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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 June 30, 2023
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)
______________________________________________________________
Tennessee62-1216058
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
1221 Broadway, Suite 1300
Nashville, Tennessee
37203
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (615) 564-1212
___________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)  Name of each exchange on which registered 
Common Stock, Par Value $1.00 Per Share FBK  New York Stock Exchange 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒  Accelerated filer ☐
Non-accelerated filer ☐  Small reporting company ☐
Emerging growth company ☐    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of registrant’s Common Stock outstanding as of July 31, 2023 was 46,798,639.
1

Table of Contents
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

























2

PART I
GLOSSARY OF ABBREVIATIONS AND ACRONYMS

As used in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, references to “we,” “our,” “us,” “FB Financial,” or “the Company” refer to FB Financial Corporation, a Tennessee corporation, and our wholly-owned banking subsidiary, FirstBank, a Tennessee state-chartered bank, unless otherwise indicated or the context otherwise requires. References to “Bank” or FirstBank, our wholly-owned banking subsidiary.
The acronyms and abbreviations identified below are used in the Notes to the Consolidated Financial Statements (unaudited) as well as in the Management’s discussion and analysis of financial condition and results of operations. You may find it helpful to refer to this page as you read this Report.

ACLAllowance for credit lossesGAAPU.S. generally accepted accounting principles
AFSAvailable-for-saleGDPGross domestic product
ALCOAsset Liability Management CommitteeGNMAGovernment National Mortgage Association
ASCAccounting Standard CodificationHELOCHome equity line of credit
ASUAccounting Standard UpdateHFIHeld for investment
CDCertificate of DepositHFSHeld for sale
CECLCurrent expected credit lossesIRLCInterest rate lock commitment
CEOChief Executive OfficerISDAInternational Swaps and Derivatives Association
CET1Common Equity Tier 1LIBORLondon Interbank Offered Rate
C&I Commercial and IndustrialMSRMortgage servicing rights
COVID-19Coronavirus pandemicNIMNet interest margin
CPRConditional prepayment rateOREOOther real estate owned
CRECommercial real estatePSUPerformance-based restricted stock units
EPSEarnings per shareReportForm 10-Q for the quarterly period ended June 30, 2023
ESPPEmployee Stock Purchase PlanROAAReturn on average assets
EVEEconomic value of equityROAEReturn on average common equity
FASBFinancial Accounting Standards BoardROATCEReturn on average tangible common equity
FDICFederal Deposit Insurance CorporationRSURestricted stock units
Federal ReserveBoard of Governors of the Federal Reserve
   System		SECU.S. Securities and Exchange Commission
FHLBFederal Home Loan BankSOFRSecured overnight financing rate
FHLMCFederal Home Loan Mortgage CorporationTDFITennessee Department of Financial Institutions
FNMAFederal National Mortgage AssociationTDRTroubled debt restructuring
3

FB Financial Corporation and subsidiaries
Consolidated balance sheets
(Amounts are in thousands except share and per share amounts) 

 June 30,December 31,
 2023 (Unaudited)2022 
ASSETS  
Cash and due from banks$147,646 $259,872 
Federal funds sold and reverse repurchase agreements
48,346 210,536 
Interest-bearing deposits in financial institutions964,362 556,644 
Cash and cash equivalents1,160,354 1,027,052 
Investments:
Available-for-sale debt securities, at fair value1,419,360 1,471,186 
Equity securities, at fair value3,031 2,990 
Federal Home Loan Bank stock, at cost40,266 58,641 
Loans held for sale (includes $78,906 and $113,240 at fair value, respectively)
99,131 139,451 
Loans held for investment9,326,024 9,298,212 
Less: allowance for credit losses on loans HFI140,664 134,192 
Net loans held for investment9,185,360 9,164,020 
Premises and equipment, net154,526 146,316 
Other real estate owned, net1,974 5,794 
Operating lease right-of-use assets56,560 60,043 
Interest receivable44,973 45,684 
Mortgage servicing rights, at fair value166,433 168,365 
Goodwill242,561 242,561 
Core deposit and other intangibles, net10,438 12,368 
Bank-owned life insurance75,341 75,329 
Other assets227,087 227,956 
Total assets$12,887,395 $12,847,756 
LIABILITIES
Deposits
Noninterest-bearing$2,400,288 $2,676,631 
Interest-bearing checking2,879,336 3,059,984 
Money market and savings3,971,975 3,697,245 
Customer time deposits1,381,176 1,420,131 
Brokered and internet time deposits239,480 1,843 
Total deposits10,872,255 10,855,834 
Borrowings390,354 415,677 
Operating lease liabilities67,304 69,754 
Accrued expenses and other liabilities170,438 180,973 
Total liabilities11,500,351 11,522,238 
SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized;
    46,798,751 and 46,737,912 shares issued and outstanding, respectively
46,799 46,738 
Additional paid-in capital859,516 861,588 
Retained earnings644,043 586,532 
Accumulated other comprehensive loss, net(163,407)(169,433)
Total FB Financial Corporation common shareholders' equity1,386,951 1,325,425 
Noncontrolling interest93 93 
Total equity1,387,044 1,325,518 
Total liabilities and shareholders' equity$12,887,395 $12,847,756 
See the accompanying notes to the consolidated financial statements.
4

FB Financial Corporation and subsidiaries
Consolidated statements of income
(Unaudited)
(Amounts are in thousands, except per share amounts)

5
 Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Interest income:  
Interest and fees on loans$149,220 $99,655 $289,576 $186,519 
Interest on securities
Taxable6,480 6,499 13,050 11,919 
Tax-exempt1,808 1,842 3,612 3,708 
Other12,675 2,218 23,425 3,195 
Total interest income170,183 110,214 329,663 205,341 
Interest expense:
Deposits65,257 6,591 118,120 12,053 
Borrowings3,383 1,452 6,340 2,935 
Total interest expense68,640 8,043 124,460 14,988 
Net interest income101,543 102,171 205,203 190,353 
Provision for credit losses on loans HFI2,575 8,181 7,572 2,052 
Provision for credit losses on unfunded commitments(3,653)4,137 (8,159)6,019 
Net interest income after provisions for credit losses102,621 89,853 205,790 182,282 
Noninterest income:
Mortgage banking income12,232 22,559 24,318 52,090 
Service charges on deposit accounts3,185 2,908 6,238 5,822 
Investment services and trust income2,777 2,275 5,155 4,407 
ATM and interchange fees2,629 5,353 5,025 10,440 
(Loss) gain from securities, net(28)(109)41 (261)
Gain (loss) on sales or write-downs of other real estate owned and     other assets533 (8)350 (442)
Other income2,485 236 6,035 2,550 
Total noninterest income23,813 33,214 47,162 74,606 
Noninterest expenses:
Salaries, commissions and employee benefits52,020 55,181 100,808 114,624 
Occupancy and equipment expense6,281 5,853 12,190 11,256 
Legal and professional fees2,199 3,116 5,307 5,723 
Data processing 2,345 2,404 4,458 4,885 
Amortization of core deposit and other intangibles940 1,194 1,930 2,438 
Advertising2,001 2,031 4,134 6,064 
Mortgage restructuring expense— 12,458 — 12,458 
Other expense15,506 14,760 32,905 28,821 
Total noninterest expense81,292 96,997 161,732 186,269 
Income before income taxes45,142 26,070 91,220 70,619 
Income tax expense9,835 6,717 19,532 16,030 
Net income applicable to FB Financial Corporation
    and noncontrolling interest		35,307 19,353 71,688 54,589 
Net income applicable to noncontrolling interest8 8 8 8 
Net income applicable to FB Financial Corporation$35,299 $19,345 $71,680 $54,581 
Earnings per common share:
Basic$0.75 $0.41 $1.53 $1.15 
Diluted0.75 0.41 1.53 1.15 
See the accompanying notes to the consolidated financial statements.
5

FB Financial Corporation and subsidiaries
Consolidated statements of comprehensive income (loss)  
(Unaudited)
(Amounts are in thousands)

 Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Net income$35,307 $19,353 $71,688 $54,589 
Other comprehensive (loss) income, net of tax:
   Net unrealized (loss) gain in available-for-sale
 securities, net of tax (benefit) expense of $(4,890), $(17,343),
 $2,169 and $(44,826)
(13,858)(49,233)6,206 (127,408)
   Reclassification adjustment for gain on sale of securities
 included in net income(1)
— (1)— (2)
   Net unrealized gain (loss) in hedging activities, net of tax expense
     (benefit) of $6, $99, $(64) and $372
17 283 (180)1,057 
         Total other comprehensive (loss) income, net of tax(13,841)(48,951)6,026 (126,353)
Comprehensive income (loss) applicable to FB Financial Corporation
    and noncontrolling interest 		21,466 (29,598)77,714 (71,764)
Comprehensive income applicable to noncontrolling interest8 8 8 8 
Comprehensive income (loss) applicable to FB Financial Corporation$21,458 $(29,606)$77,706 $(71,772)
(1) The tax expense for all periods shown was not meaningful.

See the accompanying notes to the consolidated financial statements.
6

FB Financial Corporation and subsidiaries
Consolidated statements of changes in shareholders’ equity
(Unaudited)
(Amounts are in thousands except per share amounts)

Common
stock		Additional
paid-in
capital		Retained
earnings		Accumulated
other
comprehensive
income (loss), net		Total common
shareholders' equity		Noncontrolling interestTotal shareholders' equity
Balance at March 31, 2022:$47,488 $888,168 $515,664 $(71,544)$1,379,776 $93 $1,379,869 
  Net income attributable to FB Financial
Corporation and noncontrolling interest		— — 19,345 — 19,345 8 19,353 
  Other comprehensive loss, net of taxes— — — (48,951)(48,951)— (48,951)
  Repurchase of common stock(650)(25,890)— — (26,540)— (26,540)
  Stock based compensation expense1 3,037 — — 3,038 — 3,038 
Restricted stock units vested, net of
taxes		43 (701)— — (658)— (658)
  Dividends declared ($0.13 per share)
— — (6,158)— (6,158)— (6,158)
  Noncontrolling interest distribution— — — — — (8)(8)
Balance at June 30, 2022$46,882 $864,614 $528,851 $(120,495)$1,319,852 $93 $1,319,945 
Balance at March 31, 2023:$46,763 $856,628 $615,871 $(149,566)$1,369,696 $93 $1,369,789 
Net income attributable to FB Financial
Corporation and noncontrolling interest		— — 35,299 — 35,299 8 35,307 
Other comprehensive loss, net of taxes— — — (13,841)(13,841)— (13,841)
Stock based compensation expense5 3,243 — — 3,248 — 3,248 
Restricted stock units vested, net of
taxes		23 (177)— — (154)— (154)
Performance-based restricted stock
units vested, net of taxes		8 (178)— — (170)— (170)
Dividends declared ($0.15 per share)
— — (7,127)— (7,127)— (7,127)
Noncontrolling interest distribution— — — — — (8)(8)
Balance at June 30, 2023$46,799 $859,516 $644,043 $(163,407)$1,386,951 $93 $1,387,044 
See the accompanying notes to the consolidated financial statements.

7

FB Financial Corporation and subsidiaries
Consolidated statements of changes in shareholders’ equity
(Unaudited)
(Amounts are in thousands except per share amounts)

Common
stock		Additional
paid-in
capital		Retained
earnings		Accumulated
other
comprehensive
income (loss), net		Total common
shareholders' equity		Noncontrolling interestTotal shareholders' equity
Balance at December 31, 2021:$47,549 $892,529 $486,666 $5,858 $1,432,602 $93 $1,432,695 
 Net income attributable to FB Financial
Corporation and noncontrolling interest		— — 54,581 — 54,581 8 54,589 
  Other comprehensive loss, net of taxes— — — (126,353)(126,353)— (126,353)
  Repurchase of common stock(795)(31,948)— — (32,743)— (32,743)
  Stock based compensation expense2 5,618 — — 5,620 — 5,620 
Restricted stock units vested, net of
taxes		111 (2,257)— — (2,146)— (2,146)
   Shares issued under employee stock
purchase program		15 672 — — 687 — 687 
   Dividends declared ($0.26 per share)
— — (12,396)— (12,396)— (12,396)
   Noncontrolling interest distribution— — — — — (8)(8)
Balance at June 30, 2022$46,882 $864,614 $528,851 $(120,495)$1,319,852 $93 $1,319,945 
Balance at December 31, 2022:$46,738 $861,588 $586,532 $(169,433)$1,325,425 $93 $1,325,518 
Net income attributable to FB Financial
Corporation and noncontrolling interest		— — 71,680 — 71,680 8 71,688 
Other comprehensive income, net of
taxes		— — — 6,026 6,026 — 6,026 
Repurchase of common stock(136)(4,808)— — (4,944)— (4,944)
Stock based compensation expense6 5,527 — — 5,533 — 5,533 
Restricted stock units vested, net of
taxes		115 (1,721)— — (1,606)— (1,606)
Performance-based restricted stock
units vested, net of taxes		68 (1,383)— — (1,315)— (1,315)
Shares issued under employee stock
purchase program		8 313 — — 321 — 321 
Dividends declared ($0.30 per share)
— — (14,169)— (14,169)— (14,169)
Noncontrolling interest distribution— — — — — (8)(8)
Balance at June 30, 2023$46,799 $859,516 $644,043 $(163,407)$1,386,951 $93 $1,387,044 
See the accompanying notes to the consolidated financial statements.

8
FB Financial Corporation and subsidiaries
Consolidated statements of cash flows
(Unaudited)
(Amounts are in thousands)
Six Months Ended June 30,
2023 2022 
Cash flows from operating activities:
Net income applicable to FB Financial Corporation and noncontrolling interest$71,688 $54,589 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets and software4,680 4,048 
Amortization of core deposit and other intangibles1,930 2,438 
Amortization of issuance costs on subordinated debt 194 193 
Capitalization of mortgage servicing rights(4,061)(15,070)
Net change in fair value of mortgage servicing rights5,993 (28,096)
Stock-based compensation expense5,533 5,620 
Provision for credit losses on loans HFI7,572 2,052 
Provision for credit losses on unfunded commitments(8,159)6,019 
Provision for mortgage loan repurchases(450)(1,189)
(Accretion) amortization of discounts and premiums on acquired loans, net(305)2,288 
Amortization of premiums and accretion of discounts on securities, net2,691 3,692 
(Gain) loss from securities, net(41)261 
Originations of loans held for sale(641,962)(1,719,488)
Proceeds from sale of loans held for sale679,456 2,213,443 
Gain on sale and change in fair value of loans held for sale(17,495)(35,410)
Net (gain) loss on write-downs of other real estate owned and other assets(350)442 
Provision for deferred income taxes2,629 12,461 
Earnings on bank-owned life insurance(983)(728)
Changes in:
Operating lease assets and liabilities, net1,033 166 
Other assets and interest receivable(2,727)13,566 
Accrued expenses and other liabilities(250)7,279 
Net cash provided by operating activities106,616 528,576 
Cash flows from investing activities:
Activity in available-for-sale securities:
Sales— 1,218 
Maturities, prepayments and calls58,415 126,349 
Purchases(905)(243,209)
Net change in loans(15,832)(990,402)
Sales of FHLB stock26,368 — 
Purchases of FHLB stock(7,993)(2,364)
Purchases of premises and equipment(12,576)(3,224)
Proceeds from the sale of premises and equipment— 875 
Proceeds from the sale of other real estate owned 5,155 418 
Proceeds from the sale of other assets775 — 
Proceeds from bank-owned life insurance236 — 
Net cash provided by (used in) investing activities53,643 (1,110,339)
Cash flows from financing activities:
Net increase (decrease) in deposits15,489 (287,478)
Net increase (decrease) in securities sold under agreements to repurchase and federal funds    purchased29,275 (9,010)
Net decrease in short-term FHLB advances(50,000)— 
Share based compensation withholding payments(2,921)(2,146)
Net proceeds from sale of common stock under employee stock purchase program321 687 
Repurchase of common stock(4,944)(32,743)
Dividends paid on common stock(14,011)(12,304)
Dividend equivalent payments made upon vesting of equity compensation(158)(114)
Noncontrolling interest distribution(8)(8)
Net cash used in financing activities(26,957)(343,116)
Net change in cash and cash equivalents133,302 (924,879)
Cash and cash equivalents at beginning of the period1,027,052 1,797,740 
Cash and cash equivalents at end of the period$1,160,354 $872,861 
Supplemental cash flow information:
Interest paid$116,211 $15,638 
Taxes paid, net29,338 726 
Supplemental noncash disclosures:
Transfers from loans to other real estate owned$593 $563 
Transfers from loans to other assets$1,391 $— 
Loans provided for sales of other assets424 — 
Transfers from loans to loans held for sale10,545 20,016 
Transfers from loans held for sale to loans2,755 14,179 
Decrease in rebooked GNMA loans under optional repurchase program(5,986)— 
Dividends declared not paid on restricted stock units158 118 
Right-of-use assets obtained in exchange for operating lease liabilities3,477 2,317 
See the accompanying notes to the consolidated financial statements.

9
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)

Note (1)—Basis of presentation:
Overview and presentation
FB Financial Corporation is a financial holding company headquartered in Nashville, Tennessee. The Company operates primarily through its wholly-owned subsidiary, FirstBank and the Bank's subsidiaries. As of June 30, 2023, the Bank had 82 full-service branches throughout Tennessee, Alabama, southern Kentucky and north Georgia, and a mortgage business with office locations across the Southeast, which primarily originates loans to be sold in the secondary market.
The unaudited consolidated financial statements, including the notes thereto, have been prepared in accordance with U.S. GAAP interim reporting requirements and general banking industry guidelines, and therefore, do not include all information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K.
The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.
In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported results of operations for the reporting periods and the related disclosures. Although management's estimates contemplate current conditions and how they are expected to change in the future, it is reasonably possible that actual conditions could vary from those anticipated, which could cause the Company's financial condition and results of operations to vary significantly from those estimates.
Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or shareholders’ equity.
Earnings per share
Basic EPS excludes dilution and is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares issuable under the restricted stock units granted but not yet vested and distributable. Diluted EPS is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period, plus an incremental number of common-equivalent shares computed using the treasury stock method.
Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common shareholders in undistributed earnings for purposes of computing EPS. Companies that have such participating securities are required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable dividend equivalents and are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.
10
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 June 30,Six Months Ended June 30,
 2023202220232022
Basic earnings per common share:
Net income applicable to FB Financial Corporation$35,299 $19,345 $71,680 $54,581 
Dividends paid on and undistributed earnings allocated to participating securities— — — — 
Earnings available to common shareholders$35,299 $19,345 $71,680 $54,581 
Weighted average basic shares outstanding46,779,388 47,111,055 46,729,778 47,320,784 
Basic earnings per common share$0.75 $0.41 $1.53 $1.15 
Diluted earnings per common share:
Earnings available to common shareholders$35,299 $19,345 $71,680 $54,581 
Weighted average basic shares outstanding46,779,388 47,111,055 46,729,778 47,320,784 
Weighted average diluted shares contingently issuable(1)
35,466 100,595 47,825 145,507 
Weighted average diluted shares outstanding46,814,854 47,211,650 46,777,603 47,466,291 
Diluted earnings per common share$0.75 $0.41 $1.53 $1.15 
(1)Excludes 315,989 and 250,074 restricted stock units outstanding considered to be antidilutive for the three and six months ended June 30, 2023 and 202,661 and 10,678 restricted stock units outstanding considered to be antidilutive for the three and six months ended June 30, 2022.
Recently adopted accounting standards:
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a one-time sale and/or transfer to AFS or trading to be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. ASU 2020-04 was effective for all entities as of March 12, 2020 and through December 31, 2022. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as HTM may be made any time after March 12, 2020. In December 2022, the FASB issued ASU 2022-06, "Reference rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" to extend the date to December 31, 2024 for companies to apply the relief in Topic 848. The application of this guidance has not had and is not expected to have a material impact to the consolidated financial statements or related disclosures.
In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method", to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU No. 2022-01 for any entity that has adopted the amendments in ASU No.2017-12 for the corresponding period. The Company adopted the update effective January 1, 2023. The adoption of this standard did not have an impact on the consolidated financial statements or disclosures.
Additionally, in March 2022, the FASB issued ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" related to troubled debt restructurings and vintage disclosures for financing receivables. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan modifications and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables by year of origination in the vintage disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company prospectively adopted the amendment effective January 1, 2023 and updated its disclosures
11
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
beginning with the first quarter of 2023. Refer to Note 3 for further information. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
Newly issued not yet effective accounting standards:
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB issued this update to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, to amend a related illustrative example, and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The ASU becomes effective January 1, 2024 and the adoption is not expected to have a significant impact on the Company's consolidated financial statements or related disclosures.
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” as part of the Post-Implementation Review process of Topic 842 around related party arrangements between entities under common control. Under previous guidance, a lessee is generally required to amortize leasehold improvements that it owns over the shorter of the useful life of those improvements or the lease term. However, due to the nature of leasehold improvements made under leases between entities under common control, ASU 2023-01 requires a lessee in a common-control arrangement to amortize such leasehold improvements that it owns over the improvements' useful life to the common control group, regardless of the lease term. The ASU becomes effective January 1, 2024 and is not expected to have a material impact on the Company's consolidated financial statements or related disclosures.
Additionally, in March 2023, the FASB issued ASU 2023-02, "Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method". The amendments in this update permit reporting entities to elect to account for tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The ASU becomes effective January 1, 2024. The adoption of this accounting pronouncement will have no impact on the Company's historical consolidated financial statements but could influence the Company's decisions with respect to investments in certain tax credits prospectively.
Subsequent events
The Company has evaluated, for consideration of recognition or disclosure, subsequent events that occurred through the date of issuance of these financial statements. The Company has determined that there were no subsequent events that occurred after June 30, 2023, but prior to the issuance of these financial statements that would have a material impact on the Company’s consolidated financial statements.
12
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (2)—Investment securities:
The following tables summarize the amortized cost, allowance for credit losses and fair value of the available-for-sale debt securities and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive loss at June 30, 2023 and December 31, 2022:  
June 30, 2023
 Amortized cost Gross unrealized gains Gross unrealized losses Allowance for credit losses for investments Fair Value
Investment Securities    
Available-for-sale debt securities  
U.S. government agency securities$45,185 $— $(4,656)$— $40,529 
Mortgage-backed securities - residential1,165,901 — (186,501)— 979,400 
Mortgage-backed securities - commercial 18,747 — (1,493)— 17,254 
Municipal securities294,032 387 (27,322)— 267,097 
U.S. Treasury securities113,508 — (5,287)— 108,221 
Corporate securities8,000 — (1,141)— 6,859 
Total$1,645,373 $387 $(226,400)$— $1,419,360 
December 31, 2022
 Amortized costGross unrealized gains Gross unrealized losses Allowance for credit losses for investmentsFair Value
Investment Securities    
Available-for-sale debt securities    
U.S. government agency securities$45,167 $— $(5,105)$— $40,062 
Mortgage-backed securities - residential1,224,522 — (190,329)— 1,034,193 
Mortgage-backed securities - commercial19,209 — (1,565)— 17,644 
Municipal securities295,375 458 (31,413)— 264,420 
U.S. Treasury securities113,301 — (5,621)— 107,680 
Corporate securities8,000 — (813)— 7,187 
Total$1,705,574 $458 $(234,846)$— $1,471,186 
The components of amortized cost for debt securities on the consolidated balance sheets excludes accrued interest receivable since the Company elected to present accrued interest receivable separately on the consolidated balance sheets. As of June 30, 2023 and December 31, 2022, total accrued interest receivable on debt securities was $5,358 and $5,470, respectively.
Securities pledged at June 30, 2023 and December 31, 2022 had carrying amounts of $1,138,262 and $1,191,021, respectively, and were pledged to secure a Federal Reserve Bank line of credit, public deposits and repurchase agreements.
There were no holdings of debt securities of any one issuer, other than U.S. Government sponsored enterprises, in an amount greater than 10% of shareholders' equity during any period presented.
Investment securities transactions are recorded as of the trade date. At June 30, 2023 and December 31, 2022, there were no trade date receivables or payables that related to sales or purchases settled after period end.

 
13
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 June 30, 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.
June 30,December 31,
 2023 2022 
 Available-for-saleAvailable-for-sale
 Amortized costFair valueAmortized costFair value
Due in one year or less$66,285 $64,880 $4,277 $4,225 
Due in one to five years106,548 98,449 161,556 152,181 
Due in five to ten years60,725 57,675 61,290 57,859 
Due in over ten years227,167 201,702 234,720 205,084 
460,725 422,706 461,843 419,349 
Mortgage-backed securities - residential1,165,901 979,400 1,224,522 1,034,193 
Mortgage-backed securities - commercial18,747 17,254 19,209 17,644 
Total debt securities$1,645,373 $1,419,360 $1,705,574 $1,471,186 
Sales and other dispositions of available-for-sale securities were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Proceeds from sales$— $1,218 $— $1,218 
Proceeds from maturities, prepayments and calls31,588 68,906 58,415 126,349 
Gross realized gains— 1 — 3 
Gross realized losses— — — — 
The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at June 30, 2023 and December 31, 2022, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
June 30, 2023
 Less than 12 months12 months or moreTotal
 Fair ValueUnrealized Loss Fair ValueUnrealized Loss Fair ValueUnrealized Loss
U.S. government agency securities$956 $(11)$39,573 $(4,645)$40,529 $(4,656)
Mortgage-backed securities - residential43,118 (2,190)936,282 (184,311)979,400 (186,501)
Mortgage-backed securities - commercial— — 17,254 (1,493)17,254 (1,493)
Municipal securities53,700 (767)179,210 (26,555)232,910 (27,322)
U.S. Treasury securities249 (1)107,972 (5,286)108,221 (5,287)
Corporate securities— — 6,859 (1,141)6,859 (1,141)
Total$98,023 $(2,969)$1,287,150 $(223,431)$1,385,173 $(226,400)

14
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 months12 months or moreTotal
 Fair ValueUnrealized Loss Fair ValueUnrealized Loss Fair ValueUnrealized loss
U.S. government agency securities$23,791 $(2,802)$16,271 $(2,303)$40,062 $(5,105)
Mortgage-backed securities - residential316,656 (32,470)717,537 (157,859)1,034,193 (190,329)
Mortgage-backed securities - commercial11,104 (968)6,540 (597)17,644 (1,565)
Municipal securities196,419 (26,811)36,726 (4,602)233,145 (31,413)
U.S. Treasury securities94,248 (4,122)13,432 (1,499)107,680 (5,621)
Corporate securities4,008 (492)3,179 (321)7,187 (813)
Total$646,226 $(67,665)$793,685 $(167,181)$1,439,911 $(234,846)
As of June 30, 2023 and December 31, 2022, the Company’s debt securities portfolio consisted of 505 and 503 securities, 452 and 454 of which were in an unrealized loss position, respectively.
During the three months ended June 30, 2023, the Company's available-for-sale debt securities portfolio net unrealized value decreased $18,748 to a net unrealized loss position of $226,013 from a net unrealized loss position of $207,265 as of March 31, 2023. During the six months ended June 30, 2023, the Company's available-for-sale debt securities portfolio net unrealized value increased $8,375 from a net unrealized loss position of $234,388 as of December 31, 2022.
During the three months ended June 30, 2022, the Company's available-for-sale debt securities portfolio net unrealized value declined $66,577 to a net unrealized loss position of $167,510 as of June 30, 2022 from a net unrealized loss position of $100,933 as of March 31, 2022. During the six months ended June 30, 2022, the Company's available-for-sale debt securities portfolio net unrealized value declined $172,237 from a net unrealized gain position of $4,727 as of December 31, 2021.
The majority of the investment portfolio was either government guaranteed, an issuance of a government sponsored entity or highly rated by major credit rating agencies and the Company has historically not recorded any losses associated with these investments. Municipal securities with market values below amortized cost at June 30, 2023 were reviewed for material credit events and/or rating downgrades with individual credit reviews performed. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities and the issuers will continue to be observed as a part of the Company’s ongoing credit monitoring. As such, as of June 30, 2023 and December 31, 2022, it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Further, it is not likely that the Company will be required to sell the securities before recovery of their amortized cost basis. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three and six months ended June 30, 2023 or 2022.
Equity Securities
As of June 30, 2023 and December 31, 2022, the Company had $3,031 and $2,990, in marketable equity securities recorded at fair value, respectively. The Company had equity securities without readily determinable market value included in other assets on the consolidated balance sheets with carrying amounts of $23,896 and $22,496 at June 30, 2023 and December 31, 2022, respectively. Additionally, the Company had $40,266 and $58,641 of Federal Home Loan Bank stock carried at cost at June 30, 2023 and December 31, 2022, respectively, included separately from the 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 loss of $28 and of $110 for the three months ended June 30, 2023 and 2022, respectively, and in a net gain of $41 and a net loss of $264 for the six months ended June 30, 2023 and 2022, respectively.
15
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 on loans HFI:
Loans outstanding as of June 30, 2023 and December 31, 2022, by class of financing receivable are as follows:
 June 30,December 31,
 2023 2022 
Commercial and industrial$1,693,572 $1,645,783 
Construction1,636,970 1,657,488 
Residential real estate:
1-to-4 family mortgage1,548,614 1,573,121 
Residential line of credit507,652 496,660 
Multi-family mortgage518,025 479,572 
Commercial real estate:
Owner-occupied1,158,782 1,114,580 
Non-owner occupied1,881,978 1,964,010 
Consumer and other380,431 366,998 
Gross loans9,326,024 9,298,212 
Less: Allowance for credit losses on loans HFI(140,664)(134,192)
Net loans$9,185,360 $9,164,020 
As of June 30, 2023 and December 31, 2022, $1,000,551 and $909,734, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,732,824 and $1,763,730, respectively, of qualifying commercial mortgage loans were pledged to the FHLB system securing advances against the Bank’s line of credit. Additionally, as of June 30, 2023 and December 31, 2022, qualifying loans of $3,116,035 and $3,118,172, respectively, were pledged to the Federal Reserve under the Borrower-in-Custody program.
The components of amortized cost for loans on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of June 30, 2023 and December 31, 2022, accrued interest receivable on loans held for investment amounted to $38,057 and $38,507, respectively.
Allowance for Credit Losses on Loans HFI
The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from Moody's that are applicable to each type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.
The Company's loss rate models estimate the lifetime loss rate for pools of loans by combining the calculated loss rate based on each variable within the model (including the macroeconomic variables). The lifetime loss rate for the pool is then multiplied by the loan balances to determine the expected credit losses on the pool.
The quantitative models require loan data and macroeconomic variables based on the inherent credit risks in each portfolio to more accurately measure the credit risks associated with each. Each of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss.
The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast;
16
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 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, and other considerations. The increase in the allowance for credit losses as of June 30, 2023 compared with December 31, 2022 is primarily a result of deterioration in economic forecasts between periods. These forecasts included weighted projections that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. As of June 30, 2023, the macroeconomic forecast was determined solely using the Moody’s baseline scenario, which showed a slightly more negative outlook than the comparative baseline as of December 31, 2022. As of December 31, 2022, the macroeconomic forecast used a weighting of two economic forecasts from Moody’s in order to align with management’s best estimate over the reasonable and supportable forecast period. The Moody’s baseline scenario was weighted the heaviest and the downside scenario received a smaller weighting. Additionally, as of June 30, 2023, loss rates on residential loans and HELOC were qualitatively adjusted downward, addressing the relative strength of asset values in the Company's predominant markets.
The Company calculates its allowance for credit losses on loans HFI using a lifetime loss rate methodology and disaggregates the loan portfolio into three pools. The following presents a summary of quantitative and qualitative factors considered as of June 30, 2023, which resulted in changes in the allowance for credit losses compared to December 31, 2022 as described below.
Pool Source of repayment
Quantitative and Qualitative factors considered
Commercial and Industrial Repayment is largely dependent
upon the operation of the borrower's business.
Quantitative: Prepayment speeds are modeled in the form of a prepayment benchmarking that directly impacts the ACL output for all C&I loans and lines of credit. Loss rates incorporate a peer scaling factor.
Qualitative: An uncertain economic outlook including the effects of inflation and the interest rate environment are driving a qualitative increase in the ACL.
Retail Repayment is primarily dependent on the personal cash flow of the borrower.
Quantitative: Average FICO scores, remaining life of the portfolio, delinquency composition, prepayment speeds leveraging Equifax and Moody's data
Qualitative: High modeled loss rates and the relatively strong housing market within the bank’s footprint are driving a qualitative decrease in the ACL.
Commercial Real EstateRepayment is primarily dependent on lease income generated from the underlying collateral.
Quantitative: Prepayment speeds leverage a reverse-compounding formula. Loss rates incorporate a peer scaling factor.
Qualitative: An uncertain economic outlook in Non-owner occupied CRE are driving a qualitative increase in the ACL.
When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell.
17
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. Substantially all of its loan modifications involving borrowers experiencing financial difficulty are accounted for as a continuation of the existing loan.
Prior to January 1, 2023, loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRs and TDRs used the same methodology to estimate credit losses. In cases where the expected credit loss could only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance was measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.
The following tables provide the changes in the allowance for credit losses on loans HFI by class of financing receivable for the three and six months ended June 30, 2023 and 2022:
 Commercial
and industrial 		Construction1-to-4
family
residential
mortgage 		Residential
line of credit 		Multi-family
residential
mortgage 		Commercial
real estate
owner
occupied 		Commercial
real estate
non-owner
occupied 		Consumer
and other 		Total
Three Months Ended June 30, 2023
Beginning balance -
March 31, 2023
$11,117 $41,025 $27,213 $9,034 $6,619 $7,952 $21,868 $13,981 $138,809 
Provision for credit losses
   on loans HFI		192 (1,115)185 151 209 643 1,009 1,301 2,575 
Recoveries of loans
previously charged-off
13 10 25 — — 16 — 108 172 
Loans charged off(11)— (16)— — (144)— (721)(892)
Ending balance -
June 30, 2023
$11,311 $39,920 $27,407 $9,185 $6,828 $8,467 $22,877 $14,669 $140,664 
Six Months Ended June 30, 2023
Beginning balance -
December 31, 2022
$11,106 $39,808 $26,141 $7,494 $6,490 $7,783 $21,916 $13,454 $134,192 
Provision for credit losses
   on loans HFI		182 102 1,258 1,691 338 746 961 2,294 7,572 
Recoveries of loans
previously charged-off
80 10 40 — — 82 — 347 559 
Loans charged off(57)— (32)— — (144)— (1,426)(1,659)
Ending balance -
June 30, 2023
$11,311 $39,920 $27,407 $9,185 $6,828 $8,467 $22,877 $14,669 $140,664 
 
18
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
 Commercial
and industrial 		Construction1-to-4
family
residential
mortgage 		Residential
line of credit 		Multi-family
residential
mortgage 		Commercial
real estate
owner
occupied 		Commercial
real estate
non-owner
occupied 		Consumer
and other 		Total
Three Months Ended June 30, 2022
Beginning balance -
March 31, 2022
$12,699 $31,782 $21,024 $6,545 $6,398 $8,416 $21,290 $11,895 $120,049 
Provision for credit losses
on loans HFI		(783)6,590 383 314 105 (1,102)1,246 1,428 8,181 
Recoveries of loans
previously charged-off
26 11 14 16 — 15 — 348 430 
Loans charged off(1,751)— (23)— — — — (614)(2,388)
Ending balance -
June 30, 2022
$10,191 $38,383 $21,398 $6,875 $6,503 $7,329 $22,536 $13,057 $126,272 
Six Months Ended June 30, 2022 
Beginning balance -
December 31, 2021
$15,751 $28,576 $19,104 $5,903 $6,976 $12,593 $25,768 $10,888 $125,559 
Provision for credit losses
   on loans HFI		(4,789)9,796 2,291 955 (473)(5,289)(3,232)2,793 2,052 
Recoveries of loans
previously charged-off
984 11 26 17 — 25 — 565 1,628 
Loans charged off(1,755)— (23)— — — — (1,189)(2,967)
Ending balance -
 June 30, 2022		$10,191 $38,383 $21,398 $6,875 $6,503 $7,329 $22,536 $13,057 $126,272 
Credit Quality - Commercial Type Loans
The Company categorizes commercial loan types into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans that share similar risk characteristics collectively. Loans that do not share similar risk characteristics are evaluated individually.
The Company uses the following definitions for risk ratings:
Pass.
Loans rated Pass include those that are adequately collateralized performing loans which management believes do not have conditions that have occurred or may occur that would result in the loan being downgraded into an inferior category. The Pass category also includes commercial loans rated as Watch, which include those that management believes have conditions that have occurred, or may occur, which could result in the loan being downgraded to an inferior category.

Special Mention.
Loans rated Special Mention are those that have potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Management does not believe there will be a loss of principal or interest. These loans require intensive servicing and may possess more than normal credit risk.
Classified.
Loans included in the Classified category include loans rated as Substandard and Doubtful. Loans rated as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Also included in this category are loans classified as Doubtful, which have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness or weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.
Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes.







19
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 June 30, 2023 and December 31, 2022 and the gross charge-offs for the six months ended June 30, 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 activity of gross charge-offs by year of origination are not included in the below tables.
As of and for the six months
    ended June 30, 2023
20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Pass$121,939 $348,068 $174,977 $47,672 $78,078 $82,735 $787,526 $1,640,995 
Special Mention— 3,453 329 2,016 157 1,427 20,241 27,623 
Classified481 2,666 610 1,910 1,349 5,956 11,982 24,954 
Total122,420 354,187 175,916 51,598 79,584 90,118 819,749 1,693,572 
            Current-period gross
               charge-offs		— — 46 — — — 11 57 
Construction
Pass83,247 772,013 374,540 66,581 70,096 51,937 213,231 1,631,645 
Special Mention— 169 — 6 — 718 — 893 
Classified— 3,215 318 899 — — — 4,432 
Total83,247 775,397 374,858 67,486 70,096 52,655 213,231 1,636,970 
            Current-period gross
               charge-offs		— — — — — — — — 
Residential real estate:
Multi-family mortgage
Pass19,097 139,768 150,468 119,065 33,190 41,852 13,464 516,904 
Special Mention— — — — — — — — 
Classified— — — — — 1,121 — 1,121 
Total19,097 139,768 150,468 119,065 33,190 42,973 13,464 518,025 
             Current-period gross
                charge-offs		— — — — — — — — 
Commercial real estate:
Owner occupied
Pass41,038 233,473 227,506 119,039 164,411 295,161 50,408 1,131,036 
Special Mention— 1,324 1,859 — 162 5,332 — 8,677 
Classified— 6,178 672 — 3,501 4,519 4,199 19,069 
Total41,038 240,975 230,037 119,039 168,074 305,012 54,607 1,158,782 
            Current-period gross
              charge-offs		— — 144 — — — — 144 
Non-owner occupied
Pass14,235 444,487 447,841 121,359 153,675 642,442 42,683 1,866,722 
Special Mention— — — — 399 2,474 — 2,873 
Classified188 — 1,957 — — 10,238 — 12,383 
Total14,423 444,487 449,798 121,359 154,074 655,154 42,683 1,881,978 
             Current-period gross
                charge-offs		— — — — — — — — 
Total commercial loan types
Pass279,556 1,937,809 1,375,332 473,716 499,450 1,114,127 1,107,312 6,787,302 
Special Mention— 4,946 2,188 2,022 718 9,951 20,241 40,066 
Classified669 12,059 3,557 2,809 4,850 21,834 16,181 61,959 
Total$280,225 $1,954,814 $1,381,077 $478,547 $505,018 $1,145,912 $1,143,734 $6,889,327 
            Current-period gross
                charge-offs		$— $— $190 $— $— $— $11 $201 
20
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
20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Pass$396,643 $204,000 $67,231 $90,894 $39,780 $62,816 $762,717 $1,624,081 
Special Mention125 7 — 160 143 771 2,520 3,726 
Classified65 823 1,916 1,651 273 6,913 6,335 17,976 
Total396,833 204,830 69,147 92,705 40,196 70,500 771,572 1,645,783 
Construction
Pass682,885 495,723 142,233 84,599 17,360 44,326 188,906 1,656,032 
Special Mention— — 15 — — 707 — 722 
Classified80 309 — — — 345 — 734 
Total682,965 496,032 142,248 84,599 17,360 45,378 188,906 1,657,488 
Residential real estate:
Multi-family mortgage
Pass142,912 147,168 96,819 33,547 6,971 37,385 13,604 478,406 
Special Mention— — — — — — — — 
Classified— — — — — 1,166 — 1,166 
Total142,912 147,168 96,819 33,547 6,971 38,551 13,604 479,572 
Commercial real estate:
Owner occupied
Pass237,862 223,883 110,748 148,405 66,101 246,414 57,220 1,090,633 
Special Mention101 683 — 168 2,225 1,258 5,000 9,435 
Classified— 1,293 224 4,589 1,276 7,018 112 14,512 
Total237,963 225,859 110,972 153,162 69,602 254,690 62,332 1,114,580 
Non-owner occupied
Pass467,360 440,319 131,497 159,205 210,752 473,60760,908 1,943,648 
Special Mention— — — — 82 2,459— 2,541 
Classified— 2,258 — 146 3,270 12,147— 17,821 
Total467,360 442,577 131,497 159,351 214,104 488,213 60,908 1,964,010 
Total commercial loan types
Pass1,927,662 1,511,093 548,528 516,650 340,964 864,548 1,083,355 6,792,800 
Special Mention226 690 15 328 2,450 5,195 7,520 16,424 
Classified145 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 













21
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Credit Quality - Consumer Type Loans
For consumer and residential loan classes, the company primarily evaluates credit quality based on delinquency and accrual status of the loan, credit documentation and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality.
The following tables present the credit quality by classification (performing or nonperforming) of the Company's consumer type loan portfolio as of June 30, 2023 and December 31, 2022 and the gross charge-offs for the six months ended June 30, 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 six months
     ended June 30, 2023
20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Residential real estate:
1-to-4 family mortgage
Performing$100,265 $531,715 $411,194 $152,684 $86,026 $248,803 $— $1,530,687 
Nonperforming— 2,938 3,393 4,255 517 6,824 — 17,927 
Total100,265 534,653 414,587 156,939 86,543 255,627 — 1,548,614 
          Current-period gross
             charge-offs		— 16 — — — 16 — 32 
Residential line of credit
Performing— — — — — — 506,465 506,465 
Nonperforming— — — — — — 1,187 1,187 
Total— — — — — — 507,652 507,652 
          Current-period gross
             charge-offs		— — — — — — — — 
Consumer and other
Performing45,554 102,231 50,673 36,969 26,698 102,362 7,243 371,730 
Nonperforming— 570 1,630 1,916 1,072 3,513 — 8,701 
       Total45,554 102,801 52,303 38,885 27,770 105,875 7,243 380,431 
           Current-period gross
             charge-offs		632 386 72 106 21 207 2 1,426 
Total consumer type loans
Performing145,819 633,946 461,867 189,653 112,724 351,165 513,708 2,408,882 
Nonperforming— 3,508 5,023 6,171 1,589 10,337 1,187 27,815 
        Total$145,819 $637,454 $466,890 $195,824 $114,313 $361,502 $514,895 $2,436,697 
            Current-period gross
             charge-offs		$632 $402 $72 $106 $21 $223 $2 $1,458 


22
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
20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Residential real estate:
1-to-4 family mortgage
Performing$568,210 $448,401 $160,715 $93,548 $68,113 $211,019 $— $1,550,006 
Nonperforming1,227 5,163 5,472 1,778 2,044 7,431 — 23,115 
Total569,437 453,564 166,187 95,326 70,157 218,450 — 1,573,121 
Residential line of credit
Performing— — — — — — 495,129 495,129 
Nonperforming— — — — — — 1,531 1,531 
Total— — — — — — 496,660 496,660 
Consumer and other
Performing118,637 56,779 41,008 29,139 26,982 82,318 4,175 359,038 
Nonperforming166 1,396 1,460 906 1,507 2,525 — 7,960 
       Total118,803 58,175 42,468 30,045 28,489 84,843 4,175 366,998 
Total consumer type loans
Performing686,847 505,180 201,723 122,687 95,095 293,337 499,304 2,404,173 
Nonperforming1,393 6,559 6,932 2,684 3,551 9,956 1,531 32,606 
       Total$688,240 $511,739 $208,655 $125,371 $98,646 $303,293 $500,835 $2,436,779 
Nonaccrual and Past Due Loans
Nonperforming loans include loans that are no longer accruing interest (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 June 30, 2023 and December 31, 2022:
June 30, 202330-89 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$822 $— $2,163 $1,690,587 $1,693,572 
Construction2,127 111 2,649 1,632,083 1,636,970 
Residential real estate:
1-to-4 family mortgage14,302 10,261 7,666 1,516,385 1,548,614 
Residential line of credit1,407 334 853 505,058 507,652 
Multi-family mortgage— — 37 517,988 518,025 
Commercial real estate:
Owner occupied1,316 — 5,803 1,151,663 1,158,782 
Non-owner occupied3,512 — 5,554 1,872,912 1,881,978 
Consumer and other10,133 1,541 7,160 361,597 380,431 
Total$33,619 $12,247 $31,885 $9,248,273 $9,326,024 
 
23
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
December 31, 202230-89 days
past due and accruing
interest		90 days or 
more and accruing
interest 		Nonaccrual
loans		Loans current on payments and accruing interest Total
Commercial and industrial$1,650 $136 $1,307 $1,642,690 $1,645,783 
Construction1,246 — 389 1,655,853 1,657,488 
Residential real estate:
1-to-4 family mortgage15,470 16,639 6,476 1,534,536 1,573,121 
Residential line of credit772 131 1,400 494,357 496,660 
Multi-family mortgage— — 42 479,530 479,572 
Commercial real estate:
Owner occupied1,948 — 5,410 1,107,222 1,114,580 
Non-owner occupied102 — 5,956 1,957,952 1,964,010 
Consumer and other10,108 1,509 6,451 348,930 366,998 
Total$31,296 $18,415 $27,431 $9,221,070 $9,298,212 
The following tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of June 30, 2023 and December 31, 2022 by class of financing receivable.
June 30, 2023Nonaccrual
with no
related
allowance		Nonaccrual
with
related
allowance		Related
allowance
Commercial and industrial$1,313 $850 $12 
Construction899 1,750 198 
Residential real estate:
1-to-4 family mortgage1,483 6,183 130 
Residential line of credit729 124 2 
Multi-family mortgage— 37 1 
Commercial real estate:
Owner occupied5,683 120 6 
Non-owner occupied5,509 45 1 
Consumer and other110 7,050 362 
Total$15,726 $16,159 $712 
December 31, 2022
Nonaccrual
with no
related
allowance		Nonaccrual
with
related
allowance		Related
allowance
Commercial and industrial$790 $517 $10 
Construction— 389 7 
Residential real estate:
1-to-4 family mortgage2,834 3,642 78 
Residential line of credit1,134 266 4 
Multi-family mortgage1 41 1 
Commercial real estate:
Owner occupied5,200 210 1 
Non-owner occupied5,755 201 5 
Consumer and other— 6,451 327 
Total$15,714 $11,717 $433 





24
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 and six months ended June 30, 2023 and 2022:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Commercial and industrial$28 $83 $48 $137 
Construction46 7 52 26 
Residential real estate:
1-to-4 family mortgage70 55 149 107 
Residential line of credit27 21 51 61 
Multi-family mortgage— 2 1 2 
Commercial real estate:
Owner occupied39 63 97 88 
Non-owner occupied55 76 137 146 
Consumer and other143 54 316 69 
Total$408 $361 $851 $636 
Accrued interest receivable written off as an adjustment to interest income amounted to $163 and $344 for the three and six months ended June 30, 2023, respectively, and $123 and $307 for the three and six months ended June 30, 2022, respectively.
Loan Modifications to Borrowers Experiencing Financial Difficulty
Occasionally, the Company may make certain modifications of loans to borrowers experiencing financial difficulty. These modifications may be in the form of an interest rate reduction, a term extension or a combination thereof.
Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the portion of the loan deemed uncollectible is charged off against the allowance for credit losses on loans HFI.
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.
During the three and six months ended June 30, 2023, the Company modified two residential mortgage loans in the form of term extensions for borrowers experiencing financial difficulties with balances totaling $141.
Troubled debt restructurings
The following disclosure is presented in accordance with GAAP in effect prior to the adoption of ASU 2022-02. The Company has included this disclosure as of December 31, 2022 or for the three and six months ended June 30, 2022.
Prior to the Company's adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. Loans that were restructured in a TDR prior to the adoption of ASU 2022-02 will continue to be accounted for under the historical TDR accounting until the loan is paid off, liquidated or subsequently modified. See Note 1, "Basis of presentation" for more information on the Company's adoption of ASU 2022-02.
As of December 31, 2022, the Company had a recorded investment in TDRs of $13,854. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate to borrowers experiencing financial difficulty. Of these loans, $7,321 were classified as nonaccrual loans as of December 31, 2022. The Company included $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.





25
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table presents the financial effect of TDRs recorded during the periods indicated:
Three Months Ended June 30, 2022Number of loansPre-modification outstanding recorded investmentPost-modification outstanding recorded investmentCharge offs and specific reserves
Commercial and industrial1 $55 $55 $— 
Residential real estate:
Residential line of credit1 49 49 — 
Total2 $104 $104 $— 
Six Months Ended June 30, 2022Number of loansPre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial1 $55 $55 $— 
Residential real estate:
1-to-4 family mortgage1 80 80 — 
Residential line of credit1 49 49 — 
Consumer and other1 22 22 — 
Total4 $206 $206 $— 
Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the six months ended June 30, 2022. There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended June 30, 2022. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
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.
June 30, 2023
Type of Collateral
Real EstateFinancial Assets and Equipment TotalIndividually assessed allowance for credit loss
Commercial and industrial$2,027 $11,881 $13,908 $— 
Construction1,499 — 1,499 60 
Residential real estate:
1-to-4 family mortgage6,583 1,172 7,755 168 
Residential line of credit729 — 729 — 
Commercial real estate:
Owner occupied5,902 5,902 — 
Non-owner occupied5,510 — 5,510 — 
Consumer and other131 — 131 — 
Total$22,381 $13,053 $35,434 $228 
26
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 EstateFinancial Assets and Equipment TotalIndividually assessed allowance for credit loss
Commercial and industrial$2,596 $— $2,596 $— 
Residential real estate:
1-to-4 family mortgage4,467 — 4,467 194 
Residential line of credit1,135 — 1,135 — 
Commercial real estate:
Owner occupied5,424 — 5,424 — 
Non-owner occupied5,755 — 5,755 — 
Consumer and other134 — 134 — 
Total$19,511 $— $19,511 $194 
Note (4)—Other real estate owned
The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at the lower of the carrying amount of the underlying loan or the fair value of the real estate less costs to sell. The following table summarizes the other real estate owned for the three and six months ended June 30, 2023 and 2022: 
Three Months EndedSix Months Ended
June 30,June 30,
 2023202220232022
Balance at beginning of period$4,085 $9,721 $5,794 $9,777 
Transfers from loans358 — 593 563 
Proceeds from sale of other real estate owned(3,124)(297)(5,155)(418)
Gain (loss) on sale of other real estate owned655 (26)742 (130)
Write-downs and partial liquidations— — — (394)
Balance at end of period$1,974 $9,398 $1,974 $9,398 
Foreclosed residential real estate properties totaled $772 and $840 as of June 30, 2023 and December 31, 2022, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $4,044 and $2,653 as of June 30, 2023 and December 31, 2022, respectively.
Note (5)—Leases:
As of June 30, 2023, the Company was the lessee in 58 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 insignificant equipment leases are not recorded on the Company's consolidated balance sheets.
Many leases include one or more options to renew, with renewal terms that can extend the lease up to an additional 20 years or more. Certain lease agreements contain provisions to periodically adjust rental payments for inflation. Renewal options that management is reasonably certain to renew and fixed rent escalations are included in the right-of-use asset and lease liability.

27
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 June 30, 2023 and December 31, 2022:
June 30,December 31,
Classification20232022
Right-of-use assets:
Operating leasesOperating lease right-of-use assets$56,560$60,043
Finance leasesPremises and equipment, net1,3111,367
Total right-of-use assets$57,871$61,410
Lease liabilities:
Operating leasesOperating lease liabilities$67,304$69,754
Finance leasesBorrowings 1,3741,420
Total lease liabilities $68,678$71,174
Weighted average remaining lease term (in years) -
    operating		11.812.1
Weighted average remaining lease term (in years) -
    finance		11.912.4
Weighted average discount rate - operating3.22 %3.08 %
Weighted average discount rate - finance1.76 %1.76 %
The components of total lease expense included in the consolidated statements of income were as follows:
Three Months EndedSix Months Ended
June 30,June 30,
Classification2023 2022 2023 2022 
Operating lease costs:
Amortization of right-of-use assetOccupancy and equipment$2,307 $1,851 $4,122 $3,561 
Short-term lease costOccupancy and equipment143 144 264 255 
Variable lease costOccupancy and equipment326 293 624 549 
Lease impairment
Mortgage restructuring expense
— 364 — 364 
Gain on lease modifications and   terminationsOccupancy and equipment(1)— (73)(18)
Finance lease costs:
Interest on lease liabilitiesInterest expense on borrowings6 6 12 15 
Amortization of right-of-use assetOccupancy and equipment27 28 55 65 
Sublease income Occupancy and equipment(215)(181)(496)(376)
Total lease cost$2,593 $2,505 $4,508 $4,415 

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.
28
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 lease liabilities as of June 30, 2023 is as follows:
OperatingFinance
Leases Lease
Lease payments due:
June 30, 2024$5,017 $59 
June 30, 20257,959 120 
June 30, 20267,876 121 
June 30, 20277,753 123 
June 30, 20287,390 125 
Thereafter45,689 977 
     Total undiscounted future minimum lease payments81,684 1,525 
Less: imputed interest(14,380)(151)
     Lease liabilities$67,304 $1,374 
Note (6)—Mortgage servicing rights:
Changes in the Company’s mortgage servicing rights were as follows for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended June 30,Six Months Ended June 30,
 202320222023 2022 
Carrying value at beginning of period$164,879 $144,675 $168,365 $115,512 
Capitalization2,273 5,258 4,061 15,070 
Change in fair value:
    Due to pay-offs/pay-downs(3,269)(5,024)(5,789)(9,495)
    Due to change in valuation inputs or assumptions2,550 13,769 (204)37,591 
        Carrying value at end of period$166,433 $158,678 $166,433 $158,678 
The following table summarizes servicing income and expense, which are included in 'Mortgage banking income' and 'Other noninterest expense', respectively, within the Mortgage segment operating results for the three and six months ended June 30, 2023 and 2022: 
 Three Months Ended June 30,Six Months Ended June 30,
 202320222023 2022 
Servicing income:
   Servicing income$7,586 $7,966 $15,354 $15,395 
   Change in fair value of mortgage servicing rights(719)8,745 (5,993)28,096 
   Change in fair value of derivative hedging instruments(3,503)(9,897)(1,636)(28,995)
Servicing income
3,364 6,814 7,725 14,496 
Servicing expenses2,331 3,377 4,214 5,925 
          Net servicing income
$1,033 $3,437 $3,511 $8,571 

29
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Data and key economic assumptions related to the Company’s mortgage servicing rights as of June 30, 2023 and December 31, 2022 are as follows: 
 June 30,December 31,
 20232022
Unpaid principal balance of mortgage loans sold and serviced for others$10,961,516 $11,086,582 
Weighted-average prepayment speed (CPR)5.89 %5.55 %
Estimated impact on fair value of a 10% increase$(4,659)$(4,886)
Estimated impact on fair value of a 20% increase$(9,012)$(9,447)
Discount rate9.15 %9.10 %
Estimated impact on fair value of a 100 bp increase$(7,801)$(8,087)
Estimated impact on fair value of a 200 bp increase$(14,933)$(15,475)
Weighted-average coupon interest rate3.40 %3.31 %
Weighted-average servicing fee (basis points)2727
Weighted-average remaining maturity (in months)333332
The Company economically hedges the mortgage servicing rights portfolio with various derivative instruments to offset changes in the fair value of the related mortgage servicing rights. See Note 9, "Derivatives" for additional information on these hedging instruments.
As of June 30, 2023 and December 31, 2022, mortgage escrow deposits totaled to $113,692 and $75,612, respectively.
Note (7)—Income taxes:
The following table presents a reconciliation of income taxes for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Federal taxes calculated at      statutory rate$9,480 21.0 %$5,475 21.0 %$19,156 21.0 %$14,830 21.0 %
Increase (decrease) resulting    from:
State taxes, net of federal    benefit647 1.4 %1,582 6.1 %898 1.0 %2,533 3.6 %
Expense (benefit) from    equity based    compensation69 0.2 %(15)(0.1)%184 0.2 %(306)(0.4)%
Municipal interest income,    net of interest    disallowance(451)(1.0)%(444)(1.7)%(907)(1.0)%(888)(1.3)%
Bank-owned life insurance(79)(0.2)%(79)(0.3)%(206)(0.2)%(153)(0.2)%
Section 162(m) limitation103 0.2 %40 0.2 %230 0.2 %162 0.1 %
Other66 0.2 %158 0.6 %177 0.2 %(148)(0.1)%
Income tax expense, as    reported$9,835 21.8 %$6,717 25.8 %$19,532 21.4 %$16,030 22.7 %
Note (8)—Commitments and contingencies:
Commitments to extend credit & letters of credit
Some financial instruments, such as loan commitments, credit lines and letters of credit, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.
The same credit and underwriting policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. These commitments are only recorded in the consolidated financial statements when drawn upon and many expire without being used. The Company's maximum off-balance sheet exposure to credit loss is represented by the contractual amount of these instruments.
30
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
June 30,December 31,
 2023 2022 
Commitments to extend credit, excluding interest rate lock commitments$3,187,583 $3,563,982 
Letters of credit63,814 71,250 
Balance at end of period$3,251,397 $3,635,232 
As of June 30, 2023 and December 31, 2022, loan commitments included above with floating interest rates totaled $2,711,165 and $2,961,683, respectively.
The Company estimates expected credit losses on off-balance sheet loan commitments under the CECL methodology. When applying this methodology, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.
The table below presents activity within the allowance for credit losses on unfunded commitments included in accrued expenses and other liabilities on the Company's consolidated balance sheets:
Three Months Ended June 30,Six Months Ended June 30,
2023 20222023 2022 
Balance at beginning of period$18,463 $16,262 $22,969 $14,380 
Provision for credit losses on unfunded commitments(3,653)4,137 (8,159)6,019 
Balance at end of period$14,810 $20,399 $14,810 $20,399 
Loan repurchases or indemnifications
In connection with the sale of mortgage loans to third party investors, the Company makes usual and customary representations and warranties as to the propriety of its origination activities. Occasionally, the investors require the Company to repurchase loans sold to them under the terms of the warranties. When this happens, the loans are recorded at fair value with a corresponding charge to a recorded valuation reserve. The total principal amount of loans repurchased (or indemnified for) was $1,371 and $4,697 for the three and six months ended June 30, 2023, respectively and $198 and $1,546 for the three and six months ended June 30, 2022, respectively. The Company has established a reserve associated with loan repurchases.
The following table summarizes the activity in the repurchase reserve included in accrued expenses and other liabilities on the Company's consolidated balance sheets:
Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Balance at beginning of period$1,358 $4,317 $1,621 $4,802 
Provision for loan repurchases or indemnifications(200)(800)(450)(1,189)
Losses on loans repurchased or indemnified(29)(72)(42)(168)
Balance at end of period$1,129 $3,445 $1,129 $3,445 
Legal Proceedings
Various legal claims arise from time to time in the normal course of business, which, in the opinion of management, will not have a material effect on the Company’s consolidated financial statements.
Note (9)—Derivatives:
The Company utilizes derivative financial instruments as part of its ongoing efforts to manage its interest rate risk exposure as well as the exposure for its customers. Derivative financial instruments are included in the consolidated balance sheets line items “Other assets” or “Other liabilities” at fair value in accordance with ASC 815, “Derivatives and Hedging.”
Derivatives not designated as hedging instruments
The Company enters into interest rate-lock commitments to originate loans whereby the interest rate on the loan is determined prior to funding. Under such commitments, interest rates for mortgage loans are typically locked in for between 45 to 90 days with the customer. These interest rate lock commitments are recorded at fair value in the Company’s consolidated balance sheets. The Company also enters into best effort or mandatory delivery forward
31
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
commitments to sell residential mortgage loans to secondary market investors. Gains and losses arising from changes in the valuation of the interest rate-lock commitments and forward commitments are recognized currently in earnings and are reflected under the line item “Mortgage banking income” on the consolidated statements of income.
The Company also enters into forward commitments, futures and options contracts as economic hedges to offset the changes in fair value of mortgage servicing rights. Gains and losses associated with these instruments are included in earnings and are reflected under the line item “Mortgage banking income” on the consolidated statements of income.
Additionally, the Company enters into derivative instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.
The following tables provide details on the Company’s non-designated derivative financial instruments as of the dates presented:
June 30, 2023
Notional AmountAssetLiability
  Interest rate contracts$789,547 $43,238 $43,039 
  Forward commitments314,500 820 — 
  Interest rate-lock commitments135,374 1,611 — 
  Futures contracts328,500 452 — 
    Total$1,567,921 $46,121 $43,039 
 December 31, 2022
 Notional AmountAssetLiability
  Interest rate contracts$560,310 $45,775 $45,762 
  Forward commitments207,000 306 — 
  Interest rate-lock commitments118,313 1,433 — 
  Futures contracts494,300 — 3,790 
    Total$1,379,923 $47,514 $49,552 
(Losses) gains included in the consolidated statements of income related to the Company’s non-designated derivative financial instruments were as follows:
Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Included in mortgage banking income:
  Interest rate lock commitments$(1,028)$2,007 $179 $(3,439)
  Forward commitments1,031 14,432 736 52,335 
  Futures contracts(2,521)(9,165)(584)(25,700)
  Option contracts(461)— (1,125)36 
    Total$(2,979)$7,274 $(794)$23,232 
Derivatives designated as cash flow hedges
The Company also maintains two interest rate swap agreements with notional amounts totaling $30,000 used to hedge interest rate exposure on outstanding subordinated debentures included in long-term debt totaling $30,930. The interest rate swap contracts, which mature in June of 2024, are designated as cash flow hedges with the objective of reducing the variability in cash flows resulting from changes in interest rates. Under these agreements, the Company receives a variable rate of interest equal to 3-month LIBOR and pays a weighted average fixed rate of interest of 2.08%. Given the cessation of LIBOR on June 30, 2023, the final payment date utilizing a 3-month LIBOR reset will be in the last half of 2023. Following this payment, the variable rate in these swap agreements will convert to the ISDA recommended fallback rate of SOFR plus a credit spread adjustment.
32
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following presents a summary of the Company's designated cash flow hedges as of the dates presented:
 June 30, 2023December 31, 2022
 Notional AmountEstimated fair valueBalance sheet locationEstimated fair valueBalance sheet location
Interest rate swap agreements-
   subordinated debt		$30,000 $1,011 Other assets$1,255 Other assets
The Company's consolidated statements of income included gains of $232 and $429 for the three and six months ended June 30, 2023, respectively, and losses of $101 and $240 for the three and six months ended June 30, 2022, respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedges were effective during the periods presented and as a result qualified for hedge accounting treatment. As such, no amounts were reclassified from accumulated other comprehensive loss into earnings during either period presented.
The following discloses the amount included in other comprehensive (loss) income, net of tax, for derivative instruments designated as cash flow hedges for the periods presented: 
Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Amount of gain (loss) recognized in other comprehensive (loss) income, net of tax expense (benefit) of $6, $99, $(64) and $372
$17 $283 $(180)$1,057 
Derivatives designated as fair value hedges
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 June 30, 2023 and December 31, 2022, the fair value hedges were deemed effective.
 June 30, 2023December 31, 2022
 Remaining Maturity (In Years)Receive Fixed RatePay Floating RateNotional AmountEstimated fair valueNotional AmountEstimated fair value
Derivatives included in other liabilities:  
  Interest rate swap
    agreement- fixed rate
    money market deposits		1.141.50%SOFR75,000 (3,343)75,000 (3,693)
  Interest rate swap
    agreement- fixed rate
    money market deposits		1.141.50%SOFR125,000 (5,572)125,000 (6,154)
Interest rate swap
    agreement- subordinated
    debt		0.671.46%SOFR$100,000 $(2,590)$100,000 $(3,830)
     Total0.981.48%$300,000 $(11,505)$300,000 $(13,677)
33
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following discloses the amount of (expense) income included in interest expense on borrowings and deposits, related to these fair value hedging instruments:
Three Months Ended June 30,Six Months Ended June 30,
 2023 2022 2023 2022 
Designated fair value hedge:
     Interest (expense) income on deposits$(1,769)$395 $(3,277)$708 
     Interest (expense) income on borrowings(894)186 (1,654)348 
        Total$(2,663)$581 $(4,931)$1,056 
The following amounts were recorded on the balance sheet related to cumulative adjustments of fair value hedges as of the dates presented:
Carrying Amount of the Hedged ItemCumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
Line item on the balance sheetJune 30, 2023December 31, 2022June 30, 2023December 31, 2022
Money market and savings deposits195,589 196,520 
(1)
(8,915)(9,847)
Borrowings$96,605 $95,171 
(2)
$(2,590)$(3,830)
(1) The carrying value also includes an unaccreted purchase accounting fair value premium of $4,504 and $6,367 as of June 30, 2023 and December 31, 2022, respectively.
(2) The carrying value also includes unamortized subordinated debt issuance costs of $805 and $999 as of June 30, 2023 and December 31, 2022, respectively.
Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheets when the “right of offset” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments are subject to master netting agreements, however the Company has not elected to offset such financial instruments in the consolidated balance sheets. The following table presents the Company's gross derivative positions as recognized in the consolidated balance sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement:
Gross amounts not offset in the consolidated balance sheets
Gross amounts recognizedGross amounts offset in the consolidated balance sheetsNet amounts presented in the consolidated balance sheetsFinancial instrumentsFinancial collateral pledgedNet Amount
June 30, 2023
Derivative financial assets$44,150 $— $44,150 $12,613 $— $31,537 
Derivative financial liabilities$18,441 $— $18,441 $12,613 $5,828 $— 
December 31, 2022
Derivative financial assets$44,273 $— $44,273 $14,229 $— $30,044 
Derivative financial liabilities$20,251 $— $20,251 $14,229 $6,022 $— 
Most derivative contracts with clients are secured by collateral. Additionally, in accordance with the interest rate agreements with derivatives dealers, the Company may be required to post margin to these counterparties. As of June 30, 2023 and December 31, 2022, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of $14,113 and $23,325, respectively, against its obligations under these agreements. Cash pledged as collateral on derivative contracts is recorded in "Other assets" on the consolidated balance sheets.

34
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (10)—Fair value of financial instruments:
FASB ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a framework for measuring the fair value of assets and liabilities according to a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances.
The hierarchy is broken down into the following three levels, based on the reliability of inputs:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs for assets or liabilities that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.




















35
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The Company records the fair values of financial assets and liabilities on a recurring and non-recurring basis using the following methods and assumptions:
Investment Securities
Investment securities are recorded at fair value on a recurring basis. Fair values for securities are based on quoted market prices, where available. If quoted prices are not available, fair values are based on quoted market prices of similar instruments or are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the pricing relationship or correlation among other benchmark quoted securities. Investment securities valued using quoted market prices of similar instruments or that are valued using matrix pricing are classified as Level 2. When significant inputs to the valuation are unobservable, the available-for-sale securities are classified within Level 3 of the fair value hierarchy. Where no active market exists for a security or other benchmark securities, fair value is estimated by the Company with reference to discount margins for other high-risk securities.
Loans held for sale
Loans held for sale are carried at fair value. For mortgage loans HFS, fair value is determined using current secondary market prices for loans with similar characteristics, that is, using Level 2 inputs. Rebooked guaranteed GNMA optional repurchase loans included in loans held for sale do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option and are carried at their principal balance. For commercial loans held for sale, fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, credit metrics and collateral value when appropriate. As such, these are considered Level 3.
Derivatives
The fair value of the Company's interest rate swap agreements to facilitate customer transactions are based upon fair values provided from entities that engage in interest rate swap activity and is based upon projected future cash flows and interest rates. The fair value of interest rate lock commitments associated with the mortgage pipeline is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments, the difference between current levels of interest rates and the committed rates is also considered. The fair values of the Company's designated cash flow and fair value hedges are determined by calculating the difference between the discounted fixed rate cash flows and the discounted variable rate cash flows. The fair values of both the Company's hedges, including designated cash flow hedges and designated fair value hedges are based on pricing models that utilize observable market inputs. These financial instruments are classified as Level 2.
OREO
OREO is comprised of commercial and residential real estate obtained in partial or total satisfaction of loan obligations and excess land and facilities held for sale. OREO acquired in settlement of indebtedness is recorded at the lower of the carrying amount of the loan or the fair value of the real estate less costs to sell. Fair value is determined on a nonrecurring basis based on appraisals by qualified licensed appraisers and is adjusted for management’s estimates of costs to sell and holding period discounts. The valuations are classified as Level 3.
Mortgage servicing rights
MSRs are carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. As such, MSRs are considered Level 3.
Collateral dependent loans
Collateral dependent loans are loans for which, based on current information and events, the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral and it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral dependent loans are classified as Level 3.







36
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
June 30, 2023Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,160,354 $1,160,354 $— $— $1,160,354 
Investment securities1,422,391 — 1,422,391 — 1,422,391 
Net loans held for investment9,185,360 — — 8,894,367 8,894,367 
Loans held for sale, at fair value78,906 — 69,639 9,267 78,906 
Interest receivable44,973 234 6,682 38,057 44,973 
Mortgage servicing rights166,433 — — 166,433 166,433 
Derivatives47,132 — 47,132 — 47,132 
Financial liabilities: 
Deposits: 
Without stated maturities$9,251,599 $9,251,599 $— $— $9,251,599 
With stated maturities1,620,656 — 1,611,764 — 1,611,764 
Securities sold under agreements to
repurchase and federal funds purchased
116,220 116,220 — — 116,220 
Federal Home Loan Bank advances125,000 — 125,000 — 125,000 
Subordinated debt, net127,535 — — 117,939 117,939 
Interest payable16,897 3,503 11,894 1,500 16,897 
Derivatives54,544 — 54,544 — 54,544 
 
 Fair Value
December 31, 2022Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,027,052 $1,027,052 $— $— $1,027,052 
Investment securities1,474,176 — 1,474,176 — 1,474,176 
Net loans held for investment9,164,020 — — 9,048,943 9,048,943 
Loans held for sale, at fair value113,240 — 82,750 30,490 113,240 
Interest receivable45,684 126 6,961 38,597 45,684 
Mortgage servicing rights168,365 — — 168,365 168,365 
Derivatives48,769 — 48,769 — 48,769 
Financial liabilities: 
Deposits: 
Without stated maturities$9,433,860 $9,433,860 $— $— $9,433,860 
With stated maturities1,421,974 — 1,422,544 — 1,422,544 
Securities sold under agreements to
repurchase and federal funds purchased
86,945 86,945 — — 86,945 
Federal Home Loan Bank advances175,000 — 175,000 — 175,000 
Subordinated debt, net126,101 — — 118,817 118,817 
Interest payable8,648 2,571 4,559 1,518 8,648 
Derivatives63,229 — 63,229 — 63,229 
37
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets measured at fair value on a recurring basis as of June 30, 2023 are presented in the following table:
At June 30, 2023Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
Available-for-sale securities:    
U.S. government agency securities$— $40,529 $— $40,529 
Mortgage-backed securities - residential— 979,400 — 979,400 
Mortgage-backed securities - commercial— 17,254 — 17,254 
Municipal securities— 267,097 — 267,097 
U.S. Treasury securities— 108,221 — 108,221 
Corporate securities— 6,859 — 6,859 
Equity securities, at fair value— 3,031 — 3,031 
Total securities$— $1,422,391 $— $1,422,391 
Loans held for sale, at fair value$— $69,639 $9,267 $78,906 
Mortgage servicing rights— — 166,433 166,433 
Derivatives— 47,132 — 47,132 
Financial Liabilities:
Derivatives— 54,544 — 54,544 
The balances and levels of the assets measured at fair value on a non-recurring basis as of June 30, 2023 are presented in the following table: 
At June 30, 2023Quoted prices
in active
markets for
identical assets
(liabilities
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Non-recurring valuations:    
Financial assets:    
Other real estate owned$— $— $582 $582 
Collateral dependent net loans held for
   investment:
Construction— — 540 540 
Residential real estate:
1-4 family mortgage$— $— $389 $389 
Total collateral dependent loans$— $— $929 $929 
38
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets measured at fair value on a recurring basis as of December 31, 2022 are presented in the following table: 
At December 31, 2022Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
Available-for-sale securities:    
U.S. government agency securities$— $40,062 $— $40,062 
Mortgage-backed securities - residential— 1,034,193 — 1,034,193 
Mortgage-backed securities - commercial— 17,644 — 17,644 
Municipal securities — 264,420 — 264,420 
U.S. Treasury securities— 107,680 — 107,680 
Corporate securities— 7,187 — 7,187 
Equity securities, at fair value— 2,990 — 2,990 
Total securities$— $1,474,176 $— $1,474,176 
Loans held for sale, at fair value$— $82,750 $30,490 $113,240 
Mortgage servicing rights— — 168,365 168,365 
Derivatives— 48,769 — 48,769 
Financial Liabilities:
Derivatives— 63,229 — 63,229 
The balances and levels of the assets measured at fair value on a non-recurring basis as of December 31, 2022 are presented in the following table: 
At December 31, 2022Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2)		Significant unobservable
inputs
(level 3)		Total
Non-recurring valuations:    
Financial assets:    
Other real estate owned$— $— $2,497 $2,497 
Collateral dependent net loans held for
    investment:
Residential real estate:
1-4 family mortgage$— $— $366 $366 
Commercial real estate: 
Non-owner occupied— — 2,494 2,494 
Total collateral dependent loans$— $— $2,860 $2,860 
The following tables present information as of June 30, 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:
June 30, 2023
Financial instrumentFair ValueValuation techniqueSignificant 
unobservable inputs		Range of
inputs
Collateral dependent net loans
   held for investment		$929 Valuation of collateralDiscount for comparable sales
10%-35%
Other real estate owned$582 Appraised value of property less costs to sellDiscount for costs to sell
0%-15%
39
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
Financial instrumentFair ValueValuation techniqueSignificant 
unobservable inputs		Range of
inputs
Collateral dependent loans
    held for investment		$2,860 Valuation of collateralDiscount for comparable sales
10%-35%
Other real estate owned$2,497 Appraised value of property less costs to sellDiscount for costs to sell
0%-15%
For collateral dependent loans, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. Fair value of the loan's collateral is determined by third-party appraisals, which are then adjusted for estimated selling and closing costs related to liquidation of the collateral. Collateral dependent loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on changes in market conditions from the time of valuation and management's knowledge of the borrower and borrower's business. As of June 30, 2023 and December 31, 2022, total amortized cost of collateral dependent loans measured on a non-recurring basis amounted to $1,158 and $3,054, respectively.
Other real estate owned acquired in settlement of indebtedness is recorded at fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Any write-downs based on the asset's fair value at the date of foreclosure are charged to the allowance for credit losses. Appraisals for both collateral dependent loans and other real estate owned are performed by certified appraisers whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral dependent loans that are dependent on recovery through sale of equipment, such as farm equipment, automobiles and aircrafts are generally valued based on public source pricing or subscription services while more complex assets are valued through leveraging brokers who have expertise in the collateral involved.
Fair value option
The following table summarizes the Company's loans held for sale as of the dates presented:
June 30,December 31,
20232022
Loans held for sale under a fair value option:
    Commercial loans held for sale$9,267 $30,490 
  Mortgage loans held for sale69,639 82,750 
         Total loans held for sale, at fair value78,906 113,240 
Loans held for sale not accounted for under a fair value option:
  Mortgage loans held for sale - guaranteed GNMA repurchase option20,225 26,211 
               Total loans held for sale$99,131 $139,451 
Mortgage loans held for sale
The Company measures mortgage loans originated for sale at fair value under the fair value option as permitted under ASC 825, "Financial Instruments" ("ASC 825"). Electing to measure these assets at fair value reduces certain timing differences and more accurately matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.
Net losses of $129 and $179 resulting from fair value changes of mortgage loans were recorded in income during the three and six months ended June 30, 2023, respectively, compared to net gains (losses) of $4,671 and $(12,203) during the three and six months ended June 30, 2022, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The net change in fair value of these loans held for sale and derivatives resulted in net gains of $874 and $453 for the three and six months ended June 30, 2023, respectively, compared to net losses of $5,354 and $12,902 during the three and six months ended June 30, 2022, respectively. The change in fair value of both loans held for sale and the related derivative instruments are recorded in mortgage banking Income in the consolidated statements of income. Election of the fair value option allows the Company to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value.
40
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 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 and six months ended June 30, 2023 and 2022:
Three Months Ended June 30, 2023
Principal BalanceFair Value DiscountFair Value
Carrying value at beginning of period$12,467 $(2,957)$9,510 
Change in fair value:
  Pay-downs and pay-offs(235)— (235)
  Changes in valuation included in other noninterest income— (8)(8)
      Carrying value at end of period$12,232 $(2,965)$9,267 
Six Months Ended June 30, 2023
Principal BalanceFair Value DiscountFair Value
Carrying value at beginning of period$34,357 $(3,867)$30,490 
Change in fair value:
Pay-downs and pay-offs(22,125)— (22,125)
Changes in valuation included in other noninterest income— 902 902 
     Carrying value at end of period$12,232 $(2,965)$9,267 
Three Months Ended June 30, 2022
Principal balanceFair Value discountFair Value
Carrying value at beginning of period$85,816 $(7,637)$78,179 
Change in fair value:
  Pay-downs and pay-offs(38,354)— (38,354)
  Changes in valuation included in other noninterest income— (2,010)(2,010)
    Carrying value at end of period$47,462 $(9,647)$37,815 
Six Months Ended June 30, 2022
Principal balanceFair Value discountFair Value
Carrying value at beginning of period$86,762 $(7,463)$79,299 
Change in fair value:
   Pay-downs and pay-offs(39,300)— (39,300)
   Changes in valuation included in other noninterest income— (2,184)(2,184)
      Carrying value at end of period$47,462 $(9,647)$37,815 
41
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Interest income on loans held for sale measured at fair value is accrued as it is earned based on contractual rates and is reflected in interest income in the consolidated statements of income.
The following table summarizes the differences between the fair value and the principal balance for loans held for sale and nonaccrual loans measured at fair value as of June 30, 2023 and December 31, 2022: 
June 30, 2023Aggregate
fair value 		Aggregate Unpaid Principal BalanceDifference
Mortgage loans held for sale measured at fair value$69,639 $68,589 $1,050 
Nonaccrual commercial loans held for sale9,267 12,232 (2,965)
December 31, 2022Aggregate
fair value		Aggregate Unpaid Principal BalanceDifference
Mortgage loans held for sale measured at fair value$82,750 $81,520 $1,230 
Commercial loans held for sale measured at fair value21,201 22,126 (925)
Nonaccrual commercial loans held for sale9,289 12,231 (2,942)
Note (11)—Segment reporting:
The Company and the Bank are engaged in the business of banking and provide a full range of financial services. The Company determines reportable segments based on the significance of the segment’s operating results to the overall Company, the products and services offered, customer characteristics, processes and service delivery of the segments and the regular financial performance review and allocation of resources by the Chief Executive Officer, the Company’s chief operating decision maker. The Company has identified two distinct reportable segments—Banking and Mortgage. The Company’s primary segment is Banking, which provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. The Company also originates conforming residential mortgage loans through the Mortgage segment, which activities also include the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking.
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. As a result of exiting this channel, the Company incurred $12,458 of restructuring expenses during the three and six months ended June 30, 2022. 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.
42
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Interest rate lock commitment volume and sales volume included in the Mortgage segment are as follows for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Interest rate lock commitment volume by delivery    channel:
Direct-to-consumer $— $95,756 $— $663,848 
Retail402,951 605,114 777,993 1,346,129 
       Total$402,951 $700,870 $777,993 $2,009,977 
Mortgage loan sales$330,326 $869,688 $662,633 $2,154,170 
The following tables provide segment financial information for the periods indicated:
Three Months Ended June 30, 2023
Banking(2)
MortgageConsolidated
Net interest income$101,543 $— $101,543 
Provisions for credit losses (1,078)— (1,078)
Mortgage banking income— 16,454 16,454 
Change in fair value of mortgage servicing rights, net of hedging(1)
— (4,222)(4,222)
Other noninterest income11,480 101 11,581 
Depreciation and amortization2,220 232 2,452 
Amortization of intangibles940 — 940 
Other noninterest expense64,493 13,407 77,900 
Income (loss) before income taxes$46,448 $(1,306)$45,142 
Income tax expense9,835 
Net income applicable to FB Financial Corporation and noncontrolling
interest
35,307 
Net income applicable to noncontrolling interest(2)
8 
Net income applicable to FB Financial Corporation$35,299 
Total assets$12,302,812 $584,583 $12,887,395 
Goodwill242,561 — 242,561 
(1) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(2) Banking segment includes noncontrolling interest.

Three Months Ended June 30, 2022
Banking(3)
MortgageConsolidated
Net interest income$102,171 $— $102,171 
Provisions for credit losses 12,318 — 12,318 
Mortgage banking income— 23,711 23,711 
Change in fair value of mortgage servicing rights, net of hedging(1)
— (1,152)(1,152)
Other noninterest income10,699 (44)10,655 
Depreciation and amortization1,731 281 2,012 
Amortization of intangibles1,194 — 1,194 
Other noninterest expense(2)
56,395 37,396 93,791 
Income (loss) before income taxes$41,232 $(15,162)$26,070 
Income tax expense6,717 
Net income applicable to FB Financial Corporation and noncontrolling
interest
19,353 
Net income applicable to noncontrolling interest(3)
8 
Net income applicable to FB Financial Corporation$19,345 
Total assets$11,469,762 $724,100 $12,193,862 
Goodwill242,561 — 242,561 
(1) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(2) Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer internet delivery channel.
(3) Banking segment includes noncontrolling interest.
43
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)

Six Months Ended June 30, 2023
Banking(2)
MortgageConsolidated
Net interest income$205,203 $— $205,203 
Provisions for credit losses (587)— (587)
Mortgage banking income— 31,947 31,947 
Change in fair value of mortgage servicing rights, net of hedging(1)
— (7,629)(7,629)
Other noninterest income22,973 (129)22,844 
Depreciation and amortization4,269 411 4,680 
Amortization of intangibles1,930 — 1,930 
Other noninterest expense129,804 25,318 155,122 
Income (loss) before income taxes$92,760 $(1,540)$91,220 
Income tax expense19,532 
Net income applicable to FB Financial Corporation and noncontrolling
interest
71,688 
Net income applicable to noncontrolling interest(2)
8 
Net income applicable to FB Financial Corporation$71,680 
Total assets$12,302,812 $584,583 $12,887,395 
Goodwill242,561 — 242,561 
(1) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(2) Banking segment includes noncontrolling interest.

Six Months Ended June 30, 2022
Banking(3)
MortgageConsolidated
Net interest income$190,355 $(2)$190,353 
Provisions for credit losses 8,071 — 8,071 
Mortgage banking income— 52,989 52,989 
Change in fair value of mortgage servicing rights, net of hedging(1)
— (899)(899)
Other noninterest income22,682 (166)22,516 
Depreciation and amortization3,441 607 4,048 
Amortization of intangibles2,438 — 2,438 
Other noninterest expense(2)
113,025 66,758 179,783 
Income (loss) before income taxes$86,062 $(15,443)$70,619 
Income tax expense16,030 
Net income applicable to FB Financial Corporation and noncontrolling
interest
54,589 
Net income applicable to noncontrolling interest(3)
8 
Net income applicable to FB Financial Corporation$54,581 
Total assets$11,469,762 $724,100 $12,193,862 
Goodwill242,561 — 242,561 
(1)Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(2)Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer internet delivery channel.
(3)Banking segment includes noncontrolling interest.
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 $4,319 and $8,250 for the three and six months ended June 30, 2023, respectively, and $4,850 and $10,516 for the three and six months ended June 30, 2022, respectively.

44
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (12)—Minimum capital requirements:
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
Under regulatory guidance for non-advanced 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 June 30, 2023 and December 31, 2022, the Bank and Company met all capital adequacy requirements to which they are subject. Additionally, under U.S. Basel III Capital Rules, the Bank and Company opted out of including accumulated other comprehensive income in regulatory capital.
The Company elected to phase-in the impact related to adopting FASB ASU 2016-13 over the permissible five-year transition relief period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL in the first two years after adoption. As of January 1, 2022, the cumulative amount of the transition adjustments became fixed and are being phased out of regulatory capital calculations evenly over a three year period, with 75% of the transition provision’s impact being recognized in 2022, 50% recognized in 2023, and 25% recognized in 2024.
Actual and required capital amounts and ratios are included below as of the dates indicated.

June 30, 2023
ActualMinimum Capital
Adequacy with
Capital Buffer		To be Well-Capitalized
AmountRatioAmountRatioAmountRatio
Total Capital (to risk-weighted assets)      
FB Financial Corporation$1,588,399 13.9 %$1,198,463 10.5 %N/AN/A
FirstBank1,555,006 13.6 %1,196,301 10.5 %$1,139,334 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation$1,363,796 11.9 %$970,185 8.5 %N/AN/A
FirstBank1,330,403 11.7 %968,434 8.5 %$911,467 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,363,796 10.7 %$510,676 4.0 %N/AN/A
FirstBank1,330,403 10.4 %510,283 4.0 %$637,854 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation$1,333,796 11.7 %$798,976 7.0 %N/AN/A
FirstBank1,330,403 11.7 %797,534 7.0 %$740,567 6.5 %
December 31, 2022ActualMinimum Capital
Adequacy with
Capital Buffer		To be Well-Capitalized
AmountRatioAmountRatioAmountRatio
Total Capital (to risk-weighted assets)      
FB Financial Corporation$1,528,344 13.1 %$1,225,161 10.5 %N/AN/A
FirstBank1,506,543 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/AN/A
FirstBank1,293,585 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/AN/A
FirstBank1,293,585 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/AN/A
FirstBank1,293,585 11.1 %815,281 7.0 %$757,047 6.5 %
45
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (13)—Stock-Based Compensation:
Restricted Stock Units
The Company grants RSUs under compensation arrangements for the benefit of employees, executive officers, and directors. RSU grants are subject to time-based vesting. Compensation cost associated with time-based vesting RSUs is recognized on a straight line basis based on the grant date fair value of the awards. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the service conditions set forth in the grant agreements.
The following table summarizes changes in restricted stock units for the six months ended June 30, 2023:
 Restricted Stock
Units
Outstanding		Weighted
Average Grant
Date
Fair Value
Balance at beginning of period (unvested)365,155 $39.02 
Granted163,552 36.04 
Vested(163,129)39.19 
Forfeited(2,188)41.19 
Balance at end of period (unvested)363,390 $37.59 
The total fair value of restricted stock units vested and released was $1,802 and $6,393 for the three and six months ended June 30, 2023, respectively, and $2,449 and $5,846 for the three and six months ended June 30, 2022, respectively.
The compensation cost related to these grants and vesting of restricted stock units was $2,188 and $3,894 for the three and six months ended June 30, 2023, respectively, and $2,196 and $4,052 for the three and six months ended June 30, 2022, respectively. This includes amounts paid related to director grants and compensation elected to be settled in stock amounting to $272 and $447 during the three and six months ended June 30, 2023, respectively, and $148 and $314 for the three and six months ended June 30, 2022, respectively.
As of June 30, 2023, there was $11,036 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of 2.26 years. Additionally, as of June 30, 2023, there were 1,534,973 shares available for issuance under the Company's stock compensation plans. As of both June 30, 2023 and December 31, 2022, there was $292 accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.
46
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Performance-Based Restricted Stock Units
The Company awards PSUs to executives and other officers and employees. Under the terms of the awards, the number of units that will vest and convert to shares of common stock will be based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. The number of shares issued upon vesting will range from 0% to 200% of the PSUs granted. The Company's performance relative to a predefined peer group will be measured based on non-GAAP core return on average tangible common equity ratio, which is adjusted for unusual gains/losses, merger expenses, and other items as approved by the Compensation Committee of the Company's board of directors. Compensation expense for PSUs is estimated each period based on the fair value of the Company's stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the performance period of the awards.
The following table summarizes information about the changes in PSUs as of and for the six months ended June 30, 2023:
Performance Stock
Units
Outstanding		Weighted
Average Grant
Date
Fair Value
Balance at beginning of period (unvested)161,667 $41.73 
Granted86,010 37.17 
Performance adjustment (1)
51,444 36.93 
Vested(104,833)36.93 
Forfeited or expired(1,153)44.25 
Balance at end of period (unvested)193,135 $40.96 
(1) PSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. PSU
    awards are settled with payouts ranging from 0% and 200% of the target award value based on the Company's performance relative to a predefined
    peer group over a fixed three-year performance period. The performance adjustment represents the difference in shares ultimately awarded due to
    performance attainment above or below target.
The following table summarizes data related to the Company's outstanding PSUs as of June 30, 2023:
Grant YearGrant PricePerformance PeriodPSUs Outstanding
2021 (1)
$43.20 2021 to 202352,491
2022 (2)
$44.44 2022 to 202457,190
2023 (2)
$37.17 2023 to 202583,454
(1)Vesting factor will be either at 0%, 25%, 100%, or 200% of PSUs outstanding based on the Company's performance relative to a predefined peer
    group over a fixed three-year performance period.
(2)Vesting factor will be interpolated between 0% and 200% of PSUs outstanding based on the Company's performance relative to a predefined peer
    group over a fixed three-year performance period.
The Company recorded compensation cost of $1,060 and $1,639 for the for the three and six months ended June 30, 2023, respectively, and $842 and $1,568 for the three and six months ended June 30, 2022, respectively. As of June 30, 2023, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was $13,323, and the weighted average remaining performance period over which the cost could be recognized was 2.3 years.
Employee Stock Purchase Plan:
The Company maintains an employee stock purchase plan under which employees, through payroll deductions, are able to purchase shares of Company common stock. The employee purchase price is 95% of the lower of the market price on the first or last day of the offering period. The maximum number of shares issuable during any offering period is 200,000 shares and a participant may not purchase more than 725 shares during any offering period (and, in any event, no more than $25 worth of common stock in any calendar year). There were no shares issued under the ESPP during the three months ended June 30, 2023 or 2022. There were 8,214 and 15,152 shares of common stock issued under the ESPP with proceeds from employee payroll withholdings of $305 and $588, during the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, there were 2,306,532 shares available for issuance under the ESPP.
47
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (14)—Related party transactions:
(A) Loans:
The Bank has made and expects to continue to make loans to the directors, certain management, significant shareholders, and executive officers of the Company and their related interests in the ordinary course of business, in compliance with regulatory requirements.
An analysis of loans to executive officers, certain management, and directors of the Bank and their related interests is presented below:
Loans outstanding at January 1, 2023$82,559 
New loans and advances4,524 
Change in related party status(37,812)
Repayments(1,451)
Loans outstanding at June 30, 2023$47,820 
Unfunded commitments to certain executive officers, certain management and directors and their related interests totaled $53,589 and $31,564 at June 30, 2023 and December 31, 2022, respectively.
(B) Deposits:
The Bank held deposits from related parties totaling $298,186 and $347,660 as of June 30, 2023 and December 31, 2022, respectively.
(C) 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 $103 and $193 for the three and six months ended June 30, 2023, respectively, and $100 and $201 for the three and six months ended June 30, 2022, respectively.
(D) Aviation lease:
During the year ended December 31, 2021, the Bank formed a subsidiary, FBK Aviation, LLC and purchased an aircraft under this entity. FBK Aviation, LLC also maintains a non-exclusive aircraft lease agreement with an entity owned by one of the Company's directors. The Company recognized income of $4 and $11 during the three and six months ended June 30, 2023, respectively, and $8 and $19 during the three and six months ended June 30, 2022, respectively, under this agreement.
(E) Equity investment in preferred stock and master loan purchase agreement:
During the year ended December 31, 2022, the Company invested in preferred stock of a privately held entity of which an executive officer of the Company is on the Board of directors of the investee. This investment is included in other assets on the consolidated balance sheets with a carrying amount of $10,000 as of both June 30, 2023 and December 31, 2022, and is being accounted for as an equity security without readily determinable market value. No gains or losses have been recognized to date associated with this investment.
Concurrently, the Company also entered a separate master loan purchase agreement with the entity to purchase up to $250,000 in manufactured loan housing production over an initial five-year term. During the three and six months ended June 30, 2023, the Company purchased $6,449 of loans HFI under this agreement. As of June 30, 2023, the amortized cost of these loans HFI amounted to $6,441. There were no loans recorded under the master loan purchase agreement as of December 31, 2022.






48

ITEM 2 – Management’s discussion and analysis of financial condition and results of operations
The following is a discussion of our financial condition as of June 30, 2023 and December 31, 2022, and our results of operations for the three and six months ended June 30, 2023 and 2022, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, that was filed with the SEC on February 28, 2023, and with the accompanying unaudited notes to the condensed consolidated financial statements set forth in this Report.
Forward-looking statements
Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s future plans, results, strategies, and expectations, including expectations around changing economic markets. These statements can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “project,” and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon management's current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. The inclusion of these forward-looking statements should not be regarded as a representation by the Company or any other person that such expectations, estimates, and projections will be achieved. Accordingly, the Company cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which the Company operates and/or the US economy generally, (2) changes in government interest rate policies and its impact on the Company’s business, net interest margin, and mortgage operations, (3) any continuation of the recent turmoil in the banking industry, including the associated impact to the Company and other financial institutions of any regulatory changes or other mitigation efforts taken by government agencies in response, (4) increased competition for deposits, (5) the Company’s ability to effectively manage problem credits, (6) any deterioration in commercial real estate market fundamentals, (7) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, (8) the Company’s ability to successfully execute its various business strategies, (9) changes in state and federal legislation, regulations or policies applicable to banks and other financial service providers, including legislative developments, (10) the potential impact of the phase-out of LIBOR or other changes involving LIBOR, (11) the effectiveness of the Company’s cybersecurity controls and procedures to prevent and mitigate attempted intrusions, (12) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, and (13) the impact of natural disasters, pandemics, and/or acts of war or terrorism, (14) international or political instability, including the impacts related to or resulting from Russia’s military action in Ukraine and additional sanctions and export controls, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments, and (15) general competitive, economic, political, and market conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company. The Company qualifies all forward-looking statements by these cautionary statements.


49

Critical accounting policies
Our financial statements are prepared in accordance with 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.































50

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 endedAs of or for the six months ended,As of or for the year-ended
June 30,June 30,December 31,
(dollars in thousands, except share data)2023 2022 2023 2022 2022 
Selected Statement of Income Data
Net interest income101,543 102,171 $205,203 $190,353 $412,235 
Provisions for credit losses(1,078)12,318 (587)8,071 18,982 
Total noninterest income23,813 33,214 47,162 74,606 114,667 
Total noninterest expense81,292 96,997 161,732 186,269 348,346 
Income before income taxes45,142 26,070 91,220 70,619 159,574 
Income tax expense9,835 6,717 19,532 16,030 35,003 
Net income applicable to noncontrolling
    interest		8 8 8 8 16 
Net income applicable to FB Financial
   Corporation 		$35,299 $19,345 $71,680 $54,581 $124,555 
Per Common Share
Basic net income$0.75 $0.41 $1.53 $1.15 $2.64 
Diluted net income0.75 0.41 1.53 1.15 2.64 
Book value(1)
29.64 28.15 29.64 28.15 28.36 
Tangible book value(2)
24.23 22.67 24.23 22.67 22.90 
Cash dividends declared0.15 0.13 0.30 0.26 0.52 
Selected Balance Sheet Data
Cash and cash equivalents$1,160,354 $872,861 $1,160,354 $872,861 $1,027,052 
Loans HFI9,326,024 8,624,337 9,326,024 8,624,337 9,298,212 
Allowance for credit losses on loans HFI(140,664)(126,272)(140,664)(126,272)(134,192)
Loans held for sale(5)
99,131 260,215 99,131 260,215 139,451 
Investment securities, at fair value1,422,391 1,621,344 1,422,391 1,621,344 1,474,176 
Total assets12,887,395 12,193,862 12,887,395 12,193,862 12,847,756 
Noninterest-bearing deposits2,400,288 2,895,520 2,400,288 2,895,520 2,676,631 
Interest-bearing deposits (non-brokered)8,233,082 7,646,125 8,233,082 7,646,125 8,178,453 
Brokered deposits238,885 1,657 238,885 1,657 750 
Total deposits10,872,255 10,543,302 10,872,255 10,543,302 10,855,834 
   Estimated insured or collateralized
       deposits(4)
7,858,761 7,320,537 7,858,761 7,320,537 7,288,641 
Borrowings390,354 160,400 390,354 160,400 415,677 
Total common shareholders' equity1,386,951 1,319,852 1,386,951 1,319,852 1,325,425 
Selected Ratios
Return on average:
Assets(3)
1.10 %0.62 %1.13 %0.88 %1.01 %
Common shareholders' equity(3)
10.3 %5.74 %10.6 %7.95 %9.23 %
Tangible common equity(2)
12.6 %7.09 %13.1 %9.78 %11.4 %
Efficiency ratio64.8 %71.6 %64.1 %70.3 %66.1 %
Adjusted efficiency ratio (tax-equivalent
     basis)(2)
63.5 %61.1 %63.4 %64.5 %62.7 %
Loans HFI to deposit ratio85.8 %81.8 %85.8 %81.8 %85.7 %
Net interest margin (tax-equivalent basis)3.40 %3.52 %3.45 %3.28 %3.57 %
Yield on interest-earning assets5.67 %3.80 %5.53 %3.54 %4.16 %
Cost of total deposits2.38 %0.25 %2.16 %0.22 %0.54 %
Cost of interest-bearing liabilities3.14 %0.40 %2.88 %0.37 %0.87 %
Estimated uninsured and uncollateralized
   deposits as a percentage of total deposits(4)
27.7 %30.6 %27.7 %30.6 %32.9 %
51

As of or for the three months endedAs of or for the six months ended,As of or for the year ended
June 30,June 30,December 31,
2023 2022 2023 2022 2022 
Credit Quality Ratios
Allowance for credit losses on loans HFI as a
   percentage of loans HFI		1.51 %1.46 %1.51 %1.46 %1.44 %
Net charge-offs as a percentage of average
   loans HFI		(0.03)%(0.09)%(0.02)%(0.03)%(0.02)%
Nonperforming assets as a percentage of total
   assets(5)
0.59 %0.46 %0.59 %0.46 %0.68 %
Nonperforming loans HFI to total loans HFI0.47 %0.51 %0.47 %0.51 %0.49 %
Capital Ratios (Company)
Total common shareholders' equity to assets10.8 %10.8 %10.8 %10.8 %10.3 %
Tangible common equity to tangible assets(2)
8.98 %8.90 %8.98 %8.90 %8.50 %
Tier 1 leverage10.7 %10.2 %10.7 %10.2 %10.5 %
Tier 1 risk-based capital11.9 %11.8 %11.9 %11.8 %11.3 %
Total risk-based capital13.9 %13.6 %13.9 %13.6 %13.1 %
Common Equity Tier 1 (CET1)11.7 %11.5 %11.7 %11.5 %11.0 %
Capital Ratios (Bank)
Total common shareholders' equity to assets10.7 %10.9 %10.7 %10.9 %10.4 %
Tier 1 leverage10.4 %10.0 %10.4 %10.0 %10.4 %
Tier 1 risk-based capital11.7 %11.5 %11.7 %11.5 %11.1 %
Total risk-based capital13.6 %13.4 %13.6 %13.4 %12.9 %
Common Equity Tier 1 (CET1)11.7 %11.5 %11.7 %11.5 %11.1 %
(1)Book value per share equals our total common shareholders’ equity divided by the number of share of our common stock outstanding as of the date presented.
(2)Non-GAAP financial measure; See "GAAP reconciliation and management explanation of non-GAAP financial measures” and non-GAAP reconciliations herein.
(3)ROAA and ROAE is calculated by dividing annualized net income or loss for that period by our average assets or average equity for the same period.
(4)Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.
(5)Includes optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days as of June 30, 2023 and December 31, 2022. See 'Nonperforming assets' under the subheading 'Asset quality' included within this management's discussion and analysis for further discussion.

GAAP reconciliation and management explanation of non-GAAP financial measures
We identify certain financial measures discussed in this Report as being "non-GAAP financial measures." The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax equivalent basis), tangible book value per common share, tangible common equity to tangible assets, and return on average tangible common equity.
In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.
The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our financial highlights may differ from that of other companies reporting measures with similar names. As a result of differences in how companies report non-GAAP measures, presentations by other banking organizations may not be comparable with ours. The following reconciliation tables provide a more detailed analysis of, and reconciliations for, each of these non-GAAP financial measures.






52

Adjusted Efficiency ratio (tax-equivalent basis)
The adjusted efficiency ratio (tax-equivalent basis) is a non-GAAP measure that excludes certain gains (losses), mortgage restructuring expenses, and other selected items. Our management uses this measure in its analysis of our performance. Our management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains or losses and changes. The most directly comparable financial measure calculated in accordance with GAAP is the efficiency ratio.
The following table presents a reconciliation of our adjusted efficiency ratio (tax-equivalent basis) to our efficiency ratio for the periods below:
(dollars in thousands)Three Months Ended June 30,Six Months Ended June 30,Year Ended December 31,
2023 2022 2023 2022 2022 
Adjusted efficiency ratio (tax-equivalent
    basis)
Total noninterest expense$81,292 $96,997 $161,732 $186,269 $348,346 
Less mortgage restructuring expenses— 12,458 — 12,458 12,458 
Less severance expense1,426 — 1,426 — — 
Adjusted noninterest expense$79,866 $84,539 $160,306 $173,811 $335,888 
Net interest income (tax-equivalent basis)$102,383 $102,926 $206,876 $191,858 $415,282 
Total noninterest income23,813 33,214 47,162 74,606 114,667 
Less (loss) gain on change in fair value of
   commercial loans held for sale acquired in
   previous business combination		(8)(2,010)902 (2,184)(5,133)
Less gain (loss) on sales or write-downs of
   other real estate owned and other assets		533 (8)350 (442)(265)
Less (loss) gain from securities, net(28)(109)41 (261)(376)
Adjusted noninterest income23,316 35,341 45,869 77,493 120,441 
Adjusted operating revenue$125,699 $138,267 $252,745 $269,351 $535,723 
Efficiency ratio (GAAP)64.8 %71.6 %64.1 %70.3 %66.1 %
Adjusted efficiency ratio (tax-equivalent
    basis)		63.5 %61.1 %63.4 %64.5 %62.7 %
















53

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:
June 30,
December 31,
(dollars in thousands, except share data)2023 2022 2022 
Tangible Assets
Total assets$12,887,395 $12,193,862 $12,847,756 
Adjustments:
Goodwill(242,561)(242,561)(242,561)
Intangibles, net(10,438)(14,515)(12,368)
Tangible assets$12,634,396 $11,936,786 $12,592,827 
Tangible Common Equity
Total common shareholders' equity$1,386,951 $1,319,852 $1,325,425 
Adjustments:
Goodwill(242,561)(242,561)(242,561)
Intangibles, net(10,438)(14,515)(12,368)
Tangible common equity$1,133,952 $1,062,776 $1,070,496 
Common shares outstanding46,798,751 46,881,896 46,737,912 
Book value per common share$29.64 $28.15 $28.36 
Tangible book value per common share$24.23 $22.67 $22.90 
Total common shareholders' equity to total assets10.8 %10.8 %10.3 %
Tangible common equity to tangible assets8.98 %8.90 %8.50 %
Return on average tangible common equity
Return on average tangible common equity is a non-GAAP measure that uses average shareholders' equity and excludes the impact of goodwill and other intangibles. This measurement is also used by our management to evaluate capital adequacy. The following table presents, as of the dates set forth below, reconciliations of total average tangible common equity to average shareholders' equity and return on average tangible common equity to return on average shareholders' equity:
Three Months Ended June 30,Six Months Ended June 30,Year Ended December 31,
(dollars in thousands)2023 2022 2023 2022 2022 
Return on average tangible common equity
Total average common shareholders' equity$1,376,818 $1,352,701 $1,360,108 $1,384,269 $1,349,583 
Adjustments:
Average goodwill(242,561)(242,561)(242,561)(242,561)(242,561)
Average intangibles, net(10,913)(15,144)(11,385)(15,757)(14,573)
Average tangible common equity$1,123,344 $1,094,996 $1,106,162 $1,125,951 $1,092,449 
Net income applicable to FB Financial
    Corporation		$35,299 $19,345 $71,680 $54,581 $124,555 
Return on average common shareholders'
    equity		10.3 %5.74 %10.6 %7.95 %9.23 %
Return on average tangible common equity12.6 %7.09 %13.1 %9.78 %11.4 %

54

Company overview
We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned bank subsidiary, FirstBank and the Bank's subsidiaries. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North Georgia. As of June 30, 2023, our footprint included 82 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. Our banking services extend to 16 community markets throughout Tennessee and North Georgia. FirstBank also provides retail mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.
We operate through two segments, Banking and Mortgage. We generate most of our revenue in our Banking segment from interest on loans and investments, loan-related fees, trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, however we have other sources of funds including unsecured credit lines, brokered CDs, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary mortgage loan market, as well as from mortgage servicing revenues.
Recent developments
Recent banking events
The banking sector experienced significant volatility during the first half of 2023, including high-profile bank failures, continuing interest rate hikes and recessionary concerns. We have proactively positioned the balance sheet to mitigate the risks affecting the Company and the overall banking industry in order to serve our clients and communities.
As of June 30, 2023, we carried on-balance sheet liquidity of $1.44 billion. We maintain the ability to access $6.42 billion of contingent liquidity from the FHLB, Federal Reserve, brokered CDs, and unsecured lines of credit. Our available-for-sale debt securities portfolio is 11.0% of total assets and we do not maintain any held-to-maturity investment securities. Management considers our current liquidity position to be more than adequate to meet both short-term and long-term liquidity needs. Refer to the section 'Liquidity and capital resources' for additional information.
Further, our capital ratios of the Company, and its subsidiary bank are well above the standards to be considered well-capitalized under regulatory requirements. Refer to the section 'Shareholders' equity and capital management' for additional details.
Non-performing assets were 0.59% of total assets as of June 30, 2023 and net charge-offs during the three and six months ended June 30, 2023 were 0.03% and 0.02%, respectively, which we believe reflects our disciplined underwriting and conservative lending philosophy. Refer to the section 'Asset quality' for additional information.
While the high-profile bank failures and other concerns have impacted the entire banking industry and future events cannot be predicted, we remain committed to safe and sound community banking practices that have been a cornerstone of the Company's values and historical performance.
Overview of recent financial performance
Results of operations
Three months ended June 30, 2023 compared to the three months ended June 30, 2022
Our net income increased during the three months ended June 30, 2023 to $35.3 million from $19.4 million for the three months ended June 30, 2022. Diluted earnings per common share was $0.75 and $0.41 for the three months ended June 30, 2023 and 2022, respectively. Our net income represented a return on average assets, or ROAA, of 1.10% and 0.62% for the three months ended June 30, 2023 and 2022, respectively, and a return on average shareholders’ equity, or ROAE, of 10.3% and 5.74% for the same periods. Our ratio of return on average tangible common equity, or ROATCE for the three months ended June 30, 2023 and 2022 was 12.6% and 7.09%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.
During the three months ended June 30, 2023, our net interest income before provisions for credit losses was $101.5 million compared with $102.2 million for the three months ended June 30, 2022. Our net interest margin, on a tax-equivalent basis, decreased to 3.40% for the three months ended June 30, 2023, compared with 3.52% for the three
55

months ended June 30, 2022. The decrease was primarily driven by higher interest rates increasing our total cost of funds compared to the increase in the interest income on interest-earnings assets during the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
We experienced a decrease in noninterest income of $9.4 million to $23.8 million for the three months ended June 30, 2023, compared with $33.2 million for the same period in the prior year. A decrease of $10.3 million in mortgage banking income was the primary driver for the downward movement in noninterest income, which was the result of interest rate increases and an overall slowdown in mortgage activity experienced throughout the industry. Additionally, the change also reflects the restructuring of our mortgage business (referred to herein as "Mortgage restructuring"), including the exit of our direct-to-consumer internet delivery channel during the second quarter of 2022. Refer to the section "Business segment highlights" for additional information on the restructuring of our Mortgage segment.
Noninterest expense decreased to $81.3 million for the three months ended June 30, 2023, compared with $97.0 million for the three months ended June 30, 2022. The decrease in noninterest expense is primarily driven by the mortgage restructuring expense of $12.5 million during the three months ended June 30, 2022 and decreases in salaries, commissions and employee benefit expenses due to a decrease in mortgage production volume.
Six months ended June 30, 2023 compared to the six months ended June 30, 2022
Our net income increased during the six months ended June 30, 2023 to $71.7 million from $54.6 million for the six months ended June 30, 2022. Diluted earnings per common share were $1.53 and $1.15 for the six months ended June 30, 2023 and 2022, respectively. Our net income represented a ROAA of 1.13% and 0.88% for the six months ended June 30, 2023 and 2022, respectively, and a ROAE of 10.6% and 7.95% for the same periods. Our ROATCE for the six months ended June 30, 2023 and 2022 were 13.1% and 9.78%, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of tangible common equity and return on average tangible common equity.
During the six months ended June 30, 2023, our net interest income before provisions for credit losses increased to $205.2 million compared with $190.4 million in the six months ended June 30, 2022. Our net interest margin, on a tax-equivalent basis, increased to 3.45% for the six months ended June 30, 2023 as compared to 3.28% for the six months ended June 30, 2022. The increase was primarily driven by an increase in interest rates on loans, which was partially offset by the impact of increasing costs of funds as competition over customer deposits has risen in the industry.
Noninterest income for the six months ended June 30, 2023 decreased by $27.4 million to $47.2 million, down from $74.6 million for the six months ended June 30, 2022. The decrease in noninterest income was primarily due to a $27.8 million decrease in mortgage banking income for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. These results were impacted by increasing interest rates, compressing margins, and a decrease in demand for residential mortgages during the six months ended June 30, 2023 compared with the six months ended June 30, 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 $161.7 million for the six months ended June 30, 2023, compared with $186.3 million for the six months ended June 30, 2022. The decrease in noninterest expense is reflective of the $21.7 million decrease in salaries, commissions and employee-related costs in the Mortgage segment related to the restructuring of our Mortgage segment and reduced headcount and mortgage production which was slightly offset by a $2.1 million increase in regulatory fees and assessments. Additionally, the decrease reflects $12.5 million in mortgage restructuring expenses incurred during the six months ended June 30, 2022.
Business segment highlights
We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment reporting” in the notes to our unaudited consolidated financial statements contained herein for a description of these business segments.
Banking
Three months ended June 30, 2023 compared to three months ended June 30, 2022
Income before taxes from the Banking segment increased for the three months ended June 30, 2023 to $46.4 million, compared to $41.2 million for the three months ended June 30, 2022. These results were primarily driven by a reversal in provision for credit losses on loans HFI and unfunded loan commitments of $1.1 million for the three months ended June 30, 2023 compared to a provision expense of $12.3 million for the three months ended June 30, 2022, reflecting a
56

decrease in unfunded loan commitments in the construction and land development category by $379.2 million from June 30, 2022. Noninterest income increased to $11.5 million in the three months ended June 30, 2023 compared to $10.7 million in the three months ended June 30, 2022. This includes losses associated with our commercial loans held for sale portfolio of $8 thousand for the three months ended June 30, 2023 compared with $2.0 million for the three months ended June 30, 2022. Noninterest expense increased during the three months ended June 30, 2023 to $67.7 million from $59.3 million for three months ended June 30, 2022 due to increases in salaries, severance, regulatory fees, occupancy, and marketing expenses.
Six months ended June 30, 2023 compared to the six months ended June 30, 2022
Income before taxes from the Banking segment increased for the six months ended June 30, 2023 to $92.8 million, compared to $86.1 million for the six months ended June 30, 2022. Net interest income increased by $14.8 million to $205.2 million during the six months ended June 30, 2023 compared to $190.4 million during the six months ended June 30, 2022. Our provisions for credit losses on loans HFI and unfunded loan commitments resulted in a $0.6 million net reversal during the six months ended June 30, 2023 compared to a $8.1 million provision expense during the six months ended June 30, 2022. Noninterest income increased slightly to $23.0 million in the six months ended June 30, 2023 as compared to $22.7 million in the six months ended June 30, 2022. Noninterest expense increased to $136.0 million for six months ended June 30, 2023 compared to $118.9 million for the six months ended June 30, 2022 due to increases in salaries, severance, regulatory fees and assessments, occupancy, legal and professional fees, and marketing.
Mortgage
Three months ended June 30, 2023 compared to three months ended June 30, 2022
The Mortgage segment reported a pre-tax loss of $1.3 million for the three months ended June 30, 2023, compared to a pre-tax loss of $15.2 million for the three months ended June 30, 2022. The loss in 2022 includes a $12.5 million mortgage restructuring expense associated with the exit of our direct-to-consumer internet delivery channel. Noninterest income decreased by $10.2 million to $12.3 million for the three months ended June 30, 2023, compared with $22.5 million for the three months ended June 30, 2022, which was related to a decrease in mortgage banking income. Further discussion related to the change in mortgage banking income is included under the subheading 'Noninterest income' included within this management's discussion and analysis. Noninterest expense for the three months ended June 30, 2023 and 2022 was $13.6 million and $37.7 million, respectively. This decrease is reflective of the mortgage restructuring expense mentioned above in addition to decreases in marketing, legal and professional fees, salaries, commissions, incentives and employee benefits due to a reduction in production volume and headcount reduction from the Mortgage restructuring.
Six months ended June 30, 2023 compared to the six months ended June 30, 2022
Activity in our Mortgage segment resulted in a pre-tax net loss of $1.5 million for the six months ended June 30, 2023 compared to a pre-tax net loss of $15.4 million for the six months ended June 30, 2022. Mortgage banking income decreased $27.8 million to $24.3 million during the six months ended June 30, 2023 compared to $52.1 million for the six months ended June 30, 2022. Further discussion on the components of mortgage banking income is included under the subheading 'Noninterest income' within this management's discussion and analysis. Noninterest expense for the six months ended June 30, 2023 and 2022 was $25.7 million and $67.4 million, respectively, This decrease is reflective of the mortgage restructuring expense mentioned above in addition to decreases in marketing, legal and professional fees, occupancy, salaries, commissions and incentive costs associated with the decrease in production volume and headcount reduction from the Mortgage restructuring.
Results of operations
Throughout the following discussion of our operating results, we present our net interest income, net interest margin and efficiency ratio on a fully tax-equivalent basis. The fully tax-equivalent basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income, which enhances comparability of net interest income arising from taxable and tax-exempt sources.
The adjustment to convert certain income to a tax-equivalent basis consists of dividing tax exempt income by one minus the combined federal and blended state statutory income tax rate of 26.06% for the three and six months ended June 30, 2023 and 2022.
57

Net interest income
Net interest income is the most significant component of our earnings, generally comprising over 50% of our total revenues in a given period. Net interest income and margin are shaped by many factors, primarily the volume, term structure and mix of earning assets, funding mechanisms, and interest rate fluctuations. Other factors include accretion or amortization of discounts or premiums on purchased loans, prepayment risk on mortgage and investment–related assets, and the composition and maturity of earning assets and interest-bearing liabilities. Loans typically generate more interest income than investment securities with similar maturities. Funding from client deposits generally costs less than wholesale funding sources. Factors such as general economic activity, Federal Reserve monetary policy, and price volatility of competing alternative investments, can also exert significant influence on our ability to optimize the mix of assets and funding, net interest income, and margin.
During the three and six months ended June 30, 2023, the US Treasury yield curve remained inverted as long-term rates increased at a slower pace than short-term rates which is in contrast to the more normalized upward sloping US Treasury yield curve during the three and six months ended June 30, 2022. The Federal Funds Target Rate range was 5.00% - 5.25% and 1.50% - 1.75% as of June 30, 2023 and June 30, 2022, respectively. Effective, July 27, 2023, the Federal Reserve increased the target range for the federal funds rate to 5.25% - 5.50%.
Three months ended June 30, 2023 compared to three months ended June 30, 2022
On a tax-equivalent basis, net interest income decreased slightly to $102.4 million for the three months ended June 30, 2023 as compared to $102.9 million for the three months ended June 30, 2022. Interest income, on a tax-equivalent basis, was $171.0 million for the three months ended June 30, 2023, compared to $111.0 million for the three months ended June 30, 2022, an increase of $60.1 million, which was primarily driven by an increase in both interest rates and volume on loans HFI, partially offset by an increase in our cost of funds.
Interest income on loans HFI, on a tax-equivalent basis, increased $51.7 million to $148.4 million for the three months ended June 30, 2023 from $96.7 million for the three months ended June 30, 2022 primarily due to higher interest rates with a secondary driver of increased volume. The tax-equivalent yield on loans held for investment was 6.34% for the three months ended June 30, 2023, up 168 basis points from the three months ended June 30, 2022. Our estimated contractual loan interest yield was 6.16% for the three months ended June 30, 2023 compared with 4.24% in the three months ended June 30, 2022. Additionally, average loans HFI increased to $9.39 billion for the three months ended June 30, 2023 compared to $8.32 billion for the three months ended June 30, 2022 due to strong demand in our primary markets and funding of prior loan commitments.
The components of our loan yield for the three months ended June 30, 2023 and 2022 were as follows:
Three Months Ended June 30,
20232022
(dollars in thousands)Interest
income		Average
yield		Interest
income		Average
yield
Loan HFI yield components:
Contractual interest rate on loans HFI(1)
$144,322 6.16 %$88,005 4.24 %
Origination and other loan fee income3,907 0.17 %6,927 0.33 %
(Amortization) accretion on purchased loans(14)— %64 — %
Nonaccrual interest collections200 0.01 %546 0.03 %
Syndicated fee income— — %1,150 0.06 %
Total loan HFI yield$148,415 6.34 %$96,692 4.66 %
(1) Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.

Origination and other loan fees (including syndication fee income for the three months ended June 30, 2022) impacted our NIM by 13 basis point and 28 basis points for the three months ended June 30, 2023 and 2022, respectively.
Interest expense was $68.6 million for the three months ended June 30, 2023, an increase of $60.6 million as compared to the three months ended June 30, 2022. The primary driver was increases in interest expense on money market and interest-bearing checking deposit products. Interest expense on money market deposits increased $28.6 million to $30.1 million for the three months ended June 30, 2023 compared to $1.4 million for the three months ended June 30, 2022. Interest expense on interest-bearing checking deposit products increased $20.5 million to $23.8 million for the three months ended June 30, 2023 compared to $3.3 million for the three months ended June 30, 2022. These increases were most significantly influenced by increasing interest rates. The average rate on money market deposits increased 323 basis
58

points from 0.20% for the three months ended June 30, 2022 to 3.43% for the three months ended June 30, 2023 and the average rate on interest-bearing checking deposits increased 266 basis points from 0.39% for the three months ended June 30, 2022 to 3.05% for the three months ended June 30, 2023. Total cost of interest-bearing deposits was 3.06% for the three months ended June 30, 2023 compared to 0.33% for the three months ended June 30, 2022. As interest rates on deposits increase, we tend to experience some movement between deposit types as customers seek higher interest rates and shift from noninterest-bearing deposit accounts to interest-bearing deposit products.
Overall, our NIM, on a tax-equivalent basis, decreased to 3.40% for the three months ended June 30, 2023 from 3.52% for the three months ended June 30, 2022, driven by the increase in both interest rates and volume of loans HFI, partially offset by an increase in cost of funds previously discussed. Additionally, there was a shift in our balance sheet composition, including a decline in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. Excess liquidity is estimated to have negatively impacted our NIM by approximately 3 basis point for the three months ended June 30, 2023 compared to approximately 14 basis points for the three months ended June 30, 2022.




























59

Average balance and interest yield/rate analysis
The table below shows the average balances, income and expense and yield and rates of each of our interest-earning assets and interest-bearing liabilities on a tax equivalent basis, if applicable, for the periods indicated.
Three Months Ended June 30,
20232022
(dollars in thousands on tax-equivalent basis)Average
balances 		Interest
income/
expense		Average
yield/
rate		Average
balances 		Interest
income/
expense		Average
yield/
rate
Interest-earning assets:
Loans held for investment (1)(2)
$9,387,284 $148,415 6.34 %$8,323,778 $96,692 4.66 %
Loans held for sale- mortgage63,407 1,005 6.36 %215,779 2,350 4.37 %
Loans held for sale-commercial9,377 3 0.13 %56,460 718 5.10 %
Investment securities:
Taxable1,374,308 6,480 1.89 %1,474,999 6,499 1.77 %
Tax-exempt(2)
293,739 2,445 3.34 %307,719 2,492 3.25 %
Total investment securities(2)
1,668,047 8,925 2.15 %1,782,718 8,991 2.02 %
Federal funds sold and reverse repurchase agreements
61,799 1,050 6.81 %221,929 421 0.76 %
Interest-bearing deposits with other financial institutions857,862 10,829 5.06 %1,081,474 1,551 0.58 %
FHLB stock42,133 796 7.58 %34,536 246 2.86 %
Total interest earning assets(2)
12,089,909 171,023 5.67 %11,716,674 110,969 3.80 %
Noninterest Earning Assets:
Cash and due from banks118,872 91,230 
Allowance for credit losses on loans HFI(138,983)(120,297)
Other assets (3)(4)(5)
756,651 739,872 
Total noninterest earning assets736,540 710,805 
Total assets$12,826,449 $12,427,479 
Interest-bearing liabilities:
Interest bearing deposits:
Interest-bearing checking$3,127,219 $23,751 3.05 %$3,415,135 $3,285 0.39 %
Money market deposits3,516,901 30,053 3.43 %2,842,026 1,416 0.20 %
Savings deposits433,530 63 0.06 %508,511 68 0.05 %
Customer time deposits1,426,320 10,658 3.00 %1,129,668 1,798 0.64 %
Brokered and internet time deposits56,455 732 5.20 %6,387 24 1.51 %
Time deposits1,482,775 11,390 3.08 %1,136,055 1,822 0.64 %
Total interest-bearing deposits8,560,425 65,257 3.06 %7,901,727 6,591 0.33 %
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds
   purchased		30,050 97 1.29 %27,233 12 0.18 %
Federal Home Loan Bank advances61,264 784 5.13 %— — — %
Subordinated debt127,129 2,496 7.88 %129,691 1,434 4.43 %
Other borrowings1,385 6 1.74 %1,480 6 1.63 %
Total other interest-bearing liabilities219,828 3,383 6.17 %158,404 1,452 3.68 %
Total Interest-bearing liabilities8,780,253 68,640 3.14 %8,060,131 8,043 0.40 %
Noninterest bearing liabilities:
Demand deposits2,430,476 2,879,662 
Other liabilities(4)
238,809 134,892 
Total noninterest-bearing liabilities2,669,285 3,014,554 
Total liabilities11,449,538 11,074,685 
FB Financial Corporation common shareholders' equity1,376,818 1,352,701 
Noncontrolling interest93 93 
         Shareholders' equity1,376,911 1,352,794 
Total liabilities and shareholders' equity$12,826,449 $12,427,479 
Net interest income (tax-equivalent basis)$102,383 $102,926 
Interest rate spread (tax-equivalent basis)2.53 %3.40 %
Net interest margin (tax-equivalent basis)(6)
3.40 %3.52 %
Cost of total deposits2.38 %0.25 %
Average interest-earning assets to average interest-bearing liabilities137.7 %145.4 %
(1)Average balances of nonaccrual loans and overdrafts are included in average loan balances (before deduction of ACL).
(2)Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included were $0.8 million for both the three months ended June 30, 2023 and 2022.
(3)Includes average net unrealized losses on investment securities available for sale of $212.0 million and $135.7 million for the three months ended June 30, 2023 and 2022, respectively.
(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $20.0 million for the three months ended June 30, 2023.
(5)Includes investments in premises and equipment, OREO, interest receivable, MSRs, core deposit and other intangibles, goodwill and other miscellaneous assets.
(6)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total interest earning assets.






60

Yield/rate and volume analysis
The table below presents the components of the changes in net interest income for the three months ended June 30, 2023 and 2022. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.
Three months ended June 30, 2023 compared to three months ended June 30, 2022 due to changes in
(dollars in thousands on a tax-equivalent basis)VolumeYield/ rateNet increase
(decrease)
Interest-earning assets:
Loans held for investment(1)(2)
$16,814 $34,909 $51,723 
Loans held for sale - mortgage(2,415)1,070 (1,345)
Loans held for sale - commercial(15)(700)(715)
Investment securities:
Taxable(475)456 (19)
Tax Exempt(2)
(116)69 (47)
Federal funds sold and reverse repurchase agreements
(2,721)3,350 629 
Interest-bearing deposits with other financial institutions(2,823)12,101 9,278 
FHLB stock144 406 550 
Total interest income(2)
8,393 51,661 60,054 
Interest-bearing liabilities:
Interest-bearing checking(2,187)22,653 20,466 
Money market deposits5,767 22,870 28,637 
Savings deposits(11)6 (5)
Customer time deposits2,217 6,643 8,860 
Brokered and internet time deposits649 59 708 
Securities sold under agreements to repurchase and federal funds
   purchased		9 76 85 
Federal Home Loan Bank advances784 — 784 
Subordinated debt(50)1,112 1,062 
Total interest expense7,178 53,419 60,597 
Change in net interest income(2)
$1,215 $(1,758)$(543)
(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses on loans HFI).
(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $0.8 million for both the three months ended June 30, 2023 and 2022.










61

Six months ended June 30, 2023 compared to the six months ended June 30, 2022
On a tax-equivalent basis, net interest income increased $15.0 million to $206.9 million for the six months ended June 30, 2023 as compared to $191.9 million for the six months ended June 30, 2022. Interest income, on a tax-equivalent basis, was $331.3 million for the six months ended June 30, 2023, compared to $206.8 million for the six months ended June 30, 2022, an increase of $124.5 million, which was primarily driven by increases in both interest rates and volume on loans HFI, partially offset by an increase in our cost of deposits. Total interest income represents an increase in yield on interest-earning assets to 5.53% for the six months ended June 30, 2023 compared with 3.54% for the six months ended June 30, 2022.
Interest income on loans HFI, on a tax-equivalent basis, increased $108.7 million to $287.9 million for the six months ended June 30, 2023 from $179.2 million for the six months ended June 30, 2022 due primarily to increasing interest rates, however the change was also heavily influenced by an increase in volume of average loans HFI. The average yield on loans HFI increased by 171 basis points period-over-period to 6.20% for the six months ended June 30, 2023 from 4.49% for the six months ended June 30, 2022. Our estimated contractual loan interest yield was 6.03% in the six months ended June 30, 2023 compared with 4.18% in the six months ended June 30, 2022. Additionally, average loans HFI increased to $9.37 billion for the six months ended June 30, 2023 compared to $8.04 billion for the six months ended June 30, 2022. The increase in average loans HFI is due to strong demand in our primary markets and additional funding during the six months ended June 30, 2023 of commitments made in prior periods.
The components of our loan yield for the six months ended June 30, 2023 and 2022 were as follows:
Six Months Ended June 30,
2023 2022 
(dollars in thousands)Interest
income		Average
yield		Interest
income		Average
yield
Loans HFI yield components:
Contractual interest rate on loans HFI (1)
$280,194 6.03 %$166,794 4.18 %
Origination and other loan fee income7,008 0.15 %11,909 0.30 %
Accretion (amortization) on purchased loans305 0.01 %(2,288)(0.06)%
Nonaccrual interest collections375 0.01 %1,590 0.04 %
Syndicated loan fee income— — %1,150 0.03 %
Total loans HFI yield$287,882 6.20 %$179,155 4.49 %
(1)Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.
Origination and other loan fees (including syndication fee income for the six months ended June 30, 2022) impacted our NIM by 12 basis points and 22 basis points for the six months ended June 30, 2023 and 2022, respectively.
Interest expense was $124.5 million for the six months ended June 30, 2023, an increase of $109.5 million as compared to $15.0 million for the six months ended June 30, 2022. The increase was largely attributed to a rise in interest rates in interest-bearing deposit accounts, and specifically on money market and interest-bearing checking deposit products. Interest expense on money market deposits increased $51.6 million to $54.6 million for the six months ended June 30, 2023 compared to $3.0 million for the six months ended June 30, 2022 and interest expense on interest-bearing checking deposits increased $37.1 million to $42.8 million for the six months ended June 30, 2023 from $5.7 million for the six months ended June 30, 2022. The average rate on money market deposits increased 298 basis points from 0.21% for the six months ended June 30, 2022 to 3.19% for the six months ended June 30, 2023 and the average rate on interest-bearing checking deposits increased 241 basis points from 0.33% for the six months ended June 30, 2022 to 2.74% for the six months ended June 30, 2023. Total cost of interest-bearing deposits was 2.80% for the six months ended June 30, 2023 compared to 0.30% for the six months ended June 30, 2022.
Overall, our NIM, on a tax-equivalent basis, increased to 3.45% for the six months ended June 30, 2023 from 3.28% for the six months ended June 30, 2022, driven by the interest rate increases previously discussed along with a shift in balance sheet composition, including a decline in excess liquidity as defined previously. Excess liquidity is estimated to have negatively impacted our NIM by approximately 2 basis point for the six months ended June 30, 2023 compared to approximately 22 basis points for the six months ended June 30, 2022.
62

Average balance and interest yield/rate analysis
The table below shows the average balances, income and expense and yield and rates of each of our interest-earning assets and interest-bearing liabilities on a tax equivalent basis, if applicable, for the periods indicated.
Six Months Ended June 30,
2023 2022 
(dollars in thousands on a tax-equivalent basis)Average balancesInterest
income/
expense		Average
yield/
rate		Average balancesInterest
income/
expense		Average
yield/
rate
Interest-earning assets:
Loans held for investment (1)(2)
$9,367,108 $287,882 6.20 %$8,044,722 $179,155 4.49 %
Mortgage loans held for sale59,826 1,932 6.51 %342,190 5,916 3.49 %
Commercial loans held for sale12,973 162 2.52 %67,452 1,646 4.92 %
Investment securities:
Taxable1,388,380 13,050 1.90 %1,428,342 11,919 1.68 %
Tax-exempt (2)
294,193 4,885 3.35 %313,254 5,015 3.23 %
Total investment securities (2)
1,682,573 17,935 2.15 %1,741,596 16,934 1.96 %
Federal funds sold and reverse repurchase agreements124,557 2,905 4.70 %214,421 613 0.58 %
Interest-bearing deposits with other financial institutions793,576 18,837 4.79 %1,342,639 2,189 0.33 %
FHLB stock44,600 1,683 7.61 %33,719 393 2.35 %
Total interest earning assets (2)
12,085,213 331,336 5.53 %11,786,739 206,846 3.54 %
Noninterest Earning Assets:
Cash and due from banks136,474 92,318 
Allowance for credit losses on loans HFI(136,904)(123,072)
Other assets (3)(4)(5)
759,352 777,475 
Total noninterest earning assets758,922 746,721 
Total assets$12,844,135 $12,533,460 
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing checking$3,146,034 $42,811 2.74 %$3,487,046 $5,742 0.33 %
Money market deposits3,443,833 54,563 3.19 %2,929,401 2,988 0.21 %
Savings deposits445,709 127 0.06 %498,285 132 0.05 %
Customer time deposits1,449,144 19,879 2.77 %1,103,672 3,118 0.57 %
Brokered and internet time deposits29,182 740 5.11 %11,200 73 1.31 %
Time deposits1,478,326 20,619 2.81 %1,114,872 3,191 0.58 %
Total interest-bearing deposits8,513,902 118,120 2.80 %8,029,604 12,053 0.30 %
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased28,603 143 1.01 %28,637 26 0.18 %
Federal Home Loan Bank advances51,381 1,283 5.04 %— — — %
Subordinated debt126,648 4,898 7.80 %129,642 2,894 4.50 %
Other borrowings 1,536 16 2.10 %1,491 15 2.03 %
Total other interest-bearing liabilities208,168 6,340 6.14 %159,770 2,935 3.70 %
Total interest-bearing liabilities8,722,070 124,460 2.88 %8,189,374 14,988 0.37 %
Noninterest-bearing liabilities:
Demand deposits2,509,179 2,823,685 
Other liabilities(4)
252,685 136,039 
Total noninterest-bearing liabilities2,761,864 2,959,724 
Total liabilities11,483,934 11,149,098 
FB Financial Corporation common shareholders' equity1,360,108 1,384,269 
Noncontrolling interest93 93 
         Shareholders' equity1,360,201 1,384,362 
Total liabilities and shareholders' equity$12,844,135 $12,533,460 
Net interest income (tax-equivalent basis)$206,876 $191,858 
Interest rate spread (tax-equivalent basis)2.65 %3.17 %
Net interest margin (tax-equivalent basis) (6)
3.45 %3.28 %
Cost of total deposits2.16 %0.22 %
Average interest-earning assets to average interest-bearing liabilities138.6 %143.9 %
(1)Average balances of nonaccrual loans and overdrafts (before deduction of ACL) are included in average loan balances.
(2)Interest income includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net tax-equivalent adjustment amounts included in income were $1.7 million and $1.5 million for six months ended June 30, 2023 and 2022, respectively.
(3)Includes average net unrealized losses on investment securities available for sale of $217.4 million and $80.2 million for the six months ended June 30, 2023 and 2022, respectively.
(4)Includes average of optional rights to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days of $21.7 million for the six months ended June 30, 2023.
(5)Includes investments in premises and equipment, OREO, interest receivable, MSRs, core deposit and other intangibles, goodwill, and other miscellaneous assets.
(6)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.
63

Yield/rate and volume analysis
The table below presents the components of the changes in net interest income for the six months ended June 30, 2023 and 2022. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volume and changes due to interest rates, with the changes in both volume and interest rates allocated to these two categories based on the proportionate absolute changes in each category.
Six months ended June 30, 2023 compared to six months ended June 30, 2022 due to changes in
(dollars in thousands on a tax-equivalent basis)VolumeYield/ rateNet increase
(decrease)
Interest-earning assets:
Loans held for investment(1)(2)
$40,641 $68,086 $108,727 
Loans held for sale - mortgage(9,119)5,135 (3,984)
Loans held for sale - commercial(680)(804)(1,484)
Investment securities:
   Taxable(376)1,507 1,131 
   Tax Exempt(2)
(317)187 (130)
Federal funds sold and reverse repurchase agreements
(2,096)4,388 2,292 
Interest-bearing deposits with other financial institutions(13,033)29,681 16,648 
FHLB stock411 879 1,290 
Total interest income(2)
15,431 109,059 124,490 
Interest-bearing liabilities:
Interest-bearing checking deposits(4,640)41,709 37,069 
Money market deposits8,150 43,425 51,575 
Savings deposits(15)10 (5)
Customer time deposits4,739 12,022 16,761 
Brokered and internet time deposits456 211 667 
Securities sold under agreements to repurchase and federal funds
   purchased		— 117 117 
Federal Home Loan Bank advances1,283 — 1,283 
Subordinated debt(116)2,120 2,004 
Other borrowings— 1 1 
Total interest expense9,857 99,615 109,472 
Change in net interest income(2)
$5,574 $9,444 $15,018 
(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses on loans HFI).
(2)Includes the effects of taxable-equivalent adjustments using a U.S. federal income tax rate and, where applicable, state income tax to increase tax-exempt interest income to a tax-equivalent basis. The net taxable-equivalent adjustment amounts included was $1.7 million and $1.5 million for the six months ended June 30, 2023 and 2022, respectively.















64

Provision for credit losses
The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, "Basis of presentation" in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 for a detailed discussion regarding ACL methodology.
Our allowance for credit losses calculation as of June 30, 2023 resulted from management’s best estimate of losses over the life of loans and unfunded commitments in our portfolio in accordance with the CECL approach. Our calculation included qualitative adjustments for projected slower GDP growth over the next two years, expected elevated unemployment levels, and potentially more interest rate increases from the Federal Reserve. We also considered the current global economic environment, including continued pressures on supply chains (and more specifically, oil and energy) and increased uncertainty due primarily to inflation surrounding the potential impact and hardship on the U.S. economy. The qualitative evaluations above include considered projections that the economy may be nearing a recession. These factors may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.
Three months ended June 30, 2023 compared to three months ended June 30, 2022
We recognized a provision for credit losses on loans HFI of $2.6 million and $8.2 million for the three months ended June 30, 2023 and 2022, respectively. The decrease in our provision for credit losses on loans HFI during the three months ended June 30, 2023 was a result of decreased loan growth and the factors discussed above. The slowed loan growth in our loans HFI combined with the economic variables signaling a possible recession in our forward-looking model compared to the strong loan growth used for the three months ended June 30, 2022 are the primary drivers of the decrease in the provision for credit losses on loans HFI during the three months ended June 30, 2023.
We also estimate expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. When applying the CECL methodology to estimate expected credit loss, we consider the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions. We recorded a reversal in provision for credit losses on unfunded commitments of $3.7 million and a provision expense of $4.1 million for the three months ended June 30, 2023 and 2022, respectively. The reversal is due to a $158.0 million decrease in our unfunded commitments during the three months ended June 30, 2023, including a $197.2 million decrease in our construction category.
During the three months ended June 30, 2023, our available-for-sale debt securities portfolio net unrealized value declined $18.7 million to a net unrealized loss position of $226.0 million as of June 30, 2023 from a net unrealized loss position of $207.3 million as of March 31, 2023. During the three months ended June 30, 2022, our available-for-sale debt securities portfolio net unrealized value decreased $66.6 million to a net unrealized loss position of $167.5 million as of June 30, 2022 from a net unrealized loss position of $100.9 million as of March 31, 2022. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies and we historically have not recorded any losses associated with these investments. As such, as of June 30, 2023 and December 31, 2022, it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Further, it is unlikely that the Company will be required to sell the securities before recovery to amortized cost basis at maturity due to our liquidity position and access to other sources of funds. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three months ended June 30, 2023 or 2022.
Six months ended June 30, 2023 compared to six months ended June 30, 2022
We recognized a provision for credit losses on loans HFI for the six months ended June 30, 2023 of $7.6 million. This compares to a provision for credit losses on loans HFI of $2.1 million recorded for the six months ended June 30, 2022. The current period provision on loans HFI resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach driven by a $27.8 million increase in loans HFI outstanding from December 31, 2022 to June 30, 2023 and the deteriorating economic forecasts as discussed in further detail above .For the six months ended June 30, 2022, the modest increase in the provision for credit losses on loans HFI was driven by an increase in loans HFI outstanding period-over-period coupled with the winding down of COVID-era qualitative adjustments.
65

For the six months ended June 30, 2023, we recorded a reversal in provision for credit losses on unfunded commitments of $8.2 million compared to provision expense of $6.0 million during the six months ended June 30, 2022. The decrease in the provision for credit losses on unfunded commitments is primarily due to our intentional decrease in unfunded loan commitments from December 31, 2022, including a $496.0 million decrease in our construction category and $41.0 million decrease in the non-owner occupied commercial real estate category.
During the six months ended June 30, 2023, the net unrealized value in our available-for-sale debt securities portfolio improved to a net unrealized loss position of $226.0 million from $234.4 million as of December 31, 2022. During the six months ended June 30, 2022, our available-for-sale debt securities portfolio net unrealized value declined $172.2 million to an unrealized loss position of $167.5 million from a net unrealized gain position of $4.7 million as of December 31, 2021. Based on our evaluation of potential credit risk in the portfolio, no provision for credit losses on available-for-sale debt securities was required during the six months ended June 30, 2023 or 2022.
Noninterest income
The following table sets forth the components of noninterest income for the periods indicated:
 Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2023 2022 2023 2022 
Mortgage banking income$12,232 $22,559 $24,318 $52,090 
Service charges on deposit accounts3,185 2,908 6,238 5,822 
Investment services and trust income2,777 2,275 5,155 4,407 
ATM and interchange fees2,629 5,353 5,025 10,440 
(Loss) gain from securities, net(28)(109)41 (261)
Gain (loss) on sales or write-downs of other real estate owned and other assets533 (8)350 (442)
Other income2,485 236 6,035 2,550 
Total noninterest income$23,813 $33,214 $47,162 $74,606 
Three months ended June 30, 2023 compared to three months ended June 30, 2022
Noninterest income amounted to $23.8 million for the three months ended June 30, 2023, a decrease of $9.4 million, or 28.3%, as compared to $33.2 million for the three months ended June 30, 2022. Changes in selected components of noninterest income in the above table are discussed below.
Mortgage banking income primarily includes origination fees and realized gains and losses on the sale of mortgage loans, unrealized change in fair value of mortgage loans and derivatives, and mortgage servicing fees, which includes net change in fair value of MSRs and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments at fair value at inception of the IRLCs. This is subsequently adjusted for changes in the overall interest rate environment offset by derivative contracts entered into to mitigate the interest rate exposure. Upon sale of the loan, the net fair value gain is reclassified as a realized gain on sale.
Mortgage banking income was $12.2 million and $22.6 million for the three months ended June 30, 2023 and 2022, respectively. The decrease includes a decrease from gains on sale and related fair value changes of $6.9 million to $8.9 million during the three months ended June 30, 2023 compared to $15.7 million for the three months ended June 30, 2022. This was impacted by the reduction in interest rate lock volume of $297.9 million, or 42.5%, during the three months ended June 30, 2023 over the same period in the previous year. In addition to being impacted by the interest rate environment and depressed consumer demand, this decrease also reflects the impact of the Mortgage restructuring and discontinuance of our direct-to-consumer internet delivery channel. For the three months ended June 30, 2022, direct-to-consumer comprised 13.7% our total interest rate lock volume and 37.4% of our sales volume, respectively.


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The components of mortgage banking income for three months ended June 30, 2023 and 2022 were as follows:
Three Months Ended June 30,
(dollars in thousands)20232022
Mortgage banking income:
Gains and fees from origination and sale of mortgage
   loans held for sale		$7,994 $21,099 
Net change in fair value of loans held for sale and derivatives874 (5,354)
Change in fair value on MSRs(4,222)(1,152)
Mortgage servicing income7,586 7,966 
Total mortgage banking income$12,232 $22,559 
Interest rate lock commitment volume by delivery channel:
Direct-to-consumer $— $95,756 
Retail402,951 605,114 
Total$402,951 $700,870 
Interest rate lock commitment volume by purpose (%):
Purchase88.8 %84.0 %
Refinance11.2 %16.0 %
Mortgage sales$330,326 $869,688 
Mortgage sale margin2.42 %2.43 %
Closing volume$346,202 $725,755 
Outstanding principal balance of mortgage loans serviced$10,961,516 $11,160,382 
ATM and interchange fees income for the three months ended June 30, 2023 decreased by 50.9% to $2.6 million compared to $5.4 million for the three months ended June 30, 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 transactions for the three months ended June 30, 2023 increased by approximately 6.00% from the three months ended June 30, 2022, our total interchange fee income declined 52.7% for the same period, the majority of which related to the application of the fee cap imposed by the Durbin amendment impacting the current period.
Other noninterest income for the three months ended June 30, 2023 increased $2.2 million to $2.5 million compared with $0.2 million for the three months ended June 30, 2022. This includes losses associated with our commercial loans held for sale portfolio of $8 thousand for the three months ended June 30, 2023 compared with losses of $2.0 million for the three months ended June 30, 2022. Additional information on our commercial loans held for sale portfolio is included under the subheading 'Loans held for sale' within this management's discussion and analysis.


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Six months ended June 30, 2023 compared to six months ended June 30, 2022
Noninterest income amounted to $47.2 million for the six months ended June 30, 2023, a decrease of $27.4 million, or 36.8%, as compared to $74.6 million for the six months ended June 30, 2022. Changes in selected components of noninterest income in the above table are discussed below.
Mortgage banking income was $24.3 million and $52.1 million for the six months ended June 30, 2023 and 2022, respectively, representing a $27.8 million decrease, or 53.3% year-over-year. The total decrease includes a reduction in income from gains on sale and related fair value changes, which decreased to $16.6 million during the six months ended June 30, 2023 compared to $37.6 million for the six months ended June 30, 2022. This change was caused by a decrease in interest rate lock volume of $1.23 billion, or 61.3%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. In addition to being impacted by the interest rate environment, affordability constraints and a decline in consumer demand, this decrease also reflects the impact of the Mortgage restructuring and discontinuance of our direct-to-consumer internet delivery channel. For the six months ended June 30, 2022, direct-to-consumer comprised 33.0% our total interest rate lock volume and 45.3% of our sales volume, respectively.
The components of mortgage banking income for the six months ended June 30, 2023 and 2022 were as follows:
Six Months Ended June 30,
(dollars in thousands)2023 2022 
Mortgage banking income  
Gains and fees from origination and sale of mortgage
   loans held for sale		$16,140 $50,496 
Net change in fair value of loans held for sale and derivatives453 (12,902)
Change in fair value on MSRs (7,629)(899)
Mortgage servicing income15,354 15,395 
Total mortgage banking income$24,318 $52,090 
Interest rate lock commitment volume by delivery channel:
Direct-to-consumer$— $663,848 
Retail777,993 1,346,129 
Total$777,993 $2,009,977 
Interest rate lock commitment volume by purpose (%):
Purchase87.6 %66.0 %
Refinance12.4 %34.0 %
Mortgage sales$662,633 $2,154,170 
Mortgage sale margin2.44 %2.34 %
Closing volume$641,962 $1,719,488 
Outstanding principal balance of mortgage loans serviced$10,961,516 $11,160,382 
ATM and interchange fees decreased $5.4 million to $5.0 million during the six months ended June 30, 2023 as compared to $10.4 million for the six months ended June 30, 2022. As discussed above, this decrease was primarily attributable to the expiration of our temporary exemption from the Durbin amendment during the second half of 2022. While our volume of interchange transactions increased approximately 7.00% during the six months ended June 30, 2023 from the previous year, interchange fee income declined by 53.8%, the majority of which related to the application of the fee cap imposed by the Durbin amendment impacting the current period.
Other income increased $3.5 million to $6.0 million during the six months ended June 30, 2023 as compared to $2.6 million during the six months ended June 30, 2022. This increase is primarily related to a $0.9 million gain associated with the change in fair value of the commercial loans held for sale portfolio during the six months ended June 30, 2023 compared to a $2.2 million loss for the six months ended June 30, 2022.
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Noninterest expense
The following table sets forth the components of noninterest expense for the periods indicated:
 Three Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2023 2022 2023 2022 
Salaries, commissions and employee benefits$52,020 $55,181 $100,808 $114,624 
Occupancy and equipment expense6,281 5,853 12,190 11,256 
Legal and professional fees2,199 3,116 5,307 5,723 
Data processing 2,345 2,404 4,458 4,885 
Amortization of core deposit and other intangibles940 1,194 1,930 2,438 
Advertising2,001 2,031 4,134 6,064 
Mortgage restructuring expense—12,458— 12,458 
Other expense15,506 14,760 32,905 28,821 
Total noninterest expense$81,292 $96,997 $161,732 $186,269 
Three months ended June 30, 2023 compared to three months ended June 30, 2022
Noninterest expense decreased by $15.7 million during the three months ended June 30, 2023 to $81.3 million as compared to $97.0 million in the three months ended June 30, 2022. Changes in selected components of noninterest expense in the above table are discussed below.
Salaries, commissions and employee benefits expense was the largest component of noninterest expense representing 64.0% and 56.9% of total noninterest expense for the three months ended June 30, 2023 and 2022, respectively. For the three months ended June 30, 2023, salaries and employee benefits expense decreased $3.2 million, or 5.7%, to $52.0 million as compared to $55.2 million for the three months ended June 30, 2022. This decrease was mainly driven by a decrease in commissions and incentives in addition to the reduction in headcount from the Mortgage restructuring. The decrease is partially offset by $0.6 million in severance expenses incurred during the three months ended June 30, 2023, which includes the acceleration in vesting of certain equity grants.
Mortgage restructuring expense of $12.5 million was reported during the three months ended June 30, 2022 related to the exit from our direct-to-consumer internet delivery channel. These expenses primarily include $10.0 million related to salaries, commissions and employee benefits expense, including the acceleration of vesting on restricted stock units. Other components of this expense includes $1.1 million related to software license and maintenance fees, $0.4 million impairment of our operating lease right-of-use assets, and $0.9 million loss on disposal of fixed assets.
Six months ended June 30, 2023 compared to six months ended June 30, 2022
Noninterest expense decreased by $24.5 million during the six months ended June 30, 2023 to $161.7 million as compared to $186.3 million in the six months ended June 30, 2022. Changes in selected components of noninterest expense in the above table are discussed below.
Salaries, commissions and employee benefits expense was the largest component of noninterest expense representing 62.3% and 61.5% of total noninterest expense for the six months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023, salaries and employee benefits expense decreased $13.8 million, or 12.1%, to $100.8 million as compared to $114.6 million for the six months ended June 30, 2022. The decrease was attributable to a $8.3 million decrease in salaries in the Mortgage segment due to the Mortgage restructuring. Additionally, the decrease included a $8.8 million decrease in incentive and commission-based compensation during the six months ended June 30, 2023, which was driven by the decrease in mortgage production volume and decline in profitability during the period.
Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the six months ended June 30, 2023, advertising expense decreased $1.9 million to $4.1 million compared to $6.1 million during the six months ended June 30, 2022. This decrease is primarily attributable to realigning our expenses after the Mortgage restructuring to reflect the decrease in production.
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Mortgage restructuring expense of $12.5 million was reported during the six months ended June 30, 2022 related to the exit from our direct-to-consumer internet delivery channel as discussed above.
Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense increased $4.1 million during the six months ended June 30, 2023 to $32.9 million compared to $28.8 million during the six months ended June 30, 2022. This increase includes a $2.1 million increase in regulatory fees and assessments.
Efficiency ratio
The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusted efficiency ratio, we exclude certain gains, losses and expenses we do not consider core to our business.
Our efficiency ratio was 64.8% and 64.1% for the three and six months ended June 30, 2023, respectively, and 71.6% and 70.3% for the three and six months ended June 30, 2022, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 63.5% and 63.4% for the three and six months ended June 30, 2023, respectively, and 61.1% and 64.5% for the three and six months ended June 30, 2022, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the adjusted efficiency ratio.
Income taxes
Income tax expense was $9.8 million and $6.7 million for the three months ended June 30, 2023 and 2022, respectively, and $19.5 million and $16.0 million for the six months ended June 30, 2023 and 2022, respectively. This represents effective tax rates of 21.8% and 25.8% for the three months ended June 30, 2023 and 2022, respectively, and 21.4% and 22.7% for the six months ended June 30, 2023 and 2022, respectively. The primary differences from the enacted rates are applicable state income taxes and certain expenses that are not deductible reduced for non-taxable income and additional deductions for equity-based compensation upon vesting of restricted stock units. State taxes, net of federal benefits, increased our effective tax rate by 1.40% and 6.07% for the three months ended June 30, 2023 and 2022 and by 1.00% and 3.59% for the six months ended June 30, 2023 and 2022, respectively.

Financial condition
The following discussion of our financial condition compares balances as of June 30, 2023 and December 31, 2022.
Loan portfolio
The following table sets forth the balance and associated percentage of each class of financing receivable in our loan portfolio as of the dates indicated:
June 30,December 31,
 2023 2022 
(dollars in thousands)CommittedAmount Outstanding% of total outstandingCommittedAmount Outstanding% of total outstanding
Loan Type:    
Commercial and industrial
$2,862,078 $1,693,572 18 %$2,671,861 $1,645,783 18 %
Construction2,779,952 1,636,970 18 %3,296,503 1,657,488 18 %
Residential real estate:
1-to-4 family mortgage1,549,408 1,548,614 17 %1,573,950 1,573,121 17 %
Residential line of credit1,183,299 507,652 5 %1,151,750 496,660 5 %
Multi-family mortgage522,997 518,025 6 %496,664 479,572 5 %
Commercial real estate:
Owner-occupied1,209,709 1,158,782 12 %1,156,534 1,114,580 12 %
Non-owner occupied1,986,179 1,881,978 20 %2,109,218 1,964,010 21 %
Consumer and other403,737 380,431 4 %393,632 366,998 4 %
Total loans$12,497,359 $9,326,024 100 %$12,850,112 $9,298,212 100 %
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Our loans HFI portfolio is our most significant earning asset, comprising 72.4% of our total assets at both June 30, 2023 and December 31, 2022. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). As of June 30, 2023 and December 31, 2022, loans held for investment included approximately $294.7 million and $280.5 million, respectively, related to participated loans. We also sell loan participations to unaffiliated third parties as part of our credit risk management and balance sheet management strategy. During the three months ended June 30, 2023 and 2022, we sold $11.9 million and $7.3 million loan participations, respectively. During the six months ended June 30, 2023 and 2022, we sold $16.3 million and $7.6 million loan participations, respectively. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.
Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Our lending activity is heavily concentrated in the geographic market areas we serve, with highest concentration in Tennessee. This geographic concentration subjects our loan portfolio to the general economic conditions within the state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses on loans HFI. As of June 30, 2023 and December 31, 2022, there were no concentrations of loans exceeding 10% of total loans other than our exposure to Tennessee and the categories of loans disclosed in the table above. We believe our loan portfolio is diversified relative to industry concentrations across the various loan portfolio categories.
Banking regulators have established guidelines of less than 100% of tier 1 capital plus allowance for credit losses in construction lending and less than 300% of tier 1 capital plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage of the outstanding construction and land development loans to total tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.
When our ratios are in excess of one or both of these guidelines, banking regulators generally require an increased level of monitoring in these lending areas by management. The table below shows concentration ratios for the Bank and Company as of June 30, 2023 and December 31, 2022.
As a percentage (%) of tier 1 capital plus allowance for credit losses
FirstBankFB Financial Corporation
June 30, 2023
Construction113.1 %110.5 %
Commercial real estate280.7 %274.4 %
December 31, 2022
Construction119.0 %117.2 %
Commercial real estate296.5 %291.9 %









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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 commercial and industrial loans are typically made to small and medium-sized manufacturing, wholesale, retail and service businesses for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations. This category also includes loans secured by manufactured housing receivables. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. We plan to continue to make commercial and industrial loans an area of emphasis in our lending portfolio in the future.
Construction loans.
Our construction loans include commercial construction, land acquisition and land development loans and single-family interim construction loans to small- and medium-sized businesses and individuals. These loans are generally secured by the land or the real property being built and are made based on our assessment of the value of the property on an as-completed basis. These loans can carry risk of repayment when projects incur cost overruns, have an increase in the price of building materials, encounter zoning and environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. We continue to focus on decreasing these commitments. While previous commitments have continued to fund up, new commitments to extend additional funds in this category have slowed, which is reflected in the unfunded commitments in our construction portfolio as of June 30, 2023, which have declined $496.0 million or 30.3% compared to December 31, 2022. We expect our outstanding balances in the construction portfolio to decrease in the short term as loans mature and unfunded commitments continue to decrease.
1-4 family mortgage loans.
Our residential real estate 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, including manufactured homes with real estate, which are both owner-occupied and investor owned. Our future origination volume could be impacted by any deterioration of housing values in our markets and increased unemployment or underemployment.
Residential line of credit loans.
Our residential line of credit loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We intend to continue to make residential line of credit loans if housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. Residential line of credit loans may also be affected by unemployment or underemployment and deteriorating market values of real estate.
Multi-family residential loans.
Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. The value of these loans may be affected by unemployment or underemployment, and market values of real estate among other factors. We plan to continue to make multifamily loans an area of emphasis for our loan portfolio as demand in our markets for housing increases and 1-4 family mortgages become more difficult to obtain.
Commercial real estate owner-occupied loans.
Our commercial real estate owner-occupied loans include loans to finance commercial real estate owner occupied properties for various purposes including use as offices, warehouses, production facilities, health care facilities, retail centers, restaurants, churches and agricultural based facilities. Commercial real estate owner-occupied loans are typically repaid through the ongoing business operations of the borrower, and hence are dependent on the success of the underlying business for repayment and are more exposed to general economic conditions. Due to current market conditions and macroeconomic forecasts, we expect growth in commercial real estate owner-occupied loans to be moderated compared to historical growth.
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Commercial real estate non-owner occupied loans.
Our commercial real estate non-owner occupied loans include loans to finance commercial real estate non-owner occupied investment properties for various purposes including use as offices, warehouses, health care facilities, hotels, mixed-use residential/commercial, manufactured housing communities, retail centers, multifamily properties, assisted living facilities and agricultural based facilities. Commercial real estate non-owner occupied loans are typically repaid with the funds received from the sale of the completed property or rental proceeds from such property, and are therefore more sensitive to adverse conditions in the real estate market, which can also be affected by general economic conditions. Unfunded commitments in our commercial real estate non-owner occupied portfolio as of June 30, 2023 have declined $41.0 million or 28.2% compared to December 31, 2022. We expect our outstanding balances in the commercial real estate non-owner occupied category to decrease in the short term as loans mature and unfunded commitments continue to decrease.
Consumer and other loans. 
Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat, manufactured homes (without real estate) and other recreational vehicle loans and personal lines of credit. These loans are generally secured by vehicles, manufactured homes, and other household goods. The collateral securing consumer loans may depreciate over time. We seek to minimize these risks through its underwriting standards. Other loans also include loans to states and political subdivisions in the U.S. These loans are generally subject to the risk that the borrowing municipality or political subdivision may lose a significant portion of its tax base or that the project for which the loan was made may produce inadequate revenue. None of these categories of loans represent a significant portion of our loan portfolio.























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As part of our lending policy and risk management activities, the Company tracks lending exposure of commercial and industrial and owner-occupied commercial real estate by industry classification (as defined by the North American Industry Classification System) and type to determine potential risks associated with industry concentrations, and if any risk issues could lead to additional credit loss exposure. The table below provides a summary of our commercial and industrial and owner-occupied commercial real estate portfolios by industry classification.
June 30, 2023
(dollars in thousands)CommittedAmount OutstandingNonperforming
Commercial and industrial loans
Real estate rental and leasing$648,396 $419,452 $194 
Finance and insurance487,165 305,341 — 
Construction396,547 124,186 22 
Manufacturing262,810 183,188 — 
Retail trade160,031 115,420 — 
Wholesale trade152,866 87,084 907 
Professional, scientific and technical services135,471 69,912 211 
Transportation and warehousing108,861 89,342 35 
Administrative and support and waste management and      remediation services107,951 50,975 142 
Health care and social assistance86,388 56,198 162 
Other services (except public administration)55,127 28,300 — 
Educational services55,030 39,076 26 
Accommodation and food services42,294 27,470 — 
Arts, entertainment and recreation34,426 29,276 — 
Information34,186 30,071 — 
Agriculture, forestry, fishing and hunting28,708 18,189 325 
Other 65,821 20,092 139 
Total $2,862,078 $1,693,572 $2,163 
Commercial real estate owner-occupied
Real estate rental and leasing$222,760 $213,799 $3,301 
Other services (except public administration)170,513 167,545 139 
Retail trade147,869 140,804 — 
Health care and social assistance131,522 122,427 258 
Accommodation and food services115,157 114,881 — 
Manufacturing84,468 81,317 97 
Construction68,966 63,682 7 
Wholesale trade67,884 64,800 — 
Arts, entertainment and recreation34,106 31,979 — 
Professional, scientific and technical services33,007 31,660 199 
Transportation and warehousing24,456 22,465 — 
Agriculture, forestry, fishing and hunting23,870 21,595 914 
Educational services22,438 21,998 — 
Finance and insurance16,559 16,513 — 
Information15,505 13,621 871 
Management of companies and enterprises12,321 12,321 — 
Other 18,308 17,375 17 
Total $1,209,709 $1,158,782 $5,803 
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Additionally, the Company tracks lending exposure of non-owner occupied commercial real estate and construction by collateral property type to determine potential risks associated with collateral types, and if any risk issues could lead to additional credit loss exposure. The following table provides a summary of our non-owner occupied commercial real estate and construction loan portfolios by collateral property type:
June 30, 2023
(dollars in thousands)CommittedAmount OutstandingNonperforming
Commercial real estate non-owner occupied
Retail$481,744 $469,047 $— 
Office389,354 357,357 45 
Warehouse/industrial345,108 315,482 — 
Hotel301,509 301,509 5,509 
Land-mobile home park120,865 111,756 — 
Self storage100,630 96,763 — 
Healthcare facility63,737 63,566 — 
Assisted living/special care facilities53,520 53,270 — 
Restaurants, bars and event venues42,108 26,254 — 
Recreation/sport/entertainment13,361 13,361 — 
Other 74,243 73,613 — 
Total $1,986,179 $1,881,978 $5,554 
Construction
Consumer:
Construction$276,857 $175,935 $724 
Land44,687 43,925 76 
Commercial:
Multi-family567,689 174,456 — 
Land325,471 264,374 600 
Retail116,174 69,142 — 
Hotel59,398 19,716 — 
Healthcare facility51,821 36,788 — 
Self storage44,862 26,813 — 
Assisted living/special care facilities30,058 24,373 — 
Warehouse16,383 15,859 — 
Office16,067 11,049 — 
Other91,304 36,036 350 
Residential Development:
Construction950,585 590,415 1,010 
Land144,082 107,788 — 
Lots44,514 40,301 — 
Total $2,779,952 $1,636,970 $2,760 




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Loan maturity and sensitivities
The following table presents the contractual maturities of our loan portfolio as of June 30, 2023. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments.
June 30, 2023
Loan type (dollars in thousands)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$701,588 $796,319 $194,689 $976 $1,693,572 
Commercial real estate:
Owner-occupied98,686 602,091 434,485 23,520 1,158,782 
Non-owner occupied176,507 884,833 802,687 17,951 1,881,978 
Residential real estate:
1-to-4 family mortgage76,777 426,857 254,190 790,790 1,548,614 
Residential line of credit37,223 97,133 372,879 417 507,652 
Multi-family mortgage83,409 299,763 119,351 15,502 518,025 
Construction898,774 558,978 172,391 6,827 1,636,970 
Consumer and other29,534 73,032 68,304 209,561 380,431 
Total ($)$2,102,498 $3,739,006 $2,418,976 $1,065,544 $9,326,024 
Total (%)22.5 %40.1 %25.9 %11.5 %100.0 %
For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of June 30, 2023.
June 30, 2023
Loan type (dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
Commercial and industrial$439,832 $552,152 $991,984 
Commercial real estate:
Owner-occupied795,070 265,026 1,060,096 
Non-owner occupied958,179 747,292 1,705,471 
Residential real estate:
1-to-4 family mortgage1,159,402 312,435 1,471,837 
Residential line of credit4,360 466,069 470,429 
Multi-family mortgage331,688 102,928 434,616 
Construction271,991 466,205 738,196 
Consumer and other327,566 23,331 350,897 
Total ($)$4,288,088 $2,935,438 $7,223,526 
Total (%)59.4 %40.6 %100.0 %
The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of June 30, 2023. As of June 30, 2023 and December 31, 2022, we had $17.9 million and $17.4 million, respectively, in fixed-rate loans in which we have entered into variable rate swap contracts.
June 30, 2023
(dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of June 30, 2023   
One year or less$650,076$1,452,422$2,102,498
One to five years2,268,6331,470,3733,739,006
Five to fifteen years1,255,1641,163,8122,418,976
Over fifteen years764,291301,2531,065,544
Total ($)$4,938,164$4,387,860$9,326,024
Total (%)53.0 %47.0 %100.0 %
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Of the loans shown above with floating interest rates as of June 30, 2023, many have interest rate floors as follows:
Loans with interest rate floors (dollars in thousands)Maturing in one year or less Weighted average level of support (bps) Maturing in one to five years Weighted average level of support (bps) Maturing in five years to fifteen years Weighted average level of support (bps) Maturing after
fifteen years		Weighted average level of support (bps)TotalWeighted average level of support (bps)
Loans with
   current rates
   above floors:
1-25 bps$1,290 24.80 $— — $— — $— — $1,290 24.80 
26-50 bps4,939 50.00 1,353 50.00 — — — — 6,292 50.00 
51-75 bps2,462 75.00 855 74.81 467 73.58 1,998 73.00 5,782 74.17 
76-100 bps7,666 100.00 2,737 93.18 7,791 98.03 985 96.00 19,179 98.02 
101-200 bps24,221 179.86 115,270 162.06 68,035 168.78 10,518 132.45 218,044 164.70 
201-300 bps83,661 267.26 114,711 260.39 119,463 267.02 28,964 252.06 346,799 263.64 
301-400 bps157,962 369.24 143,455 362.91 122,250 355.75 28,174 359.59 451,841 362.98 
401-500 bps674,412 459.69 525,815 468.57 438,467 463.15 54,902 458.21 1,693,596 463.30 
501-600 bps99,020 520.69 82,397 519.73 120,319 526.26 151,030 524.78 452,766 523.36 
601 bps and
   above		550 686.59 16,603 739.43 14,458 691.46 2,153 825.00 33,764 723.49 
Total loans with
    current rates
    above floors		$1,056,183 424.39 $1,003,196 401.20 $891,250 408.49 $278,724 449.39 $3,229,353 414.95 
Loans at interest
    rate floors
    providing
    support:
1-25 bps$— — $— — $422 2.00 $137 2.00 $559 2.00 
76-100 bps— — 1,750 77.00 — — — — 1,750 77.00 
101-200 bps— — 38 117.00 276 102.00 — — 314 103.83 
Total loans at
    interest rate
    floors
    providing
    support		$— — $1,788 77.86 $698 41.52 $137 — $2,623 64.23 
Asset quality
In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions, including extensions or interest rate modifications, to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. Furthermore, we are committed to collecting on all of our loans. 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 June 30, 2023 and December 31, 2022, we had $76.5 million and $87.5 million, respectively, in nonperforming assets. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. In our loan review process, we seek to identify and proactively address nonperforming loans. Accrued interest receivable written off as an adjustment to interest income amounted to $0.2 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively, and $0.3 million for both the six months ended June 30, 2023 and 2022. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.2 million and $0.5 million for the three months ended June 30, 2023 and 2022, respectively, and $0.4 million and $1.6 million for the six months ended June 30, 2023 and 2022, respectively.
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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 commercial loans, including syndicated national credits and institutional healthcare loans acquired in our 2020 merger with Franklin Financial Network, Inc. These loans amounted to $9.3 million as of both June 30, 2023 and December 31, 2022 and as of June 30, 2023, there was one relationship remaining in the portfolio.
As of June 30, 2023 and December 31, 2022, we had $20.2 million and $26.2 million, respectively, of delinquent GNMA loans previously sold included on our consolidated balance sheets in loans held for sale. These are considered nonperforming assets as we do not earn any interest on the unexercised option to repurchase these loans.
As of June 30, 2023 and December 31, 2022, other real estate owned included $0.5 million and $2.1 million, respectively, of excess land and facilities held for sale resulting from our prior acquisitions. Other nonperforming assets also included other repossessed non-real estate amounting to $0.9 million and $0.4 million as of June 30, 2023 and December 31, 2022, respectively.
The following table provides details of our nonperforming assets, the ratio of such loans and other nonperforming assets to total assets, and certain other related information as of the dates presented:
June 30,December 31,
(dollars in thousands)2023 20222022 
Loan Type  
Commercial and industrial$2,163 $3,469 $1,443 
Construction2,760 2,675 389 
Residential real estate:
1-to-4 family mortgage17,927 15,997 23,115 
Residential line of credit1,187 1,505 1,531 
Multi-family mortgage37 375 42 
Commercial real estate:
Owner-occupied5,803 7,123 5,410 
Non-owner occupied5,554 7,263 5,956 
Consumer and other8,701 5,713 7,960 
Total nonperforming loans held for investment$44,132 $44,120 $45,846 
Commercial loans held for sale9,267 1,459 9,289 
Mortgage loans held for sale(1)
20,225 — 26,211 
Other real estate owned1,974 9,398 5,794 
Other883 527 351 
Total nonperforming assets$76,481 $55,504 $87,491 
Nonperforming loans held for investment as a percentage of total loans HFI0.47 %0.51 %0.49 %
Nonperforming assets as a percentage of total assets0.59 %0.46 %0.68 %
Nonaccrual loans HFI as a percentage of loans HFI0.34 %0.34 %0.30 %
(1) Represents optional right to repurchase government guaranteed GNMA mortgage loans previously sold that have become past due greater than 90 days as of
     June 30, 2023 and December 31, 2022.

We have evaluated our loans held for investment classified as nonperforming and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses on loans HFI as of June 30, 2023 and December 31, 2022. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due that continue to accrue interest amounting to $33.6 million at June 30, 2023 as compared to $31.3 million at December 31, 2022.
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Allowance for credit losses
We calculate our expected credit loss using a lifetime loss rate methodology. We utilize probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of our loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and our prepayment history.
The allowance for credit losses represents the portion of the loan's amortized cost basis that we do not expect to collect due to credit losses over the loan's life, considering past events, current conditions, and reasonable and supportable forecasts of future economic conditions considering macroeconomic forecasts. Loan losses are charged against the allowance when we believe the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for credit losses is based on the loan's amortized cost basis, excluding accrued interest receivable, as we promptly charge off accrued interest receivable determined to be uncollectible. We determine the appropriateness of the allowance through periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors, including macroeconomic forecasts and historical loss rates. In future quarters, we may update information and forecasts that may cause significant changes in the estimate in those future quarters. See "Critical Accounting Estimates- Allowance for credit losses" within management's discussion and analysis in our Form 10-K and Note 3 “Loans and allowance for credit losses on loans HFI“ in the notes to the consolidated financial statements in this report for additional information regarding our methodology.
The following table presents the allocation of the allowance for credit losses on loans HFI by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated: 
June 30,December 31,
20232022
(dollars in thousands)AmountACL
as a % of loans HFI category		AmountACL
as a % of loans HFI category
Loan Type:
Commercial and industrial$11,311 0.67 %$11,106 0.67 %
Construction39,920 2.44 %39,808 2.40 %
Residential real estate:
   1-to-4 family mortgage27,407 1.77 %26,141 1.66 %
   Residential line of credit9,185 1.81 %7,494 1.51 %
   Multi-family mortgage6,828 1.32 %6,490 1.35 %
Commercial real estate:
   Owner-occupied8,467 0.73 %7,783 0.70 %
   Non-owner occupied22,877 1.22 %21,916 1.12 %
Consumer and other14,669 3.86 %13,454 3.67 %
Total allowance for credit losses on loans HFI$140,664 1.51 %$134,192 1.44 %










79

The following table summarizes activity in our allowance for credit losses on loans HFI during the periods indicated:
 Three Months Ended June 30,Six Months Ended June 30, Year Ended December 31,
(dollars in thousands)2023 2022 2023 2022 2022 
Allowance for credit losses on loans HFI at beginning of     period$138,809 $120,049 $134,192 $125,559 $125,559 
Charge-offs:
Commercial and industrial(11)(1,751)(57)(1,755)(2,087)
Residential real estate:
1-to-4 family mortgage(16)(23)(32)(23)(77)
Commercial real estate:
Owner-occupied(144)— (144)— (15)
Non-owner occupied— — — — (268)
Consumer and other(721)(614)(1,426)(1,189)(2,254)
Total charge-offs$(892)$(2,388)$(1,659)$(2,967)$(4,701)
Recoveries:
Commercial and industrial$13 $26 $80 $984 $2,005 
Construction10 11 10 11 11 
Residential real estate:
1-to-4 family mortgage25 14 40 26 54 
Residential line of credit— 16 — 17 17 
Commercial real estate:
Owner-occupied16 15 82 25 88 
Consumer and other108 348 347 565 766 
Total recoveries$172 $430 $559 $1,628 $2,941 
Net charge-offs (720)(1,958)(1,100)(1,339)(1,760)
Provision for credit losses on loans HFI2,575 8,181 7,572 2,052 10,393 
Allowance for credit losses on loans HFI at the end of     period$140,664 $126,272 $140,664 $126,272 $134,192 
Ratio of net charge-offs during the period to
    average loans outstanding during the period		(0.03)%(0.09)%(0.02)%(0.03)%(0.02)%
Allowance for credit losses on loans HFI as a percentage of     loans at end of period1.51 %1.46 %1.51 %1.46 %1.44 %
Allowance for credit losses on loans HFI as a percentage of     nonaccrual loans HFI441.2 %427.5 %441.2 %427.5 %489.2 %
Allowance for credit losses on loans HFI as a percentage of
    nonperforming loans at end of period		318.7 %286.2 %318.7 %286.2 %292.7 %
















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The following tables details our 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 on loans HFINet (charge-offs) recoveriesAverage loans HFIRatio of annualized net (charge-offs) recoveries to average loans HFI
(dollars in thousands)
Three months ended June 30, 2023
Commercial and industrial$192 $2 $1,692,181 — %
Construction(1,115)10 1,688,401 — %
Residential real estate:
1-to-4 family mortgage185 9 1,555,754 — %
Residential line of credit151 — 505,134 — %
Multi-family mortgage209 — 506,342 — %
Commercial real estate:
Owner-occupied643 (128)1,147,722 (0.04)%
Non-owner occupied1,009 — 1,920,016 — %
Consumer and other1,301 (613)371,734 (0.66)%
Total$2,575 $(720)$9,387,284 (0.03)%
Three months ended June 30, 2022
Commercial and industrial$(783)$(1,725)$1,430,769 (0.48)%
Construction6,590 11 1,510,077 — %
Residential real estate:
1-to-4 family mortgage383 (9)1,403,214 — %
Residential line of credit314 16 413,126 0.02 %
Multi-family mortgage105 — 405,324 — %
Commercial real estate:
Owner-occupied(1,102)15 1,032,523 0.01 %
Non-owner occupied1,246 — 1,795,905 — %
Consumer and other1,428 (266)332,840 (0.32)%
Total$8,181 $(1,958)$8,323,778 (0.09)%
Six Months Ended June 30, 2023
Commercial and industrial$182 $23 $1,677,865 — %
Construction102 10 1,688,177 — %
Residential real estate:
1-to-4 family mortgage1,258 8 1,561,368 — %
Residential line of credit1,691 — 501,297 — %
Multi-family mortgage338 — 497,654 — %
Commercial real estate:
Owner-occupied746 (62)1,137,610 (0.01)%
Non-owner occupied961 — 1,935,222 — %
Consumer and other2,294 (1,079)367,915 (0.59)%
Total$7,572 $(1,100)$9,367,108 (0.02)%
Six Months Ended June 30, 2022
Commercial and industrial$(4,789)$(771)$1,383,591 (0.11)%
Construction9,796 11 1,446,157 — %
Residential real estate:
1-to-4 family mortgage2,291 3 1,354,941 — %
Residential line of credit955 17 399,707 0.01 %
Multi-family mortgage(473)— 382,753 — %
Commercial real estate:
Owner-occupied(5,289)25 1,004,676 0.01 %
Non-owner occupied(3,232)— 1,747,587 — %
Consumer and other2,793 (624)325,310 (0.39)%
Total$2,052 $(1,339)$8,044,722 (0.03)%
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Provision for credit losses on loans HFINet (charge-offs) recoveriesAverage loans HFIRatio of net (charge-offs) recoveries to average loans HFI
(dollars in thousands)
Year ended December 31, 2022
Commercial and industrial$(4,563)$(82)$1,466,685 (0.01)%
Construction11,221 11 1,549,622 — %
Residential real estate:
1-to-4 family mortgage7,060 (23)1,438,801 — %
Residential line of credit1,574 17 431,826 — %
Multi-family mortgage(486)— 411,509 — %
Commercial real estate:
Owner-occupied(4,883)73 1,060,523 0.01 %
Non-owner occupied(3,584)(268)1,839,577 (0.01)%
Consumer and other4,054 (1,488)343,107 (0.43)%
Total$10,393 $(1,760)$8,541,650 (0.02)%
The allowance for credit losses on loans HFI was $140.7 million and $134.2 million and represented 1.51% and 1.44% of loans held for investment as of June 30, 2023 and December 31, 2022, respectively. For the three months ended June 30, 2023, we experienced net charge-offs of $0.7 million, or 0.03% of average loans HFI, compared to net charge-offs of $2.0 million, or 0.09% for the three months ended June 30, 2022. For the six months ended June 30, 2023, we experienced net charge-offs of $1.1 million, or 0.02% of average loans HFI, compared to net charge-offs of $1.3 million, or 0.03% for the six months ended June 30, 2022. Our ratio of total nonperforming loans HFI as a percentage of total loans HFI remained constant at 0.47% as of June 30, 2023 compared to December 31, 2022.
The primary reason for the increase in the allowance for credit losses on loans HFI is due to a worsening economic outlook that was incorporated into our macroeconomic forecast as of June 30, 2023 compared to December 31, 2022. Specifically, we performed evaluations within our 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, and other considerations. As a ratio of ACL to loans HFI by loan type, our consumer and other, residential 1-4 family mortgage and HELOC portfolios incurred the largest increases year-over-year due to deteriorating asset quality within our ACL model. These portfolios are heavily reliant on the strength of the economy; and therefore, they are adversely affected by inflation and high interest rates.
We also maintain an allowance for credit losses on unfunded commitments, which decreased to $14.8 million as of June 30, 2023 from $23.0 million as of December 31, 2022 due to a 10.7% or $380.6 million decrease in unfunded loan commitments during the period. Notably, there was a $496.0 million decrease in unfunded commitments in our construction loan category pipeline which resulted in a $8.1 million decrease in required ACL related to unfunded commitments. Our unfunded commitments in our construction loan category decreased as a result of management's concentrated effort over the last few quarters to reduce commitments in specific categories judged to be inherently higher risk considering the current and 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 $9.3 million as of June 30, 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 June 30, 2023, there was only one remaining relationship.
This decrease also includes gains recognized on the change in fair value of the portfolio which is included in 'other noninterest income' on the consolidated statement of income of $0.9 million for the six months ended June 30, 2023 compared to losses of $2.0 million and $2.2 million for the three and six months ended June 30, 2022, respectively. The loss recognized on the change in fair value of the portfolio for the three months ended June 30, 2023 was not meaningful.
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Mortgage loans held for sale
Mortgage loans held for sale consisted of $69.6 million of residential real estate mortgage loans in the process of being sold to third parties and $20.2 million of GNMA optional repurchase loans. This compares to $82.8 million of residential real estate mortgage loans in the process of being sold to third parties and $26.2 million of GNMA optional repurchase loans as of December 31, 2022.
Generally, mortgage volume decreases in rising interest rate environments and slower housing markets and increases in lower interest rate environments and robust housing markets. Interest rate lock volume for the three months ended June 30, 2023 and 2022 totaled $0.40 billion and $0.70 billion, respectively, and $0.78 billion and $2.01 billion for the six months ended June 30, 2023 and 2022, respectively. The decrease in interest rate lock volume during the three and six months ended June 30, 2023 reflects the slow down experienced across the industry compared with the three and six months ended June 30, 2022, which benefited from lower interest rates relative to the rising rates experienced during the three and six months ended June 30, 2023. The decrease also reflects the exit from our direct-to-consumer internet delivery channel completed during 2022. Interest rate lock volume within our direct-to-consumer internet delivery channel for the six months ended June 30, 2022 totaled $0.66 billion. Interest rate lock commitments in the pipeline were $135.4 million as of June 30, 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. Securities purchased under agreements to resell totaled $26.6 million and $75.4 million at June 30, 2023 and December 31, 2022, respectively.
Federal Funds Sold
Federal funds may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity. Federal funds sold totaled $21.7 million and $135.1 million at June 30, 2023 and December 31, 2022, respectively.
Available-for-sale debt securities portfolio
Our investment portfolio objectives include maximizing total return after other primary objectives are achieved such as, but not limited to, providing liquidity, capital preservation, and pledging collateral for various lines of credit and other borrowings. The investment objectives guide the portfolio allocation among security types, maturities, and other attributes.
The fair value of our available-for-sale debt securities portfolio was $1.42 billion and $1.47 billion as of June 30, 2023 and December 31, 2022, respectively.
During the three months ended June 30, 2022, we purchased $73.1 million in investment securities. No securities were purchased during the three months ended June 30, 2023. During the six months ended June 30, 2023 and 2022, we purchased $0.9 million and $243.2 million in investment securities, respectively. During the three and six months ended June 30, 2022, we sold $1.2 million in investment securities. There were no investment securities sold during three and six months ended June 30, 2023. During the three months ended June 30, 2023 and 2022, maturities and calls of securities totaled $31.6 million and $65.3 million, respectively. During the six months ended June 30, 2023 and 2022, maturities and calls of securities totaled $58.4 million and $126.3 million, respectively.
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Included in the fair value of available-for-sale debt securities were net unrealized losses of $226.0 million and $234.4 million as of June 30, 2023 and December 31, 2022, respectively. Current net unrealized losses are due to interest rate increases.
The following table sets forth the fair value, scheduled maturities and weighted average yields for our available-for-sale debt securities portfolio as of the dates indicated below:
June 30,
December 31,
 2023 2022 
(dollars in thousands)Fair value% of total investment securities
Weighted average yield (1)
Fair value% of total investment securities
Weighted average yield (1)
Treasury securities:
Maturing within one year$61,618 4.4 %2.51 %$729 — %2.40 %
Maturing in one to five years46,603 3.3 %1.60 %106,951 7.3 %2.10 %
Maturing in five to ten years— — %— %— — %— %
Maturing after ten years— — %— %— — %— %
Total Treasury securities108,221 7.7 %2.10 %107,680 7.3 %2.10 %
Government agency securities:
Maturing within one year— — %— %— — %— %
Maturing in one to five years33,632 2.4 %1.56 %27,082 1.8 %1.50 %
Maturing in five to ten years5,941 0.4 %1.58 %12,011 0.8 %1.70 %
Maturing after ten years956 0.1 %5.04 %969 0.1 %3.32 %
Total government agency securities40,529 2.9 %1.64 %40,062 2.7 %1.60 %
Municipal securities:
Maturing within one year3,262 0.2 %1.88 %3,496 0.2 %2.18 %
Maturing in one to five years18,214 1.3 %4.09 %17,775 1.2 %2.38 %
Maturing in five to ten years44,875 3.2 %3.83 %39,034 2.7 %3.12 %
Maturing after ten years200,746 14.1 %3.00 %204,115 13.9 %3.18 %
Total obligations of state and municipal subdivisions267,097 18.8 %3.09 %264,420 18.0 %3.10 %
Residential and commercial mortgage-backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year212 — %1.81 %— — %— %
Maturing in one to five years3,386 0.2 %2.86 %3,834 0.3 %2.73 %
Maturing in five to ten years28,671 2.0 %2.79 %23,683 1.6 %2.65 %
Maturing after ten years964,385 67.9 %1.86 %1,024,320 69.6 %1.84 %
Total residential and commercial mortgage- backed securities guaranteed by FNMA, GNMA and FHLMC996,654 70.1 %1.89 %1,051,837 71.5 %1.86 %
Corporate securities:
Maturing within one year— — %— %— — %— %
Maturing in one to five years— — %— %373 — %5.00 %
Maturing in five to ten years6,859 0.5 %3.94 %6,814 0.5 %3.87 %
Maturing after ten years— — %— %— — %— %
Total Corporate securities6,859 0.5 %3.94 %7,187 0.5 %3.94 %
          Total available-for-sale debt securities$1,419,360 100.0 %2.14 %$1,471,186 100.0 %2.10 %
(1)Yields on a tax-equivalent basis.

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

84

Deposits
Deposits represent the Bank’s primary source of funding. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs, and initiatives such as the development of our treasury management services.
Total deposits were $10.87 billion and $10.86 billion as of June 30, 2023 and December 31, 2022, respectively. Noninterest-bearing deposits at June 30, 2023 and December 31, 2022 were $2.40 billion and $2.68 billion, respectively, while interest-bearing deposits were $8.47 billion and $8.18 billion at June 30, 2023 and December 31, 2022, respectively.
The decrease in noninterest-bearing deposits of $276.3 million from December 31, 2022 to June 30, 2023 is attributable to migration to interest-yielding products such as money market and savings deposits, which increased by $274.7 million from December 31, 2022. Also included in noninterest-bearing deposits are certain mortgage escrow deposits from our third-party mortgage servicing provider, which amounted to $113.7 million and $75.6 million as of June 30, 2023 and December 31, 2022, respectively.
Interest-bearing checking deposits decreased by $180.6 million from December 31, 2022 due largely to decreases in our deposits from municipal and governmental entities (i.e. "public deposits") which decreased by $149.4 million during the period. The decline in public funds was primarily seasonal.
Additionally, brokered and internet time deposits increased by $237.6 million to $239.5 million as of June 30, 2023 compared to December 31, 2022, which was a result of our balance sheet and liquidity management strategy, which included purchasing brokered time deposits in order to increase the liquidity of our balance sheet and lower our cost of funding.
As a result of the rising interest rate environment and the shift in our deposit composition, we have experienced an increase in our cost of interest-bearing deposits and total cost of deposits. Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of operations" discussion.
We utilize designated fair value hedges to mitigate interest rate exposure associated with certain fixed-rate money market deposits. The aggregate fair value of these hedges included in the carrying amount of total money market deposits as of June 30, 2023 and December 31, 2022 was $8.9 million and $9.8 million, respectively.
Our deposit base also includes certain commercial and high net worth individuals that periodically place deposits with the Bank for short periods of time and can cause fluctuations from period to period in the overall level of customer deposits outstanding. These fluctuations may include certain deposits from related parties as disclosed within Note 14, "Related party transactions" in the notes to our consolidated financial statements included in this Report.














85

The following table sets forth the distribution by type of our deposit accounts as of the dates indicated:
June 30,
December 31,
2023 2022 
(dollars in thousands)Amount% of total deposits Average rate Amount% of total deposits Average rate
Deposit Type
Noninterest-bearing demand$2,400,288 22 %— %$2,676,631 25 %— %
Interest-bearing demand2,879,336 26 %2.74 %3,059,984 28 %0.70 %
Money market3,548,042 33 %3.19 %3,226,102 30 %0.80 %
Savings deposits423,933 4 %0.06 %471,143 4 %0.05 %
Customer time deposits1,381,176 13 %2.77 %1,420,131 13 %0.99 %
Brokered and internet time deposits239,480 2 %5.11 %1,843 — %1.36 %
Total deposits$10,872,255 100 %2.16 %$10,855,834 100 %0.54 %
Customer Time Deposits
0.00-1.00%$132,849 10 %$387,739 27 %
1.01-2.00%163,644 12 %341,721 24 %
2.01-3.00%71,101 5 %89,916 6 %
3.01-4.00%394,121 28 %342,576 24 %
4.01-5.00%527,269 38 %224,308 16 %
Above 5.00%92,192 7 %33,871 3 %
Total customer time deposits$1,381,176 100 %$1,420,131 100 %
Brokered and Internet Time Deposits
0.00-1.00%$2,081 1 %$99 5 %
1.01-2.00%980 — %747 41 %
2.01-3.00%11,005 5 %747 41 %
3.01-4.00%18,893 8 %250 13 %
4.01-5.00%20,059 8 %— — %
Above 5.00%186,462 78 %— — %
Total brokered and internet time deposits$239,480 100 %$1,843 100 %
Total time deposits$1,620,656 $1,421,974 
Further details related to our deposit customer base is presented below as of the dates indicated:
June 30,December 31,
2023 2022 
(dollars in thousands)Amount% of total deposits Amount% of total deposits
Deposits by customer segment(1)
Consumer$4,918,641 45 %$4,985,544 46 %
Commercial4,029,376 37 %3,796,698 35 %
Public1,924,238 18 %2,073,592 19 %
Total deposits$10,872,255 100 %$10,855,834 100 %
(1) Segments are determined based on the customer account level.







86

The below sets forth maturity information on time deposits below and in excess of the FDIC insurance limit as of June 30, 2023:
June 30, 2023
(dollars in thousands)AmountWeighted average interest rate at period end
Time deposits of $250 and less    
Months to maturity:
Three or less$170,059 2.76 %
Over Three to Six196,672 3.01 %
Over Six to Twelve371,130 3.59 %
Over Twelve441,054 3.71 %
Total$1,178,915 3.42 %
Time deposits of greater than $250
Months to maturity:
Three or less$56,861 2.96 %
Over Three to Six82,866 3.39 %
Over Six to Twelve168,639 4.02 %
Over Twelve133,375 3.78 %
Total$441,741 3.69 %
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any federal or state deposit insurance regimes. Collateralized deposits are included within our total uninsured deposits.
Further details related to our estimated insured or collateralized deposits and uninsured and uncollateralized deposits is presented below as of the dates indicated:
June 30,December 31,
2023 2022 
Estimated insured or collateralized deposits(2)
$7,858,761 $7,288,641 
Estimated uninsured deposits(1)
$5,041,978 $5,644,534 
Estimated uninsured and uncollateralized deposits(2)
$3,013,494 $3,567,193 
Estimated uninsured and uncollateralized deposits as a % of total deposits(2)
27.7 %32.9 %
(1) Amounts are shown on an unconsolidated basis consistent with regulatory reporting requirements.
(2) Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.
Borrowed funds
Deposits and investment securities available-for-sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, purchase federal funds and engage in overnight borrowing from the Federal Reserve, correspondent banks, or enter into client repurchase agreements. We also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds.
Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy those needs, in addition to the overall interest rate environment and cost of public funds.
Securities sold under agreements to repurchase and federal funds purchased
We enter into agreements with certain customers to sell certain securities under agreements to repurchase the security the following day. These agreements are made to provide customers with comprehensive treasury management programs as a short-term return for their excess funds. Securities sold under agreements to repurchase totaled $19.4 million and $21.9 million at June 30, 2023 and December 31, 2022, respectively.
We also maintain lines with certain correspondent banks that provide borrowing capacity in the form of federal funds purchased. Federal funds purchased are short-term borrowings that typically mature within one to ninety days. Borrowings against these lines (i.e. federal funds purchased) totaled $96.8 million and $65.0 million as of June 30, 2023 and December 31, 2022, respectively.
87

FHLB short-term borrowings
As a member of the FHLB 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 June 30, 2023 and December 31, 2022 had total borrowing capacity of $1.30 billion and $1.27 billion, respectively. As of June 30, 2023 and December 31, 2022, we had qualifying loans pledged as collateral securing these lines amounting to $2.73 billion and $2.67 billion, respectively. Overnight cash advances against this line totaled $125.0 million and $175.0 million as of June 30, 2023 and December 31, 2022.
Subordinated debt
During the year-ended December 31, 2003, we formed two separate trusts which issued $9.0 million (“Trust I”) and $21.0 million (“Trust II”) of floating rate trust preferred securities as part of a pooled offering of such securities. We issued junior subordinated debentures of $9.3 million, which included proceeds of common securities which we purchased for $0.3 million, and junior subordinated debentures of $21.7 million which included proceeds of common securities of $0.7 million. The Trusts were created for the sole purpose of issuing 30-year capital trust preferred securities to fund the purchase of junior subordinated debentures issued by us. Both issuances were to the trusts in exchange for the proceeds of the securities offerings, which represent the sole asset of the trusts.
Additionally, during the year ended December 31, 2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, maturing September 1, 2030. We mitigate 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 June 30, 2023 is detailed below:
(dollars in thousands)Year establishedMaturity Call dateTotal debt outstanding Interest rate Coupon structure
Subordinated debt issued by trust preferred securities:
  FBK Trust I (1)
200306/09/2033
6/09/2008(2)
$9,280 8.79%
3-month LIBOR plus 3.25%(5)
  FBK Trust II (1)
200306/26/2033
6/26/2008(3)
21,650 8.69%
3-month LIBOR plus 3.15%(5)
Additional subordinated debt:
  FBK subordinated debt I(4)
202009/01/2030
9/1/2025 (6)
100,000 4.50%
Semi-annual fixed(7)
      Unamortized debt issuance costs(805)
      Fair value hedge (See Note 9, "Derivatives" )
(2,590)
        Total subordinated debt, net$127,535 
(1)The Company classifies $30.0 million of the Trusts' subordinated debt as Tier 1 capital.
(2)The Company may also redeem the first junior subordinated debenture listed, in whole or in part, on any distribution payment date within 120 days of the occurrence of a
     special event, at the redemption price and must be redeemed no later than 2033.
(3)The Company may also redeem the second junior subordinated debentures listed, in whole or in part on any distribution payment date, at the redemption price and must
      be redeemed no later than 2033.
(4)The Company classified the issuance, net of unamortized issuance costs and the associated fair value hedge as Tier 2 capital, which will be phased out 20% per year in
     the final five years before maturity. 
(5)Given the cessation of LIBOR on June 30, 2023, the final payment date utilizing a 3-month LIBOR reset will be in the second half of 2023. Following the final LIBOR
    payment, the variable rate in these debt securities will convert to the fallback rate of 3-month SOFR plus the credit spread adjustment noted above as outlined in the
    LIBOR Act.
(6)The Company may redeem the notes in whole or in part on any interest payment date on or after September 1, 2025.
(7)Beginning on September 1, 2025 the coupon structure migrates to the 3-month Secured Overnight Financing Rate plus a spread of 439 basis points through the end of
     the term of the debenture.
Other borrowings
Other borrowings on our consolidated balance sheets includes our finance lease liability totaling $1.3 million and $1.4 million as of June 30, 2023 and December 31, 2022, respectively. In addition, other borrowings on our consolidated balance sheets include guaranteed rebooked GNMA loans previously sold that have become past due over 90 days and are eligible for repurchase totaling $20.2 million and $26.2 million as of June 30, 2023 and December 31, 2022, respectively. See Note 5, "Leases" and Note 10, "Fair value of financial instruments" within the Notes to our unaudited consolidated financial statements herein for additional information regarding our finance lease and guaranteed GNMA loans eligible for repurchase, respectively.

88

Liquidity and capital resources
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 optimize our 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. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. Increasing interest rates generally attracts customers to higher cost interest-bearing deposit products as they seek to maximize their yield.
Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Available-for-sale debt securities within our investment portfolio are used to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments. As of June 30, 2023 and December 31, 2022, we had pledged securities related to these items with carrying values of $1.14 billion and $1.19 billion, respectively.
Additional sources of liquidity include federal funds purchased, repurchase agreements, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances. Overnight advances obtained from the FHLB are used primarily to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. As of June 30, 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 June 30, 2023, there was $1.30 billion available to borrow against with a remaining capacity of $548.1 million. As of December 31, 2022, there was $1.27 billion available to borrow against with a remaining capacity of $830.0 million.
We also maintained unsecured lines of credit with other commercial banks totaling $350.0 million as of both June 30, 2023 and December 31, 2022. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. Borrowings against these lines (i.e. federal funds purchased) totaled $96.8 million and $65.0 million as of June 30, 2023 and December 31, 2022, respectively. As of both June 30, 2023 and December 31, 2022, we also had $50.0 million available through the IntraFi network, which allows us to offer banking customers access to FDIC insurance protection on deposits through our Bank which exceed FDIC insurance limits.










89

Our current on-balance sheet liquidity and available sources of liquidity are summarized in the table below:
June 30,December 31,
(dollars in thousands)2023 2022 
Current on-balance sheet liquidity:
   Cash and cash equivalents$1,160,354 $1,027,052 
   Unpledged available-for-sale debt securities281,098 280,165 
   Equity securities, at fair value3,031 2,990 
Total on-balance sheet liquidity$1,444,483 $1,310,207 
Available sources of liquidity:
   Unsecured borrowing capacity(1)
$3,396,674 $3,595,812 
   FHLB remaining borrowing capacity548,052 829,959 
   Federal Reserve discount window2,476,347 2,470,000 
Total available sources of liquidity$6,421,073 $6,895,771 
On-balance sheet liquidity as a percentage of total assets11.2 %10.2 %
On-balance sheet liquidity and available sources of liquidity as a percentage of estimated     uninsured and uncollateralized deposits(2)
261.0 %230.0 %
(1)Includes capacity available per internal policy in the form of brokered deposits and unsecured lines of credit.
(2)Amounts are shown on a fully consolidated basis and exclude deposits of affiliates that are eliminated in consolidation.
The Company also maintains the ability to access capital markets to meet its liquidity needs. The Company has an active shelf registration statement filed with the SEC which allows it to raise capital in various forms, including through the sale of common stock, preferred stock, depository shares, debt securities, rights, warrants and units. Specific terms and prices would be determined at the time of any such offering. In the past, the Company has utilized capital markets to generate liquidity in the form of common stock and subordinated debt primarily for the purpose of funding acquisitions.
The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid by the 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 1A. Risk Factors - Risks related to our business" and "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend Policy", each of which is set forth in our Annual Report.
Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial Institutions. Based upon this regulation, as of June 30, 2023 and December 31, 2022, $185.6 million and $161.3 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the three and six months ended June 30, 2023, there were $8.5 million and $32.0 million in cash dividends approved by the board for payment from the Bank to the holding company. During the three and six months ended June 30, 2022, there were $17.3 million and $34.5 million in cash dividends approved by the board for payment from the Bank to the holding company. None of these required approval from the TDFI. Subsequent to June 30, 2023, the board approved a dividend from the Bank to the holding company to be paid in the third quarter for $8.5 million that also did not require approval from the TDFI.
During the three and six months ended June 30, 2023, the Company declared shareholder dividends of $0.15 per share, or $7.1 million and $0.30 per share, or $14.2 million, respectively. During the three and six months ended June 30, 2022, the Company declared shareholder dividends of $0.13 per share, or $6.2 million and $0.26 per share, or $12.4 million, respectively. Subsequent to June 30, 2023, the Company declared a quarterly dividend in the amount of $0.15 per share, payable on September 5, 2023, to stockholders of record as of August 14, 2023.
90

Shareholders’ equity and capital management
Our total shareholders’ equity was $1.39 billion as of June 30, 2023 and $1.33 billion as of December 31, 2022. Book value per common share was $29.64 as of June 30, 2023 and $28.36 as of December 31, 2022. The increase in shareholders’ equity was primarily attributable to an increase in retained net income, net of dividend declarations. The increase in shareholders’ equity as of June 30, 2023 also included an increase in unrealized value of $8.4 million within our available-for-sale debt securities portfolio from December 31, 2022.
Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the TDFI, Federal Reserve and the FDIC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. As of June 30, 2023 and December 31, 2022, we met all capital adequacy requirements for which we were subject. See additional discussion regarding our capital adequacy and ratios at within Note 12, "Minimum capital requirements" in the notes to our consolidated financial statements contained herein.
June 30, 2023FB Financial CorporationFirstBank

To be Well-Capitalized(1)
Total Risk-Based Capital Ratio13.9 %13.6 %10.0 %
Tier 1 Capital Ratio11.9 %11.7 %8.0 %
Common Equity Tier 1 Ratio(CET1)11.7 %11.7 %6.5 %
Leverage Ratio10.7 %10.4 %5.0 %
(1) Applicable to Bank level capital.
Capital ratios are well above regulatory requirements for well-capitalized institutions. Management’s use of risk-based capital ratios in its analysis of the measures to assess the quality of capital and believes that investors may find it useful in their analysis of the Company. The Company also performs quarterly forward-looking stress testing to evaluate capital deployment opportunities are aligned with the Company's risk appetite.
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate sensitivity
Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure.
The Asset Liability Management Committee, which is authorized by our board of directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.
We monitor the impact of changes in interest rates on our net interest income and economic value of equity using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. Economic Value of Equity measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in affect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.

91

The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented:
Percentage change in:
Net interest income (1)
Change in interest ratesJune 30,December 31,
(in basis points)2023 2022 
+40014.8 %20.6 %
+30012.6 %15.1 %
+2009.61 %10.8 %
+1005.45 %5.98 %
-100(5.92)%(6.32)%
-200(11.9)%(13.2)%
 Percentage change in:
Economic value of equity (2)
Change in interest ratesJune 30,December 31,
(in basis points)2023 2022 
+400(8.17)%(9.90)%
+300(4.02)%(7.00)%
+200(0.70)%(4.00)%
+1000.82 %(1.66)%
-100(3.26)%0.99 %
-200(8.84)%1.07 %
(1)The percentage change represents the projected net interest income for 12 months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios.
(2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios.
The results for the net interest income simulations as of June 30, 2023 and December 31, 2022 resulted in an asset sensitive position. The primary influence of our asset sensitivity is the floating rate structure in many of our loans held for investment as well as the composition of our liabilities which is primarily customer deposits. Our variable rate loan portfolio is indexed to market rates and timing of repricing of loans and deposits varies in proportion to market rate fluctuations. We actively monitor and perform stress tests on our deposit beta's as part of our overall management of interest rate risk. This requires the use of various assumptions based on historical relationships of these variables in reaching any conclusion. Since these correlations are based on competitive pricing in the market, we anticipate that our future results will likely be different from the scenario results presented above and such differences could be material.
The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results.
We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers. For more information about our derivative financial instruments, see Note 9, “Derivatives” in the notes to our consolidated financial statements. 


92

ITEM 4 — CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

















93


PART II
ITEM 1—LEGAL PROCEEDINGS
Various legal proceedings to which we or our subsidiaries are party arise from time to time in the normal course of business. As of the date of this Report, there are no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries’ properties are subject.
ITEM 1A—RISK FACTORS
There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, with the exception of the additional risk factor disclosed in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2023.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 14, 2022, the Company announced the board of directors’ authorization of a share repurchase program pursuant to which the Company may purchase up to $100 million in shares of the Company’s issued and outstanding common stock. The purchase authorizations granted under the new repurchase plan will terminate either on the date on which the maximum dollar amount is repurchased under the new repurchase plan or on January 31, 2024, whichever date occurs earlier. This repurchase plan will be conducted pursuant to a written plan and is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended.
The Company did not complete any share repurchases during the three months ended June 30, 2023. The dollar value of shares that may yet be repurchased under the program was $61,249,538 as of June 30, 2023.

ITEM 5 — OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the quarter ended June 30, 2023, none of the Company’s directors or executive officers adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
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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 NumberDescription
101.INSInline XBRL Instance Document*
101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
101.LABInline XBRL Taxonomy Extension Label Linkbase Document*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document*
104Cover 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.
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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
August 4, 2023
Michael M. Mettee
Chief Financial Officer
(Principal Financial Officer)
/s/ Jonathan Pennington
August 4, 2023
Jonathan Pennington
Chief Accounting Officer
(Principal Accounting Officer)

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