Companies: 10,785     total market cap: $133.889 T
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FB Financial
FBK
#4133
Rank
$2.77 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$51.94
Share price
0.80%
Change (1 day)
12.96%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. FB Financial
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q2

FB Financial - 10-Q quarterly report FY2022 Q2


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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, 2022
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.)
211 Commerce Street, Suite 300
Nashville, Tennessee
37201
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (615) 564-1212
___________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)  Name of each exchange on which registered 
Common Stock, Par Value $1.00 Per Share FBK  New York Stock Exchange 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒  Accelerated filer ☐
Non-accelerated filer ☐  Small reporting company ☐
Emerging growth company ☐    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of registrant’s Common Stock outstanding as of August 3, 2022 was 46,883,935.
1

Table of Contents
Page
PART I.
3
Item 1.
4
4
Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2022 and 2021
5
Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2022 and 2021
6
Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the three and six months ended June 30, 2022 and 2021
7
Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2022 and 2021
9
10
Item 2.
49
Item 3.
87
Item 4.
88
Part II.
Item 1.
89
Item 1A.
89
Item 2.
89
Item 6.
91
92















2

GLOSSARY OF ABBREVIATIONS AND ACRONYMS
As used in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (this "Report"), references to “we,” “our,” “us,” “FB Financial,” or “the Company” refer to FB Financial Corporation, a Tennessee corporation, and our wholly-owned banking subsidiary, FirstBank, a Tennessee state-chartered bank, unless otherwise indicated or the context otherwise requires. References to “Bank” or “FirstBank” refer to FirstBank, our wholly-owned banking subsidiary.
The acronyms and abbreviations identified below are used in the Notes to the Consolidated Financial Statements (Unaudited) as well as in the Management’s discussion and analysis of financial condition and results of operations. You may find it helpful to refer to this page as you read this Report.

ACLAllowance for credit lossesGAAPU.S. generally accepted accounting principles
AFSAvailable-for-saleGNMAGovernment National Mortgage Association
ALCOAsset Liability Management CommitteeIRLC
Interest rate lock commitment
ASCAccounting Standard CodificationLIBORLondon Interbank Offered Rate
ASUAccounting Standard UpdateMSRMortgage servicing rights
CARESCoronavirus Aid, Relief, and Economic Security ActNIMNet interest margin
CECLCurrent expected credit lossesOREOOther real estate owned
CEOChief Executive OfficerPPPPaycheck Protection Program
CET1Common Equity Tier 1PSUPerformance-based restricted stock units
COVID-19Coronavirus pandemicROAAReturn on average total assets
CPRConditional prepayment rateROAEReturn on average shareholders' equity
EPSEarnings per shareROATCEReturn on average tangible common equity
ESPPEmployee Stock Purchase PlanROURight-of-use
EVEEconomic value of equityRSURestricted stock units
FASBFinancial Accounting Standards BoardSBASmall Business Administration
FDICFederal Deposit Insurance CorporationSDN List
Specially Designated Nationals and Blocked Persons
Federal ReserveBoard of Governors of the Federal Reserve
   System		SECU.S. Securities and Exchange Commission
FHLBFederal Home Loan BankSOFR
Secured overnight financing rate
FHLMCFederal Home Loan Mortgage CorporationTDFITennessee Department of Financial Institutions
FNMAFederal National Mortgage AssociationTDRTroubled debt restructuring
3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
FB Financial Corporation and subsidiaries
Consolidated balance sheets
(Amounts are in thousands except share and per share amounts) 


 June 30,December 31,
 2022 (Unaudited)2021 
ASSETS  
Cash and due from banks$79,402 $91,333 
Federal funds sold and reverse repurchase agreements
233,588 128,087 
Interest-bearing deposits in financial institutions559,871 1,578,320 
Cash and cash equivalents872,861 1,797,740 
Investments:
Available-for-sale debt securities, at fair value1,618,241 1,678,525 
Equity securities, at fair value3,103 3,367 
Federal Home Loan Bank stock, at cost34,581 32,217 
Loans held for sale, at fair value260,215 752,223 
Loans8,624,337 7,604,662 
Less: allowance for credit losses126,272 125,559 
Net loans8,498,065 7,479,103 
Premises and equipment, net142,474 143,739 
Other real estate owned, net9,398 9,777 
Operating lease right-of-use assets41,070 41,686 
Interest receivable40,393 38,528 
Mortgage servicing rights, at fair value158,678 115,512 
Goodwill242,561 242,561 
Core deposit and other intangibles, net14,515 16,953 
Bank-owned life insurance74,605 73,519 
Other assets183,102 172,236 
Total assets$12,193,862 $12,597,686 
LIABILITIES
Deposits
Noninterest-bearing$2,895,520 $2,740,214 
Interest-bearing checking3,338,561 3,418,666 
Money market and savings3,131,463 3,546,936 
Customer time deposits1,171,941 1,103,594 
Brokered and internet time deposits5,817 27,487 
Total deposits10,543,302 10,836,897 
Borrowings160,400 171,778 
Operating lease liabilities45,917 46,367 
Accrued expenses and other liabilities124,298 109,949 
Total liabilities10,873,917 11,164,991 
Commitments and contingencies (Note 8)
SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized;
    46,881,896 and 47,549,241 shares issued and outstanding at
    June 30, 2022 and December 31, 2021, respectively
46,882 47,549 
Additional paid-in capital864,614 892,529 
Retained earnings528,851 486,666 
Accumulated other comprehensive (loss) income, net(120,495)5,858 
Total FB Financial Corporation common shareholders' equity1,319,852 1,432,602 
Noncontrolling interest93 93 
Total equity1,319,945 1,432,695 
Total liabilities and shareholders' equity$12,193,862 $12,597,686 
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 share and per share amounts)

5
 Three Months Ended June 30,Six Months Ended June 30,
 202220212022 2021 
Interest income:  
Interest and fees on loans$99,655 $89,861 $186,519 $179,273 
Interest on securities
Taxable6,499 3,844 11,919 6,663 
Tax-exempt1,842 1,933 3,708 3,889 
Other2,218 691 3,195 1,289 
Total interest income110,214 96,329 205,341 191,114 
Interest expense:
Deposits6,591 7,919 12,053 17,745 
Borrowings1,452 1,847 2,935 4,230 
Total interest expense8,043 9,766 14,988 21,975 
Net interest income102,171 86,563 190,353 169,139 
Provision for credit losses8,181 (12,885)2,052 (24,517)
Provision for credit losses on unfunded commitments4,137 (954)6,019 (3,176)
Net interest income after provisions for credit losses89,853 100,402 182,282 196,832 
Noninterest income:
Mortgage banking income22,559 35,499 52,090 90,831 
Service charges on deposit accounts2,908 2,266 5,822 4,605 
ATM and interchange fees5,353 5,381 10,440 9,722 
Investment services and trust income2,275 2,999 4,407 5,007 
(Loss) gain from securities, net(109)144 (261)227 
(Loss) gain on sales or write-downs of other real estate owned(26)(23)(524)473 
 Gain (loss) from other assets18 (4)82 (15)
Other income236 3,038 2,550 5,180 
Total noninterest income33,214 49,300 74,606 116,030 
Noninterest expenses:
Salaries, commissions and employee benefits55,181 62,367 114,624 126,938 
Occupancy and equipment expense5,853 5,356 11,256 11,205 
Legal and professional fees3,116 2,090 5,723 4,524 
Data processing 2,404 2,542 4,885 4,861 
Amortization of core deposit and other intangibles1,194 1,394 2,438 2,834 
Advertising2,031 3,559 6,064 5,812 
Mortgage restructuring expense12,458 — 12,458 — 
Other expense14,760 15,652 28,821 31,484 
Total noninterest expense96,997 92,960 186,269 187,658 
Income before income taxes26,070 56,742 70,619 125,204 
Income tax expense6,717 13,440 16,030 29,028 
Net income applicable to FB Financial Corporation
    and noncontrolling interest		19,353 43,302 54,589 96,176 
Net income applicable to noncontrolling interest8 8 8 8 
Net income applicable to FB Financial Corporation$19,345 $43,294 $54,581 $96,168 
Earnings per common share
Basic$0.41 $0.91 $1.15 $2.03 
Diluted0.41 0.90 $1.15 $2.00 
See the accompanying notes to the consolidated financial statements.
5

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

 Three Months Ended June 30,Six Months Ended June 30,
 2022 2021 2022 2021 
Net income$19,353 $43,302 $54,589 $96,176 
Other comprehensive (loss) income, net of tax:
Net change in unrealized (loss) gain in available-for-sale
securities, net of tax (benefits) expense of $(17,343), $798, $(44,826) and $(2,654)
(49,233)2,286 (127,408)(9,562)
Reclassification adjustment for gain on sale of securities
included in net income, net of tax expenses of $0, $2, $1 and $4
(1)(6)(2)(11)
Net change in unrealized gain in hedging activities, net of tax
    expenses of $99, $23, $372 and $135
283 67 1,057 383 
Total other comprehensive (loss) income, net of tax(48,951)2,347 (126,353)(9,190)
Comprehensive (loss) income applicable to FB Financial Corporation
    and noncontrolling interest 		(29,598)45,649 (71,764)86,986 
Comprehensive income applicable to noncontrolling interest8 8 8 8 
Comprehensive (loss) income applicable to FB Financial Corporation$(29,606)$45,641 $(71,772)$86,978 
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 income, 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 and
distributed, net of shares withheld		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 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 income, 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 and
distributed, net of shares withheld		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 
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, net		Total common
shareholders' equity		Noncontrolling interestTotal shareholders' equity
Balance at March 31, 2021$47,332 $900,521 $365,192 $16,058 $1,329,103 $93 $1,329,196 
   Net income attributable to FB
Financial Corporation and
noncontrolling interest		— — 43,294 — 43,294 8 43,302 
   Other comprehensive loss, net of
     taxes		— — — 2,347 2,347 — 2,347 
   Stock based compensation
expense		2 2,513 — — 2,515 — 2,515 
   Restricted stock units vested and
distributed net of shares withheld		27 (252)— — (225)— (225)
   Dividends declared ($0.11 per
     share)
— — (5,313)— (5,313)— (5,313)
   Noncontrolling interest distribution— — — — — (8)(8)
Balance at June 30, 2021$47,361 $902,782 $403,173 $18,405 $1,371,721 $93 $1,371,814 
Balance at December 31, 2020$47,222 $898,847 $317,625 $27,595 $1,291,289 $93 $1,291,382 
   Net income attributable to FB
Financial Corporation and
noncontrolling interest		— — 96,168 — 96,168 8 96,176 
   Other comprehensive loss, net of
     taxes		— — — (9,190)(9,190)— (9,190)
   Stock based compensation
expense		5 5,176 — — 5,181 — 5,181 
   Restricted stock units vested and
distributed net of shares withheld		112 (2,052)— — (1,940)— (1,940)
   Shares issued under employee
stock purchase program		22 811 — — 833 — 833 
   Dividends declared ($0.22 per
     share)
— — (10,620)— (10,620)— (10,620)
   Noncontrolling interest distribution— — — — — (8)(8)
Balance at June 30, 2021$47,361 $902,782 $403,173 $18,405 $1,371,721 $93 $1,371,814 
8
FB Financial Corporation and subsidiaries
Consolidated statements of cash flows
(Unaudited)
(Amounts are in thousands)
Six Months Ended June 30,
2022 2021 
Cash flows from operating activities:
Net income applicable to FB Financial Corporation and noncontrolling interest$54,589 $96,176 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of fixed assets and software4,048 4,148 
Amortization of core deposit and other intangibles2,438 2,834 
Capitalization of mortgage servicing rights(15,070)(22,167)
Net change in fair value of mortgage servicing rights(28,096)549 
Stock-based compensation expense5,620 5,181 
Provision for credit losses2,052 (24,517)
Provision for credit losses on unfunded commitments6,019 (3,176)
Provision for mortgage loan repurchases(1,189)(266)
Amortization of premiums and accretion of discounts on acquired loans, net2,288 284 
Amortization of premiums and accretion of discounts on securities, net3,692 4,390 
Loss (gain) from securities, net261 (227)
Originations of loans held for sale(1,719,488)(3,308,882)
Proceeds from sale of loans held for sale2,213,443 3,355,152 
Gain on sale and change in fair value of loans held for sale(35,410)(86,031)
Net loss (gain) or write-downs of other real estate owned524 (473)
(Gain) loss on other assets(82)15 
Provision for deferred income taxes12,461 13,538 
Earnings on bank-owned life insurance(728)(792)
Changes in:
Operating leases166 (677)
Other assets and interest receivable13,566 (17,810)
Accrued expenses and other liabilities7,279 (92,355)
Net cash provided by (used in) operating activities528,383 (75,106)
Cash flows from investing activities:
Activity in available-for-sale securities:
Sales1,218 — 
Maturities, prepayments and calls126,349 147,906 
Purchases(243,209)(354,762)
Net change in loans(1,029,702)(95,938)
Net change in commercial loans held for sale39,300 91,792 
Sales of FHLB stock— 2,346 
Purchases of FHLB stock(2,364)(525)
Purchases of premises and equipment(3,224)(1,168)
Proceeds from the sale of premises and equipment875 — 
Proceeds from the sale of other real estate owned418 4,661 
Net cash used in investing activities(1,110,339)(205,688)
Cash flows from financing activities:
Net (decrease) increase in demand deposits(334,155)900,733 
Net increase (decrease) in time deposits46,677 (154,814)
Net (decrease) increase in securities sold under agreements to repurchase(9,010)857 
Payments on subordinated debt— (40,000)
Amortization of issuance costs and (accretion) of subordinated debt fair value premium, net193 (176)
Payments on other borrowings— (15,000)
Share based compensation withholding payments(2,146)(1,940)
Net proceeds from sale of common stock under employee stock purchase program687 833 
Repurchase of common stock(32,743)— 
Dividends paid(12,418)(10,492)
Noncontrolling interest distribution(8)(8)
Net cash (used in) provided by financing activities(342,923)679,993 
Net change in cash and cash equivalents(924,879)399,199 
Cash and cash equivalents at beginning of the period1,797,740 1,317,898 
Cash and cash equivalents at end of the period$872,861 $1,717,097 
Supplemental cash flow information:
Interest paid$15,638 $24,611 
Taxes paid726 45,335 
Supplemental noncash disclosures:
Transfers from loans to other real estate owned$563 $4,596 
Loans provided for sales of other real estate owned — 533 
Transfers from loans to loans held for sale20,016 3,709 
Transfers from loans held for sale to loans14,179 29,322 
Trade date payable - securities— 41,722 
Dividends declared not paid on restricted stock units118 128 
Right-of-use assets obtained in exchange for operating lease liabilities2,317 670 
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 (the “Company”) is a financial holding company headquartered in Nashville, Tennessee. The Company operates through its wholly-owned subsidiaries, FirstBank (the "Bank") and FirstBank Risk Management, Inc. As of June 30, 2022, the Bank had 81 full-service branches throughout Tennessee, Alabama, southern Kentucky and north Georgia, and a national mortgage business with office locations across the Southeast, which primarily originates loans to be sold in the secondary market.
The unaudited consolidated financial statements, including the notes thereto, have been prepared in accordance with U.S. GAAP interim reporting requirements and general banking industry guidelines, and therefore, do not include all information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K.
The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.
In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported results of operations for the reporting periods and the related disclosures. Although management's estimates contemplate current conditions and how they are expected to change in the future, it is reasonably possible that actual conditions could vary from those anticipated, which could affect the Company's financial condition and results of operations. Actual results could differ significantly from those estimates.
Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or shareholders’ equity.
Earnings per share
Basic EPS excludes dilution and is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares issuable under the restricted stock units granted but not yet vested and distributable. Diluted EPS is computed by dividing earnings available to common shareholders by the weighted average number of common shares outstanding for the period, plus an incremental number of common-equivalent shares computed using the treasury stock method.
Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common shareholders in undistributed earnings for purposes of computing EPS. Companies that have such participating securities are required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable dividend equivalents and are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.
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 calculation for each of the periods presented:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Basic earnings per common share calculation:
Net income applicable to FB Financial Corporation$19,345 $43,294 $54,581 $96,168 
Dividends paid on and undistributed earnings allocated to participating securities— — — — 
Earnings available to common shareholders$19,345 $43,294 $54,581 $96,168 
Weighted average basic shares outstanding47,111,055 47,351,969 47,320,784 47,312,312 
Basic earnings per common share$0.41 $0.91 $1.15 $2.03 
Diluted earnings per common share:
Earnings available to common shareholders$19,345 $43,294 $54,581 $96,168 
Weighted average basic shares outstanding47,111,055 47,351,969 47,320,784 47,312,312 
Weighted average diluted shares contingently issuable(1)
100,595 641,804 145,507 664,221 
Weighted average diluted shares outstanding47,211,650 47,993,773 47,466,291 47,976,533 
Diluted earnings per common share$0.41 $0.90 $1.15 $2.00 
(1)Excludes 202,661 and 10,678 restricted stock units outstanding considered to be antidilutive for the three and six months ended June 30, 2022 and 164,472 and 250,776 restricted stock units outstanding considered to be antidilutive for three and six months ended June 30, 2021.
Recently adopted accounting policies:
The Company did not modify or adopt any new accounting policies during the three and six months ended June 30, 2022 that were not disclosed in the Company's 2021 audited consolidated financial statements included on Form 10-K, other than as described below.
As previously disclosed, during the three months ended March 31, 2022, the Company added to the existing accounting policy related to derivative financial instruments and hedging activities as described in Note 1 of the Company's 2021 Annual Report on Form 10-K in accordance with ASC 815, "Derivatives and Hedging," as a result of entering into designated fair value hedges during the period. The Company enters into fair value hedge relationships to mitigate the effect of changing interest rates on the fair values of fixed rate securities and loans. The gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item.
Recently adopted accounting standards:
The Company did not adopt any new accounting standards that were not disclosed in the Company's 2021 audited consolidated financial statements included on Form 10-K.
Newly issued not yet effective accounting standards:
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB is issuing this update to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, to amend a related illustrative example, and to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The ASU becomes effective January 1, 2024 and the Company is evaluating the potential impact of this standard on its consolidated financial statements and related disclosures.
In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method", to expand the current single-layer method of electing hedge accounting to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. The amendments in this update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of ASU No. 2022-01 for any entity that has adopted the amendments in ASU No.2017-12 for the corresponding period. Adoption of this update will not have an impact on the Company's consolidated financial statements or related disclosures.
11
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Additionally, in March 2022, the FASB issued ASU 2022-02, "'Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" related to troubled debt restructurings and vintage disclosures for financing receivables. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan modifications and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the effect that ASU 2022-02 will have on its consolidated financial statements and related disclosures.
In March 2022, the SEC released SAB 121 to add interpretive guidance for entities to consider when they have obligations to safeguard crypto-assets held for clients. The new guidance requires reporting entities who allow clients to transact in crypto-assets and act as a custodian to record a liability with a corresponding asset regardless of whether they control the crypto-asset. The crypto-asset will need to be marked at fair value for each reporting period. The new guidance requires disclosures in the footnotes to address the amount of crypto-assets reported, and the safeguarding and recordkeeping of the assets. The guidance in this update requires that reporting companies implement SAB 121 no later than the financial statements covering the first interim or annual period ending after June 15, 2022, with retrospective application back to the beginning of the fiscal year. During the three months ended March 31, 2022, the Company became a founding member of the USDF Consortium ("the Consortium"), which plans to utilize blockchain and bank-issued digital dollars technology to streamline peer-to-peer financial transactions. While the Company does not currently hold or facilitate transactions with crypto-assets, the Company is evaluating the potential future financial statement and disclosure impact from adopting this guidance when it becomes applicable based on the Company's crypto-asset activities.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a onetime 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.
Our LIBOR Transition Committee was established to transition from LIBOR to alternative rates and has continued its efforts consistent with industry timelines. As part of these efforts, during the fourth quarter of 2021, we ceased utilization of LIBOR as an index in newly originated loans or loans that are refinanced. Additionally, we identified existing products that utilize LIBOR and are reviewing contractual language to facilitate the transition to alternative reference rates. ASU 2020-04 and ASU 2021-01 are not expected to have a material impact on our consolidated financial statements.
Subsequent events
The Company has evaluated, for consideration of recognition or disclosure, subsequent events that occurred through the date of issuance of these financial statements. The Company has determined that there were no subsequent events that occurred after June 30, 2022, 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 income at June 30, 2022 and December 31, 2021:  
June 30, 2022
 Amortized cost Gross unrealized gains Gross unrealized losses Allowance for credit losses for investments Fair Value
Investment Securities    
Available-for-sale debt securities  
U.S. government agency securities$45,154 $4 $(3,099)$— $42,059 
Mortgage-backed securities - residential1,297,033 325 (132,426)— 1,164,932 
Mortgage-backed securities - commercial 21,539 — (871)— 20,668 
Municipal securities301,175 810 (28,821)— 273,164 
U.S. Treasury securities112,844 — (3,051)— 109,793 
Corporate securities8,006 — (381)— 7,625 
Total$1,785,751 $1,139 $(168,649)$— $1,618,241 
December 31, 2021
 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$34,023 $18 $(171)$— $33,870 
Mortgage-backed securities - residential1,281,285 6,072 (17,985)— 1,269,372 
Mortgage-backed securities - commercial15,024 272 (46)— 15,250 
Municipal securities322,052 16,718 (160)— 338,610 
U.S. Treasury securities14,914 — (6)— 14,908 
Corporate securities6,500 40 (25)— 6,515 
Total$1,673,798 $23,120 $(18,393)$— $1,678,525 
The components of amortized cost for debt securities on the consolidated balance sheets excludes accrued interest receivable since the Company elected to present accrued interest receivable separately on the consolidated balance sheets. As of June 30, 2022 and December 31, 2021, total accrued interest receivable on debt securities was $5,662 and $5,051, respectively.
As of June 30, 2022 and December 31, 2021, the Company had $3,103 and $3,367, in marketable equity securities recorded at fair value, respectively.
Securities pledged at June 30, 2022 and December 31, 2021 had carrying amounts of $1,312,460 and $1,226,646, respectively, and were pledged to secure a Federal Reserve Bank line of credit, public deposits and repurchase agreements.
There were no holdings of 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, 2022 and December 31, 2021, 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 at June 30, 2022 and December 31, 2021 are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgage underlying the security may be called or repaid without any penalties. Therefore, mortgage-backed securities are not included in the maturity categories in the following summary.
June 30,December 31,
 2022 2021 
 Available-for-saleAvailable-for-sale
 Amortized costFair valueAmortized costFair value
Due in one year or less$3,078 $3,077 $21,851 $21,884 
Due in one to five years157,083 152,339 54,847 55,307 
Due in five to ten years58,406 55,967 45,714 46,975 
Due in over ten years248,612 221,258 255,077 269,737 
467,179 432,641 377,489 393,903 
Mortgage-backed securities - residential1,297,033 1,164,932 1,281,285 1,269,372 
Mortgage-backed securities - commercial21,539 20,668 15,024 15,250 
Total debt securities$1,785,751 $1,618,241 $1,673,798 $1,678,525 
Sales and other dispositions of available-for-sale securities were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2022 2021 2022 2021 
Proceeds from sales$1,218 $— $1,218 $— 
Proceeds from maturities, prepayments and calls126,349 86,866 126,349 147,906 
Gross realized gains1 8 3 15 
Gross realized losses— — — — 
Additionally, the change in the fair value of equity securities and sale of equity securities resulted in a net loss of $110 and a net gain of $136 for the three months ended June 30, 2022 and 2021, respectively, and in a net loss of $264 and a net gain of $212 for the six months ended June 30, 2022 and 2021, respectively.

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

June 30, 2022
 Less than 12 months12 months or moreTotal
 Fair ValueUnrealized Loss Fair ValueUnrealized Loss Fair ValueUnrealized Loss
U.S. government agency securities$41,061 $(3,099)$— $— $41,061 $(3,099)
Mortgage-backed securities - residential928,511 (101,181)191,387 (31,245)1,119,898 (132,426)
Mortgage-backed securities - commercial20,668 (871)— — 20,668 (871)
Municipal securities216,587 (28,536)939 (285)217,526 (28,821)
U.S. Treasury securities108,125 (3,051)— — 108,125 (3,051)
Corporate securities7,743 (381)— — 7,743 (381)
Total$1,322,695 $(137,119)$192,326 $(31,530)$1,515,021 $(168,649)

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, 2021
 Less than 12 months12 months or moreTotal
 Fair ValueUnrealized Loss Fair ValueUnrealized Loss Fair ValueUnrealized loss
U.S. government agency securities$18,360 $(171)$— $— $18,360 $(171)
Mortgage-backed securities - residential$871,368 $(14,295)$102,799 $(3,690)$974,167 $(17,985)
Mortgage-backed securities - commercial7,946 (46)— — 7,946 (46)
Municipal securities11,414 (160)— — 11,414 (160)
U.S. Treasury securities14,908 (6)— — 14,908 (6)
Corporate securities4,119 (25)— — 4,119 (25)
Total$928,115 $(14,703)$102,799 $(3,690)$1,030,914 $(18,393)
As of June 30, 2022 and December 31, 2021, the Company’s securities portfolio consisted of 509 and 511 securities, 416 and 80 of which were in an unrealized loss position, respectively.
During the three months ended June 30, 2022, the Company's available-for-sale debt securities portfolio unrealized value declined $66,577 to an unrealized loss position of $167,510 as of June 30, 2022 from an 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 unrealized value declined $172,237 from an unrealized gain position of $4,727 as of December 31, 2021.
During the three months ended June 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value increased $3,076 to an unrealized gain position of $22,321 as of June 30, 2021 from an unrealized gain position of $19,245 as of March 31, 2021. During the six months ended June 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value declined $12,231 from an unrealized gain position of $34,552 as of December 31, 2020.
The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies and the Company has historically not recorded any losses associated with these investments. As such, as of June 30, 2022 and December 31, 2021, it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three and six months ended June 30, 2022 or 2021.
Note (3)—Loans and allowance for credit losses:
Loans outstanding as of June 30, 2022 and December 31, 2021, by class of financing receivable are as follows:
 June 30,December 31,
 2022 2021 
Commercial and industrial (1)
$1,479,424 $1,290,565 
Construction1,575,331 1,327,659 
Residential real estate:
1-to-4 family mortgage1,457,452 1,270,467 
Residential line of credit425,485 383,039 
Multi-family mortgage391,970 326,551 
Commercial real estate:
Owner occupied1,053,872 951,582 
Non-owner occupied1,885,122 1,730,165 
Consumer and other355,681 324,634 
Gross loans8,624,337 7,604,662 
Less: Allowance for credit losses(126,272)(125,559)
Net loans$8,498,065 $7,479,103 
(1)Includes $1,289 and $3,990 of loans originated as part of the Paycheck Protection Program as of June 30, 2022 and December 31, 2021, respectively. PPP loans are federally guaranteed as part of the CARES Act, provided PPP loan recipients receive loan forgiveness under the SBA regulations. As such, there is minimal credit risk associated with these loans.
15
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
As of June 30, 2022 and December 31, 2021, $980,762 and $1,136,294, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,570,759 and $1,581,673, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. Additionally, as of June 30, 2022 and December 31, 2021, qualifying loans of $2,892,283 and $2,440,097, respectively, were pledged to the Federal Reserve Bank under the Borrower-in-Custody program.
The components of amortized cost for loans on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of June 30, 2022 and December 31, 2021, accrued interest receivable on loans held for investment was $33,209 and $31,676, respectively.
Allowance for Credit Losses
The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.
The Company's loss rate models estimate the lifetime loss rate for pools of loans by combining the calculated loss rate based on each variable within the model (including the macroeconomic variables). The lifetime loss rate for the pool is then multiplied by the loan balances to determine the expected credit losses on the pool.
The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations.
The 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.
When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell. Loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs.
Reasonably expected TDRs and TDRs use the same methodology. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance is measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.


16
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The Company performed qualitative evaluations within the Company's established qualitative framework, weighting the impact of the current economic outlook (including uncertainty due to inflation, negative economic forecasts, predicted Federal Reserve rate increases) status of federal government stimulus programs, and other considerations. The increase in estimated required reserve during the three and six months ended June 30, 2022 was a result of increased loan growth and a tightening monetary policy environment both of which were incorporated into the Company's reasonable and supportable forecasts when compared to June 30, 2022 and December 31, 2021. Qualitative adjustments included projected slower GDP growth over the next two to three fiscal years, expected elevated unemployment levels, and expected interest rate increases in the short-term from Federal Reserve. The qualitative evaluations above include weighted projections that the economy may be nearing a recession. These considerations were slightly offset as the Company removed the impact of COVID troubled industries from its calculation.
The following tables provide the changes in the allowance for credit losses by class of financing receivable for the three and six months ended June 30, 2022 and 2021:
 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(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(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 
 
 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, 2021
Beginning balance -
March 31, 2021
$14,643 $38,622 $19,572 $9,268 $11,657 $3,609 $50,179 $10,404 $157,954 
Provision for loan losses(579)(5,784)75 (2,558)1,818 972 (7,323)494 (12,885)
Recoveries of loans
previously charged-off
87 — 41 9 — 126 — 190 453 
Loans charged off(360)— (16)(3)— — — (480)(859)
Ending balance -
June 30, 2021
$13,791 $32,838 $19,672 $6,716 $13,475 $4,707 $42,856 $10,608 $144,663 
Six Months Ended June 30, 2021 
Beginning balance -
December 31, 2020
$14,748 $58,477 $19,220 $10,534 $7,174 $4,849 $44,147 $11,240 $170,389 
Provision for credit losses(536)(25,610)536 (3,815)6,301 (281)(1,291)179 (24,517)
Recoveries of loans
previously charged-off
216 — 65 15 — 139 — 385 820 
Loans charged off(637)(29)(149)(18)— — — (1,196)(2,029)
Ending balance -
  June 30, 2021		$13,791 $32,838 $19,672 $6,716 $13,475 $4,707 $42,856 $10,608 $144,663 
17
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Credit Quality - Commercial 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.
18
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
During the six months ended June 30, 2022, the Company revised the presentation of the below credit quality vintage tables without change to accounting or credit policies. The updated presentation disaggregates between commercial and consumer loan types with consumer loans reported as either performing or nonperforming based on their delinquency and accrual status. As such, the tables presented below as of December 31, 2021 have been revised to align with current period presentation.
The following tables present the credit quality of our commercial loan portfolio by year of origination as of June 30, 2022 and December 31, 2021. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.
As of June 30, 2022
Commercial Term Loans
Amortized Cost Basis by Origination Year
20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Pass$172,954 $258,774 $81,540 $108,279 $45,779 $69,018 $713,271 $1,449,615 
Special Mention27 48 — 949 617 1 2,892 4,534 
Classified— 957 2,197 450 2,808 9,375 9,488 25,275 
Total172,981 259,779 83,737 109,678 49,204 78,394 725,651 1,479,424 
Construction
Pass363,575 655,142 244,421 85,768 20,128 51,482 150,348 1,570,864 
Special Mention332 1,348 9 — — 2,587 — 4,276 
Classified— — — — — — 191 191 
Total363,907 656,490 244,430 85,768 20,128 54,069 150,539 1,575,331 
Residential real estate:
Multi-family mortgage
Pass65,674 171,158 33,338 72,098 4,245 37,339 6,911 390,763 
Special Mention— — — — — — — — 
Classified— — — — — 1,207 — 1,207 
Total65,674 171,158 33,338 72,098 4,245 38,546 6,911 391,970 
Commercial real estate:
Owner occupied
Pass148,727 181,856 124,643 159,095 73,107 273,556 66,424 1,027,408 
Special Mention107 — — 1,483 3,144 1,533 197 6,464 
Classified— — 242 6,030 1,401 11,629 698 20,000 
Total148,834 181,856 124,885 166,608 77,652 286,718 67,319 1,053,872 
Non-owner occupied
Pass297,437 431,172 133,593 162,956 258,273 530,258 54,403 1,868,092 
Special Mention— — — — 241 551 — 792 
Classified— — — 582 3,402 12,254 — 16,238 
Total297,437 431,172 133,593 163,538 261,916 543,063 54,403 1,885,122 
Total commercial loans
Pass1,048,367 1,698,102 617,535 588,196 401,532 961,653 991,357 6,306,742 
Special Mention466 1,396 9 2,432 4,002 4,672 3,089 16,066 
Classified— 957 2,439 7,062 7,611 34,465 10,377 62,911 
    Total commercial loans$1,048,833 $1,700,455 $619,983 $597,690 $413,145 $1,000,790 $1,004,823 $6,385,719 
19
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)

As of December 31, 2021
Commercial Term Loans
Amortized Cost Basis by Origination Year
20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Pass$273,232 $95,279 $140,938 $52,162 $33,997 $57,020 $596,667 $1,249,295 
Special Mention79 9 949 632 3 1,519 12,367 15,558 
Classified918 2,391 2,376 3,089 3,370 6,425 7,143 25,712 
Total274,229 97,679 144,263 55,883 37,370 64,964 616,177 1,290,565 
Construction
Pass677,258 280,828 135,768 23,916 15,313 67,818 117,176 1,318,077 
Special Mention62 184 — — 1,208 1,384 — 2,838 
Classified— — 2,922 2,882 3 737 200 6,744 
Total677,320 281,012 138,690 26,798 16,524 69,939 117,376 1,327,659 
Residential real estate:
Multi-family mortgage
Pass166,576 32,242 64,345 7,124 5,602 38,526 10,891 325,306 
Special Mention— — — — — — — — 
Classified— — — — — 1,245 — 1,245 
Total166,576 32,242 64,345 7,124 5,602 39,771 10,891 326,551 
Commercial real estate:
Owner occupied
Pass170,773 131,471 174,257 83,698 69,939 236,998 57,123 924,259 
Special Mention— — 1,502 3,541 885 2,555 213 8,696 
Classified— — 3,102 768 3,295 9,616 1,846 18,627 
Total170,773 131,471 178,861 88,007 74,119 249,169 59,182 951,582 
Non-owner occupied
Pass462,478 154,048 165,917 264,855 170,602 414,85946,541 1,679,300 
Special Mention— — 3,747 3,388 — 969— 8,104 
Classified— — 1,898 23,849 1,506 15,508— 42,761 
Total462,478 154,048 171,562 292,092 172,108 431,336 46,541 1,730,165 
Total commercial loans
Pass1,750,317 693,868 681,225 431,755 295,453 815,221 828,398 5,496,237 
Special Mention141 193 6,198 7,561 2,096 6,427 12,580 35,196 
Classified918 2,391 10,298 30,588 8,174 33,531 9,189 95,089 
    Total commercial loans$1,751,376 $696,452 $697,721 $469,904 $305,723 $855,179 $850,167 $5,626,522 







20
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 Loans
For consumer and residential loan classes, the company primarily evaluates credit quality based on delinquency and accrual status of the loan, credit documentation and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality.
The following tables present the credit quality by classification (performing or nonperforming) of our consumer loan portfolio by year of origination as of June 30, 2022 and December 31, 2021. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.
As of June 30, 2022
Consumer Term Loans
Amortized Cost Basis by Origination Year
20222021202020192018PriorRevolving Loans Amortized Cost BasisTotal
Residential real estate:
1-to-4 family mortgage
Performing360,922 471,972 171,459 102,401 81,481 253,220 — 1,441,455 
Nonperforming— 3,019 3,699 1,353 1,368 6,558 — 15,997 
Total360,922 474,991 175,158 103,754 82,849 259,778 — 1,457,452 
Residential line of credit
Performing— — — — — — 423,980 423,980 
Nonperforming— — — — — — 1,505 1,505 
Total— — — — — — 425,485 425,485 
Consumer and other
Performing72,176 65,356 47,669 34,779 29,873 90,011 10,104 349,968 
Nonperforming— 347 991 641 1,421 2,313 — 5,713 
       Total72,176 65,703 48,660 35,420 31,294 92,324 10,104 355,681 
Total consumer loans
Performing433,098 537,328 219,128 137,180 111,354 343,231 434,084 2,215,403 
Nonperforming— 3,366 4,690 1,994 2,789 8,871 1,505 23,215 
Total consumer loans$433,098 $540,694 $223,818 $139,174 $114,143 $352,102 $435,589 $2,238,618 


21
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
As of December 31, 2021
Consumer Term Loans
Amortized Cost Basis by Origination Year
20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
Residential real estate:
1-to-4 family mortgage
Performing521,533 204,690 121,775 100,164 109,087 199,262 — 1,256,511 
Nonperforming1,232 3,734 977 2,429 1,765 3,819 — 13,956 
Total522,765 208,424 122,752 102,593 110,852 203,081 — 1,270,467 
Residential line of credit
Performing— — — — — — 381,303 381,303 
Nonperforming— — — — — — 1,736 1,736 
Total— — — — — — 383,039 383,039 
Consumer and other
Performing82,910 55,123 38,281 32,893 21,856 74,248 14,478 319,789 
Nonperforming199 345 545 1,352 861 1,496 47 4,845 
       Total83,109 55,468 38,826 34,245 22,717 75,744 14,525 324,634 
Total consumer loans
Performing604,443 259,813 160,056 133,057 130,943 273,510 395,781 1,957,603 
Nonperforming1,431 4,079 1,522 3,781 2,626 5,315 1,783 20,537 
Total consumer loans$605,874 $263,892 $161,578 $136,838 $133,569 $278,825 $397,564 $1,978,140 
Nonaccrual and Past Due Loans
Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest.
The following tables represent an analysis of the aging by class of financing receivable as of June 30, 2022 and December 31, 2021:
June 30, 202230-89 days
past due		90 days or 
more and accruing
interest 		Non-accrual
loans		Loans current
on payments
and accruing
interest 		Total
Commercial and industrial$1,929 $55 $3,414 $1,474,026 $1,479,424 
Construction2,654 2,675 — 1,570,002 1,575,331 
Residential real estate:
1-to-4 family mortgage13,989 9,675 6,322 1,427,466 1,457,452 
Residential line of credit912 48 1,457 423,068 425,485 
Multi-family mortgage— 329 46 391,595 391,970 
Commercial real estate:
Owner occupied323 707 6,416 1,046,426 1,053,872 
Non-owner occupied282 — 7,263 1,877,577 1,885,122 
Consumer and other8,397 1,096 4,617 341,571 355,681 
Total$28,486 $14,585 $29,535 $8,551,731 $8,624,337 
 
22
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
December 31, 202130-89 days
past due		90 days or 
more and accruing
interest 		Non-accrual
loans		Loans current on payments and accruing interest Total
Commercial and industrial$1,030 $63 $1,520 $1,287,952 $1,290,565 
Construction4,852 718 3,622 1,318,467 1,327,659 
Residential real estate:
1-to-4 family mortgage11,007 9,363 4,593 1,245,504 1,270,467 
Residential line of credit319 — 1,736 380,984 383,039 
Multi-family mortgage— — 49 326,502 326,551 
Commercial real estate:
Owner occupied1,417 — 6,710 943,455 951,582 
Non-owner occupied427 — 14,084 1,715,654 1,730,165 
Consumer and other7,398 1,591 3,254 312,391 324,634 
Total$26,450 $11,735 $35,568 $7,530,909 $7,604,662 

The following tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of June 30, 2022 and December 31, 2021 by class of financing receivable.
June 30, 2022Non-accrual
with no
related
allowance		Non-accrual
with
related
allowance		Related
allowance
Commercial and industrial$2,829 $585 $4 
Residential real estate:
1-to-4 family mortgage2,672 3,650 67 
Residential line of credit1,086 371 6 
Multi-family mortgage— 46 1 
Commercial real estate:
Owner occupied3,933 2,483 48 
Non-owner occupied6,854 409 33 
Consumer and other— 4,617 233 
Total$17,374 $12,161 $392 
December 31, 2021Non-accrual
with no
related
allowance		Non-accrual
with
related
allowance		Related
allowance
Commercial and industrial$1,085 $435 $6 
Construction2,882 740 99 
Residential real estate:
1-to-4 family mortgage378 4,215 60 
Residential line of credit797 939 11 
Multi-family mortgage— 49 2 
Commercial real estate:
Owner occupied5,346 1,364 206 
Non-owner occupied13,898 186 7 
Consumer and other— 3,254 164 
Total$24,386 $11,182 $555 





23
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following presents interest income recognized on nonaccrual loans for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Commercial and industrial$83 $219 $137 $333 
Construction7 16 26 30 
Residential real estate:
1-to-4 family mortgage55 67 107 85 
Residential line of credit21 27 61 45 
Multi-family mortgage2 1 2 2 
Commercial real estate:
Owner occupied63 101 88 232 
Non-owner occupied76 141 146 230 
Consumer and other54 55 69 55 
Total$361 $627 $636 $1,012 
Accrued interest receivable written off as an adjustment to interest income amounted to $123 and $132 for the three months ended June 30, 2022 and 2021, respectively, and $307 and $597 for the six months ended June 30, 2022 and 2021, respectively.
Troubled debt restructurings
As of June 30, 2022 and December 31, 2021, the Company had a recorded investment in TDRs of $17,054 and $32,435, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate to borrowers experiencing financial difficulty. Of these loans, $10,286 and $11,084 were classified as non-accrual loans as of June 30, 2022 and December 31, 2021, respectively. The Company has calculated $78 and $1,245 in allowances for credit losses on TDRs as of June 30, 2022 and December 31, 2021, respectively. There were no significant unfunded loan commitments to extend additional funds on troubled debt restructurings as of June 30, 2022 or December 31, 2021.
The following tables present 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 $— 
24
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Three Months Ended June 30, 2021Number of loansPre-modification outstanding recorded investmentPost-modification outstanding recorded investmentCharge offs and specific reserves
Commercial and industrial4 $13,055 $13,055 $— 
Commercial real estate:
Owner occupied4 3,550 3,550 — 
Residential real estate:
1-to-4 family mortgage2 811 811 — 
Residential line of credit1 11 11 — 
Total11 $17,427 $17,427 $— 
Six Months Ended June 30, 2021Number of loansPre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial5 $13,162 $13,162 $— 
Commercial real estate:
Owner occupied43,550 3,550 — 
Non-owner occupied111,997 11,997 — 
Residential real estate:
1-4 family mortgage2811 811 — 
   Residential line of credit111 11 — 
Total13$29,531 $29,531 $— 
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 nor the three and six months ended June 30, 2021. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.
In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The terms of certain other loans were modified during the three and six months ended June 30, 2022 and 2021 that did not meet the definition of a TDR. The modification of these loans usually involve either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.
25
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Collateral Dependent Loans
For loans for which the repayment (based on the Company's assessment) is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, the following tables present the loans and the corresponding individually assessed allowance for credit losses by class of financing receivable. Significant changes in individually assessed reserves are due to changes in the valuation of the underlying collateral in addition to changes in accrual and past due status.
June 30, 2022
Type of Collateral
Real EstateFinancial Assets and Equipment TotalIndividually assessed allowance for credit loss
Commercial and industrial$1,396 $2,235 $3,631 $— 
Residential real estate:
1-to-4 family mortgage883 — 883 — 
Residential line of credit1,401 — 1,401 1 
Commercial real estate:
Owner occupied8,015 — 8,015 45 
Non-owner occupied6,855 — 6,855 — 
Consumer and other24 — 24 1 
Total$18,574 $2,235 $20,809 $47 
December 31, 2021
Type of Collateral
Real EstateFinancial Assets and Equipment TotalIndividually assessed allowance for credit loss
Commercial and industrial$799 $1,090 $1,889 $— 
Construction3,580 — 3,580 92 
Residential real estate:
1-to-4 family mortgage338 — 338 — 
Residential line of credit1,400 — 1,400 10 
Commercial real estate:
Owner occupied8,117 71 8,188 200 
Non-owner occupied13,899 — 13,899 — 
Consumer and other25 — 25 1 
Total$28,158 $1,161 $29,319 $303 
26
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (4)—Other real estate owned
The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at fair value less estimated cost to sell the property. The following table summarizes the other real estate owned for the three and six months ended June 30, 2022 and 2021: 
Three Months EndedSix Months Ended
June 30,June 30,
 2022202120222021
Balance at beginning of period$9,721 $11,177 $9,777 $12,111 
Transfers from loans— 3,201 563 4,596 
Proceeds from sale of other real estate
   owned		(297)(2,166)(418)(4,661)
(Loss) gain on sale of other real estate owned(26)272 (130)1,100 
Loans provided for sales of other real
   estate owned		— (203)— (533)
Write-downs and partial liquidations— (295)(394)(627)
Balance at end of period$9,398 $11,986 $9,398 $11,986 
Foreclosed residential real estate properties totaled $970 and $775 as of June 30, 2022 and December 31, 2021, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $419 at June 30, 2022. As of December 31, 2021, there were no such residential foreclosure proceedings in process.
Excess land and facilities held for sale resulting from branch consolidations totaled $2,980 and $3,348 as of June 30, 2022 and December 31, 2021, respectively.
Note (5)—Leases:
As of June 30, 2022, the Company was the lessee in 56 operating leases and 1 finance lease of certain branch, mortgage and operations locations, of which 45 operating leases and 1 finance lease currently have remaining terms varying from greater than one year to 33 years. Leases with initial terms of less than one year are not recorded on the consolidated balance sheets. The Company also does not include equipment leases and leases in which the Company is the lessor on the consolidated balance sheets as these are insignificant.
Many leases include one or more options to renew, with renewal terms that can extend the lease up to an additional 20 years or more. Certain lease agreements contain provisions to periodically adjust rental payments for inflation. Renewal options that management is reasonably certain to renew and fixed rent escalations are included in the right-of-use asset and lease liability.
During the year ended December 31, 2020, the Company entered into a lease for a new corporate headquarters building located in downtown Nashville. The building is currently under construction and anticipated commencement is in the third quarter of 2022. Upon commencement, the Company anticipates recording an ROU asset and operating lease liability of approximately $23,000 and $26,000, respectively, in connection with the initial term of this lease based on current information available, subject to changes based on borrowing rate changes and the Company's evaluation of renewal options and other terms.
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, 2022 and December 31, 2021:
June 30,December 31,
Classification20222021
Right-of-use assets:
Operating leasesOperating lease right-of-use assets$41,070$41,686
Finance leasesPremises and equipment, net1,4221,487
Total right-of-use assets$42,492$43,173
Lease liabilities:
Operating leasesOperating lease liabilities$45,917$46,367
Finance leasesBorrowings 1,4661,518
Total lease liabilities $47,383$47,885
Weighted average remaining lease term (in years) -
    operating		11.912.4
Weighted average remaining lease term (in years) -
    finance		12.913.4
Weighted average discount rate - operating2.74 %2.73 %
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,
Classification2022 2021 2022 2021 
Operating lease costs:
Amortization of right-of-use assetOccupancy and equipment$1,851 $2,171 $3,561 $4,110 
Short-term lease costOccupancy and equipment144 102 255 189 
Variable lease costOccupancy and equipment293 241 549 476 
Lease impairment Mortgage restructuring expense364 — 364 — 
Gain on lease modifications and
    terminations		Occupancy and equipment— (787)(18)(787)
Finance lease costs:
Interest on lease liabilitiesInterest expense on borrowings6 8 15 14 
Amortization of right-of-use assetOccupancy and equipment28 27 65 55 
Total lease cost$2,686 $1,762 $4,791 $4,057 

During the three months and six months ended June 30, 2022, the Company recorded $364 of lease impairment related to vacating two locations associated with the Mortgage restructuring. Additionally, during the six months ended June 30, 2022 and 2021, the Company recorded gains of $18 and $787, respectively, related to early lease terminations and modifications on other vacated locations.
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 the total lease liability as of June 30, 2022 is as follows:
OperatingFinance
Leases Lease
Lease payments due:
June 30, 2023$3,886 $58 
June 30, 20246,735 118 
June 30, 20255,447 120 
June 30, 20265,125 121 
June 30, 20275,039 123 
Thereafter28,877 1,102 
     Total undiscounted future minimum lease payments55,109 1,642 
Less: imputed interest(9,192)(176)
     Lease liability$45,917 $1,466 
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, 2022 and 2021:
 Three Months Ended June 30,Six Months Ended June 30,
 202220212022 2021 
Carrying value at beginning of period$144,675 $104,192 $115,512 $79,997 
Capitalization5,258 10,573 15,070 22,167 
Change in fair value:
    Due to pay-offs/pay-downs(5,024)(7,865)(9,495)(17,186)
    Due to change in valuation inputs or assumptions13,769 (5,285)37,591 16,637 
        Carrying value at end of period$158,678 $101,615 $158,678 $101,615 
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, 2022 and 2021: 
 Three Months Ended June 30,Six Months Ended June 30,
 202220212022 2021 
Servicing income:
   Servicing income$7,966 $6,788 $15,395 $13,719 
   Change in fair value of mortgage servicing rights8,745 (13,150)28,096 (549)
   Change in fair value of derivative hedging instruments(9,897)10,005 (28,995)(7,859)
Servicing income
6,814 3,643 14,496 5,311 
Servicing expenses3,377 2,693 5,925 5,225 
          Net servicing income(1)
$3,437 $950 $8,571 $86 
(1) Excludes benefit of custodial servicing related noninterest-bearing deposits held by the Bank.
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, 2022 and December 31, 2021 are as follows: 
 June 30,December 31,
 20222021
Unpaid principal balance$11,160,382 $10,759,286 
Weighted-average prepayment speed (CPR)5.13 %9.31 %
Estimated impact on fair value of a 10% increase$(4,617)$(4,905)
Estimated impact on fair value of a 20% increase$(8,901)$(9,429)
Discount rate10.5 %9.81 %
Estimated impact on fair value of a 100 bp increase$(7,274)$(4,785)
Estimated impact on fair value of a 200 bp increase$(13,943)$(9,198)
Weighted-average coupon interest rate3.23 %3.23 %
Weighted-average servicing fee (basis points)2727
Weighted-average remaining maturity (in months)330330
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, 2022 and December 31, 2021, mortgage escrow deposits totaled to $133,180 and $127,617, respectively.
Note (7)—Income taxes:
An allocation of federal and state income taxes between current and deferred portions is presented below:
 Three Months Ended June 30,
 2022 2021 
Current$3,569 $9,541 
Deferred3,148 3,899 
Total$6,717 $13,440 
Six Months Ended June 30,
2022 2021 
Current$3,569 $15,490 
Deferred12,461 13,538 
Total$16,030 $29,028 
30
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 a reconciliation of federal income taxes at the statutory federal rate of 21% to the Company's effective tax rates for the three and six months ended June 30, 2022 and 2021:
 Three Months Ended June 30,
 2022 2021 
Federal taxes calculated at statutory rate$5,475 21.0 %$11,916 21.0 %
Increase (decrease) resulting from:
State taxes, net of federal benefit1,582 6.1 %1,879 3.3 %
Benefit from equity based compensation(15)(0.1)%(124)(0.2)%
Municipal interest income, net of interest disallowance(444)(1.7)%(419)(0.7)%
Bank-owned life insurance(79)(0.3)%(82)(0.1)%
Offering costs— — %127 0.2 %
Section 162(m) limitation40 0.2 %21 — %
Other158 0.6 %121 0.2 %
Income tax expense, as reported$6,717 25.8 %$13,440 23.7 %
Six Months Ended June 30,
2022 2021 
Federal taxes calculated at statutory rate$14,830 21.0 %$26,293 21.0 %
Increase (decrease) resulting from:
State taxes, net of federal benefit2,533 3.6 %3,629 2.9 %
Benefit from equity based compensation(306)(0.4)%(345)(0.3)%
 Municipal interest income, net of interest disallowance(888)(1.3)%(843)(0.7)%
Bank-owned life insurance(153)(0.2)%(166)(0.1)%
Offering costs— — %127 0.1 %
Section 162(m) limitation162 0.1 %248 0.2 %
Other(148)(0.1)%85 0.1 %
Income tax expense, as reported$16,030 22.7 %$29,028 23.2 %
The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation paid to certain individuals. It is the Company’s policy to apply the Section 162(m) limitations to stock-based compensation first and then followed by cash compensation. As a result of the vesting of these units and cash compensation paid to date, the Company has disallowed a portion of its compensation paid to the applicable individuals.
31
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The components of the net deferred tax (liabilities) assets at June 30, 2022 and December 31, 2021, are as follows: 
June 30,December 31,
 2022 2021 
Deferred tax assets:  
Allowance for credit losses$36,547 $35,233 
Operating lease liabilities12,346 12,478 
Net operating loss1,392 1,370 
Amortization of core deposit intangibles115 — 
Deferred compensation4,794 5,484 
Unrealized loss on debt securities 43,504 — 
Unrealized loss on cash flow hedges— 205 
Other assets7,150 8,301 
Subtotal105,848 63,071 
Deferred tax liabilities:  
FHLB stock dividends$(484)$(484)
Operating leases - right of use assets(11,117)(11,287)
Depreciation(7,915)(7,938)
Amortization of core deposit intangibles— (116)
Unrealized gain on equity securities(2,333)(2,407)
Unrealized gain on cash flow hedges(168)— 
Unrealized gain on debt securities— (1,324)
Mortgage servicing rights(41,345)(30,098)
Goodwill(14,806)(13,743)
Other liabilities(2,507)(2,494)
Subtotal(80,675)(69,891)
Net deferred tax assets (liabilities) $25,173 $(6,820)
The Company had a net operating loss carryforward generated as a result of a previous acquisition amounting to $5,851 and $6,523 as of June 30, 2022 and December 31, 2021, respectively. The net operating loss carryforward can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, the Company believes the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward expires on December 31, 2029.
During the six months ended June 30, 2022, the Company generated a state net operating loss carryforward of $3,227, which may have varying expiration periods. No such loss was generated during the three months ended June 30, 2022 or the three and six months ended June 30, 2021. The Company expects to generate sufficient taxable income to utilize the loss generated.
Note (8)—Commitments and contingencies:
Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.
Commitments may expire without being used. Off-balance sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.
June 30,December 31,
 2022 2021 
Commitments to extend credit, excluding interest rate lock commitments$3,356,089 $3,106,594 
Letters of credit66,265 77,427 
Balance at end of period$3,422,354 $3,184,021 
As of June 30, 2022 and December 31, 2021, loan commitments included above with floating interest rates totaled $2.58 billion and $2.26 billion, respectively.
32
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The Company estimates expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives under the CECL methodology. When applying this methodology, the Company considers the likelihood that funding will occur, the contractual period of exposure to credit loss, the risk of loss, historical loss experience, and current conditions along with expectations of future economic conditions.
The table below presents activity within the allowance for credit losses on unfunded commitments included in accrued expenses and other liabilities on the Company's consolidated balance sheets for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30,Six Months Ended June 30,
2022 20212022 2021 
Balance at beginning of period$16,262 $14,156 $14,380 $16,378 
Provision for credit losses on unfunded commitments4,137 (954)6,019 (3,176)
Balance at end of period$20,399 $13,202 $20,399 $13,202 
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 valuation reserve. The total principal amount of loans repurchased (or indemnified for) was $198 and $1,546 for the three and six months ended June 30, 2022, respectively, and $761 and $1,469 for the three and six months ended June 30, 2021, respectively. The Company has established a reserve associated with loan repurchases.
The following table summarizes the activity in the repurchase reserve included in accrued expenses and other liabilities on the Company's consolidated balance sheets:
Three Months Ended June 30,Six Months Ended June 30,
 2022 2021 2022 2021 
Balance at beginning of period$4,317 $6,284 $4,802 $5,928 
Provision for loan repurchases or indemnifications(800)(706)(1,189)(266)
Losses on loans repurchased or indemnified(72)(89)(168)(173)
Balance at end of period$3,445 $5,489 $3,445 $5,489 
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 commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate-lock commitments). Under such commitments, interest rates for mortgage loans are typically locked in for between 45 to 90 days with the customer. These interest rate lock commitments are recorded at fair value in the Company’s consolidated balance sheets. The Company also enters into best effort or mandatory delivery forward commitments to sell residential mortgage loans to secondary market investors. Gains and losses arising from changes in the valuation of the 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 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.
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 tables provide details on the Company’s non-designated derivative financial instruments as of the dates presented:
June 30, 2022
Notional AmountAssetLiability
  Interest rate contracts$533,633 $29,701 $29,683 
  Forward commitments492,000 1,915 — 
  Interest rate-lock commitments292,716 3,758 — 
  Futures contracts318,000 952 — 
    Total$1,636,349 $36,326 $29,683 
 December 31, 2021
 Notional AmountAssetLiability
  Interest rate contracts$600,048 $19,265 $19,138 
  Forward commitments1,180,000 — 1,077 
  Interest rate-lock commitments487,396 7,197 — 
  Futures contracts429,000 922 — 
    Total$2,696,444 $27,384 $20,215 
Gains (losses) included in the consolidated statements of income related to the Company’s non-designated derivative financial instruments were as follows:
Three Months Ended June 30,Six Months Ended June 30,
 2022 2021 2022 2021 
Included in mortgage banking income:
  Interest rate lock commitments$2,007 $171 $(3,439)$(21,271)
  Forward commitments14,432 (19,200)52,335 24,058 
  Futures contracts(9,165)9,104 (25,700)(7,228)
  Option contracts— — 36 — 
    Total$7,274 $(9,925)$23,232 $(4,441)
Derivatives designated as cash flow hedges
The Company also maintains two interest rate swap agreements with notional amounts totaling $30,000 used to hedge interest rate exposure on outstanding subordinated debentures included in long-term debt totaling $30,930. Under these agreements, the Company receives a variable rate of interest equal to 3-month LIBOR and pays a weighted average fixed rate of interest of 2.08%. Upon the cessation of LIBOR in June 2023, the rate will convert to SOFR plus an adjustment in accordance with market standards. The interest rate swap contracts, which mature in June of 2024, are designated as cash flow hedges with the objective of reducing the variability in cash flows resulting from changes in interest rates.
The following presents a summary of the Company's designated cash flow hedges as of the dates presented:
 June 30, 2022December 31, 2021
 Notional AmountEstimated fair valueBalance sheet locationEstimated fair valueBalance sheet location
Interest rate swap agreements-
   subordinated debt		$30,000 $644 Other assets$(785)Accrued expenses and other liabilities
The Company's consolidated statements of income included losses of $101 and $240 for the three and six months ended June 30, 2022, respectively, and $143 and $280 for the three and six months ended June 30, 2021, respectively, in interest expense on borrowings related to these cash flow hedges. The cash flow hedges were effective during the periods presented and as a result qualified for hedge accounting treatment. As such, no amounts were reclassified from accumulated other comprehensive (loss) income into earnings during either period presented.
34
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following discloses the amount included in other comprehensive (loss) income, 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,
 2022 2021 2022 2021 
Amount of gain recognized in other comprehensive
   income, net of tax expense of $99, $23, $372 and $135
$283 $67 $1,057 $383 
Derivatives designated as fair value hedges
During the first quarter of 2022, the Company entered into three designated fair value hedges to mitigate the effect of changing rates on the fair value of various fixed rate liabilities, including certain money market deposits and subordinated debt. The hedging strategy converts the fixed interest rates of the hedged items to the daily compounded SOFR in arrears paid monthly. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged asset or liability attributable to the hedged risk are recognized in current earnings. The gain or loss on the derivative instrument is presented on the same income statement line item as the earnings effect of the hedged item. As of June 30, 2022, the fair value hedges were deemed effective.
 June 30, 2022
 Notional AmountRemaining Maturity (In Years)Receive Fixed RatePay Floating RateEstimated fair value
Derivatives included in other liabilities:   
  Interest rate swap
    agreement- subordinated
    debt		$100,000 1.671.45625%SOFR$(2,509)
  Interest rate swap
    agreement- fixed rate
    money market deposits		75,000 2.141.49500%SOFR(2,294)
  Interest rate swap
    agreement- fixed rate
    money market deposits		125,000 2.141.49500%SOFR(3,823)
     Total$300,000 1.981.48208%$(8,626)
The following discloses the amount of 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,
 2022 2022 
Designated fair value hedge:
     Interest expense on deposits$395 $708 
     Interest expense on borrowings186 348 
        Total$581 $1,056 
The following amounts were recorded on the balance sheet related to cumulative adjustments for fair value hedges as of June 30, 2022:
Line item on the balance sheetCarrying Amount of the Hedged ItemCumulative Decrease in Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Item
Borrowings$96,298 
(1)
$(2,509)
Money market and savings deposits202,114 
(2)
(6,117)
(1) The carrying value also includes unamortized subordinated debt issuance costs of $1,193.
(2) The carrying value also includes and purchase accounting fair value premium of $8,231.
35
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheets when the “right of offset” exists or when the instruments are subject to an enforceable master netting agreement, which includes the right of the non-defaulting party or non-affected party to offset recognized amounts, including collateral posted with the counterparty, to determine a net receivable or net payable upon early termination of the agreement. Certain of the Company’s derivative instruments are subject to master netting agreements, however the Company has not elected to offset such financial instruments in the consolidated balance sheets. The following table presents the Company's gross derivative positions as recognized in the consolidated balance sheets as well as the net derivative positions, including collateral pledged to the extent the application of such collateral did not reduce the net derivative liability position below zero, had the Company elected to offset those instruments subject to an enforceable master netting agreement:
Offsetting Derivative AssetsOffsetting Derivative Liabilities
June 30, 2022December 31, 2021June 30, 2022December 31, 2021
Gross amounts recognized$28,850 $4,990 $13,726 $15,733 
Gross amounts offset in the consolidated balance sheets— — — — 
Net amounts presented in the consolidated balance sheets28,850 4,990 13,726 15,733 
Gross amounts not offset in the consolidated balance sheets
Less: financial instruments9,724 4,297 9,724 4,297 
Less: financial collateral pledged— — 4,002 11,436 
Net amounts$19,126 $693 $— $— 
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, 2022 and December 31, 2021, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of $35,391 and $57,868, respectively, against its obligations under these agreements. Cash pledged as collateral on derivative contracts is recorded in other assets on the consolidated balance sheets.
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.

36
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The Company records the fair values of financial assets and liabilities on a recurring and non-recurring basis using the following methods and assumptions:
Investment Securities
Investment securities are recorded at fair value on a recurring basis. Fair values for securities are based on quoted market prices, where available. If quoted prices are not available, fair values are based on quoted market prices of similar instruments or are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the pricing relationship or correlation among other benchmark quoted securities. Investment securities valued using quoted market prices of similar instruments or that are valued using matrix pricing are classified as Level 2. When significant inputs to the valuation are unobservable, the available-for-sale securities are classified within Level 3 of the fair value hierarchy. Where no active market exists for a security or other benchmark securities, fair value is estimated by the Company with reference to discount margins for other high-risk securities.
Loans held for sale
Loans held for sale are carried at fair value. Fair value is determined using current secondary market prices for loans with similar characteristics for the mortgage portfolio, that is, using Level 2 inputs. Commercial loans held for sale's 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.
37
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
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.
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, 2022Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$872,861 $872,861 $— $— $872,861 
Investment securities1,621,344 — 1,621,344 — 1,621,344 
Loans, net8,498,065 — — 8,438,565 8,438,565 
Loans held for sale260,215 — 222,400 37,815 260,215 
Interest receivable40,393 77 7,037 33,279 40,393 
Mortgage servicing rights158,678 — — 158,678 158,678 
Derivatives36,970 — 36,970 — 36,970 
Financial liabilities: 
Deposits: 
Without stated maturities$9,365,544 $9,365,544 $— $— $9,365,544 
With stated maturities1,177,758 — 1,185,639 — 1,185,639 
Securities sold under agreement to
repurchase and federal funds sold
31,706 31,706 — — 31,706 
Subordinated debt127,228 — — 123,714 123,714 
Interest payable2,512 45 954 1,513 2,512 
Derivatives38,309 — 38,309 — 38,309 
 
 Fair Value
December 31, 2021Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,797,740 $1,797,740 $— $— $1,797,740 
Investment securities1,681,892 — 1,681,892 — 1,681,892 
Loans, net7,479,103 — — 7,566,717 7,566,717 
Loans held for sale752,223 — 672,924 79,299 752,223 
Interest receivable38,528 36 6,461 32,031 38,528 
Mortgage servicing rights115,512 — — 115,512 115,512 
Derivatives27,384 — 27,384 — 27,384 
Financial liabilities: 
Deposits: 
Without stated maturities$9,705,816 $9,705,816 $— $— $9,705,816 
With stated maturities1,131,081 — 1,137,647 — 1,137,647 
Securities sold under agreement to
repurchase and federal funds sold
40,716 40,716 — — 40,716 
Subordinated debt129,544 — — 133,021 133,021 
Interest payable3,162 140 1,510 1,512 3,162 
Derivatives21,000 — 21,000 — 21,000 
38
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets measured at fair value on a recurring basis at June 30, 2022 are presented in the following table:
At June 30, 2022Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
Available-for-sale securities:    
U.S. government agency securities$— $42,059 $— $42,059 
Mortgage-backed securities - residential— 1,164,932 — 1,164,932 
Mortgage-backed securities - commercial— 20,668 — 20,668 
Municipal securities— 273,164 — 273,164 
Treasury securities— 109,793 — 109,793 
Corporate securities— 7,625 — 7,625 
Equity securities— 3,103 — 3,103 
Total securities$— $1,621,344 $— $1,621,344 
Loans held for sale$— $222,400 $37,815 $260,215 
Mortgage servicing rights— — 158,678 158,678 
Derivatives— 36,970 — 36,970 
Financial Liabilities:
Derivatives— 38,309 — 38,309 
The balances and levels of the assets measured at fair value on a non-recurring basis at June 30, 2022 are presented in the following table: 
At June 30, 2022Quoted prices
in active
markets for
identical assets
(liabilities
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Non-recurring valuations:    
Financial assets:    
Other real estate owned$— $— $1,836 $1,836 
Collateral dependent loans:
Residential real estate:
Residential line of credit— — 315 315 
Commercial real estate:
Owner occupied— — 2,151 2,151 
Consumer and other— — 24 24 
Total collateral dependent loans$— $— $2,502 $2,502 
39
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets measured at fair value on a recurring basis at December 31, 2021 are presented in the following table: 
At December 31, 2021Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
Available-for-sale securities:    
U.S. government agency securities$— $33,870 $— $33,870 
Mortgage-backed securities - residential— 1,269,372 — 1,269,372 
Mortgage-backed securities - commercial— 15,250 — 15,250 
Municipal securities — 338,610 — 338,610 
Treasury securities— 14,908 — 14,908 
Corporate securities— 6,515 — 6,515 
Equity securities— 3,367 — 3,367 
Total securities$— $1,681,892 $— $1,681,892 
Loans held for sale$— $672,924 $79,299 $752,223 
Mortgage servicing rights— — 115,512 115,512 
Derivatives— 27,384 — 27,384 
Financial Liabilities:
Derivatives— 21,000 — 21,000 
The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, 2021 are presented in the following table: 
At December 31, 2021Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2)		Significant unobservable
inputs
(level 3)		Total
Non-recurring valuations:    
Financial assets:    
Other real estate owned$— $— $6,308 $6,308 
Collateral dependent loans:
Construction— — 606 606 
Residential real estate:
Residential line of credit— — 592 592 
Commercial real estate: 
Owner occupied— — 729 729 
Non-owner occupied— — 3,526 3,526 
Consumer and other— — 24 24 
Total collateral dependent loans$— $— $5,477 $5,477 
The following tables present information as of June 30, 2022 and December 31, 2021 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
As of June 30, 2022
Financial instrumentFair ValueValuation techniqueSignificant 
unobservable inputs		Range of
inputs
Collateral dependent loans$2,502 Valuation of collateralDiscount for comparable sales
10%-35%
Other real estate owned$1,836 Appraised value of property less costs to sellDiscount for costs to sell
0%-15%
40
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
As of December 31, 2021
Financial instrumentFair ValueValuation techniqueSignificant 
unobservable inputs		Range of
inputs
Collateral dependent loans$5,477 Valuation of collateralDiscount for comparable sales
10%-35%
Other real estate owned$6,308 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, 2022 and December 31, 2021, total amortized cost of collateral dependent loans measured on a non-recurring basis amounted to $2,537 and $5,781, respectively.
Other real estate owned acquired in settlement of indebtedness is recorded at fair value of the real estate less estimated costs to sell. Subsequently, it may be necessary to record nonrecurring fair value adjustments for declines in fair value. Any write-downs based on the asset's fair value at the date of foreclosure are charged to the allowance for credit losses. Appraisals for both collateral dependent loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the lending administrative department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry wide statistics. Collateral dependent loans that are dependent on recovery through sale of equipment, such as farm equipment, automobiles and aircrafts are generally valued based on public source pricing or subscription services while more complex assets are valued through leveraging brokers who have expertise in the collateral involved.
Fair value option
The following table summarizes the Company's loans held for sale, at fair value, as of the dates presented:
June 30,December 31,
20222021
Commercial and industrial$37,815 $79,299 
Residential real estate:
1-4 family mortgage222,400 672,924 
Total loans held for sale$260,215 $752,223 
Mortgage loans held for sale
The Company measures mortgage loans originated for sale at fair value under the fair value option as permitted under ASC 825, "Financial Instruments" ("ASC 825"). Electing to measure these assets at fair value reduces certain timing differences and more accurately matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.
Net gains (losses) of $4,671 and $(12,203) resulting from fair value changes of mortgage loans were recorded in income during the three and six months ended June 30, 2022, respectively, compared to net gains (losses) of $9,730 and $(10,986) during the three and six months ended June 30, 2021, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The 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.
Government National Mortgage Association optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing and was the original transferor. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of
41
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
the loan. Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet, regardless of whether the Company intends to exercise the buy-back option if the buyback option provides the transferor a more-than-trivial benefit. As of June 30, 2022, and December 31, 2021, there were $24,480 and $94,648, respectively, of delinquent GNMA loans previously sold that the Company did not record on its consolidated balance sheets as the Company determined there not to be a more-than-trivial benefit based on an analysis of interest rates and an assessment of potential reputational risk associated with these loans.
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.
Commercial loans held for sale
The Company also has a portfolio of shared national credits and institutional healthcare loans that were acquired during 2020 in the acquisition of Franklin. These commercial loans are also being measured under the fair value option. As such, these loans are excluded from the allowance for credit losses. The following tables sets forth the changes in fair value associated with this portfolio for the three and six months ended June 30, 2022 and 2021.
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)
  Write-offs to discount— — — 
  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)
Write-offs to discount— — — 
Changes in valuation included in other noninterest income— (2,184)(2,184)
     Carrying value at end of period$47,462 $(9,647)$37,815 
Three Months Ended June 30, 2021
Principal balanceFair Value discountFair Value
Carrying value at beginning of period$197,490 $(22,506)$174,984 
Change in fair value:
Pay-downs and pay-offs(52,226)— (52,226)
Write-offs to discount(9,292)9,292 — 
Changes in valuation included in other noninterest income— 1,364 1,364 
Carrying value at end of period$135,972 $(11,850)$124,122 
Six Months Ended June 30, 2021
Principal balanceFair Value discountFair Value
Carrying value at beginning of period$239,063 $(23,660)$215,403 
Change in fair value:
   Pay-downs and pay-offs(91,792)— (91,792)
   Write-offs to discount(11,299)11,299 — 
   Changes in valuation included in other noninterest income— 511 511 
      Carrying value at end of period$135,972 $(11,850)$124,122 
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.
42
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table 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, 2022 and December 31, 2021: 
June 30, 2022Aggregate
fair value 		Aggregate Unpaid Principal BalanceDifference
Mortgage loans held for sale measured at fair value$222,400 $219,696 $2,704 
Commercial loans held for sale measured at fair value36,356 37,733 (1,377)
Nonaccrual commercial loans held for sale1,459 9,729 (8,270)
December 31, 2021Aggregate
fair value		Aggregate Unpaid Principal BalanceDifference
Mortgage loans held for sale measured at fair value$672,924 $658,017 $14,907 
Commercial loans held for sale measured at fair value74,082 76,863 (2,781)
Nonaccrual commercial loans held for sale5,217 9,899 (4,682)
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. For the periods prior to and for the six months ended June 30, 2022, the Company offered conforming residential mortgage loans and services through two delivery channels: retail and our national direct-to-consumer internet delivery channel. Additionally, the Mortgage segment activities 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.
On May 10, 2022, the Company announced the restructuring of its Mortgage segment, including the exit from the direct-to-consumer delivery channel, which is one of two delivery channels in the Mortgage segment. For the three and six months ended June 30, 2022, the direct-to-consumer channel comprised 13.7% and 33.0%, respectively, of the Company's total interest rate lock volume compared to 51.5% and 50.9% for the three and six months ended June 30, 2021, respectively. For the three and six months ended June 30, 2022, the direct-to-consumer channel comprised 37.4% and 45.3% of the Company's sales volume, and 54.9% and 53.9% for the three and six months ended June 30, 2021, respectively. 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 current repositioning of our Mortgage segment does not qualify to be reported as discontinued operations. The Company plans to continue originating and selling residential mortgage loans within its Mortgage segment through its traditional mortgage retail channel, retain mortgage servicing rights and continue holding residential 1-4 family mortgage loans in the loan portfolio.



43
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following tables provide segment financial information for the periods indicated:
Three Months Ended June 30, 2022
Banking(4)
MortgageConsolidated
Net interest income$102,171 $— $102,171 
Provisions for credit losses(1)
12,318 — 12,318 
Mortgage banking income(2)
— 23,711 23,711 
Change in fair value of mortgage servicing rights, net of hedging(2)
— (1,152)(1,152)
Other noninterest income10,699 (44)10,655 
Depreciation and amortization 1,731 281 2,012 
Amortization of intangibles1,194 — 1,194 
Other noninterest expense(3)
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(4)
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)Includes $4,137 in provision for credit losses on unfunded commitments.
(2)Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3)Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer delivery channel.
(4)Banking segment includes noncontrolling interest.

Three Months Ended June 30, 2021
Banking(3)
MortgageConsolidated
Net interest income$86,553 $10 $86,563 
Provisions for credit losses(1)
(13,839)— (13,839)
Mortgage banking income(2)
— 38,644 38,644 
Change in fair value of mortgage servicing rights, net of hedging(2)
— (3,145)(3,145)
Other noninterest income14,002 (201)13,801 
Depreciation and amortization1,618 344 1,962 
Amortization of intangibles1,394 — 1,394 
Other noninterest expense55,182 34,422 89,604 
Income before income taxes$56,200 $542 $56,742 
Income tax expense13,440 
Net income applicable to FB Financial Corporation and noncontrolling
 interest		43,302 
Net income applicable to noncontrolling interest(3)
8 
Net income applicable to FB Financial Corporation$43,294 
Total assets$10,908,107 $1,010,260 $11,918,367 
Goodwill242,561 — 242,561 
(1) Includes $(954) in provision for credit losses on unfunded commitments.
(2) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3) Banking segment includes noncontrolling interest.

44
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
45
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, 2022
Banking(4)
MortgageConsolidated
Net interest income$190,355 $(2)$190,353 
Provisions for credit losses(1)
8,071 — 8,071 
Mortgage banking income(2)
— 52,989 52,989 
Change in fair value of mortgage servicing rights, net of hedging(2)
— (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(3)
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(4)
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) Includes $6,019 in provision for credit losses on unfunded commitments.
(2) Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3) Includes $12,458 in Mortgage restructuring expenses in the Mortgage segment related to the exit from the direct-to-consumer delivery channel.
(4) Banking segment includes noncontrolling interest.

Six Months Ended June 30, 2021
Banking(3)
MortgageConsolidated
Net interest income$169,150 $(11)$169,139 
Provisions for credit losses(1)
(27,693)— (27,693)
Mortgage banking income(2)
— 99,239 99,239 
Change in fair value of mortgage servicing rights, net of hedging(2)
— (8,408)(8,408)
Other noninterest income25,400 (201)25,199 
Depreciation and amortization3,476 672 4,148 
Amortization of intangibles2,834 — 2,834 
Other noninterest expense(3)
107,619 73,057 180,676 
Income before income taxes$108,314 $16,890 $125,204 
Income tax expense29,028 
Net income applicable to FB Financial Corporation and noncontrolling
interest
96,176 
Net income applicable to noncontrolling interest(3)
8 
Net income applicable to FB Financial Corporation$96,168 
Total assets$10,908,107 $1,010,260 $11,918,367 
Goodwill242,561 — 242,561 
(1)Includes $(3,176) in provision for credit losses on unfunded commitments.
(2)Change in fair value of mortgage servicing rights, net of hedging is included in mortgage banking income in the Company's consolidated statements of income.
(3)Banking segment includes noncontrolling interest.
Our Banking segment provides our 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 our Mortgage segment to our Banking segment under this warehouse line of credit is recorded as interest income to our Banking segment and as interest expense to our Mortgage segment, both of which are included in the calculation of net interest income for each segment. The amount of interest paid by our Mortgage segment to our Banking segment under this warehouse line of credit was $4,850 and $10,516 for the three and six months ended June 30, 2022, respectively, and $6,110 and $11,510 for the three and six months ended June 30, 2021, respectively.
Note (12)—Minimum capital requirements:
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
46
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Under regulatory guidance for non-advanced approaches institutions, the Bank and Company are required to maintain minimum capital ratios as outlined in the table below. Additionally, under U.S. Basel III Capital Rules, the decision was made to opt out of including accumulated other comprehensive income in regulatory capital. As of June 30, 2022 and December 31, 2021, the Bank and Company met all capital adequacy requirements to which they are subject.
In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced a final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rule maintained the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company adopted the capital transition relief over the permissible five-year period and delayed the initial impact of CECL adoption plus 25% of the quarterly increases in ACL through December 31, 2021. As of 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.

 As oAs of June 30, 2022ActualMinimum Capital
adequacy with
capital buffer		To be well capitalized
under prompt corrective
action provisions
AmountRatioAmountRatioAmountRatio
Total Capital (to risk-weighted assets)      
FB Financial Corporation$1,460,110 13.6 %$1,123,435 10.5 %N/AN/A
FirstBank1,432,889 13.4 %1,122,420 10.5 %$1,068,971 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation$1,257,361 11.8 %$909,448 8.5 %N/AN/A
FirstBank1,230,140 11.5 %908,625 8.5 %$855,177 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,257,361 10.2 %$494,009 4.0 %N/AN/A
FirstBank1,230,140 10.0 %494,191 4.0 %$617,738 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation$1,227,361 11.5 %$748,957 7.0 %N/AN/A
FirstBank1,230,140 11.5 %748,280 7.0 %$694,831 6.5 %
As of December 31, 2021ActualMinimum Capital
adequacy with
capital buffer		To be well capitalized
under prompt corrective
action provisions
AmountRatioAmountRatioAmountRatio
Total Capital (to risk-weighted assets)      
FB Financial Corporation$1,434,581 14.5 %$1,039,984 10.5 %N/AN/A
FirstBank1,396,407 14.1 %1,038,760 10.5 %$989,295 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation$1,251,874 12.6 %$841,892 8.5 %N/AN/A
FirstBank1,213,700 12.3 %840,901 8.5 %$791,436 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,251,874 10.5 %$474,831 4.0 %N/AN/A
FirstBank1,213,700 10.2 %474,044 4.0 %$592,555 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation$1,221,874 12.3 %$693,322 7.0 %N/AN/A
FirstBank1,213,700 12.3 %692,507 7.0 %$643,042 6.5 %
47
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. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the service conditions set forth in the grant agreements.
The following table summarizes information about the changes in restricted stock units for the six months ended June 30, 2022:
 Restricted Stock
Units
Outstanding		Weighted
Average Grant
Date
Fair Value
Balance at beginning of period (unvested)492,320 $36.06 
Granted139,785 43.82 
Vested(159,385)36.68 
Forfeited(37,917)33.15 
Balance at end of period (unvested)434,803 $38.48 
The total fair value of restricted stock units vested and released was $2,449 and $5,846 for the three and six months ended June 30, 2022, respectively, and $828 and $5,192 for the three and six months ended June 30, 2021, respectively.
The compensation cost related to stock grants and vesting of restricted stock units was $2,196 and $4,052 for the three and six months ended June 30, 2022, respectively, and $2,193 and $4,659 for the three and six months ended June 30, 2021, respectively. This included amounts paid related to director grants and compensation elected to be settled in stock amounting to $148 and $314 during the three and six months ended June 30, 2022, respectively, and $142 and $299 during the three and six months ended June 30, 2021, respectively.
As of June 30, 2022, there was $13,122 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of 2.5 years. Additionally, as of June 30, 2022, there were 1,770,128 shares available for issuance under the Company's stock compensation plans. As of June 30, 2022 and December 31, 2021, there were $252 and $274, respectively, accrued in other liabilities related to dividend equivalent units declared to be paid upon vesting and distribution of the underlying restricted stock units.
Performance Based Restricted Stock Units
The following table summarizes information about the changes in PSUs as of and for the six months ended June 30, 2022.
Performance Stock
Units
Outstanding		Weighted
Average Grant
Date
Fair Value
Balance at beginning of period (unvested)115,750 $40.13 
Granted69,010 44.44 
Vested— — 
Forfeited or expired(9,501)43.16 
Balance at end of period (unvested)175,259 $41.67 
The Company awards performance-based restricted stock units to executives and other officers and employees. Under the terms of the awards, the number of units that will vest and convert to shares of common stock will be based on the Company's performance relative to a predefined peer group over a fixed three-year performance period. The number of shares issued upon vesting will range from 0% to 200% of the PSUs granted. The Company's performance relative to the peer group will be measured based on calculated non-GAAP adjusted return on average tangible common equity, adjusted for unusual gains/losses, merger expenses, and other items as approved by the compensation committee of the Company's board of directors. Compensation expense for PSUs is estimated each period based on the fair value of the Company's stock at the grant date and the most probable outcome of the performance condition, adjusted for the passage of time within the vesting period of the awards.
48
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
As of June 30, 2022, the Company determined the probability of meeting the performance criteria for each grant and recorded compensation cost associated when factoring in the conversion of PSUs to shares of common stock.
Grant YearVest YearShares Outstanding
2020202349,964
2021202460,654
2022202564,641
The Company recorded compensation cost of $842 and $1,568 during the three and six months ended June 30, 2022 respectively, and $322 and $522 for the three and six months ended June 30, 2021, respectively. As of June 30, 2022, maximum unrecognized compensation cost at 200% payout related to the unvested PSUs was $11,502, and the remaining performance period over which the cost could be recognized was 2.1 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 $200,000 worth of common stock in any calendar year). There were no shares issued under ESPP during the three months ended June 30, 2022 and June 30, 2021, respectively. There were 15,152 and 21,566 shares of common stock issued under the ESPP with proceeds from employee payroll withholdings of $588 and $811, during the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, there were 2,326,544 shares available for issuance under the ESPP, respectively.
Note (14)—Related party transactions:
(A) Loans:
The Bank has made and expects to continue to make loans to the directors, certain management and executive officers of the Company and their affiliates 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 affiliates is presented below:
Loans outstanding at January 1, 2022$29,010 
New loans and advances52,577 
Change in related party status(9,939)
Repayments(868)
Loans outstanding at June 30, 2022$70,780 
Unfunded commitments to certain executive officers, certain management and directors and their associates totaled $38,832 and $10,994 at June 30, 2022 and December 31, 2021, respectively.
(B) Deposits:
The Bank held deposits from related parties totaling $323,089 and $312,956 as of June 30, 2022 and December 31, 2021, respectively.
(C) Leases:
The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. The Company had $2 and $6 in unamortized leasehold improvements related to these leases at June 30, 2022 and December 31, 2021, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled $100 and $201 for the three and six months ended June 30, 2022, respectively, and $132 and $260 for the three and six months ended June 30, 2021.
(D) Aviation time sharing agreements:
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 established a non-exclusive aircraft lease agreement with an entity owned by one
49

of the Company's directors. During the three and six months ended June 30, 2022, the Company recognized income amounting to $8 and $19, respectively, under this agreement. No such income was recognized during the three and six months ended June 30, 2021. Additionally, the Company is a participant to an aviation time sharing agreement with an entity owned by a certain director of the Company. During the three and six months ended June 30, 2021, the Company made payments of $21 and $32, respectively, under this agreement. No such payments were made during the three and six months ended June 30, 2022.
(E) Registration rights agreement:
The Company is party to a registration rights agreement with its former majority shareholder entered into in connection with the 2016 IPO, under which the Company is responsible for payment of expenses (other than underwriting discounts and commissions) relating to sales to the public by the shareholder of shares of the Company’s common stock beneficially owned by him. Such expenses include registration fees, legal and accounting fees, and printing costs payable by the Company and expensed when incurred. During the three and six months ended June 30, 2021, the Company paid $605 under this agreement related to the secondary offering completed during the second quarter of 2021. No such expenses were incurred during the three and six months ended June 30, 2022.

50

ITEM 2 – Management’s discussion and analysis of financial condition and results of operations
The following is a discussion of our financial condition at June 30, 2022 and December 31, 2021, and our results of operations for the three and six months ended June 30, 2022 and 2021, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, that was filed with the SEC on February 25, 2022, and with the accompanying unaudited notes to the consolidated financial statements set forth in this Report.
Forward-looking statements
Certain statements contained in this Report that are not historical in nature may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding the Company’s business operations, assets, valuations, financial conditions, results of operations, future plans, strategies, and expectations, including statements regarding the Company’s Mortgage segment restructuring. 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) the ongoing effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and the emergence of new variants and the impact on general economic and financial market conditions and on the Company’s business and the Company’s customers' business, results of operations, asset quality and financial condition, (3) vaccines' efficacy against the virus, including new variants, (4) changes in government interest rate policies and its impact on the Company’s business, NIM, and mortgage operations, (5) the Company’s ability to effectively manage problem credits, (6) the Company’s ability to identify potential candidates for, consummate, and achieve synergies from, potential future acquisitions, (7) difficulties and delays in integrating acquired businesses or fully realizing costs savings, revenue synergies and other benefits from future and prior 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) general competitive, economic, political, and market conditions, including global economic and political conditions. Further information regarding the Company and factors which could affect the forward-looking statements contained herein can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and in any of the Company’s subsequent filings with the SEC. Many of these factors are beyond the Company’s ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the company. The Company qualifies all forward-looking statements by these cautionary statements.
Critical accounting policies
Our financial statements are prepared in accordance with U.S. GAAP and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods.
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We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards if applicable, are discussed in further detail in Note 1, "Basis of presentation," in the notes to our consolidated financial statements in our Annual Report.
Financial highlights
The following table presents certain selected historical consolidated income statement data and key performance indicators 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 per share data and %)2022 2021 2022 2021 2021 
Statement of Income Data
Net interest income102,171 86,563 $190,353 $169,139 $347,370 
Provisions for credit losses12,318 (13,839)8,071 (27,693)(40,993)
Total noninterest income33,214 49,300 74,606 116,030 228,255 
Total noninterest expense96,997 92,960 186,269 187,658 373,567 
Income before income taxes26,070 56,742 70,619 125,204 243,051 
Income tax expense6,717 13,440 16,030 29,028 52,750 
Net income applicable to noncontrolling interest8 8 8 8 16 
Net income applicable to FB Financial Corporation $19,345 $43,294 $54,581 $96,168 $190,285 
Net income applicable to FB Financial Corporation and
     noncontrolling interest		19,353 43,302 54,589 96,176 190,301 
Net interest income (tax-equivalent basis)$102,926 $87,321 $191,858 $170,689 $350,456 
Per Common Share
Basic net income$0.41 $0.91 $1.15 $2.03 $4.01 
Diluted net income0.41 0.90 1.15 2.00 3.97 
Book value (1)
28.15 28.96 28.15 28.96 30.13 
Tangible book value (4)
22.67 23.43 22.67 23.43 24.67 
Cash dividends declared0.13 0.11 0.26 0.22 0.44 
Selected Ratios
Return on average:
Assets (2)
0.62 %1.46 %0.88 %1.66 %1.61 %
Common shareholders' equity (2)
5.74 %13.0 %7.95 %14.7 %14.0 %
Tangible common equity (4)
7.09 %16.1 %9.78 %18.3 %17.3 %
Average shareholders' equity to average assets10.9 %11.3 %11.0 %11.3 %11.5 %
Net interest margin (tax-equivalent basis)3.52 %3.18 %3.28 %3.18 %3.19 %
Efficiency ratio71.6 %68.4 %70.3 %65.8 %64.9 %
Adjusted efficiency ratio (tax-equivalent basis) (4)
61.1 %68.9 %64.5 %65.8 %65.8 %
Loans held for investment to deposit ratio81.8 %70.6 %81.8 %70.6 %70.2 %
Yield on interest-earning assets3.80 %3.53 %3.54 %3.59 %3.53 %
Cost of interest-bearing liabilities0.40 %0.49 %0.37 %0.57 %0.48 %
Cost of total deposits0.25 %0.31 %0.22 %0.36 %0.30 %
Credit Quality Ratios
Allowance for credit losses to loans, net of unearned
   income (5)
1.46 %2.01 %1.46 %2.01 %1.65 %
Total nonperforming assets as a percentage of total assets0.46 %0.66 %0.46 %0.66 %0.50 %
Net charge-offs as a percentage of average loans HFI(0.09)%(0.02)%(0.03)%(0.03)%(0.08)%
Nonperforming loans HFI to loans HFI, net of unearned
  income		0.51 %0.83 %0.51 %0.83 %0.62 %


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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,
2022 2021 2022 2021 2021 
Capital Ratios (Company)
Total common shareholders' equity to assets10.8 %11.5 %10.8 %11.5 %11.4 %
Tier 1 capital (to average assets)10.2 %10.1 %10.2 %10.1 %10.5 %
Tier 1 capital (to risk-weighted assets (3)
11.8 %12.7 %11.8 %12.7 %12.6 %
Total capital (to risk-weighted assets) (3)
13.6 %14.9 %13.6 %14.9 %14.5 %
Tangible common equity to tangible assets (4)
8.90 %9.52 %8.90 %9.52 %9.51 %
Common Equity Tier 1 (to risk-weighted
    assets) (CET1) (3)
11.5 %12.4 %11.5 %12.4 %12.3 %
Capital Ratios (Bank)
Total common Shareholders' equity to assets10.9 %11.4 %10.9 %11.4 %11.3 %
Tier 1 capital (to average assets)10.0 %9.72 %10.0 %9.72 %10.2 %
Tier 1 capital (to risk-weighted assets) (3)
11.5 %12.2 %11.5 %12.2 %12.3 %
Total capital to (risk-weighted assets) (3)
13.4 %14.2 %13.4 %14.2 %14.1 %
Common Equity Tier 1 (to risk-weighted
     assets) (CET1) (3)
11.5 %12.2 %11.5 %12.2 %12.3 %
(1)Book value per share equals our total common shareholders’ equity as of the date presented divided by the number of shares of our common stock outstanding as of the date presented. The number of shares of our common stock outstanding was 46,881,896, 47,360,950 and 47,549,241 as of June 30, 2022, June 30, 2021 and December 31, 2021, respectively.
(2)We have calculated our return on average assets and return on average common equity for a period by dividing annualized net income or loss for that period by our average assets and average equity, as the case may be, for that period. We calculate our average assets and average common equity for a period by dividing the sum of our total asset balance or total common shareholders' equity balance, as the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in the period.
(3)We calculate our risk-weighted assets using the standardized method of the Basel III Framework.
(4)These measures are not measures recognized under generally accepted accounting principles (United States), and are therefore considered to be non-GAAP financial measures. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a reconciliation of these measures to their most comparable GAAP measures.
(5)Excludes reserve for credit losses on unfunded commitments.
GAAP reconciliation and management explanation of non-GAAP financial measures
We identify certain financial measures discussed in this Report as being "non-GAAP financial measures." The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax equivalent basis), tangible book value per common share, tangible common equity, tangible common equity to tangible assets and return on average tangible common equity.
In accordance with the SEC's rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.
The non-GAAP financial measures that we discuss in this Report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our financial highlights may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our financial highlights when comparing such non-GAAP financial measures. The following reconciliation tables provide a more detailed analysis of, and reconciliations for, each of these non-GAAP financial measures.
Adjusted Efficiency ratio (tax-equivalent basis)
The adjusted efficiency ratio (tax-equivalent basis) is a non-GAAP measure that excludes certain gains (losses), Mortgage restructuring expenses, offering expenses, and other selected items. Our management uses this measure in its analysis of our performance. Our management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains or losses and changes. The most directly comparable financial measure calculated in accordance with GAAP is the efficiency ratio.
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The following table presents, as of the dates set forth below, a reconciliation of our adjusted efficiency ratio (tax-equivalent basis) to our efficiency ratio:
(In Thousands, Except Share Data and %)Three Months Ended June 30,Six Months Ended June 30,Year Ended December 31,
2022 2021 2022 2021 2021 
Adjusted efficiency ratio (tax-equivalent
    basis)
Total noninterest expense$96,997 $92,960 $186,269 $187,658 $373,567 
Less mortgage restructuring expenses12,458 — 12,458 — — 
Less offering expenses— 605 — 605 605 
Less gain on lease terminations— (787)— (787)(787)
Less certain charitable contributions— — — — 1,422 
Adjusted noninterest expense$84,539 $93,142 $173,811 $187,840 $372,327 
Net interest income (tax-equivalent basis)$102,926 $87,321 $191,858 $170,689 $350,456 
Total noninterest income33,214 49,300 74,606 116,030 228,255 
Less (loss) gain on change in fair value on
   commercial loans held for sale 		(2,010)1,364 (2,184)511 11,172 
Less loss on swap cancellation— — — — (1,510)
Less (loss) gain on sales or write-downs of
   other real estate owned		(26)(23)(524)473 2,504 
Less gain (loss) on other assets18 (4)82 (15)323 
Less (loss) gain from securities, net(109)144 (261)227 324 
Adjusted noninterest income$35,341 $47,819 $77,493 $114,834 $215,442 
Adjusted operating revenue$138,267 $135,140 $269,351 $285,523 $565,898 
Efficiency ratio (GAAP)71.6 %68.4 %70.3 %65.8 %64.9 %
Adjusted efficiency ratio (tax-equivalent
    basis)		61.1 %68.9 %64.5 %65.8 %65.8 %

















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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 the Company's management to evaluate capital adequacy. Because intangible assets such as goodwill and other intangibles vary extensively from company to company, we believe that the presentation of this information allows investors to more easily compare the Company's capital position to other companies. The most directly comparable financial measure calculated in accordance with GAAP is book value per common share and our total common shareholders' equity to total assets.
The following table presents, as of the dates set forth below, tangible common equity compared with total common shareholders' equity, tangible book value per common share compared with our book value per common share and common equity to tangible assets compared to total common shareholders' equity to total assets:
As of June 30,As of December 31,
(In Thousands, Except Share Data and %)2022 2021 2021 
Tangible Assets
Total assets$12,193,862 $11,918,367 $12,597,686 
Adjustments:
Goodwill(242,561)(242,561)(242,561)
Core deposit and other intangibles(14,515)(19,592)(16,953)
Tangible assets$11,936,786 $11,656,214 $12,338,172 
Tangible Common Equity
Total common shareholders' equity$1,319,852 $1,371,721 $1,432,602 
Adjustments:
Goodwill(242,561)(242,561)(242,561)
Core deposit and other intangibles(14,515)(19,592)(16,953)
Tangible common equity$1,062,776 $1,109,568 $1,173,088 
Common shares outstanding46,881,896 47,360,950 47,549,241 
Book value per common share$28.15 $28.96 $30.13 
Tangible book value per common share$22.67 $23.43 $24.67 
Total common shareholders' equity to total assets10.8 %11.5 %11.4 %
Tangible common equity to tangible assets8.90 %9.52 %9.51 %
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 the Company's 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,
(In Thousands, Except %)2022 2021 2022 2021 2021 
Return on average tangible common equity
Total average common shareholders' equity$1,352,701 $1,339,938 $1,384,269 $1,321,947 $1,361,637 
Adjustments:
Average goodwill(242,561)(242,561)(242,561)(242,561)(242,561)
Average intangibles, net(15,144)(20,253)(15,757)(20,970)(19,606)
Average tangible common equity$1,094,996 $1,077,124 $1,125,951 $1,058,416 $1,099,470 
Net income applicable to FB Financial
    Corporation		$19,345 $43,294 $54,581 $96,168 $190,285 
Return on average common shareholders'
    equity		5.74 %13.0 %7.95 %14.7 %14.0 %
Return on average tangible common equity7.09 %16.1 %9.78 %18.3 %17.3 %
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Company overview
We are a financial holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned bank subsidiary, FirstBank, the third largest bank headquartered in Tennessee, based on total assets. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, Kentucky, Alabama and North Georgia, and mortgage offices across the Southeast. As of June 30, 2022, our footprint included 81 full-service branches serving the following Tennessee Metropolitan Statistical Areas: Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and Birmingham, Florence and Huntsville, Alabama. We also provide banking services to 16 community markets throughout Tennessee and North Georgia. FirstBank also provides mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.
We operate through two segments, Banking and Mortgage. We generate most of our revenue in our Banking segment from interest on loans and investments, loan-related fees, trust and investment services and deposit-related fees. Our primary source of funding for our loans is customer deposits, and, to a lesser extent, unsecured credit lines, brokered and internet deposits, and other borrowings. We generate most of our revenue in our Mortgage segment from origination fees and gains on sales in the secondary market of mortgage loans, as well as from mortgage servicing revenues.
Recent developments
Mortgage restructuring
On May 10, 2022, we announced the restructuring of our Mortgage segment (referred to herein as "Mortgage restructuring"), including the exit from our direct-to-consumer channel, which is one of two delivery channels in the Mortgage segment. For the three months ended June 30, 2022 and 2021, our direct-to-consumer delivery channel comprised 13.7% and 51.5% of the Company's total interest rate lock volume and 37.4% and 54.9% of the Company's sales volume, respectively. For the six months ended June 30, 2022 and 2021, our direct-to-consumer delivery channel comprised 33.0% and 50.9% of the Company's total interest rate lock volume and 45.3% and 53.9% of the Company's sales volume, respectively. As a result of exiting this channel, we recorded restructuring expenses of $12.5 million during the three and six months ended June 30, 2022 and expect to complete the wind-down of the channel in the third quarter of 2022. The current repositioning of our Mortgage segment will not be reported as discontinued operations. We plan to continue originating and selling residential mortgage loans within our Mortgage segment through our traditional consumer-facing mortgage retail channel, retain mortgage servicing rights and continue holding residential 1-4 family mortgage loans in our loan portfolio.
Overview of recent financial performance
Results of operations
Three months ended June 30, 2022 compared to the three months ended June 30, 2021
Our net income decreased during the three months ended June 30, 2022 to $19.4 million, down from $43.3 million for the three months ended June 30, 2021. Diluted earnings per common share were $0.41 and $0.90 for the three months ended June 30, 2022 and 2021, respectively. Our net income represented a return on average assets, or ROAA, of 0.62% and 1.46% for the three months ended June 30, 2022 and 2021, respectively and a return on average shareholders’ equity, or ROAE, of 5.74% and 13.0% for the same periods. Our ratio of return on average tangible common equity, or ROATCE for the three months ended June 30, 2022 and 2021 was 7.09% and 16.1%, 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, 2022, our net interest income increased to $102.2 million compared with $86.6 million for the three months ended June 30, 2021. Our net interest margin, on a tax-equivalent basis, increased to 3.52% for the three months ended June 30, 2022, compared with 3.18% for the three months ended June 30, 2021. The increase was primarily driven by our loan growth, increased interest rates and a shift in balance sheet composition during the three months ended June 30, 2022 compared to the three months ended June 30, 2021. The change in our balance sheet composition was illustrated by a decrease in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. Excess liquidity is estimated to have negatively impacted our NIM by approximately 14 basis points for the three months ended June 30, 2022. This compares to excess liquidity representing an estimated 37 basis points of negative impact to NIM during the three months ended June 30, 2021.
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We experienced a decrease in noninterest income of $16.1 million to $33.2 million for the three months ended June 30, 2022, compared with $49.3 million for the same period in the prior year. The decrease of $12.9 million in mortgage banking income was the primary driver for the downward movement in noninterest income, which was a result of a 60.5% decrease in interest rate lock volume in addition to margin compression during the three months ended June 30, 2022 when compared with the three months ended June 30, 2021.
Noninterest expense increased to $97.0 million for the three months ended June 30, 2022, compared with $93.0 million for the three months ended June 30, 2021. The increase in noninterest expense reflects costs related to our Mortgage restructuring amounting to $12.5 million for the three months ended June 30, 2022 partially offset by decreases in salaries, commissions and employee benefit expenses due to a decrease in mortgage production volume.
Six months ended June 30, 2022 compared to the six months ended June 30, 2021
Our net income decreased during the six months ended June 30, 2022 to $54.6 million from $96.2 million for the six months ended June 30, 2021. Diluted earnings per common share were $1.15 and $2.00 for the six months ended June 30, 2022 and 2021, respectively. Our net income represented a return on average assets of 0.88% and 1.66% for the six months ended June 30, 2022 and 2021, respectively, and a return on average equity of 7.95% and 14.7% for the same periods. Our ratio of return on average tangible common equity for the six months ended June 30, 2022 and 2021 were 9.78% and 18.3%, 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, 2022, our net interest income increased to $190.4 million compared with $169.1 million in the six months ended June 30, 2021. The increase was primarily driven by an increase in loan production volume and increased interest rates, offset primarily by decreased excess liquidity, which was reinvested in available-for-sale securities.
Our net interest margin, on a tax-equivalent basis, increased to 3.28% for the six months ended June 30, 2022 as compared to 3.18% for the six months ended June 30, 2021. In addition to an increase in average loans HFI of $1.00 billion for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, our NIM was also influenced by a reduction in excess liquidity carried on the balance sheet, which we estimate negatively impacted our NIM by approximately 22 basis points for the six months ended June 30, 2022 compared to 35 basis points for the six months ended June 30, 2021.
Noninterest income for the six months ended June 30, 2022 decreased by $41.4 million to $74.6 million, down from $116.0 million in the same period in the prior year. The decrease in noninterest income was primarily made up of a $38.7 million decrease in mortgage banking income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. These results were impacted by lower interest rate lock volumes and compressing margins in our Mortgage segment during the six months ended June 30, 2022 compared with the six months ended June 30, 2021.
Noninterest expense decreased to $186.3 million for the six months ended June 30, 2022, compared with $187.7 million for the six months ended June 30, 2021. The decrease in noninterest expense is reflective of the $17.3 million decrease in salaries, commissions and employee-related costs in the Mortgage segment related to the reduction in mortgage production, which was partially offset by mortgage restructuring expenses incurred during the six months ended June 30, 2022 compared to the same period in the prior year.
Business segment highlights
We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment reporting” in the notes to our consolidated financial statements for a description of these business segments.
Banking
Income before taxes from the Banking segment decreased for the three months ended June 30, 2022 to $41.2 million, compared to $56.2 million for the three months ended June 30, 2021. These results were primarily driven by an increase in provisions for credit losses of $26.2 million to $12.3 million (including a provision for credit losses on unfunded commitments of $4.1 million) for the three months ended June 30, 2022 compared to a net reversal in provisions for credit losses of $13.8 million for the three months ended June 30, 2021, reflecting our growth in loans held for investment. Noninterest income decreased to $10.7 million in the three months ended June 30, 2022 as compared to $14.0 million in the three months ended June 30, 2021. The decrease in our noninterest income during the three months ended June 30, 2022 is partially attributable to a $2.0 million loss on the change in the fair value of our commercial loans held for sale which is a decrease of $3.4 million from the $1.4 gain recognized during the three months ended June 30, 2021.
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Noninterest expense during the three months ended June 30, 2022 was $59.3 million, which remained relatively steady compared to $58.2 million of noninterest expense for three months ended June 30, 2021.
Income before taxes from the Banking segment decreased for the six months ended June 30, 2022 to $86.1 million, compared to $108.3 million for the six months ended June 30, 2021. Net interest income increased by $21.2 million to $190.4 million during the six months ended June 30, 2022 compared to $169.2 million during the six months ended June 30, 2021. Our provisions for credit losses on loans held for investment and unfunded loan commitments resulted in $8.1 million of provision expense during the six months ended June 30, 2022 compared to $27.7 million reversal of provision expense in the same period in the previous year. Noninterest income decreased to $22.7 million in the six months ended June 30, 2022 as compared to $25.4 million in the six months ended June 30, 2021. Similar to the discussion above, the change in the fair value of our commercial loans held for sale was one of the main drivers in the decrease in our noninterest income period-over-period. During the six months ended June 30, 2022, we recognized $2.2 loss on the change in the in the fair value of our commercial loans held for sale compared to a $0.5 million gain for the six months ended June 30, 2021. Noninterest expense was $118.9 million for six months ended June 30, 2022 which is a 4.37% increase compared to the same period in the previous year.
Mortgage
The Mortgage segment reported a pre-tax loss of $15.2 million for the three months ended June 30, 2022, compared to income of $0.5 million for the three months ended June 30, 2021. The loss includes $12.5 million in Mortgage restructuring expenses associated with the wind-down of our direct-to-consumer internet delivery channel incurred during the three months ended June 30, 2022. Noninterest income decreased by $12.8 million to $22.5 million for the three months ended June 30, 2022, compared with $35.3 million for the three months ended June 30, 2021, primarily related to a decrease in mortgage banking income and slowdown in production volume.
Noninterest expense for the three months ended June 30, 2022 and 2021 was $37.7 million and $34.8 million, respectively, and total noninterest expense excluding mortgage restructuring expenses for the three months ended June 30, 2022 was $25.2 million. This reflects a decrease in salaries, commissions and employee benefits due to a reduction in production volume is the result of lower volumes impacted by the rising interest rate environment and a decrease in refinancing activity.
Activity in our Mortgage segment resulted in a pre-tax net loss of $15.4 million for the six months ended June 30, 2022 as compared to income of $16.9 million for the six months ended June 30, 2021. There was a decrease in mortgage banking income of $38.7 million to $52.1 million during the six months ended June 30, 2022 compared to $90.8 million for the six months ended June 30, 2021. This was a result of a 45.1% decrease in interest rate lock volume during the six months ended June 30, 2022 compared with the same period in the prior year. Noninterest expense for the six months ended June 30, 2022 and 2021 was $67.4 million and $73.7 million, respectively, reflecting decreases in commissions and incentive costs associated with the decrease in production volume partially offset by mortgage restructuring expenses of $12.5 million during the current period compared with the same period in the previous year.
Further discussion on the components of mortgage banking income and additional details related to the Mortgage restructuring are included under the subheadings 'Noninterest income' and 'Noninterest expense', respectively, included within this management's discussion and analysis.
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, 2022 and 2021.




58

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, 2022, the US Treasury yield curve inverted as long-term rates increased at a slower pace than short-term rates. This compares to the three and six months ended June 30, 2021, when the US Treasury yield curve steepened as long-term rates rose and short-term rates remained constant. The Federal Funds Target Rate range was 0% - 0.25% and 1.50% - 1.75% as of December 31, 2021 and June 30, 2022, respectively. Effective July 28, 2022, the Federal Reserve increased the target range for the federal funds rate to 2.25% to 2.50% and additional increases in the target range are anticipated to slow inflation.
Three months ended June 30, 2022 compared to three months ended June 30, 2021
On a tax-equivalent basis, net interest income increased by $15.6 million to $102.9 million for the three months ended June 30, 2022 as compared to $87.3 million for the three months ended June 30, 2021. The increase in tax-equivalent net interest income for the three months ended June 30, 2022 was primarily driven by an increase in volume of loans held for investment combined with a decrease in our cost of funding, specifically our interest rate on money market deposits, which decreased to 0.20% for the three months ended June 30, 2022 compared to 0.38% for the three months ended June 30, 2021.
Interest income, on a tax-equivalent basis, was $111.0 million for the three months ended June 30, 2022, compared to $97.1 million for the three months ended June 30, 2021, an increase of $13.9 million. This increase was largely driven by growth in our loans HFI portfolio. Interest income on loans HFI, on a tax-equivalent basis, increased $13.3 million to $96.7 million for the three months ended June 30, 2022 from $83.4 million for the three months ended June 30, 2021 primarily due to an increase in average loans HFI of $1.24 billion. The increased volume attributed $14.4 million to the total increase in interest income from loans HFI.
The tax-equivalent yield on loans held for investment was 4.66% for the three months ended June 30, 2022, down 6 basis points from the three months ended June 30, 2021. The decrease in yield was primarily due to loans with higher contractual rates maturing and loans originated at lower interest rates. Contractual loan interest rates yielded 4.24% in the three months ended June 30, 2022 compared with 4.31% in the three months ended June 30, 2021. Excluding PPP loans, which have a 1.00% contractual loan yield, our contractual loan yield would have been 6 basis points higher for three months ended June 30, 2021. PPP loans did not impact our contractual loan yield for the three months ended June 30, 2022.
Our NIM, on a tax-equivalent basis, increased to 3.52% during the three months ended June 30, 2022 from 3.18% in the three months ended June 30, 2021, driven a change in balance sheet mix which is reflected in our average interest-bearing deposits with other financial institutions to average earning assets ratio which decreased to 9.23% for the three months ended June 30, 2022 compared to 14.7% for the three months ended June 30, 2021.
59

The components of our loan yield, a key driver to our NIM for the three months ended June 30, 2022 and 2021, were as follows:            
Three Months Ended June 30,
20222021
(dollars in thousands)Interest
income		Average
yield		Interest
income		Average
yield
Loans HFI yield components:
Contractual interest rate on loans held for investment(1)(2)
$88,005 4.24 %$76,127 4.31 %
Origination and other loan fee income(2)
6,927 0.33 %6,928 0.39 %
Accretion (amortization) on purchased loans64 — %(226)(0.01)%
Nonaccrual interest collections546 0.03 %535 0.03 %
Syndicated fee income1,150 0.06 %— — %
Total loans HFI yield$96,692 4.66 %$83,364 4.72 %
1.Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.
2.Includes $0.3 million of loan contractual interest and $1.1 million of loan fees related to PPP loans for three months ended June 30, 2021. Amounts in the current period are not meaningful.
Origination and other loan fees including syndication fee income increased the NIM by 28 basis point for the three months ended June 30, 2022 compared to a 25 basis point increase for the three months ended June 30, 2021.
Interest expense was $8.0 million for the three months ended June 30, 2022, a decrease of $1.7 million as compared to the three months ended June 30, 2021. The primary driver was a decrease in interest expense on money market deposits of $1.4 million to $1.4 million for the three months ended June 30, 2022, compared to $2.8 million for the three months ended June 30, 2021 which was partially offset by an increase in interest expense on interest-bearing checking deposits of $0.6 for the same period. Further, during the first quarter of 2022, we entered into three designated fair value hedges to mitigate the effect of changing rates on various fixed rate liabilities, including certain money market deposits and subordinated debt. The fair value hedge on money market deposits lowered interest expense by $0.4 million during the three months ended June 30, 2022.


60

Average balance sheet amounts, interest earned and yield 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,
20222021
(dollars in thousands on tax-equivalent basis)
Average
balances (1)
Interest
income/
expense		Average
yield/
rate
Average
balances (1)
Interest
income/
expense		Average
yield/
rate
Interest-earning assets:
Loans(2)(4)
$8,323,778 $96,692 4.66 %$7,085,300 $83,364 4.72 %
Loans held for sale- mortgage(8)
215,779 2,350 4.37 %726,782 4,948 2.73 %
Loans held for sale-commercial56,460 718 5.10 %152,699 1,626 4.27 %
Securities:(8)
Taxable1,474,999 6,499 1.77 %976,170 3,844 1.58 %
Tax-exempt(4)
307,719 2,492 3.25 %323,902 2,614 3.24 %
Total Securities(4)
1,782,718 8,991 2.02 %1,300,072 6,458 1.99 %
Federal funds sold and reverse repurchase agreements’
221,929 421 0.76 %106,257 41 0.15 %
Interest-bearing deposits with other financial institutions1,081,474 1,551 0.58 %1,614,106 494 0.12 %
FHLB stock34,536 246 2.86 %31,731 156 1.97 %
Total interest earning assets(4)
11,716,674 110,969 3.80 %11,016,947 97,087 3.53 %
Noninterest Earning Assets:
Cash and due from banks91,230 134,501 
Allowance for credit losses(120,297)(157,990)
Other assets(3)
739,872 906,992 
Total noninterest earning assets710,805 883,503 
Total assets$12,427,479 $11,900,450 
Interest-bearing liabilities:
Interest bearing deposits:
Interest-bearing checking$3,415,135 $3,285 0.39 %$3,027,435 $2,689 0.36 %
Money market(5)
2,842,026 1,416 0.20 %2,960,264 2,816 0.38 %
Savings deposits508,511 68 0.05 %411,711 57 0.06 %
Customer time deposits(5)
1,129,668 1,798 0.64 %1,291,125 2,016 0.63 %
Brokered and internet time deposits(5)
6,387 24 1.51 %39,860 341 3.43 %
Time deposits1,136,055 1,822 0.64 %1,330,985 2,357 0.71 %
Total interest-bearing deposits7,901,727 6,591 0.33 %7,730,395 7,919 0.41 %
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds
  purchased		27,233 12 0.18 %32,543 21 0.26 %
Subordinated debt(6)
129,691 1,434 4.43 %149,155 1,819 4.89 %
Other borrowings1,480 6 1.63 %1,569 7 1.79 %
Total other interest-bearing liabilities158,404 1,452 3.68 %183,267 1,847 4.04 %
Total Interest-bearing liabilities8,060,131 8,043 0.40 %7,913,662 9,766 0.49 %
Noninterest bearing liabilities:
Demand deposits2,879,662 2,484,176 
Other liabilities134,892 162,581 
Total noninterest-bearing liabilities3,014,554 2,646,757 
Total liabilities11,074,685 10,560,419 
FB Financial Corporation common shareholders' equity1,352,701 1,339,938 
Noncontrolling interest93 93 
         Shareholders' equity1,352,794 1,340,031 
Total liabilities and shareholders' equity$12,427,479 $11,900,450 
Net interest income (tax-equivalent basis)$102,926 $87,321 
Interest rate spread (tax-equivalent basis)3.40 %3.04 %
Net interest margin (tax-equivalent basis)(7)
3.52 %3.18 %
Cost of total deposits0.25 %0.31 %
Average interest-earning assets to average interesting-bearing liabilities145.4 %139.2 %
(1)Calculated using daily averages.
(2)Average balances of nonaccrual loans are included in average loan balances. Syndicated loan fee income of $1.2 million and $0 million, origination and other loan fee income of $6.9 million and $6.9 million, net accretion (amortization) of $0.1 million and $(0.2) million, and nonaccrual interest collections of $0.5 million and $0.5 million are included in interest income in the three months ended June 30, 2022 and 2021, respectively.
(3)Includes investments in premises and equipment, other real estate owned, interest receivable, MSRs, core deposit and other intangibles, goodwill and other miscellaneous assets.
(4)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, 2022 and 2021.
(5)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $207 thousand and $625 thousand of interest rate premium accretion on customer time deposits and $11 thousand and $127 thousand of interest rate premium accretion on brokered and internet deposits for the three months ended June 30, 2022 and 2021, respectively.
(6)Includes $114 thousand of interest rate premium accretion on subordinated debt for the three months ended June 30, 2021. There was no such accretion for three months ended June 30, 2022.
(7)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.
(8)Excludes the average balance for unrealized gains (losses) for mortgage loans held for sale and investments carried at fair value.
61

Six months ended June 30, 2022 compared to six months ended June 30, 2021
On a tax-equivalent basis, net interest income increased $21.2 million to $191.9 million for the six months ended June 30, 2022 as compared to $170.7 million for the six months ended June 30, 2021. The increase in tax-equivalent net interest income for the six months ended June 30, 2022 was primarily driven by an increase in the average volume of loans held for investment outstanding, coupled with a decrease in overall cost of deposits, which declined to 0.22% for the six months ended June 30, 2022, a 14 basis point reduction from the six months ended June 30, 2021.
Interest income, on a tax-equivalent basis, was $206.8 million for the six months ended June 30, 2022, compared to $192.7 million for the six months ended June 30, 2021, an increase of $14.1 million. Interest income on loans held for investment, on a tax-equivalent basis, increased $12.8 million to $179.2 million for the six months ended June 30, 2022 from $166.4 million for the six months ended June 30, 2021. This is due to an increase in the average loans held for investment balance outstanding which increased to $8.04 billion for the six months ended June 30, 2022 compared to $7.04 billion for the six months ended June 30, 2021. The increase in average loan balance is due to the increased economic activity in our primary markets and combined with lower than expected payoffs during the period. The effect of the increase in the average loans held for investment balance outstanding was partially offset by a 28 basis point decrease in the average yield on loans HFI period-over-period to 4.49% for the six months ended June 30, 2022. The decrease in yield was primarily due to the addition of new loans which were originated in a lower interest rate environment while higher yielding loans were paid off and refinanced at lower rates. Contractual loan interest rates yielded 4.18% in the six months ended June 30, 2022 compared with 4.35% in the six months ended June 30, 2021. Excluding PPP loans, which have a 1% contractual loan yield, our contractual loan yield would have been 7 points higher for the six months ended June 30, 2021. PPP loans did not impact our contractual loan yield for the six months ended June 30, 2022.
Our yield on interest-earning assets decreased to 3.54% for the six months ended June 30, 2022 from 3.59% for the six months ended June 30, 2021 largely due to the decrease in the average yield on loans HFI period-over-period detailed above. The decrease was further amplified by a $345.4 million decrease in our average mortgage loans held for sale portfolio for the six months ended June 30, 2022 compared to the same balance for the six months ended June 30, 2021. This balance decreased due to lower mortgage origination volumes which resulted from an increasing interest rate environment, continued housing inventory shortages, and compressed margins.
Interest expense was $15.0 million for the six months ended June 30, 2022, a decrease of $7.0 million as compared to the six months ended June 30, 2021. The decrease was largely attributed to a reduction of interest rates on money market deposits. Interest expense on money market deposits decreased to $3.0 million for the six months ended June 30, 2022 from $6.4 million for the six months ended June 30, 2021. The average rate on money market deposits decreased 23 basis points from 0.44% for the six months ended June 30, 2021 to 0.21% for the six months ended June 30, 2022. Further, the decrease in interest expense during the period was attributable to $1.9 million decrease in interest expense on customer time deposits period-over-period. During the six months ended June 30, 2022, we entered into three designated fair value hedges to mitigate the effect of changing rates on various fixed rate liabilities, including certain money market deposits and subordinated debt. The fair value hedge on money market deposits lowered interest expense by $0.7 million during the six months ended June 30, 2022.
The average balance on our subordinated debt decreased to $129.6 million for the six months ended June 30, 2022 compared to $169.0 million for the six months ended June 30, 2021. As a result, interest expense on subordinated debt decreased to $2.9 million for the six months ended June 30, 2022 compared to $4.2 million for the six months ended June 30, 2021. The fair value hedge on subordinated debt lowered interest expense by $0.3 million during the six months ended June 30, 2022.
62

Overall, our NIM, on a tax-equivalent basis, increased to 3.28% for the six months ended June 30, 2022 from 3.18% for the six months ended June 30, 2021, driven by the change in balance sheet composition. Our average interest-earning assets to average interest-bearing liabilities increased to 143.9% for the six months ended June 30, 2022 from 138.7% for the six months ended June 30, 2021. The change in our balance sheet composition was further illustrated by an decrease in excess liquidity, which we estimate to be interest-bearing deposits with other financial institutions in excess of 5% of average tangible assets. Excess liquidity is estimated to have negatively impacted our NIM by approximately 22 basis points for the six months ended June 30, 2022. This compares to excess liquidity representing 35 basis points of negative impact to our NIM during the six months ended June 30, 2021. Our NIM for the six months ended June 30, 2022 was negatively affected by 4 basis points from a $2.2 million in accelerated purchase accounting premium on purchased loans which was primarily driven by two purchased credit deteriorated loans with balances totaling $21.4 million paying off early.
The components of our loan yield, a key driver to our net interest margin for the six months ended June 30, 2022 and 2021 were as follows:
Six Months Ended June 30,
2022 2021 
(dollars in thousands)Interest
income		Average
yield		Interest
income		Average
yield
Loans HFI yield components:
Contractual interest rate on loans held for
investment (1)(2)
$166,794 4.18 %$151,955 4.35 %
Origination and other loan fee income (2)
11,909 0.30 %13,568 0.39 %
Amortization on purchased loans(2,288)(0.06)%(284)(0.01)%
Nonaccrual interest collections1,590 0.04 %1,192 0.04 %
Syndicated loan fee income1,150 0.03 %— — %
Total loans HFI yield$179,155 4.49 %$166,431 4.77 %
(1)Includes tax equivalent adjustment using combined marginal tax rate of 26.06%.
(2)Includes $0.7 million of loan contractual interest and $2.7 million of loan fee income related to PPP loans for the six months ended June 30, 2021, respectively. Amounts in the current year period are not significant.
Net amortization on purchased loans lowered the NIM by 4 basis points for the six months ended June 30, 2022. For the six months ended June 30, 2021, amortization on purchased loans lowered the NIM by 1 basis point. The increase in net amortization is due to the continued impact of purchase accounting resulting from our mergers, which can fluctuate based on volume of early pay-offs as discussed above. As a result of the Franklin merger, a $11.3 million premium was recorded on August 15, 2020 which is being amortized as a reduction to loan interest income. As of June 30, 2022 and December 31, 2021, the remaining net discount on all acquired loans amounted to $4.6 million and $2.3 million, respectively. Excluding PPP loans, our NIM would have been 6 basis points higher for the six months ended June 30, 2021. PPP loans did not impact our NIM for the six months ended June 30, 2022. In addition, our NIM was positively impacted by a decrease in our total cost of deposits of 14 basis points to 0.22% for the six months ended June 30, 2022 from 0.36% for the six months ended June 30, 2021.

63

Average balance sheet amounts, interest earned and yield 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,
2022 2021 
(dollars in thousands on tax-equivalent basis)
Average
balances(1)
Interest
income/
expense		Average
yield/
rate
Average
balances(1)
Interest
income/
expense		Average
yield/
rate
Interest-earning assets:
Loans (2)(4)
$8,044,722 $179,155 4.49 %$7,043,092 $166,431 4.77 %
Loans held for sale-mortgage(8)
342,190 5,916 3.49 %687,635 9,238 2.71 %
Loans held for sale-commercial67,452 1,646 4.92 %175,135 3,783 4.36 %
Securities:(8)
Taxable1,428,342 11,919 1.68 %903,830 6,663 1.49 %
Tax-exempt (4)
313,254 5,015 3.23 %329,074 5,260 3.22 %
Total Securities (4)
1,741,596 16,934 1.96 %1,232,904 11,923 1.95 %
Federal funds sold and reverse repurchase agreements214,421 613 0.58 %119,959 61 0.10 %
Interest-bearing deposits with other financial institutions1,342,639 2,189 0.33 %1,521,162 915 0.12 %
FHLB stock33,719 393 2.35 %31,597 313 2.00 %
Total interest earning assets (4)
11,786,739 206,846 3.54 %10,811,484 192,664 3.59 %
Noninterest Earning Assets:
Cash and due from banks92,318 153,523 
Allowance for credit losses(123,072)(164,648)
Other assets (3)
777,475 900,592 
Total noninterest earning assets746,721 889,467 
Total assets$12,533,460 $11,700,951 
Interest-bearing liabilities:
Interest bearing deposits:
Interest bearing checking$3,487,046 $5,742 0.33 %$2,887,671 $5,707 0.40 %
Money market deposits(7)
2,929,401 2,988 0.21 %2,939,177 6,431 0.44 %
Savings deposits498,285 132 0.05 %390,772 110 0.06 %
Customer time deposits(7)
1,103,672 3,118 0.57 %1,332,868 5,052 0.76 %
Brokered and internet time deposits(7)
11,200 73 1.31 %40,060 445 2.24 %
Time deposits1,114,872 3,191 0.58 %1,372,928 5,497 0.81 %
Total interest bearing deposits8,029,604 12,053 0.30 %7,590,548 17,745 0.47 %
Other interest-bearing liabilities:
Securities sold under agreements to repurchase and federal funds purchased28,637 26 0.18 %31,946 57 0.36 %
Subordinated debt(6)
129,642 2,894 4.50 %168,965 4,160 4.96 %
Other borrowings 1,491 15 2.03 %3,734 13 0.70 %
Total other interest-bearing liabilities159,770 2,935 3.70 %204,645 4,230 4.17 %
Total interest-bearing liabilities8,189,374 14,988 0.37 %7,795,193 21,975 0.57 %
Noninterest bearing liabilities:
Demand deposits2,823,685 2,416,869 
Other liabilities136,039 166,849 
Total noninterest-bearing liabilities2,959,724 2,583,718 
Total liabilities11,149,098 10,378,911 
FB Financial Corporation common shareholders' equity1,384,269 1,321,947 
Noncontrolling interest93 93 
         Shareholders' equity1,384,362 1,322,040 
Total liabilities and shareholders' equity$12,533,460 $11,700,951 
Net interest income (tax-equivalent basis)$191,858 $170,689 
Interest rate spread (tax-equivalent basis)3.17 %3.02 %
Net interest margin (tax-equivalent basis) (5)
3.28 %3.18 %
Cost of total deposits0.22 %0.36 %
Average interest-earning assets to average interest-bearing liabilities143.9 %138.7 %
(1)Calculated using daily averages.
(2)Average balances of nonaccrual loans and overdrafts (before deduction of ACL) are included in average loan balances. Syndication fee income $1.2 million and $0, origination and other loan fee income of $11.9 million and $13.6 million, net amortization of $2.3 million and $0.3 million, and nonaccrual interest collections of $1.6 million and $1.2 million are included in interest income for the six months ended June 30, 2022 and 2021, respectively.
(3)Includes investments in premises and equipment, OREO, interest receivable, mortgage servicing rights, core deposit and other intangibles, goodwill and other miscellaneous assets.
(4)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. For the six months ended June 30, 2022 and 2021, the net taxable-equivalent adjustment amounts included was $1.5 million and $1.6 million for the six months ended June 30, 2022 and 2021, respectively.
(5)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.
(6)Includes $0.4 million of accretion on subordinated debt fair value premium for the six months ended June 30, 2021. There was no such accretion for six months ended June 30, 2022.
(7)Includes $1.9 million and $1.9 million of interest rate premium accretion on money market deposits, $0.5 million and $1.4 million on customer time deposits and $0.1 million and $0.3 million on brokered and internet time deposits for the six months ended June 30, 2022 and 2021, respectively.
(8)Excludes the average balance for unrealized gains (losses) for mortgage loans held for sale and investments carried at fair value.
64

Rate/volume analysis
The tables below present the components of the changes in net interest income for the three and six months ended June 30, 2022 and 2021. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes and changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.
Three months ended June 30, 2022 compared to three months ended June 30, 2021
Three months ended June 30, 2022 compared to three months ended June 30, 2021 due to changes in
(in thousands on a tax-equivalent basis)VolumeYield/ rateNet increase
(decrease)
Interest-earning assets:
Loans(1)(2)
$14,387 $(1,059)$13,328 
Loans held for sale - residential(5,565)2,967 (2,598)
Loans held for sale - commercial(1,224)316 (908)
Securities available-for-sale and other securities:
Taxable2,198 457 2,655 
Tax Exempt(2)
(131)9 (122)
Federal funds sold and reverse repurchase agreements
219 161 380 
Time deposits in other financial institutions(764)1,821 1,057 
FHLB stock20 70 90 
Total interest income(2)
9,140 4,742 13,882 
Interest-bearing liabilities:
Interest-bearing checking373 223 596 
Money market(3)
(59)(1,341)(1,400)
Savings deposits13 (2)11 
Customer time deposits(3)
(257)39 (218)
Brokered and internet time deposits(3)
(126)(191)(317)
Securities sold under agreements to repurchase and federal funds
   purchased		(2)(7)(9)
Subordinated debt(4)
(215)(170)(385)
Other borrowings— (1)(1)
Total interest expense(273)(1,450)(1,723)
Change in net interest income(2)
$9,413 $6,192 $15,605 
(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for credit losses). Syndicated loan fee income of $1.2 million and $0 million, origination and other loan fee income of $6.9 million and $6.9 million, net accretion (amortization) of $0.1 million and $(0.2) million, and nonaccrual interest collections of $0.5 million and $0.5 million are included in interest income in the three months ended June 30, 2022 and 2021, respectively.
(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis.
(3)Includes $0.9 million and $0.9 million of interest rate premium accretion on money market deposits, $207 thousand and $625 thousand of interest rate premium accretion on customer time deposits and $11 thousand and $127 thousand of interest rate premium accretion on brokered and internet deposits for the three months ended June 30, 2022 and 2021, respectively.
(4)Includes $114 thousand of interest rate premium accretion on subordinated debt for the three months ended June 30, 2021. There was no such accretion for three months ended June 30, 2022.






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Six months ended June 30, 2022 compared to six months ended June 30, 2021
Six months ended June 30, 2022 compared to six months ended June 30, 2021 due to changes in
(dollars in thousands on a tax-equivalent basis)VolumeYield/ rateNet increase
(decrease)
Interest-earning assets:
Loans(1)
$22,306 $(9,582)$12,724 
Loans held for sale - residential(5,972)2,650 (3,322)
Loans held for sale - commercial(2,628)491 (2,137)
Securities available-for-sale and other securities:
Taxable4,377 879 5,256 
Tax Exempt(2)
(253)8 (245)
Federal funds sold and reverse repurchase agreements
270 282 552 
Time deposits in other financial institutions(291)1,565 1,274 
FHLB stock25 55 80 
Total interest income(2)
17,834 (3,652)14,182 
Interest-bearing liabilities:
Interest bearing checking987 (952)35 
Money market deposits(4)
(10)(3,433)(3,443)
Savings deposits28 (6)22 
Customer time deposits(4)
(648)(1,286)(1,934)
Brokered and internet time deposits(4)
(188)(184)(372)
Securities sold under agreements to repurchase and federal funds
   purchased		(3)(28)(31)
Subordinated debt(3)
(878)(388)(1,266)
Other borrowings(23)25 2 
Total interest expense(735)(6,252)(6,987)
Change in net interest income(2)
$18,569 $2,600 $21,169 
(1)Average loans are gross, including nonaccrual loans and overdrafts (before deduction of ACL). Syndication fee income $1.2 million and $0, origination and other loan fee income of $11.9 million and $13.6 million, net amortization of $2.3 million and $0.3 million, and nonaccrual interest collections of $1.6 million and $1.2 million are included in interest income for the six months ended June 30, 2022 and 2021, respectively.
(2)Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis.
(3)Includes $0.4 million of accretion on subordinated debt fair value premium for the six months ended June 30, 2021. There was no such accretion for six months ended June 30, 2022.
(4)Includes $1.9 million and $1.9 million of interest rate premium accretion on money market deposits, $0.5 million and $1.4 million on customer time deposits and $0.1 million and $0.3 million on brokered and internet time deposits for the six months ended June 30, 2022 and 2021, respectively.
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Provision for credit losses
The provision for credit losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for credit losses at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1, "Basis of presentation" in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 for a detailed discussion regarding ACL methodology.
Three months ended June 30, 2022 compared to three months ended June 30, 2021
We recognized a provision for credit losses on loans held for investment of $8.2 million as compared to a reversal of provision for credit losses of $12.9 million for the three months ended June 30, 2022 and 2021, respectively. The provision for the three months ended June 30, 2022 resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach. These evaluations weighed the impact of the current economic outlook, status of federal government stimulus programs, and geographical and demographic considerations, among other factors. We increased our required reserve due to projected slower GDP growth over the next two to three fiscal years, expected elevated unemployment levels, and expected Federal Reserve interest rate increases in the short term. These considerations were slightly offset as we removed the impact of COVID troubled industries from our calculation. See further discussion under the subheading "Allowance for credit losses."
We 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 provision expense on unfunded commitments of $4.1 million for the three months ended June 30, 2022 compared to a release in the provision for credit losses of $1.0 million for the three months ended June 30, 2021. The increase in provision expense on unfunded commitments period-over-period is due to a $141.9 million increase in our unfunded commitment balance during the three months ended June 30, 2022, and more specifically in our construction category, which inherently carry a higher risk and associated reserve than the bulk of our portfolio (see "Loan Portfolio" section below for further information about our commitment categories). This compares to a $64.5 million decrease in our unfunded commitments for the three months ended June 30, 2021. This shift in concentration in our unfunded commitments combined with the updated economic variables in our forward looking model compared to improving economic variables used for the three months ended June 30, 2021 are the primary drivers of the increase in the provision for credit losses on unfunded commitments during the three months ended June 30, 2022.
During the three months ended June 30, 2022, our available-for-sale debt securities portfolio unrealized value declined $66.6 million to an unrealized loss position of $167.5 million as of June 30, 2022 from an unrealized loss position of $100.9 million as of March 31, 2022. During the three months ended June 30, 2021, our available-for-sale debt securities portfolio unrealized value increased $3.1 million to an unrealized gain position of $22.3 million as of June 30, 2021 from an unrealized gain position of $19.2 million as of March 31, 2021. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies and we historically have not recorded any losses associated with these investments. As such, as of June 30, 2022 and December 31, 2021, it was determined that all available-for-sale debt securities that experienced a decline in fair value below amortized cost basis were due to noncredit-related factors. Therefore, there was no provision for credit losses recognized on available-for-sale debt securities during the three months ended June 30, 2022 or 2021.
Six months ended June 30, 2022 compared to six months ended June 30, 2021
We recognized a provision for credit losses on loans held for investment for the six months ended June 30, 2022 of $2.1 million. For the six months ended June 30, 2021, we recorded a release in the provision for credit losses on loans held for investment of $24.5 million. The current period provision resulted from management’s best estimate of losses over the life of loans in our portfolio in accordance with the CECL approach driven by an $1.00 billion increase in average loans held for investments outstanding period-over-period and the increased possibility of a future recession. In addition, there continues to be uncertainty surrounding the increasing inflation. Further, there continues to be a shortfall in the labor market, inflation has become elevated and interest rates are continuing to rise. Our customers are impacted by all these factors. The conflict between Russia and Ukraine has also led to uncertainty surrounding its potential impact and hardship on the U.S. economy. 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. These evaluations weighed the impact of the current economic outlook and geographical and demographic considerations, among other factors.
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For the six months ended June 30, 2022, the Company recorded a provision for credit losses on unfunded commitments of $6.0 million compared to a release in provision of $3.2 million for the six months ended June 30, 2021. The increase in the provision for credit losses on unfunded commitments is primarily due to the increase in the total loan commitment balance and the macroeconomic factors discussed above. During the six months ended June 30, 2022, our unfunded commitment balance increased by $238.3 million compared to a decrease of $189.1 million for the six months ended June 30, 2021.
During the six months ended June 30, 2022, the unrealized value in our available-for-sale debt securities portfolio declined $172.2 million from an unrealized gain position of $4.7 million as of December 31, 2021. During the six months ended June 30, 2021, the Company's available-for-sale debt securities portfolio unrealized value declined $12.2 million from an unrealized gain position of $34.6 million as of December 31, 2020. 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, 2022 or 2021.
Noninterest income
Our noninterest income includes gains on sales of mortgage loans, unrealized change in fair value of loans held for sale and derivatives, fees on mortgage loan originations, loan servicing fees, hedging results, fees generated from deposit services, investment services and trust income, gains and losses on securities, other real estate owned and other assets and other miscellaneous 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)2022 2021 2022 2021 
Mortgage banking income$22,559 $35,499 $52,090 $90,831 
Service charges on deposit accounts2,908 2,266 5,822 4,605 
ATM and interchange fees5,353 5,381 10,440 9,722 
Investment services and trust income2,275 2,999 4,407 5,007 
(Loss) gain from securities, net(109)144 (261)227 
(Loss) gain on sales or write-downs of other real estate owned(26)(23)(524)473 
Gain (loss) from other assets18 (4)82 (15)
Other income236 3,038 2,550 5,180 
Total noninterest income$33,214 $49,300 $74,606 $116,030 
Three months ended June 30, 2022 compared to three months ended June 30, 2021
Noninterest income amounted to $33.2 million for the three months ended June 30, 2022, a decrease of $16.1 million, or 32.6%, as compared to $49.3 million for the three months ended June 30, 2021. 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 $22.6 million and $35.5 million for the three months ended June 30, 2022 and 2021, respectively.
During the three months ended June 30, 2022, the Bank’s mortgage operations had sales of $869.7 million which generated a sales margin of 2.43%. This compares to $1,681.5 million and 2.94% for the three months ended June 30, 2021. The industry benefited greatly from declining interest rates during the three months ended June 30, 2021, causing an increase in interest rate lock commitment volume, which slowed dramatically in the three months ended June 30, 2022 across the industry. Mortgage banking income from gains on sale and related fair value changes decreased to $15.7 million during the three months ended June 30, 2022 compared to $31.9 million for the three months ended June 30, 2021. Total interest rate lock volume decreased $1,073.7 million, or 60.5%, during the three months ended June 30, 2022 over the same period in the previous year.
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Our mortgage business is directly impacted by the interest rate environment, increased regulations, consumer demand, economic conditions, and investor demand for mortgage production. Mortgage production, especially refinance activity, declines in rising interest rate environments. Our interest rate lock volume during three months ended June 30, 2022 was composed of 16.0% refinancing activity compared with 58.2% during the same period in the previous year. We continue to see margin compression and reduced volumes due to excess capacity in the industry, refinance fatigue and a shortage of housing inventory in our markets. Our interest rate lock volume can be materially and adversely impacted by rising interest rates and overcapacity in the market, and we expect to see further declines in interest rate lock volume and consequently, mortgage banking income in the current environment. Our direct-to-consumer channel is particularly dependent on the support of a strong refinance market and the current lack of demand and interest rate environment is unfavorable for future profitability in this delivery channel. As a result of poor performance and declining profitability projections, we announced on May 10, 2022 that we are exiting the direct-to-consumer internet delivery channel within our Mortgage segment. For the three months ended June 30, 2022 and 2021, direct-to-consumer comprised 13.7% and 51.5% of the Company's total interest rate lock volume and 37.4% and 54.9% of the Company's sales volume, respectively. As a result of exiting this channel, we incurred restructuring charges of $12.5 million during the three months ended June 30, 2022 and anticipate being fully exited in the third quarter of 2022. This realignment of our Mortgage segment will allow us to direct resources to our traditional consumer mortgage retail channel, which has historically yielded more predictable and consistent results. Additionally, we plan to retain mortgage servicing rights and continue holding residential 1-4 family mortgage loans in our loan portfolio. The exit of this channel is expected to provide regulatory capital relief resulting from MSRs and also produce lower interest rate lock volume and consequently, mortgage banking income going forward.
Income from mortgage servicing of $8.0 million and $6.8 million for three months ended June 30, 2022 and 2021, respectively, was partially offset by losses on changes in fair value of MSRs and related hedging activity of $1.2 million and $3.1 million in the three months ended June 30, 2022 and 2021, respectively.
The components of mortgage banking income for three months ended June 30, 2022 and 2021 were as follows:
Three Months Ended June 30,
(in thousands)20222021
Mortgage banking income:
Origination and sales of mortgage loans$21,099 $49,435 
Net change in fair value of loans held for sale and derivatives(5,354)(17,579)
Change in fair value on MSRs(1,152)(3,145)
Mortgage servicing income7,966 6,788 
Total mortgage banking income$22,559 $35,499 
Interest rate lock commitment volume by line of business:
Direct-to-consumer $95,756 $914,163 
Retail605,114 860,370 
Total$700,870 $1,774,533 
Interest rate lock commitment volume by purpose (%):
Purchase84.0 %41.9 %
Refinance16.0 %58.2 %
Mortgage sales$869,688 $1,681,509 
Mortgage sale margin2.43 %2.94 %
Closing volume$725,755 $1,550,950 
Outstanding principal balance of mortgage loans serviced$11,160,382 $10,527,708 
Other noninterest income for the three months ended June 30, 2022 decreased $2.8 million to $0.2 million compared with $3.0 million for the three months ended June 30, 2021. This includes a $2.0 million loss associated with our commercial loans held for sale portfolio for the three months ended June 30, 2022 compared with $1.4 million gain for the three months ended June 30, 2021.
Six months ended June 30, 2022 compared to six months ended June 30, 2021
Noninterest income amounted to $74.6 million for the six months ended June 30, 2022, a decrease of $41.4 million, or 35.7%, as compared to $116.0 million for the six months ended June 30, 2021. Changes in selected components of noninterest income in the above table are discussed below.
Mortgage banking income was $52.1 million and $90.8 million for the six months ended June 30, 2022 and 2021, respectively, representing a $38.7 million, or 42.7% decrease year-over-year.
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During the six months ended June 30, 2022, our mortgage operations had sales of $2.15 billion which generated a gain on sales margin of 2.34%. This compares to $3.25 billion and 3.30% for the six months ended June 30, 2021. The decrease in gain on sales margin is a result of over-capacity in the industry and compressing margins. Sales of mortgage loans HFS continue to slow with the rise of interest rates and the housing inventory remaining low in many of our markets. Mortgage banking income from gains on sale and related fair value changes decreased to $37.6 million during the six months ended June 30, 2022 compared to $85.5 million for the six months ended June 30, 2021. Total interest rate lock volume decreased $1,653.6 million, or 45.1%, during the six months ended June 30, 2022 compared to the same period in the previous year. Market conditions during the six months ended June 30, 2022, including declining consumer demand for mortgages and increased interest rates have also shifted the mix of interest rate lock commitments by purpose to 34.0% refinance volume to compared with 62.4% during the same period in the previous year.
As previously discussed, during the second quarter of 2022, we began the process of winding down our direct-to-consumer internet delivery channel within our Mortgage segment. For the six months ended June 30, 2022 and 2021, direct-to-consumer comprised 33.0% and 50.9% of the Company's total interest rate lock volume and 45.3% and 53.9% of the Company's sales volume, respectively. As a result of exiting this channel, we incurred restructuring charges of $12.5 million during the six months ended June 30, 2022.
Income from mortgage servicing was $15.4 million and $13.7 million for six months ended June 30, 2022 and 2021, respectively, was partially offset by losses on changes in fair value of MSRs and related hedging activity of $0.9 million. This compares to a decline in fair value of MSRs and related hedging activity for six months ended June 30, 2021 amounting to $8.4 million.
The components of mortgage banking income for the six months ended June 30, 2022 and 2021 were as follows:
Six Months Ended June 30,
(dollars in thousands)2022 2021 
Mortgage banking income  
Origination and sales of mortgage loans$50,496 $107,328 
Net change in fair value of loans held for sale and derivatives(12,902)(21,808)
Change in fair value on MSRs (899)(8,408)
Mortgage servicing income15,395 13,719 
Total mortgage banking income$52,090 $90,831 
Interest rate lock commitment volume by line of business:
Direct-to-consumer$663,848 $1,863,350 
Retail1,346,129 1,800,233 
Total$2,009,977 $3,663,583 
Interest rate lock commitment volume by purpose (%):
Purchase66.0 %37.6 %
Refinance34.0 %62.4 %
Mortgage sales$2,154,170 $3,253,579 
Mortgage sale margin2.34 %3.30 %
Closing volume$1,719,488 $3,308,882 
Outstanding principal balance of mortgage loans serviced$11,160,382 $10,527,708 
ATM and interchange fees increased $0.7 million to $10.4 million during the six months ended June 30, 2022 as compared to $9.7 million for the six months ended June 30, 2021. This increase is attributable to our growth in deposits and increased volume of transactions. Though we have not yet experienced a decline, our interchange fee income is expected to decline beginning the second half of 2022 as a result of the Durbin amendment, which limits interchange fees banking institutions with asset sizes greater than $10 billion are permitted to charge.
Other income decreased $2.6 million to $2.6 million during the six months ended June 30, 2022 as compared to $5.2 million during the six months ended June 30, 2021. This decrease is primarily related to $2.2 million loss from change in fair value of commercial loans held for sale that were acquired through business combination.
Noninterest expense
Our noninterest expense includes primarily salaries and employee benefits expense, occupancy expense, legal and professional fees, data processing expense, regulatory fees and deposit insurance assessments, advertising and
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promotion and other real estate owned expense, among others. We monitor the ratio of noninterest expense to the sum of net interest income plus noninterest income, which is commonly known as the efficiency ratio.
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)2022 2021 2022 2021 
Salaries, commissions and employee benefits$55,181 $62,367 $114,624 $126,938 
Occupancy and equipment expense5,853 5,356 11,256 11,205 
Legal and professional fees3,116 2,090 5,723 4,524 
Data processing 2,404 2,542 4,885 4,861 
Amortization of core deposit and other intangibles1,194 1,394 2,438 2,834 
Advertising2,031 3,559 6,064 5,812 
Mortgage restructuring expense12,458—12,458 — 
Other expense14,760 15,652 28,821 31,484 
Total noninterest expense$96,997 $92,960 $186,269 $187,658 
Three months ended June 30, 2022 compared to three months ended June 30, 2021
Noninterest expense increased by $4.0 million during the three months ended June 30, 2022 to $97.0 million as compared to $93.0 million in the three months ended June 30, 2021. Changes in selected components of noninterest expense in the above table are discussed below.
Salaries, commissions and employee benefits expense was the largest component of noninterest expenses representing 56.9% and 67.1% of total noninterest expense in the three months ended June 30, 2022 and 2021, respectively. During the three months ended June 30, 2022, salaries and employee benefits expense decreased $7.2 million, or 11.5%, to $55.2 million as compared to $62.4 million for the three months ended June 30, 2021. This decrease was mainly driven by a decrease of $7.8 million in salaries and commissions in the Mortgage segment during the three months ended June 30, 2022 from the same period in 2021, reflective of the slowdown in production and restructuring during the current period.
Costs resulting from our equity compensation grants during the three months ended June 30, 2022 and 2021 amounted $3.0 million and $2.5 million, respectively.
Advertising expense includes expenses related to sponsorships, advertising, marketing, customer relations and business development and public relations. During the three months ended June 30, 2022, advertising expense decreased $1.5 million to $2.0 million as compared to $3.6 million in the three months ended June 30, 2021. This decrease is primarily attributable to decreased costs of lead generation in our Mortgage segment driven by the Mortgage restructuring and reduction in production.
Mortgage restructuring expenses of $12.5 million were 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, 2022 compared to six months ended June 30, 2021
Noninterest expense decreased by $1.4 million during the six months ended June 30, 2022 to $186.3 million as compared to $187.7 million in the six months ended June 30, 2021. Changes in selected components of noninterest expense in the above table are discussed below.
Salaries, commissions and employee benefits expense was the largest component of noninterest expenses representing 61.5% and 67.6% of total noninterest expense in the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, salaries and employee benefits expense decreased $12.3 million, or 9.7%, to $114.6 million as compared to $126.9 million for the six months ended June 30, 2021. This decrease includes a $14.3 million decrease in incentive and commission compensation during the six months ended June 30, 2022, which was largely driven by the decrease in mortgage production volume and profitability during the period.
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Mortgage restructuring expenses of $12.5 million were 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 decreased $2.7 million during the six months ended June 30, 2022 to $28.8 million compared to $31.5 million during the six months ended June 30, 2021. The change includes a $1.2 million decrease in franchise tax expense, which reflects the impact of $1.4 million in Tennessee state tax credits. These credits have historically been reflected in the income tax expense line item and were required to be reported in our pre-tax results as the Company produced no taxable income during the six months ended June 30, 2022. During the six months ended June 30, 2021, we incurred $0.6 million in offering costs under our registration rights agreement from the secondary offering completed during the period. There were no such costs during the six months ended June 30, 2022.
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 71.6% and 70.3% for the three and six months ended June 30, 2022, respectively, and 68.4% and 65.8% for the three and six months ended June 30, 2021, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 61.1% and 64.5% for the three and six months ended June 30, 2022, respectively, and 68.9% and 65.8% for the three and six months ended June 30, 2021, 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 $6.7 million and $13.4 million for the three months ended June 30, 2022 and 2021, respectively, and $16.0 million and $29.0 million for the six months ended June 30, 2022 and 2021, respectively. This represents effective tax rates of 25.8% and 23.7% for the three months ended June 30, 2022 and 2021, respectively, and 22.7% and 23.2% for the six months ended June 30, 2022 and 2021, respectively. The primary differences from the enacted rates are applicable state income taxes and certain expenses that are not deductible reduced for non-taxable income and additional deductions for equity-based compensation upon vesting of restricted stock units. State taxes, net of federal benefits, increased our effective tax rate by 6.1% and 3.3% for the three months ended June 30, 2022 and 2021 and by 3.6% and 2.9% for the six months ended June 30, 2022 and 2021, respectively. This increase included the impact of the $1.4 million in Tennessee state tax credits moving to other noninterest expense during the three months ended June 30, 2022 versus in income tax expense in previous periods. We had a net operating loss carryforward generated as a result of a previous acquisition which amounted to $5.9 million and $6.5 million as of June 30, 2022 and December 31, 2021, respectively. The net operating loss carryforward can be used to offset taxable income in future periods and reducing income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under Section 382, we believe the net operating loss carryforwards will be realized based on the projected annual limitation and the length of the net operating loss carryover period. Our determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward expires on December 31, 2029.
During the six months ended June 30, 2022, we generated a state net operating loss carryforward of $3.2 million, which may have varying expiration periods. No such loss was generated during the three months ended June 30, 2022 or the three and six months ended June 30, 2021. We expect to generate sufficient taxable income to utilize the loss generated.
The Company is subject to Section 162(m), which limits the deductibility of compensation paid to certain individuals. The restricted stock unit plans that existed prior to the corporation being public vested after the reliance period as defined in the underlying Treasury Regulations. It is our policy to apply the Section 162(m) limitations to stock-based compensation, including our restricted stock unit plan, first and then followed by cash compensation. As a result of the vesting of these units and cash compensation paid to date, we have disallowed a portion of compensation paid to the applicable individuals.
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Financial condition
The following discussion of our financial condition compares balances as of June 30, 2022 and December 31, 2021.
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,
 2022 2021 
(dollars in thousands)CommittedAmount Outstanding% of total outstandingCommittedAmount Outstanding% of total outstanding
Loan Type:    
Commercial and industrial (1)

$2,482,613 $1,479,424 17 %$2,060,028 $1,290,565 17 %
Construction3,097,486 1,575,331 18 %2,886,088 1,327,659 17 %
Residential real estate:
1-to-4 family1,458,401 1,457,452 17 %1,272,477 1,270,467 17 %
Line of credit1,021,721 425,485 5 %935,571 383,039 5 %
Multi-family403,712 391,970 5 %339,882 326,551 4 %
Commercial real estate:
Owner-Occupied1,103,796 1,053,872 12 %1,005,534 951,582 13 %
Non-Owner Occupied1,981,584 1,885,122 22 %1,839,990 1,730,165 23 %
Consumer and other404,030 355,681 4 %351,153 324,634 4 %
Total loans$11,953,343 $8,624,337 100 %$10,690,723 $7,604,662 100 %
(1)Includes $1.3 million and $4.0 million of PPP loans outstanding as of June 30, 2022 and December 31, 2021, respectively.
Our loans HFI portfolio is our most significant earning asset, comprising 70.7% and 60.4% of our total assets as of June 30, 2022 and December 31, 2021, respectively. Our strategy is to grow our loan portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. Our overall lending approach is primarily focused on providing credit to our customers directly in the markets we serve, but we are also party to loan syndications and participations from other banks (collectively, “participated loans”). At June 30, 2022 and December 31, 2021, loans held for investment included approximately $281.2 million and $263.9 million, respectively, related to purchased participated loans. All loans, whether or not we act as a participant, are underwritten to the same standards as all other loans we originate. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.
Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. Our lending activity is heavily concentrated in the geographic market areas we serve, with highest concentration in Tennessee. This geographic concentration subjects our loan portfolio to the general economic conditions within the state. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses. As of June 30, 2022 and December 31, 2021, there were no concentrations of loans exceeding 10% of total loans other than the categories of loans disclosed in the table above. We believe our loan portfolio is diversified relative to industry concentrations across the various loan portfolio categories.
Banking regulators have established thresholds of less than 100% of tier 1 capital plus allowance for credit losses in construction lending and less than 300% of tier 1 capital plus allowance for credit losses in commercial real estate lending that management monitors as part of the risk management process. The construction concentration ratio is a percentage of the outstanding construction and land development loans to total tier 1 capital plus allowance for credit losses. The commercial real estate concentration ratio is a percentage of the outstanding balance of non-owner occupied commercial real estate, multifamily, and construction and land development loans to tier 1 capital plus allowance for credit losses. Management strives to operate within the thresholds set forth above.
When a company's 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.
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The table below shows concentration ratios for the Bank and Company as of June 30, 2022 and December 31, 2021.
As a percentage (%) of tier 1 capital plus allowance for credit losses
FirstBankFB Financial Corporation
June 30, 2022
Construction119.2 %116.8 %
Commercial real estate293.6 %287.7 %
December 31, 2021
Construction102.7 %99.8 %
Commercial real estate263.5 %256.0 %
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. This category also includes the loans we originated as part of the PPP, established by the Coronavirus Aid, Relief and Economic Security Act amounting to $1.3 million and $4.0 million as of June 30, 2022 and December 31, 2021, respectively. 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 operations 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. We expect to continue to make construction loans at a similar pace so long as demand continues and the market for and values of such properties remain stable or continue to improve in our markets. 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.
Residential real estate 1-4 family mortgage loans.
Our residential real estate 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, including manufactured homes with real estate, which are both owner-occupied and investor owned. We intend to continue to make residential 1-4 family housing loans at a similar pace, so long as 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. First lien residential 1-4 family mortgages may be affected by unemployment or underemployment and deteriorating market values of real estate.
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 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. These loans may be affected by unemployment or underemployment and deteriorating market values of real estate.
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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.
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
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. Consumer loans are generally secured by vehicles, manufactured homes and other household goods. The collateral securing consumer loans may depreciate over time. The company seeks to minimize these risks through its underwriting standards. Other loans also include loans to states and political subdivisions in the U.S. These loans are generally subject to the risk that the borrowing municipality or political subdivision may lose a significant portion of its tax base or that the project for which the loan was made may produce inadequate revenue. None of these categories of loans represents a significant portion of our loan portfolio.

Loan maturity and sensitivities
The following table presents the contractual maturities of our loan portfolio as of June 30, 2022. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment assumptions or scheduled repayments.
Loan type (dollars in thousands)Maturing in one
year or less		Maturing in one
to five years		Maturing in
five years to fifteen years		Maturing after
fifteen years		Total
As of June 30, 2022    
Commercial and industrial$600,243 $656,889 $221,435 $857 $1,479,424 
Commercial real estate:
Owner occupied117,694 523,398 370,285 42,495 1,053,872 
Non-owner occupied172,785 796,838 886,124 29,375 1,885,122 
Residential real estate:
1-to-4 family70,078 387,215 276,597 723,562 1,457,452 
Line of credit24,460 91,627 308,698 700 425,485 
Multi-family14,963 232,590 127,843 16,574 391,970 
Construction844,659 494,392 214,051 22,229 1,575,331 
Consumer and other38,903 84,543 59,505 172,730 355,681 
Total ($)$1,883,785 $3,267,492 $2,464,538 $1,008,522 $8,624,337 
Total (%)21.8 %37.9 %28.6 %11.7 %100.0 %

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For loans due after one year or more, the following table presents the interest rate composition for loans outstanding as of June 30, 2022. As of June 30, 2022 and December 31, 2021, the Company had $20.9 million and $21.5 million, respectively, in fixed-rate loans in which the Company has entered into variable rate swap contracts.
Loan type (dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of June 30, 2022   
Commercial and industrial$451,804 $427,377 $879,181 
Commercial real estate:
Owner occupied705,645 230,533 936,178 
Non-owner occupied874,222 838,115 1,712,337 
Residential real estate:
1-to-4 family1,119,428 267,946 1,387,374 
Line of credit4,929 396,096 401,025 
Multi-family182,329 194,678 377,007 
Construction304,624 426,048 730,672 
Consumer and other302,760 14,018 316,778 
Total ($)$3,945,741 $2,794,811 $6,740,552 
Total (%)58.5 %41.5 %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, 2022.
(dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of June 30, 2022   
One year or less$554,228$1,329,557$1,883,785
One to five years1,957,1511,310,3413,267,492
Five to fifteen years1,226,9701,237,5682,464,538
Over fifteen years761,620246,9021,008,522
Total ($)$4,499,969$4,124,368$8,624,337
Total (%)52.2 %47.8 %100.0 %


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Of the loans shown above with floating interest rates as of June 30, 2022, 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$49,506 23.64 $10,681 23.38 $54,749 15.50 $1,846 21.84 $116,782 19.77 
26-50 bps52,148 49.51 23,339 48.72 54,108 39.27 9,672 44.00 139,267 45.01 
51-75 bps169,393 74.37 121,979 71.72 76,787 71.85 12,902 71.50 381,061 72.92 
76-100 bps92,552 98.11 161,553 96.18 169,638 97.15 5,963 98.13 429,706 97.01 
101-125 bps202,599 123.24 71,121 121.25 74,664 120.39 79,531 109.43 427,915 119.85 
126-150 bps272,416 149.26 179,760 148.25 148,004 148.39 16,063 149.45 616,243 148.76 
151-200 bps124,075 173.85 172,316 170.26 122,953 171.11 16,902 172.54 436,246 171.61 
201-250 bps2,149 236.65 12,099 224.82 90,352 224.01 12,506 229.02 117,106 224.86 
251 bps and
   above		16,959 307.70 6,564 349.36 46,148 317.67 34,975 355.79 104,646 330.79 
Total loans with
    current rates
    above floors		$981,797 120.55 $759,412 125.49 $837,403 133.58 $190,360 164.43 $2,768,972 128.86 
Loans at interest
    rate floors
    providing
    support:
1-25 bps$8,406 24.48 $22,468 11.80 $21,746 16.48 $7,111 18.42 $59,731 16.07 
26-50 bps4,839 45.20 34,290 50.00 4,167 38.60 1,021 50.00 44,317 48.40 
51-75 bps4,591 74.75 7,423 75.00 5,086 73.81 5,818 72.99 22,918 74.17 
76-100 bps— — 7,726 98.72 1,303 88.31 141 77.00 9,170 96.90 
101-125 bps2,672 120.32 25,857 123.13 8,818 113.78 107 125.00 37,454 120.74 
126-150 bps15 150.00 8,502 146.58 9,604 133.80 — — 18,121 139.81 
151-200 bps— — 27,196 187.58 15,863 161.40 — — 43,059 177.94 
201-250 bps1 240.00 — — 3,964 215.06 — — 3,965 215.06 
Total loans at
    interest rate
    floors
    providing
    support		$20,524 53.19 $133,462 96.14 $70,551 95.12 $14,198 44.44 $238,735 89.07 
Asset quality
In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions, including extensions or interest rate modifications, to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. Furthermore, we are committed to collecting on all of our loans, which can result in us carrying higher nonperforming assets. We believe this practice leads to higher recoveries in the long-term.
Nonperforming assets
Our nonperforming assets consist of nonperforming loans, other real estate owned and other miscellaneous non-earning assets. As of June 30, 2022 and December 31, 2021, we had $55.5 million and $63.0 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
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as an adjustment to interest income amounted to $0.1 million for both the three months ended June 30, 2022 and 2021, and $0.3 million and $0.6 million for the six months ended June 30, 2022 and 2021, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.5 million both for the three months ended June 30, 2022 and 2021, and $1.6 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively.
In addition to loans held for investment, nonperforming assets included commercial loans held for sale that were past due 90 days or more or not accruing interest. These nonperforming commercial loans held for sale represent a pool of previously acquired shared national credits and institutional healthcare loans that amounted to $1.5 million and $5.2 million as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 and December 31, 2021, other real estate owned included $3.0 million and $3.3 million, respectively, of excess land and facilities held for sale resulting from our prior acquisitions. Other nonperforming assets also included other repossessed non-real estate amounting to $0.5 million and $0.7 million as of June 30, 2022 and December 31, 2021, respectively.
GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing and was the original transferor. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100 percent of the remaining principal balance of the loan. Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet, regardless of whether the Company intends to exercise the buy-back option if the buyback option provides the transferor a more-than-trivial benefit. At June 30, 2022 and December 31, 2021, there were $24.5 million and $94.6 million of delinquent GNMA loans that had previously been sold; however, we determined there not to be a more-than-trivial benefit of rebooking based on an analysis of interest rates and an assessment of potential reputational risk associated with these loans. As such, these were not recorded on our balance sheets as of June 30, 2022 or December 31, 2021.
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)2022 20212021 
Loan Type  
Commercial and industrial$3,469 $15,642 $1,583 
Construction2,675 5,790 4,340 
Residential real estate:
1-to-4 family mortgage15,997 13,096 13,956 
Residential line of credit1,505 1,237 1,736 
Multi-family mortgage375 53 49 
Commercial real estate:
Owner occupied7,123 8,074 6,710 
Non-owner occupied7,263 12,016 14,084 
Consumer and other5,713 3,619 4,845 
Total nonperforming loans held for investment$44,120 $59,527 $47,303 
Loans held for sale1,459 5,844 5,217 
Other real estate owned9,398 11,986 9,777 
Other527 816 686 
Total nonperforming assets$55,504 $78,173 $62,983 
Total nonperforming loans held for investment as a percentage of total loans HFI0.51 %0.83 %0.62 %
Total nonperforming assets as a percentage of total assets0.46 %0.66 %0.50 %
Total nonaccrual loans HFI as a percentage of loans HFI0.34 %0.70 %0.47 %
Total accruing loans over 90 days delinquent as a percentage of total assets0.12 %0.08 %0.09 %
Loans restructured as troubled debt restructurings$17,054 $42,678 $32,435 
Troubled debt restructurings as a percentage of total loans held for investment0.20 %0.59 %0.43 %
We have evaluated our nonperforming loans held for investment and believe all nonperforming loans have been adequately reserved for in the allowance for credit losses as of June 30, 2022 and December 31, 2021. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include
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loans 30-89 days past due amounting to $28.5 million at June 30, 2022 as compared to $26.5 million at December 31, 2021.
Allowance for credit losses
The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.
The 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 for additional information regarding our methodology.
The following table presents the allocation of the allowance for credit losses by loan category as well as the ratio of loans by loan category compared to the total loan portfolio as of the dates indicated: 
June 30, 2022December 31, 2021
(dollars in thousands)Amount% of
Loans		ACL
as a % of loans HFI category		Amount% of
Loans		ACL
as a % of loans HFI category
Loan Type:
Commercial and industrial$10,191 17 %0.69 %$15,751 17 %1.22 %
Construction38,383 18 %2.44 %28,576 17 %2.15 %
Residential real estate:
   1-to-4 family mortgage21,398 17 %1.47 %19,104 17 %1.50 %
   Residential line of credit6,875 5 %1.62 %5,903 5 %1.54 %
   Multi-family mortgage6,503 5 %1.66 %6,976 4 %2.14 %
Commercial real estate:
   Owner occupied7,329 12 %0.70 %12,593 13 %1.32 %
   Non-owner occupied22,536 22 %1.20 %25,768 23 %1.49 %
Consumer and other13,057 4 %3.67 %10,888 4 %3.35 %
Total allowance$126,272 100 %1.46 %$125,559 100 %1.65 %










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The following table summarizes activity in our allowance for credit losses during the periods indicated:
 Three Months Ended June 30,Six Months Ended June 30,Year Ended December 31,
(dollars in thousands)2022 2021 2022 2021 2021 
Allowance for credit losses at beginning of period$120,049 $157,954 $125,559 $170,389 $170,389 
Charge-offs:
Commercial and industrial(1,751)(360)(1,755)(637)(4,036)
Construction— — — (29)(30)
Residential real estate:
1-to-4 family mortgage(23)(16)(23)(149)(154)
Residential line of credit— (3)— (18)(18)
Multi-family mortgage— — — — (1)
Commercial real estate:
Non-owner occupied— — — — (1,566)
Consumer and other(614)(480)(1,189)(1,196)(2,063)
Total charge-offs$(2,388)$(859)$(2,967)$(2,029)$(7,868)
Recoveries:
Commercial and industrial$26 $87 $984 $216 $861 
Construction11 — 11 — 3 
Residential real estate:
1-to-4 family mortgage14 41 26 65 125 
Residential line of credit16 9 17 15 115 
Commercial real estate:
Owner occupied15 126 25 139 156 
Consumer and other348 190 565 385 773 
Total recoveries$430 $453 $1,628 $820 $2,033 
Net charge-offs(1,958)(406)(1,339)(1,209)(5,835)
Provision for credit losses 8,181 (12,885)2,052 (24,517)(38,995)
Allowance for credit losses at the end of period$126,272 $144,663 $126,272 $144,663 $125,559 
Ratio of net charge-offs during the period to average loans
    outstanding during the period		(0.09)%(0.02)%(0.03)%(0.03)%(0.08)%
Allowance for credit losses as a percentage of loans at end of period(1)
1.46 %2.01 %1.46 %2.01 %1.65 %
Allowance for credit losses as a percentage of nonaccrual loans HFI(1)
427.5 %286.9 %427.5 %286.9 %353.0 %
Allowance for credit losses as a percentage of nonperforming loans at end
    of period(1)
286.2 %243.0 %286.2 %243.0 %265.4 %
(1) Excludes reserve for credit losses on unfunded commitments of $20.4 million, $13.2 million and $14.4 million recorded in accrued expenses and other liabilities at June 30, 2022, June 30, 2021, and December 31, 2021, respectively.











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The following tables details our provision for credit losses and net charge-offs to average loans outstanding by loan category during the periods indicated:
Provision for credit losses(1)
Net charge-offs Average loans held for investmentRatio of annualized net recoveries (charge-offs) to average loans
(dollars in thousands)
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)$8,323,778 (0.09)%
Three months ended June 30, 2021
Commercial and industrial$(579)$(273)$1,278,142 (0.09)%
Construction(5,784)— 1,133,436 — %
Residential real estate:
1-to-4 family mortgage75 25 1,095,914 0.01 %
Residential line of credit(2,558)6 393,828 0.01 %
Multi-family mortgage1,818 — 304,890 — %
Commercial real estate::
Owner occupied972 126 921,496 0.05 %
Non-owner occupied(7,323)— 1,649,955 — %
Consumer and other494 (290)307,639 (0.38)%
Total$(12,885)$(406)$7,085,300 (0.02)%
Six months ended June 30, 2022
Commercial and industrial$(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)$8,044,722 (0.03)%
Six months ended June 30, 2021
Commercial and industrial$(536)$(421)$1,289,988 (0.07)%
Construction(25,610)(29)1,109,972 (0.01)%
Residential real estate:
1-to-4 family mortgage536 (84)1,093,481 (0.02)%
Residential line of credit(3,815)(3)395,809 — %
Multi-family mortgage6,301 — 275,551 — %
Commercial real estate::
Owner occupied(281)139 903,841 0.03 %
Non-owner occupied(1,291)— 1,669,467 — %
Consumer and other179 (811)304,983 (0.54)%
Total$(24,517)$(1,209)$7,043,092 (0.03)%
(1) Excludes provision for credit losses on unfunded commitments of $4.1 million and $(1.0) million recorded for the three months ended June 30, 2022 and 2021, respectively, and $6.0 million and $(3.2) million for the six months ended June 30, 2022 and 2021, respectively.
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Provision for credit losses(1)
Net recoveries (charge-offs)Average loans held for investmentRatio of annualized net recoveries (charge-offs) to average loans
(dollars in thousands)
Year ended December 31, 2021
Commercial and industrial$4,178 $(3,175)$1,271,476 (0.25)%
Construction(29,874)(27)1,138,769 — %
Residential real estate:
1-to-4 family mortgage(87)(29)1,130,019 — %
Residential line of credit(4,728)97 392,907 0.02 %
Multi-family mortgage(197)(1)310,874 — %
Commercial real estate::
Owner occupied7,588 156 917,334 0.02 %
Non-owner occupied(16,813)(1,566)1,683,413 (0.09)%
Consumer and other938 (1,290)352,421 (0.37)%
Total$(38,995)$(5,835)$7,197,213 (0.08)%
1) Excludes reversal of provision for credit losses on unfunded commitments of $2.0 million recorded for the year ended December 31, 2021, respectively.
The allowance for credit losses was $126.3 million and $125.6 million and represented 1.46% and 1.65% of loans held for investment as of June 30, 2022 and December 31, 2021, respectively.
The primary reason for the increase in the allowance for credit losses is due to loan growth and a tightening monetary policy environment during the three and six months ended June 30, 2022. Specifically, we performed qualitative evaluations within our established qualitative framework, weighting the impact of the current economic outlook (including inflation, employment, global conflicts and supply chain concerns), status of federal government stimulus programs, and other considerations. Further, we increased our required reserve due to projected slower GDP growth over the next two to three fiscal years; expected elevated unemployment levels; and due to expected Federal Reserve interest rate increases in the short term. The qualitative evaluations above include weighted projections that the economy may be nearing a recession. We considered the conflict between Russia and Ukraine which has also led to uncertainty surrounding its potential impact and hardship on the U.S. economy. These considerations were slightly offset as the Company removed the impact of COVID troubled industries from its calculation during the three and six months ended June 30, 2022.
We experienced an improvement in credit quality indicators including lower nonaccrual loans and lower total nonperforming assets compared to December 31, 2021. Our total nonperforming loans as a percentage of loans held for investment as of June 30, 2022 was 0.51% compared to 0.62% as of December 31, 2021.
We also maintain an allowance for credit losses on unfunded commitments, which increased to $20.4 million as of June 30, 2022 from $14.4 million as of December 31, 2021 due to an increase in unfunded loan commitment balances, particularly in our construction pipeline, and due to the economic outlook noted above.
Loans held for sale
Commercial loans held for sale
The Company's loans held for sale includes a previously acquired portfolio of commercial loans, including shared national credits and institutional healthcare loans that the Company has elected to account for as held for sale. The loans had a fair value of $37.8 million as of June 30, 2022 compared to $79.3 million as of December 31, 2021. The change is attributable to loans within the portfolio being paid off through external refinancing and pay-downs and was partially offset by loan fundings on pre-existing loan commitments.
This decrease also includes losses recognized on the change in fair value of the portfolio which is included in 'other noninterest income' on the consolidated statement of income of $2.0 million and $2.2 million for the three and six months ended June 30, 2022, respectively, compared to gains of $1.4 million and $0.5 million for the three and six months ended June 30, 2021, respectively.
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Mortgage loans held for sale
Mortgage loans held for sale were $222.4 million at June 30, 2022 compared to $672.9 million at December 31, 2021. Interest rate lock volume for the three months ended June 30, 2022 and 2021 totaled $0.70 billion and $1.77 billion, respectively, and $2.01 billion and $3.66 billion for the six months ended June 30, 2022 and 2021, respectively. Generally, mortgage volume decreases in rising interest rate environments and slower housing markets and increases in lower interest rate environments and robust housing markets. The decrease in interest rate lock volume during the three and six months ended June 30, 2022 reflects the slow down experienced across the industry compared with the three and six months ended June 30, 2021, which benefited from historically low interest rates pre-empted by the COVID-19 Pandemic. Interest rate lock commitments in the pipeline were $292.7 million as of June 30, 2022 compared with $487.4 million as of December 31, 2021. We expect to experience declines in mortgage loans held for sale through the remainder of 2022 associated with our exit from our direct-to-consumer channel, which was announced during the second quarter of 2022.
Mortgage loans to be sold are sold either on a “best efforts” basis or under a mandatory delivery sales agreement. Under a “best efforts” sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and we are obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. These loans are typically sold within fifteen to twenty-five days after the loan is funded, depending on the economic environment and competition in the market. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.
Deposits
Deposits represent the Bank’s primary source of funds. We continue to focus on growing core customer deposits through our relationship driven banking philosophy, community-focused marketing programs, and initiatives such as the development of our treasury management services.
Total deposits were $10.54 billion and $10.84 billion as of June 30, 2022 and December 31, 2021, respectively. Noninterest-bearing deposits at June 30, 2022 and December 31, 2021 were $2.90 billion and $2.74 billion, respectively, while interest-bearing deposits were $7.64 billion and $8.10 billion at June 30, 2022 and December 31, 2021, respectively. This deposit decrease is primarily due a decrease in money market deposits outstanding of $451.2 million from December 31, 2021. This was offset by increases in customer time and saving deposits of $68.3 million and $35.7 million, respectively, in each case as of June 30, 2022 compared to balances as of December 31, 2021. This change in deposit composition is a result of our balance sheet management and focus on replacing time deposits with less costly funding sources. This strategy lowered the cost of our deposits for the six months ended June 30, 2022 to 0.22% compared to 0.36% for the six months ended June 30, 2021. Also, during the six months ended June 30, 2022, the Company entered into two 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, 2022 was $6.1 million.
Included in noninterest-bearing deposits are certain mortgage escrow and related customer deposits that our third-party servicing provider, Cenlar, transfers to the Bank which totaled $133.2 million and $127.6 million at June 30, 2022 and December 31, 2021, respectively. Additionally, our deposits from municipal and governmental entities (i.e. "public deposits") totaled $2.34 billion at June 30, 2022, compared to $2.29 billion at December 31, 2021.
Our deposit base also includes certain commercial and high net worth individuals that periodically place deposits with the Bank for short periods of time and can cause fluctuations from period to period in the overall level of customer deposits outstanding. These fluctuations may include certain deposits from related parties as disclosed within Note 14, "Related party transactions" in the notes to our consolidated financial statements included in this Report.
Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of operations" discussion.


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The following table sets forth the distribution by type of our deposit accounts as of the dates indicated:
As of June 30,
As of December 31,
2022 2021 
(dollars in thousands)Amount% of total deposits Average rate Amount% of total deposits Average rate
Deposit Type
Noninterest-bearing demand$2,895,520 27 %— %$2,740,214 26 %— %
Interest-bearing demand3,338,561 32 %0.33 %3,418,666 32 %0.35 %
Money market2,615,192 25 %0.21 %3,066,347 28 %0.36 %
Savings deposits516,271 5 %0.05 %480,589 4 %0.06 %
Customer time deposits1,171,941 11 %0.57 %1,103,594 10 %0.67 %
Brokered and internet time deposits5,817 — %1.31 %27,487 — %1.69 %
Total deposits$10,543,302 100 %0.22 %$10,836,897 100 %0.30 %
Total Uninsured Deposits$5,572,038 53 %$4,877,819 45 %
Customer Time Deposits
0.00-0.50%$762,313 65 %$792,020 72 %
0.51-1.00%60,776 5 %97,644 9 %
1.01-1.50%22,292 2 %78,539 7 %
1.51-2.00%212,111 18 %36,090 3 %
2.01-2.50%28,278 2 %44,653 4 %
Above 2.50%86,171 8 %54,648 5 %
Total customer time deposits$1,171,941 100 %$1,103,594 100 %
Brokered and Internet Time Deposits
0.00-0.50%$99 2 %$99 — %
0.51-1.00%— — %— — %
1.01-1.50%247 4 %595 2 %
1.51-2.00%757 13 %16,358 60 %
2.01-2.50%4,215 72 %4,464 16 %
Above 2.50%499 9 %5,971 22 %
Total brokered and internet time deposits$5,817 100 %$27,487 100 %
Total time deposits$1,177,758 $1,131,081 
Other earning assets
Securities purchased under agreements to resell ("reverse repurchase agreements")
We enter into agreements with certain customers to purchase investment securities under agreements to resell at specific dates in the future. This investment deploys some of our liquidity position into an instrument that improves the return on those funds in low interest rate environments. Additionally, we believe it positions us more favorably for a rising interest rate environment. Securities purchased under agreements to resell totaled $195.6 million and $74.2 million at June 30, 2022 and December 31, 2021, respectively.
Investment 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 securities types, maturities, and other attributes.
The fair value of our available-for-sale debt securities portfolio was $1.62 billion and $1.68 billion as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 and December 31, 2021, the Company had $3.1 million and $3.4 million, respectively, in equity securities recorded at fair value that primarily consisted of mutual funds.
During the three months ended June 30, 2022 and 2021, we purchased $73.1 million and $223.5 million in investment securities, respectively. During the six months ended June 30, 2022 and 2021, we purchased $243.2 million and $354.8 million in investment securities, respectively. During the three and six months ended June 30, 2022, we sold $1.2 million in
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investment securities. There were no sales of securities sold during the three and six months ended June 30, 2021. During the three months ended June 30, 2022 and 2021, maturities and calls of securities totaled $65.3 million and $86.9 million, respectively. During the six months ended June 30, 2022 and 2021, maturities and calls of securities totaled $126.3 million and $147.9 million, respectively.
Included in the fair value of available-for-sale debt securities were net unrealized losses of $167.5 million at June 30, 2022 compared net unrealized gains of $4.7 million at December 31, 2021. Our available-for-sale debt securities portfolio incurred unrealized losses during the period due to a rising interest rate environment, but we believe we are well positioned to mitigate the impact of future rate increases due to the low duration of our portfolio. During the three months ended June 30, 2022 and 2021, the change in the fair value of equity securities resulted in a net loss of $ 110 thousand and a net gain of $136 thousand, respectively. During the six months ended June 30, 2022 and 2021, the change in the fair value of equity securities resulted in a net loss of $264 thousand and a net gain of $212 thousand, respectively.
The following table sets forth the fair value, scheduled maturities and weighted average yields for our available-for-sale debt securities portfolio as of the dates indicated below:
As of June 30,As of December 31,
 2022 2021 
(dollars in thousands)Fair value% of total investment securities
Weighted average yield (1)
Fair value% of total investment securities
Weighted average yield (1)
Treasury securities:
Maturing within one year$— — %— %$— — %— %
Maturing in one to five years109,793 6.8 %2.10 %14,908 0.9 %1.24 %
Maturing in five to ten years— — %— %— — %— %
Maturing after ten years— — %— %— — %— %
Total Treasury securities109,793 6.8 %2.10 %14,908 0.9 %1.24 %
Government agency securities:
Maturing within one year— — %— %— — %— %
Maturing in one to five years21,904 1.3 %1.58 %20,141 1.2 %1.33 %
Maturing in five to ten years19,157 1.2 %1.54 %13,729 0.8 %1.40 %
Maturing after ten years998 0.1 %0.64 %— — %— %
Total government agency securities42,059 2.6 %1.54 %33,870 2.0 %1.36 %
Municipal securities:
Maturing within one year3,077 0.2 %2.14 %21,884 1.3 %1.26 %
Maturing in one to five years20,271 1.3 %2.24 %19,903 1.2 %2.05 %
Maturing in five to ten years29,556 1.8 %3.50 %27,086 1.6 %3.38 %
Maturing after ten years220,260 13.6 %3.11 %269,737 16.1 %3.14 %
Total obligations of state and municipal subdivisions273,164 16.9 %3.08 %338,610 20.2 %2.97 %
Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year— — %— %— — %— %
Maturing in one to five years3,912 0.2 %2.72 %4,041 0.2 %2.55 %
Maturing in five to ten years23,833 1.5 %2.66 %17,368 1.0 %2.28 %
Maturing after ten years1,157,855 71.6 %1.85 %1,263,213 75.3 %1.51 %
Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC1,185,600 73.3 %1.87 %1,284,622 76.5 %1.53 %
Corporate securities:
Maturing within one year— — %— %— — %— %
Maturing in one to five years371 — %5.00 %355 — %5.06 %
Maturing in five to ten years7,254 0.4 %3.87 %6,160 0.4 %4.05 %
Maturing after ten years— — %— %— — %— %
Total Corporate securities7,625 0.4 %3.94 %6,515 0.4 %4.13 %
          Total available-for-sale debt securities$1,618,241 100.0 %2.09 %$1,678,525 100.0 %1.83 %
(1)Yields on a tax-equivalent basis.
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Borrowed funds
Deposits and investment securities available-for-sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, purchase federal funds and engage in overnight borrowing from the Federal Reserve, correspondent banks, or enter into client repurchase agreements. We also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds.
Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy those needs, in addition to the overall interest rate environment and cost of public funds. Borrowings can include securities sold under agreements to repurchase, lines of credit, advances from the FHLB, federal funds purchased, and subordinated debt.
Securities sold under agreements to repurchase
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 a short-term return for their excess funds. Securities sold under agreements to repurchase totaled $31.7 million and $40.7 million at June 30, 2022 and December 31, 2021, respectively.
Subordinated debt
We have two wholly-owned subsidiaries that are statutory business trusts (“Trusts”). 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 the Company. As of June 30, 2022 and December 31, 2021, our $0.9 million investment in the Trusts was included in other assets in the accompanying consolidated balance sheets, and our $30.0 million obligation is reflected as junior subordinated debt, respectively. The junior subordinated debt bears interest at floating interest rates based on a spread over 3-month LIBOR plus 315 basis points (5.35% and 3.37% at June 30, 2022 and December 31, 2021, respectively) for the $21.7 million debenture and 3-month LIBOR plus 325 basis points (5.50% and 3.47% at June 30, 2022 and December 31, 2021, respectively) for the remaining $9.3 million. The $9.3 million debenture may be redeemed prior to the 2033 maturity date upon the occurrence of a special event, and the $21.7 million debenture may be redeemed prior to 2033 at our option. The Company classified both debentures as additional Tier 1 capital as of June 30, 2022 and December 31, 2021.
We also have $100.0 million of ten year fixed-to-floating rate subordinated notes scheduled to mature on September 1, 2030. This subordinated note pays interest semi-annually in arrears based on a 4.5% fixed annual interest rate for the first five years of the notes. For years six through ten, the interest rate resets on a quarterly basis, and will be based on the 3-month Secured Overnight Financing Rate plus a spread of 439 basis points. We are entitled to redeem the notes in whole or in part on any interest payment date on or after September 1, 2025. During the first quarter of 2022, the Company entered into a designated fair value hedge to mitigate our interest rate exposure associated with these notes. The estimated fair value of the hedge included in borrowings on the consolidated balance sheet as of June 30, 2022 was $2.5 million. The Company classified the subordinated notes issuance, net of the impact of the designated fair value hedge and unamortized issuance costs, as Tier 2 capital as of June 30, 2022, and net of unamortized issuance costs as of December 31, 2021.
Other borrowings
Other borrowings on our consolidated balance sheets includes our finance lease liability totaling $1.4 million and $1.5 million as of June 30, 2022 and December 31, 2021, respectively. See Note 5, "Leases" within the Notes to our consolidated financial statements for additional information regarding our finance lease.
Liquidity and capital resources
Bank liquidity management
We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity and Interest Rate Risk Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the
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maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.
We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.
As part of our liquidity management strategy, we also focus on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest-bearing and other low-cost deposits, while replacing higher cost funding sources including time deposits and borrowed funds. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer.
Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Securities within our investment portfolio are also used to secure certain deposit types and short-term borrowings. As of June 30, 2022 and December 31, 2021, securities with a carrying value of $1.31 billion and $1.23 billion, respectively, were pledged to secure government, public, trust and other deposits and as collateral for short-term borrowings, letters of credit and derivative instruments.
Additional sources of liquidity include federal funds purchased, reverse repurchase agreements, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased, reverse repurchase agreements and FHLB advances. Funds and advances obtained from the FHLB are used primarily to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. There were no outstanding overnight cash management advances or other advances with the FHLB as of June 30, 2022 or December 31, 2021. There was $1.16 billion and $1.23 billion as of June 30, 2022 and December 31, 2021, respectively available to borrow against. 
We also maintain lines of credit with other commercial banks totaling $315.0 million and $325.0 million as of June 30, 2022 and December 31, 2021, respectively. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. There were no borrowings against these lines as of June 30, 2022 or December 31, 2021. We also had an additional $50.0 million available through the promontory network as of both June 30, 2022 and December 31, 2021.
Holding company liquidity management
The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid to it by the Bank. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see the “Item 1. Business - Supervision and regulation,” "Item 1A. Risk Factors - Risks related to our business" and " Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend Policy," each of which is set forth in our Annual Report.
Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount exceeding the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the Tennessee Department of Financial Institutions. Based upon this regulation, as of June 30, 2022 and December 31, 2021, $105.4 million and $170.8 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, 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. During the three and six months ended June 30, 2021, there were $35.0 million and $110.0 million, respectively, in cash dividends approved by the board for payment from the Bank to the holding company. None of these required approval from the TDFI. Subsequent to June 30, 2022, the board approved a dividend from the Bank to the holding company to be paid in the third quarter for $7.3 million that also did not require approval from the TDFI.
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During the three and six months ended June 30, 2022, the Company declared and paid shareholder dividends of $0.13 per share, or $6.2 million and $0.26 per share, or $12.4 million, respectively. During the three and six months ended June 30, 2021, the Company declared and paid dividends of $0.11 per share, or $5.3 million and $0.22 per share, or $10.6 million, respectively. Subsequent to June 30, 2022, the Company declared a quarterly dividend in the amount of $0.13 per share, payable on August 22, 2022, to stockholders of record as of August 8, 2022.
Shareholders’ equity and capital management
Our total shareholders’ equity was $1.32 billion at June 30, 2022 and $1.43 billion at December 31, 2021. Book value per share was $28.15 at June 30, 2022 and $30.13 at December 31, 2021, respectively. The decrease in shareholders’ equity, during the first half of 2022, was primarily attributable to a decrease in accumulated other comprehensive income related to unrealized losses on our available-for-sale securities portfolio. Additionally, our capital was impacted by retained net income, dividends paid, and $32.7 million in common stock repurchases during the six months ended June 30, 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, 2022 and December 31, 2021, we met all capital adequacy requirements for which we are subject. See additional discussion regarding our capital adequacy and ratios at within Note 12, "Minimum capital requirements" in the notes to our consolidated financial statements contained herein.
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate sensitivity
Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure.
The Asset Liability Management Committee, which is authorized by our board of directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALCO’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.
We monitor the impact of changes in interest rates on our net interest income and economic value of equity using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. Economic Value of Equity measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in affect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.
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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)
 Year 1 Year 2
Change in interest ratesJune 30,December 31, June 30,December 31,
(in basis points)2022 2021 2022 2021 
+40019.4 %40.9 %29.3 %54.8 %
+30014.4 %30.2 %21.8 %40.8 %
+20010.7 %20.9 %15.7 %28.3 %
+1006.08 %10.8 %8.66 %14.7 %
-100(6.29)%(6.32)%(9.19)%(10.2)%
-200(14.1)%(8.73)%(21.2)%(13.5)%
 Percentage change in:
Economic value of equity (2)
Change in interest ratesJune 30,December 31,
(in basis points)2022 2021 
+400(10.6)%5.30 %
+300(7.21)%5.67 %
+200(3.58)%5.72 %
+100(1.01)%3.90 %
-100(0.34)%(8.13)%
-200(3.61)%(21.4)%
(1)The percentage change represents the projected net interest income for 12 months and 24 months on a flat balance sheet in a stable interest rate environment versus the projected net interest income in the various rate scenarios.
(2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios.
The results for the net interest income simulations as of June 30, 2022 and December 31, 2021 resulted in an asset sensitive position. The primary influence of our asset sensitivity is the floating rate structure in many of our loans held for investment as well as the composition of our liabilities which is primarily core deposits. Non-interest bearing deposits continue be a strong source of funding which also increases asset sensitivity. While our variable rate loan portfolio is indexed to market rates, deposits typically adjust at a percentage of the overall movement in market rates.
The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the ALCO may undertake in response to such changes in interest rates. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results.
We may utilize derivative financial instruments as part of an ongoing effort to mitigate interest rate risk exposure to interest rate fluctuations and facilitate the needs of our customers.
For more information about our derivative financial instruments, see Note 9, “Derivatives” in the notes to our consolidated financial statements. 
ITEM 4 — Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure
89

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, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
PART II
ITEM 1—LEGAL PROCEEDINGS
Various legal proceedings to which we or our subsidiaries are party arise from time to time in the normal course of business. As of the date of this Report, there are no material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries’ properties are subject.
ITEM 1A—RISK FACTORS
There have been no material changes to the risk factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about repurchases of common stock by the Company during the quarter ended June 30, 2022: 
Period
(a)
Total number of shares purchased(1)
(b)
Average price paid per share		(c)
Total number of shares purchased as part of publicly announced plans or programs
(d)
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs(2)
April 1 - April 30, 2022337,120 $41.18 337,120 $86,107,381 
May 1 - May 31, 2022231,097 39.7 231,097 76,925,788 
June 1 - June 30, 202281,783 42.58 81,783 73,440,676 
Total650,000 $40.83 650,000 73,440,676 
(1) On March 14, 2022, the Company announced the board of directors’ authorization of a share repurchase program pursuant to which the Company may purchase up to $100 million in shares of the Company’s issued and outstanding common stock. The purchase authorizations granted under the new repurchase plan will terminate either on the date on which the maximum dollar amount is repurchased under the new repurchase plan or on January 31, 2024, whichever date occurs earlier. The new repurchase plan will be conducted pursuant to a written plan and is intended to comply with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended.
(2) Amounts are inclusive of commissions and fees related to the stock repurchases.
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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
Amended and Restated Charter of FB Financial Corporation (incorporated by reference as Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A (File No. 333-213210), filed on September 6, 2016)
Amended and Restated Bylaws of FB Financial Corporation (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-37875) Filed on November 14, 2016)
Registration Rights Agreement by and between FB Financial Corporation and James W. Ayers, dated September 15, 2016 (incorporated by reference as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-37875) filed on November 14, 2016)
Rule 13a-14(a) Certification of Chief Executive Officer*
Rule 13a-14(a) Certification of Chief Financial Officer*
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer**
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 8, 2022
Michael M. Mettee
Chief Financial Officer
(Principal Financial Officer)
/s/ Keith Rainwater
August 8, 2022
Keith Rainwater
Chief Accounting Officer
(Principal Accounting Officer)


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