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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 March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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  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, 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 April 30, 2021 was 47,354,756.
1

Table of Contents
Page
PART I.
Item 1. 3
3
4
5
6
7
8
Item 2. 48
Item 3.85
Item 4. 86
Part II.
Item 1. 88
Item 1A.88
Item 2. 88
Item 6. 89
90






2

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) 


 March 31,December 31,
 2021 (Unaudited)2020 
ASSETS  
Cash and due from banks$206,250 $110,991 
Federal funds sold104,153 121,153 
Interest-bearing deposits in financial institutions1,584,730 1,085,754 
Cash and cash equivalents1,895,133 1,317,898 
Investments:
Available-for-sale debt securities, at fair value1,225,178 1,172,400 
Equity securities, at fair value4,667 4,591 
Federal Home Loan Bank stock, at cost31,757 31,232 
Loans held for sale, at fair value1,009,762 899,173 
Loans7,047,342 7,082,959 
Less: allowance for credit losses157,954 170,389 
Net loans6,889,388 6,912,570 
Premises and equipment, net143,467 145,115 
Other real estate owned, net11,177 12,111 
Operating lease right-of-use assets48,453 49,537 
Interest receivable44,393 43,603 
Mortgage servicing rights, at fair value104,192 79,997 
Goodwill242,561 242,561 
Core deposit and other intangibles, net20,986 22,426 
Other assets264,712 274,116 
Total assets$11,935,826 $11,207,330 
LIABILITIES
Deposits
Noninterest-bearing$2,431,077 $2,274,103 
Interest-bearing checking3,097,648 2,491,765 
Money market and savings3,347,731 3,254,915 
Customer time deposits1,342,717 1,375,695 
Brokered and internet time deposits37,713 61,559 
Total deposits10,256,886 9,458,037 
Borrowings180,179 238,324 
Operating lease liabilities54,232 55,187 
Accrued expenses and other liabilities115,333 164,400 
Total liabilities10,606,630 9,915,948 
Commitments and contingencies (Note 9)
SHAREHOLDERS' EQUITY
Common stock, $1 par value per share; 75,000,000 shares authorized;
47,331,680 and 47,220,743 shares issued and outstanding at
March 31, 2021 and December 31, 2020, respectively
47,332 47,222 
Additional paid-in capital900,521 898,847 
Retained earnings365,192 317,625 
Accumulated other comprehensive income, net
16,058 27,595 
Total FB Financial Corporation shareholders' equity1,329,103 1,291,289 
Noncontrolling interest93 93 
Total equity1,329,196 1,291,382 
Total liabilities and shareholders' equity$11,935,826 $11,207,330 
See the accompanying notes to the consolidated financial statements.
3

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


 Three Months Ended March 31,
 2021 2020 
Interest income:  
Interest and fees on loans$89,412 $63,754 
Interest on securities
Taxable2,819 3,056 
Tax-exempt1,956 1,433 
Other598 1,431 
Total interest income94,785 69,674 
Interest expense:
Deposits9,826 12,168 
Borrowings2,383 1,257 
Total interest expense12,209 13,425 
Net interest income82,576 56,249 
Provision for credit losses(11,632)27,964 
Provision for credit losses on unfunded commitments(2,222)1,601 
Net interest income after provisions for credit losses96,430 26,684 
Noninterest income:
Mortgage banking income55,332 32,745 
Service charges on deposit accounts2,339 2,563 
ATM and interchange fees4,341 3,134 
Investment services and trust income2,008 1,697 
Gain from securities, net83 63 
Gain on sales or write-downs of other real estate owned496 51 
Loss from other assets(11)(328)
Other income2,142 2,775 
Total noninterest income66,730 42,700 
Noninterest expenses:
Salaries, commissions and employee benefits64,571 43,622 
Occupancy and equipment expense5,849 4,178 
Legal and professional fees2,434 1,558 
Data processing 2,319 2,453 
Merger costs— 3,050 
Amortization of core deposit and other intangibles1,440 1,203 
Advertising2,253 2,389 
Other expense15,832 10,106 
Total noninterest expense94,698 68,559 
Income before income taxes68,462 825 
Income tax expense15,588 80 
Net income applicable to FB Financial Corporation and noncontrolling
interest
52,874 745 
Net income applicable to noncontrolling interest— — 
Net income applicable to FB Financial Corporation$52,874 $745 
Earnings per common share
Basic$1.12 $0.02 
Diluted1.10 0.02 
See the accompanying notes to the consolidated financial statements.
4

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

 Three Months Ended March 31,
 2021 2020 
Net income$52,874 $745 
Other comprehensive (loss) income, net of tax:
Net change in unrealized (loss) gain in available-for-sale
securities, net of taxes of $3,452 and $4,275
(11,848)12,094 
Reclassification adjustment for gain on sale of securities
included in net income, net of taxes of $2 and $0
(5)— 
Net change in unrealized gain (loss) in hedging activities, net of
taxes of $112 and $403
316 (1,145)
Reclassification adjustment for gain on hedging activities,
net of taxes of $— and $52
— (147)
Total other comprehensive (loss) income , net of tax(11,537)10,802 
Comprehensive income 41,337 11,547 
Comprehensive income applicable to noncontrolling interests— — 
Comprehensive income applicable to FB Financial Corporation$41,337 $11,547 
 See the accompanying notes to the consolidated financial statements.
5

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 interestsTotal shareholders' equity
Balance at December 31, 2019$31,034 $425,633 $293,524 $12,138 $762,329 $— $762,329 
Cumulative effect of change in accounting
principle
— — (25,018)— (25,018)— (25,018)
Balance at January 1, 2020$31,034 $425,633 $268,506 $12,138 $737,311 $— $737,311 
Net income— — 745 — 745 — 745 
Other comprehensive income, net of
taxes
— — — 10,802 10,802 — 10,802 
Common stock issued in connection with
acquisition of FNB Financial Corp., net of registration costs (See Note 2)
955 33,892 — — 34,847 — 34,847 
Stock based compensation expense5 1,878 — — 1,883 — 1,883 
Restricted stock units vested and
distributed, net of shares withheld
61 (899)— — (838)— (838)
Shares issued under employee stock
   purchase program		12 434 — — 446 — 446 
Dividends declared ($0.09 per share)
— — (2,866)— (2,866)— (2,866)
Balance at March 31, 2020$32,067 $460,938 $266,385 $22,940 $782,330 $— $782,330 
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
— — 52,874 — 52,874 — 52,874 
Other comprehensive income, net of taxes— — — (11,537)(11,537)— (11,537)
Stock based compensation expense3 2,663 — — 2,666 — 2,666 
Restricted stock units vested and
distributed, net of shares withheld
85 (1,800)— — (1,715)— (1,715)
Shares issued under employee stock
purchase program
22 811 — — 833 — 833 
Dividends declared ($0.11 per share)
— — (5,307)— (5,307)— (5,307)
Noncontrolling interest distribution— — — — — — — 
Balance at March 31, 2021$47,332 $900,521 $365,192 $16,058 $1,329,103 $93 $1,329,196 
See the accompanying notes to the consolidated financial statements.
6
FB Financial Corporation and subsidiaries
Consolidated statements of cash flows
(Unaudited)
(Amounts are in thousands)
Three Months Ended March 31,
2021 2020 
Cash flows from operating activities:
Net income$52,874 $745 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of fixed assets 2,056 1,612 
Amortization of core deposit and other intangibles1,440 1,203 
Capitalization of mortgage servicing rights(11,594)(7,796)
Net change in fair value of mortgage servicing rights(12,601)20,736 
Stock-based compensation expense2,666 1,883 
Provision for credit losses(11,632)27,964 
Provision for credit losses on unfunded commitments(2,222)1,601 
Provision for mortgage loan repurchases440 372 
Amortization (accretion) of premiums and discounts on acquired loans, net58 (1,578)
Accretion of discounts and amortization of premiums on securities, net2,150 906 
Gain from securities, net(83)(63)
Originations of loans held for sale(1,757,932)(1,097,672)
Proceeds from sale of loans held for sale1,648,695 1,070,137 
Gain on sale and change in fair value of loans held for sale(52,811)(33,595)
Net gain or write-downs of other real estate owned(496)(51)
Loss on other assets11 328 
Provision for deferred income taxes9,639 (8,088)
Changes in:
Other assets and interest receivable(225)(118,909)
Accrued expenses and other liabilities(42,615)38,567 
Net cash used in operating activities(172,182)(101,698)
Cash flows from investing activities:
Activity in available-for-sale securities:
Maturities, prepayments and calls61,040 27,657 
Purchases(131,268)(29,632)
Net change in loans85,150 52,701 
Purchases of FHLB stock(525)— 
Purchases of premises and equipment(2,050)(3,014)
Proceeds from the sale of other real estate owned2,495 1,442 
Net cash paid in business combinations (See Note 2)— (4,227)
Net cash provided by investing activities14,842 44,927 
Cash flows from financing activities:
Net increase in demand deposits855,673 272,566 
Net decrease in time deposits(56,824)(40,107)
Net (decrease) increase in securities sold under agreements to repurchase(2,965)4,955 
Payment of subordinated debt, net of premium accretion(40,000)— 
Accretion of subordinated debt fair value premium and amortization of issuance costs, net(158)— 
(Payments on) proceeds from other borrowings(15,000)15,000 
Share based compensation withholding payments(1,715)(838)
Net proceeds from sale of common stock under employee stock purchase program833 446 
Dividends paid(5,269)(2,838)
Net cash provided by financing activities734,575 249,184 
Net change in cash and cash equivalents577,235 192,413 
Cash and cash equivalents at beginning of the period1,317,898 232,681 
Cash and cash equivalents at end of the period$1,895,133 $425,094 
Supplemental cash flow information:
Interest paid$14,794 $10,997 
Taxes paid15,117 105 
Supplemental noncash disclosures:
Transfers from loans to other real estate owned$1,395 $365 
Transfers from premises and equipment to other real estate owned— 841 
Loans provided for sales of other real estate owned 330 — 
Transfers from loans to loans held for sale2,521 3,101 
Transfers from loans held for sale to loans14,413 1,445 
Stock consideration paid in business combination— 35,041 
Trade date payable - securities— 8,273 
Dividends declared not paid on restricted stock units38 28 
Decrease to retained earnings for adoption of new accounting standard— 25,018 
Right-of-use assets obtained in exchange for operating lease liabilities157 480 
See the accompanying notes to the consolidated financial statements.

7
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 subsidiary, FirstBank (the "Bank"). As of March 31, 2021, the Bank had 81 full-service branches throughout Tennessee, north 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 United States generally accepted accounting principles (“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 balance sheet and the reported results of operations for the periods then ended. 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.
As of March 31, 2021, the Company continues to qualify as an emerging growth company as defined by the "Jumpstart Our Business Startups Act" ("JOBS Act"), however beginning as of December 31, 2021, the Company will cease to qualify.
Risks and uncertainties
The COVID-19 health pandemic that arose in 2020 created a crisis resulting in volatility in financial markets, sudden, unprecedented job losses, and disruption in consumer and commercial behavior, resulting in governments in the United States and globally to intervene with varying levels of direct monetary support and fiscal stimulus packages. All industries, municipalities and consumers have been impacted by the health crisis to some degree, including the markets that we serve. In attempts to “flatten the curve”, businesses not deemed essential were closed or constrained to capacity limitations, individuals were asked to restrict their movements, observe social distancing and shelter in place. These actions resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses, leading to a loss of revenues and a rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. Although certain restrictions lifted and vaccines became available to many in the first quarter of 2021, there continues to be uncertainty regarding the long term effects on the global economy, which could have a material adverse impact on the Company's business operations, asset valuations, financial condition, and results of operations.
Earnings per share
Basic earnings per common share ("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
8
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.
The following is a summary of the basic and diluted earnings per common share calculation for each of the periods presented:
 Three Months Ended March 31,
 2021 2020 
Basic earnings per common share calculation:
Net income applicable to FB Financial Corporation$52,874 $745 
Dividends paid on and undistributed earnings allocated to participating securities— — 
Earnings available to common shareholders$52,874 $745 
Weighted average basic shares outstanding47,278,865 31,257,739 
Basic earnings per common share$1.12 $0.02 
Diluted earnings per common share:
Earnings available to common shareholders$52,874 $745 
Weighted average basic shares outstanding47,278,865 31,257,739 
Weighted average diluted shares contingently issuable(1)
690,241 476,373 
Weighted average diluted shares outstanding47,969,106 31,734,112 
Diluted earnings per common share$1.10 $0.02 
(1)Excludes 87,452 and 153,545 restricted stock units outstanding considered to be antidilutive for the three months ended March 31, 2021 and 2020, respectively.
Recently adopted accounting policies:
The Company did not modify or adopt any new accounting policies during the three months ended March 31, 2021 that were not disclosed in the Company's 2020 audited consolidated financial statements included on the Form 10-K, other than as described below.
During the three months ended March 31, 2021, the Company reevaluated its business segments to align all retail mortgage activities with the Mortgage segment. Previously, the Company assigned retail mortgage activities within the Banking geographical footprint to the Banking segment. See Note 12, "Segment reporting" for additional information on this change.
Recently adopted accounting standards:
Except as set forth below, the Company did not adopt any new accounting standards that were not disclosed in the Company's 2020 audited consolidated financial statements included on Form 10-K.
In January 2021, Financial Accounting Standards Board ("FASB") issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope". This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. The Company early adopted ASU 2021-01 upon issuance effective January 7, 2021. No contract modifications have been made under the new guidance, therefore the adoption of this update did not impact the Company's financial statements or disclosures.
Newly issued not yet effective accounting standards:
The Company has reviewed newly issued not yet effective accounting standards and concluded as of March 31, 2021, there are none that are likely to impact the Company's financial statements or disclosures.

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

Note (2)—Mergers and acquisitions:
The following mergers and acquisitions were accounted for pursuant to Accounting Standards Codification ("ASC") 805, "Business Combinations" ("ASC 805"). Accordingly, the purchase price of each acquisition was allocated to the acquired assets and liabilities assumed based on estimated fair values as of the respective acquisition dates. The excess of the purchase price over the net assets acquired was recorded as goodwill.
Franklin Financial Network, Inc. merger
Effective August 15, 2020, the Company completed its previously announced merger with Franklin Financial Network, Inc. and its wholly owned subsidiaries, with FB Financial Corporation continuing as the surviving entity. After consolidating duplicative locations the merger added 10 branches and expanded the Company's footprint in middle Tennessee and the Nashville metropolitan statistical area. Under the terms of the agreement, the Company acquired total assets of $3.63 billion, loans of $2.79 billion and assumed total deposits of $3.12 billion. Total loans acquired includes a non-strategic institutional portfolio with a fair value of $326,206 the Company classified as held for sale. Franklin common shareholders received 15,058,181 shares of the Company's common stock, net of the equivalent value of 44,311 shares withheld on certain Franklin employee equity awards that vested upon change in control, as consideration in connection with the merger, in addition to $31,330 in cash consideration. Also included in the purchase price, the Company issued replacement restricted stock units for awards initially granted by Franklin during 2020 that did not vest upon change in control, with a total fair value of $674 attributed to pre-combination service. Based on the closing price of the Company's common stock on the New York Stock Exchange of $29.52 on August 15, 2020, the merger consideration represented approximately $477,830 in aggregate consideration.
Goodwill of $67,191 recorded in connection with the transaction resulted from the ongoing business contribution, reputation, operating model and expertise of Franklin. Measurement period adjustments recorded during the fourth quarter of 2020 amounting to $6,546 related to the finalization of valuations relating primarily to commercial loans held for sale, deposits and premises and equipment. The goodwill is not deductible for income tax purposes. Goodwill is included in the Banking segment as substantially all of the operations resulting from the acquisition of Franklin are in alignment with the Company's banking business.


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 table presents an allocation of the consideration to net assets acquired:
Purchase Price:
Equity consideration
Franklin shares outstanding(1)
15,588,337 
Franklin options converted to net shares62,906 
15,651,243 
Exchange ratio to FB Financial shares0.965 
FB Financial shares to be issued as merger consideration(2)
15,102,492 
Issuance price as of August 15, 2020$29.52 
Value of FB Financial stock to be issued as merger consideration$445,826 
Less: tax withholding on vested restricted stock awards, units and options(3)
(1,308)
Value of FB Financial stock issued$444,518 
FB Financial shares issued15,058,181 
Franklin restricted stock units that do not vest on change in control114,915 
Replacement awards issued to Franklin employees118,776 
Fair value of replacement awards $3,506 
Fair value of replacement awards attributable to pre-combination service$674 
Cash consideration
Total Franklin shares and net shares outstanding15,651,243 
Cash consideration per share$2.00 
Total cash to be paid to Franklin(4)
$31,330 
Total purchase price$477,830 
Fair value of net assets acquired410,639 
Goodwill resulting from merger$67,191 
(1)Franklin shares outstanding includes restricted stock awards and restricted stock units that vested upon change in control.
(2)Only factors in whole share issuance. Cash was paid in lieu of fractional shares.
(3)Represents the equivalent value of approximately 44,311 shares of FB Financial Corporation stock on August 15, 2020.
(4)Includes $28 of cash paid in lieu of fractional shares.
FNB Financial Corp. merger
Effective February 14, 2020, the Company completed its previously announced acquisition of FNB Financial Corp. and its wholly owned subsidiary, Farmers National Bank of Scottsville (collectively, "Farmers National"). Following the acquisition, Farmers National was merged into the Company with FB Financial Corporation continuing as the surviving entity. The transaction added four branches and expanded the Company's footprint into Kentucky. Under the terms of the agreement, the Company acquired total assets of $258,218, loans of $182,171 and assumed total deposits of $209,535. Farmers National shareholders received 954,797 shares of the Company's common stock as consideration in connection with the merger, in addition to $15,001 in cash consideration. Based on the closing price of the Company's common stock on the New York Stock Exchange of $36.70 on February 14, 2020, the merger consideration represented approximately $50,042 in aggregate consideration.
Goodwill of $6,319 recorded in connection with the transaction resulted from the ongoing business contribution of Farmers National and anticipated synergies arising from the combination of certain operational areas of the Company. Goodwill resulting from this transaction is not deductible for income tax purposes. Goodwill is included in the Banking segment as substantially all of the operations resulting from the acquisition of Farmers National are in alignment with the Company's core banking business.
11
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table presents the total purchase price, fair value of net assets acquired, and the goodwill as of the acquisition date.
Consideration:
Net shares issued954,797 
Purchase price per share on February 14, 2020$36.70 
Value of stock consideration$35,041 
Cash consideration paid 15,001 
Total purchase price $50,042 
Fair value of net assets acquired43,723 
Goodwill resulting from merger$6,319 
Net assets acquired
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the respective acquisition dates:
As of August 15, 2020As of February 14, 2020
Franklin Financial Network, Inc. FNB Financial Corp.
ASSETS
Cash and cash equivalents $284,004 $10,774 
Investments373,462 50,594 
Mortgage loans held for sale, at fair value38,740 — 
Commercial loans held for sale, at fair value326,206 — 
Loans held for investment, net of fair value adjustments2,427,527 182,171 
Allowance for credit losses on purchased credit
   deteriorated loans		(24,831)(669)
Premises and equipment45,471 8,049 
Operating lease right-of-use assets23,958 14 
Mortgage servicing rights5,111 — 
Core deposit intangible7,670 2,490 
Other assets124,571 4,795 
Total assets$3,631,889 $258,218 
LIABILITIES
Deposits:
Noninterest-bearing $505,374 $63,531 
Interest-bearing checking1,783,379 26,451 
Money market and savings342,093 37,002 
Customer time deposits383,433 82,551 
Brokered and internet time deposits107,452 — 
Total deposits3,121,731 209,535 
Borrowings62,435 3,192 
Operating lease liabilities24,330 14 
Accrued expenses and other liabilities12,661 1,754 
Total liabilities assumed3,221,157 214,495 
Noncontrolling interests acquired93 — 
Net assets acquired$410,639 $43,723 

12
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Purchased credit-deteriorated loans
Under the current expected credit losses ("CECL") methodology, the Company is required to determine whether purchased loans held for investment have experienced more-than-insignificant deterioration in credit quality since origination. Loans that have experienced this level of deterioration in credit quality are subject to special accounting at initial recognition and measurement. The Company initially measures the amortized cost of a Purchased Credit Deteriorated ("PCD") loan by adding the acquisition date estimate of expected credit losses to the loan's purchase price (i.e. the "gross up" approach). There is no provision for credit loss recognized upon acquisition of a PCD loan because the initial allowance is established through gross-up of the loans' amortized cost.
The Company determined that 27.9% of the Franklin loan portfolio had more-than-insignificant deterioration in credit quality since origination as of the acquisition date. This included deterioration in credit metrics, such as delinquency, nonaccrual status or risk ratings as well as certain loans within designated industries of concern that have been negatively impacted by COVID-19. Additionally, it was determined that 10.1% of the Farmers National loan portfolio had more-than-insignificant deterioration in credit quality since origination as of the February acquisition date. These were primarily delinquent loans as of February 14, 2020, or loans that Farmers National had classified as nonaccrual or troubled debt restructuring (“TDR”) prior to the Company's acquisition.
As of August 15, 2020As of February 14, 2020
Franklin Financial Network, Inc. FNB Financial Corp.
Purchased credit-deteriorated loans
Principal balance$693,999 $18,964 
Allowance for credit losses at acquisition(24,831)(669)
Net premium attributable to other factors8,810 63 
Loans purchased credit-deteriorated fair value$677,978 $18,358 
Loans recognized through acquisition that have not experienced more-than-insignificant credit deterioration since origination are initially recognized at the purchase price. Expected credit losses are measured under CECL through the provision for credit losses. The Company recorded provisions for credit losses in the amounts of $52,822 and $2,885 as of August 15, 2020 and February 14, 2020, respectively, in the income statement related to estimated credit losses on non-PCD loans from Franklin and Farmers National, respectively. Additionally, the Company estimates expected credit losses on off-balance sheet loan commitments that are not accounted for as derivatives. The Company recorded an increase in provision for credit losses from unfunded commitments of $10,499 as of August 15, 2020 related to the Franklin acquisition.
Pro forma financial information (unaudited)
The results of operations of the acquisitions have been included in the Company's consolidated financial statements prospectively beginning on the date of each acquisition. The acquisitions have been fully integrated with the Company's existing operations. Accordingly, post-acquisition net interest income, total revenues, and net income are not discernible. The following unaudited pro forma condensed consolidated financial information presents the results of operations for the three months ended March 31, 2020, as though the Franklin and Farmers National acquisitions had been completed as of January 1, 2019. The unaudited estimated pro forma information combines the historical results of the mergers with the Company’s historical consolidated results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the periods presented. Merger expenses are reflected in the period they were incurred. The pro forma information is not indicative of what would have occurred had the transactions taken place on January 1, 2019 and does not include the effect of cost-saving or revenue-enhancing strategies.
Three Months Ended March 31,
2020 
Net interest income$84,742 
Total revenues$133,597 
Net loss$(474)



13
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)

Note (3)—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 March 31, 2021 and December 31, 2020:  
March 31, 2021
 Amortized cost Gross unrealized gains Gross unrealized losses Allowance for credit losses for investments Fair Value
Investment Securities    
Available-for-sale debt securities  
Mortgage-backed securities - residential$834,335 $10,971 $(6,598)$— $838,708 
Mortgage-backed securities - commercial 19,888 757 (10)— 20,635 
Municipal securities334,730 14,515 (469)— 348,776 
U.S. Treasury securities14,480 96 — — 14,576 
Corporate securities2,500 — (17)— 2,483 
Total$1,205,933 $26,339 $(7,094)$— $1,225,178 
December 31, 2020
 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$2,000 $3 $— $— $2,003 
Mortgage-backed securities - residential760,099 14,040 (803)— 773,336 
Mortgage-backed securities - commercial20,226 1,362 — — 21,588 
Municipal securities336,543 19,806 (20)— 356,329 
U.S. Treasury securities16,480 148 — — 16,628 
Corporate securities2,500 17 (1)— 2,516 
Total$1,137,848 $35,376 $(824)$— $1,172,400 
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 March 31, 2021 and December 31, 2020, total accrued interest receivable on debt securities was $4,380 and $4,540, respectively.
As of March 31, 2021 and December 31, 2020, the Company had $4,667 and $4,591, respectively, in marketable equity securities recorded at fair value, respectively.
Securities pledged at March 31, 2021 and December 31, 2020 had carrying amounts of $869,390 and $804,821, 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 the U.S. Government and its agencies, in an amount greater than 10% of shareholders' equity during any period presented.
At March 31, 2021 and December 31, 2020, there were no trade date payables that related to purchases settled after period end.
 
14
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 March 31, 2021 and December 31, 2020 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 maturity summary.
March 31,December 31,
 2021 2020 
 Available-for-saleAvailable-for-sale
 Amortized costFair valueAmortized costFair value
Due in one year or less$36,486 $36,660 $35,486 $35,662 
Due in one to five years14,008 21,113 24,278 24,684 
Due in five to ten years36,838 38,377 40,038 41,332 
Due in over ten years264,378 269,685 257,721 275,798 
351,710 365,835 357,523 377,476 
Mortgage-backed securities - residential834,335 838,708 760,099 773,336 
Mortgage-backed securities - commercial19,888 20,635 20,226 21,588 
Total debt securities$1,205,933 $1,225,178 $1,137,848 $1,172,400 
Sales and other dispositions of available-for-sale securities were as follows:
 Three Months Ended March 31,
 2021 2020 
Proceeds from sales$— $— 
Proceeds from maturities, prepayments and calls61,040 27,657 
Gross realized gains7 — 
Gross realized losses— — 
Additionally, net unrealized gains on equity securities of $76 and $63 were recognized in the three months ended March 31, 2021 and 2020, respectively.
The following tables show gross unrealized losses for which an allowance for credit losses has not been recorded at March 31, 2021 and December 31, 2020, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
March 31, 2021
 Less than 12 months12 months or moreTotal
 Fair ValueUnrealized Loss Fair ValueUnrealized Loss Fair ValueUnrealized Loss
Mortgage-backed securities - residential$402,455 $(6,598)$— $— $402,455 $(6,598)
Mortgage-backed securities - commercial20,636 (10)— — 20,636 (10)
Municipal securities60,771 (469)— — 60,771 (469)
Corporate securities1,983 (17)— — 1,983 (17)
Total$485,845 $(7,094)$— $— $485,845 $(7,094)

 December 31, 2020
 Less than 12 months12 months or moreTotal
 Fair ValueUnrealized Loss Fair ValueUnrealized Loss Fair ValueUnrealized loss
Mortgage-backed securities - residential$182,012 $(803)$— $— $182,012 $(803)
Municipal securities3,184 (20)— — 3,184 (20)
Corporate Securities499 (1)499 (1)
Total$185,695 $(824)$— $— $185,695 $(824)
As of March 31, 2021 and December 31, 2020, the Company’s securities portfolio consisted of 511 and 514 securities, 42 and 16 of which were in an unrealized loss position, respectively.
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 March 31, 2021 and 2020, the Company evaluated available-for-sale debt securities with unrealized losses for expected credit loss and recorded no allowance for credit loss as the majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity, was highly rated by major credit rating agencies and have a long history of zero losses. As such, no provision for credit losses was recorded during the three months ended March 31, 2021 and 2020.
Note (4)—Loans and allowance for credit losses:
Loans outstanding at March 31, 2021 and December 31, 2020, by class of financing receivable are as follows:
 March 31,December 31,
 2021 2020 
Commercial and industrial (1)
$1,292,530 $1,346,122 
Construction1,120,585 1,222,220 
Residential real estate:
1-to-4 family mortgage1,078,618 1,089,270 
Residential line of credit394,510 408,211 
Multi-family mortgage271,839 175,676 
Commercial real estate:
Owner occupied936,473 924,841 
Non-owner occupied1,652,638 1,598,979 
Consumer and other300,149 317,640 
Gross loans7,047,342 7,082,959 
Less: Allowance for credit losses(157,954)(170,389)
Net loans$6,889,388 $6,912,570 
(1)Includes $145,697 and $212,645 of loans originated as part of the Paycheck Protection Program ("PPP") as of March 31, 2021 and December 31, 2020, established by the Coronavirus Aid, Relief and Economic Security ("CARES") Act, in response to the COVID-19 pandemic. The PPP is administered by the Small Business Administration (“SBA”); loans originated as part of the PPP may be forgiven by the SBA under a set of defined rules. 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.
As of March 31, 2021 and December 31, 2020, $1,306,484 and $1,248,857, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,508,068 and $1,532,749, 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 March 31, 2021 and December 31, 2020, $2,215,100 and $2,463,281, respectively, of qualifying loans were pledged to the Federal Reserve Bank under the Borrower-in-Custody program.
The components of amortized cost for loans on the consolidated balance sheet excludes accrued interest receivable as the Company elected to present accrued interest receivable separately on the balance sheet. As of March 31, 2021 and December 31, 2020, total accrued interest receivable on loans was $38,987 and $38,316, respectively.
Allowance for Credit Losses
The Company estimated the allowance for credit losses under a current expected credit loss model as of March 31, 2021 and December 31, 2020. 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
16
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
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; TDRs and reasonably expected TDRs. 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 use the same methodology as TDRs. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance is measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis. The allowance for credit losses on a TDR or a reasonably expected TDR is calculated individually using a discounted cash flow methodology, unless the loan is deemed to be collateral dependent or foreclosure is probable.
The allowance for credit losses showed a reversal of provision for credit losses and a decrease in estimated required allowance for credit losses as of March 31, 2021 when compared to December 31, 2020. During the three months ended March 31, 2021, the Company performed qualitative evaluations with the Company's established qualitative framework, weighting the impact of the current economic outlook, status of federal government stimulus programs, and other considerations, in order to identify specific industries or borrowers seeing credit improvement or deterioration specific to the COVID-19 pandemic. This decrease in estimated required reserve was a result of improving macroeconomic variables incorporated into the Company's reasonable and supportable forecasts when compared to December 31, 2020.
17
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following provides the changes in the allowance for credit losses by class of financing receivable for the three months ended March 31, 2021 and 2020:
 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 March 31, 2021
Beginning balance -
December 31, 2020
$14,748 $58,477 $19,220 $10,534 $7,174 $4,849 $44,147 $11,240 $170,389 
Provision for credit losses43 (19,826)461 (1,257)4,483 (1,253)6,032 (315)(11,632)
Recoveries of loans
previously charged-off
129 — 24 6 — 13 — 195 367 
Loans charged off(277)(29)(133)(15)— — — (716)(1,170)
Ending balance -
March 31, 2021
$14,643 $38,622 $19,572 $9,268 $11,657 $3,609 $50,179 $10,404 $157,954 
 
 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 March 31, 2020 
Beginning balance -
December 31, 2019
$4,805 $10,194 $3,112 $752 $544 $4,109 $4,621 $3,002 $31,139 
Impact of adopting ASC
326 on non-purchased credit deteriorated loans
5,300 1,533 7,920 3,461 340 1,879 6,822 3,633 30,888 
Impact of adopted ASC
326 on purchased credit deteriorated loans
82 150 421 (3)— 162 184 (438)558 
Provision for loan losses1,829 10,954 1,664 1,985 1,444 3,038 5,935 1,115 27,964 
Recoveries of loans
previously charged-off
88 — 24 15 — 14 — 193 334 
Loans charged off(1,234)— (242)— — (209)— (726)(2,411)
Initial allowance on loans
purchased with deteriorated credit quality
11 11 107 3 — 54 443 40 669 
Ending balance -
   March 31, 2020		$10,881 $22,842 $13,006 $6,213 $2,328 $9,047 $18,005 $6,819 $89,141 


18
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 provides the amount of the allowance for credit losses by class of financing receivable disaggregated by measurement methodology as of March 31, 2021 and December 31, 2020:

 March 31, 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
Amount of allowance allocated to:
         
Individually evaluated for credit loss$354 $96 $— $8 $— $70 $694 $1 $1,223 
Collectively evaluated for
credit loss
13,609 36,013 17,787 8,872 11,103 2,952 35,414 9,747 135,497 
Purchased credit
deteriorated
680 2,513 1,785 388 554 587 14,071 656 21,234 
Ending balance -
March 31, 2021
$14,643 $38,622 $19,572 $9,268 $11,657 $3,609 $50,179 $10,404 $157,954 
 December 31, 2020
 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
Amount of allowance allocated to:
         
Individually evaluated for credit loss$373 $95 $— $9 $— $30 $1,531 $1 $2,039 
Collectively evaluated for
credit loss
13,493 54,065 17,206 10,031 6,326 4,062 33,706 10,516 149,405 
Purchased credit
deteriorated
882 4,317 2,014 494 848 757 8,910 723 18,945 
Ending balance -
December 31, 2020
$14,748 $58,477 $19,220 $10,534 $7,174 $4,849 $44,147 $11,240 $170,389 

19
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table provides the amount of loans by class of financing receivable disaggregated by measurement methodology as of March 31, 2021, and December 31, 2020:

 March 31, 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
Loans, net of unearned
income
         
Individually evaluated for credit loss$13,833 $6,290 $1,099 $412 $— $12,797 $7,279 $36 $41,746 
Collectively evaluated for
credit loss
1,226,554 1,056,972 986,455 376,411 260,996 828,789 1,325,198 286,498 6,347,873 
Purchased credit
deteriorated
52,143 57,323 91,064 17,687 10,843 94,887 320,161 13,615 657,723 
Ending balance -
March 31, 2021
$1,292,530 $1,120,585 $1,078,618 $394,510 $271,839 $936,473 $1,652,638 $300,149 $7,047,342 
 December 31, 2020
 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
Loans, net of unearned
income
         
Individually evaluated for credit loss$15,578 $4,851 $848 $412 $— $7,846 $8,631 $39 $38,205 
Collectively evaluated for
credit loss
1,270,058 1,140,634 987,142 387,250 156,447 813,151 1,272,203 302,983 6,329,868 
Purchased credit
deteriorated
60,486 76,735 101,280 20,549 19,229 103,844 318,145 14,618 714,886 
Ending balance -
December 31, 2020
$1,346,122 $1,222,220 $1,089,270 $408,211 $175,676 $924,841 $1,598,979 $317,640 $7,082,959 

Credit Quality
The Company categorizes loans 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 performing and collateralized and 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 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. Also included in watch are loans rated as Special Mention, which have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
    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. Loans so rated 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 classified, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The total amortized cost of loans rated as Doubtful were insignificant for all periods presented.
Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes.
20
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following tables present the credit quality of our loan portfolio by year of origination as of March 31, 2021 and December 31, 2020. 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 March 31, 2021
Term Loans
Amortized Cost Basis by Origination Year
20212020201920182017PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Pass$47,458 $264,285 $177,250 $67,564 $49,794 $80,524 $568,385 $1,255,260 
Classified230 2,719 2,353 11,084 3,136 8,333 9,415 37,270 
Total47,688 267,004 179,603 78,648 52,930 88,857 577,800 1,292,530 
Construction
Pass87,958 446,596 263,730 50,161 39,430 120,595 102,600 1,111,070 
Classified— — 2,332 3,950 127 3,106 — 9,515 
Total87,958 446,596 266,062 54,111 39,557 123,701 102,600 1,120,585 
Residential real estate:
1-to-4 family mortgage
Pass81,106 245,371 150,194 111,676 87,975 379,183 — 1,055,505 
Classified201 1,241 1,771 3,200 5,103 11,597 — 23,113 
Total81,307 246,612 151,965 114,876 93,078 390,780 — 1,078,618 
Residential line of credit
Pass— — — — — — 389,110 389,110 
Classified— — — — — — 5,400 5,400 
Total— — — — — — 394,510 394,510 
Multi-family mortgage
Pass44,220 29,241 76,432 9,548 39,549 62,665 10,129 271,784 
Classified— — — — — 55 — 55 
Total44,220 29,241 76,432 9,548 39,549 62,720 10,129 271,839 
Commercial real estate:
Owner occupied
Pass32,420 141,912 192,702 98,263 94,382 290,146 58,519 908,344 
Classified— — 966 2,398 6,240 13,714 4,811 28,129 
Total32,420 141,912 193,668 100,661 100,622 303,860 63,330 936,473 
Non-owner occupied
Pass92,161 170,606 205,565 332,674 203,164 562,311 38,934 1,605,415 
Classified— — 2,179 24,917 4,601 15,526 — 47,223 
Total92,161 170,606 207,744 357,591 207,765 577,837 38,934 1,652,638 
Consumer and other loans
Pass17,054 70,902 49,042 38,486 24,630 79,975 14,177 294,266 
Classified— 141 270 1,135 1,012 2,901 424 5,883 
Total17,054 71,043 49,312 39,621 25,642 82,876 14,601 300,149 
Total
Pass402,377 1,368,913 1,114,915 708,372 538,924 1,575,399 1,181,854 6,890,754 
Classified431 4,101 9,871 46,684 20,219 55,232 20,050 156,588 
Total$402,808 $1,373,014 $1,124,786 $755,056 $559,143 $1,630,631 $1,201,904 $7,047,342 
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, 2020
Term Loans
Amortized Cost Basis by Origination Year
20202019201820172016PriorRevolving Loans Amortized Cost BasisTotal
Commercial and industrial
Pass$339,305 $186,460 $71,110 $60,362 $38,488 $45,265 $565,786 $1,306,776 
Classified2,501 2,688 11,227 4,425 6,582 1,277 10,646 39,346 
Total341,806 189,148 82,337 64,787 45,070 46,542 576,432 1,346,122 
Construction
Pass462,184 391,928 88,687 54,163 41,636 62,903 112,004 1,213,505 
Classified573 1,755 3,178 141 — 3,068 — 8,715 
Total462,757 393,683 91,865 54,304 41,636 65,971 112,004 1,222,220 
Residential real estate:
1-to-4 family mortgage
Pass284,530 178,540 165,708 158,484 111,915 165,916 — 1,065,093 
Classified448 1,428 3,806 5,473 3,622 9,400 — 24,177 
Total284,978 179,968 169,514 163,957 115,537 175,316 — 1,089,270 
Residential line of credit
Pass— — — — — — 402,859 402,859 
Classified— — — — — — 5,352 5,352 
Total— — — — — — 408,211 408,211 
Multi-family mortgage
Pass29,006 13,446 11,843 46,561 28,330 35,339 11,094 175,619 
Classified— — — — — 57 — 57 
Total29,006 13,446 11,843 46,561 28,330 35,396 11,094 175,676 
Commercial real estate:
Owner occupied
Pass141,871 180,856 101,828 110,832 82,640 226,574 53,681 898,282 
Classified44 1,785 2,423 6,074 274 11,226 4,733 26,559 
Total141,915 182,641 104,251 116,906 82,914 237,800 58,414 924,841 
Non-owner occupied
Pass166,962 230,942 349,312 221,149 290,370 280,62938,820 1,578,184 
Classified— 2,210 1,502 — — 17,083— 20,795 
Total166,962 233,152 350,814 221,149 290,370 297,712 38,820 1,598,979 
Consumer and other loans
Pass89,906 53,636 41,313 27,669 44,029 39,03714,828 310,418 
Classified151 565 1,434 1,161 935 2,308668 7,222 
Total90,057 54,201 42,747 28,830 44,964 41,345 15,496 317,640 
Total
Pass1,513,764 1,235,808 829,801 679,220 637,408 855,663 1,199,072 6,950,736 
Classified3,717 10,431 23,570 17,274 11,413 44,419 21,399 132,223 
Total$1,517,481 $1,246,239 $853,371 $696,494 $648,821 $900,082 $1,220,471 $7,082,959 

22
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
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 represents an analysis of the aging by class of financing receivable as of March 31, 2021 and December 31, 2020:
March 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$1,049 $73 $14,174 $1,277,234 $1,292,530 
Construction2,269 — 5,584 1,112,732 1,120,585 
Residential real estate:
1-to-4 family mortgage5,333 9,068 6,116 1,058,101 1,078,618 
Residential line of credit1,226 1,195 1,672 390,417 394,510 
Multi-family mortgage— — 55 271,784 271,839 
Commercial real estate:
Owner occupied503 — 12,872 923,098 936,473 
Non-owner occupied193 67 11,997 1,640,381 1,652,638 
Consumer and other2,583 295 3,068 294,203 300,149 
Total$13,156 $10,698 $55,538 $6,967,950 $7,047,342 
 
December 31, 202030-89 days
past due		90 days or 
more and accruing
interest 		Non-accrual
loans		Loans current on payments and accruing interest Total
Commercial and industrial$3,297 $330 $16,005 $1,326,490 $1,346,122 
Construction7,607 573 4,053 1,209,987 1,222,220 
Residential real estate:
1-to-4 family mortgage7,058 10,470 5,923 1,065,819 1,089,270 
Residential line of credit3,551 239 1,757 402,664 408,211 
Multi-family mortgage— 57 — 175,619 175,676 
Commercial real estate:
Owner occupied98 — 7,948 916,795 924,841 
Non-owner occupied915 — 12,471 1,585,593 1,598,979 
Consumer and other4,469 2,027 2,603 308,541 317,640 
Total$26,995 $13,696 $50,760 $6,991,508 $7,082,959 

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 tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of March 31, 2021 and December 31, 2020 by class of financing receivable.
March 31, 2021Non-accrual
with no
related
allowance		Non-accrual
with
related
allowance		Related
allowance
Commercial and industrial$12,353 $1,821 $365 
Construction4,513 1,071 134 
Residential real estate:
1-to-4 family mortgage2,122 3,994 95 
Residential line of credit846 826 26 
Multi-family mortgage— 55 9 
Commercial real estate:
Owner occupied10,059 2,813 91 
Non-owner occupied6,549 5,448 718 
Consumer and other— 3,068 160 
Total$36,442 $19,096 $1,598 

December 31, 2020Non-accrual
with no
related
allowance		Non-accrual
with
related
allowance		Related
allowance
Commercial and industrial$13,960 $2,045 $383 
Construction3,061 992 131 
Residential real estate:
1-to-4 family mortgage3,048 2,875 84 
Residential line of credit854 903 31 
Multi-family mortgage— — — 
Commercial real estate:
Owner occupied7,172 776 63 
Non-owner occupied4,566 7,905 1,711 
Consumer and other— 2,603 147 
Total$32,661 $18,099 $2,550 

The following presents interest income recognized on nonaccrual loans for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,
20212020
Commercial and industrial$114 $152 
Construction14 27 
Residential real estate:
1-to-4 family mortgage18 7 
Residential line of credit18 1 
Multi-family mortgage1 — 
Commercial real estate:
Owner occupied131 21 
Non-owner occupied89 19 
Total$385 $227 

Accrued interest receivable written off on as an adjustment to interest income amounted to $465 and $120 for the three months ended March 31, 2021 and 2020, respectively.
24
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Troubled debt restructurings
As of March 31, 2021 and December 31, 2020, the Company had a recorded investment in TDRs of $26,095 and $15,988, 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, $8,759 and $8,279 were classified as non-accrual loans as of March 31, 2021 and December 31, 2020, respectively. The Company has calculated $2,083 and $310 in allowances for credit losses for those loans at March 31, 2021 and December 31, 2020, respectively. Unfunded loan commitments related to these loans totaled $95 as of March 31, 2021. There were no commitments to extend any additional funds on troubled debt restructurings as of December 31, 2020.
The following tables present the financial effect of TDRs recorded during the periods indicated.
Three Months Ended March 31, 2021Number of loansPre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Commercial and industrial1 $107 $107 $— 
Commercial real estate:
Non-owner occupied1 11,997 11,997 $— 
Total2 $12,104 $12,104 $— 
Three Months Ended March 31, 2020Number of loansPre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves
Residential real estate:
1-4 family mortgage1$64 $64 $— 
Total1$64 $64 $— 
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 March 31, 2021 and 2020. 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 months ended March 31, 2021 and 2020 that did not meet the definition of a TDR. The modification of these loans usually involve either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments.
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 table presents 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.
25
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
March 31, 2021
Type of Collateral
Real EstateFinancial Assets and Equipment Individually assessed allowance for credit loss
Commercial and industrial$1,449 $11,770 $230 
Construction5,513 — — 
Residential real estate:
1-to-4 family mortgage1,725 — — 
Residential line of credit1,256 — 8 
Multi-family mortgage— 485 — 
Commercial real estate:
Owner occupied13,451 — 69 
Non-owner occupied11,781 — 694 
Consumer and other— — — 
Total$35,175 $12,255 $1,001 
December 31, 2020
Type of Collateral
Real EstateFinancial Assets and Equipment Individually assessed allowance for credit loss
Commercial and industrial$— $1,728 $117 
Construction3,877 — — 
Residential real estate:
1-to-4 family mortgage226 — — 
Residential line of credit1,174 — 9 
Multi-family mortgage— — — 
Commercial real estate:
Owner occupied3,391 — 30 
Non-owner occupied8,164 — 1,531 
Consumer and other— — — 
Total$16,832 $1,728 $1,687 
Deferrals Program included in COVID-19 Relief
The following table outlines the Company's recorded investment and percentage of loans held for investment by class of financing receivable for executed deferrals remaining on deferral status as of March 31, 2021 or December 31, 2020, in connection with Company's COVID-19 relief programs. These deferrals typically ranged from sixty to ninety days per deferral and the majority were not considered TDRs under the interagency regulatory guidance or CARES Act, issued in March 2020. Section 541 of the Consolidated Appropriations Act (CAA) extended this relief to the earlier of January 1, 2022 or 60 days after the national emergency termination date. As of March 31, 2021 and December 31, 2020, the Company had a recorded investment in loans totaling $1,388,858 and $1,399,088 previously deferred that were no longer in deferral status.
26
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
March 31, 2021December 31, 2020
% of Loans% of Loans
Commercial and industrial$2,041 0.2 %$7,118 0.5 %
Construction2,247 0.2 %1,918 0.2 %
Residential real estate:
1-to-4 family mortgage11,002 1.0 %19,201 1.8 %
Residential line of credit268 0.1 %204 — %
Multi-family mortgage2,167 0.8 %3,305 1.9 %
Commercial real estate:
Owner occupied7,276 0.8 %19,815 2.1 %
Non-owner occupied117,004 7.1 %139,590 8.7 %
Consumer and other10,158 3.4 %11,366 3.6 %
Total$152,163 2.2 %$202,517 2.9 %

Note (5)—Other real estate owned
The amount reported as other real estate owned includes property acquired through foreclosure in addition to excess facilities held for sale and is carried at fair value less estimated cost to sell the property. The following table summarizes the other real estate owned for the three months ended March 31, 2021 and 2020: 
Three Months Ended
March 31,
 20212020
Balance at beginning of period$12,111 $18,939 
Transfers from loans1,395 365 
Transfers to premises and equipment — (841)
Proceeds from sale of other real estate owned(2,495)(1,442)
Gain on sale of other real estate owned828 175 
Loans provided for sales of other real estate owned (330)— 
Write-downs and partial liquidations(332)(124)
Balance at end of period$11,177 $17,072 
Foreclosed residential real estate properties totaled $1,281 and $1,890 as of March 31, 2021 and December 31, 2020, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $105 and $167 at March 31, 2021 and December 31, 2020, respectively.
Excess land and facilities held for sale resulting from branch consolidations totaled $6,442 and $5,703 as of March 31, 2021 and December 31, 2020, respectively.

Note (6)—Leases:
As of March 31, 2021, the Company was the lessee in 58 operating leases and 1 finance lease of certain branch, mortgage and operations locations, of which 48 operating leases and 1 finance lease currently have remaining terms varying from greater than one year to 34 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 ("ROU") 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 to be completed in late 2022.
27
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Upon commencement, the Company estimates recording a ROU asset and operating lease liability of approximately $29,000 and $30,000, respectively, in connection with this lease.

Information related to the Company's leases is presented below as of March 31, 2021 and December 31, 2020:
March 31,December 31,
Classification20212020
Right-of-use assets:
Operating leasesOperating lease right-of-use assets$48,453$49,537
Finance leasesPremises and equipment, net1,5601,588 
Total right-of-use assets$50,013$51,125
Lease liabilities:
Operating leasesOperating lease liabilities$54,232$55,187
Finance leasesBorrowings 1,5761,598
Total lease liabilities $55,808$56,785
Weighted average remaining lease term (in years) -
operating
12.112.2
Weighted average remaining lease term (in years) - finance14.114.4
Weighted average discount rate - operating2.66 %2.65 %
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 Ended
March 31,
Classification2021 2020 
Operating lease costs
Amortization of right-of-use assetOccupancy and equipment $1,939 $1,289 
Short-term lease costOccupancy and equipment87 136 
Variable lease costOccupancy and equipment235 138 
  Lease impairment Occupancy and equipment38 — 
Finance lease costs
Interest on lease liabilitiesInterest expense on borrowings6 — 
Amortization of right-of-use assetOccupancy and equipment28 — 
Total lease cost$2,333 $1,563 

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 March 31, 2021 is as follows:
OperatingFinance
Leases Lease
Lease payments due:
March 31, 2022$8,037 $114 
March 31, 20237,339 117 
March 31, 20246,190 118 
March 31, 20255,444 120 
March 31, 20264,899 122 
Thereafter33,008 1,194 
     Total undiscounted future minimum lease payments64,917 1,785 
Less: imputed interest(10,685)(209)
     Lease liability$54,232 $1,576 

Note (7)—Mortgage servicing rights:
Changes in the Company’s mortgage servicing rights were as follows for the three months ended March 31, 2021 and 2020:
 Three Months Ended March 31,
 2021 2020 
Carrying value at beginning of period$79,997 $75,521 
Capitalization11,594 7,796 
Change in fair value:
Due to pay-offs/pay-downs(9,321)(4,643)
Due to change in valuation inputs or assumptions21,922 (16,093)
Carrying value at end of period$104,192 $62,581 

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 months ended March 31, 2021 and 2020: 
 Three Months Ended March 31,
 2021 2020 
Servicing income:
Servicing income$6,931 $5,018 
Change in fair value of mortgage servicing rights12,601 (20,736)
Change in fair value of derivative hedging instruments(17,864)14,868 
Servicing income1,668 (850)
Servicing expenses2,532 1,401 
Net servicing loss (1)
$(864)$(2,251)
(1) Excludes benefit of custodial service 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 March 31, 2021 and December 31, 2020 are as follows: 
 March 31,December 31,
 20212020
Unpaid principal balance$10,113,716 $9,787,657 
Weighted-average prepayment speed (CPR)8.04 %14.07 %
Estimated impact on fair value of a 10% increase$(4,247)$(4,493)
Estimated impact on fair value of a 20% increase$(8,191)$(8,599)
Discount rate11.81 %11.49 %
Estimated impact on fair value of a 100 bp increase$(4,166)$(2,942)
Estimated impact on fair value of a 200 bp increase$(8,024)$(5,674)
Weighted-average coupon interest rate3.45 %3.58 %
Weighted-average servicing fee (basis points)2828
Weighted-average remaining maturity (in months)329328
The Company 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 10, "Derivatives" for additional information on these hedging instruments.
As of March 31, 2021 and December 31, 2020, mortgage escrow deposits totaled to $170,861 and $147,957, respectively.
Note (8)—Income taxes:
An allocation of federal and state income taxes between current and deferred portions is presented below:
For the Three Months Ended March 31,
2021 2020 
Current$5,949 $8,168 
Deferred9,639 (8,088)
Total$15,588 $80 
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 months ended March 31, 2021 and 2020:
For the Three Months Ended March 31,
2021 2020 
Federal taxes calculated at statutory rate$14,377 21.0 %$173 21.0 %
Increase (decrease) resulting from:
State taxes, net of federal benefit1,750 2.6 %(132)(16.0)%
Expense (benefit) from equity based compensation(221)(0.3)%139 16.8 %
Municipal interest income, net of interest disallowance(424)(0.6)%(264)(32.0)%
Bank owned life insurance(84)(0.1)%(18)(2.2)%
Merger costs— — %131 15.9 %
Section 162(m) limitation227 0.3 %— — %
Other(37)(0.1)%51 6.2 %
Income tax expense, as reported$15,588 22.8 %$80 9.7 %

As of August 15, 2020, the Company acquired $8,346 of net operating losses from Franklin. The net operating loss carryforwards 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 IRC Section 382, the Company believes the net operating losses carryforward 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 is set to expire as of December 31, 2030.

The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation of certain individuals. The restricted stock unit plans that existed prior to the corporation being public will have payments in
30
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
2021 after the reliance period defined in the Section 162 regulations. Under the limitations of IRC Section 162(m), the Company will not be able to realize the deferred tax asset established on certain restricted stock units granted to these covered individuals. Therefore, a valuation allowance was established in the first quarter of 2021 for the Company's inability to take the benefit of the exercise of the restricted stock units. It is the Company’s policy to apply the IRC Section 162(m) limitations to stock based compensation first; therefore, the first quarter 2021 nondeductible IRC Section 162(m) expense was related to cash compensation and expense on the exercised restricted stock units that were above the limit as defined in IRC Section 162(m).
The components of the net deferred tax assets at March 31, 2021 and December 31, 2020, are as follows: 
March 31,December 31
 2021 2020 
Deferred tax assets:  
Allowance for credit losses$44,590 $48,409 
Operating lease liabilities14,247 14,496 
Federal net operating loss1,753 1,753 
Deferred compensation10,385 8,872 
Unrealized loss on cash flow hedges387 499 
Other18,804 19,101 
Subtotal90,166 93,130 
Deferred tax liabilities:  
FHLB stock dividends$(561)$(561)
Operating leases - right of use assets(12,912)(13,197)
Depreciation(7,235)(7,491)
Amortization of core deposit intangibles(510)(684)
Unrealized gain on equity securities(3,785)(17)
Unrealized gain on debt securities(5,193)(13,027)
Mortgage servicing rights(27,107)(20,803)
Goodwill(11,912)(11,301)
Other(10,140)(9,653)
Subtotal(79,355)(76,734)
Net deferred tax assets$10,811 $16,396 

 
Note (9)—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.
March 31,December 31,
 2021 2020 
Commitments to extend credit, excluding interest rate lock commitments$2,613,370 $2,719,996 
Letters of credit49,578 67,598 
Balance at end of period$2,662,948 $2,787,594 
As of March 31, 2021 and December 31, 2020, loan commitments included above with floating interest rates totaled $1.92 billion and $1.65 billion, respectively.
The Company estimates 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, 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.
31
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The table below presents activity within the allowance for credit losses on unfunded commitments for the three months ended March 31, 2021 and 2020:
For the Three Months Ended March 31,
2021 2020 
Balance at beginning of period$16,378 $— 
Impact of CECL adoption on provision for credit losses on unfunded
  commitments		— 2,947 
Increase in provision for credit losses from unfunded commitments acquired in business combination— 70 
Provision for credit losses on unfunded commitments(2,222)1,601 
Balance at end of period$14,156 $4,618 
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 $708 and $2,799 for the three months ended March 31, 2021 and 2020, respectively. The Company has established a reserve associated with loan repurchases. This reserve is recorded in accrued expenses and other liabilities on the consolidated balance sheets.
The following table summarizes the activity in the repurchase reserve:
For the Three Months Ended March 31,
 2021 2020 
Balance at beginning of period$5,928 $3,529 
Provision for loan repurchases or indemnifications440 372 
Losses on loans repurchased or indemnified(84)(72)
Balance at end of period$6,284 $3,829 

32
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)


Note (10)—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 item “Other assets” or “Other liabilities” at fair value in accordance with ASC 815, “Derivatives and Hedging.”
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 that are not designated as hedging instruments as economic hedges to offset the changes in fair value of Mortgage servicing rights ("MSRs"). 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 that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.

The Company 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%. 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. As of March 31, 2021 and December 31, 2020, the fair value of these contracts resulted in liability balances of $1,481 and $1,909, respectively.
In July 2017, the Company entered into three interest rate swap contracts on floating rate liabilities at the Bank level with notional amounts of $30,000, $35,000 and $35,000 for a period of three, four and five years, respectively. These interest rate swaps were designated as cash flow hedges with the objective of reducing the variability of cash flows associated with $100,000 of FHLB borrowings. During 2018, these swaps were canceled, locking in a tax-adjusted gain of $1,564 in other comprehensive income to be accreted over the three, four and five-year terms of the underlying contracts. During the year ended December 31, 2020, the Company did not renew the advances associated with the legacy cash flow hedge, and reclassified the remaining unamortized gain, from accumulated other comprehensive income to earnings.

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 derivative financial instruments as of the dates presented:
March 31, 2021
Notional AmountAssetLiability
Not designated as hedging:
Interest rate contracts$685,330 $26,419 $26,272 
Forward commitments1,575,965 25,835 — 
Interest rate-lock commitments1,058,779 12,949 — 
Futures contracts413,200 — 2,999 
Total$3,733,274 $65,203 $29,271 

 December 31, 2020
 Notional AmountAssetLiability
Not designated as hedging:   
Interest rate contracts$606,878 $34,547 $34,317 
Forward commitments1,358,328 — 11,633 
Interest rate-lock commitments1,191,621 34,391 — 
Futures contracts375,400 — 383 
Total$3,532,227 $68,938 $46,333 
 
 March 31, 2021
 Notional AmountAssetLiability
Designated as hedging:   
Interest rate swaps$30,000 $— $1,481 
December 31, 2020
Notional AmountAssetLiability
Designated as hedging:
Interest rate swaps$30,000 $— $1,909 
Gains (losses) included in the consolidated statements of income related to the Company’s derivative financial instruments were as follows:
Three Months Ended March 31,
 2021 2020 
Not designated as hedging instruments (included in mortgage banking income):
Interest rate lock commitments$(21,442)$20,462 
Forward commitments43,258 (26,457)
Futures contracts(16,332)10,911 
Total$5,484 $4,916 
Three Months Ended March 31,
 2021 2020 
Designated as hedging:
Amount of gain reclassified from other comprehensive income and
recognized in interest expense on borrowings, net of taxes of $— and $52
$— $147 
Loss included in interest expense on borrowings(137)(12)
Total$(137)$135 
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 income, net of tax, for derivative instruments designated as cash flow hedges for the periods presented: 
Three Months Ended March 31,
 2021 2020 
Designated as hedging:
Amount of gain (loss) recognized in other comprehensive income, net of tax $112 and $403
$316 $(1,145)
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
March 31, 2021December 31, 2020March 31, 2021December 31, 2020
Gross amounts recognized$5,901 $3,863 $21,416 $34,051 
Gross amounts offset in the consolidated balance sheets— — — — 
Net amounts presented in the consolidated balance sheets5,901 3,863 21,416 34,051 
Gross amounts not offset in the consolidated balance sheets
Less: financial instruments5,360 857 5,360 857 
Less: financial collateral pledged— — 16,056 33,194 
Net amounts$541 $3,006 $— $— 
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. At March 31, 2021 and December 31, 2020, the Company had minimum collateral posting thresholds with certain derivative counterparties and had collateral posted of $57,123 and $57,985, respectively, against its obligations under these agreements. Cash collateral related to derivative contracts is recorded in other assets in the consolidated balance sheets.
Note (11)—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.
35
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
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.
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 at 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 interest rate swaps 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. Fair value of commitments 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. These financial instruments are classified as Level 2.
Other real estate owned (“OREO”)-OREO is comprised of commercial and residential real estate obtained in partial or total satisfaction of loan obligations and excess land and facilities held for sale. OREO acquired in settlement of indebtedness is recorded at the lower of the carrying amount of the loan or the fair value of the real estate less costs to sell. Fair value is determined on a nonrecurring basis based on appraisals by qualified licensed appraisers and is adjusted for management’s estimates of costs to sell and holding period discounts. The valuations are classified as Level 3.
Mortgage servicing rights-MSRs are carried at fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, market discount rates, prepayment speeds, servicing costs, and other factors. As such, MSRs are considered Level 3.
Collateral dependent loans-loans for which, based on current information and events, the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral and it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral dependent loans are classified as Level 3.
36
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The following table contains the estimated fair values and the related carrying values of the Company's financial instruments. Items which are not financial instruments are not included.
 
 Fair Value
March 31, 2021Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,895,133 $1,895,133 $— $— $1,895,133 
Investment securities1,229,845 — 1,229,845 — 1,229,845 
Loans, net6,889,388 — — 7,042,144 7,042,144 
Loans held for sale1,009,762 — 834,779 174,983 1,009,762 
Interest receivable44,393 30 5,376 38,987 44,393 
Mortgage servicing rights104,192 — — 104,192 104,192 
Derivatives65,203 — 65,203 — 65,203 
Financial liabilities: 
Deposits: 
Without stated maturities$8,876,456 $8,876,456 $— $— $8,876,456 
With stated maturities1,380,430 — 1,391,861 — 1,391,861 
Securities sold under agreement to
repurchase and federal funds sold
29,234 29,234 — — 29,234 
Subordinated debt149,369 — — 150,954 150,954 
Other borrowings1,576 — 1,576 — 1,576 
Interest payable4,187 246 3,110 831 4,187 
Derivatives30,752 — 30,752 — 30,752 

 
 Fair Value
December 31, 2020Carrying amount Level 1Level 2Level 3Total
Financial assets:     
Cash and cash equivalents$1,317,898 $1,317,898 $— $— $1,317,898 
Investment securities1,176,991 — 1,176,991 — 1,176,991 
Loans, net6,912,570 — — 7,058,693 7,058,693 
Loans held for sale899,173 — 683,770 215,403 899,173 
Interest receivable43,603 33 5,254 38,316 43,603 
Mortgage servicing rights79,997 — — 79,997 79,997 
Derivatives68,938 — 68,938 — 68,938 
Financial liabilities: 
Deposits: 
Without stated maturities$8,020,783 $8,020,783 $— $— $8,020,783 
With stated maturities1,437,254 — 1,446,605 — 1,446,605 
Securities sold under agreement to
repurchase and federal funds sold
32,199 32,199 — — 32,199 
Subordinated debt189,527 — — 192,149 192,149 
Other borrowings16,598 — 16,598 — 16,598 
Interest payable6,772 327 4,210 2,235 6,772 
Derivatives48,242 — 48,242 — 48,242 
37
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
The balances and levels of the assets measured at fair value on a recurring basis at March 31, 2021 are presented in the following table:
March 31, 2021Quoted prices
in active
markets for
identical assets
(liabilities)
(level 1)		Significant
other
observable
inputs
(level 2) 		Significant unobservable
inputs
(level 3) 		Total
Recurring valuations:    
Financial assets:     
Available-for-sale securities:    
Mortgage-backed securities - residential$— $838,708 $— $838,708 
Mortgage-backed securities - commercial— 20,635 — 20,635 
Municipal securities— 348,776 — 348,776 
Treasury securities— 14,576 — 14,576 
Corporate securities— 2,483 — 2,483 
Equity securities— 4,667 — 4,667 
Total$— $1,229,845 $— $1,229,845 
Loans held for sale$— $834,779 $174,983 $1,009,762 
Mortgage servicing rights— — 104,192 104,192 
Derivatives— 65,203 — 65,203 
Financial Liabilities:
Derivatives— 30,752 — 30,752 


The balances and levels of the assets measured at fair value on a non-recurring basis at March 31, 2021 are presented in the following table: 
At March 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$— $— $3,870 $3,870 
Collateral dependent loans:
Commercial and industrial$— $— $13,219 $13,219 
Construction— — 5,513 5,513 
Residential real estate:
1-4 family mortgage— — 1,725 1,725 
Residential line of credit— — 1,256 1,256 
Multifamily— — 485 485 
Commercial real estate:
Owner occupied— — 13,451 13,451 
Non-owner occupied— — 11,781 11,781 
Total collateral dependent loans$— $— $47,430 $47,430 
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 December 31, 2020 are presented in the following table: 
At December 31, 2020Quoted 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$— $2,003 $— $2,003 
Mortgage-backed securities - residential— 773,336 — 773,336 
Mortgage-backed securities - commercial— 21,588 — 21,588 
Municipals, tax-exempt— 356,329 — 356,329 
Treasury securities— 16,628 — 16,628 
Corporate securities— 2,516 — 2,516 
Equity securities— 4,591 — 4,591 
Total$— $1,176,991 $— $1,176,991 
Loans held for sale$— $683,770 $215,403 $899,173 
Mortgage servicing rights— — 79,997 79,997 
Derivatives— 68,938 — 68,938 
Financial Liabilities:
Derivatives— 48,242 — 48,242 
 
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 non-recurring basis at December 31, 2020 are presented in the following table: 
At December 31, 2020Quoted 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$— $— $6,662 $6,662 
Collateral dependent loans:
Commercial and industrial$— $— $1,728 $1,728 
Construction— — 3,877 3,877 
Residential real estate:
1-4 family mortgage— — 226 226 
Residential line of credit— — 1,174 1,174 
Commercial real estate: 
Owner occupied— — 3,391 3,391 
Non-owner occupied— — 8,164 8,164 
Total$— $— $18,560 $18,560 

The following tables present information as of March 31, 2021 and December 31, 2020 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:
Financial instrumentFair ValueValuation techniqueSignificant 
Unobservable inputs		Range of
inputs
Collateral dependent loans$47,430 Valuation of collateralDiscount for comparable sales
0%-30%
Other real estate owned$3,870 Appraised value of property less costs to sellDiscount for costs to sell
0%-15%
Financial instrumentFair ValueValuation techniqueSignificant 
Unobservable inputs		Range of
inputs
Collateral dependent loans$18,560 Valuation of collateralDiscount for comparable sales
0%-30%
Other real estate owned$6,662 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 the 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 client and client's business. 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.
40
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Fair value option
The following table summarizes the Company's loans held for sale, at fair value, as of the dates presented:
March 31,December 31,
20212020
Commercial and industrial$174,983 $215,403
Residential real estate:
1-4 family mortgage834,779 683,770 
Total loans held for sale$1,009,762 $899,173 

Mortgage loans held for sale
The Company measures mortgage loans originated for sale at fair value under the fair value option as permitted under ASC 825, "Financial Instruments" ("ASC 825"). Electing to measure these assets at fair value reduces certain timing differences and more accurately matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.
Net losses of $20,716 resulting from fair value changes of mortgage loans were recorded in income during the three months ended March 31, 2021, compared to net gains of $5,818 during the three months ended March 31, 2020, 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 (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. As of March 31, 2021, and December 31, 2020, there were $143,100 and $151,184, 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 table sets forth the changes in fair value associated with this portfolio.
41
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Three months ended March 31, 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(39,566)— (39,566)
  Write-offs to discount(2,007)2,007 — 
  Changes in valuation included in other noninterest income— (853)(853)
        Carrying value at end of period$197,490 $(22,506)$174,984 
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 loan interest income in the consolidated statements of income.
The following table summarizes the differences between the fair value and the principal balance for loans held for sale and nonaccrual loans measured at fair value as of March 31, 2021 and December 31, 2020: 
March 31, 2021Aggregate
fair value 		Aggregate
Unpaid
Principal
Balance 		Difference
Mortgage loans held for sale measured at fair value$834,779 $823,612 $11,167 
Commercial loans held for sale measured at fair value162,204 172,702 (10,498)
Past due loans of 90 days or more— — — 
Nonaccrual loans12,779 24,788 (12,009)
December 31, 2020 
Mortgage loans held for sale measured at fair value$683,770 $651,887 $31,883 
Commercial loans held for sale measured at fair value208,914 226,867 (17,953)
Past due loans of 90 days or more83 163 (80)
Nonaccrual loans6,406 12,033 (5,627)


Note (12)—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 (“CEO”), the Company’s chief operating decision maker. The Company has identified two distinct reportable segments—Banking and Mortgage. The Company’s primary segment is Banking, which provides a full range of deposit and lending products and services to corporate, commercial and consumer customers. The Company offers full-service conforming residential mortgage products, including conforming residential loans and services through two distinct delivery channels: retail and ConsumerDirect. Additionally, the Mortgage segment includes 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.
During the three months ended March 31, 2021, the Company re-evaluated its business segments and revised to align all mortgage activities with the Mortgage segment. Previously, the Company had attributed retail mortgage activities originating from geographical locations within the footprint of the Company's branches to the Banking segment. Results for the comparable prior period have been revised to reflect this realignment. The impact of this change on previously reported segment results was the reclassification of mortgage retail footprint total net contribution of $3.5 million from the Banking segment to the Mortgage segment for the three months ended March 31, 2020.
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.
42
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
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. The Mortgage segment utilizes funding sources from the Banking segment in order to fund mortgage loans that are ultimately sold on the secondary market. The Mortgage segment uses the proceeds from loan sales to repay obligations due to the Banking segment.
The following tables provide segment financial information for the years ended March 31, 2021 and 2020 as follows:
Three Months Ended March 31, 2021BankingMortgageConsolidated
Net interest income$82,597 $(21)$82,576 
Provisions for credit losses(1)
(13,854)— (13,854)
Mortgage banking income— 60,595 60,595 
Change in fair value of mortgage servicing rights, net of hedging(2)
— (5,263)(5,263)
Other noninterest income11,398 — 11,398 
Depreciation and amortization1,858 198 2,056 
Amortization of intangibles1,440 — 1,440 
Other noninterest expense52,437 38,765 91,202 
Income before income taxes$52,114 $16,348 $68,462 
Income tax expense15,588 
Net income applicable to FB Financial Corporation and noncontrolling
interest
$52,874 
Net income applicable to noncontrolling interest(3)
— 
Net income applicable to FB Financial Corporation$52,874 
Total assets$10,787,955 $1,147,871 $11,935,826 
Goodwill242,561 — 242,561 
(1)Included $2,222 in provision for credit losses on unfunded commitments.
(2)Included in mortgage banking income in the Company's consolidated statements of income.
(3)Banking segment includes noncontrolling interest.

Three Months Ended March 31, 2020BankingMortgageConsolidated
Net interest income$56,233 $16 $56,249 
Provisions for credit losses(1)
29,565 — 29,565 
Mortgage banking income— 38,613 38,613 
Change in fair value of mortgage servicing rights, net of hedging(2)
— (5,868)(5,868)
Other noninterest income9,955 — 9,955 
Depreciation and amortization1,492 120 1,612 
Amortization of intangibles1,203 — 1,203 
Other noninterest expense(3)
41,122 24,622 65,744 
Income before income taxes$(7,194)$8,019 $825 
Income tax expense80 
Net income applicable to FB Financial Corporation$745 
Total assets$6,122,217 $533,470 $6,655,687 
Goodwill174,859 — 174,859 
(1)Includes $1,601 in provision for credit losses on unfunded commitments.
(2)Included in mortgage banking income in the Company's consolidated statements of income.
(3)Includes $3,050 in merger costs in the Banking segment,
.
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, had a prime interest rate of 3.25% as of both March 31, 2021 and 2020, and 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 $5,400 and $2,375 for the three months ended March 31, 2021 and 2020, respectively.
43
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (13)—Minimum capital requirements:
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.
Under regulatory guidance for non-advanced approaches 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 March 31, 2021 and December 31, 2020, 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 maintains 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.
Actual and required capital amounts and ratios are included below as of the dates indicated.

 ActualMinimum Capital
adequacy with
capital buffer		To be well capitalized
under prompt corrective
action provisions
March 31, 2021AmountRatioAmountRatioAmountRatio
Total Capital (to risk-weighted assets)      
FB Financial Corporation$1,353,195 14.6 %$972,054 10.5 %N/AN/A
FirstBank1,316,420 14.2 %970,431 10.5 %$924,220 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation$1,138,657 12.3 %$786,901 8.5 %N/AN/A
FirstBank1,121,997 12.1 %785,587 8.5 %$739,376 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,138,657 10.1 %$450,971 4.0 %N/AN/A
FirstBank1,121,997 10.0 %450,889 4.0 %$563,611 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation$1,108,657 12.0 %$648,036 7.0 %N/AN/A
FirstBank1,121,997 12.1 %646,954 7.0 %$600,743 6.5 %
 ActualMinimum Capital
adequacy with
capital buffer		To be well capitalized
under prompt corrective
action provisions
December 31, 2020AmountRatioAmountRatioAmountRatio
Total Capital (to risk-weighted assets)      
FB Financial Corporation$1,358,897 15.0 %$952,736 10.5 %N/AN/A
FirstBank1,353,279 14.9 %951,327 10.5 %$906,026 10.0 %
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation$1,090,364 12.0 %$771,262 8.5 %N/AN/A
FirstBank1,142,548 12.6 %770,122 8.5 %$724,820 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,090,364 10.0 %$435,064 4.0 %N/AN/A
FirstBank1,142,548 10.5 %435,279 4.0 %$544,098 5.0 %
Common Equity Tier 1 Capital
(to risk-weighted assets)
FB Financial Corporation$1,060,364 11.7 %$635,157 7.0 %N/AN/A
FirstBank1,142,548 12.6 %634,218 7.0 %$588,917 6.5 %


44
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
Note (14)—Stock-Based Compensation

Restricted Stock Units
The Company grants restricted stock units under compensation arrangements for the benefit of employees, executive officers, and directors. Restricted stock unit 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 as of and for the three months ended March 31, 2021:
 
 Restricted Stock
Units
Outstanding		Weighted
Average Grant
Date
Fair Value
Balance at beginning of period1,047,071 $26.06 
Granted177,941 43.13 
Vested(126,011)34.63 
Forfeited(10,192)27.72 
Balance at end of period1,088,809 $26.56 

The total fair value of restricted stock units vested and released was $4,364 and $4,533 for the three months ended March 31, 2021 and 2020, respectively. The weighted average grant date fair value price was $43.13 and $36.71 for the three months ended March 31, 2021 and 2020, respectively.
The compensation cost related to stock grants and vesting of restricted stock units was $2,466 and $1,802 for the three months ended March 31, 2021 and 2020, respectively. This included $157 and $147 paid to Company independent directors during the three months ended March 31, 2021 and 2020, respectively, related to independent director grants and compensation elected to be settled in stock.
As of March 31, 2021 and December 31, 2020, there was $18,103 and $13,436 of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average period of 2.7 years and 2.5 years, respectively. As of March 31, 2021 and December 31, 2020, there were 2,188,164 and 2,240,434 shares available for issuance under the 2016-LTIP plan, respectively. At March 31, 2021 and December 31, 2020, there were $651 and $613, respectively, accrued in other liabilities related to dividends declared to be paid upon vesting and distribution of the underlying restricted stock units ("RSUs").
Performance Based Restricted Stock Units
The following table summarizes information about the changes in performance stock units as of and for the three months ended March 31, 2021:
Performance Stock
Units
Outstanding		Weighted
Average Grant
Date
Fair Value
Balance at beginning of period (unvested)53,147 36.21 
Granted65,131 43.20 
Vested— — 
Forfeited or expired(485)36.21 
Balance at end of period (unvested)117,793 39.20 
The Company awards performance-based restricted stock units ("PSUs") to executives and other officers and employees. Under the terms of the award, the number of units that will vest and convert to shares of common stock will be based on the extent to which the Company achieves specified performance criteria during the fixed three-year performance period. The number of shares issued upon vesting will range from 0% to 200% of the PSUs granted. The PSUs vest at the end of a three-year period based on average adjusted return on tangible equity as reported, 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 the PSUs will be estimated each period based on the fair value of the stock at the grant date
45
FB Financial Corporation and subsidiaries
Notes to consolidated financial statements
(Unaudited)
(Dollar amounts are in thousands, except share and per share amounts)
and the most probable outcome of the performance condition, adjusted for the passage of time within the vesting period of the awards.
The Company granted 65,131 shares of performance based restricted stock units during the three months ended March 31, 2021. The Company recorded compensation cost of $200 and $81 during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the Company determined the probability of meeting the performance criteria, and recorded compensation cost associated with a 150% vesting, when factoring in the conversion of PSUs to shares of common stock. During the three months ended March 31, 2021. there were 485 forfeitures related to these grants. As of March 31, 2021, maximum unrecognized compensation cost related to the unvested PSUs was $5,895, and the remaining performance period over which the cost could be recognized was 2.5 years.

Employee Stock Purchase Plan:
The Company maintains an employee stock purchase plan (“ESPP”) under which employees, through payroll deductions, are able to purchase shares of Company common stock. The purchase price is 95% of the lower of the market price on the first or last day of the offering period. The maximum number of shares issuable during any offering period is 200,000 shares and a participant may not purchase more than 725 shares during any offering period (and, in any event, no more than $25 worth of common stock in any calendar year). During the three months ended March 31, 2021 and 2020, there were 21,566 and 12,145 shares of common stock issued under the ESPP, respectively. As of March 31, 2021 and 2020, there were 2,357,440 and 2,397,040 shares available for issuance under the ESPP, respectively.
Note (15)—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, 2021$24,675 
New loans and advances901 
Change in related party status(98)
Repayments(2,724)
Loans outstanding at March 31, 2021$22,754 
 
Unfunded commitments to certain executive officers, certain management and directors and their associates totaled $20,267 and $23,059 at March 31, 2021 and December 31, 2020, respectively.
(B) Deposits:
The Bank held deposits from related parties totaling $221,015 and $245,084 as of March 31, 2021 and December 31, 2020, respectively.
(C) Leases:
The Bank leases various office spaces from entities owned by certain directors of the Company under varying terms. The Company had $45 and $53 in unamortized leasehold improvements related to these leases at March 31, 2021 and December 31, 2020, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled $128 for the three months ended March 31, 2021 and 2020, respectively.
(D) Aviation time sharing agreement:
The Company is a participant to aviation time sharing agreements with entities owned by a certain director of the Company. During the three months ended March 31, 2021 and 2020, the Company made payments of $11 and $33, respectively, under these agreements.

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ITEM 2 – Management’s discussion and analysis of financial condition and results of operations
The following is a discussion of our financial condition at March 31, 2021 and December 31, 2020, and our results of operations for the three months ended March 31, 2021 and 2020, 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, 2020, that was filed with the Securities and Exchange Commission (the "SEC") on March 12, 2021 (our "Annual Report"), and with the accompanying unaudited notes to the consolidated financial statements set forth in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 (this "Report").
Forward-looking statements
Certain statements contained in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, without limitation, statements regarding the projected impact of the COVID-19 global pandemic on our business operations, statements relating to the timing, benefits, costs, and synergies of the mergers with Franklin Financial Network, Inc. (“Franklin”) (the “Franklin merger”) and FNB Financial Corp. (“FNB”) (together with the Franklin merger, the “mergers”), and FB Financial’s future plans, results, strategies, and expectations. 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,” “projection,” and other variations of such words and phrases and similar expressions.
These forward-looking statements are not historical facts, and are based upon current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond FB Financial’s control. The inclusion of these forward-looking statements should not be regarded as a representation by FB Financial or any other person that such expectations, estimates, and projections will be achieved. Accordingly, FB Financial 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 supply-demand imbalances affecting local real estate prices, and high unemployment rates in the local or regional economies in which we operate and/or the US economy generally, (2) the effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and its impact on general economic and financial market conditions and on our business and our customers' business, results of operations, asset quality and financial condition, as well as the efficacy, distribution, and public adoption of vaccines, (3) changes in government interest rate policies and its impact on our business, net interest margin, and mortgage operations, (4) our ability to effectively manage problem credits, (5) the risk that the cost savings and any revenue synergies from the merger or another acquisition may not be realized or may take longer than anticipated to be realized, (6) the ability of FB Financial to effectively integrate and manage the larger and more complex operations of the combined company following the merger, (7) FB Financial’s ability to successfully execute its various business strategies, (8) the impact of the recent change in the U.S. presidential administration and Congress and any resulting impact on economic policy, capital markets, federal regulation, and the response to the COVD-19 pandemic, (9) the potential impact of the proposed phase-out of the London Interbank Offered Rate ("LIBOR") or other changes involving LIBOR (10) the effectiveness of our cyber security controls and procedures to prevent and mitigate attempted intrusions, (11) the Company's dependence on information technology systems of third party service providers and the risk of systems failures, interruptions, or breaches of security, and (12) general competitive, economic, political, and market conditions. Further information regarding FB Financial and factors which could affect the forward-looking statements contained herein can be found in FB Financial's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and in any of FB Financial's subsequent filings with the Securities and Exchange Commission (the “SEC”).Many of these factors are beyond FB Financial’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 release, and FB Financial 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 FB Financial to predict their occurrence or how they will affect the company. FB Financial qualifies all forward-looking statements by these cautionary statements.
47

Critical accounting policies
Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and general practices within the banking industry. Within our financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of any newly issued accounting standards, are discussed in further detail in Note 1, "Basis of presentation," in the notes to our consolidated financial statements in our Annual Report.
Selected historical consolidated financial data

The following table presents certain selected historical consolidated financial data as of the dates or for the periods indicated:
As of or for the three months endedAs of or for the year ended
March 31,December 31,
(dollars in thousands, except per share data and %)2021 2020 2020 
Statement of Income Data
Total interest income$94,785 $69,674 $314,644 
Total interest expense12,209 13,425 48,986 
Net interest income82,576 56,249 265,658 
Provisions for credit losses(13,854)29,565 107,967 
Total noninterest income66,730 42,700 301,855 
Total noninterest expense94,698 68,559 377,085 
Income before income taxes68,462 825 82,461 
Income tax expense15,588 80 18,832 
Net income applicable to noncontrolling interest— — 8 
Net income applicable to FB Financial Corporation52,874 745 63,621 
Net income$52,874 $745 $63,629 
Net interest income (tax—equivalent basis)$83,368 $56,784 $268,497 
Per Common Share
Basic net income$1.12 $0.02 $1.69 
Diluted net income1.10 0.02 1.67 
Book value (1)
28.08 24.40 27.35 
Tangible book value (4)
22.51 18.35 21.73 
Cash dividends declared0.11 0.09 0.36 
Selected Balance Sheet Data
Cash and cash equivalents$1,895,133 $425,094 $1,317,898 
Loans held for investment7,047,342 4,568,038 7,082,959 
Allowance for credit losses (5)
(157,954)(89,141)(170,389)
Loans held for sale1,009,762 325,304 899,173 
Investment securities, at fair value1,229,845 767,575 1,176,991 
Other real estate owned, net11,177 17,072 12,111 
Total assets11,935,826 6,655,687 11,207,330 
Customer deposits10,219,173 5,356,569 9,396,478 
Brokered and internet time deposits37,713 20,363 61,559 
Total deposits10,256,886 5,376,932 9,458,037 
Borrowings180,179 327,822 238,324 
Total common shareholders' equity1,329,103 782,330 1,291,289 
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As of or for the three months endedAs of or for the year ended
March 31,December 31,
(dollars in thousands, except per share data and %)2021 2020 2020 
Selected Ratios
Return on average:
Assets (2)
1.86 %0.05 %0.75 %
Shareholders' equity (2)
16.5 %0.39 %6.58 %
Tangible common equity (4)
20.6 %0.52 %8.54 %
Average shareholders' equity to average assets11.3 %12.0 %11.5 %
Net interest margin (tax-equivalent basis)3.19 %3.92 %3.46 %
Efficiency ratio63.4 %69.3 %66.4 %
Adjusted efficiency ratio (tax-equivalent basis) (4)
63.0 %65.7 %59.2 %
Loans held for investment to deposit ratio68.7 %85.0 %74.9 %
Yield on interest-earning assets3.66 %4.84 %4.09 %
Cost of interest-bearing liabilities0.65 %1.27 %0.94 %
Cost of total deposits0.41 %0.94 %0.62 %
Credit Quality Ratios
Allowance for credit losses to loans, net of unearned
income (5)
2.24 %1.95 %2.41 %
Allowance for credit losses to nonperforming loans (5)
238.5 %287.5 %264.3 %
Nonperforming loans to loans, net of unearned
income
0.94 %0.68 %0.91 %
Capital Ratios (Company)
Total common shareholders' equity to assets11.1 %11.8 %11.5 %
Tier 1 capital (to average assets)10.1 %10.3 %10.0 %
Tier 1 capital (to risk-weighted assets (3)
12.3 %11.6 %12.0 %
Total capital (to risk-weighted assets) (3)
14.6 %12.5 %15.0 %
Tangible common equity to tangible assets (4)
9.13 %9.11 %9.38 %
Common Equity Tier 1 (to risk-weighted assets)
(CET1) (3)
12.0 %11.0 %11.7 %
Capital Ratios (Bank)
Total common Shareholders' equity to assets11.3 %12.4 %12.3 %
Tier 1 capital (to average assets)10.0 %10.4 %10.5 %
Tier 1 capital (to risk-weighted assets) (3)
12.1 %11.7 %12.6 %
Total capital to (risk-weighted assets) (3)
14.2 %12.7 %14.9 %
Common Equity Tier 1 (to risk-weighted assets)
(CET1) (3)
12.1 %11.7 %12.6 %
(1)Book value per share equals our total 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 47,331,680, 32,067,356, and 47,220,743 as of March 31, 2021, March 31, 2020 and December 31, 2020, respectively.
(2)We have calculated our return on average assets and return on average equity for a period by dividing annualized net income 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 equity for a period by dividing the sum of our total asset balance or total stockholder’s 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) (“GAAP”), and are therefore considered to be non-GAAP financial measures. See “GAAP reconciliation and management explanation of non-GAAP financial measures” for a reconciliation of these measures to their most comparable GAAP measures.
(5)Excludes reserve for credit losses on unfunded commitments.
49

GAAP reconciliation and management explanation of non-GAAP financial measures
We identify certain financial measures discussed in this Report as being "non-GAAP financial measures." The non-GAAP financial measures presented in this Report are adjusted efficiency ratio (tax equivalent basis), tangible book value per common share, tangible common equity to tangible assets and return on average tangible 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 selected historical consolidated financial data 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 selected historical consolidated financial data 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), merger, and mortgage restructuring-related 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.
50

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:
Three Months Ended March 31,Year Ended December 31,
(dollars in thousands, except per share data)2021 2020 2020 
Adjusted efficiency ratio (tax-equivalent basis)
Total noninterest expense$94,698 $68,559 $377,085 
Less merger and conversion, and mortgage restructuring expenses — 3,050 34,879 
Less FHLB prepayment penalties— — 6,838 
Adjusted noninterest expense$94,698 $65,509 $335,368 
Net interest income (tax-equivalent basis)$83,368 $56,784 $268,497 
Total noninterest income66,730 42,700 301,855 
Less (loss) gain on change in fair value on commercial loans held
for sale
(853)— 3,228 
Gain from benefit of cash life insurance— — 715 
Less gain (loss) on sales of other real estate496 51 (1,491)
Less loss on other assets(11)(328)(90)
Less gain on securities83 63 1,631 
Adjusted noninterest income$67,015 $42,914 $297,862 
Adjusted operating revenue$150,383 $99,698 $566,359 
Efficiency ratio (GAAP)63.4 %69.3 %66.4 %
Adjusted efficiency ratio (tax-equivalent basis)63.0 %65.7 %59.2 %
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 shareholders' equity to total assets.
The following table presents, as of the dates set forth below, tangible common equity compared with total 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 shareholders' equity to total assets:
As of March 31,As of December 31,
(dollars in thousands, except share and per share data)2021 2020 2020 
Tangible Assets
Total assets$11,935,826 $6,655,687 $11,207,330 
Adjustments:
Goodwill(242,561)(174,859)(242,561)
Core deposit and other intangibles(20,986)(18,876)(22,426)
Tangible assets$11,672,279 $6,461,952 $10,942,343 
Tangible Common Equity
Total common shareholders' equity$1,329,103 $782,330 $1,291,289 
Adjustments:
Goodwill(242,561)(174,859)(242,561)
Core deposit and other intangibles(20,986)(18,876)(22,426)
Tangible common equity$1,065,556 $588,595 $1,026,302 
Common shares outstanding47,331,680 32,067,356 47,220,743 
Book value per common share$28.08 $24.40 $27.35 
Tangible book value per common share$22.51 $18.35 $21.73 
Total common shareholders' equity to total assets11.1 %11.8 %11.5 %
Tangible common equity to tangible assets9.13 %9.11 %9.38 %
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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 March 31,Year Ended December 31,
(dollars in thousands)2021 2020 2020 
Return on average tangible common equity
Total average common shareholders' equity$1,303,493 $768,929 $966,336 
Adjustments:
Average goodwill(242,561)(171,532)(199,104)
Average intangibles, net(21,695)(18,152)(22,659)
Average tangible common equity$1,039,237 $579,245 $744,573 
Net income applicable to FB Financial Corporation$52,874 $745 $63,621 
Return on average common shareholders' equity16.5 %0.39 %6.58 %
Return on average tangible common equity20.6 %0.52 %8.54 %

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, North Alabama, Southern Kentucky, and North Georgia. As of March 31, 2021, our footprint included 81 full-service branches serving the following Tennessee Metropolitan Statistical Areas (“MSAs”): Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, and Jackson in addition to Bowling Green, Kentucky and 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 in addition to a national internet delivery channel.
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, Federal Home Loan Bank (“FHLB”) advances, 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 that we originate through our retail and online ConsumerDirect channels, as well as from mortgage servicing revenues.
Pandemic Update
During 2020, the COVID-19 health pandemic created a crisis resulting in volatility in financial markets, sudden, unprecedented job losses, and disruption in consumer and commercial behavior, resulting in governments in the United States and globally to intervene with varying levels of direct monetary support and fiscal stimulus packages. All industries, municipalities and consumers have been impacted by the health crisis to some degree, including the markets that we serve. In attempts to “flatten the curve”, businesses not deemed essential were closed or constrained to capacity limitations, individuals were asked to restrict their movements, observe social distancing and shelter in place. These actions resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses, leading to a loss of revenues and a rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. As certain restrictions began lifting and more businesses were allowed to open their doors in late 2020, we began to experience a slow improvement in commerce through much of our footprint, which continued into the first quarter of 2021 with further easing of restrictions and increasing availability of vaccinations. Despite the pickup in economic activity, commercial and consumer activity has not returned to pre-pandemic levels. Although we are cautiously optimistic, the long term effects of the pandemic on the global economy, the markets we serve and our business are unknown.
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In response to the COVID-19 pandemic, the Company has taken several actions to offer various forms of support to our customers and communities impacted by the virus. In addition, the Company continues to take deliberate actions to ensure the continued health and strength of its balance sheet, including increases in liquidity and managing assets and liabilities in order to maintain a strong capital position.
Mergers and acquisitions
Franklin Financial Network, Inc.
On August 15, 2020, the Company completed its previously announced merger with Franklin Financial Network, Inc, and its wholly owned subsidiaries, with FB Financial Corporation continuing as the surviving entity. Under the terms of the agreement, the Company acquired total assets of $3.63 billion, loans of $2.79 billion and assumed total deposits of $3.12 billion. Total loans acquired included a non-strategic institutional portfolio with a fair value of $326.2 million the Company classified as held for sale. Franklin common shareholders received 15,058,181 shares of the Company's common stock, net of the equivalent value of 44,311 shares withheld on certain Franklin employee equity awards that vested upon change in control, as consideration in connection with the merger, in addition to $31.3 million in cash consideration. The Company also issued replacement restricted stock units to replace those initially granted by Franklin in 2020 that did not vest upon change in control, with a total fair value of $0.7 million attributed to pre-combination service. Based on the closing price of the Company's common stock on the New York Stock Exchange of $29.52 on August 15, 2020, the merger consideration represented approximately $477.8 million in aggregate consideration.
The merger resulted in goodwill of $67.2 million being recorded based on the fair value of total assets acquired and liabilities assumed in the transaction.
The transaction added a new subsidiary to the Company, FirstBank Risk Management ("FBRM"), which provides risk management services to the Company in the form of enhanced insurance coverages. It also added a new subsidiary to the Bank, FirstBank Investments of Tennessee, Inc. ("FBIT"), which provides investment services to the Bank. FBIT has a wholly owned subsidiary, FirstBank Investments of Nevada, Inc. ("FBIN") to provide investment services to FBIT. FBIN has a controlling interest in a subsidiary, FirstBank Preferred Capital, Inc. ("FBPC"), which serves as a real estate investment trust ("REIT"), to allow the Bank to sell real estate loans to the REIT to obtain a tax benefit.
FNB Financial Corp. merger
On February 14, 2020, the Company completed its previously announced acquisition of FNB Financial Corp. and its wholly owned subsidiary, Farmers National Bank of Scottsville (collectively, "Farmers National"). Following the acquisition, Farmers National was merged into the Company with FB Financial Corporation continuing as the surviving entity. The Company acquired total assets of $258.2 million, loans of $182.2 million and deposits of $209.5 million. The consideration is valued at approximately $50.0 million based on 954,797 shares of the Company's common stock (utilizing the Company's market price of $36.70 on February 14, 2020) and $15.0 million in cash consideration. The acquisition resulted in $6.3 million of goodwill.
Overview of recent financial performance
Results of operations
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Our net income increased during the three months ended March 31, 2021 to $52.9 million from $0.7 million for the three months ended March 31, 2020. Diluted earnings per common share was $1.10 and $0.02 for the three months ended March 31, 2021 and 2020, respectively. Our net income represented a return on average assets ("ROAA") of 1.86% and 0.05% for the three months ended March 31, 2021 and 2020, respectively, and a return on average equity ("ROAE") of 16.5% and 0.39% for the same periods. Our ratio of return on average tangible common equity ("ROATCE") for the three months ended March 31, 2021 and 2020 was 20.6% and 0.52%, respectively.
These results were significantly impacted by the improvement in economic forecasts incorporated in our current expected credit losses ("CECL") loss rate model, leading to a reversal in our provisions for credit losses and unfunded commitments amounting to $13.9 million for the three months ended March 31, 2021 compared with a provision of $29.6 million for the three months ended March 31, 2020. Our results were also impacted by our acquisition of Farmers National during the three months ended March 31, 2020, resulting in merger expenses of $3.1 million during the first quarter of 2020. There were no business combinations during the three months ended March 31, 2021.

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During the three months ended March 31, 2021, net interest income before provisions for credit losses increased to $82.6 million compared with $56.2 million in the three months ended March 31, 2020. Our net interest margin, on a tax-equivalent basis, decreased to 3.19% for the three months ended March 31, 2021 as compared to 3.92% for the three months ended March 31, 2020, influenced by sustained historically low interest rates during the current period.
Noninterest income for the three months ended March 31, 2021 increased by $24.0 million to $66.7 million, up from $42.7 million for prior year period. The increase in noninterest income was primarily driven by an increase in mortgage banking income of $22.6 million to $55.3 million.
Noninterest expense increased to $94.7 million for the three months ended March 31, 2021, compared with $68.6 million for the three months ended March 31, 2020. The increase in noninterest expense is reflective of the increase in mortgage commissions stemming from elevated business activity, as well as the impact of our acquisitions, including increases in salaries, commissions and personnel-related costs from the incremental head count.
Financial condition
Our total assets grew by 6.5% to $11.94 billion as of March 31, 2021, as compared to $11.21 billion as of December 31, 2020. This increase reflects increased liquidity in the form of cash and cash equivalents of $577.2 million to $1.90 billion as of March 31, 2021 from $1.32 billion as of December 31, 2020, in addition to an increase of $110.6 million in loans held for sale to $1.01 billion at March 31, 2021, compared to $0.90 billion at December 31, 2020.
We grew total deposits by $0.80 billion to $10.26 billion at March 31, 2021, compared to $9.46 billion at December 31, 2020.
Business segment highlights
We operate our business in two business segments: Banking and Mortgage. During the three months ended March 31, 2021, the Company re-evaluated its business segments and revised to align all mortgage activities with the Mortgage segment. Previously, the Company had attributed retail mortgage activities originating from geographical locations within the footprint of the Company's branches to the Banking segment. Previously disclosed results for the three months ended March 31, 2020 have been revised to reflect this realignment. See Note 12, “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 increased in the three months ended March 31, 2021 to $52.1 million, compared to a loss of $7.2 million for the three months ended March 31, 2020. These results were primarily driven by increases in net interest income of $26.4 million to $82.6 million during the three months ended March 31, 2021 compared to $56.2 million during the three months ended March 31, 2020. Our provisions for credit losses on loans held for investment and unfunded loan commitments resulted in a reversal of $13.9 million of provision during the three months ended March 31, 2021 compared to expense of $29.6 million in the previous year. Noninterest income increased to $11.4 million in the three months ended March 31, 2021 as compared to $10.0 million in the three months ended March 31, 2020. Noninterest expense increased $11.9 million to $55.7 million for three months ended March 31, 2021, primarily due to our overall growth, including increased salaries, commissions and employee benefits expenses associated with incremental headcount following our acquisitions.
Mortgage
Income before taxes from the Mortgage segment increased to $16.3 million for the three months ended March 31, 2021 as compared to $8.0 million for the three months ended March 31, 2020 primarily due to increased gains on origination and sale of mortgage loans held for sale driven by an increase in sales margin during the three months ended March 31, 2021 when compared to the same period in the prior year. This contributed to an overall increase in mortgage banking income of $22.6 million to $55.3 million during the three months ended March 31, 2021 compared to $32.7 million for the three months ended March 31, 2020. Further discussion on the components of mortgage banking income is included under the subheading 'Noninterest income' included in this management's discussion and analysis.
Noninterest expense for the three months ended March 31, 2021 and 2020 was $39.0 million and $24.7 million, respectively. This increase during the three months ended March 31, 2021 is mainly attributable to the increase in business activity and the result of a conducive interest rate environment for refinancing during the period, which led to an increases in related commissions and incentives expenses.
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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 months ended March 31, 2021 and 2020.
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 income 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.
In response to economic uncertainty related to the COVID-19 pandemic, short term interest rates have been at historic lows. The Federal Funds Target Rate range was 0% - 0.25% as of March 31, 2020 and maintained this rate as of March 31, 2021. According to the Chair of the Board of Governors of the Federal Reserve, the Federal Funds Target Rate is not likely to drop below this range. However, the Federal Reserve does have other tools available that it can employ and has expressed an intention to do so in order to maintain a targeted level of liquidity. Furthermore, the Federal Reserve has indicated it is committed to a target 0% - 0.25% range for Federal Funds through at least 2023. Additionally, the Federal Reserve maintained their commitment to open-ended purchases of Treasury securities and agency mortgage-backed securities. During the last half of 2020, the US Treasury yield curve steepened as long-term rates rose. As a result of the spread of COVID-19, economic uncertainties arose in the first quarter of 2020, which persisted into early 2021, negatively impacting net interest income. The potential impact of these conditions, if sustained, are unknown at this time.
Three months ended March 31, 2021 compared to three months ended March 31, 2020
On a tax-equivalent basis, net interest income increased $26.6 million to $83.4 million in the three months ended March 31, 2021 as compared to $56.8 million in the three months ended March 31, 2020. The increase in tax-equivalent net interest income in the three months ended March 31, 2021 was primarily driven by an increase in volume of loans held for investment as a result of the Franklin merger, coupled with a decrease in overall cost of deposits.
Interest income, on a tax-equivalent basis, was $95.6 million for the three months ended March 31, 2021, compared to $70.2 million for the three months ended March 31, 2020, an increase of $25.4 million. Interest income on loans held for investment, on a tax-equivalent basis, increased $21.3 million to $83.1 million for the three months ended March 31, 2021 from $61.8 million for the three months ended March 31, 2020 primarily due to increased loan volume driven by growth in average loan balances of $2.51 billion. The growth in average loan balance reflects the addition of $2.43 billion in loans acquired in the Franklin merger in August of 2020. In addition, Paycheck Protection Plan ("PPP) loans contributed $172.1 million to the increase in average total loans held for investment.                 
The tax-equivalent yield on loans held for investment was 4.81%, down 72 basis points from the three months ended March 31, 2020. The decrease in yield was primarily due to the lower interest rate environment and was also impacted by lower-yielding PPP loans originated during the period. Contractual loan interest rates yielded 4.39% in the three months ended March 31, 2021 compared with 5.14% in the three months ended March 31, 2020. PPP loans contribute 9 basis points of this decline in contractual loan yield.
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The components of our loan yield, a key driver to our net interest margin ("NIM") for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
2021 2020 
(dollars in thousands)Interest
income		Average
yield		Interest
income		Average
yield
Loan yield components:
Contractual interest rate on loans held for
investment (1)(2)
$75,828 4.39 %$57,382 5.14 %
Origination and other loan fee income (2)
6,640 0.38 %2,589 0.23 %
Accretion on purchased loans(58)— %1,578 0.14 %
Nonaccrual interest collections657 0.04 %268 0.02 %
Total loan yield$83,067 4.81 %$61,817 5.53 %
(1)Includes tax-equivalent adjustment.
(2)Includes $0.4 million of loan contractual interest and $1.60 million of loan fees related to PPP loans for the three months ended March 31, 2021.
Accretion on purchased loans contributed 0 and 11 basis points to the NIM for the three months ended March 31, 2021 and 2020, respectively. The decrease in accretion is due in part to the continued impact of purchase accounting resulting from our merger with Franklin, which after grossing up the amortized cost of purchased credit deteriorated loans, contributed a net premium of $11.3 million recorded as of August 15, 2020, to be amortized as a reduction to loan interest income. Contractual interest and origination fees on PPP loans attributed 8 basis points to the NIM for the three months ended March 31, 2021. We anticipate recognizing an estimated $1.4 million in remaining deferred origination fees, net of third party costs and deferred salaries, over the remaining life of the PPP loan portfolio.
Overall, our NIM, on a tax-equivalent basis, decreased to 3.19% during the three months ended March 31, 2021 from 3.92% in the three months ended March 31, 2020, driven by the lower interest rate environment and change in balance sheet mix, partially attributable to our acquisition of Franklin and impact of excess liquidity carried on our balance sheet.
Interest expense was $12.2 million for the three months ended March 31, 2021, a decrease of $1.2 million as compared to the three months ended March 31, 2020. The primary driver was the impact of the decrease in interest rates on deposits, resulting in total deposit interest expense decrease of $2.3 million to $9.8 million for the three months ended March 31, 2021, compared to $12.2 million for the three months ended March 31, 2020. The decrease was largely attributed to customer time deposits, which decreased to $3.0 million for the three months ended March 31, 2021 from $5.8 million for the three months ended March 31, 2020. The decrease in interest expense on customer time deposits was primarily driven by decreased interest rates as the average rate on customer time deposits decreased 105 basis points from 1.95% for the three months ended March 31, 2020 to 0.90% for the three months ended March 31, 2021. Total cost of deposits was 0.41% for the three months ended March 31, 2021 compared to 0.94% for the three months ended March 31, 2020. The decrease in interest expense from customer deposits was partially offset by an increase in interest expense on subordinated debt of $2.0 million associated with the increase in volume from our $100.0 million subordinated note offering and additional subordinated notes acquired from Franklin.
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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 March 31,
2021 2020 
(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)
$7,000,416 $83,067 4.81 %$4,495,069 $61,817 5.53 %
Loans held for sale-mortgage648,054 4,290 2.68 %214,150 1,990 3.74 %
Loans held for sale-commercial197,820 2,157 4.42 %— — — %
Securities:
Taxable830,686 2,819 1.38 %512,774 3,056 2.40 %
Tax-exempt (4)
334,303 2,646 3.21 %197,961 1,915 3.89 %
Total Securities (4)
1,164,989 5,465 1.90 %710,735 4,971 2.81 %
Federal funds sold133,813 20 0.06 %107,489 245 0.92 %
Interest-bearing deposits with other
financial institutions
1,427,184 421 0.12 %287,499 1,082 1.51 %
FHLB stock31,461 157 2.02 %16,226 104 2.58 %
Total interest earning assets (4)
10,603,737 95,577 3.66 %5,831,168 70,209 4.84 %
Noninterest Earning Assets:
Cash and due from banks172,756 64,438 
Allowance for credit losses(171,380)(63,034)
Other assets (3)
903,670 576,845 
Total noninterest earning assets905,046 578,249 
Total assets$11,508,783 $6,409,417 
Interest-bearing liabilities:
Interest bearing deposits:
Interest bearing checking$2,746,355 $3,018 0.45 %$1,085,849 $2,179 0.81 %
Money market deposits(7)
2,917,856 3,615 0.50 %1,383,229 3,971 1.15 %
Savings deposits369,600 53 0.06 %233,807 79 0.14 %
Customer time deposits(7)
1,365,570 3,036 0.90 %1,205,385 5,843 1.95 %
Brokered and internet time deposits(7)
49,764 104 0.85 %20,355 96 1.90 %
Time deposits1,415,334 3,140 0.90 %1,225,740 5,939 1.95 %
Total interest bearing deposits7,449,145 9,826 0.53 %3,928,625 12,168 1.25 %
Other interest-bearing liabilities:
Securities sold under agreements to
repurchase and federal funds
purchased
31,342 36 0.47 %26,961 57 0.85 %
Federal Home Loan Bank advances— — — %250,000 714 1.15 %
Subordinated debt(6)
188,996 2,341 5.02 %30,930 421 5.47 %
Other borrowings 5,924 6 0.41 %7,747 65 3.37 %
Total other interest-bearing
 liabilities
226,262 2,383 4.27 %315,638 1,257 1.60 %
Total interest-bearing liabilities7,675,407 12,209 0.65 %4,244,263 13,425 1.27 %
Noninterest bearing liabilities:
Demand deposits2,348,814 1,284,331 
Other liabilities180,976 111,894 
Total noninterest-bearing liabilities2,529,790 1,396,225 
Total liabilities10,205,197 5,640,488 
FB Financial Corporation common shareholders'
equity
1,303,493 768,929 
Noncontrolling interest93 — 
Shareholders' equity1,303,586 768,929 
Total liabilities and shareholders'
equity
$11,508,783 $6,409,417 
Net interest income (tax-equivalent
basis)
$83,368 $56,784 
Interest rate spread (tax-equivalent
basis)
3.01 %3.57 %
Net interest margin (tax-equivalent
basis) (5)
3.19 %3.92 %
Cost of total deposits0.41 %0.94 %
Average interest-earning assets to
average interest-bearing liabilities
138.2 %137.4 %
(1)Calculated using daily averages.
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(2)Average balances of nonaccrual loans are included in average loan balances. Loan fees of $6.6 million and $2.6 million, net (amortization) accretion of $(0.1) million and $1.6 million, and nonaccrual interest collections of $0.7 million and $0.3 million are included in interest income for the three months ended March 31, 2021 and 2020, respectively.
(3)Includes investments in premises and equipment, other real estate owned, 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. The net taxable-equivalent adjustment amounts included in the above table were $0.8 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.
(5)The NIM is calculated by dividing annualized net interest income, on a tax-equivalent basis, by average total earning assets.
(6)Includes $0.3 million of accretion on subordinated debt fair value mark for the three months ended March 31, 2021.
(7)Includes $0.9 million of interest rate premium accretion on money market deposits, $0.8 million on customer time deposits and $0.2 million on brokered and internet deposits for the three months ended March 31, 2021. Amounts in the prior year were not meaningful.

Rate/volume analysis
The tables below present the components of the changes in net interest income for the three months ended March 31, 2021 and 2020. 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 March 31, 2021 compared to Three Months Ended March 31, 2020
Three Months Ended March 31, 2021 compared to Three Months Ended March 31, 2020 due to changes in
(dollars in thousands on a tax-equivalent basis)VolumeRateNet increase
(decrease)
Interest-earning assets:
Loans(1)
$29,728 $(8,478)$21,250 
Loans held for sale - residential2,872 (572)2,300 
Loans held for sale - commercial2,157 — 2,157 
Securities available for sale and other securities:
Taxable1,079 (1,316)(237)
Tax Exempt(2)
1,079 (348)731 
Federal funds sold and balances at Federal Reserve Bank4 (229)(225)
Time deposits in other financial institutions336 (997)(661)
FHLB stock76 (23)53 
Total interest income(2)
$37,332 $(11,964)$25,368 
Interest-bearing liabilities:
Interest bearing checking1,825 (986)839 
Money market deposits(4)
1,901 (2,257)(356)
Savings deposits19 (45)(26)
Customer time deposits(4)
356 (3,163)(2,807)
Brokered and internet time deposits(4)
61 (53)8 
Securities sold under agreements to repurchase and federal funds purchased5 (26)(21)
Federal Home Loan Bank advances— (714)(714)
Subordinated debt(3)
1,958 (38)1,920 
Other borrowings(2)(57)(59)
Total interest expense$6,123 $(7,339)$(1,216)
Change in net interest income(2)
$31,209 $(4,625)$26,584 
(1) Average loans are gross, including nonaccrual loans and overdrafts (before deduction of allowance for loan losses). Loan fees of $6.6 million and $2.6 million, (amortization) accretion of $(0.1) million and $1.6 million, and nonaccrual interest collections of $0.7 million and $0.3 million, are included in interest income for the three months ended March 31, 2021 and 2020, 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 $0.3 million of accretion on subordinated debt fair value mark for the three months ended March 31, 2021.
(4) Includes $0.9 million of interest rate premium accretion on money market deposits, $0.8 million on customer time deposits and $0.2 million on brokered and internet deposits for the three months ended March 31, 2021. Amounts in the prior year were not meaningful.

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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 ("ACL") at an appropriate level under the current expected credit loss model. The (recovery of) provision for credit losses recorded represents the amount needed to maintain the appropriate level of the allowance for credit losses based on management’s quarterly estimates.
Three months ended March 31, 2021 compared to three months ended March 31, 2020
We recognized a reversal of provision for credit losses on loans held for investment for the three months ended March 31, 2021 of $11.6 million as compared to a expense of $28.0 million for the three months ended March 31, 2020. The reversal in total provision for credit losses was primarily the result of improving economic forecasts allowing for a reduction of our reserves. Although the portfolio benefited from improving economic forecasts in the first quarter of 2021, there is much uncertainty surrounding the impact of the COVID-19 pandemic, which may continue to lead to increased volatility in forecasted macroeconomic variables, a key input to our calculated level of allowance for credit losses.
The Company estimates 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, 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. As such, the Company recorded a release to the provision for credit losses on unfunded commitments of $2.2 million for the three months ended March 31, 2021 compared to a provision of $1.6 million for the three months ended March 31, 2020.
As of March 31, 2021 and 2020, we 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 March 31, 2021 or 2020.

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 March 31,
(dollars in thousands)2021 2020 
Mortgage banking income$55,332 $32,745 
Service charges on deposit accounts2,339 2,563 
ATM and interchange fees4,341 3,134 
Investment services and trust income2,008 1,697 
Gain from securities, net83 63 
Gain on sales or write-downs of other real estate owned496 51 
Loss from other assets(11)(328)
Other2,142 2,775 
Total noninterest income$66,730 $42,700 

Three months ended March 31, 2021 compared to three months ended March 31, 2020
Noninterest income amounted to $66.7 million for the three months ended March 31, 2021, an increase of $24.0 million, or 56.3%, as compared to $42.7 million for the three months ended March 31, 2020. 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
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change in fair value of mortgage servicing rights ("MSRs") and related derivatives. Mortgage banking income is initially driven by the recognition of interest rate lock commitments (IRLCs) 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 $55.3 million and $32.7 million for the three months ended March 31, 2021 and 2020, respectively, representing a 69.0% increase year-over-year.
During the three months ended March 31, 2021, our mortgage operations had sales of $1.57 billion which generated a gain on sales margin of 3.68%. This compares to $1.04 billion and 2.92% for the three months ended March 31, 2020. The increase in gain on sales margin is a result of productive market conditions. The industry benefited greatly from declining interest rates in 2020, causing a sharp increase in interest rate lock commitment volume, which slowed in 2021 with higher interest rates. Mortgage banking income from gains on sale and related fair value changes increased to $53.7 million during the three months ended March 31, 2021 compared to $33.6 million for the three months ended March 31, 2020. Total interest rate lock volume decreased $204.7 million, or 9.8%, during the three months ended March 31, 2021 compared to the previous year. The volume mix of refinances and purchases also shifted during three months ended March 31, 2021 to 66.4% refinance volume compared with 78.5% during the same period in the previous year.
Our mortgage banking business is directly impacted by the interest rate environment, regulatory environment, consumer demand, economic conditions, and investor demand for mortgage securities. Mortgage production, especially refinance activity, declines in rising interest rate environments. While mortgage production volume began to decline in the first quarter of 2021, this is expected to persist throughout 2021 as interest rates rise, which could materially and adversely impact the profitability of our mortgage business.
Income from mortgage servicing of $6.9 million and $5.0 million for three months ended March 31, 2021 and 2020, respectively, was offset by declines in fair value of MSRs and related hedging activity of $5.3 million and $5.9 million in the three months ended March 31, 2021 and 2020, respectively.
The components of mortgage banking income for the three months ended March 31, 2021 and 2020 were as follows:
Three Months Ended March 31,
(dollars in thousands)2021 2020 
Mortgage banking income:  
Origination and sales of mortgage loans$57,893 $30,390 
Net change in fair value of loans held for sale and derivatives(4,229)3,205 
Change in fair value on MSRs (5,263)(5,868)
Mortgage servicing income6,931 5,018 
Total mortgage banking income$55,332 $32,745 
Interest rate lock commitment volume by line of business:
Consumer direct$949,187 $1,314,625 
Retail939,863 779,155 
Total$1,889,050 $2,093,780 
Interest rate lock commitment volume by purpose (%):
Purchase33.6 %21.5 %
Refinance66.4 %78.5 %
Mortgage sales$1,572,070 $1,041,476 
Mortgage sale margin3.68 %2.92 %
Closing volume$1,757,932 $1,097,672 
Outstanding principal balance of mortgage loans serviced$10,113,716 $7,048,917 

Income from ATM and interchange fees includes debit card interchange, ATM and other consumer fees. These fees increased $1.2 million to $4.3 million during the three months ended March 31, 2021 as compared to $3.1 million for the three months ended March 31, 2020. This increase is attributable to our growth in deposits and increased volume of transactions, which is partially attributed to our acquisitions completed in 2020. Though we have not experienced a decline yet, if our asset size remains over $10 billion in the second half of 2021, our ATM interchange fee income is expected to decline as a result of the Durbin amendment, which limits interchange fees banking institutions with asset sizes greater than $10 billion are permitted to charge.
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Other noninterest income for the three months ended March 31, 2021 decreased $0.6 million to $2.1 million as compared to other noninterest income of $2.8 million for three months ended March 31, 2020. This decrease reflects a loss on commercial loans held for sale acquired from Franklin of $0.9 million related to changes in fair value for the three months ended March 31, 2021.
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 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 March 31,
(dollars in thousands)2021 2020 
Salaries, commissions and employee benefits$64,571 $43,622 
Occupancy and equipment expense5,849 4,178 
Legal and professional fees2,434 1,558 
Data processing 2,319 2,453 
Merger costs— 3,050 
Amortization of core deposit and other intangibles1,440 1,203 
Advertising2,253 2,389 
Other expense15,832 10,106 
Total noninterest expense$94,698 $68,559 

Three months ended March 31, 2021 compared to three months ended March 31, 2020
Noninterest expense increased by $26.1 million during the three months ended March 31, 2021 to $94.7 million as compared to $68.6 million in the three months ended March 31, 2020. 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 68.2% and 63.6% of total noninterest expense in the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, salaries and employee benefits expense increased $20.9 million, or 48.0%, to $64.6 million as compared to $43.6 million for the three months ended March 31, 2020. Included in the $20.9 million increase was an increase of $5.4 million in commissions, $4.0 million in accrued bonuses and $8.3 million employee salaries. These increases were mainly driven by our increase in headcount as a result of our mergers in addition to increased mortgage activity. Our full-time equivalent ("FTE") employees increased to 1,882 as of March 31, 2021 from 1,475 as of March 31, 2020. Also included in total salaries, commissions and employee benefits expense was an increase of $1.7 million in payroll taxes resulting from the increase in FTE's previously discussed.
Costs resulting from our equity compensation grants during the three months ended March 31, 2021 and 2020 amounted to $2.7 million and $1.9 million, respectively. These grants comprise restricted stock units granted to all new full-time associates each year in addition to annual performance grants, employment agreement grants and grants resulting from acquisition. Additionally, during 2020 we began granting performance-based stock units, which resulted in $0.2 million and $0.1 million in expense during the three months ended March 31, 2021 and 2020, respectively.
Occupancy and equipment expense increased $1.7 million to $5.8 million during the three months ended March 31, 2021 as compared to $4.2 million in the three months ended March 31, 2020. This increase is related to increased leased property and maintenance costs which increased as a result of our merger activity and additional locations.
Merger costs amounted to $3.1 million for the three months ended March 31, 2020 related to our acquisition of Farmers National, which closed February 14, 2020. There was no such merger activity in the first quarter of 2021.
Other noninterest expense primarily includes mortgage servicing expenses, regulatory fees and deposit insurance assessments, software license and maintenance fees and various other miscellaneous expenses. Other noninterest expense increased $5.7 million during the three months ended March 31, 2021 to $15.8 million compared to $10.1 million
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during the three months ended March 31, 2020. The increase reflects a $1.1 million increase in mortgage servicing expenses, increased regulatory and other costs associated with our growth, including the impact of our acquisitions.
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 63.4% and 69.3% for the three months ended March 31, 2021 and 2020, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 63.0% and 65.7% for the three months ended March 31, 2021 and 2020, respectively. See “GAAP reconciliation and management explanation of non-GAAP financial measures” in this Report for a discussion of the adjusted efficiency ratio.
Return on equity and assets
The following table sets forth our ROAA, ROAE, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:
Three Months Ended March 31,Year ended
December 31,
2021 2020 2020 
Return on average total assets1.86 %0.05 %0.75 %
Return on average shareholders' equity16.5 %0.39 %6.58 %
Dividend payout ratio10.0 %384.7 %22.8 %
Average shareholders’ equity to average assets11.3 %12.0 %11.5 %

As previously discussed, during the three months ended March 31, 2021, we recognized a reversal in our provisions for credit losses of $13.9 million, which contributed to an improvement in return on average total assets of 1.86% for the three months ended March 31, 2021. This compares to provisions for credit losses of $29.6 million for the three months ended March 31, 2020 as a result of the onset of COVID-19 and impact on the macroeconomic forecasts included in our CECL model, which resulted in a return on average assets of 0.05%. Our return on average shareholders’ equity was 16.5% for the three months ended March 31, 2021, as compared to 0.39% for the three months ended March 31, 2020.
Income taxes
We recorded an income tax expense of $15.6 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively. This represents effective tax rates of 22.77% and 9.70% for the three months ended March 31, 2021 and 2020, respectively. The primary differences from the enacted rates are applicable state income taxes reduced for non-taxable income and tax credits, and additional deductions for equity-based compensation upon the distribution of restricted stock units. The effective tax rate was unusually low for the three months ended March 31, 2020 as these items represented a much larger portion of pre-tax income than what we have experienced in other quarters.
We are subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation of certain individuals. The restricted stock unit plans that existed prior to coming a public company will have payments in 2021 after the reliance period defined in the Section 162 regulations. Under the limitations of IRC Section 162(m), we will not be able to realize the deferred tax asset established on certain restricted stock units granted to these covered individuals. Therefore, a valuation allowance was established in the first quarter of 2021 related to our inability to take the benefit of the exercise of the restricted stock units. It is our policy to apply the IRC Section 162(m) limitations to stock based compensation first; therefore, the first quarter 2021 nondeductible IRC Section 162(m) expense was related to cash compensation and expense on the exercised restricted stock units that were above the limit as defined in IRC Section 162(m).

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Financial condition
The following discussion of our financial condition compares balances as of March 31, 2021 with December 31, 2020.
Total assets
Our total assets were $11.94 billion at March 31, 2021, compared to total assets of $11.21 billion as of December 31, 2020. This increase included increased levels of liquidity as we held cash and cash equivalents of $1.90 billion at March 31, 2021, an increase of $0.58 billion from $1.32 billion as of December 31, 2020. Also included in the change from December 31, 2020 was an increase of $151.0 million in mortgage loans held for sale.
Loan portfolio
Our loan portfolio is our most significant earning asset, comprising 59.0% and 63.2% of our total assets as of March 31, 2021 and December 31, 2020, 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 rather than purchasing loan syndications and loan participations from other banks (collectively, “participated loans”). At March 31, 2021 and December 31, 2020, loans held for investment included approximately $202.5 million and $206.8 million, respectively, related to purchased participation loans. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.
Loans by type
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:
As of March 31,As of December 31,
 2021 2020 
(dollars in thousands)Amount% of
total		Amount% of
total
Loan Type:    
Commercial and industrial (1)

$1,292,530 18 %$1,346,122 19 %
Construction1,120,585 16 %1,222,220 17 %
Residential real estate:
1-to-4 family1,078,618 15 %1,089,270 15 %
Line of credit394,510 6 %408,211 6 %
Multi-family271,839 4 %175,676 2 %
Commercial real estate:
Owner-Occupied936,473 13 %924,841 13 %
Non-Owner Occupied1,652,638 24 %1,598,979 23 %
Consumer and other300,149 4 %317,640 5 %
Total loans$7,047,342 100 %$7,082,959 100 %
(1)Includes $145.7 million and $212.6 million of loans originated as part of the PPP as of March 31, 2021 and December 31, 2020, respectively.
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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. At March 31, 2021 and December 31, 2020, 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. While most industries have and are expected to continue to experience adverse impacts as a result of COVID–19, certain industries present more risk than others. The following presents industry loan categories considered to be “of concern” in relation to our total portfolio as of March 31, 2021 and December 31, 2020.
Approximate % of
total loans
IndustryDescription of componentsMarch 31, 2021December 31, 2020
Retail lendingIncludes non-owner occupied CRE, automobile, recreational vehicle and boat dealers, gas stations and convenience stores, pharmacies and drug stores, and sporting goods.8.9 %8.7 %
HealthcareIncludes assisted living, nursing and continuing care, medical practices, social assistance, mental health and substance abuse centers.4.5 %4.9 %
HotelVast majority of hotel exposure is built around long-term successful hotel operators and strong flags located within our banking footprint. 4.8 %4.9 %
Other leisureIncludes marinas, recreational vehicle parks and campgrounds, fitness and recreational sports centers, sports teams and clubs, historical sites, and theaters.1.7 %1.7 %
TransportationIncludes trucking exposure made up of truckload operators, equipment lessors to owner/operators, and local franchisees of major national trucking companies. Also includes air travel (no commercial airlines) and support and to a lesser extent, consumer charter and transportation and warehousing.1.6 %1.6 %
RestaurantsMajority made up of full service restaurants with no major concentration by operator or brand. Also includes limited service restaurants and bars.2.3 %2.0 %
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.
The table below shows concentration ratios for the Bank and Company as of March 31, 2021 and December 31, 2020, which both were within the stated thresholds.
As a percentage (%) of tier 1 capital plus allowance for credit losses
FirstBankFB Financial Corporation
March 31, 2021
Construction87.5 %86.4 %
Commercial real estate239.2 %236.1 %
December 31, 2020
Construction93.1 %96.9 %
Commercial real estate228.3 %237.7 %
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Loan categories
The principal categories of our loans held for investment portfolio are discussed below:
Commercial and industrial loans.    We provide a mix of variable and fixed rate commercial and industrial loans. Our commercial and industrial loans are typically made to small and medium-sized manufacturing, wholesale, retail and service businesses for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations. This category also includes loans secured by manufactured housing receivables. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. This category also includes the loans we originated as part of the PPP, established by the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The PPP is administered by the SBA, and loans we originated as part of the PPP may be forgiven by the SBA under a set of defined rules. These federally guaranteed loans were intended to provide up to 24 weeks of payroll and other operating costs as a source of aid to small- and medium-sized businesses. 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. Excluding PPP loans totaling $145.7 million and $212.6 million as of March 31, 2021 and December 31, 2020, respectively, our commercial and industrial loans comprised $1.15 billion, or 17% and $1.13 billion, or 16%, respectively, of our loans held for investment.
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.
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.
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
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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.
Consumer and other loans.    Consumer and other loans include consumer loans made to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans and personal lines of credit. Consumer loans are generally secured by vehicles and other household goods. The collateral securing consumer loans may depreciate over time. The company seeks to minimize these risks through its underwriting standards. 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 tables present the contractual maturities of our loan portfolio as of March 31, 2021 and December 31, 2020. 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. As of March 31, 2021 and December 31, 2020, the Company had $22.2 million and $22.4 million, respectively, in fixed-rate loans in which the Company has entered into variable rate swap contracts.
 
Loan type (dollars in thousands)Maturing in one
year or less		Maturing in one
to five years		Maturing after
five years		Total
As of March 31, 2021    
Commercial and industrial$451,452 $680,665 $160,413 $1,292,530 
Commercial real estate:
Owner occupied124,430 474,253 337,790 936,473 
Non-owner occupied179,626 743,939 729,073 1,652,638 
Residential real estate:
1-to-4 family298,935 312,121 467,562 1,078,618 
Line of credit168,863 50,351 175,296 394,510 
Multi-family10,499 153,954 107,386 271,839 
Construction583,083 387,573 149,929 1,120,585 
Consumer and other27,728 73,459 198,962 300,149 
Total ($)$1,844,616 $2,876,315 $2,326,411 $7,047,342 
Total (%)26.2 %40.8 %33.0 %100.0 %
Loan type (dollars in thousands)Maturing in one
year or less		Maturing in one
to five years		Maturing after
five years		Total
As of December 31, 2020    
Commercial and industrial$225,384 $955,847 $164,891 $1,346,122 
Commercial real estate:
Owner occupied114,993 453,426 356,422 924,841 
Non-owner occupied134,846 770,849 693,284 1,598,979 
Residential real estate:
1-to-4 family78,600 361,804 648,866 1,089,270 
Line of credit27,970 82,084 298,157 408,211 
Multi-family6,291 74,139 95,246 175,676 
Construction613,153 384,124 224,943 1,222,220 
Consumer and other29,051 77,398 211,191 317,640 
Total ($)$1,230,288 $3,159,671 $2,693,000 $7,082,959 
Total (%)17.4 %44.6 %38.0 %100.0 %
 

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For loans due after one year or more, the following tables present the sensitivities to changes in interest rates as of March 31, 2021 and December 31, 2020.
Loan type (dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of March 31, 2021   
Commercial and industrial$497,372 $343,706 $841,078 
Commercial real estate:
Owner occupied529,531 282,512 812,043 
Non-owner occupied622,257 850,755 1,473,012 
Residential real estate:
1-to-4 family626,189 153,494 779,683 
Line of credit2,384 223,263 225,647 
Multi-family96,131 165,209 261,340 
Construction150,546 386,956 537,502 
Consumer and other252,404 20,017 272,421 
Total ($)$2,776,814 $2,425,912 $5,202,726 
Total (%)53.4 %46.6 %100.0 %
Loan type (dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of December 31, 2020   
Commercial and industrial$577,567 $543,171 $1,120,738 
Commercial real estate:
Owner occupied534,035 275,813 809,848 
Non-owner occupied609,100 855,033 1,464,133 
Residential real estate:
1-to-4 family809,012 201,658 1,010,670 
Line of credit4,647 375,594 380,241 
Multi-family86,232 83,153 169,385 
Construction182,761 426,306 609,067 
Consumer and other267,263 21,326 288,589 
Total ($)$3,070,617 $2,782,054 $5,852,671 
Total (%)52.5 %47.5 %100.0 %

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The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of March 31, 2021 and December 31, 2020.
(dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of March 31, 2021   
One year or less$751,239$1,093,377$1,844,616
One to five years1,746,9031,129,4122,876,315
More than five years1,029,9111,296,5002,326,411
Total ($)$3,528,053$3,519,289$7,047,342
Total (%)50.1 %49.9 %100.0 %
(dollars in thousands)Fixed
interest rate		Floating
interest rate		Total
As of December 31, 2020   
One year or less$321,315$908,973$1,230,288
One to five years1,906,3191,253,3523,159,671
More than five years1,164,2981,528,7022,693,000
Total ($)$3,391,932$3,691,027$7,082,959
Total (%)47.9 %52.1 %100.0 %
Of the loans shown above with floating interest rates, 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 after five years Weighted average level of support (bps) TotalWeighted average level of support (bps)
As of March 31, 2021      
Loans with current rates above
floors:
1-25 bps$71,554 20.44 $195,046 16.49 $60,740 16.84 $327,340 17.42 
26-50 bps7,670 50.00 2,429 49.68 68,229 33.04 78,328 35.21 
51-75 bps508 74.99 4,745 73.13 16,056 72.04 21,309 72.35 
76-100 bps491 100.00 543 96.50 5,518 93.59 6,552 94.31 
101-125 bps386 121.62 147 124.82 1,958 121.00 2,491 121.32 
126-150 bps44 150.00 11,269 137.12 3,277 145.22 14,590 138.98 
151-200 bps1,141 183.95 1,576 178.92 6,018 176.99 8,735 178.25 
201-250 bps— — 368 247.49 920 239.69 1,288 241.92 
251 bps and above867 275.00 761 283.31 2,445 296.55 4,073 289.49 
Total loans with current rates
above floors
$82,661 29.46 $216,884 27.15 $165,161 46.46 $464,706 34.42 
Loans with current rates below
floors:
1-25 bps$69,855 21.61 $75,288 17.89 $41,851 18.37 $186,994 19.39 
26-50 bps53,827 48.71 81,617 43.75 128,209 42.68 263,653 44.24 
51-75 bps100,825 74.17 43,899 70.76 120,999 65.22 265,723 69.53 
76-100 bps75,464 95.24 141,213 88.58 102,214 91.21 318,891 91.00 
101-125 bps38,498 124.03 42,618 122.65 91,592 117.30 172,708 120.12 
126-150 bps54,097 141.26 37,352 138.05 118,997 138.83 210,446 139.32 
151-200 bps57,325 175.88 61,987 179.80 94,347 176.95 213,659 177.49 
201-250 bps8,931 225.58 30,795 226.41 72,219 219.19 111,945 221.69 
251 bps and above17,278 367.28 37,599 287.12 48,449 308.01 103,326 310.32 
Total loans with current rates
below floors
$476,100 104.30 $552,368 108.31 $818,877 119.88 $1,847,345 112.41 
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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. 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 on as an adjustment to interest income amounted to $465 and $120 for the three months ended March 31, 2021 and 2020, respectively. Additionally, we had net interest recoveries on nonperforming assets previously charged off of $0.7 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.
As of March 31, 2021 and December 31, 2020, we had $91.4 million and $84.2 million, respectively, in nonperforming assets. 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 shared national credits and institutional healthcare loans that were acquired during 2020 in our acquisition of Franklin and amounted to $12.8 million and $6.5 million as of March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, other real estate owned included $6.4 million and $5.7 million, respectively, of excess land and facilities held for sale resulting from our acquisitions. Other nonperforming assets, included other repossessed non-real estate amounted to $1.2 million as of both March 31, 2021 and December 31, 2020.
Government National Mortgage Association ("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 March 31, 2021 and December 31, 2020, there were $143.1 million and $151.2 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 March 31, 2021 or December 31, 2020.

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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:
As of March 31,As of December 31,
(dollars in thousands)2021 2020 2020 
Loan Type  
Commercial and industrial$14,247 $4,312 $16,335 
Construction5,584 1,622 4,626 
Residential real estate:
1-to-4 family mortgage15,184 9,128 16,393 
Residential line of credit2,867 1,252 1,996 
Multi-family mortgage55 — 57 
Commercial real estate:
Owner occupied12,872 1,904 7,948 
Non-owner occupied12,064 9,767 12,471 
Consumer and other3,363 3,021 4,630 
Total nonperforming loans held for investment66,236 31,006 64,456 
Loans held for sale12,779 — 6,489 
Other real estate owned11,177 17,072 12,111 
Other1,230 1,188 1,170 
Total nonperforming assets$91,422 $49,266 $84,226 
Total nonperforming loans held for investment as a
percentage of total loans held for investment
0.94 %0.68 %0.91 %
Total nonperforming assets as a percentage of
total assets
0.77 %0.74 %0.75 %
Total accruing loans over 90 days delinquent as a
percentage of total assets
0.09 %0.10 %0.12 %
Loans restructured as troubled debt restructurings$26,095 $11,566 $15,988 
Troubled debt restructurings as a percentage
of total loans held for investment
0.37 %0.25 %0.23 %
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 at March 31, 2021. Management also continually monitors past due loans for potential credit quality deterioration. Loans not considered nonperforming include loans 30-89 days past due amounting to $13.2 million at March 31, 2021 as compared to $27.0 million at December 31, 2020.
Other real estate owned consists of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure in addition to excess facilities held for sale resulting from the consolidation of our facilities resulting from our mergers. These properties are carried at the lower of cost or fair value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for credit losses. Reductions in the carrying value subsequent to foreclosure are charged to earnings and are included in “Gain on sales or write-downs of other real estate owned” in the accompanying consolidated statements of income. During the three months ended March 31, 2021, other real estate owned included write-downs and partial liquidations of $0.3 million, which combined with gains on sales of other real estate, resulted in net gains of $0.5 million. During the three months ended March 31, 2020, other real estate owned included write-downs and partial liquidations of $0.1 million, which combined with net gains on sales of other real estate owned, resulted in a net gain $0.1 million.
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Non-TDR Loan Modifications due to COVID-19
On March 22, 2020, a statement was issued by our banking regulators and titled the “Interagency Statement on Loan
Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” (the “Interagency Statement”) that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act further stipulated that a qualified loan modification was exempt by law from classification as a troubled debt restructuring (“TDR”), from the period beginning March 1, 2020 until the earlier of December 31, 2020, or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic is terminated. Section 541 of the CAA extends this relief to the earlier of January 1, 2022 or 60 days after the national emergency termination date. The Interagency Statement was subsequently revised in April 2020 to clarify the interaction of the original guidance with Section 4013 of the CARES Act, as well as setting forth the banking regulators’ views on consumer protection considerations.
We have numerous customers that have experienced financial distress as a direct result of COVID-19, and in response we offered financial relief in the form of a payment deferral program to assist our customers through these unprecedented times. The majority of these modifications were consistent with the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" and the CARES Act and did not qualify as TDRs. As of March 31, 2021 and December 31, 2020, the total amortized cost of loans deferred as part of this program that were no longer in deferral status amounted to $1.39 billion and $1.40 billion, respectively. As of March 31, 2021 and December 31, 2020, recorded balances in total loans remaining in deferral status under our program amounted to $152.2 million and $202.5 million, respectively. Additionally, we service mortgages on behalf of Fannie Mae, Freddie Mac and Ginnie Mae, and as of March 31, 2021 and December 31, 2020, approximately 5% and 6%, respectively, of customers serviced on behalf of the aforementioned companies were receiving forbearance assistance. The payment deferrals program differs from forbearance, in that all deferred payments are not normally due at the end of the deferral period. Instead, the payment due date is advanced to a future time period. Generally, interest continues to accrue on loans during the deferral period, unless the loan is on nonaccrual. The vast majority of our loans in deferral status are considered performing loans, and we anticipate collecting on these balances. We remain proactive in monitoring our loans in deferral status by reaching out to our borrowers with payment deferrals to determine their financial capacity and whether additional payment deferrals or other loan modifications are necessary.
Classified loans
We categorize loans 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. We analyze loans that share similar risk characteristics collectively and loans that do not share similar risk characteristics are evaluated individually. Pass loans include those management considers acceptable risk, watch and special mention. Classified loans include those considered substandard and doubtful. As of March 31, 2021 and December 31, 2020, Pass category loans in the tables below include Special Mention loans with a total amortized cost of $79.4 million and $102.4 million, respectively. See Note 4, “Loans and allowance for credit losses” in the notes to our consolidated financial statements for a description of these risk categories.

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The following tables set forth information related to the credit quality of our loan portfolio as of the dates presented.
Loan type (dollars in thousands)PassClassifiedTotal
As of March 31, 2021   
Commercial and industrial$1,255,260 $37,270 $1,292,530 
Construction1,111,070 9,515 1,120,585 
Residential real estate:
1-to-4 family mortgage1,055,505 23,113 1,078,618 
Residential line of credit389,110 5,400 394,510 
Multi-family mortgage271,784 55 271,839 
Commercial real estate:
Owner occupied908,344 28,129 936,473 
Non-owner occupied1,605,415 47,223 1,652,638 
Consumer and other294,266 5,883 300,149 
Total loans$6,890,754 $156,588 $7,047,342 

Loan type (dollars in thousands)PassClassifiedTotal
As of December 31, 2020   
Commercial and industrial$1,306,776 $39,346 $1,346,122 
Construction1,213,505 8,715 1,222,220 
Residential real estate:
1-to-4 family mortgage1,065,093 24,177 1,089,270 
Residential line of credit402,859 5,352 408,211 
Multi-family mortgage175,619 57 175,676 
Commercial real estate:
Owner occupied898,282 26,559 924,841 
Non-owner occupied1,578,184 20,795 1,598,979 
Consumer and other310,418 7,222 317,640 
Total loans$6,950,736 $132,223 $7,082,959 


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Allowance for credit losses
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 uncollectible accrued interest receivable. 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.
The allowance for credit losses was $158.0 million and $170.4 million and represented 2.24% and 2.41% of loans held for investment at March 31, 2021 and December 31, 2020, respectively. Excluding PPP loans with a recorded investment totaling $145.7 million and $212.6 million, our ACL as a percentage of total loans held for investment would have been 5 and 7 basis points higher as of March 31, 2021 and December 31, 2020, 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.
In addition, we evaluated for changes in reasonable and supportable forecasts of macroeconomic variables during the three months ended March 31, 2021, primarily due to the impact of the COVID-19 pandemic, which resulted in projected decrease in lifetime losses and overall decrease in the ACL. Specifically, we performed additional qualitative evaluations for certain categories within our loan portfolio, in line with our established qualitative framework, weighting the impact of the current economic outlook, status of federal government stimulus programs, and other considerations, in order to identify specific industries or borrowers seeing credit improvement or deterioration specific to the COVID-19 pandemic.
We also maintain an allowance for credit losses on unfunded commitments, which decreased to $14.2 million as of March 31, 2021 from $16.4 million as of December 31, 2020, also as a result of the improving macroeconomic forecasts incorporated into our CECL loss rate model.
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: 
As of March 31, As of December 31,
2021 2020
(dollars in thousands)Amount% of
Loans		Amount% of
Loans
Loan Type:
Commercial and industrial$14,643 18 %$14,748 19 %
Construction38,622 16 %58,477 17 %
Residential real estate:
1-to-4 family mortgage19,572 15 %19,220 15 %
Residential line of credit9,268 6 %10,534 6 %
Multi-family mortgage11,657 4 %7,174 2 %
Commercial real estate:
Owner occupied3,609 13 %4,849 13 %
Non-owner occupied50,179 24 %44,147 23 %
Consumer and other10,404 4 %11,240 5 %
Total allowance$157,954 100 %$170,389 100 %
 
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The following table summarizes activity in our allowance for credit losses during the periods indicated:
 Three Months Ended March 31,Year Ended December 31,
(dollars in thousands)2021 2020 2020 
Allowance for credit losses at beginning of period$170,389 $31,139 $31,139 
Impact of adopting ASC 326 on non-purchased credit deteriorated loans— 30,888 30,888 
Impact of adopting ASC 326 on purchased credit deteriorated loans— 558 558 
Charge-offs:
Commercial and industrial(277)(1,234)(11,735)
Construction(29)— (18)
Residential real estate:
1-to-4 family mortgage(133)(242)(403)
Residential line of credit(15)— (22)
Multi-family mortgage— — — 
Commercial real estate:
Owner occupied— (209)(304)
Non-owner occupied— — (711)
Consumer and other(716)(726)(2,112)
Total charge-offs$(1,170)$(2,411)$(15,305)
Recoveries:
Commercial and industrial$129 $88 $1,712 
Construction— — 205 
Residential real estate:
1-to-4 family mortgage24 24 122 
Residential line of credit6 15 125 
Multi-family mortgage— — — 
Commercial real estate:
Owner occupied13 14 83 
Non-owner occupied— — — 
Consumer and other195 193 756 
Total recoveries$367 $334 $3,003 
Net charge-offs(803)(2,077)(12,302)
Provision for credit losses (11,632)27,964 94,606 
Initial allowance for credit losses on loans purchased with credit deterioration— 669 25,500 
Allowance for credit losses at the end of period$157,954 $89,141 $170,389 
Ratio of net charge-offs during the period to average loans outstanding
during the period
(0.05)%(0.19)%(0.22)%
Allowance for credit losses as a percentage of loans at end of period(a)
2.24 %1.95 %2.41 %
Allowance for credit losses as a percentage of nonperforming loans at end
of period(a)
238.5 %287.5 %264.3 %
(a) Excludes reserve for credit losses on unfunded commitments of $14.2 million, $16.4 million, and $4.6 million recorded in accrued expenses and other liabilities at March 31, 2021, December 31, 2020, and March 31, 2020, respectively.
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Loans held for sale
Commercial loans held for sale
On August 15, 2020, the Company acquired a portfolio of commercial loans, including shared national credits and institutional healthcare loans, as part of the Franklin transaction that the Company has elected to account for as held for sale. The loans had a fair value of $175.0 million as of March 31, 2021 compared to $215.4 million as of December 31, 2020. The decrease is primarily attributable to loans within the portfolio being paid off through external refinancing and pay-downs. This decrease also includes a change in fair value amounting to a loss of $0.9 million, which is included in 'other noninterest income' on the consolidated statement of income.
Mortgage loans held for sale
Mortgage loans held for sale were $834.8 million at March 31, 2021 compared to $683.8 million at December 31, 2020. Interest rate lock volume for the three months ended March 31, 2021 and 2020, totaled $1.89 billion and $2.09 billion, respectively. Generally, mortgage volume increases in lower interest rate environments and robust housing markets and decreases in rising interest rate environments and slower housing markets. The decrease in interest rate lock volume for the three months ended March 31, 2021, reflects the impact of interest rate increases in the first quarter of 2021 compared with the same period in the prior year, which benefited from the lower interest rate environment. Interest rate lock commitments in the pipeline were $1.06 billion as of March 31, 2021 compared with $1.19 billion as of December 31, 2020.
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 $10.26 billion and $9.46 billion as of March 31, 2021 and December 31, 2020, respectively. Noninterest-bearing deposits at March 31, 2021 and December 31, 2020 were $2.43 billion and $2.27 billion, respectively, while interest-bearing deposits were $7.83 billion and $7.18 billion at March 31, 2021 and December 31, 2020, respectively. Brokered and internet time deposits at March 31, 2021 decreased by $23.8 million to $37.7 million compared with $61.6 million at December 31, 2020. This decrease is a result of our balance sheet management and focus on replacing brokered time deposits with less costly funding sources.
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 $170.9 million and $148.0 million at March 31, 2021 and December 31, 2020, respectively. Additionally, our deposits from municipal and governmental entities (i.e. "public deposits") totaled $1.98 billion at March 31, 2021, compared to $1.68 billion at December 31, 2020.
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 15, "Related party transactions" in the notes to our consolidated financial statements included in this Report. Management continues to focus on growing noninterest-bearing deposits while allowing more costly funding sources to mature.
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Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of operations" discussion.
The following table sets forth the distribution by type of our deposit accounts for the dates indicated: 
As of March 31,As of December 31,
2021 2020 
(dollars in thousands)Amount% of total deposits Average rate Amount% of total deposits Average rate
Deposit Type
Noninterest-bearing demand$2,431,077 24 %— %$2,274,103 24 %— %
Interest-bearing demand3,097,648 30 %0.45 %2,491,765 26 %0.61 %
Money market2,951,111 29 %0.50 %2,902,230 30 %0.76 %
Savings deposits396,620 4 %0.06 %352,685 4 %0.08 %
Customer time deposits1,342,717 13 %0.90 %1,375,695 15 %1.52 %
Brokered and internet time deposits37,713 — %0.85 %61,559 1 %0.90 %
Total deposits$10,256,886 100 %0.41 %$9,458,037 100 %0.62 %
Customer Time Deposits
0.00-0.50%$598,621 45 %$454,429 34 %
0.51-1.00%250,249 19 %253,883 18 %
1.01-1.50%142,579 11 %155,755 11 %
1.51-2.00%98,239 7 %169,414 12 %
2.01-2.50%127,909 9 %159,699 12 %
Above 2.50%125,120 9 %182,515 13 %
Total customer time deposits$1,342,717 100 %$1,375,695 100 %
Brokered and Internet Time Deposits
0.00-0.50%$— — %$— — %
0.51-1.00%— — %— — %
1.01-1.50%595 1 %5,660 9 %
1.51-2.00%26,002 69 %42,311 69 %
2.01-2.50%4,815 13 %5,312 9 %
Above 2.50%6,301 17 %8,276 13 %
Total brokered and internet time deposits37,713 100 %61,559 100 %
Total time deposits$1,380,430 $1,437,254 
 
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The following table sets forth our time deposits segmented by months to maturity and deposit amount as of March 31, 2021 and December 31, 2020: 
 As of March 31, 2021
(dollars in thousands)Time deposits
of $100 and
greater		Time deposits
of less
than $100		Total
Months to maturity:   
Three or less$246,130 $112,488 $358,618 
Over Three to Six205,811 97,814 303,625 
Over Six to Twelve201,488 123,839 325,327 
Over Twelve265,450 127,410 392,860 
Total$918,879 $461,551 $1,380,430 
 As of December 31, 2020
(dollars in thousands)Time deposits
of $100 and
greater		Time deposits
of less
than $100		Total
Months to maturity:   
Three or less$203,202 $123,080 $326,282 
Over Three to Six228,585 106,223 334,808 
Over Six to Twelve255,486 132,240 387,726 
Over Twelve254,672 133,766 388,438 
Total$941,945 $495,309 $1,437,254 

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 types of borrowings. The investment objectives guide the portfolio allocation among securities types, maturities, and other attributes.
The following table shows the carrying value of our total securities available for sale by investment type and the relative percentage of each investment type for the dates indicated:
As of March 31,As of December 31,
20212020
(dollars in thousands)Carrying value% of totalCarrying value% of total
U.S. government agency securities$— — %$2,003 — %
Mortgage-backed securities - residential838,708 69 %773,336 67 %
Mortgage-backed securities - commercial 20,635 2 %21,588 2 %
Municipal securities348,776 28 %356,329 30 %
U.S. Treasury securities14,576 1 %16,628 1 %
Corporate securities2,483 — %2,516 — %
Total securities available for sale$1,225,178 100 %$1,172,400 100 %
The fair value of our available-for-sale debt securities portfolio at March 31, 2021 was $1.23 billion compared to $1.17 billion at December 31, 2020. During the three months ended March 31, 2021 and 2020, we purchased $131.3 million and $29.6 million in investment securities, respectively. There were no sales of securities sold during the three months ended March 31, 2021 and 2020. Maturities and calls of securities totaled $61.0 million and $27.7 million, respectively. As of March 31, 2021 and December 31, 2020, net unrealized gains of $19.2 million and $34.6 million, respectively, were in included in the fair value of available-for-sale debt securities.
As of March 31, 2021 and 2020, the Company had $4.7 million and $4.6 million, respectively, in equity securities recorded at fair value that primarily consisted of mutual funds. The change in the fair value of equity securities resulted in a net gain of $76.0 thousand and $63.0 thousand during the three months ended March 31, 2021 and 2020, respectively.
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The following table sets forth the fair value, scheduled maturities and weighted average yields for our investment portfolio as of the dates indicated below:
As of March 31,As of December 31,
 2021 2020 
(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$14,576 1.2 %1.60 %$16,628 1.4 %1.57 %
Maturing in one to five years— — %— %— — %— %
Maturing in five to ten years— — %— %— — %— %
Maturing after ten years— — %— %— — %— %
Total Treasury securities14,576 1.2 %1.60 %16,628 1.4 %1.57 %
Government agency securities:
Maturing within one year— — %— %— — %— %
Maturing in one to five years— — %— %— — %— %
Maturing in five to ten years— — %— %2,003 0.2 %2.64 %
Maturing after ten years— — %— %— — %— %
Total government agency securities— — %— %2,003 0.2 %2.64 %
Municipal securities
Maturing within one year22,084 1.8 %1.55 %19,034 1.6 %1.07 %
Maturing in one to five years20,613 1.7 %1.77 %24,184 2.1 %2.06 %
Maturing in five to ten years36,394 3.0 %2.83 %37,313 3.2 %2.76 %
Maturing after ten years269,685 22.0 %3.22 %275,798 23.5 %3.12 %
Total obligations of state and municipal subdivisions348,776 28.5 %2.98 %356,329 30.4 %3.07 %
Residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC:
Maturing within one year— — %— %— — %— %
Maturing in one to five years4,458 0.4 %2.60 %2,975 0.3 %3.12 %
Maturing in five to ten years27,838 2.3 %2.59 %30,596 2.6 %2.47 %
Maturing after ten years827,047 67.4 %1.50 %761,353 64.9 %1.45 %
Total residential and commercial mortgage backed securities guaranteed by FNMA, GNMA and FHLMC859,343 70.1 %1.54 %794,924 67.8 %1.50 %
Corporate securities:
Maturing within one year— — %— %— — %— %
Maturing in one to five years500 — %5.00 %500 — %5.00 %
Maturing in five to ten years1,983 0.2 %4.19 %2,016 0.2 %4.19 %
Maturing after ten years— — %— %— — %— %
Total Corporate securities2,483 0.2 %4.35 %2,516 0.2 %4.35 %
Total investment securities$1,225,178 100.0 %1.90 %$1,172,400 100.0 %2.29 %
(1)Yields on a tax-equivalent basis.
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The following table summarizes the amortized cost of debt securities classified as available-for-sale and their approximate fair values as of the dates shown:
(dollars in thousands)Amortized cost Gross unrealized gains Gross unrealized losses Fair value
Securities available for sale    
As of March 31, 2021    
Mortgage-backed securities - residential$834,335 $10,971 $(6,598)$838,708 
Mortgage-backed securities - commercial 19,888 757 (10)20,635 
Municipal securities334,730 14,515 (469)348,776 
U.S. Treasury securities14,480 96 — 14,576 
Corporate securities2,500 — (17)2,483 
 $1,205,933 $26,339 $(7,094)$1,225,178 
As of December 31, 2020
US Government agency securities$2,000 $3 $— $2,003 
Mortgage-backed securities - residential760,099 14,040 (803)773,336 
Mortgage-backed securities - commercial20,226 1,362 — 21,588 
Municipal securities336,543 19,806 (20)356,329 
U.S. Treasury securities16,480 148 — 16,628 
Corporate securities2,500 17 (1)2,516 
$1,137,848 $35,376 $(824)$1,172,400 
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, and subordinated debt.
The following table sets forth our total borrowings segmented by years to maturity as of March 31, 2021:
 March 31, 2021
(dollars in thousands)Amount% of totalWeighted average interest rate (%)
Maturing Within:   
March 31, 2022$29,234 16 %0.34 %
March 31, 2023— — %— %
March 31, 2024— — %— %
March 31, 2025— — %— %
March 31, 2026— — %— %
Thereafter149,369 84 %4.60 %
Total$178,603 100 %3.94 %
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 $29.2 million and $32.2 million at March 31, 2021 and December 31, 2020, respectively.


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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 March 31, 2021 and December 31, 2020, 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 (3.35% and 3.40% at March 31, 2021 and December 31, 2020, respectively) for the $21.7 million debenture and 3-month LIBOR plus 325 basis points (3.45% and 3.50% at March 31, 2021 and December 31, 2020, 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.
Additionally, during 2020, we placed $100.0 million of ten year fixed-to-floating rate subordinated notes, maturing September 1, 2030. This subordinated note instrument 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. The Company has classified the issuance, net of unamortized issuance costs of $1.7 million and $1.8 million, as Tier 2 capital at March 31, 2021 and December 31, 2020, respectively.
We also assumed two issues of subordinated debt, totaling $60,000, as part of the Franklin merger. The notes, issued by Franklin in 2016, feature $40,000 of 6.875% fixed-to-floating rate subordinated notes due March 30, 2026 ("March 2026 Subordinated Notes"), and $20,000 of 7% fixed-to-floating rate subordinated notes due July 1, 2026 ("July 2026 Subordinated Notes"). During the three months ended March 31, 2021, we redeemed the $40.0 million March 2026 Subordinated Notes in full. Additionally, during the three months ended March 31, 2021, we recorded accretion of a purchase accounting premium of $0.3 million as a reduction to interest expense on borrowings. The remaining July 2026 Subordinated Notes currently pay interest semi-annually, and will begin resetting interest rates on a quarterly basis after July 1, 2021. For years six through ten, interest for the July 2026 Subordinated Notes will be based on the 3-month LIBOR plus 6.04%. We are entitled to redeem in whole or in part after the fifth anniversary of note issuance. There was $20,000 and $60.0 million related to these issuances included as Tier 2 capital as of March 31, 2021 and December 31, 2020, respectively.
Other borrowings
During the first quarter of 2020, we had total borrowings against a credit line in the amount $15.0 million against the line to fund the cash consideration paid in connection with the Farmers National transaction. The line of credit matured on February 21, 2021 and was repaid in full. Other borrowings on our consolidated balance sheets also includes our finance lease liability totaling $1.6 million as of both March 31, 2021 and December 31, 2020. See Note 6, "Leases" within the Notes to our consolidated financial statements for additional information regarding our finance lease.
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Liquidity and capital resources
Bank liquidity management
We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our Liquidity and Interest Rate Risk Policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.
We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.
As a result of the COVID-19 pandemic, we have taken steps to ensure adequate liquidity and access to funding sources. To date, we have not seen significant pressure on liquidity or sources of funding as a result of COVID-19 and have maintained higher than typical levels of liquidity in cash and cash equivalents to allow for flexibility.
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 March 31, 2021 and December 31, 2020, securities with a carrying value of $869.4 million and $804.8 million, 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, FHLB borrowings, and lines of credit. Interest is charged at the prevailing market rate on federal funds purchased 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 ("CMAs") or other advances with the FHLB as of March 31, 2021 or December 31, 2020. There was $1.29 billion and $1.18 billion as of March 31, 2021 and December 31, 2020, respectively available to borrow against. 
We also maintain lines of credit with other commercial banks totaling $345.0 million and $335.0 million as of March 31, 2021 and December 31, 2020, respectively. These are unsecured, uncommitted lines of credit typically maturing at various times within the next twelve months. There were no borrowings against the lines as of March 31, 2021 or December 31, 2020.
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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 ("TDFI"). Based upon this regulation, as of March 31, 2021 and December 31, 2020, $81.1 million and $185.7 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. During the three months ended March 31, 2021, there were $75.0 million in cash dividends approved by the board for payment from the Bank to the holding company. None of these required approval from the TDFI. Subsequent to March 31, 2021, the board approved a dividend from the Bank to the holding company for $35.0 million that did not require approval from the TDFI. No dividends from the Bank to the Company were paid during the three months ended March 31, 2020.
During the three months ended March 31, 2021, the Company declared and paid shareholder dividends of 0.11 per share, or $5.3 million. During the three months ended March 31, 2020, the Company declared and paid dividends of $0.09 per share, or $2.9 million, respectively. Subsequent to March 31, 2021, the Company declared a quarterly dividend in the amount of $0.11 per share, payable on May 24, 2021, to stockholders of record as of May 10, 2021.
The Company is party to a registration rights agreement with its former majority shareholder entered into in connection with the 2016 initial public offering, 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. No such expenses were incurred during the three months ended March 31, 2021 and 2020.
Capital management and regulatory capital requirements
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.
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The Federal Reserve and the FDIC have issued guidelines governing the levels of capital that banks must maintain. Those guidelines specify capital tiers, which include the classifications set forth in the following table. As of March 31, 2021 and December 31, 2020, we exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as detailed in the table below: 
 Actual
Required for capital
adequacy purposes (1)
To be well
capitalized under
prompt corrective
action provision
(dollars in thousands)AmountRatio
(%)		AmountRatio
(%)		AmountRatio
(%)
March 31, 2021      
Total capital (to risk weighted assets)
FB Financial Corporation$1,353,195 14.6 %$972,054 10.5 %N/AN/A
FirstBank$1,316,420 14.2 %$970,431 10.5 %$924,220 10.0 %
Tier 1 capital (to risk weighted assets)
FB Financial Corporation$1,138,657 12.3 %$786,901 8.5 %N/AN/A
FirstBank$1,121,997 12.1 %$785,587 8.5 %$739,376 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,138,657 10.1 %$450,971 4.0 %N/AN/A
FirstBank$1,121,997 10.0 %$450,889 4.0 %$563,611 5.0 %
Common Equity Tier 1 (CET1)      
FB Financial Corporation$1,108,657 12.0 %$648,036 7.0 %N/AN/A
FirstBank$1,121,997 12.1 %$646,954 7.0 %$600,743 6.5 %
December 31, 2020
Total capital (to risk weighted assets)
FB Financial Corporation$1,358,897 15.0 %$952,736 10.5 %N/AN/A
FirstBank$1,353,279 14.9 %$951,327 10.5 %$906,026 10.0 %
Tier 1 capital (to risk weighted assets)
FB Financial Corporation$1,090,364 12.0 %$771,262 8.5 %N/AN/A
FirstBank$1,142,548 12.6 %$770,122 8.5 %$724,820 8.0 %
Tier 1 Capital (to average assets)
FB Financial Corporation$1,090,364 10.0 %$435,064 4.0 %N/AN/A
FirstBank$1,142,548 10.5 %$435,279 4.0 %$544,098 5.0 %
Common Equity Tier 1 (CET1)
FB Financial Corporation$1,060,364 11.7 %$635,157 7.0 %N/AN/A
FirstBank$1,142,548 12.6 %$634,218 7.0 %$588,917 6.5 %
(1) Minimum ratios presented exclude the capital conservation buffer.
U.S. Basel III measures capital strength in three tiers and incorporates risk-adjusted assets to determine the risk-based capital ratios. Our common equity tier 1 capital primarily includes shareholders' equity less certain deductions for goodwill and other intangibles, net of taxes, net unrealized gains (losses) on AFS securities and derivative instruments, net of tax. Tier 1 capital is primarily comprised of common equity Tier 1 capital and included junior subordinated debentures with a carrying value of $30.0 million as of March 31, 2021 and December 31, 2020. Tier 2 capital components include a portion of the allowance for credit losses in excess of Tier 1 statutory limits and our remaining combined trust preferred security debt issuances.
In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced an interim final rule, which became final on September 30, 2020, to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The final rule maintains 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.
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Capital Expenditures
As of March 31, 2021, we have not committed to any material capital expenditures over the next twelve months.
Shareholders’ equity
Our total shareholders’ equity was $1.33 billion at March 31, 2021 and $1.29 billion at December 31, 2020. Book value per share was $28.08 at March 31, 2021 and $27.35 at December 31, 2020. The growth in shareholders’ equity during 2021 was primarily attributable to earnings retention and changes in accumulated other comprehensive income, partially offset by declared dividends and activity related to equity-based compensation.
Off-balance sheet arrangements
In the normal course of business, we enter into various transactions, which in accordance with GAAP, are not included as part of our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit, standby and commercial letters of credit, and commitments to purchase loans, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. For further information, see Note 9, "Commitments and contingencies" in the notes to the consolidated financial statements included elsewhere in this Report.


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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 (“ALCO”), 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 (“EVE”) 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. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in affect over the life of the current balance sheet. For purposes of calculating EVE, a zero percent floor is assumed on discount factors.
The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented:
Percentage change in:
Change in interest rates
Net interest income (1)
 Year 1 Year 2
 March 31,December 31,March 31,December 31,
(in basis points)2021 2020 2021 2020 
+40052.1 %46.8 %61.2 %52.3 %
+30038.7 %34.8 %45.5 %39.1 %
+20025.2 %22.8 %29.9 %26.1 %
+10012.1 %10.7 %14.7 %12.9 %
-100(7.4)%(3.8)%(12.4)%(6.8)%
-200(9.3)%(3.8)%(15.5)%(6.8)%
 Percentage change in:
Change in interest rates
Economic value of equity (2)
 March 31,December 31,
(in basis points)2021 2020 
+40028.2 %40.0 %
+30022.3 %32.8 %
+20015.7 %24.2 %
+1008.28 %13.2 %
-100(9.7)%(6.4)%
-200(19.5)%(6.3)%
(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 income in the various rate scenarios.
(2)The percentage change in this column represents our EVE in a stable interest rate environment versus EVE in the various rate scenarios.
The results for the net interest income simulations as of March 31, 2021 and December 31, 2020 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. The COVID-19 pandemic resulted in unprecedented monetary stimulus from the Federal Reserve, which included, but was not limited to, a 150 basis point decrease in the federal funds target rate. While our variable rate loan portfolio is indexed to market rates, deposits
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typically adjust at a percentage of the overall movement in market rates, resulting in margin compression. Index floors in our variable rate loans and aggressive deposit pricing should mitigate some of this pressure in the near term.
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.
The Company enters into derivative instruments that are not designated as hedging instruments to help its commercial customers manage their exposure to interest rate fluctuations. To mitigate the interest rate risk associated with customer contracts, the Company enters into an offsetting derivative contract. The Company manages its credit risk, or potential risk of default by its commercial customers through credit limit approval and monitoring procedures.
The Company has entered into interest rate swap contracts to hedge interest rate exposure on short term liabilities, as well as interest rate swap contracts to hedge interest rate exposure on subordinated debentures. These interest rate swaps are all accounted for as cash flow hedges, with the Company receiving a variable rate of interest and paying a fixed rate of interest.
The Company enters into rate lock commitments and forward loan sales contracts as part of our ongoing efforts to mitigate our interest rate risk exposure inherent in our mortgage pipeline and held for sale portfolio. Under the interest rate lock commitments, interest rates for a mortgage loan are locked in with the client for a period of time, typically 30-90 days. Once an interest rate lock commitment is entered into with a client, we also enter into a forward commitment to sell the residential mortgage loan to secondary market investors. Forward loan sale contracts are contracts for delayed sale and delivery of mortgage loans to a counter party. We agree to deliver on a specified future date, a specified instrument, at a specified price or yield. The credit risk inherent to us arises from the potential inability of counterparties to meet the terms of their contracts. In the event of non-acceptance by the counterparty, we would be subject to the credit and inherent (or market) risk of the loans retained.
Additionally, the Company enters into forward commitments, options and futures contracts that are not designated as hedging instruments, which serve as economic hedges of the change in fair value of its MSRs.
For more information about our derivative financial instruments, see Note 10, “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 Exchange Act) as of the end of the period covered by this Report was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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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, 2020.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about repurchases of common stock by the Company during the quarter ended March 31, 2021: 
Period(a)
Total number of shares purchased		(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
January 1 - January 31, 2021— — — $100,000,000 
February 1 - February 28, 2021— — — 100,000,000 
March 1 - March 31, 2021— — — 100,000,000 
Total— — — 100,000,000 
On February 18, 2021 the board of directors approved a repurchase plan for up to $100 million of Company common stock. This repurchase plan expires March 31, 2022, and purchases will be conducted pursuant to a written plan intended to comply with Rule 10b-18 promulgated under the Exchange Act. To date, the Company has not repurchased any shares of common stock under the plan.

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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
3.1
3.2
4.1
10.1
10.2
10.3
31.1
31.2
32.1
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.

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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
May 7, 2021
Michael M. Mettee
Chief Financial Officer
(Principal Financial Officer)
/s/ Keith Rainwater
May 7, 2021
Keith Rainwater
Chief Accounting Officer
(Principal Accounting Officer)


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