FB Financial (FBK) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the company's unaudited consolidated financial statements, management's discussion and analysis, and disclosures on market risk and internal controls Glossary Of Abbreviations And Acronyms This section provides a glossary of abbreviations and acronyms used throughout the Quarterly Report on Form 10-Q to aid reader comprehension - The glossary defines common acronyms and abbreviations used in the report, such as ACL (Allowance for credit losses), AFS (Available-for-sale), CECL (Current expected credit losses), FHLB (Federal Home Loan Bank), NIM (Net interest margin), and ROAA (Return on average assets)[10][11] Item 1. Consolidated Financial Statements This section presents the unaudited consolidated financial statements of FB Financial Corporation for the periods ended June 30, 2025, and December 31, 2024 Consolidated Balance Sheets The balance sheets detail the company's assets, liabilities, and shareholders' equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheets (Amounts in thousands) | Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | $1,165,729 | $1,042,488 | | Available-for-sale debt securities | $1,337,565 | $1,538,008 | | Loans held for investment, net | $9,725,334 | $9,450,442 | | Total assets | $13,354,238 | $13,157,482 | | LIABILITIES | | | | Total deposits | $11,403,470 | $11,210,434 | | Total liabilities | $11,743,015 | $11,589,851 | | SHAREHOLDERS' EQUITY | | | | Total equity | $1,611,223 | $1,567,631 | - Total assets increased by $196.76 million from December 31, 2024, to June 30, 2025, primarily driven by an increase in net loans held for investment and cash and cash equivalents, partially offset by a decrease in available-for-sale debt securities[12] - Total deposits increased by $193.04 million, and total shareholders' equity increased by $43.59 million during the same period[12] Consolidated Statements of Income The income statements present the company's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Income (Amounts in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $182,084 | $177,413 | $361,790 | $353,541 | | Total interest expense | $70,669 | $74,798 | $142,734 | $151,436 | | Net interest income | $111,415 | $102,615 | $219,056 | $202,105 | | Net interest income after provision for credit losses | $106,078 | $100,391 | $211,427 | $199,099 | | Total noninterest (loss) income | $(34,552) | $25,608 | $(11,520) | $33,570 | | Total noninterest expense | $81,261 | $75,093 | $160,810 | $147,513 | | (Loss) income before income taxes | $(9,735) | $50,906 | $39,097 | $85,156 | | Net income applicable to FB Financial Corporation | $2,909 | $39,979 | $42,270 | $67,929 | | Basic earnings per common share | $0.06 | $0.85 | $0.91 | $1.45 | | Diluted earnings per common share | $0.06 | $0.85 | $0.91 | $1.45 | - Net income applicable to FB Financial Corporation decreased significantly for the three months ended June 30, 2025, to $2.91 million from $39.98 million in the prior year, primarily due to a $60.55 million net loss from investment securities[13] - For the six months ended June 30, 2025, net income decreased to $42.27 million from $67.93 million in the prior year, also largely impacted by the net loss from investment securities[13] Consolidated Statements of Comprehensive Income These statements report net income and other comprehensive income, including unrealized gains and losses on securities Consolidated Statements of Comprehensive Income (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $2,917 | $39,987 | $42,278 | $67,937 | | Total other comprehensive income, net of tax | $47,942 | $710 | $57,673 | $2,951 | | Comprehensive income applicable to FB Financial Corporation | $50,851 | $40,689 | $99,943 | $70,880 | - Total other comprehensive income, net of tax, significantly increased to $47.94 million for the three months ended June 30, 2025, from $710 thousand in the prior year, primarily due to a reclassification adjustment for loss on securities included in net income[15] - Comprehensive income applicable to FB Financial Corporation increased to $50.85 million for the three months ended June 30, 2025, compared to $40.69 million in the prior year, despite lower net income, due to the substantial other comprehensive income[15] Consolidated Statements of Changes in Shareholders' Equity These statements detail the changes in shareholders' equity resulting from net income, dividends, stock transactions, and other comprehensive income Consolidated Statements of Changes in Shareholders' Equity (Amounts in thousands) | Item | Balance at March 31, 2025 | Balance at June 30, 2025 | | :--- | :--- | :--- | | Common stock | $46,515 | $45,808 | | Additional paid-in capital | $854,715 | $822,548 | | Retained earnings | $792,685 | $786,785 | | Accumulated other comprehensive loss, net | $(91,953) | $(44,011) | | Total common shareholders' equity | $1,601,962 | $1,611,130 | | Item | Balance at December 31, 2024 | Balance at June 30, 2025 | | :--- | :--- | :--- | | Common stock | $46,663 | $45,808 | | Additional paid-in capital | $860,266 | $822,548 | | Retained earnings | $762,293 | $786,785 | | Accumulated other comprehensive loss, net | $(101,684) | $(44,011) | | Total common shareholders' equity | $1,567,538 | $1,611,130 | - Total common shareholders' equity increased from $1.57 billion at December 31, 2024, to $1.61 billion at June 30, 2025, driven by net income and a significant reduction in accumulated other comprehensive loss, net[18] - Share repurchases amounted to $44.15 million for the six months ended June 30, 2025, reducing common stock and additional paid-in capital[18] Consolidated Statements of Cash Flows These statements report the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Amounts in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,324 | $66,891 | | Net cash (used in) provided by investing activities | $(58,802) | $69,882 | | Net cash provided by (used in) financing activities | $126,719 | $(146,803) | | Net change in cash and cash equivalents | $123,241 | $(10,030) | | Cash and cash equivalents at end of the period | $1,165,729 | $800,902 | - Net cash provided by financing activities significantly increased to $126.72 million for the six months ended June 30, 2025, compared to a net cash used of $146.80 million in the prior year, primarily due to a net increase in deposits[20] - Cash and cash equivalents at the end of the period increased to $1.17 billion as of June 30, 2025, from $800.90 million in the prior year, reflecting a positive net change in cash and cash equivalents[20] Condensed Notes to Consolidated Financial Statements These notes provide detailed disclosures and explanations of the accounting policies and financial data presented in the consolidated statements Note (1)—Basis of presentation This note outlines the basis for preparing the unaudited consolidated financial statements and details recent accounting policy modifications - FB Financial Corporation operates primarily through its wholly-owned subsidiary, FirstBank, which had 78 full-service branches across Tennessee, Alabama, Kentucky, and Georgia as of June 30, 2025[23] - The Company modified its accounting policy for estimating expected credit losses, transitioning from a lifetime loss rate methodology to a discounted cash flow estimation technique for most loan segments, effective June 30, 2025[30][34][35] - The adoption of new accounting standards, ASU 2023-07 (Segment Reporting) and ASU 2023-08 (Crypto Assets), did not have a material impact on the Company's consolidated financial statements[55][56] - On July 1, 2025, the Company completed the acquisition of Southern States Bancshares Inc in an all-stock transaction valued at $368.36 million, adding $2.87 billion in total assets[59][60] Note (2)—Investment securities This note details the Company's investment securities portfolio, primarily available-for-sale (AFS) debt securities AFS Debt Securities (Amounts in thousands) | Item | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | U.S. government agency securities | $642,264 | $563,007 | | Mortgage-backed securities - residential | $541,343 | $810,999 | | Municipal securities | $144,228 | $147,857 | | Total AFS debt securities | $1,337,565 | $1,538,008 | | Gross unrealized losses (June 30, 2025) | $(64,050) | | | Gross unrealized losses (December 31, 2024) | | $(141,974) | - The fair value of AFS debt securities decreased by $200.44 million from December 31, 2024, to June 30, 2025, primarily due to sales of securities[61] - Gross unrealized losses on AFS debt securities decreased from $141.97 million at December 31, 2024, to $64.05 million at June 30, 2025, with no allowance for credit losses recognized[61][64][65] Sales and Other Dispositions of AFS Debt Securities (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | Proceeds from sales | $266,454 | $266,454 | $207,882 | | Gross realized losses | $60,637 | $60,637 | $16,303 | Note (3)—Loans and allowance for credit losses on loans HFI This note provides a detailed breakdown of the Company's loan portfolio, credit quality, and the allowance for credit losses (ACL) Loans Held for Investment (HFI) by Class (Amounts in thousands) | Loan Class | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial and industrial | $1,788,911 | $1,691,213 | | Construction | $1,022,678 | $1,087,732 | | 1-to-4 family mortgage | $1,660,696 | $1,616,754 | | Multi-family mortgage | $587,254 | $653,769 | | Commercial real estate: Non-owner occupied | $2,198,689 | $2,099,129 | | Consumer and other | $604,498 | $493,744 | | Gross loans | $9,874,282 | $9,602,384 | | Less: Allowance for credit losses on loans HFI | $(148,948) | $(151,942) | | Net loans held for investment | $9,725,334 | $9,450,442 | - Gross loans HFI increased by $271.90 million from December 31, 2024, to June 30, 2025, with notable growth in commercial and industrial, 1-to-4 family mortgage, and consumer loans[70] - The allowance for credit losses on loans HFI decreased by $2.99 million to $148.95 million as of June 30, 2025, primarily due to a change in the CECL loss estimation methodology[98][99] Nonaccrual Loans by Class (Amounts in thousands) | Loan Class | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial and industrial | $2,692 | $9,661 | | Construction | $28,872 | $10,915 | | 1-to-4 family mortgage | $8,379 | $12,625 | | Multi-family mortgage | $9,582 | $21 | | Commercial real estate: Owner occupied | $7,861 | $9,551 | | Total nonaccrual loans | $73,950 | $59,358 | Note (4)—Other real estate owned This note summarizes the activity and balance of other real estate owned (OREO), which includes properties acquired through foreclosure Other Real Estate Owned (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | Balance at beginning of period | $3,326 | $4,409 | $3,192 | | Transfers from loans | $1,230 | $3,297 | $2,400 | | Proceeds from sale of other real estate owned | $(1,744) | $(4,412) | $(1,434) | | Balance at end of period | $2,998 | $2,998 | $4,173 | - The balance of other real estate owned decreased to $3.00 million at June 30, 2025, from $4.41 million at the beginning of the six-month period[101] - Foreclosed residential real estate properties included in OREO totaled $1.56 million as of June 30, 2025, a decrease from $2.88 million at December 31, 2024[101] Note (5)—Leases This note provides information on the Company's operating and finance leases, detailing assets, liabilities, and lease expenses Lease Information (Amounts in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Operating lease right-of-use assets | $47,764 | $47,963 | | Operating lease liabilities | $59,289 | $60,024 | | Weighted average remaining lease term (operating) | 10.7 years | 11.0 years | | Weighted average discount rate (operating) | 3.54% | 3.47% | Total Lease Cost (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | Total lease cost | $2,312 | $4,596 | $4,330 | - The Company had 47 operating leases and 1 finance lease as of June 30, 2025, for various locations, with total lease costs increasing slightly for the six months ended June 30, 2025, compared to the prior year[103][105] Note (6)—Mortgage servicing rights This note details the changes in the Company's mortgage servicing rights (MSRs) and related servicing income and expenses Mortgage Servicing Rights (MSRs) (Amounts in thousands) | Item | June 30, 2025 (Carrying Value) | June 30, 2024 (Carrying Value) | | :--- | :--- | :--- | | Carrying value at beginning of period (3 months) | $156,379 | $165,674 | | Carrying value at end of period (3 months) | $153,464 | $164,505 | | Carrying value at beginning of period (6 months) | $162,038 | $164,249 | | Carrying value at end of period (6 months) | $153,464 | $164,505 | Net Servicing Income (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net servicing income | $862 | $1,047 | $3,148 | $3,406 | - The carrying value of MSRs decreased to $153.46 million at June 30, 2025, from $162.04 million at the beginning of the six-month period[107] - A 10% increase in prepayment speed is estimated to decrease MSR fair value by $4.27 million, while a 100 basis point increase in discount rate is estimated to decrease fair value by $7.20 million as of June 30, 2025[107] Note (7)—Income taxes This note reconciles the Company's income tax benefit/expense, highlighting the impact of non-recurring items Income Tax (Benefit) Expense (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Income tax (benefit) expense, as reported | $(12,652) | $10,919 | $(3,181) | $17,219 | | Federal taxes calculated at statutory rate (21.0%) | $(2,045) | $10,691 | $8,210 | $17,883 | | Expiration of the statute of limitations | $(8,713) | — | $(8,713) | — | | Interest on refunds | $(1,645) | — | $(2,591) | — | - For the three and six months ended June 30, 2025, the Company recognized a significant income tax benefit of $12.65 million and $3.18 million, respectively, primarily due to a one-time tax benefit of $10.71 million from the expiration of the statute of limitations[109] Note (8)—Commitments and contingencies This note details the Company's off-balance sheet financial instruments, including commitments to extend credit and letters of credit Commitments to Extend Credit and Letters of Credit (Amounts in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commitments to extend credit, excluding interest rate lock commitments | $2,861,685 | $2,770,105 | | Letters of credit | $62,260 | $69,855 | | Balance at end of period | $2,923,945 | $2,839,960 | - Total unfunded loan commitments increased to $2.92 billion at June 30, 2025, from $2.84 billion at December 31, 2024[112] Allowance for Credit Losses on Unfunded Loan Commitments (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | Balance at beginning of period | $6,493 | $6,107 | $8,770 | | Impact of change in accounting estimate for current expected credit losses | $6,452 | $6,452 | — | | (Reversal of) provision for credit losses on unfunded commitments | $(13) | $373 | $(2,786) | | Balance at end of period | $12,932 | $12,932 | $5,984 | - The allowance for credit losses on unfunded loan commitments increased to $12.93 million at June 30, 2025, from $6.11 million at the beginning of the six-month period, largely due to a $6.45 million impact from the change in CECL estimation methodology[116] Note (9)—Derivatives This note describes the Company's use of derivative financial instruments for interest rate risk management and to facilitate customer needs - The Company uses derivative instruments, including interest rate swaps, forward commitments, and futures contracts, for interest rate risk management, with total notional amounts of $1.15 billion at June 30, 2025[120][134] Non-Designated Derivative Financial Instruments (Amounts in thousands) | Item | June 30, 2025 (Notional Amount) | June 30, 2025 (Asset Fair Value) | June 30, 2025 (Liability Fair Value) | | :--- | :--- | :--- | :--- | | Interest rate contracts | $598,390 | $23,135 | $23,194 | | Forward commitments | $236,000 | — | $638 | | Interest rate-lock commitments | $127,004 | $2,322 | — | | Futures contracts | $185,000 | $2,109 | — | | Total | $1,146,394 | $27,566 | $23,832 | Gains (Losses) from Non-Designated Derivatives (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | Total included in mortgage banking income | $(40) | $3,483 | $(3,789) | Note (10)—Fair value of financial instruments This note defines fair value measurement and categorizes financial assets and liabilities into a three-level hierarchy - The fair value hierarchy prioritizes inputs: Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[137][138][139] Financial Assets Measured at Fair Value on a Recurring Basis (Amounts in thousands) | Item | June 30, 2025 (Total Fair Value) | December 31, 2024 (Total Fair Value) | | :--- | :--- | :--- | | AFS debt securities | $1,337,565 | $1,538,008 | | Loans held for sale, at fair value | $123,235 | $95,403 | | Mortgage servicing rights (Level 3) | $153,464 | $162,038 | | Derivatives | $27,566 | $29,951 | Financial Assets Measured at Fair Value on a Nonrecurring Basis (Amounts in thousands) | Item | June 30, 2025 (Total Fair Value) | December 31, 2024 (Total Fair Value) | | :--- | :--- | :--- | | Other real estate owned (Level 3) | $1,602 | $2,873 | | Collateral-dependent net loans held for investment (Level 3) | $25,569 | $30,512 | - Net losses of $372 thousand and net gains of $1.83 million resulted from fair value changes of mortgage loans held for sale for the three and six months ended June 30, 2025, respectively[148] Note (11)—Segment reporting This note identifies the Company's two reportable segments, Banking and Mortgage, and provides selected financial information for each - The Company operates through two reportable segments: Banking and Mortgage[152] - The chief operating decision maker uses income before income taxes to assess segment performance and allocate resources[153] Segment Income Before Income Taxes (Amounts in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Banking | $(6,723) | $50,060 | $40,598 | $82,696 | | Mortgage | $(3,012) | $846 | $(1,501) | $2,460 | | Consolidated (Loss) Income before income taxes | $(9,735) | $50,906 | $39,097 | $85,156 | - The Banking segment reported a loss before taxes of $6.72 million for the three months ended June 30, 2025, compared to income of $50.06 million in the prior year, primarily due to a $60.5 million net loss on investment securities[156][222] Note (12)—Minimum capital requirements This note outlines the regulatory capital requirements for the Company and FirstBank and confirms compliance - The Company and FirstBank are subject to regulatory capital requirements and met all capital adequacy requirements as of June 30, 2025, and December 31, 2024[165][166] Capital Ratios (June 30, 2025) | Capital Ratio | FB Financial Corporation (Actual Ratio) | FirstBank (Actual Ratio) | Minimum Requirement for Capital Adequacy with Capital Buffer | | :--- | :--- | :--- | :--- | | Total Capital (to risk-weighted assets) | 14.7% | 14.2% | 10.5% | | Tier 1 Capital (to risk-weighted assets) | 12.6% | 12.1% | 8.5% | | Common Equity Tier 1 Capital (to risk-weighted assets) | 12.3% | 12.1% | 7.0% | | Tier 1 Capital (to average assets) | 11.3% | 10.8% | 4.0% | - All actual capital ratios for both FB Financial Corporation and FirstBank were well above the minimum regulatory requirements, indicating a strong capital position[169] Note (13)—Stock-based compensation This note details the Company's stock-based compensation plans, including RSUs, PSUs, and the ESPP Restricted Stock Units (RSUs) Activity (Six Months Ended June 30, 2025) | Item | Restricted Stock Units Outstanding | | :--- | :--- | | Balance at beginning of period (unvested) | 345,436 | | Granted | 148,306 | | Vested | (156,509) | | Forfeited | (3,335) | | Balance at end of period (unvested) | 333,898 | - Total unrecognized compensation cost related to unvested RSUs was $9.39 million as of June 30, 2025, expected to be recognized over a weighted-average period of 1.99 years[174] Performance-Based Restricted Stock Units (PSUs) Activity (Six Months Ended June 30, 2025) | Item | Performance Stock Units Outstanding | | :--- | :--- | | Balance at beginning of period (unvested) | 223,393 | | Granted | 75,329 | | Vested | (50,269) | | Balance at end of period (unvested) | 247,858 | - Compensation cost for PSUs was $3.22 million for the six months ended June 30, 2025, with a maximum unrecognized compensation cost at 200% payout of $14.81 million[178] Note (14)—Related party transactions This note discloses transactions with related parties, including loans to and deposits from management, directors, and significant shareholders Loans to Related Parties (Amounts in thousands) | Item | Amount | | :--- | :--- | | Loans outstanding at January 1, 2025 | $31,406 | | New loans and advances | $6,166 | | Repayments | $(10,939) | | Loans outstanding at June 30, 2025 | $26,633 | - Loans outstanding to related parties decreased to $26.63 million at June 30, 2025, from $31.41 million at January 1, 2025[180] - The Bank held $254.88 million in deposits from related parties as of June 30, 2025, a decrease from $282.96 million at December 31, 2024[181] - The Company has an equity investment in a privately held entity and a master loan purchase agreement to purchase up to $250 million in manufactured housing loans; as of June 30, 2025, the amortized cost of these loans was $112.31 million[184] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation This section provides management's perspective on the Company's financial condition and results of operations for the periods ended June 30, 2025 Forward-looking statements This section outlines the nature of forward-looking statements in the report and the risks and uncertainties that could affect actual results - The report contains forward-looking statements regarding future plans, results, strategies, and expectations, including those related to the Southern States Bancshares, Inc merger[186] - These statements are subject to various risks and uncertainties, such as economic conditions, interest rate fluctuations, and integration risks from mergers[186] Critical accounting policies This section notes that financial statements are prepared under GAAP and involve estimates, with key policy updates detailed in the notes - The financial statements are prepared in accordance with GAAP, and certain financial information involves approximate measurements and estimates[189] - Updates to accounting policies, particularly regarding the allowance for credit losses (ACL) methodology, are detailed in Note 1 of the consolidated financial statements[189] Financial highlights This section provides a summary of key financial metrics and performance indicators for the recent periods Selected Financial Highlights (Amounts in thousands, except per share data) | Item | June 30, 2025 | June 30, 2024 | December 31, 2024 | | :--- | :--- | :--- | :--- | | Total assets | $13,354,238 | $12,535,169 | $13,157,482 | | Total deposits | $11,403,470 | $10,468,002 | $11,210,434 | | Net income applicable to FB Financial Corporation (3 months) | $2,909 | $39,979 | | | Net income applicable to FB Financial Corporation (6 months) | $42,270 | $67,929 | | | Basic net income per share (3 months) | $0.06 | $0.85 | | | Diluted net income per share (6 months) | $0.91 | $1.45 | | | Return on average assets (3 months) | 0.09% | 1.30% | | | Net interest margin (tax-equivalent basis) (3 months) | 3.68% | 3.57% | | | Nonperforming loans HFI as a percentage of loans HFI | 0.97% | 0.79% | 0.87% | | Total risk-based capital (Company) | 14.7% | 15.1% | 15.2% | - Net income for the three months ended June 30, 2025, significantly decreased to $2.9 million from $40.0 million in the prior year, resulting in a lower return on average assets of 0.09% (vs 1.30%)[191] - Net interest margin (tax-equivalent basis) improved to 3.68% for the three months ended June 30, 2025, from 3.57% in the prior year[191] GAAP reconciliation and management explanation of non-GAAP financial measures This section presents non-GAAP financial measures used by management to evaluate performance and provides reconciliations to GAAP figures Core efficiency ratio (tax-equivalent basis) This non-GAAP measure is used to understand ongoing operational efficiency by excluding certain non-core items - The core efficiency ratio (tax-equivalent basis) is a non-GAAP measure used by management to understand ongoing operations and enhance comparability[197] Core Efficiency Ratio (Tax-Equivalent Basis) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Core noninterest expense | $78,527 | $74,078 | $157,675 | $145,998 | | Core revenue (tax-equivalent basis) | $137,997 | $127,086 | $270,065 | $250,895 | | Core efficiency ratio (tax-equivalent basis) | 56.9% | 58.3% | 58.4% | 58.2% | - The core efficiency ratio (tax-equivalent basis) for the three months ended June 30, 2025, was 56.9%, an improvement from 58.3% in the prior year, indicating better operational efficiency when excluding non-core items[199] Tangible book value per common share and tangible common equity to tangible assets These non-GAAP measures exclude goodwill and other intangibles to provide a clearer view of capital adequacy - Tangible book value per common share and tangible common equity to tangible assets are non-GAAP measures that exclude goodwill and other intangibles[200] Tangible Capital Measures (Amounts in thousands, except per share data) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Tangible assets | $13,107,202 | $12,909,159 | | Tangible common equity | $1,364,094 | $1,319,215 | | Tangible book value per common share | $29.78 | $28.27 | | Tangible common equity to tangible assets | 10.4% | 10.2% | - Tangible book value per common share increased to $29.78 at June 30, 2025, from $28.27 at December 31, 2024, reflecting an improvement in tangible equity per share[202] Return on average tangible common equity This non-GAAP measure depicts profitability without the impact of intangible assets by excluding them from average shareholders' equity - Return on average tangible common equity is a non-GAAP measure that excludes goodwill and other intangibles from average shareholders' equity[203] Return on Average Tangible Common Equity | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Average tangible common equity | $1,335,747 | $1,223,195 | $1,335,859 | $1,216,534 | | Net income applicable to FB Financial Corporation | $2,909 | $39,979 | $42,270 | $67,929 | | Return on average tangible common equity | 0.87% | 13.1% | 6.38% | 11.2% | - Return on average tangible common equity decreased significantly to 0.87% for the three months ended June 30, 2025, from 13.1% in the prior year, aligning with the overall decline in net income[204] Company overview This section describes the Company's business, primary operations through its subsidiary FirstBank, and its two operating segments - FB Financial Corporation is a financial holding company headquartered in Nashville, Tennessee, operating primarily through its wholly-owned subsidiary, FirstBank[205] - FirstBank provides commercial and consumer banking services across Tennessee, Alabama, Kentucky, North Carolina, and Georgia, with 78 full-service branches as of June 30, 2025[205] - The Company operates through two segments: Banking (revenue from loans, investments, fees) and Mortgage (revenue from origination fees, secondary market sales, and servicing)[207] Mergers This section details the recent acquisition of Southern States Bancshares Inc, including its strategic rationale and financial impact - On July 1, 2025, the Company completed the acquisition of Southern States Bancshares Inc in an all-stock transaction, strengthening its presence in Alabama and expanding into Georgia[208][209] - Southern States contributed approximately $2.87 billion in total assets, $2.32 billion in loans, and $2.47 billion in deposits at closing[209] - Total consideration paid was $368.4 million, based on the Company's closing stock price of $45.30 per share on June 30, 2025[209] Overview of recent financial performance This section provides a comparative analysis of the company's financial performance for the three and six months ended June 30, 2025 and 2024 Three months ended June 30, 2025 compared to three months ended June 30, 2024 This subsection compares key financial results for the second quarter of 2025 against the same period in 2024 - Net income decreased to $2.9 million for Q2 2025 from $40.0 million for Q2 2024, with diluted EPS falling from $0.85 to $0.06[210] - Net interest income increased to $111.4 million (from $102.6 million), and net interest margin (tax-equivalent basis) rose to 3.68% (from 3.57%)[211] - Noninterest income decreased by $60.2 million to a loss of $34.6 million, driven by a $60.5 million net loss on investment securities sales[213] - Noninterest expense increased to $81.3 million (from $75.1 million), including $2.7 million in merger and integration costs[214] Six months ended June 30, 2025 compared to the six months ended June 30, 2024 This subsection compares key financial results for the first half of 2025 against the same period in 2024 - Net income decreased to $42.3 million for H1 2025 from $67.9 million for H1 2024, with diluted EPS falling from $1.45 to $0.91[216] - Net interest income increased to $219.1 million (from $202.1 million), and net interest margin (tax-equivalent basis) rose to 3.61% (from 3.49%)[217] - Noninterest income decreased by $45.1 million to a loss of $11.5 million, primarily due to a $60.5 million net loss on investment securities sales (vs $16.2 million loss in prior year)[218] - Noninterest expense increased to $160.8 million (from $147.5 million), driven by higher salaries, merger costs, advertising, and other expenses[219] Business segment highlights This section analyzes the performance of the Company's two primary business segments, Banking and Mortgage Banking This subsection details the financial performance of the Banking segment, including net interest income and pre-tax results - The Banking segment reported a pre-tax loss of $6.7 million for Q2 2025, a significant decline from $50.1 million income in Q2 2024, primarily due to a $60.5 million net loss on investment securities[222] - Net interest income for the Banking segment increased to $108.9 million in Q2 2025 from $101.2 million in Q2 2024[222] - For H1 2025, the Banking segment's pre-tax income was $40.6 million, down from $82.7 million in H1 2024, also largely impacted by the $60.5 million net loss on investment securities[223] Mortgage This subsection details the financial performance of the Mortgage segment, including mortgage banking income and pre-tax results - The Mortgage segment reported a pre-tax loss of $3.0 million for Q2 2025, compared to $0.8 million income in Q2 2024[225] - Mortgage banking income increased by $1.1 million to $13.0 million in Q2 2025, driven by a $2.3 million increase in gains on sale, partially offset by negative fair value changes[225][226] - For H1 2025, the Mortgage segment's pre-tax loss was $1.5 million, compared to $2.5 million income in H1 2024, with mortgage banking income increasing by $1.0 million to $25.5 million[227][228] - Provisions for credit losses in the Mortgage segment increased significantly due to changes in the CECL loss estimation methodology and forecasts impacting mortgage reserves[225][227] Results of operations This section provides a detailed analysis of the components of the company's operating results, including net interest income and noninterest items Net interest income This subsection analyzes the components of net interest income, including interest income, interest expense, and net interest margin - Net interest income (tax-equivalent basis) increased by $9.0 million to $112.2 million for Q2 2025, driven by a $4.9 million increase in interest income and a $4.1 million decrease in interest expense[233][247] - Interest income on loans HFI increased by $3.7 million to $158.0 million in Q2 2025, primarily due to increased volume, despite a 26 basis point decrease in yield to 6.44%[235] - Interest expense on interest-bearing deposits decreased by $2.9 million to $68.6 million in Q2 2025, with the total cost of interest-bearing deposits falling to 3.10% (from 3.52%)[239] - For H1 2025, net interest income (tax-equivalent basis) increased by $17.2 million to $220.7 million, with net interest margin rising to 3.61% (from 3.49%)[248][263] Provision for credit losses This subsection discusses the provision for credit losses on loans and unfunded commitments, including the impact of the new CECL methodology - The Company recognized a reversal of credit losses on loans HFI of $1.1 million for Q2 2025, compared to a provision expense of $3.9 million for Q2 2024[272] - The Q2 2025 reversal was primarily due to a $6.8 million reduction from the change in CECL loss estimation methodology, partially offset by $5.7 million of provision growth[272] - A provision expense for credit losses on unfunded commitments of $6.4 million was recorded for Q2 2025, largely due to a $6.5 million impact from the CECL methodology change[273] - For H1 2025, the provision for credit losses on loans HFI was $0.8 million (vs $5.8 million in H1 2024), reflecting a $7.7 million growth in provision offset by a $6.8 million reduction from the CECL methodology change[275] Noninterest income This subsection analyzes the various sources of noninterest income, such as mortgage banking, investment services, and securities gains/losses Noninterest Income (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Mortgage banking income | $13,029 | $11,910 | $25,455 | $24,495 | | Investment services and trust income | $3,922 | $3,387 | $7,633 | $6,617 | | Loss from investment securities, net | $(60,549) | — | $(60,533) | $(16,213) | | Total noninterest (loss) income | $(34,552) | $25,608 | $(11,520) | $33,570 | - Total noninterest income for Q2 2025 was a $34.6 million loss (vs $25.6 million income in Q2 2024), primarily due to a $60.5 million net loss from investment securities sales[279] - Mortgage banking income increased by $1.1 million to $13.0 million in Q2 2025, driven by higher origination fees and gains on sale[280] - For H1 2025, total noninterest income was an $11.5 million loss (vs $33.6 million income in H1 2024), mainly due to a $60.5 million net loss from investment securities sales (vs $16.2 million loss in H1 2024)[287][291] Noninterest expense This subsection breaks down noninterest expenses, including salaries, merger costs, and other operating expenses Noninterest Expense (Amounts in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Salaries, commissions and employee benefits | $46,631 | $46,225 | $94,982 | $90,843 | | Merger and integration costs | $2,734 | — | $3,135 | — | | Other expense | $17,790 | $15,664 | $34,542 | $30,565 | | Total noninterest expense | $81,261 | $75,093 | $160,810 | $147,513 | - Total noninterest expense increased by $6.2 million (8.2%) to $81.3 million in Q2 2025, driven by $2.7 million in merger and integration costs and a $2.1 million increase in other expenses[295][301][302] - For H1 2025, total noninterest expense increased by $13.3 million (9.0%) to $160.8 million, primarily due to a $4.1 million increase in salaries and benefits, $3.1 million in merger costs, and $4.0 million in other expenses[303][304][307][308] Efficiency ratio This subsection presents the efficiency ratio, a key measure of operational cost-effectiveness, on both a GAAP and adjusted basis - The efficiency ratio was 105.7% for Q2 2025 (vs 58.6% in Q2 2024) and 77.5% for H1 2025 (vs 62.6% in H1 2024)[310] - The adjusted efficiency ratio (tax-equivalent basis) was 56.9% for Q2 2025 (vs 58.3% in Q2 2024) and 58.4% for H1 2025 (vs 58.2% in H1 2024), indicating a more stable core operational efficiency[310] Income taxes This subsection explains the income tax expense or benefit and the effective tax rate for the reported periods - The Company recognized an income tax benefit of $12.7 million for Q2 2025 (vs $10.9 million expense in Q2 2024) and $3.2 million for H1 2025 (vs $17.2 million expense in H1 2024)[311] - The Q2 2025 tax benefit reflects the income tax effect of a $60.5 million loss on AFS debt securities and a one-time $10.7 million tax benefit from the expiration of the statute of limitations[311] - The effective tax rates were 130.0% for Q2 2025 and (8.1)% for H1 2025, significantly impacted by these non-recurring items[311] Financial condition This section provides a detailed analysis of the company's balance sheet, including loans, asset quality, deposits, and liquidity Loan portfolio This subsection provides a detailed breakdown of the loan portfolio by type, maturity, and interest rate structure Loan Portfolio by Type (Amounts in thousands) | Loan Type | June 30, 2025 (Outstanding) | December 31, 2024 (Outstanding) | | :--- | :--- | :--- | | Commercial and industrial | $1,788,911 | $1,691,213 | | Construction | $1,022,678 | $1,087,732 | | 1-to-4 family mortgage | $1,660,696 | $1,616,754 | | Non-owner occupied commercial real estate | $2,198,689 | $2,099,129 | | Total loans | $9,874,282 | $9,602,384 | - Total loans held for investment (HFI) increased to $9.87 billion at June 30, 2025, from $9.60 billion at December 31, 2024, representing 73.9% of total assets[314] - The loan portfolio is heavily concentrated in the geographic markets served, primarily Tennessee and Alabama, and is diversified across various industry classifications[316] Loan Maturity and Interest Rate Composition (June 30, 2025, Amounts in thousands) | Maturity | Fixed Interest Rate | Floating Interest Rate | Total | | :--- | :--- | :--- | :--- | | One year or less | $644,431 | $1,309,293 | $1,953,724 | | One to five years | $2,484,702 | $2,204,726 | $4,689,428 | | Five to fifteen years | $931,079 | $1,045,487 | $1,976,566 | | Over fifteen years | $921,093 | $333,471 | $1,254,564 | | Total | $4,981,305 (50.4%) | $4,892,977 (49.6%) | $9,874,282 | Asset quality This subsection analyzes asset quality, focusing on nonperforming assets and the allowance for credit losses Nonperforming Assets (Amounts in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total nonperforming loans HFI | $95,912 | $83,705 | | Mortgage loans held for sale (delinquent GNMA) | $20,977 | $31,357 | | Other real estate owned | $2,998 | $4,409 | | Other repossessed assets | $3,151 | $2,444 | | Total nonperforming assets | $123,038 | $121,915 | | Nonperforming loans HFI as a percentage of total loans HFI | 0.97% | 0.87% | | Nonperforming assets as a percentage of total assets | 0.92% | 0.93% | - Total nonperforming assets increased to $123.0 million at June 30, 2025, from $121.9 million at December 31, 2024[332][336] - Nonperforming loans HFI increased by $12.2 million to $95.9 million, primarily in construction and multi-family portfolios[333] Allowance for Credit Losses (ACL) on Loans HFI (Amounts in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total allowance for credit losses on loans HFI | $148,948 | $151,942 | | ACL as a % of loans HFI | 1.51% | 1.58% | | ACL as a % of nonaccrual loans HFI | 201.4% | 256.0% | | ACL as a % of nonperforming loans | 155.3% | 181.5% | - The ACL on loans HFI decreased to $148.9 million (1.51% of loans HFI) at June 30, 2025, from $151.9 million (1.58% of loans HFI) at December 31, 2024, influenced by the change in CECL methodology[346] Deposits This subsection details the composition and trends of the company's deposit base, a primary source of funding - Total deposits increased to $11.40 billion at June 30, 2025, from $11.21 billion at December 31, 2024[351] - Noninterest-bearing deposits increased to $2.19 billion, including a rise in mortgage escrow deposits to $114.7 million[352] - Interest-bearing checking deposits decreased to $2.33 billion, while money market and savings deposits increased by $307.1 million due to promotional campaigns[353] Deposit Distribution by Type (Amounts in thousands) | Deposit Type | June 30, 2025 (Amount) | June 30, 2025 (% of total deposits) | December 31, 2024 (Amount) | December 31, 2024 (% of total deposits) | | :--- | :--- | :--- | :--- | :--- | | Noninterest-bearing demand | $2,191,903 | 19% | $2,116,232 | 19% | | Interest-bearing checking | $2,325,551 | 20% | $2,906,425 | 26% | | Money market | $4,294,217 | 38% | $3,986,777 | 36% | | Customer time deposits | $1,721,745 | 15% | $1,380,205 | 12% | | Brokered and internet time deposits | $518,719 | 5% | $469,089 | 4% | | Total deposits | $11,403,470 | 100% | $11,210,434 | 100% | - Estimated uninsured and uncollateralized deposits were $2.99 billion (26.2% of total deposits) at June 30, 2025[360] Other earning assets This subsection discusses other earning assets, primarily the available-for-sale (AFS) debt securities portfolio - Federal funds sold increased to $298.0 million at June 30, 2025, from $64.8 million at December 31, 2024, reflecting changes in liquidity deployment strategy[363] - The fair value of AFS debt securities decreased to $1.34 billion at June 30, 2025, from $1.54 billion at December 31, 2024, with net unrealized losses of $63.3 million[365] - During Q2 2025, the Company sold $266.5 million of mortgage-backed AFS debt securities, resulting in a $60.5 million net loss, with proceeds intended for debt redemption and higher-yielding loan originations[366] AFS Debt Securities Portfolio (Fair Value and Yields) | Security Type | June 30, 2025 (Fair Value) | June 30, 2025 (Weighted Average Yield) | December 31, 2024 (Fair Value) | December 31, 2024 (Weighted Average Yield) | | :--- | :--- | :--- | :--- | :--- | | U.S. government agency securities | $642,264 | 4.90% | $563,007 | 5.40% | | Municipal securities | $144,228 | 2.98% | $147,857 | 2.96% | | Mortgage-backed securities - residential and commercial | $550,095 | 3.85% | $825,856 | 3.09% | | Total AFS debt securities | $1,337,565 | 4.26% | $1,538,008 | 3.93% | Borrowed funds This subsection details the company's borrowed funds, including repurchase agreements, FHLB advances, and subordinated debt - Securities sold under agreements to repurchase totaled $11.4 million at June 30, 2025, down from $13.5 million at December 31, 2024[373] - The Company had no FHLB advances outstanding as of June 30, 2025, or December 31, 2024, despite having a borrowing capacity of $1.48 billion[375] Subordinated Debt (Amounts in thousands) | Item | Total Debt Outstanding | Interest Rate (June 30, 2025) | | :--- | :--- | :--- | | FBK Trust I | $9,280 | 7.81% | | FBK Trust II | $21,650 | 7.71% | | FBK subordinated debt I | $100,000 | 4.50% | | Total subordinated debt, net | $130,898 | | - The Company anticipates utilizing proceeds from recent securities sales to redeem outstanding subordinated and trust preferred debt[377] Liquidity and capital resources This subsection discusses the company's management of liquidity and capital to meet its financial obligations and support growth - The Company maintains adequate liquidity through managing asset/liability maturities, growing low-cost deposits, and utilizing investment portfolios and various borrowing lines[381][382][383][384] Liquidity Summary (Amounts in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current on-balance sheet liquidity | $1,713,083 | $1,643,453 | | Total available sources of liquidity | $6,926,145 | $6,769,537 | | On-balance sheet liquidity as a percentage of total assets | 12.8% | 12.5% | | On-balance sheet liquidity and available sources of liquidity as a percentage of estimated uninsured and uncollateralized deposits | 289.5% | 293.8% | - As of June 30, 2025, the Company had $1.48 billion in FHLB borrowing capacity and $370.0 million in unsecured lines of credit, with no outstanding borrowings[385][386] - The Bank had $91.4 million of retained earnings available for dividend payments to the Company without prior regulatory approval as of June 30, 2025[392] Shareholders' equity and capital management This subsection analyzes shareholders' equity and capital ratios, demonstrating the company's strong capital position relative to regulatory requirements - Total shareholders' equity increased to $1.61 billion at June 30, 2025, from $1.57 billion at December 31, 2024, driven by net income and a reduction in accumulated other comprehensive loss, net[394] - Book value per common share increased to $35.17 at June 30, 2025, from $33.59 at December 31, 2024[394] - The Company's capital ratios remain well above regulatory requirements for well-capitalized institutions, with a Total risk-based capital ratio of 14.7% and Common Equity Tier 1 ratio of 12.3% at June 30, 2025[395][396][397] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's market risk, primarily focusing on interest rate risk inherent in its lending and deposit-taking activities Interest rate sensitivity This subsection details how the company measures and manages its exposure to interest rate fluctuations using rate shock analysis - The Company's market risk primarily stems from interest rate risk, which is actively monitored and managed by the Asset Liability Management Committee (ALCO)[398][399] - Rate shock analysis is used to measure the estimated impact of immediate changes in interest rates on net interest income and economic value of equity (EVE)[400] Estimated Impact of Interest Rate Changes on Net Interest Income and EVE | Change in Interest Rates (in basis points) | Percentage Change in Net Interest Income (June 30, 2025) | Percentage Change in Economic Value of Equity (June 30, 2025) | | :--- | :--- | :--- | | +400 | 8.61% | (18.1)% | | +300 | 7.16% | (13.8)% | | +200 | 5.06% | (8.64)% | | +100 | 2.67% | (3.97)% | | -100 | (2.91)% | 3.10% | | -200 | (5.81)% | 5.12% | - As of June 30, 2025, the Company is in an asset-sensitive position, meaning net interest income is projected to increase with rising interest rates and decrease with falling rates[403] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and notes no material changes in internal control - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, ensuring timely and accurate reporting[406] - No material changes occurred in the Company's internal control over financial reporting during the quarter ended June 30, 2025[407] - Management acknowledges that no control procedure can prevent all errors and fraud, providing only reasonable, not absolute, assurance[408] PART II. OTHER INFORMATION This part provides information on legal proceedings, risk factors, stock repurchases, and other corporate matters Item 1. Legal Proceedings This section states that there are no material pending legal proceedings against the Company or its subsidiaries beyond the normal course of business - As of the report date, there are no material pending legal proceedings against the Company or its subsidiaries[411] Item 1A. Risk Factors This section indicates that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report - No material changes to the risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[412] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's common stock repurchases during the quarter ended June 30, 2025 Common Stock Repurchases (Quarter Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 1 - April 30 | 703,091 | $41.83 | | May 1 - May 31 | 108,613 | $44.59 | | June 1 - June 30 | — | — | | Total | 811,704 | $42.20 | - The Company repurchased 811,704 shares of common stock at an average price of $42.20 per share during the quarter ended June 30, 2025[413] - The board re-authorized a stock repurchase program for up to $100 million, with $43.15 million remaining under the program as of June 30, 2025[413] Item 5. Other Information This section states that no directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the quarter - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the quarter ended June 30, 2025[414] Item 6. Exhibits This section lists all exhibits filed, furnished, or incorporated by reference as part of the Form 10-Q report - The exhibit index includes the Agreement and Plan of Merger with Southern States Bancshares, Inc, filed on March 31, 2025[417] - Certifications from the Chief Executive Officer and Chief Financial Officer are filed or furnished with the report[417] - Inline XBRL documents for the instance, schema, calculation, definition, label, and presentation linkbases are included[417] SIGNATURES This section contains the required signatures of the Company's officers, certifying the filing of the Form 10-Q report - The report is duly signed on behalf of FB Financial Corporation by Michael M Mettee, Chief Financial Officer, and Jonathan Pennington, Chief Accounting Officer, on August 4, 2025[419][420]