FB Financial Corp (Form: 10-Q, Received: 11/15/2016 06:22:06)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2016

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37875

FB FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Tennessee	62-1216058
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

211 Commerce Street, Suite 300 Nashville, TN 37201	37201
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (615) 564-1212

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒ (Do not check if a small reporting company)	Small reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2016, the registrant had 23,975,122 shares of common stock, $1.00 par value per share, outstanding. The registrant has no other classes of securities outstanding as of given date.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity Condensed Consolidated Statements of Cash Flows	5 6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	79
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	81
Item 1A.	Risk Factors	81
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 3.	Defaults Upon Senior Securities	81
Item 4.	Mine Safety Disclosures	81
Item 5.	Other Information	81
Item 6.	Exhibits	82
Signatures		83

PART 1 – FINANC IAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS (unaudited)

FB Financial Corporation and subsidiaries

Condensed consolidated balance sheets

(Unaudited)

(Amounts are in thousands except share amounts)

	September 30, 2016		December 31, 2015
ASSETS
Cash and due from banks	$	51,292	$	53,893
Federal funds sold		8,848		21,628
Interest bearing deposits in financial institutions		57,157		22,202
Cash and cash equivalents		117,297		97,723
Investments:
Available-for-sale securities, at fair value		553,357		649,387
Federal Home Loan Bank stock, at cost		6,528		6,528
Loans held for sale, at fair value		486,601		273,196
Loans		1,793,343		1,701,863
Less: allowance for loan losses		23,290		24,460
Net loans		1,770,053		1,677,403
Premises and equipment, net		65,882		65,892
Foreclosed real estate, net		8,964		11,641
Interest receivable		7,040		6,763
Mortgage servicing rights, net		46,291		29,711
Goodwill		46,867		46,904
Core deposit intangible, net		5,090		6,695
Other assets		73,210		27,577
Total assets	$	3,187,180	$	2,899,420
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits
Noninterest-bearing	$	726,248	$	626,955
Interest-bearing		1,382,981		1,273,438
Savings deposits		131,819		212,522
Time deposits		399,024		325,559
Total deposits		2,640,072		2,438,474
Securities sold under agreements to repurchase		29,137		105,133
Short-term borrowings		80,000		18,000
Long-term debt (see Note 14)		45,291		56,616
Deferred tax liability		15,457		713
Accrued expenses and other liabilities		48,115		43,810
Total liabilities		2,858,072		2,662,746
Shareholders' equity :
Common stock, $1 par value; 75,000,000 and 25,000,000 shares authorized;
23,975,122 and 17,180,000 shares issued and outstanding at September 30, 2016
and December 31, 2015, respectively		23,975		17,180
Additional paid-in capital		211,765		94,544
Retained earnings		84,774		122,493
Accumulated other comprehensive income, net		8,594		2,457
Total shareholders' equity		329,108		236,674
Total liabilities and shareholders' equity	$	3,187,180	$	2,899,420

See accompanying notes to condensed consolidated financial statements (unaudited).

FB Financial Corporation and subsidiaries

Condensed consolidated statements of income

(Unaudited)

(Amounts are in thousands except share amounts)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2016		2015			2016			2015
Interest income:
Interest and fees on loans	$	26,550	$	22,800		$	77,740		$	64,103
Interest on securities
Taxable		2,402		2,793			8,296			8,675
Tax-exempt		875		685			2,425			2,123
Other		178		106			466			329
Total interest income		30,005		26,384			88,927			75,230
Interest expense:
Deposits
Demand and savings accounts		1,340		1,197			4,026			3,415
Time deposits		575		364			1,378			1,253
Short-term borrowings		13		214			101			543
Long-term debt		460		474			1,504			1,443
Total interest expense		2,388		2,249			7,009			6,654
Net interest income		27,617		24,135			81,918			68,576
Provision for loan losses		71		(1,159	)		(727	)		(937	)
Net interest income after provision for loan losses		27,546		25,294			82,645			69,513
Noninterest income:
Mortgage banking income		36,938		19,794			91,574			51,081
Service charges on deposit accounts		1,870		1,876			6,129			5,240
ATM and interchange fees		1,814		1,572			5,756			4,510
Investment services income		857		800			2,508			2,464
Bargain purchase gain		—		2,794			—			2,794
Gain on sale of securities		416		47			4,407			1,842
Gain (loss) on sales or write-downs of foreclosed assets		1,646		(105	)		1,504			(43	)
Gain (loss) on other assets		7		5			24			(380	)
Other income		414		265			1,451			763
Total noninterest income		43,962		27,048			113,353			68,271
Noninterest expenses:
Salaries, commissions and employee benefits		34,010		22,151			84,486			61,111
Occupancy and equipment expense		3,171		2,741			9,567			7,892
Legal and professional fees		816		1,252			2,704			2,394
Data processing		1,294		511			2,691			1,520
Merger and conversion		1,122		291			3,268			578
Amortization of core deposit intangibles		526		415			1,605			1,221
Amortization of mortgage servicing rights		2,796		764			6,221			1,543
Impairment of mortgage servicing rights		2,402		—			8,089			—
Regulatory fees and deposit insurance assessments		465		550			1,481			1,465
Software license and maintenance fees		503		559			2,361			1,410
Advertising		2,220		2,305			8,071			5,875
Other expense		6,204		4,040			16,927			11,603
Total noninterest expense		55,529		35,579			147,471			96,612
Income before income taxes		15,979		16,763			48,527			41,172
Income tax expense (Note 7)		14,772		858			16,946			2,507
Net income	$	1,207	$	15,905		$	31,581		$	38,665
Weighted average common shares outstanding:
Basic		18,259,128		17,180,000			17,542,335			17,180,000
Fully diluted		18,332,192		17,180,000			17,566,867			17,180,000
Earnings per share
Basic	$	0.07	$	0.93		$	1.80		$	2.25
Fully diluted		0.07		0.93			1.80			2.25

Pro Forma (C Corporation basis) (Note 7):
Income tax expense	$	5,946	$	5,180		$	18,115		$	14,143
Net income		10,033		11,583			30,412			27,029
Earnings per share
Basic	$	0.55	$	0.67		$	1.73		$	1.57
Fully diluted		0.55		0.67			1.73			1.57

See accompanying notes to condensed consolidated financial statements (unaudited).

FB Financial Corporation and subsidiaries

Condensed consolidated statements of comprehensive income (loss)

(Unaudited)

(Amounts are in thousands except share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Net income	$	1,207		$	15,905		$	31,581		$	38,665
Other comprehensive income, net of tax:
Net change in unrealized gain in available-for-sale securities,
net of tax of $38 and $187 and $802 and $298		(1,524	)		3,868			10,246			4,584
Reclassification adjustment for gain on sale of securities
included in net income, net of tax expense of $57 and $3 and $298 and $101		(359	)		(44	)		(4,109	)		(1,741	)
Comprehensive income (loss)	$	(676	)	$	19,729		$	37,718		$	41,508

See accompanying notes to condensed consolidated financial statements (unaudited).

FB Financial Corporation and subsidiaries

Con densed consolidated statements of changes in shareholders’ equity

(Unaudited)

(Amounts are in thousands except share amounts)

	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income, net		Total shareholders' equity
Balance at January 1, 2015	$	17,180	$	94,544		$	98,237		$	5,267	$	215,228
Net income		—		—			38,665			—		38,665
Other comprehensive income, net of taxes		—		—			—			2,843		2,843
Cash dividends paid ($1.23 per share)		—		—			(21,100	)		—		(21,100	)
Balance at September 30, 2015	$	17,180	$	94,544		$	115,802		$	8,110	$	235,636

Balance January 1, 2016	$	17,180	$	94,544		$	122,493		$	2,457	$	236,674
Net income		—		—			31,581			—		31,581
Other comprehensive income, net of taxes		—		—			—			6,137		6,137
Common stock issued, net of offering costs		6,765		108,760			—			—		115,525
Conversion of cash-settled to stock-settled for:
Equity based incentive plans		—		2,388			—			—		2,388
Deferred compensation plan		—		3,000			—			—		3,000
Stock based compensation expense		—		3,373			—			—		3,373
Restricted stock units vested and distributed, net of shares withheld for taxes		30		(300	)		—			—		(270	)
Cash dividends paid ($4.03 per share)		—		—			(69,300	)		—		(69,300	)
Balance September 30, 2016	$	23,975	$	211,765		$	84,774		$	8,594	$	329,108

See accompanying notes to condensed consolidated financial statements (unaudited).

FB Financial Corporation and subsidiaries

Condensed consolidat ed statements of cash flows

(Unaudited)

(Amounts are in thousands except share amounts)

	Nine Months Ended
	September 30,
	2016			2015
Cash flows from operating activities:
Net income	$	31,581		$	38,665
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense		2,994			2,383
Amortization of core deposit intangibles		1,605			1,221
Capitalization of mortgage servicing rights		(30,890	)		(18,392	)
Amortization of mortgage servicing rights		6,221			1,543
Impairment of mortgage servicing rights		8,089			—
Stock-based compensation expense		3,373			—
Provision for loan losses		(727	)		(937	)
Provision for mortgage loan repurchases		1,173			1,021
Accretion of yield on purchased loans		(3,195	)		—
Accretion of discounts and amortization of premiums on securities, net		1,471			1,125
Bargain purchase gain		—			(2,794	)
Gain on sales of securities		(4,407	)		(1,842	)
Origination of loans held for sale		(3,121,252	)		(2,067,466	)
Proceeds from sale of loans held for sale		2,987,252			2,020,502
Gain on sale and change in fair value of loans held for sale		(85,154	)		(49,101	)
Net (gain) loss on sales or write-downs of foreclosed assets		(1,504	)		43
Gain (loss) on other assets		(24	)		380
Provision for deferred income tax		14,239			1,177
Changes in:
Other assets and interest receivable		(47,046	)		(153,073	)
Accrued expenses and other liabilities		10,504			71,771
Net cash used in operating activities		(225,697	)		(153,774	)
Cash flows from investing activities:
Activity in available-for-sale securities:
Sales		270,663			268,830
Maturities, prepayments and calls		78,661			79,771
Purchases		(244,221	)		(141,290	)
Net increase in loans		(85,209	)		(154,336	)
Purchases of premises and equipment		(3,683	)		(2,928	)
Proceeds from the sale of foreclosed assets		6,558			2,205
Proceeds from the sale of premises and equipment		—			16
Net cash received in business combination		—			23,995
Net cash provided by investing activities		22,769			76,263
Cash flows from financing activities:
Net increase in demand and savings deposits		128,133			137,248
Net increase (decrease) in time deposits		73,465			(31,235	)
Net decrease in securities sold under agreements to repurchase		(75,996	)		(32,776	)
Increase in short-term borrowings		62,000			59,440
Payments on long-term debt		(11,325	)		(7,297	)
Net proceeds from sale of common stock		115,525			—
Dividends paid		(69,300	)		(21,100	)
Net cash provided by financing activities		222,502			104,280
Net change in cash and cash equivalents		19,574			26,769
Cash and cash equivalents at beginning of the period		97,723			49,954
Cash and cash equivalents at end of the period	$	117,297		$	76,723

Supplemental cash flow information
Interest paid	$	7,041		$	6,731
Taxes paid		1,307			1,754
Supplemental noncash disclosures:
Transfers from loans to foreclosed real estate	$	2,636		$	2,284
Transfers from foreclosed real estate to loans		259			785
Transfers from loans held for sale to loans		5,749			4,245
Conversion of cash-settled to stock-settled compensation		5,388			—
Trade date receivable- securities		32,648			73,737

See accompanying notes to condensed consolidated financial statements (unaudited).

FB Financial Corporation and subsidiaries

Notes to condensed consolidated financial statements

(Unaudited)

Note (1)—Basis of presentation:

The condensed consolidated financial statements, including the notes thereto of FB Financial Corporation (the Company), formerly First South Bancorp, Inc. until the Company name was changed in 2016, have been prepared in accordance with United States generally accepted accounting principles (GAAP) interim reporting requirements, and therefore do not include all information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included on Form S-1. The Company’s principal business activity is banking, conducted through its wholly owned subsidiary, FirstBank (the Bank).

The unaudited condensed 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.

The accompanying consolidated financial statements have been prepared in conformity with GAAP and general banking industry. 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. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, and the determination of the fair value of financial instruments, including investment securities, derivatives and mortgage servicing rights. In connection with the determination of the estimated fair value of foreclosed real estate and impaired loans, management obtains independent appraisals for significant properties.

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.

On June 28, 2016, the Company declared a 100-for-1 stock split, increasing the number of issued and authorized shares from 171,800 to 17,180,000 and 250,000 to 25,000,000, respectively. Additional shares issued as a result of the stock split were distributed immediately upon issuance to the shareholder on that date. Share and per share amounts included in the consolidated financial statements and notes thereto reflect the effect of the split for all periods presented. Additionally, in July 2016, the Company increased the authorized shares from 25,000,000 to 75,000,000.

On August 19, 2016, the Company filed a Registration Statement on Form S-1 with the SEC. That Registration Statement was declared effective by the SEC on September 15, 2016. The Company sold and issued 6,764,704 shares of common stock at $19 per share pursuant to that Registration Statement. Total proceeds received by the Company, net of offering costs, were approximately $115,525. The proceeds were used to fund a $55,000 distribution to the majority shareholder and to repay all $10,075 aggregate principal amount of subordinated notes held by the majority shareholder, plus any accrued and unpaid interest thereon. The Company qualifies as an “emerging growth company” as defined by the Jumpstart Our Business Startups Act (JOBS Act).

The Company also terminated its S-Corporation status and became a taxable corporate entity (C Corporation) on September 16, 2016 in connection with its initial public offering. Pro forma amounts for income tax expense and basic and diluted earnings per share have been presented assuming the Company’s pro forma combined effective tax rate of 37.22% and 37.33% for the three and nine months ended September 30, 2016, respectively, and 30.9% and 34.35% for the three and nine months ended September 30, 2015, respectively, as if it had been a C Corporation during those periods. The difference in the statutory state and federal tax rates of 6.5% and 35% is due to nontaxable investment income in addition to the bargain purchase gain recognized in the third quarter of 2015 related to the acquisition of NWGB. In addition, the pro forma results for the three and nine months ended September 30, 2016 excludes the effect of recognition of the deferred tax liability attributable to conversion of $13,181 as discussed in Note 7.

Basic earnings per common share are net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under the restricted stock units granted but not yet vested and distributable. Unearned

compensation plus assumed proceeds from the applicable tax benefits are used to repurchase common stock at the average market price.

The following is a summary of the basic and diluted earnings per common share calculation for each of the periods presented:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Basic earnings per share calculation:
Net income	$	1,207	$	15,905	$	31,581	$	38,665
Weighted-average basic shares outstanding		18,259,128		17,180,000		17,542,335		17,180,000
Basic earnings per share	$	0.07	$	0.93	$	1.80	$	2.25
Diluted earnings per share:
Net income	$	1,207	$	15,905	$	31,581	$	38,665
Weighted-average basic shares outstanding		18,259,128		17,180,000		17,542,335		17,180,000
Average diluted common shares outstanding		73,064		—		24,532		—
Weighted-average diluted shares outstanding		18,332,192		17,180,000		17,566,867		17,180,000
Diluted earnings per share	$	0.07	$	0.93	$	1.80	$	2.25
Pro forma earnings per share:
Pro forma net income	$	10,033	$	11,583	$	30,412	$	27,029
Weighted-average basic shares outstanding		18,259,128		17,180,000		17,542,335		17,180,000
Pro forma basic earnings per share	$	0.55	$	0.67	$	1.73	$	1.57
Pro forma diluted earnings per share:
Pro forma net income	$	10,033	$	11,583	$	30,412	$	27,029
Weighted-average diluted shares outstanding		18,332,192		17,180,000		17,566,867		17,180,000
Pro forma diluted earnings per share	$	0.55	$	0.67	$	1.73	$	1.57

Except as set forth below, the Company did not adopt any new accounting policies that were not disclosed in the Company’s 2015 audited financial statements included on Form S-1.

Stock-Based Compensation — Stock-based compensation expense is recognized in accordance with ASC 718-20 Compensation – Stock Compensation Awards Classified as Equity. Expense is recognized based on the fair value of the portion of stock-based payment awards that are ultimately expected to vest, reduced for estimated forfeitures based on grant-date fair value. The restricted stock unit awards are amortized over the required service period, if any.

Except as set forth below, there are currently no new accounting standards that have been issued that will have a significant impact on the Company’s financial position, results of operations or cash flows upon adoption that were not disclosed in the Company’s 2015 audited financial statements included on Form S-1.

In June 2016, the FASB issued ASU 2016-13-”Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The update amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale securities. For assets held at amortized cost basis, this update eliminates the probable initial recognition threshold in current GAAP and instead, requires an entity to reflect its current estimate of all expected credit losses. For available for sale securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will allow credit losses to be presented as an allowance rather than as a write-down. The provisions of this update are expected to become effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2019. Management is currently evaluating the potential impact of this update.

Note (2)—Acquisition of Northwest Georgia Bank

On September 18, 2015, the Bank completed its acquisition of Northwest Georgia Bank (NWGB), a bank headquartered in Ringgold, Georgia, pursuant to that certain Agreement and Plan of Merger dated April 27, 2015 by and between the Bank and NWGB. Pursuant to the Agreement and Plan of Merger, NWGB was merged with and into the Bank, with the Bank as the surviving entity. Prior to the acquisition, NWGB operated six banking locations in Georgia and Tennessee. The acquisition of NWGB allowed the Company to further its strategic initiatives by expanding its geographic footprint into certain markets of Georgia and Tennessee. The Company acquired NWGB in a $1,500 cash purchase.

The Company recorded a bargain purchase gain of $2,794 and a core deposit intangible asset of $4,931. The fair value of the core deposit intangible is being amortized on a straight-line basis over the estimated useful life, currently expected to be approximately 10 years.

For income tax purposes, the acquisition of NWGB was treated as an asset purchase. As an asset purchase for income tax purpos es, the carrying value of assets and liabilities for NWGB are the same for both financial reporting and income tax purposes; therefore, no deferred taxes were recorded at the date of acquisition except for a $191 deferred tax liability recorded for the bar gain purchase gain. Additionally, this treatment allows for the deductibility for income tax purposes of the core deposit intangible recorded for the NWGB merger over 15 years, net of the bargain purchase gain.

In connection with the transaction, the Company incurred $1,122 and $291 and $3,268 and $578 in merger and conversion expenses during the three months and nine months ended September 30, 2016 and 2015, respectively.

The following table summarizes the final allocation of purchase price to assets and liabilities acquired in connection with the merger with NWGB based on estimated fair value on September 18, 2015.

(Dollar amounts in thousands)
Final Allocation of Purchase Price for Northwest Georgia Bank:
Total cash purchase price				$	1,500
Net assets acquired:
Stockholders' equity at September 18, 2015	$	6,478
Increase (decrease) to net assets as a result of fair value adjustments to assets acquired and liabilities assumed:
Securities		535
Loans, net of the reversal of NWGB's allowance for loan losses of $4,383		(8,024	)
Premises and equipment		3,731
Core deposits intangible		4,931
Foreclosed real estate		(1,922	)
Other assets		(264	)
Deposits		(302	)
FHLB funds purchased		(378	)
Other liabilities		(491	)
Total net fair value adjustments					4,294
Bargain purchase gain				$	2,794

(1)	The bargain purchase gain resulting from the merger has been recognized in the Banking operating segment during the three months ended September 30, 2015.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed at acquisition date in connection with the merger with NWGB.

Cash and cash equivalents	$	25,495
Securities available-for-sale		134,278
Loans		78,565
Premises and equipment		15,343
Intangible assets		4,931
Foreclosed real estate		5,002
Other assets		8,735
Total Assets	$	272,349
Deposits	$	246,216
Borrowings		20,378
Other liabilities		1,461
Total Liabilities	$	268,055
Purchase price		1,500
Bargain purchase gain	$	2,794

The Company finalized purchase accounting surrounding the NWGB acquisition and closed the measurement period as of December 31, 2015. The Company also elected to early adopt ASU 2015-16, “ Simplifying the Accounting for Measurement Period Adjustments ” as of December 31, 2015.

The following table presents the fair value of loans acquired from NWGB as of the September 18, 2015 acquisition date:

	September 18, 2015
Contractually-required principal and interest	$	91,079
Nonaccretable difference		(8,578	)
Cash flows expected to be collected		82,501
Accretable yield		(3,936	)
Fair value	$	78,565

The following unaudited pro forma combined condensed consolidated financial information presents the results of operations for the nine months ended September 30, 2015 of the Company as though the merger with NWGB had been completed as of January 1, 2014. The unaudited estimated pro forma information combines the historical results of NWGB with the Company’s historical consolidated results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the periods presented. The pro forma information is not indicative of what would have occurred had the acquisition taken place on January 1, 2014. The pro forma information does not include the effect of any cost-saving or revenue-enhancing strategies.

	Three Months ended September 30, 2015			Nine Months ended September 30, 2015
Interest income	$	22,516		$	75,702
Interest expense		1,702			6,616
Net interest income		20,814			69,086
Provision for loan losses		(1,159	)		(937	)
Noninterest income		25,335			68,271
Noninterest expense		29,409			97,201
Income before income taxes		17,899			41,093
Income taxes		935			2,502
Net income	$	16,964		$	38,591
Earnings per share
Basic	$	0.99		$	2.25
Diluted	$	0.99		$	2.25

Note (3)—Investment securities:

The amortized cost of securities and their fair values at September 30, 2016 and December 31, 2015 are shown below (in thousands):

	September 30, 2016
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Securities Available-for-Sale
Debt securities
U.S. government agency securities	$	2,501	$	—	$	—		$	2,501
Mortgage-backed securities - residential		429,156		4,678		(270	)		433,564
Municipals, tax exempt		99,171		4,987		(46	)		104,112
Treasury securities		4,504		2		—			4,506
Total debt securities		535,332		9,667		(316	)		544,683
Equity securities		8,722		26		(74	)		8,674
Total securities available-for-sale	$	544,054	$	9,693	$	(390	)	$	553,357

	December 31, 2015
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Securities Available-for-Sale
Debt securities
U.S. government agency securities	$	34,161	$	—	$	(353	)	$	33,808
Mortgage-backed securities - residential		524,141		3,675		(5,443	)		522,373
Municipals, tax exempt		74,945		4,892		—			79,837
Treasury securities		4,507		—		(22	)		4,485
Total debt securities		637,754		8,567		(5,818	)		640,503
Equity securities		8,971	3			(90	)		8,884
Total securities available-for-sale	$	646,725	$	8,570	$	(5,908	)	$	649,387

The amortized cost and fair value of debt securities by contractual maturity at September 30, 2016 and December 31, 2015 are shown below (in thousands). 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.

	September 30, 2016				December 31, 2015
	Available-for-sale				Available-for-sale
	Amortized cost		Fair value		Amortized cost		Fair value
Due in one year or less	$	5,203	$	5,206	$	6,849	$	6,886
Due in one to five		7,486		7,608		44,108		44,358
Due in five to ten years		37,340		39,790		29,964		31,927
Due in over ten years		56,147		58,515		32,692		34,959
		106,176		111,119		113,613		118,130
Mortgage-backed securities - residential		429,156		433,564		524,141		522,373
	$	535,332	$	544,683	$	637,754	$	640,503

Sales of available-for-sale securities were as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Proceeds from sales	$	1,668	$	157,475	$	270,663	$	268,830
Gross realized gains		416		47		4,755		1,842
Gross realized losses		—		—		348		—

The following tables show gross unrealized losses at September 30, 2016 and December 31, 2015, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	September 30, 2016
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss
U.S. government agency securities	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities - residential		35,601		96		20,373		174		55,974		270
Municipals, tax exempt		4,286		46		—		—		4,286		46
Treasury securities		—		—		—		—		—		—
Total debt securities		39,887		142		20,373		174		60,260		316
Equity securities		—		—		1,543		74		1,543		74
	$	39,887	$	142	$	21,916	$	248	$	61,803	$	390

	December 31, 2015
	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized loss
U.S. government agency securities	$	15,887	$	124	$	17,921	$	229	$	33,808	$	353
Mortgage-backed securities - residential		219,756		1,778		121,362		3,665		341,118		5,443
Municipals, tax exempt		4,485		22		—		—		4,485		22
Total debt securities		240,128		1,924		139,283		3,894		379,411		5,818
Equity securities		—		—		1,583		90		1,583		90
	$	240,128	$	1,924	$	140,866	$	3,984	$	380,994	$	5,908

As of September 30, 2016 and December 31, 2015, the Company’s securities portfolio consisted of 302 and 274 securities, 19 and 64 of which were in an unrealized loss position, respectively.

The Company evaluates securities with unrealized losses for other-than-temporary impairment (OTTI), and the Company recorded no OTTI for the three and nine months ended September 30, 2016 and 2015. For debt securities, the Company currently does not intend to sell those investments with unrealized losses, and it is unlikely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. For equity securities, the Company has evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and based on that evaluation has the ability and intent to hold these investments until a recovery of fair value.

As of September 30, 2016, the Company had a trade date receivable related to securitization of mortgage loans held for sale amounting to $32,648 for securities sold not yet settled .

Note (4)—Loans and allowance for loan losses:

Loans outstanding at September 30, 2016 and December 31, 2015, by major lending classification are as follows (in thousands):

	September 30, 2016			December 31, 2015
Commercial and industrial	$	370,379		$	317,038
Construction		227,321			231,025
Residential real estate:
1-to-4 family mortgage		286,580			287,749
Residential line of credit		173,898			171,526
Multi-family mortgage		54,129			59,510
Commercial real estate:
Owner occupied		350,790			330,207
Non-owner occupied		265,190			237,222
Consumer and other		65,056			67,586
Gross loans		1,793,343			1,701,863
Less: Allowance for loan losses		(23,290	)		(24,460	)
Net loans	$	1,770,053		$	1,677,403

As of September 30, 2016 and December 31, 2015, $445,598 and $26,089, respectively, of 1-to-4 family mortgage loans and loans held for sale were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line. As of September 30, 2016 and December 31, 2015, $29,451 and $43,825, respectively, of multi-family mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line.

The following provides the allowance for loan losses by portfolio segment and the related investment in loans net of unearned interest for the nine months ended September 30, 2016 and 2015 (in thousands):

	Commercial and industrial			Construction			1-to-4 family residential mortgage			Residential line of credit			Multi- family residential mortgage		Commercial real estate owner occupied			Commercial real estate non-owner occupied			Consumer and other			Total
Three Months Ended September 30 ,2016
Beginning balance- June 30, 2016	$	6,051		$	4,266		$	3,555		$	1,922		$	448	$	3,672		$	2,752		$	1,068		$	23,734
Provision for loan losses		423			103			108			(99	)		165		(35	)		(359	)		(235	)		71
Recoveries of loans previously charged-off		8			32			2			36			—		4			22			95			199
Loans charged off		(358	)		—			(166	)		(29	)		—		—			—			(161	)		(714	)
Ending balance- September 30, 2016	$	6,124		$	4,401		$	3,499		$	1,830		$	613	$	3,641		$	2,415		$	767		$	23,290
Nine Months Ended September 30 ,2016
Beginning balance - December 31, 2015	$	5,288		$	5,030		$	4,126		$	2,178		$	311	$	4,034		$	2,610		$	883		$	24,460
Provision for loan losses		912			(764	)		(517	)		(387	)		302		(315	)		(222	)		264			(727	)
Recoveries of loans previously charged-off		480			137			109			143			—		15			27			266			1,177
Loans charged off		(556	)		(2	)		(219	)		(104	)		—		(93	)		—			(646	)		(1,620	)
Ending balance- September 30, 2016	$	6,124		$	4,401		$	3,499		$	1,830		$	613	$	3,641		$	2,415		$	767		$	23,290

	Commercial and industrial			Construction			1-to-4 family residential mortgage			Residential line of credit			Multi- family residential mortgage			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Consumer and other			Total
Three Months Ended September 30 ,2015
Beginning balance - June 30, 2015	$	5,422		$	4,251		$	5,206		$	3,592		$	312		$	7,112		$	2,294		$	841		$	29,030
Provision for loan losses		791			(824	)		45			39			(12	)		(2,084	)		576			310			(1,159	)
Recoveries of loans previously charged-off		21			976			92			147			—			13			3			177			1,429
Loans charged off		(104	)		(33	)		(376	)		(104	)		—			(1,057	)		(54	)		(378	)		(2,106	)
Ending balance- September 30, 2015	$	6,130		$	4,370		$	4,967		$	3,674		$	300		$	3,984		$	2,819		$	950		$	27,194
Nine Months Ended September 30 ,2015
Beginning balance - December 31, 2014	$	6,600		$	3,721		$	6,364		$	2,790		$	184		$	6,075		$	2,641		$	655		$	29,030
Provision for loan losses		(276	)		(404	)		(985	)		737			116			(1,060	)		226			709			(937	)
Recoveries of loans previously charged-off		53			1,086			127			251			—			26			6			433			1,982
Loans charged off		(247	)		(33	)		(539	)		(104	)		—			(1,057	)		(54	)		(847	)		(2,881	)
Ending balance- September 30, 2015	$	6,130		$	4,370		$	4,967		$	3,674		$	300		$	3,984		$	2,819		$	950		$	27,194

The following table provides the allocation of the allowance for loan losses by loan category broken out between loans individually evaluated for impairment and loans collectively evaluated for imp airment as of September 30, 2016 and December 31, 2015 (in thousands):

													September 30, 2016
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Amount of allowance allocated to:
Individually evaluated for impairment	$	24	$	—	$	30	$	140	$	—	$	162	$	748	$	2	$	1,106
Collectively evaluated for impairment		6,100		4,401		3,469		1,690		613		3,479		1,667		765		22,184
Ending balance- September 30, 2016	$	6,124	$	4,401	$	3,499	$	1,830	$	613	$	3,641	$	2,415	$	767	$	23,290

													December 31, 2015
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Year-end amount of allowance allocated to:
Individually evaluated for impairment	$	89	$	5	$	66	$	—	$	—	$	38	$	775	$	—	$	973
Collectively evaluated for impairment		5,199		5,025		4,060		2,178		311		3,996		1,835		883		23,487
Ending balance- December 31, 2015	$	5,288	$	5,030	$	4,126	$	2,178	$	311	$	4,034	$	2,610	$	883	$	24,460

The following table provides the amount of loans by loan category broken between loans individually evaluated for impairment and loans collectively evaluated for impairment as of September 30, 2016 and December 31, 2015 (in thousands):

													September 30, 2016
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for impairment	$	1,531	$	2,773	$	2,721	$	316	$	1,034	$	2,658	$	3,331	$	3	$	14,367
Collectively evaluated for impairment		368,317		220,030		281,609		173,582		53,065		344,302		256,384		65,048		1,762,337
Acquired with deteriorated credit quality		531		4,518		2,250		—		30		3,830		5,475		5		16,639
Ending balance – September 30, 2016	$	370,379	$	227,321	$	286,580	$	173,898	$	54,129	$	350,790	$	265,190	$	65,056	$	1,793,343

													December 31, 2015
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for impairment	$	1,499	$	2,866	$	3,686	$	—	$	1,074	$	2,425	$	4,026	$	—	$	15,576
Collectively evaluated for impairment		314,665		221,300		281,235		171,526		58,400		322,999		227,205		67,582		1,664,912
Acquired with deteriorated credit quality		874		6,859		2,828		—		36		4,783		5,991		4		21,375
Ending balance- December 31, 2015	$	317,038	$	231,025	$	287,749	$	171,526	$	59,510	$	330,207	$	237,222	$	67,586	$	1,701,863

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 experienc e, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings:

Watch. Loans classified as special mention 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.

Substandard. Loans classified 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 classified 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.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, 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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

The following table shows credit quality indicators by portfolio class at September 30, 2016 and December 31, 2015 (in thousands):

September 30, 2016	Pass		Watch		Substandard		Total
Commercial and industrial	$	357,447	$	8,769	$	4,163	$	370,379
Construction		219,155		3,053		5,113		227,321
Residential real estate:
1-to-4 family mortgage		269,839		6,605		10,136		286,580
Residential line of credit		169,686		2,298		1,914		173,898
Multi-family mortgage		52,910		155		1,064		54,129
Commercial real estate:
Owner occupied		331,746		10,661		8,383		350,790
Non-owner occupied		243,161		13,080		8,949		265,190
Consumer and other		64,263		459		334		65,056
Total	$	1,708,207	$	45,080	$	40,056	$	1,793,343

December 31, 2015	Pass		Watch		Substandard		Total
Commercial and industrial	$	310,125	$	1,060	$	5,853		317,038
Construction		219,684		3,238		8,103		231,025
Residential real estate:
1-to-4 family mortgage		268,046		9,367		10,336		287,749
Residential line of credit		165,838		3,069		2,619		171,526
Multi-family mortgage		58,234		166		1,110		59,510
Commercial real estate:
Owner occupied		310,538		9,852		9,817		330,207
Non-owner occupied		206,645		20,218		10,359		237,222
Consumer and other		66,794		460		332		67,586
Total	$	1,605,904	$	47,430	$	48,529	$	1,701,863

Loans acquired in business combinations that exhibited at the date of acquisition evidence of deterioration of credit quality since origination such that it was probable that all contractually required payments would not be collected are considered to be p urchased credit impaired and were as follows at September 30, 2016 and December 31, 2015 (in thousands):

	September 30, 2016		December 31, 2015
Commercial and industrial	$	531	$	874
Construction		4,518		6,859
Residential real estate:
1-to-4 family mortgage		2,250		2,828
Residential line of credit		—		—
Multi-family mortgage		30		36
Commercial real estate:
Owner occupied		3,830		4,783
Non-owner occupied		5,475		5,991
Consumer and other		5		4
Total	$	16,639	$	21,375

The following table presents the current value of loans determined to be impaired at the time of acquisition at September 30, 2016 and December 31, 2015 (in thousands):

	September 30, 2016			December 31, 2015
Contractually-required principal and interest	$	23,736		$	31,381
Nonaccretable difference		(6,058	)		(8,369	)
Cash flows expected to be collected		17,678			23,012
Accretable yield		(1,039	)		(1,637	)
Current value	$	16,639		$	21,375

Changes in accretable yield and nonaccretable difference of purchased loans were as follows (in thousands):

	Accretable yield						Nonaccretable Difference
	Purchased Credit Impaired			Purchased Non-impaired			Purchased Credit Impaired			Purchased Non-impaired			Total
Balance at July 1, 2016	$	(1,248	)	$	(1,613	)	$	(6,439	)	$	—		$	(9,300	)
Additions through acquisition		—			—			—			—			—
Principal reductions/ pay-offs		(381	)		—			381			—			—
Charge-offs		—			—			—			—			—
Accretion		590			224			—			—			814
Balance at September 30, 2016	$	(1,039	)	$	(1,389	)	$	(6,058	)	$	—		$	(8,486	)

Balance at July 1, 2015	$	—		$	—		$	—		$	—		$	—
Additions through acquisition		(1,991	)		(1,945	)		(8,508	)		(70	)		(12,514	)
Principal reductions/ pay-offs		—			—			—			—			—
Charge-offs		—			—			—			—			—
Accretion		—			—			—			—			—
Balance at September 30, 2015	$	(1,991	)	$	(1,945	)	$	(8,508	)	$	(70	)	$	(12,514	)

	Accretable yield						Nonaccretable Difference
	Purchased Credit Impaired			Purchased Non-impaired			Purchased Credit Impaired			Purchased Non-impaired			Total
Balance at January 1, 2016	$	(1,637	)	$	(2,147	)	$	(8,369	)	$	(70	)	$	(12,223	)
Additions through acquisition		—			—			—			—			—
Principal reductions/ pay-offs		(1,839	)		—			1,839			—			—
Charge-offs		—			—		472				—			472
Sale of credit card portfolio		—			—			—		70				70
Accretion		2,437			758			—			—			3,195
Balance at September 30, 2016	$	(1,039	)	$	(1,389	)	$	(6,058	)	$	—		$	(8,486	)

Balance at January 1, 2015	$	—		$	—		$	—		$	—		$	—
Additions through acquisition		(1,991	)		(1,945	)		(8,508	)		(70	)		(12,514	)
Principal reductions/ pay-offs		—			—			—			—			—
Charge-offs		—			—			—			—			—
Sale of credit card portfolio		—			—			—			—			—
Accretion		—			—			—			—			—
Balance at September 30, 2015	$	(1,991	)	$	(1,945	)	$	(8,508	)	$	(70	)	$	(12,514	)

There were no purchased credit impaired loans prior to the NWGB acquisition on September 18, 2015.

Nonperforming loans include loans that are no longer accruing interest (non-accrual loans) and loans past due ninety or more days and still accruing interest. Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category.

The following table provides the period-end amounts of loans that are past due thirty to eighty-nine days, past due ninety or more days and still accruing interest, loans not accruing interest and loans current on payments accruing interest by category at September 30, 2016 and December 31, 2015 (in thousands):

September 30, 2016	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	313	$	264	$	1,219	$	368,052	$	369,848
Construction		985		201		257		221,360		222,803
Residential real estate:
1-to-4 family mortgage		3,170		520		2,020		278,620		284,330
Residential line of credit		405		194		644		172,655		173,898
Multi-family mortgage		138		—		—		53,961		54,099
Commercial real estate:								—
Owner occupied		180		17		2,061		344,702		346,960
Non-owner occupied		92		—		3,385		256,238		259,715
Consumer and other		490		146		36		64,379		65,051
Total	$	5,773	$	1,342	$	9,622	$	1,759,967	$	1,776,704

Loans acquired with deteriorated credit quality amounting to $16,639 and have been excluded from the table above in accordance with ASC-310-10-50, Receivables- Overall- Disclosure .

December 31, 2015	30-89 days past due		90 days or more and accruing interest		Non-accruing loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	283	$	103	$	1,659	$	314,119	$	316,164
Construction		81		33		272		223,780		224,166
Residential real estate:
1-to-4 family mortgage		2,798		268		2,124		279,731		284,921
Residential line of credit		1,053		323		1,114		169,036		171,526
Multi-family mortgage		—		—		—		59,474		59,474
Commercial real estate:
Owner occupied		382		—		1,848		323,194		325,424
Non-owner occupied		60		—		3,638		227,533		231,231
Consumer and other		331		160		45		67,046		67,582
Total	$	4,988	$	887	$	10,700	$	1,663,913	$	1,680,488

Loans acquired with deteriorated credit quality amounting to $21,375 have been excluded from the table above in accordance with ASC-310-10-50, Receivables- Overall- Disclosure .

Impaired loans recognized in conformity with ASC 310 at September 30, 2016 and December 31, 2015, segregated by class, were as follows (in thousands):

September 30, 2016	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	362	$	362	$	24
Construction		—		—		—
Residential real estate:
1-to-4 family mortgage		110		376		30
Residential line of credit		316		322		140
Multi-family mortgage		—		—		—
Commercial real estate:
Owner occupied		825		831		162
Non-owner occupied		2,163		2,169		748
Consumer and other		3		3		2
Total	$	3,779	$	4,063	$	1,106
With no related allowance recorded
Commercial and industrial	$	1,169	$	1,528	$	—
Construction		2,773		2,778		—
Residential real estate:
1-to-4 family mortgage		2,611		2,615		—
Residential line of credit		—		—		—
Multi-family mortgage		1,034		1,034		—
Commercial real estate:
Owner occupied		1,833		2,957		—
Non-owner occupied		1,168		1,902		—
Consumer and other		—		—		—
Total	$	10,588	$	12,814	$	—
Total impaired loans	$	14,367	$	16,877	$	1,106

	Three Months Ended				Nine Months Ended
September 30, 2016	Average recorded investment		Interest income recognized (cash basis)		Average recorded investment		Interest income recognized (cash basis)
With a related allowance recorded:
Commercial and industrial	$	363	$	3	$	820	$	14
Construction		—		—		102		—
Residential real estate:
1-to-4 family mortgage		200		1		1,482		27
Residential line of credit		319		4		213		6
Multi-family mortgage		—		—		—		—
Commercial real estate:
Owner occupied		807		17		1,115		18
Non-owner occupied		2,573		4		2,776		13
Consumer and other		2		—		1		—
Total	$	4,264	$	29	$	6,509	$	78
With no related allowance recorded
Commercial and industrial	$	1,318	$	13	$	767	$	17
Construction		2,782		36		2,712		99
Residential real estate:
1-to-4 family mortgage		2,680		19		2,060		103
Residential line of credit		—		—		—		—
Multi-family mortgage		1,037		13		1,052		25
Commercial real estate:
Owner occupied		2,239		33		1,378		75
Non-owner occupied		1,413		1		1,212		2
Consumer and other		—		—				—
Total	$	11,469	$	115	$	9,181	$	321

September 30, 2015
With a related allowance recorded:
Commercial and industrial	$	1,844	$	34	$	2,130	$	45
Construction		4,707		51		4,702		144
Residential real estate:
1-to-4 family mortgage		4,358		73		3,660		149
Residential line of credit		—		—		—		—
Multi-family mortgage		887		—		877		—
Commercial real estate:
Owner occupied		2,853		16		2,368		52
Non-owner occupied		4,397		13		3,007		90
Consumer and other		—		—				—
Total	$	19,046	$	187	$	16,744	$	480
With no related allowance recorded
Commercial and industrial	$	425	$	—	$	390	$	—
Construction		444		—		136		—
Residential real estate:
1-to-4 family mortgage		180		—		95		—
Residential line of credit		—		—		—		—
Multi-family mortgage		218		—		214		—
Commercial real estate:
Owner occupied		157		—		146		44
Non-owner occupied		1,416		—		1,195		18
Consumer and other		—		—		—		—
Total	$	2,840	$	—	$	2,176	$	62

December 31, 2015	Recorded investment		Unpaid principal		Related allowance		Average recorded investment		Interest income recognized (cash basis)
With a related allowance recorded:
Commercial and industrial	$	1,133	$	1,133	$	89	$	1,269	$	22
Construction		308		308		5		517		3
Residential real estate:
1-to-4 family mortgage		3,397		3,398		66		2,345		199
Residential line of credit		—		—		—		—		—
Multi-family mortgage		—		—		—		468		—
Commercial real estate:
Owner occupied		2,302		2,422		38		1,938		77
Non-owner occupied		2,976		2,976		775		3,039		18
Consumer and other		—		—		—		—		—
Total	$	10,116	$	10,237	$	973	$	9,576	$	319
With no related allowance recorded:
Commercial and industrial	$	366	$	993	$	—	$	660	$	—
Construction		2,558		2,558		—		4,337		127
Residential real estate:
1-to-4 family mortgage		289		289		—		2,815		7
Residential line of credit		—		—		—		—		—
Multi-family mortgage		1,074		1,074		—		652		25
Commercial real estate:
Owner occupied		123		229		—		788		—
Non-owner occupied		1,050		1,781		—		855		—
Consumer and other		—		—		—		—		—
Total	$	5,460	$	6,924	$	—	$	10,107	$	159
Total impaired loans	$	15,576	$	17,161	$	973	$	19,683	$	478

As of September 30, 2016 and December 31, 2015, the Company has a recorded investment in troubled debt restructurings of $10,125 and $15,289, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate. The Company has allocated $848 and $946 of specific reserves for those loans at September 30, 2016 and December 31, 2015, respectively, and has committed to lend additional amounts totaling up to $1 and $69, respectively to these customers. Of these loans, $5,274 and $5,898 were classified as non-accrual loans as of September 30, 2016 and December 31, 2015.

The following table presents the financial effect of TDRs recorded during the periods indicated ($ amounts in thousands):

Three months ended September 30, 2016	Number of loans		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial real estate:
Owner occupied	1			118		118		—
Residential real estate:
1-4 family mortgage	1			1,098		1,098		—
Consumer and other		2		4		4		—
Total	4		$	1,220	$	1,220	$	—

Three months ended September 30, 2015	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial real estate:
Owner occupied	1		221		221		—
Total	1	$	221	$	221	$	—

Nine months ended September 30, 2016	Number of loans		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial
Commercial real estate:
Owner occupied	1			460		460		—
Residential real estate:
1-4 family mortgage	5			1,819		1,819		39
Consumer and other		2		4		4		—
Total	8		$	2,283	$	2,283	$	39

Nine months ended September 30, 2015	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	6	$	2,301	$	2,301	$	86
Commercial real estate:
Owner occupied	2		786		786		—
Non-owner occupied	1		133		133		—
Residential real estate:
1-4 family mortgage	5	326		326			45
Total	14	$	3,546	$	3,546	$	131

There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended September 30, 2016. The following presents loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the nine months ended September 30, 2015.

	Defaulted		Charge-offs and specific reserves
Residential real estate:
1-to-4 family mortgage	$	145	$	45
Total	$	145	$	45

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

The terms of certain other loans were modified during the nine months ended September 30, 2016 and 2015 that did not meet the definition of a troubled debt restructuring. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

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.

Note (5)—Foreclosed real estate:

The amount reported as real estate acquired through foreclosure proceedings is carried at fair value less estimated cost to sell the property. The following table summarizes the foreclosed real estate for the three and nine months ended September 30, 2016 and 2015 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Balance at beginning of period	$	9,902		$	6,199		$	11,641		$	7,259
Acquired through merger with NWGB		—			5,002			—			5,002
Transfers from loans		460			1,057			2,636			2,284
Capital improvements		—			35			—			35
Property sold		(3,044	)		(447	)		(6,558	)		(2,205	)
Gain on sale of foreclosed assets		1,680			23			1,749			127
Transferred to loans		—			(194	)		(259	)		(785	)
Write-downs and partial liquidations		(34	)		(128	)		(245	)		(170	)
Balance at end of period	$	8,964		$	11,547		$	8,964		$	11,547

Foreclosed residential real estate properties included in the table above totaled $2,796 and $2,715 as of September 30, 2016 and December 31, 2015, respectively. The recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled $- and $67 at September 30, 2016 and December 31, 2015, respectively.

Note (6)—Mortgage servicing rights:

Changes in the Company’s mortgage servicing rights were as follows for the three and nine months ended September 30, 2016 and 2015 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2016			2015			2016			2015
Carrying value at beginning of period	$	40,382		$	16,361		$	29,711		$	6,032
Capitalization		11,107			7,284			30,890			18,392
Amortization		(2,796	)		(764	)		(6,221	)		(1,543	)
Impairment		(2,402	)		—			(8,089	)		—
Carrying value at September 30	$	46,291		$	22,881		$	46,291		$	22,881

Income and expense associated with mortgage servicing rights, which include servicing fees, late charges, guarantee fees and loan payoff interest, is recorded on a cash basis which approximates income as would be recorded on a U.S. GAAP basis. The following table summarizes servicing income and expense included in mortgage banking income and other noninterest expense within the Mortgage Segment operating results, respectively, for the three months and nine months ended September 30, 2016 and 2015 (in thousands), respectively:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
		2016			2015		2016			2015
Gross servicing income	$	3,660		$	1,050	$	8,311		$	2,102
Servicing expenses:
Servicing asset amortization		2,796			764		6,221			1,543
Servicing asset impairment		2,402			—		8,089			—
Other servicing expenses		625			174		1,571			374
Gross servicing expenses		5,823			938		15,881			1,917
Net servicing (loss) income	$	(2,163	)	$	112	$	(7,570	)	$	185

Data and key economic assumptions related to the Company’s mortgage servicing rights as of September 30, 2016 and December 31, 2015 are as follows ($ amounts in thousands):

	September 30, 2016			December 31, 2015
Unpaid principal balance	$	4,975,893		$	2,545,449
Weighted-average prepayment speed (CPR)		11.55	%		7.30	%
Estimated impact on fair value of a 10% increase		(2,144	)		(371	)
Estimated impact on fair value of a 20% increase		(4,127	)		(726	)
Discount rate		9.20	%		10.14	%
Estimated impact on fair value of a 100 bp increase		(1,752	)		(1,201	)
Estimated impact on fair value of a 200 bp increase		(3,381	)		(2,317	)
Weighted-average coupon interest rate		3.65	%		3.79	%
Weighted-average servicing fee (basis points)		26			25
Weighted-average remaining maturity (in months)		310			311

On September 29, 2016, the Company signed a letter of intent to sell approximately $2.4 billion in serviced mortgage loan balances. The transaction terms dictate an adjustable daily pricing mechanism based on changes in the referenced mortgage interest rate. In order to hedge the movement of the referenced mortgage interest rate, the Company entered into a series of interest rate futures and related derivatives to approximately offset the changes to the sales price with an aggregate notional value of $130,000 subsequent to September 30, 2016. The changes in the fair value of the derivatives will be included in the change in the fair value of the MSRs and the resulting gain or loss on the sale of the underlying MSRs.

Additionally, subsequent to September 30, 2016, the Company signed a letter of intent to sell an additional approximate $1.3 billion in serviced mortgage loan balances.

At September 30, 2016, the fair value carrying amount of the related mortgage servicing rights totaled approximately $32,600 million for the two transactions.

Both transactions are expected to close prior to the end of the fourth quarter of 2016. In connection with the above sales, the Company does not expect any further material gain or loss on the sale; however, the Company does expect to incur transaction-related expenses in the aggregate amount of approximately $2,600 million which will be recorded when incurred.

Based on current management plans, the Company plans to retain the remaining MSRs related primarily to the retail mortgage originations within its existing footprint for marketing purposes while selling originated MSRs through various transactions in future periods.

Note (7)—Income taxes:

In connection with the initial public offering, as discussed in Note 1, the Company terminated its S-Corporation status and became a taxable entity (C Corporation) on September 16, 2016. As such, any periods prior to September 16, 2016 will only reflect an effective state income tax rate. The reported income tax expense for the three months and nine months ended September 30, 2016 reflects the increase in the deferred tax net liability of $13,181 from the conversion in the taxable status. The deferred tax net liability is the result of timing differences in the recognition of income/deductions for generally accepted accounting principles (GAAP) and tax purposes. The consolidated statements of income present pro forma statements of income for the current quarter and year to date and for prior year periods.

Allocation of federal and state income taxes between current and deferred portions is as follows (in thousands):

	For the three months ended
	September 30, 2016		September 30, 2015
Current	$	1,579	$	405
Deferred		13,193		453
Total	$	14,772	$	858

	For the nine months ended
	September 30, 2016		September 30, 2015
Current	$	2,707	$	1,330
Deferred		14,239		1,177
Total	$	16,946	$	2,507

Federal income tax expense for the three and nine months ended September 30, 2016 and state income tax expense for the three and nine months ended September 30, 2015 differs from the statutory federal and state rates of 35% and 6.50% due to the following (in thousands):

	For the three months ended
	September 30, 2016		September 30, 2015
Taxes calculated at statutory rate	$	1,160	$	857
Increase (decrease) resulting from:
Conversion as of September 16, 2016 to C Corporation		13,181		—
Other		431		1
Income tax expense, as reported	$	14,772	$	858

	For the nine months ended
	September 30, 2016		September 30, 2015
Taxes calculated at statutory rate	$	3,338	$	2,505
Increase (decrease) resulting from:
Conversion as of September 16, 2016 to C Corporation		13,181		—
Other		427		2
Income tax expense, as reported	$	16,946	$	2,507

The components of the net deferred tax liability at September 30, 2016 and December 31, 2015, are as follows (in thousands):

	September 30, 2016			December 31, 2015
Deferred tax assets:
Allowance for loan losses	$	9,120		$	1,565
Amortization of core deposit intangible		904			107
Compensation related		7,001			1,120
Other		2,679			39
Subtotal		19,704			2,831
Deferred tax liabilities:
FHLB stock dividends		(827	)		(135	)
Depreciation		(6,576	)		(661	)
Unrealized gain on securities		(3,649	)		(205	)
Mortgage servicing rights		(18,128	)		(1,902	)
Other		(5,981	)		(641	)
Subtotal		(35,161	)		(3,544	)
Net deferred tax liability	$	(15,457	)	$	(713	)

In recording the impact of the conversion to a C Corporation, the Company recorded a deferred income tax expense of $2,955 related to the unrealized gain on available for sale securities through the income statement in accordance with ASC 740-20-45-8; therefore, the amount shown in other comprehensive income has not been reduced by the above expense. This difference will remain in OCI until the underlying securities are sold or mature in accordance with the portfolio approach allowed under ASC 740.

Tax periods for all fiscal years after 2011 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject.

Note (8)—Commitments and contingencies:

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.

Commitments may expire without being used. Off-balance sheet risk to 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.

(in thousands)	September 30, 2016		December 31, 2015
Commitments to extend credit, excluding interest rate lock commitments	$	688,446	$	554,274
Letters of credit		20,033		20,338
Balance at end of period	$	708,479	$	574,612

In connection with the sale of mortgage loans to third party investors, the Bank makes usual and customary representations and warranties as to the propriety of its origination activities. Occasionally, the investors require the Bank 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 $13 and $0 for three and nine months ended September 30, 2016 and 2015, respectively. The Bank has established a reserve associated with loan repurchases. This reserve is recorded in accrued expenses and other liabilities on the consolidated balance sheet. The following table summarizes the activity in the repurchase reserve (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Balance at beginning of period	$	2,859	$	1,457	$	2,156	$	828
Provision for loan repurchases or indemnifications		470		392		1,173		1,021
Recoveries on previous losses		—		—		—		—
Losses on loans repurchased or indemnified		13		—		13		—
Balance at end of period	$	3,342	$	1,849	$	3,342	$	1,849

Note (9)—Derivatives:

The Company utilizes derivative financial instruments as part of its ongoing efforts to manage its interest rate risk exposure as well as the exposure for its customers. Derivative financial instruments are included in the Consolidated Balance Sheets line 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 a mortgage loan are typically locked in for up to forty-five days with the customer. These interest rate lock commitments are recorded at fair value in the Company’s Consolidated Balance Sheets. The notional amount of commitments to fund fixed-rate mortgage loans was $850,500 and $263,395 at September 30, 2016 and December 31, 2015, respectively. The Company also enters into mandatory delivery forward commitments to sell residential mortgage loans to secondary market investors. The notional amount of commitments to sell residential mortgage loans to secondary market investors was $909,000 and $445,000 at September 30, 2016 and December 31, 2015, respectively. Gains and losses arising from changes in the valuation of the commitments are recognized currently in earnings and are reflected under the line item “Mortgage banking income” on the Consolidated Statements of Income.

The Company has entered 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 these customer contracts, the Company enters into an offsetting derivative contract position. The Company manages its credit risk, or potential risk of default by its commercial customers, through credit limit approval and monitoring procedures. At September 30, 2016 and December 31, 2015, the Company had notional amounts of $19,708 and $4,409, respectively, on interest rate contracts with corporate customers and $19,708 and $4,409, respectively, in offsetting interest rate contracts with other financial institutions to mitigate the Company’s rate exposure on its corporate customers’ contracts and certain fixed-rate loans. The fair value on the swaps was $(296) and $(369) at September 30, 2016 and December 31, 2015, respectively.

Certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Balance Sheet when the “right of setoff” exists or when the instruments are subject to an enforceable master netting agreement, which includes the r ight 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 derivativ e instruments are subject to master netting agreements. The Company has not elected to offset such financial instruments in the Consolidated Balance Sheets.

The following table provides details on the Company’s derivative financial instruments as of the dates presented:

	Balance Sheet Classification	Fair Value
		September 30,		December 31,
		2016		2015
Derivative assets:
Not designated as hedging:
Interest rate swaps	Other Assets	$	296	$	369
Forward commitments	Other Assets		—		61
Interest rate-lock commitments	Other Assets		16,515		5,593
Total		$	16,811	$	6,023

Derivative liabilities:
Not designated as hedging:
Interest rate swaps	Other Liabilities	$	296	$	369
Forward commitments	Other Liabilities		4,511		—
Total		$	4,807	$	369

Gains (losses) included in the Condensed Consolidated Statements of Income related to the Company’s derivative financial instruments were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Derivatives not designated as hedging instruments:
Interest rate lock commitments:
Included in mortgage banking income	$	(1,043	)	$	2,321		$	10,922		$	4,626
Forward commitments:
Included in mortgage banking income		(4,404	)		(9,165	)		(21,149	)		(5,642	)
Total	$	(5,447	)	$	(6,844	)	$	(10,227	)	$	(1,016	)

Note (10)—Fair value of financial instruments:

ASC 820-10 establishes a framework for measuring the fair value of assets and liabilities according to a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that are derived from assumptions based on management’s estimate of assumptions that market participants would use in pricing the asset or liability based on the best information available under the circumstances.

The hierarchy is broken down into the following three levels, based on the reliability of inputs:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs for asse ts 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:

Available-for-sale securities—Available-for-sale 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. Available-for-sale 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. If fair value is used, it is determined using current secondary market prices for loans with similar characteristics, that is, using Level 2 inputs.

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.

Foreclosed real estate—Foreclosed real estate (“REO”) is comprised of commercial and residential real estate obtained in partial or total satisfaction of loan obligations. REO 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—Servicing rights are carried at the lower of amortized cost or 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. Mortgage servicing rights are disclosed as level 3.

Impaired loans—Loans considered impaired under FASB ASC 310, Receivables, are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value adjustments for impaired loans are recorded on a non-recurring basis as either partial write downs based on observable market prices or current appraisal of the collateral. Impaired loans are classified as Level 3.

The following methods were used to estimate the fair value of the Company’s financial instruments which were not previously presented.

Cash and cash equivalents—Cash and cash equivalents consist of cash and due from banks with other financial institutions and federal funds sold. The carrying amount reported in the consolidated balance sheets approximates the fair value based upon the short-term nature of these assets. Also included are interest-bearing deposits in financial institutions. Interest bearing deposits in financial institutions consist of interest bearing accounts at the Federal Reserve Bank and Federal Home Loan Bank. The carrying value reported in the consolidated balance sheets approximates the fair value based upon the short-term nature of the assets.

Federal Home Loan Bank stock—The carrying value of Federal Home Loan Bank stock reported in the consolidated balance sheets approximates the fair value as the stock is redeemable at the carrying value.

Loans—For variable rate loans that re-price frequently and with no significant change in credit risk, fair values are based upon carrying values. Fixed rate loan fair values are estimated using a discounted cash flow analysis based upon interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Deposits—The fair value disclosed for demand deposits (both interest bearing and noninterest bearing) and savings deposits are equal to the amount payable on demand as of the reporting date. The fair value of the time deposits is estimated using a discounted cash flow method based upon current rates for similar types of accounts.

Short term borrowings—The fair value of the lines of credit which represent federal funds purchase d approximate the carrying value of the amounts reported on the balance sheet due to the short-term nature of these liabilities.

Securities sold under agreement to repurchase—The fair value of the securities sold under agreement to repurchase approximate the carrying value of the amounts reported on the balance sheet due to the short-term nature of these liabilities.

Long-term debt—The fair value of long-term debt is determined using discounted cash flows using current rates.

Accrued interest payable and receivable – The carrying amounts of accrued interest approximate fair value.

The estimated fair values of the Company’s financial instruments are as follows (in thousands):

			Fair Value
September 30, 2016	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	117,297	$	117,297	$	—	$	—	$	117,297
Available-for-sale securities		553,357		—		548,808		4,549		553,357
Federal Home Loan Bank Stock		6,528		—		—		6,528		6,528
Loans, net		1,770,053		—		1,763,866		2,968		1,766,834
Loans held for sale		486,601		—		486,601		—		486,601
Interest receivable		7,040		—		7,040		—		7,040
Mortgage servicing rights, net		46,291		—		—		46,291		46,291
Derivatives		16,811		—		16,811		—		16,811
Financial liabilities:
Deposits:
Without stated maturities	$	2,241,048	$	2,241,048	$	—	$	—	$	2,241,048
With stated maturities		399,024		—		398,592		—		398,592
Securities sold under agreement to repurchase		29,137		29,137		—		—		29,137
Short term borrowings		80,000		80,000		—		—		80,000
Interest payable		518		176		342		—		518
Long-term debt		45,291		—		44,385		—		44,385
Derivatives		4,807		—		4,807		—		4,807

			Fair Value
December 31, 2015	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	97,723	$	97,723	$	—	$	—	$	97,723
Available-for-sale securities		649,387		—		644,531		4,856		649,387
Federal Home Loan Bank Stock		6,528		—		—		6,528		6,528
Loans, net		1,677,403		—		1,638,506		36,951		1,675,457
Loans held for sale		273,196		—		273,196		—		273,196
Interest receivable		6,763		—		6,763		—		6,763
Mortgage servicing rights, net		29,711		—		—		29,711		29,711
Derivatives		6,023		—		6,023		—		6,023
Financial liabilities:
Deposits:
Without stated maturities	$	2,112,915		2,112,915	$	—	$	—		2,112,915
With stated maturities		325,559		—		323,624		—		323,624
Securities sold under agreement to repurchase		105,133		105,133		—		—		105,133
Short term borrowings		18,000		18,000		—		—		18,000
Interest payable		550		244		306		—		550
Long-term debt		56,616		—		55,484		—		55,484
Derivatives		369		—		369		—		369

The balances and levels of the assets measured at fair value on a recurring basis at September 30, 2016 are presented in the following tables (in thousands):

At September 30, 2016	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:
Financial assets:
Available-for-sale securities:
U.S. government agency securities	$	—	$	2,501	$	—	$	2,501
Mortgage-backed securities		—		433,564		—		433,564
Municipals, tax-exempt		—		104,112		—		104,112
Treasury securities		—		4,506		—		4,506
Equity securities		—		4,125		4,549		8,674
Total	$	—	$	548,808	$	4,549	$	553,357
Loans held for sale		—		486,601		—		486,601
Derivatives		—		16,811		—		16,811
Financial Liabilities:
Derivatives		—		4,807		—		4,807

The balances and levels of the assets measured at fair value on a non-recurring basis at September 30, 2016 are presented in the following tables (in thousands):

At September 30, 2016	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:
Financial assets:
Foreclosed assets	$	—	$	—	$	2,564	$	2,564
Mortgage servicing rights	$	—	$	—		46,291		46,291
Impaired loans:
Commercial and industrial		—		—		362		362
Commercial real estate:
Owner occupied		—		—		825		825
Non-owner occupied		—		—		1,352		1,352
Residential real estate:
1-4 family mortgage		—		—		110		110
Residential line of credit		—		—		315		315
Consumer and other		—		—		4		4
Total	$	—	$	—	$	2,968	$	2,968

The balances and levels of the assets measured at fair value on a recurring basis at December 31, 2015 are presented in the following tables (in thousands):

At December 31, 2015	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Recurring valuations:
Financial assets:
Available-for-sale securities:
U.S. government agency securities	$	—	$	33,808	$	—	$	33,808
Mortgage-backed securities		—		522,373		—		522,373
Municipals, tax-exempt		—		79,837		—		79,837
Treasury securities		—		4,485		—		4,485
Equity securities		—		4,028		4,856		8,884
Total	$	—	$	644,531	$	4,856	$	649,387
Loans held for sale		—		273,196		—		273,196
Derivatives		—		6,023		—		6,023
Financial Liabilities:
Derivatives	$	—	$	369	$	—	$	369

The balances and levels of the assets measured at fair value on a non-recurring basis at December 31, 2015 are presented in the following tables (in thousands):

At December 31, 2015	Quoted prices in active markets for identical assets (liabilities) (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Total
Non-recurring valuations:
Financial assets:
Foreclosed assets	$	—	$	—	$	6,275	$	6,275
Impaired Loans:
Commercial and industrial		—		—		2,007		2,007
Commercial real estate:								—
Owner occupied		—		—		6,493		6,493
Non-owner occupied		—		—		7,572		7,572
Construction		—		—		6,896		6,896
Residential real estate:								—
1-4 family mortgage		—		—		6,127		6,127
Multifamily		—		—		36		36
Consumer and other		—		—		4		4
Total	$	—	$	—	$	29,135	$	29,135

There were no transfers between Level 1, 2 or 3 during the periods presented.

The following table provides a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs, during the nine months ended September 30, 2016 and 2015 (in thousands):

	Available-for-sale securities September 30,
	2016			2015
Balance at beginning of period	$	4,856		$	4,688
Realized gains included in net income		—			—
Unrealized gains included in other comprehensive income		—			118
Purchases		—			—
Sales		(307	)		—
Balance at end of period	$	4,549		$	4,806

The fair value of certain of the Company’s corporate are determined from information derived from external parties that calculate discounted cash flows using swap and LIBOR curves plus spreads that adjust for loss severities, volatility, credit risk and optionality. When available, broker quotes are used to validate the model. Industry research reports as well as assumptions about specific-issuer defaults and deferrals are reviewed and incorporated into the calculations. There is no established market for the Company’s equity securities, and as such, the Company has estimated that historical costs approximates market value.

The following table presents information as of September 30, 2016 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:

Financial instrument	Fair Value		Valuation technique	Significant Unobservable inputs	Range of inputs
Impaired loans	$	2,968	Appraised value of collateral	Discount for comparable sales	0%-30%
Foreclosed assets	$	2,564	Appraised value of property less costs to sell	Discount for costs to sell	0%-10%
Mortgage servicing rights, net	$	46,291	Discounted cash flows	See Note 6	See Note 6

The following table presents information as of December 31, 2015 about significant unobservable inputs (Level 3) used in the valuation of assets measured at fair value on a nonrecurring basis:

Financial instrument	Fair Value		Valuation technique	Significant Unobservable inputs	Range of inputs
Impaired loans	$	29,135	Appraised value of collateral	Discount for comparable sales	0%-30%
Foreclosed assets	$	6,275	Appraised value of property less costs to sell	Discount for costs to sell	0%-46%
Mortgage servicing rights, net	$	29,711	Discounted cash flows	See Note 6	See Note 6

Appraisals for both collateral-dependent impaired loans and 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.

Fair value option

The Company elected to measure all loans originated for sale at fair value under the fair value option as permitted under ASC 825. Electing to measure these assets at fair value reduces certain timing differences and better matches the changes in fair value of the loans with changes in the fair value of derivative instruments used to economically hedge them.

Net gains of $12,638 and $1,571 resulting from fair value changes of the mortgage loans were recorded in income during the nine months ended September 30, 2016 and 2015, 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.

The Company’s valuation of loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal. 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 measured at fair value as of September 30, 2016 and December 31, 2015:

September 30, 2016	Aggregate fair value		Aggregate Unpaid Principal Balance		Difference
Mortgage loans held for sale measured at fair value	$	486,601	$	465,735	$	20,866
Past due loans of 90 days or more		—		—		—
Nonaccrual loans		—		—		—

December 31, 2015
Mortgage loans held for sale measured at fair value	$	273,196	$	264,968	$	8,228
Past due loans of 90 days or more		—		—		—
Nonaccrual loans		—		—		—

Note (11)—Segment reporting:

The Company and the Bank are engaged in the business of banking and provide a full range of financial services. The Company determines reportable segments based on the significance of the segment’s operating results to the overall Company, the products and services offered, customer characteristics, processes and service delivery of the segments and the regular financial performance review and allocation of resources by the Chief Executive Officer. The Company 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 the Mortgage segment utilizing mortgage offices outside of the geographic footprint of the

Banking operations as well as internet delivery channels. Additionally, the Mortgage Segment includes the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. The residential mortgage products and services originated in our Banking footprint and related revenues and expen ses are included in our Banking segment. The Company’s mortgage division represents a distinct reportable segment which differs from the Company’s primary business of commercial and retail banking.

The financial performance of the Mortgage segment is assessed based on results of operations reflecting direct revenues and expenses and allocated expenses. This approach gives management a better indication of the operating performance of the segment. When assessing the Banking segment’s financial performance the Chief Executive Officer (CEO) utilize reports with indirect revenues and expenses including but not limited to the investment portfolio, electronic delivery channels and areas that primarily support the banking segment operations. Therefore these are included in the results of the Banking segment. Other indirect revenue and expenses related to general administrative areas are also included in the internal financial results reports of the Banking segment utilized by the CEO for analysis and are thus included for Banking segment reporting. 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.

During the three months ended March 31, 2016, the Company realigned its segment reporting structure to reclassify mortgage banking income and related expenses associated with retail mortgage originations within our Banking geographic footprint from the Mortgage segment to the Banking segment. This change was made to capture all of the product and service offerings for our Banking customer base within our banking geographic footprint into the Banking segment while capturing all of the Mortgage Banking activities outside of the banking footprint into the Mortgage segment to allow our chief executive officer to better determine resource allocations and operating performance for each segment. As such, the tables below have been revised to reflect the reclassification for all periods presented.

The following tables provides segment financial information for the three and nine months ended September 30, 2016 and 2015 follows:

Three months ended September 30, 2016	Banking		Mortgage			Consolidated
Net interest income	$	28,158	$	(541	)	$	27,617
Provision for loan loss		71		—			71
Mortgage banking income		8,878		28,060			36,938
Other noninterest income		7,024		—			7,024
Depreciation		927		45			972
Amortization of intangibles		526		—			526
Amortization and impairment of mortgage servicing rights		—		5,198			5,198
Other noninterest expense		30,332		18,501			48,833
Income before income taxes		12,204		3,775			15,979
Income tax expense							14,772
Net income							1,207
Total assets	$	2,661,116	$	526,064		$	3,187,180
Goodwill		46,767		100			46,867

Three months ended September 30, 2015	Banking			Mortgage		Consolidated
Net interest income	$	23,625		$	510	$	24,135
Provision for loan loss		(1,159	)		—		(1,159	)
Mortgage banking income		5,875			13,919		19,794
Other noninterest income		7,254			—		7,254
Depreciation		793			28		821
Amortization of intangibles		415			—		415
Amortization and impairment of mortgage servicing rights		—			764		764
Other noninterest expense		21,573			12,006		33,579
Income before income taxes		15,132			1,631		16,763
Income tax expense							858
Net income							15,905
Total assets	$	2,534,915		$	341,425	$	2,876,340
Goodwill		46,804			100		46,904

Nine months ended September 30, 2016	Banking			Mortgage			Consolidated
Net interest income	$	83,389		$	(1,471	)	$	81,918
Provision for loan loss		(727	)		—			(727	)
Mortgage banking income		22,237			69,337			91,574
Other noninterest income		21,779			—			21,779
Depreciation		2,729			265			2,994
Amortization of intangibles		1,605			—			1,605
Amortization and impairment of mortgage servicing rights		—			14,310			14,310
Other noninterest expense		81,202			47,360			128,562
Income before income taxes		42,596			5,931			48,527
Income tax expense								16,946
Net income								31,581
Total assets	$	2,661,116		$	526,064		$	3,187,180
Goodwill		46,767			100			46,867

Nine months ended September 30, 2015	Banking			Mortgage		Consolidated
Net interest income	$	67,461		$	1,115	$	68,576
Provision for loan loss		(937	)		—		(937	)
Mortgage banking income		14,227			36,854		51,081
Other noninterest income		17,190			—		17,190
Depreciation and amortization		2,207			176		2,383
Amortization of intangibles		1,221			—		1,221
Amortization and impairment of mortgage servicing rights		—			1,543		1,543
Other noninterest expense		60,698			30,767		91,465
Income before income taxes		35,689			5,483		41,172
Income tax expense							2,507
Net income							38,665
Total assets	$	2,534,915		$	341,425	$	2,876,340
Goodwill		46,804			100		46,904

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 had a prime interest rate of 3.50% and 3.25% as of September 30, 2016 and 2015, respectively. 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 $3,472 and $2,277 and $8,555 and $6,356 for the three months and nine months ended September 30, 2016 and 2015, respectively.

Note (12)—Minimum capital requirements:

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action.

For September 30, 2016 and December 31, 2015 Interim Final Basel III rules require the Bank to maintain minimum amounts and ratios of common equity Tier I capital to risk-weighted assets. Additionally under Basel III rules, the decision was made to opt-out of including accumulated other comprehensive income in regulatory capital. As of September 30, 2016 and December 31, 2015, the Bank and Company met all capital adequacy requirements to which it is subject. Also, as of September 30, 2016, the most recent notification from the FDIC, the Bank was well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The table below includes new regulatory capital ratio requirements that became effective on January 1, 2015. Beginning in 2016, an additional conservation buffer was added to the minimum requirements for capital adequacy purposes, subject to a three year phase-in period. The capital conservative buffer will be fully phased in January 1, 2019 at 2.5 percent.

Actual and required capital amounts and ratios are presented below at period-end (in thousands).

	Actual					For capital adequacy purposes					Minimum Capital adequacy with capital buffer					To be well capitalized under prompt corrective action provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2016
Total Capital (to risk-weighted assets)
FB Financial Corporation	$	328,387		13.32	%	$	197,229		8.0	%	$	212,638		8.625	%	N/A		N/A
FirstBank		292,830		11.91	%		196,695		8.0	%		212,062		8.625	%	$	245,869		10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	305,097		12.37	%	$	147,986		6.0	%	$	163,401		6.625	%	N/A		N/A
FirstBank		269,540		10.96	%		147,558		6.0	%		162,929		6.625	%	$	147,558		6.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	305,097		10.32	%	$	118,255		4.0	%	N/A		N/A			N/A		N/A
FirstBank		269,540		9.12	%		118,219		4.0	%	N/A		N/A			$	147,774		5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	275,097		11.16	%	$	110,926		4.5	%	$	126,333		5.125	%	N/A		N/A
FirstBank		269,540		10.96	%		110,669		4.5	%		126,039		5.125	%	$	159,855		6.5	%

	Actual					For capital adequacy purposes					Minimum Capital adequacy with capital buffer		To be well capitalized under prompt corrective action provisions
	Amount		Ratio			Amount		Ratio			Amount	Ratio	Amount		Ratio
December 31, 2015
Total Capital (to risk-weighted assets)
FB Financial Corporation	$	246,168		11.15	%	$	176,623		8.0	%	N/A	N/A	N/A		N/A
FirstBank		242,240		11.02	%		175,855		8.0	%	N/A	N/A	$	219,819		10.0	%
Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	211,633		9.58	%	$	132,547		6.0	%	N/A	N/A	N/A		N/A
FirstBank		211,780		9.63	%		131,950		6.0	%	N/A	N/A	$	131,950		6.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	211,633		7.64	%	$	110,803		4.0	%	N/A	N/A	N/A		N/A
FirstBank		211,780		7.65	%		110,735		4.0	%	N/A	N/A	$	138,418		5.0	%
Common Equity Tier 1 Capital (to risk-weighted assets)
FB Financial Corporation	$	181,633		8.23	%	$	99,313		4.5	%	N/A	N/A	N/A		N/A
FirstBank		211,780		9.63	%		98,963		4.5	%	N/A	N/A	$	142,946		6.5	%

Note 13 – Stock-Based Compensation

The Company granted shares of common stock and restricted stock units as a part of its initial public offering for the benefit of employees and executive officers. 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 vested and unvested restricted stock units outstanding at September 30, 2016:

	Restricted Stock Units Outstanding		Weighted Average Grant Date Fair Value
Balance, beginning of period		—	$	—
Conversion of deferred compensation plan		157,895		19.00
Conversion of equity based incentive (EBI) plans		125,684		19.00
Grants		1,077,058		19.00
Released and distributed		44,590		19.00
Forfeited/expired		—		—
Balance vested and unvested, end of period		1,316,047	$	19.00

The total fair value of restricted stock units vested and released was $847 for the three months and nine months ended September 30, 2016.

The compensation cost related to restricted stock units (included in salaries and employee benefits) was $3,373 for the three and nine months ended September 30, 2016. Additionally, participants of the existing equity based incentive (EBI) plans were given the option to elect conversion of their outstanding EBI units to restricted stock units. Effective September 16, 2016, $5,388 of accrued compensation was reclassified to additional paid in capital related to these elections. Approximately 180,447 units remain in the equity based incentive plan for those employees who elected cash settlement of EBI units.

As of September 30, 2016, there was $17,092 of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 3.56 years.

Additionally, the board of directors approved a resolution to reserve 2.5 million shares under an employee stock purchase plan.

Note (14)—Related party transactions:

(A) Loans:

The Bank has made and expects to continue to make loans to the directors and executive officers of the Company and their affiliates in the ordinary course of business. In management’s opinion, these transactions with directors and executive officers were made on substantially the same terms as those prevailing at the time for comparable transactions with other unaffiliated persons and did not involve more than the normal risk.

An analysis of loans to executive officers, the shareholder of the Company, and directors of the Bank and their affiliates follows (in thousands):

Loans outstanding at December 31, 2015	$	29,882
New loans and advances		2,604
Repayments		(9,614	)
Loans outstanding at September 30, 2016	$	22,872

Unfunded commitments to certain executive officers and directors and their associates totaled $4,014 and $7,212 at September 30, 2016 and December 31, 2015, respectively.

(B) Deposits:

The Bank held deposits from related parties totaling $138,140 and $68,612 as of September 30, 2016 and December 31, 2015, respectively.

The Bank leases various office spaces from entities related to the majority shareholder under varying terms. The Company had $164 and $180 in unamortized leasehold improvements related to these leases at September 30, 2016 and December 31, 2015, respectively. These improvements are being amortized over a term not to exceed the length of the lease. Lease expense for these properties totaled $128 and $76 and $392 and $327 for the three months and nine months ended September 30, 2016 and 2015, respectively.

(D) Consulting services:

The Bank paid $230 for the nine months ended September 30, 2015 in management consulting services to an entity owned 100% by the shareholder. The agreement was terminated effective January 1, 2016.

(E) Subordinated debt:

On February 12, 1996, the Company borrowed $775 from the shareholder through a term subordinated note. On August 26, 1999, the Company borrowed $3,300 from the shareholder through a term subordinated note. On June 30, 2006, the Company borrowed $6,000 from the shareholder through a term subordinated note. The total of $10,075 was repaid with cash proceeds from the sale of common stock in the initial public offering, as discussed in Note 1. The Company paid interest payments related to these subordinated debentures to the shareholder amounting to approximately $106 and $48 and $230 and $131 for the three months and nine months ended September 30, 2016 and 2015, respectively.

(F) Investment securities transactions:

The Company holds an investment in a fund that was issued by an entity owned by one of its directors. The balance in the investment was $1,145 and $1,472 as of September 30, 2016 and December 31, 2015, respectively. The Company did not receive any capital distributions during the nine months ended September 30, 2016 and 2015.

(G) Aviation time sharing agreement:

Effective May 24, 2016, the Company entered an aviation time sharing agreement with an entity owned by the majority shareholder. This replaces the previous agreement dated December 21, 2012. During the three months and nine months ended September 30, 2016, the Company made payments of $267 and $299, respectively, under these agreements. The Company made payments of $27 and $48 for the three months and nine months ended September 30, 2015, respectively.

ITEM 2 - Management’s discussion and analysi s of fina ncial condition and results of operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2015 set forth in our Prospectus constituting part of our Registration Statement on Form S-1 (Registration No. 333-213210) and filed with the SEC on September 19, 2016 (the “Prospectus”) and with our unaudited condensed accompanying notes set forth in this Quarterly Report on Form 10-Q for the quarterly period September 30, 2016. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth in the “Cautionary note regarding forward-looking statements” and “Risk Factors” sections on the Prospectus, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.

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 these 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. As certain accounting policies require significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, we have established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. Our critical accounting policies are described in the “Notes to Consolidated Financial Statements” in our audited financial statements for the year ended December 31, 2015 and in the “Critical Accounting Policies” section of “Management’s discussion and analysis of financial condition and results of operations”, both in the Prospectus. In the third quarter of 2016, we adopted a new accounting policy related to stock compensation, which is further described in the “Notes to condensed consolidated financial statements” on this Form 10-Q.

Overview

We are a bank 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, and North Georgia. Our footprint includes 45 full-service bank branches serving the following MSAs Nashville, Chattanooga (including North Georgia), Knoxville, Memphis, Jackson, and Huntsville (AL) and 12 community markets throughout Tennessee. FirstBank also provides mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States and 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, mortgage originations, investment services and deposit-related fees and, in our Mortgage segment, from origination fees and gains on sales in the secondary market of mortgage loans that we originate outside our Banking footprint or through our internet delivery channels and from servicing. Our primary source of funding for our loans is deposits, and to a lesser extent Federal Home Loan Bank advances and other borrowings.

Selected financial data

The following table presents certain selected financial data as of the dates or for the period indicated:

	As of and for the three months ended						As of and for the nine months ended						As of and for the year ended
	September 30,						September 30,						December 31,
	2016			2015			2016			2015			2015
Statement of Income Data
Total interest income	$	30,005		$	26,384		$	88,927		$	75,230		$	102,782
Total interest expense		2,388			2,249			7,009			6,654			8,910
Net interest income		27,617			24,135			81,918			68,576			93,872
Provision for loan losses		71			(1,159	)		(727	)		(937	)		(3,064	)
Total noninterest income		43,962			27,048			113,353			68,271			92,380
Total noninterest expense		55,529			35,579			147,471			96,612			138,492
Net income before income taxes		15,979			16,763			48,527			41,172			50,824
Income tax expense		14,772			858			16,946			2,507			2,968
Net income	$	1,207		$	15,905		$	31,581		$	38,665		$	47,856
Net interest income (tax—equivalent basis)	$	28,213		$	24,629		$	83,625		$	70,101		$	95,887
Per Common Share
Basic net income	$	0.07		$	0.93		$	1.80		$	2.25		$	2.79
Diluted net income	$	0.07		$	0.93		$	1.80		$	2.25		$	2.79
Book value(1)		13.73			13.72			13.73			13.72			13.78
Tangible book value(5)		11.56			10.57			11.56			10.57			10.66
Pro Forma Statement of Income and Per Common Share Data(4)
Pro forma provision for income tax	$	5,946		$	5,180		$	18,115		$	14,143		$	17,896
Pro forma net income		10,033			11,583			30,412			27,029			33,118
Pro forma net income per common share—basic	$	0.55		$	0.67		$	1.73		$	1.57		$	1.93
Pro forma net income per common share—diluted	$	0.55		$	0.67		$	1.73		$	1.57		$	1.93
Selected Balance Sheet Data
Cash and due from banks	$	51,292		$	49,779		$	51,292		$	49,779		$	53,893
Loans held for investment		1,793,343			1,650,644			1,793,343			1,650,644			1,701,863
Allowance for loan losses		(23,290	)		(27,194	)		(23,290	)		(27,194	)		(24,460	)
Loans held for sale		486,601			286,565			486,601			286,565			273,196
Available-for-sale securities, fair value		553,357			617,391			553,357			617,391			649,387
Foreclosed real estate, net		8,964			11,547			8,964			11,547			11,641
Total assets		3,187,180			2,876,340			3,187,180			2,876,340			2,899,420
Total deposits		2,640,072			2,275,798			2,640,072			2,275,798			2,438,474
Core deposits(5)		2,575,797			2,225,376			2,575,797			2,225,376			2,386,154
Borrowings		125,291			195,993			125,291			195,993			74,616
Total shareholders' equity		329,108			235,636			329,108			235,636			236,674
Selected Ratios
Return on average:
Assets(2)		0.16	%		2.36	%		1.44	%		2.06	%		1.86	%
Shareholders' equity(2)		1.74	%		27.23	%		16.26	%		22.76	%		20.91	%
Average shareholders' equity to average assets		9.17	%		8.67	%		8.85	%		9.05	%		8.88	%
Net interest margin (tax-equivalent basis)		4.05	%		3.95	%		4.15	%		4.00	%		3.97	%
Efficiency ratio (tax-equivalent basis)(5)		69.96	%		72.11	%		69.70	%		71.58	%		73.26	%
Loans held for investment to deposit ratio		67.93	%		72.53	%		67.93	%		72.53	%		69.79	%
Yield on interest-earning assets		4.40	%		4.31	%		4.49	%		4.38	%		4.34	%
Cost of interest-bearing liabilities		0.48	%		0.48	%		0.48	%		0.51	%		0.49	%
Cost of total deposits		0.30	%		0.29	%		0.29	%		0.31	%		0.30	%
Pro Forma Selected Ratios
Pro forma return on average assets(2)(4)		1.32	%		1.72	%		1.39	%		1.44	%		1.28	%
Pro forma return on average equity(2)(4)		14.43	%		19.83	%		15.66	%		15.91	%		14.47	%
Credit Quality Ratios
Allowance for loan losses to loans, net of unearned income		1.30	%		1.65	%		1.30	%		1.65	%		1.50	%
Allowance for loan losses to nonperforming loans		212.42	%		186.46	%		212.42	%		186.46	%		211.10	%
Nonperforming loans to loans, net of unearned income		0.61	%		0.88	%		0.61	%		0.88	%		0.68	%
Capital Ratios (Company)										`
Shareholders' equity to assets		10.33	%		8.19	%		10.33	%		8.19	%		8.16	%
Tier 1 capital (to average assets)		10.32	%		8.09	%		10.32	%		8.09	%		7.64	%
Tier 1 capital (to risk-weighted assets(3)		12.37	%		9.46	%		12.37	%		9.46	%		9.58	%
Total capital (to risk-weighted assets)(3)		13.32	%		11.17	%		13.32	%		11.17	%		11.15	%
Tangible common equity to tangible assets(5)		8.84	%		6.43	%		8.84	%		6.43	%		6.43	%
Common Equity Tier 1 (to risk-weighted assets) (CET1)(3)		11.16	%		8.07	%		11.16	%		8.07	%		8.23	%
Capital Ratios (Bank)
Shareholders' equity to assets		10.17	%		9.13	%		10.17	%		9.13	%		9.17	%
Tier 1 capital (to average assets)		9.12	%		8.17	%		9.12	%		8.17	%		7.65	%
Tier 1 capital (to risk-weighted assets)(3)		10.96	%		9.61	%		10.96	%		9.61	%		9.63	%
Total capital to (risk-weighted assets)(3)		11.91	%		11.14	%		11.91	%		11.14	%		11.02	%
Tangible common equity to tangible assets(5)		8.68	%		8.31	%		8.68	%		8.31	%		7.46	%
Common Equity Tier 1 (to risk-weighted assets) (CET1)(3)		10.96	%		9.61	%		10.96	%		9.61	%		9.63	%

(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 as of September 30, 2016 and 2015 and December 31, 2015 was 23,975,122 and 17,18 0,000 and 17,180,000, respectively.

(2)

We have calculated our return on average assets and return on average equity for a period by dividing net income for that period by our average assets and average equity, as the case may be, for that period. We have calculated our pro forma return on average assets and pro forma return on average equity for a period by calculating our pro forma net income for that period as described in footnote 5 below and dividing that by our average assets and average equity, as the case 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 as of December 31, 2015 and June 30, 2016 and the Basel II Framework for all previous periods, as implemented by the Federal Reserve and the FDIC.

(4)

We have calculated our pro forma net income, pro forma net income per share, pro forma returns on average assets and pro forma return on average equity for each period shown by calculating a pro forma provision for federal income tax using a combined effective income tax rate of 37.22% and 30.90% for the three months ended September 30, 2016 and 2015 and 37.33% and 34.35% for the nine months ended September 30, 2016 and 2015, and 35.08% for the year ended December 31, 2015, respectively, and adjusting our historical net income for each period to give effect to the pro forma provision for U.S. federal income tax for such period.

(5)

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.

GAAP reconciliation and management explanation of non-GAAP financial measures

We identify certain of the financial measures discussed in our summary historical consolidated financial data as being “non-GAAP financial measures.” 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 generally accepted accounting principles 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 our summary historical consolidated financial data 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 summary 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 summary historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures

Tax-equivalent efficiency ratio

The efficiency ratio on a tax-equivalent basis is a non-GAAP measure that provides a 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 on a tax-equivalent basis and noninterest income, excluding certain gains and losses.

The following table presents, as of the dates set forth below, the calculation of our efficiency ratio on a tax-equivalent basis:

	Three Months Ended September 30,						Nine Months Ended September 30,						Year ended December 31,
(dollars in thousands, except per Share data)	2016			2015			2016			2015			2015
Efficiency ratio (tax-equivalent basis)
Total noninterest expense	$	55,529		$	35,579		$	147,471		$	96,612		$	138,492
Less one time equity grants		2,960			—			2,960			—			—
Less merger and conversion expenses		1,122			291			3,268			578			3,543
Less impairment of mortgage servicing rights		2,402			—			8,089			—			194
Adjusted noninterest expense	$	49,045		$	35,288		$	133,154		$	96,034		$	134,755
Net interest income (tax-equivalent basis)	$	28,213		$	24,629		$	83,625		$	70,101		$	95,887
Total noninterest income		43,962			27,048			113,353			68,271			92,380
Less bargain purchase gain		—			2,794			—			2,794			2,794
Less gain on sales or write-downs of other real estate		1,646			(105	)		1,504			(43	)		(317	)
Less gain (loss) on sale of other assets		7			5			24			(380	)		13
Less gain on sales of securities		416			47			4,407			1,842			1,844
Adjusted noninterest income	$	41,893		$	24,307		$	107,418		$	64,058		$	88,046
Adjusted operating revenue	$	70,106		$	48,936		$	191,043		$	134,159		$	183,933
Efficiency ratio (tax-equivalent basis)		69.96	%		72.11	%		69.70	%		71.58	%		73.26	%

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 generally used by investors to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders’ equity less goodwill and other intangible assets; (ii) tangible assets as total assets less goodwill and other intangible assets; (iii) tangible book value per common share as tangible common equity (as described in clause (i)) divided by shares of common stock outstanding and (iv) tangible common equity to tangible assets is the ratio of tangible common equity (as described in clause (i)) to tangible assets (as described in clause (ii)). For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is our book value per common share and for tangible common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is our total shareholders’ equity to total assets.

We believe that these non-GAAP financial measures are important information to be provided to you because, as do our management, banking regulators, many investors, you can use the tangible book value in conjunction with more traditional bank capital ratios to assess our capital adequacy without the effect of our goodwill and other intangible assets and compare our capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.

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 t o tangible assets compared to total shareholders’ equity to total assets:

(dollars in thousands, except per share data)	As of September 30, 2016			As of September 30, 2015			As of December 31, 2015
Tangible Assets
Total assets	$	3,187,180		$	2,876,340		$	2,899,420
Adjustments:
Goodwill		(46,867	)		(46,904	)		(46,904	)
Core deposit intangibles		(5,090	)		(7,205	)		(6,695	)
Tangible assets	$	3,135,223		$	2,822,231		$	2,845,821
Tangible Common Equity
Total shareholders' equity	$	329,108		$	235,636		$	236,674
Adjustments:
Goodwill		(46,867	)		(46,904	)		(46,904	)
Core deposit intangibles		(5,090	)		(7,205	)		(6,695	)
Tangible common equity	$	277,151		$	181,527		$	183,075
Common shares outstanding		23,975,122			17,180,000			17,180,000
Book value per common share	$	13.73		$	13.72		$	13.78
Tangible book value per common share		11.56			10.57			10.66
Total shareholders' equity to total assets		10.33	%		8.19	%		8.16	%
Tangible common equity to tangible assets		8.84	%		6.43	%		6.43	%

Core deposits

Core deposits are a non-GAAP measure used by management and investors to evaluate organic growth of deposits and the quality of deposits as a funding source. We calculate core deposits by excluding jumbo time deposits (greater than $250,000) from total deposits. For core deposits the most directly comparable financial measure calculated in accordance with GAAP is total deposits. The following table presents, as of the dates set forth below, core deposits compared total deposits:

(dollars in thousands)	As of September 30, 2016		As of September 30, 2015		As of December 31, 2015
Core deposits
Total deposits	$	2,640,072	$	2,275,798	$	2,438,474
Less jumbo time deposits		64,275		50,422		52,320
Core deposits	$	2,575,797	$	2,225,376	$	2,386,154

Acquisition of Northwest Georgia Bank

On September 18, 2015, we completed our acquisition of Northwest Georgia Bank, which we refer to as NWGB, pursuant to the Agreement and Plan of Merger dated April 27, 2015. We acquired the stock of NWGB for $1.5 million in cash. NWGB was a 110-year old institution with six branches, serving clients in Chattanooga, Tennessee MSA, including northern Georgia. We acquired net assets with a fair value of approximately $272 million, which includes a bargain purchase gain of $2.8 million, loans with a fair value of approximately $79 million, and assumed liabilities of approximately $268 million, including deposits with a fair value of approximately $246 million. At the acquisition date, $4.9 million of core deposit intangible assets were recorded.

Our balance sheet as of December 31, 2015 and September 30, 2016 reflects the assets and liabilities we acquired from NWGB. Our results of operations for the three and nine months ended September 30, 2016 and 2015 reflect our operation of NWGB from September 18, 2015 through the end of the periods. The acquisition did not materially impact our results of operation for the three and nine months ended September 30, 2015. Additionally, we recorded merger and conversion related charges totaling $1.1 million and $0.3 million for the three and nine months ended September 30, 2016 and $3.3 million and $0.6 million for the same periods in 2015, respectively. The acquisition of NWGB is not significant for financial statement reporting purposes. See Note 2, “Acquisition of Northwest Georgia Bank” in the Notes to the condensed consolidated financial statements for additional details regarding the acquisition.

Factors affecting comparability of financial results

S Corporation status

From our formation in 2001 through September 16, 2016, we elected to be taxed for federal income tax purposes as a “Subchapter S corporation” under the provisions of Section 1361 through 1379 of the Internal Revenue Code. As a result, our net income was not subject to, and we have not paid, U.S. federal income taxes and we have not been required to make any provision or recognize any liability for federal income tax in our financial statements for the periods ending on or prior to June 30, 2016. We terminated our status as a “Subchapter S” corporation in connection with our initial public offering as of September 16, 2016. We will commence paying federal income taxes on our pre-tax net income and our net income for each fiscal year and each interim period commencing on or after September 16, 2016 will reflect a provision for federal income taxes. As a result of that change in our status under the federal income tax laws, the net income and earnings per share data presented in our historical financial statements set forth elsewhere in this report, which do not include any provision for federal income taxes , will not be comparable with our future net income and earnings per share in periods in which we are taxed as a C corporation, which will be calculated by including a provision for federal income taxes. Pro forma amounts for income tax expense and basic and diluted earnings per share are presented in the condensed consolidated statements of income assuming the Company’s pro forma tax rates of 37.22% and 37.33% for the three and nine months ended September 30, 2016, respectively, and 30.9% and 34.35% for the three and nine months ended September 30, 2015, respectively, as if it had been a C corporation during those periods. The pro forma results for the three and nine months ended September 30, 2016 excludes the effect of recognition of the deferred tax liability attributable to conversion of $13.2 million as discussed in Note 7 in the notes to our condensed consolidated financial statements.

Although we have not historically paid federal income tax, in the past, we have made periodic cash distributions to our shareholder in amounts estimated to be necessary for him to pay his estimated individual U.S. federal income tax liabilities related to our taxable income that was “passed through” to him. However, these distributions have not been consistent, as sometimes the distributions have been in excess of the shareholder’s estimated individual U.S. federal income tax rates which may differ from the rates imposed on the income of C Corporations. Our historical cash flows and financial condition have been affected by such cash distributions.

Deferred tax assets and liabilities will be recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of the change in tax rates resulting from being a C Corporation will be recognized in income in the quarter in which such change takes place. On September 16, 2016, the Company recorded an additional net deferred tax asset of $13,181 to recognize the difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases as of the date that the Company became a taxable corporate entity. In recording the impact of the conversion to a C Corporation, the Company recorded a deferred income tax expense of $2,955 related to the unrealized gain on available for sale securities through the income statement; therefore, the amount shown in other comprehensive income has not been reduced by the above expense. This difference will remain in OCI until the underlying securities are sold or mature.

Public company costs

On August 19, 2016, the Company filed a Registration Statement on Form S-1 with the SEC. That Registration Statement was declared effective by the SEC on September 15, 2016. The Company sold and issued 6,764,704 shares of common stock at $19 per share pursuant to that Registration Statement. Total proceeds received by the Company, net of offering costs, were approximately $115.5 million. The proceeds were used to fund a $55.0 million distribution to the majority shareholder and to repay all $10.1 million aggregate principal amount of subordinated notes held by the majority shareholder, plus any accrued and unpaid interest thereon . The Company qualifies as an “emerging growth company” as defined by the Jumpstart Our Business Startups Act (JOBS Act).

There are additional costs associated with operating as a public company, hiring additional personnel, enhancing technology and expanding our capabilities. We expect that these costs will include legal, regulatory, accounting, investor relations and other expenses that we did not incur as a private company. Sarbanes-Oxley, as well as rules adopted by the U.S. Securities and Exchange Commission, or SEC, the FDIC and national securities exchanges also requires public companies to implement specified corporate governance practices. In addition, due to regulatory changes in the banking industry and the implementation of new laws, rules and regulations, we are now subject to higher regulatory compliance costs. These additional rules and regulations also increase our legal, regulatory, accounting and financial compliance costs and make some activities more time-consuming.

Overview of recent financial performance

Results of operation

For the three months ended September 30, 2016, net income was $1.2 million compared to $15.9 million in the three months ended September 30, 2015. This includes the impact of our additional tax expenses to record an additional deferred tax net liability of $13.2 million resulting from our conversion to a C Corporation. Pre-tax income was $16.0 million in the three months ended September 30, 2016 compared with $16.8 million in the same period in 2015. Basic and diluted earnings per share were $0.07 and $0.93 for the three months ended September 30, 2016 and 2015. Pro forma net income was $10.0 million and $11.6 million and pro forma earnings per share were $0.55 and $0.67 for the three months ended September 30, 2016 and 2015, respectively. Our net income represented a ROAA of 0.16% and 2.36% for the three months ended September 30, 2016 and 2015, respectively, and a ROAE of 1.74% and 27.23% for the same periods. Our ratio of average shareholders’ equity to average assets in the three months ended September 30, 2016 and 2015 was 9.17% and 8.67%, respectively.

For the nine months ended September 30, 2016, net income was $31.6 million compared to $38.7 million in the nine months ended September 30, 2015. This includes the impact of our additional tax expense to record an additional deferred tax net liability of $13.2 million resulting from our conversion to a C Corporation. Pre-tax income was $48.5 million in the nine months ended September 30, 2016 compared with $41.2 million in the same period in 2015. Basic and diluted earnings per share were $1.80 and $2.25 for the nine months ended September 30, 2016 and 2015. Pro forma net income was $30.4 million and $27.0 million and pro forma earnings per share were $1.73 and $1.57 for the nine months ended September 30, 2016 and 2015, respectively. Our net income represented a ROAA of 1.44% and 2.06% for the nine months ended September 30, 2016 and 2015, respectively, and a ROAE of 16.26% and 22.76% for the same periods. Our ratio of average shareholders’ equity to average assets in the nine months ended September 30, 2016 and 2015 was 8.85% and 9.05%, respectively.

During the three months ended September 30, 2016, net interest income increased to $27.6 million compared to $24.1 million in the three months ended September 30, 2015, which was attributable to an increase in interest income, primarily driven by higher loan balances and our acquisition of NWGB, including recognized accretion of the credit discount taken in purchase accounting of $0.8 million in the three months ended September 30, 2016. Noninterest income for the three months ended September 30, 2016 compared to the same period in 2015 increased by $16.91 million, or 62.5%, primarily due to increased mortgage banking income driven by the continued growth of our mortgage banking business and expansion into new delivery channels. Our net interest margin, on a tax-equivalent basis, increased to 4.05% as compared to 3.95% for the three months ended September 30, 2016 and 2015, respectively, due to our continued efforts to maintain our cost of funds, loan growth and increase in loan fees and accretion associated with the acquisition of the NWGB loan portfolio.

Noninterest expense also increased to $23.7 million for the three months ended September 30, 2016 compared to $12.8 million for the three months ended September 30 2015, reflecting continued increases in personnel costs in addition to additional impairment of mortgage servicing rights and certain costs associated with our growth and volume and the NWGB acquisition.

During the nine months ended September 30, 2016, net interest income increased to $81.9 million compared to $68.6 million in the nine months ended September 30, 2015, which was attributable to an increase in interest income, primarily driven by higher loan balances and our acquisition of NWGB, including recognized accretion of the credit discount taken in purchase accounting of $3.2 million in the nine months ended September 30, 2016. Noninterest income for the nine months ended September 30, 2016 compared to the same periods of 2015 increased by $45.1 million, or 66.0%, primarily due to increased mortgage banking income driven by the continued growth of our mortgage banking business and expansion into new delivery channels. Our net interest margin, on a tax-equivalent basis, increased to 4.15% as compared to 4.00% for the nine months ended September 30, 2016 and 2015, respectively, due to our continued efforts to maintain our cost of funds, loan growth and increase in loan fees and accretion associated with the acquisition of the NWGB loan portfolio.

Noninterest expense also increased to $147.5 million for the nine months ended September 30, 2016 compared to $96.6 million for the nine months ended September 30, 2015, reflecting continued increases in personnel costs associated with our growth in addition to merger and conversion costs increased and occupancy costs related to our acquisition of NWGB in addition to recognized impairment on mortgage servicing rights.

Financial condition

Our total assets grew by 9.9% in the nine months ended September 30, 2016 to $3.2 billion as compared to December 30, 2015. Loans also increased by 5.4% to $1.79 billion at September 30, 2016 as compared to December 31, 2015.

We grew total deposits by 8.3% to $2.64 billio n as compared to December 31, 2015. Noninterest bearing deposits as a percentage of total deposits was 27.5% at September 30, 2016 compared to 25.7% at December 31, 2015.

Business segment highlights

We operate our business in two business segments: Banking and Mortgage. See Note 11, “Segment Reporting,” in the notes to our condensed consolidated financial statements for a description of these business segments.

During the first quarter of 2016, management evaluated the current composition of its operating segments –Banking and Mortgage. The primary focus of the evaluation was on capturing all of the revenue and expenses from all customer activities within the Banking segment’s geographic footprint. Specifically, the primary product and service that was not previously captured by the Banking segment related to our retail mortgage origination activities occurring within our banking geographic footprint and typically within our existing branch network. Therefore, we have reclassified the revenue and associated expenses from the retail mortgage origination activities within the banking geographic footprint into the Banking segment from the Mortgage segment for all periods presented. Based on the review and evaluation of the revised information, our chief executive officer believes that this presentation better presents the results of each segment to enhance overall resource allocation and evaluation of the Company’s performance. Additionally, we believe that the revised results of the Banking segment become more comparable to other banking organizations for analysis and understanding of the Banking segment operating results.

As discussed above, the mortgage retail origination activities within the Banking segment contributed the following to Banking segment results:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Mortgage banking income	$	8,878	$	5,875	$	22,237	$	14,227
Noninterest expense		6,459		3,731		14,475		10,041

Banking

Income before taxes decreased by $(2.93) million, or -19.3% in the three months ended September 30, 2016 to 12.2 million as compared to $15.1 million in the three months ended September 30, 2015. This decrease is primarily a result of the $2.8 million bargain purchase gain being included in the Banking segment for the three months ended September 30, 2015. Noninterest expense increased $9.00 million, primarily due to the investment in new branch locations and banking teams in the Nashville market and operating of NWGB for the full three month period of 2016 compared with approximately half a month in 2015.

Income before taxes increased by $6.9 million, or 19.4% in the nine months ended September 30, 2016 to 42.6 million as compared to $35.7 million in the nine months ended September 30, 2015. The increase reflects an improvement of $15.9 million in net interest income due to higher average loan balances driven primarily by interest rates and an improved credit environment, the overall economic climate and the implementation of our growth initiatives in addition to our acquisition of NWGB. Noninterest expense increased $21.4 million, primarily due to the investment in new branch locations and banking teams in the Nashville market and operating of NWGB for the entire full nine month period of 2016 compared with approximately half a month in 2015.

Mortgage

Income before taxes from the mortgage segment increased $2.1 million in the three months ended September 30, 2016 to $3.8 million as compared to $1.6 million in the three months ended September 30, 2015. This increase is primarily due to increases in overall loan origination volume in our mortgage segment driven by a favorable interest rate environment and housing market, which is partially offset by impairment of mortgage servicing rights during the period of $2.4 million. Loan originations increased $569.6 million for the three months ended September 30, 2016 to $1,359.1 million as compared to $789.5 million for the three months ended September 30, 2015. Noninterest income increased $14.1 million to $28.1 million for the three months ended September 30, 2016 as compared to $13.9 for the three months ended September 30, 2015, reflecting the significant increased activity in loan originations and sales. The increase in noninterest income was offset by a $10.9 million increase in noninterest expense, which includes an impairment of mortgage servicing rights mentioned above.

Income before taxes from the mortgage segment increased $0.4 million in the nine months ended September 30, 2016 to $5.9 million as compared to $5.5 million in the nine months ended September 30, 2015. This increase is primarily attributable to increases in overall loan origination volume in our mortgage segment driven by a favorable interest rate

environment and housing market. Loan originations increased $1,053.8 million for the nine months ended September 30, 2016 to $3,121.3 million as compared to $2,067.5 million for the nine mo nths ended September 30, 2015. Noninterest income increased $32.5 million to $69.3 million for the nine months ended September 30, 2016 as compared to $36.9 for the nine months ended September 30, 2015, reflecting the significant increased activity in loan originations and sales. The increase in noninterest income was partially offset by a $29.4 million increase in noninterest expense, which includes an impairment of mortgage servicing rights of $8.1 million.

Results of operation

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 state income tax rate of 39.225%.

Net interest income

Our net interest income is primarily affected by the interest rate environment, and by the volume and the composition of our interest-earning assets and interest-bearing liabilities. We utilize net interest margin, which represents net interest income divided by average interest-earning assets, to track the performance of our investing and lending activities. We earn interest income from interest, dividends and fees earned on interest-earning assets, as well as from amortization and accretion of discounts on acquired loans. Our interest-earning assets include loans, time deposits in other financial institutions and securities available for sale. We incur interest expense on interest-bearing liabilities, including interest-bearing deposits, borrowings and other forms of indebtedness as well as from amortization of premiums on purchased deposits. Our interest-bearing liabilities include deposits, advances from the FHLB, other borrowings and other liabilities.

Three months ended September 30, 2016 compared to three months ended September 30, 2015

Net interest income increased 14.4% to $27.6 million in the three months ended September 30, 2016 compared to $24.1 million in the three months ended September 30, 2015. On a tax-equivalent basis, net interest income increased $3.6 million to $28.2 million in the three months ended September 30, 2016 as compared to $24.6 million in the three months ended September 30, 2015. The increase in tax-equivalent net interest income in the three months ended September 30, 2016 was primarily driven by higher loan balances and our acquisition of NWGB, including recognized accretion of the credit discount taken in purchase accounting of $0.8 million in the three months ended September 30, 2016.

Interest income, on a tax-equivalent basis, was $30.6 million for the three months ended September 30, 2016, compared to $26.9 million for the three months ended September 30, 2015, an increase of $3.7 million. The two largest components of interest income are loan income and investment income. Loan income consists primarily of interest earned on our loan portfolio. Investment income consists primarily of interest earned on our investment portfolio. Loan income on loans held for investment, on a tax-equivalent basis, increased $3.5 million to $23.6 million from $20.2 million for the three months ended September 30, 2015 primarily due to increased loan balances of $0.2 million in addition to $0.8 million in accretion on loans purchased in our acquisition of NWGB, which includes pay-offs on purchased credit impaired loans and the reversal of the associated credit discounts on those loans. There was no such accretion income in the three months ended September 30, 2015. The tax-equivalent yield on loans was 5.37%, up 28 basis points from the three months ended September 30, 2015. The increase in yield was primarily due to accretion on loans purchased from NWGB, which yielded 0.19%, in addition to increased loan fees, which increased 12 basis points.

The components of our loan yield, a key driver to our NIM for the three months ended September 30, 2016 and 2015 were as follows:

	Three Months Ended September 30, 2016					Three Months Ended September 30, 2015
(dollars in thousands)	Interest income/ expense		Average yield/ rate			Interest income/ expense		Average yield/ rate
Loan yield components:
Contractual interest rate on loans held for investment (1)		20,513		4.66	%		18,216		4.60	%
Origination and other loan fee income		2,306		0.52	%		1,590		0.40	%
Accretion on purchased loans		814		0.19	%		—		—
Syndicated fee income		—		0.00	%		375		0.09	%
Total loan yield		23,633		5.37	%		20,181		5.09	%

(1)	Includes tax equivalent adjustment.

Accretion on purchased loans contributed 12 and 0 basis points to the NIM for the three months ended September 30, 2016 and 2015, respectively. Additionally, syndicated loan fees contributed 0 and 6 basis points to the NIM for the three months ended September 30, 2016 and 2015, respectively.

For the three months ended September 30, 2016, interest income on loans held for sale increased by $0.3 million compared to the three months ended September 30, 2015. The increase was driven by an increase in volume of $1.0 million partially offset by a decrease in rates of $0.8 million. For the three months ended September 30, 2016, investment income, on a tax-equivalent basis, decreased 1.4% to $3.9 million for the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The average balance in the investment portfolio in the three months ended September 30, 2016 was $555.5 million compared to $614.2 million in the three months ended September 30, 2015. The decline in the balance is driven by the use of investment cash flow to fund loan growth and overall asset liability management.

Interest expense was $2.4 million for the three months ended September 30, 2016, an increase of $0.1 million, or 6.2%, as compared to the three months ended September 30, 2015. The increase in interest expense was due primarily to an increase in deposit interest expense due to our acquisition of NWGB and the growth in deposits. Interest expense on deposits was $1.9 million and $1.6 million for the three months ended September 30, 2016 and 2015, respectively. The cost of total deposits was 0.30% and 0.29% for the three months ended September 30, 2016 and 2015, respectively. The cost of interest-bearing deposits was 0.41% and 0.39% for the same periods. The primary driver for the increase in total interest expense is the increase in money market and time deposit interest expense to $0.7 and $0.6 million from $0.4 million and $0.4 million for the three months ended September 30, 2016 and 2015, respectively, driven by an increase in rate and balances. The rate on money markets was 0.42%, up 8 basis points from the three months ended September 30, 2015. Time deposit interest expense also increased $0.2 million from the three months ended September 30, 2015. The rate on time deposits was 0.57%, up 10 basis points from the three months ended September 30, 2015. This increase is due to a restructuring of our IRA savings products to a time deposit product during the second quarter of 2016. Time deposit balances increased $93.5 million to $400.1 million from $306.6 million during the three months ended September 30, 2016. Interest expense on borrowings was $0.5 and $0.7 million for the three months ended September 30, 2016 and 2015, respectively, while the cost of total borrowings was 1.46% and 0.97% for the three months ended September 30, 2016 and 2015, respectively. For more information about our subordinated debentures which were partially paid off during the third quarter of 2016, refer to the discussion in this section under the heading “Financial condition: Borrowed funds.”

Our net interest margin, on a tax-equivalent basis, increased to 4.05% during the three months ended September 30, 2016 from 3.95% in the three months ended September 30, 2015, primarily as a result of our continued efforts to reduce our cost of funds, loan growth and benefits from our acquisition of NWGB.

Average balance sheet amounts, interest e arned and yield analysis

The table below shows the average balances, income and expense and yield rates of each of our interesting-earning assets and interest-bearing liabilities on a tax-equivalent basis, if applicable, for the periods indicated.

	Three months ended September 30,
	2016								2015
(dollars in thousands on tax-equivalent basis)	Average balances(1)			Interest income/ expense		Average yield/ rate			Average balances			Interest income/ expense		Average yield/ rate
Interest-earning assets:
Loans(2)(4)	$	1,750,300		$	23,633		5.37	%	$	1,571,936		$	20,181		5.09	%
Loans held for sale		409,736			2,948		2.86	%		266,620			2,671		3.97	%
Securities:
Taxable		454,601			2,426		2.12	%		542,067			2,793		2.04	%
Tax-exempt(4)		100,947			1,440		5.67	%		72,171			1,127		6.20	%
Total Securities(4)		555,548			3,866		2.77	%		614,238			3,920		2.53	%
Federal funds sold		14,748			18		0.49	%		6,766			8		0.47	%
Interest-bearing deposits with other financial institutions		32,262			71		0.88	%		9,256			35		1.50	%
FHLB stock		6,528			65		3.96	%		6,754			63		3.70	%
Total interest earning assets(4)		2,769,122			30,601		4.40	%		2,475,570			26,878		4.31	%
Noninterest Earning Assets:
Cash and due from banks		46,440								45,170
Allowance for loan losses		(23,493	)							(28,897	)
Other assets(3)		223,601								181,296
Total noninterest earning assets		246,548								197,569
Total assets	$	3,015,670							$	2,673,139
Interest-bearing liabilities:
Interest bearing deposits:
Time deposits	$	400,088		$	575		0.57	%	$	306,628		$	364		0.47	%
Money market		622,430			650		0.42	%		475,233			401		0.33	%
Negotiable order of withdrawals		683,527			639		0.37	%		602,298			572		0.38	%
Savings deposits		130,864			51		0.16	%		190,726			224		0.47	%
Total interest bearing deposits		1,836,909			1,915		0.41	%		1,574,885			1,561		0.39	%
Other interest-bearing liabilities:
FHLB advances		14,510			171		4.69	%		18,138			144		3.15	%
Other borrowings		74,808			2		0.01	%		221,434			81		0.15	%
Long-term debt		39,910			300		2.99	%		41,005			463		4.48	%
Total other interest-bearing liabilities		129,228			473		1.46	%		280,577			688		0.97	%
Total Interest-bearing liabilities		1,966,137			2,388		0.48	%		1,855,462			2,249		0.48	%
Noninterest bearing liabilities:
Demand deposits		738,328								546,738
Other liabilities		34,656								39,240
Total noninterest-bearing liabilities		772,984								585,978
Total liabilities		2,739,121								2,441,440
Shareholders' equity		276,549								231,699
Total liabilities and shareholders' equity	$	3,015,670							$	2,673,139
Net interest income (tax-equivalent basis)				$	28,213							$	24,629
Interest rate spread (tax-equivalent basis)							3.98	%							3.91	%
Net interest margin (tax-equivalent basis)							4.05	%							3.95	%
Average interest-earning assets to average interesting-bearing liabilities							140.8	%							133.4	%

(1)	Calculated using daily averages.

(2)	Average balances of nonaccrual loans are included in average loan balances. Loan fees of $2,306 and $1,590 and accretion of $814 and $0 are included in interest income in the three months ended September 30, 2016 and 2015 respectively.

(3)	Includes investments in premises and equipment, foreclosed assets, interest receivable, deposit base intangible, 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 $0.6 million and $0.5 million for the three months ended September 30, 2016 and 2015, respectively.

(5)	The net interest margin is calculated by dividing net interest income, on a tax-equivalent basis, by average total earning assets.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

Net interest income increased 19.5% to $81.9 million in the nine months ended September 30, 2016 compared to $68.6 million in the nine months ended September 30, 2015. On a tax-equivalent basis, net interest income increased $13.5 million to $83.6 million in the nine months ended September 30, 2016 as compared to $70.1 million in the nine months ended September 30, 2015. The increase in tax-equivalent net interest income in the nine months ended September 30,

2016 was primarily driven by higher loan balances, partially due to the success of our acquisition of NWGB, including recognized accretion of the credit discount taken in purchase accounting of $3.2 million in the nine months ended September 30, 2016.

Interest income, on a tax-equivalent basis, was $90.6 million for the nine months ended September 30, 2016, compared to $76.8 million for the nine months ended September 30, 2015, an increase of $13.9 million. The two largest components of interest income are loan income and investment income. Loan income consists primarily of interest earned on our loan portfolio. Investment income consists primarily of interest earned on our investment portfolio. Loan income, on a tax-equivalent basis, increased $13.7 million to $70.8 million from $57.1 million for the nine months ended September 30, 2015 primarily due to increased loan balances of $247.0 million in addition to $3.2 million in accretion on loans purchased in our acquisition of NWGB, which includes $1.8 million of which was due to pay-offs on purchased credit impaired loans and the reversal of the associated credit discounts on those loans. The tax-equivalent yield on loans was 5.46%, up 32 basis points from the nine months ended September 30, 2015. The increase in yield was primarily due to accretion on loans purchased from NWGB, which yielded 0.25%, in addition to increased loan fees.

The components of our loan yield, a key driver to our NIM for the nine months ended September 30, 2016 and 2015 were as follows:

	As of September 30, 2016					As of September 30, 2015
(dollars in thousands)	Interest income/ expense		Average yield/ rate			Interest income/ expense		Average yield/ rate
Loan yield components:
Contractual interest rate on loans held for investment (1)		60,556		4.67	%		52,266		4.71	%
Origination and other loan fee income		6,205		0.48	%		4,157		0.37	%
Accretion on purchased loans		3,195		0.25	%		—		—
Syndicated fee income		825		0.06	%		690		0.06	%
Total loan yield		70,781		5.46	%		57,113		5.15	%

(1)	Includes tax equivalent adjustment

Accretion on purchased loans contributed 16 and 0 basis points to the NIM for the nine months ended September 30, 2016 and 2015, respectively. Additionally, syndicated loan fees contributed 4 and 4 basis points to the NIM for the nine months ended September 30, 2016 and 2015, respectively.

For the nine months ended September 30, 2016, interest income on loans held for sale remained relatively flat compared to the nine months ended September 30, 2015. This resulted from a decrease in rates of $1.6 partially offset by the growth in volume of $1.6 million. For the nine months ended September 30, 2016, investment income, on a tax-equivalent basis, increased slightly to $12.3 million compared to $12.2 million for the nine months ended September 30, 2015. The average balance in the investment portfolio in the nine months ended September 30, 2016 was $581.5 million compared to $590.3 million in the nine months ended September 30, 2015. The decline in the balance is driven by the use of investment cash flow to fund loan growth.

Interest expense was $7.0 million for the nine months ended September 30, 2016, an increase of $0.4 million, or 5.3%, as compared to the nine months ended September 30, 2015. The increase in interest expense was due primarily to an increase in deposit interest expense due to the growth in deposits primarily driven by our acquisition of NWGB. Interest expense on deposits was $5.4 million and $4.7 million for the nine months ended September 30, 2016 and 2015, respectively. The cost of total deposits was 0.29% and 0.31% for the nine months ended September 30, 2016 and 2015, respectively. The cost of interest-bearing deposits was 0.39% and 0.41% for the same periods, respectively. The primary driver for the increase in total interest expense is the increase in money market interest expense to $1.6 million from $1.0 million for the nine months ended September 30, 2016 and 2015, respectively, driven by an increase in rate and balances. The rate on money markets was 0.37%, up 5 basis points from nine months ended September 30, 2015. Time deposit interest expense also increased $0.1 million to $1.4 million from the nine months ended September 30, 2015, primarily as a result of increased balances. The rate on time deposits was 0.52%, down 5 basis points from the nine months ended September 30, 2015 due to the lower renewal rate of maturing accounts. Average time deposit balances increased $58.5 million to $353.6 million from $295.2 million during the nine months ended September 30, 2016. The increase in time deposits from September 30, 2015 is a result of restructuring an IRA savings product to a time deposit product during the second quarter of 2016, the average balance of which was $75.7 million. Interest expense on borrowings was $1.6 and $2.0 million for the nine months ended September 30, 2016 and 2015, respectively, while the cost of total borrowings was 1.54% and 1.05% for the nine months ended September 30, 2016 and 2015, respectively.

Our net interest margin, on a tax-equivalent basis, increased to 4.15% during the nine months ended September 30, 2016 from 4.00% in the nine months ended September 30, 2015, primarily as a result of our continued efforts to r educe our cost of funds, loan growth and benefits from our acquisition of NWGB.

Average balance sheet amounts, interest earned and yield analysis

	Nine months ended September 30,
	2016								2015
(dollars in thousands on tax-equivalent basis)	Average balances(1)			Interest income/ expense		Average yield/ rate			Average balances			Interest income/ expense		Average yield/ rate
Interest-earning assets:
Loans(2)(4)	$	1,730,535		$	70,781		5.46	%	$	1,483,512		$	57,113		5.15	%
Loans held for sale		313,044			7,101		3.03	%		244,202			7,145		3.91	%
Securities:
Taxable		495,092			8,296		2.24	%		515,552			8,675		2.25	%
Tax-exempt(4)		86,368			3,990		6.17	%		74,742			3,493		6.25	%
Total Securities(4)		581,460			12,286		2.82	%		590,294			12,168		2.76	%
Federal funds sold		13,524			49		0.48	%		7,854			32		0.54	%
Interest-bearing deposits with other financial institutions		48,980			220		0.60	%		9,649			102		1.41	%
FHLB stock		6,528			197		4.03	%		6,559			195		3.97	%
Total interest earning assets(4)		2,694,071			90,634		4.49	%		2,342,070			76,755		4.38	%
Noninterest Earning Assets:
Cash and due from banks		47,409								41,040
Allowance for loan losses		(24,222	)							(29,162	)
Other assets(3)		213,948								155,369
Total noninterest earning assets		237,135								167,247
Total assets	$	2,931,206							$	2,509,317
Interest-bearing liabilities:
Interest bearing deposits:
Time deposits	$	353,645		$	1,378		0.52	%	$	295,193		$	1,253		0.57	%
Money market		588,283			1,630		0.37	%		430,064			1,016		0.32	%
Negotiable order of withdrawals		706,894			1,969		0.37	%		607,516			1,735		0.38	%
Savings deposits		178,817			427		0.32	%		173,798			664		0.51	%
Total interest bearing deposits		1,827,639			5,404		0.39	%		1,506,571			4,668		0.41	%
Other interest-bearing liabilities:
FHLB advances		14,957			430		3.84	%		18,982			473		3.33	%
Other borrowings		83,838			48		0.08	%		192,806			135		0.09	%
Long-term debt		40,638			1,127		3.70	%		41,005			1,378		4.49	%
Total other interest-bearing liabilities		139,433			1,605		1.54	%		252,793			1,986		1.05	%
Total Interest-bearing liabilities		1,967,072			7,009		0.48	%		1,759,364			6,654		0.51	%
Noninterest bearing liabilities:
Demand deposits		672,670								492,343
Other liabilities		31,980								30,525
Total noninterest-bearing liabilities		704,650								522,868
Total liabilities		2,671,722								2,282,232
Shareholders' equity		259,484								227,085
Total liabilities and shareholders' equity	$	2,931,206							$	2,509,317
Net interest income (tax-equivalent basis)				$	83,625							$	70,101
Interest rate spread (tax-equivalent basis)							4.10	%							3.99	%
Net interest margin (tax-equivalent basis)							4.15	%							4.00	%
Average interest-earning assets to average interesting-bearing liabilities							137.0	%							133.1	%

(1)	Calculated using daily averages.

(2)	Average balances of nonaccrual loans are included in average loan balances. Loan fees of $6,205 and $4,157 and accretion of $3,195 and $0 are included in interest income in the nine months ended September 30, 2016 and 2015 respectively.

(3)	Includes investments in premises and equipment, foreclosed assets, interest receivable, deposit base intangible, 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 $1.7 million and $1.5 million for the nine months ended September 30, 2016 and 2015, respectively.

(5)	The net interest margin is calculated by dividing net interest income, on a tax-equivalent basis, by average total earning assets.

Rate/volume analysis

The tables below present the components of the changes in net interest income for the three and nine months ended September 30, 2016 and 2015. 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 September 30, 2016 compared to three months ended September 30, 2015

	Three months ended September 30, 2016 compared to three months ended September 30, 2015 due to changes in
(in thousands on a tax-equivalent basis)	volume			rate			Net increase (decrease)
Interest-earning assets:
Loans(1)(2)	$	2,408		$	1,044		$	3,452
Loans held for sale		1,030			(753	)		277
Securities available for sale and other securities:								—
Taxable		(467	)		100			(367	)
Tax Exempt(2)		410			(97	)		313
Federal funds sold and balances at Federal Reserve Bank		10			0			10
Time deposits in other financial institutions		51			(15	)		36
FHLB stock		(2	)		4			2
Total interest income(2)		3,440			283			3,723
Interest-bearing liabilities:
Time deposits		134			77			211
Money market		154			95			249
Negotiable order of withdrawal accounts		76			(9	)		67
Savings deposits		(23	)		(150	)		(173	)
FHLB advances		(43	)		70			27
Other borrowings		(4	)		(75	)		(79	)
Long-term debt		(8	)		(155	)		(163	)
Total interest expense		286			(147	)		139
Change in net interest income(2)	$	3,154		$	430		$	3,584

(1)	Average loans are gross, including non-accrual loans and overdrafts (before deduction of net fees and allowance for loan losses). Loan fees of $2,306 and $1,590 and accretion of $814 and $0 are included in interest income in the three months ended September 30, 2016 and 2015 respectively.

(2)	Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis.

As discussed above, the $3.7 million increase in loan and loans held for sale interest income during the three months ended September 30, 2016 compared to September 30, 2015 was the primary driver of the $3.6 million increase in net interest income. The increase in loan interest income was driven by an increase in average loans of $0.2 million, or 11.3%, to $1.7 billion as of September 30, 2016, as compared to $1.6 billion as of September 30, 2015. Our loan growth during the period was driven by growth in our metropolitan markets, primarily in the Nashville MSA, resulting from the investment in new locations and banking teams and improving economic conditions . The increase in average loans held for sale of $143.1 million was the result of an increase in volume driven by lower interest rates in addition to the addition of a correspondent delivery channel in 2016.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

	Nine months ended September 30, 2016 compared to nine months ended September 30, 2015 due to changes in
(in thousands on a tax-equivalent basis)	volume			rate			Net increase (decrease)
Interest-earning assets:
Loans(1)(2)	$	10,104		$	3,564		$	13,668
Loans held for sale		1,562			(1,606	)		(44	)
Securities available for sale and other securities:
Taxable		(343	)		(36	)		(379	)
Tax Exempt(2)		537			(40	)		497
Federal funds sold and balances at Federal Reserve Bank		21			(4	)		17
Time deposits in other financial institutions		177			(59	)		118
FHLB stock		(1	)		3			2
Total interest income(2)		12,057			1,823			13,879
Interest-bearing liabilities:
Time deposits		228			(103	)		125
Money market		438			176			614
Negotiable order of withdrawal accounts		277			(43	)		234
Savings deposits		12			(249	)		(237	)
FHLB advances		(116	)		73			(43	)
Other borrowings		(62	)		(25	)		(87	)
Long-term debt		(10	)		(241	)		(251	)
Total interest expense		767			(412	)		355
Change in net interest income(2)	$	11,290		$	2,235		$	13,524

(1)	Average loans are gross, including non-accrual loans and overdrafts (before deduction of net fees and allowance for loan losses). Loan fees of $6,205 and $4,157 and accretion of $3,195 and $0 are included in interest income in the nine months ended September 30, 2016 and 2015 respectively.

(2)	Interest income includes the effects of the tax-equivalent adjustments to increase tax-exempt interest income to a tax-equivalent basis.

As discussed above, the $13.6 million increase in loan and loans held for sale interest income during the nine months ended September 30, 2016 compared to September 30, 2015 was the primary driver of the $13.5 increase in net interest income. The increase in loan interest income was driven by an increase in average loans of $247.0 million, or 16.7%, to $1.7 billion as of September 30, 2016, as compared to $1.5 billion as of September 30, 2015. Our loan growth during the period was driven by growth in our metropolitan markets, primarily in the Nashville MSA, resulting from the investment in new locations and banking teams and improving economic conditions in addition to the acquisition of NWGB . The increase in average loans held for sale of $68.8 million was the result of increased volume driven by lower interest rates and an increase in mortgage loan officers and expansion of our delivery channels.

Provision for loan losses

The provision for loan losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for loan losses at a level that is believed to be adequate to meet the inherent risks of losses in our loan portfolio. Factors considered by management in determining the amount of the provision for loan losses include the internal risk rating of individual credits, historical and current trends in net charge-offs, trends in nonperforming loans, trends in past due loans, trends in the market values of underlying collateral securing loans and the current economic conditions in the markets in which we operate. The determination of the amount is complex and involves a high degree of judgment and subjectivity.

Three months ended September 30, 2016 compared to three months ended September 30, 2015. Our provision for loan losses for the three months ended September 30, 2016 was $71.0 thousand as compared to a provision for loan losses of $1.2 million for the three months ended September 30, 2015 , reflecting improving asset quality partially offset by loan growth.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015. Our provision for loan losses for the nine months ended September 30, 2016 was $727.0 thousand as compared to a provision for loan losses of $937.0 thousand for the nine months ended September 30, 2015, reflecting our stable operating environment and consistent credit quality throughout the nine months ended September 30, 2016.

Noninterest income

Our noninterest income includes gains on sales of mortgage loans, fees on mortgage loan originations, loan servicing fees, hedging results, fees generated from deposit services, securities gains and all other noninterest income.

The following table sets forth the components of noninterest income for the periods indicated:

	Three months ended September 30,					Nine months ended September 30,
(in thousands)	2016		2015			2016		2015
Mortgage banking income	$	36,938	$	19,794		$	91,574	$	51,081
Service charges on deposit accounts		1,870		1,876			6,129		5,240
ATM and interchange		1,814		1,572			5,756		4,510
Bargain purchase gain		—		2,794			—		2,794
Gain on sale of securities		416		47			4,407		1,842
Net (loss) gain on sales or write-downs of foreclosed assets		1,646		(105	)		1,504		(43	)
Other		1,278		1,070			3,983		2,847
Total noninterest income	$	43,962	$	27,048		$	113,353	$	68,271

Three months ended September 30, 2016 compared to three months ended September 30, 2015.

Noninterest income was $44.0 million for the three months ended September 30, 2016, an increase of $16.91 million, or 62.5%, as compared to $27.0 million for the three months ended September 30, 2015. Noninterest income to average assets (excluding any gains or losses from sale of securities) was 5.8% in the three months ended September 30, 2016 as compared to 4.0% in the three months ended September 30, 2015.

Mortgage banking income primarily includes origination fees on mortgage loans, gains and losses on the sale of mortgage loans, fees from wholesale and third party origination services provided to community banks and mortgage companies and mortgage servicing fees. Mortgage banking income was $36.9 million and $19.8 million for the three months ended September 30, 2016 and 2015, respectively.

During the third quarter of 2016, the Bank’s mortgage operations had record originations of $1,359.1 million for the three months ended September 30, 2016 which generated $33.3 million in gains and related revenues included in mortgage banking revenue. This compares to $789.5 million for the three months ended September 30, 2015 and $18.7 million, respectively. Subsequent to September 30, 2016, mortgage rates have continued to increase above prevailing rates during the third quarter of 2016. The combination of this increase in rates and the overall seasonal nature of historical mortgage production has caused the level of interest lock commitments to decline to approximately $825 million at October 31, 2016. Furthermore, the Company currently estimates that interest rate lock commitments will decline further by the end of the fourth quarter of 2016 in the range of $675 to $725 million. With the increasing rates and a change in the mix of origination volume, including a higher contribution from the newly established correspondent origination channel, the Company is currently seeing a decline in mortgage origination margins from the third quarter for the current quarter. Based on the current conditions described above, the Company currently expects mortgage banking revenues (including Banking and Mortgage segments) to be in the $25 to $30 million range in the fourth quarter of 2016, resulting in a net contribution from overall mortgage operations of approximately $2.6 to $3.2 million to pretax income for the fourth quarter of 2016. This information is based on current information available and could change as market conditions, including interest rates, change over the remainder of the quarter. The components of mortgage banking income for the three months ended September 30, 2016 and 2015 were as follows:

	Three months ended September 30,
(in thousands)	2016		2015
Mortgage banking income:
Origination and sales of mortgage loans	$	33,278	$	18,744
Mortgage servicing income		3,660		1,050
Total mortgage banking income	$	36,938	$	19,794

Origination volume	$	1,359,109		789,462
Outstanding principal balance of mortgage loans serviced	$	4,975,893	$	1,944,882

Mortgage banking income attributable to our Banking segment was $8.9 million and $5.9 million for the three months ended September 30, 2016 and 2015, respectively, and mortgage banking income attributable to our Mortgage segment was $28.1 million and $13.9 million for the three months ended September 30, 2016 and 2015, res pectively.

Service charges on deposit accounts include analysis and maintenance fees on accounts, per item charges, non-sufficient funds and overdraft fees. Service charges on deposit accounts were $1.9 million, for the three months ended September 30, 2016 and 2015.

ATM and interchange fees include debit card interchange, ATM and other consumer fees. These fees increased 15.4% to $1.8 million during the three months ended September 30, 2016 as compared to $1.6 million for the three months ended September 30, 2015 as a result of increased debit card fees from continued growth in client usage of debit cards experienced by most financial institutions.

Gains on sales of securities for the three months ended September 30, 2016 were $0.4 million, resulting from the sale of approximately $1.7 million in securities, compared to gains on sales of securities for the three months ended September 30, 2015 of $47 thousand. The gains are attributable to management taking advantage of portfolio structuring opportunities to lock in current gains while maintaining comparable interest rates and maturities and to fund current loan growth in addition to overall asset liability management.

Net gain on sales or write-downs of foreclosed assets for the three months ended September 30, 2016 was $1.6 thousand compared to a net loss of $105 thousand for the three months ended September 30, 2015. This change was the result of specific sales and valuation transactions of other real estate.

Other noninterest income for the three months ended September 30, 2016 was $1.3 million as compared to other noninterest income of $1.1 million for the three months ended September 30, 2015. This $0.2 million increase in other noninterest income was the result of our overall growth from the three months ended September 30, 2015.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

Noninterest income was $113.4 million for the nine months ended September 30, 2016, an increase of $45.1 million, or 66.0%, as compared to $68.3 million for the nine months ended September 30, 2015. Noninterest income to average assets (excluding any gains or losses from sale of securities) was 3.7% in the nine months ended September 30, 2016 as compared to 2.6% in the nine months ended September 30, 2015.

Mortgage banking income was $91.6 million and $51.1 million for the nine months ended September 30, 2016 and 2015, respectively. Originations of mortgage loans to be sold totaled $3,121.3 million for the nine months ended September 30, 2016 as compared to $2,067.5 million for the nine months ended September 30, 2015. The increase in originations of mortgage loans to be sold is due to increased overall volume as well as the expansion of the consumer direct delivery and correspondent delivery channels and a favorable interest rate environment. The margin on the origination and sales of mortgage loans was 2.45% for the nine months ended September 30, 2016 compared to 2.37% for the nine months ended September 30, 2015. The increase is primarily due to a favorable interest rate environment and improved execution, including increased securitization activity. The components of mortgage banking income for the nine months ended September 30, 2016 and 2015 were as follows:

	Nine months ended September 30,
(in thousands)	2016		2015
Mortgage banking income:
Origination and sales of mortgage loans	$	83,263	$	48,979
Mortgage servicing income		8,311		2,102
Total mortgage banking income	$	91,574	$	51,081
Origination volume	$	3,121,252		2,067,466
Outstanding principal balance of mortgage loans serviced	$	4,975,893	$	1,944,882

Mortgage banking income attributable to our Banking segment was $22.2 million and $14.2 million for the nine months ended September 30, 2016 and 2015, respectively, and mortgage banking income attributable to our Mortgage segment was $69.3 million and $36.9 million for the nine months ended September 30, 2016 and 2015, respectively.

Service charges on deposit accounts were $6.1 million, an increase of $0.9 million or 17.0% for the nine months ended September 30, 2016, compared to $5.2 million for the nine months ended September 30, 2015. The increase in service charges on deposit accounts in the nine months ended September 30, 2016 was primarily the result of deposit account growth driven by our acquisition of NWGB.

ATM and interchange fees include debit card interchange, ATM and other consumer fees. These fees increased 27.6% to $5.8 million during the nine months ended September 30, 2016 as compared to $4.5 million for the nine months ended September 30, 2015 as a result of increased debit card fees from continued growth in client usage of debit cards experienced by most financial in stitutions.

Gains on sales of securities for the nine months ended September 30, 2016 were $4.4 million, resulting from the sale of approximately $270.7 million in securities, compared to gains on sales of securities for the nine months ended September 30, 2015 of $1.8 million. The gains are attributable to management taking advantage of portfolio structuring opportunities to lock in current gains while maintaining comparable interest rates and maturities and to fund current loan growth.

Net gain on sales or write-downs of foreclosed assets for the nine months ended September 30, 2016 was $1.5 thousand compared to a net loss of $43 thousand for the nine months ended September 30, 2015. This change was the result of specific sales and valuation transactions of other real estate.

Other noninterest income for the nine months ended September 30, 2016 was $4.0 million as compared to other noninterest income of $2.8 million for the nine months ended September 30, 2015. This $1.1 million increase in other noninterest income was due to increased miscellaneous income items associated with our overall growth.

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 foreclosed asset 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 September 30,				Nine months ended September 30,
(in thousands)	2016		2015		2016		2015
Salaries and employee benefits	$	34,010	$	22,151	$	84,486	$	61,111
Occupancy and fixed asset expense		3,171		2,741		9,567		7,892
Legal and professional fees		816		1,252		2,704		2,394
Merger and conversion expenses		1,122		291		3,268		578
Data processing expense		1,294		511		2,691		1,520
Amortization of core deposit intangible		526		415		1,605		1,221
Amortization of mortgage servicing rights		2,796		764		6,221		1,543
Impairment of mortgage servicing rights		2,402		—		8,089		—
Regulatory fees and deposit insurance assessments		465		550		1,481		1,465
Foreclosed assets expense		422		310		422		310
Software license and maintenance fees		503		559		2,361		1,410
Advertising		2,220		2,305		8,071		5,875
Other		5,782		3,730		16,505		11,293
Total noninterest expense	$	55,529	$	35,579	$	147,471	$	96,612

Three months ended September 30, 2016 compared to three months ended September 30, 2015

Noninterest expense increased by $20.0 million during the three months ended September 30, 2016 to $55.5 million as compared to $35.6 million in the three months ended September 30, 2015. This increase resulted primarily from higher salaries and employee benefits expenses in addition to an impairment of mortgage servicing rights and increased costs associated with our growth and acquisition of NWGB.

Salaries and employee benefits expense is the largest component of noninterest expenses representing 61.2% and 62.3% of total noninterest expense in the three months ended September 30, 2016 and 2015, respectively. During the three months ended September 30, 2016, salaries and employee benefits expense increased $11.9 million, or 53.5%, to $34.0 million as compared to $22.2 million for the three months ended September 30, 2015. The increase in the three months ended September 30, 2016 was primarily due to increased mortgage costs and equity compensation grants that were made in conjunction with our initial public offering. The $6.3 million increase in mortgage banking salaries and benefits resulted from the increase in mortgage loan originations and delivery expansion. Salaries and employee benefits expense previously included amounts earned under our three management incentive plans that are based on our total

assets, tangible book value of consolidated eq uity and contractually-defined after-tax earnings. As of September 16, 2016, the date of the initial public offering, participants in these plans were given the option to convert their equity based incentive plan units to shares of restricted stock units a t the IPO price of $19 per share. These plans (cash and stock-settled) converted to the fair market value of stock trading price at the IPO. Additionally, we granted certain employees and executive officers restricted stock units in a total grant value of $13.7 million and granted additional EBI units amounting to $4.5 million (subsequently converted). Expense related to these grants amounted to $3.4 million in the third quarter of 2016. As of September 30, 2016, there was $17.2 million in total unrecognize d expense related to these grants and the conversion of the equity based incentive plan units to be recognized over the remaining vesting period.

A summary of the equity based compensation items is as follows:

(a) The cash settled equity based incentive plans are based on underlying EBI units totaling 180,447 units and future expense will vary based on the fair value of the Company’s stock. The plans are scheduled to vest 112,977, 38,298, and 29,172 units on January 1, 2017, 2018 and 2019, respectively.

(b) The stock-settled equity based restricted stock units are estimated to result in expense of $677 thousand in the fourth quarter of 2016 and $2.3 million, $1.1 million, and $278 thousand in the years ended December 31, 2017, 2018 and 2019, respectively.

(c) The impact of time-based restricted stock grants before considering forfeitures will result in approximately $690 thousand per quarter over the next five years.

In connection with our initial public offering, our board of directors and majority shareholder approved an employee stock purchase plan (ESPP), which allows certain employees to purchase shares of stock with up to a 15% discount. A total of 2,500,000 shares of common stock were reserved for purchase under the ESPP. We may incur additional expense related to the ESPP in the fourth quarter of 2016. The first offering period is from September 16, 2016 through December 30, 2016 at the lower of the beginning period price of $19 per share or the price at the end of the period with no discount for this offering period. The maximum shares per offering period is 200,000 shares.

Occupancy and fixed asset expense in the three months ended September 30, 2016 was $3.2 million, an increase of $0.4 million, compared to $2.7 million for the three months ended September 30, 2015. This increase was attributable to new branch expansion in Nashville market in addition to the acquisition of NWGB.

Legal and professional fees were $0.8 million for the three months ended September 30, 2016 as compared to $1.3 million for the three months ended September 30, 2015. The decrease in legal and professional fees is attributable to our ability to capitalize certain costs associated with our initial public offering and offsetting these costs with the proceeds of the sale of our common stock. This amounted to approximately $1.7 million, of which $0.5 million was incurred in the third quarter of 2016.

Merger and conversion expenses related to the acquisition of NWGB were $1.1 million for the three months ended September 30, 2016 as compared to $0.3 million for the three months ended September 30, 2015.

Data processing costs increased $0.8 million to $1.3 million for the three months ended September 30, 2016 from $0.5 million for the three months ended September 30, 2015. The increase for the three months ended September 30, 2016 was attributable to our growth and volume of transaction processing in addition to the change of our core processor from Cardinal to Jack Henry Silverlake.

Amortization of intangible assets totaled $0.5 million for the three months ended September 30, 2016 compared to $0.4 million for the three months ended September 30, 2015. This amortization relates to core deposit intangible assets, which are being amortized over their useful lives. As of September 30, 2016 and 2015, these intangible assets have remaining estimated useful lives of approximately 9 years and 10 years, respectively.

Mortgage servicing rights are recognized as a separate asset on the date the corresponding mortgage loan is sold. Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortization of mortgage servicing rights is determined using the level yield method based on the expected life of the loan. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs and other factors. Mortgage servicing rights were carried at amortized cost less impairment. Amortization expense amounted to $2.8 million and $0.8 million for the three months ended September 30, 2016 and 2015, respectively. Impairment losses on mortgage servicing rights are recognized to the extent by which the unamortized cost exceeds fair value. Impairment losses on mortgage servicing rights of $2.4 million and $0 were recognized in earnings in the three months ended September 30, 2016 and 2015, respectively.

On September 29, 2016, we signed a letter of intent to sell approximately $2.4 billion in serviced mortgage loan balances. The transaction terms dictate an adjustable daily pricing mechanism based on changes in the referenced mortgage

interest rate. In order to hedge the movement of the referenced mortgage interest rate, we entered into a series of interest rate futures and related derivatives to approximately offset the changes to the sales price with an aggregate notional value of $130 million subsequent to September 30, 2016. The changes in fair value of the derivatives will be included together with the change in fair value of the MSRs and in the calculated gain or loss on the sale of MSRs. Additionally, subsequent to September 30, 2016, we entered into a letter of intent to sell an additional approximate $1.2 billion in serviced mortgage loan balances. At September 30, 2016 the fair value carrying amount of the related mortgage servicing rights approximates an aggregate total of $32.6 million for the two transactions. Both trans actions are expected to close prior to the end of the fourth quarter of 2016. In connection with the above sales, we do not expect any further material gain or loss on the sale, however we do expect to incur transaction-related expenses in the aggregate a mount of approximately $2.6 million which will be recorded when incurred. Based on current management plans, we plan to retain the remaining MSRs related primarily to the retail mortgage originations within its existing footprint for marketing purposes wh ile selling originated MSRs in various transactions in future periods.

The actual timing and expenses associated with these sales may differ from our current expectations depending on market conditions and transaction-specific details. We also intend to establish an ongoing arrangement whereby we could sell some or all of our ongoing mortgage servicing rights through a co-issue flow mechanism to facilitate future sales without incurring ongoing transaction costs.

Regulatory fees and deposit insurance assessments were $0.5 million for three months ended September 30, 2016, a decrease of $(0.1) million compared to $0.6 million for the three months ended September 30, 2015.

Expenses related to foreclosed assets for the three months ended September 30, 2016 were $422 thousand, an increase of $112 thousand compared to $310 thousand for the three months ended September 30, 2015. Legal fees related to foreclosed real estate sold was the primary driver for the increase.

Software license and maintenance fees for the three months ended September 30, 2016 were $0.5 million, a decrease of $(0.1) million compared to $0.6 million for the three months ended September 30, 2015.

Advertising costs for the three months ended September 30, 2016 were $2.2 million, a decrease of $(0.1) million compared to $2.3 million for the three months ended September 30, 2015. This decrease was largely driven by the mortgage segment.

Other noninterest expense for three months ended September 30, 2016 was $5.8 million, an increase of $2.1 million from the three months ended September 30, 2015, reflecting an increase of various expenses in mortgage banking activities and growth associated with the acquisition of NWGB.

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

Noninterest expense increased by $50.9 million during the nine months ended September 30, 2016 to $147.5 million as compared to $96.6 million in the nine months ended September 30, 2015. This increase resulted primarily from higher salaries and employee benefits expenses in addition to an impairment of mortgage servicing rights and increased costs associated with our growth and acquisition of NWGB.

Salaries and employee benefits expense is the largest component of noninterest expenses representing 57.3% and 63.3% of total noninterest expense in the nine months ended September 30, 2016 and 2015, respectively. During the nine months ended September 30, 2016, salaries and employee benefits expense increased $23.4 million, or 38.3%, to $84.5 million as compared to $61.1 million for the nine months ended September 30, 2015. The increase in the nine months ended September 30, 2016 was primarily due to the $12.7 million increase in mortgage banking salaries and benefits resulting from the increase in mortgage loan originations and delivery expansion and growth of our senior management team in addition to equity compensation grants that were made in conjunction with our initial public offering. Salaries and employee benefits expense includes amounts earned under our three management incentive plans that are based on our total assets, tangible book value of consolidated equity and contractually-defined after-tax earnings. Aggregate salaries and employee benefits expense recognized under these incentive plans totaled $4.6 million and $2.5 million for the nine months ended September 30, 2016 and 2015, respectively. As of September 16, 2016, the date of the initial public offering, participants in these plans were given the option to convert their equity based incentive plan units to shares of restricted stock units at the IPO price of $19 per share. Additionally, we granted certain employees and executive officers restricted stock units in a total grant value of $18.2 million. Expense related to these grants amounted to $3.4 million in the third quarter of 2016. As of September 30, 2016, there was $17.2 million in total unrecognized expense related to these grants and the conversion of the equity based incentive plan units to be recognized over the remaining vesting period.

Occupancy and fixed asset expense in the nine months ended September 30, 2016 was $9.6 million, an increase of $1.7 million, compared to $7.9 million for the nine months ended September 30, 2015. This increase was attributable to expansion including the acquisition of NWGB.

Legal and professional fees were $2.7 million for the nine months ended September 30, 2016 as compared to $2.4 million for the nine months ended September 30, 2015. The increase in legal and professiona l fees is attributable to additional professional services related to our growth and volume of business.

Merger and conversion expenses related to the acquisition of NWGB were $3.3 million for the nine months ended September 30, 2016 as compared to $0.6 million for the nine months ended September 30, 2015. We do not anticipate to incur additional costs related to our acquisition of NWGB or our core processor conversion from Cardinal to Jack Henry Silverlake.

Data processing costs increased $1.2 million, or 77.0%, to $2.7 million for the nine months ended September 30, 2016 from $1.5 million for the nine months ended September 30, 2015. The increase for the nine months ended September 30, 2016 was attributable to our growth and volume of transaction processing.

Amortization of intangible assets totaled $1.6 million for the nine months ended September 30, 2016 compared to $1.2 million for the nine months ended September 30, 2015. This amortization relates to core deposit intangible assets, which are being amortized over their useful lives. As of September 30, 2016 and 2015, these intangible assets have remaining estimated useful lives of approximately 9 year and 10 years, respectively.

Mortgage servicing rights were carried at amortized cost less impairment of $46.3 million and $22.9 million at September 30, 2016 and 2015, respectively, and amortization expense amounted to $6.2 million and $1.5 million for the nine months ended September 30, 2016 and 2015, respectively. Impairment losses on mortgage servicing rights are recognized to the extent by which the unamortized cost exceeds fair value. Impairment losses on mortgage servicing rights of $8.1 million and $0 were recognized in earnings in the nine months ended September 30, 2016 and 2015, respectively.

On September 29, 2016, we signed a letter of intent to sell approximately $2.37 billion in serviced mortgage loan balances. The transaction terms dictate an adjustable daily pricing mechanism based on changes in the referenced mortgage interest rate. In order to hedge the movement of the referenced mortgage interest rate, we entered into a series of futures and related derivatives to approximately offset the changes to the sales price with an aggregate notional value of $130 million subsequent to September 30, 2016. The changes in fair value of the derivatives will be included in the calculated gain or loss on the sale of MSRs.

Regulatory fees and deposit insurance assessments were relatively flat, amounting to $1.5 million for nine months ended September 30, 2016 and 2015.

Expenses related to foreclosed assets for the nine months ended September 30, 2016 were $422 thousand, an increase of $112 thousand compared to $310 thousand for the nine months ended September 30, 2015. Legal fees related to foreclosed real estate sold was the primary driver for the increase.

Software license and maintenance fees for the nine months ended September 30, 2016 were $2.4 million, an increase of $1.0 million compared to $1.4 million for the nine months ended September 30, 2015. This increase is due to our growth and customization costs associated with the conversion of our core system to Jack Henry Silverlake during the second quarter of 2016.

Advertising costs for the nine months ended September 30, 2016 were $8.1 million, an increase of $2.2 million compared to $5.9 million for the nine months ended September 30, 2015. This increase was largely driven by the mortgage segment’s internet delivery channel and communications surrounding our second quarter conversion to Jack Henry Silverlake.

Other noninterest expense for nine months ended September 30, 2016 was $16.5 million, an increase of $5.2 million from the nine months ended September 30, 2015, reflecting an increase of various expenses in mortgage banking activities and growth associated with the acquisition of NWGB.

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 on a fully taxable equivalent basis and noninterest income, excluding certain gains and expenses.

Our efficiency ratio, on a tax-equivalent basis, was 69.96% and 72.11% for the three months ended September 30, 2016 and 2015, respectively, and 69.70% and 71.58% for the nine months ended September 30, 2016 and 2015, respectively.

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 September 30,						Nine months ended September 30,						Year ended December 31,
	2016			2015			2016			2015			2015
Return on average:
Total assets		0.16	%		2.36	%		1.44	%		2.06	%		1.86	%
Shareholders’ equity		1.74	%		27.23	%		16.26	%		22.76	%		20.91	%
Dividend payout ratio		4971.00	%		67.27	%		219.44	%		54.57	%		49.31	%
Average shareholders’ equity to average assets		9.17	%		8.67	%		8.85	%		9.05	%		8.88	%

Income tax

Income tax expense was $14.8 million and $0.9 million for the three months ended September 30, 2016 and 2015, respectively, and $16.9 million and $2.5 million for the nine months ended September 30, 2016 and 2015, respectively. Income tax expense for the three and nine months ended September 30, 2016 includes the $13.2 million increase in deferred tax liability associated with our conversion to a C corporation. From our formation in 2001 through September 16, 2016, we elected to be taxed for federal income tax purposes as a “Subchapter S corporation” under the provisions of Section 1361 through 1379 of the Internal Revenue Code. As a result, our net income was not subject to, and we have not paid, U.S. federal income taxes and we have not been required to make any provision or recognize any liability for federal income tax in our financial statements for the periods ending on or prior to June 30, 2016. We terminated our status as a “Subchapter S” corporation in connection with our initial public offering as of September 16, 2016. We will commence paying federal income taxes on our pre-tax net income and our net income for each fiscal year and each interim period commencing on or after September 16, 2016 and each such period will reflect a provision for federal income taxes . See “Pro forma income tax expense and net income” below for a discussion on what our income tax expense and net income would have been had we been taxed as a C Corporation for the full periods.

Pro forma income tax expense and net income

We have determined that had we been taxed as a C Corporation and paid U.S. federal income tax for the three months and nine months ended September 30, 2016 and 2015, our combined effective income tax rate would have been 37.22% and 30.90% and 37.33% and 34.35%, respectively. These pro forma effective rates reflect a U.S. federal income tax rate of 35.00% on corporate income and the fact that a portion of our net income in each of these periods was derived from nontaxable investment income and a bargain purchase gain in the third quarter of 2015 and other nondeductible expenses. Our net income for the three months ended September 30, 2016 and 2015 was $1.2 million and $15.9 million, respectively, and our tax-equivalent net interest income for the same periods was $28.2 million and $24.6 million, respectively. For the nine months ended September 30, 2016 and 2015 our net income was $31.6 million and $38.7 million, respectively. Had we been subject to U.S. federal income tax during these periods, on a pro forma basis, our provision for combined federal and state income tax would have been $5.9 and $5.2, respectively, for the three months ended September 30, 2016 and 2015 and $18.1 and $14.1, respectively, for the nine months ended September 30, 2016 and 2015. The increases in such pro forma provision for U.S. federal income tax would have resulted primarily from the increase in our net income for such periods. As a result of the foregoing factors, our pro forma net income (after U.S. federal income tax) for the three months ended September 30, 2016 and 2015 would have been $10.0 million and $11.6 million, respectively, and for the nine months ended September 30, 2016 and 2015 would have been $30.4 million and $27.0 million, respectively.

Financial condition

The following discussion of our financial condition compares nine months ended September 30, 2016 with the year ended December 31, 2015.

Total assets

Our total assets were $3.19 billion at September 30, 2016. This compares to total assets of $2.90 billion as of December 31, 2015. The increase in total assets is primarily attributable to increases in both loans held for sale and loan held for investment balances, driven by strong demand for our loan products in our markets and the success of our growth initiatives.

Loan portfolio

Our loan portfolio is our most significant earning asset, comprising 56.3% and 58.7% of our total assets as of September 30, 2016 and December 31, 2015, 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. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Loans

Loans increased $91.5 million, or 5.4%, to $1.79 billion as of September 30, 2016 as compared to $1.70 billion as of December 31, 2015. Our loan growth during the nine months ended September 30, 2016 has been comprised of an increase of $53.3 million or 16.8% in commercial and industrial, a decrease of $(3.7) million or 1.6% in construction loans, an increase of $20.6 million or 6.2% in owner occupied commercial real estate, an increase of $28.0 million or 11.8% in non-owner occupied commercial real estate as well as a decrease in residential real estate of 0.8% and a decrease in consumer and other of -3.7%, respectively. The increase in loans during the nine months ended September 30, 2016 is attributable to continued strong demand in our metropolitan markets, the interest rate environment and continued favorable economic conditions.

Loans by type

The following table sets forth the balance and associated percentage of each major category in our loan portfolio of loans as of the dates indicated:

	September 30, 2016					As of December 31, 2015
(dollars in thousands)	Amount		% of total			Amount		% of total
Loan Type:
Commercial and industrial	$	370,379		21	%	$	317,038		19	%
Construction		227,321		13	%		231,025		13	%
Residential real estate:
1-to-4 family		286,580		16	%		287,749		17	%
Line of credit		173,898		10	%		171,526		10	%
Multi-family		54,129		3	%		59,510		4	%
Commercial real estate:
Owner-Occupied		350,790		19	%		330,207		19	%
Non-Owner Occupied		265,190		15	%		237,222		14	%
Consumer and other		65,056		3	%		67,586		4	%
Total loans	$	1,793,343		100	%	$	1,701,863		100	%

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. At September 30, 2016 and December 31, 2015, there were no concentrations of loans exceeding 10% of loans other than the categories of loans disclosed in the table above.

Loan categories

The principal categories of our loan 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. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. The 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. As of September 30, 2016, our commercial and industrial loans comprised of $370.4 million, or 21% of loans, compared to $317.0 million, or 19%, of loans as of December 31, 2015.

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 thro ugh 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. As of September 30, 2016, our owner occupied commercial real estate lo ans comprised $350.8 million or 19% of loans, compared to $330.2 million, or 19%, of loans as of December 31, 2015.

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, 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. As of September 30, 2016, our non-owner occupied commercial real estate loans comprised $265.2 million, or 15% of loans, compared to $237.2 million, or 14%, of loans as of December 31, 2015.

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, 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. As of September 30, 2016, our residential real estate mortgage loans comprised $286.6 million, or 16% of loans, compared to $287.7 million, or 17%, of loans as of December 31, 2015.

Home equity loans . Our home equity loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We intend to continue to make home equity 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. Our home equity loans as of September 30, 2016 comprised $173.9 million or 10% of loans compared to $171.5 million, or 10%, of loans as of December 31, 2015.

Multi-family residential loans . Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. Our multifamily loans as of September 30, 2016 comprised $54.1 million, or 3% of loans, compared to $59.5 million, or 4%, of loans as of December 31, 2015.

Construction loans . Our construction real estate 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. As of September 30, 2016, our construction loans comprised $227.3 million, or 13% of loans compared to $231.0 million, or 13% of loans as of December 31, 2015. The decline in construction loans in the nine months ended September 30, 2016 is primarily due to completed construction projects resulting in the underlying loans moving to other loan categories, such as commercial real estate.

Consumer and other loans . Consumer and other loans include consumer loans made to individuals for personal purposes, including automobile purchase loans and personal lines of credit. None of these categories of loans represents a significant portion of our loan portfolio. As September 30, 2016, our consumer and other loans comprised $65.1 million, or 3% of loans, compared to $67.6 million, or 4% of loans as of December 31, 2015.

Loan maturity and sensitivities

The following tables present the contractual maturities of our loan portfolio as of September 30, 2016 and December 31, 2015. 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 or scheduled repayments.

Loan type (in thousands)	Maturing in one year or less		Maturing in one to five years		Maturing after five years		Total
As of September 30, 2016
Commercial	$	155,420	$	171,731	$	43,228	$	370,379
Commercial real estate:
Owner occupied		48,028		240,553		62,209		350,790
Non-owner occupied		64,946		153,550		46,694		265,190
Residential real estate:
1-to-4 family		50,447		116,826		119,307		286,580
Line of credit		15,907		40,487		117,504		173,898
Multi-family		11,605		41,533		991		54,129
Construction		155,271		60,270		11,780		227,321
Consumer and other		24,703		27,934		12,419		65,056
Total	$	526,327	$	852,884	$	414,132	$	1,793,343

Loan type (in thousands)	Maturing in one year or less		Maturing in one to five years		Maturing after five years		Total
As of December 31, 2015
Commercial	$	149,743	$	160,514	$	6,781	$	317,038
Commercial real estate:
Owner occupied		36,077		248,000		46,130		330,207
Non-owner occupied		35,098		181,482		20,642		237,222
Residential real estate:
1-to-4 family		67,837		127,796		92,116		287,749
Line of credit		20,562		58,039		92,925		171,526
Multi-family		5,849		52,485		1,176		59,510
Construction		105,131		108,391		17,503		231,025
Consumer and other		34,746		32,128		712		67,586
Total	$	455,043	$	968,835	$	277,985	$	1,701,863

For loans due after one year or more, the following tables present the sensitivities to changes in interest rates as of September 30, 2016 and December 31, 2015:

Loan type (in thousands)	Fixed interest rate		Floating interest rate		Total
As of September 30, 2016
Commercial	$	120,138	$	94,821	$	214,959
Commercial real estate:
Owner occupied		199,359		103,403		302,762
Non-owner occupied		129,930		70,314		200,244
Residential real estate:
1-to-4 family		197,523		38,610		236,133
Line of credit		645		157,346		157,991
Multi-family		41,085		1,439		42,524
Construction		29,150		42,900		72,050
Consumer and other		38,193		2,160		40,353
Total	$	756,023	$	510,993	$	1,267,016

Loan type (in thousands)	Fixed interest rate		Floating interest rate		Total
As of December 31, 2015
Commercial	$	87,681	$	79,614	$	167,295
Commercial real estate:
Owner occupied		220,468		73,662		294,130
Non-owner occupied		161,577		40,547		202,124
Residential real estate:
1-to-4 family		194,885		25,027		219,912
Line of credit		570		150,394		150,964
Multi-family		52,356		1,305		53,661
Construction		41,485		84,409		125,894
Consumer and other		32,413		427		32,840
Total	$	719,435	$	455,385	$	1,246,820

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of September 30, 2016 and December 31, 2015:

(in thousands)	Fixed interest rate			Floating interest rate			Total
As of September 30, 2016
One year or less	$	244,775		$	281,552		$	526,327
One to five years		585,001			267,883			852,884
More than five years		171,022			243,110			414,132
Total	$	1,000,798		$	792,545		$	1,793,343
		55.81	%		44.19	%		100.00	%

(in thousands)	Fixed interest rate			Floating interest rate			Total
As of December 31, 2015
One year or less	$	238,171		$	216,872		$	455,043
One to five years		671,594			297,241			968,835
More than five years		119,841			158,144			277,985
Total	$	1,029,606		$	672,257		$	1,701,863
		60.50	%		39.50	%		100.00	%

Of the loans shown above with floating interest rates totaling $792.5 million as of September 30, 2016, many of such have interest rate floors as follows:

Loans with interest rate floors (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)
As of September 30, 2016
Loans with current rates above floors	$	94,572		—	$	47,658		—	$	115,678		—
Loans with current rates below floors:
1-25 bps		9,876		20.65		8,895		26.60		7,680		14.83
26-50 bps		32,286		50.15		28,979		47.78		16,097		42.40
51-75 bps		2,439		75.00		683		74.34		2,775		69.86
76-100 bps		16,625		96.80		6,782		99.02		1,020		98.75
101-125 bps		8,924		122.39		3,279		123.29		524		122.40
126-150 bps		7,596		144.55		10,356		144.36		2,682		147.83
151-200 bps		487		198.87		6,621		191.83		1,014		196.55
200-250 bps		1,660		187.85		3,746		214.22		252		248.45
251 bps and above		76		13.85		7,260		276.15		217		293.88
Total loans with current rates below floors	$	79,969		99.12	$	76,601		67.37	$	32,261		12.72

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 to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. We generally do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to many of our peer banks. This practice often results in us carrying higher nonperforming assets on our books than our peers, as we believe our peers are quicker to charge-off loans than we are. However, we believe that our commitment to collecting on all of our loans results in higher loan recoveries.

Nonperforming assets

Our nonperforming assets consist of nonperforming loans and foreclosed real estate. 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. As of September 30, 2016 and December 31, 2015, we had $21.6 million and $20.5 million, respectively, in nonperforming assets. If such nonperforming assets would have been current during the three months and nine months ended September 30, 2016 and the year ended December 31, 2015, we would have recorded an additional $152 thousand and $475 thousand and $1.0 million of interest income, respectively. No significant amount of interest income was recognized from loans classified as nonperforming during the three or nine months ended September 30, 2016 or the year ended December 31, 2015. We had net interest charged off of $8 thousand and $26 thousand and net interest recoveries of $0.3 million for the three and nine months ended September 30, 2016 and the year ended December 31, 2015, respectively, was recognized on loans that had previously been charged off or classified as nonperforming in previous periods. The decline in our nonperforming assets is the result of the consistent improvement in our overall credit quality as economic conditions in our markets have remained strong throughout 2016.

The following table provides details of our nonperforming assets, the ratio of such loans and foreclosed assets to total assets as of the dates presented, and certain other related information:

	As of September 30,			As of December 31,
(in thousands, except %)	2016			2015
Loan Type
Commercial and industrial	$	1,483		$	1,762
Construction		458			305
Residential real estate:
1-to-4 family mortgage		2,540			2,392
Residential line of credit		838			1,437
Multi-family mortgage		—			—
Commercial real estate:
Owner occupied		2,078			1,848
Non-owner occupied		3,385			3,638
Consumer and other		182			205
Total nonperforming loans		10,964			11,587
Other real estate owned		8,964			11,641
Other		1,654			1,654
Total nonperforming assets	$	21,582		$	24,882
Total nonperforming loans as a percentage of loans		0.61	%		0.68	%
Total nonperforming assets as a percentage of total assets		0.68	%		0.86	%
Total accruing loans over 90 days delinquent as a percentage of total assets		0.04	%		0.03	%
Loans restructured as troubled debt restructurings	$	10,125		$	15,289
Troubled debt restructurings as a percentage of loans		0.56	%		0.90	%

Total nonperforming loans as a percentage of non-acquired loans were 0.6% as of September 30, 2016 as compared to 0.7% as of December 31, 2015. Our coverage ratio, or our allowance for loan losses as a percentage of our nonperforming loans, was 212.42% as of September 30, 2016 as compared to 211.10% as of December 31, 2015.

Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowanc e for loan losses at September 30, 2016. Management also continually monitors past due loans for potential credit quality deterioration. Loans 30-89 days past due were $5.8 million at September 30, 2016, as compared to $5.0 million for the year ended Decem ber 31, 2015.

Under acquisition accounting rules, loans (including those considered non-performing) acquired from NWGB were recorded at their estimated fair value. We recorded the loan portfolio acquired from NWGB at fair value as of the acquisition date, which resulted in a discount to the loan portfolio’s previous carrying value. Neither the credit portion nor any other portion of the fair value mark is reflected in the reported allowance for loan and lease losses, or related allowance coverage ratios and these loans are also excluded from our non-performing ratios above. The purchased non-credit impaired loans had remaining discount that will accrete into interest income over the life of the loans of $1.4 million and $2.1, as of September 30, 2016 and December 31, 2015, respectively. The purchased credit impaired loans had remaining discount of $1.0 million and $1.6 million, as of September 30, 2016 and December 31, 2015, respectively.

Foreclosed assets consist of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for loan losses. Reductions in the carrying value subsequent to acquisition are charged to earnings and are included in “Gain/(loss) on sales or write- downs of foreclosed assets” in the accompanying condensed consolidated statements of income. Foreclosed assets with a cost basis of $6.6 million were sold as of nine months ended September 30, 2016, resulting in a net gain of $1.7 million. Foreclosed assets with a cost basis of $3.8 million were sold during the year ended December 31, 2015, resulting in a net loss of $317 thousand.

Classified loans

Accounting standards require us to identify loans, where full repayment of principal and interest is doubtful, as impaired loans. These standards require that impaired loans be valued at the present value of expected future cash flows, discounted at the loan’s effective interest rate, or using one of the following methods: the observable market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. We have implemented these standards in our quarterly review of the adequacy of the allowance for loan losses, and identify and value impaired loans in accordance with guidance on these standards. As part of the review process, we also identify loans classified as watch, which have a potential weakness that deserves management’s close attention.

Loans totaling $40.1 million and $48.5 million were classified substandard under our policy at September 30, 2016 and December 31, 2015, respectively. As of September 30, 2016 and December 31, 2015, $16.6 and $21.4 of substandard loans were acquired with deteriorated credit quality in connection with our acquisition of NWGB. The following table sets forth information related to the credit quality of our loan portfolio at September 30, 2016 and December 31, 2015.

Loan type (in thousands)	Pass		Watch		Substandard		Total
As of September 30, 2016
Commercial and industrial	$	357,447	$	8,769	$	4,163	$	370,379
Construction		219,155		3,053		5,113		227,321
Residential real estate:
1-to-4 family mortgage		269,839		6,605		10,136		286,580
Residential line of credit		169,686		2,298		1,914		173,898
Multi-family mortgage		52,910		155		1,064		54,129
Commercial real estate:
Owner occupied		331,746		10,661		8,383		350,790
Non-owner occupied		243,161		13,080		8,949		265,190
Consumer and other		64,263		459		334		65,056
Total loans	$	1,708,207	$	45,080	$	40,056	$	1,793,343

Loan type (in thousands)	Pass		Watch		Substandard		Total
As of December 31, 2015
Commercial and industrial	$	310,125	$	1,060	$	5,853	$	317,038
Construction		219,684		3,238		8,103		231,025
Residential real estate:
1-to-4 family mortgage		268,046		9,367		10,336		287,749
Residential line of credit		165,838		3,069		2,619		171,526
Multi-family mortgage		58,234		166		1,110		59,510
Commercial real estate:
Owner occupied		310,538		9,852		9,817		330,207
Non-owner occupied		206,645		20,218		10,359		237,222
Consumer and other		66,794		460		332		67,586
Total loans	$	1,605,904	$	47,430	$	48,529	$	1,701,863

Allowance for loan losses

The allowance for loan losses is the amount of expense that, based on our judgment, is required to absorb probable credit losses inherent in our loan portfolio and that, in management’s judgment, is appropriate under GAAP. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Among the material estimates required to establish the allowance are loss exposure at default, the amount and timing of future cash flows on impacted loans, value of collateral and determination of the loss factors to be applied to the various elements of the portfolio.

Our methodology for assessing the adequacy of the allowance for loan losses includes a general allowance for performing loans, which are grouped based on similar characteristics, and an allocated allowance for individual impaired loans. Actual credit losses or recoveries are charged or credited directly to the allowance.

The appropriate level of the allowance is established on a quarterly basis after input from management and our loan review staff and is based on an ongoing analysis of the credit risk of our loan portfolio. In making our evaluation of the credit risk of the loan portfolio, we consider factors such as the volume, growth and composition of our loan portfolio, the diversification by industry of our commercial loan portfolio, the effect of changes in the local real estate market on collateral values, trends in past dues, our experience as a lender, changes in lending policies, the effects on our loan portfolio of current economic indicators and their probable impact on borrowers, historical loan loss experience, industry loan loss experience, the amount of nonperforming loans and related collateral and the evaluation of our loan portfolio by our loan review function.

In addition, on a regular basis, management and the Bank’s Board of Directors review loan ratios. These ratios include the allowance for loan losses as a percentage of loans, net charge-offs as a percentage of average loans, the provision for loan losses as a percentage of average loans, nonperforming loans as a percentage of loans and the allowance coverage on nonperforming loans. Also, management reviews past due ratios by relationship manager, individual markets and the Bank as a whole. The allowance for loan losses was $23.3 million and $24.5 million at September 30, 2016 and December 31, 2015, respectively.

The following table presents the allocation of the allowance for loan losses by loan category as of the periods indicated:

	September 30, 2016					As of December 31, 2015
(in thousands, except %)	Amount		% of Loans			Amount		% of loans
Loan Type:
Commercial and industrial	$	6,124		26	%	$	5,288		22	%
Construction		4,401		19	%		5,030		21	%
Residential real estate:
1-to-4 family mortgage		3,499		15	%		4,126		17	%
Residential line of credit		1,830		8	%		2,178		8	%
Multi-family mortgage		613		3	%		311		1	%
Commercial real estate:
Owner occupied		3,641		16	%		4,034		16	%
Non-owner occupied		2,415		10	%		2,610		11	%
Consumer and other		767		3	%		883		4	%
Total allowance	$	23,290		100	%	$	24,460		100	%

The following table summarizes activity in our allowance for loan losses during the periods indicated:

	Three Months Ended			Nine Months Ended			Year ended
(in thousands, except %)	September 30, 2016			September 30, 2016			December 31, 2015
Allowance for loan loss at beginning of period	$	23,734		$	24,460		$	29,030
Charge-offs:
Commercial and industrial		(358	)		(556	)		(981	)
Construction		—			(2	)		(81	)
Residential real estate:
1-to-4 family mortgage		(166	)		(219	)		(828	)
Residential line of credit		(29	)		(104	)		(230	)
Multi-family mortgage		—			—			—
Commercial real estate:
Owner occupied		—			(93	)		(1,062	)
Non-owner occupied		—			—			(54	)
Consumer and other		(161	)		(646	)		(1,108	)
Total charge-offs		(714	)		(1,620	)		(4,344	)
Recoveries:
Commercial and industrial		8			480			116
Construction		32			137			1,354
Residential real estate:
1-to-4 family mortgage		2			109			161
Residential line of credit		36			143			286
Multi-family mortgage		—			—			—
Commercial real estate:				.
Owner occupied		4			15			35
Non-owner occupied		22			27			342
Consumer and other		95			266			544
Total recoveries		199			1,177			2,838
Net charge offs		(515	)		(443	)		(1,506	)
Provision (reversal of provision) for loan loss charged to operations		71			(727	)		(3,064	)
Allowance for loan loss at the end of period	$	23,290		$	23,290		$	24,460
Ratio of net charge-offs during the period to average loans outstanding during the period		-0.12	%		-0.03	%		-0.10	%
Allowance for loan loss as a percentage of loans at end of period		1.30	%		1.30	%		1.50	%
Allowance of loan loss as a percentage of nonperforming loans		212.42	%		212.42	%		211.10	%

Mortgage loans held for sale

Mortgage loans held for sale were $486.6 million at September 30, 2016 compared to $273.2 million at December 31, 2015. Originations of mortgage loans to be sold totaled $1,359.1 million and $789.5 million for the three months ended nine months ended September 30, 2016 and 2015 and $3,121.3 million and $2,067.5 million for the nine months ended September 30, 2016 and 2015, respectively. Generally, mortgage origination activity increases in lower interest rate environments and robust housing markets and decreases in rising interest rate environments and slower housing markets. Increasing originations during 2016 reflect a favorable interest rate environment and the ongoing expansion of our mortgage banking business, including our expansion of our consumer direct and correspondent delivery channels and increased origination volume in our retail and third party origination channels.

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 amou nt 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 treatmen t have been met. These loans are typically sold within thirty days after the loan is funded. 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 s econdary market.

Deposits

Deposits represent the Bank’s primary source of funds. We continue to focus on growing core 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 $2.64 billion and $2.44 billion as of September 30, 2016 and December 31, 2015, respectively. Noninterest-bearing deposits at September 30, 2016 and December 31, 2015 were $726.2 million and $627.0 million, respectively, while interest-bearing deposits were $1,913.8 million and $1,811.5 million at September 30, 2016 and December 31, 2015, respectively. The deposit mix shifted in the nine months ended September 30, 2016 between savings and certificates of deposits due to a restructuring of an IRA savings product to a time deposit product during the second quarter of 2016. At the time of restructuring, the approximate balance of the effected accounts was $91.0 million. During the second quarter of 2016, our third party servicing provider, Cenlar, transferred certain servicing escrow deposit accounts to the Bank which totaled $61.6 million at September 30, 2016. The mix between noninterest bearing and interest bearing demand has remained relatively stagnant, however management continues to focus on strategic pricing to grow noninterest bearing deposits while allowing more costly funding sources, including certain time deposits, to mature.

Average deposit balances by type, together with the average rates per periods are reflected in the average balance sheet amounts, interest earned and yield analysis tables included above under the discussion of net interest income.

The following table sets forth the distribution by type of our deposit accounts for the dates indicated:


	As of September 30, 2016								As of December 31, 2015
(dollars in thousands)	Amount		% of total deposits			Average rate			Amount		% of total deposits			Average rate
Deposit Type
Noninterest bearing demand	$	726,248		28	%		—	%	$	626,955		26	%		—	%
Interest bearing demand		1,382,981		52	%		0.37	%		1,273,438		52	%		0.35	%
Savings deposits		131,819		5	%		0.32	%		212,522		9	%		0.51	%
Certificates of deposit		399,024		15	%		0.52	%		325,559		13	%		0.51	%
Total deposits	$	2,640,072		100	%		0.29	%	$	2,438,474		100	%		0.30	%
Time Deposits
0.00-0.50%	$	213,944		53	%				$	232,255		71	%
0.51-1.00%		155,283		39	%					62,995		19	%
1.01-1.50%		16,298		4	%					11,908		4	%
1.51-2.00%		11,210		3	%					14,778		5	%
2.01-2.50%		2,284		1	%					3,498		1	%
Above 2.50%		5		0	%					125		—	%
Total time deposits	$	399,024		100	%				$	325,559		100	%

The following table sets forth our time deposits segmented by months to maturity and deposit amount as of September 30, 2016 and December 31, 2015:

	As of September 30, 2016
(Dollars in thousands)	Time deposits of $100 and greater		Time deposits of less than $100		Total
Months to maturity:
Three or less	$	27,390	$	41,388	$	68,778
Over Three to Six		25,786		40,158		65,944
Over Six to Twelve		57,693		63,884		121,577
Over Twelve		74,311		68,414		142,725
Total	$	185,180	$	213,844	$	399,024

	As of December 31, 2015
(Dollars in thousands)	Time deposits of $100 and greater		Time deposits of less than $100		Total
Months to maturity:
Three or less	$	37,708	$	38,225	$	75,933
Over Three to Six		21,492		32,848		54,340
Over Six to Twelve		44,336		59,159		103,495
Over Twelve		47,079		44,712		91,791
Total	$	150,615	$	174,944	$	325,559

Investment portfolio

Our investment portfolio provides liquidity and certain of our investment securities serve as collateral for certain deposits and other types of borrowings. Our investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk. The types and maturities of securities purchased are primarily based on our current and projected liquidity and interest rate sensitivity positions.

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 dated indicated:

	September 30, 2016					December 31, 2015
(dollars in thousands)	Carrying value		% of total			Carrying value		% of total
U.S. Government agency securities	$	2,501		0	%	$	33,808		5	%
Mortgage-backed securities		433,564		78	%		522,373		81	%
Municipals, tax exempt		104,112		19	%		79,837		12	%
Treasury securities		4,506		1	%		4,485		1	%
Equity Securities		8,674		2	%		8,884		1	%
Total securities available for sale	$	553,357		100	%	$	649,387		100	%

The balance of our investment portfolio at September 30, 2016 was $553.4 million compared to $649.4 million at December 31, 2015. At December 31, 2015, $122.1 million of our investment portfolio was made up of investment securities acquired from NWGB, of which the majority was subsequently sold and reinvested. During the nine months ended September 30, 2016 and the year ended December 31, 2015, we purchased $41.5 and $244.2 million and $164.9 million investment securities, respectively. Mortgage-backed securities and collateralized mortgage obligations, or CMOs, in the aggregate, comprised 77.1% and 88.6% and 97.2% of these purchases, respectively. CMOs are included in the “Mortgage-backed securities” line item in the above table. The mortgage-backed securities and CMOs held in our investment portfolio are primarily issued by government sponsored entities. U.S. Government agency securities and municipal securities accounted for 22.9% and 11.4% and 2.8%, respectively of total securities purchased in the three and nine months ended September 30, 2016 and year ended December 31, 2015. The carrying value of securities sold during the three months and nine months ended September 30, 2016 and the year ended December 31, 2015, totaled $34.4 million and $270.7 million and $194.6 million, respectively. Maturities and calls of securities during the three months and nine months ended September 30, 2016 and the year ended December 31, 2015, totaled $34.5 million and $78.7 million, and $103.2 million. As of September 30, 2016 and December 31, 2015, net unrealized gains of $9.3 million and $2.7 million, respectively, were recorded on investment securities.

The following table sets forth the fair value, scheduled maturities and weighted average yields for our investment portfolio as of September 30, 2016 and December 31, 2015:

	As of September 30, 2016								As of December 31, 2015
(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	$	3,003		0.5	%		0.67	%	$	—		0.0	%		0.00	%
Maturing in one to five years		1,503		0.3	%		0.75	%		4,485		0.7	%		0.69	%
Maturing in five to ten years		—		0.0	%		0.00	%		—		0.0	%		0.00	%
Maturing after ten years		—		0.0	%		0.00	%		—		0.0	%		0.00	%
Total Treasury securities		4,506		0.8	%		0.69	%		4,485		0.7	%		0.69	%
Government agency securities:
Maturing within one year		1,502		0.3	%		0.55	%		5,005		0.8	%		0.47	%
Maturing in one to five years		999		0.2	%		3.84	%		28,803		4.4	%		1.33	%
Maturing in five to ten years		—		0.0	%		0.00	%		—		0.0	%		0.0	%
Maturing after ten years		—		0.0	%		0.00	%		—		0.0	%		0.0	%
Total government agency securities		2,501		0.5	%		1.86	%		33,808		5.2	%		1.20	%
Obligations of state and municipal subdivisions:
Maturing within one year		701		0.1	%		7.18	%		296		0.0	%		8.83	%
Maturing in one to five years		5,106		0.9	%		6.62	%		4,281		0.7	%		6.13	%
Maturing in five to ten years		39,790		7.2	%		6.18	%		33,782		5.2	%		6.02	%
Maturing after ten years		58,515		10.6	%		5.08	%		41,478		6.4	%		6.20	%
Total obligations of state and municipal subdivisions		104,112		18.8	%		5.62	%		79,837		12.3	%		6.20	%
Residential mortgage backed securities guaranteed by FNMA, GNMA, FHLMC and SBA:
Maturing within one year		1		0.0	%		2.14	%		—		0.0	%		0.00	%
Maturing in one to five years		167		0.0	%		5.24	%		254		0.0	%		5.01	%
Maturing in five to ten years		325		0.1	%		5.29	%		13,568		2.1	%		1.95	%
Maturing after ten years		433,071		78.2	%		2.13	%		508,551		78.3	%		2.36	%
Total residential mortgage backed securities guaranteed by FNMA, GNMA, FHLMC and SBA		433,564		78.3	%		2.14	%		522,373		80.4	%		2.36	%
Total marketable equity securities		8,674		1.6	%		0.77	%		8,884		1.4	%		1.06	%
Total investment securities	$	553,357		100.0	%		2.70	%	$	649,387		100.0	%		2.74	%

(1)	Yields on a tax-equivalent basis.

The following table summarizes the amortized cost of 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 September 30, 2016
US Government agency securities	$	2,501	$	0	$	—		$	2,501
Mortgage-backed securities		429,156		4,678		(270	)		433,564
Municipals, tax exempt		99,171		4,987		(46	)		104,112
Treasury securities		4,504		2		—			4,506
Equity securities		8,722		26		(74	)		8,674
	$	544,054	$	9,693	$	(390	)	$	553,357
As of December 31, 2015
US Government agency securities	$	34,161	$	—	$	(353	)	$	33,808
Mortgage-backed securities		524,141		3,675		(5,443	)		522,373
Municipals, tax exempt		74,945		4,892		—			79,837
Treasury securities		4,507		—		(22	)		4,485
Equity securities		8,971		3		(90	)		8,884
	$	646,725	$	8,570	$	(5,908	)	$	649,387

Borrowed funds

Deposits and investment securities 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 purchase 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. This may include match funding of fixed-rate loans. Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy the needs.

Total borrowings include securities sold under agreements to repurchase, lines of credit, advances from the FHLB, federal funds, junior subordinated debentures and related party subordinated debt.

	As of September 30, 2016
(dollars in thousands)	Amount		% of total			Weighted average interest rate (%)
Maturing Within:
September 30, 2017	$	109,431		71	%		0.41	%
September 30, 2018		3,817		3	%		2.71	%
September 30, 2019		6,751		4	%		1.81	%
September 30, 2020		262		0	%		5.53	%
September 30, 2021		337		0	%		6.04	%
Thereafter		33,830		22	%		4.12	%
Total	$	154,428		100	%		1.36	%

	As of December 31, 2015
(dollars in thousands)	Amount		% of total			Weighted average interest rate (%)
Maturing Within:
December 31, 2016	$	123,427		69	%		0.18	%
December 31, 2017		741		—	%		5.37	%
December 31, 2018		10,282		7	%		2.04	%
December 31, 2019		554		—	%		5.90	%
December 31, 2020		279		—	%		5.47	%
Thereafter		44,466		24	%		3.50	%
Total	$	179,749		100	%		1.16	%

Short-term borrowings

The following table summarizes short-term borrowings (borrowings with maturities of one year or less), which consist of federal funds purchased from our correspondent banks on an overnight basis at the prevailing overnight market rates, securities sold under agreements to repurchase and FHLB Cash Management variable rate advances, or CMAs, and the weighted average interest rates paid:

	Three months ended			Nine months ended			Year ended
(dollars in thousands)	September 30, 2016			September 30, 2016			December 31, 2015
Average daily amount of short-term borrowings outstanding during the period	$	74,808		$	94,713		$	184,743
Weighted average interest rate on average daily short-term borrowings		0.18	%		0.14	%		0.23	%
Maximum outstanding short-term borrowings outstanding at any month-end	$	109,136		$	120,570		$	239,536
Short-term borrowings outstanding at period end	$	109,136		$	109,136		$	123,133
Weighted average interest rate on short-term borrowings at period end		0.41	%		0.41	%		0.17	%

Lines of credit and other borrowings.

As a member of the FHLB Cincinnati, the Bank receives advances from the FHLB pursuant to the terms of various agreements that assist in funding its mortgage and loan portfolios. Under the agreements, we pledge certain qualifying multi-family and 1 to 4 family loans as well as certain investment securities as collateral. As of September 30, 2016 and December 31, 2015, the Company had received advances from the FHLB totaling $14.4 million, $33.6 million, respectively.

As of September 30, 2016 and December 31, 2015, $445.6 million and $26.1 million, respectively, of 1 to 4 family mortgage loans were pledged to the FHLB Cincinnati, securing advances against the Bank’s line of credit. As of September 30, 2016 and December 31, 2015, $29.5 million and $43.8 million, respectively, of multi-family mortgage loans were pledged to the FHLB Cincinnati, securing advances against the Bank’s line.

The Bank has a secured line of credit with the FHLB for $150.0 million, and the line is secured by qualifying 1 to 4 family and multi-family mortgages in the Bank’s loan portfolio as well as U.S. Government agency securities. Borrowings against this line were $80 million and $18.0 million as of September 30, 2016 and December 31, 2015, respectively.

In addition to the FHLB line, the Bank maintains lines with certain correspondent banks that provide borrowing capacity in the form of federal fund purchases in the aggregate amount of $125.0 million and $125.0 million as of September 30, 2016 and December 31, 2015. As of September 30, 2016 and December 31, 2015 there were not any borrowings under these lines.

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 September 30, 2016 and December 31, 2015, our $0.9 million and $0.9 million investment in the Trusts, respectively, was included in other assets in the accompanying condensed consolidated balance sheets and our $30.9 million and $30.9 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 of 3.25% (4.01% and 3.75% at September 30, 2016 and December 31, 2015, respectively) for the $21.7 million debenture and 3.78% (3.88% and 3.58% at September 30, 2016 and December 31, 2015, 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.

As of September 30, 2016 and December 31, 2015, we have $0 and $10.1 million outstanding in three subordinated notes payable to our majority shareholder reflected in Long-term debt in our condensed consolidated balance sheets. At the completion of the initial public offering, we used a portion of the proceeds to pay off the $10.1 million outstanding balance plus accrued interest of $106 thousand .

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 asset and liability management 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 shareholder. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.

As part of our liquidity management strategy, we are also focused on minimizing our costs of liquidity and attempt to decrease these costs by growing our noninterest bearing and other low-cost deposits and replacing higher cost funding 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. As a result of these strategies, our cost of funds decreased in 2016 from 2015 as our funding mix improved due to growing noninterest bearing and other low-cost deposits and allowing higher-cost time deposits to mature.

Core deposits, which we defined as deposits excluding jumbo time deposits (greater than $250,000), are a major source of funds used by the Bank to meet its liquidity. Maintaining the ability to acquire these funds as needed in a variety of markets is important to assuring the Bank’s liquidity. Management continually monitors the liquidity and non-core dependency ratios to ensure compliance with targets established by the Bank’s Asset Liability Committee.

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. At September 30, 2016 and December 31, 2015, securities with a carrying value of $544.7 million and $525.3 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 and advances from the FHLB. Interest is charged at the prevailing market rate on federal funds purchased and FHLB advances. The balance of outstanding federal funds purchased at December 31, 2015 was $18.0 million. There were no outstanding federal funds purchased at September 30, 2016 or December 31, 2015. Funds obtained from the FHLB are used primarily to match-fund fixed rate loans in order to minimize interest rate risk and also be used 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. At September 30, 2016 and December 31, 2015, the balance of our outstanding advances with the FHLB was $14.4 million and $33.6 million, respectively, and a secured short-term borrowing of $80.0 million and $18.0 million, respectively. The total amount of the remaining credit available to us from the FHLB at September 30, 2016 and December 31, 2015 was $70.0 million and $132.0 million, respectively. We also maintain lines of credit with other commercial banks totaling $125 million. These are unsecured, uncommitted lines of credit maturing at various times within the next twelve months. There were no amounts outstanding under these lines of credit at September 30, 2016 or December 31, 2015, respectively.

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 “Risk factors: Risks related to our business,” “Dividend policy” and “Business: Supervision and regulation” sections of the Prospectus.

Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount that would exceed an amount equal to 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 TDFI. Based upon this regulation, as of September 30, 2016 and December 31, 2015, $56.9 million and $54.5 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.

The Bank also paid dividends of approximately $14.9 million and $25.1 million to the Company in the nine months ended September 30, 2016 and the year ended December 31, 2015 and 2014, respectively, for dividends to our shareholder and operational expenses that did not require approval from the TDFI.

Additionally, at September 30, 2016, the Company had cash balances on deposit with the Bank totaling $32.8 million for ongoing corporate needs. During the quarter ended September 30, 2016, the Company utilized $20 million of the IPO proceeds to inject additional capital into its subsidiary, FirstBank.

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. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

As a result of recent developments such as the Dodd-Frank Act and Basel III, we have become subject to increasingly stringent regulatory capital requirements beginning in 2015. For further discussion of the changing regulatory framework in which we operate, see “Business: Supervision and regulation” included on Form S-1.

The Federal Reserve, the FDIC and the Office of the Comptroller of the Currency have issued guidelines governing the levels of capital that banks must maintain. Those guidelines specify capital t iers, which include the classifications set forth in the following table. As of September 30, 2016 and December 31, 2015, 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							To be well capitalized under prompt corrective action provision
(dollars in thousands)	Amount		Ratio (%)				Amount			Ratio (%)				Amount			Ratio (%)
September 30, 2016
Common Equity Tier 1 (CET1)
FB Financial Corporation	$	275,097		11.16	%	>	$	110,926	>		4.5	%		N/A			N/A
FirstBank	$	269,540		10.96	%	>	$	110,669	>		4.5	%	>	$	159,855	>		6.5	%
Total capital (to risk weighted assets)
FB Financial Corporation	$	328,387		13.32	%	>	$	197,229	>		8.0	%		N/A			N/A
FirstBank	$	292,830		11.91	%	>	$	196,695	>		8.0	%	>	$	245,869	>		10.0	%
Tier 1 capital (to risk weighted assets)
FB Financial Corporation	$	305,097		12.37	%	>	$	147,986	>		6.0	%		N/A			N/A
FirstBank	$	269,540		10.96	%	>	$	147,558	>		6.0	%	>	$	147,558	>		6.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	305,097		10.32	%	>	$	118,255	>		4.0	%		N/A			N/A
FirstBank	$	269,540		9.12	%	>	$	118,219	>		4.0	%	>	$	147,774	>		5.0	%
December 31, 2015
Common Equity Tier 1 (CET1)
FB Financial Corporation	$	181,633		8.23	%	>	$	99,313	>		4.5	%		N/A			N/A
FirstBank	$	211,780		9.63	%	>	$	98,963	>		4.5	%	>	$	142,946	>		6.5	%
Total capital (to risk weighted assets)
FB Financial Corporation	$	246,168		11.15	%	>	$	176,623	>		8.0	%		N/A			N/A
FirstBank	$	242,240		11.02	%	>	$	175,855	>		8.0	%	>	$	219,819	>		10.0	%
Tier 1 capital (to risk weighted assets)
FB Financial Corporation	$	211,633		9.58	%	>	$	132,547	>		6.0	%		N/A			N/A
FirstBank	$	211,780		9.63	%	>	$	131,950	>		6.0	%	>	$	131,950	>		6.0	%
Tier 1 Capital (to average assets)
FB Financial Corporation	$	211,633		7.64	%	>	$	110,803	>		4.0	%		N/A			N/A
FirstBank	$	211,780		7.65	%	>	$	110,735	>		4.0	%	>	$	138,418	>		5.0	%

We also have outstanding junior subordinated debentures with a carrying value of $30.9 million at September 30, 2016 and December 31, 2015, of which $30.0 million are included in our Tier 1 capital. The Federal Reserve Board issued rules in March 2005 providing more strict quantitative limits on the amount of securities that, similar to our junior subordinated debentures, are includable in Tier 1 capital. This guidance, which became fully phased-in in March 2009, did not impact the amount of debentures we include in Tier 1 capital. In addition, although our existing junior subordinated debentures are unaffected and are included in our Tier 1 capital, on account of changes enacted as part of the Dodd-Frank Act, any trust preferred securities issued after May 19, 2010 may not be included in Tier 1 capital.

In July 2013, the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act, which we refer to as the Basel III Rules, that call for broad and comprehensive revision of regulatory capital standards for U.S. banking organizations. The Basel III Rules implement a new common equity Tier 1 minimum capital requirement, a higher minimum Tier 1 capital requirement and other items that will affect the calculation of the numerator of a banking organization’s risk-based capital ratios. Additionally, the Basel III Rules apply limits to a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of common equity Tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements.

The new common equity Tier 1 capital ratio includes common equity as defined under GAAP and does not include any other type of non-common equity under GAAP. When the Basel III Rules are fully phased in 2019, banks will be required to have common equity Tier 1 capital of 4.5% of average assets, Tier 1 capital of 6% of average assets, as compared to

the current 4%, and total capital of 8% of risk-weighted assets to be categorized as adequately capitalized. The Basel III Rules do not require the phase-out of trust preferred securities as Tier 1 capital of bank holding companies of the Company’s size .

Further, the Basel III Rules changed the agencies’ general risk-based capital requirements for determining risk-weighted assets, which will affect the calculation of the denominator of a banking organization’s risk-based capital ratios. The Basel III Rules have revised the agencies’ rules for calculating risk-weighted assets to enhance risk sensitivity and incorporate certain international capital standards of the Basel Committee on Banking Supervision set forth in the standardized approach of the “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”.

The calculation of risk-weighted assets in the denominator of the Basel III capital ratios are adjusted to reflect the higher risk nature of certain types of loans. Specifically, as applicable to the Company and the Bank:

•	Commercial mortgages: Replaces the current 100% risk weight with a 150% risk weight for certain high volatility commercial real estate acquisition, development and construction loans.

•	Nonperforming loans: Replaces the current 100% risk weight with a 150% risk weight for loans, other than residential mortgages, that are 90 days past due or on nonaccrual status.

•	Securities pledged to overnight repurchase agreements.

•	Unfunded lines of credit one year or less.

Generally, the new Basel III Rules became effective on January 1, 2015, although parts of the Basel III Rules will be phased in through 2019. As of December 31, 2015, the Bank and Company met all capital adequacy requirements to which it is subject. Also, as of June 30, 2015, the most recent notification from the FDIC, the Bank was well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.

Capital Expenditures

Currently, we have not entered into any material capital expenditures other than routine updates to existing facilities amounting to less than $1.0 million over the next twelve months.

Shareholders’ equity

Our total shareholders’ equity was $329.1 million at September 30, 2016 and $236.7 million, at December 31, 2015. Book value per share was $13.73 at September 30, 2016 and $13.78 at December 31, 2015,. The growth in shareholders’ equity was attributable to earnings retention offset by dividends declared and changes in accumulated other comprehensive income in addition to net proceeds from the sale of our common stock amounting to $115.5 million.

Off-balance sheet transactions

We enter into loan commitments and standby letters of credit in the normal course of our business. Loan commitments are made to accommodate the financial needs of our clients. Standby letters of credit commit us to make payments on behalf of clients when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to clients and are subject to our normal credit policies. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the client.

Loan commitments and standby letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at anytime, these commitments often expire without being drawn upon. Our unfunded loan commitments and standby letters of credit outstanding at the dates indicated were as follows:

	September 30,		December 31,
	2016		2015
Loan commitments	$	688,446	$	554,274
Standby letters of credit		20,033		20,338

We closely monitor the amount of our remaining future commitments to borrowers in light of prevailing economic conditions and adjust these commitments as necessary. We will continue this process as new commitments are entered into or existing commitments are renewed.

For more information about our off-balance sheet transactions, see Note 8, “Commitments and Contingencies,” in the notes to our condensed consolidated financial statements.

Risk management

There have been no significant changes in our Risk Management practices as described in our Prospectus constituting part of our Registration Statement on Form S-1 (Registration No. 333-213210) and filed with the SEC on September 19, 2016.

Credit risk

There have been no significant changes in our Credit Risk Management practices as described in our Prospectus constituting part of our Registration Statement on Form S-1 (Registration No. 333-213210) and filed with the SEC on September 19, 2016.

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 Committee (ALC), which is authorized by the Bank’s Board of Directors, monitors our interest rate sensitivity and makes decisions relating to that process. The ALC’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, or 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 effect over the life of the current balance sheet.

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
	September 30,			December 31,			September 30,			December 31,
(in basis points)	2016			2015			2016			2015
+400		7.2	%		4.7	%		15.2	%		12.7	%
+300		5.5	%		3.5	%		11.7	%		9.7	%
+200		3.8	%		2.4	%		8.2	%		6.8	%
+100		2.0	%		1.3	%		4.5	%		3.7	%
-100		(7.4	)%		(3.7	)%		(8.7	)%		(5.6	)%

	Percentage change in:
Change in interest rates	Economic value of equity(2)
(in basis points)	September 30, 2016			December 31, 2015
+400		3.3	%		(8.6	)%
+300		3.6	%		(4.9	)%
+200		3.5	%		(1.2	)%
+100		(14.5	)%		2.2	%
-100		(17.4	)%		(8.2	)%

(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 simulation for September 30, 2016 and December 31, 2015 resulted in an asset sensitive position. This asset sensitive position is primarily due to the increase in mortgage loans held for sale and trending growth of noninterest bearing deposits. As our mortgage loans held for sale increase, we become more asset sensitive, which has been our current trend. However, as mortgage rates rise, we expect our mortgage originations and mortgage loans held for sale to decline, which will make us less asset sensitive. Beta assumptions on loans and deposits were consistent for both time periods. The ALC also reviewed beta assumptions for time deposits and loans with industry standards and revised them accordingly. For the September 30, 2016 and December 31, 2015 simulations the loan and time deposit betas were 100% for all rate scenarios as is industry standard.

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 ALC may undertake in response to such changes in interest rates. The above results of the interest rate shock analysis are within the parameters set by the Bank’s Board of Directors. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and 400 basis points. With the present position of the target federal funds rate, the declining rate scenarios seem improbable. Furthermore, it has been the Federal Reserve’s policy to adjust the target federal funds rate incrementally over time. 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 utilize derivative financial instruments, including rate lock commitments and forward loan sales contracts as part of its ongoing efforts to mitigate its 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 thirty 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. Accordingly, we do not incur risk if the interest rate lock commitment in the pipeline fails to close. Forward loan sale contracts are contracts for delayed delivery of mortgage loans. 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.

For more information about our derivative financial instruments, see Note 9, “Derivative Instruments,” in the notes to our condensed 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) under the Securities Exchange Act of 1934 (the “Act”) as of September 30, 2016 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 September 30, 2016, 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 Act is: (i)

a ccumulated 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 perio ds specified in the SEC’s rules and forms.

During the second quarter of 2016, we completed the conversion of our core bank operating system (loans deposits, and general ledger) to the Jack Henry Silverlake platform from another third party, including the conversion and integration of NWGB. The conversion was successful and we continue to implement and improve overall internal control and related processes. During the third quarter of 2016, the Company’s mortgage operations successfully converted their core system to Loan Vision (a comprehensive mortgage lending accounting system). This change in platform impacts the control environment, however the controls remain intact and properly functioning. There were no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent all errors and fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are the plaintiff or defendant in various legal actions arising in the normal course of business. We do not anticipate incurring any material liability as a result of such currently pending litigation.

Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth in the “Risk Factors” section in the Prospectus.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On September 15, 2016, our registration statement on Form S-1 (Registration No. 333-213210) was declared effective by the SEC for our underwritten initial public offering in which we sold a total of 6,764,704 shares of our common stock at a price to the public of $19.00 per share. J.P. Morgan Securities LLC, UBS Securities LLC, and Keefe, Bruyette & Woods, Inc., acted as the joint book-running managers for the offering, and Raymond James & Associates, Inc., Sandler O’Neill & Partners, L.P., and Stephens Inc. acted as co-managers.

The offering commenced on September 15, 2016 and closed on September 21, 2016. All of the shares registered pursuant to the registration statement were sold at an aggregate offering price of $128.5 million. We received net proceeds of approximately $115.5 million after deducting underwriting discounts and commissions of $9.0 million and other offering expenses of $4.0 million. No payments with respect to expenses were made by us to directors, officers or persons owning ten percent or more of either class of our common stock or to their associates, or to our affiliates. However, $55 million of the net proceeds from the offering were used to fund a cash distribution to James W. Ayers, our majority shareholder and executive chairman, which cash distribution was intended to be non-taxable to Mr. Ayers, and $10.1 million of the net proceeds from the offering were used to fund the repayment of all amounts outstanding under our subordinated notes held by Mr. Ayers. Pending their use in our business, we have temporarily invested the approximately $34.9 million of remaining net offering proceeds in interest bearing deposits in other financial institutions. There has been no material change in the planned use of proceeds from our initial public offering as described in the Prospectus filed with the SEC on September 19, 2016.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of FB Financial Corporation (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016)
3.2		Amended and Restated Bylaws of FB Financial Corporation*
4.1		Registration Rights Agreement*
10.1		Amendment to Deferred Compensation Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.2		Employment Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.3		FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.4		Form of Restricted Stock Unit Award Certificate pursuant to the FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.5		EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes (Full-Vested) (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.6		EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes (Ratable Vesting) (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016)
10.7		FB Financial Corporation 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.8		Amendment to FirstBank 2012 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.9		Amendment to FirstBank Preferred Equity Based Incentive Plan (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.10		Amendment to FirstBank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.11		Tax Sharing Agreement*
10.12		Shareholders’ Agreement*
31.1		Rule 13a-14(a) Certification of Chief Executive Officer*
31.2		Rules 13a-14(a) Certification of Chief Financial Officer*
32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer*
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

Signa ture

Pursuant to the requirements 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/ James R. Gordon
November 14, 2016	James R. Gordon Chief Financial Officer (duly authorized officer and principal financial officer)

Exhibit Index

Exhibit Number		Description

3.1		Amended and Restated Certificate of Incorporation of FB Financial Corporation (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016)
3.2		Amended and Restated Bylaws of FB Financial Corporation*
4.1		Registration Rights Agreement*
10.1		Amendment to Deferred Compensation Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.2		Employment Agreement between FB Financial Corporation and Chris Holmes (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.3		FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.4		Form of Restricted Stock Unit Award Certificate pursuant to the FB Financial Corporation 2016 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.5		EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes (Full-Vested) (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.6		EBI Unit Award Agreement between FB Financial Corporation and Chris Holmes (Ratable Vesting) (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016)
10.7		FB Financial Corporation 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed on September 6, 2016).
10.8		Amendment to FirstBank 2012 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.16 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.9		Amendment to FirstBank Preferred Equity Based Incentive Plan (incorporated by reference to Exhibit 10.17 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.10		Amendment to FirstBank 2010 Equity Based Incentive Plan (incorporated by reference to Exhibit 10.18 of the Company’s Registration Statement on Form S-1 (File No. 333-213210), filed September 6, 2016).
10.11		Tax Sharing Agreement*
10.12		Shareholders’ Agreement*
31.1		Rule 13a-14(a) Certification of Chief Executive Officer*
31.2		Rules 13a-14(a) Certification of Chief Financial Officer*
32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer*
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

Exhibit 3.2

AMENDED AND RESTATED
BYLAWS
OF
FB FINANCIAL CORPORATION

ART ICLE I

ME E TINGS OF SHAREHOLDERS

Sec tion 1. Pl ace of Meeting. Meetings of the shareholders of FB Financial Corporation (the "Co rporation") shall be held at such place either within or without the State of Tennessee as the Bo ard of Directors ma y determine.

Sec tion 2. An nual and Special Meetings. Annual meetings of shareholders shall be held, at a date, time and place fixed by the Bo ard of Directors an d stated in the notice of meeting, to elect a Bo ard of Directors an d to transact such other business as may properly come before the meeting. A special meeting of shareholders may be called at any time, but only by the Chairman of the Bo ard of Directors, the Chief Executive Officer of the Co rporation, or upon a resolution by or affirmative vote of the Bo ard of Directors, and not by the shareholders.

Sec tion 3. No tice of Meetings. Except as otherwise provided by law, at least ten (10) days and not more than sixty (60) days before each meeting of shareholders, written notice of the time, date and place of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each shareholder. No tice ma y be provided by mail, private carrier, facsimile transmission or other form of wire, wireless or electronic communication (e.g., e-mail). Notice provided to a shareholder's e-mail address as indicated on the records of the Co rporation sh all be deemed proper notice for any purpose set forth in these Bylaws.

Sec tion 4. Re cord Date. The Bo ard of Directors sh all fix as the record date for the determination of shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote or to take any other action, a date that is not more than seventy (70) days before the meeting or action requiring a determination of shareholders. A record date fixed for a shareholders' meeting is effective for any adjournment of such meeting unless the Bo ard of Directors fi xes a new record date, which it must do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.

Sec tion 5. Sh areholders' List. After the record date for a meeting has been fixed, the Co rporation sh all prepare an alphabetical list of the names of all shareholders who are entitled to notice of a shareholders' meeting. Such list will show the address of and number of shares held by each shareholder. The shareholders' list will be available for inspection by any shareholder, beginning two (2) business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the Co rporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder or his or her agent or attorney is entitled on written demand to inspect and, subject to the requirements of the Te nnessee Business Corporation Act (the "Act"), to copy the list, during regular business hours and at his or her expense, during the period it is available for inspection.

Sec tion 6. Ac ceptance of Shareholder Documents. If the name signed on a shareholder document (e.g., a vote, consent, waiver, or proxy appointment) corresponds to the name of a shareholder, the Co rporation, if acting in good faith, is entitled to accept such shareholder document and give it effect as the ac t of the shareholder. If the name signed on such shareholder document does not correspond to the name of a shareholder, the Co rporation, if acting in good faith, is nevertheless entitled to accept such shareholder document and to give it effect as the ac t of the shareholder if:

(a) the shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;

(b) the name signed purports to be that of a fiduciary representing the shareholder and, if the Co rporation re quests, evidence of fiduciary status acceptable to the Co rporation ha s been presented with respect to such shareholder document;

(c) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the Co rporation re quests, evidence of this status acceptable to the Co rporation ha s been presented with respect to the shareholder document;

(d) the name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the shareholder and, if the Co rporation re quests, evidence acceptable to the Co rporation of the signatory's authority to sign for the shareholder has been presented with respect to such shareholder document; or

(e) two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one (1) of the co-owners, and the person signing appears to be acting on behalf of all the co-owners.

The Cor poration is entitled to reject a shareholder document if the Secretary or other officer or agent authorized to tabulate votes, acting in good faith, has a reasonable basis for doubt about the validity of the signature on such shareholder document or about the signatory's authority to sign for the shareholder.

Sec tion 7. Qu orum. At any meeting of shareholders, the holders of record of a majority of the Co rporation's issued and outstanding capital stock then having voting rights, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except as otherwise provided by law. In the absence of a quorum, any officer entitled to preside at or to ac t as secretary of the meeting shall have power to adjourn the meeting from time to time until a quorum is present.

Sec tion 8. Vo ting and Proxies. Except as otherwise required by law, all matters submitted to a meeting of shareholders (other than director elections) shall be decided by vote of the holders of record, present in person or by proxy, and shall be approved if the votes cast in favor of the matter exceed the votes cast against the matter. Every shareholder entitled to vote at any meeting may do so either in person or by written proxy, which proxy shall be filed with the secretary of the meeting before being voted. Proxies and written ballots may be in any format, including facsimile or any electronic form of communication (e.g., e-mail). Unless otherwise provided by the Ac t or the Corporation’s charter, as may be amended from time to time (the

“ Ch arter ”) , each outstanding share is entitled to one (1) vote on each matter voted on at a shareholders' meeting. Only shares are entitled to vote. Unless otherwise provided in the Ch arter, Director s are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.

Sec tion 9. Bu siness at Annual and Special Meetings. No business may be transacted at an annual or special meeting of shareholders other than business that is:

(a) specified in a notice of meeting (or any supplement thereto) given by or at the direction of the Bo ard of Directors or an authorized committee thereof,

(b) otherwise brought before the meeting by or at the direction of the Chairman of the Bo ard of Directors, the Chief Executive Officer of the Co rporation, or the Bo ard of Directors, or

(c) otherwise brought before the meeting by a "Noticing Shareholder" who complies with the notice procedures set forth in Ar ticle I, Section 10 of these Bylaws.

A "Noticing Shareholder" must be either a "Rec ord Holder" o r a "Nom inee Holder." A "Rec ord Holder" i s a shareholder that holds of record stock of the Cor poration ent itled to vote at the meeting on the business (including any election of a Director) to be appropriately conducted at the meeting. A "Nom inee Holder" i s a shareholder that holds such stock through a nominee or "street name" hol der of record and can demonstrate to the Cor poration suc h indirect ownership of such stock and such Nom inee Holder's entitlement to vote such stock on such business. Clause (c) of Section 9 o f this Article I s ha ll be the exclusive means for a Not icing Shareholder to make Director nominations or submit other business before a meeting of shareholders (other than proposals brought under Rule 14a-8 under the Sec urities Exchange Act of 1934, a s amended (the "Exc hange Act") and included in the Cor poration's notice of meeting, which proposals are not governed by these Bylaws). Notwithstanding anything in these by-laws to the contrary, no business shall be conducted at a shareholders' meeting except in accordance with the procedures set forth in Section 10 of this Article I of these Bylaws and Section 9 o f this Article I.

Se c tion 10. No tice of Shareholder Business to be Conducted at a Meeting of Shareholders. In order for a No ticing Shareholder to properly bring any item of business before a meeting of shareholders, the No ticing Shareholder mu st give timely notice thereof in writing to the Secretary of the Co rporation in compliance with the requirements of Section 10 of this Article I. Se ction 10 of this Article I sh all constitute an "ad vance notice provision" for annual meetings for purposes of Rule 14a-4(c)(1) under the Ex change Act.

(a) To be timely, a No ticing Shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Co rporation:

(i) in the case of an annual meeting of shareholders, not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event th e date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to th e

date of such annual meeting an d not later than the close of business on the later of the 90th day prior to th e date of such annual meeting or , if the first pu blic announcement of th e date of such annual meeting is less than 100 days prior to th e date of such annual meeting, the 10th day following the day on which pu blic announcement of th e date of such meeting is first made by the Co rporation; and

(ii) in the case of a special meeting of shareholders called for the purpose of electing Directors, not earlier than the close of business on the 120 ^th day prior to such special meeting and not later than the close of business on the later of the 90 ^th day prior to such special meeting or the 10 ^th day following the date on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

In no event shall any adjournment or postponement of an annual meeting, or the announcement thereof, commence a new time period for the giving of a shareholder's notice as described above.

(b) To be in proper form, whether in regard to a nominee for election to the Bo ard of Directors or other business, a No ticing Shareholder's notice to the Secretary must:

(i) Set forth, as to the No ticing Shareholder an d, if the No ticing Shareholder ho lds for the benefit of another, the beneficial owner on whose behalf the nomination or proposal is made, the following information together with a representation as to the accuracy of the information:

(A) the name and address of the No ticing Shareholder as they appear on the Co rporation's books and, if the No ticing Shareholder ho lds for the benefit of another, the name and address of such beneficial owner (collectively "Ho lder") ,

(B) the class or series and number of shares of the Co rporation th at are, directly or indirectly, owned beneficially and/or of record, and the date such ownership was acquired,

(C) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Co rporation or with a value derived in whole or in part from the value of any class or series of shares of the Co rporation, whether or not the instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Co rporation or otherwise (a "De rivative Instrument") that is directly or indirectly owned beneficially by the Ho lder an d any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Co rporation,

(D) any proxy, contract, arrangement, understanding, or relationship pursuant to which the Ho lder ha s a right to vote or has granted a right to vote any shares of any security of the Co rporation,

(E) any short interest in any security of the Co rporation (f or purposes of these Bylaws a person shall be deemed to have a short interest in a security if the Ho lder di rectly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security),

(F) any rights to dividends on the shares of the Co rporation ow ned beneficially by the Ho lder th at are separated or separable from the underlying shares of the Co rporation,

(G) any proportionate interest in shares of the Co rporation or De rivative Instruments he ld, directly or indirectly, by a general or limited partnership or limited liability company or similar entity in which the Ho lder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner, is the manager, managing member or directly or indirectly beneficially owns an interest in the manager or managing member of a limited liability company or similar entity,

(H) any performance-related fees (other than an asset-based fee) that the Ho lder is entitled to based on any increase or decrease in the value of shares of the Co rporation or De rivative Instruments, if any,

(I) any arrangements, rights, or other interests described in Sections 10 (b)(i)(C)-( H ) he ld by members of such Ho lder's immediate family sharing the same household,

(J) a representation that the No ticing Shareholder in tends to appear in person or by proxy at the meeting to nominate the person(s) named or propose the business specified in the notice and whether or not such shareholder intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Co rporation's outstanding shares required to approve the nomination(s) or the business proposed and/or otherwise to solicit proxies from shareholders in support of the nomination(s) or the business proposed,

(K) a certification regarding whether or not such shareholder and Sh areholder Associated Persons ha ve complied with all applicable federal, state and other legal requirements in connection with such shareholder's and/or Sh areholder Associated Persons' acquisition of shares or other securities of the Co rporation an d/or such shareholder's and/or Sh areholder Associated Persons' acts or omissions as a shareholder of the Co rporation,

(L) any other information relating to the Ho lder th at would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of Directors in a co ntested el ection pursuant to Section 14 of the Ex change Act an d the rules and regulations thereunder, and

(M) any other information as reasonably requested by the Co rporation.

Such information shall be provided as of the date of the notice and shall be supplemented by the Hol der not later than 10 days after the record date for the meeting to disclose such ownership as of the record date.

(ii) If the notice relates to any business other than a nomination of a Director or Directors that the shareholder proposes to bring before the meeting, the notice must set forth:

(A) a brief description of the business desired to be brought before the meeting (including the text of any resolutions proposed for consideration), the reasons for conducting such business at the meeting, and any material direct or indirect interest of the Ho lder or any Sh areholder Associated Persons in such business, and

(B) a description of all agreements, arrangements and understandings, direct and indirect, between the Ho lder, and any other person or persons (including their names) in connection with the proposal of such business by the Ho lder.

(iii) Set forth, as to each person, if any, whom the Ho lder pr oposes to nominate for election or reelection to the Bo ard of Directors:

(A) all information relating to the nominee (including, without limitation, the nominee's name, age, business and residence address and principal occupation or employment and the class or series and number of shares of capital stock of the Co rporation th at are owned beneficially or of record by the nominee) that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors in a co ntested el ection pursuant to Section 14 of the Ex change Act an d the rules and regulations thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected),

(B) a description of any agreements, arrangements and understandings between or among such shareholder or any Sh areholder Associated Person, on the one hand, and any other persons (including any Sh areholder Associated Person), on the other hand, in connection with the nomination of such person for election as a Director, and

(C) a description of all direct and indirect compensation and other material monetary agreements, arrangements, and understandings during the past three years, and any other material relationships, between or among the Ho lder an d respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand,

including, without limitation all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the Ho lder ma king the nomination or on whose behalf the nomination is made, if any, or any af filiate or as sociate th ereof or person acting in concert therewith, were the "registrant" for purposes of Item 404 and the nominee were a Director or executive officer of such registrant.

(iv) With respect to each nominee for election or reelection to the Bo ard of Directors, the No ticing Shareholder sh all include a completed and signed questionnaire, representation, and agreement required by Ar ticle I, Section 11 of these Bylaws. The Co rporation ma y require any proposed nominee to furnish such other information as may reasonably be required by the Co rporation to determine the eligibility of the proposed nominee to serve as an independent Director of the Co rporation or that could be material to a reasonable shareholder's understanding of the independence, or lack thereof, of the nominee.

(c) Notwithstanding anything in Ar ticle I, Section 10 (a) to the contrary, if the number of Directors to be elected to the Bo ard of Directors is increased and there is no pu blic announcement by the Co rporation na ming all of the nominees for Director or specifying the size of the increased Bo ard of Directors at least 100 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by these Bylaws shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Co rporation no t later than the close of business on the 10th day following the day on which the pu blic announcement na ming all nominees or specifying the size of the increased Bo ard of Directors is first made by the Co rporation.

(d) For purposes of these Bylaws, "pu blic announcement" shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Co rporation wi th the Securities and Exchange Commission pursuant to Section 13, 14, or 15(d) of the Ex change Act an d the rules and regulations thereunder. As used in these By -laws, the term "Sh areholder Associated Person" means, with respect to any shareholder, (i ) an y person acting in concert with such shareholder, (i i) an y beneficial owner of shares of stock of the Co rporation ow ned of record or beneficially by such shareholder (other than a shareholder that is a depositary) and (iii) any person controlling, controlled by or under common co ntrol wi th any shareholder, or any Sh areholder Associated Person id entified in clauses (i ) or (i i) ab ove. The terms "af filiate" and "as sociate" are fairly broad and are defined by reference to Rule 12b-2 under the Exchange Act. An "af filiate" is any "person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common co ntrol wi th, the person specified." "Co ntrol" is defined as the "possession, direct or indirect, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, or otherwise."

The term "ass ociate" o f a person means: (i) any cor poration or organization (other than the registrant or a majority-owned subsidiary of the registrant) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such person has a substantial

beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a Director or officer of the registrant or any of its parents or subsidiaries.

(e) On ly those shareholder nominees who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as Directors. Only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in these Bylaws, provided, however, that, once business has been properly brought before the meeting in accordance with Section 10 of this Article 1, nothing in Section 10 (e) of this Article I sh all be deemed to preclude discussion by any shareholder of such business, If any information submitted pursuant to Section 10 of this Article by any shareholder proposing a nominee(s) for election as a Director at a meeting of shareholders is inaccurate in any material respect, such information shall be deemed not to have been provided in accordance with Section 10 of this Article 1. E xcept as otherwise provided by law, the Charter, or these Bylaws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in compliance with the procedures set forth in these Bylaws and, if he should determine that any proposed nomination or business is not in compliance with these Bylaws, he shall so declare to the meeting and any such nomination or business not properly brought before the meeting shall be disregarded or not be transacted.

(f) No twithstanding the foregoing provisions of these Bylaws, a No ticing Shareholder al so shall comply with all applicable requirements of the Ex change Act an d the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Ex change Act or the rules thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Ar ticle I, Section 9 or Article 1, Section 10 .

( g) No thing in these Bylaws shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Co rporation's proxy statement pursuant to Rule 14a-8 under the Ex change Act. Notice of shareholder proposals that are, or that the No ticing Shareholder in tends to be, governed by Rule 14a-8 under the Ex change Act ar e not governed by these Bylaws.

Sec tion 11. Su bmission of Questionnaire. Re presentation and Agreement. To be eligible to be a nominee for election or reelection as a Director of the Co rporation by a Ho lder, a person must complete and deliver (in accordance with the time periods prescribed for delivery of notice under Article 1, Section 10 of these Bylaws) to the Secretary at the principal executive offices of the Co rporation a written questionnaire providing the information requested about the background and qualifications of such person and the background of any other person or entity on whose behalf the nomination is being made and a written representation and agreement (the questionnaire, representation, and agreement to be in the form provided by the Secretary upon written request) that such person:

(a) is not and will not become a party to:

(i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the person, if elected as a Director of the Co rporation, will ac t or vote on any issue or question (a "Vo ting Commitment") that has not been disclosed to the Co rporation, or

(ii) any Vo ting Commitment th at could limit or interfere with the person's ability to comply, if elected as a Director of the Co rporation, with the person's fiduciary duties under applicable law,

(b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Co rporation wi th respect to any direct or indirect compensation, reimbursement, or indemnification in connection with service or action as a Director that has not been disclosed therein, and

(c) in the person's individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a Director of the Co rporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality, and stock ownership and trading policies and guidelines of the Co rporation.

ART ICLE II
DI RECTORS

Sect ion 1. Num ber, Election and Removal of Directors. The Boa rd of Directors of the Cor poration sha ll consist of not less than one (1) nor more than fifteen (15) members . T he number of Directors shall be fixed from time to time exclusively pursuant to a resolution adopted by the Boa rd of Directors pur suant to and in compliance with any applicable shareholders' agreement. Each Director shall serve until the election and qualification of his successor or until his earlier death, resignation or removal as provided in the Cha rter or these Bylaws. The Directors shall be elected by shareholders at their annual meeting or a special meeting called for that purpose in compliance with these Bylaws. Subject to the provisions contained in any applicable shareholders' agreement, a Director may be removed only for cause by the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of capital stock entitled to vote generally in the election of Directors voting together as a single class.

Sect ion 2. Vac ancies. Any vacancies and newly created d ir ector ships res ulting from any increase in the number of Directors may be filled , subject to any applicable shareholders’ agreement, by Directors entitled to cast that number of votes constituting a majority of votes that may be cast by Directors then in office, although less than a quorum, or by the sole remaining Director. Each Director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided. Any Director may resign at any time upon written notice to the Cor poration .

S ect ion 3. Vot ing. Each Director shall be entitled to one vote. Except as otherwise provided by law, the Charter of the Corporation, these Bylaws or any contract or agreement to which the Corporation and its shareholders are parties, at a meeting at which a quorum is present, the vote of a majority of the Directors present shall be the act of the Board of Directors.

S ect ion 4. Mee tings. Regular meetings of the Boa rd of Directors sha ll be held at such times and places as may from time to time be fixed by the Boa rd of Directors by resolution, and if so fixed no further notice thereof need be given, provided that unless all the Directors are present at the meeting at which said resolution is passed, the first meeting held pursuant to said resolution shall not be held for at least five (5) days following the date on which the resolution is passed. Special meetings of the Boa rd of Directors may be called at any time by the Chairman, the Chief Executive Officer, or any two (2) Directors.

Sect ion 5. Not ice. Meetings (other than regular meetings the dates and times of which are established as provided in Section 4 o f this Article II) of the Boa rd of Directors mus t be preceded by at least twenty-four (24) hours’ notice to each Director. Notice of any special meeting of the Boa rd of Directors sha ll be delivered personally, by telephone, by mail, by private carrier, by telecopier, by electronic mail or by any other means of communication reasonably calculated to give notice, at such times and at such places as shall from time to time be determined by the Boa rd of Directors, o r the Chairman thereof (if any), as applicable. Telephone notice shall be deemed to be given when the Director is personally given such notice in a telephone call to which such Director is a party. Telegraph, teletype, facsimile or other electronic transmission (e.g., e-mail) notice shall be deemed to be given upon completion of the transmission of the message. Notice of a special meeting need not be given to any Director if a written waiver of notice, executed by such Director before or after the meeting, is filed with the records of the meeting, or to any Director who attends the meeting without protesting the lack of notice prior thereto or at its commencement.

Sect ion 6. Quo rum. At all duly called meetings of the Boa rd of Directors, e xcept as otherwise provided by law, the Cha rter of the Cor poration, t hese Bylaws or any contract or agreement to which the Cor poration and its shareholders are parties, the presence of a majority of the Directors shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Boa rd of Directors, t he Directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until such a quorum is present.

Sect ion 7. Com mittees. The Boa rd of Directors may , by resolution adopted pursuant to Section 3 o f this Article II, d esignate one or more committees, including, without limitation, an Aud it Committee, a Com pensation Committee, a n Executive Committee, and/or a Nominating

and Corporate Governance Committee t o have such composition and to exercise such power and authority as the Boa rd of Directors sha ll specify. At a meeting at which a quorum is present, the vote of a majority of the committee members present shall be the act of the committee. Each committee of the Boa rd of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Boa rd of Directors des ignating such committee and subject to the rules and regulations of the New York Stock Exchange.

Sect ion 8. Act ions of Board Without Meeting. Unless otherwise provided by the Cha rter of the Cor poration, t hese Bylaws or applicable law, any action required or permitted to be taken at any meeting of the Boa rd of Directors or of any committee thereof may be taken without a meeting if all the members of the Board of Directors or committee, as the case may be, consent to taking such action without a meeting, in which case, subject to Article II, S ection 3 of these Bylaws, the vote of a majority of the Directors or committee members, as the case may be, is the act of the Boa rd of Directors or any such committee. The action must be evidenced by one or more written consents describing the action taken, signed, in one or more counterparts, by that number of Directors specified pursuant to the immediately preceding sentence, indicating each such Director's vote or abstention on the action, and be included with the minutes of proceedings of the Boa rd of Directors or committee.

Sect ion 9. Pre sence through Communications Equipment. Meetings of the Boa rd of Directors, a nd any meeting of any Boa rd com mittee, may be held through any communications equipment (e.g., conference telephone) if all persons participating can hear each other, and participation in a meeting pursuant to this section shall constitute presence at that meeting.

ARTI CLE III
OFF ICERS

Section 1. General Provisions . The officers of the Corporation shall be a Chief Executive Officer, a President and a Secretary, and may include a Treasurer, Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, and one or more Assistant Treasurers. The officers shall be elected by the Board of Directors at the first meeting of the Board of Directors after the annual meeting of the shareholders in each year or shall be appointed as provided in these bylaws. The Board of Directors may elect other officers, agents and employees, who shall have such authority and perform such duties as may be prescribed by the Board of Directors. All officers shall hold office until the meeting of the Board of Directors following the next annual meeting of the shareholders after their election or appointment and until their successors shall have been elected or appointed and shall have qualified. Any two or more offices may be held by the same person, except the offices of President and Secretary. Any officer, agent or employee of the Corporation may be removed by the Board of Directors with or without cause. Removal without cause shall be without prejudice to such person’s contract rights, if any, but the election or appointment of any person as an officer, agent or employee of the Corporation shall not of itself create contract rights. The compensation of officers, agents and employees elected by the Board of Directors shall be fixed by the Board of Directors or by a committee thereof, and this power may also be delegated to any officer, agent or employee as to persons under his or her direction or control. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties .

Secti on 2. Powe rs and Duties of the Chairman of the Board , the Chief Executive Officer, and the President . The powers and duties of the Chairman of the Boar d , th e Chief Executive Officer, and the President, subject to the supervision and cont rol of t he Boar d of Directors, sh all be those usually appertaining to their respective offices and whatever other powers and duties are prescribed by these bylaws or by the Boar d of Directors.

(a) The Chairman of the Board shall preside at all meetings of the Board of Directors and at all meetings of the shareholders. The Chairman of the Board shall perform such other duties as the Board of Directors may from time to time direct.

(b) The Chief Executive Officer, in the absence of the Chairman of the Board, shall preside at all meetings of the shareholders and of the Board of Directors (except, with respect to meetings of the Board of Directors, as may be otherwise determined by the Board of Directors). The Chief Executive Officer shall be responsible for carrying out the orders of and the resolutions and policies adopted by the Board of Directors and shall have general management of the business of the Corporation and shall exercise general supervision over all of its affairs. In addition, the Chief Executive Officer shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be prescribed by the Board of Directors.

(c) The President, in the absence of the Chairman of the Board and the Chief Executive Officer, shall preside at all meetings of the shareholders and of the Board of Directors (except, with respect to meetings of the Board of Directors, as may be otherwise determined by the Board of Directors). The President shall have such powers and perform such duties as may be provided for herein and as are normally incident to the office and as may be prescribed by the Board of Directors or the Chief Executive Officer. The President shall employ and discharge employees and agents of the Corporation, except such as shall be elected by the Board of Directors, and he or she may delegate these powers. The President shall have such powers and perform such duties as generally pertain to the office of the President, as well as such further powers and duties as may be prescribed by the Board of Directors. The President may vote the shares or other securities of any other domestic or foreign corporation of any type or kind which may at any time be owned by the Corporation, may execute any shareholders’ or other consents in respect thereof and may in his or her discretion delegate such powers by executing proxies, or otherwise, on behalf of the Corporation. The Board of Directors, by resolution from time to time, may confer like powers upon any other person or persons.

Section 3. Powers and Duties of Vice Presidents . Each Vice President shall have such powers and perform such duties as the Board of Directors, Chief Executive Officer, or the President may prescribe and shall perform such other duties as may be prescribed by these bylaws. In the absence or inability to act of the President, unless the Board of Directors shall otherwise provide, the Vice President who has served in that capacity for the longest time and who shall be present and able to act, shall perform all duties and may exercise any of the powers of the President. The performance of any such duty by a Vice President shall be conclusive evidence of his or her power to act.

Section 4. Powers and Duties of the Secretary . The Secretary shall have charge of the minutes of all proceedings of the shareholders and of the Board of Directors and shall keep the

minutes of all their meetings at which he or she is present. Except as otherwise provided by these bylaws, the Secretary shall attend to the giving of all notices to shareholders and Directors. He or she shall have charge of the seal of the Corp oration , sh all attend to its use on all documents the execution of which on behalf of the Corp oration unde r its seal is duly authorized and shall attest the same by his or her signature whenever required. The Secretary shall have charge of the record of shareholders of the Corp oration , of all written requests by shareholders that notices be mailed to them at an address other than their addresses on the record of shareholders, and of such other books and papers as the Boar d of Directors may direct. Subject to the cont rol of t he Boar d of Directors, th e Secretary shall have all such powers and duties as generally are incident to the position of Secretary or as may be assigned to the Secretary by the President , the Chief Executive Officer, or the Boar d of Directors.

Section 5. Powers and Duties of the Treasurer . The Treasurer shall have charge of all funds and securities of the Corporation, shall endorse the same for deposit or collection when necessary and deposit the same to the credit of the Corporation in such banks or depositaries as the Board of Directors may authorize. The Treasurer may endorse all commercial documents requiring endorsements for or on behalf of the Corporation and may sign all receipts and all commercial documents requiring endorsements for or on behalf of the Corporation and may sign all receipts and vouchers for payments made to the Corporation. The Treasurer shall have all such powers and duties as generally are incident to the position of Treasurer or as may be assigned to the Treasurer by the President, the Chief Executive Officer, or the Board of Directors.

Section 6. Appointment, Powers and Duties of Assistant Secretaries . Assistant Secretaries may be appointed by the Chief Executive Officer or the President or elected by the Board of Directors. In the absence or inability of the Secretary to act, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary. The performance of any such duty shall be conclusive evidence of the Assistant Secretary’s power to act. An Assistant Secretary shall also perform such other duties as the Secretary or the Board of Directors may assign to him or her.

Section 7. Appointment, Powers and Duties of Assistant Treasurers . Assistant Treasurers may be appointed by the Chief Executive Officer or the President or elected by the Board of Directors. In the absence or inability of the Treasurer to act, an Assistant Treasurer may perform all the duties and exercise all the powers of the Treasurer. The performance of any such duty shall be conclusive evidence of the Assistant Treasurer’s power to act. An Assistant Treasurer shall also perform such other duties as the Treasurer or the Board of Directors may assign to him or her.

Section 8. Delegation of Duties . In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors (or in the case of Assistant Secretaries or Assistant Treasurers only, the President) may confer for the time being the powers and duties, or any of them, of such officer upon any other officer or elect or appoint any new officer to fill a vacancy created by death, resignation, retirement or termination of any officer. In such latter event such new officer shall serve until the next annual election of officers.

ARTIC LE IV

SHAR E S OF ST OCK

Secti on 1. Shar es with or without Certificates. The Boar d of Directors may authorize that some or all of the shares of any or all of the Corp oration's c lasses or series of stock be evidenced by a certificate or certificates of stock. The Boar d of Directors may also authorize the issue of some or all of the shares of any or all of the Corp oration's c lasses or series of stock without certificates. The rights and obligations of shareholders with the same class and/or series of stock shall be identical whether or not their shares are represented by certificates.

Secti on 2. Shar es with Certificates.

(a) If the Boar d of Directors choo ses to issue shares of stock evidenced by a certificate or certificates, each individual certificate shall include the following on its face: (i) the Corp oration's n ame, (ii) the fact that the Corp oration is o rganized under the laws of the State of Tennessee, (iii) the name of the person to whom the certificate is issued, (iv) the number of shares represented thereby, (v) the class of shares and the designation of the series, if any, which the certificate represents, and (vi) such other information as applicable law may require or as may be lawful.

(b) If the Corp oration is a uthorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations determined for each series (and the authority of the Boar d of Directors to d etermine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate shall state on its front or back that the Corp oration will furnish the shareholder this information in writing, without charge, upon request.

(c) Each certificate of stock issued by the Corp oration shal l be signed (either manually or in facsimile) by any two officers of the Corp oration. If the person who signed a certificate no longer holds office when the certificate is issued, the certificate is nonetheless valid.

Secti on 3. Shar es without Certificates. If the Boar d of Directors choo ses to issue shares of stock without certificates, the Corp oration, if required by the Act, sh all, within a reasonable time after the issue or transfer of shares without certificates, send the shareholder a written statement of the information required on certificates by Article IV, Se ction 2 of these Bylaws and any other information required by the Act. Th e Corp oration may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corp oration is p ermitted in accordance with applicable law.

Secti on 4. Subs criptions for Shares. Subscriptions for shares of the Corp oration shal l be valid only if they are in writing. Unless the subscription agreement provides otherwise, subscriptions for shares, regardless of the time when they are made, shall be paid in full at such time, or in such installments and at such periods, as shall be determined by the Boar d of Directors. Al l calls for payment on subscriptions shall be uniform as to all shares of the same class or of the same series, unless the subscription agreement specifies otherwise.

Secti on 5. Tran sfers. Transfers of shares of the capital stock of the Corp oration shal l be made only on the books of the Corp oration by ( i) the hold er of r ecord thereof, (ii) by h is or her legal representative, who, upon request of the Corp oration, sh all furnish proper evidence of authority to transfer, or (iii ) his or her attorney, authorized by a power of attorney duly executed and filed with the Secretary of the Corp oration or a duly appointed transfer agent. Such transfers shall be made only upon surrender, if applicable, of the certificate or certificates for such shares properly endorsed and with all taxes thereon paid.

Secti on 6. Lost . Destroyed or Stol en Certificates. In case of loss, mutilation or destruction of a certificate of stock, a duplicate certificate may be issued upon the terms prescribed by the Boar d of Directors, in cluding provision for indemnification of the Corp oration secu red by a bond or other security sufficient to protect the Corp oration agai nst any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate.

ARTIC LE V

GENE RAL PROVISIONS

Secti on 1. Fisc al Year. The fiscal year of the Corp oration shal l be fixed by the Boar d of Directors.

Se cti on 2. Corp orate Books. The books of the Corp oration may be kept at such place within or outside the State of Tennessee as the Boar d of Directors may from time to time determine.

Secti on 3. Waiv er of Notice. Whenever any notice is required to be given pursuant to the Char ter of t he Corp oration or t hese Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except when such person attends the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Any waiver of notice shall be filed with the minutes of the corporate records.

Secti on 4. Amen dment of Bylaws. Subject to the provisions of the Char ter of t he Corp oration, th ese Bylaws may be altered, amended, or repealed or new bylaws may be adopted by the majority vote of the entire Boar d of Directors at a ny regular or special meeting of the Boar d of Directors. Su bject to the provisions of the Char ter of t he Corp oration and notwithstanding any other provisions of these Bylaws or any provision of law which might otherwise permit a lesser vote of the shareholders, these Bylaws may be altered, amended, or repealed or new bylaws may be adopted by the affirmative vote of the holders of at least 80% of the voting power of all the then outstanding shares of stock of the Corp oration enti tled to vote generally in the election of Directors, voting together as a single class.

ARTIC LE VI

INDE M NIFICATION

Sect i on 1. Inde mnification and Advancement of Expenses. The Corp oration shal l indemnify and advance expenses to each Director and officer of the Corp oration, or any person who may have served at the request of the Corp oration's B oar d of Directors or i ts President or Chief Executive Officer as a director or officer of another corp oration or o f a partnership, joint venture, trust, employee benefit plan, or other enterprise, including service on a committee formed for any purpose (and, in either case, such person's heirs, executors and administrators), to the full extent allowed by the laws of the State of Tennessee, both as now in effect and as hereafter adopted. Advancement of expenses shall include reasonable legal fees and costs. The Corp oration may indemnify and advance expenses to any employee or agent of the Corp oration who is not a Director or officer (and such person's heirs, executors and administrators) to the same extent as to a Director or officer, if the Boar d of Directors dete rmines that doing so is in the best interests of the Corp oration.

Se cti on 2. Non- Exclusivity of Rights. The indemnification and expense advancement provisions of Section 1 of t his Article VI s hal l not be exclusive of any other right which any person (and such person's heirs, executors and administrators) may have or hereafter acquire under any statute, provision of the Char ter, pr ovision of these Bylaws, resolution adopted by the shareholders, resolution adopted by the Boar d of Directors, ag reement, or insurance (purchased by the Corp oration or o therwise), both as to action in such person's official capacity and as to action in another capacity.

Secti on 3. Insu rance. The Corp oration may maintain insurance, at its expense, to protect itself and any individual who is or was a Director, officer, employee or agent of the Corp oration, or who, while a Director, officer, employee or agent of the Corp oration, is or was serving at the request of the Corp oration's B oar d of Directors or i ts Chief Executive Officer as a director, officer, partner, trustee, employee or agent of another corp oration, pa rtnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss whether or not the Corp oration woul d have the power to indemnify such person against such expense, liability or loss under this Article or the Act.

Exhibit 4.1

REGISTRATION RIGHTS AGREEMENT

BY AND BETWEEN

FB FINANCIAL CORPORATION

AND

JAMES W. AYERS

DATED AS OF September 15, 2016

TABLE OF CONTENTS

			Page
1.	DEMAND REGISTRATIONS.		1
	1.1	Requests for Registration	1
	1.2	Demand Notice	1
	1.3	Demand Registration Expenses	2
	1.4	Short-Form Registrations	2
	1.5	Priority on Demand Registrations	2
	1.6	Restrictions on Demand Registrations	2
	1.7	Selection of Underwriters	3
	1.8	Other Registration Rights	3

2.	PIGGYBACK REGISTRATIONS.		3
	2.1	Right to Piggyback	3
	2.2	Piggyback Expenses	3
	2.3	Priority on Primary Registrations	3
	2.4	Priority on Secondary Registrations	3

3.	REGISTRATION AND COORDINATION GENERALLY.		4
	3.1	Registration Procedures	4
	3.2	Registration Expenses	7
	3.3	Participation in Underwritten Offerings	8
	3.4	Company Holdback	8
	3.5	Current Public Information	9
	3.6	Shelf Take-Downs	9

4.	INDEMNIFICATION		9
	4.1	Indemnification by the Company	9
	4.2	Indemnification by Ayers	10
	4.3	Procedure	11
	4.4	Entry of Judgment; Settlement	11
	4.5	Contribution	11
	4.6	Other Rights	12

5.	DEFINITIONS.		12

6.	MISCELLANEOUS.		14
	6.1	No Inconsistent Agreements; Foreign Registration	14
	6.2	Adjustments Affecting Registrable Securities	14
	6.3	Remedies	15
	6.4	Amendment and Waiver	15
	6.5	Successors and Assigns; Transferees	15
	6.6	Severability	15
	6.7	Counterparts	16
	6.8	Descriptive Headings	16
	6.9	Notices	16
	6.10	Delivery by Facsimile	17
	6.11	Governing Law	17
	6.12	Exercise of Rights and Remedies	17

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (as the same may be amended, modified or supplemented from time to time, the “ Agreement ”) is made as of September 15, 2016 (the “ Effective Time ”) by and between FB Financial Corporation, a Tennessee corporation (the “ Company ”) and James W. Ayers (“ Ayers ”).

RECITALS

WHEREAS, as of the Effective Time , the Shareholder owns all of the outstanding shares of common stock, par value $1.00 per share (the “ Common Stock ”), of the Company;

WHEREAS, the Company is proposing to consummate an initial public offering of its Common Stock (the “ Initial Public Offering ”);

WHEREAS, as of the closing of the Initial Public Offering, the Company will have the authority to issue that number of shares of Common Stock as set forth in its registration statement on Form S-1; and

WHEREAS, the parties hereto desire for the Company to provide the registration rights set forth in this Agreement. Unless otherwise noted herein, capitalized terms used herein shall have the meanings set forth in Section 5 .

AGREEMENT

NOW, THEREFORE, the parties to this Agreement hereby agree as follows:

1.	DEMAND REGISTRATIONS.

1.1

Requests for Registration . Subject to the other provisions of this Section 1 , Ayers may (on behalf of himself and any of his Affiliate) initiate, after the closing of the Initial Public Offering, an unlimited number of registrations of all or part of his Registrable Securities on Form S-1 or any similar or successor long-form registration (“ Long-Form Registrations ”) and, if available, an unlimited number of registrations of all or part of his Registrable Securities on Form S-3 or any similar or successor short-form registration (“ Short-Form Registrations ”); provided that the aggregate proposed gross offering price of the Registrable Securities requested to be registered in any Demand Registration must equal at least $10,000,000 in the case of any Long Form Registration and at least $1,000,000 or include all remaining Registrable Securities held by Ayers in the case of any Short Form Registration.

1.2

Demand Notice . All requests for Demand Registrations shall be made by giving written notice to the Company (a “ Demand Notice ”). Each Demand Notice shall specify the approximate number of Registrable Securities requested to be registered.

1.3

Demand Registration Expenses . The Company will pay all Registration Expenses in connection with any registration initiated as a Demand Registration, whether or not it has become effective.

1.4

Short-Form Registrations . Demand Registrations will be Short-Form Registrations whenever the Company is permitted to use any applicable short-form (unless the managing underwriter(s) of such offering requests the Company to use a Long-Form Registration in order to sell all of the Registrable Securities requested to be sold). After the Company has become subject to the reporting requirements of the Exchange Act, the Company will use its reasonable efforts to make Short-Form Registrations available for the sale of Registrable Securities.

1.5

Priority on Demand Registrations . The Company shall not include in any Demand Registration any securities which are not Registrable Securities, other than securities of the Company to be offered by the Company (the “ Company Offered Securities ”), without the prior written consent of Ayers. If a Demand Registration is an underwritten offering and the managing underwriter(s) advises the Company in writing that in its opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, then the Company shall include in such registration, prior to the inclusion of any securities that are not Registrable Securities, other than Company Offered Securities, the number of Registrable Securities requested to be included in such offering that, in the opinion of such underwriter(s), can be sold without adversely affecting the marketability of the offering, and only then securities that are not Registrable Securities if the managing underwriter(s) has advised that such securities may be included.

1.6

Restrictions on Demand Registrations . The Company will not be obligated to commence a Public Offering upon a Demand Registration for (i) one hundred eighty (180) days after the closing of the Initial Public Offering and (ii) ninety (90) days after the closing of any other Public Offering, in each case, except to the extent that the managing underwriter(s) agrees to a shorter lock-up period. The Company may postpone for up to thirty (30) days (from the date of the request) the filing or the effectiveness of a registration statement for a Demand Registration if and so long as the Company determines that such Demand Registration would reasonably be expected to have an adverse effect on any proposal or plan by the Company or any of its subsidiaries to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, registration or issuance of securities, financing or other material transaction; provided , that in such event, the Company will pay all Registration Expenses in connection with such registration. The Company may not postpone a Demand Registration more than two (2) times in any twelve (12)-month period.

1.7

Selection of Underwriters . Ayers shall have the right to select the underwriter or underwriters to administer the offering for a Demand Registration.

1.8

Other Registration Rights . The Company represents and warrants that it is not a party to, or otherwise subject to, any other agreement granting registration rights to any other Person with respect to any securities of the Company, other than this Agreement. Except as provided in this Agreement, the Company shall not grant to any Persons the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, without the approval of Ayers.

2.	PIGGYBACK REGISTRATIONS.

2.1

Right to Piggyback . Whenever the Company proposes to register any of its equity securities under the Securities Act, including any registration pursuant to Section 1.1 above (other than in connection with registration on Form S-4 or Form S-8 or any successor or similar form) and the registration form to be used may be used for the registration of Registrable Securities (a “ Piggyback Registration ”), the Company will give prompt written notice to Ayers of its intention to effect such a registration and, subject to Sections 2.3 and 2.4 below, will include in such registration all Registrable Securities held by Ayers with respect to which the Company has received written requests for inclusion therein within fifteen (15) days after the delivery of the Company’s notice. Each such Company notice shall specify the approximate number of Company equity securities to be registered and the anticipated per share price range for such offering.

2.2

Piggyback Expenses . The Registration Expenses of Ayers will be paid by the Company in all Piggyback Registrations, whether or not any such registration becomes effective.

2.3

Priority on Primary Registrations . If a Piggyback Registration is an underwritten primary registration on behalf of the Company and the managing underwriter(s) advises the Company in writing (with a copy to each applicable party hereto requesting registration of Registrable Securities) that in its opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of such offering, the Company will include in such registration: (a) first, the securities the Company proposes to sell, (b) second, the Registrable Securities requested to be included in such registration by Ayers, and (c) third, other securities requested to be included in such registration.

2.4

Priority on Secondary Registrations . If a Piggyback Registration is an underwritten secondary registration on behalf of holders of Company securities (other than Ayers), and the managing underwriter(s) advises the Company in writing that in its opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in

such registration: (a) first, the securities requested to be included therein by the applicable holders requesting registration and the Registrable Securities requested to be included in such registration, pro rata among the holders of such securities and Registrable Securities on the basis of the number of shares owned by each such holder, and (b) second, other such securities requested to be included in such registration.

3.	REGISTRATION AND COORDINATION GENERALLY.

3.1

Registration Procedures . Whenever Ayers requests that any of his Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof and pursuant thereto the Company will as expeditiously as reasonably practicable:

(a) prepare and (within sixty (60) days after the end of the period within which requests for inclusion in such registration may be given to the Company) file with the Securities and Exchange Commission a registration statement with respect to such Registrable Securities and thereafter use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to the counsel selected by Ayers for any registration in which Ayers participates copies of all such documents proposed to be filed, which documents will be subject to review by such counsel);

(b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary (i) to keep such registration statement effective (A) for at least ninety (90) days (subject to extension pursuant to Section 3.3(b) ) or until Ayers has completed the distribution described in the registration statement relating to such distribution, whichever occurs first or, if such registration statement relates to an underwritten offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer, or (B) in the case of a Shelf Registration, until the earlier of (I) the date on which all Registrable Securities have been sold under the Shelf Registration or otherwise no longer qualify as Registrable Securities, (II) when all such Registrable Securities can be sold in any ninety (90)-day period under Securities Act Rule 144, and (III) the latest date allowed by applicable law, and (ii) to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by Ayers thereof set forth in such registration statement;

(c) furnish to Ayers such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as Ayers

may reasonably request in order to facilitate the disposition of the Registrable Securities owned by Ayers ;

(d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as Ayers reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable Ayers to consummate the disposition in such jurisdictions of the Registrable Securities owned by Ayers (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection, (ii) subject itself to taxation in respect of doing business in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);

(e) promptly notify Ayers, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the discovery of the happening of any event as a result of which, the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and, at the request of Ayers, the Company will prepare and furnish to Ayers a reasonable number of copies of a supplement or amendment to such prospectus so that, as thereafter delivered to the prospective purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

(f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed;

(g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;

(h) enter into such customary agreements (including underwriting agreements in customary form) and perform the Company’s obligations thereunder and take all such other actions as Ayers or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (which might include effecting a stock split or a combination of shares);

(i) make available for inspection by Ayers, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by Ayers or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by Ayers, underwriter, attorney, accountant or agent in connection with such registration statement, and to cooperate and participate as reasonably requested by Ayers in road show presentations, in the preparation of the registration statement, each amendment and supplement thereto, the prospectus included therein, and other activities

as Ayers may reasonably request in order to facilitate the disposition of the Registrable Securities owned by Ayers ;

(j) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, but not later than eighteen (18) months after the effective date of the registration statement, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

(k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in such registration statement for sale in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the withdrawal of such order;

(l) obtain one or more comfort letters, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement) addressed to Ayers, signed by the Company’s independent public accountants in the then-current customary form and covering such matters of the type customarily covered from time to time by comfort letters as Ayers may reasonably request;

(m) provide a legal opinion of the Company’s outside counsel, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement and addressed to the underwriters), with respect to the registration statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and such other documents relating thereto in the then-current customary form and covering such matters of the type customarily covered from time to time by legal opinions of such nature (in a form reasonably acceptable to Ayers);

(n) cooperate with Ayers and the managing underwriter(s), if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter(s), if any, or Ayers may request;

(o) notify counsel for Ayers and the managing underwriter(s), immediately, and confirm the notice in writing (i) when the registration statement, or any post-effective amendment to the registration statement, shall have become effective, or any supplement to the prospectus or any amendment prospectus shall have been filed, (ii) of the receipt of any comments from the Securities and Exchange Commission, (iii) of any request of the Securities and Exchange Commission to amend the registration statement or amend or supplement the prospectus or for additional information, and (iv) of the issuance by the

Securities and Exchange Commission of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes;

(p) use its reasonable effort to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus;

(q) if requested by the managing underwriter(s) or Ayers, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter(s) or Ayers reasonably requests to be included therein, including, without limitation, with respect to the number of Registrable Securities being sold by Ayers to such underwriter or agent, the purchase price being paid therefor by such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment; and

(r) cooperate with Ayers and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the Financial Industry Regulatory Authority, Inc.

The Company may require Ayers to furnish the Company such information relating to the sale or registration of such securities regarding Ayers and the distribution of Ayers’ securities as the Company may from time to time reasonably request in writing.

3.2

Registration Expenses .

(a) All expenses incident to the Company’s performance of or compliance with this Agreement, including, without limitation, all registration, qualification and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called “ Registration Expenses ”), will be paid by the Company in respect of each Demand Registration and each Piggyback Registration, whether or not it has become effective, including that the Company will pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed.

(b) In connection with each Demand Registration and each Piggyback Registration, whether or not it has become effective, the Company will pay, and reimburse Ayers for the payment of, the reasonable fees and disbursements of one counsel selected by Ayers , and such expenses shall be considered Registration Expenses hereunder.

(c) For the avoidance of doubt, any underwriting discount or commission with respect to the sale of any Registrable Securities shall be borne by Ayers and shall not be considered Registration Expenses.

3.3

Participation in Underwritten Offerings .

(a) Ayers may not participate in any registration hereunder which is underwritten unless Ayers (i) agrees to sell Ayers’ securities on the basis provided in any underwriting arrangements approved by the Person entitled hereunder to approve such arrangements (including, without limitation, pursuant to the terms of any over-allotment or “green shoe” option requested by the managing underwriter(s), provided that Ayers will not be required to sell more than the number of Registrable Securities that Ayers has requested the Company to include in any registration) and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

(b) Ayers agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1(e) above, Ayers will forthwith discontinue the disposition of his Registrable Securities pursuant to the registration statement until the Ayers’ receipt of the copies of a supplemented or amended prospectus as contemplated by such Section 3.1(e) . In the event the Company shall give any such notice, the applicable time period mentioned in Section 3.1(b) during which a Registration Statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to this paragraph to and including the date when Ayers shall have received the copies of the supplemented or amended prospectus contemplated by Section 3.1(e) .

3.4

Company Holdback .

(a) The Company shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during (a) with respect to any underwritten Demand Registration or any underwritten Piggyback Registration in which Registrable Securities are included, the seven (7) days prior to and the ninety (90)-day period beginning on the effective date of such registration, and (b) upon notice from Ayers that Ayers intends to effect an underwritten distribution of Registrable Securities pursuant to a Shelf Registration, the seven (7) days prior to and the ninety (90)-day period beginning on the date of the commencement of such distribution, in each case except as part of such underwritten registration or pursuant to registrations on Form S-4 or Form S-8, and in each case unless the managing underwriter(s) otherwise agrees.

(b) Ayers agrees , if requested by the Company and the managing underwriter of Registrable Securities in connection with any underwritten public offering of the Company and if the Company’s executive officers and directors so agree, not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any equity securities of the Company (or any other security the value of which is derived by reference to the equity securities of the Company) held by Ayers for ninety (90) days following the effective date of the relevant registration statement in connection with any public offering of Registrable Securities, as such underwriter shall specify reasonably and in good faith. Ayers agrees, if requested by the Company and the managing underwriter, to execute a separate letter reflecting the agreement set forth in this Section 3.4(b) .

3.5

Current Public Information . At all times after the Company has filed a registration statement with the Securities and Exchange Commission pursuant to the requirements of either the Securities Act or the Exchange Act, the Company will use its reasonable efforts to timely file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder, and will take such further action as Ayers may reasonably request, all to the extent required to enable Ayers pursuant to Securities Act Rule 144.

3.6

Shelf Take-Downs . At any time that a Shelf Registration is effective, if Ayers delivers a written notice to the Company (a “ Take-Down Notice ”) stating that he intends to effect an offering of all or part of his Registrable Securities included on the Shelf Registration, whether such offering is underwritten or non-underwritten ( provided that such underwritten offering is for more than $2,000,000) (a “ Shelf Offering ”) and stating the number of the Registrable Securities to be included in the Shelf Offering, then, the Company shall amend or supplement the Shelf Registration as may be necessary in order to enable such Registrable Securities to be distributed pursuant to the Shelf Offering. In connection with any Shelf Offering, in the event that the managing underwriter(s), if any, advises the Company in writing that in its opinion the number of Registrable Securities to be included in such Shelf Offering exceeds the number of Registrable Securities which can be sold therein without adversely affecting the marketability of the offering, such managing underwriter(s), if any, may limit the number of shares which would otherwise be included in such Shelf Offering in the same manner as is described in Section 1.5 .

4.	INDEMNIFICATION

4.1

Indemnification by the Company . The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, Ayers and, as applicable, his agents (including, but not limited to, his officers, directors, trustees, employees, stockholders, holders of beneficial interests, members, and general and limited partners (collectively, Ayers’ “ Indemnitees ”)) and each Person who controls Ayers (within the meaning of the Securities Act) against any and all losses,

claims, damages, liabilities, joint or several, to which such holder or any such Indemnitee may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (a) any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto, together with any documents incorporated therein by reference or, (b) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse Ayers and each of his Indemnitees for any legal or any other expenses, including any amounts paid in any settlement effected with the consent of the Company, which consent will not be unreasonably withheld or delayed, incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided , however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission, made in such registration statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or in any application, in reliance upon, and in conformity with, written information prepared and furnished to the Company by Ayers expressly for use therein. In connection with an underwritten offering, the Company will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of Ayers .

4.2

Indemnification by Ayers . In connection with any registration statement in which Ayers is participating, Ayers will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify and hold harmless the Company and its Indemnitees against any losses, claims, damages, liabilities, joint or several, to which the Company or any such Indemnitee may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (a) any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or in any application, together with any documents incorporated therein by reference or (b) any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, any such prospectus or preliminary prospectus or any amendment or supplement thereto, or in any application, in reliance upon and in conformity with written information prepared and furnished to the Company by Ayers expressly for use therein, and Ayers will reimburse the Company and each such Indemnitee for any legal or any other

expenses including any amounts paid in any settlement effected with the consent of Ayers , which consent will not be unreasonably withheld or delayed, incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided , however , that the obligation to indemnify will be limited to the net amount of proceeds received by Ayers from the sale of Registrable Securities pursuant to such registration statement, less any other amounts paid by Ayers in respect of such untrue statement, alleged untrue statement, omission or alleged omission.

4.3

Procedure . Any Person entitled to indemnification hereunder will (a) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification ( provided , however , that the failure of any indemnified party to give such notice shall not relieve the indemnifying party of its obligations hereunder, except to the extent that the indemnifying party is actually prejudiced by such failure to give such notice), and (b) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim.

4.4

Entry of Judgment; Settlement . The indemnifying party shall not, except with the approval of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to each indemnified party of a release from all liability in respect to such claim or litigation without any payment or consideration provided by such indemnified party.

4.5

Contribution . If the indemnification provided for in this Section 4 is, other than expressly pursuant to its terms, unavailable to or is insufficient to hold harmless an indemnified party under the provisions above in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (a) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and Ayers and any other sellers participating in the registration statement on the other hand from the sale of Registrable Securities pursuant to the registered offering of securities as to which indemnity is sought or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is

appropriate to reflect the relative benefits referred to in clause (a) above but also the relative fault of the Company on the one hand and Ayers and any other sellers participating in the registration statement on the other hand in connection with the statement or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and Ayers and any other sellers participating in the registration statement on the other hand shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) to the Company bear to the total net proceeds from the offering (before deducting expenses) to Ayers and any other sellers participating in the registration statement. The relative fault of the Company on the one hand and Ayers and any other sellers participating in the registration statement on the other hand shall be determined by reference to, among other things, whether the untrue or alleged statement or omission to state a material fact relates to information supplied by the Company or by Ayers or other sellers participating in the registration statement and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company and Ayers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4 , Ayers shall not be required to contribute any amount in excess of the net proceeds received by Ayers covered by the registration statement filed pursuant hereto, less any other amounts paid by Ayers in respect of such untrue statement, alleged untrue statement, omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

4.6

Other Rights . The indemnification and contribution by any such party provided for under this Agreement shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and will remain in full force and effect regardless of any investigation made or omitted by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities.

5.	DEFINITIONS.

“ Affiliate ” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person.

“ Board ” shall mean the Board of Directors of the Company.

“ Demand Registrations ” shall mean Long-Form Registrations and Short-Form Registrations requested pursuant to Section 1.1 .

“ Discriminate ” shall mean, with respect to a specified Person, to change the rights of such specified Person as compared to other applicable Persons in a manner that is, or is reasonably expected to be, materially and adversely different than the changes to the rights of the other applicable Persons.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor federal law then in force.

“ Initial Public Offering ” shall mean the initial underwritten Public Offering registered on Form S-1 (or any successor form under the Securities Act).

“ Person ” shall mean any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.

“ Public Offering ” shall mean a public offering and sale of Common Stock for cash pursuant to an effective registration statement under the Securities Act.

“ Registrable Securities ” shall mean (a) any share of Common Stock owned by Ayers as of the Effective Time or thereafter acquired (other than through the exercise of options), and (b) any common equity securities issued or issuable directly or indirectly with respect to any of the foregoing securities referred to in clause (a) by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares constituting Registrable Securities, such shares will cease to be Registrable Securities when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, or (y) sold to the public pursuant to Securities Act Rule 144 or sold in a block sale to a financial institution in the ordinary course of its trading business, in each case in compliance with this Agreement. For purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever such Person has the right to acquire directly or indirectly such Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected.

“ Related Transfer ” means any Transfer by Ayers or any Related Transferee of Ayers to any Related Transferee.

“ Related Transferee ” means with respect to Ayers or any Related Transferee of Ayers, (a) a spouse, (b) any child or grandchild, (c) any parent or spouse of any child, grandchild or parent, (d) any trust created for the benefit of any of the foregoing or for the benefit of Ayers or any Related Transferee of Ayers, (e) any court-appointed legal representative of the estate of Ayers or the estate of any Related Transferee of Ayers, including, but not limited to, an administrator, personal representative, or executor, as established by letters testamentary, letters of

administration, or other similar instrument issued by a court of competent jurisdiction or ( f ) any entity created for the benefit of Ayers or any Related Transferee of Ayers or one or more members of such Person’s family where all of the ownership interests of such entity are held directly or indirectly by or for the benefit of only such Person and such family members.

“ Rule 144 ” shall mean Securities and Exchange Commission Rule 144 under the Securities Act, as Rule 144 may be amended from time to time, or any similar successor rule that may be issued by the Securities and Exchange Commission.

“ Securities Act ” shall mean the Securities Act of 1933 and the rules promulgated thereunder, in each case as amended from time to time.

“ Securities and Exchange Commission ” includes any governmental body or agency succeeding to the functions thereof.

“ Shelf Registration ” shall mean the filing of a Short-Form Registration with the Securities and Exchange Commission in accordance with and pursuant to Rule 415 under the Securities Act (or any successor rule then in effect).

“ Stock ” shall mean the capital stock of the Company. For clarification purposes, as of the Effective Time, the Common Stock constitutes all of the Company’s issued and outstanding capital stock.

“ Transfer ” shall mean any sale, pledge, assignment, encumbrance or other transfer or disposition of any Registrable Securities (or any voting or economic interest therein) to any other Person, whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise.

6.	MISCELLANEOUS.

6.1

No Inconsistent Agreements; Foreign Registration . The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to Ayers in this Agreement. In the event the Board and Ayers approve a public offering or a sale of the Common Stock of the Company (or other securities representing, or exercisable for or convertible into, shares of common stock) pursuant to the securities laws of a country other than the United States of America, the Board shall have the power to amend this Agreement in such manner as it shall deem reasonably necessary to ensure that the provisions of this Agreement will apply in as close to the same manner as possible under such foreign securities laws, and to otherwise preserve and give effect to the rights of the parties hereto.

6.2

Adjustments Affecting Registrable Securities . The Company will not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect the ability of Ayers to include his Registrable Securities in a registration undertaken pursuant to this Agreement (including, without limitation, effecting a stock split or a combination of shares). If Ayers creates a new holding company (“ Holdco ”), the result of which is that the

stockholders of the Company immediately before such event become all the stockholders of Holdco, then in each instance the provisions of this Agreement will, in addition to applying to the Company, also apply to Holdco in the same manner as if Holdco were substituted for the Company throughout this Agreement.

6.3

Remedies . The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that, in addition to any other rights and remedies at law or in equity existing in its favor, any party shall be entitled to specific performance and/or other injunctive relief from any court of law or equity of competent jurisdiction (without posting any bond or other security) in order to enforce or prevent violation of the provisions of this Agreement.

6.4

Amendment and Waiver . This Agreement may be amended, modified, extended, terminated or waived (an “ Amendment ”), and the provisions hereof may be waived, only by an agreement in writing signed by the Company and Ayers; provided , that the admission of new parties pursuant to the terms of Section 6.5 shall not constitute an Amendment of this Agreement for purposes of this Section 6.4 . Each such Amendment shall be binding upon each party hereto. In addition, each party hereto may waive any right hereunder, as to itself, by an instrument in writing signed by such party. The failure of any party to enforce any provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. To the extent the Amendment of any Section of this Agreement would require a specific consent pursuant to this Section 6.4 , any Amendment to the definitions used in such Section as applied to such Section shall also require the same specified consent.

6.5

Successors and Assigns; Transferees . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. Registrable Securities shall continue to be Registrable Securities after any Related Transfer (except if such securities were effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them). Any Related Transferee receiving shares of Registrable Securities in a Related Transfer shall become a party to this Agreement and subject to the terms and conditions of, and be entitled to enforce, this Agreement to the same extent, and in the same capacity, as the Person that Transfers such shares to such transferee. Prior to the Related Transfer of any Registrable Securities to any Related Transferee, and as a condition thereto, the Person effecting such Related Transfer shall cause such Related Transferee to deliver to the Company its written agreement, in form and substance reasonably satisfactory to the Company, to be bound by the terms and conditions of this Agreement.

6.6

Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if

any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

6.7

Counterparts . This Agreement may be executed in separate counterparts (including by means of facsimile or electronic transmission in portable document format (pdf)), each of which shall be an original and all of which taken together shall constitute one and the same Agreement.

6.8

Descriptive Headings . The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

6.9

Notices . Any notices and other communications required or permitted in this Agreement shall be effective if in writing and (a) delivered personally, (b) sent by facsimile, or (c) sent by overnight courier, in each case, addressed as follows:

If to the Company, to:

FB Financial Corporation

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: General Counsel

with a copy (which shall not constitute notice) to:

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia 30309

Attention: Kyle G. Healy

If to Ayers, to:

Ayers Asset Management

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: James W. Ayers, President

with a copy (which shall not constitute notice) to:

Ayers Asset Management

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: David Bourgeois, Chief Financial Officer

Notice to the holder of record of any shares of capital stock shall be deemed to be notice to the holder of such shares for all purposes hereof.

Unless otherwise specified herein, such notices or other communications shall be deemed effective (x) on the date received, if personally delivered, (y) on the date received if delivered by facsimile on a business day, or if not delivered on a business day, on the first business day thereafter and (z) two (2) business days after being sent by overnight courier. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.

6.10

Delivery by Facsimile . This Agreement and any signed agreement or instrument entered into in connection herewith or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation of a contract and each such party forever waives any such defense.

6.11

Governing Law . This Agreement and all claims arising out of or based upon this Agreement or relating to the subject matter hereof shall be governed by and construed in accordance with the domestic substantive laws of the State of Tennessee without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

6.12

Exercise of Rights and Remedies . No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any such delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement on the day and year first above written.


FB FINANCIAL CORPORATION

By:	/s/ Christopher T. Holmes
Name:	Christopher T. Holmes
Title:	President and Chief Executive Officer


James W. Ayers:

By:	/s/ James W. Ayers
	James W. Ayers

Exhibit 10.11

S CORPORATION TERMINATION AND

TAX SHARING AGREEMENT

This S Corporation Termination and Tax Sharing Agreement, dated as of September 15, 2016 (the “ Agreement ”), is made by and among FB Financial Corporation, a Tennessee corporation (the “ Company ”), and James W. Ayers (the “ Shareholder ”).

RECITALS:

A. The Company has elected to be an S corporation (the “ S Election ”) under Section 1362 of the Internal Revenue Code of 1986, as amended (the “ Code ”).

B. The Company intends to conduct an initial public offering registered under the Securities Act of 1933, as amended (the “ Public Offering ”).

C. Upon the consummation of the Public Offering, the Company’s status as an S corporation will terminate.

D. The Shareholder is currently the only shareholder of the Company, and will continue to be so until immediately before the consummation of the Public Offering.

E. In connection with the Public Offering, the Company and the Shareholder desire to set forth their agreement that the Company shall bear the risk of any additional tax liability, as well as any related losses, costs and expenses, resulting from a final determination made by a competent tax authority to the taxable income the Company reported as an S Corporation.

AGREEMENT:

NOW, THEREFORE, for mutual consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Shareholder do hereby covenant and agree as follows:

ARTICLE 1

DEFINITIONS

The following terms, as used herein, have the following meanings:

“ AAA ” shall have the meaning assigned to that term by Section 1368(e)(1) of the Code.

“ Assumed Tax Rate ” means, with respect to any tax period, the maximum combined federal and state income tax rates applicable for such period, taking into account the deductibility of state income tax for federal income tax purposes, applicable to an individual resident in Tennessee.

“ C Short Year ” shall have the meaning set forth in Section 1362(e)(1)(B) of the Code.

“ Code ” shall have the meaning set forth in Recital A.

“ PostTermination Distribution ” shall mean a cash distribution during the PostTermination Transition Period as set forth in Section 1371(e) of the Code to the extent it does not exceed the AAA.

“ Post-Termination Transition Period ” shall have the meaning set forth in Section 1377(b)(1) of the Code and shall begin on the day after the last day of the Company’s S Short Year.

“ Public Offering ” shall have the meaning set forth in Recital B.

“ S Corporation ” shall have the meaning set forth in Section 1361 of the Code.

“ S Corporation Taxable Income ” shall mean, for periods beginning on or after the date the Company became an S corporation and ending with the close of the last day of the S Short Year, the sum of (i) the Company’s items of separately stated income and gain (within the meaning of Section 1366(a)(1)(A) of the Code) reduced, to the extent applicable, by the Company’s separately stated items of deduction and loss (within the meaning of Section 1366(a)(1)(A) of the Code) and (ii) the Company’s nonseparately computed net income (within the meaning of Section 1366(a)(l)(B) of the Code).

“ S Corporation Tax Year ” means any taxable period during which the Company had an S Election in effect, including the S Short Year.

“ S Election ” shall have the meaning set forth in Recital A.

“ S Short Year ” shall have the meaning set forth in Section 1362(e)(1)(A) of the Code.

“ S Termination Year ” shall have the meaning set forth in Section 1362(e)(4) of the Code.

“ Tax Proceeding ” shall have the meaning set forth in Section 2.02.

“ Termination Date ” shall mean the date on which the Company’s status as an S corporation is terminated by reason of the consummation of the Public Offering.

“ Treasury Regulations ” means the regulations promulgated by the United States Treasury Department under the Code.

ARTICLE 2

S CORPORATION TERMINATION AND TAX SHARING

2.01 Termination of S Corporation Status . The Company’s status as an S corporation shall terminate pursuant to Section 1362(d)(2) of the Code on the Termination Date.

2.02 Payments Related to Future Adjustments . In the event that any final determination of an adjustment (by reason of an amended return, claim for refund, audit, judicial decision or otherwise, which determination occurs after the Termination Date (each, a “ Tax Proceeding ”)) results in an increase in the taxable income of the Company for any year during which the Company qualified as an S Corporation, including the S Short Year, the Company shall distribute to the Shareholder within 30 days of such final determination, cash in an amount equal to (i) the product of (A) the amount of increase in taxable income resulting from the adjustment and (B) the Assumed Tax Rate plus (ii) any interest and penalties imposed thereon.

2.03 Liability for Taxes Incurred During the S Short Year and for Tax Periods Ending Prior to the Termination Date . The Shareholder covenants and agrees that: (i) he has duly included (to the best of his knowledge), or will duly include, in his federal, state, and local income tax returns his respective allocable shares of all items of income, gain, loss, deduction, or credit attributable to the S Short Year of the Company, (ii) such returns shall, to the extent required by applicable law, include his allocable share of S Corporation Taxable Income of the Company from all sources through and including the close of business on the last day of the S Short Year of the Company, and (iii) he shall, to the extent required by applicable law, pay any and all taxes he is required to pay, as a result of being a shareholder of the Company, for all taxable periods (or that portion of any period) during which the Company was an S Corporation.

2.04 Shareholder Indemnification for Tax Liabilities . The Shareholder hereby indemnifies and holds the Company harmless from, against and in respect of any unpaid income tax liabilities of the Company (including interest and penalties imposed thereon) (i) which are attributable to the S Short Year and the primary liability of the Shareholder, or (ii) which are incurred by the Company as a result of a final determination of an adjustment (by reason of a Tax Proceeding) to the taxable income of the Shareholder for any period, including the S Short Year or thereafter, and which (in the case of this clause (ii)) are attributable to a decrease for any period in the Shareholder’s taxable income and a corresponding increase for any period in the taxable income of the Company.

2.05 Company Indemnification for Tax Liabilities . The Company hereby indemnifies and agrees to hold the Shareholder harmless from, against and in respect of income tax liabilities (including interest and penalties imposed thereon), if any, incurred by the Shareholder as a result of a final determination of an adjustment (by reason of a Tax Proceeding) to the taxable income of the Company for any period ending after the Termination Date (including, without limitation, the C Short Year) which results in an increase for any period in the taxable income of the Shareholder. The Company shall distribute cash in an amount equal to (i) the product of (A) the amount of such increase in the taxable income resulting from such final determination and (B) the Assumed Tax Rate, plus (ii) any interest and penalties imposed thereon.

2.06 Payments . The Shareholder or the Company, as the case may be, shall make any payment required under Sections 2.04 or 2.05 of this Agreement within 30 days after receipt of notice from the other party that a final determination of an adjustment (by reason of a Tax Proceeding) has occurred and a payment is due by such party to the appropriate taxing authority.

2.07 Termination Payments to Shareholder . Immediately prior to or as soon as possible after the Termination Date, the Company shall determine the amount of the AAA of the Company, and as soon as reasonably possible after the Termination Date shall distribute to the Shareholder an amount equal to such amount (the “ Distribution Amount ”). For purposes of this Section 2.07, the AAA shall be determined by the Company in accordance with the Company’s books and records and consistent with Section 1368 of the Code and the Treasury Regulations thereunder.

ARTICLE 3

ALLOCATION OF INCOME

3.01 Short Taxable Years . The parties acknowledge that the taxable year in which the S corporation status of the Company is terminated will be an “S Termination Year” for tax purposes, as defined in Section 1362(e)(4) of the Code. Pursuant to Section 1361(e)(1) of the Code, the S Termination Year of the Company shall be divided into two short taxable years: an “S Short Year” and a “C Short Year.” As defined in Section 1362(e)(1)(A) of the Code, the S Short Year shall be that portion of the Company’s S Termination Year ending on the day immediately preceding the Termination Date. Pursuant to Section 1362(e)(1)(B) of the Code, that portion of the S Termination Year beginning on the Termination Date and ending on the last day of the taxable year shall be the C Short Year of the Company.

3.02 Pro Rata Allocation . The Company and the Shareholder understand that for tax purposes (including for purposes of determining the Company’s S Corporation Taxable Income for its S Short Year) the Company will be required to allocate its items of income, gain, loss, deduction and credit for its calendar year between the S Short Year and the C Short Year on a “pro rata” basis in accordance with Section 1362(e)(2) of the Code.

ARTICLE 4

TAX MATTERS

4.01. Refunds . If the Company receives a refund of any income tax (including penalties and interest) for any period prior to the Termination Date, or as to which it has previously been indemnified by the Shareholder, the Company shall pay an amount equal to such refund, within 30 days after receipt thereof, to the Shareholder on the last day of any applicable period to which the refund relates. If the Shareholder receives a refund of any income tax (including penalties and interest) as to which it has previously been indemnified by the Company, he shall, within 30 days after receipt thereon, remit an amount equal to such refund to the Company (for the avoidance of doubt, such refund shall be determined assuming the Shareholder’s only items of income, loss or deduction arise from the Company during the S Short Year).

4 .0 2 . Notice and Tax Proceedings .

(a) Any time that the Shareholder believes he may be entitled to a payment under this Agreement as a result of a Tax Proceeding he shall use reasonable efforts to promptly notify the Company of such Proceeding.

(b) The Company will have the option to represent itself in any Tax Proceeding, at its own expense and using advisors of the Company’s choice.

(c) The Shareholder shall cooperate fully with the Company in any Tax Proceeding and shall have the right, but not the obligation, to participate in such Proceeding at his own expense.

(d) Breach by the Shareholder of any of the provisions of this Section 4.01 will terminate the Company’s obligation to make payments to the Shareholder under Article 2 to the extent any such breach materially prejudices the result of any Tax Proceeding.

4.03. Inconsistent Reporting . If the Shareholder hereafter reports an item on the Shareholder’s income tax return in a manner materially inconsistent with the tax treatment reflected in the Schedule K-1 or other tax information provided to the Shareholder by the Company for a taxable period during which the Company had an S Election in effect, the Shareholder shall notify the Company of such treatment before filing the Shareholder’s income tax return. If the Shareholder fails to notify the Company of such inconsistent reporting, the Shareholder shall be liable to the Company for any losses, costs or expenses (including reasonable attorneys’ fees) arising from such inconsistent reporting, including an audit.

ARTICLE 5

MISCELLANEOUS

5.01 Post-Termination Distributions . To the extent practicable and to the extent consistent with applicable law, payments or other distributions made to the Shareholder pursuant to Article 2 will be treated as Post-Termination Distributions for U.S. federal income tax purposes and any correspondingly applicable state and/or local tax purposes. To the extent that the Company’s tax return preparers determine that such payments or distributions cannot be properly treated as Post-Termination Distributions, then the amount of any distribution made to the Shareholder pursuant to Article 2 shall be increased by the amount of the Shareholder’s additional tax liability, if any, resulting from such payments or distributions, as reasonably determined by the Company’s tax return preparers, plus an amount equal to any additional tax liability resulting from the payment pursuant to this Section 5.01, assuming that the Shareholder pays tax at the Assumed Tax Rate.

5.02. Intent of Parties . It is the parties’ intent that the liability for income taxes arising from the operations of the Company will be borne by the Shareholder for all periods through and including the S Short Year and by the Company for periods beginning with the C Short Year, and this Agreement shall be construed so as most equitably to achieve such intent.

5.03 Confidentiality . Each of the parties agrees that any information furnished pursuant to this Agreement is confidential and, except as and to the extent required by law or otherwise during the course of an audit or contest or other administrative or legal proceeding, shall not be disclosed to any person or entity.

5.04 Successors and Access to Information . This Agreement shall be binding upon and inure to the benefit of any successor, heirs or personal representatives to any of the parties, by merger, acquisition of assets or stock in the Company or otherwise, to the same extent as if the successor, heir or personal representative had been an original party to this Agreement or the Shareholder for the taxable period in question, and in such event, all references herein to a party shall refer instead to the successor, heir or personal representative of such party; provided, however, that for purposes of calculating the tax liability to which any payments under this Agreement would relate, the original Shareholder’s tax liability shall be taken into account, but any payments in connection therewith shall be made to the successor, heir or personal representative of the original Shareholder.

5.05 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the State of Tennessee.

5.06 Headings . The headings in this Agreement are for convenience only and shall not be deemed for any purpose to constitute a part or to affect the interpretation of this Agreement.

5.07 Counterparts . This Agreement may be executed simultaneously in two or more counterparts, each of which will be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one counterpart.

5.08 Electronic Transmission . Any facsimile or electronically transmitted copies hereof or signature hereon shall, for all purposes, be deemed originals.

5.09 Notices . Any notice or communication required or permitted to be given under this Agreement shall be in writing (including telecopy communication) and mailed, telecopied or delivered to the parties at the addresses specified in Schedule A or at such other address as one party may specify by notice to the other party. All such notices and communications shall be effective when received. Any payment required to be made under this Agreement shall be mailed or delivered to the parties at the addresses specified in Schedule A or at such other address or account as one party may specify by notice to the other party.

5.10 Severability . If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the maximum extent practicable. In any event, all other provisions of this Agreement shall be deemed valid, binding, and enforceable to their full extent.

5 .1 1 Survival . This Agreement shall remain in force and be binding so long as the applicable period of assessments (including extensions) remains unexpired for any tax es contemplated by this Agreement.

5.12 Successor Provisions . Any reference herein to any provisions of the Code or Treasury Regulations shall be deemed to include any amendments or successor provisions thereto as appropriate.

5.13 Integration; Amendments . Except as explicitly stated herein, this Agreement embodies the entire understanding between the parties relating to its subject matter and supersedes and terminates all prior agreements and understandings among the parties with respect to such matters. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any party to enter into this Agreement. This Agreement shall not be modified or terminated except by a writing duly signed by each of the parties hereto, and no waiver of any provisions of this Agreement shall be effective unless in a writing duly signed by the party sought to be bound.

5.14 Waiver of Jury Trial . EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING OUT OF THIS AGREEMENT. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.14.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have executed this S Corporation Termination and Indemnification Agreement on the date first set forth above.

COMPANY:

FB FINANCIAL CORPORATION,
a Tennessee corporation

By:	/s/ Christopher T. Holmes
Name:	Christopher T. Holmes
Title:	President and Chief Executive Officer


SHAREHOLDER:


/s/ James W. Ayers
James W. Ayers

SCHEDULE A

Notices

To the Company:

FB Financial Corporation

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: General Counsel

With a copy to:

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, Georgia 30309

Attn: Kyle G. Healy

To the Shareholder:

Ayers Asset Management

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: James W. Ayers, President

With a copy to:

Ayers Asset Management

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: David Bourgeois, Chief Financial Officer

Exhibit 10.12

SHAREHOLDER’S AGREEMENT

BY AND BETWEEN

FB FINANCIAL CORPORATION

AND

JAMES W. AYERS

DATED AS OF September 15, 2016

TABLE OF CONTENTS

SECTION 1.			DEFINITIONS	1
	1.1.	Drafting Conventions; No Construction Against Drafter.		1
	1.2.	Defined Terms.		2

SECTION 2.			REPRESENTATIONS AND WARRANTIES	4
	2.1.	Representations and Warranties of the Shareholder.		4
	2.2.	Representations and Warranties of Company.		4

SECTION 3.			BOARD MATTERS	4
	3.1.	Board of Directors.		4
	3.2.	Committees of the Board of Directors.		6
	3.3.	Additional Management Provisions.		6
	3.4.	Company.		7

SECTION 4.			MISCELLANEOUS PROVISIONS	7
	4.1.	Confidentiality.		7
	4.2.	Reliance.		8
	4.3.	Access to Agreement; Amendment and Waiver; Actions of the Board.		8
	4.4.	Notices.		8
	4.5.	Counterparts.		8
	4.6.	Remedies; Severability.		9
	4.7.	Entire Agreement.		9
	4.8.	Termination.		9
	4.9.	Governing Law.		9
	4.10.	Successors and Assigns; Beneficiaries.		9
	4.11.	Consent to Jurisdiction; WAIVER OF JURY TRIAL.		9
	4.12.	Further Assurances.		10
	4.13.	Regulatory Matters.		10
	4.14.	Inconsistent Agreements.		10
	4.15.	Effectiveness of Agreement.		11

S HAREHOLDER’S AGREEMENT

This SHAREHOLDER’S AGREEMENT (as the same may be amended, modified or supplemented from time to time, the “ Agreement ”) is made as of September 15, 2016 (the “ Effective Time ”) by and between FB Financial Corporation, a Tennessee corporation (the “ Company ”) and James W. Ayers (the “ Shareholder ”).

RECITALS

WHEREAS, as of the Effective Time, the Shareholder owns all of the outstanding shares of common stock, par value $1.00 per share (the “ Common Stock ”), of the Company;

WHEREAS, the Company is proposing to consummate an initial public offering of its Common Stock (the “ Initial Public Offering ”);

WHEREAS, as an incentive for the Shareholder to participate in and consummate the transactions contemplated by the Initial Public Offering, the Company and the Shareholder desire to agree upon the respective rights and obligations after the date of completion of the Initial Public Offering (the “ Closing Date ”) with respect to the securities of the Company now or hereafter outstanding and held by the Shareholder and certain corporate governance matters with respect to the Shareholder’s investment in the Company; and

WHEREAS, the Board of Directors of Company (the “ Board of Directors ”) have approved this Agreement.

NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1.

DEFINITIONS

1.1. Drafting Conventions; No Construction Against Drafter.

(a) The headings in this Agreement are provided for convenience and do not affect its meaning. The words “include,” “includes” and “including” are to be read as if they were followed by the phrase “without limitation.” Unless specified otherwise, any reference to an agreement means that agreement as amended or supplemented, subject to any restrictions on amendment contained in such agreement. Unless specified otherwise, any reference to a statute or regulation means that statute or regulation as amended or supplemented from time to time and any corresponding provisions of successor statutes or regulations. If any date specified in this Agreement as a date for taking action falls on a day that is not a business day, then that action may be taken on the next business day. Unless specified otherwise, the words “party” and “parties” refer only to a party named in this Agreement or one who joins this Agreement as a party pursuant to the terms hereof.

(b) The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent. If an ambiguity or question of intent or interpretation arises, this Agreement is to be construed as if drafted jointly by the parties and

there is to be no presumption or burden of proof or rule of strict construction favoring or disfavoring any party because of the authorship of any provision of this Agreement.

1.2. Defined Terms. The following capitalized terms, as used in this Agreement, shall have the meanings set forth below.

“ Affiliate ” means, with respect to any Person, an “affiliate” as defined in Rule 405 of the rules and regulations promulgated under the Securities Act.

“ Agreement ” shall have the meaning set forth in the Preamble.

“ beneficially own ” shall have the meaning ascribed to such terms in Rule 13d-3 under the Exchange Act.

“ Board of Directors ” shall have the meaning set forth in the Recitals.

“ Bylaws ” shall mean Company’s amended and restated bylaws in effect as of the Closing Date, as amended from time to time.

“ Charter ” shall mean Company’s amended and restated articles of incorporation in effect as of the Closing Date, as amended from time to time.

“ Closing Date ” shall have the meaning set forth in the Recitals.

“ Common Stock ” shall have the meaning set forth in the Recitals, together with any shares of stock or other securities issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or in replacement or upon conversion of such shares or otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization).

“ Company ” shall have the meaning set forth in the Preamble and shall include any successor thereto.

“ Director ” shall mean a member of the Board of Directors.

“ Effective Time ” shall have the meaning set forth in the Preamble.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934 and the rules and regulations thereunder.

“ Initial Public Offering ” shall have the meaning set forth in the Recitals.

“ Law ” means any applicable constitutional provision, statute, act, code, law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority and shall include, for the avoidance of any doubt, the Tennessee Business Corporation Act and the listing or other standards of any applicable stock exchange

“ Necessary Action ” shall mean, with respect to a specified result, all actions (to the extent such actions are permitted by L aw and, in the case of any action by Company that requires a vote or other action on the part of the Board of Directors, to the extent such action is consistent with the fiduciary duties that the Board of Directors may have in such capacity) necessary or desirable to cause such result, including (i) attending meetings in person or by proxy for purposes of obtaining a quorum, (ii) voting or providing a written consent or proxy with respect to Shares, (iii) causing the adoption of resolutions and amendments to the organizational documents of Company, (iv) executing agreements and instruments and (v) making, or causing to be made, with governmental, administrative or regulatory authorities, all filings, registrations or similar actions that are required to achieve such result.

“ Permanent Disability ” shall mean the inability of the Shareholder, as reasonably determined by the Company, to perform the essential functions of his regular duties and responsibilities under this Agreement, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of twelve (12) consecutive months. At the request of Shareholder or his personal representative, the determination by the Company that the Permanent Disability of Shareholder has occurred shall be certified by a physician mutually agreed upon by the Shareholder, or his personal representative, and the Company.

“ Person ” shall mean an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, government (or agency or political subdivision thereof) or any other entity or group (as defined in Section 13(d) of the Exchange Act).

“ Registration Rights Agreement ” shall mean that certain Registration Rights Agreement dated as of September 15, 2016 by and between the Company and the Shareholder.

“ Removal Notice ” shall have the meaning as set forth in Section 3.1(c)(i).

“ Securities Act ” shall mean the Securities Act of 1933 and the rules and regulations thereunder.

“ Shareholder ” shall have the meaning set forth in the Preamble.

“ Shareholder Designee ” shall have the meaning as set forth in Section 3.1(a)(i).

“ Shares ” shall mean, at any time, (i) Common Stock and (ii) any other equity securities now or hereafter issued by Company, together with any options thereon and any other shares of stock or other securities issued or issuable with respect thereto (whether by way of a stock dividend, stock split or in exchange for or in replacement or upon conversion of such shares or otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization).

“ Total Number of Directors ” shall have the meaning as set forth in Section 3.1(a)(i).

SECTION 2.

REPRESENTATIONS AND WARRANTIES

2.1. Representations and Warranties of the Shareholder. The Shareholder hereby individually represents, warrants and covenants to Company as follows: (a) the Shareholder has full legal capacity to enter into this Agreement and perform its obligations hereunder; (b) this Agreement constitutes the valid and binding obligation of the Shareholder enforceable against the Shareholder in accordance with its terms; and (c) the execution, delivery and performance by the Shareholder of this Agreement does not and will not: (i) violate any Law, rules or regulations of the United States or any state or other jurisdiction applicable to the Shareholder, or require the Shareholder to obtain any approval, consent or waiver of, or to make any filing with, any Person that has not been obtained or made; and (ii) constitute a breach of or default under any material agreement to which the Shareholder is a party.

2.2. Representations and Warranties of Company. Company hereby represents, warrants and covenants to the Shareholder as follows: (a) Company has full corporate power and authority to enter into this Agreement and perform its obligations hereunder; (b) this Agreement constitutes the valid and binding obligation of Company enforceable against it in accordance with its terms; and (c) the execution, delivery and performance by Company of this Agreement does not and will not: (i) violate any Law, rules or regulations of the United States or any state or other jurisdiction applicable to Company, or require Company to obtain any approval, consent or waiver of, or to make any filing with, any Person that has not been obtained or made; and (ii) result in a breach of, constitute a default under, accelerate any obligation under or give rise to a right of termination of any indenture or loan or credit agreement or any other material agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which Company is a party or by which the property of Company is bound or affected, or result in the creation or imposition of any mortgage, pledge, lien, security interest or other charge or encumbrance on any of the assets or properties of Company.

SECTION 3.

BOARD MATTERS

3.1. Board of Directors. Effective as of the Closing Date:

(a) Rights to Designate . The Shareholder hereby agrees to vote, or cause to be voted, all of its Shares, at any annual or special meeting, by written consent, or otherwise, and will take all Necessary Actions within the Shareholder’s control, and Company will take all Necessary Actions within its control, to cause the authorized number of directors on the Board of Directors to be established and remain between 5 and 9, with such number approved pursuant to the Bylaws and Charter, and the Shareholder shall have the right, but not the obligation, to elect or appoint or cause to be elected or appointed to the Board of Directors and cause to be continued in office:

(i) Equal to: (A) up to a majority of the total number of directors comprising the Board of Directors (the “ Total Number of Directors ”), so long as the Shareholder beneficially owns, directly or indirectly, more than 50% of the then outstanding shares of Common Stock; (B) up to 40% of the Total Number of Directors, in the event that the Shareholder beneficially owns, directly or

indirectly, more than 40%, but less than or equal to 50%, of the then outstanding shares of Common Stock ; (C) up to 30% of the Total Number of Directors, in the event that the Shareholder beneficially owns, directly or indirectly, more than 30%, but less than or equal to 40%, of the then outstanding shares of Common Stock; (D) up to 20% of the Total Number of Directors, in the event that the Shareholder beneficially owns, directly or indirectly, more than 20%, but less than or equal to 30%, of the then outstanding shares of Common Stock; (E) up to 10% of the Total Number of Directors, in the event that the Shareholder beneficially owns, directly or indirectly, at least 5% of the then outstanding shares of Common Stock; and (F) no directors in the event that the Shareholder beneficially owns, directly or indirectly, less than 5% of the then outstanding shares of Common Stock. For purposes of calculating the number of directors that the Shareholder is entitled to designate pursuant to the immediately preceding sentence, any fractional amounts shall automatically be rounded up to the nearest whole number (e.g., 1¼ Directors shall equate to two Directors) and any such calculations shall be made on a pro forma basis, including, for the avoidance of doubt, taking into account any increase in the size of the Board of Directors . In the event that the Shareholders has nominated less than the total number of designees the Shareholder shall be entitled to nom inate pursuant to this Section 3.1(a ), the Shareholder shall have the right, at any time, to nominate such additional designees to which it is entitled, in which case, the Board of Directors shall take all N ecessary A ction to (x) increase the size of the Board of Directors as required to enable the Shareholder to so nominate such additional designees and (y) designate such additional designees nominated by the Shareholder to fill such newly-created vacancies. Each such designee whom the Shareholder shall actually nom inate pursuant to this Section 3.1(a ) and is thereafter elected to the Board of Directors to serve as a Director shall be referred to herein as a “ Shareholder Designee ”;

(ii) the chief executive officer of Company and its subsidiaries, who initially shall be Christopher T. Holmes, shall serve on the Board of Directors of the Company; and

(iii) each additional designee shall be filled as provided in the Charter and Bylaws.

Company shall cause the individuals designated in accordance with this Section 3.1(a) to be nominated for election to the Board of Directors, shall solicit proxies in favor thereof, and at each meeting of the shareholders of Company at which directors of Company are to be elected, shall recommend that the shareholders of Company elect to the Board of Directors each such individual nominated for election at such meeting.

(b) Initial Shareholder Designees . The initial Shareholder Designees pursuant to the provisions of Section 3.1(a)(i) of this Agreement shall be the Shareholder, Orrin H. Ingram and Stuart C. McWhorter. Any remaining undesignated Shareholder Designees shall be designated by the Shareholder at such time as they shall determine.

(i) The Shareholder may remove a Shareholder Designee by sending a written notice to Company’s Secretary stating the name of the designee to be removed from the Board of Directors (the “ Removal Notice ”) and, upon receipt of such notice by Company’s Secretary, such designee shall be deemed to have resigned from the Board of Directors (and such a designee shall only be removed in such manner).

(ii) If at any time any Shareholder Designee ceases to serve on the Board of Directors (whether due to death, disability, resignation, removal or otherwise), the Shareholder shall designate or nominate a successor to fill the vacancy created thereby on the terms and subject to the conditions of Section 3.1(a) of this Agreement, and the Company will take all Necessary Actions within its control, to cause the designated successor to be elected to fill such vacancy. In the event that the Shareholder does not, pursuant to Section 3.1(a) of this Agreement, have the right to designate an individual to fill such vacancy, then such vacancy shall be filled as provided in the Charter and the Bylaws.

(d) Expenses . Each Director shall be entitled to reimbursement from Company for his or her reasonable out-of-pocket expenses (including travel) incurred in attending any meeting of the Board of Directors or any committee thereof or governing body of any subsidiary of Company or any committee thereof.

3.2. Committees of the Board of Directors. For so long as the Company qualifies as a “controlled company” under applicable listing standards and subject to applicable Law, the Shareholder shall have the right, but not the obligation, to designate (a) a majority of the members of any Nominating and Corporate Governance Committee or similar committee of the Board of Directors and (b) up to two members of any Compensation Committee or similar committee of the Board of Directors. In the event that the Company no longer qualifies as a “controlled company” under applicable listing standards, the Shareholder shall continue to have the right to designate at least one member of each such committee of the Board of Directors for so long as permitted under applicable Law; provided , however , the Shareholder shall cease to have such right to designate a committee member in the event that the Shareholder ceases to have the right to designate a Director pursuant to Section 3.1(a) of this Agreement.

3.3. Additional Management Provisions.

(a) The Shareholder and Company hereby agree, notwithstanding anything to the contrary in any other agreement or at law or in equity, that, to the maximum extent permitted by Law, when the Shareholder takes any action under this Agreement to give or withhold its consent, the Shareholder shall have no duty (fiduciary or other) to consider the interests of Company and may act exclusively in its own interest in its capacity as a Shareholder and shall have only the duty to act in good faith; provided , however , that the foregoing shall in no way affect the obligations of the parties hereto to comply with the provisions of this Agreement.

(b) The provisions of this Agreement shall be controlling if any such provisions or the operation thereof conflict with the provisions of Company’s B ylaws. Each of the parties covenants and agrees to take all Necessary Actions within its control to ensure that the Charter and Bylaws do not, at any time, conflict with the provisions of this Agreement.

(c) For so long as Company qualifies as a “controlled company” under the applicable listing standards then in effect, Company will elect to be a “controlled company” for purposes of such applicable listing standards, and will disclose in its annual meeting proxy statement that it is a “controlled company” and the basis for that determination. Company and the Shareholder acknowledge and agree that, as of the date of this Agreement, Company is a “controlled company.” After Company ceases to qualify as a “controlled company” under applicable listing standards then in effect, the Shareholder acknowledges that a sufficient number of their designees will be required to qualify as “independent directors” to ensure that the Board of Directors complies with such applicable listing standards in the time periods required by the applicable listing standards then in effect, and shall discuss and use commercially reasonable efforts to agree upon appropriate changes to their designees consistent with the foregoing.

3.4. Company. Company will not give effect to any action by the Shareholder which is in contravention of this Section III.

SECTION 4.

MISCELLANEOUS PROVISIONS

4.1. Confidentiality. The Shareholder agrees that it will keep confidential and will not disclose, divulge or use for any purpose, other than to monitor its investment in Company and its subsidiaries, any confidential information obtained from the Company, unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of any confidentiality obligation by the Shareholder or its Affiliates), (b) is or has been independently developed or conceived by the Shareholder without use of Company’s confidential information or (c) is or has been made known or disclosed to the Shareholder by a third party (other than an Affiliate of the Shareholder) without a breach of any confidentiality obligations such third party may have to Company that is known to the Shareholder; provided , that , the Shareholder may disclose confidential information (i) to its attorneys, accountants, consultants and other professional advisors to the extent necessary to obtain their services in connection with monitoring its investment in the Company, (ii) to any prospective purchaser of any Shares from the Shareholder as long as such prospective purchaser agrees to be bound by the provisions of this Section 4.1 as if a Shareholder, (iii) to any Affiliate, partner, member, limited partners, prospective partners or related investment fund of the Shareholder and their respective directors, employees, consultants and representatives, in each case in the ordinary course of business (provided that the recipients of such confidential information are subject to a customary confidentiality and non-disclosure obligation), (iv) as may be reasonably determined by the Shareholder to be necessary in connection with the Shareholder’s enforcement of its rights in connection with this Agreement or its investment in the Company and its subsidiaries, or (v) as may otherwise be required by Law or legal, judicial or regulatory process, provided that the Shareholder takes reasonable steps to minimize the extent of any required disclosure described in this clause (v); and provided, further , that the acts and omissions of any Person to whom the Shareholder may disclose confidential information pursuant to

clauses (i) through (iii) of the preceding proviso shall be attributable to the S hare holder for purposes of determining S hare holder’s compliance with this Section 4. 1 .

4.2. Reliance. Each covenant and agreement made by a party in this Agreement or in any certificate, instrument or other document delivered pursuant to this Agreement is material, shall be deemed to have been relied upon by the other parties and shall remain operative and in full force and effect after the Closing Date regardless of any investigation. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties hereto and their respective successors and permitted assigns.

4.3. Access to Agreement; Amendment and Waiver; Actions of the Board. Any party may waive in writing any provision hereof intended for its benefit, provided, that, in the case of any waiver by Company, such waiver is consented to in writing by the Shareholder. No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any party at law or in equity or otherwise. This Agreement may be amended with the prior written consent of the Shareholder.

4.4 Notices. All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed (by first class registered or certified mail, postage prepaid), sent by express overnight courier service, or delivered to the applicable party at the respective address indicated below:

If to Company:

FB Financial Corporation

211 Commerce Street, Suite 300

Nashville, TN 37201

Attn: General Counsel

If to the Shareholder:

Ayers Asset Management

211 Commerce Street, Suite 300

Nashville, Tennessee 37201

Attn: James W. Ayers, President

All such notices, requests, demands and other communications shall, when mailed, telegraphed or sent, respectively, be effective (i) two days after being deposited in the mail or (ii) one day after being deposited with the express overnight courier service, respectively, addressed as aforesaid.

4.5. Counterparts. This Agreement may be executed in two or more counterparts, and delivered via facsimile, .pdf or other electronic transmission, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

4.6. Remedies; Severability . It is specifically understood and agreed that any breach of the provisions of this Agreement by any party will result in irreparable injury to the other parties, that the remedy at law alone will be an inadequate remedy for such breach, and that, in addition to any other legal or equitable remedies which they may have, such other parties may enforce their respective rights by actions for specific performance or injunctive relief (to the extent permitted at law or in equity). If any one or more of the provisions of this Agreement, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein are not to be in any way impaired thereby, it being intended that all of the rights and privileges of the parties be enforceable to the fullest extent permitted by L aw.

4.7. Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement as to the subject matter hereof and, together with the Registration Rights Agreement and the Charter, intended to be complete and exclusive statement of the agreement and understanding of the parties with respect to that subject matter, and supersedes all prior agreements and undertakings among the parties hereto with regard to such subject matter.

4.8. Termination. This Agreement shall terminate (a) if the Initial Public Offering is not consummated by December 31, 2016, or (b) on the earlier of (i) death or the Permanent Disability of the Shareholder or (ii) such date as the Shareholder, in the aggregate, holds less than 5% of the outstanding shares of Common Stock.

4.9. Governing Law. This Agreement is to be construed and enforced in accordance with the laws of the State of Tennessee, without giving effect to its principles or rules of conflict of laws to the extent such principles or rules are not mandatorily applicable by statute and would require or permit the application of the laws of another jurisdiction.

4.10. Successors and Assigns; Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties and the respective successors and assigns of the parties as contemplated herein, and shall also apply to any Common Stock acquired by the Shareholder after the date hereof; provided , that neither this Agreement nor any right arising under this Agreement may be assigned by any party hereto without the prior written consent of the Shareholder, and any attempted assignment, without such consent, will be null and void. Any successor to Company by way of merger or otherwise must specifically agree to be bound by the terms hereof as a condition of such succession.

4.11. Consent to Jurisdiction; WAIVER OF JURY TRIAL.

(a) Each of the parties hereto irrevocably and unconditionally consents to the sole and exclusive jurisdiction of the state and federal courts located in Nashville, Tennessee to resolve all disputes, claims or controversies arising out of or relating to this Agreement or any other agreement executed and delivered pursuant to or in connection with this Agreement or the negotiation, breach, validity, termination or performance hereof and thereof or the transactions contemplated hereby and thereby and agrees that it will not bring any such action in any court other than the federal or state courts located in Nashville, Tennessee. Each party further irrevocably waives any objection to proceeding in such courts based upon lack of personal

jurisdiction or to the laying of venue in such courts and further irrevocably and unconditionally waives and agrees not to make a claim that such courts are an inconvenient forum. Each of the parties hereto hereby consents to service of process by registered mail at the address to which notices are to be given as provided in Section 4. 4 of this Agreement . Each of the parties hereto agrees that its or his submission to jurisdiction and its or his consent to service of process by mail is made for the express benefit of the other parties hereto. The choice of forum set forth in this Section shall not be deemed to preclude the enforcement of any judgment of a Tennessee federal or state court, or the taking of any action under this Agreement to enforce such a judgment, in any other appropriate jurisdiction.

(b) EACH PARTY TO THIS AGREEMENT WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST THE OTHER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, OR ANY OTHER AGREEMENTS EXECUTED AND DELIVERED PURSUANT TO OR IN CONNECTION HEREWITH OR THE NEGOTIATION, BREACH, VALIDITY, TERMINATION OR PERFORMANCE HEREOF AND THEREOF OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. FURTHER, (I) NO PARTY TO THIS AGREEMENT SHALL SEEK A JURY TRIAL IN ANY SUCH ACTION AND (II) NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EACH PARTY TO THIS AGREEMENT CERTIFIES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT OR INSTRUMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH ABOVE IN THIS SECTION 4.11. NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

4.12. Further Assurances. At any time or from time to time after the Closing Date, the parties hereto agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as any other party may reasonably request in order to evidence or effectuate the provisions of this Agreement and to otherwise carry out the intent of the parties hereunder.

4.13. Regulatory Matters. Company shall and shall cause its subsidiaries to keep the Shareholder informed, on a current basis, of any events, discussions, notices or changes with respect to any criminal or regulatory investigation or action involving Company or any of its subsidiaries, so that the Shareholder and his respective Affiliates will have the opportunity to take appropriate steps to avoid or mitigate any regulatory consequences to them that might arise from such investigation or action.

4.14. Inconsistent Agreements. Neither Company nor the Shareholder shall enter into any agreement or side letter with, or grant any proxy to, the Shareholder, Company or any other Person (whether or not such proxy, agreements or side letters are with holders of Common Shares that are not parties to this Agreement or otherwise) that conflicts with the provisions of this Agreement or which would obligate such Person to breach any provision of this Agreement.

4.15. Effectiveness of Agreement . Upon effectiveness of the registration statement relating to the Initial Public Offering, th is Agreement shall thereupon be deemed to be in effect. However, to the extent such Initial Public Offering is not consummated within 60 days following the effectiveness of the registration statement relating thereto, the provisions of this Agreement shall be without any force or effect.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties are signing this Shareholder’s Agreement as of the date first set forth above.


COMPANY:

FB FINANCIAL CORPORATION


By:	/s/ Christopher T. Holmes
Name:	Christopher T. Holmes
Title:	President and Chief Executive Officer


SHAREHOLDER:

JAMES W. AYERS

By:	/s/ James W. Ayers

[Signature page to Shareholder’s Agreement]

Exhibit 31.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

I, Christopher T. Holmes, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of FB Financial Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2016

/s/ Christopher T. Holmes

Name:

Christopher T. Holmes

Title:

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

RULES 13a-14(a) CERTIFICATE OF THE CHIEF FINANCIAL OFFICER

I, James R. Gordon, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of FB Financial Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2016

/s/ James R. Gordon

Name:

James R. Gordon

Title:

Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C 1350)

Each of the undersigned officers of FB Financial Corporation (the “Company”) hereby certifies, for purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(i)

the accompanying quarterly report on Form 10-Q of the Company for the quarter ended September 30, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

(ii)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2016

/s/ Christopher T. Holmes

Christopher T. Holmes

Chief Executive Officer

(Principal Executive Officer)

Date: November 14 , 2016

/s/ James R. Gordon

James R. Gordon

Chief Financial Officer

(Principal Financial Officer)