2021 Tennessee (I.R.S. Employer Brentwood, Tennessee 37027 (Address of principal executive offices) (Zip Code) ☐ ☒ Item 1. Item 2. Item 3. Item 4. Item 1. Item 1A. Item 2. Item 6. You should also consider carefully the risk factors discussed in September 30, December 31, ASSETS Cash and due from banks Federal funds sold Total cash and cash equivalents Securities available for sale Loans, net Mortgage loans held for sale, net Accrued interest receivable Premises and equipment, net Restricted equity securities, at cost Cash surrender value of life insurance contracts Deferred tax assets, net Goodwill Core deposit intangibles Other assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Deposits Demand Interest-bearing demand Savings and money market deposit accounts Time Total deposits Accrued interest payable Federal funds purchased Federal Home Loan Bank advances Dividends payable Other liabilities TOTAL LIABILITIES STOCKHOLDERS’ EQUITY Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued to date Common stock, $1 par value; 30,000,000 shares authorized; 9,022,098 and 7,778,309 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive loss TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY INCOME - UNAUDITED Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 INTEREST INCOME Interest and fees on loans Interest and fees on loans held for sale Interest on investment securities, taxable Interest on investment securities, nontaxable Federal funds sold and other TOTAL INTEREST INCOME INTEREST EXPENSE Deposits Demand Savings and money market deposit accounts Time Federal Home Loan Bank advances and other TOTAL INTEREST EXPENSE NET INTEREST INCOME PROVISION FOR LOAN LOSSES NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NONINTEREST INCOME Service charges on deposit accounts Gains on mortgage loans sold, net Gain on securities transactions, net Gain on sale of other real estate Loss on disposal of premises and equipment Other TOTAL NONINTEREST INCOME NONINTEREST EXPENSE Salaries and employee benefits Occupancy Information technology Advertising and public relations Audit, legal and consulting Federal deposit insurance Provision for losses on other real estate Other operating TOTAL NONINTEREST EXPENSE INCOME BEFORE PROVISION FOR INCOME TAXES INCOME TAX EXPENSE CONSOLIDATED NET INCOME NONCONTROLLING INTEREST IN NET LOSS OF SUBSIDIARY NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS Basic net income attributable to common shareholders, per share Diluted net income attributable to common shareholders, per share - UNAUDITED Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Consolidated net income Other comprehensive income Net unrealized gains (losses) on available-for-sale securities, net of tax of $257 and $(122) for the three months ended September 30, 2017 and 2016, respectively, and $1,273 and $591 for the nine months ended September 30, 2017 and 2016, respectively Reclassification adjustment for gains included in net income, net of tax of $(113) for the three months ended September 30, 2016, respectively, and $(23) and $(136) for the nine months ended September 30, 2017 and 2016, respectively TOTAL OTHER COMPREHENSIVE INCOME (LOSS) TOTAL COMPREHENSIVE INCOME ACCUMULATED ADDITIONAL OTHER COMMON STOCK PAID-IN RETAINED COMPREHENSIVE NONCONTROLLING SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) INTEREST TOTAL BALANCE - JANUARY 1, 2016 Stock based compensation expense Exercise of stock options Restricted stock awards Restricted stock forfeiture Noncontrolling interest contributions Net income (loss) Other comprehensive income BALANCE - SEPTEMBER 30, 2016 BALANCE - JANUARY 1, 2017 Stock based compensation expense Exercise of stock options Restricted stock awards Restricted stock forfeiture Common stock issuance Stock issuance costs Noncontrolling interest contributions Cash dividend declared to common shareholders ($0.18 per share) Net income (loss) Other comprehensive income BALANCE - SEPTEMBER 30, 2017 2017 2016 OPERATING ACTIVITIES Consolidated net income Adjustments to reconcile consolidated net income to net cash provided by operating activities Provision for loan losses Deferred income tax benefit Loss on disposal of premises and equipment Depreciation and amortization of premises and equipment Net amortization of securities Net realized gains on sales of securities Gains on mortgage loans sold, net Stock-based compensation expense Realization of deferred gain on other real estate Provision for losses on other real estate Increase in cash surrender value of life insurance contracts Mortgage loans originated for resale Proceeds from sale of mortgage loans Amortization of core deposit intangible Change in Accrued interest receivable Other assets Accrued interest payable Other liabilities TOTAL ADJUSTMENTS NET CASH PROVIDED BY OPERATING ACTIVITIES INVESTING ACTIVITIES Activities in available for sale securities Purchases Sales Maturities, prepayments and calls Purchases of restricted equity securities Loan originations and payments, net Purchase of buildings, leasehold improvements, and equipment Proceeds from sale of other real estate Improvement of other real estate Purchase of life insurance contracts NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Net change in deposits Net change in federal funds purchased Net change in Advances from Federal Home Loan Bank Issuance of common stock Noncontrolling interest contributions received Cash dividends paid on common stock NET CASH PROVIDED BY FINANCING ACTIVITIES NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS - END OF PERIOD 2017 2016 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for Interest Taxes Non-cash investing and financing activities Unrealized gain on securities available-for-sale Unrealized loss on derivatives Change in due to/from noncontrolling interest NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES management, are necessary for a fair presentation of the financial position and results of operations for the periods covered by the report have been included. The statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Amounts in the footnotes are shown in thousands, except for numbers of shares, per share amounts and as otherwise noted. September 30, 2017 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value U. S. Treasury and other U. S. government agencies State and municipal Corporate bonds Mortgage backed securities Time deposits Total December 31, 2016 Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value U. S. Treasury and other U. S. government agencies State and municipal Corporate bonds Mortgage backed securities Time deposits Total Amortized Estimated Cost Fair Value Due within one year Due in one to five years Due in five to ten years Due after ten years Mortgage backed securities Total Less than 12 months 12 months or more Total Estimated Unrealized Estimated Unrealized Estimated Unrealized Fair Value Loss Fair Value Loss Fair Value Loss Description of Securities U. S. Treasury and other U. S. government agencies State and municipal Corporate bonds Mortgage backed securities Total temporarily impaired The following table shows available for sale securities with unrealized losses and their estimated fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2021 and December 31, Less than 12 months 12 months or more Total Estimated Unrealized Estimated Unrealized Estimated Unrealized Fair Value Loss Fair Value Loss Fair Value Loss Description of Securities U. S. Treasury and other U. S. government agencies State and municipal Corporate bonds Mortgage backed securities Total temporarily impaired 2020, respectively: September 30, December 31, 2016 Commerical, Industrial and Agricultural Real Estate 1-4 Family Residential 1-4 Family HELOC Multi-family and Commercial Construction, Land Development and Farmland Consumer Other Less Deferred loan fees Allowance for possible loan losses Loans, net Commercial Industrial and Agricultural Multi-family and Commercial Construction Land Development and Farmland 1-4 Family Residential Real Estate Beginning balance Charge-offs Recoveries Provision Ending balance 1-4 Family HELOC Consumer Other Total Beginning balance Charge-offs Recoveries Provision Ending balance Commercial Industrial and Agricultural Multi-family and Commercial Construction Land Development and Farmland 1-4 Family Residential Real Estate Beginning balance Charge-offs Recoveries Provision Ending balance 1-4 Family HELOC Consumer Other Total Beginning balance Charge-offs Recoveries Provision Ending balance Commercial Industrial and Agricultural Multi-family and Commercial Construction Land Development and Farmland 1-4 Family Residential Real Estate Allowance for loan losses Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total Loans Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total 1-4 Family HELOC Consumer Other Total Allowance for loan losses Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total Loans Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total Commercial Industrial and Agricultural Multi-family and Commercial Construction Land Development and Farmland 1-4 Family Residential Real Estate Allowance for loan losses Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total Loans Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total 1-4 Family HELOC Consumer Other Total Allowance for loan losses Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total Loans Individually evaluated for impairment Acquired with credit impairment Collectively evaluated for impairment Total September 30, December 31, Commercial, Industrial and Agricultural Multi-family and Commercial Real Estate Construction, Land Development and Farmland 1-4 Family Residential Real Estate 1-4 Family HELOC Total Unpaid Recorded Investment with no Allowance Recorded Recorded Investment with Allowance Recorded Total Recorded Related Commercial, Industrial and Agricultural Multi-family and Commercial Real Estate Construction, Land Development and Farmland 1-4 Family Residential Real Estate 1-4 Family HELOC Total Unpaid Recorded Investment with no Allowance Recorded Recorded Investment with Allowance Recorded Total Recorded Related Commercial, Industrial and Agricultural Multi-family and Commercial Real Estate Construction, Land Development and Farmland 1-4 Family Residential Real Estate 1-4 Family HELOC Total The 2017 2016 Commercial, Industrial and Agricultural Multi-family and Commercial Real Estate Construction, Land Development and Farmland 1-4 Family Residential Real Estate 1-4 Family HELOC Total Grade 6 - Special Mention Grade 7 - Substandard Pass Special Mention Substandard Total Commercial, Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial Real Estate Construction, Land Development and Farmland Consumer Other Total Pass Special Mention Substandard Total Commercial, Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial Real Estate Construction, Land Development and Farmland Consumer Other Total 30-59 Days 60-89 Days 90+ Days Past Due Total Current Total Loans Commercial, Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial Real Estate Construction, Land Development and Farmland Consumer Other Total 30-59 Days 60-89 Days 90+ Days Past Due Total Current Total Loans Commercial, Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial Real Estate Construction, Land Development and Farmland Consumer Other Total September 30, December 31, Commercial, Industrial and Agricultural Multi-family and Commercial Real Estate Construction, Land Development and Farmland 1-4 Family Residential Real Estate 1-4 Family HELOC Total outstanding balance Less remaining purchase discount Allowance for loan losses Carrying amount, net of allowance Balance at January 1, 2017 Accretion income Balance at March 31, 2017 Accretion income Balance at June 30, 2017 Accretion income Balance at September 30, 2017 of stock ("EPS"): Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Assets and liabilities measured at fair value on a nonrecurring basis include the following: The following table sets forth the Company’s major categories of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of September 30, Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) September 30, 2017 Assets U. S. Treasury and other U. S. government agencies State and municipal Corporate bonds Mortgage backed securities Time deposits Interest rate swap Liabilities Interest rate swap December 31, 2016 Assets U. S. Treasury and other U. S. government agencies State and municipal Corporate bonds Mortgage backed securities Time deposits Interest rate swap Liabilities Interest rate swap Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) September 30, 2017 Assets Impaired loans December 31, 2016 Assets Impaired loans Mortgage loans held for sale 2020: Valuation Significant Range Impaired loans Estimated costs to sell Quoted Prices in Significant Active Markets Other Significant Estimated for Identical Observable Unobservable Carrying Fair Assets Inputs Inputs Amount Value (Level 1) (Level 2) (Level 3) Financial assets Cash and due from banks Federal funds sold Loans, net Mortgage loans held for sale Accrued interest receivable Restricted equity securities Financial liabilities Deposits Accrued interest payable Federal Home Loan Bank advances NOTE Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Term Value Outstanding at January 1, 2017 Granted Exercised Forfeited or expired Outstanding at September 30, 2017 Exercisable at September 30, 2017 Weighted Average Shares Grant-Date Fair Value Non-vested options at January 1, 2017 Granted Vested Forfeited Non-vested options at September 30, 2017 Minimum Required To Be Well Actual Capital Including Capitalized Under Regulatory Capital Conservation Prompt Corrective Capital Buffer Action Provisions Amount Ratio Amount Ratio Amount Ratio September 30, 2017 Company Tier I leverage Common equity tier 1 Tier I risk-based capital Total risk-based capital Bank Tier I leverage Common equity tier 1 Tier I risk-based capital Total risk-based capital December 31, 2016 Company Tier I leverage Common equity tier 1 Tier I risk-based capital Total risk-based capital Bank Tier I leverage Common equity tier 1 Tier I risk-based capital Total risk-based capital Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Basic EPS Computation Net income attributable to common shareholders Weighted average common shares outstanding Basic earnings per common share Diluted EPS Computation Net income attributable to common shareholders Weighted average common shares outstanding Dilutive effect of stock options and restricted shares Adjusted weighted average common shares outstanding Diluted earnings per common share Three Months Ended September 30, 2017 Retail Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income Provision for loan losses Noninterest income Noninterest expense Income tax expense (benefit) Net income (loss) Noncontrolling interest in net loss of subsidiary Net income attributable to common shareholders Three Months Ended September 30, 2016 Retail Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income Provision for loan losses Noninterest income Noninterest expense Income tax expense (benefit) Net income (loss) Noncontrolling interest in net loss of subsidiary Net income attributable to common shareholders Nine Months Ended September 30, 2017 Retail Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income Provision for loan losses Noninterest income Noninterest expense Income tax expense Net income (loss) Noncontrolling interest in net loss of subsidiary Net income attributable to common shareholders Nine Months Ended September 30, 2016 Retail Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income Provision for loan losses Noninterest income Noninterest expense Income tax expense Net income Noncontrolling interest in net income of subsidiary Net income attributable to common shareholders Net income attributable to common shareholders amounted to Three Months Ended September 30, 2017 Three Months Ended September 30, 2016 Change Average Balances Rates / Yields (%) Interest Income / Expense Average Balances Rates / Yields (%) Interest Income / Expense Due to Volume Due to Rate Total Interest earning assets Loans Loan fees Loans with fees Mortgage loans held for sale Deposits with banks Investment securities - taxable Investment securities - tax-exempt Fed funds sold and other Total earning assets Nonearning assets Total Assets Interest bearing liabilities Interest bearing demand Savings and money market Time deposits - retail Time deposits - wholesale Total interest bearing deposits Federal Home Loan Bank advances Total interest-bearing liabilities Net interest rate spread (%) / Net Interest Income ($) Non-interest bearing deposits Other non-interest bearing liabilities Stockholder's equity Total liabilities and stockholders' equity Cost of funds Net interest margin Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Change Average Balances Rates / Yields (%) Interest Income / Expense Average Balances Rates / Yields (%) Interest Income / Expense Due to Volume Due to Rate Total Interest earning assets Loans Loan fees Loans with fees Mortgage loans held for sale Deposits with banks Investment securities - taxable Investment securities - tax-exempt Fed funds sold and other Total earning assets Nonearning assets Total Assets Interest bearing liabilities Interest bearing demand Savings and money market Time deposits - retail Time deposits - wholesale Total interest bearing deposits Federal Home Loan Bank advances and other Total interest-bearing liabilities Net interest rate spread (%) / Net Interest Income ($) Non-interest bearing deposits Other non-interest bearing liabilities Stockholder's equity Total liabilities and stockholders' equity Cost of funds Net interest margin Three Months Ended Dollar Percent September 30, 2017 2016 Non-Interest Income Service charges and fees Securities gains (losses), net Gains on mortgage loans sold, net Gain (loss) on sale of other real estate Loss on disposal of premises and equipment Other noninterest income: Bank-owned life insurance Brokerage revenue Miscellaneous noninterest income (expense), net Total other non-interest income Total non-interest income Nine Months Ended Dollar Percent September 30, 2017 2016 Non-Interest Income Service charges and fees Securities gains (losses), net Gains on mortgage loans sold, net Gain (loss) on sale of other real estate Loss on disposal of premises and equipment Other noninterest income: Bank-owned life insurance Brokerage revenue Rental income Miscellaneous noninterest income (expense), net Total other non-interest income Total non-interest income from bank-owned life insurance. pricing structure to help attract and retain customers. The increase in service charges and fees was driven primarily by the incremental increase in transaction volume related to our acquisitions, as well as growth in the volume of our legacy deposit accounts. Three Months Ended Dollar Percent September 30, 2017 2016 Non-Interest Expense Salaries and employee benefits Occupancy Information technology Advertising and public relations Audit, legal and consulting Federal deposit insurance Provision for losses on other real estate Other operating Total non-interest expense Nine Months Ended Dollar Percent September 30, 2017 2016 Non-Interest Expense Salaries and employee benefits Occupancy Information technology Advertising and public relations Audit, legal and consulting Federal deposit insurance Provision for losses on other real estate Other operating Total non-interest expense 3.9%, or 6.9% when PPP loans are excluded. September 30, December 31, 2017 2016 Amount Percent Amount Percent Commerical, Industrial and Agricultural Real estate: 1-4 Family Residential 1-4 Family HELOC Multifamily and Commercial Construction, Land Development and Farmland Consumer Other Less: Deferred loan fees Allowance for possible loan losses Loans, net The table below provides a summary of PCI loans as of September 30, September 30, 2017 Commerical, Industrial and Agricultural Real estate: 1-4 Family Residential 1-4 Family HELOC Multifamily and Commercial Construction, Land Development and Farmland Consumer Other Total gross PCI loans Less: Remaining purchase discount Allowance for possible loan losses Loans, net 2021 and December 31, 2020: 2020 which was largely driven by PPP loan forgiveness. market demand. The repayment of loans is a source of additional One Year or Less One to Five Years Over Five Years Total Gross loans Fixed interest rate Variable interest rate Total September 30, September 30, 2017 2016 Beginning Balance, January 1 Loans charged off: Commerical, Industrial and Agricultural Real estate: 1-4 Family Residential 1-4 Family HELOC Multifamily and Commercial Construction, Land Development and Farmland Consumer Other Total loans charged off Recoveries on loans previously charged off: Commerical, Industrial and Agricultural Real estate: 1-4 Family Residential 1-4 Family HELOC Multifamily and Commercial Construction, Land Development and Farmland Consumer Other Total loan recoveries Net recoveries (charge-offs) Provision for loan losses Total allowance at end of period Gross loans at end of period (1) Average gross loans (1) Allowance to total loans Net charge offs to average loans (annualized) September 30, December 31, 2017 2016 % of % of Loan % of % of Loan Allowance Type to Allowance Type to Amount To Total Total Loans Amount To Total Total Loans Commerical, Industrial and Agricultural Real estate: 1-4 Family Residential 1-4 Family HELOC Multifamily and Commercial Construction, Land Development and Farmland Consumer Other assured, which generally includes a minimum performance of six months. September 30, December 31, 2017 2016 Non-accrual loans Past due loans 90 days or more and still accruing interest Restructured loans Total non-performing loans Foreclosed real estate ("OREO") Total non-performing assets Total non-performing loans as a percentage of total loans Total non-performing assets as a percentage of total assets Allowance for loan losses as a percentage of non-performing loans Investment Securities and Other Earning Assets maturities. September 30, 2017 December 31, 2016 Amortized Cost Fair Value % of Total Amortized Cost Fair Value % of Total U.S.Treasury and other U.S. government agencies State and municipal Corporate bonds Mortgage backed securities Time deposits Total Amortized Cost Estimated Fair Value Due within one year Due in one to five years Due in five to ten years Due after ten years Mortgage backed securities Total Premises and Equipment real estate owned during 2021. this management's discussion and analysis under the subheading "Results of Operations" discussion. September 30, 2017 Twelve months or less Over twelve months through three years Over three years Total 2021: Earnings Simulation Instantaneous, Parallel Change in Prevailing Interest Rates Equal to Estimated Change in Net Interest Income and Policy of Maximum Percentage Decline in Net Interest Income Next 12 Next 24 Months Months Estimate Policy Estimate Policy -200 bp -100 bp +100 bp +200 bp +300 bp +400 bp Maximum Percentage Decline in Economic Value of Non-parallel shifts Scheduled Maturities Amount Weighted Average Rates 2017 2018 2019 2020 2021 Thereafter net income. issuance. The Securities and Exchange Commission declared the Registration Statement on Form S-3 effective on September 3, 2020, and the Registration Statement on Form S-3 will expire on September 3, 2023. Prompt corrective action regulations provide five bank capital classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, Actual Regulatory Capital Minimum Required Capital Including Capital Conservation Buffer To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio September 30, 2017 Company Tier I leverage Common equity Tier 1 Tier I risk-based capital Total risk-based capital Bank Tier I leverage Common equity Tier 1 Tier I risk-based capital Total risk-based capital December 31, 2016 Company Tier I leverage Common equity Tier 1 Tier I risk-based capital Total risk-based capital Bank Tier I leverage Common equity Tier 1 Tier I risk-based capital Total risk-based capital September 30, 2017 Unused lines of credit Standby letters of credit Total commitments Item 2.Unregistered Sales of Equity Securities and Use of Proceeds. 2021. Inline XBRL Instance Document. November☒, 2017COMMERCE Union Bancshares, Inc.Tennessee37-164131637-1641316 (State or other jurisdiction of
incorporation or organization)
Identification No.)1736 Carothers Parkway, , Suite 100,Title of each class Trading Symbol(s) Name of each exchange on which registered (615) 221-2020(Registrant’s telephone number, including area code)NASDAQ Registrantregistrant (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 ☐Registrantregistrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 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 ☐Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-212b-2 of the Exchange Act:Large Accelerated Filer ☐ Accelerated Filer ☒☐ Non-Accelerated Filer ☐Smaller Reporting Company ☐☒ Emerging growth company ☒☐ sectionSection 13(a) of the Exchange Act. [ ]☐Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No ☒registrant’sregistrant’s common stock, par value $1.00 per share, as of November 8, 20174, 2021 was 9,022,226.DOCUMENTS INCORPORATED BY REFERENCENone.
16,576,680 excluding 108,130 unexchanged shares in connection with acquisitions.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 3 44416262Factors 6264Item 3.64Item 4.64Item 5.64Thisof Commerce Union Bancshares, Inc. (“we,” “our,” or “us” on a consolidated basis) contains(this “Quarterly Report”) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934. Such1934, as amended (the “Exchange Act”). The words “believe,” “anticipate,” “expect,” “may,” “will,” “assume,” “should,” “predict,” “could,” “would,” “intend,” “targets,” “estimates,” “projects,” “plans,” and “potential,” and other similar words and expressions of the future, are intended to identify such forward-looking statements, include projections, predictions, expectations orbut other statements as to beliefs or future events or results or refer to other matters that are not based on historical facts. Forward-lookinginformation may also be considered forward-looking. All forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that couldmay cause the actual results, performance, or achievements of Reliant Bancorp, Inc. (“Reliant Bancorp”) to differ materially from those contemplatedany results, performance, or achievements expressed or implied by thesuch forward-looking statements. The forward-looking statements contained in this quarterly report are based on various factors and were derived using numerous assumptions. In some cases, you can identify these forward-looking statements by words like “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of those wordsSuch risks, uncertainties, and other comparable words. You should be awarefactors include, among others: those statements reflect only our predictions. If known or unknown risks or uncertainties should materialize, or if any one or more of our material underlying assumptions should prove inaccurate, actual results could differ materially from past resultscustomers, (ii) actions taken by governments, businesses and individuals in response to the coronavirus (COVID-19) pandemic, (iii) the pace of recovery when the coronavirus (COVID-19) pandemic subsides, and (iv) the speed with which coronavirus (COVID-19) vaccines can be widely distributed, those anticipated, estimated, or projected. You should bear this in mind when reading this quarterly reportvaccines’ efficacy against the virus, including new variant strains, and not place undue reliance on these forward-looking statements. Commerce Union’s actual results may differ materially frompublic acceptance of the results anticipated in forward-looking statements due to a variety of factors. Factors that might cause such differences include, but are not limited to:vaccines;The(2) the possibility that our asset quality could declines or that we experience greater loan losses than anticipated;Increased(3) increased levels of other real estate, primarily as a result of foreclosures;The(4) the impact of liquidity needs on our results of operations and financial condition;Competition(5) competition from financial institutions and other financial service providers;Economic(6) the effect of interest rate increases on the cost of deposits;operate;operate.The negative impact on profitability imposed on us by a compressed net interest margin on loans and other extensions of credit, which affects our ability to lend profitably and to price loans effectively inface of competitive pressures;A merger or acquisition, like our merger with Community First, Inc.The effect of legislative or regulatory developments, including changes in laws concerning banking, securities, taxes, insurance, and other aspectspotential effects of the coronavirus (COVID-19) pandemic on our business, financial services industry;Our abilitycondition, liquidity, or results of operations may constitute forward-looking statements and are subject to attract, develop,the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and retain qualified banking professionals;A significant numberfuture developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, failing to perform under their loansother third parties, and other terms of credit agreements;The growing concern on the impact of a future rise in interest rates, affecting both our pricing of credit and our investments;Failure to attract or retain stable deposits at reasonable cost that is competitive with the larger international, national, and regional financial service providers with which we compete;International, national, and local disasters such as terrorist attacks, natural disasters, or the effects of pandemic flu, or other pandemic illness;Incorrect responses to, or assumptions based on, experiences and circumstances, such as responses to known or perceived changes in the economy;Volatility and disruption in financial, credit, and securities markets;Difficulties encountered in our merger with Community First, Inc. with customers, employees or other business relationships;Risk that integrating Community First, Inc. with and into Commerce Union could be delayed, or substantially more expensive than anticipated;The dilution caused by our issuance of shares to investors in the private placement discussed herein;Deterioration in the financial markets that may result in other-than-temporary impairment charges relating to securities owned by the Reliant Bank;The effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board, and other regulatory agencies; andThe effect of fiscal and governmental policies of the United States federal government.Item 1A of Part II of this Form 10-Q referencing Item 1A of Part I, Item 1A. "Risk Factors" of our most recent Annual Report on Form 10-K, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results, and financial condition. The risks discussedAdditional factors which could affect the forward-looking statements can be found in thisReliant Bancorp’s quarterly report are factors that, individually or inreports on Form 10-Q, and current reports on Form 8-K filed with the aggregate, management believes could cause our actual results to differ materially from expectedSecurities and historical results.Exchange Commission (the “SEC”) and available on the SEC’s website at http://www.sec.gov. You should understand that it is not possible to predict or identify all such factors.factors, many of which are beyond our ability to control or predict. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. Factors not here or thereotherwise listed may develop or, if currently extant, we may not have yet recognized them.The forward-looking3.COMMERCE UNION BANCSHARES,SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016
2017
2016 $ 18,277 $ 23,413 669 830 18,946 24,243 192,277 146,813 739,738 657,701 19,475 11,831 4,999 3,786 9,558 9,093 7,163 7,133 29,422 24,827 2,776 3,437 11,404 11,404 1,336 1,582 4,086 10,134 $ 1,041,180 $ 911,984 $ 132,058 $ 134,792 79,439 85,478 197,521 183,788 431,430 359,776 840,448 763,834 220 107 - 3,671 56,720 32,287 541 1,711 5,307 3,455 903,236 805,065 - - 9,022 7,778 112,202 89,045 16,821 12,212 (101 ) (2,116 ) 137,944 106,919 $ 1,041,180 $ 911,984 September 30, 2021 (unaudited) December 31, 2020 ASSETS Cash and due from banks $ 13,270 $ 13,717 Interest-bearing deposits in financial institutions 66,155 79,756 Federal funds sold 1,002 1,572 Total cash and cash equivalents 80,427 95,045 Securities available for sale 254,416 256,653 Loans 2,389,833 2,300,783 Less: allowance for loan losses (20,897) (20,636) Loans, net 2,368,936 2,280,147 Mortgage loans held for sale, net 62,543 147,524 Accrued interest receivable 14,374 14,889 Premises and equipment, net 27,519 31,462 Operating leases right of use assets 12,427 13,103 Restricted equity securities, at cost 15,770 16,551 Other real estate, net 3,088 1,246 Cash surrender value of life insurance contracts 78,460 77,988 Deferred tax assets, net 5,788 7,121 Goodwill 54,396 54,396 Core deposit intangibles 9,978 11,347 Other assets 25,437 19,063 TOTAL ASSETS $ 3,013,559 $ 3,026,535 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits Noninterest-bearing demand $ 626,598 $ 575,289 Interest-bearing demand 410,923 350,392 Savings and money market deposit accounts 989,677 857,210 Time 520,507 796,344 Total deposits 2,547,705 2,579,235 Accrued interest payable 2,302 2,571 Subordinated debentures 70,821 70,446 Federal Home Loan Bank advances — 10,000 Operating leases liabilities 13,605 14,231 Other liabilities 22,811 28,079 TOTAL LIABILITIES 2,657,244 2,704,562 Preferred stock, $1 par value per share; 10,000,000 shares authorized, zero shares issued to date — — Common stock, $1 par value per share; 30,000,000 shares authorized; 16,682,928 and 16,654,409 shares issued and outstanding at September 30, 2021, and December 31, 2020, respectively 16,683 16,654 Additional paid-in capital 234,696 233,331 Retained earnings 98,182 65,757 Accumulated other comprehensive income 6,754 6,231 TOTAL SHAREHOLDERS’ EQUITY 356,315 321,973 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,013,559 $ 3,026,535 statementsstatements.4COMMERCE UNION BANCSHARES,OPERATIONSFOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016(Unaudited) $ 9,078 $ 7,729 $ 25,193 $ 24,011 211 109 420 663 179 137 514 589 1,022 578 2,796 1,506 137 103 381 298 10,627 8,656 29,304 27,067 42 46 131 137 207 151 557 480 1,117 430 2,663 1,260 165 194 383 581 1,531 821 3,734 2,458 9,096 7,835 25,570 24,609 540 145 1,195 760 8,556 7,690 24,375 23,849 309 320 936 926 1,571 551 2,751 5,675 - 296 59 356 1 145 26 301 (50 ) - (50 ) - 256 263 735 673 2,087 1,575 4,457 7,931 4,880 4,017 13,634 14,294 850 767 2,482 2,406 732 586 1,924 1,849 81 117 204 542 1,046 328 1,647 993 100 109 320 349 - 17 - 70 808 942 2,423 3,044 8,497 6,883 22,634 23,547 2,146 2,382 6,198 8,233 306 619 1,005 1,775 1,840 1,763 5,193 6,458 6 605 898 507 $ 1,846 $ 2,368 $ 6,091 $ 6,965 $ 0.23 $ 0.31 $ 0.77 $ 0.92 $ 0.22 $ 0.30 $ 0.76 $ 0.91 Three Months Ended
September 30,Nine Months Ended
September 30,2021 2020 2021 2020 INTEREST INCOME Interest and fees on loans $ 30,817 $ 32,895 $ 92,989 $ 86,987 Interest and fees on loans held for sale 1,184 1,037 4,322 2,412 Interest on investment securities, taxable 786 399 2,059 978 Interest on investment securities, nontaxable 928 1,186 3,369 3,874 Restricted equity securities and other 215 251 668 738 TOTAL INTEREST INCOME 33,930 35,768 103,407 94,989 INTEREST EXPENSE Deposits Demand 153 236 641 554 Savings and money market deposit accounts 441 1,162 1,927 3,668 Time 3,348 2,735 10,314 9,577 Federal Home Loan Bank advances and other borrowings 9 104 26 613 Subordinated debentures 980 992 2,913 2,967 TOTAL INTEREST EXPENSE 4,931 5,229 15,821 17,379 NET INTEREST INCOME 28,999 30,539 87,586 77,610 PROVISION FOR LOAN LOSSES — 1,500 — 7,400 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 28,999 29,039 87,586 70,210 NONINTEREST INCOME Service charges on deposit accounts 1,678 1,583 4,895 4,172 Gains on mortgage loans sold, net 4,218 3,784 12,124 7,605 Gain on securities transactions, net 2,419 — 5,514 327 Income from bank owned life insurance 2,181 386 3,172 1,073 Other noninterest income 373 249 811 529 TOTAL NONINTEREST INCOME 10,869 6,002 26,516 13,706 NONINTEREST EXPENSE Salaries and employee benefits 12,426 12,184 38,571 33,885 Occupancy 2,038 2,054 6,045 5,566 Data processing and software 2,265 2,240 6,756 6,085 Professional fees 526 775 2,127 1,933 Regulatory fees 328 365 1,032 1,356 Merger expenses 1,453 77 1,453 6,895 Other operating expense 3,345 2,639 8,545 6,476 TOTAL NONINTEREST EXPENSE 22,381 20,334 64,529 62,196 INCOME BEFORE PROVISION FOR INCOME TAXES 17,487 14,707 49,573 21,720 INCOME TAX EXPENSE 3,551 2,800 9,733 3,524 CONSOLIDATED NET INCOME 13,936 11,907 39,840 18,196 NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY (647) (374) (1,357) 990 NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 13,289 $ 11,533 $ 38,483 $ 19,186 Basic net income attributable to common shareholders, per share $ 0.80 $ 0.70 $ 2.31 $ 1.27 Diluted net income attributable to common shareholders, per share $ 0.79 $ 0.69 $ 2.29 $ 1.27 statementsstatements.5COMMERCE UNION BANCSHARES,FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income $ 13,936 $ 11,907 $ 39,840 $ 18,196 Other comprehensive income: Unrealized (losses) gains on securities available for sale: Unrealized holdings (losses) gains arising during the period (1,864) 1,365 (967) 3,306 Reclassification adjustment for gains included in net income (2,419) — (5,514) (327) Tax effect 1,119 (357) 1,694 (779) Net of tax (3,164) 1,008 (4,787) 2,200 Unrealized (losses) gains on cash flow hedges Unrealized holdings (losses) gains arising during the period (113) 508 2,040 (6,448) Reclassification adjustment for losses included in net income 2,290 — 5,149 — Tax effect (568) (133) (1,879) 1,686 Net of tax 1,609 375 5,310 (4,762) Other comprehensive (loss) income (1,555) 1,383 523 (2,562) Comprehensive income $ 12,381 $ 13,290 $ 40,363 $ 15,634 Comprehensive (income) loss attributable to noncontrolling interest (647) (374) (1,357) 990 Comprehensive income attributable to the controlling interest $ 11,734 $ 12,916 $ 39,006 $ 16,624 COMMON STOCK ADDITIONAL
PAID-IN
CAPITALRETAINED
EARNINGSACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)NONCONTROLLING
INTERESTTOTAL SHARES AMOUNT BALANCE - JANUARY 1, 2021 16,654,409 $ 16,654 $ 233,331 $ 65,757 $ 6,231 $ — $ 321,973 Stock based compensation expense — — 339 — — — 339 Exercise of stock options 600 1 7 — — — 8 Restricted stock awards, net of taxes withheld and stock and dividend forfeitures (594) (1) (10) — — — (11) Noncontrolling interest contributions — — — — — (570) (570) Cash dividend declared to common shareholders ($0.12 per share) — — — (2,015) — — (2,015) Net income — — — 12,149 — 570 12,719 Other comprehensive loss — — — (744) — (744) BALANCE - MARCH 31, 2021 16,654,415 $ 16,654 $ 233,667 $ 75,891 $ 5,487 $ — $ 331,699 Stock based compensation expense — — 468 — — — 468 Employee Stock Purchase Plan stock issuance 18,986 20 278 — — — 298 Restricted stock awards, net of taxes withheld and stock and dividend forfeitures (890) (1) (23) — — — (24) Noncontrolling interest contributions — — — — — (140) (140) Cash dividend declared to common shareholders ($0.12 per share) — — — (2,019) — — (2,019) Net income — — — 13,045 — 140 13,185 Other comprehensive income — — — — 2,822 — 2,822 BALANCE - JUNE 30, 2021 16,672,511 $ 16,673 $ 234,390 $ 86,917 $ 8,309 $ — $ 346,289 Stock based compensation expense — — 458 — — — 458 Exercise of stock options 1,102 1 14 — — — 15 Employee Stock Purchase Plan stock issuance 2,795 3 63 — — — 66 Restricted stock units vesting, net of taxes withheld and stock and dividend forfeitures 6,520 6 (229) — — — (223) Noncontrolling interest contributions — — — — — (647) (647) Cash dividend declared to common shareholders ($0.12 per share) — — — (2,024) — — (2,024) Net income — — — 13,289 — 647 13,936 Other comprehensive income — — — — (1,555) — (1,555) BALANCE - SEPTEMBER 30, 2021 16,682,928 $ 16,683 $ 234,696 $ 98,182 $ 6,754 $ — $ 356,315 COMMON STOCK ADDITIONAL
PAID-IN
CAPITALRETAINED
EARNINGSACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)NONCONTROLLING
INTERESTTOTAL SHARES AMOUNT BALANCE - JANUARY 1, 2020 11,206,254 $ 11,206 $ 167,006 $ 40,472 $ 5,069 $ — $ 223,753 Stock based compensation expense — — 349 — — — 349 Exercise of stock options 868 1 7 — — — 8 Restricted stock awards, net of taxes withheld and stock and dividend forfeitures (3,837) (4) (69) — — — (73) Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc. 811,210 811 17,230 — — — 18,041 Noncontrolling interest contributions — — — — — 976 976 Cash dividend declared to common shareholders ($0.10 per share) — — — (1,207) — — (1,207) Cumulative effect of lease standard adoption — — — 100 — — 100 Net loss — — — (215) — (976) (1,191) Other comprehensive loss — — — — (6,084) — (6,084) BALANCE - MARCH 31, 2020 12,014,495 $ 12,014 $ 184,523 $ 39,150 $ (1,015) $ — $ 234,672 Stock based compensation expense — — 485 — — — 485 Exercise of stock options 1,021 1 14 — — — 15 Employee Stock Purchase Plan stock issuance 8,344 8 108 — — — 116 Restricted stock awards, net of taxes withheld and stock and dividend forfeitures 1,325 2 (2) — — — — Conversion shares issued to shareholders of First Advantage Bancorp 4,606,419 4,607 47,308 — — — 51,915 Noncontrolling interest contributions — — — — — 388 388 Cash dividend declared to common shareholders ($0.10 per share) — — — (1,667) — — (1,667) Net income (loss) — — — 7,868 — (388) 7,480 Other comprehensive income — — — — 2,139 — 2,139 BALANCE - JUNE 30, 2020 16,631,604 $ 16,632 $ 232,436 $ 45,351 $ 1,124 $ — $ 295,543 Stock based compensation expense — — 349 — — — 349 Exercise of stock options 4,655 5 61 — — — 66 Employee Stock Purchase Plan stock issuance — — — — — — — Restricted stock units vesting, net of taxes withheld and stock and dividend forfeitures (1,687) (2) (108) — — — (110) Noncontrolling interest contributions — — — — — (374) (374) Cash dividend declared to common shareholders ($0.10 per share) — — — (1,678) — — (1,678) Net income — — — 11,533 — 374 11,907 Other comprehensive income — — — — 1,383 — 1,383 BALANCE - SEPTEMBER 30, 2020 16,634,572 $ 16,635 $ 232,738 $ 55,206 $ 2,507 $ — $ 307,086 Nine Months Ended
September 30,OPERATING ACTIVITIES 2021 2020 Consolidated net income $ 39,840 $ 18,196 Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities Provision for loan losses — 7,400 Deferred income taxes 1,148 2,003 Loss (gain) on disposal of premises and equipment 74 (1) Depreciation of premises and equipment 2,127 2,084 Net amortization of securities 1,202 1,980 Net realized gains on sales of securities (5,514) (327) Gains on mortgage loans sold, net (12,124) (7,605) Stock-based compensation expense 1,265 1,183 Gain on other real estate (33) (24) Provision for losses on other real estate 98 — Earnings on bank-owned life insurance (3,172) (1,073) Mortgage loans originated for resale (699,551) (327,521) Proceeds from sale of mortgage loans 796,656 278,893 Right of use asset amortization 1,951 1,224 Other accretion, net of other amortization (2,827) (8,256) Change in Accrued interest receivable 515 (4,094) Other assets (3,729) (3,794) Accrued interest payable (269) (526) Other liabilities 640 4,367 TOTAL ADJUSTMENTS 78,457 (54,087) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 118,297 (35,891) INVESTING ACTIVITIES Cash (used in) received from acquisitions, net — (8,500) Activities in available for sale securities Purchases (68,164) (31,179) Sales 58,855 103,901 Maturities, prepayments and calls 8,730 10,370 Redemptions (purchases) of restricted equity securities 781 (1,867) Net change in loans (84,218) (146,777) Purchase of premises and equipment (297) (2,709) Proceeds from sale of premises and equipment 51 257 Proceeds from sale of other real estate 126 2,273 NET CASH USED IN INVESTING ACTIVITIES (84,136) (74,231) FINANCING ACTIVITIES Net change in deposits (31,493) 163,839 Proceeds from Federal Home Loan Bank advances 423,000 444,000 Payments on Federal Home Loan Bank advances (433,000) (463,156) Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares 129 22 Noncontrolling interest contributions (1,357) 990 Cash dividends paid on common stock (6,058) (4,550) NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (48,779) 146,145 NET CHANGE IN CASH AND CASH EQUIVALENTS (14,618) 36,023 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 95,045 51,649 CASH AND CASH EQUIVALENTS - END OF PERIOD $ 80,427 $ 87,672 Nine Months Ended September 30, 2021 2020 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for Interest $ 15,752 $ 20,508 Income taxes 7,790 4,565 Supplemental disclosures of non-cash transactions Unrealized (loss) gain on securities available-for-sale $ (7,128) $ 4,039 Unrealized gain (loss) on derivatives 7,836 (7,508) Change in due to/from noncontrolling interest (1,357) 990 Bank facilities no longer in use transferred to other real estate from premises and equipment 1,988 — Loans foreclosed and transferred to other real estate 45 197 Right of use assets obtained in exchange for operating lease liabilities 1,302 11,973 BOLI proceeds receivable recognized in income 2,699 — (Unaudited) $ 1,840 $ 1,763 $ 5,193 $ 6,458 412 (197 ) 2,051 952 - (183 ) (36 ) (220 ) 412 (380 ) 2,015 732 $ 2,252 $ 1,383 $ 7,208 $ 7,190 See accompanying notes to consolidated financial statementsCOMMERCE UNION BANCSHARES, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016(Dollar amounts in thousands except per share amounts)(Unaudited) 7,279,620 $ 7,280 $ 84,520 $ 4,987 $ (36 ) $ - $ 96,751 - - 168 - - - 168 461,931 462 4,154 - - - 4,616 23,800 23 (23 ) - - - - (2,000 ) (2 ) 2 - - - - - - - - - 507 507 - - - 6,965 - (507 ) 6,458 - - - - 732 - 732 7,763,351 $ 7,763 $ 88,821 $ 11,952 $ 696 $ - $ 109,232 7,778,309 $ 7,778 $ 89,045 $ 12,212 $ (2,116 ) $ - $ 106,919 - - 412 - - - 412 59,739 60 633 - - - 693 50,050 50 (50 ) - - - - (3,000 ) (3 ) 3 - - - - 1,137,000 1,137 23,877 - - - 25,014 - - (1,718 ) - - - (1,718 ) - - - - - 898 898 - - - (1,482 ) - - (1,482 ) - - - 6,091 - (898 ) 5,193 - - - - 2,015 - 2,015 9,022,098 $ 9,022 $ 112,202 $ 16,821 $ (101 ) $ - $ 137,944 See accompanying notes to consolidated financial statements7COMMERCE UNION BANCSHARES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016(Dollar amounts in thousands except per share amounts)(Unaudited) $ 5,193 $ 6,458 1,195 760 (589 ) (36 ) 50 - 762 728 1,478 1,117 (59 ) (356 ) (2,751 ) (5,675 ) 412 168 (26 ) (301 ) - 70 (595 ) (556 ) (99,485 ) (137,667 ) 94,592 183,786 246 267 (1,213 ) (403 ) 5,701 (736 ) 113 79 1,525 2,610 1,356 43,855 6,549 50,313 (68,010 ) (47,391 ) 18,688 20,036 6,057 8,038 (30 ) (837 ) (83,232 ) (44,458 ) (1,277 ) (496 ) - 1,314 - (16 ) (4,000 ) (4,000 ) (131,804 ) (67,810 ) 76,614 19,848 (3,671 ) - 24,433 8,921 23,989 4,616 1,245 - (2,652 ) (1,489 ) 119,958 31,896 (5,297 ) 14,399 24,243 20,570 $ 18,946 $ 34,969 See accompanying notes to consolidated financial statementsCOMMERCE UNION BANCSHARES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016(Dollar amounts in thousands except per share amounts)(Unaudited) $ 3,621 $ 2,379 $ 1,277 $ 2,537 $ 3,618 $ 2,435 $ (353 ) $ (1,248 ) $ 898 $ 507 See accompanying notes to consolidated financial statementsCOMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)The accounting and reporting policiesCommerce Union Bancshares,Operations and Subsidiaries (“the Company”) conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The following is a brief summaryTennessee corporation and the holding company for and the sole shareholder of the significant policies.Principles of ConsolidationThe consolidated financial statements include the accounts of Commerce Union Bancshares, Inc., its wholly owned subsidiary, Reliant Bank (the “Bank”"Bank"), collectively, "the Company". Reliant Bancorp is registered as a bank holding company under the Bank’s wholly-owned subsidiaries, Commerce Union Mortgage Services, Inc. (inactive and terminated in September 2016) and Reliant Investments, LLC (inactive and terminated in September 2016), and the Bank’s majority controlled subsidiary, Reliant Mortgage Ventures, LLC, collectively (the “Company”Bank Holding Company Act of 1956, as amended ("Bank Holding Company Act"). As described inReliant Bancorp has elected under the notesBank Holding Company Act to our annualbe a financial holding company. Reliant Bank is a commercial bank chartered under Tennessee law and a member of the Federal Reserve System (the "Federal Reserve"). The Bank provides a full range of traditional banking products and services to business and consumer clients throughout Middle Tennessee.Reliant Mortgage Ventures, LLC is considered a variable interest entity for which the Bank is deemed to be the primary beneficiary. All significant intercompany balances and transactions have been eliminatedprepared in consolidation. The accountingaccordance with instructions to Quarterly Report on Form 10-Q and, reporting policiestherefore, do not include all information and footnotes necessary for a fair presentation of the Company conform tofinancial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") and to general practices. All adjustments consisting of normally recurring accruals that, in the banking industry.Natureopinion of OperationsCompany began its organizational activities in 2005. The Company provides financial services through its offices in Williamson, Robertson, Davidson, and Sumner Counties. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial and residential construction loans, commercial loans, installment loans and lines secured by home equity. Substantially all loans are secured by specific items of collateral including commercial and residential real estate, business assets, and consumer assets. Theseaccompanying unaudited consolidated financial statements should be read in conjunction with the Company's 2016 audited consolidated financial statements.accounting principles generally accepted in the United States of AmericaU.S. GAAP requires management to make estimates and assumptions based on available information. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for loan losses, the valuation of other real estate, the valuation of debt and equity securities, the valuation of deferred tax assets and fair values of financial instruments.consolidatedconsolidated financial statements as of September 30, 2017,2021, and for the three months and nine months ended September 30, 20172021 and 2016,2020, included herein have not been audited. The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principlesGAAP and Article 108 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures made are adequate to make the information not misleading.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Use of Estimates (Continued)These consolidated financial statements should be read in conjunction with the Company's 2016 audited consolidated financial statements. are, in the opinion of management, are necessary to present a fair statement of the results for the interim periods presented. Such adjustments are of a normal recurring nature. The Company evaluates subsequent events through the date of filing. Certain prior period amounts have been reclassified to conform to the current period presentation. The results for the three and nine months ended September 30, 20172021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.Proposed Merger with Community First, Inc.On August 22, 2017, Commerce Union Bancshares, Inc. and Reliant Bank entered into an Agreement and Plan2021.Merger (the “Merger Agreement”) with Community First, Inc. and Community First Bank & Trust, Columbia, Tennessee, that providesSignificant Accounting Policies, in the Company's Annual Report on Form 10-K for the combinationyear ended December 31, 2020 for additional information related to previously issued accounting standards updates.companies. Underaccounting for franchise taxes and enacted changes in tax laws or rates and clarifies the Merger Agreement,accounting for transactions that result in a wholly owned subsidiarystep-up in the tax basis of Commerce Union Bancshares, Inc. will mergegoodwill. ASU 2019-12 was effective for us on January 1, 2021, and did not have a significant impact on our consolidated financial statements.and into Community First, Inc. with Community First, Inc.credit deterioration. ASU 2016-13 is expected to be effective for the surviving corporationCompany on January 1, 2023. We are currently evaluating the potential impact of ASU 2016-13 on the Company's financial statements by developing an implementation plan to include assessment of processes, portfolio segmentation, model development, system requirements and becomingthe identification of data and resource needs, among other things. The adoption of ASU 2016-13 could result in an increase in the allowance for loan losses as a wholly owned subsidiaryresult of Commerce Union Bancshares, Inc. (the “Merger”)changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses for certain debt securities and other financial assets.As soon as reasonably practicable followingThe amendments in this ASU improve the Mergercodification by eliminating inconsistencies and as part of a single integrated transaction, Community First, Inc. will merge with and into Commerce Union Bancshares, Inc. (the “Second Step Merger” and, togetherproviding clarifications. The amended guidance in this ASU related to credit losses is expected to be effective for the Company in conjunction with the Merger, collectively, the “Mergers”). The Merger Agreement also contemplates that, immediately following the completionadoption of the Second Step Merger, Community First Bank & Trust,standard on January 1, 2023. The Company is currently evaluating the wholly owned bank subsidiaryimpact of Community First, Inc.,these ASUs on the Company’s consolidated financial statements. While we are currently unable to reasonably estimate the impact of adopting these ASUs, we expect that the impact of adoption will merge withbe significantly influenced by the composition, characteristics and into Reliant Bank, with Reliant Bankquality of the Company's loan and securities portfolios as well as the surviving bank (the “Bank Merger”).Pursuant to the termsprevailing economic conditions and forecasts as of the Merger Agreement, upon consummation of the Merger, each share of Community First, Inc. common stock (except for specified shares of Community First, Inc. common stock held by Community First, Inc. or Commerce Union Bancshares, Inc. and any dissenting shares) will be converted into the right to receive 0.481 (the “Exchange Ratio”) shares of Commerce Union Bancshares, Inc. common stock. Although the Exchange Ratio is fixed, the market value of the merger consideration will fluctuate with the market price of Commerce Union Bancshares, Inc. common stock and will not be known until the Merger is consummated. As of the date of the Merger Agreement, Community First, Inc. had 5,025,883.87134 shares of common stock issued and outstanding (including shares of restricted stock) and 20,700 outstanding stock options, all of which are, or will be at or prior to the effective time of the Merger, fully vested and exercisable.Commerce Union Bancshares, Inc. has filed a registration statement on Form S-4 with the Securities and Exchange Commission with respect to the registration of the shares of Commerce Union Bancshares, Inc. common stock to be issued to Community First, Inc. shareholders in connection with the Merger.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Proposed Merger with Community First, Inc. (Continued)The Mergers are subject to the satisfaction of customary closing conditions, including obtaining approvals from applicable federal and state banking regulators and the shareholders of Commerce Union Bancshares, Inc. and Community First, Inc. Additionally, the Merger Agreement contains certain termination provisions that may require Community First, Inc. to pay Commerce Union Bancshares, Inc. a termination fee of $2,100,000 under certain specified circumstances, including if Community First, Inc. terminates the Merger Agreement to enter into a definitive agreement for a transaction that its board of directors has determined is superior to the Merger. Commerce Union Bancshares Inc. may also have to pay a termination fee of $2,100,000 in certain circumstances, as set forth in the registration statement filed on Form S-4, and in the Merger Agreement thereto.NOTE 2 - SECURITIESlossincome at September 30, 20172021 and December 31, 20162020 were as follows: $ 591 $ - $ (5 ) $ 586 164,968 1,989 (1,710 ) 165,247 1,500 8 (13 ) 1,495 21,456 70 (77 ) 21,449 3,500 - - 3,500 $ 192,015 $ 2,067 $ (1,805 ) $ 192,277 $ 1,909 $ 4 $ (5 ) $ 1,908 122,813 446 (3,625 ) 119,634 2,000 8 (21 ) 1,987 20,197 11 (174 ) 20,034 3,250 - - 3,250 $ 150,169 $ 469 $ (3,825 ) $ 146,813 September 30, 2021 Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesEstimated
Fair
ValueU. S. Treasury and other U. S. government agencies $ 218 $ — $ — $ 218 State and municipal 161,733 10,039 (801) 170,971 Corporate bonds 27,000 1,160 (8) 28,152 Mortgage-backed securities - Residential 52,736 295 (208) 52,823 Asset-backed securities 2,270 1 (19) 2,252 Total $ 243,957 $ 11,495 $ (1,036) $ 254,416 12Table of ContentsDecember 31, 2020 Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesEstimated
Fair
ValueU. S. Treasury and other U. S. government agencies $ 47 $ 1 $ — $ 48 State and municipal 184,102 16,963 (77) 200,988 Corporate bonds 23,750 397 (34) 24,113 Mortgage-backed securities - Residential 28,084 360 (2) 28,442 Asset-backed securities 3,083 1 (22) 3,062 Total $ 239,066 $ 17,722 $ (135) $ 256,653 COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 2 - SECURITIES (CONTINUED)Securities20172021 and December 31, 20162020 had a carrying amount of $78,520$35,376 and $36,292,$30,491, respectively, and were pledged to collateralize Federal Home Loan Bank ("FHLB") advances, Federal Reserve Bank ("FRB") advances and municipal deposits.At September 30, 2017 and December 31, 2016, there were no holdingsThree Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Proceeds $ 23,104 $ 233 $ 58,855 $ 103,901 Gross gains 2,419 371 5,514 810 Gross losses — (371) — (483) valuevalues of available for sale debt securities at September 30, 20172021 by contractual maturity are provided below. Actual maturities may differ from contractual maturities for mortgage- and asset-backed securities since the underlying asset may be called or prepaid with or without penalty. Securities not due at a single maturity date primarily mortgage backed securities, are shown separately. $ 3,655 $ 3,657 13,488 13,584 10,234 10,391 143,182 143,196 21,456 21,449 $ 192,015 $ 192,277 The following table shows available for sale securities with unrealized losses and their estimated fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2017: $ 493 $ 5 $ - $ - $ 493 $ 5 43,122 609 23,994 1,101 67,116 1,710 - - 487 13 487 13 2,131 18 3,183 59 5,314 77 $ 45,746 $ 632 $ 27,664 $ 1,173 $ 73,410 $ 1,805 Amortized
CostEstimated
Fair ValueDue within one year $ 218 $ 218 Due in one to five years 2,085 2,120 Due in five to ten years 31,473 33,239 Due after ten years 155,175 163,764 Mortgage-backed securities 52,736 52,823 Asset-backed securities 2,270 2,252 Total $ 243,957 $ 254,416 13COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 2 - SECURITIES (CONTINUED)2016: $ 748 $ 5 $ - $ - $ 748 $ 5 83,637 3,597 1,115 28 84,752 3,625 496 4 983 17 1,479 21 17,599 129 1,255 45 18,854 174 $ 102,480 $ 3,735 $ 3,353 $ 90 $ 105,833 $ 3,825 Less than 12 months 12 months or more Total Estimated
Fair ValueUnrealized
LossEstimated
Fair ValueUnrealized
LossEstimated
Fair ValueUnrealized
LossSeptember 30, 2021 State and municipal $ 37,064 $ 801 $ — $ — $ 37,064 $ 801 Corporate bonds 1,742 8 — — 1,742 8 Mortgage-backed securities - Residential 33,283 207 74 1 33,357 208 Asset-backed securities — — 2,045 19 2,045 19 Total temporarily impaired $ 72,089 $ 1,016 $ 2,119 $ 20 $ 74,208 $ 1,036 December 31, 2020 State and municipal $ 9,475 $ 77 $ — $ — $ 9,475 $ 77 Corporate bonds 5,716 34 — — 5,716 34 Mortgage-backed securities - Residential 5,024 1 92 1 5,116 2 Asset-backed securities 729 2 2,013 20 2,742 22 Total temporarily impaired $ 20,944 $ 114 $ 2,105 $ 21 $ 23,049 $ 135 TheAs the fair value is expected to recover as the securities approach their maturity date and/or market rates decline.decline, we do not consider these securities to be other-than-temporarily impaired at September 30, 2021. There were 11748 and 19322 securities in an unrealized loss position as of September 30, 20172021 and December 31, 2016,2020, respectively.NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSESLoans at September 30, 2017 and December 31, 2016 were comprised as follows:
2017 $ 138,648 $ 134,404 100,655 113,031 79,195 57,460 258,168 215,639 141,581 115,889 16,386 17,240 15,048 13,745 749,681 667,408 320 625 9,623 9,082 $ 739,738 $ 657,701 14COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts) (CONTINUED)Activity in the allowance for loan losses by portfolio segment was as follows for the nine months ended September 30, 2017:
Real Estate $ 2,438 $ 2,731 $ 1,786 $ 1,178 (941 ) - - (15 ) 306 - 5 - 872 363 356 (296 ) $ 2,675 $ 3,094 $ 2,147 $ 867 $ 704 $ 208 $ 37 $ 9,082 - (30 ) - (986 ) 19 2 - 332 (110 ) 9 1 1,195 $ 613 $ 189 $ 38 $ 9,623 Activity in the allowance for loan losses by portfolio segment was as follows for the nine months ended September 30, 2016:
Real Estate $ 2,198 $ 2,591 $ 894 $ 1,214 (84 ) - - (25 ) 250 3 5 66 (109 ) 84 816 (97 ) $ 2,255 $ 2,678 $ 1,715 $ 1,158 $ 699 $ 192 $ 35 $ 7,823 - - (19 ) (128 ) 9 13 - 346 26 16 24 760 $ 734 $ 221 $ 40 $ 8,801 15COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)The allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2017 was as follows:
Real Estate $ 526 $ - $ 17 $ 26 4 - - - 2,145 3,094 2,130 841 $ 2,675 $ 3,094 $ 2,147 $ 867 $ 4,643 $ 1,953 $ 3,268 $ 2,574 281 1,161 1,432 47 133,724 255,054 136,881 98,034 $ 138,648 $ 258,168 $ 141,581 $ 100,655 $ - $ - $ - $ 569 - - - 4 613 189 38 9,050 $ 613 $ 189 $ 38 $ 9,623 $ 273 $ - $ - $ 12,711 17 - - 2,938 78,905 16,386 15,048 734,032 $ 79,195 $ 16,386 $ 15,048 $ 749,681 COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)The allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2016 was as follows:
Real Estate $ 747 $ - $ 17 $ 27 6 - - - 1,685 2,731 1,769 1,151 $ 2,438 $ 2,731 $ 1,786 $ 1,178 $ 5,375 $ 2,036 $ 2,544 $ 1,972 329 2,852 1,481 89 128,700 210,751 111,864 110,970 $ 134,404 $ 215,639 $ 115,889 $ 113,031 $ 62 $ - $ - $ 853 - - - 6 642 208 37 8,223 $ 704 $ 208 $ 37 $ 9,082 $ 1,479 $ - $ - $ 13,406 16 - - 4,767 55,965 17,240 13,745 649,235 $ 57,460 $ 17,240 $ 13,745 $ 667,408 COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Risk characteristics relevant to each portfolio segment are as follows:Commercial, industrial and agricultural: The commercial, industrial and agricultural loan portfolio segment includes loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations. Commercial, industrial and agricultural loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.Multi-family and commercial real estate: Multi-family and commercial real estate and multi-family loans are subject to underwriting standards and processes similar to commercial, industrial and agricultural loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. The Company also utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting the market areas it serves. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. Non-owner occupied commercial real estate loans are loans secured by multifamily and commercial properties where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. These loans are made to finance income-producing properties such as apartment buildings, office and industrial buildings, and retail properties. Owner-occupied commercial real estate loans are loans where the primary source of repayment is the cash flow from the ongoing operations and business activities conducted by the party, or affiliate of the party, who owns the property.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Construction and land development:Loans for non-owner-occupied real estate construction or land development are generally repaid through cash flow related to the operation, sale or refinance of the property. The Company also finances construction loans for owner-occupied properties. A portion of the Company’s construction and land portfolio segment is comprised of loans secured by residential product types (residential land and single-family construction). With respect to construction loans to developers and builders that are secured by non-owner occupied properties that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, market sales activity, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.1-4 family residential real estate: Residential real estate loans represent loans to consumers or investors to finance a residence. These loans are typically financed on 15 to 30 year amortization terms, but generally with shorter maturities of 5 to 15 years. Many of these loans are extended to borrowers to finance their primary or secondary residence. Loans to an investor secured by a 1-4 family residence will be repaid from either the rental income from the property or from the sale of the property. This loan segment also includes closed-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home. Loans in this portfolio segment are underwritten and approved based on a number of credit quality criteria including limits on maximum Loan-to-Value (LTV), minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment.1-4 family HELOC: This loan segment includes open-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home utilizing a revolving line of credit. These loans are underwritten and approved based on a number of credit quality criteria including limits on maximum LTV, minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment. Because of the revolving nature of these loans as well as the fact that many represent second mortgages, this portfolio segment can contain more risk than the amortizing 1-4 family residential real estate loans.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Consumer: The consumer loan portfolio segment includes non-real estate secured direct loans to consumers for household, family, and other personal expenditures. Consumer loans may be secured or unsecured and are usually structured with short or medium term maturities. These loans are underwritten and approved based on a number of consumer credit quality criteria including limits on maximum LTV on secured consumer loans, minimum credit scores, and maximum debt to income. Many traditional forms of consumer installment credit have standard monthly payments and fixed repayment schedules of one to five years. These loans are made with either fixed or variable interest rates that are based on specific indices. Installment loans fill a variety of needs, such as financing the purchase of an automobile, a boat, a recreational vehicle, or other large personal items, or for consolidating debt. These loans may be unsecured or secured by an assignment of title, as in an automobile loan, or by money in a bank account. In addition to consumer installment loans, this portfolio segment also includes secured and unsecured personal lines of credit as well as overdraft protection lines. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.Non-accrual loans by class of loan were as follows at September 30, 20172021 and December 31, 2016:
2017
2016 $ 2,460 $ 3,062 - 636 1,898 730 592 344 - 862 $ 4,950 $ 5,634 Performing non-accrual2020 were comprised as follows:September 30, 2021 December 31, 2020 Commercial, Industrial and Agricultural $ 450,710 $ 459,739 Real Estate 1-4 Family Residential 310,855 323,473 1-4 Family HELOC 100,895 100,525 Multi-family and Commercial 873,265 834,000 Construction, Land Development and Farmland 417,258 365,058 Consumer 234,734 213,863 Other 5,298 8,669 Gross loans 2,393,015 2,305,327 Less: Deferred loan fees 3,182 4,544 Less: Allowance for loan losses 20,897 20,636 Loans, net $ 2,368,936 $ 2,280,147 totaled $1,133are recorded net of purchase discounts of $11,993 and $2,799$16,634, respectively.20172021 and December 31, 2016,2020 of $857,394 and $646,498, respectively.Individually impaired loans by class of loans were as follows at September 30, 2017:
Principal
Balance
Investment
Allowance $ 5,438 $ 3,396 $ 1,529 $ 4,925 $ 530 3,479 3,114 - 3,114 - 4,788 4,463 236 4,699 17 3,325 2,595 26 2,621 26 309 290 - 290 - $ 17,339 $ 13,858 $ 1,791 $ 15,649 $ 573 20COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Individually impaired loans by class of loans were as follows at December 31, 2016:
Principal
Balance
Investment
Allowance $ 6,383 $ 3,924 $ 1,780 $ 5,704 $ 753 5,666 2,914 1,974 4,888 - 4,124 3,854 171 4,025 17 2,422 2,034 27 2,061 27 2,075 1,178 317 1,495 62 $ 20,670 $ 13,904 $ 4,269 $ 18,173 $ 859 average balances of impaired loans for the nine months ended September 30, 2017 and 2016 were as follows: $ 5,550 $ 6,143 4,403 6,074 4,319 3,047 2,225 2,879 957 1,944 $ 17,454 $ 20,087 The Company utilizes a risk grading system to monitor the credit quality of the Company’s commercial loan portfolio which consists of commercial industrial and agricultural,industrial, commercial real estate and construction loans. Loans are graded on a scale of 1 to 9. Grades 1 - 5 are pass credits, grade 6 is special mention, grade 7 is substandard, grade 8 is doubtful and grade 9 is loss. A description of the risk grades are as follows:Grade 1 - Minimal Risk (Pass)This grade includes loans to borrowers with a strong financial position and history of profits and cash flows sufficient to service the debt. These borrowers have well defined sources of primary/secondary repayment, conservatively leveraged balance sheets and the ability to access a wide range of financing alternatives. Collateral securing these loans is negotiable, of sufficient value and in possession of the Company. Risk of loss is unlikely.21COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Grade 2 - High Quality (Pass)This grade includes loans to borrowers with a strong financial condition reflecting dependable net profits and cash flows. The borrower has verifiable liquid net worth providing above average asset protection. An identifiable market exists for the collateral. Risk of loss is unlikely.Grade 3 - Above Average (Pass)This grade includes loans to borrowers with a balance sheet that reflects a comfortable degree of leverage and liquidity. Borrowers are profitable and have a sustained record of servicing debt. An identifiable market exists for the collateral, but liquidation could take up to one year. Risk of loss is unlikely.Grade 4 - Average (Pass)This grade includes loans to borrowers with a financial condition that is satisfactory and comparable to industry standards. The borrower has verifiable net worth, providing over time, average asset protection. Borrower cash flows are sufficient to satisfy debt service requirements. Risk of loss is below average.Grade 5 - Acceptable (Management Attention) (Pass)This grade includes loans to borrowers whose loans are performing, but sources of repayment are not documented by the current credit analysis. There are some declining trends in margins, ratios and/or cash flow. Guarantor(s) have strong net worth(s), but assets may be concentrated in real estate or other illiquid investments. Risk of loss is average.22COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)‘‘‘‘substandard’’ extension of credit is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Extensions of credit so classified should have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard credits, does not have to exist in individual extensions of credit classified as substandard. Substandard assets have a high probability of payment default, or they have other well-defined weaknesses. They require supervision that is more intensive supervision by Company management. Substandard assets are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigation.‘‘‘‘doubtful’’ has all the weaknesses inherent in one classified 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. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage of and strengthen the credit, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceedings, capital injection, perfecting liens on additional collateral, or refinancing plans. Generally, the doubtful classification should not extend for a long period of time because in most cases the pending factors or events that warranted the doubtful classification should be resolved either positively or negatively in a reasonable period of time.‘‘‘‘loss’’ are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the credit has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. Amounts classified loss should be promptly charged off. The Company will not attempt long term recoveries while the credit remains on the Company’s books. Losses should be taken in the period in which they surface as uncollectible. With loss assets, the underlying borrowers are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Once an asset is classified loss, there is little prospect of collecting either its principal or interest. Pass Special
MentionSubstandard Total September 30, 2021 Loans excluding PCI Commercial, Industrial and Agricultural $ 448,003 $ 1,077 $ 1,573 $ 450,653 1-4 Family Residential Real Estate 308,977 1 1,234 310,212 1-4 Family HELOC 100,529 — 352 100,881 Multi-family and Commercial Real Estate 867,351 257 5,144 872,752 Construction, Land Development and Farmland 415,235 — 1,304 416,539 Consumer 232,185 1 1,747 233,933 Other 5,298 — — 5,298 Total loans excluding PCI $ 2,377,578 $ 1,336 $ 11,354 $ 2,390,268 Total PCI loans $ 1,031 $ — $ 1,716 $ 2,747 Total loans $ 2,378,609 $ 1,336 $ 13,070 $ 2,393,015 23COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Credit quality indicators by class Pass Special
MentionSubstandard Total December 31, 2020 Loans excluding PCI Commercial, Industrial and Agricultural $ 456,170 $ 1,519 $ 1,863 $ 459,552 1-4 Family Residential Real Estate 320,555 5 2,165 322,725 1-4 Family HELOC 100,391 — 120 100,511 Multi-family and Commercial Real Estate 829,353 653 3,337 833,343 Construction, Land Development and Farmland 358,606 — 5,676 364,282 Consumer 211,305 7 1,346 212,658 Other 7,150 1,519 — 8,669 Total loans excluding PCI $ 2,283,530 $ 3,703 $ 14,507 $ 2,301,740 Total PCI loans $ 998 $ — $ 2,589 $ 3,587 Total loans $ 2,284,528 $ 3,703 $ 17,096 $ 2,305,327 loan werethe Company's loans had a risk rating of "Doubtful" or "Loss" as follows atof September 30, 2017: $ 134,802 $ 5 $ 3,841 $ 138,648 96,681 1,400 2,574 100,655 78,922 - 273 79,195 256,215 - 1,953 258,168 137,180 1,368 3,033 141,581 16,386 - - 16,386 15,048 - - 15,048 $ 735,234 $ 2,773 $ 11,674 $ 749,681 Credit quality indicators by class of loan were as follows at2021 or December 31, 2016: $ 129,880 $ - $ 4,524 $ 134,404 109,592 1,427 2,012 113,031 55,981 - 1,479 57,460 211,938 - 3,701 215,639 111,663 1,767 2,459 115,889 17,240 - - 17,240 13,745 - - 13,745 $ 650,039 $ 3,194 $ 14,175 $ 667,408 24COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amountsActivity in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)Past due statusthe Allowance for Loan Loss (“ALL”) by class of loanportfolio segment was as follows at September 30, 2017:
Past Due
Past Due
Past Due $ 71 $ - $ 1,859 $ 1,930 $ 136,718 $ 138,648 688 - 257 945 99,710 100,655 17 - - 17 79,178 79,195 70 - - 70 258,098 258,168 213 338 1,899 2,450 139,131 141,581 21 - - 21 16,365 16,386 - - - - 15,048 15,048 $ 1,080 $ 338 $ 4,015 $ 5,433 $ 744,248 $ 749,681 Past due status by class of loan was as follows at December 31, 2016:
Past Due
Past Due
Past Due $ 207 $ 1,586 $ 375 $ 2,168 $ 132,236 $ 134,404 7 - 286 293 112,738 113,031 - - - - 57,460 57,460 - - - - 215,639 215,639 58 - 730 788 115,101 115,889 193 - - 193 17,047 17,240 - - - - 13,745 13,745 $ 465 $ 1,586 $ 1,391 $ 3,442 $ 663,966 $ 667,408 There was a loan totaling $200 past due 90 days or morefor the three and still accruing interest at September 30, 2017. There were no loans past due 90 days or more still accruing interest at December 31, 2016.During the nine months ended September 30, 2017, two loans totaling $428 were modified in a troubled debt restructuring. One modification consisted of a partial charge off, totaling $470,2021 and a payment restructure with the modification having no effect on interest income. The other modification consisted of a temporary reduction in required monthly payments and had no effect on the allowance for loan losses or interest income. Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real EstateConstruction Land Development and Farmland Consumer Other Total Beginning balance at June 30, 2021 $ 6,614 $ 1,923 $ 610 $ 8,498 $ 2,011 $ 1,222 $ 16 $ 20,894 Charge-offs (3) (42) — — — (150) — (195) Recoveries 14 58 2 42 1 81 — 198 Provision 362 (642) (2) 66 78 143 (5) — Ending balance at September 30, 2021 $ 6,987 $ 1,297 $ 610 $ 8,606 $ 2,090 $ 1,296 $ 11 $ 20,897 Beginning balance at June 30, 2020 $ 4,675 $ 1,454 $ 975 $ 8,407 $ 2,126 $ 584 $ 16 $ 18,237 Charge-offs — (8) — — — (60) — (68) Recoveries 88 22 12 9 4 30 — 165 Provision 249 821 498 (169) (175) 272 4 1,500 Ending balance at September 30, 2020 $ 5,012 $ 2,289 $ 1,485 $ 8,247 $ 1,955 $ 826 $ 20 $ 19,834 25COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBERCommercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real EstateConstruction Land Development and Farmland Consumer Other Total Beginning balance at December 31, 2020 $ 5,441 $ 2,445 $ 1,416 $ 8,535 $ 1,841 $ 928 $ 30 $ 20,636 Charge-offs (35) (63) — — — (604) — (702) Recoveries 315 154 7 257 92 138 — 963 Provision 1,266 (1,239) (813) (186) 157 834 (19) — Ending balance at September 30, 2021 $ 6,987 $ 1,297 $ 610 $ 8,606 $ 2,090 $ 1,296 $ 11 $ 20,897 Beginning balance at December 31, 2019 $ 2,529 $ 1,280 $ 624 $ 5,285 $ 2,649 $ 177 $ 34 $ 12,578 Charge-offs (507) (68) (98) — (114) (355) — (1,142) Recoveries 126 769 15 20 8 60 — 998 Provision 2,864 308 944 2,942 (588) 944 (14) 7,400 Ending balance at September 30, 2020 $ 5,012 $ 2,289 $ 1,485 $ 8,247 $ 1,955 $ 826 $ 20 $ 19,834 Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real EstateConstruction Land Development and Farmland Consumer Other Total September 30, 2021 Allowance for loan losses Individually evaluated for impairment $ 847 $ — $ — $ — $ 67 $ 4 $ — $ 918 Acquired with credit impairment — — — — — — — — Collectively evaluated for impairment 6,140 1,297 610 8,606 2,023 1,292 11 19,979 Total $ 6,987 $ 1,297 $ 610 $ 8,606 $ 2,090 $ 1,296 $ 11 $ 20,897 Loans Individually evaluated for impairment $ 1,433 $ 1,371 $ 352 $ 5,390 $ 1,750 $ 1,747 $ — $ 12,043 Acquired with credit impairment 57 643 14 513 719 801 — 2,747 Collectively evaluated for impairment 449,220 308,841 100,529 867,362 414,789 232,186 5,298 2,378,225 Total $ 450,710 $ 310,855 $ 100,895 $ 873,265 $ 417,258 $ 234,734 $ 5,298 $ 2,393,015 Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real EstateConstruction Land Development and Farmland Consumer Other Total December 31, 2020 Allowance for loan losses Individually evaluated for impairment $ 717 $ 18 $ — $ — $ — $ 13 $ — $ 748 Acquired with credit impairment — — — — — — — — Collectively evaluated for impairment 4,724 2,427 1,416 8,535 1,841 915 30 19,888 Total $ 5,441 $ 2,445 $ 1,416 $ 8,535 $ 1,841 $ 928 $ 30 $ 20,636 Loans Individually evaluated for impairment $ 1,027 $ 1,829 $ 110 $ 2,504 $ 5,676 $ 1,177 $ — $ 12,323 Acquired with credit impairment 187 748 14 657 776 1,205 — 3,587 Collectively evaluated for impairment 458,525 320,896 100,401 830,839 358,606 211,481 8,669 2,289,417 Total $ 459,739 $ 323,473 $ 100,525 $ 834,000 $ 365,058 $ 213,863 $ 8,669 $ 2,305,327 2017 (UNAUDITED) AND DECEMBER2021 and December 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)The2020: Current and Accruing 30-89 Days Past Due 90+ Days
Past Due and Accruing InterestNonaccrual Loans Total Loans September 30, 2021 Loans excluding PCI Commercial, Industrial and Agricultural $ 450,349 $ 19 $ — $ 285 $ 450,653 1-4 Family Residential Real Estate 308,897 503 — 812 310,212 1-4 Family HELOC 100,777 — — 104 100,881 Multi-family and Commercial Real Estate 871,921 — — 831 872,752 Construction, Land Development and Farmland 415,350 144 — 1,045 416,539 Consumer 231,504 1,347 5 1,077 233,933 Other 5,298 — — — 5,298 Total loans excluding PCI $ 2,384,096 $ 2,013 $ 5 $ 4,154 $ 2,390,268 Total PCI loans $ 1,580 $ 24 $ — $ 1,143 $ 2,747 Total loans $ 2,385,676 $ 2,037 $ 5 $ 5,297 $ 2,393,015 Current and Accruing 30-89 Days Past Due 90+ Days
Past Due and Accruing InterestNonaccrual Loans Total Loans December 31, 2020 Loans excluding PCI Commercial, Industrial and Agricultural $ 458,974 $ 126 $ — $ 452 $ 459,552 1-4 Family Residential Real Estate 319,180 2,071 — 1,474 322,725 1-4 Family HELOC 100,501 10 — — 100,511 Multi-family and Commercial Real Estate 832,697 150 — 496 833,343 Construction, Land Development and Farmland 363,376 — — 906 364,282 Consumer 210,552 1,413 1 692 212,658 Other 8,669 — — — 8,669 Total loans excluding PCI $ 2,293,949 $ 3,770 $ 1 $ 4,020 $ 2,301,740 Total PCI loans $ 1,584 $ 37 $ — $ 1,966 $ 3,587 Total loans $ 2,295,533 $ 3,807 $ 1 $ 5,986 $ 2,305,327 acquiredpurchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition that all contractually required payments would not be collected. The outstanding balance and carrying amount of those loans is as follows:September 30, 2021 December 31, 2020 Commercial, Industrial and Agricultural $ 782 $ 919 1-4 Family Residential Real Estate 868 1,004 1-4 Family HELOC 19 19 Multi-family and Commercial Real Estate 1,175 1,325 Construction, Land Development and Farmland 935 992 Consumer 1,426 1,924 Total outstanding balance 5,205 6,183 Less remaining purchase discount 2,458 2,596 Allowance for loan losses — — Carrying amount, net of allowance for loan losses and remaining purchase discounts $ 2,747 $ 3,587 2021 2020 Balance at January 1, $ 580 $ 98 New loans purchased — 870 Accretion income (52) (137) Balance at September 30, $ 528 $ 831 creditnon-impaired loans and their related fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan.Tennessee Community Bank Holdings, Inc. acquisition on January 1, 2020 First Advantage Bancorp acquisition on April 1, 2020 Contractually required payments receivable of loans purchased during the year: $ 2,799 $ 7,540 Nonaccretable difference (980) (2,133) Cash flows expected to be collected at acquisition $ 1,819 $ 5,407 Accretable yield (131) (739) Fair value of acquired loans at acquisition $ 1,688 $ 4,668 wasby class of loans were as follows at September 30, 20172021 and December 31, 2016:
2017
2016 $ 305 $ 385 1,232 3,321 1,510 1,569 48 92 36 36 3,131 5,403 193 635 4 6 $ 2,934 $ 4,762 During2020:September 30, 2021 December 31, 2020 Unpaid
Principal
BalanceRecorded Investment Related
AllowanceUnpaid
Principal
BalanceRecorded Investment Related
AllowanceWith no related allowance recorded Commercial, Industrial and Agricultural $ 1,691 $ 642 $ — $ 1,400 $ 367 $ — 1-4 Family Residential Real Estate 2,419 2,015 — 3,034 2,473 — 1-4 Family HELOC 378 366 — 130 124 — Multi-family and Commercial Real Estate 7,141 5,903 — 4,549 3,161 — Construction, Land Development and Farmland 2,617 2,210 — 6,809 6,452 — Consumer 3,848 2,512 — 3,590 2,348 — Subtotal $ 18,094 $ 13,648 $ — $ 19,512 $ 14,925 $ — With an allowance recorded Commercial, Industrial and Agricultural $ 859 $ 847 $ 847 $ 859 $ 847 $ 717 1-4 Family Residential Real Estate — — — 104 104 18 1-4 Family HELOC — — — — — — Multi-family and Commercial Real Estate — — — — — — Construction, Land Development and Farmland 259 259 67 — — — Consumer 39 36 4 34 34 13 Subtotal 1,157 1,142 918 997 985 748 Total $ 19,251 $ 14,790 $ 918 $ 20,509 $ 15,910 $ 748 Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average recorded investment Interest income recognized Average recorded investment Interest income recognized With no allowance Commercial, Industrial and Agricultural $ 444 $ 6 $ 594 $ 42 $ 355 $ 26 $ 354 $ 56 1-4 Family Residential Real Estate 2,044 31 3,002 54 2,296 109 2,631 154 1-4 Family HELOC 332 3 331 — 272 11 367 — Multi-family and Commercial Real Estate 5,655 86 4,375 63 4,741 271 4,138 278 Construction, Land Development and Farmland 4,222 42 2,949 28 5,424 114 2,471 115 Consumer 2,473 83 2,118 68 2,411 275 1,076 205 Subtotal $ 15,170 $ 251 $ 13,369 $ 255 $ 15,499 $ 806 $ 11,037 $ 808 Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average recorded investment Interest income recognized Average recorded investment Interest income recognized With an allowance recorded Commercial, Industrial and Agricultural $ 847 $ 6 $ 947 $ 6 $ 847 $ 18 $ 976 $ 32 1-4 Family Residential Real Estate — — — — 26 — — — 1-4 Family HELOC — — — — — — — — Multi-family and Commercial Real Estate 50 — — — 38 — — — Construction, Land Development and Farmland 86 3 — — 65 4 43 — Consumer 46 1 — — 43 2 1 — Subtotal $ 1,029 $ 10 $ 947 $ 6 $ 1,019 $ 24 $ 1,020 $ 32 Total $ 16,199 $ 261 $ 14,316 $ 261 $ 16,518 $ 830 $ 12,057 $ 840 2017, there was a $2 reduction in the allowance for loan losses related to purchased credit impaired loans. During2020. Modifications made during the nine months ended September 30, 2017, there2020 are displayed below.Number of Contracts Pre-Modification Outstanding Recorded Investments Post-Modification Outstanding Recorded Investments Commercial, Industrial and Agricultural 1 $ 150 $ 150 1-4 Family Residential 1 721 721 Multi-family and Commercial Real Estate 1 394 394 Total 3 $ 1,265 $ 1,265 September 30, 2021 Active Deferrals % of Loans Multi-family and Commercial $ 67,372 2.82 % Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Interest $ 19 $ 210 $ 216 $ 358 Fees 176 455 1,808 739 Total PPP Income $ 195 $ 665 $ 2,024 $ 1,097 Notional amounts $ 10,000 Weighted average pay rates 5.19 % Weighted average receive rates 2.38 % Weighted average maturity 1.71 years Unrealized losses $ 468 September 30, 2021 December 31, 2020 Notional Amount Fair Value Notional Amount Fair Value Included in other liabilities: Interest rate swaps related to: Subordinated debentures $ 10,000 $ (468) $ 10,000 $ (690) Short-term interest-bearing liabilities — — 150,000 (6,967) Total included in other liabilities $ 10,000 $ (468) $ 160,000 $ (7,657) Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Interest rate swaps - subordinate debentures $ 47 $ 51 $ 164 $ (230) Interest rate swaps - interest-bearing liabilities 1,562 324 5,146 (4,532) $ 1,609 $ 375 $ 5,310 $ (4,762) Notional amounts $ 17,090 Weighted average pay rates 3.68 % Weighted average receive rates 1.10 % Weighted average maturity 7.44 years Unrealized losses $ 848 September 30, 2021 December 31, 2020 Notional Amount Fair Value Notional Amount Fair Value Included in other liabilities: Interest rate swaps related to investments 17,090 (848) 18,525 (1,495) Total included in other liabilities $ 17,090 $ (848) $ 18,525 $ (1,495) Three months ended September 30, Item Location 2021 2020 2021 2020 Interest rate swaps - securities Interest on investment securities, nontaxable $ (118) $ (118) $ (356) $ (243) Hedged item - securities Interest on investment securities, nontaxable $ 118 $ 118 $ 356 $ 243 allowanceshareholders of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") approved the Commerce Union Bancshares, Inc. Amended and Restated Stock Option Plan (the “A&R Plan”), which permits the grant of awards with respect to up to 1,250,000 shares of Reliant Bancorp common stock in the form of stock options. As part of the merger of Commerce Union Bank and Reliant Bank in 2015, all outstanding stock options of Reliant Bank were converted to stock options of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") under the A&R Plan. Under the A&R Plan, stock option awards may be granted in the form of incentive stock options or non-statutory stock options, and are generally exercisable for loan lossesup to 10 years following the date such option awards are granted. Exercise prices of incentive stock options must be equal to or greater than the fair market value of Reliant Bancorp's common stock on the grant date.purchased credit impaired loans.Activity related toReliant Bancorp common stock.accretable portionconsolidated statement of income as follows:Nine Months Ended September 30, 2021 2020 2021 2020 Stock-based compensation expense before income taxes $ 458 $ 349 $ 1,265 $ 1,183 Less: deferred tax benefit (120) (91) (331) (309) Reduction of net income $ 338 $ 258 $ 934 $ 874 purchase discount on loans acquired with deteriorated credit quality is as follows for each quarternine months ended September 30, 2017: $ 87 (18 ) 69 (17 ) 52 (33 ) $ 19 Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2020 116,621 $ 18.97 5.87 years $ 304 Granted — $ — Exercised (1,702) $ 14.36 20 Forfeited or expired (5,600) $ 13.42 Outstanding at September 30, 2021 109,319 $ 19.33 5.32 years $ 1,340 Exercisable at September 30, 2021 86,519 $ 17.88 4.81 years $ 1,186 26COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER2017 (UNAUDITED) AND DECEMBER2021:Restricted Stock Units Restricted Stock Underlying Shares Weighted Average Grant-Date
Fair ValueShares Weighted Average Grant-Date
Fair ValueOutstanding at January 1, 2021 132,650 $ 16.93 40,910 $ 26.82 Granted 70,655 26.07 — — Vested (14,400) 14.81 (35,410) 27.54 Forfeited (9,500) 17.59 — — Outstanding at September 30, 2021 179,405 $ 20.67 5,500 $ 22.17 2016(Dollar amounts in thousands except2020.Actual
Regulatory
CapitalMinimum Required
Capital Including
Capital Conservation
BufferTo Be Well
Capitalized Under
Prompt Corrective
Action ProvisionsAmount Ratio Amount Ratio Amount Ratio September 30, 2021 Reliant Bancorp Tier I leverage $ 297,367 10.04 % $ 118,473 4.00 % $ 148,091 5.00 % Common equity tier I 285,537 10.52 % 189,996 7.00 % 176,425 6.50 % Tier I risk-based capital 297,367 10.95 % 230,833 8.50 % 217,254 8.00 % Total risk-based capital 377,977 13.92 % 285,112 10.50 % 271,535 10.00 % Bank Tier I leverage $ 347,450 11.76 % $ 118,185 4.00 % $ 147,732 5.00 % Common equity tier I 347,450 14.10 % 172,493 7.00 % 160,172 6.50 % Tier I risk-based capital 347,450 14.10 % 209,456 8.50 % 197,135 8.00 % Total risk-based capital 369,072 14.98 % 258,695 10.50 % 246,377 10.00 % Actual
Regulatory
CapitalMinimum Required
Capital Including
Capital Conservation
BufferTo Be Well
Capitalized Under
Prompt Corrective
Action ProvisionsDecember 31, 2020 Reliant Bancorp Tier I leverage $ 262,282 8.91 % $ 117,747 4.00 % $ 147,184 5.00 % Common equity tier I 250,513 10.22 % 171,584 7.00 % 159,328 6.50 % Tier I risk-based capital 262,282 10.70 % 208,355 8.50 % 196,099 8.00 % Total risk-based capital 342,246 13.96 % 257,420 10.50 % 245,162 10.00 % Bank Tier I leverage $ 313,633 10.64 % $ 117,907 4.00 % $ 147,384 5.00 % Common equity tier I 313,633 12.83 % 171,117 7.00 % 158,894 6.50 % Tier I risk-based capital 313,633 12.83 % 207,785 8.50 % 195,562 8.00 % Total risk-based capital 334,919 13.71 % 256,503 10.50 % 244,288 10.00 % amounts)Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Basic EPS Computation Net income attributable to common shareholders $ 13,289 $ 11,533 $ 38,483 $ 19,186 Weighted average common shares outstanding 16,665,155 16,587,274 16,632,587 15,053,087 Basic earnings per common share $ 0.80 $ 0.70 $ 2.31 $ 1.27 Diluted EPS Computation Net income attributable to common shareholders $ 13,289 $ 11,533 $ 38,483 $ 19,186 Weighted average common shares outstanding 16,665,155 16,587,274 16,632,587 15,053,087 Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan 140,002 62,399 144,385 67,616 Adjusted weighted average common shares outstanding 16,805,157 16,649,673 16,776,972 15,120,703 Diluted earnings per common share $ 0.79 $ 0.69 $ 2.29 $ 1.27 48 - FAIR VALUESVALUES OF ASSETS AND LIABILITIESvalue.value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:Level 1Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.Level 2Inputs to the valuation methodology include:●Quoted prices for similar assets or liabilities in active markets;●Quoted prices for identical or similar assets or liabilities in inactive markets;●Inputs other than quoted prices that are observable for the asset or liability;●Inputs that are derived principally from or corroborated by the observable market data by correlation or other means.If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.Level 3Inputs to the valuation methodology are unobservable and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.asset’sasset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.27COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 4 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)loansloan with specific allocations of the allowance for loan losses is generally based on the present value of expected payments using the loan’s effective rate as the discount rate or recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.Mortgage Loans Held ForSalemortgage loans held for sale are valued at the lowerother real estate and repossessed assets is generally based on recent appraisals less estimated disposition cost. These appraisals may use a single valuation approach or a combination of cost or market on an aggregate basis. When the aggregate fair value of mortgage loans held for sale is less than cost, an allowance is recorded. The Company utilizes a third party to value the mortgage loans held for sale portfolio usingapproaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available with consideration of specific attributes of the loans.available. Such adjustments are typically not significant and result in a Level 23 classification of the inputs for determining fair value.There were no changes in valuation methodologies used during the nine months ended September 30, 2017.values.values. Furthermore, while the Company’s valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.items.items. Changes in assumptions or in market conditions could significantly affect the estimates.28COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 4 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)20172021 and December 31, 2016: $ 586 $ - $ 586 $ - 165,247 - 165,247 - 1,495 - 1,495 - 21,449 - 21,449 - 3,500 3,500 - - 23 - 23 - $ 448 $ - $ 448 $ - $ 1,908 $ - $ 1,908 $ - 119,634 - 119,634 - 1,987 - 1,987 - 20,034 - 20,034 - 3,250 3,250 - - 195 - 195 - $ 267 $ - $ 267 $ - Fair Value Quoted
Prices in
Active
Markets
for Identical
Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)September 30, 2021 Assets U. S. Treasury and other U. S. government agencies $ 218 $ — $ 218 $ — State and municipal 170,971 — 170,971 — Corporate bonds 28,152 — 28,152 — Mortgage-backed securities 52,823 — 52,823 — Asset-backed securities 2,252 — 2,252 — Liabilities Derivative liabilities $ 1,316 $ — $ 1,316 $ — December 31, 2020 Assets U. S. Treasury and other U. S. government agencies $ 48 $ — $ 48 $ — State and municipal 200,988 — 200,988 — Corporate bonds 24,113 — 24,113 — Mortgage-backed securities 28,442 — 28,442 — Asset-backed securities 3,062 — 3,062 — Liabilities Derivative liabilities $ 9,152 $ — $ 9,152 $ — COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 4 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)20172021 and December 31, 2016: $ 1,218 $ - $ - $ 1,218 $ 3,410 $ - $ - $ 3,410 11,831 - 11,831 - Fair Value Quoted Prices in Active Markets for Identical Assets
(Level 1)Significant Other Observable Inputs
(Level 2)Significant Unobservable Inputs
(Level 3)September 30, 2021 Assets Impaired loans $ 13,872 $ — $ — $ 13,872 Other real estate 3,088 — — 3,088 Other repossessions 865 — — 865 December 31, 2020 Assets Impaired loans $ 15,162 $ — $ — $ 15,162 Other real estate 1,246 — — 1,246 Other repossessions 1,424 — — 1,424 20172021 and December 31, 2016:2020:ValuationSignificantRange
Techniques (1)
Unobservable Inputs
(Weighted Average)Appraisal Appraisal10% Mortgage loans held for saleAppraisal Pricing ModelEstimated costs to sell Not applicable10% Other repossessions Not applicableEstimated costs to sell 10% (1)The fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar in thousands except per share amounts)NOTE 4 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)Carrying amounts and estimated fair values of financial instruments not reported at fair value at September 30, 20172021 and December 31, 2020 were as follows: $ 18,277 $ 18,277 $ 18,277 $ - $ - 669 669 - 669 - 739,738 739,783 - - 739,783 19,475 19,479 - 19,479 - 4,999 4,999 - 4,999 - 7,163 7,163 - 7,163 - 840,448 840,055 - - 840,055 220 220 - 220 - 56,720 56,792 - 56,792 - Carrying amounts and estimated fair valuesSeptember 30, 2021 Carrying
AmountEstimated
Fair
ValueQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)Financial assets Cash and due from banks $ 13,270 $ 13,270 $ 13,270 $ — $ — Interest-bearing deposits in financial institutions 66,155 66,155 66,155 — — Federal funds sold 1,002 1,002 — 1,002 — Loans, net 2,368,936 2,393,109 — — 2,393,109 Mortgage loans held for sale 62,543 62,521 — 62,521 — Accrued interest receivable 14,374 14,374 — 14,374 — Restricted equity securities 15,770 15,770 — 15,770 — Financial liabilities Deposits $ 2,547,705 $ 2,548,511 $ — $ — $ 2,548,511 Accrued interest payable 2,302 2,302 — 2,302 — Subordinate debentures 70,821 72,373 — — 72,373 Federal Home Loan Bank advances — — — — — December 31, 2020 Carrying
AmountEstimated
Fair
ValueQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)Financial assets Cash and due from banks $ 13,717 $ 13,717 $ 13,717 $ — $ — Interest-bearing deposits in financial institutions 79,756 79,756 79,756 — — Federal funds sold 1,572 1,572 — 1,572 — Loans, net 2,280,147 2,293,723 — — 2,293,723 Mortgage loans held for sale 147,524 149,342 — 149,342 — Accrued interest receivable 14,889 14,889 — 14,889 — Restricted equity securities 16,551 16,551 — 16,551 — Financial liabilities Deposits $ 2,579,235 $ 2,583,525 $ — $ — $ 2,583,525 Accrued interest payable 2,571 2,571 — 2,571 — Subordinate debentures 70,446 71,750 — — 71,750 Federal Home Loan Bank advances 10,000 10,000 — — 10,000 methodsmethods and assumptions used to estimate fair value are described as follows:31COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)5 - STOCK-BASED COMPENSATION (CONTINUED)In 2006, the Board of Directors and shareholders of the Bank approved the Commerce Union Bank Stock Option Plan (the “Plan”). The Plan provides for the granting of stock options, and authorizes the issuance of common stock upon the exercise of such options, for up to 625,000 shares of common stock to employees and organizers of the Company. As part of a reorganization, all Commerce Union Bank options were replaced with Commerce Union Bancshares, Inc. options with no change in terms. On March 10, 2015, the shareholders of the Company approved the Commerce Union Bancshares, Inc. Amended and Restated Stock Option Plan that permits the grant of awards of up to 1,250,000 shares of the Company common stock in the form of stock options. As part of the merger with Reliant Bank, all outstanding stock options of Reliant Bank were converted to stock options of Commerce Union Bancshares, Inc. under this plan.Under the Stock Option Plan, stock option awards may be granted in the form of incentive stock options or non-statutory stock options, and are generally exercisable for up to ten years following the date such option awards are granted. Exercise prices of incentive stock options must be equal to or greater than the fair market value of the common stock on the grant date.On June 18, 2015, the shareholders of Commerce Union approved the Commerce Union Bancshares, Inc. 2015 Equity Incentive Plan, which provides for the issuance of up to 900,000 shares of common stock in the form of stock options, restricted stock grants or grants for performance-based compensation.A summary of the activity in the stock option plans for the nine months ended September 30, 2017 is as follows: 241,541 $ 12.96 15,500 24.24 (59,739 ) 11.60 (11,800 ) 13.75 185,502 14.29 5.85 $ 1,673 107,802 12.68 3.92 $ 1,132 96,600 $ 3.36 15,500 6.66 (22,600 ) 3.12 (11,800 ) 3.02 77,700 4.14 COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 5 - STOCK-BASED COMPENSATIONAt September 30, 2017, the unrecognized future compensation expense to be recognized for stock compensation totals $1,569.NOTE 6 - REGULATORY CAPITAL REQUIREMENTSThe Company and the Bank are subject to regulatory capital requirements administered by the federal and state 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. Management believes as of September 30, 2017, the Company and the Bank meet all capital adequacy requirements to which they are subject.Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, 2017 and December 31, 2016, the most recent regulatory notifications categorized the Bank as 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 institution’s category.In July 2013, the FDIC approved final rules that substantially amend the regulatory risk-based capital rules applicable to the Company and the Bank. The final rules implement the regulatory capital reforms of the Basel Committee on Banking Supervision reflected in “Basel III: A Global Framework for More Resilient Banks and Banking Systems” (Basel III) and changes required by the Dodd-Frank Act.Under these rules, the leverage and risk-based capital ratios of bank holding companies may not be lower than the leverage and risk-based capital ratios for insured depository institutions. The final rules implementing Basel III became effective on January 1, 2015, and include new minimum risk-based capital and leverage ratios and a new common equity tier 1 ratio. In addition, these rules refine the definition of what constitutes capital for purposes of calculating those ratios, including the definitions of Tier 1 capital and Tier 2 capital.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 6 - REGULATORY CAPITAL REQUIREMENTS (CONTINUED)Basel III establishes a “capital conservation buffer” of 2.5% which began phasing in on January 1, 2016, at a rate of .625% per year. The buffer becomes fully phased in on January 1, 2019. An institution is subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer.Actual and required capital amounts and ratios are presented below as of September 30, 2017 and December 31, 2016. $ 125,572 12.58 % $ 39,928 4.000 % $ 49,909 5.00 % 125,572 14.72 % 49,052 5.750 % 55,450 6.50 % 125,572 14.72 % 61,848 7.250 % 68,246 8.00 % 135,195 15.85 % 78,899 9.250 % 85,297 10.00 % $ 121,715 12.20 % $ 39,907 4.000 % $ 49,883 5.00 % 121,715 14.29 % 48,976 5.750 % 55,364 6.50 % 121,715 14.29 % 61,752 7.250 % 68,140 8.00 % 131,338 15.42 % 78,786 9.250 % 85,174 10.00 % $ 96,682 10.86 % $ 35,610 4.000 % N/A N/A 96,682 13.00 % 38,115 5.125 % N/A N/A 96,682 13.00 % 49,271 6.625 % N/A N/A 105,764 14.22 % 64,150 8.625 % N/A N/A $ 95,637 10.75 % $ 35,586 4.000 % $ 44,482 5.00 % 95,637 12.88 % 38,054 5.125 % 48,264 6.50 % 95,637 12.88 % 49,192 6.625 % 59,402 8.00 % 104,719 14.10 % 64,057 8.625 % 74,269 10.00 % COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 7 - EARNINGS PER SHAREThe following is a summary of the components comprising basic and diluted earnings per common share of stock (EPS): $ 1,846 $ 2,368 $ 6,091 $ 6,965 8,174,973 7,651,549 7,878,760 7,542,573 $ 0.23 $ 0.31 $ 0.77 $ 0.92 $ 1,846 $ 2,368 $ 6,091 $ 6,965 8,174,973 7,651,549 7,878,760 7,542,573 105,885 117,243 95,587 97,674 8,280,858 7,768,792 7,974,347 7,640,247 $ 0.22 $ 0.30 $ 0.76 $ 0.91 NOTE 89 - SEGMENT REPORTINGtwo2 reportable business segments: retailcommercial banking and residential mortgage banking. Segment information is derived from the internal reportingreporting system utilized by management. Revenues and expenses for segments reflect those which can be specifically identified and have been assigned based on internally developed allocation methods. Financial results have been presented, to the extent practicable, as if each segment operated on a stand-alone basis.Retailloans are amortizingtraditional first mortgage loans and home equity line of credit loans (HELOC). The amortizing firstlien residential mortgage loans are typically underwritten to government agency standards and sold to third partythird-party secondary market mortgage investors. SomeThe home equity lines of credit are typically sold to participating banks or other investor groups and are underwritten to their standards. RMV also acquires loans from approved correspondent lenders and resells them in the HELOCsecondary market. These loans are retained in the retail banking operation’s loan portfolio while othersnot government agency-qualified loans and are sold to third party investors.35Table of Contentshigher risk, such as jumbo loans or senior position home equity lines of credit.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 8 - SEGMENT REPORTING (CONTINUED)Company’sCompany’s business segments for the periods indicated: $ 8,924 $ 172 $ - $ 9,096 540 - - 540 516 1,584 (13 ) 2,087 6,748 1,749 - 8,497 306 - - 306 1,846 7 (13 ) 1,840 - (7 ) 13 6 $ 1,846 $ - $ - $ 1,846 $ 7,750 $ 85 $ - $ 7,835 145 - - 145 1,024 551 - 1,575 5,600 1,283 - 6,883 661 (42 ) - 619 2,368 (605 ) - 1,763 - 605 - 605 $ 2,368 $ - $ - $ 2,368 Three Months Ended
September 30, 2021Commercial Banking Residential
Mortgage
BankingElimination
EntriesConsolidated Net interest income $ 28,164 $ 835 $ — $ 28,999 Provision for loan losses — — — — Noninterest income 6,651 4,177 41 10,869 Noninterest expense (excluding merger expense) 16,551 4,377 — 20,928 Merger expense 1,453 — — 1,453 Income tax expense 3,522 29 — 3,551 Net income 13,289 606 41 13,936 Noncontrolling interest in net income of subsidiary — (606) (41) (647) Net income attributable to common shareholders $ 13,289 $ — $ — $ 13,289 36COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 8 - SEGMENT REPORTING (CONTINUED) $ 25,224 $ 346 $ - $ 25,570 1,195 - - 1,195 1,704 2,851 (98 ) 4,457 18,581 4,053 - 22,634 1,061 (56 ) - 1,005 6,091 (800 ) (98 ) 5,193 - 800 98 898 $ 6,091 $ - $ - $ 6,091 $ 24,082 $ 527 $ - $ 24,609 760 - - 760 2,253 5,678 - 7,931 16,800 6,747 - 23,547 1,810 (35 ) - 1,775 6,965 (507 ) - 6,458 - 507 - 507 $ 6,965 $ - $ - $ 6,965 Three Months Ended
September 30, 2020 Commercial Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income $ 29,731 $ 808 $ — $ 30,539 Provision for loan losses 1,500 — — 1,500 Noninterest income 2,219 3,797 (14) 6,002 Noninterest expense (excluding merger expense) 16,067 4,190 — 20,257 Merger expense 77 — — 77 Income tax (benefit) expense 2,773 27 — 2,800 Net (loss) income 11,533 388 (14) 11,907 Noncontrolling interest in net income of subsidiary — (388) 14 (374) Net income attributable to common shareholders $ 11,533 $ — $ — $ 11,533 Nine months ended September 30, 2021 Commercial Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income $ 84,737 $ 2,849 $ — $ 87,586 Provision for loan losses — — — — Noninterest income 14,395 12,461 (340) 26,516 Noninterest expense (excluding merger expense) 49,581 13,495 — 63,076 Merger expense 1,453 — — 1,453 Income tax expense (benefit) 9,615 118 — 9,733 Net income (loss) 38,483 1,697 (340) 39,840 Noncontrolling interest in net income of subsidiary — (1,697) 340 (1,357) Net income attributable to common shareholders $ 38,483 $ — $ — $ 38,483 Nine months ended September 30, 2020 Commercial Banking Residential Mortgage Banking Elimination Entries Consolidated Net interest income $ 75,933 $ 1,677 $ — $ 77,610 Provision for loan losses 7,400 — — 7,400 Noninterest income 6,102 7,601 3 13,706 Noninterest expense (excluding merger expense) 44,961 10,340 — 55,301 Merger expense 6,895 — — 6,895 Income tax expense (benefit) 3,593 (69) — 3,524 Net income (loss) 19,186 (993) 3 18,196 Noncontrolling interest in net loss of subsidiary — 993 (3) 990 Net income attributable to common shareholders $ 19,186 $ — $ — $ 19,186 37COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)9 - DERIVATIVESThe Company has swap agreements that were executed upon the purchase of investment grade municipal securities effectively converting the fixed municipal yields to floating rates. These fair value hedges are intended to reduce the interest rate risk associated with the underlying hedged item by mitigating the changes in fair value based on fluctuations in interest rates.The total notional amount of swap agreements was $21,505 at September 30, 2017 and December 31, 2016. At September 30, 2017, the contracts had fair values totaling $23 recorded in other assets and $448 recorded in other liabilities. At December 31, 2016, the contracts had fair values totaling $195 recorded in other assets and $267 recorded in other liabilities.The derivative instruments held by the Company are designated and qualify as fair value hedges. Accordingly, the gain or loss on the derivatives as well as the offsetting gain or loss on the available-for-sale securities attributable to the hedged risk are recognized in current earnings. At September 30, 2017, the Company’s fair value hedges are effective and are not expected to have a significant impact on net income over the next twelve months.NOTE 10 – INCOME TAXEStotaled $306 and $1,005 for the three and nine months ended September 30, 2017 as2021 totaled $3,551 and $9,733, respectively, compared to $619$2,800 and $1,775 in the comparative periods in 2016. The tax rate was favorably impacted by an increase in income from tax-exempt securities, excess tax benefits recognized relating to the exercise of stock options and the addition of certain state tax credits on interest-free loans.NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTSASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-1 will be effective$3,524 for the Company beginning on January 1, 2018 and is not expected to have a significant impact on our consolidated financial statements.COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)ASU 2016-02,“Leases (Topic 842)” requires lessees to recognize a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors. ASU 2016-1 will be effective for the Company on January 1, 2019 and will require transition using a modified retrospective approach, which requires application of the new guidance at the beginning of the earliest comparative period presented in the year of adoption. Management is evaluating the impact of the update on the Company’s consolidated financial statements.ASU 2016-09,“Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” requires that all excess tax benefits and tax deficiencies related to share-based payment awards be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such excess tax benefits were recorded as additional paid-in capital, and tax deficiencies were charged to additional paid in capital to the extent of prior excess tax benefits. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 2016-09 also provides that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. ASU 2016-09 became effective on January 1, 2017 with early adoption permitted. The Company elected early adoption of this update and as a result recognized in income tax expense an excess tax benefit of $82 and $181 related to the exercise of stock options during the three months and nine months ended September 30, 2017, respectively and $106 and $5312020, respectively. The effective tax rate for the corresponding periodsthree and nine months ended September 30, 2021 was 20.3% and 19.6%, respectively, compared to 19.0% and 16.2% for the three and nine months ended September 30, 2020, respectively.2016.ASU 2016-13the TCB Holdings Agreement, TCB Holdings merged with and into Reliant Bancorp (the “TCB Holdings Transaction”), “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” requireswith Reliant Bancorp as the measurement of all expected credit losses for financial assets heldsurviving corporation. Immediately following the TCB Holdings Transaction, CBT merged with and into the Bank, with the Bank continuing as the surviving banking corporation. Pursuant to the TCB Holdings Agreement, at the reporting dateeffective time of the TCB Holdings Transaction, each outstanding share of TCB Holdings common stock, par value $1.00 per share (other than certain excluded shares), was converted into and canceled in exchange for the right to receive (i) $17.13 in cash, without interest, and (ii) 0.769 shares of the Reliant Bancorp’s common stock, par value $1.00 per share (“Reliant Bancorp Common Stock”). The aggregate consideration payable by Reliant Bancorp in respect of shares of TCB Holdings common stock as consideration for the TCB Holdings Transaction was 811,210 shares of Reliant Bancorp Common Stock and approximately $18,073 in cash. Reliant Bancorp did not issue fractional shares of Reliant Bancorp Common Stock in connection with the TCB Holdings Transaction, but paid cash in lieu of fractional shares based on historical experience, current conditions,the volume weighted average closing price per share of the Reliant Bancorp Common Stock on The Nasdaq Capital Market for the 10 consecutive trading days ending on and reasonable and supportable forecasts and requires enhanced disclosures relatedincluding December 30, 2019 (calculated as $22.36). At the effective time of the TCB Holdings Transaction, each outstanding option to purchase TCB Holdings common stock was canceled in exchange for a cash payment in an amount equal to the significant estimatesproduct of (i) $34.25 minus the per share exercise price of the option multiplied by (ii) the number of shares of TCB Holdings common stock subject to the option (to the extent not previously exercised). Reliant Bancorp paid aggregate consideration to holders of unexercised options of approximately $430. All shares of Reliant Bancorp Common Stock outstanding immediately prior to the TCB Holdings Transaction were unaffected by the TCB Holdings Transaction.judgments usedgoodwill recognized:Calculation of Purchase Price Shares of Tennessee Community Bank Holdings, Inc. common stock outstanding as of January 1, 2020 1,055,041 Exchange ratio for Reliant Bancorp, Inc. common stock 0.769 Reliant Bancorp, Inc. common stock shares issued 811,210 Reliant Bancorp, Inc. share price at January 1, 2020 $ 22.24 Estimated value of Reliant Bancorp, Inc. shares issued 18,041 Cash settlement for Tennessee Community Bank Holdings, Inc. common stock ($17.13 per share) 18,073 Cash settlement for Tennessee Community Bank Holdings, Inc.'s 26,450 outstanding stock options ($34.25 settlement price less weighted average exercise price of $18.00) 430 Cash settlement for Reliant Bancorp, Inc. fractional shares ($22.36 per pro rata fractional share) 3 Estimated fair value of Tennessee Community Bank Holdings, Inc. $ 36,547 Allocation of Purchase Price Total consideration above $ 36,547 Fair value of assets acquired and liabilities assumed Cash and cash equivalents 11,026 Investment securities available for sale 56,336 Loans, net of unearned income 171,445 Accrued interest receivable 948 Premises and equipment 5,221 Cash surrender value of life insurance contracts 5,629 Restricted equity securities 909 Core deposit intangible 3,617 Other assets 833 Deposits (210,538) Deferred tax liability (157) Borrowings (58) FHLB advances (13,102) Other liabilities (4,337) Total fair value of net assets acquired 27,772 Goodwill $ 8,775 estimating credit losses, as wellAshland City, Kingston Springs, Pegram, Pleasant View, and Springfield, Tennessee. These communities lie on the northwest perimeter of Nashville, Tennessee.credit qualitysurviving corporation, followed immediately by the merger of FABK with and underwriting standardsinto Reliant Bancorp, with Reliant Bancorp as the surviving corporation. Immediately following the merger of an organization’s portfolio.FABK into Reliant Bancorp, First Advantage Bank, a Tennessee-chartered commercial bank and wholly owned subsidiary of FABK ("FAB"), merged with and into the Bank, with the Bank continuing as the surviving banking corporation. Pursuant to the FABK Agreement, at the effective time of the FABK Transaction, each outstanding share of FABK common stock, par value $0.01 per share (the “FABK Common Stock”), other than certain excluded shares, was converted into the right to receive (i) 1.17 shares of Reliant Bancorp Common Stock and (ii) $3.00 in cash, without interest. In addition, ASU 2016-13 amendslieu of the accountingissuance of fractional shares of Reliant Bancorp Common Stock, Reliant Bancorp agreed to pay cash in lieu of fractional shares based on the volume-weighted average closing price per share of Reliant Bancorp Common Stock on The Nasdaq Capital Market for credit lossesthe 10 consecutive trading days ending on available-for-sale debt securities and purchasedincluding March 30, 2020 (calculated as $11.74). Based on the April 1, 2020 opening price for Reliant Bancorp Common Stock of $11.27 per share and 3,935,165 shares of FABK Common Stock outstanding on April 1, 2020, the consideration for the FABK Transaction was approximately $64,094, in the aggregate, or $16.28 per share of FABK Common Stock.with credit deterioration. ASU 2016-13 will be effective beginningassumed and goodwill recognized:Calculation of Purchase Price Shares of First Advantage Bancorp common stock outstanding as of April 1, 2020 3,935,165 Conversion of restricted stock units to shares of common stock of First Advantage Bancorp as of April 1, 2020 2,000 Total First Advantage Bancorp common stock outstanding as of April 1, 2020 3,937,165 Exchange ratio for Reliant Bancorp, Inc. common stock 1.17 Reliant Bancorp, Inc. common stock shares issued 4,606,483 Remove fractional shares (64) Reliant Bancorp, Inc. common stock shares issued 4,606,419 Reliant Bancorp, Inc. share price at April 1, 2020 $ 11.27 Estimated value of Reliant Bancorp, Inc. shares issued 51,914 Cash settlement for Reliant Bancorp, Inc. fractional shares ($11.74 per pro rata fractional share) 1 Cash settlement for First Advantage Bancorp common stock ($3.00 per share) 11,805 Cash settlement for First Advantage Bancorp restricted stock units ($3.00 per share) 6 Cash settlement for First Advantage Bancorp's 34,800 outstanding stock options ($30.00 settlement price less weighted average exercise price of $19.44) 368 Estimated fair value of First Advantage Bancorp $ 64,094 Allocation of Purchase Price Total consideration above $ 64,094 Fair value of assets acquired and liabilities assumed Cash and cash equivalents 11,159 Investment securities available for sale 35,970 Loans, net of unearned income 622,423 Mortgage loans held for sale, net 5,878 Premises and equipment 7,757 Deferred tax asset 4,937 Cash surrender value of life insurance contracts 14,776 Other real estate and repossessed assets 1,259 Core deposit intangible 2,280 Operating lease right-of-use assets 5,846 Other assets 11,624 Deposits (608,690) Borrowings (35,962) Operating lease liabilities (6,536) Other liabilities (10,606) Total fair value of net assets acquired 62,115 Goodwill $ 1,979 Management is evaluatingThese results combine the historical results of TCB Holdings and FABK into the Company's consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments, they are not indicative of what would have occurred had the pronouncementacquisitions taken place on the consolidated financial statements.ASU 2017-04, “Intangibles - Goodwillindicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of TCB Holdings' or FABK's provision for credit losses for the first three and Other (Topic 350) - Simplifyingnine months of 2020 that may not have been necessary had the Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the impliedacquired loans been recorded at fair value as of goodwill. Under ASU 2017-04, an entity should perform its annual,the beginning of 2020. Additionally, these financials were not adjusted for non-recurring expenses, such as merger-related charges incurred by either the Company, TCB Holdings or interim, goodwill impairment test by comparingFABK. The Company expects to achieve operating cost savings and other business synergies as a result of the fair valueacquisitions which are also not reflected in the pro forma amounts.Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 $ 39,868 $ 36,541 $ 114,102 $ 97,623 Net interest income $ 28,999 $ 30,539 $ 87,586 $ 82,686 Net income attributable to common shareholders $ 13,289 $ 11,533 $ 38,483 $ 13,768 a reporting unit with its carrying amount. An entity should recognize an impairment chargeaccounting for and disclosure of events that occur after the amount by whichbalance sheet date but before financial statements are issued. Reliant Bancorp evaluated all events or transactions that occurred after September 30, 2021 through the carrying amount exceedsdate of the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective beginning on January 1, 2020, with early adoption permitted for interim or annual impairment tests beginning in 2017. ASU 2017-04 is not expected to have a significant impact on the consolidatedissued financial statements.39COMMERCE UNION BANCSHARES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)SEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016(Dollar amounts in thousands except per share amounts)NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)ASU 2017-05, “Other Income - GainsLosses from the DerecognitionAnalysis of Nonfinancial Assets (Subtopic 610-20) - Clarifying the ScopeFinancial Condition and Results of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”clarifies the scope of Subtopic 610-20 and adds guidance for partial sales of nonfinancial assets, including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. ASU 2017-05 reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. ASU 2017-05 will be effective for the Company on January 1, 2018 and is not expected to have a significant impact on our consolidated financial statements.ASU 2017-08 “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities” shortens the amortization period for certain callable debt securities held at a premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual, non-pooled callable debt securities as a yield adjustment over the contractual life of the security. ASU 2017-08 does not change the accounting for callable debt securities held at a discount. ASU 2017-08 will be effective for the Company on January 1, 2019, with early adoption permitted and is not expected to have a significant impact on our consolidated financial statements.ASU 2017-09, “Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting.” ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award's fair value, (ii) the award's vesting conditions and (iii) the award's classification as an equity or liability instrument. ASU 2017-09 will be effective for the Company on January 1, 2018 and is not expected to have a significant impact on the consolidated financial statements.ASU 2017-12, “Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends the hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities to better align the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting. ASU 2017-12 will be effective for the Company on January 1, 2019 and is not expected to have a significant impact on the consolidated financial statements.40ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSIn the following section the term “Company” means “Commerce Union Bancshares, Inc.” and the term “Bank” means “Reliant Bank.” The following discussion and analysis is intended to assist in the understanding and assessment of significant changes and trends related to our financial position and operating results. This discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere herein along with ourReliant Bancorp's Annual Report on Form 10-K filed March 14, 2017.for the year ended December 31, 2020. Amounts in the narrative are shown in thousands, except for economic and demographic information, numbers of shares, per share amounts and as otherwise noted.PoliciesTheEstimateswe follow(“U.S. GAAP”) and our methods of applying these principles conform with U.S. GAAP and with general practices within the banking industry. There have been no significant changesWithin our financial statements, certain financial information contain approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of newly issued accounting standards, are discussed in further detail in Note 1, "Summary of Significant Accounting Policies," in the notes to our critical accounting policies as describedconsolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The following is a brief summary2020. Subsequent adoptions and changes to critical accounting policies during the nine months ended September 30, 2021 are further described in Note 1 within "Part 1. Financial Information - Notes to consolidated financial statements" of this report.moreCompany’s performance, financial condition, and efficiency of operations. Management of the Company believes that these non-GAAP financial measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods, and demonstrate the effects of significant policies.Principlesgains and charges in the periods presented. Management of ConsolidationThe consolidatedthe Company also believes that investors find these non-GAAP financial statementsmeasures useful as ofthey assist investors in understanding underlying operating performance and identifying and analyzing ongoing operating trends. However, the non-GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the periods presentedmost directly comparable or other financial measures calculated in accordance with U.S. GAAP. Moreover, the manner in which the non-GAAP financial measures discussed herein are calculated may differ from the manner in which measures with similar names are calculated by other companies. You should understand how other companies calculate their financial measures similar to, or with names similar to, the non-GAAP financial measures we have discussed herein when comparing such non-GAAP financial measures.the accounts of Commerce Union Bancshares, Inc., its wholly-owned subsidiary, Reliant Bank (the “Bank”), and the Bank’s 51% controlled subsidiary, Reliant Mortgage Ventures, LLC, collectively (the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.During 2011, the Bank and another entity organized Reliant Mortgage Ventures. Under the related operating agreement, the non-controlling member receives 70% of the profits of the mortgage venture, and the Bank receives 30% of the profits once the non-controlling member recovers its aggregate losses. The non-controlling member is responsible for 100% of the mortgage venture’s“adjusted net losses. As of September 30, 2017, the cumulative lossesinterest margin (NIM),” “adjusted net income,” “adjusted diluted earnings per share (EPS),” “adjusted annualized return on average assets (ROAA),” “adjusted annualized return on average equity (ROAE),” “adjusted annualized return on average tangible common equity (ROATCE),” “adjusted pre-tax pre-provision income,” “tangible common equity to date totaled $4,197 prior to intercompany eliminations. Reliant Mortgage Ventures, LLC will have to generate net income of this amount before the Company will participate in future earnings.Purchased LoansThe Company maintains an allowancetangible assets (TCE/TA),” “tangible book value per share,” “allowance for loan losses onplus unaccreted purchased loans based on credit deterioration subsequentloan discounts to the acquisition date. In accordance with the accounting guidance for business combinations, because we recorded all acquiredtotal loans, at fair value as” “bank segment adjusted net income,” “bank segment adjusted noninterest expense,” “bank segment adjusted efficiency ratio,” “adjusted cost of the datefunds,” “adjusted cost of the reverse merger (discussed below), we did not establish an allowance for loan losses on anyinterest-bearing liabilities,” and “adjusted cost of the loans we purchased as of the acquisition date as any credit deterioration evident in the loans was included in the determination of the acquisition date fair values. For purchased credit-impaired loans accounted for under ASC 310-30, management establishes an allowance for loan losses subsequent to the date of acquisition by re-estimating expected cash flows on these loans on a quarterly basis, with any decline in expected cash flows due to a credit triggering impairment recorded as provision for loan losses. The allowance established is the excess of the loan’s carrying value over the present value of projected future cash flows, discounted at the current accounting yield of the loan or the fair value of collateral (less estimated costs to sell) for collateral dependent loans. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. While the determination of specific cash flows involves estimates, each estimate is unique to the individual loan,deposits.”none is individually significant. For non-purchased credit-impaired loans acquired in the reverse merger and that are accounted for under ASC 310-20, the historical loss estimates are based on the historical losses experienced by Reliant Bank for loans with similar characteristics as those acquired other than purchased credit-impaired loans. We record an allowance for loan losses only when the calculated amount exceeds the remaining credit mark established at acquisition.Earnings Summary41Allowance for Loan LossesThe allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using historical loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, current economic conditions (national and local), and other factors such as changes in interest rates, portfolio concentrations, changes in the experience, ability, and depth of the lending function, levels of and trends in charged-off loans, recoveries, past-due loans and volume and severity of classified loans. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The entire allowance is available for any loan that, in management’s judgment, should be charged off.A loan is impaired when full payment under the loan terms is not expected. All classified loans and loans on non-accrual status or 90+ days past due still accruing are individually evaluated for impairment. Factors considered in determining if a loan is impaired include the borrower’s ability to repay amounts owed, collateral deficiencies, the risk rating of the loan and economic conditions affecting the borrower’s industry, among other things. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value (less estimated costs to sell) of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless the principal amount is deemed fully collectible, in which case interest is recognized on a cash basis. When recognition of interest income on a cash basis is appropriate, the amount of income recognized is limited to what would have been accrued on the remaining principal balance at the contractual rate. Cash payments received over this limit, and not applied to reduce the loans remaining principal balance, are recorded as recoveries of prior charge-offs until these charge-offs have been fully recovered.Fair Value of Financial InstrumentsFair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note to the consolidated financial statements. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHSENDED SEPTEMBER30, 2017AND 2016Earnings$1,846$13,289, or $0.80 per basic share, and $6,091,$38,483, or $0.23 and $0.77$2.31 per basic share, for the three and nine months ended September 30, 2017,2021, respectively, compared to $2,368$11,533, or $0.70 per basic share and $6,965,$19,186, or $0.31 and $0.92$1.27 per basic share for the same periods in 2016.2020, respectively. Diluted net income attributable to common shareholders per share was $0.22$0.79 and $0.30$2.29 for the three and nine months ended September 30, 2021, respectively, compared to $0.69 and $1.27 per share and $0.76 and $0.91 per diluted share for the three and nine months ended September 30, 2017, compared to 2016,2020, respectively.decline in income per share from the prior-year discussed further below include the private offering of 1,137,000 shares, the increase in audit, legal and consulting expenses relatingchange when compared to the merger with Community First Inc.,prior year periods are a decrease of 5.0% for the three months ended September 30, 2021 and an increase of 12.9% for the nine months ended September 30, 2021 in net interest income, an increase of 81.1% and 93.5% in noninterest income for the three and nine months ended September 30, 2021, respectively, and a decrease of $1,500 and $7,400 in provision for loan losses for the three and nine months ended September 30, 2021, respectively.(Dollar amounts in thousands, except per share amounts) Three months ended, Nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Selected Statement of Income Data Total interest income $ 33,930 $ 35,768 $ 103,407 $ 94,989 Total interest expense 4,931 5,229 15,821 17,379 Net interest income 28,999 30,539 87,586 77,610 Provision for credit loss — 1,500 — 7,400 Total noninterest income 10,869 6,002 26,516 13,706 Total noninterest expense 22,381 20,334 64,529 62,196 Net income before income taxes 17,487 14,707 49,573 0 21,720 Income tax expense 3,551 2,800 9,733 3,524 Consolidated net income 13,936 11,907 39,840 18,196 Noncontrolling interest in net loss of subsidiary (647) (374) (1,357) 990 Net income attributable to common shareholders $ 13,289 $ 11,533 $ 38,483 $ 19,186 Per Common Share Basic net income $ 0.80 $ 0.70 $ 2.31 $ 1.27 Diluted net income 0.79 0.69 2.29 1.27 0.87 0.70 2.38 1.62 Book value 21.36 18.46 21.36 18.46 17.50 14.65 17.50 14.65 Shares Outstanding Basic weighted average common shares 16,665,155 16,587,274 16,632,587 15,053,087 Diluted weighted average common shares 16,805,157 16,649,673 16,776,972 15,120,703 Common shares outstanding at period end 16,682,928 16,634,572 16,682,928 16,634,572 Selected Balance Sheet Data Loans, net of unearned income $ 2,389,833 $ 2,357,898 $ 2,389,833 $ 2,357,898 Total assets 3,013,559 3,044,512 3,013,559 3,044,512 Customer deposits 2,289,737 2,185,915 2,289,737 2,185,915 Wholesale and institutional deposits 257,968 379,587 257,968 379,587 Total deposits 2,547,705 2,565,502 2,547,705 2,565,502 Total liabilities 2,657,244 2,737,426 2,657,244 2,737,426 Total shareholders' equity 356,315 307,086 356,315 307,086 Total liabilities and shareholders' equity 3,013,559 3,044,512 3,013,559 3,044,512 Selected Balance Sheet Data - Averages Loans held for investment $ 2,360,073 $ 2,337,958 $ 2,310,056 $ 2,085,467 2,818,164 2,771,917 2,826,721 2,500,951 Total assets 3,036,777 2,991,818 3,046,160 2,711,218 Interest-bearing liabilities 2,032,296 2,108,428 2,075,003 1,955,621 Total liabilities 2,685,605 2,692,383 2,706,837 2,434,372 Total shareholders' equity 351,172 299,435 339,323 276,846 (Dollar amounts in thousands, except per share amounts) Three months ended, Nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Selected Performance Ratios 1.74 % 1.53 % 1.69 % 0.95 % 15.01 % 15.32 % 15.16 % 9.26 % 18.40 % 19.42 % 18.76 % 12.04 % Average shareholders' equity to average assets 11.56 % 10.01 % 11.14 % 10.21 % 4.22 % 4.54 % 4.28 % 4.30 % Efficiency Ratio (tax-equivalent basis) 54.8 % 54.0 % 55.1 % 66.0 % 51.7 % 50.5 % 51.5 % 63.2 % Loans held for investment to deposits ratio 93.8 % 91.9 % 93.8 % 91.9 % Yield on interest-earning assets 4.91 % 5.29 % 5.03 % 5.23 % Yield on loans held for investment 5.29 % 5.73 % 5.50 % 5.69 % Cost of interest-bearing liabilities 0.96 % 0.99 % 1.02 % 1.19 % 0.52 % 0.99 % 0.69 % 1.19 % Cost of funds 0.74 % 0.79 % 0.79 % 0.97 % 0.40 % 0.79 % 0.53 % 0.97 % Cost of total deposits 0.58 % 0.62 % 0.64 % 0.81 % 0.26 % 0.62 % 0.40 % 0.81 % Tier 1 leverage 10.04 % 8.72 % 10.04 % 8.72 % Common equity tier 1 10.52 % 9.77 % 10.52 % 9.77 % Tier 1 risk-based capital 10.95 % 10.25 % 10.95 % 10.25 % Total risk-based capital 13.92 % 13.44 % 13.92 % 13.44 % Selected Asset Quality Measures Allowance for loan losses to total loans 0.87 % 0.84 % 0.87 % 0.84 % 1.38 % 1.64 % 1.38 % 1.64 % Net (recoveries) charge offs $ (3) $ (97) $ (261) $ 144 — % (0.02) % (0.02) % 0.01 % Total nonperforming loans held for investment (HFI) $ 5,302 $ 6,802 $ 5,302 $ 6,802 $ 10,232 $ 9,731 $ 10,232 $ 9,731 Nonperforming loans HFI to total loans HFI 0.22 % 0.29 % 0.22 % 0.29 % Nonperforming assets to total assets 0.34 % 0.32 % 0.34 % 0.32 % Nonperforming assets to total loans HFI and NPAs 0.43 % 0.41 % 0.43 % 0.41 % Three Months Ended Nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Adjusted net interest margin: Net interest income $ 28,999 $ 30,539 $ 87,586 $ 77,610 Add: tax equivalent interest income 947 1,107 2,987 2,960 Add: swap termination fees 2,290 — 5,149 — Less: purchase accounting adjustments (993) (3,868) (4,676) (9,773) Adjusted net interest income $ 31,243 $ 27,778 $ 91,046 $ 70,797 Average earning assets $ 2,818,164 $ 2,771,917 $ 2,826,721 $ 2,500,951 Net interest margin-tax equivalent 4.22 % 4.54 % 4.28 % 4.30 % Adjusted net interest margin 4.40 % 3.99 % 4.31 % 3.78 % Net income attributable to common shareholders $ 13,289 $ 11,533 $ 38,483 $ 19,186 Add: merger related expenses 1,453 77 1,453 6,895 Less: income tax impact of merger related expenses (48) (10) (48) (1,607) Adjusted net income $ 14,694 $ 11,600 $ 39,888 $ 24,474 Adjusted diluted earnings per share: Adjusted net income $ 14,694 $ 11,600 $ 39,888 $ 24,474 Weighted average shares - diluted 16,805,157 16,649,673 16,776,972 15,120,703 Diluted earnings per share $ 0.79 $ 0.69 $ 2.29 $ 1.27 Adjusted diluted earnings per share $ 0.87 $ 0.70 $ 2.38 $ 1.62 Adjusted annualized return on average assets: Adjusted net income $ 14,694 $ 11,600 $ 39,888 $ 24,474 Average assets 3,036,777 2,991,818 3,046,160 2,711,218 Annualized return on average assets 1.74 % 1.53 % 1.69 % 0.95 % Adjusted annualized return on average assets 1.92 % 1.54 % 1.75 % 1.21 % Adjusted annualized return on average equity: Adjusted net income $ 14,694 $ 11,600 $ 39,888 $ 24,474 Average total shareholders' equity 351,172 299,435 339,323 276,846 Annualized return on average equity 15.01 % 15.32 % 15.16 % 9.26 % Adjusted annualized return on average equity 16.60 % 15.41 % 15.72 % 11.81 % Adjusted annualized return on average tangible common equity: Average total shareholders' equity $ 351,172 $ 299,435 $ 339,323 $ 276,846 Less: average intangible assets (64,607) (63,212) (65,072) (64,042) Average tangible common equity $ 286,565 $ 236,223 $ 274,251 $ 212,804 Adjusted net income 14,694 11,600 39,888 24,474 Annualized return on average tangible common equity 18.40 % 19.42 % 18.76 % 12.04 % Adjusted annualized return on average tangible common equity 20.34 % 19.54 % 19.45 % 15.36 % Three Months Ended Nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Adjusted pre-tax pre-provision income: Income before provision for income taxes $ 17,487 $ 14,707 $ 49,573 $ 21,720 Add: merger related expenses 1,453 77 1,453 6,895 Add: provision for loan losses — 1,500 — 7,400 Adjusted pre-tax pre-provision income $ 18,940 $ 16,284 $ 51,026 $ 36,015 Tangible common equity to tangible assets: Tangible common equity: Total shareholders' equity $ 356,315 $ 307,086 $ 356,315 $ 307,086 Less: intangible assets (64,374) (63,326) (64,374) (63,326) Tangible common equity $ 291,941 $ 243,760 $ 291,941 $ 243,760 Tangible assets: Total assets $ 3,013,559 $ 3,044,512 $ 3,013,559 $ 3,044,512 Less: intangible assets (64,374) (63,326) (64,374) (63,326) Tangible assets $ 2,949,185 $ 2,981,186 $ 2,949,185 $ 2,981,186 Total shareholders' equity to total assets 11.82 % 10.09 % 11.82 % 10.09 % Tangible common equity to tangible assets 9.90 % 8.18 % 9.90 % 8.18 % Tangible book value per share: Tangible common equity $ 291,941 $ 243,760 $ 291,941 $ 243,760 Total shares of common stock outstanding 16,682,928 16,634,572 16,682,928 16,634,572 Book value per common share $ 21.36 $ 18.46 $ 21.36 $ 18.46 Tangible book value per share $ 17.50 $ 14.65 $ 17.50 $ 14.65 Allowance for loan losses plus unaccreted loan purchase discounts: Allowance for loan losses $ 20,897 $ 19,834 $ 20,897 $ 19,834 Unaccreted loan purchase discounts 11,993 18,939 11,993 18,939 Allowance for loan losses plus unaccreted loan purchase discounts: $ 32,890 $ 38,773 $ 32,890 $ 38,773 Total loans 2,389,833 2,357,898 2,389,833 2,357,898 Allowance for loan losses plus unaccreted purchased loan discounts to total loans 1.38 % 1.64 % 1.38 % 1.64 % Allowance for loan losses to total loans 0.87 % 0.84 % 0.87 % 0.84 % Bank segment adjusted net income: Bank segment net income $ 13,289 $ 11,533 $ 38,483 $ 19,186 Add: merger related expenses 1,453 77 1,453 6,895 Less: income tax impact of merger related expenses (48) (10) (48) (1,607) Bank segment adjusted net income $ 14,694 $ 11,600 $ 39,888 $ 24,474 Bank segment adjusted noninterest expense: Bank segment noninterest expense $ 18,004 $ 16,144 $ 51,034 $ 51,856 Less: merger related expenses (1,453) (77) (1,453) (6,895) Bank segment adjusted noninterest expense $ 16,551 $ 16,067 $ 49,581 $ 44,961 Three Months Ended Nine months ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Bank segment adjusted efficiency ratio: Bank segment adjusted total revenues: Bank segment net interest income $ 28,164 $ 29,731 $ 84,737 $ 75,933 Add: Tax equivalent interest income 947 1,107 2,987 2,960 Add: Bank segment noninterest income 6,651 2,219 14,395 6,102 (2,405) 9 (5,473) (352) 2,290 — 5,149 — Bank segment adjusted total revenues $ 35,647 $ 33,066 $ 101,795 $ 84,643 Bank segment efficiency ratio 51.7 % 50.5 % 51.5 % 63.2 % Bank segment adjusted efficiency ratio 46.4 % 48.6 % 48.7 % 53.1 % Adjusted cost of funds: Adjusted interest expense: Interest Expense $ 4,931 $ 5,229 $ 15,821 $ 17,379 Less: Swap termination fees (2,290) — (5,149) — Adjusted interest expense $ 2,641 $ 5,229 $ 10,672 $ 17,379 Average funds 2,649,200 2,644,781 2,668,477 2,394,976 Cost of funds 0.74 % 0.79 % 0.79 % 0.97 % Adjusted cost of funds 0.40 % 0.79 % 0.53 % 0.97 % Adjusted cost of interest-bearing liabilities: Adjusted interest expense $ 2,641 $ 5,229 $ 10,672 $ 17,379 Average interest-bearing liabilities 2,032,296 2,108,428 2,075,003 1,955,621 Cost of interest-bearing liabilities 0.96 % 0.99 % 1.02 % 1.19 % Adjusted cost of interest-bearing liabilities 0.52 % 0.99 % 0.69 % 1.19 % Adjusted cost of deposits: Adjusted deposit expense: Deposit expense $ 3,942 $ 4,133 $ 12,882 $ 13,799 Less: Swap termination fees (2,290) — (5,149) — Adjusted deposit expense $ 1,652 $ 4,133 $ 7,733 $ 13,799 Average deposits 2,567,679 2,533,853 2,584,162 2,232,298 Cost of deposits 0.58 % 0.62 % 0.64 % 0.81 % Adjusted cost of deposits 0.26 % 0.62 % 0.40 % 0.81 % somewhat offset by ana rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. As certain restrictions began lifting and more businesses were allowed to open their doors in late 2020, we began to experience a slow improvement in commerce through much of our footprint, which continued into the first half of 2021 with further easing of restrictions and increasing availability of vaccinations. Despite the pickup in economic activity, commercial and consumer activity has not returned to pre-pandemic levels. Although most restrictions were lifted and vaccines became widely available during the first half of 2021, during the summer of 2021, concern began building regarding the potential impact the new Delta variant of the virus may have on the global economy and the efficacy of available vaccines to protect against widespread infection. As such, there continues to be uncertainty regarding the long term effects on the global economy, which could have a material adverse impact on the Company's business operations, asset valuations, financial condition, and results of operations.a declinenet interest margin are changes in income taxes. Our earnings per share declined withvolumes, the change in earningsyield on interest-earning assets and the greater numbercost of average shares outstanding dueinterest-bearing liabilities. Our margin can also be affected by economic conditions, the competitive environment, loan demand and deposit flow. Our ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the exercisestability of Company stock optionsthe net interest margin and the private offering.our net interest income.42Net Interest IncomeNet interest income represents the amount by which interest earned on various earning assets exceeds interest paid on deposits and other interest-bearing liabilities and is the most significant component of our revenues. table setstables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the three and nine months ended September 30, 2017,2021, and 20162020 (dollars in thousands): $ 727,453 4.78 $ 8,588 $ 649,778 4.57 $ 7,277 $ 947 $ 364 $ 1,311 - 0.27 490 - 0.28 452 38 - 38 727,453 5.05 9,078 649,778 4.85 7,729 985 364 1,349 18,333 4.57 211 12,804 3.39 109 56 46 102 14,451 0.88 32 20,439 0.37 19 (34 ) 47 13 30,212 2.35 179 33,512 1.63 137 (81 ) 123 42 157,718 3.99 1,022 111,448 3.33 578 300 144 444 7,557 5.51 105 8,506 3.93 84 (53 ) 74 21 955,724 4.72 10,627 836,487 4.37 8,656 1,173 798 1,971 54,812 48,640 $ 1,010,536 $ 885,127 81,629 0.20 42 89,572 0.20 46 (4 ) - (4 ) 205,463 0.40 207 179,816 0.33 151 23 33 56 329,203 1.02 845 143,344 0.73 262 446 137 583 90,222 1.20 272 94,239 0.71 168 (48 ) 152 104 706,517 0.77 1,366 506,971 0.49 627 417 322 739 46,910 1.40 165 132,876 0.58 194 (694 ) 665 (29 ) 753,427 0.81 1,531 639,847 0.51 821 (277 ) 987 710 3.91 $ 9,096 3.86 $ 7,835 $ 1,450 $ (189 ) $ 1,261 133,108 (0.13 ) 134,343 (0.09 ) 4,574 4,159 119,427 106,778 $ 1,010,536 $ 885,127 0.68 0.42 4.08 3.98 Three Months Ended September 30, Change 2021 2020 Rates / Yields (%) Interest Income / Expense Rates / Yields (%) Interest Income / Expense Due to Volume Due to Rate Total Interest earning assets $ 2,360,073 4.96 $ 28,847 $ 2,337,958 5.34 $ 30,640 $ 289 $ (2,173) $ (1,884) Loan fees — 0.33 1,970 — 0.38 2,255 (285) — (285) Loans with fees 2,360,073 5.29 30,817 2,337,958 5.73 32,895 4 (2,173) (2,169) Mortgage loans held for sale 134,245 3.50 1,184 103,729 3.98 1,037 249 (102) 147 Deposits with banks 45,885 0.39 45 57,909 0.47 68 (13) (10) (23) Investment securities - taxable 106,433 2.93 786 67,569 2.35 399 271 116 387 154,417 3.10 928 185,058 3.30 1,186 (239) (88) (327) Restricted equity securities and other 17,111 3.94 170 19,694 3.70 183 (26) 13 (13) Total earning assets 2,818,164 4.91 33,930 2,771,917 5.29 35,768 246 (2,244) (1,998) Nonearning assets 218,613 219,901 Total assets $ 3,036,777 $ 2,991,818 Interest bearing liabilities Interest bearing demand 411,796 0.15 153 272,506 0.34 236 890 (973) (83) Savings and money market 980,069 0.18 441 786,589 0.59 1,162 395 (1,116) (721) Time deposits - retail 440,390 0.74 825 715,310 0.97 1,744 (568) (351) (919) Time deposits - wholesale 118,520 8.45 2,523 223,095 1.77 991 (217) 1,749 1,532 Total interest-bearing deposits 1,950,775 0.80 3,942 1,997,500 0.82 4,133 499 (690) (191) Federal Home Loan Bank advances and other borrowings 10,724 0.33 9 40,567 1.02 104 (49) (46) (95) Subordinated debt 70,797 5.49 980 70,361 5.61 992 5 (17) (12) Total borrowed funds 81,521 4.81 989 110,928 3.93 1,096 (45) (62) (107) Total interest-bearing liabilities 2,032,296 0.96 4,931 2,108,428 0.99 5,229 455 (753) (298) 3.95 $ 28,999 4.30 $ 30,539 $ (209) $ (1,491) $ (1,700) Noninterest bearing deposits 616,904 (0.22) 536,353 (0.20) Other noninterest bearing liabilities 36,405 47,602 Shareholders' equity 351,172 299,435 Total liabilities and shareholders' equity $ 3,036,777 $ 2,991,818 Cost of funds 0.74 0.79 4.22 4.54 43(1) Calculated using daily averages. $ 701,362 4.61 $ 23,652 $ 635,055 4.87 $ 22,603 $ 2,879 $ (1,830 ) $ 1,049 - 0.29 1,541 - 0.30 1,408 133 - 133 701,362 4.90 25,193 635,055 5.17 24,011 3,012 (1,830 ) 1,182 13,310 4.22 420 24,351 3.64 663 (389 ) 146 (243 ) 15,177 0.71 81 20,646 0.35 54 (25 ) 52 27 32,355 2.12 514 43,840 1.79 589 (214 ) 139 (75 ) 145,412 4.01 2,796 98,560 3.33 1,506 902 388 1,290 7,787 5.15 300 7,447 4.38 244 12 44 56 915,403 4.58 29,304 829,899 4.60 27,067 3,298 (1,061 ) 2,237 54,240 49,350 $ 969,643 $ 879,249 84,307 0.21 131 89,604 0.20 137 (13 ) 7 (6 ) 200,304 0.37 557 188,387 0.34 480 32 45 77 308,911 0.86 1,994 142,602 0.70 747 1,043 204 1,247 87,105 1.03 669 105,188 0.65 513 (147 ) 303 156 680,627 0.66 3,351 525,781 0.48 1,877 915 559 1,474 41,132 1.24 383 121,999 0.64 581 (689 ) 491 (198 ) 721,759 0.69 3,734 647,780 0.51 2,458 226 1,050 1,276 3.89 $ 25,570 4.09 $ 24,609 $ 3,072 $ (2,111 ) $ 961 132,406 (0.11 ) 123,526 (0.08 ) 3,548 4,846 111,930 103,097 $ 969,643 $ 879,249 0.58 0.43 4.04 4.20 Table Assumptions—(2) Average loan balances are inclusiveinclude nonaccrual loans.nonperforming loans.$669 and $760, for the three months ended September 30, 2021 and September 30, 2020, respectively. computed on tax-exempt instrumentssecurities are shown on a tax equivalenttax-equivalent basis. Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources2017,2021 compared to three months ended September 30, 2020$9.1 million and $25.6 million, respectively,$29,946 which resulted in a net interest margin (net interest income divided by the average balance of interest earninginterest-earning assets) of 4.08% and 4.04% respectively. For4.22% as compared to 4.54% for the three months ended September 30, 2020. This decrease was primarily due to a decrease in loan yields and a $2,290 swap termination fee incurred during the quarter which is reflected in the cost of funds. The adjusted net interest margin, which excludes this fee impact as well as the benefits from purchase accounting accretion, showed continued improvement as it increased 41 basis points from the prior year to 4.40%. Net income and earnings per share during the quarter were not materially affected by this termination fee as securities were sold for a gain of $2,419 to offset the swap termination transaction.Three months ended September 30, 2021 2020 Interest Income Average Yield Interest Income Average Yield Loan yield components: $ 27,862 4.68 % $ 27,760 4.73 % 1,970 0.33 % 2,255 0.38 % Accretion on purchased loans 985 0.17 % 2,880 0.49 % Loan tax credits 669 0.11 % 760 0.13 % Tax-equivalent loan interest income $ 31,486 5.29 % $ 33,655 5.73 % 2016,2021, and 2020 (dollars in thousands):Nine Months Ended
September 30, 2021Nine Months Ended
September 30, 2020Change Rates / Yields (%) Interest Income / Expense Rates / Yields (%) Interest Income / Expense Due to Volume Due to Rate Total Interest earning assets $ 2,310,056 5.07 $ 85,675 $ 2,085,467 5.38 $ 82,105 $ 10,835 $ (7,133) $ 3,702 Loan fees — 0.42 7,314 — 0.31 4,882 2,432 — 2,432 Loans with fees 2,310,056 5.50 92,989 2,085,467 5.69 86,987 13,267 (7,133) 6,134 Mortgage loans held for sale 178,817 3.23 4,322 79,000 4.08 2,412 2,793 (883) 1,910 Deposits with banks 55,422 0.36 149 55,856 0.58 242 (2) (91) (93) Investment securities - taxable 81,917 3.36 2,059 69,490 1.88 978 200 881 1,081 183,094 3.18 3,369 191,814 3.46 3,874 (220) (390) (610) Restricted equity securities and other 17,415 3.98 519 19,324 3.43 496 (72) 95 23 Total earning assets 2,826,721 5.03 103,407 2,500,951 5.23 94,989 15,966 (7,521) 8,445 Nonearning assets 219,439 210,267 Total assets $ 3,046,160 $ 2,711,218 Interest bearing liabilities Interest bearing demand 400,667 0.21 641 246,042 0.30 554 358 (271) 87 Savings and money market 951,486 0.27 1,927 659,673 0.74 3,668 1,831 (3,572) (1,741) Time deposits - retail 459,272 0.95 3,271 669,119 1.29 6,457 (1,731) (1,455) (3,186) Time deposits - wholesale 179,263 5.25 7,043 218,109 1.91 3,120 (984) 4,907 3,923 Total interest-bearing deposits 1,990,688 0.87 12,882 1,792,943 1.03 13,799 (526) (391) (917) Federal Home Loan Bank advances and other borrowings 13,603 0.26 26 92,223 0.89 613 (321) (266) (587) Subordinated debt 70,712 5.51 2,913 70,455 5.63 2,967 16 (70) (54) Total borrowed funds 84,315 4.66 2,939 162,678 2.94 3,580 (305) (336) (641) Total interest-bearing liabilities 2,075,003 1.02 15,821 1,955,621 1.19 17,379 (831) (727) (1,558) 4.01 $ 87,586 4.04 $ 77,610 $ 16,797 $ (6,794) $ 10,003 Noninterest bearing deposits 593,474 (0.23) 439,355 (0.22) Other noninterest bearing liabilities 38,360 39,396 Shareholders' equity 339,323 276,846 Total liabilities and shareholders' equity $ 3,046,160 $ 2,711,218 Cost of funds 0.79 0.97 4.28 4.30 $7.8 million and $24.6 million, respectively,$90,573 which resulted in a net interest margin (net interest income divided by the average balance of 3.98% and 4.20%, respectively. For the three months ended September 30, 2017 and 2016, our net interest spread was 3.91% and 3.86%, respectively. Forinterest-earning assets) of 4.28% compared to 4.30% for the nine months ended September 30, 20172020. This decrease was primarily driven by a decrease in loan yields and 2016,a $5,149 swap termination fee incurred during 2021 which is reflected in the cost of funds. The adjusted netnetloan yield, a key driver to our NIM for the nine months ended September 30, 2021, and September 30, 2020, were as follows:Nine months ended September 30, 2021 2020 Interest Income Average Yield Interest Income Average Yield Loan yield components: $ 81,059 4.69 % $ 74,463 4.77 % 7,314 0.42 % 4,882 0.31 % Accretion on purchased loans 4,616 0.27 % 7,642 0.49 % Loan tax credits 1,997 0.12 % 1,865 0.12 % Tax-equivalent loan interest income $ 94,986 5.50 % $ 88,852 5.69 % spreadrelated to PPP loans for the nine months ended September 30, 2021 and September 30, 2020, respectively.3.89%largely driven by the FABK Transaction.4.09%, respectively. The main factor contributingorigination fees on PPP loans contributed 5 basis points to the NIM for the nine months ended September 30, 2021 as fees are recognized upon forgiveness as compared to decreasing NIM by 6 basis points in the comparable period in 2020 due to the increased PPP loan volume in 2020 compared to the loan yield in 2020.our net interest income was our earning asset growth outpacing our interest-bearing liability growthaverage total deposits of 15.8%. In addition to the 17 basis point decrease in cost of deposits, or 41 basis points adjusted for swap termination fees, cost of funds benefited from a decrease in the periods presented. Additionally, net interest incomecost of FHLB advances of 63 basis points as the average balance decreased 85.2% as a result of the prepayments in the fourth quarter of 2020.2017 was impacted by the recognition of income from the remaining purchase discount of $354 on a purchase-credit impaired loan that paid in full during the third quarter of 20172021 compared to a similar $619 recognition of income for$1,500 and $7,400 recorded in the three and nine months ended September 30, 2016.Our year-over-year average loan volume increased by approximately 10.4% from the first nine months of 2016 to the first nine months of 2017. Our combined loan and loan fee yield decreased from 5.17% to 4.90% for the first nine months of 2016 compared to 2017, respectively, while our combined loan and loan fee yield increased from 4.85% to 5.05% for the three months ended September 30, 2016 to 2017,2020, respectively. The increased yield for the three months ended September 30, 2017 is attributable to the recognition of income from the remaining purchase discount of $354 on a purchase-credit impaired loan that paid in full during the third quarter of 2017.Our yield on tax-exempt investments increased to 3.99% and 4.01%, respectively,provision expense for the three and nine months ended September 30, 2017, from 3.33% for the same periods in 2016. Our year-over-year average tax-exempt investment volume increased by approximately 41.5% and 47.5% from the first three and nine months of 2016 compared2020 can be primarily attributed to the same periods in 2017. Our year-over-year average taxable securities volume decreased by 9.9% and 26.2% from the first three and nine months of 2016 compared to the same periods in 2017. We have continued to add volume to our investment portfolio. A portion of the earnings growthexpected downturn in the tax-exempt investment portfolio related to the completion of a municipal bond replacement strategy that was implemented late in the fourth quarter of 2016 and completed in the first quarter 2017 and additional strategies that were implemented in 2017 that are expected to provide better yielding securities that are relatively less sensitive to rising interest rates and potential declines in corporate tax rates.Our cost of funds increased from 0.43% to 0.58% for the nine months ended September 30, 2016 compared to the same period in 2017. Our cost of funds increased from 0.42% to 0.68% for the three months ended September 30, 2016 compared to the same period in 2017. The increase in our cost of funds was driven mainly by higher rates being paid on time deposits and FHLB advances. We experienced a 7.2% increase and a 0.9% decrease in our average non-interest bearing deposits from the nine and three months ended September 30, 2016, respectively.We continue to deploy various asset and liability management strategies to manage our risk relating to interest rate fluctuations. We believe margin expansion over both the short and the long term will be challenging primarilyeconomy due to continued pressure on loan yields in our competitive marketsCOVID-19 as well as recent and anticipated increases in short term interest rates. Any increases in short-term market interest rates would be expected to increase our interest income on variable-rate loans, certain investments and interest rate swaps but may be offset by an increase in our cost of funds that is somewhat dependent on short-term interest rates.Provision for Loan LossesThe provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses that, in management’s evaluation, should be adequate to provide coverage for the inherent losses on outstanding loans. Based upon management’s assessment of the loan portfolio, we adjust our allowance for loan losses on a quarterly basis to an amount deemed appropriate to adequately cover probable losses inherent in the loan portfolio.Based upon our evaluation of the loan portfolio, we believe the allowance for loan losses to be adequate to absorb our estimate of probable losses existinggrowth in the loan portfolio, at September 30, 2017. While policieswhereas economic outlooks have improved in 2021, in part due to the federal stimulus programs and procedures used to estimatevaccine rollouts. allowance for loan losses, as well as the resultant provision for loan losses charged to operations, are considered adequate by management, they are necessarily approximate and imprecise. There are factors beyond our control, such as conditions in the local and national economy, local real estate market, or particular industry or borrower-specific conditions, which may materially negatively impact our asset quality and the adequacy of our allowance for loan losses and, thus, the resulting provision for loan losses.We recorded a provision for loan losses of $540 and $1,195, for the three and nine months ended September 30, 2017, respectively, compared to $145 and $760, for loan losses recorded for the three and nine months ended September 30, 2016, respectively. Our provision for loan losses was impacted by the level of loan growth, the credit quality of the loan portfolio, and the amount of net charge-offs and recoveries.45Non-Interestnon-interestnoninterest income is composed of several components, some of which vary significantly between periods. The following is a summary of our non-interestnoninterest income for the three and nine months ended September 30, 2017,2021, and 20162020 (dollars in thousands): Increase Increase (Decrease) (Decrease) $ 309 $ 320 $ (11 ) -3.4 % - 296 (296 ) -100.0 % 1,571 551 1,020 185.1 % 1 145 (144 ) -99.3 % (50 ) - (50 ) -100.0 % 219 194 25 12.9 % 16 40 (24 ) -60.0 % 21 29 (8 ) -27.6 % 256 263 (7 ) -2.7 % $ 2,087 $ 1,575 $ 512 32.5 % Increase Increase (Decrease) (Decrease) $ 936 $ 926 $ 10 1.1 % 59 356 (297 ) -83.4 % 2,751 5,675 (2,924 ) -51.5 % 26 301 (275 ) -91.4 % (50 ) - (50 ) -100.0 % 595 557 38 6.8 % 70 67 3 4.5 % - 2 (2 ) -100.0 % 70 47 23 48.9 % 735 673 62 9.2 % $ 4,457 $ 7,931 $ (3,474 ) -43.8 % Three Months Ended September 30, Percent
IncreaseNine Months Ended September 30, Percent
Increase2021 2020 (Decrease) 2021 2020 (Decrease) Non-Interest Income Service charges and fees on deposits $ 1,678 $ 1,583 6.0 % $ 4,895 $ 4,172 17.3 % Gains on mortgage loans sold, net 4,218 3,784 11.5 % 12,124 7,605 59.4 % Gain on securities transactions, net 2,419 — 100.0 % 5,514 327 1586.2 % Bank-owned life insurance 2,181 386 465.0 % 3,172 1,073 195.6 % Brokerage revenue 79 65 21.5 % 232 142 63.4 % Miscellaneous noninterest income 294 184 59.8 % 579 387 49.6 % Total noninterest income $ 10,869 $ 6,002 81.1 % $ 26,516 $ 13,706 93.5 % reasonreasons for the changes in total non-interestnoninterest income during the three and nine months ended September 30, 20172021 compared to the same periods in 2016 is2020 are the fluctuation in gains on mortgage loans sold, net. Thisnet as well as the increase in service charges, gain on securities transactions, and other factors impacting non-interest income are discussed further below. have remained generally flat and mainly reflect customer growth trends but have also beenare impacted by changes in our fee structures.2017,2021, the Company sold securities totaling $58,855 with a gain of $5,514. Of this gain, $2,966 and $2,419 was realized to offset the effects of the swap termination fees incurred in the second quarter and third quarters, respectively. During the nine months ended September 30, 2020, the Company sold securities classified as available for sale, many of which were acquired in the TCB Holdings transaction, totaling $18,688$103,901 for gains of $59. During the nine months ended September 30, 2016, the Company sold securities classified as available for sale totaling $20,036, including $18,978 sold during the third quarter of 2016. The Company recognized a gain on sales of securities classified as available for sale of $296 and $356 for$327.2016, respectively.Gains on mortgage loans sold, net, consists of fees2021 when compared to the the same period in 2020, driven by the additional policies acquired from the originationFABK and sale of mortgage loans. These mortgage fees are for loans originatedTCB Holdings transactions, additional policies purchased in 2020, and subsequently sold to third-party investors. All of these loan sales transfer servicing rights to the buyer. Generally, mortgage related revenue increases in lower interest rate environments and more robust housing markets and decrease in rising interest rate environments and more challenging housing markets. Mortgage-related revenue will fluctuateproceeds from quarter to quarter as the rate environment changes and as changes occur with our mortgage operations including but not limited to the number of loan originators employed and the channels available for loan sales of the venture’s productsdeath benefit claims in the secondary markets. Gains on mortgage loans sold, net, amounted to $1,571 and $2,751 for the three and nine months ended September 30, 2017, compared to $551 and $5,675 for the same periods in the prior year. As discussed further in the notes to our consolidated financial statements, gains on mortgage loans sold are generally recognized at the timethird quarter of a loan sale corresponding to the transfer of risk. The timing of this revenue recognition varies from the time a loan is originated with a customer. We completed the transition to dispose a majority of our out-of-market mortgage loan production offices during the quarter ended June 30, 2016 to better focus our marketing and other resources in our core Middle Tennessee markets. The decline in gains on mortgage loans sold during the nine months ended September 30, 2017 was impacted by the transition. The increase in gains on mortgage loans sold during the three months ended September 30, 2017 was influenced by our new first-lien HELOC program.During the three and nine months ended September 30, 2017, we recognized a gain of $1 and $26, respectively, due to the recognition of a previously deferred gain from a payoff of a loan compared to a gain of $145 and $301 in the same periods in 2016 for similar transactions.Non-interest income also includes appreciation in the cash surrender value of bank-owned life insurance which was $219 and $595 for the three and nine months ended September 30, 2017, compared to $194 and $557 for the same periods in, 2016.2021. The assets that support these policies are administered by the life insurance carriers and the income we receive (i.e., increases or decreases in the cash surrender value of the policies) is dependent upon the returns the insurance carriers are able to earn on the underlying investments that support the policies. Earnings on these policies generally are not taxable. An additional $4.0 millionnon-interestnoninterest expense for the three and nine months ended September 30, 20172021 and 20162020 (dollars in thousands): Increase Increase (Decrease) (Decrease) $ 4,880 $ 4,017 $ 863 21.5 % 850 767 83 10.8 % 732 586 146 24.9 % 81 117 (36 ) -30.8 % 1,046 328 718 218.9 % 100 109 (9 ) -8.3 % - 17 (17 ) -100.0 % 808 942 (134 ) -14.2 % $ 8,497 $ 6,883 $ 1,614 23.4 % 47Three Months Ended September 30, Percent
IncreaseNine Months Ended
September 30,Percent
Increase2021 2020 (Decrease) 2021 2020 (Decrease) Non-Interest Expense Salaries and employee benefits $ 12,426 $ 12,184 2.0 % $ 38,571 $ 33,885 13.8 % Occupancy 2,038 2,054 (0.8) % 6,045 5,566 8.6 % Data processing and software 2,265 2,240 1.1 % 6,756 6,085 11.0 % Professional fees 526 775 (32.1) % 2,127 1,933 10.0 % Regulatory fees 328 365 (10.1) % 1,032 1,356 (23.9) % Merger expenses 1,453 77 1787.0 % 1,453 6,895 (78.9) % Other operating expense 3,345 2,639 26.8 % 8,545 6,476 31.9 % Total noninterest expense $ 22,381 $ 20,334 10.1 % $ 64,529 $ 62,196 3.8 % Increase Increase (Decrease) (Decrease) $ 13,634 $ 14,294 $ (660 ) -4.6 % 2,482 2,406 76 3.2 % 1,924 1,849 75 4.1 % 204 542 (338 ) -62.4 % 1,647 993 654 65.9 % 320 349 (29 ) -8.3 % - 70 (70 ) -100.0 % 2,423 3,044 (621 ) -20.4 % $ 22,634 $ 23,547 $ (913 ) -3.9 % The most significant reasons for the increase in total non-interestof $1,614 or 23.4% forincreased during the three months ended September 30, 20172021 when compared to September 30, 2020 which is due toprimarily driven by the increasemerger expenses incurred in audit, legal and consulting expenses 2021 and the increase in salariesincremental costs incurred following the TCB Holdings and employee benefits. The most significant reason for the decline in total non-interestFABK transactions. Noninterest expense of $913 or 3.9% forincreased during the nine months ended September 30, 2017 is due to the decrease in salary and employee benefits2021 when compared to the same period in 2016. These and other factors impacting non-interest expense are discussed further below.Salaries and employee benefits increased by $863 or 21.5% for the three months ended September 30, 2017 compared to2020 which is primarily driven by the same periodincremental costs incurred following the TCB Holdings and FABK transactions offset by the merger expenses incurred in 2016. This2020.is attributable to the staffing of the Green Hills branch, the Chattanooga loan and deposit production office, and other strategic hires. For the nine months ended September 30, 2017 compared to the same period in 2016, salaries and employee benefits decreased by $660 or 4.6%. The decline is mainly attributable to the decrease in employee related expenses of the mortgage operations resulting from the transition of a majority of our out-of-market mortgage loan production offices during the second quarter of 2016 and was partially offset by staffing previously mentioned.Certain of our facilities are leased while there are others that we own. Primarily, occupancy costs increased $83 and $76 during the three and nine months ended September 30, 20172021, respectively, when compared to the same period in 2016 dueSeptember 30, 2020 is primarily attributable to the full quarter of depreciationincrease in employees from the FABK transaction as well as our year-over-year growth. While staffing levels have normalized, we experienced an overall decrease in average FTEs from 422 for our new Green Hills location and a full quarter of depreciation and lease expense for our new Chattanooga location that opened in the first quarter of 2017 and the related depreciation for our new Mortgage office in Brentwood which opened in the second quarter of 2017.Information technology costs increased by $146 and $75 or 24.9% and 4.1% when comparing the three months ended September 30, 2020 to 415 for the three months ended September 30, 2021, and an increase from 364 for the nine months ended September 30, 20172020 to 419 for the comparable periods in 2016. These fluctuations are mainly attributable to the timing of project related activities.Advertising and public relations costs decreased when comparing the three and nine months ended September 30, 2017 to the same periods in 2016,2021.$36 and $338, respectively. The decrease was substantially attributable to a decline in our direct-mail advertising and related consultation expenditures and partially offset by the recently completed marketing campaign to increase core deposits. Additional customer acquisition strategies are being evaluated by the Company.Audit, legal and consulting costs increased by $718 and $654, respectively,$16 or 218.9% and 65.9% when comparing0.8% during the three months ended September 30, 2021 and increased $479, or 8.6% during the nine months ended September 30, 2017 to the same periods in 2016. This increase is mainly attributable to the $562 of merger related expenses in the third quarter of 2017.Our FDIC expense is based on our outstanding liabilities for the period multiplied by a factor determined by the FDIC, mainly driven by our most recent regulatory rating and certain financial performance factors. Our FDIC expense decreased by $9 and $29, respectively for three and nine months ended September 30, 2017,2021 compared to the same periods in 2016. This decrease2020 as the FABK Transaction and the expansion of RMV increased costs in 2020 and is primarily the result of a reduction in the applicable rate which was partially offset by the increasebranch justification project that has resulted in average liabilities.48Tablethe closure of Contentsthree branches in 2021.We recorded a provision for losses on other real estate of $17$70software expense increased during the three and nine months ended September 30, 2016, respectively compared2020 to no provision during the three and nine months ended September 30, 2017. As2021 and is mainly attributable to an increased volume of September 30, 2017,accounts and transactions services as well as continued investments in information technology infrastructure. Both the Company has no properties heldvolume and location increases are primarily due to the FABK Transaction and the expansion of RMV.other real estate portfolio.Other operatingbanking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusted efficiency ratio, we exclude certain gains, losses and expenses decreasedwe do not consider core to our business.2017,2021, respectively, compared to 50.5% and 63.2% for the same periods in 2016 mainly due to decreases in loan-related expenses such as processing costs relating to our mortgage operations as volume decreased2020. Our adjusted efficiency ratio, on a tax-equivalent basis, was 46.4% and our transitioning of several of our out-of-market mortgage offices to another bank, and the reversal of the lower of cost or market adjustment for loans held for sale during the nine months ended September 30, 2017.Income TaxesDuring the three and nine months ended September 30, 2017, we recorded consolidated income tax expense of $306 and $1,005, respectively, compared to $619 and $1,775, respectively,48.7% for the three and nine months ended September 30, 2016. The Company files separate federal tax returns2021, respectively, compared to 48.6% and 53.1% for the operationssame periods in 2020. See “Reconciliation of Non-GAAP Financial Measures” in this Quarterly Report for the reconciliation of the mortgage banking and banking operations. The taxable income or lossesadjusted efficiency ratio.mortgage banking operations are included in the respective returns of the Bank and non-controlling members for federal purposes.Our income tax expense attributable to Bank shareholders for the three and nine months ended September 30, 2017, reflects an effective2021 we recorded consolidated income tax rateexpense of 14.2%$3,551 and 14.8%$9,733, respectively, as compared to $2,800 and $3,524 for the same periods in 2020. This represents consolidated effective tax rates for the three and nine month ended September 30, 2021 of 20.3% and 19.6%, respectively, (exclusive of a tax benefit from our mortgage banking operations of $0 and $56 on pre-tax gains (losses) of $7 and $(856) prior to intercompany eliminations), compared to 21.8%19.0% and 20.6% (exclusive of tax benefit of $42 and $35 on pre-tax losses of $647 and $542 from our mortgage banking operations16.2% for the comparablesame periods of 2016). Our tax ratein 2020. When evaluating the bank segment alone, this ratio was 21.0% and 20.0% for the three and nine months ended September 30, 2017, was favorably influenced by tax credits related2021, respectively, as compared to interest-free loans originated19.4% and 15.8% for the same period in the second quarter of 2016, an increase in income earned on tax-exempt investment securities, certain federal and state tax credits, and benefits relating to the exercise of Company stock options.Noncontrolling2020.Net Income (Loss)Operating Resultsof Subsidiarynoncontrollingnon-controlling interest in net income (loss)operating results of subsidiary is solely attributable to Reliant Mortgage Ventures, LLC. Reliantthe RMV minority interest. The Bank has a 51% voting interest in this venture. Underventure, but under the terms of the related operating agreement, the noncontrollingnon-controlling member receives 70% of the profitscash flow distributions of the mortgage venture,RMV and the Bank receives 30% of any profits.cash flow distributions, after the non-controlling member recovers its aggregate capital contributions. The noncontrollingnon-controlling member is responsible for 100% of the mortgage venture’s net losses. The venturerequired to fund RMV's losses, in arrears, via additional capital contributions. RMV had a net income of $7$647 and a net loss of $800, respectively prior to intercompany eliminations,$1,357 for the three and nine months ended September 30, 20172021, respectively, compared to net income of $374 and loss of $605 and $507,$990 for the same periods in 2016.2020. The increaseimprovements in income for the three months ended September 30, 2017 when comparedoperating results is mainly attributable to the same period in 2016 results from their increased production volume from our first-lien HELOC program. The decrease in income forproductive market conditions produced by the nine months ended September 30, 2017 when compared to the same period in 2016 results from the transition of most of its out-of-market mortgage offices to another bank. These amounts are included in our consolidated results.low interest rate environment. Also, see Note 8 for segment reporting in the9 to our consolidated financial statements included elsewhere herein.for segment reporting.49Table of ContentsFINANCIAL CONDITIONCOMPARISON OF BALANCE SHEETS ATSEPTEMBER 30, 2017AND DECEMBER31, 2016$1,041,180$3,013,559 at September 30, 20172021 and $911,984$3,026,535 at December 31, 2016. Our assets increased by 14.2% from2020, a decrease of 0.4%. Total liabilities were $2,657,244 at September 30, 2021 and $2,704,562 at December 31, 2016 to September 30, 2017.2020, a decrease of 1.7%. The increasedecrease in liabilities was substantially attributable to the growthdecrease in loansdeposits of $31,530, or 1.2% and investments during the period of $82.0 million, or 12.5% and $45.5 million or 31.0%, respectively discussed further below. Other increases includedecrease in assets was largely attributable to the decrease in mortgage loans held for sale of $7.6 million$84,981, or 64.6% and cash surrender value of life insurance contracts of $4.6 million or 18.5%57.6%. These increases were partially offset by the decline of cash and cash equivalents by $5.3 million or 21.8%. The Company’s total liabilities were $903,236 at September 30, 2017 and $805,065 at December 31, 2016, an increase of 12.2%. The increase in liabilities from December 31, 2016 to September 30, 2017, was substantially attributable to an increase in deposits and Federal Home Loan Bank advances of $76.6 million or 10.0% and $24.4 million or 75.7%, respectively, during the period. This increase was partially offset by a decrease in federal funds purchased of $3.7 million. These and other components of our consolidated balance sheets are discussed further below.most importantlargest component of our net interest income and is a major contributor to profitability. The loan portfolio is the largest component of earning assets, and it, therefore, generates the largest portion of revenues. The absolute volume of loans and the volume of loans as a percentage of earning assets is an important determinant of net interest margin as loans are expected to produce higher yields than securities and other earning assets. As previously discussed theThe competition for quality loans in our markets has remained strong. Our goal is to steadily grow our loan portfolio, focusing on quality. This is not always possible for various factors,reasons, including but not limited to scheduled maturities or early payoffs exceeding new loan volume.volume, as well as economic conditions. Early payoffs typically increase in loweringfalling rate environments as customers identify advantageous opportunities for refinancing. We have been adding experienced lending officers to our staff to help with loan growth. In the first quarter of 2017 we expanded outside Middle Tennessee into Chattanooga, one of the state’s fastest growing metropolitan markets. Our Chattanooga team as well as the lending staff in our new full-service branch in Green Hills opened in the first quarter of 2017 are expected to help us towards our goal of obtaining quality loan growth. Total loans, net of allowance for loan losses, at September 30, 2017,2021, and December 31, 2016,2020, were $739,738$2,368,936 and $657,701, respectively. This represented$2,280,147, respectively, representing an increase of 12.5% from December 31, 2016 to September 30, 2017.(PCI)("PCI") loans). $ 138,648 18.5 % $ 134,404 20.1 % 100,655 13.4 % 113,031 16.9 % 79,195 10.6 % 57,460 8.6 % 258,168 34.4 % 215,639 32.3 % 141,581 18.9 % 115,889 17.4 % 16,386 2.2 % 17,240 2.6 % 15,048 2.0 % 13,745 2.1 % 749,681 100.0 % 667,408 100.0 % 320 625 9,623 9,082 $ 739,738 $ 657,701 September 30, 2021 December 31, 2020 Amount Percent Amount Percent Commercial, Industrial and Agricultural $ 450,710 18.8 % $ 459,739 19.9 % Real estate: 1-4 Family Residential 310,855 13.0 % 323,473 14.0 % 1-4 Family HELOC 100,895 4.2 % 100,525 4.4 % Multifamily and Commercial 873,265 36.6 % 834,000 36.2 % Construction, Land Development and Farmland 417,258 17.4 % 365,058 15.8 % Consumer 234,734 9.8 % 213,863 9.3 % Other 5,298 0.2 % 8,669 0.4 % 2,393,015 100.0 % 2,305,327 100.0 % Less: Deferred loan fees 3,182 4,544 Allowance for loan losses 20,897 20,636 Loans, net $ 2,368,936 $ 2,280,147 502017: $ 305 48 36 1,232 1,510 - - 3,131 193 4 $ 2,934 September 30, 2021 December 31, 2020 Commercial, Industrial and Agricultural $ 782 $ 919 Real estate: 1-4 Family Residential 868 1,004 1-4 Family HELOC 19 19 Multifamily and Commercial 1,175 1,325 Construction, Land Development and Farmland 935 992 Consumer 1,426 1,924 Total gross PCI loans 5,205 6,183 Less: Remaining purchase discount 2,458 2,596 Allowance for loan losses — — Loans, net $ 2,747 $ 3,587 , industrial and agricultural loans above consist solely of loans made to U.S. domiciledU.S.-domiciled customers. These include loans for use in normal business operations to finance working capital needs, equipment purchases, or other expansionary projects. Commercial, industrial, and agricultural loans of $138,648were $450,710 at September 30, 2017, increased 3.2%2021 and decreased by 2.0% compared to $134,404$459,739 at December 31, 2016.77.3%71.2% of the loan portfolio at September 30, 2017.2021. Residential loans included in this category consist mainly of closed-end loans secured by first and second liens that are not held for sale and revolving, open-end loans secured by 1-4 family residential properties extended under home equity lines of credit. The Company decreased the residential portfolio 2.9% from December 31, 20162020 to September 30, 2017.2021. Multi-family and commercial loans included in the real estate category above include (in typical order of prominence) loans secured by non-owner-occupied nonfarm nonresidential properties, loans secured by owner-occupied nonfarm nonresidentialcommercial real estate properties, and loans secured by multi-family residential properties. Multi-family and commercial real estate loans of $258,168were $873,265 at September 30, 2017,2021 and increased 19.7%4.7% compared to the $215,639$834,000 held as of December 31, 2016.2020. Real estate construction loans consist of 1-4 family residential construction loans, other construction loans, land loans, and loans secured by farmland. Construction lending increased during 2016 and into the first nine months of 2017,has continued to increase based on a strong local economy. loans. We have a small amount of credit card loans on our balance sheet due to the implementation of a new credit card program during the third quarter of 2017. We have a relatively small number of automobile loans. Our consumer loans experienced a decreasean increase from2016,2020, to September 30, 2017,2021, of 5.0%.Other9.8% primarily due to the $25,062 increase in loans to finance manufactured homes that are not secured by real estate.were minimal for the periods presented. Our other loans experienced an increasea decrease of 9.5%38.9% from December 31, 20162020 to September 30, 2017.2021 due to loan payments.51liquidity for us.liquidity. The following table sets forth the loans repricing or maturing within specific intervals at September 30, 2017,2021, excluding unearned net fees and costs. $ 284,604 $ 267,591 $ 197,486 $ 749,681 $ 509,603 240,078 $ 749,681 One Year or
LessOne to Five
YearsOver Five
YearsTotal Gross loans $ 566,044 $ 1,290,581 $ 536,390 $ 2,393,015 Fixed interest rate $ 1,213,415 Variable interest rate 1,179,600 Total $ 2,393,015 We maintain an allowance for loan losses that we believe is adequate to absorb the probable incurred losses inherent in our loan portfolio. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using historical loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, current economic conditions (national and local), and other factors such as changes in interest rates, portfolio concentrations, changes in the experience, ability, and depth of the lending function, levels of and trends in charged-off loans, recoveries, past-due loans and volume and severity of classified loans. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The entire allowance is available for any loan that, in management’s judgment, should be charged off.A loan is impaired when full payment under the loan terms is not expected. All classified loans and loans on non-accrual status are individually evaluated for impairment. Factors considered in determining if a loan is impaired include the borrower’s ability to repay amounts owed, collateral deficiencies, the risk rating of the loan and economic conditions affecting the borrower’s industry, among other things. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value (less estimated costs to sell) of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless the principal amount is deemed fully collectible, in which case interest is recognized on a cash basis. When recognition of interest income on a cash basis is appropriate, the amount of income recognized is limited to what would have been accrued on the remaining principal balance at the contractual rate. Cash payments received over this limit, and not applied to reduce the loans remaining principal balance, are recorded as recoveries of prior charge-offs until these charge-offs have been fully recovered.2017,2021, the allowance for loan losses was $9,623$20,897 compared to $9,082$20,636 at December 31, 2016.2020. The allowance for loan losses as a percentage of total loans was 1.28%0.87% at September 30, 20172021 compared to 1.36%0.90% at December 31, 2016. The allowance was adjusted downward as a percent of total loans from December 31, 2016 to September 30, 2017. The increase in our allowance for loan losses is directly attributable to our loan growth and offset by our net charge offs and recoveries.2020.52Analysis $ 9,082 $ 7,823 (941 ) (84 ) (15 ) (25 ) - - - - - - (30 ) - - (19 ) (986 ) (128 ) 306 250 - 66 19 9 - 3 5 5 2 13 - - 332 346 (654 ) 218 1,195 760 $ 9,623 $ 8,801 $ 749,681 $ 662,079 $ 701,362 $ 635,055 1.28 % 1.33 % 0.12 % -0.05 % (1)Loan balances exclude loans held for sale. September 30, 2021 September 30, 2020 Beginning Balance, January 1, 2021 and 2020, respectively $ 20,636 $ 12,578 Loans charged off: Commercial, Industrial and Agricultural (35) (507) Real estate: 1-4 Family Residential (63) (68) 1-4 Family HELOC — (98) Multifamily and Commercial — — Construction, Land Development and Farmland — (114) Consumer (604) (355) Other — — Total loans charged off (702) (1,142) Recoveries on loans previously charged off: Commercial, Industrial and Agricultural 315 126 Real estate: 1-4 Family Residential 154 769 1-4 Family HELOC 7 15 Multifamily and Commercial 257 20 Construction, Land Development and Farmland 92 8 Consumer 138 60 Other — — Total loan recoveries 963 998 Net recoveries (charge-offs) 261 (144) Provision for loan losses — 7,400 Total allowance for loan losses at end of period $ 20,897 $ 19,834 Allowance for loan losses to total loans, net 0.87 % 0.84 % Net (recoveries) charge-offs to average loans outstanding (0.02) % 0.01 % 53 $ 2,675 27.8 % 18.5 % $ 2,438 26.8 % 20.1 % 867 9.0 % 13.4 % 1,178 13.0 % 16.9 % 613 6.4 % 10.6 % 704 7.8 % 8.6 % 3,094 32.2 % 34.4 % 2,731 30.1 % 32.3 % 2,147 22.3 % 18.9 % 1,786 19.7 % 17.4 % 189 2.0 % 2.2 % 208 2.3 % 2.6 % 38 0.3 % 2.0 % 37 0.5 % 2.1 % $ 9,623 100.0 % 100.0 % $ 9,082 100.0 % 100.0 % September 30, 2021 December 31, 2020 Amount % of Allowance to Allowance % of Loan Type to Total Loans Amount % of Allowance to Allowance % of Loan Type to Total Loans Commercial, Industrial and Agricultural $ 6,987 33.4 % 18.8 % $ 5,441 26.4 % 19.9 % Real estate: 1-4 Family Residential 1,297 6.2 % 13.0 % 2,445 11.8 % 14.0 % 1-4 Family HELOC 610 2.9 % 4.2 % 1,416 6.9 % 4.4 % Multifamily and Commercial 8,606 41.2 % 36.6 % 8,535 41.4 % 36.2 % Construction, Land Development and Farmland 2,090 10.0 % 17.4 % 1,841 8.9 % 15.8 % Consumer 1,296 6.2 % 9.8 % 928 4.5 % 9.3 % Other 11 0.1 % 0.2 % 30 0.1 % 0.4 % $ 20,897 100.0 % 100.0 % $ 20,636 100.0 % 100.0 % Non-performingconsistconsists of non-performingnonperforming loans plus real estate acquired through foreclosure or deed in lieu of foreclosure. Non-performingforeclosure and other repossessed collateral as well as banking facilities taken out of service. Nonperforming loans by definition consistconsists of non-accrualnonaccrual loans and loans past due 90 days or more and still accruing interest. When we place a loan on non-accrualnonaccrual status, interest accruals cease and uncollected interest is reversed and charged against current income. The interest on these loans is accounted for on the cash-basis, or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.non-performingnonperforming assets. $ 4,950 $ 5,634 200 - 2,204 2,953 7,354 8,587 - - $ 7,354 $ 8,587 0.98 % 1.29 % 0.71 % 0.94 % 130.85 % 105.76 % September 30, 2021 December 31, 2020 Total nonperforming loans $ 5,302 $ 5,987 Foreclosed real estate ("OREO") 3,088 1,246 Repossessed collateral 865 1,424 Mortgage Loans HFS 977 630 Total nonperforming assets $ 10,232 $ 9,287 Total nonperforming loans HFI as a percentage of total loans HFI 0.22 % 0.26 % Total nonperforming assets as a percentage of total assets 0.34 % 0.31 % Allowance for loan losses as a percentage of nonperforming loans HFI 394.13 % 344.68 % Troubled Debt Restructurings ("TDRs") $ 2,903 $ 4,236 TDRs as a percentage of total loans 0.12 % 0.18 % 54CompanyBank with adequate liquidity, flexible asset/liability management and a source of stable income. The portfolio is structured with minimal credit exposure to the Companyinvestment grade holdings and consists of securities classified as available-for-sale. All available-for-sale securities are carried at fair value and may be used for liquidity purposes should management deem it to be in our best interest. Unrealized gains and losses on this portfolio are excluded from earnings, but are reported as other comprehensive income in a separate component of stockholders’shareholders’ equity, net of income taxes. Premium amortization and discount accretion are recognized as adjustments to interest income using the interest method. Realized gains or losses on sales are based on the net proceeds and the adjusted carrying value amount of the securities sold using the specific identification method.Securities are a significant component of the Company’s earning assets. $192,277$254,416 at September 30, 2017. This represents a 31.0% increase from2021, in comparison to the $256,653 in securities balances at December 31, 2016 total2020. This decrease can largely be attributed to the Company's sale of $146,813. The increase is attributablesecurities to purchasing $68,010 securities available for saleoffset swap termination fees during the second and third quarters of 2021. Activity during the nine months ended September 30, 2017, offset by sales2021 includes the sale of $18,688, and$58,855 of securities as well as $8,730 of principal paydowns, calls, and maturities of $6,057 during the same period. A portion of our year-to-date growth in the investment portfolio is related to the completion of a municipal bond replacement strategy that was implemented late in the fourth quarter of 2016 and completed in the first quarter 2017 and additional strategies that were implemented in 2017 that are expected to provide better yielding securities that are relatively less sensitive to rising interest rates and potential declines in corporate tax rates.$7,163$15,770 and 7,133$16,551 at September 30, 2017,2021, and December 31, 2016,2020, respectively, and consist of Federal Reserve BankFRB and Federal Home Loan BankFHLB stock. $ 591 586 0.30 % $ 1,909 1,908 1.30 % 164,968 165,247 85.94 % 122,813 119,634 81.49 % 1,500 1,495 0.78 % 2,000 1,987 1.35 % 21,456 21,449 11.16 % 20,197 20,034 13.65 % 3,500 3,500 1.82 % 3,250 3,250 2.21 % $ 192,015 192,277 100.00 % $ 150,169 146,813 100.00 % September 30, 2021 December 31, 2020 Amortized
CostFair Value % of Total Amortized
CostFair Value % of Total U.S. Treasury and other U.S. government agencies $ 218 218 0.09 % $ 47 48 0.02 % State and municipal bonds 161,733 170,971 67.19 % 184,102 200,988 78.31 % Corporate bonds 27,000 28,152 11.07 % 23,750 24,113 9.40 % Mortgage-backed securities 52,736 52,823 20.76 % 28,084 28,442 11.08 % Asset-backed securities 2,270 2,252 0.89 % 3,083 3,062 1.19 % Total $ 243,957 254,416 100.00 % $ 239,066 256,653 100.00 % available for sale at September 30, 2017: $ 3,655 $ 3,657 13,488 13,584 10,234 10,391 143,182 143,196 21,456 21,449 $ 192,015 $ 192,277 Amortized
CostEstimated
Fair ValueDue within one year $ 218 $ 218 Due in one to five years 2,085 2,120 Due in five to ten years 31,473 33,239 Due after ten years 155,175 163,764 Mortgage-backed securities 52,736 52,823 Asset-backed securities 2,270 2,252 Total $ 243,957 $ 254,416 55$9,558$27,519 at September 30, 20172021 compared to $9,093$31,462 at December 31, 2016,2020, a net increasedecrease of $465$3,943, or 5.1%12.5%. Premises and equipment purchases amounted to approximately $1,277$297 during the first nine months of 2017ended September 30, 2021 and were mainly incurred for additional leasehold improvements related toand equipment for our new Green Hills branchbranches and improvements to our IT infrastructure for disaster recovery planningmortgage locations while depreciation expense amounted to $762. At September 30, 2017, we operated from eight retail banking locations as well as two stand-alone mortgage loan production offices and two commercial loan and deposit production offices. Two$2,127. Retired bank facilities of our bank branch locations, including our main office, are in Brentwood, Tennessee. Our$1,988 were transferred to other six bank branch locations are in Franklin, Springfield, Gallatin, and Nashville, Tennessee. Our commercial loan and deposit production offices are in Murfreesboro and Chattanooga, Tennessee. As of September 30, 2017 our mortgage loan production offices were located Hendersonville and Brentwood, Tennessee, as well as Timonium, Maryland. During the three months ended March 31, 2016, the Company began transitioning most of its out-of-market branches to another bank. We own three branch and office facilities located in Robertson and Sumner counties of Tennessee while the remainder of our locations are leased.bankbanks and nonbanknon-bank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors such as money market funds and other brokerage investment products. Challenges to deposit growth include priceinterest rate changes on deposit products given movements in the interest rate environment and other competitive pricing pressures, and customer preferences regarding higher-costing deposit products or non-deposit investment alternatives.2017,2021, total deposits were $840,448, an increase$2,547,705, a decrease of $76,614,$31,530, or 10.0%1.2%, compared to $763,834$2,579,235 at December 31, 2016.2020. During the first nine months of 2017,ended September 30, 2021, noninterest bearing demand deposits increased by $51,309, interest-bearing demand deposits increased by $60,531, savings and money market deposits increased by $13.7 million,$132,467, and time deposits increased by $71.7 million, while non-interest bearing demand and interest-bearing demand deposits decreased by $2.7$275,837. Our team continues to focus on retaining low cost customer deposits and $6.0 million, respectively. A substantial portionhas utilized cash flow from mortgage loan sales in order to decrease higher cost time deposits.increasedates indicated:September 30, 2021 December 31, 2020 Ending Balance % of Total Deposits Average Rate Ending Balance % of Total Deposits Average Rate Noninterest-bearing demand $ 626,598 24.6 % — % $ 575,289 22.3 % — % Interest bearing demand 410,923 16.1 % 0.21 % $ 350,392 13.6 % 0.30 % Savings and money market 989,677 38.9 % 0.27 % $ 857,210 33.2 % 0.67 % Time deposits - retail 433,442 17.0 % 0.95 % 527,985 20.5 % 1.19 % Time deposits - wholesale 87,065 3.4 % 5.25 % 268,359 10.4 % 1.77 % Total deposits $ 2,547,705 100.00 % 0.64 % $ 2,579,235 100.00 % 0.73 % time deposits is attributable to our marketing campaignaverage balance sheet amounts, interest paid and rate analysis tables included in August.2017. $ 232,064 13,669 4,589 $ 250,322 September 30, 2021 Twelve months or less $ 137,387 Over twelve months through three years 23,245 Over three years 2,420 Total $ 163,052 (ALCO)("ALCO") is charged with the responsibility of monitoring these policies, which are designed to ensure acceptable composition of asset/liability mix. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management.on-balance sheet and off-balance sheet items to maximize long-term earnings and mitigate interest rate risk. Measurements we use to help us manage interest rate sensitivity include a gap analysis, an earnings simulation model and an economic value of equity model. These measurements are used in conjunction with competitive pricing analysis and are further described below.56Interest Rate Sensitivity Gap Analysis—The rate sensitive position, or gap, is the difference in the volume of rate-sensitive assets and liabilities, at a given time interval, including both floating rate instruments and instruments which are approaching maturity. The measurement of our interest rate sensitivity, or gap, is one of the three principal techniques we use in our asset/liability management effort.Our policy is to have 12 and 24-month cumulative repricing gaps that do not exceed 25% of assets. We were in compliance with our policy as of September 30, 2017. Although we do monitor our gap on a periodic basis, we recognize the potential shortcomings of such a model. The static nature of the gap schedule makes it difficult to incorporate changes in behavior that are caused by changes in interest rates. Also, although the periods of estimated and contractual repricing are identified in the analysis, the extent of repricing is not modeled in the gap schedule (i.e. whether repricing is expected to move on a one-to-one or other basis in relationship to the market changes simulated). For these and other shortcomings, we rely more heavily on the earnings simulation model and the economic value of equity model discussed further below.ModelModel—We believe interest rate risk is effectively measured by our earnings simulation modeling. Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with simulated forecasts of interest rates for the next 12 months and 24 months. To limit interest rate risk, we have guidelines for our earnings at risk which seek to limit the variancenegative variances of net interest income in instantaneous changes to interest rates. We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts in market interest rates over time. For changes up or down in rates from a flat interest rate forecast over the next 12 and 24 months, our estimated change in net interest income as well as our policy limits are as follows: -2.3% -15% -6.6% -15% 0.8% -10% -0.3% -10% 0.0% -10% -0.5% -10% 0.2% -15% -0.7% -15% 0.8% -20% -0.8% -20% 1.0% -25% -1.2% -25% Instantaneous, Parallel Change in Prevailing Interest Rates Equal to Estimated Change in Net Interest Income and Policy of Maximum
Percentage Decline in Net Interest IncomeNext 12 Next 24 Months Months Estimate Policy Estimate Policy -200 bp (3.0)% (15)% (6.7)% (15)% -100 bp (2.0)% (10)% (4.9)% (10)% +100 bp 1.5% (10)% 3.8% (10)% +200 bp 3.6% (15)% 7.6% (15)% +300 bp 6.0% (20)% 11.7% (20)% +400 bp 8.4% (25)% 15.9% (25)% 2017,2021, indicating what we believe to be a fairly neutral interest-rate risk profile.valueValue of equityEquity Model—Our economic value of equity model measures the extent that estimated economic values of our assets, liabilities and off-balance sheet items will change as a result of interest rate changes. Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case economic value of equity.57’ve have established the following policy limits regarding simulated changes in our economic value of equity:Instantaneous, Parallel Change in Prevailing
Interest Rates Equal to
Equity from the Economic Value of Equity at
Currently Prevailing Interest Rates+100 bp15% +±200 bp25% +±300 bp30% +±400 bp35% 35% 2017,2021, our model results indicated that we were within these policy limits.mortgage loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. Our ALCO reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies.Federal Home Loan Bank of CincinnatiFHLB, which is secured by a blanket pledge of 1-4 family residential mortgages, multi-family residential, commercial real estate, and home equity loans, and available-for-sale securities. At September 30, 2017,2021, FHLB advances totaled $56,720$0 compared to $32,287$10,000 as of December 31, 2016. 2020.increaseCompany has outstanding $23,000 of subordinated debentures associated with trust preferred securities issued by trusts that are affiliates of Reliant Bancorp, $10,000 of which is owned by a wholly-owned subsidiary of Reliant Bancorp. Reliant Bancorp has timely made its scheduled interest payments on these subordinated debentures since assumed in FHLB advances generallythe first quarter of 2018. As of September 30, 2021, Reliant Bancorp was current on all interest payments due related to its subordinated debentures. Reliant Bancorp has the right to defer the payment of interest on the subordinated debentures at any time, for a period not to exceed 20 consecutive quarters. During the period in which it is attributable to our increase in loans and securities and offset by our increase in deposits.deferring the payment of interest on its58At September 30, 2017,scheduled maturitiesindentures governing the subordinated debentures provide that Reliant Bancorp cannot pay any dividends on its common stock or preferred stock. FHLB advances and interest rates were as follows (scheduled maturities will differ from scheduled repayments): $ 45,000 1.18% 6,000 2.74% - 0.00% - 0.00% 483 2.73% 5,237 1.87% $ 56,720 1.42% Stockholders’$137,944$356,315 at September 30, 2017,2021, an increase of $31,025,$34,342, or 29.0%10.7%, from $106,919$321,973 at December 31, 2016. During2020, mainly due to net income and other comprehensive income of $523. This increase was primarily offset by dividends declared of $6,058. Contributions from the third quarternoncontrolling interest of 2017, the company issued 1,137,000 shares of common stock$1,357 were recognized in a private offering raising $23.3 million net of expenses of which $20.0 million was pushed-down to the Bank. Additionally, during the nine months ended September 30, 2017, the Company raised $693 of capital through the exercise of Company stock options.2021. The additional capital for the stock option exercises and a portion of the proceeds from the private placement was pushed-down to the Bank and when combined with the accretion of earnings to capital partially offsetincrease in shareholders' equity mitigated by the declared dividends andgrowth in the increase inBank's average assets led to aan increase in the Bank’s September 30, 20172021 Tier 1 leverage ratio to 12.20%11.76% compared with 10.75%10.64% at December 31, 2016 (see2020. See other ratios discussed further below). Common dividendsbelow. Additionally, the subordinated debentures qualified as Tier 1 and Total risk-based capital for the Company due to asset size at the time of $1,711 (declared during the fourth quarter of 2016) and $941 (declared in the second quarter of 2017) were paid during the nine months ended September 30, 2017, and dividends of $541 were declared in the second quarter of 2017 and were paid subsequent to quarter end.July 14, 2017,August 24, 2020, the Company filed a Registration Statement on Form S-3 registration statement to offer, issue and sell from time to time in one or more offerings any combination of (i) common stock, (ii) preferred stock, (iii) debt securities, (iv) depositarydepository shares, (v) warrants, and (vi) units, (vii) purchase contracts, and (viii) rights, up to a maximum aggregate offering price of $75,000,000.$100,000. The net proceeds from any offering will be used for general corporate purposes including acquisitions,repayment of debt or payment of interest thereon, capital expenditures, acquisitions, investments, and the repayment, redemption, or refinancing of any indebtedness or other securities.purposes that we may specify in any prospectus supplement. Until allocated to such purposes it is expected that we will invest any proceeds in short-term, interest-bearing instruments or other investment-grade securities.meetmaintain certain levels of capital. The Federal Reserve BoardBoard of Governors, the primary federal regulator for the Bank, has adopted minimum capital regulations or guidelines that categorize capital components and the level of risk associated with various types of assets. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with theapplicable regulations and guidelines. We regularly review our capital adequacy to ensure compliance with these regulations and guidelines and to help ensure that sufficient capital is available for current and future needs. It is management’s intent to maintain an optimal capital and leverage mix for growth and for shareholder return.returns.592017,2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since thatthese notifications that management believes have changed the institution’s category. Actual and required capital amounts and ratios are presented below as of September 30, 20172021 and December 31, 20162020 for Reliant Bancorp and the Company and Bank. $ 125,572 12.58 % $ 39,928 4.000 % $ 49,909 5.00 % 125,572 14.72 % 49,052 5.750 % 55,450 6.50 % 125,572 14.72 % 61,848 7.250 % 68,246 8.00 % 135,195 15.85 % 78,899 9.250 % 85,297 10.00 % $ 121,715 12.20 % $ 39,907 4.000 % $ 49,883 5.00 % 121,715 14.29 % 48,976 5.750 % 55,364 6.50 % 121,715 14.29 % 61,752 7.250 % 68,140 8.00 % 131,338 15.42 % 78,786 9.250 % 85,174 10.00 % $ 96,682 10.86 % $ 35,610 4.000 % N/A N/A 96,682 13.00 % 38,115 5.125 % N/A N/A 96,682 13.00 % 49,271 6.625 % N/A N/A 105,764 14.22 % 64,150 8.625 % N/A N/A $ 95,637 10.75 % $ 35,586 4.000 % $ 44,482 5.00 % 95,637 12.88 % 38,054 5.125 % 48,264 6.50 % 95,637 12.88 % 49,192 6.625 % 59,402 8.00 % 104,719 14.10 % 64,057 8.625 % 74,269 10.00 % Actual Regulatory Capital Minimum Required Capital
Including Capital
Conservation BufferTo Be Well Capitalized
Under Prompt Corrective
Action ProvisionsAmount Ratio Amount Ratio Amount Ratio September 30, 2021 Company Tier I leverage $ 297,367 10.04 % $ 118,473 4.00 % $ 148,091 5.00 % Common equity Tier 1 285,537 10.52 % 189,996 7.00 % 176,425 6.50 % Tier I risk-based capital 297,367 10.95 % 230,833 8.50 % 217,254 8.00 % Total risk-based capital 377,977 13.92 % 285,112 10.50 % 271,535 10.00 % Bank Tier I leverage $ 347,450 11.76 % $ 118,185 4.00 % $ 147,732 5.00 % Common equity Tier 1 347,450 14.10 % 172,493 7.00 % 160,172 6.50 % Tier I risk-based capital 347,450 14.10 % 209,456 8.50 % 197,135 8.00 % Total risk-based capital 369,072 14.98 % 258,695 10.50 % 246,377 10.00 % December 31, 2020 Company Tier I leverage $ 262,282 8.91 % $ 117,747 4.00 % $ 147,184 5.00 % Common equity Tier 1 250,513 10.22 % 171,584 7.00 % 159,328 6.50 % Tier I risk-based capital 262,282 10.70 % 208,355 8.50 % 196,099 8.00 % Total risk-based capital 342,246 13.96 % 257,420 10.50 % 245,162 10.00 % Bank Tier I leverage $ 313,633 10.64 % $ 117,907 4.00 % $ 147,384 5.00 % Common equity Tier 1 313,633 12.83 % 171,117 7.00 % 158,894 6.50 % Tier I risk-based capital 313,633 12.83 % 207,785 8.50 % 195,562 8.00 % Total risk-based capital 334,919 13.71 % 256,503 10.50 % 244,288 10.00 % generally accepted accounting principles,U.S. GAAP, which requirerequires the measurement of financial positionpositions and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on the performance of a financial institution than the effects of general levels of inflation. Although interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services, increases in inflation generally have resulted in increased interest rates. In addition, inflation affects financial institutions’ increasedinstitutions’ cost of goods and services purchased, the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders’ equity. Commercial and other loan originations and refinancingsrefinancing tend to slow as interest rates increase, and can reduce our earnings from such activities.60Off BalanceOff-Balance Sheet Lending ArrangementsOff-balancefollows: $ 179,462 12,358 $ 191,820 Emerging Growth Company StatusThe Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if the Company complies with the greater obligations of public companies that are not emerging growth companies, the Company may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as the Company is an emerging growth company. The Company will remain an emerging growth company for an initial five year period, though it may cease to be an emerging growth company earlier under certain circumstances, including if, before the end of such five years, it is deemed to be a large accelerated filer under the rules of the SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million) or if total annual gross revenues equal or exceed $1.07 billion in a fiscal year. Management cannot predict if investors will find the Company’s common stock less attractive because it will rely on these exemptions. If some investors find the Company’s common stock less attractive as a result, there may be a less active trading market for its common stock and the Company’s stock price may be more volatile.Further, the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to take advantage of the extended transition period that allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies, which means that the financial statements included in this filing, as well as the financial statements we will file in the future, will be subject to all new or revised accounting standards generally applicable to private companies. As a result, we will comply with new or revised accounting standards to the same extent that compliance is required for non-public companies.September 30, 2021 Unused lines of credit $ 638,112 Standby letters of credit 30,633 Total commitments $ 668,745 The information required by this Item 3discussed in Part 1 – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Market and Liquidity Risk.” President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file andor submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our President and Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.three monthsquarter ended September 30, 2017,2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Commerce UnionReliantthe Bank, are periodically involved as a plaintiff or defendant in various legal actions in the ordinary course of its business. Neither Commerce UnionReliant Bancorp nor Reliantthe Bank is involved in any litigation that is expected to have a material impact on our financial position or results of operations. Management believes that any claims pending against Commerce UnionReliant Bancorp or its subsidiaries are without merit or that the ultimate liability, if any, resulting from them will not materially affect Reliantthe Bank’s financial condition or Commerce Union’sReliant Bancorp’s consolidated financial position.Except as set forth below there have beentofrom the risk factors includedset forth under Part I, Item 1A. "Risk Factors" in “Item 1A. Risk Factors” in ourReliant Bancorp's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.The merger of Commerce Union and Community First may not be completed, which could have a material adverse effect on our business, future operations, and stock price.Completion of the merger is subject to certain closing conditions, including the receipt of all required regulatory approvals, in each case without the imposition of a materially burdensome condition. If we are not successful in obtaining the required regulatory approvals, the merger will not be completed. Even if the regulatory approvals are received, the timing of the regulatory approvals and any conditions imposed by the regulatory approvals could result in certain closing conditions of the merger not being satisfied.Consummation of the merger is also conditioned upon other customary closing conditions, including (1) the approval of the merger agreement by Community First’s shareholders and the approval by our shareholders of the issuance of stock by Commerce Union in connection with the merger, (2) the absence of any order, decree, injunction, or law enjoining or prohibiting the merger, (3) the effectiveness of a registration statement on Form S-4 for the shares of common stock to be issued by Commerce Union in connection with the merger, and (4) the authorization for listing on the Nasdaq Capital Market of the shares to be issued by Commerce Union in connection with the merger. Each party’s obligation to complete the merger is also subject to certain additional customary conditions. Additionally, Commerce Union’s obligation to complete the merger is subject to holders of not more than 7.5% of the outstanding shares of Community First’s common stock perfecting their rights to dissent from the merger. If a condition to either party’s obligation to consummate the merger is not satisfied, that party may be able to terminate the merger agreement and, in such case, the transaction would not be consummated.If the merger is not completed, our ongoing business and financial results may be adversely affected and we will be subject to several risks, including the following:●the price of our common stock may decline to the extent that its current market prices reflect a market assumption that the merger will be completed;●having to pay significant costs relating to the merger without receiving any benefits arising from the merger;●negative reactions from customers, shareholders and market analysts; and●the diversion of the focus of our management to the merger instead of on pursuing other opportunities that could have been beneficial to our business.If the merger is not completed, our business may be adversely affected by the failure to pursue other beneficial opportunities due to the focus of our management team on the merger, without realizing any of the anticipated benefits of completing the merger. If the merger agreement is terminated under certain circumstances, we may be required to pay a termination fee of $2.1 million to Community First.62Integrating Community First Bank into Reliant Bank’s operations may be more difficult, costly, or time-consuming than we expect.Reliant Bank and Community First Bank have operated and, until the bank merger is completed, will continue to operate, independently. Accordingly, the process of integrating Community First Bank’s operations into Reliant Bank’s operations could result in the disruption of operations or the loss of Community First Bank customers and employees, and could make it more difficult to achieve the intended benefits of the merger. Inconsistencies between the standards, controls, procedures, and policies of Reliant Bank and those of Community First Bank could adversely affect Reliant Bank’s ability to maintain relationships with current customers and employees of Community First Bank if and when the bank merger is completed.As with any merger of banking institutions, business disruptions may occur that may cause Reliant Bank to lose customers or may cause Community First Bank’s customers to withdraw their deposits from Community First Bank prior to the merger’s consummation and from Reliant Bank thereafter. The realization of the anticipated benefits of the merger may depend in large part on our ability to integrate Community First Bank’s operations into Reliant Bank’s operations, and to address differences in business models and cultures. If we are unable to integrate the operations of Community First and Community First Bank into our and Reliant Bank’s operations successfully and on a timely basis, some or all of the expected benefits of the acquisition may not be realized. Difficulties encountered with respect to such matters could result in an adverse effect on the financial condition, results of operations, capital, liquidity, or cash flows of Reliant Bank and our company.We may fail to realize the cost savings anticipated from the merger.Although we anticipate that we would realize certain cost savings as to the operations of Community First and Community First Bank and otherwise from the merger if and when the operations of Community First and Community First Bank are fully integrated into our and Reliant Bank’s operations, it is possible that we may not realize all of the cost savings that we have estimated we can realize from the merger. For example, we may be required to continue to operate or maintain functions that are currently expected to be combined or reduced as a result of the merger. Our realization of the estimated cost savings also will depend on our ability to combine the operations of our company and Reliant Bank with the operations of Community First and Community First Bank in a manner that permits those costs savings to be realized. If we are not able to integrate the operations of Community First and Community First Bank into our and Reliant Bank’s operations successfully and to reduce the combined costs of conducting the integrated operations of the two banks, the anticipated cost savings may not be fully realized, if at all, or may take longer to realize than expected. Our failure to realize those cost savings could materially adversely affect our financial condition, results of operations, capital, liquidity, or cash flows.The issuance of the stock consideration to Community First’s shareholders and the issuance of the shares in the private placement may decrease the market price of our common stock.We issued 1,137,000 shares of our common stock in connection with the private placement of our shares, and as consideration for the merger, we will issue approximately 2,417,450 additional shares of our common stock to Community First’s shareholders. These two transactions together will result in our shareholders’ existing share ownership being diluted by an aggregate of approximately 3,554,450 new shares, which represents 45.3% of our outstanding common stock immediately prior to the closing of the private placement. The dilution associated with the issuance of new shares of common stock in the private placement and/or the merger may result in fluctuations in the market price of our common stock, including a stock price decrease, and could materially impair our earnings per share and other per share financial metrics.The combined company will incur significant transaction and merger-related costs in connection with the merger.We expect to incur significant costs associated with combining the operations of Community First with our operations. We recently began collecting information in order to formulate detailed integration plans to deliver anticipated cost savings. Additional unanticipated costs may be incurred in the integration of our business with the business of Community First. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.Whether or not the merger is consummated, each of Commerce Union and Community First will incur substantial expenses, such as legal, accounting, and financial advisory fees, in pursuing the merger which will adversely impact its earnings.We will be subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect our business and operations.Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Reliant Bank. Uncertainties surrounding the merger may impair the ability of one or more of Commerce Union, Reliant Bank, Community First, and/or Community First Bank to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with either of the banks to seek to change their existing business relationships with such bank.Under the terms of the merger agreement, Commerce Union is subject to certain restrictions on its business prior to completing the merger, which may adversely affect our ability to execute certain of our business strategies. In addition, the merger agreement restricts Community First and Community First Bank from taking other specified actions until the merger occurs without our consent, such as acquiring or disposing of assets, incurring indebtedness, or incurring capital expenditures. These restrictions may prevent Community First and Community First Bank from pursuing attractive business opportunities that may arise prior to the completion of the merger. Such limitations could negatively impact Community First’s or Commerce Union’s businesses and operations prior to the completion of the merger.Commerce Union completed a private placementinrepurchased by Reliant Bancorp during the three months ended September 30, 2021.Period Average Price Paid Per Share July 1, 2021 to July 31, 2021 7,746 $28.21 — $10,000 August 1, 2021 to August 31, 2021 134 $29.91 — $10,000 September 1, 2021 to September 30, 2021 — $— — $10,000 Total 7,880 $28.24 — $10,000 2017, as reported on2021, 30,410 shares of restricted stock previously awarded to certain of the participants in our Current Report on Form 8-K filedstock plans vested. We withheld 7,880 shares to satisfy tax withholding requirements associated with the Securities and Exchange Commission onvesting of these shares of restricted stock.23, 2017.Item 3. Defaults Upon Senior Securities.Not applicable.Item 4. Mine Safety Disclosures.Not applicable.None.2.1Description 2.1 31.131.232.132.2Certification pursuant to 18 USC Section 1350 – Sarbanes-Oxley Act of 2002101101.SCH* Inline XBRL Schema Documents. 101.CAL* Inline XBRL Calculation Linkbase Document. 101.LAB* Inline XBRL Label Linkbase Document. 101.PRE* Inline XBRL Presentation Linkbase Document. 101.DEF* Inline XBRL Definition Linkbase Document. 104 Cover Page Interactive Data Files*File (formatted as Inline XBRL and contained in Exhibit 101).* The documents formatted in eXtensible Business Reporting Language (XBRL) and attached as Exhibit 101 to this report are deemed not filed as part of a registration statement or prospectus for purposes of Section 12 of the Securities Act, are deemed not filed for purposes of Section 18 of the Exchange Act and otherwise not subject to liability under these sections.COMMERCE UNION BANCSHARES, INC.RELIANT BANCORP, INC. November 9, 2017November 5, 2021 /s/ DeVan D. Ard, Jr. DeVan D. Ard, Jr. President( PrincipalPrincipal Executive Officer) 9, 2017/s/ J. Daniel DellingerJerry Cooksey J. Daniel DellingerJerry Cooksey Chief Financial Officer (Principal Financial Officer)