UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2019

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

For the transition period from ______ to ______

Commission File Number: 001-37391

Reliant Bancorp, Inc.

(Exact name of registrant as specified in its charter)



Tennessee	37-1641316
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1736 Carothers Parkway
Suite 100
Brentwood,
Tennessee	37027
(Address of principal executive offices)	(Zip Code)

~~(615) 221-2020~~
~~(Registrant’s~~

615-221-2020

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value per share	RBNC	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ý☒No ¨☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files): Yes ý☒ No ¨☐

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



Large Accelerated Filer¨	¨	Accelerated Filer	ý
Non-Accelerated Filer¨	¨	Smaller Reporting Company	ý
Emerging growth company	ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

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

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of ~~May 6,~~August 2, 2019 was ~~11,294,620.~~11,195,062.

TABLE OF CONTENTS



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		3
PART I – FINANCIAL INFORMATION		4
Item 1.	Consolidated Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3739
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5659
Item 4.	Controls and Procedures	5659

PART II – OTHER INFORMATION		5760
Item 1.	Legal Proceedings	5760
Item 1A.	Risk Factors	X60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5760
Item 3.	Defaults Upon Senior Securities	5761
Item 4.	Mine Safety Disclosures	5761
Item 5.	Other Information	5761
Item 6.	Exhibits	5862

SIGNATURES		5963

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

~~Reliant Bancorp, Inc.~~ (“~~Reliant Bancorp” or the “Company”) may from time to time make written or oral statements, including~~Various statements contained in or incorporated by reference into this ~~report (including, without limitation, certain statements in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations)~~Quarterly Report on Form 10-Q (this "Quarterly Report")~~, that constitute~~ are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “~~Securities Act~~”“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “~~Exchange Act~~”“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, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of Reliant Bancorp, Inc. ("Reliant Bancorp") to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include, among others:


(i)	the possibility that our asset quality will decline or that we experience greater loan losses than anticipated;


(ii)	increased levels of other real estate, primarily as a result of foreclosures;


(iii)	the impact of liquidity needs on our results of operations and financial condition;


(iv)	the effect of interest rate increases on the cost of deposits;


(v)	unanticipated weakness in loan demand or loan pricing;


(vi)	greater than anticipated adverse conditions in the national economy or local economies in which we operate, including Middle Tennessee;


(vii)	lack of strategic growth opportunities or our failure to execute on those opportunities;


(viii)	deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses;


(ix)	the ability to grow and retain low-cost core deposits and retain large, uninsured deposits;


(x)	the impact of competition with other financial institutions and financial services providers, including pricing pressures and the resulting impact on Reliant Bancorp’s results, including as a result of compression to net interest margin;


(xi)	our ability to effectively manage problem credits;


(xii)	our ability to successfully implement efficiency initiatives on time and in amounts projected;


(xiii)	our ability to successfully develop and market new products and technology;


(xiv)	the impact of negative developments in the financial industry and U.S. and global capital and credit markets;


(xv)	our ability to retain the services of key personnel;


(xvi)	our ability to adapt to technological changes;


(xvii)	risks associated with litigation, including the applicability of insurance coverage;


(xviii)	the vulnerability of Reliant Bank’s network and online banking portals, and the systems of parties with whom Reliant Bancorp and Reliant Bank contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches;


(xix)	changes in state and federal laws, rules, regulations or policies applicable to banks or bank or financial holding companies, including regulatory or legislative developments;


(xx)	adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions; and


(xxi)	general competitive, economic, political and market conditions, including economic conditions in the local markets where we operate.

You should also consider carefully the risk factors discussed in Part I 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 discussed in this ~~quarterly report~~Quarterly Report are factors that, individually or in the aggregate, management believes could cause our actual results to differ materially from expected and historical results. You should understand that it is not possible to predict or identify all such 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 there listed may develop or, if currently extant, we may not have yet recognized them.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

RELIANT BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018 (AUDITED)

(Dollar amounts in ~~thousands except per share amounts)~~thousands)


	March 31, 2019		December 31, 2018			June 30, 2019		December 31, 2018
	Unaudited		Audited			Unaudited		Audited
ASSETS
Cash and due from banks	$	34,796	$	34,807		$	35,917	$	34,807
Federal funds sold	409		371			80		371
Total cash and cash equivalents	35,205		35,178			35,997		35,178
Securities available for sale	310,305		296,323			290,373		296,323
Loans, net	1,250,806		1,220,184			1,301,019		1,220,184
Mortgage loans held for sale, net	9,990		15,823			11,571		15,823
Accrued interest receivable	8,389		8,214			7,246		8,214
Premises and equipment, net	21,970		22,033			21,632		22,033
Restricted equity securities, at cost	11,499		11,690			11,488		11,690
Other real estate, net	1,000		1,000			1,848		1,000
Cash surrender value of life insurance contracts	45,791		45,513			46,068		45,513
Deferred tax assets, net	4,730		7,428			3,133		7,428
Goodwill	43,642		43,642			43,642		43,642
Core deposit intangibles	7,982		8,219			7,745		8,219
Other assets	10,617		9,091			12,486		9,091

TOTAL ASSETS	$	1,761,926	$	1,724,338		$	1,794,248	$	1,724,338
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits
Demand	$	220,966	$	216,937		$	225,380	$	216,937
Interest-bearing demand	144,166		154,218			144,265		154,218
Savings and money market deposit accounts	398,366		401,308			368,764		401,308
Time	747,823		665,440			811,871		665,440
Total deposits	1,511,321		1,437,903			1,550,280		1,437,903
Accrued interest payable	990		1,063			967		1,063
Subordinated debentures	11,624		11,603			11,644		11,603
Federal Home Loan Bank advances	15,309		57,498			11,119		57,498
Dividends payable	1,035		1,036			1,008		1,036
Other liabilities	6,528		6,821			5,287		6,821

TOTAL LIABILITIES	1,546,807		1,515,924			1,580,305		1,515,924
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; 11,502,285 and 11,530,810 shares issued and outstanding at March 31, 2019, and December 31, 2018, respectively	11,502		11,531
Common stock, $1 par value; 30,000,000 shares authorized; 11,196,563 and 11,530,810 shares issued and outstanding at June 30, 2019, and December 31, 2018, respectively						11,197		11,531
Additional paid-in capital	172,886		173,238			166,252		173,238
Retained earnings	30,119		27,329			33,349		27,329
Accumulated other comprehensive gain (loss)	612		(3,684		)
Accumulated other comprehensive income (loss)						3,145		(3,684		)

TOTAL STOCKHOLDERS’ EQUITY	215,119		208,414			213,943		208,414

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,761,926	$	1,724,338		$	1,794,248	$	1,724,338

See accompanying notes to consolidated financial ~~statements~~statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2019 AND 2018

(Dollar amounts in thousands except per share amounts)

(Unaudited)


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019			2018
INTEREST INCOME
Interest and fees on loans	$	16,169	$	13,558	$	16,960	$	14,066	$	33,129		$	27,624
Interest and fees on loans held for sale	153		481		198		326		351			807
Interest on investment securities, taxable	503		507		587		453		1,090			960
Interest on investment securities, nontaxable	1,718		1,504		1,650		1,708		3,368			3,212
Federal funds sold and other	300		312		297		277		597			589

TOTAL INTEREST INCOME	18,843		16,362		19,692		16,830		38,535			33,192

INTEREST EXPENSE
Deposits
Demand	111		77		86		84		197			161
Savings and money market deposit accounts	1,130		478		1,051		574		2,181			1,052
Time	3,571		1,996		4,369		2,199		7,940			4,195
Federal Home Loan Bank advances and other	377		272		175		397		552			669
Subordinated debentures	193		157		198		172		391			329

TOTAL INTEREST EXPENSE	5,382		2,980		5,879		3,426		11,261			6,406

NET INTEREST INCOME	13,461		13,382		13,813		13,404		27,274			26,786

PROVISION FOR LOAN LOSSES	—		137		200		300		200			437

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	13,461		13,245		13,613		13,104		27,074			26,349

NONINTEREST INCOME
Service charges on deposit accounts	884		771		936		900		1,820			1,671
Gains on mortgage loans sold, net	560		1,705		1,225		957		1,785			2,662
Gain on securities transactions, net	131		—		175		25		306			25
Gain on sale of other real estate	—		89		—		20		—			109
Other	363		426		362		352		725			778

TOTAL NONINTEREST INCOME	1,938		2,991		2,698		2,254		4,636			5,245

NONINTEREST EXPENSE
Salaries and employee benefits	7,265		6,954		7,706		6,613		14,971			13,567
Occupancy	1,352		1,229		1,358		1,210		2,710			2,439
Information technology	1,410		1,349		1,575		1,249		2,985			2,598
Advertising and public relations	254		89		275		141		529			230
Audit, legal and consulting	796		623		690		816		1,486			1,439
Federal deposit insurance	195		196		249		224		444			420
Merger expenses	2		177		1		2,483		3			2,660
Other operating	1,472		1,545		1,272		1,305		2,744			2,850

TOTAL NONINTEREST EXPENSE	12,746		12,162		13,126		14,041		25,872			26,203

INCOME BEFORE PROVISION FOR INCOME TAXES	2,653		4,074		3,185		1,317		5,838		—	5,391

INCOME TAX EXPENSE	372		797		501		115		873			912

CONSOLIDATED NET INCOME	2,281		3,277		2,684		1,202		4,965			4,479

NONCONTROLLING INTEREST IN NET LOSS OF SUBSIDIARY	1,543		464		1,555		937		3,098			1,401

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	3,824	$	3,741	$	4,239	$	2,139	$	8,063		$	5,880

Basic net income attributable to common shareholders, per share	$	0.34	$	0.33	$	0.38	$	0.19	$	0.71		$	0.52
Diluted net income attributable to common shareholders, per share	$	0.33	$	0.33	$	0.38	$	0.19	$	0.71		$	0.51

See accompanying notes to consolidated financial ~~statements~~statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2019 AND 2018

(Dollar amounts in ~~thousands except per share amounts)~~thousands)

(Unaudited)

Three Months Ended
March 31,
2019 2018
Consolidated net income $ 2,281
$ 3,277
Other comprehensive income (loss)
Net unrealized gains (losses) on available-for-sale securities, net of tax of ($1,721) and $1,579 for the three months ended March 31, 2019 and 2018, respectively 4,863
(4,414 )
Net unrealized losses on interest rate swap derivatives net of tax of $167 for the three months ended March 31, 2019 (470 ) —
Reclassification adjustment for gains included in net income, net of tax of $34 for the three months ended March 31, 2019 (97 ) —
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 4,296
(4,414 )
TOTAL COMPREHENSIVE INCOME (LOSS) $ 6,577
$ (1,137 )



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Consolidated net income	$	2,684		$	1,202		$	4,965		$	4,479
Other comprehensive income (loss)
Net unrealized gains (losses) on available-for-sale securities, net of tax of ($1,241) and ($31) for the three months ended June 30, 2019 and 2018, respectively, and ($2,962) and $1,548 for the six months ended June 30, 2019 and 2018, respectively	3,523			36			8,386			(4,378		)
Net unrealized losses on interest rate swap derivatives net of tax of $304 for the three months ended June 30, 2019 and $471 for the six months ended June 30, 2019	(861		)	—			(1,331		)	—
Reclassification adjustment for gains included in net income, net of tax of $46 and $7 for the three months ended June 30, 2019 and 2018, respectively, and $80 and $7 for the six months ended June 30, 2019 and 2018, respectively	(129		)	(18		)	(226		)	(18		)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	2,533			18			6,829			(4,396		)
TOTAL COMPREHENSIVE INCOME	$	5,217		$	1,220		$	11,794		$	83

See accompanying notes to consolidated financial ~~statements~~statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2019 AND 2018

(Dollar amounts in ~~thousands except per share amounts)~~thousands)

(Unaudited)


	COMMON STOCK					ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS				ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)				NONCONTROLLING INTEREST				TOTAL			COMMON STOCK							ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			NONCONTROLLING INTEREST			TOTAL
	SHARES		AMOUNT										SHARES								AMOUNT
BALANCE - JANUARY 1, 2018	9,034,439		$	9,034					$	112,437			$		17,189			$	1,477					$	—			$	140,137

BALANCE - JANUARY 1, 2019																									11,530,810			$	11,531			$	173,238			$	27,329		$	(3,684	)	$	—		$	208,414
Stock based compensation expense	—		—			224				—				—				—				224			—			—				250				—			—			—			250

Exercise of stock options	25,225		25			315				—				—				—				340			2,183			2				26				—			—			—			28

Restricted stock awards	4,500		5			(5		)		—				—				—				—			3,000			3				(3		)		—			—			—			—

Restricted stock forfeiture	(1,000	)	(1		)	1				—				—				—				—

Conversion shares issued to shareholders' of Community First, Inc.	2,416,444		2,417			59,566				—				—				—				61,983

Restricted stock and dividend forfeiture																									(3,750	)		(4		)		4				1			—			—			1
Common stock shares redeemed																									(29,958	)		(30		)		(629		)		—			—			—			(659		)
Noncontrolling interest contributions	—		—			—				—				—				464				464			—			—				—				—			—			1,543			1,543

Cash dividend declared to common shareholders	—		—			—				(1,060		)		—				—				(1,060		)	—			—				—				(1,035		)	—			—			(1,035		)

Net income (loss)	—		—			—				3,741				—				(464		)		3,277			—			—				—				3,824			—			(1,543		)	2,281

Other comprehensive loss	—		—			—				—				(4,414		)		—				(4,414		)	—			—				—				—			4,296			—			4,296

BALANCE - MARCH 31, 2018	11,479,608		$	11,480		$	172,538			$	19,870			$	(2,937	)		$	—			$	200,951

	COMMON STOCK					ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS				ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)				NONCONTROLLING INTEREST				TOTAL
	SHARES		AMOUNT
BALANCE - JANUARY 1, 2019	11,530,810		$	11,531					$	173,238			$				27,329									$	(3,684	)		$	—			$	208,414

BALANCE - MARCH 31, 2019																									11,502,285			11,502				172,886				30,119			612			—			215,119
Stock based compensation expense	—		—			250				—				—				—				250			—			—				280				—			—			—			280

Exercise of stock options	2,183		2			26				—				—				—				28			24,523			25				298				—			—			—			323

Employee Stock Purchase Plan stock issuance																									4,728			5				85				—			—			—			90
Restricted stock awards	3,000		3			(3		)		—				—				—				—			5,000			5				(5		)		—			—			—			—

Restricted stock and dividend forfeiture	(3,750	)	(4		)	4				1				—				—				1			(4,000	)		(4		)		4				—			—			—			—

Common stock shares redeemed	(29,958	)	(30		)	(629		)		—				—				—				(659		)	(335,973	)		(336		)		(7,296		)		—			—			—			(7,632		)

Noncontrolling interest contributions	—		—			—				—				—				1,543				1,543			—			—				—				—			—			1,555			1,555

Cash dividend declared to common shareholders	—		—			—				(1,035		)		—				—				(1,035		)	—			—				—				(1,009		)	—			—			(1,009		)

Net income (loss)	—		—			—				3,824				—				(1,543		)		2,281			—			—				—				4,239			—			(1,555		)	2,684

Other comprehensive income	—		—			—				—				4,296				—				4,296			—			—				—				—			2,533			—			2,533

BALANCE - MARCH 31, 2019	11,502,285		$	11,502		$	172,886			$	30,119			$	612			$	—			$	215,119
BALANCE - JUNE 30, 2019																									11,196,563			$	11,197			$	166,252			$	33,349		$	3,145		$	—		$	213,943

See accompanying notes to consolidated financial statements.



	COMMON STOCK					ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			NONCONTROLLING INTEREST			TOTAL
	SHARES		AMOUNT			ADDITIONAL PAID-IN CAPITAL			RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)			NONCONTROLLING INTEREST			TOTAL
BALANCE - JANUARY 1, 2018	9,034,439		$	9,034		$	112,437		$	17,189		$	1,477		$	—		$	140,137
Stock based compensation expense	—		—			224			—			—			—			224
Exercise of stock options	25,225		25			315			—			—			—			340
Restricted stock awards	4,500		5			(5		)	—			—			—			—
Restricted stock forfeiture	(1,000	)	(1		)	1			—			—			—			—
Conversion shares issued to shareholders' of Community First, Inc.	2,416,444		2,417			59,566			��			—			—			61,983
Noncontrolling interest contributions	—		—			—			—			—			464			464
Cash dividends declared to common shareholders	—		—			—			(1,060		)	—			—			(1,060		)
Net income (loss)	—		—			—			3,741			—			(464		)	3,277
Other comprehensive income	—		—			—			—			(4,414		)	—			(4,414		)
BALANCE - MARCH 31, 2018	11,479,608		11,480			172,538			19,870			(2,937		)	—			200,951
Stock based compensation expense	—		—			148			—			—			—			148
Exercise of stock options	357		—			3			—			—			—			3
Restricted stock awards	3,000		3			(3		)	—			—			—			—
Noncontrolling interest contributions	—		—			—			—			—			937			937
Cash dividend declared to common shareholders	—		—			—			(919		)	—			—			(919		)
Net income (loss)	—		—			—			2,139			—			(937		)	1,202
Other comprehensive income	—		—			—			—			18			—			18
BALANCE - JUNE 30, 2018	11,482,965		$	11,483		$	172,686		$	21,090		$	(2,919	)	$	—		$	202,340

See accompanying notes to consolidated financial ~~statements~~statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2019 AND 2018

(Dollar amounts in ~~thousands except per share amounts)~~thousands)

(Unaudited)


							Six Months Ended June 30,
	2019			2018			2019			2018
OPERATING ACTIVITIES
Consolidated net income	$	2,281		$	3,277		$	4,965		$	4,479
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Provision for loan losses	—			137			200			437
Deferred income taxes (benefit)	1,179			(118		)	1,880			(374		)
Depreciation and amortization of premises and equipment	497			396			991			792
Net amortization of securities	825			731			1,586			1,515
Net realized gains on sales of securities	(131		)	—			(306		)	(25		)
Gains on mortgage loans sold, net	(560		)	(1,705		)	(1,785		)	(2,662		)
Stock-based compensation expense	250			224			530			372
Realization of gain on other real estate	—			(89		)	—			(109		)
Increase in cash surrender value of life insurance contracts	(278		)	(303		)	(555		)	(600		)
Mortgage loans originated for resale	(18,422		)	(37,527		)	(57,816		)	(70,064		)
Proceeds from sale of mortgage loans	24,815			60,495			63,853			87,795
Other accretion	(134		)	(327		)	(380		)	(471		)
Change in
Accrued interest receivable	(175		)	(208		)	968			(565		)
Other assets	(1,433		)	828			(3,202		)	(856		)
Accrued interest payable	(73		)	509			(96		)	496
Other liabilities	(1,432		)	(2,103		)	(4,389		)	(1,321		)

TOTAL ADJUSTMENTS	4,928			20,940			1,479			14,360

NET CASH PROVIDED BY OPERATING ACTIVITIES	7,209			24,217			6,444			18,839

INVESTING ACTIVITIES
Cash received from merger	—			33,128			—			33,128
Activities in available for sale securities
Purchases	(20,571		)	(69,815		)	(41,083		)	(103,323		)
Sales	10,558			82,187			52,434			92,991
Maturities, prepayments and calls	2,291			2,866			5,418			6,862
Purchases of restricted equity securities	(9		)	—			—			(2,177		)
Redemption of restricted equity securities	200			—			202			—
Net increase in loans	(30,253		)	(20,003		)	(81,026		)	(57,337		)
Purchase of buildings, leasehold improvements, and equipment	(434		)	(479		)	(590		)	(1,372		)
Proceeds from sale of other real estate							—			670

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(38,218		)	27,884
NET CASH USED IN INVESTING ACTIVITIES							(64,645		)	(30,558		)
							Six Months Ended June 30,
	2019			2018			2019			2018
FINANCING ACTIVITIES
Net change in deposits	73,427			33,389			112,388			18,298
Net change in advances from Federal Home Loan Bank	(42,175		)	(54,672		)	(46,352		)	6,154
Issuance of common stock, net	28			340			351			343
Issuance of common stock from Employee Stock Purchase Plan							90			—
Redemption of common stock	(659		)	—			(8,291		)	—
Noncontrolling interest contributions received	1,450			210			2,905			560
Cash dividends paid on common stock	(1,035		)	(684		)	(2,071		)	(1,602		)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	31,036			(21,417		)
NET CASH PROVIDED BY FINANCING ACTIVITIES							59,020			23,753

NET CHANGE IN CASH AND CASH EQUIVALENTS	27			30,684			819			12,034
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	35,178			20,668			35,178			20,668
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	35,205		$	51,352		$	35,997		$	32,702


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest	$	5,455		$	2,472		$	11,357		$	5,910
Taxes	$	4		$	1		$	536		$	1,623

Non-cash investing and financing activities
Unrealized gain (loss) on securities available-for-sale	$	6,954		$	(6,607	)	$	12,099		$	(6,499	)
Unrealized gain (loss) on derivatives	$	(1,139	)	$	614		$	(2,859	)	$	598
Change in due to/from noncontrolling interest	$	1,543		$	464		$	3,098		$	1,401
Loans foreclosed and transferred to other real estate owned and foreclosed assets							$	848		$	1,060

See accompanying notes to consolidated financial ~~statements~~statements.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) ~~AND DECEMBER 31, 2018~~

(Dollar amounts in thousands except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Reliant Bancorp, Inc. conform to accounting principles generally accepted in the United States of America ("U.S. GAAP") and to general practices within the banking industry. The following is a brief summary of the significant policies.

Nature of Operations

Reliant ~~Bancorp, Inc.~~Bank began organizational activities in 2005. Reliant Bancorp, Inc. provides financial services through its wholly owned bank subsidiary, Reliant Bank, which has offices in Williamson, Robertson, Davidson, Sumner, Rutherford, Maury, Hickman and Hamilton Counties in Tennessee. 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.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Quarterly Report on Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with U.S. GAAP. All adjustments consisting of normally recurring accruals that, in the opinion of 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 accompanying unaudited consolidated financial statements should be read in conjunction with Reliant Bancorp, Inc.’s consolidated financial statements and related notes appearing in Reliant Bancorp, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018.

The consolidated financial statements as of and for the periods presented include the accounts of Reliant Bancorp Inc., Reliant Bank (the "Bank"), Community First TRUPS Holding Company ("TRUPS"), which is wholly owned by Reliant Bancorp Inc., ~~(“TRUPS”),~~ Reliant Investment Holdings, LLC ("Holdings") of, which is ~~100%~~ wholly owned by ~~Reliant~~the Bank, ~~("Bank"),~~ and Reliant Mortgage Ventures, LLC ("RMV"), of which the Bank controls 51% of the governance rights. Reliant Bancorp Inc., ~~Reliant~~the Bank, TRUPS, Holdings and RMV, are, collectively, referred to herein as the “Company”. ~~As described in the notes to our annual consolidated financial statements, all~~All significant inter-company balances and transactions have been eliminated in consolidation. As described in Note 12 to these unaudited consolidated financial statements, Reliant Bancorp, Inc. and Community First, Inc. ("Community First") merged effective on January 1, 2018. The accounting and reporting policies of the Company conform to U.S. GAAP and general practices in the banking industry.

Use of Estimates

The preparation of financial statements in conformity with U.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.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates (Continued)

The consolidated financial statements as of ~~March 31,~~June 30, 2019, and for the three and six months ended ~~March 31,~~June 30, 2019 and 2018, included herein have not been audited. The accounting and reporting policies of the Company conform to U.S. GAAP and Article 8 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.

The accompanying consolidated financial statements reflect all adjustments, which are, in the opinion of management, 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 six months ended ~~March 31,~~June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

Reclassifications

Certain reclassifications were made to the ~~March 31,~~June 30, 2018 financial statement presentation in order to conform to the ~~March 31,~~June 30, 2019 financial statement presentation. Total stockholders' equity and net income are unchanged due to these reclassifications.

NOTE 2 - SECURITIES

The amortized cost and fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive ~~gain (loss)~~income at ~~March 31,~~June 30, 2019 and ~~accumulated other comprehensive income at~~ December 31, 2018 were as follows:


	March 31, 2019									June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U. S. Treasury and other U. S. government agencies	$	566	$	—	$	(4	)	$	562	$	313	$	—	$	(1	)	$	312
State and municipal	234,736		4,395		(786		)	238,345		212,157		8,540		(83		)	220,614
Corporate bonds	3,130		—		(112		)	3,018		3,130		2		(113		)	3,019
Mortgage backed securities	34,642		120		(340		)	34,422		37,515		190		(197		)	37,508
Asset backed securities	31,048		—		(590		)	30,458		29,430		12		(522		)	28,920
Time deposits	3,500		—		—			3,500
Total	$	307,622	$	4,515	$	(1,832	)	$	310,305	$	282,545	$	8,744	$	(916	)	$	290,373



	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U. S. Treasury and other U. S. government agencies	$	568	$	—	$	(14	)	$	554
State and municipal	232,589		879		(4,170		)	229,298
Corporate bonds	3,130		—		(113		)	3,017
Mortgage backed securities	32,172		34		(248		)	31,958
Asset backed securities	28,635		—		(639		)	27,996
Time deposits	3,500		—		—			3,500
Total	$	300,594	$	913	$	(5,184	)	$	296,323

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 2 - SECURITIES (CONTINUED)

Securities pledged at ~~March 31,~~June 30, 2019 and December 31, 2018 had a carrying amount of ~~$84,506~~$59,682 and $70,097, respectively, and were pledged to collateralize Federal Home Loan Bank advances, Federal Reserve advances and municipal deposits.

At ~~March 31,~~June 30, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

The fair value of available for sale debt securities at ~~March 31,~~June 30, 2019 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 are shown separately.


	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	2,755	$	2,757	$	660	$	663
Due in one to five years	4,722		4,711		938		935
Due in five to ten years	11,301		11,334		7,240		7,400
Due after ten years	223,154		226,623		206,762		214,947
Mortgage backed securities	34,642		34,422		37,515		37,508
Asset backed securities	31,048		30,458		29,430		28,920
Total	$	307,622	$	310,305	$	282,545	$	290,373

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 ~~March 31,~~June 30, 2019:


	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Description of Securities
U. S. Treasury and other U. S. government agencies	$	—	$	—	$	562	$	4	$	562	$	4	$	—	$	—	$	249	$	1	$	249	$	1
State and municipal	—		—		49,357		786		49,357		786		—		—		9,611		83		9,611		83
Corporate bonds	500		1		2,518		111		3,018		112		—		—		2,517		113		2,517		113
Mortgage backed securities	12,655		217		8,356		123		21,011		340		9,706		127		5,200		70		14,906		197
Asset backed securities	11,526		167		16,702		423		28,228		590		2,100		6		24,704		516		26,804		522

Total temporarily impaired	$	24,681	$	385	$	77,495	$	1,447	$	102,176	$	1,832	$	11,806	$	133	$	42,281	$	783	$	54,087	$	916

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 2 - SECURITIES (CONTINUED)



	Less than 12 months				12 months or more				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Description of Securities
U. S. Treasury and other U. S. government agencies	$	—	$	—	$	555	$	14	$	555	$	14
State and municipal	118,580		2,263		47,223		1,907		165,803		4,170
Corporate bonds	2,526		105		492		8		3,018		113
Mortgage backed securities	17,015		99		5,397		149		22,412		248
Asset backed securities	20,351		383		7,255		256		27,606		639

Total temporarily impaired	$	158,472	$	2,850	$	60,922	$	2,334	$	219,394	$	5,184

Management has the intent and ability to hold all securities in an unrealized loss position for the foreseeable future, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline. There were ~~127~~69 and 242 securities in an unrealized loss position as of ~~March 31,~~June 30, 2019 and December 31, 2018, respectively.

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans at ~~March 31,~~June 30, 2019 and December 31, 2018 were comprised as follows:


	March 31, 2019		December 31, 2018			June 30, 2019			December 31, 2018
Commercial, Industrial and Agricultural	$	218,767	$	213,850		$	233,312		$	213,850
Real Estate
1-4 Family Residential	230,124		225,863			233,229			225,863
1-4 Family HELOC	90,944		88,112			94,436			88,112
Multi-family and Commercial	469,468		447,840			481,973			447,840
Construction, Land Development and Farmland	220,752		220,801			237,421			220,801
Consumer	17,926		20,495			18,881			20,495
Other	14,213		14,106			13,338			14,106
Total	1,262,194		1,231,067			1,312,590			1,231,067
Less
Deferred loan fees (cost)	34		(9		)	(95		)	(9		)
Allowance for possible loan losses	11,354		10,892			11,666			10,892

Loans, net	$	1,250,806	$	1,220,184		$	1,301,019		$	1,220,184

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

Activity in the allowance for loan losses by portfolio segment was as follows for the ~~three~~six months ended ~~March 31,~~June 30, 2019:


	Commercial Industrial and Agricultural			Multi-family and Commercial Real Estate		Construction Land Development and Farmland		1-4 Family Residential Real Estate			Commercial Industrial and Agricultural			Multi-family and Commercial Real Estate		Construction Land Development and Farmland		1-4 Family Residential Real Estate
Beginning balance	$	1,751		$	4,429	$	2,500	$	1,333		$	1,751		$	4,429	$	2,500	$	1,333
Charge-offs	(6		)	—		—		(17		)	(168		)	—		—		(17		)
Recoveries	240			34		—		212			294			59		201		216
Provision	(111		)	130		150		(169		)	4			225		6		(77		)
Ending balance	$	1,874		$	4,593	$	2,650	$	1,359		$	1,881		$	4,713	$	2,707	$	1,455


	1-4 Family HELOC		Consumer			Other			Total			1-4 Family HELOC		Consumer			Other			Total
Beginning balance	$	656	$	184		$	39		$	10,892		$	656	$	184		$	39		$	10,892
Charge-offs	—		(11		)	—			(34		)	—		(21		)	(13		)	(219		)
Recoveries	—		10			—			496			11		12			—			793
Provision	14		(12		)	(2		)	—			19		13			10			200
Ending balance	$	670	$	171		$	37		$	11,354		$	686	$	188		$	36		$	11,666

Activity in the allowance for loan losses by portfolio segment was as follows for the ~~three~~six months ended ~~March 31,~~June 30, 2018:


	Commercial Industrial and Agricultural			Multi-family and Commercial Real Estate		Construction Land Development and Farmland			1-4 Family Residential Real Estate		Commercial Industrial and Agricultural			Multi-family and Commercial Real Estate		Construction Land Development and Farmland			1-4 Family Residential Real Estate
Beginning balance	$	2,538		$	3,166	$	2,434		$	773	$	2,538		$	3,166	$	2,434		$	773
Charge-offs	(308		)	—		—			—		(308		)	—		(140		)	(8		)
Recoveries	143			2		41			8		425			3		44			11
Provision	112			101		(329		)	223		(970		)	692		177			469
Ending balance	$	2,485		$	3,269	$	2,146		$	1,004	$	1,685		$	3,861	$	2,515		$	1,245


	1-4 Family HELOC			Consumer			Other			Total			1-4 Family HELOC			Consumer			Other			Total
Beginning balance	$	595		$	183		$	42		$	9,731		$	595		$	183		$	42		$	9,731
Charge-offs	(6		)	(16		)	(9		)	(339		)	(6		)	(24		)	(22		)	(508		)
Recoveries	2			1			5			202			5			18			3			509
Provision	41			(12		)	1			137			42			15			12			437
Ending balance	$	632		$	156		$	39		$	9,731		$	636		$	192		$	35		$	10,169

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(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 ~~March 31,~~June 30, 2019 was as follows:


	Commercial Industrial and Agricultural		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		1-4 Family Residential Real Estate		Commercial Industrial and Agricultural		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		1-4 Family Residential Real Estate
Allowance for loan losses
Individually evaluated for impairment	$	191	$	—	$	17	$	—	$	72	$	—	$	17	$	—
Acquired with credit impairment	—		—		—		—		—		—		—		—
Collectively evaluated for impairment	1,683		4,593		2,633		1,359		1,809		4,713		2,690		1,455
Total	$	1,874	$	4,593	$	2,650	$	1,359	$	1,881	$	4,713	$	2,707	$	1,455
Loans
Individually evaluated for impairment	$	413	$	2,786	$	1,070	$	1,682	$	903	$	3,017	$	1,069	$	1,218
Acquired with credit impairment	40		227		1,743		257		—		222		829		253
Collectively evaluated for impairment	218,314		466,455		217,939		228,185		232,409		478,734		235,523		231,758
Total	$	218,767	$	469,468	$	220,752	$	230,124	$	233,312	$	481,973	$	237,421	$	233,229


	1-4 Family HELOC		Consumer		Other		Total		1-4 Family HELOC		Consumer		Other		Total
Allowance for loan losses
Individually evaluated for impairment	$	—	$	—	$	—	$	208	$	—	$	—	$	—	$	89
Acquired with credit impairment	—		—		—		—		—		—		—		—
Collectively evaluated for impairment	670		171		37		11,146		686		188		36		11,577
Total	$	670	$	171	$	37	$	11,354	$	686	$	188	$	36	$	11,666
Loans
Individually evaluated for impairment	$	—	$	—	$	—	$	5,951	$	296	$	—	$	—	$	6,503
Acquired with credit impairment	—		11		—		2,278		—		—		—		1,304
Collectively evaluated for impairment	90,944		17,915		14,213		1,253,965		94,140		18,881		13,338		1,304,783
Total	$	90,944	$	17,926	$	14,213	$	1,262,194	$	94,436	$	18,881	$	13,338	$	1,312,590

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(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, 2018 was as follows:



	Commercial Industrial and Agricultural		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		1-4 Family Residential Real Estate
Allowance for loan losses
Individually evaluated for impairment	$	38	$	—	$	17	$	—
Acquired with credit impairment	—		—		—		—
Collectively evaluated for impairment	1,713		4,429		2,483		1,333
Total	$	1,751	$	4,429	$	2,500	$	1,333
Loans
Individually evaluated for impairment	$	978	$	1,160	$	1,780	$	1,246
Acquired with credit impairment	40		232		1,751		262
Collectively evaluated for impairment	212,832		446,448		217,270		224,355
Total	$	213,850	$	447,840	$	220,801	$	225,863



	1-4 Family HELOC		Consumer		Other		Total
Allowance for loan losses
Individually evaluated for impairment	$	—	$	—	$	—	$	55
Acquired with credit impairment	—		—		—		—
Collectively evaluated for impairment	656		184		39		10,837
Total	$	656	$	184	$	39	$	10,892
Loans
Individually evaluated for impairment	$	—	$	12	$	—	$	5,176
Acquired with credit impairment	—		11		—		2,296
Collectively evaluated for impairment	88,112		20,472		14,106		1,223,595
Total	$	88,112	$	20,495	$	14,106	$	1,231,067

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.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

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.

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)~~("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.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

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.

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 ~~March 31,~~June 30, 2019 and December 31, 2018:


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Commercial, Industrial and Agricultural	$	439	$	279	$	314	$	279
Multi-family and Commercial Real Estate	—		—		811		—
Construction, Land Development and Farmland	1,294		1,294		387		1,294
1-4 Family Residential Real Estate	2,802		2,556		1,187		2,556
1-4 Family HELOC	—		—		296		—
Consumer	47		65		50		65
Total	$	4,582	$	4,194	$	3,045	$	4,194

Performing non-accrual loans totaled ~~$1,886~~$1,578 and $2,010 at ~~March 31,~~June 30, 2019 and December 31, 2018, respectively.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(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 ~~March 31,~~June 30, 2019:


	Unpaid Principal Balance		Recorded Investment with no Allowance Recorded		Recorded Investment with Allowance Recorded		Total Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment with no Allowance Recorded		Recorded Investment with Allowance Recorded		Total Recorded Investment		Related Allowance
Commercial, Industrial and Agricultural	$	556	$	40	$	413	$	453	$	191	$	904	$	589	$	314	$	903	$	72
Multi-family and Commercial Real Estate	3,289		3,013		—		3,013		—		3,513		3,239		—		3,239		—
Construction, Land Development and Farmland	3,201		2,642		171		2,813		17		2,214		1,726		172		1,898		17
1-4 Family Residential Real Estate	2,188		1,939		—		1,939		—		1,685		1,471		—		1,471		—
Consumer	17		11		—		11		—
1-4 Family HELOC											298		296		—		296		—
Total	$	9,251	$	7,645	$	584	$	8,229	$	208	$	8,614	$	7,321	$	486	$	7,807	$	89

Individually impaired loans by class of loans were as follows at December 31, 2018:


	Unpaid Principal Balance		Recorded Investment with no Allowance Recorded		Recorded Investment with Allowance Recorded		Total Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment with no Allowance Recorded		Recorded Investment with Allowance Recorded		Total Recorded Investment		Related Allowance
Commercial, Industrial and Agricultural	$	1,247	$	765	$	253	$	1,018	$	38	$	1,247	$	765	$	253	$	1,018	$	38
Multi-family and Commercial Real Estate	1,670		1,391		—		1,391		—		1,670		1,392		—		1,392		—
Construction, Land Development and Farmland	3,920		3,360		172		3,532		17		3,920		3,359		172		3,531		17
1-4 Family Residential Real Estate	2,243		1,508		—		1,508		—		2,243		1,508		—		1,508		—
Consumer	29		23		—		23		—		29		23		—		23		—
Total	$	9,109	$	7,047	$	425	$	7,472	$	55	$	9,109	$	7,047	$	425	$	7,472	$	55

The average balances of impaired loans for the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018 was as follows:


	2019		2018		2019		2018
Commercial, Industrial and Agricultural	$	736	$	3,939	$	791	$	3,040
Multi-family and Commercial Real Estate	2,202		3,155		2,548		3,010
Construction, Land Development and Farmland	3,173		5,621		2,747		5,083
1-4 Family Residential Real Estate	1,724		2,821		1,639		2,774
1-4 Family HELOC	—		90		99		90
Consumer	17		126		11		88
Total	$	7,852	$	15,752	$	7,835	$	14,085

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

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, commercial real estate and construction loans. Loans are graded on a scale of 1 to 9. Grades 1 to 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.

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~~Borrower's 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.

Grade 6 - Special Mention

Special mention assets have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These assets pose elevated risk, but their weakness does not yet justify a substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons for rating a credit exposure special mention include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices. The special mention rating is designed to identify a specific level of risk and concern about asset quality. Although a special mention asset has a higher probability of default than a pass asset, its default is not imminent.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

Grade 7 - Substandard

A ‘‘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 substandard. Substandard assets have a high probability of payment default, or they have other well-defined weaknesses. They require 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.

Grade 8 - Doubtful

An extension of credit classified ‘‘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.

Grade 9 - Loss

Extensions of credit classified ‘‘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.

Non-commercial purpose loans are initially assigned a default loan grade of 99 (Pass) and are risk graded (Grade 6, 7, or 8) according to delinquency status when applicable.

Credit quality indicators by class of loan were as follows at ~~March 31,~~June 30, 2019:


	Pass		Special Mention		Substandard		Doubtful		Total		Pass		Special Mention		Substandard		Total
Commercial, Industrial and Agricultural	$	217,332	$	292	$	1,103	$	40	$	218,767	$	231,448	$	266	$	1,598	$	233,312
1-4 Family Residential Real Estate	226,907		—		3,217		—		230,124		231,538		—		1,691		233,229
1-4 Family HELOC	90,944		—		—		—		90,944		93,974		—		462		94,436
Multi-family and Commercial Real Estate	463,978		1,565		3,925		—		469,468		476,858		—		5,115		481,973
Construction, Land Development and Farmland	219,322		456		974		—		220,752		236,508		—		913		237,421
Consumer	17,669		—		248		9		17,926		18,624		—		257		18,881
Other	14,213		—		—		—		14,213		13,338		—		—		13,338
Total	$	1,250,365	$	2,313	$	9,467	$	49	$	1,262,194	$	1,302,288	$	266	$	10,036	$	1,312,590

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

Credit quality indicators by class of loan were as follows at December 31, 2018:



	Pass		Special Mention		Substandard		Total
Commercial, Industrial and Agricultural	$	212,761	$	—	$	1,089	$	213,850
1-4 Family Residential Real Estate	221,546		1,125		3,192		225,863
1-4 Family HELOC	88,112		—		—		88,112
Multi-family and Commercial Real Estate	442,127		3,135		2,578		447,840
Construction, Land Development and Farmland	218,053		579		2,169		220,801
Consumer	20,236		—		259		20,495
Other	14,106		—		—		14,106
Total	$	1,216,941	$	4,839	$	9,287	$	1,231,067

Past due status by class of loan was as follows at ~~March 31,~~June 30, 2019:


	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans
Commercial, Industrial and Agricultural	$	167	$	85	$	1,001	$	1,253	$	217,514	$	218,767	$	170	$	—	$	301	$	471	$	232,841	$	233,312
1-4 Family Residential Real Estate	2,129		208		2,073		4,410		225,714		230,124		680		516		67		1,263		231,966		233,229
1-4 Family HELOC	5		—		—		5		90,939		90,944		120		—		—		120		94,316		94,436
Multi-family and Commercial Real Estate	511		19		—		530		468,938		469,468		1,064		—		—		1,064		480,909		481,973
Construction, Land Development and Farmland	6		—		171		177		220,575		220,752		1		—		171		172		237,249		237,421
Consumer	33		11		17		61		17,865		17,926		12		10		7		29		18,852		18,881
Other	—		—		—		—		14,213		14,213		—		—		—		—		13,338		13,338
Total	$	2,851	$	323	$	3,262	$	6,436	$	1,255,758	$	1,262,194	$	2,047	$	526	$	546	$	3,119	$	1,309,471	$	1,312,590

Past due status by class of loan was as follows at December 31, 2018:



	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans
Commercial, Industrial and Agricultural	$	22	$	153	$	279	$	454	$	213,396	$	213,850
1-4 Family Residential Real Estate	1,104		335		1,203		2,642		223,221		225,863
1-4 Family HELOC	50		—		—		50		88,062		88,112
Multi-family and Commercial Real Estate	—		104		—		104		447,736		447,840
Construction, Land Development and Farmland	214		—		171		385		220,416		220,801
Consumer	11		30		46		87		20,408		20,495
Other	—		—		—		—		14,106		14,106
Total	$	1,401	$	622	$	1,699	$	3,722	$	1,227,345	$	1,231,067

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

There were two loans totaling ~~$566~~$22 past due 90 days or more and still accruing interest at ~~March 31,~~June 30, 2019. There was aone loan totaling $6 past due 90 days or more and still accruing interest at December 31, 2018.

During the six months ended June 30, 2019, there were no loans that were modified to troubled debt restructurings. One previously disclosed troubled debt restructuring with a principal balance of $89, was paid in full during the six months ended June 30, 2019.

The following table presents loans by class modified as troubled debt restructurings that occurred during the first ~~three~~six months of ~~2019 and~~ 2018:


	Number of Contracts	Pre-Modification Outstanding Recorded Investments		Post-Modification Outstanding Recorded Investments		Number of Contracts	Pre-Modification Outstanding Recorded Investments		Post-Modification Outstanding Recorded Investments
March 31, 2019
1-4 Family Residential	—	$	—	$	—
Multi-family and Commercial Real Estate	—	—		—
Total	—	$	—	$	—

March 31, 2018
June 30, 2018
1-4 Family Residential	1	$	1,254	$	1,254	1	$	1,254	$	1,254
Total	1	$	1,254	$	1,254	1	$	1,254	$	1,254

~~One~~The modification that occurred during the ~~three~~six months ended ~~March 31,~~June 30, 2018, consisted of an interest only monthly payment restructure and had no effect on the allowance for loan losses or interest income.

The Company has acquired 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 the purchased credit impaired loans ~~was~~were as follows at ~~March 31,~~June 30, 2019 and December 31, 2018:


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Commercial, Industrial and Agricultural	$	63	$	63	$	—	$	63
Multi-family and Commercial Real Estate	229		233		224		233
Construction, Land Development and Farmland	1,950		1,958		1,037		1,958
1-4 Family Residential Real Estate	319		324		315		324
1-4 Family HELOC	—		—
Consumer	17		18		—		18
Total outstanding balance	2,578		2,596		1,576		2,596
Less remaining purchase discount	300		300		272		300
Allowance for loan losses	—		—		—		—
Carrying amount, net of allowance	$	2,278	$	2,296	$	1,304	$	2,296

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

Activity related to the accretable portion of the purchase discount on loans acquired with deteriorated credit quality is as follows for the quarters and ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018:


	2019		2018			2019			2018
Balance at January 1,	$	110	$	—		$	110		$	—
New loans purchased	—		260			—			260
Loan charge offs	—		—			—			—
Accretion income	—		(38		)	—			(38		)
Balance at March 31,	110		222			110			222
New loans purchased						—			—
Loan payoffs						—			(67		)
Loan charge offs						(7		)	—
Accretion income						—			(95		)
Balance at June 30,						$	103		$	60

NOTE 4 - OTHER REAL ESTATE

In connection with the merger with Community First, the Company acquired three real estate parcels. The Company valued the properties at their estimated fair values less costs to sell which totaled $1,650. Expenses related to other real estate totaled $6$15 and $3$13 for the ~~quarters~~six months ended ~~March 31,~~June 30, 2019 and 2018, respectively.

At ~~March 31,~~June 30, 2019, there were ~~two 1-4 Family Residential~~four loans to one borrower, all cross-collateralized, with related balances totaling ~~$1,902 and a Commercial, Industrial and Agricultural loan, with a related balance of $160,~~$48, in the process of foreclosure. There was one 1-4 Family Residential property at

June 30, 2019, with a recorded balance of $848 related to other real estate.

NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES

Financial accounting standards relating to fair value measurements establish a framework for measuring fair 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 1 Inputs 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 2 Inputs 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; and

•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 3 Inputs 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.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)

An asset’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.

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis:

Securities available for sale: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The Company obtains fair value measurements for securities available for sale from an independent pricing service. The fair value measurements consider observable data that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, cash flows and reference data, including market research publications, among other things.

Interest rate swaps: The fair values of interest rate swaps are determined based on discounted future cash flows.

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:

Impaired Loans: The fair value of impaired loans 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.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair 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.

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.

2425

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)

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 ~~March 31,~~June 30, 2019 and December 31, 2018:


	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2019
June 30, 2019
Assets
U. S. Treasury and other U. S. government agencies	$	562	$	—	$	562	$	—	$	312	$	—	$	312	$	—
State and municipal	238,345		—		238,345		—		220,614		—		220,614		—
Corporate bonds	3,018		—		3,018		—		3,019		—		3,019		—
Mortgage backed securities	34,422		—		34,422		—		37,508		—		37,508		—
Asset backed securities	30,458		—		30,458		—		28,920		—		28,920		—
Time deposits	3,500		3,500		—		—
Interest rate swaps	101		—		101		—		1		—		1		—

Liabilities
Interest rate swaps	$	1,955	$	—	$	1,955	$	—	$	3,576	$	—	$	3,576	$	—

December 31, 2018
Assets
U. S. Treasury and other U. S. government agencies	$	554	$	—	$	554	$	—	$	554	$	—	$	554	$	—
State and municipal	229,298		—		229,298		—		229,298		—		229,298		—
Corporate bonds	3,017		—		3,017		—		3,017		—		3,017		—
Mortgage backed securities	31,958		—		31,958		—		31,958		—		31,958		—
Asset backed securities	27,996		—		27,996		—		27,996		—		27,996		—
Time deposits	3,500		3,500		—		—		3,500		3,500		—		—
Interest rate swaps	467		—		467		—		467		—		467		—

Liabilities
Interest rate swaps	$	1,183	$	—	$	1,183	$	—	$	1,183	$	—	$	1,183	$	—

2526

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)

The following table sets forth the Company’s major categories of assets and liabilities measured at fair value on a nonrecurring basis, by level within the fair value hierarchy, as of ~~March 31,~~June 30, 2019 and December 31, 2018:


	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2019
June 30, 2019
Assets
Impaired loans	$	376	$	—	$	—	$	376	$	397	$	—	$	—	$	397
Other real estate owned	1,000		—		—		1,000		1,848		—		—		1,848

December 31, 2018
Assets
Impaired loans	$	370	$	—	$	—	$	370	$	370	$	—	$	—	$	370
Other real estate owned	1,000		—		—		1,000		1,000		—		—		1,000

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at ~~March 31,~~June 30, 2019 and December 31, 2018:



	Valuation Techniques (1)	Significant Unobservable Inputs	Range (Weighted Average)
Impaired loans	Appraisal	Estimated costs to sell	10%
Other real estate owned	Appraisal	Estimated 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. Estimated cash flows change and appraised values of the assets or collateral underlying the loans will be sensitive to changes.

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)

Carrying amounts and estimated fair values of financial instruments not reported at fair value at ~~March 31,~~June 30, 2019 were as follows:


	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount		Estimated Fair Value		Quoted 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	$	34,796	$	34,796	$	34,796	$	—	$	—	$	35,917	$	35,917	$	35,917	$	—	$	—
Federal funds sold	409		409		—		409		—		80		80		—		80		—
Loans, net	1,250,806		1,235,864		—		—		1,235,864		1,301,019		1,288,697		—		—		1,288,697
Mortgage loans held for sale	9,990		10,066		—		10,066		—		11,571		11,701		—		11,701		—
Accrued interest receivable	8,389		8,389		—		8,389		—		7,246		7,246		—		7,246		—
Restricted equity securities	11,499		11,499		—		11,499		—		11,488		11,488		—		11,488		—
Financial liabilities
Deposits	$	1,511,321	$	1,509,732	$	—	$	—	$	1,509,732	$	1,550,280	$	1,551,492	$	—	$	—	$	1,551,492
Accrued interest payable	990		990		—		990		—		967		967		—		967		—
Subordinate debentures	11,624		11,993		—		—		11,993		11,644		12,261		—		—		12,261
Federal Home Loan Bank advances	15,309		15,277		—		—		15,277		11,119		11,133		—		—		11,133

Carrying amounts and estimated fair values of financial instruments not reported at fair value at December 31, 2018 were as follows:


	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount		Estimated Fair Value		Quoted 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	$	34,807	$	34,807	$	34,807	$	—	$	—	$	34,807	$	34,807	$	34,807	$	—	$	—
Federal funds sold	371		371		—		371		—		371		371		—		371		—
Loans, net	1,220,184		1,206,574		—		—		1,206,574		1,220,184		1,206,574		—		—		1,206,574
Mortgage loans held for sale	15,823		15,871		—		15,871		—		15,823		15,871		—		15,871		—
Accrued interest receivable	8,214		8,214		—		8,214		—		8,214		8,214		—		8,214		—
Restricted equity securities	11,690		11,690		—		11,690		—		11,690		11,690		—		11,690		—
Financial liabilities
Deposits	$	1,437,903	$	1,434,652	$	—	$	—	$	1,434,652	$	1,437,903	$	1,434,652	$	—	$	—	$	1,434,652
Accrued interest payable	1,063		1,063		—		1,063		—		1,063		1,063		—		1,063		—
Subordinate debentures											11,603		11,522		—		—		11,522
Federal Home Loan Bank advances	57,498		57,434		—		—		57,434		57,498		57,434		—		—		57,434

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)

The methods and assumptions used to estimate fair value are described as follows:

Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest receivable and payable, restricted equity securities, federal funds sold or purchased, demand deposits, and variable rate loans or deposits that re-price frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of debt is based on discounted cash flows using current rates for similar financing.

NOTE 6 - STOCK-BASED COMPENSATION

Stock Option Plan

In 2006, the Board of Directors and shareholders of the Bank (then known as "Commerce Union Bank") approved the Commerce Union Bank Stock Option Plan (the “Plan”). The Plan ~~provides~~provided for the granting of stock options, and ~~authorizes~~authorized 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.~~organizers. As part of the Bank's reorganization into a holding company corporate structure in 2012, all ~~Commerce Union~~ Bank options were replaced with Commerce Union Bancshares, Inc. (now known as "Reliant Bancorp, 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 (the “A&R Plan”) that permits the grant of awards ofwith respect to up to 1,250,000 shares of ~~the~~ Company

common stock in the form of stock options. As part of the merger ~~with~~of Commerce Bank and Reliant Bank, all outstanding stock options of Reliant Bank were converted to stock options of Commerce Union Bancshares, Inc. (now known as "Reliant Bancorp, Inc.") under ~~this plan.~~the A&R Plan.

Under the ~~Stock Option~~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 up to ~~ten~~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 the common stock on the grant

date.

A summary of the activity in the ~~stock option plan~~A&R Plan for the ~~three~~six months ended ~~March 31,~~June 30, 2019 is as follows:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	159,260	$	16.72	6.04	$	1,146	159,260	$	16.72	6.04 years	$	1,146
Granted	1,000	$	22.67	10.00			1,000	$	22.67
Exercised	(2,183)	$	12.37	5.69			(26,706)	$	13.14
Forfeited or expired	(2,600)	$	19.90	7.95			(2,753)	$	19.34
Outstanding at March 31, 2019	155,477	$	16.75	5.79	$	1,023
Exercisable at March 31, 2019	87,877	$	13.49	4.10	$	780
Outstanding at June 30, 2019							130,801	$	17.44	6.22 years	$	924
Exercisable at June 30, 2019							64,201	$	13.75	4.66 years	$	636

Shares
Weighted Average
Grant-Date Fair Value
Non-vested options at January 1, 2019 71,200
$5.28
Granted 1,000
$6.57
Vested (2,000 ) $3.55
Forfeited (2,600 ) $5.03
Non-vested options at March 31, 2019 67,600
$5.36



	Shares		Weighted Average Grant-Date Fair Value
Non-vested options at January 1, 2019	71,200		$5.28
Granted	1,000		$6.57
Vested	(2,847	)	$4.24
Forfeited	(2,753	)	$4.89
Non-vested options at June 30, 2019	66,600		$5.36

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 6 - STOCK-BASED COMPENSATION (CONTINUED)

Stock Option Plan, Continued

As of ~~March 31,~~June 30, 2019, there was ~~$283~~$259 of unrecognized future compensation expense to be recognized related to stock options.

Equity Incentive Plan

On June 18, 2015, the shareholders of Commerce Union Bancshares, Inc. (now known as "Reliant Bancorp, Inc.") approved the Commerce Union Bancshares, Inc. 2015 Equity

Incentive Plan, which ~~provides for the issuance of~~reserves up to 900,000 shares of common stock to be subject to awards under the plan, including awards in the form of stock options, restricted stock grants, performance-based awards, and other awards denominated or ~~grants for performance-based compensation.~~payable by reference to or based on or related to common stock.

The following table shows the activity related to non-vested restricted stock for the ~~three~~six months ended ~~March 31,~~June 30, 2019:


	Shares		Weighted Average Grant-Date Fair Value		Shares		Weighted Average Grant-Date Fair Value
Non-vested shares at January 1, 2019	110,660		$	24.28	110,660		$	24.28
Granted	3,000		21.77		8,000		21.94
Vested	—		—		—		—
Forfeited	(3,750	)	23.31		(7,750	)	23.25
Non-vested shares at March 31, 2019	109,910		$	24.25
Non-vested shares at June 30, 2019					110,910		$	24.19

The restricted shares vest over periods ranging from one to three years. As of ~~March 31,~~June 30, 2019, there was ~~$1,472~~$1,250 of unrecognized compensation cost related to non-vested restricted share awards.

NOTE 7 - REGULATORY CAPITAL REQUIREMENTS

The ~~Company and the~~ Bank ~~are~~is subject to regulatory capital requirements administered by the federal and state banking agencies. The Company meets the Small Bank Holding Company regulatory exemption limit presently set at three billion in total assets. 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 ~~March 31,~~June 30, 2019, the ~~Company and the~~ Bank ~~meet~~meets all capital adequacy requirements to which ~~they are~~it is 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 ~~March 31,~~June 30, 2019 and December 31, 2018, 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~~Federal Deposit Insurance Corporation (FDIC) approved final rules that substantially ~~amend~~amended 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)~~("Basel III") and changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 7 - REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

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.

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~MARCH 31, 2019 (UNAUDITED) AND DECEMBER 31, 2018~~

~~(Dollar amounts in thousands except per share amounts)~~

~~NOTE 7 - 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 0.625% per year. The buffer became 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~~Capital amounts and ratios for the Company and the Bank (required) are presented below as of ~~March 31,~~June 30, 2019 and December 31, 2018.


	Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions				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		Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2019
June 30, 2019
Company
Tier I leverage	$	171,606	10.23	%	$	67,099	4.000	%	$	83,874	5.000	%	$	168,218	9.81	%	$	68,590	4.000	%	$	85,738	5.000	%
Common equity tier 1	159,982		11.50	%	97,380		7.000	%	90,425		6.500	%	156,574		10.93	%	100,276		7.000	%	93,114		6.500	%
Tier I risk-based capital	171,606		12.34	%	118,205		8.500	%	111,252		8.000	%	168,218		11.75	%	121,690		8.500	%	114,531		8.000	%
Total risk-based capital	183,385		13.19	%	145,985		10.500	%	139,033		10.000	%	180,309		12.59	%	150,377		10.500	%	143,216		10.000	%

Bank
Tier I leverage	$	167,447	9.99	%	$	67,046	4.000	%	$	83,807	5.000	%	$	164,042	9.58	%	$	68,492	4.000	%	$	85,615	5.000	%
Common equity tier 1	167,447		12.07	%	97,111		7.000	%	90,174		6.500	%	164,042		11.48	%	100,020		7.000	%	92,875		6.500	%
Tier I risk-based capital	167,447		12.07	%	117,920		8.500	%	110,984		8.000	%	164,042		11.48	%	121,452		8.500	%	114,308		8.000	%
Total risk-based capital	179,226		12.92	%	145,656		10.500	%	138,720		10.000	%	176,133		12.33	%	150,029		10.500	%	142,885		10.000	%

December 31, 2018
Company
Tier I leverage	$	168,876	10.38	%	$	65,077	4.000	%	$	81,347	5.000	%	$	168,876	10.38	%	$	65,077	4.000	%	$	81,347	5.000	%
Common equity tier 1	157,273		11.59	%	86,507		6.375	%	88,203		6.500	%	157,273		11.59	%	86,507		6.375	%	88,203		6.500	%
Tier I risk-based capital	168,876		12.44	%	106,905		7.875	%	108,602		8.000	%	168,876		12.44	%	106,905		7.875	%	108,602		8.000	%
Total risk-based capital	180,193		13.28	%	133,991		9.875	%	135,688		10.000	%	180,193		13.28	%	133,991		9.875	%	135,688		10.000	%

Bank
Tier I leverage	$	165,308	10.17	%	$	65,018	4.000	%	$	81,272	5.000	%	$	165,308	10.17	%	$	65,018	4.000	%	$	81,272	5.000	%
Common equity tier 1	165,308		12.19	%	86,451		6.375	%	88,146		6.500	%	165,308		12.19	%	86,451		6.375	%	88,146		6.500	%
Tier I risk-based capital	165,308		12.19	%	106,792		7.875	%	108,488		8.000	%	165,308		12.19	%	106,792		7.875	%	108,488		8.000	%
Total risk-based capital	176,625		13.02	%	133,961		9.875	%	135,657		10.000	%	176,625		13.02	%	133,961		9.875	%	135,657		10.000	%

NOTE 8 - EARNINGS PER SHARE

The following is a summary of the components comprising basic and diluted earnings per common share of stock ~~(EPS)~~("EPS"):


					Three Months Ended				Six Months Ended
	Three Months Ended March 31,				June 30,				June 30,
	2019		2018		2019		2018		2019		2018
Basic EPS Computation
Net income attributable to common shareholders	$	3,824	$	3,741	$	4,239	$	2,139	$	8,063	$	5,880
Weighted average common shares outstanding	11,405,438		11,385,323		11,196,898		11,396,829		11,300,095		11,389,634
Basic earnings per common share	$	0.34	$	0.33	$	0.38	$	0.19	$	0.71	$	0.52
Diluted EPS Computation
Net income attributable to common shareholders	$	3,824	$	3,741	$	4,239	$	2,139	$	8,063	$	5,880
Weighted average common shares outstanding	11,405,438		11,385,323		11,196,898		11,396,829		11,300,095		11,389,634
Dilutive effect of stock options, restricted shares and employee stock purchase plan	81,707		92,611		89,729		98,404		78,300		96,838
Adjusted weighted average common shares outstanding	11,487,145		11,477,934		11,286,627		11,495,233		11,378,395		11,486,472
Diluted earnings per common share	$	0.33	$	0.33	$	0.38	$	0.19	$	0.71	$	0.51

NOTE 9 - SEGMENT REPORTING

The Company has two reportable business segments: retail banking and residential mortgage banking. Segment information is derived from the internal reporting 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.

Retail Banking provides deposit and lending services to consumer and business customers within our primary geographic markets. Our customers are serviced through branch locations, ATMs, online banking, and mobile banking.

Residential Mortgage Banking originates traditional first lien residential mortgage loans and first lien home equity lines of credit throughout the United States. The traditional first lien residential mortgage loans are typically underwritten to government agency standards and sold to ~~third party~~third-party secondary market mortgage investors. The home equity lines of credit are typically ~~underwritten~~sold to participating banks or other investor ~~group~~groups and are underwritten to their standards.

During the second quarter of 2019, RMV began acquiring loans from approved correspondent lenders and reselling them in the secondary market. These loans are not FNMA or FHLMC qualified loans, and are of higher risk, such as, jumbo loans or senior position home equity lines of credit.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 9 - SEGMENT REPORTING (CONTINUED)

The following presents summarized results of operations for the Company’s business segments for the periods indicated:


	Three Months Ended March 31, 2019										Three Months Ended June 30, 2019
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated		Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	13,373	$	88		$	—		$	13,461	$	13,703	$	110		$	—		$	13,813
Provision for loan losses	—		—			—			—		200		—			—			200
Noninterest income	1,378		575			(15		)	1,938		1,473		1,235			(10		)	2,698
Noninterest expense (excluding merger expense)	10,445		2,299			—			12,744		10,129		2,996			—			13,125
Merger expense	2		—			—			2		1		—			—			1
Income tax expense (benefit)	480		(108		)	—			372		607		(106		)	—			501
Net income (loss)	3,824		(1,528		)	(15		)	2,281		4,239		(1,545		)	(10		)	2,684
Noncontrolling interest in net loss of subsidiary	—		1,528			15			1,543		—		1,545			10			1,555
Net income attributable to common shareholders	$	3,824	$	—		$	—		$	3,824	$	4,239	$	—		$	—		$	4,239


	Three Months Ended March 31, 2018										Three Months Ended June 30, 2018
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated		Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	13,044	$	338		$	—		$	13,382	$	13,190	$	214		$	—		$	13,404
Provision for loan losses	137		—			—			137		300		—			—			300
Noninterest income	1,288		1,748			(45		)	2,991		1,299		993			(38		)	2,254
Noninterest expense (excluding merger expense)	9,451		2,534			—			11,985		9,389		2,169			—			11,558
Merger expense	177		—			—			177		2,483		—			—			2,483
Income tax expense (benefit)	826		(29		)	—			797		178		(63		)	—			115
Net income (loss)	3,741		(419		)	(45		)	3,277		2,139		(899		)	(38		)	1,202
Noncontrolling interest in net loss of subsidiary	—		419			45			464		—		899			38			937
Net income attributable to common shareholders	$	3,741	$	—		$	—		$	3,741	$	2,139	$	—		$	—		$	2,139

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 9 - SEGMENT REPORTING (CONTINUED)



	Six Months Ended June 30, 2019
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	27,076	$	198		$	—		$	27,274
Provision for loan losses	200		—			—			200
Noninterest income	2,851		1,810			(25		)	4,636
Noninterest expense (excluding merger expense)	20,574		5,295			—			25,869
Merger expense	3		—			—			3
Income tax expense (benefit)	1,087		(214		)	—			873
Net income (loss)	8,063		(3,073		)	(25		)	4,965
Noncontrolling interest in net loss of subsidiary	—		3,073			25			3,098
Net income attributable to common shareholders	$	8,063	$	—		$	—		$	8,063



	Six Months Ended June 30, 2018
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	26,234	$	552		$	—		$	26,786
Provision for loan losses	437		—			—			437
Noninterest income	2,587		2,741			(83		)	5,245
Noninterest expense (excluding merger expense)	18,840		4,703			—			23,543
Merger expense	2,660		—			—			2,660
Income tax expense (benefit)	1,004		(92		)	—			912
Net income	5,880		(1,318		)	(83		)	4,479
Noncontrolling interest in net income of subsidiary	—		1,318			83			1,401
Net income attributable to common shareholders	$	5,880	$	—		$	—		$	5,880

NOTE 10 - DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and other terms of the individual interest rate swap agreements.

3133

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 10 - DERIVATIVES (CONTINUED)

Interest Rate Swaps Designated as Cash Flow Hedges

Interest rate swaps with notional amounts totaling $60,000 as of ~~March 31,~~June 30, 2019 , were designated as cash flow hedges of certain ~~certificates of deposits~~short-term interest bearing liabilities and subordinated debentures,which are fully effective. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swap agreements.

Summary information related to the interest rate swaps designated as cash flow hedges as of ~~March 31,~~June 30, 2019, is as follows:


Notional amounts	$	60,000		$	60,000
Weighted average pay rates	3.338		%	3.338		%
Weighted average receive rates	3.060		%	3.060		%
Weighted average maturity	4.22 years			3.97 years
Unrealized losses	$	1,790		$	2,955

Cash Flow Hedges

The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the Consolidated Statements of Income relating to the cash flow derivative instruments for the period ended:


	Amount of Gain (Loss) Recognized in OCI (Effective Portion)			Amount of Gain (Loss) Reclassified from OCI to Interest Income		Amount of Gain (Loss) Recognized in Other Non-Interest Income (Ineffective Portion)		Amount of Gain (Loss) Recognized in OCI (Effective Portion)			Amount of Gain (Loss) Reclassified from OCI to Interest Income		Amount of Gain (Loss) Recognized in Other Non-Interest Income (Ineffective Portion)
March 31, 2019
June 30, 2019
Interest rate contracts	$	(637	)	$	—	$	—	$	(1,802	)	$	—	$	—

The following table reflects the cash flow hedges included in the Consolidated Balance Sheets as of ~~March 31,~~June 30, 2019 and December 31, 2018, respectively:

March 31, 2019 December 31, 2018
Notional Amount Fair Value Notional Amount Fair Value
Included in other liabilities:
Interest rate swaps related to
subordinate debentures $ 10,000
$ 284
$ 10,000
$ 174

Interest rate swaps related to
Certificates of deposits 50,000
1,506
—
—
Federal Home Loan Bank borrowings —
—
50,000
979
Total included in other liabilities $ 60,000
$ 1,790
$ 60,000
$ 1,153



	June 30, 2019				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other liabilities:
Interest rate swaps related to:
Subordinate debentures	$	10,000	$	475	$	10,000	$	174
Short-term interest bearing liabilities	50,000		2,480		50,000		979
Total included in other liabilities	$	60,000	$	2,955	$	60,000	$	1,153

3234

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 10 - DERIVATIVES (CONTINUED)

Fair Value Hedges

The following table reflects the fair value hedges included in the Consolidated Statements of Income for the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018, respectively:


Interest rate contracts	Location	March 31, 2019			December 31, 2018		Location	June 30, 2019			June 30, 2018
Change in fair value on interest
rate swaps hedging investments	Interest income	$	(501	)	$	614	Interest income	$	(1,057	)	$	255

The following table reflects the fair value hedges included in the Consolidated Balance Sheets as of ~~March 31,~~June 30, 2019 and December 31, 2018, respectively:


	March 31, 2019				December 31, 2018				June 30, 2019				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate swaps related to investments	$	10,668	$	101	$	16,902	$	467	$	1,000	$	1	$	16,902	$	467

Total included in other assets	$	10,668	$	101	$	16,902	$	467	$	1,000	$	1	$	16,902	$	467

Included in other liabilities:
Interest rate swaps related to investments	10,437		165		4,203		30		19,605		621		4,203		30

Total included in other liabilities	$	10,437	$	165	$	4,203	$	30	$	19,605	$	621	$	4,203	$	30

NOTE 11 – INCOME TAXES

Income tax expense totaled $501 in the second quarter of 2019 as compared to $115 in the second quarter of 2018 and $873 and $912 for the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018, was $372 and $797. The decline is attributable to; a lower income before tax level, an increased level of tax-exempt income in 2019, increased utilization of state tax credit lending programs, and there were no non-deductible merger expenses in 2019.respectively. The effective tax rate for the three months ended ~~March 31,~~June 30, 2019 and 2018 was ~~14%~~16% and ~~20%~~9%, respectively. The increase in the effective tax rate for the three months ended June 30, 2019 can be attributed to a decrease in tax-exempt securities. Merger expenses in the second quarter of 2018, had the impact of reducing taxable income and increasing the proportion of tax exempt income to total income. The effective tax rate for the six months ended June 30, 2019 and 2018 was 15% and 17%, respectively.

3335

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 12 - BUSINESS COMBINATION

OnEffective January 1, 2018, ~~pursuant to the Agreement and Plan of Merger, dated August 22, 2017, by and among Reliant Bancorp, Inc., Community First Inc.,~~ Pioneer Merger Sub, Inc., ~~and Community First Bank & Trust, Community First,~~a wholly owned subsidiary of Reliant Bancorp, Inc., merged with and into ~~the Reliant Bancorp, Inc. Immediately following the merger,~~ Community First, ~~Bank & Trust~~with Community First continuing as the surviving corporation, and immediately thereafter Community First merged with and into Reliant ~~Bank,~~Bancorp, Inc., with Reliant ~~Bank surviving. Pioneer Merger Sub,~~Bancorp, Inc. ~~was formed to effect~~continuing as the ~~merger and no longer exists.~~surviving corporation.

Pursuant to the merger agreement, each outstanding share of Community First ~~Inc.~~ common stock (except for excluded shares and dissenting shares) was converted into and ~~cancelled~~canceled in exchange for the right to receive 0.481 shares of Reliant Bancorp, Inc. common stock, together with cash in lieu of any fractional shares. This business combination ~~results in~~ expanded and ~~more~~further diversified the Company's market ~~area for the Company.~~area.

The following table details the financial impact of the ~~merger,~~business combination, including the calculation of the purchase price, the allocation of the purchase price to the fair values of net assets assumed and goodwill recognized:



Calculation of Purchase Price

Shares of Community First common stock outstanding as of December 31, 2017	5,025,884
Exchange ratio for Reliant Bancorp, Inc. common stock	0.481
Share conversion	2,417,450
Reliant Bancorp, Inc. common stock shares issued	2,416,444
Reliant Bancorp, Inc. share price at December 29, 2017	$	25.64
Value of Reliant Bancorp, Inc. common stock shares issued	61,958
Value of fractional shares	25
Estimated fair value of Community First, Inc.	$	61,983

Allocation of Purchase Price
Total consideration above	$	61,983
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents	(33,128		)
Time deposits in other financial institutions	(23,309		)
Investment securities available for sale	(69,078		)
Loans, net of unearned income	(313,040		)
Mortgage loans held for sale, net	(910		)
Accrued interest receivable	(1,165		)
Premises and equipment	(9,585		)
Restricted equity securities	(1,726		)
Cash surrender value of life insurance contracts	(10,664		)
Other real estate owned	(1,650		)
Deferred tax asset, net	(4,885		)
Core deposit intangible	(7,888		)
Other assets	(1,795		)
Deposits—noninterest-bearing	80,395
Deposits—interest-bearing	352,100
Other borrowings	11,522
Payables and other liabilities	5,061
Net liabilities assumed (net assets acquired)	(29,745		)
Goodwill	$	32,238

3436

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 12 - BUSINESS COMBINATION (CONTINUED)

During 2018, as part of the system integration of Community First, the Company determined minor adjustments were appropriate to reduce other assets by $93 and increase payables and other liabilities by $85 effective as of the acquisition date.

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

Information about certain issued accounting standards updates is presented below. Also refer to Note 1 - Summary of Significant Accounting Policies “Recent Authoritative Accounting Guidance” in our ~~2018~~Annual Report on Form 10-K for the year ended December 31, 2018 for additional information related to previously issued accounting standards updates.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” implements a common revenue standard that clarifies the principles for recognizing revenue. The principle element of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 was originally going to be effective for the Company on January 1, 2018; however, the FASB recently issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date" which deferred the effective date of ASU 2014-09 by one year to January 1, 2019. Revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. The adoption of this standard did not have a significant impact on the Company.

ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." ASU 2016-01, among other things, (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 securities. ASU 2016-01 became effective for us on January 1, 2019 and did not have a significant impact on our financial statements.

ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 will require 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 will be effective for us on January 1, 2020 and will require transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. We estimate that the effect of implementing this pronouncement will result in right to use assets of ~~$13,804~~$11,455 and a corresponding liability, using the remaining contractual lease periods. We also estimate the impact on regulatory capital of the Company to be a reduction of ~~eight~~seven basis points to the Tier 1 leverage capital ratio. Management is presently evaluating the planned renewals of existing leases. If management determines to utilize the renewals of leases then the right to use assets and corresponding liability will increase.

3537

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~MARCH 31,~~JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

(Dollar amounts in thousands except per share amounts)

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting

date based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced

disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality

and underwriting standards of an organization’s portfolio. In addition, ASU 2016-13 amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 ~~will~~is expected to be effective on January 1, 2021. We are currently evaluating the potential impact of ASU 2016-13 on our financial statements. We are currently developing an implementation plan to include assessment of processes, portfolio segmentation, model

development, system requirements and the identification of data and resource needs, among other things. We are also in the process of implementing a third-party vendor solution to assist us in the application of the ASU 2016-13. The adoption of the ASU 2016-13 could result in an increase in the allowance for loan losses as a result of 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. While we are currently unable to reasonably estimate the impact of adopting ASU 2016-13, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of our loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates Step 2 from the goodwill impairment test which required entities to compute the implied fair value of goodwill. Under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds 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 for the Company on January 1, 2021, with earlier adoption permitted and is not currently expected to have a significant impact on ~~the consolidated~~our financial statements.

ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 will be effective for the Company on January 1, 2021, with early adoption permitted, and is not expected to have a significant impact on our financial statements.

~~NOTE 14 - SUBSEQUENT EVENT~~

~~On May 3, 2019, in connection with the Company's stock repurchase plan, 200,000 shares were acquired at a total cost of $4,598.~~

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

The following is a summary of the Company’s (as defined below) financial highlights and significant events for the ~~three~~six months ended ~~March 31,~~June 30, 2019:

Net income ~~available~~attributable to common shareholders totaled ~~$3.8~~$8.1 million, or ~~$0.33~~$0.71 per diluted common share, for the ~~three~~six months ended ~~March 31,~~June 30, 2019 compared to ~~$3.7~~$5.9 million, or ~~$0.33~~$0.51 per diluted common share, during same period in 2018.

Loans ~~net of unearned income~~ increased ~~$31.1~~$81.5 million for the ~~three~~six months ended ~~March 31,~~June 30, 2019.

Deposits increased ~~$73.4~~$112.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2019.

Asset quality ~~remains~~remained strong with nonperforming assets to total assets of just ~~0.45~~0.38 percent.

~~In the following section the term “Company” means “Reliant Bancorp, Inc. and all of its subsidiaries” 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 our Annual Report on Form 10-K ~~filed March 8, 2019.~~for the year ended December 31, 2018. Amounts in the narrative are shown in thousands, except for economic and demographic information, numbers of shares, per share amounts and as otherwise noted.

Critical Accounting Policies

The accounting principles we follow and our methods of applying these principles conform to accounting principles generally accepted in the United States of America ("U.S. GAAP") and with general practices within the banking industry. There have been no significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2018. The following is a brief summary of the more significant policies.

Principles of Consolidation

The consolidated financial statements as of and for the periods presented include the accounts of Reliant Bancorp, ~~the~~Inc. ("Reliant Bancorp"), Reliant Bank (the "Bank"), Community First Trups Holding Company, which is wholly owned by Reliant Bancorp (“~~TRUPS~~”TRUPS”), Reliant Investment Holdings, LLC ("~~Holdings~~"Holdings"), which is ~~100%~~ wholly owned by the Bank, and Reliant Mortgage Ventures, LLC ("~~RMV~~"RMV"), of which the Bank controls 51% of the governance rights (Reliant Bancorp, the Bank, TRUPS, Holdings, ~~TRUPS,~~ and RMV are, collectively, referred to herein as the “Company”). As described in the notes to our ~~annual~~ consolidated financial statements, RMV 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 eliminated in consolidation. As described in Note 12 to our consolidated financial statements, effective on January 1, 2018, Reliant Bancorp and Community First, Inc. ~~merged effective January 1, 2018.~~merged. The accounting and reporting policies of the Company conform to U.S. GAAP and to general practices in the banking industry.

During 2011, the Bank and another entity organized RMV. Under the ~~related~~RMV operating agreement, the non-controlling member receives 70% of the cash flow distributions of RMV, and the Bank receives 30% of the cash flow distributions, once the non-controlling member recovers its capital contributions to RMV. The non-controlling member is required to fund RMV’s losses via additional capital contributions to RMV. As of ~~March 31,~~June 30, 2019, RMV's cumulative losses to date totaled ~~$9,601.~~$11,121. RMV will have to generate net income of this amount before the Company will participate in future cash flow distributions.

Purchased Loans

The Company maintains an allowance for loan losses on purchased loans based on credit deterioration subsequent to the acquisition date. In accordance with the accounting guidance for business combinations, because we recorded all acquired loans at fair value as of the date of the ~~merger (discussed~~Merger (as defined below), we did not establish an allowance for loan losses on any 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, and none is individually significant. For non-purchased credit-impaired loans acquired in the ~~merger~~Merger and that are accounted for under ASC 310-20, the historical loss estimates are based on the historical losses experienced by ~~Reliant~~the 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.

Allowance for Loan Losses

The 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 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~~loan's remaining principal balance, are recorded as recoveries of prior charge-offs until these charge-offs have been fully recovered.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note to ~~the~~our 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 SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2019 AND 2018

Merger Between Reliant Bancorp, Inc. and Community First, Inc.

~~On December 15, 2017, the shareholders~~Effective January 1, 2018, Pioneer Merger Sub, Inc., a wholly owned subsidiary of Reliant Bancorp, ~~approved a merger~~merged with and into Community First, Inc. (“Community First”), with Community First ~~Inc. ("~~continuing as the surviving corporation, and immediately thereafter Community ~~First"), which became effective on January 1, 2018 (the "Merger”~~First merged with and into Reliant Bancorp, with Reliant Bancorp continuing as the surviving corporation (such transactions collectively, the “Merger”). ~~Each~~In connection with the Merger, each outstanding share of Community First common stock converted into the right to receive ~~.481~~0.481 shares of Reliant Bancorp common stock. After the Merger was completed, legacy Reliant ~~Bancorp’s~~Bancorp shareholders and legacy Community First shareholders owned approximately 78.9% ~~of the common stock of the combined company,~~ and ~~legacy Community First’s shareholders owned approximately~~ 21.1%, respectively, of the common stock of the combined company.

The assets and liabilities of Community First, as of the effective date of the Merger, were recorded at their respective estimated fair values and added to those of the Company. Any excess of purchase price over the net estimated fair values of the acquired assets and assumed liabilities of Community First was allocated to all identifiable intangibles assets. Any remaining excess was then allocated to goodwill.

As of December 31, 2017, Community First, including its wholly owned subsidiaries, had total assets of $480 million, total loans of $316 million and total deposits of $433 million. Community First held a loan portfolio that was primarily comprised of real estate loans.

As a result of the Merger on January 1, 2018, the Company:

grew consolidated total assets from $1,125.0 million to $1,636.0 million ~~as of January 1, 2018~~ after giving effect to purchase accounting;

increased total loans from $762.5 million to $1,075.5 ~~million as of January 1, 2018;~~million;

increased total deposits from $883.5 million to $1,316.9 ~~million as of January 1, 2018;~~million; and

expanded its employee base from 167 ~~full time equivalent employees~~ to 272 full time equivalent ~~employees as of January 1, 2018.~~employees.

Earnings

Net income attributable to common shareholders amounted to ~~$3,824,~~$4,239 and $8,063, or ~~$0.34~~$0.38 and $0.71 per basic share, for the three and six months ended ~~March 31,~~June 30, 2019, respectively, compared to ~~$3,741,~~$2,139 and $5,880, or ~~$0.33~~$0.19 and $0.52 per basic share, for the same ~~period~~periods in 2018. Diluted net income attributable to common shareholders was ~~$0.33~~$0.38 and $0.71 per share and $0.19 and $0.51 per share for the three and six months ended ~~March 31,~~June 30, 2019 and ~~March 31, 2018.~~June 30, 2018, respectively. The major components contributing to the increases when compared to the prior year are a decrease of 6.5% and 1.3% in non-interest expense for the three and six months ended June 30, 2019, respectively, and an increase of ~~0.6%~~3.1% and 1.8% in net interest income for the three and six months ended ~~March 31,~~June 30, 2019, respectively, compared to the same ~~period~~periods in ~~2018 accounts for all of the increase in net income attributable to common shareholders. This~~2018. These and other components of earnings are discussed further below.

Net Interest Income

Net 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. The following table sets 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 six months ended ~~March 31,~~June 30, 2019, and 2018 (dollars in thousands):


	Three Months Ended March 31, 2019						Three Months Ended March 31, 2018						Change									Three Months Ended June 30, 2019						Three Months Ended June 30, 2018						Change
	Average Balances		Rates / Yields (%)		Interest Income / Expense		Average Balances		Rates / Yields (%)		Interest Income / Expense		Due to Volume			Due to Rate			Total			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	$	1,238,341	5.16		$	15,463	$	1,088,166	4.81		$	12,872	$	1,697		$	895		$	2,591		$	1,276,197	5.18		$	16,178	$	1,119,884	4.81		$	13,393	$	1,795		$	989		$	2,785
Loan fees	—		0.23		706		—		0.26		686		20			—			20			—		0.25		782		—		0.24		673		109			—			109
Loans with fees	1,238,341		5.39		16,169		1,088,166		5.07		13,558		1,716			895			2,611			1,276,197		5.43		16,960		1,119,884		5.05		14,066		1,905			989			2,894
Mortgage loans held for sale	10,747		5.77		153		39,235		4.97		481		(782		)	454			(328		)	14,502		5.48		198		24,611		5.31		326		(196		)	68			(128		)
Deposits with banks	27,643		1.73		118		50,206		1.34		166		(267		)	219			(48		)	30,342		1.53		116		36,550		1.21		110		(89		)	95			6
Investment securities - taxable	72,464		2.82		503		72,678		2.83		507		(2		)	(2		)	(4		)	77,405		3.04		587		67,647		2.69		453		70			64			134
Investment securities - tax-exempt	228,497		3.86		1,718		218,246		3.57		1,504		78			136			214			222,149		3.77		1,650		231,874		3.75		1,708		(134		)	76			(58		)
Federal funds sold and other	12,650		5.83		182		9,934		5.96		146		57			(21		)	36			13,308		5.46		181		11,441		5.85		167		73			(59		)	14
Total earning assets	1,590,342		5.00		18,843		1,478,465		4.61		16,362		801			1,680			2,481			1,633,903		5.02		19,692		1,492,007		4.66		16,830		1,629			1,233			2,862
Nonearning assets	140,835						134,621															139,123						137,707
Total assets	$	1,731,177					$	1,613,086														$	1,773,026					$	1,629,714
Interest bearing liabilities
Interest bearing demand	148,649		0.30		111		154,318		0.20		77		(19		)	53			34			141,997		0.24		86		143,811		0.23		84		(6		)	8			2
Savings and money market	400,328		1.14		1,130		344,641		0.56		478		88			564			652			374,406		1.13		1,051		357,475		0.64		574		28			449			477
Time deposits - retail	577,270		2.05		2,921		516,424		1.31		1,664		217			1,040			1,257			612,148		2.14		3,263		517,209		1.43		1,848		382			1,033			1,415
Time deposits - wholesale	106,625		2.47		650		95,743		1.41		332		42			276			318			169,956		2.61		1,106		92,197		1.53		351		411			344			755
Total interest bearing deposits	1,232,872		1.58		4,812		1,111,126		0.93		2,551		328			1,933			2,261			1,298,507		1.70		5,506		1,110,692		1.03		2,857		815			1,834			2,649
Federal Home Loan Bank advances	56,718		2.70		377		70,172		1.57		272		(312		)	417			105			23,668		2.97		175		79,520		2.00		397		(1,044		)	822			(222		)
Subordinated debt	11,613		6.74		193		11,536		5.52		157		1			35			36			11,634		6.83		198		11,556		5.97		172		1			25			26
Total borrowed funds	68,331		3.38		570		81,708		2.13		429		(310		)	451			141			35,302		4.24		373		91,076		2.51		569		(1,043		)	847			(196		)
Total interest-bearing liabilities	1,301,203		1.68		5,382		1,192,834		1.01		2,980		17			2,385			2,402			1,333,809		1.77		5,879		1,201,768		1.14		3,426		(228		)	2,681			2,453
Net interest rate spread (%) / Net interest income ($)			3.32		$	13,461			3.60		$	13,382	$	784		$	(705	)	$	79				3.25		$	13,813			3.52		$	13,404	$	1,857		$	(1,448	)	$	409
Non-interest bearing deposits	211,122		(0.24	)			212,614		(0.15	)												218,512		(0.25	)			219,860		(0.17	)
Other non-interest bearing liabilities	9,391						6,205															8,057						5,781
Stockholder's equity	209,461						201,433															212,648						202,305
Total liabilities and stockholders' equity	$	1,731,177					$	1,613,086														$	1,773,026					$	1,629,714
Cost of funds			1.44						0.86															1.52						0.97
Net interest margin			3.63						3.79															3.57						3.74



	Six Months Ended June 30, 2019						Six Months Ended June 30, 2018						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	$	1,257,373	5.17		$	31,641	$	1,104,025	4.81		$	26,268	$	3,492		$	1,881		$	5,373
Loan fees	—		0.24		1,488		—		0.25		1,356		132			—			132
Loans with fees	1,257,373		5.41		33,129		1,104,025		5.06		27,624		3,624			1,881			5,505
Mortgage loans held for sale	12,635		5.60		351		31,923		5.10		807		(667		)	211			(456		)
Deposits with banks	29,000		1.63		234		43,378		1.28		276		(189		)	147			(42		)
Investment securities - taxable	74,948		2.93		1,090		70,162		2.76		960		68			62			130
Investment securities - tax-exempt	225,305		3.82		3,368		225,060		3.66		3,212		4			152			156
Federal funds sold and other	12,981		5.64		363		10,688		5.91		313		89			(39		)	50
Total earning assets	1,612,242		5.01		38,535		1,485,236		4.63		33,192		2,929			2,414			5,343
Nonearning assets	139,964						136,163
Total assets	$	1,752,206					$	1,621,399
Interest bearing liabilities
Interest bearing demand	145,304		0.27		197		149,065		0.22		161		(11		)	47			36
Savings and money market	387,296		1.14		2,181		351,058		0.60		1,052		116			1,013			1,129
Time deposits - retail	594,805		2.10		6,184		516,816		1.37		3,512		589			2,083			2,672
Time deposits - wholesale	138,466		2.56		1,756		93,970		1.47		683		418			655			1,073
Total interest bearing deposits	1,265,871		1.64		10,318		1,110,909		0.98		5,408		1,112			3,798			4,910
Federal Home Loan Bank advances and other	40,101		2.78		552		74,846		1.80		669		(729		)	612			(117		)
Subordinated debt	11,634		6.78		391		11,546		5.75		329		2			60			62
Total borrowed funds	51,735		3.68		943		86,392		2.33		998		(727		)	672			(55		)
Total interest-bearing liabilities	1,317,606		1.72		11,261		1,197,301		1.08		6,406		385			4,470			4,855
Net interest rate spread (%) / Net interest income ($)			3.29		$	27,274			3.55		$	26,786	$	2,544		$	(2,056	)	$	488
Non-interest bearing deposits	214,838		(0.24	)			216,237		(0.11	)
Other non-interest bearing liabilities	8,698						5,992
Stockholder's equity	211,064						201,869
Total liabilities and stockholders' equity	$	1,752,206					$	1,621,399
Cost of funds			1.48						0.97
Net interest margin			3.60						3.76

Table Assumptions—Average loan balances are inclusive of nonperforming loans. Yields computed on tax-exempt instruments are on a tax equivalent basis including a state tax credit included in loan yields of $300 and ~~$25~~$600 for the three and six months ended ~~March 31,~~June 30, 2019, respectively, and ~~2018, respectively.~~$25 and $50 for the same periods in 2018. Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities. Net interest margin is the result of net interest income calculated on a tax-equivalent basis divided by average interest earning assets for the period. 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 sources of funds on which interest is received or paid. Volume change is calculated as change in volume times the previous rate while rate change is change in rate times the previous volume. Changes not due solely to volume or rate changes have been allocated to volume change and rate change in proportion to the relationship of the absolute dollar amounts of the change in each category.

Analysis—For the three and six months ended ~~March 31,~~June 30, 2019, we recorded net interest income of approximately ~~$13.5~~$13.8 million and $27.3 million, respectively, which resulted in a net interest margin (net interest income divided by the average balance of interest earning assets) of ~~3.63%.~~3.57% and 3.60%, respectively. For the three and six months ended ~~March 31,~~June 30, 2018, we recorded net interest income of approximately $13.4 million and $26.8 million, respectively, which resulted in a net interest margin of ~~3.79%.~~3.74% and 3.76%, respectively. The main factor contributing to the slight increase in our net interest income was ~~our~~an increase in our loans and the related yield. ItOur net interest income increase was partially offset by the increase in our cost of funds.

Our year-over-year average loan volume increased by approximately ~~13.8%~~13.9% for the first ~~three~~six months of 2019 compared to the first ~~three~~six months of 2018. Our combined loan and loan fee yield increased from ~~5.07%~~5.06% to ~~5.39%~~5.41% for the first ~~three~~six months of 2019 compared to 2018, while our combined loan and loan fee yield increased from 5.05% to 5.43% for the three months ended June 30, 2019 compared to the same period in 2018. The increased yield for the ~~three~~six months ended ~~March 31,~~June 30, 2019 is primarily attributable to a 3428 basis points increase in contractual loan yields ~~a nine~~and an eight basis points increase in state tax credits, and partially offset by ~~an eight~~a one basis point decrease in loan fees. The increased yield for the three months ended June 30, 2019 is primarily attributable to a 26 basis points ~~decrease~~increase in ~~purchase accounting~~contractual loan yields, a six basis points increase in state tax credits, a two basis points increase in accretion and a ~~three~~one basis ~~points decrease~~point increase in loan fees.

Our tax equivalent yield on tax-exempt investments increased to ~~3.86%~~3.77% and 3.82% for the three and six months ended ~~March 31,~~June 30, 2019, respectively, from ~~3.57%~~3.75% and 3.66% for the same ~~period~~periods in ~~2018.~~2018, respectively. This increase was primarily driven by investment restructurings in the first ~~quarter~~and second quarters of ~~2018.~~2019. Our year-over-year average tax-exempt investment volume ~~increased by approximately 4.7%~~remained flat for the first ~~three~~six months of 2019 compared to the same period in 2018. Our year-over-year average taxable securities volume ~~decreased~~increased by ~~0.3%~~6.8% for the first ~~three~~six months of 2019 compared to the same period in 2018. ~~No material changes to our investment portfolio were made during the first quarter of 2019.~~

Our cost of funds increased to ~~1.44%~~1.52% and 1.48% from ~~0.86%~~0.97% and 0.97% for the three and six months ended ~~March 31,~~June 30, 2019, respectively, compared to the same ~~period~~periods in 2018. The increase in our cost of funds was primarily driven ~~mainly~~ by ~~higher rates being paid on time~~an across the board increase in all of our interest bearing deposits ~~FHLB advances,~~ and ~~subordinated debt.~~interest bearing liabilities as well as an increase in our wholesale deposits from 28.6% of our deposit portfolio at March 31, 2019 to 30.3% at June 30, 2019. We experienced a ~~0.7% decrease~~0.6% increase in our average non-interest bearing deposits ~~from~~for the three and six months ended ~~March 31,~~June 30, 2019 when compared to the same periods in 2018.

The Bank strives to maintain a strong net interest margin that is insulated from changes in market interest rates. Our ~~balance sheet has some components~~net interest margin, while generally considered fairly neutral, is currently subject to slightly contract in a rising rate environment and slightly expand in a falling rate environment. In the lowering interest rate environment that ~~will benefit from rising~~we anticipate, the shorter durations of our non-core funding sources are expected to contribute to interest ~~rates, including~~expense savings that are expected to be slightly higher than (i) the anticipated loss of interest income that are likely to be driven by certain variable rate loans ~~some variable rate investment securities~~ and ~~interest rate swaps. Conversely~~investments repricing and (ii) the increased expenses to be incurred on our interest bearing liabilities are negatively impacted with rising interest rates. Our wholesale fundings are particularly sensitive to changes in interest rates mainly due to their short term nature. We added $30 million of pay-fixed receive-variable interest rate swaps in each of the second and third quarters of 2018. We are always looking for opportunities to increase our non-interest bearing and lower cost deposits and have seen some success with a stronger focus on low cost deposits in all of our sales incentive plans. These efforts will continue as well as continuing to evaluate the benefits of fixing a greater portion of our funding costs through interest rate swaps.

Provision for Loan Losses

The provision for loan losses ~~represents a charge~~is determined by management as the amount to ~~earnings necessary~~be added to ~~establish an~~the allowance for loan losses ~~that,~~after net recoveries have been added bringing the allowance to a level which, in management’s ~~evaluation, should be adequate~~best estimate, is necessary to ~~provide coverage for the~~absorb inherent losses ~~on outstanding loans. Based upon management’s assessment of~~within 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~~existing 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 existing in the loan portfolio at ~~March 31,~~June 30, 2019. While policies and procedures used to estimate the 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 and negatively impact our asset quality and the adequacy of our allowance for loan losses and, thus, the resulting provision for loan losses.

We recorded noa provision of $200 for loan losses for each of the three and six months ended ~~March 31,~~June 30, 2019 compared to ~~$137~~$300 and $437 for loan losses recorded for the three and six months ended ~~March 31, 2018.~~June 30, 2018, 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 recoveries for the three and six months ended ~~March~~June 30, 2019. Additionally, four out of the five previous quarters have ended with net recoveries. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Balance Sheets at June 30, 2019 and December 31, ~~2019.~~2018 - Allowance for Loan Losses” included herein for further analysis of the provision for loan losses.

Non-Interest Income

Our non-interest income is composed of several components, some of which vary significantly between periods. The following is a summary of our non-interest income for the three and six months ended ~~March 31,~~June 30, 2019, and 2018 (dollars in thousands):



	Three Months Ended June 30,				Dollar Increase			Percent Increase
	2019		2018		(Decrease)			(Decrease)
Non-Interest Income
Service charges and fees	$	936	$	900	$	36		4.0	%
Securities gains, net	175		25		150			600.0	%
Gains on mortgage loans sold, net	1,225		957		268			28.0	%
Gain on sale of other real estate	—		20		(20		)	(100.0	)%
Other noninterest income:
Bank-owned life insurance	277		298		(21		)	(7.0	)%
Brokerage revenue	9		9		—			—	%
Miscellaneous noninterest income	76		45		31			68.9	%
Total other non-interest income	362		352		10			2.8	%
Total non-interest income	$	2,698	$	2,254	$	444		19.7	%


	Three Months Ended March 31,				Dollar Increase			Percent Increase		Six Months Ended June 30,				Dollar Increase			Percent Increase
	2019		2018		(Decrease)			(Decrease)		2019		2018		(Decrease)			(Decrease)
Non-Interest Income
Service charges and fees	$	884	$	771	$	113		14.7	%	$	1,820	$	1,671	$	149		8.9	%
Securities gains, net	131		—		131			100.0	%	306		25		281			1,124.0	%
Gains on mortgage loans sold, net	560		1,705		(1,145		)	(67.2	)%	1,785		2,662		(877		)	(32.9	)%
Gain on sale of other real estate	—		89		(89		)	(100.0	)%	—		109		(109		)	(100.0	)%
Other noninterest income:
Bank-owned life insurance	279		302		(23		)	(7.6	)%	555		600		(45		)	(7.5	)%
Brokerage revenue	11		75		(64		)	(85.3	)%	20		85		(65		)	(76.5	)%
Miscellaneous noninterest income	73		49		24			49.0	%	150		93		57			61.3	%
Total other non-interest income	363		426		(63		)	(14.8	)%	725		778		(53		)	(6.8	)%
Total non-interest income	$	1,938	$	2,991	$	(1,053	)	(35.2	)%	$	4,636	$	5,245	$	(609	)	(11.6	)%

The most significant reasons for the changes in total non-interest income during the three and six months ended ~~March 31,~~June 30, 2019 compared to the same periods in 2018 are the fluctuation in gains on mortgage loans sold, net, ~~the increase in service charges,~~ and the gains on securities transactions. These and other factors impacting non-interest income are discussed further below.

Service charges on deposit accounts have increased and mainly reflect customer growth trends but have also been impacted by changes in our fee structures. The majority of the ~~14.7%~~4.0% increase for the three and six months ended ~~March 31,~~June 30, 2019 was driven by ~~the changes~~an increase in our ~~fee structures.~~debit card fees.

Securities gains and losses often fluctuate from period to period and can sometimes be attributable to various balance sheet risk strategies. During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company sold securities classified as available for sale totaling ~~$10,558~~$52,434 with a gain of ~~$131.~~$306. During the ~~three~~six months ended ~~March 31,~~June 30, 2018, the Company sold securities classified as available for sale totaling ~~$82,187~~$92,991 with ~~no gain.~~a gain of $25.

Gains on mortgage loans sold, net, consists of fees from the origination and sale of mortgage loans and first-lien HELOCs. These mortgage fees are for loans originated 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 decreases in rising interest rate environments and more challenging housing markets. Mortgage-related revenue will fluctuate 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~~RMV’s products in the secondary markets. Gains on mortgage loans sold, net, amounted to ~~$560~~$1,225 and $1,785 for the three and six months ended ~~March 31,~~June 30, 2019, respectively, compared to ~~$1,705~~$957 and $2,662 for the same ~~period~~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 time of a loan sale corresponding to the transfer of risk.

During the three and six months ended ~~March 31,~~June 30, 2019, there was no gain or loss due to the sale of other real estate compared to a gain of ~~$89~~$20 and $109 in the same ~~period~~periods in ~~2018.~~2018, respectively.

Non-interest income also includes appreciation in the cash surrender value of bank-owned life insurance, which was ~~$279~~$277 and $555 for the three and six months ended ~~March 31,~~June 30, 2019, respectively, compared to ~~$302~~$298 and $600 for the same ~~period~~periods in ~~2018.~~2018, respectively. The decrease relates to the introductory rate ending from our last ~~purchase.The~~purchase. 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 expected to be taxable.

Our brokerage revenue is solely based on commissions received from established referral relationships and ~~fluctuate~~fluctuates based on assets under management.

Non-Interest Expense

The following is a summary of our non-interest expense for the three and six months ended ~~March 31,~~June 30, 2019 and 2018 (dollars in thousands):



	Three Months Ended June 30,				Dollar Increase			Percent Increase
	2019		2018		(Decrease)			(Decrease)
Non-Interest Expense
Salaries and employee benefits	$	7,706	$	6,613	$	1,093		16.5	%
Occupancy	1,358		1,210		148			12.2	%
Information technology	1,575		1,249		326			26.1	%
Advertising and public relations	275		141		134			95.0	%
Audit, legal and consulting	690		816		(126		)	(15.4	)%
Federal deposit insurance	249		224		25			11.2	%
Merger expenses	1		2,483		(2,482		)	(100.0	)%
Other operating	1,272		1,305		(33		)	(2.5	)%
Total non-interest expense	$	13,126	$	14,041	$	(915	)	(6.5	)%


	Three Months Ended March 31,				Dollar Increase			Percent Increase		Six Months Ended June 30,				Dollar Increase			Percent Increase
	2019		2018		(Decrease)			(Decrease)		2019		2018		(Decrease)			(Decrease)
Non-Interest Expense
Salaries and employee benefits	$	7,265	$	6,954	$	311		4.5	%	$	14,971	$	13,567	$	1,404		10.3	%
Occupancy	1,352		1,229		123			10.0	%	2,710		2,439		271			11.1	%
Information technology	1,410		1,349		61			4.5	%	2,985		2,598		387			14.9	%
Advertising and public relations	254		89		165			185.4	%	529		230		299			130.0	%
Audit, legal and consulting	796		623		173			27.8	%	1,486		1,439		47			3.3	%
Federal deposit insurance	195		196		(1		)	(0.5	)%	444		420		24			5.7	%
Merger expenses	2		177		(175		)	(98.9	)%	3		2,660		(2,657		)	(99.9	)%
Other operating	1,472		1,545		(73		)	(4.7	)%	2,744		2,850		(106		)	(3.7	)%
Total non-interest expense	$	12,746	$	12,162	$	584		4.8	%	$	25,872	$	26,203	$	(331	)	(1.3	)%

The most significant reason for the ~~increase~~decrease in total non-interest expense of ~~$584~~ $915 and $331,or ~~4.8%~~6.5% and 1.3%, for the three and six months ended ~~March 31,~~June 30, 2019, respectively, is due to merger expenses in 2018 and is partially offset by additional staffing for ~~our mortgage venture~~RMV and opening our new branches in Murfreesboro and Chattanooga as well as our investment in revenue producers. These and other factors impacting non-interest expense are discussed further below.

Salaries and employee benefits increased by ~~$311~~$1,093 and $1,404, or ~~4.5%~~16.5% and 10.3%, for the three and six months ended ~~March 31,~~June 30, 2019 compared to the same ~~period~~periods in 2018. This increase is attributable mainly to the increased staff for ~~our mortgage venture~~RMV as well as our staffing of our new branches in Murfreesboro and Chattanooga and other investments in revenue producers.

Certain of our facilities are leased while there are others that we own. Primarily, occupancy costs increased ~~$123~~$148 and $271, or ~~10.0%~~12.2% and 11.1%, during the three and six months ended ~~March 31,~~June 30, 2019 when compared to the same ~~period~~periods in 2018 due to ~~the lease for a new executive office which opened in the second quarter of 2018,~~ the lease for the Murfreesboro branch, which opened in the third quarter of 2018, ~~and~~ the lease for the Chattanooga branch, which opened in the fourth quarter of ~~2018.~~2018, the lease in Memphis for a mortgage location, and the leases of two mortgage locations in Little Rock, Arkansas.

Information technology costs increased by ~~$61~~$326 and $387, or ~~4.5%~~26.1% and 14.9%, when comparing the three and six months ended ~~March 31,~~June 30, 2019 to the comparable ~~period~~periods in 2018. This increase is mainly attributable to increased costs due to increasing ~~the~~ volume of accounts and transactions as well as our continued investment in information security and other technology.

Advertising and public relations costs increased by ~~$165~~$134 and $299, or ~~185.4%~~95.0% and 130.0%, when comparing the three and six months ended ~~March 31,~~June 30, 2019 to the same ~~period~~periods in 2018. ~~The increase was~~Increased costs were attributable to an ~~increase~~upsurge in promotional expenses and advertising for ~~our mortgage venture as well as cost~~RMV, additional donation and sponsorship commitments, and expenses associated with the launch of a ~~brand initiative campaign and an increase in donations and sponsorships.~~branding initiative.

Audit, legal and consulting costs decreased by $126 and increased by ~~$173~~$47, respectively, or ~~27.8%~~15.4% and 3.3%, when comparing the three and six months ended ~~March 31,~~June 30, 2019 to the same ~~period~~periods in 2018. ~~This increase is~~These fluctuations are mainly attributable to the ~~increase in~~fluctuation of legal ~~fees~~ and consulting fees incurred in connection with ~~our mortgage venture.~~RMV.

Our Federal Deposit Insurance Corporation ~~(FDIC)~~("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~~increased by $1$25 and $24, respectively, for the three and six months ended ~~March 31,~~June 30, 2019, compared to the same ~~period~~periods in 2018. This ~~slight decrease~~increase is primarily the result of ~~a decrease of the rates charged by the FDIC which was offset by~~ our increase in deposits.

Merger related expenses decreased by ~~98.9%~~100.0% and 99.9%, respectively, to $2$1 and $3 for the three and six months ended ~~March 31,~~June 30, 2019 when compared to the same ~~period~~periods in 2018. These costs are considered one time expenses associated with the Merger, and most of these expected expenses have been incurred at this point.

Other operating expenses decreased by ~~$73~~$33 and $106 or ~~4.7%~~2.5% and 3.7% for the three and six months ended ~~March 31,~~June 30, 2019, compared to the same ~~period~~periods in 2018 mainly due to the decrease in loan-related expenses such as processing costs based on volume ~~for the three months ended March 31, 2019.~~and a decrease in recruiting expenses.

Income Taxes

During the three and six months ended ~~March 31,~~June 30, 2019, we recorded consolidated income tax expense of ~~$372~~$501 and $873 compared to ~~$797~~$115 and $912 for the three and six months ended ~~March 31,~~June 30, 2018. The Company files separate federal tax returns for the ~~operations of the~~ mortgage banking

operations and banking operations. The taxable income or losses of the mortgage banking operations are included in the respective returns of the Bank and non-controlling ~~members~~member for federal purposes.

Our income tax expense attributable to shareholders for the three and six months ended ~~March 31,~~June 30, 2019, reflects an effective income tax rate of ~~11.2%~~12.5% and 11.9% (exclusive of a tax benefit from our mortgage banking operations of ~~$108~~$106 and $214 on pre-tax losses of ~~$1,651)~~$1,661 and $3,312), compared to ~~18.1%~~7.7% and 14.6% (exclusive of a tax benefit of ~~$29~~$63 and $92 on pre-tax losses of ~~$493~~$1,000 and $1,493 from our mortgage banking operations for the comparable ~~period~~periods of 2018). Our tax rate for the three and six months ended ~~March 31,~~June 30, 2019, was favorably influenced by the increase in state tax credits of ~~$275.~~$275 per quarter. Additionally, our effective tax rate for the three months ended June 30, 2019 is higher than the same period in 2018 primarily due to merger expenses in the second quarter of 2018, which reduced taxable income and increased the proportion of tax exempt income to total income.

Noncontrolling Interest in Net Loss of Subsidiary

Our non-controlling interest in net loss of subsidiary is solely attributable to ~~Reliant Mortgage Ventures, LLC. Reliant~~RMV. the Bank has a 51% voting interest in this venture. Under the terms of the related operating agreement, the non-controlling member receives 70% of the cash flow distributions of the mortgage venture, and the Bank receives 30% of any cash flow distributions, after the non-controlling member recovers its capital contributions to the venture. The non-controlling member is required to fund the mortgage venture's losses in arrears via additional capital contributions to the mortgage venture. The venture had a net loss of ~~$1,543~~$1,555 and $3,098 for the three and six

months ended ~~March 31,~~June 30, 2019 compared to a net loss of ~~$464~~$937 and $1,401 for the same ~~period~~periods in 2018. The increase in loss for the three and six months ended ~~March 31,~~June 30, 2019 when compared to the same ~~period~~periods in 2018 is mainly attributable to the increase in salaries and benefits due to ~~the~~ increased staff, ~~as well as legal fees~~increased occupancy costs due to new locations, and consulting fees previously mentioned. These amounts are included in our consolidated results. Also, see Note 9 ~~for segment reporting in the~~to our consolidated financial statements ~~included elsewhere herein.~~for segment reporting.

COMPARISON OF BALANCE SHEETS AT ~~MARCH 31,~~JUNE 30, 2019 AND DECEMBER 31, 2018

Overview

The Company’s total assets were ~~$1,761,926~~$1,794,248 at ~~March 31,~~June 30, 2019 and $1,724,338 at December 31, 2018. Our assets increased by ~~2.2%~~4.1% from December 31, 2018 to ~~March 31,~~June 30, 2019. The increase was substantially attributable to the growth in net loans ~~and investments~~ during the period of ~~$30.6~~$80.8 million, or ~~2.5% and $14.0 million or 4.7%~~6.6%, ~~respectively,~~ discussed further below. ~~These increases were~~This increase was partially offset by the decline in investment of $5,950 ,or 2.0%, and mortgage loans held for sale by ~~$5.8~~$4.3 million, or ~~36.9%~~26.9%. The Company’s total liabilities were ~~$1,546,807~~$1,580,305 at ~~March 31,~~June 30, 2019 and $1,515,924 at December 31, 2018, an increase of ~~2.0%~~4.2%. The increase in liabilities from December 31, 2018 to ~~March 31,~~June 30, 2019, was substantially attributable to the increase in deposits of ~~$73.4~~$112.4 million, or ~~5.1% and~~7.8% ,and the increase was partially offset by the decrease in Federal Home Loan Bank (FHLB) advances of ~~$42~~$46 million or ~~73.4%~~80.7% during the period. These and other components of our balance sheets are discussed further below.

Loans

Lending-related income is the ~~most important~~largest 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~~described, the 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 reasons, including but not limited to scheduled maturities or early payoffs exceeding new loan volume. Early payoffs typically increase in lowering 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, and with the Merger we~~We have expanded our Middle Tennessee footprint into Maury and Hickman ~~Counties.~~Counties with the Merger, and in the third and fourth quarter of 2018, we opened full service branches in Murfreesboro and Chattanooga where we previously had loan production offices. Total loans, net, at ~~March 31,~~June 30, 2019, and December 31, 2018, were ~~$1,250,806~~$1,301,019 and $1,220,184, respectively. This represented an increase of ~~2.5%~~6.6% from December 31, 2018 to ~~March 31,~~June 30, 2019.

The table below provides a summary of the loan portfolio composition for the dates noted (including purchased credit-impaired (PCI) loans).


	March 31,				December 31,					June 30,					December 31,
	2019				2018					2019					2018
	Amount		Percent		Amount			Percent		Amount			Percent		Amount			Percent
Commerical, Industrial and Agricultural	$	218,767	17.3	%	$	213,850		17.4	%
Commercial, Industrial and Agricultural										$	233,312		17.8	%	$	213,850		17.4	%
Real estate:
1-4 Family Residential	230,124		18.2	%	225,863			18.3	%	233,229			17.8	%	225,863			18.3	%
1-4 Family HELOC	90,944		7.2	%	88,112			7.2	%	94,436			7.2	%	88,112			7.2	%
Multifamily and Commercial	469,468		37.2	%	447,840			36.4	%	481,973			36.7	%	447,840			36.4	%
Construction, Land Development and Farmland	220,752		17.5	%	220,801			17.9	%	237,421			18.1	%	220,801			17.9	%
Consumer	17,926		1.4	%	20,495			1.7	%	18,881			1.4	%	20,495			1.7	%
Other	14,213		1.2	%	14,106			1.1	%	13,338			1.0	%	14,106			1.1	%
	1,262,194		100.0	%	1,231,067			100.0	%	1,312,590			100.0	%	1,231,067			100.0	%
Less:
Deferred loan fees (costs)	34				(9		)			(95		)			(9		)
Allowance for possible loan losses	11,354				10,892					11,666					10,892

Loans, net	$	1,250,806			$	1,220,184				$	1,301,019				$	1,220,184

The table below provides a summary of PCI loans as of ~~March 31,~~June 30, 2019:


	March 31, 2019		June 30, 2019

Commerical, Industrial and Agricultural	$	63
Commercial, Industrial and Agricultural			$	—
Real estate:
1-4 Family Residential	319		315
1-4 Family HELOC	—		—
Multifamily and Commercial	229		224
Construction, Land Development and Farmland	1,950		1,037
Consumer	17		—
Other	—		—
Total gross PCI loans	2,578		1,576
Less:
Remaining purchase discount	300		272
Allowance for possible loan losses	—		—

Loans, net	$	2,278	$	1,304

Commercial, industrial and agricultural loans above consist solely of loans made to U.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 ~~$218,767~~$233,312 at ~~March 31,~~June 30, 2019, increased ~~2.3%~~9.1% compared to $213,850 at December 31, 2018.

Real estate loans comprised ~~80.1%~~79.8% of the loan portfolio at ~~March 31,~~June 30, 2019. 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 increased the residential portfolio ~~2.3%~~4.4% from December 31, 2018 to ~~March 31,~~June 30, 2019. 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 nonresidential properties, and loans secured by multi-family residential properties. Multi-family and commercial

real estate loans of ~~$469,468~~$481,973 at ~~March 31,~~June 30, 2019, increased ~~4.8%~~7.6% compared to the $447,840 held as of December 31, 2018. Real

estate construction loans consist of 1-4 family residential construction loans, other construction loans, land loans, and loans secured by farmland. Construction lending has increased since 2016 primarily based on a strong local economy.

Consumer loans mainly consist of loans to individuals for household, family, and other personal expenditures under revolving credit plans and other consumer 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 decrease from December 31, 2018, to ~~March 31,~~June 30, 2019, of ~~12.5%~~7.9%.

Other loans consist mainly of loans to states and political subdivisions and loans to other depository institutions and experienced ~~an increase~~a decrease of ~~0.8%~~5.4% from December 31, 2018 to ~~March 31,~~June 30, 2019.

The repayment of loans is a source of additional liquidity for us. The following table sets forth the loans repricing or maturing within specific intervals at ~~March 31,~~June 30, 2019, excluding unearned net fees and costs.


	One Year or Less		One to Five Years		Over Five Years		Total		One Year or Less		One to Five Years		Over Five Years		Total
Gross loans	$	414,547	$	552,364	$	295,283	$	1,262,194	$	443,231	$	561,665	$	307,694	$	1,312,590

Fixed interest rate							$	768,000							$	772,010
Variable interest rate							494,194								540,580
Total							$	1,262,194							$	1,312,590

The information presented in the above table is based upon the contractual maturities or next repricing date of the individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon their maturity. Consequently, we believe this treatment presents fairly the maturity and repricing structure of the loan portfolio.

Allowance for Loan Losses

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.

At ~~March 31,~~June 30, 2019, the allowance for loan losses was ~~$11,354~~$11,666 compared to $10,892 at December 31, 2018. The allowance for loan losses as a percentage of total loans was ~~0.90%~~0.89% at ~~March 31,~~June 30, 2019 compared to 0.88% at December 31, 2018.

The following table sets forth the activity in the allowance for loan losses for the periods presented.

Analysis of Changes in Allowance for Loan Losses


	March 31, 2019			March 31, 2018			June 30, 2019			June 30, 2018
Beginning Balance, January 1	$	10,892		$	9,731
Beginning Balance, January 1, 2019 and 2018							$	10,892		$	9,731
Loans charged off:
Commerical, Industrial and Agricultural	(6		)	(308		)
Commercial, Industrial and Agricultural							(168		)	(308		)
Real estate:
1-4 Family Residential	(17		)	—			(17		)	(8		)
1-4 Family HELOC	—			(6		)	—			(6		)
Multifamily and Commercial	—			—			—			—
Construction, Land Development and Farmland	—			—			—			(140		)
Consumer	(11		)	(16		)	(21		)	(24		)
Other	—			(9		)	(13		)	(22		)
Total loans charged off	(34		)	(339		)	(219		)	(508		)
Recoveries on loans previously charged off:
Commerical, Industrial and Agricultural	240			143
Commercial, Industrial and Agricultural							294			425
Real estate:
1-4 Family Residential	212			8			216			11
1-4 Family HELOC	—			2			11			5
Multifamily and Commercial	34			2			59			3
Construction, Land Development and Farmland	—			41			201			44
Consumer	10			1			12			18
Other	—			5			—			3
Total loan recoveries	496			202			793			509
Net recoveries (charge-offs)	462			(137		)	574			1
Provision for loan losses	—			137			200			437
Total allowance at end of period	$	11,354		$	9,731		$	11,666		$	10,169
Gross loans at end of period ⁽¹⁾	$	1,262,194		$	1,105,799		$	1,312,590		$	1,142,451
Average gross loans ⁽¹⁾	$	1,238,341		$	1,088,166		$	1,257,373		$	1,104,025
Allowance to total loans	0.90		%	0.88		%	0.89		%	0.89		%
Net recoveries (charge-offs) to average loans (annualized)	0.15		%	(0.05		)%	0.09		%	—		%


⁽¹⁾	Loan balances exclude loans held for sale.

While no portion of the allowance is in any way restricted to any individual loan or group of loans, and the entire allowance is available to absorb losses from any and all loans, the following table summarizes our allocation of allowance for loan losses by loan category and loans in each category as a percentage of total loans, for the periods presented.


	March 31, 2019						March 31, 2018						June 30, 2019						June 30, 2018
	Amount		% of Allowance To Total		% of Loan Type to Total Loans		Amount		% of Allowance To Total		% of Loan Type to Total Loans		Amount		% of Allowance To Total		% of Loan Type to Total Loans		Amount		% of Allowance To Total		% of Loan Type to Total Loans
Commercial, Industrial and Agricultural	$	1,874	16.5	%	17.3	%	$	2,485	25.5	%	15.1	%	$	1,881	16.1	%	17.8	%	$	1,685	16.6	%	16.3	%
Real estate:
1-4 Family Residential	1,359		12.0	%	18.2	%	1,004		10.3	%	19.7	%	1,455		12.5	%	17.8	%	1,245		12.2	%	19.2	%
1-4 Family HELOC	670		5.9	%	7.2	%	632		6.5	%	7.6	%	686		5.9	%	7.2	%	636		6.3	%	7.5	%
Multifamily and Commercial	4,593		40.5	%	37.2	%	3,269		33.6	%	36.6	%	4,713		40.4	%	36.7	%	3,861		38.0	%	35.1	%
Construction, Land Development and Farmland	2,650		23.3	%	17.5	%	2,146		22.1	%	17.8	%	2,707		23.2	%	18.1	%	2,515		24.7	%	18.8	%
Consumer	171		1.5	%	1.4	%	156		1.6	%	1.9	%	188		1.6	%	1.4	%	192		1.9	%	1.9	%
Other	37		0.3	%	1.2	%	39		0.4	%	1.3	%	36		0.3	%	1.0	%	35		0.3	%	1.2	%
	$	11,354	100.0	%	100.0	%	$	9,731	100.0	%	100.0	%	$	11,666	100.0	%	100.0	%	$	10,169	100.0	%	100.0	%

Nonperforming Assets

Non-performing assets consist of non-performing loans plus real estate acquired through foreclosure or deed in lieu of foreclosure. Non-performing loans by definition consist of non-accrual loans and loans past due 90 days or more and still accruing interest. When we place a loan on non-accrual 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, which generally includes a minimum performance of six months.

The following table provides information with respect to the Company’s non-performing assets.


	March 31, 2019			December 31, 2018			June 30, 2019			December 31, 2018
Non-accrual loans	$	4,582		$	4,194		$	3,045		$	4,194
Past due loans 90 days or more and still accruing interest	566			6			22			6
Restructured loans	1,748			2,469			1,830			2,469
Total non-performing loans	6,896			6,669			4,897			6,669
Foreclosed real estate ("OREO")	1,000			1,000			1,848			1,000
Total non-performing assets	$	7,896		$	7,669		$	6,745		$	7,669
Total non-performing loans as a percentage of total loans	0.55		%	0.54		%	0.37		%	0.54		%
Total non-performing assets as a percentage of total assets	0.45		%	0.44		%	0.38		%	0.44		%
Allowance for loan losses as a percentage of non-performing loans	164.65		%	163.32		%	238.23		%	163.32		%

Investment Securities and Other Earning Assets

The investment securities portfolio is intended to provide the Bank with adequate liquidity, flexible asset/liability management and a source of stable income. The portfolio is structured with minimal credit exposure to the Company 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’ 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~~totaled $290,373 at June 30, 2019, a ~~significant component of the Company’s earning assets. Securities totaled $310,305 at March 31, 2019. This represents a 4.7% increase~~2.0% decrease from the December 31, ~~2018 total of $296,323. Our growth is~~2018. The decrease was primarily attributable to the ~~Merger and~~planned rotation of $25.5 million in investments to loans during the ~~planned investment securities restructuring, mentioned previously, that began in the fourth~~second quarter of ~~2017. The increase is attributable to~~2019. Other factors include the sale of $52,434, principal paydowns, calls, and maturities of $5,418 during the six months ended June 30, 2019, offset by purchasing ~~$20,571~~$41,083 of securities available for sale ~~during the three months ended March 31, 2019, offset by sales of $10,558, and principal paydowns and maturities of $2,291~~ during the same period.

Restricted equity securities totaled ~~$11,499~~$11,488 and $11,690 at ~~March 31,~~June 30, 2019, and December 31, 2018, respectively, and consist of Federal Reserve Bank and Federal Home Loan Bank stock.

The following table shows the Company’s investments’ amortized cost and fair value, aggregated by investment category for the periods presented:


	March 31, 2019					December 31, 2018					June 30, 2019					December 31, 2018
	Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total
U.S.Treasury and other U.S. government agencies	$	566	562	0.18	%	$	568	554	0.19	%	$	313	312	0.11	%	$	568	554	0.19	%
State and municipal	234,736		238,345	76.81	%	232,589		229,298	77.38	%	212,157		220,614	75.98	%	232,589		229,298	77.38	%
Corporate bonds	3,130		3,018	0.97	%	3,130		3,017	1.02	%	3,130		3,019	1.04	%	3,130		3,017	1.02	%
Mortgage backed securities	34,642		34,422	11.09	%	32,172		31,958	10.78	%	37,515		37,508	12.92	%	32,172		31,958	10.78	%
Asset backed securities	31,048		30,458	9.82	%	28,635		27,996	9.45	%	29,430		28,920	9.95	%	28,635		27,996	9.45	%
Time deposits	3,500		3,500	1.13	%	3,500		3,500	1.18	%	—		—	—	%	3,500		3,500	1.18	%
Total	$	307,622	310,305	100.00	%	$	300,594	296,323	100.00	%	$	282,545	290,373	100.00	%	$	300,594	296,323	100.00	%

The table below summarizes the contractual maturities of securities available for sale at ~~March 31,~~June 30, 2019:


	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	2,755	$	2,757	$	660	$	663
Due in one to five years	4,722		4,711		938		935
Due in five to ten years	11,301		11,334		7,240		7,400
Due after ten years	223,154		226,623		206,762		214,947
Mortgage backed securities	34,642		34,422		37,515		37,508
Asset backed securities	31,048		30,458		29,430		28,920
Total	$	307,622	$	310,305	$	282,545	$	290,373

Premises and Equipment

Premises and equipment, net, totaled ~~$21,970~~$21,632 at ~~March 31,~~June 30, 2019 compared to $22,033 at December 31, 2018, a net decrease of ~~$63~~$401, or ~~0.3%~~1.8%. Premises and equipment purchases amounted to approximately ~~$434~~$590 during the first ~~three~~six months of 2019 and were mainly incurred for additional leasehold improvements for our branches and new mortgage locations while depreciation expense amounted to ~~$497.~~$991. At ~~March 31,~~June 30, 2019, we operated from ~~seventeen~~17 retail banking locations as well as ~~six~~five stand-alone mortgage loan production offices. Two of our bank branch locations, including our main office, are in Brentwood, Tennessee. Of our other ~~fifteen~~15 bank branch locations three are in Columbia, and the remaining are in Franklin, Springfield, Gallatin, Nashville, Murfreesboro, Mt. Pleasant, Thompson Station, Centerville, Lyles, and Chattanooga, Tennessee. As of ~~March 31,~~June 30, 2019, our mortgage loan production offices were located Brentwood, Hendersonville, and ~~Chattanooga,~~Memphis, Tennessee as well as two in Little Rock, ~~Arkansas and one in Timonium, Maryland.~~

Arkansas.

Deposits

Deposits represent the Company’s largest source of funds. The Company competes with other bank and nonbank 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 price 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.

At ~~March 31,~~June 30, 2019, total deposits were ~~$1,511,321,~~$1,550,280, an increase of ~~$73,418,~~$112,377, or ~~5.1%~~7.8%, compared to $1,437,903 at December 31, 2018. During the first ~~three~~six months of 2019, non-interest bearing demand deposits increased by ~~$4.0~~$8.4 million, interest-bearing demand deposits decreased by ~~$10.1~~$10.0 million, savings and money market deposits decreased by ~~$2.9~~$32.5 million, and time deposits increased by ~~$82.4~~$146.4 million. A substantial portion of the increase in ~~the~~ deposits is attributable to ~~time deposits with~~ the ~~state~~increased use of ~~Tennessee~~a variety of wholesale deposit products as part of our strategy to lower our funding costs.

The following table shows maturity or repricing of time deposits of $250 or more by category based on time remaining until maturity at ~~March 31,~~June 30, 2019.


	March 31, 2019		June 30, 2019
Twelve months or less	$	371,657	$	332,390
Over twelve months through three years	14,140		18,506
Over three years	4,227		4,092
Total	$	390,024	$	354,988

Market and Liquidity Risk Management

Our objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies. Our Asset Liability Management Committee ~~(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.

Interest Rate Sensitivity—Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes in market interest rates. In the normal course of business, we are exposed to market risk arising from fluctuations in interest rates. ALCO measures and evaluates the interest rate risk so that we can meet customer demands for various types of loans and deposits. ALCO determines the most appropriate amounts of 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.

Interest 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 ~~March 31,~~June 30, 2019. 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.

Earnings Simulation Model—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 variance 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:


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				Estimated Change in Net Interest Income and Policy of Maximum Percentage Decline in Net Interest Income
	Next 12		Next 24		Next 12		Next 24
	Months		Months		Months		Months
	Estimate	Policy	Estimate	Policy	Estimate	Policy	Estimate	Policy
-200 bp	2.1%	(15)%	(2.3)%	(15)%	0.3%	(15)%	(2.3)%	(15)%
-100 bp	1.7%	(10)%	0.4%	(10)%	0.6%	(10)%	(0.6)%	(10)%
+100 bp	(1.0)%	(10)%	(0.4)%	(10)%	0.1%	(10)%	0.6%	(10)%
+200 bp	(1.7)%	(15)%	(0.3)%	(15)%	0.6%	(15)%	1.6%	(15)%
+300 bp	(2.4)%	(20)%	(0.4)%	(20)%	1.0%	(20)%	2.6%	(20)%
+400 bp	(3.5)%	(25)%	(0.9)%	(25)%	1.0%	(25)%	3.1%	(25)%

We were in compliance with our earnings simulation model policies as of ~~March 31,~~June 30, 2019, indicating what we believe to be a fairly neutral interest-rate risk profile.

Economic ~~value~~Value of ~~equity~~Equity—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.

To help monitor our related risk, we have established the following policy limits regarding simulated changes in our economic value of equity:



Instantaneous, Parallel Change in Prevailing Interest Rates Equal to		Maximum Percentage Decline in Economic Value of Equity from the Economic Value of Equity at Currently Prevailing Interest Rates
+100 bp		15%
+200 bp		25%
+300 bp		30%
+400 bp		35%
Non-parallel shifts		35%

At ~~March 31,~~June 30, 2019, our model results indicated that we were within these policy limits.

Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate 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.

Liquidity Risk Management —The purpose of liquidity risk management is to ensure that there are sufficient cash flows to satisfy loan demand, deposit withdrawals, and our other needs. Traditional sources of liquidity for a bank include asset maturities and growth in core deposits. A bank may achieve its desired liquidity objectives from the management of its assets and liabilities and by internally generated funding through its operations. Funds invested in marketable instruments that can be readily sold and the

continuous maturing of other earning assets are sources of liquidity from an asset perspective. The liability base provides sources of liquidity through attraction of increased deposits and borrowing funds from various other institutions and sources.

Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and our management intends to continue this policy. If deposits are not priced in response to market rates, a loss of deposits could occur which would negatively affect our liquidity position.

Scheduled loan payments are a relatively stable source of funds, but loan payoffs and deposit flows fluctuate significantly, being influenced by interest rates, general economic conditions, competition, and the actions of our customers. Additionally, debt security investments are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs. Our regulators also monitor our liquidity and capital resources on a periodic basis.

The Company has established a line of credit with the FHLB, 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 ~~March 31,~~June 30, 2019, advances totaled ~~$15,309~~$11,119 compared to $57,498 as of December 31, 2018. The decrease in FHLB advances generally is attributable to our increase in deposits, mainly our increase in time deposits from the ~~state~~State of Tennessee and other brokered deposits, and the decrease in our mortgage loans held for sale and securities and somewhat offset by our increase in ~~loans and securities.~~loans.

At ~~March 31,~~June 30, 2019, the scheduled maturities of our FHLB advances and interest rates were as follows (scheduled maturities will differ from scheduled repayments):


Scheduled Maturities	Amount		Weighted Average Rates	Amount		Weighted Average Rates
2019	$	11,000	2.52%	$	7,000	2.39%
2020	—		—%	—		—%
2021	356		2.73%	345		2.73%
2022	711		1.22%	660		1.22%
2023	2,600		1.94%	2,502		1.94%
Thereafter	642		2.47%	612		2.48%
	$	15,309	2.36%	$	11,119	2.23%

The Company has ~~issued~~outstanding $23.0 million of subordinated debentures ~~in connection~~associated with TRUPS issued by trusts that are affiliates of the Company, $10.0 million of which is owned by a wholly owned subsidiary of the Company. The Company has timely made its scheduled interest payments on these subordinated debentures since assumed in the first quarter of 2018. As of ~~March 31,~~June 30, 2019, the Company was current on all interest payments due related to its subordinated debentures. The Company 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 deferring the payment of interest on its subordinated debentures, the indentures governing the subordinated debentures provide that the Company cannot pay any dividends on its common stock or preferred stock.

Capital

Stockholders’ equity was ~~$215,119~~$213,943 at ~~March 31,~~June 30, 2019, an increase of ~~$6,705,~~$5,529, or ~~3.2%~~2.7%, from $208,414 at December 31, 2018. During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company raised ~~$28~~$351 of capital through the exercise of Company stock options and purchased ~~$659~~$8,291 of its common stock as part of its previously announced share repurchase program. The accretion of earnings to capital which was offset by the declared dividends, net stock ~~purchase,~~purchases, and the increase in assets led to a decrease in the Bank’s ~~March 31,~~June 30, 2019 Tier 1 leverage ratio to ~~9.99%~~9.58% compared with 10.17% at December 31, 2018 (see other ratios discussed further below). Additionally, the subordinated debentures qualify as Tier 1 and Total risk-based capital for the Company. Common dividends of ~~$1,036~~$2,071 (of which $1,036 were declared in the prior year) were paid during the ~~three~~six months ended ~~March 31,~~June 30, 2019, and common dividends of ~~$1,035~~$1,008 were declared in the ~~first~~second quarter of 2019 and were paid subsequent to quarter end.

On July 14, 2017, 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) depositary shares, (v) warrants, and (vi) units, up to a maximum aggregate offering price of $75,000,000. The net proceeds from any offering will be used for general corporate purposes including acquisitions, capital expenditures, investments, and the repayment, redemption, or refinancing

of any indebtedness or other securities. 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.

Banks as regulated institutions are required to meet certain levels of capital. The Federal Reserve Board of Governors, the primary federal regulator for the Bank, has adopted minimum capital regulations or guidelines that categorize 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 the guidelines. We regularly review our capital adequacy to ensure compliance with these 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.

Prompt corrective action regulations provide five 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 ~~March 31,~~June 30, 2019, 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 these notifications that management believes have changed the institution’s category. Actual and required capital amounts and ratios are presented below as of ~~March 31,~~June 30, 2019 and December 31, 2018 for the Company and Bank.


	Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions				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		Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2019
June 30, 2019
Company
Tier I leverage	$	171,606	10.23	%	$	67,099	4.000	%	$	83,874	5.00	%	$	168,218	9.81	%	$	68,590	4.000	%	$	85,738	5.00	%
Common equity Tier 1	159,982		11.50	%	97,380		7.000	%	90,425		6.50	%	156,574		10.93	%	100,276		7.000	%	93,114		6.50	%
Tier I risk-based capital	171,606		12.34	%	118,205		8.500	%	111,252		8.00	%	168,218		11.75	%	121,690		8.500	%	114,531		8.00	%
Total risk-based capital	183,385		13.19	%	145,985		10.500	%	139,033		10.00	%	180,309		12.59	%	150,377		10.500	%	143,216		10.00	%

Bank
Tier I leverage	$	167,447	9.99	%	$	67,046	4.000	%	$	83,807	5.00	%	$	164,042	9.58	%	$	68,492	4.000	%	$	85,615	5.00	%
Common equity Tier 1	167,447		12.07	%	97,111		7.000	%	90,174		6.50	%	164,042		11.48	%	100,020		7.000	%	92,875		6.50	%
Tier I risk-based capital	167,447		12.07	%	117,920		8.500	%	110,984		8.00	%	164,042		11.48	%	121,452		8.500	%	114,308		8.00	%
Total risk-based capital	179,226		12.92	%	145,656		10.500	%	138,720		10.00	%	176,133		12.33	%	150,029		10.500	%	142,885		10.00	%

December 31, 2018
Company
Tier I leverage	$	168,876	10.38	%	$	65,077	4.000	%	$	81,347	5.00	%	$	168,876	10.38	%	$	65,077	4.000	%	$	81,347	5.00	%
Common equity Tier 1	157,273		11.59	%	86,507		6.375	%	88,203		6.50	%	157,273		11.59	%	86,507		6.375	%	88,203		6.50	%
Tier I risk-based capital	168,876		12.44	%	106,905		7.875	%	108,602		8.00	%	168,876		12.44	%	106,905		7.875	%	108,602		8.00	%
Total risk-based capital	180,193		13.28	%	133,991		9.875	%	135,688		10.00	%	180,193		13.28	%	133,991		9.875	%	135,688		10.00	%

Bank
Tier I leverage	$	165,308	10.17	%	$	65,018	4.000	%	$	81,272	5.00	%	$	165,308	10.17	%	$	65,018	4.000	%	$	81,272	5.00	%
Common equity Tier 1	165,308		12.19	%	86,451		6.375	%	88,146		6.50	%	165,308		12.19	%	86,451		6.375	%	88,146		6.50	%
Tier I risk-based capital	165,308		12.19	%	106,792		7.875	%	108,488		8.00	%	165,308		12.19	%	106,792		7.875	%	108,488		8.00	%
Total risk-based capital	176,625		13.02	%	133,961		9.875	%	135,657		10.00	%	176,625		13.02	%	133,961		9.875	%	135,657		10.00	%

Effects of Inflation and Changing Prices

The accompanying consolidated financial statements have been prepared in accordance with ~~generally accepted accounting principles,~~U.S. GAAP, which require the measurement of financial ~~position~~positions 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’ ~~increased~~ 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 refinancings tend to slow as interest rates increase, and can reduce our earnings from such activities.

~~Off Balance~~Off-Balance Sheet Lending Arrangements

Off-balance sheet arrangements generally consist of unused lines of credit and standby letters of credit. Such commitments were as follows at ~~March 31,~~June 30, 2019:


	March 31, 2019		June 30, 2019
Unused lines of credit	$	261,188	$	284,103
Standby letters of credit	18,056		16,076
Total commitments	$	279,244	$	300,179

Other ~~Off Balance~~Off-Balance Sheet Arrangements

The total notional amount of swap agreements was $80,605, and $81,505 at ~~March 31,~~June 30, 2019 and December 31, ~~2018.~~2018, respectively. At ~~March 31,~~June 30, 2019, the contracts had negative fair values totaling ~~$1,854~~$3,575 recorded. At December 31, 2018, the contracts had negative fair values totaling ~~$542~~$716 recorded.

Emerging Growth Company Status

~~The Company~~Reliant Bancorp 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~~Reliant Bancorp chooses to comply with the reporting requirements of public companies that are not emerging growth companies, ~~the Company~~Reliant Bancorp may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as ~~the Company~~Reliant Bancorp is an emerging growth company. ~~The Company~~Reliant Bancorp will remain an emerging growth company for ~~an initial five year period, though it may cease~~up 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~~or until such earlier time that we have more than $1.07 billion in ~~excess of $700 million) or if~~ total annual gross revenues, ~~equal~~have more than $700 million in market value of our common shares held by non-affiliates, or ~~exceed $1.07~~issue more than $1.0 billion inof non-convertible debt over a ~~fiscal year.~~three-year period. Management cannot predict if investors will find ~~the Company’s~~Reliant Bancorp’s common stock less attractive because it will rely on these exemptions. If some investors find ~~the Company’s~~Reliant Bancorp’s common stock less attractive as a result, there may be a less active trading market for its common stock and ~~the Company’s~~Reliant Bancorp’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~~Reliant Bancorp 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

This Item is not applicable to smaller reporting companies.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management, including our 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 or 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.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the ~~three months~~quarter ended ~~March 31,~~June 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Reliant Bancorp and its wholly-owned subsidiary, ~~Reliant~~the Bank, are periodically involved as a plaintiff or defendant in various legal actions in the ordinary course of ~~its~~ business. Neither Reliant Bancorp nor ~~Reliant~~the 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 Reliant Bancorp or its subsidiaries are without merit or that the ultimate liability, if any, resulting from them will not materially affect ~~Reliant~~the Bank’s financial condition or Reliant Bancorp’s consolidated financial position.

Item 1A. Risk Factors.

There are no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in Reliant Bancorp's Annual Report on Form 10-K for the year ended December 31, 2018, except as described below.

Uncertainty About the Continuing Availability of LIBOR May Adversely Affect Our Business.

On July 27, 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offering Rate ("LIBOR"), announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after December 31, 2021. The announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. Efforts in the United States to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York. Uncertainty as to the nature of alternative reference rates and as to potential changes in other reforms to LIBOR may adversely affect LIBOR rates and the value of LIBOR-based loans, and to a lesser extent securities in our portfolio, and may impact the availability and cost of hedging instruments and borrowings, including the rates we pay on our subordinated debentures. If LIBOR rates are no longer available, any successor or replacement interest rates may perform differently, and we may incur significant costs to transition both our borrowing arrangements and the loan agreements with our customers from LIBOR, which may have an adverse effect on our results of operations. The impact of alternatives to LIBOR on the valuations, pricing and operation of our financial instruments is not yet known. In addition, failing to adequately manage this transition process with our customers could also adversely impact our reputation.

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

The following table contains information regarding shares of our common stock repurchased by Reliant Bancorp during the three months ended ~~March 31,~~June 30, 2019.

Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (2)
January 1, 2019 to January 31, 2019 $21.77 11,497 $11,750
February 1, 2019 to February 28, 2019 $21.86 11,538 $11,498
March 1, 2019 to March 31, 2019 $22.59 6,923 $11,341
Total $21.99 29,958 $11,341



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (2)
April 1, 2019 to April 30, 2019	7,665	$22.41	7,665	$11,169
May 1, 2019 to May 31, 2019	324,871	$22.73	324,871	$3,785
June 1, 2019 to June 30, 2019	3,437	$21.97	3,437	$3,709
Total	335,973	$22.72	335,973	$3,709


(1)	During the quarter ended ~~March 31,~~June 30, 2019, no shares of common stock were purchased other than through a publicly announced plan or program of Reliant Bancorp.

(2)

On December 4, 2018, Reliant Bancorp announced a stock repurchase plan pursuant to which we may purchase, in the aggregate, up to $12 million of our common stock. This stock repurchase plan will remain in effect through December 31, 2019, unless the entire authorized amount of shares is sooner repurchased. The stock repurchase plan does not obligate Reliant Bancorp to repurchase any dollar amount or number of shares, and the plan may be extended, modified, amended, suspended, or discontinued at any time.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

EXHIBIT INDEX



Exhibit No.	Description	~~Location~~
3.1	Amended and Restated Charter of Reliant Bancorp, Inc. (Restated for SEC filing purposes)	~~Incorporated~~ (incorporated by reference to Exhibit 3.1 toof Reliant Bancorp's Quarterly Report on Form 10-Q filed on November 6, ~~2018~~2018).

3.2	Third Amended and Restated Bylaws of Reliant Bancorp, Inc., effective June 15, 2018	~~Incorporated~~ (incorporated by reference to Exhibit 3.1 toof Reliant Bancorp's Current Report on Form 8-K filed on June 21, ~~2018~~2018).

4.1	Common Stock Specimen Certificate	~~Incorporated~~ (incorporated by reference to Exhibit 4.4 toof Reliant Bancorp's Registration Statement on Form S-8 filed on December 19, ~~2018~~2018).

~~4.2~~	~~The rights of securities holders are defined in the Charter and Bylaws provided in Exhibits 3.1 and 3.2~~

10.1	~~Employment Agreement, dated March 25, 2019, by and among Reliant Bancorp,~~Commerce Union Bancshares, Inc.~~, Reliant Bank, and David A. Kowalski~~	~~Incorporated~~ 2015 Equity Incentive Plan (incorporated by reference to ~~Exhibit 10.1 to Form 8-K~~Appendix A of Reliant Bancorp's Definitive Proxy Statement filed ~~March 29, 2019~~on May 14, 2015).

10.2*	Form of Employees Restricted Stock Agreement.

~~31.1~~10.3*	Form of Directors Restricted Stock Agreement.

31.1*	Certification pursuant to Rule 13a-14(a)/15d-14(a).	~~Filed herewith.~~

~~31.2~~31.2*	Certification pursuant to Rule 13a-14(a)/15d-14(a).	~~Filed herewith.~~

~~32.1~~32.1**	Certification pursuant to 18 USC Section 1350 - Sarbanes-Oxley Act of ~~2002~~2002.	~~Furnished herewith.~~

101.INS*	XBRL Instance Document.

~~101~~101.SCH*	~~Interactive Data Files~~XBRL Schema Documents.

~~Filed herewith.~~101.CAL*	XBRL Calculation Linkbase Document.

101.LAB*	XBRL Label Linkbase Document.

101.PRE*	XBRL Presentation Linkbase Document.

101.DEF*	XBRL Definition Linkbase Document.

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	RELIANT BANCORP, INC.

~~May 7,~~August 6, 2019		/s/ DeVan D. Ard, Jr.
		DeVan D. Ard, Jr.
		President and Chief Executive Officer
		(Principal Executive Officer)


~~May 7,~~August 6, 2019		/s/ J. Daniel Dellinger
		J. Daniel Dellinger
		Chief Financial Officer
		(Principal Financial Officer)

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