UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 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 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 ☒ 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 ☒ 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 ☒

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of ~~August 2,~~November 4, 2019 was ~~11,195,062.~~11,195,164.

TABLE OF CONTENTS



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		3
PART I – FINANCIAL INFORMATION		45
Item 1.	Consolidated Financial Statements (Unaudited)	45
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3934
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5953
Item 4.	Controls and Procedures	5953

PART II – OTHER INFORMATION		6054
Item 1.	Legal Proceedings	6054
Item 1A.	Risk Factors	6054
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6055
Item 3.	Defaults Upon Senior Securities	6155
Item 4.	Mine Safety Disclosures	6155
Item 5.	Other Information	6155
Item 6.	Exhibits	6256

SIGNATURES		6357

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q (this "Quarterly Report") are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “anticipate,” “expect,” “may,” “will,” “assume,” “should,” “predict,” “could,” “would,” “intend,” “targets,” “estimates,” “projects,” “plans,” and “potential,” and other similar words and expressions of the future, are intended to identify such forward-looking statements, 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~~could 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;

(xxi)

the risk that expected cost savings and revenue synergies from the pending acquisitions of Tennessee Community Bank Holdings, Inc. (“TCB Holdings”) (the “TCB Holdings Transaction”) and First Advantage Bancorp (“First Advantage”) (the “First Advantage Transaction” and, together with the TCB Holdings Transaction, the “Transactions”) may not be realized or take longer than anticipated to be realized;


(xxii)	the ability to meet expectations regarding the timing and completion and accounting and tax treatment of the Transactions;


(xxiii)	the effect of the announcement and pendency of the Transactions on customer, supplier, or employee relationships and operating results (including without limitation difficulties in maintaining relationships with employees and customers), as well as on the market price of Reliant Bancorp’s common stock;


(xxiv)	the risk that the businesses and operations of First Advantage and its subsidiaries and of TCB Holdings and its subsidiaries cannot be successfully integrated with the business and operations of Reliant Bancorp and its subsidiaries or that integration will be more costly or difficult than expected;


(xxv)	the occurrence of any event, change, or other circumstances that could give rise to the termination of the definitive merger agreement for the TCB Holdings Transaction or the First Advantage Transaction;


(xxvi)	the amount of costs, fees, expenses, and charges related to the Transactions, including those arising as a result of unexpected factors or events;


(xxvii)	the ability to obtain the shareholder and governmental approvals required for the Transactions;


(xxviii)	reputational risk associated with and the reaction of the parties’ customers, suppliers, employees, or other business partners to the Transactions;


(xxix)	the failure of any of the conditions to the closing of the Transactions to be satisfied, or any unexpected delay in closing the Transactions;


(xxx)	the dilution caused by Reliant Bancorp’s issuance of additional shares of its common stock in the Transactions;


(xxxi)	Reliant Bancorp’s ability to simultaneously execute on two separate business combination transactions;


(xxxii)	the risk associated with Reliant Bancorp management’s attention being diverted away from the day-to-day business and operations of Reliant Bancorp to the completion of the Transactions; and


~~(xxi)~~(xxxiii)	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 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

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

(Dollar amounts in thousands)


	June 30, 2019		December 31, 2018
	Unaudited		Audited			September 30, 2019		December 31, 2018
ASSETS
Cash and due from banks	$	35,917	$	34,807		$	51,247	$	34,807
Federal funds sold	80		371			73		371
Total cash and cash equivalents	35,997		35,178			51,320		35,178
Securities available for sale	290,373		296,323			297,310		296,323
Loans, net	1,301,019		1,220,184			1,338,392		1,220,184
Mortgage loans held for sale, net	11,571		15,823			16,757		15,823
Accrued interest receivable	7,246		8,214			7,488		8,214
Premises and equipment, net	21,632		22,033			21,390		22,033
Restricted equity securities, at cost	11,488		11,690			11,279		11,690
Other real estate, net	1,848		1,000			1,943		1,000
Cash surrender value of life insurance contracts	46,068		45,513			46,351		45,513
Deferred tax assets, net	3,133		7,428			456		7,428
Goodwill	43,642		43,642			43,642		43,642
Core deposit intangibles	7,745		8,219			7,507		8,219
Other assets	12,486		9,091			8,652		9,091

TOTAL ASSETS	$	1,794,248	$	1,724,338		$	1,852,487	$	1,724,338
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits
Demand	$	225,380	$	216,937
Noninterest-bearing demand						$	237,917	$	216,937
Interest-bearing demand	144,265		154,218			149,442		154,218
Savings and money market deposit accounts	368,764		401,308			397,243		401,308
Time	811,871		665,440			826,031		665,440
Total deposits	1,550,280		1,437,903			1,610,633		1,437,903
Accrued interest payable	967		1,063			1,610		1,063
Subordinated debentures	11,644		11,603			11,665		11,603
Federal Home Loan Bank advances	11,119		57,498			3,928		57,498
Dividends payable	1,008		1,036			1,012		1,036
Other liabilities	5,287		6,821			3,987		6,821

TOTAL LIABILITIES	1,580,305		1,515,924			1,632,835		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; 11,196,563 and 11,530,810 shares issued and outstanding at June 30, 2019, and December 31, 2018, respectively	11,197		11,531
Common stock, $1 par value; 30,000,000 shares authorized; 11,195,062 and 11,530,810 shares issued and outstanding at Sept. 30, 2019, and Dec. 31, 2018, respectively						11,195		11,531
Additional paid-in capital	166,252		173,238			166,512		173,238
Retained earnings	33,349		27,329			36,339		27,329
Accumulated other comprehensive income (loss)	3,145		(3,684		)	5,606		(3,684		)

TOTAL STOCKHOLDERS’ EQUITY	213,943		208,414			219,652		208,414

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,794,248	$	1,724,338		$	1,852,487	$	1,724,338

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2019 AND 2018

(Dollar amounts in thousands except per share amounts)

~~(Unaudited)~~


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018		2019			2018		2019			2018		2019			2018
INTEREST INCOME
Interest and fees on loans	$	16,960	$	14,066	$	33,129		$	27,624	$	17,502		$	14,873	$	50,631		$	42,497
Interest and fees on loans held for sale	198		326		351			807		263			294		614			1,101
Interest on investment securities, taxable	587		453		1,090			960		549			414		1,639			1,374
Interest on investment securities, nontaxable	1,650		1,708		3,368			3,212		1,576			1,709		4,944			4,921
Federal funds sold and other	297		277		597			589		321			280		918			869

TOTAL INTEREST INCOME	19,692		16,830		38,535			33,192		20,211			17,570		58,746			50,762

INTEREST EXPENSE
Deposits
Demand	86		84		197			161		81			102		278			263
Savings and money market deposit accounts	1,051		574		2,181			1,052		973			657		3,154			1,709
Time	4,369		2,199		7,940			4,195		4,828			2,542		12,852			6,737
Federal Home Loan Bank advances and other	175		397		552			669		66			606		534			1,275
Subordinated debentures	198		172		391			329		199			197		590			526

TOTAL INTEREST EXPENSE	5,879		3,426		11,261			6,406		6,147			4,104		17,408			10,510

NET INTEREST INCOME	13,813		13,404		27,274			26,786		14,064			13,466		41,338			40,252

PROVISION FOR LOAN LOSSES	200		300		200			437		606			322		806			759

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	13,613		13,104		27,074			26,349		13,458			13,144		40,532			39,493

NONINTEREST INCOME
Service charges on deposit accounts	936		900		1,820			1,671		976			833		2,796			2,504
Gains on mortgage loans sold, net	1,225		957		1,785			2,662		1,385			1,399		3,170			4,061
Gain on securities transactions, net	175		25		306			25		—			18		306			43
Gain on sale of other real estate	—		20		—			109		—			150		—			259
Gain (loss) on disposal of premises and equipment										—			16		—			16
Other	362		352		725			778		399			361		1,124			1,139

TOTAL NONINTEREST INCOME	2,698		2,254		4,636			5,245		2,760			2,777		7,396			8,022

NONINTEREST EXPENSE
Salaries and employee benefits	7,706		6,613		14,971			13,567		7,634			6,913		22,605			20,480
Occupancy	1,358		1,210		2,710			2,439		1,359			1,234		4,069			3,673
Information technology	1,575		1,249		2,985			2,598		1,553			1,315		4,538			3,913
Advertising and public relations	275		141		529			230		387			183		916			413
Audit, legal and consulting	690		816		1,486			1,439		350			588		1,836			2,027
Federal deposit insurance	249		224		444			420		(96		)	210		348			630
Merger expenses	1		2,483		3			2,660		299			82		302			2,742
Other operating	1,272		1,305		2,744			2,850		1,561			1,637		4,305			4,487

TOTAL NONINTEREST EXPENSE	13,126		14,041		25,872			26,203		13,047			12,162		38,919			38,365

INCOME BEFORE PROVISION FOR INCOME TAXES	3,185		1,317		5,838		—	5,391		3,171			3,759		9,009		—	9,150

INCOME TAX EXPENSE	501		115		873			912		557			519		1,430			1,431

CONSOLIDATED NET INCOME	2,684		1,202		4,965			4,479		2,614			3,240		7,579			7,719

NONCONTROLLING INTEREST IN NET LOSS OF SUBSIDIARY	1,555		937		3,098			1,401		1,386			842		4,484			2,243

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	4,239	$	2,139	$	8,063		$	5,880	$	4,000		$	4,082	$	12,063		$	9,962

Basic net income attributable to common shareholders, per share	$	0.38	$	0.19	$	0.71		$	0.52	$	0.36		$	0.36	$	1.07		$	0.88
Diluted net income attributable to common shareholders, per share	$	0.38	$	0.19	$	0.71		$	0.51	$	0.36		$	0.36	$	1.07		$	0.87

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2019 AND 2018

(Dollar amounts in thousands)

~~(Unaudited)~~


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018			2019			2018
Consolidated net income	$	2,684		$	1,202		$	4,965		$	4,479		$	2,614		$	3,240		$	7,579		$	7,719
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		)
Net unrealized gains (losses) on available-for-sale securities, net of tax of $973 and $712 for the three months ended September 30, 2019 and 2018, respectively, and $3,935 and $2,260 for the nine months ended September 30, 2019 and 2018, respectively													2,736			(2,023		)	11,122			(6,401		)
Net unrealized losses on interest rate swap derivatives net of tax of $98 for the three months ended September 30, 2019 and $569 for the nine months ended September 30, 2019													(275		)	—			(1,606		)	—
Reclassification adjustment for gains included in net income, net of tax of $4 for the three months ended September 30, 2018 and $80 and $11 for the nine months ended September 30, 2019 and 2018, respectively													—			(14		)	(226		)	(32		)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	2,533			18			6,829			(4,396		)	2,461			(2,037		)	9,290			(6,433		)
TOTAL COMPREHENSIVE INCOME	$	5,217		$	1,220		$	11,794		$	83		$	5,075		$	1,203		$	16,869		$	1,286

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - UNAUDITED

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2019 AND 2018

(Dollar amounts in 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							RETAINED EARNINGS			SHARES			NONCONTROLLING INTEREST			AMOUNT										ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS				ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)				NONCONTROLLING INTEREST				TOTAL
BALANCE - JANUARY 1, 2019	11,530,810		$	11,531		ADDITIONAL PAID-IN CAPITAL			$	173,238			$	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	27,329	$	(3,684	)		TOTAL		$	—		$	208,414		11,530,810			$	11,531			$	173,238			$	27,329			$	(3,684	)		$	—	$	208,414
Stock based compensation expense	—		—			250				—				—		—				250			—		—				250				—				—				—				250
Exercise of stock options	2,183		2			26				—				—		—				28			2,183		2				26				—				—				—				28
Restricted stock awards	3,000		3			(3		)		—				—		—				—			3,000		3				(3		)		—				—				—				—
Restricted stock and dividend forfeiture	(3,750	)	(4		)	4				1				—		—				1			(3,750	)	(4		)		4				1				—				—				1
Common stock shares redeemed	(29,958	)	(30		)	(629		)		—				—		—				(659		)	(29,958	)	(30		)		(629		)		—				—				—				(659		)
Noncontrolling interest contributions	—		—			—				—				—		1,543				1,543			—		—				—				—				—				1,543				1,543
Cash dividend declared to common shareholders	—		—			—				(1,035		)		—		—				(1,035		)	—		—				—				(1,035		)		—				—				(1,035		)
Net income (loss)	—		—			—				3,824				—		(1,543		)		2,281			—		—				—				3,824				—				(1,543		)		2,281
Other comprehensive loss	—		—			—				—				4,296		—				4,296
Other comprehensive income																							—		—				—				—				4,296				—				4,296
BALANCE - MARCH 31, 2019	11,502,285		11,502			172,886				30,119				612		—				215,119			11,502,285		$	11,502			$	172,886			$	30,119			$	612			$	—			$	215,119
Stock based compensation expense	—		—			280				—				—		—				280			—		—				280				—				—				—				280
Exercise of stock options	24,523		25			298				—				—		—				323			24,523		25				298				—				—				—				323
Employee Stock Purchase Plan stock issuance	4,728		5			85				—				—		—				90			4,728		5				85				—				—				—				90
Restricted stock awards	5,000		5			(5		)		—				—		—				—			5,000		5				(5		)		—				—				—				—
Restricted stock and dividend forfeiture	(4,000	)	(4		)	4				—				—		—				—			(4,000	)	(4		)		4				—				—				—				—
Common stock shares redeemed	(335,973	)	(336		)	(7,296		)		—				—		—				(7,632		)	(335,973	)	(336		)		(7,296		)		—				—				—				(7,632		)
Noncontrolling interest contributions	—		—			—				—				—		1,555				1,555			—		—				—				—				—				1,555				1,555
Cash dividend declared to common shareholders	—		—			—				(1,009		)		—		—				(1,009		)	—		—				—				(1,009		)		—				—				(1,009		)
Net income (loss)	—		—			—				4,239				—		(1,555		)		2,684			—		—				—				4,239				—				(1,555		)		2,684
Other comprehensive income	—		—			—				—				2,533		—				2,533			—		—				—				—				2,533				—				2,533
BALANCE - JUNE 30, 2019	11,196,563		$	11,197		$	166,252			$	33,349			$	3,145	$	—			$	213,943		11,196,563		$	11,197			$	166,252			$	33,349			$	3,145			$	—			$	213,943
Stock based compensation expense																							—		—				337				—				—				—				337
Exercise of stock options																							600		1				8				—				—				—				9
Restricted stock awards																							1,500		1				(1		)		—				—				—				—
Restricted shares withheld for taxes																							(3,601	)	(4		)		(84		)		—				—				—				(88		)
Noncontrolling interest contributions																							—		—				—				—				—				1,386				1,386
Cash dividend declared to common shareholders																							—		—				—				(1,010		)		—				—				(1,010		)
Net income (loss)																							—		—				—				4,000				—				(1,386		)		2,614
Other comprehensive income																							—		—				—				—				2,461				—				2,461
BALANCE - SEPTEMBER 30, 2019																							11,195,062		$	11,195			$	166,512			$	36,339			$	5,606			$	—			$	219,652

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - UNAUDITED - CONTINUED

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollar amounts in thousands)


	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							RETAINED EARNINGS			SHARES				NONCONTROLLING INTEREST			AMOUNT										ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS				ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)				NONCONTROLLING INTEREST				TOTAL
BALANCE - JANUARY 1, 2018	9,034,439		$	9,034		ADDITIONAL PAID-IN CAPITAL			$	112,437			$	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	17,189		$	1,477			TOTAL		$	—		$	140,137		9,034,439			$	9,034			$	112,437			$	17,189			$	1,477			$	—	$	140,137
Stock based compensation expense	—		—			224				—				—			—				224			—		—				224				—				—				—				224
Exercise of stock options	25,225		25			315				—				—			—				340			25,225		25				315				—				—				—				340
Restricted stock awards	4,500		5			(5		)		—				—			—				—			4,500		5				(5		)		—				—				—				—
Restricted stock forfeiture	(1,000	)	(1		)	1				—				—			—				—			(1,000	)	(1		)		1				—				—				—				—
Conversion shares issued to shareholders' of Community First, Inc.	2,416,444		2,417			59,566				��				—			—				61,983			2,416,444		2,417				59,566				—				—				—				61,983
Noncontrolling interest contributions	—		—			—				—				—			464				464			—		—				—				—				—				464				464
Cash dividends declared to common shareholders	—		—			—				(1,060		)		—			—				(1,060		)	—		—				—				(1,060		)		—				—				(1,060		)
Net income (loss)	—		—			—				3,741				—			(464		)		3,277			—		—				—				3,741				—				(464		)		3,277
Other comprehensive income	—		—			—				—				(4,414		)	—				(4,414		)
Other comprehensive loss																								—		—				—				—				(4,414		)		—				(4,414		)
BALANCE - MARCH 31, 2018	11,479,608		11,480			172,538				19,870				(2,937		)	—				200,951			11,479,608		$	11,480			$	172,538			$	19,870			$	(2,937	)		$	—			$	200,951
Stock based compensation expense	—		—			148				—				—			—				148			—		—				148				—				—				—				148
Exercise of stock options	357		—			3				—				—			—				3			357		—				3				—				—				—				3
Restricted stock awards	3,000		3			(3		)		—				—			—				—			3,000		3				(3		)		—				—				—				—
Noncontrolling interest contributions	—		—			—				—				—			937				937			—		—				—				—				—				937				937
Cash dividend declared to common shareholders	—		—			—				(919		)		—			—				(919		)	—		—				—				(919		)		—				—				(919		)
Net income (loss)	—		—			—				2,139				—			(937		)		1,202			—		—				—				2,139				—				(937		)		1,202
Other comprehensive income	—		—			—				—				18			—				18			—		—				—				—				18				—				18
BALANCE - JUNE 30, 2018	11,482,965		$	11,483		$	172,686			$	21,090			$	(2,919	)	$	—			$	202,340		11,482,965		$	11,483			$	172,686			$	21,090			$	(2,919	)		$	—			$	202,340
Stock based compensation expense																								—		—				237				—				—				—				237
Exercise of stock options																								4,419		5				50				—				—				—				55
Restricted stock awards																								43,710		43				(43		)		—				—				—				—
Noncontrolling interest contributions																								—		—				—				—				—				842				842
Cash dividend declared to common shareholders																								—		—				—				(926		)		—				—				(926		)
Net income (loss)																								—		—				—				4,082				—				(842		)		3,240
Other comprehensive loss																								—		—				—				—				(2,037		)		—				(2,037		)
BALANCE - SEPTEMBER 30, 2018																								11,531,094		$	11,531			$	172,930			$	24,246			$	(4,956	)		$	—			$	203,751

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2019 AND 2018

(Dollar amounts in thousands)

~~(Unaudited)~~



	Nine Months Ended September 30,
	2019			2018
OPERATING ACTIVITIES
Consolidated net income	$	7,579		$	7,719
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Provision for loan losses	806			759
Provision to reflect market value of mortgage loans held for sale	—			196
Deferred income taxes (benefit)	3,686			(959		)
Loss on disposal of premises and equipment	—			(16		)
Depreciation and amortization of premises and equipment	1,486			1,235
Net amortization of securities	2,302			2,374
Net realized gains on sales of securities	(306		)	(43		)
Gains on mortgage loans sold, net	(3,170		)	(4,061		)
Stock-based compensation expense	867			609
Realization of gain on other real estate	—			(259		)
Increase in cash surrender value of life insurance contracts	(838		)	(893		)
Mortgage loans originated for resale	(106,520		)	(113,481		)
Proceeds from sale of mortgage loans	108,756			150,866
Other accretion	(477		)	(615		)
Change in: Accrued interest receivable	726			(1,123		)
Other assets	508			(2,852		)
Accrued interest payable	547			845
Other liabilities	(6,392		)	778
TOTAL ADJUSTMENTS	1,981			33,360
NET CASH PROVIDED BY OPERATING ACTIVITIES	9,560			41,079
INVESTING ACTIVITIES
Cash received from merger	—			33,128
Activities in available for sale securities
Purchases	(47,870		)	(103,375		)
Sales	52,434			100,737
Maturities, prepayments and calls	8,587			10,125
Purchases of restricted equity securities	—			(2,181		)
Redemption of restricted equity securities	411			—
Net increase in loans	(118,758		)	(108,431		)
Purchase of buildings, leasehold improvements, and equipment	(843		)	(4,000		)
Proceeds from sale of other real estate	—			1,947
NET CASH USED IN INVESTING ACTIVITIES	(106,039		)	(72,050		)
FINANCING ACTIVITIES
Net change in deposits	172,741			79,588
Net change in advances from Federal Home Loan Bank	(53,529		)	(34,020		)
Issuance of common stock, net of repurchase of restricted shares	272			398
Issuance of common stock from Employee Stock Purchase Plan	90			—
Redemption of common stock	(8,291		)	—
Noncontrolling interest contributions received	4,415			1,305
Cash dividends paid on common stock	(3,077		)	(2,525		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	112,621			44,746
NET CHANGE IN CASH AND CASH EQUIVALENTS	16,142			13,775
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	35,178			20,668
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	51,320		$	34,443

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Dollar amounts in thousands)

Six Months Ended
June 30,
2019 2018
OPERATING ACTIVITIES
Consolidated net income $ 4,965
$ 4,479
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Provision for loan losses 200
437
Deferred income taxes (benefit) 1,880
(374 )
Depreciation and amortization of premises and equipment 991
792
Net amortization of securities 1,586
1,515
Net realized gains on sales of securities (306 ) (25 )
Gains on mortgage loans sold, net (1,785 ) (2,662 )
Stock-based compensation expense 530
372
Realization of gain on other real estate —
(109 )
Increase in cash surrender value of life insurance contracts (555 ) (600 )
Mortgage loans originated for resale (57,816 ) (70,064 )
Proceeds from sale of mortgage loans 63,853
87,795
Other accretion (380 ) (471 )
Change in
Accrued interest receivable 968
(565 )
Other assets (3,202 ) (856 )
Accrued interest payable (96 ) 496
Other liabilities (4,389 ) (1,321 )

TOTAL ADJUSTMENTS 1,479
14,360

NET CASH PROVIDED BY OPERATING ACTIVITIES 6,444
18,839

INVESTING ACTIVITIES
Cash received from merger —
33,128
Activities in available for sale securities
Purchases (41,083 ) (103,323 )
Sales 52,434
92,991
Maturities, prepayments and calls 5,418
6,862
Purchases of restricted equity securities —
(2,177 )
Redemption of restricted equity securities 202
—
Net increase in loans (81,026 ) (57,337 )
Purchase of buildings, leasehold improvements, and equipment (590 ) (1,372 )
Proceeds from sale of other real estate —
670

NET CASH USED IN INVESTING ACTIVITIES (64,645 ) (30,558 )
Six Months Ended
June 30,
2019 2018
FINANCING ACTIVITIES
Net change in deposits 112,388
18,298
Net change in advances from Federal Home Loan Bank (46,352 ) 6,154
Issuance of common stock, net 351
343
Issuance of common stock from Employee Stock Purchase Plan 90
—
Redemption of common stock (8,291 ) —
Noncontrolling interest contributions received 2,905
560
Cash dividends paid on common stock (2,071 ) (1,602 )

NET CASH PROVIDED BY FINANCING ACTIVITIES 59,020
23,753

NET CHANGE IN CASH AND CASH EQUIVALENTS 819
12,034
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 35,178
20,668
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 35,997
$ 32,702

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

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



	Nine Months Ended September 30,
	2019			2018

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest	$	16,861		$	9,655
Taxes	$	1,607		$	2,170

Non-cash investing and financing activities
Unrealized gain (loss) on securities available-for-sale	$	16,134		$	(9,742	)
Unrealized gain (loss) on derivatives	$	(3,558	)	$	1,038
Change in due to/from noncontrolling interest	$	4,484		$	2,243
Loans foreclosed and transferred to other real estate owned and foreclosed assets	$	943		$	1,060

See accompanying notes to consolidated financial statements.

Table of Contents

RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE~~SEPTEMBER 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 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. Additionally, on September 16, 2019, Reliant Bancorp, Inc. entered into a definitive agreement to acquire the parent company of Community Bank & Trust headquartered in Ashland City, Tennessee.

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~~Trups Holding Company ("TRUPS"), which is wholly owned by Reliant Bancorp Inc., Reliant Investment Holdings, LLC ("Holdings"), which is wholly owned by the Bank, and Reliant Mortgage Ventures, LLC ("RMV"), of which the Bank controls 51% of the governance rights. Reliant Bancorp Inc., the Bank, TRUPS, Holdings and RMV, are, collectively, referred to herein as the “Company”. 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)~~

~~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 ~~June~~September 30, 2019, and for the three and ~~six~~nine months ended ~~June~~September 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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~~nine months ended ~~June~~September 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 ~~June~~September 30, 2018 financial statement presentation in order to conform to the ~~June~~September 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 income at ~~June~~September 30, 2019 and December 31, 2018 were as follows:


	June 30, 2019									September 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	$	313	$	—	$	(1	)	$	312	$	310	$	—	$	—		$	310
State and municipal	212,157		8,540		(83		)	220,614		210,537		12,479		—			223,016
Corporate bonds	3,130		2		(113		)	3,019		7,880		64		(122		)	7,822
Mortgage backed securities	37,515		190		(197		)	37,508		39,143		379		(404		)	39,118
Asset backed securities	29,430		12		(522		)	28,920		27,577		11		(544		)	27,044
Total	$	282,545	$	8,744	$	(916	)	$	290,373	$	285,447	$	12,933	$	(1,070	)	$	297,310



	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)~~

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

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

~~NOTE 2 - SECURITIES (CONTINUED)~~

Securities pledged at ~~June~~September 30, 2019 and December 31, 2018 had a carrying amount of ~~$59,682~~$58,341 and $70,097, respectively, and were pledged to collateralize Federal Home Loan Bank ("FHLB") advances, Federal Reserve Bank ("FRB") advances and municipal deposits.

At ~~June~~September 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 2 - SECURITIES (CONTINUED)

The fair ~~value~~values of available for sale debt securities at ~~June~~September 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	$	660	$	663	$	500	$	499
Due in one to five years	938		935		1,035		1,035
Due in five to ten years	7,240		7,400		12,076		12,447
Due after ten years	206,762		214,947		205,116		217,167
Mortgage backed securities	37,515		37,508		39,143		39,118
Asset backed securities	29,430		28,920		27,577		27,044
Total	$	282,545	$	290,373	$	285,447	$	297,310

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 ~~June~~September 30, ~~2019:~~

2019 and December 31, 2018, respectively:

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
$ —
$ —
$ 249
$ 1
$ 249
$ 1
State and municipal —
—
9,611
83
9,611
83
Corporate bonds —
—
2,517
113
2,517
113
Mortgage backed securities 9,706
127
5,200
70
14,906
197
Asset backed securities 2,100
6
24,704
516
26,804
522

Total temporarily impaired $ 11,806
$ 133
$ 42,281
$ 783
$ 54,087
$ 916

~~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 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
At September 30, 2019
U. S. Treasury and other U. S. government agencies	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	—		—		—		—		—		—
Corporate bonds	499		1		2,509		121		3,008		122
Mortgage backed securities	16,070		224		8,296		180		24,366		404
Asset backed securities	1,990		11		23,056		533		25,046		544
Total temporarily impaired	$	18,559	$	236	$	33,861	$	834	$	52,420	$	1,070


	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
At December 31, 2018
U. S. Treasury and other U. S. government agencies	$	—	$	—	$	555	$	14	$	555	$	14	$	—	$	—	$	555	$	14	$	555	$	14
State and municipal	118,580		2,263		47,223		1,907		165,803		4,170		118,580		2,263		47,223		1,907		165,803		4,170
Corporate bonds	2,526		105		492		8		3,018		113		2,526		105		492		8		3,018		113
Mortgage backed securities	17,015		99		5,397		149		22,412		248		17,015		99		5,397		149		22,412		248
Asset backed securities	20,351		383		7,255		256		27,606		639		20,351		383		7,255		256		27,606		639

Total temporarily impaired	$	158,472	$	2,850	$	60,922	$	2,334	$	219,394	$	5,184	$	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 6956 and 242 securities in an unrealized loss position as of ~~June~~September 30, 2019 and December 31, 2018, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

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

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

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

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



	September 30, 2019			December 31, 2018
Commercial, Industrial and Agricultural	$	231,935		$	213,850
Real Estate
1-4 Family Residential	236,332			225,863
1-4 Family HELOC	93,176			88,112
Multi-family and Commercial	520,297			447,840
Construction, Land Development and Farmland	238,082			220,801
Consumer	17,448			20,495
Other	13,252			14,106
Total	1,350,522			1,231,067
Less
Deferred loan fees (cost)	(161		)	(9		)
Allowance for possible loan losses	12,291			10,892
Loans, net	$	1,338,392		$	1,220,184

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

2019 and September 30, 2018, respectively:


	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			1-4 Family HELOC		Consumer			Other			Total
Beginning balance	$	1,751		$	4,429	$	2,500	$	1,333
Beginning balance at December 31, 2018											$	1,751		$	4,429	$	2,500	$	1,333		$	656	$	184		$	39		$	10,892
Charge-offs	(168		)	—		—		(17		)	(170		)	—		—		(29		)	—		(37		)	(34		)	(270		)
Recoveries	294			59		201		216			342			62		—		220			11		28			200			863
Provision	4			225		6		(77		)	376			697		13		(141		)	37		(5		)	(171		)	806
Ending balance	$	1,881		$	4,713	$	2,707	$	1,455
Ending balance at September 30, 2019											$	2,299		$	5,188	$	2,513	$	1,383		$	704	$	170		$	34		$	12,291

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

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

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
Charge-offs (308 ) —
(140 ) (8 )
Recoveries 425
3
44
11
Provision (970 ) 692
177
469
Ending balance $ 1,685
$ 3,861
$ 2,515
$ 1,245


	1-4 Family HELOC			Consumer			Other			Total
Beginning balance	$	595		$	183		$	42		$	9,731
Beginning balance at December 31, 2017													$	2,538		$	3,166		$	2,434		$	773		$	595		$	183		$	42		$	9,731
Charge-offs	(6		)	(24		)	(22		)	(508		)	(308		)	(76		)	(144		)	(36		)	(6		)	(24		)	(37		)	(631		)
Recoveries	5			18			3			509			530			215			44			11			7			29			3			839
Provision	42			15			12			437			(734		)	813			56			573			24			(2		)	29			759
Ending balance	$	636		$	192		$	35		$	10,169
Ending balance at September 30, 2018													$	2,026		$	4,118		$	2,390		$	1,321		$	620		$	186		$	37		$	10,698

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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 ~~June~~September 30, 2019 ~~was~~were 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		1-4 Family HELOC		Consumer		Other		Total
Allowance for loan losses
Individually evaluated for impairment	$	72	$	—	$	17	$	—	$	580	$	—	$	17	$	—	$	50	$	—	$	—	$	647
Acquired with credit impairment	—		—		—		—		—		—		—		—		—		—		—		—
Collectively evaluated for impairment	1,809		4,713		2,690		1,455		1,719		5,188		2,496		1,383		654		170		34		11,644
Total	$	1,881	$	4,713	$	2,707	$	1,455	$	2,299	$	5,188	$	2,513	$	1,383	$	704	$	170	$	34	$	12,291
Loans
Individually evaluated for impairment	$	903	$	3,017	$	1,069	$	1,218	$	5,309	$	2,428	$	1,217	$	1,997	$	346	$	—	$	—	$	11,297
Acquired with credit impairment	—		222		829		253		—		218		822		201		—		—		—		1,241
Collectively evaluated for impairment	232,409		478,734		235,523		231,758		226,626		517,651		236,043		234,134		92,830		17,448		13,252		1,337,984
Total	$	233,312	$	481,973	$	237,421	$	233,229	$	231,935	$	520,297	$	238,082	$	236,332	$	93,176	$	17,448	$	13,252	$	1,350,522

1-4 Family
HELOC
Consumer Other Total
Allowance for loan losses
Individually evaluated for impairment $ —
$ —
$ —
$ 89
Acquired with credit impairment —
—
—
—
Collectively evaluated for impairment 686
188
36
11,577
Total $ 686
$ 188
$ 36
$ 11,666
Loans
Individually evaluated for impairment $ 296
$ —
$ —
$ 6,503
Acquired with credit impairment —
—
—
1,304
Collectively evaluated for impairment 94,140
18,881
13,338
1,304,783
Total $ 94,436
$ 18,881
$ 13,338
$ 1,312,590

~~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 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~~were 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		1-4 Family HELOC		Consumer		Other		Total
Allowance for loan losses
Individually evaluated for impairment	$	38	$	—	$	17	$	—	$	38	$	—	$	17	$	—	$	—	$	—	$	—	$	55
Acquired with credit impairment	—		—		—		—		—		—		—		—		—		—		—		—
Collectively evaluated for impairment	1,713		4,429		2,483		1,333		1,713		4,429		2,483		1,333		656		184		39		10,837
Total	$	1,751	$	4,429	$	2,500	$	1,333	$	1,751	$	4,429	$	2,500	$	1,333	$	656	$	184	$	39	$	10,892
Loans
Individually evaluated for impairment	$	978	$	1,160	$	1,780	$	1,246	$	978	$	1,160	$	1,780	$	1,246	$	—	$	12	$	—	$	5,176
Acquired with credit impairment	40		232		1,751		262		40		232		1,751		262		—		11		—		2,296
Collectively evaluated for impairment	212,832		446,448		217,270		224,355		212,832		446,448		217,270		224,355		88,112		20,472		14,106		1,223,595
Total	$	213,850	$	447,840	$	220,801	$	225,863	$	213,850	$	447,840	$	220,801	$	225,863	$	88,112	$	20,495	$	14,106	$	1,231,067

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

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

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

Risk characteristics relevant to each portfolio segment are as follows:

Commercial, industrial and agricultural: The commercial, industrial and agricultural loan portfolio segment includes loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of underlying borrowers, particularly cash flow from customers’ business operations. Commercial, industrial and agricultural loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis.

~~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 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~~comprising 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 an 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 development 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 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 residential real estate: Residential real estate loans represent loans to consumers or investors to finance a residence. These loans are typically financed on 15 to 30 year amortization terms, but generally with shorter maturities of 5 to 15 years. Many of these loans are extended to borrowers to finance their primary or secondary residence. Loans to an investor secured by a 1-4 family residence will be repaid from either the rental income from the property or from the sale of the property. This loan segment also includes closed-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home. Loans in this portfolio segment are underwritten and approved based on a number of credit quality criteria including limits on maximum Loan-to-Value ("LTV"), minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment.

~~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 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~~Nonaccrual loans by class of loan were as follows at ~~June~~September 30, 2019 and December 31, 2018:


	June 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Commercial, Industrial and Agricultural	$	314	$	279	$	601	$	279
Multi-family and Commercial Real Estate	811		—		1,310		—
Construction, Land Development and Farmland	387		1,294		555		1,294
1-4 Family Residential Real Estate	1,187		2,556		1,538		2,556
1-4 Family HELOC	296		—		346		—
Consumer	50		65		30		65
Total	$	3,045	$	4,194	$	4,380	$	4,194

Performing ~~non-accrual~~nonaccrual loans totaled ~~$1,578~~$1,076 and $2,010 at ~~June~~September 30, 2019 and December 31, 2018, respectively.

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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 ~~June~~September 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	$	904	$	589	$	314	$	903	$	72	$	5,309	$	754	$	4,555	$	5,309	$	580
Multi-family and Commercial Real Estate	3,513		3,239		—		3,239		—		2,655		2,646		—		2,646		—
Construction, Land Development and Farmland	2,214		1,726		172		1,898		17		2,356		1,868		171		2,039		17
1-4 Family Residential Real Estate	1,685		1,471		—		1,471		—		2,286		2,198		—		2,198		—
1-4 Family HELOC	298		296		—		296		—		348		296		50		346		50
Total	$	8,614	$	7,321	$	486	$	7,807	$	89	$	12,954	$	7,762	$	4,776	$	12,538	$	647

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
Commercial, Industrial and Agricultural	$	1,247	$	765	$	253	$	1,018	$	38
Multi-family and Commercial Real Estate	1,670		1,392		—		1,392		—
Construction, Land Development and Farmland	3,920		3,359		172		3,531		17
1-4 Family Residential Real Estate	2,243		1,508		—		1,508		—
Consumer	29		23		—		23		—
Total	$	9,109	$	7,047	$	425	$	7,472	$	55

The average balances of impaired loans for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 ~~was~~were as follows:

2019 2018
Commercial, Industrial and Agricultural $ 791
$ 3,040
Multi-family and Commercial Real Estate 2,548
3,010
Construction, Land Development and Farmland 2,747
5,083
1-4 Family Residential Real Estate 1,639
2,774
1-4 Family HELOC 99
90
Consumer 11
88
Total $ 7,835
$ 14,085

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



	2019		2018
Commercial, Industrial and Agricultural	$	1,921	$	2,661
Multi-family and Commercial Real Estate	2,573		2,610
Construction, Land Development and Farmland	2,570		4,831
1-4 Family Residential Real Estate	1,779		2,708
1-4 Family HELOC	161		90
Consumer	9		72
Total	$	9,013	$	12,972

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 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 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's~~The 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)~~

~~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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 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 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 ~~June~~September 30, 2019:



	Pass		Special Mention		Substandard		Total
Commercial, Industrial and Agricultural	$	225,542	$	442	$	5,951	$	231,935
1-4 Family Residential Real Estate	233,559		—		2,773		236,332
1-4 Family HELOC	92,574		—		602		93,176
Multi-family and Commercial Real Estate	515,570		—		4,727		520,297
Construction, Land Development and Farmland	237,171		—		911		238,082
Consumer	17,217		—		231		17,448
Other	13,252		—		—		13,252
Total	$	1,334,885	$	442	$	15,195	$	1,350,522

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


	Pass		Special Mention		Substandard		Total		Pass		Special Mention		Substandard		Total
Commercial, Industrial and Agricultural	$	231,448	$	266	$	1,598	$	233,312	$	212,761	$	—	$	1,089	$	213,850
1-4 Family Residential Real Estate	231,538		—		1,691		233,229		221,546		1,125		3,192		225,863
1-4 Family HELOC	93,974		—		462		94,436		88,112		—		—		88,112
Multi-family and Commercial Real Estate	476,858		—		5,115		481,973		442,127		3,135		2,578		447,840
Construction, Land Development and Farmland	236,508		—		913		237,421		218,053		579		2,169		220,801
Consumer	18,624		—		257		18,881		20,236		—		259		20,495
Other	13,338		—		—		13,338		14,106		—		—		14,106
Total	$	1,302,288	$	266	$	10,036	$	1,312,590	$	1,216,941	$	4,839	$	9,287	$	1,231,067

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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 ~~June~~September 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	$	170	$	—	$	301	$	471	$	232,841	$	233,312	$	5	$	133	$	579	$	717	$	231,218	$	231,935
1-4 Family Residential Real Estate	680		516		67		1,263		231,966		233,229		539		514		426		1,479		234,853		236,332
1-4 Family HELOC	120		—		—		120		94,316		94,436		42		—		346		388		92,788		93,176
Multi-family and Commercial Real Estate	1,064		—		—		1,064		480,909		481,973		—		505		558		1,063		519,234		520,297
Construction, Land Development and Farmland	1		—		171		172		237,249		237,421		136		—		171		307		237,775		238,082
Consumer	12		10		7		29		18,852		18,881		20		29		10		59		17,389		17,448
Other	—		—		—		—		13,338		13,338		—		—		—		—		13,252		13,252
Total	$	2,047	$	526	$	546	$	3,119	$	1,309,471	$	1,312,590	$	742	$	1,181	$	2,090	$	4,013	$	1,346,509	$	1,350,522

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

There was one loan totaling $111 past due 90 days or more and still accruing interest at September 30, 2019. Additionally, credit card balances totaling $10 were past due 90 days or more and still accruing interest. There was one loan totaling $6 past due 90 days or more and still accruing interest at December 31, 2018.

During the nine months ended September 30, 2019, there were no loans that were modified to troubled debt restructurings. One previously disclosed troubled debt restructuring with a principal balance of $69 was paid in full during the nine months ended September 30, 2019.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2018:



	Number of Contracts	Pre-Modification Outstanding Recorded Investments		Post-Modification Outstanding Recorded Investments
September 30, 2018
1-4 Family Residential	1	$	1,254	$	1,254
Multi-family and Commercial Real Estate	1	$	661	$	585
Total	2	$	1,915	$	1,839

~~Table~~

One modification that occurred during the nine months ended September 30, 2018, consisted of ~~Contents~~an interest only monthly payment restructure and had no effect on the allowance for loan losses or interest income. The other modification was a restructure of five loans, including purchased credit impaired loans, in which a charge off occurred of $76, resulting in one remaining loan of $585.

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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 $22 past due 90 days or more and still accruing interest at June 30, 2019. There was one 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 six months of 2018:~~

Number of Contracts Pre-Modification Outstanding Recorded Investments Post-Modification Outstanding Recorded Investments
June 30, 2018
1-4 Family Residential 1
$ 1,254
$ 1,254
Total 1
$ 1,254
$ 1,254

The modification that occurred during the six months ended 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 were as follows at ~~June~~September 30, 2019 and December 31, 2018:

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

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



	September 30, 2019		December 31, 2018
Commercial, Industrial and Agricultural	$	—	$	63
Multi-family and Commercial Real Estate	220		233
Construction, Land Development and Farmland	1,030		1,958
1-4 Family Residential Real Estate	237		324
Consumer	—		18
Total outstanding balance	1,487		2,596
Less remaining purchase discount	246		300
Allowance for loan losses	—		—
Carrying amount, net of allowance	$	1,241	$	2,296

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

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



	2019			2018
Balance at January 1,	$	171		$	61
New loans purchased	—			261
Year-to-date settlements	(7		)	(151		)
Balance at March 31,	164			171

NOTE 4 - OTHER REAL ESTATE

At September 30, 2019 and December 31, 2018, the balance of other real estate owned includes $1,943 and $1,000, respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the properties. During the three and nine months ended September 30, 2019, $95 and $943, respectively, were added to other real estate owned. Additionally, at September 30, 2019, there were five real estate loans to four borrowers with related balances totaling $961, in the process of foreclosure.

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. As of September 30, 2019, only one parcel remains with a related book value of $1,000.

Expenses related to other real estate totaled $15 and ~~$13~~$30 for the ~~six~~three and nine months ended ~~June~~September 30, 2019, respectively, compared to $25 and $38 for the three and nine months ended September 30, 2018, respectively.

~~At June 30, 2019, there were four loans to one borrower, all cross-collateralized, with related balances totaling $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~~


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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

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

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)~~


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.

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.

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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 ~~June~~September 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)
September 30, 2019
Assets
U. S. Treasury and other U. S. government agencies	$	310	$	—	$	310	$	—
State and municipal	223,016		—		223,016		—
Corporate bonds	7,822		—		7,822		—
Mortgage backed securities	39,118		—		39,118		—
Asset backed securities	27,044		—		27,044		—
Interest rate swaps	—		—		—		—

Liabilities
Interest rate swaps	$	4,273	$	—	$	4,273	$	—

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

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

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 September 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)
June 30, 2019
Assets
U. S. Treasury and other U. S. government agencies $ 312
$ —
$ 312
$ —
State and municipal 220,614
—
220,614
—
Corporate bonds 3,019
—
3,019
—
Mortgage backed securities 37,508
—
37,508
—
Asset backed securities 28,920
—
28,920
—
Interest rate swaps 1
—
1
—

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

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

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



	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2019
Assets
Impaired loans	$	4,129	$	—	$	—	$	4,129
Other real estate owned	1,943		—		—		1,943

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

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

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

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

December 31, 2018
Assets
Impaired loans $ 370
$ —
$ —
$ 370
Other real estate owned 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 ~~June~~September 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.

~~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)~~

Carrying amounts and estimated fair values of financial instruments not reported at fair value at ~~June~~September 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)
Financial assets
Cash and due from banks $ 35,917
$ 35,917
$ 35,917
$ —
$ —
Federal funds sold 80
80
—
80
—
Loans, net 1,301,019
1,288,697
—
—
1,288,697
Mortgage loans held for sale 11,571
11,701
—
11,701
—
Accrued interest receivable 7,246
7,246
—
7,246
—
Restricted equity securities 11,488
11,488
—
11,488
—
Financial liabilities
Deposits $ 1,550,280
$ 1,551,492
$ —
$ —
$ 1,551,492
Accrued interest payable 967
967
—
967
—
Subordinate debentures 11,644
12,261
—
—
12,261
Federal Home Loan Bank advances 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)
September 30, 2019											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	$	—	$	—	$	51,247	$	51,247	$	51,247	$	—	$	—
Federal funds sold	371		371		—		371		—		73		73		—		73		—
Loans, net	1,220,184		1,206,574		—		—		1,206,574		1,338,392		1,326,932		—		—		1,326,932
Mortgage loans held for sale	15,823		15,871		—		15,871		—		16,757		17,052		—		17,052		—
Accrued interest receivable	8,214		8,214		—		8,214		—		7,488		7,488		—		7,488		—
Restricted equity securities	11,690		11,690		—		11,690		—		11,279		11,279		—		11,279		—
Financial liabilities
Deposits	$	1,437,903	$	1,434,652	$	—	$	—	$	1,434,652	$	1,610,633	$	1,612,749	$	—	$	—	$	1,612,749
Accrued interest payable	1,063		1,063		—		1,063		—		1,610		1,610		—		1,610		—
Subordinate debentures	11,603		11,522		—		—		11,522		11,665		12,357		—		—		12,357
Federal Home Loan Bank advances	57,498		57,434		—		—		57,434		3,928		3,954		—		—		3,954



December 31, 2018
Financial assets
Cash and due from banks	$	34,807	$	34,807	$	34,807	$	—	$	—
Federal funds sold	371		371		—		371		—
Loans, net	1,220,184		1,206,574		—		—		1,206,574
Mortgage loans held for sale	15,823		15,871		—		15,871		—
Accrued interest receivable	8,214		8,214		—		8,214		—
Restricted equity securities	11,690		11,690		—		11,690		—
Financial liabilities
Deposits	$	1,437,903	$	1,434,652	$	—	$	—	$	1,434,652
Accrued interest payable	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

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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 provided for the granting of stock options, for up to 625,000 shares of common stock to employees and organizers, and 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.~~options. As part of the Bank's reorganization into a holding company corporate structure in 2012, all 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~~, which permits the grant of awards with respect to up to 1,250,000 shares of Company common stock in the form of stock options. As part of the merger of Commerce Union Bank and ~~Reliant~~the Bank, all outstanding stock options of ~~Reliant~~the Bank were converted to stock options of Commerce Union Bancshares, Inc. (now known as "Reliant Bancorp, Inc.") under the A&R Plan.

Under the A&R Plan, stock option awards may be granted in the form of incentive stock options or non-statutory

stock options, and are generally exercisable for up to 10 years following the date such option awards are granted. Exercise

prices of incentive stock options must be equal to or greater than the fair market value of the common stock on the grant

date.

~~A summary of the activity in the A&R Plan for the six months ended June 30, 2019 is as follows:~~

Shares
Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
Outstanding at January 1, 2019 159,260
$ 16.72
6.04 years $ 1,146
Granted 1,000
$ 22.67

Exercised (26,706)
$ 13.14

Forfeited or expired (2,753)
$ 19.34

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 (2,847 ) $4.24
Forfeited (2,753 ) $4.89
Non-vested options at June 30, 2019 66,600
$5.36

~~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 6 - STOCK-BASED COMPENSATION (CONTINUED)~~

~~Stock Option Plan, Continued~~

~~As of June 30, 2019, there was $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 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 payable by reference to or based on or related to common stock.

Common Stock Options

A summary of stock option activity for the nine months ended September 30, 2019 is as follows:



	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	159,260	$	16.72	6.04 years	$	1,146
Granted	27,500	$	23.28
Exercised	(27,306)	$	13.15
Forfeited or expired	(2,753)	$	19.34
Outstanding at September 30, 2019	156,701	$	18.44	6.62 years	$	970
Exercisable at September 30, 2019	81,701	$	14.89	4.97 years	$	764



	Shares		Weighted Average Grant-Date Fair Value
Non-vested options at January 1, 2019	71,200		$5.28
Granted	27,500		$6.97
Vested	(20,947	)	$4.69
Forfeited	(2,753	)	$4.89
Non-vested options at September 30, 2019	75,000		$6.08

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 6 - STOCK-BASED COMPENSATION (CONTINUED)

As of September 30, 2019, there was $413 of unrecognized future compensation expense to be recognized related to stock options.

Restricted Stock Awards

The following table shows the activity related to non-vested restricted stock awards for the ~~six~~nine months ended ~~June~~September 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	8,000		21.94		9,500		22.01
Vested	—		—		(21,450	)	19.31
Forfeited	(7,750	)	23.25		(7,750	)	23.25
Non-vested shares at June 30, 2019	110,910		$	24.19
Non-vested shares at September 30, 2019					90,960		$	25.31

The non-vested restricted ~~shares~~stock awards vest over periods ranging from one to three years.

Restricted Stock Units

On July 23, 2019, 41,250 stock-settled restricted stock units were awarded to certain employees of Reliant Bancorp, Inc. and/or the Bank. Subject to certain special vesting and forfeiture rules set forth in the underlying award agreements, these restricted stock units generally will vest on the third anniversary of the award date and will be settled promptly after vesting. Also, on July 23, 2019, 6,500 stock-settled restricted stock units were awarded to members of the board of directors of Reliant Bancorp. Subject to certain special vesting and forfeiture rules set forth in the underlying award agreements, these restricted stock units generally will vest on the first anniversary of the award date and will be settled promptly after vesting. None of these employee or director restricted stock units have been forfeited or vested during the nine months ended September 30, 2019.

As of ~~June~~September 30, 2019, there was ~~$1,250~~$2,066 of unrecognized compensation cost related to non-vested restricted ~~share~~stock and restricted stock unit awards.

NOTE 7 - REGULATORY CAPITAL REQUIREMENTS

The Bank 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 ~~June~~September 30, 2019, the Bank meets all capital adequacy requirements to which 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 ~~June~~September 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 Federal Deposit Insurance Corporation (FDIC) approved final rules that substantially 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") 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~~SEPTEMBER 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.

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.

Capital amounts and ratios for the Company and the Bank (required) are presented below as of ~~June~~September 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
June 30, 2019
September 30, 2019
Company
Tier I leverage	$	168,218	9.81	%	$	68,590	4.000	%	$	85,738	5.000	%	$	171,789	9.85	%	$	69,762	4.00	%	$	87,203	5.00	%
Common equity tier 1	156,574		10.93	%	100,276		7.000	%	93,114		6.500	%	160,124		10.85	%	103,306		7.00	%	95,927		6.50	%
Tier I risk-based capital	168,218		11.75	%	121,690		8.500	%	114,531		8.000	%	171,789		11.64	%	125,447		8.50	%	118,068		8.00	%
Total risk-based capital	180,309		12.59	%	150,377		10.500	%	143,216		10.000	%	184,505		12.51	%	154,860		10.50	%	147,486		10.00	%

Bank
Tier I leverage	$	164,042	9.58	%	$	68,492	4.000	%	$	85,615	5.000	%	$	166,265	9.55	%	$	69,654	4.00	%	$	87,067	5.00	%
Common equity tier 1	164,042		11.48	%	100,020		7.000	%	92,875		6.500	%	166,265		11.29	%	103,082		7.00	%	95,719		6.50	%
Tier I risk-based capital	164,042		11.48	%	121,452		8.500	%	114,308		8.000	%	166,265		11.29	%	125,171		8.50	%	117,808		8.00	%
Total risk-based capital	176,133		12.33	%	150,029		10.500	%	142,885		10.000	%	178,981		12.15	%	154,623		10.50	%	147,260		10.00	%

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	4.00	%	$	81,347	5.00	%
Common equity tier 1	157,273		11.59	%	86,507		6.375	%	88,203		6.500	%	157,273		11.59	%	86,507		6.38	%	88,203		6.50	%
Tier I risk-based capital	168,876		12.44	%	106,905		7.875	%	108,602		8.000	%	168,876		12.44	%	106,905		7.88	%	108,602		8.00	%
Total risk-based capital	180,193		13.28	%	133,991		9.875	%	135,688		10.000	%	180,193		13.28	%	133,991		9.88	%	135,688		10.00	%

Bank
Tier I leverage	$	165,308	10.17	%	$	65,018	4.000	%	$	81,272	5.000	%	$	165,308	10.17	%	$	65,018	4.00	%	$	81,272	5.00	%
Common equity tier 1	165,308		12.19	%	86,451		6.375	%	88,146		6.500	%	165,308		12.19	%	86,451		6.38	%	88,146		6.50	%
Tier I risk-based capital	165,308		12.19	%	106,792		7.875	%	108,488		8.000	%	165,308		12.19	%	106,792		7.88	%	108,488		8.00	%
Total risk-based capital	176,625		13.02	%	133,961		9.875	%	135,657		10.000	%	176,625		13.02	%	133,961		9.88	%	135,657		10.00	%

NOTE 8 - EARNINGS PER SHARE

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


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018		2019		2018
Basic EPS Computation
Net income attributable to common shareholders	$	4,239	$	2,139	$	8,063	$	5,880	$	4,000	$	4,082	$	12,063	$	9,962
Weighted average common shares outstanding	11,196,898		11,396,829		11,300,095		11,389,634		11,104,918		11,406,753		11,247,921		11,378,755
Basic earnings per common share	$	0.38	$	0.19	$	0.71	$	0.52	$	0.36	$	0.36	$	1.07	$	0.88
Diluted EPS Computation
Net income attributable to common shareholders	$	4,239	$	2,139	$	8,063	$	5,880	$	4,000	$	4,082	$	12,063	$	9,962
Weighted average common shares outstanding	11,196,898		11,396,829		11,300,095		11,389,634		11,104,918		11,406,753		11,247,921		11,378,755
Dilutive effect of stock options, restricted shares and employee stock purchase plan	89,729		98,404		78,300		96,838		72,449		91,426		66,445		83,944
Adjusted weighted average common shares outstanding	11,286,627		11,495,233		11,378,395		11,486,472		11,177,367		11,498,179		11,314,366		11,462,699
Diluted earnings per common share	$	0.38	$	0.19	$	0.71	$	0.51	$	0.36	$	0.36	$	1.07	$	0.87

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 secondary market mortgage investors. The home equity lines of credit are typically sold to participating banks or other investor 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)

~~JUNE~~SEPTEMBER 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 September 30, 2019
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	13,910	$	154		$	—		$	14,064
Provision for loan losses	606		—			—			606
Noninterest income	1,375		1,377			8			2,760
Noninterest expense (excluding merger expense)	9,726		3,022			—			12,748
Merger expense	299		—			—			299
Income tax expense (benefit)	654		(97		)	—			557
Net income (loss)	4,000		(1,394		)	8			2,614
Noncontrolling interest in net loss of subsidiary	—		1,394			(8		)	1,386
Net income attributable to common shareholders	$	4,000	$	—		$	—		$	4,000


	Three Months Ended June 30, 2019										Three Months Ended September 30, 2018
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated		Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	13,703	$	110		$	—		$	13,813	$	13,295	$	171		$	—		$	13,466
Provision for loan losses	200		—			—			200		322		—			—			322
Noninterest income	1,473		1,235			(10		)	2,698		1,379		1,449			(51		)	2,777
Noninterest expense (excluding merger expense)	10,129		2,996			—			13,125		9,614		2,466			—			12,080
Merger expense	1		—			—			1		82		—			—			82
Income tax expense (benefit)	607		(106		)	—			501		574		(55		)	—			519
Net income (loss)	4,239		(1,545		)	(10		)	2,684		4,082		(791		)	(51		)	3,240
Noncontrolling interest in net loss of subsidiary	—		1,545			10			1,555		—		791			51			842
Net income attributable to common shareholders	$	4,239	$	—		$	—		$	4,239	$	4,082	$	—		$	—		$	4,082


	Three Months Ended June 30, 2018										Nine Months Ended September 30, 2019
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated		Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	13,190	$	214		$	—		$	13,404	$	40,986	$	352		$	—		$	41,338
Provision for loan losses	300		—			—			300		806		—			—			806
Noninterest income	1,299		993			(38		)	2,254		4,226		3,187			(17		)	7,396
Noninterest expense (excluding merger expense)	9,389		2,169			—			11,558		30,300		8,317			—			38,617
Merger expense	2,483		—			—			2,483		302		—			—			302
Income tax expense (benefit)	178		(63		)	—			115		1,741		(311		)	—			1,430
Net income (loss)	2,139		(899		)	(38		)	1,202		12,063		(4,467		)	(17		)	7,579
Noncontrolling interest in net loss of subsidiary	—		899			38			937		—		4,467			17			4,484
Net income attributable to common shareholders	$	2,139	$	—		$	—		$	2,139	$	12,063	$	—		$	—		$	12,063

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~JUNE~~SEPTEMBER 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										Nine Months Ended September 30, 2018
	Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated		Retail Banking		Residential Mortgage Banking			Elimination Entries			Consolidated
Net interest income	$	26,234	$	552		$	—		$	26,786	$	39,529	$	723		$	—		$	40,252
Provision for loan losses	437		—			—			437		759		—			—			759
Noninterest income	2,587		2,741			(83		)	5,245		3,966		4,190			(134		)	8,022
Noninterest expense (excluding merger expense)	18,840		4,703			—			23,543		28,454		7,169			—			35,623
Merger expense	2,660		—			—			2,660		2,742		—			—			2,742
Income tax expense (benefit)	1,004		(92		)	—			912		1,578		(147		)	—			1,431
Net income	5,880		(1,318		)	(83		)	4,479		9,962		(2,109		)	(134		)	7,719
Noncontrolling interest in net income of subsidiary	—		1,318			83			1,401		—		2,109			134			2,243
Net income attributable to common shareholders	$	5,880	$	—		$	—		$	5,880	$	9,962	$	—		$	—		$	9,962

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.

~~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 10 - DERIVATIVES (CONTINUED)~~

Interest Rate Swaps Designated as Cash Flow Hedges

Interest rate swaps with notional amounts totaling $60,000 as of ~~June~~September 30, 2019 were designated as cash flow hedges of certain 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 ~~June~~September 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		%	2.460		%
Weighted average maturity	3.97 years			3.75 years
Unrealized losses	$	2,955		$	3,328

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:~~

nine months ended September 30, 2019:


	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 Noninterest Income (Ineffective Portion)
June 30, 2019
September 30, 2019
Interest rate contracts	$	(1,802	)	$	—	$	—	$	(2,175	)	$	—	$	—

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

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

~~Table of Contents~~

~~RELIANT BANCORP, INC.~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 10 - DERIVATIVES (CONTINUED)

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



	September 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	$	532	$	10,000	$	174
Short-term interest bearing liabilities	50,000		2,796		50,000		979
Total included in other liabilities	$	60,000	$	3,328	$	60,000	$	1,153

Fair Value Hedges

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

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



Interest rate contracts	Location	September 30, 2019			September 30, 2018
Change in fair value on interest rate swaps hedging investments	Interest income	$	(1,382	)	$	950

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


	June 30, 2019				December 31, 2018				September 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	$	1,000	$	1	$	16,902	$	467	$	—	$	—	$	16,902	$	467

Total included in other assets	$	1,000	$	1	$	16,902	$	467	$	—	$	—	$	16,902	$	467

Included in other liabilities:
Interest rate swaps related to investments	19,605		621		4,203		30		19,605		945		4,203		30

Total included in other liabilities	$	19,605	$	621	$	4,203	$	30	$	19,605	$	945	$	4,203	$	30

NOTE 11 – INCOME TAXES

Income tax expense for the three and nine months ended September 30, 2019 totaled ~~$501 in the second quarter of 2019 as~~$557 and $1,430, respectively, compared to ~~$115 in the second quarter of 2018~~$519 and ~~$873 and $912~~$1,431, respectively, for the ~~six~~three and nine months ended ~~June~~September 30, ~~2019 and 2018, respectively.~~2018. The effective tax rate for the three and nine months ended ~~June~~September 30, 2019 was 17.6% and ~~2018 was 16%~~15.9%, respectively, compared to 13.8% and 9%15.6%, ~~respectively. The increase in the effective tax rate~~respectively, for the three and nine months ended ~~June~~September 30, ~~2019 can be attributed to a decrease in tax-exempt securities.~~2018. Merger expenses induring the ~~second quarter of~~nine months ended September 30, 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.~~

~~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 12 - BUSINESS COMBINATION

Effective January 1, 2018, Pioneer Merger Sub, Inc., a wholly owned subsidiary of Reliant Bancorp, Inc., merged with and into Community First, with Community First continuing as the surviving corporation, and immediately thereafter Community First merged with and into Reliant Bancorp, Inc., with Reliant Bancorp, Inc. continuing as the surviving corporation.

Pursuant to the merger agreement, each outstanding share of Community First common stock (except for certain excluded shares and dissenting shares) was converted into and 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 expanded and further diversified the Company's market area.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 12 - BUSINESS COMBINATION (CONTINUED)

The following table details the financial impact of the 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

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

~~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 12 - BUSINESS COMBINATION (CONTINUED)~~



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

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 Annual Report on Form 10-K for the year ended December 31, 2018 for additional information related to previously issued accounting standards updates.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

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~~noninterest 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 ~~$11,455~~$9,821 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 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.

~~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 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 is expected to be effective on January 1, ~~2021.~~2023. 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(Dollar amounts in thousands except per share amounts)

NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS

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 our financial statements.

~~ASU 2018-13, “Fair Value Measurement (Topic 820)~~

NOTE 14 - ~~Disclosure Framework-Changes to~~SUBSEQUENT EVENTS

ASC 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the ~~Disclosure Requirements for Fair Value Measurement.”~~ ~~ASU 2018-13 modifies~~balance sheet date but before financial statements are issued. Reliant Bancorp, Inc. evaluated all events or transactions that occurred after September 30, 2019 through 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~~date of 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 ourissued financial statements.

On October 7, 2019, Reliant Bancorp, Inc. entered into two additional interest rate swap transactions with a notional amount of $50,000 designated as cash flow hedges. These derivatives are intended to protect against the effects of changing interest rates on short-term funding.

On October 22, 2019, Reliant Bancorp, Inc. entered into a definitive agreement to acquire First Advantage Bancorp (“FABK”), the parent company for First Advantage Bank (“FAB”), located in Clarksville, Tennessee. The agreement provides for a cash and stock transaction valued at approximately $123,400, or $30.67 per share of FABK common stock, based on the closing price for Reliant Bancorp, Inc. common stock of $23.65 per share on October 22, 2019.

The definitive agreement provides for the merger of PG Merger Sub, Inc., with and into FABK with FABK to be the surviving company, followed by the merger of FABK with and into Reliant Bancorp, Inc. with Reliant Bancorp, Inc. to be the surviving company. Under the terms of the definitive agreement, shareholders of FABK will receive 1.17 shares of Reliant Bancorp, Inc. common stock and $3.00 cash (subject to adjustment under certain circumstances provided for in the definitive agreement) in exchange for each share of FABK common stock. The definitive agreement has been approved by the boards of directors of both Reliant Bancorp, Inc. and FABK. The parties currently expect to consummate the transaction in the second quarter of 2020, subject to the receipt of required regulatory and shareholder approvals, as well as the satisfaction of certain other customary closing conditions. The Bank and FAB have entered into a separate bank merger agreement providing for the merger of FAB with and into the Bank following the merger of Reliant Bancorp, Inc. and FABK. The combined bank will operate as the Bank. Current FABK board members William Lawson Mabry and Michael E. Wallace are expected to join Reliant Bancorp, Inc.'s Board of Directors upon completion of the transaction.

Other than what is noted above, no other events meeting the requirements of disclosure arose during the time period from September 30, 2019 through the date of the issued financial statements.

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 ~~six~~nine months ended ~~June~~September 30, 2019:

Net income attributable to common shareholders totaled ~~$8.1~~$12.1 million, or ~~$0.71~~$1.07 per diluted common share, for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to ~~$5.9~~$10.0 million, or ~~$0.51~~$0.87 per diluted common share, during same period in 2018.

Loans increased ~~$81.5~~$119.5 million for the ~~six~~nine months ended ~~June~~September 30, 2019.

Deposits increased ~~$112.4~~$172.7 million for the ~~six~~nine months ended ~~June~~September 30, 2019.

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

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 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.

Definitive Agreement to acquire the parent company of First Advantage Bank

On October 22, 2019, Reliant Bancorp, Inc. ("Reliant Bancorp"), the parent company for Reliant Bank (the "Bank"), entered into a definitive agreement to acquire First Advantage Bancorp (“FABK”), the parent company for First Advantage Bank (“FAB”), located in Clarksville, Tennessee. The agreement provides for a cash and stock transaction valued at approximately $123.4 million, or $30.67 per share of FABK common stock, based on the closing price for Reliant Bancorp common stock of $23.65 per share on October 22, 2019.

The definitive agreement provides for the merger of PG Merger Sub, Inc., with and into FABK with FABK to be the surviving company, followed by the merger of FABK with and into Reliant Bancorp with Reliant Bancorp to be the surviving company. Under the terms of the definitive agreement, shareholders of FABK will receive 1.17 shares of Reliant Bancorp common stock and $3.00 cash (subject to adjustment under certain circumstances provided for in the definitive agreement) in exchange for each share of FABK common stock. The definitive agreement has been approved by the boards of directors of both Reliant Bancorp and FABK. The parties currently expect to consummate the transaction in the second quarter of 2020, subject to the receipt of required regulatory and shareholder approvals, as well as the satisfaction of certain other customary closing conditions. The Bank and FAB have entered into a separate bank merger agreement providing for the merger of FAB with and into the Bank following the merger of Reliant Bancorp and FABK. The combined bank will operate as the Bank. Current FABK board members William Lawson Mabry and Michael E. Wallace are expected to join Reliant Bancorp’s Board of Directors upon completion of the transaction.

Definitive Agreement to acquire the parent company of Community Bank and Trust

On September 16, 2019, Reliant Bancorp entered into a definitive agreement to acquire Tennessee Community Bank Holdings, Inc. (“TCB Holdings”), the parent company for Community Bank & Trust (“CB&T”) located in Ashland City, Tennessee, in an approximately 50% stock and 50% cash transaction.

The definitive agreement provides for the merger of TCB Holdings with and into Reliant Bancorp, with Reliant Bancorp to be the surviving company. Under the terms of the definitive agreement, shareholders of TCB Holdings will receive 0.769 shares of Reliant Bancorp common stock (subject to adjustment under certain circumstances provided for in the definitive agreement) and $17.13 in cash in exchange for each share of TCB Holdings common stock. The 24,450 outstanding options to acquire TCB Holdings common stock are to be cashed out, which equates to additional consideration of approximately $0.40 million. Based on Reliant Bancorp's 20-day volume-weighted average closing price per share on September 16, 2019, of $23.06, this represents a total transaction value of approximately $37.2 million. The transaction value is likely to change due to fluctuations in the price of Reliant Bancorp's common stock, and the consideration payable to TCB Holdings shareholders is also subject to adjustment under certain circumstances provided for the Company's in the definitive agreement. The definitive agreement has been approved by the boards of directors of Reliant Bancorp, TCB Holdings, and CB&T. The parties currently expect to consummate the transaction in the first quarter of 2020, subject to the receipt of necessary regulatory approvals and the approval of the shareholders of TCB Holdings, as well as other customary closing conditions.

The Bank and CB&T have entered into a separate bank merger agreement providing for the merger of CB&T with and into the Bank following the merger of Reliant Bancorp and TCB Holdings. The combined bank will operate under the Reliant Bank name.

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, ~~Inc. ("Reliant Bancorp"), Reliant~~the Bank, ~~(the "Bank"),~~ Community First Trups Holding Company, which is wholly owned by Reliant Bancorp (“TRUPS”), Reliant Investment Holdings, LLC ("Holdings"), which is wholly owned by the Bank, and Reliant Mortgage Ventures, LLC ("RMV"), of which the Bank controls 51% of the governance rights (Reliant Bancorp, the Bank, TRUPS, Holdings, and RMV are, collectively, referred to herein as the “Company”). As described in the notes to our 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. ~~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 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 in arrears via additional capital contributions to RMV. As of ~~June~~September 30, 2019, RMV's cumulative losses to date totaled ~~$11,121.~~$12,542. RMV will have to generate net income of this amount before the ~~Company~~Bank will participate in future ~~cash flow~~income 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 (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~~is required to establish 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 and that are accounted for under ASC 310-20, the historical loss estimates are based on the historical losses experienced by the Bank for loans with similar characteristics as those acquired other than purchased credit-impaired loans. ~~We record~~The Bank records 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 ("allowance") 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~~nonaccrual 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 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 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~~NINE MONTHS ENDED~~JUNE~~SEPTEMBER 30, 2019 AND 2018

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

Effective January 1, 2018, Pioneer Merger Sub, Inc., a wholly owned subsidiary of Reliant Bancorp, merged with and into Community First, Inc. (“Community First”), with Community First continuing as the surviving corporation, and immediately thereafter Community First merged with and into Reliant Bancorp, with Reliant Bancorp continuing as the surviving corporation (such transactions collectively, the “Merger”). In connection with the Merger, each outstanding share of Community First common stock converted into the right to receive 0.481 shares of Reliant Bancorp common stock. After the Merger was completed, legacy Reliant Bancorp shareholders and legacy Community First shareholders owned approximately 78.9% and 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 approximately $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 after giving effect to purchase accounting;

increased total loans from $762.5 million to $1,075.5 million;

increased total deposits from $883.5 million to $1,316.9 million; and

expanded its employee base from 167 to 272 full time equivalent employees.

Earnings

Net income attributable to common shareholders amounted to ~~$4,239~~$4,000 and ~~$8,063,~~$12,063, or ~~$0.38~~$0.36 and ~~$0.71~~$1.07 per basic share, for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, compared to ~~$2,139~~$4,082 and ~~$5,880,~~$9,962, or ~~$0.19~~$0.36 and ~~$0.52~~$0.88 per basic share, for the same periods in 2018. Diluted net income attributable to common shareholders was ~~$0.38~~$0.36 and ~~$0.71 per share and $0.19 and $0.51~~$1.07 per share for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, compared to $0.36 and ~~June~~$0.87 per share for the three and nine months ended September 30, 2018, respectively. The major components contributing to the ~~increases~~change when compared to the prior year are ~~a decrease~~an increase of ~~6.5%~~7.3% and ~~1.3%~~1.4% in ~~non-interest~~noninterest expense for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, and an increase of ~~3.1%~~4.4% and ~~1.8%~~2.7% in net interest income for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, compared to the same periods in 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~~nine months ended ~~June~~September 30, 2019, and 2018 (dollars in thousands):

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
Interest earning assets
Loans $ 1,276,197
5.18
$ 16,178
$ 1,119,884
4.81
$ 13,393
$ 1,795
$ 989
$ 2,785
Loan fees —
0.25
782
—
0.24
673
109
—
109
Loans with fees 1,276,197
5.43
16,960
1,119,884
5.05
14,066
1,905
989
2,894
Mortgage loans held for sale 14,502
5.48
198
24,611
5.31
326
(196 ) 68
(128 )
Deposits with banks 30,342
1.53
116
36,550
1.21
110
(89 ) 95
6
Investment securities - taxable 77,405
3.04
587
67,647
2.69
453
70
64
134
Investment securities - tax-exempt 222,149
3.77
1,650
231,874
3.75
1,708
(134 ) 76
(58 )
Federal funds sold and other 13,308
5.46
181
11,441
5.85
167
73
(59 ) 14
Total earning assets 1,633,903
5.02
19,692
1,492,007
4.66
16,830
1,629
1,233
2,862
Nonearning assets 139,123
137,707

Total assets $ 1,773,026
$ 1,629,714

Interest bearing liabilities
Interest bearing demand 141,997
0.24
86
143,811
0.23
84
(6 ) 8
2
Savings and money market 374,406
1.13
1,051
357,475
0.64
574
28
449
477
Time deposits - retail 612,148
2.14
3,263
517,209
1.43
1,848
382
1,033
1,415
Time deposits - wholesale 169,956
2.61
1,106
92,197
1.53
351
411
344
755
Total interest bearing deposits 1,298,507
1.70
5,506
1,110,692
1.03
2,857
815
1,834
2,649
Federal Home Loan Bank advances 23,668
2.97
175
79,520
2.00
397
(1,044 ) 822
(222 )
Subordinated debt 11,634
6.83
198
11,556
5.97
172
1
25
26
Total borrowed funds 35,302
4.24
373
91,076
2.51
569
(1,043 ) 847
(196 )
Total interest-bearing liabilities 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 ($) 3.25
$ 13,813
3.52
$ 13,404
$ 1,857
$ (1,448 ) $ 409
Non-interest bearing deposits 218,512
(0.25 ) 219,860
(0.17 )
Other non-interest bearing liabilities 8,057
5,781

Stockholder's equity 212,648
202,305

Total liabilities and stockholders' equity $ 1,773,026
$ 1,629,714

Cost of funds 1.52
0.97

Net interest margin 3.57
3.74



	Three Months Ended September 30, 2019						Three Months Ended September 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	$	1,312,153	5.12		$	16,934	$	1,144,307	5.01		$	14,445	$	2,165		$	324		$	2,489
Loan fees	—		0.26		870		—		0.27		781		89			—			89
Loans with fees	1,312,153		5.38		17,804		1,144,307		5.28		15,226		2,254			324			2,578
Mortgage loans held for sale	18,271		5.71		263		22,464		5.19		294		(172		)	141			(31		)
Deposits with banks	33,410		1.96		165		24,570		1.53		95		39			31			70
Investment securities - taxable	73,115		2.98		549		70,389		2.33		414		16			119			135
Investment securities - tax-exempt	220,233		3.60		1,999		229,934		3.74		2,168		(89		)	(79		)	(169		)
Federal funds sold and other	12,300		5.03		156		12,760		5.75		185		(6		)	(23		)	(29		)
Total earning assets	1,669,482		4.98		20,937		1,504,424		4.85		18,382		2,042			513			2,555
Nonearning assets	136,973						139,972
Total assets	$	1,806,455					$	1,644,396
Interest bearing liabilities
Interest bearing demand	142,702		0.23		81		143,057		0.28		102		—			(21		)	(21		)
Savings and money market	350,440		1.10		973		339,487		0.77		657		22			294			316
Time deposits - retail	540,688		2.17		2,956		527,930		1.60		2,128		53			775			828
Time deposits - wholesale	294,750		2.52		1,872		87,262		1.88		414		1,275			183			1,458
Total interest bearing deposits	1,328,580		1.76		5,882		1,097,736		1.19		3,301		1,350			1,231			2,581
Federal Home Loan Bank advances	14,216		1.84		66		102,731		2.34		606		(433		)	(107		)	(540		)
Subordinated debt	11,655		6.77		199		11,577		6.75		197		1			1			2
Total borrowed funds	25,871		4.06		265		114,308		2.79		803		(431		)	(107		)	(538		)
Total interest-bearing liabilities	1,354,451		1.80		6,147		1,212,044		1.34		4,104		919			1,124			2,043
Net interest rate spread (%) / Net interest income ($)			3.18		$	14,790			3.51		$	14,278	$	1,123		$	(612	)	$	512
Noninterest bearing deposits	227,502		(0.26	)			221,107		(0.20	)
Other noninterest bearing liabilities	7,415						7,344
Stockholder's equity	217,087						203,901
Total liabilities and stockholders' equity	$	1,806,455					$	1,644,396
Cost of funds			1.54						1.14
Net interest margin			3.51						3.77


	Six Months Ended June 30, 2019						Six Months Ended June 30, 2018						Change									Nine Months Ended September 30, 2019						Nine Months Ended September 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	$	1,257,373	5.17		$	31,641	$	1,104,025	4.81		$	26,268	$	3,492		$	1,881		$	5,373		$	1,275,834	5.15		$	49,181	$	1,117,743	4.88		$	40,770	$	6,045		$	2,365		$	8,410
Loan fees	—		0.24		1,488		—		0.25		1,356		132			—			132			—		0.25		2,358		—		0.26		2,137		221			—			221
Loans with fees	1,257,373		5.41		33,129		1,104,025		5.06		27,624		3,624			1,881			5,505			1,275,834		5.40		51,539		1,117,743		5.14		42,907		6,266			2,365			8,631
Mortgage loans held for sale	12,635		5.60		351		31,923		5.10		807		(667		)	211			(456		)	14,534		5.65		614		28,636		5.14		1,101		(648		)	161			(487		)
Deposits with banks	29,000		1.63		234		43,378		1.28		276		(189		)	147			(42		)	30,487		1.75		399		36,837		1.35		371		(98		)	126			28
Investment securities - taxable	74,948		2.93		1,090		70,162		2.76		960		68			62			130			74,330		2.95		1,639		70,276		2.61		1,374		81			184			265
Investment securities - tax-exempt	225,305		3.82		3,368		225,060		3.66		3,212		4			152			156			223,596		3.75		6,264		226,601		3.69		6,258		(120		)	126			6
Federal funds sold and other	12,981		5.64		363		10,688		5.91		313		89			(39		)	50			12,751		5.44		519		11,389		5.85		498		72			(51		)	21
Total earning assets	1,612,242		5.01		38,535		1,485,236		4.63		33,192		2,929			2,414			5,343			1,631,532		5.00		60,974		1,491,482		4.71		52,509		5,554			2,911			8,465
Nonearning assets	139,964						136,163															138,926						137,606
Total assets	$	1,752,206					$	1,621,399														$	1,770,458					$	1,629,088
Interest bearing liabilities
Interest bearing demand	145,304		0.27		197		149,065		0.22		161		(11		)	47			36			144,427		0.26		278		147,022		0.24		263		(7		)	22			15
Savings and money market	387,296		1.14		2,181		351,058		0.60		1,052		116			1,013			1,129			374,876		1.12		3,154		347,184		0.66		1,709		149			1,296			1,445
Time deposits - retail	594,805		2.10		6,184		516,816		1.37		3,512		589			2,083			2,672			576,568		2.12		9,139		520,717		1.45		5,640		659			2,840			3,499
Time deposits - wholesale	138,466		2.56		1,756		93,970		1.47		683		418			655			1,073			191,133		2.60		3,713		91,466		1.60		1,097		1,662			954			2,616
Total interest bearing deposits	1,265,871		1.64		10,318		1,110,909		0.98		5,408		1,112			3,798			4,910			1,287,004		1.69		16,284		1,106,389		1.05		8,709		2,463			5,112			7,575
Federal Home Loan Bank advances and other	40,101		2.78		552		74,846		1.80		669		(729		)	612			(117		)	31,378		2.28		534		84,176		2.03		1,275		(971		)	230			(741		)
Subordinated debt	11,634		6.78		391		11,546		5.75		329		2			60			62			11,634		6.78		590		11,556		6.09		526		4			60			64
Total borrowed funds	51,735		3.68		943		86,392		2.33		998		(727		)	672			(55		)	43,012		3.49		1,124		95,732		2.52		1,801		(967		)	290			(677		)
Total interest-bearing liabilities	1,317,606		1.72		11,261		1,197,301		1.08		6,406		385			4,470			4,855			1,330,016		1.75		17,408		1,202,121		1.17		10,510		1,496			5,402			6,898
Net interest rate spread (%) / Net interest income ($)			3.29		$	27,274			3.55		$	26,786	$	2,544		$	(2,056	)	$	488				3.25		$	43,566			3.54		$	41,999	$	4,058		$	(2,491	)	$	1,567
Non-interest bearing deposits	214,838		(0.24	)			216,237		(0.11	)
Other non-interest bearing liabilities	8,698						5,992
Noninterest bearing deposits																						219,106		(0.25	)			217,957		(0.18	)
Other noninterest bearing liabilities																						8,229						6,464
Stockholder's equity	211,064						201,869															213,107						202,546
Total liabilities and stockholders' equity	$	1,752,206					$	1,621,399														$	1,770,458					$	1,629,088
Cost of funds			1.48						0.97															1.50						0.99
Net interest margin			3.60						3.76															3.57						3.76

Table Assumptions—Average loan balances are inclusive of nonperforming loans. ~~Yields~~Interest income and yields computed on tax-exempt instruments are on a tax equivalent basis including a state tax credit included in loan yields of $300 and ~~$600~~$900 for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, and ~~$25~~$350 and ~~$50~~$400 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~~nine months ended ~~June~~September 30, 2019, we recorded net interest income on a tax equivalent basis of approximately ~~$13.8 million~~$14,790 and ~~$27.3 million,~~$43,566, respectively, which resulted in a net interest margin (net interest income divided by the average balance of interest earning assets) of ~~3.57%~~3.51% and ~~3.60%~~3.57%, respectively. For the three and ~~six~~nine months ended ~~June~~September 30, 2018, we recorded net interest income on a tax equivalent basis of approximately ~~$13.4 million~~$14,278 and ~~$26.8 million,~~$41,999, respectively, which resulted in a net interest margin of ~~3.74%~~3.77% and 3.76%, respectively. The main factor contributing to the slight increase in our net interest income was an increase in our loans and the related yield. Our 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 ~~13.9%~~14.1% for the ~~first six~~nine months ofended September 30, 2019 compared to the ~~first six~~nine months ofended September 30, 2018. Our combined loan and loan fee yield increased from ~~5.06%~~5.14% to ~~5.41%~~5.40% for the ~~first 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~~nine months ended ~~June~~September 30, 2019 compared to the same period in 2018. The increased yield for the ~~six~~nine months ended ~~June~~September 30, 2019 is primarily attributable to a 2823 basis points increase in contractual loan yields including adjustment for purchase accounting accretion and ~~an eight~~a four basis points increase in state tax credits, and partially offset by a one basis point decrease in loan fees. For the three months ended September 30, 2019, our combined loan and loan fee yield increased from 5.28% to 5.38% compared to the same period in 2018. The increased yield for the three months ended ~~June~~September 30, 2019 is primarily attributable to a 2614 basis points increase in contractual loan yields including purchase accounting accretion, partially offset by a ~~six~~three basis points ~~increase~~decrease in state tax credits ~~a two basis points increase in accretion~~ and a one basis point ~~increase~~decrease in loan fees.

Our tax equivalent yield on tax-exempt investments ~~increased to 3.77%~~was 3.60% and ~~3.82%~~3.75% for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, ~~from 3.75%~~compared to 3.74% and ~~3.66%~~3.69% for the same periods in 2018, respectively. ~~This increase~~The year-over-year change was primarily driven by the restructuring of our investment ~~restructurings~~portfolio in the first ~~and second quarters~~half of ~~2019.~~2019 while the reduction of interest income for the three months ended September 30, 2019 is associated with our variable rate securities. Our year-over-year average tax-exempt investment volume remained relatively flat for the ~~first six~~nine months ofended September 30, 2019 compared to the same period in 2018. Our year-over-year average taxable securities volume increased by ~~6.8%~~5.8% for the ~~first six~~nine months ofended September 30, 2019 compared to the same period in 2018.

Our cost of funds increased to ~~1.52%~~1.54% and ~~1.48%~~1.50% from ~~0.97%~~1.14% and ~~0.97%~~0.99% for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, compared to the same periods in 2018. The increase in our cost of funds was primarily driven by an across the board increase in ~~all~~the cost of our interest bearing deposits and other interest bearing liabilities as well as an increase in ~~our~~average wholesale deposits from ~~28.6%~~6.9% of our average total deposit portfolio at ~~March 31, 2019~~September 30, 2018 to ~~30.3%~~12.7% at ~~June~~September 30, 2019. We experienced a ~~0.6%~~2.9% and 0.5% increase in our average ~~non-interest~~noninterest bearing deposits for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, 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 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 we anticipate, the shorter durations of our non-core funding sources are expected to contribute to interest 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 and investments repricing and (ii) the increased expenses to be incurred on our interest rate swaps.

Provision for Loan Losses

The provision for loan losses is determined by management as the amount to be added to the allowance for loan losses after net recoveries have been added bringing the allowance to a level which, in management’s best estimate, is necessary to absorb inherent losses within the existing loan portfolio.

Based upon our evaluation of the loan portfolio, we believe at September 30, 2019 the allowance for loan losses to be adequate to absorb our estimate of probable losses existing in the loan ~~portfolio at June 30, 2019.~~portfolio. 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 a provision of ~~$200~~$606 and $806 for loan losses for ~~each of~~ the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, compared to ~~$300~~$322 and ~~$437 for loan losses recorded~~$759 for the three and ~~six~~nine months ended ~~June~~September 30, 2018, respectively. ~~Our~~The increase in 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~~expense for the three months and ~~six~~nine months ended ~~June~~September 30, ~~2019. Additionally, four out~~2019 can be primarily attributed to a growing loan portfolio. Also, a portion of the provision expense for the three months ended September 30, 2019 was used to establish a specific reserve, primarily, for one $5,000 lending relationship that experienced credit deterioration and was determined by management to be impaired. Management believes an adequate reserve has been established for the impaired credit. The Company has experienced a net recovery five of the previous six quarters that have ~~ended with net recoveries.~~positively impacted provision expense during the first nine months of 2019. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Balance Sheets at ~~June~~September 30, 2019 and December 31, 2018 - Allowance for Loan Losses” included herein for further analysis of the provision for loan losses.

~~Non-Interest~~

Noninterest Income

Our ~~non-interest~~noninterest income is composed of several components, some of which vary significantly between periods. The following is a summary of our ~~non-interest~~noninterest income for the three and ~~six~~nine months ended ~~June~~September 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 %


	Six Months Ended June 30,				Dollar Increase			Percent Increase		Three Months Ended September 30,				Percent Increase		Nine Months Ended September 30,				Percent Increase
	2019		2018		(Decrease)			(Decrease)		2019		2018		(Decrease)		2019		2018		(Decrease)
Non-Interest Income
Noninterest Income
Service charges and fees	$	1,820	$	1,671	$	149		8.9	%	$	976	$	833	17.2	%	$	2,796	$	2,504	11.7	%
Gains on mortgage loans sold, net										1,385		1,399		(1.0	)%	3,170		4,061		(21.9	)%
Securities gains, net	306		25		281			1,124.0	%	—		18		(100.0	)%	306		43		611.6	%
Gains on mortgage loans sold, net	1,785		2,662		(877		)	(32.9	)%
Gain on sale of other real estate	—		109		(109		)	(100.0	)%	—		150		(100.0	)%	—		259		(100.0	)%
Gain (loss) on disposal of premises and equipment										—		16		(100.0	)%	—		16		(100.0	)%
Other noninterest income:
Bank-owned life insurance	555		600		(45		)	(7.5	)%	283		293		(3.4	)%	838		893		(6.2	)%
Brokerage revenue	20		85		(65		)	(76.5	)%	13		7		85.7	%	33		91		(63.7	)%
Miscellaneous noninterest income	150		93		57			61.3	%	103		61		68.9	%	253		155		63.2	%
Total other non-interest income	725		778		(53		)	(6.8	)%
Total non-interest income	$	4,636	$	5,245	$	(609	)	(11.6	)%
Total other noninterest income										399		361		10.5	%	1,124		1,139		(1.3	)%
Total noninterest income										$	2,760	$	2,777	(0.6	)%	$	7,396	$	8,022	(7.8	)%

The most significant reasons for the changes in total ~~non-interest~~noninterest income during the three and ~~six~~nine months ended ~~June~~September 30, 2019 compared to the same periods in 2018 are the fluctuation in gains on mortgage loans sold, net, gains on sale of other real estate, and the gains on securities transactions. These and other factors impacting ~~non-interest~~noninterest 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 ~~4.0%~~17.2% and 11.7% increase for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, was driven by an increase in our 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 ~~six~~nine months ended ~~June~~September 30, 2019, the Company sold securities classified as available for sale totaling $52,434 with a gain of $306. During the ~~six~~nine months ended ~~June~~September 30, 2018, the Company sold securities classified as available for sale totaling ~~$92,991~~$100,737 with a gain of ~~$25.~~$43.

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 RMV’s products in the secondary markets. Gains on mortgage loans sold, net, amounted to ~~$1,225~~$1,385 and ~~$1,785~~$3,170, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019 ~~respectively,~~ compared to ~~$957~~$1,399 and ~~$2,662~~$4,061, respectively, for the same periods in the prior year. The decrease in gains for the nine months ended September 30, 2019 when compared to 2018 is primarily driven by an initial bulk sale of first lien HELOCs upon signing an agreement with an investor, which included several months of production, that netted more than $600 in gains. 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~~nine months ended ~~June~~September 30, 2019, there was no gain or loss due to the sale of other real estate compared to a gain of ~~$20~~$150 and ~~$109~~$259, respectively, in the same periods in ~~2018, respectively.~~2018.

~~Non-interest~~Noninterest income also includes appreciation in the cash surrender value of bank-owned life insurance, which was ~~$277~~$283 and ~~$555~~$838, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019 ~~respectively,~~ compared to ~~$298~~$293 and ~~$600~~$893, respectively, for the same periods in ~~2018, respectively.~~2018. The decrease relates to the introductory rate ending from our last 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 fluctuates based on assets under management.~~

~~Non-Interest~~Noninterest Expense

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


	Three Months Ended June 30,				Dollar Increase			Percent Increase		Three Months Ended September 30,					Percent Increase		Nine Months Ended September 30,				Percent Increase
	2019		2018		(Decrease)			(Decrease)		2019			2018		(Decrease)		2019		2018		(Decrease)
Non-Interest Expense
Noninterest Expense
Salaries and employee benefits	$	7,706	$	6,613	$	1,093		16.5	%	$	7,634		$	6,913	10.4	%	$	22,605	$	20,480	10.4	%
Occupancy	1,358		1,210		148			12.2	%	1,359			1,234		10.1	%	4,069		3,673		10.8	%
Information technology	1,575		1,249		326			26.1	%	1,553			1,315		18.1	%	4,538		3,913		16.0	%
Advertising and public relations	275		141		134			95.0	%	387			183		111.5	%	916		413		121.8	%
Audit, legal and consulting	690		816		(126		)	(15.4	)%	350			588		(40.5	)%	1,836		2,027		(9.4	)%
Federal deposit insurance	249		224		25			11.2	%	(96		)	210		(145.7	)%	348		630		(44.8	)%
Merger expenses	1		2,483		(2,482		)	(100.0	)%	299			82		264.6	%	302		2,742		(89.0	)%
Other operating	1,272		1,305		(33		)	(2.5	)%	1,561			1,637		(4.6	)%	4,305		4,487		(4.1	)%
Total non-interest expense	$	13,126	$	14,041	$	(915	)	(6.5	)%
Total noninterest expense										$	13,047		$	12,162	7.3	%	$	38,919	$	38,365	1.4	%

Six Months Ended June 30,
Dollar
Increase
Percent
Increase
2019 2018 (Decrease) (Decrease)
Non-Interest Expense
Salaries and employee benefits $ 14,971
$ 13,567
$ 1,404
10.3 %
Occupancy 2,710
2,439
271
11.1 %
Information technology 2,985
2,598
387
14.9 %
Advertising and public relations 529
230
299
130.0 %
Audit, legal and consulting 1,486
1,439
47
3.3 %
Federal deposit insurance 444
420
24
5.7 %
Merger expenses 3
2,660
(2,657 ) (99.9 )%
Other operating 2,744
2,850
(106 ) (3.7 )%
Total non-interest expense $ 25,872
$ 26,203
$ (331 ) (1.3 )%

~~The most significant reason for the decrease in total non-interest~~Noninterest expense ~~of $915 and $331,~~increased by $885, or ~~6.5% and 1.3%~~7.3%, for the three ~~and six~~ months ended ~~June~~September 30, 2019 ~~respectively,~~due in large part to an increase in salaries and employee benefits offset in part by declines in audit, legal and consulting fees as well as FDIC deposit insurance costs during the period. Noninterest expense for the nine months ended September 30, 2019 had an increase of $554, or 1.4%, and is similarly due in large part to ~~merger expenses~~an increase in ~~2018~~salaries and isemployee benefits that has been partially offset by a $2,440 decrease in merger expenses. Both the three and nine month periods ended September 30, 2019 have been impacted by RMV's build out of a correspondent mortgage line-of-business that has resulted in adds to staff, additional ~~staffing for RMV~~vendor relationships and ~~opening our new branches~~investments in ~~Murfreesboro and Chattanooga as well as our investment in revenue producers.~~technology. These and other factors impacting ~~non-interest~~noninterest expense are discussed further below.

Salaries and employee benefits increased by ~~$1,093~~$721 and ~~$1,404, or 16.5% and 10.3%,~~$2,125 for the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, or 10.4%, for both of these periods compared to the same periods in 2018. This increase is attributable mainly to the increased staff for RMV, due in part, to their build out of a correspondent mortgage line-of-business, as well as our staffing of our ~~new~~de novo branches in Murfreesboro during the third quarter of 2018 and Chattanooga in the fourth quarter of 2018 and other investments in revenue producers.

~~Certain of our facilities are leased while there are others that we own. Primarily, occupancy~~Occupancy costs increased ~~$148~~$125 and ~~$271,~~$396, or ~~12.2%~~10.1% and ~~11.1%~~10.8%, during the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively, when compared to the same periods in 2018 due to the ~~lease for~~commencement of leases during the period. During the third and fourth quarters of 2018, respectively, we opened the Murfreesboro ~~branch, which opened in the third quarter of 2018, the lease~~and Chattanooga branches. Additionally, we added leases for ~~the Chattanooga branch, which opened in the fourth quarter of 2018, the lease~~mortgage production offices in Memphis, ~~for a mortgage location,~~Chattanooga and ~~the leases of~~ two ~~mortgage locations~~ in Little Rock, Arkansas.

Information technology costs increased by ~~$326~~$238 and ~~$387,~~$625, or ~~26.1%~~18.1% and ~~14.9%~~16.0%, respectively, when comparing the three and ~~six~~nine months ended ~~June~~September 30, 2019 to the comparable periods in 2018. This increase is mainly attributable to increased costs due to increasing volume of accounts and transactions as well as our continued investment in information security and other ~~technology.~~technology, and our increase in locations mentioned in the previous paragraph.

Advertising and public relations costs increased by ~~$134~~$204 and ~~$299,~~$503, or ~~95.0%~~111.5% and ~~130.0%~~121.8%, respectively, when comparing the three and ~~six~~nine months ended ~~June~~September 30, 2019 to the same periods in 2018. Increased costs were primarily attributable to ~~an upsurge in~~increased promotional expenses and advertising for RMV, additional donation and sponsorship commitments, and expenses associated with the launch of a branding initiative.

Audit, legal and consulting costs decreased by ~~$126~~$238 and ~~increased by $47,~~$191, or 40.5% and 9.4%, respectively, ~~or 15.4% and 3.3%,~~ when comparing the three and ~~six~~nine months ended ~~June~~September 30, 2019 to the same periods in 2018. These fluctuations are mainly attributable to the fluctuation of legal and consulting fees incurred ~~in connection with~~by RMV.

Our ~~Federal Deposit Insurance Corporation ("FDIC")~~FDIC deposit insurance 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 ~~increased~~decreased by ~~$25~~$306 and ~~$24,~~$282, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019, compared to the same periods in 2018. This ~~increase~~decrease is primarily the result of our ~~increase~~small bank assessment credit received in ~~deposits.~~the third quarter of 2019.

Merger related expenses increased by 264.6% and decreased by ~~100.0% and 99.9%~~89.0%, respectively, to $1$299 and $3$302 for the three and ~~six~~nine months ended ~~June~~September 30, 2019 when compared to the same periods in 2018. These costs are considered one time expenses which for 2019 are associated with the definitive agreement to acquire TCB Holdings and for 2018 are associated with the Merger. All of the costs associated with the Merger ~~and most of these expected expenses~~ have been incurred at this point. We expect merger expenses to increase in the fourth quarter of 2019 as compared to the third quarter of 2019 due to our entering into definitive agreements to acquire TCB Holdings and FABK during the third and fourth quarters of 2019, respectively.

Other operating expenses decreased by ~~$33~~$76 and ~~$106~~$182, or ~~2.5%~~4.6% and ~~3.7%~~4.1%, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2019, compared to the same periods in 2018 mainly due to a $196 lower of cost or market adjustment for mortgage loans held for sale in 2018 compared to none in 2019 and partially offset by the ~~decrease~~increase in ~~loan-related expenses such as processing costs based on volume~~travel and ~~a decrease~~entertainment expense in ~~recruiting expenses.~~connection with RMV.

Income Taxes

During the three and ~~six~~nine months ended ~~June~~September 30, 2019, we recorded consolidated income tax expense of ~~$501~~$557 and ~~$873~~$1,430, respectively, compared to ~~$115~~$519 and ~~$912~~$1,431, respectively, for the three and ~~six~~nine months ended ~~June~~September 30, 2018. The Company files separate federal tax returns for the mortgage banking ~~operations~~segment and ~~banking operations.~~bank segment. The taxable income or losses of the mortgage banking operations are included in the respective returns of the Bank and non-controlling member for federal purposes.

Our income tax expense attributable to shareholders for the three and ~~six~~nine months ended ~~June~~September 30, 2019, reflects an effective income tax rate of ~~12.5%~~14.1% and ~~11.9%~~12.6%, respectively (exclusive of a tax benefit from our mortgage banking operations of ~~$106~~$97 and ~~$214~~$311 for the three and nine months ended September 30, 2019, respectively, on pre-tax losses of ~~$1,661~~$1,483 and ~~$3,312)~~$4,795 for the three and nine months ended September 30, 2019, respectively), compared to ~~7.7%~~12.3% and ~~14.6%~~13.7%, respectively, for the same period in 2018 (exclusive of a tax benefit of ~~$63~~$55 and ~~$92~~$147, respectively, on pre-tax losses of ~~$1,000~~$897 and ~~$1,493~~$2,390, respectively, from our mortgage banking operations for the comparable periods of 2018). ~~Our tax rate for the three and six months ended June 30, 2019, was favorably influenced by the increase in state tax credits of $275 per quarter.~~ Additionally, our effective tax rate for the three months ended ~~June~~September 30, 2019 is higher than the same period in 2018 primarily due to a state tax credit for a loan booked in the third quarter of 2018 from the Community Investment Tax Credit Program as well as a decrease in the proportion of our tax-exempt income to total income. Our effective tax rate for the nine months ended September 30, 2019 was lower than the same period in 2018 primarily due to the large amount of 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 RMV. ~~the~~The Bank has a 51% voting interest in this ~~venture. Under~~venture, but under the terms of the related operating agreement, the non-controlling member receives 70% of the ~~cash flow distributions~~distribution of ~~the mortgage venture,~~RMV and the Bank receives 30% of any ~~cash flow distributions,~~distribution, after the non-controlling member recovers its aggregate capital ~~contributions to the venture.~~contributions. The non-controlling member is required to fund ~~the mortgage venture's~~RMV's losses, in arrears, via additional capital ~~contributions to the mortgage venture.~~contributions. The venture had a net loss of ~~$1,555~~$1,386 and ~~$3,098~~$4,484, respectively, for the three and ~~six~~

nine months ended ~~June~~September 30, 2019 compared to a net loss of ~~$937~~$842 and ~~$1,401~~$2,243, respectively, for the same periods in 2018. The ~~increase in~~increased loss for the three and ~~six~~nine months ended ~~June~~September 30, 2019 when compared to the same periods in 2018 is mainly attributable to the increase in salaries and benefits due to increased ~~staff,~~staffing levels, increased occupancy costs due to the opening of new locations, expenses associated with launching the correspondent mortgage group and consulting and advertising fees previously mentioned. These ~~amounts~~expenses are included in our consolidated results. Also, see Note 9 to our consolidated financial statements for segment reporting.

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

Overview

The Company’s total assets were ~~$1,794,248~~$1,852,487 at ~~June~~September 30, 2019 and $1,724,338 at December 31, 2018. ~~Our assets~~Assets increased by ~~4.1%~~7.4% from December 31, 2018 to ~~June~~September 30, ~~2019. The increase was substantially attributable~~2019, primarily due to ~~the~~loan growth ~~in net loans during the period~~ of ~~$80.8 million,~~$118,208, or ~~6.6%, discussed further below. This increase was partially offset by the decline in investment of $5,950 ,or 2.0%, and mortgage loans held for sale by $4.3 million, or 26.9%~~9.7%. ~~The Company’s total~~Total liabilities were ~~$1,580,305~~$1,632,835 at ~~June~~September 30, 2019 and $1,515,924 at December 31, 2018, an increase of ~~4.2%~~7.7%. The increase in liabilities from December 31, 2018 to ~~June~~September 30, 2019, was substantially attributable to the increase in deposits of ~~$112.4 million,~~$172,730, or ~~7.8%~~12.0% ,and the increase was partially offset by the decrease in Federal Home Loan Bank ~~(FHLB)~~("FHLB") advances of ~~$46 million~~$53,570, or ~~80.7%~~93.2%, during the period. These and other components of our balance sheets are discussed further below.

Loans

Lending-related income is the 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 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. We have expanded our Middle Tennessee footprint into Maury and Hickman 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 only loan production offices. Total loans, net, at ~~June~~September 30, 2019, and December 31, 2018, were ~~$1,301,019~~$1,338,392 and $1,220,184, respectively. This represented an increase of ~~6.6%~~9.7% from December 31, 2018 to ~~June~~September 30, 2019.

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


	June 30,					December 31,
	2019					2018					September 30, 2019					December 31, 2018
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
Commercial, Industrial and Agricultural	$	233,312		17.8	%	$	213,850		17.4	%	$	231,935		17.2	%	$	213,850		17.4	%
Real estate:
1-4 Family Residential	233,229			17.8	%	225,863			18.3	%	236,332			17.5	%	225,863			18.3	%
1-4 Family HELOC	94,436			7.2	%	88,112			7.2	%	93,176			6.9	%	88,112			7.2	%
Multifamily and Commercial	481,973			36.7	%	447,840			36.4	%	520,297			38.5	%	447,840			36.4	%
Construction, Land Development and Farmland	237,421			18.1	%	220,801			17.9	%	238,082			17.6	%	220,801			17.9	%
Consumer	18,881			1.4	%	20,495			1.7	%	17,448			1.3	%	20,495			1.7	%
Other	13,338			1.0	%	14,106			1.1	%	13,252			1.0	%	14,106			1.1	%
	1,312,590			100.0	%	1,231,067			100.0	%	1,350,522			100.0	%	1,231,067			100.0	%
Less:
Deferred loan fees (costs)	(95		)			(9		)			(161		)			(9		)
Allowance for possible loan losses	11,666					10,892					12,291					10,892

Loans, net	$	1,301,019				$	1,220,184				$	1,338,392				$	1,220,184

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


	June 30, 2019		September 30, 2019

Commercial, Industrial and Agricultural	$	—	$	—
Real estate:
1-4 Family Residential	315		237
1-4 Family HELOC	—		—
Multifamily and Commercial	224		220
Construction, Land Development and Farmland	1,037		1,030
Consumer	—		—
Other	—		—
Total gross PCI loans	1,576		1,487
Less:
Remaining purchase discount	272		246
Allowance for possible loan losses	—		—

Loans, net	$	1,304	$	1,241

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 ~~$233,312~~$231,935 at ~~June~~September 30, 2019, increased ~~9.1%~~8.5% compared to $213,850 at December 31, 2018.

Real estate loans comprised ~~79.8%~~80.5% of the loan portfolio at ~~June~~September 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 ~~4.4%~~4.9% from December 31, 2018 to ~~June~~September 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 ~~$481,973~~$520,297 at ~~June~~September 30, 2019, increased ~~7.6%~~16.2% 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, credit cards, automobile 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 ~~June~~September 30, 2019, of ~~7.9%~~14.9%.

Other loans consist mainly of loans to states and political subdivisions and loans to other depository institutions and experienced a decrease of ~~5.4%~~6.1% from December 31, 2018 to ~~June~~September 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 ~~June~~September 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	$	443,231	$	561,665	$	307,694	$	1,312,590	$	436,644	$	581,508	$	332,370	$	1,350,522

Fixed interest rate							$	772,010							$	770,407
Variable interest rate							540,580								580,115
Total							$	1,312,590							$	1,350,522

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 ~~June~~September 30, 2019, the allowance for loan losses was ~~$11,666~~$12,291 compared to $10,892 at December 31, 2018. The allowance for loan losses as a percentage of total loans was ~~0.89%~~0.91% at ~~June~~September 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


	June 30, 2019			June 30, 2018			September 30, 2019			September 30, 2018
Beginning Balance, January 1, 2019 and 2018	$	10,892		$	9,731		$	10,892		$	9,731
Loans charged off:
Commercial, Industrial and Agricultural	(168		)	(308		)	(170		)	(308		)
Real estate:
1-4 Family Residential	(17		)	(8		)	(29		)	(36		)
1-4 Family HELOC	—			(6		)	—			(6		)
Multifamily and Commercial	—			—			—			(76		)
Construction, Land Development and Farmland	—			(140		)	—			(144		)
Consumer	(21		)	(24		)	(37		)	(24		)
Other	(13		)	(22		)	(34		)	(37		)
Total loans charged off	(219		)	(508		)	(270		)	(631		)
Recoveries on loans previously charged off:
Commercial, Industrial and Agricultural	294			425			342			530
Real estate:
1-4 Family Residential	216			11			220			11
1-4 Family HELOC	11			5			11			7
Multifamily and Commercial	59			3			62			215
Construction, Land Development and Farmland	201			44			—			44
Consumer	12			18			28			29
Other	—			3			200			3
Total loan recoveries	793			509			863			839
Net recoveries (charge-offs)	574			1			593			208
Provision for loan losses	200			437			806			759
Total allowance at end of period	$	11,666		$	10,169		$	12,291		$	10,698
Gross loans at end of period ⁽¹⁾	$	1,312,590		$	1,142,451		$	1,350,522		$	1,194,198
Average gross loans ⁽¹⁾	$	1,257,373		$	1,104,025		$	1,275,834		$	1,117,743
Allowance to total loans	0.89		%	0.89		%	0.91		%	0.90		%
Net recoveries (charge-offs) to average loans (annualized)	0.09		%	—		%	0.06		%	0.02		%


⁽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.


	June 30, 2019						June 30, 2018						September 30, 2019						September 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	$	1,881	16.1	%	17.8	%	$	1,685	16.6	%	16.3	%	$	2,299	18.7	%	17.2	%	$	2,026	18.9	%	17.6	%
Real estate:
1-4 Family Residential	1,455		12.5	%	17.8	%	1,245		12.2	%	19.2	%	1,383		11.3	%	17.5	%	1,321		12.3	%	19.1	%
1-4 Family HELOC	686		5.9	%	7.2	%	636		6.3	%	7.5	%	704		5.7	%	6.9	%	620		5.8	%	7.3	%
Multifamily and Commercial	4,713		40.4	%	36.7	%	3,861		38.0	%	35.1	%	5,188		42.2	%	38.5	%	4,118		38.7	%	36.3	%
Construction, Land Development and Farmland	2,707		23.2	%	18.1	%	2,515		24.7	%	18.8	%	2,513		20.4	%	17.6	%	2,390		22.3	%	16.7	%
Consumer	188		1.6	%	1.4	%	192		1.9	%	1.9	%	170		1.4	%	1.3	%	186		1.7	%	1.8	%
Other	36		0.3	%	1.0	%	35		0.3	%	1.2	%	34		0.3	%	1.0	%	37		0.3	%	1.2	%
	$	11,666	100.0	%	100.0	%	$	10,169	100.0	%	100.0	%	$	12,291	100.0	%	100.0	%	$	10,698	100.0	%	100.0	%

Nonperforming Assets

~~Non-performing~~Nonperforming assets consist of ~~non-performing~~nonperforming loans plus real estate acquired through foreclosure or deed in lieu of foreclosure. ~~Non-performing~~Nonperforming loans by definition consist of ~~non-accrual~~nonaccrual loans and loans past due 90 days or more and still accruing interest. When we place a loan on ~~non-accrual~~nonaccrual 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~~nonperforming assets.

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



	September 30, 2019			December 31, 2018
Nonaccrual loans	$	4,380		$	4,194
Past due loans 90 days or more and still accruing interest	121			6
Restructured loans	1,812			2,469
Total nonperforming loans	6,313			6,669
Foreclosed real estate ("OREO")	1,943			1,000
Total nonperforming assets	$	8,256		$	7,669
Total nonperforming loans as a percentage of total loans	0.47		%	0.54		%
Total nonperforming assets as a percentage of total assets	0.45		%	0.44		%
Allowance for loan losses as a percentage of nonperforming loans	194.69		%	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 totaled ~~$290,373~~$297,310 at ~~June~~September 30, 2019, ~~a 2.0% decrease from~~which was relatively flat in comparison to the $296,323 in securities balances at December 31, 2018. ~~The decrease was primarily attributable to the planned rotation of $25.5 million in investments to loans~~Activity during the ~~second quarter of 2019. Other factors include~~nine months ended September 30, 2019 includes the sale of $52,434 of securities as well as $8,587 of principal paydowns, calls, and maturities, ~~of $5,418 during the six months ended June 30, 2019,~~ offset by purchasing ~~$41,083~~$47,870 of securities ~~available for sale~~ during the same period.

Restricted equity securities totaled ~~$11,488~~$11,279 and $11,690 at ~~June~~September 30, 2019, and December 31, 2018, respectively, and consist of ~~Federal Reserve Bank~~FRB and ~~Federal Home Loan Bank~~FHLB stock.

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


	June 30, 2019					December 31, 2018					September 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	$	313	312	0.11	%	$	568	554	0.19	%	$	310	310	0.10	%	$	568	554	0.19	%
State and municipal	212,157		220,614	75.98	%	232,589		229,298	77.38	%	210,537		223,016	75.01	%	232,589		229,298	77.38	%
Corporate bonds	3,130		3,019	1.04	%	3,130		3,017	1.02	%	7,880		7,822	2.63	%	3,130		3,017	1.02	%
Mortgage backed securities	37,515		37,508	12.92	%	32,172		31,958	10.78	%	39,143		39,118	13.16	%	32,172		31,958	10.78	%
Asset backed securities	29,430		28,920	9.95	%	28,635		27,996	9.45	%	27,577		27,044	9.10	%	28,635		27,996	9.45	%
Time deposits	—		—	—	%	3,500		3,500	1.18	%	—		—	—	%	3,500		3,500	1.18	%
Total	$	282,545	290,373	100.00	%	$	300,594	296,323	100.00	%	$	285,447	297,310	100.00	%	$	300,594	296,323	100.00	%

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


	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due within one year	$	660	$	663	$	500	$	499
Due in one to five years	938		935		1,035		1,035
Due in five to ten years	7,240		7,400		12,076		12,447
Due after ten years	206,762		214,947		205,116		217,167
Mortgage backed securities	37,515		37,508		39,143		39,118
Asset backed securities	29,430		28,920		27,577		27,044
Total	$	282,545	$	290,373	$	285,447	$	297,310

Premises and Equipment

Premises and equipment, net, totaled ~~$21,632~~$21,390 at ~~June~~September 30, 2019 compared to $22,033 at December 31, 2018, a net decrease of ~~$401,~~$643, or ~~1.8%~~2.9%. Premises and equipment purchases amounted to approximately ~~$590~~$843 during the ~~first six~~nine months ofended September 30, 2019 and were mainly incurred for additional leasehold improvements for our branches and new mortgage locations while depreciation expense amounted to ~~$991.~~$1,486. At ~~June~~September 30, 2019, we operated from 17 retail banking locations as well as five stand-alone mortgage loan production offices. Two of our bank branch locations, including our main office, are in Brentwood, Tennessee. Of our other 15 ~~bank~~ branch locations three are in Columbia, and the remaining are in Franklin, Springfield, Gallatin, Nashville, Murfreesboro, Mt. Pleasant, ~~Thompson~~Thompson's Station, Centerville, Lyles, and Chattanooga, Tennessee. As of ~~June~~September 30, 2019, our mortgage loan production offices were located Brentwood, Hendersonville, and Memphis, Tennessee as well as two in Little Rock, Arkansas.

Deposits

Deposits represent the Company’s largest source of funds. The Company competes with other bank and ~~nonbank~~non-bank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors such as money market funds and other brokerage investment products. Challenges to deposit growth include 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 ~~June~~September 30, 2019, total deposits were ~~$1,550,280,~~$1,610,633, an increase of ~~$112,377,~~$172,730, or ~~7.8%~~12.0%, compared to $1,437,903 at December 31, 2018. During the ~~first six~~nine months ofended September 30, 2019, ~~non-interest~~noninterest bearing demand deposits increased by ~~$8.4 million,~~$20,980, interest-bearing demand deposits decreased by ~~$10.0 million,~~$4,776, savings and money market deposits decreased by ~~$32.5 million,~~$4,065, and time deposits increased by ~~$146.4 million.~~$160,591. A substantial portion of the increase in deposits is attributable to the increased use of 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 ~~June~~September 30, 2019.


	June 30, 2019		September 30, 2019
Twelve months or less	$	332,390	$	258,872
Over twelve months through three years	18,506		18,053
Over three years	4,092		5,169
Total	$	354,988	$	282,094

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") 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 ~~June~~September 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~~negative variances of net interest income in instantaneous changes to interest rates. We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts in market interest rates over time. For changes up or down in rates from a flat interest rate forecast over the next 12 and 24 months, our estimated change in net interest income as well as our policy limits are as follows:


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	0.3%	(15)%	(2.3)%	(15)%	1.0%	(15)%	(2.5)%	(15)%
-100 bp	0.6%	(10)%	(0.6)%	(10)%	1.1%	(10)%	(0.8)%	(10)%
+100 bp	0.1%	(10)%	0.6%	(10)%	(0.3)%	(10)%	(0.1)%	(10)%
+200 bp	0.6%	(15)%	1.6%	(15)%	0.2%	(15)%	0.5%	(15)%
+300 bp	1.0%	(20)%	2.6%	(20)%	0.8%	(20)%	1.1%	(20)%
+400 bp	1.0%	(25)%	3.1%	(25)%	1.0%	(25)%	1.3%	(25)%

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

Economic Value of 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 ~~June~~September 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,~~commercial real estate, and home equity loans, and available-for-sale securities. At ~~June~~September 30, 2019, FHLB advances totaled ~~$11,119~~$3,928 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 of Tennessee and other~~less expensive brokered ~~deposits, and the decrease in our mortgage loans held for sale and securities and somewhat offset by our increase in loans.~~deposits.

At ~~June~~September 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	$	7,000	2.39%	$	—	—%
2020	—		—%	—		—%
2021	345		2.73%	334		2.73%
2022	660		1.22%	609		1.22%
2023	2,502		1.94%	2,403		1.94%
Thereafter	612		2.48%	582		2.48%
	$	11,119	2.23%	$	3,928	1.97%

The Company has outstanding ~~$23.0 million~~$23,000 of subordinated debentures associated with ~~TRUPS~~trust preferred securities issued by trusts that are affiliates of ~~the Company, $10.0 million~~Reliant Bancorp, $10,000 of which is owned by a wholly owned subsidiary of ~~the Company. The Company~~Reliant Bancorp. Reliant Bancorp has timely made its scheduled interest payments on these subordinated debentures since assumed in the first quarter of 2018. As of ~~June~~September 30, 2019, ~~the Company~~Reliant Bancorp was current on all interest payments due related to its subordinated debentures. ~~The Company~~Reliant Bancorp has the right to defer the payment of interest on the subordinated debentures at any time, for a period not to exceed 20 consecutive quarters. During the period in which it is deferring the payment of interest on its subordinated debentures, the indentures governing the subordinated debentures provide that ~~the Company~~Reliant Bancorp cannot pay any dividends on its common stock or preferred stock.

Capital

Stockholders’ equity was ~~$213,943~~$219,652 at ~~June~~September 30, 2019, an increase of ~~$5,529,~~$11,238, or ~~2.7%~~5.4%, from $208,414 at December 31, 2018. During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company raised ~~$351~~$360 of capital through the exercise of Company stock options and purchased $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 purchases, and the increase in assets led to a decrease in the Bank’s ~~June~~September 30, 2019 Tier 1 leverage ratio to ~~9.58%~~9.55% 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 ~~$2,071~~$3,077 (of which $1,036 were declared in the prior year) were paid during the ~~six~~nine months ended ~~June~~September 30, 2019, and common dividends of ~~$1,008~~$1,012 were declared induring the ~~second quarter of~~ three months ended September 30, 2019 and ~~were~~ paid ~~subsequent~~on October 18, 2019 to ~~quarter end.~~shareholders of record on October 8, 2019.

On July 14, 2017, the Company filed a Registration Statement on Form S-3 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~~maintain 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 ~~June~~September 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 ~~June~~September 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
June 30, 2019
September 30, 2019
Company
Tier I leverage	$	168,218	9.81	%	$	68,590	4.000	%	$	85,738	5.00	%	$	171,789	9.85	%	$	69,762	4.00	%	$	87,203	5.00	%
Common equity Tier 1	156,574		10.93	%	100,276		7.000	%	93,114		6.50	%	160,124		10.85	%	103,306		7.00	%	95,927		6.50	%
Tier I risk-based capital	168,218		11.75	%	121,690		8.500	%	114,531		8.00	%	171,789		11.64	%	125,447		8.50	%	118,068		8.00	%
Total risk-based capital	180,309		12.59	%	150,377		10.500	%	143,216		10.00	%	184,505		12.51	%	154,860		10.50	%	147,486		10.00	%

Bank
Tier I leverage	$	164,042	9.58	%	$	68,492	4.000	%	$	85,615	5.00	%	$	166,265	9.55	%	$	69,654	4.00	%	$	87,067	5.00	%
Common equity Tier 1	164,042		11.48	%	100,020		7.000	%	92,875		6.50	%	166,265		11.29	%	103,082		7.00	%	95,719		6.50	%
Tier I risk-based capital	164,042		11.48	%	121,452		8.500	%	114,308		8.00	%	166,265		11.29	%	125,171		8.50	%	117,808		8.00	%
Total risk-based capital	176,133		12.33	%	150,029		10.500	%	142,885		10.00	%	178,981		12.15	%	154,623		10.50	%	147,260		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	4.00	%	$	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		6.38	%	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		7.88	%	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		9.88	%	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	4.00	%	$	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		6.38	%	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		7.88	%	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		9.88	%	135,657		10.00	%

Effects of Inflation and Changing Prices

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP, which require the measurement of financial 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’ 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 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 ~~June~~September 30, 2019:


	June 30, 2019		September 30, 2019
Unused lines of credit	$	284,103	$	291,134
Standby letters of credit	16,076		17,896
Total commitments	$	300,179	$	309,030

Other Off-Balance Sheet Arrangements

The total notional amount of swap agreements was ~~$80,605,~~$79,605 and $81,505, respectively, at ~~June~~September 30, 2019 and December 31, ~~2018, respectively.~~2018. At ~~June~~September 30, 2019 ~~the contracts had negative fair values totaling $3,575 recorded. At~~and December 31, 2018, the contracts had negative fair values totaling $4,273 and $716, ~~recorded.~~respectively.

Emerging Growth Company Status

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 Reliant Bancorp chooses to comply with the reporting requirements of public companies that are not emerging growth companies, Reliant Bancorp may avail itself of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as Reliant Bancorp is an emerging growth company. Reliant Bancorp will remain an emerging growth company ~~for up to five years~~through fiscal year ended December 31, 2020, or until such earlier time that we have more than $1.07 billion in total annual gross revenues, have more than $700 million in market value of our common shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. Management cannot predict if investors will find Reliant Bancorp’s common stock less attractive because it will rely on these exemptions. If some investors find Reliant Bancorp’s common stock less attractive as a result, there may be a less active trading market for its common stock and 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. 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~~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 quarter ended ~~June~~September 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, the Bank, are periodically involved as a plaintiff or defendant in various legal actions in the ordinary course of business. Neither Reliant Bancorp nor 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 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~~We may not be able to successfully integrate the ~~Continuing Availability~~businesses we recently entered into definitive agreements to acquire or to realize the anticipated benefits of ~~LIBOR May Adversely Affect Our Business.~~ the acquisitions.

~~On July 27, 2017,~~Upon consummation of the ~~United Kingdom's Financial Conduct Authority,~~Transactions, we will begin the process of integrating TCB Holdings and First Advantage. A successful integration of these businesses with ours will depend substantially on our ability to consolidate operations, corporate cultures, systems and procedures and to eliminate redundancies and costs. We may not be able to combine our business with these businesses we recently entered into definitive agreements to acquire without encountering difficulties, such as:

the loss of key employees;

the disruption of operations and business;

inability to maintain and increase competitive presence;

loan and deposit attrition, customer loss and revenue loss;

possible inconsistencies in standards, control procedures and policies;

unexpected problems with costs, operations, personnel, technology and credit; and/or

problems with the assimilation of new operations, sites or personnel, which ~~regulates~~could divert resources from regular banking operations.

Additionally, general market and economic conditions or governmental actions affecting the ~~London Interbank Offering Rate ("LIBOR"), announced~~financial industry generally may inhibit our successful integration of TCB Holdings and First Advantage. Further, we have entered into definitive agreements to acquire TCB Holdings and First Advantage with the expectation that ~~it intends~~these acquisitions will result in various benefits including, among other things, benefits relating to ~~stop persuading or compelling banks to submit rates~~enhanced revenues, a strengthened market position for the ~~calculation~~combined company, cross selling opportunities, technological efficiencies, cost savings and operating efficiencies. Achieving the anticipated benefits of ~~LIBOR after December 31, 2021. The announcement indicates that~~these acquisitions is subject to a number of uncertainties, including whether we integrate TCB Holdings and First Advantage in an efficient and effective manner, and general competitive factors in the ~~continuation of LIBOR~~marketplace. Failure to achieve these anticipated benefits on the ~~current basis cannot~~anticipated timeframes, or at all, could result in a reduction in the price of our shares as well as in increased costs, decreases in the amount of expected revenues and ~~will not be guaranteed after 2021. It is impossible to predict whether~~diversion of management's time 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~~energy and could materially and adversely affect our business, financial condition and operating results. Finally, any ~~additional reforms to LIBOR~~cost savings that are realized may be ~~enacted~~offset by losses in revenues or other charges to earnings.

The combined company following 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~~consummation of the ~~Federal Reserve Board~~Transactions will incur significant transaction and merger-related costs in connection with the ~~Federal Reserve Bank of New York. Uncertainty as~~acquisitions.

We expect 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~~associated with combining the operations of TCB Holdings and ~~the loan agreements~~First Advantage with our ~~customers from LIBOR,~~operations. Unanticipated costs may be incurred in the integration of our business with the businesses of TCB Holdings and First Advantage. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.

Whether or not the Transactions are consummated, we will incur substantial expenses, such as legal, accounting and financial advisory fees, in pursuing the Transactions which ~~may~~will adversely impact our earnings. Completion of the Transactions are conditioned upon customary closing conditions, including the receipt of all required governmental authorizations, consents, orders and approvals, including approval by certain federal and state banking regulators. We and TCB Holdings and First Advantage intend to pursue all required approvals in accordance with the respective definitive agreements. However, there can be no assurance that such approvals will be obtained on the anticipated timeframe, or at all.

Failure to complete the Transactions could have ana material adverse effect on our business, future operations, and stock price.

If the Transactions are not completed, our ongoing business and financial results ~~of operations. The impact of alternatives~~may be adversely affected and we will be subject to ~~LIBOR on~~several risks, including the ~~valuations, pricing and operation~~following:

the price of our ~~financial instruments is not yet known. In addition, failing~~common stock may decline to ~~adequately manage this transition process with~~the extent that its current market prices reflect a market assumption that the Transactions will be completed;

having to pay significant costs relating to the Transactions without receiving any benefits arising from the Transactions;

negative reactions from customers, shareholders and market analysts; and

the diversion of the focus of our ~~customers~~management to the Transactions instead of on pursuing other opportunities that could ~~also adversely impact~~have been beneficial to our ~~reputation.~~business.

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 ~~June~~September 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)
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



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)
July 1, 2019 to July 31, 2019	3,601	$24.15	—	$3,709
August 1, 2019 to August 31, 2019	—	$—	—	$3,709
September 1, 2019 to September 30, 2019	—	$—	—	$3,709
Total	3,601	$24.15	—	$3,709


(1)	During the quarter ended ~~June~~September 30, 2019, no21,450 shares of ~~common~~restricted stock ~~were purchased other than through a publicly announced plan or program~~previously awarded to certain of ~~Reliant Bancorp.~~the participants in our stock plans vested. We withheld 3,601 shares to satisfy tax withholding requirements associated with the vesting of these restricted shares.

(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

2.1	Agreement and Plan of Merger dated September 16, 2019, by and among Reliant Bancorp, Inc., Tennessee Community Bank Holdings, Inc., and Community Bank & Trust (incorporated by reference to Exhibit 2.1 of Reliant Bancorp's Current Report on Form 8-K filed on September 17, 2019).

3.1	Amended and Restated Charter of Reliant Bancorp, Inc. ~~(Restated for SEC filing purposes)~~ (incorporated by reference to Exhibit 3.1 of Reliant Bancorp's Quarterly Report on Form 10-Q filed on November 6, 2018).

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

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

10.1	~~Commerce Union Bancshares, Inc. 2015 Equity Incentive Plan~~Form of 2019 Restricted Stock Unit Agreement (for Employees) (incorporated by reference to ~~Appendix A~~Exhibit 10.1 of ~~Reliant~~Reliant's Bancorp's ~~Definitive Proxy Statement~~Current Report on Form 8-K filed on ~~May 14, 2015)~~July 24, 2019).

10.2* 10.2	Form of ~~Employees Restricted~~2019 Incentive Stock ~~Agreement.~~Option Agreement (incorporated by reference to Exhibit 10.2 of Reliant's Bancorp's Current Report on Form 8-K filed on July 24, 2019).

10.3*	Form of ~~Directors~~2019 Restricted Stock ~~Agreement.~~Unit Agreement (for Directors).

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

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

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

101.INS*	XBRL Instance Document.

101.SCH*	XBRL Schema Documents.

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.

~~August 6,~~November 5, 2019		/s/ DeVan D. Ard, Jr.
		DeVan D. Ard, Jr.
		President and Chief Executive Officer
		(Principal Executive Officer)


~~August 6,~~November 5, 2019		/s/ J. Daniel Dellinger
		J. Daniel Dellinger
		Chief Financial Officer
		(Principal Financial Officer)

6357



	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	159,260	$	16.72	6.04 years	$	1,146
Granted	1,000	$	22.67
Exercised	(26,706)	$	13.14
Forfeited or expired	(2,753)	$	19.34
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



	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



	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
Interest earning assets
Loans	$	1,276,197	5.18		$	16,178	$	1,119,884	4.81		$	13,393	$	1,795		$	989		$	2,785
Loan fees	—		0.25		782		—		0.24		673		109			—			109
Loans with fees	1,276,197		5.43		16,960		1,119,884		5.05		14,066		1,905			989			2,894
Mortgage loans held for sale	14,502		5.48		198		24,611		5.31		326		(196		)	68			(128		)
Deposits with banks	30,342		1.53		116		36,550		1.21		110		(89		)	95			6
Investment securities - taxable	77,405		3.04		587		67,647		2.69		453		70			64			134
Investment securities - tax-exempt	222,149		3.77		1,650		231,874		3.75		1,708		(134		)	76			(58		)
Federal funds sold and other	13,308		5.46		181		11,441		5.85		167		73			(59		)	14
Total earning assets	1,633,903		5.02		19,692		1,492,007		4.66		16,830		1,629			1,233			2,862
Nonearning assets	139,123						137,707
Total assets	$	1,773,026					$	1,629,714
Interest bearing liabilities
Interest bearing demand	141,997		0.24		86		143,811		0.23		84		(6		)	8			2
Savings and money market	374,406		1.13		1,051		357,475		0.64		574		28			449			477
Time deposits - retail	612,148		2.14		3,263		517,209		1.43		1,848		382			1,033			1,415
Time deposits - wholesale	169,956		2.61		1,106		92,197		1.53		351		411			344			755
Total interest bearing deposits	1,298,507		1.70		5,506		1,110,692		1.03		2,857		815			1,834			2,649
Federal Home Loan Bank advances	23,668		2.97		175		79,520		2.00		397		(1,044		)	822			(222		)
Subordinated debt	11,634		6.83		198		11,556		5.97		172		1			25			26
Total borrowed funds	35,302		4.24		373		91,076		2.51		569		(1,043		)	847			(196		)
Total interest-bearing liabilities	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 ($)			3.25		$	13,813			3.52		$	13,404	$	1,857		$	(1,448	)	$	409
Non-interest bearing deposits	218,512		(0.25	)			219,860		(0.17	)
Other non-interest bearing liabilities	8,057						5,781
Stockholder's equity	212,648						202,305
Total liabilities and stockholders' equity	$	1,773,026					$	1,629,714
Cost of funds			1.52						0.97
Net interest margin			3.57						3.74



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