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 endedSeptember 30, 20192020
OR
☐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.) |
| |
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 MarketNASDAQ |
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 November 4, 2019 3, 2020
was 11,195,164.
16,297,676, excluding 337,794 unexchanged shares in connection with acquisitions.
TABLE OF CONTENTS
TABLE OF CONTENTS
| | | | | | | | |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | 3 |
| |
| Item 1. | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| | |
| |
| Item 1. | | |
| Item 1A. | Risk Factors | | |
| Item 2. | | |
| Item 3. | | |
| Item 4. | | |
| Item 5. | | |
| Item 6. | | |
| | |
| |
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"“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"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 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; |
(1) the global health and economic crisis precipitated by the coronavirus (COVID-19) pandemic;
| |
(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 |
| |
(xxxiii) | general competitive, economic, political, and market conditions, including economic conditions in the local markets where we operate. |
(2) actions taken by governments, businesses and individuals in response to the coronavirus (COVID-19) pandemic;
(3) the pace of recovery when the coronavirus (COVID-19) pandemic subsides;
(4) the possible recurrence of the coronavirus (COVID-19);
(5) changes in political conditions or the legislative or regulatory environment, including governmental initiatives affecting the financial services industry such as, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act (or the CARES Act);
(6) the possibility that our asset quality could decline or that we experience greater loan losses than anticipated;
(7) increased levels of other real estate, primarily as a result of foreclosures;
(8) the impact of liquidity needs on our results of operations and financial condition;
(9) competition from financial institutions and other financial service providers;
(10) the effect of interest rate increases on the cost of deposits;
(11) unanticipated weakness in loan demand or loan pricing;
(12) greater than anticipated adverse conditions in the national economy or local economies in which we operate, including Middle Tennessee;
(13) lack of strategic growth opportunities or our failure to execute on available opportunities;
(14) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses;
(15) economic crises and associated credit issues in industries most impacted by the coronavirus (COVID-19) pandemic, including the restaurant, hospitality and retail sectors;
(16) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits;
(17) our ability to effectively manage problem credits;
(18) our ability to successfully implement efficiency initiatives on time and with the results projected;
(19) our ability to successfully develop and market new products and technology;
(20) the impact of negative developments in the financial industry and United States and global capital and credit markets;
(21) our ability to retain the services of key personnel;
(22) our ability to adapt to technological changes;
(23) risks associated with litigation, including the applicability of insurance coverage;
(24) the vulnerability of the computer and information technology systems and networks of Reliant Bank (the “Bank”), and the systems and networks of third parties with whom Reliant Bancorp or the Bank contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches and interruptions;
(25) changes in state and federal laws, rules, regulations, or policies applicable to banks or bank or financial holding companies, including regulatory or legislative developments;
(26) adverse results (including costs, fines, reputational harm, and/or other negative effects) from current or future litigation, regulatory examinations, or other legal or regulatory actions;
(27) the risk that expected cost savings and revenue synergies from (a) the merger of Reliant Bancorp and Tennessee Community Bank Holdings, Inc. (“TCB Holdings”) (the “TCB Holdings Transaction”) or (b) the merger of Reliant Bancorp and First Advantage Bancorp (“FABK”) (the “FABK Transaction” and, together with the TCB Holdings Transaction, collectively, the “Transactions”), may not be realized or may take longer than anticipated to be realized;
(28) the effect of the Transactions on our 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;
(29) the risk that the businesses and operations of TCB Holdings and its subsidiaries and of FABK 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;
(30) the amount of costs, fees, expenses, and charges related to the Transactions, including those arising as a result of unexpected factors or events;
(31) reputational risk associated with and the reaction of our customers, suppliers, employees, or other business partners to the Transactions;
(32) 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 integration of the Transactions; and
(33) general competitive, economic, political, and market conditions, including economic conditions in the local markets where we operate.
Further, statements about the potential effects of the coronavirus (COVID-19) pandemic on our business, financial condition, liquidity, or results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, other third parties, and us.
You should also consider carefully the risk factors discussed in Part I, Item 1A. "Risk Factors" of our most recent Annual Report on Form 10-K and in Part II, Item 1A. "Risk Factors" in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, 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 thereotherwise listed may develop or, if currently extant, we may not have yet recognized them.
The forward-lookingForward-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
SEPTEMBER 30, 20192020 (UNAUDITED) AND DECEMBER 31, 20182019 (AUDITED)
(Dollar amounts in thousands)
| | | | September 30,
2019 | | December 31, 2018 | | September 30, 2020 | | December 31, 2019 |
| ASSETS | | | | ASSETS | | | |
| Cash and due from banks | $ | 51,247 |
| | $ | 34,807 |
| Cash and due from banks | $ | 14,050 | | | $ | 7,953 | |
| Interest-bearing deposits in financial institutions | | Interest-bearing deposits in financial institutions | 61,349 | | | 43,644 | |
| Federal funds sold | 73 |
| | 371 |
| Federal funds sold | 12,273 | | | 52 | |
| Total cash and cash equivalents | 51,320 |
| | 35,178 |
| Total cash and cash equivalents | 87,672 | | | 51,649 | |
| Securities available for sale | 297,310 |
| | 296,323 |
| Securities available for sale | 273,893 | | | 260,293 | |
| Loans | | Loans | 2,357,898 | | | 1,409,952 | |
| Less allowance for loan losses | | Less allowance for loan losses | (19,834) | | | (12,578) | |
| Loans, net | 1,338,392 |
| | 1,220,184 |
| Loans, net | 2,338,064 | | | 1,397,374 | |
| Mortgage loans held for sale, net | 16,757 |
| | 15,823 |
| Mortgage loans held for sale, net | 99,587 | | | 37,476 | |
| Accrued interest receivable | 7,488 |
| | 8,214 |
| Accrued interest receivable | 14,615 | | | 7,188 | |
| Premises and equipment, net | 21,390 |
| | 22,033 |
| Premises and equipment, net | 33,319 | | | 21,064 | |
| Operating leases right of use assets | | Operating leases right of use assets | 14,619 | | | — | |
| Restricted equity securities, at cost | 11,279 |
| | 11,690 |
| Restricted equity securities, at cost | 17,367 | | | 11,279 | |
| Other real estate, net | 1,943 |
| | 1,000 |
| Other real estate, net | 1,326 | | | 750 | |
| Cash surrender value of life insurance contracts | 46,351 |
| | 45,513 |
| Cash surrender value of life insurance contracts | 68,109 | | | 46,632 | |
| Deferred tax assets, net | 456 |
| | 7,428 |
| Deferred tax assets, net | 8,523 | | | 3,933 | |
| Goodwill | 43,642 |
| | 43,642 |
| Goodwill | 51,506 | | | 43,642 | |
| Core deposit intangibles | 7,507 |
| | 8,219 |
| Core deposit intangibles | 11,820 | | | 7,270 | |
| Other assets | 8,652 |
| | 9,091 |
| Other assets | 24,092 | | | 13,292 | |
| TOTAL ASSETS | $ | 1,852,487 |
| | $ | 1,724,338 |
| TOTAL ASSETS | $ | 3,044,512 | | | $ | 1,901,842 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
| Deposits | | | | Deposits | |
| Noninterest-bearing demand | $ | 237,917 |
| | $ | 216,937 |
| Noninterest-bearing demand | $ | 538,844 | | | $ | 260,681 | |
| Interest-bearing demand | 149,442 |
| | 154,218 |
| Interest-bearing demand | 272,805 | | | 152,718 | |
| Savings and money market deposit accounts | 397,243 |
| | 401,308 |
| Savings and money market deposit accounts | 813,001 | | | 408,724 | |
| Time | 826,031 |
| | 665,440 |
| Time | 940,852 | | | 762,330 | |
| Total deposits | 1,610,633 |
| | 1,437,903 |
| Total deposits | 2,565,502 | | | 1,584,453 | |
| Accrued interest payable | 1,610 |
| | 1,063 |
| Accrued interest payable | 3,744 | | | 2,022 | |
| Federal funds purchased | | Federal funds purchased | 5,000 | | | 0 | |
| Subordinated debentures | 11,665 |
| | 11,603 |
| Subordinated debentures | 70,389 | | | 70,883 | |
| Federal Home Loan Bank advances | 3,928 |
| | 57,498 |
| Federal Home Loan Bank advances | 40,555 | | | 10,737 | |
| Dividends payable | 1,012 |
| | 1,036 |
| |
| | Operating leases liabilities | | Operating leases liabilities | 15,756 | | | — | |
| Other liabilities | 3,987 |
| | 6,821 |
| Other liabilities | 36,480 | | | 9,994 | |
| TOTAL LIABILITIES | 1,632,835 |
| | 1,515,924 |
| TOTAL LIABILITIES | 2,737,426 | | | 1,678,089 | |
| 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; 11,195,062 and 11,530,810 shares issued and outstanding at Sept. 30, 2019, and Dec. 31, 2018, respectively | 11,195 |
| | 11,531 |
| |
| Preferred stock, $1 par value; 10,000,000 shares authorized, 0 shares issued to date | | Preferred stock, $1 par value; 10,000,000 shares authorized, 0 shares issued to date | 0 | | | 0 | |
| Common stock, $1 par value; 30,000,000 shares authorized; 16,634,572 and 11,206,254 shares issued and outstanding at September 30, 2020, and December 31, 2019, respectively | | Common stock, $1 par value; 30,000,000 shares authorized; 16,634,572 and 11,206,254 shares issued and outstanding at September 30, 2020, and December 31, 2019, respectively | 16,635 | | | 11,206 | |
| Additional paid-in capital | 166,512 |
| | 173,238 |
| Additional paid-in capital | 232,738 | | | 167,006 | |
| Retained earnings | 36,339 |
| | 27,329 |
| Retained earnings | 55,206 | | | 40,472 | |
| Accumulated other comprehensive income (loss) | 5,606 |
| | (3,684 | ) | |
| TOTAL STOCKHOLDERS’ EQUITY | 219,652 |
| | 208,414 |
| |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,852,487 |
| | $ | 1,724,338 |
| |
| Accumulated other comprehensive income | | Accumulated other comprehensive income | 2,507 | | | 5,069 | |
| TOTAL SHAREHOLDERS’ EQUITY | | TOTAL SHAREHOLDERS’ EQUITY | 307,086 | | | 223,753 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 3,044,512 | | | $ | 1,901,842 | |
See accompanying notes to consolidated financial statements.
RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 20192020 AND 20182019
(Dollar amounts in thousands except per share amounts)
| | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 | | 2020 | | 2019 | |
| INTEREST INCOME | | | | | | | | INTEREST INCOME | | | | | | | | |
| Interest and fees on loans | $ | 17,502 |
| | $ | 14,873 |
| | $ | 50,631 |
| | $ | 42,497 |
| Interest and fees on loans | $ | 32,895 | | | $ | 17,502 | | | $ | 86,987 | | | $ | 50,631 | | |
| Interest and fees on loans held for sale | 263 |
| | 294 |
| | 614 |
| | 1,101 |
| Interest and fees on loans held for sale | 1,037 | | | 263 | | | 2,412 | | | 614 | | |
| Interest on investment securities, taxable | 549 |
| | 414 |
| | 1,639 |
| | 1,374 |
| Interest on investment securities, taxable | 399 | | | 549 | | | 978 | | | 1,639 | | |
| Interest on investment securities, nontaxable | 1,576 |
| | 1,709 |
| | 4,944 |
| | 4,921 |
| Interest on investment securities, nontaxable | 1,186 | | | 1,576 | | | 3,874 | | | 4,944 | | |
| Federal funds sold and other | 321 |
| | 280 |
| | 918 |
| | 869 |
| Federal funds sold and other | 250 | | | 321 | | | 738 | | | 918 | | |
| TOTAL INTEREST INCOME | 20,211 |
| | 17,570 |
| | 58,746 |
| | 50,762 |
| TOTAL INTEREST INCOME | 35,767 | | | 20,211 | | | 94,989 | | | 58,746 | | |
| INTEREST EXPENSE | | | | | | | | INTEREST EXPENSE | | | | | | | | |
| Deposits | | | | | | | | Deposits | | |
| Demand | 81 |
| | 102 |
| | 278 |
| | 263 |
| Demand | 236 | | | 81 | | | 554 | | | 278 | | |
| Savings and money market deposit accounts | 973 |
| | 657 |
| | 3,154 |
| | 1,709 |
| Savings and money market deposit accounts | 1,162 | | | 976 | | | 3,668 | | | 3,156 | | |
| Time | 4,828 |
| | 2,542 |
| | 12,852 |
| | 6,737 |
| Time | 2,736 | | | 4,825 | | | 9,577 | | | 12,850 | | |
| Federal Home Loan Bank advances and other | 66 |
| | 606 |
| | 534 |
| | 1,275 |
| Federal Home Loan Bank advances and other | 104 | | | 66 | | | 613 | | | 534 | | |
| Subordinated debentures | 199 |
| | 197 |
| | 590 |
| | 526 |
| Subordinated debentures | 992 | | | 199 | | | 2,967 | | | 590 | | |
| TOTAL INTEREST EXPENSE | 6,147 |
| | 4,104 |
| | 17,408 |
| | 10,510 |
| TOTAL INTEREST EXPENSE | 5,230 | | | 6,147 | | | 17,379 | | | 17,408 | | |
| NET INTEREST INCOME | 14,064 |
| | 13,466 |
| | 41,338 |
| | 40,252 |
| NET INTEREST INCOME | 30,537 | | | 14,064 | | | 77,610 | | | 41,338 | | |
| PROVISION FOR LOAN LOSSES | 606 |
| | 322 |
| | 806 |
| | 759 |
| PROVISION FOR LOAN LOSSES | 1,500 | | | 606 | | | 7,400 | | | 806 | | |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 13,458 |
| | 13,144 |
| | 40,532 |
| | 39,493 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 29,037 | | | 13,458 | | | 70,210 | | | 40,532 | | |
| NONINTEREST INCOME | | | | | | | | NONINTEREST INCOME | | | | | | | | |
| Service charges on deposit accounts | 976 |
| | 833 |
| | 2,796 |
| | 2,504 |
| Service charges on deposit accounts | 1,583 | | | 976 | | | 4,172 | | | 2,796 | | |
| Gains on mortgage loans sold, net | 1,385 |
| | 1,399 |
| | 3,170 |
| | 4,061 |
| Gains on mortgage loans sold, net | 3,783 | | | 1,385 | | | 7,605 | | | 3,170 | | |
| Gain on securities transactions, net | — |
| | 18 |
| | 306 |
| | 43 |
| Gain on securities transactions, net | 0 | | | 0 | | | 327 | | | 306 | | |
| Gain on sale of other real estate | — |
| | 150 |
| | — |
| | 259 |
| |
| Gain (loss) on disposal of premises and equipment | — |
| | 16 |
| | — |
| | 16 |
| |
| Other | 399 |
| | 361 |
| | 1,124 |
| | 1,139 |
| |
| | Other noninterest income | | Other noninterest income | 635 | | | 399 | | | 1,602 | | | 1,124 | | |
| TOTAL NONINTEREST INCOME | 2,760 |
| | 2,777 |
| | 7,396 |
| | 8,022 |
| TOTAL NONINTEREST INCOME | 6,001 | | | 2,760 | | | 13,706 | | | 7,396 | | |
| NONINTEREST EXPENSE | | | | | | | | NONINTEREST EXPENSE | | | | | | | | |
| Salaries and employee benefits | 7,634 |
| | 6,913 |
| | 22,605 |
| | 20,480 |
| Salaries and employee benefits | 12,184 | | | 7,634 | | | 33,885 | | | 22,605 | | |
| Occupancy | 1,359 |
| | 1,234 |
| | 4,069 |
| | 3,673 |
| Occupancy | 2,054 | | | 1,359 | | | 5,566 | | | 4,069 | | |
| Information technology | 1,553 |
| | 1,315 |
| | 4,538 |
| | 3,913 |
| |
| Advertising and public relations | 387 |
| | 183 |
| | 916 |
| | 413 |
| |
| Audit, legal and consulting | 350 |
| | 588 |
| | 1,836 |
| | 2,027 |
| |
| Federal deposit insurance | (96 | ) | | 210 |
| | 348 |
| | 630 |
| |
| Data processing and software | | Data processing and software | 2,240 | | | 1,553 | | | 6,085 | | | 4,538 | | |
| | Professional fees | | Professional fees | 775 | | | 404 | | | 1,933 | | | 1,836 | | |
| Regulatory Fees | | Regulatory Fees | 365 | | | (17) | | | 1,356 | | | 596 | | |
| | Merger expenses | 299 |
| | 82 |
| | 302 |
| | 2,742 |
| Merger expenses | 78 | | | 299 | | | 6,895 | | | 302 | | |
| Other operating | 1,561 |
| | 1,637 |
| | 4,305 |
| | 4,487 |
| |
| Other operating expense | | Other operating expense | 2,637 | | | 1,815 | | | 6,476 | | | 4,973 | | |
| TOTAL NONINTEREST EXPENSE | 13,047 |
| | 12,162 |
| | 38,919 |
| | 38,365 |
| TOTAL NONINTEREST EXPENSE | 20,333 | | | 13,047 | | | 62,196 | | | 38,919 | | |
| INCOME BEFORE PROVISION FOR INCOME TAXES | 3,171 |
| | 3,759 |
| | 9,009 |
| — |
| 9,150 |
| INCOME BEFORE PROVISION FOR INCOME TAXES | 14,705 | | | 3,171 | | | 21,720 | | | 9,009 | | |
| INCOME TAX EXPENSE | 557 |
| | 519 |
| | 1,430 |
| | 1,431 |
| INCOME TAX EXPENSE | 2,800 | | | 557 | | | 3,524 | | | 1,430 | | |
| CONSOLIDATED NET INCOME | 2,614 |
| | 3,240 |
| | 7,579 |
| | 7,719 |
| CONSOLIDATED NET INCOME | 11,905 | | | 2,614 | | | 18,196 | | | 7,579 | | |
| NONCONTROLLING INTEREST IN NET LOSS OF SUBSIDIARY | 1,386 |
| | 842 |
| | 4,484 |
| | 2,243 |
| |
| NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY | | NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY | (374) | | | 1,386 | | | 990 | | | 4,484 | | |
| NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | 4,000 |
| | $ | 4,082 |
| | $ | 12,063 |
| | $ | 9,962 |
| NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | 11,531 | | | $ | 4,000 | | | $ | 19,186 | | | $ | 12,063 | | |
| Basic net income attributable to common shareholders, per share | $ | 0.36 |
| | $ | 0.36 |
| | $ | 1.07 |
| | $ | 0.88 |
| Basic net income attributable to common shareholders, per share | $ | 0.70 | | | $ | 0.36 | | | $ | 1.27 | | | $ | 1.07 | | |
| Diluted net income attributable to common shareholders, per share | $ | 0.36 |
| | $ | 0.36 |
| | $ | 1.07 |
| | $ | 0.87 |
| Diluted net income attributable to common shareholders, per share | $ | 0.69 | | | $ | 0.36 | | | $ | 1.27 | | | $ | 1.07 | | |
See accompanying notes to consolidated financial statements.
RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 20192020 AND 20182019
(Dollar amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | | |
| 2020 | | 2019 | | 2020 | | 2019 | | | | | | | | |
| Consolidated net income | $ | 11,905 | | | $ | 2,614 | | | $ | 18,196 | | | $ | 7,579 | | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | | | | | | | | |
| Net unrealized gains on available-for-sale securities, net of tax of ($357) and ($973) for the three months ended September 30, 2020 and 2019, respectively, and ($864) and ($3,935) for the nine months ended September 30, 2020 and 2019, respectively | 1,008 | | | 2,736 | | | 2,442 | | | 11,122 | | | | | | | | | |
| Net unrealized losses on interest rate swap derivatives net of tax of ($133) and $98 for the three months ended September 30, 2020 and 2019, respectively, and $1,685 and $569 for the nine months ended September 30, 2020 and 2019, respectively | 375 | | | (275) | | | (4,762) | | | (1,606) | | | | | | | | | |
| Reclassification adjustment for gains included in net income, net of tax of $0 and $0 for the three months ended September 30, 2020 and 2019, respectively, and $85 and $80 for the nine months ended September 30, 2020 and 2019, respectively | 0 | | | 0 | | | (242) | | | (226) | | | | | | | | | |
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | 1,383 | | | 2,461 | | | (2,562) | | | 9,290 | | | | | | | | | |
| TOTAL COMPREHENSIVE INCOME | $ | 13,288 | | | $ | 5,075 | | | $ | 15,634 | | | $ | 16,869 | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Consolidated net income | $ | 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 $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) | 2,461 |
| | (2,037 | ) | | 9,290 |
| | (6,433 | ) |
| TOTAL COMPREHENSIVE INCOME | $ | 5,075 |
| | $ | 1,203 |
| | $ | 16,869 |
| | $ | 1,286 |
|
See accompanying notes to consolidated financial statements.
RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’SHAREHOLDERS’ EQUITY - UNAUDITED
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 20192020 AND 20182019
(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 | |
| | SHARES | | AMOUNT | | |
| BALANCE - JANUARY 1, 2019 | 11,530,810 |
| | $ | 11,531 |
| | $ | 173,238 |
| | $ | 27,329 |
| | $ | (3,684 | ) | | $ | — |
| | $ | 208,414 |
| |
| BALANCE - DECEMBER 31, 2019 | | BALANCE - DECEMBER 31, 2019 | 11,206,254 | | | $ | 11,206 | | | $ | 167,006 | | | $ | 40,472 | | | $ | 5,069 | | | $ | 0 | | | $ | 223,753 | |
| Stock based compensation expense | — |
| | — |
| | 250 |
| | — |
| | — |
| | — |
| | 250 |
| Stock based compensation expense | — | | | — | | | 349 | | | — | | | — | | | — | | | 349 | |
| Exercise of stock options | 2,183 |
| | 2 |
| | 26 |
| | — |
| | — |
| | — |
| | 28 |
| Exercise of stock options | 868 | | | 1 | | | 7 | | | — | | | — | | | — | | | 8 | |
| Restricted stock awards | 3,000 |
| | 3 |
| | (3 | ) | | — |
| | — |
| | — |
| | — |
| |
| | Restricted stock and dividend forfeiture | (3,750 | ) | | (4 | ) | | 4 |
| | 1 |
| | — |
| | — |
| | 1 |
| Restricted stock and dividend forfeiture | (3,837) | | | (4) | | | (69) | | | — | | | — | | | — | | | (73) | |
| Common stock shares redeemed | (29,958 | ) | | (30 | ) | | (629 | ) | | — |
| | — |
| | — |
| | (659 | ) | |
| Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc. | | Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc. | 811,210 | | | 811 | | | 17,230 | | | — | | | — | | | — | | | 18,041 | |
| Noncontrolling interest contributions | — |
| | — |
| | — |
| | — |
| | — |
| | 1,543 |
| | 1,543 |
| Noncontrolling interest contributions | — | | | — | | | — | | | — | | | — | | | 976 | | | 976 | |
| Cash dividend declared to common shareholders | — |
| | — |
| | — |
| | (1,035 | ) | | — |
| | — |
| | (1,035 | ) | |
| Net income (loss) | — |
| | — |
| | — |
| | 3,824 |
| | — |
| | (1,543 | ) | | 2,281 |
| |
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 4,296 |
| | — |
| | 4,296 |
| |
| BALANCE - MARCH 31, 2019 | 11,502,285 |
| | $ | 11,502 |
| | $ | 172,886 |
| | $ | 30,119 |
| | $ | 612 |
| | $ | — |
| | $ | 215,119 |
| |
| Cash dividend declared to common shareholders ($0.10 per share) | | Cash dividend declared to common shareholders ($0.10 per share) | — | | | — | | | — | | | (1,207) | | | — | | | — | | | (1,207) | |
| Cumulative effect of lease standard adoption | | Cumulative effect of lease standard adoption | — | | | — | | | — | | | 100 | | | — | | | — | | | 100 | |
| Net loss | | Net loss | — | | | — | | | — | | | (215) | | | — | | | (976) | | | (1,191) | |
| Other comprehensive loss | | Other comprehensive loss | — | | | — | | | — | | | — | | | (6,084) | | | — | | | (6,084) | |
| BALANCE - MARCH 31, 2020 | | BALANCE - MARCH 31, 2020 | 12,014,495 | | | $ | 12,014 | | | $ | 184,523 | | | $ | 39,150 | | | $ | (1,015) | | | $ | 0 | | | $ | 234,672 | |
| Stock based compensation expense | — |
| | — |
| | 280 |
| | — |
| | — |
| | — |
| | 280 |
| Stock based compensation expense | — | | | — | | | 485 | | | — | | | — | | | — | | | 485 | |
| Exercise of stock options | 24,523 |
| | 25 |
| | 298 |
| | — |
| | — |
| | — |
| | 323 |
| Exercise of stock options | 1,021 | | | 1 | | | 14 | | | — | | | — | | | — | | | 15 | |
| Employee Stock Purchase Plan stock issuance | 4,728 |
| | 5 |
| | 85 |
| | — |
| | — |
| | — |
| | 90 |
| Employee Stock Purchase Plan stock issuance | 8,344 | | | 8 | | | 108 | | | — | | | — | | | — | | | 116 | |
| Restricted stock awards | 5,000 |
| | 5 |
| | (5 | ) | | — |
| | — |
| | — |
| | — |
| Restricted stock awards | 3,022 | | | 3 | | | (3) | | | — | | | — | | | — | | | 0 | |
| Restricted stock and dividend forfeiture | (4,000 | ) | | (4 | ) | | 4 |
| | — |
| | — |
| | — |
| | — |
| Restricted stock and dividend forfeiture | (1,697) | | | (1) | | | 1 | | | — | | | — | | | — | | | 0 | |
| Common stock shares redeemed | (335,973 | ) | | (336 | ) | | (7,296 | ) | | — |
| | — |
| | — |
| | (7,632 | ) | |
| Conversion shares issued to shareholders of First Advantage Bancorp | | Conversion shares issued to shareholders of First Advantage Bancorp | 4,606,419 | | | 4,607 | | | 47,308 | | | — | | | — | | | — | | | 51,915 | |
| Noncontrolling interest contributions | — |
| | — |
| | — |
| | — |
| | — |
| | 1,555 |
| | 1,555 |
| Noncontrolling interest contributions | — | | | — | | | — | | | — | | | — | | | 388 | | | 388 | |
| Cash dividend declared to common shareholders | — |
| | — |
| | — |
| | (1,009 | ) | | — |
| | — |
| | (1,009 | ) | |
| Cash dividend declared to common shareholders ($0.10 per share) | | Cash dividend declared to common shareholders ($0.10 per share) | — | | | — | | | — | | | (1,667) | | | — | | | — | | | (1,667) | |
| Net income (loss) | — |
| | — |
| | — |
| | 4,239 |
| | — |
| | (1,555 | ) | | 2,684 |
| Net income (loss) | — | | | — | | | — | | | 7,868 | | | — | | | (388) | | | 7,480 | |
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 2,533 |
| | — |
| | 2,533 |
| Other comprehensive income | — | | | — | | | — | | | — | | | 2,139 | | | — | | | 2,139 | |
| BALANCE - JUNE 30, 2019 | 11,196,563 |
| | $ | 11,197 |
| | $ | 166,252 |
| | $ | 33,349 |
| | $ | 3,145 |
| | $ | — |
| | $ | 213,943 |
| |
| BALANCE - JUNE 30, 2020 | | BALANCE - JUNE 30, 2020 | 16,631,604 | | | $ | 16,632 | | | $ | 232,436 | | | $ | 45,351 | | | $ | 1,124 | | | $ | 0 | | | $ | 295,543 | |
| Stock based compensation expense | — |
| | — |
| | 337 |
| | — |
| | — |
| | — |
| | 337 |
| Stock based compensation expense | — | | | — | | | 349 | | | — | | | — | | | — | | | 349 | |
| Exercise of stock options | 600 |
| | 1 |
| | 8 |
| | — |
| | — |
| | — |
| | 9 |
| Exercise of stock options | 4,655 | | | 5 | | | 61 | | | — | | | — | | | — | | | 66 | |
| Restricted stock awards | 1,500 |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
| | — |
| |
| Restricted shares withheld for taxes | (3,601 | ) | | (4 | ) | | (84 | ) | | — |
| | — |
| | — |
| | (88 | ) | |
| Restricted stock units vesting, net of taxes withheld | | Restricted stock units vesting, net of taxes withheld | 8,030 | | | 8 | | | (14) | | | — | | | — | | | — | | | (6) | |
| Restricted stock and dividend forfeiture | | Restricted stock and dividend forfeiture | (9,717) | | | (10) | | | (94) | | | — | | | — | | | — | | | (103) | |
| Noncontrolling interest contributions | — |
| | — |
| | — |
| | — |
| | — |
| | 1,386 |
| | 1,386 |
| Noncontrolling interest contributions | — | | | — | | | — | | | — | | | — | | | (374) | | | (374) | |
| Cash dividend declared to common shareholders | — |
| | — |
| | — |
| | (1,010 | ) | | — |
| | — |
| | (1,010 | ) | |
| Net income (loss) | — |
| | — |
| | — |
| | 4,000 |
| | — |
| | (1,386 | ) | | 2,614 |
| |
| Cash dividend declared to common shareholders ($0.10 per share) | | Cash dividend declared to common shareholders ($0.10 per share) | — | | | — | | | — | | | (1,676) | | | — | | | — | | | (1,676) | |
| Net income | | Net income | — | | | — | | | — | | | 11,531 | | | — | | | 374 | | | 11,905 | |
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 2,461 |
| | — |
| | 2,461 |
| Other comprehensive income | — | | | — | | | — | | | — | | | 1,383 | | | — | | | 1,383 | |
| BALANCE - SEPTEMBER 30, 2019 | 11,195,062 |
| | $ | 11,195 |
| | $ | 166,512 |
| | $ | 36,339 |
| | $ | 5,606 |
| | $ | — |
| | $ | 219,652 |
| |
| BALANCE - SEPTEMBER 30, 2020 | | BALANCE - SEPTEMBER 30, 2020 | 16,634,572 | | | $ | 16,635 | | | $ | 232,738 | | | $ | 55,206 | | | $ | 2,507 | | | $ | 0 | | | $ | 307,086 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| COMMON STOCK | | ADDITIONAL
PAID-IN
CAPITAL | | RETAINED
EARNINGS | | ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS) | | NONCONTROLLING
INTEREST | | TOTAL |
| SHARES | | AMOUNT | | | | | |
| BALANCE - DECEMBER 31, 2018 | 11,530,810 | | | $ | 11,531 | | | $ | 173,238 | | | $ | 27,329 | | | $ | (3,684) | | | $ | 0 | | | $ | 208,414 | |
| Stock based compensation expense | — | | | — | | | 250 | | | — | | | — | | | — | | | 250 | |
| Exercise of stock options | 2,183 | | | 2 | | | 26 | | | — | | | — | | | — | | | 28 | |
| Restricted stock awards | 3,000 | | | 3 | | | (3) | | | — | | | — | | | — | | | 0 | |
| Restricted stock forfeiture | (3,750) | | | (4) | | | 4 | | | 1 | | | — | | | — | | | 1 | |
| Common stock shares redeemed | (29,958) | | | (30) | | | (629) | | | — | | | — | | | — | | | (659) | |
| Noncontrolling interest contributions | — | | | — | | | — | | | — | | | — | | | 1,543 | | | 1,543 | |
| Cash dividends declared to common shareholders ($0.09 per share) | — | | | — | | | — | | | (1,035) | | | — | | | — | | | (1,035) | |
| Net income (loss) | — | | | — | | | — | | | 3,824 | | | — | | | (1,543) | | | 2,281 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | 4,296 | | | — | | | 4,296 | |
| BALANCE - MARCH 31, 2019 | 11,502,285 | | | $ | 11,502 | | | $ | 172,886 | | | $ | 30,119 | | | $ | 612 | | | $ | 0 | | | $ | 215,119 | |
| Stock based compensation expense | — | | | — | | | 280 | | | — | | | — | | | — | | | 280 | |
| Exercise of stock options | 24,523 | | | 25 | | | 298 | | | — | | | — | | | — | | | 323 | |
| Employee Stock Purchase Plan stock issuance | 4,728 | | | 5 | | | 85 | | | — | | | — | | | — | | | 90 | |
| Restricted stock awards | 5,000 | | | 5 | | | (5) | | | — | | | — | | | — | | | 0 | |
| Restricted stock and dividend forfeiture | (4,000) | | | (4) | | | 4 | | | — | | | — | | | — | | | 0 | |
| Common stock shares redeemed | (335,973) | | | (336) | | | (7,296) | | | — | | | — | | | — | | | (7,632) | |
| Noncontrolling interest contributions | — | | | — | | | — | | | — | | | — | | | 1,555 | | | 1,555 | |
| Cash dividends declared to common shareholders ($0.09 per share) | — | | | — | | | — | | | (1,009) | | | — | | | — | | | (1,009) | |
| Net income (loss) | — | | | — | | | — | | | 4,239 | | | — | | | (1,555) | | | 2,684 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | 2,533 | | | — | | | 2,533 | |
| BALANCE - JUNE 30, 2019 | 11,196,563 | | | $ | 11,197 | | | $ | 166,252 | | | $ | 33,349 | | | $ | 3,145 | | | $ | 0 | | | $ | 213,943 | |
| Stock based compensation expense | — | | | — | | | 337 | | | — | | | — | | | — | | | 337 | |
| Exercise of stock options | 600 | | | 1 | | | 8 | | | — | | | — | | | — | | | 9 | |
| Restricted stock awards | 1,500 | | | 1 | | | (1) | | | — | | | — | | | — | | | 0 | |
| Restricted shares withheld for taxes | (3,601) | | | (4) | | | (84) | | | — | | | — | | | — | | | (88) | |
| Noncontrolling interest contributions | — | | | — | | | — | | | — | | | — | | | 1,386 | | | 1,386 | |
| Cash dividend declared to common shareholders ($0.09 per share) | — | | | — | | | — | | | (1,010) | | | — | | | — | | | (1,010) | |
| Net income (loss) | — | | | — | | | — | | | 4,000 | | | — | | | (1,386) | | | 2,614 | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | 2,461 | | | — | | | 2,461 | |
| BALANCE - SEPTEMBER 30, 2019 | 11,195,062 | | | $ | 11,195 | | | $ | 166,512 | | | $ | 36,339 | | | $ | 5,606 | | | $ | 0 | | | $ | 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 |
| | SHARES | | AMOUNT | | | | | |
| BALANCE - JANUARY 1, 2018 | 9,034,439 |
| | $ | 9,034 |
| | $ | 112,437 |
| | $ | 17,189 |
| | $ | 1,477 |
| | $ | — |
| | $ | 140,137 |
|
| Stock based compensation expense | — |
| | — |
| | 224 |
| | — |
| | — |
| | — |
| | 224 |
|
| Exercise of stock options | 25,225 |
| | 25 |
| | 315 |
| | — |
| | — |
| | — |
| | 340 |
|
| Restricted stock awards | 4,500 |
| | 5 |
| | (5 | ) | | — |
| | — |
| | — |
| | — |
|
| Restricted stock forfeiture | (1,000 | ) | | (1 | ) | | 1 |
| | — |
| | — |
| | — |
| | — |
|
Conversion shares issued to shareholders' of
Community First, Inc. | 2,416,444 |
| | 2,417 |
| | 59,566 |
| | — |
| | — |
| | — |
| | 61,983 |
|
| Noncontrolling interest contributions | — |
| | — |
| | — |
| | — |
| | — |
| | 464 |
| | 464 |
|
| Cash dividends declared to common shareholders | — |
| | — |
| | — |
| | (1,060 | ) | | — |
| | — |
| | (1,060 | ) |
| Net income (loss) | — |
| | — |
| | — |
| | 3,741 |
| | — |
| | (464 | ) | | 3,277 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (4,414 | ) | | — |
| | (4,414 | ) |
| BALANCE - MARCH 31, 2018 | 11,479,608 |
| | $ | 11,480 |
| | $ | 172,538 |
| | $ | 19,870 |
| | $ | (2,937 | ) | | $ | — |
| | $ | 200,951 |
|
| Stock based compensation expense | — |
| | — |
| | 148 |
| | — |
| | — |
| | — |
| | 148 |
|
| Exercise of stock options | 357 |
| | — |
| | 3 |
| | — |
| | — |
| | — |
| | 3 |
|
| Restricted stock awards | 3,000 |
| | 3 |
| | (3 | ) | | — |
| | — |
| | — |
| | — |
|
| Noncontrolling interest contributions | — |
| | — |
| | — |
| | — |
| | — |
| | 937 |
| | 937 |
|
| Cash dividend declared to common shareholders | — |
| | — |
| | — |
| | (919 | ) | | — |
| | — |
| | (919 | ) |
| Net income (loss) | — |
| | — |
| | — |
| | 2,139 |
| | — |
| | (937 | ) | | 1,202 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 18 |
| | — |
| | 18 |
|
| BALANCE - JUNE 30, 2018 | 11,482,965 |
| | $ | 11,483 |
| | $ | 172,686 |
| | $ | 21,090 |
| | $ | (2,919 | ) | | $ | — |
| | $ | 202,340 |
|
| 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 NINE MONTHS ENDED SEPTEMBER 30, 20192020 AND 20182019
(Dollar amounts in thousands)
| | | | | | | | | | | |
| Nine Months Ended
September 30, |
| OPERATING ACTIVITIES | 2020 | | 2019 |
| Consolidated net income | $ | 18,196 | | | $ | 7,579 | |
| Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities | | | |
| Provision for loan losses | 7,400 | | | 806 | |
| | | |
| Deferred income taxes | 2,003 | | | 3,686 | |
| Gain on disposal of premises and equipment | (1) | | | 0 | |
| Depreciation and amortization of premises and equipment | 2,084 | | | 1,486 | |
| Net amortization of securities | 1,980 | | | 2,302 | |
| Net realized gains on sales of securities | (327) | | | (306) | |
| Gains on mortgage loans sold, net | (7,605) | | | (3,170) | |
| Stock-based compensation expense | 1,183 | | | 867 | |
| Gain on other real estate | (24) | | | 0 | |
| Increase in cash surrender value of life insurance contracts | (1,073) | | | (838) | |
| Mortgage loans originated for resale | (327,521) | | | (106,520) | |
| Proceeds from sale of mortgage loans | 278,893 | | | 108,756 | |
| Cash payments arising from operating leases | 2,327 | | | — | |
| Other accretion, net of other amortization | (10,748) | | | (477) | |
| Change in | | | |
| Accrued interest receivable | (4,094) | | | 726 | |
| Other assets | (4,535) | | | 508 | |
| Accrued interest payable | (526) | | | 547 | |
| Other liabilities | 6,497 | | | (6,392) | |
| TOTAL ADJUSTMENTS | (54,087) | | | 1,981 | |
| NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (35,891) | | | 9,560 | |
| INVESTING ACTIVITIES | | | |
| Cash used to convert shares, and redeem stock options and fractional shares, net of cash received | (8,500) | | | 0 | |
| Activities in available for sale securities | | | |
| Purchases | (31,179) | | | (47,870) | |
| Sales | 103,901 | | | 52,434 | |
| Maturities, prepayments and calls | 10,370 | | | 8,587 | |
| (Purchases) redemptions of restricted equity securities | (1,867) | | | 411 | |
| Net increase in loans | (146,777) | | | (118,758) | |
| Purchase of premises and equipment | (2,709) | | | (843) | |
| Proceeds from sale of premises and equipment | 257 | | | 0 | |
| Proceeds from sale of other real estate | 2,273 | | | 0 | |
| | | |
| | | |
| NET CASH USED IN INVESTING ACTIVITIES | (74,231) | | | (106,039) | |
| FINANCING ACTIVITIES | | | |
| Net change in deposits | 163,839 | | | 172,741 | |
| Proceeds from Federal Home Loan Bank Advances | 444,000 | | | 163,824 | |
| Payments on Federal Home Loan Bank Advances | (463,156) | | | (217,353) | |
| Proceeds from Federal Funds Purchased | 5,000 | | | 0 | |
| Issuance of common stock, net of repurchase of restricted shares | (177) | | | 272 | |
| Issuance of common stock related to exercise of stock options and ESPP | 199 | | | 90 | |
| Redemption of common stock | — | | | (8,291) | |
| Noncontrolling interest contributions received | 990 | | | 4,415 | |
| Cash dividends paid on common stock | (4,550) | | | (3,077) | |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 146,145 | | | 112,621 | |
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 36,023 | | | 16,142 | |
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 51,649 | | | 35,178 | |
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 87,672 | | | $ | 51,320 | |
|
| | | | | | | |
| | 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, 20192020 AND 20182019
(Dollar amounts in thousands)
| | | | | | | | | | | |
| Nine Months Ended
September 30, |
| 2020 | | 2019 |
| | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | |
| Cash paid during the period for | | | |
| Interest | $ | 20,508 | | | $ | 16,861 | |
| Taxes | $ | 4,565 | | | $ | 1,607 | |
| | | |
| Non-cash investing and financing activities | | | |
| | | |
| | | |
| Change in due to/from noncontrolling interest | $ | 990 | | | $ | 4,484 | |
| Acquired bank facilities no longer in use transferred to other real estate owned and foreclosed assets from premises and equipment | $ | 2,420 | | | $ | 0 | |
| Loans foreclosed and transferred to other real estate owned and foreclosed assets | $ | 197 | | | $ | 943 | |
|
| | | | | | | |
| | 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.
RELIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(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,is a Tennessee corporation and the holding company for and the sole shareholder of Reliant Bank which has offices in Williamson, Robertson, Davidson, Sumner, Rutherford, Maury, Hickman(the "Bank"), collectively, "the Company". Reliant Bancorp is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended ("Bank Holding Company Act"). Reliant Bank is a commercial bank chartered under Tennessee law and Hamilton Counties in Tennessee. Its primary deposita member of the Federal Reserve System (the "Federal Reserve"). The Bank provides a full range of traditional banking 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,services to business assets, and consumer assets. Additionally, on September 16, 2019,clients throughout Middle Tennessee.
Reliant Risk Management, Inc., a wholly-owned insurance captive subsidiary of Reliant Bancorp, that began operations on June 1, 2020, is a Tennessee-based captive insurance company which insures Reliant Bancorp and the Bank against certain risks unique to their operations and for which insurance may not be currently available or economically feasible in today's insurance marketplace. Reliant Risk Management, Inc. entered intopools resources with several other similar insurance company subsidiaries of financial institutions to spread a definitive agreementlimited amount of risk among themselves. Reliant Risk Management, Inc. is subject to acquireregulations of the parent companyState of Community Bank & Trust headquartered in Ashland City, Tennessee.Tennessee and undergoes periodic examinations by the Tennessee Department of Commerce and Insurance.
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 accounting principles generally accepted in the United States of America ("U.S. GAAP.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.’sthe Company's consolidated financial statements and related notes appearing in Reliant Bancorp, Inc.’sthe Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
The consolidated financial statements as of and for the periods presented include the accounts of Reliant Bancorp, Inc., Reliant Bank (the "Bank"), Community First Trups Holding Company ("TRUPS"), which is wholly owned by Reliant Bancorp Inc., Reliant Investment Holdings, LLC ("Holdings"), which is wholly owned by the Bank,its wholly-owned direct and indirect subsidiaries 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")TCB Holdings merged effective on January 1, 2018. The accounting2020, and reporting policies of the Company conform to U.S. GAAPReliant Bancorp, Inc. and general practices in the banking industry.FABK merged effective April 1, 2020.
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.
The consolidated financial statements as of September 30, 2019,2020, and for the three and nine months ended September 30, 20192020 and 2018,2019, 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, are necessary to present a fair statement of the results for the interim periods presented. Such adjustments are of a normal recurring nature. The Company evaluates subsequent events through the date of filing. Certain prior period amounts have been reclassified to
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
conform to the current period presentation. The results for the three and nine months ended September 30, 20192020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020.
ReclassificationsRecently Adopted Accounting Pronouncements
Certain reclassifications were madeInformation about certain issued accounting standards updates is presented below. Also refer to Note 1 - Summary of Significant Accounting Policies, “Recent Authoritative Accounting Guidance” in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for additional information related to previously issued accounting standards updates.
ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 went into effect for the Company on January 1, 2020 and the Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. The effect of implementing this pronouncement resulted in right to use assets of $11,973 and a similar corresponding liability, as of January 1, 2020.
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 was early adopted as of January 1, 2020 and did not have a significant impact on the Company's consolidated financial statements as it simplifies the test of impairment of goodwill.
ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." In March 2020, the FASB issued Topic 848 amendments to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. It provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has evaluated the effect of the pronouncement on the consolidated financial statements, noting no significant impact.
Newly Issued not yet Effective Accounting Standards
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 Septembersignificant 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 for the Company on January 1, 2023. We are currently evaluating the potential impact of ASU 2016-13 on the Company's financial statements by developing an implementation plan to include assessment of processes, portfolio segmentation, model development, system requirements and the identification of data and resource needs, among other things. The adoption of ASU 2016-13 could result in an increase in the allowance for loan losses as a 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. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments - Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in this ASU improve the codification by eliminating inconsistencies and providing clarifications. The amended guidance in this ASU related to credit losses is expected to be effective for the Company in conjunction with the adoption of the standard on January 1, 2023. The Company is currently evaluating the impact of these ASUs on the Company’s consolidated financial statements. While we are currently unable to
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2018 financial statement presentation2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in order to conform tothousands except per share amounts)
reasonably estimate the September 30, 2019 financial statement presentation. Total stockholders' equityimpact of adopting these ASUs, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and net income are unchanged due to these reclassifications.quality of the Company's loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.
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 September 30, 20192020 and December 31, 20182019 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 |
| Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Estimated
Fair
Value |
| U. S. Treasury and other U. S. government agencies | $ | 12,117 | | | $ | 1 | | | $ | (1) | | | $ | 12,117 | |
| State and municipal | 175,976 | | | 14,717 | | | (70) | | | 190,623 | |
| Corporate bonds | 15,750 | | | 167 | | | (108) | | | 15,809 | |
| Mortgage-backed securities | 41,240 | | | 348 | | | (1,212) | | | 40,376 | |
| Asset-backed securities | 15,199 | | | 0 | | | (231) | | | 14,968 |
| | | | | | | |
| Total | $ | 260,282 | | | $ | 15,233 | | | $ | (1,622) | | | $ | 273,893 | |
|
| | | | | | | | | | | | | | | |
| | September 30, 2019 |
| | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Estimated
Fair
Value |
| U. S. Treasury and other U. S. government agencies | $ | 310 |
| | $ | — |
| | $ | — |
| | $ | 310 |
|
| State and municipal | 210,537 |
| | 12,479 |
| | — |
| | 223,016 |
|
| Corporate bonds | 7,880 |
| | 64 |
| | (122 | ) | | 7,822 |
|
| Mortgage backed securities | 39,143 |
| | 379 |
| | (404 | ) | | 39,118 |
|
| Asset backed securities | 27,577 |
| | 11 |
| | (544 | ) | | 27,044 |
| Total | $ | 285,447 |
| | $ | 12,933 |
| | $ | (1,070 | ) | | $ | 297,310 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 |
| Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Estimated
Fair
Value |
| U. S. Treasury and other U. S. government agencies | $ | 59 | | | $ | 0 | | | $ | 0 | | | $ | 59 | |
| State and municipal | 186,283 | | | 10,413 | | | (36) | | | 196,660 | |
| Corporate bonds | 7,880 | | | 97 | | | (132) | | | 7,845 | |
| Mortgage-backed securities | 38,126 | | | 296 | | | (661) | | | 37,761 | |
| Asset-backed securities | 18,374 | | | 0 | | | (406) | | | 17,968 | |
| | | | | | | |
| Total | $ | 250,722 | | | $ | 10,806 | | | $ | (1,235) | | | $ | 260,293 | |
|
| | | | | | | | | | | | | | | |
| | 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 |
|
Securities pledged at September 30, 20192020 and December 31, 20182019 had a carrying amount of $58,341$43,406 and $70,097,$46,918, respectively, and were pledged to collateralize Federal Home Loan Bank ("FHLB") advances, Federal Reserve Bank ("FRB") advances and municipal deposits.
At 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 values of available for sale debt securities at September 30, 20192020 by contractual maturity are provided below. Actual maturities may differ from contractual maturities for mortgagemortgage- and asset backedasset-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.
Results from sales of securities were as follows:
| | | | | | | | | | | |
| Nine months ended |
| September 30, 2020 | | September 30, 2019 |
| Proceeds | $ | 103,901 | | | $ | 52,434 | |
| Gross gains | 810 | | | 475 | |
| Gross losses | (483) | | | (169) | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
| | | | Amortized Cost | | Estimated Fair Value | | Amortized
Cost | | Estimated
Fair Value |
| Due within one year | $ | 500 |
| | $ | 499 |
| Due within one year | $ | 12,567 | | | $ | 12,565 | |
| Due in one to five years | 1,035 |
| | 1,035 |
| Due in one to five years | 2,175 | | | 2,186 | |
| Due in five to ten years | 12,076 |
| | 12,447 |
| Due in five to ten years | 17,222 | | | 17,965 | |
| Due after ten years | 205,116 |
| | 217,167 |
| Due after ten years | 171,879 | | | 185,833 | |
| Mortgage backed securities | 39,143 |
| | 39,118 |
| |
| Asset backed securities | 27,577 |
| | 27,044 |
| |
| Mortgage-backed securities | | Mortgage-backed securities | 41,240 | | | 40,376 | |
| Asset-backed securities | | Asset-backed securities | 15,199 | | | 14,968 | |
| Total | $ | 285,447 |
| | $ | 297,310 |
| Total | $ | 260,282 | | | $ | 273,893 | |
The following table shows available for sale securities with unrealized losses and their estimated fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 20192020 and December 31, 2018,2019, 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 |
| September 30, 2020 | | | | | | | | | | | |
U. S. Treasury and other
U. S. government agencies | $ | 12,066 | | | $ | 1 | | | $ | 0 | | | $ | 0 | | | $ | 12,066 | | | $ | 1 | |
| State and municipal | 7,319 | | | 70 | | | 0 | | | 0 | | | 7,319 | | | 70 | |
| Corporate bonds | 9,142 | | | 107 | | | 500 | | | 1 | | | 9,642 | | | 108 | |
| Mortgage-backed securities | 6,613 | | | 282 | | | 20,982 | | | 930 | | | 27,595 | | | 1,212 | |
| Asset-backed securities | 790 | | | 1 | | | 14,092 | | | 230 | | | 14,882 | | | 231 | |
| Total temporarily impaired | $ | 35,930 | | | $ | 461 | | | $ | 35,574 | | | $ | 1,161 | | | $ | 71,504 | | | $ | 1,622 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | | | | | | | | | | |
U. S. Treasury and other
U. S. government agencies | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| State and municipal | 1,960 | | | 36 | | | 0 | | | 0 | | | 1,960 | | | 36 | |
| Corporate bonds | 0 | | | 0 | | | 2,499 | | | 132 | | | 2,499 | | | 132 | |
| Mortgage-backed securities | 16,104 | | | 286 | | | 9,081 | | | 375 | | | 25,185 | | | 661 | |
| Asset-backed securities | 0 | | | 0 | | | 17,682 | | | 406 | | | 17,682 | | | 406 | |
| Total temporarily impaired | $ | 18,064 | | | $ | 322 | | | $ | 29,262 | | | $ | 913 | | | $ | 47,326 | | | $ | 1,235 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2018 | | | | | | | | | | | |
U. S. Treasury and other U. S. government agencies | $ | — |
| | $ | — |
| | $ | 555 |
| | $ | 14 |
| | $ | 555 |
| | $ | 14 |
|
| State and municipal | 118,580 |
| | 2,263 |
| | 47,223 |
| | 1,907 |
| | 165,803 |
| | 4,170 |
|
| Corporate bonds | 2,526 |
| | 105 |
| | 492 |
| | 8 |
| | 3,018 |
| | 113 |
|
| Mortgage backed securities | 17,015 |
| | 99 |
| | 5,397 |
| | 149 |
| | 22,412 |
| | 248 |
|
| Asset backed securities | 20,351 |
| | 383 |
| | 7,255 |
| | 256 |
| | 27,606 |
| | 639 |
|
| Total temporarily impaired | $ | 158,472 |
| | $ | 2,850 |
| | $ | 60,922 |
| | $ | 2,334 |
| | $ | 219,394 |
| | $ | 5,184 |
|
Management has the intent and ability to hold all securities in an unrealized loss position for the foreseeable future, and the decline in fair value is largely due to changes in interest rates. TheAs the fair value is expected to recover as the securities approach their maturity date and/or market rates decline.decline, we do not consider these securities to be other-than-temporarily impaired at September 30, 2020. There were 5643 and 24247 securities in an unrealized loss position as of September 30, 20192020 and December 31, 2018,2019, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(Dollar amounts in thousands except per share amounts)
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans at September 30, 20192020 and December 31, 20182019 were comprised as follows:
| | | | | | | | | | | |
| September 30,
2020 | | December 31, 2019 |
| Commercial, Industrial and Agricultural | $ | 477,785 | | | $ | 245,515 | |
| Real Estate | | | |
| 1-4 Family Residential | 334,730 | | | 227,529 | |
| 1-4 Family HELOC | 101,492 | | | 96,228 | |
| Multi-family and Commercial | 864,756 | | | 536,845 | |
| Construction, Land Development and Farmland | 366,760 | | | 273,872 | |
| Consumer | 209,071 | | | 16,855 | |
| Other | 8,259 | | | 13,180 | |
| Gross loans | 2,362,853 | | | 1,410,024 | |
| Less: Deferred loan fees | 4,955 | | | 72 | |
| Less: Allowance for loan losses | 19,834 | | | 12,578 | |
| Loans, net | $ | 2,338,064 | | | $ | 1,397,374 | |
Activity in the allowance for loan losses by portfolio segment was as follows for the three months ended September 30, 2020 and September 30, 2019, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 at June 30, 2020 | $ | 4,675 | | $ | 8,407 | | $ | 2,126 | | $ | 1,454 | | $ | 975 | | $ | 584 | | $ | 16 | | $ | 18,237 | |
| Charge-offs | 0 | | 0 | | 0 | | (8) | | 0 | | (60) | | 0 | | (68) | |
| Recoveries | 88 | | 9 | | 4 | | 22 | | 12 | | 30 | | 0 | | 165 | |
| Provision | 249 | | (169) | | (175) | | 821 | | 498 | | 272 | | 4 | | 1,500 | |
Ending balance at September 30, 2020 | $ | 5,012 | | $ | 8,247 | | $ | 1,955 | | $ | 2,289 | | $ | 1,485 | | $ | 826 | | $ | 20 | | $ | 19,834 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Beginning balance at June 30, 2019 | $ | 1,881 | | $ | 4,713 | | $ | 2,707 | | $ | 1,455 | | $ | 686 | | $ | 188 | | $ | 36 | | $ | 11,666 | |
| Charge-offs | (2) | | 0 | | 0 | | (12) | | 0 | | (16) | | (21) | | (51) | |
| Recoveries | 48 | | 3 | | (201) | | 4 | | 0 | | 16 | | 200 | | 70 | |
| Provision | 372 | | 472 | | 7 | | (64) | | 18 | | (18) | | (181) | | 606 | |
Ending balance at September 30, 2019 | $ | 2,299 | | $ | 5,188 | | $ | 2,513 | | $ | 1,383 | | $ | 704 | | $ | 170 | | $ | 34 | | $ | 12,291 | |
|
| | | | | | | |
| | 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 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
Activity in the allowance for loan losses by portfolio segment was as follows for the nine months ended September 30, 20192020 and September 30, 2018,2019, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 at December 31, 2019 | $ | 2,529 | | | $ | 5,285 | | | $ | 2,649 | | | $ | 1,280 | | $ | 624 | | $ | 177 | | $ | 34 | | $ | 12,578 | |
| Charge-offs | (507) | | | 0 | | | (114) | | | (68) | | (98) | | (355) | | 0 | | (1,142) | |
| Recoveries | 126 | | | 20 | | | 8 | | | 769 | | 15 | | 60 | | 0 | | 998 | |
| Provision | 2,864 | | | 2,942 | | | (588) | | | 308 | | 944 | | 944 | | (14) | | 7,400 | |
Ending balance at September 30, 2020 | $ | 5,012 | | | $ | 8,247 | | | $ | 1,955 | | | $ | 2,289 | | $ | 1,485 | | $ | 826 | | $ | 20 | | $ | 19,834 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 at December 31, 2018 | $ | 1,751 |
| $ | 4,429 |
| $ | 2,500 |
| $ | 1,333 |
| $ | 656 |
| $ | 184 |
| $ | 39 |
| $ | 10,892 |
|
| Charge-offs | (170 | ) | — |
| — |
| (29 | ) | — |
| (37 | ) | (34 | ) | (270 | ) |
| Recoveries | 342 |
| 62 |
| — |
| 220 |
| 11 |
| 28 |
| 200 |
| 863 |
|
| Provision | 376 |
| 697 |
| 13 |
| (141 | ) | 37 |
| (5 | ) | (171 | ) | 806 |
|
| Ending balance at September 30, 2019 | $ | 2,299 |
| $ | 5,188 |
| $ | 2,513 |
| $ | 1,383 |
| $ | 704 |
| $ | 170 |
| $ | 34 |
| $ | 12,291 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Beginning balance at December 31, 2018 | $ | 1,751 | | | $ | 4,429 | | | $ | 2,500 | | | $ | 1,333 | | $ | 656 | | $ | 184 | | $ | 39 | | $ | 10,892 | |
| Charge-offs | (170) | | | 0 | | | 0 | | | (29) | | 0 | | (37) | | (34) | | (270) | |
| Recoveries | 342 | | | 62 | | | 0 | | | 220 | | 11 | | 28 | | 200 | | 863 | |
| Provision | 376 | | | 697 | | | 13 | | | (141) | | 37 | | (5) | | (171) | | 806 | |
Ending balance at September 30, 2019 | $ | 2,299 | | | $ | 5,188 | | | $ | 2,513 | | | $ | 1,383 | | $ | 704 | | $ | 170 | | $ | 34 | | $ | 12,291 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Beginning balance at December 31, 2017 | $ | 2,538 |
| $ | 3,166 |
| $ | 2,434 |
| $ | 773 |
| $ | 595 |
| $ | 183 |
| $ | 42 |
| $ | 9,731 |
|
| Charge-offs | (308 | ) | (76 | ) | (144 | ) | (36 | ) | (6 | ) | (24 | ) | (37 | ) | (631 | ) |
| Recoveries | 530 |
| 215 |
| 44 |
| 11 |
| 7 |
| 29 |
| 3 |
| 839 |
|
| Provision | (734 | ) | 813 |
| 56 |
| 573 |
| 24 |
| (2 | ) | 29 |
| 759 |
|
| Ending balance at September 30, 2018 | $ | 2,026 |
| $ | 4,118 |
| $ | 2,390 |
| $ | 1,321 |
| $ | 620 |
| $ | 186 |
| $ | 37 |
| $ | 10,698 |
|
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)
The allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 20192020 were as follows:
| | | | 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 | | 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 | | Allowance for loan losses | | | | | | | |
| Individually evaluated for impairment | $ | 580 |
| $ | — |
| $ | 17 |
| $ | — |
| $ | 50 |
| $ | — |
| $ | — |
| $ | 647 |
| Individually evaluated for impairment | $ | 764 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 764 | |
| Acquired with credit impairment | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| Acquired with credit impairment | 0 | | | 0 | | | 0 | | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Collectively evaluated for impairment | 1,719 |
| 5,188 |
| 2,496 |
| 1,383 |
| 654 |
| 170 | 34 |
| 11,644 |
| Collectively evaluated for impairment | 4,248 | | | 8,247 | | | 1,955 | | | 2,289 | | 1,485 | | 826 | 20 | | 19,070 | |
| Total | $ | 2,299 |
| $ | 5,188 |
| $ | 2,513 |
| $ | 1,383 |
| $ | 704 |
| $ | 170 |
| $ | 34 |
| $ | 12,291 |
| Total | $ | 5,012 | | | $ | 8,247 | | | $ | 1,955 | | | $ | 2,289 | | $ | 1,485 | | $ | 826 | | $ | 20 | | $ | 19,834 | |
| Loans | | Loans | | | | | | | |
| Individually evaluated for impairment | $ | 5,309 |
| $ | 2,428 |
| $ | 1,217 |
| $ | 1,997 |
| $ | 346 |
| $ | — |
| $ | — |
| $ | 11,297 |
| Individually evaluated for impairment | $ | 1,084 | | | $ | 2,537 | | | $ | 1,777 | | | $ | 1,687 | | $ | 316 | | $ | 592 | | $ | 0 | | $ | 7,993 | |
| Acquired with credit impairment | — |
| 218 |
| 822 |
| 201 |
| — |
| — |
| — |
| 1,241 |
| Acquired with credit impairment | 257 | | | 1,211 | | | 787 | | | 934 | | 14 | | 1,330 | | 0 | | 4,533 | |
| Collectively evaluated for impairment | 226,626 |
| 517,651 |
| 236,043 |
| 234,134 |
| 92,830 |
| 17,448 | 13,252 |
| 1,337,984 |
| Collectively evaluated for impairment | 476,444 | | | 861,008 | | | 364,196 | | | 332,109 | | 101,162 | | 207,149 | 8,259 | | 2,350,327 | |
| Total | $ | 231,935 |
| $ | 520,297 |
| $ | 238,082 |
| $ | 236,332 |
| $ | 93,176 |
| $ | 17,448 |
| $ | 13,252 |
| $ | 1,350,522 |
| Total | $ | 477,785 | | | $ | 864,756 | | | $ | 366,760 | | | $ | 334,730 | | $ | 101,492 | | $ | 209,071 | | $ | 8,259 | | $ | 2,362,853 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
The allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 20182019 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | $ | 755 | | | $ | 0 | | | $ | 17 | | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 772 | |
| Acquired with credit impairment | 0 | | | 0 | | | 0 | | | 0 | | 0 | | 0 | | 0 | | 0 | |
| Collectively evaluated for impairment | 1,774 | | | 5,285 | | | 2,632 | | | 1,280 | | 624 | | 177 | | 34 | | 11,806 | |
| Total | $ | 2,529 | | | $ | 5,285 | | | $ | 2,649 | | | $ | 1,280 | | $ | 624 | | $ | 177 | | $ | 34 | | $ | 12,578 | |
| Loans | | | | | | | | | | | |
| Individually evaluated for impairment | $ | 1,154 | | | $ | 3,439 | | | $ | 1,217 | | | $ | 1,536 | | $ | 374 | | $ | 28 | | $ | 0 | | $ | 7,748 | |
| Acquired with credit impairment | 0 | | | 215 | | | 813 | | | 195 | | 0 | | 0 | | 0 | | 1,223 | |
| Collectively evaluated for impairment | 244,361 | | | 533,191 | | | 271,842 | | | 225,798 | | 95,854 | | 16,827 | | 13,180 | | 1,401,053 | |
| Total | $ | 245,515 | | | $ | 536,845 | | | $ | 273,872 | | | $ | 227,529 | | $ | 96,228 | | $ | 16,855 | | $ | 13,180 | | $ | 1,410,024 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 55 |
|
| Acquired with credit impairment | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
| Collectively evaluated for impairment | 1,713 |
| 4,429 |
| 2,483 |
| 1,333 |
| 656 |
| 184 |
| 39 |
| 10,837 |
|
| Total | $ | 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 |
| $ | — |
| $ | 12 |
| $ | — |
| $ | 5,176 |
|
| Acquired with credit impairment | 40 |
| 232 |
| 1,751 |
| 262 |
| — |
| 11 |
| — |
| 2,296 |
|
| Collectively evaluated for impairment | 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 |
| $ | 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)
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Risk characteristics relevant to each portfolio segment are as follows:
Commercial,industrialand 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.
Multi-family and commercial real estate: Multi-family and commercial real estate 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 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)
1-4family residential real estate: Residential real estate loans represent loans to consumers or investors to finance a residence. These loans are typically financed on 15 to 30 year amortization terms, but generally with shorter maturities of 5 to 15 years. Many of these loans are extended to borrowers to finance their primary or secondary residence. Loans to an investor secured by a 1-4 family residence will be repaid from either the rental income from the property or from the sale of the property. This loan segment also includes closed-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home. Loans in this portfolio segment are underwritten and approved based on a number of credit quality criteria including limits on maximum Loan-to-Value ("LTV"), minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment.
1-4 family HELOC: This loan segment includes open-end home equity loans that are secured by a first or second mortgage on the borrower’s residence. This allows customers to borrow against the equity in their home utilizing a revolving line of credit. These loans are underwritten and approved based on a number of credit quality criteria including limits on maximum LTV, minimum credit scores, and maximum debt to income. Real estate market values as of the time the loan is made directly affect the amount of credit extended and, in addition, changes in these residential property values impact the depth of potential losses in this portfolio segment. Because of the revolving nature of these loans as well as the fact that many represent second mortgages, this portfolio segment can contain more risk than the amortizing 1-4 family residential real estate loans.
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.
NonaccrualNon-accrual loans by class of loan were as follows at September 30, 20192020 and December 31, 2018:2019:
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Commercial, Industrial and Agricultural | $ | 791 | | | $ | 572 | |
| Multi-family and Commercial Real Estate | 1,532 | | | 1,276 | |
| Construction, Land Development and Farmland | 1,100 | | | 555 | |
| 1-4 Family Residential Real Estate | 1,591 | | | 1,344 | |
| 1-4 Family HELOC | 239 | | | 296 | |
| Consumer | 1,485 | | | 28 | |
| Total | $ | 6,738 | | | $ | 4,071 | |
|
| | | | | | | |
| | September 30, 2019 | | December 31, 2018 |
| Commercial, Industrial and Agricultural | $ | 601 |
| | $ | 279 |
|
| Multi-family and Commercial Real Estate | 1,310 |
| | — |
|
| Construction, Land Development and Farmland | 555 |
| | 1,294 |
|
| 1-4 Family Residential Real Estate | 1,538 |
| | 2,556 |
|
| 1-4 Family HELOC | 346 |
| | — |
|
| Consumer | 30 |
| | 65 |
|
| Total | $ | 4,380 |
| | $ | 4,194 |
|
Performing nonaccrualnon-accrual loans totaled $1,076$2,926 and $2,010$1,332 at September 30, 20192020 and December 31, 2018,2019, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(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 September 30, 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unpaid
Principal
Balance | | Recorded
Investment
with no
Allowance for Loan Losses
Recorded | | Recorded
Investment
with
Allowance for Loan Losses
Recorded | | Total
Recorded
Investment | | Related
Allowance for Loan Losses |
| Commercial, Industrial and Agricultural | $ | 2,575 | | | $ | 436 | | | $ | 905 | | | $ | 1,341 | | | $ | 764 | |
| Multi-family and Commercial Real Estate | 5,837 | | | 3,748 | | | 0 | | | 3,748 | | | 0 | |
| Construction, Land Development and Farmland | 3,032 | | | 2,564 | | | 0 | | | 2,564 | | | 0 | |
| 1-4 Family Residential Real Estate | 3,322 | | | 2,621 | | | 0 | | | 2,621 | | | 0 | |
| 1-4 Family HELOC | 436 | | | 330 | | | 0 | | | 330 | | | 0 | |
| Consumer | 3,819 | | | 1,922 | | | 0 | | | 1,922 | | | 0 | |
| Total | $ | 19,021 | | | $ | 11,621 | | | $ | 905 | | | $ | 12,526 | | | $ | 764 | |
|
| | | | | | | | | | | | | | | | | | | |
| | Unpaid Principal Balance | | Recorded Investment with no Allowance Recorded | | Recorded Investment with Allowance Recorded | | Total Recorded Investment | | Related Allowance |
| Commercial, Industrial and Agricultural | $ | 5,309 |
| | $ | 754 |
| | $ | 4,555 |
| | $ | 5,309 |
| | $ | 580 |
|
| Multi-family and Commercial Real Estate | 2,655 |
| | 2,646 |
| | — |
| | 2,646 |
| | — |
|
| Construction, Land Development and Farmland | 2,356 |
| | 1,868 |
| | 171 |
| | 2,039 |
| | 17 |
|
| 1-4 Family Residential Real Estate | 2,286 |
| | 2,198 |
| | — |
| | 2,198 |
| | — |
|
| 1-4 Family HELOC | 348 |
| | 296 |
| | 50 |
| | 346 |
| | 50 |
|
| Total | $ | 12,954 |
| | $ | 7,762 |
| | $ | 4,776 |
| | $ | 12,538 |
| | $ | 647 |
|
Individually impaired loans by class of loans were as follows at December 31, 2018:2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Unpaid
Principal
Balance | | Recorded
Investment
with no
Allowance for Loan Losses
Recorded | | Recorded
Investment
with
Allowance for Loan Losses
Recorded | | Total
Recorded
Investment | | Related
Allowance for Loan Losses |
| Commercial, Industrial and Agricultural | $ | 1,154 | | | $ | 5 | | | $ | 1,149 | | | $ | 1,154 | | | $ | 755 | |
| Multi-family and Commercial Real Estate | 3,746 | | | 3,654 | | | 0 | | | 3,654 | | | 0 | |
| Construction, Land Development and Farmland | 2,347 | | | 1,859 | | | 171 | | | 2,030 | | | 17 | |
| 1-4 Family Residential Real Estate | 1,852 | | | 1,731 | | | 0 | | | 1,731 | | | 0 | |
| 1-4 Family HELOC | 376 | | | 374 | | | 0 | | | 374 | | | 0 | |
| Consumer | 31 | | | 28 | | | 0 | | | 28 | | | 0 | |
| Total | $ | 9,506 | | | $ | 7,651 | | | $ | 1,320 | | | $ | 8,971 | | | $ | 772 | |
|
| | | | | | | | | | | | | | | | | | | |
| | 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 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
The average balances of impaired loans and the interest income recognized for the three and nine months ended September 30, 20192020 and 20182019 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2020 | | 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans with an allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial, Industrial and Agricultural | $ | 947 | | | $6 | | $ | 2,435 | | | $112 | | $ | 975 | | | $32 | | $ | 1,384 | | | $342 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Multi-family and Commercial Real Estate | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Construction, Land Development and Farmland | 0 | | | 0 | | | 172 | | | 0 | | | 43 | | | 0 | | | 172 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1-4 Family Residential Real Estate | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1-4 Family HELOC | 0 | | | 0 | | | 25 | | | 0 | | | 0 | | | 0 | | | 13 | | | 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer | 0 | | | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | 947 | | | 6 | | | 2,631 | | | 112 | | | 1,019 | | | 32 | | | 1,568 | | | 343 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Impaired loans with no allowance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial, Industrial and Agricultural | 594 | | | 42 | | | 672 | | | 9 | | | 356 | | | 56 | | | 537 | | | 33 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Multi-family and Commercial Real Estate | 4,375 | | | 63 | | | 3,474 | | | 46 | | | 4,138 | | | 278 | | | 2,838 | | | 141 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Construction, Land Development and Farmland | 2,949 | | | 28 | | | 1,797 | | | 21 | | | 2,471 | | | 115 | | | 2,399 | | | 168 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1-4 Family Residential Real Estate | 3,002 | | | 54 | | | 2,124 | | | 26 | | | 2,631 | | | 154 | | | 1,924 | | | 88 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1-4 Family HELOC | 331 | | | 0 | | | 296 | | | 0 | | | 367 | | | 0 | | | 148 | | | 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer | 2,118 | | | 68 | | | 15 | | | 1 | | | 1,076 | | | 205 | | | 16 | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Subtotal | $ | 13,369 | | | $255 | | $ | 8,378 | | | $103 | | $ | 11,039 | | | $808 | | $ | 7,862 | | | $ | 436 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | $ | 14,316 | | | $ | 261 | | | $ | 11,009 | | | $ | 215 | | | $ | 12,058 | | | $840 | | $ | 9,430 | | | $ | 779 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | |
| | 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. 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.
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
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 affectedeffected 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.
Loans not falling in the criteria above are considered to be pass-rated loans.
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 September 30, 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Pass | | Special
Mention | | Substandard | | | | Total |
| Commercial, Industrial and Agricultural | $ | 474,199 | | | $ | 1,534 | | | $ | 2,052 | | | | | $ | 477,785 | |
| 1-4 Family Residential Real Estate | 331,930 | | | 5 | | | 2,795 | | | | | 334,730 | |
| 1-4 Family HELOC | 101,176 | | | 0 | | | 316 | | | | | 101,492 | |
| Multi-family and Commercial Real Estate | 859,739 | | | 663 | | | 4,354 | | | | | 864,756 | |
| Construction, Land Development and Farmland | 365,135 | | | 0 | | | 1,625 | | | | | 366,760 | |
| Consumer | 207,016 | | | 7 | | | 2,048 | | | | | 209,071 | |
| Other | 6,739 | | | 1,520 | | | 0 | | | | | 8,259 | |
| Total | $ | 2,345,934 | | | $ | 3,729 | | | $ | 13,190 | | | | | $ | 2,362,853 | |
|
| | | | | | | | | | | | | | | |
| | 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 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
Credit quality indicators by class of loan were as follows at December 31, 2018:2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| Pass | | Special
Mention | | Substandard | | Total |
| Commercial, Industrial and Agricultural | $ | 241,089 | | | $ | 2,382 | | | $ | 2,044 | | | $ | 245,515 | |
| 1-4 Family Residential Real Estate | 225,809 | | | 0 | | | 1,720 | | | 227,529 | |
| 1-4 Family HELOC | 95,678 | | | 0 | | | 550 | | | 96,228 | |
| Multi-family and Commercial Real Estate | 531,055 | | | 1,519 | | | 4,271 | | | 536,845 | |
| Construction, Land Development and Farmland | 272,440 | | | 0 | | | 1,432 | | | 273,872 | |
| Consumer | 16,634 | | | 0 | | | 221 | | | 16,855 | |
| Other | 13,180 | | | 0 | | | 0 | | | 13,180 | |
| Total | $ | 1,395,885 | | | $ | 3,901 | | | $ | 10,238 | | | $ | 1,410,024 | |
|
| | | | | | | | | | | | | | | |
| | 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 |
|
None of the Company's loans had a risk rating of "Doubtful" or "Loss" as of September 30, 2020 or December 31, 2019.
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)
Past due status by class of loan was as follows at September 30, 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 30-59 Days
Past Due | | 60-89 Days
Past Due | | 90+ Days
Past Due | | Total
Past Due | | Current | | Total Loans |
| Commercial, Industrial and Agricultural | $ | 219 | | | $ | 0 | | | $ | 412 | | | $ | 631 | | | $ | 477,154 | | | $ | 477,785 | |
| 1-4 Family Residential Real Estate | 1,006 | | | 544 | | | 318 | | | 1,868 | | | 332,862 | | | 334,730 | |
| 1-4 Family HELOC | 0 | | | 0 | | | 198 | | | 198 | | | 101,294 | | | 101,492 | |
| Multi-family and Commercial Real Estate | 0 | | | 0 | | | 1,023 | | | 1,023 | | | 863,733 | | | 864,756 | |
| Construction, Land Development and Farmland | 0 | | | 684 | | | 205 | | | 889 | | | 365,871 | | | 366,760 | |
| Consumer | 389 | | | 767 | | | 617 | | | 1,773 | | | 207,298 | | | 209,071 | |
| Other | 0 | | | 0 | | | 0 | | | 0 | | | 8,259 | | | 8,259 | |
| Total | $ | 1,614 | | | $ | 1,995 | | | $ | 2,773 | | | $ | 6,382 | | | $ | 2,356,471 | | | $ | 2,362,853 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 30-59 Days Past Due | | 60-89 Days Past Due | | 90+ Days Past Due | | Total Past Due | | Current | | Total Loans |
| Commercial, Industrial and Agricultural | $ | 5 |
| | $ | 133 |
| | $ | 579 |
| | $ | 717 |
| | $ | 231,218 |
| | $ | 231,935 |
|
| 1-4 Family Residential Real Estate | 539 |
| | 514 |
| | 426 |
| | 1,479 |
| | 234,853 |
| | 236,332 |
|
| 1-4 Family HELOC | 42 |
| | — |
| | 346 |
| | 388 |
| | 92,788 |
| | 93,176 |
|
| Multi-family and Commercial Real Estate | — |
| | 505 |
| | 558 |
| | 1,063 |
| | 519,234 |
| | 520,297 |
|
| Construction, Land Development and Farmland | 136 |
| | — |
| | 171 |
| | 307 |
| | 237,775 |
| | 238,082 |
|
| Consumer | 20 |
| | 29 |
| | 10 |
| | 59 |
| | 17,389 |
| | 17,448 |
|
| Other | — |
| | — |
| | — |
| | — |
| | 13,252 |
| | 13,252 |
|
| Total | $ | 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, 2018:2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 30-59 Days
Past Due | | 60-89 Days
Past Due | | 90+ Days
Past Due | | Total
Past Due | | Current | | Total Loans |
| Commercial, Industrial and Agricultural | $ | 79 | | | $ | 4 | | | $ | 572 | | | $ | 655 | | | $ | 244,860 | | | $ | 245,515 | |
| 1-4 Family Residential Real Estate | 501 | | | 236 | | | 229 | | | 966 | | | 226,563 | | | 227,529 | |
| 1-4 Family HELOC | 0 | | | 0 | | | 296 | | | 296 | | | 95,932 | | | 96,228 | |
| Multi-family and Commercial Real Estate | 485 | | | 0 | | | 558 | | | 1,043 | | | 535,802 | | | 536,845 | |
| Construction, Land Development and Farmland | 255 | | | 0 | | | 339 | | | 594 | | | 273,278 | | | 273,872 | |
| Consumer | 38 | | | 26 | | | 64 | | | 128 | | | 16,727 | | | 16,855 | |
| Other | 0 | | | 0 | | | 0 | | | 0 | | | 13,180 | | | 13,180 | |
| Total | $ | 1,358 | | | $ | 266 | | | $ | 2,058 | | | $ | 3,682 | | | $ | 1,406,342 | | | $ | 1,410,024 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 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 one1 loan totaling $111 past due 90 days or more and still accruing interest at September 30, 2019. Additionally, credit card balances2020 totaling $10 were$38. At December 31, 2019, there was 1 loan totaling $64 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2018.2019
(Dollar amounts in thousands except per share amounts)
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("TDRs") during the first nine months of 2020. There were 0 modifications in the three months ending September 30, 2020. There were 0 loans that were modified as TDRs during the three or nine months ended September 30, 2018:2019.
| | | | | | | | | | | | | | | | | |
| Number of Contracts | | Pre-Modification Outstanding Recorded Investments | | Post-Modification Outstanding Recorded Investments |
| September 30, 2020 | | | | | |
| Commercial, Industrial and Agricultural | 1 | | | $ | 150 | | | $ | 150 | |
| Multi-family and Commercial Real Estate | 1 | | | 721 | | | 721 | |
| 1-4 Family Residential | 1 | | | 394 | | | 394 | |
| Total | 3 | | | $ | 1,265 | | | $ | 1,265 | |
|
| | | | | | | | | | |
| | 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 |
|
One modificationThe Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, and subsequent regulatory guidance provide that occurred during the ninefinancial institutions may elect to account for certain loan modifications due to COVID-19 as not TDRs. The Company had applied this guidance to approve initial modifications in April and May 2020 for loans with principal balances of $530.7 million. The majority of these modifications were for a period of up to three months endedand contained either interest-only periods or full payment deferrals. Through September 30, 2018, consisted2020, further modifications were approved for $21.8 million of an interest only monthly payment restructurethe loans previously modified. Additional modifications of these loans are likely to be executed in the fourth quarter of 2020.
The CARES Act provides over $2.0 trillion in emergency economic relief to individuals and had no effect onbusinesses impacted by the allowance forCOVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to administer new loan losses or interest income.programs including, but not limited to, the guarantee of loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). Upon completion of the FABK Transaction as disclosed in Note 12, we assumed their qualified SBA lender status. The other modification was a restructureCompany originated 893 loans amounting to $83 million of five loans, including purchased credit impairedPPP loans in 2020 which are included in the commercial, industrial, and agricultural segment. PPP loans do not have a charge off occurredcorresponding allowance as they are fully guaranteed by the SBA. Fees range from 1% to 5% of $76, resulting in one remainingthe loan and are deferred and amortized over the life of $585.the loan. As PPP loans are forgiven, any deferred loan fee or cost is recognized related to each individual loan.
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)
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 September 30, 20192020 and December 31, 2018:2019:
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Commercial, Industrial and Agricultural | $ | 989 | | | $ | 0 | |
| Multi-family and Commercial Real Estate | 2,243 | | | 217 | |
| Construction, Land Development and Farmland | 1,003 | | | 1,021 | |
| 1-4 Family Residential Real Estate | 1,211 | | | 231 | |
| 1-4 Family HELOC | 18 | | | 0 | |
| Consumer | 2,105 | | | 0 | |
| Total outstanding balance | 7,569 | | | 1,469 | |
| Less remaining purchase discount | 3,036 | | | 246 | |
| Allowance for loan losses | 0 | | | 0 | |
| Carrying amount, net of allowance for loan losses and remaining purchase discounts | $ | 4,533 | | | $ | 1,223 | |
|
| | | | | | | |
| | 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 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
Activity related to the accretable portion of the purchase discount on loans acquired with deteriorated credit quality is as follows for the nine months ended September 30, 20192020 and 2018:2019:
| | | | | | | | | | | |
| 2020 | | 2019 |
| Balance at January 1, | $ | 98 | | | $ | 110 | |
| New loans purchased | 870 | | | 0 | |
| Year-to-date settlements | (137) | | | (12) | |
| Balance at September 30, | $ | 831 | | | $ | 98 | |
Year-to-date settlements include both loans that were charged-off as well as loans that were paid off.
|
| | | | | | | |
| | 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 ESTATELEASES
At September 30, 2019On January 1, 2020, the Company adopted ASU No. 2016-02 “Leases (Topic 842)” and December 31, 2018,all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU 2018-11 and did not adjust prior periods for ASC 842. Leases with initial terms of less than one year are not recorded on the balance sheet.
The Company’s long-term lease agreements are classified as operating leases. Certain of other real estate owned includes $1,943these leases offer the option to extend the lease term and $1,000, respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possessionthe Company has included such extensions in its calculation of the properties. Duringlease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
The implementation of the new standard resulted in recognition of a right-of-use asset of $12.0 million and a lease liability of $11.9 million at the date of adoption, which is related to the Company’s lease of premises used in operations. The Company used a discount rate of 4.5% in determining the right-of-use asset and lease liability as of January 1, 2020.
Information related to the Company's operating leases is presented below:
| | | | | |
| |
| September 30, 2020 |
| Operating leases right of use assets | $ | 14,619 | |
| Operating leases liabilities | $ | 15,756 | |
| Weighted average remaining lease term (in years) | 6.14 |
| Weighted average discount rate | 4.34 | % |
The components of lease expense included in occupancy expenses for the three and nine months ended September 30, 2019, $95 and $943, respectively,2020, 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.as follows:
In connection with the merger with Community First, the Company acquired three real estate parcels. | | | | | | | | | | | |
| Three Months Ended September 30, 2020 | | Nine Months Ended September 30, 2020 |
| Operating lease cost | $ | 851 | | | $ | 2,333 | |
| Short-term lease cost | 2 | | | 2 | |
| Variable lease cost | 98 | | 276 | |
| Total lease cost | $ | 951 | | | $ | 2,611 | |
The Company valued the properties at their estimated fair values less costsdoes not separate lease and non-lease components and instead elects to sell which totaled $1,650. As of September 30, 2019, only one parcel remains withaccount for them as a related book value of $1,000.single lease component. Variable lease cost primarily represents variable payments such as common area maintenance, utilities, and property taxes.
Expenses related to other real estate totaled $15 and $30Lease expense for the three and nine months ended September 30, 2019, respectively, comparedprior to $25the adoption of ASU 2016-02, was $669 and $38 for the three and nine months ended September 30, 2018,$2,039, respectively.
NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES
Financial accounting standards relating to fair value measurements establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
| |
Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(Dollar amounts in thousands except per share amounts)
NOTE 5 - FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)
Level 2 InputsA maturity analysis of operating lease liabilities and a reconciliation of undiscounted cash flows to the valuation methodology include:total operating lease liability is as follows:
•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. |
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.
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)
The following table sets forth the Company’s major categories of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of September 30, 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) |
| 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 |
|
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)
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 September 30, 2019 and December 31, 2018:
|
| | | | | |
| Lease payments due on or before | Valuation
Techniques (1)
| | Significant
Unobservable Inputs
| | Range
(Weighted Average)
September 30, 2020 |
Impaired loansSeptember 30, 2021 | Appraisal | $ | Estimated costs to sell3,155 | | 10% |
Other real estate ownedSeptember 30, 2022 | Appraisal | 2,755 | Estimated costs to sell |
| September 30, 2023 | | 10%2,716 | |
| September 30, 2024 | | 2,703 | |
| September 30, 2025 | | 2,372 | |
| Thereafter | | 4,289 | |
| Total undiscounted cash flows | | 17,990 | |
| | |
(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. EstimatedDiscount on cash flows change and appraised values of the assets or collateral underlying the loans will be sensitive to changes. | | (2,234) | |
| Total lease liability | | $ | 15,756 | |
Carrying amounts and estimated fair values of financial instruments not reported at fair value at September 30, 2019 and December 31, 2018 were as follows:
|
| | | | | | | | | | | | | | | | | | | |
| 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 | $ | 51,247 |
| | $ | 51,247 |
| | $ | 51,247 |
| | $ | — |
| | $ | — |
|
| Federal funds sold | 73 |
| | 73 |
| | — |
| | 73 |
| | — |
|
| Loans, net | 1,338,392 |
| | 1,326,932 |
| | — |
| | — |
| | 1,326,932 |
|
| Mortgage loans held for sale | 16,757 |
| | 17,052 |
| | — |
| | 17,052 |
| | — |
|
| Accrued interest receivable | 7,488 |
| | 7,488 |
| | — |
| | 7,488 |
| | — |
|
| Restricted equity securities | 11,279 |
| | 11,279 |
| | — |
| | 11,279 |
| | — |
|
| Financial liabilities | | | | | | | | | |
| Deposits | $ | 1,610,633 |
| | $ | 1,612,749 |
| | $ | — |
| | $ | — |
| | $ | 1,612,749 |
|
| Accrued interest payable | 1,610 |
| | 1,610 |
| | — |
| | 1,610 |
| | — |
|
| Subordinate debentures | 11,665 |
| | 12,357 |
| | — |
| | — |
| | 12,357 |
|
| Federal Home Loan Bank advances | 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 |
|
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)
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
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. 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”), 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 the Bank, all outstanding stock options of 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.
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 $4132020, the Company entered into a five year lease with a related party that commences January 1, 2021 and has a base annual rental of unrecognized future compensation expense to$211,000, with a 2.5% per year increase. This lease may be recognized related to stock options.
Restricted Stock Awards
The following table showsterminated December 31, 2021 with a 90-day notice. As the activity related to non-vested restricted stock awards for the nine months ended September 30, 2019:
|
| | | | | | |
| | Shares | | Weighted Average Grant-Date
Fair Value |
| Non-vested shares at January 1, 2019 | 110,660 |
| | $ | 24.28 |
|
| Granted | 9,500 |
| | 22.01 |
| Vested | (21,450 | ) | | 19.31 |
|
| Forfeited | (7,750 | ) | | 23.25 |
| Non-vested shares at September 30, 2019 | 90,960 |
| | $ | 25.31 |
|
The non-vested restricted 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 forthlease has not yet commenced, it is not included 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.lease payments due above.
As of September 30, 2019, there was $2,066 of unrecognized compensation cost related to non-vested restricted 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 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 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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 |
| | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| September 30, 2019 | | | | | | | | | | | |
| Company | | | | | | | | | | | |
| Tier I leverage | $ | 171,789 |
| | 9.85 | % | | $ | 69,762 |
| | 4.00 | % | | $ | 87,203 |
| | 5.00 | % |
| Common equity tier 1 | 160,124 |
| | 10.85 | % | | 103,306 |
| | 7.00 | % | | 95,927 |
| | 6.50 | % |
| Tier I risk-based capital | 171,789 |
| | 11.64 | % | | 125,447 |
| | 8.50 | % | | 118,068 |
| | 8.00 | % |
| Total risk-based capital | 184,505 |
| | 12.51 | % | | 154,860 |
| | 10.50 | % | | 147,486 |
| | 10.00 | % |
| | | | | | | | | | | | |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 166,265 |
| | 9.55 | % | | $ | 69,654 |
| | 4.00 | % | | $ | 87,067 |
| | 5.00 | % |
| Common equity tier 1 | 166,265 |
| | 11.29 | % | | 103,082 |
| | 7.00 | % | | 95,719 |
| | 6.50 | % |
| Tier I risk-based capital | 166,265 |
| | 11.29 | % | | 125,171 |
| | 8.50 | % | | 117,808 |
| | 8.00 | % |
| Total risk-based capital | 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 |
| | 4.00 | % | | $ | 81,347 |
| | 5.00 | % |
| Common equity tier 1 | 157,273 |
| | 11.59 | % | | 86,507 |
| | 6.38 | % | | 88,203 |
| | 6.50 | % |
| Tier I risk-based capital | 168,876 |
| | 12.44 | % | | 106,905 |
| | 7.88 | % | | 108,602 |
| | 8.00 | % |
| Total risk-based capital | 180,193 |
| | 13.28 | % | | 133,991 |
| | 9.88 | % | | 135,688 |
| | 10.00 | % |
| | | | | | | | | | | | |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 165,308 |
| | 10.17 | % | | $ | 65,018 |
| | 4.00 | % | | $ | 81,272 |
| | 5.00 | % |
| Common equity tier 1 | 165,308 |
| | 12.19 | % | | 86,451 |
| | 6.38 | % | | 88,146 |
| | 6.50 | % |
| Tier I risk-based capital | 165,308 |
| | 12.19 | % | | 106,792 |
| | 7.88 | % | | 108,488 |
| | 8.00 | % |
| Total risk-based capital | 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 | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2019 | | 2018 | | 2019 | | 2018 |
| Basic EPS Computation | | | | | | | |
| Net income attributable to common shareholders | $ | 4,000 |
| | $ | 4,082 |
| | $ | 12,063 |
| | $ | 9,962 |
|
| Weighted average common shares outstanding | 11,104,918 |
| | 11,406,753 |
| | 11,247,921 |
| | 11,378,755 |
|
| Basic earnings per common share | $ | 0.36 |
| | $ | 0.36 |
| | $ | 1.07 |
| | $ | 0.88 |
|
| Diluted EPS Computation | | | | | | | |
| Net income attributable to common shareholders | $ | 4,000 |
| | $ | 4,082 |
| | $ | 12,063 |
| | $ | 9,962 |
|
| Weighted average common shares outstanding | 11,104,918 |
| | 11,406,753 |
| | 11,247,921 |
| | 11,378,755 |
|
| Dilutive effect of stock options, restricted shares and employee stock purchase plan | 72,449 |
| | 91,426 |
| | 66,445 |
| | 83,944 |
|
| Adjusted weighted average common shares outstanding | 11,177,367 |
| | 11,498,179 |
| | 11,314,366 |
| | 11,462,699 |
|
| Diluted earnings per common share | $ | 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
September 30, 2018 |
| | Retail Banking | | Residential Mortgage Banking | | Elimination Entries | | Consolidated |
| Net interest income | $ | 13,295 |
| | $ | 171 |
| | $ | — |
| | $ | 13,466 |
|
| Provision for loan losses | 322 |
| | — |
| | — |
| | 322 |
|
| Noninterest income | 1,379 |
| | 1,449 |
| | (51 | ) | | 2,777 |
|
| Noninterest expense (excluding merger expense) | 9,614 |
| | 2,466 |
| | — |
| | 12,080 |
|
| Merger expense | 82 |
| | — |
| | — |
| | 82 |
|
| Income tax expense (benefit) | 574 |
| | (55 | ) | | — |
| | 519 |
|
| Net income (loss) | 4,082 |
| | (791 | ) | | (51 | ) | | 3,240 |
|
| Noncontrolling interest in net loss of subsidiary | — |
| | 791 |
| | 51 |
| | 842 |
|
| Net income attributable to common shareholders | $ | 4,082 |
| | $ | — |
| | $ | — |
| | $ | 4,082 |
|
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, 2019 |
| | Retail Banking | | Residential Mortgage Banking | | Elimination Entries | | Consolidated |
| Net interest income | $ | 40,986 |
| | $ | 352 |
| | $ | — |
| | $ | 41,338 |
|
| Provision for loan losses | 806 |
| | — |
| | — |
| | 806 |
|
| Noninterest income | 4,226 |
| | 3,187 |
| | (17 | ) | | 7,396 |
|
| Noninterest expense (excluding merger expense) | 30,300 |
| | 8,317 |
| | — |
| | 38,617 |
|
| Merger expense | 302 |
| | — |
| | — |
| | 302 |
|
| Income tax expense (benefit) | 1,741 |
| | (311 | ) | | — |
| | 1,430 |
|
| Net income (loss) | 12,063 |
| | (4,467 | ) | | (17 | ) | | 7,579 |
|
| Noncontrolling interest in net loss of subsidiary | — |
| | 4,467 |
| | 17 |
| | 4,484 |
|
| Net income attributable to common shareholders | $ | 12,063 |
| | $ | — |
| | $ | — |
| | $ | 12,063 |
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018
(Dollar amounts in thousands except per share amounts)
NOTE 9 - SEGMENT REPORTING (CONTINUED)
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended
September 30, 2018 |
| | Retail Banking | | Residential Mortgage Banking | | Elimination Entries | | Consolidated |
| Net interest income | $ | 39,529 |
| | $ | 723 |
| | $ | — |
| | $ | 40,252 |
|
| Provision for loan losses | 759 |
| | — |
| | — |
| | 759 |
|
| Noninterest income | 3,966 |
| | 4,190 |
| | (134 | ) | | 8,022 |
|
| Noninterest expense (excluding merger expense) | 28,454 |
| | 7,169 |
| | — |
| | 35,623 |
|
| Merger expense | 2,742 |
| | — |
| | — |
| | 2,742 |
|
| Income tax expense (benefit) | 1,578 |
| | (147 | ) | | — |
| | 1,431 |
|
| Net income | 9,962 |
| | (2,109 | ) | | (134 | ) | | 7,719 |
|
| Noncontrolling interest in net income of subsidiary | — |
| | 2,109 |
| | 134 |
| | 2,243 |
|
| Net income attributable to common shareholders | $ | 9,962 |
| | $ | — |
| | $ | — |
| | $ | 9,962 |
|
NOTE 105 - 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.
Interest Rate Swaps Designated as Cash Flow Hedges
Interest rate swaps with notional amounts totaling $60,000$160,000 as of September 30, 20192020 were designated as cash flow hedges of certain short-term interest bearinginterest-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. NaN gains or losses were reclassified from accumulated other comprehensive income into net income during the periods presented.
Summary information related to the interest rate swaps designated as cash flow hedges as of September 30, 2019,2020, is as follows:
| | | | | |
| Notional amounts | $ | 160,000 | |
| Weighted average pay rates | 2.050 | % |
| Weighted average receive rates | 0.390 | % |
| Weighted average maturity | 3.35 years |
| Unrealized losses | $ | 8,526 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
|
| | | |
| Notional amounts | $ | 60,000 |
|
| Weighted average pay rates | 3.338 | % |
| Weighted average receive rates | 2.460 | % |
| Weighted average maturity | 3.75 years |
|
| Unrealized losses | $ | 3,328 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Notional Amount | | Fair Value | | Notional Amount | | Fair Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Included in other liabilities: | | | | | | | |
| Interest rate swaps related to: | | | | | | | |
| Subordinated debentures | $ | 10,000 | | | $ | (750) | | | $ | 10,000 | | | $ | (439) | |
| Short-term interest-bearing liabilities | 150,000 | | | (7,776) | | | 100,000 | | | (1,639) | |
| Total included in other liabilities | $ | 160,000 | | | $ | (8,526) | | | $ | 110,000 | | | $ | (2,078) | |
Cash Flow Hedges
The following table presents the net gains (losses) recorded in accumulated other comprehensive income and the Consolidated Statements of Income, net of tax, relating to the cash flow derivative instruments for the three and nine months ended September 30, 2019:2020 and 2019, respectively:
|
| | | | | | | | | | | |
| | 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) |
| September 30, 2019 | | | | | |
| Interest rate contracts | $ | (2,175 | ) | | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Interest rate swaps-subordinate debentures | $ | 51 | | | $ | (42) | | | $ | (230) | | | $ | (264) | |
| Interest rate swaps-interest-bearing liabilities | 324 | | | (233) | | | (4,532) | | | (1,342) | |
| $ | 375 | | | $ | (275) | | | $ | (4,762) | | | $ | (1,606) | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Fair Value Hedges
SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018
(Dollar amounts in thousands except per share amounts)
NOTE 10 - DERIVATIVES (CONTINUED)
The following table reflectsSummary information related to the cash flowfair value hedges included in the Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively:2020, is as follows:
| | | | | |
| Notional amounts | $ | 19,345 | |
| Weighted average pay rates | 3.51 | % |
| Weighted average receive rates | 1.21 | % |
| Weighted average maturity | 8.34 years |
| Unrealized losses | $ | 1,690 | |
|
| | | | | | | | | | | | | | | |
| | 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 nine months ended September 30, 2019 and 2018, respectively:
|
| | | | | | | | | |
| 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 September 30, 20192020 and December 31, 2018,2019, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Notional Amount | | Fair Value | | Notional Amount | | Fair Value |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Included in other liabilities: | | | | | | | |
| Interest rate swaps related to investments | 19,345 | | | (1,690) | | | 19,605 | | | (630) | |
| Total included in other liabilities | $ | 19,345 | | | $ | (1,690) | | | $ | 19,605 | | | $ | (630) | |
The following table reflects the fair value hedges and the underlying hedged items included in the Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Item | Location | | 2020 | | 2019 | | 2020 | | 2019 |
| Interest rate swaps - securities | Interest on investment securities, nontaxable | | $ | (118) | | | $ | (20) | | | $ | (243) | | | $ | (21) | |
| Hedged item - securities | Interest on investment securities, nontaxable | | $ | 118 | | | $ | 20 | | | $ | 243 | | | $ | 21 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
|
| | | | | | | | | | | | | | | |
| | September 30, 2019 | | December 31, 2018 |
| | Notional Amount | | Fair Value | | Notional Amount | | Fair Value |
| Included in other assets: | | | | | | | |
| Interest rate swaps related to investments | $ | — |
| | $ | — |
| | $ | 16,902 |
| | $ | 467 |
|
| Total included in other assets | $ | — |
| | $ | — |
| | $ | 16,902 |
| | $ | 467 |
|
| | | | | | | | |
| Included in other liabilities: | | | | | | | |
| Interest rate swaps related to investments | 19,605 |
| | 945 |
| | 4,203 |
| | 30 |
|
| Total included in other liabilities | $ | 19,605 |
| | $ | 945 |
| | $ | 4,203 |
| | $ | 30 |
|
NOTE 6 - STOCK-BASED COMPENSATION
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 Bank common stock to employees and organizers and authorized the issuance of Bank common stock upon the exercise of such 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 Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") approved the Commerce Union Bancshares, Inc. Amended and Restated Stock Option Plan (the “A&R Plan”), which permits the grant of awards with respect to up to 1,250,000 shares of Reliant Bancorp common stock in the form of stock options. As part of the merger of Commerce Union Bank and Reliant Bank in 2015, all outstanding stock options of Reliant Bank were converted to stock options of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") under the A&R Plan. Under the A&R Plan, stock option awards may be granted in the form of incentive stock options or non-statutory stock options, and are generally exercisable for 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 Reliant Bancorp's common stock on the grant date.
On June 18, 2015, the shareholders of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") approved the Commerce Union Bancshares, Inc. 2015 Equity Incentive Plan, which reserves up to 900,000 shares of Reliant Bancorp 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 Reliant Bancorp common stock.
The Company has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statement of income as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Stock-based compensation expense before income taxes | $ | 349 | | | $ | 337 | | | $ | 1,183 | | | $ | 867 | |
| Less: deferred tax benefit | (91) | | | (88) | | | (309) | | | (227) | |
| Reduction of net income | $ | 258 | | | $ | 249 | | | $ | 874 | | | $ | 640 | |
Common Stock Options
A summary of stock option activity for the nine months ended September 30, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| Outstanding at January 1, 2020 | 149,293 | | $ | 18.81 | | | 6.68 years | | $ | 553 | |
| Granted | 0 | | | $ | 0 | | | | | |
| Exercised | (6,544) | | $ | 12.03 | | | | | 26 |
| Forfeited or expired | (20,007) | | $ | 21.02 | | | | | |
| Outstanding at September 30, 2020 | 122,742 | | $ | 18.81 | | | 5.95 years | | $ | 73 | |
| Exercisable at September 30, 2020 | 83,042 | | $ | 16.43 | | | 5.03 years | | $ | 73 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
| | | | | | | | | | | |
| Shares | | Weighted Average
Grant-Date Fair Value |
| Non-vested options at January 1, 2020 | 74,600 | | | $6.08 |
| Granted | 0 | | | $0 |
| Vested | (23,400) | | | $5.23 |
| Forfeited | (11,500) | | | $6.37 |
| Non-vested options at September 30, 2020 | 39,700 | | | $6.56 |
As of September 30, 2020, there was $235 of unrecognized future compensation expense to be recognized related to stock options. The cost is expected to be recognized over a weighted-average period of 3.08 years.
Restricted Stock and Restricted Stock Unit Awards
The following table shows the activity related to non-vested restricted stock and restricted stock unit awards for the nine months ended September 30, 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Restricted Stock Units | | Restricted Stock |
| Underlying Shares | | Weighted Average Grant-Date
Fair Value | | Shares | | Weighted Average Grant-Date
Fair Value |
| Non-vested units/shares at January 1, 2020 | 47,750 | | | $ | 23.30 | | | 90,960 | | | $ | 25.31 | |
| Granted | 102,400 | | | 14.02 | | | 0 | | | 0 | |
| Vested | (12,500) | | | 22.57 | | | (48,550) | | | 23.99 | |
| Forfeited | (2,000) | | | 10.25 | | | 0 | | | |
| Non-vested units/shares at September 30, 2020 | 135,650 | | | $ | 16.55 | | | 42,410 | | | $ | 26.82 | |
As of September 30, 2020, there was $2,096 of unrecognized compensation cost related to non-vested restricted stock and restricted stock unit awards. The cost is expected to be recognized over a weighted-average period of 2.11 years. The total fair value of shares vested during the nine months ended September 30, 2020 was $970.
NOTE 7 - REGULATORY CAPITAL REQUIREMENTS
The Company and the Bank are subject to regulatory capital requirements administered by the federal and state banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action or affect the amount of dividends the Company and the Bank may distribute. Management believes that as of September 30, 2020, the Company and the Bank met all capital adequacy requirements to which they were subject.
Capital amounts and ratios for Reliant Bancorp and the Bank (required) are presented below as of September 30, 2020 and December 31, 2019.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual
Regulatory
Capital | | Minimum Required
Capital Including
Capital Conservation
Buffer | | To Be Well
Capitalized Under
Prompt Corrective
Action Provisions |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| September 30, 2020 | | | | | | | | | | | |
| Reliant Bancorp | | | | | | | | | | | |
| Tier I leverage | $ | 253,534 | | | 8.72 | % | | $ | 116,300 | | | 4.00 | % | | $ | 145,375 | | | 5.00 | % |
| Common equity tier I | 241,786 | | | 9.77 | % | | 173,235 | | | 7.00 | % | | 160,861 | | | 6.50 | % |
| Tier I risk-based capital | 253,534 | | | 10.25 | % | | 210,248 | | | 8.50 | % | | 197,880 | | | 8.00 | % |
| Total risk-based capital | 332,434 | | | 13.44 | % | | 259,714 | | | 10.50 | % | | 247,347 | | | 10.00 | % |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 304,376 | | | 10.48 | % | | $ | 116,174 | | | 4.00 | % | | $ | 145,218 | | | 5.00 | % |
| Common equity tier I | 304,376 | | | 12.33 | % | | 172,801 | | | 7.00 | % | | 160,458 | | | 6.50 | % |
| Tier I risk-based capital | 304,376 | | | 12.33 | % | | 209,829 | | | 8.50 | % | | 197,486 | | | 8.00 | % |
| Total risk-based capital | 324,635 | | | 13.15 | % | | 259,214 | | | 10.50 | % | | 246,871 | | | 10.00 | % |
| | | | | | | | | | | |
| December 31, 2019 | | | | | | | | | | | |
| Reliant Bancorp | | | | | | | | | | | |
| Tier I leverage | $ | 176,748 | | | 9.74 | % | | $ | 72,586 | | | 4.00 | % | | $ | 90,733 | | | 5.00 | % |
| Common equity tier I | 165,063 | | | 10.55 | % | | 109,520 | | | 7.00 | % | | 101,698 | | | 6.50 | % |
| Tier I risk-based capital | 176,748 | | | 11.30 | % | | 132,952 | | | 8.50 | % | | 125,131 | | | 8.00 | % |
| Total risk-based capital | 249,751 | | | 15.97 | % | | 164,207 | | | 10.50 | % | | 156,388 | | | 10.00 | % |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 186,734 | | | 10.30 | % | | $ | 72,518 | | | 4.00 | % | | $ | 90,648 | | | 5.00 | % |
| Common equity tier I | 186,734 | | | 11.95 | % | | 109,384 | | | 7.00 | % | | 101,571 | | | 6.50 | % |
| Tier I risk-based capital | 186,734 | | | 11.95 | % | | 132,823 | | | 8.50 | % | | 125,010 | | | 8.00 | % |
| Total risk-based capital | 199,737 | | | 12.79 | % | | 163,975 | | | 10.50 | % | | 156,167 | | | 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 | | Nine Months Ended |
| September 30, | | September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
| Basic EPS Computation | | | | | | | |
| Net income attributable to common shareholders | $ | 11,531 | | | $ | 4,000 | | | $ | 19,186 | | | $ | 12,063 | |
| Weighted average common shares outstanding | 16,587,274 | | | 11,104,918 | | | 15,053,087 | | | 11,247,921 | |
| Basic earnings per common share | $ | 0.70 | | | $ | 0.36 | | | $ | 1.27 | | | $ | 1.07 | |
| Diluted EPS Computation | | | | | | | |
| Net income attributable to common shareholders | $ | 11,531 | | | $ | 4,000 | | | $ | 19,186 | | | $ | 12,063 | |
| Weighted average common shares outstanding | 16,587,274 | | | 11,104,918 | | | 15,053,087 | | | 11,247,921 | |
| Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan | 62,399 | | | 72,449 | | | 67,616 | | | 66,445 | |
| Adjusted weighted average common shares outstanding | 16,649,673 | | | 11,177,367 | | | 15,120,703 | | | 11,314,366 | |
| Diluted earnings per common share | $ | 0.69 | | | $ | 0.36 | | | $ | 1.27 | | | $ | 1.07 | |
NOTE 9 - FAIR VALUES OF ASSETS AND LIABILITIES
Financial accounting standards relating to fair value measurements establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 Inputs to the valuation methodology include:
•Quoted prices for similar assets or liabilities in active markets;
•Quoted prices for identical or similar assets or liabilities in inactive markets;
•Inputs other than quoted prices that are observable for the asset or liability; and
•Inputs that are derived principally from or corroborated by the observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 Inputs to the valuation methodology are unobservable and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
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 and fair value hedges 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 an impaired loan 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
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.
Other Real Estate: The fair value of other real estate is generally based on recent real estate appraisals less estimated disposition cost. These appraisals may use 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 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.
The following table sets forth the Company’s major categories of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of September 30, 2020 and December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2020 | | | | | | | |
| Assets | | | | | | | |
| U. S. Treasury and other U. S. government agencies | $ | 12,117 | | | $ | 0 | | | $ | 12,117 | | | $ | 0 | |
| State and municipal | 190,623 | | | 0 | | | 190,623 | | | 0 | |
| Corporate bonds | 15,809 | | | 0 | | | 15,809 | | | 0 | |
| Mortgage backed securities | 40,376 | | | 0 | | | 40,376 | | | 0 | |
| Asset backed securities | 14,968 | | | 0 | | | 14,968 | | | 0 | |
| | | | | | | |
| Liabilities | | | | | | | |
| Derivative liabilities | $ | 10,216 | | | $ | 0 | | | $ | 10,216 | | | $ | 0 | |
| December 31, 2019 | | | | | | | |
| Assets | | | | | | | |
| U. S. Treasury and other U. S. government agencies | $ | 59 | | | $ | 0 | | | $ | 59 | | | $ | 0 | |
| State and municipal | 196,660 | | | 0 | | | 196,660 | | | 0 | |
| Corporate bonds | 7,845 | | | 0 | | | 7,845 | | | 0 | |
| Mortgage backed securities | 37,761 | | | 0 | | | 37,761 | | | 0 | |
| Asset backed securities | 17,968 | | | 0 | | | 17,968 | | | 0 | |
| | | | | | | |
| Derivative assets | 688 | | | 0 | | | 688 | | | 0 | |
| Liabilities | | | | | | | |
| Derivative liabilities | $ | 3,396 | | | $ | 0 | | | $ | 3,396 | | | $ | 0 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
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, 2020 and December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | |
| 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, 2020 | | | | | | | |
| Assets | | | | | | | |
| Impaired loans | $ | 141 | | | $ | 0 | | | $ | 0 | | | $ | 141 | |
| Other real estate | 1,326 | | | 0 | | | 0 | | | 1,326 | |
| Other repossessions | 1,603 | | | 0 | | | 0 | | | 1,603 | |
| December 31, 2019 | | | | | | | |
| Assets | | | | | | | |
| Impaired loans | $ | 553 | | | $ | 0 | | | $ | 0 | | | $ | 553 | |
| Other real estate | 750 | | 0 | | | 0 | | | 750 | |
| Other repossessions | 0 | | 0 | | | 0 | | | 0 | |
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 September 30, 2020 and December 31, 2019:
| | | | | | | | | | | | | | | | | |
| Valuation
Techniques (1) | | Significant
Unobservable Inputs | | Range
(Weighted Average) |
| Impaired loans | Appraisal | | Estimated costs to sell | | 10% |
| Other real estate | Appraisal | | Estimated costs to sell | | 10% |
| Other repossessions | Third-party guidelines | | 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
Carrying amounts and estimated fair values of financial instruments not reported at fair value at September 30, 2020 and December 31, 2019 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | 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 | $ | 14,050 | | | $ | 14,050 | | | $ | 14,050 | | | $ | 0 | | | $ | 0 | |
| Federal funds sold | 12,273 | | | 12,273 | | | 0 | | | 12,273 | | | 0 | |
| Loans, net | 2,338,064 | | | 2,336,300 | | | 0 | | | 0 | | | 2,336,300 | |
| Mortgage loans held for sale | 99,587 | | | 99,587 | | | 0 | | | 99,587 | | | 0 | |
| Accrued interest receivable | 14,615 | | | 14,615 | | | 0 | | | 14,615 | | | 0 | |
| Restricted equity securities | 17,367 | | | 17,367 | | | 0 | | | 17,367 | | | 0 | |
| Financial liabilities | | | | | | | | | |
| Deposits | $ | 2,565,502 | | | $ | 2,571,305 | | | $ | 0 | | | $ | 0 | | | $ | 2,571,305 | |
| Accrued interest payable | 3,744 | | | 3,744 | | | 0 | | | 3,744 | | | 0 | |
| Subordinate debentures | 70,389 | | | 69,237 | | | 0 | | | 0 | | | 69,237 | |
| Federal Home Loan Bank advances | 40,555 | | | 40,887 | | | 0 | | | 0 | | | 40,887 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2019 | | | | | | | | | |
| Financial assets | | | | | | | | | |
| Cash and due from banks | $ | 7,953 | | | $ | 7,953 | | | $ | 7,953 | | | $ | 0 | | | $ | 0 | |
| Federal funds sold | 52 | | | 52 | | | 0 | | | 52 | | | 0 | |
| Loans, net | 1,397,374 | | | 1,383,719 | | | 0 | | | 0 | | | 1,383,719 | |
| Mortgage loans held for sale | 37,476 | | | 38,379 | | | 0 | | | 38,379 | | | 0 | |
| Accrued interest receivable | 7,188 | | | 7,188 | | | 0 | | | 7,188 | | | 0 | |
| Restricted equity securities | 11,279 | | | 11,279 | | | 0 | | | 11,279 | | | 0 | |
| Financial liabilities | | | | | | | | | |
| Deposits | $ | 1,584,453 | | | $ | 1,582,781 | | | $ | 0 | | | $ | 0 | | | $ | 1,582,781 | |
| Accrued interest payable | 2,022 | | | 2,022 | | | 0 | | | 2,022 | | | 0 | |
| Subordinate debentures | 70,883 | | | 71,454 | | | 0 | | | 0 | | | 71,454 | |
| Federal Home Loan Bank advances | 10,737 | | | 10,755 | | | 0 | | | 0 | | | 10,755 | |
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 10 - SEGMENT REPORTING
The Company has 2 reportable business segments: commercial 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
Commercial 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 government agency-qualified loans and are of higher risk, such as jumbo loans or senior position home equity lines of credit.
The following presents summarized results of operations for the Company’s business segments for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, 2020 |
| Commercial Banking | | Residential
Mortgage
Banking | | Elimination
Entries | | Consolidated |
| Net interest income | $ | 29,729 | | | $ | 808 | | | $ | 0 | | | $ | 30,537 | |
| Provision for loan losses | 1,500 | | | 0 | | | 0 | | | 1,500 | |
| Noninterest income | 2,218 | | | 3,797 | | | (14) | | | 6,001 | |
| Noninterest expense (excluding merger expense) | 16,065 | | | 4,190 | | | 0 | | | 20,255 | |
| Merger expense | 78 | | | 0 | | | 0 | | | 78 | |
| Income tax expense (benefit) | 2,773 | | | 27 | | | 0 | | | 2,800 | |
| Net income (loss) | 11,531 | | | 388 | | | (14) | | | 11,905 | |
| Noncontrolling interest in net income of subsidiary | 0 | | | (388) | | | 14 | | | (374) | |
| Net income attributable to common shareholders | $ | 11,531 | | | $ | 0 | | | $ | 0 | | | $ | 11,531 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, 2019 |
| | Commercial Banking | | Residential Mortgage Banking | | Elimination Entries | | Consolidated |
| Net interest income | $ | 13,910 | | | $ | 154 | | | $ | 0 | | | $ | 14,064 | |
| Provision for loan losses | 606 | | | 0 | | | 0 | | | 606 | |
| Noninterest income | 1,375 | | | 1,377 | | | 8 | | | 2,760 | |
| Noninterest expense (excluding merger expense) | 9,726 | | | 3,022 | | | 0 | | | 12,748 | |
| Merger expense | 299 | | | 0 | | | 0 | | | 299 | |
| Income tax expense (benefit) | 654 | | | (97) | | | 0 | | | 557 | |
| Net income (loss) | 4,000 | | | (1,394) | | | 8 | | | 2,614 | |
| Noncontrolling interest in net loss of subsidiary | 0 | | | 1,394 | | | (8) | | | 1,386 | |
| Net income attributable to common shareholders | $ | 4,000 | | | $ | 0 | | | $ | 0 | | | $ | 4,000 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| Commercial Banking | | Residential Mortgage Banking | | Elimination Entries | | Consolidated |
| Net interest income | $ | 75,933 | | | $ | 1,677 | | | $ | 0 | | | $ | 77,610 | |
| Provision for loan losses | 7,400 | | | 0 | | | 0 | | | 7,400 | |
| Noninterest income | 6,102 | | | 7,601 | | | 3 | | | 13,706 | |
| Noninterest expense (excluding merger expense) | 44,961 | | | 10,340 | | | 0 | | | 55,301 | |
| Merger expense | 6,895 | | | 0 | | | 0 | | | 6,895 | |
| Income tax expense (benefit) | 3,593 | | | (69) | | | 0 | | | 3,524 | |
| Net income (loss) | 19,186 | | | (993) | | | 3 | | | 18,196 | |
| Noncontrolling interest in net loss of subsidiary | 0 | | | 993 | | | (3) | | | 990 | |
| Net income attributable to common shareholders | $ | 19,186 | | | $ | 0 | | | $ | 0 | | | $ | 19,186 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2019 |
| Commercial Banking | | Residential Mortgage Banking | | Elimination Entries | | Consolidated |
| Net interest income | $ | 40,986 | | | $ | 352 | | | $ | 0 | | | $ | 41,338 | |
| Provision for loan losses | 806 | | | 0 | | | 0 | | | 806 | |
| Noninterest income | 4,226 | | | 3,187 | | | (17) | | | 7,396 | |
| Noninterest expense (excluding merger expense) | 30,300 | | | 8,317 | | | 0 | | | 38,617 | |
| Merger expense | 302 | | | 0 | | | 0 | | | 302 | |
| Income tax expense (benefit) | 1,741 | | | (311) | | | 0 | | | 1,430 | |
| Net income (loss) | 12,063 | | | (4,467) | | | (17) | | | 7,579 | |
| Noncontrolling interest in net loss of subsidiary | 0 | | | 4,467 | | | 17 | | | 4,484 | |
| Net income attributable to common shareholders | $ | 12,063 | | | $ | 0 | | | $ | 0 | | | $ | 12,063 | |
NOTE 11 – INCOME TAXES
Income tax expense for the three and nine months ended September 30, 20192020 totaled $2,800 and $3,524, respectively, compared to $557 and $1,430, respectively, compared to $519 and $1,431, respectively, for the three and nine months ended September 30, 2018.2019. The effective tax rate for the three and nine months ended September 30, 20192020 was 17.6%19.0% and 15.9%16.2%, respectively, compared to 13.8%17.6% and 15.6%15.9%, respectively, for the three and nine months ended September 30, 2018. Merger expenses during the nine months ended September 30, 2018, had the impact of reducing taxable income and increasing the proportion of tax exempt income to total income.2019.
NOTE 12 - BUSINESS COMBINATIONCOMBINATIONS
Tennessee Community Bank Holdings, Inc.
Effective January 1, 2018, Pioneer2020, Reliant Bancorp completed the acquisition of TCB Holdings pursuant to the Agreement and Plan of Merger, Sub, Inc.dated September 16, 2019 (the “TCB Holdings Agreement”), by and among Reliant Bancorp, TCB Holdings, and Community Bank & Trust, a Tennessee-chartered commercial bank and wholly owned subsidiary of Reliant Bancorp, Inc., merged withTCB Holdings (“CBT”). On the terms and into Community First, with Community First continuing assubject to the surviving corporation, and immediately thereafter Community Firstconditions set forth in the TCB Holdings Agreement, TCB Holdings merged with and into Reliant Bancorp Inc.(the “TCB Holdings Transaction”), with Reliant Bancorp Inc.as the surviving corporation. Immediately following the TCB Holdings Transaction, CBT merged with and into the Bank, with the Bank continuing as the surviving banking corporation.
Pursuant to the merger agreement,TCB Holdings Agreement, at the effective time of the TCB Holdings Transaction, each outstanding share of Community FirstTCB Holdings common stock, (except forpar value $1.00 per share (other than certain excluded shares and dissenting shares), was converted into and canceled in exchange for the right to receive 0.481(i) $17.13 in cash, without interest, and (ii) 0.769 shares of the Reliant Bancorp’s common stock, par value $1.00 per share (“Reliant Bancorp Inc. common stock, together with cash in lieuCommon Stock”). The aggregate consideration payable by Reliant
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(Dollar amounts in thousands except per share amounts)
Bancorp in respect of shares of TCB Holdings common stock as consideration for the TCB Holdings Transaction was 811,210 shares of Reliant Bancorp Common Stock and approximately $18,073 in cash. Reliant Bancorp did not issue fractional shares of Reliant Bancorp Common Stock in connection with the TCB Holdings Transaction, but paid cash in lieu of fractional shares based on the volume weighted average closing price per share of the Reliant Bancorp Common Stock on The Nasdaq Capital Market for the 10 consecutive trading days ending on and including December 30, 2019 (calculated as $22.36). At the effective time of the TCB Holdings Transaction, each outstanding option to purchase TCB Holdings common stock was canceled in exchange for a cash payment in an amount equal to the product of (i) $34.25 minus the per share exercise price of the option multiplied by (ii) the number of shares of TCB Holdings common stock subject to the option (to the extent not previously exercised). Reliant Bancorp paid aggregate consideration to holders of unexercised options of approximately $430. All shares of Reliant Bancorp’s common stock outstanding immediately prior to the TCB Holdings Transaction were unaffected by the TCB Holdings Transaction.
NOTE 12 - BUSINESS COMBINATION (CONTINUED)
The following table details the financial impact of the business combination,TCB Holdings Transaction, 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 Tennessee Community Bank Holdings, Inc. common stock outstanding as of January 1, 2020 | | 1,055,041 | |
| Exchange ratio for Reliant Bancorp, Inc. common stock | | 0.769 | |
| Reliant Bancorp, Inc. common stock shares issued | | 811,210 | |
| Reliant Bancorp, Inc. share price at January 1, 2020 | | $ | 22.24 | |
| Estimated value of Reliant Bancorp, Inc. shares issued | | 18,041 |
| Cash settlement for Tennessee Community Bank Holdings, Inc. common stock ($17.13 per share) | | 18,073 | |
| Cash settlement for Tennessee Community Bank Holdings, Inc.'s 26,450 outstanding stock options ($34.25 settlement price less weighted average exercise price of $18.00) | | 430 | |
| Cash settlement for Reliant Bancorp, Inc. fractional shares ($22.36 per pro rata fractional share) | | 3 | |
| Estimated fair value of Tennessee Community Bank Holdings, Inc. | | $ | 36,547 | |
|
| | | | |
| 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 |
|
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, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(Dollar amounts in thousands except per share amounts)
NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS | | | | | |
| Allocation of Purchase Price | |
| Total consideration above | $ | 36,547 | |
| Fair value of assets acquired and liabilities assumed | |
| Cash and cash equivalents | 11,026 | |
| |
| Investment securities available for sale | 56,336 | |
| Loans, net of unearned income | 171,445 | |
| |
| Accrued interest receivable | 948 | |
| Premises and equipment | 6,401 | |
| |
| Cash surrender value of life insurance contracts | 5,629 | |
| Restricted equity securities | 909 | |
| |
| Core deposit intangible | 3,617 | |
| Other assets | 833 | |
| Deposits | (210,538) | |
| Deferred tax liability | (337) | |
| Borrowings | (58) | |
| FHLB advances | (13,102) | |
| Other liabilities | (3,682) | |
| Total fair value of net assets acquired | 29,427 | |
| Goodwill | $ | 7,120 | |
ASU 2014-09, “Revenue from ContractsCBT was a Tennessee-based full-service community bank with Customers (Topic 606operations in Ashland City, Kingston Springs, Pegram, Pleasant View, and Springfield, Tennessee. These communities lie on the northwest perimeter of Nashville, Tennessee.
First Advantage Bancorp
Effective April 1, 2020, Reliant Bancorp completed the acquisition of FABK pursuant to the Agreement and Plan of Merger, dated October 22, 2019 (the “FABK Agreement”)” implements, by and among Reliant Bancorp, FABK, and PG Merger Sub, Inc., a Tennessee corporation and wholly owned subsidiary of Reliant Bancorp ("Merger Sub"). On the terms and subject to the conditions set forth in the FABK Agreement, Merger Sub merged with and into FABK (the "FABK Transaction"), with FABK as the surviving corporation, followed immediately by the merger of FABK with and into Reliant Bancorp, with Reliant Bancorp as the surviving corporation. Immediately following the merger of FABK into Reliant Bancorp, First Advantage Bank, a Tennessee-chartered commercial bank and wholly owned subsidiary of FABK ("FAB"), merged with and into the Bank, with the Bank continuing as the surviving banking corporation. Pursuant to the FABK Agreement, at the effective time of the FABK Transaction, each outstanding share of FABK common revenue standard that clarifiesstock, par value $0.01 per share (the “FABK Common Stock”), other than certain excluded shares, was converted into the principlesright to receive (i) 1.17 shares of Reliant Bancorp Common Stock and (ii) $3.00 in cash, without interest. In lieu of the issuance of fractional shares of Reliant Bancorp Common Stock, Reliant Bancorp agreed to pay cash in lieu of fractional shares based on the volume-weighted average closing price per share of Reliant Bancorp Common Stock on The Nasdaq Capital Market for recognizing revenue. The principle elementthe 10 consecutive trading days ending on and including March 30, 2020 (calculated as $11.74). Based on the April 1, 2020 opening price for Reliant Bancorp Common Stock of ASU 2014-09 is that an entity should recognize revenue to depict the transfer$11.27 per share and 3,935,165 shares of promised goods or services to customers in an amount that reflectsFABK Common Stock outstanding on April 1, 2020, the consideration to whichfor 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 obligationsFABK Transaction was approximately $64,094, in the contract, (iii) determineaggregate, or $16.28 per share of FABK Common Stock.
The following table details the transactionfinancial impact of the FABK Transaction, including the calculation of the purchase price, (iv) allocate the transactionallocation of the purchase 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 comprisedfair values of net interest income on financial assets assumed and financial liabilities, which is explicitly excluded from the scopegoodwill recognized:
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 $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.
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, 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. 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, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 20182019
(Dollar amounts in thousands except per share amounts)
| | | | | |
| Calculation of Purchase Price | |
| Shares of First Advantage Bancorp common stock outstanding as of April 1, 2020 | 3,935,165 | |
| Conversion of restricted stock units to shares of common stock of First Advantage Bancorp as of April 1, 2020 | 2,000 | |
| Total First Advantage Bancorp common stock outstanding as of April 1, 2020 | 3,937,165 | |
| Exchange ratio for Reliant Bancorp, Inc. common stock | 1.17 |
| Reliant Bancorp, Inc. common stock shares issued | 4,606,483 | |
| Remove fractional shares | (64) | |
| Reliant Bancorp, Inc. common stock shares issued | 4,606,419 |
| Reliant Bancorp, Inc. share price at April 1, 2020 | $ | 11.27 | |
| Estimated value of Reliant Bancorp, Inc. shares issued | 51,914 | |
| Cash settlement for Reliant Bancorp, Inc. fractional shares ($11.74 per pro rata fractional share) | 1 |
| Cash settlement for First Advantage Bancorp common stock ($3.00 per share) | 11,805 |
| Cash settlement for First Advantage Bancorp restricted stock units ($3.00 per share) | 6 |
| Cash settlement for First Advantage Bancorp's 34,800 outstanding stock options ($30.00 settlement price less weighted average exercise price of $19.44) | 368 |
| Estimated fair value of First Advantage Bancorp | $ | 64,094 | |
NOTE 13 - RECENT ACCOUNTING PRONOUNCEMENTS
| | | | | |
| Allocation of Purchase Price | |
| Total consideration above | $ | 64,094 | |
| Fair value of assets acquired and liabilities assumed | |
| Cash and cash equivalents | 11,159 | |
| |
| Investment securities available for sale | 35,970 | |
| Loans, net of unearned income | 622,423 | |
| Mortgage loans held for sale, net | 5,878 | |
| |
| Premises and equipment | 7,905 | |
| Deferred tax asset | 6,024 | |
| Cash surrender value of life insurance contracts | 14,776 | |
| Other real estate and repossessed assets | 1,259 | |
| Core deposit intangible | 2,280 | |
| Operating lease right-of-use assets | 6,536 | |
| Other assets | 10,934 | |
| Deposits | (608,690) | |
| Borrowings | (35,962) | |
| Operating lease liabilities | (6,536) | |
| Other liabilities | (10,606) | |
| Total fair value of net assets acquired | 63,350 | |
| Goodwill | $ | 744 | |
ASU 2017-04, “Intangibles - Goodwill
FAB was a Tennessee-based full-service community bank headquartered in Clarksville, Tennessee. FAB operated branch offices in Montgomery, Davidson 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 valueWilliamson counties, Tennessee and operated a loan production office in Knoxville, Tennessee primarily originating manufactured housing loans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2020 AND 2019 (UNAUDITED) AND DECEMBER 31, 2019
(Dollar amounts in thousands except per share amounts)
Supplemental Pro Forma Combined Condensed Statements of a reporting unit with its carrying amount. An entity should recognize an impairment chargeIncome
Pro forma data for the amount by whichthree and nine months ended September 30, 2020 and 2019 in the carrying amount exceedstable below presents information as if 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 CompanyTCB Holdings Transaction and FABK Transaction occurred on January 1, 2021, with earlier adoption permitted2019. These results combine the historical results of TCB Holdings and isFABK into the Company's consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments, they are not currently expectedindicative of what would have occurred had the acquisitions taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have a significant impact on our financial statements.
NOTE 14 - SUBSEQUENT EVENTS
ASC 855, Subsequent Events, establishes general standardsbeen made to eliminate the amount of accountingTCB Holdings' or FABK's provision for credit losses for the first three and disclosurenine months of events2019 that occur aftermay not have been necessary had the 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 dateacquired loans been recorded at fair value as of the issued financial statements.
On October 7, 2019, Reliant Bancorp, Inc. entered into two additional interest rate swap transactions withbeginning of 2019. Additionally, these financials were not adjusted for non-recurring expenses, such as merger-related charges incurred by either the Company, TCB Holdings or FABK. The Company expects to achieve operating cost savings and other business synergies as 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 termsresult 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 foracquisitions which are also not reflected in the definitive agreement) in exchange for each sharepro forma amounts.
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Nine Months Ended |
| September 30, | September 30, |
| 2020 | | 2019 | 2020 | | 2019 |
Revenue(1) | $ | 35,881 | | | $ | 29,478 | | $ | 106,771 | | | $ | 86,217 | |
| Net interest income | $ | 29,880 | | | $ | 25,232 | | $ | 85,741 | | | $ | 74,835 | |
| Net income attributable to common shareholders | $ | 11,117 | | | $ | 9,182 | | $ | 17,715 | | | $ | 28,545 | |
| | | | | | |
| | | | | | |
(1) Net interest income plus noninterest income | | | | | | |
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.
Item2. 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 nine months ended September 30, 2019:2020:
•Net income attributable to common shareholders totaled $12.1$19.2 million, or $1.07$1.27 per diluted common share, for the nine months ended September 30, 20192020 compared to $10.0$12.1 million, or $0.87$1.07 per diluted common share, during the same period in 2018.2019.
•Merger expenses for the nine months ended September 30, 2020 totaled $6.9 million.
•Loans increased $119.5$940.7 million for the nine months ended September 30, 2019.2020.
•Deposits increased $172.7$981.0 million for the nine months ended September 30, 2019.2020.
•Asset quality remained strong with nonperforming assets to total assets of just 0.450.32 percent.
•Successfully closed the TCB Holdings and FABK transactions as well as conversions with Community Bank & Trust and First Advantage Bank.
The following discussion and analysis is intended to assist in the understanding and assessment of significant changes and trends related to our financial position and operating results. This discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere herein along with ourReliant Bancorp's Annual Report on Form 10-K for the year ended December 31, 2018.2019. 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 theAcquisition of parent company of First Advantage BankCBT
On October 22, 2019,Effective January 1, 2020, Reliant Bancorp Inc. ("completed the acquisition of TCB Holdings. On the terms and subject to the conditions set forth in the TCB Holdings Agreement, TCB Holdings merged with and into Reliant Bancorp")Bancorp, with Reliant Bancorp as the parent company forsurviving corporation. Immediately following the TCB Holdings Transaction, CBT merged with and into Reliant Bank, (the "Bank")with Reliant Bank continuing as the surviving banking corporation. Pursuant to the TCB Holdings Agreement, at the effective time of the TCB Holdings Transaction, each outstanding share of TCB Holdings common stock, par value $1.00 per share (other than certain excluded shares), enteredwas converted into a definitive agreementand canceled in exchange for the right to acquire First Advantagereceive (i) $17.13 in cash, without interest, and (ii) 0.769 shares of Reliant Bancorp's common stock. The aggregate consideration payable by Reliant Bancorp (“FABK”),in respect of shares of TCB Holdings common stock as consideration for the parent companyTCB Holdings Transaction was 811,210 shares of Reliant Bancorp Common Stock and approximately $18,073 in cash. Reliant Bancorp did not issue fractional shares of Reliant Bancorp Common Stock in connection with the TCB Holdings Transaction, but instead paid cash in lieu of fractional shares based on the volume weighted average closing price per share of the Reliant Bancorp Common Stock on The Nasdaq Capital Market for First Advantage Bank (“FAB”), locatedthe 10 consecutive trading days ending on and including December 30, 2019 (calculated as $22.36). At the effective time of the TCB Holdings Transaction, each outstanding option to purchase TCB Holdings common stock was canceled in Clarksville, Tennessee. The agreement providesexchange for a cash and stock transaction valued at approximately $123.4 million, or $30.67payment in an amount equal to the product of (i) $34.25 minus the per share exercise price of the option multiplied by (ii) the number of shares of TCB Holdings common stock subject to the option (to the extent not previously exercised). Reliant Bancorp paid aggregate consideration to holders of unexercised options of approximately $430.
Acquisition of parent company of FAB
Effective April 1, 2020, Reliant Bancorp, completed the acquisition of FABK common stock, based onand FAB. In accordance with the closing price for Reliant Bancorp common stockterms of $23.65 per share on October 22, 2019.
The definitive agreement provides for the merger of PGFABK Agreement, (i) Merger Sub Inc.,merged with and into FABK, with FABK to bebeing the surviving company, followed bycorporation and becoming a wholly-owned subsidiary of Reliant Bancorp, and (ii) immediately following the merger of FABK and Merger Sub, FABK merged with and into Reliant Bancorp, with Reliant Bancorp to bebeing 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 Bankcorporation. Additionally, immediately 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 HoldingsFAB merged with and into Reliant Bancorp,Bank, with Reliant Bancorp to beBank being the surviving company. Underbank.
As consideration for the termsFABK Transaction, each outstanding share of FABK Common Stock, other than certain excluded shares, at the effective time of the definitive agreement, shareholders of TCB Holdings willFABK Transaction converted into the right to receive 0.769(i) 1.17 shares of Reliant Bancorp common stock (subject to adjustment under certain circumstances provided for in the definitive agreement)Common Stock and $17.13(ii) $3.00 in cash, without interest. In lieu of the issuance of fractional shares of Reliant Bancorp Common Stock, Reliant Bancorp agreed to pay cash in exchange for each sharelieu 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. Basedfractional shares based on Reliant Bancorp's 20-daythe 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,Common Stock on The Nasdaq Capital Market for the 10 consecutive trading days ending on and CB&T. The parties currently expectincluding March 30, 2020 (calculated as $11.74). Reliant Bancorp paid aggregate consideration to consummateholders of unexercised options of approximately $368. Based on the transactionMarch 31, 2020 closing price for Reliant Bancorp Common Stock of $11.27 per
share and 3,937,165 shares of FABK Common Stock outstanding on March 31, 2020, the consideration for the FABK Transaction was approximately $64,094, in the first quarteraggregate, or $16.28 per share of 2020, subject to the receiptFABK Common Stock.
Formation of necessary regulatory approvals and the approval of the shareholders of TCB Holdings, as well as other customary closing conditions.Reliant Risk Management, Inc.
The Bank and CB&T have entered intoReliant Risk Management, Inc. is a separate bank merger agreement providing for the merger of CB&T with and into the Bank following the mergerwholly-owned insurance captive subsidiary of Reliant Bancorp, Inc. that began operations on June 1, 2020 as a Tennessee-based captive insurance company which insures Reliant Bancorp and TCB Holdings. The combined bank will operate under the Bank against certain risks unique to their operations and for which insurance may not be currently available or economically feasible in today's insurance marketplace. It pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. Reliant Bank name.Risk Management, Inc. is subject to regulations of the State of Tennessee and undergoes periodic examinations by the Tennessee Department of Commerce and Insurance.
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")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, 2018.2019. The following is a brief summary of the more significant policies.
Principles of Consolidation
The Company's consolidated financial statements as of and for the periods presented include the accounts of Reliant Bancorp, the Bank, Community First Trups Holding Company which is(a wholly owned bysubsidiary of Reliant Bancorp (“TRUPS”)Bancorp), Reliant Risk Management, Inc., Reliant Investment Holdings, LLC ("Holdings"), which is(a wholly owned by the Bank, and Reliant Mortgage Ventures, LLC ("RMV"), of which the Bank controls 51%subsidiary of the governance rights (Reliant Bancorp, the Bank, TRUPS, Holdings,Bank), 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.RMV. All significant intercompany balances and transactions have been eliminated in consolidation. As described in Note 12 to our consolidated financial statements,previously, effective on January 1, 2018,2020, Reliant Bancorp and CommunityTCB Holdings merged and effective April 1, 2020, Reliant Bancorp and First Inc.Advantage Bancorp merged.
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 September 30, 2019,2020, RMV's cumulative losses to date totaled $12,542.$14,707. RMV will have to generate net income of at least this amount before the Bank will participate in future incomecash flow distributions.
Purchased Loans
The Company maintains an allowance for loan losses on purchased loans based on credit deterioration subsequent to the acquisition date. In accordance with the accounting guidance for business combinations, because we recorded all loans acquired loansfrom TCB Holdings and FABK at fair value as of the datedates of the Merger (as defined below),TCB Holdings Transaction and the FABK Transaction, respectively, 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 is required to establish an allowance for loan losses subsequent to the datedates 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 for loan losses 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-impairedpurchased non-credit-impaired loans acquired in the MergerTCB Holdings Transaction and the FABK Transaction 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. 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.off as uncollectible.
A loan is impaired when full payment under the loan terms is not expected. All classified loans and loans on 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.
Coronavirus (COVID-19) Impact
The following is a description of certain impacts the novel coronavirus (COVID-19) pandemic is having on our financial condition and results of operations and certain risks to our business that the pandemic creates or exacerbates.
Operational Impact
As part of our pandemic response, we have encouraged a significant portion of our employees to work from home. We have also extended virtual medical coverage to all employees as well as provided pay to employees who may have been exposed as they quarantine at home. We are encouraging virtual meetings and conference calls in place of in-person meetings, including our earnings call and investor meetings which were held virtually this quarter. We are promoting social distancing, frequent hand washing, thorough disinfection of all surfaces, and the use of masks or nose and mouth coverings have been mandated in all of our locations. We have reopened all branches for normal business hours. Banking center drive-ups, ATMs and online/mobile banking services continue to operate. Infection rates in the communities we serve vary by region and we will make prudent decisions for the safety of our colleagues and our clients.
Loan Modifications
Section 4013 of the CARES Act, which was signed into law on March 27, 2020, provides that financial institutions may elect to account for loan modifications occurring between March 1, 2020, and the earlier of December 31, 2020 and the 60th day after the end of the COVID-19 national emergency declared by President Trump, which are due to COVID-19 and where the borrower was current on contractual payments as of December 31, 2019, as not TDRs. Additionally, on April 7, 2020, federal banking regulators issued an Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus (Revised), which replaced a prior interagency statement predating the CARES Act. The revised interagency statement encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual payment obligations because of the effects of COVID-19. It also addresses loan modifications not meeting the criteria set forth in Section 4013 of the CARES Act or for which financial institutions elect not to apply Section 4013. With respect to these loan modifications, the revised interagency statement provides that short-term (e.g. six month) modifications made on a good faith basis in response to COVID-19 to borrowers who were current on their contractual payments at the time of implementation of a modification program are not TDRs.
Through September 30, 2020, the Company had applied this guidance to approve initial modifications in April and May 2020 for loans with principal balances of $530.7 million. The majority of these modifications involved extensions of up to three months of either interest-only periods or full payment deferrals. Through September 30, 2020, further modifications were approved for $21.8 million of the loans previously modified. Additional modifications are likely to be executed in the fourth quarter of 2020.
| | | | | | | | |
| Initial Modification Requests through May 31, 2020 | Subsequent Modification Requests through September 30, 2020 |
| Commercial RE | $ | 291,232 | | $ | 6,179 | |
| Hospitality | 96,047 | | 14,211 | |
| Restaurant | 54,067 | | — | |
| C&I | 34,851 | | 1,448 | |
| Multifamily | 14,757 | | — | |
| Manufactured Housing | 14,887 | | — | |
| Church/Consumer/Medical | 24,809 | | — | |
| Total Modification Requests | $ | 530,650 | | $21,838 |
Paycheck Protection Program (PPP) and Liquidity
The CARES Act provided for over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the SBA to administer new loan programs, including, but not limited to, the guarantee of loans under a new 7(a) loan program called the "Paycheck Protection Program".
An eligible business could apply for a PPP loan in an amount up to the lesser of: (1) 2.5 times its average monthly “payroll costs” or (2) $10.0 million. PPP loans have: (a) an interest rate of 1.0%; (b) a two-year loan term to maturity for loans made prior to June 5, 2020, or a five-year loan term to maturity for loans made on or after June 5, 2020; and (c) principal and interest payments deferred for 10 months after the end of the borrower's loan forgiveness covered period. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses.
Through September 30, 2020, we had received SBA authorizations for 893 PPP loans totaling $83,290 and related fees of $3,296. Participation in the PPP will likely have an impact on the Company's asset mix and net interest margin for the remainder of 2020. At September 30, 2020, we had $93,000 in federal funds lines available and $337,000 of available borrowing capacity from correspondent banks. In addition, the Federal Reserve has implemented a liquidity facility available to financial institutions participating in the PPP. As such, the Company believes it has sufficient liquidity sources to continue to provide this important service to local businesses if and as additional funds are appropriated for the PPP.
As of September 30, 2020, the Bank's capital ratios were in excess of all regulatory requirements. While we believe that we have sufficient capital to withstand an extended economic recession brought about by the COVID-19 pandemic, our reported and regulatory capital ratios could be adversely impacted by future credit losses.
Asset Impairment
At September 30, 2020, our level of non-performing assets was not materially impacted by the economic pressures of COVID-19. We are closely monitoring credit risk and our exposure to increased loan losses resulting from the impact of COVID-19 on our commercial and other clients.
At this time, we do not believe there exists any impairment to our intangible assets, long-lived assets, right of use assets, or available-for-sale investment securities due to the COVID-19 pandemic. It is uncertain whether prolonged effects of the COVID-19 pandemic will result in future impairment charges related to any of the aforementioned assets.
Risks
See Part II , Item 1A. "Risk Factors" for more information.
Allowance for Loan Loss
We are in regular communication with our customers to gain a better understanding of our highest risk exposures and probable defaults. In the third quarter of 2020 we recorded a provision expense of $1.5 million, which can be attributed to increased risk factors related to the COVID-19 pandemic as well as our loan growth. Our losses year-to-date remain low but we continue to build reserves as we anticipate future downgrades and defaults may eventually result in losses.
See Note 3 to the Company's financial statements included in Part I, Item 1. "Consolidated Financial Statements (Unaudited)" and Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations -Comparison of Balance Sheets at September 30, 2020 and December 31, 2019 - Allowance for Loan Losses” for more information.
COMPARISON OF RESULTS OF OPERATIONS FOR THETHREE AND NINE MONTHSENDED SEPTEMBER 30, 20192020AND 20182019
Merger Between Reliant Bancorp, Inc. and Community First, Inc.
Effect of Mergers
Effective January 1, 2018, Pioneer Merger Sub, Inc., a wholly owned subsidiary of2020, Reliant Bancorp merged with and into Community First, Inc. (“Community First”), with Community First continuing ascompleted 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 shareacquisition 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.TCB Holdings.
As a result of the MergerTCB Holdings Transaction, on January 1, 2018,2020, the Company:
grew consolidated
•acquired total assets from $1,125.0 million to $1,636.0 million after giving effect to purchase accounting;of $257 million;
increased•acquired total loans from $762.5 million to $1,075.5of $171 million; and
increased•acquired total deposits from $883.5 million to $1,316.9of $211 million.
Effective April 1, 2020, Reliant Bancorp completed the acquisition of FABK.
As a result of the FABK Transaction, on April 1, 2020, the Company:
•acquired total assets of $725 million;
•acquired total loans of $622 million; and
expanded its employee base from 167 to 272 full time equivalent employees.•acquired total deposits of $609 million.
Earnings
Net income attributable to common shareholders amounted to $4,000$11,531, or $0.70 per basic share, and $12,063,$19,186, or $0.36 and $1.07$1.27 per basic share, for the three and nine months ended September 30, 2019,2020, respectively, compared to $4,082 and $9,962,$4,000, or $0.36 per basic share, and $0.88$12,063, or $1.07 per basic share, for the same periods in 2018.2019, respectively. Diluted net income attributable to common shareholders was $0.69 and $1.27 per share for the three and nine months ended September 30, 2020, respectively, compared to $0.36 and $1.07 per share for the three and nine months ended September 30, 2019, respectively, compared to $0.36 and $0.87 per share for the three and nine months ended September 30, 2018, respectively. The major components contributing to the change when compared to the prior year periods are an increase of 7.3%117.1% and 1.4% in noninterest expense for the three and nine months ended September 30, 2019, respectively, and an increase of 4.4% and 2.7%87.7% in net interest income for the three and nine months ended September 30, 2019,2020, respectively, and an increase of 117.4% and 85.3% in noninterest income for the three and nine months ended September 30, 2020, respectively, and partially offset by an increase of 55.8% and 59.8% in noninterest expense (mainly driven by salaries and employee benefits) for the three and nine months ended September 30, 2020, and an increase of $894 and $6,594 in provision for loan losses for the three and nine months ended September 30, 2020, compared to the same periods in 2018.2019. These and other components of earnings are discussed further below.
Non-GAAP Financial Measures
This Quarterly Report contains certain financial measures that are considered "non-GAAP financial measures" and should be read along with the accompanying tables. Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position, or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with U.S. GAAP. Management believes that non-GAAP financial measures provide a greater understanding of ongoing performance and operations and enhance comparability across periods. Non-GAAP financial measures should not, however, be considered as an alternative to any measure of performance or financial condition as determined in accordance with U.S. GAAP, and readers should consider the Company’s performance and financial condition as reported under U.S. GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical
tools, and readers should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under U.S. GAAP. Non-GAAP financial measures presented by the Company may not be comparable to non-GAAP financial measures (even those with the same or similar names) presented by other companies.
Company management uses, and believes that investors benefit from referring to, the following non-GAAP financial measures, among others, to assess the Company's operating results and trends: (i) tax-equivalent net interest income; (ii) adjusted net interest income; (iii) adjusted net interest margin; (iv) adjusted net income attributable to common shareholders; (v) adjusted net income attributable to common shareholders, per diluted share; (vi) adjusted return on average assets; (vii) adjusted return on average shareholders' equity; (viii) average tangible shareholders' equity; (ix) return on average tangible common equity (ROATCE); and (x) adjusted return on average tangible common equity. In the following table, the Company has provided a reconciliation of these non-GAAP financial measures to their most comparable U.S. GAAP financial measures.
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2020 | September 30, 2019 | | September 30, 2020 | September 30, 2019 |
| NON-GAAP FINANCIAL MEASURES | | | | | |
Adjusted net interest margin (1)(4) | | | | | |
| Net interest income | $ | 30,537 | | $ | 14,064 | | | $ | 77,610 | | $ | 41,338 | |
| Fully tax-equivalent adjustments: | | | | | |
| Loans | $ | 760 | | $ | 302 | | | $ | 1,865 | | $ | 908 | |
| Tax-exempt investment securities | $ | 347 | | $ | 424 | | | $ | 1,095 | | $ | 1,320 | |
Tax-equivalent net interest income (1)(2) | $ | 31,643 | | $ | 14,787 | | | $ | 80,570 | | $ | 43,566 | |
| Purchase accounting adjustments | (3,868) | | (383) | | | (9,773) | | (1,163) | |
| | | | | |
Adjusted net interest income (1) | $ | 27,775 | | $ | 14,404 | | | $ | 70,797 | | $ | 42,403 | |
| | | | | |
| Net interest margin (tax-equivalent basis) | 4.54 | % | 3.51 | % | | 4.30 | % | 3.57 | % |
| Adjusted net interest margin | 3.98 | % | 3.42 | % | | 3.78 | % | 3.47 | % |
| | | | | |
Adjusted net income attributable to common shareholders and related impact (1) | | | | | |
| Net income attributable to common shareholders | $ | 11,531 | | $ | 4,000 | | | $ | 19,186 | | $ | 12,063 | |
| Merger expenses | 78 | | 299 | | | 6,895 | | 302 | |
| | | | | |
| Tax effect of adjustments to net income | (20) | | (27) | | | (1,617) | | (79) | |
| After tax adjustments to net income | 58 | | 272 | | | 5,278 | | 223 | |
| Adjusted net income attributable to common shareholders | 11,589 | | 4,272 | | | 24,464 | | 12,286 | |
| | | | | |
| Net income attributable to common shareholders, per diluted share | $ | 0.69 | | $ | 0.36 | | | $ | 1.27 | | $ | 1.07 | |
| Adjusted net income attributable to common shareholders, per diluted share | $ | 0.70 | | $ | 0.38 | | | $ | 1.62 | | $ | 1.09 | |
| | | | | |
| Return on average: | | | | | |
Return on average assets(3) | 1.54 | % | 0.88 | % | | 0.95 | % | 0.91 | % |
Adjusted return on average assets (1)(3) | 1.55 | % | 0.94 | % | | 1.21 | % | 0.93 | % |
Return on average shareholders' equity(3) | 15.32 | % | 7.31 | % | | 9.26 | % | 7.57 | % |
Adjusted return on average shareholders' equity (1)(3) | 15.40 | % | 7.81 | % | | 11.80 | % | 7.71 | % |
| | | | | |
Average tangible shareholders' equity: (1) | | | | | |
| Average shareholders' equity | 299,435 | | 217,087 | | | 276,846 | | 213,107 | |
| Less: average goodwill | 51,108 | | 43,642 | | | 52,241 | | 43,642 | |
| Less: average core deposit intangibles | 12,104 | | 7,598 | | | 11,801 | | 7,863 | |
| Average tangible shareholders' equity | 236,223 | | 165,847 | | | 212,804 | | 161,602 | |
| | | | | |
Return on average tangible common equity (ROATCE) (1)(3) | 19.42 | % | 9.57 | % | | 12.04 | % | 9.98 | % |
Adjusted ROATCE (1) (3) | 19.52 | % | 10.22 | % | | 15.36 | % | 10.16 | % |
(1) Not a recognized measure under U.S. GAAP.
(2) Amount includes tax equivalent adjustment to quantify the tax equivalent net interest income.
(3) Data has been annualized.
(4) Prior calculation of this ratio removed tax credits related to certain tax-preference-qualified loans and tax-exempt securities. The Company views these credits as normal course of business and as such removal is unnecessary.
Net Interest Income
Net interest income represents the amount by which interest earned on various earning assets exceeds interest paidaccrued 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 rate spread and net interest margin for the three and nine months ended September 30, 2019,2020, and 20182019 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 | | Three Months Ended September 30, 2019 | | 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 | $ | 2,337,958 | | 5.34 | | $ | 30,640 | | | $ | 1,312,153 | | 5.12 | | $ | 16,632 | | | $ | 13,712 | | $ | 754 | | $ | 14,466 | |
| Loan fees | — | | 0.38 | | 2,255 | | | — | | 0.26 | | 870 | | | 1,385 | | — | | 1,385 | |
| Loans with fees | 2,337,958 | | 5.73 | | 32,895 | | | 1,312,153 | | 5.38 | | 17,502 | | | 15,097 | | 754 | | 15,850 | |
| Mortgage loans held for sale | 103,729 | | 3.98 | | 1,037 | | | 18,271 | | 5.71 | | 263 | | | 828 | | (54) | | 774 | |
| Deposits with banks | 57,909 | | 0.47 | | 68 | | | 33,410 | | 1.96 | | 165 | | | 2,642 | | (2,739) | | (97) | |
| Investment securities - taxable | 67,569 | | 2.35 | | 399 | | | 73,115 | | 2.98 | | 549 | | | (40) | | (110) | | (150) | |
| Investment securities - tax-exempt | 185,058 | | 3.29 | | 1,186 | | | 220,233 | | 3.60 | | 1,576 | | | (303) | | (164) | | (467) | |
| Federal funds sold and other | 19,694 | | 3.68 | | 182 | | | 12,300 | | 5.03 | | 156 | | | 47 | | (21) | | 26 | |
| Total earning assets | 2,771,917 | | 5.29 | | 35,767 | | | 1,669,482 | | 4.98 | | 20,211 | | | 18,271 | | (2,334) | | 15,937 | |
| Nonearning assets | 209,770 | | | | | 136,973 | | | | | | | |
| Total assets | $ | 2,981,687 | | | | | $ | 1,806,455 | | | | | | | |
| Interest bearing liabilities | | | | | | | | | | | |
| Interest bearing demand | 272,506 | | 0.34 | | 236 | | | 142,702 | | 0.23 | | 81 | | | 102 | | 53 | | 155 | |
| Savings and money market | 786,589 | | 0.59 | | 1,162 | | | 350,440 | | 1.10 | | 976 | | | 296 | | (110) | | 186 | |
| Time deposits - retail | 715,310 | | 1.01 | | 1,819 | | | 540,688 | | 2.17 | | 2,956 | | | 1,735 | | (2,872) | | (1,137) | |
| Time deposits - wholesale | 223,095 | | 1.64 | | 917 | | | 294,750 | | 2.52 | | 1,872 | | | (392) | | (563) | | (955) | |
| Total interest-bearing deposits | 1,997,500 | | 0.82 | | 4,134 | | | 1,328,580 | | 1.76 | | 5,885 | | | 1,741 | | (3,492) | | (1,751) | |
| Federal Home Loan Bank advances and other borrowings | 40,567 | | 1.02 | | 104 | | | 14,216 | | 1.84 | | 66 | | | 50 | | (12) | | 38 | |
| Subordinated Debt | 70,361 | | 5.61 | | 992 | | | 11,655 | | 6.77 | | 199 | | | 821 | | (28) | | 793 | |
| Total borrowed funds | 110,928 | | 3.93 | | 1,096 | | | 25,871 | | 4.06 | | 265 | | | 871 | | (40) | | 831 | |
| Total interest-bearing liabilities | 2,108,428 | | 0.99 | | 5,230 | | | 1,354,451 | | 1.80 | | 6,150 | | | 2,612 | | (3,532) | | (920) | |
| Net interest rate spread (%) / Net interest income ($) | | 4.30 | | $ | 30,537 | | | | 3.18 | | $ | 14,061 | | | $ | 15,658 | | $ | 1,198 | | $ | 16,857 | |
| Noninterest bearing deposits | 536,353 | | (0.20) | | | | 227,502 | | (0.26) | | | | | | |
| Other noninterest bearing liabilities | 37,471 | | | | | 7,415 | | | | | | | |
| Shareholders' equity | 299,435 | | | | | 217,087 | | | | | | | |
| Total liabilities and shareholders' equity | $ | 2,981,687 | | | | | $ | 1,806,455 | | | | | | | |
| Cost of funds | | 0.79 | | | | | 1.54 | | | | | | |
| Net interest margin | | 4.54 | | | | | 3.51 | | | | | | |
| | | | Three Months Ended
September 30, 2019 | | Three Months Ended
September 30, 2018 | | Change | | Nine Months Ended September 30, 2020 | | Nine Months Ended September 30, 2019 | | 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 | | | | | | | | | | Interest earning assets | | | |
| Loans | $ | 1,312,153 |
| 5.12 |
| $ | 16,934 |
| | $ | 1,144,307 |
| 5.01 |
| $ | 14,445 |
| | $ | 2,165 |
| $ | 324 |
| $ | 2,489 |
| Loans | $ | 2,085,316 | | 5.38 | | $ | 82,105 | | | $ | 1,275,834 | | 5.15 | | $ | 48,273 | | | $ | 32,502 | | $ | 2,288 | | $ | 34,790 | |
| Loan fees | — |
| 0.26 |
| 870 |
| | — |
| 0.27 |
| 781 |
| | 89 |
| — |
| 89 |
| Loan fees | — | | 0.31 | | 4,882 | | | — | | 0.25 | | 2,358 | | | 2,524 | | — | | 2,524 | |
| Loans with fees | 1,312,153 |
| 5.38 |
| 17,804 |
| | 1,144,307 |
| 5.28 |
| 15,226 |
| | 2,254 |
| 324 |
| 2,578 |
| Loans with fees | 2,085,316 | | 5.69 | | 86,987 | | | 1,275,834 | | 5.40 | | 50,631 | | | 35,026 | | 2,288 | | 37,314 | |
| Mortgage loans held for sale | 18,271 |
| 5.71 |
| 263 |
| | 22,464 |
| 5.19 |
| 294 |
| | (172 | ) | 141 |
| (31 | ) | Mortgage loans held for sale | 79,000 | | 4.08 | | 2,412 | | | 14,534 | | 5.65 | | 614 | | | 1,918 | | (120) | | 1,798 | |
| Deposits with banks | 33,410 |
| 1.96 |
| 165 |
| | 24,570 |
| 1.53 |
| 95 |
| | 39 |
| 31 |
| 70 |
| Deposits with banks | 55,212 | | 0.59 | | 242 | | | 30,487 | | 1.75 | | 399 | | | (859) | | 702 | | (157) | |
| Investment securities - taxable | 73,115 |
| 2.98 |
| 549 |
| | 70,389 |
| 2.33 |
| 414 |
| | 16 |
| 119 |
| 135 |
| Investment securities - taxable | 69,490 | | 1.88 | | 978 | | | 74,330 | | 2.95 | | 1,639 | | | (101) | | (560) | | (661) | |
| Investment securities - tax-exempt | 220,233 |
| 3.60 |
| 1,999 |
| | 229,934 |
| 3.74 |
| 2,168 |
| | (89 | ) | (79 | ) | (169 | ) | Investment securities - tax-exempt | 191,814 | | 3.46 | | 3,874 | | | 223,596 | | 3.75 | | 3,874 | | | (839) | | (456) | | (1,295) | |
| Federal funds sold and other | 12,300 |
| 5.03 |
| 156 |
| | 12,760 |
| 5.75 |
| 185 |
| | (6 | ) | (23 | ) | (29 | ) | Federal funds sold and other | 19,324 | | 3.43 | | 496 | | | 12,751 | | 5.44 | | 519 | | | (81) | | 58 | | (23) | |
| Total earning assets | 1,669,482 |
| 4.98 |
| 20,937 |
| | 1,504,424 |
| 4.85 |
| 18,382 |
| | 2,042 |
| 513 |
| 2,555 |
| Total earning assets | 2,500,156 | | 5.23 | | 94,989 | | | 1,631,532 | | 5.00 | | 57,676 | | | 35,064 | | 1,912 | | 36,976 | |
| Nonearning assets | 136,973 |
| | | | 139,972 |
| | | | | Nonearning assets | 203,703 | | | | 138,926 | | | | |
| Total assets | $ | 1,806,455 |
| | | | $ | 1,644,396 |
| | | | | Total assets | $ | 2,703,859 | | | $ | 1,770,458 | | |
| Interest bearing liabilities | | | | | | | | | | Interest bearing liabilities | | | | |
| Interest bearing demand | 142,702 |
| 0.23 |
| 81 |
| | 143,057 |
| 0.28 |
| 102 |
| | — |
| (21 | ) | (21 | ) | Interest bearing demand | 245,962 | | 0.30 | | 554 | | | 144,427 | | 0.26 | | 278 | | | 226 | | 50 | | 276 | |
| Savings and money market | 350,440 |
| 1.10 |
| 973 |
| | 339,487 |
| 0.77 |
| 657 |
| | 22 |
| 294 |
| 316 |
| Savings and money market | 659,673 | | 0.74 | | 3,668 | | | 374,876 | | 1.13 | | 3,156 | | | 938 | | (426) | | 512 | |
| Time deposits - retail | 540,688 |
| 2.17 |
| 2,956 |
| | 527,930 |
| 1.60 |
| 2,128 |
| | 53 |
| 775 |
| 828 |
| Time deposits - retail | 669,119 | | 1.29 | | 6,446 | | | 576,568 | | 2.12 | | 9,137 | | | 1,870 | | (4,561) | | (2,691) | |
| Time deposits - wholesale | 294,750 |
| 2.52 |
| 1,872 |
| | 87,262 |
| 1.88 |
| 414 |
| | 1,275 |
| 183 |
| 1,458 |
| Time deposits - wholesale | 218,109 | | 1.92 | | 3,131 | | | 191,133 | | 2.60 | | 3,713 | | | 682 | | (1,264) | | (582) | |
| 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 interest-bearing deposits | | Total interest-bearing deposits | 1,792,863 | | 1.03 | | 13,799 | | | 1,287,004 | | 1.69 | | 16,284 | | | 3,717 | | (6,202) | | (2,485) | |
| Federal Home Loan Bank advances and other | | Federal Home Loan Bank advances and other | 92,264 | | 0.89 | | 613 | | | 31,378 | | 2.28 | | 534 | | | 115 | | (36) | | 79 | |
| Subordinated Debt | | Subordinated Debt | 70,455 | | 5.63 | | 2,967 | | | 11,634 | | 6.78 | | 590 | | | 2,460 | | (83) | | 2,377 | |
| Total borrowed funds | 25,871 |
| 4.06 |
| 265 |
| | 114,308 |
| 2.79 |
| 803 |
| | (431 | ) | (107 | ) | (538 | ) | Total borrowed funds | 162,719 | | 2.94 | | 3,580 | | | 43,012 | | 3.49 | | 1,124 | | | 2,575 | | (119) | | 2,456 | |
| Total interest-bearing liabilities | 1,354,451 |
| 1.80 |
| 6,147 |
| | 1,212,044 |
| 1.34 |
| 4,104 |
| | 919 |
| 1,124 |
| 2,043 |
| Total interest-bearing liabilities | 1,955,582 | | 1.19 | | 17,379 | | | 1,330,016 | | 1.75 | | 17,408 | | | 6,292 | | (6,321) | | (29) | |
| Net interest rate spread (%) / Net interest income ($) | | 3.18 |
| $ | 14,790 |
| | | 3.51 |
| $ | 14,278 |
| | $ | 1,123 |
| $ | (612 | ) | $ | 512 |
| Net interest rate spread (%) / Net interest income ($) | | 4.04 | | $ | 77,610 | | | | 3.25 | | $ | 43,566 | | | $ | 28,772 | | $ | 8,232 | | $ | 37,005 | |
| Noninterest bearing deposits | 227,502 |
| (0.26 | ) | | | 221,107 |
| (0.20 | ) | | | | Noninterest bearing deposits | 439,521 | | (0.22) | | | | 219,106 | | (0.25) | | | | |
| Other noninterest bearing liabilities | 7,415 |
| | | | 7,344 |
| | | | | Other noninterest bearing liabilities | 31,910 | | | 8,229 | | |
| Stockholder's equity | 217,087 |
| | | | 203,901 |
| | | | | |
| Total liabilities and stockholders' equity | $ | 1,806,455 |
| | | | $ | 1,644,396 |
| | | | | |
| Shareholders' equity | | Shareholders' equity | 276,846 | | | 213,107 | | |
| Total liabilities and shareholders' equity | | Total liabilities and shareholders' equity | $ | 2,703,859 | | | $ | 1,770,458 | | |
| Cost of funds | | 1.54 |
| | | | 1.14 |
| | | | Cost of funds | | 0.97 | | | | 1.50 | | |
| Net interest margin | | 3.51 |
| | | | 3.77 |
| | | | Net interest margin | | 4.30 | | | 3.57 | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
| Interest earning assets | | | | | | | | | | | |
| Loans | $ | 1,275,834 |
| 5.15 |
| $ | 49,181 |
| | $ | 1,117,743 |
| 4.88 |
| $ | 40,770 |
| | $ | 6,045 |
| $ | 2,365 |
| $ | 8,410 |
|
| Loan fees | — |
| 0.25 |
| 2,358 |
| | — |
| 0.26 |
| 2,137 |
| | 221 |
| — |
| 221 |
|
| Loans with fees | 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 | 14,534 |
| 5.65 |
| 614 |
| | 28,636 |
| 5.14 |
| 1,101 |
| | (648 | ) | 161 |
| (487 | ) |
| Deposits with banks | 30,487 |
| 1.75 |
| 399 |
| | 36,837 |
| 1.35 |
| 371 |
| | (98 | ) | 126 |
| 28 |
|
| Investment securities - taxable | 74,330 |
| 2.95 |
| 1,639 |
| | 70,276 |
| 2.61 |
| 1,374 |
| | 81 |
| 184 |
| 265 |
|
| Investment securities - tax-exempt | 223,596 |
| 3.75 |
| 6,264 |
| | 226,601 |
| 3.69 |
| 6,258 |
| | (120 | ) | 126 |
| 6 |
|
| Federal funds sold and other | 12,751 |
| 5.44 |
| 519 |
| | 11,389 |
| 5.85 |
| 498 |
| | 72 |
| (51 | ) | 21 |
|
| Total earning assets | 1,631,532 |
| 5.00 |
| 60,974 |
| | 1,491,482 |
| 4.71 |
| 52,509 |
| | 5,554 |
| 2,911 |
| 8,465 |
|
| Nonearning assets | 138,926 |
| | | | 137,606 |
| | | | | | |
| Total assets | $ | 1,770,458 |
| | | | $ | 1,629,088 |
| | | | | | |
| Interest bearing liabilities | | | | | | | | | | | |
| Interest bearing demand | 144,427 |
| 0.26 |
| 278 |
| | 147,022 |
| 0.24 |
| 263 |
| | (7 | ) | 22 |
| 15 |
|
| Savings and money market | 374,876 |
| 1.12 |
| 3,154 |
| | 347,184 |
| 0.66 |
| 1,709 |
| | 149 |
| 1,296 |
| 1,445 |
|
| Time deposits - retail | 576,568 |
| 2.12 |
| 9,139 |
| | 520,717 |
| 1.45 |
| 5,640 |
| | 659 |
| 2,840 |
| 3,499 |
|
| Time deposits - wholesale | 191,133 |
| 2.60 |
| 3,713 |
| | 91,466 |
| 1.60 |
| 1,097 |
| | 1,662 |
| 954 |
| 2,616 |
|
| Total interest bearing deposits | 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 | 31,378 |
| 2.28 |
| 534 |
| | 84,176 |
| 2.03 |
| 1,275 |
| | (971 | ) | 230 |
| (741 | ) |
| Subordinated debt | 11,634 |
| 6.78 |
| 590 |
| | 11,556 |
| 6.09 |
| 526 |
| | 4 |
| 60 |
| 64 |
|
| Total borrowed funds | 43,012 |
| 3.49 |
| 1,124 |
| | 95,732 |
| 2.52 |
| 1,801 |
| | (967 | ) | 290 |
| (677 | ) |
| Total interest-bearing liabilities | 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 ($) | | 3.25 |
| $ | 43,566 |
| | | 3.54 |
| $ | 41,999 |
| | $ | 4,058 |
| $ | (2,491 | ) | $ | 1,567 |
|
| Noninterest bearing deposits | 219,106 |
| (0.25 | ) | | | 217,957 |
| (0.18 | ) | | | | | |
| Other noninterest bearing liabilities | 8,229 |
| | | | 6,464 |
| | | | | | |
| Stockholder's equity | 213,107 |
| | | | 202,546 |
| | | | | | |
| Total liabilities and stockholders' equity | $ | 1,770,458 |
| | | | $ | 1,629,088 |
| | | | | | |
| Cost of funds | | 1.50 |
| | | | 0.99 |
| | | | | |
| Net interest margin | | 3.57 |
| | | | 3.76 |
| | | | | |
Table Assumptions—Average loan balances are inclusive of nonperforming loans. Interest income and yields computed on tax-exempt instruments are on a tax equivalenttax-equivalent basis including a state tax credit included in loan yields of $300$751 and $900$1,834 for the three and nine months ended September 30, 2019,2020, respectively, and $350$300 and $400$900 for the same periods in 2018.2019. Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities.liabilities as well as tax-exempt securities adjustments of $347 and $1,095 for the three and nine months ended September 30, 2020, respectively, and $423 and $1,320 for the same periods in 2019. 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 nine months ended September 30, 2020, we recorded net interest income on a tax-equivalent basis of approximately $31,643 and $80,570, respectively, which resulted in a net interest margin (net interest income divided by the average balance of interest-earning assets) of 4.54% and 4.30%, respectively. For the three and nine months ended September 30, 2019, we recorded net interest income on a tax equivalenttax-equivalent basis of approximately $14,790$14,787 and $43,566, respectively, which resulted in a net interest margin (net interest income divided by the average balance of interest earning assets) of 3.51% and 3.57%, respectively. For the three and nine months ended September 30, 2018, we recorded net interest income on a tax equivalent basis of approximately $14,278 and $41,999, respectively, which resulted in a net interest margin of 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 14.1%63.4% for the nine months ended September 30, 20192020 compared to the nine months ended September 30, 2018.2019 and was mainly driven by the TCB Holdings Transaction and FABK
Transaction. Our combined loan and loan fee yield increased from 5.14%5.38% to 5.73% for the three months ended September 30, 2020 compared to the same period in 2019 and increased from 5.40% to 5.69% for the nine months ended September 30, 20192020 compared to the same period in 2018.2019. The increased yield for the nine months ended September 30, 2019 is primarily attributable to a 23 basis points increase in contractual loan yields including adjustment for purchase accounting accretion and 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 September 30, 2019 is primarily attributable to a 14 basis points increase in contractual loan yields including purchase accounting accretion, partially offset by a three basis points decrease in state tax credits and a one basis point decrease in loan fees.
Our tax equivalent yield on tax-exempt investments was 3.60% and 3.75% for the three and nine months ended September 30, 2019, respectively, compared to 3.74% and 3.69% for the same periods in 2018, respectively. The year-over-year change was2020 is primarily driven by the restructuring of our investment portfolio in the first half of 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 nine months ended September 30, 2019 comparedattributable to the same period in 2018. Our year-over-year average taxable securities volume increased by 5.8% forpurchase accounting accretion from the nine months ended September 30, 2019 compared totwo mergers as well as the same period in 2018.increased fees from the PPP loans.
Our cost of funds increased to 1.54%tax-equivalent yield on tax-exempt investments was 3.29% and 1.50% from 1.14% and 0.99%3.46% for the three and nine months ended September 30, 2020 compared to 3.60% and 3.75% for the same periods in 2019. Our year-over-year average tax-exempt investment volume decreased by 14.2% for the nine months ended September 30, 2020 compared to the same period in 2019 due to investment sales in the fourth quarter of 2019. Our year-over-year average taxable securities volume decreased by 6.5% for the nine months ended September 30, 2020 compared to the same period in 2019.
Our cost of funds decreased to 0.79% and 0.97% from 1.54% and 1.50%, respectively, for the three and nine months ended September 30, 2020 compared to the same periods in 2018.2019. The increasedecrease in our cost of funds was primarily driven by an across the board increasea decrease in the cost of our interest bearinginterest-bearing deposits and other interest bearinginterest-bearing liabilities as well as an increasedue to the recent decrease in average wholesale deposits from 6.9% of our average total deposit portfolio at September 30, 2018 to 12.7% at September 30, 2019.rates by the Federal Reserve. We experienced a 2.9% and 0.5%100.6% increase in our average noninterest bearingnoninterest-bearing deposits for the three and nine months ended September 30, 2019, respectively,2020 when compared to the same periodsperiod in 2018.2019, which is largely attributable to the TCB Holdings Transaction and FABK Transaction.
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 contractslight expansions in a rising rate environment and slightly expandslight contractions in a falling rate environment. In the loweringThe Company has 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 likely to be driven byfloors on certain variable rate loans and investments repricing and (ii) the increased expenses to be incurred on ourthose floors will mitigate further declines in interest rate swaps.rates.
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. 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 $606$1,500 and $806$7,400 for loan losses for the three and nine months ended September 30, 2019,2020, respectively, compared to $322$606 and $759$806 for the three and nine months ended September 30, 2018, respectively.2019. The increase in provision expense for the three months and nine months ended September 30, 20192020 can be primarily attributed to the recent downturn in the economy due to COVID-19 while a portion is due to the growing loan portfolio. Also, a portion of the provision expenseThe acquired loan portfolios from First Advantage Bank and Community Bank & Trust are reserved for the three months ended September 30, 2019 was used to establish a specific reserve, primarily, for one $5,000 lending relationshipthrough fair value marks that experiencedconsider both credit deteriorationquality 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 positively impacted provision expense during the first nine months of 2019.changes in interest rates. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Balance Sheets at September 30, 20192020 and December 31, 20182019 - Allowance for Loan Losses” included herein for further analysis of the provision for loan losses.
Noninterest Income
Our noninterest income is composed of several components, some of which vary significantly between periods. The following is a summary of our noninterest income for the three and nine months ended September 30, 2019,2020, and 20182019 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Percent
Increase | Nine Months Ended September 30, | | Percent
Increase |
| 2020 | 2019 | | | (Decrease) | 2020 | 2019 | | (Decrease) |
| Noninterest Income | | | | | | | | | |
| Service charges and fees on deposits | $ | 1,583 | | $ | 976 | | | | 62.2 | % | $ | 4,172 | | $ | 2,796 | | | 49.2 | % |
| Gains on mortgage loans sold, net | 3,783 | | 1,385 | | | | 173.1 | % | 7,605 | | 3,170 | | | 139.9 | % |
| Securities gains, net | — | | — | | | | — | % | 327 | | 306 | | | 6.9 | % |
| | | | | | | | | |
| | | | | | | | | |
| Other noninterest income: | | | | | | | | | |
| Bank-owned life insurance | 386 | | 283 | | | | 36.4 | % | 1,073 | | 838 | | | 28.0 | % |
| Brokerage revenue | 65 | | 13 | | | | 400.0 | % | 142 | | 33 | | | 330.3 | % |
| Miscellaneous noninterest income | 184 | | 103 | | | | 78.6 | % | 387 | | 253 | | | 53.0 | % |
| Total other noninterest income | 635 | | 399 | | | | 59.1 | % | 1,602 | | 1,124 | | | 42.5 | % |
| Total noninterest income | $ | 6,001 | | $ | 2,760 | | | | 117.4 | % | $ | 13,706 | | $ | 7,396 | | | 85.3 | % |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | Percent Increase | Nine Months Ended September 30, | Percent
Increase |
| | 2019 | 2018 | (Decrease) | 2019 | 2018 | (Decrease) |
| Noninterest Income | | | | | | |
| Service charges and fees | $ | 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 | — |
| 18 |
| (100.0 | )% | 306 |
| 43 |
| 611.6 | % |
| Gain on sale of other real estate | — |
| 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 | 283 |
| 293 |
| (3.4 | )% | 838 |
| 893 |
| (6.2 | )% |
| Brokerage revenue | 13 |
| 7 |
| 85.7 | % | 33 |
| 91 |
| (63.7 | )% |
| Miscellaneous noninterest income | 103 |
| 61 |
| 68.9 | % | 253 |
| 155 |
| 63.2 | % |
| 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 noninterest income during the three and nine months ended September 30, 20192020 compared to the same periods in 20182019 are the fluctuation in gains on mortgage loans sold, net gains on sale of other real estate, andas well as the gains on securities transactions.increase in service charges mainly attributable to the two mergers. These and other factors impacting noninterest income are discussed further below.
Service charges and fees on deposit accounts have increased due to the TCB Holdings Transaction, the FABK Transaction, and mainly reflect customer growth trends but have also been impacted by changesthe concentrated effort to attract noninterest-bearing deposits. An increase in our fee structures. Thedebit card fees makes up the majority of the 17.2%62.2% and 11.7%49.2% increase for the three and nine months ended September 30, 2019, respectively, was driven by an increase2020 as compared to the same period in our debit card fees.2019.
Securities gains and losses often fluctuate from period to period and can sometimes be attributable to various balance sheet risk strategies. During the nine months ended September 30, 2020, the Company sold securities totaling $103,901 with a gain of $327. During the nine months ended September 30, 2019, the Company sold securities classified as available for sale totaling $52,434 with a gain of $306. DuringSecurities were not sold in the ninethree months ended September 30, 2018, the Company sold securities classified as available for sale totaling $100,737 with a gain of $43.2020 or September 30, 2019.
Gains on mortgage loans sold, net, consists of fees from the origination and sale of mortgage loans and first-lien HELOCs. These 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 relatedmortgage-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 $1,385$3,783 and $3,170, respectively,$7,605 for the three and nine months ended September 30, 20192020, respectively, compared to $1,399$1,385 and $4,061, respectively,$3,170 for the same periods in the prior year. The decreaseincrease in gains for the three and nine months ended September 30, 20192020 when compared to 2018the same periods in 2019 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 $600the increase in gains.volume in the traditional mortgage market. As discussed further in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019, gains on mortgage loans sold are generally recognized at the time of a loan sale corresponding to the transfer of risk.
During As a result of increased production in the threesecond and nine months endedthird quarters, the Company's held-for-sale portfolio increased by $62.1 million from December 31, 2019 to September 30, 2019, there was no gain or loss due to the sale of other real estate compared to a gain of $150 and $259, respectively, in the same periods in 2018.2020.
Noninterest income also includes appreciation in the cash surrender value of bank-owned life insurance, which was $283$386 and $838, respectively,$1,073 for the three and nine months ended September 30, 20192020, respectively, compared to $293$283 and $893, respectively,$838 for the same periods in 2018.2019. The decrease relatesincreases for both periods are attributable to the introductory rate ending from our last purchase.recent mergers. 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.
Noninterest Expense
The following is a summary of our noninterest expense for the three and nine months ended September 30, 20192020 and 20182019 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Percent
Increase | Nine Months Ended
September 30, | | Percent
Increase |
| 2020 | 2019 | | (Decrease) | 2020 | 2019 | | (Decrease) |
| Noninterest Expense | | | | | | | | |
| Salaries and employee benefits | $ | 12,184 | | $ | 7,634 | | | 59.6 | % | $ | 33,885 | | $ | 22,605 | | | 49.9 | % |
| Occupancy | 2,054 | | 1,359 | | | 51.1 | % | 5,566 | | 4,069 | | | 36.8 | % |
| Data processing and software | 2,240 | | 1,553 | | | 44.2 | % | 6,085 | | 4,538 | | | 34.1 | % |
| | | | | | | | |
| Professional fees | 775 | | 404 | | | 91.8 | % | 1,933 | | 1,836 | | | 5.3 | % |
| Regulatory fees | 365 | | (17) | | | 2,247.1 | % | 1,356 | | 596 | | | 127.5 | % |
| Merger expenses | 78 | | 299 | | | (73.9) | % | 6,895 | | 302 | | | 2,183.1 | % |
| Other operating expense | 2,637 | | 1,815 | | | 45.3 | % | 6,476 | | 4,973 | | | 30.2 | % |
| Total noninterest expense | $ | 20,333 | | $ | 13,047 | | | 55.8 | % | $ | 62,196 | | $ | 38,919 | | | 59.8 | % |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | Percent Increase | Nine Months Ended
September 30, | Percent
Increase |
| | 2019 | 2018 | (Decrease) | 2019 | 2018 | (Decrease) |
| Noninterest Expense | | | | | | |
| Salaries and employee benefits | $ | 7,634 |
| $ | 6,913 |
| 10.4 | % | $ | 22,605 |
| $ | 20,480 |
| 10.4 | % |
| Occupancy | 1,359 |
| 1,234 |
| 10.1 | % | 4,069 |
| 3,673 |
| 10.8 | % |
| Information technology | 1,553 |
| 1,315 |
| 18.1 | % | 4,538 |
| 3,913 |
| 16.0 | % |
| Advertising and public relations | 387 |
| 183 |
| 111.5 | % | 916 |
| 413 |
| 121.8 | % |
| Audit, legal and consulting | 350 |
| 588 |
| (40.5 | )% | 1,836 |
| 2,027 |
| (9.4 | )% |
| Federal deposit insurance | (96 | ) | 210 |
| (145.7 | )% | 348 |
| 630 |
| (44.8 | )% |
| Merger expenses | 299 |
| 82 |
| 264.6 | % | 302 |
| 2,742 |
| (89.0 | )% |
| Other operating | 1,561 |
| 1,637 |
| (4.6 | )% | 4,305 |
| 4,487 |
| (4.1 | )% |
| Total noninterest expense | $ | 13,047 |
| $ | 12,162 |
| 7.3 | % | $ | 38,919 |
| $ | 38,365 |
| 1.4 | % |
Noninterest expense increased by $885,$7,286 and $23,277, or 7.3%55.8% and 59.8%, for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019 due in large part todriven by an increase in salaries and employee benefits offset in part by declines in audit, legalfor both periods and consulting fees as well as FDIC deposit insurance costs during the period. Noninterest expense formerger expenses when comparing the nine months ended September 30, 2019 had an increase of $554, or 1.4%, and is similarly due in large part to an increase in salaries and employee benefits that has been partially offset by a $2,440 decrease in merger expenses. Both theended. The three and nine monthnine-months periods ended September 30, 20192020 have been impacted by RMV's build out of a correspondent mortgage line-of-business that hasthe TCB Holdings Transaction and the FABK Transaction which have resulted in addsadditions to staff, additional vendor relationships and investments in technology. These and other factors impacting noninterest expense are discussed further below.
Salaries and employee benefits increased by $721$4,550 and $2,125$11,280 or 59.6% and 49.9% for the three and nine months ended September 30, 2019,2020, respectively, or 10.4%, for both of these periods compared to the same periods in 2018.2019. This increase is primarily attributable mainly to the increased staff for RMV, dueTCB Holdings Transaction in part, to their build outthe first quarter of a correspondent mortgage line-of-business,2020 and FABK Transaction in the second quarter of 2020, as well as our year over year growth and severance for three executive officers. The staffing of our de novo branches in Murfreesborolevels have normalized during the third quarter of 2018 and Chattanooga in the fourth quarter of 2018 and other investments in revenue producers.quarter.
Occupancy costs increased $125by $695 or 51.1% and $396,$1,497 or 10.1% and 10.8%,36.8% during the three and nine months ended September 30, 2019,2020, respectively, when compared to the same periods in 20182019 mainly due to the commencementTCB Holdings Transaction and the FABK Transaction as well as the expansion of leases during the period. During the thirdRMV.
Data processing and fourth quarters of 2018, respectively, we opened the Murfreesboro and Chattanooga branches. Additionally, we added leases for mortgage production offices in Memphis, Chattanooga and two in Little Rock, Arkansas.
Information technologysoftware costs increased by $238$687 or 44.2% and $625,$1,547 or 18.1%34.1% when comparing the three and 16.0%nine months ended September 30, 2020, respectively, to the comparable periods in 2019. This increase is mainly attributable to increased costs due to an increased volume of accounts and transactions services as well as continued investments in information technology infrastructure. Both the volume and location increases are primarily due to the TCB Holdings Transaction, the FABK Transaction, and the expansion of RMV.
Professional fees increased by $371 or 91.8%, and $97 or 5.3%, respectively, when comparing the three and nine months ended 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, and our increase in locations mentioned in the previous paragraph.
Advertising and public relations costs increased by $204 and $503, or 111.5% and 121.8%, respectively, when comparing the three and nine months ended September 30, 20192020, to the same periods in 2018. Increased costs were primarily attributable to 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 $238 and $191, or 40.5% and 9.4%, respectively, when comparing the three and nine months ended September 30, 2019 to the same periods in 2018. These fluctuations are2019. This fluctuation is mainly attributable to the fluctuation of legal and consultingincreased fees incurredrelated to special projects by RMV.the Company.
Our regulatory expenses are largely made up of FDIC deposit insurance expense which 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 decreasedincreased by $306$382 and $282, respectively,$760 for the three and nine months ended September 30, 2019,2020, compared to the same periods in 2018.2019. This decreaseincrease is primarily the result of our small bank assessment creditincrease in deposits due to the TCB Holdings Transaction and the FABK Transaction as well as credits received in 2019 which significantly reduced the third quarter of 2019.expense recognized.
Merger relatedMerger-related expenses increased by 264.6%$6,593 for the nine months ended September 30, 2020 when compared to the same period in 2019 and decreased by 89.0%, respectively,$221 for the three months ended September 30, 2020 as compared to $299the same period in 2019. These costs are considered one-time expenses which are associated with the TCB Holdings Transaction and $302the FABK Transaction. We anticipate no further significant merger expenses to be incurred in relation to these two transactions.
Other operating expenses increased by $822 or 45.3% and $1,503 or 30.2% for the three and nine months ended September 30, 2019 when2020 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 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 $76 and $182, or 4.6% and 4.1%, respectively, for the three and nine months ended 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 thean increase in travelamortization of core deposit intangibles and entertainment expense in connection with RMV.franchise taxes due to the TCB Holdings Transaction and FABK Transaction.
Income Taxes
During the three and nine months ended September 30, 2019,2020, we recorded consolidated income tax expense of $557$2,800 and $1,430,$3,524, respectively, compared to $519$557 and $1,431,$1,430, respectively, for the three and nine months ended September 30, 2018.2019. The Company files separate federal tax returns for RMV and the mortgage banking segment and bank segment. The taxable income or losses of the mortgage banking operations are included in the respective franchise and excise returns of the Bank and non-controlling member for federal purposes.
Our income tax expense attributable to shareholders for the three and nine months ended September 30, 2019,2020, reflects an effective income tax rate of 14.1%19.39% and 12.6%15.77%, respectively, (exclusive of a tax benefitexpense (benefit) from our mortgage banking operations of $97$27 and $311$(69) for the three and nine months ended September 30, 2019,2020, respectively, on pre-tax lossesincome (losses) of $1,483$415 and $4,795$(1,062) for the three and nine months ended September 30, 2019,2020, respectively), compared to 12.3%14.05% and 13.7%, respectively,12.61% for the same periodperiods in 20182019 (exclusive of a tax benefit of $55 and $147, respectively,$97and $311 on pre-tax losses of $897$(1,491) and $2,390,$(4,778), respectively, from our mortgage banking operations for the comparable periods of 2018)in 2019). Additionally, our effective tax rate for the three and nine months ended September 30, 20192020 is higher than the same period in 20182019 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 decreasechange in the proportion of our tax-exempt income to total income. Ourincome before taxes. The Company's tax-exempt income from securities, loans and earnings from bank-owned life insurance contracts as well as state tax credits related to loans to encourage economic development impact the 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 2018, which reduced taxable income and increased the proportion of tax exempt income to total income.rate.
NoncontrollingNon-controlling Interest in NetLossOperating Resultsof Subsidiary
Our non-controlling interest in net lossoperating results of subsidiary is solely attributable to RMV.the RMV minority interest. The Bank has a 51% voting interest in this venture, but under the terms of the related operating agreement, the non-controlling member receives 70% of the distributioncash flow distributions of RMV and the Bank receives 30% of any distribution,cash flow distributions, after the non-controllingnon-
controlling member recovers its aggregate capital contributions. The non-controlling member is required to fund RMV's losses, in arrears, via additional capital contributions. The ventureRMV had a net lossincome (loss) of $1,386$374 and $4,484, respectively,$(990) for the three and nine months ended September 30, 20192020, respectively, compared to a net loss of $842$(1,386) and $2,243, respectively,$(4,484) for the same periods in 2018.2019. The increased lossimprovements in operating results for the three and nine months ended September 30, 20192020 when compared to the same periodsperiod in 20182019 is mainly attributable to the increasedecrease in salaries and benefits due to increased staffing levels, increased occupancy costs dueexpense relating to the openingstart-up of new locations, expenses associated with launching the correspondent mortgage group and consulting and advertising fees previously mentioned. These expenses are includedline of business in our consolidated results.2019. Also, see Note 910 to our consolidated financial statements for segment reporting.
COMPARISON OF BALANCE SHEETS ATSEPTEMBER 30, 20192020ANDDECEMBER 31, 20182019
Overview
The Company’s total assets were $1,852,487$3,044,512 at September 30, 20192020 and $1,724,338$1,901,842 at December 31, 2018.2019. Assets increased by 7.4%60.1% from December 31, 20182019 to September 30, 2019,2020, primarily due to loan growth of $118,208, or 9.7%.acquisition activity which increased total loans by $756,240. Total liabilities were $1,632,835$2,737,426 at September 30, 20192020 and $1,515,924$1,678,089 at December 31, 2018,2019, an increase of 7.7%63.1%. The increase in liabilities from December 31, 2018 to September 30, 2019, was substantially attributable to the increase in deposits of $172,730,$981,049, or 12.0% ,and61.9%, and an increase in FHLB advances of $29,818 during the increase was partially offsetperiod. These changes were materially impacted by the decrease in Federal Home Loan Bank ("FHLB") advances of $53,570, or 93.2%, duringTCB Holdings Transaction as well as the period.FABK Transaction. These and other components of our consolidated 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, theThe competition for quality loans in our markets has remained strong. Our goal is to steadily grow our loan portfolio, focusing on quality. This is not always possible for various reasons, including but not limited to scheduled maturities or early payoffs exceeding new loan volume.volume, as well as economic conditions. Early payoffs typically increase in loweringfalling rate environments as customers identify advantageous opportunities for refinancing. We have been adding experienced lending officers to our staff to help with loan growth. We have expanded our Middle Tennessee footprint into Maury and Hickman CountiesCheatham County with the Merger, andTCB Holdings Transaction. The FABK Transaction expanded our footprint into Montgomery County as well as enhanced our presence in Davidson County. Additionally, the third and fourth quarterFABK Transaction diversified our loan portfolio with the addition of 2018, we opened full service branches in Murfreesboro and Chattanooga where we previously had only loan production offices.loans related to manufactured housing. Total loans, net, at September 30, 2019,2020, and December 31, 2018,2019, were $1,338,392$2,338,064 and $1,220,184, respectively. This represented$1,397,374, respectively, representing an increase of 9.7% from December 31, 201867.3%. Contributing to September 30, 2019.this increase, $171,445 were acquired in connection with the first quarter TCB Holdings Transaction and $622,423 were acquired in connection with the second quarter FABK Transaction.
The table below provides a summary of the loan portfolio composition for the dates noted (including purchased credit-impaired ("PCI") loans).
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Amount | | Percent | | Amount | | Percent |
| Commercial, Industrial and Agricultural | $ | 477,785 | | | 20.2 | % | | $ | 245,515 | | | 17.4 | % |
| Real estate: | | | | | | | |
| 1-4 Family Residential | 334,730 | | | 14.2 | % | | 227,529 | | | 16.2 | % |
| 1-4 Family HELOC | 101,492 | | | 4.3 | % | | 96,228 | | | 6.8 | % |
| Multifamily and Commercial | 864,756 | | | 36.7 | % | | 536,845 | | | 38.1 | % |
| Construction, Land Development and Farmland | 366,760 | | | 15.5 | % | | 273,872 | | | 19.4 | % |
| Consumer | 209,071 | | | 8.8 | % | | 16,855 | | | 1.2 | % |
| Other | 8,259 | | | 0.3 | % | | 13,180 | | | 0.9 | % |
| 2,362,853 | | | 100.0 | % | | 1,410,024 | | | 100.0 | % |
| Less: | | | | | | | |
| Deferred loan fees | 4,955 | | | | | 72 | | | |
| Allowance for loan losses | 19,834 | | | | | 12,578 | | | |
| Loans, net | $ | 2,338,064 | | | | | $ | 1,397,374 | | | |
|
| | | | | | | | | | | | | |
| | September 30, 2019 | | December 31, 2018 |
| | Amount | | Percent | | Amount | | Percent |
| Commercial, Industrial and Agricultural | $ | 231,935 |
| | 17.2 | % | | $ | 213,850 |
| | 17.4 | % |
| Real estate: | | | | | | | |
| 1-4 Family Residential | 236,332 |
| | 17.5 | % | | 225,863 |
| | 18.3 | % |
| 1-4 Family HELOC | 93,176 |
| | 6.9 | % | | 88,112 |
| | 7.2 | % |
| Multifamily and Commercial | 520,297 |
| | 38.5 | % | | 447,840 |
| | 36.4 | % |
| Construction, Land Development and Farmland | 238,082 |
| | 17.6 | % | | 220,801 |
| | 17.9 | % |
| Consumer | 17,448 |
| | 1.3 | % | | 20,495 |
| | 1.7 | % |
| Other | 13,252 |
| | 1.0 | % | | 14,106 |
| | 1.1 | % |
| | 1,350,522 |
| | 100.0 | % | | 1,231,067 |
| | 100.0 | % |
| Less: | | | | | | | |
| Deferred loan fees (costs) | (161 | ) | | | | (9 | ) | | |
| Allowance for possible loan losses | 12,291 |
| | | | 10,892 |
| | |
| Loans, net | $ | 1,338,392 |
| | | | $ | 1,220,184 |
| | |
The table below provides a summary of PCI loans as of September 30, 2020 and December 31, 2019:
| | | | | | | | |
| September 30, 2020 | December 31, 2019 |
| | |
| Commercial, Industrial and Agricultural | $ | 989 | | $ | — | |
| Real estate: | | |
| 1-4 Family Residential | 1,211 | | 231 | |
| 1-4 Family HELOC | 18 | | — | |
| Multifamily and Commercial | 2,243 | | 217 | |
| Construction, Land Development and Farmland | 1,003 | | 1,021 | |
| Consumer | 2,105 | | — | |
| Other | — | | — | |
| Total gross PCI loans | 7,569 | | 1,469 | |
| Less: | | |
| Remaining purchase discount | 3,036 | | 246 | |
| Allowance for loan losses | — | | — | |
| Loans, net | $ | 4,533 | | $ | 1,223 | |
|
| | | |
| | September 30, 2019 |
| | |
| Commercial, Industrial and Agricultural | $ | — |
|
| Real estate: | |
| 1-4 Family Residential | 237 |
|
| 1-4 Family HELOC | — |
|
| Multifamily and Commercial | 220 |
|
| Construction, Land Development and Farmland | 1,030 |
|
| Consumer | — |
|
| Other | — |
|
| Total gross PCI loans | 1,487 |
|
| Less: | |
| Remaining purchase discount | 246 |
|
| Allowance for possible loan losses | — |
|
| Loans, net | $ | 1,241 |
|
Commercial, industrial and agricultural loans above consist solely of loans made to U.S. domiciledU.S.-domiciled customers. These include loans for use in normal business operations to finance working capital needs, equipment purchases, or other expansionary projects.
Commercial, industrial, and agricultural loans of $231,935were $477,785 at September 30, 2019,2020 and increased 8.5%by 94.6% compared to $213,850$245,515 at December 31, 2018.2019 primarily driven by the TCB Holdings Transaction and FABK Transaction.
Real estate loans comprised 80.5%70.7% of the loan portfolio at September 30, 2019.2020. 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 4.9%34.7% from December 31, 20182019 to September 30, 2019.2020 primarily driven by the TCB Holdings Transaction and FABK Transaction. Multi-family and commercial loans included in the real estate category above include (in typical order of prominence) loans secured by non-owner-occupied nonfarm nonresidential properties, loans secured by owner-occupied nonfarm nonresidentialcommercial real estate properties, and loans secured by multi-family residential properties. Multi-family and commercial real estate loans of $520,297were $864,756 at September 30, 2019,2020 and increased 16.2%61.1% compared to the $447,840$536,845 held as of December 31, 2018.2019 primarily driven by the TCB Holdings Transaction and FABK Transaction. 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 primarilycontinued to increase based on a strong local economy.market demand.
Consumer loans mainly consist of loans to individuals for household, family, and other personal expenditures under revolving credit plans, credit cards, and automobile and other consumer loans. Our consumer loans experienced a decreasean increase from December 31, 2018,2019, to September 30, 2019,2020, of 14.9%.1,140.4% primarily due to loans to finance manufactured homes that are not secured by real estate acquired in the FABK Transaction.
Other loans consist mainly of loans to states and political subdivisions and loans to other depository institutions and experienced a decrease of 6.1%37.3% from December 31, 20182019 to September 30, 2019.2020 due to loan payments.
The repayment of loans is a source of additional liquidity for us.liquidity. The following table sets forth the loans repricing or maturing within specific intervals at September 30, 2019,2020, excluding unearned net fees and costs.
| | | | | | | | | | | | | | | | | | | | | | | |
| One Year or
Less | | One to Five
Years | | Over Five
Years | | Total |
| Gross loans | $ | 617,774 | | | $ | 1,132,058 | | | $ | 613,021 | | | $ | 2,362,853 | |
| Fixed interest rate | | | | | | | $ | 1,391,044 | |
| Variable interest rate | | | | | | | 971,809 | |
| Total | | | | | | | $ | 2,362,853 | |
|
| | | | | | | | | | | | | | | |
| | One Year or Less | | One to Five Years | | Over Five Years | | Total |
| Gross loans | $ | 436,644 |
| | $ | 581,508 |
| | $ | 332,370 |
| | $ | 1,350,522 |
|
| | | | | | | | |
| Fixed interest rate | | | | | | | $ | 770,407 |
|
| Variable interest rate | | | | | | | 580,115 |
|
| Total | | | | | | | $ | 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.
A loan is impaired when full payment under the loan terms is not expected. All classified loans and loans on 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.
At September 30, 2019,2020, the allowance for loan losses was $12,291$19,834 compared to $10,892$12,578 at December 31, 2018.2019. The allowance for loan losses as a percentage of total loans was 0.91%0.84% at September 30, 20192020 compared to 0.88%0.89% at December 31, 2018.2019.
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
| | | | | | | | | | | |
| September 30, 2020 | | September 30, 2019 |
| Beginning Balance, January 1, 2020 and 2019, respectively | $ | 12,578 | | | $ | 10,892 | |
| Loans charged off: | | | |
| Commercial, Industrial and Agricultural | (507) | | | (170) | |
| Real estate: | | | |
| 1-4 Family Residential | (68) | | | (29) | |
| 1-4 Family HELOC | (98) | | | — | |
| Multifamily and Commercial | — | | | — | |
| Construction, Land Development and Farmland | (114) | | | — | |
| Consumer | (355) | | | (37) | |
| Other | — | | | (34) | |
| Total loans charged off | (1,142) | | | (270) | |
| Recoveries on loans previously charged off: | | | |
| Commercial, Industrial and Agricultural | 126 | | | 342 | |
| Real estate: | | | |
| 1-4 Family Residential | 769 | | | 220 | |
| 1-4 Family HELOC | 15 | | | 11 | |
| Multifamily and Commercial | 20 | | | 62 | |
| Construction, Land Development and Farmland | 8 | | | — | |
| Consumer | 60 | | | 28 | |
| Other | — | | | 200 | |
| Total loan recoveries | 998 | | | 863 | |
| Net (charge-offs) recoveries | (144) | | | 593 | |
| Provision for loan losses | 7,400 | | | 806 | |
| Total allowance for loan losses at end of period | $ | 19,834 | | | $ | 12,291 | |
Gross loans at end of period (1) | $ | 2,362,853 | | | $ | 1,350,522 | |
Average gross loans (1) | $ | 2,085,316 | | | $ | 1,275,834 | |
| Allowance for loan losses to total loans | 0.84 | % | | 0.91 | % |
| Net (charge-offs) recoveries to average loans (annualized) | (0.01) | % | | 0.06 | % |
(1)Loan balances exclude loans held for sale.
|
| | | | | | | |
| | September 30, 2019 | | September 30, 2018 |
| Beginning Balance, January 1, 2019 and 2018 | $ | 10,892 |
| | $ | 9,731 |
|
| Loans charged off: | | | |
| Commercial, Industrial and Agricultural | (170 | ) | | (308 | ) |
| Real estate: | | | |
| 1-4 Family Residential | (29 | ) | | (36 | ) |
| 1-4 Family HELOC | — |
| | (6 | ) |
| Multifamily and Commercial | — |
| | (76 | ) |
| Construction, Land Development and Farmland | — |
| | (144 | ) |
| Consumer | (37 | ) | | (24 | ) |
| Other | (34 | ) | | (37 | ) |
| Total loans charged off | (270 | ) | | (631 | ) |
| Recoveries on loans previously charged off: | | | |
| Commercial, Industrial and Agricultural | 342 |
| | 530 |
|
| Real estate: | | | |
| 1-4 Family Residential | 220 |
| | 11 |
|
| 1-4 Family HELOC | 11 |
| | 7 |
|
| Multifamily and Commercial | 62 |
| | 215 |
|
| Construction, Land Development and Farmland | — |
| | 44 |
|
| Consumer | 28 |
| | 29 |
|
| Other | 200 |
| | 3 |
|
| Total loan recoveries | 863 |
| | 839 |
|
| Net recoveries (charge-offs) | 593 |
| | 208 |
|
| Provision for loan losses | 806 |
| | 759 |
|
| Total allowance at end of period | $ | 12,291 |
| | $ | 10,698 |
|
Gross loans at end of period (1) | $ | 1,350,522 |
| | $ | 1,194,198 |
|
Average gross loans (1) | $ | 1,275,834 |
| | $ | 1,117,743 |
|
| Allowance to total loans | 0.91 | % | | 0.90 | % |
| Net recoveries (charge-offs) to average loans (annualized) | 0.06 | % | | 0.02 | % |
| |
(1)
| Loan balances exclude loans held for sale. |
While no portion of the allowance for loan losses is in any way restricted to any individual loan or group of loans, and the entire allowance for loan losses 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | September 30, 2019 |
| Amount | | % of Allowance to Allowance | | % of Loan Type to Total Loans | | Amount | | % of Allowance to Allowance | | % of Loan Type to Total Loans |
| Commercial, Industrial and Agricultural | $ | 5,012 | | | 25.3 | % | | 20.2 | % | | $ | 2,299 | | | 18.7 | % | | 17.2 | % |
| Real estate: | | | | | | | | | | | |
| 1-4 Family Residential | 2,289 | | | 11.5 | % | | 14.2 | % | | 1,383 | | | 11.3 | % | | 17.5 | % |
| 1-4 Family HELOC | 1,485 | | | 7.5 | % | | 4.3 | % | | 704 | | | 5.7 | % | | 6.9 | % |
| Multifamily and Commercial | 8,247 | | | 41.5 | % | | 36.7 | % | | 5,188 | | | 42.2 | % | | 38.5 | % |
| Construction, Land Development and Farmland | 1,955 | | | 9.9 | % | | 15.5 | % | | 2,513 | | | 20.4 | % | | 17.6 | % |
| Consumer | 826 | | | 4.2 | % | | 8.8 | % | | 170 | | | 1.4 | % | | 1.3 | % |
| Other | 20 | | | 0.1 | % | | 0.3 | % | | 34 | | | 0.3 | % | | 1.0 | % |
| $ | 19,834 | | | 100.0 | % | | 100.0 | % | | $ | 12,291 | | | 100.0 | % | | 100.0 | % |
|
| | | | | | | | | | | | | | | | | | | |
| | 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 |
| Commercial, Industrial and Agricultural | $ | 2,299 |
| | 18.7 | % | | 17.2 | % | | $ | 2,026 |
| | 18.9 | % | | 17.6 | % |
| Real estate: | | | | | | | | | | | |
| 1-4 Family Residential | 1,383 |
| | 11.3 | % | | 17.5 | % | | 1,321 |
| | 12.3 | % | | 19.1 | % |
| 1-4 Family HELOC | 704 |
| | 5.7 | % | | 6.9 | % | | 620 |
| | 5.8 | % | | 7.3 | % |
| Multifamily and Commercial | 5,188 |
| | 42.2 | % | | 38.5 | % | | 4,118 |
| | 38.7 | % | | 36.3 | % |
| Construction, Land Development and Farmland | 2,513 |
| | 20.4 | % | | 17.6 | % | | 2,390 |
| | 22.3 | % | | 16.7 | % |
| Consumer | 170 |
| | 1.4 | % | | 1.3 | % | | 186 |
| | 1.7 | % | | 1.8 | % |
| Other | 34 |
| | 0.3 | % | | 1.0 | % | | 37 |
| | 0.3 | % | | 1.2 | % |
| | $ | 12,291 |
| | 100.0 | % | | 100.0 | % | | $ | 10,698 |
| | 100.0 | % | | 100.0 | % |
Nonperforming Assets
Nonperforming assets consistconsists of nonperforming loans plus real estate acquired through foreclosure or deed in lieu of foreclosure.foreclosure and other repossessed collateral. Nonperforming loans by definition consistconsists of nonaccrual loans and loans past due 90 days or more and still accruing interest. When we place a loan on 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 nonperforming assets.
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Nonaccrual loans | $ | 6,738 | | | $ | 4,071 | |
| Past due loans 90 days or more and still accruing interest | 64 | | | 64 | |
| | | |
| Total nonperforming loans | 6,802 | | | 4,135 | |
| Foreclosed real estate ("OREO") | 1,326 | | | 750 | |
| Repossessed collateral | 1,603 | | | — | |
| Total nonperforming assets | $ | 9,731 | | | $ | 4,885 | |
| Total nonperforming loans as a percentage of total loans | 0.29 | % | | 0.29 | % |
| Total nonperforming assets as a percentage of total assets | 0.32 | % | | 0.26 | % |
| Allowance for loan losses as a percentage of nonperforming loans | 291.61 | % | | 304.18 | % |
|
| | | | | | | |
| | 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 exposureinvestment grade holdings and consists of securities classified as available-for-sale. All available-for-sale securities are carried at fair value and may be used for liquidity purposes should management deem it to be in our best interest. Unrealized gains and losses on this portfolio are excluded from earnings, but are reported as other comprehensive income in a separate component of stockholders’shareholders’ equity, net of income taxes. Premium amortization and discount accretion are recognized as adjustments to interest income using the interest method. Realized gains or losses on sales are based on the net proceeds and the adjusted carrying value amount of the securities sold using the specific identification method.
Securities totaled $297,310$273,893 at September 30, 2019, which was relatively flat2020, in comparison to the $296,323$260,293 in securities balances at December 31, 2018.2019. This increase can largely be attributed to the Company's investment in bank holding company subordinated debt offerings and U.S. Treasuries during the period of $31,179. Activity during the nine months ended September 30, 20192020 includes the sale of $52,434
$103,901 of securities, most of which were acquired as part of the TCB Holdings Transaction and FABK Transaction, as well as $8,587$10,370 of principal paydowns, calls, and maturities, offset by purchasing $47,870 of securities duringmaturities. In connection with the same period.TCB Holdings Transaction and FABK Transaction, management determined that it would be beneficial to liquidate those portfolios and utilize those funds for loan demand and other uses.
Restricted equity securities totaled $11,279$17,367 and $11,690$11,279 at September 30, 2019,2020, and December 31, 2018,2019, respectively, and consist of FRB and FHLB stock.
The following table shows the Company’s investments’ amortized cost and fair value, aggregated by investment category, for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Amortized
Cost | | Fair Value | | % of Total | | Amortized
Cost | | Fair Value | | % of Total |
| U.S. Treasury and other U.S. government agencies | $ | 12,117 | | | 12,117 | | | 4.42 | % | | $ | 59 | | | 59 | | | 0.02 | % |
| State and municipal bonds | 175,976 | | | 190,623 | | | 69.61 | % | | 186,283 | | | 196,660 | | | 75.56 | % |
| Corporate bonds | 15,750 | | | 15,809 | | | 5.77 | % | | 7,880 | | | 7,845 | | | 3.01 | % |
| Mortgage-backed securities | 41,240 | | | 40,376 | | | 14.74 | % | | 38,126 | | | 37,761 | | | 14.51 | % |
| Asset-backed securities | 15,199 | | | 14,968 | | | 5.46 | % | | 18,374 | | | 17,968 | | | 6.90 | % |
| | | | | | | | | | | |
| Total | $ | 260,282 | | | 273,893 | | | 100.00 | % | | $ | 250,722 | | | 260,293 | | | 100.00 | % |
|
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2019 | | December 31, 2018 |
| | Amortized Cost | | Fair Value | | % of Total | | Amortized Cost | | Fair Value | | % of Total |
| U.S.Treasury and other U.S. government agencies | $ | 310 |
| | 310 |
| | 0.10 | % | | $ | 568 |
| | 554 |
| | 0.19 | % |
| State and municipal | 210,537 |
| | 223,016 |
| | 75.01 | % | | 232,589 |
| | 229,298 |
| | 77.38 | % |
| Corporate bonds | 7,880 |
| | 7,822 |
| | 2.63 | % | | 3,130 |
| | 3,017 |
| | 1.02 | % |
| Mortgage backed securities | 39,143 |
| | 39,118 |
| | 13.16 | % | | 32,172 |
| | 31,958 |
| | 10.78 | % |
| Asset backed securities | 27,577 |
| | 27,044 |
| | 9.10 | % | | 28,635 |
| | 27,996 |
| | 9.45 | % |
| Time deposits | — |
| | — |
| | — | % | | 3,500 |
| | 3,500 |
| | 1.18 | % |
| Total | $ | 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 September 30, 2019:2020:
| | | | | | | | | | | |
| Amortized
Cost | | Estimated
Fair Value |
| Due within one year | $ | 12,567 | | | $ | 12,565 | |
| Due in one to five years | 2,175 | | | 2,186 | |
| Due in five to ten years | 17,222 | | | 17,965 | |
| Due after ten years | 171,879 | | | 185,833 | |
| Mortgage-backed securities | 41,240 | | | 40,376 | |
| Asset-backed securities | 15,199 | | | 14,968 | |
| Total | $ | 260,282 | | | $ | 273,893 | |
|
| | | | | | | |
| | Amortized Cost | | Estimated Fair Value |
| Due within one year | $ | 500 |
| | $ | 499 |
|
| Due in one to five years | 1,035 |
| | 1,035 |
|
| Due in five to ten years | 12,076 |
| | 12,447 |
|
| Due after ten years | 205,116 |
| | 217,167 |
|
| Mortgage backed securities | 39,143 |
| | 39,118 |
|
| Asset backed securities | 27,577 |
| | 27,044 |
|
| Total | $ | 285,447 |
| | $ | 297,310 |
|
Premises and Equipment
Premises and equipment, net, totaled $21,390$33,319 at September 30, 20192020 compared to $22,033$21,064 at December 31, 2018,2019, a net decreaseincrease of $643,$12,255, or 2.9%58.2%. Premises and equipment purchases amounted to approximately $843$2,709 during the nine months ended September 30, 20192020 and were mainly incurred for additional leasehold improvements for our branches and new mortgage locations while depreciation expense amounted to $1,486. At September 30, 2019, we operated from 17 retail banking locations as well as five stand-alone mortgage loan production offices. Two$2,084. As part of our bank branch locations, including our main office, arethe TCB Holdings Transaction, $6,401 of premises and equipment were acquired effective January 1, 2020. Effective April 1, 2020, premises and equipment of $7,905 were acquired in Brentwood, Tennessee. Of our other 15 branch locations three are in Columbia, and the remaining are in Franklin, Springfield, Gallatin, Nashville, Murfreesboro, Mt. Pleasant, Thompson's Station, Centerville, Lyles, and Chattanooga, Tennessee. As of September 30, 2019, our mortgage loan production offices were located Brentwood, Hendersonville, and Memphis, Tennessee as well as two in Little Rock, Arkansas.FABK Transaction.
Deposits
Deposits represent the Company’s largest source of funds. The Company competes with other bankbanks and 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 priceinterest rate changes on deposit products given movements in the interest rate environment and other competitive pricing pressures, and customer preferences regarding higher-costing deposit products or non-deposit investment alternatives.
At September 30, 2019,2020, total deposits were $1,610,633,$2,565,502, an increase of $172,730,$981,049, or 12.0%61.9%, compared to $1,437,903$1,584,453 at December 31, 2018.2019. During the nine months ended September 30, 2019,2020, noninterest bearing demand deposits increased by $20,980,$278,163, interest-bearing demand deposits decreasedincreased by $4,776,$120,087, savings and money market deposits decreasedincreased by $4,065,$404,277, and time deposits increased by $160,591. A substantial portion$178,522. The primary driver of the increase in deposits is attributable to the increased usedeposits acquired in the TCB Holdings Transaction which totaled $210,538 coupled with those acquired in the FABK Transaction which totaled
$608,690. During the nine months ending September 30, 2020, management shifted from using brokered time deposits to lower our funding costs.transactional deposits and to using FHLB advances which offset this increase.
The following table shows maturity or repricing of time deposits of $250 or more by category based on time remaining until maturity at September 30, 2019.2020.
|
| | | |
| | September 30, 2019 |
| Twelve months or less | $ | 258,872 |
|
| Over twelve months through three years | 18,053 |
|
| Over three years | 5,169 |
|
| Total | $ | 282,094 |
|
| | | | | |
| September 30, 2020 |
| Twelve months or less | $ | 293,942 | |
| Over twelve months through three years | 21,622 | |
| Over three years | 5,221 | |
| Total | $ | 320,785 | |
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 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 withslightly exceeded our policy as of September 30, 2019.2020 for the 12-month cumulative repricing gap. 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 reasons and as a result of other model 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 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 | Instantaneous, Parallel Change in Prevailing Interest Rates Equal to | | Estimated Change in Net Interest Income and Policy of Maximum
Percentage Decline in Net Interest Income |
| | | Next 12 | | Next 24 | | | Next 12 | | Next 24 |
| | | Months | | Months | | Months | | Months |
| | | Estimate | | Policy | | Estimate | | Policy | | Estimate | | Policy | | Estimate | | Policy |
| -200 bp | | 1.0% | | (15)% | | (2.5)% | | (15)% | -200 bp | | (0.9)% | | (15)% | | (2.2)% | | (15)% |
| -100 bp | | 1.1% | | (10)% | | (0.8)% | | (10)% | -100 bp | | (0.7)% | | (10)% | | (1.8)% | | (10)% |
| +100 bp | | (0.3)% | | (10)% | | (0.1)% | | (10)% | +100 bp | | 0.9% | | (10)% | | 3.2% | | (10)% |
| +200 bp | | 0.2% | | (15)% | | 0.5% | | (15)% | +200 bp | | 2.4% | | (15)% | | 6.6% | | (15)% |
| +300 bp | | 0.8% | | (20)% | | 1.1% | | (20)% | +300 bp | | 4.5% | | (20)% | | 10.3% | | (20)% |
| +400 bp | | 1.0% | | (25)% | | 1.3% | | (25)% | +400 bp | | 6.7% | | (25)% | | 14.2% | | (25)% |
We were in compliance with our earnings simulation model policies as of September 30, 2019,2020, indicating what we believe to be a fairly neutral interest-rate risk profile.
Economic Value of Equity Model—Our economic value of equity model measures the extent that estimated economic values of our assets, liabilities and off-balance sheet items will change as a result of interest rate changes. Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case economic value of equity.
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±100bp | | 15% |
+±200 bp | | 25% |
+±300 bp | | 30% |
+±400 bp | | 35% |
| Non-parallel shifts | | 35% |
At September 30, 2019,2020, 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 loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. Our ALCO reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies.
Liquidity Risk Management—The purpose of liquidity risk management is to ensure that there are sufficient cash flows to satisfy loan demand, deposit withdrawals, and our other needs. Traditional sources of liquidity for a bank include asset maturities and growth in core deposits. A bank may achieve its desired liquidity objectives from the management of its assets and liabilities and by internally generated funding through its operations. Funds invested in marketable instruments that can be readily sold and the continuous maturing of other earning assets are sources of liquidity from an asset perspective. The liability base provides sources of liquidity through attraction of increased deposits and borrowing funds from various other institutions and sources.
Changes in interest rates also affect our liquidity position. We currently price deposits in response to market rates and our management intends to continue this policy. If deposits are not priced in response to market rates, a loss of deposits could occur which would negatively affect our liquidity position.
Scheduled loan payments are a relatively stable source of funds, but loan payoffs and deposit flows fluctuate significantly, being influenced by interest rates, general economic conditions, competition, and the actions of our customers. Additionally, debt security investments are subject to prepayment and call provisions that could accelerate their payoff prior to stated maturity. We attempt to price our deposit products to meet our asset/liability objectives consistent with local market conditions. Our ALCO is responsible for monitoring our ongoing liquidity needs. Our regulators also monitor our liquidity and capital resources on a periodic basis.
The Company has established a line of credit with the FHLB, which is secured by a blanket pledge of 1-4 family residential mortgages, multi-family residential, commercial real estate, and home equity loans, and available-for-sale securities. At September 30, 2019,2020, FHLB advances totaled $3,928$40,555 compared to $57,498$10,737 as of December 31, 2018. The decrease2019. This increase in FHLB advances generally is attributable to our increasecorrelates with a decrease in deposits, mainly our increase in lessmore expensive brokered deposits.deposits, contributing to an improved net interest margin.
At September 30, 2019,2020, 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 |
| 2020 | | $ | 23,000 | | | 0.22% |
| 2021 | | 12,636 | | | 2.36% |
| 2022 | | 402 | | | 1.22% |
| 2023 | | 4,005 | | | 2.38% |
| 2024 | | 512 | | | 2.52% |
| | | | |
| | $ | 40,555 | | | 1.14% |
|
| | | | | | |
| Scheduled Maturities | | Amount | | Weighted Average Rates |
| 2019 | | $ | — |
| | —% |
| 2020 | | — |
| | —% |
| 2021 | | 334 |
| | 2.73% |
| 2022 | | 609 |
| | 1.22% |
| 2023 | | 2,403 |
| | 1.94% |
| Thereafter | | 582 |
| | 2.48% |
| | | $ | 3,928 |
| | 1.97% |
The Company has outstanding $23,000 of subordinated debentures associated with trust preferred securities issued by trusts that are affiliates of Reliant Bancorp, $10,000 of which is owned by a wholly ownedwholly-owned subsidiary of 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 September 30, 2019,2020, Reliant Bancorp was current on all interest payments due related to its subordinated debentures. Reliant Bancorp has the right to defer the payment of interest on the subordinated debentures at any time, for a period not to exceed 20 consecutive quarters. During the period in which it is deferring the payment of interest on its subordinated debentures, the indentures governing the subordinated debentures provide that Reliant Bancorp cannot pay any dividends on its common stock or preferred stock.
On December 13, 2019, Reliant Bancorp issued and sold $60,000 in aggregate principal amount of its 5.125% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “Subordinated Notes”). The Subordinated Notes will bear interest at an initial rate of 5.125%, payable semi-annually until December 15, 2024, at which time the Subordinated Notes will bear interest at a floating rate equal to the three-month Secured Overnight Financing Rate (“SOFR”) (provided, that in the event the three-month SOFR is less than zero, the three-month SOFR will be deemed to be zero), plus a spread of 376.5 basis points. If the three-month SOFR rises during the floating interest period, the cost of the Subordinated Notes will increase, thereby negatively affecting our net income.
Capital
Stockholders’Shareholders’ equity was $219,652$307,086 at September 30, 2019,2020, an increase of $11,238,$83,333, or 5.4%37.2%, from $208,414$223,753 at December 31, 2018.2019. During the nine months ended September 30, 2019,2020, the Company raised $360 of capital throughcompleted the exercise of Company stock optionsTCB Holdings Transaction which increased shareholders' equity $18,041 and purchased $8,291 of its common stock as part of its previously announced share repurchase program. The accretion of earningsthe FABK Transaction which increased shareholders' equity $51,915. Net income also contributed to capital whichthe increase by $19,186. This increase was primarily offset by dividends declared of $4,550, and other comprehensive loss of $2,562. Contributions from the declared dividends, net stock purchases, andnoncontrolling interest of $990 were recognized in the nine months ended September 30, 2020. The increase in shareholders' equity mitigated by the growth in the Bank's assets led to a decreasean increase in the Bank’s September 30, 20192020 Tier 1 leverage ratio to 9.55%10.48% compared with 10.17%10.30% at December 31, 2018 (see2019. See other ratios discussed further below).below. Additionally, the subordinated debentures qualifyqualified as Tier 1 and Total risk-based capital for the Company. Common dividendsCompany due to asset size at the time of $3,077 (of which $1,036 were declared in the prior year) were paid during the nine months ended September 30, 2019, and common dividendsissuance.
On July 14, 2017,August 24, 2020, 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) depositarydepository shares, (v) warrants, and (vi) units, (vii) purchase contracts, and (viii) rights, up to a maximum aggregate offering price of $75,000,000.$100,000. The net proceeds from any offering will be used for general corporate purposes including acquisitions,repayment of debt or payment of interest thereon, capital expenditures, acquisitions, investments, and the repayment, redemption, or refinancing of any indebtedness or other securities.purposes that we may specify in any prospectus supplement. Until allocated to such purposes it is expected that we will invest any proceeds in short-term, interest-bearing instruments or other investment-grade securities. The Securities and Exchange Commission declared the Registration Statement on Form S-3 effective on September 3, 2020, and the Registration Statement on Form S-3 will expire on September 3, 2023.
Banks as regulated institutions are required to 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 capital components and the level of risk associated with various types of assets. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with theapplicable regulations and guidelines. We regularly review our capital adequacy to ensure compliance with these regulations and guidelines and to help ensure that sufficient capital is available for current and future needs. It is management’s intent to maintain an optimal capital and leverage mix for growth and for shareholder return.returns.
Prompt corrective action regulations provide five bank capital classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At September 30, 2019,2020, 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 September 30, 20192020 and December 31, 20182019 for Reliant Bancorp and the Company and Bank.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Actual Regulatory Capital | | Minimum Required Capital
Including Capital
Conservation Buffer | | To Be Well Capitalized
Under Prompt Corrective
Action Provisions |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| September 30, 2020 | | | | | | | | | | | |
| Reliant Bancorp | | | | | | | | | | | |
| Tier I leverage | $ | 253,534 | | | 8.72 | % | | $ | 116,300 | | | 4.00 | % | | $ | 145,375 | | | 5.00 | % |
| Common equity Tier 1 | 241,786 | | | 9.77 | % | | 173,235 | | | 7.00 | % | | 160,861 | | | 6.50 | % |
| Tier I risk-based capital | 253,534 | | | 10.25 | % | | 210,248 | | | 8.50 | % | | 197,880 | | | 8.00 | % |
| Total risk-based capital | 332,434 | | | 13.44 | % | | 259,714 | | | 10.50 | % | | 247,347 | | | 10.00 | % |
| | | | | | | | | | | |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 304,376 | | | 10.48 | % | | $ | 116,174 | | | 4.00 | % | | $ | 145,218 | | | 5.00 | % |
| Common equity Tier 1 | 304,376 | | | 12.33 | % | | 172,801 | | | 7.00 | % | | 160,458 | | | 6.50 | % |
| Tier I risk-based capital | 304,376 | | | 12.33 | % | | 209,829 | | | 8.50 | % | | 197,486 | | | 8.00 | % |
| Total risk-based capital | 324,635 | | | 13.15 | % | | 259,214 | | | 10.50 | % | | 246,871 | | | 10.00 | % |
| | | | | | | | | | | |
| December 31, 2019 | | | | | | | | | | | |
| Reliant Bancorp | | | | | | | | | | | |
| Tier I leverage | $ | 176,748 | | | 9.74 | % | | $ | 72,586 | | | 4.00 | % | | $ | 90,733 | | | 5.00 | % |
| Common equity Tier 1 | 165,063 | | | 10.55 | % | | 109,520 | | | 7.00 | % | | 101,698 | | | 6.50 | % |
| Tier I risk-based capital | 176,748 | | | 11.30 | % | | 132,952 | | | 8.50 | % | | 125,131 | | | 8.00 | % |
| Total risk-based capital | 249,751 | | | 15.97 | % | | 164,207 | | | 10.50 | % | | 156,388 | | | 10.00 | % |
| | | | | | | | | | | |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 186,734 | | | 10.30 | % | | $ | 72,518 | | | 4.00 | % | | $ | 90,648 | | | 5.00 | % |
| Common equity Tier 1 | 186,734 | | | 11.95 | % | | 109,384 | | | 7.00 | % | | 101,571 | | | 6.50 | % |
| Tier I risk-based capital | 186,734 | | | 11.95 | % | | 132,823 | | | 8.50 | % | | 125,010 | | | 8.00 | % |
| Total risk-based capital | 199,737 | | | 12.79 | % | | 163,975 | | | 10.50 | % | | 156,167 | | | 10.00 | % |
|
| | | | | | | | | | | | | | | | | | | | |
| | Actual Regulatory Capital | | Minimum Required Capital Including Capital Conservation Buffer | | To Be Well Capitalized Under Prompt Corrective Action Provisions |
| | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| September 30, 2019 | | | | | | | | | | | |
| Company | | | | | | | | | | | |
| Tier I leverage | $ | 171,789 |
| | 9.85 | % | | $ | 69,762 |
| | 4.00 | % | | $ | 87,203 |
| | 5.00 | % |
| Common equity Tier 1 | 160,124 |
| | 10.85 | % | | 103,306 |
| | 7.00 | % | | 95,927 |
| | 6.50 | % |
| Tier I risk-based capital | 171,789 |
| | 11.64 | % | | 125,447 |
| | 8.50 | % | | 118,068 |
| | 8.00 | % |
| Total risk-based capital | 184,505 |
| | 12.51 | % | | 154,860 |
| | 10.50 | % | | 147,486 |
| | 10.00 | % |
| | | | | | | | | | | | |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 166,265 |
| | 9.55 | % | | $ | 69,654 |
| | 4.00 | % | | $ | 87,067 |
| | 5.00 | % |
| Common equity Tier 1 | 166,265 |
| | 11.29 | % | | 103,082 |
| | 7.00 | % | | 95,719 |
| | 6.50 | % |
| Tier I risk-based capital | 166,265 |
| | 11.29 | % | | 125,171 |
| | 8.50 | % | | 117,808 |
| | 8.00 | % |
| Total risk-based capital | 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 |
| | 4.00 | % | | $ | 81,347 |
| | 5.00 | % |
| Common equity Tier 1 | 157,273 |
| | 11.59 | % | | 86,507 |
| | 6.38 | % | | 88,203 |
| | 6.50 | % |
| Tier I risk-based capital | 168,876 |
| | 12.44 | % | | 106,905 |
| | 7.88 | % | | 108,602 |
| | 8.00 | % |
| Total risk-based capital | 180,193 |
| | 13.28 | % | | 133,991 |
| | 9.88 | % | | 135,688 |
| | 10.00 | % |
| | | | | | | | | | | | |
| Bank | | | | | | | | | | | |
| Tier I leverage | $ | 165,308 |
| | 10.17 | % | | $ | 65,018 |
| | 4.00 | % | | $ | 81,272 |
| | 5.00 | % |
| Common equity Tier 1 | 165,308 |
| | 12.19 | % | | 86,451 |
| | 6.38 | % | | 88,146 |
| | 6.50 | % |
| Tier I risk-based capital | 165,308 |
| | 12.19 | % | | 106,792 |
| | 7.88 | % | | 108,488 |
| | 8.00 | % |
| Total risk-based capital | 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 requirerequires 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 refinancingsrefinancing 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 of the Company were as follows at September 30, 2019:2020:
| | | | | |
| September 30, 2020 |
| Unused lines of credit | $ | 534,971 | |
| Standby letters of credit | 19,793 | |
| Total commitments | $ | 554,764 | |
|
| | | |
| | September 30, 2019 |
| Unused lines of credit | $ | 291,134 |
|
| Standby letters of credit | 17,896 |
|
| Total commitments | $ | 309,030 |
|
Other Off-Balance Sheet Arrangements
The Company utilizes interest rate swaps to mitigate interest rate risk. The total notional amount of swap agreements was $79,605$179,345 and $81,505,$129,605, respectively, at September 30, 20192020 and December 31, 2018.2019. At September 30, 20192020 and December 31, 2018,2019, the contracts had negative fair values totaling $4,273$10,216 and $716,$2,708, respectively.
Emerging Growth Company Status
Reliant Bancorp is presently 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 through the 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.2020. 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 thecertain financial statements we will file in the future, will be subject to all new or revised accounting standards generally applicable to private companies. As a result, we will comply with new or revised accounting standards to the same extent that compliance is required for non-public companies.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not applicable to smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Management, including our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our President and Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2019,2020, 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 bank 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, except2019 as described below.
We may not be able to successfully integrate the businesses we recently entered into definitive agreements to acquire or to realize the anticipated benefits of the acquisitions.
Upon consummation of the Transactions, we will begin the process of integrating TCB Holdings and First Advantage. A successful integration of these businesses with ours will depend substantiallysupplemented by Part II, Item 1A. "Risk Factors" in Reliant Bancorp's Quarterly Reports 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 could divert resources from regular banking operations.
Additionally, general market and economic conditions or governmental actions affecting the 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 these acquisitions will result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market positionForm 10-Q for the combined company, cross selling opportunities, technological efficiencies, cost savingsquarters ended March 31, 2020 and operating efficiencies. Achieving the anticipated benefits of 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 marketplace. Failure to achieve these anticipated benefits on the 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 diversion of management's time and energy and could materially and adversely affect our business, financial condition and operating results. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.June 30, 2020.
The combined company following the consummation of the Transactions will incur significant transaction and merger-related costs in connection with the acquisitions.
We expect to incur significant costs associated with combining the operations of TCB Holdings and First Advantage with our 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 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 a material adverse effect on our business, future operations, and stock price.
If the Transactions are not completed, our ongoing business and financial results may be adversely affected and we will be subject to several risks, including the following:
the price of our common stock may decline to the extent that its current market prices reflect a market assumption that the 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 management to the Transactions instead of on pursuing other opportunities that could have been beneficial to our 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 September 30, 2019.2020.
| | | | | | | | | | | | | | |
| 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) (in thousands) |
| July 1, 2020 to July 31, 2020 | — | $— | — | $15,000 |
| August 1, 2020 to August 31, 2020 | 6,799 | $14.66 | — | $15,000 |
| September 1, 2020 to September 30, 2020 | 545 | $14.70 | — | $15,000 |
| Total | 7,344 | $14.67 | — | $15,000 |
| | | | |
| | | | |
| | | | |
(1)During the quarter ended September 30, 2020, 26,550 shares of restricted stock previously awarded to certain of the participants in our stock plans vested. We withheld 7,344 shares to satisfy tax withholding requirements associated with the vesting of these shares of restricted stock.
(2)On March 10, 2020, Reliant Bancorp's board of directors authorized a stock repurchase plan allowing Reliant Bancorp to repurchase up to $15 million of outstanding Reliant Bancorp common stock (the "Repurchase Plan"). As of September 30, 2020, Reliant Bancorp had not repurchased any shares of Reliant Bancorp common stock under the Repurchase Plan. The Repurchase Plan does not obligate Reliant Bancorp to repurchase any dollar amount or number of shares. The Repurchase Plan may be extended, modified, amended, suspended, or discontinued at any time. On April 27, 2020, we announced that our board of directors suspended the Repurchase Plan to preserve our financial strength during this challenging economic environment.
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| | | | |
| 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 September 30, 2019, 21,450 shares of restricted stock previously awarded to certain of 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
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Exhibit No. | Description |
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| 101.INS* | Inline XBRL Instance Document. |
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| 101.SCH* | Inline XBRL Schema Documents. |
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| 101.CAL* | Inline XBRL Calculation Linkbase Document. |
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| 101.LAB* | Inline XBRL Label Linkbase Document. |
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| 101.PRE* | Inline XBRL Presentation Linkbase Document. |
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| 101.DEF* | Inline XBRL Definition Linkbase Document. |
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| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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* 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. |
| | | | |
| November 5, 2020 | | | | /s/ DeVan D. Ard, Jr. |
| | | | DeVan D. Ard, Jr. |
| | | | Chairman andChief Executive Officer |
| | | | (Principal Executive Officer) |
| | | | |
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| November 5, 2020 | | | RELIANT BANCORP, INC. | /s/ Jerry Cooksey |
| | | | Jerry Cooksey |
November 5, 2019 | | | | /s/ DeVan D. Ard, Jr. |
| | | | DeVan D. Ard, Jr. |
| | | | President andChief Executive Officer
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| | | | (Principal Executive Officer) |
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November 5, 2019 | | | | /s/ J. Daniel Dellinger |
| | | | J. Daniel Dellinger |
| | | | Chief Financial Officer |
| | | | (Principal Financial Officer) |