UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~March 31,~~June 30, 2021

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

For the transition period from ______ to ______

Commission File Number: 001-37391

Reliant Bancorp, Inc.

(Exact name of registrant as specified in its charter)

_______________________________


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

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

615-221-2020

(Registrant's telephone number, including area code)

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


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

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	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
Emerging growth company	☐

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 ~~May~~August 4, 2021 was ~~16,406,720~~16,495,961 excluding ~~248,398~~183,306 unexchanged shares in connection with acquisitions.

~~TABLE OF CONTENTS~~

TABLE OF CONTENTS


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		3
PART I – FINANCIAL INFORMATION		5
Item 1.	Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3839
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5862
Item 4.	Controls and Procedures	5862

PART II – OTHER INFORMATION		5963
Item 1.	Legal Proceedings	5963
Item 1A.	Risk Factors	5963
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5963
~~Item 3.~~	~~Defaults Upon Senior Securities~~	~~<#>~~
~~Item 4.~~	~~Mine Safety Disclosures~~	~~<#>~~
~~Item 5.~~	~~Other Information~~	~~<#>~~
Item 6.	Exhibits	6064

SIGNATURES		6165

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q (this “Quarterly Report”) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “anticipate,” “expect,” “may,” “will,” “assume,” “should,” “predict,” “could,” “would,” “intend,” “targets,” “estimates,” “projects,” “plans,” and “potential,” and other similar words and expressions of the future, are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Reliant Bancorp, Inc. (“Reliant Bancorp”) to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others:

(1) the effects of the coronavirus (COVID-19) pandemic, including (i) the magnitude and duration of the pandemic and its impact on general economic and financial market conditions and on our business, results of operations, and financial condition and that of our customers, (ii) actions taken by governments, businesses and individuals in response to the coronavirus (COVID-19) pandemic, (iii) the pace of recovery when the coronavirus (COVID-19) pandemic subsides, and (iv) the speed with which coronavirus (COVID-19) vaccines can be widely distributed, those vaccines’ efficacy against the virus, including new variant strains, and public acceptance of the vaccines;

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

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

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

(5) competition from financial institutions and other financial service providers;

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

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

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

(9) lack of strategic growth opportunities or our failure to execute on available opportunities;

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

(11) economic crises and associated credit issues in industries most impacted by the coronavirus (COVID-19) pandemic, including the hotel and retail sectors;

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

(13) our ability to effectively manage problem credits;

(14) our ability to successfully implement efficiency initiatives on time and with the results projected;

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

(16) the impact of negative developments in the financial industry and United States and global capital and credit markets;

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

(18) our ability to adapt to technological changes;

(19) risks associated with litigation, including reputational and financial risks and the applicability of insurance coverage;

(20) the vulnerability of Reliant Bank’s computer and information technology systems and networks, and the systems and networks of third parties with whom Reliant Bancorp or Reliant Bank contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches and interruptions;

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

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

(23) the risk of successful integration of the businesses Reliant Bancorp has recently acquired;

(24) the ability to meet expectations regarding the timing and completion and accounting and tax treatment of the pending transaction with United Community Banks, Inc. (“UCBI”) (the “Transaction”);

(25) the effect of the announcement and pendency of the Transaction 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;

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

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

(28) the ability to obtain the shareholder and governmental approvals required for the Transaction;

(29) reputational risk associated with and the reaction of the parties' customers, suppliers, employees, or other business partners to the Transaction;

(30) the outcome of any legal proceedings that may be instituted against Reliant Bancorp, UCBI or any of their respective directors or officers, following the announcement of the Transaction;

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

(32) the risk associated with Company management's attention being diverted away from the day-to-day business and operations of Reliant Bancorp to the completion of the Transaction; and

~~(24)~~(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, which address additional factors that could cause our actual results to differ from those set forth in

forward-looking statements and could materially and adversely affect our business, operating results, and financial condition. Additional factors which could affect the forward-looking statements can be found in Reliant Bancorp’s quarterly reports on Form 10-Q, and current reports on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website at http://www.sec.gov. You should understand that it is not possible to predict or identify all such factors, 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 otherwise listed may develop or, if currently extant, we may not have yet recognized them.

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

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

RELIANT BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands except per share amounts)

March 31, 2021 (unaudited) December 31, 2020
ASSETS
Cash and due from banks $ 13,105 $ 13,717
Interest-bearing deposits in financial institutions 104,620 79,756
Federal funds sold 186 1,572
Total cash and cash equivalents 117,911 95,045
Securities available for sale 267,191 256,653
Loans 2,277,714 2,300,783
Less: allowance for loan losses (20,785) (20,636)
Loans, net 2,256,929 2,280,147
Mortgage loans held for sale, net 166,599 147,524
Accrued interest receivable 14,568 14,889
Premises and equipment, net 30,879 31,462
Operating leases right of use assets 13,372 13,103
Restricted equity securities, at cost 16,146 16,551
Other real estate, net 1,198 1,246
Cash surrender value of life insurance contracts 78,423 77,988
Deferred tax assets, net 7,453 7,121
Goodwill 54,396 54,396
Core deposit intangibles 10,891 11,347
Other assets 21,110 19,063
TOTAL ASSETS $ 3,057,066 $ 3,026,535
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing demand $ 578,764 $ 575,289
Interest-bearing demand 397,047 350,392
Savings and money market deposit accounts 950,630 857,210
Time 686,469 796,344
Total deposits 2,612,910 2,579,235
Accrued interest payable 3,087 2,571
Subordinated debentures 70,719 70,446
Federal Home Loan Bank advances 0 10,000
Operating leases liabilities 14,552 14,231
Other liabilities 24,099 28,079
TOTAL LIABILITIES 2,725,367 2,704,562
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; 16,654,415 and 16,654,409 shares issued and outstanding at March 31, 2021, and December 31, 2020, respectively 16,654 16,654
Additional paid-in capital 233,667 233,331
Retained earnings 75,891 65,757
Accumulated other comprehensive income 5,487 6,231
TOTAL SHAREHOLDERS’ EQUITY 331,699 321,973
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,057,066 $ 3,026,535


	June 30, 2021 (unaudited)		December 31, 2020
ASSETS
Cash and due from banks	$	11,763	$	13,717
Interest-bearing deposits in financial institutions	43,676		79,756
Federal funds sold	656		1,572
Total cash and cash equivalents	56,095		95,045
Securities available for sale	266,695		256,653
Loans	2,321,070		2,300,783
Less: allowance for loan losses	(20,894)		(20,636)
Loans, net	2,300,176		2,280,147
Mortgage loans held for sale, net	229,418		147,524
Accrued interest receivable	14,492		14,889
Premises and equipment, net	29,183		31,462
Operating leases right of use assets	12,744		13,103
Restricted equity securities, at cost	15,770		16,551
Other real estate, net	2,233		1,246
Cash surrender value of life insurance contracts	78,979		77,988
Deferred tax assets, net	5,978		7,121
Goodwill	54,396		54,396
Core deposit intangibles	10,434		11,347
Other assets	21,871		19,063
TOTAL ASSETS	$	3,098,464	$	3,026,535
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing demand	$	602,555	$	575,289
Interest-bearing demand	441,161		350,392
Savings and money market deposit accounts	1,003,402		857,210
Time	582,722		796,344
Total deposits	2,629,840		2,579,235
Accrued interest payable	1,967		2,571

Subordinated debentures	70,770		70,446
Federal Home Loan Bank advances	16,000		10,000
Operating leases liabilities	13,932		14,231
Other liabilities	19,666		28,079
TOTAL LIABILITIES	2,752,175		2,704,562
Preferred stock, $1 par value per share; 10,000,000 shares authorized, 0 shares issued to date	0		0
Common stock, $1 par value per share; 30,000,000 shares authorized; 16,672,511 and 16,654,409 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively	16,673		16,654
Additional paid-in capital	234,390		233,331
Retained earnings	86,917		65,757
Accumulated other comprehensive income	8,309		6,231
TOTAL SHAREHOLDERS’ EQUITY	346,289		321,973
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,098,464	$	3,026,535

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~ - UNAUDITED

(Dollar amounts in thousands except per share amounts)

Three Months Ended
March 31,
2021 2020
INTEREST INCOME
Interest and fees on loans $ 30,989 $ 20,645
Interest and fees on loans held for sale 1,331 560
Interest on investment securities, taxable 610 451
Interest on investment securities, nontaxable 1,225 1,371
Federal funds sold and other 227 279
TOTAL INTEREST INCOME 34,382 23,306
INTEREST EXPENSE
Deposits
Demand 272 100
Savings and money market deposit accounts 839 1,030
Time 2,288 3,707
Federal Home Loan Bank advances and other 4 361
Subordinated debentures 953 993
TOTAL INTEREST EXPENSE 4,356 6,191
NET INTEREST INCOME 30,026 17,115
PROVISION FOR LOAN LOSSES 0 2,900
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 30,026 14,215
NONINTEREST INCOME
Service charges on deposit accounts 1,561 1,208
Gains on mortgage loans sold, net 4,928 1,573
Gain on securities transactions, net 129 0
Other noninterest income 719 501
TOTAL NONINTEREST INCOME 7,337 3,282
NONINTEREST EXPENSE
Salaries and employee benefits 13,352 9,237
Occupancy 2,008 1,486
Data processing and software 2,229 1,819
Professional fees 1,243 478
Regulatory Fees 361 454
Merger expenses 0 4,186
Other operating expense 2,471 1,938
TOTAL NONINTEREST EXPENSE 21,664 19,598
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 15,699 (2,101)
INCOME TAX EXPENSE (BENEFIT) 2,980 (910)
CONSOLIDATED NET INCOME (LOSS) 12,719 (1,191)
NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY (570) 976
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 12,149 $ (215)
Basic net income (loss) attributable to common shareholders, per share $ 0.73 $ (0.02)
Diluted net income (loss) attributable to common shareholders, per share $ 0.73 $ (0.02)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
INTEREST INCOME
Interest and fees on loans	$	31,183	$	33,447	$	62,172	$	54,092
Interest and fees on loans held for sale	1,807		815		3,138		1,375
Interest on investment securities, taxable	663		128		1,273		579
Interest on investment securities, nontaxable	1,216		1,317		2,441		2,688
Restricted equity securities and other	226		208		453		487
TOTAL INTEREST INCOME	35,095		35,915		69,477		59,221
INTEREST EXPENSE
Deposits
Demand	216		218		488		318
Savings and money market deposit accounts	647		1,476		1,486		2,506
Time	4,678		3,135		6,966		6,842
Federal Home Loan Bank advances and other borrowings	13		148		17		509
Subordinated debentures	980		982		1,933		1,975
TOTAL INTEREST EXPENSE	6,534		5,959		10,890		12,150
NET INTEREST INCOME	28,561		29,956		58,587		47,071
PROVISION FOR LOAN LOSSES	0		3,000		0		5,900
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	28,561		26,956		58,587		41,171
NONINTEREST INCOME
Service charges on deposit accounts	1,656		1,381		3,217		2,589
Gains on mortgage loans sold, net	2,978		2,248		7,906		3,821
Gain on securities transactions, net	2,966		327		3,095		327
Other noninterest income	710		466		1,429		967
TOTAL NONINTEREST INCOME	8,310		4,422		15,647		7,704
NONINTEREST EXPENSE
Salaries and employee benefits	12,793		12,464		26,145		21,701
Occupancy	1,999		2,026		4,007		3,512
Data processing and software	2,262		2,026		4,491		3,845
Professional fees	358		680		1,601		1,158
Regulatory fees	343		537		704		991
Merger expenses	0		2,632		0		6,818
Other operating expense	2,729		1,899		5,200		3,837
TOTAL NONINTEREST EXPENSE	20,484		22,264		42,148		41,862
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	16,387		9,114		32,086		7,013
INCOME TAX EXPENSE (BENEFIT)	3,202		1,634		6,182		724
CONSOLIDATED NET INCOME	13,185		7,480		25,904		6,289
NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY	(140)		388		(710)		1,364
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	13,045	$	7,868	$	25,194	$	7,653
Basic net income attributable to common shareholders, per share	$	0.79	$	0.48	$	1.52	$	0.54
Diluted net income attributable to common shareholders, per share	$	0.78	$	0.48	$	1.50	$	0.54

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(Dollar amounts in thousands)


		Three Months Ended			Three Months Ended June 30,				Six Months Ended June 30,
			March 31, 2021			March 31, 2020			2021		2020		2021		2020
Net income (loss)			$	12,719		$	(1,191)
Other comprehensive (loss) income:
Net income								Net income	$	13,185	$	7,480	$	25,904	$	6,289
Other comprehensive income:								Other comprehensive income:
Unrealized gains (losses) on securities available for sale:	Unrealized gains (losses) on securities available for sale:							Unrealized gains (losses) on securities available for sale:
Unrealized holdings (losses) arising during the period	Unrealized holdings (losses) arising during the period		(2,357)			(2,368)		Unrealized holdings (losses) arising during the period	3,254		4,309		897		1,941
Reclassification adjustment for (gains) losses included in net income (loss)	Reclassification adjustment for (gains) losses included in net income (loss)		(129)			0		Reclassification adjustment for (gains) losses included in net income (loss)	(2,966)		(327)		(3,095)		(327)
Tax effect	Tax effect		650			619		Tax effect	(75)		(1,041)		574		(422)
Net of tax	Net of tax		(1,836)			(1,749)		Net of tax	213		2,941		(1,624)		1,192
Unrealized gains (losses) on cash flow hedges	Unrealized gains (losses) on cash flow hedges							Unrealized gains (losses) on cash flow hedges
Unrealized holdings gains (losses) arising during the period	Unrealized holdings gains (losses) arising during the period		1,478			(5,869)		Unrealized holdings gains (losses) arising during the period	675		(1,086)		2,153		(6,956)
Reclassification adjustment for (gains) losses included in net income			0			0
Reclassification adjustment for losses included in net income								Reclassification adjustment for losses included in net income	2,859		0		2,859		0
Tax effect	Tax effect		(386)			1,534		Tax effect	(925)		284		(1,310)		1,819
Net of tax	Net of tax		1,092			(4,335)		Net of tax	2,609		(802)		3,702		(5,137)
Other comprehensive (loss)			(744)			(6,084)
Comprehensive income (loss)			$	11,975		$	(7,275)
Other comprehensive income (loss)								Other comprehensive income (loss)	2,822		2,139		2,078		(3,945)
Comprehensive income								Comprehensive income	$	16,007	$	9,619	$	27,982	$	2,344
Comprehensive (income) loss attributable to noncontrolling interest	Comprehensive (income) loss attributable to noncontrolling interest		(570)			976		Comprehensive (income) loss attributable to noncontrolling interest	(140)		388		(710)		1,364
Comprehensive income (loss) attributable to the controlling interest			$	11,405		$	(6,299)
Comprehensive income attributable to the controlling interest								Comprehensive income attributable to the controlling interest	$	15,867	$	10,007	$	27,272	$	3,708

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED

(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, 2021	16,654,409	$	16,654	$	233,331	$	65,757	$	6,231	$	0	$	321,973
Stock based compensation expense	—	—		339		—		—		—		339
Exercise of stock options	600	1		7		—		—		—		8

Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(594)	(1)		(10)		—		—		—		(11)
Noncontrolling interest contributions	—	—		—		—		—		(570)		(570)
Cash dividend declared to common shareholders ($0.12 per share)	—	—		—		(2,015)		—		—		(2,015)
Net income	—	—		—		12,149		—		570		12,719
Other comprehensive loss	—	—		—				(744)		—		(744)
BALANCE - MARCH 31, 2021	16,654,415	$	16,654	$	233,667	$	75,891	$	5,487	$	0	$	331,699
Stock based compensation expense	—	—		468		—		—		—		468

Employee Stock Purchase Plan stock issuance	18,986	20		278		—		—		—		298
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(890)	(1)		(23)		—		—		—		(24)
Noncontrolling interest contributions	—	—		—		—		—		(140)		(140)
Cash dividend declared to common shareholders ($0.12 per share)	—	—		—		(2,019)		—		—		(2,019)
Net income	—	—		—		13,045		—		140		13,185
Other comprehensive income	—	—		—		—		2,822		—		2,822
BALANCE - JUNE 30, 2021	16,672,511	$	16,673	$	234,390	$	86,917	$	8,309	$	0	$	346,289

COMMON STOCK ADDITIONAL
PAID-IN
CAPITAL RETAINED
EARNINGS ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS) NONCONTROLLING
INTEREST TOTAL
SHARES AMOUNT
BALANCE - JANUARY 1, 2021 16,654,409 16,654 233,331 65,757 6,231 0 321,973
Stock based compensation expense — — 339 — — — 339
Exercise of stock options 600 1 7 — — — 8
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures (594) (1) (10) — — — (11)
Noncontrolling interest contributions — — — — — (570) (570)
Cash dividend declared to common shareholders ($0.12 per share) — — — (2,015) — — (2,015)
Net income — — — 12,149 — 570 12,719
Other comprehensive loss — — — (744) — (744)
BALANCE - MARCH 31, 2021 16,654,415 $ 16,654 $ 233,667 $ 75,891 $ 5,487 $ 0 $ 331,699


		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, 2020	BALANCE - JANUARY 1, 2020	11,206,254	11,206				167,006			40,472					5,069			0			223,753	BALANCE - JANUARY 1, 2020		11,206,254				$	11,206				$	167,006				$	40,472				$	5,069				$	0	$	223,753
Stock based compensation expense	Stock based compensation expense	—	—		349			—		—			—			349			Stock based compensation expense	—		—					349					—					—					—					349
Exercise of stock options	Exercise of stock options	868	1		7			—		—			—			8			Exercise of stock options	868		1			7					—					—					—					8
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(3,837)	(4)		(69)			—		—			—			(73)			Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(3,837)		(4)			(69)					—					—					—					(73)
Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc.	Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc.	811,210	811		17,230			—		—			—			18,041			Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc.	811,210		811			17,230					—					—					—					18,041
Noncontrolling interest contributions	Noncontrolling interest contributions	—	—		—			—		—			976			976			Noncontrolling interest contributions	—		—			—					—					—					976					976
Cash dividend declared to common shareholders ($0.10 per share)	Cash dividend declared to common shareholders ($0.10 per share)	—	—		—			(1,207)		—			—			(1,207)			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			Cumulative effect of lease standard adoption	—		—			—					100					—					—					100
Net loss	Net loss	—	—		—			(215)		—			(976)			(1,191)			Net loss	—		—			—					(215)					—					(976)					(1,191)
Other comprehensive loss	Other comprehensive loss	—	—		—			—		(6,084)			—			(6,084)			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		BALANCE - MARCH 31, 2020	12,014,495		$	12,014		$	184,523				$	39,150				$	(1,015)				$	0				$	234,672
Stock based compensation expense																			Stock based compensation expense	—		—			485					—					—					—					485
Exercise of stock options																			Exercise of stock options	1,021		1			14					—					—					—					15
Employee Stock Purchase Plan stock issuance																			Employee Stock Purchase Plan stock issuance	8,344		8			108					—					—					—					116
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures																			Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	1,325		2			(2)					—					—					—					0
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																			Noncontrolling interest contributions	—		—			—					—					—					388					388
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)																			Net income (loss)	—		—			—					7,868					—					(388)					7,480
Other comprehensive income																			Other comprehensive income	—		—			—					—					2,139					—					2,139
BALANCE - JUNE 30, 2020																			BALANCE - JUNE 30, 2020	16,631,604		$	16,632		$	232,436				$	45,351				$	1,124				$	0				$	295,543

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollar amounts in thousands)

Three Months Ended
March 31,
OPERATING ACTIVITIES 2021 2020
Consolidated net income (loss) $ 12,719 $ (1,191)
Adjustments to reconcile consolidated net income (loss) to net cash (used in) provided by operating activities
Provision for loan losses 0 2,900
Deferred income taxes (68) 264
Gain on disposal of premises and equipment (3) (9)
Depreciation of premises and equipment 741 564
Net amortization of securities 415 202
Net realized gains on sales of securities (129) 0
Gains on mortgage loans sold, net (4,928) (1,573)
Stock-based compensation expense 339 349
Gain on other real estate (14) (14)
Earnings on bank-owned life insurance (435) (295)
Mortgage loans originated for resale (311,296) (89,076)
Proceeds from sale of mortgage loans 297,149 57,773
Right of use asset amortization 667 536
Other accretion, net of other amortization (1,080) (175)
Change in
Accrued interest receivable 321 514
Other assets (2,074) (12,708)
Accrued interest payable 516 1,455
Other liabilities (2,593) (5,609)
TOTAL ADJUSTMENTS (22,472) (44,902)
NET CASH USED IN OPERATING ACTIVITIES (9,753) (46,093)
INVESTING ACTIVITIES
Cash (used in) received from acquisitions, net 0 (7,480)
Activities in available for sale securities
Purchases (17,199) 0
Sales 1,795 56,336
Maturities, prepayments and calls 1,570 1,836
Redemptions (purchases) of restricted equity securities 405 (2,217)
Net change in loans 25,017 (37,883)
Purchase of premises and equipment (217) (457)
Proceeds from sale of premises and equipment 62 75
Proceeds from sale of other real estate 62 764
NET CASH PROVIDED BY INVESTING ACTIVITIES 11,495 10,974
FINANCING ACTIVITIES
Net change in deposits 33,712 (72,023)
Proceeds from Federal Home Loan Bank advances 162,962 219,000
Payments on Federal Home Loan Bank advances (172,962) (115,179)
Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares (3) (65)
Noncontrolling interest contributions (570) 976
Cash dividends paid on common stock (2,015) (1,207)
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,124 31,502
NET CHANGE IN CASH AND CASH EQUIVALENTS 22,866 (3,617)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 95,045 51,649
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 117,911 $ 48,032


	Six Months Ended June 30,
OPERATING ACTIVITIES	2021		2020
Consolidated net income	$	25,904	$	6,289
Adjustments to reconcile consolidated net income (loss) to net cash (used in) provided by operating activities
Provision for loan losses	0		5,900

Deferred income taxes	407		1,997
Loss (gain) on disposal of premises and equipment	40		(9)
Depreciation of premises and equipment	1,455		1,327
Net amortization of securities	844		1,354
Net realized gains on sales of securities	(3,095)		(327)
Gains on mortgage loans sold, net	(7,906)		(3,821)
Stock-based compensation expense	807		834
Gain on other real estate	(14)		(25)
Earnings on bank-owned life insurance	(991)		(687)
Mortgage loans originated for resale	(593,801)		(184,146)
Proceeds from sale of mortgage loans	519,813		129,742
Right of use asset amortization	1,304		1,224
Other accretion, net of other amortization	(2,378)		(4,875)
Change in
Accrued interest receivable	397		(3,058)
Other assets	(2,862)		(3,441)
Accrued interest payable	(604)		(1,170)
Other liabilities	(4,094)		(6,512)
TOTAL ADJUSTMENTS	(90,678)		(65,693)
NET CASH USED IN OPERATING ACTIVITIES	(64,774)		(59,404)
INVESTING ACTIVITIES
Cash (used in) received from acquisitions, net	0		(8,500)
Activities in available for sale securities
Purchases	(48,070)		(6,000)
Sales	35,751		103,668
Maturities, prepayments and calls	1,779		9,635
Redemptions (purchases) of restricted equity securities	781		(2,009)
Net change in loans	(16,443)		(108,983)
Purchase of premises and equipment	(261)		(1,896)
Proceeds from sale of premises and equipment	56		90
Proceeds from sale of other real estate	62		889


NET CASH USED IN INVESTING ACTIVITIES	(26,345)		(13,106)
FINANCING ACTIVITIES
Net change in deposits	50,642		127,398
Proceeds from Federal Home Loan Bank advances	346,962		313,898
Payments on Federal Home Loan Bank advances	(340,962)		(324,515)

Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares	271		66
Noncontrolling interest contributions	(710)		1,364
Cash dividends paid on common stock	(4,034)		(2,874)
NET CASH PROVIDED BY FINANCING ACTIVITIES	52,169		115,337
NET CHANGE IN CASH AND CASH EQUIVALENTS	(38,950)		42,827
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	95,045		51,649
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	56,095	$	94,476

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollar amounts in thousands)

Three Months Ended March 31,
2021 2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest $ 3,877 $ 4,218
Income taxes $ 61 $ 0
Supplemental disclosures of non-cash transactions
Unrealized gain on securities available-for-sale $ (3,010) $ (1,327)
Unrealized gain (loss) on derivatives $ 2,002 $ (6,910)
Change in due to/from noncontrolling interest $ (570) $ 976
Right of use assets obtained in exchange for operating lease liabilities $ 936 $ 11,973


	Six Months Ended June 30,
	2021		2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest	$	11,207	$	12,382
Income taxes	5,760		31

Supplemental disclosures of non-cash transactions
Unrealized (gain) loss on securities available-for-sale	$	(2,749)	$	2,745
Unrealized gain (loss) on derivatives	5,563		(8,087)
Change in due to/from noncontrolling interest	(710)		1,364
Bank facilities no longer in use transferred to other real estate from premises and equipment	990		0
Loans foreclosed and transferred to other real estate	45		0
Right of use assets obtained in exchange for operating lease liabilities	945		11,973

See accompanying notes to consolidated financial statements.

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RELIANT BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share amounts)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Reliant Bancorp, Inc. is a Tennessee corporation and the holding company for and the sole shareholder of Reliant Bank (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 a member of the Federal Reserve System (the "Federal Reserve"). The Bank provides a full range of traditional banking products and services to business and consumer clients throughout Middle Tennessee.

Reliant 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. pools resources with several other similar insurance company subsidiaries of financial institutions to spread a limited amount of risk among themselves. Reliant Risk Management, Inc. is subject to regulations of the State of 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"). 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 the Company's consolidated financial statements and related notes appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Amounts in the footnotes are shown in thousands, except for numbers of shares, per share amounts and as otherwise noted.

The consolidated financial statements as of and for the periods presented include Reliant Bancorp, Inc., its wholly-owned direct and indirect subsidiaries and Reliant Mortgage Ventures, LLC ("RMV"), of which the Bank controls 51% of the governance rights. As described in Note 1211 to these unaudited consolidated financial statements, Reliant Bancorp, Inc. and Tennessee Community Bank Holdings, Inc. (“TCB Holdings”) merged effective on January 1, 2020, and Reliant Bancorp, Inc. and First Advantage Bancorp (“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 ~~March 31,~~June 30, 2021, and for the three and six months ended ~~March 31,~~June 30, 2021 and 2020, included herein have not been audited. The accounting and reporting policies of the Company conform to U.S. GAAP and Article 8 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures made are adequate to make the information not misleading.

The accompanying consolidated financial statements reflect all adjustments which, 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

~~Table of Contents~~

conform to the current period presentation. The results for the three and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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Recently Adopted 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for additional information related to previously issued accounting standards updates.

ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.” The guidance issued in this update simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for outside basis differences. ASU 2019-12 also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 was effective for us on January 1, 2021, and did not have a significant impact on our consolidated financial statements.

ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting." In March 2020, the Financial Accounting Standards Board (“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 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 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 reasonably estimate the impact of adopting these ASUs, we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of the Company's loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

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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 ~~March 31,~~June 30, 2021 and December 31, 2020 were as follows:

March 31, 2021
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair
Value
U. S. Treasury and other U. S. government agencies $ 225 $ 1 $ 0 $ 226
State and municipal 190,980 14,484 (564) 204,900
Corporate bonds 27,000 392 (128) 27,264
Mortgage-backed securities - Residential 31,607 448 (32) 32,023
Asset-backed securities 2,802 1 (25) 2,778
Total $ 252,614 $ 15,326 $ (749) $ 267,191


	June 30, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U. S. Treasury and other U. S. government agencies	$	222	$	0	$	0	$	222
State and municipal	174,093		13,611		(170)		187,534
Corporate bonds	27,000		1,123		(41)		28,082
Mortgage-backed securities - Residential	47,908		392		(56)		48,244
Asset-backed securities	2,634		1		(22)		2,613

Total	$	251,857	$	15,127	$	(289)	$	266,695


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U. S. Treasury and other U. S. government agencies	$	47	$	1	$	0	$	48
State and municipal	184,102		16,963		(77)		200,988
Corporate bonds	23,750		397		(34)		24,113
Mortgage-backed securities - Residential	28,084		360		(2)		28,442
Asset-backed securities	3,083		1		(22)		3,062

Total	$	239,066	$	17,722	$	(135)	$	256,653

Securities pledged at ~~March 31,~~June 30, 2021 and December 31, 2020 had a carrying amount of ~~$29,643~~$42,110 and $30,491, respectively, and were pledged to collateralize Federal Home Loan Bank ("FHLB") advances, Federal Reserve Bank ("FRB") advances and municipal deposits.

Results from sales of securities were as follows:


		Three months ended					Three Months Ended June 30,				Six Months Ended June 30,
		March 31, 2021		March 31, 2020			2021		2020		2021		2020
Proceeds	Proceeds	$	1,795	$	56,336	Proceeds	$	33,955	$	47,332	$	35,751	$	103,668
Gross gains	Gross gains	129		0		Gross gains	2,966		439		3,095		439
Gross losses	Gross losses	0		0		Gross losses	0		(112)		0		(112)

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The fair values of available for sale debt securities at ~~March 31,~~June 30, 2021 by contractual maturity are provided below. Actual maturities may differ from contractual maturities for mortgage- and asset-backed securities since the underlying asset may be called or prepaid with or without penalty. Securities not due at a single maturity date are shown separately.


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
Due within one year	Due within one year	$	225	$	226	Due within one year	$	222	$	223
Due in one to five years	Due in one to five years	2,085		2,089		Due in one to five years	2,085		2,129
Due in five to ten years	Due in five to ten years	33,886		35,028		Due in five to ten years	33,773		35,729
Due after ten years	Due after ten years	182,009		195,047		Due after ten years	165,235		177,757
Mortgage-backed securities	Mortgage-backed securities	31,607		32,023		Mortgage-backed securities	47,908		48,244
Asset-backed securities	Asset-backed securities	2,802		2,778		Asset-backed securities	2,634		2,613
Total	Total	$	252,614	$	267,191	Total	$	251,857	$	266,695

The following table shows available for sale securities with unrealized losses and their estimated fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of ~~March 31,~~June 30, 2021 and December 31, 2020, 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
March 31, 2021
State and municipal $ 23,357 $ 564 $ 0 $ 0 $ 23,357 $ 564
Corporate bonds 11,622 128 0 0 11,622 128
Mortgage-backed securities - Residential 4,366 31 80 1 4,446 32
Asset-backed securities 665 5 1,884 20 2,549 25
Total temporarily impaired $ 40,010 $ 728 $ 1,964 $ 21 $ 41,974 $ 749


	Less than 12 months				12 months or more				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
June 30, 2021

State and municipal	$	21,952	$	170	$	0	$	0	$	21,952	$	170
Corporate bonds	5,209		41		0		0		5,209		41
Mortgage-backed securities - Residential	16,019		55		76		1		16,095		56
Asset-backed securities	0		0		2,424		22		2,424		22
Total temporarily impaired	$	43,180	$	266	$	2,500	$	23	$	45,680	$	289


December 31, 2020

State and municipal	$	9,475	$	77	$	0	$	0	$	9,475	$	77
Corporate bonds	5,716		34		0		0		5,716		34
Mortgage-backed securities - Residential	5,024		1		92		1		5,116		2
Asset-backed securities	729		2		2,013		20		2,742		22
Total temporarily impaired	$	20,944	$	114	$	2,105	$	21	$	23,049	$	135

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. As the fair value is expected to recover as the securities approach their maturity date and/or market rates decline, we do not consider these securities to be other-than-temporarily impaired at ~~March 31,~~June 30, 2021. There were 3234 and 22 securities in an unrealized loss position as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

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NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans at ~~March 31,~~June 30, 2021 and December 31, 2020 were comprised as follows:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	430,373	$	459,739	Commercial, Industrial and Agricultural	$	435,093	$	459,739
Real Estate	Real Estate					Real Estate
1-4 Family Residential	1-4 Family Residential	322,170		323,473		1-4 Family Residential	326,768		323,473
1-4 Family HELOC	1-4 Family HELOC	100,056		100,525		1-4 Family HELOC	100,614		100,525
Multi-family and Commercial	Multi-family and Commercial	831,242		834,000		Multi-family and Commercial	831,093		834,000
Construction, Land Development and Farmland	Construction, Land Development and Farmland	372,950		365,058		Construction, Land Development and Farmland	397,557		365,058
Consumer	Consumer	216,034		213,863		Consumer	225,433		213,863
Other	Other	8,560		8,669		Other	7,614		8,669
Gross loans	Gross loans	2,281,385		2,305,327		Gross loans	2,324,172		2,305,327
Less: Deferred loan fees	Less: Deferred loan fees	3,671		4,544		Less: Deferred loan fees	3,102		4,544
Less: Allowance for loan losses	Less: Allowance for loan losses	20,785		20,636		Less: Allowance for loan losses	20,894		20,636
Loans, net	Loans, net	$	2,256,929	$	2,280,147	Loans, net	$	2,300,176	$	2,280,147

At ~~March 31,~~June 30, 2021 and December 31, 2020, loans are recorded net of purchase discounts of ~~$14,833~~$12,980 and $16,634, respectively.

The Company pledged loans to the FHLB at ~~March 31,~~June 30, 2021 and December 31, 2020 of ~~$448,697~~$877,732 and $646,498, respectively.

The Company utilizes a risk grading system to monitor the credit quality of the Company’s commercial loan portfolio which consists of commercial and industrial, commercial real estate and construction loans. Loans are graded on a scale of 1 to 9. Grades 1 - 5 are pass credits, grade 6 is special mention, grade 7 is substandard, grade 8 is doubtful and grade 9 is loss. A description of the risk grades are as follows:

Grade 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 as substandard. Substandard assets have a high probability of payment default, or they have other well-defined weaknesses. They require supervision that is more intensive by Company management. Substandard assets are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigation.

Table of Contents

Grade 8 - Doubtful

An extension of credit classified ‘‘doubtful’’ has all the weaknesses inherent in one classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage of and strengthen the credit, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceedings, capital injection, perfecting liens on additional collateral, or refinancing plans. Generally, the doubtful classification should not extend for a long period of time because in most cases the pending factors or events that warranted the doubtful classification should be resolved either positively or negatively in a reasonable period of time.

Grade 9 - Loss

Extensions of credit classified ‘‘loss’’ are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the credit has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. Amounts classified loss should be promptly charged off. The Company will not attempt long term recoveries while the credit remains on the Company’s books. Losses should be taken in the period in which they surface as uncollectible. With loss assets, the underlying borrowers are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Once an asset is classified loss, there is little prospect of collecting either its principal or interest.

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.

The following table provides the risk category of loans by applicable class of loans including purchase credit impaired (“PCI”) loans as of ~~March 31,~~June 30, 2021 and December 31, 2020:


		Pass		Special Mention		Substandard		Total			Pass		Special Mention		Substandard		Total
March 31, 2021
June 30, 2021										June 30, 2021
Loans excluding PCI	Loans excluding PCI									Loans excluding PCI
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	427,787	$	1,415	$	1,004	$	430,206	Commercial, Industrial and Agricultural	$	432,841	$	1,098	$	996	$	434,935
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	318,446		860		2,197		321,503		1-4 Family Residential Real Estate	323,591		961		1,572		326,124
1-4 Family HELOC	1-4 Family HELOC	99,757		0		285		100,042		1-4 Family HELOC	100,315		0		285		100,600
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	825,088		1,757		3,803		830,648		Multi-family and Commercial Real Estate	823,945		1,741		4,856		830,542
Construction, Land Development and Farmland	Construction, Land Development and Farmland	366,620		0		5,591		372,211		Construction, Land Development and Farmland	391,793		0		5,036		396,829
Consumer	Consumer	213,609		2		1,379		214,990		Consumer	222,959		2		1,589		224,550
Other	Other	8,560		0		0		8,560		Other	7,614		0		0		7,614
Total loans excluding PCI	Total loans excluding PCI	$	2,259,867	$	4,034	$	14,259	$	2,278,160	Total loans excluding PCI	$	2,303,058	$	3,802	$	14,334	$	2,321,194

Total PCI loans	Total PCI loans	$	1,024	$	0	$	2,201	$	3,225	Total PCI loans	$	967	$	0	$	2,011	$	2,978
Total loans	Total loans	$	2,260,891	$	4,034	$	16,460	$	2,281,385	Total loans	$	2,304,025	$	3,802	$	16,345	$	2,324,172

Table of Contents


	Pass		Special Mention		Substandard		Total
December 31, 2020
Loans excluding PCI
Commercial, Industrial and Agricultural	$	456,170	$	1,519	$	1,863	$	459,552
1-4 Family Residential Real Estate	320,555		5		2,165		322,725
1-4 Family HELOC	100,391		0		120		100,511
Multi-family and Commercial Real Estate	829,353		653		3,337		833,343
Construction, Land Development and Farmland	358,606		0		5,676		364,282
Consumer	211,305		7		1,346		212,658
Other	7,150		1,519		0		8,669
Total loans excluding PCI	$	2,283,530	$	3,703	$	14,507	$	2,301,740








Total PCI loans	$	998	$	0	$	2,589	$	3,587
Total loans	$	2,284,528	$	3,703	$	17,096	$	2,305,327

None of the Company's loans had a risk rating of "Doubtful" or "Loss" as of ~~March 31,~~June 30, 2021 or December 31, 2020.

Activity in the Allowance for Loan Loss (“ALL”) by portfolio segment was as follows for the three and six months ended ~~March 31,~~June 30, 2021 and 2020:

Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real Estate Construction Land Development and Farmland Consumer Other Total
Beginning balance at December 31, 2020 $ 5,441 $ 2,445 $ 1,416 $ 8,535 $ 1,841 $ 928 $ 30 $ 20,636
Charge-offs (32) (7) 0 0 0 (259) 0 (298)
Recoveries 251 82 2 9 85 18 0 447
Provision 412 (82) (308) (479) (21) 476 2 0
Ending balance at March 31, 2021 $ 6,072 $ 2,438 $ 1,110 $ 8,065 $ 1,905 $ 1,163 $ 32 $ 20,785
Beginning balance at December 31, 2019 $ 2,529 $ 1,280 $ 624 $ 5,285 $ 2,649 $ 177 $ 34 $ 12,578
Charge-offs (294) 0 0 0 (114) (31) 0 (439)
Recoveries 61 11 1 3 0 6 0 82
Provision 1,555 197 248 1,472 (699) 146 (19) 2,900
Ending balance at March 31, 2020 $ 3,851 $ 1,488 $ 873 $ 6,760 $ 1,836 $ 298 $ 15 $ 15,121


	Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total
Beginning balance at March 31, 2021	$	6,072	$	2,438	$	1,110	$	8,065	$	1,905	$	1,163	$	32	$	20,785
Charge-offs	0		(14)		0		0		0		(195)		0		(209)
Recoveries	50		14		3		206		6		39		0		318
Provision	492		(515)		(503)		227		100		215		(16)		0
Ending balance at June 30, 2021	$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894

Beginning balance at March 31, 2020	$	3,851	$	1,488	$	873	$	6,760	$	1,836	$	298	$	15	$	15,121
Charge-offs	(245)		(60)		(98)		0		0		(264)		0		(667)
Recoveries	9		736		2		8		4		24		0		783
Provision	1,060		(710)		198		1,639		286		526		1		3,000
Ending balance at June 30, 2020	$	4,675	$	1,454	$	975	$	8,407	$	2,126	$	584	$	16	$	18,237

Table of Contents


	Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total
Beginning balance at December 31, 2020	$	5,441	$	2,445	$	1,416	$	8,535	$	1,841	$	928	$	30	$	20,636
Charge-offs	(32)		(21)		0		0		0		(454)		0		(507)
Recoveries	301		96		5		215		91		57		0		765
Provision	904		(597)		(811)		(252)		79		691		(14)		0
Ending balance at June 30, 2021	$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894

Beginning balance at December 31, 2019	$	2,529	$	1,280	$	624	$	5,285	$	2,649	$	177	$	34	$	12,578
Charge-offs	(539)		(60)		(98)		0		(114)		(295)		0		(1,106)
Recoveries	70		747		3		11		4		30		0		865
Provision	2,615		(513)		446		3,111		(413)		672		(18)		5,900
Ending balance at June 30, 2020	$	4,675	$	1,454	$	975	$	8,407	$	2,126	$	584	$	16	$	18,237

The ALL and the recorded investment in loans by portfolio segment and based on impairment method as of was as follows:

Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real Estate Construction Land Development and Farmland Consumer Other Total
March 31, 2021
Allowance for loan losses
Individually evaluated for impairment $ 847 $ 0 $ 0 $ 70 $ 0 $ 17 $ 0 $ 934
Acquired with credit impairment 0 0 0 0 0 0 0 0
Collectively evaluated for impairment 5,225 2,438 1,110 7,995 1,905 1,146 32 19,851
Total $ 6,072 $ 2,438 $ 1,110 $ 8,065 $ 1,905 $ 1,163 $ 32 $ 20,785
Loans
Individually evaluated for impairment $ 847 $ 1,956 $ 286 $ 4,047 $ 6,062 $ 1,372 $ 0 $ 14,570
Acquired with credit impairment 167 667 14 594 739 1,044 0 3,225
Collectively evaluated for impairment 429,359 319,547 99,756 826,601 366,149 213,618 8,560 2,263,590
Total $ 430,373 $ 322,170 $ 100,056 $ 831,242 $ 372,950 $ 216,034 $ 8,560 $ 2,281,385
December 31, 2020
Allowance for loan losses
Individually evaluated for impairment $ 717 $ 18 $ 0 $ 0 $ 0 $ 13 $ 0 $ 748
Acquired with credit impairment 0 0 0 0 0 0 0 0
Collectively evaluated for impairment 4,724 2,427 1,416 8,535 1,841 915 30 19,888
Total $ 5,441 $ 2,445 $ 1,416 $ 8,535 $ 1,841 $ 928 $ 30 $ 20,636
Loans
Individually evaluated for impairment $ 1,027 $ 1,829 $ 110 $ 2,504 $ 5,676 $ 1,177 $ 0 $ 12,323
Acquired with credit impairment 187 748 14 657 776 1,205 0 3,587
Collectively evaluated for impairment 458,525 320,896 100,401 830,839 358,606 211,481 8,669 2,289,417
Total $ 459,739 $ 323,473 $ 100,525 $ 834,000 $ 365,058 $ 213,863 $ 8,669 $ 2,305,327


	Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total
June 30, 2021
Allowance for loan losses
Individually evaluated for impairment	$	847	$	0	$	0	$	0	$	0	$	5	$	0	$	852
Acquired with credit impairment	0		0		0		0		0		0		0		0
Collectively evaluated for impairment	5,767		1,923		610		8,498		2,011		1,217		16		20,042
Total	$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894
Loans
Individually evaluated for impairment	$	934	$	1,428	$	284	$	4,856	$	5,506	$	1,587	$	0	$	14,595
Acquired with credit impairment	158		644		14		551		728		883		0		2,978
Collectively evaluated for impairment	434,001		324,696		100,316		825,686		391,323		222,963		7,614		2,306,599
Total	$	435,093	$	326,768	$	100,614	$	831,093	$	397,557	$	225,433	$	7,614	$	2,324,172

Table of Contents


	Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total
December 31, 2020
Allowance for loan losses
Individually evaluated for impairment	$	717	$	18	$	0	$	0	$	0	$	13	$	0	$	748
Acquired with credit impairment	0		0		0		0		0		0		0		0
Collectively evaluated for impairment	4,724		2,427		1,416		8,535		1,841		915		30		19,888
Total	$	5,441	$	2,445	$	1,416	$	8,535	$	1,841	$	928	$	30	$	20,636
Loans
Individually evaluated for impairment	$	1,027	$	1,829	$	110	$	2,504	$	5,676	$	1,177	$	0	$	12,323
Acquired with credit impairment	187		748		14		657		776		1,205		0		3,587
Collectively evaluated for impairment	458,525		320,896		100,401		830,839		358,606		211,481		8,669		2,289,417
Total	$	459,739	$	323,473	$	100,525	$	834,000	$	365,058	$	213,863	$	8,669	$	2,305,327

The following tables provide the period-end amounts of loans that are past due thirty to eighty-nine days, past due ninety or more days and still accruing interest, loans not accruing interest, purchased credit impaired loans, and loans current on payments accruing interest by category at ~~March 31,~~June 30, 2021 and December 31, 2020:


		Current and Accruing		30-89 Days Past Due		90+ Days Past Due and Accruing Interest		Nonaccrual Loans		Total Loans			Current and Accruing		30-89 Days Past Due		90+ Days Past Due and Accruing Interest		Nonaccrual Loans		Total Loans
March 31, 2021
June 30, 2021												June 30, 2021
Loans excluding PCI	Loans excluding PCI											Loans excluding PCI
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	429,859	$	75	$	0	$	272	$	430,206	Commercial, Industrial and Agricultural	$	434,662	$	0	$	0	$	273	$	434,935
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	319,522		525		0		1,456		321,503		1-4 Family Residential Real Estate	325,100		385		0		639		326,124
1-4 Family HELOC	1-4 Family HELOC	99,986		56		0		0		100,042		1-4 Family HELOC	100,450		150		0		0		100,600
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	830,242		0		0		406		830,648		Multi-family and Commercial Real Estate	829,306		0		0		1,236		830,542
Construction, Land Development and Farmland	Construction, Land Development and Farmland	370,538		0		0		1,673		372,211		Construction, Land Development and Farmland	395,711		0		0		1,118		396,829
Consumer	Consumer	213,377		897		3		713		214,990		Consumer	222,527		1,293		9		721		224,550
Other	Other	8,560		0		0		0		8,560		Other	7,614		0		0		0		7,614
Total loans excluding PCI	Total loans excluding PCI	$	2,272,084	$	1,553	$	3	$	4,520	$	2,278,160	Total loans excluding PCI	$	2,315,370	$	1,828	$	9	$	3,987	$	2,321,194

Total PCI loans	Total PCI loans	$	1,595	$	43	$	0	$	1,587	$	3,225	Total PCI loans	$	1,619	$	0	$	0	$	1,359	$	2,978
Total loans	Total loans	$	2,273,679	$	1,596	$	3	$	6,107	$	2,281,385	Total loans	$	2,316,989	$	1,828	$	9	$	5,346	$	2,324,172
December 31, 2020
Loans excluding PCI
Commercial, Industrial and Agricultural		$	458,974	$	126	$	0	$	452	$	459,552
1-4 Family Residential Real Estate		319,180		2,071		0		1,474		322,725
1-4 Family HELOC		100,501		10		0		0		100,511
Multi-family and Commercial Real Estate		832,697		150		0		496		833,343
Construction, Land Development and Farmland		363,376		0		0		906		364,282
Consumer		210,552		1,413		1		692		212,658
Other		8,669		0		0		0		8,669
Total loans excluding PCI		$	2,293,949	$	3,770	$	1	$	4,020	$	2,301,740

Total PCI loans		$	1,584	$	37	$	0	$	1,966	$	3,587
Total loans		$	2,295,533	$	3,807	$	1	$	5,986	$	2,305,327

Table of Contents


	Current and Accruing		30-89 Days Past Due		90+ Days Past Due and Accruing Interest		Nonaccrual Loans		Total Loans
December 31, 2020
Loans excluding PCI
Commercial, Industrial and Agricultural	$	458,974	$	126	$	0	$	452	$	459,552
1-4 Family Residential Real Estate	319,180		2,071		0		1,474		322,725
1-4 Family HELOC	100,501		10		0		0		100,511
Multi-family and Commercial Real Estate	832,697		150		0		496		833,343
Construction, Land Development and Farmland	363,376		0		0		906		364,282
Consumer	210,552		1,413		1		692		212,658
Other	8,669		0		0		0		8,669
Total loans excluding PCI	$	2,293,949	$	3,770	$	1	$	4,020	$	2,301,740








Total PCI loans	$	1,584	$	37	$	0	$	1,966	$	3,587
Total loans	$	2,295,533	$	3,807	$	1	$	5,986	$	2,305,327

Approximately ~~$2,306~~$2,136 and $2,438 of nonaccrual loans as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively, were performing pursuant to their contractual terms at those dates. Mortgage loans held for sale are excluded from the loan tables herein and have ~~$1,070~~$977 and $630 on nonaccrual as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

~~Table of Contents~~

Purchased Credit Impaired Loans

The Company has purchased 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 carrying amount of those loans is as follows:

March 31, 2021 December 31, 2020
Commercial, Industrial and Agricultural $ 899 $ 919
1-4 Family Residential Real Estate 905 1,004
1-4 Family HELOC 19 19
Multi-family and Commercial Real Estate 1,261 1,325
Construction, Land Development and Farmland 954 992
Consumer 1,732 1,924
Total outstanding balance 5,770 6,183
Less remaining purchase discount 2,545 2,596
Allowance for loan losses 0 0
Carrying amount, net of allowance for loan losses and remaining purchase discounts $ 3,225 $ 3,587


	June 30, 2021		December 31, 2020
Commercial, Industrial and Agricultural	$	889	$	919
1-4 Family Residential Real Estate	885		1,004
1-4 Family HELOC	19		19
Multi-family and Commercial Real Estate	1,218		1,325
Construction, Land Development and Farmland	944		992
Consumer	1,552		1,924
Total outstanding balance	5,507		6,183
Less remaining purchase discount	2,529		2,596
Allowance for loan losses	0		0
Carrying amount, net of allowance for loan losses and remaining purchase discounts	$	2,978	$	3,587

Table of Contents

Accretable yield, or income expected to be collected on PCI loans, is as follows:


		2021		2020			2021		2020
Balance at January 1,	Balance at January 1,	$	580	$	98	Balance at January 1,	$	580	$	98
New loans purchased	New loans purchased	0		131		New loans purchased	0		870
Accretion income	Accretion income	(36)		(20)		Accretion income	(38)		(80)
Balance at March 31,		$	544	$	209
Balance at June 30,						Balance at June 30,	$	542	$	888

On January 1, 2020 and April 1, 2020, the Company completed the TCB Holdings and FABK Transactions, respectively (see Note 1211 for more information). As a result of the acquisitions, the Company recorded loans with an initial fair value of $170.0 million and $625.8 million, respectively. Of those loans, $1,688 and $4,668, respectively, were considered to be PCI loans, which are loans for which it is probable at the acquisition date that all contractually required payments will not be collected. The remaining loans are considered to be purchased non-impaired loans and their related fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan.

PCI loans purchased during the year ended December 31, 2020, for which it was probable at acquisition that all contractually required payments would not be collected are as follows:


	Tennessee Community Bank Holdings, Inc. acquisition on January 1, 2020		First Advantage Bancorp acquisition on April 1, 2020
Contractually required payments receivable of loans purchased during the year:	$	2,799	$	7,540
Nonaccretable difference	(980)		(2,133)
Cash flows expected to be collected at acquisition	$	1,819	$	5,407
Accretable yield	(131)		(739)
Fair value of acquired loans at acquisition	$	1,688	$	4,668

1920

Table of Contents

Impaired Loans

Individually impaired loans by class of loans were as follows at ~~March 31,~~June 30, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020
Unpaid
Principal
Balance Recorded Investment Related
Allowance Unpaid
Principal
Balance Recorded Investment Related
Allowance
With no related allowance recorded
Commercial, Industrial and Agricultural $ 1,207 $ 167 $ — $ 1,400 $ 367 $ —
1-4 Family Residential Real Estate 3,110 2,623 — 3,034 2,473 —
1-4 Family HELOC 313 300 — 130 124 —
Multi-family and Commercial Real Estate 5,937 4,491 — 4,549 3,161 —
Construction, Land Development and Farmland 7,185 6,801 — 6,809 6,452 —
Consumer 3,605 2,352 — 3,590 2,348 —
Subtotal $ 21,357 $ 16,734 $ — $ 19,512 $ 14,925 $ —
With an allowance recorded
Commercial, Industrial and Agricultural $ 859 $ 847 $ 847 $ 859 $ 847 $ 717
1-4 Family Residential Real Estate 0 0 0 104 104 18
1-4 Family HELOC 0 0 0 0 0 0
Multi-family and Commercial Real Estate 150 150 70 0 0 0
Construction, Land Development and Farmland 0 0 0 0 0 0
Consumer 66 64 17 34 34 13
Subtotal 1,075 1,061 934 997 985 748
Total $ 22,432 $ 17,795 $ 934 $ 20,509 $ 15,910 $ 748

~~Table of Contents~~


	June 30, 2021						December 31, 2020
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
With no related allowance recorded
Commercial, Industrial and Agricultural	$	1,294	$	245	$	—	$	1,400	$	367	$	—
1-4 Family Residential Real Estate	2,490		2,072		—		3,034		2,473		—
1-4 Family HELOC	311		298		—		130		124		—
Multi-family and Commercial Real Estate	6,856		5,407		—		4,549		3,161		—
Construction, Land Development and Farmland	6,619		6,234		—		6,809		6,452		—
Consumer	3,716		2,433		—		3,590		2,348		—
Subtotal	$	21,286	$	16,689	$	—	$	19,512	$	14,925	$	—
With an allowance recorded
Commercial, Industrial and Agricultural	$	859	$	847	$	847	$	859	$	847	$	717
1-4 Family Residential Real Estate	0		0		0		104		104		18
1-4 Family HELOC	0		0		0		0		0		0
Multi-family and Commercial Real Estate	0		0		0		0		0		0
Construction, Land Development and Farmland	0		0		0		0		0		0
Consumer	40		37		5		34		34		13
Subtotal	899		884		852		997		985		748
Total	$	22,185	$	17,573	$	852	$	20,509	$	15,910	$	748

The average recorded investment in impaired loans for the ~~period~~three and six months ended ~~March 31,~~June 30, 2021, and 2020 was as follows:


	Three months ended June 30,								Six months ended June 30,
	2021				2020				2021				2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With no allowance
Commercial, Industrial and Agricultural	$	206	$	2	$	491	$	9	$	260	$	10	$	450	$	14
1-4 Family Residential Real Estate	2,348		34		3,086		60		2,389		64		2,881		100
1-4 Family HELOC	299		3		382		0		241		6		296		0
Multi-family and Commercial Real Estate	4,949		74		4,575		162		4,353		179		4,103		215
Construction, Land Development and Farmland	6,518		76		2,730		33		6,496		186		3,971		87
Consumer	2,393		88		1,177		136		2,378		177		1,567		137
Subtotal	$	16,713	$	277	$	12,441	$	400	$	16,117	$	622	$	13,268	$	553

Three months ended March 31,
2021 2020
Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized
With no allowance
Commercial, Industrial and Agricultural $ 267 $ 6 $ 298 $ 5
1-4 Family Residential Real Estate 2,548 33 2,630 40
1-4 Family HELOC 212 3 278 0
Multi-family and Commercial Real Estate 3,826 88 3,654 53
Construction, Land Development and Farmland 6,627 104 4,290 54
Consumer 2,350 76 1,193 1
Subtotal $ 15,830 $ 310 $ 12,343 $ 153
With an allowance recorded
Commercial, Industrial and Agricultural $ 847 $ 6 $ 852 $ 20
1-4 Family Residential Real Estate 52 0 52 0
1-4 Family HELOC 0 0 0 0
Multi-family and Commercial Real Estate 75 2 0 0
Construction, Land Development and Farmland 0 0 0 0
Consumer 49 2 19 0
Subtotal $ 1,023 $ 10 $ 923 $ 20
Total $ 16,853 $ 320 $ 13,266 $ 173

Table of Contents


	Three months ended June 30,								Six months ended June 30,
	2021				2020				2021				2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With an allowance recorded
Commercial, Industrial and Agricultural	$	847	$	6	$	923	$	6	$	847	$	12	$	898	$	26
1-4 Family Residential Real Estate	0		0		0		0		35		0		35		0
1-4 Family HELOC	0		0		0		0		0		0		0		0
Multi-family and Commercial Real Estate	75		0		0		0		50		0		0		0
Construction, Land Development and Farmland	0		0		0		0		0		0		0		0
Consumer	51		1		2		0		45		1		13		0
Subtotal	$	973	$	7	$	925	$	6	$	977	$	13	$	946	$	26
Total	$	17,686	$	284	$	13,366	$	406	$	17,094	$	635	$	14,214	$	579

Restructured Loans

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had recorded investments in troubled debt restructurings (“TDRs”) of ~~$3,938~~$3,490 and $4,236, respectively. The Company did not allocate a specific allowance for those loans at ~~March 31,~~June 30, 2021 and December 31, 2020 and there were no commitments to lend additional amounts. Loans accounted for as TDR include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. Loans accounted for as TDR are individually evaluated for impairment.

There were 0 TDR modifications in the three months ending ~~March 31, 2021 or March 31, 2020.~~June 30, 2021. Modifications made during the six months ended June 30, 2020 are displayed below.


	Number of Contracts	Pre-Modification Outstanding Recorded Investments		Post-Modification Outstanding Recorded Investments
Commercial, Industrial and Agricultural	1	$	150	$	150
1-4 Family Residential	1	721		721
Multi-family and Commercial Real Estate	1	394		394
Total	3	$	1,265	$	1,265

Programs as part of COVID-19 Relief

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law in March 2020 and subsequently amended, along with subsequent regulatory guidance encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, the CARES Act further provides that a qualified loan modification is exempt by law from classification as a TDR as defined by U.S. GAAP beginning March 1, 2020 until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. The following table outlines the Company's recorded investment and percentage of loans held for investment by class of financing receivable for Company executed deferrals that remain on deferral at ~~March 31,~~June 30, 2021, in connection with Company COVID-19 relief programs. These deferrals typically ranged from sixty to ninety days per deferral and were not considered TDRs under the interagency regulatory guidance or the CARES ~~Act.. As of March 31, 2021, the Company had a total of $597,327 loans previously deferred that returned to normal payment status.~~Act.

2122

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		March 31, 2021					June 30, 2021
		Active Deferrals		% of Loans			Active Deferrals		% of Loans
Multi-family and Commercial	Multi-family and Commercial	$	21,329	0.94	%	Multi-family and Commercial	$	54,984	2.37	%
Construction, Land Development and Farmland	Construction, Land Development and Farmland	11,792		0.52	%	Construction, Land Development and Farmland	13,000		0.56	%
Total	Total	$	33,121	1.46	%	Total	$	67,984	2.93	%

The CARES Act provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“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 (“PPP”). As of ~~March 31,~~June 30, 2021, the Company had ~~588~~84 PPP loans outstanding amounting to ~~$41.9~~$14.0 million which are included in the commercial, industrial, and agricultural segment. PPP loans do not have a corresponding allowance as they are fully guaranteed by the SBA. Fees range from 1% to 5% of the loan and are deferred and amortized over the life of the loan. As PPP loans are forgiven, any deferred loan fee or cost is recognized related to each individual loan. As of ~~March 31,~~June 30, 2021, ~~$41.5~~$69.4 million in PPP loans had cumulatively been forgiven ~~cumulatively~~of the $83.4 million in loan originations since the CARES Act’s inception. ~~During the three months ended March 31, 2021, $1,042 in fees and interest was recognized in earnings.~~

~~NOTE 4 - LEASES~~

~~On January 1, 2020, the Company adopted ASU No. 2016-02 “Leases (Topic 842~~)” and 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 these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease 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:~~

March 31, 2021 December 31, 2020
Operating leases right of use assets $ 13,372 $ 13,103
Operating leases liabilities $ 14,552 $ 14,231
Weighted average remaining lease term (in years) 6.08 6.33
Weighted average discount rate 4.30 % 4.34 %

~~The components of lease expense included in occupancy expenses for the three months ended March 31, 2021 and 2020, were as follows:~~

Three months ended March 31,
2021 2020
Operating lease cost $ 806 $ 628
Short-term lease cost 2 0
Variable lease cost 97 80
Total lease cost $ 905 $ 708

~~Table of Contents~~

The Company does not separate lease and non-lease components and instead elects to account for them as a single lease component. Variable lease cost primarily represents variable payments such as common area maintenance, utilities, and property taxes.

~~A maturity analysis of operating lease liabilities and a reconciliation of undiscounted cash flows to the total operating lease liability is as follows:~~


~~Lease payments due on or before~~	~~March 31, 2021~~
~~March 31, 2022~~	$	~~2,255~~
~~March 31, 2023~~	~~2,702~~
~~March 31, 2024~~	~~2,717~~
~~March 31, 2025~~	~~2,700~~
~~March 31, 2026~~	~~2,211~~
~~Thereafter~~	~~3,773~~
~~Total undiscounted cash flows~~	~~16,358~~

~~Discount on cash flows~~	~~(1,806)~~
~~Total lease liability~~	$	~~14,552~~

The Company entered into a five year lease with a related party that commenced January 1, 2021 and has a base annual rental of $211,000, with a 2.5% per year increase. This lease may be terminated December 31, 2021 with a 90-day notice and included in the table above.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Interest	$	58	$	148	$	197	$	148
Fees	729		284		1,632		284
Total PPP Income	$	787	$	432	$	1,829	$	432

NOTE 54 - 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 ~~$160,000~~$110,000 as of ~~March 31,~~June 30, 2021 were designated as cash flow hedges of certain short-term interest-bearing liabilities and subordinated debentures, which are fully effective. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swap agreements. ~~NaN gains or losses~~Losses of $2,859 were reclassified from accumulated other comprehensive income into net income during the periods ~~presented.~~presented related to the $50 million in swaps which were terminated.

Summary information related to the interest rate swaps designated as cash flow hedges as of ~~March 31,~~June 30, 2021, is as follows:


Notional amounts	$	~~160,000~~110,000
Weighted average pay rates	~~2.05~~1.63		%
Weighted average receive rates	~~0.35~~0.37		%
Weighted average maturity	~~2.85~~2.88 years
Unrealized losses	$	~~6,178~~2,645

Table of Contents

The following table reflects the cash flow hedges included in the Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively:


		March 31, 2021				December 31, 2020					June 30, 2021				December 31, 2020
		Notional Amount		Fair Value		Notional Amount		Fair Value			Notional Amount		Fair Value		Notional Amount		Fair Value

Included in other liabilities:	Included in other liabilities:									Included in other liabilities:
Interest rate swaps related to:	Interest rate swaps related to:									Interest rate swaps related to:
Subordinated debentures	Subordinated debentures	$	10,000	$	(598)	$	10,000	$	(690)	Subordinated debentures	$	10,000	$	(532)	$	10,000	$	(690)
Short-term interest-bearing liabilities	Short-term interest-bearing liabilities	150,000		(5,580)		150,000		(6,967)		Short-term interest-bearing liabilities	100,000		(2,113)		150,000		(6,967)
Total included in other liabilities	Total included in other liabilities	$	160,000	$	(6,178)	$	160,000	$	(7,657)	Total included in other liabilities	$	110,000	$	(2,645)	$	160,000	$	(7,657)

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 six months ended ~~March 31,~~June 30, 2021 and 2020, respectively:

Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)
Three months ended March 31,
2021 2020
Interest rate swaps - subordinate debentures $ 68 $ (289)
Interest rate swaps - interest-bearing liabilities 1,024 (4,046)
$ 1,092 $ (4,335)


	Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)
	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Interest rate swaps - subordinate debentures	$	49	$	8	$	117	$	(281)
Interest rate swaps - interest-bearing liabilities	2,560		(810)		3,585		(4,856)
	$	2,609	$	(802)	$	3,702	$	(5,137)

Fair Value Hedges

Summary information related to the fair value hedges as of ~~March 31,~~June 30, 2021, is as follows:


Notional amounts	$	17,925
Weighted average pay rates	3.67		%
Weighted average receive rates	~~1.17~~1.13		%
Weighted average maturity	~~7.83~~7.58 years
Unrealized losses	$	~~971~~944

The following table reflects the fair value hedges included in the Consolidated Balance Sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively:


		March 31, 2021				December 31, 2020					June 30, 2021				December 31, 2020
		Notional Amount		Fair Value		Notional Amount		Fair Value			Notional Amount		Fair Value		Notional Amount		Fair Value

Included in other liabilities:	Included in other liabilities:									Included in other liabilities:
Interest rate swaps related to investments	Interest rate swaps related to investments	17,925		(971)		18,525		(1,495)		Interest rate swaps related to investments	17,925		(944)		18,525		(1,495)
Total included in other liabilities	Total included in other liabilities	$	17,925	$	(971)	$	18,525	$	(1,495)	Total included in other liabilities	$	17,925	$	(944)	$	18,525	$	(1,495)

The following table reflects the fair value hedges and the underlying hedged items included in the Consolidated Statements of Income for the three and six months ended ~~March 31,~~June 30, 2021 and 2020, respectively:


			Three months ended March 31,					Three months ended June 30,			Six months ended June 30,
Item	Item	Location	2021		2020		Item	Location	2021		2020		2021		2020
Interest rate swaps - securities	Interest rate swaps - securities	Interest on investment securities, nontaxable	$	(121)	$	(47)	Interest rate swaps - securities	Interest on investment securities, nontaxable	$	(117)	$	(78)	$	(238)	$	(125)
Hedged item - securities	Hedged item - securities	Interest on investment securities, nontaxable	$	121	$	47	Hedged item - securities	Interest on investment securities, nontaxable	$	117	$	78	$	238	$	125

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NOTE 65 - 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 March 31,				Three months ended June 30,				Six Months Ended June 30,
		2021		2020				2021		2020		2021		2020
Stock-based compensation expense before income taxes	Stock-based compensation expense before income taxes	$	339	$	349		Stock-based compensation expense before income taxes	$	468	$	485	$	807	$	834
Less: deferred tax benefit	Less: deferred tax benefit	(89)		(91)			Less: deferred tax benefit	(122)		(127)		(211)		(218)
Reduction of net income	Reduction of net income	$	250	$	258		Reduction of net income	$	346	$	358	$	596	$	616

Common Stock Options

A summary of stock option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2021 is as follows:


		Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value			Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2020	Outstanding at December 31, 2020	116,621	$	18.97	5.87 years	$	304	Outstanding at December 31, 2020	116,621	$	18.97	5.87 years	$	304
Granted	Granted	0	$	0				Granted	0	$	0
Exercised	Exercised	(600)	$	13.65		4		Exercised	(600)	$	13.65		4
Forfeited or expired	Forfeited or expired	(600)	$	26.43				Forfeited or expired	(5,600)	$	13.42
Outstanding at March 31, 2021		115,421	$	18.96	5.66 years	$	1,126
Exercisable at March 31, 2021		79,721	$	16.56	4.82 years	$	969
Outstanding at June 30, 2021								Outstanding at June 30, 2021	110,421	$	19.28	5.66 years	$	938
Exercisable at June 30, 2021								Exercisable at June 30, 2021	75,721	$	16.94	4.90 years	$	819

As of ~~March 31,~~June 30, 2021, there was ~~$185~~$164 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 ~~2.70~~2.51 years.

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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 ~~three~~six months ended ~~March 31,~~June 30, 2021:


		Restricted Stock Units			Restricted Stock				Restricted Stock Units			Restricted Stock
		Underlying Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value			Underlying Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2021	Outstanding at January 1, 2021	132,650	$	16.93	40,910	$	26.82	Outstanding at January 1, 2021	132,650	$	16.93	40,910	$	26.82
Granted	Granted	2,000	18.42		0	0		Granted	70,655	26.07		0	0
Vested	Vested	0	0		(2,000)	27.49		Vested	0	0		(5,000)	24.76
Forfeited	Forfeited	(1,000)	22.13		0	0		Forfeited	(5,500)	16.20		0	0
Outstanding at March 31, 2021		133,650	$	16.92	38,910	$	26.78
Outstanding at June 30, 2021								Outstanding at June 30, 2021	197,805	$	20.22	35,910	$	27.10

As of ~~March 31,~~June 30, 2021, there was ~~$1,361~~$2,776 and ~~$135~~$52 of unrecognized compensation cost related to non-vested restricted share units and restricted stock share awards, respectively. The cost is expected to be recognized over a weighted-average period of ~~1.95~~2.39 years for the restricted stock units and 0.57 years for the restricted stock share awards. The total fair value of shares vested during ~~three~~six months ended ~~March 31,~~June 30, 2021 was ~~$37.~~$121.

NOTE 76 - 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 ~~March 31,~~June 30, 2021, 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 ~~March 31,~~June 30, 2021 and December 31, 2020.

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
March 31, 2021
Reliant Bancorp
Tier I leverage $ 273,173 9.33 % $ 117,116 4.00 % $ 146,395 5.00 %
Common equity tier I 261,384 10.41 % 175,763 7.00 % 163,208 6.50 %
Tier I risk-based capital 273,173 10.88 % 213,416 8.50 % 200,863 8.00 %
Total risk-based capital 353,538 14.09 % 263,460 10.50 % 250,914 10.00 %
Bank
Tier I leverage $ 324,052 11.06 % $ 117,198 4.00 % $ 146,497 5.00 %
Common equity tier I 324,052 12.93 % 175,434 7.00 % 162,903 6.50 %
Tier I risk-based capital 324,052 12.93 % 213,027 8.50 % 200,496 8.00 %
Total risk-based capital 345,487 13.79 % 263,061 10.50 % 250,534 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
June 30, 2021
Reliant Bancorp
Tier I leverage	$	285,363	9.47	%	$	120,533	4.00	%	$	150,667	5.00	%
Common equity tier I	273,553		10.18	%	188,101		7.00	%	174,665		6.50	%
Tier I risk-based capital	285,363		10.62	%	228,398		8.50	%	214,963		8.00	%
Total risk-based capital	365,942		13.62	%	282,114		10.50	%	268,680		10.00	%
Bank
Tier I leverage	$	334,911	11.14	%	$	120,255	4.00	%	$	150,319	5.00	%
Common equity tier I	334,911		12.50	%	187,550		7.00	%	174,154		6.50	%
Tier I risk-based capital	334,911		12.50	%	227,739		8.50	%	214,343		8.00	%
Total risk-based capital	356,530		13.30	%	281,471		10.50	%	268,068		10.00	%

Table of Contents


	Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2020
Reliant Bancorp
Tier I leverage	$	262,282	8.91	%	$	117,747	4.00	%	$	147,184	5.00	%
Common equity tier I	250,513		10.22	%	171,584		7.00	%	159,328		6.50	%
Tier I risk-based capital	262,282		10.70	%	208,355		8.50	%	196,099		8.00	%
Total risk-based capital	342,246		13.96	%	257,420		10.50	%	245,162		10.00	%
Bank
Tier I leverage	$	313,633	10.64	%	$	117,907	4.00	%	$	147,384	5.00	%
Common equity tier I	313,633		12.83	%	171,117		7.00	%	158,894		6.50	%
Tier I risk-based capital	313,633		12.83	%	207,785		8.50	%	195,562		8.00	%
Total risk-based capital	334,919		13.71	%	256,503		10.50	%	244,288		10.00	%

NOTE 87 - 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				Three Months Ended				Six Months Ended
		March 31,				June 30,				June 30,
		2021		2020				2021		2020		2021		2020
Basic EPS Computation	Basic EPS Computation						Basic EPS Computation
Net income (loss) attributable to common shareholders		$	12,149	$	(215)
Net income attributable to common shareholders							Net income attributable to common shareholders	$	13,045	$	7,868	$	25,194	$	7,653
Weighted average common shares outstanding	Weighted average common shares outstanding	16,615,169		11,892,723			Weighted average common shares outstanding	16,616,888		16,496,817		16,616,034		14,196,254
Basic earnings (loss) per common share		$	0.73	$	(0.02)
Basic earnings per common share							Basic earnings per common share	$	0.79	$	0.48	$	1.52	$	0.54
Diluted EPS Computation	Diluted EPS Computation						Diluted EPS Computation
Net income (loss) attributable to common shareholders		$	12,149	$	(215)
Net income attributable to common shareholders							Net income attributable to common shareholders	$	13,045	$	7,868	$	25,194	$	7,653
Weighted average common shares outstanding	Weighted average common shares outstanding	16,615,169		11,892,723			Weighted average common shares outstanding	16,616,888		16,496,817		16,616,034		14,196,254
Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	125,134		0			Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	167,856		32,263		146,613		44,911
Adjusted weighted average common shares outstanding	Adjusted weighted average common shares outstanding	16,740,303		11,892,723			Adjusted weighted average common shares outstanding	16,784,744		16,529,080		16,762,647		14,241,165
Diluted earnings (loss) per common share		$	0.73	$	(0.02)
Diluted earnings per common share							Diluted earnings per common share	$	0.78	$	0.48	$	1.50	$	0.54

NOTE 98 - 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:~~

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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 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 and Repossessed Assets: The fair value of other real estate and repossessed assets is generally based on recent appraisals less estimated disposition cost. These appraisals may use a single valuation approach or a combination of 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.

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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 ~~March 31,~~June 30, 2021 and December 31, 2020:


		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2021
June 30, 2021										June 30, 2021
Assets	Assets									Assets
U. S. Treasury and other U. S. government agencies	U. S. Treasury and other U. S. government agencies	$	226	$	0	$	226	$	0	U. S. Treasury and other U. S. government agencies	$	222	$	0	$	222	$	0
State and municipal	State and municipal	204,900		0		204,900		0		State and municipal	187,534		0		187,534		0
Corporate bonds	Corporate bonds	27,264		0		27,264		0		Corporate bonds	28,082		0		28,082		0
Mortgage backed securities		32,023		0		32,023		0
Asset backed securities		2,778		0		2,778		0
Mortgage-backed securities										Mortgage-backed securities	48,244		0		48,244		0
Asset-backed securities										Asset-backed securities	2,613		0		2,613		0

Liabilities	Liabilities									Liabilities
Derivative liabilities	Derivative liabilities	$	7,149	$	0	$	7,149	$	0	Derivative liabilities	$	3,589	$	0	$	3,589	$	0
December 31, 2020	December 31, 2020									December 31, 2020
Assets	Assets									Assets
U. S. Treasury and other U. S. government agencies	U. S. Treasury and other U. S. government agencies	$	48	$	0	$	48	$	0	U. S. Treasury and other U. S. government agencies	$	48	$	0	$	48	$	0
State and municipal	State and municipal	200,988		0		200,988		0		State and municipal	200,988		0		200,988		0
Corporate bonds	Corporate bonds	24,113		0		24,113		0		Corporate bonds	24,113		0		24,113		0
Mortgage backed securities		28,442		0		28,442		0
Asset backed securities		3,062		0		3,062		0
Mortgage-backed securities										Mortgage-backed securities	28,442		0		28,442		0
Asset-backed securities										Asset-backed securities	3,062		0		3,062		0

Liabilities	Liabilities									Liabilities
Derivative liabilities	Derivative liabilities	$	9,152	$	0	$	9,152	$	0	Derivative liabilities	$	9,152	$	0	$	9,152	$	0

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The following table sets forth the Company’s major categories of assets and liabilities measured at fair value on a nonrecurring basis, by level within the fair value hierarchy, as of ~~March 31,~~June 30, 2021 and December 31, 2020:

Fair Value Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Other Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
March 31, 2021
Assets
Impaired loans $ 16,861 $ 0 $ 0 $ 16,861
Other real estate 1,198 0 0 1,198
Other repossessions 1,283 0 0 1,283
December 31, 2020
Assets
Impaired loans $ 15,162 $ 0 $ 0 $ 15,162
Other real estate 1,246 0 0 1,246
Other repossessions 1,424 0 0 1,424


	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
Assets
Impaired loans	$	16,721	$	0	$	0	$	16,721
Other real estate	2,233		0		0		2,233
Other repossessions	1,161		0		0		1,161
December 31, 2020
Assets
Impaired loans	$	15,162	$	0	$	0	$	15,162
Other real estate	1,246		0		0		1,246
Other repossessions	1,424		0		0		1,424

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at ~~March 31,~~June 30, 2021 and December 31, 2020:

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.

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Carrying amounts and estimated fair values of financial instruments not reported at fair value at ~~March 31,~~June 30, 2021 and December 31, 2020 were as follows:

March 31, 2021 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 $ 13,105 $ 13,105 $ 13,105 $ 0 $ 0
Interest-bearing deposits in financial institutions 104,620 104,620 104,620 0 0
Federal funds sold 186 186 0 186 0
Loans, net 2,256,929 2,261,953 0 0 2,261,953
Mortgage loans held for sale 166,599 168,456 0 168,456 0
Accrued interest receivable 14,568 14,568 0 14,568 0
Restricted equity securities 16,146 16,146 0 16,146 0
Financial liabilities
Deposits $ 2,612,910 $ 2,615,295 $ 0 $ 0 $ 2,615,295
Accrued interest payable 3,087 3,087 0 3,087 0
Subordinate debentures 70,719 72,522 0 0 72,522
Federal Home Loan Bank advances 0 0 0 0 0


June 30, 2021	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	$	11,763	$	11,763	$	11,763	$	0	$	0
Interest-bearing deposits in financial institutions	43,676		43,676		43,676		0		0
Federal funds sold	656		656		0		656		0
Loans, net	2,300,176		2,330,188		0		0		2,330,188
Mortgage loans held for sale	229,418		231,779		0		231,779		0
Accrued interest receivable	14,492		14,492		0		14,492		0
Restricted equity securities	15,770		15,770		0		15,770		0
Financial liabilities
Deposits	$	2,629,840	$	2,631,464	$	0	$	0	$	2,631,464
Accrued interest payable	1,967		1,967		0		1,967		0
Subordinate debentures	70,770		72,650		0		0		72,650
Federal Home Loan Bank advances	16,000		16,000		0		0		16,000


December 31, 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	$	13,717	$	13,717	$	13,717	$	0	$	0
Interest-bearing deposits in financial institutions	79,756		79,756		79,756		0		0
Federal funds sold	1,572		1,572		0		1,572		0
Loans, net	2,280,147		2,293,723		0		0		2,293,723
Mortgage loans held for sale	147,524		149,342		0		149,342		0
Accrued interest receivable	14,889		14,889		0		14,889		0
Restricted equity securities	16,551		16,551		0		16,551		0
Financial liabilities
Deposits	$	2,579,235	$	2,583,525	$	0	$	0	$	2,583,525
Accrued interest payable	2,571		2,571		0		2,571		0
Subordinate debentures	70,446		71,750		0		0		71,750
Federal Home Loan Bank advances	10,000		10,000		0		0		10,000

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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,

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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 109 - 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.

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. RMV also acquires loans from approved correspondent lenders and resells 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
March 31, 2021
Commercial Banking Residential
Mortgage
Banking Elimination
Entries Consolidated
Net interest income $ 29,133 $ 893 $ 0 $ 30,026
Provision for loan losses 0 0 0 0
Noninterest income 2,409 5,033 (105) 7,337
Noninterest expense (excluding merger expense) 16,460 5,204 0 21,664
Merger expense 0 0 0 0
Income tax expense (benefit) 2,933 47 0 2,980
Net income (loss) 12,149 675 (105) 12,719
Noncontrolling interest in net income of subsidiary 0 (675) 105 (570)
Net income attributable to common shareholders $ 12,149 $ 0 $ 0 $ 12,149


	Three Months Ended June 30, 2021
	Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	$	27,440	$	1,121	$	0	$	28,561
Provision for loan losses	0		0		0		0
Noninterest income	5,335		3,251		(276)		8,310
Noninterest expense (excluding merger expense)	16,570		3,914		0		20,484
Merger expense	0		0		0		0
Income tax expense	3,160		42		0		3,202
Net income	13,045		416		(276)		13,185
Noncontrolling interest in net income of subsidiary	0		(416)		276		(140)
Net income attributable to common shareholders	$	13,045	$	0	$	0	$	13,045

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		Three Months Ended March 31, 2020									Three Months Ended June 30, 2020
		Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated			Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	Net interest income	$	16,782	$	333	$	0	$	17,115	Net interest income	$	29,420	$	536	$	0	$	29,956
Provision for loan losses	Provision for loan losses	2,900		0		0		2,900		Provision for loan losses	3,000		0		0		3,000
Noninterest income	Noninterest income	1,709		1,565		8		3,282		Noninterest income	2,174		2,240		8		4,422
Noninterest expense (excluding merger expense)	Noninterest expense (excluding merger expense)	12,461		2,951		0		15,412		Noninterest expense (excluding merger expense)	16,433		3,199		0		19,632
Merger expense	Merger expense	4,186		0		0		4,186		Merger expense	2,632		0		0		2,632
Income tax (benefit) expense	Income tax (benefit) expense	(841)		(69)		0		(910)		Income tax (benefit) expense	1,661		(27)		0		1,634
Net (loss) income	Net (loss) income	(215)		(984)		8		(1,191)		Net (loss) income	7,868		(396)		8		7,480
Noncontrolling interest in net loss of subsidiary	Noncontrolling interest in net loss of subsidiary	0		984		(8)		976		Noncontrolling interest in net loss of subsidiary	0		396		(8)		388
Net income attributable to common shareholders	Net income attributable to common shareholders	$	(215)	$	0	$	0	$	(215)	Net income attributable to common shareholders	$	7,868	$	0	$	0	$	7,868


	Six months ended June 30, 2021
	Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	$	56,573	$	2,014	$	0	$	58,587
Provision for loan losses	0		0		0		0
Noninterest income	7,744		8,284		(381)		15,647
Noninterest expense (excluding merger expense)	33,030		9,118		0		42,148
Merger expense	0		0		0		0
Income tax expense (benefit)	6,093		89		0		6,182
Net income (loss)	25,194		1,091		(381)		25,904
Noncontrolling interest in net loss of subsidiary	0		(1,091)		381		(710)
Net income attributable to common shareholders	$	25,194	$	0	$	0	$	25,194


	Six months ended June 30, 2020
	Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	$	46,202	$	869	$	0	$	47,071
Provision for loan losses	5,900		0		0		5,900
Noninterest income	3,883		3,804		17		7,704
Noninterest expense (excluding merger expense)	28,894		6,150		0		35,044
Merger expense	6,818		0		0		6,818
Income tax expense (benefit)	820		(96)		0		724
Net income (loss)	7,653		(1,381)		17		6,289
Noncontrolling interest in net loss of subsidiary	0		1,381		(17)		1,364
Net income attributable to common shareholders	$	7,653	$	0	$	0	$	7,653

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NOTE 1110 – INCOME TAXES

Income tax expense for the three and six months ended ~~March 31,~~June 30, 2021 totaled ~~$2,980,~~$3,202 and $6,182, respectively, compared to ~~a benefit of $910~~$1,634 and $724 for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. The effective tax rate for the three and six months ended ~~March 31,~~June 30, 2021 was ~~19.0%~~19.5% and 19.3%, respectively, compared to ~~43.3%~~17.9% and 10.3% for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively.

NOTE 1211 - BUSINESS COMBINATIONS

Tennessee Community Bank Holdings, Inc.

Effective January 1, 2020, Reliant Bancorp completed the acquisition of TCB Holdings pursuant to the Agreement and Plan of Merger, 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 TCB Holdings (“CBT”). On the terms and subject to the conditions set forth in the TCB Holdings Agreement, TCB Holdings merged with and into Reliant Bancorp (the “TCB Holdings Transaction”), with Reliant Bancorp 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 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), was converted into and canceled in exchange for the right to receive (i) $17.13 in cash, without interest, and (ii) 0.769 shares of the Reliant Bancorp’s common stock, par value $1.00 per share (“Reliant Bancorp Common Stock”). The aggregate consideration payable by Reliant Bancorp in respect of shares of TCB Holdings common stock as consideration for the TCB Holdings Transaction was 811,210 shares of Reliant Bancorp Common Stock and approximately $18,073 in cash. Reliant Bancorp did not issue fractional shares of Reliant Bancorp Common Stock in connection with the TCB Holdings Transaction, but paid cash in lieu of fractional shares based on 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 Common Stock outstanding immediately prior to the TCB Holdings Transaction were unaffected by the TCB Holdings Transaction.

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The following table details the financial impact of the 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

~~Table of Contents~~


Allocation of Purchase Price
Total consideration above	$	36,547
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents	11,026

Investment securities available for sale	56,336
Loans, net of unearned income	171,445

Accrued interest receivable	948
Premises and equipment	5,221

Cash surrender value of life insurance contracts	5,629
Restricted equity securities	909

Core deposit intangible	3,617
Other assets	833
Deposits	(210,538)
Deferred tax liability	(157)
Borrowings	(58)
FHLB advances	(13,102)
Other liabilities	(4,337)
Total fair value of net assets acquired	27,772
Goodwill	$	8,775

CBT was a Tennessee-based full-service community bank with operations in Ashland City, Kingston Springs, Pegram, Pleasant View, and Springfield, Tennessee. These communities lie on the northwest perimeter of Nashville, Tennessee.

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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”), 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 stock, par value $0.01 per share (the “FABK Common Stock”), other than certain excluded shares, was converted into the right to receive (i) 1.17 shares of Reliant Bancorp Common Stock and (ii) $3.00 in cash, without interest. In 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 the 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 $11.27 per share and 3,935,165 shares of FABK Common Stock outstanding on April 1, 2020, the consideration for the FABK Transaction was approximately $64,094, in the aggregate, or $16.28 per share of FABK Common Stock.

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The following table details the financial impact of the FABK 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 First Advantage Bancorp common stock outstanding as of April 1, 2020	3,935,165
Conversion of restricted stock units to shares of common stock of First Advantage Bancorp as of April 1, 2020	2,000
Total First Advantage Bancorp common stock outstanding as of April 1, 2020	3,937,165
Exchange ratio for Reliant Bancorp, Inc. common stock	1.17
Reliant Bancorp, Inc. common stock shares issued	4,606,483
Remove fractional shares	(64)
Reliant Bancorp, Inc. common stock shares issued	4,606,419
Reliant Bancorp, Inc. share price at April 1, 2020	$	11.27
Estimated value of Reliant Bancorp, Inc. shares issued	51,914
Cash settlement for Reliant Bancorp, Inc. fractional shares ($11.74 per pro rata fractional share)	1
Cash settlement for First Advantage Bancorp common stock ($3.00 per share)	11,805
Cash settlement for First Advantage Bancorp restricted stock units ($3.00 per share)	6
Cash settlement for First Advantage Bancorp's 34,800 outstanding stock options ($30.00 settlement price less weighted average exercise price of $19.44)	368
Estimated fair value of First Advantage Bancorp	$	64,094


Allocation of Purchase Price
Total consideration above	$	64,094
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents	11,159

Investment securities available for sale	35,970
Loans, net of unearned income	622,423
Mortgage loans held for sale, net	5,878

Premises and equipment	7,757
Deferred tax asset	4,937
Cash surrender value of life insurance contracts	14,776
Other real estate and repossessed assets	1,259
Core deposit intangible	2,280
Operating lease right-of-use assets	5,846
Other assets	11,624
Deposits	(608,690)
Borrowings	(35,962)
Operating lease liabilities	(6,536)
Other liabilities	(10,606)
Total fair value of net assets acquired	62,115
Goodwill	$	1,979

FAB was a Tennessee-based full-service community bank headquartered in Clarksville, Tennessee. FAB operated branch offices in Montgomery, Davidson and Williamson counties, Tennessee and operated a loan production office in Knoxville, Tennessee primarily originating manufactured housing loans.

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Supplemental Pro Forma Combined Condensed Statements of Income

Pro forma data for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 in the table below presents information as if the TCB Holdings Transaction and FABK Transaction occurred on January 1, 2020. These results combine the historical results of TCB Holdings and FABK into the Company's consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments, they are not indicative of what would have occurred had the 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 been made to eliminate the amount of TCB Holdings' or FABK's provision for credit losses for the first three and six months of 2020 that may not have been necessary had the acquired loans been recorded at fair value as of the beginning of 2020. Additionally, these financials were not adjusted for non-recurring expenses, such as merger-related charges incurred by either the Company, TCB Holdings or FABK. The Company expects to achieve operating cost savings and other business synergies as a result of the acquisitions which are also not reflected in the pro forma amounts.


		Three Months Ended				Three Months Ended				Six Months Ended
		March 31,				June 30,
		2021		2020				2021			2020		2021		2020
Revenue(1)	Revenue(1)	$	37,363	$	28,109		Revenue(1)	$	36,871		$	34,378	$	74,234	$	61,644
Net interest income	Net interest income	$	30,026	$	23,596		Net interest income	$	28,561		$	29,956	$	58,587	$	52,709
Net income attributable to common shareholders	Net income attributable to common shareholders	$	12,149	$	(3,821)		Net income attributable to common shareholders	$	13,045		$	7,868	$	25,194	$	2,963

(1) Net interest income plus noninterest income	(1) Net interest income plus noninterest income						(1) Net interest income plus noninterest income

NOTE 12 - SUBSEQUENT EVENTS

ASC 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Reliant Bancorp evaluated all events or transactions that occurred after June 30, 2021 through the date of the issued financial statements.

United Community Banks, Inc. (NASDAQGS: UCBI) (“United”) and Reliant Bancorp announced on July 14, 2021 the execution of a definitive merger agreement pursuant to which United will acquire Reliant Bancorp in an all-stock transaction with an aggregate value of approximately $517 million, or $30.58 per share of Reliant Bancorp common stock, based on United’s closing stock price of $31.07 on July 13, 2021. This agreement is subject to both regulatory and Reliant Bancorp shareholder approval.

On July 20, 2021, the board of directors of Reliant Bancorp declared a quarterly cash dividend of $0.12 per share payable on August 12, 2021 to shareholders of record as of the close of business on July 30, 2021.

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

Executive Summary

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 Reliant Bancorp's Annual Report on Form 10-K for the year ended December 31, 2020. Amounts in the narrative are shown in thousands, except for economic and demographic information, numbers of shares, per share amounts and as otherwise noted.

Critical Accounting Estimates

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and general practices within the banking industry. Within our financial statements, certain financial information contain approximate measurements of financial effects of transactions and impacts at the consolidated balance sheet dates and our results of operations for the reporting periods. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of newly issued accounting standards, are discussed in further detail in Note 1, "Summary of Significant Accounting Policies," in the notes to our consolidated financial statements in our Annual ~~report.~~Report on Form 10-K for the fiscal year ended December 31, 2020. Subsequent adoptions and changes to critical accounting policies during the ~~three~~six months ended ~~March 31,~~June 30, 2021 are further described in Note 1 within "Part 1. Financial Information - Notes to consolidated financial statements" of this report.

Non-GAAP Financial Measures

This Quarterly Report contains certain financial measures that are not measures recognized under U.S. GAAP and, therefore, are considered non-GAAP financial measures. Members of Company management use these non-GAAP financial measures in their analysis of the Company’s performance, financial condition, and efficiency of operations. Management of the Company believes that these non-GAAP financial measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods, and demonstrate the effects of significant gains and charges in the periods presented. Management of the Company also believes that investors find these non-GAAP financial measures useful as they assist investors in understanding underlying operating performance and identifying and analyzing ongoing operating trends. However, the non-GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with U.S. GAAP. Moreover, the manner in which the non-GAAP financial measures discussed herein are calculated may differ from the manner in which measures with similar names are calculated by other companies. You should understand how other companies calculate their financial measures similar to, or with names similar to, the non-GAAP financial measures we have discussed herein when comparing such non-GAAP financial measures.

The non-GAAP measures in this Quarterly Report include “adjusted net interest margin (NIM),” “adjusted net income, ~~(loss),~~” “adjusted diluted earnings ~~(loss)~~ per share (EPS),” “adjusted annualized return on average assets (ROAA),” “adjusted annualized return on average equity (ROAE),” “adjusted annualized return on average tangible common equity (ROATCE),” “adjusted pre-tax pre-provision income,” “tangible common equity to tangible assets (TCE/TA),” “tangible book value per share,” “allowance for loan losses plus unaccreted ~~purchased~~ loan purchase discounts to total loans,” “bank segment adjusted net income, ~~(loss),~~” “bank segment adjusted noninterest expense,” and “bank segment adjusted efficiency ratio.”

Executive Overview and Earnings Summary

Net income attributable to common shareholders amounted to ~~$12,149,~~$13,045, or ~~$0.73~~$0.79 per basic share, and $25,194, or $1.52 per basic share, for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to ~~a loss of $215,~~$7,868, or ~~$0.02~~$0.48 per basic share and $7,653, or $0.54 per basic share for the same periods in ~~2020.~~2020, respectively. Diluted net income attributable to common shareholders was ~~$0.73~~$0.78 and $1.50 for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to ~~a loss of $0.02~~$0.48 and $0.54 per share for the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively.

The major components contributing to the change when compared to the prior year ~~period~~periods are ~~an increase~~a decrease of ~~75.4% in net interest income~~4.7% for the three months ended ~~March 31,~~June 30, 2021 and an increase of ~~123.6%~~24.5% for the six months ended June 30, 2021 in net interest income, an increase of 87.9% and 103.1% in noninterest income for the three and six months ended ~~March 31,~~June 30, 2021, ~~and partially offset by an increase of 10.5% in noninterest expense for the three months ended March 31, 2021,~~respectively, and a decrease of ~~$2,900~~$3,000 and $5,900 in provision for loan losses for the three and six months ended ~~March 31,~~June 30, 2021, ~~compared to the same period in 2020 due to the expected impact from the economic slowdown from the COVID-19 pandemic experienced in 2020.~~respectively.

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Tax-equivalent net interest margin ~~increased~~decreased to ~~4.51%~~4.14% from 4.58% for the three months ended ~~March 31,~~June 30, 2021 compared to ~~3.60% in~~2020 and increased to 4.32% from 4.16% for the six months ended June 30, 2021 compared to the same ~~period~~periods in 2020. These and other components of earnings are discussed further below.

Selected Financial Data


(Dollar amounts in thousands, except per share amounts)	(Dollar amounts in thousands, except per share amounts)	Three months ended,		(Dollar amounts in thousands, except per share amounts)	Three months ended,						Six months ended
		March 31, 2021				March 31, 2020			June 30, 2021			June 30, 2020		June 30, 2021			June 30, 2020
Selected Statement of Income Data	Selected Statement of Income Data							Selected Statement of Income Data
Total interest income	Total interest income	$	34,382			$	23,306	Total interest income	$	35,095		$	35,915	$	69,477		$	59,221
Total interest expense	Total interest expense	4,356				6,191		Total interest expense	6,534			5,959		10,890			12,150
Net interest income	Net interest income	30,026				17,115		Net interest income	28,561			29,956		58,587			47,071
Provision for credit loss	Provision for credit loss	—				2,900		Provision for credit loss	—			3,000		—			5,900
Total noninterest income	Total noninterest income	7,337				3,282		Total noninterest income	8,310			4,422		15,647			7,704
Total noninterest expense	Total noninterest expense	21,664				19,598		Total noninterest expense	20,484			22,264		42,148			41,862
Net income before income taxes	Net income before income taxes	15,699				(2,101)		Net income before income taxes	16,387			9,114		32,086		0	7,013
Income tax expense (benefit)		2,980				(910)
Consolidated net income (loss)		12,719				(1,191)
Income tax expense								Income tax expense	3,202			1,634		6,182			724
Consolidated net income								Consolidated net income	13,185			7,480		25,904			6,289
Noncontrolling interest in net loss of subsidiary	Noncontrolling interest in net loss of subsidiary	(570)				976		Noncontrolling interest in net loss of subsidiary	(140)			388		(710)			1,364
Net income (loss) attributable to common shareholders		$	12,149			$	(215)
Net income attributable to common shareholders								Net income attributable to common shareholders	$	13,045		$	7,868	$	25,194		$	7,653
Per Common Share	Per Common Share							Per Common Share
Basic income (loss)		$	0.73			$	(0.02)
Diluted income (loss)		0.73				(0.02)
Basic net income								Basic net income	$	0.79		$	0.48	$	1.52		$	0.54
Diluted net income								Diluted net income	0.78			0.48		1.50			0.54
Adjusted diluted income (1)	Adjusted diluted income (1)	0.73				0.25		Adjusted diluted income (1)	0.78			0.60		1.50			0.90
Book value	Book value	19.92				19.53		Book value	20.77			17.77		20.77			17.77
Tangible book value(1)	Tangible book value(1)	16.00				14.44		Tangible book value(1)	16.88			13.96		16.88			13.96
Shares Outstanding	Shares Outstanding							Shares Outstanding
Basic weighted average common shares	Basic weighted average common shares	16,615,169				11,892,723		Basic weighted average common shares	16,616,888			16,496,817		16,616,034			14,196,254
Diluted weighted average common shares	Diluted weighted average common shares	16,740,303				11,892,723		Diluted weighted average common shares	16,784,744			16,529,080		16,762,647			14,241,165
Common shares outstanding at period end	Common shares outstanding at period end	16,654,415				12,014,495		Common shares outstanding at period end	16,672,511			16,631,604		16,672,511			16,631,604
Selected Balance Sheet Data	Selected Balance Sheet Data							Selected Balance Sheet Data
Loans, net of unearned income	Loans, net of unearned income	$	2,277,714			$	1,619,445	Loans, net of unearned income	$	2,321,070		$	2,317,324	$	2,321,070		$	2,317,324
Total assets	Total assets	3,057,066				2,185,793		Total assets	3,098,464			2,990,126		3,098,464			2,990,126
Customer deposits	Customer deposits	2,350,168				1,377,407		Customer deposits	2,320,054			2,177,734		2,320,054			2,177,734
Wholesale and institutional deposits	Wholesale and institutional deposits	262,742				345,450		Wholesale and institutional deposits	309,786			352,280		309,786			352,280
Total deposits	Total deposits	2,612,910				1,722,857		Total deposits	2,629,840			2,530,014		2,629,840			2,530,014
Total liabilities	Total liabilities	2,725,367				1,951,121		Total liabilities	2,752,175			2,694,583		2,752,175			2,694,583
Total shareholders' equity	Total shareholders' equity	331,699				234,672		Total shareholders' equity	346,289			295,543		346,289			295,543
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	3,057,066				2,185,793		Total liabilities and shareholders' equity	3,098,464			2,990,126		3,098,464			2,990,126
Selected Balance Sheet Data - Quarterly Averages
Selected Balance Sheet Data - Averages								Selected Balance Sheet Data - Averages
Loans held for investment	Loans held for investment	$	2,280,379			$	1,613,030	Loans held for investment	$	2,288,841		$	2,302,639	$	2,284,633		$	1,957,834
Earning assets(1)	Earning assets(1)	2,792,919				1,992,550		Earning assets(1)	2,868,803			2,735,404		2,831,071			2,363,975
Total assets	Total assets	3,013,114				2,181,809		Total assets	3,088,329			2,956,942		3,050,929			2,569,376
Interest-bearing liabilities	Interest-bearing liabilities	2,079,238				1,597,762		Interest-bearing liabilities	2,113,993			2,158,990		2,096,711			1,878,376
Total liabilities	Total liabilities	2,686,085				1,939,910		Total liabilities	2,748,825			2,667,981		2,717,628			2,303,949
Total shareholders' equity	Total shareholders' equity	327,029				241,899		Total shareholders' equity	339,504			288,961		333,301			265,427

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(Dollar amounts in thousands, except per share amounts)	(Dollar amounts in thousands, except per share amounts)	Three months ended,			(Dollar amounts in thousands, except per share amounts)	Three months ended,								Six months ended
		March 31, 2021					March 31, 2020				June 30, 2021				June 30, 2020			June 30, 2021			June 30, 2020
Selected Performance Ratios	Selected Performance Ratios									Selected Performance Ratios
Return on average assets (2)	Return on average assets (2)	1.64		%			(0.04)		%	Return on average assets (2)	1.69		%		1.07		%	1.67		%	0.60		%
Return on shareholders' equity (2)	Return on shareholders' equity (2)	15.07		%			(0.36)		%	Return on shareholders' equity (2)	15.41		%		10.95		%	15.24		%	5.80		%
Return on average tangible common equity (1) (2)	Return on average tangible common equity (1) (2)	18.84		%			(0.49)		%	Return on average tangible common equity (1) (2)	19.07		%		14.04		%	18.96		%	7.66		%
Average shareholders' equity to average assets	Average shareholders' equity to average assets	10.85		%			11.09		%	Average shareholders' equity to average assets	10.99		%		9.77		%	10.92		%	10.33		%
Net interest margin (tax-equivalent basis) (2)	Net interest margin (tax-equivalent basis) (2)	4.51		%			3.60		%	Net interest margin (tax-equivalent basis) (2)	4.14		%		4.58		%	4.32		%	4.16		%
Efficiency Ratio (tax-equivalent basis)	Efficiency Ratio (tax-equivalent basis)	56.4		%			92.9		%	Efficiency Ratio (tax-equivalent basis)	54.1		%		62.7		%	55.3		%	73.9		%
Bank Segment efficiency ratio (1)	Bank Segment efficiency ratio (1)	52.2		%			90.0		%	Bank Segment efficiency ratio (1)	50.6		%		60.3		%	51.4		%	71.3		%
Loans held for investment to deposits ratio	Loans held for investment to deposits ratio	87.20		%			94.00		%	Loans held for investment to deposits ratio	88.3		%		91.6		%	88.3		%	91.6		%
Interest Rates and Yields (2)	Interest Rates and Yields (2)									Interest Rates and Yields (2)
Yield on interest-earning assets	Yield on interest-earning assets	5.14		%			4.85		%	Yield on interest-earning assets	5.05		%		5.45		%	5.09		%	5.20		%
Yield on loans held for investment	Yield on loans held for investment	5.63		%			5.23		%	Yield on loans held for investment	5.58		%		5.98		%	5.60		%	5.67		%
Cost of interest-bearing liabilities	Cost of interest-bearing liabilities	0.85		%			1.56		%	Cost of interest-bearing liabilities	1.24		%		1.11		%	1.05		%	1.30		%
Adjust cost of interest-bearing liabilities (1)										Adjust cost of interest-bearing liabilities (1)	0.70		%		1.11		%	0.77		%	1.30		%
Cost of funds										Cost of funds	0.97		%		0.91		%	0.82		%	1.08		%
Adjusted cost of funds (1)										Adjusted cost of funds (1)	0.54		%		0.91		%	0.60		%	1.08		%
Cost of total deposits	Cost of total deposits	0.51		%			1.11		%	Cost of total deposits	0.83		%		0.79		%	0.67		%	0.93		%
Adjusted cost of total deposits (1)										Adjusted cost of total deposits (1)	0.41		%		0.79		%	0.47		%	0.93		%
Preliminary Consolidated Capital Ratios (3)	Preliminary Consolidated Capital Ratios (3)									Preliminary Consolidated Capital Ratios (3)
Tier 1 leverage	Tier 1 leverage	9.33		%			8.91		%	Tier 1 leverage	9.47		%		8.47		%	9.47		%	8.47		%
Common equity tier 1	Common equity tier 1	10.41		%			9.54		%	Common equity tier 1	10.18		%		9.25		%	10.18		%	9.25		%
Tier 1 risk-based capital	Tier 1 risk-based capital	10.88		%			10.19		%	Tier 1 risk-based capital	10.62		%		9.71		%	10.62		%	9.71		%
Total risk-based capital	Total risk-based capital	14.09		%			14.30		%	Total risk-based capital	13.62		%		12.80		%	13.62		%	12.80		%
Selected Asset Quality Measures	Selected Asset Quality Measures									Selected Asset Quality Measures

Allowance for loan losses to total loans	Allowance for loan losses to total loans	0.91		%			0.93		%	Allowance for loan losses to total loans	0.90		%		0.79		%	0.90		%	0.79		%

Allowance for loan losses and purchase loan discounts to total loans	Allowance for loan losses and purchase loan discounts to total loans	1.56		%			1.23		%	Allowance for loan losses and purchase loan discounts to total loans	1.46		%		1.73		%	1.46		%	1.73		%
Net (recoveries) charge offs	Net (recoveries) charge offs	$	(149)				$	357		Net (recoveries) charge offs	$	(109)			$	(116)		$	(258)		$	241
Net (recoveries) charge offs to average loans (2)	Net (recoveries) charge offs to average loans (2)	(0.03)		%			0.09		%	Net (recoveries) charge offs to average loans (2)	(0.02)		%		(0.02)		%	(0.02)		%	0.02		%
Total nonperforming loans held for investment (HFI)	Total nonperforming loans held for investment (HFI)	$	6,110				$	4,043		Total nonperforming loans held for investment (HFI)	$	5,355			$	7,549		$	5,355		$	7,549
Total nonperforming assets (4)	Total nonperforming assets (4)	$	9,661				$	4,043		Total nonperforming assets (4)	$	9,726			$	11,571		$	9,726		$	11,571
Nonperforming loans HFI to total loans HFI	Nonperforming loans HFI to total loans HFI	0.27		%			0.25		%	Nonperforming loans HFI to total loans HFI	0.23		%		0.33		%	0.23		%	0.33		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.32		%			0.18		%	Nonperforming assets to total assets	0.31		%		0.39		%	0.31		%	0.39		%
Nonperforming assets to total loans HFI and NPAs	Nonperforming assets to total loans HFI and NPAs	0.42		%			0.25		%	Nonperforming assets to total loans HFI and NPAs	0.42		%		0.50		%	0.42		%	0.50		%

(1) Certain measures are considered non-GAAP financial measures. See “Reconciliation of Non-GAAP Financial Measures”.

(2) Data has been annualized.

(3) Current quarter capital ratios are ~~estimated~~estimated.

(4) Nonperforming assets consist of nonperforming loans held for investment, nonperforming loans held for sale, repossessed assets, and other real estate.

Reconciliation of Non-GAAP Financial Measures

Three months ended
March 31, 2021 March 31, 2020
Adjusted net interest margin (1):
Net interest income $ 30,026 $ 17,115
Add: tax equivalent interest income 1,019 699
Less: purchase accounting adjustments (1,844) (672)
Adjusted net interest income $ 29,201 $ 17,142
Average Earning Assets $ 2,792,919 $ 1,992,550
Net interest margin-tax equivalent 4.51 % 3.60 %
Adjusted net interest margin 4.24 % 3.46 %

~~Table of~~ ~~Contents~~

Three months ended
March 31, 2021 March 31, 2020
Adjusted net income:
Net income (loss) attributable to common shareholders $ 12,149 $ (215)
Add: merger related expenses — 4,186
Less: income tax impact of merger related expenses — (1,032)
Adjusted net income $ 12,149 $ 2,939
Adjusted diluted earnings per share:
Adjusted net income $ 12,149 $ 2,939
Weighted average shares - diluted 16,740,303 11,892,723
Diluted earnings (loss) per share $ 0.73 $ (0.02)
Adjusted diluted earnings per share $ 0.73 $ 0.25
Adjusted annualized return on average assets:
Adjusted net income $ 12,149 $ 2,939
Average assets 3,013,114 2,181,809
Annualized return on average assets 1.64 % (0.04) %
Adjusted annualized return on average assets 1.64 % 0.54 %
Adjusted annualized return on average equity:
Adjusted net income $ 12,149 $ 2,939
Average total shareholders' equity 327,029 241,899
Annualized return on average equity 15.07 % (0.36) %
Adjusted annualized return on average equity 15.07 % 4.89 %
Adjusted annualized return on average tangible common equity:
Average total shareholders' equity $ 327,029 $ 241,899
Less: average intangible assets (65,531) (65,329)
Average tangible common equity $ 261,498 $ 176,570
Adjusted net income 12,149 2,939
Annualized return on average tangible common equity 18.84 % (0.49) %
Adjusted annualized return on average tangible common equity 18.84 % 6.69 %
Adjusted pre-tax pre-provision income:
Income (loss) before provision for income taxes $ 15,699 $ (2,101)
Add: merger related expenses — 4,186
Add: provision for loan losses — 2,900
Adjusted pre-tax pre-provision income $ 15,699 $ 4,985


	Three Months Ended		Six months ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Adjusted net interest margin (1):
Net interest income	$	28,561	$	29,956	$	58,587	$	47,071
Add: tax equivalent interest income	1,021		1,161		2,040		1,854
Add: swap termination fees	2,859		—		2,859		—
Less: purchase accounting adjustments	(1,839)		(5,232)		(3,683)		(5,905)
Adjusted net interest income	$	30,602	$	25,885	$	59,803	$	43,020

Table of Contents

Three months ended
March 31, 2021 March 31, 2020
Tangible common equity to tangible assets:
Tangible common equity:
Total shareholders' equity $ 331,699 $ 234,672
Less: intangible assets (65,287) (61,209)
Tangible common equity $ 266,412 $ 173,463
Tangible assets:
Total assets $ 3,057,066 $ 2,185,793
Less: intangible assets (65,287) (61,209)
Tangible assets $ 2,991,779 $ 2,124,584
Total shareholders' equity to total assets 10.85 % 10.74 %
Tangible common equity to tangible assets 8.90 % 8.16 %
Tangible book value per share:
Tangible common equity $ 266,412 $ 173,463
Total shares of common stock outstanding 16,654,415 12,014,495
Book value per common share $ 19.92 $ 19.53
Tangible book value per share $ 16.00 $ 14.44
Allowance for loan losses plus unaccreted loan purchase discounts:
Allowance for loan losses $ 20,785 $ 15,121
Unaccreted loan purchase discounts 14,833 4,771
Allowance for loan losses plus unaccreted loan purchase discounts: $ 35,618 $ 19,892
Total loans 2,277,714 1,619,445
Allowance for loan losses plus unaccreted purchased loan discounts to total loans 1.56 % 1.23 %
Allowance for loan losses to total loans 0.91 % 0.93 %
Bank segment adjusted net income:
Bank segment net income (loss) $ 12,149 $ (215)
Add: merger related expenses — 4,186
Less: income tax impact of merger related expenses — (1,032)
Bank segment adjusted net income $ 12,149 $ 2,939
Bank segment adjusted noninterest expense:
Bank segment noninterest expense $ 16,460 $ 16,647
Add: merger related expenses — (4,186)
Bank segment adjusted noninterest expense $ 16,460 $ 12,461
Bank segment adjusted efficiency ratio:
Bank segment adjusted total revenues:
Bank segment net interest income $ 29,133 $ 16,782
Add: Tax equivalent interest income 1,019 699
Add: Bank segment noninterest income 2,409 1,709
Add: (Gain) loss on sale of securities, OREO, premises and equipment (146) (23)
Bank segment adjusted total revenues $ 32,415 $ 19,167
Bank segment efficiency ratio 52.2 % 90.0 %
Bank segment adjusted efficiency ratio 50.8 % 65.0 %


	Three Months Ended			Six months ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Average Earning Assets	$	2,868,803		$	2,735,404		$	2,831,071		$	2,363,975
Net interest margin-tax equivalent	4.14		%	4.58		%	4.32		%	4.16		%
Adjusted net interest margin	4.28		%	3.81		%	4.26		%	3.66		%

Adjusted net income (2):
Net income attributable to common shareholders	$	13,045		$	7,868		$	25,194		$	7,653
Add: merger related expenses	—			2,632			—			6,818
Less: income tax impact of merger related expenses	—			(565)			—			(1,597)
Adjusted net income	$	13,045		$	9,935		$	25,194		$	12,874

Adjusted diluted earnings per share:
Adjusted net income	$	13,045		$	9,935		$	25,194		$	12,874
Weighted average shares - diluted	16,784,744			16,529,080			16,762,647			14,241,165
Diluted earnings per share	$	0.78		$	0.48		$	1.50		$	0.54
Adjusted diluted earnings per share	$	0.78		$	0.60		$	1.50		$	0.90

Adjusted annualized return on average assets:
Adjusted net income	$	13,045		$	9,935		$	25,194		$	12,874
Average assets	3,088,329			2,956,942			3,050,929			2,569,376
Annualized return on average assets	1.69		%	1.07		%	1.67		%	0.60		%
Adjusted annualized return on average assets	1.69		%	1.35		%	1.67		%	1.01		%

Adjusted annualized return on average equity:
Adjusted net income	$	13,045		$	9,935		$	25,194		$	12,874
Average total shareholders' equity	339,504			288,961			333,301			265,427
Annualized return on average equity	15.41		%	10.95		%	15.24		%	5.80		%
Adjusted annualized return on average equity	15.41		%	13.83		%	15.24		%	9.75		%

Adjusted annualized return on average tangible common equity:
Average total shareholders' equity	$	339,504		$	288,961		$	333,301		$	265,427
Less: average intangible assets	(65,088)			(63,594)			(65,308)			(64,461)
Average tangible common equity	$	274,416		$	225,367		$	267,993		$	200,966
Adjusted net income	13,045			9,935			25,194			12,874
Annualized return on average tangible common equity	19.07		%	14.04		%	18.96		%	7.66		%
Adjusted annualized return on average tangible common equity	19.07		%	17.73		%	18.96		%	12.88		%

Adjusted pre-tax pre-provision income:
Income before provision for income taxes	$	16,387		$	9,114		$	32,086		$	7,013
Add: merger related expenses	—			2,632			—			6,818
Add: provision for loan losses	—			3,000			—			5,900
Adjusted pre-tax pre-provision income	$	16,387		$	14,746		$	32,086		$	19,731

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	Three Months Ended			Six months ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Tangible common equity to tangible assets:
Tangible common equity:
Total shareholders' equity	$	346,289		$	295,543		$	346,289		$	295,543
Less: intangible assets	(64,830)			(63,351)			(64,830)			(63,351)
Tangible common equity	$	281,459		$	232,192		$	281,459		$	232,192
Tangible assets:
Total assets	$	3,098,464		$	2,990,126		$	3,098,464		$	2,990,126
Less: intangible assets	(64,830)			(63,351)			(64,830)			(63,351)
Tangible assets	$	3,033,634		$	2,926,775		$	3,033,634		$	2,926,775
Total shareholders' equity to total assets	11.18		%	9.88		%	11.18		%	9.88		%
Tangible common equity to tangible assets	9.28		%	7.93		%	9.28		%	7.93		%

Tangible book value per share:
Tangible common equity	$	281,459		$	232,192		$	281,459		$	232,192
Total shares of common stock outstanding	16,672,511			16,631,604			16,672,511			16,631,604
Book value per common share	$	20.77		$	17.77		$	20.77		$	17.77
Tangible book value per share	$	16.88		$	13.96		$	16.88		$	13.96

Allowance for loan losses plus unaccreted loan purchase discounts:
Allowance for loan losses	$	20,894		$	18,237		$	20,894		$	18,237
Unaccreted loan purchase discounts	12,980			21,939			12,980			21,939
Allowance for loan losses plus unaccreted loan purchase discounts:	$	33,874		$	40,176		$	33,874		$	40,176
Total loans	2,321,070			2,317,324			2,321,070			2,317,324
Allowance for loan losses plus unaccreted purchased loan discounts to total loans	1.46		%	1.73		%	1.46		%	1.73		%
Allowance for loan losses to total loans	0.90		%	0.79		%	0.90		%	0.79		%

Bank segment adjusted net income:
Bank segment net income	$	13,045		$	7,868		$	25,194		$	7,653
Add: merger related expenses	—			2,632			—			6,818
Less: income tax impact of merger related expenses	—			(565)			—			(1,597)
Bank segment adjusted net income	$	13,045		$	9,935		$	25,194		$	12,874

Bank segment adjusted noninterest expense:
Bank segment noninterest expense	$	16,570		$	19,065		$	33,030		$	35,712
Add: merger related expenses	—			(2,632)			—			(6,818)
Bank segment adjusted noninterest expense	$	16,570		$	16,433		$	33,030		$	28,894

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	Three Months Ended			Six months ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Bank segment adjusted efficiency ratio:
Bank segment adjusted total revenues:
Bank segment net interest income	$	27,440		$	29,420		$	56,573		$	46,202
Add: Tax equivalent interest income	1,021			1,161			2,040			1,854
Add: Bank segment noninterest income	5,335			2,174			7,744			3,883
Less: Gains on sale of securities, OREO, premises and equipment (3)	(2,922)			(338)			(3,069)			(361)
Add: Swap termination fee (3)	2,859			—			2,859			—
Bank segment adjusted total revenues	$	33,733		$	32,417		$	66,147		$	51,578
Bank segment efficiency ratio	50.6		%	60.3		%	51.4		%	71.3		%
Bank segment adjusted efficiency ratio	49.1		%	50.7		%	49.9		%	56.0		%

Adjusted cost of funds:
Adjusted interest expense:
Interest Expense	$	6,534		$	5,959		$	10,890		$	12,150
Less: Swap termination fees	(2,859)			—			(2,859)			—
Adjusted interest expense	$	3,675		$	5,959		$	8,031		$	12,150
Average funds	2,711,181			2,627,565			2,678,277			2,268,700
Cost of funds	0.97		%	0.91		%	0.82		%	1.08		%
Adjusted cost of funds	0.54		%	0.91		%	0.60		%	1.08		%

Adjusted cost of interest-bearing liabilities:
Adjusted interest expense	$	3,675		$	5,959		$	8,031		$	12,150
Average interest-bearing liabilities	2,113,993			2,158,990			2,096,711			1,878,376
Cost of interest-bearing liabilities	1.24		%	1.11		%	1.05		%	1.30		%
Adjusted cost of interest-bearing liabilities	0.70		%	1.11		%	0.77		%	1.30		%

Adjusted cost of deposits:
Adjusted deposit expense:
Deposit expense	$	5,541		$	4,829		$	8,940		$	9,666
Less: Swap termination fees	(2,859)			—			(2,859)			—
Adjusted deposit expense	$	2,682		$	4,829		$	6,081		$	9,666
Average deposits	2,617,853			2,429,818			2,592,542			2,079,863
Cost of deposits	0.83		%	0.79		%	0.67		%	0.93		%
Adjusted cost of deposits	0.41		%	0.79		%	0.47		%	0.93		%

(1) Prior calculation of this measure 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.

42(2) The swap termination fees included in the adjusted net interest income calculation in the second quarter of 2021 were done so in conjunction with securities sales thereby nullifying the effects on net income. Therefore, we have not adjusted for these transactions as adjusted net income.

~~Table~~(3) Securities sold in the second quarter of ~~Contents~~2021 were done in conjunction with the swap termination fees. Therefore, we have adjusted for both sides of this transaction.

Mergers and acquisitions

Acquisition of Tennessee Community Bank Holdings, Inc.

On January 1, 2020, Reliant Bancorp acquired Tennessee Community Bank Holdings, Inc., the parent company for Community Bank & Trust, a Tennessee state-chartered bank headquartered in Ashland City, Tennessee. Upon completion of this transaction, the Company had approximately $2.2 billion in total consolidated assets, gross loans of approximately $1.6 billion, and total deposits of approximately $1.8 billion.

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Acquisition of First Advantage Bancorp

On April 1, 2020, Reliant Bancorp acquired First Advantage Bancorp, the parent company for First Advantage Bank, a Tennessee state-chartered bank headquartered in Clarksville, Tennessee. Upon completion of this transaction, the Company had approximately $2.9 billion in total consolidated assets, gross loans of approximately $2.2 billion, and total deposits of approximately $2.3 billion.

See Note ~~12-Business~~11-Business Combinations for further information regarding our acquisition activity, assets acquired, and purchase price paid.

Coronavirus (COVID-19) Impact

During the current and prior fiscal year, the COVID-19 pandemic had a significant impact on our customers, associates, and communities, which collectively impacts our shareholders. Below is a summary of some of those impacts and our responses related to COVID-19.

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. We are encouraging virtual meetings and conference calls in place of in-person meetings. We are promoting social distancing, frequent hand washing, thorough disinfection of all surfaces, and the use of masks or nose and mouth coverings has been mandated in all of our ~~locations.~~locations as required by local ordinances. We have welcomed back customers for lobby visits ~~beginning March 29, 2021~~ after a steady decline of COVID-19 case counts and hospitalizations were reported by the Tennessee Department of Health. Banking center drive-ups, ATMs and online/mobile banking services continue to operate. Tennessee’s Governor Lee has declared that the pandemic state in Tennessee is no longer considered a health crisis, but a “managed public health issue” as businesses begin to return to normal operation and mask mandates are lifted. 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.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law in March 2020 and subsequently amended, along with subsequent regulatory guidance encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, the CARES Act further provides that a qualified loan modification is ~~except~~exempt by law from classification as a TDR as defined by U.S. GAAP beginning March 1, 2020 until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. As of ~~March 31,~~June 30, 2021, the Company had ~~$33,121~~$67,984 of loans ~~modified and a total of $597,327 loans previously deferred that returned to normal payment status.~~modified. These deferrals typically ranged from sixty to ninety days per deferral and were not considered TDRs under the interagency regulatory guidance or the CARES Act.

The Company is participating in the Paycheck Protection Program ("PPP") under the CARES Act, which is being administered by the SBA. As of ~~March 31,~~June 30, 2021 the Bank had ~~588~~84 PPP loans outstanding totaling ~~$41.9~~$14.0 million with ~~$41.5~~$69.4 million in PPP loans forgiven and repaid to date. ~~Participation in the PPP will likely have an impact on the Company's asset mix and net interest margin in 2021.~~

At ~~March 31,~~June 30, 2021, our level of nonperforming assets was ~~0.32%~~0.31% of total assets and 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.

We are in regular communication with our customers to gain a better understanding of our highest risk exposures and probable defaults. In the quarter ended ~~March 31,~~June 30, 2021 we did not increase our allowance for loan loss through a provision as loan growth was minimal during the quarter and economic factors have considerably improved, partially due to the federal stimulus programs.

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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.

As of March 31, 2021, Reliant Bancorp’s and Reliant Bank’s capital ratios were in excess of the regulatory minimum capital requirements and those required to be considered well-capitalized under applicable federal regulations. 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.

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RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

The largest component of our net income is net interest income - the difference between the income earned on loans, investment securities and other interest earning assets and interest expense on deposit accounts and other interest-bearing liabilities. Net interest income calculated on a tax-equivalent basis divided by total average interest-earning assets represents our net interest margin. The major factors that affect net interest income and net interest margin are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our margin can also be affected by economic conditions, the competitive environment, loan demand and deposit flow. Our ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and our net interest income.

The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the three months ended ~~March 31,~~June 30, 2021, and 2020 (dollars in thousands):


																			Three Months Ended June 30,										Change
		Three Months Ended March 31, 2021					Three Months Ended March 31, 2020					Change							2021					2020
		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total			Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total
Interest earning assets	Interest earning assets																	Interest earning assets
Loans (2) (3)	Loans (2) (3)	$	2,280,379	5.15	$	28,288	$	1,613,030	5.01	$	19,755	$	8,311	$	561	$	8,872	Loans (2) (3)	$	2,288,841	5.12	$	28,539	$	2,302,639	5.68	$	31,708	$	(189)	$	(3,103)	$	(3,292)
Loan fees	Loan fees	—		0.48	2,701		—		0.22	890		1,811		—		1,811		Loan fees	—		0.46	2,644		—		0.30	1,739		905		—		905
Loans with fees	Loans with fees	2,280,379		5.63	30,989		1,613,030		5.23	20,645		10,122		561		10,683		Loans with fees	2,288,841		5.58	31,183		2,302,639		5.98	33,447		716		(3,103)		(2,387)
Mortgage loans held for sale	Mortgage loans held for sale	169,747		3.18	1,331		47,685		4.72	560		884		(113)		771		Mortgage loans held for sale	232,850		3.11	1,807		85,313		3.84	815		1,115		(123)		992
Deposits with banks	Deposits with banks	61,939		0.34	52		43,583		1.14	124		108		(180)		(72)		Deposits with banks	58,619		0.36	52		66,052		0.30	50		(3)		5		2
Investment securities - taxable	Investment securities - taxable	65,499		3.78	610		74,688		2.43	451		(45)		204		159		Investment securities - taxable	73,368		3.62	663		66,234		0.78	128		15		520		535
Investment securities - tax-exempt (4)	Investment securities - tax-exempt (4)	198,034		3.24	1,225		197,241		3.56	1,371		8		(173)		(165)		Investment securities - tax-exempt (4)	197,309		3.19	1,216		193,216		3.51	1,317		36		(154)		(118)
Restricted equity securities and other	Restricted equity securities and other	17,321		4.10	175		16,323		3.82	155		9		11		20		Restricted equity securities and other	17,816		3.92	174		21,950		2.90	158		(18)		34		16
Total earning assets	Total earning assets	2,792,919		5.14	34,382		1,992,550		4.85	23,306		11,085		311		11,396		Total earning assets	2,868,803		5.05	35,095		2,735,404		5.45	35,915		1,861		(2,821)		(960)
Nonearning assets	Nonearning assets	220,195					189,259											Nonearning assets	219,526					221,538
Total assets	Total assets	$	3,013,114				$	2,181,809										Total assets	$	3,088,329				$	2,956,942
Interest bearing liabilities	Interest bearing liabilities																	Interest bearing liabilities
Interest bearing demand	Interest bearing demand	377,714		0.29	272		186,236		0.22	100		131		41		172		Interest bearing demand	412,117		0.21	216		279,092		0.31	218		(6)		4		(2)
Savings and money market	Savings and money market	901,444		0.38	839		459,756		0.90	1,030		(479)		288		(191)		Savings and money market	972,082		0.27	647		731,278		0.81	1,476		809		(1,638)		(829)
Time deposits - retail	Time deposits - retail	494,508		1.15	1,404		541,973		1.85	2,496		(205)		(887)		(1,092)		Time deposits - retail	443,512		0.94	1,042		749,566		1.19	2,217		(776)		(399)		(1,175)
Time deposits - wholesale	Time deposits - wholesale	227,513		1.58	884		229,870		2.12	1,211		(13)		(314)		(327)		Time deposits - wholesale	192,954		7.56	3,636		201,307		1.83	918		(37)		2,755		2,718
Total interest-bearing deposits	Total interest-bearing deposits	2,001,179		0.69	3,399		1,417,835		1.37	4,837		(566)		(872)		(1,438)		Total interest-bearing deposits	2,020,665		1.10	5,541		1,961,243		0.99	4,829		(9)		721		712
Federal Home Loan Bank advances and other borrowings	Federal Home Loan Bank advances and other borrowings	7,467		0.22	4		109,320		1.33	361		(188)		(169)		(357)		Federal Home Loan Bank advances and other borrowings	22,582		0.23	13		127,350		0.47	148		(83)		(52)		(135)
Subordinated debt	Subordinated debt	70,592		5.48	953		70,607		5.66	993		—		(40)		(40)		Subordinated debt	70,746		5.56	980		70,397		5.61	982		3		(5)		(2)
Total borrowed funds	Total borrowed funds	78,059		4.97	957		179,927		3.03	1,354		(189)		(208)		(397)		Total borrowed funds	93,328		4.27	993		197,747		2.30	1,130		(81)		(56)		(137)
Total interest-bearing liabilities	Total interest-bearing liabilities	2,079,238		0.85	4,356		1,597,762		1.56	6,191		(754)		(1,081)		(1,835)		Total interest-bearing liabilities	2,113,993		1.24	6,534		2,158,990		1.11	5,959		(90)		665		575
Net interest spread (5)	Net interest spread (5)			4.29	$	30,026			3.29	$	17,115	$	11,839	$	1,392	$	13,231	Net interest spread (5)			3.81	$	28,561			4.34	$	29,956	$	1,951	$	(3,486)	$	(1,535)
Noninterest bearing deposits	Noninterest bearing deposits	565,770		(0.18)			312,073		(0.26)									Noninterest bearing deposits	597,188		(0.27)			468,575		(0.20)
Other noninterest bearing liabilities	Other noninterest bearing liabilities	41,077					30,075											Other noninterest bearing liabilities	37,644					40,416
Shareholders' equity	Shareholders' equity	327,029					241,899											Shareholders' equity	339,504					288,961
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	3,013,114				$	2,181,809										Total liabilities and shareholders' equity	$	3,088,329				$	2,956,942
Cost of funds	Cost of funds			0.67					1.30									Cost of funds			0.97					0.91
Net interest margin (6)	Net interest margin (6)			4.51					3.60									Net interest margin (6)			4.14					4.58

(1) Calculated using daily averages.

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(2) Average loan balances include nonaccrual loans.

(3) Yields on loans reflects tax-exempt interest and state tax credits received on low or zero percent interest loans made to construct low income housing of $667 and $790, for the three months ended June 30, 2021 and June 30, 2020, respectively.

(4) Yields on tax-exempt securities are shown on a tax-equivalent basis.

(5) Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities.

(6) 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.

Three months ended June 30, 2021 compared to three months ended June 30, 2020

For the three months ended June 30, 2021, we recorded net interest income on a tax-equivalent basis of approximately $29,582 which resulted in a net interest margin (net interest income divided by the average balance of interest-earning assets) of 4.14% as compared to 4.58% for the three months ended June 30, 2020. This decrease was primarily due to an increase in our cost of funds due to a $2,859 swap termination fee incurred during the quarter. The adjusted net interest margin, which excludes this fee impact as well as the benefits from purchase accounting accretion, showed continued improvement as it increased 47 basis points from the prior year to 4.28%. Net income and earnings per share during the quarter were not affected by this termination fee as securities were sold for a gain of $2,966 to offset the swap termination transaction.

The components of our loan yield, a key driver to our NIM for the three months ended June 30, 2021, and June 30, 2020, were as follows:


	Three months ended June 30,
	2021				2020
	Interest Income		Average Yield		Interest Income		Average Yield
Loan yield components:
Contractual interest rate on loans held for investment (1)	$	26,707	4.68	%	$	27,468	4.80	%
Origination and other fee income (2)	2,644		0.46	%	1,739		0.30	%
Accretion on purchased loans	1,832		0.32	%	4,240		0.74	%
Loan tax credits	667		0.12	%	790		0.14	%
Tax-equivalent loan interest income	$	31,850	5.58	%	$	34,237	5.98	%

(1) Includes $58 and $148 in loan contractual interest related to PPP loans for the three months ended June 30, 2021 and June 30, 2020, respectively.

(2) Includes $729 and $284 in PPP related fees for the three months ended June 30, 2021 and June 30, 2020, respectively.

Our combined loan and loan fee yield decreased from 5.98% to 5.58% for the three months ended June 30, 2021 compared to the same period in 2020 as purchase accounting accretion decreased during the quarter. Our year-over-year average loan volume decreased by approximately 0.6% for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. However, when PPP loans are excluded, average loan volume increased by 0.9%.

Accretion on purchased loans contributed 32 basis points to the NIM for three months ended June 30, 2021 compared to the 74 basis points contributed in the comparable period in 2020, and $13.0 million of purchase accounting accretion remained as of June 30, 2021. Contractual interest and origination fees on PPP loans contributed 8 basis points to the NIM for the three months ended June 30, 2021 as fees are recognized upon forgiveness compared to decreasing NIM by 7 basis points in the comparable period in 2020 due to the low comparative loan yield driven by the increased PPP loan volume in 2020. We anticipate recognizing $184 in deferred origination fees over the remaining life of the PPP loan portfolio.

Our cost of funds increased to 0.97% from 0.91% for the three months ended June 30, 2021 compared to the same period in 2020 due to the swap termination fees realized in interest expense. Cost of funds excluding this fee decreased 37 basis points as rates continue to decline and our team continues to focus on reducing more costly time deposits and retaining lower cost customer deposits. Average retail time deposits decreased 40.8% year-over-year compared to the increase in average total deposits of 7.7%. In addition to the 4 basis point increase in cost of deposits, or 38 basis point decrease when excluding swap termination fees, cost of funds benefited from a decrease in the cost of FHLB advances of 24 basis points as the average balance decreased 82.3% as a result of the prepayments in the fourth quarter of 2020.

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The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the six months ended June 30, 2021, and 2020 (dollars in thousands):


	Six Months Ended June 30, 2021					Six Months Ended June 30, 2020					Change
	Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total
Interest earning assets
Loans (2) (3)	$	2,284,633	5.13	$	56,828	$	1,957,834	5.40	$	51,463	$	12,434	$	(6,847)	$	5,587
Loan fees	—		0.47	5,344		—		0.27	2,629		2,715		—		2,715
Loans with fees	2,284,633		5.60	62,172		1,957,834		5.67	54,092		15,149		(6,847)		8,302
Mortgage loans held for sale	201,473		3.14	3,138		66,499		4.16	1,375		2,783		(1,020)		1,763
Deposits with banks	60,270		0.34	103		54,817		0.64	174		45		(116)		(71)
Investment securities - taxable	69,455		3.70	1,273		70,461		1.65	579		(26)		720		694
Investment securities - tax-exempt (4)	197,670		3.22	2,441		195,228		3.54	2,688		117		(400)		(283)
Restricted equity securities and other	17,570		4.02	350		19,136		3.29	313		(66)		103		37
Total earning assets	2,831,071		5.09	69,477		2,363,975		5.20	59,221		18,002		(7,560)		10,442
Nonearning assets	219,858					205,401
Total assets	$	3,050,929				$	2,569,376
Interest bearing liabilities
Interest bearing demand	395,011		0.25	488		232,664		0.27	318		238		(68)		170
Savings and money market	936,958		0.32	1,486		595,517		0.85	2,506		2,535		(3,555)		(1,020)
Time deposits - retail	468,869		1.05	2,446		645,769		1.47	4,713		(1,110)		(1,157)		(2,267)
Time deposits - wholesale	210,138		4.34	4,520		215,589		1.99	2,129		(162)		2,553		2,391
Total interest-bearing deposits	2,010,976		0.90	8,940		1,689,539		1.15	9,666		1,501		(2,227)		(726)
Federal Home Loan Bank advances and other borrowings	15,066		0.23	17		118,335		0.86	509		(267)		(225)		(492)
Subordinated debt	70,669		5.52	1,933		70,502		5.63	1,975		12		(54)		(42)
Total borrowed funds	85,735		4.59	1,950		188,837		2.65	2,484		(255)		(279)		(534)
Total interest-bearing liabilities	2,096,711		1.05	10,890		1,878,376		1.30	12,150		1,246		(2,506)		(1,260)
Net interest spread (5)			4.04	$	58,587			3.90	$	47,071	$	16,756	$	(5,054)	$	11,702
Noninterest bearing deposits	581,566		(0.23)			390,324		(0.22)
Other noninterest bearing liabilities	39,351					35,249
Shareholders' equity	333,301					265,427
Total liabilities and shareholders' equity	$	3,050,929				$	2,569,376
Cost of funds			0.82					1.08
Net interest margin (6)			4.32					4.16

(1) Calculated using daily averages.

(2) Average loan balances include nonaccrual loans.

(3) Yields on loans reflects tax-exempt interest and state tax credits received on low or zero percent interest loans made to construct low income housing of ~~$661~~$1,328 and ~~$322,~~$1,106, for the ~~years~~six months ended ~~March 31,~~June 30, 2021 and ~~March 31,~~June 30, 2020, respectively.

(4) Yields on tax-exempt securities are shown on a tax-equivalent basis.

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(5) Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities.

(6) 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.

Six months ended June 30, 2021 compared to six months ended June 30, 2020

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, we recorded net interest income on a tax-equivalent basis of approximately ~~$31,045~~$60,627 which resulted in a net interest margin (net interest income divided by the average balance of interest-earning assets) of ~~4.51%~~4.32% compared to ~~3.60%~~4.16% for the ~~three~~six months ended ~~March 31,~~June 30, 2020. This increase was primarily driven by an increase in average loan balances and a decrease in the Company's use of retail time deposits which have a higher interest rate as well as an overall decline in the interest rate environment.

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The components of our loan yield, a key driver to our NIM for the ~~three~~six months ended ~~March 31,~~June 30, 2021, and ~~March 31,~~June 30, 2020, were as follows:

Three months ended March 31,
2021 2020
Interest Income Average Yield Interest Income Average Yield
Loan yield components:
Contractual interest rate on loans held for investment (1)
$ 26,489 4.71 % $ 19,233 4.80 %
Origination and other fee income (2)
2,701 0.48 % 890 0.22 %
Accretion on purchased loans 1,799 0.32 % 522 0.13 %
Loan tax credits 661 0.12 % 322 0.08 %
Tax-equivalent loan interest income $ 31,650 5.63 % $ 20,967 5.23 %


	Six months ended June 30,
	2021				2020
	Interest Income		Average Yield		Interest Income		Average Yield
Loan yield components:
Interest rate on loans held for investment (1)	$	53,197	4.69	%	$	46,701	4.80	%
Origination and other fee income (2)	5,344		0.47	%	2,629		0.27	%
Accretion on purchased loans	3,631		0.32	%	4,762		0.49	%
Loan tax credits	1,328		0.12	%	1,106		0.11	%
Tax-equivalent loan interest income	$	63,500	5.60	%	$	55,198	5.67	%

(1) Includes ~~$139~~$197 and $148 in loan contractual interest related to PPP loans for the ~~three~~six months ended ~~March 31, 2021.~~June 30, 2021 and June 30, 2020, respectively.

(2) Includes ~~$903~~$1,632 and $284 in PPP related fees for the ~~three~~six months ended ~~March 31, 2021.~~June 30, 2021 and June 30, 2020, respectively.

Our combined loan and loan fee yield increased from ~~5.23%~~5.07% to ~~5.63%~~5.16% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the same period in 2020. The effects of the declining interest rate environment were offset by the realization of additional interest income related to the FABK acquisition which occurred on April 1, 2020. Our year-over-year average loan volume increased by approximately ~~41.4%~~16.7% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the ~~three~~six months ended ~~March 31,~~June 30, 2020 and was ~~mainly~~largely driven by the FABK Transaction which made up $526.0 million of the loan balance as of March 31, 2021. Additionally, our continued focus on serving our customers led to organic growth of 8.2% year-over-year. In addition to the overall loan volume increase, the FABK acquisition resulted in the addition of the manufactured housing loan portfolio which generate higher yields when compared to other loan types and contributed to the loan yield increase.Transaction.

Accretion on purchased loans contributed 32 basis points to the NIM for ~~three~~six months ended ~~March 31,~~June 30, 2021 ~~as a result of the increased accretion included in interest income from the FABK Transaction~~ compared to the 1349 basis points contributed in the comparable period in ~~2020 which only included accretion income from the TCB Transaction.~~2020. Contractual interest and origination fees on PPP loans attributed 56 basis points to the NIM for the ~~three~~six months ended ~~March 31, 2021. We anticipate recognizing $906~~June 30, 2021 as fees are recognized upon forgiveness as compared to decreasing NIM by 3 basis points in ~~deferred origination fees over~~ the ~~remaining life of~~comparable period in 2020 due to the increased PPP loan ~~portfolio.~~volume in 2020 compared the loan yield in 2020.

Our cost of funds decreased to ~~0.67%~~0.82% from ~~1.30%~~1.08% for the ~~three~~six months ended ~~March 31,~~June 30, 2021 compared to the same period in 2020 as rates continue to decline and our team continues to focus on reducing more costly time deposits and retaining lower cost customer deposits. When excluding the swap termination fees, cost of funds decreased 48 basis points to 0.60%. Average retail time deposits decreased ~~8.8%~~27.4% year-over-year compared to the increase in average total deposits of ~~48.4%~~24.6%. ~~While the acquired FABK deposits drives a majority of this increase, organic deposits increased 22.1% year-over-year.~~ In addition to the 6026 basis point decrease in cost of deposits, or 46 basis points adjusted for swap termination fees, cost of funds benefited from a decrease in the cost of FHLB advances of ~~111~~63 basis points as the average balance decreased ~~93.2%~~87.3% as a result of the prepayments in the fourth quarter of 2020.

Provision for Loan Losses

We did not record a provision for loan losses for the three and six months ended ~~March 31,~~June 30, 2021 compared to ~~$2,900~~$3,000 and $5,900 recorded in the three and six months ended ~~March 31, 2020.~~June 30, 2020, respectively. The provision expense for the three and six months ended ~~March 31,~~June 30, 2020 can be primarily attributed to the expected downturn in the economy due to COVID-19 as well as the growth in the loan portfolio, whereas, the three months ended ~~March 31,~~June 30, 2021 experienced minimal growth in the loan portfolio. Additionally, economic outlooks have improved, in part due to the federal stimulus programs and vaccine rollouts.

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The acquired loan portfolios from First Advantage Bank and Community Bank & Trust are reserved for through fair value marks that consider both credit quality and changes in interest rates. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Allowance for Loan Losses” included herein for further analysis of the provision for loan losses.

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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 six months ended ~~March 31,~~June 30, 2021, and 2020 (dollars in thousands):


		Three Months Ended March 31,				Percent Increase		Three Months Ended June 30,						Percent Increase	Six Months Ended June 30,						Percent Increase
		2021		2020		(Decrease)				2021		2020			(Decrease)		2021		2020			(Decrease)
Non-Interest Income	Non-Interest Income								Non-Interest Income
Service charges and fees on deposits	Service charges and fees on deposits	$	1,561	$	1,208	29.2	%		Service charges and fees on deposits	$	1,656	$	1,381		19.9	%	$	3,217	$	2,589		24.3	%
Gains on mortgage loans sold, net	Gains on mortgage loans sold, net	4,928		1,573		213.3	%		Gains on mortgage loans sold, net	2,978		2,248			32.5	%	7,906		3,821			106.9	%
Securities gains, net		129		—		100.0	%
Gain (loss) on securities transactions, net									Gain (loss) on securities transactions, net	2,966		327			807.0	%	3,095		327			846.5	%

Bank-owned life insurance	Bank-owned life insurance	435		295		47.5	%		Bank-owned life insurance	556		392			41.8	%	991		687			44.3	%
Brokerage revenue	Brokerage revenue	69		32		115.6	%		Brokerage revenue	84		45			86.7	%	153		77			98.7	%
Miscellaneous noninterest income	Miscellaneous noninterest income	215		174		23.6	%		Miscellaneous noninterest income	70		29			141.4	%	311		169			84.0	%

Total noninterest income	Total noninterest income	$	7,337	$	3,282	123.6	%		Total noninterest income	$	8,310	$	4,422		87.9	%	$	15,647	$	7,704		103.1	%

The most significant reasons for the changes in total noninterest income during the three and six months ended ~~March 31,~~June 30, 2021 compared to the same ~~period~~periods in 2020 are the fluctuation in gains on mortgage loans sold, net as well as the increase in service ~~charges.~~charges and gain on securities transactions.

Service charges on deposit accounts generally reflect customer growth trends but also are impacted by changes in our fee pricing structure to help attract and retain customers. The increase in service charges and fees was driven primarily by the incremental increase in transaction volume related to our acquisitions, as well as growth in the volume of our legacy deposit accounts.

Gains on mortgage loans sold, net, consists of fees from the origination and sale of mortgage loans. All of these loan sales transfer servicing rights to the buyer. The mortgage banking business is directly impacted by the interest rate environment, increased regulations, consumer demand, and economic conditions. Mortgage production, especially refinance activity, typically rises in declining interest rate environments. Mortgage loans originated or purchased through correspondents for resale totaled ~~$311,296~~$282,505 and $593,801 in three and six months ended ~~March 31,~~June 30, 2021, respectively, as compared to ~~$89,076~~$95,070 and $184,146 in the same ~~period~~periods in 2020 as a result of the productive market conditions produced by the low interest rate environment.

Securities gains and losses often fluctuate from period to period and can sometimes be attributable to various balance sheet risk strategies. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company sold securities totaling ~~$1,795~~$35,751 with a gain of ~~$129.~~$3,095. Of this gain, $2,859 was realized to offset the effects of the swap termination fees incurred in the second quarter. During the ~~three~~six months ended ~~March 31,~~June 30, 2020, the Company sold securities classified as available for sale which were acquired in the TCB Holdings transaction totaling ~~$56,336.~~$103,668. No gain was recognized as the securities were sold at the fair value for which they were acquired.

Noninterest income also includes income from bank-owned life insurance (“BOLI”), which increased during the three and six months ended ~~March 31,~~June 30, 2021 when compared to the the same period in 2020, driven by the additional policies acquired from the FABK and TCB Holdings transactions as well as additional policies purchased in 2020. The assets that support these policies are administered by the life insurance carriers and the income we receive (i.e., increases or decreases in the cash surrender value of the policies) is dependent upon the returns the insurance carriers are able to earn on the underlying investments that support the policies. Earnings on these policies generally are not taxable.

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Noninterest Expense

The following is a summary of our noninterest expense for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 (dollars in thousands):

Three Months Ended March 31, Percent
Increase
2021 2020 (Decrease)
Non-Interest Expense
Salaries and employee benefits $ 13,352 $ 9,237 44.5 %
Occupancy 2,008 1,486 35.1 %
Data processing and software 2,229 1,819 22.5 %
Professional fees 1,243 478 160.0 %
Regulatory fees 361 454 (20.5) %
Merger expenses — 4,186 (100.0) %
Other operating expense 2,471 1,938 27.5 %
Total noninterest expense $ 21,664 $ 19,598 10.5 %


	Three Months Ended June 30,				Percent Increase		Six Months Ended June 30,				Percent Increase
	2021		2020		(Decrease)		2021		2020		(Decrease)
Non-Interest Expense
Salaries and employee benefits	$	12,793	$	12,464	2.6	%	$	26,145	$	21,701	20.5	%
Occupancy	1,999		2,026		(1.3)	%	4,007		3,512		14.1	%
Data processing and software	2,262		2,026		11.6	%	4,491		3,845		16.8	%
Professional fees	358		680		(47.4)	%	1,601		1,158		38.3	%
Regulatory fees	343		537		(36.1)	%	704		991		(29.0)	%
Merger expenses	—		2,632		(100.0)	%	—		6,818		(100.0)	%
Other operating expense	2,729		1,899		43.7	%	5,200		3,837		35.5	%
Total noninterest expense	$	20,484	$	22,264	(8.0)	%	$	42,148	$	41,862	0.7	%

Noninterest expense ~~increased~~decreased during the three months ended ~~March 31,~~June 30, 2021 when compared to ~~March 31,~~June 30, 2020 which is primarily driven by the merger expenses incurred in 2020 and offset by the incremental costs incurred following the TCB Holdings and FABK transactions. Noninterest expense increased during the six months ended June 30, 2021 when compared to June 30, 2020 which is primarily driven by the incremental costs incurred following the TCB Holdings and FABK transactions offset by the merger expenses incurred in 2020. ~~While we continue to pursue strategic acquisition activities, we are not currently anticipating any merger expenses in 2021.~~

The ~~44.5%~~2.6% and 20.5% increase in salaries and employee benefits during the three and six months ended June 30, 2021, respectively, when compared to June 30, 2020 is primarily attributable to the increase in employees from the FABK transaction as well as our year-over-year growth. While staffing levels have normalized, we experienced an overall increase in average FTEs from ~~321 at March 31,~~369 for the three months ended June 30, 2020 to ~~425 at March 31,~~423 for the three months ended June 30, 2021, or 359 for the six months ended June 30, 2020 to 424 for the six months ended June 30, 2021.

Occupancy costs ~~increased~~decreased by ~~$522~~$27 or ~~35.1%~~1.3% during the three months ended ~~March 31,~~June 30, 2021 and increased $495, or 14.1% during the six months ended June 30, 2021 compared to the same ~~period~~periods in 2020 ~~mainly due to~~as the FABK Transaction ~~as well as~~and the expansion of ~~RMV. The Board has approved a~~RMV increased costs in 2020 and is offset by the branch justification project that has resulted in the announced closure of one branch and the intent to close two additional branches later in 2021.

Data processing and software expense increased ~~from March 31,~~during the three and six months ended June 30, 2020 to ~~March 31,~~June 30, 2021 and is mainly attributable 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 FABK Transaction and the expansion of RMV.

Professional fees increased by $765 or 160.0%, when comparing the three months ended March 31, 2021 to the same period in 2020 primarily driven by the settlement of lawsuits occurring at RMV regarding activities under previous RMV management.

Efficiency ratio

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. For an adjusted efficiency ratio, we exclude certain gains, losses and expenses we do not consider core to our business.

Our efficiency ratio of our banking segment was ~~52.2%~~50.6% and ~~90.0%~~51.4% for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to 60.3% and ~~2020, respectively.~~71.3% for the same periods in 2020. Our adjusted efficiency ratio, on a tax-equivalent basis, was ~~50.8%~~49.1% and ~~65.0%~~49.9% for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to 50.7% and ~~2020, respectively.~~56.0% for the same periods in 2020. See “Reconciliation of Non-GAAP Financial Measures” in this Quarterly Report for the reconciliation of the adjusted efficiency ratio.

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Income Taxes

During the three and six months ended ~~March 31,~~June 30, 2021 we recorded consolidated income tax expense of ~~$2,980~~$3,202 and $6,182, respectively, as compared to ~~a recorded benefit of $910~~$1,634 and $724 for the same ~~period~~periods in 2020. This represents consolidated effective tax rates for the three and six month ended June 30, 2021 of ~~19.0%~~19.5% and ~~43.3%~~17.9%, ~~respectively.~~respectively, compared to 19.3% and 10.3% for the same periods in 2020. When evaluating the bank segment alone, this ratio was 19.5% for both the three and six months ended ~~March 31,~~June 30, 2021, respectively, as

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compared to ~~79.6%~~17.4% and 9.7% for the same period in 2020. ~~This decrease is primarily due to the nondeductible merger expenses in the first quarter of 2020 when compared to 2021.~~

Non-controlling Interest in Operating Results of Subsidiary

Our non-controlling interest in operating results of subsidiary is solely attributable to 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 cash flow distributions of RMV and the Bank receives 30% of any cash flow distributions, after the non-controlling member recovers its aggregate capital contributions. The non-controlling member is required to fund RMV's losses, in arrears, via additional capital contributions. RMV had a net income of ~~$570~~$140 and $710 for the three and six months ended ~~March 31,~~June 30, 2021, respectively, compared to a net loss of ~~$976~~$388 and $1,364 for the same ~~period~~periods in 2020. The improvements in operating results is mainly attributable to the productive market conditions produced by the low interest rate environment. Also, see Note 109 to our consolidated financial statements for segment reporting.

FINANCIAL CONDITION

Overview

The Company’s total assets were ~~$3,057,066~~$3,098,464 at ~~March 31,~~June 30, 2021 and $3,026,535 at December 31, 2020, an increase of ~~1.0%~~2.4%. Total liabilities were ~~$2,725,367~~$2,752,175 at ~~March 31,~~June 30, 2021 and $2,704,562 at December 31, 2020, an increase of ~~0.8%~~1.8%. The increase in liabilities was substantially attributable to the increase in deposits of ~~$33,675,~~$50,605, or ~~1.3%, and offset by a decrease in FHLB advances of $10,000 during the period.~~2.0%. 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. The competition for quality loans in our markets has remained strong. Our goal is to steadily grow our loan portfolio, focusing on quality. This is not always possible for various reasons, including but not limited to scheduled maturities or early payoffs exceeding new loan volume, as well as economic conditions. Early payoffs typically increase in falling rate environments as customers identify advantageous opportunities for refinancing. We have been adding experienced lending officers to our staff to help with loan growth. Total loans, net of allowance for loan losses, at ~~March 31,~~June 30, 2021, and December 31, 2020, were ~~$2,256,929~~$2,300,176 and $2,280,147, respectively, representing ~~a decrease~~an increase of ~~1.0%.~~0.9%, or 3.2% when PPP loans are excluded.

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


		March 31, 2021				December 31, 2020					June 30, 2021				December 31, 2020
		Amount		Percent		Amount		Percent			Amount		Percent		Amount		Percent
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	430,373	18.9	%	$	459,739	19.9	%	Commercial, Industrial and Agricultural	$	435,093	18.7	%	$	459,739	19.9	%
Real estate:	Real estate:									Real estate:
1-4 Family Residential	1-4 Family Residential	322,170		14.1	%	323,473		14.0	%	1-4 Family Residential	326,768		14.1	%	323,473		14.0	%
1-4 Family HELOC	1-4 Family HELOC	100,056		4.4	%	100,525		4.4	%	1-4 Family HELOC	100,614		4.3	%	100,525		4.4	%
Multifamily and Commercial	Multifamily and Commercial	831,242		36.4	%	834,000		36.2	%	Multifamily and Commercial	831,093		35.8	%	834,000		36.2	%
Construction, Land Development and Farmland	Construction, Land Development and Farmland	372,950		16.3	%	365,058		15.8	%	Construction, Land Development and Farmland	397,557		17.1	%	365,058		15.8	%
Consumer	Consumer	216,034		9.5	%	213,863		9.3	%	Consumer	225,433		9.7	%	213,863		9.3	%
Other	Other	8,560		0.4	%	8,669		0.4	%	Other	7,614		0.3	%	8,669		0.4	%
		2,281,385		100.0	%	2,305,327		100.0	%		2,324,172		100.0	%	2,305,327		100.0	%
Less:	Less:									Less:
Deferred loan fees	Deferred loan fees	3,671				4,544				Deferred loan fees	3,102				4,544
Allowance for loan losses	Allowance for loan losses	20,785				20,636				Allowance for loan losses	20,894				20,636
Loans, net	Loans, net	$	2,256,929			$	2,280,147			Loans, net	$	2,300,176			$	2,280,147

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The table below provides a summary of PCI loans as of ~~March 31,~~June 30, 2021 and December 31, 2020:


		March 31, 2021		December 31, 2020			June 30, 2021		December 31, 2020

Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	899	$	919	Commercial, Industrial and Agricultural	$	889	$	919
Real estate:	Real estate:					Real estate:
1-4 Family Residential	1-4 Family Residential	905		1,004		1-4 Family Residential	885		1,004
1-4 Family HELOC	1-4 Family HELOC	19		19		1-4 Family HELOC	19		19
Multifamily and Commercial	Multifamily and Commercial	1,261		1,325		Multifamily and Commercial	1,218		1,325
Construction, Land Development and Farmland	Construction, Land Development and Farmland	954		992		Construction, Land Development and Farmland	944		992
Consumer	Consumer	1,732		1,924		Consumer	1,552		1,924

Total gross PCI loans	Total gross PCI loans	5,770		6,183		Total gross PCI loans	5,507		6,183
Less:	Less:					Less:
Remaining purchase discount	Remaining purchase discount	2,545		2,596		Remaining purchase discount	2,529		2,596
Allowance for loan losses	Allowance for loan losses	—		—		Allowance for loan losses	—		—
Loans, net	Loans, net	$	3,225	$	3,587	Loans, net	$	2,978	$	3,587

Commercial, industrial and agricultural loans above consist solely of loans made to U.S.-domiciled customers. These include loans for use in normal business operations to finance working capital needs, equipment purchases, or other expansionary projects. Commercial, industrial, and agricultural loans were ~~$430,373~~$435,093 at ~~March 31,~~June 30, 2021 and decreased by ~~6.4%~~5.4% compared to $459,739 at December 31, 2020 which was largely driven by PPP loan forgiveness.

Real estate loans comprised ~~71.2%~~71.3% of the loan portfolio at ~~March 31,~~June 30, 2021. Residential loans included in this category consist mainly of closed-end loans secured by first and second liens that are not held for sale and revolving, open-end loans secured by 1-4 family residential properties extended under home equity lines of credit. The Company ~~decreased~~increased the residential portfolio ~~0.4%~~0.8% from December 31, 2020 to ~~March 31,~~June 30, 2021. Multi-family and commercial loans included in the real estate category above include (in typical order of prominence) loans secured by non-owner-occupied commercial real estate properties, and loans secured by multi-family residential properties. Multi-family and commercial real estate loans were ~~$831,242~~$831,093 at ~~March 31,~~June 30, 2021 and decreased 0.3% compared to the $834,000 held as of December 31, 2020. Real estate construction loans consist of 1-4 family residential construction loans, other construction loans, land loans, and loans secured by farmland. Construction lending has continued to increase based on a strong local 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 an increase from

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December 31, 2020, to ~~March 31,~~June 30, 2021, of ~~1.0%~~5.4% primarily due to the ~~$4,716~~$14,759 increase in loans to finance manufactured homes that are not secured by real estate.

Other loans consist mainly of loans to states and political subdivisions and loans to other depository institutions and experienced a decrease of ~~1.3%~~12.2% from December 31, 2020 to ~~March 31,~~June 30, 2021 due to loan payments.

The repayment of loans is a source of additional liquidity. The following table sets forth the loans repricing or maturing within specific intervals at ~~March 31,~~June 30, 2021, excluding unearned net fees and costs.


		One Year or Less		One to Five Years		Over Five Years		Total			One Year or Less		One to Five Years		Over Five Years		Total
Gross loans	Gross loans	$	632,171	$	1,091,418	$	557,796	$	2,281,385	Gross loans	$	701,267	$	1,275,256	$	347,649	$	2,324,172
Fixed interest rate	Fixed interest rate							$	1,273,607	Fixed interest rate							$	1,224,723
Variable interest rate	Variable interest rate							1,007,778		Variable interest rate							1,099,449
Total	Total							$	2,281,385	Total							$	2,324,172

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.

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Allowance for Loan Losses

At ~~March 31,~~June 30, 2021, the allowance for loan losses was ~~$20,785~~$20,894 compared to $20,636 at December 31, 2020. The allowance for loan losses as a percentage of total loans was ~~0.91%~~0.90% at ~~March 31,~~June 30, 2021 compared to 0.90% at December 31, 2020.

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

Analysis of Changes in Allowance for Loan Losses


		March 31, 2021			March 31, 2020				June 30, 2021			June 30, 2020
Beginning Balance, January 1, 2021 and 2020, respectively	Beginning Balance, January 1, 2021 and 2020, respectively	$	20,636		$	12,578		Beginning Balance, January 1, 2021 and 2020, respectively	$	20,636		$	12,578
Loans charged off:	Loans charged off:							Loans charged off:
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	(32)			(294)			Commercial, Industrial and Agricultural	(32)			(539)
Real estate:	Real estate:							Real estate:
1-4 Family Residential	1-4 Family Residential	(7)			—			1-4 Family Residential	(21)			(60)
1-4 Family HELOC	1-4 Family HELOC	—			—			1-4 Family HELOC	—			(98)
Multifamily and Commercial	Multifamily and Commercial	—			—			Multifamily and Commercial	—			—
Construction, Land Development and Farmland	Construction, Land Development and Farmland	—			(114)			Construction, Land Development and Farmland	—			(114)
Consumer	Consumer	(259)			(31)			Consumer	(454)			(295)
Other	Other	—			—			Other	—			—
Total loans charged off	Total loans charged off	(298)			(439)			Total loans charged off	(507)			(1,106)
Recoveries on loans previously charged off:	Recoveries on loans previously charged off:							Recoveries on loans previously charged off:
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	251			61			Commercial, Industrial and Agricultural	301			70
Real estate:	Real estate:							Real estate:
1-4 Family Residential	1-4 Family Residential	82			11			1-4 Family Residential	96			747
1-4 Family HELOC	1-4 Family HELOC	2			1			1-4 Family HELOC	5			3
Multifamily and Commercial	Multifamily and Commercial	9			3			Multifamily and Commercial	215			11
Construction, Land Development and Farmland	Construction, Land Development and Farmland	85			—			Construction, Land Development and Farmland	91			4
Consumer	Consumer	18			6			Consumer	57			30
Other	Other	—			—			Other	—			—
Total loan recoveries	Total loan recoveries	447			82			Total loan recoveries	765			865
Net (charge-offs) recoveries		149			(357)
Net recoveries (charge-offs)								Net recoveries (charge-offs)	258			(241)
Provision for loan losses	Provision for loan losses	—			2,900			Provision for loan losses	—			5,900
Total allowance for loan losses at end of period	Total allowance for loan losses at end of period	$	20,785		$	15,121		Total allowance for loan losses at end of period	$	20,894		$	18,237
Allowance for loan losses to total loans, net	Allowance for loan losses to total loans, net	0.91		%	0.93		%	Allowance for loan losses to total loans, net	0.90		%	0.79		%
Net charge-offs (recoveries) to average loans outstanding		(0.03)		%	0.09		%
Net (recoveries) charge-offs to average loans outstanding								Net (recoveries) charge-offs to average loans outstanding	(0.02)		%	0.02		%

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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.


		March 31, 2021						March 31, 2020							June 30, 2021						December 31, 2020
		Amount		% of Allowance to Allowance		% of Loan Type to Total Loans		Amount		% of Allowance to Allowance		% of Loan Type to Total Loans			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	Commercial, Industrial and Agricultural	$	6,072	29.2	%	18.9	%	$	3,851	25.5	%	17.4	%	Commercial, Industrial and Agricultural	$	6,614	31.7	%	18.7	%	$	5,441	26.4	%	19.9	%
Real estate:	Real estate:													Real estate:
1-4 Family Residential	1-4 Family Residential	2,438		11.7	%	14.1	%	1,488		9.8	%	16.2	%	1-4 Family Residential	1,923		9.2	%	14.1	%	2,445		11.8	%	14.0	%
1-4 Family HELOC	1-4 Family HELOC	1,110		5.3	%	4.4	%	873		5.8	%	6.1	%	1-4 Family HELOC	610		2.9	%	4.3	%	1,416		6.9	%	4.4	%
Multifamily and Commercial	Multifamily and Commercial	8,065		38.8	%	36.4	%	6,760		44.7	%	39.2	%	Multifamily and Commercial	8,498		40.7	%	35.8	%	8,535		41.4	%	36.2	%
Construction, Land Development and Farmland	Construction, Land Development and Farmland	1,905		9.2	%	16.3	%	1,836		12.1	%	19.1	%	Construction, Land Development and Farmland	2,011		9.6	%	17.1	%	1,841		8.9	%	15.8	%
Consumer	Consumer	1,163		5.6	%	9.5	%	298		2.0	%	1.5	%	Consumer	1,222		5.8	%	9.7	%	928		4.5	%	9.3	%
Other	Other	32		0.2	%	0.4	%	15		0.1	%	0.5	%	Other	16		0.1	%	0.3	%	30		0.1	%	0.4	%
		$	20,785	100.0	%	100.0	%	$	15,121	100.0	%	100.0	%		$	20,894	100.0	%	100.0	%	$	20,636	100.0	%	100.0	%

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Nonperforming Assets

Nonperforming assets consists of nonperforming loans plus real estate acquired through foreclosure or deed in lieu of foreclosure and other repossessed collateral as well as banking facilities taken out of service. Nonperforming loans by definition consists 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.


		March 31, 2021			December 31, 2020				June 30, 2021			December 31, 2020

Total nonperforming loans	Total nonperforming loans	$	6,110		$	5,987		Total nonperforming loans	$	5,355		$	5,987
Foreclosed real estate ("OREO")	Foreclosed real estate ("OREO")	1,198			1,246			Foreclosed real estate ("OREO")	2,233			1,246
Repossessed collateral	Repossessed collateral	1,283			1,424			Repossessed collateral	1,161			1,424
Mortgage Loans HFS	Mortgage Loans HFS	1,070			630			Mortgage Loans HFS	977			630
Total nonperforming assets	Total nonperforming assets	$	9,661		$	9,287		Total nonperforming assets	$	9,726		$	9,287
Total nonperforming loans HFI as a percentage of total loans HFI	Total nonperforming loans HFI as a percentage of total loans HFI	0.27		%	0.26		%	Total nonperforming loans HFI as a percentage of total loans HFI	0.23		%	0.26		%
Total nonperforming assets as a percentage of total assets	Total nonperforming assets as a percentage of total assets	0.32		%	0.31		%	Total nonperforming assets as a percentage of total assets	0.31		%	0.31		%
Allowance for loan losses as a percentage of nonperforming loans HFI	Allowance for loan losses as a percentage of nonperforming loans HFI	340.18		%	344.68		%	Allowance for loan losses as a percentage of nonperforming loans HFI	390.18		%	344.68		%
Troubled Debt Restructurings ("TDRs")	Troubled Debt Restructurings ("TDRs")	$	3,938		$	4,236		Troubled Debt Restructurings ("TDRs")	$	3,490		$	4,236
TDRs as a percentage of total loans	TDRs as a percentage of total loans	0.17		%	0.18		%	TDRs as a percentage of total loans	0.15		%	0.18		%

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 investment 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 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.

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Securities totaled ~~$267,191~~$266,695 at ~~March 31,~~June 30, 2021, in comparison to the $256,653 in securities balances at December 31, 2020. This increase can largely be attributed to the Company's investment in state and municipal bonds and mortgage backed securities during the period of ~~$17,199.~~$48,070. Activity during the ~~three~~six months ended ~~March 31,~~June 30, 2021 includes the sale of ~~$1,795~~$35,751 of securities as well as ~~$1,570~~$1,779 of principal paydowns, calls, and maturities.

Restricted equity securities totaled ~~$16,146~~$15,770 and $16,551 at ~~March 31,~~June 30, 2021, and December 31, 2020, 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:


		March 31, 2021					December 31, 2020						June 30, 2021					December 31, 2020
		Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total			Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total
U.S. Treasury and other U.S. government agencies	U.S. Treasury and other U.S. government agencies	$	225	226	0.08	%	$	47	48	0.02	%	U.S. Treasury and other U.S. government agencies	$	222	222	0.08	%	$	47	48	0.02	%
State and municipal bonds	State and municipal bonds	190,980		204,900	76.69	%	184,102		200,988	78.31	%	State and municipal bonds	174,093		187,534	70.32	%	184,102		200,988	78.31	%
Corporate bonds	Corporate bonds	27,000		27,264	10.20	%	23,750		24,113	9.40	%	Corporate bonds	27,000		28,082	10.53	%	23,750		24,113	9.40	%
Mortgage-backed securities	Mortgage-backed securities	31,607		32,023	11.99	%	28,084		28,442	11.08	%	Mortgage-backed securities	47,908		48,244	18.09	%	28,084		28,442	11.08	%
Asset-backed securities	Asset-backed securities	2,802		2,778	1.04	%	3,083		3,062	1.19	%	Asset-backed securities	2,634		2,613	0.98	%	3,083		3,062	1.19	%

Total	Total	$	252,614	267,191	100.00	%	$	239,066	256,653	100.00	%	Total	$	251,857	266,695	100.00	%	$	239,066	256,653	100.00	%

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The table below summarizes the contractual maturities of securities at ~~March 31,~~June 30, 2021:

Amortized
Cost Estimated
Fair Value
Due within one year $ 225 $ 226
Due in one to five years 2,085 2,089
Due in five to ten years 33,886 35,028
Due after ten years 182,009 195,047
Mortgage-backed securities 31,607 32,023
Asset-backed securities 2,802 2,778
Total $ 252,614 $ 267,191


	Amortized Cost		Estimated Fair Value
Due within one year	$	222	$	223
Due in one to five years	2,085		2,129
Due in five to ten years	33,773		35,729
Due after ten years	165,235		177,757
Mortgage-backed securities	47,908		48,244
Asset-backed securities	2,634		2,613
Total	$	251,857	$	266,695

Premises and Equipment

Premises and equipment, net, totaled ~~$30,879~~$29,183 at ~~March 31,~~June 30, 2021 compared to $31,462 at December 31, 2020, a net decrease of ~~$583,~~$2,279, or ~~1.9%~~7.2%. Premises and equipment purchases amounted to approximately ~~$217~~$261 during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and were mainly incurred for additional leasehold improvements and equipment for our branches and mortgage locations while depreciation expense amounted to ~~$741.~~$1,455. Retired bank facilities of $990 were transferred to other real estate owned during the second quarter of 2021.

Deposits

Deposits represent the Company’s largest source of funds. The Company competes with other banks 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 interest 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 ~~March 31,~~June 30, 2021, total deposits were ~~$2,612,910,~~$2,629,840, an increase of ~~$33,675,~~$50,605, or ~~1.3%~~2.0%, compared to $2,579,235 at December 31, 2020. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, noninterest bearing demand deposits increased by ~~$3,475,~~$27,266, interest-bearing demand deposits increased by ~~$46,655,~~$90,769, savings and money market deposits increased by ~~$93,420,~~$146,192, and time deposits decreased by ~~$109,875.~~$213,622. Our team continues to focus on retaining low cost customer deposits while decreasing higher cost time deposits.

The following table sets forth the distribution by type of our deposit accounts as well as year-to-date average rates for the dates indicated:


	June 30, 2021						December 31, 2020
	Ending Balance		% of Total Deposits		Average Rate		Ending Balance		% of Total Deposits		Average Rate
Noninterest-bearing demand	$	602,555	22.9	%	—	%	$	575,289	22.3	%	—	%
Interest bearing demand	441,161		16.8	%	0.25	%	$	350,392	13.6	%	0.30	%
Savings and money market	1,003,402		38.2	%	0.32	%	$	857,210	33.2	%	0.67	%
Time deposits - retail	445,432		16.9	%	1.05	%	527,985		20.5	%	1.19	%
Time deposits - wholesale	137,290		5.2	%	4.34	%	268,359		10.4	%	1.77	%
Total deposits	$	2,629,840	100.00	%	0.67	%	$	2,579,235	100.00	%	0.73	%

Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of Operations" discussion.

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The following table shows maturity or repricing of time deposits of $250 or more by category based on time remaining until maturity at ~~March 31, 2021.~~

June 30, 2021:


	~~March 31,~~June 30, 2021
Twelve months or less	$	~~136,406~~127,701
Over twelve months through three years	~~19,145~~21,306
Over three years	~~4,396~~3,345
Total	$	~~159,947~~152,352

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

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	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	-200 bp	(3.9)%	(15)%	(7.2)%	(15)%	-200 bp	(4.0)%	(15)%	(7.4)%	(15)%
-100 bp	-100 bp	(2.3)%	(10)%	(4.7)%	(10)%	-100 bp	(2.7)%	(10)%	(5.3)%	(10)%
+100 bp	+100 bp	2.2%	(10)%	5.1%	(10)%	+100 bp	2.3%	(10)%	4.9%	(10)%
+200 bp	+200 bp	5.1%	(15)%	10.3%	(15)%	+200 bp	5.1%	(15)%	9.6%	(15)%
+300 bp	+300 bp	8.5%	(20)%	15.8%	(20)%	+300 bp	8.3%	(20)%	14.7%	(20)%
+400 bp	+400 bp	11.8%	(25)%	21.3%	(25)%	+400 bp	11.5%	(25)%	19.8%	(25)%

We were in compliance with our earnings simulation model policies as of ~~March 31,~~June 30, 2021, 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.

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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
±100bp						15%
±200 bp						25%
±300 bp						30%
±400 bp						35%
Non-parallel shifts						35%

At ~~March 31,~~June 30, 2021, 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 ~~March 31,~~June 30, 2021, FHLB advances totaled $0$16,000 compared to $10,000 as of December 31, 2020.

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-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 ~~March 31,~~June 30, 2021, Reliant Bancorp was current on all interest payments due related to its subordinated debentures. Reliant Bancorp has the right to defer the payment of interest on the subordinated debentures at any time, for a period not to exceed 20 consecutive quarters. During the period in which it is deferring the payment of interest on its

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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

Shareholders’ equity was ~~$331,699~~$346,289 at ~~March 31,~~June 30, 2021, an increase of ~~$9,726,~~$24,316, or ~~3.0%~~7.6%, from $321,973 at December 31, 2020, mainly due to ~~current quarter~~ net ~~income.~~income and other comprehensive income of $2,078. This increase was primarily offset by dividends declared of ~~$2,015, and other comprehensive loss of $744.~~$4,034. Contributions from the noncontrolling interest of ~~$570~~$710 were recognized in the ~~three~~six months ended ~~March 31,~~June 30, 2021. The increase in shareholders' equity mitigated by the growth in the Bank's assets led to an increase in the Bank’s ~~March 31,~~June 30, 2021 Tier 1 leverage ratio to ~~11.06%~~11.14% compared with 10.64% at December 31, 2020. See other ratios discussed further below. Additionally, the subordinated debentures qualified as Tier 1 and Total risk-based capital for the Company due to asset size at the time of issuance.

On 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) depository shares, (v) warrants, (vi) units, (vii) purchase contracts, and (viii) rights, up to a maximum aggregate offering price of $100,000. The net proceeds from any offering will be used for general corporate purposes including repayment of debt or payment of interest thereon, capital expenditures, acquisitions, investments, and any other 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 applicable 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 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 ~~March 31,~~June 30, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since these notifications that management believes have changed the institution’s category. Actual and required capital amounts and ratios are presented below as of ~~March 31,~~June 30, 2021 and December 31, 2020 for Reliant Bancorp and the Bank.

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		Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions					Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2021
June 30, 2021														June 30, 2021
Company	Company													Company
Tier I leverage	Tier I leverage	$	273,173	9.33	%	$	117,116	4.00	%	$	146,395	5.00	%	Tier I leverage	$	285,363	9.47	%	$	120,533	4.00	%	$	150,667	5.00	%
Common equity Tier 1	Common equity Tier 1	261,384		10.41	%	175,763		7.00	%	163,208		6.50	%	Common equity Tier 1	273,553		10.18	%	188,101		7.00	%	174,665		6.50	%
Tier I risk-based capital	Tier I risk-based capital	273,173		10.88	%	213,416		8.50	%	200,863		8.00	%	Tier I risk-based capital	285,363		10.62	%	228,398		8.50	%	214,963		8.00	%
Total risk-based capital	Total risk-based capital	353,538		14.09	%	263,460		10.50	%	250,914		10.00	%	Total risk-based capital	365,942		13.62	%	282,114		10.50	%	268,680		10.00	%
Bank	Bank													Bank
Tier I leverage	Tier I leverage	$	324,052	11.06	%	$	117,198	4.00	%	$	146,497	5.00	%	Tier I leverage	$	334,911	11.14	%	$	120,255	4.00	%	$	150,319	5.00	%
Common equity Tier 1	Common equity Tier 1	324,052		12.93	%	175,434		7.00	%	162,903		6.50	%	Common equity Tier 1	334,911		12.50	%	187,550		7.00	%	174,154		6.50	%
Tier I risk-based capital	Tier I risk-based capital	324,052		12.93	%	213,027		8.50	%	200,496		8.00	%	Tier I risk-based capital	334,911		12.50	%	227,739		8.50	%	214,343		8.00	%
Total risk-based capital	Total risk-based capital	345,487		13.79	%	263,061		10.50	%	250,534		10.00	%	Total risk-based capital	356,530		13.30	%	281,471		10.50	%	268,068		10.00	%

December 31, 2020	December 31, 2020													December 31, 2020
Company	Company													Company
Tier I leverage	Tier I leverage	$	262,282	8.91	%	$	117,747	4.00	%	$	147,184	5.00	%	Tier I leverage	$	262,282	8.91	%	$	117,747	4.00	%	$	147,184	5.00	%
Common equity Tier 1	Common equity Tier 1	250,513		10.22	%	171,584		7.00	%	159,328		6.50	%	Common equity Tier 1	250,513		10.22	%	171,584		7.00	%	159,328		6.50	%
Tier I risk-based capital	Tier I risk-based capital	262,282		10.70	%	208,355		8.50	%	196,099		8.00	%	Tier I risk-based capital	262,282		10.70	%	208,355		8.50	%	196,099		8.00	%
Total risk-based capital	Total risk-based capital	342,246		13.96	%	257,420		10.50	%	245,162		10.00	%	Total risk-based capital	342,246		13.96	%	257,420		10.50	%	245,162		10.00	%
Bank	Bank													Bank
Tier I leverage	Tier I leverage	$	313,633	10.64	%	$	117,907	4.00	%	$	147,384	5.00	%	Tier I leverage	$	313,633	10.64	%	$	117,907	4.00	%	$	147,384	5.00	%
Common equity Tier 1	Common equity Tier 1	313,633		12.83	%	171,117		7.00	%	158,894		6.50	%	Common equity Tier 1	313,633		12.83	%	171,117		7.00	%	158,894		6.50	%
Tier I risk-based capital	Tier I risk-based capital	313,633		12.83	%	207,785		8.50	%	195,562		8.00	%	Tier I risk-based capital	313,633		12.83	%	207,785		8.50	%	195,562		8.00	%
Total risk-based capital	Total risk-based capital	334,919		13.71	%	256,503		10.50	%	244,288		10.00	%	Total risk-based capital	334,919		13.71	%	256,503		10.50	%	244,288		10.00	%

Effects of Inflation and Changing Prices

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires 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 refinancing 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 ~~March 31,~~June 30, 2021:


	~~March 31,~~June 30, 2021
Unused lines of credit	$	~~614,196~~628,183
Standby letters of credit	~~26,736~~31,752
Total commitments	$	~~640,932~~659,935

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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 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 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 Chief Executive Officer and 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 ~~March 31,~~June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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 fiscal year ended December 31, 2020.

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

The following table contains information regarding shares of our common stock repurchased by Reliant Bancorp during the three months ended ~~March 31,~~June 30, 2021.

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)
January 1, 2021 to January 31, 2021 594 $18.62 — $10,000
February 1, 2021 to February 28, 2021 — $— — $10,000
March 1, 2021 to March 31, 2021 — $— — $10,000
Total 594 $18.62 — $10,000


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)
April 1, 2021 to April 30, 2021	297	$28.50	—	$10,000
May 1, 2021 to May 31, 2021	593	$27.63	—	$10,000
June 1, 2021 to June 30, 2021	—	$—	—	$10,000
Total	890	$28.50	—	$10,000

(1)During the quarter ended ~~March 31,~~June 30, 2021, ~~2,000~~3,000 shares of restricted stock previously awarded to certain of the participants in our stock plans vested. We withheld ~~594~~890 shares to satisfy tax withholding requirements associated with the vesting of these shares of restricted stock.

(2)On January 26, 2021, Reliant Bancorp's board of directors authorized a stock repurchase plan allowing Reliant Bancorp to repurchase up to $10 million of outstanding Reliant Bancorp Common Stock (the "Repurchase Plan"). As of ~~March 31,~~June 30, 2021, 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. The Repurchase Plan is effective through December 31, 2021.

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Item 6. Exhibits.

EXHIBIT INDEX


Exhibit No.			Description

2.1			Agreement and Plan of Merger, dated as of July 14, 2021, by and between Reliant Bancorp, Inc. and United Community Banks, Inc. (incorporated by reference to Exhibit 2.1 of Reliant Bancorp’s Current Report on Form 8-K filed on July 15, 2021).

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

3.2			Third Amended and Restated Bylaws of Reliant Bancorp, Inc., as amended (Restated for SEC filing purposes) (incorporated by reference to Exhibit 3.2 of Reliant Bancorp's Quarterly Report on Form 10-Q filed on August 7, 2020).

10.1			~~Amended~~Employment Agreement, dated April 26, 2021, by and ~~Restated~~among DeVan Ard, Jr., Reliant Bancorp, Inc. ~~2018 Employee Stock Purchase Plan (incorporated~~, and Reliant Bank (incorporated by reference to Exhibit ~~10.3~~10.1 of Reliant Bancorp’s ~~Annual~~Current Report on Form ~~10-K~~8-K filed on ~~March 9,~~April 28, 2021).

10.2			Employment Agreement, dated April 26, 2021, by and among John R. Wilson, Reliant Bancorp, Inc., and Reliant Bank (incorporated by reference to Exhibit 10.2 of Reliant Bancorp’s Current Report on Form 8-K filed on April 28, 2021).

10.3			Employment Agreement, dated April 26, 2021, by and among Jerry Cooksey, Reliant Bancorp, Inc., and Reliant Bank (incorporated by reference to Exhibit 10.3 of Reliant Bancorp’s Current Report on Form 8-K filed on April 28, 2021).

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

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

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

101.INS*			Inline XBRL Instance Document.

101.SCH*			Inline XBRL Schema Documents.

101.CAL*			Inline XBRL Calculation Linkbase Document.

101.LAB*			Inline XBRL Label Linkbase Document.

101.PRE*			Inline XBRL Presentation Linkbase Document.

101.DEF*			Inline XBRL Definition Linkbase Document.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

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SIGNATURES

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

RELIANT BANCORP, INC.

~~May 6,~~August 5, 2021

/s/ DeVan D. Ard, Jr.

DeVan D. Ard, Jr.

Chairman and Chief Executive Officer

(Principal Executive Officer)

~~May 6,~~August 5, 2021

/s/ Jerry Cooksey

Jerry Cooksey

Chief Financial Officer

(Principal Financial Officer)

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	March 31, 2021 (unaudited)		December 31, 2020
ASSETS
Cash and due from banks	$	13,105	$	13,717
Interest-bearing deposits in financial institutions	104,620		79,756
Federal funds sold	186		1,572
Total cash and cash equivalents	117,911		95,045
Securities available for sale	267,191		256,653
Loans	2,277,714		2,300,783
Less: allowance for loan losses	(20,785)		(20,636)
Loans, net	2,256,929		2,280,147
Mortgage loans held for sale, net	166,599		147,524
Accrued interest receivable	14,568		14,889
Premises and equipment, net	30,879		31,462
Operating leases right of use assets	13,372		13,103
Restricted equity securities, at cost	16,146		16,551
Other real estate, net	1,198		1,246
Cash surrender value of life insurance contracts	78,423		77,988
Deferred tax assets, net	7,453		7,121
Goodwill	54,396		54,396
Core deposit intangibles	10,891		11,347
Other assets	21,110		19,063
TOTAL ASSETS	$	3,057,066	$	3,026,535
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing demand	$	578,764	$	575,289
Interest-bearing demand	397,047		350,392
Savings and money market deposit accounts	950,630		857,210
Time	686,469		796,344
Total deposits	2,612,910		2,579,235
Accrued interest payable	3,087		2,571

Subordinated debentures	70,719		70,446
Federal Home Loan Bank advances	0		10,000
Operating leases liabilities	14,552		14,231
Other liabilities	24,099		28,079
TOTAL LIABILITIES	2,725,367		2,704,562
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; 16,654,415 and 16,654,409 shares issued and outstanding at March 31, 2021, and December 31, 2020, respectively	16,654		16,654
Additional paid-in capital	233,667		233,331
Retained earnings	75,891		65,757
Accumulated other comprehensive income	5,487		6,231
TOTAL SHAREHOLDERS’ EQUITY	331,699		321,973
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,057,066	$	3,026,535


	Three Months Ended March 31,
		2021		2020
INTEREST INCOME
Interest and fees on loans		$	30,989	$	20,645
Interest and fees on loans held for sale		1,331		560
Interest on investment securities, taxable		610		451
Interest on investment securities, nontaxable		1,225		1,371
Federal funds sold and other		227		279
TOTAL INTEREST INCOME		34,382		23,306
INTEREST EXPENSE
Deposits
Demand		272		100
Savings and money market deposit accounts		839		1,030
Time		2,288		3,707
Federal Home Loan Bank advances and other		4		361
Subordinated debentures		953		993
TOTAL INTEREST EXPENSE		4,356		6,191
NET INTEREST INCOME		30,026		17,115
PROVISION FOR LOAN LOSSES		0		2,900
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		30,026		14,215
NONINTEREST INCOME
Service charges on deposit accounts		1,561		1,208
Gains on mortgage loans sold, net		4,928		1,573
Gain on securities transactions, net		129		0
Other noninterest income		719		501
TOTAL NONINTEREST INCOME		7,337		3,282
NONINTEREST EXPENSE
Salaries and employee benefits		13,352		9,237
Occupancy		2,008		1,486
Data processing and software		2,229		1,819
Professional fees		1,243		478
Regulatory Fees		361		454
Merger expenses		0		4,186
Other operating expense		2,471		1,938
TOTAL NONINTEREST EXPENSE		21,664		19,598
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		15,699		(2,101)
INCOME TAX EXPENSE (BENEFIT)		2,980		(910)
CONSOLIDATED NET INCOME (LOSS)		12,719		(1,191)
NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY		(570)		976
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	12,149	$	(215)
Basic net income (loss) attributable to common shareholders, per share		$	0.73	$	(0.02)
Diluted net income (loss) attributable to common shareholders, per share		$	0.73	$	(0.02)