rbnc-20210331

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, 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 4, 2021 was 16,406,720 excluding 248,398 unexchanged shares in connection with acquisitions.

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	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58

PART II – OTHER INFORMATION		59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	<#>
Item 4.	Mine Safety Disclosures	<#>
Item 5.	Other Information	<#>
Item 6.	Exhibits	60

SIGNATURES		61

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 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; and

(24) 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	—		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, — shares issued to date	—		—
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

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		—		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		—
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		—		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)

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(Dollar amounts in thousands)


	Three Months Ended
		March 31, 2021		March 31, 2020
Net income (loss)		$	12,719	$	(1,191)
Other comprehensive (loss) income:
Unrealized gains (losses) on securities available for sale:
Unrealized holdings (losses) arising during the period		(2,357)		(2,368)
Reclassification adjustment for (gains) losses included in net income (loss)		(129)		—
Tax effect		650		619
Net of tax		(1,836)		(1,749)
Unrealized gains (losses) on cash flow hedges
Unrealized holdings gains (losses) arising during the period		1,478		(5,869)
Reclassification adjustment for (gains) losses included in net income		—		—
Tax effect		(386)		1,534
Net of tax		1,092		(4,335)
Other comprehensive (loss)		(744)		(6,084)
Comprehensive income (loss)		$	11,975	$	(7,275)
Comprehensive (income) loss attributable to noncontrolling interest		(570)		976
Comprehensive income (loss) attributable to the controlling interest		$	11,405	$	(6,299)

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		—		321,973
Stock based compensation expense	—	—		339		—		—		—		339
Exercise of stock options	600	1		7		—		—		—		8

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


	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		NONCONTROLLING INTEREST		TOTAL
	SHARES	AMOUNT
BALANCE - JANUARY 1, 2020	11,206,254	11,206		167,006		40,472		5,069		—		223,753
Stock based compensation expense	—	—		349		—		—		—		349
Exercise of stock options	868	1		7		—		—		—		8
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(3,837)	(4)		(69)		—		—		—		(73)
Conversion shares issued to shareholders of Tennessee Community Bank Holdings, Inc.	811,210	811		17,230		—		—		—		18,041
Noncontrolling interest contributions	—	—		—		—		—		976		976
Cash dividend declared to common shareholders ($0.10 per share)	—	—		—		(1,207)		—		—		(1,207)
Cumulative effect of lease standard adoption	—	—		—		100		—		—		100
Net loss	—	—		—		(215)		—		(976)		(1,191)
Other comprehensive loss	—	—		—		—		(6,084)		—		(6,084)
BALANCE - MARCH 31, 2020	12,014,495	$	12,014	$	184,523	$	39,150	$	(1,015)	$	—	$	234,672

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	—		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)		—
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	—		(7,480)
Activities in available for sale securities
Purchases	(17,199)		—
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

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	$	—

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

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 12 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, 2021, and for the three months ended March 31, 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

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

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, 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	$	—	$	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


	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	$	—	$	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, 2021 and December 31, 2020 had a carrying amount of $29,643 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
	March 31, 2021		March 31, 2020
Proceeds	$	1,795	$	56,336
Gross gains	129		—
Gross losses	—		—

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The fair values of available for sale debt securities at March 31, 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
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

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, 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	$	—	$	—	$	23,357	$	564
Corporate bonds	11,622		128		—		—		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


December 31, 2020

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

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, 2021. There were 32 and 22 securities in an unrealized loss position as of March 31, 2021 and December 31, 2020, respectively.

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NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

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


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

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

The Company pledged loans to the FHLB at March 31, 2021 and December 31, 2020 of $448,697 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.

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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, 2021 and December 31, 2020:


	Pass		Special Mention		Substandard		Total
March 31, 2021
Loans excluding PCI
Commercial, Industrial and Agricultural	$	427,787	$	1,415	$	1,004	$	430,206
1-4 Family Residential Real Estate	318,446		860		2,197		321,503
1-4 Family HELOC	99,757		—		285		100,042
Multi-family and Commercial Real Estate	825,088		1,757		3,803		830,648
Construction, Land Development and Farmland	366,620		—		5,591		372,211
Consumer	213,609		2		1,379		214,990
Other	8,560		—		—		8,560
Total loans excluding PCI	$	2,259,867	$	4,034	$	14,259	$	2,278,160








Total PCI loans	$	1,024	$	—	$	2,201	$	3,225
Total loans	$	2,260,891	$	4,034	$	16,460	$	2,281,385

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	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		—		120		100,511
Multi-family and Commercial Real Estate	829,353		653		3,337		833,343
Construction, Land Development and Farmland	358,606		—		5,676		364,282
Consumer	211,305		7		1,346		212,658
Other	7,150		1,519		—		8,669
Total loans excluding PCI	$	2,283,530	$	3,703	$	14,507	$	2,301,740








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

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

Activity in the Allowance for Loan Loss (“ALL”) by portfolio segment was as follows for the three months ended March 31, 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)		—		—		—		(259)		—		(298)
Recoveries	251		82		2		9		85		18		—		447
Provision	412		(82)		(308)		(479)		(21)		476		2		—
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)		—		—		—		(114)		(31)		—		(439)
Recoveries	61		11		1		3		—		6		—		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

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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	$	—	$	—	$	70	$	—	$	17	$	—	$	934
Acquired with credit impairment	—		—		—		—		—		—		—		—
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	$	—	$	14,570
Acquired with credit impairment	167		667		14		594		739		1,044		—		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	$	—	$	—	$	—	$	13	$	—	$	748
Acquired with credit impairment	—		—		—		—		—		—		—		—
Collectively evaluated for impairment	4,724		2,427		1,416		8,535		1,841		915		30		19,888
Total	$	5,441	$	2,445	$	1,416	$	8,535	$	1,841	$	928	$	30	$	20,636
Loans
Individually evaluated for impairment	$	1,027	$	1,829	$	110	$	2,504	$	5,676	$	1,177	$	—	$	12,323
Acquired with credit impairment	187		748		14		657		776		1,205		—		3,587
Collectively evaluated for impairment	458,525		320,896		100,401		830,839		358,606		211,481		8,669		2,289,417
Total	$	459,739	$	323,473	$	100,525	$	834,000	$	365,058	$	213,863	$	8,669	$	2,305,327

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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, 2021 and December 31, 2020:


	Current and Accruing		30-89 Days Past Due		90+ Days Past Due and Accruing Interest		Nonaccrual Loans		Total Loans
March 31, 2021
Loans excluding PCI
Commercial, Industrial and Agricultural	$	429,859	$	75	$	—	$	272	$	430,206
1-4 Family Residential Real Estate	319,522		525		—		1,456		321,503
1-4 Family HELOC	99,986		56		—		—		100,042
Multi-family and Commercial Real Estate	830,242		—		—		406		830,648
Construction, Land Development and Farmland	370,538		—		—		1,673		372,211
Consumer	213,377		897		3		713		214,990
Other	8,560		—		—		—		8,560
Total loans excluding PCI	$	2,272,084	$	1,553	$	3	$	4,520	$	2,278,160








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








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

Approximately $2,306 and $2,438 of nonaccrual loans as of March 31, 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 and $630 on nonaccrual as of March 31, 2021 and December 31, 2020, respectively.

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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	—		—
Carrying amount, net of allowance for loan losses and remaining purchase discounts	$	3,225	$	3,587

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


	2021		2020
Balance at January 1,	$	580	$	98
New loans purchased	—		131
Accretion income	(36)		(20)
Balance at March 31,	$	544	$	209

On January 1, 2020 and April 1, 2020, the Company completed the TCB and FABK Transactions, respectively (see Note 12 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

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Impaired Loans

Individually impaired loans by class of loans were as follows at March 31, 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	—		—		—		104		104		18
1-4 Family HELOC	—		—		—		—		—		—
Multi-family and Commercial Real Estate	150		150		70		—		—		—
Construction, Land Development and Farmland	—		—		—		—		—		—
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

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The average recorded investment in impaired loans for the period ended March 31, 2021, and 2020 was as follows:


	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		—
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		—		52		—
1-4 Family HELOC	—		—		—		—
Multi-family and Commercial Real Estate	75		2		—		—
Construction, Land Development and Farmland	—		—		—		—
Consumer	49		2		19		—
Subtotal	$	1,023	$	10	$	923	$	20
Total	$	16,853	$	320	$	13,266	$	173

Restructured Loans

As of March 31, 2021 and December 31, 2020, the Company had recorded investments in troubled debt restructurings (“TDRs”) of $3,938 and $4,236, respectively. The Company did not allocate a specific allowance for those loans at March 31, 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 no TDR modifications in the three months ending March 31, 2021 or March 31, 2020.

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, 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.

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	March 31, 2021
	Active Deferrals		% of Loans
Multi-family and Commercial	$	21,329	0.94	%
Construction, Land Development and Farmland	11,792		0.52	%
Total	$	33,121	1.46	%

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, 2021, the Company had 588 PPP loans outstanding amounting to $41.9 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, 2021, $41.5 million in PPP loans had been forgiven cumulatively 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		—
Variable lease cost	97		80
Total lease cost	$	905	$	708

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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.

NOTE 5 - 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 as of March 31, 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. No gains or losses were reclassified from accumulated other comprehensive income into net income during the periods presented.

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


Notional amounts	$	160,000
Weighted average pay rates	2.05		%
Weighted average receive rates	0.35		%
Weighted average maturity	2.85 years
Unrealized losses	$	6,178

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


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



Included in other liabilities:
Interest rate swaps related to:
Subordinated debentures	$	10,000	$	(598)	$	10,000	$	(690)
Short-term interest-bearing liabilities	150,000		(5,580)		150,000		(6,967)
Total included in other liabilities	$	160,000	$	(6,178)	$	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 months ended March 31, 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)

Fair Value Hedges

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


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

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


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



Included in other liabilities:
Interest rate swaps related to investments	17,925		(971)		18,525		(1,495)
Total included in other liabilities	$	17,925	$	(971)	$	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 months ended March 31, 2021 and 2020, respectively:


		Three months ended March 31,
Item	Location	2021		2020
Interest rate swaps - securities	Interest on investment securities, nontaxable	$	(121)	$	(47)
Hedged item - securities	Interest on investment securities, nontaxable	$	121	$	47

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NOTE 6 - STOCK-BASED COMPENSATION

In 2006, the board of directors and shareholders of the Bank (then known as "Commerce Union Bank") approved the Commerce Union Bank Stock Option Plan (the “Plan”). The Plan provided for the granting of stock options for up to 625,000 shares of Bank common stock to employees and organizers and authorized the issuance of Bank common stock upon the exercise of such options. As part of the Bank's reorganization into a holding company corporate structure in 2012, all Bank options were replaced with Commerce Union Bancshares, Inc. (now known as "Reliant Bancorp, Inc.") options with no change in terms.

On March 10, 2015, the shareholders of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") approved the Commerce Union Bancshares, Inc. Amended and Restated Stock Option Plan (the “A&R Plan”), which permits the grant of awards with respect to up to 1,250,000 shares of Reliant Bancorp common stock in the form of stock options. As part of the merger of Commerce Union Bank and Reliant Bank in 2015, all outstanding stock options of Reliant Bank were converted to stock options of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") under the A&R Plan. Under the A&R Plan, stock option awards may be granted in the form of incentive stock options or non-statutory stock options, and are generally exercisable for up to 10 years following the date such option awards are granted. Exercise prices of incentive stock options must be equal to or greater than the fair market value of Reliant Bancorp's common stock on the grant date.

On June 18, 2015, the shareholders of Reliant Bancorp (then known as "Commerce Union Bancshares, Inc.") approved the Commerce Union Bancshares, Inc. 2015 Equity Incentive Plan, which reserves up to 900,000 shares of Reliant Bancorp common stock to be subject to awards under the plan, including awards in the form of stock options, restricted stock grants, performance-based awards, and other awards denominated or payable by reference to or based on or related to Reliant Bancorp common stock.

The Company has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statement of income as follows:


	Three months ended March 31,
	2021		2020
Stock-based compensation expense before income taxes	$	339	$	349
Less: deferred tax benefit	(89)		(91)
Reduction of net income	$	250	$	258

Common Stock Options

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


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2020	116,621	$	18.97	5.87 years	$	304
Granted	—	$	—
Exercised	(600)	$	13.65		4
Forfeited or expired	(600)	$	26.43
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

As of March 31, 2021, there was $185 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 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 months ended March 31, 2021:


	Restricted Stock Units			Restricted Stock
	Underlying Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2021	132,650	$	16.93	40,910	$	26.82
Granted	2,000	18.42		—	—
Vested	—	—		(2,000)	27.49
Forfeited	(1,000)	22.13		—	—
Outstanding at March 31, 2021	133,650	$	16.92	38,910	$	26.78

As of March 31, 2021, there was $1,361 and $135 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 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 months ended March 31, 2021 was $37.

NOTE 7 - REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to regulatory capital requirements administered by the federal and state banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action or affect the amount of dividends the Company and the Bank may distribute. Management believes that as of March 31, 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, 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	%

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	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 8 - EARNINGS PER SHARE

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


	Three Months Ended
	March 31,
	2021		2020
Basic EPS Computation
Net income (loss) attributable to common shareholders	$	12,149	$	(215)
Weighted average common shares outstanding	16,615,169		11,892,723
Basic earnings (loss) per common share	$	0.73	$	(0.02)
Diluted EPS Computation
Net income (loss) attributable to common shareholders	$	12,149	$	(215)
Weighted average common shares outstanding	16,615,169		11,892,723
Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	125,134		—
Adjusted weighted average common shares outstanding	16,740,303		11,892,723
Diluted earnings (loss) per common share	$	0.73	$	(0.02)

NOTE 9 - FAIR VALUES OF ASSETS AND LIABILITIES

Financial accounting standards relating to fair value measurements establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 Inputs to the valuation methodology include:

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•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, 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
U. S. Treasury and other U. S. government agencies	$	226	$	—	$	226	$	—
State and municipal	204,900		—		204,900		—
Corporate bonds	27,264		—		27,264		—
Mortgage backed securities	32,023		—		32,023		—
Asset backed securities	2,778		—		2,778		—

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


Liabilities
Derivative liabilities	$	9,152	$	—	$	9,152	$	—

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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, 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	$	—	$	—	$	16,861
Other real estate	1,198		—		—		1,198
Other repossessions	1,283		—		—		1,283
December 31, 2020
Assets
Impaired loans	$	15,162	$	—	$	—	$	15,162
Other real estate	1,246		—		—		1,246
Other repossessions	1,424		—		—		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, 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, 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	$	—	$	—
Interest-bearing deposits in financial institutions	104,620		104,620		104,620		—		—
Federal funds sold	186		186		—		186		—
Loans, net	2,256,929		2,261,953		—		—		2,261,953
Mortgage loans held for sale	166,599		168,456		—		168,456		—
Accrued interest receivable	14,568		14,568		—		14,568		—
Restricted equity securities	16,146		16,146		—		16,146		—
Financial liabilities
Deposits	$	2,612,910	$	2,615,295	$	—	$	—	$	2,615,295
Accrued interest payable	3,087		3,087		—		3,087		—
Subordinate debentures	70,719		72,522		—		—		72,522
Federal Home Loan Bank advances	—		—		—		—		—


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

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 10 - SEGMENT REPORTING

The Company has two 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	$	—	$	30,026
Provision for loan losses	—		—		—		—
Noninterest income	2,409		5,033		(105)		7,337
Noninterest expense (excluding merger expense)	16,460		5,204		—		21,664
Merger expense	—		—		—		—
Income tax expense (benefit)	2,933		47		—		2,980
Net income (loss)	12,149		675		(105)		12,719
Noncontrolling interest in net income of subsidiary	—		(675)		105		(570)
Net income attributable to common shareholders	$	12,149	$	—	$	—	$	12,149

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	Three Months Ended March 31, 2020
	Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	$	16,782	$	333	$	—	$	17,115
Provision for loan losses	2,900		—		—		2,900
Noninterest income	1,709		1,565		8		3,282
Noninterest expense (excluding merger expense)	12,461		2,951		—		15,412
Merger expense	4,186		—		—		4,186
Income tax (benefit) expense	(841)		(69)		—		(910)
Net (loss) income	(215)		(984)		8		(1,191)
Noncontrolling interest in net loss of subsidiary	—		984		(8)		976
Net income attributable to common shareholders	$	(215)	$	—	$	—	$	(215)

NOTE 11 – INCOME TAXES

Income tax expense for the three months ended March 31, 2021 totaled $2,980, compared to a benefit of $910 for the three months ended March 31, 2020. The effective tax rate for the three months ended March 31, 2021 was 19.0%, compared to 43.3% for the three months ended March 31, 2020.

NOTE 12 - 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

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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.

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 months ended March 31, 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 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
	March 31,
	2021		2020
Revenue(1)	$	37,363	$	28,109
Net interest income	$	30,026	$	23,596
Net income attributable to common shareholders	$	12,149	$	(3,821)


(1) Net interest income plus noninterest income

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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. Subsequent adoptions and changes to critical accounting policies during the three months ended March 31, 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 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, or $0.73 per basic share, for the three months ended March 31, 2021, compared to a loss of $215, or $0.02 per basic share for the same periods in 2020. Diluted net income attributable to common shareholders was $0.73 for the three months ended March 31, 2021 compared to a loss of $0.02 per share for the three months ended March 31, 2020.

The major components contributing to the change when compared to the prior year period are an increase of 75.4% in net interest income for the three months ended March 31, 2021 and an increase of 123.6% in noninterest income for the three months ended March 31, 2021, and partially offset by an increase of 10.5% in noninterest expense for the three months ended March 31, 2021, and a decrease of $2,900 in provision for loan losses for the three months ended March 31, 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.

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Tax-equivalent net interest margin increased to 4.51% for the three months ended March 31, 2021 compared to 3.60% in the same period in 2020. These and other components of earnings are discussed further below.

Selected Financial Data


(Dollar amounts in thousands, except per share amounts)	Three months ended,
	March 31, 2021		March 31, 2020
Selected Statement of Income Data
Total interest income	$	34,382	$	23,306
Total interest expense	4,356		6,191
Net interest income	30,026		17,115
Provision for credit loss	—		2,900
Total noninterest income	7,337		3,282
Total noninterest expense	21,664		19,598
Net income before 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 loss of subsidiary	(570)		976
Net income (loss) attributable to common shareholders	$	12,149	$	(215)
Per Common Share
Basic income (loss)	$	0.73	$	(0.02)
Diluted income (loss)	0.73		(0.02)
Adjusted diluted income (1)	0.73		0.25
Book value	19.92		19.53
Tangible book value(1)	16.00		14.44
Shares Outstanding
Basic weighted average common shares	16,615,169		11,892,723
Diluted weighted average common shares	16,740,303		11,892,723
Common shares outstanding at period end	16,654,415		12,014,495
Selected Balance Sheet Data
Loans, net of unearned income	$	2,277,714	$	1,619,445
Total assets	3,057,066		2,185,793
Customer deposits	2,350,168		1,377,407
Wholesale and institutional deposits	262,742		345,450
Total deposits	2,612,910		1,722,857
Total liabilities	2,725,367		1,951,121
Total shareholders' equity	331,699		234,672
Total liabilities and shareholders' equity	3,057,066		2,185,793
Selected Balance Sheet Data - Quarterly Averages
Loans held for investment	$	2,280,379	$	1,613,030
Earning assets(1)	2,792,919		1,992,550
Total assets	3,013,114		2,181,809
Interest-bearing liabilities	2,079,238		1,597,762
Total liabilities	2,686,085		1,939,910
Total shareholders' equity	327,029		241,899

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(Dollar amounts in thousands, except per share amounts)	Three months ended,
	March 31, 2021			March 31, 2020
Selected Performance Ratios
Return on average assets (2)	1.64		%	(0.04)		%
Return on shareholders' equity (2)	15.07		%	(0.36)		%
Return on average tangible common equity (1) (2)	18.84		%	(0.49)		%
Average shareholders' equity to average assets	10.85		%	11.09		%
Net interest margin (tax-equivalent basis) (2)	4.51		%	3.60		%
Efficiency Ratio (tax-equivalent basis)	56.4		%	92.9		%
Bank Segment efficiency ratio (1)	52.2		%	90.0		%
Loans held for investment to deposits ratio	87.20		%	94.00		%
Interest Rates and Yields (2)
Yield on interest-earning assets	5.14		%	4.85		%
Yield on loans held for investment	5.63		%	5.23		%
Cost of interest-bearing liabilities	0.85		%	1.56		%
Cost of total deposits	0.51		%	1.11		%
Preliminary Consolidated Capital Ratios (3)
Tier 1 leverage	9.33		%	8.91		%
Common equity tier 1	10.41		%	9.54		%
Tier 1 risk-based capital	10.88		%	10.19		%
Total risk-based capital	14.09		%	14.30		%
Selected Asset Quality Measures


Allowance for loan losses to total loans	0.91		%	0.93		%

Allowance for loan losses and purchase loan discounts to total loans	1.56		%	1.23		%
Net (recoveries) charge offs	$	(149)		$	357
Net (recoveries) charge offs to average loans (2)	(0.03)		%	0.09		%
Total nonperforming loans held for investment (HFI)	$	6,110		$	4,043
Total nonperforming assets (4)	$	9,661		$	4,043
Nonperforming loans HFI to total loans HFI	0.27		%	0.25		%
Nonperforming assets to total assets	0.32		%	0.18		%
Nonperforming assets to total loans HFI and NPAs	0.42		%	0.25		%

(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

(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		%

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	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

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	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		%

(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.

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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.

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 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. 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 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, 2021, the Company had $33,121 of loans modified and a total of $597,327 loans previously deferred that returned to normal payment status. 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, 2021 the Bank had 588 PPP loans outstanding totaling $41.9 million with $41.5 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, 2021, our level of nonperforming assets was 0.32% 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, 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, 2021, and 2020 (dollars in thousands):


	Three Months Ended March 31, 2021					Three Months Ended March 31, 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)	$	2,280,379	5.15	$	28,288	$	1,613,030	5.01	$	19,755	$	8,311	$	561	$	8,872
Loan fees	—		0.48	2,701		—		0.22	890		1,811		—		1,811
Loans with fees	2,280,379		5.63	30,989		1,613,030		5.23	20,645		10,122		561		10,683
Mortgage loans held for sale	169,747		3.18	1,331		47,685		4.72	560		884		(113)		771
Deposits with banks	61,939		0.34	52		43,583		1.14	124		108		(180)		(72)
Investment securities - taxable	65,499		3.78	610		74,688		2.43	451		(45)		204		159
Investment securities - tax-exempt (4)	198,034		3.24	1,225		197,241		3.56	1,371		8		(173)		(165)
Restricted equity securities and other	17,321		4.10	175		16,323		3.82	155		9		11		20
Total earning assets	2,792,919		5.14	34,382		1,992,550		4.85	23,306		11,085		311		11,396
Nonearning assets	220,195					189,259
Total assets	$	3,013,114				$	2,181,809
Interest bearing liabilities
Interest bearing demand	377,714		0.29	272		186,236		0.22	100		131		41		172
Savings and money market	901,444		0.38	839		459,756		0.90	1,030		(479)		288		(191)
Time deposits - retail	494,508		1.15	1,404		541,973		1.85	2,496		(205)		(887)		(1,092)
Time deposits - wholesale	227,513		1.58	884		229,870		2.12	1,211		(13)		(314)		(327)
Total interest-bearing deposits	2,001,179		0.69	3,399		1,417,835		1.37	4,837		(566)		(872)		(1,438)
Federal Home Loan Bank advances and other borrowings	7,467		0.22	4		109,320		1.33	361		(188)		(169)		(357)
Subordinated debt	70,592		5.48	953		70,607		5.66	993		—		(40)		(40)
Total borrowed funds	78,059		4.97	957		179,927		3.03	1,354		(189)		(208)		(397)
Total interest-bearing liabilities	2,079,238		0.85	4,356		1,597,762		1.56	6,191		(754)		(1,081)		(1,835)
Net interest spread (5)			4.29	$	30,026			3.29	$	17,115	$	11,839	$	1,392	$	13,231
Noninterest bearing deposits	565,770		(0.18)			312,073		(0.26)
Other noninterest bearing liabilities	41,077					30,075
Shareholders' equity	327,029					241,899
Total liabilities and shareholders' equity	$	3,013,114				$	2,181,809
Cost of funds			0.67					1.30
Net interest margin (6)			4.51					3.60

(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 and $322, for the years ended March 31, 2021 and March 31, 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.

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

The components of our loan yield, a key driver to our NIM for the three months ended March 31, 2021, and March 31, 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	%

(1) Includes $139 in loan contractual interest related to PPP loans for the three months ended March 31, 2021.

(2) Includes $903 in PPP related fees for the three months ended March 31, 2021.

Our combined loan and loan fee yield increased from 5.23% to 5.63% for the three months ended March 31, 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% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 and was mainly 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.

Accretion on purchased loans contributed 32 basis points to the NIM for three months ended March 31, 2021 as a result of the increased accretion included in interest income from the FABK Transaction compared to the 13 basis points contributed in the comparable period in 2020 which only included accretion income from the TCB Transaction. Contractual interest and origination fees on PPP loans attributed 5 basis points to the NIM for the three months ended March 31, 2021. We anticipate recognizing $906 in deferred origination fees over the remaining life of the PPP loan portfolio.

Our cost of funds decreased to 0.67% from 1.30% for the three months ended March 31, 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. Average retail time deposits decreased 8.8% year-over-year compared to the increase in average total deposits of 48.4%. While the acquired FABK deposits drives a majority of this increase, organic deposits increased 22.1% year-over-year. In addition to the 60 basis point decrease in cost of deposits, cost of funds benefited from a decrease in the cost of FHLB advances of 111 basis points as the average balance decreased 93.2% 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 months ended March 31, 2021 compared to $2,900 recorded in the three months ended March 31, 2020. The provision expense for the three months ended March 31, 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, 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.

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 months ended March 31, 2021, and 2020 (dollars in thousands):


	Three Months Ended March 31,				Percent Increase
	2021		2020		(Decrease)
Non-Interest Income
Service charges and fees on deposits	$	1,561	$	1,208	29.2	%
Gains on mortgage loans sold, net	4,928		1,573		213.3	%
Securities gains, net	129		—		100.0	%



Bank-owned life insurance	435		295		47.5	%
Brokerage revenue	69		32		115.6	%
Miscellaneous noninterest income	215		174		23.6	%

Total noninterest income	$	7,337	$	3,282	123.6	%

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

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 in three months ended March 31, 2021 as compared to $89,076 in the same period 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 months ended March 31, 2021, the Company sold securities totaling $1,795 with a gain of $129. During the three months ended March 31, 2020, the Company sold securities classified as available for sale which were acquired in the TCB Holdings transaction totaling $56,336. 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 months ended March 31, 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 months ended March 31, 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	%

Noninterest expense increased during the three months ended March 31, 2021 when compared to March 31, 2020 which is primarily driven by 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% increase in salaries and employee benefits 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 FTEs from 321 at March 31, 2020 to 425 at March 31, 2021.

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

Data processing and software expense increased from March 31, 2020 to March 31, 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% and 90.0% for the three months ended March 31, 2021 and 2020, respectively. Our adjusted efficiency ratio, on a tax-equivalent basis, was 50.8% and 65.0% for the three months ended March 31, 2021 and 2020, respectively. See “Reconciliation of Non-GAAP Financial Measures” in this Quarterly Report for the reconciliation of the adjusted efficiency ratio.

Income Taxes

During the three months ended March 31, 2021 we recorded consolidated income tax expense of $2,980 as compared to a recorded benefit of $910 for the same period in 2020. This represents consolidated effective tax rates of 19.0% and 43.3%, respectively. When evaluating the bank segment alone, this ratio was 19.5% for the three months ended March 31, 2021 as

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compared to 79.6% 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 for the three months ended March 31, 2021 compared to a net loss of $976 for the same period 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 10 to our consolidated financial statements for segment reporting.

FINANCIAL CONDITION

Overview

The Company’s total assets were $3,057,066 at March 31, 2021 and $3,026,535 at December 31, 2020, an increase of 1.0%. Total liabilities were $2,725,367 at March 31, 2021 and $2,704,562 at December 31, 2020, an increase of 0.8%. The increase in liabilities was substantially attributable to the increase in deposits of $33,675, or 1.3%, and offset by a decrease in FHLB advances of $10,000 during the period. 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, 2021, and December 31, 2020, were $2,256,929 and $2,280,147, respectively, representing a decrease of 1.0%.

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
	Amount		Percent		Amount		Percent
Commercial, Industrial and Agricultural	$	430,373	18.9	%	$	459,739	19.9	%
Real estate:
1-4 Family Residential	322,170		14.1	%	323,473		14.0	%
1-4 Family HELOC	100,056		4.4	%	100,525		4.4	%
Multifamily and Commercial	831,242		36.4	%	834,000		36.2	%
Construction, Land Development and Farmland	372,950		16.3	%	365,058		15.8	%
Consumer	216,034		9.5	%	213,863		9.3	%
Other	8,560		0.4	%	8,669		0.4	%
	2,281,385		100.0	%	2,305,327		100.0	%
Less:
Deferred loan fees	3,671				4,544
Allowance for loan losses	20,785				20,636
Loans, net	$	2,256,929			$	2,280,147

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


	March 31, 2021		December 31, 2020

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

Total gross PCI loans	5,770		6,183
Less:
Remaining purchase discount	2,545		2,596
Allowance for loan losses	—		—
Loans, net	$	3,225	$	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 at March 31, 2021 and decreased by 6.4% compared to $459,739 at December 31, 2020 which was largely driven by PPP loan forgiveness.

Real estate loans comprised 71.2% of the loan portfolio at March 31, 2021. Residential loans included in this category consist mainly of closed-end loans secured by first and second liens that are not held for sale and revolving, open-end loans secured by 1-4 family residential properties extended under home equity lines of credit. The Company decreased the residential portfolio 0.4% from December 31, 2020 to March 31, 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 at March 31, 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 December 31, 2020, to March 31, 2021, of 1.0% primarily due to the $4,716 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% from December 31, 2020 to March 31, 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, 2021, excluding unearned net fees and costs.


	One Year or Less		One to Five Years		Over Five Years		Total
Gross loans	$	632,171	$	1,091,418	$	557,796	$	2,281,385
Fixed interest rate							$	1,273,607
Variable interest rate							1,007,778
Total							$	2,281,385

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

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
Beginning Balance, January 1, 2021 and 2020, respectively	$	20,636		$	12,578
Loans charged off:
Commercial, Industrial and Agricultural	(32)			(294)
Real estate:
1-4 Family Residential	(7)			—
1-4 Family HELOC	—			—
Multifamily and Commercial	—			—
Construction, Land Development and Farmland	—			(114)
Consumer	(259)			(31)
Other	—			—
Total loans charged off	(298)			(439)
Recoveries on loans previously charged off:
Commercial, Industrial and Agricultural	251			61
Real estate:
1-4 Family Residential	82			11
1-4 Family HELOC	2			1
Multifamily and Commercial	9			3
Construction, Land Development and Farmland	85			—
Consumer	18			6
Other	—			—
Total loan recoveries	447			82
Net (charge-offs) recoveries	149			(357)
Provision for loan losses	—			2,900
Total allowance for loan losses at end of period	$	20,785		$	15,121
Allowance for loan losses to total loans, net	0.91		%	0.93		%
Net charge-offs (recoveries) to average loans outstanding	(0.03)		%	0.09		%

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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
	Amount		% of Allowance to Allowance		% of Loan Type to Total Loans		Amount		% of Allowance to Allowance		% of Loan Type to Total Loans
Commercial, Industrial and Agricultural	$	6,072	29.2	%	18.9	%	$	3,851	25.5	%	17.4	%
Real estate:
1-4 Family Residential	2,438		11.7	%	14.1	%	1,488		9.8	%	16.2	%
1-4 Family HELOC	1,110		5.3	%	4.4	%	873		5.8	%	6.1	%
Multifamily and Commercial	8,065		38.8	%	36.4	%	6,760		44.7	%	39.2	%
Construction, Land Development and Farmland	1,905		9.2	%	16.3	%	1,836		12.1	%	19.1	%
Consumer	1,163		5.6	%	9.5	%	298		2.0	%	1.5	%
Other	32		0.2	%	0.4	%	15		0.1	%	0.5	%
	$	20,785	100.0	%	100.0	%	$	15,121	100.0	%	100.0	%

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



Total nonperforming loans	$	6,110		$	5,987
Foreclosed real estate ("OREO")	1,198			1,246
Repossessed collateral	1,283			1,424
Mortgage Loans HFS	1,070			630
Total nonperforming assets	$	9,661		$	9,287
Total nonperforming loans HFI as a percentage of total loans HFI	0.27		%	0.26		%
Total nonperforming assets as a percentage of total assets	0.32		%	0.31		%
Allowance for loan losses as a percentage of nonperforming loans HFI	340.18		%	344.68		%
Troubled Debt Restructurings ("TDRs")	$	3,938		$	4,236
TDRs as a percentage of total loans	0.17		%	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 at March 31, 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. Activity during the three months ended March 31, 2021 includes the sale of $1,795 of securities as well as $1,570 of principal paydowns, calls, and maturities.

Restricted equity securities totaled $16,146 and $16,551 at March 31, 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
	Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total
U.S. Treasury and other U.S. government agencies	$	225	226	0.08	%	$	47	48	0.02	%
State and municipal bonds	190,980		204,900	76.69	%	184,102		200,988	78.31	%
Corporate bonds	27,000		27,264	10.20	%	23,750		24,113	9.40	%
Mortgage-backed securities	31,607		32,023	11.99	%	28,084		28,442	11.08	%
Asset-backed securities	2,802		2,778	1.04	%	3,083		3,062	1.19	%

Total	$	252,614	267,191	100.00	%	$	239,066	256,653	100.00	%

The table below summarizes the contractual maturities of securities at March 31, 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

Premises and Equipment

Premises and equipment, net, totaled $30,879 at March 31, 2021 compared to $31,462 at December 31, 2020, a net decrease of $583, or 1.9%. Premises and equipment purchases amounted to approximately $217 during the three months ended March 31, 2021 and were mainly incurred for additional leasehold improvements and equipment for our branches and mortgage locations while depreciation expense amounted to $741.

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, 2021, total deposits were $2,612,910, an increase of $33,675, or 1.3%, compared to $2,579,235 at December 31, 2020. During the three months ended March 31, 2021, noninterest bearing demand deposits increased by $3,475, interest-bearing demand deposits increased by $46,655, savings and money market deposits increased by $93,420, and time deposits decreased by $109,875. Our team continues to focus on retaining low cost customer deposits while decreasing higher cost time deposits.

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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.


	March 31, 2021
Twelve months or less	$	136,406
Over twelve months through three years	19,145
Over three years	4,396
Total	$	159,947

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	Estimated Change in Net Interest Income and Policy of Maximum Percentage Decline in Net Interest Income
	Next 12		Next 24
	Months		Months
	Estimate	Policy	Estimate	Policy
-200 bp	(3.9)%	(15)%	(7.2)%	(15)%
-100 bp	(2.3)%	(10)%	(4.7)%	(10)%
+100 bp	2.2%	(10)%	5.1%	(10)%
+200 bp	5.1%	(15)%	10.3%	(15)%
+300 bp	8.5%	(20)%	15.8%	(20)%
+400 bp	11.8%	(25)%	21.3%	(25)%

We were in compliance with our earnings simulation model policies as of March 31, 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, 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, 2021, FHLB advances totaled $0 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, 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 at March 31, 2021, an increase of $9,726, or 3.0%, from $321,973 at December 31, 2020, mainly due to current quarter net income. This increase was primarily offset by dividends declared of $2,015, and other comprehensive loss of $744. Contributions from the noncontrolling interest of $570 were recognized in the three months ended March 31, 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, 2021 Tier 1 leverage ratio to 11.06% 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, 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, 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
	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2021
Company
Tier I leverage	$	273,173	9.33	%	$	117,116	4.00	%	$	146,395	5.00	%
Common equity Tier 1	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 1	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	%

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

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, 2021:


	March 31, 2021
Unused lines of credit	$	614,196
Standby letters of credit	26,736
Total commitments	$	640,932

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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, 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 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, 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

(1)During the quarter ended March 31, 2021, 2,000 shares of restricted stock previously awarded to certain of the participants in our stock plans vested. We withheld 594 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, 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

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 and Restated Reliant Bancorp, Inc. 2018 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 of Reliant Bancorp’s Annual Report on Form 10-K filed on March 9, 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, 2021

/s/ DeVan D. Ard, Jr.

DeVan D. Ard, Jr.

Chairman and Chief Executive Officer

(Principal Executive Officer)

May 6, 2021

/s/ Jerry Cooksey

Jerry Cooksey

Chief Financial Officer

(Principal Financial Officer)