UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 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 ~~August~~November 4, 2021 was ~~16,495,961~~16,576,680 excluding ~~183,306~~108,130 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	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 4.	Controls and Procedures	62

PART II – OTHER INFORMATION		63
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63



Item 6.	Exhibits	64

SIGNATURES		65

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

(13) our ability to effectively manage problem credits;

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

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

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

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

(18) our ability to adapt to technological changes;

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

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

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

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

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

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

~~(25)~~(24) the effect of the announcement and pendency of the Transaction on customer, supplier, or employee relationships and operating results (including without limitation difficulties in maintaining relationships with employees and customers), as well as on the market price of Reliant Bancorp's common stock;

~~(26)~~(25) the occurrence of any event, change, or other circumstances that could give rise to the termination of the definitive merger agreement for the Transaction;

~~(27)~~(26) the amount of costs, fees, expenses and charges related to the Transaction, including those arising as a result of unexpected factors or events;

~~(28)~~(27) the ability to obtain the shareholder and governmental approvals required for the Transaction;

~~(29)~~(28) reputational risk associated with and the reaction of the parties' customers, suppliers, employees, or other business partners to the Transaction;

~~(30)~~(29) the outcome of any legal proceedings that may be instituted against Reliant Bancorp, UCBI or any of their respective directors or officers, following the announcement of the Transaction;

~~(31)~~

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

~~(32)~~(31) the risk associated with Company management's attention being diverted away from the day-to-day business and operations of Reliant Bancorp to the completion of the Transaction; and

~~(33)~~(32) 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)


		June 30, 2021 (unaudited)		December 31, 2020			September 30, 2021 (unaudited)		December 31, 2020
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	11,763	$	13,717	Cash and due from banks	$	13,270	$	13,717
Interest-bearing deposits in financial institutions	Interest-bearing deposits in financial institutions	43,676		79,756		Interest-bearing deposits in financial institutions	66,155		79,756
Federal funds sold	Federal funds sold	656		1,572		Federal funds sold	1,002		1,572
Total cash and cash equivalents	Total cash and cash equivalents	56,095		95,045		Total cash and cash equivalents	80,427		95,045
Securities available for sale	Securities available for sale	266,695		256,653		Securities available for sale	254,416		256,653
Loans	Loans	2,321,070		2,300,783		Loans	2,389,833		2,300,783
Less: allowance for loan losses	Less: allowance for loan losses	(20,894)		(20,636)		Less: allowance for loan losses	(20,897)		(20,636)
Loans, net	Loans, net	2,300,176		2,280,147		Loans, net	2,368,936		2,280,147
Mortgage loans held for sale, net	Mortgage loans held for sale, net	229,418		147,524		Mortgage loans held for sale, net	62,543		147,524
Accrued interest receivable	Accrued interest receivable	14,492		14,889		Accrued interest receivable	14,374		14,889
Premises and equipment, net	Premises and equipment, net	29,183		31,462		Premises and equipment, net	27,519		31,462
Operating leases right of use assets	Operating leases right of use assets	12,744		13,103		Operating leases right of use assets	12,427		13,103
Restricted equity securities, at cost	Restricted equity securities, at cost	15,770		16,551		Restricted equity securities, at cost	15,770		16,551
Other real estate, net	Other real estate, net	2,233		1,246		Other real estate, net	3,088		1,246
Cash surrender value of life insurance contracts	Cash surrender value of life insurance contracts	78,979		77,988		Cash surrender value of life insurance contracts	78,460		77,988
Deferred tax assets, net	Deferred tax assets, net	5,978		7,121		Deferred tax assets, net	5,788		7,121
Goodwill	Goodwill	54,396		54,396		Goodwill	54,396		54,396
Core deposit intangibles	Core deposit intangibles	10,434		11,347		Core deposit intangibles	9,978		11,347
Other assets	Other assets	21,871		19,063		Other assets	25,437		19,063
TOTAL ASSETS	TOTAL ASSETS	$	3,098,464	$	3,026,535	TOTAL ASSETS	$	3,013,559	$	3,026,535
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	Deposits					Deposits
Noninterest-bearing demand	Noninterest-bearing demand	$	602,555	$	575,289	Noninterest-bearing demand	$	626,598	$	575,289
Interest-bearing demand	Interest-bearing demand	441,161		350,392		Interest-bearing demand	410,923		350,392
Savings and money market deposit accounts	Savings and money market deposit accounts	1,003,402		857,210		Savings and money market deposit accounts	989,677		857,210
Time	Time	582,722		796,344		Time	520,507		796,344
Total deposits	Total deposits	2,629,840		2,579,235		Total deposits	2,547,705		2,579,235
Accrued interest payable	Accrued interest payable	1,967		2,571		Accrued interest payable	2,302		2,571

Subordinated debentures	Subordinated debentures	70,770		70,446		Subordinated debentures	70,821		70,446
Federal Home Loan Bank advances	Federal Home Loan Bank advances	16,000		10,000		Federal Home Loan Bank advances	—		10,000
Operating leases liabilities	Operating leases liabilities	13,932		14,231		Operating leases liabilities	13,605		14,231
Other liabilities	Other liabilities	19,666		28,079		Other liabilities	22,811		28,079
TOTAL LIABILITIES	TOTAL LIABILITIES	2,752,175		2,704,562		TOTAL LIABILITIES	2,657,244		2,704,562
Preferred stock, $1 par value per share; 10,000,000 shares authorized, 0 shares issued to date		0		0
Common stock, $1 par value per share; 30,000,000 shares authorized; 16,672,511 and 16,654,409 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively		16,673		16,654
Preferred stock, $1 par value per share; 10,000,000 shares authorized, zero shares issued to date						Preferred stock, $1 par value per share; 10,000,000 shares authorized, zero shares issued to date	—		—
Common stock, $1 par value per share; 30,000,000 shares authorized; 16,682,928 and 16,654,409 shares issued and outstanding at September 30, 2021, and December 31, 2020, respectively						Common stock, $1 par value per share; 30,000,000 shares authorized; 16,682,928 and 16,654,409 shares issued and outstanding at September 30, 2021, and December 31, 2020, respectively	16,683		16,654
Additional paid-in capital	Additional paid-in capital	234,390		233,331		Additional paid-in capital	234,696		233,331
Retained earnings	Retained earnings	86,917		65,757		Retained earnings	98,182		65,757
Accumulated other comprehensive income	Accumulated other comprehensive income	8,309		6,231		Accumulated other comprehensive income	6,754		6,231
TOTAL SHAREHOLDERS’ EQUITY	TOTAL SHAREHOLDERS’ EQUITY	346,289		321,973		TOTAL SHAREHOLDERS’ EQUITY	356,315		321,973
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,098,464	$	3,026,535	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,013,559	$	3,026,535

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(Dollar amounts in thousands except per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,		Nine Months Ended September 30,
		2021		2020		2021		2020				2021		2020		2021		2020
INTEREST INCOME	INTEREST INCOME										INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	31,183	$	33,447	$	62,172	$	54,092		Interest and fees on loans	$	30,817	$	32,895	$	92,989	$	86,987
Interest and fees on loans held for sale	Interest and fees on loans held for sale	1,807		815		3,138		1,375			Interest and fees on loans held for sale	1,184		1,037		4,322		2,412
Interest on investment securities, taxable	Interest on investment securities, taxable	663		128		1,273		579			Interest on investment securities, taxable	786		399		2,059		978
Interest on investment securities, nontaxable	Interest on investment securities, nontaxable	1,216		1,317		2,441		2,688			Interest on investment securities, nontaxable	928		1,186		3,369		3,874
Restricted equity securities and other	Restricted equity securities and other	226		208		453		487			Restricted equity securities and other	215		251		668		738
TOTAL INTEREST INCOME	TOTAL INTEREST INCOME	35,095		35,915		69,477		59,221			TOTAL INTEREST INCOME	33,930		35,768		103,407		94,989
INTEREST EXPENSE	INTEREST EXPENSE										INTEREST EXPENSE
Deposits	Deposits										Deposits
Demand	Demand	216		218		488		318			Demand	153		236		641		554
Savings and money market deposit accounts	Savings and money market deposit accounts	647		1,476		1,486		2,506			Savings and money market deposit accounts	441		1,162		1,927		3,668
Time	Time	4,678		3,135		6,966		6,842			Time	3,348		2,735		10,314		9,577
Federal Home Loan Bank advances and other borrowings	Federal Home Loan Bank advances and other borrowings	13		148		17		509			Federal Home Loan Bank advances and other borrowings	9		104		26		613
Subordinated debentures	Subordinated debentures	980		982		1,933		1,975			Subordinated debentures	980		992		2,913		2,967
TOTAL INTEREST EXPENSE	TOTAL INTEREST EXPENSE	6,534		5,959		10,890		12,150			TOTAL INTEREST EXPENSE	4,931		5,229		15,821		17,379
NET INTEREST INCOME	NET INTEREST INCOME	28,561		29,956		58,587		47,071			NET INTEREST INCOME	28,999		30,539		87,586		77,610
PROVISION FOR LOAN LOSSES	PROVISION FOR LOAN LOSSES	0		3,000		0		5,900			PROVISION FOR LOAN LOSSES	—		1,500		—		7,400
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	28,561		26,956		58,587		41,171			NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	28,999		29,039		87,586		70,210
NONINTEREST INCOME	NONINTEREST INCOME										NONINTEREST INCOME
Service charges on deposit accounts	Service charges on deposit accounts	1,656		1,381		3,217		2,589			Service charges on deposit accounts	1,678		1,583		4,895		4,172
Gains on mortgage loans sold, net	Gains on mortgage loans sold, net	2,978		2,248		7,906		3,821			Gains on mortgage loans sold, net	4,218		3,784		12,124		7,605
Gain on securities transactions, net	Gain on securities transactions, net	2,966		327		3,095		327			Gain on securities transactions, net	2,419		—		5,514		327
Income from bank owned life insurance											Income from bank owned life insurance	2,181		386		3,172		1,073
Other noninterest income	Other noninterest income	710		466		1,429		967			Other noninterest income	373		249		811		529
TOTAL NONINTEREST INCOME	TOTAL NONINTEREST INCOME	8,310		4,422		15,647		7,704			TOTAL NONINTEREST INCOME	10,869		6,002		26,516		13,706
NONINTEREST EXPENSE	NONINTEREST EXPENSE										NONINTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	12,793		12,464		26,145		21,701			Salaries and employee benefits	12,426		12,184		38,571		33,885
Occupancy	Occupancy	1,999		2,026		4,007		3,512			Occupancy	2,038		2,054		6,045		5,566
Data processing and software	Data processing and software	2,262		2,026		4,491		3,845			Data processing and software	2,265		2,240		6,756		6,085
Professional fees	Professional fees	358		680		1,601		1,158			Professional fees	526		775		2,127		1,933
Regulatory fees	Regulatory fees	343		537		704		991			Regulatory fees	328		365		1,032		1,356
Merger expenses	Merger expenses	0		2,632		0		6,818			Merger expenses	1,453		77		1,453		6,895
Other operating expense	Other operating expense	2,729		1,899		5,200		3,837			Other operating expense	3,345		2,639		8,545		6,476
TOTAL NONINTEREST EXPENSE	TOTAL NONINTEREST EXPENSE	20,484		22,264		42,148		41,862			TOTAL NONINTEREST EXPENSE	22,381		20,334		64,529		62,196
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		16,387		9,114		32,086		7,013
INCOME TAX EXPENSE (BENEFIT)		3,202		1,634		6,182		724
INCOME BEFORE PROVISION FOR INCOME TAXES											INCOME BEFORE PROVISION FOR INCOME TAXES	17,487		14,707		49,573		21,720
INCOME TAX EXPENSE											INCOME TAX EXPENSE	3,551		2,800		9,733		3,524
CONSOLIDATED NET INCOME	CONSOLIDATED NET INCOME	13,185		7,480		25,904		6,289			CONSOLIDATED NET INCOME	13,936		11,907		39,840		18,196
NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY	NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY	(140)		388		(710)		1,364			NONCONTROLLING INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY	(647)		(374)		(1,357)		990
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	13,045	$	7,868	$	25,194	$	7,653		NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	13,289	$	11,533	$	38,483	$	19,186
Basic net income attributable to common shareholders, per share	Basic net income attributable to common shareholders, per share	$	0.79	$	0.48	$	1.52	$	0.54		Basic net income attributable to common shareholders, per share	$	0.80	$	0.70	$	2.31	$	1.27
Diluted net income attributable to common shareholders, per share	Diluted net income attributable to common shareholders, per share	$	0.78	$	0.48	$	1.50	$	0.54		Diluted net income attributable to common shareholders, per share	$	0.79	$	0.69	$	2.29	$	1.27

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(Dollar amounts in thousands)


		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020				2021		2020		2021		2020
Net income	Net income	$	13,185	$	7,480	$	25,904	$	6,289		Net income	$	13,936	$	11,907	$	39,840	$	18,196
Other comprehensive income:	Other comprehensive income:										Other comprehensive income:
Unrealized gains (losses) on securities available for sale:
Unrealized holdings (losses) arising during the period		3,254		4,309		897		1,941
Reclassification adjustment for (gains) losses included in net income (loss)		(2,966)		(327)		(3,095)		(327)
Unrealized (losses) gains on securities available for sale:											Unrealized (losses) gains on securities available for sale:
Unrealized holdings (losses) gains arising during the period											Unrealized holdings (losses) gains arising during the period	(1,864)		1,365		(967)		3,306
Reclassification adjustment for gains included in net income											Reclassification adjustment for gains included in net income	(2,419)		—		(5,514)		(327)
Tax effect	Tax effect	(75)		(1,041)		574		(422)			Tax effect	1,119		(357)		1,694		(779)
Net of tax	Net of tax	213		2,941		(1,624)		1,192			Net of tax	(3,164)		1,008		(4,787)		2,200
Unrealized gains (losses) on cash flow hedges
Unrealized holdings gains (losses) arising during the period		675		(1,086)		2,153		(6,956)
Unrealized (losses) gains on cash flow hedges											Unrealized (losses) gains on cash flow hedges
Unrealized holdings (losses) gains arising during the period											Unrealized holdings (losses) gains arising during the period	(113)		508		2,040		(6,448)
Reclassification adjustment for losses included in net income	Reclassification adjustment for losses included in net income	2,859		0		2,859		0			Reclassification adjustment for losses included in net income	2,290		—		5,149		—
Tax effect	Tax effect	(925)		284		(1,310)		1,819			Tax effect	(568)		(133)		(1,879)		1,686
Net of tax	Net of tax	2,609		(802)		3,702		(5,137)			Net of tax	1,609		375		5,310		(4,762)
Other comprehensive income (loss)		2,822		2,139		2,078		(3,945)
Other comprehensive (loss) income											Other comprehensive (loss) income	(1,555)		1,383		523		(2,562)
Comprehensive income	Comprehensive income	$	16,007	$	9,619	$	27,982	$	2,344		Comprehensive income	$	12,381	$	13,290	$	40,363	$	15,634
Comprehensive (income) loss attributable to noncontrolling interest	Comprehensive (income) loss attributable to noncontrolling interest	(140)		388		(710)		1,364			Comprehensive (income) loss attributable to noncontrolling interest	(647)		(374)		(1,357)		990
Comprehensive income attributable to the controlling interest	Comprehensive income attributable to the controlling interest	$	15,867	$	10,007	$	27,272	$	3,708		Comprehensive income attributable to the controlling interest	$	11,734	$	12,916	$	39,006	$	16,624

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				COMMON STOCK						ADDITIONAL PAID-IN CAPITAL					RETAINED EARNINGS					ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)					NONCONTROLLING INTEREST					TOTAL
		SHARES	AMOUNT										SHARES								AMOUNT
BALANCE - JANUARY 1, 2021	BALANCE - JANUARY 1, 2021	16,654,409	$	16,654			$	233,331			$	65,757				$	6,231			$	0		$	321,973	BALANCE - JANUARY 1, 2021		16,654,409				$	16,654				$	233,331				$	65,757				$	6,231				$	—	$	321,973
Stock based compensation expense	Stock based compensation expense	—	—		339				—		—			—				339			Stock based compensation expense	—			—					339					—					—					—					339
Exercise of stock options	Exercise of stock options	600	1		7				—		—			—				8			Exercise of stock options	600			1			7					—					—					—					8

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

Employee Stock Purchase Plan stock issuance	Employee Stock Purchase Plan stock issuance	18,986	20		278				—		—			—				298			Employee Stock Purchase Plan stock issuance	18,986			20			278					—					—					—					298
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(890)	(1)		(23)				—		—			—				(24)			Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	(890)			(1)			(23)					—					—					—					(24)
Noncontrolling interest contributions	Noncontrolling interest contributions	—	—		—				—		—			(140)				(140)			Noncontrolling interest contributions	—			—			—					—					—					(140)					(140)
Cash dividend declared to common shareholders ($0.12 per share)	Cash dividend declared to common shareholders ($0.12 per share)	—	—		—				(2,019)		—			—				(2,019)			Cash dividend declared to common shareholders ($0.12 per share)	—			—			—					(2,019)					—					—					(2,019)
Net income	Net income	—	—		—				13,045		—			140				13,185			Net income	—			—			—					13,045					—					140					13,185
Other comprehensive income	Other comprehensive income	—	—		—				—		2,822			—				2,822			Other comprehensive income	—			—			—					—					2,822					—					2,822
BALANCE - JUNE 30, 2021	BALANCE - JUNE 30, 2021	16,672,511	$	16,673	$	234,390			$	86,917	$	8,309		$	0			$	346,289		BALANCE - JUNE 30, 2021	16,672,511			$	16,673		$	234,390				$	86,917				$	8,309				$	—				$	346,289
Stock based compensation expense																					Stock based compensation expense	—			—			458					—					—					—					458
Exercise of stock options																					Exercise of stock options	1,102			1			14					—					—					—					15
Employee Stock Purchase Plan stock issuance																					Employee Stock Purchase Plan stock issuance	2,795			3			63					—					—					—					66
Restricted stock units vesting, net of taxes withheld and stock and dividend forfeitures																					Restricted stock units vesting, net of taxes withheld and stock and dividend forfeitures	6,520			6			(229)					—					—					—					(223)
Noncontrolling interest contributions																					Noncontrolling interest contributions	—			—			—					—					—					(647)					(647)
Cash dividend declared to common shareholders ($0.12 per share)																					Cash dividend declared to common shareholders ($0.12 per share)	—			—			—					(2,024)					—					—					(2,024)
Net income																					Net income	—			—			—					13,289					—					647					13,936
Other comprehensive income																					Other comprehensive income	—			—			—					—					(1,555)					—					(1,555)
BALANCE - SEPTEMBER 30, 2021																					BALANCE - SEPTEMBER 30, 2021	16,682,928			$	16,683		$	234,696				$	98,182				$	6,754				$	—				$	356,315

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 $ 0 $ 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) $ 0 $ 234,672
Stock based compensation expense — — 485 — — — 485
Exercise of stock options 1,021 1 14 — — — 15
Employee Stock Purchase Plan stock issuance 8,344 8 108 — — — 116
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures 1,325 2 (2) — — — 0
Conversion shares issued to shareholders of First Advantage Bancorp 4,606,419 4,607 47,308 — — — 51,915
Noncontrolling interest contributions — — — — — 388 388
Cash dividend declared to common shareholders ($0.10 per share) — — — (1,667) — — (1,667)
Net income (loss) — — — 7,868 — (388) 7,480
Other comprehensive income — — — — 2,139 — 2,139
BALANCE - JUNE 30, 2020 16,631,604 $ 16,632 $ 232,436 $ 45,351 $ 1,124 $ 0 $ 295,543


	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
Stock based compensation expense	—	—		485		—		—		—		485
Exercise of stock options	1,021	1		14		—		—		—		15
Employee Stock Purchase Plan stock issuance	8,344	8		108		—		—		—		116
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures	1,325	2		(2)		—		—		—		—
Conversion shares issued to shareholders of First Advantage Bancorp	4,606,419	4,607		47,308		—		—		—		51,915
Noncontrolling interest contributions	—	—		—		—		—		388		388
Cash dividend declared to common shareholders ($0.10 per share)	—	—		—		(1,667)		—		—		(1,667)
Net income (loss)	—	—		—		7,868		—		(388)		7,480
Other comprehensive income	—	—		—		—		2,139		—		2,139
BALANCE - JUNE 30, 2020	16,631,604	$	16,632	$	232,436	$	45,351	$	1,124	$	—	$	295,543
Stock based compensation expense	—	—		349		—		—		—		349
Exercise of stock options	4,655	5		61		—		—		—		66
Employee Stock Purchase Plan stock issuance	—	—		—		—		—		—		—
Restricted stock units vesting, net of taxes withheld and stock and dividend forfeitures	(1,687)	(2)		(108)		—		—		—		(110)
Noncontrolling interest contributions	—	—		—		—		—		(374)		(374)
Cash dividend declared to common shareholders ($0.10 per share)	—	—		—		(1,678)		—		—		(1,678)
Net income	—	—		—		11,533		—		374		11,907
Other comprehensive income	—	—		—		—		1,383		—		1,383
BALANCE - SEPTEMBER 30, 2020	16,634,572	$	16,635	$	232,738	$	55,206	$	2,507	$	—	$	307,086

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollar amounts in thousands)


		Six Months Ended June 30,					Nine Months Ended September 30,
OPERATING ACTIVITIES	OPERATING ACTIVITIES	2021		2020		OPERATING ACTIVITIES	2021		2020
Consolidated net income	Consolidated net income	$	25,904	$	6,289	Consolidated net income	$	39,840	$	18,196
Adjustments to reconcile consolidated net income (loss) to net cash (used in) provided by operating activities
Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities						Adjustments to reconcile consolidated net income to net cash (used in) provided by operating activities
Provision for loan losses	Provision for loan losses	0		5,900		Provision for loan losses	—		7,400

Deferred income taxes	Deferred income taxes	407		1,997		Deferred income taxes	1,148		2,003
Loss (gain) on disposal of premises and equipment	Loss (gain) on disposal of premises and equipment	40		(9)		Loss (gain) on disposal of premises and equipment	74		(1)
Depreciation of premises and equipment	Depreciation of premises and equipment	1,455		1,327		Depreciation of premises and equipment	2,127		2,084
Net amortization of securities	Net amortization of securities	844		1,354		Net amortization of securities	1,202		1,980
Net realized gains on sales of securities	Net realized gains on sales of securities	(3,095)		(327)		Net realized gains on sales of securities	(5,514)		(327)
Gains on mortgage loans sold, net	Gains on mortgage loans sold, net	(7,906)		(3,821)		Gains on mortgage loans sold, net	(12,124)		(7,605)
Stock-based compensation expense	Stock-based compensation expense	807		834		Stock-based compensation expense	1,265		1,183
Gain on other real estate	Gain on other real estate	(14)		(25)		Gain on other real estate	(33)		(24)
Provision for losses on other real estate						Provision for losses on other real estate	98		—
Earnings on bank-owned life insurance	Earnings on bank-owned life insurance	(991)		(687)		Earnings on bank-owned life insurance	(3,172)		(1,073)
Mortgage loans originated for resale	Mortgage loans originated for resale	(593,801)		(184,146)		Mortgage loans originated for resale	(699,551)		(327,521)
Proceeds from sale of mortgage loans	Proceeds from sale of mortgage loans	519,813		129,742		Proceeds from sale of mortgage loans	796,656		278,893
Right of use asset amortization	Right of use asset amortization	1,304		1,224		Right of use asset amortization	1,951		1,224
Other accretion, net of other amortization	Other accretion, net of other amortization	(2,378)		(4,875)		Other accretion, net of other amortization	(2,827)		(8,256)
Change in	Change in					Change in
Accrued interest receivable	Accrued interest receivable	397		(3,058)		Accrued interest receivable	515		(4,094)
Other assets	Other assets	(2,862)		(3,441)		Other assets	(3,729)		(3,794)
Accrued interest payable	Accrued interest payable	(604)		(1,170)		Accrued interest payable	(269)		(526)
Other liabilities	Other liabilities	(4,094)		(6,512)		Other liabilities	640		4,367
TOTAL ADJUSTMENTS	TOTAL ADJUSTMENTS	(90,678)		(65,693)		TOTAL ADJUSTMENTS	78,457		(54,087)
NET CASH USED IN OPERATING ACTIVITIES		(64,774)		(59,404)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES						NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	118,297		(35,891)
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Cash (used in) received from acquisitions, net	Cash (used in) received from acquisitions, net	0		(8,500)		Cash (used in) received from acquisitions, net	—		(8,500)
Activities in available for sale securities	Activities in available for sale securities					Activities in available for sale securities
Purchases	Purchases	(48,070)		(6,000)		Purchases	(68,164)		(31,179)
Sales	Sales	35,751		103,668		Sales	58,855		103,901
Maturities, prepayments and calls	Maturities, prepayments and calls	1,779		9,635		Maturities, prepayments and calls	8,730		10,370
Redemptions (purchases) of restricted equity securities	Redemptions (purchases) of restricted equity securities	781		(2,009)		Redemptions (purchases) of restricted equity securities	781		(1,867)
Net change in loans	Net change in loans	(16,443)		(108,983)		Net change in loans	(84,218)		(146,777)
Purchase of premises and equipment	Purchase of premises and equipment	(261)		(1,896)		Purchase of premises and equipment	(297)		(2,709)
Proceeds from sale of premises and equipment	Proceeds from sale of premises and equipment	56		90		Proceeds from sale of premises and equipment	51		257
Proceeds from sale of other real estate	Proceeds from sale of other real estate	62		889		Proceeds from sale of other real estate	126		2,273

NET CASH USED IN INVESTING ACTIVITIES	NET CASH USED IN INVESTING ACTIVITIES	(26,345)		(13,106)		NET CASH USED IN INVESTING ACTIVITIES	(84,136)		(74,231)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net change in deposits	Net change in deposits	50,642		127,398		Net change in deposits	(31,493)		163,839
Proceeds from Federal Home Loan Bank advances	Proceeds from Federal Home Loan Bank advances	346,962		313,898		Proceeds from Federal Home Loan Bank advances	423,000		444,000
Payments on Federal Home Loan Bank advances	Payments on Federal Home Loan Bank advances	(340,962)		(324,515)		Payments on Federal Home Loan Bank advances	(433,000)		(463,156)

Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares	Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares	271		66		Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares	129		22
Noncontrolling interest contributions	Noncontrolling interest contributions	(710)		1,364		Noncontrolling interest contributions	(1,357)		990
Cash dividends paid on common stock	Cash dividends paid on common stock	(4,034)		(2,874)		Cash dividends paid on common stock	(6,058)		(4,550)
NET CASH PROVIDED BY FINANCING ACTIVITIES		52,169		115,337
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES						NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(48,779)		146,145
NET CHANGE IN CASH AND CASH EQUIVALENTS	NET CHANGE IN CASH AND CASH EQUIVALENTS	(38,950)		42,827		NET CHANGE IN CASH AND CASH EQUIVALENTS	(14,618)		36,023
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	95,045		51,649		CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	95,045		51,649
CASH AND CASH EQUIVALENTS - END OF PERIOD	CASH AND CASH EQUIVALENTS - END OF PERIOD	$	56,095	$	94,476	CASH AND CASH EQUIVALENTS - END OF PERIOD	$	80,427	$	87,672

See accompanying notes to consolidated financial statements.

RELIANT BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollar amounts in thousands)


		Six Months Ended June 30,					Nine Months Ended September 30,
		2021		2020			2021		2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for	Cash paid during the period for					Cash paid during the period for
Interest	Interest	$	11,207	$	12,382	Interest	$	15,752	$	20,508
Income taxes	Income taxes	5,760		31		Income taxes	7,790		4,565

Supplemental disclosures of non-cash transactions	Supplemental disclosures of non-cash transactions					Supplemental disclosures of non-cash transactions
Unrealized (gain) loss on securities available-for-sale		$	(2,749)	$	2,745
Unrealized (loss) gain on securities available-for-sale						Unrealized (loss) gain on securities available-for-sale	$	(7,128)	$	4,039
Unrealized gain (loss) on derivatives	Unrealized gain (loss) on derivatives	5,563		(8,087)		Unrealized gain (loss) on derivatives	7,836		(7,508)
Change in due to/from noncontrolling interest	Change in due to/from noncontrolling interest	(710)		1,364		Change in due to/from noncontrolling interest	(1,357)		990
Bank facilities no longer in use transferred to other real estate from premises and equipment	Bank facilities no longer in use transferred to other real estate from premises and equipment	990		0		Bank facilities no longer in use transferred to other real estate from premises and equipment	1,988		—
Loans foreclosed and transferred to other real estate	Loans foreclosed and transferred to other real estate	45		0		Loans foreclosed and transferred to other real estate	45		197
Right of use assets obtained in exchange for operating lease liabilities	Right of use assets obtained in exchange for operating lease liabilities	945		11,973		Right of use assets obtained in exchange for operating lease liabilities	1,302		11,973
BOLI proceeds receivable recognized in income						BOLI proceeds receivable recognized in income	2,699		—

See accompanying notes to consolidated financial statements.

Table of Contents

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~~bank holding company under the Bank Holding Company Act of 1956, as amended ("Bank Holding Company Act"). Reliant Bancorp has elected under the Bank Holding Company Act to be a financial holding company. 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.

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 11 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.

Proposed Merger with United Community Banks, Inc.

On July 14, 2021, United Community Banks, Inc. (NASDAQGS: UCBI) (“United”) and Reliant Bancorp announced the execution of a definitive merger agreement pursuant to which United will acquire Reliant Bancorp in an all-stock transaction with an aggregate value of approximately $517 million, or $30.58 per share of Reliant Bancorp common stock, based on United’s closing stock price of $31.07 on July 13, 2021. This agreement is subject to both regulatory and Reliant Bancorp shareholder approval. The transaction is expected to close in the first quarter of 2022.

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 ~~June~~September 30, 2021, and for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, included herein have not been audited. The accounting and reporting policies of the Company conform to U.S. GAAP and Article 8 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures made are adequate to make the information not misleading.

Table of Contents

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

~~Table of Contents~~

Recently Adopted Accounting Pronouncements

Information about certain issued accounting standards updates is presented below. Also refer to Note 1 - Summary of Significant Accounting Policies, 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 ~~June~~September 30, 2021 and December 31, 2020 were as follows:


		June 30, 2021									September 30, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U. S. Treasury and other U. S. government agencies	U. S. Treasury and other U. S. government agencies	$	222	$	0	$	0	$	222	U. S. Treasury and other U. S. government agencies	$	218	$	—	$	—	$	218
State and municipal	State and municipal	174,093		13,611		(170)		187,534		State and municipal	161,733		10,039		(801)		170,971
Corporate bonds	Corporate bonds	27,000		1,123		(41)		28,082		Corporate bonds	27,000		1,160		(8)		28,152
Mortgage-backed securities - Residential	Mortgage-backed securities - Residential	47,908		392		(56)		48,244		Mortgage-backed securities - Residential	52,736		295		(208)		52,823
Asset-backed securities	Asset-backed securities	2,634		1		(22)		2,613		Asset-backed securities	2,270		1		(19)		2,252

Total	Total	$	251,857	$	15,127	$	(289)	$	266,695	Total	$	243,957	$	11,495	$	(1,036)	$	254,416


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

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

Securities pledged at ~~June~~September 30, 2021 and December 31, 2020 had a carrying amount of ~~$42,110~~$35,376 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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Proceeds	Proceeds	$	33,955	$	47,332	$	35,751	$	103,668	Proceeds	$	23,104	$	233	$	58,855	$	103,901
Gross gains	Gross gains	2,966		439		3,095		439		Gross gains	2,419		371		5,514		810
Gross losses	Gross losses	0		(112)		0		(112)		Gross losses	—		(371)		—		(483)

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


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
Due within one year	Due within one year	$	222	$	223	Due within one year	$	218	$	218
Due in one to five years	Due in one to five years	2,085		2,129		Due in one to five years	2,085		2,120
Due in five to ten years	Due in five to ten years	33,773		35,729		Due in five to ten years	31,473		33,239
Due after ten years	Due after ten years	165,235		177,757		Due after ten years	155,175		163,764
Mortgage-backed securities	Mortgage-backed securities	47,908		48,244		Mortgage-backed securities	52,736		52,823
Asset-backed securities	Asset-backed securities	2,634		2,613		Asset-backed securities	2,270		2,252
Total	Total	$	251,857	$	266,695	Total	$	243,957	$	254,416

The following table shows available for sale securities with unrealized losses and their estimated fair value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of ~~June~~September 30, 2021 and December 31, 2020, respectively:


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

State and municipal	State and municipal	$	21,952	$	170	$	0	$	0	$	21,952	$	170	State and municipal	$	37,064	$	801	$	—	$	—	$	37,064	$	801
Corporate bonds	Corporate bonds	5,209		41		0		0		5,209		41		Corporate bonds	1,742		8		—		—		1,742		8
Mortgage-backed securities - Residential	Mortgage-backed securities - Residential	16,019		55		76		1		16,095		56		Mortgage-backed securities - Residential	33,283		207		74		1		33,357		208
Asset-backed securities	Asset-backed securities	0		0		2,424		22		2,424		22		Asset-backed securities	—		—		2,045		19		2,045		19
Total temporarily impaired	Total temporarily impaired	$	43,180	$	266	$	2,500	$	23	$	45,680	$	289	Total temporarily impaired	$	72,089	$	1,016	$	2,119	$	20	$	74,208	$	1,036


December 31, 2020	December 31, 2020													December 31, 2020

State and municipal	State and municipal	$	9,475	$	77	$	0	$	0	$	9,475	$	77	State and municipal	$	9,475	$	77	$	—	$	—	$	9,475	$	77
Corporate bonds	Corporate bonds	5,716		34		0		0		5,716		34		Corporate bonds	5,716		34		—		—		5,716		34
Mortgage-backed securities - Residential	Mortgage-backed securities - Residential	5,024		1		92		1		5,116		2		Mortgage-backed securities - Residential	5,024		1		92		1		5,116		2
Asset-backed securities	Asset-backed securities	729		2		2,013		20		2,742		22		Asset-backed securities	729		2		2,013		20		2,742		22
Total temporarily impaired	Total temporarily impaired	$	20,944	$	114	$	2,105	$	21	$	23,049	$	135	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 ~~June~~September 30, 2021. There were 3448 and 22 securities in an unrealized loss position as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

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NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

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


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	435,093	$	459,739	Commercial, Industrial and Agricultural	$	450,710	$	459,739
Real Estate	Real Estate					Real Estate
1-4 Family Residential	1-4 Family Residential	326,768		323,473		1-4 Family Residential	310,855		323,473
1-4 Family HELOC	1-4 Family HELOC	100,614		100,525		1-4 Family HELOC	100,895		100,525
Multi-family and Commercial	Multi-family and Commercial	831,093		834,000		Multi-family and Commercial	873,265		834,000
Construction, Land Development and Farmland	Construction, Land Development and Farmland	397,557		365,058		Construction, Land Development and Farmland	417,258		365,058
Consumer	Consumer	225,433		213,863		Consumer	234,734		213,863
Other	Other	7,614		8,669		Other	5,298		8,669
Gross loans	Gross loans	2,324,172		2,305,327		Gross loans	2,393,015		2,305,327
Less: Deferred loan fees	Less: Deferred loan fees	3,102		4,544		Less: Deferred loan fees	3,182		4,544
Less: Allowance for loan losses	Less: Allowance for loan losses	20,894		20,636		Less: Allowance for loan losses	20,897		20,636
Loans, net	Loans, net	$	2,300,176	$	2,280,147	Loans, net	$	2,368,936	$	2,280,147

At ~~June~~September 30, 2021 and December 31, 2020, loans are recorded net of purchase discounts of ~~$12,980~~$11,993 and $16,634, respectively.

The Company pledged loans to the FHLB at ~~June~~September 30, 2021 and December 31, 2020 of ~~$877,732~~$857,394 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 ~~June~~September 30, 2021 and December 31, 2020:


		Pass		Special Mention		Substandard		Total			Pass		Special Mention		Substandard		Total
June 30, 2021
September 30, 2021										September 30, 2021
Loans excluding PCI	Loans excluding PCI									Loans excluding PCI
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	432,841	$	1,098	$	996	$	434,935	Commercial, Industrial and Agricultural	$	448,003	$	1,077	$	1,573	$	450,653
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	323,591		961		1,572		326,124		1-4 Family Residential Real Estate	308,977		1		1,234		310,212
1-4 Family HELOC	1-4 Family HELOC	100,315		0		285		100,600		1-4 Family HELOC	100,529		—		352		100,881
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	823,945		1,741		4,856		830,542		Multi-family and Commercial Real Estate	867,351		257		5,144		872,752
Construction, Land Development and Farmland	Construction, Land Development and Farmland	391,793		0		5,036		396,829		Construction, Land Development and Farmland	415,235		—		1,304		416,539
Consumer	Consumer	222,959		2		1,589		224,550		Consumer	232,185		1		1,747		233,933
Other	Other	7,614		0		0		7,614		Other	5,298		—		—		5,298
Total loans excluding PCI	Total loans excluding PCI	$	2,303,058	$	3,802	$	14,334	$	2,321,194	Total loans excluding PCI	$	2,377,578	$	1,336	$	11,354	$	2,390,268

Total PCI loans	Total PCI loans	$	967	$	0	$	2,011	$	2,978	Total PCI loans	$	1,031	$	—	$	1,716	$	2,747
Total loans	Total loans	$	2,304,025	$	3,802	$	16,345	$	2,324,172	Total loans	$	2,378,609	$	1,336	$	13,070	$	2,393,015

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

Total PCI loans	Total PCI loans	$	998	$	0	$	2,589	$	3,587	Total PCI loans	$	998	$	—	$	2,589	$	3,587
Total loans	Total loans	$	2,284,528	$	3,703	$	17,096	$	2,305,327	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 ~~June~~September 30, 2021 or December 31, 2020.

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


		Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total			Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total
Beginning balance at March 31, 2021		$	6,072	$	2,438	$	1,110	$	8,065	$	1,905	$	1,163	$	32	$	20,785
Beginning balance at June 30, 2021																		Beginning balance at June 30, 2021	$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894
Charge-offs	Charge-offs	0		(14)		0		0		0		(195)		0		(209)		Charge-offs	(3)		(42)		—		—		—		(150)		—		(195)
Recoveries	Recoveries	50		14		3		206		6		39		0		318		Recoveries	14		58		2		42		1		81		—		198
Provision	Provision	492		(515)		(503)		227		100		215		(16)		0		Provision	362		(642)		(2)		66		78		143		(5)		—
Ending balance at June 30, 2021		$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894
Ending balance at September 30, 2021																		Ending balance at September 30, 2021	$	6,987	$	1,297	$	610	$	8,606	$	2,090	$	1,296	$	11	$	20,897

Beginning balance at March 31, 2020		$	3,851	$	1,488	$	873	$	6,760	$	1,836	$	298	$	15	$	15,121
Beginning balance at June 30, 2020																		Beginning balance at June 30, 2020	$	4,675	$	1,454	$	975	$	8,407	$	2,126	$	584	$	16	$	18,237
Charge-offs	Charge-offs	(245)		(60)		(98)		0		0		(264)		0		(667)		Charge-offs	—		(8)		—		—		—		(60)		—		(68)
Recoveries	Recoveries	9		736		2		8		4		24		0		783		Recoveries	88		22		12		9		4		30		—		165
Provision	Provision	1,060		(710)		198		1,639		286		526		1		3,000		Provision	249		821		498		(169)		(175)		272		4		1,500
Ending balance at June 30, 2020		$	4,675	$	1,454	$	975	$	8,407	$	2,126	$	584	$	16	$	18,237
Ending balance at September 30, 2020																		Ending balance at September 30, 2020	$	5,012	$	2,289	$	1,485	$	8,247	$	1,955	$	826	$	20	$	19,834

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		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			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	Beginning balance at December 31, 2020	$	5,441	$	2,445	$	1,416	$	8,535	$	1,841	$	928	$	30	$	20,636	Beginning balance at December 31, 2020	$	5,441	$	2,445	$	1,416	$	8,535	$	1,841	$	928	$	30	$	20,636
Charge-offs	Charge-offs	(32)		(21)		0		0		0		(454)		0		(507)		Charge-offs	(35)		(63)		—		—		—		(604)		—		(702)
Recoveries	Recoveries	301		96		5		215		91		57		0		765		Recoveries	315		154		7		257		92		138		—		963
Provision	Provision	904		(597)		(811)		(252)		79		691		(14)		0		Provision	1,266		(1,239)		(813)		(186)		157		834		(19)		—
Ending balance at June 30, 2021		$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894
Ending balance at September 30, 2021																		Ending balance at September 30, 2021	$	6,987	$	1,297	$	610	$	8,606	$	2,090	$	1,296	$	11	$	20,897

Beginning balance at December 31, 2019	Beginning balance at December 31, 2019	$	2,529	$	1,280	$	624	$	5,285	$	2,649	$	177	$	34	$	12,578	Beginning balance at December 31, 2019	$	2,529	$	1,280	$	624	$	5,285	$	2,649	$	177	$	34	$	12,578
Charge-offs	Charge-offs	(539)		(60)		(98)		0		(114)		(295)		0		(1,106)		Charge-offs	(507)		(68)		(98)		—		(114)		(355)		—		(1,142)
Recoveries	Recoveries	70		747		3		11		4		30		0		865		Recoveries	126		769		15		20		8		60		—		998
Provision	Provision	2,615		(513)		446		3,111		(413)		672		(18)		5,900		Provision	2,864		308		944		2,942		(588)		944		(14)		7,400
Ending balance at June 30, 2020		$	4,675	$	1,454	$	975	$	8,407	$	2,126	$	584	$	16	$	18,237
Ending balance at September 30, 2020																		Ending balance at September 30, 2020	$	5,012	$	2,289	$	1,485	$	8,247	$	1,955	$	826	$	20	$	19,834

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			Commercial Industrial and Agricultural		1-4 Family Residential Real Estate		1-4 Family HELOC		Multi-family and Commercial Real Estate		Construction Land Development and Farmland		Consumer		Other		Total
June 30, 2021
September 30, 2021																		September 30, 2021
Allowance for loan losses	Allowance for loan losses																	Allowance for loan losses
Individually evaluated for impairment	Individually evaluated for impairment	$	847	$	0	$	0	$	0	$	0	$	5	$	0	$	852	Individually evaluated for impairment	$	847	$	—	$	—	$	—	$	67	$	4	$	—	$	918
Acquired with credit impairment	Acquired with credit impairment	0		0		0		0		0		0		0		0		Acquired with credit impairment	—		—		—		—		—		—		—		—
Collectively evaluated for impairment	Collectively evaluated for impairment	5,767		1,923		610		8,498		2,011		1,217		16		20,042		Collectively evaluated for impairment	6,140		1,297		610		8,606		2,023		1,292		11		19,979
Total	Total	$	6,614	$	1,923	$	610	$	8,498	$	2,011	$	1,222	$	16	$	20,894	Total	$	6,987	$	1,297	$	610	$	8,606	$	2,090	$	1,296	$	11	$	20,897
Loans	Loans																	Loans
Individually evaluated for impairment	Individually evaluated for impairment	$	934	$	1,428	$	284	$	4,856	$	5,506	$	1,587	$	0	$	14,595	Individually evaluated for impairment	$	1,433	$	1,371	$	352	$	5,390	$	1,750	$	1,747	$	—	$	12,043
Acquired with credit impairment	Acquired with credit impairment	158		644		14		551		728		883		0		2,978		Acquired with credit impairment	57		643		14		513		719		801		—		2,747
Collectively evaluated for impairment	Collectively evaluated for impairment	434,001		324,696		100,316		825,686		391,323		222,963		7,614		2,306,599		Collectively evaluated for impairment	449,220		308,841		100,529		867,362		414,789		232,186		5,298		2,378,225
Total	Total	$	435,093	$	326,768	$	100,614	$	831,093	$	397,557	$	225,433	$	7,614	$	2,324,172	Total	$	450,710	$	310,855	$	100,895	$	873,265	$	417,258	$	234,734	$	5,298	$	2,393,015

Table of Contents


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

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


		Current and Accruing		30-89 Days Past Due		90+ Days Past Due and Accruing Interest		Nonaccrual Loans		Total Loans			Current and Accruing		30-89 Days Past Due		90+ Days Past Due and Accruing Interest		Nonaccrual Loans		Total Loans
June 30, 2021
September 30, 2021												September 30, 2021
Loans excluding PCI	Loans excluding PCI											Loans excluding PCI
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	434,662	$	0	$	0	$	273	$	434,935	Commercial, Industrial and Agricultural	$	450,349	$	19	$	—	$	285	$	450,653
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	325,100		385		0		639		326,124		1-4 Family Residential Real Estate	308,897		503		—		812		310,212
1-4 Family HELOC	1-4 Family HELOC	100,450		150		0		0		100,600		1-4 Family HELOC	100,777		—		—		104		100,881
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	829,306		0		0		1,236		830,542		Multi-family and Commercial Real Estate	871,921		—		—		831		872,752
Construction, Land Development and Farmland	Construction, Land Development and Farmland	395,711		0		0		1,118		396,829		Construction, Land Development and Farmland	415,350		144		—		1,045		416,539
Consumer	Consumer	222,527		1,293		9		721		224,550		Consumer	231,504		1,347		5		1,077		233,933
Other	Other	7,614		0		0		0		7,614		Other	5,298		—		—		—		5,298
Total loans excluding PCI	Total loans excluding PCI	$	2,315,370	$	1,828	$	9	$	3,987	$	2,321,194	Total loans excluding PCI	$	2,384,096	$	2,013	$	5	$	4,154	$	2,390,268

Total PCI loans	Total PCI loans	$	1,619	$	0	$	0	$	1,359	$	2,978	Total PCI loans	$	1,580	$	24	$	—	$	1,143	$	2,747
Total loans	Total loans	$	2,316,989	$	1,828	$	9	$	5,346	$	2,324,172	Total loans	$	2,385,676	$	2,037	$	5	$	5,297	$	2,393,015

Table of Contents


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

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

Approximately ~~$2,136~~$1,973 and $2,438 of nonaccrual loans as of ~~June~~September 30, 2021 and December 31, 2020, respectively, were performing pursuant to their contractual terms at those dates. Mortgage loans held for sale are excluded from the loan tables herein and have $977 and $630 on nonaccrual as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

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:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	889	$	919	Commercial, Industrial and Agricultural	$	782	$	919
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	885		1,004		1-4 Family Residential Real Estate	868		1,004
1-4 Family HELOC	1-4 Family HELOC	19		19		1-4 Family HELOC	19		19
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	1,218		1,325		Multi-family and Commercial Real Estate	1,175		1,325
Construction, Land Development and Farmland	Construction, Land Development and Farmland	944		992		Construction, Land Development and Farmland	935		992
Consumer	Consumer	1,552		1,924		Consumer	1,426		1,924
Total outstanding balance	Total outstanding balance	5,507		6,183		Total outstanding balance	5,205		6,183
Less remaining purchase discount	Less remaining purchase discount	2,529		2,596		Less remaining purchase discount	2,458		2,596
Allowance for loan losses	Allowance for loan losses	0		0		Allowance for loan losses	—		—
Carrying amount, net of allowance for loan losses and remaining purchase discounts	Carrying amount, net of allowance for loan losses and remaining purchase discounts	$	2,978	$	3,587	Carrying amount, net of allowance for loan losses and remaining purchase discounts	$	2,747	$	3,587

Table of Contents

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


		2021		2020			2021		2020
Balance at January 1,	Balance at January 1,	$	580	$	98	Balance at January 1,	$	580	$	98
New loans purchased	New loans purchased	0		870		New loans purchased	—		870
Accretion income	Accretion income	(38)		(80)		Accretion income	(52)		(137)
Balance at June 30,		$	542	$	888
Balance at September 30,						Balance at September 30,	$	528	$	831

On January 1, 2020 and April 1, 2020, the Company completed the TCB Holdings and FABK Transactions, respectively (see Note 11 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

Table of Contents

Impaired Loans

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


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance			Unpaid Principal Balance		Recorded Investment		Related Allowance		Unpaid Principal Balance		Recorded Investment		Related Allowance
With no related allowance recorded	With no related allowance recorded													With no related allowance recorded
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	1,294	$	245	$	—	$	1,400	$	367	$	—	Commercial, Industrial and Agricultural	$	1,691	$	642	$	—	$	1,400	$	367	$	—
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	2,490		2,072		—		3,034		2,473		—		1-4 Family Residential Real Estate	2,419		2,015		—		3,034		2,473		—
1-4 Family HELOC	1-4 Family HELOC	311		298		—		130		124		—		1-4 Family HELOC	378		366		—		130		124		—
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	6,856		5,407		—		4,549		3,161		—		Multi-family and Commercial Real Estate	7,141		5,903		—		4,549		3,161		—
Construction, Land Development and Farmland	Construction, Land Development and Farmland	6,619		6,234		—		6,809		6,452		—		Construction, Land Development and Farmland	2,617		2,210		—		6,809		6,452		—
Consumer	Consumer	3,716		2,433		—		3,590		2,348		—		Consumer	3,848		2,512		—		3,590		2,348		—
Subtotal	Subtotal	$	21,286	$	16,689	$	—	$	19,512	$	14,925	$	—	Subtotal	$	18,094	$	13,648	$	—	$	19,512	$	14,925	$	—
With an allowance recorded	With an allowance recorded													With an allowance recorded
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	859	$	847	$	847	$	859	$	847	$	717	Commercial, Industrial and Agricultural	$	859	$	847	$	847	$	859	$	847	$	717
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	0		0		0		104		104		18		1-4 Family Residential Real Estate	—		—		—		104		104		18
1-4 Family HELOC	1-4 Family HELOC	0		0		0		0		0		0		1-4 Family HELOC	—		—		—		—		—		—
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	0		0		0		0		0		0		Multi-family and Commercial Real Estate	—		—		—		—		—		—
Construction, Land Development and Farmland	Construction, Land Development and Farmland	0		0		0		0		0		0		Construction, Land Development and Farmland	259		259		67		—		—		—
Consumer	Consumer	40		37		5		34		34		13		Consumer	39		36		4		34		34		13
Subtotal	Subtotal	899		884		852		997		985		748		Subtotal	1,157		1,142		918		997		985		748
Total	Total	$	22,185	$	17,573	$	852	$	20,509	$	15,910	$	748	Total	$	19,251	$	14,790	$	918	$	20,509	$	15,910	$	748

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


		Three months ended June 30,								Six months ended June 30,									Three months ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020					2021				2020				2021				2020
		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized			Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With no allowance	With no allowance																	With no allowance
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	206	$	2	$	491	$	9	$	260	$	10	$	450	$	14	Commercial, Industrial and Agricultural	$	444	$	6	$	594	$	42	$	355	$	26	$	354	$	56
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	2,348		34		3,086		60		2,389		64		2,881		100		1-4 Family Residential Real Estate	2,044		31		3,002		54		2,296		109		2,631		154
1-4 Family HELOC	1-4 Family HELOC	299		3		382		0		241		6		296		0		1-4 Family HELOC	332		3		331		—		272		11		367		—
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	4,949		74		4,575		162		4,353		179		4,103		215		Multi-family and Commercial Real Estate	5,655		86		4,375		63		4,741		271		4,138		278
Construction, Land Development and Farmland	Construction, Land Development and Farmland	6,518		76		2,730		33		6,496		186		3,971		87		Construction, Land Development and Farmland	4,222		42		2,949		28		5,424		114		2,471		115
Consumer	Consumer	2,393		88		1,177		136		2,378		177		1,567		137		Consumer	2,473		83		2,118		68		2,411		275		1,076		205
Subtotal	Subtotal	$	16,713	$	277	$	12,441	$	400	$	16,117	$	622	$	13,268	$	553	Subtotal	$	15,170	$	251	$	13,369	$	255	$	15,499	$	806	$	11,037	$	808

Table of Contents


		Three months ended June 30,								Six months ended June 30,									Three months ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020					2021				2020				2021				2020
		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized			Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With an allowance recorded	With an allowance recorded																	With an allowance recorded
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	847	$	6	$	923	$	6	$	847	$	12	$	898	$	26	Commercial, Industrial and Agricultural	$	847	$	6	$	947	$	6	$	847	$	18	$	976	$	32
1-4 Family Residential Real Estate	1-4 Family Residential Real Estate	0		0		0		0		35		0		35		0		1-4 Family Residential Real Estate	—		—		—		—		26		—		—		—
1-4 Family HELOC	1-4 Family HELOC	0		0		0		0		0		0		0		0		1-4 Family HELOC	—		—		—		—		—		—		—		—
Multi-family and Commercial Real Estate	Multi-family and Commercial Real Estate	75		0		0		0		50		0		0		0		Multi-family and Commercial Real Estate	50		—		—		—		38		—		—		—
Construction, Land Development and Farmland	Construction, Land Development and Farmland	0		0		0		0		0		0		0		0		Construction, Land Development and Farmland	86		3		—		—		65		4		43		—
Consumer	Consumer	51		1		2		0		45		1		13		0		Consumer	46		1		—		—		43		2		1		—
Subtotal	Subtotal	$	973	$	7	$	925	$	6	$	977	$	13	$	946	$	26	Subtotal	$	1,029	$	10	$	947	$	6	$	1,019	$	24	$	1,020	$	32
Total	Total	$	17,686	$	284	$	13,366	$	406	$	17,094	$	635	$	14,214	$	579	Total	$	16,199	$	261	$	14,316	$	261	$	16,518	$	830	$	12,057	$	840

Restructured Loans

As of ~~June~~September 30, 2021 and December 31, 2020, the Company had recorded investments in troubled debt restructurings (“TDRs”) of ~~$3,490~~$2,903 and $4,236, respectively. The Company did not allocate a specific allowance for those loans at ~~June~~September 30, 2021 and December 31, 2020 and there were no commitments to lend additional amounts. Loans accounted for as TDR include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. Loans accounted for as TDR are individually evaluated for impairment.

There were 0no TDR modifications in the three and nine months ending ~~June~~September 30, ~~2021.~~2021 or the three months ended September 30, 2020. Modifications made during the ~~six~~nine months ended ~~June~~September 30, 2020 are displayed below.


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

Programs as part of COVID-19 Relief

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

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June 30, 2021
Active Deferrals % of Loans
Multi-family and Commercial $ 54,984 2.37 %
Construction, Land Development and Farmland 13,000 0.56 %
Total $ 67,984 2.93 %


	September 30, 2021
	Active Deferrals		% of Loans
Multi-family and Commercial	$	67,372	2.82	%

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 ~~June~~September 30, 2021, the Company had 847 PPP loans outstanding amounting to ~~$14.0 million~~$292 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 ~~June~~September 30, 2021, ~~$69.4 million~~$83,075 in PPP loans had cumulatively been forgiven of the ~~$83.4 million~~$83,366 in loan originations since the CARES Act’s inception.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Interest	Interest	$	58	$	148	$	197	$	148	Interest	$	19	$	210	$	216	$	358
Fees	Fees	729		284		1,632		284		Fees	176		455		1,808		739
Total PPP Income	Total PPP Income	$	787	$	432	$	1,829	$	432	Total PPP Income	$	195	$	665	$	2,024	$	1,097

NOTE 4 - 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 ~~$110,000~~$10,000 as of ~~June~~September 30, 2021 were designated as cash flow hedges of certain ~~short-term interest-bearing liabilities and~~variable rate 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. Losses of ~~$2,859~~$2,290 and $5,149 were reclassified from accumulated other comprehensive income into net income ~~during the periods presented~~ related to the ~~$50~~$100 million and $150 million in swaps which were ~~terminated.~~terminated during the three and nine months ended September 30, 2021, respectively.

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


Notional amounts	$	~~110,000~~10,000
Weighted average pay rates	~~1.63~~5.19		%
Weighted average receive rates	~~0.37~~2.38		%
Weighted average maturity	~~2.88~~1.71 years
Unrealized losses	$	~~2,645~~468

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


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

Included in other liabilities:	Included in other liabilities:									Included in other liabilities:
Interest rate swaps related to:	Interest rate swaps related to:									Interest rate swaps related to:
Subordinated debentures	Subordinated debentures	$	10,000	$	(532)	$	10,000	$	(690)	Subordinated debentures	$	10,000	$	(468)	$	10,000	$	(690)
Short-term interest-bearing liabilities	Short-term interest-bearing liabilities	100,000		(2,113)		150,000		(6,967)		Short-term interest-bearing liabilities	—		—		150,000		(6,967)
Total included in other liabilities	Total included in other liabilities	$	110,000	$	(2,645)	$	160,000	$	(7,657)	Total included in other liabilities	$	10,000	$	(468)	$	160,000	$	(7,657)

The following table presents the net gains (losses) recorded in accumulated other comprehensive income net of tax, relating to the cash flow derivative instruments for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively:


		Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)									Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)
		Three months ended June 30,				Six months ended June 30,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Interest rate swaps - subordinate debentures	Interest rate swaps - subordinate debentures	$	49	$	8	$	117	$	(281)	Interest rate swaps - subordinate debentures	$	47	$	51	$	164	$	(230)
Interest rate swaps - interest-bearing liabilities	Interest rate swaps - interest-bearing liabilities	2,560		(810)		3,585		(4,856)		Interest rate swaps - interest-bearing liabilities	1,562		324		5,146		(4,532)
		$	2,609	$	(802)	$	3,702	$	(5,137)		$	1,609	$	375	$	5,310	$	(4,762)

Fair Value Hedges

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


Notional amounts	$	~~17,925~~17,090
Weighted average pay rates	~~3.67~~3.68		%
Weighted average receive rates	~~1.13~~1.10		%
Weighted average maturity	~~7.58~~7.44 years
Unrealized losses	$	~~944~~848

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


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

Included in other liabilities:	Included in other liabilities:									Included in other liabilities:
Interest rate swaps related to investments	Interest rate swaps related to investments	17,925		(944)		18,525		(1,495)		Interest rate swaps related to investments	17,090		(848)		18,525		(1,495)
Total included in other liabilities	Total included in other liabilities	$	17,925	$	(944)	$	18,525	$	(1,495)	Total included in other liabilities	$	17,090	$	(848)	$	18,525	$	(1,495)

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


			Three months ended June 30,				Six months ended June 30,						Three months ended September 30,				Nine months ended September 30,
Item	Item	Location	2021		2020		2021		2020		Item	Location	2021		2020		2021		2020
Interest rate swaps - securities	Interest rate swaps - securities	Interest on investment securities, nontaxable	$	(117)	$	(78)	$	(238)	$	(125)	Interest rate swaps - securities	Interest on investment securities, nontaxable	$	(118)	$	(118)	$	(356)	$	(243)
Hedged item - securities	Hedged item - securities	Interest on investment securities, nontaxable	$	117	$	78	$	238	$	125	Hedged item - securities	Interest on investment securities, nontaxable	$	118	$	118	$	356	$	243

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NOTE 5 - 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 June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Stock-based compensation expense before income taxes	Stock-based compensation expense before income taxes	$	468	$	485	$	807	$	834	Stock-based compensation expense before income taxes	$	458	$	349	$	1,265	$	1,183
Less: deferred tax benefit	Less: deferred tax benefit	(122)		(127)		(211)		(218)		Less: deferred tax benefit	(120)		(91)		(331)		(309)
Reduction of net income	Reduction of net income	$	346	$	358	$	596	$	616	Reduction of net income	$	338	$	258	$	934	$	874

Common Stock Options

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


		Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value			Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2020	Outstanding at December 31, 2020	116,621	$	18.97	5.87 years	$	304	Outstanding at December 31, 2020	116,621	$	18.97	5.87 years	$	304
Granted	Granted	0	$	0				Granted	—	$	—
Exercised	Exercised	(600)	$	13.65		4		Exercised	(1,702)	$	14.36		20
Forfeited or expired	Forfeited or expired	(5,600)	$	13.42				Forfeited or expired	(5,600)	$	13.42
Outstanding at June 30, 2021		110,421	$	19.28	5.66 years	$	938
Exercisable at June 30, 2021		75,721	$	16.94	4.90 years	$	819
Outstanding at September 30, 2021								Outstanding at September 30, 2021	109,319	$	19.33	5.32 years	$	1,340
Exercisable at September 30, 2021								Exercisable at September 30, 2021	86,519	$	17.88	4.81 years	$	1,186

As of ~~June~~September 30, 2021, there was ~~$164~~$144 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 ~~2.51~~2.31 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 ~~six~~nine months ended ~~June~~September 30, 2021:


		Restricted Stock Units			Restricted Stock				Restricted Stock Units			Restricted Stock
		Underlying Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value			Underlying Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1, 2021	Outstanding at January 1, 2021	132,650	$	16.93	40,910	$	26.82	Outstanding at January 1, 2021	132,650	$	16.93	40,910	$	26.82
Granted	Granted	70,655	26.07		0	0		Granted	70,655	26.07		—	—
Vested	Vested	0	0		(5,000)	24.76		Vested	(14,400)	14.81		(35,410)	27.54
Forfeited	Forfeited	(5,500)	16.20		0	0		Forfeited	(9,500)	17.59		—	—
Outstanding at June 30, 2021		197,805	$	20.22	35,910	$	27.10
Outstanding at September 30, 2021								Outstanding at September 30, 2021	179,405	$	20.67	5,500	$	22.17

As of ~~June~~September 30, 2021, there was ~~$2,776~~$2,297 and ~~$52~~$23 of unrecognized compensation cost related to non-vested restricted ~~share~~stock units and restricted stock ~~share awards,~~units, respectively. The cost is expected to be recognized over a weighted-average period of ~~2.39~~2.01 years for the restricted stock units and ~~0.57~~0.62 years for the restricted stock share awards. The total fair value of shares vested during ~~six~~nine months ended ~~June~~September 30, 2021 was ~~$121.~~$1,379.

NOTE 6 - 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 ~~June~~September 30, 2021, the Company and the Bank met all capital adequacy requirements to which they were subject.

Capital amounts and ratios for Reliant Bancorp and the Bank are presented below as of ~~June~~September 30, 2021 and December 31, 2020.


		Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions					Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2021
September 30, 2021														September 30, 2021
Reliant Bancorp	Reliant Bancorp													Reliant Bancorp
Tier I leverage	Tier I leverage	$	285,363	9.47	%	$	120,533	4.00	%	$	150,667	5.00	%	Tier I leverage	$	297,367	10.04	%	$	118,473	4.00	%	$	148,091	5.00	%
Common equity tier I	Common equity tier I	273,553		10.18	%	188,101		7.00	%	174,665		6.50	%	Common equity tier I	285,537		10.52	%	189,996		7.00	%	176,425		6.50	%
Tier I risk-based capital	Tier I risk-based capital	285,363		10.62	%	228,398		8.50	%	214,963		8.00	%	Tier I risk-based capital	297,367		10.95	%	230,833		8.50	%	217,254		8.00	%
Total risk-based capital	Total risk-based capital	365,942		13.62	%	282,114		10.50	%	268,680		10.00	%	Total risk-based capital	377,977		13.92	%	285,112		10.50	%	271,535		10.00	%
Bank	Bank													Bank
Tier I leverage	Tier I leverage	$	334,911	11.14	%	$	120,255	4.00	%	$	150,319	5.00	%	Tier I leverage	$	347,450	11.76	%	$	118,185	4.00	%	$	147,732	5.00	%
Common equity tier I	Common equity tier I	334,911		12.50	%	187,550		7.00	%	174,154		6.50	%	Common equity tier I	347,450		14.10	%	172,493		7.00	%	160,172		6.50	%
Tier I risk-based capital	Tier I risk-based capital	334,911		12.50	%	227,739		8.50	%	214,343		8.00	%	Tier I risk-based capital	347,450		14.10	%	209,456		8.50	%	197,135		8.00	%
Total risk-based capital	Total risk-based capital	356,530		13.30	%	281,471		10.50	%	268,068		10.00	%	Total risk-based capital	369,072		14.98	%	258,695		10.50	%	246,377		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 7 - EARNINGS PER SHARE

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


		Three Months Ended				Six Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					September 30,				September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Basic EPS Computation	Basic EPS Computation									Basic EPS Computation
Net income attributable to common shareholders	Net income attributable to common shareholders	$	13,045	$	7,868	$	25,194	$	7,653	Net income attributable to common shareholders	$	13,289	$	11,533	$	38,483	$	19,186
Weighted average common shares outstanding	Weighted average common shares outstanding	16,616,888		16,496,817		16,616,034		14,196,254		Weighted average common shares outstanding	16,665,155		16,587,274		16,632,587		15,053,087
Basic earnings per common share	Basic earnings per common share	$	0.79	$	0.48	$	1.52	$	0.54	Basic earnings per common share	$	0.80	$	0.70	$	2.31	$	1.27
Diluted EPS Computation	Diluted EPS Computation									Diluted EPS Computation
Net income attributable to common shareholders	Net income attributable to common shareholders	$	13,045	$	7,868	$	25,194	$	7,653	Net income attributable to common shareholders	$	13,289	$	11,533	$	38,483	$	19,186
Weighted average common shares outstanding	Weighted average common shares outstanding	16,616,888		16,496,817		16,616,034		14,196,254		Weighted average common shares outstanding	16,665,155		16,587,274		16,632,587		15,053,087
Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	167,856		32,263		146,613		44,911		Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan	140,002		62,399		144,385		67,616
Adjusted weighted average common shares outstanding	Adjusted weighted average common shares outstanding	16,784,744		16,529,080		16,762,647		14,241,165		Adjusted weighted average common shares outstanding	16,805,157		16,649,673		16,776,972		15,120,703
Diluted earnings per common share	Diluted earnings per common share	$	0.78	$	0.48	$	1.50	$	0.54	Diluted earnings per common share	$	0.79	$	0.69	$	2.29	$	1.27

NOTE 8 - 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.

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Level 2 Inputs to the valuation methodology include:

•Quoted prices for similar assets or liabilities in active markets;

•Quoted prices for identical or similar assets or liabilities in inactive markets;

•Inputs other than quoted prices that are observable for the asset or liability; and

•Inputs that are derived principally from or corroborated by the observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.

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

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

Interest rate swaps: The fair values of interest rate swaps and fair value hedges are determined based on estimated 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 ~~June~~September 30, 2021 and December 31, 2020:


		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
September 30, 2021										September 30, 2021
Assets	Assets									Assets
U. S. Treasury and other U. S. government agencies	U. S. Treasury and other U. S. government agencies	$	222	$	0	$	222	$	0	U. S. Treasury and other U. S. government agencies	$	218	$	—	$	218	$	—
State and municipal	State and municipal	187,534		0		187,534		0		State and municipal	170,971		—		170,971		—
Corporate bonds	Corporate bonds	28,082		0		28,082		0		Corporate bonds	28,152		—		28,152		—
Mortgage-backed securities	Mortgage-backed securities	48,244		0		48,244		0		Mortgage-backed securities	52,823		—		52,823		—
Asset-backed securities	Asset-backed securities	2,613		0		2,613		0		Asset-backed securities	2,252		—		2,252		—

Liabilities	Liabilities									Liabilities
Derivative liabilities	Derivative liabilities	$	3,589	$	0	$	3,589	$	0	Derivative liabilities	$	1,316	$	—	$	1,316	$	—
December 31, 2020	December 31, 2020									December 31, 2020
Assets	Assets									Assets
U. S. Treasury and other U. S. government agencies	U. S. Treasury and other U. S. government agencies	$	48	$	0	$	48	$	0	U. S. Treasury and other U. S. government agencies	$	48	$	—	$	48	$	—
State and municipal	State and municipal	200,988		0		200,988		0		State and municipal	200,988		—		200,988		—
Corporate bonds	Corporate bonds	24,113		0		24,113		0		Corporate bonds	24,113		—		24,113		—
Mortgage-backed securities	Mortgage-backed securities	28,442		0		28,442		0		Mortgage-backed securities	28,442		—		28,442		—
Asset-backed securities	Asset-backed securities	3,062		0		3,062		0		Asset-backed securities	3,062		—		3,062		—

Liabilities	Liabilities									Liabilities
Derivative liabilities	Derivative liabilities	$	9,152	$	0	$	9,152	$	0	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 ~~June~~September 30, 2021 and December 31, 2020:


		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2021
September 30, 2021										September 30, 2021
Assets	Assets									Assets
Impaired loans	Impaired loans	$	16,721	$	0	$	0	$	16,721	Impaired loans	$	13,872	$	—	$	—	$	13,872
Other real estate	Other real estate	2,233		0		0		2,233		Other real estate	3,088		—		—		3,088
Other repossessions	Other repossessions	1,161		0		0		1,161		Other repossessions	865		—		—		865
December 31, 2020	December 31, 2020									December 31, 2020
Assets	Assets									Assets
Impaired loans	Impaired loans	$	15,162	$	0	$	0	$	15,162	Impaired loans	$	15,162	$	—	$	—	$	15,162
Other real estate	Other real estate	1,246		0		0		1,246		Other real estate	1,246		—		—		1,246
Other repossessions	Other repossessions	1,424		0		0		1,424		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 ~~June~~September 30, 2021 and December 31, 2020:

Valuation
Techniques (1)

Significant
Unobservable Inputs

Range
(Weighted Average)

Impaired loans

Appraisal

Estimated costs to sell

10%

Other real estate

Appraisal

Estimated costs to sell

10%

Other repossessions

Third-party guidelines

Estimated costs to sell

10%

(1)The fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent. Estimated cash flows change and appraised values of the assets or collateral underlying the loans will be sensitive to changes.

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


June 30, 2021		Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2021												September 30, 2021	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets	Financial assets											Financial assets
Cash and due from banks	Cash and due from banks	$	11,763	$	11,763	$	11,763	$	0	$	0	Cash and due from banks	$	13,270	$	13,270	$	13,270	$	—	$	—
Interest-bearing deposits in financial institutions	Interest-bearing deposits in financial institutions	43,676		43,676		43,676		0		0		Interest-bearing deposits in financial institutions	66,155		66,155		66,155		—		—
Federal funds sold	Federal funds sold	656		656		0		656		0		Federal funds sold	1,002		1,002		—		1,002		—
Loans, net	Loans, net	2,300,176		2,330,188		0		0		2,330,188		Loans, net	2,368,936		2,393,109		—		—		2,393,109
Mortgage loans held for sale	Mortgage loans held for sale	229,418		231,779		0		231,779		0		Mortgage loans held for sale	62,543		62,521		—		62,521		—
Accrued interest receivable	Accrued interest receivable	14,492		14,492		0		14,492		0		Accrued interest receivable	14,374		14,374		—		14,374		—
Restricted equity securities	Restricted equity securities	15,770		15,770		0		15,770		0		Restricted equity securities	15,770		15,770		—		15,770		—
Financial liabilities	Financial liabilities											Financial liabilities
Deposits	Deposits	$	2,629,840	$	2,631,464	$	0	$	0	$	2,631,464	Deposits	$	2,547,705	$	2,548,511	$	—	$	—	$	2,548,511
Accrued interest payable	Accrued interest payable	1,967		1,967		0		1,967		0		Accrued interest payable	2,302		2,302		—		2,302		—
Subordinate debentures	Subordinate debentures	70,770		72,650		0		0		72,650		Subordinate debentures	70,821		72,373		—		—		72,373
Federal Home Loan Bank advances	Federal Home Loan Bank advances	16,000		16,000		0		0		16,000		Federal Home Loan Bank advances	—		—		—		—		—


December 31, 2020	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)		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	Financial assets											Financial assets
Cash and due from banks	Cash and due from banks	$	13,717	$	13,717	$	13,717	$	0	$	0	Cash and due from banks	$	13,717	$	13,717	$	13,717	$	—	$	—
Interest-bearing deposits in financial institutions	Interest-bearing deposits in financial institutions	79,756		79,756		79,756		0		0		Interest-bearing deposits in financial institutions	79,756		79,756		79,756		—		—
Federal funds sold	Federal funds sold	1,572		1,572		0		1,572		0		Federal funds sold	1,572		1,572		—		1,572		—
Loans, net	Loans, net	2,280,147		2,293,723		0		0		2,293,723		Loans, net	2,280,147		2,293,723		—		—		2,293,723
Mortgage loans held for sale	Mortgage loans held for sale	147,524		149,342		0		149,342		0		Mortgage loans held for sale	147,524		149,342		—		149,342		—
Accrued interest receivable	Accrued interest receivable	14,889		14,889		0		14,889		0		Accrued interest receivable	14,889		14,889		—		14,889		—
Restricted equity securities	Restricted equity securities	16,551		16,551		0		16,551		0		Restricted equity securities	16,551		16,551		—		16,551		—
Financial liabilities	Financial liabilities											Financial liabilities
Deposits	Deposits	$	2,579,235	$	2,583,525	$	0	$	0	$	2,583,525	Deposits	$	2,579,235	$	2,583,525	$	—	$	—	$	2,583,525
Accrued interest payable	Accrued interest payable	2,571		2,571		0		2,571		0		Accrued interest payable	2,571		2,571		—		2,571		—
Subordinate debentures	Subordinate debentures	70,446		71,750		0		0		71,750		Subordinate debentures	70,446		71,750		—		—		71,750
Federal Home Loan Bank advances	Federal Home Loan Bank advances	10,000		10,000		0		0		10,000		Federal Home Loan Bank advances	10,000		10,000		—		—		10,000

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

Carrying amount is the estimated fair value for cash and cash equivalents, accrued interest receivable and payable, restricted equity securities, federal funds sold or purchased, demand deposits, and variable rate loans or deposits that re-price frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent re-pricing or re-pricing limits, 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 9 - SEGMENT REPORTING

The Company has 2 reportable business segments: commercial banking and residential mortgage banking. Segment information is derived from the internal reporting system utilized by management. Revenues and expenses for segments reflect those which can be specifically identified and have been assigned based on internally developed allocation methods. Financial results have been presented, to the extent practicable, as if each segment operated on a stand-alone basis.

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

Residential Mortgage Banking originates traditional first lien residential mortgage loans and first lien home equity lines of credit throughout the United States. The traditional first lien residential mortgage loans are typically underwritten to government agency standards and sold to third-party secondary market mortgage investors. The home equity lines of credit are typically sold to participating banks or other investor groups and are underwritten to their standards. RMV also acquires loans from approved correspondent lenders and resells them in the secondary market. These loans are not government agency-qualified loans and are of higher risk, such as jumbo loans or senior position home equity lines of credit.

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


		Three Months Ended June 30, 2021									Three Months Ended September 30, 2021
		Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated			Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	Net interest income	$	27,440	$	1,121	$	0	$	28,561	Net interest income	$	28,164	$	835	$	—	$	28,999
Provision for loan losses	Provision for loan losses	0		0		0		0		Provision for loan losses	—		—		—		—
Noninterest income	Noninterest income	5,335		3,251		(276)		8,310		Noninterest income	6,651		4,177		41		10,869
Noninterest expense (excluding merger expense)	Noninterest expense (excluding merger expense)	16,570		3,914		0		20,484		Noninterest expense (excluding merger expense)	16,551		4,377		—		20,928
Merger expense	Merger expense	0		0		0		0		Merger expense	1,453		—		—		1,453
Income tax expense	Income tax expense	3,160		42		0		3,202		Income tax expense	3,522		29		—		3,551
Net income	Net income	13,045		416		(276)		13,185		Net income	13,289		606		41		13,936
Noncontrolling interest in net income of subsidiary	Noncontrolling interest in net income of subsidiary	0		(416)		276		(140)		Noncontrolling interest in net income of subsidiary	—		(606)		(41)		(647)
Net income attributable to common shareholders	Net income attributable to common shareholders	$	13,045	$	0	$	0	$	13,045	Net income attributable to common shareholders	$	13,289	$	—	$	—	$	13,289

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		Three Months Ended June 30, 2020									Three Months Ended September 30, 2020
		Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated			Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	Net interest income	$	29,420	$	536	$	0	$	29,956	Net interest income	$	29,731	$	808	$	—	$	30,539
Provision for loan losses	Provision for loan losses	3,000		0		0		3,000		Provision for loan losses	1,500		—		—		1,500
Noninterest income	Noninterest income	2,174		2,240		8		4,422		Noninterest income	2,219		3,797		(14)		6,002
Noninterest expense (excluding merger expense)	Noninterest expense (excluding merger expense)	16,433		3,199		0		19,632		Noninterest expense (excluding merger expense)	16,067		4,190		—		20,257
Merger expense	Merger expense	2,632		0		0		2,632		Merger expense	77		—		—		77
Income tax (benefit) expense	Income tax (benefit) expense	1,661		(27)		0		1,634		Income tax (benefit) expense	2,773		27		—		2,800
Net (loss) income	Net (loss) income	7,868		(396)		8		7,480		Net (loss) income	11,533		388		(14)		11,907
Noncontrolling interest in net loss of subsidiary		0		396		(8)		388
Noncontrolling interest in net income of subsidiary										Noncontrolling interest in net income of subsidiary	—		(388)		14		(374)
Net income attributable to common shareholders	Net income attributable to common shareholders	$	7,868	$	0	$	0	$	7,868	Net income attributable to common shareholders	$	11,533	$	—	$	—	$	11,533


		Six months ended June 30, 2021									Nine months ended September 30, 2021
		Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated			Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	Net interest income	$	56,573	$	2,014	$	0	$	58,587	Net interest income	$	84,737	$	2,849	$	—	$	87,586
Provision for loan losses	Provision for loan losses	0		0		0		0		Provision for loan losses	—		—		—		—
Noninterest income	Noninterest income	7,744		8,284		(381)		15,647		Noninterest income	14,395		12,461		(340)		26,516
Noninterest expense (excluding merger expense)	Noninterest expense (excluding merger expense)	33,030		9,118		0		42,148		Noninterest expense (excluding merger expense)	49,581		13,495		—		63,076
Merger expense	Merger expense	0		0		0		0		Merger expense	1,453		—		—		1,453
Income tax expense (benefit)	Income tax expense (benefit)	6,093		89		0		6,182		Income tax expense (benefit)	9,615		118		—		9,733
Net income (loss)	Net income (loss)	25,194		1,091		(381)		25,904		Net income (loss)	38,483		1,697		(340)		39,840
Noncontrolling interest in net loss of subsidiary		0		(1,091)		381		(710)
Noncontrolling interest in net income of subsidiary										Noncontrolling interest in net income of subsidiary	—		(1,697)		340		(1,357)
Net income attributable to common shareholders	Net income attributable to common shareholders	$	25,194	$	0	$	0	$	25,194	Net income attributable to common shareholders	$	38,483	$	—	$	—	$	38,483


		Six months ended June 30, 2020									Nine months ended September 30, 2020
		Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated			Commercial Banking		Residential Mortgage Banking		Elimination Entries		Consolidated
Net interest income	Net interest income	$	46,202	$	869	$	0	$	47,071	Net interest income	$	75,933	$	1,677	$	—	$	77,610
Provision for loan losses	Provision for loan losses	5,900		0		0		5,900		Provision for loan losses	7,400		—		—		7,400
Noninterest income	Noninterest income	3,883		3,804		17		7,704		Noninterest income	6,102		7,601		3		13,706
Noninterest expense (excluding merger expense)	Noninterest expense (excluding merger expense)	28,894		6,150		0		35,044		Noninterest expense (excluding merger expense)	44,961		10,340		—		55,301
Merger expense	Merger expense	6,818		0		0		6,818		Merger expense	6,895		—		—		6,895
Income tax expense (benefit)	Income tax expense (benefit)	820		(96)		0		724		Income tax expense (benefit)	3,593		(69)		—		3,524
Net income (loss)	Net income (loss)	7,653		(1,381)		17		6,289		Net income (loss)	19,186		(993)		3		18,196
Noncontrolling interest in net loss of subsidiary	Noncontrolling interest in net loss of subsidiary	0		1,381		(17)		1,364		Noncontrolling interest in net loss of subsidiary	—		993		(3)		990
Net income attributable to common shareholders	Net income attributable to common shareholders	$	7,653	$	0	$	0	$	7,653	Net income attributable to common shareholders	$	19,186	$	—	$	—	$	19,186

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NOTE 10 – INCOME TAXES

Income tax expense for the three and ~~six~~nine months ended ~~June~~September 30, 2021 totaled ~~$3,202~~$3,551 and ~~$6,182,~~$9,733, respectively, compared to ~~$1,634~~$2,800 and ~~$724~~$3,524 for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. The effective tax rate for the three and ~~six~~nine months ended ~~June~~September 30, 2021 was ~~19.5%~~20.3% and ~~19.3%~~19.6%, respectively, compared to ~~17.9%~~19.0% and ~~10.3%~~16.2% for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

NOTE 11 - 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


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

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

Accrued interest receivable	948
Premises and equipment	5,221

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

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

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

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First Advantage Bancorp

Effective April 1, 2020, Reliant Bancorp completed the acquisition of FABK pursuant to the Agreement and Plan of Merger, dated October 22, 2019 (the “FABK Agreement”), by and among Reliant Bancorp, FABK, and PG Merger Sub, Inc., a Tennessee corporation and wholly owned subsidiary of Reliant Bancorp ("Merger Sub"). On the terms and subject to the conditions set forth in the FABK Agreement, Merger Sub merged with and into FABK (the "FABK Transaction"), with FABK as the surviving corporation, followed immediately by the merger of FABK with and into Reliant Bancorp, with Reliant Bancorp as the surviving corporation. Immediately following the merger of FABK into Reliant Bancorp, First Advantage Bank, a Tennessee-chartered commercial bank and wholly owned subsidiary of FABK ("FAB"), merged with and into the Bank, with the Bank continuing as the surviving banking corporation. Pursuant to the FABK Agreement, at the effective time of the FABK Transaction, each outstanding share of FABK common stock, par value $0.01 per share (the “FABK Common Stock”), other than certain excluded shares, was converted into the right to receive (i) 1.17 shares of Reliant Bancorp Common Stock and (ii) $3.00 in cash, without interest. In lieu of the issuance of fractional shares of Reliant Bancorp Common Stock, Reliant Bancorp agreed to pay cash in lieu of fractional shares based on the volume-weighted average closing price per share of Reliant Bancorp Common Stock on The Nasdaq Capital Market for the 10 consecutive trading days ending on and including March 30, 2020 (calculated as $11.74). Based on the April 1, 2020 opening price for Reliant Bancorp Common Stock of $11.27 per share and 3,935,165 shares of FABK Common Stock outstanding on April 1, 2020, the consideration for the FABK Transaction was approximately $64,094, in the aggregate, or $16.28 per share of FABK Common Stock.

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


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


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

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

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

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

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Supplemental Pro Forma Combined Condensed Statements of Income

Pro forma data for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 in the table below presents information as if the TCB Holdings Transaction and FABK Transaction occurred on January 1, 2020. These results combine the historical results of TCB Holdings and FABK into the Company's consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments, they are not indicative of what would have occurred had the acquisitions taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of TCB Holdings' or FABK's provision for credit losses for the first three and ~~six~~nine 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				Six Months Ended					Three Months Ended				Nine Months Ended
		June 30,									September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Revenue(1)	Revenue(1)	$	36,871	$	34,378	$	74,234	$	61,644	Revenue(1)	$	39,868	$	36,541	$	114,102	$	97,623
Net interest income	Net interest income	$	28,561	$	29,956	$	58,587	$	52,709	Net interest income	$	28,999	$	30,539	$	87,586	$	82,686
Net income attributable to common shareholders	Net income attributable to common shareholders	$	13,045	$	7,868	$	25,194	$	2,963	Net income attributable to common shareholders	$	13,289	$	11,533	$	38,483	$	13,768

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

NOTE 12 - SUBSEQUENT EVENTS

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

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

On ~~July 20,~~October 19, 2021, the board of directors of Reliant Bancorp declared a quarterly cash dividend of $0.12 per share payable on ~~August~~November 12, 2021 to shareholders of record as of the close of business on ~~July 30,~~October 29, 2021.

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

Executive Summary

The following discussion and analysis is intended to assist in the understanding and assessment of significant changes and trends related to our financial position and operating results. This discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere herein along with Reliant Bancorp's Annual Report on Form 10-K for the year ended December 31, 2020. Amounts in the narrative are shown in thousands, except for economic and demographic information, numbers of shares, per share amounts and as otherwise noted.

Critical Accounting Estimates

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

Non-GAAP Financial Measures

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

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

Executive Overview and Earnings Summary

Net income attributable to common shareholders amounted to ~~$13,045,~~$13,289, or ~~$0.79~~$0.80 per basic share, and ~~$25,194,~~$38,483, or ~~$1.52~~$2.31 per basic share, for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~$7,868,~~$11,533, or ~~$0.48~~$0.70 per basic share and ~~$7,653,~~$19,186, or ~~$0.54~~$1.27 per basic share for the same periods in 2020, respectively. Diluted net income attributable to common shareholders was ~~$0.78~~$0.79 and ~~$1.50~~$2.29 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~$0.48~~$0.69 and ~~$0.54~~$1.27 per share for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

The major components contributing to the change when compared to the prior year periods are a decrease of ~~4.7%~~5.0% for the three months ended ~~June~~September 30, 2021 and an increase of ~~24.5%~~12.9% for the ~~six~~nine months ended ~~June~~September 30, 2021 in net interest income, an increase of ~~87.9%~~81.1% and ~~103.1%~~93.5% in noninterest income for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, and a decrease of ~~$3,000~~$1,500 and ~~$5,900~~$7,400 in provision for loan losses for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

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Tax-equivalent net interest margin decreased to ~~4.14%~~4.22% from ~~4.58%~~4.54% for the three months ended ~~June~~September 30, 2021 compared to 2020 and ~~increased~~decreased to ~~4.32%~~4.28% from ~~4.16%~~4.30% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same periods in 2020. These and other components of earnings are discussed further below.

Selected Financial Data


(Dollar amounts in thousands, except per share amounts)	(Dollar amounts in thousands, except per share amounts)	Three months ended,		Six months ended				(Dollar amounts in thousands, except per share amounts)	Three months ended,						Nine months ended
		June 30, 2021		June 30, 2020		June 30, 2021				June 30, 2020			September 30, 2021			September 30, 2020		September 30, 2021			September 30, 2020
Selected Statement of Income Data	Selected Statement of Income Data											Selected Statement of Income Data
Total interest income	Total interest income	$	35,095	$	35,915	$	69,477			$	59,221	Total interest income	$	33,930		$	35,768	$	103,407		$	94,989
Total interest expense	Total interest expense	6,534		5,959		10,890				12,150		Total interest expense	4,931			5,229		15,821			17,379
Net interest income	Net interest income	28,561		29,956		58,587				47,071		Net interest income	28,999			30,539		87,586			77,610
Provision for credit loss	Provision for credit loss	—		3,000		—				5,900		Provision for credit loss	—			1,500		—			7,400
Total noninterest income	Total noninterest income	8,310		4,422		15,647				7,704		Total noninterest income	10,869			6,002		26,516			13,706
Total noninterest expense	Total noninterest expense	20,484		22,264		42,148				41,862		Total noninterest expense	22,381			20,334		64,529			62,196
Net income before income taxes	Net income before income taxes	16,387		9,114		32,086		0		7,013		Net income before income taxes	17,487			14,707		49,573		0	21,720
Income tax expense	Income tax expense	3,202		1,634		6,182				724		Income tax expense	3,551			2,800		9,733			3,524
Consolidated net income	Consolidated net income	13,185		7,480		25,904				6,289		Consolidated net income	13,936			11,907		39,840			18,196
Noncontrolling interest in net loss of subsidiary	Noncontrolling interest in net loss of subsidiary	(140)		388		(710)				1,364		Noncontrolling interest in net loss of subsidiary	(647)			(374)		(1,357)			990
Net income attributable to common shareholders	Net income attributable to common shareholders	$	13,045	$	7,868	$	25,194			$	7,653	Net income attributable to common shareholders	$	13,289		$	11,533	$	38,483		$	19,186
Per Common Share	Per Common Share											Per Common Share
Basic net income	Basic net income	$	0.79	$	0.48	$	1.52			$	0.54	Basic net income	$	0.80		$	0.70	$	2.31		$	1.27
Diluted net income	Diluted net income	0.78		0.48		1.50				0.54		Diluted net income	0.79			0.69		2.29			1.27
Adjusted diluted income (1)	Adjusted diluted income (1)	0.78		0.60		1.50				0.90		Adjusted diluted income (1)	0.87			0.70		2.38			1.62
Book value	Book value	20.77		17.77		20.77				17.77		Book value	21.36			18.46		21.36			18.46
Tangible book value(1)	Tangible book value(1)	16.88		13.96		16.88				13.96		Tangible book value(1)	17.50			14.65		17.50			14.65
Shares Outstanding	Shares Outstanding											Shares Outstanding
Basic weighted average common shares	Basic weighted average common shares	16,616,888		16,496,817		16,616,034				14,196,254		Basic weighted average common shares	16,665,155			16,587,274		16,632,587			15,053,087
Diluted weighted average common shares	Diluted weighted average common shares	16,784,744		16,529,080		16,762,647				14,241,165		Diluted weighted average common shares	16,805,157			16,649,673		16,776,972			15,120,703
Common shares outstanding at period end	Common shares outstanding at period end	16,672,511		16,631,604		16,672,511				16,631,604		Common shares outstanding at period end	16,682,928			16,634,572		16,682,928			16,634,572
Selected Balance Sheet Data	Selected Balance Sheet Data											Selected Balance Sheet Data
Loans, net of unearned income	Loans, net of unearned income	$	2,321,070	$	2,317,324	$	2,321,070			$	2,317,324	Loans, net of unearned income	$	2,389,833		$	2,357,898	$	2,389,833		$	2,357,898
Total assets	Total assets	3,098,464		2,990,126		3,098,464				2,990,126		Total assets	3,013,559			3,044,512		3,013,559			3,044,512
Customer deposits	Customer deposits	2,320,054		2,177,734		2,320,054				2,177,734		Customer deposits	2,289,737			2,185,915		2,289,737			2,185,915
Wholesale and institutional deposits	Wholesale and institutional deposits	309,786		352,280		309,786				352,280		Wholesale and institutional deposits	257,968			379,587		257,968			379,587
Total deposits	Total deposits	2,629,840		2,530,014		2,629,840				2,530,014		Total deposits	2,547,705			2,565,502		2,547,705			2,565,502
Total liabilities	Total liabilities	2,752,175		2,694,583		2,752,175				2,694,583		Total liabilities	2,657,244			2,737,426		2,657,244			2,737,426
Total shareholders' equity	Total shareholders' equity	346,289		295,543		346,289				295,543		Total shareholders' equity	356,315			307,086		356,315			307,086
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	3,098,464		2,990,126		3,098,464				2,990,126		Total liabilities and shareholders' equity	3,013,559			3,044,512		3,013,559			3,044,512
Selected Balance Sheet Data - Averages	Selected Balance Sheet Data - Averages											Selected Balance Sheet Data - Averages
Loans held for investment	Loans held for investment	$	2,288,841	$	2,302,639	$	2,284,633			$	1,957,834	Loans held for investment	$	2,360,073		$	2,337,958	$	2,310,056		$	2,085,467
Earning assets(1)	Earning assets(1)	2,868,803		2,735,404		2,831,071				2,363,975		Earning assets(1)	2,818,164			2,771,917		2,826,721			2,500,951
Total assets	Total assets	3,088,329		2,956,942		3,050,929				2,569,376		Total assets	3,036,777			2,991,818		3,046,160			2,711,218
Interest-bearing liabilities	Interest-bearing liabilities	2,113,993		2,158,990		2,096,711				1,878,376		Interest-bearing liabilities	2,032,296			2,108,428		2,075,003			1,955,621
Total liabilities	Total liabilities	2,748,825		2,667,981		2,717,628				2,303,949		Total liabilities	2,685,605			2,692,383		2,706,837			2,434,372
Total shareholders' equity	Total shareholders' equity	339,504		288,961		333,301				265,427		Total shareholders' equity	351,172			299,435		339,323			276,846

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(Dollar amounts in thousands, except per share amounts)	(Dollar amounts in thousands, except per share amounts)	Three months ended,			Six months ended						(Dollar amounts in thousands, except per share amounts)	Three months ended,								Nine months ended
		June 30, 2021			June 30, 2020			June 30, 2021					June 30, 2020				September 30, 2021				September 30, 2020			September 30, 2021			September 30, 2020
Selected Performance Ratios	Selected Performance Ratios															Selected Performance Ratios
Return on average assets (2)	Return on average assets (2)	1.69		%	1.07		%	1.67		%			0.60		%	Return on average assets (2)	1.74		%		1.53		%	1.69		%	0.95		%
Return on shareholders' equity (2)	Return on shareholders' equity (2)	15.41		%	10.95		%	15.24		%			5.80		%	Return on shareholders' equity (2)	15.01		%		15.32		%	15.16		%	9.26		%
Return on average tangible common equity (1) (2)	Return on average tangible common equity (1) (2)	19.07		%	14.04		%	18.96		%			7.66		%	Return on average tangible common equity (1) (2)	18.40		%		19.42		%	18.76		%	12.04		%
Average shareholders' equity to average assets	Average shareholders' equity to average assets	10.99		%	9.77		%	10.92		%			10.33		%	Average shareholders' equity to average assets	11.56		%		10.01		%	11.14		%	10.21		%
Net interest margin (tax-equivalent basis) (2)	Net interest margin (tax-equivalent basis) (2)	4.14		%	4.58		%	4.32		%			4.16		%	Net interest margin (tax-equivalent basis) (2)	4.22		%		4.54		%	4.28		%	4.30		%
Efficiency Ratio (tax-equivalent basis)	Efficiency Ratio (tax-equivalent basis)	54.1		%	62.7		%	55.3		%			73.9		%	Efficiency Ratio (tax-equivalent basis)	54.8		%		54.0		%	55.1		%	66.0		%
Bank Segment efficiency ratio (1)	Bank Segment efficiency ratio (1)	50.6		%	60.3		%	51.4		%			71.3		%	Bank Segment efficiency ratio (1)	51.7		%		50.5		%	51.5		%	63.2		%
Loans held for investment to deposits ratio	Loans held for investment to deposits ratio	88.3		%	91.6		%	88.3		%			91.6		%	Loans held for investment to deposits ratio	93.8		%		91.9		%	93.8		%	91.9		%
Interest Rates and Yields (2)	Interest Rates and Yields (2)															Interest Rates and Yields (2)
Yield on interest-earning assets	Yield on interest-earning assets	5.05		%	5.45		%	5.09		%			5.20		%	Yield on interest-earning assets	4.91		%		5.29		%	5.03		%	5.23		%
Yield on loans held for investment	Yield on loans held for investment	5.58		%	5.98		%	5.60		%			5.67		%	Yield on loans held for investment	5.29		%		5.73		%	5.50		%	5.69		%
Cost of interest-bearing liabilities	Cost of interest-bearing liabilities	1.24		%	1.11		%	1.05		%			1.30		%	Cost of interest-bearing liabilities	0.96		%		0.99		%	1.02		%	1.19		%
Adjust cost of interest-bearing liabilities (1)	Adjust cost of interest-bearing liabilities (1)	0.70		%	1.11		%	0.77		%			1.30		%	Adjust cost of interest-bearing liabilities (1)	0.52		%		0.99		%	0.69		%	1.19		%
Cost of funds	Cost of funds	0.97		%	0.91		%	0.82		%			1.08		%	Cost of funds	0.74		%		0.79		%	0.79		%	0.97		%
Adjusted cost of funds (1)	Adjusted cost of funds (1)	0.54		%	0.91		%	0.60		%			1.08		%	Adjusted cost of funds (1)	0.40		%		0.79		%	0.53		%	0.97		%
Cost of total deposits	Cost of total deposits	0.83		%	0.79		%	0.67		%			0.93		%	Cost of total deposits	0.58		%		0.62		%	0.64		%	0.81		%
Adjusted cost of total deposits (1)	Adjusted cost of total deposits (1)	0.41		%	0.79		%	0.47		%			0.93		%	Adjusted cost of total deposits (1)	0.26		%		0.62		%	0.40		%	0.81		%
Preliminary Consolidated Capital Ratios (3)	Preliminary Consolidated Capital Ratios (3)															Preliminary Consolidated Capital Ratios (3)
Tier 1 leverage	Tier 1 leverage	9.47		%	8.47		%	9.47		%			8.47		%	Tier 1 leverage	10.04		%		8.72		%	10.04		%	8.72		%
Common equity tier 1	Common equity tier 1	10.18		%	9.25		%	10.18		%			9.25		%	Common equity tier 1	10.52		%		9.77		%	10.52		%	9.77		%
Tier 1 risk-based capital	Tier 1 risk-based capital	10.62		%	9.71		%	10.62		%			9.71		%	Tier 1 risk-based capital	10.95		%		10.25		%	10.95		%	10.25		%
Total risk-based capital	Total risk-based capital	13.62		%	12.80		%	13.62		%			12.80		%	Total risk-based capital	13.92		%		13.44		%	13.92		%	13.44		%
Selected Asset Quality Measures	Selected Asset Quality Measures															Selected Asset Quality Measures

Allowance for loan losses to total loans	Allowance for loan losses to total loans	0.90		%	0.79		%	0.90		%			0.79		%	Allowance for loan losses to total loans	0.87		%		0.84		%	0.87		%	0.84		%

Allowance for loan losses and purchase loan discounts to total loans		1.46		%	1.73		%	1.46		%			1.73		%
Allowance for loan losses plus unaccreted purchased loan discounts to total loans (1)																Allowance for loan losses plus unaccreted purchased loan discounts to total loans (1)	1.38		%		1.64		%	1.38		%	1.64		%
Net (recoveries) charge offs	Net (recoveries) charge offs	$	(109)		$	(116)		$	(258)				$	241		Net (recoveries) charge offs	$	(3)			$	(97)		$	(261)		$	144
Net (recoveries) charge offs to average loans (2)	Net (recoveries) charge offs to average loans (2)	(0.02)		%	(0.02)		%	(0.02)		%			0.02		%	Net (recoveries) charge offs to average loans (2)	—		%		(0.02)		%	(0.02)		%	0.01		%
Total nonperforming loans held for investment (HFI)	Total nonperforming loans held for investment (HFI)	$	5,355		$	7,549		$	5,355				$	7,549		Total nonperforming loans held for investment (HFI)	$	5,302			$	6,802		$	5,302		$	6,802
Total nonperforming assets (4)	Total nonperforming assets (4)	$	9,726		$	11,571		$	9,726				$	11,571		Total nonperforming assets (4)	$	10,232			$	9,731		$	10,232		$	9,731
Nonperforming loans HFI to total loans HFI	Nonperforming loans HFI to total loans HFI	0.23		%	0.33		%	0.23		%			0.33		%	Nonperforming loans HFI to total loans HFI	0.22		%		0.29		%	0.22		%	0.29		%
Nonperforming assets to total assets	Nonperforming assets to total assets	0.31		%	0.39		%	0.31		%			0.39		%	Nonperforming assets to total assets	0.34		%		0.32		%	0.34		%	0.32		%
Nonperforming assets to total loans HFI and NPAs	Nonperforming assets to total loans HFI and NPAs	0.42		%	0.50		%	0.42		%			0.50		%	Nonperforming assets to total loans HFI and NPAs	0.43		%		0.41		%	0.43		%	0.41		%

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

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Three Months Ended Six months ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Average Earning Assets $ 2,868,803 $ 2,735,404 $ 2,831,071 $ 2,363,975
Net interest margin-tax equivalent 4.14 % 4.58 % 4.32 % 4.16 %
Adjusted net interest margin 4.28 % 3.81 % 4.26 % 3.66 %
Adjusted net income (2):
Net income attributable to common shareholders $ 13,045 $ 7,868 $ 25,194 $ 7,653
Add: merger related expenses — 2,632 — 6,818
Less: income tax impact of merger related expenses — (565) — (1,597)
Adjusted net income $ 13,045 $ 9,935 $ 25,194 $ 12,874
Adjusted diluted earnings per share:
Adjusted net income $ 13,045 $ 9,935 $ 25,194 $ 12,874
Weighted average shares - diluted 16,784,744 16,529,080 16,762,647 14,241,165
Diluted earnings per share $ 0.78 $ 0.48 $ 1.50 $ 0.54
Adjusted diluted earnings per share $ 0.78 $ 0.60 $ 1.50 $ 0.90
Adjusted annualized return on average assets:
Adjusted net income $ 13,045 $ 9,935 $ 25,194 $ 12,874
Average assets 3,088,329 2,956,942 3,050,929 2,569,376
Annualized return on average assets 1.69 % 1.07 % 1.67 % 0.60 %
Adjusted annualized return on average assets 1.69 % 1.35 % 1.67 % 1.01 %
Adjusted annualized return on average equity:
Adjusted net income $ 13,045 $ 9,935 $ 25,194 $ 12,874
Average total shareholders' equity 339,504 288,961 333,301 265,427
Annualized return on average equity 15.41 % 10.95 % 15.24 % 5.80 %
Adjusted annualized return on average equity 15.41 % 13.83 % 15.24 % 9.75 %
Adjusted annualized return on average tangible common equity:
Average total shareholders' equity $ 339,504 $ 288,961 $ 333,301 $ 265,427
Less: average intangible assets (65,088) (63,594) (65,308) (64,461)
Average tangible common equity $ 274,416 $ 225,367 $ 267,993 $ 200,966
Adjusted net income 13,045 9,935 25,194 12,874
Annualized return on average tangible common equity 19.07 % 14.04 % 18.96 % 7.66 %
Adjusted annualized return on average tangible common equity 19.07 % 17.73 % 18.96 % 12.88 %
Adjusted pre-tax pre-provision income:
Income before provision for income taxes $ 16,387 $ 9,114 $ 32,086 $ 7,013
Add: merger related expenses — 2,632 — 6,818
Add: provision for loan losses — 3,000 — 5,900
Adjusted pre-tax pre-provision income $ 16,387 $ 14,746 $ 32,086 $ 19,731
Reconciliation of Non-GAAP Financial Measures


	Three Months Ended			Nine months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Adjusted net interest margin:
Net interest income	$	28,999		$	30,539		$	87,586		$	77,610
Add: tax equivalent interest income	947			1,107			2,987			2,960
Add: swap termination fees	2,290			—			5,149			—
Less: purchase accounting adjustments	(993)			(3,868)			(4,676)			(9,773)
Adjusted net interest income	$	31,243		$	27,778		$	91,046		$	70,797
Average earning assets	$	2,818,164		$	2,771,917		$	2,826,721		$	2,500,951
Net interest margin-tax equivalent	4.22		%	4.54		%	4.28		%	4.30		%
Adjusted net interest margin	4.40		%	3.99		%	4.31		%	3.78		%

Adjusted net income (1):
Net income attributable to common shareholders	$	13,289		$	11,533		$	38,483		$	19,186
Add: merger related expenses	1,453			77			1,453			6,895
Less: income tax impact of merger related expenses	(48)			(10)			(48)			(1,607)
Adjusted net income	$	14,694		$	11,600		$	39,888		$	24,474

Adjusted diluted earnings per share:
Adjusted net income	$	14,694		$	11,600		$	39,888		$	24,474
Weighted average shares - diluted	16,805,157			16,649,673			16,776,972			15,120,703
Diluted earnings per share	$	0.79		$	0.69		$	2.29		$	1.27
Adjusted diluted earnings per share	$	0.87		$	0.70		$	2.38		$	1.62

Adjusted annualized return on average assets:
Adjusted net income	$	14,694		$	11,600		$	39,888		$	24,474
Average assets	3,036,777			2,991,818			3,046,160			2,711,218
Annualized return on average assets	1.74		%	1.53		%	1.69		%	0.95		%
Adjusted annualized return on average assets	1.92		%	1.54		%	1.75		%	1.21		%

Adjusted annualized return on average equity:
Adjusted net income	$	14,694		$	11,600		$	39,888		$	24,474
Average total shareholders' equity	351,172			299,435			339,323			276,846
Annualized return on average equity	15.01		%	15.32		%	15.16		%	9.26		%
Adjusted annualized return on average equity	16.60		%	15.41		%	15.72		%	11.81		%

Adjusted annualized return on average tangible common equity:
Average total shareholders' equity	$	351,172		$	299,435		$	339,323		$	276,846
Less: average intangible assets	(64,607)			(63,212)			(65,072)			(64,042)
Average tangible common equity	$	286,565		$	236,223		$	274,251		$	212,804
Adjusted net income	14,694			11,600			39,888			24,474
Annualized return on average tangible common equity	18.40		%	19.42		%	18.76		%	12.04		%
Adjusted annualized return on average tangible common equity	20.34		%	19.54		%	19.45		%	15.36		%

Table of Contents


		Three Months Ended			Six months ended						Three Months Ended								Nine months ended
																September 30, 2021				September 30, 2020			September 30, 2021			September 30, 2020
Adjusted pre-tax pre-provision income:															Adjusted pre-tax pre-provision income:
Income before provision for income taxes															Income before provision for income taxes	$	17,487			$	14,707		$	49,573		$	21,720
Add: merger related expenses															Add: merger related expenses	1,453				77			1,453			6,895
Add: provision for loan losses															Add: provision for loan losses	—				1,500			—			7,400
Adjusted pre-tax pre-provision income															Adjusted pre-tax pre-provision income	$	18,940			$	16,284		$	51,026		$	36,015
		June 30, 2021			June 30, 2020			June 30, 2021				June 30, 2020
Tangible common equity to tangible assets:	Tangible common equity to tangible assets:														Tangible common equity to tangible assets:
Tangible common equity:	Tangible common equity:														Tangible common equity:
Total shareholders' equity	Total shareholders' equity	$	346,289		$	295,543		$	346,289			$	295,543		Total shareholders' equity	$	356,315			$	307,086		$	356,315		$	307,086
Less: intangible assets	Less: intangible assets	(64,830)			(63,351)			(64,830)				(63,351)			Less: intangible assets	(64,374)				(63,326)			(64,374)			(63,326)
Tangible common equity	Tangible common equity	$	281,459		$	232,192		$	281,459			$	232,192		Tangible common equity	$	291,941			$	243,760		$	291,941		$	243,760
Tangible assets:	Tangible assets:														Tangible assets:
Total assets	Total assets	$	3,098,464		$	2,990,126		$	3,098,464			$	2,990,126		Total assets	$	3,013,559			$	3,044,512		$	3,013,559		$	3,044,512
Less: intangible assets	Less: intangible assets	(64,830)			(63,351)			(64,830)				(63,351)			Less: intangible assets	(64,374)				(63,326)			(64,374)			(63,326)
Tangible assets	Tangible assets	$	3,033,634		$	2,926,775		$	3,033,634			$	2,926,775		Tangible assets	$	2,949,185			$	2,981,186		$	2,949,185		$	2,981,186
Total shareholders' equity to total assets	Total shareholders' equity to total assets	11.18		%	9.88		%	11.18		%		9.88		%	Total shareholders' equity to total assets	11.82		%		10.09		%	11.82		%	10.09		%
Tangible common equity to tangible assets	Tangible common equity to tangible assets	9.28		%	7.93		%	9.28		%		7.93		%	Tangible common equity to tangible assets	9.90		%		8.18		%	9.90		%	8.18		%

Tangible book value per share:	Tangible book value per share:														Tangible book value per share:
Tangible common equity	Tangible common equity	$	281,459		$	232,192		$	281,459			$	232,192		Tangible common equity	$	291,941			$	243,760		$	291,941		$	243,760
Total shares of common stock outstanding	Total shares of common stock outstanding	16,672,511			16,631,604			16,672,511				16,631,604			Total shares of common stock outstanding	16,682,928				16,634,572			16,682,928			16,634,572
Book value per common share	Book value per common share	$	20.77		$	17.77		$	20.77			$	17.77		Book value per common share	$	21.36			$	18.46		$	21.36		$	18.46
Tangible book value per share	Tangible book value per share	$	16.88		$	13.96		$	16.88			$	13.96		Tangible book value per share	$	17.50			$	14.65		$	17.50		$	14.65

Allowance for loan losses plus unaccreted loan purchase discounts:	Allowance for loan losses plus unaccreted loan purchase discounts:														Allowance for loan losses plus unaccreted loan purchase discounts:
Allowance for loan losses	Allowance for loan losses	$	20,894		$	18,237		$	20,894			$	18,237		Allowance for loan losses	$	20,897			$	19,834		$	20,897		$	19,834
Unaccreted loan purchase discounts	Unaccreted loan purchase discounts	12,980			21,939			12,980				21,939			Unaccreted loan purchase discounts	11,993				18,939			11,993			18,939
Allowance for loan losses plus unaccreted loan purchase discounts:	Allowance for loan losses plus unaccreted loan purchase discounts:	$	33,874		$	40,176		$	33,874			$	40,176		Allowance for loan losses plus unaccreted loan purchase discounts:	$	32,890			$	38,773		$	32,890		$	38,773
Total loans	Total loans	2,321,070			2,317,324			2,321,070				2,317,324			Total loans	2,389,833				2,357,898			2,389,833			2,357,898
Allowance for loan losses plus unaccreted purchased loan discounts to total loans	Allowance for loan losses plus unaccreted purchased loan discounts to total loans	1.46		%	1.73		%	1.46		%		1.73		%	Allowance for loan losses plus unaccreted purchased loan discounts to total loans	1.38		%		1.64		%	1.38		%	1.64		%
Allowance for loan losses to total loans	Allowance for loan losses to total loans	0.90		%	0.79		%	0.90		%		0.79		%	Allowance for loan losses to total loans	0.87		%		0.84		%	0.87		%	0.84		%

Bank segment adjusted net income:	Bank segment adjusted net income:														Bank segment adjusted net income:
Bank segment net income	Bank segment net income	$	13,045		$	7,868		$	25,194			$	7,653		Bank segment net income	$	13,289			$	11,533		$	38,483		$	19,186
Add: merger related expenses	Add: merger related expenses	—			2,632			—				6,818			Add: merger related expenses	1,453				77			1,453			6,895
Less: income tax impact of merger related expenses	Less: income tax impact of merger related expenses	—			(565)			—				(1,597)			Less: income tax impact of merger related expenses	(48)				(10)			(48)			(1,607)
Bank segment adjusted net income	Bank segment adjusted net income	$	13,045		$	9,935		$	25,194			$	12,874		Bank segment adjusted net income	$	14,694			$	11,600		$	39,888		$	24,474

Bank segment adjusted noninterest expense:	Bank segment adjusted noninterest expense:														Bank segment adjusted noninterest expense:
Bank segment noninterest expense	Bank segment noninterest expense	$	16,570		$	19,065		$	33,030			$	35,712		Bank segment noninterest expense	$	18,004			$	16,144		$	51,034		$	51,856
Add: merger related expenses		—			(2,632)			—				(6,818)
Less: merger related expenses															Less: merger related expenses	(1,453)				(77)			(1,453)			(6,895)
Bank segment adjusted noninterest expense	Bank segment adjusted noninterest expense	$	16,570		$	16,433		$	33,030			$	28,894		Bank segment adjusted noninterest expense	$	16,551			$	16,067		$	49,581		$	44,961

Table of Contents


		Three Months Ended			Six months ended						Three Months Ended								Nine months ended
		June 30, 2021			June 30, 2020			June 30, 2021				June 30, 2020				September 30, 2021				September 30, 2020			September 30, 2021			September 30, 2020
Bank segment adjusted efficiency ratio:	Bank segment adjusted efficiency ratio:														Bank segment adjusted efficiency ratio:
Bank segment adjusted total revenues:	Bank segment adjusted total revenues:														Bank segment adjusted total revenues:
Bank segment net interest income	Bank segment net interest income	$	27,440		$	29,420		$	56,573			$	46,202		Bank segment net interest income	$	28,164			$	29,731		$	84,737		$	75,933
Add: Tax equivalent interest income	Add: Tax equivalent interest income	1,021			1,161			2,040				1,854			Add: Tax equivalent interest income	947				1,107			2,987			2,960
Add: Bank segment noninterest income	Add: Bank segment noninterest income	5,335			2,174			7,744				3,883			Add: Bank segment noninterest income	6,651				2,219			14,395			6,102
Less: Gains on sale of securities, OREO, premises and equipment ~~(3)~~(2)	Less: Gains on sale of securities, OREO, premises and equipment ~~(3)~~(2)	(2,922)			(338)			(3,069)				(361)			Less: Gains on sale of securities, OREO, premises and equipment ~~(3)~~(2)	(2,405)				9			(5,473)			(352)
Add: Swap termination fee (3)		2,859			—			2,859				—
Add: Swap termination fees (2)															Add: Swap termination fees (2)	2,290				—			5,149			—
Bank segment adjusted total revenues	Bank segment adjusted total revenues	$	33,733		$	32,417		$	66,147			$	51,578		Bank segment adjusted total revenues	$	35,647			$	33,066		$	101,795		$	84,643
Bank segment efficiency ratio	Bank segment efficiency ratio	50.6		%	60.3		%	51.4		%		71.3		%	Bank segment efficiency ratio	51.7		%		50.5		%	51.5		%	63.2		%
Bank segment adjusted efficiency ratio	Bank segment adjusted efficiency ratio	49.1		%	50.7		%	49.9		%		56.0		%	Bank segment adjusted efficiency ratio	46.4		%		48.6		%	48.7		%	53.1		%

Adjusted cost of funds:	Adjusted cost of funds:														Adjusted cost of funds:
Adjusted interest expense:	Adjusted interest expense:														Adjusted interest expense:
Interest Expense	Interest Expense	$	6,534		$	5,959		$	10,890			$	12,150		Interest Expense	$	4,931			$	5,229		$	15,821		$	17,379
Less: Swap termination fees	Less: Swap termination fees	(2,859)			—			(2,859)				—			Less: Swap termination fees	(2,290)				—			(5,149)			—
Adjusted interest expense	Adjusted interest expense	$	3,675		$	5,959		$	8,031			$	12,150		Adjusted interest expense	$	2,641			$	5,229		$	10,672		$	17,379
Average funds	Average funds	2,711,181			2,627,565			2,678,277				2,268,700			Average funds	2,649,200				2,644,781			2,668,477			2,394,976
Cost of funds	Cost of funds	0.97		%	0.91		%	0.82		%		1.08		%	Cost of funds	0.74		%		0.79		%	0.79		%	0.97		%
Adjusted cost of funds	Adjusted cost of funds	0.54		%	0.91		%	0.60		%		1.08		%	Adjusted cost of funds	0.40		%		0.79		%	0.53		%	0.97		%

Adjusted cost of interest-bearing liabilities:	Adjusted cost of interest-bearing liabilities:														Adjusted cost of interest-bearing liabilities:
Adjusted interest expense	Adjusted interest expense	$	3,675		$	5,959		$	8,031			$	12,150		Adjusted interest expense	$	2,641			$	5,229		$	10,672		$	17,379
Average interest-bearing liabilities	Average interest-bearing liabilities	2,113,993			2,158,990			2,096,711				1,878,376			Average interest-bearing liabilities	2,032,296				2,108,428			2,075,003			1,955,621
Cost of interest-bearing liabilities	Cost of interest-bearing liabilities	1.24		%	1.11		%	1.05		%		1.30		%	Cost of interest-bearing liabilities	0.96		%		0.99		%	1.02		%	1.19		%
Adjusted cost of interest-bearing liabilities	Adjusted cost of interest-bearing liabilities	0.70		%	1.11		%	0.77		%		1.30		%	Adjusted cost of interest-bearing liabilities	0.52		%		0.99		%	0.69		%	1.19		%

Adjusted cost of deposits:	Adjusted cost of deposits:														Adjusted cost of deposits:
Adjusted deposit expense:	Adjusted deposit expense:														Adjusted deposit expense:
Deposit expense	Deposit expense	$	5,541		$	4,829		$	8,940			$	9,666		Deposit expense	$	3,942			$	4,133		$	12,882		$	13,799
Less: Swap termination fees	Less: Swap termination fees	(2,859)			—			(2,859)				—			Less: Swap termination fees	(2,290)				—			(5,149)			—
Adjusted deposit expense	Adjusted deposit expense	$	2,682		$	4,829		$	6,081			$	9,666		Adjusted deposit expense	$	1,652			$	4,133		$	7,733		$	13,799
Average deposits	Average deposits	2,617,853			2,429,818			2,592,542				2,079,863			Average deposits	2,567,679				2,533,853			2,584,162			2,232,298
Cost of deposits	Cost of deposits	0.83		%	0.79		%	0.67		%		0.93		%	Cost of deposits	0.58		%		0.62		%	0.64		%	0.81		%
Adjusted cost of deposits	Adjusted cost of deposits	0.41		%	0.79		%	0.47		%		0.93		%	Adjusted cost of deposits	0.26		%		0.62		%	0.40		%	0.81		%

(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.

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

~~(3)~~(2) Securities sold in the second ~~quarter~~and third quarters of 2021 were done in conjunction with the swap termination fees. Therefore, we have adjusted for both sides of this transaction.

Mergers and acquisitions

Acquisition of Tennessee Community Bank Holdings, Inc.

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

Table of Contents

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

Proposed Merger with United Community Banks, Inc.

On July 14, 2021, United Community Banks, Inc. (NASDAQGS: UCBI) (“United”) and Reliant Bancorp announced the execution of a definitive merger agreement pursuant to which United will acquire Reliant Bancorp in an all-stock transaction with an aggregate value of approximately $517 million, or $30.58 per share of Reliant Bancorp common stock, based on United’s closing stock price of $31.07 per share on July 13, 2021. This agreement is subject to both regulatory and Reliant Bancorp shareholder approval. The transaction is expected to close in the first quarter of 2022.

Coronavirus (COVID-19) Impact

During ~~the current and prior fiscal year,~~2020, the COVID-19 health pandemic ~~had~~created a ~~significant~~crisis resulting in volatility in financial markets, sudden, unprecedented job losses, and disruption in consumer and commercial behavior, resulting in governments in the United States and globally to intervene with varying levels of direct monetary support and fiscal stimulus packages. All industries, municipalities and consumers have been impacted by the health crisis to some degree, including the markets that we serve. In attempts to “flatten the curve”, businesses not deemed essential were closed or constrained to capacity limitations, individuals were asked to restrict their movements, observe social distancing and shelter in place. These actions resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses, leading to a loss of revenues and a rapid increase in unemployment, widening of credit spreads, dislocation of bond markets, disruption of global supply chains and changes in consumer spending behavior. As certain restrictions began lifting and more businesses were allowed to open their doors in late 2020, we began to experience a slow improvement in commerce through much of our footprint, which continued into the first half of 2021 with further easing of restrictions and increasing availability of vaccinations. Despite the pickup in economic activity, commercial and consumer activity has not returned to pre-pandemic levels. Although most restrictions were lifted and vaccines became widely available during the first half of 2021, during the summer of 2021, concern began building regarding the potential impact the new Delta variant of the virus may have on the global economy and the efficacy of available vaccines to protect against widespread infection. As such, there continues to be uncertainty regarding the long term effects on the global economy, which could have a material adverse impact on ~~our customers, associates,~~the Company's business operations, asset valuations, financial condition, and ~~communities, which collectively impacts our shareholders. Below is a summary~~results 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 as required by local ordinances. We have welcomed back customers for lobby visits 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 exempt by law from classification as a TDR as defined by U.S. GAAP beginning March 1, 2020 until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak terminates. As of June 30, 2021, the Company had $67,984 of loans modified. These deferrals typically ranged from sixty to ninety days per deferral and were not considered TDRs under the interagency regulatory guidance or the CARES Act.operations.

The Company ~~is participating in the Paycheck Protection Program ("PPP") under the CARES Act, which is being administered~~has taken several actions to offer various forms of support to our customers and communities impacted by the ~~SBA. As~~virus. In addition, the Company continues to take deliberate actions to ensure the continued health and strength of ~~June 30, 2021 the Bank had 84 PPP loans outstanding totaling $14.0 million with $69.4 million~~its balance sheet, including increases in ~~PPP loans forgiven~~liquidity and ~~repaid~~managing assets and liabilities in order to ~~date.~~maintain a strong capital position.

At June 30, 2021, our level of nonperforming assets was 0.31% of total assets and was not materially impacted by the economic pressures of COVID-19. We are closely monitoring credit risk and our exposure to increased loan losses resulting from the impact of COVID-19 on our commercial and other clients.

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

~~Table of Contents~~

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.

Table of Contents

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 ~~June~~September 30, 2021, and 2020 (dollars in thousands):


		Three Months Ended June 30,										Change							Three Months Ended September 30,										Change
		2021					2020												2021					2020
		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total			Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total
Interest earning assets	Interest earning assets																	Interest earning assets
Loans (2) (3)	Loans (2) (3)	$	2,288,841	5.12	$	28,539	$	2,302,639	5.68	$	31,708	$	(189)	$	(3,103)	$	(3,292)	Loans (2) (3)	$	2,360,073	4.96	$	28,847	$	2,337,958	5.34	$	30,640	$	289	$	(2,173)	$	(1,884)
Loan fees	Loan fees	—		0.46	2,644		—		0.30	1,739		905		—		905		Loan fees	—		0.33	1,970		—		0.38	2,255		(285)		—		(285)
Loans with fees	Loans with fees	2,288,841		5.58	31,183		2,302,639		5.98	33,447		716		(3,103)		(2,387)		Loans with fees	2,360,073		5.29	30,817		2,337,958		5.73	32,895		4		(2,173)		(2,169)
Mortgage loans held for sale	Mortgage loans held for sale	232,850		3.11	1,807		85,313		3.84	815		1,115		(123)		992		Mortgage loans held for sale	134,245		3.50	1,184		103,729		3.98	1,037		249		(102)		147
Deposits with banks	Deposits with banks	58,619		0.36	52		66,052		0.30	50		(3)		5		2		Deposits with banks	45,885		0.39	45		57,909		0.47	68		(13)		(10)		(23)
Investment securities - taxable	Investment securities - taxable	73,368		3.62	663		66,234		0.78	128		15		520		535		Investment securities - taxable	106,433		2.93	786		67,569		2.35	399		271		116		387
Investment securities - tax-exempt (4)	Investment securities - tax-exempt (4)	197,309		3.19	1,216		193,216		3.51	1,317		36		(154)		(118)		Investment securities - tax-exempt (4)	154,417		3.10	928		185,058		3.30	1,186		(239)		(88)		(327)
Restricted equity securities and other	Restricted equity securities and other	17,816		3.92	174		21,950		2.90	158		(18)		34		16		Restricted equity securities and other	17,111		3.94	170		19,694		3.70	183		(26)		13		(13)
Total earning assets	Total earning assets	2,868,803		5.05	35,095		2,735,404		5.45	35,915		1,861		(2,821)		(960)		Total earning assets	2,818,164		4.91	33,930		2,771,917		5.29	35,768		246		(2,244)		(1,998)
Nonearning assets	Nonearning assets	219,526					221,538											Nonearning assets	218,613					219,901
Total assets	Total assets	$	3,088,329				$	2,956,942										Total assets	$	3,036,777				$	2,991,818
Interest bearing liabilities	Interest bearing liabilities																	Interest bearing liabilities
Interest bearing demand	Interest bearing demand	412,117		0.21	216		279,092		0.31	218		(6)		4		(2)		Interest bearing demand	411,796		0.15	153		272,506		0.34	236		890		(973)		(83)
Savings and money market	Savings and money market	972,082		0.27	647		731,278		0.81	1,476		809		(1,638)		(829)		Savings and money market	980,069		0.18	441		786,589		0.59	1,162		395		(1,116)		(721)
Time deposits - retail	Time deposits - retail	443,512		0.94	1,042		749,566		1.19	2,217		(776)		(399)		(1,175)		Time deposits - retail	440,390		0.74	825		715,310		0.97	1,744		(568)		(351)		(919)
Time deposits - wholesale	Time deposits - wholesale	192,954		7.56	3,636		201,307		1.83	918		(37)		2,755		2,718		Time deposits - wholesale	118,520		8.45	2,523		223,095		1.77	991		(217)		1,749		1,532
Total interest-bearing deposits	Total interest-bearing deposits	2,020,665		1.10	5,541		1,961,243		0.99	4,829		(9)		721		712		Total interest-bearing deposits	1,950,775		0.80	3,942		1,997,500		0.82	4,133		499		(690)		(191)
Federal Home Loan Bank advances and other borrowings	Federal Home Loan Bank advances and other borrowings	22,582		0.23	13		127,350		0.47	148		(83)		(52)		(135)		Federal Home Loan Bank advances and other borrowings	10,724		0.33	9		40,567		1.02	104		(49)		(46)		(95)
Subordinated debt	Subordinated debt	70,746		5.56	980		70,397		5.61	982		3		(5)		(2)		Subordinated debt	70,797		5.49	980		70,361		5.61	992		5		(17)		(12)
Total borrowed funds	Total borrowed funds	93,328		4.27	993		197,747		2.30	1,130		(81)		(56)		(137)		Total borrowed funds	81,521		4.81	989		110,928		3.93	1,096		(45)		(62)		(107)
Total interest-bearing liabilities	Total interest-bearing liabilities	2,113,993		1.24	6,534		2,158,990		1.11	5,959		(90)		665		575		Total interest-bearing liabilities	2,032,296		0.96	4,931		2,108,428		0.99	5,229		455		(753)		(298)
Net interest spread (5)	Net interest spread (5)			3.81	$	28,561			4.34	$	29,956	$	1,951	$	(3,486)	$	(1,535)	Net interest spread (5)			3.95	$	28,999			4.30	$	30,539	$	(209)	$	(1,491)	$	(1,700)
Noninterest bearing deposits	Noninterest bearing deposits	597,188		(0.27)			468,575		(0.20)									Noninterest bearing deposits	616,904		(0.22)			536,353		(0.20)
Other noninterest bearing liabilities	Other noninterest bearing liabilities	37,644					40,416											Other noninterest bearing liabilities	36,405					47,602
Shareholders' equity	Shareholders' equity	339,504					288,961											Shareholders' equity	351,172					299,435
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	3,088,329				$	2,956,942										Total liabilities and shareholders' equity	$	3,036,777				$	2,991,818
Cost of funds	Cost of funds			0.97					0.91									Cost of funds			0.74					0.79
Net interest margin (6)	Net interest margin (6)			4.14					4.58									Net interest margin (6)			4.22					4.54

(1) Calculated using daily averages.

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(2) Average loan balances include nonaccrual loans.

(3) Yields on loans reflects tax-exempt interest and state tax credits received on low or zero percent interest loans made to construct low income housing of ~~$667~~$669 and ~~$790,~~$760, for the three months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

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

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

(6) Net interest margin is the result of net interest income calculated on a tax-equivalent basis divided by average interest earning assets for the period.

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

For the three months ended ~~June~~September 30, 2021, we recorded net interest income on a tax-equivalent basis of approximately ~~$29,582~~$29,946 which resulted in a net interest margin (net interest income divided by the average balance of interest-earning assets) of ~~4.14%~~4.22% as compared to ~~4.58%~~4.54% for the three months ended ~~June~~September 30, 2020. This decrease was primarily due to ~~an increase~~a decrease in ~~our cost of funds due to~~loan yields and a ~~$2,859~~$2,290 swap termination fee incurred during the ~~quarter.~~quarter which is reflected in the cost of funds. The adjusted net interest margin, which excludes this fee impact as well as the benefits from purchase accounting accretion, showed continued improvement as it increased 4741 basis points from the prior year to ~~4.28%~~4.40%. Net income and earnings per share during the quarter were not materially affected by this termination fee as securities were sold for a gain of ~~$2,966~~$2,419 to offset the swap termination transaction.

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


		Three months ended June 30,									Three months ended September 30,
		2021				2020					2021				2020
		Interest Income		Average Yield		Interest Income		Average Yield			Interest Income		Average Yield		Interest Income		Average Yield
Loan yield components:	Loan yield components:									Loan yield components:
Contractual interest rate on loans held for investment (1)	Contractual interest rate on loans held for investment (1)	$	26,707	4.68	%	$	27,468	4.80	%	Contractual interest rate on loans held for investment (1)	$	27,862	4.68	%	$	27,760	4.73	%
Origination and other fee income (2)	Origination and other fee income (2)	2,644		0.46	%	1,739		0.30	%	Origination and other fee income (2)	1,970		0.33	%	2,255		0.38	%
Accretion on purchased loans	Accretion on purchased loans	1,832		0.32	%	4,240		0.74	%	Accretion on purchased loans	985		0.17	%	2,880		0.49	%
Loan tax credits	Loan tax credits	667		0.12	%	790		0.14	%	Loan tax credits	669		0.11	%	760		0.13	%
Tax-equivalent loan interest income	Tax-equivalent loan interest income	$	31,850	5.58	%	$	34,237	5.98	%	Tax-equivalent loan interest income	$	31,486	5.29	%	$	33,655	5.73	%

(1) Includes ~~$58~~$19 and ~~$148~~$210 in loan contractual interest related to PPP loans for the three months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

(2) Includes ~~$729~~$176 and ~~$284~~$455 in PPP related fees for the three months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

Our combined loan and loan fee yield decreased from ~~5.98%~~5.11% to ~~5.58%~~5.01% for the three months ended ~~June~~September 30, 2021 compared to the same period in 2020 as purchase accounting accretion decreased during the quarter. Our year-over-year quarterly average loan volume ~~decreased~~increased by approximately ~~0.6%~~0.9% for the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, ~~2020. However,~~2020 and when PPP loans are excluded, average loan volume increased by ~~0.9%~~1.6%.

Accretion on purchased loans contributed 3217 basis points to the NIM for three months ended ~~June~~September 30, 2021 compared to the 7449 basis points contributed in the comparable period in 2020, and ~~$13.0~~$12.0 million of purchase accounting accretion remained as of ~~June~~September 30, 2021. Contractual interest and origination fees on PPP loans contributed 81 basis ~~points~~point to the NIM for the three months ended ~~June~~September 30, 2021 as fees are recognized upon forgiveness compared to decreasing NIM by 76 basis points in the comparable period in 2020 due to the low comparative loan yield driven by the increased PPP loan volume in 2020. We anticipate recognizing ~~$184~~$11 in deferred origination fees over the remaining life of the PPP loan portfolio.

Our cost of funds ~~increased~~decreased to ~~0.97%~~0.74% from ~~0.91%~~0.79% for the three months ended ~~June~~September 30, 2021 compared to the same period in ~~2020 due to the swap termination fees realized in interest expense.~~2020. Cost of funds excluding ~~this~~the swap termination fee decreased 3739 basis points as rates continue to decline and our team continues to focus on reducing more costly time deposits and retaining lower cost customer deposits. Average retail time deposits decreased ~~40.8%~~38.4% year-over-year compared to the increase in average total deposits of ~~7.7%~~1.3%. In addition to the 4 basis point increase in cost of deposits, or 3836 basis point decrease when excluding swap termination fees, cost of funds benefited from a decrease in the cost of FHLB advances of 2469 basis points as the average balance decreased ~~82.3%~~73.6% as a result of the prepayments in the fourth quarter of 2020.

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


		Six Months Ended June 30, 2021					Six Months Ended June 30, 2020					Change							Nine Months Ended September 30, 2021					Nine Months Ended September 30, 2020					Change
		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total			Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Average Balances (1)		Rates / Yields (%)	Interest Income / Expense		Due to Volume		Due to Rate		Total
Interest earning assets	Interest earning assets																	Interest earning assets
Loans (2) (3)	Loans (2) (3)	$	2,284,633	5.13	$	56,828	$	1,957,834	5.40	$	51,463	$	12,434	$	(6,847)	$	5,587	Loans (2) (3)	$	2,310,056	5.07	$	85,675	$	2,085,467	5.38	$	82,105	$	10,835	$	(7,133)	$	3,702
Loan fees	Loan fees	—		0.47	5,344		—		0.27	2,629		2,715		—		2,715		Loan fees	—		0.42	7,314		—		0.31	4,882		2,432		—		2,432
Loans with fees	Loans with fees	2,284,633		5.60	62,172		1,957,834		5.67	54,092		15,149		(6,847)		8,302		Loans with fees	2,310,056		5.50	92,989		2,085,467		5.69	86,987		13,267		(7,133)		6,134
Mortgage loans held for sale	Mortgage loans held for sale	201,473		3.14	3,138		66,499		4.16	1,375		2,783		(1,020)		1,763		Mortgage loans held for sale	178,817		3.23	4,322		79,000		4.08	2,412		2,793		(883)		1,910
Deposits with banks	Deposits with banks	60,270		0.34	103		54,817		0.64	174		45		(116)		(71)		Deposits with banks	55,422		0.36	149		55,856		0.58	242		(2)		(91)		(93)
Investment securities - taxable	Investment securities - taxable	69,455		3.70	1,273		70,461		1.65	579		(26)		720		694		Investment securities - taxable	81,917		3.36	2,059		69,490		1.88	978		200		881		1,081
Investment securities - tax-exempt (4)	Investment securities - tax-exempt (4)	197,670		3.22	2,441		195,228		3.54	2,688		117		(400)		(283)		Investment securities - tax-exempt (4)	183,094		3.18	3,369		191,814		3.46	3,874		(220)		(390)		(610)
Restricted equity securities and other	Restricted equity securities and other	17,570		4.02	350		19,136		3.29	313		(66)		103		37		Restricted equity securities and other	17,415		3.98	519		19,324		3.43	496		(72)		95		23
Total earning assets	Total earning assets	2,831,071		5.09	69,477		2,363,975		5.20	59,221		18,002		(7,560)		10,442		Total earning assets	2,826,721		5.03	103,407		2,500,951		5.23	94,989		15,966		(7,521)		8,445
Nonearning assets	Nonearning assets	219,858					205,401											Nonearning assets	219,439					210,267
Total assets	Total assets	$	3,050,929				$	2,569,376										Total assets	$	3,046,160				$	2,711,218
Interest bearing liabilities	Interest bearing liabilities																	Interest bearing liabilities
Interest bearing demand	Interest bearing demand	395,011		0.25	488		232,664		0.27	318		238		(68)		170		Interest bearing demand	400,667		0.21	641		246,042		0.30	554		358		(271)		87
Savings and money market	Savings and money market	936,958		0.32	1,486		595,517		0.85	2,506		2,535		(3,555)		(1,020)		Savings and money market	951,486		0.27	1,927		659,673		0.74	3,668		1,831		(3,572)		(1,741)
Time deposits - retail	Time deposits - retail	468,869		1.05	2,446		645,769		1.47	4,713		(1,110)		(1,157)		(2,267)		Time deposits - retail	459,272		0.95	3,271		669,119		1.29	6,457		(1,731)		(1,455)		(3,186)
Time deposits - wholesale	Time deposits - wholesale	210,138		4.34	4,520		215,589		1.99	2,129		(162)		2,553		2,391		Time deposits - wholesale	179,263		5.25	7,043		218,109		1.91	3,120		(984)		4,907		3,923
Total interest-bearing deposits	Total interest-bearing deposits	2,010,976		0.90	8,940		1,689,539		1.15	9,666		1,501		(2,227)		(726)		Total interest-bearing deposits	1,990,688		0.87	12,882		1,792,943		1.03	13,799		(526)		(391)		(917)
Federal Home Loan Bank advances and other borrowings	Federal Home Loan Bank advances and other borrowings	15,066		0.23	17		118,335		0.86	509		(267)		(225)		(492)		Federal Home Loan Bank advances and other borrowings	13,603		0.26	26		92,223		0.89	613		(321)		(266)		(587)
Subordinated debt	Subordinated debt	70,669		5.52	1,933		70,502		5.63	1,975		12		(54)		(42)		Subordinated debt	70,712		5.51	2,913		70,455		5.63	2,967		16		(70)		(54)
Total borrowed funds	Total borrowed funds	85,735		4.59	1,950		188,837		2.65	2,484		(255)		(279)		(534)		Total borrowed funds	84,315		4.66	2,939		162,678		2.94	3,580		(305)		(336)		(641)
Total interest-bearing liabilities	Total interest-bearing liabilities	2,096,711		1.05	10,890		1,878,376		1.30	12,150		1,246		(2,506)		(1,260)		Total interest-bearing liabilities	2,075,003		1.02	15,821		1,955,621		1.19	17,379		(831)		(727)		(1,558)
Net interest spread (5)	Net interest spread (5)			4.04	$	58,587			3.90	$	47,071	$	16,756	$	(5,054)	$	11,702	Net interest spread (5)			4.01	$	87,586			4.04	$	77,610	$	16,797	$	(6,794)	$	10,003
Noninterest bearing deposits	Noninterest bearing deposits	581,566		(0.23)			390,324		(0.22)									Noninterest bearing deposits	593,474		(0.23)			439,355		(0.22)
Other noninterest bearing liabilities	Other noninterest bearing liabilities	39,351					35,249											Other noninterest bearing liabilities	38,360					39,396
Shareholders' equity	Shareholders' equity	333,301					265,427											Shareholders' equity	339,323					276,846
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	3,050,929				$	2,569,376										Total liabilities and shareholders' equity	$	3,046,160				$	2,711,218
Cost of funds	Cost of funds			0.82					1.08									Cost of funds			0.79					0.97
Net interest margin (6)	Net interest margin (6)			4.32					4.16									Net interest margin (6)			4.28					4.30

(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 ~~$1,328~~$1,997 and ~~$1,106,~~$1,865, for the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

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

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

(6) Net interest margin is the result of net interest income calculated on a tax-equivalent basis divided by average interest earning assets for the period.

~~Six~~Nine months ended ~~June~~September 30, 2021 compared to ~~six~~nine months ended ~~June~~September 30, 2020

For the ~~six~~nine months ended ~~June~~September 30, 2021, we recorded net interest income on a tax-equivalent basis of approximately ~~$60,627~~$90,573 which resulted in a net interest margin (net interest income divided by the average balance of interest-earning assets) of ~~4.32%~~4.28% compared to ~~4.16%~~4.30% for the ~~six~~nine months ended ~~June~~September 30, 2020. This ~~increase~~decrease was primarily driven by ~~an increase in average loan balances and~~ a decrease in ~~the Company's use of retail time deposits~~loan yields and a $5,149 swap termination fee incurred during 2021 which ~~have a higher interest rate as well as an overall decline~~is reflected in the ~~interest rate environment.~~cost of funds. The adjusted net

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interest margin, which excludes this fee impact as well as the benefits from purchase accounting accretion, showed continued improvement as it increased 53 basis points from the prior year to 4.31%. Net income and earnings per share during the year were not materially affected by this termination fee as securities were sold for a gain of $5,514 to offset the swap termination transaction.

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


		Six months ended June 30,									Nine months ended September 30,
		2021				2020					2021				2020
		Interest Income		Average Yield		Interest Income		Average Yield			Interest Income		Average Yield		Interest Income		Average Yield
Loan yield components:	Loan yield components:									Loan yield components:
Interest rate on loans held for investment (1)	Interest rate on loans held for investment (1)	$	53,197	4.69	%	$	46,701	4.80	%	Interest rate on loans held for investment (1)	$	81,059	4.69	%	$	74,463	4.77	%
Origination and other fee income (2)	Origination and other fee income (2)	5,344		0.47	%	2,629		0.27	%	Origination and other fee income (2)	7,314		0.42	%	4,882		0.31	%
Accretion on purchased loans	Accretion on purchased loans	3,631		0.32	%	4,762		0.49	%	Accretion on purchased loans	4,616		0.27	%	7,642		0.49	%
Loan tax credits	Loan tax credits	1,328		0.12	%	1,106		0.11	%	Loan tax credits	1,997		0.12	%	1,865		0.12	%
Tax-equivalent loan interest income	Tax-equivalent loan interest income	$	63,500	5.60	%	$	55,198	5.67	%	Tax-equivalent loan interest income	$	94,986	5.50	%	$	88,852	5.69	%

(1) Includes ~~$197~~$216 and ~~$148~~$358 in loan contractual interest related to PPP loans for the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

(2) Includes ~~$1,632~~$1,808 and ~~$284~~$739 in PPP related fees for the ~~six~~nine months ended ~~June~~September 30, 2021 and ~~June~~September 30, 2020, respectively.

Our combined loan and loan fee yield increased from ~~5.07%~~5.08% to ~~5.16%~~5.11% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period in 2020. The effects of the declining interest rate environment were offset by the realization of additional interest income related to the FABK acquisition which occurred on April 1, 2020. Our year-over-year average loan volume increased by approximately ~~16.7%~~10.8% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020 and was largely driven by the FABK Transaction.

Accretion on purchased loans contributed 3227 basis points to the NIM for ~~six~~the nine months ended ~~June~~September 30, 2021 compared to the 49 basis points contributed in the comparable period in 2020. Contractual interest and origination fees on PPP loans ~~attributed 6~~contributed 5 basis points to the NIM for the ~~six~~nine months ended ~~June~~September 30, 2021 as fees are recognized upon forgiveness as compared to decreasing NIM by 36 basis points in the comparable period in 2020 due to the increased PPP loan volume in 2020 compared to the loan yield in 2020.

Our cost of funds decreased to ~~0.82%~~0.79% from ~~1.08%~~0.97% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period in 2020 as rates continue to decline and our team continues to focus on reducing more costly time deposits and retaining lower cost customer deposits. When excluding the swap termination fees incurred in the second and third quarters of 2021, cost of funds decreased 4844 basis points to ~~0.60%~~0.53%. Average retail time deposits decreased ~~27.4%~~31.4% year-over-year compared to the increase in average total deposits of ~~24.6%~~15.8%. In addition to the 2617 basis point decrease in cost of deposits, or 4641 basis points adjusted for swap termination fees, cost of funds benefited from a decrease in the cost of FHLB advances of 63 basis points as the average balance decreased ~~87.3%~~85.2% 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 and ~~six~~nine months ended ~~June~~September 30, 2021 compared to ~~$3,000~~$1,500 and ~~$5,900~~$7,400 recorded in the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. The provision expense for the three and ~~six~~nine months ended ~~June~~September 30, 2020 can be primarily attributed to the expected downturn in the economy due to COVID-19 as well as the growth in the loan portfolio, whereas ~~the three months ended June 30, 2021 experienced minimal growth in the loan portfolio. Additionally,~~ economic outlooks have improved in 2021, in part due to the federal stimulus programs and vaccine rollouts.

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

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Noninterest Income

Our noninterest income is composed of several components, some of which vary significantly between periods. The following is a summary of our noninterest income for the three and ~~six~~nine months ended ~~June~~September 30, 2021, and 2020 (dollars in thousands):


		Three Months Ended June 30,				Percent Increase		Six Months Ended June 30,				Percent Increase			Three Months Ended September 30,				Percent Increase		Nine Months Ended September 30,				Percent Increase
		2021		2020		(Decrease)		2021		2020		(Decrease)			2021		2020		(Decrease)		2021		2020		(Decrease)
Non-Interest Income	Non-Interest Income													Non-Interest Income
Service charges and fees on deposits	Service charges and fees on deposits	$	1,656	$	1,381	19.9	%	$	3,217	$	2,589	24.3	%	Service charges and fees on deposits	$	1,678	$	1,583	6.0	%	$	4,895	$	4,172	17.3	%
Gains on mortgage loans sold, net	Gains on mortgage loans sold, net	2,978		2,248		32.5	%	7,906		3,821		106.9	%	Gains on mortgage loans sold, net	4,218		3,784		11.5	%	12,124		7,605		59.4	%
Gain (loss) on securities transactions, net		2,966		327		807.0	%	3,095		327		846.5	%
Gain on securities transactions, net														Gain on securities transactions, net	2,419		—		100.0	%	5,514		327		1586.2	%

Bank-owned life insurance	Bank-owned life insurance	556		392		41.8	%	991		687		44.3	%	Bank-owned life insurance	2,181		386		465.0	%	3,172		1,073		195.6	%
Brokerage revenue	Brokerage revenue	84		45		86.7	%	153		77		98.7	%	Brokerage revenue	79		65		21.5	%	232		142		63.4	%
Miscellaneous noninterest income	Miscellaneous noninterest income	70		29		141.4	%	311		169		84.0	%	Miscellaneous noninterest income	294		184		59.8	%	579		387		49.6	%

Total noninterest income	Total noninterest income	$	8,310	$	4,422	87.9	%	$	15,647	$	7,704	103.1	%	Total noninterest income	$	10,869	$	6,002	81.1	%	$	26,516	$	13,706	93.5	%

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

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 ~~$282,505~~$105,750 and ~~$593,801~~$699,551 in the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to ~~$95,070~~$143,375 and ~~$184,146~~$327,521 in the same periods in 2020 as a result of the productive market conditions produced by the low interest rate environment.

Securities gains and losses often fluctuate from period to period and can sometimes be attributable to various balance sheet risk strategies. During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company sold securities totaling ~~$35,751~~$58,855 with a gain of ~~$3,095.~~$5,514. Of this gain, ~~$2,859~~$2,966 and $2,419 was realized to offset the effects of the swap termination fees incurred in the second ~~quarter.~~quarter and third quarters, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company sold securities classified as available for sale, many of which were acquired in the TCB Holdings transaction, totaling ~~$103,668. No~~$103,901 for a gain ~~was recognized as the securities were sold at the fair value for which they were acquired.~~of $327.

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

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Noninterest Expense

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


		Three Months Ended June 30,				Percent Increase		Six Months Ended June 30,				Percent Increase			Three Months Ended September 30,				Percent Increase		Nine Months Ended September 30,				Percent Increase
		2021		2020		(Decrease)		2021		2020		(Decrease)			2021		2020		(Decrease)		2021		2020		(Decrease)
Non-Interest Expense	Non-Interest Expense													Non-Interest Expense
Salaries and employee benefits	Salaries and employee benefits	$	12,793	$	12,464	2.6	%	$	26,145	$	21,701	20.5	%	Salaries and employee benefits	$	12,426	$	12,184	2.0	%	$	38,571	$	33,885	13.8	%
Occupancy	Occupancy	1,999		2,026		(1.3)	%	4,007		3,512		14.1	%	Occupancy	2,038		2,054		(0.8)	%	6,045		5,566		8.6	%
Data processing and software	Data processing and software	2,262		2,026		11.6	%	4,491		3,845		16.8	%	Data processing and software	2,265		2,240		1.1	%	6,756		6,085		11.0	%
Professional fees	Professional fees	358		680		(47.4)	%	1,601		1,158		38.3	%	Professional fees	526		775		(32.1)	%	2,127		1,933		10.0	%
Regulatory fees	Regulatory fees	343		537		(36.1)	%	704		991		(29.0)	%	Regulatory fees	328		365		(10.1)	%	1,032		1,356		(23.9)	%
Merger expenses	Merger expenses	—		2,632		(100.0)	%	—		6,818		(100.0)	%	Merger expenses	1,453		77		1787.0	%	1,453		6,895		(78.9)	%
Other operating expense	Other operating expense	2,729		1,899		43.7	%	5,200		3,837		35.5	%	Other operating expense	3,345		2,639		26.8	%	8,545		6,476		31.9	%
Total noninterest expense	Total noninterest expense	$	20,484	$	22,264	(8.0)	%	$	42,148	$	41,862	0.7	%	Total noninterest expense	$	22,381	$	20,334	10.1	%	$	64,529	$	62,196	3.8	%

Noninterest expense ~~decreased~~increased during the three months ended ~~June~~September 30, 2021 when compared to ~~June~~September 30, 2020 which is primarily driven by the merger expenses incurred in ~~2020~~2021 and ~~offset by~~ the incremental costs incurred following the TCB Holdings and FABK transactions. Noninterest expense increased during the ~~six~~nine months ended ~~June~~September 30, 2021 when compared to ~~June~~September 30, 2020 which is primarily driven by the incremental costs incurred following the TCB Holdings and FABK transactions offset by the merger expenses incurred in 2020.

The ~~2.6%~~2.0% and ~~20.5%~~13.8% increase in salaries and employee benefits during the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, when compared to ~~June~~September 30, 2020 is primarily attributable to the increase in employees from the FABK transaction as well as our year-over-year growth. While staffing levels have normalized, we experienced an overall ~~increase~~decrease in average FTEs from ~~369~~422 for the three months ended ~~June~~September 30, 2020 to ~~423~~415 for the three months ended ~~June~~September 30, 2021, ~~or 359~~and an increase from 364 for the ~~six~~nine months ended ~~June~~September 30, 2020 to ~~424~~419 for the ~~six~~nine months ended ~~June~~September 30, 2021.

Occupancy costs decreased by ~~$27~~$16 or ~~1.3%~~0.8% during the three months ended ~~June~~September 30, 2021 and increased ~~$495,~~$479, or ~~14.1%~~8.6% during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same periods in 2020 as the FABK Transaction and the expansion of RMV increased costs in 2020 and is offset by the branch justification project that has resulted in the ~~announced~~ closure of ~~one branch and the intent to close two additional~~three branches ~~later~~ in 2021.

Data processing and software expense increased during the three and ~~six~~nine months ended ~~June~~September 30, 2020 to ~~June~~September 30, 2021 and is mainly attributable to an increased volume of accounts and transactions services as well as continued investments in information technology infrastructure. Both the volume and location increases are primarily due to the FABK Transaction and the expansion of RMV.

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 ~~50.6%~~51.7% and ~~51.4%~~51.5% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~60.3%~~50.5% and ~~71.3%~~63.2% for the same periods in 2020. Our adjusted efficiency ratio, on a tax-equivalent basis, was ~~49.1%~~46.4% and ~~49.9%~~48.7% for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to ~~50.7%~~48.6% and ~~56.0%~~53.1% for the same periods in 2020. See “Reconciliation of Non-GAAP Financial Measures” in this Quarterly Report for the reconciliation of the adjusted efficiency ratio.

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Income Taxes

During the three and ~~six~~nine months ended ~~June~~September 30, 2021 we recorded consolidated income tax expense of ~~$3,202~~$3,551 and ~~$6,182,~~$9,733, respectively, as compared to ~~$1,634~~$2,800 and ~~$724~~$3,524 for the same periods in 2020. This represents consolidated effective tax rates for the three and ~~six~~nine month ended ~~June~~September 30, 2021 of ~~19.5%~~20.3% and ~~17.9%~~19.6%, respectively, compared to ~~19.3%~~19.0% and ~~10.3%~~16.2% for the same periods in 2020. When evaluating the bank segment alone, this ratio was ~~19.5%~~21.0% and 20.0% for ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, as compared to ~~17.4%~~19.4% and ~~9.7%~~15.8% for the same period in 2020.

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 ~~$140~~$647 and ~~$710~~$1,357 for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively, compared to net income of $374 and loss of ~~$388 and $1,364~~$990 for the same periods in 2020. The improvements in operating results is mainly attributable to the productive market conditions produced by the low interest rate environment. Also, see Note 9 to our consolidated financial statements for segment reporting.

FINANCIAL CONDITION

Overview

The Company’s total assets were ~~$3,098,464~~$3,013,559 at ~~June~~September 30, 2021 and $3,026,535 at December 31, 2020, ~~an increase~~a decrease of ~~2.4%~~0.4%. Total liabilities were ~~$2,752,175~~$2,657,244 at ~~June~~September 30, 2021 and $2,704,562 at December 31, 2020, ~~an increase~~a decrease of ~~1.8%~~1.7%. The ~~increase~~decrease in liabilities was substantially attributable to the ~~increase~~decrease in deposits of ~~$50,605,~~$31,530, or ~~2.0%~~1.2% and the decrease in assets was largely attributable to the decrease in mortgage loans held for sale of $84,981, or 57.6%. 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 ~~June~~September 30, 2021, and December 31, 2020, were ~~$2,300,176~~$2,368,936 and $2,280,147, respectively, representing an increase of ~~0.9%~~3.9%, or ~~3.2%~~6.9% when PPP loans are excluded.

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


		June 30, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Amount		Percent		Amount		Percent			Amount		Percent		Amount		Percent
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	435,093	18.7	%	$	459,739	19.9	%	Commercial, Industrial and Agricultural	$	450,710	18.8	%	$	459,739	19.9	%
Real estate:	Real estate:									Real estate:
1-4 Family Residential	1-4 Family Residential	326,768		14.1	%	323,473		14.0	%	1-4 Family Residential	310,855		13.0	%	323,473		14.0	%
1-4 Family HELOC	1-4 Family HELOC	100,614		4.3	%	100,525		4.4	%	1-4 Family HELOC	100,895		4.2	%	100,525		4.4	%
Multifamily and Commercial	Multifamily and Commercial	831,093		35.8	%	834,000		36.2	%	Multifamily and Commercial	873,265		36.6	%	834,000		36.2	%
Construction, Land Development and Farmland	Construction, Land Development and Farmland	397,557		17.1	%	365,058		15.8	%	Construction, Land Development and Farmland	417,258		17.4	%	365,058		15.8	%
Consumer	Consumer	225,433		9.7	%	213,863		9.3	%	Consumer	234,734		9.8	%	213,863		9.3	%
Other	Other	7,614		0.3	%	8,669		0.4	%	Other	5,298		0.2	%	8,669		0.4	%
		2,324,172		100.0	%	2,305,327		100.0	%		2,393,015		100.0	%	2,305,327		100.0	%
Less:	Less:									Less:
Deferred loan fees	Deferred loan fees	3,102				4,544				Deferred loan fees	3,182				4,544
Allowance for loan losses	Allowance for loan losses	20,894				20,636				Allowance for loan losses	20,897				20,636
Loans, net	Loans, net	$	2,300,176			$	2,280,147			Loans, net	$	2,368,936			$	2,280,147

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


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020

Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	889	$	919	Commercial, Industrial and Agricultural	$	782	$	919
Real estate:	Real estate:					Real estate:
1-4 Family Residential	1-4 Family Residential	885		1,004		1-4 Family Residential	868		1,004
1-4 Family HELOC	1-4 Family HELOC	19		19		1-4 Family HELOC	19		19
Multifamily and Commercial	Multifamily and Commercial	1,218		1,325		Multifamily and Commercial	1,175		1,325
Construction, Land Development and Farmland	Construction, Land Development and Farmland	944		992		Construction, Land Development and Farmland	935		992
Consumer	Consumer	1,552		1,924		Consumer	1,426		1,924

Total gross PCI loans	Total gross PCI loans	5,507		6,183		Total gross PCI loans	5,205		6,183
Less:	Less:					Less:
Remaining purchase discount	Remaining purchase discount	2,529		2,596		Remaining purchase discount	2,458		2,596
Allowance for loan losses	Allowance for loan losses	—		—		Allowance for loan losses	—		—
Loans, net	Loans, net	$	2,978	$	3,587	Loans, net	$	2,747	$	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 ~~$435,093~~$450,710 at ~~June~~September 30, 2021 and decreased by ~~5.4%~~2.0% compared to $459,739 at December 31, 2020 which was largely driven by PPP loan forgiveness.

Real estate loans comprised ~~71.3%~~71.2% of the loan portfolio at ~~June~~September 30, 2021. Residential loans included in this category consist mainly of closed-end loans secured by first and second liens that are not held for sale and revolving, open-end loans secured by 1-4 family residential properties extended under home equity lines of credit. The Company ~~increased~~decreased the residential portfolio ~~0.8%~~2.9% from December 31, 2020 to ~~June~~September 30, 2021. Multi-family and commercial loans included in the real estate category above include (in typical order of prominence) loans secured by non-owner-occupied commercial real estate properties, and loans secured by multi-family residential properties. Multi-family and commercial real estate loans were ~~$831,093~~$873,265 at ~~June~~September 30, 2021 and ~~decreased 0.3%~~increased 4.7% compared to the $834,000 held as of December 31, 2020. Real estate construction loans consist of 1-4 family residential construction loans, other construction loans, land loans, and loans secured by farmland. Construction lending has continued to increase based on a strong local market demand.

Consumer loans mainly consist of loans to individuals for household, family, and other personal expenditures under revolving credit plans, credit cards, and automobile and other consumer loans. Our consumer loans experienced an increase from

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December 31, 2020, to ~~June~~September 30, 2021, of ~~5.4%~~9.8% primarily due to the ~~$14,759~~$25,062 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 ~~12.2%~~38.9% from December 31, 2020 to ~~June~~September 30, 2021 due to loan payments.

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


		One Year or Less		One to Five Years		Over Five Years		Total			One Year or Less		One to Five Years		Over Five Years		Total
Gross loans	Gross loans	$	701,267	$	1,275,256	$	347,649	$	2,324,172	Gross loans	$	566,044	$	1,290,581	$	536,390	$	2,393,015
Fixed interest rate	Fixed interest rate							$	1,224,723	Fixed interest rate							$	1,213,415
Variable interest rate	Variable interest rate							1,099,449		Variable interest rate							1,179,600
Total	Total							$	2,324,172	Total							$	2,393,015

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

Allowance for Loan Losses

At ~~June~~September 30, 2021, the allowance for loan losses was ~~$20,894~~$20,897 compared to $20,636 at December 31, 2020. The allowance for loan losses as a percentage of total loans was ~~0.90%~~0.87% at ~~June~~September 30, 2021 compared to 0.90% at December 31, 2020.

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

Analysis of Changes in Allowance for Loan Losses


		June 30, 2021			June 30, 2020				September 30, 2021			September 30, 2020
Beginning Balance, January 1, 2021 and 2020, respectively	Beginning Balance, January 1, 2021 and 2020, respectively	$	20,636		$	12,578		Beginning Balance, January 1, 2021 and 2020, respectively	$	20,636		$	12,578
Loans charged off:	Loans charged off:							Loans charged off:
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	(32)			(539)			Commercial, Industrial and Agricultural	(35)			(507)
Real estate:	Real estate:							Real estate:
1-4 Family Residential	1-4 Family Residential	(21)			(60)			1-4 Family Residential	(63)			(68)
1-4 Family HELOC	1-4 Family HELOC	—			(98)			1-4 Family HELOC	—			(98)
Multifamily and Commercial	Multifamily and Commercial	—			—			Multifamily and Commercial	—			—
Construction, Land Development and Farmland	Construction, Land Development and Farmland	—			(114)			Construction, Land Development and Farmland	—			(114)
Consumer	Consumer	(454)			(295)			Consumer	(604)			(355)
Other	Other	—			—			Other	—			—
Total loans charged off	Total loans charged off	(507)			(1,106)			Total loans charged off	(702)			(1,142)
Recoveries on loans previously charged off:	Recoveries on loans previously charged off:							Recoveries on loans previously charged off:
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	301			70			Commercial, Industrial and Agricultural	315			126
Real estate:	Real estate:							Real estate:
1-4 Family Residential	1-4 Family Residential	96			747			1-4 Family Residential	154			769
1-4 Family HELOC	1-4 Family HELOC	5			3			1-4 Family HELOC	7			15
Multifamily and Commercial	Multifamily and Commercial	215			11			Multifamily and Commercial	257			20
Construction, Land Development and Farmland	Construction, Land Development and Farmland	91			4			Construction, Land Development and Farmland	92			8
Consumer	Consumer	57			30			Consumer	138			60
Other	Other	—			—			Other	—			—
Total loan recoveries	Total loan recoveries	765			865			Total loan recoveries	963			998
Net recoveries (charge-offs)	Net recoveries (charge-offs)	258			(241)			Net recoveries (charge-offs)	261			(144)
Provision for loan losses	Provision for loan losses	—			5,900			Provision for loan losses	—			7,400
Total allowance for loan losses at end of period	Total allowance for loan losses at end of period	$	20,894		$	18,237		Total allowance for loan losses at end of period	$	20,897		$	19,834
Allowance for loan losses to total loans, net	Allowance for loan losses to total loans, net	0.90		%	0.79		%	Allowance for loan losses to total loans, net	0.87		%	0.84		%
Net (recoveries) charge-offs to average loans outstanding	Net (recoveries) charge-offs to average loans outstanding	(0.02)		%	0.02		%	Net (recoveries) charge-offs to average loans outstanding	(0.02)		%	0.01		%

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.


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Amount		% of Allowance to Allowance		% of Loan Type to Total Loans		Amount		% of Allowance to Allowance		% of Loan Type to Total Loans			Amount		% of Allowance to Allowance		% of Loan Type to Total Loans		Amount		% of Allowance to Allowance		% of Loan Type to Total Loans
Commercial, Industrial and Agricultural	Commercial, Industrial and Agricultural	$	6,614	31.7	%	18.7	%	$	5,441	26.4	%	19.9	%	Commercial, Industrial and Agricultural	$	6,987	33.4	%	18.8	%	$	5,441	26.4	%	19.9	%
Real estate:	Real estate:													Real estate:
1-4 Family Residential	1-4 Family Residential	1,923		9.2	%	14.1	%	2,445		11.8	%	14.0	%	1-4 Family Residential	1,297		6.2	%	13.0	%	2,445		11.8	%	14.0	%
1-4 Family HELOC	1-4 Family HELOC	610		2.9	%	4.3	%	1,416		6.9	%	4.4	%	1-4 Family HELOC	610		2.9	%	4.2	%	1,416		6.9	%	4.4	%
Multifamily and Commercial	Multifamily and Commercial	8,498		40.7	%	35.8	%	8,535		41.4	%	36.2	%	Multifamily and Commercial	8,606		41.2	%	36.6	%	8,535		41.4	%	36.2	%
Construction, Land Development and Farmland	Construction, Land Development and Farmland	2,011		9.6	%	17.1	%	1,841		8.9	%	15.8	%	Construction, Land Development and Farmland	2,090		10.0	%	17.4	%	1,841		8.9	%	15.8	%
Consumer	Consumer	1,222		5.8	%	9.7	%	928		4.5	%	9.3	%	Consumer	1,296		6.2	%	9.8	%	928		4.5	%	9.3	%
Other	Other	16		0.1	%	0.3	%	30		0.1	%	0.4	%	Other	11		0.1	%	0.2	%	30		0.1	%	0.4	%
		$	20,894	100.0	%	100.0	%	$	20,636	100.0	%	100.0	%		$	20,897	100.0	%	100.0	%	$	20,636	100.0	%	100.0	%

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Nonperforming Assets

Nonperforming assets consists of nonperforming loans plus real estate acquired through foreclosure or deed in lieu of foreclosure and other repossessed collateral as well as banking facilities taken out of service. Nonperforming loans by definition consists of nonaccrual loans and loans past due 90 days or more and still accruing interest. When we place a loan on nonaccrual status, interest accruals cease and uncollected interest is reversed and charged against current income. The interest on these loans is accounted for on the cash-basis, or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured, which generally includes a minimum performance of six months.

The following table provides information with respect to the Company’s nonperforming assets.


		June 30, 2021			December 31, 2020				September 30, 2021			December 31, 2020

Total nonperforming loans	Total nonperforming loans	$	5,355		$	5,987		Total nonperforming loans	$	5,302		$	5,987
Foreclosed real estate ("OREO")	Foreclosed real estate ("OREO")	2,233			1,246			Foreclosed real estate ("OREO")	3,088			1,246
Repossessed collateral	Repossessed collateral	1,161			1,424			Repossessed collateral	865			1,424
Mortgage Loans HFS	Mortgage Loans HFS	977			630			Mortgage Loans HFS	977			630
Total nonperforming assets	Total nonperforming assets	$	9,726		$	9,287		Total nonperforming assets	$	10,232		$	9,287
Total nonperforming loans HFI as a percentage of total loans HFI	Total nonperforming loans HFI as a percentage of total loans HFI	0.23		%	0.26		%	Total nonperforming loans HFI as a percentage of total loans HFI	0.22		%	0.26		%
Total nonperforming assets as a percentage of total assets	Total nonperforming assets as a percentage of total assets	0.31		%	0.31		%	Total nonperforming assets as a percentage of total assets	0.34		%	0.31		%
Allowance for loan losses as a percentage of nonperforming loans HFI	Allowance for loan losses as a percentage of nonperforming loans HFI	390.18		%	344.68		%	Allowance for loan losses as a percentage of nonperforming loans HFI	394.13		%	344.68		%
Troubled Debt Restructurings ("TDRs")	Troubled Debt Restructurings ("TDRs")	$	3,490		$	4,236		Troubled Debt Restructurings ("TDRs")	$	2,903		$	4,236
TDRs as a percentage of total loans	TDRs as a percentage of total loans	0.15		%	0.18		%	TDRs as a percentage of total loans	0.12		%	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.

Securities totaled ~~$266,695~~$254,416 at ~~June~~September 30, 2021, in comparison to the $256,653 in securities balances at December 31, 2020. This ~~increase~~decrease can largely be attributed to the Company's ~~investment in state and municipal bonds and mortgage backed~~sale of securities to offset swap termination fees during the ~~period~~second and third quarters of ~~$48,070.~~2021. Activity during the ~~six~~nine months ended ~~June~~September 30, 2021 includes the sale of ~~$35,751~~$58,855 of securities as well as ~~$1,779~~$8,730 of principal paydowns, calls, and maturities.

Restricted equity securities totaled $15,770 and $16,551 at ~~June~~September 30, 2021, and December 31, 2020, respectively, and consist of FRB and FHLB stock.

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


		June 30, 2021					December 31, 2020						September 30, 2021					December 31, 2020
		Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total			Amortized Cost		Fair Value	% of Total		Amortized Cost		Fair Value	% of Total
U.S. Treasury and other U.S. government agencies	U.S. Treasury and other U.S. government agencies	$	222	222	0.08	%	$	47	48	0.02	%	U.S. Treasury and other U.S. government agencies	$	218	218	0.09	%	$	47	48	0.02	%
State and municipal bonds	State and municipal bonds	174,093		187,534	70.32	%	184,102		200,988	78.31	%	State and municipal bonds	161,733		170,971	67.19	%	184,102		200,988	78.31	%
Corporate bonds	Corporate bonds	27,000		28,082	10.53	%	23,750		24,113	9.40	%	Corporate bonds	27,000		28,152	11.07	%	23,750		24,113	9.40	%
Mortgage-backed securities	Mortgage-backed securities	47,908		48,244	18.09	%	28,084		28,442	11.08	%	Mortgage-backed securities	52,736		52,823	20.76	%	28,084		28,442	11.08	%
Asset-backed securities	Asset-backed securities	2,634		2,613	0.98	%	3,083		3,062	1.19	%	Asset-backed securities	2,270		2,252	0.89	%	3,083		3,062	1.19	%

Total	Total	$	251,857	266,695	100.00	%	$	239,066	256,653	100.00	%	Total	$	243,957	254,416	100.00	%	$	239,066	256,653	100.00	%

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


		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value
Due within one year	Due within one year	$	222	$	223	Due within one year	$	218	$	218
Due in one to five years	Due in one to five years	2,085		2,129		Due in one to five years	2,085		2,120
Due in five to ten years	Due in five to ten years	33,773		35,729		Due in five to ten years	31,473		33,239
Due after ten years	Due after ten years	165,235		177,757		Due after ten years	155,175		163,764
Mortgage-backed securities	Mortgage-backed securities	47,908		48,244		Mortgage-backed securities	52,736		52,823
Asset-backed securities	Asset-backed securities	2,634		2,613		Asset-backed securities	2,270		2,252
Total	Total	$	251,857	$	266,695	Total	$	243,957	$	254,416

Premises and Equipment

Premises and equipment, net, totaled ~~$29,183~~$27,519 at ~~June~~September 30, 2021 compared to $31,462 at December 31, 2020, a net decrease of ~~$2,279,~~$3,943, or ~~7.2%~~12.5%. Premises and equipment purchases amounted to approximately ~~$261~~$297 during the ~~six~~nine months ended ~~June~~September 30, 2021 and were mainly incurred for additional leasehold improvements and equipment for our branches and mortgage locations while depreciation expense amounted to ~~$1,455.~~$2,127. Retired bank facilities of ~~$990~~$1,988 were transferred to other real estate owned during ~~the second quarter of~~ 2021.

Deposits

Deposits represent the Company’s largest source of funds. The Company competes with other banks and non-bank institutions for deposits, as well as with a growing number of non-deposit investment alternatives available to depositors such as money market funds and other brokerage investment products. Challenges to deposit growth include interest rate changes on deposit products given movements in the interest rate environment and other competitive pricing pressures, and customer preferences regarding higher-costing deposit products or non-deposit investment alternatives.

At ~~June~~September 30, 2021, total deposits were ~~$2,629,840, an increase~~$2,547,705, a decrease of ~~$50,605,~~$31,530, or ~~2.0%~~1.2%, compared to $2,579,235 at December 31, 2020. During the ~~six~~nine months ended ~~June~~September 30, 2021, noninterest bearing demand deposits increased by ~~$27,266,~~$51,309, interest-bearing demand deposits increased by ~~$90,769,~~$60,531, savings and money market deposits increased by ~~$146,192,~~$132,467, and time deposits decreased by ~~$213,622.~~$275,837. Our team continues to focus on retaining low cost customer deposits ~~while decreasing~~and has utilized cash flow from mortgage loan sales in order to decrease higher cost time deposits.

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


		June 30, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Ending Balance		% of Total Deposits		Average Rate		Ending Balance		% of Total Deposits		Average Rate			Ending Balance		% of Total Deposits		Average Rate		Ending Balance		% of Total Deposits		Average Rate
Noninterest-bearing demand	Noninterest-bearing demand	$	602,555	22.9	%	—	%	$	575,289	22.3	%	—	%	Noninterest-bearing demand	$	626,598	24.6	%	—	%	$	575,289	22.3	%	—	%
Interest bearing demand	Interest bearing demand	441,161		16.8	%	0.25	%	$	350,392	13.6	%	0.30	%	Interest bearing demand	410,923		16.1	%	0.21	%	$	350,392	13.6	%	0.30	%
Savings and money market	Savings and money market	1,003,402		38.2	%	0.32	%	$	857,210	33.2	%	0.67	%	Savings and money market	989,677		38.9	%	0.27	%	$	857,210	33.2	%	0.67	%
Time deposits - retail	Time deposits - retail	445,432		16.9	%	1.05	%	527,985		20.5	%	1.19	%	Time deposits - retail	433,442		17.0	%	0.95	%	527,985		20.5	%	1.19	%
Time deposits - wholesale	Time deposits - wholesale	137,290		5.2	%	4.34	%	268,359		10.4	%	1.77	%	Time deposits - wholesale	87,065		3.4	%	5.25	%	268,359		10.4	%	1.77	%
Total deposits	Total deposits	$	2,629,840	100.00	%	0.67	%	$	2,579,235	100.00	%	0.73	%	Total deposits	$	2,547,705	100.00	%	0.64	%	$	2,579,235	100.00	%	0.73	%

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

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The following table shows maturity or repricing of time deposits of $250 or more by category based on time remaining until maturity at ~~June~~September 30, 2021:


	~~June~~September 30, 2021
Twelve months or less	$	~~127,701~~137,387
Over twelve months through three years	~~21,306~~23,245
Over three years	~~3,345~~2,420
Total	$	~~152,352~~163,052

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 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~~below.

Earnings Simulation Model—We believe interest rate risk is effectively measured by our earnings simulation modeling. Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with simulated forecasts of interest rates for the next 12 months and 24 months. To limit interest rate risk, we have guidelines for our earnings at risk which seek to limit the negative variances of net interest income in instantaneous changes to interest rates. We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts in market interest rates over time. For changes up or down in rates from a flat interest rate forecast over the next 12 and 24 months, our estimated change in net interest income as well as our policy limits are as follows:


Instantaneous, Parallel Change in Prevailing Interest Rates Equal to	Instantaneous, Parallel Change in Prevailing Interest Rates Equal to	Estimated Change in Net Interest Income and Policy of Maximum Percentage Decline in Net Interest Income				Instantaneous, Parallel Change in Prevailing Interest Rates Equal to	Estimated Change in Net Interest Income and Policy of Maximum Percentage Decline in Net Interest Income
		Next 12		Next 24			Next 12		Next 24
		Months		Months			Months		Months
		Estimate	Policy	Estimate	Policy		Estimate	Policy	Estimate	Policy
-200 bp	-200 bp	(4.0)%	(15)%	(7.4)%	(15)%	-200 bp	(3.0)%	(15)%	(6.7)%	(15)%
-100 bp	-100 bp	(2.7)%	(10)%	(5.3)%	(10)%	-100 bp	(2.0)%	(10)%	(4.9)%	(10)%
+100 bp	+100 bp	2.3%	(10)%	4.9%	(10)%	+100 bp	1.5%	(10)%	3.8%	(10)%
+200 bp	+200 bp	5.1%	(15)%	9.6%	(15)%	+200 bp	3.6%	(15)%	7.6%	(15)%
+300 bp	+300 bp	8.3%	(20)%	14.7%	(20)%	+300 bp	6.0%	(20)%	11.7%	(20)%
+400 bp	+400 bp	11.5%	(25)%	19.8%	(25)%	+400 bp	8.4%	(25)%	15.9%	(25)%

We were in compliance with our earnings simulation model policies as of ~~June~~September 30, 2021, indicating what we believe to be a fairly neutral interest-rate risk profile.

Economic Value of Equity Model—Our economic value of equity model measures the extent that estimated economic values of our assets, liabilities and off-balance sheet items will change as a result of interest rate changes. Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case economic value of equity.

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


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

At ~~June~~September 30, 2021, our model results indicated that we were within these policy limits.

Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. Our ALCO reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies.

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

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

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

The Company has established a line of credit with the FHLB, which is secured by a blanket pledge of 1-4 family residential mortgages, multi-family residential, commercial real estate, and home equity loans, and available-for-sale securities. At ~~June~~September 30, 2021, FHLB advances totaled ~~$16,000~~$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 ~~June~~September 30, 2021, Reliant Bancorp was current on all interest payments due related to its subordinated debentures. Reliant Bancorp has the right to defer the payment of interest on the subordinated debentures at any time, for a period not to exceed 20 consecutive quarters. During the period in which it is deferring the payment of interest on its

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subordinated debentures, the indentures governing the subordinated debentures provide that Reliant Bancorp cannot pay any dividends on its common stock or preferred stock.

On December 13, 2019, Reliant Bancorp issued and sold $60,000 in aggregate principal amount of its 5.125% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “Subordinated Notes”). The Subordinated Notes ~~will~~ bear interest at an initial rate of 5.125%, payable semi-annually until December 15, 2024, at which time the Subordinated Notes will bear interest at a floating rate equal to the three-month Secured Overnight Financing Rate (“SOFR”) (provided, that in the event the three-month SOFR is less than zero, the three-month SOFR will be deemed to be zero), plus a spread of 376.5 basis points. If the three-month SOFR rises during the floating interest period, the cost of the Subordinated Notes will increase, thereby negatively affecting our net income.

Capital

Shareholders’ equity was ~~$346,289~~$356,315 at ~~June~~September 30, 2021, an increase of ~~$24,316,~~$34,342, or ~~7.6%~~10.7%, from $321,973 at December 31, 2020, mainly due to net income and other comprehensive income of ~~$2,078.~~$523. This increase was primarily offset by dividends declared of ~~$4,034.~~$6,058. Contributions from the noncontrolling interest of ~~$710~~$1,357 were recognized in the ~~six~~nine months ended ~~June~~September 30, 2021. The increase in shareholders' equity mitigated by the growth in the Bank's average assets led to an increase in the Bank’s ~~June~~September 30, 2021 Tier 1 leverage ratio to ~~11.14%~~11.76% 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 ~~June~~September 30, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since these notifications that management believes have changed the institution’s category. Actual and required capital amounts and ratios are presented below as of ~~June~~September 30, 2021 and December 31, 2020 for Reliant Bancorp and the Bank.

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		Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions					Actual Regulatory Capital				Minimum Required Capital Including Capital Conservation Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
June 30, 2021
September 30, 2021														September 30, 2021
Company	Company													Company
Tier I leverage	Tier I leverage	$	285,363	9.47	%	$	120,533	4.00	%	$	150,667	5.00	%	Tier I leverage	$	297,367	10.04	%	$	118,473	4.00	%	$	148,091	5.00	%
Common equity Tier 1	Common equity Tier 1	273,553		10.18	%	188,101		7.00	%	174,665		6.50	%	Common equity Tier 1	285,537		10.52	%	189,996		7.00	%	176,425		6.50	%
Tier I risk-based capital	Tier I risk-based capital	285,363		10.62	%	228,398		8.50	%	214,963		8.00	%	Tier I risk-based capital	297,367		10.95	%	230,833		8.50	%	217,254		8.00	%
Total risk-based capital	Total risk-based capital	365,942		13.62	%	282,114		10.50	%	268,680		10.00	%	Total risk-based capital	377,977		13.92	%	285,112		10.50	%	271,535		10.00	%
Bank	Bank													Bank
Tier I leverage	Tier I leverage	$	334,911	11.14	%	$	120,255	4.00	%	$	150,319	5.00	%	Tier I leverage	$	347,450	11.76	%	$	118,185	4.00	%	$	147,732	5.00	%
Common equity Tier 1	Common equity Tier 1	334,911		12.50	%	187,550		7.00	%	174,154		6.50	%	Common equity Tier 1	347,450		14.10	%	172,493		7.00	%	160,172		6.50	%
Tier I risk-based capital	Tier I risk-based capital	334,911		12.50	%	227,739		8.50	%	214,343		8.00	%	Tier I risk-based capital	347,450		14.10	%	209,456		8.50	%	197,135		8.00	%
Total risk-based capital	Total risk-based capital	356,530		13.30	%	281,471		10.50	%	268,068		10.00	%	Total risk-based capital	369,072		14.98	%	258,695		10.50	%	246,377		10.00	%

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

Effects of Inflation and Changing Prices

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires the measurement of financial positions and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on the performance of a financial institution than the effects of general levels of inflation. Although interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services, increases in inflation generally have resulted in increased interest rates. In addition, inflation affects financial institutions’ cost of goods and services purchased, the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders’ equity. Commercial and other loan originations and refinancing tend to slow as interest rates increase, and can reduce our earnings from such activities.

Off-Balance Sheet Lending Arrangements

Off-balance sheet arrangements generally consist of unused lines of credit and standby letters of credit. Such commitments of the Company were as follows at ~~June~~September 30, 2021:


	~~June~~September 30, 2021
Unused lines of credit	$	~~628,183~~638,112
Standby letters of credit	~~31,752~~30,633
Total commitments	$	~~659,935~~668,745

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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 ~~June~~September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Reliant Bancorp and its wholly-owned bank subsidiary, the Bank, are periodically involved as a plaintiff or defendant in various legal actions in the ordinary course of business. Neither Reliant Bancorp nor the Bank is involved in any litigation that is expected to have a material impact on our financial position or results of operations. Management believes that any claims pending against Reliant Bancorp or its subsidiaries are without merit or that the ultimate liability, if any, resulting from them will not materially affect the Bank’s financial condition or Reliant Bancorp’s consolidated financial position.

Item 1A. Risk Factors.

There are no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in Reliant Bancorp's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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

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

Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (2) (in thousands)
April 1, 2021 to April 30, 2021 297 $28.50 — $10,000
May 1, 2021 to May 31, 2021 593 $27.63 — $10,000
June 1, 2021 to June 30, 2021 — $— — $10,000
Total 890 $28.50 — $10,000


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (2) (in thousands)
July 1, 2021 to July 31, 2021	7,746	$28.21	—	$10,000
August 1, 2021 to August 31, 2021	134	$29.91	—	$10,000
September 1, 2021 to September 30, 2021	—	$—	—	$10,000
Total	7,880	$28.24	—	$10,000

(1)During the quarter ended ~~June~~September 30, 2021, ~~3,000~~30,410 shares of restricted stock previously awarded to certain of the participants in our stock plans vested. We withheld ~~890~~7,880 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 ~~June~~September 30, 2021, Reliant Bancorp had not repurchased any shares of Reliant Bancorp Common Stock under the Repurchase Plan. The Repurchase Plan does not obligate Reliant Bancorp to repurchase any dollar amount or number of shares. The Repurchase Plan may be extended, modified, amended, suspended, or discontinued at any time. The Repurchase Plan is effective through December 31, 2021 but was suspended in August 2021.

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Item 6. Exhibits.

EXHIBIT INDEX


Exhibit No.			Description

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

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

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

~~10.1~~			~~Employment Agreement, dated April 26, 2021, by and among DeVan Ard, Jr., Reliant Bancorp, Inc., and Reliant Bank(incorporated by reference to Exhibit 10.1 of Reliant Bancorp’s Current Report on Form 8-K filed on April 28, 2021)~~.

~~10.2~~			~~Employment Agreement, dated April 26, 2021, by and among John R. Wilson, Reliant Bancorp, Inc., and Reliant Bank(incorporated by reference to Exhibit 10.~~2 ~~of Reliant Bancorp’s Current Report on Form 8-K filed on April 28, 2021)~~.

~~10.3~~			~~Employment Agreement, dated April 26, 2021, by and among Jerry Cooksey, Reliant Bancorp, Inc., and Reliant Bank(incorporated by reference to Exhibit 10.~~3 ~~of Reliant Bancorp’s Current Report on Form 8-K filed on April 28, 2021)~~.

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

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

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

101.INS*			Inline XBRL Instance Document.

101.SCH*			Inline XBRL Schema Documents.

101.CAL*			Inline XBRL Calculation Linkbase Document.

101.LAB*			Inline XBRL Label Linkbase Document.

101.PRE*			Inline XBRL Presentation Linkbase Document.

101.DEF*			Inline XBRL Definition Linkbase Document.

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

* Filed herewith.

** Furnished herewith.

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SIGNATURES

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

RELIANT BANCORP, INC.

~~August~~November 5, 2021

/s/ DeVan D. Ard, Jr.

DeVan D. Ard, Jr.

Chairman and Chief Executive Officer

(Principal Executive Officer)

~~August~~November 5, 2021

/s/ Jerry Cooksey

Jerry Cooksey

Chief Financial Officer

(Principal Financial Officer)