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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 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission File Number: 001-37391
_______________________________
Reliant Bancorp, Inc.
(Exact name of registrant as specified in its charter)
_______________________________
Tennessee 37-1641316
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer
Identification No.)
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 4, 2021 was 16,495,961 excluding 183,306 unexchanged shares in connection with acquisitions.






TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 3
5
Item 1.
5
Item 2.
39
Item 3.
62
Item 4.
62
63
Item 1.
63
Item 1A.
Risk Factors
63
Item 2.
63
Item 6.
64
65

2


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

(1) the effects of the coronavirus (COVID-19) pandemic, including (i) the magnitude and duration of the pandemic and its impact on general economic and financial market conditions and on our business, results of operations, and financial condition and that of our customers, (ii) actions taken by governments, businesses and individuals in response to the coronavirus (COVID-19) pandemic, (iii) the pace of recovery when the coronavirus (COVID-19) pandemic subsides, and (iv) the speed with which coronavirus (COVID-19) vaccines can be widely distributed, those vaccines’ efficacy against the virus, including new variant strains, and public acceptance of the vaccines;
(2) the possibility that our asset quality could decline or that we experience greater loan losses than anticipated;
(3) increased levels of other real estate, primarily as a result of foreclosures;
(4) the impact of liquidity needs on our results of operations and financial condition;
(5) competition from financial institutions and other financial service providers;
(6) the effect of interest rate increases on the cost of deposits;
(7) unanticipated weakness in loan demand or loan pricing;
(8) greater than anticipated adverse conditions in the national economy or local economies in which we operate, including in Middle Tennessee;
(9) lack of strategic growth opportunities or our failure to execute on available opportunities;
(10) deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses;
(11) economic crises and associated credit issues in industries most impacted by the coronavirus (COVID-19) pandemic, including the hotel and retail sectors;
(12) the ability to grow and retain low-cost core deposits and retain large, uninsured deposits;
(13) our ability to effectively manage problem credits;
(14) our ability to successfully implement efficiency initiatives on time and with the results projected;
(15) our ability to successfully develop and market new products and technology;
(16) the impact of negative developments in the financial industry and United States and global capital and credit markets;
(17) our ability to retain the services of key personnel;
(18) our ability to adapt to technological changes;
(19) risks associated with litigation, including reputational and financial risks and the applicability of insurance coverage;
(20) the vulnerability of Reliant Bank’s computer and information technology systems and networks, and the systems and networks of third parties with whom Reliant Bancorp or Reliant Bank contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches and interruptions;
(21) changes in state and federal laws, rules, regulations, or policies applicable to banks or bank or financial holding companies, including regulatory or legislative developments;
(22) adverse impacts (including costs, fines, reputational harm, or other negative effects) from current or future litigation, regulatory examinations, or other legal and/or regulatory actions;
(23) the risk of successful integration of the businesses Reliant Bancorp has recently acquired;
(24) the ability to meet expectations regarding the timing and completion and accounting and tax treatment of the pending transaction with United Community Banks, Inc. (“UCBI”) (the “Transaction”);
(25) the effect of the announcement and pendency of the Transaction on customer, supplier, or employee relationships and operating results (including without limitation difficulties in maintaining relationships with employees and customers), as well as on the market price of Reliant Bancorp's common stock;
(26) the occurrence of any event, change, or other circumstances that could give rise to the termination of the definitive merger agreement for the Transaction;
(27) the amount of costs, fees, expenses and charges related to the Transaction, including those arising as a result of unexpected factors or events;
(28) the ability to obtain the shareholder and governmental approvals required for the Transaction;
(29) reputational risk associated with and the reaction of the parties' customers, suppliers, employees, or other business partners to the Transaction;
3

(30) the outcome of any legal proceedings that may be instituted against Reliant Bancorp, UCBI or any of their respective directors or officers, following the announcement of the Transaction;
(31) the failure of any of the conditions to the closing of the Transaction to be satisfied, or any unexpected delay in closing the Transaction;
(32) the risk associated with Company management's attention being diverted away from the day-to-day business and operations of Reliant Bancorp to the completion of the Transaction; and
(33) general competitive, economic, political, and market conditions, including economic conditions in the local markets where we operate.

Further, statements about the potential effects of the coronavirus (COVID-19) pandemic on our business, financial condition, liquidity, or results of operations may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, other third parties, and us.

You should also consider carefully the risk factors discussed in Part I, Item 1A. "Risk Factors" of our most recent Annual Report on Form 10-K, which address additional factors that could cause our actual results to differ from those set forth in forward-looking statements and could materially and adversely affect our business, operating results, and financial condition. Additional factors which could affect the forward-looking statements can be found in Reliant Bancorp’s quarterly reports on Form 10-Q, and current reports on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) and available on the SEC’s website at http://www.sec.gov. You should understand that it is not possible to predict or identify all such factors, many of which are beyond our ability to control or predict. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. Factors not here or otherwise listed may develop or, if currently extant, we may not have yet recognized them.

Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
4
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
ASSETS
Cash and due from banks $ 11,763  $ 13,717 
Interest-bearing deposits in financial institutions 43,676  79,756 
Federal funds sold 656  1,572 
Total cash and cash equivalents 56,095  95,045 
Securities available for sale 266,695  256,653 
Loans 2,321,070  2,300,783 
Less: allowance for loan losses (20,894) (20,636)
Loans, net 2,300,176  2,280,147 
Mortgage loans held for sale, net 229,418  147,524 
Accrued interest receivable 14,492  14,889 
Premises and equipment, net 29,183  31,462 
Operating leases right of use assets 12,744  13,103 
Restricted equity securities, at cost 15,770  16,551 
Other real estate, net 2,233  1,246 
Cash surrender value of life insurance contracts 78,979  77,988 
Deferred tax assets, net 5,978  7,121 
Goodwill 54,396  54,396 
Core deposit intangibles 10,434  11,347 
Other assets 21,871  19,063 
TOTAL ASSETS $ 3,098,464  $ 3,026,535 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest-bearing demand $ 602,555  $ 575,289 
Interest-bearing demand 441,161  350,392 
Savings and money market deposit accounts 1,003,402  857,210 
Time 582,722  796,344 
Total deposits 2,629,840  2,579,235 
Accrued interest payable 1,967  2,571 
Subordinated debentures 70,770  70,446 
Federal Home Loan Bank advances 16,000  10,000 
Operating leases liabilities 13,932  14,231 
Other liabilities 19,666  28,079 
TOTAL LIABILITIES 2,752,175  2,704,562 
Preferred stock, $1 par value per share; 10,000,000 shares authorized, — shares issued to date
—  — 
Common stock, $1 par value per share; 30,000,000 shares authorized; 16,672,511 and 16,654,409 shares issued and outstanding at June 30, 2021, and December 31, 2020, respectively
16,673  16,654 
Additional paid-in capital 234,390  233,331 
Retained earnings 86,917  65,757 
Accumulated other comprehensive income 8,309  6,231 
TOTAL SHAREHOLDERS’ EQUITY 346,289  321,973 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,098,464  $ 3,026,535 
See accompanying notes to consolidated financial statements.
5

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

RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
(Dollar amounts in thousands)
Three Months Ended June 30, Six Months Ended June 30,
  2021 2020 2021 2020
Net income $ 13,185  $ 7,480  $ 25,904  $ 6,289 
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)
Tax effect (75) (1,041) 574  (422)
Net of tax 213  2,941  (1,624) 1,192 
Unrealized gains (losses) on cash flow hedges
Unrealized holdings gains (losses) arising during the period 675  (1,086) 2,153  (6,956)
Reclassification adjustment for losses included in net income 2,859  —  2,859  — 
Tax effect (925) 284  (1,310) 1,819 
Net of tax 2,609  (802) 3,702  (5,137)
Other comprehensive income (loss) 2,822  2,139  2,078  (3,945)
Comprehensive income $ 16,007  $ 9,619  $ 27,982  $ 2,344 
Comprehensive (income) loss attributable to noncontrolling interest (140) 388  (710) 1,364 
Comprehensive income attributable to the controlling interest $ 15,867  $ 10,007  $ 27,272  $ 3,708 


See accompanying notes to consolidated financial statements.
7

RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED
(Dollar amounts in thousands)
COMMON STOCK ADDITIONAL
PAID-IN
CAPITAL 		RETAINED
EARNINGS 		ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS) 		NONCONTROLLING
INTEREST 		TOTAL
SHARES AMOUNT
BALANCE - JANUARY 1, 2021 16,654,409  $ 16,654  $ 233,331  $ 65,757  $ 6,231  $ —  $ 321,973 
Stock based compensation expense —  —  339  —  —  —  339 
Exercise of stock options 600  1  7  —  —  —  8 
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures (594) (1) (10) —  —  —  (11)
Noncontrolling interest contributions —  —  —  —  —  (570) (570)
Cash dividend declared to common shareholders ($0.12 per share)
—  —  —  (2,015) —  —  (2,015)
Net income —  —  —  12,149  —  570  12,719 
Other comprehensive loss —  —  —  (744) —  (744)
BALANCE - MARCH 31, 2021 16,654,415  $ 16,654  $ 233,667  $ 75,891  $ 5,487  $ —  $ 331,699 
Stock based compensation expense —  —  468  —  —  —  468 
Employee Stock Purchase Plan stock issuance 18,986  20  278  —  —  —  298 
Restricted stock awards, net of taxes withheld and stock and dividend forfeitures (890) (1) (23) —  —  —  (24)
Noncontrolling interest contributions —  —  —  —  —  (140) (140)
Cash dividend declared to common shareholders ($0.12 per share)
—  —  —  (2,019) —  —  (2,019)
Net income —  —  —  13,045  —  140  13,185 
Other comprehensive income —  —  —  —  2,822  —  2,822 
BALANCE - JUNE 30, 2021 16,672,511  $ 16,673  $ 234,390  $ 86,917  $ 8,309  $ —  $ 346,289 
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 

See accompanying notes to consolidated financial statements.
8

RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollar amounts in thousands)
Six Months Ended
June 30,
OPERATING ACTIVITIES 2021 2020
Consolidated net income $ 25,904  $ 6,289 
Adjustments to reconcile consolidated net income (loss) to net cash (used in) provided by operating activities
Provision for loan losses —  5,900 
Deferred income taxes 407  1,997 
Loss (gain) on disposal of premises and equipment 40  (9)
Depreciation of premises and equipment 1,455  1,327 
Net amortization of securities 844  1,354 
Net realized gains on sales of securities (3,095) (327)
Gains on mortgage loans sold, net (7,906) (3,821)
Stock-based compensation expense 807  834 
Gain on other real estate (14) (25)
Earnings on bank-owned life insurance (991) (687)
Mortgage loans originated for resale (593,801) (184,146)
Proceeds from sale of mortgage loans 519,813  129,742 
Right of use asset amortization 1,304  1,224 
Other accretion, net of other amortization (2,378) (4,875)
Change in
Accrued interest receivable 397  (3,058)
Other assets (2,862) (3,441)
Accrued interest payable (604) (1,170)
Other liabilities (4,094) (6,512)
TOTAL ADJUSTMENTS (90,678) (65,693)
NET CASH USED IN OPERATING ACTIVITIES (64,774) (59,404)
INVESTING ACTIVITIES
Cash (used in) received from acquisitions, net —  (8,500)
Activities in available for sale securities
Purchases (48,070) (6,000)
Sales 35,751  103,668 
Maturities, prepayments and calls 1,779  9,635 
Redemptions (purchases) of restricted equity securities 781  (2,009)
Net change in loans (16,443) (108,983)
Purchase of premises and equipment (261) (1,896)
Proceeds from sale of premises and equipment 56  90 
Proceeds from sale of other real estate 62  889 
NET CASH USED IN INVESTING ACTIVITIES (26,345) (13,106)
FINANCING ACTIVITIES
Net change in deposits 50,642  127,398 
Proceeds from Federal Home Loan Bank advances 346,962  313,898 
Payments on Federal Home Loan Bank advances (340,962) (324,515)
Issuance of ESPP shares and exercise of common stock options and warrants, net of repurchase of restricted shares 271  66 
Noncontrolling interest contributions (710) 1,364 
Cash dividends paid on common stock (4,034) (2,874)
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,169  115,337 
NET CHANGE IN CASH AND CASH EQUIVALENTS (38,950) 42,827 
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 95,045  51,649 
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 56,095  $ 94,476 
See accompanying notes to consolidated financial statements.



RELIANT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollar amounts in thousands)
Six Months Ended June 30,
2021 2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest $ 11,207  $ 12,382 
Income taxes 5,760  31 
Supplemental disclosures of non-cash transactions
Unrealized (gain) loss on securities available-for-sale $ (2,749) $ 2,745 
Unrealized gain (loss) on derivatives 5,563  (8,087)
Change in due to/from noncontrolling interest (710) 1,364 
Bank facilities no longer in use transferred to other real estate from premises and equipment 990  — 
Loans foreclosed and transferred to other real estate 45  — 
Right of use assets obtained in exchange for operating lease liabilities 945  11,973 

See accompanying notes to consolidated financial statements.
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RELIANT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands except per share amounts)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Reliant Bancorp, Inc. is a Tennessee corporation and the holding company for and the sole shareholder of Reliant Bank (the "Bank"), collectively, "the Company". Reliant Bancorp is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended ("Bank Holding Company Act"). Reliant Bank is a commercial bank chartered under Tennessee law and a member of the Federal Reserve System (the "Federal Reserve"). The Bank provides a full range of traditional banking products and services to business and consumer clients throughout Middle Tennessee.

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.

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

The accompanying consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods presented. Such adjustments are of a normal recurring nature. The Company evaluates subsequent events through the date of filing. Certain prior period amounts have been reclassified to conform to the current period presentation. The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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Recently Adopted Accounting Pronouncements
Information about certain issued accounting standards updates is presented below. Also refer to Note 1 - Summary of Significant Accounting Policies, 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 30, 2021 and December 31, 2020 were as follows:
June 30, 2021
Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Estimated
Fair
Value
U. S. Treasury and other U. S. government agencies $ 222  $ —  $ —  $ 222 
State and municipal 174,093  13,611  (170) 187,534 
Corporate bonds 27,000  1,123  (41) 28,082 
Mortgage-backed securities - Residential 47,908  392  (56) 48,244 
Asset-backed securities 2,634  1  (22) 2,613
Total $ 251,857  $ 15,127  $ (289) $ 266,695 

December 31, 2020
Amortized
Cost 		Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Estimated
Fair
Value
U. S. Treasury and other U. S. government agencies $ 47  $ 1  $ —  $ 48 
State and municipal 184,102  16,963  (77) 200,988 
Corporate bonds 23,750  397  (34) 24,113 
Mortgage-backed securities - Residential 28,084  360  (2) 28,442 
Asset-backed securities 3,083  1  (22) 3,062 
Total $ 239,066  $ 17,722  $ (135) $ 256,653 

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

Results from sales of securities were as follows:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Proceeds $ 33,955  $ 47,332  $ 35,751  $ 103,668 
Gross gains 2,966  439  3,095  439 
Gross losses —  (112) —  (112)

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The fair values of available for sale debt securities at June 30, 2021 by contractual maturity are provided below. Actual maturities may differ from contractual maturities for mortgage- and asset-backed securities since the underlying asset may be called or prepaid with or without penalty. Securities not due at a single maturity date are shown separately.
Amortized
Cost 		Estimated
Fair Value
Due within one year $ 222  $ 223 
Due in one to five years 2,085  2,129 
Due in five to ten years 33,773  35,729 
Due after ten years 165,235  177,757 
Mortgage-backed securities 47,908  48,244 
Asset-backed securities 2,634  2,613 
Total $ 251,857  $ 266,695 

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 30, 2021 and December 31, 2020, respectively:
Less than 12 months 12 months or more Total
Estimated
Fair Value 		Unrealized
Loss 		Estimated
Fair Value 		Unrealized
Loss 		Estimated
Fair Value 		Unrealized
Loss
June 30, 2021
State and municipal $ 21,952  $ 170  $ —  $ —  $ 21,952  $ 170 
Corporate bonds 5,209  41  —  —  5,209  41 
Mortgage-backed securities - Residential 16,019  55  76  1  16,095  56 
Asset-backed securities —  —  2,424  22  2,424  22 
Total temporarily impaired $ 43,180  $ 266  $ 2,500  $ 23  $ 45,680  $ 289 
December 31, 2020
State and municipal $ 9,475  $ 77  $ —  $ —  $ 9,475  $ 77 
Corporate bonds 5,716  34  —  —  5,716  34 
Mortgage-backed securities - Residential 5,024  1  92  1  5,116  2 
Asset-backed securities 729  2  2,013  20  2,742  22 
Total temporarily impaired $ 20,944  $ 114  $ 2,105  $ 21  $ 23,049  $ 135 

Management has the intent and ability to hold all securities in an unrealized loss position for the foreseeable future, and the decline in fair value is largely due to changes in interest rates. As the fair value is expected to recover as the securities approach their maturity date and/or market rates decline, we do not consider these securities to be other-than-temporarily impaired at June 30, 2021. There were 34 and 22 securities in an unrealized loss position as of June 30, 2021 and December 31, 2020, respectively.

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NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans at June 30, 2021 and December 31, 2020 were comprised as follows:
June 30, 2021 December 31, 2020
Commercial, Industrial and Agricultural $ 435,093  $ 459,739 
Real Estate
    1-4 Family Residential 326,768  323,473 
    1-4 Family HELOC 100,614  100,525 
    Multi-family and Commercial 831,093  834,000 
    Construction, Land Development and Farmland 397,557  365,058 
Consumer 225,433  213,863 
Other 7,614  8,669 
Gross loans 2,324,172  2,305,327 
    Less: Deferred loan fees 3,102  4,544 
    Less: Allowance for loan losses 20,894  20,636 
Loans, net $ 2,300,176  $ 2,280,147 

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

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

The Company utilizes a risk grading system to monitor the credit quality of the Company’s commercial loan portfolio which consists of commercial and industrial, commercial real estate and construction loans. Loans are graded on a scale of 1 to 9. Grades 1 - 5 are pass credits, grade 6 is special mention, grade 7 is substandard, grade 8 is doubtful and grade 9 is loss. A description of the risk grades are as follows:
 
Grade 6 - Special Mention
 
Special mention assets have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date. These assets pose elevated risk, but their weakness does not yet justify a substandard classification. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons for rating a credit exposure special mention include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices. The special mention rating is designed to identify a specific level of risk and concern about asset quality. Although a special mention asset has a higher probability of default than a pass asset, its default is not imminent.

Grade 7 - Substandard
 
A ‘‘substandard’’ extension of credit is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Extensions of credit so classified should have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard credits, does not have to exist in individual extensions of credit classified as substandard. Substandard assets have a high probability of payment default, or they have other well-defined weaknesses. They require supervision that is more intensive by Company management. Substandard assets are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigation.
 

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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 30, 2021 and December 31, 2020:
  Pass Special
Mention 		Substandard Total
June 30, 2021
Loans excluding PCI
Commercial, Industrial and Agricultural $ 432,841  $ 1,098  $ 996  $ 434,935 
1-4 Family Residential Real Estate 323,591  961  1,572  326,124 
1-4 Family HELOC 100,315  —  285  100,600 
Multi-family and Commercial Real Estate 823,945  1,741  4,856  830,542 
Construction, Land Development and Farmland 391,793  —  5,036  396,829 
Consumer 222,959  2  1,589  224,550 
Other 7,614  —  —  7,614 
Total loans excluding PCI $ 2,303,058  $ 3,802  $ 14,334  $ 2,321,194 
Total PCI loans $ 967  $ —  $ 2,011  $ 2,978 
Total loans $ 2,304,025  $ 3,802  $ 16,345  $ 2,324,172 
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  Pass Special
Mention 		Substandard Total
December 31, 2020
Loans excluding PCI
Commercial, Industrial and Agricultural $ 456,170  $ 1,519  $ 1,863  $ 459,552 
1-4 Family Residential Real Estate 320,555  5  2,165  322,725 
1-4 Family HELOC 100,391  —  120  100,511 
Multi-family and Commercial Real Estate 829,353  653  3,337  833,343 
Construction, Land Development and Farmland 358,606  —  5,676  364,282 
Consumer 211,305  7  1,346  212,658 
Other 7,150  1,519  —  8,669 
Total loans excluding PCI $ 2,283,530  $ 3,703  $ 14,507  $ 2,301,740 
Total PCI loans $ 998  $ —  $ 2,589  $ 3,587 
Total loans $ 2,284,528  $ 3,703  $ 17,096  $ 2,305,327 

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

Activity in the Allowance for Loan Loss (“ALL”) by portfolio segment was as follows for the three and six months ended June 30, 2021 and 2020:
  Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real Estate 		Construction Land Development and Farmland Consumer Other Total
Beginning balance at March 31, 2021
$ 6,072  $ 2,438  $ 1,110  $ 8,065  $ 1,905  $ 1,163  $ 32  $ 20,785 
Charge-offs —  (14) —  —  —  (195) —  (209)
Recoveries 50  14  3  206  6  39  —  318 
Provision 492  (515) (503) 227  100  215  (16) — 
Ending balance at June 30, 2021
$ 6,614  $ 1,923  $ 610  $ 8,498  $ 2,011  $ 1,222  $ 16  $ 20,894 
Beginning balance at March 31, 2020
$ 3,851  $ 1,488  $ 873  $ 6,760  $ 1,836  $ 298  $ 15  $ 15,121 
Charge-offs (245) (60) (98) —  —  (264) —  (667)
Recoveries 9  736  2  8  4  24  —  783 
Provision 1,060  (710) 198  1,639  286  526  1  3,000 
Ending balance at June 30, 2020
$ 4,675  $ 1,454  $ 975  $ 8,407  $ 2,126  $ 584  $ 16  $ 18,237 
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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
Beginning balance at December 31, 2020
$ 5,441  $ 2,445  $ 1,416  $ 8,535  $ 1,841  $ 928  $ 30  $ 20,636 
Charge-offs (32) (21) —  —  —  (454) —  (507)
Recoveries 301  96  5  215  91  57  —  765 
Provision 904  (597) (811) (252) 79  691  (14) — 
Ending balance at June 30, 2021
$ 6,614  $ 1,923  $ 610  $ 8,498  $ 2,011  $ 1,222  $ 16  $ 20,894 
Beginning balance at December 31, 2019
$ 2,529  $ 1,280  $ 624  $ 5,285  $ 2,649  $ 177  $ 34  $ 12,578 
Charge-offs (539) (60) (98) —  (114) (295) —  (1,106)
Recoveries 70  747  3  11  4  30  —  865 
Provision 2,615  (513) 446  3,111  (413) 672  (18) 5,900 
Ending balance at June 30, 2020
$ 4,675  $ 1,454  $ 975  $ 8,407  $ 2,126  $ 584  $ 16  $ 18,237 

The ALL and the recorded investment in loans by portfolio segment and based on impairment method as of was as follows:
Commercial Industrial and Agricultural 1-4 Family Residential Real Estate 1-4 Family HELOC Multi-family and Commercial
Real Estate 		Construction Land Development and Farmland Consumer Other Total
June 30, 2021
Allowance for loan losses
Individually evaluated for impairment $ 847  $ —  $ —  $ —  $ —  $ 5  $ —  $ 852 
Acquired with credit impairment —  —  —  —  —  —  —  — 
Collectively evaluated for impairment 5,767  1,923  610  8,498  2,011  1,217 16  20,042 
Total $ 6,614  $ 1,923  $ 610  $ 8,498  $ 2,011  $ 1,222  $ 16  $ 20,894 
Loans
Individually evaluated for impairment $ 934  $ 1,428  $ 284  $ 4,856  $ 5,506  $ 1,587  $ —  $ 14,595 
Acquired with credit impairment 158  644  14  551  728  883  —  2,978 
Collectively evaluated for impairment 434,001  324,696  100,316  825,686  391,323  222,963 7,614  2,306,599 
Total $ 435,093  $ 326,768  $ 100,614  $ 831,093  $ 397,557  $ 225,433  $ 7,614  $ 2,324,172 
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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
December 31, 2020
Allowance for loan losses
Individually evaluated for impairment $ 717  $ 18  $ —  $ —  $ —  $ 13  $ —  $ 748 
Acquired with credit impairment —  —  —  —  —  —  —  — 
Collectively evaluated for impairment 4,724  2,427  1,416  8,535  1,841  915 30  19,888 
Total $ 5,441  $ 2,445  $ 1,416  $ 8,535  $ 1,841  $ 928  $ 30  $ 20,636 
Loans
Individually evaluated for impairment $ 1,027  $ 1,829  $ 110  $ 2,504  $ 5,676  $ 1,177  $ —  $ 12,323 
Acquired with credit impairment 187  748  14  657  776  1,205  —  3,587 
Collectively evaluated for impairment 458,525  320,896  100,401  830,839  358,606  211,481  8,669  2,289,417 
Total $ 459,739  $ 323,473  $ 100,525  $ 834,000  $ 365,058  $ 213,863  $ 8,669  $ 2,305,327 


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 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
June 30, 2021
Loans excluding PCI
Commercial, Industrial and Agricultural $ 434,662  $ —  $ —  $ 273  $ 434,935 
1-4 Family Residential Real Estate 325,100  385  —  639  326,124 
1-4 Family HELOC 100,450  150  —  —  100,600 
Multi-family and Commercial Real Estate 829,306  —  —  1,236  830,542 
Construction, Land Development and Farmland 395,711  —  —  1,118  396,829 
Consumer 222,527  1,293  9  721  224,550 
Other 7,614  —  —  —  7,614 
Total loans excluding PCI $ 2,315,370  $ 1,828  $ 9  $ 3,987  $ 2,321,194 
Total PCI loans $ 1,619  $ —  $ —  $ 1,359  $ 2,978 
Total loans $ 2,316,989  $ 1,828  $ 9  $ 5,346  $ 2,324,172 
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  Current and Accruing 30-89 Days Past Due 90+ Days
Past Due and Accruing Interest 		Nonaccrual Loans Total Loans
December 31, 2020
Loans excluding PCI
Commercial, Industrial and Agricultural $ 458,974  $ 126  $ —  $ 452  $ 459,552 
1-4 Family Residential Real Estate 319,180  2,071  —  1,474  322,725 
1-4 Family HELOC 100,501  10  —  —  100,511 
Multi-family and Commercial Real Estate 832,697  150  —  496  833,343 
Construction, Land Development and Farmland 363,376  —  —  906  364,282 
Consumer 210,552  1,413  1  692  212,658 
Other 8,669  —  —  —  8,669 
Total loans excluding PCI $ 2,293,949  $ 3,770  $ 1  $ 4,020  $ 2,301,740 
Total PCI loans $ 1,584  $ 37  $ —  $ 1,966  $ 3,587 
Total loans $ 2,295,533  $ 3,807  $ 1  $ 5,986  $ 2,305,327 
   
Approximately $2,136 and $2,438 of nonaccrual loans as of June 30, 2021 and December 31, 2020, respectively, were performing pursuant to their contractual terms at those dates. Mortgage loans held for sale are excluded from the loan tables herein and have $977 and $630 on nonaccrual as of June 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
Commercial, Industrial and Agricultural $ 889  $ 919 
1-4 Family Residential Real Estate 885  1,004 
1-4 Family HELOC 19  19 
Multi-family and Commercial Real Estate 1,218  1,325 
Construction, Land Development and Farmland 944  992 
Consumer 1,552  1,924 
Total outstanding balance 5,507  6,183 
Less remaining purchase discount 2,529  2,596 
Allowance for loan losses —  — 
Carrying amount, net of allowance for loan losses and remaining purchase discounts $ 2,978  $ 3,587 

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Accretable yield, or income expected to be collected on PCI loans, is as follows:
2021 2020
Balance at January 1, $ 580  $ 98 
New loans purchased —  870 
Accretion income (38) (80)
Balance at June 30,
$ 542  $ 888 

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

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

The average recorded investment in impaired loans for the three and six months ended June 30, 2021, and 2020 was as follows:
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average recorded investment Interest income recognized Average recorded investment Interest income recognized
With no allowance
Commercial, Industrial and Agricultural $ 206  $ 2  $ 491  $ 9  $ 260  $ 10  $ 450  $ 14 
1-4 Family Residential Real Estate 2,348  34  3,086  60  2,389  64  2,881  100 
1-4 Family HELOC 299  3  382  —  241  6  296  — 
Multi-family and Commercial Real Estate 4,949  74  4,575  162  4,353  179  4,103  215 
Construction, Land Development and Farmland 6,518  76  2,730  33  6,496  186  3,971  87 
Consumer 2,393  88  1,177  136  2,378  177  1,567  137 
Subtotal $ 16,713  $ 277  $ 12,441  $ 400  $ 16,117  $ 622  $ 13,268  $ 553 
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Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average recorded investment Interest income recognized Average recorded investment Interest income recognized
With an allowance recorded
Commercial, Industrial and Agricultural $ 847  $ 6  $ 923  $ 6  $ 847  $ 12  $ 898  $ 26 
1-4 Family Residential Real Estate —  —  —  —  35  —  35  — 
1-4 Family HELOC —  —  —  —  —  —  —  — 
Multi-family and Commercial Real Estate 75  —  —  —  50  —  —  — 
Construction, Land Development and Farmland —  —  —  —  —  —  —  — 
Consumer 51  1  2  —  45  1  13  — 
Subtotal $ 973  $ 7  $ 925  $ 6  $ 977  $ 13  $ 946  $ 26 
Total $ 17,686  $ 284  $ 13,366  $ 406  $ 17,094  $ 635  $ 14,214  $ 579 

Restructured Loans

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

There were no TDR modifications in the three months ending June 30, 2021. Modifications made during the six months ended June 30, 2020 are displayed below.
Number of Contracts Pre-Modification Outstanding Recorded Investments Post-Modification Outstanding Recorded Investments
Commercial, Industrial and Agricultural 1  $ 150  $ 150 
1-4 Family Residential 1  721  721 
Multi-family and Commercial Real Estate 1  394  394 
Total 3  $ 1,265  $ 1,265 

Programs as part of COVID-19 Relief

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

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 30, 2021, the Company had 84 PPP loans outstanding amounting to $14.0 million which are included in the commercial, industrial, and agricultural segment. PPP loans do not have a corresponding allowance as they are fully guaranteed by the SBA. Fees range from 1% to 5% of the loan and are deferred and amortized over the life of the loan. As PPP loans are forgiven, any deferred loan fee or cost is recognized related to each individual loan. As of June 30, 2021, $69.4 million in PPP loans had cumulatively been forgiven of the $83.4 million in loan originations since the CARES Act’s inception.
Three Months Ended June 30,
Six Months Ended June 30,
2021 2020 2021 2020
Interest $ 58  $ 148  $ 197  $ 148 
Fees 729  284  1,632  284 
Total PPP Income $ 787  $ 432  $ 1,829  $ 432 


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


Summary information related to the interest rate swaps designated as cash flow hedges as of June 30, 2021, is as follows:
Notional amounts $ 110,000 
Weighted average pay rates 1.63  %
Weighted average receive rates 0.37  %
Weighted average maturity 2.88 years
Unrealized losses $ 2,645 

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The following table reflects the cash flow hedges included in the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively:
June 30, 2021 December 31, 2020
Notional Amount Fair Value Notional Amount Fair Value
Included in other liabilities:
Interest rate swaps related to:
Subordinated debentures $ 10,000  $ (532) $ 10,000  $ (690)
Short-term interest-bearing liabilities 100,000  (2,113) 150,000  (6,967)
Total included in other liabilities $ 110,000  $ (2,645) $ 160,000  $ (7,657)

The following table presents the net gains (losses) recorded in accumulated other comprehensive income net of tax, relating to the cash flow derivative instruments for the three and six months ended June 30, 2021 and 2020, respectively:
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)
Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Interest rate swaps - subordinate debentures $ 49  $ 8  $ 117  $ (281)
Interest rate swaps - interest-bearing liabilities 2,560  (810) 3,585  (4,856)
$ 2,609  $ (802) $ 3,702  $ (5,137)

Fair Value Hedges

Summary information related to the fair value hedges as of June 30, 2021, is as follows:
Notional amounts $ 17,925 
Weighted average pay rates 3.67  %
Weighted average receive rates 1.13  %
Weighted average maturity 7.58 years
Unrealized losses $ 944 

The following table reflects the fair value hedges included in the Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively:
June 30, 2021 December 31, 2020
Notional Amount Fair Value Notional Amount Fair Value
Included in other liabilities:
Interest rate swaps related to investments 17,925  (944) 18,525  (1,495)
Total included in other liabilities $ 17,925  $ (944) $ 18,525  $ (1,495)

The following table reflects the fair value hedges and the underlying hedged items included in the Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020, respectively:
Three months ended June 30,
Six months ended
June 30,
Item Location 2021 2020 2021 2020
Interest rate swaps - securities Interest on investment securities, nontaxable $ (117) $ (78) $ (238) $ (125)
Hedged item - securities Interest on investment securities, nontaxable $ 117  $ 78  $ 238  $ 125 


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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,
2021 2020 2021 2020
Stock-based compensation expense before income taxes $ 468  $ 485  $ 807  $ 834 
Less: deferred tax benefit (122) (127) (211) (218)
Reduction of net income $ 346  $ 358  $ 596  $ 616 

Common Stock Options
    
A summary of stock option activity for the six months ended June 30, 2021 is as follows:
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at December 31, 2020 116,621  $ 18.97  5.87 years $ 304 
Granted —  $ — 
Exercised (600) $ 13.65  4
Forfeited or expired (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 

As of June 30, 2021, there was $164 of unrecognized future compensation expense to be recognized related to stock options. The cost is expected to be recognized over a weighted-average period of 2.51 years.
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Restricted Stock and Restricted Stock Unit Awards

The following table shows the activity related to non-vested restricted stock and restricted stock unit awards for the six months ended June 30, 2021:
Restricted Stock Units Restricted Stock
Underlying Shares Weighted Average Grant-Date
Fair Value 		Shares Weighted Average Grant-Date
Fair Value
Outstanding at January 1, 2021 132,650  $ 16.93  40,910  $ 26.82 
Granted 70,655  26.07  —  — 
Vested —  —  (5,000) 24.76 
Forfeited (5,500) 16.20  —  — 
Outstanding at June 30, 2021 197,805  $ 20.22  35,910  $ 27.10 

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


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 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 30, 2021 and December 31, 2020.

Actual
Regulatory
Capital 		Minimum Required
Capital Including
Capital Conservation
Buffer 		To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount Ratio Amount Ratio Amount Ratio
June 30, 2021
Reliant Bancorp
Tier I leverage $ 285,363  9.47  % $ 120,533  4.00  % $ 150,667  5.00  %
Common equity tier I 273,553  10.18  % 188,101  7.00  % 174,665  6.50  %
Tier I risk-based capital 285,363  10.62  % 228,398  8.50  % 214,963  8.00  %
Total risk-based capital 365,942  13.62  % 282,114  10.50  % 268,680  10.00  %
Bank
Tier I leverage $ 334,911  11.14  % $ 120,255  4.00  % $ 150,319  5.00  %
Common equity tier I 334,911  12.50  % 187,550  7.00  % 174,154  6.50  %
Tier I risk-based capital 334,911  12.50  % 227,739  8.50  % 214,343  8.00  %
Total risk-based capital 356,530  13.30  % 281,471  10.50  % 268,068  10.00  %
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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
June 30, June 30,
2021 2020 2021 2020
Basic EPS Computation
Net income attributable to common shareholders $ 13,045  $ 7,868  $ 25,194  $ 7,653 
Weighted average common shares outstanding 16,616,888  16,496,817  16,616,034  14,196,254 
Basic earnings per common share $ 0.79  $ 0.48  $ 1.52  $ 0.54 
Diluted EPS Computation
Net income attributable to common shareholders $ 13,045  $ 7,868  $ 25,194  $ 7,653 
Weighted average common shares outstanding 16,616,888  16,496,817  16,616,034  14,196,254 
Dilutive effect of stock options, restricted stock shares and units, and employee stock purchase plan 167,856  32,263  146,613  44,911 
Adjusted weighted average common shares outstanding 16,784,744  16,529,080  16,762,647  14,241,165 
Diluted earnings per common share $ 0.78  $ 0.48  $ 1.50  $ 0.54 


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 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 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)
June 30, 2021
Assets
U. S. Treasury and other U. S. government agencies $ 222  $ —  $ 222  $ — 
State and municipal 187,534  —  187,534  — 
Corporate bonds 28,082  —  28,082  — 
Mortgage-backed securities 48,244  —  48,244  — 
Asset-backed securities 2,613  —  2,613  — 
Liabilities
Derivative liabilities $ 3,589  $ —  $ 3,589  $ — 
December 31, 2020
Assets
U. S. Treasury and other U. S. government agencies $ 48  $ —  $ 48  $ — 
State and municipal 200,988  —  200,988  — 
Corporate bonds 24,113  —  24,113  — 
Mortgage-backed securities 28,442  —  28,442  — 
Asset-backed securities 3,062  —  3,062  — 
Liabilities
Derivative liabilities $ 9,152  $ —  $ 9,152  $ — 
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The following table sets forth the Company’s major categories of assets and liabilities measured at fair value on a nonrecurring basis, by level within the fair value hierarchy, as of June 30, 2021 and December 31, 2020:

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

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which we have utilized Level 3 inputs to determine fair value at June 30, 2021 and December 31, 2020:
Valuation
Techniques (1) 		Significant
Unobservable Inputs 		Range
(Weighted Average)
Impaired loans Appraisal Estimated costs to sell 10%
Other real estate Appraisal Estimated costs to sell 10%
Other repossessions Third-party guidelines Estimated costs to sell 10%
(1)The fair value is generally determined through independent appraisals of the underlying collateral, which may include Level 3 inputs that are not identifiable, or by using the discounted cash flow method if the loan is not collateral dependent. Estimated cash flows change and appraised values of the assets or collateral underlying the loans will be sensitive to changes.

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Carrying amounts and estimated fair values of financial instruments not reported at fair value at June 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)
Financial assets
Cash and due from banks $ 11,763  $ 11,763  $ 11,763  $ —  $ — 
Interest-bearing deposits in financial institutions 43,676  43,676  43,676  —  — 
Federal funds sold 656  656  —  656  — 
Loans, net 2,300,176  2,330,188  —  —  2,330,188 
Mortgage loans held for sale 229,418  231,779  —  231,779  — 
Accrued interest receivable 14,492  14,492  —  14,492  — 
Restricted equity securities 15,770  15,770  —  15,770  — 
Financial liabilities
Deposits $ 2,629,840  $ 2,631,464  $ —  $ —  $ 2,631,464 
Accrued interest payable 1,967  1,967  —  1,967  — 
Subordinate debentures 70,770  72,650  —  —  72,650 
Federal Home Loan Bank advances 16,000  16,000  —  —  16,000 
December 31, 2020 Carrying
Amount 		Estimated
Fair
Value 		Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3)
Financial assets
Cash and due from banks $ 13,717  $ 13,717  $ 13,717  $ —  $ — 
Interest-bearing deposits in financial institutions 79,756  79,756  79,756  —  — 
Federal funds sold 1,572  1,572  —  1,572  — 
Loans, net 2,280,147  2,293,723  —  —  2,293,723 
Mortgage loans held for sale 147,524  149,342  —  149,342  — 
Accrued interest receivable 14,889  14,889  —  14,889  — 
Restricted equity securities 16,551  16,551  —  16,551  — 
Financial liabilities
Deposits $ 2,579,235  $ 2,583,525  $ —  $ —  $ 2,583,525 
Accrued interest payable 2,571  2,571  —  2,571  — 
Subordinate debentures 70,446  71,750  —  —  71,750 
Federal Home Loan Bank advances 10,000  10,000  —  —  10,000 

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

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

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

The following presents summarized results of operations for the Company’s business segments for the periods indicated:
Three Months Ended
June 30, 2021
Commercial Banking Residential
Mortgage
Banking 		Elimination
Entries 		Consolidated
Net interest income $ 27,440  $ 1,121  $ —  $ 28,561 
Provision for loan losses —  —  —  — 
Noninterest income 5,335  3,251  (276) 8,310 
Noninterest expense (excluding merger expense) 16,570  3,914  —  20,484 
Merger expense —  —  —  — 
Income tax expense 3,160  42  —  3,202 
Net income 13,045  416  (276) 13,185 
Noncontrolling interest in net income of subsidiary —  (416) 276  (140)
Net income attributable to common shareholders $ 13,045  $ —  $ —  $ 13,045 
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  Three Months Ended
June 30, 2020
  Commercial Banking Residential Mortgage Banking Elimination Entries Consolidated
Net interest income $ 29,420  $ 536  $ —  $ 29,956 
Provision for loan losses 3,000  —  —  3,000 
Noninterest income 2,174  2,240  8  4,422 
Noninterest expense (excluding merger expense) 16,433  3,199  —  19,632 
Merger expense 2,632  —  —  2,632 
Income tax (benefit) expense 1,661  (27) —  1,634 
Net (loss) income 7,868  (396) 8  7,480 
Noncontrolling interest in net loss of subsidiary —  396  (8) 388 
Net income attributable to common shareholders $ 7,868  $ —  $ —  $ 7,868 

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

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

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NOTE 10 – INCOME TAXES
Income tax expense for the three and six months ended June 30, 2021 totaled $3,202 and $6,182, respectively, compared to $1,634 and $724 for the three and six months ended June 30, 2020, respectively. The effective tax rate for the three and six months ended June 30, 2021 was 19.5% and 19.3%, respectively, compared to 17.9% and 10.3% for the three and six months ended June 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 months ended June 30, 2021 and 2020 in the table below presents information as if the TCB Holdings Transaction and FABK Transaction occurred on January 1, 2020. These results combine the historical results of TCB Holdings and FABK into the Company's consolidated statement of income and, while certain adjustments were made for the estimated impact of certain fair value adjustments, they are not indicative of what would have occurred had the acquisitions taken place on the indicated date nor are they intended to represent or be indicative of future results of operations. In particular, no adjustments have been made to eliminate the amount of TCB Holdings' or FABK's provision for credit losses for the first three and six months of 2020 that may not have been necessary had the acquired loans been recorded at fair value as of the beginning of 2020. Additionally, these financials were not adjusted for non-recurring expenses, such as merger-related charges incurred by either the Company, TCB Holdings or FABK. The Company expects to achieve operating cost savings and other business synergies as a result of the acquisitions which are also not reflected in the pro forma amounts.

Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenue(1)
$ 36,871  $ 34,378  $ 74,234  $ 61,644 
Net interest income $ 28,561  $ 29,956  $ 58,587  $ 52,709 
Net income attributable to common shareholders $ 13,045  $ 7,868  $ 25,194  $ 2,963 
(1) Net interest income plus noninterest income


NOTE 12 - SUBSEQUENT EVENTS

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

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

On July 20, 2021, the board of directors of Reliant Bancorp declared a quarterly cash dividend of $0.12 per share payable on August 12, 2021 to shareholders of record as of the close of business on July 30, 2021.
38
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 months ended June 30, 2021 are further described in Note 1 within "Part 1. Financial Information - Notes to consolidated financial statements" of this report.

Non-GAAP Financial Measures

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

The non-GAAP measures in this Quarterly Report include “adjusted net interest margin (NIM),” “adjusted net income,” “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 loan purchase discounts to total loans,” “bank segment adjusted net income,” “bank segment adjusted noninterest expense,” and “bank segment adjusted efficiency ratio.”

Executive Overview and Earnings Summary

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

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

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Tax-equivalent net interest margin decreased to 4.14% from 4.58% for the three months ended June 30, 2021 compared to 2020 and increased to 4.32% from 4.16% for the six months ended June 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)
Three months ended,
Six months ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Selected Statement of Income Data
Total interest income $ 35,095  $ 35,915  $ 69,477  $ 59,221 
Total interest expense 6,534  5,959  10,890  12,150 
Net interest income 28,561  29,956  58,587  47,071 
Provision for credit loss —  3,000  —  5,900 
Total noninterest income 8,310  4,422  15,647  7,704 
Total noninterest expense 20,484  22,264  42,148  41,862 
Net income before income taxes 16,387  9,114  32,086  0 7,013 
Income tax expense 3,202  1,634  6,182  724 
Consolidated net income 13,185  7,480  25,904  6,289 
Noncontrolling interest in net loss of subsidiary (140) 388  (710) 1,364 
Net income attributable to common shareholders $ 13,045  $ 7,868  $ 25,194  $ 7,653 
Per Common Share
Basic net income $ 0.79  $ 0.48  $ 1.52  $ 0.54 
Diluted net income 0.78  0.48  1.50  0.54 
Adjusted diluted income (1)
0.78  0.60  1.50  0.90 
Book value 20.77  17.77  20.77  17.77 
Tangible book value(1)
16.88  13.96  16.88  13.96 
Shares Outstanding
Basic weighted average common shares 16,616,888  16,496,817  16,616,034  14,196,254 
Diluted weighted average common shares 16,784,744  16,529,080  16,762,647  14,241,165 
Common shares outstanding at period end 16,672,511  16,631,604  16,672,511  16,631,604 
Selected Balance Sheet Data
Loans, net of unearned income $ 2,321,070  $ 2,317,324  $ 2,321,070  $ 2,317,324 
Total assets 3,098,464  2,990,126  3,098,464  2,990,126 
Customer deposits 2,320,054  2,177,734  2,320,054  2,177,734 
Wholesale and institutional deposits 309,786  352,280  309,786  352,280 
Total deposits 2,629,840  2,530,014  2,629,840  2,530,014 
Total liabilities 2,752,175  2,694,583  2,752,175  2,694,583 
Total shareholders' equity 346,289  295,543  346,289  295,543 
Total liabilities and shareholders' equity 3,098,464  2,990,126  3,098,464  2,990,126 
Selected Balance Sheet Data - Averages
Loans held for investment $ 2,288,841  $ 2,302,639  $ 2,284,633  $ 1,957,834 
Earning assets(1)
2,868,803  2,735,404  2,831,071  2,363,975 
Total assets 3,088,329  2,956,942  3,050,929  2,569,376 
Interest-bearing liabilities 2,113,993  2,158,990  2,096,711  1,878,376 
Total liabilities 2,748,825  2,667,981  2,717,628  2,303,949 
Total shareholders' equity 339,504  288,961  333,301  265,427 
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(Dollar amounts in thousands, except per share amounts)
Three months ended,
Six months ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Selected Performance Ratios
Return on average assets (2)
1.69  % 1.07  % 1.67  % 0.60  %
Return on shareholders' equity (2)
15.41  % 10.95  % 15.24  % 5.80  %
Return on average tangible common equity (1) (2)
19.07  % 14.04  % 18.96  % 7.66  %
Average shareholders' equity to average assets
10.99  % 9.77  % 10.92  % 10.33  %
Net interest margin (tax-equivalent basis) (2)
4.14  % 4.58  % 4.32  % 4.16  %
Efficiency Ratio (tax-equivalent basis) 54.1  % 62.7  % 55.3  % 73.9  %
Bank Segment efficiency ratio (1)
50.6  % 60.3  % 51.4  % 71.3  %
Loans held for investment to deposits ratio 88.3  % 91.6  % 88.3  % 91.6  %
Interest Rates and Yields (2)
Yield on interest-earning assets 5.05  % 5.45  % 5.09  % 5.20  %
Yield on loans held for investment 5.58  % 5.98  % 5.60  % 5.67  %
Cost of interest-bearing liabilities 1.24  % 1.11  % 1.05  % 1.30  %
Adjust cost of interest-bearing liabilities (1)
0.70  % 1.11  % 0.77  % 1.30  %
Cost of funds 0.97  % 0.91  % 0.82  % 1.08  %
Adjusted cost of funds (1)
0.54  % 0.91  % 0.60  % 1.08  %
Cost of total deposits 0.83  % 0.79  % 0.67  % 0.93  %
Adjusted cost of total deposits (1)
0.41  % 0.79  % 0.47  % 0.93  %
Preliminary Consolidated Capital Ratios (3)
Tier 1 leverage 9.47  % 8.47  % 9.47  % 8.47  %
Common equity tier 1 10.18  % 9.25  % 10.18  % 9.25  %
Tier 1 risk-based capital 10.62  % 9.71  % 10.62  % 9.71  %
Total risk-based capital 13.62  % 12.80  % 13.62  % 12.80  %
Selected Asset Quality Measures
Allowance for loan losses to total loans 0.90  % 0.79  % 0.90  % 0.79  %
Allowance for loan losses and purchase loan discounts to total loans 1.46  % 1.73  % 1.46  % 1.73  %
Net (recoveries) charge offs $ (109) $ (116) $ (258) $ 241 
Net (recoveries) charge offs to average loans (2)
(0.02) % (0.02) % (0.02) % 0.02  %
Total nonperforming loans held for investment (HFI) $ 5,355  $ 7,549  $ 5,355  $ 7,549 
Total nonperforming assets (4)
$ 9,726  $ 11,571  $ 9,726  $ 11,571 
Nonperforming loans HFI to total loans HFI 0.23  % 0.33  % 0.23  % 0.33  %
Nonperforming assets to total assets 0.31  % 0.39  % 0.31  % 0.39  %
Nonperforming assets to total loans HFI and NPAs 0.42  % 0.50  % 0.42  % 0.50  %
(1) Certain measures are considered non-GAAP financial measures. See “Reconciliation of Non-GAAP Financial Measures”.
(2) Data has been annualized.
(3) Current quarter capital ratios are estimated.
(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 
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Three Months Ended Six months ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Tangible common equity to tangible assets:
Tangible common equity:
Total shareholders' equity $ 346,289  $ 295,543  $ 346,289  $ 295,543 
Less: intangible assets (64,830) (63,351) (64,830) (63,351)
Tangible common equity $ 281,459  $ 232,192  $ 281,459  $ 232,192 
Tangible assets:
Total assets $ 3,098,464  $ 2,990,126  $ 3,098,464  $ 2,990,126 
Less: intangible assets (64,830) (63,351) (64,830) (63,351)
Tangible assets $ 3,033,634  $ 2,926,775  $ 3,033,634  $ 2,926,775 
Total shareholders' equity to total assets 11.18  % 9.88  % 11.18  % 9.88  %
Tangible common equity to tangible assets 9.28  % 7.93  % 9.28  % 7.93  %
Tangible book value per share:
Tangible common equity $ 281,459  $ 232,192  $ 281,459  $ 232,192 
Total shares of common stock outstanding 16,672,511  16,631,604  16,672,511  16,631,604 
Book value per common share $ 20.77  $ 17.77  $ 20.77  $ 17.77 
Tangible book value per share $ 16.88  $ 13.96  $ 16.88  $ 13.96 
Allowance for loan losses plus unaccreted loan purchase discounts:
Allowance for loan losses $ 20,894  $ 18,237  $ 20,894  $ 18,237 
Unaccreted loan purchase discounts 12,980  21,939  12,980  21,939 
Allowance for loan losses plus unaccreted loan purchase discounts: $ 33,874  $ 40,176  $ 33,874  $ 40,176 
Total loans 2,321,070  2,317,324  2,321,070  2,317,324 
Allowance for loan losses plus unaccreted purchased loan discounts to total loans 1.46  % 1.73  % 1.46  % 1.73  %
Allowance for loan losses to total loans 0.90  % 0.79  % 0.90  % 0.79  %
Bank segment adjusted net income:
Bank segment net income $ 13,045  $ 7,868  $ 25,194  $ 7,653 
Add: merger related expenses —  2,632  —  6,818 
Less: income tax impact of merger related expenses —  (565) —  (1,597)
Bank segment adjusted net income $ 13,045  $ 9,935  $ 25,194  $ 12,874 
Bank segment adjusted noninterest expense:
Bank segment noninterest expense $ 16,570  $ 19,065  $ 33,030  $ 35,712 
Add: merger related expenses —  (2,632) —  (6,818)
Bank segment adjusted noninterest expense $ 16,570  $ 16,433  $ 33,030  $ 28,894 
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Three Months Ended Six months ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Bank segment adjusted efficiency ratio:
Bank segment adjusted total revenues:
Bank segment net interest income $ 27,440  $ 29,420  $ 56,573  $ 46,202 
Add: Tax equivalent interest income 1,021  1,161  2,040  1,854 
Add: Bank segment noninterest income 5,335  2,174  7,744  3,883 
Less: Gains on sale of securities, OREO, premises and equipment (3)
(2,922) (338) (3,069) (361)
Add: Swap termination fee (3)
2,859  —  2,859  — 
Bank segment adjusted total revenues $ 33,733  $ 32,417  $ 66,147  $ 51,578 
Bank segment efficiency ratio 50.6  % 60.3  % 51.4  % 71.3  %
Bank segment adjusted efficiency ratio 49.1  % 50.7  % 49.9  % 56.0  %
Adjusted cost of funds:
Adjusted interest expense:
Interest Expense $ 6,534  $ 5,959  $ 10,890  $ 12,150 
Less: Swap termination fees (2,859) —  (2,859) — 
Adjusted interest expense $ 3,675  $ 5,959  $ 8,031  $ 12,150 
Average funds 2,711,181  2,627,565  2,678,277  2,268,700 
Cost of funds 0.97  % 0.91  % 0.82  % 1.08  %
Adjusted cost of funds 0.54  % 0.91  % 0.60  % 1.08  %
Adjusted cost of interest-bearing liabilities:
Adjusted interest expense $ 3,675  $ 5,959  $ 8,031  $ 12,150 
Average interest-bearing liabilities 2,113,993  2,158,990  2,096,711  1,878,376 
Cost of interest-bearing liabilities 1.24  % 1.11  % 1.05  % 1.30  %
Adjusted cost of interest-bearing liabilities 0.70  % 1.11  % 0.77  % 1.30  %
Adjusted cost of deposits:
Adjusted deposit expense:
Deposit expense $ 5,541  $ 4,829  $ 8,940  $ 9,666 
Less: Swap termination fees (2,859) —  (2,859) — 
Adjusted deposit expense $ 2,682  $ 4,829  $ 6,081  $ 9,666 
Average deposits 2,617,853  2,429,818  2,592,542  2,079,863 
Cost of deposits 0.83  % 0.79  % 0.67  % 0.93  %
Adjusted cost of deposits 0.41  % 0.79  % 0.47  % 0.93  %
(1) Prior calculation of this measure removed tax credits related to certain tax-preference-qualified loans and tax-exempt securities. The Company views these credits as normal course of business and as such removal is unnecessary.
(2) The swap termination fees included in the adjusted net interest income calculation in the second quarter of 2021 were done so in conjunction with securities sales thereby nullifying the effects on net income. Therefore, we have not adjusted for these transactions as adjusted net income.
(3) Securities sold in the second quarter 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.

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

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


Coronavirus (COVID-19) Impact

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

As part of our pandemic response, we have encouraged a significant portion of our employees to work from home. We have also extended virtual medical coverage to all employees as well as provided pay to employees who may have been exposed. We are encouraging virtual meetings and conference calls in place of in-person meetings. We are promoting social distancing, frequent hand washing, thorough disinfection of all surfaces, and the use of masks or nose and mouth coverings has been mandated in all of our locations 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.

The Company is participating in the Paycheck Protection Program ("PPP") under the CARES Act, which is being administered by the SBA. As of June 30, 2021 the Bank had 84 PPP loans outstanding totaling $14.0 million with $69.4 million in PPP loans forgiven and repaid to date.

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.


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RESULTS OF OPERATIONS

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

The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the three months ended June 30, 2021, and 2020 (dollars in thousands):
Three Months Ended June 30,
Change
2021
2020
Average Balances (1)
Rates / Yields (%) Interest Income / Expense
Average Balances (1)
Rates / Yields (%) Interest Income / Expense Due to Volume Due to Rate Total
Interest earning assets
Loans (2) (3)
$ 2,288,841  5.12  $ 28,539  $ 2,302,639  5.68  $ 31,708  $ (189) $ (3,103) $ (3,292)
Loan fees —  0.46  2,644  —  0.30  1,739  905  —  905 
Loans with fees 2,288,841  5.58  31,183  2,302,639  5.98  33,447  716  (3,103) (2,387)
Mortgage loans held for sale 232,850  3.11  1,807  85,313  3.84  815  1,115  (123) 992 
Deposits with banks 58,619  0.36  52  66,052  0.30  50  (3) 5  2 
Investment securities - taxable 73,368  3.62  663  66,234  0.78  128  15  520  535 
Investment securities - tax-exempt (4)
197,309  3.19  1,216  193,216  3.51  1,317  36  (154) (118)
Restricted equity securities and other 17,816  3.92  174  21,950  2.90  158  (18) 34  16 
Total earning assets 2,868,803  5.05  35,095  2,735,404  5.45  35,915  1,861  (2,821) (960)
Nonearning assets 219,526  221,538 
Total assets $ 3,088,329  $ 2,956,942 
Interest bearing liabilities
Interest bearing demand 412,117  0.21  216  279,092  0.31  218  (6) 4  (2)
Savings and money market 972,082  0.27  647  731,278  0.81  1,476  809  (1,638) (829)
Time deposits - retail 443,512  0.94  1,042  749,566  1.19  2,217  (776) (399) (1,175)
Time deposits - wholesale 192,954  7.56  3,636  201,307  1.83  918  (37) 2,755  2,718 
Total interest-bearing deposits 2,020,665  1.10  5,541  1,961,243  0.99  4,829  (9) 721  712 
Federal Home Loan Bank advances and other borrowings 22,582  0.23  13  127,350  0.47  148  (83) (52) (135)
Subordinated debt 70,746  5.56  980  70,397  5.61  982  3  (5) (2)
Total borrowed funds 93,328  4.27  993  197,747  2.30  1,130  (81) (56) (137)
Total interest-bearing liabilities 2,113,993  1.24  6,534  2,158,990  1.11  5,959  (90) 665  575 
Net interest spread (5)
3.81  $ 28,561  4.34  $ 29,956  $ 1,951  $ (3,486) $ (1,535)
Noninterest bearing deposits 597,188  (0.27) 468,575  (0.20)
Other noninterest bearing liabilities 37,644  40,416 
Shareholders' equity 339,504  288,961 
Total liabilities and shareholders' equity $ 3,088,329  $ 2,956,942 
Cost of funds 0.97  0.91 
Net interest margin (6)
4.14  4.58 
(1)    Calculated using daily averages.
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(2)    Average loan balances include nonaccrual loans.
(3)    Yields on loans reflects tax-exempt interest and state tax credits received on low or zero percent interest loans made to construct low income housing of $667 and $790, for the three months ended June 30, 2021 and June 30, 2020, respectively.
(4)     Yields on tax-exempt securities are shown on a tax-equivalent basis.
(5)    Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities.
(6)    Net interest margin is the result of net interest income calculated on a tax-equivalent basis divided by average interest earning assets for the period.

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

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

The components of our loan yield, a key driver to our NIM for the three months ended June 30, 2021, and June 30, 2020, were as follows:
Three months ended June 30,
2021
2020
Interest Income Average Yield Interest Income Average Yield
Loan yield components:
Contractual interest rate on loans held for investment (1)
$ 26,707  4.68  % $ 27,468  4.80  %
Origination and other fee income (2)
2,644  0.46  % 1,739  0.30  %
Accretion on purchased loans 1,832 0.32  % 4,240 0.74  %
Loan tax credits 667 0.12  % 790 0.14  %
Tax-equivalent loan interest income $ 31,850  5.58  % $ 34,237  5.98  %
(1)    Includes $58 and $148 in loan contractual interest related to PPP loans for the three months ended June 30, 2021 and June 30, 2020, respectively.
(2)    Includes $729 and $284 in PPP related fees for the three months ended June 30, 2021 and June 30, 2020, respectively.

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

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

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


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The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the six months ended June 30, 2021, and 2020 (dollars in thousands):
Six Months Ended
June 30, 2021
Six Months Ended
June 30, 2020
Change
Average Balances (1)
Rates / Yields (%) Interest Income / Expense
Average Balances (1)
Rates / Yields (%) Interest Income / Expense Due to Volume Due to Rate Total
Interest earning assets
Loans (2) (3)
$ 2,284,633  5.13  $ 56,828  $ 1,957,834  5.40  $ 51,463  $ 12,434  $ (6,847) $ 5,587 
Loan fees —  0.47  5,344  —  0.27  2,629  2,715  —  2,715 
Loans with fees 2,284,633  5.60  62,172  1,957,834  5.67  54,092  15,149  (6,847) 8,302 
Mortgage loans held for sale 201,473  3.14  3,138  66,499  4.16  1,375  2,783  (1,020) 1,763 
Deposits with banks 60,270  0.34  103  54,817  0.64  174  45  (116) (71)
Investment securities - taxable 69,455  3.70  1,273  70,461  1.65  579  (26) 720  694 
Investment securities - tax-exempt (4)
197,670  3.22  2,441  195,228  3.54  2,688  117  (400) (283)
Restricted equity securities and other 17,570  4.02  350  19,136  3.29  313  (66) 103  37 
Total earning assets 2,831,071  5.09  69,477  2,363,975  5.20  59,221  18,002  (7,560) 10,442 
Nonearning assets 219,858  205,401 
Total assets $ 3,050,929  $ 2,569,376 
Interest bearing liabilities
Interest bearing demand 395,011  0.25  488  232,664  0.27  318  238  (68) 170 
Savings and money market 936,958  0.32  1,486  595,517  0.85  2,506  2,535  (3,555) (1,020)
Time deposits - retail 468,869  1.05  2,446  645,769  1.47  4,713  (1,110) (1,157) (2,267)
Time deposits - wholesale 210,138  4.34  4,520  215,589  1.99  2,129  (162) 2,553  2,391 
Total interest-bearing deposits 2,010,976  0.90  8,940  1,689,539  1.15  9,666  1,501  (2,227) (726)
Federal Home Loan Bank advances and other borrowings 15,066  0.23  17  118,335  0.86  509  (267) (225) (492)
Subordinated debt 70,669  5.52  1,933  70,502  5.63  1,975  12  (54) (42)
Total borrowed funds 85,735  4.59  1,950  188,837  2.65  2,484  (255) (279) (534)
Total interest-bearing liabilities 2,096,711  1.05  10,890  1,878,376  1.30  12,150  1,246  (2,506) (1,260)
Net interest spread (5)
4.04  $ 58,587  3.90  $ 47,071  $ 16,756  $ (5,054) $ 11,702 
Noninterest bearing deposits 581,566  (0.23) 390,324  (0.22)
Other noninterest bearing liabilities 39,351  35,249 
Shareholders' equity 333,301  265,427 
Total liabilities and shareholders' equity $ 3,050,929  $ 2,569,376 
Cost of funds 0.82  1.08 
Net interest margin (6)
4.32  4.16 
(1)    Calculated using daily averages.
(2)    Average loan balances include nonaccrual loans.
(3)    Yields on loans reflects tax-exempt interest and state tax credits received on low or zero percent interest loans made to construct low income housing of $1,328 and $1,106, for the six months ended June 30, 2021 and June 30, 2020, respectively.
(4)     Yields on tax-exempt securities are shown on a tax-equivalent basis.
(5)    Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities.
(6)    Net interest margin is the result of net interest income calculated on a tax-equivalent basis divided by average interest earning assets for the period.


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

For the six months ended June 30, 2021, we recorded net interest income on a tax-equivalent basis of approximately $60,627 which resulted in a net interest margin (net interest income divided by the average balance of interest-earning assets) of 4.32% compared to 4.16% for the six months ended June 30, 2020. This increase was primarily driven by an increase in average loan balances and a decrease in the Company's use of retail time deposits which have a higher interest rate as well as an overall decline in the interest rate environment.
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The components of our loan yield, a key driver to our NIM for the six months ended June 30, 2021, and June 30, 2020, were as follows:
Six months ended June 30,
2021
2020
Interest Income Average Yield Interest Income Average Yield
Loan yield components:
Interest rate on loans held for investment (1)
$ 53,197  4.69  % $ 46,701  4.80  %
Origination and other fee income (2)
5,344  0.47  % 2,629  0.27  %
Accretion on purchased loans 3,631 0.32  % 4,762 0.49  %
Loan tax credits 1,328 0.12  % 1,106 0.11  %
Tax-equivalent loan interest income $ 63,500  5.60  % $ 55,198  5.67  %
(1)    Includes $197 and $148 in loan contractual interest related to PPP loans for the six months ended June 30, 2021 and June 30, 2020, respectively.
(2)    Includes $1,632 and $284 in PPP related fees for the six months ended June 30, 2021 and June 30, 2020, respectively.

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

Accretion on purchased loans contributed 32 basis points to the NIM for six months ended June 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 basis points to the NIM for the six months ended June 30, 2021 as fees are recognized upon forgiveness as compared to decreasing NIM by 3 basis points in the comparable period in 2020 due to the increased PPP loan volume in 2020 compared the loan yield in 2020.

Our cost of funds decreased to 0.82% from 1.08% for the six months ended June 30, 2021 compared to the same period in 2020 as rates continue to decline and our team continues to focus on reducing more costly time deposits and retaining lower cost customer deposits. When excluding the swap termination fees, cost of funds decreased 48 basis points to 0.60%. Average retail time deposits decreased 27.4% year-over-year compared to the increase in average total deposits of 24.6%. In addition to the 26 basis point decrease in cost of deposits, or 46 basis points adjusted for swap termination fees, cost of funds benefited from a decrease in the cost of FHLB advances of 63 basis points as the average balance decreased 87.3% as a result of the prepayments in the fourth quarter of 2020.

Provision for Loan Losses

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

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

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Noninterest Income
Our noninterest income is composed of several components, some of which vary significantly between periods. The following is a summary of our noninterest income for the three and six months ended June 30, 2021, and 2020 (dollars in thousands):
Three Months Ended June 30, Percent
Increase 		Six Months Ended June 30, Percent
Increase
2021 2020 (Decrease) 2021 2020 (Decrease)
Non-Interest Income
Service charges and fees on deposits $ 1,656  $ 1,381  19.9  % $ 3,217  $ 2,589  24.3  %
Gains on mortgage loans sold, net 2,978  2,248  32.5  % 7,906  3,821  106.9  %
Gain (loss) on securities transactions, net 2,966  327  807.0  % 3,095  327  846.5  %
Bank-owned life insurance 556  392  41.8  % 991  687  44.3  %
Brokerage revenue 84  45  86.7  % 153  77  98.7  %
Miscellaneous noninterest income 70  29  141.4  % 311  169  84.0  %
Total noninterest income $ 8,310  $ 4,422  87.9  % $ 15,647  $ 7,704  103.1  %

The most significant reasons for the changes in total noninterest income during the three and six months ended June 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.

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 and $593,801 in three and six months ended June 30, 2021, respectively, as compared to $95,070 and $184,146 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 months ended June 30, 2021, the Company sold securities totaling $35,751 with a gain of $3,095. Of this gain, $2,859 was realized to offset the effects of the swap termination fees incurred in the second quarter. During the six months ended June 30, 2020, the Company sold securities classified as available for sale which were acquired in the TCB Holdings transaction totaling $103,668. No gain was recognized as the securities were sold at the fair value for which they were acquired.

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

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Noninterest Expense

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

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

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

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

Occupancy costs decreased by $27 or 1.3% during the three months ended June 30, 2021 and increased $495, or 14.1% during the six months ended June 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 branches later in 2021.

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

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

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Income Taxes
During the three and six months ended June 30, 2021 we recorded consolidated income tax expense of $3,202 and $6,182, respectively, as compared to $1,634 and $724 for the same periods in 2020. This represents consolidated effective tax rates for the three and six month ended June 30, 2021 of 19.5% and 17.9%, respectively, compared to 19.3% and 10.3% for the same periods in 2020. When evaluating the bank segment alone, this ratio was 19.5% for both the three and six months ended June 30, 2021, respectively, as compared to 17.4% and 9.7% 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 and $710 for the three and six months ended June 30, 2021, respectively, compared to net loss of $388 and $1,364 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 at June 30, 2021 and $3,026,535 at December 31, 2020, an increase of 2.4%. Total liabilities were $2,752,175 at June 30, 2021 and $2,704,562 at December 31, 2020, an increase of 1.8%. The increase in liabilities was substantially attributable to the increase in deposits of $50,605, or 2.0%. These and other components of our consolidated balance sheets are discussed further below.

Loans

Lending-related income is the largest component of our net interest income and is a major contributor to profitability. The loan portfolio is the largest component of earning assets, and it, therefore, generates the largest portion of revenues. The absolute volume of loans and the volume of loans as a percentage of earning assets is an important determinant of net interest margin as loans are expected to produce higher yields than securities and other earning assets. The competition for quality loans in our markets has remained strong. Our goal is to steadily grow our loan portfolio, focusing on quality. This is not always possible for various reasons, including but not limited to scheduled maturities or early payoffs exceeding new loan volume, as well as economic conditions. Early payoffs typically increase in falling rate environments as customers identify advantageous opportunities for refinancing. We have been adding experienced lending officers to our staff to help with loan growth. Total loans, net of allowance for loan losses, at June 30, 2021, and December 31, 2020, were $2,300,176 and $2,280,147, respectively, representing an increase of 0.9%, or 3.2% when PPP loans are excluded.

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The table below provides a summary of the loan portfolio composition for the dates noted (including purchased credit-impaired ("PCI") loans).
June 30, 2021 December 31, 2020
Amount Percent Amount Percent
Commercial, Industrial and Agricultural $ 435,093  18.7  % $ 459,739  19.9  %
Real estate:
1-4 Family Residential 326,768  14.1  % 323,473  14.0  %
1-4 Family HELOC 100,614  4.3  % 100,525  4.4  %
Multifamily and Commercial 831,093  35.8  % 834,000  36.2  %
Construction, Land Development and Farmland 397,557  17.1  % 365,058  15.8  %
Consumer 225,433  9.7  % 213,863  9.3  %
Other 7,614  0.3  % 8,669  0.4  %
2,324,172  100.0  % 2,305,327  100.0  %
Less:
Deferred loan fees 3,102  4,544 
Allowance for loan losses 20,894  20,636 
Loans, net $ 2,300,176  $ 2,280,147 

The table below provides a summary of PCI loans as of June 30, 2021 and December 31, 2020:
June 30, 2021 December 31, 2020
Commercial, Industrial and Agricultural $ 889  $ 919 
Real estate:
1-4 Family Residential 885  1,004 
1-4 Family HELOC 19  19 
Multifamily and Commercial 1,218  1,325 
Construction, Land Development and Farmland 944  992 
Consumer 1,552  1,924 
Total gross PCI loans 5,507  6,183 
Less:
Remaining purchase discount 2,529  2,596 
Allowance for loan losses —  — 
Loans, net $ 2,978  $ 3,587 

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

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

Consumer loans mainly consist of loans to individuals for household, family, and other personal expenditures under revolving credit plans, credit cards, and automobile and other consumer loans. Our consumer loans experienced an increase from
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December 31, 2020, to June 30, 2021, of 5.4% primarily due to the $14,759 increase in loans to finance manufactured homes that are not secured by real estate.

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

The repayment of loans is a source of additional liquidity. The following table sets forth the loans repricing or maturing within specific intervals at June 30, 2021, excluding unearned net fees and costs.
One Year or
Less 		One to Five
Years 		Over Five
Years 		Total
Gross loans $ 701,267  $ 1,275,256  $ 347,649  $ 2,324,172 
Fixed interest rate $ 1,224,723 
Variable interest rate 1,099,449 
Total $ 2,324,172 

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

Allowance for Loan Losses

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

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The following table sets forth the activity in the allowance for loan losses for the periods presented.
Analysis of Changes in Allowance for Loan Losses
June 30, 2021 June 30, 2020
Beginning Balance, January 1, 2021 and 2020, respectively $ 20,636  $ 12,578 
Loans charged off:
Commercial, Industrial and Agricultural (32) (539)
Real estate:
1-4 Family Residential (21) (60)
1-4 Family HELOC —  (98)
Multifamily and Commercial —  — 
Construction, Land Development and Farmland —  (114)
Consumer (454) (295)
Other —  — 
Total loans charged off (507) (1,106)
Recoveries on loans previously charged off:
Commercial, Industrial and Agricultural 301  70 
Real estate:
1-4 Family Residential 96  747 
1-4 Family HELOC 5  3 
Multifamily and Commercial 215  11 
Construction, Land Development and Farmland 91  4 
Consumer 57  30 
Other —  — 
Total loan recoveries 765  865 
Net recoveries (charge-offs) 258  (241)
Provision for loan losses —  5,900 
Total allowance for loan losses at end of period $ 20,894  $ 18,237 
Allowance for loan losses to total loans, net 0.90  % 0.79  %
Net (recoveries) charge-offs to average loans outstanding (0.02) % 0.02  %


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
Amount % of Allowance to Allowance % of Loan Type to Total Loans Amount % of Allowance to Allowance % of Loan Type to Total Loans
Commercial, Industrial and Agricultural $ 6,614  31.7  % 18.7  % $ 5,441  26.4  % 19.9  %
Real estate:
1-4 Family Residential 1,923  9.2  % 14.1  % 2,445  11.8  % 14.0  %
1-4 Family HELOC 610  2.9  % 4.3  % 1,416  6.9  % 4.4  %
Multifamily and Commercial 8,498  40.7  % 35.8  % 8,535  41.4  % 36.2  %
Construction, Land Development and Farmland 2,011  9.6  % 17.1  % 1,841  8.9  % 15.8  %
Consumer 1,222  5.8  % 9.7  % 928  4.5  % 9.3  %
Other 16  0.1  % 0.3  % 30  0.1  % 0.4  %
$ 20,894  100.0  % 100.0  % $ 20,636  100.0  % 100.0  %

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

The following table provides information with respect to the Company’s nonperforming assets.
June 30, 2021 December 31, 2020
Total nonperforming loans $ 5,355  $ 5,987 
Foreclosed real estate ("OREO") 2,233  1,246 
Repossessed collateral 1,161  1,424 
Mortgage Loans HFS 977  630 
Total nonperforming assets $ 9,726  $ 9,287 
Total nonperforming loans HFI as a percentage of total loans HFI 0.23  % 0.26  %
Total nonperforming assets as a percentage of total assets 0.31  % 0.31  %
Allowance for loan losses as a percentage of nonperforming loans HFI 390.18  % 344.68  %
Troubled Debt Restructurings ("TDRs") $ 3,490  $ 4,236 
TDRs as a percentage of total loans 0.15  % 0.18  %

Investment Securities and Other Earning Assets

The investment securities portfolio is intended to provide the Bank with adequate liquidity, flexible asset/liability management and a source of stable income. The portfolio is structured with investment grade holdings and consists of securities classified as available-for-sale. All available-for-sale securities are carried at fair value and may be used for liquidity purposes should management deem it to be in our best interest. Unrealized gains and losses on this portfolio are excluded from earnings, but are reported as other comprehensive income in a separate component of shareholders’ equity, net of income taxes. Premium amortization and discount accretion are recognized as adjustments to interest income using the interest method. Realized gains or losses on sales are based on the net proceeds and the adjusted carrying value amount of the securities sold using the specific identification method.

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

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

The following table shows the Company’s investments’ amortized cost and fair value, aggregated by investment category, for the periods presented:
June 30, 2021 December 31, 2020
Amortized
Cost 		Fair Value % of Total Amortized
Cost 		Fair Value % of Total
U.S. Treasury and other U.S. government agencies $ 222  222  0.08  % $ 47  48  0.02  %
State and municipal bonds 174,093  187,534  70.32  % 184,102  200,988  78.31  %
Corporate bonds 27,000  28,082  10.53  % 23,750  24,113  9.40  %
Mortgage-backed securities 47,908  48,244  18.09  % 28,084  28,442  11.08  %
Asset-backed securities 2,634  2,613  0.98  % 3,083  3,062  1.19  %
Total $ 251,857  266,695  100.00  % $ 239,066  256,653  100.00  %

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The table below summarizes the contractual maturities of securities at June 30, 2021:
Amortized
Cost 		Estimated
Fair Value
Due within one year $ 222  $ 223 
Due in one to five years 2,085  2,129 
Due in five to ten years 33,773  35,729 
Due after ten years 165,235  177,757 
Mortgage-backed securities 47,908  48,244 
Asset-backed securities 2,634  2,613 
Total $ 251,857  $ 266,695 

Premises and Equipment

Premises and equipment, net, totaled $29,183 at June 30, 2021 compared to $31,462 at December 31, 2020, a net decrease of $2,279, or 7.2%. Premises and equipment purchases amounted to approximately $261 during the six months ended June 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. Retired bank facilities of $990 were transferred to other real estate owned during the second quarter of 2021.

Deposits

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

At June 30, 2021, total deposits were $2,629,840, an increase of $50,605, or 2.0%, compared to $2,579,235 at December 31, 2020. During the six months ended June 30, 2021, noninterest bearing demand deposits increased by $27,266, interest-bearing demand deposits increased by $90,769, savings and money market deposits increased by $146,192, and time deposits decreased by $213,622. Our team continues to focus on retaining low cost customer deposits while decreasing higher cost time deposits.

The following table sets forth the distribution by type of our deposit accounts as well as year-to-date average rates for the dates indicated:
June 30, 2021
December 31, 2020
Ending Balance % of Total Deposits Average Rate Ending Balance % of Total Deposits Average Rate
Noninterest-bearing demand $ 602,555  22.9  % —  % $ 575,289  22.3  % —  %
Interest bearing demand 441,161  16.8  % 0.25  % $ 350,392  13.6  % 0.30  %
Savings and money market 1,003,402  38.2  % 0.32  % $ 857,210  33.2  % 0.67  %
Time deposits - retail 445,432  16.9  % 1.05  % 527,985  20.5  % 1.19  %
Time deposits - wholesale 137,290  5.2  % 4.34  % 268,359  10.4  % 1.77  %
Total deposits $ 2,629,840  100.00  % 0.67  % $ 2,579,235  100.00  % 0.73  %

Average deposit balances by type, together with the average rates per period are reflected in the average balance sheet amounts, interest paid and rate analysis tables included in this management's discussion and analysis under the subheading "Results of Operations" discussion.
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The following table shows maturity or repricing of time deposits of $250 or more by category based on time remaining until maturity at June 30, 2021:
June 30, 2021
Twelve months or less $ 127,701 
Over twelve months through three years 21,306 
Over three years 3,345 
Total $ 152,352 

Market and Liquidity Risk Management

Our objective is to manage assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing, and capital policies. Our Asset Liability Management Committee ("ALCO") is charged with the responsibility of monitoring these policies, which are designed to ensure acceptable composition of asset/liability mix. Two critical areas of focus for ALCO are interest rate sensitivity and liquidity risk management.

Interest Rate Sensitivity—Interest rate sensitivity refers to the responsiveness of interest-earning assets and interest-bearing liabilities to changes in market interest rates. In the normal course of business, we are exposed to market risk arising from fluctuations in interest rates. ALCO measures and evaluates the interest rate risk so that we can meet customer demands for various types of loans and deposits. ALCO determines the most appropriate amounts of off-balance sheet items to maximize long-term earnings and mitigate interest rate risk. Measurements we use to help us manage interest rate sensitivity include an earnings simulation model and an economic value of equity model. These measurements are used in conjunction with competitive pricing analysis and are further described below

Earnings Simulation Model—We believe interest rate risk is effectively measured by our earnings simulation modeling. Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with simulated forecasts of interest rates for the next 12 months and 24 months. To limit interest rate risk, we have guidelines for our earnings at risk which seek to limit the negative variances of net interest income in instantaneous changes to interest rates. We also periodically monitor simulations based on various rate scenarios such as non-parallel shifts in market interest rates over time. For changes up or down in rates from a flat interest rate forecast over the next 12 and 24 months, our estimated change in net interest income as well as our policy limits are as follows:
Instantaneous, Parallel Change in Prevailing Interest Rates Equal to Estimated Change in Net Interest Income and Policy of Maximum
Percentage Decline in Net Interest Income
Next 12 Next 24
Months Months
Estimate Policy Estimate Policy
-200 bp (4.0)% (15)% (7.4)% (15)%
-100 bp (2.7)% (10)% (5.3)% (10)%
+100 bp 2.3% (10)% 4.9% (10)%
+200 bp 5.1% (15)% 9.6% (15)%
+300 bp 8.3% (20)% 14.7% (20)%
+400 bp 11.5% (25)% 19.8% (25)%

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

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

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To help monitor our related risk, we have established the following policy limits regarding simulated changes in our economic value of equity:
Instantaneous, Parallel Change in Prevailing
Interest Rates Equal to 		Maximum Percentage Decline in Economic Value of
Equity from the Economic Value of Equity at
Currently Prevailing Interest Rates
±100bp 15%
±200 bp 25%
±300 bp 30%
±400 bp 35%
Non-parallel shifts 35%

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

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

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

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

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

The Company has established a line of credit with the FHLB, which is secured by a blanket pledge of 1-4 family residential mortgages, multi-family residential, commercial real estate, and home equity loans, and available-for-sale securities. At June 30, 2021, FHLB advances totaled $16,000 compared to $10,000 as of December 31, 2020.

The Company has outstanding $23,000 of subordinated debentures associated with trust preferred securities issued by trusts that are affiliates of Reliant Bancorp, $10,000 of which is owned by a wholly-owned subsidiary of Reliant Bancorp. Reliant Bancorp has timely made its scheduled interest payments on these subordinated debentures since assumed in the first quarter of 2018. As of June 30, 2021, Reliant Bancorp was current on all interest payments due related to its subordinated debentures. Reliant Bancorp has the right to defer the payment of interest on the subordinated debentures at any time, for a period not to exceed 20 consecutive quarters. During the period in which it is deferring the payment of interest on its
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subordinated debentures, the indentures governing the subordinated debentures provide that Reliant Bancorp cannot pay any dividends on its common stock or preferred stock. 

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

Capital

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

On August 24, 2020, the Company filed a Registration Statement on Form S-3 to offer, issue and sell from time to time in one or more offerings any combination of (i) common stock, (ii) preferred stock, (iii) debt securities, (iv) depository shares, (v) warrants, (vi) units, (vii) purchase contracts, and (viii) rights, up to a maximum aggregate offering price of $100,000. The net proceeds from any offering will be used for general corporate purposes including repayment of debt or payment of interest thereon, capital expenditures, acquisitions, investments, and any other purposes that we may specify in any prospectus supplement. Until allocated to such purposes it is expected that we will invest any proceeds in short-term, interest-bearing instruments or other investment-grade securities. The Securities and Exchange Commission declared the Registration Statement on Form S-3 effective on September 3, 2020, and the Registration Statement on Form S-3 will expire on September 3, 2023.

Banks as regulated institutions are required to maintain certain levels of capital. The Federal Reserve Board of Governors, the primary federal regulator for the Bank, has adopted minimum capital regulations or guidelines that categorize capital components and the level of risk associated with various types of assets. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with applicable regulations and guidelines. We regularly review our capital adequacy to ensure compliance with these regulations and guidelines and to help ensure that sufficient capital is available for current and future needs. It is management’s intent to maintain an optimal capital and leverage mix for growth and for shareholder returns.

Prompt corrective action regulations provide five bank capital classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since these notifications that management believes have changed the institution’s category. Actual and required capital amounts and ratios are presented below as of June 30, 2021 and December 31, 2020 for Reliant Bancorp and the Bank.

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Actual Regulatory Capital Minimum Required Capital
Including Capital
Conservation Buffer 		To Be Well Capitalized
Under Prompt Corrective
Action Provisions
Amount Ratio Amount Ratio Amount Ratio
June 30, 2021
Company
Tier I leverage $ 285,363  9.47  % $ 120,533  4.00  % $ 150,667  5.00  %
Common equity Tier 1 273,553  10.18  % 188,101  7.00  % 174,665  6.50  %
Tier I risk-based capital 285,363  10.62  % 228,398  8.50  % 214,963  8.00  %
Total risk-based capital 365,942  13.62  % 282,114  10.50  % 268,680  10.00  %
Bank
Tier I leverage $ 334,911  11.14  % $ 120,255  4.00  % $ 150,319  5.00  %
Common equity Tier 1 334,911  12.50  % 187,550  7.00  % 174,154  6.50  %
Tier I risk-based capital 334,911  12.50  % 227,739  8.50  % 214,343  8.00  %
Total risk-based capital 356,530  13.30  % 281,471  10.50  % 268,068  10.00  %
December 31, 2020
Company
Tier I leverage $ 262,282  8.91  % $ 117,747  4.00  % $ 147,184  5.00  %
Common equity Tier 1 250,513  10.22  % 171,584  7.00  % 159,328  6.50  %
Tier I risk-based capital 262,282  10.70  % 208,355  8.50  % 196,099  8.00  %
Total risk-based capital 342,246  13.96  % 257,420  10.50  % 245,162  10.00  %
Bank
Tier I leverage $ 313,633  10.64  % $ 117,907  4.00  % $ 147,384  5.00  %
Common equity Tier 1 313,633  12.83  % 171,117  7.00  % 158,894  6.50  %
Tier I risk-based capital 313,633  12.83  % 207,785  8.50  % 195,562  8.00  %
Total risk-based capital 334,919  13.71  % 256,503  10.50  % 244,288  10.00  %

Effects of Inflation and Changing Prices

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

Off-Balance Sheet Lending Arrangements

Off-balance sheet arrangements generally consist of unused lines of credit and standby letters of credit. Such commitments of the Company were as follows at June 30, 2021:
June 30, 2021
Unused lines of credit $ 628,183 
Standby letters of credit 31,752 
Total commitments $ 659,935 



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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

This item is not applicable to smaller reporting companies.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION



Item 1.        Legal Proceedings.

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

Item 1A.    Risk Factors.

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

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

The following table contains information regarding shares of our common stock repurchased by Reliant Bancorp during the three months ended June 30, 2021.
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (2) (in thousands)
April 1, 2021 to April 30, 2021 297 $28.50 — $10,000
May 1, 2021 to May 31, 2021 593 $27.63 — $10,000
June 1, 2021 to June 30, 2021 — $— — $10,000
Total 890 $28.50 — $10,000
(1)During the quarter ended June 30, 2021, 3,000 shares of restricted stock previously awarded to certain of the participants in our stock plans vested. We withheld 890 shares to satisfy tax withholding requirements associated with the vesting of these shares of restricted stock.

(2)On January 26, 2021, Reliant Bancorp's board of directors authorized a stock repurchase plan allowing Reliant Bancorp to repurchase up to $10 million of outstanding Reliant Bancorp Common Stock (the "Repurchase Plan"). As of June 30, 2021, Reliant Bancorp had not repurchased any shares of Reliant Bancorp Common Stock under the Repurchase Plan. The Repurchase Plan does not obligate Reliant Bancorp to repurchase any dollar amount or number of shares. The Repurchase Plan may be extended, modified, amended, suspended, or discontinued at any time. The Repurchase Plan is effective through December 31, 2021.
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Item 6.         Exhibits.
EXHIBIT INDEX 
Exhibit
No.
Description    
2.1
3.1
3.2
        
 
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 5, 2021 /s/ DeVan D. Ard, Jr.
DeVan D. Ard, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
August 5, 2021 /s/ Jerry Cooksey
Jerry Cooksey
Chief Financial Officer
(Principal Financial Officer)

65

EXHIBIT 31.1


CERTIFICATIONS

I, DeVan D. Ard, Jr., certify that:
1. I have reviewed this report on Form 10-Q of Reliant Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


EXHIBIT 31.1

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 5, 2021
/ s/ DeVan D. Ard, Jr.
DeVan D. Ard, Jr.
Chief Executive Officer
(Principal Executive Officer)




EXHIBIT 31.2


CERTIFICATIONS

I, Jerry Cooksey, certify that:
1. I have reviewed this report on Form 10-Q of Reliant Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


EXHIBIT 31.2

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 5, 2021
/ s/ Jerry Cooksey
Jerry Cooksey
Chief Financial Officer
(Principal Financial Officer)





EXHIBIT 32.1


CERTIFICATIONS OF CEO AND CFO PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Reliant Bancorp, Inc., a Tennessee corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), each of DeVan D. Ard, Jr., Chief Executive Officer of the Company, and Jerry Cooksey, Chief Financial Officer of the Company, do hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
August 5, 2021
/ s/ DeVan D. Ard, Jr.
DeVan D. Ard, Jr.
Chief Executive Officer
(Principal Executive Officer)
August 5, 2021
/ s/ Jerry Cooksey
Jerry Cooksey
Chief Financial Officer
(Principal Financial Officer)