Reliant Bancorp, Inc. Reports Record Third Quarter 2021 Results

Reported Net Income of $13.3 million, or Diluted EPS of $0.79

Loan Growth Continues With 11.8% Annualized Increase

Reliant Bancorp, Inc. (“Reliant Bancorp” or the “Company”) (Nasdaq: RBNC), parent company of Reliant Bank (the “Bank”), reported net income attributable to common shareholders of $13.3 million, or $0.79 per diluted common share, for the third quarter of 2021 compared to net income attributable to common shareholders of $13.0 million, or $0.78 per diluted common share, for the second quarter of 2021, and $11.5 million, or $0.69 per diluted common share, for the third quarter of 2020. When merger expenses are excluded, income per diluted common share increased to $0.87 during the third quarter of 2021 compared to $0.78 and $0.70 the second quarter of 2021 and the third quarter of 2020, respectively.

DeVan Ard, Jr., Reliant Bancorp's Chairman and CEO stated, “I am very pleased to continue 2021 with solid third quarter results as evidenced by our strong net interest margin, sound asset quality, and impressive loan production. Loan growth has continued to accelerate with a 3.0% increase from the prior quarter. When PPP loans are excluded, loan growth increased to 3.6%, or 14.2% when annualized.”

Ard continued, “Our team continues to focus on reducing high cost wholesale deposits, as customer deposits increased to make up 89.9% of our deposit portfolio and the cost of deposits decreased to 0.58%, or 0.26% when adjusted for swap termination fees. We also continued to build shareholder value as our book value and tangible book value per share increased 2.8% and 3.7%, respectively, from the prior quarter, or 11.3% and 14.6%, respectively, when annualized. Additionally, shareholders’ equity to total assets and tangible common equity to tangible assets increased to 11.82% and 9.90%, respectively, which allows us to continue to deliver exceptional returns to our shareholders.”

Net Interest Margin Improves Through Asset Mix Optimization

Net interest margin increased to 4.22% at September 30, 2021, an increase of 8 basis points from the previous quarter and a decrease of 32 basis points from the third quarter of 2020. The linked quarter increase was primarily due to a 23 basis point decrease in our cost of funds due to a decrease in interest-bearing deposits, especially higher cost wholesale time deposits, as well as a $2,290 swap termination fee incurred during the quarter compared to the $2,859 swap termination fee incurred during the previous quarter. The adjusted net interest margin, which excludes this swap termination fee impact as well as the benefits from purchase accounting accretion, showed continued improvement as it increased 12 basis points from the linked quarter to 4.40%. Net income and earnings per share during the quarter were not affected by this termination fee as securities were sold for a gain of $2,419 to offset the transaction.

Loan yields remain strong at 4.96% when excluding fees, representing a decrease of 16 basis points from the linked quarter and a 38 basis point decrease from the same period in the prior year, which can both largely be attributed to the decrease in purchase accounting accretion. As of September 30, 2021, $12.0 million of purchase accounting accretion remains unaccreted.

The cost of deposits continued to improve to 0.58% with a decrease of 25 basis points from the previous quarter and 4 basis points from the third quarter of 2020. When removing the impact of the second and third quarter swap termination fees the cost of deposits improves even further to 0.26%, or a decrease of 15 basis points from the previous quarter and 36 basis points from the third quarter of 2020. This decrease is largely the result of a decrease in average wholesale time deposits of $74.4 million and $104.6 million from the linked quarter and year-over-year, respectively. These decreases were offset by an increase in average noninterest-bearing deposits of $19.7 million and $80.6 million from the linked quarter and year-over-year, respectively.

Continued Loan Growth and Asset Quality Stability

Loans increased $68.8 million from the linked quarter to $2.4 billion. Loan originations during the quarter totaled $272.0 million at a weighted-average coupon rate of 4.15% with a continued focus on credit quality through sound underwriting. These originations were offset with principal payments, including PPP forgiveness payments of $13.7 million. When PPP loans are excluded, loans increased $82.5 million, or 3.6%, from the linked quarter and $114.9 million, or 5.1%, year-over-year.

Our longstanding focus on credit quality continued to be a source of strength with net recoveries continuing into the third quarter. Nonperforming loans held for investment accounted for 0.22% of total loans held for investment and nonperforming assets accounted for only 0.34% of total assets at September 30, 2021, despite the addition of a retired bank facility to other real estate owned during the quarter. Criticized assets to total loans remains low at 0.60%. The allowance for loan loss was 0.87% of loans (1.38% including unaccreted net purchased loan discounts) at September 30, 2021. There was no provision recognized during the quarter as net charge-offs were in a recovery position for the quarter and year-to-date.

Conclusion

Ard concluded, “I am proud of our team’s ability to serve the community and our shareholders as well as our ability to create meaningful careers and a positive workplace for our employees as evidenced through Newsweek’s recognition of the Bank as the Best Small Bank in Tennessee for the second year in a row. We continue to see increased demand in the loan pipeline as we move into the fourth quarter, and we are optimistic about our market and financial positions as we continue to build a bright future for Reliant Bank.”

About Reliant Bancorp, Inc. and Reliant Bank

Reliant Bancorp, Inc. is a Brentwood, Tennessee-based financial holding company which, through its wholly owned subsidiary Reliant Bank, operates banking centers in Tennessee. Reliant Bank is a full-service commercial bank that offers a variety of deposit, lending, and mortgage products and services to business and consumer customers. As of September 30, 2021, Reliant Bancorp had approximately $3.0 billion in total consolidated assets, approximately $2.4 billion in loans held for investment and approximately $2.5 billion in deposits. For additional information, locations and hours of operation, please visit www.reliantbank.com.

Financial Measures

This release contains certain financial measures that are not measures recognized under generally accepted accounting principles (“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 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 financial measures in this release include “adjusted net interest margin (NIM),” “adjusted net income,” “adjusted diluted earnings per share (EPS),” “adjusted annualized return on average assets (ROAA),” “adjusted annualized return on average equity (ROAE),” “adjusted annualized return on average tangible common equity (ROATCE),” “adjusted pre-tax pre-provision income,” “tangible common equity to tangible assets (TCE/TA),” “tangible book value per share,” “allowance for loan losses plus unaccreted purchased loan discounts to total loans,” “bank segment adjusted net income,” “bank segment adjusted noninterest expense,” “bank segment adjusted efficiency ratio,” “adjusted cost of funds,” “adjusted cost of interest-bearing liabilities,” and “adjusted cost of deposits.”

Forward-Looking Statements

All statements, other than statements of historical fact, included in this release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements relating to continued delivery of exceptional shareholder returns, increased demand in the loan pipeline, and management’s optimism about the Company’s market and financial positions. 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, including statements about the Company’s future financial and operating results and the Company’s plans, objectives, and intentions. All forward-looking statements are subject to risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the Company to differ materially from any results, performance, or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties, and other factors include, among others: (1) the effects of the coronavirus (COVID-19) pandemic, including (i) the magnitude and duration of the pandemic and its impact on general economic and financial market conditions and on our business, results of operations, and financial condition and that of our customers, (ii) actions taken by governments, businesses and individuals in response to the coronavirus (COVID-19) pandemic, (iii) the pace of recovery when the coronavirus (COVID-19) pandemic subsides, and (iv) the speed with which coronavirus (COVID-19) vaccines can be widely distributed, those vaccines’ efficacy against the virus and public acceptance of the vaccines, (2) the possibility that our asset quality could decline or that we experience greater loan losses than anticipated, (3) increased levels of other real estate, primarily as a result of foreclosures, (4) the impact of liquidity needs on our results of operations and financial condition, (5) competition from financial institutions and other financial service providers, (6) the effect of interest rate increases on the cost of deposits, (7) unanticipated weakness in loan demand or loan pricing, (8) unanticipated 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 the Bank’s computer and information technology systems and networks, and the systems and networks of third parties with whom the Company or the Bank contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss, and other security breaches and interruptions, (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 ability to meet expectations regarding the timing and completion and accounting and tax treatment of the pending transaction with United Community Banks, Inc. (the “Transaction”), (24) the effect of the announcement and pendency of the Transaction on customer, supplier, or employee relationships and operating results (including without limitation difficulties in maintaining relationships with employees and customers), as well as on the market price of the Company's common stock, (25) the occurrence of any event, change, or other circumstances that could give rise to the termination of the definitive merger agreement for the Transaction, (26) the amount of costs, fees, expenses and charges related to the Transaction, including those arising as a result of unexpected factors or events, (27) the ability to obtain the shareholder and governmental approvals required for the Transaction, (28) reputational risk associated with and the reaction of the parties' customers, suppliers, employees, or other business partners to the Transaction, (29) the failure of any of the conditions to the closing of the Transaction to be satisfied, or any unexpected delay in closing the Transaction, (30) the risk associated with Company management's attention being diverted away from the day-to-day business and operations of the Company to the completion of the Transaction, and (31) general competitive, economic, political, and market conditions, including economic conditions in the local markets where we operate. Additional factors which could affect the forward-looking statements can be found in the Company’s annual report on Form 10-K, 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. The Company believes the forward-looking statements contained herein are reasonable; however, many of such risks, uncertainties, and other factors are beyond the Company’s ability to control or predict and undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. Therefore, the Company can give no assurance that its future results will be as estimated. The Company does not intend to, and disclaims any obligation to, update or revise any forward-looking statement.