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 nine months
ended September 30, 2021 are further described in Note 1 within "Part 1.
Financial Information - Notes to consolidated financial statements" of this
report.
Non-GAAP Financial Measures
This Quarterly Report contains certain financial measures that are not measures
recognized under U.S. GAAP and, therefore, are considered non-GAAP financial
measures. Members of Company management use these non-GAAP financial measures in
their analysis of the Company's performance, financial condition, and efficiency
of operations. Management of the Company believes that these non-GAAP financial
measures provide a greater understanding of ongoing operations, enhance
comparability of results with prior periods, and demonstrate the effects of
significant gains and charges in the periods presented. Management of the
Company also believes that investors find these non-GAAP financial measures
useful as they assist investors in understanding underlying operating
performance and identifying and analyzing ongoing operating trends. However, the
non-GAAP financial measures discussed herein should not be considered in
isolation or as a substitute for the most directly comparable or other financial
measures calculated in accordance with U.S. GAAP. Moreover, the manner in which
the non-GAAP financial measures discussed herein are calculated may differ from
the manner in which measures with similar names are calculated by other
companies. You should understand how other companies calculate their financial
measures similar to, or with names similar to, the non-GAAP financial measures
we have discussed herein when comparing such non-GAAP financial measures.
The non-GAAP measures in this Quarterly Report include "adjusted net interest
margin (NIM)," "adjusted net income," "adjusted diluted earnings per share
(EPS)," "adjusted annualized return on average assets (ROAA)," "adjusted
annualized return on average equity (ROAE)," "adjusted annualized return on
average tangible common equity (ROATCE)," "adjusted pre-tax pre-provision
income," "tangible common equity to tangible assets (TCE/TA)," "tangible book
value per share," "allowance for loan losses plus unaccreted purchased loan
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."
Executive Overview and Earnings Summary
Net income attributable to common shareholders amounted to $13,289, or $0.80 per
basic share, and $38,483, or $2.31 per basic share, for the three and nine
months ended September 30, 2021, respectively, compared to $11,533, or $0.70 per
basic share and $19,186, or $1.27 per basic share for the same periods in 2020,
respectively. Diluted net income attributable to common shareholders was $0.79
and $2.29 for the three and nine months ended September 30, 2021, respectively,
compared to $0.69 and $1.27 per share for the three and nine months ended
September 30, 2020, respectively.
The major components contributing to the change when compared to the prior year
periods are a decrease of 5.0% for the three months ended September 30, 2021 and
an increase of 12.9% for the nine months ended September 30, 2021 in net
interest income, an increase of 81.1% and 93.5% in noninterest income for the
three and nine months ended September 30, 2021, respectively, and a decrease of
$1,500 and $7,400 in provision for loan losses for the three and nine months
ended September 30, 2021, respectively.
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Tax-equivalent net interest margin decreased to 4.22% from 4.54% for the three
months ended September 30, 2021 compared to 2020 and decreased to 4.28% from
4.30% for the nine months ended September 30, 2021 compared to the same periods
in 2020. These and other components of earnings are discussed further below.
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