KBRA Assigns Ratings to Reliant Bancorp, Inc.

Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, subordinated debt rating of BBB-, and short-term debt rating of K3 for Brentwood, Tennessee-based Reliant Bancorp, Inc. (NASDAQ: RBNC) (“the company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 for the subsidiary bank, Reliant Bank (“the bank”). The Outlook for all long-term ratings is Stable.The ratings are supported by the company’s low credit loss history which has permitted relatively stable earnings, reporting core ROA generally near 1% (core ROA of 0.95% for 3Q19) since 2014. Historically, RBNC has maintained a sound capital profile including TCE and leverage ratios ranging from 9-10%. However, the pending acquisitions of Tennessee Community Bank Holdings, Inc. and First Advantage Bancorp, Inc. (OTC: FABK) are expected to markedly decrease capital ratios, with the TCE ratio dropping to roughly 8.0% on a proforma basis. Nevertheless, management intends to rebuild capital over time, managing towards pre-acquisition levels. Somewhat counterbalancing RBNC’s ratings strengths, which incorporate our favorable impressions of the company’s senior management team, is a funding profile that is relatively higher cost, with a heavier component of CDs. Additionally, RBNC has a comparatively high concentration in riskier C&D lending, though the bank has managed the portfolio well over time, minimizing credit losses with proven credit controls. Moreover, in addition to the inherent risks associated with integrating multiple acquired institutions in a calendar year, RBNC’s pending acquisition of First Advantage Bancorp, Inc. includes the high-risk, high-yield manufactured home loan portfolio, though partly mitigated by RBNC’s retention of key members of FABK who have a successful track record with manufactured home lending.