Commerce Union Bancshares Reports $1 Billion in Assets Driven by Record Loans and Deposits in Second Quarter

Loans Increase 10.9% to a Record $719.8 Million

Deposits Increase 29.7% to a Record of $840.0 Million

Commerce Union Bancshares, Inc. CUBN, parent of Reliant Bank, today announced a record $1.0 billion in assets at June 30, 2017. The growth in assets benefited from record loan volume with total loans rising to $719.8 million – an increase of 10.9% since June 30, 2016, and 3.2% (12.7% annualized growth) since March 31, 2017. Asset growth also benefited from a 25.1% increase in the company's investment portfolio since June 30, 2016 with securities available for sale reaching $184.8 million at June 30, 2017.

Total deposits were a record $840.0 million at June 30, 2017 – an increase of 29.7% over the prior year and 1.7% (6.7% annualized growth) since March 31, 2017. Second quarter net income attributable to common shareholders was $2.2 million, or $0.28 per fully diluted share, compared with $2.4 million, or $0.31 per fully diluted share, recorded in the second quarter of 2016. Second quarter 2016 after-tax earnings included $228,000, or $0.03 per fully diluted share of purchase accounting related income and $382,000 or $0.05 of earnings per fully diluted share related to purchase credit impaired loans.

"We are very excited to report that our assets surpassed the $1 billion milestone at June 30, 2017," said DeVan Ard, Chairman and CEO of Commerce Union Bancshares. "We believe our record results benefited from strong organic growth across our markets, our recent expansion into Chattanooga and the first quarter launch of a new retail branch in the deposit rich area of Green Hills in Nashville. Our growth in market cap also contributed to Commerce Union's recent addition to the Russell 2000 index.

"Jobs continue to fuel Nashville's economic engine," continued Ard. "Our home market of Williamson County had the highest job growth rate in America last year, and our principal markets of Williamson, Sumner and Robertson Counties have shown the highest growth in jobs in the Nashville area over the past five years according to BLS reports. Job growth drives consumer and business confidence, and as a result, we have seen an increase in loan demand."

"This quarter our loan production was a record $109 million, a 28% increase over the first quarter," continued Ard. Ard also noted that significant contributions from the company's new Chattanooga loan production office, as well as increased volume from its Murfreesboro loan production office helped power the loan growth. He further stated, "We remain very optimistic the strong dynamics within our key markets will continue to support our growth and profitability goals in 2017."

Ard further commented on second quarter corporate initiatives that included improvements to customers' account statements and the development of branded MasterCard credit cards for consumer and business clients. Both initiatives are targeted to generate income and grow the bank's share of wallet. The bank also added to its employee team; bringing expertise to the key areas of payments, digital channels and business development disciplines.

"Our focus at Reliant Bank is to create and fine-tune our organization so that we can quickly adapt to change and effectively position ourselves for long-lasting success," said Ard. "We know the importance of a strategic mindset relevant to building market share, and our second-quarter results reflect the ongoing commitment to achieving that goal."

Balance Sheet Growth

($ in thousands)

• Total assets increased $120.7 million, or 13.7%, to a record $1.0 billion at June 30, 2017, rising from $883.2 million at June 30, 2016 and up $41.5 million from March 31, 2017. The increase in assets was due primarily to growth in loans, investments and bank-owned life insurance, as well as an increase in cash.
• Earning assets grew $38.4 million in the second quarter, including $22.2 million in loans and $5.5 million in investment securities. Earning assets grew 13.8% from the June 30, 2016, including a net increase of $70.6 million in loans and $37.0 million in investment securities.
• Loans increased 3.2%, or 12.7% on an annualized basis, from March 31, 2017, to a record $719.8 million at June 30, 2017, and were up 10.9% over June 30, 2016. Loan growth benefited from increased demand from commercial customers and home builders.
• Asset quality remained sound at the end of the quarter. Nonperforming assets to total assets were 0.61% at June 30, 2017, compared to 0.57% at March 31, 2017 and 0.52% at June 30, 2016. The company had no other real estate owned at June 30, 2017.
• Total deposits rose to a record $840.0 million at June 30, 2017, an increase of 1.7% from March 31, 2017, and 29.7% over June 30, 2016. Deposit growth benefited from increases in demand and time deposits. Demand deposits grew by 0.4% during the quarter and 1.5% since June 30, 2016. The company continues to enhance its efforts to seek these low-cost deposits in the market. Total consumer and business checking accounts increased 8.0% from June 30, 2016.
• Total stockholders' equity grew by 2.7% during the quarter to $112.6 million and grew 6.2% since June 30, 2016. Capital growth since March 31, 2017 benefited from earnings accretion, an improvement in the Accumulated Other Comprehensive Income and capital raised through the exercises of employee stock options. Capital growth from June 30, 2016 benefited from earnings accretion, partially offset by dividends and the decline in the Accumulated Other Comprehensive Income.

Revenue Growth and Profitability

($ in thousands except per share amounts)

• Net income attributable to common shareholders was $2.2 million in the second quarter of 2017, compared to $2.1 million in the first quarter of 2017, and $2.4 million in the second quarter of 2016. The decrease in earnings from the prior year was due primarily to a $619,000, pre-tax, recovery of a purchase-credit impaired loan recorded in the second quarter of 2016 and a $317,000 decrease in net discount accretion, pre-tax, associated with the merger of Commerce Union Bank and Reliant Bank.
• Return on average assets for the quarter ended June 30, 2017, was 0.90%, compared to 0.89% for the first quarter of 2017, and 1.07% for the second quarter of 2016.
• Return on average equity for the quarter ended June 30, 2017, was 7.98%, compared to 7.71% in the first quarter of 2017, and 9.14% in the second quarter of 2016.
• Total interest income rose to $9.7 million in the second quarter of 2017, up 8.1%, compared to the first quarter of 2017, and up 2.2% compared to the second quarter of 2016. The increases were driven by growth in earning assets, including loans and investment securities offset by a reduction of discount accretion relating to purchase accounting discussed previously. Net interest income was $8.5 million in the second quarter of 2017, up 6.7% from the first quarter of 2017 due mainly to a higher level of earning assets.
• Net interest margin for the quarter ended June 30, 2017, was 4.01%, compared with the 4.01% in the first quarter of 2017, and 4.33% for the second quarter of 2016. The decline in net interest margin from the prior year was due to the recovery of a purchase-credit impaired loan recorded in the second quarter of 2016. Net interest margin was also lower than the prior year due to lower yields on new loans and a reduction in purchase accounting discount accretion, partially offset by higher yields on investment securities.
• The company continued to add volume and better yields to its investment portfolio. Securities available for sale grew to $184.8 million as of June 30, 2017, an increase of 3.1% from March 31, 2017 and 25.1% from June 30, 2016. The average tax-equivalent yield increased to 3.69% in the second quarter of 2017 compared to 2.67% in the same quarter of 2016 as the company sought to increase investment volumes and yields while maintaining acceptable levels of interest rate and credit risk.
• Provision for loan losses was $245,000 for the second quarter of 2017, compared to $410,000 in the first quarter of 2017 and $450,000 in the second quarter of 2016. The reduction from the prior periods was driven mainly by favorable net charge-off / recovery activity. The Company had net recoveries of $49,000 and a net charge off (recovery) to average loans ratio of (0.03%) for the second quarter of 2017.
• Noninterest income was $1.2 million in the second quarter of 2017, compared to $1.1 million in the first quarter of 2017 and $2.5 million in the second quarter of 2016. Revenue from mortgage loans sold were down $1.1 million from the second quarter of 2016 due to lower sales of mortgage loans following the transition of most of the out-of-market mortgage offices to another bank early in the second quarter of 2016. Gain on mortgage loans sold increased from the first quarter of 2017 due to a greater number of loan sales in the second quarter compared to the first. The Company does not absorb any losses incurred by its mortgage venture. For the second quarter of 2017, the mortgage subsidiary incurred a net loss of $393,000 that was allocated 100% to the non-controlling member of the venture compared with a loss of $499,000 in the first quarter of 2017 and a loss of $223,000 in the second quarter of 2016.
• Noninterest expenses were $7.3 million in the second quarter of 2017, compared to $6.9 million in the first quarter of 2017, and $8.0 million in the second quarter of 2016. The slight increase from the prior quarter was driven by incurring a full quarter's worth of expense relating to Chattanooga and Green Hills locations as well as compensation costs for recent strategic hires. A substantial portion of the decline from the prior year was due to a reduction of mortgage personnel following the transition of out-of-market offices referenced previously.
• The subsidiary Bank's efficiency ratio, excluding the mortgage subsidiary, for the quarter ended June 30, 2017, was 60.8% compared to 60.5% in the first quarter of 2017, and 58.6% for the second quarter of 2016. The increase in the efficiency ratio was driven primarily by the expansionary activities discussed previously.
• Income tax expense totaled $427,000 in the second quarter of 2017 and $272,000 in the first quarter of 2017. Tax expense recorded in the second quarter of 2016 amounted to $588,000. The company's effective tax rate of 19.2% was favorably impacted by an increase in income from tax-exempt securities, excess tax benefits recognized relating to the exercise of stock options and the addition of certain state tax credits on interest-free loans compared with the second quarter of 2016.

Strong Capital Position

Reliant Bank's capital position remained strong at June 30, 2017. The bank maintained a June 30, 2017, Tier 1 leverage ratio of 10.29%, compared to a 10.69% ratio at March 31, 2017 and 10.59% at June 30, 2016. Total stockholders' equity rose to $112.6 million and tangible book value per common share grew to $12.73 at June 30, 2017 from $12.36 at March 31, 2017 and $12.17 at June 30, 2016. The bank's capital ratios are expected to be maintained significantly above the ratios of a "well-capitalized" institution.

"Our outlook for the remainder of 2017 is very positive based on recent and anticipated earning asset growth achieved. I am confident our executive leadership team will continue to add value to our balance sheet and strengthen opportunities for future growth and profitability," concluded Ard.

Non-GAAP Financial Measures

This document contains non-GAAP financial measures. The non-GAAP measures in this release below include "adjusted net interest margin," "adjusted net income attributable to common shareholders, per diluted share," and "efficiency ratio." We believe these non-GAAP measures provide useful information to investors because these are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe certain purchase accounting adjustments and non-recurring income relating to the payoff of a purchased credit impaired loan in the second quarter of 2016 do not reflect the operational performance of the business in this period; accordingly, it is useful to consider these line items with and without such adjustments. We believe this presentation also increases comparability of period-to-period results.

Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by other companies. We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measure. Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for our results as reported under generally accepted accounting principles.

About Commerce Union Bancshares, Inc. and Reliant Bank

Commerce Union Bancshares, Inc. CUBN is a Brentwood, Tennessee-based bank holding company which operates banking centers in Davidson, Robertson, Sumner and Williamson counties, Tennessee along with loan and deposit production offices in Rutherford County and the recently opened loan production and deposit production office in Chattanooga, Tennessee through its wholly-owned subsidiary Reliant Bank. 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. For additional information, locations and hours of operation, please visit our website found at www.reliantbank.com.

Forward-Looking Statements

Statements in this press release relating to Commerce Union Bancshares Inc.'s plans, objectives, expectations or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "may," "should," "anticipate," "estimate," "expect," "intend," "objective," "possible," "seek," "plan," "strive" or similar words, or negatives of these words, identify forward-looking statements. These forward-looking statements are based on management's current expectations. The Company's actual results in future periods may differ materially from those indicated by forward-looking statements due to various risks and uncertainties, including those related to the combination of Commerce Union Bank and Reliant Bank following the merger. These and other risks and uncertainties are described in greater detail under "Risk Factors" in the Company's 10-K and subsequent periodic reports filed with the Securities and Exchange Commission. The forward-looking statements and other statements in this press release are made as of the date of the release and the Company does not assume any responsibility to update these statements. The information included in this release is preliminary and based on Company data available at the time of this release.

Yield Table Assumptions - Average loan balances are inclusive of nonperforming loans. Yields computed on tax-exempt instruments are on a tax equivalent basis. Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities. 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. Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid. Volume change is calculated as change in volume times the previous rate while rate change is change in rate times the previous volume. Changes not due solely to volume or rate changes are allocated to volume change and rate change in proportion to the relationship of the absolute dollar amounts of the change in each category.

Yield Table Assumptions - Average loan balances are inclusive of nonperforming loans. Yields computed on tax-exempt instruments are on a tax equivalent basis. Net interest spread is calculated as the yields realized on interest-bearing assets less the rates paid on interest-bearing liabilities. 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. Changes in net interest income are attributed to either changes in average balances (volume change) or changes in average rates (rate change) for earning assets and sources of funds on which interest is received or paid. Volume change is calculated as change in volume times the previous rate while rate change is change in rate times the previous volume. Changes not due solely to volume or rate changes are allocated to volume change and rate change in proportion to the relationship of the absolute dollar amounts of the change in each category.

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