RIVER FINANCIAL CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and related notes thereto and other financial information appearing elsewhere in
this document. In addition to historical information, this discussion and
analysis contains forward-looking statements that involve risks, uncertainties
and assumptions that could cause actual results to differ materially from our
expectations. Factors that could cause such differences are discussed in the
sections entitled "Special Note Regarding Forward-Looking Statements" and "Risk
Factors." We assume no obligation to update any of these forward-looking
statements.

The following discussion pertains to our historical results, on a consolidated
basis. However, because we conduct all of our material business operations
through our subsidiaries, the discussion and analysis relates to activities
primarily conducted at the subsidiary level.

All dollar amounts in the tables in this section are in thousands of dollars,
except per share data or when specifically identified.

Current Developments regarding COVID-19


As a result of the COVID-19 pandemic, and the potential adverse effects it may
have on our customers, including our loan and depositor relationships, we are
assessing how such developments could affect our business and operations.  We
have taken the following steps to operate in an environment that is safe for
both our employees and customers (and the public in general) and have
implemented guidelines and programs to assist our customers and help ensure the
safe and sound operation of our bank.

Daily Operations

• We have established social distancing policies in keeping with federal and

state of Alabama guidelines to help ensure the health of our employees. To

the extent possible, we have encouraged our employees to work from home

remotely, and we believe such steps have been welcomed by, and helpful to,

      our employees.


• Currently, our lobbies at our main office and branches and public areas are

open to walk-in business and other in-person visits by customers. Among

other things, customers may have in-person meetings at our facilities,

consistent with social distancing policies, including customers who may wish

to have access to their safe deposit boxes. We have installed plexiglass in

lobby areas for employees that have regular contact with customers and masks

      are available for both employees and customers as needed.


• Our drive through facilities at all our locations remain open for customer

      service, and we believe that the drive-through option for customers has
      worked well. All of our ATM locations are operative.

We expect to continue with the foregoing procedures until both the federal and
state guidance provides comfort that a return to a more normal operation
environment is advisable and we, too, are comfortable with such return.

Participation in Government Programs

We are participating in several government programs designed to assist
customers, to bolster the economy and to provide protection for the Bank.

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Paycheck Protection Program


The Bank has participated as a lender in the Small Business Administration's
(SBA) Paycheck Protection Program (PPP) as established by the Coronavirus Aid,
Relief, and Economic Security (CARES) Act. The PPP was established under the
CARES Act to provide unsecured low interest rate loans to small businesses that
have been impacted by the COVID-19 pandemic. The PPP loans are 100% guaranteed
by the SBA. The loans have a fixed interest rate of 1% and payments of interest
and principal are deferred until the earlier of the date SBA remits the
forgiveness amount to the lender, the forgiveness application is denied, or if
no forgiveness application is filed, ten months from the end of the covered
period. If originated before June 5, 2020, loans mature two years from
origination and if origination occurs after June 5, 2020, loans mature five
years from origination. PPP loans are forgiven by the SBA (which makes
forgiveness payments directly to the lender) to the extent the borrower uses the
proceeds of the loan for certain purposes (primarily to fund payroll costs)
during a certain time period following origination and maintains certain
employee and compensation levels. Lenders receive processing fees from the SBA
for originating the PPP loans which are based on a percentage of the loan
amount. On December 27, 2020, legislation was enacted that renewed the PPP and
allocated additional appropriations for both new first time PPP loans under the
existing PPP and also authorized second draw PPP loans for certain eligible
borrowers that had previously received a PPP loan. As of December 31, 2021, the
Bank has made approximately 3,995 PPP loans in the aggregate amount of
approximately $251.5 million with approximately $52 million still
outstanding.

Our Business


We are a bank holding company headquartered in Prattville, Alabama. We operate
one subsidiary bank - River Bank and Trust ("RB&T" or the "Bank"). Through the
Bank, we provide a broad array of financial services to businesses, business
owners and professionals through eighteen full-service banking offices in
Alabama.

Segments


While our chief decision makers monitor the revenue streams of the various
banking products and services, operations are managed and financial performance
is evaluated on a Company-wide basis. Accordingly, all of the Company's banking
operations are considered by management to be aggregated in one reportable
operating segment. Because the overall banking operations comprise substantially
all of the consolidated operations, no separate segment disclosures are
presented in the accompanying consolidated financial statements.

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Overview of 2021 Results

• Our net income was $25.0 million in 2021, compared with $17.1 million in

2020. The largest contributing factors leading to the increase in net income

and other highlights include the following: Average interest earning assets

in 2021 were $2.04 billion compared to $1.52 billion in 2020. The Bank’s

participation in the Paycheck Protection Program was one of the reasons for

the increase in average interest earning assets. Current year net income was

increased by approximately $6.5 million of Paycheck Protection Program loan

fee income that was recognized in 2021 compared to $3.1 million in 2020. The

higher level of interest earning assets led to an increase in net interest

      income from $55.3 million in 2020 to $66.1 million in 2021.


• Average loans outstanding in 2021 were $1.22 billion, approximately 12.04%

higher than $1.09 billion in average loans outstanding in 2020. The higher

average balance for total loans outstanding was the primary reason for the

increase of $10.8 million in our net interest income. The Bank’s

participation in the Paycheck Protection Program was one of the reasons for

      the increase in average loans outstanding.


• The effective yield on our loan portfolio decreased from 5.16% in 2020 to

5.07% in 2021. The decrease in the yield was mainly attributable to the

decrease in interest rates in 2020 and 2021 as well as the effect of the

$84.4 million of Paycheck Protection Program loans originated in 2021.

Paycheck Protection Program loans carry an interest rate of 1.00% which is

well below the average yield on other loans. However, this lower yield is

      offset by the recognition of net origination fees paid by the SBA on PPP
      loans.


• Average total investment securities in 2021 were $723.2 million compared to

$377.4 million in 2020. The increase was due to the Company’s deposit growth

exceeding loan growth during the year. The excess cash was used to purchase

      investment securities.


• Average non-interest bearing deposits grew from $410.8 million in 2020 to

$546.9 million in 2021. The increase resulted from organic growth as well as

      the influx of liquidity from government stimulus.


• Our higher net interest income was partially offset by higher operating

expenses, which grew to $43.7 million in 2021 from $36.8 million in 2020.

The increase in noninterest expense came from organic growth with most of

      the increase in salaries and employee benefits.


• Our noninterest income increased from $11.8 million in 2020 to $14.5 million

      in 2021. The increase resulted from increases in service charges and fee
      income and income from mortgage operations.



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Critical Accounting Policies and Estimates


Our consolidated financial statements are prepared based on the application of
certain accounting policies, the most significant of which are described in
RFC's Notes to the Consolidated Financial Statements. Certain of these policies
require numerous estimates and strategic or economic assumptions that may prove
inaccurate or subject to variation and may significantly affect our reported
results and financial position for the current period or future periods. The use
of estimates, assumptions, and judgment is necessary when financial assets and
liabilities are required to be recorded at, or adjusted to reflect fair value.
Assets carried at fair value inherently result in more financial statement
volatility. Fair values and information used to record valuation adjustments for
certain assets and liabilities are based on quoted market prices or are provided
by other independent third-party sources, when available. When such information
is not available, management estimates valuation adjustments. Changes in
underlying factors, assumptions or estimates in any of these areas could have a
material impact on our future financial condition and results of operations.

The following briefly describes the more complex policies involving a
significant amount of judgments about valuation and the application of complex
accounting standards and interpretations.

Allowance for Loan Losses


We record estimated probable inherent credit losses in the loan portfolio as an
allowance for loan losses. The methodologies and assumptions for determining the
adequacy of the overall allowance for loan losses involve significant judgments
to be made by management. Some of the more critical judgments supporting RFC's
allowance for loan losses include judgments about: creditworthiness of
borrowers, estimated value of underlying collateral, assumptions about cash
flow, determination of loss factors for estimated credit losses, and the impact
of current events, conditions, and other factors impacting the level of inherent
losses. Under different conditions or using different assumptions, the actual or
estimated credit losses ultimately realized by RFC may be different than
management's estimates provided in our Consolidated Financial Statements
included elsewhere in this Form 10-K. For a more complete discussion of the
methodology employed to calculate the allowance for loan losses, see Note 1 to
our Consolidated Financial Statements for the year ended December 31, 2021,
which are included elsewhere in this document.

Investment Securities Impairment


Periodically, we assess whether there have been any events or economic
circumstances to indicate that a security on which there is an unrealized loss
is impaired on an other-than-temporary basis. In such instance, we would
consider many factors, including the severity and duration of the impairment,
our intent and ability to hold the security for a period of time sufficient for
a recovery in value, recent events specific to the issuer or industry, and for
debt securities, external credit ratings and recent downgrades. Securities on
which there is an unrealized loss that is deemed to be other-than-temporary are
written down to fair value. The credit portion of the impairment, if any, is
recognized as a realized loss in current earnings.

Income Taxes


Deferred income tax assets and liabilities are computed using the asset and
liability method, which recognizes a liability or asset representing the tax
effects, based on current tax law, of future deductible or taxable amounts
attributable to events recognized in the financial statements. A valuation
allowance may be established to the extent necessary to reduce the deferred tax
asset to a level at which it is "more likely than not" that the tax assets or
benefits will be realized. Realization of tax benefits depends on having
sufficient taxable income, available tax loss carrybacks or credits, the
reversing of taxable temporary differences and/or tax planning strategies within
the reversal period and that current tax law allows for the realization of
recorded tax benefits.

Business Combinations


Assets purchased and liabilities assumed in a business combination are recorded
at their fair value. The fair value of a loan portfolio acquired in a business
combination requires greater levels of management estimates and judgment than
the remainder of purchased assets or assumed liabilities. On the date of
acquisition, when the loans have evidence of credit deterioration since
origination and it is probable at the date of acquisition that the Company will
not collect all contractually required principal and interest payments, the
difference between contractually required payments at acquisition and the cash
flows expected to be collected at acquisition is referred to as the
non-accretable difference. We must estimate expected cash flows at each
reporting date. Subsequent decreases to the expected cash flows will generally
result in a provision for loan losses. Subsequent increases in cash flows result
in a reversal of the provision for loan losses to the extent of prior charges
and adjusted accretable yield which will have a positive impact on interest
income. In addition, purchased loans without evidence of credit deterioration
are also handled under this method.


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Comparison of Results of Operations for the years ended December 31, 2021 and
2020

The following is a narrative discussion and analysis of significant changes in
our results of operations for the years ended December 31, 2021 and 2020.

Net Income

2021 vs. 2020


During the year ended December 31, 2021, our net income was $25.0 million,
compared to $17.1 million for the year ended December 31, 2020, an increase of
46.50%. The primary reason for the increase in net income in 2021 compared to
2020 was an increase in net interest income from $55.3 million in 2020 to $66.1
million in 2021 for an increase of $10.8 million, or 19.67%. Our net interest
margin decreased from 3.63% in 2020 to 3.25% in 2021. The decrease in the margin
resulted from a combination of the decrease in the yield on our loan portfolio
from 5.16% in 2020 to 5.07% in 2021 and a decrease in the average cost of funds
from 0.76% in 2020 to 0.39% in 2021. Loans also decreased slightly as a
percentage of total interest earning assets to 59.8% in 2021 compared to 71.3%
in 2020.

Noninterest income increased from $11.8 million in 2020 to $14.5 million in
2021, or 23.19%. The increase resulted from increases in service charges and fee
income and income from mortgage operations.

Net Interest Income and Net Interest Margin Analysis


The largest component of our net income is net interest income - the difference
between the income earned on interest-earning assets and the interest paid on
deposits and borrowed funds used to support our assets. Net interest income
divided by average 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 primary source of earnings.

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The following table shows, for the years 2021 and 2020, the average balance of
each principal category of our assets and liabilities and the average yields on
assets and average costs of liabilities. Such yields and costs are calculated by
dividing income or expense by the average daily balances of the associated
assets or liabilities.

                  AVERAGE BALANCE SHEETS & NET INTEREST INCOME

                                            Year Ended December 31, 2021                    Year Ended December 31, 2020
                                                       Interest                                        Interest
                                        Average         Income/        Average          Average         Income/        Average
                                        Balance         Expense     

Yield/Rate Balance Expense Yield/Rate
Interest earning assets
Loans

                                $   1,217,901     $  61,808            5.07 %   $   1,087,007     $  56,063            5.16 %
Mortgage loans held for sale                23,144           442            1.91 %          16,798           435            2.59 %
Investment securities:
Taxable securities                         627,642         7,409            1.18 %         295,856         4,888            1.65 %
Tax-exempt securities                       95,545         2,745            2.87 %          81,582         2,495            3.06 %
Interest bearing balances in other
banks                                       61,238           134            0.22 %          37,178           228            0.61 %
Federal funds sold                          10,705            26            0.24 %           6,312            16            0.25 %
Total interest earning assets        $   2,036,175     $  72,564            3.56 %   $   1,524,733     $  64,125            4.21 %
Interest bearing liabilities
Interest bearing transaction
accounts                             $     459,228     $     382            0.08 %   $     310,385     $     561            0.18 %
Savings and money market accounts          650,394         1,432            0.22 %         459,354         2,307            0.50 %
Time deposits                              285,514         2,221            0.78 %         263,569         3,900            1.48 %
Securities sold under agreement to
repurchase                                  10,847            11            0.10 %           9,333            16            0.17 %
Federal Home Loan Bank advances                  -             -            0.00 %               -             -            0.00 %
Federal funds purchased                         11             -            0.00 %               -             -            0.00 %
Note payable                                 3,229           222            6.88 %          21,667         1,348            6.22 %
Subordinated debentures, net of
loan costs                                  32,964         1,381            4.19 %               -             -            0.00 %
Total interest bearing liabilities   $   1,442,187     $   5,649            0.39 %   $   1,064,308     $   8,132            0.76 %
Noninterest-bearing funding of
earning assets                             593,988             -            0.00 %         460,425             -            0.00 %
Total cost of funding earning
assets                               $   2,036,175     $   5,649            0.28 %   $   1,524,733     $   8,132            0.53 %
Net interest rate spread                                                    3.17 %                                          3.45 %
Net interest income/margin
(taxable equivalent)                                   $  66,915            3.28 %                     $  55,993            3.68 %
Tax equivalent adjustment                                   (766 )                                          (718 )
Net interest income/margin                             $  66,149            3.25 %                     $  55,275            3.63 %



Comparison of net interest income for the years ended December 31, 2021 and 2020


Net interest income increased $10.8 million, or 19.67%, to $66.1 million for the
year ended December 31, 2021, compared to $55.3 million for 2020. The increase
was due to an increase in interest income of $8.4 million, resulting from higher
levels of loan volume. The increase in interest income was primarily due to a
12.04% increase in average loans outstanding during 2021 compared to 2020.
Current year net interest income was also increased by approximately $6.5
million of Paycheck Protection Program loan fee income that was recognized in
2021 compared to $3.1 million in 2020. The resulting net interest margin
decreased to 3.25% for 2021 from 3.63% for 2020. During 2021, non-interest
bearing deposits averaged $546.9 million, compared to $410.8 million during
2020, an increase of $136.1 million, or 33.13%. The average cost of funds also
decreased from 0.76% in 2020 to 0.39% in 2021.


Interest-earning assets averaged $2.04 billion for 2021, compared to $1.52
billion for 2020, an increase of $511.4 million, or 33.54%. Average loans
increased $130.9 million during 2021 to $1.22 billion from $1.09 billion in
2020. The mix of average earning assets also shifted from loans to investment
securities. As a percentage of average total earning assets, average loans
decreased from 71.3% in 2020 to 59.8% in 2021. The yield on average
interest-earning assets decreased 65 basis points to 3.56% during 2021, compared
to 4.21% for 2020. The yield on earning assets decreased primarily due to the
decrease in interest rates during 2020 and 2021 as well as a result of the
addition of the approximately $84.4 million of Paycheck Protection Program
loans. Paycheck Protection Program loans carry an interest rate of 1.00% which
is well below the average yield on other loans. However, this lower yield is
offset by the recognition of net origination fees paid by the SBA on PPP
loans. During 2021, loan yields decreased 9 basis points to 5.07%.


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Interest-bearing liabilities averaged $1.44 billion for 2021, compared to $1.06
billion for 2020, an increase of $377.9 million. The increase in average volume
occurred from organic growth as well as the influx of liquidity from government
stimulus. The average rate paid on interest-bearing liabilities was 0.39% for
2021, compared to 0.76% for 2020. During recent years, we have benefited from
the historically low interest rates and repriced time deposits at maturity at
the lower current market rates, and we have also lowered rates on other deposit
accounts to lower market rates where possible. The decrease in total interest
expense from $8.1 million in 2020 to $5.6 million in 2021 was mainly
attributable to the steady decrease in our cost of funds as a result of market
conditions.

The following table reflects, for the years 2021 and 2020, the changes in our
net interest income due to changes in the volume of earning assets and
interest-bearing liabilities and the associated rates earned or paid on the
assets and liabilities.

                                                      Year Ended December 31, 2021 vs.
                                                        Year Ended December 31, 2020
                                                                    Variance
                                                                     due to
                                                  Volume           Yield/Rate        Total
Interest earning assets
Loans                                           $     6,841       $     (1,096 )   $    5,745
Mortgage loans held for sale                            164               (157 )            7
Investment securities:
Taxable securities                                    5,471             (2,950 )        2,521
Tax-exempt securities                                   432               (182 )          250
Interest bearing balances in other banks                145               (239 )          (94 )
Federal funds sold                                       11                 (1 )           10
Total interest earning assets                   $    13,064       $     (4,625 )   $    8,439
Interest bearing liabilities
Interest bearing transaction accounts           $       268       $       (447 )   $     (179 )
Savings and money market accounts                       955             (1,830 )         (875 )
Time deposits                                           325             (2,004 )       (1,679 )
Securities sold under agreement to repurchase             3                 (8 )           (5 )
Note payable                                         (1,147 )               21         (1,126 )
Subordinated debentures, net of loan costs            1,381                  -          1,381
Total interest bearing liabilities              $     1,785       $     (4,268 )   $   (2,483 )
Net interest income
Net interest income (taxable equivalent)        $    11,279       $       (357 )   $   10,922
Taxable equivalent adjustment                          (113 )               65            (48 )
Net interest income                             $    11,166       $       (292 )   $   10,874



Provision for Loan Losses

During the year ended December 31, 2021, we recorded a provision for loan losses
of $4.7 million compared to $8.6 million during the year ended December 31,
2020. The decrease in the provision for loan losses resulted from the fact that
potential credit concerns as a result of the pandemic did not materialize. Net
loan charge-offs increased from $491 thousand in 2020 to $625 thousand in 2021.
The allowance for loan losses is increased by a provision for loan losses, which
is a charge to earnings, and is decreased by charge-offs and increased by loan
recoveries. In determining the adequacy of our allowance for loan losses, we
consider our historical loan loss experience, the general economic environment,
the overall portfolio composition, and other information. As these factors
change, the level of loan loss provision changes. When individual loans are
evaluated for impairment, and impairment is deemed necessary, the impaired
portion of the loan amount is generally charged off. As of December 31, 2021 and
2020, $424 thousand and $343 thousand of our allowance was related to impaired
loans, respectively.

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Noninterest Income


In addition to net interest margin, we generate other types of recurring
noninterest income from our operations. Our banking operations generate revenue
from service charges and fees on deposit accounts. We have a mortgage division
that generates revenue from originating and selling mortgages, and from the sale
of non-deposit investment products through an arrangement with a registered
broker-dealer with which we have a revenue-sharing arrangement. In addition to
these types of recurring noninterest income, the Bank owns insurance on several
key employees and records income on the increase in the cash surrender value of
these policies.

The following table sets forth the principal components of noninterest income
for the periods indicated.

                                                        For the Year Ended
                                                           December 31,
                                                         2021          2020
Service charges and fees                              $    5,922     $  5,038
Investment brokerage revenue                                 285          184
Mortgage operations                                        7,389        5,284
Bank owned life insurance income                           1,139          

792

Net gains (losses) on sale of investment securities         (608 )         87
Other noninterest income                                     415          420
Total noninterest income                              $   14,542     $ 11,805



Noninterest income for the years ended December 31, 2021 and 2020 was $14.5
million and $11.8 million, respectively. The primary reason for the increase in
noninterest income was from service charges and fees and income from our
mortgage operations. Service charges and fees continued to be one of our largest
sources of noninterest income in 2021 with $5.9 million compared to $5.0 million
in 2020. These service charges and fees are primarily generated by checking and
savings accounts. Our mortgage operations produced noninterest income in 2021 of
$7.4 million compared to $5.3 million in 2020. The significant increase in
mortgage operations revenue was due to record low mortgage rates.

Noninterest expense


Our total noninterest expense increase reflects our continued growth, as well as
the expansion of our operational framework, employee expansion, and facility
expansion, as we build the foundation to support our recent and future growth.
We believe that some of our overhead costs will reduce as a percentage of our
revenue as we grow and gain operating leverage by spreading these costs over a
larger revenue base.

The following table presents the primary components of noninterest expense for
the periods indicated.

                                                               For the Years Ended
                                                                   December 31,
                                                                2021           2020
Salaries and employee benefits                               $    27,190     $ 22,127
Occupancy expenses                                                 2,428    

2,327

Equipment rentals, depreciation, and maintenance                   1,118    

1,152

Telephone and communications                                         662    

543

Advertising and business development                                 764          549
Data processing                                                    3,268        2,788
Foreclosed assets, net                                               (72 )        234

Federal deposit insurance and other regulatory assessments 1,298

829

Legal and other professional services                                841          762
Other operating expense                                            6,251        5,469
Total noninterest expense                                    $    43,748     $ 36,780



Noninterest expense for the years ended December 31, 2021 and 2020 was $43.7
million and $36.8 million, respectively, an increase of $6.9 million, or 18.9%.
The largest component of noninterest expense was salaries and employee
benefits. Salaries and benefits increased approximately $5.1 million mainly due
to the addition of new employees across our six regions and an expanding
mortgage department. The increase is federal deposit insurance and other
regulatory assessments was due to the tremendous deposit growth during the year.

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Income Tax Provision


Income tax expense of $7.2 million and $4.6 million was recognized during the
years ended December 31, 2021 and 2020, respectively. The increase in income tax
expense during 2021 was mainly due to the increase in net income.  The effective
tax rate for the year 2021 was 22.2% compared to 21.2% for the year 2020. The
effective tax rates are affected by items of income and expense that are not
subject to federal and state taxation.

Comparison of Balance Sheets at December 31, 2021 and 2020

Overview


Our total assets increased $531.0 million, or 28.5%, from $1.86 billion at
December 31, 2020, to $2.40 billion at December 31, 2021. Net loans increased by
$76.0 million during 2021 and investment securities increased $383.5 million in
2021. Cash and cash equivalents decreased by $1.7 million during 2021.

Deposits at December 31, 2021 totaled $2.15 billion, an increase of $497.5
million as compared to December 31, 2020. Noninterest-bearing deposits increased
$173.1 million in 2021 and interest-bearing deposits increased $324.4 million.
Our deposits increased during 2021 from organic deposit growth and the influx of
liquidity from government stimulus.

Loans


Loans are our largest category of earning assets and typically provide higher
yields than other types of earning assets. Associated with the higher loan
yields are the inherent credit and liquidity risks that we attempt to control
and counterbalance. Total loans averaged $1.22 billion during the year ended
December 31, 2021, or 59.8% of average earning assets, as compared to $1.09
billion or 71.3% of average earning assets, for the year ended December 31,
2020. At December 31, 2021, total loans, net of unearned income, were $1.27
billion, compared to $1.2 billion at December 31, 2020, an increase of $80.1
million, or 6.7%.

The organic, or non-acquired, growth in our loan portfolio is attributable to
our ability to attract new customers from other financial institutions and
overall growth in our markets. Much of our loan growth has come from moving
customers from other financial institutions to RB&T. We have also been
successful in building banking relationships with new customers. We have hired
several new bankers in the markets that we serve, and these employees have been
successful in transitioning their former clients and attracting new clients to
RB&T. Our bankers are expected to be involved in their communities and to
maintain business development efforts to develop relationships with clients, and
our philosophy is to be responsive to customer needs by providing decisions in a
timely manner. In addition to our business development efforts, many of the
markets that we serve have shown signs of economic recovery over the last few
years.

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The table below provides a summary of the loan portfolio composition as of the
periods indicated.

                         COMPOSITION OF LOAN PORTFOLIO

                                             December 31, 2021           December 31, 2020
                                                           % of                        % of
                                            Amount         Total        Amount         Total
Residential real estate:
Closed-end 1-4 family - first lien        $   317,754        25.5 %   $   252,528        21.6 %
Closed-end 1-4 family - junior lien             5,434         0.4 %         8,343         0.7 %
Multi-family                                    9,981         0.8 %        10,817         0.9 %
Total residential real estate                 333,169        26.7 %       271,688        23.2 %
Commercial real estate:
Nonfarm nonresidential                        350,373        28.1 %       317,279        27.1 %
Farmland                                       38,808         3.1 %        34,586         3.0 %
Total commercial real estate                  389,181        31.2 %       351,865        30.1 %
Construction and land development:
Residential                                    90,924         7.3 %        71,784         6.1 %
Other                                         105,192         8.4 %        78,818         6.7 %
Total construction and land development       196,116        15.7 %       150,602        12.8 %
Home equity lines of credit                    49,569         4.0 %        43,424         3.7 %
Commercial loans:
Other commercial loans                        201,922        16.2 %       279,385        23.9 %
Agricultural                                   36,063         2.9 %        29,854         2.6 %
State, county, and municipal loans             23,939         2.0 %        25,922         2.2 %
Total commercial loans                        261,924        21.1 %       335,161        28.7 %
Consumer loans                                 43,080         3.5 %        40,646         3.5 %
Total gross loans                           1,273,039       102.2 %     1,193,386       102.0 %
Allowance for loan losses                     (20,922 )      -1.7 %       (16,803 )      -1.4 %
Net discounts                                    (400 )       0.0 %        (1,010 )      -0.1 %
Net deferred loan fees                         (5,974 )      -0.5 %        (5,794 )      -0.5 %
Net loans                                 $ 1,245,743       100.0 %   $ 1,169,779       100.0 %



In the context of this discussion, a "real estate mortgage loan" is defined as
any loan, other than a loan for construction purposes, secured by real estate,
regardless of the purpose of the loan. It is common practice for financial
institutions in our market areas, and for us in particular, to obtain a security
interest or lien in real estate whenever possible, in addition to any other
available collateral. This collateral is taken to reinforce the likelihood of
the ultimate repayment of the loan. This practice tends to increase the
magnitude of the real estate loan portfolio. In many cases, we prefer real
estate collateral to many other potential collateral sources, such as accounts
receivable, inventory, and equipment.

The Federal regulatory agencies issued two "guidance" documents that have a
significant impact on real estate related lending and, thus, on the operations
of the Bank. One part of the guidance could require lenders to restrict lending
secured primarily by certain categories of commercial real estate to a level of
300% of their capital or raise additional capital. This factor, combined with
the current economic environment, could affect the Bank's lending strategy away
from, or to limit its expansion of, commercial real estate lending which has
been a material part of River Financial Corporation's lending strategy. This
could also have a negative impact on our lending and profitability. Management
actively monitors the composition of the Bank's loan portfolio, focusing on
concentrations of credit, and the results of that monitoring activity are
periodically reported to the Board of Directors.

The other guidance relates to the structuring of certain types of mortgages that
allows negative amortization of consumer mortgage loans. Although the Bank does
not engage at present in lending using these types of instruments, the guidance
could have the effect of making the Bank less competitive in consumer mortgage
lending if the local market is driving the demand for such an offering.









                                       45
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The principal component of our loan portfolio is real estate mortgage loans on
residential and commercial properties. At December 31, 2021, this category
totaled $771.9 million and represented 61.9% of the total loan portfolio,
compared to $667.0 million, or 57.0% of the total loan portfolio at year-end
2020. Residential real estate loans increased $61.5 million in 2021, or 22.6%,
and commercial real estate loans increased $37.3 million, or 10.6%. Home equity
lines of credit increased $6.1 million, or 14.2%.

Real estate construction loans totaled $196.1 million at December 31, 2021, an
increase $45.5 million, or 30.2%, over $150.6 million at December 31, 2020. This
loan type accounted for 15.7% and 12.8% of our total loan portfolio at December
31, 2021 and December 31, 2020, respectively.

Commercial and industrial loans totaled $261.9 million at December 31, 2021,
compared to $335.2 million at December 31, 2020, a decrease of $73.2 million, or
21.9% during 2021. A majority of the decrease was from loans guaranteed under
the Paycheck Protection Program which had a balance outstanding of approximately
$52 million at year-end 2021 compared to approximately $139 million at year-end
2020.

The repayment of loans is a source of additional liquidity for us. The following
table sets forth our variable rate and fixed rate loans maturing within specific
intervals at December 31, 2021.

           LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES

                                                          Over one           Over five
                                          One year      year through       years through       Over fifteen
Variable Rate Loans:                       or less       five years        fifteen years          years            Total
Residential real estate:
Closed-end 1-4 family - first lien        $   3,881     $         535     $         5,696     $       94,344     $ 104,456
Closed-end 1-4 family - junior lien              77                 1                   -                302           380
Multi-family                                    315               284                 330                  -           929
Total residential real estate                 4,273               820               6,026             94,646       105,765
Commercial real estate:
Nonfarm nonresidential                        4,977             5,391               1,799              4,879        17,046
Farmland                                      1,736             4,499                   -                  -         6,235
Total commercial real estate                  6,713             9,890               1,799              4,879        23,281
Construction and land development:
Residential                                  24,295                 -                  93              7,845        32,233
Other                                         5,844             5,861               2,902                156        14,763
Total construction and land development      30,139             5,861               2,995              8,001        46,996
Home equity lines of credit                   3,889             4,102              40,518                 22        48,531
Commercial loans:
Other commercial loans                       35,065            13,769               3,234                  -        52,068
Agricultural                                 26,117                37                   -                  -        26,154
State, county, and municipal loans                -                 -                   -                  -             -
Total commercial loans                       61,182            13,806               3,234                  -        78,222
Consumer loans                                1,161               973                 182                  -         2,316
Total gross variable rate loans           $ 107,357     $      35,452     $        54,754     $      107,548     $ 305,111




                                       46
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                                                           Over one           Over five
                                          One year       year through       years through       Over fifteen
Fixed Rate Loans:                          or less        five years        fifteen years          years            Total
Residential real estate:
Closed-end 1-4 family - first lien        $  24,643     $       92,165     $        56,784     $       39,706     $ 213,298
Closed-end 1-4 family - junior lien             400              2,561               1,859                234         5,054
Multi-family                                  1,513              1,661               5,398                480         9,052
Total residential real estate                26,556             96,387              64,041             40,420       227,404
Commercial real estate:
Nonfarm nonresidential                       30,985            154,063             143,293              4,986       333,327
Farmland                                      2,832             20,450               9,291                  -        32,573
Total commercial real estate                 33,817            174,513             152,584              4,986       365,900
Construction and land development:
Residential                                  57,011              1,210                 390                 80        58,691
Other                                        20,255             39,562              30,612                  -        90,429
Total construction and land development      77,266             40,772              31,002                 80       149,120
Home equity lines of credit                     198                840                   -                  -         1,038
Commercial loans:
Other commercial loans                       12,364            117,805              19,685                  -       149,854
Agricultural                                  1,348              8,291                 270                  -         9,909
State, county, and municipal loans            1,492              3,361              14,724              4,362        23,939
Total commercial loans                       15,204            129,457              34,679              4,362       183,702
Consumer loans                                4,308             23,216              13,229                 11        40,764
Total fixed rate gross loans              $ 157,349     $      465,185     $       295,535     $       49,859     $ 967,928



                                                           Over one           Over five
                                          One year       year through       years through       Over fifteen
Total Loans:                               or less        five years        fifteen years          years             Total

Residential real estate:
Closed-end 1-4 family – first lien $ 28,524 $ 92,700 $ 62,480 $ 134,050 $ 317,754
Closed-end 1-4 family – junior lien

             477              2,562               1,859                536           5,434
Multi-family                                  1,828              1,945               5,728                480           9,981
Total residential real estate                30,829             97,207              70,067            135,066         333,169
Commercial real estate:
Nonfarm nonresidential                       35,962            159,454             145,092              9,865         350,373
Farmland                                      4,568             24,949               9,291                  -          38,808
Total commercial real estate                 40,530            184,403             154,383              9,865         389,181
Construction and land development:
Residential                                  81,306              1,210                 483              7,925          90,924
Other                                        26,099             45,423              33,514                156         105,192
Total construction and land development     107,405             46,633              33,997              8,081         196,116
Home equity lines of credit                   4,087              4,942              40,518                 22          49,569
Commercial loans:
Other commercial loans                       47,429            131,574              22,919                  -         201,922
Agricultural                                 27,465              8,328                 270                  -          36,063
State, county, and municipal loans            1,492              3,361              14,724              4,362          23,939
Total commercial loans                       76,386            143,263              37,913              4,362         261,924
Consumer loans                                5,469             24,189              13,411                 11          43,080
Total gross loans                         $ 264,706     $      500,637     $       350,289     $      157,407     $ 1,273,039



The information presented in the table above is based upon the contractual
maturities of the individual 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 at their maturity. Consequently, we
believe that this treatment presents fairly the maturity structure of the loan
portfolio.

                                       47
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Investment Securities


We use our securities portfolio primarily to enhance our overall yield on
interest-earning assets and as a source of liquidity, as a tool to manage our
balance sheet sensitivity and regulatory capital ratios, and as a base upon
which to pledge assets for public deposits. When our liquidity position exceeds
current needs and our expected loan demand, other investments are considered as
a secondary earnings alternative. As investments mature, they are used to meet
current cash needs, or they are reinvested to maintain our desired liquidity
position. We have designated the majority of our securities as
available-for-sale to provide flexibility, in case an immediate need for
liquidity arises, and we believe that the composition of the portfolio offers
needed flexibility in managing our liquidity position and interest rate
sensitivity without adversely impacting our regulatory capital levels. In
certain cases, we have designated securities as held-to-maturity to protect
capital from changes in the value of the securities portfolio. Securities
available-for-sale are reported at fair value with unrealized gains or losses
reported as a separate component of other comprehensive income (loss), net of
related deferred taxes while securities held-to-maturity are reported at
amortized cost. Purchase premiums and discounts are recognized in income using
the interest method over the terms of the securities.

The following tables summarize the amortized cost and fair value of securities
available-for-sale and held-to-maturity at December 31, 2021 and 2020.

                             INVESTMENT SECURITIES
                                      December 31, 2021            December 31, 2020
                                   Amortized        Fair        Amortized        Fair
                                      Cost          Value          Cost          Value
Securities available for sale:
Residential mortgage-backed        $  562,109     $ 557,558     $  346,001     $ 350,597
U.S. treasury securities              151,331       149,528              -             -

U.S. govt. sponsored enterprises 54,005 54,495 34,963

36,231

State, county, and municipal           94,976        99,254         98,026       103,229
Corporate debt obligations             15,942        15,924          3,166         3,217
Totals                             $  878,363     $ 876,759     $  482,156     $ 493,274




                                  December 31, 2021             December 31, 2020
                               Amortized        Fair        Amortized           Fair
                                  Cost         Value          Cost              Value
Securities held-to-maturity:
State, county, and municipal   $   50,182     $ 50,165     $         -         $     -
Totals                         $   50,182     $ 50,165     $         -         $     -


The following tables show the scheduled maturity and average yields of our
securities at December 31, 2021.

             INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS

                                                              After one year but          After five years but
                                     Within one year           within five years            within ten years            After ten years          Other securities
                                    Amount       Yield         Amount        Yield         Amount          Yield       Amount       Yield        Amount       Yield
Securities available for sale:
U.S. govt. sponsored enterprises   $   8,077       2.71 %   $     20,670    

1.70 % $ 24,775 1.32 % $ 973 2.02 % $ – — %
State, county, and municipal

           3,605       2.45 %          9,926       2.54 %          7,935         2.08 %      77,788       2.26 %            -        --- %
U.S. treasury securities                   -        --- %        125,202       0.87 %         24,326         1.22 %           -        --- %            -        --- %
Corporate debt obligations                 -        --- %          2,001       1.68 %         13,923         3.16 %           -        --- %            -        --- %
Residential mortgage-backed                -        --- %              -        --- %              -          --- %           -        --- %      557,558       1.36 %
Totals                             $  11,682       2.63 %   $    157,799       1.10 %   $     70,959         1.73 %   $  78,761       2.26 %   $  557,558       1.36 %



                                                               After one year but           After five years but
                                   Within one year              within five years             within ten years            After ten years           
Other securities
                                Amount          Yield        Amount           Yield         Amount           Yield       Amount       Yield       Amount          Yield
Securities held-to-maturity:
State, county, and municipal   $      -             --- %   $      -              --- %   $     1,132          2.14 %   $  49,033       2.26 %   $      -             --- %
Totals                         $      -             --- %   $      -              --- %   $     1,132           --- %   $  49,033        --- %   $      -             --- %


                                       48
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We invest primarily in mortgage-backed securities, municipal securities, and
obligations of government-sponsored entities and agencies of the United States,
though we may in some situations also invest in direct obligations of the United
States or obligations guaranteed as to the principal and interest by the United
States. All of our mortgage-backed securities are residential securities issued
by the Federal National Mortgage Association (FNMA), and the Federal Home Loan
Mortgage Corporation (FHLMC). During all periods presented, we have used most of
our excess liquidity to invest in securities, as our loan demand has not kept up
with our tremendous deposit growth.

                                       49
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Allowance for Loan Losses, Provision for Loan Losses and Asset Quality

Allowance for loan losses and provision for loan losses


Our allowance for loan losses represents our estimate of probable inherent
credit losses in the loan portfolio. We determine the required allowance each
quarter based on an ongoing evaluation of risk as it correlates to potential
losses within the portfolio. Increases in the allowance are made by charges to
the provision for loan losses. Loans deemed to be uncollectible are charged
against the allowance. Recoveries of previously charged-off amounts are credited
to our allowance for loan losses.

Management utilizes a review process for the loan portfolio to identify loans
that are deemed to be impaired. A loan is considered impaired when it is
probable that the Bank will be unable to collect the scheduled payments of
principal and interest due under the contractual terms of the loan agreement or
when the loan is deemed to be a troubled debt restructuring. For loans and loan
relationships deemed to be impaired that are $100 thousand, or greater,
management determines the estimated value of the underlying collateral, less
estimated costs to acquire and sell the collateral, or the estimated net present
value of the cash flows expected to be received on the loan or loan
relationship. These amounts are compared to the current investment in the loan
and a specific allowance for the deficiency, if any, is specifically included in
the analysis of the allowance for loan losses. For loans and loan relationships
less than $100 thousand that are deemed to be impaired, management applies a
loss factor of 15% and includes that amount in that analysis of the allowance
for loan losses rather than specifically measuring the impairment for each loan
or loan relationship.

All other loans are deemed to be unimpaired and are grouped into various
homogeneous risk pools utilizing regulatory reporting classifications. The
Bank's historical loss factors are calculated for each of these risk pools based
on the net losses experienced as a percentage of the average loans outstanding.
The time periods utilized in these historical loss factor calculations are
subjective and vary according to management's estimate of the impact of current
economic cycles. As every loan has a risk of loss, minimum loss factors are
estimated based on long term trends for the Bank, the banking industry, and the
economy. The greater of the calculated historical loss factors or the minimum
loss factors are applied to the unimpaired loan amounts currently outstanding
for the risk pool and included in the analysis of the allowance for loan losses.
In addition, certain qualitative adjustments may be included by management as
additional loss factors applied to the unimpaired loan risk pools. These
adjustments may include, among other things, changes in loan policy, loan
administration, loan, geographic, or industry concentrations, loan growth rates,
and experience levels of our lending officers. The loss allocations for
specifically impaired loans, smaller impaired loans not specifically measured
for impairment, and unimpaired loans are totaled to determine the total required
allowance for loan losses. This total is compared to the current allowance on
the Bank's books and adjustments made accordingly by a charge or credit to the
provision for loan losses.

Management believes the data it uses in determining the allowance for loan
losses is sufficient to estimate potential losses in the loan portfolio;
however, actual results could differ from management’s estimate.

                                       50

——————————————————————————–

The following table presents a summary of changes in the allowance for loan
losses for the periods and dates indicated.

                           ALLOWANCE FOR LOAN LOSSES

                                                                   Year Ended:
                                                         December 31,       December 31,
Amounts in thousands, (except percentages)                   2021           

2020

Allowance for loan losses at beginning of period        $       16,803     $        8,679
Charge-offs:
Mortgage loans on real estate:
Residential                                                        127                 52
Commercial real estate                                             241      

186

Construction and land development                                    2                 59
Equity lines of credit                                               -                  -
Total mortgage loans on real estate                                370                297
Commercial                                                         514                406
Consumer                                                           103                114
Total charge-offs                                                  987                817
Recoveries:
Mortgage loans on real estate:
Residential                                                         60                  7
Commercial real estate                                              35                 24
Construction and land development                                   11      

109

Equity lines of credit                                               -                 19
Total mortgage loans on real estate                                106                159
Commercial                                                         189                127
Consumer                                                            67                 40
Total recoveries                                                   362                326
Net charge-offs                                                    625                491
Provision for loan losses                                        4,744              8,615
Allowance for loan losses at end of period              $       20,922     

$ 16,803
Total loans outstanding, net of deferred loan fees
and discounts

                                           $    1,266,665     $    1,186,582
Average loans outstanding, net of deferred loan fees    $    1,217,901     $    1,087,007
Allowance for loan losses to period end loans                     1.65 %             1.42 %
Net charge-offs to average loans (annualized)                     0.05 %    

0.05 %




In accordance with ASC Topic 805, Business Combinations, the loans acquired in
2015 from Keystone Bank, in 2018 from Peoples Southern Bank and in 2019 from
Trinity Bank were recorded at fair value and any discount to fair value was
recorded against the loans rather than as an allowance for loan losses.
Approximately $1.6 million of the discount associated with the loans acquired
from Trinity Bank in 2019 was deemed related to credit quality. Approximately
$504 thousand of the discount associated with the loans acquired from Peoples
Southern Bank in 2018 was deemed related to credit quality. The total discount
was recorded as an accretable discount and is accreted into interest income over
the life of the loans using the level yield method. The following table presents
a summary of the acquired loan information for the periods and dates indicated.

                                                    As of December 31, 2021                                          As of December 31, 2020
                                                      Peoples                                                      Peoples
                                                      Southern                                      Keystone       Southern
                                  Keystone Bank         Bank         Trinity Bank       Total         Bank           Bank         Trinity Bank        Total
Acquired loan portfolio at
year-end                         $         7,379     $   12,320     $       30,194     $ 49,893     $  12,735     $   19,483     $       70,609     $ 102,827
Remaining accretable loan
discount at year-end                          48             71                281          400           105            163                742         1,010
Discount accretion recognized
in interest income on loans                   57             92                461          610           335            264              1,040         1,639


Overall, asset quality indicators have continued to improve, and, as a result,
provision expense has been minimal for the Bank's loan portfolio. During the
years ended December 31, 2021 and 2020, we recorded provision expense of $4.7
million and $8.6 million, respectively.

                                       51

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Allocation of Our Allowance for Loan Losses


While no portion of our allowance for loan losses is in any way restricted to
any individual loan or group of loans and the entire allowance is available to
absorb losses from any and all loans, the following table represents
management's allocation of our allowance for loan losses to specific loan
categories for the periods indicated.

                    ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

                                                                     As of December 31,
                                                         2021                                  2020
                                                             Percent of                            Percent of
                                                          Allowance in each                     Allowance in each
                                                             Category to                           Category to
                                            Amount         Total Allowance        Amount         Total Allowance
Residential real estate                    $   2,596                    12.4 %   $   1,676                    10.0 %
Commercial real estate                         8,038                    38.4 %       6,807                    40.5 %
Construction and land development              2,992                    14.3 %       1,749                    10.4 %
Home equity lines of credit                      396                     1.9 %         268                     1.6 %
Commercial                                     6,486                    31.0 %       5,897                    35.1 %
Consumer                                         414                     2.0 %         406                     2.4 %
Total                                      $  20,922                   100.0 %   $  16,803                   100.0 %



Nonperforming Assets

The following table presents our nonperforming assets for the dates indicated.

                              NONPERFORMING ASSETS

                                                                December 31,
                                                            2021             2020
Nonaccrual loans                                        $      2,272     $      4,264
Accruing loans past due 90 days or more                            -              398
Total nonperforming loans                                      2,272            4,662
Foreclosed assets                                                256              240
Total nonperforming assets                              $      2,528     $      4,902
Allowance for loan losses to period end loans                   1.65 %      

1.42 %
Allowance for loan losses to period end nonperforming
loans

                                                         920.86 %         360.42 %
Net charge-offs to average loans (annualized)                   0.05 %           0.05 %
Nonperforming assets to period end loans and
  foreclosed property                                           0.20 %           0.41 %
Nonperforming loans to period end loans                         0.18 %           0.39 %
Nonperforming assets to total assets                            0.11 %           0.26 %
Period end loans                                           1,266,665        1,186,582
Period end total assets                                    2,395,680        1,864,650
Allowance for loan losses                                     20,922           16,803
Average loans for the period                               1,217,901        

1,087,007

Net charge-offs for the period                                   625        

491

Period end loans plus foreclosed property                  1,266,921        

1,186,822




Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
borrower's financial condition is such that the collection of interest is
doubtful. In addition to consideration of these factors, loans that are past due
90 days or more are generally placed on nonaccrual status. When a loan is placed
on nonaccrual status, all accrued interest on the loan is reversed and deducted
from earnings as a reduction of reported interest income. No additional interest
is accrued on the loan balance until collection of both principal and interest
becomes reasonably certain. Payments received while a loan is on nonaccrual
status will generally be applied to the outstanding principal balance. When a
problem loan is finally resolved, there may ultimately be an actual write-down
or charge-off of the principal balance of the loan that would necessitate
additional charges to the allowance for loan losses.

                                       52
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Total nonperforming assets decreased $2.4 million to $2.5 million at December
31, 2021, from $4.9 million at December 31, 2020. Total nonperforming assets as
a percentage of total assets decreased 0.15% from 0.26% at December 31, 2020 to
0.11% at December 31, 2021. Improving asset quality has been and will continue
to be a primary focus of management.

Deposits


Deposits, which include noninterest-bearing demand deposits, interest-bearing
demand deposits, money market accounts, and savings, time, and other deposits,
are the primary funding source for the Bank. We offer a variety of products
designed to attract and retain customers, with primary focus on building and
expanding client relationships. We continue to focus on establishing a
comprehensive relationship with consumer and business borrowers, seeking
deposits as well as lending relationships.

The following table details the composition of our deposit portfolio as of the
dates indicated.

                            COMPOSITION OF DEPOSITS

                                                December 31, 2021                December 31, 2020
                                                            Percent of                       Percent of
                                             Amount           Total           Amount           Total
Demand deposits, noninterest-bearing       $   610,002             28.4 %   $   436,885             26.4 %
Demand deposits, interest-bearing              519,547             24.2 %       377,745             22.8 %
Money market accounts                          623,763             29.0 %       473,714             28.6 %
Savings deposits                               117,767              5.5 %        89,914              5.4 %
Time certificates of $250 or more              106,271              4.9 %        96,839              5.9 %
Other time certificates                        173,827              8.0 %       178,538             10.9 %
Totals                                     $ 2,151,177            100.0 %   $ 1,653,635            100.0 %



Total deposits were $2.15 billion at December 31, 2021, an increase of $497.5
million, or 30.1%, from $1.65 billion at December 31, 2020. Noninterest-bearing
demand deposits and interest-bearing demand deposits increased a combined total
of $314.9 million, or 38.7% from December 31, 2020 to December 31, 2021. These
two categories of deposits are our least expensive source of funding for
interest-earning assets.

The following table details the maturities of our time deposits which consist
entirely of certificates of deposit.


                     MATURITIES OF CERTIFICATES OF DEPOSIT

                                                                CDs            CDs
                                                               $100         Less Than
                                                All CDs       or more         $100
Three months or less                           $  83,192     $  63,160     $    20,032
Greater than three months through six months      76,449        55,564      

20,885

Greater than six months through one year 69,552 46,435

23,117

Greater than one year through three years 28,792 18,276

    10,516
Greater than three years                          22,113        17,213           4,900
Total                                          $ 280,098     $ 200,648     $    79,450


Deposit growth has benefited to a large extent from uncertainty in the financial
markets, which has increased the liquidity of many banks as consumers and
businesses look for safe places for liquidity, thereby increasing bank deposits.

Other Funding Sources


We supplement our deposit funding with wholesale funding when needed for balance
sheet planning or when the terms are attractive and will not disrupt our
offering rates in our markets. A source that we have used for wholesale funding
is the Federal Home Loan Bank of Atlanta (FHLB). There were no borrowings
outstanding with FHLB as of December 31, 2021 and 2020.

                                       53
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Liquidity

Market and public confidence in our financial strength and financial
institutions in general will largely determine our access to appropriate levels
of liquidity. This confidence is significantly dependent on our ability to
maintain sound asset quality and appropriate levels of capital reserves.


Liquidity is defined as the ability to meet anticipated customer demands for
funds under credit commitments and deposit withdrawals at a reasonable cost and
on a timely basis. We measure our liquidity position by giving consideration to
both on- and off-balance sheet sources of and demands for funds on a daily,
weekly, and monthly basis.

Liquidity risk involves the risk of being unable to fund assets with the
appropriate duration and rate-based liabilities, as well as the risk of not
being able to meet unexpected cash needs. Liquidity planning and management are
necessary to ensure the ability to fund operations in a cost-effective manner
and to meet current and future potential obligations such as loan commitments,
lease obligations, and unexpected deposit outflows. In this process, we focus on
both assets and liabilities and on the manner in which they combine to provide
adequate liquidity to meet our needs.

Funds are available from a number of basic banking activity sources, including
the core deposit base, the repayment and maturity of loans, and investment
security cash flows. Other funding sources include federal funds purchased,
brokered certificates of deposit, and borrowings from the FHLB.


Cash and cash equivalents at December 31, 2021 and 2020 were $62.0 million and
$60.3 million, respectively. Based on the recorded cash and cash equivalents,
our liquidity resources were sufficient at December 31, 2021 to fund loans and
meet other cash needs as necessary.

Contractual Obligations

While our liquidity monitoring and management considers both present and future
demands for and sources of liquidity, the following table of contractual
commitments focuses only on future obligations.

                                                          Due after 1       Due after 3
                                         Due in 1           through           through         Due after
                                       year or less         3 years           5 years          5 years         Total
Certificates of deposit of less
than $100                                     64,034            10,516             4,900               -        79,450
Certificates of deposit of $100 or
more                                         165,159            18,276            17,213               -       200,648
Securities sold under agreements to
repurchase                                     9,754                 -                 -               -         9,754
Subordinated debentures, net of
loan costs                                         -                 -                 -          39,344        39,344
Operating leases                                 583             1,201               963           2,591         5,338

Total contractual obligations $ 239,530 $ 29,993 $ 23,076 $ 41,935 $ 334,534

Off-Balance Sheet Arrangements


We are party to credit-related financial instruments with off-balance sheet
risks in the normal course of business to meet the financing needs of our
customers. These financial instruments include commitments to extend credit and
standby letters of credit. Such commitments involve, to varying degrees,
elements of credit and interest rate risk in excess of amounts recorded on our
balance sheet. Our exposure to credit loss is represented by the contractual
amounts of these commitments. We follow the same credit policies in making
commitments as we do for on-balance sheet instruments.

Our off-balance sheet arrangements are summarized in the following table for the
periods indicated.

                          CREDIT EXTENSION COMMITMENTS

                                                         December 31, 2021       December 31, 2020
Commitments to extend credit                            $           328,646     $           246,700
Stand-by and performance letters of credit                            2,426                   2,659
Total                                                   $           331,072     $           249,359




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Interest Sensitivity and Market Risk

Interest Sensitivity


We monitor and manage the pricing and maturity of our assets and liabilities in
order to diminish the potential adverse impact that changes in interest rates
could have on net interest income. The principal monitoring technique we employ
is simulation analysis and this technique is augmented by "gap" analysis.

In simulation analysis, we review each individual asset and liability category
and their projected behavior in various different interest rate environments.
These projected behaviors are based upon management's past experiences and upon
current competitive environments, including the various environments in the
different markets in which we compete. Using this projected behavior and
differing rate scenarios as inputs, the simulation analysis generates as output
projections of net interest income. We also periodically verify the validity of
this approach by comparing actual results with those that were projected in
previous models.

Another technique used in interest rate management, but to a lesser degree than
simulation analysis, is the measurement of the interest sensitivity "gap," which
is the positive or negative dollar difference between assets and liabilities
that are subject to interest rate repricing within a given period of time.
Interest rate sensitivity can be managed by repricing assets and liabilities,
selling securities available for sale or trading securities, replacing an asset
or liability at maturity, or by adjusting the interest rate during the life of
an asset or liability.

We evaluate interest rate sensitivity risk and then formulate guidelines
regarding asset generation and repricing and sources and prices of off-balance
sheet commitments in order to decrease interest sensitivity risk. We use
computer simulations to measure the net income effect of various interest rate
scenarios. The modeling reflects interest rate changes and the related impact on
net income over specified periods of time.


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The following table illustrates our interest rate sensitivity at December 31,
2021, assuming that the relevant assets and liabilities are collected and paid,
respectively, based upon historical experience rather than their stated
maturities.

                         INTEREST SENSITIVITY ANALYSIS

                                   0-1 Mos        1-3 Mos       3-12 Mos       1-2 Yrs       2-3 Yrs       >3 Yrs          Total
Interest earning assets
Loans                             $ 252,822      $  88,253      $ 273,260     $ 177,717     $ 131,332     $ 343,281     $ 1,266,665
Securities                           37,345         26,659         86,102        85,672        90,916       600,247         926,941
Certificates of deposit in
banks                                   (28 )          232            498         2,461             -           249           3,412
Cash balances in banks               36,706              -              -             -             -             -          36,706
Federal funds sold                    9,500              -              -             -             -             -           9,500

Total interest earning assets $ 336,345 $ 115,144 $ 359,860

   $ 265,850     $ 222,248     $ 943,777     $ 2,243,224
Interest bearing liabilities
Interest bearing transaction
accounts                          $ 108,087      $   8,356      $  37,602     $  50,134     $  50,134     $ 265,234     $   519,547
Savings and money market
accounts                            230,725         16,528         74,379        99,173        99,173       221,552         741,530
Time deposits                        26,239         57,187        144,314        17,981        10,222        24,155         280,098
Securities sold under
agreements to repurchase              9,754              -              -             -             -             -           9,754
Subordinated debt, net of loan
costs                                     -              -              -             -             -        39,344          39,344
Total interest bearing
liabilities                       $ 374,805      $  82,071      $ 256,295     $ 167,288     $ 159,529     $ 550,285     $ 1,590,273
Interest sensitive gap
Period gap                        $ (38,460 )    $  33,073      $ 103,565     $  98,562     $  62,719     $ 393,492     $   652,951
Cumulative gap                    $ (38,460 )    $  (5,387 )    $  98,178     $ 196,740     $ 259,459     $ 652,951
Cumulative gap - Rate Sensitive
Assets/ Rate
Sensitive Liabilities                  (1.7 )%        (0.2 )%         4.4 %         8.8 %        11.6 %        29.1 %




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We generally benefit from increasing market rates of interest when we have an
asset-sensitive gap (a positive number) and generally benefit from decreasing
market interest rates when we are liability-sensitive (a negative number). As
shown in the table above, we are slightly liability-sensitive on a cumulative
basis through two years. The interest sensitivity analysis presents only a
static view of the timing and repricing opportunities, without taking into
consideration that changes in interest rates do not affect all assets and
liabilities equally. For example, rates paid on a substantial portion of core
deposits may change contractually within a relatively short time frame, but
those are viewed by management as significantly less interest-sensitive than
market- based rates such as those paid on non-core deposits. For this and other
reasons, management relies more upon the simulation analysis (as noted above) in
managing interest rate risk. Net interest income may be impacted by other
significant factors in a given interest rate environment, including changes in
the volume and mix of earning assets and interest-bearing liabilities.

Market Risk


Our earnings are dependent, to a large degree, on our net interest income, which
is the difference between interest income earned on all earning assets,
primarily loans and securities, and interest paid on all interest
bearing-liabilities, primarily deposits. Market risk is the risk of loss from
adverse changes in market prices and interest rates. Our market risk arises
primarily from inherent interest rate risk in our lending, investing, and
deposit gathering activities. We seek to reduce our exposure to market risk
through actively monitoring and managing interest rate risk. Management relies
upon static "gap" analysis to determine the degree of mismatch in the maturity
and repricing distribution of interest-earning assets and interest-bearing
liabilities which quantifies, to a large extent, the degree of market risk
inherent in our balance sheet. Gap analysis is further augmented by simulation
analysis to evaluate the impact of varying levels of prevailing interest rates
and the sensitivity of specific earning assets and interest-bearing liabilities
to changes in those prevailing rates. Simulation analysis consists of evaluating
the impact on net interest income given changes from 400 basis points below the
current prevailing rates to 400 basis points above the current prevailing rates.
Management makes certain assumptions as to the effect that varying levels of
interest rates have on certain earning assets and interest bearing-liabilities,
which assumptions consider both historical experience and consensus estimates of
outside sources.

The following table illustrates the results of our simulation analysis to
determine the extent to which market risk would affect net interest margin for
the next 12 months if prevailing interest rates increased or decreased by the
specified amounts from current rates. As noted above, this model uses estimates
and assumptions in asset and liability account rate reactions to changes in
prevailing interest rates. However, to isolate the market risk inherent in the
balance sheet, the model assumes that no growth in the balance sheet occurs
during the projection period. This model also assumes an immediate and parallel
shift in interest rates, which would result in no change in the shape or slope
of the interest rate yield curve. Because of the inherent use of these estimates
and assumptions in the simulation model to derive this market risk information,
the actual results of the future impact of market risk on our net interest
margin may (and most likely will) differ from that found in the table.

                                  MARKET RISK

                                         Impact on net interest income
                                     As of                           As of
                               December 31, 2021               December 31, 2020
Change in prevailing rates:
+ 400 basis points                   2.18%                          (7.80)%
+ 300 basis points                   1.87%                          (5.16)%
+ 200 basis points                   1.45%                          (3.53)%
+ 100 basis points                   0.75%                          (2.19)%
+ 0 basis points                            -                               -
- 100 basis points                  (1.84)%                          1.57%
- 200 basis points                  (2.81)%                          1.44%
- 300 basis points                  (2.87)%                          1.35%
- 400 basis points                  (2.91)%                          1.30%




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Capital Resources


Total stockholders' equity at December 31, 2021 was $179.6 million, or 7.5% of
total assets. At December 31, 2020, total stockholders' equity was $166.4
million, or 8.9% of total assets. The increase in shareholders' equity for 2021
was mainly attributable to net income of $25.0 million. The increase from net
income was partially offset by a $9.5 million decrease in other comprehensive
income.

The bank regulatory agencies have established risk-based capital requirements
for banks. These guidelines are intended to provide an additional measure of a
bank's capital adequacy by assigning weighted levels of risk to asset
categories. Banks are also required to systematically maintain capital against
"off-balance sheet" activities such as loans sold with recourse, loan
commitments, guarantees, and standby letters of credit. These guidelines are
intended to strengthen the quality of capital by increasing the emphasis on
common equity and restricting the amount of loan loss reserves and other forms
of equity, such as preferred stock, that may be included in capital. Certain
items, such as goodwill and other intangible assets, are deducted from total
capital in arriving at the various regulatory capital measures such as Tier 1
capital and total risk-based capital. Our objective is to maintain the Bank's
current status as a "well-capitalized institution," as that term is defined by
the Bank's regulators. As of December 31, 2021, RB&T was "well-capitalized"
under the regulatory framework for prompt corrective action.

Changes to the regulatory guidelines for bank capital levels that became
effective January 1, 2015, the minimum ratio of total capital to risk-weighted
assets (including certain off-balance sheet activities such as standby letters
of credit) is 8%. The required ratio of "Tier 1 Capital" (consisting generally
of shareholders' equity and qualifying preferred stock, less certain goodwill
items and other intangible assets) to risk-weighted assets is 6%. While there
was previously no required ratio of "Common Equity Tier 1 Capital" (which
generally consists of common stock, retained earnings, certain qualifying
capital instruments issued by consolidated subsidiaries, and Accumulated Other
Comprehensive Income, subject to adjustments) to total risk-weighted assets, a
required minimum ratio of 4.5% became effective on January 1, 2015, as well. The
remainder of total capital, or "Tier 2 Capital," may consist of (a) the
allowance for loan losses of up to 1.25% of risk-weighted assets, (b) preferred
stock not qualifying as Tier 1 Capital, (c) hybrid capital instruments, (d)
perpetual debt, (e) mandatory convertible securities, and (f) certain
subordinated debt and intermediate-term preferred stock up to 50% of Tier 1
Capital. Total Capital is the sum of Tier 1 Capital and Tier 2 Capital (which is
included only to the extent of Tier 1 Capital), less reciprocal holdings of
other banking organizations' capital instruments, investments in unconsolidated
subsidiaries, and any other deductions as determined by the appropriate
regulator.

River Bank & Trust is eligible to utilize the community bank leverage ratio
(CBLR) framework. The Bank has evaluated this option and has elected not to
utilize the CBLR framework at this time, but may do so in the future.


Quantitative measures, established by regulation to ensure capital adequacy
effective January 1, 2015, require River Bank & Trust to maintain minimum
amounts and ratios (set forth in the table below) of total risk-based capital,
Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to
average assets (as defined).


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The following table presents the Bank's capital amounts and ratios with the
required minimum levels for capital adequacy purposes including the phase in of
the capital conservation buffer under Basel III and minimum levels to be well
capitalized (as defined) under the regulatory prompt corrective action
regulations. The following table contains selected capital ratios at December
31, 2021 and 2020 for the Bank.

                           CAPITAL ADEQUACY ANALYSIS

                                                                                         To Be Well Capitalized
                                                              Required For Capital       Under Prompt Corrective
As of December 31, 2021:                 Actual                Adequacy Purposes           Action Regulations
                                  Amount        Ratio        Amount         Ratio         Amount          Ratio
Total Capital (To
Risk-Weighted Assets)            $ 203,848       14.071 %   $ 152,116     >= 10.500%   $    144,872     >= 10.000%
Common Equity Tier 1 Capital
  (To Risk- weighted Assets)       185,704       12.819 %     101,410      >= 7.000%         94,167      >= 6.500%
Tier 1 Capital (To
Risk-Weighted Assets)              185,704       12.819 %     123,141      >= 8.500%        115,897      >= 8.000%
Tier 1 Capital (To Average
Assets)                            185,704        8.013 %      92,707      >= 4.000%        115,884      >= 5.000%



                                                                                           To Be Well Capitalized
                                                                Required For Capital       Under Prompt Corrective
As of December 31, 2020:                   Actual                Adequacy Purposes           Action Regulations
                                    Amount        Ratio        Amount         Ratio         Amount           Ratio
Total Capital (To Risk-Weighted
Assets)                            $ 161,566       13.548 %   $ 125,219     >= 10.500%   $    119,256      >= 10.00%
Common Equity Tier 1 Capital
  (To Risk- weighted Assets)         146,636       12.296 %      83,479      >= 7.000%         77,516       >= 6.50%
Tier 1 Capital (To Risk-Weighted
Assets)                              146,636       12.296 %     101,368      >= 8.500%         95,405       >= 8.00%
Tier 1 Capital (To Average
Assets)                              146,636        8.229 %      71,277      >= 4.000%         89,096       >= 5.00%


The Bank’s Total Capital ratio and Tier 1 Capital (To Risk-weighted Assets)
ratio increased from year-end 2020 to year-end 2021 and the ratios remain well
above the levels for the Bank to be deemed well-capitalized.


Banking regulations limit the amount of dividends that a bank may pay without
approval of the regulatory authorities. These restrictions are based on the
bank's level of regulatory classified assets, prior years' net earnings and
ratio of equity capital to assets. As of December 31, 2021, the maximum amount
of dividend the Bank could declare payable to the Company was approximately
$46.9 million.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable. However, see Item 8 “Interest Sensitivity and Market Risk”

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