Blue Ridge Bankshares, Inc.
Annual Report 2013

Plain-text annual report

loaD^iodL) BLUE RIDGE BANKSHARES, iNC Paient of Blue Ridge Bank 2013 Annual Report TO OUR SHAREHOLDERS Blue Ridge Bankshares, Inc. enjoyed a great year in 2013. Amidst celebrating the 120 anniversary of Blue Ridge Bank, we were also able to record net income of $1,844,604, marking the 5* consecutive year of record net income for the Company. Eamings per common share also increased 25% from $1.40 per share in 2012 to $1.75 per share in 2013. We are very fortunate to have been able to enjoy this success in recent years as many others in the industry have struggled. Our achievements today are possible due to the hard work and diligence of those who have worked at the Bank over its history; diligently serving the conmnunity and serving as a steward to the shareholders' investment. We are planning to open a full-service branch in Harrisonburg in April 2014. The Bank has enjoyed some success in the market working to attract loans from current locations, but the Board and Management decided that to increase our ability to capitalize on opportunities in the market we needed to establish a physical presence. While we will have startup costs to absorb as we become fully operational, we think that long-term this move will create value for your investment. We continue to look for opportunities to grow the Bank in a prudent and meaningful fashion. Regulatory and competitive pressures necessitate a strategy that focuses on continuing to grow in order to absorb additional costs required to be compliant and competitive. The writer of Ecclesiastes tells us "to every thing there is a season, and a time to every purpose under the heaven ". While the writer does not specifically mention a "time to retire", quite possibly because retirement as we know it did not exist at that point in history, there is a time for that as well. During 2013 I aimounced my intention to retire at December 31, 2014. The Board of Directors accepted my retirement and has designated Brian Pltmi as my successor. Brian has been with the Bank since 2006 and has been a key part of our success in recent years. Just as importantly, I know Brian believes in the mission of conamunity banking. He will be working with a great Board and management team, and I am confident that moving ahead they will continue to lead the Company in the right direction. As a result of my pending retirement, this is the last Annual Report Shareholders' Letter that I will write. I want to take this opportunity to offer my deep and heartfelt gratitude to all shareholders and the Board ofDirectors for allowing me to serve you over the last 12 years. While certainly not perfect, I believe we worked together to make a lot of positive things happen during my tenure as President and Chief Executive Officer. Lord Robert Baden-Powell, founder ofthe Boy Scouts, charged Scouts in his final message to "try and leave this world a little better than you fonnd it". It is my sincere hope that I have accomplished this for Blue Ridge Bankshares, Inc. As always, I encotirage you to contact me with any questions, concems, or suggestions you may have regarding the Company. Please remember the best way to add value to your investment is to conduct your financial business with, and refer others to Blue Ridge Bank. Sincerely, 7y)(mL oC (pfaty/nd^^nj Monte L. Layman President/CEO BLUE RIDGE BANKSHARES, M C. FINANCIAL HIGHLIGHTS For The Year Net income Net income available to common stockholders Common stock dividends declared Eamings per common share Dividends per common share At Year End Total assets Total investments Net loans Deposits Total stockholders' equity Common stockholders' equity Book value per common share Number ofcommon stock shares outstanding Key Ratios Retum on average assets Retum on average equity Retum on average common equity Total stockholders' equity to assets Common stockholders' equity to assets Increase in assets Increase (decrease) in eamings per common share Increase in book value per share 2013 1,844,604 $ 1,637,349 318,223 1.75 0.34 2012 1,516,362 1,318,942 282,574 1.40 0.30 214,724,007 $ 47,712,416 153,786,879 168,345,328 19,229,543 14,729,543 15.76 934,539 208,228,537 56,372,941 136,138,597 168,737,648 18,494,435 13,994,435 14.85 942,221 0.87% 9.78% 11.40% 8.96% 6.86% 3.12% 25.00% 6.12% 0.74% 8.44% 9.79% 8.88% 6.72% 4.20% 22.81% 8.10% Financial Statements BLUE RIDGE BANKSHARES, INC. PARENT OF BLUE RIDGE BANK LuRAY, VIRGINIA December 31, 2013 CONTENTS INDEPENDENT AUDITOR'S REPORT FINANCIAL STATEMENTS Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Page 1 3 4 5 6 7 9 BROWNEDWARDS (-crtifu'il pubiit rt(irftM»tf.iHtb I N D E P E N D E NT AUDITOR'S REPORT The Board ofDirectors Blue Ridge Bankshares, Inc. Luray, Virginia Report on the Financial Statenients We have audited the accompanying consolidated financial statements of Blue Ridge Bankshares, Inc. and subsidiaries, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of income, changes in stockholders' equity, comprehensive income, and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of ttiese consolidated financial statements in accordance with accounting principles generally accepted m the United States of America; this includes the design, implementation, and maintenance of mtemal control relevant to the preparation and fair presentation of fmancial statements that are fi-ee firom material misstatement, whether due to fi-aud or error. Auditor's Responsibility Our responsibihty is to express an opinion on these consoUdated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards requhre that we plan and perform the audit to obtaui reasonable assurance about whether the consolidated financial statements are fi-ee of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fmancial statements. Tlie procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fi-aud or error. In making those risk assessments, the auditor considers intemal control relevant to the entity's preparation and fair presentation ofthe consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity's intemal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accotmting poUcies used and the reasonableness of significant accounting estimates made by management, as weU as evaluating the overaU presentation ofthe consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for otor audit opinion. 124 Newman Avenue • Hanisonburg, VA 22801-4004 • 540-434-6736 • Fax: 540-434-3097 • www.BEcpas.com - Your Success is Our Focus - Opinion In our opinion, the consolidated financial statements referred to above present fairly, in aU material respects, the fmancial position of Blue Ridge Bankshares, Inc. and subsidiaries as of December 31,2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Harrisonbtirg, Virginia March 5,2014 CERTIFIED PUBLIC ACCOUNTANTS BLUE RIDGE BANKSHARES, INC. CONSOLIDATED BALANCE SHEETS December 31,2013 and 2012 ASSETS Cash and due from banks (Note 2) Federal funds sold Investraent securities Securities available for sale (at fair value) (Note 3) Securities held to maturity (fair value of $15,407,134 In 2013, $13,568,540 in 2012) (Note 3) Restricted investments Total Investment Securities Loans held for sale (Note 4) Loans held for investment (Note 4) Allowance for loan losses (Note 4) Net Loans Held for Investment Bank premises and equipment, net (Note 5) Bank owned life insurance (Note 1) Goodwill (Note 11) Other assets Total Assets LIABILITIES Deposits Demand deposits Noninterest bearing Interest bearing Savings deposits Time deposits (Note 6) Total Deposits Other borrowed funds (Note 7) Other liabilities Total liabilities STOCKHOLDERS' EQUITY Preferred stock, $50 par value, authorized - 250,000 shares; outstanding - 4,500 shares (Note 8) Common stock, no par value, authorized - 5,000,000 shares; outstanding - 934,539 and 942,221, respectively (Note 9) Contributed equity Retained eamings Accumulated other comprehensive income (loss) Total Stockholders' Equity Total Liabilities and Stockholders' Equity The accompanying notes are an integral part ofthis statement. 2013 2012 $ 4,561,708 : $ 3,672,032 545,000 3,648,000 30,406,638 41,956,697 15,411,778 1,894,000 47,712,416 - 12,817,744 1,598,500 56,372,941 10,792,727 155,858,186 (2,071,307) 127,127,540 (1,781,670) 153,786,879 125,345,870 1,830,643 2,283,800 366,300 3,637,261 1,987,953 2,215,300 366,300 3,827,414 $ 214,724,007 $ 208,228,537 23,450,958 42,726,208 10,501,484 91,666,678 21,570,207 39,423,482 9,615,540 98,128,419 168,345,328 168,737,648 26,388,861 760,275 20,334,123 662,331 195,494,464 189,734,102 225,000 225,000 859,944 4,275,000 14,273,627 (404,028) 19,229,543 938,573 4,275,000 12,954,501 101,361 18,494,435 $ 214,724,007 $ 208,228,537 BLUE RIDGE BANKSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME December 31,2013 and 2012 2013 2012 INTEREST INCOME Interest and fees on loans held for investment Interest and fees on loans held for sale Interest on federal funds sold Interest and dividends on taxable investment securities Interest and dividends on nontaxable investment securities Total Interest Income INTEREST EXPENSE Interest on savings and interest bearing demand deposits Interest on time deposits Interest on borrowed fiinds Total Interest Expense Net Interest Income PROVISION FOR LOAN LOSSES Net Interest Income after Provision for Loan Losses OTHER INCOME Service charges on deposit accounts Eamings on investment in life insurance Securities gains Other than temporary impairment losses Gain (loss) on disposal of assets Other noninterest income Total Other Income OTHER EXPENSES Salaries and employee benefits Occupancy and equipment expenses Data processing Audits and examinations Advertising expense Directors fees Debit card expenses Other taxes and assessments Other noninterest expense Total Other Expenses Income before Income Taxes INCOME TAX EXPENSE (Note 14) Net Income Dividends to Preferred Stockholders Net Income Available to Common Stockholders Eamings per Share Weighted Average Shares Outstanding The accompanying notes are an integral part ofthis statement. $ 6,931,126 $ 181,802 2,557 842,515 308,676 8,266,676 166,218 1,029,832 375,709 1,571,759 6,694,917 310,000 6,384,917 298,984 68,500 66,562 - 110,419 451,299 995,764 2,265,760 466,495 366,104 136,944 266,659 103,750 127,829 320,376 772,468 4,826,385 2,554,296 709,692 1,844,604 $ $ (207,255) 1,637,349 $ 1.75 $ 936,535 6,667,519 219,864 3,477 1,088,945 301,336 8,281,141 143,023 1,121,925 512,142 1,777,090 6,504,051 670,000 5,834,051 315,926 71,500 30,437 (102,802) (112,561) 420,510 623,010 2,036,776 495,673 311,264 123,547 141,106 109,800 107,543 314,839 737,339 4,377,887 2,079,174 562,812 1,516,362 (197,420) 1,318,942 1.40 941,939 BLUE MDGE BANKSHARES, INC. CONSOLIDATED STAEMENTS OF COMPREHENSIVE INCOME December 31,2013 and 2012 Net Income Other comprehensive income: Gross unrealized gains (losses) arising during the period Adjustment for income tax expense Less: Reclassification adjustment for gains included in net income Adjustment for income tax expense 2013 2012 1,844,604 $ 1,516,362 (699,177) 237,720 (461,457) (66,562) 22,630 (43,932) 56,377 (19,168) 37,209 (30,437) 10,349 (20,088) Other comprehensive income (loss), net of tax (505,389) 17,121 Comprehensive income _$__ 1,339,215 $ 1,533,483 The accompanying notes are an integral part ofthis statement. m r- m -* o (S 00 m ^ •* (N r-" (N m ON. 00 in O NO '*" ON 00 m^ in o in in ^H ts ON" r 'l m ts u-1 NO r-" in in (N f- o (N ^H 90 o^ • *" >n o\ •* o NO • *" •* 00 ^-s r-N in m ts in ts_ ts^ t--" oo" r-1 O ts m r-fS VO^ rn r- ts^ -*" s^ ON^ ON" in 00 ' ' tN r-l 00 in ts NO^ t-." NO" 00 NO NO" (S NO o" m r -" ts 't" 00 Os m" m ON o o o" o in r f" I O o- i a ® u s .s S E Ji o o 1#J •B b 4> c u h SM o ts so oo" tl-l o _u ^ s o o "« " o U "S « iH «5 . S3 S S C M 60 p C O 3 u U u S e u .a i u o u pa e U g g to •a >. •3 a u u o u T3 5 « u pe u u Efl W5 3 o c 60 fi u g S3 .s s V5 S T3 •s • >. 1. ^ & 1 1 4^ "S rt J3 fS-^ BLUE MDGE BANKSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS December 31,2013 and 2012 CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operatmg activities; Provision for loan losses Deferred income taxes Net (increase) decrease in loans held for sale (Gain) loss on disposition of assets Securities gains Gain on sale of other real estate owned Other than temporary impairment losses Depreciation Investment amortization expense, net Amortization of debt refinancing fees Decrease in other assets Increase (Decrease) in accrued expenses Increase in carrying value of life insurance investments Total adjustments Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities available for sale Purchases of securities held to maturity Proceeds from calls, maturities, sales, paydowns and maturities of securities available for sale Proceeds from calls, maturities, sales, paydowns and maturities of securities held for investment (Increase) Decrease in federal funds sold Net increase in loans held for investment Purchase of bank premises and equipment Investment in limited liability companies Nonincome distributions from limited liability companies Proceeds from sale of assets (Increase) Decrease in restricted investments Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Net change in demand and savings deposits Net change in time deposits Federal Home Loan Bank advances Federal Home Loan Bank repayments Payment of debt refinancing fees Decrease in federal funds purchased Preferred stock dividends paid Common stock dividends paid Purchase ofcommon stock Issuance ofcommon stock Net Cash Provided by Financmg Activities CASH AND CASH EQUIVALENTS Net increase in cash and cash equivalents Cash and Cash Equivalents, Begirming of Year Cash and Cash Equivalents, End of Year The accompanying notes are an integral part ofthis statement 2013 2012 1,844,604 $ 1,516,362 310,000 163,539 10,792,727 (110,419) (66,562) (2,300) - 199,681 758,602 76,169 207,445 100,024 (68,500) 12,360,406 14,205,010 670,000 (60,361) (1,182,846) 112,561 (30,437) (20,322) 102,802 222,101 789,577 12,694 313,600 17,250 (71,500) 875,119 2,391,481 (14,173,080) (3.329,152) (22,277,424) (783,215) 24,369,855 28,084,238 630,621 3,103,000 (28,751,009) (140,179) (162,500) 244,321 208,227 (295,500) (18,295,396) 6,069,421 (6.461,741) 55,450,000 (49,471,431) - - (209,335) (318,223) (86,281) 7,652 4,980,062 808,486 (3,648,000) (10,598,874) (306,577) (275,000) 51,436 - 55,800 (8,889,130) 2,424,333 2,873,611 69,857,000 (66,671,428) (457,000) (752,000) (169,840) (282,573) - 3,234 6,825,337 889,676 3,672,032 4,561,708 $ 327,688 3,344,344 3,672,032 $ BLUE RIDGE BANTCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) December 3L 2013 and 2012 SUPPLEMENTAL INFORMATION Interest Paid Income taxes paid Preferred stock dividends accraed, not paid Real estate acquired by foreclosure 2013 2012 $ $ 1,588,631 540,000 30,750 175,000 1,786,675 275,000 28,670 140,000 The accompanying notes are an integral part ofthis statement. BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Notel. Nature ofOperations and Significant Accounting Policies: Nature of Operations: Blue Ridge Bankshares, Inc. ("Company") through Blue Ridge Bank, Inc. ("Bank") operates under a charter issued by the Commonwealth of Virginia and provides commercial banking services. As a state chartered bank, the Bank is subject to regulation by the Virginia Bureau of Financial Institutions and The Federal Reserve Bank of Richmond. The Bank provides services to customers located primarily in the Piedmont and Shenandoah Valley regions ofthe Commonwealth of Virginia. Consolidation Policy: The consolidated financial statements include the accoimts of Blue Ridge Bankshares, Inc. and its whoUy-owned subsidiaries. Blue Ridge Bank, Inc., Page VaUey Investments, LLC, and PVB Properties, LLC. All significant intercompany balances and transactions have been eliminated. Use of Estimates in the Preparation of Financial Statements: In preparing the fmancial statements, management is required to make estimates and assumptions that affect the reported amoimts in those statements. Actual results could dififer significantly from those estimates. A material estimate that is particularly susceptible to significant changes is the determination of the allowance for loan losses, which is sensitive to changes in local and national economic conditions. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and correspondent balances in other financial institutions. Investment Securities: Management determines the appropriate classification of securities at the time of purchase. If management has the intent and the Company has the abiUty at the time of purchase to hold securities until maturity, they are classified as held to maturity and carried at amortized historical cost. Securities not intended to be held to maturity are classified as available for sale and carried at fair value. Securities available for sale are intended to be used as part of the Company's asset and liabiUty management strategy and may be sold in response to changes in interest rates, prepayment risk or other similar factors. Amortization of premiums and accretion of discounts on securities are reported as adjustments to interest income using the effective interest method. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold using the specific identification method. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to shareholders' equity, whereas reaUzed gains and losses flow through the Company's current eamings. (Continued) BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 1. Nature of Operations and Significant Accounting Policies (Continued): Loans: Loans that management has the intent and abiUty to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accmed on the unpaid principal balance. Loan origination fees and costs are deferred and recognized as an adjustment ofthe yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan that are carried on the balance sheet net of any uneamed discount and the allowance for loan losses. Interest income on loans is based generaUy on the daily amount of principal outstanding. The accmal of interest on impaired loans is discontinued when, in the opinion of management, the interest income recognized will not be coUected. Receipts on impaired loans are appUed to principal until the loan is brought current and coUection is reasonably assured. Loans are considered past due based on the contractual terms ofthe loan. AUowance for Loan Losses: The aUowance for loan losses is maintained at a level beUeved to be adequate by management to absorb probable losses inherent in the portfolio and is based on the size and current risk characteristics of the loan portfoUo, an assessment of individual problem loans and actual loss experience, current economic events in specific industries and other pertinent factors such as regulatory guidance and general economic conditions. The allowance is established through a provision for loan losses charged to eamings. Loans identified as losses and deemed uncollectible by management are charged to the allowance. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management. The allowance consists of specific, generai and unallocated components. The specific component relates to loans that are classified as impaired, for which an aUowance is established when the fair value ofthe loan is lower than its canying value. The generai component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. Historical losses are categorized into risk-similar loan pools and a loss ratio factor is applied to each group's loan balances to determine the aUocation. The loss ratio factor is based on average loss history for the current year and two prior years. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the aUowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfoUo. Qualitative and environmental factors include extemal risk factors that management believes affect the overall lending environment of the Company. Environmental factors that management ofthe Company routmely analyze include levels and trends in delinquencies and impaired loans, levels and trends in charge-offs and recoveries, trends in volume and terms of loans, effects of changes in risk selection and underwriting practices, experience, abUity, depth of lending management and staff, national and local economic trends, conditions such as unemployment rates, housing statistics, banking industry conditions, and the effect of changes in credit concentrations. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected ftiture cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current economic trends, all of which may be susceptible to significant change. (Continued) 10 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 1. Nature ofOperations and Significant Accounting Policies (Continued): AUowance for Loan Losses (Continued): There have been no significant changes to the methods used to determine the aUowance for loan losses during the years ended December 31,2013 and 2012. Loan Charge-off Policies: Consumer loans are generally fiilly or partially charged down to the fair value of collateral securing the asset when the loan is 120 days past due unless the loan is well secured and in the process of coUection. All other loans are generally charged down to the net reaUzable value when the loan is 90 days past due or when current information confirms aU or part of a specific loan to be uncollectible. Bank Owned Life Insurance: The Bank owns and is the beneficiary of several single premium life insurance contracts insuring key employees of the Bank. The poUcies are stated at cash surtender value, with changes in value recorded in income for the year. Advertising Costs: Advertising costs are expensed as incurred. Bank Premises and Equipment: Bank premises and equipment are stated at cost, less any accumulated depreciation. Depreciation is recognized over the estimated useful lives ofthe assets on a straight-line basis. Maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are reflected in noninterest income or expense. Income Taxes: Amounts provided for income tax expense are based on income reported for financial statement purposes rather than amounts currently payable under income tax laws. Deferred taxes, which arise principally from temporary differences between the period in which certain income and expenses are recognized for financial accounting purposes and the period in which they affect taxable income, are included in the amounts provided for income taxes. Eamings Per Share: Eamings per share are based on the weighted average number of shares outstanding. Financial Instmments: In the ordinary course of business the Bank has entered into commitments to extend credit. Such financial instmments are recorded in the fmancial statements when they are funded. (Continued) 11 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 1. Nature of Operations and Significant Accounting Policies (Continued): Reclassified Amounts: Certain amounts have been reclassified fi-om prior year financial statements to ensure consistent presentation with current year araounts. These reclassifications are for presentation purposes, and have no impact on overaU financial information. Subsequent Events: Subsequent events have been evaluated through March 5, 2014, the date the financial statements were available to be issued. Note 2. Cash and Due From Banks The Bank has compensating balance agreements with its correspondent bank and The Federal Reserve Bank of Richmond. The total included in cash and due fi-om banks related to these agreements at December 31, 2013 and 2012 was $275,000. Note 3. Investment Securities The amortized cost and fair values oflnvestment securities are as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31,2013 Available for Sale Mortgage backed securities Corporate bonds Equity securities Held to Maturitv State and municipal Mortgage backed securities Total Investment Securities December 31,2012 Available for Sale Mortgage backed securities Equity securities Held to Maturitv State and municipal Mortgage backed securities Total Investment Securities $ 28,427,935 1,975,462 613,731 31,017,128 15,408,700 3,078 15,411,778 $ 46,428,906 Amortized Cost $ 40,931,965 860,751 41,792,716 $ $ $ 143,572 20,235 24,345 188,152 343,376 18 343,394 531,546 $ 777,170 6,905 14,567 798,642 $ 27,794,337 1,988,792 623,509 30,406,638 348,026 12 348,038 $ 1,146,680 15,404,050 3,084 15,407,134 $ 45,813,772 Gross Unrealized Gains Gross Unrealized Losses Fair Value 281,110 42,237 323,347 $ $ 112,131 47,235 159,366 $ 41,100,944 855,753 41,956,697 2,500 - 2,500 161,866 13,554,835 13,705 13,568,540 $ 55,525,237 12,804,115 13,629 12,817,744 $ 54,610,460 753,220 76 753,296 $ 1,076,643 (Continued) 12 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 3. Investment Securities (Continued) Proceeds fi-om sales, caUs and maturities of available for sale securities during 2013 and 2012 were $24,369,855 and $15,588,188, resulting in gains of $66,562 and $30,437 for 2013 and 2012, respectively. During 2013 and 2012, held to maturity securities witii book values of $630,621 and $789,879, respectively, were either called or matured resulting in no gain or loss for both years. Investment securities with an approximate fan- value of $3,119,000 and $6,141,000, at December 31, 2013 and 2012, respectively, were pledged to secure pubUc deposits and for other purposes required by law and as collateral for the Bank's Une of credit with the Federal Home Loan Bank of Atlanta. The amortized cost and fair value of investment securities at December 31, 2013, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because bortowers may have the right to call or prepay obligations with or without prepayment penalties. Securities Available for Sale Amortized Cost Fair Value Seciu-ities Held to Maturity Amortized Cost Fair Value Amounts maturing: Within one year After one year through five years After five years through ten years After ten years Equity investments with no maturity Total 342,768 $ 344,584 2,467,331 2,514,340 210,624 212,494 4,520,934 23,415,132 30,403,397 4,539,290 22,729,499 29,783,129 6,570,774 8,287,612 15,411,778 6,661,779 8,188,277 15,407,134 613,731 $ 31,017,128 623,509 $ 30,406,638 $ 15,411,778 $ 15,407,134 Information pertaining to securities with gross unrealized losses at December 31, 2013 and 2012 aggregated by investment category and length of time that individual securities have been in a continuous loss position is as follows: 2013 Less than 12 Months Gross Unrealized Losses Fair Value 12 Months or Greater Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses State and Municipal $ Mortgage backed Corporate bonds Equity securities Total $_ 5,514,512 5,254,104 993,095 8,400 11,770,111 $ $ (310,991) (134,941) (6,905) (100) (452,937) $ 462,965 14,207,225 - 364,155 $ 15,034,345 S (37,035) $ (642,229) - (14,467) (693,731) S 1 5,977,477 19,461,329 993,095 372,555 26,804,456 $ (348,026) (777,170) (6,905) (14,567) $ (1,146,668) (Continued) 13 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 3. Investment Securities (Continued) 2012 State and Municipal Mortgage backed Equity securities Total Less than 12 Months Gross Unrealized Losses Fair Value 12 Months or Greater Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses $ 497,500 17,871,375 267,789 $ 18,636,664 $ $ (2,500) (89,545) (39,593) (131,638) $ 1,465,030 85,174 $ 1,550,204 $ $ - $ 497,500 19,336,405 (22,586) (7,642) 352,963 (30,228) $ 20,186,868 $ $ (2,500) (112,131) (47,235) (161,866) Management evaluates securities for other-than-temporary unpairment on a quarterly basis, and more frequently when economic or market concems wartant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects ofthe issuer, and (3) the intent and abiUty ofthe Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. At December 31, 2013, the Company had securities which have depreciated .5% in value from the amortized cost. In analyzing an issuer's fmancial condition, management considers whether the securities are issued by the federal govemment or its agencies, whether dovmgrades by bond rating agencies have occurred, and the results of reviews ofthe issuer's financial condition. As management has the ability and intent to hold debt securities until maturity, or for the foreseeable future if classified as available-for-sale, no declines are deemed to be other-than-temporary. Note 4. Loans Receivable and Related Allowance for Loan Losses The following table summarizes the primary segments ofthe loan portfolio as of December 31, 2013 and 2012 (in thousands): December 31,2013 Residential loans Commercial real estate loans Non owner-occupied & multi-family Ovraer-occupied & farmland Constmction loans Residential constraction loans Commercial constraction & raw land loans Home equity loans Consumer loans Commercial/farm loans Municipal/other loans IndividuaUy Evaluated for Impairment Collectively Evaluated for Impairment Total $ 111 $ 61,416 $ 61,527 908 - - 21,612 34,284 21,612 35,192 809 809 10,385 2,547 1,510 11,712 10,666 (102) 154,839 10,385 2,547 1,510 11,712 10,666 (102) S 155,858 Uneamed income on loans Total $ 1,019 S (Continued) 14 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 4. Loans Receivable and Related Allowance for Loan Losses (Continued) December 31,2012 Residential loans Commercial real estate loans Non owner-occupied & multi-family Owner-occupied & farmland Constraction loans Residential constraction loans Commercial constraction & raw land loans Home equity loans Consumer loans Commercial/farm loans Municipal/other loans Uneamed income on loans Total $ Individually Evaluated for Impairment CoUectively Evaluated for Impairment Total $ 433 $ 51,183 $ 51,616 918 933 - - 23 - - - - 2,307 24,922 18,822 25,840 19,755 569 569 7,744 2,220 1,832 7,710 10,136 (317) 124,821 7,744 2,243 1,832 7,710 10,136 (317) $ 127,128 $ The segments of the Bank's loan portfolio are disaggregated to a level that allows management to monitor risk and perforraance. In reviewing risk, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) the commercial loan portfolio; (ii) the commercial real estate loan portfolio; (iii) the municipal loan portfolio; (iv) the consumer loan portfolio; and, (v) the residential loan portfolio. The commercial loan segment consists of loans made for the purpose of financing the activities of commercial customers. The commercial real estate ("CRE") loan segment includes both non-owner occupied and owner occupied CRE loans, in addition to multifamily residential and commercial real estate constmction loans. The municipal loan segment includes loans made to local govemments and govemmental authorities in the normal course of their operations. The consumer loans consist of motor vehicle loans, savings account loans, personal lines of credit, overdraft loans, other types of secured consumer loans, and unsecured personal loans. The residential loan segment is made up of fixed rate and adjustable rate single-family amortizing term loans, which are primarily first liens. The residential loan segment also includes the Bank's home equity loan portfoUo, which are generally second liens. Management estabUshes the aUowance for loan losses based upon its evaluation of the pertinent factors underlying the types and quality of loans in the portfoUo. Commercial loans and commercial real estate loans are reviewed on a regular basis with a focus on larger loans along with loans which have experienced past payment or financial deficiencies. Certain loans including commercial and other loans which are experiencing payment or fmancial difficulties, loans in industries for which economic trends are negative and loans which are of heightened concem to management are included on the Bank's "watch list". Watch list loans, if significant, and larger commercial loans and commercial real estate loans which are 90 days or more past due are selected for impairment testing. These loans are analyzed to determine if they are "impaired", which means that it is probable that all amounts will not be coUected according to the contractual terms of the loan agreement. (Continued) 15 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 4. Loans Receivable and Related Allowance for Loan Losses (Continued) Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of coUecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfaUs on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length ofthe delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfaU in relation to the principal and interest owed. The Bank does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restmcturing agreement. Once the determination has been made that a loan is impaired, the determination of whether a specific aUocation of the allowance is necessary is measured by comparing the recorded mvestment in the loan to the fair value ofthe loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan's effective interest rate; (b) the loan's observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method, which is required for loans that are collateral dependent. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a monthly basis. The Bank's policy for recognizing interest income on impaired loans does not differ from its overaU policy for interest recognition. The Bank had no material impaired loans during 2013 or 2012. Management uses a nine point intemal risk rating system to monitor the credit quality ofthe overall loan portfoUo. The first five categories are considered not criticized, and are aggregated as "Pass" rated. The criticized rating categories utilized by management generally follow Bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the orderly liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Loans in the Doubtful category have all the weaknesses found in Substandard loans, with the added provision that the weaknesses raake collection of debt in full highly questionable and improbable. Any portion ofa loan that has been charged off is placed in the Loss category. To help ensure that risk ratings are accurate and reflect the present and future capacity of bortowers to repay a loan as agreed, the Bank has a stmctured loan rating process with both intemal and extemal oversight. The Bank's loan officers are responsible for the timely and accurate risk rating ofthe loans in their portfolios at origination and on an ongoing basis. The loan processing department confirms the appropriate risk grade at origination and monitors all subsequent changes to risk ratings. The Bank's Loan Committee reviews risk grades when approving a loan and approves all risk rating changes, except those made within the pass risk ratings. The Bank engages an extemal consultant to conduct loan reviews on a semi-annual basis. Generally, the extemal consultant reviews relationships greater than $750,000 and all loans over $50,000 that are either in nonaccmal status, over 90 days past due, or that are adversely classified. The extemal consultant also reviews a sample of new loans during the year. The Bank's process requires the review and evaluation of an impaired loan to be updated at least quarterly. Loans in the Special Mention and Substandard categories that are collectively evaluated for irapairment are given separate consideration in the determination of the allowance. (Continued) 16 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 4. Loans Receivable and Related Allowance for Loan Losses (Continued) The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, and Doubtful within the intemal risk rating systera as of December 31,2013 and 2012 (in thousands): Pass Special Mention Substandard Doubtful Total December 31,2013 Commercial real estate loans Non owner-occupied &. multi-family Owner-occupied & farmland $ 18,188 33,530 $ 3,424 754 $ Construction loans Residential construction loans Commercial construction & raw land loans Commercial/farm loans Municipal/other loans Purchased Loan Premiums Less: Uneamed revenue Total 809 10,140 11,410 9,603 $ 83,680 255 (236) $ 83.699 _ 233 267 1,063 5,741 $ $ 908 _ 12 - - 920 $ - - - 35 - 35 $ $ 5,741 920 $ 35 $ Pass Special Mention Substandard Doubtful Total December 31,2012 Commercial real estate loans Non owner-occupied & multi-family Owner-occupied & fannland 21,952 18,018 $ $ 2,970 804 Construction loans Residential construction loans Commercial construction & raw land loans Commercial/farm loans Municipal/other loans Less: Uneamed revenue Total 569 7,494 7,654 9,002 $ 64.689 (219) $ 64,470 $ , 236 12 1,134 5,156 918 933 - 14 - - 1,865 44 44 $ 5,156 $ 1,865 44 $ 21,612 35,192 809 10,385 11,712 10.666 90,376 255 (236) 90,395 25,840 19,755 569 7,744 7,710 10,136 71,754 (219) 71,535 The following table presents (in thousands) the classes of the loan portfolio for which loan perforraance is the priraary credit quality indicator as of December 31, 2013 and 2012: December 31,2013 Performing loans Non-performing loans Less: Uneamed revenue Total December 31,2012 Performing loans Non-performing loans Less: Uneamed revenue Total (Continued) Home Equity Loans 2,547 2,547 (6) 2,541 Home Equity Loans 2,220 23 2,243 2,243 $ $ $ $ $ $ Residential Loans $ 61,527 $ 61,527 (92) $ 61,435 Residential Loans $ 51,261 355 $ 51,616 $ 51,616 17 Consumer Loans 1,505 5 1,510 (23) 1,487 Consumer Loans 1,832 1,832 (98) 1,734 $ $ $ $ $ $ Total 65,579 5 65,584 (121) 65,463 $ $ "1~ Total $ T $ 55,313 378 55,691 (98) 55,593 BLUE RDDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 4. Loans Receivable and Related Allowance for Loan Losses (Continued) An allowance for loan and lease losses ("ALLL") is maintained to absorb losses from the loan portfolio. The ALLL is based on raanageraent's continuing evaluation ofthe risk characteristics and credit quality of the loan portfoUo, assessraent of curtent economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans. Management further monitors the performance and credit quality of the loan portfolio by analyzing the age ofthe portfolio as determmed by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio sumraarized by the aging categories of performing loans and nonaccmal loans as of December 31, 2013 and 2012 (in thousands): December 31,2013 Residential loans Commercial real estate loans Non owner-occupied/multi-family Owner-occupied & farmland Construction loans Residential construction loans Commercial construction & raw land loans Home equity loans Consumer loans Commercial/farm loans Municipal/other loans Uneamed income on loans Total T December 31,2012 Residential loans Commercial real estate loans Non owner-occupied/multi-family Owner-occupied & farmland Construction loans Residential construction loans Commercial construction & raw land loans Home equity loans Consumer loans Commercial/farm loans Municipal/other loans Uneamed income on loans Tota! T Current $ 61,413 30-59 Days Past Due 60- Days 89 Past Due $ 95 $ 19 90 Days+ Past Due $ Total Past Due $ 114 Non- Accrual $ Total Loans $ 61,527 21,612 35,192 809 10,385 2,547 1,501 11,609 10,666 (102) 155,632 . - . . . 4 82 - $ 181 $ - . . - - . . - . 19 $ - . _ - - . . - . . $ - . _ - . 4 82 - - 200 $ - - - - - 5 21 - - 26 21.612 35,192 809 10,385 2,547 1,510 11,712 10,666 (102) 155,858 F 30-59 Davs Past Due 60- Days 89 Past Due S 826 $ 21 Current $ 50,414 90 Days+ Past Due $ Total Past Due $ 847 Non- Accrual $ 355 Total Loans $ 51,616 25.840 19,755 569 7,744 2,211 1.827 7,681 10,136 (317) 125,860 . - _ - 9 5 . - $ 840 $ - . , - . - - - . 21 $ - - _ - - . 18 - - 18 $ - . _ - 9 5 18 - - 879 $ - - - 25,840 19,755 569 - 23 - 11 - - 389 7,744 2.243 1,832 7,710 10,136 (317) 127,128 $" The classes described above provide the starting point for the ALLL analysis. Management tracks the historical net charge-off activity by loan class. A historical charge-off factor is calculated and applied to each class. Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. Other qualitative factors are also considered. (Continued) 18 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 4. Loans Receivable and Related Allowance for Loan Losses (Continued) "Pass" rated credits are segregated from "Criticized" credits for the application of qualitative factors. Management has identified a nuraber of qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The qualitative factors are evaluated quarterly and updated using inforraation obtained from intemal, regulatory, and govemmental sources. The Bank's qualitative factors consist of national and local econoraic trends and conditions; levels of and trends in delinquency rates and non-accmal loans; levels of and frends in the Bank's borrowers in bankraptcy; trends in voluraes and terms of loans; effects of changes in lending policies and strategies; and concenfrations of credit from a loan type, industry and/or geographic standpoint. Management reviews the loan portfoUo on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALLL. When infi)rmation confirms all or part of specific loans to be imcoUectible, these amounts are promptly charged off against the ALLL. The following tables sumraarize the priraary segraents of the ALLL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for irapairraent as of December 31, 2013 and 2012. Activity in the allowance is presented for the each ofthe twelve months ended December 31, 2013 and 2012 (in thousands): Commercial Commercial Real Estate Consumer Residential Municipal Unallocated Total ALLL Balance at December 31, 2012 Charge-offs Recoveries Provision ALLL Balance at December 31, 2013 Individually evaluated for impairment Collectively evaluated for impairment $ $ $ $ 284 - - 22 306 - 306 $ - X $ $ 751 - - 322 S $ 43 (34) 13 34 360 - - (38) 1,073 $ 56 J_ 322 - 1,073 $ $ - $ - - 56 $ 322 $ 314 $ $ $ $ 344 - - (30) 314 1^ $ $ - - - - - - - $ • — L $ 1,782 (34) 13 310 2,071 - $ 2,071 CommerGial Commercial Real Estate Consumer Residential Municipal Unallocated Total ALLL Balance at December 31, 2011 Charge-offs Recoveries Provision ALLL Balance at December 31, 2012 Individually evaluated for impainnent Collectively evaluated for impairment (Continued) $ $ $ $ 262 (14) - 36 284 _ $ . $ $ 665 (267) - 353 751 . $ $ $ 56 (39) 16 10 43 . $ $ $ 158 (41) - 243 360 _ $ $ $ 304 - - 40 344 _ $ $ $ $ 12 - - (12) 1,457 (361) 16 670 - _ $ $ 1,782 . 284 $ 751 $ 43 $ 360 $ 344 $ - $ 1,782 15 1 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 4. Loans Receivable and Related Allowance for Loan Losses (Continued) The following is a sumraary of the changes in the allowance for loan losses for the years ended Deceraber 31, 2013 and 2012 (in thousands): Balance, beginning $ Charge-offs Recoveries Provisk)n Balance, ending _$_ 2013 2012 1,782 (34) 13 310 2,071 $ $ 1,457 (361) 16 670 1,782 The allowance for loan losses is based on estiraates, and actual losses will vary frora current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, resuU in an ALLL that is representative of the risk found in the components of the portfolio at any given date. At Deceraber 31, 2013 loans with a carrying araount of $50.2 raillion were pledged to secure short- terra and long-terra bortowings with the Federal Horae Loan Bank. Nonaccmal loans were approxiraately $26,000 and $389,000 at December 31, 2013 and 2012, respectively. Loans held for sale consists ofthe Bank's comraitraent to purchase residential mortgage loan fimdings originated primarily in Virginia and North Carolina by another fmancial institution. The Bank reviews loan documentation for each specific raortgage prior to funding to ensure it conforms to the terms ofthe agreeraent. The mortgages funded through this program must have already obtained a purchase commitment (takeout) frora another financial institution as part ofthe conditions ofthe Bank's fitnding. The Bank earns Prime less .50% on a daily floating rate plus additional loan fees on all loans held in this category. The Bank's maxiraura coramitraent under this agreeraent was $3,000,000 and $15,000,000 at Deceraber 31, 2013 and 2012, respectively, and the balance of loans held for sale was zero and $10,792,727 at December 31, 2013 and 2012, respectively. The large year-to-year decline is atfributable to the precipitous decline in raortgage refinancings in the 2°'^ half of 2013 due to an increase in interest rates. The Bank is not comraitted to lend additional ftmds to borrowers whose loans are considered irapaired or whose loans have been raodified. The Bank has a loan with a balance of approxiraately $833,000 and $897,000 at December 31,2013 and 2012 that was involved in bankmptcy litigation. The loan was for the benefit of a municipality. Funds advanced for the loan were held in the custody ofthe corapany that declared bankmptcy, resulting in the mtmicipality not taking in its direct possession the ftill note amount. The municipality has continued to make payraents on the note and it was curtent at December 31,2013 and 2012. (Continued) 20 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 5. Bank Premises and Equipment Bank premises and equipraent are summarized as follows: Buildings and land Fumiture, fixtures and equipment Software Total Cost Less: Accumulated depreciation Total, net of depreciation 2013 $ 1,993,632 $ 1,894,732 221,343 4,109,707 2,279,064 $ 1,830,643 $ 2012 2,157,796 1,846,545 220,015 4,224,356 2,236,403 1,987,953 Depreciation expense for 2013 and 2012 was $199,681 and $222,101, respectively. Note 6. Tirae Deposits The aggregate araounts of certificates of deposit, with a rainiraura denoraination of $100,000 were $50,554,000 and $52,269,000 at Deceraber 31, 2013 and 2012, respectively. Time deposits include brokered deposits purchased through the Certificate of Deposit Account Registry Service (CDARS). The balance of these time deposits was approxiraately $15,231,000 and $26,580,000 at December 31, 2013 and 2012, respectively. As long as the Bank raaintains its ctmrent rating through CDARS rating service, it may purchase deposits up to 15% of its assets as ofthe most recent quarter end. At December 31, 2013, the Bank could have purchased up to approximately $32,100,000 in deposits through CDARS. The decision to utilize this funding depends on the Bank's liquidity needs and the pricing of CDARS deposits compared to other potential funding sources. At Deceraber 31,2013, the scheduled maturities of time deposits are as follows: 2014 2015 2016 2017 2018 2019 and beyond $ Maturities 37,074,444 19,553,073 23,436,551 7,041,705 3,630,653 930,252 Total $ 91,666,678 (Continued) 21 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 7. Borrowings The Bank has a line of credit from the Federal Home Loan Bank of Atlanta (FHLB) secured by the Bank's real estate loan portfolio and certain pledged securities. The FHLB will lend up to 25% ofthe Bank's total assets at the prior quarter end, subject to certain eligibility requirements, including adequate collateral. At December 31, 2013, the Bank had borrowings from FHLB that totaled $26,757,000. The interest rate on the bortowings range from .38%) to 3.96% depending on stracture and maturity. The bortowings at year-end also required the Bank to own $1,529,000 of FHLB's stock. This araount is included with restricted investments on the consoUdated balance sheets. During 2012, the Bank refinanced $11,000,000 of its fixed rate debt to take advantage ofthe low rate interest environment by extending raaturities. The refinancing of this debt created fees of approxiraately $457,000, which were capitalized according to accounting standards and are included on the balance sheet as a reduction ofthe outstanding principal. This araount is being amortized over the life ofthe new debt. The principal on FHLB borrowings matures as follows: $ 2014 2015 2016 2017 2018 2019 and beyond Total principal Capitalized refinancing fees Bortowings, net J Maturities 6,171,428 2,128,572 2,500,000 - 14,957,000 1,000,000 26,757,000 (368,139) 26,388,861 At Deceraber 31, 2012, the Bank had fixed rate advances from the Federal Home Loan Bank of Atlanta (FHLB) totaling $20,778,429. In addition the Bank has established lines of credit for federal funds purchases of $5,000,000 with its correspondent bank. The balance was zero at December 31, 2013 and Deceraber 31,2012. Note 8. Preferred Stock The Company is authorized to issue 250,000 shares of preferred stock at a par value of $50 per share. The Company issued 4,500 shares of Senior Non-Curaulative Perpetual Preferred Stock, Series A to the United States Departraent of Treasury as part of the Sraall Business Lending Fund (SBLF) program. The shares were issued at $1,000 per share, which is also the liquidation value, for a total issuance of $4,500,000. Dividend rates fluctuated with the araount of qualified sraall business lending as defmed by the SBLF program. As of Deceraber 31, 2013, the dividend rate was 1.00%). The dividend rate wiU becorae 9% during 2016 ifthe preferted stock is still outstanding. (Continued) 22 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 9. Common Stock The Corapany has 5,000,000 shares of no par value authorized coraraon stock of which 934,539 and 942,221 shares were issued and outstanding at Deceraber 31,2013 and 2012, respectively. Frora time to time, we repurchase shares of our Coraraon Stock under share repurchase prograras authorized by our Board of Directors. Shares repurchased constitute authorized, but unissued shares under the Virginia laws under which we are incorporated. Additionally, our Common Stock has no par or stated value. Accordingly, we record the full value of share repurchases, upon the frade date, against Coraraon Stock except when to do so would result in a negative balance in our Coraraon Stock account. Note 10. Other Real Estate Owned (Foreclosed Assets) The Bank had the foUowing amounts in Other Real Estate Owned at December 31,2013 and 2012: Real Estate HeU Land 1-4 famify Total Estiraated Realizable Value 2012 2013 $ $ 140,000 $ - 140,000 $ 140,000 300,000 440,000 The estiraated realizable value is the net amount Bank management expects to realize from the sale of the foreclosed upon real estate. The net realizable amount takes into account realtor commissions and other anticipated costs associated with the disposition of real estate. The property currently held in Other Real Estate Owned was obtained during 2012. Adjustments to reduce the loan balance to net realizable value at the tirae the property was acquired were made to the Allowance for Loan Losses. Bank manageraent continues to raonitor the properties for changes in value. Any decline in value would be charged to operations. Expenses associated with the raaintenance and upkeep of Other Real Estate Owned are recorded as Other Real Estate Expense. The balance of Other Real Estate Owned is included with Other Assets on the Company's Balance Sheet. Note 11. Goodwill The balance in goodwill is the resuh ofa branch acquisition in Charlottesville in 2011. The Bank purchased the branch in an effort to expand its geographic service area by targeting an attractive market with the potential to provide continued balance sheet growth and new opportunities for the Bank. Bank raanageraent wiU evaluate at least annually the recorded value of the goodwill. In the event the asset suffers a decline in value based on criteria established in goveming accounting standards, an irapairment will be recorded. (Continued) 23 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 12. Disclosures About Fair Value of Financial Instruments In accordance with the requireraents of U.S. GAAP, fair value disclosure estimates are being raade for like kind financial instruments. Fair value estimates are based on present value of expected ftiture cash flows, quoted market prices of siraUar financial instraraents, if available, and other valuation techniques. These valuations are significantly affected by the discount rates, cash flow assuraptions and risk assuraptions used. Therefore, the fair value estiraates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settleraent ofthe financial instruments. U.S. GAAP excludes certain iteras frora the disclosure requireraents, and accordingly, the aggregate fair value of araounts presented do not represent the underlying value of the Company. Manageraent does not have the intention to dispose of a significant portion of its financial instraraents and, therefore, the unrealized gains or losses should not be interpreted as a forecast of future eamings and cash flows. The following December 31,2013 and 2012: table represents the estiraates of fair value of financial instruraents as of Financial Assets Cash and short-term investments Federal funds sold Investment securities Loans held for sale Net loans held for investment Accrued interest receivable Bank-owned life insurance Financial Liabilities Deposits Other borrowed funds Federal fimds purchased Accrued interest payable 2013 $ Carrying Carrying Amount Amount 4,561,708 545,000 47,712,416 - 153,786,879 751,464 2,283,800 168,345,328 26,388,861 167,556 Fair Value 4,561,708 545,000 47,707,772 - 158,381,000 751,464 2,283,800 169,816,000 26,651,000 . 167,556 2012 $ $ Carrying Amount 3,672,032 3,648,000 56,372.941 10,792,727 125,345,870 697,128 2,215,300 Fair Value 3,672,032 3,648,000 57,124,197 10,792,727 132,812,000 697,128 2,215,300 168,737,648 20,334,123 . .. 170,474,000 20,999,000 184,428 184,428 The following raethods and assumptions are used to estimate the fair value of financial instraments: Cash and short term investments: The carrying araount for cash and short-terra investraents is a reasonable estiraate of fair value. Short-term investments consist of certificates of deposit in other banks. Investment securities: Fair values for investment securities are based on quoted raarket prices, if available. If raarket prices are not avaUable, quoted raarket prices of sirailar securities are used. Loans held for investment: The fair value of loans held for investment is based on a discounted value of the estimated ftiture cash flow expected to be received through the earUer ofthe loan payout or the loan repricing date. The interest rate applied m the discounted cash flow method reflects average current rates on similar loans adjusted for relative risk and maturity. Fair values of impaired loans are estimated based on estiraates of net realization of underlying collateral. Loans held for sale: Loans held for sale are usually held for a short period of tirae ranging frora 10 to 60 days. The carrying value of these loans approximates their fair value. (Continued) 24 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 12. Disclosures About Fair Value of Financial Instruments (Continued) Deposits: The carrying araount is considered a reasonable estiraate of fair value for deraand and savings deposits and other variable rate deposit accounts. The fair value of fixed maturity certificates of deposit is estimated by a discounted cash flow method using the interest rates curtently offered for deposits of sirailar reraaining raaturities. Accrued interest receivable and payable: The carrying amounts of accraed interest receivable and payable approximate their fair values. Bank-owned life insurance: The carrying and fair value amotmt of bank-owned life insurance is based on the present value of the receivable from the executive. The cash surtender values of the policies exceed the carrying amounts as ofthe balance sheet date. Off-balance sheet instruments: The fair value of commitments is estimated using the fees curtently charged to enter into similar agreements, taking into account the reraaining terms ofthe agreeraents and the present credit standing ofthe customers. The amount of fees curtently charged on commitments is detennined to be insignificant and therefore the fair value and carrying value of off-balance sheet instraments are not shown. Note 13. Fair Value Measurements U.S. GAAP defines fair value, establishes a framework for measuring fair value, establishes a three- level valuation hierarchy for disclosure of fair value raeasurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as ofthe raeasureraent date. The three levels are defined as follows: Level 1 - Inputs to the valuation raethodology are quoted prices (unadjusted) for identical assets or liabilities in active raarkets. Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and mputs that are observable for the asset or liabilities, either directly or indirectly, for substantially the full term ofthe fmancial instrament. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The following sections provide a description of the valuation raethodologies used for instraraents measured at fair value, as well as the general classification of such instraraents pursuant to the valuation hierarchy: (Continued) 25 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 13. Fair Value Measurements (Continued) Securities: Where quoted prices are available in an active market, securities are classified within Level 1 ofthe valuation hierarchy. Level 1 securities would include highly liquid govemraent bonds, raortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. Level 2 securities would include U.S. agency securities, raortgage-backed agency securities, obUgations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less fransparency around inputs to the valuation, securities are classified within Level 3 ofthe valuation hierarchy. Currentiy, all ofthe Company's securities are considered to be Level 2 securities. Fair values of assets and liabUities measured on a recurring basis at Deceraber 31,2013 and 2012 are as foUows: Fair Value Measurements at Reporting Date Using Fau-Value (Level 1) (Level 2) (Level 3) December 31,2013 Available for-sale securities Bank-owned life insurance Total $ 30,406,638 2,283,800 $ 32,690,438 December 31,2012 Available for-sale securities Bank-ovraed life insurance Total $ 41,956,697 2,215,300 $ 44,171,997 $ $ $ $ - $ 30,406,638 2,283,800 -__ ;__ $ 32,690,438 $ $^ -_ $ 41,956,697 - -__ 2,215,300 -_ $ 44,171,997 $ _ $ Gains and losses (realized and um-ealized) included in eamings for the year are reported in noninterest incorae as foUows: December 31,2013: Total gains included in eamings for the year Change in unrealized gains or losses relating to assets still held at year end December 31,2012: Total gains included in eamings for the year Change in imrealized gains or losses relating to assets stUl held at year end $ $ $ $ 66,562 (765,741) 30,437 25,941 (Continued) 26 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 13. Fair Value Measurements (Continued) Fair values of assets raeasured on a non-recmring basis at Deceraber 31,2013 and 2012 are as follows: Fair Value Measurements at Reporting Date Using December 31,2013 Other real estate owned Impaired loans Total December 31,2012 Other real estate owned Impaired loans Total Fair Value (Level 1) (Level 2) (Level 3) $ $ 140,000 140,000 $ 440,000 440,000 $ $ s $ $ - - - $ $ $ $ - - - 140,000 140,000 440,000 440,000 Note 14. Income Taxes A reconciliation between the amount of total incorae taxes and the araount coraputed by raultiplying income by the applicable federal mcome tax rates is as follows: 2013 2012 Incorae taxes coraputed at the applicable federal income tax rate Tax exerapt raunicipal income Income from life insurance Other, net Incorae Tax Expense $ 874,492 (147,665) (23,290) 6,155 709,692 $ $ 706,919 (142,309) (24,310) 22,512 562,812 ^ —— - • •— "' • ™ — L= ' The current and deferred coraponents of income tax expense are as follows: Current tax expense Deferred tax expense Income Tax Expense 2013 2012 $ $ 873,231 (163,539) 709,692 $ $ 623,173 (60,361) 562,812 Deferred tax assets have been provided for temporary differences related to the allowance for loan losses, recognition of loan fee income, and deferred compensation agreements. Deferred tax liabilities have been provided for temporary differences related to depreciation and unrealized security losses. The net deferred tax asset was made up ofthe following: Deferted tax assets Deferred tax liabilities Net Defen-ed Tax Asset (Continued) 27 2013 1,341,723 (254,217) 1,087,506 $ $ 2012 865,522 (419,299) 446,223 $ $ BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 14. Income Taxes (Continued) This amount has been included as part of other assets on the balance sheet. The federal and Virginia incorae tax retums of the Corapany for 2010 to 2013 are subject to examination by the Intemal Revenue Service and the Virgmia Department of Taxation. Note 15. Employee Benefite The Bank has a 401(k) Profit Sharing Plan that covers eligible employees. Eraployees raay raake voluntary contributions subject to certain limits based on federal tax laws. The Bank matches 100 percent of an employee's confribution up to five percent of his or her salary. The Bank's Board of Directors raay make additional confributions at its discretion. Eraployees becorae eligible to participate after one year of continuous service and the benefits vest over a five-year period. For the years ended December 31, 2013 and 2012, total expenses attributable to this plan were $73,312 and $97,321, respectively. The Bank implemented an Employee Stock Ownership Plan (ESOP) in 2013 that covers eligible eraployees. Benefits in the Plan vest over a five-year period. Contributions to the plan are made at the discretion of the Board of Directors, and raay include both the matching component to employees' elective defenals into the 401(k) plan and any profit-sharing contributions. All shares issued and held by the Plan are considered outstanding in the computation of eamings per share. The Company recognized expenses of $51,484 for contributions to tiie Plan in 2013. The Plan held 1,600 shares of Company stock at Deceraber 31,2013. Note 16. Financial Instruments With Off-Balance-Sheet Risk In the norraal course of business, to raeet the credit needs of its custoraers, the Bank has made commiitinents to extend credit of $21,408,000 and $14,461,000 as of December 31, 2013 and 2012, respectively. These coraraitments represent a credit risk which is not recognized in the consolidated balance sheet. The Bank uses the same credit policies in making commitments as it does for the loans reflected in the balance sheet. Commitments to extend credit are generally made for a period of one year and interest rates are determined when ftinds are disbursed. Collateral and other securiiy for the loans are deterrained on a case-by-case basis. Since raany ofthe commitments are expected to expire without being drawn upon, the total comraitraent amounts do not necessarily represent future cash requirements. The distribution of coraraitments to extend credit approximates the distribution of loans outstanding. Note 17. Commitments and Contingencies In the ordinary course of business, the Bank has various outstanding coraraitments and contingent liabUities that are not reflected in the accorapanying consolidated fmancial stateraents. The coraraitments include a total of $612,500 for its interest in two Small Business Investinent Company investtnent prior to (SBIC) December 31, 2013, and anticipates capital calls for the reraaining araount to occur during the next one to three years. Manageraent does not anticipate any loss resulting frora these commitments. The Bank ftmded $887,500 of its total $1,500,000 ftinds. (Continued) 28 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCLiL STATEMENTS December 31,2013 Note 18. Lease Commitments The Bank leases real property in McGaheysviUe, Virginia for a branch that began operations in March 2003. The lease terra comraenced March 1, 2003 and continues for fifteen years, with five optional one year extensions. Base annual rent, including utilities, is $36,300 or $3,025 per month, adjusted aimually for inflation as listed by the Consuraer Price Index. The Bank leases real property in Albemarle County, Virginia for a branch that began operations in May 2012. The lease term commenced May 1, 2012 and continues for seven years with two optional five year extensions. Base annual rent, including utilities, is $81,400, or $6,783 per month, increasing at 2% annually. This lease replaced a lease at the original branch location that terrainated Deceraber 31, 2012 and had a base annual rent of $24,000, or $2,000 per month. At Deceraber 31, 2013, the aggregate ftiture rainiraura rental commitments (base rents) under this noncancellable operating lease are as follows: For the year ending December 31, 2014 2015 2016 2017 2018 Thereafter Total Annual Payraents 117,700 117,700 117,700 117,700 87,450 27,133 585,383 $ $ Rent expense for 2013 and 2012 was $128,548 and $138,510, respectively. Note 19. Concentration of Credit Risk The raajority of the Bank's loans are raade to custoraers in the Bank's tiade area and a substantial portion of the loans are secured by real estate. Accordingly, the ultimate coUectabUity of the Bank's loan portfolio is susceptible to changes in local econoraic conditions including the agribusiness sector and the real estate market. A sumraary of loans by type is shown in Note 4. Collateral requu-ed by the Bank is determined on an individual basis depending on the nature of the loan and the fmancial condition of the bonower. In addition, investment in state and municipal securities include govemraental entities within the Bank's raarket area. (Continued) 29 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 20. Transactions With Related Parties During the year, officers and directors and their related interests were customers of and had fransactions with the Bank during the normal course ofbusiness. These transactions were made on substantially the same terms as those prevailing for other customers and did not involve any abnormal risk. Loan fransactions to such related parties are shown in the following schedule: Total loans, beginning of year Advances Curtailments Total loans, end of year 2013 1,690,000 2,412,000 (1,960,000) 2,142,000 $ $ 2012 1,625,000 1,557,000 (1,492,000) 1,690,000 $ $ The Bank held December 31,2013 and 2012, respectively. related party deposits of approximately $3,285,000 and $3,277,000 at Note 21. Regulatory Matters The principal source of funds of Blue Ridge Bankshares, Inc. are dividends paid by its subsidiary bank. The various regulatory authorities impose resfrictions on dividends paid by a state bank. A state bank cannot pay dividends (without the consent of state banking authorities) in excess of the total net profits (net income less dividends paid) ofthe cunent year to date and the combined retained net profits ofthe previous two years. As of January 1, 2014, Blue Ridge Bank could pay dividends to Blue Ridge Bankshares, Inc. of approximately $3,467,000 without the permission of regulatory authorities. The ability to pay such a dividend would additionally be affected by the subsidiary bank's capital availability. The Bank is subject to various regulatoty capital requirements administered by the federal banking agencies. Failure to raeet rainiraura capital requirements can initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's fmancial stateraents. Under capital adequacy guidelines and the regulatory framework for prompt conective action, the Bank raust raeet specific capital guidelines that involve quantitative raeasures of the Bank's assets, liabilities, and certain off-balance-sheet iteras as calculated under regulatory accounting practices. The Bank's capital araounts and classification are also subject to qualitative judgments by the regulators about coraponents, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios (set forth in the following table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of Deceraber 31, 2013, that the Bank meets aU capital adequacy requirements to which it is subject (Continued) 30 BLUE RIDGE BAIVKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2013 Note 21. Regulatory Matters (Continued) The Bank is considered well capitalized under the regulatory framework for prompt conective action. To remain categorized as well capitalized, the Bank will have to maintain minimura total risk-based. Tier I risk-based, and Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events since the most recent notification that manageraent believes have changed the Bank's prorapt cortective action category. Actual Amount Ratio For Capital Adequacy Purposes Ratio Amount As of December 31, 2013 Total risk based capital (To risk rated assets) Blue Ridge Bankshares $ $ Blue Ridge Bank 21,608 19,933 16.21% 15.04% $ $ 10,662 10,605 Tier I capital (To risk rated assets) Blue Ridge Bankshares $ $ Blue Ridge Bank 19,537 18,271 14.66% 13.78% $ $ 5,331 5,303 Tier I capital (To average assets) Blue Ridge Bankshares $ $ Blue Ridge Bank 19,537 18,271 9.24% 8.57% $ $ 8,459 8,531 8% 8% 4% 4% 4% 4% $ S $ Actual For Capital Adequacy Purposes To Be Well Capitalized Under the Prompt Corrective Action Provisions Amount Ratio N/A 13,257 N/A 10% N/A 7,954 N/A 6% N/A 10,664 N/A 5% To Be Well Capitalized Under the Prompt Corrective Action Provisions \mount J Ratio Amotmt Ratio Amount Ratio AsofDecember31,2012 Total risk based capital (To risk rated assets) Blue Ridge Bankshares $ $ Blue Ridge Bank 20,074 18,224 16.64% 15.24% $ $ 9,649 9,567 Tier I capital (To risk rated assets) Blue Ridge Bankshares $ $ Blue Ridge Bank 18,292 16,726 15.17% 13.99% $ $ 4,825 4,784 Tier I capital (To average assets) Blue Ridge Bankshares $ S Blue Ridge Bank 18,292 16,726 8.97% 8.06% $ $ 8,161 8,305 8% 8% 4% 4% 4% 4% $ $ $ N/A 11,959 N/A 10% N/A 7,175 N/A 6% N/A 10,381 N/A 5% (Continued) 31 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2012 Note 21. Regulatory Matters (Continued) On July 7, 2013 the Federal Reserve Board approved Basel III Final Rule to begin implementation January 1, 2015. The desired overall objective of Basel III is to improve the banking sector's ability to absorb shocks arising from financial and econoraic sfress. The Final Rule changes rainimum capital ratios and raises the Tier 1 Risk Weighted Assets to 6% frora 4%. In addition, the new rales require a bank to raaintam a capital conservation buffer of between 2 and 2 Vi % beginning in 2016. The new rules will be phased in begirming in 2015 with coraplete corapliance required by 2019. Generally, the Basel III Final Rule will require banks to raaintain higher levels of coraraon equity and regulatory capital. Note 22. New Accounting Standards The following is a discussion of accounting pronouncements that have and/or may impact the presentation ofthe Company's financial statements: In February 2013, ASU No. 2013-02 - Comprehensive Income was issued to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to present, either on the face ofthe stateinent where net income is presented or in the notes, significant araounts reclassified out of accumulated other coraprehensive incorae by the respective line iteras of net income but only if the araount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendraents are effective for reporting periods beginning after December 15, 2013 with early adoption permitted. In July 2013, tiie FASB issued ASU 2013-11, Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss or a Tax Credit Carrryforward Exists. ASU 2013-11 is intended to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carrryforward exists. This presentation had not been addressed in Topic 740 and there was diversity in reporting practices m those instances. ASU 2013-11 requires an unrecognized tax benefit to be presented as a liability and not netted against a defened tax asset. ASU 2013-11 is effective for reporting periods beginning after Deceraber 15, 2013. Adoption by the Company is not expected to have an irapact on the consolidated financial statements and related disclosures. (Continued) 32 BLUE RIDGE BANKSHARES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS December 31,2012 Note 22. New Accounting Standards (Continued) In January 2014, the FASB issued ASU No. 2014-04, Receivables - Troubled Debt Restructurings by Creditors - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendraents are intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. These amendraents clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (a) the creditor obtaining legal title to the residential real estate property upon completion ofa foreclosure; or (b) the bonower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreeraent. Additional disclosures are required. The amendraents are effective for annual periods beginning after Deceraber 15, 2014, and interira periods within annual periods beginning after Deceraber 15, 2015. Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies are not currently applicable to the Company or are not expected to have a significant impact on the Corapany's financial position, results of operations and cash flows. 33 Board of Directors Mensel D. Dean, Jr. Partner PBMares, LLP Larry Dees Certified Public Accountant James E. Gander, II Farmer John H. H. Graves President/CEO Luray Caverns Corporation Robert S. Janney Attorney at Law Janney & Janney, PLC Monte L. Layman President/CEO Blue Ridge Bank Richard L. Masincup Retired Tax Auditor William W. Stokes ChiefFinancial Officer Bio-Cat, Inc. Malcolm R. Sullivan, Jr. Chairman Sullivan Mechanical Contractors, Inc. BhieRidggBank Sinceimi Officers and Employees CORPORATE Operations Cynthia D. Fravel, Vice President Kimberly D. Dinges Pamela G. Miller Patricia B. Painter Compliance Ashley N. Marshall Credit Administration Julie A. Catron, Assistant Vice President Crystal D. Alger Melissa A. Deeds Retail Investments Adam J. Powell, Investment Advisor Management and Administration Monte L. Layman, President/CEO Benjamin T. Home, IV, Executive Vice President/CLO Brian K. Plum, Executive Vice President/CFO Ann M. Mann, Vice President/Retail Operations Office Timothy C. Peifer, VP - Retail Market Manager Craig H. Richards, Controller Sharon S. Lamb, Assistant Cashier Sharon D. Nauman, Secretary LURAY Juanita A. Woodward, Office Manager Jonathan B. Comer, Commercial Lender Kimberly F. Good, Loan Officer Mark P. Milam, Mortgage Loan Officer Cheryl E. Petefish, Loan Officer Donna S. Dofflemyer, Loan Officer Brandy L. Rothgeb Miranda D. Silvious Jill M. Taylor Betty J. White Lisa M. Tumer SHENANDOAH Timothy W. Bailey, Assistant Vice President Rebecca K. Dovel Brittney D. Hinegardner Paula R. Morris MCGAHEYSVILLE Crystal L. Breeden Burker Darlene M. Tumer Alisha M. Breeden CHARLOTTESVILLE Kelly A. Potter, Vice President - Commercial Lending Laura S. Breeden, Branch Manager Lisa S. Engstler Alexis N. Ray