2017
ANNUAL REPORT
BLUE RIDGE
BANKSHARES, INC.
PARENT COMPANY OF
Celebrating 125 Years
1893-2018
TO OUR SHAREHOLDERS
Blue Ridge Bankshares, Inc. experienced a year of firsts in 2017; it was the first full year of integration following
a bank merger, the first full year of having a full-service mortgage division, and the first time the Company has
purchased a controlling position in a noncore bank service, which occurred in the 4th quarter with the acquisition
of a payroll services company within the commercial bank’s footprint. Overall, we did these things well, but there
is room for improvement and we will continue working hard to make that happen.
You will note as you review the financial statements that our earnings per share increased from $0.31 in 2016 to
$1.22 in 2017, and of course this comparison is impacted greatly by the one-time merger expenses associated with
the River Bancorp, Inc. acquisition in 2016. The Company did not start to experience the full benefit of merger
synergies until the 3rd quarter of 2017, so some costs associated with the merger did spill over into the new year.
We disappointed on balance sheet growth in 2017, only growing assets just under $6 million, or 1.43%. A lot of
energy was utilized, particularly in the first half of the year, integrating the merger of two banks and ensuring a
smooth customer transition. Also, more time than anticipated was spent on managing several large loan
relationships to the best outcome for the Company and shareholders. Both tasks were and remain critically
important and the efforts will pay long-term dividends, but it does not excuse the level of balance sheet growth
we produced. We can and must do better prospectively, and as the CEO of the Company I am entirely accountable
to see that through. We are seeing more positive momentum for core relationship growth early in 2018, and we
anticipate that to maintain throughout the year.
We remain acutely aware of our obligations, which include our communities, employees, and shareholders. I am
incredibly proud of the effort our bank puts into supporting the communities in which we operate. Countless
hours and significant dollars, both corporate and personal, go into making our communities a better place in which
to live. We continue to place energy into creating and maintaining an attractive workplace environment where
we are committed equally to results and enjoyment. A year of personnel changes associated with a merger
accentuates the value that comes with productive longevity in an employee base. We also retain our absolute
focus on creating value for shareholders. We must earn the privilege of your investment dollar every day. We
implemented the 3:2 stock split in 2017 to improve shareholder liquidity, recognizing we need to continue pushing
on this front, and every business decision we make is made with the long-term interests of shareholders in mind.
I am often asked what I think about the future of the industry, and how that translates into what our Company
needs to do to prepare for it. We have enjoyed recent positive developments; the corporate tax rate reduction has
a direct positive impact on our earnings, and there has been a slight improvement in the regulatory framework.
Neither factor controls our fate. There is more competitive pressure in the industry than ever before, even with a
significant reduction in the number of banks in the country. Technology is changing the way banking happens at
an accelerating pace, both with loans and deposits and with payment intermediation. Many economically
transformational technologies have centered around disintermediation, which should be particularly troubling for
any company that operates in an intermediation business. Any traditional banker that is not at least a little scared
is not paying attention, but at the same time there are incredible new and exciting opportunities being created on
which we can capitalize. Technology is allowing a broader reach delivered more efficiently by reducing the need
for large branch networks and significant costs associated. The opportunities to improve and grow what we are
doing with technology are limitless.
We remain forward-looking and vigilant about the technology landscape and are continually looking for ways to
improve our competitive positioning. I cannot make any guarantees about what the future does or does not bring,
but I do believe that for much of our business, particularly with commercial and real estate transactions, we will
continue to see technological evolution but at a pace that does not mirror consumer products, due to transaction
complexity (though artificial intelligence advancement continues to close this gap). Our differentiating factors
must be responsiveness, flexibility, and personal relationships. We must continually improve in positioning
ourselves as a banking advisor providing meaningful advice, and not just a sales force peddling financial
commoditization by trying to compete on price or gadgetry. There is a demand for what we are delivering, and
our execution of this model will ensure success and deliver value for you as a shareholder.
The uptick in interest rates has helped and should continue to help industry earnings. I do not know the direction
of interest rates, and if anyone else claims to know with certainty he or she is lying. Interest rates may rise, interest
rates may fall. Interest rate movements will always have an impact on us, but if we are executing core banking
services well and developing our noninterest income streams our return on equity profile will still warrant your
investment dollars. That is our goal and mission, and what we are waking up every day aiming to achieve.
Please use us for your financial needs, and also please refer any opportunities to us whenever you can. Your
referrals have a direct impact on the Company’s earnings and the value of your investment. Please contact me
with referrals, questions, or concerns at 540-743-6521 or bplum@mybrb.com.
Thank you for your investment and trust in us. We do not take it lightly.
Sincerely,
Brian K. Plum
President and Chief Executive Officer
BLUE RIDGE BANKSHARES, INC.
FINANCIAL HIGHLIGHTS
For The Year
Net income
Net income available to common stockholders
Common stock dividends paid
Earnings per common share
Dividends per common share
At Year End
Total assets
Total investments
Net loans held for investment
Deposits
Total stockholders' equity
Common stockholders' equity
Book value per common share
Number of common stock shares outstanding
$
$
2017
3,350,124
3,350,520
880,443
1.22
0.320
424,122,390
48,994,839
328,002,333
339,289,742
36,441,623
36,441,623
13.18
2,765,635
$
$
2016
688,728
688,728
708,443
0.31
0.313
418,124,046
42,607,381
317,614,392
340,874,155
33,627,105
33,627,105
12.29
2,737,136
$
$
$
$
2015
2,498,105
2,453,105
611,430
1.19
0.307
268,910,152
37,957,139
204,936,540
196,491,845
24,100,824
24,100,824
11.46
2,102,267
2014
2,029,062
1,984,062
412,934
1.41
0.293
239,353,596
37,056,056
184,723,649
183,898,642
24,786,488
20,286,488
10.64
1,905,833
2013
1,844,604
1,637,349
318,223
1.17
0.227
214,724,007
47,712,416
153,786,879
168,345,328
19,229,543
14,729,543
10.51
1,401,809
Key Ratios
Return on average assets
Return on average equity
Return on average common equity
Total stockholders' equity to assets
Common stockholders' equity to assets
Increase in assets
Change in earnings per common share
Increase in book value per share
0.80%
9.56%
9.56%
8.59%
8.59%
1.43%
297.83%
7.25%
0.20%
2.39%
2.39%
8.04%
8.04%
55.49%
-74.30%
7.16%
0.98%
10.22%
11.05%
8.96%
8.96%
12.35%
-15.17%
7.70%
0.89%
9.22%
11.33%
10.36%
8.48%
11.47%
20.57%
1.30%
0.87%
9.78%
11.40%
8.96%
6.86%
3.12%
25.00%
6.12%
Five Year Stock Performance (January 1, 2013 to December 31, 2017)
)
%
(
e
g
n
a
h
C
e
c
i
r
P
OTC Pink: BRBS: 142.86%
S&P 500: 87.47%
KBW Nasdaq Bank: 108.09%
A 2017 Stock-Split
Source: S&P Global Market Intelligence
BLUE RIDGE BANKSHARES, INC.
PARENT OF
BLUE RIDGE BANK, NATIONAL ASSOCIATION
LURAY, VIRGINIA
FINANCIAL STATEMENTS
December 31, 2017
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
INDEPENDENT AUDITOR’S REPORT
The Board of Directors
Blue Ridge Bankshares, Inc.
Luray, Virginia
Report on the Financial Statements
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, 2017 and 2016,
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 these consolidated
financial statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the 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 of the entity’s internal control. Accordingly, we express no such opinion. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Your Success is Our Focus
124 Newman Avenue • Harrisonburg, VA 22801-4004 • 540-434-6736 • Fax: 540-434-3097 • www.BEcpas.com
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Blue Ridge Bankshares, Inc. and subsidiaries as of
December 31, 2017 and 2016, 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.
Harrisonburg, Virginia
March 9, 2018
CERTIFIED PUBLIC ACCOUNTANTS
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
ASSETS
Cash and due from banks (Note 3)
Federal funds sold
Investment securities
Securities available for sale (at fair value) (Note 4)
Securities held to maturity (fair value of $13,414,988
in 2017, $13,193,364 in 2016) (Note 4)
Restricted investments
Total Investment Securities
Loans held for sale (Note 5)
Loans held for investment (Note 5)
Allowance for loan losses (Note 5)
Net Loans Held for Investment
Bank premises and equipment, net (Note 6)
Bank owned life insurance (Note 1)
Goodwill (Note 12)
Core deposit intangible
Other assets
LIABILITIES
Total Assets
Deposits
Demand deposits
Noninterest bearing
Interest bearing
Savings deposits
Time deposits (Note 7)
Total Deposits
Other borrowed funds (Note 8)
Subordinated debt, net of issuance costs (Note 9)
Other liabilities
Total liabilities
STOCKHOLDERS' EQUITY
Common stock and related surplus, no par value; authorized 5,000,000
shares; outstanding - 2,765,636 and 2,737,136, respectively (Note 10)
Contributed equity
Retained earnings
Accumulated other comprehensive income
Noncontrolling interest
Unearned ESOP shares
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
The accompanying notes are an
integral part of this statement.
3
$
$
$
2017
10,319,189
88,000
$
2016
14,098,449
1,726,000
32,578,294
26,748,394
13,206,415
3,210,130
48,994,839
17,219,636
330,804,825
(2,802,492)
328,002,333
2,277,269
7,654,471
2,094,164
745,805
6,726,684
424,122,390
61,387,671
88,356,225
27,532,229
162,013,617
339,289,742
36,044,626
9,732,671
2,613,728
387,680,767
16,323,685
194,864
20,190,047
(323,621)
199,604
36,584,579
(142,956)
$
$
12,971,598
2,887,389
42,607,381
24,655,901
319,627,525
(2,013,133)
317,614,392
2,506,399
4,516,310
2,094,164
1,134,590
7,170,460
418,124,046
60,137,568
95,253,117
24,176,888
161,306,582
340,874,155
32,623,264
9,698,790
1,300,732
384,496,941
16,270,152
131,357
17,666,715
(143,025)
-
33,925,199
(298,094)
36,441,623
424,122,390
33,627,105
418,124,046
$
$
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2017 and 2016
2017
2016
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 funds
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
Earnings on investment in life insurance
Loss on disposal of assets
Gain (loss) on sale of other real estate owned
Small business investment company fund income
Mortgage brokerage income
Gain on sale of mortgages
Gain on sale of available for sale securities
Gain on sale of government guaranteed USDA loans
Other noninterest income
Total Other Income
OTHER EXPENSES
Salaries and employee benefits
Occupancy and equipment expenses
Data processing
Communications
Advertising expense
Debit card expenses
Directors fees
Audits and examinations
Other taxes and assessments
Other contractual services
Other noninterest expense
Total Other Expenses
Income before income taxes & noncontrolling interest
INCOME TAX EXPENSE (Note 15)
Net Income
Net loss attributable to noncontrolling interest
Net income attributable to Blue Ridge Bankshares, Inc.
Net Income Available to Common Stockholders
Earnings per Share
Weighted Average Shares Outstanding
$
$
$
$
16,430,902
505,013
16,753
1,278,031
250,458
18,481,157
490,246
2,238,186
1,202,505
3,930,937
14,550,220
1,095,000
13,455,220
654,893
138,161
(52,291)
(11,010)
162,126
1,527,203
4,139,475
192,161
264,069
783,738
7,798,525
8,690,038
1,615,892
891,825
480,637
371,077
270,252
202,150
116,176
636,222
351,477
2,220,770
15,846,516
5,407,229
2,057,105
3,350,124
396
3,350,520
3,350,520
1.22
2,751,503
$
$
$
$
11,752,919
457,849
12,993
930,177
280,772
13,434,710
416,083
1,453,674
1,211,365
3,081,122
10,353,588
926,000
9,427,588
395,597
102,064
(1,025)
4,436
138,888
446,116
928,210
-
-
476,047
2,490,333
4,984,080
796,010
891,086
215,321
329,341
158,878
150,100
83,440
512,840
1,474,347
1,080,299
10,675,742
1,242,179
553,451
688,728
-
688,728
688,728
0.31
2,227,501
The accompanying notes are an
integral part of this statement.
4
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STAEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, 2017 and 2016
2017
2016
Net Income
$
3,350,124
$
688,728
Other comprehensive income:
Gross unrealized gains (losses) arising during the period
Adjustment for income tax benefit (expense)
Less:
Reclassification adjustment for gains included in net income
Adjustment for income tax expense
Other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive loss attributable to noncontrolling interest
Comprehensive income attributable to Blue Ridge Bankshares, Inc.
(16,524)
5,618
(10,906)
(192,161)
75,726
(116,435)
(127,341)
3,222,783
(396)
3,223,179
$
$
$
$
$
$
96,651
(38,720)
57,931
-
-
-
57,931
746,659
-
746,659
The accompanying notes are an
integral part of this statement.
5
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 2017 and 2016
Common
Stock &
Related
Surplus
Contributed
Equity
Retained
Earnings
Accumulated Other
Comprehensive Income
(Loss)
Noncontrolling
Interest
Unearned
ESOP Shares
Total
Balance, December 31, 2015
$
7,080,669
$
42,887
$
17,686,430
$
(200,956)
$
Comprehensive Net Income
Net income
Changes in unrealized gains on
securities available for sale, net of
deferred income tax liability of $38,720
Total Comprehensive Income
Isssuance of common stock (423,246 shares)
Release of unearned ESOP shares
Preferred stock dividends
Common stock dividends
Balance, December 31, 2016
Comprehensive Net Income
Net income (loss)
Changes in unrealized gains on
securities available for sale, net of
deferred income tax asset of $81,344
Tax rate change effect
Total Comprehensive Income
Isssuance of restricted common stock
Release of unearned ESOP shares
Noncontrolling interest
Common stock dividends
Balance, December 31, 2017
-
-
688,728
-
-
-
9,189,483
-
-
-
16,270,152
-
-
-
-
-
88,470
-
-
131,357
-
-
-
53,533
-
-
-
16,323,685
$
$
-
-
63,507
-
-
194,864
$
-
-
-
-
-
(708,443)
17,666,715
57,931
-
-
-
-
-
(143,025)
3,350,520
-
-
53,255
-
-
-
-
(880,443)
20,190,047
$
(180,596)
-
-
-
-
-
(323,621)
$
The accompanying notes are an
integral part of this statement.
6
-
-
-
-
-
-
-
-
-
(396)
-
$
(508,206)
$
24,100,824
-
688,728
-
-
-
210,112
-
-
(298,094)
-
-
57,931
746,659
9,189,483
298,582
-
(708,443)
33,627,105
3,350,124
(180,596)
53,255
3,222,783
53,533
218,645
200,000
(880,443)
36,441,623
-
-
-
200,000
-
199,604
$
-
-
155,138
-
-
(142,956)
$
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2017 and 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses
Deferred income taxes
Net decrease (increase) in loans held for sale
Loss on disposition of assets
Loss on sale of other real estate owned
Securities gains
Depreciation
Investment amortization expense, net
Amortization of debt refinancing fees
Amortization of subordinated debt issuance costs
Amortization of other intangibles
(Increase) Decrease in other assets
Increase (Decrease) in accrued expenses
Increase in carrying value of life insurance investments
Release of unearned ESOP shares
Total adjustments
Net Cash Provided (Used) in 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
2017
2016
$
3,350,124
$
688,728
1,095,000
(324,604)
7,436,265
52,291
11,010
(192,161)
374,277
212,209
76,167
33,881
437,992
979,372
1,313,392
(138,161)
218,645
11,585,575
14,935,699
(14,076,296)
(1,144,048)
926,000
(261,330)
(4,207,314)
1,025
4,436
-
292,919
187,015
76,167
33,882
79,410
(142,313)
15,414
(102,064)
298,582
(2,798,171)
(2,109,443)
(4,831,435)
-
securities available for sale
2,382,784
4,282,576
Proceeds from calls, maturities, sales, paydowns and maturities of
securities held for investment
Increase in federal funds sold
Net decrease (increase) in loans held for investment
Purchase of bank premises and equipment
Capital calls of SBIC funds and other investments
Nonincome distributions from limited liability companies
Purchase of bank owned life insurance
Net cash used in acquisition
Decrease (Increase) 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
Common stock dividends paid
Issuance of common stock
Noncontrolling interest
Repayment of contingent ESOP liability
Net Cash Provided by Financing Activities
CASH AND CASH EQUIVALENTS
Net increase (decrease) in cash and cash equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
6,622,239
1,638,000
(11,482,941)
(197,438)
(220,590)
30,725
(3,000,000)
-
(400,870)
(19,848,435)
(2,291,448)
707,035
26,000,000
(22,500,000)
(880,443)
53,533
199,604
(154,805)
1,133,476
1,150,000
568,000
(24,575,253)
(347,230)
(402,255)
3,291
(2,000,000)
(834,735)
353,425
(26,633,616)
49,911,236
(3,214,227)
36,400,000
(46,600,000)
(708,443)
-
-
(212,322)
35,576,244
(3,779,260)
14,098,449
10,319,189
$
6,833,185
7,265,264
14,098,449
$
The accompanying notes are an
integral part of this statement.
7
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, 2017 and 2016
SUPPLEMENTAL INFORMATION
Interest Paid
Income taxes paid
Real estate acquired by foreclosure
2017
2016
$
$
3,872,382
650,000
-
2,998,945
1,000,000
611,456
The accompanying notes are an
integral part of this statement.
8
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 1.
Nature of Operations and Significant Accounting Policies:
Nature of Operations:
Blue Ridge Bankshares, Inc. ("Company") through Blue Ridge Bank, N.A. ("Bank") operates under a
national charter and provides commercial banking services and mortgage lending services. As a
nationally chartered institution, the Bank is subject to regulation by the Office of the Comptroller of
the Currency. The Bank provides commercial banking services to customers located primarily in the
Piedmont, Southside, and Shenandoah Valley regions of the Commonwealth of Virginia. Mortgage
lending services are provided in these regions as well with additional mortgage offices located across
North Carolina.
Consolidation Policy:
The consolidated financial statements include the accounts of Blue Ridge Bankshares, Inc. and its
wholly-owned subsidiaries, Blue Ridge Bank, N.A. and PVB Properties, LLC, as well as Moneywise
Payroll Solutions, Inc, of which Blue Ridge Bank, N.A. has a controlling ownership interest. All
significant intercompany balances and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements:
In preparing the financial statements, management is required to make estimates and assumptions that
affect the reported amounts in those statements. Actual results could differ 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 ability 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 liability
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 realized gains and losses flow through the
Company’s current earnings.
(Continued)
9
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 1.
Nature of Operations and Significant Accounting Policies (Continued):
Loans Held for Sale:
Mortgage loans originated or purchased and intended for sale in the secondary market are carried at
the lower of cost or estimated market value in the aggregate. As all of these loans are under
agreements to sell to investors at the time of origination, the agreed upon sales price is considered fair
value. This amount is generally the loan’s principal amount. Changes in fair value are recognized in
the Gain on Sale of Mortgages on the Consolidated Statements of Income.
Loans Held for Investment:
Loans that management has the intent and ability 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 accrued on the unpaid principal balance.
Loan origination fees and costs are deferred and recognized as an adjustment of the 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 unearned discount and the
allowance for loan losses. Interest income on loans is based generally on the daily amount of principal
outstanding.
The accrual of interest on impaired loans is discontinued when, in the opinion of management, the
interest income recognized will not be collected. Receipts on impaired loans are applied to principal
until the loan is brought current and collection is reasonably assured. Loans are considered past due
based on the contractual terms of the loan.
Allowance for Loan Losses:
The allowance for loan losses is maintained at a level believed 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 portfolio, 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 earnings. 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, general and unallocated components. The specific component
relates to loans that are classified as impaired, for which an allowance is established when the fair
value of the loan is lower than its carrying value. The general 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 allocation. The loss ratio factor is based on average loss history for the
current year and at least two prior years.
(Continued)
10
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 1.
Nature of Operations and Significant Accounting Policies (Continued):
Qualitative and environmental factors include external risk factors that management believes affect
the overall lending environment of the Company. Environmental factors that management of the
Company routinely 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, ability, 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 future 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.
There have been no significant changes to the methods used to determine the allowance for loan
losses during the years ended December 31, 2017 and 2016.
Loan Charge-off Policies:
Consumer loans are generally fully 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
collection. All other loans are generally charged down to the net realizable value when the loan is
90 days past due or when current information confirms all 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 policies are stated at cash surrender value, with changes in value
recorded in income for the year.
Small Business Investment Company (SBIC) Fund Income:
The Bank has an interest in several Small Business Investment Company funds. The Bank’s
obligations to these funds are satisfied in the form of capital calls that occur during the commitment
period. Two-thirds of income distributions from these funds are shown as a reduction to the Bank’s
principal investment. The remaining one-third is recognized as income until the investment
principal has been recovered. At that time, all distributions in excess of initial investment are
recognized as income.
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 of the 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.
(Continued)
11
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 1.
Nature of Operations and Significant Accounting Policies (Continued):
Other Real Estate Owned (Foreclosed Assets):
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at
fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed by management and the assets are carried at the lower of
carrying amount or fair value less cost to sell. Expenses associated with the maintenance and upkeep
of Other Real Estate Owned are recorded as Other Real Estate Expense.
Assets acquired through loan foreclosure that are guaranteed by governmental agencies are carried as
a receivable for the value which is guaranteed. The remainder of the asset is recorded at fair value at
the date of foreclosure and valuations are periodically performed by management. The assets are
carried at the lower of carrying amount or fair value less cost to sell.
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.
Earnings Per Share:
Earnings per share are based on the weighted average number of shares outstanding.
Financial Instruments:
In the ordinary course of business the Bank has entered into commitments to extend credit. Such
financial instruments are recorded in the financial statements when they are funded.
Reclassified Amounts:
Certain amounts have been reclassified from prior year financial statements to ensure consistent
presentation with current year amounts. These reclassifications are for presentation purposes and have
no impact on overall financial information.
Subsequent Events:
Subsequent events have been evaluated through March 9, 2018, the date the financial statements
were available to be issued.
(Continued)
12
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 2.
Acquisition
On October 20, 2016, the Company completed the acquisition of River Bancorp, Inc. (“River”), the
holding company for River Community Bank, N.A., pursuant to the terms of the Agreement and Plan
of Reorganization dated March 30, 2016. Under the agreement, River’s shareholders had the right to
receive, at the holder’s election, either $16.57 per share in cash or 0.8143 shares (1.221 after 2017
stock split) of Blue Ridge Bankshares, Inc. common stock, subject to the allocation and proration
procedures set forth in the agreement, plus cash in lieu of fractional shares.
A summary of the assets received and liabilities assumed and related adjustments are as follows:
As Recorded by
River
Bancorp, Inc.
As Recorded by
Blue Ridge
Bankshares, Inc.
Adjustments
Assets
$
Cash and due from banks
Investment securities available-for-sale
Federal Funds Sold
Restricted equity securities
Available-for-sale loans
Held-for-investment loans
Furniture, Fixtures, and equipment
Accrued interest receivable
Core deposit intangible
Other assets
Total assets acquired
$
2,858,037 $
5,111,322
1,712,000
583,850
11,133,949
89,721,946
673,956
349,946
-
2,700,988
114,845,994 $
- $
-
-
-
-
(693,347) (1)
(260,660) (2)
-
1,214,000 (3)
(674,133) (4)
(414,140) $
2,858,037
5,111,322
1,712,000
583,850
11,133,949
89,028,599
413,296
349,946
1,214,000
2,026,855
114,431,854
Liabilities
Deposits
Borrowings
Other liabilities
Total liabilities assumed
Net assets acquired
Total consideration paid
Goodwill
Explanation of adjustments:
97,685,301
5,000,000
592,162
103,277,463 $
$
-
-
-
- $
97,685,301
5,000,000
592,162
103,277,463
11,154,391
12,882,255
1,727,864
$
(1) Adjustment to reflect estimated fair value of loans of $557,000, credit mark on loan portfolio of
$(2,178,814), and elimination of River’s allowance for loan and lease losses of $928,467.
(2) Adjustment to reflect estimated fair value of furniture, fixtures, and equipment.
(3) Adjustment to reflect recording of core deposit intangible.
(4) Adjustment to reflect recording of credit mark on other real estate owned $(227,186) and adjustment to
other assets including deferred taxes related to acquisition of $(446,947).
A summary of the consideration paid is as follows:
Common stock issued (423,246 shares)
Cash payments to common shareholders
Total consideration paid
(Continued)
13
$
$
9,189,483
3,692,772
12,882,255
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 2.
Acquisition (Continued)
This acquisition expands the Company’s commercial banking presence in the Southside region of
Virginia through the addition of four branches and introduced a commercial loan production office in
Greensboro, North Carolina. Mortgage loan production offices were also introduced in these locations
and across North Carolina.
The following table presents unaudited pro forma results of operations for the periods presented as if
the River Bancorp, Inc. acquisition had been completed on January 1, 2015. The pro forma results of
operations include the historical accounts of the Company and River Bancorp, Inc., and pro-forma
adjustments may be required. The pro forma information is intended for informational purposes only
and is not necessarily indicative of our future operating results or operating results that would have
occurred had the acquisition been completed at the beginning of 2015. No assumptions have been
applied to the pro forma results of operations regarding possible revenue enhancements, expense
efficiencies or asset dispositions. Transaction-related costs related to the acquisition are not reflected
in the pro-forma amounts.
Pro Forma for
the Year Ended
December 31, 2016
Pro Forma for
the Year Ended
December 31, 2015
Revenues (net interest income plus noninterest income)
Net income
$
$
22,050,000
3,065,000
$
$
22,722,000
3,903,000
Note 3.
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 from banks related to these agreements at
December 31, 2017 and 2016 was $275,000.
Note 4.
Investment Securities
The amortized cost and fair values of investment securities are as follows:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2017
Available for Sale
State and municipal
U.S. Treasury and Agencies
Mortgage backed securities
Corporate bonds
Equity securities
Held to Maturity
State and municipal
Total Investment Securities
$
$
1,321,005
3,374,900
22,910,329
4,825,614
556,091
32,987,939
13,206,415
13,206,415
$ 46,194,354
$
14
(Continued)
23,658
-
20,751
119,406
149,611
313,426
224,180
224,180
537,606
$
-
174,169
504,001
20,000
24,901
723,071
$
1,344,663
3,200,731
22,427,079
4,925,020
680,801
32,578,294
15,607
15,607
738,678
13,414,988
13,414,988
$ 45,993,282
$
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 4.
Investment Securities (Continued)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2016
Available for Sale
State and municipal
U.S. Treasury and Agencies
Mortgage backed securities
Corporate bonds
Equity securities
Held to Maturity
State and municipal
Total Investment Securities
$
$
1,323,150
3,374,881
16,985,263
4,600,000
679,169
26,962,463
12,971,598
12,971,598
$ 39,934,061
$
-
-
45,062
12,455
181,485
239,002
245,336
245,336
484,338
$
-
39,043
389,633
24,395
-
453,071
$
1,323,150
3,335,838
16,640,692
4,588,060
860,654
26,748,394
23,570
23,570
476,641
13,193,364
13,193,364
$ 39,941,758
$
Proceeds from sales, calls and maturities of available for sale securities during 2017 and 2016 were
$2,382,784 and $4,282,576, resulting in a gain of $192,161 and $0, respectively.
During 2017 and 2016, held to maturity securities with book values of $6,622,239 and $1,150,000,
respectively, were either called or matured resulting in no gain or loss for either year.
Investment securities with an approximate fair value of $15,541,324 and $15,867,000, at
December 31, 2017 and 2016, respectively, were pledged to secure public deposits and for other
purposes required by law and as collateral for the Bank’s line of credit with the Federal Home Loan
Bank of Atlanta.
The amortized cost and fair value of investment securities at December 31, 2017, by contractual
maturity, are shown below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without prepayment penalties.
Amounts maturing:
After one year through five
years
After five years through ten
years
After ten years
Equity investments with no
maturity
Total
Securities Available for Sale Securities Held to Maturity
Amortized
Cost
Amortized
Fair
Value
Fair
Value
Cost
$
827,389
$
838,896 $ 3,819,322
$
3,880,541
10,887,382
20,717,077
32,431,848
4,502,455
10,730,558
20,328,039
4,884,638
31,897,493 13,206,415
4,549,660
4,984,787
13,414,988
556,091
-
$ 32,987,939 $ 32,578,294 $ 13,206,415 $ 13,414,988
680,801
-
(Continued)
15
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 4.
Investment Securities (Continued)
Information pertaining to securities with gross unrealized losses aggregated by investment category
and length of time that securities have been in a continuous loss position is as follows:
December 31, 2017
State and
Municipal
U.S. Treasury and
Agency
Mortgage backed
Corporate bonds
Equity securities
Total
December 31, 2016
State and
Municipal
U.S. Treasury and
Agency
Mortgage backed
Corporate bonds
Total
Less than 12 Months
Gross
Unrealized
Losses
Fair
Value
12 Months or Greater
Gross
Unrealized
Losses
Fair
Value
Total
Gross
Unrealized
Losses
Fair
Value
$
2,306,451 $
(15,607)
$
-
$
-
$ 2,306,451 $
(15,607)
-
-
(237,469)
11,442,024
(20,000)
1,230,000
-
-
$ 14,978,475 $ (273,076)
3,200,731
8,490,769
-
25,099
$11,716,599
(174,169)
(266,532)
-
(24,901)
3,200,731
19,932,793
1,255,099
-
(174,169)
(504,001)
(44,901)
-
$
(465,602) $ 26,695,074 $
(738,678)
Less than 12 Months
Gross
Unrealized
Losses
Fair
Value
12 Months or Greater
Gross
Unrealized
Losses
Fair
Value
Total
Gross
Unrealized
Losses
Fair
Value
$
982,830 $
(23,570)
$
-
$
-
$
982,830 $
(23,570)
(39,043)
835,958
(163,339)
5,471,092
1,478,730
(21,270)
8,768,610 $ (247,222)
-
6,711,335
246,875
$ 6,958,210
$
-
(226,294)
(3,125)
835,958
12,182,427
1,725,605
$
(229,419) $ 15,726,820 $
(39,043)
(389,633)
(24,395)
(476,641)
Management evaluates securities for other-than-temporary impairment on a quarterly basis, and
more frequently when economic or market concerns warrant 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 of the issuer, and (3) the intent and ability of the
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, 2017, the Company had securities which have depreciated 2.76% in value from
the amortized cost. Included in this total are eleven securities that have been in a continuous loss
position for more than twelve months. In analyzing an issuer’s financial condition, management
considers whether the securities are issued by the federal government or its agencies, whether
downgrades by bond rating agencies have occurred, and the results of reviews of the 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.
(Continued)
16
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses
The following table summarizes the primary segments of the loan portfolio (in thousands):
December 31, 2017
Residential loans
Commercial real estate loans
Non owner-occupied & multi-family
Owner-occupied & farmland
Construction loans
Residential construction
Commercial construction & raw land
Home equity loans
Consumer loans
Commercial/farm loans
Municipal/other loans
Unearned income on loans
Total
December 31, 2016
Residential loans
Commercial real estate loans
Non owner-occupied & multi-family
Owner-occupied & farmland
Construction loans
Residential construction
Commercial construction & raw land
Home equity loans
Consumer loans
Commercial/farm loans
Municipal/other loans
Unearned income on loans
Total
Individually
Evaluated for
Impairment
Collectively
Evaluated for
Impairment
Total
$
- $
106,243
$
106,243
700
1,091
-
-
395
-
1,041
-
-
3,227
$
49,227
64,865
8,130
11,967
12,875
25,491
37,484
11,763
(467)
327,578
$
49,927
65,956
8,130
11,967
13,270
25,491
38,525
11,763
(467)
330,805
$
Individually
Evaluated for
Impairment
Collectively
Evaluated for
Impairment
Total
$
- $
103,926
$
103,926
-
-
-
-
-
-
-
-
-
-
$
53,941
60,648
5,116
17,736
11,529
16,104
37,410
13,538
(320)
319,628
$
53,941
60,648
5,116
17,736
11,529
16,104
37,410
13,538
(320)
319,628
$
To allow management to better monitor risk and performance, the Bank’s loan portfolio is
disaggregated to a level that is consistent with applicable call report codes. In general, the loan
portfolio is segmented into the following categories: (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; however, each category may consist of multiple call
report codes.
(Continued)
17
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
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 construction loans. The municipal loan segment includes loans made to local governments
and governmental 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,
and also includes the Bank’s home equity loan portfolio, which are generally second liens.
Management establishes the allowance for loan losses based upon its evaluation of the pertinent
factors underlying the types and quality of loans in the portfolio. 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 financial difficulties, loans in industries for which
economic trends are negative and loans which are of heightened concern 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 collected according to the contractual terms of the loan
agreement.
Factors considered by management in evaluating impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest payments when due.
Management determines the significance of payment delays and payment shortfalls on a case-by-
case basis, taking into consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and
the amount of the shortfall 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
restructuring agreement.
Once the determination has been made that a loan is impaired, the determination of whether a
specific allocation of the allowance is necessary is measured by comparing the recorded investment
in the loan to the fair value of the 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 overall policy for interest recognition.
The Bank had $3,227,000 and zero in loans individually evaluated for impairment as of
December 31, 2017 and 2016, respectively.
(Continued)
18
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
Loans acquired in a transfer, including business combinations, where there is evidence of credit
deterioration since origination and it is probable at the date of acquisition that we will not collect all
contractually required principal and interest payments, are accounted for as purchased impaired
loans. Purchased impaired loans are initially recorded at fair value, which includes estimated future
credit losses expected to be incurred over the life of the loan. Accordingly, the historical allowance
for credit losses related to these loans is not carried over.
Purchased loans from the River Bancorp Inc. transaction had remaining balances of $49,831,573
as of December 31, 2017. Of these balances three loan relationships totaling $3,149,216 were
considered specifically impaired PCI loans. Specific impairment on these loans was $920,672. The
following table presents the segments of the River Bancorp Inc. purchased loans as of December
31, 2017 (in thousands):
River
Bancorp
Inc.
Purchased
Loans
Balances
2,031
193
3,659
13,727
875
984
11,701
8,284
8
7,833
252
100
185
$
49,832
Real Estate
Construction loans and all land development and other land loans
Secured by farmland
$
Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit
Secured by first liens
Secured by junior liens
Secured by multifamily (5 or more) residential properties
Loans secured by owner-occupied, nonfarm nonresidential
properties
Loans secured by other nonfarm nonresidential properties
Commercial and Industrial
Loans to finance agricultural production and other loans to farmers
Commercial and industrial loans
Other
Other revolving credit plans
Automobile loans
Other consumer loans
Total
(Continued)
19
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
Management uses a nine point internal risk rating system to monitor the credit quality of the overall
loan portfolio. 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 make collection of debt in full highly questionable and
improbable. Any portion of a 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 borrowers
to repay a loan as agreed, the Bank has a structured loan rating process with both internal and
external oversight. The Bank’s loan officers are responsible for the timely and accurate risk rating
of the 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 external consultant to conduct loan reviews on an annual basis of all relationships greater than
$1,800,000. The internal audit function of the Bank reviews a sample of new loans throughout 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 impairment are given separate consideration in the determination of the allowance.
The following table presents the classes of the loan portfolio summarized by the aggregate Pass,
Watch and the criticized categories of Special Mention, Substandard, and Doubtful within the
internal watch risk rating system as of December 31, 2017 and 2016 (in thousands):
(Continued)
20
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
Watch/
Special
Mention Substandard Doubtful
Total
Pass
December 31, 2017
Commercial real estate loans
Non owner-occupied & multi-
family
Owner-occupied & farmland
Construction loans
Residential construction loans
Commercial construction & raw
land loans
Commercial/farm loans
Municipal/other loans
Less: Unearned revenue
Total
December 31, 2016
Commercial real estate loans
Non owner-occupied & multi-
family
Owner-occupied & farmland
Construction loans
Residential construction loans
Commercial construction & raw
land loans
Commercial/farm loans
Municipal/other loans
Less: Unearned revenue
Total
$ 47,228
62,826
$
$
2,004
-
695 $
3,130
- $
-
49,927
65,956
8,130
10,612
37,046
11,763
177,605
(262)
$177,343
$
-
-
-
-
2,004
-
2,004
$
-
-
8,130
1,355
1,480
-
6,660
-
6,660 $
11,967
-
38,526
-
11,763
-
188,269
-
-
(262)
- $ 186,007
Watch/
Special
Mention Substandard Doubtful
Total
Pass
$ 52,839
54,860
$
$
1,102
3,876
- $
1,912
- $
-
53,941
60,648
5,116
16,698
34,794
13,538
177,845
(109)
$177,736
$
-
40
1,400
-
6,418
-
6,418
$
-
-
5,116
998
1,216
-
4,126
-
4,126 $
17,736
-
37,410
-
13,538
-
188,389
-
-
(109)
- $ 188,280
The following table presents (in thousands) the classes of the loan portfolio for which loan
performance is the primary credit quality indicator as of December 31, 2017 and 2016:
December 31, 2017
Performing loans
Non-performing loans
Less: Unearned revenue
Total
Residential
Loans
Home
Equity
Loans
Consumer
Loans
Total
$
$
105,675
568
106,243
(297)
105,946
$
$
12,875
395
13,270
27
13,297
$
$
25,295
196
25,491
64
25,555
$ 143,845
1,159
145,004
(206)
$ 144,798
(Continued)
21
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
December 31, 2016
Performing loans
Non-performing loans
Less: Unearned revenue
Total
Residential
Loans
Home
Equity
Loans
Consumer
Loans
Total
$
$
103,617
309
103,926
(298)
103,628
$
$
11,332
197
11,529
30
11,559
$
$
16,040
64
16,104
57
16,161
$ 130,989
570
131,559
(211)
$ 131,348
An allowance for loan and lease losses (“ALLL”) is maintained to absorb losses from the loan
portfolio. The ALLL is based on management’s continuing evaluation of the risk characteristics and
credit quality of the loan portfolio, assessment of current 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 of the portfolio as determined by the length of time a recorded
payment is past due. The following table presents the classes of the loan portfolio summarized by
the aging categories of performing loans and nonaccrual loans as of December 31, 2017 and 2016
(in thousands):
90 Days+
Past Due
Total Past
Due
Non-
Accrual
Total
Loans
$
30
$
53
$
568
$ 106,243
-
-
-
-
-
-
43
-
-
73
$
-
48
-
-
-
1,014
333
-
-
1,448
695
3,130
49,927
65,956
-
8,130
1,036
395
196
1,493
-
-
11,967
13,270
25,491
38,525
11,763
(467)
7,513 $ 330,805
$
$
-
-
-
-
-
-
228
55
-
-
283
December 31, 2017
Current
30-59 Days
Past Due
60 - 89
Days Past
Due
$ 105,622
$
23
$
Residential loans
Commercial real estate loans
Non owner-occupied/multi-
family
Owner-occupied & farmland
Construction loans
Residential construction loans
Commercial construction &
49,232
62,778
8,130
raw land loans
Home equity loans
Consumer loans
Commercial/farm loans
Municipal/other loans
Unearned income on loans
Total
10,931
12,875
24,281
36,699
11,763
(467)
$ 321,844
$
-
48
-
-
-
786
235
-
-
1,092
$
(Continued)
22
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
December 31, 2016
Current
30-59 Days
Past Due
60 - 89
Days Past
Due
90 Days+
Past Due
Total Past
Due
Non-
Accrual
Total
Loans
$ 101,470
$
1,017
$
480
$
650
$
2,147
$
309
$ 103,926
Residential loans
Commercial real estate loans
Non owner-occupied/multi-
family
Owner-occupied & farmland
Construction loans
Residential construction loans
Commercial construction &
53,224
60,111
5,116
raw land loans
Home equity loans
Consumer loans
Commercial/farm loans
Municipal/other loans
Unearned income on loans
Total
17,696
11,333
15,107
37,062
13,538
(320)
$ 314,337
$
717
400
-
-
-
540
211
-
-
2,885
$
-
137
-
-
-
260
-
-
-
877
$
-
-
-
-
-
133
-
-
-
783
$
717
537
-
-
-
933
211
-
-
4,545
$
-
-
-
40
197
64
136
-
-
746
53,941
60,648
5,116
17,736
11,530
16,104
37,409
13,538
(320)
$ 319,628
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.
“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative
factors. Management has identified a number 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 information obtained from internal, regulatory,
and governmental sources. The Bank’s qualitative factors consist of: changes in lending policies and
procedures, changes in international, national, regional, and local conditions, changes in the nature
and volume of the portfolio and terms of loans, changes in the experience, depth, and ability of
lending management, changes in the volume and severity of past due loans and other similar
conditions, changes in the quality of the organization’s loan review system, changes in the value of
underlying collateral for dependent loans, the existence and effect of any concentrations of credit
and changes in the levels of such concentrations, and the effect of other external factors.
Management reviews the loan portfolio on a monthly basis using a defined, consistently applied
process in order to make appropriate and timely adjustments to the ALLL. When information
confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off
against the ALLL.
(Continued)
23
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
The following tables summarize the primary segments of the ALLL, segregated into the amount
required for loans individually evaluated for impairment and the amount required for loans
collectively evaluated for impairment as of December 31, 2017 and 2016. Activity in the allowance
is presented for the each of the twelve months ended December 31, 2017 and 2016 (in thousands):
ALLL Balance at
December 31, 2016
Charge-offs
Recoveries
Provision
ALLL Balance at
December 31, 2017
Commercial
$
294
-
34
209
$
537
Individually evaluated for
impairment
$
-
Collectively evaluated for
impairment
$
537
ALLL Balance at
December 31, 2015
Charge-offs
Recoveries
Provision
ALLL Balance at
December 31, 2016
Commercial
$
418
(330)
1
205
$
294
Individually evaluated for
impairment
$
-
Collectively evaluated for
impairment
$
294
Commercial
Real
Estate
Consumer Residential
Municipal
Total
$
$
$
$
658
(71)
-
239
826
-
826
$
$
$
$
631
(365)
95
575
936
-
936
$
$
$
$
365
-
1
79
445
-
445
$
$
$
$
65
-
-
(7)
58
-
58
Commercial
Real
Estate
Consumer Residential
Municipal
$
$
$
$
680
-
-
(22)
658
-
658
$
$
$
$
476
(307)
64
398
631
-
631
$
$
$
$
487
-
-
(122)
365
-
365
$
$
$
$
287
(689)
-
467
65
-
65
$
$
$
$
$
$
$
$
2,013
(436)
130
1,095
2,802
-
2,802
Total
2,348
(1,326)
65
926
2,013
-
2,013
The following is a summary of the changes in the allowance for loan losses for the years ended
December 31, 2017 and 2016 (in thousands):
Balance, beginning
Charge-offs
Recoveries
Provision
Balance, ending
2017
2016
$
$
2,013
(436)
130
1,095
2,802
$
$
2,348
(1,326)
65
926
2,013
(Continued)
24
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 5.
Loans Receivable and Related Allowance for Loan Losses (Continued)
The allowance for loan losses is based on estimates, and actual losses will vary from 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, result in an ALLL that is representative of the risk found in the components of the
portfolio at any given date.
At December 31, 2017 loans with a carrying amount of $79.0 million were pledged to secure short-
term and long-term borrowings with the Federal Home Loan Bank.
Loans held for sale includes the Bank’s commitment to purchase up to $20,000,000 in residential
mortgage loan fundings originated by another financial institution. The Bank reviews loan
documentation for each specific mortgage prior to funding to ensure it conforms to the terms of the
agreement. The mortgages funded through this program must have already obtained a purchase
commitment (takeout) from another financial institution as part of the conditions of the Bank’s
funding. The Bank also has an in-house residential mortgage loan division that originates loans
held for sale. The balance of loans held for sale was $17,219,636 and $24,655,901 at December 31,
2017 and 2016, respectively.
Nonaccrual loans were approximately $7,513,000 and $746,000 at December 31, 2017 and 2016,
respectively. The Bank is not committed to lend additional funds to borrowers whose loans are
considered impaired or whose loans have been modified.
Note 6.
Bank Premises and Equipment
Bank premises and equipment are summarized as follows:
Buildings and land
Furniture, fixtures and equipment
Software
Total Cost
Less: Accumulated depreciation
Total, net of depreciation
2017
2,494,030
2,450,202
321,463
5,265,695
(2,988,426)
2,277,269
$
$
2016
2,509,609
2,451,289
297,057
5,257,955
(2,751,556)
2,506,399
$
$
Depreciation expense for 2017 and 2016 was $374,277 and $292,919, respectively.
(Continued)
25
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 7.
Time Deposits
The aggregate amounts of certificates of deposit, with a minimum denomination of $250,000 were
$37,060,000 and $31,947,000 at December 31, 2017 and 2016, respectively.
Time deposits include brokered deposits purchased through the Certificate of Deposit Account
Registry Service (CDARS). The balance of these time deposits was $1,221,229 and $2,283,251 at
December 31, 2017 and 2016, respectively. As long as the Bank maintains its current rating through
CDARS rating service, it may purchase deposits up to 15% of its assets as of the most recent quarter
end. At December 31, 2017, the Bank could have purchased up to approximately $64,000,000 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 December 31, 2017, the scheduled maturities of time deposits are as follows:
2018
2019
2020
2021
2022
2023 and beyond
Total
Maturities
$ 61,659,718
40,142,002
22,705,733
26,985,228
8,125,778
2,395,158
$ 162,013,617
Note 8.
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% of
the Bank’s total assets at the prior quarter end, subject to certain eligibility requirements, including
adequate collateral. At December 31, 2017, the Bank had borrowings from FHLB that totaled
$35,957,000. The interest rate on the borrowings range from 1.21% to 3.95% depending on
structure and maturity. The borrowings also required the Bank to own $1,903,100 of FHLB stock.
This amount is included with restricted investments on the consolidated balance sheets.
During 2012, the Bank refinanced $11,000,000 of its fixed rate debt to take advantage of the low
rate interest environment by extending maturities. The refinancing of this debt created fees of
approximately $457,000, which were capitalized according to accounting standards and are included
on the balance sheet as a reduction of the outstanding principal. This amount is being amortized
over the life of the new debt.
(Continued)
26
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 8.
Borrowings (Continued)
The principal on FHLB borrowings matures as follows:
2018
2019
Total principal
Capitalized refinancing fees
FHLB borrowings, net
Maturities
$
$
26,957,000
9,000,000
35,957,000
(63,472)
35,893,528
At December 31, 2016, the Bank had fixed rate advances from FHLB totaling $32,317,361.
In December 2014, the Company issued stock as part of a private placement capital raise. The
Bank’s Employee Stock Ownership Plan (“ESOP”) purchased stock as part of this raise and
borrowed $600,000 from Community Bankers’ Bank to fund the purchase. The loan carries an
interest rate of 4.50% and is to be repaid in seven annual installments of principal and interest. The
Company has guaranteed the loan, which carried a balance of $151,098 and $305,903 at
December 31, 2017 and 2016, respectively. The balance is included in other borrowed funds on the
consolidated balance sheet. Repayment of the loan comes from the Bank’s annual discretionary
contribution to the ESOP, as well as the Bank’s matching component to employee’s elective
deferrals into the 401(k) plan, the proceeds of which are contributed to the ESOP. The shares
purchased with the proceeds of this loan are being used as collateral and are therefore restricted. A
prorated portion of the restricted shares are released each year as the loan is repaid. The Company
also pledged securities from its AFS portfolio with an approximate fair value of $326,000. These
securities are included in restricted investments on the consolidated balance sheet.
In addition the Bank has established lines of credit for federal funds purchases of $15,000,000 with
its correspondent banks. The balance was zero at December 31, 2017 and December 31, 2016.
Note 9.
Subordinated Debt
On November 20, 2015, the Company entered into a Subordinated Note Purchase Agreement (the
“Purchase Agreement”) with 14 institutional accredited investors under which the Company issued an
aggregate of $10,000,000 of subordinated notes (the “Notes”) to the institutional accredited investors.
The Notes have a maturity date of December 1, 2025. The Notes bear interest, payable on the 1st of
June and December of each year, commencing June 1, 2016, at a fixed rate of 6.75% per year for the
first five years, and thereafter will bear a floating interest rate of LIBOR plus 512.8 basis points. The
Notes are not convertible into common stock or preferred stock and are not callable by the holders.
The Company has the right to redeem the Notes, in whole or in part, without premium or penalty, at
any interest payment date on or after December 1, 2020 and prior to the maturity date, but in all cases
in a principal amount with integral multiples of $1,000, plus interest accrued and unpaid through the
date of redemption. If an event of default occurs, such as the bankruptcy of the Company, the holder
of a Note may declare the principal amount of the Note to be due and immediately payable. The
Notes are unsecured, subordinated obligations of the Company and will rank junior in right of
payment to the Company’s existing and future senior indebtedness. The Notes qualify as Tier 2
capital for regulatory reporting.
(Continued)
27
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 9.
Subordinated Debt (Continued)
As part of the transaction, the Company incurred issuance costs totaling $338,813. These costs are
being amortized over the life of the Notes. The following table summarizes the balance of the Notes
and related issuance costs at December 31, 2017 and 2016:
2017
2016
Subordinated debt
Unamortized issuance costs
Subordinated debt, net
$
$
10,000,000
(267,329)
9,732,671
$ 10,000,000
(301,210)
9,698,790
$
Note 10 Common Stock
The Company has 5,000,000 shares of no par value authorized common stock of which 2,765,636 and
2,737,136 shares were issued and outstanding at December 31, 2017 and 2016, respectively.
Note 11. Other Real Estate Owned (Foreclosed Assets)
The Bank had the following amounts in Other Real Estate Owned at December 31, 2017 and 2016:
Real Estate Held
Estimated Realizable Value
2016
2017
1-4 Family
$
207,425
$
611,456
The estimated 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. Adjustments to reduce the loan
balance to net realizable value at the time the properties were acquired were made to the Allowance
for Loan Losses. Bank Management continues to monitor the properties for changes in value. Any
decline in value would be charged to operations.
Expenses associated with the maintenance 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 consolidated balance sheets.
Foreclosed assets guaranteed by governmental agencies and not included in the above total, amounted
to $274,073 and $719,014 at December 31, 2017 and 2016, respectively. These balances are included
with other assets on the Company’s consolidated balance sheets.
(Continued)
28
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 12. Goodwill
The balance in goodwill is the result of a branch acquisition in Charlottesville in 2011 and the
acquisition of River Bancorp, Inc. in 2016. The purpose of these acquisitions was to expand the
geographic service area by targeting attractive markets with potential to provide continued balance
sheet growth and new opportunities for the Company. Bank management will 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 governing accounting standards, an impairment will be recorded.
Goodwill
2017
2016
Charlottesville Branch Acquisition
River Bancorp, Inc. Acquisition
$
366,300
1,727,864
$ 2,094,164
$
366,300
1,727,864
$ 2,094,164
Note 13. Disclosures About Fair Value of Financial Instruments
In accordance with the requirements of U.S. GAAP, fair value disclosure estimates are being made for
like-kind financial instruments. Fair value estimates are based on present value of expected future
cash flows, quoted market prices of similar financial instruments, if available, and other valuation
techniques. These valuations are significantly affected by the discount rates, cash flow assumptions
and risk assumptions used. Therefore, the fair value estimates may not be substantiated by
comparison to independent markets and are not intended to reflect the proceeds that may be realizable
in an immediate settlement of the financial instruments.
U.S. GAAP excludes certain items from the disclosure requirements, and accordingly, the aggregate
fair value of amounts presented do not represent the underlying value of the Company. Management
does not have the intention to dispose of a significant portion of its financial instruments and,
therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and
cash flows.
The following table represents the estimates of fair value of financial instruments as of
December 31, 2017 and 2016:
$
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
Subordinated debt, net
Accrued interest payable
2016
$
2017
$
Carrying
Amount
10,319,189
88,000
48,994,839
17,219,636
328,002,333
1,519,577
7,654,471
339,289,742
36,044,626
9,732,671
285,753
Fair Value
10,319,189
88,000
49,203,412
17,219,636
331,854,364
1,519,577
7,654,471
335,359,051
36,162,098
9,732,671
285,753
$
Carrying
Amount
14,098,449
1,726,000
42,607,381
24,655,901
317,614,392
1,296,268
4,516,310
340,874,155
32,623,264
9,698,790
233,929
Fair Value
14,098,449
1,726,000
42,829,147
24,655,901
325,438,099
1,296,268
4,516,310
340,272,000
32,905,903
9,698,790
233,929
(Continued)
29
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 13. Disclosures About Fair Value of Financial Instruments (Continued)
The following methods and assumptions are used to estimate the fair value of financial instruments:
Cash and short term investments: The carrying amount for cash and short-term investments is a
reasonable estimate 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 market prices, if
available. If market prices are not available, quoted market prices of similar securities are used.
Loans held for sale: Loans held for sale are usually held for a short period of time ranging from 10 to
60 days. The carrying value of these loans approximates their fair value.
Loans held for investment: The fair value of loans held for investment is based on a discounted value
of the estimated future cash flow expected to be received through the earlier of the loan payout or the
loan repricing date. The interest rate applied in 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 estimates of net realization of underlying collateral.
Deposits: The carrying amount is considered a reasonable estimate of fair value for demand 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 currently offered for
deposits of similar remaining maturities.
Other borrowed funds: The fair value of fixed maturity obligations is estimated by a discounted cash
flow method using the interest rates currently offered for borrowings of similar remaining maturities.
Accrued interest receivable and payable: The carrying amounts of accrued interest receivable and
payable approximate their fair values.
Bank-owned life insurance: The carrying and fair value amount of bank-owned life insurance is based
on the present value of the receivable from the executive. The cash surrender values of the policies
exceed the carrying amounts as of the balance sheet date.
Off-balance sheet instruments: The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining terms of the agreements
and the present credit standing of the customers. The amount of fees currently charged on
commitments is determined to be insignificant and therefore the fair value and carrying value of off-
balance sheet instruments are not shown.
(Continued)
30
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 14.
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 measurement 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 of the measurement date. The three levels are
defined as follows:
Level 1 -
Inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets.
Level 2 -
Inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liabilities, either directly or indirectly, for substantially the full term of the
financial instrument.
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 methodologies used for instruments
measured at fair value, as well as the general classification of such instruments pursuant to the
valuation hierarchy:
Securities: Where quoted prices are available in an active market, securities are classified within
Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government
bonds, mortgage 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, mortgage-backed agency
securities, obligations of states and political subdivisions and certain corporate, asset backed and
other securities. In certain cases where there is limited activity or less transparency around inputs to
the valuation, securities are classified within Level 3 of the valuation hierarchy. Currently, all of the
Company’s securities are considered to be Level 2 securities.
Fair values of assets and liabilities measured on a recurring basis at December 31, 2017 and 2016 are
as follows:
Fair Value Measurements at Reporting Date Using
Fair Value
(Level 1)
(Level 2)
(Level 3)
December 31, 2017
Available for-sale securities $ 32,578,294 $
Bank-owned life insurance
Total
7,654,471
$ 40,232,765 $
December 31, 2016
Available for-sale securities $ 26,748,394 $
Bank-owned life insurance
Total
4,516,310
$ 31,264,704 $
-
-
-
-
-
-
$ 32,578,294 $
7,654,471
$ 40,232,765 $
$ 26,748,394 $
4,516,310
$ 31,264,704 $
-
-
-
-
-
-
(Continued)
31
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 14.
Fair Value Measurements (Continued)
Gains and losses (realized and unrealized) included in earnings for the year are reported in noninterest
income as follows:
December 31, 2017:
Total gains included in earnings for the year
Change in unrealized gains or losses relating to assets still held at
year end
December 31, 2016:
Total gains included in earnings for the year
Change in unrealized gains or losses relating to assets still held at
year end
$
$
$
$
192,161
(16,524)
-
96,651
Fair values of assets measured on a non-recurring basis at December 31, 2017 and 2016 are as
follows:
Fair Value Measurements at Reporting Date Using
Fair Value
(Level 1)
(Level 2)
(Level 3)
December 31, 2017
Other real estate owned
Total
December 31, 2016
Other real estate owned
Total
$
$
$
$
207,425 $
207,425 $
611,456 $
611,456 $
- $
- $
- $
- $
- $
- $
207,425
207,425
- $
- $
611,456
611,456
For level 3 assets and liabilities measured at fair value on a recurring basis or non-recurring basis as of
December 31, the significant unobservable inputs used in the fair value measurements were as
follows:
Fair Value At
December 31,
2017
Valuation Technique
Other real
estate owned
$ 207,425 Discounted appraised value
Significant Unobservable Inputs
Discounted for selling costs and
age of appraisals
Range
15%-35%
Fair Value At
December 31,
2016
Valuation Technique
Other real
estate owned
$ 611,456 Discounted appraised value
Significant Unobservable Inputs
Discounted for selling costs and
age of appraisals
Range
15%-35%
(Continued)
32
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 15.
Income Taxes
A reconciliation between the amount of total income taxes and the amount computed by multiplying
income by the applicable federal income tax rates is as follows:
Income taxes computed at the applicable federal
income tax rate
Tax exempt municipal income
Income from life insurance
Nondeductible merger expenses
Nondeductible amortization
Other, net
Income Tax Expense
2017
2016
$
$
2,099,816 $
(137,526)
(46,975)
-
132,187
9,603
2,057,105 $
426,230
(146,711)
(34,702)
311,140
-
(2,506)
553,451
The current and deferred components of income tax expense are as follows:
Current tax expense
Deferred tax expense
Income Tax Expense
2017
2016
$
$
1,732,501 $
324,604
2,057,105 $
292,121
261,330
553,451
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 securities gains.
The net deferred tax asset was made up of the following:
Deferred tax assets
Deferred tax liabilities
Net Deferred Tax Asset
2017
2016
$
$
752,751 $
(314,838)
437,913 $
1,008,318
(349,083)
659,235
This amount has been included as part of other assets on the balance sheet.
The federal and Virginia income tax returns of the Company for 2014 to 2017 are subject to
examination by the Internal Revenue Service and the Virginia Department of Taxation.
On December 22, 2017, President Trump signed into law new U.S. tax reform legislation (the
“Act”). The Act makes significant changes to U.S. corporate income tax laws including a decrease
in the corporate income tax rate to 21% effective for tax years beginning after December 31, 2017.
As a result of the change in tax rate, a deferred tax expense of $217,835 was recorded in 2017.
(Continued)
33
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 15.
Income Taxes (Continued)
In February 2018, FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive
Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income. The standard provides financial statement preparers with an option to
reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect
of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or
portion thereof) is recorded. The Company has reclassified $53,255 from accumulated other
comprehensive income to retained earnings as of December 31, 2017.
Note 16. Employee Benefits
The Bank has a 401(k) Profit Sharing Plan that covers eligible employees. Employees may make
voluntary contributions subject to certain limits based on federal tax laws. The Bank matches 100
percent of an employee’s contribution up to five percent of his or her salary following one year of
continuous service and the benefits vest immediately. The Bank’s Board of Directors may make
additional contributions at its discretion. Employees become eligible to participate in the discretionary
contributions after one year of continuous service and the benefits vest over a five-year period. For
the years ended December 31, 2017 and 2016, total expenses attributable to this plan were $308,878
and $142,565, respectively.
In 2013, the Company established an Employee Stock Ownership Plan (ESOP) that covers eligible
employees. 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 may include both the matching component to employees’
elective deferrals into the 401(k) plan and discretionary profit contributions. In December 2014, the
ESOP borrowed $600,000 and used the proceeds to purchase 64,286 common shares from the
Company. Shares purchased with the borrowed funds are allocated and released to participants over
the repayment period of the loan using a formula that considers current contributions to service the
debt compared to total expected future contributions. As of December 31, 2017, 48,969 shares had
been released from the suspended shares resulting in a remaining balance of 15,317 unallocated ESOP
shares. The fair value of unallocated shares as of December 31, 2017 was $201,871. All shares issued
to and held by the Plan are considered outstanding in the computation of earnings per share. The Plan
or the Company is required to purchase shares from separated employees at a price determined by a
third-party appraisal.
The Company recognized discretionary expenses of $120,000 and $46,000 for contributions to the
Plan in 2017 and 2016, respectively. Compensation expense with regards to allocated shares is
determined based on the fair value of the stock at the date of allocation and totaled $211,000 for 2017
and $291,000 for 2016, respectively. Dividends on shares released are recorded as dividends paid on
common stock in the statement of Stockholders’ Equity (totaled approximately $16,000 in 2017) and
dividends on unreleased shares are recorded as compensation expense (totaled approximately $6,000
in 2017). The Plan held 79,800 total shares of Company stock at December 31, 2017 and 2016.
(Continued)
34
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 17.
Financial Instruments With Off-Balance-Sheet Risk
In the normal course of business, to meet credit needs of customers, the Bank has made commitments
to extend credit of $45,499,000 and $33,830,000 as of December 31, 2017 and 2016, respectively.
These commitments 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 funds are disbursed. Collateral and other security for the loans are
determined on a case-by-case basis. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements. The distribution of commitments to extend credit approximates the distribution of loans
outstanding.
Note 18. Commitments and Contingencies
In the ordinary course of business, the Bank has various outstanding commitments and contingent
liabilities that are not reflected in the accompanying consolidated financial statements. The
commitments include a total of $1,536,145 for its interest in six Small Business Investment Company
(SBIC) funds. The Bank funded $1,763,855 of its total $3,500,000 investment prior to
December 31, 2017, and anticipates capital calls for the remaining amount to occur during the next
one to three years. Management does not anticipate any loss resulting from these commitments.
The Bank sells mortgage loans to unrelated investors. In the event the Bank is not able to deliver
certain loan closing documents within the specified time period, the Company may be required to
repurchase some of these loans.
Note 19. Lease Commitments
Various facilities are leased under noncancellable operating leases with initial remaining terms in
excess of one year and an option for renewal. In addition to minimum rentals, certain leases have
escalation clauses and include provisions for additional payments to cover taxes, insurance, and
maintenance. Rental expense for 2017 and 2016 was $777,228 and $298,274, respectively.
At December 31, 2017, the aggregate future minimum rental commitments (base rents) under this
noncancellable operating lease are as follows:
For the year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total
Annual
Payments
$
692,295
654,861
596,687
462,703
348,893
841,035
$ 3,596,474
(Continued)
35
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 20. Concentration of Credit Risk
The majority of the Bank’s loans are made to customers in the Bank’s trade area and a substantial
portion of the loans are secured by real estate. Accordingly, the ultimate collectability of the Bank’s
loan portfolio is susceptible to changes in local economic conditions including the agribusiness sector
and the real estate market. A summary of loans by type is shown in Note 5. Collateral required by the
Bank is determined on an individual basis depending on the nature of the loan and the financial
condition of the borrower. In addition, investment in state and municipal securities include
governmental entities within the Bank’s market area.
Note 21. Transactions With Related Parties
During the year, officers, directors, and principal shareholders and their related interests were
customers of and had transactions with the Bank during the normal course of business. These
transactions were made on substantially the same terms as those prevailing for other customers and
did not involve any abnormal risk. Loan transactions to such related parties are shown in the
following schedule:
2017
2016
Total loans, beginning of year
Advances
Curtailments
Total loans, end of year
$ 7,785,000
6,293,000
(2,267,000)
$ 6,244,000
4,291,000
(2,750,000)
$ 11,811,000 $ 7,785,000
The Bank held related party deposits of approximately $5,664,000 and $5,556,000 at
December 31, 2017 and 2016, respectively.
Note 22.
Stock-Based Compensation
The Company has granted restricted stock awards to employees under the Blue Ridge Bank Equity
Incentive Plan. The restricted stock awards are considered fixed awards as the number of shares and
fair value is known at the date of grant and the fair value at the grant date is amortized over the vesting
period. Non-cash compensation expense recognized in the Consolidated Statements of Income related
to restricted stock awards, net of estimated forfeitures, was $53,533 for the year ended December 31,
2017. The fair value of restricted stock awards during the year ended December 31, 2017 was
$418,000. There were no restricted stock awards granted prior to 2017.
Note 23. Derivative Instruments and Hedging Activities
The Bank participates in a “mandatory” delivery program for its government guaranteed mortgage
loans. Under the mandatory delivery system, loans with interest rate locks are paired with the sale of a
TBA (To Be Announced) mortgage-backed security bearing similar attributes. Under the mandatory
delivery program, the Bank commits to deliver loans to an investor at an agreed-upon price prior to
the close of such loans. This differs from a “best efforts” delivery, which sets the sale price with the
investor on a loan-by-loan basis when each loan is locked.
(Continued)
36
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 24. Regulatory Matters
The principal source of funds of Blue Ridge Bankshares, Inc. is dividends paid by its subsidiary
bank. The various regulatory authorities impose restrictions on dividends paid by a national bank.
A national bank cannot pay dividends (without the consent of the Comptroller of the Currency) in
excess of the total net profits (net income less dividends paid) of the current year to date and the
combined retained net profits of the previous two years. As of January 1, 2018, the Bank could pay
dividends to Blue Ridge Bankshares, Inc. of approximately $6,665,656 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 regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum 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 financial statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank’s capital amounts and classification are also subject to
qualitative judgments by the regulators about components, 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 December 31, 2017, that the Bank meets all capital adequacy
requirements to which it is subject.
The Bank is considered well capitalized under the regulatory framework for prompt corrective action.
To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based,
Tier 1 risk-based, Common Equity Tier 1, and Tier 1 leverage ratios as disclosed in the table below.
There are no conditions or events since the most recent notification that management believes have
changed the Bank’s prompt corrective action category.
(Continued)
37
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 24
Regulatory Matters (Continued)
Actual
Amount
Ratio
For Capital
Adequacy Purposes
Ratio
Amount
To Be Well Capitalized
Under the Prompt Corrective
Action Provisions
Amount
Ratio
As of December 31, 2017
Total risk based capital
(To risk rated assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
39,328
45,127
12.70% $
14.61% $
24,767
24,714
8.0%
8.0% $
N/A
30,893
N/A
10.0%
Tier I capital
(To risk rated assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
Common equity tier 1 capital
(To risk rated assets)
36,526
42,325
11.80% $
13.70% $
18,575
18,536
6.0%
6.0% $
N/A
24,714
N/A
8.0%
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
36,526
42,325
11.80% $
13.70% $
13,932
13,902
4.5%
4.5% $
N/A
20,080
N/A
6.5%
Tier I capital
(To average assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
36,526
42,325
8.67% $
10.33% $
16,845
16,392
4.0%
4.0% $
N/A
20,491
N/A
5.0%
Actual
Amount
Ratio
For Capital
Adequacy Purposes
Ratio
Amount
To Be Well Capitalized
Under the Prompt Corrective
Action Provisions
Amount
Ratio
As of December 31, 2016
Total risk based capital
(To risk rated assets)
Blue Ridge Bankshares $
$
Blue Ridge Bank
35,759
41,900
11.99% $
14.11% $
23,862
23,749
8.0%
8.0% $
N/A
29,687
N/A
10.0%
Tier I capital
(To risk rated assets)
Blue Ridge Bankshares $
$
Blue Ridge Bank
Common equity tier 1 capital
(To risk rated assets)
33,746
39,887
11.31% $
13.44% $
17,896
17,812
6.0%
6.0% $
N/A
23,749
N/A
8.0%
Blue Ridge Bankshares $
$
Blue Ridge Bank
33,746
39,887
11.31% $
13.44% $
13,422
13,359
4.5%
4.5% $
N/A
19,296
N/A
6.5%
Tier I capital
(To average assets)
Blue Ridge Bankshares $
$
Blue Ridge Bank
33,746
39,887
10.27% $
9.64% $
13,150
16,550
4.0%
4.0% $
N/A
20,687
N/A
5.0%
(Continued)
38
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 24
Regulatory Matters (Continued)
On July 7, 2013 the Federal Reserve Board approved the Basel III Final Rule which began
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 economic stress. The Final
Rule changed minimum capital ratios and raised the Tier 1 Risk Weighted Assets to 6% from 4%.
In addition, the new rules require a bank to maintain a capital conservation buffer that started at
0.625% beginning in 2016 and reaches 2.50% by 2019. The phase in of this buffer began in 2015
with complete compliance required by 2019. Generally, the Basel III Final Rule requires banks to
maintain higher levels of common equity and regulatory capital.
Note 25. Recent Accounting Pronouncements and Changes
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic
606). ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to
recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects
the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 also
requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash
flows arising from customer contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 was effective
for annual reporting periods beginning after December 15, 2017. ASU No. 2015-14 issued in
August 2015 deferred the effective date of this update to annual reporting periods beginning after
December 15, 2018. Earlier application is permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. The
adoption of this ASU is not expected to have a material effect on the Company’s current financial
position or results of operations; however, it may impact the reporting of future financial statement
disclosures.
In January 2016, ASU No. 2016-01 Financial Instruments – Overall (Subtopic 825-10) was issued
by the FASB. The amendments address certain aspects of recognition, measurement, presentation,
and disclosure of financial instruments. The amendments will be effective for fiscal years
beginning after December 15, 2018. The Company is currently evaluating the impact of these
amendments on its financial statements.
In June 2016, ASU No. 2016-13 Financial Instruments – Credit Losses (Topic 326) was issued by
the FASB. The ASU is intended to improve financial reporting by requiring timelier recording of
credit losses on loans and other financial instruments held by financial institutions and other
organizations. The ASU is effective for the Company in fiscal years beginning after December 15,
2020. Early application will be permitted for all organizations for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating
the effect that implementation of the new standard will have on its financial position, results of
operations, and cash flows.
39
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017
Note 25. Recent Accounting Pronouncements and Changes (Continued)
In March 2017, ASU No. 2017-07 Compensation – Retirement Benefits (Topic 715) was issued by
the FASB. The amendments in this ASU require an employer that offers defined benefit pension
plans, other postretirement benefit plans, or other types of benefits accounted for under Topic 715 to
report the service cost component of net periodic benefit cost in the same line item(s) as other
compensation costs arising from services rendered during the period. The other components of net
periodic benefit cost are required to be presented in the income statement separately from the
service cost component. If the other components of net periodic benefit cost are not presented on a
separate line or lines, the line item(s) used in the income statement must be disclosed. In addition,
only the service cost component will be eligible for capitalization as part of an asset, when
applicable. The amendments are effective for annual periods beginning after December 15, 2017.
Early adoption is permitted. The Company does not expect the adoption of ASU 2017-07 to have a
material impact on its consolidated financial statements.
Other accounting standards have been issued by the FASB that are not currently applicable to the
Company or are not expected to have a material impact on the Company’s financial statements.
40
BOARD OF DIRECTORS
Ottis R. Barham, Jr.
Kenneth E. Flynt
Brian K. Plum
Hunter H. Bost
James E. Gander, II
William W. Stokes
Robert B. Burger, Jr.
John H. H. Graves
Malcolm R. Sullivan, Jr.
Mensel D. Dean, Jr.
Robert S. Janney
Larry Dees
Richard L. Masincup
LOCATIONS
Branch Locations
Mortgage Loan Production Offices
Luray
Shenandoah
McGaheysville
Harrisonburg
Charlottesville
Drakes Branch
Stuart
Martinsville
Kernersville
Greensboro
Cary
Raleigh
Fayetteville
Whiteville
Wilmington
Stay connected with Blue Ridge Bank
www.mybrb.com
@MyBlueRidgeBank
Blue Ridge Bank, N.A.
Cover Photographs (Left to Right):
• Luray Caverns, Luray, VA
• Skyline, Greensboro, NC
• Court Square, Harrisonburg, VA
• Downtown Mall, Charlottesville, VA
• Martinsville Speedway, Martinsville, VA
• Skyline, Raleigh, NC