Blue Ridge Bankshares, Inc.
Annual Report
Bank
Smarter.
Parent Company of:
@myblueridgebank
www.mybrb.com
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Mortgages
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TO OUR SHAREHOLDERS
Blue Ridge Bankshares, Inc., your Company, had a record year in 2018. We recorded the highest
earnings in the Company’s history and also paid significantly more in annual common stock dividends
than any prior year. This was accomplished while concurrently launching the Company’s efforts in
Greensboro, North Carolina, its first commercial banking effort outside of Virginia, and onboarding
significant additions to Blue Ridge Bank’s mortgage division. I hope that you, as a shareholder, are as
proud of the efforts of the Blue Ridge team as I am for accomplishing the profitability growth, geographic
expansion, and business line enhancements that we saw in 2018.
You are likely aware, prior to reading the financial statement disclosure, that subsequent to year-end we
announced the conclusion of a common stock raise. The addition of these shares provides us with the
capital needed to take advantage of the opportunities that exist for us to grow, expand, and enhance
shareholder value. The common stock raise serves as both a validation of our efforts and includes key
strategic investors that will help the Company continue to succeed. The Company was pleased to raise
the capital at a level accretive to tangible book value.
The process of raising capital is instructive. It is not just an opportunity to explain to current and potential
investors the story and vision of Blue Ridge Bankshares, Inc., it is a time to reflect more critically on the
strength and robustness of that vision, particularly in conjunction with insightful questions and critiques
from potential investors.
We continue to focus on meaningful, prudent growth driven by identifying attractive geographic and
service market segments. The expansion into the Piedmont Triad in North Carolina was driven by
recognizing an opportunity created in that market by the mass consolidation of North Carolina banks
and the resulting service gap it created. The Piedmont Triad Combined Statistical Area has over 1.6
million residents, surpassing all other Blue Ridge Bank commercial banking population areas combined.
Combining the population and local economy size with the relative inattention paid by the national banks
creates a compelling opportunity for us to create shareholder value through the expansion of our model
of responsive banking.
Our focus on asset growth is only to the extent that asset growth creates more income. Ultimately, we
are an earnings business, and in the long run earnings, not assets, determines our capacity to reinvest in
the business and drive meaningful shareholder return.
We remain diligent about executing the expansion of our noninterest income streams. We added
significant mortgage pieces in 2018 to drive our purchase-based, profitability-oriented mortgage banking
model. We are continuing our efforts to better integrate our payroll company with the core banking
model, and in 2019 we are expecting to see significant noninterest income improvements resulting from
our business credit card program and a steadier flow of government-guaranteed loan sales.
You will note in our subsequent disclosures that early in 2019 we also invested in an insurance
partnership. We believe this relationship, particularly when coupled with effective cross-selling of
opportunities in the commercial and mortgage banking sectors, will drive meaningful income growth in
the future and our partner is just as focused on generating success and growth as much as we are.
The addition of an insurance partner provides one of the last desired pieces in building a full-service,
comprehensive financial services partner that provides services across the financial spectrum that
improve the client experience and also create additional points of contact for the Company. The
augmentation of the core commercial banking model with additional services does not simply create
additional current income from that line of business, it adds commercial banking value with improved
client retention and lengthened average customer lives. It is much easier to grow the balance sheet and
further enhance earnings when our average relationship stays longer.
We are uniquely positioned. Our combined service suite is unmatched by other community banks, and
as most national banks continue to look upstream and reduce efforts across our footprint, we are able to
step in and offer our clients a product and technology suite that matches the national banks but with our
customized service level. There is no other bank like us in our geographic markets.
We are excited. There is an incredible opportunity ahead of us that can be captured with diligence, hard
work, and a commitment to evolve with the industry and technology. The writer of Ecclesiastes noted
in verse 11 of the 9th chapter that “…the race is not to the swift, nor the battle to the strong, neither yet
bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and
chance happeneth to them all.” I am not saying we are any of those things, but the best laid plans mean
nothing if not executed in the right circumstances. Banking industry changes are swirling around us at
an accelerating pace, and we remain vigilant and observant about the impacts they will have on us. That
does not mean we will always be right or react as quickly as we could, but we also recognize success is
an iterative process and with energy and a rabid focus on our client experience we can continue to create
outsized value for our investors.
Our growth and success in 2018 also came in the form of key talent acquisitions. We significantly added
to the depth and breadth of the team across our business lines, and as a result are much better positioned
to deal with any events, expected or unexpected, that impact the management team. While perhaps not
exciting, this is a key business item you as an investor should take comfort in.
Please contact me with any questions, comments, or suggestions you have. My phone number is 540-
743-6521 and my e-mail address is bplum@mybrb.com.
Thank you for your continued trust and investment dollars. We do not take it lightly, and we’ll continue
to work hard for you.
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 equity
Common stockholders' equity
Book value per common share
Number of common stock shares outstanding
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
$
$
$
$
$
$
2018
4,572,709
4,559,269
1,500,578
1.64
0.540
539,589,524
58,750,128
411,288,250
415,026,585
39,620,139
39,407,095
14.11
2,792,885
$
$
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
36,242,019
13.10
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
0.95%
12.02%
12.05%
7.34%
7.30%
0.80%
9.56%
9.59%
8.59%
8.55%
0.20%
2.39%
2.39%
8.04%
8.04%
0.98%
10.22%
11.05%
8.96%
8.96%
0.89%
9.22%
11.33%
10.36%
8.48%
Dividends
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
$0.00
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
Dividends per Common Share
Dividend Payout Ratio
2014
2015
2016
2017
2018
Five Year Stock Performance (January 1, 2014 to December 31, 2018)
)
%
(
e
g
n
a
h
C
e
c
i
r
P
Source: S&P Global Market Intelligence
OTC Pink: BRBS: 61.72%
S&P 500: 35.63%
KBW Nasdaq Bank: 23.86%
A 2017 Stock-Split
BLUE RIDGE BANKSHARES, INC.
PARENT OF
BLUE RIDGE BANK, NATIONAL ASSOCIATION
LURAY, VIRGINIA
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
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, 2018 and 2017, and the
related consolidated statements of income, comprehensive income, changes in stockholders’ equity, 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
1909 Financial Drive • Harrisonburg, VA 22801 • 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, 2018
and 2017, 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 13, 2019
CERTIFIED PUBLIC ACCOUNTANTS
2
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2018 and 2017
ASSETS
Cash and due from banks (Note 1)
Federal funds sold
Investment securities
Securities available for sale (at fair value) (Note 2)
Securities held to maturity (fair value of $15,503,426
in 2018, $13,414,988 in 2017) (Note 2)
Restricted investments
Total Investment Securities
Loans held for sale (Note 3)
Loans held for investment (Note 3)
Allowance for loan losses (Note 3)
Net Loans Held for Investment
Bank premises and equipment, net (Note 4)
Bank owned life insurance (Note 1)
Goodwill (Note 10)
Other assets
LIABILITIES
Total Assets
Deposits
Demand deposits
Noninterest bearing
Interest bearing
Savings deposits
Time deposits (Note 5)
Total Deposits
Other borrowed funds (Note 6)
Subordinated debt, net of issuance costs (Note 7)
Other liabilities
Total liabilities
STOCKHOLDERS' EQUITY
Common stock and related surplus, no par value;
authorized 10,000,000 (2018) and 5,000,000 (2017);
outstanding 2,792,885 and 2,765,636, respectively (Note 8)
Contributed equity
Retained earnings
Accumulated other comprehensive income
Unearned ESOP shares
Total Stockholders' Equity
Noncontrolling interest
Total Equity
Total Liabilities and Stockholders' Equity
The accompanying notes are an
integral part of this statement.
3
$
2018
15,025,651
546,000
$
2017
10,319,189
88,000
38,046,596
32,578,294
15,565,086
5,138,446
58,750,128
29,233,325
414,867,966
(3,579,716)
411,288,250
3,343,030
8,454,893
2,694,164
10,254,083
539,589,524
88,264,516
128,077,956
28,922,144
169,761,969
415,026,585
73,100,000
9,766,554
2,076,246
499,969,385
16,452,452
251,543
23,321,026
(617,926)
39,407,095
-
39,407,095
213,044
39,620,139
539,589,524
$
$
$
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
7,472,489
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)
36,384,975
(142,956)
36,242,019
199,604
36,441,623
424,122,390
$
$
$
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
December 31, 2018 and 2017
2018
2017
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
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 12)
Net Income
Net (income) 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
$
$
$
$
$
19,692,607
785,794
17,016
1,649,255
291,889
22,436,561
813,657
2,698,546
1,639,602
5,151,805
17,284,756
1,225,000
16,059,756
635,207
200,422
208,215
2,724,048
4,541,061
5,242
-
1,808,476
10,122,671
11,842,850
1,614,174
1,110,574
401,350
484,775
290,013
190,220
142,515
800,871
544,497
3,040,734
20,462,573
5,719,854
1,147,145
4,572,709
(13,440)
4,559,269
4,559,269
1.64
2,779,090
$
$
$
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
162,126
1,527,203
4,139,475
192,161
264,069
720,437
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
The accompanying notes are an
integral part of this statement.
4
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STAEMENTS OF COMPREHENSIVE INCOME
December 31, 2018 and 2017
2018
2017
Net Income
$
4,572,709
$
3,350,124
Other comprehensive income:
Gross unrealized gains (losses) arising during the period
Adjustment for income tax benefit
Less:
Reclassification adjustment for gains included in net income
Adjustment for income tax expense
Other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive (income) loss attributable to noncontrolling interest
Comprehensive income attributable to Blue Ridge Bankshares, Inc.
(275,325)
57,450
(217,875)
(5,242)
1,100
(4,142)
(222,017)
4,350,692
(13,440)
4,337,252
$
$
$
(16,524)
5,618
(10,906)
(192,161)
75,726
(116,435)
(127,341)
3,222,783
396
3,223,179
$
$
$
The accompanying notes are an
integral part of this statement.
5
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
December 31, 2018 and 2017
Common
Stock &
Related
Surplus
Contributed
Equity
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest
Unearned
ESOP Shares
Total
Balance, December 31, 2016
$
16,270,152
$
131,357
$
17,666,715
$
(143,025)
$
-
$
(298,094)
$
33,627,105
Comprehensive Net Income
Net income
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
Issuance of restricted common stock
Release of unearned ESOP shares
Noncontrolling interest
Common stock dividends
Balance, December 31, 2017
Comprehensive Net Income
Net income (loss)
Changes in unrealized gains on
securities available for sale, net of
deferred income tax asset of $58,550
Total Comprehensive Income
Reclassification of equity securities
Issuance of restricted common stock, net of forfeitures
Release of unearned ESOP shares
Common stock dividends
Balance, December 31, 2018
-
-
3,350,520
-
(396)
-
3,350,124
-
-
-
53,533
-
-
-
16,323,685
-
-
-
-
63,507
-
-
194,864
-
53,255
-
-
-
-
(880,443)
20,190,047
(180,596)
-
-
-
-
-
-
(323,621)
-
-
-
-
-
200,000
-
199,604
-
-
-
-
155,138
-
-
(142,956)
$
(180,596)
53,255
3,222,783
53,533
218,645
200,000
(880,443)
36,441,623
-
-
4,559,269
-
13,440
-
4,572,709
-
-
-
128,767
-
-
16,452,452
$
$
-
-
-
-
56,679
-
251,543
-
-
72,288
-
-
(1,500,578)
23,321,026
$
$
(222,017)
-
(72,288)
-
-
-
(617,926)
$
-
-
-
-
-
-
213,044
$
-
-
-
-
142,956
-
-
(222,017)
4,350,692
-
128,767
199,635
(1,500,578)
39,620,139
$
The accompanying notes are an
integral part of this statement.
6
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2018 and 2017
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 (increase) decrease in loans held for sale, originated
(Gain) 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 (Used in) Provided by Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale
Purchases of securities held to maturity
Proceeds from calls, maturities, sales, paydowns and maturities of
2018
2017
$
4,572,709
$
3,350,124
1,225,000
8,763
(8,433,389)
(795)
-
(5,242)
414,794
238,621
63,472
33,883
504,677
(3,381,856)
(537,481)
(200,422)
199,635
(9,870,340)
(5,297,631)
1,095,000
(324,604)
2,640,840
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
6,790,150
10,140,274
(11,581,996)
(4,400,884)
(14,076,296)
(1,144,048)
securities available for sale
5,274,262
2,382,784
Proceeds from calls, maturities, paydowns and maturities of
securities held for investment
(Decrease) increase in federal funds sold
Net increase in loans held for investment
Net (increase) decrease in loans held for sale, participated
Purchase of bank premises and equipment
Capital calls of SBIC funds and other investments
Nonincome distributions from limited liability companies
Proceeds from sale of assets
Purchase of bank owned life insurance
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 restricted common stock, net of forfeitures
Noncontrolling interest
Repayment of contingent ESOP liability
Net Cash Provided by Financing Activities
CASH AND CASH EQUIVALENTS
Net increase in cash and cash equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
1,915,000
(458,000)
(84,510,917)
(3,580,300)
(1,496,773)
(552,031)
97,403
17,013
(600,000)
(1,475,618)
(101,352,841)
67,988,491
7,748,352
185,300,000
(148,157,000)
(1,500,578)
128,767
-
(151,098)
111,356,934
6,622,239
1,638,000
(11,482,941)
4,795,425
(197,438)
(220,590)
30,725
-
(3,000,000)
(400,870)
(15,053,010)
(2,291,448)
707,035
26,000,000
(22,500,000)
(880,443)
53,533
199,604
(154,805)
1,133,476
4,706,462
10,319,189
15,025,651
$
(3,779,260)
14,098,449
10,319,189
$
The accompanying notes are an
integral part of this statement.
7
BLUE RIDGE BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
December 31, 2018 and 2017
SUPPLEMENTAL INFORMATION
Interest Paid
Income taxes paid
2018
2017
$
4,984,907
1,350,000
$
3,872,382
650,000
The accompanying notes are an
integral part of this statement.
8
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 1.
Nature of Operations and Significant Accounting Policies
Nature of operations
Blue Ridge Bankshares, Inc. (the “Company”) through Blue Ridge Bank, N.A. (the “Bank”) operates
under a national charter and provides commercial banking services and mortgage lending services.
The Bank is subject to regulation by the Office of the Comptroller of the Currency as a nationally
chartered institution. The Bank provides commercial banking services to customers located primarily
in the Piedmont, Southside, and Shenandoah Valley regions of the Commonwealth of Virginia and
also operates under the name Carolina State Bank in Greensboro, North Carolina. Mortgage lending
services are provided in these regions as well, with additional mortgage offices located in Northern
Virginia, Maryland, North Carolina, and Florida.
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
Management is required to make estimates and assumptions that affect the reported amounts in
preparing the financial 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. The Bank also has compensating balance agreements with is 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, 2018 and 2017 was $775,000.
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.
(Continued)
9
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 1.
Nature of Operations and Significant Accounting Policies (Continued)
Investment securities (Continued)
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.
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. The agreed upon sales price is
considered fair value as all of these loans are under agreements to sell to investors at the time of
origination. 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.
(Continued)
10
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 1.
Nature of Operations and Significant Accounting Policies (Continued)
Allowance for loan losses (Continued)
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.
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, 2018 and 2017.
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 SBIC 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. All distributions
in excess of initial investment are recognized as income.
(Continued)
11
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 1.
Nature of Operations and Significant Accounting Policies (Continued)
Advertising costs
Advertising costs are expensed as incurred.
Bank premises and equipment
Bank premises and equipment are stated at cost less 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.
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
The Bank has entered into commitments to extend credit in the ordinary course of business. Such
financial instruments are recorded in the financial statements when 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.
(Continued)
12
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 1.
Nature of Operations and Significant Accounting Policies (Continued)
Subsequent events
Subsequent events have been evaluated through March 13, 2019, the date the financial statements
were available to be issued.
Note 2.
Investment Securities
The amortized cost and fair values of investment securities are as follows:
December 31, 2018
Available for Sale (AFS)
State and municipal
U.S. Treasury and agencies
Mortgage backed securities
Corporate bonds
Held to Maturity (HTM)
State and municipal
Total Investment Securities
December 31, 2017
Available for Sale (AFS)
State and municipal
U.S. Treasury and agencies
Mortgage backed securities
Corporate bonds
Equity securities
Held to Maturity (HTM)
State and municipal
Total Investment Securities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
1,000,240
3,374,917
28,975,918
5,477,239
38,828,314
15,565,086
15,565,086
$ 54,393,400
$
3,170
-
22,306
77,279
102,755
78,649
78,649
181,404
$
-
208,358
628,172
47,943
884,473
$ 1,003,410
3,166,559
28,370,052
5,506,575
38,046,596
140,309
140,309
1,024,782
15,503,426
15,503,426
$ 53,550,022
$
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
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
$
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
$
Proceeds from sales, calls, and maturities of AFS securities during 2018 and 2017 were $5,274,262
and $2,382,784, respectively, resulting in a gain of $5,242 and $192,161, respectively.
(Continued)
13
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 2.
Investment Securities (Continued)
During 2018 and 2017, HTM securities with book values of $1,915,000 and $6,622,239, respectively,
were either called or matured resulting in no gain or loss for either year.
Investment securities with an approximate fair value of $26,408,094 and $15,541,000, at
December 31, 2018 and 2017, 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, 2018, 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:
Within one year
After one year through five
years
After five years through ten
years
After ten years
Securities Available for Sale
Amortized
Cost
Fair
Value
Securities Held to Maturity
Amortized
Cost
Fair
Value
$
500,240 $
502,130 $
302,493 $
302,412
2,499,917
2,436,714
4,088,803
4,109,832
8,546,937
27,281,220
38,828,314
2,687,057
8,346,572
8,486,733
26,761,180
38,046,596 15,565,086
2,678,578
8,412,604
15,503,426
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, 2018
State and
Municipal
U.S. Treasury and
Agency
Mortgage backed
Corporate bonds
Total
Less Than 12 Months
Gross
Fair
Value
Unrealized
Losses
12 Months or Greater
Gross
Unrealized
Losses
Fair
Value
Total
Gross
Unrealized
Losses
Fair
Value
$
6,278,495 $ (105,118)
$ 2,402,406
$
(35,191)
$ 8,680,901 $
(140,309)
-
10,030,885
2,114,453
-
(50,590)
(35,548)
$ 18,423,833 $ (191,256)
3,166,559
17,172,584
487,605
$ 23,229,154
$
(208,358)
(577,582)
(12,395)
(833,526)
3,166,559
27,203,469
2,602,058
(208,358)
(628,172)
(47,943)
$ 41,652,987 $ (1,024,782)
(Continued)
14
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 2.
Investment Securities (Continued)
December 31, 2017
State and
Municipal
U.S. Treasury and
Agency
Mortgage backed
Corporate bonds
Equity securities
Total
Less Than 12 Months
Gross
Fair
Value
Unrealized
Losses
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)
-
11,442,024
1,230,000
-
-
(237,469)
(20,000)
-
$ 14,978,475 $ (273,076)
3,200,731
8,490,769
-
25,099
$ 11,716,599
$
(174,169)
(266,532)
-
(24,901)
(465,602)
3,200,731
19,932,793
1,255,099
-
$ 26,695,074 $
(174,169)
(504,001)
(44,901)
-
(738,678)
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.
The Company had securities which have depreciated 2.51% in value from the amortized cost at
December 31, 2018. Included in this total are 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. No
declines are deemed to be other-than-temporary as management has the ability and intent to hold debt
securities until maturity, or for the foreseeable future if classified as AFS.
(Continued)
15
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
Loans Receivable and Related Allowance for Loan Losses
The following table summarizes the primary segments of the loan portfolio (in thousands):
December 31, 2018
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, 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
Individually
Evaluated for
Impairment
Collectively
Evaluated for
Impairment
Total
$
293 $
132,219
$
132,512
-
1,258
-
-
395
-
-
-
-
1,946
$
91,229
62,169
15,097
14,614
16,798
31,991
40,625
8,688
(508)
412,922
$
91,229
63,427
15,097
14,614
17,193
31,991
40,625
8,688
(508)
414,868
$
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
$
The Bank’s loan portfolio is disaggregated to a level that is consistent with applicable call report
codes to allow management to better monitor risk and performance. 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)
16
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
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. 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 $1,946,000 and $3,227,000 in loans individually evaluated for impairment as of
December 31, 2018 and 2017, respectively.
(Continued)
17
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
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 2016 River Bancorp, Inc. acquisition had remaining balances of
$34,672,107 and 49,831,573 as of December 31, 2018 and 2017, respectively. Of these balances,
three loan relationships were considered specifically impaired purchased credit-impaired loans. One
of these relationships was resolved during 2018 and the Company recovered $200,000 of the balance
previously written-off. At December 31, 2018, the remaining specifically impaired PCI loans totaled
$2,761,919 with a specific impairment of $390,000. The following table presents the segments of the
River Bancorp, Inc. purchased loans as of December 31, 2018 (in thousands):
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
Other
Other revolving credit plans
Automobile loans
Other consumer loans
Total
River Bancorp, Inc.
Purchased Loan Balances
2018
2017
$
1,522
319
$
1,712
512
3,376
10,448
505
250
7,344
6,239
4,457
89
30
93
34,672
$
3,659
13,727
875
984
11,701
8,284
7,841
252
100
185
49,832
$
(Continued)
18
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
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.
The Bank has a structured loan rating process with both internal and external oversight 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’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 $2,400,000. 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.
(Continued)
19
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
Loans Receivable and Related Allowance for Loan Losses (Continued)
The following tables present 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, 2018 and 2017 (in thousands):
Watch/
Special
Mention Substandard Doubtful Total
Pass
December 31, 2018
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, 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
$ 90,884
58,924
$
$
345
1,323
- $
3,180
- $
-
91,229
63,427
15,097
13,594
40,313
8,688
227,500
(449)
$227,051
$
-
-
-
-
1,668
-
1,668
$
-
-
15,097
1,020
312
-
4,512
-
4,512 $
-
14,614
-
40,625
-
8,688
-
233,680
(449)
-
- $ 233,231
Watch/
Special
Mention Substandard Doubtful Total
Pass
$ 47,228
62,826
$
$
2,004
-
695 $
3,130
- $
-
49,927
65,956
8,130
10,612
37,045
11,763
177,604
(261)
$177,343
$
-
-
-
-
2,004
-
2,004
$
-
-
8,130
1,355
1,480
-
6,660
-
6,660 $
11,967
-
38,525
-
11,763
-
186,268
-
-
(261)
- $ 186,007
(Continued)
20
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
Loans Receivable and Related Allowance for Loan Losses (Continued)
The following tables present (in thousands) the classes of the loan portfolio for which loan
performance is the primary credit quality indicator as of December 31, 2018 and 2017:
December 31, 2018
Performing loans
Non-performing loans
Less: Unearned revenue
Total
December 31, 2017
Performing loans
Non-performing loans
Less: Unearned revenue
Total
Residential
Loans
Home
Equity
Loans
Consumer
Loans
Total
$
$
$
$
131,515
997
132,512
(201)
132,311
Residential
Loans
105,675
568
106,243
(297)
105,946
$
$
$
$
16,749
444
17,193
42
17,235
$
$
31,634
357
31,991
100
32,091
$ 179,898
1,798
181,696
(59)
$ 181,637
Home
Equity
Loans
Consumer
Loans
Total
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
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.
(Continued)
21
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
Loans Receivable and Related Allowance for Loan Losses (Continued)
The following tables present the classes of the loan portfolio summarized by the aging categories of
performing loans and nonaccrual loans as of December 31, 2018 and 2017 (in thousands):
December 31, 2018
Current
30-59 Days
Past Due
60 - 89
Days Past
Due
90 Days+
Past Due
Total Past
Due
Non-
Accrual
Total
Loans
$ 129,728
$
701
$
7
$
1,079 $
1,787
$
997
$ 132,512
Residential loans
Commercial real estate loans
Non owner-occupied/multi-
family
Owner-occupied & farmland
Construction loans
Residential construction loans
Commercial construction &
91,075
59,619
14,866
raw land loans
Home equity loans
Consumer loans
Commercial/farm loans
Municipal/other loans
Unearned income on loans
Total
13,635
16,690
30,205
40,004
8,688
(508)
$ 404,002
$
-
341
-
-
59
1,017
280
-
-
2,398
$
154
287
-
-
-
408
29
-
-
885
-
739
231
-
-
4
-
-
-
2,053 $
$
154
1,367
231
-
59
1,429
309
-
-
5,336
-
2,441
91,229
63,427
-
15,097
979
444
357
312
-
-
14,614
17,193
31,991
40,625
8,688
(508)
5,530 $ 414,868
$
December 31, 2017
Current
30-59 Days
Past Due
60 - 89
Days Past
Due
90 Days+
Past Due
Total Past
Due
Non-
Accrual
Total
Loans
$ 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
$
-
-
-
-
-
-
228
55
-
-
283
$
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
$
$
The classes described above provide the starting point for the ALLL analysis. Management tracks the
historical net charge-off activity by loan class. A historical charge-off factor is calculated and applied
to each class. Loans that are collectively evaluated for impairment are analyzed with general
allowances being made as appropriate. For general allowances, historical loss trends are used in the
estimation of losses in the current portfolio. Other qualitative factors are also considered.
(Continued)
22
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
Loans Receivable and Related Allowance for Loan Losses (Continued)
“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors.
Management has identified a 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, 2018
Note 3.
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, 2018 and 2017. Activity in the allowance is
presented for the each of the twelve months ended December 31, 2018 and 2017 (in thousands):
ALLL Balance at
December 31, 2017
Charge-offs
Recoveries
Provision
ALLL Balance at
December 31, 2018
Commercial
$
537
(6)
12
96
$
639
Individually evaluated for
impairment
$
-
Collectively evaluated for
impairment
$
639
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
Commercial
Real
Estate
Consumer Residential
Municipal
Total
$
$
$
$
826
-
-
377
$
936
(544)
104
704
1,203
$ 1,200
-
$
-
1,203
$ 1,200
$
$
$
$
445
(13)
-
58
490
-
490
$
$
$
$
58
-
-
(10)
48
-
48
Commercial
Real
Estate
Consumer Residential
Municipal
$
$
$
$
658
(71)
-
239
826
-
826
$
$
$
$
631
(365)
95
575
936
-
936
$
$
$
$
365
-
1
79
445
-
445
$
$
$
$
65
-
-
(7)
58
-
58
$
$
$
$
$
$
$
$
2,802
(563)
116
1,225
3,580
-
3,580
Total
2013
(436)
130
1,095
2,802
-
2,802
(Continued)
24
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 3.
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.
Loans with a carrying amount of $105 million were pledged to secure short-term and long-term
borrowings with the Federal Home Loan Bank at December 31, 2018.
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 $29,233,325 and $17,219,636 at December 31, 2018
and 2017, respectively.
Nonaccrual loans were approximately $5,530,000 and $7,513,000 at December 31, 2018 and 2017,
respectively. The Bank is not committed to lend additional funds to borrowers whose loans are
considered impaired or whose loans have been modified.
Note 4.
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
2018
3,109,573
2,976,895
376,508
6,462,976
(3,119,946)
3,343,030
$
$
2017
2,494,030
2,450,202
321,463
5,265,695
(2,988,426)
2,277,269
$
$
Depreciation expense for 2018 and 2017 was $414,794 and $374,277, respectively.
(Continued)
25
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 5.
Time Deposits
The aggregate amounts of certificates of deposit, with a minimum denomination of $250,000
were $39,148,000 and $37,060,000 at December 31, 2018 and 2017, respectively.
Time deposits include brokered deposits purchased through the Certificate of Deposit Account
Registry Service (CDARS). The balance of these time deposits was $1,204,844 and $1,221,229 at
December 31, 2018 and 2017, 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, 2018, the Bank could have purchased up to approximately $81,000,000 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, 2018, the scheduled maturities of time deposits are as follows:
2019
2020
2021
2022
2023
2024 and beyond
Total
Maturities
$ 71,658,999
39,180,287
27,919,644
9,078,767
18,673,176
3,251,096
$ 169,761,969
Note 6.
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. The Bank had borrowings from FHLB
totaled $73,100,000 at
December 31, 2018. The interest rate on the borrowings range from 1.34% to 3.95% depending on
structure and maturity. The borrowings also required the Bank to own $3,487,900 of FHLB stock.
This amount is included with restricted investments on the consolidated balance sheets.
that
The principal on FHLB borrowings matures as follows:
2019
Maturities
$
73,100,000
The Bank had fixed rate advances from FHLB totaling $35,893,528 at December 31, 2017.
(Continued)
26
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 6.
Borrowings (Continued)
The Company issued stock as part of a private placement capital raise in December 2014. 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 carried an interest rate of 4.50% and
was to be repaid in seven annual installments of principal and interest. The Company guaranteed the
loan, which was paid off as of December 31, 2018 and carried a balance of $151,098 at
December 31, 2017. The 2017 balance is included in other borrowed funds on the consolidated
balance sheet. Repayment of the loan came 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 were contributed to the ESOP. The shares purchased with the proceeds of
this loan were being used as collateral and were therefore restricted. A prorated portion of the
restricted shares were released each year as the loan was repaid. As of December 31, 2018, there are
no longer any restricted shares related to this loan. The Company also pledged securities from its AFS
portfolio, which were included in restricted investments on the consolidated balance sheet in prior
years.
The Bank has established lines of credit for federal funds purchases of $19,000,000 with its
correspondent banks. The balance was zero at December 31, 2018 and December 31, 2017.
Note 7.
Subordinated Debt
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 on
November 20, 2015. 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.
The Company incurred issuance costs totaling $338,813 as part of the transaction. 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, 2018 and 2017:
2018
2017
Subordinated debt
Unamortized issuance costs
Subordinated debt, net
$
$
10,000,000
(233,446)
9,766,554
$ 10,000,000
(267,329)
9,732,671
$
(Continued)
27
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 8.
Common Stock
The Company has 10,000,000 shares of no par value authorized common stock of which 2,792,885
shares were issued and outstanding at December 31, 2018. The Company had 5,000,000 shares of no
par value authorized common stock of which 2,765,636 shares were issued and outstanding at
December 31, 2017.
Note 9.
Other Real Estate Owned (Foreclosed Assets)
The Bank had the following amounts in other real estate owned at December 31, 2018 and 2017:
Real Estate Held
Estimated Realizable Value
2017
2018
1 ‒ 4 Family
$
134,230
$
207,425
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 $43,849 and $274,073 at December 31, 2018 and 2017, respectively. These balances are included
with other assets on the Company’s consolidated balance sheets.
Note 10. Goodwill
The balance in goodwill is the result of a branch acquisition in Charlottesville in 2011, the acquisition
of River Bancorp, Inc. in 2016, and the acquisition of a mortgage line of business in 2018. 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 accordance with GAAP the Company is not amortizing 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
2018
2017
Charlottesville Branch Acquisition
River Bancorp, Inc. Acquisition
Mortgage Business Acquisition
$
366,300
1,727,864
600,000
$ 2,694,164
$
366,300
1,727,864
-
$ 2,094,164
(Continued)
28
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 11. 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, 2018 and 2017 are
as follows:
Fair Value Measurements at Reporting Date Using
Fair Value
(Level 1)
(Level 2)
(Level 3)
December 31, 2018
Available for-sale securities $ 38,046,596 $
Bank-owned life insurance
Total
8,454,893
$ 46,501,489 $
December 31, 2017
Available for-sale securities $ 32,578,294 $
Bank-owned life insurance
Total
7,654,471
$ 40,232,765 $
-
-
-
-
-
-
$ 38,046,596 $
8,454,893
$ 46,501,489 $
$ 32,578,294 $
7,654,471
$ 40,232,765 $
-
-
-
-
-
-
(Continued)
29
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 11. 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, 2018:
Total gains included in earnings for the year
Change in unrealized gains or losses relating to assets still held at
year end
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
$
5,242
$
(275,325)
$
192,161
$
(16,524)
Fair values of assets measured on a non-recurring basis at December 31, 2018 and 2017 are as
follows:
Fair Value Measurements at Reporting Date Using
Fair Value
(Level 1)
(Level 2)
(Level 3)
December 31, 2018
Other real estate owned
Total
December 31, 2017
Other real estate owned
Total
$
$
$
$
134,230 $
134,230 $
207,425 $
207,425 $
- $
- $
- $
- $
- $
- $
134,230
134,230
- $
- $
207,425
207,425
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,
2018
Valuation Technique
Other real
estate owned
$ 134,230
Discounted appraised value
Significant Unobservable Inputs
Discounted for selling costs and
age of appraisals
Range
15%-35%
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%
(Continued)
30
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 11.
Fair Value Measurements (Continued)
The estimated fair values, and related carrying amounts (in thousands), of the Company’s financial
instruments are as follows:
Fair Value Measurements at December 31, 2018
$
$
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
15,025,651
546,000
-
-
-
-
-
-
-
-
-
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
10,319,189
88,000
-
-
-
-
-
-
-
-
-
$
Significant
Observable
Inputs
(Level 2)
-
-
58,688,468
29,233,325
-
1,769,450
8,454,893
323,280,000
73,113,000
-
395,892
$
Significant
Unobservable
Inputs
(Level 3)
-
-
-
-
404,888,675
-
-
81,070,864
-
9,766,554
-
Fair Value Measurements at December 31, 2017
$
Significant
Observable
Inputs
(Level 2)
-
-
49,203,412
17,219,636
-
1,519,577
7,654,471
266,694,000
36,162,098
-
285,753
$
Significant
Unobservable
Inputs
(Level 3)
-
-
-
-
331,854,364
-
-
68,665,051
-
9,732,671
-
$
$
Fair Value
15,025,651
546,000
58,688,468
29,233,325
404,888,675
1,769,450
8,454,893
404,350,864
73,113,000
9,766,554
395,892
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
15,025,651
546,000
58,750,128
29,233,325
411,288,250
1,769,450
8,454,893
415,026,585
73,100,000
9,766,554
395,892
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
$
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
$
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
(Continued)
31
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 12.
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 core deposit intangible amortization
Other, net
Income Tax Expense
2018
2017
$
$
1,201,765 $
(89,380)
(42,089)
64,649
12,200
1,147,145 $
2,099,816
(137,526)
(46,975)
132,187
9,603
2,057,105
The current and deferred components of income tax expense are as follows:
Current tax expense
Deferred tax (benefit) expense
Income tax expense
2018
2017
$
$
1,155,908 $
(8,763)
1,147,145 $
1,732,501
324,604
2,057,105
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
2018
2017
$
$
938,743 $
(433,517)
505,226 $
752,751
(314,838)
437,913
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 2015 to 2018 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)
32
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 13. 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%
of an employee’s contribution up to 5% 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, 2018 and 2017, total expenses attributable to this plan were $364,653 and $308,878,
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 were allocated and released to participants over
the repayment period of the loan using a formula that considered current contributions to service the
debt compared to total expected future contributions. The loan was repaid and all shares released as of
December 31, 2018. 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 $165,000 and $120,000 for contributions to the
Plan in 2018 and 2017, 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 $196,000 for 2018
and $211,000 for 2017. Dividends on shares released are recorded as dividends paid on common
stock in the statement of stockholders’ equity and totaled approximately $23,000 in 2018. The Plan
held 79,800 total shares of Company stock at December 31, 2018 and 2017.
Note 14. 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 $58,664,000 and $45,499,000 as of December 31, 2018 and 2017, 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.
(Continued)
33
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 15. 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 $1,319,627 for its interest in five Small Business Investment
Company (SBIC) funds. The Bank funded $1,326,873 of its total $2,646,500 investment prior to
December 31, 2018, 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 16. 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 2018 and 2017 was $816,590 and $777,228, respectively.
At December 31, 2018, the aggregate future minimum rental commitments (base rents) under this
noncancellable operating lease are as follows:
For the year ending December 31,
2019
2020
2021
2022
2023
Thereafter
Total
Annual
Payments
$ 1,183,502
1,123,313
971,496
754,243
667,933
1,752,047
$ 6,452,534
Note 17. 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 4. 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.
(Continued)
34
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 18. 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:
2018
2017
Total loans, beginning of year
Advances
Curtailments
Total loans, end of year
$ 11,811,000 $
4,180,000
(6,383,000)
$ 9,608,000
7,785,000
6,293,000
(2,267,000)
$ 11,811,000
The Bank held related party deposits of approximately $5,500,000 and $5,664,000 at
December 31, 2018 and 2017, respectively.
Note 19.
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 $128,767 and $53,533 for the
years ended December 31, 2018 and 2017, respectively. The fair value of restricted stock awards at
December 31, 2018 and 2017 was $933,000 and $418,000, respectively.
Note 20. Derivative Instruments and Hedging Activities
The Bank participates in a “mandatory” delivery program for its government guaranteed and
conventional mortgage loans. Under the mandatory delivery system, loans with interest rate locks are
paired with the sale of a TBA 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.
Note 21. 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, 2019, the Bank could pay
dividends to Blue Ridge Bankshares, Inc. of approximately $7,358,932 without the permission of
regulatory authorities. The ability to pay such a dividend would additionally be affected by the
subsidiary bank’s capital availability.
(Continued)
35
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 21 Regulatory Matters (Continued)
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, 2018, 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.
Actual
For Capital
Adequacy Purposes
To Be Well Capitalized
Under the Prompt Corrective
Action Provisions
Amount
$000s
Ratio
Amount
$000s
Ratio
Amount
$000s
Ratio
As of December 31, 2018
Total risk based capital
(To risk rated assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
43,500
48,811
10.78% $
12.11% $
32,285
32,235
8.0%
8.0% $
N/A
40,294
N/A
10.0%
Tier I capital
(To risk rated assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
39,920
45,231
9.89% $
11.23% $
24,214
24,176
6.0%
6.0% $
N/A
32,235
Common equity tier 1 capital
(To risk rated assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
39,920
45,231
9.89% $
11.23% $
18,160
18,132
4.5%
4.5% $
N/A
26,191
Tier I capital
(To average assets)
Blue Ridge Bankshares $
Blue Ridge Bank, N.A. $
39,920
45,231
8.28% $
8.89% $
19,274
20,342
4.0%
4.0% $
N/A
25,428
N/A
8.0%
N/A
6.5%
N/A
5.0%
(Continued)
36
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 21 Regulatory Matters (Continued)
Actual
For Capital
Adequacy Purposes
To Be Well Capitalized
Under the Prompt Corrective
Action Provisions
Amount
$000s
Ratio
Amount
$000s
Ratio
Amount
$000s
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. $
36,526
42,325
11.80% $
13.70% $
18,575
18,536
6.0%
6.0% $
N/A
24,714
Common equity tier 1 capital
(To risk rated assets)
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
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
8.0%
N/A
6.5%
N/A
5.0%
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 22. Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic
606). ASU 2014-09 is a comprehensive 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.
Interest income, loan fees, realized securities gains and losses, bank owned life insurance income,
SBIC income, and mortgage banking revenue are not in the scope of ASC Topic 606. All of our
revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest
income in the consolidated statements of income. Incremental costs of obtaining a contract are
expensed when incurred when the amortization period is one year or less.
(Continued)
37
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 22. Revenue from Contracts with Customers (Continued)
A description of our significant sources of revenue accounted for under ASC 606 is as follows:
Service fees on deposit accounts are fees charged to deposit customers for transaction-based, account
maintenance and overdraft services. Transaction-based fees, which are earned based on specific
transactions or customer activity within a customer’s deposit account, are recognized at the time the
related transaction or activity occurs, as it is at this point when the customer’s request has been
fulfilled. Account maintenance fees, which relate primarily to monthly maintenance, are earned over
the course of a month, representing the period over which the performance obligation was satisfied.
Overdraft fees are recognized when the overdraft occurs. Service fees on deposit accounts are paid
through a direct charge to the customer’s account.
Bank card revenue is comprised of interchange revenue and ATM fees. Interchange revenue is earned
when bank debit and credit cardholders conduct transactions through VISA, MasterCard, and other
payment networks. Interchange fees represent a percentage of the underlying cardholder’s transaction
value and are generally recognized daily, concurrent with the transaction processing services provided
to the cardholder. ATM fees are earned when a non-Bank cardholder uses a Bank ATM. ATM fees
are recognized daily, as the related ATM transactions are settled.
Payroll processing income is comprised of fees charged to customers for payroll services through
MoneyWise Payroll Solutions, Inc., of which Blue Ridge Bank, N.A. owns a controlling interest.
The following table illustrates our total non-interest income segregated by revenues within the scope
of ASC Topic 606 and those which are within the scope of other ASC Topics:
Service fees on deposit accounts
Bank card revenue
Payroll processing income
Revenue from contracts with customers
Non-interest income within scope of other ASC topics
Total noninterest income
2018
2017
$ 635,207 $ 654,893
446,009
235,100
1,336,002
6,462,523
$ 7,798,525
513,884
1,009,649
2,158,740
7,963,931
$ 10,122,671
Note 23.
Subsequent Events
On February 1, 2019, the Company purchased a 35% ownership interest in an insurance agency for an
aggregate purchase price of $1,018,500. The purchase price is expected to be allocated to goodwill in
the amount of $612,500 and an amortizing intangible asset of $406,000, which will be amortized over
a period of 12 years.
On February 27, 2019, the Company announced the sale of 1,304,848 shares of common stock for an
aggregate price of approximately $19.9 million in a private placement to accredited investors. The
Company expects to sell up to an additional 232,000 shares of common stock pursuant to a previously
existing non-dilution right. Once completed, the total net proceeds for the Company are expected to
be approximately $22.3 million. The Company intends to use the net proceeds of the offering for
general corporate purposes, including organic growth.
(Continued)
38
BLUE RIDGE BANKSHARES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Note 24. Recent Accounting Pronouncements and Changes
In February 2016, ASU No. 2016-02, Leases (Topic 842) was issued by the FASB. In the
amendments in this ASU, lessees will be required to recognize the following for all leases (with the
exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s
obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A
right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a
specified asset for the lease term. The amendments in this ASU are effective for fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. Early
application is permitted upon issuance. 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.
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.
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.
39
Board of Directors
Hunter H. Bost
Kenneth E. Flynt
Richard L. Masincup
Robert B. Burger, Jr.
James E. Gander, II
Brian K. Plum
Mensel D. Dean
John H. H. Graves
William W. Stokes
Larry Dees
Robert S. Janney
Malcolm R. Sullivan, Jr.
Locations
Commercial Bank Locations
Charlottesville, VA
Drakes Branch, VA
Greensboro, NC
Harrisonburg, VA
Luray, VA
Martinsville, VA
McGaheysville, VA
Shenandoah, VA
Stuart, VA
Mortgage Locations
Cary, NC
Dunkirk, MD
Delray Beach, FL
Fairfax, VA
Fayetteville, NC
Greensboro, NC
Harrisonburg, VA
Kernersville, NC
Luray, VA
Martinsville, VA
Raleigh, NC
Rockville, MD
Virginia Beach, VA
Whiteville, NC
Wilmington, NC
Bank
Smarter.
www.mybrb.com
@myblueridgebank