Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 3,~~July 31, 2023, the registrant had ~~18,942,513~~19,191,060 shares of common stock, no par value per share, outstanding.


	(unaudited)						(unaudited)
(Dollars in thousands except share data)	March 31, 2023			December 31, 2022 (1)			June 30, 2023			December 31, 2022 (1)
ASSETS
Cash and due from banks	$	226,374		$	77,274		$	131,843		$	77,274
Federal funds sold		1,976			1,426			2,492			1,426
Securities available for sale, at fair value		351,990			354,341			340,617			354,341
Restricted equity investments		18,388			21,257			17,538			21,257
Other equity investments		22,960			23,776			22,693			23,776
Other investments		26,538			24,672			27,157			24,672
Loans held for sale		76,528			69,534			64,102			69,534
Paycheck Protection Program loans, net of deferred fees and costs		7,988			11,967			7,234			11,967
Loans held for investment, net of deferred fees and costs		2,448,992			2,399,092			2,451,697			2,399,092
Less: allowance for credit losses		(29,974	)		(22,939	)		(43,067	)		(22,939	)
Loans held for investment, net		2,419,018			2,376,153			2,408,630			2,376,153
Accrued interest receivable		14,915			12,393			15,474			12,393
Other real estate owned		—			195			—			195
Premises and equipment, net		23,244			23,152			22,849			23,152
Right-of-use asset		6,470			6,903
Right-of-use assets								5,744			6,903
Bank owned life insurance		47,536			47,245			47,828			47,245
Goodwill		26,826			26,826			26,826			26,826
Other intangible assets		6,196			6,583			5,925			6,583
Mortgage servicing rights, net		27,095			28,991			28,246			28,991
Deferred tax asset, net		9,605			9,182			11,051			9,182
Other assets		21,264			19,175			28,175			19,175
Total assets	$	3,334,911		$	3,141,045		$	3,214,424		$	3,141,045
LIABILITIES & STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	594,518		$	640,101		$	575,989		$	640,101
Interest-bearing demand and money market deposits		1,326,655			1,318,799			1,293,754			1,318,799
Savings		143,530			151,646			131,332			151,646
Time deposits		696,344			391,961			612,019			391,961
Total deposits		2,761,047			2,502,507			2,613,094			2,502,507
FHLB borrowings		239,100			311,700			219,100			311,700
FRB borrowings		—			51			65,000			51
Subordinated notes, net		39,904			39,920			39,888			39,920
Lease liabilities		7,398			7,860			6,765			7,860
Other liabilities		29,876			19,634			39,306			19,634
Total liabilities		3,077,325			2,881,672			2,983,153			2,881,672
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Common stock, no par value; 50,000,000 shares authorized at March 31, 2023 and December 31, 2022; 18,942,091 and 18,774,082 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		196,498			195,960
Common stock, no par value; 50,000,000 shares authorized at June 30, 2023 and December 31, 2022; 18,933,637 and 18,950,329 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively								196,990			195,960
Additional paid-in capital		252			252			252			252
Retained earnings		102,071			108,262			80,287			108,262
Accumulated other comprehensive loss, net of tax		(41,235	)		(45,101	)		(46,258	)		(45,101	)
Total stockholders’ equity		257,586			259,373			231,271			259,373
Total liabilities and stockholders’ equity	$	3,334,911		$	3,141,045		$	3,214,424		$	3,141,045


	For the three months ended						For the three months ended						For the six months ended
(Dollars in thousands, except per share data)	March 31, 2023			March 31, 2022			June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
INTEREST INCOME
Interest and fees on loans	$	39,294		$	23,899		$	34,839		$	23,787		$	74,133		$	47,686
Interest on securities, deposit accounts, and federal funds sold		3,759			1,903			4,134			2,456			7,893			4,359
Total interest income		43,053			25,802			38,973			26,243			82,026			52,045
INTEREST EXPENSE
Interest on deposits		11,331			1,556			14,624			1,541			25,955			3,097
Interest on subordinated notes		553			553			547			545			1,100			1,098
Interest on FHLB and FRB borrowings		3,810			25			3,399			67			7,209			92
Total interest expense		15,694			2,134			18,570			2,153			34,264			4,287
Net interest income		27,359			23,668			20,403			24,090			47,762			47,758
Provision for credit losses - loans		4,100			2,500			21,100			7,494			25,200			9,994
Provision (benefit) for credit losses - unfunded commitments		(400	)		—			(600	)		—			(1,000	)		—
Total provision for credit losses		3,700			2,500			20,500			7,494			24,200			9,994
Net interest income after provision for credit losses		23,659			21,168
Net interest (loss) income after provision for credit losses								(97	)		16,596			23,562			37,764
NONINTEREST INCOME
Fair value adjustments of other equity investments		(51	)		9,364			(281	)		(86	)		(332	)		9,278
Residential mortgage banking income, including MSRs		1,303			9,559			4,295			5,960			5,598			15,519
Gain on sale of guaranteed government loans		2,409			1,427			2,384			1,538			4,793			2,965
Wealth and trust management		432			391			462			414			894			805
Service charges on deposit accounts		343			315			349			327			692			642
Increase in cash surrender value of bank owned life insurance		282			272			292			276			574			548
Bank and purchase card, net		340			422			560			599			900			1,021
Other		2,225			2,344			1,675			1,162			3,900			3,506
Total noninterest income		7,283			24,094			9,736			10,190			17,019			34,284
NONINTEREST EXPENSE
Salaries and employee benefits		15,289			14,096			14,518			15,873			29,807			29,969
Occupancy and equipment		1,569			1,485			1,913			1,500			3,482			2,985
Data processing		1,346			946			1,131			874			2,477			1,820
Legal		1,234			382
Legal, issuer, and regulatory filing								2,753			618			3,987			1,000
Advertising and marketing		286			428			337			412			623			840
Communications		1,131			799			1,171			1,030			2,302			1,829
Audit and accounting fees		146			141			503			379			649			520
FDIC insurance		729			231			1,246			106			1,975			337
Intangible amortization		355			397			335			386			690			783
Other contractual services		939			534			3,218			999			4,157			1,533
Other taxes and assessments		802			570			803			671			1,605			1,241
Regulatory remediation		1,134			—			2,388			—			3,522			—
Merger-related		—			50			—			—			—			50
Other		3,887			2,630			3,736			2,478			7,623			5,108
Total noninterest expense		28,847			22,689			34,052			25,326			62,899			48,015
Income from continuing operations before income tax expense		2,095			22,573
Income tax expense		491			5,153
Net income from continuing operations	$	1,604		$	17,420
(Loss) income from continuing operations before income tax expense								(24,413	)		1,460			(22,318	)		24,033
Income tax (benefit) expense								(4,949	)		342			(4,458	)		5,495
Net (loss) income from continuing operations							$	(19,464	)	$	1,118		$	(17,860	)	$	18,538
Discontinued Operations
Income from discontinued operations before income taxes		—			426			—			—			—			426
Income tax expense		—			89			—			—			—			89
Net income from discontinued operations		—			337			—			—			—			337
Net income	$	1,604		$	17,757
Net (loss) income							$	(19,464	)	$	1,118		$	(17,860	)	$	18,875
Net income from discontinued operations attributable to noncontrolling interest		—			(1	)		—			—			—			(1	)
Net income attributable to Blue Ridge Bankshares, Inc.	$	1,604		$	17,756
Net income available to common stockholders	$	1,604		$	17,756
Basic and Diluted EPS from continuing operations	$	0.09		$	0.93
Net (loss) income attributable to Blue Ridge Bankshares, Inc.							$	(19,464	)	$	1,118		$	(17,860	)	$	18,874
Net (loss) income available to common stockholders							$	(19,464	)	$	1,118		$	(17,860	)	$	18,874
Basic and diluted (loss) earnings per share from continuing operations							$	(1.03	)	$	0.06		$	(0.95	)	$	0.99
Basic and diluted earnings per share from discontinued operations							$	—		$	—		$	—		$	0.02
Basic and diluted (loss) earnings per share attributable to Blue Ridge Bankshares, Inc.							$	(1.03	)	$	0.06		$	(0.95	)	$	1.01


	For the three months ended						For the six months ended
(Dollars in thousands)	March 31, 2023			March 31, 2022			June 30, 2023			June 30, 2022
Cash Flows From Operating Activities
Net income from continuing operations	$	1,604		$	17,420
Net (loss) income from continuing operations							$	(17,860	)	$	18,538
Net income from discontinued operations		—			337			—			337
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		444			525			877			1,038
Deferred income tax (benefit) expense		(462	)		3,801			(1,242	)		3,316
Provision for credit losses		3,700			2,500
Provision for credit losses - loans								25,200			9,994
Provision for credit losses - unfunded commitments								(1,000	)		—
Accretion of fair value adjustments (discounts) on acquired loans		(688	)		(2,691	)		(1,161	)		(4,058	)
Accretion of fair value adjustments (premiums) on acquired time deposits		(284	)		(470	)		(506	)		(833	)
Accretion of fair value adjustments (premiums) on acquired subordinated notes		(25	)		(25	)		(50	)		(50	)
Proceeds from sale of mortgage loans held for sale		51,748			234,550			116,540			368,217
Mortgage loans held for sale, originated		(45,231	)		(153,534	)		(115,528	)		(275,897	)
Gain on sale of mortgage loans		(364	)		(77	)		(995	)		(3,136	)
Proceeds from sale of guaranteed government loans held for sale		33,049			—			69,449			—
Guaranteed government loans held for sale, originated		(32,024	)		—			(49,708	)		—
Gain on sale of guaranteed government loans		(2,409	)		—			(4,793	)		—
Loss (gain) on disposal of other assets		11			(405	)
Loss (gain) on disposal of premises and equipment								14			(405	)
Loss on disposal of other assets								528			—
Realized gains on sale of other equity securities		(10	)		—			(10	)		—
Investment amortization expense, net		162			452			348			809
Amortization of subordinated debt issuance costs		9			9			18			17
Intangible amortization		355			397			690			783
Fair value adjustments of other equity investments		51			(9,364	)		332			(9,278	)
Fair value adjustments attributable to mortgage servicing rights		2,138			(3,777	)		1,364			(3,548	)
Increase in cash surrender value of bank owned life insurance		(282	)		(272	)		(574	)		(548	)
Increase in accrued interest receivable		(2,522	)		(2,820	)		(3,081	)		(665	)
(Increase) decrease in other assets		(4,374	)		3,971			(11,277	)		399
Increase in reserve for unfunded commitments		3,292			70
Increase in other liabilities		6,488			4,430			19,577			5,033
Net cash provided by operating activities - continuing operations		14,376			95,027			27,152			110,063
Net cash provided by operating activities - discontinued operations		—			55			—			55
Cash provided by operating activities		14,376			95,082			27,152			110,118
Cash Flows From Investing Activities
Net increase in loans held for investment		(61,529	)		(66,088	)		(69,948	)		(272,026	)
Net increase in federal funds sold		(550	)		(30,391	)
Net (increase) decrease in federal funds sold								(1,066	)		8,410
Purchases of securities available for sale		—			(32,660	)		—			(66,761	)
Proceeds from calls, sales, paydowns, and maturities of securities available for sale		7,972			7,743			12,690			15,163
Proceeds from sale of other real estate owned		264			70			264			70
Net decrease in Paycheck Protection Program loans		3,979			7,552			4,733			14,752
Net change in restricted equity and other investments		2,561			(283	)		3,499			(4,857	)
Purchase of premises and equipment		(536	)		(104	)		(643	)		(221	)
Proceeds from sale of premises and equipment								55			1,937
Proceeds from sale of other assets		193			1,937			950			—
Proceeds from sale of LSMG								250			—
Capital calls of small business investment company funds and other investments		(1,682	)		(3,553	)		(2,594	)		(3,997	)
Nonincome distributions from SBIC funds and other investments		141			227
Nonincome distributions from limited liability companies								332			420
Net cash used in investing activities - continuing operations		(49,187	)		(115,550	)		(51,478	)		(307,110	)
Net cash provided by investing activities - discontinued operations		—			245			—			245
Cash used in investing activities		(49,187	)		(115,305	)		(51,478	)		(306,865	)
Cash Flows From Financing Activities:
Net (decrease) increase in demand, savings, and other interest-bearing deposits								(109,471	)		144,924
Net increase (decrease) in time deposits								220,564			(106,155	)
Common stock dividends paid								(4,641	)		(4,552	)
FHLB advances								1,080,000			135,000
FHLB repayments								(1,172,600	)		(10,000	)
FRB advances								65,000			—
FRB repayments								(51	)		(17,841	)
Stock option exercises								26			15
Dividend reinvestment plan issuances								68			—
Net cash provided by financing activities - continuing operations								78,895			141,391
Net cash provided by financing activities - discontinued operations								—			—
Cash provided by financing activities								78,895			141,391
Net increase (decrease) in cash and due from banks								54,569			(55,356	)
Cash and due from banks at beginning of period								77,274			130,548
Cash and due from banks at end of period							$	131,843		$	75,192

Note 1 – Organization and Basis of Presentation

Blue Ridge Bankshares, Inc. (the “Company”) conducts its business activities primarily through its wholly-owned subsidiary bank, Blue Ridge Bank, National Association (the “Bank”) and its wealth and trust management subsidiary, BRB Financial Group, Inc. (the “Financial Group”). The Company exists primarily for the purposes of holding the stock of its subsidiaries, the Bank and the Financial Group.

The accompanying unaudited consolidated financial statements of the Company include the accounts of the Bank and the Financial Group and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. All significant intercompany balances and transactions have been eliminated in consolidation. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The Company sold its majority interest in MoneyWise Payroll Solutions, Inc. (“MoneyWise”) to the holder of the minority interest in MoneyWise in the first quarter of 2022. ~~Asset and liability balances and income~~Income statement amounts related to MoneyWise are reported as discontinued operations for all relevant periods.

On August 29, 2022, the Bank entered into a formal written agreement (the “Written Agreement”) with the Office of the Comptroller of the Currency (the “OCC”), the Bank’s primary federal banking regulator. The Written Agreement principally concerns the Bank’s fintech line of business and requires the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering, and information technology risks stemming from its fintech partnerships. A complete copy of the Written Agreement was filed as an exhibit to a Form 8-K filed with the Securities and Exchange Commission (“SEC”) on September 1, 2022 and can be accessed on the SEC’s website (www.sec.gov) and the Company’s website (~~www.blueridgebankshares.com~~www.blueridgebankshares.com). The Company is actively working to bring the Bank’s fintech policies, procedures, and operations into conformity with OCC directives. The Company reports that although work is progressing, many aspects of the Written Agreement require considerable time for completion, implementation, validation, and sustainability.

On May 15, 2023, the Company sold its wholesale mortgage business operating as LenderSelect Mortgage Group (“LSMG”) to a third-party for $250 thousand in cash. The Company recorded a loss on the sale of LSMG of $553 thousand, which is reported in other noninterest income in the consolidated statements of operations for the three and six months ended June 30, 2023.

Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current period presentations. The reclassifications had no effect on net income, net income per share, total assets, total liabilities, or stockholders’ equity as previously reported.

The Company's significant accounting policies are disclosed in Note 2 of the audited financial statements and notes for the year ended December 31, 2022 and are contained in the Company's Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2022, except as described in Note 2 - Adoption of New Accounting Standard of this Form 10-Q.

Note 2 – Adoption of New Accounting Standard

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13 - Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) along with amendments ASU 2019-11 - Codification Improvements to Topic 326, Financial Instruments – Credit Losses, and ASU 2022-02 - Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). Together, these ASUs, referred to herein as Accounting Standards Codification (“ASC”) “ASC 326”, replace the incurred loss impairment methodology with the current expected credit loss methodology (“CECL”) and require consideration of a broader range of information to determine credit loss estimates at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASC 326

applies to financial assets subject to credit losses that are measured at amortized cost and certain off-balance sheet credit exposures, which include, but are not limited to, loans held for investment, leases, held to maturity (“HTM”) securities, loan commitments, and financial guarantees.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures, which included loans held for investment and commitments to extend credit (loan commitments and stand-by letters of credit), respectively. The Company does not have any securities classified as HTM. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts are reported in accordance with previously applicable GAAP.

The following table presents the impact to the consolidated balance sheet as the result of adopting ASC 326 effective January 1, 2023.


(Dollars in thousands)	January 1, 2023 Post-ASC 326 Adoption			December 31, 2022 Pre-ASC 326 Adoption			Impact of ASC 326 Adoption
Assets:
Loans held for investment, net of deferred fees and costs	$	2,399,757		$	2,399,092		$	665
Allowance for credit losses		(26,961	)		(22,939	)		(4,022	)
Deferred tax asset, net		10,757			9,182			1,575
Liabilities:
Reserve for unfunded commitments1		5,504			1,812			3,692
Stockholders' Equity:
Retained earnings		102,788			108,262			(5,474	)
1 Included in other liabilities on the consolidated balance sheets

Loans Held for Investment and Allowance for Credit Losses (“ACL”). Loans that management has the intent and ability to hold for the foreseeable future or until loan maturity or pay-off are reported held for investment at their outstanding principal balance adjusted for any charge-offs and net of any deferred fees (including purchase accounting adjustments) and origination costs (collectively referred to as "amortized cost"). Loan origination fees and certain direct origination costs are deferred and amortized as an adjustment of the yield using the payment terms required by the loan contract.

Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt. A loan remains in nonaccrual status until the loan is current as to payment of both principal and interest or past due less than 90 days and the borrower demonstrates the ability to pay and remain current. When cash payments are received, they are applied to principal first, then to accrued interest. It is the Company's policy not to record interest income on nonaccrual loans until principal has become current. In certain instances, accruing loans that are past due 90 days or more as to principal or interest may not gobe placed on nonaccrual status, if the Company determines that the loans are well-secured and are in the process of collection. In accordance with ASC 326, the Company elected to exclude accrued interest from the amortized cost basis in its determination of the ACL for loans held for investment, and will instead reverse accrued but unpaid interest through interest income in the period in which the loan is placed on nonaccrual status.

The ACL represents management’s best estimate of credit losses over the remaining life of the loan portfolio. Loans are charged-off against the ACL when management believes the loan balance is no longer collectible. Subsequent recoveries of previously charged-off amounts (recoveries) are recorded as increases to the ACL. The provision for credit losses is an amount sufficient to bring the ACL to an estimated balance that management considers adequate to absorb lifetime expected losses in the Company’s held for investment loan portfolio. The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans.

Management’s determination of the adequacy of the ACL under ASC 326 is based on an evaluation of the composition of the loan portfolio, current economic conditions, historical loan loss experience, reasonable and supportable forecasts, and other risk factors. The Company uses a third-party CECL model ~~as part of its estimation of~~in estimating the ACL on a quarterly basis. Loans with similar risk characteristics are collectively assessed within pools (or segments). Loss estimates within the collectively assessed population are based on a combination of pooled assumptions and loan-level characteristics. The Company has determined that using federal call codes is an appropriate loan segmentation methodology, as it is generally based on risk characteristics of a loan's underlying collateral. Using federal call codes

also allows the Company to utilize and assess publicly-available external information when developing its estimate of the ACL. The discounted cash flow ("DCF") method is the primary credit loss estimation methodology used by the Company and involves estimating future cash flows for each individual loan and discounting them back to their present value using the loan's contractual interest rate, which is adjusted for any net deferred fees, costs, premiums, or

discounts existing at the loan's origination or acquisition date (also referred to as the effective interest rate). The DCF method also considers factors such as loan term, prepayment or curtailment assumptions, and other relevant economic factors that could affect future cash flows. By discounting the cash flows, ~~the~~this method incorporates the time value of money and reflects the credit risk inherent in the loan.

In applying future economic forecasts, the Company utilizes a forecast period of one year and then reverts to the mean of historical loss rates on a straight-line basis over the following one-year period. The Company considers economic forecasts of national gross domestic product and unemployment rates from the Federal Open Market Committee to inform the model for loss estimation. Historical loss rates used in the quantitative model ~~were~~are derived using both the Bank's and peer bank data obtained from publicly-available sources (i.e., federal call reports). The Bank's peer group utilized is comprised of financial institutions of relatively similar size (i.e., $3 - $5 billion of total assets) and in similar markets. Management also considers qualitative adjustments when estimating loan losses to take into account the model's quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of trends in delinquencies, nonaccrual loans, charged-off loans, changes in volume and terms of loans, effects of changes in lending policy, experience and depth of management, regional and local economic trends and conditions, ~~and~~ concentrations of credit, competition, and loan review results.

For those loans that do not share similar risk characteristics, the Company evaluates the ACL needs on an individual (or loan by loan) basis. This population of individually evaluated loans (or loan relationships with the same primary source of repayment) is determined on a quarterly basis and is based on whether (1) the risk grade of the loan is substandard or worse and the balance exceeds $500,000 or, (2) the risk grade of the loan is special mention and the balance exceeds $~~3,000,000~~1,000,000, ~~and~~or (3) the loan's terms differ significantly from other pooled loans. Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan's effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan discounted ~~to consider~~for estimated costs to sell the collateral for collateral-dependent loans. If the net value applying these measures is less than the loan's amortized cost, a specific reserve is recorded in the ACL ~~is recorded, which is~~and charged-off in the period when management believes the loan balance is no longer collectible.

The Company’s ~~Allowance Committee~~allowance committee approves the key methodologies and assumptions, as well as the final ACL, on a quarterly basis. While management uses available information at the time of estimation to determine expected credit losses on loans, future changes in the ACL may be necessary based on changes in portfolio composition, portfolio credit quality, changes in underlying facts for individually evaluated loans, and/or economic conditions. In addition, bank regulatory agencies and the Bank’s auditors periodically review its ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management.

Upon the adoption of ASC 326, the Company recorded an increase in its ACL of $4.0 million, along with an after-tax cumulative effect adjustment, which reduced stockholders' equity by $2.6 million.

Collateral-dependent Loans

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral-dependent loans:

•

Commercial real estate loans may be secured by either owner occupied commercial real estate or non-owner occupied ~~investment~~ commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties occupied by operating companies. Repayment is generally from the cash flows of the business occupying the property. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.

•

Commercial and industrial loans may be secured by non-real estate collateral such as accounts receivable, inventory, equipment, or other similar assets.

•

Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.

•

Home equity lines of credit are generally secured by second mortgages on residential real estate property.

•

Consumer loans are generally secured by automobiles, ~~motorcycles,~~ recreational vehicles and other personal property. Some consumer loans are unsecured, have no underlying collateral, and would not be considered collateral-dependent.

Acquired Loans

The Company has acquired loans through its mergers with Bay Banks of Virginia, Inc. in 2021 (the "Bay Banks Merger") and Virginia Community Bankshares, Inc. in 2019. Prior to the adoption of ASC 326, a portion of these loans were classified as purchased-credit impaired ("PCI") under ASC 310-30 – Loans and Debt Securities Acquired with Deteriorated Credit Quality. Upon the adoption of ASC 326, the Company elected to designate its existing PCI loans as purchased credit deteriorated ("PCD") loans using the prospective transition approach. Previously established PCI loan "pools" were eliminated, and, as a result, an increase in the ACL for PCD loans of $665 thousand was recorded, and a corresponding increase in the amortized cost basis of loans held for investment was recorded. This amount represented the then-existing credit discount. The amortized cost of PCD loans post ASC 326 adoption on January 1, 2023 was $59.3 million, which includes a non-credit discount of $5.6 million that will be accreted into interest income over the remaining contractual lives of the underlying loans.

Modified Loans

ASU 2022-22 eliminated the concept of troubled debt restructurings ("TDRs") from the accounting standards for companies that have adopted ASC 326. ASU 2022-02 ~~also~~ requires additional disclosures for certain loan modifications and disclosures of gross charge-offs by year of origination. Specifically, loan modification disclosures in periods subsequent to the adoption of ASC 326 must be made for modifications of existing loans to borrowers who were experiencing financial difficulties at the time of the modification. The modification type must include a direct change in the timing or amount of a loan's contractual cash flows. The additional disclosures are applicable to situations where there is: principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or any combination thereof.

Available for Sale ("AFS") Securities. The Company evaluates the fair value and credit quality of its AFS securities portfolio on a quarterly basis. In the event the fair value of a security falls below its amortized cost basis, the security is evaluated to determine whether the decline in value was caused by changes in market interest rates or security credit quality. The primary indicators of credit quality for the Company’s AFS securities portfolio are security type and credit rating, which is influenced by a number of security-specific factors that may include obligor cash flow, geography, seniority, and others. If unrealized losses are related to credit quality, the Company estimates the credit-related loss by evaluating the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. Subsequent to the adoption of ASC 326, if the present value of cash flows expected to be collected is less than the amortized cost basis of the security and a credit loss exists, then an ACL is recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis. As of December 31, 2022, the Company did not have any other-than-temporarily impaired AFS ~~securities. Therefore,~~securities; therefore, upon adoption of ASC 326, ~~the Company determined that~~ an ACL on AFS securities was not warranted.

Reserve for Unfunded Commitments. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The reserve for unfunded commitments is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, the existence of any third-party guarantees, and an estimate of credit losses on commitments expected to be funded using the same loss rates of similar financial instruments derived in the estimation of ACL for loans held for investment. Upon the adoption of ASC 326, the Company recorded an increase in its reserve for unfunded commitments of $3.7 million, along with an after-tax cumulative effect adjustment, which reduced stockholders' equity by $2.9 million.

As of ~~March 31,~~June 30, 2023 and December 31, 2022, securities with a fair value of $~~242.8~~178.8 million and $241.9 million, respectively, were pledged to secure the Bank’s line of credit with the Federal Home Loan Bank of Atlanta ~~("FHLB"~~(“FHLB”).

As of ~~March 31,~~June 30, 2023 the Company pledged securities with $~~29.9~~108.7 million of par value (amortized cost and fair value of $~~29.8~~109.6 million and $~~25.5~~90.0 million, respectively) as collateral for the Bank Term Funding Program (“BTFP”) established by the Board of Governors of the Federal Reserve System ~~(the “Federal Reserve”).~~on March 12, 2023. The BTFP was created ~~and announced on March 12, 2023~~ in response to industry events to provide banks with additional liquidity via a secured line of credit collateralized by eligible pledged securities. ~~Available credit is equal to the current par~~In addition, securities with a fair value of $11.6 million and $0 were pledged as of June 30, 2023 and December 31, 2022, respectively, to secure potential borrowings from the ~~pledged securities. Advances under the BTFP are up to a one-year term and are priced at the one-year overnight index swap rate plus 10 basis points, which is fixed for the term on the advance date.~~Federal Reserve Bank of Richmond (“FRB”) Discount Window.

The following table presents the amortized cost and fair value of securities available for sale by contractual maturity as of the date stated. Expected maturities may differ from contractual maturities, as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2023				June 30, 2023
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	1,502	$	1,499	$	502	$	502
Due after one year through five years		52,227		47,470		34,949		31,921
Due after five years through ten years		129,729		114,220		138,894		119,581
Due after ten years		222,182		188,801		226,390		188,613
Total	$	405,640	$	351,990	$	400,735	$	340,617

The Company reviews its AFS securities portfolio for potential credit losses ~~at least~~no less than quarterly. At ~~March 31,~~June 30, 2023 and December 31, 2022, the majority of securities in an unrealized loss position were of investment grade; however, a few did not have a third-party investment grade available. These ungraded securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds ~~in the~~ in the tables above. Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed securities are guaranteed and/or funded by the U.S. government. Municipal securities show no indication that the contractual cash flows will not be received when due. The Company does not intend to sell, nor does it believe that it will be required to sell, any of its temporarily impaired securities prior to the recovery of the amortized cost. As of ~~March 31,~~June 30, 2023, there iswas no ACL against the Company's AFS securities portfolio.

Restricted equity investments consisted of stock in the FHLB (carrying value of $~~11.8~~10.9 million and $14.7 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively), stock in the ~~Federal Reserve Bank of Richmond ("FRB")~~FRB (carrying value of $6.1 million at both ~~March 31,~~June 30, 2023 and December 31, 2022), and stock in the Bank’s correspondent bank (carrying value of $468 thousand at both ~~March 31,~~June 30, 2023 and December 31, 2022). Restricted equity investments are carried at cost.

The Company also has various other equity investments, including shares in other financial institutions and fintech companies, totaling $~~23.0~~22.7 million and $23.8 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, which are carried at fair value with any gain or loss reported in the consolidated statements of operations each reporting period. As no actively traded market exists for substantially all of the Company's other equity investments, fair value adjustments are determined by reviewing recent observable market transactions, such as stock or equity transactions, that are substantially similar to the Company's existing investments. Other equity investments are also periodically evaluated for impairment using information obtained either directly from the investee or from a third-party broker. If an impairment has been identified, the carrying value of the investment is written down to its estimated fair market value through a charge to earnings.

Note 4 – Loans and ACL

All loan and ACL information presented as of and for the three and six months ended ~~March 31,~~June 30, 2023 is in accordance with ASC 326. All loan information presented prior to this period is presented in accordance with ~~previously applicable~~

previously applicable GAAP. As a result, the presentation of information pre-ASC 326 and post-ASC 326 adoption will not be comparable for most disclosures.

The following table presents the amortized cost of loans held for investment, including Paycheck Protection Program ("PPP") loans, as of the dates stated.

(Dollars in thousands)

March 31, 2023

December 31, 2022

Commercial and industrial

$
571,095

$
590,049

Paycheck Protection Program

7,988

11,967

Real estate – construction, commercial

180,149

183,301

Real estate – construction, residential

92,403

76,599

Real estate – mortgage, commercial

867,916

864,989

Real estate – mortgage, residential

672,473

631,772

Real estate – mortgage, farmland

6,394

6,599

Consumer

58,907

47,423

Gross loans

2,457,325

2,412,699

Less: deferred loan fees, net of costs

(345
)

(1,640
)
Total

$
2,456,980

$
2,411,059


(Dollars in thousands)	June 30, 2023		December 31, 2022
Commercial and industrial	$	545,921	$	590,049
Paycheck Protection Program		7,234		11,967
Real estate – construction, commercial		165,863		183,301
Real estate – construction, residential		82,199		76,599
Real estate – mortgage, commercial		879,729		864,989
Real estate – mortgage, residential		709,565		631,772
Real estate – mortgage, farmland		5,583		6,599
Consumer		62,510		47,423
Gross loans		2,458,604		2,412,699
Less: deferred loan fees, net of costs		327		(1,640	)
Total	$	2,458,931	$	2,411,059

The Company has pledged certain commercial and residential mortgages as collateral for borrowings with the FHLB. Loans totaling $~~531.8~~601.9 million and $436.0 million were pledged as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. Additionally, PPP loans were pledged as collateral for the FRB's Paycheck Protection Program Liquidity Facility ("PPPLF") advances in the amount of $0 and $51 thousand as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

The following table presents the aging of the amortized cost of loans held for investment by loan category as of ~~March 31, 2023.~~the date stated.


	March 31, 2023														June 30, 2023
(Dollars in thousands)	Current Loans			30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Loans			Current Loans		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Loans
Commercial and industrial	$	561,261		$	1,122	$	61	$	—	$	8,651	$	571,095		$	482,419	$	1,654	$	—	$	—	$	61,848	$	545,921
Paycheck Protection Program		7,988			—		—		—		—		7,988			7,234		—		—		—		—		7,234
Real estate – construction, commercial		177,739			1,106		867		—		437		180,149			162,176		2,329		313		—		1,045		165,863
Real estate – construction, residential		91,616			399		388		—		—		92,403			80,818		727		—		—		654		82,199
Real estate – mortgage, commercial		855,385			960		—		—		11,571		867,916			866,968		462		1,104		—		11,195		879,729
Real estate – mortgage, residential		658,290			4,153		585		1,998		7,447		672,473			698,181		389		571		1,998		8,426		709,565
Real estate – mortgage, farmland		6,394			—		—		—		—		6,394			5,583		—		—		—		—		5,583
Consumer		56,891			1,246		150		169		451		58,907			59,530		1,370		658		405		547		62,510
Less: Deferred loan fees, net of costs		(345	)		—		—		—		—		(345	)		327		—		—		—		—		327
Total Loans	$	2,415,219		$	8,986	$	2,051	$	2,167	$	28,557	$	2,456,980		$	2,363,236	$	6,931	$	2,646	$	2,403	$	83,715	$	2,458,931

The following table presents the amortized cost of nonaccrual loans held for investment by loan category as of the date stated.

March 31, 2023

(Dollars in thousands)

Nonaccrual Loans with No ACL

Nonaccrual Loans with an ACL

Total Nonaccrual Loans

Commercial and industrial

$
186

$
8,465

$
8,651

Real estate – construction, commercial

—

437

437

Real estate – mortgage, commercial

10,108

1,463

11,571

Real estate – mortgage, residential

592

6,855

7,447

Consumer

2

449

451

Total

$
10,888

$
17,669

$
28,557

~~The table above excludes PPP~~Nonaccrual loans ofincreased $~~8.0~~73.4 million to $83.7 million as of ~~March~~June 30, 2023 from $10.3 million as of December 31, ~~2023. PPP~~2022. Of this increase, $37.3 million was due to one commercial and industrial loan that was placed on nonaccrual status in the second quarter of 2023, discussed further in the modified loans ~~are fully guaranteed by the U.S. government; therefore, the Company reports them as accruing loans.~~ section below.

The Company ~~received~~recognized $~~378~~0 and $89 thousand of interest ~~payments~~income from nonaccrual loans during the three and six months ended ~~March 31, 2023.~~

The Company categorizes loans held for investment into risk categories based on relevant information about the expected ability of borrowers to service their debt, such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Management considers loan risk grades to be the best indication of credit quality of its portfolio of loans held for investment. The Company uses the following definitions for loan risk ~~ratings~~grades and periodically evaluates the appropriateness of these ~~ratings~~grades across its loan ~~portfolio:~~portfolio. Bank regulatory agencies periodically review the Company's loan portfolio, including loan risk grades. Loan risk grades as determined by management may be changed by regulators, based on their judgment of the facts at the time of review.

Risk Grade 1 – Strong: This grade is reserved for loans to the strongest of borrowers. These loans are to individuals or corporations that are well known to the Bank and are always secured with an almost guaranteed source of repayment such as a lien on a bank deposit account. Character, credit history, and ability of individuals or company principals are excellent and unquestioned. Source of income and industry of borrower appears stable. High liquidity, minimum risk, good ratios, and low handling cost are present.

Risk Grade 2 – Minimal: This grade is reserved for loans to borrowers who are deemed exceptionally strong. These loans are within guidelines and where the borrowers have documented significant overall financial strength. These loans have excellent sources of repayment, significant balance sheet liquidity, no significant identifiable risk of collection, and conform in all respects to policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind).

Risk Grade 3 – Acceptable: This grade is reserved for loans to borrowers who are deemed strong. These loans have adequate sources of repayment, with little identifiable risk of collection. Generally, loans assigned this risk grade will demonstrate the following characteristics: (1) conformity in all respects with policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind), (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt.

Risk Grade 4 – Satisfactory: This grade is given to satisfactory loans containing more risk than Risk Grade 3 loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics: (1) general conformity to the Bank's underwriting requirements, with limited exceptions to policy, product, or underwriting guidelines. All exceptions noted have documented mitigating factors that offset any additional risk associated with the exceptions noted, (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor.

Risk Grade 5 – Watch: This grade is for satisfactory loans containing acceptable but elevated risk. These loans are characterized by borrowers who have a marginal cash flow, marginal profitability, or have experienced an unprofitable year and declining financial condition. The borrower's management may be deemed to be satisfactory, the collateral securing the loan may create a loan-to-value ratio in excess of 90%, the debt service coverage ratio and global debt service coverage are unstable but mostly positive, and/or guarantor support, if any, is inadequate. Loans classified as Watch warrant additional monitoring by management.

Risk Grade 6 – Special Mention: This grade is for loans that have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the Bank's credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention credits typically exhibit underwriting guideline tolerances and/or exceptions with no mitigating factors, or emerging weaknesses that may or may not be cured as time passes.

Risk Grade 7 – Substandard: A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans consistently not meeting the repayment schedule should be downgraded further to substandard. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. The weaknesses may include, but are not limited to: (1) high debt to worth ratios, (2) declining or negative earnings trends, (3) declining or inadequate

liquidity, (4) improper loan structure, (5) questionable repayment sources, (6) lack of well-defined secondary repayment source, and (7) unfavorable competitive comparisons. Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins, and/or unperfected collateral positions. The possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals.

Risk Grade 8 – Doubtful: Loans classified doubtful have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the Bank's position, which can include, but not limited to (1) an injection of capital, (2) alternative financing, and (3) liquidation of assets or the pledging of additional collateral. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off against the allowance for ~~loan~~credit losses.

Risk Grade 9 – Loss: Loans classified loss are considered uncollectable and of such little value that their continuance as assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer charging off the worthless loan, even though partial recovery may be effected in the future. Probable loss portions of doubtful loans are charged off promptly against the allowance for ~~loan~~credit losses.

~~There were~~ no ~~loans classified as doubtful or loss as of March 31, 2023.~~

The following table presents the amortized cost of loans held for investment by internal loan risk grade by year of origination as of ~~March 31,~~June 30, 2023. Also presented are current period gross charge-offs by loan type for the ~~three~~six months ended ~~March 31,~~June 30, 2023.


	Term Loans Amortized Cost Basis by Origination Year																Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total		2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Commercial and industrial
Risk Grades 1 - 4	$	46,836	$	145,311	$	54,533	$	36,707	$	15,681	$	20,557	$	120,901	$	440,526	$	36,665	$	131,441	$	44,931	$	31,890	$	12,814	$	17,085	$	135,331	$	410,157
Risk Grades 5 - 6		117		34,640		9,205		8,391		467		1,450		25,942		80,212		28,363		1,904		9,964		6,793		450		1,827		17,375		66,676
Risk Grade 7		—		40,262		—		—		1,203		118		8,774		50,357		—		55,429		2,172		3,253		870		44		1,567		63,335
Risk Grade 8																		—		5,338		36		—		—		—		379		5,753
Total		46,953		220,213		63,738		45,098		17,351		22,125		155,617		571,095		65,028		194,112		57,103		41,936		14,134		18,956		154,652		545,921
Current period gross charge-offs		—		—		664		—		—		9		126		799		—		198		39		—		625		9		7,224		8,095

Paycheck Protection Program
Risk Grades 1 - 4		—		—		7,988		—		—		—		—		7,988		—		—		7,234		—		—		—		—		7,234
Total		—		—		7,988		—		—		—		—		7,988		—		—		7,234		—		—		—		—		7,234

Real estate – construction, commercial
Risk Grades 1 - 4		8,488		52,358		55,721		16,576		2,118		8,803		12,209		156,273		4,684		56,296		46,538		16,193		2,345		8,865		10,820		145,741
Risk Grades 5 - 6		—		5,571		6,301		722		—		710		10,282		23,586		—		6,464		6,252		532		—		840		5,792		19,880
Risk Grade 7		—		—		—		—		—		290		—		290		—		—		—		—		—		242		—		242
Total		8,488		57,929		62,022		17,298		2,118		9,803		22,491		180,149		4,684		62,760		52,790		16,725		2,345		9,947		16,612		165,863
Current period gross charge-offs																		—		—		—		—		—		28		—		28

Real estate – construction, residential
Risk Grades 1 - 4		20,084		50,390		15,528		1,113		998		—		2,456		90,569		27,215		39,151		7,998		347		1,194		71		2,046		78,022
Risk Grades 5 - 6		—		—		949		—		—		—		—		949		—		2,278		473		585		—		—		240		3,576
Risk Grade 7		21		864		—		—		—		—		—		885		21		580		—		—		—		—		—		601
Total		20,105		51,254		16,477		1,113		998		—		2,456		92,403		27,236		42,009		8,471		932		1,194		71		2,286		82,199

Real estate – mortgage, commercial
Risk Grades 1 - 4		28,993		250,028		117,823		153,436		44,957		151,324		20,171		766,732		29,516		268,410		113,715		153,897		44,080		144,333		11,689		765,640
Risk Grades 5 - 6		—		15,442		4,039		19,182		13,390		32,237		500		84,790		—		25,746		4,757		16,870		13,304		31,823		4,042		96,542
Risk Grade 7		—		—		6,344		—		774		9,176		100		16,394		—		—		6,307		2,180		131		8,831		98		17,547
Total		28,993		265,470		128,206		172,618		59,121		192,737		20,771		867,916		29,516		294,156		124,779		172,947		57,515		184,987		15,829		879,729

Real estate – mortgage, residential
Risk Grades 1 - 4		30,743		197,427		105,466		73,162		30,080		151,984		59,207		648,069		50,358		204,528		117,255		71,731		29,032		146,643		57,415		676,962
Risk Grades 5 - 6		22		1,282		24		2,112		2,508		6,852		878		13,678		35		8,570		24		1,605		2,482		6,475		1,189		20,380
Risk Grade 7		—		369		1,228		1,659		461		6,413		596		10,726		—		650		2,287		1,934		611		6,417		324		12,223
Total		30,765		199,078		106,718		76,933		33,049		165,249		60,681		672,473		50,393		213,748		119,566		75,270		32,125		159,535		58,928		709,565
Current period gross charge-offs		—		—		—		—		—		13		—		13		—		744		—		498		—		14		—		1,256

Real estate – mortgage, farmland
Risk Grades 1 - 4		—		729		1,328		—		1,657		2,372		184		6,270		—		729		1,424		—		1,549		1,624		211		5,537
Risk Grades 5 - 6		—		—		—		—		—		78		46		124		—		—		—		—		—		—		46		46
Total		—		729		1,328		—		1,657		2,450		230		6,394		—		729		1,424		—		1,549		1,624		257		5,583

Consumer
Risk Grades 1 - 4		18,113		18,718		5,544		4,515		2,292		1,320		7,284		57,786		23,641		17,070		4,779		3,875		1,854		970		9,043		61,232
Risk Grades 5 - 6		13		26		18		81		5		429		30		602		56		54		11		71		4		444		30		670
Risk Grade 7		—		50		109		115		104		141		—		519		15		159		125		118		85		106		—		608
Total		18,126		18,794		5,671		4,711		2,401		1,890		7,314		58,907		23,712		17,283		4,915		4,064		1,943		1,520		9,073		62,510
Current period gross charge-offs		38		97		39		12		36		6		269		497		571		156		131		23		41		27		1		950

Total Loans
Risk Grades 1 - 4	$	153,257	$	714,961	$	363,931	$	285,509	$	97,783	$	336,360	$	222,412	$	2,174,213	$	172,079	$	717,625	$	343,874	$	277,933	$	92,868	$	319,591	$	226,555	$	2,150,525
Risk Grades 5 - 6		152		56,961		20,536		30,488		16,370		41,756		37,678		203,941		28,454		45,016		21,481		26,456		16,240		41,409		28,714		207,770
Risk Grade 7		21		41,545		7,681		1,774		2,542		16,138		9,470		79,171		36		56,818		10,891		7,485		1,697		15,640		1,989		94,556
Risk Grade 8																		—		5,338		36		—		—		—		379		5,753
Total	$	153,430	$	813,467	$	392,148	$	317,771	$	116,695	$	394,254	$	269,560	$	2,457,325	$	200,569	$	824,797	$	376,282	$	311,874	$	110,805	$	376,640	$	257,637	$	2,458,604
Total current period gross charge-offs	$	38	$	97	$	703	$	12	$	36	$	28	$	395	$	1,309	$	571	$	1,098	$	170	$	521	$	666	$	78	$	7,225	$	10,329

The table above includes one $5.3 million commercial and industrial loan classified as doubtful (risk grade 8) as of June 30, 2023, which was fully reserved as of the same date. There were no loans classified as loss (risk grade 9) as of June 30, 2023.

The following table presents an analysis of the change in the ACL by major loan segment for the period stated. Loan segments are presented as either commercial or consumer as follows:


	For the three months ended June 30, 2023
(Dollars in thousands)	Commercial			Consumer			Total
Balance, beginning of period	$	21,279		$	8,695		$	29,974
Charge-offs		(7,326	)		(1,694	)		(9,020	)
Recoveries		887			126			1,013
Net charge-offs		(6,439	)		(1,568	)		(8,007	)
Provision for credit losses - loans		19,524			1,576			21,100
Balance, end of period	$	34,364		$	8,703		$	43,067


	For the three months ended March 31, 2023									For the six months ended June 30, 2023
(Dollars in thousands)	Commercial			Consumer			Total			Commercial			Consumer			Total
Balance, beginning of period	$	19,269		$	3,670		$	22,939		$	19,269		$	3,670		$	22,939
Impact of ASC 326 adoption		(470	)		4,492			4,022			(470	)		4,492			4,022
Charge-offs		(799	)		(510	)		(1,309	)		(8,125	)		(2,204	)		(10,329	)
Recoveries		118			104			222			1,005			230			1,235
Net charge-offs		(681	)		(406	)		(1,087	)		(7,120	)		(1,974	)		(9,094	)
Provision for credit losses - loans		3,161			939			4,100			22,685			2,515			25,200
Balance, end of period	$	21,279		$	8,695		$	29,974		$	34,364		$	8,703		$	43,067

~~There~~The increase in the ACL during the six months ended June 30, 2023 was primarily attributable to specific reserve needs of $14.1 million for a portfolio of specialty finance loans (classified as commercial and industrial loans) and $4.0 million due to the adoption of ASC 326 effective January 1, 2023. Of the $9.0 million and $10.3 million in gross loan charge-offs for the three and six months ended June 30, 2023, respectively, $7.0 million was attributable to one commercial and industrial loan that was fully charged-off in the second quarter of 2023.

Other than the aforementioned, there were no material changes to the assumptions, loss factors (both quantitative and qualitative), or reasonable and supportable forecasts used in the estimation of the ACL and the provision for credit losses for loans held for investment as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2023.

The following table presents the amortized cost of collateral-dependent loans as of the date stated.


(Dollars in thousands)	March 31, 2023		June 30, 2023
Commercial and industrial	$	71,984	$	94,743
Real estate – construction, commercial				5,792
Real estate – construction, residential		580		1,646
Real estate – mortgage, commercial		12,641		17,403
Real estate – mortgage, residential		772		1,735
Total collateral-dependent loans	$	85,977	$	121,319

As of ~~March 31,~~June 30, 2023, the amortized cost of PCD loans totaled $~~58.2~~57.1 million with an estimated ACL of $~~639~~601 thousand. The remaining non-credit discount on PCD loans was $~~5.3~~5.0 million as of ~~March 31,~~June 30, 2023.

The Company closely monitors the performance of borrowers experiencing financial difficulty to understand the effectiveness of its loan modification efforts.

The following table presents information on modified loans as of the date stated.

March 31, 2023

All Modifications
(Dollars in thousands)

Number of Loans

Amortized Cost

Amortized Cost of Modified Loans to Gross Loans by Category

Financial Effect
Modification - term extension

Commercial and industrial

1

$
37,271

6.53
%

13-month extension through January 2024
Modification - interest-only

Real estate – mortgage, commercial

2

3,381

0.39
%

Interest-only payments for six months
Total

3

$
40,652

1.65
%

The modified commercial and industrial loan was performing in accordance with its modified terms during the first quarter 2023. The loan is collateral-dependent, management is closely monitoring, and the loan is adequately


	June 30, 2023
(Dollars in thousands)	Number of Loans		Amortized Cost		Amortized Cost of Modified Loans to Gross Loans by Category			Financial Effect
Modification - term extension and forbearance
Commercial and industrial		1		37,250		6.82	%	See Note (1)
Real estate – mortgage, commercial		2		6,288		0.71	%	Forbearance agreements
Modification - interest-only
Real estate – mortgage, commercial		1		3,051		0.35	%	Interest-only payments for six months
Modification - term extension and interest-only
Real estate – mortgage, commercial		1		287		0.03	%	Term extension and interest-only payments for six months
Total		5	$	46,876		1.91	%
(1) This $37.3 million loan was modified via a forbearance agreement in the second quarter of 2023 under which the borrower defaulted in this same period. The Company received cash payments of $4.5 million in the six months ended June 30, 2023 for interest. This loan is collateral-dependent, is on nonaccrual status, and has a specific reserve of $8.0 million as of June 30, 2023.

Six residential mortgage loans with a total amortized cost of $645 thousand were in the process of foreclosure as of ~~March 31,~~June 30, 2023, compared to none as of December 31, 2022.

Prior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology. The following disclosures are presented under this previously applicable GAAP for the applicable prior periods.

The following table presents the aging of the amortized cost of loans held for investment as of the date stated.


	December 31, 2022																		December 31, 2022
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Past Due & Nonaccrual		PCI Loans		Current Loans			Total Loans			Current Loans			30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Past Due & Nonaccrual		PCI Loans		Total Loans
Commercial and industrial	$	488	$	279	$	—	$	2,314	$	3,081	$	1,481	$	585,487		$	590,049		$	585,487		$	488	$	279	$	—	$	2,314	$	3,081	$	1,481	$	590,049
Paycheck Protection Program		—		—		—		—		—		—		11,967			11,967			11,967			—		—		—		—		—		—		11,967
Real estate – construction, commercial		1,136		19		—		714		1,869		—		181,432			183,301			181,432			1,136		19		—		714		1,869		—		183,301
Real estate – construction, residential		1,416		1,204		—		—		2,620		7		73,972			76,599			73,972			1,416		1,204		—		—		2,620		7		76,599
Real estate – mortgage, commercial		6,199		297		6,234		1,658		14,388		51,223		799,378			864,989			799,378			6,199		297		6,234		1,658		14,388		51,223		864,989
Real estate – mortgage, residential		4,544		231		1,998		5,143		11,916		5,678		614,178			631,772			614,178			4,544		231		1,998		5,143		11,916		5,678		631,772
Real estate – mortgage, farmland		—		75		—		—		75		—		6,524			6,599			6,524			—		75		—		—		75		—		6,599
Consumer		880		200		28		495		1,603		359		45,461			47,423			45,461			880		200		28		495		1,603		359		47,423
Less: deferred loan fees, net of costs		—		—		—		—		—		—		(1,640	)		(1,640	)		(1,640	)		—		—		—		—		—		—		(1,640	)
Total Loans	$	14,663	$	2,305	$	8,260	$	10,324	$	35,552	$	58,748	$	2,316,759		$	2,411,059		$	2,316,759		$	14,663	$	2,305	$	8,260	$	10,324	$	35,552	$	58,748	$	2,411,059

The following table presents the aging of the amortized cost of PCI loans as of the date stated.

December 31, 2022

(Dollars in thousands)

30-89
Days
Past Due

Greater than
90 Days Past
Due &
Accruing

Current
Loans

Total
Loans

Commercial and industrial

$
—

$
—

$
1,481

$
1,481

Real estate – construction, commercial

—

—

7

7

Real estate – mortgage, commercial

—

—

51,223

51,223

Real estate – mortgage, residential

354

—

5,324

5,678

Consumer

—

—

359

359

Total PCI Loans

$
354

$
—

$
58,394

$
58,748


	December 31, 2022
(Dollars in thousands)	Current Loans		30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Total Loans
Commercial and industrial	$	1,481	$	—	$	—	$	1,481
Real estate – construction, commercial		7		—		—		7
Real estate – mortgage, commercial		51,223		—		—		51,223
Real estate – mortgage, residential		5,324		354		—		5,678
Consumer		359		—		—		359
Total PCI Loans	$	58,394	$	354	$	—	$	58,748

The following table presents the outstanding principal balance and related recorded investment of acquired loans included in the consolidated balance ~~sheets~~sheet as of the date stated.


(Dollars in thousands)	December 31, 2022
PCI loans
Outstanding principal balance	$	64,911
Recorded investment		58,748
Purchased performing loans
Outstanding principal balance		513,461
Recorded investment		511,752
Total acquired loans
Outstanding principal balance		578,372
Recorded investment		570,500

The following table presents a summary of the loan portfolio individually and collectively evaluated for impairment as of the date stated.


	December 31, 2022
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total Loan Balances			Related Allowance for Loan Losses
PCI loans:
Commercial and industrial	$	—	$	1,481	$	1,481		$	—
Real estate – construction, commercial		—		7		7			—
Real estate – mortgage, commercial		—		51,223		51,223			3
Real estate – mortgage, residential		—		5,678		5,678			—
Consumer		—		359		359			—
Total PCI loans		—		58,748		58,748			3
Originated and purchased performing loans:
Commercial and industrial		39,247		549,321		588,568			15,272
Real estate – construction, commercial		521		182,773		183,294			1,637
Real estate – construction, residential		—		76,599		76,599			628
Real estate – mortgage, commercial		4,567		809,199		813,766			2,353
Real estate – mortgage, residential		835		625,259		626,094			1,760
Real estate – mortgage, farmland		—		6,599		6,599			4
Consumer		—		47,064		47,064			1,282
Total originated and purchased performing loans		45,170		2,296,814		2,341,984			22,936
Gross loans		45,170		2,355,562		2,400,732			22,939
Less: deferred loan fees, net of costs		—		—		(1,640	)		—
Total	$	45,170	$	2,355,562	$	2,399,092		$	22,939

The table above excludes PPP loans of $12.0 million as of December 31, 2022. PPP loans are fully guaranteed by the U.S. government; therefore, the Company recorded no allowance for loan losses for these loans.

The following tables present information related to impaired loans held for investment by loan type as of and for the dates ~~presented.~~stated.


	December 31, 2022
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no specific allowance recorded:
Commercial and industrial	$	1,309	$	1,289	$	—
Real estate – construction, commercial		521		521		—
Real estate – mortgage, commercial		4,438		4,404		—
Real estate – mortgage, residential		835		834		—
With an allowance recorded:
Commercial and industrial	$	37,938	$	37,911	$	3,178
Real estate – mortgage, commercial		129		126		1
Total	$	45,170	$	45,085	$	3,179


	For the three months ended June 30, 2022				For the six months ended June 30, 2022
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	6,203	$	12	$	5,754	$	74
Real estate – construction, commercial		521		8		523		8
Real estate – mortgage, commercial		6,254		100		9,067		148
Real estate – mortgage, residential		1,441		3		1,392		17
With an allowance recorded:
Commercial and industrial	$	6,619	$	33	$	4,955	$	33
Real estate – mortgage, commercial		3,570		2		1,829		2
Real estate – mortgage, residential		58		5		59		5
Total	$	24,666	$	163	$	23,579	$	287

2223

December 31, 2022

(Dollars in thousands)

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance

With no specific allowance recorded:

Commercial and industrial

$
1,309

$
1,289

$
—

Real estate – construction, commercial

521

521

—

Real estate – mortgage, commercial

4,438

4,404

—

Real estate – mortgage, residential

835

834

—

With an allowance recorded:

Commercial and industrial

$
37,938

$
37,911

$
3,178

Real estate – mortgage, commercial

129

126

1

Total

$
45,170

$
45,085

$
3,179

For the three months ended March 31, 2022

(Dollars in thousands)

Average
Recorded
Investment

Interest
Income
Recognized

With no specific allowance recorded:

Commercial and industrial

$
5,305

$
62

Real estate – construction, commercial

524

—

Real estate – mortgage, commercial

11,880

48

Real estate – mortgage, residential

1,342

14

With an allowance recorded:

Commercial and industrial

$
3,290

$
—

Real estate – mortgage, commercial

88

—

Real estate – mortgage, residential

59

—

Total

$
22,488

$
124

Impaired loans also include TDRs, and as of December 31, 2022, there were 11 TDRs totaling $1.1 million.

The following table presents the amortized cost of loans held for investment by internal loan risk grade as of the date stated.


	December 31, 2022
(Dollars in thousands)	Grade 1 Prime		Grade 2 Desirable		Grade 3 Good		Grade 4 Acceptable		Grade 5 Pass/Watch		Grade 6 Special Mention		Grade 7 Substandard		Total
PCI loans:
Commercial and industrial	$	—	$	—	$	—	$	1,369	$	—	$	112	$	—	$	1,481
Real estate – construction, commercial		—		—		—		7		—		—		—		7
Real estate – mortgage, commercial		—		—		—		22,778		26,059		1,700		686		51,223
Real estate – mortgage residential		—		—		—		1,453		1,985		—		2,240		5,678
Consumer		—		—		—		—		353		—		6		359
Total PCI loans		—		—		—		25,607		28,397		1,812		2,932		58,748
Originated and purchased performing loans:
Commercial and industrial		318		885		193,144		312,278		38,552		2,834		40,557		588,568
Paycheck Protection Program		11,967		—		—		—		—		—		—		11,967
Real estate – construction, commercial		—		361		14,223		156,027		8,504		3,365		814		183,294
Real estate – construction, residential		—		—		3,110		72,327		1,162		—		—		76,599
Real estate – mortgage, commercial		—		2,330		187,648		561,554		54,352		2,048		5,834		813,766
Real estate – mortgage residential		—		7,311		233,697		365,511		11,858		—		7,717		626,094
Real estate – mortgage, farmland		549		—		1,315		4,609		126		—		—		6,599
Consumer		197		—		21,330		24,731		256		—		550		47,064
Total originated and purchased performing loans		13,031		10,887		654,467		1,497,037		114,810		8,247		55,472		2,353,951
Gross loans	$	13,031	$	10,887	$	654,467	$	1,522,644	$	143,207	$	10,059	$	58,404	$	2,412,699
Less: deferred loan fees, net of costs																(1,640	)
Total															$	2,411,059

There were no loans classified as doubtful or loss as of December 31, 2022.

Note 6 – Borrowings

FHLB Borrowings

The Bank has a line of credit from the FHLB secured by pledged qualifying real estate loans and securities. At ~~March 31,~~June 30, 2023 and December 31, 2022, based on pledged collateral, the line totaled $~~576.8~~572.7 million and $525.1 million, respectively. The FHLB will lend up to 30% of the Bank’s total assets as of the prior quarter end, subject to certain eligibility requirements, including adequate collateral. The Bank had borrowings from the FHLB totaling $~~239.1~~219.1 million and $311.7 million at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. FHLB borrowings required the Bank to hold $~~11.8~~10.9 million and $14.7 million of FHLB stock at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, which is included in restricted equity investments on the consolidated balance sheets. The Bank also has letters of credit ~~with~~issued by the FHLB in the amount of $67.6 million as of ~~March 31,~~June 30, 2023 for the purpose of collateral for public deposits with the Treasury Board of the Commonwealth of Virginia. Outstanding letters of credit reduce the available balance of the borrowing facility with the FHLB, which was $~~270.1~~286.0 million as of ~~March 31,~~June 30, 2023.

The following table presents information regarding FHLB advances outstanding as of the date stated.


	March 31, 2023							June 30, 2023
(Dollars in thousands)	Balance		Origination Date	Stated Interest Rate			Maturity Date	Balance		Origination Date	Stated Interest Rate			Maturity Date
Fixed Rate Credit								$	50,000	3/15/2023		4.07	%	3/15/2027
Fixed Rate Credit									50,000	5/2/2023		3.87	%	5/3/2027
Fixed Rate Credit									50,000	5/4/2023		3.52	%	5/4/2028
Daily Rate Credit	$	189,100	5/6/2022		5.07	%	5/8/2023		69,100	5/8/2023		5.32	%	5/8/2024
Fixed Rate Credit		50,000	3/15/2023		4.07	%	3/15/2027
Total FHLB borrowings	$	239,100						$	219,100

FRB Borrowings

Advances under the BTFP are up to a one-year term and are priced at the one-year overnight index swap rate plus 10 basis points, which is fixed for the term on the advance date. Advances can be repaid at any time without penalty. As of June 30, 2023, the Company had an immediately available line through the BTFP of $100.5 million, of which the Company had drawn one advance for $65.0 million, maturing May 10, 2024, with a fixed interest rate of 4.74%. As of June 30, 2023, availability through the FRB Discount Window was $11.1 million. As of June 30, 2023 and December 31, 2022, the Company had no outstanding borrowings through the FRB Discount Window.

Other Borrowings

The Company had unsecured lines of credit with correspondent banks, which totaled $28.0 million as of both ~~March 31,~~June 30, 2023 and December 31, 2022. These lines bear interest at the prevailing rates for such loans and are cancellable any time by the correspondent bank. As of ~~March 31,~~June 30, 2023 and December 31, 2022, none of these lines of credit with correspondent banks were drawn upon.

The Company had $39.9 million of subordinated notes, net, outstanding as of both ~~March 31,~~June 30, 2023 and December 31, 2022. The Company's subordinated notes are comprised of an issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”) and an issuance in May 2020 maturing June 1, 2030 (the “2030 Note”). As of ~~March 31,~~June 30, 2023, the net carrying amount of the 2029 Notes was $~~25.2~~25.1 million, inclusive of a $~~654~~629 thousand purchase accounting adjustment (premium). For the three months ended ~~March 31,~~June 30, 2023 and 2022, the effective interest rate on the 2029 Notes was ~~5.09~~4.99% and 4.94%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). For the six months ended June 30, 2023 and 2022, the effective interest rate on the 2029 Notes was 5.04% and 5.01%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). As of ~~March 31,~~June 30, 2023, the net carrying amount of the 2030 Note, including capitalized, unamortized debt issuance costs, was $14.8 million. For the three and six months ended ~~March 31,~~June 30, 2023 and 2022, the effective interest rate on the 2030 Note was 6.10%.

~~The Company has an immediately available and undrawn line with the BTFP of $29.8~~ ~~million as of March 31, 2023.~~

Note 7 – Derivative Financial Instruments and Hedging Activities

The Company enters into interest rate swap agreements to accommodate the needs of its banking customers. The Company mitigates the interest rate risk entering into these swap agreements by entering into equal and offsetting swap

agreements with highly-rated third-party financial institutions. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value in the consolidated balance sheets (asset positions are included in other assets and liability positions are included in other liabilities).

The following tables present the notional and fair value of interest rate swap agreements as of the dates stated.


	March 31, 2023					June 30, 2023
(Dollars in thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest rate swap agreement
Receive fixed/pay variable swaps	$	2,178	$	(57	)	$	1,974	$	(95	)
Pay fixed/receive variable swaps		2,178		57			1,974		95

	December 31, 2022					December 31, 2022
(Dollars in thousands)	Notional Amount		Fair Value			Notional Amount		Fair Value
Interest rate swap agreement
Receive fixed/pay variable swaps	$	2,178	$	(95	)	$	2,178	$	(95	)
Pay fixed/receive variable swaps		2,178		95			2,178		95

As part of its efforts to sell originated government guaranteed and conventional residential mortgages into the secondary market, the Bank had entered into $~~13.3~~9.0 million and $11.7 million of rate lock commitments with borrowers, net of expected fallout, as of ~~March 31,~~June 30, 2023 and December 31, 2022, ~~respectively, and~~respectively. Additionally, $~~8.3~~10.2 million and $12.8 million of closed loan inventory waiting for sale ~~which~~ were hedged by $~~15.8~~16.0 million and $21.5 million in forward to-be-announced mortgage-backed securities as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. Mortgage derivative assets totaled $~~455~~305 thousand and $112 thousand as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, and

mortgage derivative liabilities were $570 thousand and $24 thousand as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively. Mortgage derivative assets and liabilities are included in other assets and other liabilities, respectively, in the consolidated balance sheets.

Note 8 – Stock-Based Compensation

The Company ~~has granted~~grants time-based restricted stock awards (“time-based RSAs”) to employees and directors under the Blue Ridge Bankshares, Inc. 2023 Stock Incentive Plan, which was approved by shareholders at the Company’s 2023 annual meeting of shareholders on June 14, 2023 and replaced the Company’s prior stock-based compensation plan, the Blue Ridge Bankshares, Inc. Equity Incentive ~~Plan.~~Plan, effective such date. Time-based RSAs are considered fixed awards as the number of shares and fair value isare both known at the date of grant, and the fair value of the award at the grant date is amortized over the requisite service period, which is generally three years. Beginning in 2022, the Company began granting performance-based restricted stock awards (“PSAs”) to employees, ~~under the same plan,~~ in addition to time-based RSAs. PSAs vest at the end of a three-year period contingent on the Company's achievement of financial goals and are being expensed on a straight-line basis over the same period with adjustments periodically based on projected achievement of the performance target, which may change the number of PSA shares that will ultimately vest. Time-based RSAs carry voting and dividend rights, while PSAs carry voting rights and are subject to deferred dividend payout restrictions.

Compensation expense recognized in the consolidated statements of operations related to time-based RSAs and PSAs, net of forfeitures, was $~~479~~457 thousand and $~~355~~936 thousand for the three and six months ended ~~March 31,~~June 30, 2023, respectively, and was $374 thousand and $729 thousand for the three and six months ended June 30, 2022, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2023, no grants of time-based RSAs or PSAs were made, while forfeitures ~~of time-based RSAs and PSAs~~ relating to ~~14,632~~26,841 shares of the Company's common stock ~~were processed~~resulted due to employee terminations. As of ~~March 31,~~June 30, 2023, time-based RSAs and PSAs relating to ~~296,329~~281,523 shares of the Company's common stock were outstanding, and unrecognized compensation expense related to these awards totaled $~~2.4~~1.7 million.

During the ~~three~~first six months ~~ended March 31,~~of 2023, stock options relating to 3,750 shares were exercised and stock options relating to 1,875 shares expired, resulting in stock options relating to 47,049 shares remaining outstanding as of ~~March 31,~~June 30, 2023. These options were assumed by the Company in connection with the Bay Banks Merger and expire between March 2024 and December 2029.

Note 9 – Leases

The Company’s long-term lease agreements are classified as operating ~~leases.~~leases and consist primarily of real estate for retail branches and office space. Certain of these leases offer the option to extend the lease term and such extensions are included in the calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company’s leases as of the dates and for the periods stated.

(Dollars in thousands)

March 31, 2023

December 31, 2022

Right-of-use assets

$
6,470

$
6,903

Lease liabilities

$
7,398

$
7,860

Weighted average remaining lease term (years)

5.62

5.85

Weighted average discount rate

2.42
%

2.40
%


	For the three months ended March 31,				For the three months ended				For the six months ended
(Dollars in thousands)	2023		2022		June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Operating lease cost	$	715	$	555	$	526	$	654	$	1,241	$	1,210
Total lease cost		715		555		526		654		1,241		1,210
Cash paid for amounts included in the measurement of lease liabilities		599		736		546		341		1,145		1,077


(Dollars in thousands)	June 30, 2023			December 31, 2022
Right-of-use assets	$	5,744		$	6,903
Lease liabilities	$	6,765		$	7,860
Weighted average remaining lease term (years)		5.76			5.85
Weighted average discount rate		2.41	%		2.40	%

The following table presents a maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities as of the date stated.

(Dollars in thousands)

March 31, 2023

Nine months ending December 31, 2023

$
1,484

Twelve months ending December 31, 2024

1,464

Twelve months ending December 31, 2025

1,191

Twelve months ending December 31, 2026

1,073

Twelve months ending December 31, 2027

990

Thereafter

1,786

Total undiscounted cash flows

7,988

Discount

(590
)
Lease liabilities

$
7,398


(Dollars in thousands)	June 30, 2023
Six months ending December 31, 2023	$	889
Twelve months ending December 31, 2024		1,445
Twelve months ending December 31, 2025		1,116
Twelve months ending December 31, 2026		1,049
Twelve months ending December 31, 2027		963
Thereafter		1,771
Total undiscounted cash flows		7,233
Discount		(468	)
Lease liabilities	$	6,765

Note 10 – Fair Value

The fair value of a financial instrument is the current amount that would be exchanged between willing parties in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Additional considerations are involved to determine the fair value of financial assets in markets that are not active.

The Company uses a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while

unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows:


Level 1 –		Valuation is based on quoted prices in active markets for identical assets and liabilities.
Level 2 –		Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3 –		Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.

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, quoted prices of securities with similar characteristics, or discounted cash flows. 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. The carrying value of restricted FRB

and FHLB stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table.

Rabbi trust assets

The Company's rabbi trust is associated with a deferred compensation plan. The assets held by the rabbi trust are invested at the direction of the individual participants and are generally invested in marketable investment securities, such as common stocks and mutual funds or short-term investments (e.g., cash) (Level 1). Rabbi trust assets and the associated deferred compensation plan liability are included in other assets and other liabilities, respectively, in the consolidated balance sheets.

Derivative financial instruments

Derivative instruments used to hedge residential mortgage loans held for sale and the related interest rate lock commitments include forward commitments to sell mortgage loans and are reported at fair value utilizing Level 2 inputs. The fair values of derivative financial instruments are based on derivative market data inputs as of the valuation date and the underlying value of mortgage loans for rate lock commitments.

The Company has interest rate swap assets and liabilities associated with certain customer commercial loans. The interest rate swap asset with the customer is offset with an equal swap agreement with a ~~highly-rated~~highly rated third-party financial institution (i.e., “back-to-back”). Both the interest rate swap assets and liabilities are free-standing derivatives and are recorded at fair value utilizing Level 2 inputs.

The following tables present the balances of financial assets measured at fair value on a recurring basis as of the dates stated.


	June 30, 2023
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Securities available for sale
State and municipals	$	50,909	$	—	$	50,909	$	—
U.S. Treasury and agencies		60,702		—		60,702		—
Mortgage backed securities		192,042		—		184,598		7,444
Corporate bonds		36,964		—		28,665		8,299
Total securities available for sale	$	340,617	$	—	$	324,874	$	15,743
Other assets
MSR assets	$	28,246	$	—	$	—	$	28,246
Rabbi trust assets		584		584		—		—
Mortgage derivative asset		305		—		305		—
Interest rate swap asset		95		—		95		—
Other liabilities
Interest rate swap liability	$	95	$	—	$	95	$	—


	December 31, 2022
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Securities available for sale
State and municipals	$	50,993	$	—	$	50,993	$	—
U.S. Treasury and agencies		67,162		—		67,162		—
Mortgage backed securities		196,336		—		188,719		7,617
Corporate bonds		39,850		—		35,561		4,289
Total securities available for sale	$	354,341	$	—	$	342,435	$	11,906
Other assets
MSR assets	$	28,991	$	—	$	—	$	28,991
Rabbi trust assets		584		584		—		—
Mortgage derivative asset		112		—		112		—
Interest rate swap asset		95		—		95		—
Other liabilities
Mortgage derivative liability	$	24	$	—	$	24	$	—
Interest rate swap liability		95		—		95		—

March 31, 2023

(Dollars in thousands)

Total

Level 1

Level 2

Level 3

Securities available for sale

State and municipals

$
51,662

$
—

$
51,662

$
—

U.S. Treasury and agencies

62,152

—

62,152

—

Mortgage backed securities

199,320

—

191,816

7,504

Corporate bonds

38,856

—

34,557

4,299

Total securities available for sale

$
351,990

$
—

$
340,187

$
11,803

Other assets

MSR assets

$
27,095

$
—

$
—

$
27,095

Rabbi trust assets

577

577

—

—

Mortgage derivative asset

455

—

455

—

Interest rate swap asset

57

—

57

—

Other liabilities

Mortgage derivative liability

$
57

$
—

$
57

$
—

Interest rate swap liability

57

—

57

—

December 31, 2022

(Dollars in thousands)

Total

Level 1

Level 2

Level 3

Securities available for sale

State and municipals

$
50,993

$
—

$
50,993

$
—

U.S. Treasury and agencies

67,162

—

67,162

—

Mortgage backed securities

196,336

—

188,719

7,617

Corporate bonds

39,850

—

35,561

4,289

Total securities available for sale

$
354,341

$
—

$
342,435

$
11,906

Other assets

MSR assets

$
28,991

$
—

$
—

$
28,991

Rabbi trust assets

584

584

—

—

Mortgage derivative asset

112

—

112

—

Interest rate swap asset

95

—

95

—

Other liabilities

Mortgage derivative liability

$
24

$
—

$
24

$
—

Interest rate swap liability

95

—

95

—

The following table presents the change in corporate bonds and mortgage backed securities using Level 3 inputs for the periods stated.


(Dollars in thousands)	Corporate Bonds		Mortgage Backed Securities			Corporate Bonds		Mortgage Backed Securities
Balance as of December 31, 2022	$	4,289	$	7,617		$	4,289	$	7,617
Transfers from Level 2 to Level 3							4,000		—
Fair value adjustments		10		(113	)		10		(173	)
Balance as of March 31, 2023	$	4,299	$	7,504
Balance as of June 30, 2023						$	8,299	$	7,444

As of ~~March 31,~~June 30, 2023, 1011 corporate bonds totaling $~~4.3~~8.3 million and 6six mortgage backed securities totaling $~~7.5~~7.4 million were reported at their respective ~~purchase prices~~amortized cost and as Level 3 assets in the fair value hierarchy, as there were no observable market prices for similar investments. The $4.0 million transfer from Level 2 to Level 3 inputs for corporate bonds in the first six months of 2023 was attributable to one security for which a fair value could not be obtained as of June 30, 2023.

A third-party model is used to determine the fair value of the Company’s MSR assets. The model establishes pools of performing loans, calculates projected future cash flows for each pool, and applies a discount rate to each pool. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company was servicing approximately $2.15 billion and $2.16 billion of loans, respectively. Loans are segregated into homogenous pools based on loan term, interest rates, and other similar characteristics. Cash flows are then estimated based on net servicing fee income and utilizing assumed servicing costs and prepayment speeds. The weighted average net servicing fee income of the portfolio was ~~28.4~~28.3 basis points as of ~~March 31,~~June 30, 2023. Estimated base annual servicing costs were $75.00 to $85.00 per loan depending on the guarantor.

Prepayment speeds in the model are based on empirically derived data for mortgage pool factors and differences between a mortgage pool’s weighted average coupon and its current mortgage rate. The weighted average prepayment speed assumption used in the fair value model was ~~8.15~~8.06% as of ~~March 31,~~June 30, 2023. A base discount rate of ~~9.5~~9.50% to ~~11.5~~11.50% (~~9.81~~9.92% weighted average discount rate) was then applied to each pool’s projected future cash flows as of ~~March 31,~~June 30, 2023. The discount rate is intended to represent the estimated market yield for the highest quality grade of comparable servicing. MSR assets are classified as Level 3.

The fair value of other equity investments, including the Company's investments in certain fintech companies, is based on either observable market prices, if available, or observable market transactions for identical or significantly similar investments (Level 2).

Collateral-dependent loans with specific reserves are carried at fair value, which equals the estimated market value of the collateral less estimated costs to sell. Collateral may be in the form of real estate, securities, or business assets, including equipment, inventory, and accounts receivable. A loan may have multiple types of collateral; however, the majority of the Company’s loan collateral is real estate. The value of real estate collateral is generally determined

utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties or is discounted by the Company because of lack of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of operations.

Mortgage loans originated or purchased and intended for sale in the secondary market (i.e., loans held for sale) are carried at estimated market value in the aggregate. Changes in fair value are recognized in residential mortgage banking income, including MSRs, on the consolidated statements of operations (Level 2).

Certain consumer loans originated by the Bank and sourced by fintech partners are classified on the consolidated balance sheets as held for sale. After origination, these loans are sold directly to the applicable fintech partner or another investor at par, generally up to 10 days from origination. Due to the relatively short time between origination and sale, these loans are held at cost, which approximates fair value (Level 2).

Government guaranteed loans, or portions thereof, intended for sale in the secondary market are classified as held for sale on the consolidated balance sheets and carried at the lower of cost or estimated fair market value (Level 2).

Certain assets such as OREO are measured at fair value less estimated costs to sell. Valuation of OREO is generally determined using current appraisals from independent appraisers (Level 2). If current appraisals cannot be obtained

prior to reporting dates, or if declines in value are identified after a recent appraisal is received, appraisal values are discounted, resulting in Level 3 estimates. If the Company markets the property with a real estate agent or broker, estimated selling costs reduce the listing price, resulting in a valuation based on Level 3 inputs.

The following tables present quantitative information about Level 3 fair value measurements as of the dates stated.

(Dollars in thousands)

Balance as of March 31, 2023

Unobservable Input

Range

Balance as of June 30, 2023

Unobservable Input

Range

Collateral-dependent loans

Discounted appraised value technique

7,165

Selling Costs

78,311

Selling Costs


(Dollars in thousands)	Balance as of December 31, 2022		Unobservable Input	Range
Impaired loans - Pre-ASC 326
Discounted appraised value technique		34,743	Selling Costs	7% - 10%
Discounted cash flows technique		145	Discount Rate	4% - 11%
OREO
Discounted appraised value technique		195	Selling Costs		7	%

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.

The following tables present the estimated fair values, related carrying amounts, and valuation level of the financial instruments as of the dates stated.


	March 31, 2023										June 30, 2023
					Fair Value Measurements										Fair Value Measurements
(Dollars in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3		Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and due from banks	$	226,374	$	226,374	$	226,374	$	—	$	—	$	131,843	$	131,843	$	131,843	$	—	$	—
Federal funds sold		1,976		1,976		1,976		—		—		2,492		2,492		2,492		—		—
Securities available for sale		351,990		351,990		—		340,187		11,803		340,617		340,617		—		324,874		15,743
Restricted equity investments		18,388		18,388		—		18,388		—		17,538		17,538		—		17,538		—
Other equity investments		22,960		22,960		—		22,960		—		22,693		22,693		—		22,693		—
Other investments		26,538		26,538		—		—		26,538		27,157		27,157		—		—		27,157
PPP loans receivable, net		7,988		7,988		—		—		7,988		7,234		7,234		—		—		7,234
Loans held for investment, net		2,419,018		2,382,220		—		—		2,382,220		2,408,630		2,329,532		—		—		2,329,532
Accrued interest receivable		14,915		14,915		—		14,915		—		15,474		15,474		—		15,474		—
Bank owned life insurance		47,536		47,536		—		47,536		—		47,828		47,828		—		47,828		—
MSR assets		27,095		27,095		—		—		27,095		28,246		28,246		—		—		28,246
Financial Liabilities
Noninterest-bearing demand deposits	$	594,518	$	594,518	$	594,518	$	—	$	—	$	575,989	$	575,989	$	575,989	$	—	$	—
Interest-bearing demand and money market deposits		1,326,655		1,326,655		—		1,326,655		—		1,293,754		1,293,754		—		1,293,754		—
Savings deposits		143,530		143,530		—		143,530				131,332		131,332		—		131,332
Time deposits		696,344		693,332		—		—		693,332		612,019		608,923		—		—		608,923
FHLB borrowings		239,100		239,045		—		239,045		—		219,100		223,296		—		223,296		—
FRB borrowings												65,000		65,000		—		65,000		—
Subordinated notes, net		39,904		37,610		—		—		37,610		39,888		37,094		—		—		37,094


	December 31, 2022
					Fair Value Measurements
(Dollars in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and due from banks	$	77,274	$	77,274	$	77,274	$	—	$	—
Federal funds sold		1,426		1,426		1,426		—		—
Securities available for sale		354,341		354,341		—		342,435		11,906
Restricted equity investments		21,257		21,257		—		21,257		—
Other equity investments		23,776		23,776		—		23,776		—
Other investments		24,672		24,672		—		—		24,672
PPP loans receivable, net		11,967		11,967		—		—		11,967
Loans held for investment, net		2,376,153		2,321,042		—		—		2,321,042
Accrued interest receivable		12,393		12,393		—		12,393		—
Bank owned life insurance		47,245		47,245		—		47,245		—
MSR assets		28,991		28,991		—		—		28,991
Financial Liabilities
Noninterest-bearing demand deposits	$	640,101	$	640,101	$	640,101	$	—	$	—
Interest-bearing demand and money market deposits		1,318,799		1,318,799		—		1,318,799		—
Savings deposits		151,646		151,646		—		151,646		—
Time deposits		391,961		352,294		—		—		352,294
FHLB borrowings		311,700		311,700		—		311,700		—
FRB borrowings		51		51		—		51		—
Subordinated notes, net		39,920		37,689		—		—		37,689

Note 11 – Minimum Regulatory Capital Requirements

additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by ~~the~~ regulators ~~about~~regarding components, risk weightings, and other factors.

Pursuant to the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III rules”), the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios of 2.50% for all ratios, except the tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. ~~Management believes as of March 31, 2023 and December 31, 2022, the Bank met all capital adequacy requirements to which it is subject.~~

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized; although, these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. ~~At March~~As of June 30, 2023 and December 31, ~~2023, the most recent regulatory notification categorized~~2022, the Bank met the capital requirements to be classified as well ~~capitalized under the regulatory framework. There are no conditions or events since that notification that management believes have changed the institution's category.~~capitalized.

As previously noted, the Company adopted CECL effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings ("(“CECL Transitional ~~Amount"~~Amount”) over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital will be 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report.

The following tables present the capital and capital ratios to which the Bank is subject and the amounts and ratios to be adequately and well capitalized as of the dates stated. Adequately capitalized ratios include the conversation buffer, if applicable. The CECL Transitional Amount was $5.5 million, of which $1.4 million reduced the regulatory capital amounts and capital ratios as of ~~March 31,~~June 30, 2023.

March 31, 2023

Actual

For Capital Adequacy Purposes

To Be Well Capitalized

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

Total risk based capital

(To risk-weighted assets)

Blue Ridge Bank, N.A.

$
307,024

11.12
%

$
289,940

10.50
%

$
276,133

10.00
%
Tier 1 capital

(To risk-weighted assets)

Blue Ridge Bank, N.A.

$
277,898

10.06
%

$
234,711

8.50
%

$
220,905

8.00
%
Common equity tier 1 capital

(To risk-weighted assets)

Blue Ridge Bank, N.A.

$
277,898

10.06
%

$
193,368

7.00
%

$
179,556

6.50
%
Tier 1 leverage

(To average assets)

Blue Ridge Bank, N.A.

$
277,898

8.50
%

$
130,776

4.00
%

$
163,469

5.00
%


	December 31, 2022															June 30, 2023
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized					Actual					For Capital Adequacy Purposes					To Be Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk based capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	303,876		11.22	%	$	286,161		10.50	%	$	272,535		10.00	%	$	298,815		10.77	%	$	291,324		10.50	%	$	277,451		10.00	%
Tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	279,125		10.31	%	$	231,470		8.50	%	$	217,854		8.00	%	$	257,195		9.27	%	$	235,831		8.50	%	$	221,959		8.00	%
Common equity tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	279,125		10.31	%	$	190,622		7.00	%	$	177,006		6.50	%	$	257,195		9.27	%	$	194,214		7.00	%	$	180,342		6.50	%
Tier 1 leverage
(To average assets)
Blue Ridge Bank, N.A.	$	279,125		9.25	%	$	120,703		4.00	%	$	150,878		5.00	%	$	257,195		7.86	%	$	130,888		4.00	%	$	163,610		5.00	%


	December 31, 2022
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk based capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	303,876		11.22	%	$	284,376		10.50	%	$	270,834		10.00	%
Tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	279,125		10.31	%	$	230,122		8.50	%	$	216,586		8.00	%
Common equity tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	279,125		10.31	%	$	189,513		7.00	%	$	175,976		6.50	%
Tier 1 leverage
(To average assets)
Blue Ridge Bank, N.A.	$	279,125		9.25	%	$	120,703		4.00	%	$	150,878		5.00	%

Note 12 – Commitments and Contingencies

In the ordinary course of operations, the Company is party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, in the aggregate, will not have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.

~~Also, in~~ the ordinary course of operations, the Company offers various financial products to its customers to meet their credit and liquidity needs. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and stand-by letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional commitments as it does for on-balance sheet commitments.

Subject to its normal credit standards and risk monitoring procedures, the Company makes contractual commitments to extend credit. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. As of ~~March 31,~~June 30, 2023 and December 31, 2022, the Company had outstanding loan commitments of $~~707.9~~679.1 million and $736.1 million, respectively.

Conditional commitments are issued by the Company in the form of performance stand-by letters of credit, which guarantee the performance of a customer to a third party. As of March 31, 2023 and December 31, 2022, commitments under outstanding performance stand-by letters of credit totaled $0 ~~and $655~~ ~~thousand, respectively. Additionally, the Company issues~~ financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of ~~March 31,~~June 30, 2023 and December 31, 2022, commitments under outstanding financial stand-by letters of credit totaled $~~29.3~~29.5 million and $29.8 million, respectively. The credit risk of issuing financial stand-by letters of credit can be greater than the risk involved in extending loans to customers.

Upon the adoption of ASC 326 on January 1, 2023, the Company recorded an increase in its reserve for unfunded commitments of $3.7 million. Most of this increase was attributable to higher funding assumptions of the underlying credit commitments, based on industry data available. For the three and six months ended ~~March 31,~~June 30, 2023, the Company recorded a ~~recovery of~~reduction in the provision for credit losses for unfunded commitments of $~~400~~600 thousand and $1.0 million,

respectively, which was primarily attributable to lower balances of ~~conditionally cancellable~~ loan commitments. As of ~~March 31,~~June 30, 2023, the reserve for unfunded commitments was $~~5.1~~4.5 million compared to $1.8 million as of December 31, 2022.

The Company invests in various partnerships, limited liability companies, and SBIC funds. Pursuant to these investments, the Company commits to an investment amount to be fulfilled in future periods. At ~~March 31,~~June 30, 2023, the Company had future commitments outstanding totaling $~~17.7~~17.9 million related to these investments.

Note 14 – Business Segments

The Company has three reportable business segments: commercial banking, mortgage banking, and holding company activities. The commercial banking business segment makes loans to and generates deposits from individuals and businesses, while offering a wide array of general banking activities to its customers. It is distinct from the Company's mortgage banking division, which concentrates on individual ~~and wholesale~~ mortgage lending and sales activities. Activities at the holding company (or parent level) are primarily associated with investments, borrowings, and certain noninterest expenses.

The following tables present statement of operations items and assets by segment as of the dates and for the periods stated.


	As of and for the three months ended March 31, 2023													As of and for the three months ended June 30, 2023
(Dollars in thousands)	Commercial Banking		Mortgage Banking			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated		Commercial Banking			Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	42,742	$	305		$	6		$	—		$	43,053	$	38,553		$	415	$	5		$	—		$	38,973
Interest expense		15,002		139			553			—			15,694		17,853			170		547			—			18,570
Net interest income		27,740		166			(547	)		—			27,359		20,700			245		(542	)		—			20,403
Provision for credit losses		3,700		—			—			—			3,700		20,500			—		—			—			20,500
Net interest income after provision for credit losses		24,040		166			(547	)		—			23,659		200			245		(542	)		—			(97	)
NONINTEREST INCOME
Residential mortgage banking income, including MSRs		—		1,303			—			—			1,303		712			3,583		—			—			4,295
Gain on sale of guaranteed government loans		2,409		—			—			—			2,409		2,384			—		—			—			2,384
Service charges on deposit accounts		343		—			—			—			343		349			—		—			—			349
Increase in cash surrender value of bank owned life insurance		282		—			—			—			282		292			—		—			—			292
Other income		3,088		—			(43	)		(99	)		2,946		2,797			—		(282	)		(99	)		2,416
Total noninterest income		6,122		1,303			(43	)		(99	)		7,283		6,534			3,583		(282	)		(99	)		9,736
NONINTEREST EXPENSE
Salaries and employee benefits		12,628		2,661			—			—			15,289		12,233			2,285		—			—			14,518
Other operating expenses		11,210		1,485			962			(99	)		13,558		15,917			1,392		2,324			(99	)		19,534
Total noninterest expense		23,838		4,146			962			(99	)		28,847		28,150			3,677		2,324			(99	)		34,052
Income (loss) from continuing operations before income tax expense		6,324		(2,677	)		(1,552	)		—			2,095
Income tax expense (benefit)		1,400		(583	)		(326	)		—			491
Net income (loss)	$	4,924	$	(2,094	)	$	(1,226	)	$	—		$	1,604
Total assets as of March 31, 2023	$	3,270,452	$	34,083		$	299,450		$	(269,074	)	$	3,334,911
(Loss) income from continuing operations before income tax expense															(21,416	)		151		(3,148	)		—			(24,413	)
Income tax (benefit) expense															(4,322	)		34		(661	)		—			(4,949	)
Net (loss) income														$	(17,094	)	$	117	$	(2,487	)	$	—		$	(19,464	)
Total assets as of June 30, 2023														$	3,141,817		$	41,124	$	273,280		$	(241,797	)	$	3,214,424


	As of and for the three months ended March 31, 2022														As of and for the three months ended June 30, 2022
(Dollars in thousands)	Commercial Banking			Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated			Commercial Banking			Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	25,183		$	591	$	28		$	—		$	25,802		$	25,725		$	337	$	181		$	—		$	26,243
Interest expense		1,546			35		553			—			2,134			1,402			93		658			—			2,153
Net interest income		23,637			556		(525	)		—			23,668			24,323			244		(477	)		—			24,090
Provision for credit losses		2,500			—		—			—			2,500			7,494			—		—			—			7,494
Net interest income after provision for credit losses		21,137			556		(525	)		—			21,168			16,829			244		(477	)		—			16,596
NONINTEREST INCOME
Residential mortgage banking income, including MSRs		—			9,559		—			—			9,559			(25	)		5,985		—			—			5,960
Gain on sale of guaranteed government loans		1,427			—		—			—			1,427			1,538					—			—			1,538
Service charges on deposit accounts		315			—		—			—			315			327			—		—			—			327
Increase in cash surrender value of bank owned life insurance		272			—		—			—			272			276			—		—			—			276
Other income		3,177			—		9,426			(82	)		12,521			2,457			—		(173	)		(195	)		2,089
Total noninterest income		5,191			9,559		9,426			(82	)		24,094			4,573			5,985		(173	)		(195	)		10,190
NONINTEREST EXPENSE
Salaries and employee benefits		9,089			5,007		—			—			14,096			10,916			4,957		—			—			15,873
Other operating expenses		6,581			1,936		158			(82	)		8,593			8,506			761		381			(195	)		9,453
Total noninterest expense		15,670			6,943		158			(82	)		22,689			19,422			5,718		381			(195	)		25,326
Income from continuing operations before income tax expense		10,658			3,172		8,743			—			22,573
Income tax expense		2,906			624		1,623			—			5,153
Net income from continuing operations	$	7,752		$	2,548	$	7,120		$	—		$	17,420
Discontinued Operations
Income from discontinued operations before income taxes		426			—		—			—			426
Income tax expense		89			—		—			—			89
Net income from discontinued operations		337			—		—			—			337
Net income	$	8,089		$	2,548	$	7,120		$	—		$	17,757
Net income from discontinued operations attributable to noncontrolling interest		(1	)		—		—			—			(1	)
Net income attributable to Blue Ridge Bankshares, Inc.	$	8,088		$	2,548	$	7,120		$	—		$	17,756
Total assets as of March 31, 2022	$	2,628,323		$	64,419	$	334,424		$	(302,582	)	$	2,724,584
Income (loss) from continuing operations before income tax expense																1,980			511		(1,031	)		—			1,460
Income tax expense (benefit)																389			108		(155	)		—			342
Net income (loss) from continuing operations															$	1,591		$	403	$	(876	)	$	—		$	1,118
Total assets as of June 30, 2022															$	2,712,209		$	55,335	$	316,891		$	(284,792	)	$	2,799,643


	As of and for the six months ended June 30, 2023
(Dollars in thousands)	Commercial Banking			Mortgage Banking			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	81,295		$	720		$	11		$	—		$	82,026
Interest expense		32,855			309			1,100			—			34,264
Net interest income		48,440			411			(1,089	)		—			47,762
Provision for credit losses		24,200			—			—			—			24,200
Net interest income after provision for credit losses		24,240			411			(1,089	)		—			23,562
NONINTEREST INCOME
Residential mortgage banking income, including MSRs		642			4,956			—			—			5,598
Gain on sale of guaranteed government loans		4,793			—			—			—			4,793
Service charges on deposit accounts		692			—			—			—			692
Increase in cash surrender value of bank owned life insurance		574			—			—			—			574
Other income		5,885			—			(325	)		(198	)		5,362
Total noninterest income		12,586			4,956			(325	)		(198	)		17,019
NONINTEREST EXPENSE
Salaries and employee benefits		24,861			4,946			—			—			29,807
Other operating expenses		27,127			2,877			3,286			(198	)		33,092
Total noninterest expense		51,988			7,823			3,286			(198	)		62,899
Loss from continuing operations before income tax expense		(15,162	)		(2,456	)		(4,700	)		—			(22,318	)
Income tax benefit		(2,922	)		(549	)		(987	)		—			(4,458	)
Net loss	$	(12,240	)	$	(1,907	)	$	(3,713	)	$	—		$	(17,860	)
Total assets as of June 30, 2023	$	3,141,817		$	41,124		$	273,280		$	(241,797	)	$	3,214,424


	As of and for the six months ended June 30, 2022
(Dollars in thousands)	Commercial Banking			Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	50,908		$	928	$	209		$	—		$	52,045
Interest expense		2,948			128		1,211			—			4,287
Net interest income		47,960			800		(1,002	)		—			47,758
Provision for credit losses		9,994			—		—			—			9,994
Net interest income after provision for credit losses		37,966			800		(1,002	)		—			37,764
NONINTEREST INCOME
Residential mortgage banking income, including MSRs		176			15,343		—			—			15,519
Gain on sale of guaranteed government loans		2,965			—		—			—			2,965
Service charges on deposit accounts		642			—		—			—			642
Increase in cash surrender value of bank owned life insurance		548			—		—			—			548
Other income		5,634			—		9,253			(277	)		14,610
Total noninterest income		9,965			15,343		9,253			(277	)		34,284
NONINTEREST EXPENSE
Salaries and employee benefits		20,005			9,964		—						29,969
Other operating expenses		15,087			2,697		539			(277	)		18,046
Total noninterest expense		35,092			12,661		539			(277	)		48,015
Income from continuing operations before income tax expense		12,839			3,482		7,712			—			24,033
Income tax expense		3,295			732		1,468			—			5,495
Net income from continuing operations	$	9,544		$	2,750	$	6,244		$	—		$	18,538
Discontinued Operations
Income from discontinued operations before income taxes		426			—		—			—			426
Income tax expense		89			—		—			—			89
Net income from discontinued operations		337			—		—			—			337
Net income	$	9,881		$	2,750	$	6,244		$	—		$	18,875
Net income from discontinued operations attributable to noncontrolling interest		(1	)		—		—			—			(1	)
Net income attributable to Blue Ridge Bankshares, Inc.	$	9,880		$	2,750	$	6,244		$	—		$	18,874
Total assets as of June 30, 2022	$	2,712,209		$	55,335	$	316,891		$	(284,792	)	$	2,799,643

Note 15 – Changes to Accumulated Other Comprehensive Income (Loss), net

The following tables present components of accumulated other comprehensive income (loss) for the periods stated.

For the three months ended March 31, 2023

(Dollars in thousands)

Net Unrealized (Losses) Gains on Available for Sale Securities

Transfer of Securities Held to Maturity to Available For Sale

Pension and Post-retirement Benefit Plans

Accumulated Other Comprehensive (Loss) Income, net

Balance as of December 31, 2022

$
(45,525
)

$
425

$
(1
)

$
(45,101
)
Change in net unrealized holding gains on securities available for sale, net of deferred tax expense of $1,113

3,866

—

—

3,866

Balance as of March 31, 2023

$
(41,659
)

$
425

$
(1
)

$
(41,235
)

For the three months ended March 31, 2022

(Dollars in thousands)

Net Unrealized Losses on Available for Sale Securities

Transfer of Securities Held to Maturity to Available For Sale

Pension and Post-retirement Benefit Plans

Accumulated Other Comprehensive Loss, net

Balance as of December 31, 2021

$
(4,056
)

$
425

$
(1
)

$
(3,632
)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $4,742

(17,844
)

—

—

(17,844
)
Balance as of March 31, 2022

$
(21,900
)

$
425

$
(1
)

$
(21,476
)


	For the three months ended June 30, 2023
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of April 1, 2023	$	(41,659	)	$	425	$	(1	)	$	(41,235	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $1,446		(5,023	)		—		—			(5,023	)
Balance as of June 30, 2023	$	(46,682	)	$	425	$	(1	)	$	(46,258	)

	For the three months ended June 30, 2022
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of April 1, 2022	$	(21,900	)	$	425	$	(1	)	$	(21,476	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $4,257		(16,015	)		—		—			(16,015	)
Balance as of June 30, 2022	$	(37,915	)	$	425	$	(1	)	$	(37,491	)


	For the six months ended June 30, 2023
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of January 1, 2023	$	(45,525	)	$	425	$	(1	)	$	(45,101	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $333		(1,157	)		—		—			(1,157	)
Balance as of June 30, 2023	$	(46,682	)	$	425	$	(1	)	$	(46,258	)

	For the six months ended June 30, 2022
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of January 1, 2022	$	(4,056	)	$	425	$	(1	)	$	(3,632	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $9,000		(33,859	)		—		—			(33,859	)
Balance as of June 30, 2022	$	(37,915	)	$	425	$	(1	)	$	(37,491	)

Note 16 – Legal Matters

On August 12, 2019, a former employee of Virginia Community Bankshares, Inc. (“VCB”) and participant in its Employee Stock Ownership Plan (the “VCB ESOP”) filed a class action complaint against VCB, Virginia Community Bank, and certain individuals associated with the VCB ESOP in the U.S. District Court for the Western District of Virginia, Charlottesville Division. The complaint alleges, among other things, that the defendants breached their fiduciary duties to VCB ESOP participants in violation of the Employee Retirement Income Security Act of 1974, as amended. The complaint alleges that the VCB ESOP incurred damages “that approach or exceed $12 million.” The Company automatically assumed any liability of VCB in connection with this litigation as a result of its 2019 acquisition of VCB. The outcome of this litigation is uncertain, and the plaintiff and other individuals may file additional lawsuits related to the VCB ESOP. The Company believes the claims are without merit and no loss has been accrued for this lawsuit.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following presents management’s discussion and analysis of the Company’s consolidated financial condition and the results of our operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Results of operations for the three and six months ended ~~March 31,~~June 30, 2023 are not necessarily indicative of the results of operations for the balance of 2023, or for any other period. As used in this report, the terms “the Company,” “we,” “us,” and “our” refer to Blue Ridge Bankshares, Inc. and its consolidated subsidiaries. The term “Bank” refers to Blue Ridge Bank, National Association.

The Company makes certain forward-looking statements in this Form 10-Q that are subject to risks and uncertainties. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of management’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on management’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond its control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.

The following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements: (i) the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; (ii) geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; (iii) the residual effects of the COVID-19 pandemic, including the adverse impact on the Company’s business and operations and on the Company’s customers which may result, among other things, in increased delinquencies, defaults, foreclosures and losses on loans; (iv) the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events; (v) the Company’s management of risks inherent in its ~~real estate~~ loan portfolio, the credit quality of its borrowers, and the risk of a prolonged downturn in the real estate market, which could impair the value of the Company’s collateral and its ability to sell collateral upon any foreclosure; (vi) changes in consumer spending and savings habits; (vii) deposit out flows; (viii) technological and social media changes; (ix) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; (x) changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Company’s subsidiary bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; (xi) the impact of changes in financial services policies, laws, and regulations, including laws, regulations and policies concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies; (xii) the impact of, and the ability to comply with, the terms of the formal written agreement between the Bank and the Office of the Comptroller of the Currency (the ~~"OCC"~~“OCC”); (xiii) the impact of changes in laws, regulations, and policies affecting the real estate industry; (xiv) the effect of changes in accounting policies and practices, as may be adopted from time to time by bank regulatory agencies, the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board or other accounting standards setting bodies; (xv) the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; (xvi) the willingness of users to substitute competitors’ products and services for the Company’s products and services; (xvii) the outcome of any legal proceedings that may be instituted against the Company; (xviii) reputational risk and potential adverse reactions of the Company’s customers, suppliers, employees, or other business partners; (xix) the ability to maintain adequate liquidity

funding sources, especially if the Company's or industry's reputation become damaged; (xx) maintaining capital levels adequate to support the Company's growth and to remain well-capitalized under regulatory standards; (xxi) the effects of acquisitions the Company may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such transactions; ~~(xxi)~~(xxii) changes in the level of the Company’s nonperforming assets and charge-offs; ~~(xxii)~~(xxiii) the Company’s involvement, from time to time, in legal proceedings and examination and remedial actions by regulators; ~~(xxiii)~~(xxiv) adverse developments in the financial industry generally, such as recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior; (xxv) potential exposure to fraud, negligence, computer theft, and cyber-crime; ~~(xxiv)~~(xxvi) the Company’s ability to pay dividends; ~~(xxv)~~(xxvii) the ability to manage the Company's fintech relationships, including implementing enhanced controls and maintaining deposit levels and the quality of loans associated with these relationships; (xxviii) the Company’s involvement as a participating lender in the Paycheck Protection Program ~~("PPP"~~(“PPP”) as administered through the U.S. Small Business Administration; and ~~(xxvi)~~(xxiv) other risks and factors identified in the “Risk Factors” sections and elsewhere in documents the Company files from time to time with the SEC.

The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in the 2022 Form 10-K including those discussed in the section entitled ~~"Risk~~“Risk Factors."” If one or more of the factors affecting forward-looking information and statements proves incorrect, then actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, the Company cautions not to place undue reliance on its forward-looking information and statements. The Company will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how these risks and uncertainties will affect it.

On August 29, 2022, the Bank entered into a formal written agreement (the “Written Agreement”) with the OCC, the Bank's primary federal banking regulator. The Written Agreement principally concerns the Bank’s fintech line of business and requires the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering, and information technology risks stemming from its fintech partnerships. A complete copy of the Written Agreement was filed as an exhibit to a Form 8-K filed with the SEC on September 1, 2022 and can be accessed on the SEC’s website (www.sec.gov) and the Company’s website (www.blueridgebankshares.com). The Company is actively working to bring the Bank’s fintech policies, procedures, and operations into conformity with OCC directives. The Company reports that although work is progressing, many aspects of the Written Agreement require considerable time for completion, implementation, validation, and sustainability. If the Company does not comply with the Written Agreement, or the OCC imposes additional measures, the Company could be subject to additional regulatory requirements or directives, including developing and maintaining capital plans, asset sales, loan reserves or impairments, limitations on growth, further regulatory sanctions, and/or other regulatory enforcement actions.

There were no changes to the Critical Accounting Policies disclosed in Item 7 of the 2022 Form 10-K, except as noted in Part I, Note 2 - Adoption of New Accounting Standard of this Form 10-Q, which describes the Company's adoption of Accounting Standards Codification (“ASC”) 326 - Financial Instruments – Credit Losses (referred herein as “ASC 326” or “CECL”), effective January 1, 2023.

Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share, total assets, total liabilities, or stockholders’ equity as previously reported.

Comparison of Financial Condition as of ~~March 31,~~June 30, 2023 and December 31, 2022

Total assets were ~~$3.33~~$3.21 billion as of ~~March 31,~~June 30, 2023, an increase of ~~$193.9~~$73.4 million from $3.14 billion as of December 31, 2022. Most of this increase was attributable to higher cash and due from banks balances, which increased ~~$149.1~~$54.6 million to ~~$226.4~~$131.8 million as of ~~March 31,~~June 30, 2023 from $77.3 million as of December 31, 2022. Loans held for investment, excluding PPP loans, increased ~~$49.9~~$52.6 million to ~~$2.49~~$2.45 billion as of ~~March 31,~~June 30, 2023 from $2.40 billion at December 31, 2022, an annualized growth rate of ~~8.32%~~4.39%. The allowance for credit losses ~~("ACL"~~(“ACL”) increased ~~$7.0~~$20.1 million to ~~$30.0~~$43.1 million as of ~~March 31,~~June 30, 2023 from $22.9 million as of December 31, 2022. OfMost of this increase was attributable to $14.1 million of specific reserves for specialty finance loans, reported in commercial and industrial loans, placed on nonaccrual status in the second quarter of 2023, while $4.0 million of the year-to-date increase was due to the adoption of ASC 326 on January 1, 2023.

Total deposits as of ~~March 31,~~June 30, 2023 were ~~$2.76~~$2.61 billion, an increase of ~~$258.5~~$110.6 million from December 31, 2022. The increase in the first ~~three~~six months of 2023 was primarily due to an increase of ~~$304.4~~$220.1 million in time deposit balances, of which ~~$293.0~~$211.0 million was attributable to brokered time deposits ~~acquired,~~secured primarily in response to banking industry liquidity ~~concerns that began~~events in ~~early~~ March 2023. Partially offsetting this increase were lower noninterest-bearing demand deposit balances of ~~$45.6~~$64.1 million. Deposits related to fintech relationships increased by ~~$26.0~~$17.4 million, or ~~3.8%~~2.52%, from December 31, 2022, to ~~$716.0~~$707.6 million as of ~~March 31, 2023,~~June 30, 2023. Fintech related deposits represented 27.1% and ~~represented~~ 27.6% ~~and 25.9%~~ of total deposits as of ~~the same respective dates.~~June 30, 2023 and December 31, 2022, respectively.

Total stockholders’ equity decreased by ~~$1.8~~$28.1 million to ~~$257.6~~$231.3 million as of ~~March 31,~~June 30, 2023 compared to $259.4 million at December 31, 2022. Of the decrease, $17.9 million was due to a net loss for the first six months of 2023 while $5.5 million was attributable to the after-tax adoption of ASC ~~326, which included an after-tax increase in the ACL and reserve for unfunded commitments of $2.6 million and $2.9 million, respectively.~~326. The fair value of the Company’s portfolio of securities available for sale ~~("AFS"~~(“AFS”) ~~increased~~decreased in the first ~~three~~six months of 2023, primarily as a result of a modest ~~decline~~increase in market longer-term interest rates, resulting in an after-tax ~~increase~~decrease in stockholders’ equity of ~~$3.9~~$1.2 million. The Company ~~does not have any~~had no investment securities classified as held to maturity as of ~~March 31,~~June 30, 2023 or December 31, 2022.

Comparison of Results of Operations for the Three and Six Months Ended ~~March 31,~~June 30, 2023 and 2022

For the three months ended ~~March 31,~~June 30, 2023, the Company reported a net loss from continuing operations of ($19.5) million, or ($1.03) per diluted common share, compared to net income from continuing operations of ~~$1.6~~$1.1 million, or ~~$0.09 per diluted common share, compared to $17.4 million, or $0.93~~$0.06 per diluted common share, for the three months ended ~~March 31,~~June 30, 2022.

~~Income~~For the six months ended June 30, 2023, the Company reported a net loss from continuing operations of ($17.9) million, or ($0.95) per diluted common share, compared to net income from continuing operations of $18.5 million, or $0.99 per diluted common share, for the six months ended June 30, 2022.

The loss from continuing operations before income taxes for the ~~first~~ three and six months ended June 30, 2023 included a provision for credit losses on loans of ~~2022 included $9.4~~$21.1 million and $25.2 million, respectively, most of which was attributable to specific reserves on specialty finance loans totaling $14.1 million. Additionally, net loan charge-offs of $8.0 million and $9.1 million were recorded for the same respective periods. Also contributing to the decline in income from continuing operations before income taxes from the year-ago periods was $9.3 million of fair value adjustments for the Company's equity investments, primarily in certain fintech companies, ~~compared to a nominal amount for~~reported in the ~~same period of 2023.~~2022 period. For the three and six months ended ~~March 31,~~June 30, 2023, ~~and 2022,~~ income from continuing operations before income taxes included ~~$1.1~~$2.4 million and ~~$0,~~$3.5 million, respectively, of costs incurred primarily for professional services related to regulatory remediation efforts in connection with the Written Agreement.

Net Interest Income. Net interest income is the amount by which interest earned on assets exceeds the interest paid on interest-bearing liabilities and is the Company’s primary revenue source. Net interest income is thereby affected by overall balance sheet growth, changes in interest rates, and changes in the mix of investments, loans, deposits, and borrowings. The Company’s principal interest-earning assets are loans to businesses, real estate investors, and individuals and its investment securities portfolio. Interest-bearing liabilities consist primarily of negotiable order of withdrawal and savings accounts, money market accounts, certificates of deposit, and Federal Home Loan Bank of Atlanta (“FHLB”) and Federal Reserve Bank of Richmond (“FRB”) advances. A common net interest income measure is net interest margin. Net interest margin represents the difference between interest income and interest expense calculated as a percentage of average interest-earning assets.

The following table presents the average balance sheets for the three months ended ~~March 31,~~June 30, 2023 and 2022. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated.


		Average Balances, Income and Expense, Yields and Rates																										Average Balances, Income and Expense, Yields and Rates
		For the three months ended March 31,																										For the three months ended June 30,
		2023								2022								Total Increase/			Increase/(Decrease) Due to							2023								2022									Total Increase/			Increase/(Decrease) Due to
(Dollars in thousands)		Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest		Yield/ Rate (1)			(Decrease)			Volume (2)			Rate (2)				Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest			Yield/ Rate (1)			(Decrease)			Volume (2)			Rate (2)
Average Assets
Taxable securities		$	374,956		$	2,628		2.80	%	$	379,113		$	1,770		1.87	%	$	858		$	(19	)	$	877			$	367,814		$	2,543		2.77	%	$	394,000		$	2,129			2.16	%	$	414		$	(141	)	$	555
Tax-exempt securities (3)			20,726			116		2.25	%		19,372			75		1.55	%		41			5			36				20,713			121		2.34	%		21,336			113			2.12	%		8			(3	)		11
Total securities			395,682			2,744		2.77	%		398,485			1,845		1.85	%		899			(14	)		914				388,527			2,664		2.74	%		415,336			2,242			2.16	%		422			(145	)		567
Interest-earning deposits in other banks			107,614			941		3.50	%		94,710			35		0.15	%		906			5			901				121,248			1,452		4.79	%		77,703			148			0.76	%		1,304			83			1,221
Federal funds sold			8,890			99		4.45	%		51,460			22		0.17	%		77			(18	)		95				3,539			45		5.09	%		44,979			90			0.80	%		(45	)		(83	)		38
Loans held for sale			40,024			282		2.82	%		73,710			621		3.37	%		(339	)		(284	)		(55	)			56,102			396		2.82	%		42,957			348			3.24	%		48			106			(58	)
Paycheck Protection Program loans (4)			10,265			20		0.78	%		27,081			393		5.80	%		(373	)		(244	)		(129	)			7,599			16		0.84	%		19,412			64			1.32	%		(48	)		(39	)		(9	)
Loans held for investment (4,5,6)			2,498,059			38,992		6.24	%		1,798,653			22,885		5.09	%		16,107			8,899			7,208				2,487,089			34,428		5.54	%		1,881,678			23,376			4.97	%		11,052			7,521			3,531
Total average interest-earning assets			3,060,534			43,078		5.63	%		2,444,099			25,801		4.22	%		17,277			8,343			8,934				3,064,104			39,001		5.09	%		2,482,065			26,268			4.23	%		12,733			7,444			5,289
Less: allowance for credit losses			(24,722	)							(12,063	)																	(31,151	)							(13,619	)
Total noninterest-earning assets			234,297								221,951																		244,330								232,125
Total average assets		$	3,270,109							$	2,653,987																	$	3,277,283							$	2,700,571
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market deposits, and savings		$	1,287,839		$	8,259		2.57	%	$	1,082,743		$	585		0.22	%	$	7,674		$	111		$	7,563			$	1,347,499		$	8,860		2.63	%	$	1,144,418		$	690			0.24	%	$	8,170		$	122		$	8,048
Time deposits (7)			513,642			3,072		2.39	%		483,236			971		0.80	%		2,101			61			2,040				661,259			5,764		3.49	%		415,815			851			0.82	%		4,913			502			4,411
Total interest-bearing deposits			1,801,481			11,331		2.52	%		1,565,979			1,556		0.40	%		9,775			172			9,603				2,008,758			14,624		2.91	%		1,560,233			1,541			0.40	%		13,083			624			12,459
FHLB borrowings (8)			328,223			3,810		4.64	%		10,110			11		0.44	%		3,799			346			3,453				262,345			2,958		4.51	%		23,955			(33	)		(0.55	)%		2,991			(328	)		3,319
FRB borrowings			4			—		0.40	%		16,379			14		0.34	%		(14	)		(14	)		—				35,714			439		4.92	%		3,266			100			12.25	%		339			994			(655	)
Subordinated notes and other borrowings (9)			39,935			553		5.54	%		39,976			553		5.53	%		—			(1	)		1				39,905			548		5.49	%		39,969			545			5.45	%		3			(1	)		4
Total average interest-bearing liabilities			2,169,643			15,694		2.89	%		1,632,444			2,134		0.52	%		13,560			503			13,057				2,346,722			18,569		3.17	%		1,627,423			2,153			0.53	%		16,416			1,289			15,127
Noninterest-bearing demand deposits			808,425								720,226																		638,274								772,310
Other noninterest-bearing liabilities			32,130								26,430																		35,170								29,700
Stockholders' equity			259,911								274,887																		257,117								271,138
Total average liabilities and stockholders’ equity		$	3,270,109							$	2,653,987																	$	3,277,283							$	2,700,571
Net interest income and margin (10)					$	27,384		3.58	%				$	23,667		3.87	%	$	3,717		$	7,840		$	(4,122	)					$	20,432		2.67	%				$	24,115			3.89	%	$	(3,683	)	$	6,155		$	(9,838	)
Cost of funds (11)								2.11	%							0.36	%																	2.49	%								0.36	%
Net interest spread (12)								2.74	%							3.70	%																	1.93	%								3.70	%

(1) Annualized.	(1) Annualized.																										(1) Annualized.
(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.	(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.																										(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.
(3) Computed on a fully taxable equivalent basis assuming a 21% income tax rate.
(3) Computed on a fully taxable equivalent basis assuming a 22.65% and 21% income tax rate for the three months ended June 30, 2023 and 2022, respectively.																											(3) Computed on a fully taxable equivalent basis assuming a 22.65% and 21% income tax rate for the three months ended June 30, 2023 and 2022, respectively.
(4) Includes deferred loan fees/costs.	(4) Includes deferred loan fees/costs.																										(4) Includes deferred loan fees/costs.
(5) Non-accrual loans have been included in the computations of average loan balances.	(5) Non-accrual loans have been included in the computations of average loan balances.																										(5) Non-accrual loans have been included in the computations of average loan balances.
(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $688 thousand and $2.7 million for the three months ended March 31, 2023 and 2022, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $284 thousand and $474 thousand for the three months ended March 31, 2023 and 2022, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $0 and $3 thousand for the three months ended March 31, 2023 and 2022, respectively.
(9) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $25 thousand and $25 thousand for the three months ended March 31, 2023 and 2022, respectively.
(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $463 thousand and $1.3 million for the three months ended June 30, 2023 and 2022, respectively.																											(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $463 thousand and $1.3 million for the three months ended June 30, 2023 and 2022, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $222 thousand and $366 thousand for the three months ended June 30, 2023 and 2022, respectively.																											(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $222 thousand and $366 thousand for the three months ended June 30, 2023 and 2022, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $0 and $108 thousand for the three months ended June 30, 2023 and 2022, respectively.																											(8) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $0 and $108 thousand for the three months ended June 30, 2023 and 2022, respectively.
(9) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $25 thousand for both the three months ended June 30, 2023 and 2022.																											(9) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $25 thousand for both the three months ended June 30, 2023 and 2022.
(10) Net interest margin is net interest income divided by average interest-earning assets.	(10) Net interest margin is net interest income divided by average interest-earning assets.																										(10) Net interest margin is net interest income divided by average interest-earning assets.
(11) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.	(11) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.																										(11) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.
(12) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.	(12) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.																										(12) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.

Average interest-earning assets were $3.06 billion for the three months ended ~~March 31,~~June 30, 2023 compared to ~~$2.44~~$2.48 billion for the same period of 2022, a ~~$616.4~~$582.0 million increase. This increase was primarily attributable to growth in average balances of loans held for investment, ~~excluding PPP loans,~~ which ~~increased $699.4~~were greater by $605.4 million in the 2023 period compared to the 2022 period, partially offset by lower average balances of taxable securities, federal funds sold, ~~loans held for sale,~~ and PPP loans. Total interest income (on a taxable equivalent basis) increased ~~$17.3~~$12.7 million for the three-month period ended ~~March 31,~~June 30, 2023 from the same period of 2022. This increase was primarily due to higher average balances and yields, including fee income, on loans held for investment, ~~excluding PPP loans,~~ and ~~securities.~~interest earning deposits in other banks. Higher yields in the 2023 period were primarily attributable ~~to loan growth and~~ the re-pricing of variable rate loans and new loans in the higher interest rate environment, partially offset by the reversal of interest on the previously mentioned group of specialty loans placed on nonaccrual status in the second quarter of 2023, and lower accretion of purchase accounting adjustments (discounts) on acquired loans. ~~Interest~~The reversal of interest income in the ~~first quarters~~second quarter of 2023 was $4.7 million for the group of specialty finance loans placed on nonaccrual status, which had an approximate negative 75 basis point impact on the yield on loans held

for investment. Interest income for the three months ended June 30, 2023 and 2022 included accretion of discounts on acquired loans of ~~$688~~$463 thousand and ~~$2.7~~$1.3 million, respectively.

Average interest-bearing liabilities were ~~$2.17~~$2.35 billion for the three months ended ~~March 31,~~June 30, 2023 compared to $1.63 billion for the same period of 2022, a ~~$537.2~~$719.3 million increase. Of this increase, $533.4 million was attributable to higher average balances of wholesale funding, primarily brokered time deposits and FHLB advances. Interest expense increased by ~~$13.6~~$16.4 million to ~~$15.7~~$18.6 million for the three months ended ~~March 31,~~June 30, 2023 compared to the same period of 2022. Cost of interest-bearing liabilities increased to ~~2.89%~~3.17% for the ~~first~~second quarter of 2023 from ~~0.52%~~0.53% for the ~~first~~second quarter of 2022, while cost of funds were ~~2.11%~~2.49% and 0.36% for the same respective periods. Higher cost of funds in the 2023 period was primarily due to higher market interest rates onand a shift in the mix of average interest-bearing ~~demand deposits,~~liabilities, including ~~fintech relationship deposits, money market accounts, brokered time deposits, and FHLB advances.~~higher cost wholesale funding sources. Interest expense in the ~~first~~second quarters of 2023 and 2022 included the amortization of fair value adjustments (premium) on assumed time deposits of ~~$284~~$222 thousand and ~~$474~~$366 thousand, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) for the three months ended ~~March 31,~~June 30, 2023 was ~~$27.4~~$20.4 million compared to ~~$23.7~~$24.1 million for the same period in 2022, ~~an increase~~a decrease of $3.7 million. Net interest margin was ~~3.58%~~2.67% and ~~3.87%~~3.89% for the ~~first~~second quarters of 2023 and 2022, respectively. The reversal of interest income previously noted had an approximate negative 60 basis point impact on net interest margin for the second quarter of 2023. Accretion and amortization of purchase accounting adjustments had a 139 and 5329 basis point positive effect on net interest margin for the same respective periods.

The following table presents the average balance sheets for the six months ended June 30, 2023 and 2022. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated.

Average interest-earning assets were $3.06 billion for the six months ended June 30, 2023 compared to $2.47 billion for the same period of 2022, a $597.2 million increase. This increase was primarily attributable to growth in average balances of loans held for investment, which increased $652.1 million in the 2023 period compared to the 2022 period, partially offset by lower average balances of taxable securities, federal funds sold, loans held for sale, and PPP loans. Total interest income (on a taxable equivalent basis) increased $30.0 million for the six-month period ended June 30, 2023 from the same period of 2022. This increase was primarily due to higher average balances and yields, including fee income on loans held for investment and interest earning deposits in other banks. Higher yields in the 2023 period were primarily attributable to the re-pricing of variable rate loans and new loans in the higher interest rate environment, partially offset by the previously noted reversal of interest income on nonaccrual loans, and lower accretion of purchase accounting adjustments (discounts) on acquired loans. Interest income for the six months ended June 30, 2023 and 2022 included accretion of discounts on acquired loans of $1.2 million thousand and $4.1 million, respectively.

Average interest-bearing liabilities were $2.26 billion for the six months ended June 30, 2023 compared to $1.63 billion for the same period of 2022, a $628.8 million increase. Interest expense increased by $30.0 million to $34.3 million for the six months ended June 30, 2023 compared to the same period of 2022. Cost of interest-bearing liabilities increased to 3.03% for the second half of 2023 from 0.53% for the second half of 2022, while cost of funds were 2.30% and 0.36% for the same respective periods. Higher cost of funds in the 2023 period was primarily due to higher market interest rates and a shift in the mix of average interest-bearing liabilities, including higher cost wholesale funding sources. Interest expense in the first halves of 2023 and 2022 included the amortization of fair value adjustments (premium) on assumed time deposits of $506 thousand and $840 thousand, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) was $47.8 million for both the six months ended June 30, 2023 and the same period in 2022. Net interest margin was 3.12% and 3.88% for the second halves of 2023 and 2022, respectively. The reversal of interest income previously noted had an approximate negative 31 basis point impact on net interest margin for the first half of 2023. Accretion and amortization of purchase accounting adjustments had a 11 basis point and 41 basis point positive effect on net interest margin for the same respective periods.

Provision for Credit Losses. The Company recorded a provision for credit losses of ~~$3.7~~$20.5 million in the ~~first~~second quarter of 2023 compared to ~~$2.5~~$7.5 million in the ~~first~~second quarter of 2022. Provision for credit losses for the first halves of 2023 and 2022 was $24.2 million and $10.0 million, respectively. Provision for credit losses in the 2023 ~~period was~~periods were primarily attributable to specific reserves on ~~collateral-dependent~~the previously noted group of specialty finance loans and ~~quarterly~~net loan ~~growth,~~charge-offs, partially offset by a credit to provision for credit losses on unfunded ~~commitments of $400 thousand.~~commitments.

Noninterest Income. The following table presents a summary of noninterest income and the dollar and percentage change for the periods presented.

Lower noninterest income in the first ~~quarter~~half of 2023 compared to the ~~first quarter~~same period of 2022 was primarily attributable to lower residential mortgage banking income, including mortgage servicing rights ~~("MSR"~~(“MSR”), which was driven by ~~higher market interest rates which lead to~~ lower mortgage volumes in the 2023 period ($~~46.3~~107.0 million) compared to the 2022 period ($~~151.4~~269.2 million). The change in the fair value of MSR assets was a negative ~~$2.1~~$1.4 million and a positive ~~$3.8~~$3.5 million for the first ~~quarter~~halves of 2023 and 2022, respectively. Also contributing to the decline in the six month period ended June 30, 2023 compared to the 2022 period was higher income from fair value adjustments of other equity investments in the ~~first three months of~~ 2022 period attributable to the Company's equity investments, primarily in certain fintech companies. The Company records certain equity investments

at fair value when an observable market event occurs, such as the issuance or transfer of shares of substantially similar investments.

Noninterest Expense. The following tables present a summary of noninterest expense and the dollar and percentage change for the periods stated.

Excluding regulatory remediation and merger-related expenses, noninterest expense increased ~~$5.1~~$6.3 million and $11.4 million for the three and six months ended ~~March 31,~~June 30, 2023, respectively, compared to the same ~~period~~periods of 2022. ~~Higher noninterest expense for the 2023 period was primarily attributable to higher~~Lower salaries and ~~employee benefit expenses~~employees in both comparative periods were due to ~~the addition of commercial lenders and support personnel and personnel to support the fintech business, partially offset by reduced~~lower headcount ~~and lower commissions~~ in the Company's mortgage division. Regulatory remediation expenses include consulting, legal, and other costs incurred as part of the Company's efforts to remediate the findings in the Written Agreement. Higher ~~legal expenses~~other contractual services expense in the 2023 ~~period were~~periods was primarily due to outsourced BSA/AML compliance services as the Bank continues to augment its compliance staff, while higher legal expense was primarily attributable to ~~costs incurred for loan origination and on~~ corporate, employee benefit plans, and other employment matters. Higher FDIC insurance expense relative to the prior periods was primarily due to balance sheet growth and other factors such as lower profitability and regulatory capital levels, which increase the assessment rate. Included in other noninterest expense infor the first six months of 2023 ~~period~~ was a $0.9 million charge related to the sale of PPP loans in the second quarter of 2021.

Income Tax (Benefit) Expense. Income tax ~~expense~~benefit from continuing operations for the three months ended ~~March 31,~~June 30, 2023 ~~and~~was $5.0 million compared to income tax expense of $0.3 million for the same period of 2022, ~~was $491 thousand and $5.1 million, respectively,~~ resulting in an effective income tax rate of 20.3% and 23.4% for the same respective periods. Income tax benefit from continuing operations for the six months ended June 30, 2023 was $4.5 million compared to income tax expense of $5.5 million for the same period of 2022, resulting in an effective income tax rate of 20.0% and 22.8% for the same respective periods.

All loan portfolio and ACL information presented as of and for the three and six months ended ~~March 31,~~June 30, 2023 is in accordance with ASC 326. All loan information presented prior to this period is presented in accordance with previously applicable GAAP. As a result, the presentation of information pre-ASC 326 and post-ASC 326 adoption will not be comparable for most disclosures.

Loan Portfolio. The Company makes loans to commercial entities and to individuals. Loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan and the creditworthiness of the borrower. Credit risk tends to be geographically concentrated in that a majority of the loans are to borrowers located in the markets served by the ~~Company.~~Company; however, the loans contributing to the increase in nonperforming assets and the ACL in the first six months of 2023 were primarily outside of the Company's primary geographic footprint. All loans are underwritten within specific lending policy guidelines that are designed to maximize the Company’s profitability within an acceptable level of business risk.

The following table presents the Company’s loan portfolio by category of loan and the percentage of loans in each category to total loans as of the dates stated.

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of ~~March 31,~~June 30, 2023.


					Variable rate								Fixed rate												Variable rate								Fixed rate
(Dollars in thousands)	Total Maturities		One Year or Less		Total		1-5 years		5-15 years		More than 15 years		Total		1-5 years		5-15 years		More than 15 years		Total Maturities		One Year or Less		Total		1-5 years		5-15 years		More than 15 years		Total		1-5 years		5-15 years		More than 15 years
Commercial and industrial	$	571,095	$	147,642	$	211,884	$	180,833	$	29,948	$	1,103	$	211,569	$	105,017	$	93,130	$	13,422	$	545,921	$	136,387	$	223,659	$	189,961	$	32,824	$	874	$	185,875	$	90,897	$	89,832	$	5,146
Paycheck Protection Program		7,988		—		—		—		—		—		7,988		7,988		—		—		7,234		—		—		—		—		—		7,234		7,234		—		—
Real estate – construction, commercial		180,149		49,020		92,247		52,863		10,132		29,252		38,882		36,462		2,376		44		165,863		46,602		80,925		31,141		16,202		33,582		38,336		35,243		1,687		1,406
Real estate – construction, residential		92,403		21,745		16,286		14,697		—		1,589		54,372		1,578		3,129		49,665		82,199		23,415		9,858		8,797		71		990		48,926		9,712		—		39,214
Real estate – mortgage, commercial		867,916		34,254		452,922		66,892		218,392		167,638		380,740		211,325		161,950		7,465		879,729		52,847		457,901		69,902		218,050		169,949		368,981		212,808		148,736		7,437
Real estate – mortgage, residential		672,473		15,268		388,286		14,480		74,690		299,116		268,919		37,595		43,517		187,807		709,565		13,530		405,516		11,741		74,865		318,910		290,519		44,307		41,168		205,044
Real estate – mortgage, farmland		6,394		582		1,768		91		255		1,422		4,044		2,445		870		729		5,583		197		1,484		60		109		1,315		3,902		2,416		757		729
Consumer loans		58,907		5,861		7,062		6,898		164		—		45,984		25,431		20,491		62		62,510		4,933		8,615		8,454		161		—		48,962		25,955		23,003		4
Gross loans	$	2,457,325	$	274,372	$	1,170,455	$	336,754	$	333,581	$	500,120	$	1,012,498	$	427,841	$	325,463	$	259,194	$	2,458,604	$	277,911	$	1,187,958	$	320,056	$	342,282	$	525,620	$	992,735	$	428,572	$	305,183	$	258,980

Allowance for Credit Losses. Management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company’s ~~allowance for credit losses (“ACL”)~~ACL was adequate as of ~~March 31,~~June 30, 2023 and December 31, 2022. There can be no assurance, however, that adjustments to the ACL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments; adverse developments in the economy, on a national basis or in the Company’s market area; and changes in the circumstances of particular borrowers are criteria, among others, that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management.

The following table presents an analysis of the change in the ACL by loan type, as of and for the periods stated.

Of the $9.0 million and $10.3 million in gross loan charge-offs for the three and six months ended June 30, 2023, respectively, $7.0 million was attributable to one commercial and industrial loan that was fully charged-off in the second quarter of 2023.

The ACL includes specific reserves for individually evaluated loans and a general allowance applicable to all loan categories; however, management has allocated the ACL by loan type to provide an indication of the relative risk characteristics of the loan portfolio. The allocation is an estimate and should not be interpreted as an indication that charge-offs will occur in these amounts, or that the allocation indicates future trends, and does not restrict the usage of the allowance for any specific loan or category. The following presents the allocation of the ACL by loan category and the percentage of loans in each category to total loans as of the dates stated.

The information in the table above excludes PPP loans, which carry no ACL as they are fully guaranteed by the U.S. government.

Nonperforming Assets. Nonperforming assets consist of nonaccrual loans, loans past due 90 days and still accruing interest, and other real estate owned (“OREO”).

OREO includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of a loan. Such properties, which are held for resale, are carried at the lower of cost or fair market value, including a reduction for the estimated selling expenses.

The following table presents summary information pertaining to nonperforming assets and certain asset quality ratios as of the dates stated.

The increase in nonperforming loans at ~~March 31,~~June 30, 2023 compared to December 31, 2022 was primarily due to ~~two~~$58.1 million of specialty finance loans (classified in commercial ~~loans totaling $13.0 million~~and industrial loans) that were placed on nonaccrual status in the ~~first~~second quarter of 2023. The increase in the ratio of ACL to total loans held for investment, excluding PPP loans, at ~~March 31,~~June 30, 2023 compared to December 31, 2022 was primarily attributable to $14.1 million of specific reserves associated with the aforementioned group of specialty finance loans, while $4.0 million was due to the adoption of ASC 326 on January 1, ~~2023, which resulted in a $4.0 million increase in the ACL, specific reserve needs for collateral-dependent loans, and loan growth in the first three months of~~ 2023. The remaining purchase accounting adjustments (discounts) related to loans acquired in the Bay Banks of Virginia, Inc. merger in 2021 and earlier acquisitions by the Company were ~~$6.7~~$6.4 million and $7.9 million at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Modified Loans. The Company granted certain loan modifications to borrowers experiencing financial difficulties during the ~~first quarter of~~six months ended June 30, 2023. The total amortized cost of these modified loans was ~~$40.7~~$46.9 million, or ~~1.65%~~1.91% of gross loans held for investment, as of ~~March 31, 2023. Of this amount, a $37.3 million commercial and industrial loan did not make a contractually due payment at~~June 30, 2023, all of which were on nonaccrual status as of the ~~end of April 2023. An amendment to the loan agreement is under negotiation, and the loan continues to be adequately collateralized.~~same date.

Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities AFS may be sold in response to changes in market interest rates, changes in the securities’ prepayment risk, increased loan demand, general liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s AFS investment securities was ~~$352.0~~$340.6 million as of ~~March 31,~~June 30, 2023, a ~~slight~~ decrease from $354.3 million at December 31, 2022, primarily due to amortization of securities. ~~Primarily as~~As a result of a modest ~~decline~~increase in market longer-term interest rates in the first ~~three~~six months of 2023, the Company’s portfolio of AFS securities had an unrealized ~~gain~~loss of approximately ~~$5.0~~$1.5 million in the same period.

As of ~~March 31,~~June 30, 2023 and December 31, 2022, the majority of the investment securities portfolio consisted of securities rated as investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default. At ~~March 31,~~June 30, 2023 and December 31, 2022, securities with a fair value of ~~$242.8~~$178.8 million and $241.9 million, respectively, were pledged to secure the Bank’s borrowing facility with the FHLB. As of ~~March 31,~~June 30, 2023, the Company pledged securities with ~~$29.9~~$108.7 million of par value (amortized cost and fair value of ~~$29.8~~$109.6 million and ~~$25.5~~$90.0 million, respectively) as collateral for the Bank Term Funding Program (“BTFP”) established by the Board of Governors of the Federal Reserve System. The Company also pledged securities with a fair value of $11.6 million (amortized cost of $13.4 million) as of June 30, 2023 for access to the FRB Discount Window.

The Company reviews its AFS investment securities portfolio for potential credit losses ~~at least~~no less than quarterly. AFS investment securities with unrealized losses are generally a result of pricing changes due to changes in the current interest rate environment and not as a result of permanent credit impairment. The Company does not intend to sell, nor

does it believe that it will be required to sell, any of its temporarily impaired AFS securities prior to the recovery of the amortized cost. No ACL has been recognized for AFS securities as of ~~March 31,~~June 30, 2023.

Restricted equity investments consisted of stock in the FHLB (carrying basis ~~$11.8~~$10.9 million and $14.7 million at ~~March 31,~~June 30, 2023 and December 31, 2022, respectively), stock in the ~~Federal Reserve Bank of Richmond (the "FRB")~~FRB (carrying basis of $6.1 million at both ~~March 31,~~June 30, 2023 and December 31, 2022, respectively), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both ~~March 31,~~June 30, 2023 and December 31, 2022). Restricted equity investments are carried at cost. The Company holds various other equity investments, including shares in other financial institutions and fintech companies, totaling ~~$23.0~~$22.7 million and $23.8 million as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively, which are carried at fair value with any gain or loss reported in the consolidated statements of operations each reporting period.

The following table presents the amortized cost of the investment portfolio by contractual maturities, as well as the weighted average yields for each of the maturity ranges as of and for the period stated. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Deposits. The principal sources of funds for the Company are core deposits (demand deposits, interest-bearing transaction accounts, money market accounts, savings deposits, and certificates of deposit), primarily from its market area. The Company’s deposit base includes transaction accounts, time and savings accounts, and other accounts that customers use for cash management purposes and which provide a source of fee income and cross-marketing opportunities as well as a ~~low-cost~~ source of funds. Time and savings accounts, including money market deposit accounts, also provide a relatively stable ~~low-cost~~ source of funding.

Total deposits as of ~~March 31,~~June 30, 2023 were ~~$2.76~~$2.61 billion, an increase of ~~$258.5~~$110.6 million from December 31, 2022, of which ~~$304.4~~$220.1 million was due to higher time deposits, primarily brokered time deposits. The Company's relationships with fintech partners have resulted in approximately ~~$716.0~~$707.6 million of deposits as of ~~March 31,~~June 30, 2023, up from ~~approximately $690.0~~$690.2 million as of December 31, ~~2022, a $26.0 million increase for the three months ended March 31, 2023.~~2022. Estimated uninsured deposits totaled approximately ~~$898~~$865.7 million as of ~~March 31,~~June 30, 2023, or ~~32%~~33% of total deposits, compared to ~~$923 million,~~$1.01 billion, or ~~37%~~40% of total deposits, as of December 31, 2022. Excluding fintech-related deposits, estimated uninsured deposits were ~~23%~~26% and ~~27%~~31% of total deposits as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

Approximately ~~21.5%~~22.0% of total deposits as of ~~March 31,~~June 30, 2023 were composed of noninterest-bearing demand deposits compared to 25.6% as of December 31, 2022. In contrast, approximately ~~25.2%~~23.4% of total deposits as of ~~March 31,~~June 30, 2023 were composed of time deposits compared to ~~15.7%~~15.6% as of December 31, 2022, which was primarily due to the ~~acquisition~~addition of brokered time deposits in ~~the~~late first quarter ~~of 2023.~~2023 in response to then recent industry events. Brokered time deposits represented approximately ~~12.2%~~10.7% and 1.7% of total deposits as of ~~March 31,~~June 30, 2023 and December 31, 2022, respectively.

The following table presents maturities of time deposits for certificate of deposits of $250 thousand or greater as of the dates stated.

Borrowings. The following tables present information on the balances and interest rates on borrowings as of and for the periods stated.

FHLB advances are secured by collateral consisting of a blanket lien on qualifying loans in the Company’s residential, multi-family, and commercial real estate mortgage loan portfolios, as well as ~~selected~~select investment securities.

Subordinated notes, net, totaled $39.9 million as of both ~~March 31,~~June 30, 2023 and December 31, 2022. ~~The effective interest rate on the subordinated notes for the three months ended March 31, 2023 and 2022 was 5.54% and 5.53%, respectively.~~

Liquidity. Liquidity is essential to the Company’s business. The Company’s liquidity could be impaired by unforeseen outflows of cash, including deposits, or the inability to access the capital and/or wholesale funding markets. This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the Company or the financial services industry generally, or an operational problem that affects the Company or a third party. The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events.

The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management. Pursuant to the Company’s liquidity management program, it first determines its current liquidity position and then forecasts liquidity based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. Management then stress tests the Company’s liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established. Management also monitors the Company’s liquidity position through cash flow forecasting and believes its level of liquidity ~~and capital~~ is adequate to conduct the business of the Company.

Deposits are the primary source of the Company’s liquidity. Cash flow from amortizing assets or maturing assets provides funding to meet the needs of depositors and borrowers. The Bank had unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $28.0 million as of ~~March 31,~~June 30, 2023 and December 31, 2022. These lines bear interest at the prevailing rates for such loan and are cancellable any time by the correspondent bank. As of ~~March 31,~~June 30, 2023 and December 31, 2022, none of these lines of credit with correspondent banks were drawn upon.

In addition to deposits and federal funds lines, the Company has access to various wholesale funding markets. These markets include the brokered certificate of deposit market, listing service deposit market, and the federal funds market. The Company is a member of the IntraFi Network (formerly, Promontory Interfinancial Network), which allows banking customers to access Federal Deposit Insurance Corporation (the “FDIC”) insurance protection through the Bank on deposits that exceed FDIC insurance limits. The Company also has one-way authority with the IntraFi Network for both Certificate of Deposit Account Registry Service and Insured Cash Sweep products which provides the Company the ability to access additional wholesale funding as needed.

The Company ~~also~~ maintains secured lines of credit with the FHLB under which the Company can borrow up to the allowable amount for the collateral pledged. As of ~~March 31,~~June 30, 2023, the Company had a credit line available of ~~$576.8~~$572.7 million with the FHLB with outstanding advances totaling ~~$239.1~~$219.1 million and letters of credit totaling $67.6

million, leaving the remaining credit availability of ~~$270.1~~$286.0 million as of the same date. The letters of credit are for the benefit of the Treasury Board of the Commonwealth of Virginia to secure public deposits.

~~The Company has an immediately available and undrawn line with the BTFP of $29.9 million as of March 31, 2023.~~ 52

The BTFP provides banks with additional liquidity via a secured line of credit collateralized by eligible pledged securities. Available credit is equal to the current par value of the pledged securities. Advances under the BTFP are up to a one-year term and are priced at the one-year overnight index swap rate plus 10 basis points, which is fixed for the term on the advance date. Advances can be repaid at any time without penalty. The Company had an available line of credit through the BTFP of $100.5 million as of June 30, 2023, of which the Company had drawn one advance for $65.0 million, maturing May 10, 2024, with a fixed interest rate of 4.74%, leaving the remaining credit availability of $35.5 million as of the same date.

The Company maintains access to the FRB Discount Window, under which the Company can borrow up to the allowable amount for the securities pledged as collateral. As of June 30, 2023, availability under the FRB Discount Window was $11.1 million. The Company had no outstanding borrowings through the FRB Discount Window as of June 30, 2023 or December 31, 2022.

The Company utilized the FRB Paycheck Protection Program Liquidity Facility to partially fund PPP loans, which collateralize the advances. As of ~~March 31,~~June 30, 2023 and December 31, 2022, FRB borrowings under this facility totaled $0 and $51 thousand, respectively.

Subsequent to the financial industry events in early March 2023, the Company has undertaken efforts to increase its borrowing capacity by pledging additional eligible collateral with the FHLB, adding borrowing capacity by participating in the BTFP, and more actively sourcing brokered deposits to enhance its liquidity position. The Company also added a treasury management resource to provide additional oversight to the Company's liquidity position.

Capital. Capital adequacy is an important measure of financial stability and performance. The Company’s objectives are to maintain a level of capitalization that is sufficient to ~~sustain asset growth and promote depositor and investor confidence.~~support the Company's strategic objectives.

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Pursuant to the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III rules”), the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios, except the tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. ~~Management believes as~~The Banks's primary regulators may place certain restrictions on dividends paid by the Bank. The total amount of ~~March 31, 2023,~~dividends which may be paid at any date is generally limited to retained earnings of the ~~Bank met all capital adequacy requirements to which it is subject.~~Bank.

As of June 30, 2023 and December 31, ~~2023, the most recent regulatory notification categorized~~2022, the Bank met the capital requirements to be classified as well ~~capitalized under the regulatory framework.~~capitalized. There ~~are~~have been no conditions or events since ~~that notification~~these dates that management believes have changed the institution's categorization. ~~Federal~~

If the Bank were fail to meet the capital adequacy guidelines for a “well-capitalized” bank, it could be required to pay higher insurance premiums to the FDIC or subject to increased regulatory scrutiny. In addition, the Bank would not be able to renew or accept brokered deposits without prior regulatory approval and ~~state banking regulations place certain~~would be subject to interest rate restrictions on ~~dividends paid by the Company. The total amount of dividends which may be paid at any date is generally limited to retained earnings of the Company.~~its deposit accounts.

As previously noted, the Company adopted CECL effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings ("CECL Transitional Amount") over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital will be 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report.

if applicable. The CECL Transitional Amount was $5.5 million, of which $1.4 million reduced the regulatory capital amounts and capital ratios as of ~~March 31,~~June 30, 2023.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. 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 Company evaluates each customer’s credit worthiness on a case-by-case basis, in a manner similar to that if underwriting a loan. The approved commitments to extend credit that were available but unused as of ~~March 31,~~June 30, 2023 and December 31, 2022 totaled ~~$707.9~~$679.1 million and $736.1 million, respectively.

Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of ~~March 31,~~June 30, 2023 and December 31, 2022, commitments under outstanding financial stand-by letters of

credit totaled ~~$29.3~~$29.5 million and ~~$29.8~~$28.3 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers. Additionally, the Company issues performance stand-by letters of credit, which guarantee the performance of a customer to a third party. As of March 31, 2023 and December 31, 2022, commitments under outstanding performance stand-by letters of credit totaled $0 and $655 thousand, respectively.

Upon the adoption of ASC 326 on January 1, 2023, the Company recorded an increase to its reserve for unfunded commitments of $3.7 million. For the ~~three~~six months ended ~~March 31,~~June 30, 2023, the Company recorded a ~~recovery of~~

reduction to the provision for credit losses for unfunded commitments of ~~$400 thousand.~~$1.0 million, which was primarily attributable to lower balances of loan commitments. As of ~~March 31,~~June 30, 2023, the reserve for unfunded commitments was ~~$5.1~~$4.5 million compared to $1.8 million as of December 31, 2022.

The Company invests in various partnerships, limited liability companies, and small business investment company funds. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At ~~March 31,~~June 30, 2023, the Company had future commitments outstanding totaling ~~$17.7~~$17.9 million related to these investments.

As a financial institution, the Company is exposed to various business risks, including interest rate risk. Interest rate risk is the risk to earnings and value arising from volatility in market interest rates. Interest rate risk arises from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities, changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers' ability to prepay loans and depositors' ability to redeem certificates of deposit before maturity, changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion, and changes in spread relationships between different yield curves, such as U.S. Treasuries and other market-based index rates. The Company’s goal is to maximize net interest income without incurring excessive interest rate risk. Management of net interest income and interest rate risk must be consistent with the level of capital and liquidity that the Bank maintains. The Company manages interest rate risk through an asset and liability committee comprised of members of its board of directors and management (the “ALCO”). The ALCO is responsible for monitoring the Company’s interest rate risk in conjunction with liquidity and capital management.

The Company employs an independent consulting firm to model its interest rate sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. Assumptions for modeling are developed based on expected activity in the balance sheet. For maturing assets, assumptions are created for the redeployment of these assets. For maturing liabilities, assumptions are developed for the replacement of these funding sources. Assumptions are also developed for assets and liabilities that could reprice during the modeled time period. These assumptions also cover how management expects interest rates to change on non-maturity deposits such as interest checking, money market checking, savings accounts, as well as certificates of deposit. Based on inputs that include the current balance sheet, the current level of interest rates, and the developed assumptions, the model produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. The model then simulates the impact on net interest income based on specific changes in interest rates. The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 300 basis points and up 100 basis points to 300 basis points. The results of these simulations are then compared to the base case.

The following table presents the estimated change in net interest income under various rate change scenarios. The scenarios assume rate changes occur instantaneous and in a parallel manner, which means the changes are the same on all points of the rate curve.

The severity of the effect of instantaneous increases in interest rates as shown above is due to the timing of pricing change in the Company's interest-bearing liabilities compared to its interest-earning assets. A significant portion of the Company's deposits through its fintech partnerships reprice with changes in federal funds rates. Therefore, an

instantaneous change in this index rate results in a relative change in deposit costs. The Company contracts with its fintech partners and continually assesses the cost of these fintech-related deposits relative to sources of fees and other noninterest income earned from these partnerships.

Stress testing the balance sheet and net interest income using instantaneous parallel shock movements in the yield curve of 100 to 300 basis points is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve. In addition, instantaneous parallel interest rate shock modeling is not a predictor of actual future performance of earnings. It is a financial metric used to manage interest rate risk and track the movement of the Company’s interest rate risk position over a historical time frame for comparison purposes.

The asset and liability repricing characteristics of the Company’s assets and liabilities will have a significant impact on its future interest rate risk profile.

This information is incorporated herein by reference to the information in section "Interest Rate Risk Management" within Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q.

The Company maintains disclosure controls and procedures that are designed to provide assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods required by the SEC and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of ~~March 31,~~June 30, 2023 was carried out under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer. Based on and as of the date of such evaluation, the aforementioned officers concluded that the Company’s disclosure controls and procedures were effective.

The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

There have been no material developments in the status of the legal proceedings previously disclosed in Part I, Item 3 of the Company’s 2022 Form 10-K.

In the ordinary course of its operations, the Company is a party to various legal proceedings. As of the date of this report, there are no pending or threatened proceedings against the Company, other than previously disclosed as stated in the preceding paragraph, that, if determined adversely, would have a material effect on the business, results of operations or financial position of the Company.

~~The~~Other than as set forth below, there have been no material changes to the risk factors disclosed in the 2022 Form 10-K. The following risk factors supplement, and should be read together with, the risk factors disclosed in the 2022 Form 10-K. Additional risks not presently known to ~~us,~~the Company, or that weit currently ~~deem~~deems immaterial, may also adversely affect ~~our~~the Company's business, financial condition, or results of operations. See also “Cautionary Note About Forward-Looking Statements,” included in Part 1, Item 2, of this Form 10-Q.

Over the first six months of 2023, the Company’s nonperforming loans have increased from $18.6 million, or 0.77% of total loans held for investment, excluding PPP loans, at December 31, 2022 to $85.8 million, or 3.50% of total loans held for investment, excluding PPP loans, at June 30, 2023. This increase was primarily due to a group of specialty finance loans totaling $58.1 million as of June 30, 2023 that were placed on nonaccrual status during the second quarter of 2023. The Company’s ACL as of June 30, 2023 includes $14.1 million of specific reserves for this group of loans. While management believes that the ACL was adequate as of June 30, 2023 and that the credit deterioration of this group of loans is an isolated event within the Company's loan portfolio, there can be no assurance that the Company will not experience further deterioration within this group of loans or other increases in nonperforming loans in the future.

These specialty finance loans are of higher risk than other types of loans originated by the Bank, due to the nature of the collateral, and as such, the Company's ability to pursue collections could be delayed or protracted. Any of these factors could cause the Company to incur charge-offs to the ACL, lost interest income relating to these loans, and additional increases in the loan loss reserves, any of which may have a material adverse effect on earnings, liquidity, and capital.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Virginia	54-1838100
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1807 Seminole Trail Charlottesville, Virginia	22901
(Address of principal executive offices)	(Zip Code)


Blue Ridge Bankshares, Inc. Table of Contents
Item		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2023 (unaudited) and December 31, 2022	3

	Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited)	6

	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2023 and 2022 (unaudited)	8

	Notes to Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3839

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5256

Item 4.	Controls and Procedures	5256

PART II	OTHER INFORMATION	5357

Item 1.	Legal Proceedings	5357

Item 1A.	Risk Factors	5357

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5357

Item 3.	Defaults Upon Senior Securities	5357

Item 4.	Mine Safety Disclosures	5357

Item 5.	Other Information	5357

Item 6.	Exhibits	5357

Signatures		5459


Supplemental Schedule of Cash Flow Information
Cash paid for:
Interest	$	28,999		$	4,395
Income taxes	$	6,656		$	575
Non-cash investing and financing activities:
Unrealized losses on securities available for sale	$	(1,490	)	$	(42,859	)
Restricted stock awards, net of forfeitures	$	936		$	729
Cumulative effect adjustment due to adoption of accounting standard, net of income taxes	$	(5,474	)	$	—
Cumulative effect adjustment of change in accounting method, net of income taxes	$	—		$	3,542


	March 31, 2023									June 30, 2023
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
State and municipal	$	59,408	$	—	$	(7,747	)	$	51,661	$	59,303	$	—	$	(8,394	)	$	50,909
U.S. Treasury and agencies		72,051		—		(9,898	)		62,153		72,057		—		(11,355	)		60,702
Mortgage backed securities		231,761		19		(32,461	)		199,319		227,961		9		(35,928	)		192,042
Corporate bonds		42,420		32		(3,595	)		38,857		41,414		—		(4,450	)		36,964
Total investment securities	$	405,640	$	51	$	(53,701	)	$	351,990	$	400,735	$	9	$	(60,127	)	$	340,617


			March 31, 2023																	June 30, 2023
			Less than 12 Months					12 Months or Greater					Total							Less than 12 Months					12 Months or Greater					Total
(Dollars in thousands)	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and municipal		80	$	3,265	$	(92	)	$	46,807	$	(7,655	)	$	50,072	$	(7,747	)		82	$	2,900	$	(74	)	$	47,119	$	(8,320	)	$	50,019	$	(8,394	)
U.S. Treasury and agencies		26		4,885		(115	)		57,264		(9,783	)		62,149		(9,898	)		23		—		—			60,699		(11,355	)		60,699		(11,355	)
Mortgage backed securities		81		11,475		(408	)		179,759		(32,053	)		191,234		(32,461	)		84		5,420		(367	)		178,615		(35,561	)		184,035		(35,928	)
Corporate bonds		34		20,801		(1,729	)		12,724		(1,866	)		33,525		(3,595	)		33		12,895		(1,605	)		15,769		(2,845	)		28,664		(4,450	)
Total		221	$	40,426	$	(2,344	)	$	296,554	$	(51,357	)	$	336,980	$	(53,701	)		222	$	21,215	$	(2,046	)	$	302,202	$	(58,081	)	$	323,417	$	(60,127	)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the six months ended June 30, 2023
(Dollars in thousands)	Shares of Common Stock			Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss, net			Total
Balance at beginning of period		18,950,329		$	195,960	$	252	$	108,262		$	(45,101	)	$	259,373
Cumulative effect adjustment due to adoption of accounting standard, net of income taxes		—		$	—	$	—	$	(5,474	)	$	—		$	(5,474	)
Net loss		—			—		—		(17,860	)		—			(17,860	)
Other comprehensive loss		—			—		—		—			(1,157	)		(1,157	)
Dividends on common stock		—			—		—		(4,641	)		—			(4,641	)
Stock option exercises		3,750			26		—		—			—			26
Restricted stock awards, net of forfeitures		(26,842	)		936		—		—			—			936
Dividend reinvestment plan issuances		6,400			68		—		—			—			68
Balance at end of period		18,933,637		$	196,990	$	252	$	80,287		$	(46,258	)	$	231,271


Cash Flows From Financing Activities
Net (decrease) increase in demand, savings, and other interest-bearing deposits		(45,843	)		98,992
Net increase (decrease) in time deposits		304,667			(42,212	)
Common stock dividends paid		(2,321	)		(2,253	)
FHLB advances		510,000			—
FHLB repayments		(582,600	)		—
FRB repayments		(51	)		(2,690	)
Stock option exercises		26			15
Dividend reinvestment plan issuances		33			—
Net cash provided by financing activities - continuing operations		183,911			51,852
Net cash provided by financing activities - discontinued operations		—			—
Cash provided by financing activities		183,911			51,852
Net increase in cash and due from banks		149,100			31,629
Cash and due from banks at beginning of period		77,274			130,548
Cash and due from banks at end of period	$	226,374		$	162,177

Supplemental Schedule of Cash Flow Information
Cash paid for:
Interest	$	13,203		$	1,598
Income taxes	$	6		$	—
Non-cash investing and financing activities:
Unrealized gains (losses) on securities available for sale	$	4,979		$	(22,586	)
Restricted stock awards, net of forfeitures	$	479		$	355
Cumulative effect adjustment due to adoption of accounting standard, net of income taxes	$	(5,474	)	$	—
Cumulative effect adjustment of change in accounting method, net of income taxes	$	—		$	3,542


	March 31, 2023
(Dollars in thousands)	Nonaccrual Loans with No ACL		Nonaccrual Loans with an ACL		Total Nonaccrual Loans
Commercial and industrial	$	186	$	8,465	$	8,651
Real estate – construction, commercial		—		437		437
Real estate – mortgage, commercial		10,108		1,463		11,571
Real estate – mortgage, residential		592		6,855		7,447
Consumer		2		449		451
Total	$	10,888	$	17,669	$	28,557


	March 31, 2023
	All Modifications
(Dollars in thousands)	Number of Loans		Amortized Cost		Amortized Cost of Modified Loans to Gross Loans by Category			Financial Effect
Modification - term extension
Commercial and industrial		1	$	37,271		6.53	%	13-month extension through January 2024
Modification - interest-only
Real estate – mortgage, commercial		2		3,381		0.39	%	Interest-only payments for six months
Total		3	$	40,652		1.65	%


	March 31, 2023
	Payment Status (Amortized Cost)
(Dollars in thousands)	Current Loans		30-89 Days Past Due		90+ Days Past Due
Commercial and industrial	$	37,271	$	—	$	—
Real estate – mortgage, commercial		3,360		—		—
Total modified loans	$	40,631	$	—	$	—


(Dollars in thousands)	For the three months ended March 31, 2022
Allowance for loan losses, beginning of period	$	12,121
Charge-offs
Commercial and industrial		(2,401	)
Real estate – construction		(123	)
Real estate – mortgage		(16	)
Consumer		(279	)
Total charge-offs		(2,819	)
Recoveries
Commercial and industrial		74
Real estate – construction		12
Real estate – mortgage		4
Consumer		121
Total recoveries		211
Net charge-offs		(2,608	)
Provision for loan losses		2,500
Allowance for loan losses, end of period	$	12,013


(Dollars in thousands)	March 31, 2023
Nine months ending December 31, 2023	$	1,484
Twelve months ending December 31, 2024		1,464
Twelve months ending December 31, 2025		1,191
Twelve months ending December 31, 2026		1,073
Twelve months ending December 31, 2027		990
Thereafter		1,786
Total undiscounted cash flows		7,988
Discount		(590	)
Lease liabilities	$	7,398


	For the three months ended March 31, 2023
(Dollars in thousands)	Net Unrealized (Losses) Gains on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive (Loss) Income, net
Balance as of December 31, 2022	$	(45,525	)	$	425	$	(1	)	$	(45,101	)
Change in net unrealized holding gains on securities available for sale, net of deferred tax expense of $1,113		3,866			—		—			3,866
Balance as of March 31, 2023	$	(41,659	)	$	425	$	(1	)	$	(41,235	)

	For the three months ended March 31, 2022
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of December 31, 2021	$	(4,056	)	$	425	$	(1	)	$	(3,632	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $4,742		(17,844	)		—		—			(17,844	)
Balance as of March 31, 2022	$	(21,900	)	$	425	$	(1	)	$	(21,476	)


	Average Balances, Income and Expense, Yields and Rates
	For the six months ended June 30,
	2023								2022									Total Increase/			Increase/(Decrease) Due to
(Dollars in thousands)	Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest			Yield/ Rate (1)			(Decrease)			Volume (2)			Rate (2)
Average Assets
Taxable securities	$	371,270		$	5,171		2.79	%	$	388,419		$	3,899			2.01	%	$	1,272		$	(172	)	$	1,444
Tax-exempt securities (3)		20,719			239		2.31	%		20,359			208			2.04	%		31			4			27
Total securities		391,989			5,410		2.76	%		408,778			4,107			2.01	%		1,303			(168	)		1,471
Interest-earning deposits in other banks		114,469			2,393		4.18	%		86,160			183			0.42	%		2,210			60			2,150
Federal funds sold		6,200			144		4.65	%		48,201			112			0.46	%		32			(98	)		130
Loans held for sale		48,107			678		2.82	%		58,249			969			3.33	%		(291	)		(169	)		(122	)
Paycheck Protection Program loans (4)		8,924			36		0.81	%		23,225			457			3.94	%		(421	)		(281	)		(140	)
Loans held for investment (4,5,6)		2,492,544			73,420		5.89	%		1,840,395			46,261			5.03	%		27,159			16,393			10,766
Total average interest-earning assets		3,062,233			82,081		5.36	%		2,465,008			52,089			4.23	%		29,992			15,737			14,255
Less: allowance for credit losses		(27,954	)							(12,845	)
Total noninterest-earning assets		239,584								230,652
Total average assets	$	3,273,863							$	2,682,815
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market deposits, and savings	$	1,317,834		$	17,119		2.60	%	$	1,113,751		$	1,275			0.23	%	$	15,844		$	234		$	15,610
Time deposits (7)		587,858			8,836		3.01	%		449,339			1,822			0.81	%		7,014			562			6,452
Total interest-bearing deposits		1,905,692			25,955		2.72	%		1,563,090			3,097			0.40	%		22,858			795			22,063
FHLB borrowings (8)		295,102			6,768		4.59	%		17,071			(22	)		(0.26	)%		6,790			(358	)		7,148
FRB borrowings		17,958			439		4.89	%		9,786			114			2.33	%		325			95			230
Subordinated notes and other borrowings (9)		39,916			1,102		5.52	%		39,969			1,099			5.50	%		3			(1	)		4
Total average interest-bearing liabilities		2,258,668			34,264		3.03	%		1,629,916			4,288			0.53	%		29,976			531			29,445
Noninterest-bearing demand deposits		723,131								745,820
Other noninterest-bearing liabilities		34,947								35,831
Stockholders' equity		257,117								271,248
Total average liabilities and stockholders’ equity	$	3,273,863							$	2,682,815
Net interest income and margin (10)				$	47,817		3.12	%				$	47,801			3.88	%	$	16		$	15,206		$	(15,190	)
Cost of funds (11)							2.30	%								0.36	%
Net interest spread (12)							2.33	%								3.70	%

(1) Annualized.
(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.
(3) Computed on a fully taxable equivalent basis assuming a 22.65% and 21% income tax rate for the six months ended June 30, 2023 and 2022, respectively.
(4) Includes deferred loan fees/costs.
(5) Non-accrual loans have been included in the computations of average loan balances.
(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $1.2 million and $4.1 million for the six months ended June 30, 2023 and 2022, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $506 thousand and $840 thousand for the six months ended June 30, 2023 and 2022, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $0 and $111 thousand for the six months ended June 30, 2023 and 20221, respectively.
(9) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $50 thousand for both the six months ended June 30, 2023 and 2022.
(10) Net interest margin is net interest income divided by average interest-earning assets.
(11) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.
(12) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.


	As of and for the three months ended						As of and for the three months ended						As of and for the six months ended
(Dollars in thousands)	March 31, 2023			March 31, 2022			June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
ACL, beginning of period	$	22,939		$	12,121		$	29,974		$	12,013		$	22,939		$	12,121
Impact of ASC 326 adoption		4,022			—			—			—			4,022			—
Charge-offs
Commercial and industrial		(799	)		(2,401	)		(7,326	)		(2,442	)		(8,125	)		(4,927	)
Consumer		(510	)		(418	)		(1,694	)		(349	)		(2,204	)		(640	)
Total charge-offs		(1,309	)		(2,819	)		(9,020	)		(2,791	)		(10,329	)		(5,567	)
Recoveries
Commercial and industrial		118			86			887			388			1,005			424
Consumer		104			125			126			138			230			270
Total recoveries		222			211			1,013			526			1,235			694
Net charge-offs		(1,087	)		(2,608	)		(8,007	)		(2,265	)		(9,094	)		(4,873	)
Provision for credit losses - loans		4,100			2,500			21,100			7,494			25,200			9,994
ACL, end of period	$	29,974		$	12,013		$	43,067		$	17,242		$	43,067		$	17,242
Ratio of net charge-offs to average loans outstanding during period:
Commercial		0.17	%		0.82	%		1.64	%		0.69	%		0.89	%		2.08	%
Consumer		0.19	%		0.18	%		0.68	%		0.83	%		0.44	%		0.66	%
Total loans		0.17	%		0.58	%		1.29	%		0.47	%		0.73	%		0.52	%


	March 31, 2023																						June 30, 2023
	Within One Year					One to Five Years					Five to Ten Years					Over Ten Years							Within One Year					One to Five Years					Five to Ten Years					Over Ten Years
(Dollars in thousands)	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Total Amortized Cost		Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Total Amortized Cost
Securities available for sale
State and municipal	$	—		—	%	$	5,299		2.40	%	$	30,658		1.92	%	$	23,451		2.37	%	$	59,408	$	—		—	%	$	6,068		2.40	%	$	32,393		1.97	%	$	20,842		1.60	%	$	59,303
U. S. Treasury and agencies		2		—	%		17,486		0.97	%		47,563		1.85	%		7,000		2.11	%		72,051		2		—	%		19,487		0.98	%		45,568		1.88	%		7,000		2.11	%		72,057
Mortgage backed securities		—		—	%		3,114		0.51	%		26,762		2.13	%		201,885		1.93	%		231,761		—		—	%		3,094		0.51	%		26,819		1.75	%		198,048		1.92	%		227,961
Corporate bonds		1,500		6.08	%		6,300		6.48	%		34,120		4.63	%		500		4.00	%		42,420		500		6.54	%		6,300		6.75	%		34,114		4.60	%		500		4.00	%		41,414
Total	$	1,502				$	32,199				$	139,103				$	232,836				$	405,640	$	502				$	34,949				$	138,894				$	226,390				$	400,735


	March 31, 2023
	Instantaneous Parallel Rate Shock Scenario
	Change in Net Interest Income - Year 1					Change in Net Interest Income - Year 2
Change in interest rates:
+300 basis points	$	(12,201	)	(11.8	%)	$	(10,384	)	(9.2	%)
+200 basis points		(7,242	)	(7.0	%)		(5,815	)	(5.2	%)
+100 basis points		(3,132	)	(3.0	%)		(2,248	)	(2.0	%)
Base case
-100 basis points		1,393		1.3	%		(96	)	(0.1	%)
-200 basis points		1,965		1.9	%		(2,244	)	(2.0	%)
-300 basis points		2,196		2.1	%		(5,357	)	(4.8	%)


10.1		Employment Agreement, dated as of May 7, 2023, by and between Blue Ridge Bank, National Association, and G. William Beale.


10.2		Blue Ridge Bankshares, Inc. 2023 Stock Incentive Plan (incorporated by reference to Appendix A of Blue Ridge Bankshares, Inc.'s proxy statement for the 2023 annual meeting, filed April 28, 2023).

31.1		Rule 13(a)-14(a) Certification of Chief Executive Officer.

31.2		Rule 13(a)-14(a) Certification of Chief Financial Officer.

32.1		Statement of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101		The following materials from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~June 30, 2023, formatted in Inline Extensible Business Reporting Language (XBRL), include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) related notes (filed herewith).

104		The cover page from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~June 30, 2023, formatted in Inline XBRL (included with Exhibit 101).



	BLUE RIDGE BANKSHARES, INC.

Date: ~~May 10,~~August 7, 2023	By:	/s/ ~~Brian K. Plum~~G. William Beale
		~~Brian K. Plum~~G. William Beale
		President and Chief Executive Officer

	By:	/s/ Judy C. Gavant
		Judy C. Gavant
		Executive Vice President and Chief Financial Officer

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