UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~Washington,~~WASHINGTON, D.C. 20549

~~FORM10-Q~~

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, ~~2019~~2021


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

For the transition period fromto

Commission File ~~Number 033-25507~~Number: 001-39165

BLUE RIDGE BANKSHARES, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in its ~~Charter)~~charter)


~~Virginia~~		~~54-1470908~~
~~State or Other Jurisdiction of~~ ~~Incorporation or Organization~~		~~I.R.S. Employer~~ ~~Identification No.~~

~~17 West Main Street, Luray,~~ Virginia		~~22835~~ 54-1470908
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1807 Seminole Trail Charlottesville, Virginia	22835
(Address of ~~Principal Executive Offices~~principal executive offices)		(Zip ~~Code~~Code)

~~(540)743-6521~~

Registrant’s ~~Telephone Number, Including Area Code~~telephone number, including area code: (540) 743-6521

~~Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report~~

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, no par value

~~None~~

BRBS

NYSE American

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 ofRegulation 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, anon-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 Rule12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

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 inRule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~The~~As of November 1, 2021, the registrant had ~~4,346,866~~18,774,932 shares of common stock, no par value per share, ~~outstanding as of December 13, 2019.~~outstanding.


PART I	FINANCIAL INFORMATION
~~PART I~~	~~FINANCIAL INFORMATION~~
Item 1.	Financial Statements		3
~~Item 1.~~
	~~Financial Statements~~

	Consolidated Balance Sheets as of September 30, ~~2019~~2021 (unaudited) and December 31, ~~2018~~2020		3

	Consolidated Statements of Income for the three months ~~ended September 30, 2019~~ and ~~September 30, 2018~~		4

	~~Consolidated Statement of Income for the~~ nine months ended September 30, ~~2019~~2021 and ~~September 30, 2018~~2020 (unaudited)		5 4

	Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, ~~2019~~2021 and ~~2018~~2020 (unaudited)		6 5

	~~Condensed~~ Consolidated Statements of Changes in Stockholders’ Equity for the three months and nine months ended September 30, ~~2019~~2021 and ~~2018~~2020 (unaudited)		6

	Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2019~~2021 and ~~2018~~2020 (unaudited)		7 8

	Notes to Consolidated Financial Statements (unaudited)		8
		10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
		44

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		44
		61

Item 4.	Controls and Procedures		44
		61
~~PART II~~	~~OTHER INFORMATION~~		45

~~Item 1.~~PART II	~~Legal Proceedings~~OTHER INFORMATION		45
		62
~~Item 1A.~~	~~Risk Factors~~		45

Item 2.1.	Legal Proceedings		62

Item 1A.	Risk Factors		62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		45
		64

Item 3.	Defaults Upon Senior Securities		45
		65

Item 4.	Mine Safety Disclosures		45
		65
~~Item 5.~~	~~Other Information~~		45

Item 6.5.	~~Exhibits~~Other Information		45 65

Item 6.	Exhibits		65

Signatures			46 66

PART I. ~~FINANCIAL~~FINANCIAL INFORMATION

Item 1. Financial Statements

Blue Ridge Bankshares, Inc.

Consolidated Balance Sheets


	(unaudited)
(Dollars in thousands except share data)	September 30, 2021			December 31, 2020 (2)
ASSETS
Cash and due from banks	$	53,077		$	117,945
Federal funds sold		144,376			775
Securities available for sale, at fair value		360,098			109,475
Restricted and other equity investments		19,343			11,173
Other investments		13,550			6,565
Loans held for sale		144,111			148,209
Paycheck Protection Program loans, net of deferred fees and costs		46,648			288,533
Loans held for investment, net of deferred fees and costs		1,752,453			732,883
Less allowance for loan losses		(12,614	)		(13,827	)
Loans held for investment, net		1,739,839			719,056
Accrued interest receivable		9,900			5,428
Other real estate owned		227			0
Premises and equipment, net		26,963			14,831
Right-of-use asset		5,645			5,328
Bank owned life insurance		46,278			15,724
Goodwill		26,826			19,620
Other intangible assets		8,099			2,581
Mortgage derivative asset		3,456			5,293
Mortgage servicing rights, net		14,976			7,084
Mortgage brokerage receivable		4,316			8,516
Interest rate swap asset		5,838			1,716
Other assets		25,736			10,406
Total assets	$	2,699,302		$	1,498,258
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	684,859		$	333,051
Interest-bearing demand and money market deposits		828,477			282,263
Savings		144,904			78,352
Time deposits		541,964			251,443
Total deposits		2,200,204			945,109
FHLB borrowings		125,115			115,000
FRB borrowings		33,857			281,650
Subordinated notes, net		40,503			24,506
Lease liability		7,113			5,506
Interest rate swap liability		1,239			2,735
Other liabilities		21,551			15,552
Total liabilities		2,429,582			1,390,058
Commitments and contingencies (Note 14)
Stockholders’ Equity:
Common stock, 0 par value; 25,000,000 shares authorized; 18,776,307 and 8,577,932 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively (1)		193,770			66,771
Additional paid-in capital		252			252
Retained earnings		73,189			40,688
Accumulated other comprehensive income, net of tax		2,283			264
		269,494			107,975
Noncontrolling interest		226			225
Total stockholders’ equity		269,720			108,200
Total liabilities and stockholders’ equity	$	2,699,302		$	1,498,258

(1)

Common stock as of the periods presented is reflective of the Company’s 3-for-2 stock split effective April 30, 2021.

(2)

Derived from audited December 31, 2020 Consolidated Financial Statements.

~~(dollars in thousands, except share and per share data)~~

   September 30,
2019 December 31,
2018
   (unaudited) (audited)
Assets

Cash and due from banks
   $ 22,318 $ 15,026
Federal funds sold
   285 546
Securities available for sale, at fair value
   121,740 38,047
Securities held to maturity, at cost
   13,117 15,565
Restricted equity securities, at cost
   7,855 5,138
Loans held for sale
   80,255 29,233
Loans, net of unearned income
   460,878 414,868
Less allowance for loan losses
   (4,404 ) (3,580 )


Loans, net
   456,474 411,288
Premises and equipment, net
   3,457 3,343
Cash surrender value of life insurance
   8,871 8,455
Goodwill
   3,307 2,694
Other assets
   18,559 10,255


Total assets
   $ 736,238 $ 539,590


Liabilities and Stockholders’ Equity
Deposits:

Noninterest-bearing
   $ 91,840 $ 88,265
Interest-bearing
   428,440 326,762


Total deposits
   520,280 415,027


Other borrowings
   129,600 73,100
Subordinated debentures, net of issuance costs
   9,792 9,766
Other liabilities
   10,970 2,076


Total liabilities
   670,642 499,969


Stockholders’ Equity:

Common stock, no par value; 10,000,000 shares authorized; 4,346,866 and 2,792,885 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
   38,731 16,453
Additionalpaid-in capital
   252 252
Retained earnings
   25,516 23,321
Accumulated other comprehensive income
   876 (618 )


   65,375 39,408
Noncontrolling interest
   221 213


Total stockholders’ equity
   65,596 39,621


Total liabilities and stockholders’ equity
   $ 736,238 $ 539,590

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Income

~~(dollars in thousands, except share and per share data)~~(unaudited)



	For the three months ended				For the nine months ended
(Dollars in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021			September 30, 2020
INTEREST INCOME
Interest and fees on loans	$	22,294	$	13,780	$	76,248		$	35,766
Interest on securities, deposit accounts, and federal funds sold		1,460		664		3,894			2,268
Total interest income		23,754		14,444		80,142			38,034
INTEREST EXPENSE
Interest on deposits		1,622		1,515		4,844			4,889
Interest on subordinated notes		644		411		2,142			854
Interest on FHLB and FRB borrowings		364		689		1,553			1,794
Total interest expense		2,630		2,615		8,539			7,537
Net interest income		21,124		11,829		71,603			30,497
Provision for loan losses		—		4,000		—			8,075
Net interest income after provision for loan losses		21,124		7,829		71,603			22,422
NONINTEREST INCOME
Gain on sale of Paycheck Protection Program loans		—		—		24,315			—
Residential mortgage banking income, net		7,704		14,400		24,259			31,969
Mortgage servicing rights		1,827		1,645		6,905			3,241
Gain on sale of guaranteed government loans		108		516		1,325			779
Wealth and trust management		499		—		1,934			—
Service charges on deposit accounts		376		215		1,073			669
Increase in cash surrender value of bank owned life insurance		278		94		679			278
Payroll processing		223		221		706			736
Bank and purchase card, net		497		211		1,096			483
Other		2,006		311		3,460			651
Total noninterest income		13,518		17,613		65,752			38,806
NONINTEREST EXPENSE
Salaries and employee benefits		14,774		11,880		46,425			29,886
Occupancy and equipment		1,743		922		4,968			2,653
Data processing		893		656		3,272			1,649
Legal, issuer, and regulatory filing		372		291		1,437			781
Advertising and marketing		452		165		989			518
Communications		761		214		1,802			536
Audit and accounting fees		195		98		675			278
FDIC insurance		487		187		839			568
Intangible amortization		500		232		1,406			608
Other contractual services		633		516		2,152			870
Other taxes and assessments		547		280		1,973			748
Merger-related		1,441		1,264		11,697			1,710
Other		2,839		1,971		9,062			4,688
Total noninterest expenses		25,637		18,676		86,697			45,493
Income before income tax		9,005		6,766		50,658			15,735
Income tax expense		2,199		1,707		10,973			3,618
Net income	$	6,806	$	5,059	$	39,685		$	12,117
Net loss (income) attributable to noncontrolling interest		4		4		(1	)		(1	)
Net income attributable to Blue Ridge Bankshares, Inc.	$	6,810	$	5,063	$	39,684		$	12,116
Net income available to common stockholders	$	6,810	$	5,063	$	39,684		$	12,116
Basic and diluted earnings per common share (EPS) (1)	$	0.36	$	0.59	$	2.26		$	1.42

(1)

EPS has been adjusted for all periods presented to reflect the Company’s 3-for-2 stock split effective April 30, 2021.

~~(Unaudited)~~

   Three Months Ended
September 30,
   2019 2018
Interest income:

Interest and fees on loans
   $ 6,927 $ 5,285
Interest on taxable securities
   1,133 409
Interest on nontaxable securities
   56 73
Interest on federal funds sold
   2 3


Total interest income
   8,118 5,770


Interest expense:

Interest on deposits
   1,763 910
Interest on subordinated debentures
   169 169
Interest on other borrowings
   750 255


Total interest expense
   2,682 1,334


Net interest income
   5,436 4,436
Provision for loan losses
   570 225


Net interest income after provision for loan losses
   4,866 4,211


Non-interest income:

Service charges on deposit accounts
   171 155
Mortgage brokerage income
   1,648 904
Gain on sale of mortgages
   2,295 1,385
Income from investment in life insurance contracts
   59 50
Other income
   800 597


Total other income
   4,973 3,091


Non-interest expenses:

Salaries and employee benefits
   5,079 3,430
Occupancy and equipment expense
   627 414
Data processing fees
   413 265
Legal and other professional fees
   434 334
Advertising fees
   191 113
Audit and accounting fees
   37 29
FDIC insurance expense
   86 42
Director fees
   52 45
Other taxes and assessments
   171 159
Other operating
   1,117 872


Total other expenses
   8,207 5,703


Income before income tax
   1,632 1,599
Income tax expense
   379 329


Net income
   $ 1,253 $ 1,270


Net Income attributable to noncontrolling interest
   (3 ) (1 )


Net Income attributable to Blue Ridge Bankshares, Inc.
   $ 1,250 $ 1,269


Net Income available to Common Stockholders
   $ 1,250 $ 1,269


Basic earnings per common share
   $ 0.29 $ 0.45


Diluted earnings per common share
   $ 0.29 $ 0.45

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Comprehensive Income

~~(dollars in thousands, except share and per share data)~~(unaudited)

~~(Unaudited)~~


	For the three months ended						For the nine months ended
(Dollars in thousands)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Net income	$	6,806		$	5,059		$	39,685		$	12,117
Other comprehensive income:
Gross unrealized (losses) gains on securities available for sale arising during the period		(866	)		331			(3,062	)		(340	)
Deferred income tax benefit (expense)		182			(70	)		643			71
Unrealized (losses) gains on securities available for sale arising during the period, net of tax		(684	)		261			(2,419	)		(269	)
Gross unrealized gains (losses) on interest rate swaps		972			902			5,618			(2,956	)
Deferred income tax (expense) benefit		(205	)		(189	)		(1,180	)		621
Unrealized gains (losses) on interest rate swaps, net of tax		767			713			4,438			(2,335	)
Less:
Reclassification adjustment for gains included in net income		0			209			0			209
Adjustment for income tax expense		0			(44	)		0			(44	)
Reclassification adjustment for gains included in net income, net of tax		0			165			0			165
Other comprehensive income (loss), net of tax		83			1,139			2,019			(2,439	)
Comprehensive net income	$	6,889		$	6,198		$	41,704		$	9,678
Comprehensive net loss (income) attributable to noncontrolling interest		4			4			(1	)		(1	)
Comprehensive net income attributable to Blue Ridge Bankshares, Inc.	$	6,893		$	6,202		$	41,703		$	9,677

   Nine Months Ended
September 30,
   2019 2018
Interest income:

Interest and fees on loans
   $ 19,640 $ 14,625
Interest on taxable securities
   2,601 1,199
Interest on nontaxable securities
   183 226
Interest on federal funds sold
   6 13


Total interest income
   22,430 16,063


Interest expense:

Interest on deposits
   4,491 2,469
Interest on subordinated debentures
   532 532
Interest on other borrowings
   1,920 563


Total interest expense
   6,943 3,564


Net interest income
   15,487 12,499
Provision for loan losses
   1,465 640


Net interest income after provision for loan losses
   14,022 11,859


Non-interest income:

Service charges on deposit accounts
   459 479
Mortgage brokerage income
   3,511 1,914
Gain on sale of mortgages
   7,455 2,954
Income from investment in life insurance contracts
   874 148
Other income
   1,956 1,514


Total other income
   14,255 7,009


Non-interest expenses:

Salaries and employee benefits
   14,149 8,127
Occupancy and equipment expense
   1,868 1,117
Data processing fees
   1,069 803
Legal and other professional fees
   1,253 578
Advertising fees
   607 348
Audit and accounting fees
   125 114
FDIC insurance expense
   256 138
Director fees
   174 141
Other taxes and assessments
   490 397
Other operating
   3,226 2,574


Total other expenses
   23,217 14,337


Income before income tax
   5,060 4,531
Income tax expense
   989 944


Net income
   $ 4,071 $ 3,587


Net Income attributable to noncontrolling interest
   (21 ) (8 )


Net Income attributable to Blue Ridge Bankshares, Inc.
   $ 4,050 $ 3,579


Net Income available to Common Stockholders
   $ 4,050 $ 3,579


Basic earnings per common share
   $ 1.01 $ 1.29


Diluted earnings per common share
   $ 1.01 $ 1.29

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of ~~Comprehensive Income~~Changes in Stockholders’ Equity

~~(dollars in thousands)~~(unaudited)

~~(Unaudited)~~


	For the nine months ended September 30, 2021
										Accumulated
	Shares of				Additional					Other
	Common		Common		Paid-in		Retained			Comprehensive		Noncontrolling
(Dollars in thousands)	Stock (1)		Stock		Capital		Earnings			Income, net		Interest		Total
Balance at beginning of period		8,577,932	$	66,771	$	252	$	40,688		$	264	$	225	$	108,200
Net income		—		—		—		39,684			—		1		39,685
Other comprehensive income		—		—		—		—			2,019		—		2,019
Dividends on common stock		—		—		—		(7,183	)		—		—		(7,183	)
Issuance of common stock and other consideration paid in business combination		9,951,743		125,403		—		—			—		—		125,403
Stock option exercises		83,647		748		—		—			—		—		748
Restricted stock awards, net of forfeitures		162,985		848		—		—			—		—		848
Balance at end of period		18,776,307	$	193,770	$	252	$	73,189		$	2,283	$	226	$	269,720


	For the nine months ended September 30, 2020
										Accumulated
										Other
	Shares of				Additional					Comprehensive
	Common		Common		Paid-in		Retained			Income (Loss),			Noncontrolling
(Dollars in thousands)	Stock (1)		Stock		Capital		Earnings			net			Interest		Total
Balance at beginning of period		8,487,878	$	66,204	$	252	$	25,428		$	229		$	224	$	92,337
Net income		—		—		—		12,116			—			1		12,117
Other comprehensive loss		—		—		—		—			(2,439	)		—		(2,439	)
Dividends on common stock		—		—		—		(2,437	)		—			—		(2,437	)
Restricted stock awards, net of forfeitures		90,054		352		—		—			—			—		352
Balance at end of period		8,577,932	$	66,556	$	252	$	35,107		$	(2,210	)	$	225	$	99,930

   Nine Months Ended
September 30, Three Months Ended
September 30,
   2019 2018 2019 2018
Net income
   $ 4,071 $ 3,587 $ 1,253 $ 1,270
Other comprehensive income:

Gross unrealized gains (losses) arising during the period
   2,288 (500 ) 1,256 (110 )
Adjustment for income tax (expense) benefit
   (480 ) 101 (264 ) 23


   1,808 (399 ) 992 (87 )
Unrealized gains (losses) on interest rate swaps
   (483 ) —   (258 ) —
Adjustment for income tax benefit
   102 —   54 —


   (381 ) —   (204 ) —
Less:

Reclassifications adjustment for gains included in net income
   86 5 —   2
Adjustment for income tax expense
   (20 ) (1 ) —   (1 )


   66 4 —   1
Other comprehensive income (loss), net of tax
   1,493 (395 ) 788 (86 )


Comprehensive income
   $ 5,564 $ 3,192 $ 2,041 $ 1,184


Comprehensive income attributable to noncontrolling interest
   $ (21 ) $ (8 ) $ (3 ) $ (1 )


Comprehensive income attributable to Blue Ridge Bankshares, Inc.
   $ 5,543 $ 3,184 $ 2,038 $ 1,183

See accompanying notes to unaudited consolidated financial statements.

~~Blue Ridge Bankshares, Inc.~~

~~Condensed Consolidated Statements~~6

For the three months ended September 30, 2021

Accumulated

Other

Shares of

Additional

Comprehensive

Common

Common

Paid-in

Retained

Income,

Noncontrolling

(Dollars in thousands)
Stock (1)

Stock

Capital

Earnings

net

Interest

Total

Balance at beginning of period

18,631,073

$
193,259

$
252

$
70,885

$
2,200

$
230

$
266,826

Net income (loss)

—

—

—

6,810

—

(4
)

6,806

Other comprehensive income

—

—

—

—

83

—

83

Dividends on common stock

—

—

—

(4,506
)

—

—

(4,506
)
Stock option exercises

750

—

—

—

—

—

—

Restricted stock awards, net of forfeitures

144,484

511

—

—

—

—

511

Balance at end of period

18,776,307

$
193,770

$
252

$
73,189

$
2,283

$
226

$
269,720

For the three months ended September 30, 2020

Accumulated

Other

Shares of

Additional

Comprehensive

Common

Common

Paid-in

Retained

Income (Loss),

Noncontrolling

(Dollars in thousands)
Stock (1)

Stock

Capital

Earnings

net

Interest

Total

Balance at beginning of period

8,480,432

$
66,353

$
252

$
31,675

$
(3,349
)

$
229

$
95,160

Net income (loss)

—

—

—

5,063

—

(4
)

5,059

Other comprehensive income

—

—

—

—

1,139

—

1,139

Dividends on common stock

—

—

—

(1,631
)

—

—

(1,631
)
Restricted stock awards, net of forfeitures

97,500

203

—

—

—

—

203

Balance at end of period

8,577,932

$
66,556

$
252

$
35,107

$
(2,210
)

$
225

$
99,930

(1)

Common stock outstanding as of ~~Changes in Stockholders’ Equity~~and for the periods presented is reflective of the Company’s 3-for-2 stock split effective April 30, 2021.

~~(dollars in thousands)~~

~~(Unaudited)~~

~~Three Months Ended September 30, 2019 and 2018~~

   Common Stock
& Related
Surplus    Contributed
Equity    Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling
Interest    Unearned
ESOP Shares Total
Balance, June 30, 2018
   $ 16,375    $ 237    $ 21,782 $ (633 ) $ 206    $ (31 ) $ 37,936
Net income
   —      —      1,269 —   1    —   1,270
Other comprehensive income (loss)
   —      —      —   (86 ) —      —   (86 )
Dividends on common stock ($0.14 per share)
   —      —      (391 ) —   —      —   (391 )
Issuance of restricted common stock, net of forfeitures
   38    —      —   —   —      —   38
Release of unearned ESOP shares
   —      10    —   —   —      31 41








Balance, September 30, 2018
   $ 16,413    $ 248    $ 22,660 $ (719 ) $ 207    $ —   $ 38,808








Balance, June 30, 2019
   $ 38,690    $ 252    $ 24,886 $ 88 $ 218    $ —   $ 64,134
Net income
   —      —      1,250 —   3    —   1,253
Other comprehensive income (loss)
   —      —      —   788 —      —   788
Dividends on common stock ($0.1425 per share)
   —      —      (620 ) —   —      —   (620 )
Issuance of restricted common stock, net of forfeitures
   41    —      —   —   —      —   41








Balance, September 30, 2019
   $ 38,731    $ 252    $ 25,516 $ 876 $ 221    $ —   $ 65,596

~~Blue Ridge Bankshares, Inc.~~

~~Condensed Consolidated Statements of Changes in Stockholders’ Equity~~

~~(dollars in thousands)~~

~~(Unaudited)~~

~~Nine Months Ended September 30, 2019 and 2018~~

   Common Stock
& Related
Surplus    Contributed
Equity    Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling
Interest Unearned
ESOP Shares Total
Balance,December 31, 2017
   $ 16,324    $ 195    $ 20,190 $ (324 ) $ 199 $ (143 ) $ 36,441
Net income
   —      —      3,579 —   8 —   3,587
Other comprehensive income (loss)
   —      —      —   (395 ) —   —   (395 )
Dividends on common stock ($0.40 per share)
   —      —      (1,110 ) —   —   —   (1,110 )
Issuance of restricted common stock, net of forfeitures
   89    —      —   —   —   —   89
Release of unearned ESOP shares
   —      53    —   —   —   143 196






Balance, September 30, 2018
   $ 16,413    $ 248    $ 22,660 $ (719 ) $ 207 $ —   $ 38,808






Balance,December 31, 2018
   $ 16,452    $ 252    $ 23,321 $ (618 ) $ 213 $ —   $ 39,620
Net income
   —      —      4,050 —   21 —   4,071
Other comprehensive income (loss)
   —      —      —   1,494 —   —   1,494
Noncontrolling interest capital distributions
   —      —      —   —   (13 ) —   (13 )
Dividends on common stock ($0.1425 per share)
   —      —      (1,855 ) —   —   —   (1,855 )
Issuance of common stock (1,536,731 shares), Net of capital raise expenses
   22,119    —      —   —   —   —   22,119
Issuance of restricted common stock, net of forfeitures
   160    —      —   —   —   —   160






Balance, September 30, 2019
   $ 38,731    $ 252    $ 25,516 $ 876 $ 221 $ —   $ 65,596

~~Blue Ridge Bankshares, Inc.~~

~~Consolidated Statements of Cash Flows~~

~~For the Nine Months Ended September 30, 2019 and 2018~~

~~(Unaudited)~~

   2019 2018
Cash flows from operating activities:

Net income
   $ 4,071 $ 3,587
Adjustments to reconcile net income to net cash used in operating activities:

Depreciation, amortization and accretion
   383 295
Deferred income taxes
   9 (325 )
Provision for loan losses
   1,465 640
Proceeds from sale of loans held for sale, originated
   241,112 105,343
Gain on sale of loans held for sale, originated
   (7,455 ) (2,954 )
Gain on sale of securities
   (86 ) (5 )
Loans held for sale, originated
   (264,625 ) (108,773 )
(Gain) loss on disposal of premises and equipment
   (2 ) 5
Loss on sale of other real estate owned
   33 —
Investment amortization expense, net
   356 182
Amortization of debt refinancing fees
   —   57
Amortization of subordinated debt issuance costs
   25 25
Amortization of other intangibles
   352 390
Earnings on life insurance
   (874 ) (148 )
Increase in other assets
   (9,677 ) (2,392 )
Increase (decrease) in accrued expenses
   8,893 (160 )
Release of unearned ESOP shares
   —   196


Net cash used in operating activities
   (26,020 ) (4,037 )


Cash flows used in investing activities:

Net (increase) decrease in federal funds sold
   261 (138 )
Purchase of securities available for sale
   (96,743 ) (9,307 )
Purchase of securities held to maturity
   —   (4,401 )
Proceeds from calls, maturities, sales, paydowns and maturities of securities available for sale
   15,231 4,342
Proceeds from calls, maturities, sales, paydowns and maturities of securities held for investment
   2,370 1,915
Purchase of insurance policies
   (600 ) —
Redemption of insurance policies
   1,058 —
Net change in restricted equity securities
   (2,717 ) (249 )
Net increase in loans held for investment
   (46,650 ) (45,484 )
Net increase in loans held for sale, participations
   (20,053 ) (4,719 )
Purchase of premises and equipment
   (507 ) (640 )
Proceeds from sale of premises and equipment
   13 4
Capital calls of SBIC funds and other investments
   (665 ) (310 )
Nonincome distributions from limited liability companies
   147 252


Net cash used in investing activities
   (148,855 ) (58,735 )


Cash flows from financing activities:

Net increase in deposits
   105,254 53,683
Common stock dividends paid
   (1,866 ) (1,110 )
Federal Home Loan Bank advances
   257,100 106,100
Federal Home Loan Bank repayments
   (200,600 ) (92,700 )
Issuance of common stock
   22,279 89
Repayment of contingent ESOP liability
   —   (151 )


Net cash provided by financing activities
   182,167 65,911


Net increase in cash and due from banks
   7,292 3,139
Cash and due from banks at beginning of period
   15,026 10,319


Cash and due from banks at end of period
   $ 22,318 $ 13,458


Supplemental disclosures of cash flow information:

Cash paid during the period for interest
   $ 6,217 $ 3,203

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Cash Flows

(unaudited)


	For the nine months ended
(Dollars in thousands)	September 30, 2021			September 30, 2020
Cash Flows From Operating Activities
Net income	$	39,685		$	12,117
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,623			704
Deferred income taxes		(537	)		85
Provision for loan losses		—			8,075
Accretion of fair value adjustments (discounts) on acquired loans		(1,279	)		(909	)
Amortization of fair value adjustments (premiums) on assumed time deposits		(2,540	)		(12	)
Amortization of fair value adjustments (premiums) on assumed subordinated notes		(145	)		—
Fair value adjustments on other real estate owned		75			—
Proceeds from sale of loans held for sale		965,119			652,765
Loans held for sale, originated		(939,377	)		(747,771	)
Gain on sale of loans held for sale, originated		(17,830	)		(27,386	)
Gain on sale of Paycheck Protection Program loans		(24,315	)		—
Loss on disposal of premises and equipment		192			116
Investment amortization expense, net		1,282			870
Amortization of subordinated debt issuance costs		192			37
Intangible amortization		1,406			608
Increase in cash surrender value of bank owned life insurance		(679	)		(278	)
Increase in other assets		(6,110	)		(28,535	)
(Decrease) increase in other liabilities		(3,249	)		12,160
Net cash provided by (used in) operating activities		13,513			(117,354	)
Cash Flows From Investing Activities
Net (increase) decrease in federal funds sold		(141,869	)		480
Purchases of securities available for sale		(224,143	)		(38,579	)
Proceeds from calls, sales, paydowns and maturities of securities available for sale		45,553			43,452
Proceeds from calls, sales, paydowns and maturities of securities held to maturity		—			1,210
Proceeds from sale of other real estate owned		271			—
Proceeds from sale of Paycheck Protection Program loans		705,930			—
Net change in restricted equity and other investments		(1,473	)		(1,307	)
Net increase in Paycheck Protection Program loans		(399,072	)		(361,850	)
Net increase in loans held for investment		(29,729	)		(46,103	)
Purchase of premises and equipment		(954	)		(2,785	)
Proceeds from sale of premises and equipment		405			669
Purchase of bank owned life insurance		(9,600	)		—
Capital calls of other investments		(1,567	)		(569	)
Net cash acquired in acquisition of Bay Banks of Virginia, Inc.		44,066			—
Distributions from other investments		247			44
Net cash used in investing activities		(11,935	)		(405,338	)
Cash Flows From Financing Activities:
Net increase in demand, savings and other interest-bearing deposits		312,144			193,834
Net decrease in time deposits		(85,397	)		(598	)
Dividends paid on common stock		(7,183	)		(2,436	)
Federal Home Loan Bank advances		721,000			436,900
Federal Home Loan Bank repayments		(721,000	)		(446,700	)
Federal Reserve Bank advances		434,336			355,484
Federal Reserve Bank repayments		(706,944	)		(11,008	)
Stock option exercises		748			—
Increase in federal funds purchased		—			135
Payment of subordinated notes issuance costs		—			(349	)
Issuance of subordinated notes		—			15,000
Redemption of subordinated notes		(14,150	)		—
Net cash (used in) provided by financing activities		(66,446	)		540,262
Net (decrease) increase in cash and due from banks		(64,868	)		17,570
Cash and due from banks at beginning of period		117,945			60,026
Cash and due from banks at end of period	$	53,077		$	77,596


Supplemental Schedule of Cash Flow Information
Cash paid for:
Interest	$	8,087		$	7,294
Income taxes	$	10,000		$	2,000
Non-cash investing and financing activities:
Unrealized loss on available-for-sale securities	$	(3,062	)	$	(340	)
Transfer of held to maturity securities to available for sale	$	—		$	10,980
Issuance of restricted stock awards, net of forfeitures	$	848		$	352
Assets acquired in business combination	$	1,224,583		$	—
Liabilities assumed in business combination	$	1,107,036		$	—
Effective settlement of subordinated notes in business combination	$	650		$	—
Change in goodwill	$	7,206		$	(23	)

See accompanying notes to unaudited consolidated financial statements.

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – ~~Summary~~Organization and Basis of ~~Significant Accounting Policies~~Presentation

~~Principles~~Blue Ridge Bankshares, Inc. (the "Company"), a Virginia corporation, was formed in 1988 and is registered as a bank holding company under the Bank Holding Company Act of ~~Consolidation~~1956, as amended. The Company is headquartered in Charlottesville, Virginia and conducts its business activities primarily through the branch offices of 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 Bank operates under a national charter and is subject to regulation by the Office of the Comptroller of the Currency (the “OCC”). Consequently, it undergoes periodic examinations by this regulatory authority.

On January 31, 2021, the Company completed a merger with Bay Banks of Virginia, Inc. (“Bay Banks”), a bank holding company conducting substantially all its operations through its bank subsidiary, Virginia Commonwealth Bank, and the Financial Group (formerly VCB Financial Group, Inc.). Immediately following the Company’s merger with Bay Banks, Bay Banks’ subsidiary bank was merged with and into the Bank, while the Financial Group became a subsidiary of the Company (collectively, the “Bay Banks Merger”).

The accompanying unaudited consolidated financial statements of ~~Blue Ridge Bankshares, Inc. (“~~the ~~Company” or “Blue Ridge”)~~Company include the accounts of ~~Blue Ridge~~the Bank, ~~N.A. (“~~the ~~Bank”),~~Financial Group, PVB Properties, LLC, and MoneyWise Payroll Solutions, Inc. (net of noncontrolling interest) and were prepared in accordance with accounting principles generally accepted in the United States of America (“~~U.S.~~ GAAP”) ~~for~~and to general practices within the ~~interim financial information. Accordingly, these financial statements do not include all of the information~~banking industry. All significant intercompany balances and footnotes required by U.S. GAAP for complete financial statements. Operating results for the quarter ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.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, ~~2018 included~~2020 ("2020 Form 10-K").

Information contained herein as of September 30, 2021 includes the balances of Bay Banks; information contained herein as of and for the year ended December 31, 2020 does not include the balances of Bay Banks. Information for the nine months ended September 30, 2021 includes the operations of Bay Banks only for the period immediately following the effective date of the Bay Banks Merger (January 31, 2021) through September 30, 2021.

In March 2021, the Company’s board of directors approved a three-for-two stock split (“Stock Split”) effected in the ~~joint proxy statement/prospectus filed with~~form of a 50% stock dividend on the ~~Securities and Exchange Commission~~Company’s common stock outstanding paid on ~~October 31, 2019.~~

~~The~~April 30, 2021 to shareholders of record as of April 20, 2021. Cash was paid in lieu of fractional shares based on the closing price of common stock on the record date. References made to outstanding shares or per share amounts in the accompanying ~~unaudited~~ consolidated financial statements ~~include~~and disclosures have been adjusted to reflect the ~~accounts~~Stock Split for all periods presented, unless otherwise noted.

On July 14, 2021, the Company and FVCBankcorp, Inc. (“FVCB”) jointly announced they had entered into a definitive agreement pursuant to which FVCB will merge with and into the Company in an all-stock merger of equals (the “FVCB Merger”). Pursuant to the agreement, shareholders of FVCB will receive 1.1492 shares of the ~~Company,~~Company’s common stock for each FVCB share held, with fractional shares paid in cash. The FVCB Merger is subject to customary closing conditions, including regulatory approvals and approval from the ~~Bank and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.~~

~~Nature~~shareholders of ~~Operations~~

both companies. The Company ~~operates under the supervision and monitoring of the Federal Reserve Bank of Richmond while the Bank operates under a national charter subject to regulation by~~has learned that the Office of the Comptroller of the ~~Currency.~~Currency (the “OCC”) identified certain regulatory concerns with Blue Ridge Bank that could impact the application process and timing of the FVCB Merger. Blue Ridge Bank has already commenced an initiative intended to fully address the OCC’s concerns. The ~~Bank provides commercial banking services to customers located primarily~~Company anticipates the FVCB Merger will close in the ~~Piedmont, Southside,~~second or third quarter of 2022.

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

Correction of Immaterial Classification Errors

During the third quarter of 2021, the Company determined that its 35% investment in a third-party insurance company, Hammond Insurance Agency, Inc. ("Hammond Insurance"), which had been reported on its consolidated balance sheets in goodwill and ~~Shenandoah Valley regions~~other intangible assets, should have been reported as other assets. Also during the third quarter of 2021, the Company determined that its acquisition of BluePoint Benefits, LLC ("BluePoint Benefits"), which had been reported on its consolidated balance sheets in other assets, should have been reported as goodwill.

The Company has changed the classification of both investments on its December 31, 2020 consolidated balance sheets. The change in the classification for the investment in Hammond Insurance resulted in a $613 thousand and $341 thousand decrease from what was previously reported in the 2020 Form 10-K in goodwill and other intangible assets, respectively, with a corresponding increase of $954 thousand in other investments as of December 31, 2020. The change in the classification for the investment in BluePoint Benefits resulted in a $340 thousand decrease from what was previously reported in the 2020 Form 10-K in other assets with a corresponding increase of the ~~Commonwealth~~same amount in goodwill as of ~~Virginia~~December 31, 2020. Neither change in classification for the Company's investment in Hammond Insurance and BluePoint Benefits affected the Company's reported earnings for 2020 or total assets for 2020 on the Company's consolidated balance sheets.

During the first quarter of 2021, the Company determined a loan arrangement with a third-party financial institution for the purpose of residential mortgage loan originations, which had been reported on its consolidated balance sheets in loans held for sale, should have been reported as loans held for investment.

The Company has changed the classification of this loan on its December 31, 2020 consolidated balance sheet to reflect it as held for investment. The change in classification resulted in a $30.4 million decrease from what was previously reported in the Company’s 2020 Form 10-K in loans held for sale with a corresponding increase of the same amount in loans held for investment as of December 31, 2020. There were 0 outstanding loans under this arrangement as of September 30, 2021.

The change in classification did not affect the Company’s reported earnings for 2020, the Company does not believe any material allowance for loan losses (“ALL”) would have been necessary for this loan as of December 31, 2020, and the Company believes its ALL was adequate as of December 31, 2020. This reclassification did not change total loans or total assets on the Company’s consolidated balance sheets.

The Company evaluated the effect of the previously noted incorrect presentations, both qualitatively and quantitatively, and concluded that its previously issued financial statements were not materially misstated due to the changes in classification.

Note 2 – Amendments to the Accounting Standards Codification

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. As a “smaller reporting company” under Securities and Exchange Commission (“SEC”) rules, the Company will be required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company has formed a cross-functional working group to assess and implement the requirements of ASU 2016-13 by the adoption date.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. This ASU addresses issues raised by stakeholders during the implementation of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Among other narrow-scope improvements, the new ASU clarifies guidance around how to report expected recoveries.

“Expected recoveries” describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether expected recoveries were permitted on assets that had already shown credit deterioration at the time of purchase (also known as purchased credit-deteriorated (“PCD”) assets). In response to this question, the ASU permits organizations to record expected recoveries on PCD assets. In addition to other narrow technical improvements, the ASU also ~~operates~~reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities. The ASU includes effective dates and transition requirements that vary depending on whether or not an entity has already adopted ASU 2016-13. The Company is currently assessing the impact that ASU 2019-11 will have on its consolidated financial statements.

Note 3 – Business Combinations

On January 31, 2021, the Company completed the Bay Banks Merger, which was accounted for as a business combination. At the effective date of the merger, Bay Banks’ shareholders received 0.5000 shares of the Company’s common stock in exchange for each share of Bay Banks common stock held (“Exchange Ratio”), plus cash in lieu of any fractional shares, resulting in the Company issuing 6,634,495 shares (9,951,743 shares on a post Stock Split basis) with an aggregate fair market value of $124.9 million based on the closing price of the Company’s common stock at January 29, 2021, the last trading day prior to the effective date of the merger, and paying $3.4 thousand in lieu of fractional shares. In addition, options to purchase 198,362 shares of Bay Banks common stock, whether vested or unvested, were converted to options to acquire 99,176 shares of the Company’s common stock (148,764 shares on a post Stock Split basis) at an estimated fair value of $472 thousand as of the merger date. Finally, Bay Banks had previously acquired $1.75 million of the Company’s subordinated notes, while the Bank had previously acquired $1.10 million of Bay Banks’ subordinated notes. In the merger, an effective settlement of the notes occurred in the amount of $650 thousand, which reduced the consideration paid.

The Bay Banks Merger combined two banks with complementary capabilities and geographical focus, thus provided the opportunity for the organization to leverage its existing infrastructure, including people, processes and systems, across a larger asset base.

The Company has accounted for the Bay Banks Merger under the ~~name Carolina State Bank~~acquisition method of accounting, whereby the acquired assets and assumed liabilities are recorded by the Company at their estimated fair values as of the effective date of the merger. Fair value estimates were based on management’s assessment of the best information available at the time of determination and are highly subjective.

The following table presents the consideration paid in ~~Greensboro, North Carolina. Mortgage lending services~~the merger and the summary balance sheet of Bay Banks as of the date of the merger inclusive of estimated fair value adjustments and the allocation of consideration paid in the merger to the acquired assets and assumed liabilities. Goodwill resulting from the Bay Banks Merger was $7.2 million.


(Dollars in thousands, except per share data)
Consideration paid:				Reference:
Company's common shares issued		9,951,743		A
Purchase price per share	$	12.55		A, B
Value of common stock issued	$	124,928
Estimated fair value of stock options		472
Cash in lieu of fractional shares		3
Total consideration paid	$	125,403
Effective settlement of subordinated notes		(650	)
Total consideration paid less effective settlement of subordinated notes	$	124,753
Fair value of assets acquired:
Cash and due from banks	$	44,066
Federal funds sold		1,732
Certificates of deposit		1,018
Securities available for sale		79,505
Restricted securities		4,385
Loans held for investment		1,030,433		C
Loans held for sale		3,814
Premises and equipment		15,532		D
Right-of-use asset		1,864
Other real estate owned		598
Bank owned life insurance		20,259
Mortgage servicing rights		987
Core deposit intangible		6,850		E
Deferred tax asset, net		2,685		F
Other assets		10,855		G
Total assets	$	1,224,583
Fair value of liabilities assumed:
Deposits	$	1,030,888		H
FHLB borrowings		10,124		I
FRB borrowings		24,815
Subordinated notes		31,850		J
Other liabilities		9,359
Total liabilities	$	1,107,036
Net identifiable assets acquired at fair value	$	117,547
Goodwill	$	7,206


Reference:	Explanation of reference:
A	Common shares issued and purchase price per share are presented on a post Stock Split basis.
B	The value of the shares of the Company's common stock exchanged for shares of Bay Banks common stock was based upon the closing price of the Company's common stock at January 29, 2021, the last trading day prior to the date of completion of the merger.
C	Reflective of a $17.9 million (or 1.70%) fair value adjustment (discount) to the amortized cost of the loan portfolio acquired.
D	Reflective of a $4.4 million fair value adjustment (premium) over the net book value of premises and equipment acquired.
E	Core deposit intangible asset recorded to reflect the fair value of nonmaturity deposits, except for time deposits over $100,000, assumed by the Company.
F	Reflective of a $2.1 million net deferred tax asset recorded on all fair value adjustments, excluding goodwill, at the statutory federal income tax rate of 21%.
G	Reflective of a $203 thousand fair vale adjustment (premium) on other assets acquired.
H	Reflective of a $5.8 million fair value adjustment (premium) over the book value of time deposits assumed.
I	Reflective of a $124 thousand fair value adjustment (premium) on the $10 million Federal Home Loan Bank of Atlanta ("FHLB") advance assumed.
J	Reflective of a $950 thousand fair value adjustment (premium) over the book value of subordinated notes assumed.

Cash and cash equivalents. The carrying amounts of cash, due from banks, federal funds sold, and certificates of deposit was deemed to be a reasonable estimate of fair value.

Securities available for sale. The estimated fair value of investment securities acquired was based on quoted market and third-party broker provided prices as of the merger date.

Restricted securities. The carrying amount of restricted equity securities was used as a reasonable estimate of fair value. These investments are ~~provided~~carried at cost as no active trading market exists.

Loans. The acquired loan portfolio was segregated into two categories for valuation purposes: purchased credit-impaired (“PCI”) and purchased performing loans. PCI loans were identified as those loans that were nonaccrual prior to the business combination and those loans that were identified as potentially impaired. Potentially impaired loans were those loans that were identified during the credit review process where there was an indication that the borrower did not have sufficient cash flows to service the loan in accordance with its terms. Specifically, loans with a risk rating of special mention or worse, loans that had been previously restructured as a troubled debt restructuring (“TDR”), or loans that had a history of delinquent payments were deemed PCI. Performing loans were those loans that were currently performing in accordance with the loan contract and did not exhibit any significant deterioration in credit quality since origination.

For loans that were identified as performing, the fair values were determined using a discounted cash flow analysis (the "income approach"). Performing loans were segmented into pools based on loan type including commercial mortgages, multifamily, commercial and industrial, construction and land development, consumer residential, and consumer nonresidential, and further segmented based on payment structure (fully amortizing, non-fully amortizing balloon, or interest only), rate type (fixed versus variable), and remaining maturity. The estimated cash flows expected to be collected for each loan were determined using a valuation model that included the following key assumptions: prepayment speeds, expected credit loss rates, and discount rates. Prepayment speeds were influenced by many factors including, but not limited to, current yields, historic rate trends, payment types, interest rate type, and the duration of the individual loan. Expected credit loss rates were based on recent and historical default and loss rates observed for loans with similar characteristics, and further influenced by a third-party loan review on a selection of loans within the acquired portfolio. The discount rates used were based on rates market participants may require for cash flows with similar risk characteristics at the acquisition date.

For loans that were identified as PCI, either the above income approach or the asset approach was used. The income approach was used for PCI loans where there was an expectation that the borrower would more likely than not continue to pay based on the current terms of the loan contract. Management used the asset approach for all nonaccrual

loans to reflect market participant assumptions. Under the asset approach, the fair value of each loan was determined based on the estimated fair values of the underlying collateral, less estimated costs to sell.

The methods used to estimate the fair values of loans are sensitive to the assumptions and estimates used. While management attempted to use assumptions and estimates that best reflected the acquired loan portfolios and current market conditions, a greater degree of subjectivity is inherent in these ~~regions~~values than in those determined in active markets.

Premises and equipment. Land and buildings (collectively, “premises”) acquired were recorded at estimated fair value as ~~well with additional mortgage offices located in Northern Virginia, Maryland, North Carolina,~~determined by third-party appraisals at or near the merger date. Equipment, including office furniture, computers, and ~~Florida.~~similar assets, were recorded at the their net book values as of the merger date, which approximated fair value.

~~Basis~~Bank owned life insurance. The carrying value of ~~Presentation~~bank owned life insurance was deemed to reasonably approximate fair value. These policies are recorded at their cash surrender value, using information provided by the insurance carriers.

The ~~preparation of financial statements in conformity with U.S. GAAP requires management to make estimates~~following table presents the purchased performing and ~~assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities~~PCI loans receivable at the date of the ~~financial statements~~Bay Banks Merger and the ~~reported amounts~~fair value adjustments (discounts) recorded immediately following the merger.


	As of January 31, 2021
(Dollars in thousands)	Purchased Performing			PCI			Total
Principal payments receivable	$	936,523		$	111,766		$	1,048,289
Fair value adjustment - credit and interest		(2,784	)		(15,072	)		(17,856	)
Fair value of acquired loans	$	933,739		$	96,694		$	1,030,433

Core deposit intangible. Core deposit intangible ("CDI") is the measure of ~~revenues~~the value of noninterest-bearing checking, savings, interest-bearing checking, money market, and ~~expenses during~~certain certificates of deposits assumed in a business combination. Certificates of deposit with balances over $100,000 and brokered deposits are excluded from evaluation, as the ~~reporting period. Actual results could differ from those estimates. Material estimates that~~Company determined customer related intangible assets are ~~particularly susceptible to significant change in~~non-existent for these accounts. The estimated fair value of CDI was based on the ~~near term relate~~present value of the expected cost savings attributable to the ~~determination~~core deposit funding relative to an alternative funding source. The CDI is being amortized over an estimated useful life of 10 years, which approximates the existing deposit relationships acquired.

Deposits. The fair values of deposit liabilities with no stated maturity (noninterest-bearing checking, savings, interest-bearing checking, and money market deposits) are equal to the carrying amounts payable on demand. The estimated fair value of the ~~allowance for loan losses, goodwill~~certificates of deposit represents contractual cash flows, discounted to present value using interest rates currently offered by market participants on deposits with similar characteristics and ~~intangibles,~~remaining maturities.

FHLB borrowings. The fair value the valuation of deferred tax assets and liabilities, and valuation of foreclosed real estate. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for fair presentation of the ~~results~~FHLB borrowings was estimated by discounting the future cash flows using current interest rates offered for similar advances as of ~~operations in these financial statements, have been made.~~the acquisition date.

~~Reclassification~~FRB borrowings. The fair value of Federal Reserve Bank (“FRB”) borrowings was deemed to approximate its carrying value. These borrowings are pursuant to the FRB’s Paycheck Protection Program Liquidity Facility (“PPPLF”) and there is no comparable borrowing to advances under this facility.

~~Certain reclassifications~~Subordinated notes. The fair value of the subordinated notes was estimated by utilizing recent issuance rates for subordinated debt offerings of similar issuer size near the merger date and adjusted for time to redemption or maturity.

The fair value estimates are subject to change for up to one year after the effective date of the merger, if additional information relative to effective date fair values becomes available. NaN adjustments have been made to ~~prior period amounts to conform to current period presentation. None of these reclassifications are considered material and have no impact on net income.~~

~~Earnings Per Share~~

~~Accounting guidance specifies~~ the computation, presentation and disclosure requirements for earnings per share (“EPS”) for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. ESOP shares are considered outstanding for this calculation. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding. Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive common shares had been issued. The Company had no dilutive common shares outstanding atfair value estimates through September 30, ~~2019~~2021.

Impact of Certain Fair Value Adjustments

The net effect of the amortization and ~~2018.~~

~~Note 1 – Summary~~accretion of ~~Significant Accounting Policies, continued~~

~~The~~premiums and discounts associated with the fair value adjustments to assets acquired and liabilities assumed in the Bay Banks Merger had the following ~~table sets forth~~effect on the ~~computation of basic and diluted earnings per share~~consolidated income statements for the three and nine months ended September ~~30.~~30, 2021.



(Dollars in thousands)	For the three months ended September 30, 2021			For the nine months ended September 30, 2021
Loans (1)	$	(54	)	$	964
Time deposits (2)		827			2,465
FHLB borrowings (3)		4			10
Subordinated notes (4)		55			145
CDI (5)		(323	)		(880	)
Net effect to income before income taxes	$	509		$	2,704

(1) Loan discount accretion and premium (amortization) is included in the Interest and fees on loans section of Interest Income in the consolidated income statements.

(2) Time deposit premium amortization is included in the Interest on deposits section of Interest Expense in the consolidated income statements.

   For the nine months ended
September 30,    For the three months ended
September 30,
   2019    2018    2019    2018
Net income
   $ 4,070,745    $ 3,587,096    $ 1,253,139    $ 1,269,659
Net income attributable to noncontrolling interest
   (21,251 )    (7,612 )    (3,075 )    (1,043 )








Net income available to common shareholders
   $ 4,049,494    $ 3,579,484    $ 1,250,064    $ 1,268,616








Weighted average common shares
   3,998,267    2,774,441    4,346,866    2,795,303
Effect of dilutive securities
   —      —      —      —








Diluted average common shares
   3,998,267    2,774,441    4,346,866    2,795,303








Earnings (losses) per common share
   $ 1.01    $ 1.29    $ 0.29    $ 0.45








Diluted earnings (losses) per common share
   $ 1.01    $ 1.29    $ 0.29    $ 0.45

(3) FHLB borrowings premium amortization is included in the Interest on FHLB and FRB borrowings section of Interest Expense in the consolidated income statements.

(4) Subordinated notes premium amortization is included in the Interest on subordinated notes section of Interest Expense in the consolidated income statements.

(5) CDI amortization is included in the Intangible amortization section of Noninterest Expense in the consolidated income statements.

Pro Forma Financial Information

The following table presents the effect of the Bay Banks Merger on the Company on a pro forma basis, as if the merger had occurred at the beginning of the nine-month periods ended September 30, 2021 and 2020 and the three-month period ended September 30, 2020. Merger-related expenses of $1.4 million and $11.7 million for the three months and nine months ended September 30, 2021 and $1.3 million and $1.7 million for the three and nine months ended September 30, 2020, which are included in the Company’s consolidated income statements, are not included in the pro forma information below. Merger-related expenses incurred by Bay Banks prior to the completion of the Bay Banks Merger are not included in the Company’s consolidated income statements and are also not included in the pro forma information below. Net income includes pro forma adjustments for the accretion and amortization of estimated fair value adjustments on acquired loans and assumed time deposits and borrowings, as well as amortization of estimated CDI. An income tax rate of 21% was used in determining pro forma net income.


	For the three months ended
(Dollars in thousands, except per share data)	September 30, 2020
Revenue (net interest income plus noninterest income)	$	42,471
Net income		8,730
Earnings per common share		0.47


	For the nine months ended
(Dollars in thousands, except per share data)	September 30, 2021		September 30, 2020
Revenue (net interest income plus noninterest income)	$	140,447	$	106,514
Net income		48,029		19,749
Earnings per common share		2.62		1.08

Note 24 – ~~Investment Securities~~Investments

Investment securities available for sale are carried at fair value in the consolidated balance ~~sheets at their fair value and investment securities held to maturity are carried in the consolidated balance sheets at their amortized cost.~~sheets. The following tables present amortized cost and fair values of investment securities at available for sale as of the dates stated.


	September 30, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
State and municipal	$	41,843	$	289	$	(280	)	$	41,852
U.S. Treasury and agencies		49,212		—		(664	)		48,548
Mortgage backed securities		241,108		617		(2,802	)		238,923
Corporate bonds		30,210		808		(243	)		30,775
Total investment securities	$	362,373	$	1,714	$	(3,989	)	$	360,098


	December 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
State and municipal	$	14,069	$	258	$	(68	)	$	14,259
U.S. Treasury and agencies		2,500		—		(91	)		2,409
Mortgage backed securities		72,337		696		(398	)		72,635
Corporate bonds		19,755		469		(52	)		20,172
Total investment securities	$	108,661	$	1,423	$	(609	)	$	109,475

As ofSeptember 30, ~~2019~~2021 and December 31, ~~2018 are as follows:~~2020, securities with a fair value of $9.1 million and $12.5 million, respectively, were pledged with the Treasury Board of the Commonwealth of Virginia to secure public deposits.

As of September 30, 2021 and December 31, 2020, securities with a fair value of $27.7 million and $29.4 million, respectively, were pledged to secure the Bank’s borrowing facility with the FHLB.

   September 30, 2019
(In thousands)    Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair
Value
Available for sale

U.S. Treasury and agencies
   $ 3,375    $ 2    $ 46    $ 3,331
Mortgage backed securities
   110,220    1,640    70    111,790
Corporate bonds
   6,553    68    2    6,619








   $ 120,148    $ 1,710    $ 118    $ 121,740








Held to maturity

State and municipal
   $ 13,117    $ 506    $ 8    $ 13,615








   $ 13,117    $ 506    $ 8    $ 13,615








Total Investment Securities
   $ 133,265    $ 2,216    $ 126    $ 135,355








   December 31, 2018
(In thousands)    Amortized
Cost    Gross
Unrealized
Gains    Gross
Unrealized
Losses    Fair
Value
Available for sale

State and municipal
   $ 1,000    $ 3    $ —      $ 1,003
U.S. Treasury and agencies
   3,375    —      208    3,167
Mortgage backed securities
   28,976    22    628    28,370
Corporate bonds
   5,477    78    48    5,507








   $ 38,828    $ 103    $ 884    $ 38,047








Held to maturity

State and municipal
   $ 15,565    $ 78    $ 140    $ 15,503








   $ 15,565    $ 78    $ 140    $ 15,503








Total Investment Securities
   $ 54,393    $ 181    $ 1,024    $ 53,550

~~Note 2 – Investment Securities, continued~~

The following table presents the amortized cost and fair value of securities ~~at September 30, 2019,~~available for sale by contractual maturity ~~are shown below.~~as of the date stated. Expected maturities ~~will~~may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2019								September 30, 2021
	Securities Available for Sale				Securities Held to Maturity
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
(Dollars in thousands)									Amortized Cost		Fair Value
Due in one year or less	$	—	$	—	$	461	$	463	$	694	$	694
Due after one year through five years		2,500		2,499		2,590		2,641		27,345		27,356
Due after five years		8,794		8,781		3,761		3,863
Due after five years through ten years										89,716		89,920
Due after ten years		108,854		110,460		6,305		6,648		244,618		242,128

Total	$	120,148	$	121,740	$	13,117	$	13,615	$	362,373	$	360,098

AThe following tables present a summary of unrealized losses ~~(in thousands)~~ and the length of time securities have been in a continuous loss position, by security type and number of securities, as of the dates stated.


			September 30, 2021
			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
State and municipal		31	$	19,291	$	(280	)	$	—	$	—		$	19,291	$	(280	)
U.S. Treasury and agencies		20		46,234		(664	)		—		—			46,234		(664	)
Mortgage backed securities		72		180,950		(2,795	)		834		(7	)		181,784		(2,802	)
Corporate bonds		10		5,099		(230	)		987		(13	)		6,086		(243	)
Total		133	$	251,574	$	(3,969	)	$	1,821	$	(20	)	$	253,395	$	(3,989	)


			December 31, 2020
			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
State and municipal		6	$	3,111	$	(68	)	$	—	$	—		$	3,111	$	(68	)
U.S. Treasury and agencies		1		2,410		(91	)		—		—			2,410		(91	)
Mortgage backed securities		22		20,545		(65	)		8,592		(333	)		29,137		(398	)
Corporate bonds		7		3,242		(7	)		1,955		(45	)		5,197		(52	)
Total		36	$	29,308	$	(231	)	$	10,547	$	(378	)	$	39,855	$	(609	)

The Company reviews for other-than-temporary impairment of its investment securities portfolio at least quarterly. As of September 30, ~~2019~~2021 and December 31, ~~2018 is~~2020, only investment grade securities were in an unrealized loss position or the amount of unrealized loss for the security was not significant. Investment securities with unrealized losses are generally a result of pricing changes due to recent changes in the current interest rate environment and not as ~~follows:~~a result of permanent credit impairment. Contractual cash flows for the 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.

September 30, 2019
   Less than 12 Months 12 Months or Greater Total
   Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses
State and Municipal
   $ 1,667    $ (8 ) $ —      $ —   $ 1,667    $ (8 )
U.S. Treasury and Agency
   —      —   2,829    (46 ) 2,829    (46 )
Mortgage backed
   6,251    (4 ) 6,986    (66 ) 13,237    (70 )
Corporate bonds
   250    —   898    (2 ) 1,148    (2 )








Total
   $ 8,168    $ (12 ) $ 10,713    $ (114 ) $ 18,881    $ (126 )

December 31, 2018
   Less than 12 Months 12 Months or Greater Total
   Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses Fair
Value    Unrealized
Losses
State and Municipal
   $ 6,278    $ (105 ) $ 2,402    $ (35 ) $ 8,680    $ (140 )
U.S. Treasury and Agency
   —      —   3,167    (208 ) 3,167    (208 )
Mortgage backed
   10,031    (51 ) 17,173    (577 ) 27,204    (628 )
Corporate bonds
   2,114    (36 ) 488    (12 ) 2,602    (48 )








Total
   $ 18,423    $ (192 ) $ 23,230    $ (832 ) $ 41,653    $ (1,024 )

~~Other~~Restricted equity investments ~~(in thousands) consist~~consisted of stock in the ~~Federal Home Loan Bank~~FHLB (carrying ~~basis $5,993)~~value of $6.0 million and $5.8 million as of September 30, ~~Federal Reserve stock (carrying basis $963), and various other investments (carrying basis $899).~~

~~The Company had pledged securities (in thousands) of $97,265 and $26,408 at September 30, 2019~~2021 and December 31, ~~2018, respectively.~~2020, respectively), FRB stock (carrying value of $4.9 million and $2.2 million as of September 30, 2021 and December 31, 2020, respectively), and stock in the Company’s correspondent bank (carrying value of $468 thousand and $248 thousand as of September 30, 2021 and December 31, 2020, respectively). 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 $7.9 million and $3.0 million as of September 30, 2021 and December 31, 2020, respectively, which are carried at fair value with any gain or loss reported in the consolidated income statements each reporting period.

10The Company also holds investments in early-stage focused investment funds, small business investment companies ("SBIC"), and low-income housing partnerships, which are reported in other investments on the consolidated balance sheets.

Note 35 – Loans and Allowance for Loan Losses

~~Loans~~The following table presents loans held for investment, ~~outstanding at~~including Paycheck Protection Program ("PPP") loans, as of the dates stated.


(Dollars in thousands)	September 30, 2021			December 31, 2020
Commercial and industrial	$	309,058		$	123,675
Paycheck Protection Program		47,325			292,068
Real estate – construction, commercial		139,286			54,702
Real estate – construction, residential		51,098			18,040
Real estate – mortgage, commercial		680,309			273,499
Real estate – mortgage, residential		499,361			213,404
Real estate – mortgage, farmland		6,317			3,615
Consumer		67,787			46,684
Gross loans		1,800,541			1,025,687
Less: Deferred loan fees, net of costs		(1,440	)		(4,271	)
Total	$	1,799,101		$	1,021,416

In 2020, the Company participated in the PPP under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (“PPP 1”). Through the PPP 1, the federal government partnered with banks, including the Bank, to provide over $650 billion to small businesses to support payrolls and other operating expenses. PPP 1 loans have a two-year term if originated prior to June 5, 2020, or a five-year term if originated on or subsequent to June 5, 2020, and earn an annual interest rate of 1%. Banks originating PPP 1 loans earned a processing fee of 1%, 3%, or 5% of the loan amount, depending on the size of the loan. The Company originated approximately $363.4 million in PPP 1 loans in

2020, and as of September 30, ~~2019~~2021, $32.6 million of PPP 1 loans were outstanding, including those acquired in the Bay Banks Merger.

In 2021 the Company participated in the PPP pursuant to the Economic Aid Act, passed into law on December 27, 2020 (“PPP 2”). The PPP 2 was for applications received by May 31, 2021. The Company funded over 20,000 PPP 2 loans for approximately $730 million. PPP 2 loans have a contractual term of five years and earn an annual interest rate of 1%. Banks originating PPP 2 loans earned processing fees that were tiered depending on the size of the loan. Specifically, processing fees for loans of not more than $50,000 equaled 50% of the loan balance or $2,500, whichever was less; processing fees for loans more than $50,000 and not more than $350,000 equaled 5% of the loan balance, and processing fees for loans above $350,000 equaled 3% of the loan balance. Of the PPP 2 loans originated in 2021, approximately 19,500 with principal balances of $712.6 million were sold on June 28, 2021. Gross proceeds from the sale were $705.9 million and the Company recorded a pre-tax gain in noninterest income of $24.3 million on the sale after giving effect to $30.9 million of unamortized fees, net of deferred costs, and the sale discount. As of September 30, 2021, the Company held PPP 2 loans with aggregate principal balances and unamortized fees, net of deferred costs, of $14.7 million and $676 thousand, respectively.

The Company believes that the majority of PPP 1 and PPP 2 loans will be forgiven, in accordance with the terms of the program, and will be paid in full pursuant to the U.S. government guarantee.

The Company is accounting for the PPP processing fees in accordance with ASC 310-20, Receivables - Nonrefundable Fees and Other Costs, which requires fees, net of costs, to be deferred and amortized as a component of loan yield over the expected life of the loans, which the Company believes is 1.5 years for PPP 1 loans and one to three years for PPP 2 loans, depending on the individual loan balance. Of the $11.5 million of processing fees received in 2020 for PPP 1 loans, approximately $0 of unamortized fees remain as of September 30, 2021, with $228 thousand and $4.8 million recognized as a component of interest income for the three and nine months ended September 30, 2021, respectively. PPP 2 processing fees, net of costs, totaled $40.8 million through the first nine months of 2021, of which $484 thousand and $12.1 million were recognized as interest income for the three and nine months ended September 30, 2021, respectively, and $30.9 million was recognized as part of the gain on sale in the second quarter of 2021.

From the onset of the global COVID-19 pandemic, the Company has proactively addressed the needs of its commercial and individual borrowers by modifying loans allowing for the short-term deferral of principal payments or of principal and interest payments. Pursuant to the CARES Act and the Economic Aid Act, banks have the option to temporarily suspend certain requirements of GAAP related to TDRs to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency terminates if certain conditions are met. All loan modifications made by the Company were made on a good faith basis to borrowers who met the requirements for modifications under the CARES Act. As a result of regulatory and accounting guidance regarding such modifications, the loans were not designated as TDRs as of September 30, 2021 and December 31, ~~2018~~2020. In response to the COVID-19 pandemic, during 2020, the Company approved over 550 loan deferrals for a total of $110.6 million. In addition, Bay Banks approved nearly 400 loan deferrals for approximately $160.0 million. Most of these loans are ~~summarized~~now past the deferment period and are back on normal payment schedules, and as ~~follows:~~of September 30, 2021, 16 loans were in deferment for a total of approximately $4.7 million.

   September 30,
2019    December 31,
2018
(in thousands)
Commercial and industrial
   $ 50,826    $ 49,076
Agricultural
   175    216
Real estate – construction, commercial
   19,876    14,666
Real estate – construction, residential
   16,364    15,102
Real estate – mortgage, commercial
   167,223    150,513
Real estate – mortgage, residential
   165,865    149,856
Real estate – mortgage, farmland
   3,754    4,179
Consumer installment loans
   37,433    31,979




Gross loans
   461,516    415,587
Less: Unearned income
   (638 )    (719 )




Total
   $ 460,878    $ 414,868

The Company has pledged ~~loans held for investment (in thousands)~~certain commercial and residential mortgages as collateral for borrowings with the ~~Federal Home Loan Bank of Atlanta~~FHLB. Loans totaling ~~$126,125~~$517.6 million and ~~$104,791~~$213.3 million were pledged as of September 30, ~~2019~~2021 and December 31, ~~2018,~~2020, respectively. Additionally, PPP loans were pledged as collateral for PPPLF advances in the amount of $33.9 million and $281.6 million as of September 30, 2021 and December 31, 2020, respectively.

As a result of the Bay Banks Merger and the 2019 acquisition of Virginia Community Bankshares, Inc., the acquired loan portfolios were initially measured at fair value as of the respective acquisition dates and subsequently accounted for as either purchased performing loans or PCI loans. The following table presents the outstanding principal balance and related recorded investment of these acquired loans included in the consolidated balance sheets as of the dates stated.


(Dollars in thousands)	September 30, 2021		December 31, 2020
PCI loans
Outstanding principal balance	$	98,076	$	1,278
Recorded investment		84,044		1,085
Purchased performing loans
Outstanding principal balance		784,302		97,301
Recorded investment		781,348		96,317
Total acquired loans
Outstanding principal balance		882,378		98,579
Recorded investment		865,392		97,402

The following table presents the changes in the accretable yield for PCI loans for the periods stated.


	For the three months ended September 30,						For the nine months ended September 30,
(Dollars in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	7,830		$	153		$	123		$	185
Additions		—	��		—			10,030			—
Accretion		(1,239	)		(16	)		(3,704	)		(48	)
Reclassification of nonaccretable difference due to improvement in expected cash flows		—			—			106			—
Other changes, net		—			0			36			0
Balance, end of period	$	6,591		$	137		$	6,591		$	137

The following tables present the aging of the recorded investment of loans held for investment as of the dates stated.


	September 30, 2021
(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
Commercial and industrial	$	338	$	332	$	—	$	6,270	$	6,940	$	8,947	$	293,171		$	309,058
Paycheck Protection Program		—		—		—		—		—		—		47,325			47,325
Real estate – construction, commercial		2,696		21		65		88		2,870		14,015		122,401			139,286
Real estate – construction, residential		—		—		451		254		705		—		50,393			51,098
Real estate – mortgage, commercial		2,006		15		24		3,191		5,236		52,371		622,702			680,309
Real estate – mortgage, residential		989		1,601		1,726		2,605		6,921		7,671		484,769			499,361
Real estate – mortgage, farmland		—		—		—		—		—		—		6,317			6,317
Consumer		702		236		112		369		1,419		1,040		65,328			67,787
Less: Deferred loan fees, net of costs		—		—		—		—		—		—		(1,440	)		(1,440	)
Total Loans	$	6,731	$	2,205	$	2,378	$	12,777	$	24,091	$	84,044	$	1,690,966		$	1,799,101


	December 31, 2020
(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
Commercial and industrial	$	1,117	$	—	$	—	$	1,310	$	2,427	$	—	$	121,248		$	123,675
Paycheck Protection Program		—		—		—		—		—		—		292,068			292,068
Real estate – construction, commercial		—		—		—		—		—		35		54,667			54,702
Real estate – construction, residential		262		—		—		—		262		—		17,778			18,040
Real estate – mortgage, commercial		771		211		—		3,643		4,625		808		268,066			273,499
Real estate – mortgage, residential		1,062		—		46		881		1,989		242		211,173			213,404
Real estate – mortgage, farmland		—		—		—		—		—		—		3,615			3,615
Consumer		935		334		—		714		1,983		—		44,701			46,684
Less: Deferred loan fees, net of costs		—		—		—		—		—		—		(4,271	)		(4,271	)
Total Loans	$	4,147	$	545	$	46	$	6,548	$	11,286	$	1,085	$	1,009,045		$	1,021,416

The following tables present the aging of the recorded investment of PCI loans as of the dates stated.


	September 30, 2021
(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Current Loans		Total Loans
Commercial and industrial	$	—	$	—	$	8,947	$	8,947
Real estate – construction, commercial		21		65		13,929		14,015
Real estate – mortgage, commercial		148		24		52,199		52,371
Real estate – mortgage, residential		552		1,726		5,393		7,671
Consumer		5		—		1,035		1,040
Total PCI Loans	$	726	$	1,815	$	81,503	$	84,044


	December 31, 2020
(Dollars in thousands)	30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Current Loans		Total Loans
Real estate – construction, commercial		—		—		35		35
Real estate – mortgage, commercial		224		—		584		808
Real estate – mortgage, residential		35		—		207		242
Total PCI Loans	$	259	$	—	$	826	$	1,085

The Company prepares a quarterly analysis of the ALL, with the objective of quantifying portfolio risk into a dollar amount of inherent losses. The ALL is increased through a provision for loan losses charged against income and decreased by loans charged-off (net of recoveries, if any). Management’s periodic evaluation of the adequacy of the ALL is based on past ~~due~~loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used.

The ALL consists of specific and general components. The specific component relates to loans ~~(in thousands)~~that are identified as impaired, which generally include loans risk rated substandard or worse with balances of $500 thousand or more and all loans classified as TDRs. For loans that are classified as impaired, an allowance is established when the discounted cash flows or the net realizable value of underlying collateral, which is equal to the estimated fair value less estimated costs to sell, of the impaired loan is lower than the carrying value of that loan. The general component covers those loans not classified as impaired and those loans classified as impaired that are not individually evaluated for impairment and is based on historical loss experience adjusted for other internal or external influences on credit quality that are not fully reflected in the historical data.

The Company follows applicable guidance issued by the FASB, which requires that losses be accrued when they are probable of occurring and can be estimated. It also requires that impaired loans, within its scope, be measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, a creditor may measure impairment based on a loan’s observable market price, or the fair value of the underlying collateral if the loan is collateral dependent.

PPP loans are fully guaranteed by the U.S. government; therefore, the Company recorded no ALL for these loans as of September 30, ~~2019~~2021 and December 31, ~~2018:~~2020. In future periods, the Company may be required to establish an ALL for these loans, which would result in a provision for loan losses charged to earnings.

   September 30, 2019
(in thousands)
   30-59
Days Past
Due    60-89
Days Past
Due    Greater than
90 Days Past
Due &
Accruing    Nonaccrual    Total Past Due
& Nonaccrual    Current
Loans Total Loans
Commercial and industrial
   $ 126    $ —      $ —      $ 538    $ 664    $ 50,162 $ 50,826
Real estate – construction, commercial
   141    363    —      942    1,446    18,430 19,876
Real estate – construction, residential
   493    240    —      —      733    15,631 16,364
Real estate – mortgage, commercial
   —      —      —      2,026    2,026    165,197 167,223
Real estate – mortgage, residential
   1,482    —      708    947    3,137    162,728 165,865
Agricultural & Farmland
   —      —      —      —      —      3,929 3,929
Consumer installment loans
   760    322    —      688    1,770    35,663 37,433
Less: Unearned income
   —      —      —      —      —      (638 ) (638 )












   $ 3,002    $ 925    $ 708    $ 5,141    $ 9,776    $ 451,102 $ 460,878

1121

~~Note 3 – Loans, continued~~

   December 31, 2018
(in thousands)
   30-59
Days Past
Due    60-89
Days Past
Due    Greater than
90 Days Past
Due &
Accruing    Nonaccrual    Total Past Due
& Nonaccrual    Current
Loans Total Loans
Commercial and industrial
   $ 280    $ 29    $ —      $ 312    $ 621    $ 48,455 $ 49,076
Real estate – construction, commercial
   —      —      —      979    979    13,687 14,666
Real estate – construction, residential
   —      —      231    —      231    14,871 15,102
Real estate – mortgage, commercial
   218    441    430    2,441    3,530    146,983 150,513
Real estate – mortgage, residential
   760    7    1,079    1,441    3,287    146,569 149,856
Agricultural & Farmland
   123    —      309    —      432    3,963 4,395
Consumer installment loans
   1,017    408    4    357    1,786    30,193 31,979
Less: Unearned income
   —      —      —      —      —      (719 ) (719 )












   $ 2,398    $ 885    $ 2,053    $ 5,530    $ 10,866    $ 404,002 $ 414,868

~~Note 4 – Allowance for Loans Losses~~

AThe following tables present a summary of ~~changes in~~ the ~~allowance~~loan portfolio individually and collectively evaluated for impairment as of the dates stated.


	September 30, 2021
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Total
Originated and purchased performing loans:
Commercial and industrial	$	4,697	$	295,414		$	300,111
Real estate – construction, commercial		531		124,740			125,271
Real estate – construction, residential		—		51,098			51,098
Real estate – mortgage, commercial		1,333		626,605			627,938
Real estate – mortgage, residential		1,672		490,018			491,690
Real estate – mortgage, farmland		—		6,317			6,317
Consumer		—		66,747			66,747
Total originated and purchased performing loans		8,233		1,660,939			1,669,172
PCI loans:
Commercial and industrial		—		8,947			8,947
Real estate – construction, commercial		—		14,015			14,015
Real estate – mortgage, commercial		—		52,371			52,371
Real estate – mortgage, residential		—		7,671			7,671
Consumer		—		1,040			1,040
Total PCI loans		—		84,044			84,044
Gross loans		8,233		1,744,983			1,753,216
Less: Deferred loan fees, net of costs		—		(763	)		(763	)
Total	$	8,233	$	1,744,220		$	1,752,453


	December 31, 2020
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Total
Originated and purchased performing loans:
Commercial and industrial	$	234	$	123,441		$	123,675
Real estate – construction, commercial		—		54,667			54,667
Real estate – construction, residential		—		18,040			18,040
Real estate – mortgage, commercial		1,645		271,046			272,691
Real estate – mortgage, residential		452		212,710			213,162
Real estate – mortgage, farmland		—		3,615			3,615
Consumer		—		46,684			46,684
Total originated and purchased performing loans		2,331		730,203			732,534
PCI loans:
Real estate – construction, commercial		—		35			35
Real estate – mortgage, commercial		—		808			808
Real estate – mortgage, residential		—		242			242
Total PCI loans		—		1,085			1,085
Gross loans		2,331		731,288			733,619
Less: Deferred loan fees, net of costs		—		(736	)		(736	)
Total	$	2,331	$	730,552		$	732,883

The tables above exclude gross PPP loans ~~losses (in thousands) for~~of $47.3 million and $292.1 million as of September 30, ~~2019~~2021 and December ~~31, 2018 is as follows:~~2020, respectively.

   September 30,
2019    December 31,
2018
(Dollars in thousands)

Allowance, beginning of period
   $ 3,580    $ 2,803




Charge-Offs

Commercial and industrial
   $ 43    $ 6
Real estate, construction
   —      —
Real estate, mortgage
   3    13
Consumer and other loans
   733    545




Total charge-offs
   779    564




Recoveries

Commercial and industrial
   —      —
Real estate, construction
   —      —
Real estate, mortgage
   (6 )    (12 )
Consumer and other loans
   (132 )    (104 )




Total recoveries
   (138 )    (116 )




Net charge-offs (recoveries)
   641    448




Provision for loan losses
   1,465    1,225




Allowance, end of period
   $ 4,404    $ 3,580

~~Note 4 – Allowance for Loans Losses, continued~~

   Individually
Evaluated for
Impairment    Collectively
Evaluated for
Impairment    Total
September 30, 2019

Commercial and industrial
   $ 291    $ 50,535    $ 50,826
Agricultural
   —      175    175
Real Estate – construction, commercial
   —      19,876    19,876
Real Estate – construction, residential
   —      16,364    16,364
Real Estate – mortgage, commercial
   735    166,488    167,223
Real Estate – mortgage, residential
   658    165,207    165,865
Real Estate – mortgage, farmland
   —      3,754    3,754
Consumer installment loans
   —      37,433    37,433






Gross loans
   1,684    459,832    461,516
Less: Unearned income
   —      (638 )    (638 )






Total
   $ 1,684    $ 459,194    $ 460,878

   Individually
Evaluated for
Impairment    Collectively
Evaluated for
Impairment    Total
December 31, 2018

Commercial and industrial
   $ —      $ 49,076    $ 49,076
Agricultural
   —      216    216
Real Estate – construction, commercial
   —      14,666    14,666
Real Estate – construction, residential
   —      15,102    15,102
Real Estate – mortgage, commercial
   1,258    149,255    150,513
Real Estate – mortgage residential
   688    149,168    149,856
Real Estate – mortgage, farmland
   —      4,179    4,179
Consumer installment loans
   —      31,979    31,979






Gross loans
   1,946    413,641    415,587
Less: Unearned income
   —      (719 )    (719 )






Total
   $ 1,946    $ 412,922    $ 414,868

The following ~~table presents~~tables present information related to impaired loans by ~~portfolio segment,~~loan type as of the dates presented.


	September 30, 2021						December 31, 2020
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no specific allowance recorded:
Commercial and industrial	$	4,697	$	4,697	$	—	$	234	$	234	$	144
Real estate – construction, commercial		531		531		—		—		—		—
Real estate – mortgage, commercial		1,333		1,432		—		1,645		2,030		—
Real estate – mortgage, residential		1,672		1,672		—		452		571		—
With an allowance recorded:
Real estate – mortgage, commercial		—		—		—		—		—		—
Real estate – mortgage, residential		—		—		—		—		—		—
	$	8,233	$	8,332	$	—	$	2,331	$	2,835	$	144


	For the three months ended
	September 30, 2021				September 30, 2020
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	4,710	$	53	$	—	$	—
Real estate – construction, commercial		532		8		—		—
Real estate – mortgage, commercial		1,378		21		—		—
Real estate – mortgage, residential		1,421		5		696		28
With an allowance recorded:
Commercial and industrial		—		—		375		—
Real estate – mortgage, commercial		—		—		337		1
Real estate – mortgage, residential		—		—		—		—
	$	8,041	$	87	$	1,408	$	29

	For the nine months ended
	September 30, 2021				September 30, 2020
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	4,390	$	149	$	—	$	—
Real estate – construction, commercial		537		24		—		—
Real estate – mortgage, commercial		1,402		62		—		—
Real estate – mortgage, residential		1,078		11		696		28
With an allowance recorded:
Commercial and industrial		—		—		375		1
Real estate – mortgage, commercial		—		—		337		7
Real estate – mortgage, residential		—		—		—		—
	$	7,407	$	246	$	1,408	$	36

Impaired loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as non-performing at the ~~dates presented.~~

   September 30, 2019
(in thousands)    Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance    Average
Recorded
Investment    Interest
Income
Recognized
With no specific allowance recorded:

Real estate – mortgage, residential
   $ 658    $ 658    $ —      $ 661    $ 7
With an allowance recorded:

Commercial and industrial
   291    291    151    146    2
Real estate – mortgage, commercial
   735    735    100    735    5










   $ 1,684    $ 1,684    $ 251    $ 1,542    $ 14

~~Note 4 – Allowance~~time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for ~~Loans Losses, continued~~

   December 31, 2018
(in thousands)
   Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance    Average
Recorded
Investment    Interest
Income
Recognized
With no specific allowance recorded:

Real estate – mortgage, residential
   $ 1,946    $ 1,946    $ —      $ 2,067    $ 64
With an allowance recorded:

Real estate – mortgage, commercial
   —      —      —      —      —










   $ 1,946    $ 1,946    $ —      $ 2,067    $ 64

~~Purchased loans from the 2016 River Bancorp, Inc. acquisition~~a reasonable period, generally six months. The Company had ~~remaining balances (in thousands) of $25,091 and 34,672~~four TDRs totaling $235 thousand as of September 30, ~~2019~~2021, two of which were classified as TDRs due to a change in interest rate and payment terms and two of which were classified as TDRs due to a change in payment terms. The Company had two TDRs totaling $142

thousand as of December 31, ~~2018, respectively. Of these balances three loan relationships were considered specifically impaired purchased credit-impaired loans. One~~2020, one of ~~these relationships~~which was ~~resolved during 2018~~classified as a TDR due to a change in interest rate and payment terms and the ~~Company recovered $200 of the balance previouslywritten-off.~~ ~~During the first quarter of 2019, another~~other loan ~~relationship~~ was ~~resolved and the Company recovered $200 of the balance previouslywritten-off.~~ ~~At September 30, 2019, the remaining specifically impaired PCI loans totaled $2,318 with~~classified as a ~~specific impairment of $190.~~ TDR due to a change in payment terms.

The following table presents an analysis of the ~~recorded investment~~change in the ~~segments~~ALL by loan type as of and for the ~~River Bancorp, Inc. purchased~~periods stated.


	For the three months ended September 30,						For the nine months ended September 30,
(Dollars in thousands)	2021			2020			2021			2020
ALL, beginning of period	$	13,007		$	8,206		$	13,827		$	4,572
Charge-offs
Commercial and industrial		(18	)		—			(968	)		—
Real estate – mortgage		(133	)		—			(146	)		—
Consumer		(361	)		(213	)		(757	)		(787	)
Total charge-offs		(512	)		(213	)		(1,871	)		(787	)
Recoveries
Commercial and industrial		26			33			210			34
Real estate – mortgage		5			—			108			—
Consumer		88			97			340			229
Total recoveries		119			130			658			263
Net charge-offs		(393	)		(83	)		(1,213	)		(524	)
Provision for loan losses		—			4,000			—			8,075
ALL, end of period	$	12,614		$	12,123		$	12,614		$	12,123

The Company categorizes loans into risk categories based on relevant information about the 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. The Company analyzes loans individually by classifying the loans as ~~of September 30, 2019~~to credit risk (loan grade). This analysis typically includes larger non-homogeneous loans, such as commercial real estate and ~~December 31, 2018 (in thousands):~~commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained.

   September 30,
2019    December 31,
2018
Real Estate

Construction loans and all land development and other land loans
   $ 1,415    $ 1,522
Secured by farmland
   3    319
Revolving,open-end loans secured by1-4 family residential
properties and extended under lines of credit
   2,814    3,376
Secured by first liens
   7,803    10,448
Secured by junior liens
   399    505
Secured by multifamily (5 or more) residential properties
   95    250
Loans secured by owner-occupied, nonfarm nonresidential
properties
   4,146    7,344
Loans secured by other nonfarm nonresidential properties
   5,395    6,239
Commercial and Industrial
   2,906    4,457
Other

Other revolving credit plans
   37    89
Automobile loans
   10    30
Other consumer loans
   68    93




Total
   $ 25,091    $ 34,672

~~Note 4 – Allowance for Loans Losses, continued~~

The following ~~table presents~~tables present the Company’s loan portfolio by internal loan grade ~~(in thousands)~~as of the dates stated.


	September 30, 2021
(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
Commercial and industrial	$	591	$	3,521	$	142,771	$	135,275	$	14,247	$	4,505	$	8,148	$	309,058
Paycheck Protection Program		47,325		—		—		—		—		—		—		47,325
Real estate – construction, commercial		—		516		32,633		86,430		6,845		10,849		2,013		139,286
Real estate – construction, residential		7		—		16,715		29,246		4,875		—		255		51,098
Real estate – mortgage, commercial		4,358		2,447		317,296		244,322		34,810		60,845		16,231		680,309
Real estate – mortgage residential		1,286		9,068		291,246		173,404		13,621		4,422		6,314		499,361
Real estate – mortgage, farmland		366		—		1,122		4,829		—		—		—		6,317
Consumer		339		8		17,768		47,346		1,279		489		558		67,787
Gross loans	$	54,272	$	15,560	$	819,551	$	720,852	$	75,677	$	81,110	$	33,519	$	1,800,541
Less: Deferred loan fees, net of costs																(1,440	)
Total															$	1,799,101


	December 31, 2020
(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
Commercial and industrial	$	844	$	484	$	23,828	$	85,928	$	7,251	$	4	$	5,336	$	123,675
Paycheck Protection Program		292,068		—		—		—		—		—		—		292,068
Real estate – construction, commercial		—		2,143		19,524		26,324		5,916		218		577		54,702
Real estate – construction, residential		—		—		3,073		8,247		6,458		—		262		18,040
Real estate – mortgage, commercial		—		3,994		128,163		114,977		15,799		2,968		7,598		273,499
Real estate – mortgage residential		—		3,583		101,078		100,601		5,750		158		2,234		213,404
Real estate – mortgage, farmland		444		—		1,175		1,996		—		—		—		3,615
Consumer		324		36		17,062		28,033		521		1		707		46,684
Gross loans	$	293,680	$	10,240	$	293,903	$	366,106	$	41,695	$	3,349	$	16,714	$	1,025,687
Less: Deferred loan fees, net of costs																(4,271	)
Total															$	1,021,416

Note 6 – Goodwill and Other Intangibles

Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. Intangible assets with definite useful lives are amortized over their estimated useful lives, which range from 5 to 12 years. Goodwill is the only intangible asset with an indefinite life on the consolidated balance sheets.

As of September 30, 2021 and December 31, 2020, the Company's goodwill totaled $26.8 million and $19.6 million, respectively.

The following table presents information on amortizable intangible assets included on the consolidated balance sheets as of the dates stated.


	Gross					Net
(Dollars in thousands)	Carrying		Accumulated			Carrying
September 30, 2021	Value		Amortization			Value
Core deposit intangibles	$	9,626	$	(2,522	)	$	7,104
Other amortizable intangibles		2,659		(1,664	)		995
Total	$	12,285	$	(4,186	)	$	8,099

	Gross					Net
(Dollars in thousands)	Carrying		Accumulated			Carrying
December 31, 2020	Value		Amortization			Value
Core deposit intangibles	$	2,776	$	(1,366	)	$	1,410
Other amortizable intangibles		2,187		(1,016	)		1,171
Total	$	4,963	$	(2,382	)	$	2,581

As a result of the Bay Banks Merger, a core deposit intangible asset of $6.9 million was recorded as of the acquisition date and is being amortized on an accelerated basis over 10 years using the sum-of-years digits method.

Included in other amortizable intangibles were loan servicing assets of $258 thousand and $209 thousand at September 30, 2021 and December 31, 2020, respectively, related to the sale of the government guaranteed portion of certain loans that the Company continues to service. Loan servicing assets of $131 thousand and $189 thousand were added during the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively. The amortization of these intangibles is included in interest and fees on loans in the consolidated statement of income.

The Company retains servicing rights on mortgages originated and sold to the secondary market. The Company records mortgage servicing rights (“MSR”) assets initially at fair value and subsequently accounts for them under the amortization method, pursuant to which an impairment assessment is performed each reporting period. The amortization method requires that the MSR assets be recorded at the lower of cost or fair value. As of September 30, 2021 and December 31, 2020, the carrying value of MSR assets were $15.0 million and $7.1 million, respectively.

Note 7 – Other Real Estate Owned

The following table presents the number and carrying values of properties included in other real estate owned (“OREO”) as of the dates stated.


	September 30, 2021				December 31, 2020
	Number of		Carrying		Number of		Carrying
	Properties		Value		Properties		Value
Residential		—	$	—		1	$	—
Land		4		227		—		—
Total other real estate owned		4	$	227		1	$	—

The Company acquired $598 thousand of OREO in the Bay Banks Merger. As of September 30, 2021, the carrying value of the OREO portfolio totaled $227 thousand.

NaN residential mortgage loans were in the process of foreclosure as of September 30, ~~2019~~2021.

Note 8 – Borrowings

FHLB Borrowings

The Bank has a borrowing facility from the FHLB secured by certain real estate loans and pledged securities. 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. Total lendable collateral was $392.2 million as of September 30, 2021. The Bank had borrowings from the FHLB that totaled $125.1 million and $115.0 million as of September 30, 2021 and December 31, ~~2018:~~2020, respectively. Of these advances, the Company assumed $10.1 million in the Bay Banks Merger. The borrowings also required the Bank to own $6.0 million and $5.8 million of FHLB stock, as of September 30, 2021 and December 31, 2020, respectively, which is included in restricted equity and other investments on the consolidated balance sheets.

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

   September 30, 2019
   Grade
1
Prime    Grade
2
Desirable    Grade
3
Good    Grade
4
Acceptable    Grade
5
Pass/Watch    Grade
6
Special
Mention    Grade
7
Substandard    Total
Commercial and industrial
   $ 406    $ 1,827    $ 21,936    $ 25,540    $ 579    $ —      $ 538    $ 50,826
Agricultural
   —      103    66    6    —      —      —      175
Real Estate – construction, commercial
   —      659    10,210    7,923    104    —      980    19,876
Real Estate – construction, residential
   —      —      4,295    8,011    4,058    —      —      16,364
Real Estate – mortgage, commercial
   —      1,656    81,973    70,093    10,226    1,012    2,263    167,223
Real Estate – mortgage residential
   —      2,917    81,246    76,351    3,648    96    1,607    165,865
Real Estate – mortgage, farmland
   1,565    100    1,418    218    453    —      —      3,754
Consumer installment loans
   297    32    23,863    12,447    106    —      688    37,433
















Gross loans
   2,268    7,294    225,007    200,589    19,174    1,108    6,076    461,516
















Less: Unearned income
                        (638 )


Total
                        $ 460,878


   December 31, 2018
   Grade
1
Prime    Grade
2
Desirable    Grade
3
Good    Grade
4
Acceptable    Grade
5
Pass/Watch    Grade
6
Special
Mention    Grade
7
Substandard    Total
Commercial and industrial
   $ 44    $ 2,660    $ 21,009    $ 24,254    $ 797    $ —      $ 312    $ 49,076
Agricultural
   9    99    105    3    —      —      —      216
Real Estate – construction, commercial
   —      485    7,118    5,937    106    —      1,020    14,666
Real Estate – construction, residential
   —      —      4,305    5,059    5,738    —      —      15,102
Real Estate – mortgage, commercial
   —      1,920    82,097    53,487    8,470    1,668    2,871    150,513
Real Estate – mortgage residential
   —      3,647    76,496    63,397    3,805    522    1,989    149,856
Real Estate – mortgage, farmland
   1,700    100    1,340    730    —      —      309    4,179
Consumer installment loans
   213    29    16,174    15,081    123    —      359    31,979
















Gross loans
   1,966    8,940    208,644    167,948    19,039    2,190    6,860    415,587
















Less: Unearned income
                        (719 )


Total
                        $ 414,868


	September 30, 2021
				Stated
			Originated	Interest			Maturity
(Dollars in thousands)	Balance		Date	Rate			Date
Convertible	$	10,115	2/28/2020		0.56	%	2/28/2030
Fixed Rate Credit		15,000	7/1/2021		0.17	%	10/1/2021
Fixed Rate Credit		25,000	8/2/2021		0.16	%	11/2/2021
Fixed Rate Credit		35,000	8/6/2021		0.16	%	11/8/2021
Fixed Rate Credit		10,000	8/30/2021		0.16	%	11/30/2021
Fixed Rate Credit		10,000	8/30/2021		0.16	%	11/30/2021
Fixed Rate Credit		20,000	9/17/2021		0.19	%	12/17/2021
Total FHLB borrowings	$	125,115

As of September 30, 2021, 1-4 family residential loans held for investment with a lendable value of $185.5 million, multi-family residential loans with a lendable value of $35.0 million, commercial real estate loans with a lendable value of $117.3 million, 1-4 family residential loans held for sale with a lendable value of $27.9 million, and securities with a lendable value of $26.5 million were pledged against the available line of credit with the FHLB. The Bank also has letters of credit with the FHLB totaling $57.0 million 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 $210.2 million as of September 30, 2021.

FRB Borrowings

~~Note 4 – Allowance~~In the second quarter of 2020, the Company began participating in the FRB’s PPPLF, which allowed banks to pledge PPP loans as collateral in exchange for ~~Loans Losses, continued~~advances. The PPPLF advances are at 100% of the PPP loan value and term, have a fixed annual cost of 35 basis points, and receive favorable regulatory capital treatment. As of September 30, 2021, these FRB borrowings were $33.9 million with maturities ranging from 0.5 to 3.07 years. Of this balance, $24.8 million were assumed by the Company in the Bay Banks Merger. As of December 31, 2020, the Company’s FRB borrowings were $281.6 million with maturities ranging from 1.2 years to 4.5 years.

Other Borrowings

The Company ~~also utilizes the grades 8 (Doubtful)~~has unsecured lines of credit with correspondent banks, which totaled $64.0 million and ~~9 (Loss). There were no loans classified in these categories~~$38.0 million at September 30, ~~2019~~2021 and December 31, ~~2018.~~2020, respectively. These lines bear interest at the prevailing rates for such loans and are cancellable any time by the correspondent bank. As of September 30, 2021 and December 31, 2020, 0ne of these lines of credit with correspondent banks were drawn upon.

~~Note 5 - Derivative Financial Instruments~~26

The Company had $40.5 million and ~~Hedging Activities~~$24.5 million of subordinated notes, net, outstanding as of September 30, 2021 and December 31, 2020, respectively. The Company assumed $30.9 million par value (or $31.9 million fair value) of subordinated notes in the Bay Banks Merger, which is composed of an issuance in October 2019 and maturing October 15, 2029 (the “2029 Bay Banks Notes”) and an issuance in May 2015 and maturing May 28, 2025 (the “2025 Bay Banks Notes”).

~~During~~The 2029 Bay Banks Notes bear interest at 5.625% per annum, through October 14, 2024, payable semi-annually in arrears. From October 15, 2024 through October 14, 2029, or up to an early redemption date, the ~~first quarter of 2019, the Company entered into~~interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Funding Rate (“SOFR”) (as defined in the 2029 Bay Banks Notes) plus 433.5 basis points, payable quarterly in arrears. The 2029 Bay Banks Notes are unsecured, subordinated obligations of the Company and rank junior in right of payment to the Company’s existing and future senior indebtedness and rank in parity with the other subordinated notes issued by the Company. Beginning on October 15, 2024 through maturity, the 2029 Bay Banks Notes may be redeemed, at the Company's option, on any scheduled interest payment date. As of September 30, 2021, the net carrying amount of the 2029 Bay Banks Notes was $25.8 million, inclusive of a $830 thousand purchase accounting adjustment (premium) recorded at the effective date of the Bay Banks Merger. For the three and nine months ended September 30, 2021, the effective interest rate on the 2029 Bay Banks Notes was 4.63% and 4.64%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium).

The 2025 Bay Banks Notes had interest, payable on the first of March and September of each year, at a fixed interest rate of 6.50% per year. The 2025 Bay Banks Notes were redeemable in whole or in part, without premium or penalty, at any interest payment date at the option of the Company. The Company exercised its right to redeem the 2025 Bay Banks Notes in the third quarter of 2021 and repaid the 2025 Bay Banks Notes in full.

On May 28, 2020, the Company issued a subordinated note with a principal amount of $15.0 million which matures on June 1, 2030 (the “2030 Note”). The 2030 Note is an unsecured, subordinated obligation of the Company and ranks junior in right of payment to the Company’s existing and future senior indebtedness and ranks in parity with the other subordinated notes issued by the Company. Beginning on June 1, 2025 through maturity, the 2030 Note may be redeemed, at the Company's option, on any scheduled interest payment date. The aggregate carrying value of the 2030 Note, including capitalized, unamortized debt issuance costs, was $14.7 million as of September 30, 2021. For both the three and nine months ended September 30, 2021, the effective interest rate on the 2020 Note was 6.12%.

On November 20, 2015, the Company issued an aggregate of $10.0 million of subordinated notes with a maturity date of December 1, 2025 (the “2025 Notes”). The 2025 Notes could be redeemed in part or in full at any interest payment date on or after December 1, 2020, at the option of the Company. The Company exercised its right to redeem the 2025 Notes in the second quarter of 2021 and repaid the 2025 Notes in full.

Note 9 – Derivatives

The Company enters into interest rate swap ~~agreement (‘‘swap agreement’’)~~agreements to facilitate the risk management strategies ~~needed in order~~ to accommodate the needs of its banking customers. The Company mitigates the risk of entering into these ~~loan~~interest rate swap agreements by entering into equal and offsetting swap agreements with ~~a highly rated~~highly-rated third-party financial ~~institution. This~~institutions. These back-to-back interest rate swap ~~agreement is a~~agreements are free-standing ~~derivative~~derivatives and isare recorded at fair value in the ~~Company’s~~ 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 recorded as other assets and other liabilities on the Company’s consolidated balance sheets as of the dates stated.


	September 30, 2021
(Dollars in thousands)	Notional Amount		Fair Value
Interest rate swap agreement
Receive fixed/pay variable swaps	$	2,064	$	224
Pay fixed/receive variable swaps		2,064		(224	)

	December 31, 2020
(Dollars in thousands)	Notional Amount		Fair Value
Interest rate swap agreement
Receive fixed/pay variable swaps	$	2,100	$	339
Pay fixed/receive variable swaps		2,100		(339	)

The Company entered into various cash flow hedges as defined by ASC 815-20, Derivatives and Hedging. The objective of these interest rate swap agreements was to hedge the risk of variability in the Company’s cash flows attributable to changes in the 3-month LIBOR index rate component of forecasted three-month fixed rate funding advances from the FHLB. The hedging objective was to reduce the interest rate risk associated with the Company’s fixed rate advances from the designation date and through the maturity date. The identified hedge layers are presented in the following table (in thousands). Each hedge layer has a variable receive leg of 3-month LIBOR and a pay fixed leg of 1.80%.


3-Month LIBOR		Cash & Securities		Period Hedged
Hedged Notional		Exposure Hedged		From	To
$	15,000	$	15,000	July 1, 2019	July 1, 2022
$	25,000	$	25,000	August 2, 2019	February 2, 2023
$	10,000	$	10,000	August 29, 2019	August 29, 2023

At the time the hedges identified in the table above expire, new hedges will begin. These new hedges are summarized in the following table (in thousands). Each hedge layer has a variable receive leg of 3-month LIBOR and a pay fixed leg ranging from 0.92% to 0.95%.


3-Month LIBOR		Cash & Securities		Period Hedged
Hedged Notional		Exposure Hedged		From	To
$	15,000	$	15,000	July 1, 2022	July 1, 2032
$	25,000	$	25,000	February 2, 2023	February 2, 2033
$	10,000	$	10,000	August 29, 2023	August 29, 2033

Beginning in 2020, the Company entered into three additional hedges summarized in the following table (in thousands). Each hedge layer has a variable receive leg of 3-month LIBOR and a pay fixed leg ranging from 0.83% to 0.86%.


3-Month LIBOR		Cash & Securities		Period Hedged
Hedged Notional		Exposure Hedged		From	To
$	20,000	$	20,000	March 13, 2020	March 13, 2030
$	35,000	$	35,000	May 6, 2020	May 6, 2027
$	10,000	$	10,000	May 29, 2020	May 29, 2027

The Company has the intent and ability to fund the 3-month rate advances during the term of these cash flow hedges. Interest rate swap assets and liabilities were $5.8 million and $1.2 million, respectively, as of September 30, ~~2019.~~2021, and $1.7 million and $2.7 million, respectively, as of December 31, 2020. The Company had cash collateral with

   September 30, 2019
   Notional Amount    Fair Value
(Dollars in thousands)

Interest Rate Swap Agreements

Receive Fixed/Pay Variable Swaps
   $ 2,156    $ 244
Pay Fixed/Receive Variable Swaps
   2,156    (244 )

the counterparties of $6.0 million included within other assets on the consolidated balance sheets as of September 30, 2021 and December 31, 2020.

The Bank also participates in a “mandatory” delivery program for its government guaranteed and conventional mortgage loans held for sale. Under the mandatory delivery ~~system,~~program, loans with interest rate locks are paired with the sale of a ~~TBA~~to-be-announced mortgage-backed security bearing similar attributes. Under the mandatory delivery program, the Bank commits to deliver loans to an investor at an agreed upon price ~~prior to~~after the close of such loans. This differs from a “best efforts” delivery, which sets the sale price with the investor on aloan-by-loan basis when each loan is locked.

~~Note 6 – Employee Benefit Plan~~

~~The Company has a 401(k) Profit Sharing Plan that covers eligible employees. Employees may make voluntary contributions subject to certain limits based on federal tax laws.~~ The Bank ~~matches 100 percent~~had entered into $93.7 million and $154.3 million of ~~an employee’s contribution up to five percent~~rate lock commitments with borrowers, net of ~~his or her salary following one year~~expected fallout, as of continuous service and the benefits vest immediately. The Company’s Board of Directors may make additional contributions at its discretion. Employees become eligible to participate in the discretionary contributions after one year of continuous service and the benefits vest over a five-year period. For the nine months ended September 30, ~~2019 and the year ended December 31, 2018, total expenses attributable to this plan were $454,439 and $364,653, respectively.~~

In 2013, the Company established an Employee Stock Ownership Plan (ESOP) that covers eligible employees. Benefits in the Plan vest over a five-year period. Contributions to the plan are made at the discretion of the Board of Directors and may include both the matching component to employees’ elective deferrals into the 401(k) plan and discretionary profit contributions. The Plan held 79,800 total shares of Company stock at September 30, 20192021 and December 31, ~~2018. All shares issued to~~2020, respectively, and ~~held~~$144.5 million and $97.1 million of closed loan inventory waiting for sale, which were hedged by $241.6 million and $225.0 million in forward to-be-announced mortgage-backed securities as of September 30, 2021 and December 31, 2020, respectively. Mortgage derivative assets totaled $3.5 million and $5.3 million as of September 30, 2021 and December 31, 2020, respectively, and mortgage derivative liabilities, which are included in other liabilities on the ~~Plan are considered outstanding in the computation~~consolidated balance sheets, were $0 and $1.6 million as of ~~earnings per share. The Plan or the Company is required to purchase shares from separated employees at a price determined by a third-party appraisal.~~September 30, 2021 and December 31, 2020, respectively.

Note 710 – Stock-Based Compensation

The Company has granted restricted stock awards to employees and directors under the ~~Blue Ridge Bank~~Company’s 2017 Equity Incentive Plan. The restricted stock awards are considered fixed awards as the number of shares and fair value is known at the date of grant, and the fair value of the award at the grant date is amortized over the ~~vesting~~requisite service period.~~Non-cash~~ ~~compensation~~ Compensation expense recognized in the ~~Consolidated Statements~~consolidated statements of ~~Income~~income related to restricted stock awards, net of ~~estimated~~ forfeitures, ~~in thousands,~~ was ~~$160~~$511 thousand and ~~$89~~$848 thousand for the three and nine months ended September 30, 2021, respectively, and was $199 thousand and $331 thousand for the three and nine months ended September 30, 2020, respectively. On July 1, 2021, the Company granted restricted stock awards relating to 173,484 shares of the Company's common stock to employees and directors. At September 30, 2021, restricted stock awards relating to 237,785 shares of the Company’s common stock were outstanding and unrecognized compensation expense related to the restricted stock awards at September 30, 2021 totaled $3.1 million.

The Company converted fully vested options to purchase 198,362 shares of Bay Banks common stock into options to purchase 99,176 shares (148,764 on a post Stock Split basis) of the Company’s common stock pursuant to the Bay Banks Merger. The estimated fair value of the converted stock options as of the effective date of the merger was $472 thousand and included in the Bay Banks Merger consideration.

The estimated fair value of $472 thousand was determined using the Black-Scholes Model, which requires the use of assumptions including the risk-free interest rate, expected term, expected volatility (of the underlying stock), and expected dividend yield. The following table presents the ranges and weighted averages of assumptions used to determine the estimated fair value of the converted stock options in the Bay Banks Merger.


	As of January 31, 2021
	Range	Weighted-average
Risk free interest rate (U.S. Treasury)	0.06% - 0.45%	0.32%
Expected term (years)	0.14 - 5.00	3.89
Expected volatility	21.2% - 38.2%	32.8%
Expected dividend yield	2.85%	2.85%

The weighted-average exercise price and remaining contractual life (in years) of the stock options as of the date of the Bay Banks Merger was $14.83 per stock option ($9.89 on a post Stock Split basis) and 5.47 years, respectively.

During the nine months ended September 30, ~~2019~~2021, 83,647 and ~~2018,~~380 stock options were exercised and forfeited, respectively, ~~and $40 thousand and $67 thousand for the three months ended~~resulting in 64,737 options outstanding as of September 30, ~~2019, and 2018, respectively. The fair value of restricted stock awards at September 30, 2019 was $1.0 million.~~2021.

Note 8–11 – 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 ~~Company’s~~ 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.

~~Note 8– Fair Value, continued~~

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 flow. 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 ~~Federal Reserve Bank~~FRB and ~~Federal Home Loan Bank~~FHLB stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table.

Rabbi trust assets

As a result of the Bay Banks Merger, the Company acquired and assumed a rabbi trust and 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.

Cash flow hedges (interest rate swaps) hedge against the risk of variability in cash flows attributable to changes in the 3-month LIBOR index rate component of forecasted 3-month fixed rate funding advances from the FHLB. These cash flow hedges 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:~~basis as of the dates stated.


	September 30, 2021
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Securities available for sale
State and municipals	$	41,852	$	—	$	41,852	$	—
U.S. Treasury and agencies		48,548		—		48,548		—
Mortgage backed securities		238,923		—		238,923		—
Corporate bonds		30,775		—		30,775		—
Total securities available for sale	$	360,098	$	—	$	360,098	$	—
Other assets
Rabbi trust assets	$	963	$	963	$	—	$	—
Mortgage derivative asset		3,456		—		3,456		—
Interest rate swap asset		5,838		—		5,838		—
Other liabilities
Mortgage derivative liability	$	—	$	—	$	—	$	—
Interest rate swap liability		1,239		—		1,239		—


	December 31, 2020
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Securities available for sale
State and municipals	$	14,259	$	—	$	14,259	$	—
U.S. Treasury and agencies		2,409		—		2,409		—
Mortgage backed securities		72,635		—		72,635		—
Corporate bonds		20,172		—		20,172		—
Total securities available for sale	$	109,475	$	—	$	109,475	$	—
Other assets
Mortgage derivative asset	$	5,293	$	—	$	5,293	$	—
Interest rate swap asset		1,716		—		1,716		—
Other liabilities
Mortgage derivative liability	$	1,569	$	—	$	1,569	$	—
Interest rate swap liability		2,735		—		2,735		—

   September 30, 2019
(In thousands)    Total    Level 1    Level 2    Level 3
Available for sale securities

U.S. Treasury and agencies
   $ 3,331    $ —      $ 3,331    $ —
Mortgage backed securities
   111,790    —      111,790    —
Corporate bonds
   6,619    —      6,619    —








Total securities available for sale
   $ 121,740    $ —      $ 121,740    $ —








   December 31, 2018
(In thousands)    Total    Level 1    Level 2    Level 3
Available for sale securities

State and municipal
   $ 1,003    $ —      $ 1,003    $ —
U.S. Treasury and agencies
   3,167    —      3,167    —
Mortgage backed securities
   28,370    —      28,370    —
Corporate bonds
   5,507    —      5,507    —








Total securities available for sale
   $ 38,047    $ —      $ 38,047    $ —

~~Note 8– Fair Value, continued~~

Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application oflower-of-cost-or-market accounting or write-downs of individual assets.

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

Mortgage Servicing Rights

The Company records MSR assets initially at fair value and subsequently accounts for them under the amortization method and performs an impairment assessment each reporting period. The amortization method requires that the MSR assets be recorded at the lower of cost or fair value.

The following tables present the change in MSR assets using Level 3 inputs as of and for the periods stated.

(Dollars in thousands)

MSR Assets

Balance, December 31, 2020

$
7,084

Acquired in Bay Banks Merger

997

Additions

9,252

Write-offs

(616
)
Amortization

(1,741
)
Impairments

—

Fair value adjustments

3,567

Balance, September 30, 2021 - fair value

$
18,543

Balance, September 30, 2021 - amortized cost

$
14,976

(Dollars in thousands)

MSR Assets

Balance, December 31, 2019

$
—

Additions

7,539

Write-offs

(61
)
Amortization

(391
)
Impairments

(3
)
Fair value adjustments

207

Balance, December 31, 2020 - fair value

$
7,291

Balance, December 31, 2020 - amortized cost

$
7,084

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 September 30, 2021 and December 31, 2020, the Company was servicing approximately $1.75 billion and $846.5 million 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 28.1 basis points as of September 30, 2021. Estimated base annual servicing costs were $65.00 to $80.00 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 12.16% as of September 30, 2021. A base discount rate of 9.0% to 12.0% (9.30% weighted average discount rate) was then applied to each pool’s projected future cash flows as of September 30, 2021. 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.

Impaired Loans

Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. The measurement of loss associated with impaired loans can be based on either the discounted cash flows of the loan or the fair value of the collateral, if any, less estimated costs to sell, if the loan is collateral dependent. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given 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 using observable market data (Level 2). If the collateral value is significantly adjusted due to differences in the comparable properties or is discounted 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 based on the borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statements or aging reports (Level 3). Fair value adjustments are recorded in the period incurred as provision for loan losses on the consolidated statements of income.

Loans Held for Sale

Mortgage loans originated or purchased and intended for sale in the secondary market are carried at ~~the lower of cost or~~ estimated market value in the aggregate. The agreed upon sales price is considered fair value as all of these loans are under agreements to sell to investors at the time of origination. This amount is generally the loan’s principal amount. Changes in fair value are recognized in the ~~Gain~~gain on ~~Sale~~sale of ~~Mortgages~~mortgages on the ~~Consolidated Statements~~consolidated statements of ~~Income.~~income.

Other Real Estate Owned

Certain assets such as ~~other real estate owned (OREO)~~OREO are measured at fair value less ~~cost~~estimated costs to sell. Valuation of ~~other real estate owned~~OREO is generally determined using current appraisals from independent ~~parties,~~appraisers, a ~~level two~~Level 2 input. 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 ~~realtor,~~real estate agent or broker, estimated selling costs reduce the ~~fair value,~~listing price, resulting in a valuation based on Level 3 inputs.

The Company markets other real estate owned both independently and with local realtors. Properties marketed by realtors are discounted by selling costs. Properties that the Company markets independently are not discounted by selling costs.

The following ~~table summarizes the Company’s other real estate owned~~tables summarize assets that were measured at fair value on a nonrecurring basis ~~during~~as of the ~~period.~~dates stated.


	September 30, 2021
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	8,233	$	—	$	—	$	8,233
Loans held for sale		144,111		—		144,111		—
OREO		227		—		—		227

~~September 30, 2019~~

~~(In thousands)~~

~~Total~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Other real estate owned~~

—


	December 31, 2020
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Impaired loans, net	$	2,187	$	—	$	—	$	2,187
Loans held for sale		148,209		—		148,209		—

   December 31, 2018
(In thousands)    Total    Level 1    Level 2    Level 3
Other real estate owned
   $ 134    $ —      $ —      $ 134

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

~~Fair Value At~~
~~September 30,~~
~~2019~~

~~Valuation Technique~~

~~Significant Unobservable Inputs~~

~~Range~~

~~Other real estate owned~~

—

~~Discounted appraised value~~

~~Discounted for selling costs~~

~~N/A~~

Balance as of

Valuation

Unobservable

Weighted

(Dollars in thousands)

September 30, 2021

Technique

Input

Average

Impaired loans, net

8,233

Discounted appraised value

Selling costs

OREO

227

Discounted appraised value

Selling costs

   Fair Value At
December 31,
2018    Valuation Technique    Significant Unobservable Inputs    Range
Other real estate owned
   $ 134    Discounted appraised value    Discounted for selling costs    15%-35%

Balance as of

Valuation

Unobservable

Weighted

(Dollars in thousands)

December 31, 2020

Technique

Input

Average

Impaired loans, net

2,097

Discounted appraised value

Selling costs

Discounted cash flows

Discount rate

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it ispractical 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.

~~Note 9 – Disclosures About Fair Value~~The carrying values of ~~Financial Instruments~~cash and due from banks and federal funds sold are of such short duration that carrying value reasonably approximates fair value (Level 1).

The carrying values of accrued interest receivable and accrued interest payable are of such short duration that carrying value reasonably approximates fair value (Level 2).

The carrying value of restricted equity investments approximates fair value based on the redemption provisions of the issuer (Level 2).

The fair value of the Company’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, impaired loans, and

all other loans. The results are then adjusted to account for credit risk as described above. The fair value of the Company’s loan portfolio also considers illiquidity risk through the use of a discounted cash flow model to compensate for based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan. This consideration of both credit risk and illiquidity risk provides an estimated exit price for the Company’s loan portfolio. Loans held for investment are reported as Level 3.

There is 0 credit risk associated with PPP loans as they are fully guaranteed by the U.S. government. Further, the Company believes the PPP loans will be forgiven within 1.5 years for PPP 1 loans and between one and three years for PPP 2 loans, depending on the loan’s balance, and any fair value adjustment for potential interest rate change was considered inconsequential as of September 30, 2021. As a result, the carrying value of PPP loans reasonably approximates fair value (Level 3).

The carrying value of cash surrender value of life insurance reasonably approximates fair value. The Company records these policies at their cash surrender value, which is estimated using information by insurance carriers (Level 2).

The carrying value of noninterest-bearing deposits approximates fair value (Level 1). The carrying values of interest-bearing demand, money market, and savings deposits approximates fair value based on their current pricing and are reported as Level 2. The fair value of certificates of deposits were valued using a discounted cash flow calculation that includes a market rate analysis of the current rates offered by market participants for certificates of deposits that mature in the same period. Time deposits are reported as Level 3.

The fair value of the FHLB borrowings is estimated by discounting the future cash flows using current interest rates offered for similar advances (Level 2).

The fair value of FRB borrowings was approximated as its carrying value as there is no comparable debt to PPPLF advances (Level 2).

The fair value of the Company’s subordinated notes was estimated by utilizing recent issuance rates for subordinated debt offerings of similar issuer size (Level 3).

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values ~~and related carrying amounts,~~ of the Company’s financial instruments will change when interest rate levels change, and these changes may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. Borrowers with fixed rate obligations, however, are ~~as follows:~~

      Fair Value Measurements at September 30, 2019
   Carrying
Amount    Quoted
Prices in
Active
Markets for
Identical
Assets (Level 1)    Significant
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Fair Value
(in thousands)
Financial Assets

Cash and short-term investments
   $ 22,318    $ 22,318    $ —      $ —      $ 22,318
Federal funds sold
   285    285    —      —      285
Investment securities
   142,712    —      143,210    —      143,210
Loans held for sale
   80,255    —      80,255    —      80,255
Net loans held for investment
   456,474    —      —      462,414    462,414
Accrued interest receivable
   2,162    —      2,162    —      2,162
Bank-owned life insurance
   8,871    —      8,871    —      8,871
Financial Liabilities

Deposits
   520,280    —      428,908    85,162    514,070
Other borrowed funds
   129,600    —      129,908    —      129,908
Subordinated debt, net
   9,792    —      —      9,792    9,792
Accrued interest payable
   834    —      834    —      834

      Fair Value Measurements at December 31, 2018
   Carrying
Amount    Quoted
Prices in
Active
Markets for
Identical
Assets (Level 1)    Significant
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Fair Value
(in thousands)
Financial Assets

Cash and short-term investments
   $ 15,026    $ 15,026    $ —      $ —      $ 15,026
Federal funds sold
   546    546    —      —      546
Investment securities
   58,750    —      58,688    —      58,688
Loans held for sale
   29,233    —      29,233    —      29,233
Net loans held for investment
   411,288    —      —      404,888    404,888
Accrued interest receivable
   1,769    —      1,769    —      1,769
Bank-owned life insurance
   8,455    —      8,455    —      8,455
Financial Liabilities

Deposits
   415,027    —      323,280    81,070    404,350
Other borrowed funds
   73,100    —      73,113    —      73,113
Subordinated debt, net
   9,766    —      —      9,766    9,766
Accrued interest payable
   395    —      395    —      395

~~Note 10 – Business Segments~~

~~The Company utilizes its subsidiaries~~less likely to prepay in a rising rate environment and ~~divisions~~more likely to ~~provide multiple business segments including retail banking, mortgage banking,~~prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and ~~payroll processing services. Revenues from retail banking operations consist primarily~~less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest ~~earned on~~rate risk by adjusting terms of new loans and ~~investment~~deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

The following tables present the estimated fair values, related carrying amounts, and ~~service charges on deposit accounts. Mortgage Banking operating revenues consist principally~~valuation level of ~~gains on sales~~the financial instruments as of ~~loans in~~ the ~~secondary market, loan origination fee income and interest earned on mortgage loans held for sale. Revenues from payroll services consist of fees charged to customers for payroll services.~~dates stated.

Nine Months Ended September 30, 2019

(in thousands)
   Blue Ridge
Bank    Blue
Ridge
Bank
Mortgage
Division    MoneyWise
Payroll
Solutions, Inc. Parent Only Eliminations Blue Ridge
Bankshares,
Inc.
Consolidated
Revenues:

Interest income
   $ 21,582    $ 844    $ —   $ 4 $ —   $ 22,430
Service charges on deposit accounts
   459    —      —   —   —   459
Mortgage banking income, net
   —      10,967    —   —   —   10,967
Payroll processing revenue
   —      —      743 —   —   743
Other operating income
   2,056    —      —   48 (18 ) 2,086






Total income
   24,097    11,811    743 52 (18 ) 36,685






Expenses:

Interest expense
   5,921    490    —   532 —   6,943
Provision for loan losses
   1,465    —      —   —   —   1,465
Salary and benefits
   6,167    7,711    271 —   —   14,149
Other operating expenses
   5,194    2,697    344 851 (18 ) 9,068






Total expense
   18,747    10,898    615 1,383 (18 ) 31,625






Income (loss) before income taxes
   5,350    913    128 (1,331 ) —   5,060






Income tax expense
   932    193    22 (158 ) —   989






Net income (loss)
   $ 4,418    $ 720    $ 106 $ (1,173 ) $ —   $ 4,071






Net (income) loss attributable to noncontrolling interest
   $ —      $ —      $ (21 ) $ —   $ —   $ (21 )






Net income (loss) attributable to Blue Ridge Bankshares
   $ 4,418    $ 720    $ 85 $ (1,173 ) $ —   $ 4,050

Three Months Ended September 30, 2019

(in thousands)
   Blue Ridge
Bank    Blue
Ridge
Bank
Mortgage
Division    MoneyWise
Payroll
Solutions, Inc. Parent Only Eliminations Blue Ridge
Bankshares,
Inc.
Consolidated
Revenues:

Interest income
   $ 7,757    $ 359    $ —   $ 2 $ —   $ 8,118
Service charges on deposit accounts
   171    —      —   —   —   171
Mortgage banking income, net
   —      3,943    —   —   —   3,943
Payroll processing revenue
   —      —      232 —   —   232
Other operating income
   609    —      —   23 (6 ) 626






Total income
   8,537    4,302    232 25 (6 ) 13,090






Expenses:

Interest expense
   2,289    215    —   178 —   2,682
Provision for loan losses
   570    —      —   —   —   570
Salary and benefits
   2,126    2,858    95 —   —   5,079
Other operating expenses
   1,784    955    119 275 (6 ) 3,127






Total expense
   6,769    4,028    214 453 (6 ) 11,458






Income (loss) before income taxes
   1,768    274    18 (428 ) —   1,632






Income tax expense (benefit)
   344    80    (1 ) (44 ) —   379






Net income (loss)
   $ 1,424    $ 194    $ 19 $ (384 ) $ —   $ 1,253






Net (income) loss attributable to noncontrolling interest
   $ —      $ —      $ (3 ) $ —   $ —   $ (3 )






Net income (loss) attributable to Blue Ridge Bankshares
   $ 1,424    $ 194    $ 16 $ (384 ) $ —   $ 1,250


	Carrying Value as of		Fair Value as of		Fair Value Measurements as of September 30, 2021
(Dollars in thousands)	September 30, 2021		September 30, 2021		Level 1		Level 2		Level 3
Financial Assets
Cash and due from banks	$	53,077	$	53,077	$	53,077	$	—	$	—
Federal funds sold		144,376		144,376		144,376		—		—
Securities available for sale		360,098		360,098		—		360,098		—
Restricted equity and other investments		19,343		19,343		—		19,343		—
PPP loans receivable, net		46,648		46,648		—		—		46,648
Loans held for investment, net		1,739,839		1,732,771		—		—		1,732,771
Accrued interest receivable		9,900		9,900		—		9,900		—
Bank owned life insurance		46,278		46,278		—		46,278		—
Financial Liabilities
Noninterest-bearing demand deposits	$	684,859	$	684,859	$	684,859	$	—	$	—
Interest-bearing demand and money market deposits		828,477		828,477		—		828,477		—
Savings deposits		144,904		144,904		—		144,904		—
Time deposits		541,964		547,140		—		—		547,140
FHLB borrowings		125,115		124,900		—		124,900		—
FRB borrowings		33,857		33,857		—		33,857		—
Subordinated notes, net		40,503		42,048		—		—		42,048


	Carrying Value as of		Fair Value as of		Fair Value Measurements as of December 31, 2020
(Dollars in thousands)	December 31, 2020		December 31, 2020		Level 1		Level 2		Level 3
Financial Assets
Cash and due from banks	$	117,945	$	117,945	$	117,945	$	—	$	—
Federal funds sold		775		775		775		—		—
Securities available for sale		109,475		109,475		—		109,475		—
Restricted equity investments		11,173		11,173		—		11,173		—
PPP loans receivable, net		288,533		288,533		—		—		288,533
Loans held for investment, net		719,056		720,396		—		—		720,396
Accrued interest receivable		5,428		5,428		—		5,428		—
Bank owned life insurance		15,724		15,724		—		15,724		—
Financial Liabilities
Noninterest-bearing demand deposits	$	333,051	$	333,051	$	333,051	$	—	$	—
Interest-bearing demand and money market deposits		282,263		282,263		—		282,263
Savings deposits		78,352		78,352		—		78,352		—
Time deposits		251,443		257,647		—		—		257,647
FHLB borrowings		115,000		114,983		—		114,983		—
FRB borrowings		281,650		281,650		—		281,650		—
Subordinated notes, net		24,506		25,830		—		—		25,830

~~Note 10 – Business Segments, continued~~

Nine Months Ended September 30, 2018

(in thousands)
   Blue Ridge
Bank    Blue
Ridge
Bank
Mortgage
Division    MoneyWise
Payroll
Solutions, Inc. Parent Only Eliminations Blue Ridge
Bankshares,
Inc.
Consolidated
Revenues:

Interest income
   $ 15,738    $ 325    $ —   $ 6 $ —   $ 15,738
Service charges on deposit accounts
   479    —      —   —   —   479
Mortgage banking income, net
   —      4,868    —   —   —   4,868
Payroll processing revenue
   —      —      739 —   —   739
Other operating income
   1,262    —      —   4 (18 ) 1,248






Total income
   17,479    5,193    739 10 (18 ) 23,072






Expenses:

Interest expense
   3,032    —      —   532 —   3,564
Provision for loan losses
   640    —      —   —   —   640
Salary and benefits
   3,851    3,980    296 —   —   8,127
Other operating expenses
   4,800    776    397 255 (18 ) 6,210






Total expense
   12,323    4,756    693 787 (18 ) 18,541






Income (loss) before income taxes
   4,825    437    46 (777 ) —   4,531






Income tax expense
   999    92    8 (155 ) —   944






Net income (loss)
   $ 3,826    $ 345    $ 38 $ (622 ) $ —   $ 3,587






Net (income) loss attributable to noncontrolling interest
   $ —      $ —      $ (8 ) $ —   $ —   $ (8 )






Net income (loss) attributable to Blue Ridge Bankshares
   $ 3,826    $ 345    $ 30 $ (622 ) $ —   $ 3,579

Three Months Ended September 30, 2018

(in thousands)
   Blue Ridge
Bank    Blue
Ridge
Bank
Mortgage
Division    MoneyWise
Payroll
Solutions, Inc. Parent Only Eliminations Blue Ridge
Bankshares,
Inc.
Consolidated
Revenues:

Interest income
   $ 5,255    $ 184    $ —   $ 6 $ —   $ 5,445
Service charges on deposit accounts
   155    —      —   —   —   155
Mortgage banking income, net
   —      2,289    —   —   —   2,289
Payroll processing revenue
   —      —      220 —   —   220
Other operating income
   755    —      —   4 (6 ) 753






Total income
   6,165    2,473    220 10 (6 ) 8,862






Expenses:

Interest expense
   1,159    —      —   176 —   1,335
Provision for loan losses
   225    —      —   —   —   225
Salary and benefits
   963    1,745    103 —   —   2,811
Other operating expenses
   2,066    550    103 179 (6 ) 2,892






Total expense
   4,413    2,295    206 355 (6 ) 7,263






Income (loss) before income taxes
   1,752    178    14 (345 ) —   1,599






Income tax expense
   366    33    1 (71 ) —   329






Net income (loss)
   $ 1,386    $ 145    $ 13 $ (274 ) $ —   $ 1,270






Net (income) loss attributable to noncontrolling interest
   $ —      $ —      $ (1 ) $ —   $ —   $ (1 )






Net income (loss) attributable to Blue Ridge Bankshares
   $ 1,386    $ 145    $ 12 $ (274 ) $ —   $ 1,269

~~Note 11 - Other Borrowed Funds~~

Other Borrowings of $129.6 million at September 30, 2019 are composed of advances from the Federal Home Loan Bank of Atlanta (“FHLB”). The Company utilizes the FHLB advance programs to fund loan growth and provide liquidity. Other borrowings increased $56.5 million from $73.1 million at December 31, 2018.

~~FHLB advances outstanding and related terms at September 30, 2019 and December 31, 2018 are shown in the following tables:~~

(In thousands)       FHLB Advances Outstanding
September 30, 2019
Type advance
   Balance    Interest rate Maturity date
Fixed rate
   $ 15,000    2.31 % October 1, 2019
Fixed rate
   5,000    2.58 % October 4, 2019
Fixed rate
   5,000    2.15 % October 16, 2019
Fixed rate
   4,000    2.59 % October 23, 2019
Fixed rate
   3,500    2.58 % October 30, 2019
Fixed rate
   25,000    2.24 % November 4, 2019
Fixed rate
   10,000    2.13 % November 29, 2019
Fixed rate
   7,000    2.51 % November 29, 2019
Fixed rate
   10,000    2.46 % December 4, 2019
Daily rate
   10,000    2.07 % December 30, 2019
Fixed rate
   26,100    2.49 % May 4, 2020
Fixed rate
   5,000    1.99 % May 6, 2020
Fixed rate
   4,000    2.15 % September 9, 2020



FHLB Advances, net
   $ 129,600

(In thousands)       FHLB Advances Outstanding
December 31, 2018
Type advance
   Balance    Interest rate Maturity date
Fixed rate
   $ 5,000    2.42 % January 3, 2019
Fixed rate
   2,800    2.40 % January 7, 2019
Fixed rate
   4,500    2.38 % January 9, 2019
Fixed rate
   5,000    2.46 % January 16, 2019
Fixed rate
   1,200    2.49 % January 18, 2019
Fixed rate
   8,000    2.47 % January 31, 2019
Fixed rate
   3,000    2.51 % March 8, 2019
Fixed rate
   2,000    2.54 % March 19, 2019
Fixed rate
   5,000    2.55 % April 1, 2019
Fixed rate
   3,500    2.62 % April 30, 2019
Fixed rate
   4,000    1.34 % May 31, 2019
Fixed rate
   2,000    2.66 % June 19, 2019
Fixed rate
   1,000    3.95 % August 27, 2019
Daily rate
   22,100    2.65 % August 30, 2019
Fixed rate
   4,000    2.13 % September 30, 2019



FHLB Advances, net
   $ 73,100

Note 12 ~~- Subordinated Debt~~

On November 20, 2015, the Company entered into a Subordinated Note Purchase Agreement (the “Purchase Agreement”) with 14 institutional accredited investors under which the Company issued an aggregate of $10,000,000 of subordinated notes (the “Notes”) to the institutional accredited investors. The Notes have a maturity date of December 1, 2025. The Notes bear interest, payableon the 1st of June and December of each year, commencing June 1, 2016, at a fixed rate of 6.75% per year for the first five years, and thereafter will bear a floating interest rate of LIBOR plus 512.8 basis points. The Notes are not convertible into common stock or preferred stock and are not callable by the holders. The Company has the right to redeem the Notes, in whole or in part, without premium or penalty, at any interest payment date on or after December 1, 2020 and prior to the maturity date, but in all cases in a principal amount with integral multiples of $1,000, plus interest accrued and unpaid through the date of redemption. If an event of default occurs, such as the bankruptcy of the Company, the holder of a Note may declare the principal amount of the Note to be due and immediately payable. The Notes are unsecured, subordinated obligations of the Company and will rank junior in right of payment to the Company’s existing and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory reporting.

As part of the transaction, the Company incurred issuance costs totaling $338,813. These costs are being amortized over the life of the Notes. The following table summarizes the balance of the Notes and related issuance costs at September 30, 2019 and December 31, 2018:

   September 30,    December 31,
(In thousands)    2019    2018
Subordinated debt
   $ 10,000    $ 10,000
Unamortized issuance costs
   (208 )    (233 )




Subordinated debt, net
   $ 9,792    $ 9,767

~~Note 13 - Revenue from Contracts with Customers~~

~~In May 2014, the FASB issued ASUNo. 2014-09,~~~~Revenue from Contracts with Customers (Topic 606)~~~~. ASU2014-09~~ is a comprehensive revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

Interest income, loan fees, realized securities gains and losses, bank owned life insurance income, SBIC income, and mortgage banking revenue are not in the scope of ASC Topic 606. All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income in the consolidated statements of income. Incremental costs of obtaining a contract are expensed when incurred when the amortization period is one year or less.

~~A description of the Company’s significant sources of revenue accounted for under ASC 606 is as follows:~~

~~Service fees on deposit accounts~~ are fees charged to deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which are earned based on specific transactions or customer activity within a customer’s deposit account, are recognized at the time the related transaction or activity occurs, as it is at this point when the customer’s request has been fulfilled. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the performance obligation was satisfied. Overdraft fees are recognized when the overdraft occurs. Service fees on deposit accounts are paid through a direct charge to the customer’s account.

~~Bank card revenue~~ is comprised of interchange revenue and ATM fees. Interchange revenue is earned when bank debit and credit cardholders conduct transactions through VISA, MasterCard, and other payment networks. Interchange fees represent a percentage of the underlying cardholder’s transaction value and are generally recognized daily, concurrent with the transaction processing services provided to the cardholder. ATM fees are earned when a~~non-Bank~~ ~~cardholder uses a Bank ATM. ATM fees are recognized daily, as the related ATM transactions are settled.~~

~~Payroll processing income~~ ~~is comprised of fees charged to customers for payroll services through MoneyWise Payroll Solutions, Inc., of which Blue Ridge Bank, N.A. owns a controlling interest.~~

~~Note 13 - Revenue from Contracts with Customers, continued~~

~~The following table illustrates our totalnon-interest~~ ~~income segregated by revenues within the scope of ASC Topic 606 and those which are within the scope of other ASC Topics:~~

   Nine Months Ended September 30,
   2019    2018
Service fees on deposit accounts
   $ 459    $ 479
Bank card revenue
   408    356
Payroll processing income
   743    739




Revenue from contracts with customers
   1,610    1,574
Non-interest income within scope of other ASC topics
   12,645    5,435




Total noninterest income
   $ 14,255    $ 7,009

~~Note 14~~ – Leases

~~On January 1, 2019, the Company adopted ASUNo. 2016-02~~~~“Leases (Topic 842)”~~ ~~and all subsequent ASUs that modified Topic 842. The Company elected the prospective application approach provided by ASU2018-11~~ and did not adjust prior periods for ASC 842. The Company also elected certain practical expedients within the standard and consistent with such elections did not reassess whether any expired or existing contracts are or contain leases, did not reassess the lease classification for any expired or existing leases, and did not reassess any initial direct costs for existing leases. The implementation of the new standard resulted in recognition of a~~right-of-use~~ ~~asset and lease liability of $7.0 million at the date of adoption, which is related to the Company’s lease of premises used in operations. Theright-of-use~~ ~~asset and lease liability are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets.~~

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease.Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs, and any incentives received from the lessor.

The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and ~~the Company has included~~ such extensions are included in ~~its~~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 Company assumed 5 operating leases for real estate in the Bay Banks Merger. In accordance with ASC 842–Leases, the original classification of each lease was retained and not re-evaluated as part of the accounting for the business combination. The Company measured each of the assumed lease liabilities as if the lease was new, determined the appropriate lease liability and right-of-use asset fair value based on the Company’s incremental borrowing rate at merger date, and obtained independent assessments of favorable or unfavorable market terms for each lease contract.

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


(Dollars in thousands)	September 30, 2019			September 30, 2021
Lease liabilities	$	6,672		$	7,113
Right-of-use assets	$	6,575
Weighted average remaining lease term		6.26 years
Right-of-use asset				$	5,645
Weighted average remaining lease term (years)				5.89
Weighted average discount rate		2.79	%		2.18	%

   For the Three Months Ended
September 30,    For the Nine Months Ended
September 30,
Lease Cost(in thousands)        2019            2018            2019            2018
Operating lease cost
   $ 369    $ 213    $ 1,104    $ 582
Total lease cost
   $ 369    $ 213    $ 1,104    $ 582
Cash paid for amounts included in the measurement of lease liabilities
   $ 218    $ 213    $ 874    $ 582

~~Note 14 – Leases, continued~~


	For the three months ended				For the nine months ended
(Dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Operating lease cost	$	400	$	458	$	1,806	$	1,347
Total lease cost	$	400	$	458	$	1,806	$	1,347

AThe 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.


	As of
(Dollars in thousands)	September 30, 2021
Three months ending December 31, 2021	$	507
Twelve months ending December 31, 2022		1,712
Twelve months ending December 31, 2023		1,330
Twelve months ending December 31, 2024		939
Twelve months ending December 31, 2025		785
Thereafter		2,427
Total undiscounted cash flows		7,700
Discount		(587	)
Lease liabilities	$	7,113

Note 13 – Minimum Regulatory Capital

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.

The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III rules”) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements phased-in over a multi-year schedule and fully phased-in at January 1, 2019. Under 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 ~~follows:~~of September 30, 2021 and December 31, 2020, the Bank met all capital adequacy requirements to which it is subject.

   As of
Lease payments due(in thousands)    September 30, 2019
Three months ending December 31, 2019
   $ 314
Twelve months ending December 31, 2020
   1,305
Twelve months ending December 31, 2021
   1,230
Twelve months ending December 31, 2022
   1,022
Twelve months ending December 31, 2023
   934
Twelve months ending December 31, 2024
   640
Thereafter
   1,979


Total undiscounted cash flows
   7,425
Discount
   (753 )


Lease liabilities
   $ 6,672

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.


	Actual					For Capital Adequacy Purposes					To Be Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2021
Total risk based capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	269,123		13.15	%	$	214,936		10.50	%	$	204,701		10.00	%
Tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	255,997		12.51	%	$	173,996		8.50	%	$	163,761		8.00	%
Common equity tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	255,997		12.51	%	$	143,291		7.00	%	$	133,056		6.50	%
Tier 1 leverage
(To average assets)
Blue Ridge Bank, N.A.	$	255,997		9.72	%	$	105,358		4.00	%	$	131,698		5.00	%


	Actual					For Capital Adequacy Purposes					To Be Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2020
Total risk based capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	109,219		13.10	%	$	87,574		10.50	%	$	83,404		10.00	%
Tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	98,751		11.84	%	$	70,893		8.50	%	$	66,723		8.00	%
Common equity tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	98,751		11.84	%	$	58,383		7.00	%	$	54,213		6.50	%
Tier 1 leverage
(To average assets)
Blue Ridge Bank, N.A.	$	98,751		8.34	%	$	47,363		4.00	%	$	59,180		5.00	%

The Company's principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amounts of dividends that may be paid without approval of regulatory agencies.

Note 14 – Commitments & 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 September 30, 2021 and December 31, 2020, the Company had outstanding loan commitments of $384.9 million and $126.0 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 September 30, 2021 and December 31, 2020, commitments under outstanding performance stand-by letters of credit totaled $655 thousand and $0, 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 September 30, 2021 and December 31, 2020, commitments under outstanding financial stand-by letters of credit totaled $3.6 million and $6.1 million, respectively. The credit risk of issuing stand-by letters of credit is essentially the same as that involved in extending loans to customers.

Reserves for unfunded commitments to borrowers as of September 30, 2021 and December 31, 2020 were $512 thousand and $0, respectively, and are included in other liabilities on the consolidated balance sheets.

The Company invests in various partnerships and limited liability companies, many of which invest in early-stage companies operating in fintech businesses. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At September 30, 2021, the Company has future commitments outstanding totaling $9.1 million related to these investments.

Note 15 – ~~Subsequent Events~~Earnings Per Share

~~On November 20, 2019,~~The following table shows the ~~Company declared a quarterly dividend~~calculation of ~~$0.1425~~basic and diluted EPS and the weighted average number of shares outstanding used in computing EPS and the effect on the weighted average number of shares outstanding of dilutive potential common stock. Basic EPS amounts are computed by dividing net income (the numerator) by the weighted average number of common shares outstanding (the denominator). Diluted EPS amounts assume the conversion, exercise, or issuance of all potential common stock instruments, unless the effect would be to reduce the loss or increase earnings per common share. Potential dilutive common stock instruments include exercisable stock options, including those converted and assumed in the Bay Banks Merger. For the three and nine months ended September 30, 2021, stock options for 0 and 433 shares of the Company’s common stock, respectively, were not included in the computation of diluted earnings per share ~~payable~~because their effects would have been anti-dilutive. Weighted average common shares outstanding, basic and dilutive, for all periods presented are presented on ~~December 13,~~a post Stock Split basis.


	For the three months ended				For the nine months ended
(Dollars in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021			September 30, 2020
Net income	$	6,806	$	5,059	$	39,685		$	12,117
Net loss (income) attributable to noncontrolling interest		4		4		(1	)		(1	)
Net income available to common shareholders	$	6,810	$	5,063	$	39,684		$	12,116
Weighted average common shares outstanding, basic		18,776,014		8,577,932		17,526,055			8,521,395
Effect of dilutive securities		22,711		—		9,341			—
Weighted average common shares outstanding, dilutive		18,798,725		8,577,932		17,535,396			8,521,395
Basic and diluted earnings per common share	$	0.36	$	0.59	$	2.26		$	1.42

Note 16 – Business Segments

The Company has identified 2 primary business segments, which are commercial banking and mortgage banking. Revenues from commercial banking operations consist primarily of interest earned on loans and investment securities and service charges on deposit accounts. Mortgage banking operating revenues consist principally of gains on sales of loans in the secondary market, loan origination fee income, and interest earned on mortgage loans held for sale.

The following tables present revenues and expenses by segment for the periods stated.


	For the three months ended September 30, 2021
(Dollars in thousands)	Commercial Banking		Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	23,019	$	706	$	29		$	—		$	23,754
Residential mortgage banking income, net		—		7,704		—			—			7,704
Mortgage servicing rights		—		1,827		—			—			1,827
Gain on sale of guaranteed government loans		108		—		—			—			108
Wealth and trust management		499		—		—			—			499
Service charges on deposit accounts		376		—		—			—			376
Increase in cash surrender value of bank owned life insurance		278		—		—			—			278
Payroll processing revenue		223		—		—			—			223
Bank and purchase card, net		497		—		—			—			497
Other income		979		—		1,075			(48	)		2,006
Total income		25,979		10,237		1,104			(48	)		37,272
Expenses:
Interest expense		1,913		73		644			—			2,630
Provision for loan losses		—		—		—			—			—
Salaries and employee benefits		7,417		7,357		—			—			14,774
Merger-related		216		—		1,225			—			1,441
Other		8,563		693		214			(48	)		9,422
Total expense		18,109		8,123		2,083			(48	)		28,267
Income (loss) before income taxes		7,870		2,114		(979	)		—			9,005
Income tax expense (benefit)		1,943		421		(165	)		—			2,199
Net income (loss)	$	5,927	$	1,693	$	(814	)	$	—		$	6,806
Net loss attributable to noncontrolling interest		4		—		—			—			4
Net income (loss) attributable to Blue Ridge Bankshares, Inc.	$	5,931	$	1,693	$	(814	)	$	—		$	6,810


	For the three months ended September 30, 2020
(Dollars in thousands)	Commercial Banking		Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	13,495	$	917	$	32		$	—		$	14,444
Residential mortgage banking income, net		—		14,400		—			—			14,400
Mortgage servicing rights		—		1,645		—			—			1,645
Gain on sale of guaranteed government loans		516		—		—			—			516
Service charges on deposit accounts		215		—		—			—			215
Increase in cash surrender value of bank owned life insurance		94		—		—			—			94
Payroll processing		221		—		—			—			221
Bank and purchase card, net		211		—		—			—			211
Other		317		—		—			(6	)		311
Total income		15,069		16,962		32			(6	)		32,057
Expenses:
Interest expense		2,132		72		411			—			2,615
Provision for loan losses		4,000		—		—			—			4,000
Salaries and employee benefits		3,425		8,455		—			—			11,880
Merger-related		19		—		1,245			—			1,264
Other		3,348		2,133		57			(6	)		5,532
Total expense		12,924		10,660		1,713			(6	)		25,291
Income (loss) before income taxes		2,145		6,302		(1,681	)		—			6,766
Income tax expense (benefit)		523		1,276		(92	)		—			1,707
Net income (loss)	$	1,622	$	5,026	$	(1,589	)	$	—		$	5,059
Net loss attributable to noncontrolling interest		4		—		—			—			4
Net income (loss) attributable to Blue Ridge Bankshares, Inc.	$	1,626	$	5,026	$	(1,589	)	$	—		$	5,063


	For the nine months ended September 30, 2021
(Dollars in thousands)	Commercial Banking			Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	77,501		$	2,536	$	105		$	—		$	80,142
Gain on sale of Paycheck Protection Program loans		24,315			—		—			—			24,315
Residential mortgage banking income, net		—			24,259		—			—			24,259
Mortgage servicing rights		—			6,905		—			—			6,905
Gain on sale of guaranteed government loans		1,325			—		—			—			1,325
Wealth and trust management		1,934			—		—			—			1,934
Service charges on deposit accounts		1,073			—		—			—			1,073
Increase in cash surrender value of bank owned life insurance		679			—		—			—			679
Payroll processing		706			—		—			—			706
Bank and purchase card, net		1,096			—		—			—			1,096
Other		1,817			—		1,778			(135	)		3,460
Total income		110,446			33,700		1,883			(135	)		145,894
Expenses:
Interest expense		6,209			188		2,142			—			8,539
Provision for loan losses		—			—		—			—			—
Salaries and employee benefits		24,118			22,307		—			—			46,425
Merger-related		9,350			—		2,347			—			11,697
Other		22,793			5,130		787			(135	)		28,575
Total expense		62,470			27,625		5,276			(135	)		95,236
Income (loss) before income taxes		47,976			6,075		(3,393	)		—			50,658
Income tax expense (benefit)		10,350			1,238		(615	)		—			10,973
Net income (loss)	$	37,626		$	4,837	$	(2,778	)	$	—		$	39,685
Net income attributable to noncontrolling interest		(1	)		—		—			—			(1	)
Net income (loss) attributable to Blue Ridge Bankshares, Inc.	$	37,625		$	4,837	$	(2,778	)	$	—		$	39,684


	For the nine months ended September 30, 2020
(Dollars in thousands)	Commercial Banking			Mortgage Banking		Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	35,985		$	2,012	$	37		$	—		$	38,034
Residential mortgage banking income, net		—			31,969		—			—			31,969
Mortgage servicing rights		—			3,241		—			—			3,241
Gain on sale of guaranteed government loans		779			—		—			—			779
Service charges on deposit accounts		669			—		—			—			669
Increase in cash surrender value of bank owned life insurance		278			—		—			—			278
Payroll processing		736			—		—			—			736
Bank and purchase card, net		483			—		—			—			483
Other		669			—		—			(18	)		651
Total income		39,599			37,222		37			(18	)		76,840
Expenses:
Interest expense		6,440			243		854			—			7,537
Provision for loan losses		8,075			—		—			—			8,075
Salaries and employee benefits		9,665			20,221		—			—			29,886
Merger-related		405			—		1,305			—			1,710
Other		8,549			4,914		452			(18	)		13,897
Total expense		33,134			25,378		2,611			(18	)		61,105
Income (loss) before income taxes		6,465			11,844		(2,574	)		—			15,735
Income tax expense (benefit)		1,445			2,440		(267	)		—			3,618
Net income (loss)	$	5,020		$	9,404	$	(2,307	)	$	—		$	12,117
Net income attributable to noncontrolling interest		(1	)		—		—			—			(1	)
Net income (loss) attributable to Blue Ridge Bankshares, Inc.	$	5,019		$	9,404	$	(2,307	)	$	—		$	12,116

Note 17 – Changes to Accumulated Other Comprehensive Income, net

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


	For the three months ended September 30, 2021
(Dollars in thousands)	Net Unrealized Gains (Losses) on Available for Sale Securities			Net Unrealized Gains (Losses) on Interest Rate Swaps			Accumulated Other Comprehensive Income (Loss), net
Balance as of July 1, 2021	$	(666	)	$	2,866		$	2,200
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $182		(684	)		—			(684	)
Change in net unrealized holding gains on interest rate swaps, net of deferred tax expense of $205		—			767			767
Balance as of September 30, 2021	$	(1,350	)	$	3,633		$	2,283


	For the three months ended September 30, 2020
(Dollars in thousands)	Net Unrealized Gains (Losses) on Available for Sale Securities			Net Unrealized Gains (Losses) on Interest Rate Swaps			Accumulated Other Comprehensive Income (Loss), net
Balance as of July 1, 2020	$	(107	)	$	(3,242	)	$	(3,349	)
Change in net unrealized holding gains on securities available for sale, net of deferred tax expense of $70		261			—			261
Reclassification for previously unrealized net gains recognized in net income, net of tax expense of $44		165			0			165
Change in net unrealized holding gains on interest rate swaps, net of deferred tax expense of $189		0			713			713
Balance as of September 30, 2020	$	319		$	(2,529	)	$	(2,210	)


	For the nine months ended September 30, 2021
(Dollars in thousands)	Net Unrealized Gains (Losses) on Available for Sale Securities			Net Unrealized Gains (Losses) on Interest Rate Swaps			Accumulated Other Comprehensive Income (Loss), net
Balance as of January 1, 2021	$	1,069		$	(805	)	$	264
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $643		(2,419	)		—			(2,419	)
Change in net unrealized holding gains on interest rate swaps, net of deferred tax expense of $1,180		—			4,438			4,438
Balance as of September 30, 2021	$	(1,350	)	$	3,633		$	2,283


	For the nine months ended September 30, 2020
(Dollars in thousands)	Net Unrealized Gains (Losses) on Available for Sale Securities			Net Unrealized Gains (Losses) on Interest Rate Swaps			Accumulated Other Comprehensive Income (Loss), net
Balance as of January 1, 2020	$	423		$	(194	)	$	229
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $71		(269	)		—			(269	)
Reclassification for previously unrealized net gains recognized in net income, net of tax expense of $44		165			0			165
Change in net unrealized holding losses on interest rate swaps, net of deferred tax benefit of $621		0			(2,335	)		(2,335	)
Balance as of September 30, 2020	$	319		$	(2,529	)	$	(2,210	)

Note 18 – Legal Matters

On August 12, 2019, ~~to shareholders of record as of December 6, 2019.~~

~~Effective December 15, 2019, the Company completed its acquisition~~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 ~~merger~~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 0 loss has been accrued for this lawsuit.

On June 24, 2021, a customer of the Bank filed a purported class action complaint against the Bank in the U.S. District Court for the Western District of Virginia, Harrisonburg Division. The complaint alleged, among other things, that the Bank breached its contract with checking account customers by charging improper overdraft fees, and was seeking monetary damages, restitution, and declaratory relief arising from the alleged assessment and collection of such fees. The complaint also alleged that the aggregate claims of the putative class members exceed $5 million. The Company settled this lawsuit for a nominal amount in the third quarter of 2021.

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, 2020. Results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations for the balance of 2021, 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.

Cautionary Note About Forward-Looking Statements

This report contains statements concerning the Company’s expectations, plans, objectives, future financial performance, and other statements that are not historical facts. These statements may constitute “forward-looking statements” as defined by federal securities laws. These statements may address issues that involve estimates and assumptions made by management, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Words such as “anticipates,” “believes,” “intends,” “should,” “expects,” “will,” and variations of similar expressions are intended to identify forward-looking statements. Factors that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to: the effect of the COVID-19 pandemic, including its potential adverse effect on economic conditions, and the Company’s employees, customers, loan losses, and financial performance; the Company’s participation in the Paycheck Protection Program (“PPP”); changes in interest rates, general economic conditions, the legislative/regulatory climate, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System (the “Federal Reserve”); the quality or composition of the loan and investment portfolios; demand for loan products; deposit flows; competition; expansion activities; demand for financial services in the Company’s market area; accounting principles, policies, and guidelines; changes in banking, tax, and other laws and regulations and interpretations or guidance thereunder; technological changes; fraud and cybersecurity risks; the effects of the Company’s pending merger with FVCBankcorp, Inc. (“FVCB”) or its completed merger with Bay Banks of Virginia, Inc. (“Bay Banks”) and other acquisitions the Company may make, including, without limitation, the ability to complete the FVCB merger within the expected time frame, or at all, the failure to achieve the expected revenue growth and/or expense savings from such transactions, disruptions in customer and employee relationships and business operations, and unexpected costs and difficulties integrating the companies’ business; and other factors detailed in the Company’s publicly filed documents, including the factors described in Item 1A., “Risk Factors,” in the Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), the Quarterly Report on Form 10-Q for the period ended June 30, 2021, and in this Quarterly Report on Form 10-Q. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made.

Merger with FVCBankcorp, Inc.

On July 14, 2021, the Company announced that it had entered into a definitive agreement pursuant to which FVCB will merge with and into the Company, ~~(the “Merger”) was effected pursuant to the terms and conditions of the Agreement and Plan of Reorganization, dated as of May 13, 2019, between~~with the Company ~~and VCB, and a related Plan~~surviving, in an all-stock merger of ~~Merger~~equals (the ~~“Merger Agreement”~~“FVCB Merger”). ~~Immediately after the Merger, Virginia Community Bank, VCB’s wholly-owned bank subsidiary, merged with and into the Bank. Pursuant to the Merger Agreement, former holders~~Shareholders of ~~shares of VCB common stock had the right to elect~~FVCB will be entitled to receive ~~either $58.00 in cash or 3.05~~1.1492 shares of the Company’s common stock for each share of ~~VCB~~FVCB common stock ~~held,~~upon completion of the merger. FVCB is the holding company for FVCbank, a Virginia-chartered community bank based in Fairfax, Virginia and serving the greater Washington, D.C. and Baltimore metropolitan areas. As of September 30, 2021, FVCB had total assets of $2.0 billion. The FVCB Merger is subject to ~~adjustment so~~customary closing conditions, including regulatory approvals and approval from the shareholders of both companies. The Company has learned that the overall mix of consideration paid to VCB shareholders consists of approximately 60% the Company’s common stock and 40% cash. The Company expects to issue approximately 1,312,970 shares of its common stock and pay approximately $16.6 million in cash in connection with the Merger.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Cautionary Statement Regarding Forward-Looking Statements~~

~~This quarterly report on Form 10-Q contains forward-looking statements within the meaning~~Office of the Private Securities Litigation Reform Act of 1995. This Form 10-Q reflects the current views and estimates of future economic circumstances, industry conditions, company performance, and financial resultsComptroller of the management of Blue Ridge. These forward-looking statements are subject to a number of factors and uncertainties which could cause Blue Ridge’s actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements, and such differences may be material. Forward-looking statements speak only as of the date they are made andCurrency (the “OCC”) identified certain regulatory concerns with Blue Ridge ~~does not assume any duty to update forward-looking statements. These forward-looking statements include, but are not limited to, statements about (i)~~Bank that could impact the expected benefits of the transaction between Blue Ridge and VCB, including future financial and operating results, cost savings, enhanced revenues and the expected market position of the combined company that may be realized from the transaction, and (ii) Blue Ridge’s and VCB’s plans, objectives, expectations and intentions and other statements contained in this Form 10-Q that are not historical facts. Other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” “predicts,” “potential,” “possible,” “should,” “would,” “will,” “goal,” “target” or words of similar meaning generally are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of Blue Ridge’s management and are inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond their respective control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ from those indicated or implied in the forward-looking statements and such differences may be material.

~~The following risks, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:~~

~~the expected cost savings from the transaction with VCB may not be fully realized or may take longer to realize than expected;~~

~~the integration of the businesses of Blue Ridge and VCB may be more difficult, costly or time-consuming than expected, and could result in the loss of customers;~~

~~changes in general business, economic and market conditions;~~

~~changes in fiscal and monetary policies, and laws and regulations;~~

~~changes in interest rates, deposit flows, loan demand and real estate values;~~

~~deterioration in asset quality and/or a reduced demand for, or supply of, credit;~~

~~increased information security risk, including cyber security risk, which may lead to potential business disruptions or financial losses;~~

~~volatility in the securities markets generally or in the market price of Blue Ridge’s stock specifically; and~~

~~Blue Ridge’s limited ability to pay dividends; and~~

~~other risks and factors identified in the “Risk Factors” sections and elsewhere in documents Blue Ridge files from time to time with the Securities and Exchange Commission.~~

~~Critical Accounting Policies~~

~~General~~

The accounting principles Blue Ridge applies under U.S. GAAP are complex and require management to apply significant judgment to various accounting, reporting and disclosure matters. Management must use assumptions, judgments and estimates when applying these principles where precise measurements are not possible or practical. These policies are critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such judgments, assumptions and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from initial estimates.

The accounting policies Blue Ridge views as critical are those relating to judgments, assumptions and estimates regarding the determination of the allowance for loan losses, the fair value measurements of certain assets and liabilities, and accounting for other real estate owned.

~~Allowance for Loan Losses~~

The allowance for loan losses is maintained at a level believed to be adequate by Blue Ridge to absorb probable losses inherent in the portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans and actual loss experience, current economic events in specific industries and other pertinent factors such as regulatory guidance and general economic conditions. The allowance is established through a provision for loan losses charged to earnings. Loans identified as losses and deemed uncollectible by management are charged to the allowance. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired, for which an allowance is established when the fair value of the loan or present value of future cash flows is lower than its carrying value. The general component covers~~non-impaired~~ loans and is based on historical loss experience adjusted for qualitative factors. Historical losses are categorized into risk-similar loan pools and a loss ratio factor is applied to each group’s loan balances to determine the allocation.

Qualitative and environmental factors include external risk factors that Blue Ridge believes affects its overall lending environment. Environmental factors that Blue Ridge routinely analyzes include levels and trends in delinquencies and impaired loans, levels and trends in charge-offs and recoveries, trends in volume and terms of loans, effects of changes in risk selection and underwriting practices, experience, ability, depth of lending management and staff, national and local economic trends, conditions such as unemployment rates, housing statistics, banking industry conditions, and the effect of changes in credit concentrations. Determination of the allowance is inherently subjective as it requires significant estimates, including the amountsapplication process and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current economic trends, all of which may be susceptible to significant change.

~~Credit losses are an inherent part of Blue Ridge’s business and, although~~the FVCB Merger. Blue Ridge ~~believes~~Bank has already commenced an initiative intended to fully address the ~~methodologies for determining~~OCC’s concerns. The Company anticipates the ~~allowance for loan losses and the current level of the allowance are appropriate, it is possible that there may be unidentified losses~~FVCB Merger will close in the ~~portfolio at any particular time that may become evident at a future date pursuant to additional internal analysis~~second or ~~regulatory comment. Additional provisions for such losses, if necessary, would be recorded, and would negatively impact earnings.~~third quarter of 2022.

~~Fair Value Measurements~~

Blue Ridge determines the fair values of financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. Blue Ridge’s investment securities~~available-for-sale~~ are recorded at fair value using reliable and unbiased evaluations by an industry-wide valuation service. This service uses evaluated pricing models that vary based on asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable.

~~Other Real Estate Owned~~

Real estate acquired through, or in lieu of, foreclosure is held for sale and is stated at fair value of the property, less estimated disposal costs, if any. Any excess of cost over the fair value less costs to sell at the time of acquisition is charged to the allowance for loan losses. The fair value is reviewed periodically by management and any write downs are charged against current earnings. Accounting policy and treatment is consistent with accounting for impaired loans described above.

~~Emerging Growth Company~~

Blue Ridge qualifies as an “emerging growth company,” as defined in the federal securities laws. For as long as it continues to be an emerging growth company, Blue Ridge may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company Blue Ridge has elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to a company that is not an issuer (as defined under Section 2(a) of the Sarbanes-Oxley Act of 2002), if such standards apply to companies that are not issuers. This may make Blue Ridge’s financial statements not comparable with other public companies that are not emerging growth companies or that are emerging growth companies that have opted out of the extended transition period because of the potential differences in accounting standards used. Blue Ridge could be an emerging growth company for up to five years, although it could lose that status sooner if its gross revenues exceed $1.07 billion, if it issues more than $1.0 billion in~~non-convertible~~ ~~debt in a three-year period, or if the market value of its common stock held bynon-affiliates~~ ~~exceeds $700 million as of any June 30 before that time, in which case Blue Ridge would no longer be an emerging growth company as of the following December 31.~~

Merger with ~~VCB~~Bay Banks of Virginia, Inc.

~~Effective December 15, 2019, Blue Ridge~~On January 31, 2021, the Company completed its ~~acquisition of~~merger with Bay Banks, a bank holding company conducting substantially all its operations through its bank subsidiary, Virginia Commonwealth Bank, and its wealth and trust management subsidiary, VCB ~~and, immediately thereafter, Virginia Community Bank, VCB’s wholly-owned~~Financial Group, Inc. Immediately following the Company’s merger with Bay Banks, Bay Banks’ subsidiary bank ~~subsidiary,~~was merged with and into the ~~Bank. As~~Bank, while VCB Financial Group, Inc. became a subsidiary of the Company (collectively, the “Bay Banks Merger”) and was subsequently renamed as BRB Financial Group, Inc. (the “Financial Group”).

Information contained herein as of September 30, ~~2019, VCB had approximately $251.5 million~~2021 includes the balances of Bay Banks; information contained herein as of the year ended December 31, 2020 does not include the balances of Bay Banks. Information for the nine months ended September 30, 2021 includes the operations of Bay Banks for the period immediately following the effective date (January 31, 2021) of the Bay Banks Merger through September 30, 2021.

Stock Split

On April 30, 2021, the Company effected a 3-for-2 stock split (“Stock Split”) in ~~total assets, $179.5 million in total loans and $219.6 million in total deposits. Blue Ridge expects to issue approximately 1,312,970 shares~~the form of a 50% stock dividend on its common stock to shareholders of record as of April 20, 2021. Cash was paid in lieu of fractional shares based on the closing price of the Company’s common stock on the record date. References made to outstanding shares or per share amounts in the accompanying consolidated financial statements and ~~pay approximately $16.6 million~~disclosures have been retroactively adjusted to reflect the Stock Split, unless otherwise noted.

General

There were no changes to the Critical Accounting Policies disclosed in ~~cash~~Item 7 of the 2020 Form 10-K, except for the addition of accounting for business combinations, due to the significance of the Bay Banks Merger. See Note 2 – Summary of Significant Accounting Policies in ~~connection with~~Item 8 of the ~~Merger.~~Company’s 2020 Form 10-K for more information.

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, or shareholders’ equity as previously reported.

Comparison of Financial Condition ~~at September 30, 2019 and December 31, 2018~~

Total assets at September 30, 2019 were $736.2 million, an increase of $196.6 million or 36.4%, from $539.6 million at December 31, 2018. The increase in assets was primarily driven by growth in investment securities, both the loans held for sale and loans held for investment portfolios, as well as other assets. Investment securities totaled $142.7 million at September 30, 2019, an increase of $84.0 million, or 142.9% compared to $58.8 million at December 31, 2018, and is attributed to the implementation of a balance sheet strategy following the Company’s common stock raise. Loans held for sale totaled $80.3 million as of September 30, ~~2019, an increase of $51.0 million, or 174.5% compared to $29.2 million at~~2021 and December 31, ~~2018, while loans held for investment totaled $461.0 million~~2020

Total assets as of September 30, ~~2019,~~2021 were $2.70 billion, an increase of ~~$46.0 million, or 11.1% compared to $414.9 million~~$1.20 billion from $1.50 billion at December 31, ~~2018. Other assets totaled $18.6 million at September 30, 2019, an increase of $8.3 million, or 81.0% compared to $10.3 million as of December 31, 2018.~~2020. The increase in ~~other~~total assets was primarily due to the ~~implementation~~Bay Banks Merger, which increased assets by $1.22 billion at the effective date of ~~ASUNo. 2016-02,~~~~Leases (Topic 842)~~ ~~and~~ the ~~recording~~merger. Of the increase in total assets due to the Bay Banks Merger, $1.03 billion were loans held for investment. The purchase accounting adjustment (discount) to record the Bay Banks’ loan portfolio at estimated fair value, at the effective date of a~~right-of-use~~ ~~asset on~~ the ~~balance sheet for property leased for branches and offices.~~

~~The~~merger, was $17.9 million, or 1.70% of the pre-adjusted portfolio balance. No allowance for loan losses ~~increased by $825 thousand during~~(“ALL”) carried over in the business combination.

Total deposits as of September 30, 2021 were $2.20 billion, an increase of $1.26 billion from December 31, 2020, of which $1.03 billion were assumed in the Bay Banks Merger, at the effective date of the merger. The remaining increase in the first nine months of ~~2019~~2021 was primarily due to ~~$4.4~~the general increase in liquidity in the banking system, believed to result from economic stimulus funds granted by the federal government’s response to the COVID-19 pandemic. The Company’s expanding relationships with fintech partners have resulted in approximately $52 million ~~or 0.96%~~ of ~~total loans held for investment as of~~deposit growth in the nine months ended September 30, ~~2019, compared to $3.6~~2021.

As previously reported, the majority of PPP loans were funded through the Federal Reserve Bank of Richmond’s (“FRB”) Paycheck Protection Program Liquidity Facility (“PPPLF”). FRB advances totaled $33.9 million ~~or 0.86%~~at September 30, 2021, a decline of ~~total loans held for investment as of~~$247.8 million from December 31, ~~2018, reflective~~2020, primarily attributable to the Company’s sale of PPP loans in the ~~growth~~second quarter of 2021, as explained below. Additionally, the Company redeemed subordinated notes with an initial aggregate principal balances of $10.0 million and $7.0 million in ~~Blue Ridge’s loan portfolio.~~the second and third quarters of 2021, respectively. The Company assumed $31.9 million of subordinated debt in the Bay Banks Merger.

~~At September 30, 2019, total liabilities were $670.6~~45

Total shareholders’ equity increased by $161.5 million ~~an increase of $170.7 million, or 34.1% compared~~ to ~~$500.0 million at December 31, 2018. The increase in liabilities was concentrated in total deposit growth of $105.3 million, or 25.4%, to $520.3~~$269.7 million as of September 30, ~~2019~~2021 compared to ~~$415.0~~$108.2 million at December 31, ~~2018. FHLB borrowings increased $56.5~~2020, primarily attributable to $125.4 million ~~or 77.3% from $129.6~~of consideration paid in the Bay Banks Merger and net income totaling $39.7 million atin the nine months ended September 30, 2019 compared to $73.1 million at December 31, 2018. Additionally, other liabilities totaled $11.0 million as of September 30, 2019, an increase of $8.9 million, or 428.3%, compared to $2.1 million at December 31, 2018. The increase in other liabilities was due to the implementation of ASU~~No. 2016-02,~~~~Leases (Topic 842)~~ ~~and the recording of a lease liability on the balance sheet for property leased for branches and offices.~~2021.

Total shareholders’ equity increased by $26.0 million to $65.6 million at September 30, 2019 compared to $39.6 million at December 31, 2018. The increase in shareholders’ equity was due primarily to the sale of 1.5 million shares of Blue Ridge’s common stock in a private placement to accredited investors. Net proceeds from the sale amounted to $22.2 million.

Comparison of Results of ~~Operation~~Operations for the Three and Nine Months Ended September 30, ~~2019~~2021 and ~~2018~~2020

For the three months ended September 30, 2021, the Company reported net income of $6.8 million, or $0.36 earnings per diluted common share, compared to $5.1 million, or $0.59 earnings per diluted common share, for the three months ended September 30, 2020.

For the nine months ended September 30, ~~2019, Blue Ridge~~2021, the Company reported net income of ~~$4.1~~$39.7 million, ~~equal to basic and~~or $2.26 earnings per diluted ~~income per~~ common share, ~~of $1.01. For~~compared to $12.1 million, or $1.42 earnings per diluted common share, for the nine months ended September 30, ~~2018, net~~2020.

Net income ~~was $3.6~~before income taxes for first nine months of 2021 included a gain of $24.3 million ($19.2 million after tax) resulting from the sale in the second quarter of 2021 of over $700 million of loans originated under the PPP.

Net income before income taxes included merger-related expenses of $1.4 million and ~~both basic~~$11.7 million, for the three and ~~diluted earnings per share were $1.29.~~nine months ended September 30, 2021, respectively, compared to $1.3 million and $1.7 million for the three and nine months ended September 30, 2020, respectively.

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 ~~Blue Ridge’s~~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. ~~Blue Ridge’s~~The Company’s principal ~~interest earning~~interest-earning assets are loans to ~~individuals,~~ businesses, ~~and~~ real estate investors, and individuals as well as its investment securities portfolio. Interest-bearing liabilities consist primarily of negotiable order of withdrawal ~~(“NOW”)~~ and savings accounts, money market accounts, certificates of deposit, and ~~FHLB~~Federal Home Loan Bank of Atlanta (“FHLB”) and FRB advances. Generally, changes in net interest income are measured by the net interest rate spread and the net interest margin. ~~The net~~Net interest rate spread is ~~equal to~~ the difference between the average rate earned on ~~interest earning~~interest-earning assets and the average rate incurred on interest-bearing liabilities. ~~The net~~Net interest margin represents the difference between interest income and interest expense calculated as a percentage of average ~~earning~~interest-earning assets.

The following table ~~shows~~presents the average balance sheets for the ~~first nine~~three months ~~of 2019 compared to the first nine months of 2018.~~ended September 30, 2021 and September 30, 2020. 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.~~

   Nine Months Ended
September 30, 2019 Nine Months Ended
September 30, 2018
(Dollars in thousands)    Average
Balance Interest
Income-
Expense    Average
Yields /
Rates (1) Average
Balance Interest
Income-
Expense    Average
Yields /
Rates (1)
Assets

Taxable investments (2)
   $ 100,453 $ 2,384    3.16 % $ 43,538 $ 1,139    3.49 %
Tax-free investments (2)
   8,153 182    3.61 % 9,739 226    3.75 %





Total securities
   108,606 2,566    3.39 % 53,277 1,365    3.62 %
Interest-bearing deposits in other banks
   17,852 218    1.63 % 9,685 59    0.82 %
Federal funds sold
   338 6    2.37 % 988 13    1.73 %
Loans held for sale
   46,800 1,333    3.80 % 15,747 498    4.22 %
Loans held for investment (3)
   441,569 18,307    5.53 % 347,155 14,127    5.43 %





Total interest-earning assets
   615,165 22,430    4.87 % 426,852 16,062    5.03 %
Less allowance for loan losses
   (3,953 )    (3,002 )
Totalnon-interest earning assets
   31,742    23,545





Total assets
   $ 642,954    $ 447,395





Liabilities & Shareholders’ equity

Interest-bearing demand and savings deposits
   $ 165,481 $ 1,194    0.96 % $ 128,500 $ 538    0.56 %
Time deposits
   210,448 3,297    2.09 % 165,475 1,931    1.56 %





Total interest-bearing deposits
   375,929 4,491    1.53 % 293,975 2,469    1.06 %
FHLB advances and other borrowings
   113,989 2,452    2.87 % 47,774 1,094    3.06 %





Total interest-bearing liabilities
   489,918 6,943    1.89 % 341,749 3,563    1.39 %
Demand deposits and other liabilities
   102,033    69,168





Total liabilities
   591,951    410,917
Shareholders’ equity
   51,003    36,478





Total liabilities and shareholders’ equity
   $ 642,954    $ 447,395





Interest rate spread
      2.98 %    3.64 %
Net interest income and margin
   $ 15,487    3.36 % $ 12,499    3.90 %

~~(1)~~

~~Annualized.~~

~~(2)~~

~~Computed on a fully taxable equivalent basis.~~

~~(3)~~

~~Non-accrual~~ ~~loans have been included in the computations of average loan balances.~~

~~The increase~~rates, as well as a volume and rate analysis of changes in ~~average~~net interest income for the periods stated.


	Average Balances, Income and Expense, Yields and Rates
	As of and for the three months ended September 30,
	2021								2020								Total Increase/			Increase/(Decrease) Due to
(Dollars in thousands)	Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest		Yield/ Rate (1)			(Decrease)			Volume (12)			Rate (12)
Average Assets
Taxable securities	$	335,811		$	1,317		1.57	%	$	104,796		$	562		2.15	%	$	755		$	1,239		$	(484	)
Tax-exempt securities (2)		17,048			77		1.81	%		6,217			37		2.38	%		40			64			(24	)
Total securities		352,859			1,394		1.58	%		111,013			599		2.16	%		795			1,303			(508	)
Interest-earning deposits in other banks		128,674			58		0.18	%		146,386			71		0.19	%		(13	)		(9	)		(4	)
Federal funds sold		81,772			24		0.12	%		1,629			1		0.25	%		23			49			(26	)
Loans held for sale		164,143			1,157		2.82	%		155,857			1,113		2.86	%		44			59			(15	)
Paycheck Protection Program loans (3)		86,834			713		3.28	%		357,498			3,847		4.30	%		(3,134	)		(2,912	)		(222	)
Loans held for investment (3,4,5)		1,734,393			20,424		4.71	%		679,024			8,820		5.20	%		11,605			13,710			(2,105	)
Total average interest-earning assets		2,548,675			23,770		3.73	%		1,451,407			14,451		3.98	%		9,320			12,200			(2,880	)
Less: allowance for loan losses		(12,913	)							(8,871	)
Total noninterest-earning assets		214,147								110,597
Total average assets	$	2,749,909							$	1,553,133
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market deposits, and savings	$	964,779		$	589		0.24	%	$	352,040		$	325		0.37	%	$	264		$	566		$	(302	)
Time deposits (6)		558,766			1,033		0.74	%		268,564			1,190		1.77	%		(157	)		1,286			(1,443	)
Total interest-bearing deposits		1,523,545			1,622		0.43	%		620,604			1,515		0.98	%		107			1,852			(1,745	)
FHLB borrowings (7)		125,117			304		0.97	%		118,587			381		1.29	%		(77	)		21			(98	)
FRB borrowings		67,121			60		0.36	%		352,558			308		0.35	%		(248	)		(250	)		2
Subordinated notes and other borrowings (8)		44,585			644		5.78	%		24,930			411		6.59	%		233			324			(91	)
Total average interest-bearing liabilities		1,760,368			2,630		0.60	%		1,116,679			2,616		0.94	%		15			1,947			(1,932	)
Noninterest-bearing demand deposits		693,200								310,829
Other noninterest-bearing liabilities		28,671								28,417
Stockholders’ equity		267,670								97,208
Total average liabilities and stockholders’ equity	$	2,749,909							$	1,553,133
Net interest income and margin (9)				$	21,140		3.32	%				$	11,835		3.26	%	$	9,305		$	10,253		$	(948	)
Cost of funds (10)							0.43	%							0.73	%
Net interest spread (11)							3.13	%							3.04	%

(1) Annualized.
(2) Computed on a fully taxable equivalent basis assuming a 21% income tax rate.
(3) Includes deferred loan fees/costs.
(4) Non-accrual loans have been included in the computations of average loan balances.
(5) Includes accretion of fair value adjustments (discounts) on acquired loans of $72 thousand and $189 thousand for the three months ended September 30, 2021 and 2020, respectively.
(6) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $827 thousand and $10 thousand for the three months ended September 30, 2021 and 2020, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $4 thousand and $0 for the three months ended September 30, 2021 and 2020, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $55 thousand and $0 for the three months ended September 30, 2021 and 2020, respectively.
(9) Net interest margin is net interest income divided by average interest-earning assets.
(10) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.
(11) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.
(12) 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.

Average interest-earning assets were $2.55 billion for the three months ended September 30, 2021 compared to $1.45 billion for the same period of 2020, a $1.1 billion increase. Most of this increase was ~~primarily driven~~attributable to acquired loans in the Bay Banks Merger, partially offset by ~~an increase~~lower average PPP loans in ~~average investment securities and average loans and resulted in increased interest income during~~ the ~~first nine months of 2019.~~2021 period compared to the 2020 period. Total interest income (on a taxable equivalent basis) increased by ~~$6.4~~$9.3 million ~~or 39.6%,~~ for the ~~nine-month~~three-month period ended September 30, ~~2019 as~~2021 from the same period of 2020. This increase was primarily due to higher average balances of loans, excluding PPP loans, and securities, partially offset by lower yields on interest-earning assets due to a lower interest rate environment in which interest-earning assets have re-priced and lower yields on PPP loans (discussed below). Interest income in the 2021 and 2020 periods included the amortization of PPP processing fees, net of costs, of $713 thousand

and $3.8 million, respectively. Interest income in the third quarters of 2021 and 2020 included accretion of fair value adjustments (discounts) on acquired loans of $72 thousand and $189 thousand, respectively.

Average interest-bearing liabilities were $1.76 billion for the three months ended September 30, 2021 compared to $1.12 billion for the same period of 2020, a $643.7 million increase. Most of this increase was attributable to interest-bearing deposits assumed in the Bay Banks Merger and organic deposit growth, primarily attributable to general liquidity in the banking system, believed to be from economic stimulus funds granted by the federal government’s response to the COVID-19 pandemic, partially offset by lower average balances of PPPLF advances in the 2021 period compared to 2020 period. Interest expense increased by $15 thousand to $2.6 million for the three months ended September 30, 2021 compared to the same amount for the same period of 2020. Higher interest expense attributable to higher average balances of interest-bearing liabilities was partially offset by lower rates paid on deposits and borrowings due to a lower interest rate environment in the 2021 period. Cost of interest-bearing liabilities decreased to 0.60% for the third quarter of 2021 from 0.94% for the third quarter of 2020. Cost of funds were 0.43% and 0.73% for the third quarters of 2021 and 2020, respectively. Interest expense in the third quarters of 2021 and 2020 included the amortization of fair value adjustments (premium) on assumed time deposits of $827 thousand and $10 thousand, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) for the three months ended September 30, 2021 was $21.1 million as compared to $11.8 million for the same period in ~~2018.~~2020, an increase of $9.3 million. Net interest margin was 3.32% and 3.26% for third quarters of 2021 and 2020, respectively. PPP loan processing fees, net of costs, and interest income, along with the corresponding funding costs through the PPPLF, had a 1 and 23 basis point positive effect on the Company’s net interest margin for the three months ended September 30, 2021 and 2020, respectively.

~~Interest expense increased by $3.4 million, or 94.8% to $6.9 million~~The following table presents the average balance sheets for the nine months ended September 30, ~~2019 as compared to $3.6 million during the first nine months of 2018. Average interest bearing-liabilities increased by 43.4% for the nine-month period ended~~2021 and September 30, ~~2019, as compared to the same period in 2018, and the average cost of funds increased to 1.89% during the first nine months of 2019, compared to 1.39% during the first nine months of 2018.~~

Net interest income for the nine-month period ended September 30, 2019 was $15.5 million as compared to $12.5 million for the same period in 2018, an increase of 23.9%. The increase in net interest income during the period is primarily attributed to an increase of $94.4 million in average loans held for investment and an increase in average loans held for sale outstanding of $31.1 million from the period ended September 30, 2019 compared to the same period in 2018.

Interest income and expense are affected by changes in interest rates, by changes in the volumes of earning assets and interest-bearing liabilities, and by changes in the mix of these assets and liabilities. The following rate-volume variance analysis shows the~~year-to-date~~ ~~changes in the components of net interest income as of September 30, 2019 compared to September 30, 2018.~~

   Nine Months Ended
September 30,
2019 vs. 2018
   Increase/
(Decrease)
Due to    Total
Increase/
(Decrease)
(Dollars in thousands)    Volume    Rate
Interest Income

Taxable investments
   $ 1,489    $ (244 )    $ 1,245
Tax-free investments
   (45 )    2    (43 )
Interest bearing deposits in other banks
   50    108    158
Federal funds sold
   (8 )    1    (7 )
Loans available for sale
   982    (148 )    834
Loans held for investment
   3,842    338    4,180






Total interest income
   $ 6,310    $ 57    $ 6,367






Interest Expense

Interest-bearing demand and savings deposits:
   $ 155    $ 502    $ 657
Time deposits
   525    840    1,365
FHLB advances and other borrowings
   1,517    (160 )    1,357






Total interest expense
   2,197    1,182    3,379






Change in Net Interest Income
   $ 4,113    $ (1,125 )    $ 2,988

~~Provision for Loan Losses.~~ The provision for loan losses was $1.5 million during the nine-month period ended September 30, 2019 as compared to $640 thousand during the nine months ended September 30, 2018. Net charge-offs for such periods amounted to $641 thousand during the period ended September 30, 2019 and $220 thousand in net charge-offs for the period ended September 30, 2018. The increase in the provision for loan losses during the first nine months of 2019 compared to the like period in 2018 was due to overall loan portfolio growth as well as changes in portfolio mix.

~~Non-Interest~~ ~~Income~~~~. Blue Ridge’snon-interest~~ ~~income sources include deposit service charges and other fees, gains/losses on sales of mortgages, and income from bank-owned life insurance (“BOLI”).Non-interest~~ ~~income totaled $14.3 million for the nine months ended September 30, 2019, compared to $7.0 million for the like period in 2018. The increase innon-interest~~ ~~income was due to an increase of $6.1 million related to the origination and sale of held for sale mortgages and a $726 thousand gain on life insurance proceeds related to BOLI.~~

~~Non-Interest~~ ~~Expense.~~ ~~Non-interest~~ expense totaled $23.2 million for the nine-month period ended September 30, 2019 as compared to $14.3 million for the same period in 2018, a 61.9% increase. This increase was primarily due to an increase in salaries and employee benefits of $6.0 million, or 74.1%, in addition to an increase in occupancy expenses of $751 thousand to $1.9 million for the nine-month period ended September 30, 2019, compared to $1.1 million of the like period in 2018. Other contractual services also increased $658 thousand to $1.1 million at September 30, 2019 from $442 thousand at September 30, 2018 as a result of expenses associated with the pending merger with VCB.

~~Income Tax Expense~~. During the nine months ended September 30, 2019, Blue Ridge recognized a provision for income taxes of $989 thousand, for an effective tax rate of 19.6%, as compared to a provision of $944 thousand, for an effective tax rate of 21.0% for the period ended September 30, 2018.

~~Comparison of Results of Operation for the Three Months Ended September 30, 2019 and 2018~~

For the three months ended September 30, 2019, Blue Ridge reported net income of $1.3 million, equal to basic and diluted income per common share of $0.29. For the three months ended September 30, 2018, net income was $1.3 million and both basic and diluted earnings per share were $0.45.

~~Net Interest Income.~~ Net interest income is the excess of interest earned on loans and investments over the interest paid on deposits and borrowings and is Blue Ridge’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 following table shows the average balance sheets for the three months ending September 30, 2019 compared to the three months ending September 30, 2018.~~2020. 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.~~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
	As of and for the nine months ended September 30,
	2021								2020								Total Increase/			Increase/(Decrease) Due to
(Dollars in thousands)	Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest		Yield/ Rate (1)			(Decrease)			Volume (12)		Rate (12)
Average Assets
Taxable securities	$	281,227		$	3,580		1.70	%	$	105,716		$	1,841		2.32	%	$	1,739		$	3,056	$	(1,316	)
Tax-exempt securities (2)		10,810			224		2.76	%		6,276			145		3.08	%		79			105		(26	)
Total securities		292,037			3,804		1.74	%		111,992			1,986		2.36	%		1,818			3,161		(1,342	)
Interest-earning deposits in other banks		124,707			108		0.12	%		118,094			305		0.34	%		(197	)		17		(214	)
Federal funds sold		40,599			29		0.10	%		673			2		0.40	%		27			119		(92	)
Loans held for sale		145,210			2,992		2.75	%		113,016			2,420		2.86	%		572			689		(117	)
Paycheck Protection Program loans (3)		461,637			16,852		4.87	%		203,330			6,392		4.19	%		10,459			8,121		2,338
Loans held for investment (3,4,5)		1,625,405			56,404		4.63	%		670,607			26,954		5.36	%		29,451			38,376		(8,925	)
Total average interest-earning assets		2,689,595			80,189		3.98	%		1,217,712			38,059		4.17	%		42,130			50,483		(8,352	)
Less: allowance for loan losses		(13,270	)							(6,207	)
Total noninterest-earning assets		176,651								101,524
Total average assets	$	2,866,246							$	1,313,029
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market deposits, and savings	$	870,827		$	1,643		0.25	%	$	341,402		$	1,192		0.47	%	$	451		$	1,848	$	(1,397	)
Time deposits (6)		546,866			3,201		0.78	%		263,755			3,697		1.87	%		(496	)		3,968		(4,464	)
Total interest-bearing deposits		1,417,693			4,844		0.46	%		605,157			4,889		1.08	%		(45	)		5,816		(5,861	)
FHLB borrowings (7)		165,953			806		0.65	%		116,432			1,294		1.48	%		(488	)		550		(1,038	)
FRB borrowings		319,215			745		0.31	%		190,548			500		0.35	%		245			337		(92	)
Subordinated notes and other borrowings (8)		48,931			2,144		5.84	%		21,800			855		5.23	%		1,289			1,064		225
Total average interest-bearing liabilities		1,951,792			8,539		0.58	%		933,936			7,537		1.08	%		1,002			7,767		(6,766	)
Noninterest-bearing demand deposits		662,406								262,974
Other noninterest-bearing liabilities		16,889								22,147
Stockholders' equity		235,159								93,972
Total average liabilities and stockholders’ equity	$	2,866,246							$	1,313,029

   Three Months Ended
September 30, 2019 Three Months Ended
September 30, 2018
(Dollars in thousands)    Average
Balance Interest
Income-
Expense    Average
Yields /
Rates (1) Average
Balance Interest
Income-
Expense    Average
Yields /
Rates (1)
Assets

Taxable investments (2)
   $ 140,425 $ 1,039    2.61 % $ 48,541 $ 395    3.25 %
Tax-free investments (2)
   7,273 56    3.72 % 9,529 73    3.73 %





Total securities
   147,698 1,095    3.16 % 58,070 468    3.49 %
Interest-bearing deposits in other banks
   19,760 94    1.90 % 8,533 15    0.69 %
Federal funds sold
   352 2    2.28 % 710 3    1.95 %
Loans held for sale
   61,633 563    3.65 % 25,221 272    4.32 %
Loans held for investment (3)
   458,668 6,364    5.55 % 362,078 5,011    5.54 %





Total interest-earning assets
   688,111 8,118    4.73 % 454,612 5,769    5.09 %
Less allowance for loan losses
   (4,231 )    (3,157 )
Totalnon-interest earning assets
   35,129    21,329





Total assets
   $ 719,009    $ 472,784





Liabilities & Shareholders’ equity

Interest-bearing demand and savings deposits
   $ 173,868 $ 457    1.05 % $ 133,314 $ 207    0.62 %
Time deposits
   235,911 1,306    2.21 % 168,946 703    1.66 %





Total interest-bearing deposits
   409,779 1,763    1.63 % 302,260 910    1.14 %
FHLB advances and other borrowings
   136,539 919    2.69 % 57,719 423    2.95 %





Total interest-bearing liabilities
   546,318 2,682    1.96 % 359,979 1,333    1.48 %
Demand deposits and other liabilities
   108,025    75,632





Total liabilities
   654,343    435,611
Shareholders’ equity
   64,666    37,173





Total liabilities and shareholders’ equity
   $ 719,009    $ 472,784





Interest rate spread
      2.77 %    3.61 %
Net interest income and margin
   $ 5,436    3.16 % $ 4,436    3.90 %

~~(1)~~

~~Annualized.~~

~~(2)~~

~~Computed on a fully taxable equivalent basis.~~

~~(3)~~

~~Non-accrual~~ ~~loans have been included in the computations of average loan balances.~~


Net interest income and margin (9)	$	71,650	3.55	%	$	30,522	3.34	%	$	41,128	$	42,716	$	(1,586	)
Cost of funds (10)			0.44	%			0.84	%
Net interest spread (11)			3.39	%			3.09	%

(1) Annualized.
(2) Computed on a fully taxable equivalent basis assuming a 21% income tax rate.
(3) Includes deferred loan fees/costs.
(4) Non-accrual loans have been included in the computations of average loan balances.
(5) Includes accretion of fair value adjustments (discounts) on acquired loans of $1.3 million and $877 thousand for the nine months ended September 30, 2021 and 2020, respectively.
(6) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $2.5 million and $13 thousand for the nine months ended September 30, 2021 and 2020, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $10 thousand and $0 for the nine months ended September 30, 2021 and 2020, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $145 thousand and $0 for the nine months ended September 30, 2021 and 2020, respectively.
(9) Net interest margin is net interest income divided by average interest-earning assets.
(10) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.
(11) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.
(12) 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.

~~The increase in average~~Average interest-earning assets were $2.69 billion for the nine months ended September 30, 2021 compared to $1.22 billion for the same period of 2020, a $1.5 billion increase. Most of this increase was ~~primarily driven by an increase in average investment securities and average~~attributable to acquired loans and ~~resulted~~securities in ~~increased interest income during 2019.~~the Bay Banks Merger and PPP loans, which were originated beginning in the second quarter of 2020. Total interest income (on a taxable equivalent basis) increased by ~~$2.3~~$42.1 million ~~or 40.7%,~~ for the ~~three-month~~nine-month period ended September 30, ~~2019~~2021 from the same period of 2020. This increase was primarily due to higher average balances of loans, including PPP loans, partially offset by lower yields on interest-earning assets due to a lower interest rate environment in 2021 compared to 2020. Interest income in the 2021 and 2020 periods included the amortization of PPP processing fees, net of costs, of $16.9 million and $3.8 million, respectively. Interest income in the first nine months of 2021 and 2020 included accretion of fair value adjustments (discounts) on acquired loans of $1.3 million and $877 thousand, respectively.

Average interest-bearing liabilities were $1.95 billion for the nine months ended September 30, 2021 compared to $933.9 million for the same period of 2020, a $1.0 billion increase. Most of this increase was attributable to interest-bearing deposits assumed in the Bay Banks Merger and organic deposit growth, primarily attributable to general liquidity in the banking system, as previously noted. Additionally, the Company utilized the PPPLF offered by the FRB starting in the second quarter of 2020 to fund PPP loans. Interest expense increased by $1.0 million to $8.5 million for the nine months ended September 30, 2021 compared to $7.5 million for the same period of 2020. Higher interest expense attributable to higher average balances of interest-bearing liabilities was partially offset by lower rates paid on deposits and borrowings due to a lower interest rate environment in the 2021 period. Cost of interest-bearing liabilities decreased to 0.58% for the first nine months of 2021 from 1.08% for the same period in 2020. Cost of funds were 0.44% and 0.84% for the nine months ended September 30, 2021 and 2020, respectively. Interest expense in the first nine months of 2021 and 2020 included the amortization of fair value adjustments (premium) on assumed time deposits of $2.5 million and $13 thousand, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) for the nine months ended September 30, 2021 was $71.7 million as compared to $30.5 million for the same period in 2020, an increase of $41.2 million. Net interest margin was 3.55% and 3.34% for the nine months ended September 30, 2021 and 2020, respectively. PPP loan processing fees, net of costs, and interest income, along with the corresponding funding costs through the PPPLF, had a 23 and 10 basis point positive effect on the Company’s net interest margin for the nine months ended September 30, 2021 and 2020, respectively.

Provision for Loan Losses. The Company recorded no provision for loan losses for the three- and nine-month periods ended September 30, 2021 compared to provision expense of $4.0 million and $8.1 million for the same respective periods of 2020. In 2020, the Company increased its allowance for loan losses through the application of a qualitative factor in response to potential credit losses as a result of the COVID-19 pandemic. The decline in the Company’s allowance for loan losses in the first nine months of 2021 due to the release of the COVID-19 factor was partially offset by organic loan growth, reserve needs for loans that have migrated from the Company’s acquired loan pools, and reserve needs for fintech related loans. The Company holds no ALL for PPP loans, as these loans are fully guaranteed by the U.S. government.

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


	For the three months ended
(Dollars in thousands)	September 30, 2021		September 30, 2020		Change $			Change %
Residential mortgage banking income, net		7,704		14,400		(6,696	)		(46.50	%)
Mortgage servicing rights		1,827		1,645		182			11.06	%
Gain on sale of guaranteed government loans		108		516		(408	)		(79.07	%)
Wealth and trust management		499		—		499			—
Service charges on deposit accounts		376		215		161			74.88	%
Increase in cash surrender value of bank owned life insurance		278		94		184			195.74	%
Payroll processing		223		221		2			0.90	%
Bank and purchase card, net		497		211		286			135.55	%
Other		2,006		311		1,695			545.02	%
Total noninterest income	$	13,518	$	17,613	$	(4,095	)		(23.25	%)


	For the nine months ended
(Dollars in thousands)	September 30, 2021		September 30, 2020		Change $			Change %
Gain on sale of Paycheck Protection Program loans	$	24,315	$	—	$	24,315			—
Residential mortgage banking income, net		24,259		31,969		(7,710	)		(24.12	%)
Mortgage servicing rights		6,905		3,241		3,664			113.05	%
Gain on sale of guaranteed government loans		1,325		779		546			70.09	%
Wealth and trust management		1,934		—		1,934			—
Service charges on deposit accounts		1,073		669		404			60.39	%
Increase in cash surrender value of bank owned life insurance		679		278		401			144.24	%
Payroll processing		706		736		(30	)		(4.08	%)
Bank and purchase card, net		1,096		483		613			126.92	%
Other		3,460		651		2,809			431.49	%
Total noninterest income	$	65,752	$	38,806	$	26,946			69.44	%

During 2021, the Company funded over 20,000 PPP loans with aggregate principal balances of approximately $730.0 million pursuant to the Economic Aid Act, passed at the end of December 2020 ("PPP 2 loans"). Of the PPP 2 loans, the Company sold approximately 19,500 with principal balances of $712.6 million on June 28, 2021. Gross proceeds from the sale were $705.9 million and the Company recorded a pre-tax gain of $24.3 million on the sale after giving effect to $30.9 million of unearned fees, net of deferred costs, and the sale discount. The $3.7 million increase in mortgage servicing rights income in the nine months ended September 30, 2021 compared to the same period of 2020 was primarily attributable to the Company retaining servicing rights on mortgages originated and sold in ~~2018.~~the secondary market, beginning in the second quarter of 2020. The $6.7 million and $7.7 million decline in residential mortgage banking income, net, in the three and nine months ended September 30, 2021, respectively, compared to the same periods 2020 was primarily attributable to pricing compression on loans sold in the secondary market in the 2021 periods. Additionally, noninterest income in the three and nine months ended September 30, 2021 included wealth and trust management fee income of $499 thousand and $1.9 million, respectively, which was a business added with the Bay Banks Merger. Other noninterest income in the three and nine months ended September 30, 2021 included $1.0 million and $1.6 million of fair value adjustments, respectively, for the Company's investments in certain fintech companies.

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


	For the three months ended
(Dollars in thousands)	September 30, 2021		September 30, 2020		Change $		Change %
Salaries and employee benefits	$	14,774	$	11,880	$	2,894		24.36	%
Occupancy and equipment		1,743		922		821		89.05	%
Data processing		893		656		237		36.13	%
Legal, issuer, and regulatory filing		372		291		81		27.84	%
Advertising and marketing		452		165		287		173.94	%
Communications		761		214		547		255.61	%
Audit and accounting fees		195		98		97		98.98	%
FDIC insurance		487		187		300		160.43	%
Intangible amortization		500		232		268		115.52	%
Other contractual services		633		516		117		22.67	%
Other taxes and assessments		547		280		267		95.36	%
Merger-related		1,441		1,264		177		14.00	%
Other		2,839		1,971		868		44.04	%
Total noninterest expense	$	25,637	$	18,676	$	6,961		37.27	%


	For the nine months ended
(Dollars in thousands)	September 30, 2021		September 30, 2020		Change $		Change %
Salaries and employee benefits	$	46,425	$	29,886	$	16,539		55.34	%
Occupancy and equipment		4,968		2,653		2,315		87.26	%
Data processing		3,272		1,649		1,623		98.42	%
Legal, issuer, and regulatory filing		1,437		781		656		83.99	%
Advertising and marketing		989		518		471		90.93	%
Communications		1,802		536		1,266		236.19	%
Audit and accounting fees		675		278		397		142.81	%
FDIC insurance		839		568		271		47.71	%
Intangible amortization		1,406		608		798		131.25	%
Other contractual services		2,152		870		1,282		147.36	%
Other taxes and assessments		1,973		748		1,225		163.77	%
Merger-related		11,697		1,710		9,987		584.04	%
Other		9,062		4,688		4,374		93.30	%
Total noninterest expense	$	86,697	$	45,493	$	41,204		90.57	%

Excluding merger-related expenses, noninterest expense increased ~~by $1.4~~$6.8 million ~~or 101.1%~~and $31.2 million for the three and nine months September 30, 2021, compared to ~~$2.7~~the same periods of 2020, primarily due to the Bay Banks Merger, which occurred in the first quarter of 2021. Higher salaries and employee benefits of $2.9 million and $16.5 million, for the three- and nine-month periods ended September 30, 2021 were primarily attributable to employees added in the Bay Banks Merger, employees added to support the Company’s noninterest income business lines, and greater incentive expense. Greater incentive expense in the nine months ended September 30, 2021 included bonuses to reward front-line and support personnel for the efforts made to fulfill PPP loans and other management incentives. Partially offsetting the higher salaries and employee benefits expense in the 2021 periods were lower salaries and employee benefit expenses of $1.1 million and $2.1 million in the Company's mortgage banking division in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. Higher noninterest expenses in other categories for both the three and nine months ended September 30, 2021 compared to the same periods in 2020 were primarily attributable to the Bay Banks Merger. Other noninterest expenses for both 2021 periods included a $1.5 million loss that resulted from duplicate PPP loan fundings and an increase in the reserve for unfunded commitments. The Company continues to utilize all available remedies for recovering the duplicative PPP loan fundings. Additionally, in the third quarter of 2021, the Company consolidated five branches across its footprints. In connection with the closures, the Company recorded $521 thousand to write-down owned properties and impair leases. These expenses are reported in occupancy and equipment and other noninterest expense in the amounts of $233 thousand and $288 thousand, respectively.

Income Tax Expense. Income tax expense for the three months ended September 30, ~~2019 as compared to $1.3~~2021 and 2020 was $2.2 million ~~during~~and $1.7 million, respectively, resulting in an effective income tax rate of 24.4% and 25.2% for the ~~three~~respective periods. For the nine months ended September 30, ~~2018. Average interest bearing-liabilities increased by 51.7% for the three-month period ended September 30, 2019, as compared to the same period~~2021 and 2020, income tax expense was $11.0 million and $3.6 million, respectively, resulting in ~~2018, and the average cost of funds increased to 1.96% during the three months ended September 30, 2019, compared to 1.48% during the three months ended September 30, 2018.~~

Net interest income for the three-month period ended September 30, 2019 was $5.4 million as compared to $4.4 million for the same period in 2018, an increase of 22.5%. The increase in net interest income during the period is primarily attributed to an increase of $96.6 million in average loans held for investment and an increase in average securities of $89.6 million from the three-month period ended September 30, 2019 compared to the same period in 2018.

~~Provision for Loan Losses.~~ The provision for loan losses was $570 thousand during the three-month period ended September 30, 2019 as compared to $225 thousand during the three months ended September 30, 2018. The increase in the provision for loan losses during the three months ended September 30, 2019 compared to the like period in 2018 was due to overall loan portfolio growth as well as changes in portfolio mix.

~~Non-Interest~~ ~~Income~~~~. Blue Ridge’snon-interest~~ ~~income sources include deposit service charges and other fees, gains/losses on sales of mortgages, and income from bank-owned life insurance (“BOLI”).Non-interest~~ ~~income totaled $5.0 million for the three months ended September 30, 2019, compared to $3.1 million for the like period in 2018. The increase innon-interest~~ ~~income was due to an increase of $1.7 million related to the origination and sale of held for sale mortgages.~~

~~Non-Interest~~ ~~Expense.~~ ~~Non-interest~~ expense totaled $8.2 million for the three-month period ended September 30, 2019 as compared to $5.7 million for the same period in 2018, a 43.9% increase. This increase was primarily due to an increase in salaries and employee benefits of $1.6 million, or 48.1%, in addition to an increase in occupancy expenses of $213 thousand to $627 thousand for the three-month period ended September 30, 2019, compared to $414 thousand of the like period in 2018. Data processing fees also increased $148 thousand to $413 thousand at September 30, 2019 from $265 thousand at September 30, 2018 as a result of expenses associated with the pending merger with Virginia Community.

~~Income Tax Expense~~~~. During the three months ended September 30, 2019, Blue Ridge recognized a provision for income taxes of $379 thousand, for~~ an effective income tax rate of ~~23.2%, as compared to a provision of $329 thousand, for an effective tax rate of 20.6%~~21.7% and 23.0% for the ~~period ended September 30, 2018.~~respective periods.

Analysis of Financial Condition

Loan Portfolio. ~~Blue Ridge~~The Company makes loans to ~~individuals as well as~~commercial entities and to ~~commercial entities. Specific loan~~individuals. Loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan ~~requested~~ and the creditworthiness of the ~~prospective~~ borrower. Credit risk tends to be geographically concentrated in that a majority of the ~~loan customers~~loans are to borrowers located in the markets ~~serviced~~served by ~~Blue Ridge.~~the Company. All loans are underwritten within specific lending policy guidelines that are designed to maximize ~~Blue Ridge’s~~the Company’s profitability within an acceptable level of business risk.

The following table ~~sets forth~~presents the ~~distribution of Blue Ridge’s~~Company’s loan portfolio ~~at the dates indicated~~ by category of loan and the percentage of loans in each category to total ~~loans.~~loans as of the dates stated.


	September 30, 2021						December 31, 2020
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial and industrial	$	309,058			17.2	%	$	123,675			12.1	%
Paycheck Protection Program		47,325			2.6	%		292,068			28.5	%
Real estate – construction, commercial		139,286			7.7	%		54,702			5.3	%
Real estate – construction, residential		51,098			2.8	%		18,040			1.8	%
Real estate – mortgage, commercial		680,309			37.8	%		273,499			26.7	%
Real estate – mortgage, residential		499,361			27.7	%		213,404			20.8	%
Real estate – mortgage, farmland		6,317			0.4	%		3,615			0.4	%
Consumer		67,787			3.8	%		46,684			4.4	%
Gross loans		1,800,541			100.0	%		1,025,687			100.0	%
Less: deferred loan fees, net of costs		(1,440	)					(4,271	)
Gross loans, net of deferred loans fees and costs		1,799,101						1,021,416
Less: allowance for loan losses		(12,614	)					(13,827	)
Loans held for investment, net	$	1,786,487					$	1,007,589
Loans held for sale (not included in totals above)	$	144,111					$	148,209

The Company acquired approximately $1.03 billion of loans (at fair value) as of January 31, 2021, as a result of the Bay Banks Merger.

   At September 30, At December 31,
   2019 2018
(Dollars in thousands)
   Amount Percent Amount Percent
Commercial and financial
   $ 50,826 11.01 % $ 49,076 11.81 %
Agricultural
   175 0.04 % 216 0.05 %
Real estate – construction, commercial
   19,876 4.31 % 14,666 3.53 %
Real estate – construction, residential
   16,364 3.55 % 15,102 3.63 %
Real estate – mortgage, commercial
   167,223 36.23 % 150,513 36.22 %
Real estate – mortgage, residential
   165,865 35.94 % 149,856 36.06 %
Real estate – mortgage, farmland
   3,754 0.81 % 4,179 1.01 %
Consumer installment loans
   37,433 8.11 % 31,979 7.69 %


Gross loans
   461,516 100.00 % 415,587 100.00 %


Less: Unearned Income
   (638 ) (719 )


Gross loans, net of unearned income
   460,878 414,868
Less: Allowance for loan losses
   (4,404 ) (3,580 )


Net loans
   $ 456,474 $ 411,288


Loans and leases held for sale
   $ 80,255 $ 29,233


(not included in totals above)

~~The following table sets forth~~In 2020, the ~~repricing characteristics~~Company participated in the PPP pursuant to the Coronavirus Aid, Relief, and ~~sensitivity~~Economic Security Act (“CARES Act”) (“PPP 1”). Through the PPP 1, which is administered by the Small Business Administration (“SBA”), the federal government partnered with banks, including the Bank, to provide over $650 billion to small businesses to support payrolls and other operating expenses. PPP 1 loans have a two-year term if originated prior to June 5, 2020 or a five-year term if originated on or subsequent to June 5, 2020 and earn an annual interest rate ~~changes~~ of ~~our~~1%. Banks originating PPP 1 loans earned a processing fee of 1%, 3%, or 5% of the loan ~~portfolio at~~amount, depending on the size of the loan. The Company originated PPP 1 loans totaling approximately $363.4 million throughout 2020, and as of September 30, ~~2019~~2021, $32.6 million of PPP 1 loans were outstanding, including those acquired in the Bay Banks Merger.

PPP 2 loans have a contractual term of five years and earn an annual interest rate of 1%. Banks originating PPP 2 loans earned processing fees that were tiered depending on the size of the loan. Specifically, processing fees for loans of not more than $50,000 equal 50% of the loan balance or $2,500, whichever is less; processing fees for loans more than $50,000 and not more than $350,000 equaled 5% of the loan balance, and processing fees for loans above $350,000 equaled 3% of the loan balance. As of September 30, 2021, the Company's PPP 2 loans aggregate principal and unamortized fees balances, net of deferred costs, were $14.7 million and $676 thousand, respectively

The Company believes that the majority of PPP 1 and PPP 2 loans will be forgiven, in accordance with the terms of the program, and will be paid in full pursuant to the U.S. government guarantee. As of September 30, 2021, no PPP 2 loans had been forgiven.

From the onset of the global COVID-19 pandemic, the Company has proactively addressed the needs of its commercial and individual borrowers by modifying loans allowing for the short-term deferral of principal payments or of principal and interest payments. Pursuant to the CARES Act, banks have the option to temporarily suspend certain requirements of generally accepted accounting principles related to troubled debt restructuring (“TDR”) for a limited period of time if certain conditions are met. During 2020, in response to the COVID-19 pandemic, the Company approved over 550 loan deferrals for a total of $110.6 million. In addition, during 2020, Bay Banks approved nearly 400 loan deferrals for approximately $160.0 million. At September 30, 2021, most of these loans were past the deferment period and back on normal payment schedules, and as of September 30, 2021, 16 loans were in deferment for a total of approximately $4.7 million. All loan modifications made by the Company were made on a good faith basis to borrowers who met the requirements for modifications under the CARES Act. As a result of regulatory and accounting guidance regarding such modifications, the loans were not designated as TDRs as of September 30, 2021 and December 31, ~~2018.~~2020.

September 30, 2019
   One Year or
Less    Between
One and
Five Years    After Five Years    Total
Commercial and financial
   $ 12,410    $ 15,221    $ 23,195    $ 50,826
Agricultural
   11    164    —      175
Real estate – construction, commercial
   4,615    13,375    1,886    19,876
Real estate – construction, residential
   16,364    —      —      16,364
Real estate – mortgage, commercial
   16,235    58,526    92,462    167,223
Real estate – mortgage, residential
   9,052    20,902    135,911    165,865
Real estate – mortgage, farmland
   420    1,692    1,642    3,754
Consumer installment loans
   672    31,224    5,537    37,433








Gross loans
   $ 59,779    $ 141,104    $ 260,633    $ 461,516








Fixed-rate loans
   $ 49,247    $ 132,582    $ 152,028    $ 333,857
Floating-rate loans
   10,532    8,522    108,605    127,659








Gross loans
   $ 59,779    $ 141,104    $ 260,633    $ 461,516

December 31, 2018
   One Year or
Less    Between
One and
Five Years    After Five Years    Total
Commercial and financial
   $ 11,880    $ 19,583    $ 17,613    $ 49,076
Agricultural
   183    33    —      216
Real estate – construction, commercial
   6,987    6,412    1,267    14,666
Real estate – construction, residential
   15,102    —      —      15,102
Real estate – mortgage, commercial
   21,403    52,743    76,367    150,513
Real estate – mortgage, residential
   11,353    18,291    120,212    149,856
Real estate – mortgage, farmland
   723    1,494    1,962    4,179
Consumer installment loans
   787    23,378    7,814    31,979








Gross loans
   $ 68,418    $ 121,934    $ 225,235    $ 415,587








Fixed-rate loans
   $ 52,431    $ 115,860    $ 126,942    $ 295,233
Floating-rate loans
   15,987    6,074    98,293    120,354








Gross loans
   $ 68,418    $ 121,934    $ 225,235    $ 415,587

~~Blue Ridge~~Allowance for Loan Losses. The Company prepares a quarterly analysis of the ~~allowance for loan losses,~~ALL, with the objective of quantifying portfolio risk into a dollar amount of inherent losses. The ~~allowance for loan losses~~ALL is established ~~as losses are estimated to have occurred~~ through a provision for loan losses charged against income and decreased by loanscharged-off (net of recoveries, if any). Management’s periodic evaluation of the adequacy of the allowance is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, and current economic conditions. While management uses the best information available to make evaluations, future adjustments may be necessary, if economic or other conditions differ substantially from the assumptions used. The ~~allowance~~ALL consists of specific and general components. The specific component relates to loans that are identified as ~~impaired.~~impaired and meet certain additional criteria, such as size. For these loans ~~that are classified as impaired,~~ an allowance is established when the discounted cash flows or the net realizable value, which is equal to the estimated fair value of the underlying collateral less estimated costs to sell, of the impaired loan is lower than the carrying value of that loan. The general component coversnon-classified loans and those loans classified that are not ~~impaired~~evaluated for impairment and is based on historical loss experience adjusted for other internal or external influences on credit quality that are not fully reflected in the historical data.

~~Blue Ridge~~The Company follows applicable guidance ~~within~~issued by the Financial Accounting Standards ~~Board Accounting Standards Codification.~~Board. This guidance requires that losses be accrued when they are probable of occurring and can be estimated. It also requires that impaired loans, within its scope, be measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, ~~a creditor~~impairment may ~~measure impairment~~be measured based on a loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

Loans are evaluated fornon-accrual status when principal or interest is delinquent for 90 days or more ~~and are placed onnon-accrual~~ ~~status~~or when a loan is specifically determined to be impaired. Any unpaid interest previously accrued on those loans is reversed from income. Any interest payments subsequently received are recognized as income or amortized over the life of the ~~refinanced~~ loan depending on the specific circumstances. Interest payments received on loans where management believes a potential for loss remains are applied as a reduction of the loan principal balance.

Management believes that the ~~allowance for loan losses is adequate.~~Company’s ALL was adequate as of September 30, 2021 and December 31, 2020. There can be no assurance, however, that adjustments to the ~~provision for loan losses~~ALL 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 ~~Blue Ridge’s~~the Company’s market area; orthe impact of the COVID-19 pandemic; and changes in the circumstances of particular borrowers are criteria that could ~~change and make adjustments~~increase the level of the ALL required, resulting in charges to the provision for loan ~~losses necessary.~~losses.

The following table presents ~~a summary~~an analysis of the ~~provision~~change in the ALL by loan type as of and ~~allowance for loan losses~~ for the periods ~~indicated:~~stated.


	For the three months ended						For the nine months ended
(Dollars in thousands)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
ALL, beginning of period	$	13,007		$	8,206		$	13,827		$	4,572
Charge-offs
Commercial and industrial		(18	)		—			(968	)		—
Real estate – mortgage		(133	)		—			(146	)		—
Consumer		(361	)		(213	)		(757	)		(787	)
Total charge-offs		(512	)		(213	)		(1,871	)		(787	)
Recoveries
Commercial and industrial		26			33			210			34
Real estate – mortgage		5			—			108			—
Consumer		88			97			340			229
Total recoveries		119			130			658			263
Net charge-offs		(393	)		(83	)		(1,213	)		(524	)
Provision for loan losses		—			4,000			—			8,075
ALL, end of period	$	12,614		$	12,123		$	12,614		$	12,123

(Dollars in thousands)    Nine Months
Ended
September 30,
2019 Year Ended
December 31,
2018
Allowance, beginning of period
   $ 3,580 $ 2,803


Charge-Offs

Commercial and industrial
   $ 43 $ 6
Real estate, construction
   —   —
Real estate, mortgage
   3 13
Consumer and other loans
   733 545


Total charge-offs
   779 564


Recoveries

Commercial and industrial
   —   —
Real estate, construction
   —   —
Real estate, mortgage
   (6 ) (12 )
Consumer and other loans
   (132 ) (104 )


Total recoveries
   (138 ) (116 )


Net charge-offs
   641 448


Provision for loan losses
   1,465 1,225


Allowance, end of period
   $ 4,404 $ 3,580


Ratio of net charges-offs to average total loans outstanding during period
   0.05 % 0.12 %

The ~~allowance for loan losses~~ALL includes specific ~~and additional~~ allowances for impaired loans and a general allowance applicable to all loan categories; however, management has allocated the allowance 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 table presents the allocation of the ~~allowance at the end of the period indicated,~~ALL by loan category and as a ~~percent~~percentage of each category as of the ~~applicable loan segment, is~~dates stated.


	September 30, 2021					December 31, 2020
(Dollars in thousands)	$		% of Loans			$		% of Loans
Commercial and industrial	$	2,201		0.7	%	$	3,762		3.0	%
Real estate – construction, commercial		749		0.5	%		960		1.8	%
Real estate – construction, residential		160		0.3	%		150		0.8	%
Real estate – mortgage, commercial		4,681		0.7	%		4,215		1.5	%
Real estate – mortgage, residential		955		0.2	%		1,481		0.7	%
Real estate – mortgage, farmland		20		0.3	%		18		0.5	%
Consumer		3,848		5.7	%		3,241		6.9	%
	$	12,614				$	13,827

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

   September 30, December 31,
(Dollars in thousands)    2019    % of
Loans 2018    % of
Loans
Commercial and industrial
   $ 786    1.6 % $ 568    1.2 %
Real estate – construction, commercial
   157    0.8 % 111    0.8 %
Real estate – construction, residential
   60    0.4 % 56    0.4 %
Real estate – mortgage, commercial
   1,517    0.9 % 1,183    0.8 %
Real estate – mortgage, residential
   502    0.3 % 431    0.3 %
Agricultural and farmland
   13    0.3 % 13    0.3 %
Consumer installment
   1,369    3.7 % 1,218    3.8 %






   $ 4,404    1.0 % $ 3,580    0.9 %

Non-performing Assets. Non-performing assets consist ofnon-accrual ~~loans;~~ loans, loans past due 90 days and still accruing interest, and other real estate owned ~~(foreclosed properties)~~(“OREO”). ~~The level ofnon-performing~~ assets decreased by $1.8 million during the first nine months of 2019 to $5.8 million as of September 30, 2019, compared to $7.7 million at December 31, 2018 and $7.8 million at December 31, 2017. Blue Ridge has established specific loan loss reserves on impaired loans equal to the estimated collateral deficiency (if any), plus the cost of sale of the underlying collateral, as applicable.

~~Loans are placed innon-accrual~~ ~~status when in the opinion of management the collection of additional interest is unlikely or a specific loan meets the criteria fornon-accrual~~ ~~status established by regulatory authorities. No interest is taken into income onnon-accrual~~ ~~loans. A loan remains onnon-accrual~~ ~~status until the loan is current as to both principal and interest or the borrower demonstrates the ability to pay and remain current, or both.~~

~~Foreclosed real properties include~~OREO includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of ~~debt.~~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.

Impaired loans also include certain loans that have been modified as TDRs where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as non-performing at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. The Company had four TDRs totaling $235 thousand as of September 30, 2021, two of which were classified as TDRs due to a change in interest rate and payment terms and two of which were classified as TDRs due to a change in payment terms. The Company had two TDRs totaling $142 thousand as of December 31, 2020, one of which was classified as a TDR due to a change in interest rate and payment terms and the other loan due to a change in payment terms. All of these TDRs were performing in accordance with their

modified terms at the respective dates and therefore excluded from the non-performing loan and non-performing asset figures in the table below.

The following ~~is a~~table presents summary of information pertaining to ~~risk elements~~non-performing assets and~~non-performing~~ ~~assets:~~ certain asset quality ratios as of the periods stated.

   September 30, December 31,
(Dollars in thousands)    2019 2018
Non-accrual loans
   $ 5,141 $ 5,515
Loans past due 90 days and still accruing
   708 2,005


Totalnon-performing loans
   $ 5,849 $ 7,520
Other real estate owned
   — 134


Totalnon-performing assets
   $ 5,849 $ 7,654
Allowance for loan losses to total loans held for investment
   0.96 % 0.86 %
Allowance for loan losses tonon-performing loans
   75.29 % 47.61 %
Non-performing loans to total loans held for investment
   1.27 % 1.81 %
Non-performing assets to total assets
   0.79 % 1.42 %


(Dollars in thousands)	September 30, 2021			December 31, 2020
Non-accrual loans (1)	$	12,777		$	6,583
Loans past due 90 days and still accruing (1)		2,378			46
Total non-performing loans	$	15,155		$	6,629
OREO		227			—
Total non-performing assets	$	15,382		$	6,629
ALL	$	12,614		$	13,827
Loans held for investment, including PPP loans	$	1,799,101		$	1,021,416
Loans held for investment, excluding PPP loans	$	1,752,453		$	732,883
Total assets	$	2,699,302		$	1,498,258
ALL to total loans held for investment, including PPP loans		0.70	%		1.35	%
ALL to total loans held for investment, excluding PPP loans		0.72	%		1.89	%
ALL to non-performing loans		83.23	%		208.58	%
Non-performing loans to total loans held for investment, including PPP loans		0.84	%		0.65	%
Non-performing loans to total loans held for investment, excluding PPP loans		0.86	%		0.90	%
Non-performing assets to total assets		0.57	%		0.44	%

(1) Excludes PCI loans and accruing TDRs

The decline in the ratio of ALL to total loans held for investment, excluding PPP loans, at September 30, 2021 compared to December 31, 2020 was primarily attributable to loans acquired in the Bay Banks Merger, as no ALL carried over in the merger. The remaining purchase accounting adjustment (discount) related to loans acquired in the Bay Banks Merger and earlier acquisitions by the Company was $17.0 million at September 30, 2021. The $8.8 million increase in non-performing assets since December 31, 2020 is primarily attributable to commercial loans totaling $5.2 million to the same borrower relationship that were placed on non-accrual status in the second quarter of 2021.

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~~available-for-sale~~ available for sale 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 ~~Blue Ridge’s~~the Company’s investment securities~~available-for-sale~~ available for sale was ~~$121.7~~$360.1 million atas of September 30, ~~2019,~~2021, an increase of ~~$83.7~~$250.6 million ~~or 219.98%~~ from ~~$38.0~~$109.5 million at December 31, ~~2018. Investment~~2020. The Company acquired approximately $79.5 million of securities~~held-to-maturity~~ at ~~September 30, 2019 totaled $13.1 million and $15.6 million at December 31, 2018. Securities in~~fair value as of the ~~investment portfolio classified asheld-to-maturity~~ ~~are those securities that Blue Ridge has~~effective date of the ~~intent and ability to hold to maturity and are carried at amortized cost.~~Bay Banks Merger.

As of September 30, ~~2019~~2021 and December 31, ~~2018,~~2020, the majority of the investment securities portfolio consisted of securities rated ~~A to AAA~~as investment grade by a leading rating agency. Investment grade securities ~~which carry a AAA rating~~ are judged to behave a low risk of ~~the best quality and carry the smallest degree of investment risk.~~default. Investment securities ~~that were~~ pledged to secure public deposits totaled ~~$13.5~~$9.1 million and ~~$16.8~~$12.5 million at September 30, ~~2019~~2021 and December 31, ~~2018,~~2020, respectively. At September 30, 2021 and December 31, 2020, securities with a fair value of $27.7 million and $29.4 million, respectively, were pledged to secure the Bank’s borrowing facility with the FHLB.

~~Blue Ridge completes~~The Company reviews for other-than-temporary impairment of its investment securities portfolio at least quarterly. At September 30, ~~2019~~2021 and December 31, ~~2018,~~2020, only investment grade securities were in an unrealized loss ~~position.~~position or the amount of unrealized loss for the security was not significant. Investment securities with unrealized losses are generally a result of pricing changes due to recent ~~and negative conditions~~changes in the current ~~market~~interest rate environment and not as a result of permanent credit impairment. Contractual cash flows for the agency 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. ~~Blue Ridge~~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.

No other-than-temporary impairment has been recognized for the securities ~~in Blue Ridge’s investment portfolio~~ as of September 30, ~~2019~~2021 and December 31, ~~2018.~~2020.

~~Blue Ridge~~The Company holds restricted equity investments ~~in equities~~ of the ~~Federal Reserve Bank of Richmond (“FRB”),~~FRB, FHLB, and ~~through~~ its correspondent ~~bank, Community Banker’s Bank (“CBB”).~~bank. At September 30, ~~2019 Blue Ridge~~2021, the Company owned $6.0 million of FHLB stock, ~~$963 thousand~~$4.9 million of FRB stock, and ~~$168~~$468 thousand of ~~CBB~~correspondent bank stock. At December 31, ~~2018, Blue Ridge~~2020, the Company owned ~~$3.5~~$5.8 million of FHLB stock, ~~$813 thousand~~$2.2 million of FRB stock, and ~~$168~~$248 thousand of ~~CBB~~correspondent bank stock. The Company also has various other equity investments, including shares in other financial institutions and fintech companies, totaling $7.9 million and $3.0 million as of September 30, 2021 and December 31, 2020, respectively, which are marked to market through the consolidated income statements each reporting period.

The Company also holds investments in early-stage focused investment funds, small business investment companies ("SBIC") , and low-income housing partnerships, which are reported in other investments on the consolidated balance sheets.

The following table ~~reflects~~presents the composition of ~~Blue Ridge’s~~the Company’s investment portfolio, at amortized cost, ~~at September 30, 2019 and December 31, 2018.~~as of the dates stated.


	September 30,					December 31,
	2021					2020
(Dollars in thousands)	Amortized Cost		Percent of total			Amortized Cost		Percent of total
Available-for-sale
State and municipal	$	41,843		11.55	%	$	14,069		12.95	%
U. S. Treasury and agencies		49,212		13.58	%		2,500		2.30	%
Mortgage backed securities		241,108		66.54	%		72,337		66.57	%
Corporate bonds		30,210		8.34	%		19,755		18.18	%
Total investment securities	$	362,373		100.00	%	$	108,661		100.00	%

   September 30, 2019 December 31, 2018
(Dollars in thousands)
Balance    Percent
of total Balance    Percent
of total
Held-to maturity

State and municipal
   $ 13,117    9.8 % $ 15,565    28.6 %
Available-for-sale

State and municipal
   —      —   1,000    1.8 %
U. S. Treasury and agencies
   3,375    2.5 % 3,375    6.2 %
Mortgage backed securities
   110,220    82.7 % 28,976    53.3 %
Corporate bonds
   6,553    5.0 % 5,477    10.1 %
Equity securities
   —      —   —      —






Total investments
   $ 133,265    100.0 % $ 54,393    100.0 %

The following tables present information about the ~~amortized cost of Blue Ridge’s~~Company’s investment portfolio ~~by their stated maturities, as well as~~for the ~~weighted average yields for each of the maturity ranges at September 30, 2019 and December 31, 2018.~~periods stated.


																					September 30, 2021
	At September 30, 2019																								Weighted		Weighted
	Within One Year					One to Five Years					Five to Ten Years					Over Ten Years									Average Life		Average
(Dollars in thousands)	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Fair Value		in Years		Yield
Held-to maturity
Available-for-sale
State and municipal	$	461		3.1	%	$	2,590		3.5	%	$	3,761		3.7	%	$	6,305		3.8	%	$	41,843	$	41,852		6.2		0.75	%
Available-for-sale
U. S. Treasury and agencies		—		—			1,000		1.9	%		2,375		2.3	%		—		—			49,212		48,548		8.5		1.68	%
Mortgage backed securities		—		—			—		—			1,594		1.7	%		108,626		2.4	%		241,108		238,923		7.9		1.05	%
Corporate bonds		—					1,500		5.3	%		4,825		6.3	%		228		6.9	%		30,210		30,775		3.5		4.68	%

Total investments	$	461				$	5,090				$	12,555				$	115,159				$	362,373	$	360,098		6.5		2.04	%

																					December 31, 2020
																									Weighted		Weighted
																									Average Life		Average
(Dollars in thousands)																					Amortized Cost		Fair Value		in Years		Yield
Available-for-sale
State and municipal																					$	14,069	$	14,259		5.0		1.68	%
U. S. Treasury and agencies																						2,500		2,409		9.6		0.87	%
Mortgage backed securities																						72,337		72,635		3.8		3.37	%
Corporate bonds																						19,755		20,172		3.1		3.10	%
Total investments																					$	108,661	$	109,475		5.4		2.26	%

   At December 31, 2018
   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
Held-to maturity

State and municipal
   $ 302    2.8 % $ 4,089    3.1 % $ 2,688    3.8 % $ 8,486    3.6 %
Available-for-sale

State and municipal
   500    3.9 % 500    4.9 % —      —   —      —
U. S. Treasury and agencies
   —      —   500    1.8 % 2,875    2.3 % —      —
Mortgage backed securities
   —      —   —      —   1,922    1.8 % 27,054    2.9 %
Corporate bonds
   —      1,500    5.2 % 3,750    6.5 % 227    7.0 %









Total investments
   $ 802    $ 6,589    $ 11,235    $ 35,767

Deposits. The principal sources of funds for ~~Blue Ridge~~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. ~~Blue Ridge’s~~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 ~~Blue Ridge~~the Company with a source of fee income and cross-marketing opportunities as well as alow-cost source of funds. Time and savings accounts, including money market deposit accounts, also provide a relatively stablelow-cost source of funding. ~~Please refer to the average balance tables under “Net Interest Income” for information regarding the average balance~~

Total deposits as of ~~deposits, and average rates paid.~~

~~Approximately 45.5% of Blue Ridge’s deposits at~~ September 30, ~~2019~~2021 were ~~made up~~$2.20 billion, an increase of $1.26 billion from December 31, 2020, of which $1.03 billion were assumed in the Bay Banks Merger as of the effective date of the merger. The Company's expanding relationships with fintech partners have resulted in approximately $52 million of deposit growth in the first nine months of 2021.

Approximately 24.6% of the Company’s deposits as of September 30, 2021 were composed of time deposits ~~which are generally the most expensive form of deposit because of their fixed rate and term, as~~ compared to ~~40.9% and 47.8% at~~26.6% as of December 31, ~~2018 and~~2020. In contrast, approximately 31.1% of the Company’s deposits as of September 30, 2021 were composed of noninterest-bearing demand deposits compared to 35.2% as of December 31, ~~2017, respectively.~~2020. The reduction in this ratio was primarily attributable to the Bay Banks Merger.

The following ~~tables provide a summary of Blue Ridge’s deposit base at the dates indicated and~~table provides the maturity distribution of certificates of deposit of $100,000 or more as of the ~~end of the~~ periods ~~indicated:~~stated.

   September 30, 2019 December 31, 2018
(Dollars in thousands)    Balance    Average
Rate Balance    Average
Rate
Noninterest-bearing demand
   $ 91,840    —   $ 88,265    —
Interest-bearing –
checking, savings and
money market
   191,654    0.93 % 157,000    0.87 %
Time deposits $100,000
or more
   175,224    2.32 % 109,004    2.02 %
Other time deposits
   61,562    1.84 % 60,758    1.58 %





Total deposits
   $ 520,280    $ 415,027


(Dollars in thousands)	September 30, 2021		December 31, 2020
Maturing in:
3 months or less	$	74,755	$	25,211
Over 3 months through 6 months		61,709		33,963
Over 6 months through 12 months		74,986		24,675
Over 12 months		134,261		92,341
	$	345,711	$	176,190

~~Maturities of Time Deposits ($100,000 or greater)~~

(Dollars in thousands)    September 30,
2019    December 31,
2018
Maturing in:

3 months or less
   $ 48,992    $ 8,155
Over 3 months through 6 months
   12,048    19,265
Over 6 months through 12 months
   21,113    20,867
Over 12 months
   93,071    60,717




   $ 175,224    $ 109,004

Brokered and listing service deposits made up of both certificate of deposits and money market demand accounts totaled $64.8 million at September 30, 2019, an increase of $41.3 million from $23.5 million at December 31, 2018.

~~Borrowings:~~Borrowings. The following ~~table provides~~tables present information on the balances and interest rates on total borrowings as of and for the periods ~~indicated:~~stated.


	For the nine months ended September 30, 2021
(Dollars in thousands)	Period-End Balance		Highest Month-End Balance		Average Balance		Weighted Average Rate
FHLB borrowings	$	125,115	$	220,115	$	165,953		0.65	%
FRB borrowings		33,857		632,540		319,215		0.31	%

	Year ended December 31, 2020
(Dollars in thousands)	Period-End Balance		Highest Month-End Balance		Average Balance		Weighted Average Rate
FHLB borrowings	$	115,000	$	124,000	$	121,033		0.24	%
FRB borrowings		281,650		355,484		223,869		0.35	%

(Dollars in thousands)    September 30,
2019 At December 31
2018
FHLB borrowings
   $ 129,600 $ 73,100


Weighted average interest rate
   2.33 % 2.47 %

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

FRB borrowings through the PPPLF are secured by loans the Bank originated under the PPP. The PPPLF advances are at the full PPP loan value and term, have a fixed annual cost of 35 basis points, and receive favorable regulatory capital treatment.

Subordinated notes, net, totaled $40.5 million as of September 30, 2021 compared to $24.5 million as of December 31, 2020, a $16.0 million increase for the nine months ending September 30 2021, which was primarily attributable to $31.9 million of subordinated notes assumed in the Bay Banks Merger, partially offset by two subordinated note

redemptions in 2021. The Company redeemed subordinated notes with an initial aggregate principal balance of $10.0 million and $7.0 million in the second and third quarters of 2021, respectively.

Liquidity. Liquidity is essential to the Company’s business. The Company’s liquidity could be impaired by an inability to access the capital markets or by unforeseen outflows of cash, including deposits. This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the financial services industry generally, or an operational problem that affects a third party or the Company. The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the ~~banking industry is defined as the ability to meet the demand for funds of both depositors and borrowers. Blue Ridge must be able to meet these needs by obtaining funding from depositors~~capital markets or other ~~lenders or by convertingnon-cash~~ ~~items into cash.~~ events.

The objective of Blue Ridge’s liquidity management program is to ensure that it always has sufficient resources to meet the demands of depositors and borrowers. Stable core deposits and a strong capital position provide the base for Blue Ridge’s liquidity position. Blue Ridge believes it has demonstrated its ability to attract deposits because of Blue Ridge’s convenient branch locations, personal service, technology and pricing.

In addition to deposits, Blue Ridge has access to the different wholesale funding markets. These markets include the brokered certificate of deposit market, listing service deposit market, and the federal funds market. Blue Ridge is a member of the Promontory Interfinancial Network, which allows banking customers to access FDIC insurance protection on deposits through Blue Ridge which exceed FDIC insurance limits. Blue Ridge also has~~one-way~~ authority with Promontory for both their CDARs and ICS products which provides Blue Ridge the ability to access additional wholesale funding as needed. Blue Ridge also maintains secured lines of credit with the FRB and the FHLB for which Blue Ridge can borrow up to the allowable amount for the collateral pledged. Having diverse funding alternatives reduces Blue Ridge’s reliance on any one source for funding.

~~Cash flow from amortizing assets or maturing assets also provides funding to meet the needs of depositors and borrowers.~~

~~Blue Ridge~~Company has established a formal liquidity contingency plan ~~which~~that provides guidelines for liquidity management. For ~~Blue Ridge’s~~the Company’s liquidity management program, it first determines ~~Blue Ridge’s~~ current liquidity position and then forecasts liquidity based on anticipated changes in the balance sheet. In this forecast, ~~Blue Ridge~~the Company expects to maintain a liquidity cushion. ~~Blue Ridge~~Management also stress tests ~~its~~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. ~~Blue Ridge believes that it has sufficient resources to meet its~~Management also monitors the Company’s liquidity ~~needs.~~

Blue Ridge had a credit line available of $216.3 million with the FHLB with an outstanding balance of $129.6 million as of September 30, 2019, leaving the remaining credit availability of $86.7 million at September 30, 2019. As of December 31, 2018, the outstanding balance of borrowings with the FHLB totaled $73.1 million.

Blue Ridge had four unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $21 million at September 30, 2019 and December 31, 2018. These lines were not drawn upon at September 30, 2019 and December 31, 2018.

Liquidity is essential to Blue Ridge’s business. Blue Ridge’s liquidity could be impaired by an inability to access the capital markets or by unforeseen outflows of cash, including deposits. This situation may arise due to circumstances that Blue Ridge may be unable to control, such as general market disruption, negative views about the financial services industry generally, or an operational problem that affects a third party or Blue Ridge. Blue Ridge’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. Blue Ridge monitors its liquidity position ~~daily~~ through cash flow forecasting ~~and monthly testing against minimum policy ratios~~ and believes its level of liquidity and capital is adequate to conduct the business of ~~Blue Ridge.~~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 Company has unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $64.0 million and $38.0 million as of September 30, 2021 and December 31, 2020, respectively. These lines bear interest at the prevailing rates for such loan and are cancellable any time by the correspondent Bank. As of September 30, 2021 and December 31, 2020, 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 Company 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 and the FRB under which the Company can borrow up to the allowable amount for the collateral pledged. As of September 30, 2021, the Company had a credit line available of $392.2 million with the FHLB with outstanding advances totaling $125.0 million and letters of credit totaling $57.0 million, leaving the remaining credit availability of $210.2 million as of the same date. The letters of credit are for the benefits of the Commonwealth of Virginia to secure public deposits. As of December 31, 2020, outstanding FHLB advances totaled $115.0 million and letters of credit totaled $20.0 million.

The Company utilizes the FRB PPPLF to fund loans originated under the PPP, which collateralize the advances. As of September 30, 2021 and December 31, 2020, FRB borrowings under this facility totaled $33.9 million and $281.7 million, respectively.

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

~~Regulatory agencies measure~~Banks and bank holding companies are subject to various regulatory capital ~~adequacy utilizing a formula that considers~~requirements administered by the ~~individual risk profile of the financial institution. The~~federal banking agencies. Failure to meet minimum capital requirements ~~are: (i)~~can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a ~~common equity Tier~~direct material effect on the Bank'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. The final rules implementing Basel Committee on Banking Supervision's capital

guidelines for U.S. banks (the “Basel III rules”) became effective for the Bank on January 1, ~~(“CET1”) capital ratio~~2015, with full compliance with all of ~~4.5%; (ii)~~the requirements phased-in over a ~~Tier~~multi-year schedule and fully phased-in on January 1, ~~to risk-based assets capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. Additionally,~~2019. Under 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 September 30, 2021, the Bank met all capital adequacy requirement 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 September 30, 2021, the most recent regulatory notification, categorized the Bank as well capitalized under the regulatory framework. There are no conditions or events since that notification that management believes have changed the institution's categorization. Federal and state banking regulations place certain restrictions on dividends paid by the Company. The total amount of ~~2.5%~~dividends which may be paid at any date is generally limited to retained earnings of ~~risk-weighted assets, is designed to absorb losses during periods of economic stress and is applicable to Blue Ridge Bank’s CET1 capital, Tier 1~~the Company.

The following tables present the capital and ~~total capital ratios. Including the conservation buffer, Blue Ridge Bank currently considers its minimum~~ capital ratios to ~~be as follows: 7.00% for CET1; 8.50% for Tier 1 capital; and 10.50% for Total Risk-Based capital. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above~~which the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation. Blue Ridge Bank was considered “well capitalized” for regulatory purposes at September 30, 2019 and December 31, 2018.

~~As noted above, regulatory capital levels for Blue Ridge Bank meet those established for “well capitalized” institutions. While Blue Ridge~~ Bank is currently considered “well capitalized,” it may from time to time find it necessary to access the capital markets to meet Blue Ridge’s growth objectives or capitalize on specific business opportunities.

~~The following table shows the minimum capital requirement~~subject and the ~~capital position at September 30, 2019~~amounts and ~~December 31, 2018~~ratios to be adequately and ~~2017~~well capitalized for ~~Blue Ridge Bank.~~the dates stated. Adequately capitalized ratios include the conversation buffer.

   Minimum Ratios
   September 30,
2019 December 31,
2018 To be
“Adequately
Capitalized” To be “Well
Capitalized”
Total Capital (to Risk Weighted Assets):

Consolidated
   13.9 % 10.8 % N/A N/A
Bank
   12.9 % 12.1 % 8.0 % 10.5 %
Tier 1 Capital (to Risk Weighted Assets):

Consolidated
   10.9 % 9.9 % N/A N/A
Bank
   12.0 % 11.2 % 6.0 % 8.5 %
Tier 1 Capital (to Average Assets):

Consolidated
   8.6 % 8.3 % N/A N/A
Bank
   8.4 % 8.9 % 4.0 % 5.0 %
Common Equity Tier 1 Capital (to Risk Weighted Assets):

Consolidated
   10.9 % 9.9 % N/A N/A
Bank
   12.0 % 11.2 % 4.5 % 7.0 %


	Actual					For Capital Adequacy Purposes					To Be Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2021
Total risk based capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	269,123		13.15	%	$	214,936		10.50	%	$	204,701		10.00	%
Tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	255,997		12.51	%	$	173,996		8.50	%	$	163,761		8.00	%
Common equity tier 1 capital
(To risk-weighted assets)
Blue Ridge Bank, N.A.	$	255,997		12.51	%	$	143,291		7.00	%	$	133,056		6.50	%
Tier 1 leverage
(To average assets)
Blue Ridge Bank, N.A.	$	255,997		9.72	%	$	105,358		4.00	%	$	131,698		5.00	%

Actual

For Capital
Adequacy Purposes

To Be Well Capitalized

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2020

Total risk based capital

(To risk-weighted assets)

Blue Ridge Bank, N.A.

$
109,219

13.10
%

$
87,574

10.50
%

$
83,404

10.00
%
Tier 1 capital

(To risk-weighted assets)

Blue Ridge Bank, N.A.

$
98,751

11.84
%

$
70,893

8.50
%

$
66,723

8.00
%
Common equity tier 1 capital

(To risk-weighted assets)

Blue Ridge Bank, N.A.

$
98,751

11.84
%

$
58,383

7.00
%

$
54,213

6.50
%
Tier 1 leverage

(To average assets)

Blue Ridge Bank, N.A.

$
98,751

8.34
%

$
47,363

4.00
%

$
59,180

5.00
%
59

Off-Balance Sheet Activities

Standby letters of credit are conditional commitments issued by Blue Ridge to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers; Blue Ridge generally holds collateral supporting these commitments. In the event the customer does not perform in accordance with the terms of the agreement with the third party, Blue Ridge would be required to fund the commitment. The maximum potential

amount of future payments Blue Ridge could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, Blue Ridge would be entitled to seek recovery from the customer. The maximum potential amount of future advances on standby letters of credit available through Blue Ridge at September 30, 2019 and December 31, 2018, totaled $1.3 million and $1.6 million, respectively.

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. ~~Blue Ridge~~The Company evaluates each customer’s credit worthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by ~~Blue Ridge~~the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include real estate and income producing commercial properties. The approved commitments to extend credit that was available but unused atas of September 30, ~~2019~~2021 and December 31, ~~2018~~2020 totaled ~~$89.2~~$384.9 million and ~~$65.2~~$126.0 million, respectively. The majority of the increase since year-end 2020 is attributable to the Bay Banks Merger.

Reserves for unfunded commitments as of September 30, 2021 and December 31, 2020 were $512 thousand and $0, respectively, and are included in other liabilities on the consolidated balances sheets.

The Company invests in various partnerships and limited liability companies, many of which invest in early stage companies operating in fintech businesses. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At September 30, 2021, the Company has future commitments outstanding totaling $9.1 million related to these investments.

Interest Rate Risk Management

As a financial institution, ~~Blue Ridge~~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’~~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 LIBOR. ~~Blue Ridge’s~~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 ~~Blue Ridge~~the Bank maintains. ~~Blue Ridge~~The Company manages interest rate risk through an asset and liability committee or (“ALCO”). The ALCO is responsible for ~~managing Blue Ridge’s~~monitoring the Company’s interest rate risk in conjunction with liquidity and capital ~~management.~~management and in accordance with policies established by the Company’s board of directors.

~~Blue Ridge~~

The Company employs an independent consulting firm to model its interest rate ~~sensitivity. Blue Ridge~~sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. ~~Many assumptions~~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 ~~Blue Ridge~~management expects rates to change onnon-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 then produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. Next, the model determines what net interest income would be based on specific changes in interest rates. The rate simulations are performed for atwo-year period and include ~~ramped~~rapid rate changes of down 100 basis points to ~~300~~200 basis points and up 100 basis points to 400 basis points. ~~In both the up and down scenarios, the model assumes a parallel shift in the yield curve.~~ The results of these simulations are then compared to the base case.

Stress testing the balance sheet and net interest income using instantaneous parallel shock movements in the yield curve of 100 to 400 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 ~~Blue Ridge’s~~the Company’s interest rate risk position over a historical time frame for comparison purposes.

At September 30, 2019, Blue Ridge’s asset/liability position was considered to be slightly asset sensitive based on its interest rate sensitivity model. Blue Ridge’s net interest income would increase by 14.2% in an up 100 basis point scenario

Item 3. Quantitative and ~~would increase 15.8% in an up 400 basis point scenario over aone-year~~ ~~time frame. In thetwo-year~~ time horizon, Blue Ridge’s net interest income would increase by 15.3% in an up 100 basis point scenario and would increase by 20.1% in an up 400 basis point scenario. At September 30, 2019, all interest rate risk stress tests measures were within Blue Ridge’s board policy established limits in each of the increased rate scenarios.Qualitative Disclosures about Market Risk

~~Additional information on Blue Ridge’s interest rate sensitivity for a static balance sheet over aone-year~~ ~~time horizon as of September 30, 2019 can be found below.~~

Interest Rate Risk to Earnings
(Net Interest Income)

September 30, 2019

Change in interest
rates (basis points)
   Percentage change in
net interest income
+400
   15.8 %
+300
   14.9 %
+200
   14.6 %
+100
   14.2 %
      0
   —
-100
   6.2 %
-200
   -1.7 %
-300
   -3.5 %

Economic value of equity, or (“EVE”), measures the period end market value of assets less the market value of liabilities and the change in this value as rates change. It models simultaneous parallel shifts in market interest rates, implied by the forward yield curve. The EVE model calculates the market value of capital by taking the present value of all asset cash flows less the present value of all liability cash flows.

The interest rate risk to capital at September 30, 2019 is shown below and reflects that Blue Ridge’s market value of capital is in a slightly liability sensitive position in which an increase in short-term interest rates is expected to generate lower market values of capital. At September 30, 2019, all EVE stress tests measures were within Blue Ridge’s board policy established limits.

Interest Rate Risk to Capital

September 30, 2019

Change in interest
rates (basis points)
   Percentage change in
economic value of equity
+400
   0.4 %
+300
   1.3 %
+200
   3.5 %
+100
   5.5 %
      0
   —
-100
   4.2 %
-200
   2.8 %
-300
   15.7 %

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Not required.

Item 4. Controls and Procedures

~~Item 4.~~

~~Controls and Procedures~~

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 September 30, ~~2019~~2021 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Item 1.~~

~~Legal Proceedings~~

~~There are~~Other than as set forth below, there have been no material ~~pending~~developments in the status of the legal proceedings ~~other than~~previously disclosed in Part II, Item 1 of the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.

In the ordinary ~~routine litigation incidental to the business, to which~~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 or as set forth below, that, if determined adversely, would have a material effect on the business, results of operations or financial position of the Company.

On June 24, 2021, a customer of the Bank filed a purported class action complaint against the Bank in the U.S. District Court for the Western District of Virginia, Harrisonburg Division. The complaint alleged, among other things, that the Bank breached its contract with checking account customers by charging improper overdraft fees, and was seeking monetary damages, restitution and declaratory relief arising from the alleged assessment and collection of such fees. The complaint also alleged that the aggregate claims of the putative class members exceed $5 million. The Company settled this lawsuit for a nominal amount in the third quarter of 2021.

Item 1A. Risk Factors

Other than as set forth below, there have been no material changes to the risk factors disclosed in the 2020 Form 10-K. The following risk factors supplement, and should be read together with, the risk factors disclosed in the 2020 Form 10-K. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our 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.

Combining the Company and FVCB may be more difficult, costly or time-consuming than we expect.

On July 14, 2021, the Company entered into a definitive merger agreement to acquire FVCB in an all-stock transaction. Subject to the terms and conditions stated in the merger agreement, upon the consummation of the merger, FVCB will be merged into the Company, with the Company as the surviving corporation (the “merger”), and each share of FVCB common stock will be converted into the right to receive 1.1492 shares of the Company’s common stock. At or immediately following consummation of the merger, FVCB’s wholly-owned banking subsidiary, FVCbank, will be merged with and into the Company’s wholly-owned national bank subsidiary, the Bank, with the Bank as the surviving bank (the “bank merger”).

The success of the merger will depend, in part, on the Company’s ability to realize the anticipated benefits and cost savings from combining the businesses of the Company and FVCB. To realize such anticipated benefits and cost savings, the Company must successfully combine the businesses of the Company and FVCB in a manner that permits growth opportunities and cost savings to be realized without materially disrupting the existing customer relationships of FVCB or the Company or decreasing revenues due to loss of customers. If the Company is not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than expected.

The Company and FVCB have operated, and, until the completion of the merger, will continue to operate, independently, and after the completion of the merger, the Company will integrate FVCB’s business into its own. The integration process in the merger could result in the loss of key employees, the disruption of each party’s ongoing business, inconsistencies in standards, controls, procedures and policies that may adversely affect either party’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the merger. The loss of key employees could adversely affect the Company’s ability to successfully conduct its business in the markets in which FVCB now operates, which could have an adverse effect on the Company’s financial results and the value of its common stock. If the Company experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized, fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be disruptions that cause the Company and FVCB to lose customers or cause customers to

withdraw their deposits from the Company’s or FVCB’s banking subsidiaries, or other unintended consequences that could have a material adverse effect on the Company’s results of operations or financial condition after the merger. These integration matters could have an adverse effect on each of the Company and FVCB during this transition period and for an undetermined period after consummation of the merger.

The Company may not be able to effectively integrate the operations of FVCB into the operations of the Company.

The future operating performance of the Company and the Bank will depend, in part, on the success of the bank merger, which is expected to occur as soon as practicable after the merger. The success of the bank merger will, in turn, depend on a number of factors, including the Company’s ability to (i) integrate the operations and branches of FVCbank and the Bank, (ii) retain the deposits and customers of FVCbank and the Bank, (iii) control the incremental increase in noninterest expense arising from the merger in a manner that enables the combined bank to improve its overall operating efficiencies and (iv) retain and integrate the appropriate personnel of FVCbank into the operations of the Bank. The integration of FVCbank and the Bank following the bank merger will require the dedication of the time and resources of the banks’ management teams and may temporarily distract the management teams’ attention from the day-to-day business of the banks. If the Bank is unable to successfully integrate FVCbank, the Bank may not be able to realize expected operating efficiencies and eliminate redundant costs.

The Company will incur significant transaction and merger-related integration costs in connection with the merger.

The Company expects to incur significant costs associated with completing the merger and integrating the operations of the two companies. The Company and FVCB are continuing to assess the impact of these costs. Although the Company believes that the elimination of duplicate costs, as well as the realization of other efficiencies related to the integration of the businesses, will offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all. If the merger is not completed, the parties would have to recognize these expenses without realizing any of ~~its property~~the expected benefits of the merger.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are burdensome on the Company, not presently anticipated or cannot be met.

Before the transactions contemplated by the merger agreement may be completed, various approvals or waivers must be obtained from bank regulatory authorities, including the Federal Reserve, the OCC, and the Virginia Bureau of Financial Institutions. In determining whether to grant these approvals, the applicable regulatory agencies consider a variety of factors, including the competitive impact of the proposal in the relevant geographic and banking markets; financial, managerial and other supervisory considerations of each party; convenience and needs of the communities to be served and the record of insured depository institution subsidiaries under the Community Reinvestment Act of 1977 and related regulations (the “Community Reinvestment Act”); and the effectiveness of the parties in combating money laundering activities. The regulatory approvals or waivers may not be received at all, may not be received in a timely fashion or may contain conditions on the completion of the merger that are not anticipated, cannot be met, or are onerous on the Company, including by delaying completion of the merger or of imposing additional costs on or limiting the revenues of the Company following the merger. Furthermore, such conditions or changes may constitute or be reasonably likely to result in a burdensome condition that may allow the Company to terminate the merger agreement. If the necessary governmental approvals or waivers contain such conditions, the business, financial condition, and results of operations of the Company following the merger may be materially adversely affected.

Failure of the merger to be completed, the termination of the merger agreement, or a significant delay in completing the merger could negatively impact the Company.

The merger agreement is ~~subject.~~subject to a number of conditions which must be fulfilled in order to complete the merger. These conditions to the consummation of the merger may not be fulfilled and, accordingly, the merger may not be completed. In addition, if the merger is not completed by June 30, 2022, either the Company or FVCB may terminate the merger agreement at any time after that date if the failure of the effective time to occur on or before that date is not caused by any breach of the merger agreement by the party electing to terminate the merger agreement, before or after shareholder approval.

~~Item 1A.~~

~~Risk Factors~~

~~Not required.~~Any delay in completion of the merger may have a material adverse effect on the Company’s business during the pendency of the merger, and on the Company’s business and results of operations following the merger, due to potential

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None~~

~~Item 3.~~

~~Defaults Upon Senior Securities~~

~~None~~diversion of management attention from other opportunities, constraints contained in the merger agreement on the Company’s business during the pendency of the merger, the incurrence of additional merger-related expenses, and negative reactions by markets and customers. If the merger is not completed, the ongoing business, financial condition, and results of operations of the Company may be materially adversely affected and the market price of the Company’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be completed.

~~Item 4.~~

~~Mine Safety Disclosures~~

~~None~~In addition, the Company’s business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. If the merger agreement is terminated and the Company’s board of directors seeks another merger or business combination, the Company’s shareholders cannot be certain that the Company will be able to find another company willing to engage in a merger or business combination on more attractive terms than the merger.

~~Item 5.~~

~~Other Information~~

~~None~~The Company will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of the Company. These uncertainties may impair the Company’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the completion of the merger, as such personnel and customers may experience uncertainty about their future roles and relationships with the Company or the Bank following the merger and the bank merger. Additionally, these uncertainties could cause customers (including depositors and borrowers) to seek to change existing business relationships with FVCB or the Company or fail to extend an existing relationship with FVCB or the Company. Further, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger and the bank merger.

~~Item 6.~~

~~Exhibits~~

The merger agreement restricts the Company from taking certain actions without FVCB’s consent while the merger is pending. These restrictions could have a material adverse effect on the Company’s business, financial condition, and results of operations, including by limiting the actions that the Company may take to address a business uncertainty while the merger is pending.

Litigation against FVCB or the Company, or the members of the FVCB or the Company board of directors, could prevent or delay the completion of the merger.

Purported shareholder plaintiffs may assert legal claims related to the merger. The results of any such potential legal proceeding would be difficult to predict and such legal proceedings could delay or prevent the merger from being completed in a timely manner. The existence of litigation related to the merger could affect the likelihood of obtaining the required approval from the Company’s and FVCB’s shareholders. Moreover, any litigation could be time consuming and expensive, and could divert attention of the Company’s management team away from the Company’s regular business. Any lawsuit adversely resolved against FVCB, the Company or members of the FVCB or the Company’s board of directors, could cause a significant increase in merger-related costs or otherwise have a material adverse effect on the Company’s business, financial condition and results of operations.

One of the conditions to the consummation of the merger is the absence of any law, order, decree, or injunction (whether temporary, preliminary, or permanent) or other action taken by the governmental authority of competent jurisdiction that restricts, enjoins or prohibits or makes illegal the consummation of the transactions contemplated by the merger agreement, including the merger. Consequently, if a settlement or other resolution is not reached in any lawsuit that is filed or any regulatory proceeding and a claimant secures injunctive or other relief or a governmental authority issues an order or other directive restricting, prohibiting, or making illegal the completion of the transactions contemplated by the merger agreement, including the merger, then such injunctive or other relief may prevent the merger from being completed in a timely manner or at all.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits


2.1		Agreement and Plan of Reorganization, dated as of July 14, 2021, between Blue Ridge Bankshares, Inc. and FVCBankcorp, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed July 15, 2021).
~~31.1~~
31.1		Rule~~15(d)~~ 13(a)-14(a) Certification of Chief Executive Officer.

31.2		Rule~~15(d)~~ 13(a)-14(a) Certification of Chief Financial Officer.

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

101		Interactive Data Files.*

*	~~To be filed by amendment.~~	The following materials from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, formatted in Inline Extensible Business Reporting Language (XBRL), include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (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 September 30, 2021, formatted in Inline XBRL (included with Exhibit 101).

4565

~~SIGNATURES~~SIGNATURES

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.


	~~Blue Ridge Bankshares, Inc.~~
	BLUE RIDGE BANKSHARES, INC.

Date: ~~December 16, 2019~~November 10, 2021	By:	/s/ Brian K. Plum
		Brian K. Plum
		President and Chief Executive Officer

	By:	/s/ ~~Amanda G. Story~~Judy C. Gavant
		~~Amanda G. Story~~ Judy C. Gavant
		Executive Vice President and Chief Financial Officer

4666


	September 30, 2019			December 31, 2018
	(unaudited)			(audited)
Assets
Cash and due from banks	$	22,318		$	15,026
Federal funds sold		285			546
Securities available for sale, at fair value		121,740			38,047
Securities held to maturity, at cost		13,117			15,565
Restricted equity securities, at cost		7,855			5,138
Loans held for sale		80,255			29,233
Loans, net of unearned income		460,878			414,868
Less allowance for loan losses		(4,404	)		(3,580	)

Loans, net		456,474			411,288
Premises and equipment, net		3,457			3,343
Cash surrender value of life insurance		8,871			8,455
Goodwill		3,307			2,694
Other assets		18,559			10,255

Total assets	$	736,238		$	539,590

Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing	$	91,840		$	88,265
Interest-bearing		428,440			326,762

Total deposits		520,280			415,027

Other borrowings		129,600			73,100
Subordinated debentures, net of issuance costs		9,792			9,766
Other liabilities		10,970			2,076

Total liabilities		670,642			499,969

Stockholders’ Equity:
Common stock, no par value; 10,000,000 shares authorized; 4,346,866 and 2,792,885 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		38,731			16,453
Additionalpaid-in capital		252			252
Retained earnings		25,516			23,321
Accumulated other comprehensive income		876			(618	)

		65,375			39,408
Noncontrolling interest		221			213

Total stockholders’ equity		65,596			39,621

Total liabilities and stockholders’ equity	$	736,238		$	539,590


	Three Months Ended September 30,
	2019			2018
Interest income:
Interest and fees on loans	$	6,927		$	5,285
Interest on taxable securities		1,133			409
Interest on nontaxable securities		56			73
Interest on federal funds sold		2			3

Total interest income		8,118			5,770

Interest expense:
Interest on deposits		1,763			910
Interest on subordinated debentures		169			169
Interest on other borrowings		750			255

Total interest expense		2,682			1,334

Net interest income		5,436			4,436
Provision for loan losses		570			225

Net interest income after provision for loan losses		4,866			4,211

Non-interest income:
Service charges on deposit accounts		171			155
Mortgage brokerage income		1,648			904
Gain on sale of mortgages		2,295			1,385
Income from investment in life insurance contracts		59			50
Other income		800			597

Total other income		4,973			3,091

Non-interest expenses:
Salaries and employee benefits		5,079			3,430
Occupancy and equipment expense		627			414
Data processing fees		413			265
Legal and other professional fees		434			334
Advertising fees		191			113
Audit and accounting fees		37			29
FDIC insurance expense		86			42
Director fees		52			45
Other taxes and assessments		171			159
Other operating		1,117			872

Total other expenses		8,207			5,703

Income before income tax		1,632			1,599
Income tax expense		379			329

Net income	$	1,253		$	1,270

Net Income attributable to noncontrolling interest		(3	)		(1	)

Net Income attributable to Blue Ridge Bankshares, Inc.	$	1,250		$	1,269

Net Income available to Common Stockholders	$	1,250		$	1,269

Basic earnings per common share	$	0.29		$	0.45

Diluted earnings per common share	$	0.29		$	0.45


	Nine Months Ended September 30,
	2019			2018
Interest income:
Interest and fees on loans	$	19,640		$	14,625
Interest on taxable securities		2,601			1,199
Interest on nontaxable securities		183			226
Interest on federal funds sold		6			13

Total interest income		22,430			16,063

Interest expense:
Interest on deposits		4,491			2,469
Interest on subordinated debentures		532			532
Interest on other borrowings		1,920			563

Total interest expense		6,943			3,564

Net interest income		15,487			12,499
Provision for loan losses		1,465			640

Net interest income after provision for loan losses		14,022			11,859

Non-interest income:
Service charges on deposit accounts		459			479
Mortgage brokerage income		3,511			1,914
Gain on sale of mortgages		7,455			2,954
Income from investment in life insurance contracts		874			148
Other income		1,956			1,514

Total other income		14,255			7,009

Non-interest expenses:
Salaries and employee benefits		14,149			8,127
Occupancy and equipment expense		1,868			1,117
Data processing fees		1,069			803
Legal and other professional fees		1,253			578
Advertising fees		607			348
Audit and accounting fees		125			114
FDIC insurance expense		256			138
Director fees		174			141
Other taxes and assessments		490			397
Other operating		3,226			2,574

Total other expenses		23,217			14,337

Income before income tax		5,060			4,531
Income tax expense		989			944

Net income	$	4,071		$	3,587

Net Income attributable to noncontrolling interest		(21	)		(8	)

Net Income attributable to Blue Ridge Bankshares, Inc.	$	4,050		$	3,579

Net Income available to Common Stockholders	$	4,050		$	3,579

Basic earnings per common share	$	1.01		$	1.29

Diluted earnings per common share	$	1.01		$	1.29


	Nine Months Ended September 30,						Three Months Ended September 30,
	2019			2018			2019			2018
Net income	$	4,071		$	3,587		$	1,253		$	1,270
Other comprehensive income:
Gross unrealized gains (losses) arising during the period		2,288			(500	)		1,256			(110	)
Adjustment for income tax (expense) benefit		(480	)		101			(264	)		23

		1,808			(399	)		992			(87	)
Unrealized gains (losses) on interest rate swaps		(483	)		—			(258	)		—
Adjustment for income tax benefit		102			—			54			—

		(381	)		—			(204	)		—
Less:
Reclassifications adjustment for gains included in net income		86			5			—			2
Adjustment for income tax expense		(20	)		(1	)		—			(1	)

		66			4			—			1
Other comprehensive income (loss), net of tax		1,493			(395	)		788			(86	)

Comprehensive income	$	5,564		$	3,192		$	2,041		$	1,184

Comprehensive income attributable to noncontrolling interest	$	(21	)	$	(8	)	$	(3	)	$	(1	)

Comprehensive income attributable to Blue Ridge Bankshares, Inc.	$	5,543		$	3,184		$	2,038		$	1,183


	Common Stock & Related Surplus		Contributed Equity		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Unearned ESOP Shares			Total
Balance, June 30, 2018	$	16,375	$	237	$	21,782		$	(633	)	$	206	$	(31	)	$	37,936
Net income		—		—		1,269			—			1		—			1,270
Other comprehensive income (loss)		—		—		—			(86	)		—		—			(86	)
Dividends on common stock ($0.14 per share)		—		—		(391	)		—			—		—			(391	)
Issuance of restricted common stock, net of forfeitures		38		—		—			—			—		—			38
Release of unearned ESOP shares		—		10		—			—			—		31			41

Balance, September 30, 2018	$	16,413	$	248	$	22,660		$	(719	)	$	207	$	—		$	38,808

Balance, June 30, 2019	$	38,690	$	252	$	24,886		$	88		$	218	$	—		$	64,134
Net income		—		—		1,250			—			3		—			1,253
Other comprehensive income (loss)		—		—		—			788			—		—			788
Dividends on common stock ($0.1425 per share)		—		—		(620	)		—			—		—			(620	)
Issuance of restricted common stock, net of forfeitures		41		—		—			—			—		—			41

Balance, September 30, 2019	$	38,731	$	252	$	25,516		$	876		$	221	$	—		$	65,596


	2019			2018
Cash flows from operating activities:
Net income	$	4,071		$	3,587
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, amortization and accretion		383			295
Deferred income taxes		9			(325	)
Provision for loan losses		1,465			640
Proceeds from sale of loans held for sale, originated		241,112			105,343
Gain on sale of loans held for sale, originated		(7,455	)		(2,954	)
Gain on sale of securities		(86	)		(5	)
Loans held for sale, originated		(264,625	)		(108,773	)
(Gain) loss on disposal of premises and equipment		(2	)		5
Loss on sale of other real estate owned		33			—
Investment amortization expense, net		356			182
Amortization of debt refinancing fees		—			57
Amortization of subordinated debt issuance costs		25			25
Amortization of other intangibles		352			390
Earnings on life insurance		(874	)		(148	)
Increase in other assets		(9,677	)		(2,392	)
Increase (decrease) in accrued expenses		8,893			(160	)
Release of unearned ESOP shares		—			196

Net cash used in operating activities		(26,020	)		(4,037	)

Cash flows used in investing activities:
Net (increase) decrease in federal funds sold		261			(138	)
Purchase of securities available for sale		(96,743	)		(9,307	)
Purchase of securities held to maturity		—			(4,401	)
Proceeds from calls, maturities, sales, paydowns and maturities of securities available for sale		15,231			4,342
Proceeds from calls, maturities, sales, paydowns and maturities of securities held for investment		2,370			1,915
Purchase of insurance policies		(600	)		—
Redemption of insurance policies		1,058			—
Net change in restricted equity securities		(2,717	)		(249	)
Net increase in loans held for investment		(46,650	)		(45,484	)
Net increase in loans held for sale, participations		(20,053	)		(4,719	)
Purchase of premises and equipment		(507	)		(640	)
Proceeds from sale of premises and equipment		13			4
Capital calls of SBIC funds and other investments		(665	)		(310	)
Nonincome distributions from limited liability companies		147			252

Net cash used in investing activities		(148,855	)		(58,735	)

Cash flows from financing activities:
Net increase in deposits		105,254			53,683
Common stock dividends paid		(1,866	)		(1,110	)
Federal Home Loan Bank advances		257,100			106,100
Federal Home Loan Bank repayments		(200,600	)		(92,700	)
Issuance of common stock		22,279			89
Repayment of contingent ESOP liability		—			(151	)

Net cash provided by financing activities		182,167			65,911

Net increase in cash and due from banks		7,292			3,139
Cash and due from banks at beginning of period		15,026			10,319

Cash and due from banks at end of period	$	22,318		$	13,458

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	6,217		$	3,203


December 31, 2018	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
State and Municipal	$	6,278	$	(105	)	$	2,402	$	(35	)	$	8,680	$	(140	)
U.S. Treasury and Agency		—		—			3,167		(208	)		3,167		(208	)
Mortgage backed		10,031		(51	)		17,173		(577	)		27,204		(628	)
Corporate bonds		2,114		(36	)		488		(12	)		2,602		(48	)

Total	$	18,423	$	(192	)	$	23,230	$	(832	)	$	41,653	$	(1,024	)


	September 30, 2019			December 31, 2018
(in thousands)
Commercial and industrial	$	50,826		$	49,076
Agricultural		175			216
Real estate – construction, commercial		19,876			14,666
Real estate – construction, residential		16,364			15,102
Real estate – mortgage, commercial		167,223			150,513
Real estate – mortgage, residential		165,865			149,856
Real estate – mortgage, farmland		3,754			4,179
Consumer installment loans		37,433			31,979

Gross loans		461,516			415,587
Less: Unearned income		(638	)		(719	)

Total	$	460,878		$	414,868


	September 30, 2019
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Past Due & Nonaccrual		Current Loans			Total Loans
Commercial and industrial	$	126	$	—	$	—	$	538	$	664	$	50,162		$	50,826
Real estate – construction, commercial		141		363		—		942		1,446		18,430			19,876
Real estate – construction, residential		493		240		—		—		733		15,631			16,364
Real estate – mortgage, commercial		—		—		—		2,026		2,026		165,197			167,223
Real estate – mortgage, residential		1,482		—		708		947		3,137		162,728			165,865
Agricultural & Farmland		—		—		—		—		—		3,929			3,929
Consumer installment loans		760		322		—		688		1,770		35,663			37,433
Less: Unearned income		—		—		—		—		—		(638	)		(638	)

	$	3,002	$	925	$	708	$	5,141	$	9,776	$	451,102		$	460,878


	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			Total
September 30, 2019
Commercial and industrial	$	291	$	50,535		$	50,826
Agricultural		—		175			175
Real Estate – construction, commercial		—		19,876			19,876
Real Estate – construction, residential		—		16,364			16,364
Real Estate – mortgage, commercial		735		166,488			167,223
Real Estate – mortgage, residential		658		165,207			165,865
Real Estate – mortgage, farmland		—		3,754			3,754
Consumer installment loans		—		37,433			37,433

Gross loans		1,684		459,832			461,516
Less: Unearned income		—		(638	)		(638	)

Total	$	1,684	$	459,194		$	460,878


	September 30, 2019		December 31, 2018
Real Estate
Construction loans and all land development and other land loans	$	1,415	$	1,522
Secured by farmland		3		319
Revolving,open-end loans secured by1-4 family residential properties and extended under lines of credit		2,814		3,376
Secured by first liens		7,803		10,448
Secured by junior liens		399		505
Secured by multifamily (5 or more) residential properties		95		250
Loans secured by owner-occupied, nonfarm nonresidential properties		4,146		7,344
Loans secured by other nonfarm nonresidential properties		5,395		6,239
Commercial and Industrial		2,906		4,457
Other
Other revolving credit plans		37		89
Automobile loans		10		30
Other consumer loans		68		93

Total	$	25,091	$	34,672


	September 30, 2019
	Grade 1 Prime		Grade 2 Desirable		Grade 3 Good		Grade 4 Acceptable		Grade 5 Pass/Watch		Grade 6 Special Mention		Grade 7 Substandard		Total
Commercial and industrial	$	406	$	1,827	$	21,936	$	25,540	$	579	$	—	$	538	$	50,826
Agricultural		—		103		66		6		—		—		—		175
Real Estate – construction, commercial		—		659		10,210		7,923		104		—		980		19,876
Real Estate – construction, residential		—		—		4,295		8,011		4,058		—		—		16,364
Real Estate – mortgage, commercial		—		1,656		81,973		70,093		10,226		1,012		2,263		167,223
Real Estate – mortgage residential		—		2,917		81,246		76,351		3,648		96		1,607		165,865
Real Estate – mortgage, farmland		1,565		100		1,418		218		453		—		—		3,754
Consumer installment loans		297		32		23,863		12,447		106		—		688		37,433

Gross loans		2,268		7,294		225,007		200,589		19,174		1,108		6,076		461,516

Less: Unearned income																(638	)

Total															$	460,878


	December 31, 2018
	Grade 1 Prime		Grade 2 Desirable		Grade 3 Good		Grade 4 Acceptable		Grade 5 Pass/Watch		Grade 6 Special Mention		Grade 7 Substandard		Total
Commercial and industrial	$	44	$	2,660	$	21,009	$	24,254	$	797	$	—	$	312	$	49,076
Agricultural		9		99		105		3		—		—		—		216
Real Estate – construction, commercial		—		485		7,118		5,937		106		—		1,020		14,666
Real Estate – construction, residential		—		—		4,305		5,059		5,738		—		—		15,102
Real Estate – mortgage, commercial		—		1,920		82,097		53,487		8,470		1,668		2,871		150,513
Real Estate – mortgage residential		—		3,647		76,496		63,397		3,805		522		1,989		149,856
Real Estate – mortgage, farmland		1,700		100		1,340		730		—		—		309		4,179
Consumer installment loans		213		29		16,174		15,081		123		—		359		31,979

Gross loans		1,966		8,940		208,644		167,948		19,039		2,190		6,860		415,587

Less: Unearned income																(719	)

Total															$	414,868


	September 30, 2019
	Notional Amount		Fair Value
(Dollars in thousands)
Interest Rate Swap Agreements
Receive Fixed/Pay Variable Swaps	$	2,156	$	244
Pay Fixed/Receive Variable Swaps		2,156		(244	)


(Dollars in thousands)	MSR Assets
Balance, December 31, 2020	$	7,084
Acquired in Bay Banks Merger		997
Additions		9,252
Write-offs		(616	)
Amortization		(1,741	)
Impairments		—
Fair value adjustments		3,567
Balance, September 30, 2021 - fair value	$	18,543
Balance, September 30, 2021 - amortized cost	$	14,976


(Dollars in thousands)	MSR Assets
Balance, December 31, 2019	$	—
Additions		7,539
Write-offs		(61	)
Amortization		(391	)
Impairments		(3	)
Fair value adjustments		207
Balance, December 31, 2020 - fair value	$	7,291
Balance, December 31, 2020 - amortized cost	$	7,084


			Fair Value Measurements at September 30, 2019
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
(in thousands)
Financial Assets
Cash and short-term investments	$	22,318	$	22,318	$	—	$	—	$	22,318
Federal funds sold		285		285		—		—		285
Investment securities		142,712		—		143,210		—		143,210
Loans held for sale		80,255		—		80,255		—		80,255
Net loans held for investment		456,474		—		—		462,414		462,414
Accrued interest receivable		2,162		—		2,162		—		2,162
Bank-owned life insurance		8,871		—		8,871		—		8,871
Financial Liabilities
Deposits		520,280		—		428,908		85,162		514,070
Other borrowed funds		129,600		—		129,908		—		129,908
Subordinated debt, net		9,792		—		—		9,792		9,792
Accrued interest payable		834		—		834		—		834



			Fair Value Measurements at December 31, 2018
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
(in thousands)
Financial Assets
Cash and short-term investments	$	15,026	$	15,026	$	—	$	—	$	15,026
Federal funds sold		546		546		—		—		546
Investment securities		58,750		—		58,688		—		58,688
Loans held for sale		29,233		—		29,233		—		29,233
Net loans held for investment		411,288		—		—		404,888		404,888
Accrued interest receivable		1,769		—		1,769		—		1,769
Bank-owned life insurance		8,455		—		8,455		—		8,455
Financial Liabilities
Deposits		415,027		—		323,280		81,070		404,350
Other borrowed funds		73,100		—		73,113		—		73,113
Subordinated debt, net		9,766		—		—		9,766		9,766
Accrued interest payable		395		—		395		—		395


Nine Months Ended September 30, 2019
(in thousands)	Blue Ridge Bank		Blue Ridge Bank Mortgage Division		MoneyWise Payroll Solutions, Inc.			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	21,582	$	844	$	—		$	4		$	—		$	22,430
Service charges on deposit accounts		459		—		—			—			—			459
Mortgage banking income, net		—		10,967		—			—			—			10,967
Payroll processing revenue		—		—		743			—			—			743
Other operating income		2,056		—		—			48			(18	)		2,086

Total income		24,097		11,811		743			52			(18	)		36,685

Expenses:
Interest expense		5,921		490		—			532			—			6,943
Provision for loan losses		1,465		—		—			—			—			1,465
Salary and benefits		6,167		7,711		271			—			—			14,149
Other operating expenses		5,194		2,697		344			851			(18	)		9,068

Total expense		18,747		10,898		615			1,383			(18	)		31,625

Income (loss) before income taxes		5,350		913		128			(1,331	)		—			5,060

Income tax expense		932		193		22			(158	)		—			989

Net income (loss)	$	4,418	$	720	$	106		$	(1,173	)	$	—		$	4,071

Net (income) loss attributable to noncontrolling interest	$	—	$	—	$	(21	)	$	—		$	—		$	(21	)

Net income (loss) attributable to Blue Ridge Bankshares	$	4,418	$	720	$	85		$	(1,173	)	$	—		$	4,050


Three Months Ended September 30, 2019
(in thousands)	Blue Ridge Bank		Blue Ridge Bank Mortgage Division		MoneyWise Payroll Solutions, Inc.			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	7,757	$	359	$	—		$	2		$	—		$	8,118
Service charges on deposit accounts		171		—		—			—			—			171
Mortgage banking income, net		—		3,943		—			—			—			3,943
Payroll processing revenue		—		—		232			—			—			232
Other operating income		609		—		—			23			(6	)		626

Total income		8,537		4,302		232			25			(6	)		13,090

Expenses:
Interest expense		2,289		215		—			178			—			2,682
Provision for loan losses		570		—		—			—			—			570
Salary and benefits		2,126		2,858		95			—			—			5,079
Other operating expenses		1,784		955		119			275			(6	)		3,127

Total expense		6,769		4,028		214			453			(6	)		11,458

Income (loss) before income taxes		1,768		274		18			(428	)		—			1,632

Income tax expense (benefit)		344		80		(1	)		(44	)		—			379

Net income (loss)	$	1,424	$	194	$	19		$	(384	)	$	—		$	1,253

Net (income) loss attributable to noncontrolling interest	$	—	$	—	$	(3	)	$	—		$	—		$	(3	)

Net income (loss) attributable to Blue Ridge Bankshares	$	1,424	$	194	$	16		$	(384	)	$	—		$	1,250


Nine Months Ended September 30, 2018
(in thousands)	Blue Ridge Bank		Blue Ridge Bank Mortgage Division		MoneyWise Payroll Solutions, Inc.			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	15,738	$	325	$	—		$	6		$	—		$	15,738
Service charges on deposit accounts		479		—		—			—			—			479
Mortgage banking income, net		—		4,868		—			—			—			4,868
Payroll processing revenue		—		—		739			—			—			739
Other operating income		1,262		—		—			4			(18	)		1,248

Total income		17,479		5,193		739			10			(18	)		23,072

Expenses:
Interest expense		3,032		—		—			532			—			3,564
Provision for loan losses		640		—		—			—			—			640
Salary and benefits		3,851		3,980		296			—			—			8,127
Other operating expenses		4,800		776		397			255			(18	)		6,210

Total expense		12,323		4,756		693			787			(18	)		18,541

Income (loss) before income taxes		4,825		437		46			(777	)		—			4,531

Income tax expense		999		92		8			(155	)		—			944

Net income (loss)	$	3,826	$	345	$	38		$	(622	)	$	—		$	3,587

Net (income) loss attributable to noncontrolling interest	$	—	$	—	$	(8	)	$	—		$	—		$	(8	)

Net income (loss) attributable to Blue Ridge Bankshares	$	3,826	$	345	$	30		$	(622	)	$	—		$	3,579


Three Months Ended September 30, 2018
(in thousands)	Blue Ridge Bank		Blue Ridge Bank Mortgage Division		MoneyWise Payroll Solutions, Inc.			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
Revenues:
Interest income	$	5,255	$	184	$	—		$	6		$	—		$	5,445
Service charges on deposit accounts		155		—		—			—			—			155
Mortgage banking income, net		—		2,289		—			—			—			2,289
Payroll processing revenue		—		—		220			—			—			220
Other operating income		755		—		—			4			(6	)		753

Total income		6,165		2,473		220			10			(6	)		8,862

Expenses:
Interest expense		1,159		—		—			176			—			1,335
Provision for loan losses		225		—		—			—			—			225
Salary and benefits		963		1,745		103			—			—			2,811
Other operating expenses		2,066		550		103			179			(6	)		2,892

Total expense		4,413		2,295		206			355			(6	)		7,263

Income (loss) before income taxes		1,752		178		14			(345	)		—			1,599

Income tax expense		366		33		1			(71	)		—			329

Net income (loss)	$	1,386	$	145	$	13		$	(274	)	$	—		$	1,270

Net (income) loss attributable to noncontrolling interest	$	—	$	—	$	(1	)	$	—		$	—		$	(1	)

Net income (loss) attributable to Blue Ridge Bankshares	$	1,386	$	145	$	12		$	(274	)	$	—		$	1,269


(In thousands)			FHLB Advances Outstanding September 30, 2019
Type advance	Balance		Interest rate			Maturity date
Fixed rate	$	15,000		2.31	%		October 1, 2019
Fixed rate		5,000		2.58	%		October 4, 2019
Fixed rate		5,000		2.15	%		October 16, 2019
Fixed rate		4,000		2.59	%		October 23, 2019
Fixed rate		3,500		2.58	%		October 30, 2019
Fixed rate		25,000		2.24	%		November 4, 2019
Fixed rate		10,000		2.13	%		November 29, 2019
Fixed rate		7,000		2.51	%		November 29, 2019
Fixed rate		10,000		2.46	%		December 4, 2019
Daily rate		10,000		2.07	%		December 30, 2019
Fixed rate		26,100		2.49	%		May 4, 2020
Fixed rate		5,000		1.99	%		May 6, 2020
Fixed rate		4,000		2.15	%		September 9, 2020

FHLB Advances, net	$	129,600


(In thousands)			FHLB Advances Outstanding December 31, 2018
Type advance	Balance		Interest rate			Maturity date
Fixed rate	$	5,000		2.42	%		January 3, 2019
Fixed rate		2,800		2.40	%		January 7, 2019
Fixed rate		4,500		2.38	%		January 9, 2019
Fixed rate		5,000		2.46	%		January 16, 2019
Fixed rate		1,200		2.49	%		January 18, 2019
Fixed rate		8,000		2.47	%		January 31, 2019
Fixed rate		3,000		2.51	%		March 8, 2019
Fixed rate		2,000		2.54	%		March 19, 2019
Fixed rate		5,000		2.55	%		April 1, 2019
Fixed rate		3,500		2.62	%		April 30, 2019
Fixed rate		4,000		1.34	%		May 31, 2019
Fixed rate		2,000		2.66	%		June 19, 2019
Fixed rate		1,000		3.95	%		August 27, 2019
Daily rate		22,100		2.65	%		August 30, 2019
Fixed rate		4,000		2.13	%		September 30, 2019

FHLB Advances, net	$	73,100


	Nine Months Ended September 30,
	2019		2018
Service fees on deposit accounts	$	459	$	479
Bank card revenue		408		356
Payroll processing income		743		739

Revenue from contracts with customers		1,610		1,574
Non-interest income within scope of other ASC topics		12,645		5,435

Total noninterest income	$	14,255	$	7,009


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease Cost(in thousands)	2019		2018		2019		2018
Operating lease cost	$	369	$	213	$	1,104	$	582
Total lease cost	$	369	$	213	$	1,104	$	582
Cash paid for amounts included in the measurement of lease liabilities	$	218	$	213	$	874	$	582


	As of
Lease payments due(in thousands)	September 30, 2019
Three months ending December 31, 2019	$	314
Twelve months ending December 31, 2020		1,305
Twelve months ending December 31, 2021		1,230
Twelve months ending December 31, 2022		1,022
Twelve months ending December 31, 2023		934
Twelve months ending December 31, 2024		640
Thereafter		1,979

Total undiscounted cash flows		7,425
Discount		(753	)

Lease liabilities	$	6,672


	Nine Months Ended September 30, 2019 vs. 2018
	Increase/ (Decrease) Due to						Total Increase/ (Decrease)
(Dollars in thousands)	Volume			Rate			Total Increase/ (Decrease)
Interest Income
Taxable investments	$	1,489		$	(244	)	$	1,245
Tax-free investments		(45	)		2			(43	)
Interest bearing deposits in other banks		50			108			158
Federal funds sold		(8	)		1			(7	)
Loans available for sale		982			(148	)		834
Loans held for investment		3,842			338			4,180

Total interest income	$	6,310		$	57		$	6,367

Interest Expense
Interest-bearing demand and savings deposits:	$	155		$	502		$	657
Time deposits		525			840			1,365
FHLB advances and other borrowings		1,517			(160	)		1,357

Total interest expense		2,197			1,182			3,379

Change in Net Interest Income	$	4,113		$	(1,125	)	$	2,988


	Three Months Ended September 30, 2019								Three Months Ended September 30, 2018
(Dollars in thousands)	Average Balance			Interest Income- Expense		Average Yields / Rates (1)			Average Balance			Interest Income- Expense		Average Yields / Rates (1)
Assets
Taxable investments (2)	$	140,425		$	1,039		2.61	%	$	48,541		$	395		3.25	%
Tax-free investments (2)		7,273			56		3.72	%		9,529			73		3.73	%

Total securities		147,698			1,095		3.16	%		58,070			468		3.49	%
Interest-bearing deposits in other banks		19,760			94		1.90	%		8,533			15		0.69	%
Federal funds sold		352			2		2.28	%		710			3		1.95	%
Loans held for sale		61,633			563		3.65	%		25,221			272		4.32	%
Loans held for investment (3)		458,668			6,364		5.55	%		362,078			5,011		5.54	%

Total interest-earning assets		688,111			8,118		4.73	%		454,612			5,769		5.09	%
Less allowance for loan losses		(4,231	)							(3,157	)
Totalnon-interest earning assets		35,129								21,329

Total assets	$	719,009							$	472,784

Liabilities & Shareholders’ equity
Interest-bearing demand and savings deposits	$	173,868		$	457		1.05	%	$	133,314		$	207		0.62	%
Time deposits		235,911			1,306		2.21	%		168,946			703		1.66	%

Total interest-bearing deposits		409,779			1,763		1.63	%		302,260			910		1.14	%
FHLB advances and other borrowings		136,539			919		2.69	%		57,719			423		2.95	%

Total interest-bearing liabilities		546,318			2,682		1.96	%		359,979			1,333		1.48	%
Demand deposits and other liabilities		108,025								75,632

Total liabilities		654,343								435,611
Shareholders’ equity		64,666								37,173

Total liabilities and shareholders’ equity	$	719,009							$	472,784

Interest rate spread							2.77	%							3.61	%
Net interest income and margin				$	5,436		3.16	%				$	4,436		3.90	%


	At September 30,						At December 31,
	2019						2018
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial and financial	$	50,826			11.01	%	$	49,076			11.81	%
Agricultural		175			0.04	%		216			0.05	%
Real estate – construction, commercial		19,876			4.31	%		14,666			3.53	%
Real estate – construction, residential		16,364			3.55	%		15,102			3.63	%
Real estate – mortgage, commercial		167,223			36.23	%		150,513			36.22	%
Real estate – mortgage, residential		165,865			35.94	%		149,856			36.06	%
Real estate – mortgage, farmland		3,754			0.81	%		4,179			1.01	%
Consumer installment loans		37,433			8.11	%		31,979			7.69	%

Gross loans		461,516			100.00	%		415,587			100.00	%

Less: Unearned Income		(638	)					(719	)

Gross loans, net of unearned income		460,878						414,868
Less: Allowance for loan losses		(4,404	)					(3,580	)

Net loans	$	456,474					$	411,288

Loans and leases held for sale	$	80,255					$	29,233

(not included in totals above)


September 30, 2019	One Year or Less		Between One and Five Years		After Five Years		Total
Commercial and financial	$	12,410	$	15,221	$	23,195	$	50,826
Agricultural		11		164		—		175
Real estate – construction, commercial		4,615		13,375		1,886		19,876
Real estate – construction, residential		16,364		—		—		16,364
Real estate – mortgage, commercial		16,235		58,526		92,462		167,223
Real estate – mortgage, residential		9,052		20,902		135,911		165,865
Real estate – mortgage, farmland		420		1,692		1,642		3,754
Consumer installment loans		672		31,224		5,537		37,433

Gross loans	$	59,779	$	141,104	$	260,633	$	461,516

Fixed-rate loans	$	49,247	$	132,582	$	152,028	$	333,857
Floating-rate loans		10,532		8,522		108,605		127,659

Gross loans	$	59,779	$	141,104	$	260,633	$	461,516