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, 20192021
or
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission File Number 033-25507Number: 001-39165
BLUE RIDGE BANKSHARES, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
|
| |
Virginia | 54-1470908 | |
( State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |
1807 Seminole Trail Charlottesville, Virginia | 22835 | |
(Address of | (Zip |
(540)743-6521
Registrant’s Telephone Number, Including Area Codetelephone 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 | 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 ☒
TheAs of November 1, 2021, the registrant had 4,346,86618,774,932 shares of common stock, no par value per share, outstanding as of December 13, 2019.outstanding.
PART I | ||||
| ||||
Item 1. | 3 | |||
| ||||
Consolidated Balance Sheets as of September 30, | 3 | |||
4 | ||||
5 | ||||
6 | ||||
8 | ||||
Notes to Consolidated Financial Statements (unaudited) | ||||
10 | ||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||
44 | ||||
Item 3. | ||||
61 | ||||
Item 4. | ||||
61 | ||||
| ||||
| ||||
62 | ||||
| ||||
Item | 62 | |||
Item 1A. | 62 | |||
Item 2. | ||||
64 | ||||
Item 3. | ||||
65 | ||||
Item 4. | ||||
65 | ||||
| ||||
Item | 65 | |||
Item 6. | 65 | |||
66 |
2
PART I. FINANCIALFINANCIAL INFORMATION
Blue Ridge Bankshares, Inc.
|
| (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 |
|
| 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 |
|
(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.
3
3
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 |
|
(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.
4
4
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.
5
5
Blue Ridge Bankshares, Inc.
Consolidated Statements of Comprehensive IncomeChanges 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 Statements6
| 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 |
|
(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 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
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.
7
7
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 |
|
8
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.
9
Notes to Consolidated Financial Statements (Unaudited)
Note 1 – SummaryOrganization and Basis of Significant Accounting PoliciesPresentation
PrinciplesBlue 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 Consolidation1956, 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 Ridgethe 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”) forand to general practices within the interim financial information. Accordingly, these financial statements do not include all of the informationbanking 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 included2020 ("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 withform of a 50% stock dividend on the Securities and Exchange CommissionCompany’s common stock outstanding paid on October 31, 2019.
TheApril 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 includeand disclosures have been adjusted to reflect the accountsStock 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.
Natureshareholders 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 byhas 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 primarilyCompany 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.
10
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 regionsother 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 Commonwealthsame amount in goodwill as of VirginiaDecember 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.
11
“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 operatesreinforces 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 Bankacquisition 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.
12
The following table presents the consideration paid in Greensboro, North Carolina. Mortgage lending servicesthe 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 |
|
|
13
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 providedcarried 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
14
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 regionsvalues 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.
BasisBank owned life insurance. The carrying value of Presentationbank 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 estimatesfollowing table presents the purchased performing and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilitiesPCI loans receivable at the date of the financial statementsBay Banks Merger and the reported amountsfair 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 revenuesthe value of noninterest-bearing checking, savings, interest-bearing checking, money market, and expenses duringcertain 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 thatCompany determined customer related intangible assets are particularly susceptible to significant change innon-existent for these accounts. The estimated fair value of CDI was based on the near term relatepresent value of the expected cost savings attributable to the determinationcore 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, goodwillcertificates 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 resultsFHLB 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.
ReclassificationFRB 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 reclassificationsSubordinated 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, 20192021.
15
Impact of Certain Fair Value Adjustments
The net effect of the amortization and 2018.
8
Note 1 – Summaryaccretion of Significant Accounting Policies, continued
Thepremiums and discounts associated with the fair value adjustments to assets acquired and liabilities assumed in the Bay Banks Merger had the following table sets fortheffect on the computation of basic and diluted earnings per shareconsolidated 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 SecuritiesInvestments
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.
16
|
| September 30, 2021 |
| |||||||||||||
(Dollars in thousands) |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair |
| ||||
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, 20192021 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 | ||||||||
|
|
|
|
|
|
|
|
9
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 willmay 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 |
| Fair |
| |||||||||||||||||||
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 |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| |||||||
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 | ) |
17
|
|
|
|
| December 31, 2020 |
| ||||||||||||||||||||||
|
|
|
|
| Less than 12 Months |
|
| 12 Months or Greater |
|
| Total |
| ||||||||||||||||
(Dollars in thousands) |
| Number of Securities |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| |||||||
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, 20192021 and December 31, 2018 is2020, 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 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
OtherRestricted equity investments (in thousands) consistconsisted of stock in the Federal Home Loan BankFHLB (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, 20192021 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
LoansThe following table presents loans held for investment, outstanding atincluding 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
18
2020, and as of September 30, 20192021, $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, 20182020. 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 summarizednow 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 AtlantaFHLB. Loans totaling $126,125$517.6 million and $104,791$213.3 million were pledged as of September 30, 20192021 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.
19
(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 |
|
| 60-89 |
|
| Greater than |
|
| Nonaccrual |
|
| Total Past |
|
| PCI Loans |
|
| Current |
|
| Total |
| ||||||||
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 |
|
| 60-89 |
|
| Greater than |
|
| Nonaccrual |
|
| Total Past |
|
| PCI Loans |
|
| Current |
|
| Total |
| ||||||||
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 |
|
20
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 |
|
| Greater than |
|
| Current |
|
| Total |
| ||||
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 |
|
| Greater than |
|
| Current |
|
| Total |
| ||||
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 dueloan 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, 20192021 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 allowanceloan portfolio individually and collectively evaluated for impairment as of the dates stated.
|
| September 30, 2021 |
| |||||||||
(Dollars in thousands) |
| Individually |
|
| Collectively |
|
| 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 |
|
| Collectively |
|
| 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) forof $47.3 million and $292.1 million as of September 30, 20192021 and December 31, 2018 is as follows:2020, respectively.
22
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 | ||||
|
|
|
|
12
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 presentstables 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 |
|
| Unpaid |
|
| Related |
|
| Recorded |
|
| Unpaid |
|
| Related |
| ||||||
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 |
|
| Interest |
|
| Average |
|
| Interest |
| ||||
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 |
|
| Interest |
|
| Average |
|
| Interest |
| ||||
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 | |||||||||||
|
|
|
|
|
|
|
|
|
|
13
Note 4 – Allowancetime 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. acquisitiona reasonable period, generally six months. The Company had remaining balances (in thousands) of $25,091 and 34,672four TDRs totaling $235 thousand as of September 30, 20192021, 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
23
thousand as of December 31, 2018, respectively. Of these balances three loan relationships were considered specifically impaired purchased credit-impaired loans. One2020, one of these relationshipswhich was resolved during 2018classified 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, anotherother 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 withclassified as a specific impairment of $190. TDR due to a change in payment terms.
The following table presents an analysis of the recorded investmentchange in the segmentsALL by loan type as of and for the River Bancorp, Inc. purchasedperiods 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, 2019to 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 | ||||
|
|
|
|
14
Note 4 – Allowance for Loans Losses, continued
The following table presentstables present the Company’s loan portfolio by internal loan grade (in thousands)as of the dates stated.
|
| September 30, 2021 |
| |||||||||||||||||||||||||||||
(Dollars in thousands) |
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| 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 |
|
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| Grade |
|
| 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 |
|
24
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 |
|
| $ | — |
|
25
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, 20192021.
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.
15
Note 4 – AllowanceIn 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, continuedadvances. 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, 20192021 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 Instruments26
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”).
DuringThe 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 intointerest 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 loaninterest rate swap agreements by entering into equal and offsetting swap agreements with a highly ratedhighly-rated third-party financial institution. Thisinstitutions. These back-to-back interest rate swap agreement is aagreements are free-standing derivativederivatives 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.
27
|
| September 30, 2021 |
| |||||
(Dollars in thousands) |
| Notional |
|
| Fair |
| ||
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 |
|
| Fair |
| ||
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 |
|
|
|
|
|
| ||||
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 |
|
|
|
|
|
| ||||
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 |
|
|
|
|
|
| ||||
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
28
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 TBAto-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 toafter 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 percenthad entered into $93.7 million and $154.3 million of an employee’s contribution up to five percentrate lock commitments with borrowers, net of his or her salary following one yearexpected 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 to2020, 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 computationconsolidated 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 BankCompany’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 vestingrequisite service period.Non-cash compensation Compensation expense recognized in the Consolidated Statementsconsolidated statements of Incomeincome 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, 20192021, 83,647 and 2018,380 stock options were exercised and forfeited, respectively, and $40 thousand and $67 thousand for the three months endedresulting 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,
29
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.
16
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 BankFRB and Federal Home Loan BankFHLB 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.
30
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 | $ | — | ||||||||
|
|
|
|
|
|
|
|
17
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.
31
(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 Gaingain on Salesale of Mortgagesmortgages on the Consolidated Statementsconsolidated statements of Income.income.
32
Other Real Estate Owned
Certain assets such as other real estate owned (OREO)OREO are measured at fair value less costestimated costs to sell. Valuation of other real estate ownedOREO is generally determined using current appraisals from independent parties,appraisers, a level twoLevel 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 ownedtables summarize assets that were measured at fair value on a nonrecurring basis duringas 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 |
|
|
|
| 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.
|
|
| 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 |
|
| 7 | % |
OREO |
|
| 227 |
|
| Discounted appraised value |
| Selling costs |
|
| 7 | % |
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 |
|
| 10 | % |
|
|
| 90 |
|
| Discounted cash flows |
| Discount rate |
|
| 6 | % |
18
Note 9 – Disclosures About Fair ValueThe carrying values of Financial Instrumentscash 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
33
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 |
19
Note 10 – Business Segments
The Company utilizes its subsidiariesless likely to prepay in a rising rate environment and divisionsmore 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 primarilyless likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest earned onrate risk by adjusting terms of new loans and investmentdeposits 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 principallyvaluation level of gains on salesthe 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.
34
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 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
20
|
| 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 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
21
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 | ||||||||||
|
|
22
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 anon-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.
23
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 aright-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 itsthe 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
35
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 |
24
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,
36
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.
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 category.
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 |
|
| To Be Well |
| |||||||||||||||
(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 |
|
| To Be Well |
| |||||||||||||||
(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
37
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 EventsEarnings Per Share
On November 20, 2019,The following table shows the Company declared a quarterly dividendcalculation of $0.1425basic 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 payablebecause 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.
38
|
| 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 |
| |||||
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 |
|
39
|
| For the three months ended September 30, 2020 |
| |||||||||||||||||
(Dollars in thousands) |
| Commercial Banking |
|
| Mortgage Banking |
|
| Parent Only |
|
| Eliminations |
|
| Blue Ridge |
| |||||
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 |
| |||||
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 |
|
40
|
| For the nine months ended September 30, 2020 |
| |||||||||||||||||
(Dollars in thousands) |
| Commercial Banking |
|
| Mortgage Banking |
|
| Parent Only |
|
| Eliminations |
|
| Blue Ridge |
| |||||
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 |
|
41
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 |
|
| Net Unrealized Gains (Losses) on Interest Rate Swaps |
|
| Accumulated Other |
| |||
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 |
|
| Net Unrealized Gains (Losses) on Interest Rate Swaps |
|
| Accumulated Other |
| |||
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 |
|
| Net Unrealized Gains (Losses) on Interest Rate Swaps |
|
| Accumulated Other |
| |||
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 |
|
| Net Unrealized Gains (Losses) on Interest Rate Swaps |
|
| Accumulated Other |
| |||
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 | ) |
42
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 acquisitiona 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 mergercomplaint 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.
43
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, betweenwith the Company and VCB, and a related Plansurviving, in an all-stock merger of Mergerequals (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 holdersShareholders of shares of VCB common stock had the right to electFVCB will be entitled to receive either $58.00 in cash or 3.051.1492 shares of the Company’s common stock for each share of VCBFVCB 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 socustomary 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.
25
|
Cautionary Statement Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within the meaningOffice 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 coversnon-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, althoughthe FVCB Merger. Blue Ridge believesBank has already commenced an initiative intended to fully address the methodologies for determiningOCC’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 lossesFVCB Merger will close in the portfolio at any particular time that may become evident at a future date pursuant to additional internal analysissecond or regulatory comment. Additional provisions for such losses, if necessary, would be recorded, and would negatively impact earnings.third quarter of 2022.
44
26
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 securitiesavailable-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 innon-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 VCBBay Banks of Virginia, Inc.
Effective December 15, 2019, Blue RidgeOn January 31, 2021, the Company completed its acquisition ofmerger 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-ownedFinancial Group, Inc. Immediately following the Company’s merger with Bay Banks, Bay Banks’ subsidiary bank subsidiary,was merged with and into the Bank. AsBank, 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 million2021 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 sharesthe 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 milliondisclosures have been retroactively adjusted to reflect the Stock Split, unless otherwise noted.
General
There were no changes to the Critical Accounting Policies disclosed in cashItem 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 withItem 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 at2021 and December 31, 2018, while loans held for investment totaled $461.0 million2020
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 othertotal assets was primarily due to the implementationBay Banks Merger, which increased assets by $1.22 billion at the effective date of ASUNo. 2016-02,Leases (Topic 842) and the recordingmerger. 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 aright-of-use asset on the balance sheet for property leased for branches and offices.
27
Themerger, 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 20192021 was primarily due to $4.4the 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 ofdeposit growth in the nine months ended September 30, 2019, compared to $3.62021.
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, reflective2020, primarily attributable to the Company’s sale of PPP loans in the growthsecond 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 $670.645
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, 20192021 compared to $415.0$108.2 million at December 31, 2018. FHLB borrowings increased $56.52020, primarily attributable to $125.4 million or 77.3% from $129.6of 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 ASUNo. 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 OperationOperations for the Three and Nine Months Ended September 30, 20192021 and 20182020
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 Ridge2021, the Company reported net income of $4.1$39.7 million, equal to basic andor $2.26 earnings per diluted income per common share, of $1.01. Forcompared to $12.1 million, or $1.42 earnings per diluted common share, for the nine months ended September 30, 2018, net2020.
Net income was $3.6before 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’sthe 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’sThe Company’s principal interest earninginterest-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 FHLBFederal 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 netNet interest rate spread is equal to the difference between the average rate earned on interest earninginterest-earning assets and the average rate incurred on interest-bearing liabilities. The netNet interest margin represents the difference between interest income and interest expense calculated as a percentage of average earninginterest-earning assets.
46
28
The following table showspresents the average balance sheets for the first ninethree 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 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
The increaserates, as well as a volume and rate analysis of changes in averagenet 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/(Decrease) |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
|
| (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 drivenattributable to acquired loans in the Bay Banks Merger, partially offset by an increaselower 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-monththree-month period ended September 30, 2019 as2021 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
47
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 millionThe 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 ended2021 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.
29
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 theyear-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.
30
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/(Decrease) |
| ||||||||||||||||||||||||
(Dollars in thousands) |
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
|
| (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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
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 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
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 averageAverage 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 averageattributable to acquired loans and resultedsecurities 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-monthnine-month period ended September 30, 20192021 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.
49
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.
InterestNoninterest Expense. The following tables present a summary of noninterest expense and the dollar and percentage change for the periods stated.
50
|
| 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 $2.7the 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.
51
Income Tax Expense. Income tax expense for the three months ended September 30, 2019 as compared to $1.32021 and 2020 was $2.2 million duringand $1.7 million, respectively, resulting in an effective income tax rate of 24.4% and 25.2% for the threerespective 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 period2021 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.
31
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.
32
Analysis of Financial Condition
Loan Portfolio. Blue RidgeThe Company makes loans to individuals as well ascommercial entities and to commercial entities. Specific loanindividuals. 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 customersloans are to borrowers located in the markets servicedserved by Blue Ridge.the Company. All loans are underwritten within specific lending policy guidelines that are designed to maximize Blue Ridge’sthe Company’s profitability within an acceptable level of business risk.
The following table sets forthpresents the distribution of Blue Ridge’sCompany’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 |
| $ | 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) |
|
33
The following table sets forthIn 2020, the repricing characteristicsCompany participated in the PPP pursuant to the Coronavirus Aid, Relief, and sensitivityEconomic 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 our1%. Banks originating PPP 1 loans earned a processing fee of 1%, 3%, or 5% of the loan portfolio atamount, 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, 20192021, $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.
52
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 | ||||||||
|
|
|
|
|
|
|
|
34
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 RidgeAllowance 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 lossesALL 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 allowanceALL 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 impairedevaluated 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 RidgeThe Company follows applicable guidance withinissued 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 creditorimpairment may measure impairmentbe 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 statusor 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 lossesALL 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’sthe 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 adjustmentsincrease the level of the ALL required, resulting in charges to the provision for loan losses necessary.losses.
53
35
The following table presents a summaryan analysis of the provisionchange 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 lossesALL 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 percentpercentage of each category as of the applicable loan segment, isdates stated.
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||||||||||
(Dollars in thousands) |
| $ |
|
| % of |
|
| $ |
|
| % of |
| ||||
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.
36
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 includeOREO 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
54
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 atable presents summary of information pertaining to risk elementsnon-performing assets andnon-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 securitiesavailable-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’sthe Company’s investment securitiesavailable-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. Investment2020. The Company acquired approximately $79.5 million of securitiesheld-to-maturity at September 30, 2019 totaled $13.1 million and $15.6 million at December 31, 2018. Securities infair value as of the investment portfolio classified asheld-to-maturity are those securities that Blue Ridge haseffective date of the intent and ability to hold to maturity and are carried at amortized cost.Bay Banks Merger.
As of September 30, 20192021 and December 31, 2018,2020, the majority of the investment securities portfolio consisted of securities rated A to AAAas 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, 20192021 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 completesThe Company reviews for other-than-temporary impairment of its investment securities portfolio at least quarterly. At September 30, 20192021 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 conditionschanges in the current marketinterest 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
55
received when due. Blue RidgeThe 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.
37
No other-than-temporary impairment has been recognized for the securities in Blue Ridge’s investment portfolio as of September 30, 20192021 and December 31, 2018.2020.
Blue RidgeThe 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 Ridge2021, the Company owned $6.0 million of FHLB stock, $963 thousand$4.9 million of FRB stock, and $168$468 thousand of CBBcorrespondent bank stock. At December 31, 2018, Blue Ridge2020, the Company owned $3.5$5.8 million of FHLB stock, $813 thousand$2.2 million of FRB stock, and $168$248 thousand of CBBcorrespondent 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 reflectspresents the composition of Blue Ridge’sthe 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 |
|
| Amortized Cost |
|
| Percent of |
| ||||
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’sCompany’s investment portfolio by their stated maturities, as well asfor 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 |
| 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 |
| 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 | % |
38
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 Ridgethe Company are core deposits (demand deposits, interest-bearing transaction accounts, money market accounts, savings deposits, and certificates of deposit), primarily from its market
56
area. Blue Ridge’sThe 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 Ridgethe 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, 20192021 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% at26.6% as of December 31, 2018 and2020. 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 andtable 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 | |||||
|
|
|
|
39
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 providestables 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’sthe Company’s residential, multifamilymulti-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
57
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 depositorscapital 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 hasone-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 RidgeCompany has established a formal liquidity contingency plan whichthat provides guidelines for liquidity management. For Blue Ridge’sthe 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 Ridgethe Company expects to maintain a liquidity cushion. Blue RidgeManagement also stress tests itsthe 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 itsManagement 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.
40
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’sThe 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 measureBanks and bank holding companies are subject to various regulatory capital adequacy utilizing a formula that considersrequirements administered by the individual risk profile of the financial institution. Thefederal 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 Tierdirect 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
58
guidelines for U.S. banks (the “Basel III rules”) became effective for the Bank on January 1, (“CET1”) capital ratio2015, with full compliance with all of 4.5%; (ii)the requirements phased-in over a Tiermulti-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 1the 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 abovewhich 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 requirementsubject and the capital position at September 30, 2019amounts and December 31, 2018ratios to be adequately and 2017well 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 |
|
| 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 |
|
| 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
41
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 RidgeThe Company evaluates each customer’s credit worthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by Blue Ridgethe 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, 20192021 and December 31, 20182020 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.
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 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 Ridgethe 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’sThe 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 Ridgethe Bank maintains. Blue RidgeThe Company manages interest rate risk through an asset and liability committee or (“ALCO”). The ALCO is responsible for managing Blue Ridge’smonitoring 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 Ridgesensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. Many assumptionsAssumptions 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 Ridgemanagement 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 rampedrapid rate changes of down 100 basis points to 300200 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.
60
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’sthe 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
42
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 | % |
43
|
Not required.
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, 20192021 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.
44
61
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
|
There areOther than as set forth below, there have been no material pendingdevelopments in the status of the legal proceedings other thanpreviously 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 whichcourse 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
62
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 propertythe 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.
|
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
63
|
None
|
Nonediversion 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.
|
NoneIn 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.
|
NoneThe 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.
|
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
64
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits
2.1 | ||
31.1 | Rule | |
31.2 | Rule | |
32.1 | ||
101 |
| 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
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. | ||||||
Date: | By: | /s/ Brian K. Plum | ||||
Brian K. Plum | ||||||
President and Chief Executive Officer | ||||||
By: | /s/ | |||||
Judy C. Gavant | ||||||
Executive Vice President and Chief Financial Officer |
4666