10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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, 2024


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

For the transition period from to

Commission File Number: 001-39165

BLUE RIDGE BANKSHARES, INC.

(Exact name of registrant as specified in its charter)


Virginia	54-1838100
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1801 Bayberry Court, Suite 101 Richmond, Virginia	23226
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 331-6521

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 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

As of October 30, 2024, the registrant had 73,516,146 shares of common stock, no par value per share, outstanding.


Blue Ridge Bankshares, Inc. Table of Contents
Item		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	3

	Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (unaudited)	4

	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023 (unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023 (unaudited)	6

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (unaudited)	8

	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56

Item 4.	Controls and Procedures	56

PART II	OTHER INFORMATION	57

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58

Item 3.	Defaults Upon Senior Securities	58

Item 4.	Mine Safety Disclosures	58

Item 5.	Other Information	58

Item 6.	Exhibits	59

Signatures		60

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Blue Ridge Bankshares, Inc.

Consolidated Balance Sheets


	(unaudited)
(Dollars in thousands except share data)	September 30, 2024			December 31, 2023 (1)
ASSETS
Cash and due from banks	$	281,698		$	110,491
Restricted cash		4,160			10,660
Federal funds sold		2,910			4,451
Securities available for sale, at fair value		314,784			321,081
Restricted equity investments		20,891			18,621
Other equity investments		4,525			12,905
Other investments		21,344			29,467
Loans held for sale		22,082			46,337
Loans held for investment, net of deferred fees and costs		2,180,413			2,430,947
Less: allowance for credit losses		(25,453	)		(35,893	)
Loans held for investment, net		2,154,960			2,395,054
Accrued interest receivable		13,171			14,967
Premises and equipment, net		21,621			22,348
Right-of-use lease asset		7,764			8,738
Bank owned life insurance		14,953			48,453
Other intangible assets		4,201			5,382
Mortgage servicing rights, net		19,502			27,114
Deferred tax asset, net		18,248			21,556
Other assets		17,877			19,929
Total assets	$	2,944,691		$	3,117,554
LIABILITIES & STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	459,793		$	506,248
Interest-bearing demand and money market		748,416			1,049,536
Savings		103,820			117,923
Time		1,034,463			892,325
Total deposits		2,346,492			2,566,032
FHLB borrowings		190,000			210,000
FRB borrowings		—			65,000
Subordinated notes, net		39,806			39,855
Lease liabilities		8,537			9,619
Other liabilities		23,509			41,059
Total liabilities		2,608,344			2,931,565
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Common stock, no par value; 150,000,000 and 50,000,000 shares authorized at September 30, 2024 and December 31, 2023, respectively; 73,474,147 and 19,198,379 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		300,763			197,636
Preferred stock, $50 per share par value; 250,000 shares authorized at September 30, 2024 and December 31, 2023; 2,732 Series C shares and 0 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		137			—
Additional paid-in capital		50,155			252
Retained earnings		19,775			33,157
Accumulated other comprehensive loss, net of tax		(34,483	)		(45,056	)
Total stockholders’ equity		336,347			185,989
Total liabilities and stockholders’ equity	$	2,944,691		$	3,117,554

(1)

Derived from audited December 31, 2023 Consolidated Financial Statements.

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Operations

(unaudited)


	For the three months ended						For the nine months ended
(Dollars in thousands, except per share data)	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
INTEREST INCOME
Interest and fees on loans	$	34,747		$	38,551		$	109,289		$	114,009
Interest on securities, deposit accounts, and federal funds sold		4,478			3,934			13,098			11,826
Total interest income		39,225			42,485			122,387			125,835
INTEREST EXPENSE
Interest on deposits		16,984			16,115			52,741			42,070
Interest on subordinated notes		566			566			1,677			1,666
Interest on FHLB and FRB borrowings		2,574			3,612			8,433			10,821
Total interest expense		20,124			20,293			62,851			54,557
Net interest income		19,101			22,192			59,536			71,278
(Recovery of) provision for credit losses - loans		(6,000	)		11,600			(2,400	)		21,103
Recovery of credit losses - unfunded commitments		(200	)		(550	)		(1,700	)		(1,550	)
Total (recovery of) provision for credit losses		(6,200	)		11,050			(4,100	)		19,553
Net interest income after provision for credit losses		25,301			11,142			63,636			51,725
NONINTEREST INCOME
Fair value adjustments of other equity investments		160			55			(8,384	)		(277	)
Residential mortgage banking income		2,939			2,917			8,693			9,261
Mortgage servicing rights		(2,915	)		894			(166	)		148
Loss on sale of mortgage servicing rights		(1,011	)		—			(1,011	)		—
Gain on sale of guaranteed government loans		10			6			131			4,799
Wealth and trust management		730			462			1,873			1,356
Service charges on deposit accounts		417			365			1,238			1,057
Increase in cash surrender value of bank owned life insurance		127			311			797			885
Bank and purchase card, net		690			357			1,444			1,257
Loss on sale of securities available for sale		—			(649	)		(67	)		(649	)
Other		1,592			2,697			6,324			6,597
Total noninterest income		2,739			7,415			10,872			24,434
NONINTEREST EXPENSE
Salaries and employee benefits		13,938			14,640			44,918			44,447
Occupancy and equipment		1,394			1,475			4,221			4,957
Technology and communications		2,767			2,891			7,378			7,670
Legal and regulatory filings		614			912			1,424			4,899
Advertising and marketing		222			350			701			973
Audit fees		498			791			1,948			1,440
FDIC insurance		1,130			1,322			4,324			3,297
Intangible amortization		265			308			828			998
Other contractual services		1,374			1,492			4,851			5,649
Other taxes and assessments		759			802			2,290			2,407
Regulatory remediation		357			3,782			4,398			7,304
Goodwill impairment		—			26,826			—			26,826
ESOP litigation		—			6,000			—			6,000
Other		3,177			3,030			11,033			10,653
Total noninterest expense		26,495			64,621			88,314			127,520
Income (loss) before income tax expense		1,545			(46,064	)		(13,806	)		(51,361	)
Income tax expense (benefit)		599			(4,693	)		(424	)		(5,347	)
Net income (loss)	$	946		$	(41,371	)	$	(13,382	)	$	(46,014	)
Basic and diluted earnings (loss) per common share	$	0.01		$	(2.18	)	$	(0.34	)	$	(2.43	)

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)


	For the three months ended						For the nine months ended
(Dollars in thousands)	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net income (loss)	$	946		$	(41,371	)	$	(13,382	)	$	(46,014	)
Other comprehensive income (loss):
Gross unrealized gains (losses) on securities available for sale arising during the period		12,803			(10,331	)		13,814			(11,821	)
Deferred income tax (expense) benefit		(2,803	)		2,309			(3,293	)		2,642
Reclassification of net losses on sale and calls of securities available for sale		—			649			67			649
Deferred income tax benefit on realized losses on securities available for sale		—			(145	)		(15	)		(145	)
Unrealized gains (losses) on securities available for sale arising during the period, net of tax		10,000			(7,518	)		10,573			(8,675	)
Other comprehensive gain (loss), net of tax		10,000			(7,518	)		10,573			(8,675	)
Comprehensive net income (loss)	$	10,946		$	(48,889	)	$	(2,809	)	$	(54,689	)

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)


	For the nine months ended September 30, 2024
(Dollars in thousands)	Shares of Common Stock		Shares of Preferred Stock		Common Stock		Preferred Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss) Income, net			Total
Balance at beginning of period		19,198,379		—	$	197,636	$	—	$	252	$	33,157		$	(45,056	)	$	185,989
Net loss		—		—		—		—		—		(13,382	)		—			(13,382	)
Other comprehensive income		—		—		—		—		—		—			10,573			10,573
Issuance of stock and warrants from Private Placements, net of issuance costs		53,922,000		2,732		102,108		137		49,903		—			—			152,148
Restricted stock awards, net of forfeitures		353,768		—		1,019		—		—		—			—			1,019
Balance at end of period		73,474,147		2,732	$	300,763	$	137	$	50,155	$	19,775		$	(34,483	)	$	336,347


	For the nine months ended September 30, 2023
(Dollars in thousands)	Shares of Common Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss, net			Total
Balance at beginning of period		18,950,329	$	195,960	$	252	$	97,682		$	(45,101	)	$	248,793
Cumulative effect adjustment due to adoption of accounting standard, net of income taxes		—		—		—		(8,111	)		—			(8,111	)
Net loss		—		—		—		(46,014	)		—			(46,014	)
Other comprehensive loss		—		—		—		—			(8,675	)		(8,675	)
Dividends on common stock		—		—		—		(4,641	)		—			(4,641	)
Stock option exercises		3,750		26		—		—			—			26
Restricted stock awards, net of forfeitures		230,955		1,382		—		—			—			1,382
Dividend reinvestment plan issuances		7,437		77		—		—			—			77
Balance at end of period		19,192,471	$	197,445	$	252	$	38,916		$	(53,776	)	$	182,837


	For the three months ended September 30, 2024
(Dollars in thousands)	Shares of Common Stock			Shares of Preferred Stock		Common Stock			Preferred Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income, net			Total
Balance at beginning of period		73,503,647			2,732	$	300,976		$	137	$	50,155	$	18,829	$	(44,483	)	$	325,614
Net income		—			—		—			—		—		946		—			946
Other comprehensive income		—			—		—			—		—		—		10,000			10,000
Issuance costs from Private Placements		—			—		(326	)		—		—		—		—			(326	)
Restricted stock awards, net of forfeitures		(29,500	)		—		113			—		—		—		—			113
Balance at end of period		73,474,147			2,732	$	300,763		$	137	$	50,155	$	19,775	$	(34,483	)	$	336,347


	For the three months ended September 30, 2023
(Dollars in thousands)	Shares of Common Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss, net			Total
Balance at beginning of period		18,933,637	$	196,990	$	252	$	80,287		$	(46,258	)	$	231,271
Net loss		—		—		—		(41,371	)		—			(41,371	)
Other comprehensive loss		—		—		—		—			(7,518	)		(7,518	)
Restricted stock awards, net of forfeitures		257,797		446		—		—			—			446
Dividend reinvestment plan issuances		1,037		9		—		—			—			9
Balance at end of period		19,192,471	$	197,445	$	252	$	38,916		$	(53,776	)	$	182,837

See accompanying notes to unaudited consolidated financial statements.

Blue Ridge Bankshares, Inc.

Consolidated Statements of Cash Flows

(unaudited)


	For the nine months ended
(Dollars in thousands)	September 30, 2024			September 30, 2023
Cash Flows From Operating Activities
Net loss	$	(13,382	)	$	(46,014	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Goodwill impairment		—			26,826
Depreciation and amortization		1,171			1,290
Deferred income tax expense		3,308			163
(Recovery of) provision for credit losses - loans		(2,400	)		21,103
Recovery of credit losses - unfunded commitments		(1,700	)		(1,550	)
Accretion of fair value adjustments (discounts) on acquired loans		(915	)		(1,785	)
Accretion of fair value adjustments (premiums) on acquired time deposits		(248	)		(666	)
Accretion of fair value adjustments (premiums) on acquired subordinated notes		(75	)		(75	)
Proceeds from sale of other loans held for sale		25,250			—
Proceeds from sale of mortgage loans held for sale		183,868			186,460
Mortgage loans held for sale, originated		(177,632	)		(189,340	)
Gain on sale of mortgage loans		(1,469	)		(1,523	)
Proceeds from sale of guaranteed government loans held for sale		1,626			69,455
Guaranteed government loans held for sale, originated		(293	)		(35,027	)
Gain on sale of guaranteed government loans		(131	)		(4,799	)
Loss on disposal of premises and equipment		6			14
(Gain) loss on sale of other investments and other assets		(258	)		321
Realized loss on sale of securities available for sale		67			649
Loss on sale of MSRs		1,011			—
Investment amortization expense, net		409			510
Amortization of subordinated debt issuance costs		26			26
Intangible amortization		828			998
Fair value adjustments of other equity investments		8,384			277
Net adjustments attributable to mortgage servicing rights		166			(148	)
Increase in cash surrender value of bank owned life insurance		(797	)		(885	)
Decrease (increase) in accrued interest receivable		1,796			(4,818	)
Decrease (increase) in other assets		115			(20,784	)
(Decrease) increase in other liabilities		(16,932	)		22,910
Cash provided by operating activities		11,799			23,588
Cash Flows From Investing Activities
Net decrease (increase) in loans held for investment		236,445			(66,847	)
Net decrease (increase) in federal funds sold		1,541			(1,158	)
Proceeds from calls, sales, paydowns, and maturities of securities available for sale		19,770			28,774
Proceeds from sale of other investments, other assets, and other real estate owned		11,680			1,561
Proceeds from surrender of bank owned life insurance policies		34,297			—
Net change in restricted equity and other investments		(2,832	)		4,413
Purchase of premises and equipment		(454	)		(713	)
Proceeds from sale of premises and equipment and other assets		4			1,005
Proceeds from sale of MSRs		6,568			—
Proceeds from sale of LenderSelect Mortgage Group		—			250
Capital calls of SBIC funds and other investments		(2,684	)		(3,816	)
Nonincome distributions from SBIC funds and other investments		717			1,221
Cash provided by (used in) investing activities		305,052			(35,310	)
Cash Flows From Financing Activities
Net decrease in demand, savings, and other interest-bearing deposits		(361,678	)		(62,655	)
Net increase in time deposits		142,386			336,965
Common stock dividends paid		—			(4,641	)
FHLB advances		726,000			1,500,000
FHLB repayments		(746,000	)		(1,661,700	)
FRB advances		—			65,000
FRB repayments		(65,000	)		(51	)
Proceeds from Private Placements, net of issuance costs		152,148			—
Stock option exercises		—			26
Dividend reinvestment plan issuances		—			77
Cash (used in) provided by financing activities		(152,144	)		173,021
Net increase in cash and due from banks		164,707			161,299
Cash and due from banks and restricted cash at beginning of period		121,151			77,274
Cash and due from banks and restricted cash at end of period	$	285,858		$	238,573


Supplemental Schedule of Cash Flow Information
Cash paid for:
Interest	$	64,704	$	48,974
Income taxes	$	—	$	6,656
Non-cash investing and financing activities:
Unrealized gains (losses) on securities available for sale	$	13,814	$	(11,821	)
Restricted stock awards, net of forfeitures	$	1,019	$	1,382
Cumulative effect adjustment due to adoption of accounting standard, net of income taxes	$	—	$	(8,111	)

See accompanying notes to unaudited consolidated financial statements.

Notes to Consolidated Financial Statements (Unaudited)

Note 1 – Organization and Basis of Presentation

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

The accompanying unaudited consolidated financial statements of the Company include the accounts of the Bank and the Financial Group and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. All significant intercompany balances and transactions have been eliminated in consolidation. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as amended (the “2023 Form 10-K”).

The Company's significant accounting policies are disclosed in Note 2 of the audited financial statements and notes for the year ended December 31, 2023 and are contained in the 2023 Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2023.

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

Restatement

On October 31, 2023, the Company and the Audit Committee of its board of directors, after consultation with the Company’s independent registered public accounting firm and the Office of the Comptroller of the Currency (“OCC”), the Bank's primary federal banking regulator, determined that certain specialty finance loans that, as previously disclosed, were placed on nonaccrual, reserved for, or charged off in the interim periods ended March 31, 2023 and June 30, 2023 should have been reported as nonaccrual, reserved for, or charged off in earlier periods. On November 14, 2023, the Company filed amendments to its Annual Report on Form 10-K for the year ended December 31, 2022 and its Quarterly Reports on Form 10-Q for the periods ended March 31, 2023 and June 30, 2023 to restate the consolidated financial statements included therein. Following the restatements, the Company has partially recovered—and, in some cases, fully recovered—amounts from certain specialty finance loans previously charged off. See Note 3 of this Form 10-Q for additional information.

The Company does not believe that the restatements reflect any significant financial impact on the Company's financial condition as of September 30, 2024, or any trends in the Company's business or its prospects. The consolidated financial statements included in this Quarterly Report on Form 10-Q reflect the effects of the aforementioned restatement for the nine-month period ended September 30, 2023.

Regulatory Matters

On January 24, 2024, the Bank consented to the issuance of a consent order (the “Consent Order”) with the OCC. The Consent Order generally incorporates the provisions of the formal written agreement (the "Written Agreement") entered into between the Bank and the OCC on August 29, 2022, as well as adding new provisions. The Written Agreement principally concerned the Bank’s fintech operations and required the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering, and information technology risks stemming from its fintech partnerships. The Consent Order adds time frames by which certain of the directives are required, requires the Bank to submit a strategic plan and a capital plan, and places further restrictions on the Company’s fintech operations. The Consent Order also requires the Bank to maintain a leverage ratio of 10.0% and a total capital ratio of 13.0%, referred to as minimum capital ratios. Complete copies of the Written Agreement and the Consent Order are included as Exhibits 10.14 and 10.15, respectively, to the 2023 Form 10-K.

Private Placements

"Private Placements"). At a special meeting of shareholders held June 20, 2024, the Company’s shareholders approved various proposals, thus approving the conversion of the preferred shares issued in the Private Placements into shares of the Company’s common stock. On June 28, 2024, all outstanding shares of the Company’s Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”) converted into shares of the Company’s common stock. The outstanding shares of the Company’s Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”), remained outstanding at September 30, 2024. On July 11, 2024, the holder of the Series C Preferred Stock received the required regulatory non-objection to exchange the Series C Preferred Stock for common stock as stipulated in the Private Placements. The Company expects the exchange for shares of the Company's common stock will be completed during the fourth quarter of 2024. Capital proceeds received, net of issuance costs, from the Private Placements totaled $152.1 million.

The Private Placements also included the issuance of warrants for 6,549 shares of Series B Preferred Stock and warrants for 1,441 shares of Series C Preferred Stock. Each warrant can be exercised to purchase shares at a price of $10 thousand per share. On June 28, 2024, the warrants for Series B Preferred Stock converted to warrants for common stock, and the warrants for Series C Preferred Stock remain outstanding pending exchange of the Series C Preferred Stock. The conversion rate on the warrants from preferred stock to common stock was 4,000 shares of common per preferred share. As of September 30, 2024, there were warrants outstanding to purchase 26,195,999 common shares. Of these, warrants to purchase 21,635,999 common shares have an exercise price of $2.50 per share, and warrants to purchase 4,560,000 common shares have an exercise price of $2.39 per share. The warrants have 5-year terms and expire April 3, 2029.

The Company intends to use the capital from the Private Placements to propel its near-term strategic initiatives, which include repositioning business lines, supporting organic growth, and further enhancing the Bank’s capital levels, including compliance with the minimum capital ratios set forth in the Consent Order. As of September 30, 2024 and June 30, 2024, the Bank’s capital ratios exceeded these minimum capital ratios.

The following tables summarize the effect of the Private Placements on the Company's shares of common and preferred stock as of and for the nine months ended September 30, 2024.


Effect of Private Placements on Common Stock	Number of Shares
Common stock
Shares issued on April 3, 2024 and June 13, 2024		3,690,000
Shares of Series B Preferred Stock converted into common stock on June 28, 2024 (1)		50,232,000
Increase in shares of common stock		53,922,000
Warrants issued to purchase common stock (2), (3)		26,195,999

(1) The conversion rate for Series B Preferred Stock into common stock was 4,000 common shares per preferred share.
(2) The conversion rate for warrants for Series B Preferred Stock into warrants for common stock was 4,000 common shares per preferred share.
(3) The warrants for Series B Preferred Stock converted into warrants for common stock on June 28, 2024.


	Number of Shares
Effect of Private Placements on Preferred Stock	Series B			Series C
Preferred stock
Shares issued on April 3, 2024 and June 13, 2024		12,558			2,732
Shares of preferred stock that converted into common stock on June 28, 2024 (1)		(12,558	)		—
Increase in shares of preferred stock		—			2,732
Warrants, preferred stock
Warrants issued		6,549			1,441
Warrants for preferred stock that converted into warrants for common stock (2)		(6,549	)		—
Increase in warrants for preferred stock		—			1,441

(1) The conversion rate for preferred stock into common stock was 4,000 common shares per preferred share.
(2) The holder of Series C Preferred Stock received regulatory non-objection to exchange the Series C Preferred Stock for common stock as stipulated in the Private Placements on July 11, 2024. The Company expects the exchange for shares of the Company's common stock will be completed during the fourth quarter of 2024.

In accordance with Accounting Standards Codification ("ASC") 820 - Fair Value Measurements, the Company calculated the fair value of the stock warrants issued as part of the Private Placements, through the engagement of a third-party valuation firm. The Black-Scholes Option Pricing Model ("BSOPM") was used for the valuation and incorporated grant date assumptions, including the fair value of the underlying stock, strike price, risk-free interest rate, term, and expected volatility.

The issued warrants have been accounted for as freestanding financial instruments and classified as equity in the Company's consolidated financial statements. The warrants were deemed freestanding because they are (1) legally detachable and separately exercisable from the common or preferred shares, as applicable, issued in the Private Placements, (2) only exercisable into shares of the Company’s stock, with no obligation for the Company to transfer any asset in settlement, and (3) do not obligate the Company to issue a variable number of shares. The warrants are classified as equity because they are freestanding and (1) the Company has sufficient authorized and unissued shares available for issuance, (2) the warrant agreements specify a fixed number of shares to be issued upon exercise, and (3) there are no provisions requiring cash payments by the Company in any "top-off" or "make-whole" situations or for failure to make timely filings with the Securities and Exchange Commission (the "SEC").

The following table presents the assumptions used in the calculation of the fair value of the warrants issued in connection with the Private Placements.


	Issued April 3, 2024							Issued June 13, 2024
Assumptions	Common Stock Warrants			Series C Preferred Stock Warrants				Common Stock Warrants
Fair value per warrant	$	1.34		$	1.34		(1)	$	1.49
Stock price per share	$	2.76		$	2.76		(1)	$	2.99
Strike price per share	$	2.50		$	2.50		(1)	$	2.39
Risk-free interest rate		4.40	%		4.40	%			4.30	%
Term (years)		5.00			5.00				4.81
Expected volatility		45.00	%		45.00	%			45.00	%

(1) Presented on a common share equivalent basis.

The $152.1 million net proceeds from the Private Placements were allocated among the individual freestanding financial instruments, including common stock, Series C Preferred Stock, and stock warrants, based on the relative fair value method. The fair value of the Series C Preferred Stock in excess of par value has been classified as additional paid-in capital on the consolidated balance sheets. The fair value of the issued warrants has also been classified as additional paid-in capital on the consolidated balance sheets.

Recent Accounting Pronouncements (Issued But Not Adopted)

Improvements to Reportable Segment Disclosures. In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2023-07–Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods certain disclosures that are currently required annually. Additionally, the ASU requires a public entity to disclose the title and position of the Chief Operating Decision Maker ("CODM"), as well as the metric that the CODM uses to gauge segment performance. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU requires retrospective application to all prior periods presented in the financial statements. The adoption of this ASU will only impact disclosures, with no impacts to results of operations, cash flows, and financial condition.

Improvements to Income Tax Disclosures. In December 2023, the FASB issued ASU No. 2023-09–Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The ASU requires prospective application by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or alternately applying the amendments retrospectively by providing the revised disclosures for all periods presented. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements.

Note 2 – Investment Securities and Other Investments

Investment securities classified as available for sale ("AFS") are carried at fair value in the consolidated balance sheets. The following tables present amortized cost, fair values, and gross unrealized gains and losses of investment securities AFS as of the dates stated.


	September 30, 2024
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
Mortgage backed securities	$	192,870	$	—	$	(27,434	)	$	165,436
U.S. Treasury and agencies		79,428		—		(7,975	)		71,453
State and municipal		50,295		1		(5,767	)		44,529
Corporate bonds		36,883		—		(3,517	)		33,366
Total investment securities	$	359,476	$	1	$	(44,693	)	$	314,784


	December 31, 2023
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
Mortgage backed securities	$	212,214	$	—	$	(35,244	)	$	176,970
U.S. Treasury and agencies		79,856		—		(10,985	)		68,871
State and municipal		50,682		—		(7,357	)		43,325
Corporate bonds		36,902		12		(4,999	)		31,915
Total investment securities	$	379,654	$	12	$	(58,585	)	$	321,081

As of September 30, 2024 and December 31, 2023, securities with a fair value of $273.0 million and $35.9 million, respectively, were pledged to secure the Bank’s line of credit with the Federal Home Loan Bank of Atlanta ("FHLB").

As of December 31, 2023, securities with $260.9 million of par value (amortized cost and fair value of $262.7 million and $218.7 million, respectively) were pledged as collateral for the Bank Term Funding Program (“BTFP”) established by the Board of Governors of the Federal Reserve System (the "Federal Reserve"). Effective March 11, 2024, the Federal Reserve terminated the BTFP. During the second quarter of 2024, the Company repaid its BTFP $65.0 million advance upon maturity and unpledged all collateralized securities.

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


	September 30, 2024
(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	2,043	$	2,031
Due after one year through five years		49,212		46,239
Due after five years through ten years		116,115		102,976
Due after ten years		192,106		163,538
Total	$	359,476	$	314,784

The following tables present a summary of unrealized losses 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, 2024
			Less than 12 Months					12 Months or Greater					Total
(Dollars in thousands)	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage backed securities		79	$	—	$	—		$	165,434	$	(27,434	)	$	165,434	$	(27,434	)
U.S. Treasury and agencies		29		—		—			71,452		(7,975	)		71,452		(7,975	)
State and municipal		64		330		(1	)		41,953		(5,766	)		42,283		(5,767	)
Corporate bonds		40		2,209		(40	)		30,407		(3,477	)		32,616		(3,517	)
Total		212	$	2,539	$	(41	)	$	309,246	$	(44,652	)	$	311,785	$	(44,693	)


			December 31, 2023
			Less than 12 Months					12 Months or Greater					Total
(Dollars in thousands)	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage backed securities		86	$	7,497	$	(45	)	$	169,474	$	(35,199	)	$	176,971	$	(35,244	)
U.S. Treasury and agencies		29		283		(1	)		68,399		(10,984	)		68,682		(10,985	)
State and municipal		65		536		(9	)		41,118		(7,348	)		41,654		(7,357	)
Corporate bonds		39		7,469		(830	)		21,683		(4,169	)		29,152		(4,999	)
Total		219	$	15,785	$	(885	)	$	300,674	$	(57,700	)	$	316,459	$	(58,585	)

The Company evaluates the fair value and credit quality of its securities AFS portfolio no less than quarterly. At September 30, 2024 and December 31, 2023, the majority of securities in an unrealized loss position were of investment grade; however, a portion of the portfolio does not have a third-party investment grade available. These ungraded securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds in the tables above. The Company evaluated the issuers of these individually, observing that each issuer had strong capital ratios and profitability thereby indicating limited exposure to asset quality or liquidity issues, which resulted in no identifiable credit losses. Investment securities with unrealized losses are generally attributable to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed securities and U.S. Treasury and agencies are guaranteed and/or funded by the U.S. government and government agencies. State and municipal securities showed no indication that the contractual cash flows would 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 impaired securities prior to the recovery of the amortized cost. As of September 30, 2024 and December 31, 2023, there was no allowance for credit losses (“ACL”) against the Company's securities AFS portfolio. Any impairment that has not been recorded through an ACL is recognized in accumulated other comprehensive income (loss).

Restricted equity investments consisted of stock in the FHLB (carrying value of $11.3 million and $12.3 million as of September 30, 2024 and December 31, 2023, respectively), stock in the Federal Reserve Bank of Richmond ("FRB") (carrying value of $9.2 million and $5.9 million at September 30, 2024 and December 31, 2023, respectively), and stock in the Bank’s correspondent bank (carrying value of $468 thousand at both September 30, 2024 and December 31, 2023). Restricted equity investments are carried at cost.

The Company also has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.5 million and $12.9 million as of September 30, 2024 and December 31, 2023, respectively. The Company reports such investments at fair value if observable market transactions have occurred in similar securities, resulting in a new carrying value that is evaluated for impairment no less than quarterly. These impairment analyses may include quantitative and/or qualitative information obtained either directly from the investee, a third-party broker, or a third-party valuation firm. If a potential impairment has been identified, the carrying value of the investment would be written down to its estimated fair market value through a charge to earnings. In the second quarter of 2024, the Company identified potential impairment triggers related to one of its investments, mainly due to regulatory pressures on banks partnering with fintech companies in the banking-as-a-service sector. These pressures led some fintech companies to announce cost-saving measures and at least one to seek bankruptcy protection. As a result, the Company engaged a third-party valuation firm to value the Company's investment in a fintech company. This valuation resulted in an $8.5 million impairment charge, recorded in fair value adjustments of other equity investments, to adjust the investment to its estimated fair market value during the second quarter of 2024.

The Company also holds investments in early stage focused investment funds, small business investment companies ("SBIC"), and low-income housing partnerships, which totaled $21.3 million and $29.5 million as of September 30, 2024 and December 31, 2023, respectively, and are reported in other investments on the consolidated balance sheets. These investments do not have readily-determinable fair values, are generally reported at amortized cost, and are periodically evaluated for potential impairment. For the nine months ended September 30, 2024, the Company sold $6.4 million of its SBIC investments at a $69 thousand loss, which is reported in other noninterest income.

Note 3 – Loans and ACL

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


(Dollars in thousands)	September 30, 2024		December 31, 2023
Commercial and industrial	$	378,922	$	508,944
Real estate – construction, commercial		116,276		180,052
Real estate – construction, residential		43,322		75,832
Real estate – commercial		873,721		870,540
Real estate – residential		713,442		730,110
Real estate – farmland		5,619		5,470
Consumer		48,206		59,169
Gross loans		2,179,508		2,430,117
Deferred costs, net of loan fees		905		830
Total	$	2,180,413	$	2,430,947

The Company has pledged certain commercial and residential mortgages as collateral for borrowings with the FHLB. Loans totaling $802.6 million and $767.1 million were pledged with the FHLB as of September 30, 2024 and December 31, 2023, respectively. The Company has pledged certain commercial and industrial loans totaling $69.6 million and $161.0 million as collateral for borrowings with the FRB Discount Window as of September 30, 2024 and December 31, 2023, respectively. The decline in the amount pledged at the FRB Discount Window was primarily due to paydowns and payoffs of the commercial and industrial loans serving as collateral.

The following tables present the aging of the amortized cost of loans held for investment by loan category as of the dates stated.


	September 30, 2024
(Dollars in thousands)	Current Loans		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Loans
Commercial and industrial	$	361,417	$	1,640	$	1,253	$	3,142	$	11,470	$	378,922
Real estate – construction, commercial		115,963		—		—		—		313		116,276
Real estate – construction, residential		43,322		—		—		—		—		43,322
Real estate – commercial		862,140		4,252		—		—		7,329		873,721
Real estate – residential		703,539		1,237		77		—		8,589		713,442
Real estate – farmland		5,619		—		—		—		—		5,619
Consumer		44,433		1,942		600		583		648		48,206
Deferred costs, net of loan fees		905		—		—		—		—		905
Total	$	2,137,338	$	9,071	$	1,930	$	3,725	$	28,349	$	2,180,413


	December 31, 2023
(Dollars in thousands)	Current Loans		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Loans
Commercial and industrial	$	464,939	$	2,235	$	632	$	1,709	$	39,429	$	508,944
Real estate – construction, commercial		177,653		2,016		—		—		383		180,052
Real estate – construction, residential		75,309		523		—		—		—		75,832
Real estate – commercial		855,263		2,109		714		574		11,880		870,540
Real estate – residential		717,141		5,101		288		—		7,580		730,110
Real estate – farmland		5,470		—		—		—		—		5,470
Consumer		55,084		2,298		279		754		754		59,169
Deferred costs, net of loan fees		830		—		—		—		—		830
Total	$	2,351,689	$	14,282	$	1,913	$	3,037	$	60,026	$	2,430,947

the loan, which was provisioned for in prior years. In the third quarter, the sale was completed upon the receipt of all contractual amounts due. Upon the completion of the sale, the Company recorded an $8.4 million recovery of credit losses.

The following tables present the amortized cost of nonaccrual loans held for investment with and without an ACL by loan category as of the dates stated.


	September 30, 2024
(Dollars in thousands)	Nonaccrual Loans with No ACL		Nonaccrual Loans with an ACL		Total Nonaccrual Loans
Commercial and industrial	$	—	$	11,470	$	11,470
Real estate – construction, commercial		—		313		313
Real estate – commercial		—		7,329		7,329
Real estate – residential		2,496		6,093		8,589
Consumer		—		648		648
Total	$	2,496	$	25,853	$	28,349


	December 31, 2023
(Dollars in thousands)	Nonaccrual Loans with No ACL		Nonaccrual Loans with an ACL		Total Nonaccrual Loans
Commercial and industrial	$	1,487	$	37,942	$	39,429
Real estate – construction, commercial		—		383		383
Real estate – commercial		2,024		9,856		11,880
Real estate – residential		577		7,003		7,580
Consumer		—		754		754
Total	$	4,088	$	55,938	$	60,026

The Company recognized $275 thousand and $463 thousand of interest income on nonaccrual loans during the three and nine months ended September 30, 2024, respectively, compared to $0 and $89 thousand for the same respective periods in 2023.

The following tables present accrued interest receivable by loan type reversed from interest income associated with loans held for investment that were placed on nonaccrual status for the periods stated.


	For the three months ended September 30,				For the nine months ended September 30,
(Dollars in thousands)	2024		2023		2024		2023
Commercial and industrial	$	165	$	34	$	381	$	302
Real estate – construction, commercial		35		42		60		42
Real estate – construction, residential		—		11		—		26
Real estate – commercial		77		53		175		251
Real estate – residential		52		12		104		49
Consumer		5		6		10		15
Total	$	334	$	158	$	730	$	685

Credit Quality Indicators

The Company segments loans held for investment into risk categories based on relevant information about the expected ability of borrowers to repay debt, such as current financial information, historical payment performance, experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Management assigns loan risk grades by a numerical system as an indication of credit quality of its portfolio of loans held for investment. The Company uses the following definitions for loan risk ratings and periodically evaluates the appropriateness of these ratings across its loan portfolio. Independent third-party loan reviews are periodically performed on the Company's loan portfolio and such reviews are used to validate management's determination of loan risk grades. Bank regulatory agencies also periodically review the Company's loan portfolio, including loan risk grades and may change a grade based on their judgment of the facts at the time of review.

Risk Grade 1 – Strong: This grade is reserved for loans to the strongest of borrowers. These loans are to individuals or businesses where the probability of default is extremely low to the Bank and are secured with collateral where the loss given default is unlikely because of the source of repayment such as a lien on a deposit account held at the Bank. Character, credit history, and ability of individuals or company principals are excellent. High liquidity, minimum risk, strong ratios, and low servicing cost are present.

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

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

Risk Grade 4 – Satisfactory: This grade is given to satisfactory loans containing more, but deemed acceptable, risk and where the borrower is assessed as sound. These loans have adequate sources of repayment, with minimal identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics: (1) general conformity to the Bank's underwriting requirements, with limited exceptions to policy, product, or underwriting guidelines. All exceptions noted have documented mitigating factors that offset any additional risk associated with the exceptions noted, (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt. In addition, guarantor support, when provided, is viewed as satisfactory.

Risk Grade 5 – Watch: This grade is for satisfactory loans containing acceptable but elevated risk. These loans are characterized by borrowers who exhibit signs of financial distress or experience unstable or unfavorable change(s) adversely impacting their current or expected financial condition. The borrower's management is deemed to be satisfactory, the collateral securing the loan may have decreased in value, the debt service coverage ratio is inconsistent or breakeven but mostly positive, and/or guarantor support, if any, is limited or marginal. Loans classified as Watch warrant additional monitoring by management.

Risk Grade 6 – Special Mention: This grade is for loans that have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the Bank's credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention credits typically do not conform to underwriting guidelines and/or exceptions without mitigating factors, or have emerging weaknesses that may or may not be cured with the passage of time.

Risk Grade 7 – Substandard: A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. The probability of default is likely and may have occurred. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. The weaknesses may include, but are not limited to: (1) current or expected unprofitable operations, (2) inadequate debt service coverage, (3) declining or inadequate liquidity, (4) improper loan structure, (5) questionable or weak repayment sources, and (6) lack of well-defined secondary repayment source. There is a distinct possibility of loss and the Bank will sustain some loss if the deficiencies are not corrected.

Risk Grade 8 – Doubtful: Loans classified doubtful have all the weaknesses inherent in loans classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the Bank's position, which can include, but is not limited to (1) an injection of capital, (2) alternative financing, and (3) liquidation of assets or the pledging of additional

collateral. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off against the allowance for credit losses.

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

The following table presents the amortized cost of loans held for investment by internal loan risk grade by year of origination as of September 30, 2024. There were no loans classified as loss (risk grade 9) as of the same date. Also presented are current period gross charge-offs by loan type for the nine months ended September 30, 2024.


	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
Commercial and industrial
Risk Grades 1 - 4	$	9,046	$	9,673	$	84,473	$	16,702	$	19,368	$	17,087	$	102,357	$	258,706
Risk Grades 5 - 6		752		25,585		38,620		11,558		5,621		893		13,974		97,003
Risk Grade 7		871		1,013		4,250		10,515		420		1,376		1,701		20,146
Risk Grade 8		—		—		—		2,289		727		1		50		3,067
Total		10,669		36,271		127,343		41,064		26,136		19,357		118,082		378,922
Current period gross charge-offs		73		475		16,213		2,437		130		165		447		19,940

Real estate – construction, commercial
Risk Grades 1 - 4		6,071		7,005		63,471		15,166		10,480		5,615		399		108,207
Risk Grades 5 - 6		—		1,094		102		1,034		—		3,620		—		5,850
Risk Grade 7		—		116		1,723		26		—		354		—		2,219
Total		6,071		8,215		65,296		16,226		10,480		9,589		399		116,276

Real estate – construction, residential
Risk Grades 1 - 4		12,491		11,772		3,563		11,917		—		60		—		39,803
Risk Grades 5 - 6		255		—		3,005		—		—		—		—		3,260
Risk Grade 7		—		104		155		—		—		—		—		259
Total		12,746		11,876		6,723		11,917		—		60		—		43,322
Current period gross charge-offs		—		—		—		—		—		39		—		39

Real estate – commercial
Risk Grades 1 - 4		4,799		22,723		274,021		120,168		144,931		142,903		20,621		730,166
Risk Grades 5 - 6		535		—		65,919		7,042		15,291		24,264		4,184		117,235
Risk Grade 7		1,570		—		—		12,403		3,690		6,753		525		24,941
Risk Grade 8		—		—		—		1,379		—		—		—		1,379
Total		6,904		22,723		339,940		140,992		163,912		173,920		25,330		873,721
Current period gross charge-offs		—		—		1,103		—		—		6		—		1,109

Real estate – residential
Risk Grades 1 - 4		940		56,212		225,724		114,846		64,510		143,476		55,317		661,025
Risk Grades 5 - 6		300		12,649		8,715		3,075		2,250		9,237		1,274		37,500
Risk Grade 7		—		741		2,598		2,321		1,769		5,318		2,170		14,917
Total		1,240		69,602		237,037		120,242		68,529		158,031		58,761		713,442
Current period gross charge-offs		—		—		—		—		—		72		2		74

Real estate – farmland
Risk Grades 1 - 4		148		—		1,000		1,252		—		2,816		164		5,380
Risk Grades 5 - 6		—		138		—		101		—		—		—		239
Total		148		138		1,000		1,353		—		2,816		164		5,619

Consumer
Risk Grades 1 - 4		6,217		19,199		9,923		2,151		1,461		599		7,178		46,728
Risk Grades 5 - 6		—		50		36		10		24		53		450		623
Risk Grade 7		45		201		344		141		83		41		—		855
Total		6,262		19,450		10,303		2,302		1,568		693		7,628		48,206
Current period gross charge-offs		609		324		1,007		64		26		33		—		2,063

Total Loans
Risk Grades 1 - 4	$	39,712	$	126,584	$	662,175	$	282,202	$	240,750	$	312,556	$	186,036	$	1,850,015
Risk Grades 5 - 6		1,842		39,516		116,397		22,820		23,186		38,067		19,882		261,710
Risk Grade 7		2,486		2,175		9,070		25,406		5,962		13,842		4,396		63,337
Risk Grade 8		—		—		—		3,668		727		1		50		4,446
Total	$	44,040	$	168,275	$	787,642	$	334,096	$	270,625	$	364,466	$	210,364	$	2,179,508
Total current period gross charge-offs	$	682	$	799	$	18,323	$	2,501	$	156	$	315	$	449	$	23,225

The following table presents the amortized cost of loans held for investment by internal loan risk grade by year of origination as of December 31, 2023. There were no loans classified as loss (risk grade 9) as of the same date.


	Term Loans Recorded Investment Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
Commercial and industrial
Risk Grades 1 - 4	$	15,830	$	114,291	$	32,273	$	25,429	$	8,217	$	14,200	$	138,267	$	348,507
Risk Grades 5 - 6		26,563		40,399		12,759		6,305		819		1,537		19,722		108,104
Risk Grade 7		—		877		3,623		829		543		134		9,191		15,197
Risk Grade 8		—		34,203		2,554		—		—		379		—		37,136
Total		42,393		189,770		51,209		32,563		9,579		16,250		167,180		508,944

Real estate – construction, commercial
Risk Grades 1 - 4		8,533		85,687		33,344		14,690		6,358		5,589		4,367		158,568
Risk Grades 5 - 6		4,213		11,072		760		293		—		738		3,827		20,903
Risk Grade 7		119		46		40		—		—		376		—		581
Total		12,865		96,805		34,144		14,983		6,358		6,703		8,194		180,052

Real estate – construction, residential
Risk Grades 1 - 4		31,611		22,734		3,867		59		741		67		10,656		69,735
Risk Grades 5 - 6		1,486		2,672		—		167		200		—		—		4,525
Risk Grade 7		367		1,205		—		—		—		—		—		1,572
Total		33,464		26,611		3,867		226		941		67		10,656		75,832

Real estate – commercial
Risk Grades 1 - 4		14,671		280,479		121,257		144,498		42,226		123,774		20,332		747,237
Risk Grades 5 - 6		2,841		25,075		9,038		19,597		12,921		27,778		4,214		101,464
Risk Grade 7		323		—		8,202		4,938		111		8,265		—		21,839
Total		17,835		305,554		138,497		169,033		55,258		159,817		24,546		870,540

Real estate – residential
Risk Grades 1 - 4		51,042		218,375		121,872		69,165		27,877		132,986		55,327		676,644
Risk Grades 5 - 6		12,014		9,339		677		1,944		2,122		7,281		3,255		36,632
Risk Grade 7		—		2,240		2,446		1,812		943		9,307		85		16,833
Risk Grade 8		—		—		—		—		—		1		—		1
Total		63,056		229,954		124,995		72,921		30,942		149,575		58,667		730,110

Real estate – farmland
Risk Grades 1 - 4		—		729		1,397		—		1,520		1,562		115		5,323
Risk Grades 5 - 6		147		—		—		—		—		—		—		147
Total		147		729		1,397		—		1,520		1,562		115		5,470

Consumer
Risk Grades 1 - 4		26,535		14,215		3,598		2,724		1,137		466		8,766		57,441
Risk Grades 5 - 6		61		42		12		12		8		433		495		1,063
Risk Grade 7		14		259		115		131		44		102		—		665
Total		26,610		14,516		3,725		2,867		1,189		1,001		9,261		59,169

Total Loans
Risk Grades 1 - 4	$	148,222	$	736,510	$	317,608	$	256,565	$	88,076	$	278,644	$	237,830	$	2,063,455
Risk Grades 5 - 6		47,325		88,599		23,246		28,318		16,070		37,767		31,513		272,838
Risk Grade 7		823		4,627		14,426		7,710		1,641		18,184		9,276		56,687
Risk Grade 8		—		34,203		2,554		—		—		380		—		37,137
Total	$	196,370	$	863,939	$	357,834	$	292,593	$	105,787	$	334,975	$	278,619	$	2,430,117

The following table presents an analysis of the change in the ACL by loan segment for the periods stated.


	As of and for the three months ended						As of and for the nine months ended
(Dollars in thousands)	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Allowance for credit losses, beginning of period	$	28,036		$	38,567		$	35,893		$	30,740
Impact of ASC 326 adoption		—			—			—			7,418
Charge-offs
Commercial and industrial	$	(6,001	)	$	(1,832	)	$	(19,940	)	$	(9,927	)
Real estate – construction, commercial		—			—			—			(28	)
Real estate – construction, residential		—			—			(39	)		—
Real estate – commercial		(1,109	)		—			(1,109	)		—
Real estate – residential		(30	)		—			(74	)		(1,255	)
Consumer		(773	)		(749	)		(2,063	)		(1,699	)
Total charge-offs		(7,913	)		(2,581	)		(23,225	)		(12,909	)
Recoveries
Commercial and industrial	$	11,095		$	1,596		$	14,455		$	2,327
Real estate – construction, commercial		—			5			—			15
Real estate – construction, residential		—			132			—			132
Real estate – commercial		—			—			—			263
Real estate – residential		60			126			76			145
Consumer		175			186			654			397
Total recoveries		11,330			2,045			15,185			3,279
Net recoveries (charge-offs)		3,417			(536	)		(8,040	)		(9,630	)
Total (recovery of) provision for credit losses - loans		(6,000	)		11,600			(2,400	)		21,103
Allowance for credit losses, end of period	$	25,453		$	49,631		$	25,453		$	49,631

Of the commercial and industrial loan net charge-off amount in the nine months ended September 30, 2024, $9.4 million was charged-off when the previously noted specialty finance loan was reclassified from loans held for investment to loans held for sale in the second quarter of 2024. Of this charge-off, $8.4 million was recovered in the third quarter of 2024 upon the completion of the note sale, which is reflected in the recovery of provision for credit losses - loans, for the three and nine months ended September 30, 2024.

There were no material changes to the assumptions, loss factors (both quantitative and qualitative), or reasonable and supportable forecasts used in the estimation of the ACL and the provision for (recovery of) credit losses for loans held for investment as of and for the three and nine months ended September 30, 2024.

Excluded from the ACL as of September 30, 2024 and December 31, 2023 was $11.1 million and $13.2 million of accrued interest attributable to loans held for investment, respectively, which is included in accrued interest receivable on the consolidated balance sheets.

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


(Dollars in thousands)	September 30, 2024		December 31, 2023
Commercial and industrial	$	45,058	$	67,555
Real estate – construction, commercial		1,839		6,309
Real estate – construction, residential		—		2,303
Real estate – commercial		19,448		13,401
Real estate – residential		7,796		7,337
Total collateral-dependent loans	$	74,141	$	96,905

Acquired Loans

As of September 30, 2024 and December 31, 2023, the amortized cost of purchased credit deteriorated ("PCD") loans totaled $48.5 million and $51.0 million, respectively, with estimated ACL of $463 thousand and $529 thousand, respectively. The remaining non-credit discount on PCD loans was $3.0 million and $3.8 million as of September 30, 2024 and December 31, 2023, respectively.

Troubled Loan Modifications

The Company closely monitors the performance of borrowers experiencing financial difficulty and grants certain loan modifications it would otherwise not consider. The Company refers to such loan modifications as troubled loan modifications ("TLMs").

The following tables present the amortized cost of TLMs, categorized by loan type and type of concession granted, for the periods stated.


	For the three months ended September 30, 2024					For the nine months ended September 30, 2024
(Dollars in thousands)	Recorded Investment		% of Recorded Investment to Gross Loans by Category			Recorded Investment		% of Recorded Investment to Gross Loans by Category
Term extension and forbearance
Commercial and industrial	$	335		0.09	%	$	335		0.09	%
Real estate – residential		72		0.01	%		72		0.01	%
Real estate – commercial		1,743		0.20	%		1,781		0.20	%
Total term extension and forbearance	$	2,150				$	2,188

Payment deferral 6-9 months
Commercial and industrial	$	644		0.17	%	$	1,024		0.27	%
Real estate – residential		504		0.07	%		504		0.07	%
Real estate – commercial		74		0.01	%		74		0.01	%
Consumer loans		—		—			11		0.02	%
Total payment deferral	$	1,222				$	1,613

Total	$	3,372				$	3,801


	For the three months ended September 30, 2023					For the nine months ended September 30, 2023
(Dollars in thousands)	Recorded Investment		% of Recorded Investment to Gross Loans by Category			Recorded Investment			% of Recorded Investment to Gross Loans by Category
Term extension and forbearance
Commercial and industrial	$	5,806		1.09	%	$	32,750	(1)		6.14	%
Real estate – commercial		2,999		0.34	%		6,208			0.71	%
Total term extension and forbearance	$	8,805				$	38,958

Interest-only for 6 months
Commercial and industrial	$	297		0.06	%	$	2,982			0.34	%
Real estate – commercial		—		—			244			0.03	%
Total interest-only	$	297				$	3,226

Payment deferral 3-9 months
Commercial and industrial	$	—		—		$	5,806			0.66	%
Real estate – commercial		—		—			2,999			0.34	%
Total payment deferral	$	—				$	8,805

Total	$	9,102				$	50,989

(1) A $32.8 million specialty finance loan was modified via a forbearance agreement in the second quarter of 2023 under which the borrower defaulted in the same period. The Company received cash payments of $4.5 million in the first nine months of 2023 for interest, which were applied to principal as the loan was on nonaccrual status.

The following tables present an aging analysis of the amortized cost of TLMs as of the dates stated.


	September 30, 2024
(Dollars in thousands)	Current Loans		30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total
Commercial and industrial	$	335	$	—	$	—	$	3,238	$	3,573
Real estate – construction, residential		155		—		—		—		155
Real estate – residential		196		—		—		504		700
Real estate - commercial		1,781		—		—		3,074		4,854
Consumer loans		—		—		—		11		11
Total modified loans	$	2,467	$	—	$	—	$	6,826	$	9,293


	December 31, 2023
(Dollars in thousands)	Current Loans		30-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total
Commercial and industrial	$	1,626	$	—	$	—	$	35,486	$	37,112
Real estate – mortgage, commercial		—		—		—		6,087		6,087
Real estate – mortgage, residential		129		—		—		577		706
Real estate – construction, residential		155		—		—		—		155
Total modified loans	$	1,910	$	—	$	—	$	42,150	$	44,060

As of September 30, 2024 and December 31, 2023, there were no unfunded commitments to borrowers of loans modified and designated as TLMs.

The following table presents the amortized cost of TLMs that were modified in the preceding twelve months and had a payment default during the periods stated.


	For the three months ended September 30, 2024					For the nine months ended September 30, 2024
(Dollars in thousands)	Amortized Cost		% of Amortized Cost to Gross Loans by Category			Amortized Cost		% of Amortized Cost to Gross Loans by Category
Term extension and forbearance
Commercial and industrial	$	—		—		$	350		0.09	%
Real estate – construction, residential		—		—			155		0.36	%
Real estate – commercial		—		—			299		0.03	%
Total term extension and forbearance	$	—				$	804

Payment deferral 6-9 months
Commercial and industrial	$	225		0.06	%	$	569		0.15	%
Real estate – commercial		74		0.01	%		74		0.01	%
Total payment deferral	$	299				$	643

Total	$	299				$	1,447

Other than the $32.8 million specialty finance loan that defaulted in the second quarter of 2023 noted above, there were no TLMs that defaulted in 2023.

As of September 30, 2024, no residential mortgage loans were in the process of foreclosure.

Note 4 – Borrowings

FHLB Borrowings

The Bank has a line of credit from the FHLB secured by pledged qualifying commercial and residential mortgage loans and securities. At September 30, 2024 and December 31, 2023, the line totaled $680.1 million and $455.6 million, respectively, based on pledged collateral. The FHLB will lend up to 30% of the Bank’s total assets as of the prior quarter end, subject to certain eligibility requirements, including adequate collateral. The Bank had borrowings from the FHLB totaling $190.0 million and $210.0 million at September 30, 2024 and December 31, 2023, respectively. The FHLB borrowings required the Bank to hold $11.3 million and $12.3 million of FHLB stock at September 30, 2024 and December 31, 2023, respectively, which is included in restricted equity investments on the consolidated balance sheets.

At September 30, 2024 and December 31, 2023, the Bank also had letters of credit outstanding with the FHLB in the amount of $81.2 million and $110.1 million, respectively, of which $80.0 million and $110.0 million were for the purpose of collateral for public deposits with the Treasury Board of the Commonwealth of Virginia as of the same dates. Outstanding letters of credit reduce the available balance of the borrowing facility with the FHLB. Available balances on the FHLB credit facility were $408.9 million and $135.5 million as of September 30, 2024 and December 31, 2023, respectively.

The following tables present information regarding FHLB advances outstanding as of the dates stated.


	September 30, 2024
(Dollars in thousands)	Balance		Origination Date	Stated Interest Rate			Maturity Date
Fixed rate credit (1)	$	40,000	7/29/2024	4.75% - 4.89%			7/29/2025 - 11/18/2025
Fixed rate credit		50,000	3/15/2023		4.07	%	3/15/2027
Fixed rate credit		50,000	5/2/2023		3.87	%	5/3/2027
Fixed rate credit		50,000	5/4/2023		3.52	%	5/4/2028
Total FHLB borrowings	$	190,000

(1) Consists of four $10 million advances.


	December 31, 2023
(Dollars in thousands)	Balance		Origination Date	Stated Interest Rate			Maturity Date
Daily rate credit	$	60,000	5/8/2023		5.57	%	5/8/2024
Fixed rate credit		50,000	3/15/2023		4.07	%	3/15/2027
Fixed rate credit		50,000	5/2/2023		3.87	%	5/3/2027
Fixed rate credit		50,000	5/4/2023		3.52	%	5/4/2028
Total FHLB borrowings	$	210,000

FRB Borrowings

The Company may obtain advances from the FRB through the FRB Discount Window. The Company had secured capacity through the FRB Discount Window of $69.6 million and $161.0 million as of September 30, 2024 and December 31, 2023, respectively, of which the Company had no outstanding advances as of both dates. The $65.0 million advance obtained through the BTFP was repaid at its maturity in the second quarter of 2024.

Other Borrowings

The Company had an unsecured line of credit with a correspondent bank of $10.0 million as of both September 30, 2024 and December 31, 2023. This line bears interest at the prevailing rates for such loans and is cancelable any time by the correspondent bank. As of both September 30, 2024 and December 31, 2023, this line of credit was undrawn.

The Company had $39.8 million and $39.9 million of subordinated notes, net, outstanding as of September 30, 2024 and December 31, 2023, respectively. The Company's subordinated notes are comprised of an issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”) and an issuance in May 2020 maturing June 1, 2030 (the “2030 Note”). As of September 30, 2024, the net carrying amount of the 2029 Notes was $25.0 million, inclusive of a $503 thousand purchase accounting adjustment (premium). For both the three months ended September 30, 2024 and 2023, the effective interest rate on the 2029 Notes was 5.3%, inclusive of the amortization of the purchase accounting

adjustment (premium). For the nine months ended September 30, 2024 and 2023, the effective interest rate on the 2029 Notes was 5.2% and 5.1%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). As of September 30, 2024, the net carrying amount of the 2030 Note, including capitalized, unamortized debt issuance costs, was $14.8 million. For the three and nine months ended September 30, 2024 and 2023, the effective interest rate on the 2030 Note was 6.08% and 6.10%, respectively.

Note 5 – Leases

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 such extensions are included in the calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

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


(Dollars in thousands)	September 30, 2024			December 31, 2023
Lease liabilities	$	8,537		$	9,619
Right-of-use lease asset	$	7,764		$	8,738
Weighted average remaining lease term (years)		6.97			7.14
Weighted average discount rate		3.42	%		3.25	%


	For the three months ended September 30,				For the nine months ended September 30,
(Dollars in thousands)	2024		2023		2024		2023
Operating lease cost	$	420	$	672	$	1,333	$	1,913
Cash paid for amounts included in the measurement of lease liabilities		411		628		1,278		1,773

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


(Dollars in thousands)	September 30, 2024
Three months ending December 31, 2024	$	392
Twelve months ending December 31, 2025		1,703
Twelve months ending December 31, 2026		1,497
Twelve months ending December 31, 2027		1,312
Twelve months ending December 31, 2028		1,122
Thereafter		3,673
Total undiscounted cash flows		9,699
Discount		(1,162	)
Lease liabilities	$	8,537

Note 6 – Fair Value

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

The three levels of input that may be used to measure fair value 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 tables present the balances of financial assets measured at fair value on a recurring basis as of the dates stated.


	September 30, 2024
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Securities available for sale
Mortgage backed securities	$	165,436	$	—	$	165,436	$	—
U.S. Treasury and agencies		71,453		—		71,453		—
State and municipals		44,529		—		44,529		—
Corporate bonds		33,366		—		32,616		750
Total securities available for sale	$	314,784	$	—	$	314,034	$	750
Other assets
Mortgage servicing rights assets	$	19,502	$	—	$	—	$	19,502
Rabbi trust assets		593		593		—		—
Mortgage derivative asset		212		—		212		—
Interest rate swap asset		69		—		69		—
Other liabilities
Interest rate swap liability	$	71	$	—	$	71	$	—


	December 31, 2023
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Securities available for sale
Mortgage backed securities	$	176,970	$	—	$	176,970	$	—
U.S. Treasury and agencies		68,871		—		68,871		—
State and municipals		43,325		—		43,325		—
Corporate bonds		31,915		—		31,165		750
Total securities available for sale	$	321,081	$	—	$	320,331	$	750
Other assets
Mortgage servicing rights assets	$	27,114	$	—	$	—	$	27,114
Rabbi trust assets		531		531		—		—
Mortgage derivative asset		335		—		335		—
Interest rate swap asset		71		—		71		—
Other liabilities
Mortgage derivative liability	$	140	$	—	$	140	$	—
Interest rate swap liability		71		—		71		—

As of September 30, 2024, two corporate bonds totaling $750 thousand were reported at their respective amortized cost basis and as Level 3 assets in the fair value hierarchy, as there were no observable market prices for similar investments.

The following table presents the change in mortgage servicing rights ("MSR") assets as of the dates and for the periods stated.


(Dollars in thousands)	MSR Assets
Balance as of December 31, 2023	$	27,114
Additions		10
Fair value adjustments		(176	)
Sale proceeds		(6,568	)
Transfer to other assets		(731	)
Loss on sale		(147	)
Balance as of September 30, 2024	$	19,502

The following tables summarize assets that were measured at fair value on a nonrecurring basis as of the dates stated. As previously reported, in the second quarter of 2024, the Company recorded an $8.5 million impairment charge against the Company's investment in a fintech company, which is reported in other equity investments on the consolidated balance sheets.


	September 30, 2024
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Other equity investments	$	4,525	$	—	$	1,519	$	3,006
Collateral-dependent loans		21,337		—		—		21,337
Loans held for sale		22,082		—		22,082		—
Other real estate owned ("OREO") (1)		100		—		—		100

(1) Included in other assets on the consolidated balance sheets.


	December 31, 2023
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Other equity investments	$	12,905	$	—	$	12,905	$	—
Collateral-dependent loans		56,068		—		—		56,068
Loans held for sale		46,337		—		46,337		—

The following tables present quantitative information about Level 3 fair value measurements of assets measured on a nonrecurring basis as of the dates stated.


(Dollars in thousands)	Balance as of September 30, 2024		Unobservable Input	Range
Other equity investments
Probability weighted expected return technique	$	3,006	Discount Rate		20	%
Collateral-dependent loans
Discounted appraised value technique		21,337	Selling Costs	7% - 15%
OREO (1)
Discounted sales price technique		100	Selling Costs		7	%

(1) Included in other assets on the consolidated balance sheets.


(Dollars in thousands)	Balance as of December 31, 2023		Unobservable Input	Range
Collateral-dependent loans
Discounted appraised value technique	$	56,068	Selling Costs	7% - 15%

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


	September 30, 2024
					Fair Value Measurements
(Dollars in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and due from banks	$	281,698	$	281,698	$	281,698	$	—	$	—
Restricted cash		4,160		4,160		4,160		—		—
Federal funds sold		2,910		2,910		2,910		—		—
Securities available for sale		314,784		314,784		—		314,034		750
Restricted equity investments		20,891		20,891		—		20,891		—
Other equity investments		4,525		4,525		—		1,519		3,006
Other investments		21,344		21,344		—		—		21,344
Loans held for sale		22,082		22,082		—		22,082		—
Loans held for investment, net		2,154,960		2,055,614		—		—		2,055,614
Accrued interest receivable		13,171		13,171		—		13,171		—
Bank owned life insurance		14,953		14,953		—		14,953		—
MSR assets		19,502		19,502		—		—		19,502
Financial Liabilities
Noninterest-bearing demand	$	459,793	$	459,793	$	459,793	$	—	$	—
Interest-bearing demand and money market		748,416		748,416		—		748,416		—
Savings		103,820		103,820		—		103,820		—
Time		1,034,463		1,040,044		—		—		1,040,044
FHLB borrowings		190,000		189,506		—		189,506		—
Subordinated notes, net		39,806		38,687		—		—		38,687


	December 31, 2023
					Fair Value Measurements
(Dollars in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and due from banks	$	110,491	$	110,491	$	110,491	$	—	$	—
Restricted cash		10,660		10,660		10,660		—		—
Federal funds sold		4,451		4,451		4,451		—		—
Securities available for sale		321,081		321,081		—		320,331		750
Restricted equity investments		18,621		18,621		—		18,621		—
Other equity investments		12,905		12,905		—		12,905		—
Other investments		29,467		29,467		—		—		29,467
Loans held for sale		46,337		46,337		—		46,337		—
Loans held for investment, net		2,395,054		2,316,113		—		—		2,316,113
Accrued interest receivable		14,967		14,967		—		14,967		—
Bank owned life insurance		48,453		48,453		—		48,453		—
MSR assets		27,114		27,114		—		—		27,114
Financial Liabilities
Noninterest-bearing demand	$	506,248	$	506,248	$	506,248	$	—	$	—
Interest-bearing demand and money market		1,049,536		1,049,536		—		1,049,536		—
Savings		117,923		117,923		—		117,923		—
Time		892,325		892,439		—		—		892,439
FHLB borrowings		210,000		211,799		—		211,799		—
FRB borrowings		65,000		65,000		—		65,000		—
Subordinated notes, net		39,855		37,803		—		—		37,803

Note 7 – Minimum Regulatory Capital Requirements

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

Banks 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. Federal and state banking regulations place certain restrictions on dividends paid by the Company. The total amount of dividends that may be paid at any date is generally limited to retained earnings of the Company.

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 undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

In addition to the foregoing capital requirements, the Bank is subject to minimum capital ratios set forth in the Consent Order that are higher than those required for capital adequacy purposes generally. The Bank is required to maintain a leverage ratio of 10.00% and a total capital ratio of 13.00%. As of September 30, 2024 and June 30, 2024, the Bank met these minimum capital ratios. Until the Consent Order has been lifted, the Bank is deemed to be less than well capitalized, thus adequately capitalized.

The Company adopted ASC 326, Financial Instruments - Credit Losses (referred herein as “current expected credit losses” or “CECL”) effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings (“CECL Transitional Amount”) over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital is 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report.

The following tables present the capital ratios to which banks are subject to be adequately and well capitalized, as well as the capital and capital ratios for the Bank as of the dates stated. Adequately capitalized ratios include the conservation buffer, if applicable. The following table also includes the capital adequacy ratios to which bank holding companies are subject. On January 1, 2024, the Company became subject to these ratios. Also presented are the minimum capital ratios set forth in the Consent Order for the Bank and the related capital amounts for both the leverage ratio and the total capital ratio. The CECL Transitional Amount was $8.1 million, of which $4.1 million and $2.0 million reduced the regulatory capital amounts and capital ratios as of September 30, 2024 and December 31, 2023, respectively.


	September 30, 2024
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized					Minimum Capital Ratios
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk based capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	367,736		16.64	%	$	232,080		10.50	%	$	221,028		10.00	%	$	287,337		13.00	%
Blue Ridge Bankshares, Inc.	$	427,441		19.26	%	$	177,546		8.00	%	n/a		n/a			n/a		n/a
Tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	346,545		15.68	%	$	187,875		8.50	%	$	176,823		8.00	%	n/a		n/a
Blue Ridge Bankshares, Inc.	$	345,839		15.58	%	$	133,186		6.00	%	n/a		n/a			n/a		n/a
Common equity tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	346,545		15.68	%	$	154,720		7.00	%	$	143,669		6.50	%	n/a		n/a
Blue Ridge Bankshares, Inc.	$	345,839		15.58	%	$	99,889		4.50	%	n/a		n/a			n/a		n/a
Tier 1 leverage (to average assets)
Blue Ridge Bank, N.A.	$	346,545		11.56	%	$	119,912		4.00	%	$	149,890		5.00	%	$	299,779		10.00	%
Blue Ridge Bankshares, Inc.	$	345,839		11.46	%	$	120,712		4.00	%	n/a		n/a			n/a		n/a


	December 31, 2023
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized					Minimum Capital Ratios
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk based capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	270,293		10.25	%	$	276,842		10.50	%	$	263,659		10.00	%	$	342,757		13.00	%
Tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	239,775		9.09	%	$	224,111		8.50	%	$	210,928		8.00	%	n/a		n/a
Common equity tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	239,775		9.09	%	$	184,562		7.00	%	$	171,379		6.50	%	n/a		n/a
Tier 1 leverage (to average assets)
Blue Ridge Bank, N.A.	$	239,775		7.49	%	$	128,001		4.00	%	$	160,001		5.00	%	$	320,003		10.00	%

Note 8 – Commitments and Contingencies

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

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

Subject to its normal credit standards and risk monitoring procedures, the Company makes contractual commitments to extend credit. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. As of September 30, 2024 and December 31, 2023, the Company had outstanding loan commitments of $320.3 million and $480.8 million, respectively. Of these amounts, $106.3 million and $113.5 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.

Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of September 30, 2024 and December 31, 2023, commitments under outstanding financial stand-by letters of credit totaled $11.9 million and $12.6 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.

For the three and nine months ended September 30, 2024, the Company recorded a recovery of credit losses for unfunded commitments of $200 thousand and $1.7 million, respectively, which was primarily attributable to lower balances of loan commitments. As of September 30, 2024, the reserve for unfunded commitments was $1.4 million compared to $3.1 million as of December 31, 2023.

As of and for the three month period ended September 30, 2024, the Company recorded a recourse reserve of $520 thousand for estimated putbacks and transition costs as part of the sale of a portion of its MSR portfolio in the same period. This amount is included in the loss on sale of MSRs and other liabilities on the consolidated statement of operations and consolidated balance sheet, respectively. The putbacks relate to industry-standard items, including prepayments or early delinquencies of the underlying mortgages, as well as any deficiencies in the underlying documentation, all of which are subject to term limits per the sales agreement.

The Company invests in various partnerships, limited liability companies, and SBIC funds. Pursuant to these investments, the Company commits to an investment amount to be fulfilled in future periods. At September 30, 2024, the Company had future commitments outstanding totaling $7.6 million related to these investments.

Note 9 – Earnings Per Share

Basic earnings per share ("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, performance-based restricted stock awards (“PSAs”), preferred stock, and warrants. The Company calculates diluted EPS for its warrants and stock options using the treasury stock method, for its preferred stock using the if-converted method, and for its PSAs using the two-class method.

The following table shows the calculation of basic and diluted EPS and the weighted average number of shares outstanding used in computing EPS and the effect on the weighted average number of shares outstanding of dilutive potential common stock for the periods stated. For the 2023 periods presented and for the nine months ended September 30, 2024, all outstanding stock options, PSAs, preferred stock, and warrants were considered anti-dilutive and excluded from the computation of diluted EPS, due to the net loss in the respective periods. For the three months ended September 30, 2024, stock options of 29,741 shares and PSAs of 171,752 shares of the Company's common stock were not included in the computation of diluted earnings per share because their effects would have been anti-dilutive.


	For the three months ended					For the nine months ended
(Dollars in thousands, except per share data)	September 30, 2024		September 30, 2023			September 30, 2024			September 30, 2023
Net income (loss)	$	946	$	(41,371	)	$	(13,382	)	$	(46,014	)

Weighted average common shares outstanding, basic		73,366,140		19,014,883			39,132,557			18,907,921
Effect of dilutive securities (1)		13,720,237		—			—			—
Weighted average common shares outstanding, dilutive		87,086,377		19,014,883			39,132,557			18,907,921

Basic and diluted earnings (loss) per share	$	0.01	$	(2.18	)	$	(0.34	)	$	(2.43	)

(1) Components of dilutive securities
PSAs		1,805		—			—			—
Preferred stock		10,928,000		—			—			—
Warrants		2,790,432		—			—			—
Total dilutive weighted average securities		13,720,237		—			—			—

Note 10 – Business Segments

The Company has three reportable business segments: commercial banking, mortgage banking, and holding company activities. The commercial banking business segment makes loans to and generates deposits from individuals and businesses, while offering a wide array of general banking activities to its customers. It is distinct from the Company's mortgage banking division, which concentrates on individual and wholesale mortgage lending and sales

activities. Activities at the holding company (or parent level) are primarily associated with investments, borrowings, and certain noninterest expenses.

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


	As of and for the three months ended September 30, 2024
(Dollars in thousands)	Commercial Banking			Mortgage Banking			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	38,803		$	422		$	—		$	—		$	39,225
Interest expense		19,385			174			565			—			20,124
Net interest income		19,418			248			(565	)		—			19,101
Recovery of credit losses		(6,200	)		—			—			—			(6,200	)
Net interest income after recovery of credit losses		25,618			248			(565	)		—			25,301
NONINTEREST INCOME
Fair value adjustments of other equity investments		—			—			160			—			160
Residential mortgage banking income		—			2,939			—			—			2,939
Mortgage servicing rights		—			(2,915	)		—			—			(2,915	)
Loss on sale of mortgage servicing rights		—			(1,011	)		—			—			(1,011	)
Other income		3,660			—			2			(96	)		3,566
Total noninterest income		3,660			(987	)		162			(96	)		2,739
NONINTEREST EXPENSE
Salaries and employee benefits		12,554			1,365			19			—			13,938
Regulatory remediation		357			—			—			—			357
Other expenses		10,737			1,140			419			(96	)		12,200
Total noninterest expense		23,648			2,505			438			(96	)		26,495
Income (loss) before income tax expense		5,630			(3,244	)		(841	)		—			1,545
Income tax expense (benefit)		1,523			(751	)		(173	)		—			599
Net income (loss)	$	4,107		$	(2,493	)	$	(668	)	$	—		$	946
Total assets as of September 30, 2024	$	2,900,927		$	33,519		$	377,806		$	(367,561	)	$	2,944,691


	As of and for the three months ended September 30, 2023
(Dollars in thousands)	Commercial Banking			Mortgage Banking			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	41,699		$	777		$	9		$	—		$	42,485
Interest expense		18,766			408			1,119			—			20,293
Net interest income		22,933			369			(1,110	)		—			22,192
Provision for credit losses		11,050			—			—			—			11,050
Net interest income after provision for credit losses		11,883			369			(1,110	)		—			11,142
NONINTEREST INCOME
Fair value adjustments of other equity investments		—			—			55			—			55
Residential mortgage banking income		—			2,917			—			—			2,917
Mortgage servicing rights		—			894			—			—			894
Other income		3,523			—			125			(99	)		3,549
Total noninterest income		3,523			3,811			180			(99	)		7,415
NONINTEREST EXPENSE
Salaries and employee benefits		10,136			4,504			—			—			14,640
Regulatory remediation		3,782			—			—			—			3,782
Goodwill impairment		26,826			—			—			—			26,826
ESOP litigation		—			—			6,000			—			6,000
Other expenses		9,047			2,834			1,591			(99	)		13,373
Total noninterest expense		49,791			7,338			7,591			(99	)		64,621
Loss before income tax expense		(34,385	)		(3,158	)		(8,521	)		—			(46,064	)
Income tax benefit		(2,446	)		(446	)		(1,801	)		—			(4,693	)
Net loss	$	(31,939	)	$	(2,712	)	$	(6,720	)	$	—		$	(41,371	)
Total assets as of September 30, 2023	$	3,183,121		$	46,959		$	230,999		$	(198,366	)	$	3,262,713


	As of and for the nine months ended September 30, 2024
(Dollars in thousands)	Commercial Banking			Mortgage Banking			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	121,181		$	1,206		$	—		$	—		$	122,387
Interest expense		60,635			539			1,677			—			62,851
Net interest income		60,546			667			(1,677	)		—			59,536
Recovery of credit losses		(4,100	)		—			—			—			(4,100	)
Net interest income after recovery of credit losses		64,646			667			(1,677	)		—			63,636
NONINTEREST INCOME
Fair value adjustments of other equity investments		—			—			(8,384	)		—			(8,384	)
Residential mortgage banking income		—			8,693			—			—			8,693
Mortgage servicing rights		—			(166	)		—			—			(166	)
Loss on sale of mortgage servicing rights		—			(1,011	)		—			—			(1,011	)
Other income		12,009			—			19			(288	)		11,740
Total noninterest income		12,009			7,516			(8,365	)		(288	)		10,872
NONINTEREST EXPENSE
Salaries and employee benefits		40,307			4,548			63			—			44,918
Regulatory remediation		4,398			—			—			—			4,398
Other expenses		34,870			3,535			881			(288	)		38,998
Total noninterest expense		79,575			8,083			944			(288	)		88,314
(Loss) income before income tax expense		(2,920	)		100			(10,986	)		—			(13,806	)
Income tax expense (benefit)		1,960			(90	)		(2,294	)		—			(424	)
Net (loss) income	$	(4,880	)	$	190		$	(8,692	)	$	—		$	(13,382	)
Total assets as of September 30, 2024	$	2,900,927		$	33,519		$	377,806		$	(367,561	)	$	2,944,691


	As of and for the nine months ended September 30, 2023
(Dollars in thousands)	Commercial Banking			Mortgage Banking			Parent Only			Eliminations			Blue Ridge Bankshares, Inc. Consolidated
NET INTEREST INCOME
Interest income	$	124,629		$	1,192		$	14		$	—		$	125,835
Interest expense		52,313			578			1,666			—			54,557
Net interest income		72,316			614			(1,652	)		—			71,278
Provision for credit losses		19,553			—			—			—			19,553
Net interest income after provision for credit losses		52,763			614			(1,652	)		—			51,725
NONINTEREST INCOME
Fair value adjustments of other equity investments		—			—			(277	)		—			(277	)
Residential mortgage banking income		—			9,261			—			—			9,261
Mortgage servicing rights		—			148			—			—			148
Other income		15,380			—			120			(198	)		15,302
Total noninterest income		15,380			9,409			(157	)		(198	)		24,434
NONINTEREST EXPENSE
Salaries and employee benefits		37,658			6,789			—			—			44,447
Regulatory remediation		7,304			—			—			—			7,304
Goodwill impairment		26,826			—			—			—			26,826
ESOP litigation		—			—			6,000			—			6,000
Other expenses		35,000			4,226			3,915			(198	)		42,943
Total noninterest expense		106,788			11,015			9,915			(198	)		127,520
Loss before income tax expense		(38,645	)		(992	)		(11,724	)		—			(51,361	)
Income tax benefit		(2,473	)		(412	)		(2,462	)		—			(5,347	)
Net loss	$	(36,172	)	$	(580	)	$	(9,262	)	$	—		$	(46,014	)
Total assets as of September 30, 2023	$	3,183,121		$	46,959		$	230,999		$	(198,366	)	$	3,262,713

Note 11 – Changes to Accumulated Other Comprehensive (Loss) Gain, net

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


	For the three months ended September 30, 2024
(Dollars in thousands)	Net Unrealized (Losses) Gains on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Accumulated Other Comprehensive (Loss) Gain, net
Balance as of July 1, 2024	$	(44,908	)	$	425	$	(44,483	)
Change in net unrealized holding gains on securities available for sale, net of deferred tax expense of $2,803		10,000			—		10,000
Balance as of September 30, 2024	$	(34,908	)	$	425	$	(34,483	)


	For the nine months ended September 30, 2024
(Dollars in thousands)	Net Unrealized (Losses) Gains on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Accumulated Other Comprehensive (Loss) Gain, net
Balance as of January 1, 2024	$	(45,481	)	$	425	$	(45,056	)
Change in net unrealized holding gains on securities available for sale, net of deferred tax expense of $3,293		10,521			—		10,521
Reclassification for previously unrealized net losses on securities available for sale, net of income tax benefit of $15		52			—		52
Balance as of September 30, 2024	$	(34,908	)	$	425	$	(34,483	)


	For the three months ended September 30, 2023
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of July 1, 2023	$	(46,682	)	$	425	$	(1	)	$	(46,258	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $2,309		(8,022	)		—		—			(8,022	)
Reclassification for previously unrealized net losses recognized in net income, net of income tax benefit of $145		504			—		—			504
Balance as of September 30, 2023	$	(54,200	)	$	425	$	(1	)	$	(53,776	)


	For the nine months ended September 30, 2023
(Dollars in thousands)	Net Unrealized Losses on Available for Sale Securities			Transfer of Securities Held to Maturity to Available For Sale		Pension and Post-retirement Benefit Plans			Accumulated Other Comprehensive Loss, net
Balance as of January 1, 2023	$	(45,525	)	$	425	$	(1	)	$	(45,101	)
Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $2,642		(9,179	)		—		—			(9,179	)
Reclassification for previously unrealized net losses recognized in net income, net of income tax benefit of $145		504			—		—			504
Balance as of September 30, 2023	$	(54,200	)	$	425	$	(1	)	$	(53,776	)

Note 12 – Bank Owned Life Insurance and MSRs

As of September 30, 2024 and December 31, 2023, the Company's investment in bank owned life insurance totaled $14.9 million and $48.5 million, respectively. In the second quarter of 2024, the Company surrendered the majority of its bank owned life insurance policies and received $34.3 million of the proceeds by the end of the third quarter of 2024. The Company expects to receive the remaining proceeds of approximately $14.0 million in the fourth quarter of 2024. There was no gain or loss as a result of this transaction, as bank owned life insurance is carried at cash surrender value. Other noninterest expense for the nine months ended September 30, 2024, included approximately $940 thousand of excise taxes related to the surrender of these policies. Additionally, $2.0 million of income tax expense was recognized in the second quarter of 2024 representing the tax effect of the life-to-date income earned on the policies, as the earnings were previously permanently deferred but became subject to tax upon surrender.

As of September 30, 2024 and December 31, 2023, the Company's portfolio of MSRs totaled $19.5 million and $27.1 million, respectively. During the third quarter of 2024, the Company sold certain MSRs, representing loans with an aggregate unpaid principal balance of approximately $438.6 million. The sale resulted in $6.6 million in sales proceeds and a loss on sale of approximately $1.0 million. This loss includes transaction-related costs and an estimated recourse reserve for potential putbacks and/or transition costs to the Company.

Note 13 – Legal Matters

In December of 2023, a purported shareholder of the Company commenced a putative class action in the U.S. District Court for the Eastern District of New York (No. 1:23-cv-08944) (Hunter v. Blue Ridge Bankshares, Inc., et al). The complaint alleges violations of federal securities laws against the Company and certain of its current and former officers based on alleged material misstatements and omissions in the Company’s SEC filings. The complaint seeks certification of a class action, unspecified damages, and attorneys fees. The putative class has filed an amended complaint, and the Company has filed a letter seeking permission to file a motion to dismiss. The parties are scheduled to engage in non-binding mediation on December 5, 2024. The Company nevertheless continues to believe the claims are without merit and no loss has been accrued for this lawsuit as of September 30, 2024.

On August 12, 2019, a former employee of Virginia Community Bankshares, Inc. ("VCB") and participant in its Employee Stock Ownership Plan (the “VCB ESOP”) filed a class action complaint against VCB, its subsidiary, Virginia Community Bank, and certain individuals associated with the VCB ESOP in the U.S. District Court for the Western District of Virginia, Charlottesville Division. The complaint alleged, 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 Company automatically assumed liability of VCB in connection with this litigation as a result of its 2019 acquisition of VCB.

During the fourth quarter of 2023, the Company entered into a settlement agreement with the plaintiff to resolve the VCB ESOP litigation (the "Settlement Agreement"). As provided in the Settlement Agreement, the plaintiff agreed to release the Company, the Bank, and related parties from all claims related to acts or omissions associated with the VCB ESOP and the Company agreed to pay $6.0 million for such release. In June of 2024, the court granted final approval of the Settlement Agreement. This resulted in the ongoing lawsuit being dismissed with prejudice, and all similar claims that were or could have been brought relating to the VCB ESOP released and barred. The Company entered into the Settlement Agreement to eliminate the burden and expense of further litigation and to resolve the claims that were or could have been asserted related to the VCB ESOP. The Company accrued $6.0 million in the third quarter of 2023 in anticipation of this settlement. On July 15, 2024, the Company made the final payment related to the VCB ESOP litigation pursuant to the Settlement Agreement.

Note 14 – Subsequent Events

On October 31, 2024, the Company sold the majority of its remaining MSR portfolio consisting of $1.51 billion unpaid principal balances of underlying mortgages at an estimated loss of $1.6 million. This loss includes transaction-related costs and an estimated recourse reserve for potential putbacks and/or estimated transition costs to the Company.

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 the Company's 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 the Company's Annual Report on Form 10-K for the year ended December 31, 2023, as amended (the “2023 Form 10-K”). Results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations for the balance of 2024, 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

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

The following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements:

•

the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations;

•

the effects of, and changes in, the macroeconomic environment and financial market conditions, including monetary and fiscal policies, interest rates and inflation;

•

the impact of, and the ability to comply with, the terms of the Consent Order, as defined below, with the Office of the Comptroller of the Currency ("OCC"), including the heightened capital requirements and other restrictions therein, and other regulatory directives;

•

the imposition of additional regulatory actions or restrictions for noncompliance with the Consent Order or otherwise;

•

the Company’s involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company;

•

reputational risk and potential adverse reactions of the Company’s customers, suppliers, employees, or other business partners;

•

the Company’s ability to manage its fintech relationships, including implementing enhanced controls and procedures, complying with the OCC directives and applicable laws and regulations, maintaining deposit levels and the quality of loans associated with these relationships, and, in certain cases, winding down certain of these partnerships;

•

the quality and composition of the Company’s loan and investment portfolios, including changes in the level of the Company’s nonperforming assets and charge-offs;

•

the Company’s management of risks inherent in its loan portfolio, the credit quality of its borrowers, and the risk of a prolonged downturn in the real estate market, which could impair the value of the Company’s collateral and its ability to sell collateral upon any foreclosure;

•

the ability to maintain adequate liquidity by growing and retaining deposits and secondary funding sources, especially if the Company's or its industry's reputation become damaged;

•

the ability to maintain capital levels adequate to support the Company's business and to comply with the Consent Order directives;

•

the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

•

changes in consumer spending and savings habits;

•

the willingness of users to substitute competitors’ products and services for the Company’s products and services;

•

the impact of unanticipated outflows of deposits;

•

technological and social media changes;

•

potential exposure to fraud, negligence, computer theft, and cyber-crime;

•

adverse developments in the financial industry generally, such as recent bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior;

•

changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products;

•

the impact of changes in financial services policies, laws, and regulations, including laws, regulations and policies concerning taxes, banking, securities, real estate and insurance, and the application thereof by regulatory bodies;

•

the effect of changes in accounting standards, policies, and practices as may be adopted from time to time;

•

estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Company’s assets and liabilities;

•

geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;

•

the occurrence or continuation of widespread health emergencies or pandemics, significant natural disasters, severe weather conditions, floods, and other catastrophic events; and

•

other risks and factors identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections and elsewhere in the 2023 Form 10-K and in this Form 10-Q and in filings the Company makes from time to time with the Securities and Exchange Commission (“SEC”).

The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in the 2023 Form 10-K and this Form 10-Q, including those discussed in the section entitled "Risk Factors" in those filings. If one or more of the factors affecting forward-looking information and statements proves incorrect, then actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, the Company cautions not to place undue reliance on its forward-looking information and statements. The Company will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how these risks and uncertainties will affect it.

Regulatory Matters

On January 24, 2024, the Bank consented to the issuance of a consent order (the “Consent Order”) with the OCC, the Bank's primary regulator. The Consent Order generally incorporates the provisions of the formal written agreement (the "Written Agreement") entered into between the Bank and the OCC on August 29, 2022, as well as adding new provisions. The Written Agreement principally concerned the Bank’s fintech operations and required the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering,

and information technology risks stemming from its fintech partnerships. The Consent Order adds time frames by which certain of the directives are required, requires the Bank to submit a strategic plan and a capital plan, and places further restrictions on the Company’s fintech operations. The Consent Order also requires the Bank to maintain a leverage ratio of 10.0% and a total capital ratio of 13.0%, referred to as minimum capital ratios. As of September 30, 2024, the Company believes it has timely submitted the required documents under the Consent Order. Complete copies of the Written Agreement and the Consent Order are included as Exhibits 10.14 and 10.15, respectively, to the 2023 Form 10-K.

In connection with the requirements of the Consent Order, during 2024, the Company developed and submitted a three-year strategic plan. The strategic plan sets forth the Company’s priorities, which include; 1) remediation and compliance with the Consent Order; 2) redefining its fintech business, including exiting fintech banking-as-a-service (“BaaS”) depository operations; 3) refocusing on core community banking; 4) enhancing its enterprise risk management and credit risk administration infrastructures; 5) achieving operational efficiency, and 6) building development and training infrastructure for its employees. The Company also submitted its annual capital plan for the Company and the Bank. The capital plan supports the strategic plan and forecasts capital needs based on the Company’s proposed strategy.

Private Placements

On April 3, 2024 and June 13, 2024, the Company closed private placements in which it issued and sold shares of its common and preferred stock for gross proceeds of $150.0 million and $11.6 million, respectively (collectively, the "Private Placements"). At a special meeting of shareholders held June 20, 2024, the Company’s shareholders approved various proposals, thus approving the conversion of the preferred shares issued in the Private Placements into shares of the Company’s common stock. On June 28, 2024, all outstanding shares of the Company’s Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series B (the "Series B Common Stock") converted into shares of the Company’s common stock. The outstanding shares of the Company’s Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”), remained outstanding at September 30, 2024. On July 11, 2024, the holder of Series C Preferred Stock received the required regulatory non-objection to exchange the Series C Preferred Stock for common stock as stipulated in the Private Placements. The Company expects the exchange of the Series C Preferred Stock for shares of the Company's common stock will be completed during the fourth quarter of 2024. Capital proceeds received, net of issuance costs, from the Private Placements totaled $152.1 million.

The Company intends to use the capital from the Private Placements to propel its near-term strategic initiatives, which include repositioning business lines, supporting organic growth, and further enhancing the Bank’s capital levels, including compliance with the minimum capital ratios set forth in the Bank’s Consent Order. As of September 30, 2024 and June 30, 2024, the Bank’s capital ratios exceeded these minimum capital ratios.

Restatement

On October 31, 2023, the Company and the Audit Committee of its board of directors, after consultation with the Company’s independent registered public accounting firm and the OCC, determined that certain specialty finance loans that, as previously disclosed, were placed on nonaccrual, reserved for, or charged off in the interim periods ended March 31, 2023 and June 30, 2023 should have been reported as nonaccrual, reserved for, or charged off in earlier periods. On November 14, 2023, the Company filed amendments to its annual report on Form 10-K for the year ended December 31, 2022 and its quarterly reports on Form 10-Q for the periods ended March 31, 2023 and June 30, 2023 to restate the consolidated financial statements included therein. Following the restatements, the Company has partially recovered—and, in some cases, fully recovered—amounts from certain specialty finance loans previously charged off. See Note 3 of this Form 10-Q for additional information.

General

There were no changes to the Critical Accounting Policies disclosed in Item 7 of the 2023 Form 10-K.

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

Comparison of Financial Condition as of September 30, 2024 and December 31, 2023

Total assets were $2.94 billion as of September 30, 2024, a decrease of $172.9 million from $3.12 billion as of December 31, 2023. Most of this decrease was attributable to a decline in loans held for investment, which decreased $250.5 million to $2.18 billion as of September 30, 2024 from $2.43 billion as of December 31, 2023. The Company previously announced it would exit its fintech BaaS operations. The Company has purposely and selectively reduced assets to meet the liquidity needs of exiting its fintech BaaS operations, which is expected to be completed by the fourth quarter of 2024. The allowance for credit losses ("ACL") declined $10.4 million to $25.5 million as of September 30, 2024 from $35.9 million as of December 31, 2023, primarily attributable to a $9.4 million charge-off as a result of the previously noted specialty finance loan's reclassification to loans held for sale in the second quarter of 2024 and lower reserve needs due to loan portfolio balance reductions, partially offset by higher specific reserves for certain purchased loans.

Total deposits as of September 30, 2024 were $2.35 billion, a net decrease of $219.5 million from December 31, 2023. The decrease in the first nine months of 2024 was primarily due to a decrease of $264.4 million of interest-bearing fintech-related deposits. Total deposits related to fintech relationships decreased by $278.4 million to $187.5 million as of September 30, 2024 from $465.9 million as of December 31, 2023, and represented 8.0% and 18.2% of total deposits as of the same respective dates. Fintech BaaS deposits decreased by $307.3 million to $63.7 million as of September 30, 2024 from $371.0 million as of December 31, 2023. During the first nine months of 2024, deposits, excluding fintech-related and brokered deposits, increased $143.5 million.

Total stockholders’ equity increased by $150.4 million to $336.3 million as of September 30, 2024 compared to $186.0 million at December 31, 2023, primarily due to the closing of the Private Placements in the second quarter of 2024.

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

For the three months ended September 30, 2024, the Company reported net income of $946 thousand, or $0.01 per diluted common share, compared to a net loss of $41.4 million, or ($2.18) per diluted common share, for the three months ended September 30, 2023. In the second quarter of 2024, the Company executed an agreement to sell a nonperforming specialty finance loan to a third party, reclassifying the loan from loans held for investment to loans held for sale in the same period at its estimated fair value. Upon reclassification, the Company recorded a charge-off of substantially all of the reserve held on the loan, which was provisioned for in prior years. In the third quarter, the sale was completed upon the receipt of all contractual amounts due. Income before income taxes of $1.5 million for the

quarter included a $6.2 million recovery of credit losses resulting primarily from an $8.4 million recovery upon the completion of the specialty finance loan sale.

For the nine months ended September 30, 2024, the Company reported a net loss of $13.4 million, or ($0.35) per diluted common share, compared to a net loss of $46.0 million, or ($2.43) per diluted common share, for the nine months ended September 30, 2023. The net loss for the nine months ended September 30, 2024 included a second quarter $6.7 million non-cash, after-tax negative fair value adjustment recorded for an equity investment in a fintech company, partially offset by a $6.6 million after-tax recovery of credit losses on a specialty finance loan that was sold in the third quarter upon the receipt of all contractual amounts due. The third quarter 2023 loss included a non-cash, after-tax goodwill impairment charge of $26.8 million, which was the entirety of the goodwill balance, and a $4.7 million after-tax settlement reserve for the now-settled Employee Stock Ownership Plan (“ESOP”) litigation assumed in the 2019 acquisition of Virginia Community Bankshares, Inc (“VCB”).

The net loss for the three and nine months ended September 30, 2024 also included $282 thousand and $3.5 million, respectively, of after tax-costs incurred for professional services related to regulatory remediation efforts in connection with the Consent Order, compared to $2.9 million and $5.7 million, respectively, of after tax-costs incurred for the same periods in 2023 in connection with the Written Agreement.

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

The following table presents the average balance sheets for the three months ended September 30, 2024 and 2023. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated.


	Average Balances, Income and Expense, Yields and Rates
	For the three months ended September 30,
	2024								2023								Total Increase/			Increase/(Decrease) Due to
(Dollars in thousands)	Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest		Yield/ Rate (1)			(Decrease)			Volume (2)			Rate (2)
Average Assets
Taxable securities	$	321,920		$	2,282		2.84	%	$	355,373		$	2,493		2.81	%	$	(211	)	$	(235	)	$	24
Tax-exempt securities (3)		12,560			80		2.55	%		15,383			93		2.42	%		(13	)		(17	)		4
Total securities		334,480			2,362		2.82	%		370,756			2,586		2.79	%		(224	)		(252	)		28
Interest-earning deposits in other banks		149,990			2,053		5.48	%		126,660			1,312		4.14	%		741			242			499
Federal funds sold		5,868			81		5.52	%		4,270			57		5.34	%		24			21			3
Loans held for sale		65,219			2,242		13.75	%		67,021			2,219		13.24	%		23			(60	)		83
Loans held for investment (4,5,6)		2,240,559			32,505		5.80	%		2,470,088			36,332		5.88	%		(3,827	)		(3,376	)		(451	)
Total average interest-earning assets		2,796,116			39,243		5.61	%		3,038,795			42,506		5.60	%		(3,263	)		(3,425	)		162
Less: allowance for credit losses		(32,001	)							(41,034	)
Total noninterest-earning assets		203,659								251,468
Total average assets	$	2,967,774							$	3,249,229
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market, and savings	$	844,747		$	5,398		2.56	%	$	1,349,336		$	10,038		2.98	%	$	(4,640	)	$	(3,754	)	$	(886	)
Time (7)		1,003,751			11,586		4.62	%		643,449			6,077		3.78	%		5,509			3,403			2,106
Total interest-bearing deposits		1,848,498			16,984		3.68	%		1,992,785			16,115		3.23	%		869			(351	)		1,220
FHLB borrowings		233,090			2,574		4.42	%		256,668			2,836		4.42	%		(262	)		(261	)		(1	)
FRB borrowings		—			—		—			65,000			777		4.78	%		(777	)		(777	)		—
Subordinated notes and other borrowings (8)		39,814			566		5.69	%		39,906			566		5.67	%		—			(1	)		1
Total average interest-bearing liabilities		2,121,402			20,124		3.79	%		2,354,359			20,294		3.45	%		(170	)		(1,390	)		1,220
Noninterest-bearing demand deposits		482,809								624,202
Other noninterest-bearing liabilities		36,683								32,138
Stockholders' equity		326,880								238,530
Total average liabilities and stockholders’ equity	$	2,967,774							$	3,249,229
Net interest income and margin (9)				$	19,119		2.74	%				$	22,212		2.92	%	$	(3,093	)	$	(2,035	)	$	(1,058	)
Cost of funds (10)							3.09	%							2.73	%
Net interest spread (11)							1.82	%							2.15	%

(1) Annualized.
(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.
(3) Computed on a fully taxable equivalent basis assuming a 21.89% and 22.65% income tax rate for the three months ended September 30, 2024 and 2023, respectively.
(4) Includes deferred loan fees/costs.
(5) Non-accrual loans have been included in the computations of average loan balances.
(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $311 thousand and $624 thousand for the three months ended September 30, 2024 and 2023, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $70 thousand and $160 thousand for the three months ended September 30, 2024 and 2023, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $25 thousand for both the three months ended September 30, 2024 and 2023, 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.

Average interest-earning assets were $2.80 billion for the three months ended September 30, 2024 compared to $3.04 billion for the same period of 2023, a $242.7 million decrease. This decrease was primarily attributable to lower average balances of loans held for investment and securities, which decreased $229.5 million and $36.3 million, respectively, partially offset by higher average balances of interest-earning deposits in other banks. Total interest income (on a taxable equivalent basis) decreased $3.3 million for the three-month period ended September 30, 2024 from the same period of 2023, primarily due to lower average balances of interest-earning assets. Lower loan yields in the 2024 period were primarily attributable to lower relative average balances of variable rate commercial and industrial loans, reversal of interest income on loans moved to nonaccrual, reversal of interest income for other loan adjustments, and lower accretion of purchase accounting adjustments (discounts) on acquired loans. Interest income for the three months ended September 30, 2024 and 2023 included accretion of discounts on acquired loans of $311 thousand and $624 thousand, respectively.

Average interest-bearing liabilities were $2.12 billion for the three months ended September 30, 2024 compared to $2.35 billion for the same period of 2023, a $232.9 million decrease. Interest expense decreased by $170 thousand to

$20.1 million for the three months ended September 30, 2024 compared to the same period of 2023. Cost of interest-bearing liabilities increased to 3.79% for the third quarter of 2024 from 3.45% for the third quarter of 2023, while total cost of funds was 3.09% and 2.73% for the same respective periods. Higher cost of funds in the 2024 period was primarily due to higher rates on time deposits, particularly brokered time deposits the Company began issuing late in the first quarter of 2023 to increase liquidity in response to financial industry events. Interest expense in the third quarters of 2024 and 2023 included the amortization of fair value adjustments (premium) on assumed time deposits of $70 thousand and $160 thousand, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) for the three months ended September 30, 2024 was $19.1 million compared to $22.2 million for the same period in 2023, a decrease of $3.1 million. Net interest margin was 2.74% and 2.92% for the third quarters of 2024 and 2023, respectively. Accretion and amortization of purchase accounting adjustments had a 6 and 11 basis point positive effect on net interest margin for the same respective periods.

The following table presents the average balance sheets for the nine months ended September 30, 2024 and 2023. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated.


	Average Balances, Income and Expense, Yields and Rates
	For the nine months ended September 30,
	2024								2023								Total Increase/			Increase/(Decrease) Due to
(Dollars in thousands)	Average Balance			Interest		Yield/ Rate (1)			Average Balance			Interest		Yield/ Rate (1)			(Decrease)			Volume (2)			Rate (2)
Average Assets
Taxable securities	$	328,024		$	7,119		2.89	%	$	365,802		$	7,663		2.79	%	$	(544	)	$	(791	)	$	247
Tax-exempt securities (3)		12,584			236		2.50	%		18,921			331		2.33	%		(95	)		(111	)		16
Total securities		340,608			7,355		2.88	%		384,723			7,994		2.77	%		(639	)		(902	)		263
Interest-earning deposits in other banks		138,255			5,501		5.31	%		118,576			3,705		4.17	%		1,796			615			1,181
Federal funds sold		7,200			294		5.44	%		5,549			201		4.83	%		93			60			33
Loans held for sale		62,425			6,374		13.61	%		54,481			5,631		13.78	%		743			821			(78	)
Loans held for investment (4,5,6)		2,334,126			102,915		5.88	%		2,489,708			108,378		5.80	%		(5,463	)		(6,773	)		1,310
Total average interest-earning assets		2,882,614			122,439		5.66	%		3,053,037			125,909		5.50	%		(3,470	)		(6,179	)		2,709
Less: allowance for credit losses		(34,149	)							(37,992	)
Total noninterest-earning assets		223,613								242,886
Total average assets	$	3,072,078							$	3,257,931
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market, and savings	$	971,362		$	19,235		2.64	%	$	1,328,450		$	27,157		2.73	%	$	(7,922	)	$	(7,300	)	$	(622	)
Time (7)		985,077			33,505		4.54	%		606,592			14,913		3.28	%		18,592			9,305			9,287
Total interest-bearing deposits		1,956,439			52,740		3.59	%		1,935,042			42,070		2.90	%		10,670			2,005			8,665
FHLB borrowings		226,117			7,353		4.34	%		282,150			9,604		4.54	%		(2,251	)		(1,907	)		(344	)
FRB borrowings		30,839			1,080		4.67	%		33,811			1,216		4.80	%		(136	)		(107	)		(29	)
Subordinated notes and other borrowings (8)		39,840			1,677		5.61	%		39,908			1,666		5.57	%		11			(3	)		14
Total average interest-bearing liabilities		2,253,235			62,850		3.72	%		2,290,911			54,556		3.18	%		8,294			(12	)		8,306
Noninterest-bearing demand deposits		499,289								690,117
Other noninterest-bearing liabilities		43,095								38,373
Stockholders' equity		276,459								238,530
Total average liabilities and stockholders’ equity	$	3,072,078							$	3,257,931
Net interest income and margin (9)				$	59,589		2.76	%				$	71,353		3.12	%	$	(11,764	)	$	(6,167	)	$	(5,597	)
Cost of funds (10)							3.04	%							2.44	%
Net interest spread (11)							1.94	%							2.32	%

(1) Annualized.
(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.
(3) Computed on a fully taxable equivalent basis assuming a 21.89% and 22.65% income tax rate for the nine months ended September 30, 2024 and 2023, respectively.
(4) Includes deferred loan fees/costs.
(5) Non-accrual loans have been included in the computations of average loan balances.
(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $915 thousand and $1.8 million for the nine months ended September 30, 2024 and 2023, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $248 thousand and $666 thousand for the nine months ended September 30, 2024 and 2023, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $75 thousand for both the nine months ended September 30, 2024 and 2023.
(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.

Average interest-earning assets were $2.88 billion for the nine months ended September 30, 2024 compared to $3.05 billion for the same period of 2023, a $168.4 million decrease. This decrease was primarily attributable to declines in average balances of loans held for investment and securities, which decreased $155.6 million and $44.1 million, respectively, partially offset by higher average balances of interest-earning deposits in other banks and loans held for sale. Total interest income (on a taxable equivalent basis) decreased $3.5 million for the nine month period ended September 30, 2024 from the same period of 2023. This decrease was primarily due to lower average balances on loans held for investment, in addition to lower accretion of purchase accounting adjustments (discounts) on acquired loans. Interest income on loans held for investment for the nine month period ended September 30, 2024 included $671 thousand of interest received as a result of the payoff of a nonaccrual loan, which had a 4 and 3 basis point positive effect on the yield on loans held for investment and net interest margin, respectively. Interest income for the nine months ended September 30, 2024 and 2023 included accretion of discounts on acquired loans of $915 thousand and $1.8 million, respectively.

Average interest-bearing liabilities were $2.25 billion for the nine months ended September 30, 2024 compared to $2.29 billion for the same period of 2023, a $37.7 million decrease. Interest expense increased by $8.3 million to $62.9 million for the nine months ended September 30, 2024 compared to the same period of 2023. Cost of interest-bearing liabilities increased to 3.72% for the nine months ended September 30, 2024 from 3.18% for the nine months ended September 30, 2023, while cost of funds were 3.04% and 2.44% for the same respective periods. Higher cost of funds in the 2024 period was primarily due to higher market interest rates and a shift in the mix of average interest-bearing liabilities, partially to higher cost brokered funding sources. Interest expense in the first nine months of 2024 and 2023 included the amortization of fair value adjustments (premium) on assumed time deposits of $248 thousand and $666 thousand, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) was $59.6 million for the nine months ended September 30, 2024 compared to $71.4 million for the same period in 2023. Net interest margin was 2.76% and 3.12% for the first nine months of 2024 and 2023, respectively. Accretion and amortization of purchase accounting adjustments had a 6 basis point and 11 basis point positive effect on net interest margin for the same respective periods.

Provision for Credit Losses. The Company recorded a recovery of credit losses of $6.2 million in the third quarter of 2024 compared to a provision for credit losses of $11.1 million in the third quarter of 2023. The recovery of credit losses for the first nine months of 2024 was $4.1 million compared to a provision for credit losses of $19.6 million for the same period in 2023. The recovery of credit losses in the 2024 periods was primarily attributable to an $8.4 million recovery from the sale of the previously mentioned specialty finance loan and lower reserve needs due to loan portfolio balance reductions, partially offset by higher specific reserves for certain purchased loans. Provision for credit losses in the 2023 periods was primarily attributable to specific reserves on the previously reported group of specialty finance loans, partially offset by a recovery of credit losses on lower balances of unfunded loan commitments.

Noninterest Income. The following table presents 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, 2024			September 30, 2023			Change $			Change %
Fair value adjustments of other equity investments	$	160		$	55		$	105			190.9	%
Residential mortgage banking income		2,939			2,917			22			0.8	%
Mortgage servicing rights		(2,915	)		894			(3,809	)		(426.1	%)
Loss on sale of mortgage servicing rights		(1,011	)		—			(1,011	)		100.0	%
Gain on sale of guaranteed government loans		10			6			4			66.7	%
Wealth and trust management		730			462			268			58.0	%
Service charges on deposit accounts		417			365			52			14.2	%
Increase in cash surrender value of bank owned life insurance		127			311			(184	)		(59.2	%)
Bank and purchase card, net		690			357			333			93.3	%
Loss on sale of securities available for sale		—			(649	)		649			(100.0	%)
Other		1,592			2,697			(1,105	)		(41.0	%)
Total noninterest income	$	2,739		$	7,415		$	(4,676	)		(63.1	%)


	For the nine months ended
(Dollars in thousands)	September 30, 2024			September 30, 2023			Change $			Change %
Fair value adjustments of other equity investments	$	(8,384	)	$	(277	)	$	(8,107	)		2,926.7	%
Residential mortgage banking income		8,693			9,261			(568	)		(6.1	%)
Mortgage servicing rights		(166	)		148			(314	)		(212.2	%)
Loss on sale of mortgage servicing rights		(1,011	)		—			(1,011	)		100.0	%
Gain on sale of guaranteed government loans		131			4,799			(4,668	)		(97.3	%)
Wealth and trust management		1,873			1,356			517			38.1	%
Service charges on deposit accounts		1,238			1,057			181			17.1	%
Increase in cash surrender value of bank owned life insurance		797			885			(88	)		(9.9	%)
Bank and purchase card, net		1,444			1,257			187			14.9	%
Loss on sale of securities available for sale		(67	)		(649	)		582			(89.7	%)
Other		6,324			6,597			(273	)		(4.1	%)
Total noninterest income	$	10,872		$	24,434		$	(13,562	)		(55.5	%)

The decline in MSR income was primarily due to negative fair value adjustments in the 2024 periods, arising from lower future interest rate expectations, and a $1.0 million third quarter of 2024 loss on the sale of a portion of the Company's portfolio of MSRs. The decline in other noninterest income in the 2024 periods compared to the same periods of 2023 was primarily attributable to a decline in income from fintech BaaS deposit partnerships. This decline was also attributable to a decline in income from SBIC investments as the Company sold the majority of these small business investment companies ("SBIC") in the second quarter of 2024.

Lower gain on sale of guaranteed government loans in the nine months ended September 30, 2024 was attributable to the exit of the majority of the Company's guaranteed government lending team, which aligns with the Company’s enhanced focus on lending opportunities within its core geographic market. Noninterest income in the nine months ended September 30, 2024 also included an $8.5 million non-cash, negative fair value adjustment of an equity investment the Company holds in a fintech company.

For the three and nine months ended September 30, 2024, other noninterest income included $831 thousand and $2.5 million, respectively, from fintech lending partnerships, compared to $821 thousand and $2.3 million for the same periods in 2023. The Company is currently evaluating these partnerships and, as a result, anticipates a decline in noninterest income associated with fintech lending partnerships beginning in 2025.

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


	For the three months ended
(Dollars in thousands)	September 30, 2024		September 30, 2023		Change $			Change %
Salaries and employee benefits	$	13,938	$	14,640	$	(702	)		(4.8	%)
Occupancy and equipment		1,394		1,475		(81	)		(5.5	%)
Technology and communications		2,767		2,891		(124	)		(4.3	%)
Legal and regulatory filings		614		912		(298	)		(32.7	%)
Advertising and marketing		222		350		(128	)		(36.6	%)
Audit fees		498		791		(293	)		(37.0	%)
FDIC insurance		1,130		1,322		(192	)		(14.5	%)
Intangible amortization		265		308		(43	)		(14.0	%)
Other contractual services		1,374		1,492		(118	)		(7.9	%)
Other taxes and assessments		759		802		(43	)		(5.4	%)
Regulatory remediation		357		3,782		(3,425	)		(90.6	%)
Goodwill impairment		—		26,826		(26,826	)		(100.0	%)
ESOP litigation		—		6,000		(6,000	)		(100.0	%)
Other		3,177		3,030		147			4.9	%
Total noninterest expense	$	26,495	$	64,621	$	(38,126	)		(59.0	%)


	For the nine months ended
(Dollars in thousands)	September 30, 2024		September 30, 2023		Change $			Change %
Salaries and employee benefits	$	44,918	$	44,447	$	471			1.1	%
Occupancy and equipment		4,221		4,957		(736	)		(14.8	%)
Technology and communications		7,378		7,670		(292	)		(3.8	%)
Legal and regulatory filings		1,424		4,899		(3,475	)		(70.9	%)
Advertising and marketing		701		973		(272	)		(28.0	%)
Audit fees		1,948		1,440		508			35.3	%
FDIC insurance		4,324		3,297		1,027			31.1	%
Intangible amortization		828		998		(170	)		(17.0	%)
Other contractual services		4,851		5,649		(798	)		(14.1	%)
Other taxes and assessments		2,290		2,407		(117	)		(4.9	%)
Regulatory remediation		4,398		7,304		(2,906	)		(39.8	%)
Goodwill impairment		—		26,826		(26,826	)		(100.0	%)
ESOP litigation		—		6,000		(6,000	)		(100.0	%)
Other		11,033		10,653		380			3.6	%
Total noninterest expense	$	88,314	$	127,520	$	(39,206	)		(30.7	%)

Excluding the goodwill impairment charge, the ESOP litigation settlement charge, and regulatory remediation expenses, noninterest expense decreased $1.9 million and $3.5 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023. Salaries and employee benefits expense in third quarter of 2024 reflected lower head count, primarily in the Bank's GGL and compliance areas, and lower health insurance expense compared to the same respective period of 2023. Lower legal and regulatory filings expenses in the 2024 periods were primarily the result of reduced legal costs associated with the VCB ESOP litigation. Lower other contractual services and regulatory remediation expenses in the 2024 period were due to the reduction in the use of third-party resources in the Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) area, as the Bank completes certain requirements under the Consent Order and exits its fintech BaaS operations. Higher audit fees in the first nine months of 2024 were primarily due to outsourced internal audits and assessments related to fintech operations. Higher Federal Deposit Insurance Corporation ("FDIC") insurance expense in the first nine months of 2024 was primarily due to changes in the Bank's insurance assessment rate. Other noninterest expense in the 2024 periods included approximately $940 thousand of excise taxes related to the surrender of bank owned life insurance policies in the period.

Income Tax Expense. Income tax expense for the three months ended September 30, 2024 was $599 thousand compared to an income tax benefit of $4.7 million for the same period of 2023, resulting in effective income tax rates of 38.8% and 10.2%, respectively. Income tax benefit for the nine months ended September 30, 2024 was $424 thousand compared to income tax benefit of $5.3 million for the same period in 2023, resulting in effective income tax rates of 3.1% and 10.4% for the same respective periods. The higher effective income tax rate for the three months ended September 30, 2024 was primarily attributable to the vesting of restricted stock awards, where the fair value of the underlying stock at the time of vesting was lower than the fair value previously recognized for financial reporting purposes. The lower effective income tax rate for the nine months ended September 30, 2024 was primarily attributable to $2.0 million of tax expense recognized in the second quarter of 2024 upon surrendering bank owned life insurance policies. Taxes on such earnings were previously permanently deferred but became subject to tax upon the surrender of the policies. The effective tax rates in the 2023 periods were primarily attributable to the goodwill impairment charge of $26.8 million, which had no tax effect, thus resulting in a lower income tax benefit.

Analysis of Financial Condition

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

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


	September 30, 2024						December 31, 2023
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial and industrial	$	378,922			17.4	%	$	508,944			21.0	%
Real estate – construction, commercial		116,276			5.3	%		180,052			7.4	%
Real estate – construction, residential		43,322			2.0	%		75,832			3.1	%
Real estate – commercial		873,721			40.1	%		870,540			35.8	%
Real estate – residential		713,442			32.7	%		730,110			30.1	%
Real estate – farmland		5,619			0.3	%		5,470			0.2	%
Consumer		48,206			2.2	%		59,169			2.4	%
Gross loans held for investment		2,179,508			100.0	%		2,430,117			100.0	%
Deferred costs, net of loan fees		905						830
Gross loans held for investment, net of deferred costs		2,180,413						2,430,947
Less: allowance for credit losses		(25,453	)					(35,983	)
Net loans	$	2,154,960					$	2,394,964
Loans held for sale (not included in totals above)	$	22,082					$	46,337

The following table presents the Company’s portfolio of commercial real estate loans by property type as of the dates stated.


	September 30, 2024					December 31, 2023
(Dollars in thousands)	Amount		Percent			Amount		Percent
Commercial real estate – owner occupied	$	201,149		23.0	%	$	210,233		24.1	%
Commercial real estate – non-owner occupied
Multifamily		188,193		21.5	%		162,888		18.7	%
Hospitality		126,067		14.4	%		136,679		15.7	%
Retail		108,767		12.4	%		118,638		13.6	%
Office		76,603		8.8	%		71,717		8.2	%
Mixed use		49,880		5.7	%		54,590		6.3	%
Warehouse and industrial		41,035		4.7	%		40,643		4.7	%
Other		82,027		9.4	%		75,152		8.6	%
Total real estate – commercial	$	873,721		100.0	%	$	870,540		100.0	%

The current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment. Potential negative impacts include higher debt service burdens for floating rate loans and fixed rate loans that mature and require renewal or refinancing. Collateral values overall may be impaired by higher capitalization rates and also pose risks for refinancing maturing loans. In addition, certain CRE collateral types have experienced declining occupancy, demand, and rental rates, which could potentially lead to material declines in property level economics and borrowers' ability to service their debt.

In response to the heightened risk, earlier in 2024 the Bank’s credit policy and risk committee conducted a targeted exam of certain of the Bank’s loan types, including office loans, to confirm its internal risk ratings. In addition, the Bank’s credit administration department led by its Chief Credit Officer performs a periodic analysis of emerging trends by geography where the Bank has the largest concentrations by CRE property type. The analysis includes all real estate property types and geographic markets represented in the loan portfolio. This analysis is provided to the board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the board of directors. As of September 30, 2024, all limits are in compliance.

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of September 30, 2024.


					Variable rate								Fixed rate
(Dollars in thousands)	Total Maturities		One Year or Less		Total		1-5 years		5-15 years		More than 15 years		Total		1-5 years		5-15 years		More than 15 years
Commercial and industrial	$	378,922	$	92,609	$	152,712	$	125,804	$	25,308	$	1,600	$	133,601	$	49,784	$	65,195	$	18,622
Real estate – construction, commercial		116,276		21,785		74,876		15,787		15,305		43,784		19,615		18,530		1,027		58
Real estate – construction, residential		43,322		29,989		3,007		2,635		60		312		10,326		75		—		10,251
Real estate – commercial		873,721		82,472		465,070		86,979		198,228		179,863		326,179		196,487		120,149		9,543
Real estate – residential		713,442		17,272		409,299		12,007		78,770		318,522		286,871		34,321		33,540		219,010
Real estate – farmland		5,619		698		2,086		164		239		1,683		2,835		1,808		310		717
Consumer loans		48,206		2,183		6,879		6,783		96		—		39,144		28,415		10,728		1
Gross loans	$	2,179,508	$	247,008	$	1,113,929	$	250,159	$	318,006	$	545,764	$	818,571	$	329,420	$	230,949	$	258,202

Allowance for Credit Losses. In determining the adequacy of the Company’s ACL, management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company’s ACL was adequate as of September 30, 2024 and December 31, 2023. There can be no assurance, however, that adjustments to the ACL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments; adverse developments in the economy, on a national basis or in the Company’s market area; and changes in the circumstances of particular borrowers are criteria, among others, that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on their judgment of the facts at the time of their review that may differ than that of management.

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


	As of and for the three months ended						As of and for the nine months ended
(Dollars in thousands)	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Allowance for credit losses, beginning of period	$	28,036		$	38,567		$	35,893		$	30,740
Impact of ASC 326 adoption		—			—			—			7,418
Charge-offs
Commercial and industrial		(6,001	)		(1,832	)		(19,940	)		(9,927	)
Real estate – construction, commercial		—			—			—			(28	)
Real estate – construction, residential		—			—			(39	)		—
Real estate – commercial		(1,109	)		—			(1,109	)		—
Real estate – residential		(30	)		—			(74	)		(1,255	)
Consumer		(773	)		(749	)		(2,063	)		(1,699	)
Total charge-offs		(7,913	)		(2,581	)		(23,225	)		(12,909	)
Recoveries
Commercial and industrial		11,095			1,596			14,455			2,327
Real estate – construction, commercial		—			5			—			15
Real estate – construction, residential		—			132			—			132
Real estate – commercial		—			—			—			263
Real estate – residential		60			126			76			145
Consumer		175			186			654			397
Total recoveries		11,330			2,045			15,185			3,279
Net recoveries (charge-offs)		3,417			(536	)		(8,040	)		(9,630	)
(Recovery of) provision for credit losses - loans		(6,000	)		11,600			(2,400	)		21,103
Allowance for credit losses, end of period	$	25,453		$	49,631		$	25,453		$	49,631
Ratio of net recoveries (charge-offs) to average loans outstanding during period:
Commercial and industrial		4.91	%		(0.16	)%		(4.67	)%		(5.05	)%
Real estate – construction, commercial		—	%		0.01	%		—	%		(0.03	)%
Real estate – construction, residential		—	%		0.66	%		(0.25	)%		0.65	%
Real estate – commercial		(0.53	)%		—	%		(0.52	)%		0.12	%
Real estate – residential		0.02	%		0.07	%		—	%		(0.66	)%
Consumer		(4.51	)%		(3.65	)%		(10.06	)%		(8.68	)%
Total		0.61	%		(0.09	)%		(1.38	)%		(1.58	)%

In the second quarter of 2024, the Company executed an agreement to sell a nonperforming specialty finance loan to a third party, reclassifying the loan from loans held for investment to loans held for sale in the same period at its estimated fair value. Upon reclassification, the Company recorded a charge-off of substantially all of the reserve held on the loan, which was provisioned for in prior years. In the third quarter, the sale was completed upon the receipt of all contractual amounts due, and pursuant to the note sale agreement, the Company recorded an $8.4 million recovery of credit losses.

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


	September 30, 2024					December 31, 2023
(Dollars in thousands)	ACL Amount		% of Loans			ACL Amount		% of Loans
Commercial and industrial	$	5,951		17.4	%	$	13,787		21.0	%
Real estate – construction, commercial		3,143		5.3	%		4,024		7.4	%
Real estate – construction, residential		660		2.0	%		1,094		3.1	%
Real estate – commercial		9,084		40.1	%		9,929		35.8	%
Real estate – residential		6,029		32.7	%		6,286		30.1	%
Real estate – farmland		19		0.3	%		15		0.2	%
Consumer		567		2.2	%		758		2.4	%
Total	$	25,453		100.0	%	$	35,893		100.0	%

Nonperforming Assets. The following table presents a summary of nonperforming assets and various measures as of the dates stated.


(Dollars in thousands)	September 30, 2024			December 31, 2023
Nonaccrual loans held for investment	$	28,349		$	60,026
Loans past due 90 days and still accruing		3,725			3,037
Total nonperforming loans	$	32,074		$	63,063
OREO (1)		100			—
Total nonperforming assets	$	32,174		$	63,063
Loans held for sale	$	22,082		$	46,337
Loans held for investment		2,180,413			2,430,947
Total loans	$	2,202,495		$	2,477,284
Total assets	$	2,944,691		$	3,117,554
ACL	$	25,453		$	35,893
ACL to total loans held for investment		1.17	%		1.48	%
ACL to nonaccrual loans		89.78	%		59.80	%
ACL to nonperforming loans		79.36	%		56.92	%
Nonaccrual loans to total loans		1.29	%		2.42	%
Nonperforming loans to total loans		1.46	%		2.55	%
Nonperforming loans to total assets		1.09	%		2.02	%
Nonperforming assets to total assets		1.09	%		2.02	%

(1) Included in other assets on the consolidated balance sheets.

Nonperforming loans, which include nonaccrual loans and loans past due 90 days and still accruing interest, decreased $31.0 million from December 31, 2023 to $32.1 million as of September 30, 2024. This decline primarily reflects the sale of the previously noted specialty finance loan, which had a December 31, 2023 carrying value of $32.8 million.

The remaining purchase accounting adjustments (discounts) related to loans acquired by the Company were $4.2 million and $5.1 million at September 30, 2024 and December 31, 2023, respectively.

Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to provide collateral for borrowings. Securities in the investment portfolio classified as securities AFS may be sold in response to changes in market interest rates, changes in the security's prepayment risk, general liquidity needs, such as funding loans and deposits, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s AFS investment securities portfolio was $314.8 million as of September 30, 2024, a decrease of $6.3 million from $321.1 million at December 31, 2023, primarily due to the sale of several mortgage backed securities and normal principal amortization, partially offset by year-to-date unrealized gains. As a result of elevated market interest rates, the Company’s portfolio of AFS securities had an unrealized loss of approximately $44.7 million as of September 30, 2024.

As of September 30, 2024 and December 31, 2023, the majority of the investment securities portfolio consisted of securities rated as investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default. At September 30, 2024 and December 31, 2023, securities with a fair value of $273.0 million and $35.9 million, respectively, were pledged to secure the Bank’s borrowing facility with the FHLB.

The Company reviews its AFS investment securities portfolio for potential credit losses at least quarterly. AFS investment securities with unrealized losses are generally a result of pricing changes due to changes in the current interest rate environment and not as a result of permanent credit impairment. The Company does not intend to sell, nor does it believe that it will be required to sell, any of its impaired AFS securities prior to the recovery of the amortized cost. No ACL has been recognized for AFS securities as of both September 30, 2024 and December 31, 2023.

Restricted equity investments consisted of stock in the FHLB (carrying basis $11.3 million and $12.3 million at September 30, 2024 and December 31, 2023, respectively), stock in the Federal Reserve Bank of Richmond (the "FRB") (carrying value of $9.2 million and $5.9 million at September 30, 2024 and December 31, 2023, respectively), and stock in the Company’s correspondent bank (carrying value of $468 thousand at both September 30, 2024 and December 31, 2023). Restricted equity investments are carried at cost.

The Company also has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.5 million and $12.9 million as of September 30, 2024 and December 31, 2023, respectively. The Company reports such investments at fair value if observable market transactions have occurred in similar securities, resulting in a new carrying value that is evaluated for impairment no less than quarterly. These impairment analyses may include quantitative and/or qualitative information obtained either directly from the investee, a third-party broker, or a third-party valuation firm. If a potential impairment has been identified, the carrying value of the investment would be written down to its estimated fair market value through a charge to earnings. In the second quarter of 2024, the Company identified potential impairment triggers related to one of its investments, mainly due to regulatory pressures on banks partnering with fintech companies in the BaaS sector. These pressures led some fintech companies to announce cost-saving measures and at least one to seek bankruptcy protection. As a result, the Company engaged a third-party valuation firm to value the Company's investment in a fintech company. This valuation resulted in an $8.5 million impairment charge, recorded in fair value adjustments of other equity investments, to adjust the investment to its estimated fair market in the second quarter of 2024.

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


	September 30, 2024
	Within One Year					One to Five Years					Five to Ten Years					Over Ten Years
(Dollars in thousands)	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Total Amortized Cost
Securities available for sale
Mortgage backed securities	$	1,546		0.69	%	$	—		—		$	15,145		2.24	%	$	176,179		1.88	%	$	192,870
U. S. Treasury and agencies		1		—			35,205		1.14	%		38,950		2.14	%		5,272		1.97	%		79,428
State and municipal		495		4.58	%		5,632		2.51	%		34,012		2.03	%		10,156		2.53	%		50,295
Corporate bonds		—		—			8,375		7.47	%		28,008		4.27	%		500		4.00	%		36,883
Total	$	2,042				$	49,212				$	116,115				$	192,107				$	359,476

Deposits. The principal sources of funds for the Company are deposits, including transaction accounts (demand deposits and money market accounts), time deposits, and savings accounts, of customers in the Company’s primary geographic market area. Such customers provide the Bank a source of fee income and cross-marketing opportunities and are generally a lower cost source of funding for the Bank.

Fintech-related deposits are sourced from fintech partnerships and in recent history have been a significant source of deposits for the Company. Fintech BaaS deposits comprise a significant portion of the Company’s fintech-related deposits. The Company is exiting its fintech BaaS operations and expects to be fully exited by the end of the fourth quarter of 2024.

Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 to enhance liquidity in light of financial industry events that began in March 2023 and in anticipation of the exit of the Company's fintech BaaS operations. Brokered deposits represented approximately 18.3% and 20.1% of total deposits as of September 30, 2024 and December 31, 2023, respectively, and were all time deposits at September 30, 2024. The Bank has a liquidity management program, with oversight of the Bank’s asset and liability committee (the “ALCO”) that sets forth guidelines for the desired maximum level of brokered deposits, which is 20.0% of total deposits. As noted, the Company issued brokered deposits as a liquidity management tool in light of industry events and the exit of its fintech BaaS operations, and for these reasons, brokered deposit levels approximated the high-end of the guideline at September 30, 2024. In recent quarters, the Company has reduced levels of brokered deposits and expects to continue to reduce levels in future periods to a level of 10.0% or less of total deposits. As certain brokered deposits have multiple-year terms, the Company expects brokered deposits to be a funding source for several years. The ALCO monitors brokered deposit concentrations as part of its liquidity risk management program.

Total deposits decreased $219.5 million from $2.57 billion as of December 31, 2023 to $2.35 billion as of September 30, 2024, as:

•

Deposits, excluding fintech-related and brokered deposits, increased $143.5 million from approximately $1.58 billion as of December 31, 2023 to approximately $1.73 billion as of September 30, 2024;

•

Fintech-related deposits decreased $278.4 million from approximately $465.9 million as of December 31, 2023 to approximately $187.5 million as of September 30, 2024. Of the decline, fintech BaaS deposits decreased $307.3 million from December 31, 2023, and represent approximately 3% of total deposits at September 30, 2024. Partially offsetting the decline in fintech BaaS deposits were $28.9 million of increased fintech corporate deposits;

•

Brokered deposits decreased $85.0 million from approximately $515.5 million as of December 31, 2023 to approximately $430.5 million as of September 30, 2024.

As a result of the Consent Order, subsequent to the date of the order, the Bank is prohibited from soliciting, accepting, renewing, or rolling over any brokered deposits, except in compliance with certain applicable restrictions under federal law, while subject to the Consent Order. In response and pursuant to 12 USC 1831f, 12 CFR 337.6(c) and 12 CFR 303.243(a), the Bank submitted to the FDIC an application for a waiver of the prohibition on the acceptance, renewal, or rollover of brokered deposits by an adequately capitalized insured depository institution. During the third quarter, the Bank received approval from the FDIC allowing the Bank to accept, renew, and rollover brokered deposits. The approval is for a six-month period and in the amount of maturities during this period. The Bank expects to file another application for waiver of this prohibition in the fourth quarter of 2024.

Estimated uninsured deposits totaled approximately $402.0 million as of September 30, 2024, or 16.8% of total deposits, compared to $573.9 million, or 22.3% of total deposits, as of December 31, 2023. Excluding fintech BaaS deposits, estimated uninsured deposits were 16.7% and 18.2% of total deposits as of September 30, 2024 and December 31, 2023, respectively.

Approximately 19.6% of total deposits as of September 30, 2024 were composed of noninterest-bearing demand deposits compared to 19.7% as of December 31, 2023. In contrast, approximately 44.1% and 34.8% of total deposits as of September 30, 2024 and December 31, 2023, respectively, were composed of time deposits.

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


(Dollars in thousands)	September 30, 2024		December 31, 2023
Maturing in:
3 months or less	$	23,541	$	30,547
Over 3 months through 6 months		36,096		19,961
Over 6 months through 12 months		58,778		36,254
Over 12 months		31,932		9,500
Total	$	150,347	$	96,262

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


	As of and for the nine months ended September 30, 2024
(Dollars in thousands)	Period-End Balance		Highest Month-End Balance		Average Balance		Weighted Average Rate
FHLB borrowings	$	190,000	$	280,000	$	226,117		4.34	%
FRB borrowings		—		65,000		30,839		4.67	%

	As of and for the year ended December 31, 2023
(Dollars in thousands)	Period-End Balance		Highest Month-End Balance		Average Balance		Weighted Average Rate
FHLB borrowings	$	210,000	$	310,800	$	263,259		4.48	%
FRB borrowings		65,000		65,000		41,672		4.78	%

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

Total borrowings decreased $85.0 million from $275.0 million as of December 31, 2023 to $190.0 million as of September 30, 2024. The Company utilizes its FHLB line of credit, as an element of its liquidity management program, to maintain cash levels in the range of 3%-5% of total assets. In the year-to-date period, funding from the Private Placements contributed to the reduction of outstanding balances. Conversely, FHLB advances were used to meet the effects from fintech BaaS operation wind down, if and when the timing of such differed from loan payoffs/paydowns and asset liquidations.

Subordinated notes, net, totaled $39.8 million and $39.9 million as of September 30, 2024 and December 31, 2023, respectively. The effective interest rate on the subordinated notes for the three and nine months ended September 30, 2024 was 5.69% and 5.61%, respectively, compared to 5.67% and 5.57% for the same periods in 2023. The Company's subordinated notes are comprised of an issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”) and an issuance in May 2020 maturing June 1, 2030 (the “2030 Note”). The fixed rates on these subordinated notes transition to variable rates based on the Secured Overnight Funding Rate ("SOFR") roughly five years from issued date. On October 15, 2024, the rate on the 2029 Notes reset quarterly to the current three-month SOFR interest rate, which was 465.0 basis points, plus 433.5 basis points. On June 1, 2025, the rate on the 2030 Note will reset quarterly to the current three-month SOFR interest rate plus 587 basis points.

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

Deposits are the primary source of the Company’s liquidity. Cash flow from amortizing or maturing assets also provides funding to meet the liquidity needs of the Company. Deposit sources are the Bank’s core customers and through brokered deposit markets. These markets are accessed through brokers or through the IntraFi Network (“IntraFi”), of which the Bank is a member. IntraFi facilitates the Bank attaining brokered deposits via an on-line marketplace. The Bank utilizes IntraFi's reciprocal deposit services to offer its high-value customers access to FDIC insurance through IntraFi's network of banks. Partly through the use of the IntraFi reciprocal deposit program, the Company has reduced uninsured deposits to $402.0 million as of September 30, 2024 from $573.9 million as of December 31, 2023, respectively.

The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management. Pursuant to the Company’s liquidity contingency plan, liquidity needs are forecasted based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. Management then stress tests the Company’s liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established. Management also monitors the Company’s liquidity position on a day-to-day basis through daily cash monitoring and short- and long-term cash flow forecasting and believes its sources of liquidity are adequate to conduct the business of the Company.

The following table presents information on the available sources of liquidity as of the period stated.


(Dollars in thousands)	Capacity		Less: Outstanding Borrowings			Available Balance
Cash and due from banks						$	281,698
Fed funds sold							2,910
Unpledged securities available for sale							41,801
Total						$	326,409
Borrowings
FHLB	$	680,109	$	271,160	(1)	$	408,949
FRB		69,620		—			69,620
Unsecured line of credit		10,000		—			10,000
Total	$	759,729	$	271,160		$	488,569
Available liquidity as of September 30, 2024						$	814,978

(1) Outstanding borrowings is comprised of advances of $190.0 million and letters of credit totaling $81.2 million, of which $80.0 million served as collateral for public deposits with the Treasury Board of the Commonwealth of Virginia.

Managing the Company's liquidity position through the exit of the fintech BaaS operations has required significant liquidity oversight. Management has utilized proceeds from the Private Placements, loan portfolio amortization and prepayments, in-market deposit growth, and, as needed, availability of secured borrowing capacity to offset the outflow of fintech BaaS deposits. Fintech BaaS deposits have declined $307.3 million since December 31, 2023, with $63.7 million remaining as of September 30, 2024. Management believes that it has the adequate sources of liquidity to meet the remainder of the wind down and brokered deposit maturities.

Uninsured deposits at September 30, 2024 were $402.0 million or 16.8% of total deposits. In the unlikely event that uninsured deposit balances leave the Bank over a short period of time, management could more than satisfy the demand with cash on-hand and FHLB and FRB borrowing capacity.

Capital. Capital adequacy is an important measure of financial stability and performance. The Company’s objectives are to maintain a level of capitalization that is sufficient support the Company's strategic objectives.

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Banks must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios except the Tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Additionally, regulators may place certain restrictions on dividends paid by banks. The total amount of dividends which may be paid at any date is generally limited to retained earnings of banks.

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.

The Consent Order requires the Bank to achieve and maintain minimum capital requirements that are higher than those required for capital adequacy purposes. Specifically, the Bank is required to maintain a leverage ratio of 10.00% and a total capital ratio of 13.00%. As of September 30, 2024 and June 30, 2024, the Bank met these minimum capital ratios. Until such levels are maintained and the Consent Order has been lifted, the Bank is deemed to be less than well capitalized, thus adequately capitalized.

Because the Bank may not be deemed to be “well capitalized” while subject to the Consent Order, it could be required to pay higher insurance premiums to the FDIC, obtain approval prior to acquiring branches or opening new lines of business, and be subject to increased regulatory scrutiny such as limitations on asset growth.

As previously noted, the Company adopted Accounting Standards Codification 326, Financial Instruments - Credit Losses (referred herein as “current expected credit losses” or “CECL”) effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings ("CECL Transitional Amount") over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital is 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report.

The following tables present the capital ratios to which banks are subject to be adequately and well capitalized, as well as the capital and capital ratios for the Bank as of the dates stated. Adequately capitalized ratios include the conversation buffer, if applicable. The following table also includes the capital adequacy ratios to which bank holding companies are subject. On January 1, 2024, the Company became subject to these ratios. Also presented are the minimum capital ratios set forth in the Consent Order for the Bank with the corresponding capital amounts for both the leverage ratio and the total capital ratio as of both September 30, 2024 and December 31, 2023. The CECL Transitional Amount was $8.1 million, of which $4.1 million and $2.0 million reduced the regulatory capital amounts and capital ratios as of September 30, 2024 and December 31, 2023, respectively.


	September 30, 2024
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized					Minimum Capital Ratios
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk based capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	367,736		16.64	%	$	232,080		10.50	%	$	221,028		10.00	%	$	287,337		13.00	%
Blue Ridge Bankshares, Inc.	$	427,441		19.26	%	$	177,546		8.00	%	n/a		n/a			n/a		n/a
Tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	346,545		15.68	%	$	187,875		8.50	%	$	176,823		8.00	%	n/a		n/a
Blue Ridge Bankshares, Inc.	$	345,839		15.58	%	$	133,186		6.00	%	n/a		n/a			n/a		n/a
Common equity tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	346,545		15.68	%	$	154,720		7.00	%	$	143,669		6.50	%	n/a		n/a
Blue Ridge Bankshares, Inc.	$	345,839		15.58	%	$	99,889		4.50	%	n/a		n/a			n/a		n/a
Tier 1 leverage (to average assets)
Blue Ridge Bank, N.A.	$	346,545		11.56	%	$	119,912		4.00	%	$	149,890		5.00	%	$	299,779		10.00	%
Blue Ridge Bankshares, Inc.	$	345,839		11.46	%	$	120,712		4.00	%	n/a		n/a			n/a		n/a


	December 31, 2023
	Actual					For Capital Adequacy Purposes					To Be Well Capitalized					Minimum Capital Ratios
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk based capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	270,293		10.25	%	$	276,842		10.50	%	$	263,659		10.00	%	$	342,757		13.00	%
Tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	239,775		9.09	%	$	224,111		8.50	%	$	210,928		8.00	%	n/a		n/a
Common equity tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.	$	239,775		9.09	%	$	184,562		7.00	%	$	171,379		6.50	%	n/a		n/a
Tier 1 leverage (to average assets)
Blue Ridge Bank, N.A.	$	239,775		7.49	%	$	128,001		4.00	%	$	160,001		5.00	%	$	320,003		10.00	%

Commitments and Contingencies

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 and involve the same credit risk and evaluation as making a loan to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis, in a manner similar to that if underwriting a loan. As of September 30, 2024 and December 31, 2023, the Company had outstanding loan commitments of $320.3 million and $480.8 million, respectively. Of these amounts, $106.3 million and $113.5 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.

For the three and nine months ended September 30, 2024, the Company recorded a recovery of credit losses for unfunded commitments of $200 thousand and $1.7 million, respectively, primarily due to lower balances of unfunded loan commitments. As of September 30, 2024, the reserve for unfunded commitments was $1.4 million compared to $3.1 million as of December 31, 2023.

The Company invests in various partnerships, limited liability companies, and small business investment company funds. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At September 30, 2024, the Company had future commitments outstanding totaling $7.6 million related to these investments.

Interest Rate Risk Management

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

interest rate risk in conjunction with liquidity and capital management, pursuant to policy guidelines approved by the board of directors.

The Company employs an independent consulting firm to model its interest rate sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. Assumptions for modeling are developed based on expected activity in the balance sheet. For maturing assets, assumptions are created for the redeployment of these assets. For maturing liabilities, assumptions are developed for the replacement of these funding sources. Assumptions are also developed for assets and liabilities that could reprice during the modeled time period. These assumptions also cover how management expects rates to change on non-maturity deposits such as interest checking, money market checking, savings accounts, as well as certificates of deposit. Based on inputs that include the current balance sheet, the current level of interest rates, and the developed assumptions, the model produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. The model then simulates what net interest income would be based on specific changes in interest rates. The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 400 basis points and up 100 basis points to 400 basis points. The results of these simulations are then compared to the base case.

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


	September 30, 2024
	Instantaneous Parallel Rate Shock Scenario
	Change in Net Interest Income - Year 1					Change in Net Interest Income - Year 2
Change in interest rates:
+400 basis points	$	2,073		2.6	%	$	4,289		4.7	%
+300 basis points		2,555		3.2	%		4,173		4.6	%
+200 basis points		2,450		3.0	%		3,633		4.0	%
+100 basis points		1,636		2.0	%		2,343		2.6	%
Base case
-100 basis points		(2,927	)	(3.6	%)		(3,867	)	(4.2	%)
-200 basis points		(6,327	)	(7.8	%)		(8,870	)	(9.7	%)
-300 basis points		(9,826	)	(12.1	%)		(13,929	)	(15.2	%)
-400 basis points		(13,306	)	(16.5	%)		(18,624	)	(20.3	%)


	December 31, 2023
	Instantaneous Parallel Rate Shock Scenario
	Change in Net Interest Income - Year 1					Change in Net Interest Income - Year 2
Change in interest rates:
+400 basis points	$	(17,416	)	(19.6	%)	$	(14,978	)	(15.7	%)
+300 basis points		(12,160	)	(13.7	%)		(10,262	)	(10.7	%)
+200 basis points		(7,416	)	(8.4	%)		(5,957	)	(6.2	%)
+100 basis points		(3,324	)	(3.7	%)		(2,448	)	(2.6	%)
Base case
-100 basis points		2,028		2.3	%		930		1.0	%
-200 basis points		3,615		4.1	%		778		0.8	%
-300 basis points		4,732		5.3	%		(305	)	(0.3	%)
-400 basis points		5,621		6.3	%		(1,238	)	(1.3	%)

The change in the results of interest rate scenarios from December 31, 2023 to September 30, 2024 is primarily the result of the decrease in the Bank’s fintech BaaS deposits. A significant portion of fintech BaaS deposits bear interest rates that adjust with changes in the federal funds rate making them highly sensitive to instantaneous interest rate changes.

The severity of the effect of instantaneous increases in interest rates as shown above is due to the assumption of the timing of pricing changes in the Company's interest-bearing liabilities compared to its interest-earning assets. A significant portion of the Company's deposits through its fintech partnerships reprice with changes in federal funds rates by contractual agreement. Therefore, an instantaneous change in this index rate results in a relative change in deposit costs for this portion of deposits.

Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve 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 rate shock modeling is not a predictor of actual future performance of earnings. It is a financial metric used to manage interest rate risk and track the movement of the Company’s interest rate risk position over a historical time frame for comparison purposes.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure 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, 2024 was carried out under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer. Based on and as of the date of such evaluation, the aforementioned officers concluded that the Company’s disclosure controls and procedures were effective.

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings in which the Company is involved, please see Note 13 to the unaudited consolidated financial statements included in this Form 10-Q.

Item 1A. Risk Factors

Except as described below, there have been no material changes to the risk factors disclosed in the 2023 Form 10-K. Additional risks not presently known to the Company, or that are currently deem immaterial, may also adversely affect the Company's business, financial condition, or results of operations. See also “Cautionary Note About Forward-Looking Statements,” included in Part 1, Item 2, of this Form 10-Q.

Liquidity and Capital

Future issuances of the Company’s common stock or other securities, including upon the exercise of warrants issued by the Company, could adversely affect the market price of the Company's common stock and could be dilutive.

In the second quarter of 2024, the Company completed the Private Placements pursuant to which it has issued approximately (i) 53.9 million shares of the Company’s common stock, (ii) warrants to purchase 23.8 million shares of the Company’s common stock at an exercise price of $2.50 per share and 2.4 million shares of the Company’s common stock at an exercise price of $2.39 per share, (iii) 2,732 shares of Series C Preferred Stock, which are convertible or exchangeable into 10.9 million shares of the Company’s common stock, and (iv) warrants to purchase 1,441 shares of Series C Preferred Stock at an exercise price of $10 thousand per share, which are convertible or exchangeable upon exercise into 5.7 million shares of the Company’s common stock at an exercise price of $2.50 per share.

The issuance of shares of common stock in the Private Placements has resulted, and upon the conversion or exchange of the Series C Preferred Stock and upon exercise of the warrants will result, in substantial dilution to the holders of common stock in place prior to the consummation of the Private Placements and a significant reduction in the percentage interests of such common shareholders in the voting power and in the future earnings per share of their common stock. Further, the exercise of such warrants at any time when the exercise price is less than the tangible book value of the shares of the Company’s common stock received will be dilutive to the tangible book value of the then existing common shareholders. The resale of the additional shares of the Company’s common stock could also cause the market price of the Company’s common stock to decline.

In addition, the Company’s board of directors, without the approval of shareholders, could from time to time decide to issue additional shares of common stock or shares of preferred stock, which may adversely affect the market price of the shares of common stock and could be substantially dilutive to holders of the Company’s common stock. Any sale of additional shares of the Company’s common stock may be at prices lower than the current market value of the Company’s common stock. In addition, new investors may have rights, preferences, and privileges that are senior to, and that could adversely affect, the Company’s existing shareholders. For example, preferred stock would be senior to common stock in right of dividends and as to distributions in liquidation. The Company’s shareholders bear the risk of future securities offerings diluting their stock holdings, adversely affecting their rights as shareholders, and/or reducing the market price of the Company’s common stock.

Sales of large amounts of the Company’s common stock, or the perception that sales could occur, may depress the Company’s stock price.

The market price of the Company’s common stock could drop if existing shareholders decide to sell their shares, especially certain of the purchasers in the Private Placements. As of July 19, 2024, Kenneth L. Lehman owned approximately 20.0 million common shares, or about 27.2% of the outstanding shares of the Company’s common stock, and Castle Creek Capital Partners VIII, LP (“Castle Creek”) owned 593,078 common shares and owned all 2,732 outstanding shares of the Series C Preferred Stock, which are convertible or exchangeable into approximately 10.9 million shares of the Company’s common stock in certain circumstances, which, taken together, would constitute about 13.6% of the outstanding shares of the Company’s common stock (taking into account such additional shares of the

Company’s common stock upon conversion or exchange). The market price could drop significantly if one or more shareholders sold substantial amounts of the Company’s common stock or other investors perceive sales to be imminent. The Company cannot foresee the impact of such potential sales on the market, but it is possible that if a significant percentage of shares were attempted to be sold within a short period of time, the market for the Company’s shares would be adversely affected. Even if a substantial number of sales do not occur within a short period of time, the mere existence of this “market overhang” could have a negative impact on the market for the Company’s common stock.

Kenneth L. Lehman and Castle Creek are substantial holders of the Company’s securities.

Following the conversion or exchange of the Series C Preferred Stock, the Company expects that Mr. Lehman will own approximately 20.0 million common shares, or about 23.7% of the outstanding shares of the Company’s common stock, and Castle Creek will own approximately 11.5 million common shares, or about 13.6% of the outstanding shares of the Company’s common stock (in each case, taking into account such additional shares of the Company’s common stock upon conversion or exchange). Pursuant to the terms of the securities purchase agreement with the purchasers in the Private Placements, Mr. Lehman has the right to appoint one representative on the Company’s Board of Directors, and Castle Creek has the right to appoint two representatives on the Company’s Board of Directors. Mr. Lehman and/or Castle Creek may have individual economic interests that are different from the other’s interests and different from the interests of the Company’s other shareholders.

The Company's Series C Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to, the rights, preferences, and privileges of common stock, which could adversely affect the Company's liquidity and financial condition.

The Series C Preferred Stock has certain rights, preferences, and privileges compared to the rights, preferences, and privileges of common stock. For example, the Series C Preferred Stock is senior to the Company’s common stock, such that in the event of any liquidation, dissolution, or winding up of the Company’s affairs, each holder of shares of Series C Preferred Stock will be entitled to receive for each share of Series C Preferred Stock, out of the assets of the Company or proceeds thereof available for distribution to shareholders of the Company, before any distribution of such assets or proceeds is made to the holders of shares of the Company’s common stock, payment in an amount equal to the sum of (i) the liquidation amount (which is initially $10 thousand per share of Series C Preferred Stock) and (ii) any declared and unpaid dividends on such share of Series C Preferred Stock (collectively, the “Liquidation Preference”). In the case of a merger, sale of substantially all of the Company’s assets, or certain other reorganization events, each holder of Series C Preferred Stock will be entitled to receive for each share of Series C Preferred Stock, out of the assets of the Company or proceeds thereof (whether capital or surplus), legally available for distribution to the shareholders of the Company, a preference distribution equal to two times the amount of the Liquidation Preference.

The Company’s obligations to the holders of Series C Preferred Stock could limit its ability to obtain additional financing, which could have an adverse effect on the Company’s financial condition. Additionally, the preferential rights of the Series C Preferred Stock could also result in divergent interests between the holders of the Company’s common stock and the holders of Series C Preferred Stock.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

During the fiscal quarter ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K).

Item 6. Exhibits


10.1		Blue Ridge Bankshares, Inc. Amended and Restated 2023 Stock Incentive Plan (incorporated by reference to Appendix A of the proxy statement for the Annual Meeting of Shareholders held October 10, 2024, filed on August 30, 2024).

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

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

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

101		The following materials from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, formatted in Inline Extensible Business Reporting Language (XBRL), include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) related notes (filed herewith).

104		The cover page from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, formatted in Inline XBRL (included with Exhibit 101).

SIGNATURES

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



	BLUE RIDGE BANKSHARES, INC.

Date: November 6, 2024	By:	/s/ G. William Beale
		G. William Beale
		President and Chief Executive Officer

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