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What changed in BLUE RIDGE BANKSHARES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BLUE RIDGE BANKSHARES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+469 added−460 removedSource: 10-K (2025-03-10) vs 10-K (2024-03-15)

Top changes in BLUE RIDGE BANKSHARES, INC.'s 2024 10-K

469 paragraphs added · 460 removed · 305 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

83 edited+25 added−33 removed91 unchanged
Biggest changeThe Company, through the Financial Group, offers management services for personal and corporate trusts, including estate planning, estate settlement and trust administration, insurance products, and investment and wealth management. Employment benefit services are offered under the trade name BluePoint Benefits.
Biggest changeDeposits of the Bank are insured by the Deposit Insurance Fund (the “DIF”) of the Federal Deposit Insurance Corporation (“FDIC”) to the full extent of the limits of the DIF. The Company, through the Financial Group, offers investment and wealth management and management services for personal and corporate trusts, including estate planning, estate settlement, trust administration, and life insurance products.
Under the Basel III Capital Rules, 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.
Under the Basel III Capital Rules, 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 the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties. Effective April 1, 2022, the OCC, Federal Reserve, and FDIC issued a joint rule imposing upon banking organizations and their service providers notification requirements for significant cybersecurity incidents.
If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties. Effective April 1, 2022, the OCC, the Federal Reserve, and the FDIC issued a joint rule imposing upon banking organizations and their service providers notification requirements for significant cybersecurity incidents.
For 9 example, mortgage lenders are required to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, either by considering underwriting factors prescribed by Regulation Z or by originating loans that meet the definition of a “qualified mortgage.” If the Company fails to comply with these laws and regulations, it may be subject to various penalties.
For example, mortgage lenders are required to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, either by considering underwriting factors prescribed by Regulation Z or by originating loans that meet the definition of a “qualified mortgage.” If the Company fails to comply with these laws and regulations, it may be subject to various penalties.
The Company competes for loans, deposits, and financial services directly with other bank and nonbank institutions, including credit unions, located within its markets, internet-based banks, out-of-market banks, fintech companies, and bank holding companies that advertise in or otherwise serve its markets, along with money market and mutual funds, brokerage houses, mortgage companies, and insurance companies or other commercial entities that offer financial services products.
The Company competes for loans, deposits, and other financial services directly with other bank and nonbank institutions, including credit unions, located within its markets, internet-based banks, out-of-market banks, and fintech companies that advertise in or otherwise serve its markets, along with money market and mutual funds, brokerage houses, mortgage companies, and insurance companies or other commercial entities that offer financial services products.
Qualified mortgages that are “higher-priced” (e.g., subprime loans) garner a rebuttable presumption of compliance with the ability-to-repay rules, while qualified mortgages that are not “higher-priced” (e.g., prime loans) are given a safe harbor of compliance. The Company is predominantly an originator of compliant qualified mortgages. Cybersecurity In March 2015, federal regulators issued two related statements regarding cybersecurity.
Qualified mortgages that are “higher-priced” (e.g., subprime loans) garner a rebuttable presumption of compliance with the ability-to-repay rules, while qualified mortgages that are not “higher-priced” (e.g., prime loans) are given a safe harbor of compliance. The Company is predominantly an originator of compliant qualified mortgages. 11 Cybersecurity In March 2015, federal regulators issued two related statements regarding cybersecurity.
OFAC publishes lists of prohibited parties that are regularly consulted by the Company in the conduct of its business in order to assure compliance. The Company is responsible for, 10 among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such parties, and reporting blocked transactions after their occurrence.
OFAC publishes lists of prohibited parties that are regularly consulted by the Company in the conduct of its business in order to assure compliance. The Company is responsible for, among other things, blocking accounts of, and transactions with, prohibited parties identified by OFAC, avoiding unlicensed trade and financial transactions with such parties, and reporting blocked transactions after their occurrence.
Failure to comply with OFAC requirements could have serious legal, financial, and reputational consequences for the Company. Privacy Legislation Several recent laws, including the Right to Financial Privacy Act, and related regulations issued by the federal bank regulatory agencies, also provide new protections against the transfer and use of customer information by financial institutions.
Failure to comply with OFAC requirements could have serious legal, financial, and reputational consequences for the Company. Privacy Legislation Several recent laws, including the Right to Financial Privacy Act, and related regulations issued by the federal bank regulatory agencies, provide new protections against the transfer and use of customer information by financial institutions.
In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include greater convenience, increased competition, and gains in efficiency.
In determining whether a particular activity is permissible, the Federal Reserve must consider whether the performance of such an activity reasonably can be expected to produce benefits to the public that outweigh possible adverse effects. Possible benefits include 7 greater convenience, increased competition, and gains in efficiency.
Government securities, setting the reserve requirements of member banks, and establishing the discount rate on member bank borrowings. The policies of the Federal Reserve have a direct impact on loan and deposit growth and the interest rates charged and paid thereon. They also impact the source, cost of funds, and the rates of return on investments.
Government securities, setting the reserve requirements of member banks, and establishing the discount rate on member bank borrowings. The policies of the Federal Reserve have a direct impact on loan and deposit growth and the interest rates charged and paid thereon. They also affect the source, cost of funds, and the rates of return on investments.
The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The CFPB may also institute a civil action against an entity in violation of federal consumer financial law in order to impose a civil penalty or injunction.
The CFPB can issue cease-and-desist orders against banks and other entities that violate consumer financial laws. The CFPB may 9 also institute a civil action against an entity in violation of federal consumer financial law in order to impose a civil penalty or injunction.
A depository institution may not pay any dividend if payment would cause the institution to become “undercapitalized” or if it already is “undercapitalized.” The OCC may prevent the payment of a dividend if it determines that the payment would be an unsafe 7 and unsound banking practice.
A depository institution may not pay any dividend if payment would cause the institution to become “undercapitalized” or if it already is “undercapitalized.” The OCC may prevent the payment of a dividend if it determines that the payment would be an unsafe and unsound banking practice.
As a bank holding company, the Company is subject to supervision, regulation, and examination by the Federal Reserve and is required to file various reports and 5 additional information with the Federal Reserve. The Company is also registered under the bank holding company laws of Virginia and is subject to supervision, regulations, and examination by the Virginia SCC.
As a bank holding company, the Company is subject to supervision, regulation, and examination by the Federal Reserve and is required to file various reports and additional information with the Federal Reserve. The Company is also registered under the bank holding company laws of Virginia and is subject to supervision, regulations, and examination by the Virginia SCC.
In addition, those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth. The Bank is subject to the rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).
In addition, those regulatory agencies may from time to time require that a banking organization maintain capital above the minimum levels because of its financial condition or actual or anticipated growth. The Bank is subject to the Basel III capital framework and certain related provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).
As further discussed in the Supervision and Regulation section below, the Bank is subject to the Community Reinvestment Act (the "CRA"), under which the appropriate federal banking agency periodically assesses the Bank’s record in meeting the credit needs of the communities it serves, including low and moderate income neighborhoods.
As further discussed in the following Supervision and Regulation section, the Bank is subject to the Community Reinvestment Act (the "CRA"), under which the appropriate federal banking agency periodically assesses the Bank’s record in meeting the credit needs of the communities it serves, including low and moderate income neighborhoods.
At December 31, 2023, the Bank operated twenty-seven full-service banking offices across its footprint, which stretches from the Shenandoah Valley across the Piedmont region through Richmond and into the coastal peninsulas and Hampton Roads region of Virginia and into central North Carolina.
At December 31, 2024, the Bank operated twenty-seven full-service banking offices across its footprint, which stretches from the Shenandoah Valley across the Piedmont region through Richmond and into the coastal peninsulas and the Hampton Roads region of Virginia and into central North Carolina.
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 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 ("BSA/AML"), and information technology risks stemming from its fintech partnerships.
Interstates 40, 64, 66, 73, 74, 81, 85, and 95 and ancillary major highways pass through the Bank’s trade area and provide efficient access to other regions of Virginia, North Carolina, and beyond.
Interstates 40, 64, 66, 73, 74, 81, 85, and 95 and ancillary major highways pass through the Bank’s market area and provide efficient access to other regions of Virginia, North Carolina, and beyond.
The Dodd-Frank Act has had, and may in the future have, a material impact on the Company’s operations, particularly through increased compliance costs resulting from new and possible future consumer and fair lending regulations.
The Dodd-Frank Act has had, and may in the future have, a material impact on the Company’s operations, particularly through increased compliance costs resulting from current and possible future consumer and fair lending regulations.
Loan transactions with an affiliate generally must be collateralized and certain transactions between the Bank and its affiliates, including the sale of assets, the payment of money, or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions.
Loan transactions with an affiliate generally must be collateralized at a specified level, and certain transactions between the Bank and its affiliates, including the sale of assets, the payment of money, or the provision of services, must be on terms and conditions that are substantially the same, or at least as favorable to the Bank, as those prevailing for comparable nonaffiliated transactions.
ITEM 1: B USINESS General Blue Ridge Bankshares, Inc. (the “Company”) is a bank holding company headquartered in Charlottesville, Virginia. It provides commercial and consumer banking and financial services through its wholly-owned bank subsidiary, Blue Ridge Bank, National Association (the “Bank”), and its wealth and trust management subsidiary, BRB Financial Group, Inc. (the “Financial Group”).
ITEM 1: B USINESS General Blue Ridge Bankshares, Inc. (the “Company”) is a bank holding company headquartered in Richmond, Virginia. The Company provides commercial and consumer banking and financial services through its wholly-owned bank subsidiary, Blue Ridge Bank, National Association (the “Bank”), and its wealth and trust management subsidiary, BRB Financial Group, Inc. (the “Financial Group”).
The Dodd-Frank Act centralized responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau ("CFPB"), and giving it responsibility for implementing, examining, and enforcing compliance with federal consumer protection laws.
The Dodd-Frank Act centralized responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau ("CFPB"), and gave it responsibility for implementing, examining, and enforcing compliance with federal consumer protection laws.
The proposed rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products and services.
The rule is 10 intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products and services.
A change in statutes, regulations or regulatory policies applicable to the Company or the Bank could have a material adverse effect on the business, financial condition, and results of operations of the Company and the Bank. 13
A change in statutes, regulations, or regulatory policies applicable to the Company or the Bank could have a material adverse effect on the business, financial condition, and results of operations of the Company and the Bank. 12
The Company, through its minority investment in Hammond Insurance Agency, Incorporated (“Hammond Insurance”), offers property and casualty insurance to individuals and businesses. The Bank’s mortgage banking activities include a retail mortgage business operating as Monarch 1 Mortgage. The Company conducted a wholesale mortgage business operating as LenderSelect Mortgage Group (“LenderSelect”) until it was sold on May 15, 2023.
The Company, through its minority investment in Hammond Insurance Agency, Incorporated, offers property and casualty insurance to individuals and businesses. The Bank’s mortgage banking activities include a retail mortgage business operating as Monarch Mortgage. The Company conducted a wholesale mortgage business operating as LenderSelect Mortgage Group until it was sold on May 15, 2023.
The Basel III Capital Rules, effective January 1, 2015, require the Company and the Bank to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 to risk-weighted assets of at least 4.50%, plus a 2.50% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of 7.00%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.00%, plus the 2.50% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.50%), (iii) a ratio of total capital to risk-weighted assets of at least 8.00%, plus the 2.50% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.50%), and (iv) a leverage ratio of 4.00%, calculated as the ratio of Tier 1 capital to average assets ("Tier 1 Leverage ratio").
The Basel III Capital Rules require the Company and the Bank to comply with the following minimum capital ratios: (i) a ratio of common equity Tier 1 6 to risk-weighted assets of at least 4.50%, plus a 2.50% capital conservation buffer (resulting in a minimum common equity Tier 1 ratio of 7.00%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.00%, plus the 2.50% capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.50%), (iii) a ratio of total capital to risk-weighted assets of at least 8.00%, plus the 2.50% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.50%), and (iv) a leverage ratio of 4.00%, calculated as the ratio of Tier 1 capital to average assets ("Tier 1 leverage ratio").
The FDIC has indicated that the new assessment rate 6 schedules will remain in effect until the DIF reserve ratio meets or exceeds 2 percent. In the years ended December 31, 2023 and 2022, the Company recorded expense of $5.1 million and $1.3 million, respectively, for FDIC insurance premiums.
The FDIC has indicated that the new assessment rate schedules will remain in effect until the DIF reserve ratio meets or exceeds 2 percent. In the years ended December 31, 2024 and 2023, the Company recorded expense of $5.5 million and $5.1 million, respectively, for FDIC insurance premiums.
As of December 31, 2023, the Company had not been made aware of any instances of non-compliance with the guidance.
As of December 31, 2024, the Company had not been made aware of any instances of non-compliance with the guidance.
As a bank holding company incorporated under the laws of the Commonwealth of Virginia, the Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Bureau of Financial Institutions of the Virginia State Corporation Commission (the “Virginia SCC”).
As a bank holding company incorporated under the laws of the Commonwealth of Virginia, the Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Bureau of Financial Institutions of the Virginia State Corporation Commission (the “Virginia SCC”). The Bank’s primary federal regulator is the the OCC.
While subject to the Consent Order, the Bank will also be required to obtain an OCC non-objection prior to onboarding or signing a contract with a new third-party fintech relationship or offering new products or services or conducting new activities with or through existing third-party fintech relationships.
While subject to the Consent Order, the Bank is required to obtain an OCC non-objection prior to onboarding or signing a contract with a new third-party fintech relationship or offering new products or services or conducting new activities with or through existing third-party fintech relationships.
The Bank is subject to the Consent Order, which requires the Bank and/or the board of directors of the Bank to, among other things, address and remediate Bank Secrecy Act/Anti-Money Laundering deficiencies, violations and corrective actions, enhance oversight of its third-party partnerships, submit to the OCC acceptable strategic and capital plans and adopt, implement, and adhere to various revised and expanded risk-based policies, procedures, and processes.
The Bank is subject to the Consent Order, which requires the Bank and/or the board of directors of the Bank to, among other things, address and remediate BSA/AML deficiencies, violations and corrective actions, enhance oversight of its third-party partnerships, submit to the OCC acceptable strategic and capital plans and adopt, implement, and adhere to various revised and expanded risk-based policies, procedures, and processes.
The Company’s primary market area stretches from the Shenandoah Valley across the Piedmont region through Richmond and into the coastal peninsulas and Hampton Roads region of Virginia and into central North Carolina. The Company’s retail mortgage operations are primarily in the Mid-Atlantic and Southern regions of the United States.
The Company’s primary market area stretches from the Shenandoah Valley across the Piedmont region through Richmond and into the coastal peninsulas and the Hampton Roads region of Virginia and into central North Carolina. The Company’s retail mortgage operations are primarily in the Mid-Atlantic and Southern regions of the United States. Products and Services Mortgage Loans on Real Estate.
These consumer loans historically entail greater risk than loans secured by real estate and also comprise a small segment of the Company's portfolio. Consumer Deposit Services. Consumer deposit products offered by the Company include checking accounts, savings accounts, money market accounts, certificates of deposit, online banking, mobile banking, and electronic statements. Commercial Banking Services.
These consumer loans historically entail greater risk than loans secured by real estate. Consumer Deposit Services. Consumer deposit products offered by the Company include checking accounts, savings accounts, money market accounts, certificates of deposit, online banking, mobile banking, and electronic statements. Commercial Banking Services.
The Bank serves businesses, professionals, consumers, nonprofits, and municipalities with a wide variety of financial services, including retail and commercial banking, mortgage banking, government guaranteed lending, and employee benefit plan services.
The Bank serves businesses, professionals, consumers, nonprofits, and municipalities with a wide variety of financial services, including retail and commercial banking, and mortgage banking lending.
Office of Foreign Assets Control The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals, and other foreign organizations and entities.
Compliance with AML laws are onerous and costly. Office of Foreign Assets Control The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) is responsible for administering and enforcing economic and trade sanctions against specified foreign parties, including countries and regimes, foreign individuals, and other foreign organizations and entities.
The Bank’s other sources of revenue are interest and dividend income from investments, interest income from its interest-earning deposit balances in other depository institutions, mortgage banking income, gains on sales of government-guaranteed loans, transactions and fee income from its lending and deposit activities, including fintech activities, and income associated with wealth and trust management services.
The Company's other sources of revenue are interest and dividend income from investments, interest income from its interest-earning deposit balances in other depository institutions, mortgage banking income, transactions and fee income from its lending and deposit activities, including fintech activities, and income associated with wealth and trust management services.
Mortgage lenders are required to determine consumers’ ability to repay in one of two ways. 11 The first alternative requires the mortgage lender to consider the following eight underwriting factors when making the credit decision: (i) current or reasonably expected income or assets; (ii) current employment status; (iii) the monthly payment on the covered transaction; (iv) the monthly payment on any simultaneous loan; (v) the monthly payment for mortgage-related obligations; (vi) current debt obligations, alimony, and child support; (vii) the monthly debt-to-income ratio or residual income; and (viii) credit history.
The first alternative requires the mortgage lender to consider the following eight underwriting factors when making the credit decision: (i) current or reasonably expected income or assets; (ii) current employment status; (iii) the monthly payment on the covered transaction; (iv) the monthly payment on any simultaneous loan; (v) the monthly payment for mortgage-related obligations; (vi) current debt obligations, alimony, and child support; (vii) the monthly debt-to-income ratio or residual income; and (viii) credit history.
The Bank has not opted into the CBLR framework. Dividends The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company.
Dividends Generally, the Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company.
The Dodd-Frank Act codified this policy as a statutory requirement. Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources.
Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the Company may not be in a financial position to provide such resources.
The Bay Banks Merger added $1.22 billion in assets and $1.03 billion in deposits and expanded the Bank’s operating footprint east through the greater Richmond region, the Northern Neck region, Middlesex County, and the Hampton Roads region of Virginia. On December 15, 2019, the Company acquired Virginia Community Bankshares, Inc.
The Bay Banks Merger added $1.22 billion in assets and $1.03 billion in deposits and expanded the Bank’s operating footprint east through the greater Richmond region, the Northern Neck region, Middlesex County, and the Hampton Roads region of Virginia.
As required by FDICIA, the federal bank regulatory agencies also have adopted guidelines prescribing safety and soundness standards relating to, among other things, internal controls and information systems, internal audit systems, loan documentation, credit underwriting, and interest rate exposure. In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines.
As required by FDICIA, the federal bank regulatory agencies also have adopted guidelines prescribing safety and soundness standards relating to, among other things, internal controls and information systems, internal audit systems, loan 8 documentation, credit underwriting, and interest rate exposure.
Box 609, 17 West Main Street, Luray, Virginia 22835, or by calling (540) 743-6521. Information on the Company’s website does not constitute part of, and is not incorporated into, this report or any other filing the Company makes with the SEC. 2 The Company qualifies as an “emerging growth company”, as defined in federal securities laws.
Box 609, 17 West Main Street, Luray, Virginia 22835, or by calling (540) 743-6521. Information on the Company’s website does not constitute part of, and is not incorporated into, this report or any other filing the Company makes with the SEC.
In addition, the agencies adopted regulations that authorize, but do not require, an institution that has been notified that it is not in compliance with safety and soundness standard to submit a compliance plan.
In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. In addition, the agencies adopted regulations that authorize, but do not require, an institution that has been notified that it is not in compliance with safety and soundness standard to submit a compliance plan.
The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which the Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner.
Enactment of legislation and changes in the application of existing legislation could impact the regulatory structure under which the Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy, and limit the ability to pursue business opportunities in an efficient manner.
Supervision and Regulation The Company and the Bank are extensively regulated under federal and state law. The following information describes certain aspects of that regulation applicable to the Company and the Bank and does not purport to be complete. Proposals to change the laws, regulations, and policies governing the banking industry are frequently raised in the U.S.
The following information describes certain aspects of that regulation applicable to the Company and the Bank and does not purport to be complete. Proposals to change the laws, regulations, and policies governing the banking industry are frequently raised in the U.S. Congress, in state legislatures, and before the various bank regulatory agencies.
Congress, in state legislatures, and before the various bank regulatory agencies. The likelihood and timing of any changes and the impact such changes might have on the Company and the Bank are impossible to determine with any certainty.
The likelihood and timing of any changes and the impact such changes might have on the Company and the Bank are impossible to determine with any certainty.
To be well capitalized under these regulations, a bank must have the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of at least 6.50%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.00%; (iii) a total capital to risk-weighted assets ratio of at least 10.00%; and (iv) a Tier 1 Leverage ratio of at least 5.00%.
With respect to banks, the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act ("FDI Act") specify that to be well capitalized under these regulations a bank must have the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of at least 6.50%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.00%; (iii) a total capital to risk-weighted assets ratio of at least 10.00%; and (iv) a Tier 1 leverage ratio of at least 5.00%.
The guaranteed portion of government guaranteed loans may be sold, in whole or in part, to secondary market buyers. Consumer Loans. The Company’s consumer lending services include automobile lending, home equity lines of credit, credit cards, and other unsecured personal loans.
Small Business Administration ("SBA") guidelines and afford the Company guarantees under these programs. The guaranteed portion of SBA loans may be sold, in whole or in part, to secondary market buyers. 3 Consumer Loans. The Company’s consumer lending services include automobile lending, home equity lines of credit, credit cards, and other unsecured personal loans.
In October 2023, the CFPB proposed a new rule that would require a provider of payment accounts or products, such as the Bank, to make certain data available to consumers upon request regarding the products or services they obtain from the provider.
In October 2024, the CFPB adopted a new rule that requires financial services providers, such as the Bank, to make certain data available to consumers upon request regarding the products or services they obtain from the provider.
The Company anticipates losing its emerging growth status on December 31, 2024. Market Area The Bank currently has branches in Callao, Charlottesville, Chester, Colonial Heights, Culpeper, Fredericksburg, Gordonsville, Harrisonburg, Hartfield, Henrico, Kilmarnock, Louisa, Luray, Martinsville, Midlothian, Mineral, Montross, Orange, Petersburg, Richmond, Shenandoah, Suffolk, Virginia Beach, Warsaw, and White Stone, Virginia, and in Greensboro, North Carolina.
Market Area The Bank currently has branches in Callao, Charlottesville, Chester, Colonial Heights, Culpeper, Fredericksburg, Gordonsville, Harrisonburg, Hartfield, Henrico, Kilmarnock, Louisa, Luray, Martinsville, Midlothian, Mineral, Montross, Orange, Petersburg, Richmond, Shenandoah, Suffolk, Virginia Beach, Warsaw, and White Stone, Virginia, and in Greensboro, North Carolina. Additionally, the Company has offices located in Winchester and Norfolk, Virginia, to support its commercial lending operations.
In addition, the Consent Order places restrictions on the Bank’s ability to declare or pay dividends in certain situations and requires the written non-objection of the OCC prior to any dividend or capital distribution.
The Consent Order places additional restrictions on the Bank’s ability to declare or pay dividends in certain situations and requires the written non-objection of the OCC prior to any dividend or capital distribution. As a result of the Consent Order, the Company likely will not resume payments of dividends in the foreseeable future.
The loans were provided through participating financial institutions, such as the Bank, that process loan applications and service the loans. 12 Future Legislation and Regulation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
Future Legislation and Regulation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states.
Loans in this segment are underwritten in accordance with loan policy, which has guidelines to mitigate declines in real estate values, changes in the underlying cash flows from the properties, and general economic conditions. Commercial and Industrial Loans. Commercial lending activities of the Company include business loans, asset-based loans, and other secured and unsecured loans and lines of credit.
Loans in this category include loans on real estate used for commercial purposes. Loans in this segment are underwritten in accordance with loan policy, which has guidelines to mitigate declines in real estate values, changes in the underlying cash flows from the properties, and general economic conditions. Commercial and Industrial Loans.
Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied.
Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted.
On January 31, 2021, the Company completed a merger with Bay Banks of Virginia, Inc. (“Bay Banks”), a bank holding company conducting substantially all its operations through its subsidiaries Virginia Commonwealth Bank and VCB Financial Group, Inc.
(“Bay Banks”), a bank holding company conducting substantially all its operations through its subsidiaries, Virginia Commonwealth Bank and VCB Financial Group, Inc.
Regulatory bodies have broad authority to implement standards and initiate proceedings designed to prohibit depository institutions from engaging in unsafe and unsound banking practices. The standards relate generally to operations and management, asset quality, interest rate exposure, and capital. The bank regulatory agencies are authorized to take action against institutions that fail to meet such standards.
Depository institutions, including the Bank, are subject to extensive federal and state regulations that significantly affect their businesses and activities. Regulatory bodies have broad authority to implement standards and initiate proceedings designed to prohibit depository institutions from engaging in unsafe and unsound banking practices. The standards relate generally to operations and management, asset quality, interest rate exposure, liquidity, and capital.
The Company’s SEC filings are filed electronically and are available to the public over the Internet at the SEC’s website at http://www.sec.gov. The Company’s website can be accessed at https://www.blueridgebankshares.com.
The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The Company’s SEC filings are filed electronically and are available to the public over the Internet at the SEC’s website at http://www.sec.gov. The Company’s website can be accessed at https://www.blueridgebankshares.com.
In addition, Virginia law requires the prior approval of the Virginia SCC for (i) the acquisition of more than 5% of the voting shares of a Virginia bank or any holding company that controls a Virginia bank, or (ii) the acquisition by a Virginia bank holding company of a bank or its holding company domiciled outside Virginia. 8 Source of Strength Federal Reserve policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks.
In addition, Virginia law requires the prior approval of the Virginia SCC for (i) the acquisition of more than 5% of the voting shares of a Virginia bank or any holding company that controls a Virginia bank, or (ii) the acquisition by a Virginia bank holding company of a bank or its holding company domiciled outside Virginia.
The Company has not elected to become a financial holding company and has no immediate plans to become a financial holding company. Blue Ridge Bank, National Association The Bank is a federally chartered national bank. The Bank is subject to supervision, regulation, and examination by the OCC and is required to file various reports and additional information with the OCC.
The Company has not elected to become a financial holding company and has no immediate plans to become a financial holding company. 5 Blue Ridge Bank, National Association The Bank is a federally chartered national bank.
The Bank’s primary federal regulator is the Office of the Comptroller of the Currency (the “OCC”). The Bank’s primary source of revenue is interest income from its lending activities.
The Company's primary source of revenue is interest income from its lending activities.
The Consent Order replaced the written agreement entered into by the Bank and the OCC on August 29, 2022 (the “Written Agreement”) and generally incorporates the provisions of the Written Agreement, as well as adding new provisions.
Regulatory Matters On January 24, 2024, the Bank consented to the issuance of 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 Company believes that its competitive pricing, personalized service, and community involvement enable it to effectively compete in the communities in which it operates. Environmental, Social and Governance The Company is committed to promoting sound Environmental, Social and Governance (“ESG”) practices through board of directors and management oversight.
The Company believes that its competitive pricing, personalized service, and community involvement enable it to effectively compete in the communities in which it operates. Governance, Social, and Human Capital The Company operates under a governance structure that starts with an independent chairman of the board of directors of the Company who is independent from management.
A complete copy of the Consent Order is included as Exhibit 10.14 to this Form 10-K. The Company is actively working to bring the Bank’s policies, procedures, and operations into conformity with OCC directives and believes its exit of BaaS fintech operations will partly satisfy the requirements of the Consent Order.
The Company is actively working to bring the Bank’s policies, procedures, and operations into conformity with OCC directives and believes its has met many requirements of the Consent Order. Management believes the exit of fintech BaaS depository operations will expedite the satisfaction of the requirements of the Consent Order.
Mortgage loans on real estate include on family residential properties, 1-4 family investment properties, home equity loans, commercial properties, and owner-occupied commercial properties. The Company also makes loans on properties under construction to qualified individuals and builders. These loans are generally for the construction period only and funds are disbursed as construction progresses and verified by the Company.
The Company’s mortgage loans on real estate comprise the largest segment of its loan portfolio. Mortgage loans on real estate include those on family residential properties, 1-4 family investment properties, home equity loans, commercial properties, and owner-occupied commercial properties. The Company also makes loans on properties under construction to qualified individuals and builders.
Loans are for varying terms and may be at fixed or adjustable interest rates. Residential Mortgage Loans. Residential mortgages are underwritten and documented within regulatory guidelines. The Company offers residential loan origination with such loans either sold in the secondary market or held by the Bank.
These loans are for the construction period and funds are disbursed as construction progresses and verified by the Company. Loans are for varying terms and may be at fixed or adjustable interest rates. Residential Mortgage Loans. Residential mortgages are underwritten and documented within regulatory guidelines.
Home mortgages are generally underwritten in accordance with the guidelines of agencies including the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), and Government National Mortgage Association (“Ginnie Mae”). These loans are then sold into the secondary market on a loan-by-loan basis to aggregators or directly to Freddie Mac, Fannie Mae, and Ginnie Mae.
The Company offers residential loan origination with such loans either sold in the secondary market or held by the Bank. Residential mortgages are generally underwritten in accordance with the guidelines of agencies including the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association (“Fannie Mae”), and Government National Mortgage Association (“Ginnie Mae”).
The Company has partnerships with financial technology (fintech) providers, through which it offers indirect depository services (referred to as "banking-as-a-service" or "BaaS") and indirect lending services to both consumers and businesses.
Over the past several years, the Company has had partnerships with financial technology ("fintech") providers, through which it provided indirect depository services (referred to as banking-as-a-service or "BaaS") to both consumers and businesses. Fintech companies provide technologies to enable the delivery of digital bank services and are a source of interest and fee income, and deposits.
The Bank earns origination, commitment, service release premium, pricing gain or loss, and servicing fees on each loan depending on how the loan is sold. Commercial Real Estate Loans. Loans in this category include loans on real estate used for commercial purposes.
These loans are then sold into the secondary market on a loan-by-loan basis to aggregators or directly to Fannie Mae and Ginnie Mae. The Bank earns origination, commitment, service release premium, pricing gain or loss, and servicing fees on each loan depending on how the loan is sold. Commercial Real Estate Loans.
The OCC has primary supervisory and regulatory authority over the operations of the Bank. Because the Bank accepts insured deposits from the public, it is also subject to examination by the FDIC. Depository institutions, including the Bank, are subject to extensive federal and state regulations that significantly affect their businesses and activities.
The Bank is subject to supervision, regulation, and examination by the OCC and is required to file various reports and additional information with the OCC and the FDIC. The OCC has primary supervisory and regulatory authority over the operations of the Bank. Because the Bank accepts insured deposits from the public, it is also subject to examination by the FDIC.
In addition to the foregoing capital requirements, the Bank is subject to individual minimum capital ratios ("IMCRs") that are higher than those required for capital adequacy purposes pursuant to OCC directives.
In addition to the foregoing capital requirements, as set forth in the Consent Order, the Bank is subject to minimum capital ratios for Tier 1 leverage and total capital to risk-weighted assets that are higher than those required for capital adequacy purposes generally.
The Company, through the Financial Group, offers management services for personal and corporate trusts, including estate planning, estate settlement and trust administration, insurance products, and investment and wealth management. Banking-as-a-Service. The Company, through the Bank, provides banking-as-a-service to its fintech partners and to their end users.
The Company, through the Financial Group, offers investment and wealth management services and management services for personal and corporate trusts, including estate planning, estate settlement, trust administration, and life insurance products. Fintech Lending Programs. The Company partners with certain fintech providers that accommodate lending programs to consumers. These loans are originated by the Bank to borrowers sourced by fintech partners.
As of December 31, 2023, the Bank's common equity Tier 1 capital ratio was 9.09%; its Tier 1 capital to risk-weighted asset ratio was 9.09%; its total capital to risk-weighted asset ratio was 10.25%; and the Bank's Tier 1 Leverage ratio was 7.49%.
The Bank has not opted into the CBLR framework. As of December 31, 2024, the Bank's common equity Tier 1 capital ratio was 17.26%; its Tier 1 capital to risk-weighted asset ratio was 16.38%; its total capital to risk-weighted asset ratio was 16.38%; and the Bank's Tier 1 leverage ratio was 11.80%.
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 Individual Minimum Capital Ratios (“IMCRs”). As of December 31, 2023, the Bank did not meet these IMCR requirements. A complete copy of the Consent Order is attached as Exhibit 10.14 to this Form 10-K.
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 December 31, 2024, the Bank’s capital ratios exceeded these minimum capital ratios. The Company believes it has made significant progress towards meeting the requirements of the Consent Order.
Commercial and industrial loans may entail greater risk than residential mortgage loans, and are underwritten in accordance with loan policy, which sets risk management standards. Among the criteria for determining the borrower’s ability to repay is a cash flow analysis of the business and business collateral. Guaranteed Government Loans.
Commercial lending activities of the Company include business loans, asset-based loans, and other secured and unsecured loans and lines of credit. Commercial and industrial loans may entail greater risk than residential mortgage loans, and are underwritten in accordance with loan policy, which sets risk management standards.
Pursuant to the Unit partnership, the Bank has subpartner relationships that target certain niches of end users, where Unit provides the technology platform to access banking activities. Subsequent to the end of 2023, the Bank exited its partnership with Increase.
Pursuant to the Unit partnership, the Bank had subpartner relationships that target certain niches of end users, where Unit provides the technology platform to access banking activities. The Company also provides indirect lending services through fintech partnerships. In these arrangements, the fintech partner sources the loans, which the Bank then originates.
Management believes that the Company's compensation programs offer competitive pay and benefits, including paid time off for vacation and sick leave, a 401(k) plan, health, dental, and vision plans, life and disability coverage, wellness plans, training, including tuition reimbursement, and pre-tax flexible spending accounts.
Management believes that the Company's compensation programs offer competitive salaries and performance-based bonuses, and a comprehensive benefits package including paid time off, 4 health, dental, and vision coverage, disability insurance, paid parental leave, and a 401(k) retirement plan. The Company goes beyond compensation by investing in its employees' growth and development through professional development programs, ongoing training, and tuition reimbursement.
The Bank is required to attain and maintain a leverage ratio of 10.00% and a total capital to risk-weighted assets ratio of 13.00%, and as of December 31, 2023, the Bank did not meet these IMCRs.
The Bank is required to maintain a Tier 1 leverage ratio of 10.00% and a total capital ratio of 13.00%. As of December 31, 2024, the Bank met these minimum capital ratios. Until these minimum capital ratios have been lifted, the Bank is deemed to be less than well capitalized, thus adequately capitalized.
The Company offers a variety of services to commercial customers, including analysis checking, cash management deposit accounts, wire services, direct deposit payroll service, online banking, telephone banking, remote deposit, fraud detection services, and a full line of commercial lending options. The Company also offers property and casualty insurance and employee benefit plans and administration. Wealth and Trust Services.
The Company offers a variety of commercial banking services, including deposit accounts, treasury management solutions, wire services, online banking, fraud prevention services, procurement cards, and a wide range of commercial lending options. The Company can also offer property and casualty insurance through its minority interest in Hammond Insurance Agency, Inc. Wealth and Trust Services.
The Bank’s major expenses are interest on deposits and general and administrative expenses, such as employee salaries and benefits, federal deposit insurance premiums, data processing expenses, technology costs, and office occupancy expenses. On January 24, 2024, the Bank consented to the issuance of a consent order (the “Consent Order”) with the OCC.
The Company's major expenses are interest on deposits and general and administrative expenses, such as employee salaries and benefits, FDIC assessments, data processing expenses, technology costs, and professional services expenses.
Higher FDIC insurance expense relative to the prior period was primarily due to balance sheet growth and other factors such as lower profitability and regulatory capital levels, which increased the assessment rate. Capital Requirements The Federal Reserve, the OCC, and the FDIC have issued substantially similar capital requirements applicable to all banks and bank holding companies.
Capital Requirements The Federal Reserve, the OCC, and the FDIC have issued substantially similar capital requirements applicable to all banks and bank holding companies. On January 1, 2024, the Company became subject to the bank holding capital requirements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny of these factors could cause the Company to incur charge-offs to the ACL and additional increases in the ACL, which may have a material adverse effect on the Company's results of operations and capital. The Company’s concentration in loans secured by real estate may increase its future credit losses, which would negatively affect the Company’s financial results.
Biggest changeThe Company’s concentration in loans secured by real estate may increase its future credit losses, which would negatively affect the Company’s financial results. The Company offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans.
Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws and regulations may subject the Company to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage the Company’s reputation and otherwise adversely affect its operations, financial condition, and results of operations.
Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws and regulations may subject the Company to inquiries, examinations, and investigations that could result in requirements to modify or cease certain operations or practices or result in significant liabilities, fines, or penalties, and could damage the Company’s reputation and otherwise adversely affect its operations, financial condition, and results of operations.
The Company is exposed to many types of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees, directors or outsiders, unauthorized transactions by employees, operational errors, clerical or record-keeping errors, and errors resulting from faulty or disabled computer or communications systems.
The Company is exposed to many types of operational risks, including reputational, legal, and compliance risk, the risk of fraud or theft by employees, directors or outsiders, unauthorized transactions by employees, operational errors, clerical or record-keeping errors, and errors resulting from faulty or disabled computer or communications systems.
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 shares. In addition, new investors may have rights, preferences, and privileges that are senior to, and that could adversely affect, the Company’s existing shareholders.
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.
Any sustained period of decreased activity caused by an economic downturn, fewer refinancing transactions, higher interest rates, housing price pressure, or loan underwriting restrictions would adversely affect the Company’s mortgage originations and, 21 consequently, could significantly reduce its income from mortgage banking activities. As a result, these conditions would also adversely affect the Company’s results of operations.
Any sustained period of decreased activity caused by an economic downturn, fewer refinancing transactions, higher interest rates, housing price pressure, or loan underwriting restrictions would adversely affect the Company’s mortgage originations and, consequently, could significantly reduce its income from mortgage banking activities. As a result, these conditions would also adversely affect the Company’s results of operations.
If funding costs continue to rise in future periods, as a result of reliance on higher-cost deposits, further increases in market interest rates, rates paid by competitors, or otherwise, it could reduce the Company’s net interest margin and net interest income and could have an adverse effect on the Company’s business, financial condition, results of operations, and cash flows from operations.
If funding costs continue to rise in future periods, as a result of reliance on higher cost deposits, further increases in market interest rates, rates paid by competitors, or otherwise, it could reduce the Company’s net interest income and could have an adverse effect on the Company’s business, financial condition, results of operations, and cash flows from operations.
The market for financial services, including banking and consumer finance services, is increasingly affected by advances in technology, including developments in telecommunications, data processing, computers, automation, online banking, and tele-banking. The Company’s ability to compete successfully in its market may depend on the extent to which it is able to implement or exploit such technological changes.
The market for financial services, including banking and consumer finance services, is increasingly affected by advances in technology, including developments in telecommunications, data processing, computers, automation, online banking, and 17 tele-banking. The Company’s ability to compete successfully in its market may depend on the extent to which it is able to implement or exploit such technological changes.
The Company’s business requires the collection and retention of large volumes of customer data, including personally identifiable information (“PII”), in various information systems that the Company maintains and in those maintained by third- party service providers. The Company also maintains important internal company data such as PII about its employees and information relating to its operations.
The Company’s business requires the collection and retention of large volumes of customer data, including personally identifiable information (“PII”), in various information systems that the Company maintains and in those maintained by third-party service providers. The Company also maintains important internal company data such as PII about its employees 14 and information relating to its operations.
Revenues from mortgage banking generally are favorably impacted by decreasing interest rates and a low interest rate environment that creates the potential for mortgage loan refinancing activity. Conversely, revenues are adversely affected by rising interest rates, home affordability and inventory, increases in competitive pressures, and changing incentives for homeownership.
Revenues from mortgage banking generally are favorably impacted by decreasing interest rates and a low interest rate environment that creates the potential for mortgage loan refinancing and purchasing activity. Conversely, revenues are adversely affected by rising interest rates, home affordability and inventory, increases in competitive pressures, and changing incentives for homeownership.
Therefore, the Company’s shareholders may not be able to sell their shares at the volume, prices, or times that they desire. Shareholders should be financially prepared and able to hold shares for an indefinite period. 22 In addition, thinly-traded stocks can be more volatile than more widely traded stocks.
Therefore, the Company’s shareholders may not be able to sell their shares at the volume, prices, or times that they desire. Shareholders should be financially prepared and able to hold shares for an indefinite period. In addition, thinly-traded stocks can be more volatile than more widely traded stocks.
In addition, bank regulatory agencies periodically review its ACL and may, on occasion, require an increase in the provision for credit losses 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.
In addition, bank regulatory agencies periodically review the ACL and may, on occasion, require an increase in the provision for credit losses 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.
If the Company cannot provide reliable financial reports or prevent fraud, its reputation and operating results would be harmed. As part of its ongoing monitoring of internal controls, the Company may discover material weaknesses or significant deficiencies in its internal controls that require remediation.
If the Company cannot provide reliable financial reports or reasonably prevent fraud, its reputation and operating results would be harmed. As part of its ongoing monitoring of internal controls, the Company may discover material weaknesses or significant deficiencies in its internal controls that require remediation.
The Company's inability to maintain operating effectiveness of the internal controls over financial reporting could result in a material misstatement to financial statements or other disclosures, which could have an adverse effect on its business, financial condition, and results of operations.
The Company's inability to maintain operating effectiveness of the internal controls over financial reporting could result in a material misstatement to financial statements or other disclosures, which could have an 15 adverse effect on its business, financial condition, and results of operations.
Appraisals are only estimates of value and the independent appraisers may make mistakes of fact or judgment that 25 adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease.
Appraisals are only estimates of value and the independent appraisers may make mistakes of fact or judgment that adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease.
Although the Company has policies and procedures in place to verify the authenticity of its 18 customers, it cannot guarantee that such policies and procedures will prevent all fraudulent transfers. Such activity can result in financial liability and harm to the Company’s reputation.
Although the Company has policies and procedures in place to verify the authenticity of its customers, it cannot guarantee that such policies and procedures will prevent all fraudulent transfers. Such activity can result in financial liability and harm to the Company’s reputation.
If market interest rates rise or the Company’s competitors raise the rates they pay on deposits, the Company’s funding costs may increase, either because the Company raises its rates to avoid losing 26 deposits or because the Company must rely on more expensive sources of funding.
If market interest rates rise or the Company’s competitors raise the rates they pay on deposits, the Company’s funding costs may increase, either because the Company raises its rates to avoid losing deposits or because the Company must rely on more expensive sources of funding.
Risk of loss on a 24 construction or land development loan is largely dependent upon the accuracy of the initial estimate of the property’s value at completion of construction or development, the marketability of the property, and the bid price and estimated cost (including interest) of construction or development.
Risk of loss on a construction or land development loan is largely dependent upon the accuracy of the initial estimate of the property’s value at completion of construction or development, the marketability of the property, and the bid price and estimated cost (including interest) of construction or development.
CECL is generally viewed throughout the industry as the most significant change in accounting standards to affect financial institutions in decades as it fundamentally changes the 16 accounting for and estimation of the allowance for credit losses (“ACL”).
CECL is generally viewed throughout the industry as the most significant change in accounting standards to affect financial institutions in decades as it fundamentally changes the accounting for and estimation of the allowance for credit losses (“ACL”).
The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and future trends, all of which may undergo material changes.
The 21 determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and future trends, all of which may undergo material changes.
The occurrence of any such events in the future and the economic impact from such events could have a 19 material adverse effect on the Company's business, which, in turn, could have a material adverse effect on its financial condition and results of operations.
The occurrence of any such events in the future and the economic impact from such events could have a material adverse effect on the Company's business, which, in turn, could have a material adverse effect on its financial condition and results of operations.
If the Company is unable to attract and retain banking customers, it may be unable to continue to grow loan and deposit portfolios and its results of operations and financial condition may otherwise be adversely affected.
If the Company is unable to 20 attract and retain banking customers, it may be unable to continue to grow loan and deposit portfolios and its results of operations and financial condition may otherwise be adversely affected.
It may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers ability to repay their loans frequently depends on the successful rental of their properties.
It may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers' ability to repay their loans frequently depends on the successful rental of their properties.
In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not.
In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may 23 create the impression that a loan is adequately collateralized when it is not.
The Company’s banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies, and portfolio stress testing, as well as possibly higher levels of ACL and regulatory capital, which could have a material adverse effect on the Company’s results of operations.
The Company’s banking regulators generally give commercial real estate lending greater scrutiny and may require that banks with higher levels of commercial real estate loans implement improved underwriting, internal controls, risk management policies, and portfolio stress testing, as well as possibly higher levels of ACL and regulatory capital, which could have a material adverse effect on the Company’s results of operations.
The level of the ACL reflects management’s evaluation of relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectibility of the remaining cash flows over the contractual term of the financial assets.
The level of the ACL reflects management’s evaluation of relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets.
While subject to the Consent Order, the Bank will also be required to obtain an OCC non-objection prior to onboarding or signing a contract with a new third-party fintech relationship or offering new products or services or conducting new activities with or through existing third-party fintech relationships.
While subject to the Consent Order, the Bank will also be required to obtain non-objection from the OCC prior to onboarding or signing a contract with a new third-party fintech relationship or offering new products or services or conducting new activities with or through existing third-party fintech relationships.
Further, the Company’s failure to comply with these laws and regulations, has in the past and could subject it to restrictions on its business activities, fines, and other penalties, any of which could adversely affect the Company’s results of operations, capital base, and the price of its securities.
The Company’s failure to comply with these laws and regulations, has in the past and could in the future subject it to restrictions on its business activities, fines, and other penalties, any of which could adversely affect the Company’s results of operations, capital base, and the price of its securities.
Furthermore, the Company may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means.
Furthermore, the Company may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with it, particularly where such information is transmitted by electronic means.
From time to time, regulators implement changes to these regulatory capital adequacy guidelines. If the Company or the Bank fails to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition would be materially and adversely affected.
From time to time, regulators implement changes to these regulatory capital adequacy guidelines. If the Company or the Bank fail to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition would be materially and adversely affected.
These factors include, but are not limited to, analysts’ recommendations or projections, developments related to the Company’s business and operations, stock performance of other companies deemed to be peers, news reports of trends, concerns, and irrational exuberance on the part of investors, geopolitical uncertainty, and other issues related to the financial services industry, in general.
These factors include, but are not limited to, developments related to the Company’s business and operations, stock performance of other companies deemed to be peers, news reports of trends, concerns, and irrational exuberance on the part of investors, geopolitical uncertainty, and other issues related to the financial services industry, in general.
Because the Company’s loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in its percentage of nonperforming loans.
Because the Company’s loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase 22 in nonperforming loans.
Further, the growth in economic activity and in the demand for goods and services, coupled with labor shortages, supply chain disruptions and other factors, has contributed to rising inflationary pressures, the Federal Reserve’s responsive interest rate hikes, and the risk of recession.
The growth in economic activity and in the demand for goods and services, coupled with labor shortages, supply chain disruptions and other factors, has contributed to rising inflationary pressures, the Federal Reserve’s responsive interest rate hikes during 2022 and 2023, and the risk of recession.
The federal banking agencies, including the OCC, have emphasized that climate-related risks are faced by banking organizations of all types and sizes and are in the process of enhancing supervisory expectations regarding banks’ risk management practices. In December 2021, the OCC published proposed principles for climate risk management by banking organizations with more than $100 billion in assets.
The federal banking agencies, including the OCC, have emphasized that climate-related risks are faced by banking organizations of all types and sizes and are in the process of enhancing supervisory expectations regarding banks’ risk management practices. In October 2023, the OCC published principles for climate risk management by banking organizations with more than $100 billion in assets.
As indicated above, a significant portion of the Company’s loan portfolio consists of loans secured by real estate and it also holds a portfolio of foreclosed properties. The Company relies upon independent appraisers to estimate the value of such real estate.
As indicated above, a significant portion of the Company’s loan portfolio consists of loans secured by real estate and it may hold a portfolio of foreclosed properties. The Company relies upon independent appraisers to estimate the value of such real estate.
These laws and regulations, and regulatory actions implementing such law and regulations , including the Consent Order, among other matters, prescribe minimum capital requirements, impose limitations on the Company’s business activities, limit the dividends or distributions that it can pay, restrict the ability of institutions to guarantee its debt, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in its capital than GAAP.
These laws and regulations, and regulatory actions implementing such laws and regulations, including the Consent Order, among other matters, prescribe minimum capital requirements, impose limitations on the Company’s business activities, limit the dividends or distributions that it can pay, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in its capital than GAAP.
For more information regarding recent accounting pronouncements and their effects on the Company, including CECL, see “Recent Accounting Pronouncements” in Note 2 of the Company’s audited financial statements as of and for the year ended December 31, 2023.
For more information regarding recent accounting pronouncements and their effects on the Company, see “Recent Accounting Pronouncements” in Note 2 of the Company’s audited financial statements as of and for the year ended December 31, 2024.
The Company’s mortgage banking revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market, any of which could adversely impact the Company’s profits. Residential mortgage banking income, including mortgage service rights, represented approximately 35.0% of total noninterest income for the year ended December 31, 2023.
The Company’s mortgage banking revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market, any of which could adversely impact the Company’s profits. Residential mortgage banking income, including mortgage service rights, represented approximately 81.2% of total noninterest income for the year ended December 31, 2024.
At December 31, 2023, approximately 10.5% of the Company’s loan portfolio, or $255.9 million, consisted of construction and land development loans. Construction financing typically involves a higher degree of credit risk than financing on improved, owner-occupied real estate and improved, income producing real estate.
At December 31, 2024 and December 31, 2023, approximately 7.8% and 10.5% of the Company’s loan portfolio, or $166.3 million and $255.9 million, respectively, consisted of construction and land development loans. Construction financing typically involves a higher degree of credit risk than financing on improved, owner-occupied real estate and improved, income producing real estate.
The Consent Order requires the Bank and/or the board of directors of the Bank to, among other things, address and remediate Bank Secrecy Act/Anti-Money Laundering deficiencies, violations and corrective actions, enhance oversight of its third-party partnerships, submit to the OCC acceptable strategic and capital plans, and adopt, implement, and adhere to various revised and expanded risk-based policies, procedures, and processes.
The Consent Order requires the Bank and/or the board of directors of the Bank to, among other things, address and remediate BSA/AML deficiencies, violations and corrective actions, enhance oversight of its third-party partnerships, submit to the OCC acceptable strategic and capital plans, and adopt, implement, and adhere to various revised and expanded risk-based policies, procedures, and processes.
During 2022 and 2023, revenues from mortgage banking have decreased significantly, primarily due to lower mortgage volumes as demand declined as market interest rates increased significantly during that time. Loan production levels may continue to suffer if there is a sustained slowdown in the housing markets in which the Company conducts business or tightening credit conditions.
During 2023 and 2024, revenues from mortgage banking have decreased significantly compared to prior years, primarily due to lower mortgage volumes as demand declined as market interest rates remained elevated during that time. Loan production levels may continue to suffer if there is a sustained slowdown in the housing markets in which the Company conducts business or tightening credit conditions.
Third party vendors provide key components of the Company’s business operations such as data processing, recording, and monitoring transactions, online banking interfaces and services, internet connections, and network access. While the Company has selected these third-party vendors carefully, it does not control their actions.
The Company relies on other companies to provide key components of its business infrastructure. Third-party vendors provide key components of the Company’s business operations such as data processing, recording, and monitoring transactions, online banking interfaces and services, internet connections, and network access. While the Company has selected these third-party vendors carefully, it does not control their actions.
The Federal Reserve increased the target federal funds rate by 425 basis points during 2022 to a range of 425 to 450 basis points as of December 31, 2022 and by another 100 basis points during 2023 to a range of 525 to 550 basis points at December 31, 2023.
The Federal Reserve increased the target federal funds rate by 100 basis points during 2023 to a range of 525 to 550 basis points as of December 31, 2023, and then decreased by 100 basis points during 2024 to a range of 425 to 450 basis points at December 31, 2024.
Growth Strategy The Company may not be able to successfully manage its long-term growth, which may adversely affect its results of operations and financial condition. A key aspect of the Company’s long-term business strategy is its continued growth.
These costs and claims could adversely affect the Company’s results of operations. 24 Strategy The Company may not be able to successfully manage its long-term growth, which may adversely affect its results of operations and financial condition. A key aspect of the Company’s long-term business strategy is growth.
As of December 31, 2023, approximately 76.6% of the Company’s loans were secured by real estate, both residential and commercial, substantially all of which are located in its market area.
As of December 31, 2024 and December 31, 2023, approximately 80.8% and 76.4%, respectively, of the Company’s loans were secured by real estate, both residential and commercial, substantially all of which are located in its market area.
For example, in 2023, the CFPB brought enforcement actions against a number of financial institutions for overdraft practices that the CFPB alleged to be unlawful and ordered each of these institutions to pay a substantial civil money penalty in addition to customer restitution.
For example, the CFPB has brought enforcement actions against financial institutions for overdraft practices that the CFPB alleged to be unlawful and ordered each of these institutions to pay a substantial civil money penalty in addition to customer restitution and proposed rules to curb overdraft fees.
The Company may not be able to successfully continue its growth if it is unable to identify attractive markets, locations, or opportunities to expand in the future, or if the Company is subject to prolonged regulatory restrictions prohibiting growth or expansion of its operations.
The Company may not be able to successfully grow in the long-term if it is unable to execute on these initiatives or identify attractive markets, locations, or opportunities to expand in the future, or if the Company is subject to prolonged regulatory restrictions prohibiting growth or expansion of its operations.
The Company’s primary sources of funds are deposits and loan repayments. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans.
While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans.
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 the Company’s 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. 26 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.
In March 2023, Silicon Valley Bank and Signature Bank experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receiverships. In the aftermath, there was substantial market disruption and concern that diminished depositor confidence could spread across the banking industry, leading to deposit outflows that could destabilize other institutions.
In 2023 and 2024, several large regional banks experienced large deposit outflows coupled with insufficient liquidity to meet withdrawal demands, resulting in the institutions being placed into FDIC receivership. In the aftermath, there was substantial market disruption and concern that diminished depositor confidence could spread across the banking industry, leading to deposit outflows that could destabilize other institutions.
If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected.
The Company’s management cannot ensure that it can minimize interest rate risk. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected.
If the Company is the owner or former owner of a contaminated site, it may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect the Company’s results of operations.
If the Company is the owner or former owner of a contaminated site, it may be subject to claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including generation of new loans.
In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including generation of new loans. There can be no assurance that the Company will avoid increases in nonperforming assets in the future.
The Company and the Bank are subject to regulatory restrictions which limit their ability to pay dividends. The Company’s ability to make dividend payments on its common stock depends primarily on certain regulatory considerations and the receipt of dividends and other distributions from the Bank.
The Company’s ability to make dividend payments on its common stock depends primarily on certain regulatory considerations and the receipt of dividends and other distributions from the Bank.
This rapid increase in deposit accounts necessitates enhanced operational and control systems and additional qualified personnel to oversee and manage the increased operational and compliance burdens from these accounts, including those resulting from increased account opening, suspicious activity monitoring, network security controls related to ACH and payment systems, protection of customer records and data confidentiality, and consumer compliance matters, among others.
This level of deposit accounts necessitated enhanced operational and control systems and additional qualified personnel to oversee and manage the increased operational and compliance burdens from these accounts, including those resulting from increased account opening, suspicious activity monitoring, network security controls related to ACH and payment systems, protection of customer records and data confidentiality, and consumer compliance matters, among others, and may subject the Company to additional supervisory actions, operational and compliance risks, or reputational harm.
As of December 31, 2023, the Company had approximately $71.8 million of non-owner occupied office loans, representing approximately 3.0% of total loans outstanding at that date.
As of December 31, 2024, the Company had approximately $73.9 million of non-owner occupied office loans, representing approximately 8.7% of total loans outstanding at that date.
Satisfying these capital and IMCR requirements also may require the Bank to limit its banking operations and/or require the Company to raise additional capital in the future to improve regulatory capital levels, which could negatively affect the business, financial condition, and results of operations of the Company. 27 The Company may not be able to raise capital on acceptable terms, or at all.
Satisfying these capital requirements also may require the Bank to limit its banking operations and/or require the Company to raise additional capital in the future to improve regulatory capital levels, which could negatively affect the business, financial condition, and results of operations of the Company and the value of its common stock.
The Company’s business strategy over the past several years had included growing partnerships with fintech companies, which serve as a source of loan and deposit growth, interest and noninterest income, and technology-related solutions for the Company. The fintech BaaS partnerships have resulted, among other things, in rapid growth in the Company’s deposit base.
Starting in 2019 through late 2023, the Company’s business strategy included growing partnerships with fintech companies, which served as a source of loan and deposit growth, interest and noninterest income, and technology-related solutions for the Company. The fintech BaaS depository partnerships resulted in, among other things, rapid growth in the Company’s deposit base.
Nonperforming assets, which include nonaccrual loans and loans past due 90 days and still accruing interest, were $63.1 million, or 2.02% of total assets, as of December 31, 2023.
Nonperforming assets, which include nonaccrual loans, loans past due 90 days and still accruing interest, and other real estate owned ("OREO") were $25.7 million, or 0.94% of total assets, and $63.1 million, or 2.02% of total assets, as of December 31, 2024 and December 31, 2023, respectively.
Such sources historically have included Federal Home Loan Bank of Atlanta (“FHLB”) advances, sales of securities and loans, and federal funds lines of credit from correspondent banks, as well as additional out-of-market time deposits and brokered deposits. The Company’s ability to access borrowings from the FHLB is dependent upon providing collateral to secure FHLB borrowings.
Such sources historically have included Federal Home Loan Bank of Atlanta (“FHLB”) advances, sales of securities and loans, and federal funds lines of credit from correspondent banks, as well as additional out-of-market time deposits and brokered deposits.
For example, effective January 1, 2023, the Company adopted Accounting Standards Codification (“ASC”) 326, Financial Instruments - Credit Losses (referred herein as “current expected credit losses” or “CECL”).
Such changes could also require the Company to incur additional personnel or technology costs. For example, effective January 1, 2023, the Company adopted Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses (referred herein as “current expected credit losses” or “CECL”).
Future issuances of the Company’s securities could adversely affect the market price of the common stock and could be dilutive.
Future issuances of the Company’s securities, including upon the exercise of the warrants issued by the Company, could adversely affect the market price of the common stock and could be dilutive.
The Company is also utilizing third-party consultants and other advisors to assist in complying with the Consent Order and noninterest expense has increased, and may continue to increase, as a result.
The Company is also utilizing third-party consultants and other advisors to assist in complying with the Consent Order and noninterest expense has increased, and may continue to increase, as a result. There is no guarantee that the Company will ultimately address the OCC’s concerns and comply with all of the terms of the Consent Order.
They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt.
These types of loans are generally viewed as having more risk of default than residential and owner-occupied real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt.
The Company’s plans to expand could depress earnings in the short run, even if it efficiently executes a growth strategy leading to long-term financial benefits. Any of the foregoing could adversely affect the Company’s results of operations. Liquidity and Capital The Company’s liquidity needs could adversely affect results of operations and financial condition.
The Company’s plans to expand could depress earnings in the short run, even if it efficiently executes a growth strategy leading to long-term financial benefits. Any of the foregoing could adversely affect the Company’s results of operations. The Company may not be able to generate acceptable levels of profitability in the future.
The costs and limitations related to this additional regulatory scrutiny with respect to consumer product offerings and services may adversely affect the Company’s profitability. 15 The Company is subject to laws regarding the privacy, information security, and protection of personal information and any violation of these laws or another incident involving personal, confidential, or proprietary information of individuals could damage the Company’s reputation and otherwise adversely affect its business.
The Company is subject to laws regarding the privacy, information security, and protection of personal information and any violation of these laws or another incident involving personal, confidential, or proprietary information of individuals could damage the Company’s reputation and otherwise adversely affect its business.
These unrealized losses (net of income taxes) were approximately $45.1 million at both December 31, 2023 and December 31, 2022 compared to $3.6 million as of December 31, 2021.
These unrealized losses (net of income taxes) were approximately $42.5 million as of December 31, 2024 compared to $45.1 million as of December 31, 2023.
Any changes in these market conditions, in current accounting principles or interpretations of these principles could impact the Company’s assessment of fair value and thus the determination of credit losses associated with the securities in the investment securities portfolio, which could adversely affect the Company’s financial condition, capital ratios, and results of operations.
Any changes in these market conditions, in current accounting principles or interpretations of these principles could impact the Company’s assessment of fair value and thus the determination of credit losses associated with the securities in the investment securities portfolio, which could adversely affect the Company’s financial condition, capital ratios, and results of operations. 19 The Company’s investment securities portfolio, in particular, may be impacted by market conditions beyond its control, including rating agency downgrades of the securities, defaults of the issuers of the securities, lack of market pricing of the securities, inactivity or instability in the credit markets, and changes in market interest rates.
While public confidence in the banking system has stabilized, deposit outflows caused by reputational concerns or events affecting the banking industry generally could adversely affect the Company’s liquidity, financial condition, and results of operations.
While public confidence in the banking system has stabilized, deposit outflows caused by reputational concerns or events affecting the banking industry generally could adversely affect the Company’s liquidity, financial condition, and results of operations. 16 The Company is subject to a variety of operational risks, including reputational, legal, and compliance risk, and the risk of fraud or theft by employees, directors, or outsiders.
Although the 2022 Material Weakness was remediated in 2023 (see Item 9A, Controls and Procedures, in this Form 10-K), there can be no absolute assurances that future material weaknesses will not arise. Compliance with the requirements of Section 404, including the costs of remediation efforts relating to weaknesses, is expensive and time-consuming.
The Company has experienced material weaknesses in the past, and there can be no absolute assurances that future material weaknesses will not arise. Compliance with the requirements of Section 404, including the costs of remediation efforts relating to weaknesses, is expensive and time-consuming.
The Company operates in a highly-regulated industry and the laws and regulations that govern the Company’s operations, corporate governance, executive compensation, and financial accounting or reporting, including changes in them or the Company’s failure to comply with them, and regulatory actions implementing such law and regulations, may adversely affect the Company.
The Company operates in a highly regulated industry, and the laws and regulations that govern the Company’s operations, including changes in them or the Company’s failure to comply with them, and regulatory actions implementing such laws and regulations, may adversely affect the Company. The Company is subject to extensive regulation and supervision that govern almost all aspects of its operations.
Pursuant to the Consent Order, the Bank may not be deemed to be “well capitalized” while subject to the Consent Order, which restricts it 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, the Bank may not be deemed to be “well capitalized,” which restricts it from accepting, renewing, or rolling over brokered deposits except in compliance with certain applicable restrictions under federal 25 law. During the third quarter of 2024, the Bank received approval from the FDIC allowing it to accept, renew, and rollover brokered deposits.
The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers.
Regulations issued by the CFPB could adversely impact earnings due to, among other things, increased compliance costs or costs due to noncompliance. The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers.
The Company offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans. Credit risk and credit losses can increase if its loans are concentrated to borrowers who, as a group, may be uniquely or disproportionately affected by economic or market conditions.
Credit risk and credit losses can increase if its loans are concentrated to borrowers who, as a group, may be uniquely or disproportionately affected by economic or market conditions.
The Company has a moderate concentration of credit exposure in commercial real estate, and loans with this type of collateral are viewed as having a higher risk of default. As of December 31, 2023, the Company had approximately $870.5 million in loans secured by commercial real estate, representing approximately 35.8% of total loans outstanding at that date.
The Company has a moderate concentration of credit exposure in commercial real estate and loans with this type of collateral are viewed as having a higher risk of default.
The authorities that promulgate accounting standards, including the Financial Accounting Standards Board, the SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes are difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations.
Changes in accounting standards could impact reported earnings. The authorities that promulgate accounting standards, including the Financial Accounting Standards Board, the SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements.
Further, any new laws, rules and regulations, and regulatory actions implementing such laws and regulations, could make compliance more difficult or expensive or otherwise adversely affect the Company’s business and financial condition. Regulations issued by the CFPB could adversely impact earnings due to, among other things, increased compliance costs or costs due to noncompliance.
Compliance with laws and regulations, and regulatory actions implementing such laws and regulations, can be difficult and costly, and changes to laws and regulations could make compliance more difficult or expensive or otherwise adversely affect the Company’s business and financial condition.
In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of financial statements for prior periods. Such changes could also require the Company to incur additional personnel or technology costs.
These changes are difficult to predict and can materially impact how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retroactively, resulting in the restatement of financial statements for prior periods.
Other changes to statutes, regulations, or regulatory policies, or supervisory guidance, including changes in interpretation or implementation of statutes, regulations, policies or supervisory guidance, could affect the Company in substantial and unpredictable ways. Such additional regulation and supervision has increased, and may continue to increase, the Company’s costs and limit its ability to pursue business opportunities.
Changes to laws, regulations, or regulatory policies, or supervisory guidance, including changes in interpretation or implementation of laws, regulations, policies, or supervisory guidance, could affect the Company in substantial and unpredictable ways.
In addition, the process of identifying and recruiting individuals with the combination of skills and attributes required to carry out the Company’s strategy is often lengthy.
In addition, the process of identifying and recruiting individuals with the combination of skills and attributes required to carry out the Company’s strategy is often lengthy. The Company’s inability to identify, recruit, and retain talented personnel could limit its ability to pursue its strategic goals and materially adversely affect its business, financial condition, and results of operations.
Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Accordingly, changes in levels of market interest rates could materially and adversely affect the net interest spread, asset quality, loan origination volume, and the Company’s overall profitability.
Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Further, shifts in the Company’s mix of interest-earning assets or interest-bearing liabilities could adversely affect yields on assets or costs of funds, respectively.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company’s BCMP provides a structured framework for responding to actual or potential cybersecurity incidents, including escalation to the appropriate stakeholders. The BCMP is coordinated by the Business Continuity Manager, who reports to the Chief Information Officer (“CIO”), and key members of management who are embedded into the BCMP by its design.
Biggest changeThe Company’s BCMP provides a structured framework for responding to actual or potential cybersecurity incidents, including escalation to the appropriate stakeholders and restoring affected systems and services. The BCMP is evaluated and tested at least annually.
Due to reliance upon third-party service providers, the Company uses a variety of 28 methods and tools to assess providers’ system and organizational controls related to cybersecurity threats, which includes but is not limited to proof of the provider’s independent testing of data protection controls, imposition of contractual obligations, review of vulnerability and penetration testing, and review of data protection controls such as backups, encryption standards, and disaster recovery.
Due to reliance upon third-party service providers, the Company uses a variety of methods and tools to assess providers’ system and organizational controls related to cybersecurity threats, which includes but is not limited to proof of the provider’s independent testing of data protection controls, imposition of contractual obligations, review of vulnerability and penetration testing, and review of data protection controls such as backups, encryption standards, and disaster recovery.
Under the leadership of the CISO, the information security department is responsible for evaluating and developing the processes for monitoring, identifying, containing, and remediating the impact of cybersecurity risks, vulnerabilities, and threats. The CISO also directs technology efforts, both internally and through third-party service providers, to strengthen controls throughout the organization.
Under the leadership of the CISO, the information security department is responsible for evaluating and developing the processes for monitoring, identifying, containing, and remediating the impact of cybersecurity risks, vulnerabilities, and threats. The CISO also directs technology efforts, both internally and through third-party service providers , to strengthen controls throughout the organization and manage cybersecurity risks.
Although the Company has not experienced a material cybersecurity incident, it periodically experiences threats or is tested by bad actors, including phishing, smishing, and vishing. The Company believes it maintains a robust cybersecurity program designed to assess and manage risks from cyber threats.
Although the Company has not experienced a material cybersecurity incident, it periodically experiences threats or is tested by bad actors, including phishing, smishing, and vishing. 27 The Company believes it maintains a robust cybersecurity program designed to assess and manage risks from cyber threats.
The CIO and the CISO each have over 20 years of experience leading cybersecurity oversight, and others under their leadership have cybersecurity experience and certifications. However, the Company considers cybersecurity to be a shared responsibility and conducts periodic simulations and training for all employees. In 2024, the Company is scheduling two table-top scenario training exercises for all personnel.
The Company's Chief Information Officer and CISO each have over 20 years of experience leading cybersecurity oversight, and others under their leadership have cybersecurity experience and certifications. However, the Company considers cybersecurity to be a shared responsibility across the organization and conducts periodic simulations and training for all employees.
For more information about cybersecurity threats that could have a material impact on the Company's business, see the discussion in "The Company's operations may adversely be affected by cybersecurity risks" in Item 1A, Risk Factors, of this Form 10-K.
Awareness campaigns, mock phishing exercises, and tabletop exercises are conducted to help promote a culture of security within the Company. For more information about cybersecurity threats that could have a material impact on the Company's business, see the discussion in “The Company's operations may adversely be affected by cybersecurity risks” in Item 1A, Risk Factors, of this Form 10-K.
The BCMP is evaluated and tested at least annually. The Company's cybersecurity program is subject to multiple audits throughout the year primarily using third-party audit firms that possess particular expertise, under the leadership of the Company's internal audit function. Cybersecurity issues are brought before the Information Technology (“IT”) Steering Committee, which meets quarterly or as needed.
The Company's cybersecurity program is subject to multiple audits throughout the year, primarily using third-party independent audit firms that possess particular expertise, under the leadership of the Company's internal audit function. The CISO routinely presents a summary of the Company’s cybersecurity landscape to the Company’s board of directors.
Removed
This committee, chaired by the CIO, is composed of the CISO, Chief Operations and Technology Officer, Chief Risk Officer, Business Continuity Manager, Director of Information Technology, and Director of Internal Audit. At these meetings, committee members discuss relevant cybersecurity issues, which may include new threats, incidents, and information.
Removed
No less than quarterly, the chair of the Information Technology Steering Committee presents a summary of the Company’s cybersecurity landscape to the Company’s Enterprise Risk Management Committee of the board of directors. Additionally, the CIO presents an IT program update to the Company's board of directors, which includes cybersecurity topics.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2: PRO PERTIES The Company, through its subsidiaries, owns or leases buildings and office space that are used in the normal course of business. The headquarters of the Company is located at 1807 Seminole Trail, Charlottesville, Virginia 22901 in a building leased by the Bank.
Biggest changeITEM 2: PRO PERTIES The Company, through its subsidiaries, owns or leases buildings and office space that are used in the normal course of business. The headquarters of the Company is located at 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226 in a building leased by the Bank.
Additional information with respect to the amounts at which Company premises and equipment are carried and commitments under long-term leases is set forth in Part II, Item 8 - "Financial Statements and Supplementary Data", Note 5 - "Premises and Equipment, net" and Note 12 - "Leases", respectively, in this Form 10-K.
Additional information with respect to the amounts at which Company premises and equipment are carried and commitments under long-term leases is set forth in Part II, Item 8 - "Financial Statements and Supplementary Data", Note 5 - "Premises and Equipment, net," and Note 10 - "Leases", respectively, in this Form 10-K.
As of December 31, 2023, the Company's employees occupied an additional 42 properties, of which 18 were owned by the Company.
As of December 31, 2024, the Company's employees occupied an additional 38 properties, of which 19 were owned by the Company.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn December 2023, a purported shareholder of the Company commenced a putative class action in the U.S. District for the Eastern District of New York (No. 1:23-cv-08944) Hunter v. Blue Ridge Bankshares, Inc., et al).
Biggest changeOn December 5, 2023, an alleged 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) ( Russell Hunter v.
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 filings. The complaint seeks certification of a class action, unspecified damages, and attorneys fees.
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 related to accounting judgments in the Company’s SEC filings. The complaint seeks certification of a class action, unspecified damages, and attorney’s fees.
Removed
The putative class plaintiff intends to file an amended complaint after the court 29 appoints lead plaintiff and lead counsel. The Company believes the claims are without merit and no loss has been accrued for this lawsuit as of December 31, 2023.
Added
On December 20, 2024, a former Deputy Bank Secrecy Act Officer and manager at the Bank filed suit against the Company and the Company’s and the Bank’s Chief Executive Officer, in the Circuit Court of the City of Richmond (Virginia) alleging that she was retaliated against and constructively discharged in violation of the Virginia Whistleblower Protection Act, Va.
Removed
On August 12, 2019, a former employee of VCB and participant in the VCB Employee Stock Option Plan ("ESOP") filed a class action complaint against VCB, Virginia Community Bank, and certain individuals associated with the VCB ESOP in the U.S. District Court for the Western District of Virginia, Charlottesville Division (Case No. 3:19-cv-000450-GEC).
Added
Code § 40.1-27.3, and Bowman v. State Bank of Keysville , 331 S.E.2d 797 (Va. 1985). On December 30, 2024, the Company removed the matter to the United States District Court for the Eastern District of Virginia, where it 28 subsequently filed a motion to dismiss, which has since been fully briefed and is awaiting decision by the court.
Removed
The complaint alleges, among other things, that the defendants breached their fiduciary duties to VCB ESOP participants in violation of the Employee Retirement Income Security Act of 1974, as amended.
Added
There is no specified time by which the court’s decision must be rendered. The Company believes the plaintiff’s claims are without merit and will defend itself vigorously in the matter. The case caption is Porter v. Blue Ridge Bankshares, Inc. (No. 3:24-cv-909 (E.D. Va.)).
Removed
The complaint alleges that the VCB ESOP incurred damages “that approach or exceed $12 million.” The Company automatically assumed any liability of VCB in connection with this litigation as a result of its 2019 acquisition of VCB.
Added
Blue Ridge Bankshares, Inc., et al. ) on behalf of himself and any persons or entities who purchased the publicly traded stock of the Company between February 3, 2023 and October 31, 2023, both dates inclusive (the “Action”).
Removed
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").
Added
The putative class representative filed an amended complaint, and the Company filed a letter seeking permission to file a motion to dismiss. The parties engaged in non-binding mediation on December 5, 2024, during which the parties agreed in principle to settlement terms for $2.5 million.
Removed
As provided in the Settlement Agreement, the plaintiff has agreed to release the Company, the Bank, and related parties from all claims related to acts or omissions associated with the VCB ESOP, once the court hearing the case has granted final approval of the Settlement Agreement.
Added
On February 4, 2025, the plaintiff filed an unopposed motion for preliminary approval of the proposed class action settlement, which, if granted, will settle the Action and any claims related to the Action or that could have been brought in the Action by the parties, the parties’ counsel, or settlement class members (the “Motion”).
Removed
Pursuant to the Settlement Agreement, the Company has agreed to make a settlement payment of $6.0 million to a fund for the benefit of VCB ESOP participants, with $5.95 million due after final approval of the Settlement Agreement by the court.
Added
The Motion expressly disclaims any fault, liability, or wrongdoing on the part of the Company. The Company’s outside legal counsel has effected service, pursuant to 28 U.S.C. § 1715, of the Motion and related court filings to the Company’s federal and state regulators as well as to Attorneys General for all U.S. states and territories.
Removed
On February 22, 2024, the court granted preliminary approval of the Settlement Agreement and a final hearing is scheduled in early June 2024, at which it is expected that the court will grant final approval of the Settlement Agreement.
Added
The court has not yet ruled on the Motion. The Company has submitted an insurance claim for the amount of the settlement plus the cost of defense, less a deductible, which has been expensed for the year ended December 31, 2024.
Removed
If the court grants final approval of the Settlement Agreement, the ongoing lawsuit will be dismissed with prejudice, and all similar claims that were or could have been brought relating to the VCB ESOP will be released and barred.
Removed
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 proposed settlement.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends The Company paid two quarterly dividends totaling $0.245 per common share in the year ended December 31, 2023. 31 On October 30, 2023, the board of directors of the Company determined to suspend future quarterly dividend payments until further notice. The decision was based on the desire to preserve capital.
Biggest changeDividends On October 30, 2023, the board of directors of the Company determined to suspend future quarterly dividend payments until further notice. The decision was based on the desire to preserve capital. The type, amount, and timing of any dividend payments are established by the Company’s board of directors.
A discussion of certain restrictions and limitations on the ability of the Bank to pay dividends to the Company, and the ability of the Company to pay dividends to shareholders of its common stock, is set forth in Part I, Item 1, Business, of this Form 10-K under the heading “Supervision and Regulation.” Stock Repurchases There were no repurchases of the Company's common stock during the year ended December 31, 2023.
A discussion of certain restrictions and limitations on the ability of the Bank to pay dividends to the Company, and the ability of the Company to pay dividends to shareholders of its common stock, is set forth in Part I, Item 1, Business, of this Form 10-K under the heading “Supervision and Regulation.” Stock Repurchases There were no repurchases of the Company's common stock as part of a stock repurchase program during the year ended December 31, 2024.
The dividend type, amount, and timing are established by the Company’s board of directors. In making its decisions regarding the payment of dividends on the Company’s common stock, the board of directors considers the Company's operating results, financial condition, capital adequacy, regulatory requirements, shareholders' return, and other factors.
In making its decisions regarding the payment of dividends on the Company’s common stock, the board of directors considers the Company's regulatory requirements and restrictions, operating results, financial condition, capital adequacy, shareholders' return, and other factors.
There were 19,198,379 shares of the Company’s common stock outstanding at the close of business on March 7, 2024, which were held by approximately 3,260 shareholders of record. The closing price of the Company's common stock on December 31, 2023 was $3.03 per common share compared to $12.49 per common share as of December 31, 2022.
There were 87,789,843 shares of the Company’s common stock outstanding at the close of business on March 3, 2025, which were held by approximately 2,575 shareholders of record. The closing price of the Company's common stock on December 31, 2024 was $3.22 per common share compared to $3.03 per common share as of December 31, 2023.
Removed
Five-Year Stock Performance Graph The following five-year stock performance graph compares the cumulative total shareholder return (assuming reinvestment of dividends) on the Company's common stock to the Invesco KBW Regional Banking ETF (NASDAQ ticker: "KBWR") and the Russell 2000® Index (ticker: "RUT") for the five-year period ended December 31, 2023.
Added
However, when incentive stock awards vest, employees and directors may elect to have the Company withhold shares of the Company’s common stock as payment for income and payroll taxes. The following table provides information regarding repurchases of common stock for the three months ended December 31, 2024.
Removed
This comparison assumes $100.00 was invested on December 31, 2018 in the Company’s common stock and the comparison indices and the cumulative return is measured as of each subsequent fiscal year-end.
Added
Shares Purchased (1) Average Price Paid per Share Shares Purchased as Part of a Publicly Announced Program Approximate Value of Shares that May Yet Be Purchased Under the Program October 1, 2024 through October 31, 2024 71 $ 2.93 — — November 1, 2024 through November 30, 2024 752 3.53 — — December 1, 2024 through December 31, 2024 — — — — Total 823 — — (1) For the three months ended December 31, 2024, employees and directors of the Company elected to have 823 shares of their vesting restricted stock awards withheld as payment for tax obligations.
Removed
Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Blue Ridge Bankshares, Inc. $ 100.00 $ 124.19 $ 108.61 $ 168.36 $ 121.45 $ 29.76 Invesco KBW Regional Banking ETF 100.00 123.57 112.52 153.08 142.03 136.24 Russell 2000® Index 100.00 123.72 146.44 166.50 130.60 150.31 The performance graph above does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates the performance graph by reference therein.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6: [Reserved] 32 Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A: Quantitative and Qualitative Disclosures About Market Risk 53 Item 8: Financial Statements and Supplementary Data 55 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 108 Item 9A: Controls and Procedures 109
Biggest changeItem 6: [Reserved] 30 Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A: Quantitative and Qualitative Disclosures About Market Risk 53 Item 8: Financial Statements and Supplementary Data 58 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 109 Item 9A: Controls and Procedures 110 Item 9B: Other Information 111 Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 111 PART III Item 10: Directors, Executive Officers and Corporate Governance 112 Item 11: Executive Compensation 112 Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 112 Item 13: Certain Relationships and Related Transactions, and Director Independence 113 Item 14: Principal Accountant Fees and Services 113 PART IV Item 15: Exhibits and Financial Statement Schedules 114 Item 16: Form 10-K Summary 116 PA RT I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

118 edited+85 added−68 removed35 unchanged
Biggest changeFor the Years Ended December 31, 2023 2022 2021 (Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Assets: Taxable securities $ 358,122 $ 10,120 2.83 % $ 386,363 $ 8,744 2.26 % $ 304,685 $ 5,192 1.70 % Tax-exempt securities (1) 17,386 403 2.32 % 20,562 423 2.06 % 12,518 302 2.41 % Total securities 375,508 10,523 2.80 % 406,925 9,167 2.25 % 317,203 5,494 1.73 % Interest-earning deposits in other banks 119,361 5,367 4.50 % 83,544 1,208 1.45 % 114,316 135 0.12 % Federal funds sold 5,086 253 4.97 % 33,989 364 1.07 % 45,314 47 0.10 % Loans held for sale 56,951 1,554 2.73 % 44,543 1,494 3.35 % 145,075 4,162 2.87 % Paycheck Protection Program loans (2) 7,354 26 0.35 % 18,224 535 2.94 % 351,179 17,311 4.93 % Loans held for investment (including loan fees) (2,3,4) 2,469,806 151,362 6.13 % 2,028,828 108,972 5.37 % 1,659,845 76,460 4.61 % Total average interest-earning assets 3,034,066 169,085 5.57 % 2,616,053 121,740 4.65 % 2,632,932 103,609 3.94 % Less: allowance for credit losses (39,700 ) (16,474 ) (13,036 ) Total noninterest-earning assets 240,507 225,253 201,222 Total average assets $ 3,234,873 $ 2,824,832 $ 2,821,118 Liabilities and stockholders’ equity: Interest-bearing demand, money market deposits, and savings $ 1,322,542 $ 37,195 2.81 % $ 1,131,718 $ 7,625 0.67 % $ 908,418 $ 2,244 0.25 % Time deposits (5) 641,645 22,774 3.55 % 412,671 3,635 0.88 % 540,471 4,193 0.78 % Total interest-bearing deposits 1,964,187 59,969 3.05 % 1,544,389 11,260 0.73 % 1,448,889 6,437 0.44 % FHLB borrowings (6) 263,259 11,782 4.48 % 113,478 3,497 3.08 % 147,919 1,211 0.82 % FRB borrowings 41,672 1,992 4.78 % 4,881 114 2.34 % 245,196 790 0.32 % Subordinated notes (7) 39,899 2,210 5.54 % 39,953 2,215 5.54 % 46,226 2,627 5.68 % Total average interest-bearing liabilities 2,309,017 75,953 3.29 % 1,702,701 17,086 1.00 % 1,888,230 11,065 0.59 % Noninterest-bearing demand deposits 661,053 821,208 658,063 Other noninterest-bearing liabilities 40,963 37,042 30,700 Stockholders’ equity 223,840 263,881 244,125 Total average liabilities and stockholders’ equity $ 3,234,873 $ 2,824,832 $ 2,821,118 Net interest income and margin (8) $ 93,132 3.07 % $ 104,654 4.00 % $ 92,544 3.51 % Cost of funds (9) 2.56 % 0.68 % 0.43 % Net interest spread (10) 2.28 % 3.65 % 3.35 % (1) Computed on a fully taxable equivalent basis assuming a 21% federal income tax rate.
Biggest changeFor the Years Ended December 31, 2024 2023 (Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Assets: Taxable securities $ 326,405 $ 9,406 2.88 % $ 358,122 $ 10,120 2.83 % Tax-exempt securities (1) 12,575 317 2.52 % 17,386 403 2.32 % Total securities 338,980 9,723 2.87 % 375,508 10,523 2.80 % Interest-earning deposits in other banks 157,087 7,993 5.09 % 119,361 5,367 4.50 % Federal funds sold 6,232 335 5.38 % 5,086 253 4.97 % Loans held for sale 57,225 8,157 14.25 % 56,951 8,022 14.09 % Loans held for investment (including loan fees) (2,3,4) 2,286,446 134,182 5.87 % 2,477,160 144,920 5.85 % Total average interest-earning assets 2,845,970 160,390 5.64 % 3,034,066 169,085 5.57 % Less: allowance for credit losses (31,896 ) (39,700 ) Total noninterest-earning assets 205,453 240,507 Total average assets $ 3,019,527 $ 3,234,873 Liabilities and stockholders’ equity: Interest-bearing demand, money market, and savings $ 921,674 $ 23,716 2.57 % $ 1,322,542 $ 37,195 2.81 % Time (5) 997,470 45,354 4.55 % 641,645 22,774 3.55 % Total interest-bearing deposits 1,919,144 69,070 3.60 % 1,964,187 59,969 3.05 % FHLB borrowings 213,003 9,095 4.27 % 263,259 11,784 4.48 % FRB borrowings 23,087 1,080 4.68 % 41,672 1,992 4.78 % Subordinated notes (6) 39,829 2,414 6.06 % 39,899 2,209 5.54 % Total average interest-bearing liabilities 2,195,063 81,659 3.72 % 2,309,017 75,954 3.29 % Noninterest-bearing demand deposits 493,133 661,053 Other noninterest-bearing liabilities 41,327 40,963 Stockholders’ equity 290,004 223,840 Total average liabilities and stockholders’ equity $ 3,019,527 $ 3,234,873 Net interest income and margin (7) $ 78,731 2.77 % $ 93,131 3.07 % Cost of funds (8) 3.04 % 2.56 % Net interest spread (9) 1.92 % 2.28 % (1) Computed on a fully taxable equivalent basis assuming a 22.32% and 22.65% income tax rate for the years ended December 31, 2024 and 2023, respectively.
Nonperforming Assets. The following table presents a summary of nonperforming assets and various measures as of the dates stated.
The following table presents a summary of nonperforming assets and various measures as of the dates stated.
The Company uses short-term and long-term borrowings from various sources, including FHLB advances and FRB advances, to fund assets and operations. The following table presents information on the balances and interest rates on borrowings as of and for periods stated.
The Company uses short-term and long-term borrowings from various sources, including FHLB advances and FRB advances, to fund assets and operations. The following table presents information on the balances and interest rates on borrowings as of and for the periods stated.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial 50 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.
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.
These ungraded securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds. Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed and U.S.
These securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds. Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed and U.S.
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 33 contained in this Form 10-K. Therefore, the Company cautions you not to place undue reliance on its forward-looking information and statements.
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-K. Therefore, the Company cautions you not to place undue reliance on its forward-looking information and statements.
This discussion should be read in conjunction with the Company’s consolidated financial statements and the notes thereto presented in Item 8, Financial Statements and Supplementary Information, of this Form 10-K. Cautionary Note About Forward-Looking Statements The Company makes certain forward-looking statements in this Form 10-K that are subject to risks and uncertainties.
This discussion should be read in conjunction with the Company’s consolidated financial statements and the notes thereto presented in Item 8, Financial Statements and Supplementary Information, of this Form 10-K. 30 Cautionary Note About Forward-Looking Statements The Company makes certain forward-looking statements in this Form 10-K that are subject to risks and uncertainties.
Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan’s effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan discounted for estimated costs to sell 34 the collateral for collateral-dependent loans.
Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan’s effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan discounted for estimated costs to sell the collateral for collateral-dependent loans.
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.
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 51 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.
Per ASC 740, the objective is to (a) recognize the amount of taxes payable or refundable for the current year, and (b) 35 defer tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or federal income tax returns.
Per ASC 740, the objective is to (a) recognize the amount of taxes payable or refundable for the current year, and (b) defer tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or federal income tax returns.
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 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 general allowance for any specific loan or category.
Historical loss rates used in the quantitative model are derived using both the Bank’s and peer bank data obtained from publicly-available sources (i.e., federal call reports). The Bank’s peer group utilized is comprised of financial institutions of relatively similar size (i.e., $3 - $5 billion of total assets) and in similar markets.
Historical loss rates used in the quantitative model are derived using both the Bank’s and peer bank data obtained from publicly-available sources (i.e., federal call reports). The Bank’s peer group utilized is comprised of financial institutions of relatively similar size (i.e., $1 - $5 billion of total assets) and in similar markets.
The DCF method also considers factors such as loan term, prepayment or curtailment assumptions, and other relevant economic factors that could affect future cash flows. By discounting the cash flows, this method incorporates the time value of money and reflects the credit risk inherent in the loan.
The DCF method also considers factors such as loan term, prepayment or curtailment assumptions, accrual status, and other relevant economic factors that could affect future cash flows. By discounting the cash flows, this method incorporates the time value of money and reflects the credit risk inherent in the loan.
All loans are underwritten within specific lending policy guidelines that are designed to maximize the Company’s profitability within an acceptable level of credit and 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.
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. 39 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.
Securities in the investment portfolio may be classified as held to maturity, if the Company has the ability and intent to hold them to maturity, in which case they would be carried at amortized cost. The Company did not hold any investment securities classified as held to maturity as of December 31, 2023 or December 31, 2022.
Securities in the investment portfolio may be classified as held to maturity, if the Company has the ability and intent to hold them to maturity, in which case they would be carried at amortized cost. The Company did not hold any investment securities classified as held to maturity as of December 31, 2024 or December 31, 2023.
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.
Interest rate risk arises from timing differences in the repricing and cash flows of interest-earning assets and interest-bearing liabilities, changes in the expected cash flows 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.
As of December 31, 2023 and 2022, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default, to be of the best quality and carry the smallest degree of investment risk.
As of December 31, 2024 and 2023, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default, to be of the best quality and carry the smallest degree of investment risk.
As previously noted, the Company adopted CECL effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings ("CECL Transitional Amount") over a three-year period.
As previously noted, the Company adopted CECL effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings (“CECL Transitional Amount”) over a three-year period.
The Company does not intend to sell nor does it believe that it will be required to sell, any of its temporarily impaired securities prior to the recovery of the amortized cost. No ACL has been recognized for investment securities as of December 31, 2023.
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. No ACL has been recognized for investment securities as of December 31, 2024 and 2023.
The three-year phase-in of the CECL Transitional Amount to regulatory capital will be 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report.
The 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.
Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of trends in delinquencies, nonaccrual loans, charged-off loans, changes in volume and terms of loans, effects of changes in lending policy, experience and depth of management, regional and local economic trends and conditions, concentrations of credit, competition, and loan review results.
Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of trends in delinquencies, changes in volume and terms of loans, effects of changes in lending policy, experience and depth of management, regional and local economic trends and conditions, concentrations of credit, and loan review results.
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 December 31, 2023 and 2022, commitments under outstanding financial stand-by letters of credit totaled $12.6 million and $28.3 million, respectively.
Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of December 31, 2024 and 2023, commitments under outstanding financial stand-by letters of credit totaled $12.5 million and $12.6 million, respectively.
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 Company’s ability to satisfy the conditions to closing of, and consummate, the Private Placement (the “Private Placement”); • the impact of, and the ability to comply with, the terms of the Consent Order with the 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; 32 • the Company’s ability to manage its fintech operations, including implementing enhanced controls and procedures, complying with the Consent Order, other regulatory directives and applicable laws and regulations, maintaining 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; • 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 industry's reputation become damaged; • the ability to attain and maintain capital levels adequate to support the Company's business and to comply with the Consent Order and other regulatory directives placed upon the Bank; • 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; • changes in technological and social media; • 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 this Form 10-K and in filings the Company makes from time to time with the SEC.
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 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, and managing the wind down 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 ability of the Company to implement cost-saving initiatives and efficiency measures, as well as increase earning assets, in order to yield acceptable levels of profitability; • the ability to generate sufficient future taxable income for the Company to realize its deferred tax assets, including the net operating loss carryforward; • 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; 31 • 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, the application thereof by bank regulatory bodies, and the three branches of the federal government; • 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; • 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 this Form 10-K and in filings the Company makes from time to time with the SEC.
At December 31, 2023 and 2022, securities with a fair value of $35.8 million and $241.9 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB.
At December 31, 2024 and 2023, securities with a fair value of $268.9 million and $35.8 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB.
(2) Includes deferred loan fees/costs. (3) Nonaccrual loans have been included in the computations of average loan balances. (4) Includes accretion of fair value adjustments (discounts) on acquired loans of $2.6 million, $7.4 million, and $2.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.
(2) Includes deferred loan fees/costs. (3) Nonaccrual loans have been included in the computations of average loan balances. (4) Includes accretion of fair value adjustments (discounts) on acquired loans of $1.1 million and $2.6 million for the years ended December 31, 2024 and 2023, respectively.
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.
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 the ALCO comprised of members of management.
Interest expense in the 2023 and 2022 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $0.8 million and $1.5 million, respectively, which was a reduction to interest expense.
Interest expense in the 2024 and 2023 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $0.3 million and $0.8 million, respectively, which was a reduction to interest expense.
Provision for credit losses in both the 2023 and 2022 periods were primarily attributable to specific reserves for specialty finance loans that were originated in 2022. The Company ceased making loans identified as specialty finance in late 2022.
Provision for credit losses in the 2023 period was primarily attributable to specific reserves for specialty finance loans that were originated in 2022. The Company ceased making loans identified as specialty finance in late 2022.
As of December 31, 2023 and 2022, carrying values of specialty finance loans totaled $34.2 million and $65.7 million, respectively, with specific reserves of $9.6 million and $11.4 million, respectively, as of the same dates. Net loan charge-offs were $27.0 million for the year ended December 31, 2023, compared to $7.1 million for the year ended December 31, 2022.
As of December 31, 2024 and 2023, carrying values of specialty finance loans totaled $0 and $34.2 million, respectively, with specific reserves of $0 and $9.6 million, respectively, as of the same dates. Net loan charge-offs were $10.0 million for the year ended December 31, 2024, compared to $27.0 million for the year ended December 31, 2023.
Capital adequacy is an important measure of financial stability and performance. The Company’s objectives are to maintain a level of capitalization that is sufficient to support the Company's strategic objectives. Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies.
The Company’s objectives are to maintain a level of capitalization that is sufficient to support the Company's strategic objectives. Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies.
Primarily as a result of market interest rates in the year ended December 31, 2023, the Company’s portfolio of securities available for sale had a net unrealized loss of approximately $58.6 million as of the same date. Of the unrealized loss in the portfolio at December 31, 2023, approximately 78.9% was related to securities backed by U.S. government agencies.
Primarily as a result of market interest rates in the year ended December 31, 2024, the Company’s portfolio of securities available for sale had a net unrealized loss of approximately $55.5 million as of the same date. Of the unrealized loss in the portfolio at December 31, 2024, approximately 81.0% was related to securities backed by U.S. government agencies.
Net interest income (on a taxable equivalent basis) was $93.1 million for the year ended December 31, 2023 compared to $104.7 million for the year ended December 31, 2022, while net interest margin was 3.07% and 4.00% for the same respective periods.
Net interest income (on a taxable equivalent basis) was $78.7 million for the year ended December 31, 2024 compared to $93.1 million for the year ended December 31, 2023, while net interest margin was 2.77% and 3.07% for the same respective periods.
The ALCO is responsible for monitoring the Company’s interest rate risk in conjunction with liquidity and capital management. 52 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.
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 firm to model its interest rate sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity.
The following table presents the composition of the Company’s available for sale securities portfolio, at amortized cost, as of the dates stated. December 31, 2023 2022 (Dollars in thousands) Balance Percent of total Balance Percent of total Securities available for sale Mortgage backed securities $ 212,214 56.0 % $ 230,015 55.7 % U.S.
The following table presents the composition of the Company’s available for sale securities portfolio, at amortized cost, as of the dates stated. December 31, 2024 2023 (Dollars in thousands) Balance Percent of total Balance Percent of total Securities available for sale Mortgage backed securities $ 199,453 54.3 % $ 212,214 56.0 % U.S.
Consequently, a positive $3.5 million after-tax cumulative effect adjustment was recorded to stockholders' equity as of January 1, 2022. 36 Five Year Summary of Selected Financial Data As of and for the years ended December 31, (Dollars and shares in thousands, except per share data) 2023 2022 2021 2020 2019 Income Statement Data: Interest income $ 168,995 $ 121,652 $ 103,546 $ 54,460 $ 30,888 Interest expense 75,954 17,085 11,065 9,950 9,520 Net interest income 93,041 104,567 92,481 44,510 21,368 Provision for credit losses 22,323 25,687 117 10,450 1,742 Net interest income after provision for credit losses 70,718 78,880 92,364 34,060 19,626 Noninterest income 28,541 48,092 86,988 55,850 17,816 Noninterest expense 158,103 104,776 110,988 67,236 31,806 (Loss) income from continuing operations before income tax expense (58,844 ) 22,196 68,364 22,674 5,636 Income tax (benefit) expense attributable to continuing operations (7,071 ) 5,199 15,740 4,837 985 Net (loss) income from continuing operations (51,773 ) 16,997 52,624 17,837 4,651 Net income (loss) from discontinued operations — 337 (144 ) (140 ) (47 ) Net income from discontinued operations attributable to noncontrolling interest — (1 ) (3 ) (1 ) (24 ) Net (loss) income attributable to Blue Ridge Bankshares, Inc. $ (51,773 ) $ 17,333 $ 52,477 $ 17,696 $ 4,580 Per Common Share Data: Diluted (loss) earnings per share from continuing operations (1) $ (2.73 ) $ 0.90 $ 2.95 $ 2.07 $ 0.74 Dividends declared per share (1) (2) 0.245 0.490 0.435 0.285 0.380 Book value per common share (1) 9.69 13.13 14.76 12.61 10.88 Balance Sheet Data: Total assets $ 3,117,554 $ 3,130,465 $ 2,665,139 $ 1,498,258 $ 960,811 Loans held for investment, gross (including PPP loans) 2,430,947 2,411,059 1,807,578 1,016,694 646,834 Loans held for sale 46,337 69,534 121,943 152,931 55,646 Securities 352,607 399,374 396,050 120,648 128,897 Total deposits 2,566,032 2,502,507 2,297,771 945,109 722,030 Subordinated notes, net 39,855 39,920 39,986 24,506 9,800 FHLB borrowings 210,000 311,700 10,111 115,000 124,800 FRB borrowings 65,000 51 17,901 281,650 — Stockholders' equity 185,989 248,793 277,139 108,200 92,337 Weighted average common shares outstanding - basic (1) 18,939 18,811 17,841 8,535 6,221 Weighted average common shares outstanding - diluted (1) 18,939 18,825 17,851 8,535 6,221 Financial Ratios: Return on average assets (1.60 )% 0.61 % 1.86 % 1.44 % 0.61 % Return on average equity (23.13 )% 6.57 % 21.50 % 17.65 % 6.94 % Net interest margin 3.07 % 4.00 % 3.51 % 3.49 % 3.34 % Efficiency ratio 130.04 % 68.63 % 62.15 % 67.49 % 81.78 % Dividend payout ratio (8.97 )% 54.44 % 14.80 % 13.75 % 51.61 % Capital and Credit Quality Ratios: Average equity to average assets 6.92 % 9.34 % 8.65 % 7.08 % 8.79 % Allowance for credit losses to loans held for investment, excluding PPP loans 1.48 % 1.28 % 0.68 % 1.90 % 0.71 % Nonperforming loans to total assets 2.02 % 2.69 % 0.60 % 0.44 % 0.54 % Nonperforming assets to total assets 2.02 % 2.70 % 0.61 % 0.44 % 0.54 % Net charge-offs to total loans held for investment 1.13 % 0.30 % 0.10 % 0.12 % 0.12 % (1) Share and per share figures have been adjusted for all periods presented to reflect the Company's 3-for-2 stock split effective April 30, 2021.
Five Year Summary of Selected Financial Data As of and for the years ended December 31, (Dollars and shares in thousands, except per share data) 2024 2023 2022 2021 2020 Income Statement Data: Interest income $ 160,320 $ 168,995 $ 121,652 $ 103,546 $ 54,460 Interest expense 81,659 75,954 17,085 11,065 9,950 Net interest income 78,661 93,041 104,567 92,481 44,510 (Recovery of) provision for credit losses (5,100 ) 22,323 25,687 117 10,450 Net interest income after provision for credit losses 83,761 70,718 78,880 92,364 34,060 Noninterest income 13,573 28,375 47,945 86,988 55,850 Noninterest expense 113,841 157,937 104,629 110,988 67,236 (Loss) income from continuing operations before income tax expense (16,507 ) (58,844 ) 22,196 68,364 22,674 Income tax (benefit) expense attributable to continuing operations (1,122 ) (7,071 ) 5,199 15,740 4,837 Net (loss) income from continuing operations (15,385 ) (51,773 ) 16,997 52,624 17,837 Net income (loss) from discontinued operations — — 337 (144 ) (140 ) Net income from discontinued operations attributable to noncontrolling interest — — (1 ) (3 ) (1 ) Net (loss) income attributable to Blue Ridge Bankshares, Inc. $ (15,385 ) $ (51,773 ) $ 17,333 $ 52,477 $ 17,696 Per Common Share Data: Diluted (loss) earnings per share from continuing operations (1) $ (0.31 ) $ (2.73 ) $ 0.90 $ 2.95 $ 2.07 Dividends declared per share (1) — 0.245 0.490 0.435 0.285 Book value per common share (1) 3.86 9.69 13.13 14.76 12.61 Balance Sheet Data: Total assets $ 2,737,260 $ 3,117,554 $ 3,130,465 $ 2,665,139 $ 1,498,258 Loans held for investment, gross 2,111,797 2,430,947 2,411,059 1,807,578 1,016,694 Loans held for sale 30,976 46,337 69,534 121,943 152,931 Securities and investments 336,144 352,607 399,374 396,050 120,648 Total deposits 2,179,442 2,566,032 2,502,507 2,297,771 945,109 Subordinated notes, net 39,789 39,855 39,920 39,986 24,506 FHLB borrowings 150,000 210,000 311,700 10,111 115,000 FRB borrowings — 65,000 51 17,901 281,650 Stockholders' equity 327,788 185,989 248,793 277,139 108,200 Weighted average common shares outstanding - basic (1) 49,124 18,939 18,811 17,841 8,535 Weighted average common shares outstanding - diluted (1) 49,124 18,939 18,825 17,851 8,535 Financial Ratios: Return on average assets (0.51 )% (1.60 )% 0.61 % 1.86 % 1.44 % Return on average equity (5.31 )% (23.13 )% 6.57 % 21.50 % 17.65 % Net interest margin 2.77 % 3.07 % 4.00 % 3.51 % 3.49 % Efficiency ratio 123.43 % 130.08 % 68.60 % 62.15 % 67.49 % Dividend payout ratio — (8.97 )% 54.44 % 14.80 % 13.75 % Capital and Credit Quality Ratios: Average equity to average assets 9.60 % 6.92 % 9.34 % 8.65 % 7.08 % Allowance for credit losses to loans held for investment 1.09 % 1.48 % 1.27 % 0.67 % 1.36 % Nonperforming loans to total assets 0.93 % 2.02 % 2.69 % 0.60 % 0.44 % Nonperforming assets to total assets 0.94 % 2.02 % 2.70 % 0.61 % 0.44 % Net charge-offs to total loans held for investment 0.48 % 1.13 % 0.30 % 0.10 % 0.12 % (1) Share and per share figures have been adjusted for all periods presented to reflect the Company's 3-for-2 stock split effective April 30, 2021. 35 Comparison of Results of Operations for the Years Ended December 31, 2024 and 2023 For the year ended December 31, 2024, the Company reported a net loss of $15.4 million compared to a net loss of $51.8 million for 2023.
A net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book (i.e., financial statement) and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
Deferred tax assets and liabilities are determined based on the tax effects of the temporary differences between the book (i.e., financial statement) and tax bases of the various balance sheet assets and liabilities, and give current recognition to changes in tax rates and laws.
The 2030 Note bears interest at the rate of 6.00% per annum until June 1, 2025, at which date the rate will reset quarterly, equal to the three-month SOFR determined on the date of the applicable interest period plus 587 basis points. Interest on the 2030 Note is payable semi-annually in arrears. Liquidity .
The 2030 Note bears an interest rate of 6.0% per annum until June 1, 2025, at which date the rate will reset quarterly to the current three-month CME Term SOFR interest rate plus 587 basis points. Interest on the 2030 Note is payable semi-annually in arrears.
For the year ended December 31, 2023, the Company recorded an income tax benefit of $7.1 million (effective income tax rate of 12.0%) compared to income tax expense of $5.3 million (effective income tax rate of 23.3%) for the same period of 2022.
For the year ended December 31, 2024, the Company recorded an income tax benefit of $1.1 million (effective income tax rate of 6.8%) compared to income tax benefit of $7.1 million (effective income tax rate of 12.0%) for the same period of 2023.
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.
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.
Restricted equity investments consisted of stock in the FHLB (carrying basis $12.3 million and $14.7 million at December 31, 2023 and 2022, respectively), Federal Reserve Bank of Richmond ("FRB") stock (carrying basis of $5.9 million and $6.1 million at December 31, 2023 and 2022, respectively), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both December 31, 2023 and 2022).
Restricted equity investments consisted of stock in the FHLB (carrying basis $9.4 million and $12.3 million at December 31, 2024 and 2023, respectively), FRB stock (carrying basis of $9.4 million and $5.9 million at December 31, 2024 and 2023, respectively), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both December 31, 2024 and 2023).
The fair value of the Company’s investment securities available for sale was $321.1 million and $354.3 million at December 31, 2023 and 45 2022, respectively.
The fair value of the Company’s investment securities available for sale was $312.0 million and $321.1 million at December 31, 2024 and 2023, respectively.
The Company reviews its available for sale investment securities portfolio for potential credit losses at least quarterly. At December 31, 2023 and 2022, the majority of securities in an unrealized loss position were of investment grade; however, a few did not have a third-party investment grade available.
The Company reviews its available for sale investment securities portfolio for potential credit losses at least quarterly. At December 31, 2024 and 2023, the majority of securities in an unrealized loss position were of investment grade; however, a portion did not have a third-party investment grade available (securities with fair values of of $29.3 million and $20.5 million, respectively).
The increase in net charge-offs in the 2023 period was primarily attributable to charge-offs of specialty finance loans. 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 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.
Provision for credit losses in the 2023 period was primarily composed of specific reserves on the previously noted group of specialty finance loans, partially offset by a credit to provision for credit losses on unfunded commitments, as the Company actively worked to reduce these balances.
Provision for credit losses in 2023 was primarily composed of specific reserves on the previously reported group of specialty finance loans, partially offset by a credit to provision for credit losses on unfunded commitments, as the Company actively worked to reduce these balances. Noninterest Income . The following table provides detail for noninterest income and changes for the periods stated.
Treasury and agencies 79,856 21.0 % 80,073 19.4 % State and municipal 50,682 13.3 % 60,018 14.5 % Corporate bonds 36,902 9.7 % 42,909 10.4 % Total $ 379,654 100.0 % $ 413,015 100.0 % 46 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 periods stated.
Treasury and agencies 79,430 21.6 % 79,856 21.0 % State and municipal 50,233 13.7 % 50,682 13.3 % Corporate bonds 38,453 10.4 % 36,902 9.7 % Total $ 367,569 100.0 % $ 379,654 100.0 % 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 periods stated.
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 or obtain approval prior to acquiring branches or opening new lines of business, and be subject to increased regulatory scrutiny and to limitations on asset growth.
Until such levels are maintained and the minimum required ratios are lifted, the Bank is deemed to be less than well capitalized, thus adequately capitalized. 49 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.
The net loss of $51.8 million for the year ended December 31, 2023 included an after-tax goodwill impairment charge of $26.8 million and a $4.8 million after-tax settlement reserve for the ESOP litigation assumed in the 2019 acquisition of VCB. 37 Net Interest Income.
The net loss of $51.8 million for the year ended December 31, 2023 included an after-tax goodwill impairment charge of $26.8 million and a $4.7 million after-tax settlement reserve for the the previously disclosed Employee Stock Ownership Plan ("ESOP") litigation assumed in the 2019 acquisition of Virginia Community Bankshares, Inc. ("VCB").
Average interest-earning assets were $3.03 billion for the year ended December 31, 2023 compared to $2.62 billion for the same period of 2022, a $418.0 million increase.
Average interest-earning assets were $2.85 billion for the year ended December 31, 2024 compared to $3.03 billion for the same period of 2023, a $188.1 million decrease.
(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $0.8 million, $1.5 million, and $3.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.
(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $0.3 million and $0.8 million for the years ended December 31, 2024 and 2023, respectively. (6) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $100 thousand for both years ended December 31, 2024 and 2023.
The cost of average interest-bearing liabilities increased to 3.29% in 2023 from 1.00% in 2022, while the cost of funds increased to 2.56% in 2023 from 0.68% in 2022.
The cost of average interest-bearing liabilities increased to 3.72% in 2024 from 3.29% in 2023, while the cost of funds increased to 3.04% in 2024 from 2.56% in 2023.
A deferred tax liability is recognized for all temporary differences that will result in future taxable income; a deferred tax asset is recognized for all temporary differences that will result in future tax deductions, potentially reduced by a valuation allowance.
Temporary differences are reversed in the period in which an amount or amounts become taxable or deductible. A deferred tax liability is recognized for all temporary differences that will result in future taxable income; a deferred tax asset is recognized for all temporary differences that will result in future tax deductions, potentially reduced by a valuation allowance.
Loans are charged-off against the ACL when management believes the loan balance is no longer collectible. Subsequent recoveries of previously charged-off amounts (recoveries) are recorded as increases to the ACL.
Allowance for Credit Losses ("ACL") The allowance for credit losses represents management’s best estimate of credit losses over the remaining life of the loan portfolio. Loans are charged-off against the ACL when management believes the loan balance is no longer collectible. Subsequent recoveries of previously charged-off amounts (recoveries) are recorded as increases to the ACL.
The provision for credit losses is an amount sufficient to bring the ACL to an estimated balance that management considers adequate to absorb lifetime expected losses in the Company’s held for investment loan portfolio. The ACL is a valuation account that is deducted from the loans’ recorded investment to present the net amount expected to be collected on the loans.
The provision for credit losses is an amount sufficient to bring the ACL to an estimated balance that management considers adequate to absorb lifetime expected losses in the Company’s held for investment loan portfolio.
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 December 31, 2023 and December 31, 2022. There can be no assurance that adjustments to the ACL will not be required in the future.
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 December 31, 2024 and December 31, 2023.
The Company has an ACL management "work group", which includes the Chief Financial Officer, Chief Credit Officer, Chief Accounting Officer, and head of the Bank's special assets group, who approve the key methodologies and assumptions, as well as the final ACL.
The Company has an ACL management "work group", which includes executive and senior management of the accounting and credit administration teams, who approve the key methodologies and assumptions, as well as the final ACL.
Accretion and amortization of purchase accounting adjustments had a 12 basis point and 35 basis point positive effect on net interest margin for the same respective periods. The decrease in net interest income in 2023 was primarily due higher rates on deposits, primarily fintech-related accounts and brokered deposits.
Accretion and amortization of purchase accounting adjustments had a 5 basis point and 12 basis point positive effect on net interest margin for the same respective periods. The decrease in net interest income in 2024 was primarily due to lower average balances of loans held for investment and higher rates on deposits, primarily time deposits.
The Company's subordinated notes are comprised of a $25 million issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”) and a $15 million issuance in May 2020 maturing June 1, 2030 (the “2030 Note”). The 2029 Notes bear interest at 5.625% per annum, through October 14, 2024, payable semi-annually in arrears.
The Company's subordinated notes are comprised of a $25 million issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”) and a $15 million issuance in May 2020 maturing June 1, 2030 (the “2030 Note”).
The following tables present the capital and capital ratios to which the Bank is subject and the amounts and ratios to be adequately and well capitalized for the dates stated. Adequately capitalized ratios include the conversation buffer, if applicable.
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.
The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings.
In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value. Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings.
As a result of the Consent Order, subsequent to December 31, 2023, 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.
The ALCO monitors brokered deposit concentrations as part of its liquidity risk management program. The Bank is prohibited from accepting, renewing, or rolling over any brokered deposits, except in compliance with certain applicable restrictions under federal law, while subject to the Consent Order.
The provision for credit losses was $22.3 million for the year ended December 31, 2023 compared to $25.7 million for the year ended December 31, 2022, a decrease of $3.4 million.
The Company recorded a recovery of credit losses of $5.1 million for the year ended December 31, 2024 compared to a provision for credit losses of $22.3 million for the year ended December 31, 2023, a decrease of $27.4 million.
In addition, bank regulatory agencies periodically review the Bank's ACL and may, on occasion, 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. 43 The following table presents a summary of the activity in the Company's ACL and the ratio of net charge-offs to average loans outstanding for the periods stated.
In addition, bank regulatory agencies periodically review the Bank's ACL and may, on occasion, 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. 41 The following tables present an analysis of the change in the ACL by loan type as of the dates and for the periods stated.
The principal sources of funds for the Company are core deposits, which include transaction accounts (demand deposits and money market accounts), time deposits, and savings accounts, all of which provide the Bank a source of fee income and cross-marketing opportunities. Core deposits are generally a low-cost source of funding for the Bank and are preferred to brokered 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.
(9) Cost of funds is total interest expense divided by total interest-bearing liabilities and non interest-bearing demand deposits.
(7) Net interest margin is net interest income divided by average interest-earning assets. (8) Cost of funds is total interest expense divided by total interest-bearing liabilities and non interest-bearing demand deposits.
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.
The effective interest rate on the 2030 Note was 6.08% for the year ended December 31, 2024. 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.
Loan terms vary as to interest rate and repayment and collateral requirements based on the type of loan requested and the creditworthiness of the borrower.
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.
Also contributing to the decline in residential mortgage banking income were fair value adjustments to MSR assets, which were a negative $2.8 million in the 2023 period compared to a positive $2.2 million in the 2022 period. Fair value adjustments are primarily driven by market interest rates and related assumptions.
Also contributing to the decline in noninterest income was the sale of MSR assets, which resulted in a loss on sale of $3.6 million, while fair value adjustments to MSR assets was a positive $619 thousand in 2024 compared to a negative $2.8 million in 2023. Fair value adjustments are primarily driven by market interest rates and related assumptions.
This change in accounting method, which was an irrevocable election, was prospective in nature and resulted in an after-tax difference in carrying values of its MSR assets under the two methods at the beginning of the year.
This change in accounting method, which was an irrevocable election, was prospective in nature and resulted in an after-tax difference in carrying values of its MSR assets under the two methods at the beginning of 2022. Consequently, a positive $3.5 million cumulative effect adjustment was recorded to stockholders’ equity as of January 1, 2022.
The evaluation of the recoverability of deferred tax assets requires management to make significant judgments regarding the releases of temporary differences and future profitability, among other items. The Company concluded that, as of December 31, 2023, no valuation allowance was required on the Company's deferred tax asset.
The evaluation of the recoverability of deferred tax assets requires management to make significant judgments regarding the releases of temporary differences and future profitability, among other items.
The following table presents the average balance sheets for each of the years ended December 31, 2023, 2022, and 2021. In addition, the amounts of interest earned on interest-earning assets, with related taxable equivalent yields, and interest expense on interest-bearing liabilities, with related rates, are presented.
In addition, the amounts of interest earned on interest-earning assets, with related taxable equivalent yields, and interest expense on interest-bearing liabilities, with related rates, are presented.
For the year ended December 31, 2023 2022 (Dollars in thousands) Average Balance Rate Average Balance Rate Noninterest-bearing demand deposits $ 661,053 — $ 821,208 — Interest-bearing deposits: Demand deposits 733,141 3.14 % 567,897 0.93 % Savings 132,812 3.51 % 150,947 0.32 % Money market deposits 456,589 2.09 % 412,874 0.45 % Time deposits 641,645 3.55 % 412,671 0.88 % Total interest-bearing deposits 1,964,187 1,544,389 Total average deposits $ 2,625,240 $ 2,365,597 48 The following table presents maturities of time deposits for certificate of deposits $250 thousand or greater as of the dates stated.
For the year ended December 31, 2024 2023 (Dollars in thousands) Average Balance Average Rate Average Balance Average Rate Noninterest-bearing demand $ 493,133 — $ 661,053 — Interest-bearing: Demand 432,099 2.22 % 733,141 3.14 % Savings 108,093 4.63 % 132,812 3.51 % Money market 381,482 2.40 % 456,589 2.09 % Time 997,470 4.55 % 641,645 3.55 % Total interest-bearing 1,919,144 1,964,187 Total average deposits $ 2,412,277 $ 2,625,240 The following table presents maturities of time deposits for certificates of deposits $250 thousand or greater as of the dates stated.
The cost of fintech-related deposits was 3.82% in 2023, while the cost of core deposits (also excluding brokered deposits) was 2.03% in the same period. Brokered time deposits also contributed to the higher interest expense in the 2023 period in the amount of $14.5 million.
The cost of fintech-related deposits was 3.86% in 2024, while the cost of deposits of customers in the Bank's primary markets (also excluding brokered deposits) was 3.15% in the same period. Brokered time deposits also contributed to the higher interest expense in the 2024 period in the amount of $23.9 million.
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.
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.
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 severity of the effect of instantaneous increases in interest rates as shown above is due to the timing of pricing change in the Company's interest-bearing liabilities compared to its interest-earning assets.
December 31, 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 $ 3,288 3.8 % $ 6,628 6.7 % +300 basis points 3,347 3.8 % 5,842 5.9 % +200 basis points 2,877 3.3 % 4,610 4.7 % +100 basis points 1,798 2.1 % 2,751 2.8 % Base case -100 basis points (2,978 ) (3.4 %) (4,205 ) (4.3 %) -200 basis points (6,468 ) (7.4 %) (9,650 ) (9.8 %) -300 basis points (9,831 ) (11.2 %) (15,174 ) (15.4 %) -400 basis points (12,664 ) (14.5 %) (19,666 ) (20.0 %) 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 December 31, 2024 is primarily the result of the decrease in the Bank’s fintech BaaS deposits.
At December 31, 2023, the Company had future commitments outstanding totaling $15.3 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.
Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At December 31, 2024, the Company had future commitments outstanding totaling $7.1 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.
December 31, (Dollars in thousands) 2023 2022 Maturing in: 3 months or less $ 30,547 $ 10,642 Over 3 months through 6 months 19,961 14,699 Over 6 months through 12 months 36,254 15,423 Over 12 months 9,500 35,075 $ 96,262 $ 75,839 Borrowings.
December 31, (Dollars in thousands) 2024 2023 Maturing in: 3 months or less $ 38,758 $ 30,547 Over 3 months through 6 months 33,845 19,961 Over 6 months through 12 months 60,308 36,254 Over 12 months 31,117 9,500 $ 164,028 $ 96,262 Borrowings.
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.
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. 52
As of December 31, 2023, the Company had pledged securities with a total par value of $260.9 million (amortized cost and fair value of $262.7 million and $218.7 million, respectively) as collateral for the Bank Term Funding Program ("BTFP"), established by the Federal Reserve.
As of December 31, 2024, the Company had pledged securities with a fair value of $16.3 million as collateral for the FRB Discount Window, and as of December 31, 2023, the Company had pledged $260.9 million as collateral for the FRB Bank Term Funding Program (“BTFP”).
December 31, 2023 2022 (Dollars in thousands) Amount % of Total Deposits Amount % of Total Deposits Noninterest-bearing demand $ 506,248 19.7 % $ 640,101 25.6 % Interest-bearing demand and money market deposits 1,049,536 40.9 % 1,318,799 52.7 % Savings 117,923 4.6 % 151,646 6.1 % Time deposits 892,325 34.8 % 391,961 15.6 % Total deposits $ 2,566,032 100.0 % $ 2,502,507 100.0 % Total deposits include uninsured deposits of $573.9 million and $923.2 million as of December 31, 2023 and 2022, respectively, representing 22.3% and 46.0% of total deposits, respectively.
December 31, 2024 2023 (Dollars in thousands) Amount Percent of Total Deposits Amount Percent of Total Deposits Noninterest-bearing demand $ 452,690 20.8 % $ 506,248 19.7 % Interest-bearing demand and money market 598,875 27.5 % 1,049,536 40.9 % Savings 100,857 4.6 % 117,923 4.6 % Time 1,027,020 47.1 % 892,325 34.8 % Total deposits $ 2,179,442 100.0 % $ 2,566,032 100.0 % 46 Estimated uninsured deposits totaled approximately $399.3 million as of December 31, 2024, or 18.0% of total deposits, compared to $573.9 million, or 22.3% of total deposits, as of December 31, 2023.
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.
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.

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