10q10k10q10k.net

What changed in BLUE RIDGE BANKSHARES, INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of BLUE RIDGE BANKSHARES, INC.'s 2022 and 2023 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 2023 report.

+481 added−424 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-10)

Top changes in BLUE RIDGE BANKSHARES, INC.'s 2023 10-K

481 paragraphs added · 424 removed · 298 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

73 edited+34 added−32 removed100 unchanged
Biggest changeCapital Requirements The Federal Reserve, the OCC, and the FDIC have issued substantially similar capital requirements applicable to all banks and bank holding companies. 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.
Biggest changeIn 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”).
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.
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.
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. 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. 2 The Company qualifies as an “emerging growth company”, as defined in federal securities laws.
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, 12 and limit the ability to pursue business opportunities in an efficient manner.
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.
Failure to comply with OFAC requirements could have serious legal, financial, and reputational consequences for the Company. 10 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, also provide new protections against the transfer and use of customer information by financial institutions.
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.
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.
The Bank’s other major 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, and income associated with wealth and trust management services.
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 OCC has primary supervisory and 5 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 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 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 strong 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. Environmental, Social and Governance The Company is committed to promoting sound Environmental, Social and Governance (“ESG”) practices through board of directors and management oversight.
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.
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.
In the 8 event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment.
The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing.
The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report potential money laundering and terrorist financing.
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, 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 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.
Management believes that the Company's compensation programs offer competitive pay and benefits, including paid time off for vacations and sick leave, a 401(k) plan, health, dental, and vision plans, life and disability coverage, wellness plans, paid training, including tuition reimbursement, and pre-tax flexible spending accounts.
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.
The Bank’s primary federal regulator is the Office of the Comptroller of the Currency (the “OCC”). 1 The Bank’s primary source of revenue is interest income from its lending activities.
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.
At December 31, 2022, 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 central North Carolina.
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.
In addition, Section 18(c) of the Federal Deposit Insurance Act, commonly known as the “Bank Merger Act,” requires the prior written approval of the OCC before any national bank may (i) merge or consolidate with, (ii) purchase or otherwise acquire the assets of, or (iii) assume the deposit liabilities of, another bank if the resulting institution is to be a national bank.
In addition, Section 18(c) of the FDI Act, commonly known as the “Bank Merger Act,” requires the prior written approval of the OCC before any national bank may (i) merge or consolidate with, (ii) purchase or otherwise acquire the assets of, or (iii) assume the deposit liabilities of, another bank if the resulting institution is to be a national bank.
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, usually directly to Freddie Mac, Fannie Mae, and Ginnie Mae.
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 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 plans.
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 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 4.5%, plus a 2.5% “capital conservation buffer” (effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of 7%), (ii) a ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets ("Tier 1 Leverage 6 ratio").
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").
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 6.5%; (ii) a Tier 1 capital to risk-weighted assets ratio of at least 8.0%; (iii) a total capital to risk-weighted assets ratio of at least 10.0%; and (iv) a Tier 1 Leverage ratio of at least 5.0%.
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 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 central North Carolina. The Company’s retail mortgage operations are primarily in the Mid-Atlantic and Southern regions of the United States, while the Company's wholesale mortgage operations are nationwide.
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.
As of December 31, 2022, the Company had not been made aware of any instances of non-compliance with the guidance.
As of December 31, 2023, the Company had not been made aware of any instances of non-compliance with the guidance.
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 (“BaaS”) to its fintech partners.
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 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, 2022 and 2021, the Company recorded expense of $1.3 million and $1.0 million, respectively, for FDIC insurance premiums.
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.
BaaS is a model that provides products and banking services to nonbank fintech partners, which are, in turn, offered to a broad base of consumers and small businesses through internet-enabled connections. The Company refers to BaaS as an 3 offering to those fintech partners that generate deposits and provide payment services.
BaaS is a model that provides products and banking services to nonbank fintech partners, which are, in turn, offered to a broad base of consumers and small businesses through internet-enabled connections. The Company refers to BaaS as an offering to fintech partners that generates deposits and provides payment services.
Failure to comply with consumer protection requirements may also result in failure to obtain any required bank regulatory 9 approval for merger or acquisition transactions the Company may wish to pursue or being prohibited from engaging in such transactions even if approval is not required.
Failure to comply with consumer protection requirements may also result in failure to obtain any required bank regulatory approval for merger or acquisition transactions or in being prohibited from engaging in such transactions even if approval is not required.
Loans in this segment are underwritten 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 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.
With respect to the Bank, the “prompt corrective action” regulations pursuant to Section 38 of the FDI Act incorporate a common equity Tier 1 capital ratio and increase certain other capital ratios.
With respect to banks, the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act ("FDI Act") incorporate a common equity Tier 1 capital ratio and increase certain other capital ratios.
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.
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.
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 11 obligations; (vi) current debt obligations, alimony, and child support; (vii) the monthly debt-to-income ratio or residual income; and (viii) credit history.
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.
Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. As a general rule, the amount of a dividend may not exceed, without prior regulatory approval, the sum of net income in the calendar year to date and the retained net earnings of the immediately preceding two calendar years.
As a general rule, the amount of a dividend may not exceed, without prior regulatory approval, the sum of net income in the calendar year to date and the retained net earnings of the immediately preceding two calendar years.
The Written Agreement principally concerns the Bank’s fintech line of business and requires the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering, and information technology risks stemming from its fintech partnerships.
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.
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 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.
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 Mortgage and a wholesale mortgage business operating as LenderSelect Mortgage Group (“LenderSelect”).
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 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.
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.
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, 2 Orange, Petersburg, Richmond, Shenandoah, Suffolk, Virginia Beach, Warsaw, and White Stone, Virginia, and in Greensboro, North Carolina.
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.
Department of Agriculture (“USDA”) guidelines and afford the Company guarantees under these programs. 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.
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.
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.
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 Bank has a designated CRA officer who monitors the Bank’s compliance under the CRA. Governance. The Company operates under a strong governance structure, starting with the chairman of the board of directors that is independent from management. Members of the board of directors routinely undergo evaluations to assess their effectiveness.
The Bank has a designated CRA officer who monitors the Bank’s compliance under the CRA. The Company operates under a governance structure, starting with the chairman of the board of directors who is independent from management.
The Bank exceeded the thresholds to be considered well capitalized as of December 31, 2022. 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 above the adequately capitalized risk-based capital ratios of 2.50% for all ratios, except the tier 1 leverage ratio.
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.
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.
To comply with these obligations, the Company has implemented internal practices, procedures, and controls. 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.
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.
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.
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.
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 impact the source, cost of funds, and the rates of return on investments.
The Company files annual, quarterly and current reports, proxy statements and other information with the 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.
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.
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.
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.
Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The Bank was rated “satisfactory” in its most recent CRA evaluation. In May 2022, the federal bank regulatory agencies jointly issued a proposed rule intended to strengthen and modernize the CRA regulatory framework.
Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The Bank was rated “satisfactory” in its most recent CRA evaluation. On October 24, 2023, the federal bank regulatory agencies issued a final rule to modernize their respective CRA regulations.
Employees operate under policies approved by the Company’s or the Bank’s board of directors and complete as many as 33 courses per year, covering topics such as preventing harassment, confidentiality of data, and unfair banking practices. Human Capital Resources The success of the Company is directly attributable to its exceptional and dedicated team of employees.
Employees operate under policies approved by the Company’s or the Bank’s board of 4 directors and, depending on job duties, complete between 13 and 21 courses per year, covering topics such as preventing harassment, confidentiality of data, and unfair banking practices. Human Capital Resources The Company is dependent upon a dedicated team of employees.
(“Bay Banks”), a bank holding company conducting substantially all its operations through its subsidiaries Virginia Commonwealth Bank and VCB Financial Group, Inc.
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.
The Company’s guaranteed government lending and fintech markets span across the United States. Products and Services Mortgage Loans on Real Estate. The Company’s mortgage loans on real estate comprise the largest segment of its loan portfolio. Mortgage loans on real estate include family residential properties, 1-4 family investment properties, home equity loans, commercial properties, and owner-occupied commercial properties.
The Company’s guaranteed government lending and markets accessed through fintech partnerships span across the United States. Products and Services Mortgage Loans on Real Estate. The Company’s mortgage loans on real estate comprise the largest segment of its loan portfolio.
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.
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.
The common equity Tier 1 capital ratio was 10.25% for the Bank as of December 31, 2022. The Tier 1 and total capital to risk-weighted asset ratios of the Bank were 10.25% and 11.15%, respectively, as of December 31, 2022. The Tier 1 Leverage ratio for the Bank was 9.25% as of December 31, 2022.
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%.
Immediately following the merger, Virginia Community Bank, merged with and into the Bank. Pursuant to the acquisition, the Company acquired total assets of approximately $242.5 million and assumed total liabilities of approximately $219.2 million. In the merger, the Company issued 1,312,919 shares of its common stock and made cash payments to VCB shareholders totaling $16.6 million in the aggregate.
(“VCB”), the bank holding company of Virginia Community Bank based in Louisa, Virginia. Immediately following the merger of VCB into the Company, Virginia Community Bank, merged with and into the Bank. Pursuant to the acquisition, the Company acquired total assets of approximately $242.5 million and assumed total liabilities of approximately $219.2 million.
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 August 29, 2022, the Bank entered into a formal written agreement (the “Written Agreement”) with the OCC.
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.
Management focuses on designing compensation, incentive, and benefit programs to ensure that the Company is competitive in attracting and retaining top talent in the market, while emphasizing the importance of diversity, equity, and inclusion.
Management, under the direction of the Compensation Committee of the board, designs compensation, incentive, and benefit programs to ensure that the Company is competitive in attracting and retaining top talent in the market.
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. Loans are for varying terms and may be at fixed or adjustable interest rates. Residential Mortgage Loans.
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.
Management also believes in giving back to the communities in which the Company serves. In 2022, the Company committed approximately $440 thousand of financial donations to many community organizations and nonprofits, including first responders, colleges and universities, youth athletics, and the arts. In addition, the Company's employees donate countless hours volunteering in business associations and helping the underserved.
In 2023, the Company committed approximately $310 thousand of financial donations to community and not-for-profit organizations, including first responders, colleges and universities, youth athletics, and the arts. In addition, the Company's employees donate countless hours volunteering in business associations and helping the underserved. The Company had 507 full-time and 27 part-time employees as of December 31, 2023.
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. Loans in this category provide customers access to capital that avoid many of the challenges of conventional commercial lending. Loans are generally underwritten pursuant to U.S. Small Business Administration (“SBA”) or U.S.
Loans in this category provide customers access to capital that avoid many of the challenges of conventional commercial lending. Loans are generally underwritten pursuant to U.S. Small Business Administration (“SBA”) or U.S. Department of Agriculture guidelines and afford the Company guarantees under these 3 programs.
The Bank earns origination fees and a premium on servicing rights, if the loans are sold with servicing retained. Commercial Real Estate Loans. Loans in this category include loans on real estate used for commercial purposes.
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.
Management believes that fostering an environment that values diversity, equity, and inclusion creates an organization that is able to embrace, leverage, and respect differences amongst the 4 Company's employees and customers. Management believes that such an environment results in improved employee morale and higher levels of job satisfaction, which ultimately translates into a better customer experience.
Management believes that fostering an environment that values diversity, equity, and inclusion creates an organization that is able to embrace, leverage, and respect differences amongst the Company's employees and customers. Management also believes in giving back to the communities in which the Company serves.
These CBLR rules were modified in response to the COVID-19 pandemic. See “Coronavirus Aid, Relief, and Economic Security Act and Consolidated Appropriations Act, 2021” below. The Company 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.
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.
Fintech companies provide technologies to enable the delivery of digital bank services, which generate interest income, fees, and deposits and increase the Bank’s customer reach beyond its traditional branch footprint. Two of the Company's fintech relationships provide the Bank access to other fintech companies and vastly expand the Bank’s customer reach.
Fintech companies provide technologies to enable the delivery of digital bank services, and generate interest income, fee income, and deposits, and increase the Bank’s customer reach beyond its traditional branch footprint. At the end of 2023, the Bank had active partnerships including Unit Finance (“Unit”), Flexible Finance, Increase, Upgrade, Kashable, Marlette, Jaris, and Grow Credit.
The Company also partners with certain of the fintech providers that accommodate lending programs, both consumer and small business. Competition The financial services industry is highly competitive.
The Company expects to substantially reduce its involvement in BaaS in 2024. Fintech Lending Programs. The Company also partners with certain of the fintech providers that accommodate lending programs to both consumer and small businesses.
The Federal Reserve exerts a substantial influence on interest rates and credit conditions, primarily through open market operations in U.S. Government securities, setting the reserve requirements of member banks, and establishing the discount rate on member bank borrowings.
Part 359. As with other financial institutions, the earnings of the Bank are affected by general economic conditions and by the monetary policies of the Federal Reserve. The Federal Reserve exerts a substantial influence on interest rates and credit conditions, primarily through open market operations in U.S.
In November 2021, the federal banking agencies approved a final rule that, among other things, requires banking organizations to notify their primary regulator within 36 hours of becoming aware of a “computer-security incident” that rises to the level of a “notification incident.” The rule also requires bank service providers to notify their banking organization customers as soon as possible after becoming aware of similar incidents.
Specifically, the rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” as those terms are defined in the rule.
As of December 31, 2022, the Company had total assets of approximately $3.14 billion, total gross loans of approximately $2.48 billion, total deposits of approximately $2.50 billion, and stockholders’ equity of approximately $259.4 million. On January 31, 2021, the Company completed a merger with Bay Banks of Virginia, Inc.
As of December 31, 2023, the Company had total assets of approximately $3.12 billion, total gross loans of approximately $2.48 billion, total deposits of approximately $2.57 billion, and stockholders’ equity of approximately $186.0 million. On December 21, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Kenneth R.
In the first quarter of 2022, the Bank sold its majority interest in MoneyWise Payroll Solutions, Inc., to the holder of the minority interest. The principal executive offices of the Company are located at 1807 Seminole Trail, Charlottesville, Virginia 22901, and its telephone number is (540) 743-6521.
The principal executive offices of the Company are located at 1807 Seminole Trail, Charlottesville, Virginia 22901, and its telephone number is (540) 743-6521. The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).
The Company’s systems and those of its customers and third-party service providers are under constant threat.
Additionally, multiple states and Congress are considering laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data. The Company’s systems and those of its customers and third-party service providers are under constant threat.
If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.
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.
The Company is actively working to bring the Bank’s fintech policies, procedures, and operations into conformity with OCC directives and believes its work to date has been delivered on schedule. On December 15, 2019, the Company completed its acquisition of Virginia Community Bankshares, Inc. (“VCB”), the bank holding company of Virginia Community Bank based in Louisa, Virginia.
The Company is actively working to bring the Bank’s policies, procedures, and operations into conformity with OCC directives. In connection therewith, the Company has plans to substantially exit its BaaS fintech operations in 2024. Additionally, the Bank has added talented leadership to address the requirements of the OCC and to solidify the risk management practices of the Company.
The Company is actively working to bring the Bank’s fintech policies, procedures, and operations into conformity with OCC directives and believes its work to date has been delivered on schedule. As with other financial institutions, the earnings of the Bank are affected by general economic conditions and by the monetary policies of the Federal Reserve.
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.
Federal banking agencies are required to defer to the determination of the banks making such suspension. The Appropriations Act extended this temporary relief until January 1, 2022. Paycheck Protection Program . The CARES Act created the PPP, administered by the SBA, and it was extended by the Appropriations Act.
Among other things, the CARES Act created the Paycheck Protection Program ("PPP"), administered by the SBA, which was extended by the Appropriations Act.
Removed
Pursuant to the terms of the Bay Banks Merger agreement, each share of Bay Banks common stock was converted into the right to receive 0.50 shares of the Company’s common stock plus cash in lieu of fractional shares. In the merger, the Company issued 6,627,558 shares of its common stock and paid $3.4 thousand in lieu of fractional shares.
Added
Lehman, Castle Creek Capital Partners VIII, L.P., other institutional investors, and certain directors and executive officers of the Company (collectively, the “Purchasers”) pursuant to which the Company has agreed to issue and sell to the Purchasers (i) 60 million shares of the Company’s common stock at a purchase price of $2.50 per share and (ii) warrants to purchase approximately 29.4 million shares of the Company’s common stock at an exercise price of $2.50 per share in a private placement (the “Private Placement”), for gross proceeds of $150 million.
Removed
LenderSelect offers wholesale and third-party residential mortgage origination services to other financial institutions and credit unions. The Company has partnerships with financial technology (fintech) providers and ended 2022 with active partnerships including Unit Finance, Flexible Finance, Increase, Upgrade, Kashable, Jaris, Grow Credit, MentorWorks, and Marlette.
Added
The Company will issue the warrants to each Purchaser other than the Company’s directors and executive officers who are participating in the Private Placement. The Private Placement is subject to closing conditions and is expected to close late in the first quarter or early in the second quarter of 2024.
Removed
A complete copy of the Written Agreement was furnished in a Form 8-K filed with the Securities and Exchange Commission (“SEC”) on September 1, 2022 and can be accessed on the SEC’s website (www.sec.gov) and the Company’s website (www.blueridgebankshares.com).
Added
The Company plans to use the net proceeds from the Private Placement for general corporate purposes and to reposition business lines, support organic growth, and enhance capital levels of the Bank. A complete copy of the Securities Purchase Agreement is included as Exhibit 10.15 to this Form 10-K.
Removed
Commercial and industrial loans may entail greater risk than residential mortgage loans, and therefore are underwritten with strict risk management standards. During 2022, the Company added a team focused on commercial and industrial lending to middle market businesses, which are those businesses generally with revenues of at least $25 million.

… 59 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

108 edited+57 added−35 removed102 unchanged
Biggest changeA deterioration in economic conditions, whether caused by global, national, or local concerns (including the continued effects of the COVID-19 pandemic, inflation concerns, rising wages in a tight labor market, geopolitical uncertainty, and supply chain complications), especially within the Company’s market area, could result in the following potentially material consequences: loan 20 delinquencies increasing; problem assets and foreclosures increasing; demand for products and services decreasing; low cost or non-interest bearing deposits decreasing; and collateral for loans, especially real estate, declining in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans.
Biggest changeA deterioration in economic conditions, whether caused by global, national, or local concerns, especially within the Company’s market area, could result in, among other consequences, an increase in loan delinquencies, problem assets and foreclosures, a decline in demand for the Company’s products and services, a decrease in low cost or non-interest bearing deposits, and/or a deterioration in the value of collateral for loans, especially real estate loans, any of which could result in losses that materially and adversely affect the Company’s business.
Negative public opinion can adversely affect the Company’s ability to attract and keep customers and employees and can expose it to litigation and regulatory action. Further, if any of the Company’s financial, accounting, or other data processing systems fail or have other significant issues, the Company could be adversely affected.
Negative public opinion can adversely affect the Company’s ability to attract and keep customers and employees and can expose it to litigation and further regulatory action. Further, if any of the Company’s financial, accounting, or other data processing systems fail or have other significant issues, the Company could be adversely affected.
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.
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.
Other possible points of intrusion or disruption not within the Company’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (cloud) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers. 18 The Company’s ability to operate profitably may be dependent on its ability to integrate or introduce various technologies into its operations.
Other possible points of intrusion or disruption not within the Company’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (cloud) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers. The Company’s ability to operate profitably may be dependent on its ability to integrate or introduce various technologies into its operations.
The Company manages credit risk through a program of underwriting standards, the review of certain credit decisions, and a continuous quality assessment process of credit already extended. The Company’s exposure to credit risk is managed through 22 the use of consistent underwriting standards that emphasize local lending while avoiding highly leveraged transactions, as well as excessive industry and other concentrations.
The Company manages credit risk through a program of underwriting standards, the review of certain credit decisions, and a continuous quality assessment process of credit already extended. The Company’s exposure to credit risk is managed through the use of consistent underwriting standards that emphasize local lending while avoiding highly leveraged transactions, as well as excessive industry and other concentrations.
It is expected that the Company will continue to realize income from the differential or “spread” between the interest earned on loans, securities, and other interest 19 earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities.
It is expected that the Company will continue to realize income from the differential or “spread” between the interest earned on loans, securities, and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities.
Many of these 16 transactions expose the Company to credit risk in the event of default of its counterparty or client. In addition, credit risk may be exacerbated when the collateral held cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the financial instrument exposure due.
Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client. In addition, credit risk may be exacerbated when the collateral held cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the financial instrument exposure due.
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.
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.
An increase in nonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations.
An increase in nonperforming loans could result in a net loss of earnings from these loans, an increase in the provision for credit losses, and an increase in loan charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations.
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.
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.
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.
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.
The CFPB has also been directed to write rules identifying practices or acts that are unfair, deceptive, or abusive in connection with any transaction with a 14 consumer for a consumer financial product or service, or the offering of a consumer financial product or service.
The CFPB has also been directed to write rules identifying practices or acts that are unfair, deceptive, or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.
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.
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.
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 dilutive to the Company’s shareholders.
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 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.
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.
In addition, collateral appraisals that 24 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 create the impression that a loan is adequately collateralized when it is not.
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.
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.
An increase in nonperforming loans could result in a loss of earnings from these loans, an increase in the provision for loan losses, and an increase in charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations.
An increase in nonperforming loans could result in a loss of earnings from these loans, an increase in the provision for credit losses, and an increase in charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations.
For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks.
For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, insurance and pension funds, or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks.
In addition, multiple major U.S. companies have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information, and other financial or privileged data. These incursions affect cards issued and deposit accounts maintained by many banks, including the Bank.
In addition, multiple U.S. companies have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information, and other financial or privileged data. These incursions affect cards issued and deposit accounts maintained by many banks, including the Company.
Access to sufficient capital is critical in order to enable the Company to implement its business plan, support its business, expand its operations, and meet applicable capital requirements. The inability to have sufficient capital, whether internally generated through earnings or raised in the capital markets, could adversely impact the Company’s ability to support and to grow its operations.
Access to sufficient capital is critical in order to enable the Company to implement its business plan, support its business, expand its operations in the future, and meet applicable regulatory capital requirements. The inability to have sufficient capital, whether internally generated through earnings or raised in the capital markets, could adversely impact the Company’s ability to support its operations.
The Company’s growth will continue to place significant demands on management, and the loss of any such person’s services may have an adverse effect upon growth and profitability. If the Company fails to retain or continue to recruit qualified employees, growth and profitability could be adversely affected.
The Company’s operations will continue to place significant demands on management, and the loss of any such person’s services may have an adverse effect upon the Company's operations and profitability. If the Company fails to retain or continue to recruit qualified employees, its operations and profitability could be adversely affected.
Specifically, unpredictable and more frequent weather disasters may adversely impact the value of real property securing the loans in the Bank’s loan portfolio.
Specifically, unpredictable and more frequent weather disasters may adversely impact the value of real property securing the loans in the Company’s loan portfolio.
Mergers and Acquisitions and 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 and expansion.
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.
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 allowances for losses and 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 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.
During 2022, revenues from mortgage banking decreased significantly, primarily due to lower mortgage volumes as demand declined as market interest rates increased significantly during 2022. 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 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.
Further, any new laws, rules 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.
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.
While the Company believes that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if the Company continues to grow experiences increasing loan demand or is unable to maintain its deposit base.
While the Company believes its funding sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if the Company experiences increasing loan demand or is unable to maintain or grow its deposit base.
Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs. The Company faces increasing regulation and supervision of its industry. The Dodd-Frank Act instituted major changes to the banking and financial institutions regulatory regimes.
Compliance with laws and regulations, and regulatory actions implementing such law and regulations, can be difficult and costly, and changes to laws and regulations often impose additional compliance costs. The Company faces increasing regulation and supervision of its industry. The Dodd-Frank Act instituted major changes to the banking and financial institutions regulatory regimes.
The current incurred loss approach will be replaced by a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. As a result, the Company has incurred additional expenses to support both the adoption and the subsequent accounting and financial reporting requirements of CECL.
The prior incurred loss approach was replaced by a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. As a result, the Company has incurred additional expenses to support both the adoption and the subsequent accounting and financial reporting requirements of CECL.
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 loan losses.
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”).
The Company is also utilizing third-party consultants and other advisors to assist in complying with the Written Agreement 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.
These laws and regulations, 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 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.
The success of the Company’s mortgage division is dependent upon its ability to originate loans and sell them to investors at or near current volumes. Mortgage loan production levels are highly sensitive to changes in the level of interest rates and changes in economic conditions.
The success of the Company’s mortgage division is dependent upon its ability to originate loans and sell them to investors. Mortgage loan production levels are highly sensitive to changes in the level of interest rates and changes in economic conditions.
At December 31, 2022, approximately 10.8% of the Company’s loan portfolio, or $259.9 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, 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.
The Company’s inability to maintain the operating effectiveness of the controls described above could result in a material misstatement to the Company’s financial statements or other disclosures, which could have an adverse effect on its business, financial condition, or 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 adverse effect on its business, financial condition, and results of operations.
Collateral values may be adversely affected by changes in economic, environmental, and other conditions, including the impacts of the COVID-19 pandemic, declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, terrorist activity, environmental contamination, and other external events.
Collateral values may be adversely affected by changes in economic, environmental, declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, terrorist activity, environmental contamination, and other external events.
Further, if charge-offs in future periods exceed the allowance for loan losses, the Bank will need additional provisions to increase the allowance for loan losses. Nonperforming assets take significant time to resolve and adversely affect the Company’s results of operations and financial condition. The Company’s nonperforming assets adversely affect its net income in various ways.
Further, if charge-offs in future periods exceed the ACL, the Company will need additional provisions to increase the ACL. Nonperforming assets take significant time to resolve and adversely affect the Company’s results of operations and financial condition. The Company’s nonperforming assets adversely affect its net income in various ways.
The Company relies on other companies to provide key components of its business infrastructure. Third parties 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.
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’s operations may be adversely affected by cybersecurity risks. In the ordinary course of business, the Company collects and stores sensitive data, including proprietary business information and personally identifiable information of its customers and employees in systems and on networks. The secure processing, maintenance, and use of this information is critical to operations and the Company’s business strategy.
In the ordinary course of business, the Company collects and stores sensitive data, including proprietary business information and personally identifiable information of its customers and employees in systems and on networks. The secure processing, maintenance, and use of this information is critical to operations and the Company’s business strategy.
In addition, loan volume and yields are affected by market interest rates on loans, and the current interest rate environment encourages extreme competition for new loan originations from qualified borrowers. The Company’s management cannot ensure that it can minimize interest rate risk.
In addition, loan volume and yields are affected by market interest rates on loans, and there is substantial competition for new loan originations from qualified borrowers. The Company’s management cannot ensure that it can minimize interest rate risk.
Although the Company’s systems are not breached in these incursions, these events can cause it to reissue a significant number of cards and take other costly steps to avoid significant theft loss to the Company and its customers. In some cases, the Company may be required to reimburse customers for the losses they incur.
These events can cause the Company to reissue a significant number of cards and take other costly steps to avoid significant theft loss to the Company and its customers. In some cases, the Company may be required to reimburse customers for the losses they incur.
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 other-than-temporary impairment of 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.
While subject to the Written Agreement, 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 partner or offering new products or services or conducting new activities with or through existing third-party fintech partners.
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.
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, net, represented approximately 26.2% of total noninterest income for the year ended December 31, 2022.
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 determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires the Bank to make significant estimates of current credit risks and future trends, all of which may undergo material changes.
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 Company has a moderate concentration of credit exposure in commercial real estate and loans with this type of collateral are viewed as having more risk of default. As of December 31, 2022, the Company had approximately $865.0 million in loans secured by commercial real estate, representing approximately 35.9% 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. 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.
Deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside the Bank’s control, may require an increase in the allowance for loan losses.
Deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside the Company’s control, may require an increase in the ACL.
Additionally, deposit levels may be affected by a number of factors, including, but not limited to, rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to customers on alternative investments, the ability to maintain fintech partnerships, and general economic conditions.
Deposit levels and other funding costs may be affected by a number of factors, including, but not limited to, rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to customers on alternative investments, and general economic conditions.
The Company’s stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to its performance. General market declines or market volatility in the future, especially in the financial institutions sector of the economy, could adversely affect the price of the Company’s common stock, and the current market price may not be indicative of future market prices.
General market declines or market volatility in the future, especially in the financial institutions sector of the economy, could adversely affect the price of the Company’s common stock, and the current market price may not be indicative of future market prices.
The Bank’s allowance for loan losses may be insufficient and any increases in the allowance for loan losses may have a material adverse effect on the Company’s financial condition and results of operations.
The Company's ACL may be insufficient and any increases in the ACL may have a material adverse effect on the Company’s financial condition and results of operations.
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 loans in the future.
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.
Further, the Company’s failure to comply with these laws and regulations, even if the failure was inadvertent or reflects a difference in interpretation, 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.
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.
Cash flows may be affected significantly by general economic conditions, and a sustained downturn in the local economy or in occupancy rates in the local economy where the property is located could increase the likelihood of default.
Cash flows to service commercial real estate loans may be negatively affected by general economic conditions, such as a sustained downturn, or in occupancy rates in the local economy where the property is located and could increase the likelihood of default.
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 regulatory restrictions on growth or expansion of its operations, including its fintech partnerships, due to the Written Agreement with the OCC.
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.
Liquidity and Capital The Company’s liquidity needs could adversely affect results of operations and financial condition. 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.
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.
In addition, any failure to maintain effective controls in accordance with Section 404 of the Sarbanes-Oxley Act and FDIC regulations or to timely effect any necessary improvement of the Company’s internal and disclosure controls could, among other things, result in losses from fraud or error, harm the Company’s reputation, or cause investors to lose confidence in its reported financial information, all of which could have a material adverse effect on its results of operations and financial condition.
In addition, any failure to remediate and maintain effective controls or to timely effect any necessary improvement of internal and disclosure controls could, among other things, result in losses from fraud or error, reputational damage, subject the Company to regulatory scrutiny, or cause investors to lose confidence in reported financial information, all of which could have a material adverse effect on the Company's financial condition and results of operations.
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. There are various regulatory restrictions on the ability of banks, such as the Bank, to pay dividends or make other payments to their holding companies.
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.
Although the Company believes the allowance for loan losses is a reasonable estimate of known and inherent losses in the loan portfolio, it cannot precisely predict such losses or be certain that the loan loss allowance will be adequate in the future.
Although the Company believes the ACL is a reasonable estimate of lifetime credit losses associated with the loan portfolio, it cannot precisely predict such losses or be certain that the ACL will be adequate in the future.
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, may adversely affect the Company. The Company is subject to extensive regulation and supervision that govern almost all aspects of its operations.
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.
Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions. As a financial institution, market risk is inherent in the financial instruments associated with the Company’s operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt, and trading account assets and liabilities.
As a financial institution, market risk is inherent in the financial instruments associated with the Company’s operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt, and trading account assets and liabilities.
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 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.
If the Company fails to receive the appropriate regulatory approvals, it will not be able to consummate acquisitions that it believes are in its best interests.
This competition could increase prices for potential acquisitions that the Company believes are attractive. Acquisitions are also subject to various regulatory approvals. If the Company fails to receive the appropriate regulatory approvals, it will not be able to consummate expansion that it believes are in its best interests.
In addition, bank regulatory agencies and the Bank’s auditors periodically review its allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.
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.
There is no assurance that any such losses would not materially and adversely affect results of operations. The Company is subject to a variety of operational risks, including reputational risk, legal and compliance risk, and the risk of fraud or theft by employees, directors or outsiders.
The Company is subject to a variety of operational risks, including reputational risk, legal and compliance risk, and the risk of fraud or theft by employees, directors, or outsiders.
Moreover, a portion of these loans have been made by the Company in recent years and the borrowers may not have experienced a complete business or economic cycle. Any deterioration of the borrowers’ businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on its financial condition and results of operations.
Any deterioration of the borrowers’ businesses may hinder their ability to repay their loans with the Company, which could have a material adverse effect on its financial condition and results of operations. The Company’s results of operations are significantly affected by the ability of borrowers to repay their loans.
The Company encounters substantial competition from other financial institutions in its market area and competition is increasing. Ultimately, the Company may not be able to compete successfully against current and future competitors. Many competitors offer the same banking services that the Company offers in its service area. These competitors include national, regional, and community banks.
The Company faces strong and growing competition from financial services companies and other companies that offer banking and other financial services, which could negatively affect the Company’s business. The Company encounters substantial competition from other financial institutions in its market area and competition is increasing. Ultimately, the Company may not be able to compete successfully against current and future competitors.
Thus, the Company’s shareholders bear the risk of future offerings diluting their stock holdings, adversely affecting their rights as shareholders, and/or reducing the market price of the Company’s common stock.
For example, preferred stock would be senior to common stock in right of dividends and as to distributions in liquidation. The Company’s shareholders bear the risk of future securities offerings diluting their stock holdings, adversely affecting their rights as shareholders, and/or reducing the market price of the Company’s common stock.
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, 2022. 15 Failure to maintain effective systems of internal and disclosure controls could have a material adverse effect on the Company’s results of operation and financial condition.
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.
Regulatory and Operational The Bank’s formal written agreement with the OCC has required, and in the future will require, the Bank to devote significant resources to enhance its fintech policies, procedures, and operations, and the failure to comply with any provision of the agreement may cause the OCC to take further action against it.
Regulatory and Operational The Consent Order issued by the OCC requires the Bank to devote significant resources to enhance its policies, procedures, and practices, and places additional restrictions on the Bank’s operations, and the failure to comply with any provision of the Consent Order may cause the OCC to take further action against it.
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 growth and could materially adversely affect its business, financial condition, and results of operations.
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.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. Pending litigation could result in a judgment against the Company resulting in the payment of damages.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. The Company’s operations may be adversely affected by cybersecurity risks.
Loans secured by vacant or unimproved land are generally riskier than loans secured by improved property. These loans are more susceptible to adverse conditions in the real estate market and local economy. The Company’s results of operations are significantly affected by the ability of borrowers to repay their loans.
Loans secured by vacant or unimproved land are generally riskier than loans secured by improved property. These loans are more susceptible to adverse conditions in the real estate market and local economy. The Company’s focus on lending to small to mid-sized community-based businesses may increase its credit risk.
The Company’s ability to manage its growth successfully also will depend on whether it can maintain capital levels adequate to support its growth, maintain cost controls and asset quality, maintain regulatory requirements, and successfully integrate any businesses the Company acquires or partners with into its organization. 25 The Company has acquired and expanded into new product lines and may consider additional acquisitions and expansion into other businesses that it believes will help it fulfill its strategic objectives.
The Company’s ability to manage its growth successfully also will depend on whether it can maintain capital levels adequate to support its business, maintain operational and control systems, cost controls and asset quality, comply with regulatory requirements, and successfully integrate any businesses the Company pursues into its organization.
Changes in accounting standards could impact reported earnings. The authorities that promulgate accounting standards, including the Financial Accounting Standards Board (“FASB”), 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.
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.
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. As of 23 December 31, 2022, approximately 73.1% of the Company’s loans were secured by real estate, both residential and commercial, substantially all of which are located in its market area.
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.
If the Company fails to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition would be materially and adversely affected. The Basel III Capital Rules require bank holding companies and their subsidiaries to maintain significantly more capital as a result of higher required capital levels and more demanding regulatory capital risk weightings and calculations.
The Basel III Capital Rules require bank holding companies and their subsidiaries to maintain significantly more capital as a result of higher required capital levels and more demanding regulatory capital risk weightings and calculations, which could adversely affect the Company's profitability and return on equity.
Such changes could also require the Company to incur additional personnel or technology costs. For example, effective January 1, 2023, the Company will adopt Accounting Standards Codification (“ASC”) 326, Financial Instruments - Credit Losses (referred herein as "current expected credit losses" or "CECL").
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”).
The Company's noninterest income and deposits may decrease to the extent that the Company changes or terminates certain fintech relationships or products or is unable to successfully create new fintech relationships or products. There is no guarantee that the Company will ultimately address the OCC’s concerns and comply with all of the terms of the Written Agreement.
In addition, the Company's noninterest income and deposits may decrease to the extent that the Company changes or terminates certain fintech relationships or products or is unable to successfully create new fintech relationships or products while subject to the Consent Order.
These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. If general economic conditions in the market areas in which the Company operates negatively impact this important customer sector, the Company’s results of operations and financial condition may be adversely affected.
If general economic conditions in the market areas in which the Company operates negatively impact this important customer sector, the Company’s results of operations and financial condition may be adversely affected. Moreover, a portion of these loans have been made by the Company in recent years and the borrowers may not have experienced a complete business or economic cycle.

… 120 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed2 unchanged
Biggest changeAdditional 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. 27 The Company’s properties are maintained in good operating condition and the Company believes the properties are suitable and adequate for its operational needs.
Biggest changeAdditional 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.
As of December 31, 2022, the Company's employees occupied an additional 46 properties, of which 18 were owned by the Company.
As of December 31, 2023, the Company's employees occupied an additional 42 properties, of which 18 were owned by the Company.
Added
The Company’s properties are maintained in good operating condition and the Company believes the properties are suitable and adequate for its operational needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+9 added−0 removed3 unchanged
Biggest changeThe complaint alleges that the VCB ESOP incurred damages “that approach or exceed $12 million.” The Company automatically assumed any liability of VCB in connection with this litigation as a result of its 2019 acquisition of VCB. The outcome of this litigation is uncertain, and the plaintiff and other individuals may file additional lawsuits related to the VCB ESOP.
Biggest changeThe 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.
On August 12, 2019, a former employee of VCB and participant in the VCB ESOP filed a class action complaint against VCB, Virginia Community Bank, and certain individuals associated with the VCB ESOP in the U.S. District Court for the Western District of Virginia, Charlottesville Division (Case No. 3:19-cv-000450-GEC).
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
In 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).
Added
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.
Added
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
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
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
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
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
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.
Added
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

6 edited+1 added−1 removed1 unchanged
Biggest changeIndex 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Blue Ridge Bankshares, Inc. $ 100.00 $ 104.45 $ 129.72 $ 113.44 $ 175.85 $ 126.86 Invesco KBW Regional Banking ETF 100.00 81.69 100.94 91.91 125.04 116.02 Russell 2000® Index 100.00 87.82 108.66 128.61 146.23 114.70 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. 29 Dividends The Company paid four quarterly dividends totaling $0.49 per common share in the year ended December 31, 2022.
Biggest changeIndex 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.
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, 2022.
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.
This comparison assumes $100.00 was invested on December 31, 2017 in the Company’s common stock and the comparison indices and the cumulative return is measured as of each subsequent fiscal year-end.
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.
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").
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.
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.
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.
There were 18,946,466 shares of the Company’s common stock outstanding at the close of business on March 1, 2023, which were held by approximately 2,552 shareholders of record. The closing price of the Company's common stock on December 31, 2022 was $12.49 per common share compared to $17.78 per common share as of December 31, 2021.
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.
Removed
On January 10, 2023, the board of directors of the Company declared a quarterly dividend of $0.1225 per common share to shareholders of record as of the close of business on January 23, 2023, which was paid on January 31, 2023. The dividend type, amount, and timing are established by the Company’s board of directors.
Added
Dividends 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.

Item 7. Management's Discussion & Analysis

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

107 edited+81 added−58 removed33 unchanged
Biggest changeThe following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements: • the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rate, market, and monetary fluctuations; • the impact of, and the ability to comply with, the terms of the formal written agreement between the Bank and the OCC; • the strength of the United States economy in general and the strength of the local economies in which it conducts operations; • changes in the level of the Company’s nonperforming assets and charge-offs; • management of risks inherent in the Company’s real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of collateral and the ability to sell collateral upon any foreclosure; • changes in consumer spending and savings habits; 30 • the Company's ability to identify, attract, and retain experienced management, relationship managers, and support personnel, particularly in a competitive labor environment; • technological and social media changes impacting the Company, the Bank, and the financial services industry in general; • the Bank's ability to effectively manage its fintech partnerships, and the abilities of those fintech companies to perform as expected; • changing bank regulatory conditions, laws, regulations, 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, increased regulations, 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 and insurance, and the application thereof by regulatory bodies; • the Company’s involvement, from time to time, in legal proceedings and examination and remedial actions by regulators; • the impact of changes in laws, regulations, and policies affecting the real estate industry; • the effect of changes in accounting policies and practices, as may be adopted from time to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB, or other accounting standards setting bodies, for example, the Company's adoption of CECL effective January 1, 2023; • the impact of the COVID-19 pandemic, including the adverse impact on our business and operations and on the Company’s customers which may result, among other things, in increased delinquencies, defaults, foreclosures and losses on loans; • the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events; • geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad; • the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; • the willingness of users to substitute competitors’ products and services for the Company’s products and services; • the Company’s inability to successfully manage growth or implement its growth strategy; • reputational risk and potential adverse reactions of the Company’s customers, suppliers, employees or other business partners; • the effect of acquisitions the Company may make in the future, including, without limitation, disruption of employee or customer relationships, and the failure to achieve the expected revenue growth and/or expense savings from such acquisitions; • the Company’s participation in the PPP established by the U.S. government and its administration of the loans and processing fees earned under the program; • the Company’s involvement, from time to time, in legal proceedings, and examination and remedial actions by regulators; • the Company’s potential exposure to fraud, negligence, computer theft, and cyber-crime; and • the Bank’s ability to pay dividends.
Biggest changeThe 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.
For commitments issued in connection with potential loans intended for sale, the Company enters into positions of forward month MBS TBA contracts on a mandatory basis or on a one-to-one forward sales contract on a best efforts basis.
For commitments issued in connection with potential loans intended for sale, the Company enters into positions of forward month TBA MBS contracts on a mandatory basis or on a one-to-one forward sales contract on a best efforts basis.
Mortgage Servicing Rights ("MSR") MSR assets represent the economic value associated with servicing a borrower during the life of the mortgage. The assets are separate from the underlying mortgage and may be retained or sold by the Company when the related mortgage is sold.
Mortgage Servicing Rights ("MSR" assets) MSR assets represent the economic value associated with servicing a borrower during the life of the mortgage. The assets are separate from the underlying mortgage and may be retained or sold by the Company when the related mortgage is sold.
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.
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.
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. 40 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 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.
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.
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.
This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the financial services industry generally, or an operational problem that 49 affects a third party or the Company.
This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the Company or the financial services industry generally, or an operational problem that affects the Company or a third party.
The Company enters into TBA contracts in order to control interest rate risk during the period between the rate lock commitment and mandatory sale of the mortgage 33 loan. Both the rate lock commitment and the forward TBA contract are considered derivatives.
The Company enters into TBA contracts in order to control interest rate risk during the period between the rate lock commitment and mandatory sale of the mortgage loan. Both the rate lock commitment and the forward TBA contract are considered derivatives.
A significant portion of the Company's deposits through its fintech partnerships reprice with changes in federal funds rates. Therefore, an instantaneous change in this index rate results in a relative change in deposit costs.
A significant portion of the Company's deposits through its fintech partnerships reprice with changes in federal funds rates. Therefore, an instantaneous change in this index rate results in a relative change in deposit costs for this portion of deposits.
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 31 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 33 contained in this Form 10-K. Therefore, the Company cautions you not to place undue reliance on its forward-looking information and statements.
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, 2022, 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 Company concluded that, as of December 31, 2023, no valuation allowance was required on the Company's deferred tax asset.
(2) Beginning in the fourth quarter of 2020, the quarterly dividends have been declared and paid subsequent to the applicable quarter-end. 35 Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021 This section of this Form 10-K generally discusses 2022 and 2021 events and results and year-to-year comparisons between 2022 and 2021.
(2) Beginning in the fourth quarter of 2020, the quarterly dividends have been declared and paid subsequent to the applicable quarter-end. Comparison of Results of Operations for the Years Ended December 31, 2023 and 2022 This section of this Form 10-K generally discusses 2023 and 2022 events and results and year-to-year comparisons between 2023 and 2022.
(6) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $111 thousand, $12 thousand, and $0 for the years ended December 31, 2022, 2021, and 2020, respectively.
(6) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $0, $111 thousand, and $12 thousand for the years ended December 31, 2023, 2022, and 2021, respectively.
Securities in the investment portfolio classified as securities available for sale may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs for loan demand, for general liquidity needs, and other similar factors, and are carried at estimated fair value.
Securities in the investment portfolio classified as securities available for sale may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2022.
The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this Form 10-K, including those discussed in the section entitled "Risk Factors" in Item 1A above.
The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this Form 10-K, including those discussed in the section entitled “Risk Factors” in Item 1A above.
The Company uses short-term and long-term borrowings from various sources, including FHLB advances and FRB advances, to fund asset growth 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 periods stated.
(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 $7.4 million, $2.0 million, and $1.0 million for the years ended December 31, 2022, 2021, and 2020, 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 $2.6 million, $7.4 million, and $2.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events. The Company has established a formal liquidity contingency plan, which provides guidelines for liquidity management.
The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the markets in which they operate or other events. The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management.
Higher interest expense was primarily attributable to higher rates paid on interest-bearing liabilities (except for subordinated notes), particularly deposits related to the Bank's fintech relationships, due 38 to significant increases in market interest rates throughout 2022. The interest rate for the majority of the fintech-related accounts are index-priced, with the index being the federal funds rate.
Higher interest expense was primarily attributable to higher rates paid on interest-bearing liabilities (except for subordinated notes), particularly deposits related to the Bank's fintech operations, due to significant increases in market interest rates throughout 2023. The interest rate for the majority of the fintech-related accounts are index-priced, with the index being the federal funds rate.
(7) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $101 thousand, $176 37 thousand, and $0 for the years ended December 31, 2022, 2021, and 2020, respectively. (8) Net interest margin is net interest income divided by average interest-earning assets.
(7) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $100 thousand, $101 thousand, and $176 thousand for the years ended December 31, 2023, 2022, and 2021, respectively. (8) Net interest margin is net interest income divided by average interest-earning assets.
Noninterest-bearing demand deposits, which represented 25.6% and 29.8% of total deposits as of December 31, 2022 and 2021, respectively, are generally viewed as the most favorable form of deposit for financial institutions. The following table presents a summary of average deposits and the weighted average rate paid for the periods stated.
Noninterest-bearing demand deposits, which represented 19.7% and 25.6% of total deposits as of December 31, 2023 and 2022, respectively, are generally viewed as the most favorable form of deposit for financial institutions. The following table presents a summary of average deposits and the weighted average rate paid for the periods stated.
At December 31, 2022, the Company had future commitments outstanding totaling $19.0 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.
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.
Interest expense in the 2022 and 2021 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $1.5 million and $3.2 million, respectively, which was a reduction to interest expense.
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.
(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $1.5 million, $3.2 million and $23 thousand for the years ended December 31, 2022, 2021, and 2020, respectively.
(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.
The increase in the provision for loan losses during 2022 was primarily due to reserves for loan growth, excluding PPP loans, of $621.9 million, qualitative loss factor adjustments, primarily due to changes in economic conditions, and higher specific reserves for impaired loans. Noninterest Income . The following table provides detail for noninterest income and changes for the periods stated.
Provision for credit losses in the 2022 period was primarily due to reserves for loan growth, excluding PPP loans, of $621.9 million, specific reserves on specialty finance loans, and qualitative loss factor adjustments, primarily due to changes in economic conditions. Noninterest Income . The following table provides detail for noninterest income and changes for the periods stated.
Measurement of impairment is based on the expected future cash flows of an impaired loan, discounted at the loan's effective interest rate, or measured based on an observable market value, if one exists, or the fair value of the collateral underlying the loan, discounted to consider estimated costs to sell 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 34 the collateral for collateral-dependent loans.
The three-year phase-in of the Day 1 CECL adjustment to regulatory capital will be 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank plans to make this irrevocable election effective with its first quarter 2023 call report.
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.
Interest income in 2022 and 2021 included accretion of fair value adjustments (discounts) on acquired loans of $7.4 million and $2.0 million, respectively. Average interest-bearing liabilities were $1.70 billion for the year ended December 31, 2022 compared to $1.89 billion for the same period of 2021, a $185.5 million decrease.
Interest income in 2023 and 2022 included accretion of fair value adjustments (discounts) on acquired loans of $2.6 million and $7.4 million, respectively. Average interest-bearing liabilities were $2.31 billion for the year ended December 31, 2023 compared to $1.70 billion for the same period of 2022, a $606.3 million increase.
Restricted equity investments consisted of stock in the FHLB (carrying basis $14.7 million and $1.7 million at December 31, 2022 and 2021, respectively), FRB stock (carrying basis of $6.1 million at both December 31, 2022 and 2021), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both December 31, 2022 and 2021).
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).
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. 43 The following presents the allocation of the allowance for loan losses by loan category and the percentage of loans in each category to total loans as of the dates stated.
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.
Approximately 15.6% of the Company’s deposits as of December 31, 2022 were comprised of time deposits, which are generally the most expensive form of deposit because of their fixed rate and term, compared to 21.8% as of December 31, 2021.
Uninsured deposit amounts are based on estimates as of the reported date. Approximately 34.8% of the Company’s deposits as of December 31, 2023 were comprised of time deposits, which are generally the most expensive form of deposit because of their fixed rate and term, compared to 15.6% as of December 31, 2022.
The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 300 basis points and up 100 basis points to 300 basis points.
The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 400 basis points and up 100 basis points to 400 basis points. The results of these simulations are then compared to the base case.
As of December 31, 2022 and December 31, 2021, the Company had outstanding loan commitments of $719.2 million and $475.1 million, respectively. Of these amounts, $107.9 million and $88.1 million were unconditionally cancellable at the sole discretion of the Company as of the same respective dates.
As of December 31, 2023 and December 31, 2022, the Company had outstanding loan commitments of $480.8 million and $719.2 million, respectively. Of these amounts, $113.5 million and $107.9 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.
Changes in the economic assumptions underlying management’s estimates and judgments; adverse developments in the economy, on a national basis or in the Company’s market area; or changes in the circumstances of particular borrowers are criteria that could require adjustments to the provision for loan losses.
Changes in the economic assumptions underlying management’s estimates and judgments, adverse developments in the economy, on a national basis or in the Company’s market area, and changes in the circumstances of particular borrowers are criteria, among others, that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans.
In making this assessment, all sources of taxable income available to realize the deferred tax asset are considered including taxable income in prior carryback years, future releases of existing temporary differences, tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards.
In making this assessment, all sources of taxable income available to realize the deferred tax asset are considered, including future releases of existing temporary differences, tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. The predictability that future taxable income, exclusive of reversing temporary differences, will occur is the most subjective of these four sources.
For the Company’s liquidity management program, the current liquidity position is determined and then forecasted based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. The Company then stresses its liquidity position under several different stress scenarios, from moderate to severe.
Pursuant to the Company’s liquidity management program, it forecasts liquidity based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. Management then stress tests the Company’s liquidity position under several different stress scenarios, from moderate to severe.
The Company has not opted into the CBLR framework. As previously noted, the Company will adopt 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 to retained earnings ("Day 1 CECL adjustment") 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.
Consequently, a positive $3.5 million after-tax cumulative effect adjustment was recorded to stockholders' equity as of January 1, 2022. 34 Five Year Summary of Selected Financial Data (Dollars and shares in thousands, except per share data) 2022 2021 2020 2019 2018 Income Statement Data: Interest income $ 127,476 $ 103,546 $ 54,460 $ 30,888 $ 22,437 Interest expense 17,085 11,065 9,950 9,520 5,152 Net interest income 110,391 92,481 44,510 21,368 17,285 Provision for loan losses 17,886 117 10,450 1,742 1,225 Net interest income after provision for loan losses 92,505 92,364 34,060 19,626 16,060 Noninterest income 48,092 86,988 55,850 17,816 9,113 Noninterest expense 104,776 110,988 67,236 31,806 19,361 Income from continuing operations before income tax expense 35,821 68,364 22,674 5,636 5,812 Income tax expense attributable to continuing operations 8,244 15,740 4,837 985 1,167 Net income from continuing operations 27,577 52,624 17,837 4,651 4,645 Net income (loss) from discontinued operations 337 (144 ) (140 ) (47 ) (73 ) Net income from discontinued operations attributable to noncontrolling interest (1 ) (3 ) (1 ) (24 ) (13 ) Net income attributable to Blue Ridge Bankshares, Inc. $ 27,913 $ 52,477 $ 17,696 $ 4,580 $ 4,559 Per Common Share Data: Diluted EPS from continuing operations (1) $ 1.46 $ 2.95 $ 2.07 $ 0.74 $ 1.09 Dividends declared per share (1) (2) 0.4900 0.4350 0.2850 0.3800 0.3600 Book value per common share (1) 13.69 14.76 12.61 10.88 9.41 Balance Sheet Data: Total assets $ 3,141,045 $ 2,665,139 $ 1,498,258 $ 960,811 $ 539,590 Loans held for investment, gross (including PPP loans) 2,411,059 1,807,578 1,016,694 646,834 414,868 Loans held for sale 69,534 121,943 152,931 55,646 29,233 Securities 399,374 396,050 120,648 128,897 58,750 Total deposits 2,502,507 2,297,771 945,109 722,030 415,027 Subordinated notes, net 39,920 39,986 24,506 9,800 9,766 FHLB borrowings 311,700 10,111 115,000 124,800 73,100 FRB borrowings 51 17,901 281,650 — — Stockholders' equity 259,373 277,139 108,200 92,337 39,621 Weighted average common shares outstanding - basic (1) 18,811 17,841 8,535 6,221 4,169 Weighted average common shares outstanding - diluted (1) 18,825 17,851 8,535 6,221 4,169 Financial Ratios: Return on average assets 0.99 % 1.86 % 1.44 % 0.61 % 0.95 % Return on average equity 10.58 % 21.50 % 17.65 % 6.94 % 12.02 % Net interest margin 4.22 % 3.51 % 3.49 % 3.34 % 3.88 % Efficiency ratio 66.11 % 62.15 % 67.49 % 81.78 % 74.66 % Dividend payout ratio 33.56 % 14.80 % 13.75 % 51.61 % 32.92 % Capital and Credit Quality Ratios: Average equity to average assets 9.34 % 8.65 % 7.08 % 8.79 % 7.89 % Allowance for loan losses to loans held for investment, excluding PPP loans 0.96 % 0.68 % 1.90 % 0.71 % 0.86 % Nonperforming loans to total assets 0.59 % 0.60 % 0.44 % 0.54 % 1.39 % Nonperforming assets to total assets 0.60 % 0.61 % 0.44 % 0.54 % 1.42 % Net charge-offs to total loans held for investment 0.30 % 0.10 % 0.12 % 0.12 % 0.11 % (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.
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.
December 31, 2022 (Dollars in thousands) Period-End Balance Highest Month-End Balance Average Balance Weighted Average Rate FHLB borrowings $ 311,700 $ 311,700 $ 113,478 3.08 % FRB borrowings 51 17,197 4,881 2.34 % December 31, 2021 (Dollars in thousands) Period-End Balance Highest Month-End Balance Average Balance Weighted Average Rate FHLB borrowings $ 10,111 $ 220,000 $ 147,919 0.82 % FRB borrowings 17,901 632,540 245,196 0.32 % FHLB advances are secured by collateral consisting of a blanket lien on qualifying loans in the Company’s residential, multifamily, and commercial real estate mortgage loan portfolios, as well as selected investment portfolio securities.
December 31, 2023 (Dollars in thousands) Period-End Balance Highest Month-End Balance Average Balance Weighted Average Rate FHLB borrowings $ 210,000 $ 310,800 $ 263,259 4.48 % FRB borrowings 65,000 65,000 41,672 4.78 % December 31, 2022 (Dollars in thousands) Period-End Balance Highest Month-End Balance Average Balance Weighted Average Rate FHLB borrowings $ 311,700 $ 311,700 $ 113,478 3.08 % FRB borrowings 51 17,197 4,881 2.34 % FHLB advances are secured by collateral consisting of a blanket lien on qualifying loans in the Company’s residential, multifamily, and commercial real estate mortgage loan portfolios, as well as selected investment portfolio securities.
The cost of average interest-bearing liabilities increased to 1.00% in 2022 from 0.59% in 2021, while the cost of funds increased to 0.68% in 2022 from 0.43% in 2021.
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.
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.
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.
Additionally, the Company issues financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of December 31, 2022 and 2021, commitments under outstanding financial stand-by letters of credit totaled $29.8 million and $4.5 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, 2023 and 2022, commitments under outstanding financial stand-by letters of credit totaled $12.6 million and $28.3 million, respectively.
The Company holds various other equity investments, including shares in other financial institutions and fintech companies, totaling $23.8 million and $14.2 million as of December 31, 2022 and 2021, respectively, which are carried at fair value with any gain or loss reported in the consolidated statements of operations each reporting period. 45 The following table presents the composition of the Company’s available for sale securities portfolio, at amortized cost, as of the dates stated.
Restricted equity investments are carried at cost. The Company holds various other equity investments, including shares in other financial institutions and fintech companies, totaling $12.9 million and $23.8 million as of December 31, 2023 and 2022, respectively, which are carried at fair value with any gain or loss reported in the consolidated statements of operations each reporting period.
Net interest income is the excess of interest earned on loans, investments, and other interest-earning assets over the interest paid on deposits and borrowings and is the Company’s primary revenue source.
Net interest income is the excess of interest earned on loans, investments, and other interest-earning assets over the interest paid on deposits and borrowings and is the Company’s primary revenue source. Net interest income is thereby affected by overall balance sheet growth, changes in interest rates, and changes in the mix of investments, loans, deposits, and borrowings.
Net interest income (on a taxable equivalent basis) was $110.5 million for the year ended December 31, 2022 compared to $92.5 million for the year ended December 31, 2021, while net interest margin was 4.22% and 3.51% for the same respective periods.
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.
The Bank had unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $28.0 million and $44.0 million at December 31, 2022 and 2021, respectively. These lines bear interest at the prevailing rate for such lines and are cancellable at any time by the correspondent banks. These lines were not drawn upon at December 31, 2022 or 2021.
The Bank had unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $10.0 million and $28.0 million as of December 31, 2023 and 2022, respectively. These lines bear interest at the prevailing rates for such loan and are cancelable any time by the correspondent bank.
For the Years Ended December 31, 2022 2021 2020 (Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Assets: Taxable securities $ 386,363 $ 8,744 2.26 % $ 304,685 $ 5,192 1.70 % $ 106,228 $ 2,582 2.43 % Tax-exempt securities (1) 20,562 423 2.06 % 12,518 302 2.41 % 6,175 178 2.88 % Total securities 406,925 9,167 2.25 % 317,203 5,494 1.73 % 112,403 2,760 2.46 % Interest-earning deposits in other banks 83,544 1,208 1.45 % 114,316 135 0.12 % 108,587 169 0.16 % Federal funds sold 33,989 364 1.07 % 45,314 47 0.10 % 596 2 0.34 % Loans held for sale 44,543 1,494 3.35 % 145,075 4,162 2.87 % 140,496 3,922 2.79 % Paycheck Protection Program loans (2) 18,224 535 2.94 % 351,179 17,311 4.93 % 237,229 10,347 4.36 % Loans held for investment (including loan fees) (2,3,4) 2,028,828 114,797 5.66 % 1,659,845 76,460 4.61 % 675,226 37,291 5.52 % Total average interest-earning assets 2,616,053 127,565 4.88 % 2,632,932 103,609 3.94 % 1,274,537 54,491 4.28 % Less: allowance for loan losses (16,474 ) (13,036 ) (7,944 ) Total noninterest-earning assets 225,253 201,222 106,245 Total average assets $ 2,824,832 $ 2,821,118 $ 1,372,838 Liabilities and stockholders’ equity: Interest-bearing demand, money market deposits, and savings $ 1,131,718 $ 7,625 0.67 % $ 908,418 $ 2,244 0.25 % $ 346,784 $ 1,485 0.43 % Time deposits (5) 412,671 3,635 0.88 % 540,471 4,193 0.78 % 261,891 4,761 1.82 % Total interest-bearing deposits 1,544,389 11,260 0.73 % 1,448,889 6,437 0.44 % 608,675 6,246 1.03 % FHLB borrowings (6) 113,478 3,497 3.08 % 147,919 1,211 0.82 % 121,033 1,654 1.37 % FRB borrowings 4,881 114 2.34 % 245,196 790 0.32 % 223,869 785 0.35 % Subordinated notes (7) 39,953 2,215 5.54 % 46,226 2,627 5.68 % 23,566 1,265 5.37 % Total average interest-bearing liabilities 1,702,701 17,086 1.00 % 1,888,230 11,065 0.59 % 977,143 9,950 1.02 % Noninterest-bearing demand deposits 821,208 658,063 283,186 Other noninterest-bearing liabilities 37,042 30,700 15,358 Stockholders’ equity 263,881 244,125 97,151 Total average liabilities and stockholders’ equity $ 2,824,832 $ 2,821,118 $ 1,372,838 Net interest income and margin (8) $ 110,479 4.22 % $ 92,544 3.51 % $ 44,541 3.49 % Cost of funds (9) 0.68 % 0.43 % 0.79 % Net interest spread (10) 3.87 % 3.35 % 3.26 % (1) Computed on a fully taxable equivalent basis assuming a 21% federal income tax rate.
For 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.
Average interest-earning assets were $2.62 billion for the year ended December 31, 2022 compared to $2.63 billion for the same period of 2021, a $16.9 million decrease.
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.
The Company manages interest rate risk through an asset and liability committee comprised of members of its board of directors and management (the “ALCO”). The ALCO is responsible for monitoring the Company’s interest rate risk in conjunction with liquidity and capital management.
The Company manages interest rate risk through an asset and liability committee comprised of members of its board of directors and management (the “ALCO”).
A significant portion of the unrealized loss in the portfolio at December 31, 2022 was related to securities backed by U.S. government agencies. 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.
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.
December 31, (Dollars in thousands) 2022 % of Loans 2021 % of Loans Commercial and industrial $ 15,272 24.4 % $ 2,859 17.7 % Paycheck Protection Program — 0.5 % — 1.7 % Real estate – construction, commercial 1,637 7.6 % 895 8.1 % Real estate – construction, residential 628 3.2 % 21 3.3 % Real estate – mortgage, commercial 2,356 35.8 % 4,294 38.8 % Real estate – mortgage, residential 1,760 26.2 % 1,493 27.3 % Real estate – mortgage, farmland 4 0.3 % 18 0.3 % Consumer 1,282 2.0 % 2,541 2.8 % $ 22,939 100.0 % $ 12,121 100.0 % The Company does not carry an allowance for loan losses on PPP loans as they are fully guaranteed by the U.S. government.
December 31, (Dollars in thousands) 2023 % of Loans 2022 % of Loans Commercial and industrial $ 13,787 20.9 % $ 23,073 24.4 % Paycheck Protection Program — 0.1 % — 0.5 % Real estate – construction, commercial 4,024 7.4 % 1,637 7.6 % Real estate – construction, residential 1,094 3.1 % 628 3.2 % Real estate – mortgage, commercial 9,929 35.8 % 2,356 35.8 % Real estate – mortgage, residential 6,286 30.1 % 1,760 26.2 % Real estate – mortgage, farmland 15 0.2 % 4 0.3 % Consumer 758 2.4 % 1,282 2.0 % Total $ 35,893 100.0 % $ 30,740 100.0 % 44 The Company does not carry an allowance for credit losses on PPP loans as they are fully guaranteed by the U.S. government.
The FHLB may provide a credit line of up to 30% of the Bank’s asset value as of the prior quarter-end, subject to certain eligibility requirements, and loan and/or securities pledged as collateral. The Bank's line of credit with the FHLB was $525.0 million as of December 31, 2022, with available credit of $128.3 million as of the same date.
The FHLB may provide a credit line of up to 30% of the Bank’s asset value as of the prior quarter-end, subject to certain eligibility requirements, including the value of loans and/or securities pledged as collateral.
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 MBS are guaranteed and/or funded by the U.S. government.
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.
(9) Cost of funds is total interest expense divided by total interest-bearing liabilities and non interest-bearing demand deposits. (10) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.
(9) Cost of funds is total interest expense divided by total interest-bearing liabilities and non interest-bearing demand deposits.
The Basel III Capital Rules were phased-in over a multi-year schedule and were fully phased-in on January 1, 2019. Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios of 2.50% for all ratios, except the tier 1 leverage ratio.
Pursuant to the Basel III 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.
Such properties, which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the carrying value. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value.
OREO includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. Such properties, which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the carrying value.
The results of these simulations are then compared to the base case. 52 The following table illustrates the expected effect on net interest income for year one and year two following December 31, 2022 due to an immediate change ("instantaneous parallel rate shock" scenario) in interest rates at various degrees of change.
The following table illustrates the expected effect on net interest income for year one and year two following December 31, 2023 due to an immediate change ("instantaneous parallel rate shock" scenario) in interest rates at various degrees of change. Estimated changes set forth below are dependent on material assumptions, such as those previously discussed.
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. As of December 31, 2022, the Bank met all capital adequacy requirement to which it is subject.
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.
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.
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.
For the year ended December 31, 2022, the Company reported net income from continuing operations of $27.5 million compared to $52.6 million reported for 2021. Basic and diluted earnings per share from continuing operations were $1.46 for 2022 compared to $2.95 for 2021. Net Interest Income.
For the year ended December 31, 2023, the Company reported a net loss from continuing operations of $51.8 million compared to net income from continuing operations of $17.0 million for 2022. Basic and diluted (loss) earnings per share from continuing operations were ($2.73) for 2023 compared to $0.90 for 2022.
For maturing liabilities, assumptions are developed for the replacement of these funding sources. Assumptions are also developed for assets and liabilities that could reprice during the modeled time period. These assumptions also cover how management expects rates to change on non-maturity deposits such as interest checking, money market checking, savings accounts, as well as certificates of deposit.
These assumptions also cover how management expects rates to change on non-maturity deposits such as interest checking, money market checking, savings accounts, as well as certificates of deposit.
December 31, 2022 Instantaneous Parallel Rate Shock Scenario Change in Net Interest Income - Year 1 Change in Net Interest Income - Year 2 Change in interest rates: +300 basis points $ (14,509 ) (12.2 %) $ (12,436 ) (9.7 %) +200 basis points (8,790 ) (7.4 %) (7,179 ) (5.6 %) +100 basis points (3,912 ) (3.3 %) (2,939 ) (2.3 %) Base case -100 basis points 1,958 1.6 % 115 0.1 % -200 basis points 3,232 2.7 % (1,480 ) (1.1 %) -300 basis points 4,147 3.5 % (4,122 ) (3.2 %) 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, 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.
The Company's fintech partnerships have been a significant source of deposits and comprised approximately $690 million (or 27.6%) of the Company's deposits as of December 31, 2022 compared to approximately $189 million (or 8.2%) as of December 31, 2021. The following table presents the composition of deposits as of the dates stated.
The Company's fintech partnerships have been a significant source of deposits and comprised approximately $466 million, or 18%, of the Company's deposits as of December 31, 2023, compared to approximately $690 million, or 28%, as of December 31, 2022.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized; although, these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.
The 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.
Primarily as a result of a significant increase in market interest rates in the year ended December 31, 2022, the Company’s portfolio of securities available for sale had a net unrealized loss of approximately $58.8 million in the same period.
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.
For the year ended December 31, 2022 2021 (Dollars in thousands) Average Balance Rate Average Balance Rate Noninterest-bearing demand deposits $ 821,208 — $ 658,063 — Interest-bearing deposits: Demand deposits 567,897 0.93 % 262,679 0.27 % Savings 150,947 0.32 % 144,151 0.16 % Money market deposits 412,874 0.45 % 501,588 0.26 % Time deposits 412,671 0.88 % 540,471 0.78 % Total interest-bearing deposits 1,544,389 1,448,889 Total average deposits $ 2,365,597 $ 2,106,952 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, 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.
December 31, (Dollars in thousands) 2022 2021 Maturing in: 3 months or less $ 10,642 $ 30,943 Over 3 months through 6 months 14,699 47,818 Over 6 months through 12 months 15,423 14,213 Over 12 months 35,075 51,868 $ 75,839 $ 144,842 48 Borrowings.
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.
At December 31, 2022 and 2021, securities with a fair value of $241.9 million and $23.1 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB. The Company reviews for other-than-temporary impairment of its investment portfolio at least quarterly.
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.
The allowance for loan losses includes specific and general components applicable to all loan categories; however, management has allocated the allowance by loan type to provide an indication of the relative risk characteristics of the loan portfolio.
The 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 asset and liability repricing characteristics of the Company’s assets and liabilities will have a significant impact on its future interest rate risk profile.
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 fair value of the Company’s investment securities available for sale was $354.3 million at December 31, 2022, a decrease of $19.2 million from $373.5 million at December 31, 2021.
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.
December 31, 2022 2021 (Dollars in thousands) Amount % of Total Deposits Amount % of Total Deposits Noninterest-bearing demand $ 640,101 25.6 % $ 685,801 29.8 % Interest-bearing demand and money market deposits 1,318,799 52.7 % 962,092 41.9 % Savings 151,646 6.1 % 150,376 6.5 % Time deposits 391,961 15.6 % 499,502 21.8 % Total deposits $ 2,502,507 100.0 % $ 2,297,771 100.0 % Total deposits include uninsured deposits of $1.14 billion and $680.4 million as of December 31, 2022 and 2021, respectively.
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.
Treasury and agencies 80,073 19.4 % 65,680 17.3 % Mortgage backed securities 230,015 55.7 % 222,968 58.9 % Corporate bonds 42,909 10.4 % 38,752 10.2 % Total $ 413,015 100.0 % $ 378,741 100.0 % 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 period 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.
The Company contracts with its fintech partners and continually assesses the cost of these fintech-related deposits relative to sources of fees and other noninterest income earned from these partnerships.
The Company contracts with its fintech partners and continually assesses the cost of these fintech-related deposits relative to sources of fees and other noninterest income earned from these partnerships. Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve is a regulatory and banking industry practice.
Municipal securities with unrealized losses showed no indication that the contractual cash flows will not be received when due. The Company does not intend to sell nor does it believe that it will be required to sell, any of its temporarily impaired securities prior to the recovery of the amortized cost.
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.
Management's objectives are to maintain a level of capitalization that is sufficient for the Bank to be categorized as "well capitalized" for regulatory purposes, to sustain asset growth, and promote depositor and investor confidence. Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies.
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.
Allowance for Loan Losses The allowance for loan losses is maintained at a level believed to be adequate to absorb probable losses inherent in the portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans and actual loss experience, current economic events in specific industries, and other pertinent factors, such as regulatory guidance and general economic conditions.
Allowance for Credit Losses The allowance for credit losses is maintained at a level believed to be adequate to absorb lifetime expected credit losses in the Company's portfolio of loans held for investment and is based on an evaluation of the composition of the loan portfolio, current economic conditions, historical loan loss experience, reasonable and supportable forecasts, and other risk factors.
Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve of 100 to 300 basis points is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve.
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.
December 31, 2022 2021 (Dollars in thousands) Amount Percent Amount Percent Commercial and industrial $ 590,049 24.4 % $ 320,827 17.7 % Paycheck Protection Program 11,967 0.5 % 30,742 1.7 % Real estate – construction, commercial 183,301 7.6 % 146,523 8.1 % Real estate – construction, residential 76,599 3.2 % 58,857 3.3 % Real estate – mortgage, commercial 864,989 35.8 % 701,503 38.8 % Real estate – mortgage, residential 631,772 26.2 % 493,982 27.3 % Real estate – mortgage, farmland 6,599 0.3 % 6,173 0.3 % Consumer 47,423 2.0 % 49,877 2.8 % Gross loans 2,412,699 100.0 % 1,808,484 100.0 % Less: deferred loan fees, net of costs (1,640 ) (906 ) Gross loans, net of deferred loan fees 2,411,059 1,807,578 Less: Allowance for loan losses (22,939 ) (12,121 ) Net loans $ 2,388,120 $ 1,795,457 Loans held for sale (not included in totals above) $ 69,534 $ 121,943 41 The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed) as of December 31, 2022.
December 31, 2023 2022 (Dollars in thousands) Amount Percent Amount Percent Commercial and industrial $ 506,558 20.9 % $ 590,049 24.4 % Paycheck Protection Program 2,386 0.1 % 11,967 0.5 % Real estate – construction, commercial 180,052 7.4 % 183,301 7.6 % Real estate – construction, residential 75,832 3.1 % 76,599 3.2 % Real estate – mortgage, commercial 870,540 35.8 % 864,989 35.8 % Real estate – mortgage, residential 730,110 30.1 % 631,772 26.2 % Real estate – mortgage, farmland 5,470 0.2 % 6,599 0.3 % Consumer 59,169 2.4 % 47,423 2.0 % Gross loans held for investment 2,430,117 100.0 % 2,412,699 100.0 % Less: deferred loan fees, net of costs 830 (1,640 ) Gross loans held for investment, net of deferred loan fees 2,430,947 2,411,059 Less: Allowance for credit losses (35,983 ) (30,740 ) Net loans $ 2,394,964 $ 2,380,319 Loans held for sale (not included in totals above) $ 46,337 $ 69,534 41 The following table presents the Company’s portfolio of commercial real estate mortgages by property type as of the date stated.

… 166 more changes not shown on this page.

Other BRBS 10-K year-over-year comparisons