BLUE RIDGE BANKSHARES, INC. 10-Q

10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39165 BLUE RIDGE BANKSHARES, INC. (Exact name of registrant as specified in its charter) Virginia 54-1470908 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1807 Seminole Trail Charlottesville , Virginia 22901 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: ( 540 ) 743-6521 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value BRBS NYSE American Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 2, 2022, the registrant had 18,767,565 shares of common stock, no par value per share, outstanding. Auditor Firm Id: 149 Auditor Firm Name: Elliott Davis, LLC Auditor Firm Location: Raleigh, NC, USA PART I FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 20 21 3 Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited) 4 Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 (unaudited) 6 Consolidated Statements of Changes in Stockholders’ Equity for the three months March 31, 2022 and 2021 (unaudited) 7 Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited) 8 Notes to Consolidated Financial Statements (unaudited) 10 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 3. Quantitative and Qualitative Disclosures about Market Risk 47 Item 4. Controls and Procedures 47 PART II OTHER INFORMATION 48 Item 1. Legal Proceedings 48 Item 1A. Risk Factors 48 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 48 Item 3. Defaults Upon Senior Securities 48 Item 4. Mine Safety Disclosures 48 Item 5. Other Information 48 Item 6. Exhibits 48 Signatures 49 2 PART I. FINAN CIAL INFORMATION Item 1. Financi al Statements Blue Ridge Bankshares, Inc. Consolidated B alance Sheets (unaudited) (Dollars in thousands except share data) March 31, 2022 December 31, 2021 (1) ASSETS Cash and due from banks $ 162,177 $ 130,548 Federal funds sold 74,294 43,903 Securities available for sale, at fair value 375,484 373,532 Restricted equity investments 8,385 8,334 Other equity investments 23,943 14,184 Other investments 16,010 12,681 Loans held for sale 41,004 121,943 Paycheck Protection Program loans, net of deferred fees and costs 22,853 30,406 Loans held for investment, net of deferred fees and costs 1,843,344 1,777,172 Less allowance for loan losses ( 12,013 ) ( 12,121 ) Loans held for investment, net 1,831,331 1,765,051 Accrued interest receivable 9,505 9,573 Other real estate owned 74 157 Premises and equipment, net 24,668 26,624 Right-of-use asset 6,766 6,317 Bank owned life insurance 46,817 46,545 Goodwill 26,826 26,826 Other intangible assets 7,455 7,594 Mortgage derivative asset 2,063 1,876 Mortgage servicing rights, net 27,691 16,469 Mortgage brokerage receivable 430 4,064 Other assets 16,808 17,211 Assets of discontinued operations — 1,301 Total assets $ 2,724,584 $ 2,665,139 LIABILITIES & STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing demand $ 766,506 $ 706,088 Interest-bearing demand and money market deposits 978,650 941,805 Savings 152,105 150,376 Time deposits 456,820 499,502 Total deposits 2,354,081 2,297,771 FHLB borrowings 10,108 10,111 FRB borrowings 15,211 17,901 Subordinated notes, net 39,970 39,986 Lease liability 8,038 7,651 Other liabilities 18,694 14,543 Liabilities of discontinued operations — 37 Total liabilities 2,446,102 2,388,000 Commitments and contingencies (Note 12) Stockholders’ Equity: Common stock, no par value; 25,000,000 shares authorized; 18,771,065 and 18,774,082 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively 194,679 194,309 Additional paid-in capital 252 252 Retained earnings 105,027 85,982 Accumulated other comprehensive loss, net of tax ( 21,476 ) ( 3,632 ) Total Blue Ridge Bankshares, Inc. stockholders’ equity before noncontrolling interest 278,482 276,911 Noncontrolling interest of discontinued operations — 228 Total stockholders’ equity 278,482 277,139 Total liabilities and stockholders’ equity $ 2,724,584 $ 2,665,139 (1) Derived from audited December 31, 2021 Consolidated Financial Statements. See accompanying notes to unaudited consolidated financial statements. 3 Blue Ridge Bankshares, Inc. Consolidated Stat ements of Operations (unaudited) For the three months ended (Dollars in thousands, except per share data) March 31, 2022 March 31, 2021 INTEREST INCOME Interest and fees on loans $ 23,899 $ 21,363 Interest on securities, deposit accounts, and federal funds sold 1,903 1,213 Total interest income 25,802 22,576 INTEREST EXPENSE Interest on deposits 1,556 1,540 Interest on subordinated notes 553 630 Interest on FHLB and FRB borrowings 25 389 Total interest expense 2,134 2,559 Net interest income 23,668 20,017 Provision for loan losses 2,500 — Net interest income after provision for loan losses 21,168 20,017 NONINTEREST INCOME Fair value adjustments of other equity investments 9,364 — Residential mortgage banking income, net 2,821 9,301 Mortgage servicing rights 6,738 3,371 Gain on sale of guaranteed government loans 1,427 1,074 Wealth and trust management 391 169 Service charges on deposit accounts 315 327 Increase in cash surrender value of bank owned life insurance 272 164 Bank and purchase card, net 422 300 Other 2,344 833 Total noninterest income 24,094 15,539 NONINTEREST EXPENSE Salaries and employee benefits 14,096 13,903 Occupancy and equipment 1,485 1,331 Data processing 946 805 Legal, issuer, and regulatory filing 382 576 Advertising and marketing 428 279 Communications 799 367 Audit and accounting fees 141 189 FDIC insurance 231 343 Intangible amortization 397 351 Other contractual services 534 853 Other taxes and assessments 570 347 Merger-related 50 9,019 Other 2,630 1,872 Total noninterest expense 22,689 30,235 Income from continuing operations before income tax expense 22,573 5,321 Income tax expense 5,153 1,078 Net income from continuing operations $ 17,420 $ 4,243 Discontinued Operations Income (loss) from discontinued operations before income taxes (including gain on disposal of $ 471 thousand for the three months ended March 31, 2022) 426 ( 7 ) Income tax expense (benefit) 89 ( 1 ) Net income (loss) from discontinued operations 337 ( 6 ) Net income 17,757 4,237 Net income from discontinued operations attributable to noncontrolling interest $ ( 1 ) $ ( 9 ) Net income attributable to Blue Ridge Bankshares, Inc. 17,756 4,228 Net income available to common stockholders 17,756 4,228 Basic and diluted EPS from continuing operations (1) $ 0.93 $ 0.28 Basic and diluted EPS from discontinued operations (1) $ 0.02 — Basic and diluted EPS attributable to Blue Ridge Bankshares, Inc. (1) $ 0.95 $ 0.28 4 (1) Earnings per common share ("EPS") has been adjusted for the three months ended March 31, 2021 to reflect the Company’s 3-for- 2 stock split effective April 30, 2021. See accompanying notes to unaudited consolidated financial statements. 5 Blue Ridge Bankshares, Inc. Consolidated Statements of Comprehensive Income (Loss) (unaudited) For the three months ended (Dollars in thousands) March 31, 2022 March 31, 2021 Net income $ 17,757 $ 4,237 Other comprehensive (loss) income: Gross unrealized losses on securities available for sale arising during the period ( 22,586 ) ( 3,142 ) Deferred income tax benefit 4,742 660 Unrealized losses on securities available for sale arising during the period, net of tax ( 17,844 ) ( 2,482 ) Gross unrealized gains on interest rate swaps — 7,915 Deferred income tax expense — ( 1,662 ) Unrealized gains on interest rate swaps, net of tax — 6,253 Other comprehensive net (loss) income ( 17,844 ) 3,771 Comprehensive net (loss) income $ ( 87 ) $ 8,008 Comprehensive income from discontinued operations attributable to noncontrolling interest ( 1 ) ( 9 ) Comprehensive net (loss) income attributable to Blue Ridge Bankshares, Inc. $ ( 88 ) $ 7,999 See accompanying notes to unaudited consolidated financial statements. 6 Blue Ridge Bankshares, Inc. Consolidated Statements of Changes in Stockholders’ Equity (unaudited) For the three months ended March 31, 2022 (Dollars in thousands) Shares of Common Stock (1) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss, net Noncontrolling Interest of Discontinued Operations Total Balance at beginning of period 18,774,082 $ 194,309 $ 252 $ 85,982 $ ( 3,632 ) $ 228 $ 277,139 Net income — — — 17,756 — 1 17,757 Other comprehensive loss — — — — ( 17,844 ) — ( 17,844 ) Dividends on common stock — — — ( 2,253 ) — — ( 2,253 ) Stock option exercises 1,183 15 — — — — 15 Restricted stock awards, net of forfeitures ( 4,200 ) 355 — — — — 355 Cumulative effect adjustment of change in accounting method, net of income taxes — — — 3,542 — — 3,542 Disposition of noncontrolling interest — — — — — ( 229 ) ( 229 ) Balance at end of period 18,771,065 $ 194,679 $ 252 $ 105,027 $ ( 21,476 ) $ — $ 278,482 For the three months ended March 31, 2021 (Dollars in thousands) Shares of Common Stock (1) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income, net Noncontrolling Interest Total Balance at beginning of period 8,577,932 $ 66,771 $ 252 $ 40,688 $ 264 $ 225 $ 108,200 Net income — — — 4,228 — 9 4,237 Other comprehensive income — — — — 3,771 — 3,771 Dividends on common stock — — — ( 2,677 ) — — ( 2,677 ) Issuance of common stock and other consideration paid in business combination 9,951,743 125,403 — — — — 125,403 Stock option exercises 67,031 633 — — — — 633 Restricted stock awards, net of forfeitures 24,825 167 — — — — 167 Balance at end of period 18,621,531 $ 192,974 $ 252 $ 42,239 $ 4,035 $ 234 $ 239,734 (1) Common stock outstanding as of and for the period ended March 31, 2021 is reflective of the Company’s 3-for-2 stock split effective April 30, 2021. See accompanying notes to unaudited consolidated financial statements. 7 Blue Ridge Bankshares, Inc. Consolidated Statem ents of Cash Flows (unaudited) For the three months ended (Dollars in thousands) March 31, 2022 March 31, 2021 Cash Flows From Operating Activities Net income from continuing operations $ 17,420 $ 4,243 Net income (loss) from discontinued operations 337 ( 6 ) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 525 446 Deferred income tax benefit (expense) 3,801 ( 1,002 ) Provision for loan losses 2,500 — Accretion of fair value adjustments (discounts) on acquired loans ( 2,691 ) ( 359 ) Accretion of fair value adjustments (premiums) on acquired time deposits ( 470 ) ( 697 ) Accretion of fair value adjustments (premiums) on acquired subordinated notes ( 25 ) ( 35 ) Proceeds from sale of loans held for sale 234,550 412,139 Loans held for sale, originated ( 153,534 ) ( 377,854 ) Gain on sale of loans held for sale, originated ( 77 ) ( 4,715 ) (Gain) loss on disposal of premises and equipment ( 405 ) 32 Investment amortization expense, net 452 463 Amortization of subordinated debt issuance costs 9 17 Intangible amortization 397 351 Fair value adjustments of other equity investments ( 9,364 ) — Fair value adjustments attributable to mortgage servicing rights ( 3,777 ) — Increase in cash surrender value of bank owned life insurance ( 272 ) ( 164 ) Increase in other assets 1,151 ( 2,873 ) Increase in other liabilities 4,500 5,674 Net cash provided by operating activities - continuing operations 95,027 35,660 Net cash provided by operating activities - discontinued operations 55 56 Cash provided by operating activities 95,082 35,716 Cash Flows From Investing Activities Net increase in federal funds sold ( 30,391 ) ( 2,731 ) Purchases of securities available for sale ( 32,660 ) ( 107,057 ) Proceeds from calls, sales, paydowns and maturities of securities available for sale 7,743 12,490 Proceeds from sale of other real estate owned 70 4 Net change in restricted equity and other investments ( 283 ) 1,990 Net decrease (increase) in Paycheck Protection Program loans 7,552 ( 291,196 ) Net (increase) decrease in loans held for investment ( 66,088 ) 38,436 Purchase of premises and equipment ( 104 ) ( 78 ) Proceeds from sale of premises and equipment 1,937 278 Capital calls of small business investment company funds and other investments ( 3,553 ) ( 376 ) Net cash acquired in acquisition of Bay Banks of Virginia, Inc. — 44,066 Nonincome distributions from limited liability companies 227 107 Net cash used in investing activities - continuing operations ( 115,550 ) ( 304,067 ) Net cash provided by (used in) investing activities - discontinued operations 245 ( 46 ) Cash used in investing activities ( 115,305 ) ( 304,113 ) Cash Flows From Financing Activities: Net increase in demand, savings and other interest-bearing deposits 98,992 181,850 Net decrease in time deposits ( 42,212 ) ( 17,032 ) Common stock dividends paid ( 2,253 ) ( 2,677 ) Federal Home Loan Bank advances — 200,000 Federal Home Loan Bank repayments — ( 142,000 ) Federal Reserve Bank advances — 265,908 Federal Reserve Bank repayments ( 2,690 ) ( 62,706 ) Stock option exercises 15 633 Net increase in securities sold under repurchase agreements — 16 Net cash provided by financing activities - continuing operations 51,852 423,992 Net cash provided by financing activities - discontinued operations — — Cash provided by financing activities 51,852 423,992 Net increase in cash and due from banks 31,629 155,595 Cash and due from banks at beginning of period 130,548 117,945 Cash and due from banks at end of period $ 162,177 $ 273,540 8 Supplemental Schedule of Cash Flow Information Cash paid for: Interest $ 1,598 $ 2,039 Income taxes $ — $ 1,000 Non-cash investing and financing activities: Unrealized loss on securities available for sale $ ( 22,586 ) $ ( 3,142 ) Restricted stock awards, net of forfeitures $ 355 $ 167 Assets acquired in business combination $ — $ 1,224,583 Liabilities assumed in business combination $ — $ 1,107,036 Effective settlement of subordinated notes in business combination $ — $ 650 Change in goodwill $ — $ 7,206 Cumulative effect adjustment of change in accounting method $ 3,542 $ — See accompanying notes to unaudited consolidated financial statements. 9 Notes to Consolidated Financial Statements (Unaudited) Note 1 – Organization and Basis of Presentation Blue Ridge Bankshares, Inc. (the "Company") conducts its business activities primarily through its wholly-owned subsidiary bank, Blue Ridge Bank, National Association (the "Bank") and its wealth and trust management subsidiary, BRB Financial Group, Inc. (the “Financial Group”). The Company exists primarily for the purposes of holding the stock of its subsidiaries, the Bank and the Financial Group. The Company sold its majority interest in MoneyWise Payroll Solutions, Inc. (“MoneyWise”) to the holder of the minority interest in MoneyWise in the first quarter of 2022. Asset and liability balances and income statement amounts related to MoneyWise are reported as discontinued operations for all periods presented. The accompanying unaudited consolidated financial statements of the Company include the accounts of the Bank and the Financial Group and were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and to general practices within the banking industry. All significant intercompany balances and transactions have been eliminated in consolidation. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In March 2021, the Company’s board of directors approved a three-for-two stock split (“Stock Split”) effected in the form of a 50 % stock dividend on the Company’s common stock outstanding paid on April 30, 2021 to shareholders of record as of April 20, 2021 . Cash was paid in lieu of fractional shares based on the closing price of common stock on the record date. References made to outstanding shares or per share amounts in the accompanying consolidated financial statements and disclosures have been adjusted to reflect the Stock Split for all periods presented, unless otherwise noted. On January 31, 2021, the Company completed a merger with Bay Banks of Virginia, Inc. (“Bay Banks”), a bank holding company conducting substantially all its operations through its bank subsidiary, Virginia Commonwealth Bank, and the Financial Group (formerly VCB Financial Group, Inc.). Immediately following the Company’s merger with Bay Banks, Bay Banks’ subsidiary bank was merged with and into the Bank, while the Financial Group became a subsidiary of the Company (collectively, the “Bay Banks Merger”). Information contained herein as of March 31, 2022 includes the balances of Bay Banks. Information for the periods in the year ended and as of December 31, 2021 includes the operations of Bay Banks only for the period immediately following the effective date of the Bay Banks Merger (January 31, 2021) through December 31, 2021. On January 1, 2022, the Company changed its accounting method for mortgage servicing rights ("MSR") assets from the amortization method to the fair value measurement method under Accounting Standards Codification 860 Transfers and Servicing. This change in accounting method, which was an irrevocable election, was prospective in nature and resulted in an after-tax difference in carrying values of its MSR assets under the two methods at the beginning of the quarter. Consequently, a positive $ 3.5 million cumulative effect adjustment was recorded to stockholders’ equity as of January 1, 2022. Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share, total assets, total liabilities, or stockholders’ equity as previously reported. Note 2 – Amendments to the Accounting Standards Codification In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the 10 accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company will be required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company has formed a cross-functional working group, supported by a third-party consultant, which is implementing the requirements of ASU 2016-13 by the adoption date. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. This ASU addresses issues raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Among other narrow-scope improvements, the new ASU clarifies guidance around how to report expected recoveries. “Expected recoveries” describes a situation in which an organization recognizes a full or partial write-off of the amortized cost basis of a financial asset, but then later determines that the amount written off, or a portion of that amount, will in fact be recovered. While applying the credit losses standard, stakeholders questioned whether expected recoveries were permitted on assets that had already shown credit deterioration at the time of purchase (also known as purchased credit-deteriorated (“PCD”) assets). In response to this question, the ASU permits organizations to record expected recoveries on PCD assets. In addition to other narrow technical improvements, the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities. The ASU includes effective dates and transition requirements that vary depending on whether or not an entity has already adopted ASU 2016-13. The Company is currently assessing the impact that ASU 2019-11 will have on its consolidated financial statements. Note 3 – In vestments Investment securities available for sale are carried at fair value in the consolidated balance sheets. The following tables present amortized cost and fair values of investment securities available for sale as of the dates stated. March 31, 2022 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available for sale State and municipal $ 58,962 $ 5 $ ( 4,041 ) $ 54,926 U.S. Treasury and agencies 75,402 — ( 5,683 ) 69,719 Mortgage backed securities 225,163 78 ( 18,106 ) 207,135 Corporate bonds 43,679 572 ( 547 ) 43,704 Total investment securities $ 403,206 $ 655 $ ( 28,377 ) $ 375,484 December 31, 2021 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Available for sale State and municipal $ 51,341 $ 302 $ ( 530 ) $ 51,113 U.S. Treasury and agencies 65,680 — ( 1,614 ) 64,066 Mortgage backed securities 222,968 403 ( 4,261 ) 219,110 Corporate bonds 38,752 808 ( 317 ) 39,243 Total investment securities $ 378,741 $ 1,513 $ ( 6,722 ) $ 373,532 As of March 31, 2022 and December 31, 2021, no securities and securities with a fair value of $ 8.7 million were pledged to secure public deposits with the Treasury Board of the Commonwealth of Virginia. As of March 31, 2022 and December 31, 2021, securities with a fair value of $ 20.0 million and $ 23.1 million, respectively, were pledged to secure the Bank’s line of credit with the Federal Home Loan Bank of Atlanta ("FHLB"). The following table presents the amortized cost and fair value of securities available for sale by contractual maturity as of the date stated. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. 11 March 31, 2022 (Dollars in thousands) Amortized Cost Fair Value Due in one year or less $ 9,412 $ 9,320 Due after one year through five years 36,249 34,710 Due after five years through ten years 133,649 126,631 Due after ten years 223,896 204,823 Total $ 403,206 $ 375,484 The following tables present a summary of unrealized losses and the length of time securities have been in a continuous loss position, by security type and number of securities, as of the dates stated. March 31, 2022 Less than 12 Months 12 Months or Greater Total (Dollars in thousands) Number of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses State and municipal 75 $ 44,827 $ ( 3,611 ) $ 4,986 $ ( 430 ) $ 49,813 $ ( 4,041 ) U.S. Treasury and agencies 28 51,162 ( 4,376 ) 10,193 ( 1,307 ) 61,355 ( 5,683 ) Mortgage backed securities 65 158,560 ( 13,607 ) 42,108 ( 4,499 ) 200,668 ( 18,106 ) Corporate bonds 16 15,119 ( 485 ) 1,938 ( 62 ) 17,057 ( 547 ) Total 184 $ 269,668 $ ( 22,079 ) $ 59,225 $ ( 6,298 ) $ 328,893 $ ( 28,377 ) December 31, 2021 Less than 12 Months 12 Months or Greater Total (Dollars in thousands) Number of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses State and municipal 38 $ 27,905 $ ( 530 ) $ — $ — $ 27,905 $ ( 530 ) U.S. Treasury and agencies 22 64,067 ( 1,614 ) — — 64,067 ( 1,614 ) Mortgage backed securities 54 186,924 ( 4,257 ) 543 ( 4 ) 187,467 ( 4,261 ) Corporate bonds 11 6,770 ( 313 ) 996 ( 4 ) 7,766 ( 317 ) Total 125 $ 285,666 $ ( 6,714 ) $ 1,539 $ ( 8 ) $ 287,205 $ ( 6,722 ) The Company reviews for other-than-temporary impairment of its investment securities portfolio at least quarterly. At March 31, 2022 and December 31, 2021, with the exception of one security, all securities in an unrealized loss position were of investment grade. In addition, the amount of unrealized loss for the security was not significant. Investment securities with unrealized losses are generally a result of pricing changes due to recent changes in the interest rate environment and not as a result of permanent credit impairment. Contractual cash flows for the mortgage-backed securities are guaranteed and/or funded by the U.S. government. Municipal securities show no indication that the contractual cash flows will not be received when due. The Company does not intend to sell nor does it believe that it will be required to sell any of its temporarily impaired securities prior to the recovery of the amortized cost. Restricted equity investments consisted of stock in the FHLB (carrying value of $ 1.8 million and $ 1.7 million as of March 31, 2022 and December 31, 2021, respectively), stock in the Federal Reserve Bank of Richmond ("FRB") (carrying value of $ 6.1 million at both March 31, 2022 and December 31, 2021), and stock in the Bank’s correspondent bank (carrying value of $ 468 thousand at both March 31, 2022 and December 31, 2021). Restricted equity investments are carried at cost. The Company also has various other equity investments, including shares in other financial institutions and fintech companies, totaling $ 23.9 million and $ 14.2 million as of March 31, 2022 and December 31, 2021, respectively, which are carried at fair value with any gain or loss reported in the consolidated income statements each reporting period. As no actively-traded market exists for substantially all of the Company's other equity investments, fair value adjustments are determined by reviewing recent observable market transactions, such as stock or equity transactions, that are substantially similar to the Company's existing investments. Other equity investments are also periodically evaluated for impairment using information obtained either directly from the investee or from a third-party broker. If an impairment 12 has been identified, the carrying value of the investment is written down to its estimated fair market value through a charge to earnings. As of March 31, 2022, no impairment on other equity investments has been recorded. The Company also holds investments in early-stage focused investment funds, small business investment companies ("SBIC"), and low-income housing partnerships, which are reported in other investments on the consolidated balance sheets. Note 4 – Loans and Allowance for Loan Losses The following table presents loans held for investment, including Paycheck Protection Program ("PPP") loans, as of the dates stated. (Dollars in thousands) March 31, 2022 December 31, 2021 Commercial and industrial $ 380,754 $ 320,827 Paycheck Protection Program 22,902 30,742 Real estate – construction, commercial 124,523 146,523 Real estate – construction, residential 60,195 58,857 Real estate – mortgage, commercial 748,223 701,503 Real estate – mortgage, residential 487,257 493,982 Real estate – mortgage, farmland 6,062 6,173 Consumer 37,368 49,877 Gross loans 1,867,284 1,808,484 Less: deferred loan fees, net of costs ( 1,087 ) ( 906 ) Total $ 1,866,197 $ 1,807,578 The Company has pledged certain commercial and residential mortgages as collateral for borrowings with the FHLB. Loans totaling $ 423.3 million and $ 478.3 million were pledged as of March 31, 2022 and December 31, 2021, respectively. Additionally, PPP loans were pledged as collateral for the FRB's Paycheck Protection Program Liquidity Facility ("PPPLF") advances in the amount of $ 15.2 million and $ 17.9 million as of March 31, 2022 and December 31, 2021, respectively. As a result of the Bay Banks Merger and the 2019 acquisition of Virginia Community Bankshares, Inc., the acquired loan portfolios were initially measured at fair value as of the respective acquisition dates and subsequently accounted for as either purchased performing loans or purchased credit-impaired ("PCI") loans. The following table presents the outstanding principal balance and related recorded investment of these acquired loans included in the consolidated balance sheets as of the dates stated. (Dollars in thousands) March 31, 2022 December 31, 2021 PCI loans Outstanding principal balance $ 68,778 $ 97,418 Recorded investment 57,841 84,029 Purchased performing loans Outstanding principal balance 665,979 706,147 Recorded investment 663,397 703,333 Total acquired loans Outstanding principal balance 734,757 803,565 Recorded investment 721,238 787,362 The following table presents the changes in the accretable yield for PCI loans for the periods stated. 13 For the three months ended March 31, (Dollars in thousands) 2022 2021 Balance, beginning of period $ 16,849 $ 123 Additions — 10,030 Accretion ( 3,512 ) ( 840 ) Reclassification of nonaccretable difference due to improvement in expected cash flows — 104 Other changes, net — 22 Balance, end of period $ 13,337 $ 9,439 The following tables present the aging of the recorded investment of loans held for investment as of the dates stated. March 31, 2022 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Past Due & Accruing Nonaccrual Total Past Due & Nonaccrual PCI Loans Current Loans Total Loans Commercial and industrial $ 2,278 $ 1,117 $ 212 $ 3,378 $ 6,985 $ 6,471 $ 367,298 $ 380,754 Paycheck Protection Program — — — — — — 22,902 22,902 Real estate – construction, commercial 3,894 269 — 88 4,251 1,196 119,076 124,523 Real estate – construction, residential 1,383 663 457 240 2,743 — 57,452 60,195 Real estate – mortgage, commercial 717 1,202 — 3,284 5,203 42,031 700,989 748,223 Real estate – mortgage, residential 6,392 2,000 362 5,221 13,975 7,553 465,729 487,257 Real estate – mortgage, farmland 339 — — — 339 — 5,723 6,062 Consumer 715 205 239 703 1,862 590 34,916 37,368 Less: deferred loan fees, net of costs — — — — — — ( 1,087 ) ( 1,087 ) Total Loans $ 15,718 $ 5,456 $ 1,270 $ 12,914 $ 35,358 $ 57,841 $ 1,772,998 $ 1,866,197 December 31, 2021 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Past Due & Accruing Nonaccrual Total Past Due & Nonaccrual PCI Loans Current Loans Total Loans Commercial and industrial $ 2,338 $ — $ 30 $ 6,066 $ 8,434 $ 8,903 $ 303,490 $ 320,827 Paycheck Protection Program — — — — — — 30,742 30,742 Real estate – construction, commercial 271 — — 88 359 14,754 131,410 146,523 Real estate – construction, residential 651 98 279 413 1,441 — 57,416 58,857 Real estate – mortgage, commercial 53 — — 3,024 3,077 51,872 646,554 701,503 Real estate – mortgage, residential 13,950 1,587 359 5,190 21,086 7,621 465,275 493,982 Real estate – mortgage, farmland — — — — — — 6,173 6,173 Consumer 902 583 249 396 2,130 879 46,868 49,877 Less: deferred loan fees, net of costs — — — — — — ( 906 ) ( 906 ) Total Loans $ 18,165 $ 2,268 $ 917 $ 15,177 $ 36,527 $ 84,029 $ 1,687,022 $ 1,807,578 The following tables present the aging of the recorded investment of PCI loans as of the dates stated. 14 March 31, 2022 (Dollars in thousands) 30-89 Days Past Due Greater than 90 Days Past Due & Accruing Current Loans Total Loans Commercial and industrial $ — $ — $ 6,471 $ 6,471 Real estate – construction, commercial — — 1,196 1,196 Real estate – mortgage, commercial — — 42,031 42,031 Real estate – mortgage, residential 146 — 7,407 7,553 Consumer — — 590 590 Total PCI Loans $ 146 $ — $ 57,695 $ 57,841 December 31, 2021 (Dollars in thousands) 30-89 Days Past Due Greater than 90 Days Past Due & Accruing Current Loans Total Loans Commercial and industrial $ — $ — $ 8,903 $ 8,903 Real estate – construction, commercial — — 14,754 14,754 Real estate – mortgage, commercial — — 51,872 51,872 Real estate – mortgage, residential 147 — 7,474 7,621 Consumer — 4 875 879 Total PCI Loans $ 147 $ 4 $ 83,878 $ 84,029 The following tables present a summary of the loan portfolio individually and collectively evaluated for impairment as of the dates stated. March 31, 2022 (Dollars in thousands) Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Loan Balances Related Allowance for Loan Losses PCI loans: Commercial and industrial $ — $ 6,471 $ 6,471 $ — Real estate – construction, commercial — 1,196 1,196 — Real estate – mortgage, commercial — 42,031 42,031 — Real estate – mortgage, residential — 7,553 7,553 117 Consumer — 590 590 — Total PCI loans — 57,841 57,841 117 Originated and purchased performing loans: Commercial and industrial 6,808 367,475 374,283 6,510 Real estate – construction, commercial 523 122,804 123,327 1,282 Real estate – construction, residential — 60,195 60,195 469 Real estate – mortgage, commercial 11,304 694,888 706,192 1,367 Real estate – mortgage, residential 1,403 478,301 479,704 1,382 Real estate – mortgage, farmland — 6,062 6,062 21 Consumer — 36,778 36,778 865 Total originated and purchased performing loans 20,038 1,766,503 1,786,541 11,896 Gross loans 20,038 1,824,344 1,844,382 12,013 Less: deferred loan fees, net of costs — ( 1,087 ) ( 1,087 ) — Total $ 20,038 $ 1,823,257 $ 1,843,295 $ 12,013 15 December 31, 2021 (Dollars in thousands) Individually Evaluated for Impairment Collectively Evaluated for Impairment Total Loan Balances Related Allowance for Loan Losses PCI loans: Commercial and industrial $ — $ 8,903 $ 8,903 $ — Real estate – construction, commercial — 14,754 14,754 — Real estate – mortgage, commercial — 51,872 51,872 — Real estate – mortgage, residential — 7,621 7,621 117 Consumer — 879 879 — Total PCI loans — 84,029 84,029 117 Originated and purchased performing loans: Commercial and industrial 4,612 307,312 311,924 7,133 Real estate – construction, commercial 527 131,242 131,769 953 Real estate – construction, residential — 58,857 58,857 395 Real estate – mortgage, commercial 3,194 646,437 649,631 1,403 Real estate – mortgage, residential 1,400 484,961 486,361 1,184 Real estate – mortgage, farmland — 6,173 6,173 23 Consumer — 48,998 48,998 913 Total originated and purchased performing loans 9,733 1,683,980 1,693,713 12,004 Gross loans 9,733 1,768,009 1,777,742 12,121 Less: deferred loan fees, net of costs — ( 570 ) ( 570 ) — Total $ 9,733 $ 1,767,439 $ 1,777,172 $ 12,121 The tables above exclude gross PPP loans of $ 22.9 million and $ 30.7 million as of March 31, 2022 and December 31, 2021, respectively. PPP loans are fully guaranteed by the U.S. government; therefore, the Company recorded no allowance for loan losses ("ALL") for these loans as of March 31, 2022 and December 31, 2021. In future periods, the Company may be required to establish an ALL for these loans, which would result in a provision for loan losses charged to earnings. The following tables present information related to impaired loans by loan type as of the dates and for the periods stated. March 31, 2022 December 31, 2021 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With no specific allowance recorded: Commercial and industrial $ 3,521 $ 6,054 $ — $ — $ — $ — Real estate – construction, commercial 523 522 — 527 527 — Real estate – mortgage, commercial 11,216 12,172 — — — — Real estate – mortgage, residential 1,345 1,339 — — — — With an allowance recorded: Commercial and industrial $ 3,287 $ 3,285 $ 640 $ 4,612 $ 4,612 $ 836 Real estate – mortgage, commercial 88 87 1 3,194 3,849 1 Real estate – mortgage, residential 58 59 15 1,400 1,400 42 Total $ 20,038 $ 23,518 $ 656 $ 9,733 $ 10,388 $ 879 16 For the three months ended March 31, 2022 March 31, 2021 (Dollars in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no specific allowance recorded: Commercial and industrial $ 5,305 $ 62 $ 3,250 $ 35 Real estate – construction, commercial 524 — 542 8 Real estate – mortgage, commercial 11,880 48 1,384 14 Real estate – mortgage, residential 1,342 14 583 6 With an allowance recorded: Commercial and industrial $ 3,290 $ — $ — $ — Real estate – mortgage, commercial 88 — — — Real estate – mortgage, residential 59 — — — Total $ 22,488 $ 124 $ 5,759 $ 63 Impaired loans also include certain loans that have been modified in troubled debt restructurings ("TDRs") where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as non-performing at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. The Company had nine TDRs totaling $ 673 thousand as of March 31, 2022 and eight TDRs totaling $ 688 thousand as of December 31, 2021. No residential mortgage loans were in the process of foreclosure as of March 31, 2022. The following table presents an analysis of the change in the ALL by loan type as of the dates and for the periods stated. For the three months ended March 31, (Dollars in thousands) 2022 2021 ALL, beginning of period $ 12,121 $ 13,827 Charge-offs Commercial and industrial ( 2,401 ) ( 359 ) Real estate – construction ( 123 ) — Real estate – mortgage ( 16 ) ( 12 ) Consumer ( 279 ) ( 263 ) Total charge-offs ( 2,819 ) ( 634 ) Recoveries Commercial and industrial 74 56 Real estate – construction 12 — Real estate – mortgage 4 16 Consumer 121 137 Total recoveries 211 209 Net charge-offs ( 2,608 ) ( 425 ) Provision for loan losses 2,500 — ALL, end of period $ 12,013 $ 13,402 The following tables present the Company’s loan portfolio by internal loan grade as of the dates stated. 17 March 31, 2022 (Dollars in thousands) Grade 1 Prime Grade 2 Desirable Grade 3 Good Grade 4 Acceptable Grade 5 Pass/Watch Grade 6 Special Mention Grade 7 Substandard Grade 8 Doubtful Total PCI loans: Commercial and industrial $ — $ — $ 1,503 $ 2,524 $ 2 $ 989 $ 1,453 $ — $ 6,471 Real estate – construction, commercial — — — 5 — — 1,191 — 1,196 Real estate – mortgage, commercial — — — 4,340 19,183 16,073 2,435 — 42,031 Real estate – mortgage residential — — — 142 1,653 2,701 3,057 — 7,553 Consumer loans — — — — 215 366 8 — 589 Total PCI loans — — 1,503 7,011 21,053 20,129 8,144 — 57,840 Originated and purchased performing loans: Commercial and industrial 290 768 195,187 157,865 9,976 2,836 4,722 2,639 374,283 Paycheck Protection Program 22,902 — — — — — — — 22,902 Real estate – construction, commercial — 395 22,895 90,618 8,632 149 637 — 123,326 Real estate – construction, residential — — 10,390 47,331 2,235 — 240 — 60,196 Real estate – mortgage, commercial — 2,300 264,816 398,340 24,102 5,202 11,432 — 706,192 Real estate – mortgage residential — 7,925 254,089 199,388 10,552 873 6,877 — 479,704 Real estate – mortgage, farmland 339 — 879 4,713 131 — — — 6,062 Consumer loans 306 2 15,700 19,728 433 1 609 — 36,779 Total originated and purchased performing loans: 23,837 11,390 763,956 917,983 56,061 9,061 24,517 2,639 1,809,444 Gross loans $ 23,837 $ 11,390 $ 765,459 $ 924,994 $ 77,114 $ 29,190 $ 32,661 $ 2,639 $ 1,867,284 Less: deferred loan fees, net of costs ( 1,087 ) Total $ 1,866,197 December 31, 2021 (Dollars in thousands) Grade 1 Prime Grade 2 Desirable Grade 3 Good Grade 4 Acceptable Grade 5 Pass/Watch Grade 6 Special Mention Grade 7 Substandard Grade 8 Doubtful Total PCI loans: Commercial and industrial $ — $ — $ — $ 1,567 $ 2,818 $ 2,748 $ 1,770 $ — $ 8,903 Real estate – construction, commercial — — — 2,423 — 11,010 1,321 — 14,754 Real estate – mortgage, commercial — — — 2,642 3,892 33,487 11,851 — 51,872 Real estate – mortgage residential — — — 142 1,657 2,709 3,113 — 7,621 Consumer loans — — — — 388 481 10 — 879 Total PCI loans — — — 6,774 8,755 50,435 18,065 — 84,029 Originated and purchased performing loans: Commercial and industrial 291 560 156,519 133,738 11,256 3,180 6,380 — 311,924 Paycheck Protection Program 30,742 — — — — — — — 30,742 Real estate – construction, commercial — 412 28,973 91,900 7,995 1,846 643 — 131,769 Real estate – construction, residential — — 14,610 40,418 3,416 — 413 — 58,857 Real estate – mortgage, commercial — 2,382 307,067 283,165 34,750 17,133 5,134 — 649,631 Real estate – mortgage residential 990 9,218 276,992 180,980 11,107 974 6,100 — 486,361 Real estate – mortgage, farmland 340 — 1,067 4,766 — — — — 6,173 Consumer loans 262 3 16,920 30,691 542 — 580 — 48,998 Total originated and purchased performing loans: 32,625 12,575 802,148 765,658 69,066 23,133 19,250 — 1,724,455 Gross loans $ 32,625 $ 12,575 $ 802,148 $ 772,432 $ 77,821 $ 73,568 $ 37,315 $ — $ 1,808,484 Less: deferred loan fees, net of costs ( 906 ) Total $ 1,807,578 18 Note 5 – Goodwill and Other Intangibles Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exist that indicate that a goodwill impairment test should be performed. Intangible assets with definite useful lives are amortized over their estimated useful lives, which range from 5 to 12 years. Goodwill is the only intangible asset with an indefinite life on the consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the Company's goodwill totaled $ 26.8 million. The following table presents information on amortizable intangible assets included on the consolidated balance sheets as of the dates stated. As of March 31, 2022 (Dollars in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value Core deposit intangibles $ 9,626 $ ( 3,279 ) $ 6,347 Other amortizable intangibles 2,955 ( 1,847 ) 1,108 Total $ 12,581 $ ( 5,126 ) $ 7,455 As of December 31, 2021 (Dollars in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value Core deposit intangibles $ 9,626 $ ( 2,908 ) $ 6,718 Other amortizable intangibles 2,659 ( 1,783 ) 876 Total $ 12,285 $ ( 4,691 ) $ 7,594 Included in other amortizable intangibles were loan servicing assets of $ 620 thousand and $ 362 thousand at March 31, 2022 and December 31, 2021, respectively, related to the sale of the government guaranteed portion of certain loans that the Company continues to service. Loan servicing assets of $ 297 thousand and $ 266 thousand were added during the three months ended March 31, 2022 and the year ended December 31, 2021, respectively. The amortization of these intangibles is included in interest and fees on loans in the consolidated statement of income. The Company retains servicing rights on mortgages originated and sold to the secondary market. Beginning January 1, 2022, the Company elected the fair value measurement method for accounting for MSR assets, pursuant to which assets are initially recorded at fair value and subsequently adjusted to fair value at each reporting period. Prior to this, MSR assets were recorded under the amortization method, which required that MSR assets be recorded at the lower of cost or fair value. As of March 31, 2022, the fair value of MSR assets was $ 27.7 million, and at December 31, 2021, the carrying value of MSR assets under the amortization method was $ 16.5 million. Note 6 – Borrowings FHLB Borrowings The Bank has a lin e of credit from the FHLB secured by pledged qualifying real estate loans and certain pledged securities. At March 31, 2022 and December 31, 2021, based on pledged collateral, the line totaled $ 315.1 million and $ 358.1 million, respectively. The FHLB will lend up to 30 % of the Bank’s total assets as of the prior quarter end, subject to certain eligibility requirements, including adequate collateral. The Bank had borrowings from the FHLB that totaled $ 10.0 million at both March 31, 2022 and December 31, 2021. The interest rate on the borrowing was 0.56 % and the maturity date is February 28, 2030 . FHLB borrowings required the Bank to hold $ 1.8 million and $ 1.7 million of FHLB stock at March 31, 2022 and December 31, 2021, respectively, which is included in restricted equity investments on the consolidated balance sheets. The Bank also has letters of credit with the FHLB in the amount of $ 85.0 million for the purpose of collateral for public deposits with the Treasury Board of the Commonwealth of Virginia. Outstanding letters of credit reduce the available balance of the borrowing facility with the FHLB, which was $ 220.1 million as of March 31, 2022. 19 FRB Borrowings In the second quarter of 2020, the Company began participating in the FRB’s PPPLF, which allowed banks to pledge PPP loans as collateral in exchange for advances. The PPPLF advances are at 100 % of the PPP loan value and term, have a fixed annual cost of 35 basis points, and receive favorable regulatory capital treatment. As of March 31, 2022, FRB borrowings pursuant to the PPPLF were $ 15.2 million with maturities ranging from less than one year to over three years . Other Borrowings The Company had unsecured lines of credit with correspondent banks, which totaled $ 44.0 million at both March 31, 2022 and December 31, 2021. These lines bear interest at the prevailing rates for such loans and are cancellable any time by the correspondent bank. As of March 31, 2022 and December 31, 2021, no ne of these lines of credit with correspondent banks were drawn upon. The Company had $ 40.0 million of subordinated notes, net, outstanding as of March 31, 2022 and December 31, 2021. The Company's subordinated notes are comprised of an issuance in October 2019 and maturing October 15, 2029 (the “2029 Notes”) and an issuance in May 2020 and maturing June 1, 2030 (the "2030 Note". As of March 31, 2022, the net carrying amount of the 2029 Notes was $ 25.3 million, inclusive of a $ 830 thousand purchase accounting adjustment (premium) . For the three months ended March 31, 2022 and 2021, the effective interest rate on the 2029 Notes was 5.1 % and 4.7 %, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). As of March 31, 2022, the net carrying amount of the 2030 Note, including capitalized, unamortized debt issuance costs, was $ 14.7 million. For the three months ended March 31, 2022 and 2021, the effective interest rate on the 2030 Note was 6.1 %. Note 7 – Derivatives The Company enters into interest rate swap agreements to accommodate the needs of its banking customers. The Company mitigates the interest rate risk entering into these swap agreements by entering into equal and offsetting swap agreements with highly-rated third-party financial institutions. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated balance sheets (asset positions are included in other assets and liability positions are included in other liabilities). The following tables present the notional and fair value of interest rate swap agreements for the dates stated. March 31, 2022 (Dollars in thousands) Notional Amount Fair Value Interest rate swap agreement Receive fixed/pay variable swaps $ 2,039 $ 70 Pay fixed/receive variable swaps 2,039 ( 70 ) December 31, 2021 (Dollars in thousands) Notional Amount Fair Value Interest rate swap agreement Receive fixed/pay variable swaps $ 2,052 $ 199 Pay fixed/receive variable swaps 2,052 ( 199 ) As part of its efforts to sell originated government guaranteed and conventional residential mortgages into the secondary market, the Bank had entered into $ 70.9 million and $ 64.8 million of rate lock commitments with borrowers, net of expected fallout, as of March 31, 2022 and December 31, 2021, respectively, and $ 38.4 million and $ 113.6 million of closed loan inventory waiting for sale, which were hedged by $ 95.5 million and $ 169.5 million in forward to-be-announced mortgage-backed securities as of March 31, 2022 and December 31, 2021, respectively. Mortgage derivative assets totaled $ 2.1 million and $ 1.9 million as of March 31, 2022 and December 31, 2021, respectively, and mortgage derivative liabilities, which are included in other liabilities on the consolidated balance sheets, were $ 0 and $ 75 thousand as of March 31, 2022 and December 31, 2021, respectively. 20 Note 8 – Stock-Based Compensation The Company has granted restricted stock awards ("RSAs") to employees and directors under the Blue Ridge Bankshares, Inc. Equity Incentive Plan. RSAs are considered fixed awards as the number of shares and fair value is known at the date of grant, and the fair value of the award at the grant date is amortized over the requisite service period, which is generally three years. Compensation expense recognized in the consolidated statements of operations related to RSAs, net of forfeitures, for the three months ended March 31, 2022 and 2021 was $ 355 thousand and $ 167 thousand, respectively. Unrecognized compensation expense related to the restricted stock awards as of March 31, 2022 totaled $ 2.1 million . During the three months ended March 31, 2022, 1,183 stock options were exercised resulting in 56,424 options outstanding as of March 31, 2022. These options were assumed by the Company in connection with the Bay Banks Merger. Note 9 – Leases The Company’s long-term lease agreements are classified as operating leases. Certain of these leases offer the option to extend the lease term and such extensions are included in the calculation of the lease liabilities to the extent the options are reasonably assured of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations. The following tables present information about the Company’s leases as of and for the periods stated. (Dollars in thousands) March 31, 2022 Lease liabilities $ 8,038 Right-of-use asset $ 6,766 Weighted average remaining lease term (years) 6.45 Weighted average discount rate 1.87 % For the three months ended (Dollars in thousands) March 31, 2022 March 31, 2021 Operating lease cost $ 555 $ 646 Total lease cost $ 555 $ 646 Cash paid for amounts included in the measurement of lease liabilities $ 736 $ 646 The following table presents a maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities as of the date stated. (Dollars in thousands) March 31, 2022 Nine months ending December 31, 2022 $ 1,340 Twelve months ending December 31, 2023 1,504 Twelve months ending December 31, 2024 1,180 Twelve months ending December 31, 2025 966 Twelve months ending December 31, 2026 887 Thereafter 2,458 Total undiscounted cash flows 8,335 Discount ( 297 ) Lease liabilities $ 8,038 21 Note 10 – Fair Value The fair value of a financial instrument is the current amount that would be exchanged between willing parties in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Additional considerations are involved to determine the fair value of financial assets in markets that are not active. The Company uses a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows: Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities. Level 2 – Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market. Level 3 – Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market. The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements: Securities Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. The carrying value of restricted FRB and FHLB stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table. Mortgage servicing rights A third-party model is used to determine the fair value of the Company’s MSR assets. The model establishes pools of performing loans, calculates projected future cash flows for each pool, and applies a discount rate to each pool. As of March 31, 2022 and December 31, 2021, the Company was servicing approximately $ 2.08 billion and $ 1.91 billion of loans, respectively. Loans are segregated into homogenous pools based on loan term, interest rates, and other similar characteristics. Cash flows are then estimated based on net servicing fee income and utilizing assumed servicing costs and prepayment speeds. The weighted average net servicing fee income of the portfolio was 28.3 basis points as of March 31, 2022. Estimated base annual servicing costs were $ 65.00 to $ 80.00 per loan depending on the guarantor. Prepayment speeds in the model are based on empirically derived data for mortgage pool factors and differences between a mortgage pool’s weighted average coupon and its current mortgage rate. The weighted average prepayment speed assumption used in the fair value model was 8.65 % as of March 31, 2022. A base discount rate of 8.5 % to 10.5 % 22 ( 8.81 % weighted average discount rate) was then applied to each pool’s projected future cash flows as of March 31, 2022. The discount rate is intended to represent the estimated market yield for the highest quality grade of comparable servicing. MSR assets are classified as Level 3. As previously noted, t he Company changed its accounting method for MSR assets from the amortization method to the fair value measurement method effective January 1, 2022. This was a prospective change in accounting method; therefore, the carrying value of the MSR assets in periods prior to January 1, 2022 are stated at amortized cost. Accordingly, the following table presents a reconciliation between the amortized cost and fair value of MSR assets as of and for the period stated. (Dollars in thousands) MSR Assets Balance, December 31, 2020 $ 7,084 Acquired in Bay Banks Merger 997 Additions 11,809 Write-offs ( 959 ) Amortization ( 2,462 ) Impairments — Fair value adjustments 4,484 Balance, December 31, 2021 - Fair value $ 20,953 Balance, December 31, 2021 - Amortized cost $ 16,469 Rabbi trust assets The Company's rabbi trust is associated with a deferred compensation plan. The assets held by the rabbi trust are invested at the direction of the individual participants and are generally invested in marketable investment securities, such as common stocks and mutual funds or short-term investments (e.g., cash) (Level 1). Rabbi trust assets and the associated deferred compensation plan liability are included in other assets and other liabilities, respectively, in the consolidated balance sheets. Derivative financial instruments Derivative instruments used to hedge residential mortgage loans held for sale and the related interest rate lock commitments include forward commitments to sell mortgage loans and are reported at fair value utilizing Level 2 inputs. The fair values of derivative financial instruments are based on derivative market data inputs as of the valuation date and the underlying value of mortgage loans for rate lock commitments. The Company has interest rate swap assets and liabilities associated with certain customer commercial loans. The interest rate swap asset with the customer is offset with an equal swap agreement with a highly-rated third-party financial institution (i.e., "back-to-back"). Both the interest rate swap assets and liabilities are free-standing derivatives and are recorded at fair value utilizing Level 2 inputs. The following tables present the balances of financial assets measured at fair value on a recurring basis as of the dates stated. 23 March 31, 2022 (Dollars in thousands) Total Level 1 Level 2 Level 3 Securities available for sale State and municipals $ 54,926 $ 1,062 $ 53,864 $ — U.S. Treasury and agencies 69,719 5,949 63,770 — Mortgage backed securities 207,135 4,965 195,338 6,832 Corporate bonds 43,704 5,000 30,647 8,057 Total securities available for sale $ 375,484 $ 16,976 $ 343,619 $ 14,889 Other assets MSR assets $ 27,691 $ — $ — $ 27,691 Rabbi trust assets 908 908 — — Mortgage derivative asset 2,063 — 2,063 — Interest rate swap asset 70 — 70 — Other liabilities Mortgage derivative liability $ — $ — $ — $ — Interest rate swap liability 70 — 70 — December 31, 2021 (Dollars in thousands) Total Level 1 Level 2 Level 3 Securities available for sale State and municipals $ 51,113 $ — $ 51,113 $ — U.S. Treasury and agencies 64,066 — 64,066 — Mortgage backed securities 219,110 — 211,194 7,916 Corporate bonds 39,243 3,000 25,179 11,064 Total securities available for sale $ 373,532 $ 3,000 $ 351,552 $ 18,980 Other assets Rabbi trust assets $ 994 $ 994 $ — $ — Mortgage derivative asset 1,876 — 1,876 — Interest rate swap asset 199 — 199 — Other liabilities Mortgage derivative liability $ 75 $ — $ 75 $ — Interest rate swap liability 199 — 199 — The following table presents the change in financial assets valued using Level 3 inputs for the periods stated. (Dollars in thousands) MSR Assets Corporate Bonds Mortgage backed securities Balance as of December 31, 2021 $ 16,469 $ 11,064 $ 7,916 Change in accounting method 4,484 — — Transfers from Level 2 to Level 3 — 2,000 — Transfers from Level 3 to Level 2 — ( 5,001 ) ( 1,007 ) Additions 2,961 — — Sales or paydowns — — ( 76 ) Fair value adjustments 3,777 ( 6 ) ( 1 ) Balance as of March 31, 2022 $ 27,691 $ 8,057 $ 6,832 As of March 31, 2022, 13 corporate bonds totaling $ 8.1 million and 6 mortgage backed securities totaling $ 7.8 million were reported at their respective purchase prices and as Level 3 assets in the fair value hierarchy as there were no observable market prices for similar investments. Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or the write-down of individual assets. The following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements. 24 Impaired Loans Impaired loans with specific reserves are carried at fair value. Fair value is based on the discounted cash flows of the loan or the fair value of the collateral less estimated costs to sell, if the loan is collateral-dependent. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. Any given loan may have multiple types of collateral; however, the majority of the Company’s loan collateral is real estate. The value of real estate collateral is generally determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties or is discounted by the Company because of lack of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant or the net book value on the applicable business’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Fair value adjustments are recorded in the period incurred as provision for loan losses on the consolidated statements of operations. As of March 31, 2022, one impaired loan was evaluated using an Enterprise Value ("EV") technique, as the Company owns a portion of a nationally syndicated loan. EV is estimated using a multiple of earnings before income taxes, depreciation and amortization ("EBITDA"). EBITDA estimates were developed based on historical and projected performance of this company while the EV multiple was derived based on publicly available data of the borrower's respective peer companies and industry (Level 3). Loans Held for Sale Mortgage loans originated or purchased and intended for sale in the secondary market are carried at estimated market value in the aggregate (i.e., loans held for sale). Changes in fair value are recognized in residential mortgage banking income, net on the consolidated statements of operations (Level 2). Certain consumer loans originated by the Company and sourced by fintech partners are classified on the Company's consolidated balance sheets as held for sale. These loans are originated by the Bank and either sold directly to the applicable fintech partner or another investor at par, generally up to 10 days from origination. Due to relatively short time between origination and sale, these loans are held at cost, which approximates fair value (Level 2). Other Real Estate Owned ("OREO") Certain assets such as OREO are measured at fair value less estimated costs to sell. Valuation of OREO is generally determined using current appraisals from independent appraisers, a Level 2 input. If current appraisals cannot be obtained prior to reporting dates, or if declines in value are identified after a recent appraisal is received, appraisal values are discounted, resulting in Level 3 estimates. If the Company markets the property with a real estate agent or broker, estimated selling costs reduce the listing price, resulting in a valuation based on Level 3 inputs. The following tables summarize assets that were measured at fair value on a nonrecurring basis as of the dates stated. March 31, 2022 (Dollars in thousands) Total Level 1 Level 2 Level 3 Impaired loans, net $ 2,777 $ — $ — $ 2,777 Loans held for sale 41,004 — 41,004 — OREO 74 — — 74 December 31, 2021 (Dollars in thousands) Total Level 1 Level 2 Level 3 Impaired loans, net $ 8,344 $ — $ — $ 8,344 Loans held for sale 121,943 — 121,943 — OREO 157 — — 157 The following tables present quantitative information about Level 3 fair value measurements as of the dates stated. 25 (Dollars in thousands) Balance as of March 31, 2022 Unobservable Input Range Impaired loans, net Discounted appraised value technique $ 1,106 Discount Rate 25.0%-50.0 % Discounted cash flows technique 152 Discount Rate 4.3%-6.5 % Enterprise Value ("EV") technique 1,519 EV Multiple 7.75 OREO Discounted appraised value technique 74 Selling Costs 7.0 % (Dollars in thousands) Balance as of December 31, 2021 Unobservable Input Range Impaired loans, net Discounted appraised value technique $ 8,108 Selling Costs 7 % Discounted cash flows technique 236 Discount Rate 4 % - 7 % OREO Discounted appraised value technique 157 Selling Costs 7 % Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different. The following tables present the estimated fair values, related carrying amounts, and valuation level of the financial instruments as of the dates stated. March 31, 2022 Fair Value Measurements (Dollars in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and due from banks $ 162,177 $ 162,177 $ 162,177 $ — $ — Federal funds sold 74,294 74,294 74,294 — — Securities available for sale 375,484 375,484 16,976 343,619 14,889 Restricted equity investments 8,385 8,385 — 8,385 — Other equity investments 23,943 23,943 — 23,943 — PPP loans receivable, net 22,853 22,853 — — 22,853 Loans held for investment, net 1,831,331 1,822,252 — — 1,822,252 Accrued interest receivable 9,505 9,505 — 9,505 — Bank owned life insurance 46,817 46,817 — 46,817 — MSR assets 27,691 27,691 — — 27,691 Financial Liabilities Noninterest-bearing deposits $ 766,506 $ 766,506 $ 766,506 $ — $ — Interest-bearing demand and money market deposits 978,650 978,650 — 978,650 — Savings deposits 152,105 152,105 — 152,105 — Time deposits 456,820 460,644 — — 460,644 FHLB borrowings 10,108 9,998 — 9,998 — FRB borrowings 15,211 15,211 — 15,211 — Subordinated notes, net 39,970 40,655 — — 40,655 26 December 31, 2021 Fair Value Measurements (Dollars in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and due from banks $ 130,643 $ 130,643 $ 130,643 $ — $ — Federal funds sold 43,903 43,903 43,903 — — Securities available for sale 373,532 373,532 3,000 351,552 18,980 Restricted equity investments 8,334 8,334 — 8,334 — Other equity investments 14,184 14,184 — 14,184 — PPP loans receivable, net 30,406 30,406 — — 30,406 Loans held for investment, net 1,765,051 1,766,820 — — 1,766,820 Accrued interest receivable 9,573 9,573 — 9,573 — Bank owned life insurance 46,545 46,545 — 46,545 — Financial Liabilities Noninterest-bearing deposits $ 706,088 $ 706,088 $ 706,088 $ — $ — Interest-bearing demand and money market deposits 941,805 941,805 — 941,805 — Savings deposits 150,376 150,376 — 150,376 — Time deposits 499,502 503,968 — — 503,968 FHLB borrowings 10,111 9,943 — 9,943 — FRB borrowings 17,901 17,901 — 17,901 — Subordinated notes, net 39,986 41,388 — — 41,388 Note 11 – Minimum Regulatory Capital Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III rules”) were fully phased-in at January 1, 2019. Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios of 2.50 % for all ratios, except the tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Management believes as of March 31, 2022 and December 31, 2021, the Bank met all capital adequacy requirements to which it is subject. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized; although, these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2022, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework. There are no conditions or events since that notification that management believes have changed the institution's category. The following tables present the capital and capital ratios to which the Bank is subject and the amounts and ratios to be adequately and well capitalized as of the dates stated. Adequately capitalized ratios include the conversation buffer, if applicable. 27 Actual For Capital Adequacy Purposes To Be Well Capitalized (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of March 31, 2022 Total risk based capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 288,450 13.29 % $ 227,866 10.50 % $ 217,015 10.00 % Tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 275,405 12.69 % $ 184,463 8.50 % $ 173,612 8.00 % Common equity tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 275,405 12.69 % $ 151,910 7.00 % $ 141,060 6.50 % Tier 1 leverage (To average assets) Blue Ridge Bank, N.A. $ 275,405 10.64 % $ 103,530 4.00 % $ 129,412 5.00 % Actual For Capital Adequacy Purposes To Be Well Capitalized (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2021 Total risk based capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 273,978 13.11 % $ 219,393 10.50 % $ 208,946 10.00 % Tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 260,896 12.49 % $ 177,604 8.50 % $ 167,157 8.00 % Common equity tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 260,896 12.49 % $ 146,262 7.00 % $ 135,815 6.50 % Tier 1 leverage (To average assets) Blue Ridge Bank, N.A. $ 260,896 10.05 % $ 103,883 4.00 % $ 129,853 5.00 % Note 12 – Commitments & Contingencies In the ordinary course of operations, the Company is party to legal proceedings. Based upon information currently available, management believes that such legal proceedings, in the aggregate, will not have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. Also, in the ordinary course of operations, the Company offers various financial products to its customers to meet their credit and liquidity needs. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and stand-by letters of credit written is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional commitments as it does for on-balance sheet commitments. Subject to its normal credit standards and risk monitoring procedures, the Company makes contractual commitments to extend credit. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. Since many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. As of March 31, 2022 and December 31, 2021, the Company had outstanding loan commitments of $ 496.2 million and $ 475.1 million, respectively. 28 Conditional commitments are issued by the Company in the form of performance stand-by letters of credit, which guarantee the performance of a customer to a third party. As of March 31, 2022 and December 31, 2021, commitments under outstanding performance stand-by letters of credit totaled $ 77 thousand and $ 655 thousand, respectively. Additionally, the Company issues financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of March 31, 2022 and December 31, 2021, commitments under outstanding financial stand-by letters of credit totaled $ 4.7 million and $ 4.5 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers. Reserves for unfunded commitments to borrowers as of March 31, 2022 and December 31, 2021 were $ 1.0 million and $ 962 thousand, respectively, and are included in other liabilities on the consolidated balance sheets. The Company invests in various partnerships and limited liability companies, many of which invest in early-stage companies operating in fintech businesses. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At March 31, 2022, the Company has future commitments outstanding totaling $ 7.7 million related to these investments. The Company also has investments in various SBIC funds. The Company's obligations to these funds are satisfied in the form of capital calls that occur during the commitment period. As of March 31, 2022, the Company's remaining capital commitments associated with its investments in SBIC funds totaled $ 9.0 million. Note 13 – Earnings Per Share The following table shows the calculation of basic and diluted earnings per share ("EPS") and the weighted average number of shares outstanding used in computing EPS and the effect on the weighted average number of shares outstanding of dilutive potential common stock. Basic EPS amounts are computed by dividing net income (the numerator) by the weighted average number of common shares outstanding (the denominator). Diluted EPS amounts assume the conversion, exercise, or issuance of all potential common stock instruments, unless the effect would be to reduce the loss or increase earnings per common share. Potential dilutive common stock instruments include exercisable stock options. For the three months ended March 31, 2022 and 2021, stock options for 0 shares and 75,410 shares of the Company’s common stock were not included in the computation of diluted earnings per share because their effects would have been anti-dilutive, respectively. Weighted average common shares outstanding, basic and dilutive, for the period ended March 31, 2021 are adjusted to reflect the 3-for-2 stock split effective April 30, 2021. For the three months ended (Dollars in thousands, except per share data) March 31, 2022 March 31, 2021 Weighted average common shares outstanding, basic 18,772,258 15,137,446 Effect of dilutive securities 17,087 16,533 Weighted average common shares outstanding, dilutive 18,789,345 15,153,979 Net income: Net income from continuing operations $ 17,420 $ 4,243 Net income (loss) from discontinued operations 337 ( 6 ) Net income from discontinued operations attributable to noncontrolling interest ( 1 ) ( 9 ) Net income attributable to Blue Ridge Bankshares, Inc. $ 17,756 $ 4,228 Basic earnings per share: Earnings per share from continuing operations $ 0.93 $ 0.28 Earnings per share from discontinued operations 0.02 — Earnings per share attributable to Blue Ridge Bankshares, Inc. $ 0.95 $ 0.28 Diluted earnings per share: Earnings per share from continuing operations $ 0.93 $ 0.28 Earnings per share from discontinued operations 0.02 — Earnings per share attributable to Blue Ridge Bankshares, Inc. $ 0.95 $ 0.28 29 Note 14 – Business Segments The Company has three reportable business segments: commercial banking, mortgage banking, and holding company activities. The commercial banking business segment makes loans to and generates deposits from individuals and businesses, while offering a wide array of general banking activities to its customers. It is distinct from the Company's mortgage banking division, which concentrates on individual, wholesale, and participated mortgage lending, and sales activities. Activities at the holding company or parent level are primarily associated with investments, borrowings, and certain noninterest expenses. The following tables present statement of operations items and assets by segment as of and for the periods stated. For the three months ended March 31, 2022 (Dollars in thousands) Commercial Banking Mortgage Banking Parent Only Eliminations Blue Ridge Bankshares, Inc. Consolidated NET INTEREST INCOME Interest income $ 25,183 $ 591 $ 28 $ — $ 25,802 Interest expense 1,546 35 553 — 2,134 Net interest income 23,637 556 ( 525 ) — 23,668 Provision for loan losses 2,500 — — — 2,500 Net interest income after provision for loan losses 21,137 556 ( 525 ) — 21,168 NONINTEREST INCOME Residential mortgage banking income, net — 2,821 — — 2,821 Mortgage servicing rights 201 6,537 — — 6,738 Gain on sale of guaranteed government loans 1,427 — — — 1,427 Service charges on deposit accounts 315 — — — 315 Increase in cash surrender value of bank owned life insurance 272 — — — 272 Other income 3,177 — 9,426 ( 82 ) 12,521 Total noninterest income 5,392 9,358 9,426 ( 82 ) 24,094 NONINTEREST EXPENSE Salaries and employee benefits 9,089 5,007 — — 14,096 Other operating expenses 6,581 1,936 158 ( 82 ) 8,593 Total noninterest expense 15,670 6,943 158 ( 82 ) 22,689 Income from continuing operations before income tax expense 10,859 2,971 8,743 — 22,573 Income tax expense 2,906 624 1,623 — 5,153 Net income from continuing operations $ 7,953 $ 2,347 $ 7,120 $ — $ 17,420 Discontinued Operations Income from discontinued operations before income taxes (including gain on disposal of $ 471 thousand) 426 — — — 426 Income tax expense 89 — — — 89 Net income from discontinued operations 337 — — — 337 Net income $ 8,290 $ 2,347 $ 7,120 $ — $ 17,757 Net income from discontinued operations attributable to noncontrolling interest ( 1 ) — — — ( 1 ) Net income attributable to Blue Ridge Bankshares, Inc. $ 8,289 $ 2,347 $ 7,120 $ — $ 17,756 Total assets as of March 31, 2022 $ 2,628,323 $ 64,419 $ 334,424 $ ( 302,582 ) $ 2,724,584 30 For the three months ended March 31, 2021 (Dollars in thousands) Commercial Banking Mortgage Banking Parent Only Eliminations Blue Ridge Bankshares, Inc. Consolidated NET INTEREST INCOME Interest income $ 21,707 $ 820 $ 49 $ — $ 22,576 Interest expense 1,871 58 630 — 2,559 Net interest income 19,836 762 ( 581 ) — 20,017 Provision for loan losses — — — — — Net interest income after provision for loan losses 19,836 762 ( 581 ) — 20,017 NONINTEREST INCOME Residential mortgage banking income, net — 9,301 — — 9,301 Mortgage servicing rights — 3,371 — — 3,371 Gain on sale of guaranteed government loans 1,074 — — — 1,074 Service charges on deposit accounts 327 — — — 327 Increase in cash surrender value of bank owned life insurance 164 — — — 164 Other income 1,275 — 52 ( 25 ) 1,302 Total noninterest income 2,840 12,672 52 ( 25 ) 15,539 NONINTEREST EXPENSE Salaries and employee benefits 5,635 8,268 — — 13,903 Other operating expenses 13,136 2,181 1,040 ( 25 ) 16,332 Total noninterest expense 18,771 10,449 1,040 ( 25 ) 30,235 Income (loss) from continuing operations before income tax expense (benefit) 3,905 2,985 ( 1,569 ) — 5,321 Income tax expense (benefit) 764 605 ( 291 ) — 1,078 Net income (loss) $ 3,141 $ 2,380 $ ( 1,278 ) $ — $ 4,243 Discontinued Operations Loss from discontinued operations before income taxes ( 7 ) — — — ( 7 ) Income tax benefit ( 1 ) — — — ( 1 ) Net loss from discontinued operations ( 6 ) — — — ( 6 ) Net income (loss) $ 3,135 $ 2,380 $ ( 1,278 ) $ — $ 4,237 Net income from discontinued operations attributable to noncontrolling interest ( 9 ) — — — ( 9 ) Net income (loss) attributable to Blue Ridge Bankshares, Inc. $ 3,126 $ 2,380 $ ( 1,278 ) $ — $ 4,228 Total assets as of March 31, 2021 $ 3,015,771 $ 143,568 $ 298,848 $ ( 290,813 ) $ 1,498,258 31 Note 15 – Changes to Accumulated Other Comprehensive Income, net The following tables present components of accumulated other comprehensive income (loss) for the periods stated. For the three months ended March 31, 2022 (Dollars in thousands) Net Unrealized Losses on Available for Sale Securities Transfer of Securities Held to Maturity to Available For Sale Pension and Post-retirement Benefit Plans Accumulated Other Comprehensive Loss, net Balance as of January 1, 2022 $ ( 4,056 ) $ 425 $ ( 1 ) $ ( 3,632 ) Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $ 4,742 ( 17,844 ) — — ( 17,844 ) Balance as of March 31, 2022 $ ( 21,900 ) $ 425 $ ( 1 ) $ ( 21,476 ) For the three months ended March 31, 2021 (Dollars in thousands) Net Unrealized Gains (Losses) on Available for Sale Securities Transfer of Securities Held to Maturity to Available For Sale Net Unrealized Gains (Losses) on Interest Rate Swaps Accumulated Other Comprehensive Income (Loss), net Balance as of January 1, 2021 $ 644 $ 425 $ ( 805 ) $ 264 Change in net unrealized holding losses on securities available for sale, net of deferred tax benefit of $ 660 ( 2,482 ) — — ( 2,482 ) Change in net unrealized holding gains on interest rate swaps, net of deferred tax expense of $ 1,662 — — 6,253 6,253 Balance as of March 31, 2021 $ ( 1,838 ) $ 425 $ 5,448 $ 4,035 Note 16 – Legal Matters On August 12, 2019, a former employee of Virginia Community Bankshares, Inc. (“VCB”) and participant in its Employee Stock Ownership Plan (the “VCB ESOP”) filed a class action complaint against VCB, Virginia Community Bank, and certain individuals associated with the VCB ESOP in the U.S. District Court for the Western District of Virginia, Charlottesville Division. The complaint alleges, among other things, that the defendants breached their fiduciary duties to VCB ESOP participants in violation of the Employee Retirement Income Security Act of 1974, as amended. The complaint alleges that the VCB ESOP incurred damages “that approach or exceed $ 12 million.” The Company automatically assumed any liability of VCB in connection with this litigation as a result of its 2019 acquisition of VCB. The outcome of this litigation is uncertain, and the plaintiff and other individuals may file additional lawsuits related to the VCB ESOP. The Company believes the claims are without merit and no loss has been accrued for this lawsuit. Note 17 – Subsequent Events On April 6, 2022 , the board of directors of the Company declared a quarterly dividend of $ 0.1225 per share, which was paid on April 29, 2022 to shareholders of record as of the close of business on April 18, 2022 . 32 Item 2. Management’s Discussion and Analysis o f Financial Condition and Results of Operations The following presents management’s discussion and analysis of the Company’s consolidated financial condition and the results of our operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations for the balance of 2022, or for any other period. As used in this report, the terms “the Company,” “we,” “us,” and “our” refer to Blue Ridge Bankshares, Inc. and its consolidated subsidiaries. The term “Bank” refers to Blue Ridge Bank, National Association. Cautionary Note About Forward-Looking Statements The Company makes certain forward-looking statements in this Form 10-Q that are subject to risks and uncertainties. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections, and statements of management’s beliefs concerning future events, business plans, objectives, expected operating results, and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. The Company cautions that the forward-looking statements are based largely on management’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond its control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. The following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which 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; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market, and monetary fluctuations; changes in consumer spending and savings habits; 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; 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 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 Securities and Exchange Commission (the "SEC"), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, or other accounting standards setting bodies; the impact of the COVID-19 pandemic on the Company's customers and employees, and the associated efforts by the Company and others to limit the spread of the virus; 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, including the military conflict between Russia and Ukraine, 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; the effect of acquisitions the Company may make, 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 Paycheck Protection Program ("PPP") established by the U.S. government and its administration of the loans and processing fees earned under the program; 33 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; the Bank’s ability to pay dividends; and the Bank's ability to effectively manage its fintech partnerships, and the abilities of those fintech companies to perform as expected . The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in the Form 10-K including those discussed in the section entitled "Risk Factors." If one or more of the factors affecting forward-looking information and statements proves incorrect, then actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, the Company cautions you not to place undue reliance on its forward-looking information and statements. The Company will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how these risks and uncertainties will affect it. Sale of MoneyWise Payroll Solutions, Inc. The Company sold its majority interest in MoneyWise Payroll Solutions, Inc. (“MoneyWise”) to the holder of the minority interest in MoneyWise in the first quarter of 2022. Asset and liability balances and income statement amounts related to MoneyWise are reported as discontinued operations for all periods presented. Stock Split On April 30, 2021, the Company effected a 3-for-2 stock split (“Stock Split”) in the form of a 50% stock dividend on its common stock to shareholders of record as of April 20, 2021. Cash was paid in lieu of fractional shares based on the closing price of the Company’s common stock on the record date. References made to outstanding shares or per share amounts in the accompanying consolidated financial statements and disclosures have been retroactively adjusted to reflect the Stock Split, unless otherwise noted. Merger with Bay Banks of Virginia, Inc. The Company completed its merger with Bay Banks of Virginia, Inc. ("Bay Banks"), the holding company of Virginia Commonwealth Bank, into the Company on January 31, 2021. Immediately following the completion of the merger, Virginia Commonwealth Bank was merged with and into Blue Ridge Bank (collectively, the “Bay Banks Merger”). Earnings for the first quarter of 2021 included the earnings of Bay Banks from the effective date of the merger. Information contained herein as of March 31, 2022 includes the balances of Bay Banks; information contained herein for the quarter ended March 31, 2021 and as of December 31, 2021 includes the operations of Bay Banks for the period immediately following the effective date (January 31, 2021) of the Bay Banks Merger. General There were no changes to the Critical Accounting Policies disclosed in Item 7 of the 2021 Form 10-K, except for an irrevocable change in accounting method for mortgage servicing rights ("MSR") assets from the amortization method to the fair value measurement method under Accounting Standards Codification 860 Transfers and Servicing. See Part I, Item 1, Note 1 – Organization and Basis of Presentation for more information. Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share, total assets, total liabilities, or stockholders’ equity as previously reported. Comparison of Financial Condition as of March 31, 2022 and December 31, 2021 Total assets were $2.72 billion as of March 31, 2022, an increase of $59 million from $2.67 billion at December 31, 2021. Loans held for investment, excluding PPP loans, increased $66.2 million to $1.84 billion at March 31, 2022 from $1.78 billion at December 31, 2021, an annualized growth rate of 14.9%. 34 Total deposits as of March 31, 2022 were $2.35 billion, an increase of $56.3 million from December 31, 2021. The increase in the first three months of 2022 was primarily due to noninterest-bearing demand deposits, primarily related to the Company’s fintech partnerships. Total stockholders’ equity increased by $1.3 million to $278.5 million as of March 31, 2022 compared to $277.1 million at December 31, 2021. The fair value of the Company’s portfolio of available for sale securities declined in the first quarter of 2022, primarily as a result of an increase in market interest rates, resulting in an after-tax decline in stockholders’ equity of $17.9 million . This decrease was offset by net income of $17.8 million for the three months ended March 31, 2022 and a positive $3.5 million cumulative effect adjustment recorded to stockholders’ equity as of January 1, 2022 to account for the change in accounting method for MSR assets, as noted previously. Comparison of Results of Operations for the Three Months Ended March 31, 2022 and 2021 For the three months ended March 31, 2022, the Company reported net income from continuing operations of $17.4 million, or $0.93 earnings per diluted common share, compared to $4.2 million, or $0.28 earnings per diluted common share, for the three months ended March 31, 2021. Net income before income taxes for the first quarter of 2022 included $9.4 million of fair value adjustments for the Company's equity investments, primarily in certain fintech companies. Income from MSRs was $6.7 million for the first quarter of 2022, an increase of $3.4 million compared to the same period of 2021. Net income before income taxes included merger-related expenses of $50 thousand and $9.0 million, for the three months ended March 31, 2022 and 2021, respectively, the former attributable to the now-terminated FVCBankcorp, Inc. merger and the latter attributable to the completed Bay Banks Merger. Net Interest Income. Net interest income is the amount by which interest earned on assets exceeds the interest paid on interest-bearing liabilities and is 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. The Company’s principal interest-earning assets are loans to businesses, real estate investors, and individuals as well as its investment securities portfolio. Interest-bearing liabilities consist primarily of negotiable order of withdrawal and savings accounts, money market accounts, certificates of deposit, and Federal Home Loan Bank of Atlanta (“FHLB”) and Federal Reserve Bank of Richmond ("FRB") advances. Generally, changes in net interest income are measured by the net interest rate spread and the net interest margin. Net interest rate spread is the difference between the rate earned on interest-earning assets and the rate incurred on interest-bearing liabilities. Net interest margin represents the difference between interest income and interest expense calculated as a percentage of average interest-earning assets. 35 The following table presents the average balance sheets for the three months ended March 31, 2022 and 2021. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated. Average Balances, Income and Expense, Yields and Rates As of and for the three months ended March 31, 2022 2021 Total Increase/ Increase/(Decrease) Due to (Dollars in thousands) Average Balance Interest Yield/ Rate (1) Average Balance Interest Yield/ Rate (1) (Decrease) Volume (12) Rate (12) Average Assets Taxable securities $ 379,113 $ 1,770 1.87 % $ 213,028 $ 1,130 2.12 % $ 640 $ 881 $ (241 ) Tax-exempt securities (2) 19,372 75 1.55 % 14,170 67 1.89 % 8 25 (17 ) Total securities 398,485 1,845 1.85 % 227,198 1,197 2.11 % 648 906 (258 ) Interest-earning deposits in other banks 94,710 35 0.15 % 131,051 30 0.09 % 5 (8 ) 13 Federal funds sold 51,460 22 0.17 % 3,113 — — 22 — 22 Loans held for sale 73,710 621 3.37 % 132,918 821 2.47 % (200 ) (366 ) 166 Paycheck Protection Program loans (3) 27,081 393 5.80 % 452,096 4,477 3.96 % (4,084 ) (4,209 ) 125 Loans held for investment (3,4,5) 1,798,653 22,885 5.09 % 1,386,113 16,065 4.64 % 6,820 4,781 2,039 Total average interest-earning assets 2,444,098 25,802 4.22 % 2,332,489 22,590 3.87 % 3,212 1,104 2,109 Less: allowance for loan losses (12,063 ) (13,625 ) Total noninterest-earning assets 221,952 157,048 Total average assets $ 2,653,987 $ 2,475,912 Average Liabilities and Stockholders’ Equity: Interest-bearing demand, money market deposits, and savings $ 1,082,743 $ 585 0.22 % $ 700,291 $ 462 0.26 % $ 123 $ 252 $ (129 ) Time deposits (6) 483,236 971 0.80 % 498,965 1,079 0.86 % (108 ) (34 ) (74 ) Total interest-bearing deposits 1,565,980 1,556 0.40 % 1,199,256 1,541 0.51 % 15 218 (204 ) FHLB borrowings (7) 10,110 11 0.42 % 137,583 85 0.25 % (74 ) (79 ) 4 FRB borrowings 16,379 14 0.35 % 348,803 304 0.35 % (290 ) (290 ) — Subordinated notes and other borrowings (8) 39,976 553 5.54 % 47,016 630 5.36 % (77 ) (94 ) 18 Total average interest-bearing liabilities 1,632,445 2,134 0.52 % 1,732,658 2,560 0.59 % (426 ) (245 ) (181 ) Noninterest-bearing demand deposits 720,226 522,971 Other noninterest-bearing liabilities 26,429 25,180 Stockholders’ equity 274,887 195,103 Total average liabilities and stockholders’ equity $ 2,653,987 $ 2,475,912 Net interest income and margin (9) $ 23,668 3.87 % $ 20,030 3.43 % $ 3,638 $ 1,349 $ 2,290 Cost of funds (10) 0.36 % 0.45 % Net interest spread (11) 3.70 % 3.28 % (1) Annualized. (2) Computed on a fully taxable equivalent basis assuming a 21% income tax rate. (3) Includes deferred loan fees/costs. (4) Non-accrual loans have been included in the computations of average loan balances. (5) Includes accretion of fair value adjustments (discounts) on acquired loans of $2.7 million and $359 thousand for the three months ended March 31, 2022 and 2021, respectively. (6) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $474 thousand and $697 thousand for the three months ended March 31, 2022 and 2021, respectively. (7) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $3 thousand and $2 thousand for the three months ended March 31, 2022 and 2021, respectively. (8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $25 thousand and $35 thousand for the three months ended March 31, 2022 and 2021, respectively. (9) Net interest margin is net interest income divided by average interest-earning assets. (10) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits. (11) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities. (12) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each. Average interest-earning assets were $2.44 billion for the three months ended March 31, 2022 compared to $2.33 billion for the same period of 2021, a $111.6 million increase. This increase was primarily attributable to organic loan growth and loans acquired in the Bay Banks Merger as of the effective date of the merger and higher average balances of securities, partially offset by significantly lower average balances of PPP loans. Total interest income (on a taxable equivalent basis) increased $3.2 million for the three-month period ended March 31, 2022 from the same period of 2021. This increase was primarily due to higher average balances of interest-earnings assets, and higher accretion of purchase accounting adjustments (discounts) on acquired loans, partially offset by lower PPP interest and fee income. Interest income in the 2022 and 2021 periods included the amortization of PPP processing fees, net of costs, of $329 thousand and $3.3 million, respectively. Interest income in the first quarters of 2022 and 2021 included accretion of discounts on acquired loans of $2.7 million and $359 thousand, respectively. 36 Average interest-bearing liabilities were $1.63 billion for the three months ended March 31, 2022 compared to $1.73 billion for the same period of 2021, a $100.2 million decrease. Most of this decrease was attributable to a decline in average balances of FHLB and FRB borrowings of $127.5 million and $332.4 million, respectively, partially offset by higher average balances of interest-bearing deposits. FHLB advances were reduced in the fourth quarter of 2021 commensurate with the termination of interest rate swaps, while FRB advances were reduced as PPP loans were forgiven. Interest expense decreased by $426 thousand to $2.1 million for the three months ended March 31, 2022 compared to the same period of 2021. Cost of interest-bearing liabilities decreased to 0.52% for the first quarter of 2022 from 0.59% for the first quarter of 2021, partially due to the redemption of subordinated notes in the second and third quarters of 2021. Cost of funds were 0.36% and 0.45% for the first quarters of 2022 and 2021, respectively. Interest expense in the first quarters of 2022 and 2021 included the amortization of fair value adjustments (premium) on assumed time deposits of $474 thousand and $697 thousand, respectively, which was a reduction to interest expense. Net interest income (on a taxable equivalent basis) for the three months ended March 31, 2022 was $23.7 million compared to $20.0 million for the same period in 2021, an increase of $3.7 million. Net interest margin was 3.88% and 3.43% for first quarters of 2022 and 2021, respectively. Accretion and amortization of purchase accounting adjustments had a 53 and 17 basis point positive effect on net interest margin for the same respective periods. PPP loan processing fees, net of costs, and interest income, along with the corresponding funding costs through the FRB Paycheck Protection Program Liquidity Facility ("PPPLF"), had a 2 and 6 basis point positive effect on the Company’s net interest margin for the three months ended March 31, 2022 and 2021, respectively. Provision for Loan Losses. The Company recorded a provision for loan losses of $2.5 million in the first quarter of 2022 compared to $0 for the same period of 2021. The $2.5 million provision in the first quarter of 2022 was primarily due to additional reserves for loan growth and higher specific reserves for three relationships. Noninterest Income . The following table presents a summary of noninterest income and the dollar and percentage change for the periods presented. For the three months ended (Dollars in thousands) March 31, 2022 March 31, 2021 Change $ Change % Fair value adjustments of other equity investments $ 9,364 $ — $ 9,364 100.0 % Residential mortgage banking income, net 2,821 9,301 (6,480 ) (69.7 %) Mortgage servicing rights 6,738 3,371 3,367 99.9 % Gain on sale of guaranteed government loans 1,427 1,074 353 32.9 % Wealth and trust management 391 602 (211 ) (35.0 %) Service charges on deposit accounts 315 327 (12 ) (3.7 %) Increase in cash surrender value of bank owned life insurance 272 164 108 65.9 % Bank and purchase card, net 422 300 122 40.7 % Other 2,344 400 1,944 486.0 % Total noninterest income $ 24,094 $ 15,539 $ 8,555 55.1 % Income from fair value adjustments of other equity investments in the first quarter of 2022 was attributable to the Company's equity investments, primarily in certain fintech companies. The Company records certain equity investments at fair value when an observable market event occurs, such as the issuance or transfer of shares of substantially similar investments. The decline in residential mortgage banking income was primarily due to lower mortgage volumes in the first quarter of 2022 ($151.4 million) compared to the first quarter of 2021 ($361.4 million). The decline in mortgage volumes was primarily attributable to a decline in demand for mortgages as market interest rates increased significantly in the first quarter 2022 compared to the same period of 2021. Partially offsetting the decline in residential mortgage banking income was higher income from MSR assets, of which $3.8 million was for the fair value adjustment and $2.9 million for new servicing rights retained. Generally, as market interest rates increase, the value of MSR assets increase as the underlying mortgages are less likely to be refinanced or curtailed. Other noninterest income in the first quarter of 2022 includes a net gain on sale of assets of $404 thousand, primarily attributable to the sale of a former branch location, and fee income from fintech partnerships of $740 thousand (compared to $0 for the same period of 2021). 37 Noninterest Expense. The following tables present a summary of noninterest expense and the dollar and percentage change for the periods stated. For the three months ended (Dollars in thousands) March 31, 2022 March 31, 2021 Change $ Change % Salaries and employee benefits $ 14,096 $ 13,903 $ 193 1.4 % Occupancy and equipment 1,485 1,331 154 11.6 % Data processing 946 805 141 17.5 % Legal, issuer, and regulatory filing 382 576 (194 ) (33.7 %) Advertising and marketing 428 279 149 53.4 % Communications 799 367 432 117.7 % Audit and accounting fees 141 189 (48 ) (25.4 %) FDIC insurance 231 343 (112 ) (32.7 %) Intangible amortization 397 351 46 13.1 % Other contractual services 534 853 (319 ) (37.4 %) Other taxes and assessments 570 347 223 64.3 % Merger-related 50 9,019 (8,969 ) (99.4 %) Other 2,630 1,872 758 40.5 % Total noninterest expense $ 22,689 $ 30,235 $ (7,546 ) (25.0 %) Excluding merger-related expenses, noninterest expense increased $1.4 million for the three months March 31, 2022 compared to the same period in 2021. Higher salaries and employee benefits for the three-month period ended March 31, 2022 were primarily attributable to employees added to support the Company’s noninterest income business lines, particularly the fintech business, and additional commercial lenders, partially offset by lower salaries and employee benefit expenses attributable to the mortgage banking division. Other increases in noninterest expenses in the first quarter of 2022 compared to the first quarter of 2021 were partially attributable to the 2021 period including expenses only from the effective date of the Bay Banks Merger, January 31, 2021. Income Tax Expense . Income tax expense from continuing operations for the three months ended March 31, 2022 and 2021 was $5.1 million and $1.1 million, respectively, resulting in an effective income tax rate of 22.8% and 20.3% for the respective periods. The higher effective income tax rate for the 2022 period was primarily the result of tax provisions made for state income taxes, as the Company expanded its operations, primarily its mortgage banking division, into various states. Analysis of Financial Condition Loan Portfolio. The Company makes loans to commercial entities and to individuals. Loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan and the creditworthiness of the borrower. Credit risk tends to be geographically concentrated in that a majority of the loans are to borrowers located in the markets served by the Company. All loans are underwritten within specific lending policy guidelines that are designed to maximize the Company’s profitability within an acceptable level of business risk. 38 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. March 31, 2022 December 31, 2021 (Dollars in thousands) Amount Percent Amount Percent Commercial and industrial $ 380,754 20.4 % $ 320,827 17.7 % Paycheck Protection Program 22,902 1.2 % 30,742 1.7 % Real estate – construction, commercial 124,523 6.7 % 146,523 8.1 % Real estate – construction, residential 60,195 3.2 % 58,857 3.3 % Real estate – mortgage, commercial 748,223 40.1 % 701,503 38.8 % Real estate – mortgage, residential 487,257 26.1 % 493,982 27.3 % Real estate – mortgage, farmland 6,062 0.3 % 6,173 0.3 % Consumer 37,368 2.0 % 49,877 2.6 % Gross loans 1,867,284 100.0 % 1,808,484 100.0 % Less: deferred loan fees, net of costs (1,087 ) (906 ) Gross loans, net of deferred loans fees and costs 1,866,197 1,807,578 Less: allowance for loan losses (12,013 ) (12,121 ) Loans held for investment, net $ 1,854,184 $ 1,795,457 Loans held for sale (not included in totals above) $ 41,004 $ 121,943 The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed) as of March 31, 2022. Variable rate Fixed rate (Dollars in thousands) Total Maturities One Year or Less Total 1-5 years 5-15 years More than 15 years Total 1-5 years 5-15 years More than 15 years Commercial and industrial $ 380,754 $ 103,041 $ 120,605 $ 83,908 $ 35,676 $ 1,021 $ 157,108 $ 78,403 $ 76,844 $ 1,861 Paycheck Protection Program 22,902 — — — — — 22,902 22,902 — — Real estate – construction, commercial 124,523 26,865 57,294 28,687 12,677 15,930 40,364 37,494 2,775 95 Real estate – construction, residential 60,195 30,666 4,615 1,603 1,047 1,965 24,914 393 2,097 22,424 Real estate – mortgage, commercial 748,223 50,685 320,553 50,425 167,894 102,234 376,985 206,793 163,904 6,288 Real estate – mortgage, residential 487,257 15,834 245,082 11,597 65,509 167,976 226,341 45,117 57,354 123,870 Real estate – mortgage, farmland 6,062 293 1,909 144 294 1,471 3,860 2,855 1,005 — Consumer loans 37,368 4,604 724 622 102 — 32,040 24,703 7,269 68 Gross loans $ 1,867,284 $ 231,988 $ 750,782 $ 176,986 $ 283,199 $ 290,597 $ 884,514 $ 418,660 $ 311,248 $ 154,606 Although the PPP loans have established terms of one or five years depending on the program under which they were funded, the Company believes that the majority of PPP loans will be forgiven prior to their full term, in accordance with the terms of the program. Allowance for Loan Losses . Management believes that the Company’s allowance for loan losses ("ALL") was adequate as of March 31, 2022 and December 31, 2021. There can be no assurance, however, that adjustments to the ALL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments; adverse developments in the economy, on a national basis or in the Company’s market area; the impact of the COVID-19 pandemic; and changes in the circumstances of particular borrowers are criteria that could increase the level of the ALL required, resulting in charges to the provision for loan losses. 39 The following table presents an analysis of the change in the ALL by loan type as of and for the periods stated. As of and for the three months ended (Dollars in thousands) March 31, 2022 March 31, 2021 Allowance, beginning of period $ 12,121 $ 13,827 Charge-offs Commercial and industrial (2,401 ) (359 ) Real estate – construction (123 ) — Real estate – mortgage (16 ) (12 ) Consumer (279 ) (263 ) Total charge-offs (2,819 ) (634 ) Recoveries Commercial and industrial 74 56 Real estate – construction 12 — Real estate – mortgage 4 16 Consumer 121 137 Total recoveries 211 209 Net charge-offs (2,608 ) (425 ) Provision for loan losses 2,500 — Allowance, end of period $ 12,013 $ 13,402 Ratio of net charge-offs to average loans outstanding during period: Commercial and industrial 0.69 % 0.13 % Real estate – construction 0.06 % 0.00 % Real estate – mortgage 0.00 % 0.00 % Consumer and other loans 0.12 % 0.31 % Total loans 0.14 % 0.03 % The ALL includes specific allowances for impaired loans and a general allowance applicable to all loan categories; however, management has allocated the ALL by loan type to provide an indication of the relative risk characteristics of the loan portfolio. The allocation is an estimate and should not be interpreted as an indication that charge-offs will occur in these amounts, or that the allocation indicates future trends, and does not restrict the usage of the allowance for any specific loan or category. The following table presents the allocation of the ALL by loan category and as a percentage of each category as of the dates stated. March 31, 2022 December 31, 2021 (Dollars in thousands) $ % of Loans $ % of Loans Commercial and industrial $ 6,510 1.71 % $ 7,133 2.22 % Real estate – construction, commercial 1,282 1.03 % 953 0.65 % Real estate – construction, residential 469 0.78 % 395 0.67 % Real estate – mortgage, commercial 1,367 0.18 % 1,403 0.20 % Real estate – mortgage, residential 1,499 0.31 % 1,301 0.26 % Real estate – mortgage, farmland 21 0.35 % 23 0.37 % Consumer 865 2.31 % 913 1.83 % $ 12,013 $ 12,121 The information in the table above excludes PPP loans, which carry no ALL as they are fully guaranteed by the U.S. government. Nonperforming Assets. Nonperforming assets consist of nonaccrual loans, loans past due 90 days and still accruing interest, and other real estate owned (“OREO”). OREO includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of a loan. Such properties, which are held for resale, are carried at the lower of cost or fair market value, including a reduction for the estimated selling expenses. Impaired loans also include certain loans that have been modified as troubled debt restructurings ("TDRs") where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include 40 reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six month s. The Company reported $673 thousand and $688 thousand of TDRs as of March 31, 2022 and December 31, 2021, respectively. All of these TDRs were performing in accordance with their modified terms at the respective dates and therefore excluded from the nonperforming loan and non-performing asset figures in the table below. The following table presents summary information pertaining to nonperforming assets and certain asset quality ratios as of the dates stated. (Dollars in thousands) March 31, 2022 December 31, 2021 Nonaccrual loans (1) $ 12,913 $ 15,177 Loans past due 90 days and still accruing (1) 1,271 917 Total nonperforming loans $ 14,184 $ 16,094 OREO 73 157 Total nonperforming assets $ 14,257 $ 16,251 ALL $ 12,013 $ 12,121 Loans held for investment, including PPP loans $ 1,866,197 $ 1,807,578 Loans held for investment, excluding PPP loans $ 1,843,294 $ 1,777,172 Total assets $ 2,724,584 $ 2,665,139 ALL to total loans held for investment, including PPP loans 0.64 % 0.67 % ALL to total loans held for investment, excluding PPP loans 0.65 % 0.68 % ALL to nonperforming loans 84.69 % 75.31 % Nonperforming loans to total loans held for investment, including PPP loans 0.76 % 0.89 % Nonperforming loans to total loans held for investment, excluding PPP loans 0.77 % 0.91 % Nonperforming assets to total assets 0.52 % 0.61 % (1) Excludes PCI loans and accruing TDRs The decrease in the ratio of ALL to total loans held for investment, excluding PPP loans, at March 31, 2022 compared to December 31, 2021 was primarily attributable to a partial charge-off of a nonaccrual commercial loan related to one relationship, partially offset by reserve needs for loan growth in the first quarter of 2022. The remaining purchase accounting adjustments (discounts) related to loans acquired in the Bay Banks Merger and earlier acquisitions by the Company were $13.5 million and $16.2 million at March 31, 2022 and December 31, 2021, respectively. Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities available for sale may be sold in response to changes in market interest rates, changes in the securities’ prepayment risk, increased loan demand, general liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s investment securities available for sale was $375.5 million as of March 31, 2022, a slight increase from $373.5 million at December 31, 2021. Primarily as a result of a significant increase in market interest rates in the first quarter of 2022, the value of the Company’s portfolio of securities available for sale declined approximately $22.6 million. This decline in value was offset by investment purchases, net of investment paydowns, totaling $24.9 million in the first quarter of 2022. As of March 31, 2022 and December 31, 2021, the majority of the investment securities portfolio consisted of securities rated as investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default. Investment securities pledged to secure public deposits totaled $0 and $8.7 million at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022 and December 31, 2021, securities with a fair value of $20.0 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 securities portfolio at least quarterly. At March 31, 2022 and December 31, 2021, with the exception of one security, all securities in an unrealized loss position were of investment grade. In addition, the amount of unrealized loss for the security was not significant. 41 Investment securities with unrealized losses are generally a result of pricing changes due to changes in the current interest rate environment and not as a result of permanent credit impairment. Contractual cash flows for the agency mortgage-backed securities are guaranteed and/or funded by the U.S. government. Municipal securities show no indication that the contractual cash flows will not be received when due. The Company does not intend to sell nor does it believe that it will be required to sell any of its temporarily impaired securities prior to the recovery of the amortized cost. No other-than-temporary impairment has been recognized for the securities as of March 31, 2022 and December 31, 2021. Restricted equity investments consisted of stock in the FHLB (carrying basis $1.8 million and $1.7 million at March 31, 2022 and December 31, 2021, respectively), stock in the FRB (carrying basis of $6.1 million at both March 31, 2022 and December 31, 2021, respectively), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both March 31, 2022 and December 31, 2021). Restricted equity investments are carried at cost. The Company holds various other equity investments, including shares in other financial institutions and fintech companies, totaling $23.9 million and $14.2 million as of March 31, 2022 and December 31, 2021, respectively, which are carried at fair value with any gain or loss reported in the consolidated statements of operations each reporting period. The Company also holds investments in early-stage focused investment funds, small business investment companies ("SBIC") , and low-income housing partnerships, which are reported in other investments on the consolidated balance sheets. The following table presents information about the Company’s investment portfolio for the periods stated. March 31, 2022 Within One Year One to Five Years Five to Ten Years Over Ten Years (Dollars in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Total Amortized Cost Securities available for sale State and municipal $ 1,410 1.48 % $ 2,977 1.83 % $ 22,783 1.77 % $ 31,792 2.11 % $ 58,962 U. S. Treasury and agencies 5 — 12,500 0.92 % 51,621 1.92 % 11,276 1.76 % 75,402 Mortgage backed securities 7,997 0.41 % 3,192 0.52 % 19,158 1.50 % 194,816 1.56 % 225,163 Corporate bonds — — 5,497 5.09 % 36,450 4.33 % 1,732 4.51 % 43,679 Total $ 9,410 $ 24,166 $ 130,012 $ 239,616 $ 403,206 Deposits. The principal sources of funds for the Company are core deposits (demand deposits, interest-bearing transaction accounts, money market accounts, savings deposits, and certificates of deposit), primarily from its market area. The Company’s deposit base includes transaction accounts, time and savings accounts, and other accounts that customers use for cash management purposes and which provide the Company with a source of fee income and cross-marketing opportunities as well as a low-cost source of funds. Time and savings accounts, including money market deposit accounts, also provide a relatively stable low-cost source of funding. Total deposits as of March 31, 2022 were $2.35 billion, an increase of $56.3 million from December 31, 2021, of which $60.4 million was attributable to noninterest-bearing demand deposit growth primarily related to the Company's fintech partnerships. The Company's expanding relationships with fintech partners have resulted in approximately $329 million of deposits as of March 31, 2022, up from $189 million as of December 31, 2021. Approximately 19.4% of the Company’s deposits as of March 31, 2022 were composed of time deposits compared to 21.7% as of December 31, 2021. In contrast, approximately 32.6% of the Company’s deposits as of March 31, 2022 were composed of noninterest-bearing demand deposits compared to 30.7% as of December 31, 2021. The increase in this ratio was primarily attributable to the Company's relationships with fintech partners, as noted previously. The following table presents maturities of time deposits for certificate of deposits of $250 thousand or greater as of the dates stated. 42 (Dollars in thousands) March 31, 2022 December 31, 2021 Maturing in: 3 months or less $ 48,609 $ 30,943 Over 3 months through 6 months 6,544 47,818 Over 6 months through 12 months 20,178 14,213 Over 12 months 54,737 51,868 $ 130,069 $ 144,842 Borrowings. The following tables present information on the balances and interest rates on borrowings as of and for the periods stated. As of and for the three months ended March 31, 2022 (Dollars in thousands) Period-End Balance Highest Month-End Balance Average Balance Weighted Average Rate FHLB borrowings $ 10,108 $ 10,110 $ 10,110 0.56 % FRB borrowings 15,211 17,197 16,379 0.35 % As of and for the year ended 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, multi-family, and commercial real estate mortgage loan portfolios, as well as selected investment securities. FRB borrowings through the PPPLF are secured by loans the Bank originated under the PPP. The PPPLF advances are at the full PPP loan value and term, have a fixed annual cost of 35 basis points, and receive favorable regulatory capital treatment. Subordinated notes, net, totaled $40.0 million as of both March 31, 2022 and December 31, 2021. Liquidity . Liquidity is essential to the Company’s business. The Company’s liquidity could be impaired by unforeseen outflows of cash, including deposits or the inability to access the capital markets. This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the Company or the financial services industry generally, or an operational problem that affects the Company or a third party. The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events. The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management. Pursuant to the Company’s liquidity management program, it first determines its current liquidity position and then 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. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established. Management also monitors the Company’s liquidity position through cash flow forecasting and believes its level of liquidity and capital is adequate to conduct the business of the Company. 43 Deposits are the primary source of the Company’s liquidity. Cash flow from amortizing assets or maturing assets provides funding to meet the needs of depositors and borrowers. The Company has unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $44.0 million as of both March 31, 2022 and December 31, 2021. These lines bear interest at the prevailing rates for such loan and are cancellable any time by the correspondent Bank. As of March 31, 2022 and December 31, 2021, none of these lines of credit with correspondent banks were drawn upon. In addition to deposits and federal funds lines, the Company has access to various wholesale funding markets. These markets include the brokered certificate of deposit market, listing service deposit market, and the federal funds market. The Company is a member of the IntraFi Network (formerly, Promontory Interfinancial Network), which allows banking customers to access Federal Deposit Insurance Corporation (the “FDIC”) insurance protection through the Bank on deposits that exceed FDIC insurance limits. The Company also has one-way authority with the IntraFi Network for both Certificate of Deposit Account Registry Service and Insured Cash Sweep products which provides the Company the ability to access additional wholesale funding as needed. The Company also maintains secured lines of credit with the FHLB and the FRB under which the Company can borrow up to the allowable amount for the collateral pledged. As of March 31, 2022, the Company had a credit line available of $315.1 million with the FHLB with outstanding advances totaling $10.0 million and letters of credit totaling $85.0 million, leaving the remaining credit availability of $220.1 million as of the same date. The letters of credit are for the benefits of the Commonwealth of Virginia to secure public deposits. The Company utilized the FRB PPPLF to partially fund PPP loans, which collateralize the advances. As of March 31, 2022 and December 31, 2021, FRB borrowings under this facility totaled $15.2 million and $17.9 million, respectively. Capital. Capital adequacy is an important measure of financial stability and performance. The Company’s objectives are to maintain a level of capitalization that is sufficient 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. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Pursuant to the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (the “Basel III rules”), the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios, except the tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Management believes as of March 31, 2022, the Bank met all capital adequacy requirement to which it is subject. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized; although, these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At March 31, 2022, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework. There are no conditions or events since that notification that management believes have changed the institution's categorization. Federal and state banking regulations place certain restrictions on dividends paid by the Company. The total amount of dividends which may be paid at any date is generally limited to retained earnings of the Company. 44 The following tables present the capital and capital ratios to which the Bank is subject and the amounts and ratios to be adequately and well capitalized for the dates stated. Adequately capitalized ratios include the conversation buffer, if applicable. Actual For Capital Adequacy Purposes To Be Well Capitalized (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of March 31, 2022 Total risk based capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 288,450 13.29 % $ 227,866 10.50 % $ 217,015 10.00 % Tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 275,405 12.69 % $ 184,463 8.50 % $ 173,612 8.00 % Common equity tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 275,405 12.69 % $ 151,910 7.00 % $ 141,060 6.50 % Tier 1 leverage (To average assets) Blue Ridge Bank, N.A. $ 275,405 10.64 % $ 103,530 4.00 % $ 129,412 5.00 % Actual For Capital Adequacy Purposes To Be Well Capitalized (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2021 Total risk based capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 273,978 13.11 % $ 219,393 10.50 % $ 208,946 10.00 % Tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 260,896 12.49 % $ 177,604 8.50 % $ 167,157 8.00 % Common equity tier 1 capital (To risk-weighted assets) Blue Ridge Bank, N.A. $ 260,896 12.49 % $ 146,262 7.00 % $ 135,815 6.50 % Tier 1 leverage (To average assets) Blue Ridge Bank, N.A. $ 260,896 10.05 % $ 103,883 4.00 % $ 129,853 5.00 % Off-Balance Sheet Activities Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include real estate and income producing commercial properties. The approved commitments to extend credit that was available but unused as of March 31, 2022 and December 31, 2021 totaled $496.2 million and $475.1 million, respectively. Conditional commitments are issued by the Company in the form of performance stand-by letters of credit, which guarantee the performance of a customer to a third party. As of March 31, 2022 and December 31, 2021, commitments under outstanding performance stand-by letters of credit totaled $77 thousand and $655 thousand, respectively. Additionally, the Company issues financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of March 31, 2022 and December 31, 2021, commitments under outstanding financial stand-by letters of credit totaled $4.7 million and $4.5 45 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers. Reserves for unfunded commitments as of March 31, 2022 and December 31, 2021 were $1.0 million and $962 thousand, respectively, and are included in other liabilities on the consolidated balances sheets. The Company invests in various partnerships and limited liability companies, many of which invest in early-stage companies. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods, pursuant to capital calls. At March 31, 2022, the Company had future commitments outstanding totaling $7.7 million related to these investments. The Company also has investments in various SBIC funds. The Company's obligations to these funds are satisfied in the form of capital calls that occur during the commitment period. As of March 31, 2022, the Company's remaining capital commitments associated with its investments in SBIC funds was $9.0 million. Interest Rate Risk Management As a financial institution, the Company is exposed to various business risks, including interest rate risk. Interest rate risk is the risk to earnings and value arising from volatility in market interest rates. Interest rate risk arises from timing differences in the repricing and maturities of interest-earning assets and interest-bearing liabilities, changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers' ability to prepay loans and depositors' ability to redeem certificates of deposit before maturity, changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion, and changes in spread relationships between different yield curves, such as U.S. Treasuries and other market-based index rates. The Company’s goal is to maximize net interest income without incurring excessive interest rate risk. Management of net interest income and interest rate risk must be consistent with the level of capital and liquidity that the Bank maintains. The Company manages interest rate risk through an 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 employs an independent consulting firm to model its interest rate sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. Assumptions for modeling are developed based on expected activity in the balance sheet. For maturing assets, assumptions are created for the redeployment of these assets. For maturing liabilities, assumptions are developed for the replacement of these funding sources. Assumptions are also developed for assets and liabilities that could reprice during the modeled time period. These assumptions also cover how management expects rates to change on non-maturity deposits such as interest checking, money market checking, savings accounts, as well as certificates of deposit. Based on inputs that include the current balance sheet, the current level of interest rates, and the developed assumptions, the model produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. The model then simulates the impact on net interest income based on specific changes in interest rates. The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 200 basis points and up 100 basis points to 400 basis points. The results of these simulations are then compared to the base case. March 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: +400 basis points $ 9,159 10.3 % $ 16,859 18.9 % +300 basis points 8,062 9.1 % 13,833 15.5 % +200 basis points 6,188 7.0 % 10,121 11.3 % +100 basis points 3,473 3.9 % 5,549 6.2 % Base case — — — — -100 basis points (2,603 ) (2.9 %) (4,493 ) (5.0 %) -200 basis points (3,930 ) (4.4 %) (6,592 ) (7.4 %) 46 Stress testing the balance sheet and net interest income using instantaneous parallel shock movements in the yield curve of 100 to 400 basis points is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve. In addition, instantaneous parallel interest rate shock modeling is not a predictor of actual future performance of earnings. It is a financial metric used to manage interest rate risk and track the movement of the Company’s interest rate risk position over a historical time frame for comparison purposes. The asset and liability repricing characteristics of the Company’s assets and liabilities will have a significant impact on its future interest rate risk profile . Item 3. Quantitative and Qualitati ve Disclosures about Market Risk This information is incorporated herein by reference to the information in section "Interest Rate Risk Management" within Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q. Item 4. Controls and Procedures The Company maintains disclosure controls and procedures that are designed to provide assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods required by the SEC and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2022 was carried out under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer. Based on and as of the date of such evaluation, the aforementioned officers concluded that the Company’s disclosure controls and procedures were effective. The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting. 47 PART II. OTHER INFORMATION Item 1. Legal Proceedings There have been no material developments in the status of the legal proceedings previously disclosed in Part I, Item 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the ordinary course of its operations, the Company is a party to various legal proceedings. As of the date of this report, there are no pending or threatened proceedings against the Company, other than previously disclosed as stated in the preceding paragraph or as set forth below, that, if determined adversely, would have a material effect on the business, results of operations or financial position of the Company. Item 1A. Ri sk Factors There have been no material changes to the risk factors disclosed in the 2021 Form 10-K. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition, or results of operations. See also “Cautionary Note About Forward-Looking Statements,” included in Part 1, Item 2, of this Form 10-Q. Item 2. Unregistered Sales of Equi ty Securities and Use of Proceeds None Item 3. Defaults Upo n Senior Securities None Item 4. Mine Saf ety Disclosures None Item 5. Other Information None Item 6. E xhibits 31.1 Rule 13(a)-14(a) Certification of Chief Executive Officer. 31.2 Rule 13(a)-14(a) Certification of Chief Financial Officer. 32.1 Statement of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. 101 The following materials from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, formatted in Inline Extensible Business Reporting Language (XBRL), include: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) related notes (filed herewith). 104 The cover page from Blue Ridge Bankshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, formatted in Inline XBRL (included with Exhibit 101). 48 SIGNAT URES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BLUE RIDGE BANKSHARES, INC. Date: May 5, 2022 By: /s/ Brian K. Plum Brian K. Plum President and Chief Executive Officer By: /s/ Judy C. Gavant Judy C. Gavant Executive Vice President and Chief Financial Officer 49