Item 2. Management’s Discussion and Analysis
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 the Company's operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the “ 2025 Form 10-K ” ). Results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results of operations for the balance of 2026, 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 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 may change based on factors which are, in many instances, beyond its control. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements.
The following factors, among others, could cause the Company’s financial performance to differ materially from that expressed in such forward-looking statements:
• the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations;
• the effects of, and changes in, the macroeconomic environment and financial market conditions, including monetary and fiscal policies, interest rates, and inflation;
• reputational risk and potential adverse reactions of the Company’s customers, suppliers, employees, or other business partners;
• the quality and composition of the Company’s loan and investment portfolios, including changes in the level of the Company’s nonperforming assets and charge-offs;
• the Company’s management of risks inherent in its loan portfolio, the credit quality of its borrowers, and the risk of a prolonged downturn in the real estate market, which could impair the value of the Company’s collateral and its ability to sell collateral upon any foreclosure;
• the ability to maintain adequate liquidity by growing and retaining deposits and secondary funding sources, especially if the Company's or its industry's reputation becomes damaged;
• the emergence of digital assets and payment stablecoins, and evolving legislative or regulatory frameworks, which could alter deposit flows, competition, and credit intermediation and, in turn, adversely affect the Company’s funding, liquidity, or overall financial performance;
• the ability to maintain capital levels adequate to support the Company's business;
• the ability of the Company to implement cost-saving initiatives and efficiency measures, as well as increase earning assets, in order to yield acceptable levels of profitability;
• the ability to generate sufficient future taxable income for the Company to realize its deferred tax assets, including the net operating loss carryforward;
• the usage of advances and changes in technological and social media to develop timely and competitive 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;
27
• the impact of unanticipated outflows of deposits;
• potential exposure to fraud, negligence, computer theft, and cyber-crime;
• adverse developments in the financial industry generally, such as bank failures, responsive measures to mitigate and manage such developments, supervisory and regulatory actions and costs, and related impacts on customer and client behavior;
• changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products;
• political developments, including government shutdowns and other significant disruptions and changes in the funding, size, scope and effectiveness of the federal government, its agencies and services;
• the impact of changes in financial services policies, laws, and regulations, including laws, regulations, and policies concerning taxes, banking, securities, real estate and insurance, and the application thereof by bank regulatory bodies and the three branches of the federal government;
• the effect of changes in accounting standards, policies, and practices as may be adopted from time to time;
• estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Company’s assets and liabilities;
• geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad;
• the economic impact of duties, tariffs, or other barriers or restrictions on trade, any retaliatory countermeasures, and the volatility and uncertainty arising therefrom;
• the occurrence or continuation of widespread health emergencies or pandemics, significant natural disasters, severe weather conditions, floods, and other catastrophic events;
• the Company’s involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company; and
• other risks and factors identified in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections and elsewhere in the 2025 Form 10-K and in this Form 10-Q and in filings the Company makes from time to time with the Securities and Exchange Commission (“SEC”).
The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in the 2025 Form 10-K and this Form 10-Q, including those discussed in the section entitled "Risk Factors" in those filings. If one or more of the factors affecting forward-looking information and statements proves incorrect, then actual results, performance, or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, the Company cautions not to place undue reliance on its forward-looking information and statements. The Company will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how these risks and uncertainties will affect it.
Special Cash Dividend and Warrants
On March 30, 2026, the Company announced a special cash dividend of $0.60 per share of the Company's common stock totaling approximately $54.1 million. The dividend was paid on April 27, 2026 to shareholders of record as of the close of business on April 13, 2026. Also on March 30, 2026, the Company announced that the holders of outstanding warrants to purchase the Company's common stock (the "Warrants") representing a majority of shares of common stock underlying such Warrants approved an amendment and restatement of the Warrants (the "Warrant Amendment"). Pursuant to the Warrant Amendment, in connection with certain cash distributions to holders of the Company's common stock while the Warrants are outstanding, the per share exercise price of each Warrant is reduced by the per share dividend amount in lieu of cash distributions to Warrant holders, including the special cash dividends of $0.25 per share
28
paid in November 2025 and $0.60 per share paid in April 2026. The Company had previously accrued $6.1 million for the November 2025 dividend to be paid if and when the Warrants are exercised. As a result of the Warrant Amendment, the $6.1 million accrual was reversed in the first quarter 2026, and upon execution of the amended and restated Warrants, the strike price of the Warrants reduces to $1.65 per common share.
The table below presents information pertaining to the Warrants as of and for the period stated.
Warrants Issued April 3, 2024
Warrants Issued June 13, 2024
Total Warrants
Balance, December 31, 2025
21,895,999
2,424,000
24,319,999
Warrants exercised
—
—
—
Balance, March 31, 2026
21,895,999
2,424,000
24,319,999
Remaining exercise term (years) as of March 31, 2026
3.01
3.20
Warrants Issued April 3, 2024
Warrants Issued June 13, 2024
Total Warrants
Balance, December 31, 2024
29,027,999
2,424,000
31,451,999
Warrants exercised
(2,762,000
)
—
(2,762,000
)
Balance, March 31, 2025
26,265,999
2,424,000
28,689,999
General
There were no changes to the Critical Accounting Policies disclosed in Item 7 of the 2025 Form 10-K.
Certain amounts presented in the consolidated financial statements of prior periods have been reclassified to conform to current year presentations. The reclassifications had no effect on net income, net income per share, total assets, total liabilities, or stockholders’ equity as previously reported.
Comparison of Financial Condition as of March 31, 2026 and December 31, 2025
Total assets were $2.41 billion as of March 31, 2026, a decrease of $18.5 million from $2.43 billion as of December 31, 2025. Most of this decrease was attributable to a $31.8 million decline in loans held for investment and a $14.8 million decline in loans held for sale, partially offset by an increase in cash and due from banks, which increased $30.7 million from December 31, 2025. Included in the reduction of loans held for investment in the first quarter of 2026 were payoffs and paydowns of $24.1 million of out-of-market loans. The decline in loans held for sale reflects the Company's complete exit from its indirect fintech lending activities in the first quarter. The allowance for credit losses ("ACL") was $19.2 million and $19.4 million as of March 31, 2026 and December 31, 2025, respectively.
Total deposits were $1.89 billion as of March 31, 2026, a net decrease of $18.1 million from December 31, 2025. The decline in the first quarter of 2026 was primarily due to a $31.5 million decrease in brokered time deposits. Excluding the decline in brokered deposits, deposits increased $13.4 million in the first quarter of 2026.
Total stockholders’ equity decreased by $46.7 million to $277.0 million as of March 31, 2026, from $323.7 million at December 31, 2025, primarily due to the special cash dividend ($54.1 million) announced March 30, 2026, partially offset by a $6.1 million reversal of accrued dividends due to the aforementioned Warrant Amendment.
Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025
For the three months ended March 31, 2026, the Company reported net income of $0.8 million, or $0.01 per diluted common share, compared to net loss of $0.4 million, or ($0.01) per diluted common share, for the same period of 2025. Net income for the first quarter of 2026 included after-tax expenses of $1.3 million related to the transition of executive officers. Net income for the first quarter of 2026 when excluding these transition expenses was $2.1 million, or $0.02 per diluted common share. Net loss for the first quarter of 2025 included after-tax severance costs of $0.5 million and an after-tax $0.2 million loss on the sale of the mortgage division.
Net Interest Income. Net interest income is the excess of interest earned on loans, investments, and other interest-earning assets less the interest paid on deposits and borrowings and is the Company’s primary revenue source. Net interest income is thereby affected by overall balance sheet size, changes in interest rates, and changes in the mix of
29
investments, loans, deposits, and borrowings. Net interest income for the three months ended March 31, 2026 was $16.9 million, a decline of $2.1 million from the same respective period in 2025, primarily due to a decline in average loan balances.
The following table presents the average balance sheets for the three months ended March 31, 2026 and 2025. Also shown are the amounts of interest earned on interest-earning assets, with related tax-equivalent yields, and interest expense on interest-bearing liabilities, with related rates, as well as a volume and rate analysis of changes in net interest income for the periods stated.
Average Balances, Income and Expense, Yields and Rates
For the three months ended March 31,
2026
2025
Total
Increase/
Increase/(Decrease)
Due to
(Dollars in thousands)
Average
Balance
Interest
Yield/
Rate (1)
Average
Balance
Interest
Yield/
Rate (1)
(Decrease)
Volume (2)
Rate (2)
Average Assets
Taxable securities
$
343,777
$
2,531
2.94
%
$
325,076
$
2,420
2.98
%
$
111
$
139
$
(28
)
Tax-exempt securities (3)
12,076
94
3.11
%
12,475
81
2.60
%
13
(3
)
16
Total securities
355,853
2,625
2.95
%
337,551
2,501
2.96
%
124
137
(13
)
Interest-earning deposits in other banks
126,250
1,063
3.37
%
162,771
1,698
4.17
%
(635
)
(381
)
(254
)
Federal funds sold
1,342
13
3.87
%
1,385
15
4.33
%
(2
)
(0
)
(2
)
Loans held for sale
4,693
314
26.76
%
29,455
1,366
18.55
%
(1,052
)
(1,148
)
96
Loans held for investment (4,5,6)
1,846,535
25,395
5.50
%
2,089,563
29,788
5.70
%
(4,393
)
(3,465
)
(928
)
Total average interest-earning assets
2,334,673
29,410
5.04
%
2,620,725
35,368
5.40
%
(5,958
)
(4,858
)
(1,100
)
Less: allowance for credit losses
(19,272
)
(22,747
)
Total noninterest-earning assets
108,089
123,736
Total average assets
$
2,423,490
$
2,721,714
Average Liabilities and Stockholders’ Equity:
Interest-bearing demand, money market, and savings
$
700,423
$
3,035
1.73
%
$
720,034
$
3,350
1.86
%
$
(315
)
$
(91
)
$
(224
)
Time (7)
807,942
7,725
3.82
%
989,486
10,842
4.38
%
(3,117
)
(1,989
)
(1,128
)
Total interest-bearing deposits
1,508,365
10,760
2.85
%
1,709,520
14,192
3.32
%
(3,432
)
(2,080
)
(1,352
)
FHLB borrowings
150,000
1,432
3.82
%
150,000
1,432
3.82
%
—
—
—
Subordinated notes and other borrowings (8)
14,713
291
7.91
%
39,794
736
7.40
%
(445
)
(464
)
19
Total average interest-bearing liabilities
1,673,078
12,483
2.98
%
1,899,314
16,360
3.45
%
(3,877
)
(2,544
)
(1,333
)
Noninterest-bearing demand deposits
388,303
458,157
Other noninterest-bearing liabilities
37,719
34,559
Stockholders' equity
324,390
329,684
Total average liabilities and stockholders’ equity
$
2,423,490
$
2,721,714
Net interest income and margin (9)
$
16,927
2.90
%
$
19,008
2.90
%
$
(2,081
)
$
(2,313
)
$
232
Cost of funds (10)
2.42
%
2.78
%
Net interest spread (11)
2.05
%
1.95
%
(1) Annualized.
(2) Change in income/expense due to both volume and rate has been allocated in proportion to the absolute dollar amounts of the change in each.
(3) Computed on a fully taxable equivalent basis assuming a 21.96% and 22.32% income tax rate for the three months ended March 31, 2026 and 2025, respectively.
(4) Includes deferred loan fees/costs.
(5) Non-accrual loans have been included in the computations of average loan balances.
(6) Includes accretion of fair value adjustments (discounts) on acquired loans of $165 thousand and $366 thousand for the three months ended March 31, 2026 and 2025, respectively.
(7) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $1 thousand and $35 thousand for the three months ended March 31, 2026 and 2025, respectively.
(8) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $14 thousand and $25 thousand for the three months ended March 31, 2026 and 2025, respectively.
(9) Net interest margin is net interest income divided by average interest-earning assets.
(10) Cost of funds is total interest expense divided by total interest-bearing liabilities and non-interest bearing demand deposits.
(11) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.
Average balances of interest-earning assets decreased $286.1 million to $2.33 billion for the three months ended March 31, 2026 compared to $2.62 billion for the same period of 2025. Relative to the year-ago period, this decrease primarily reflected lower average balances of loans held for investment and lower average loans held for sale, reflective of the Company's exit of its indirect fintech lending partnerships, in addition to lower average interest-earning deposits in other banks. The yield on average loans held for investment was 5.50% and 5.70% for the first quarters of 2026 and 2025, respectively. The decline in yield on loans held for investment was primarily due to a decline in higher yielding out-of-market loans and lower accretion of discounts on acquired loans. Accretion of discounts on acquired loans had a four and seven basis point positive effect on yield on loans held for investment for the same respective periods. Interest income for the three months ended March 31, 2026 and 2025 included accretion of discounts on acquired loans of $0.2 million and $0.4 million, respectively.
Average balances of interest-bearing liabilities decreased $226.2 million to $1.67 billion for the three months ended March 31, 2026 compared to $1.90 billion for the same period of 2025. The decline relative to the year-ago period was primarily due to a $138.8 million reduction of brokered deposits, reported in time deposits, and a $25.1 million reduction in borrowings attributable to the Company's redemption of a portion of its subordinated notes.
Cost of funds was 2.42% for the first quarter of 2026 compared to 2.78% for the first quarter of 2025, while cost of deposits was 2.27% and 2.62%, for the same respective periods. Lower cost of funds and deposits in the first quarter of
30
2026 relative to the year-ago periods were primarily due to the reduction in brokered deposits and partial redemption of the Company's subordinated notes. Cost of deposits, excluding brokered deposits, was 1.97% for the first quarter of 2026 compared to 2.19% for the first quarter of 2025.
Net interest income (on a taxable equivalent basis) for the three months ended March 31, 2026 was $16.9 million compared to $19.0 million for the same period in 2025. Interest income declined $6.0 million to $29.4 million for the three months ended March 31, 2026 from $35.4 million for the three months ended March 31, 2025, while interest expense declined $3.9 million to $12.5 million from $16.4 million for the same respective periods. Net interest margin remained unchanged at 2.90% for the first quarters of 2026 and 2025.
Recovery of Credit Losses . A recovery of credit losses of $0.6 million was reported for the three months ended March 31, 2026, whereas none was reported for the three months ended March 31, 2025. The recovery of credit losses for the first quarter of 2026 was primarily due to loan portfolio balance reductions of $31.8 million and $0.3 million of net loan recoveries, including an $0.8 million recovery on a loan charged off in 2022.
Noninterest Income . The following tables present a summary of noninterest income and the dollar and percentage change for the periods presented.
For the three months ended
(Dollars in thousands)
March 31, 2026
March 31, 2025
Change $
Change %
Service charges on deposit accounts
$
632
$
457
$
175
38.3
%
Bank and purchase card interchange income, net
545
567
(22
)
(3.9
%)
Wealth and trust management fees
464
454
10
2.2
%
Residential mortgage banking income
—
724
(724
)
(100.0
%)
Fair value adjustments of other equity investments
66
(73
)
139
(190.4
%)
Other
641
943
(302
)
(32.0
%)
Total noninterest income
$
2,348
$
3,072
$
(724
)
(23.6
%)
The Company reported higher service charges on deposit accounts during the three months ended March 31, 2026 compared to 2025, primarily due to the execution of a project in early 2025 to more closely align products and pricing with competitors in the markets in which the Bank operates. The decline in residential mortgage banking income for the same comparative periods was attributable to the sale of the mortgage division late in the first quarter of 2025. The $0.2 million loss on the sale of the mortgage division was included in other noninterest income in the 2025 period. Additionally, the decline in other noninterest income for the 2026 period compared to 2025 was primarily driven by lower income from the Company's other investments.
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, 2026
March 31, 2025
Change $
Change %
Salaries and employee benefits
$
11,057
$
12,610
$
(1,553
)
(12.3
%)
Occupancy and equipment
1,239
1,381
(142
)
(10.3
%)
Technology and communication
1,987
2,784
(797
)
(28.6
%)
Legal and regulatory filings
582
439
143
32.6
%
Advertising and marketing
765
191
574
300.5
%
Audit fees
255
578
(323
)
(55.9
%)
FDIC insurance
420
1,097
(677
)
(61.7
%)
Intangible amortization
202
244
(42
)
(17.2
%)
Other contractual services
202
595
(393
)
(66.1
%)
Other taxes and assessments
828
921
(93
)
(10.1
%)
Other
1,204
2,111
(907
)
(43.0
%)
Total noninterest expense
$
18,741
$
22,951
$
(4,210
)
(18.3
%)
Noninterest expense decreased $4.2 million to $18.7 million for the three months ended March 31, 2026, from the same period of 2025. The decline relative to the prior period was primarily due to the termination of the consent order with the Bank's primary regulator, under which the Bank was operating until it was terminated in the fourth quarter of
31
2025. Lower expenses resulting from the consent order termination were primarily in salaries and benefits, as the number of full-time employees declined by 70 full-time employees, or approximately 20%, since March 31, 2025, and lower technology costs, other contractual services, audit fees, and Federal Deposit Insurance Corporation ("FDIC") insurance premiums. Included in salaries and employee benefits expense for the three months ended March 31, 2026 and 2025 were executive officer transition and severance costs of $1.7 million and $0.7 million, respectively. The decrease in other noninterest expense in the first quarter 2026 compared to the same period of 2025 was primarily due to lower third-party loan servicing costs and losses on loans previously sold.
Income Tax Expense. For the three months ended March 31, 2026, the effective income tax rate was 24.9% compared to 51.2% for the three months ended March 31, 2025. The effective income tax rate for the three months ended March 31, 2026 included the effect of limitations on the tax deductibility of certain costs. The higher effective income tax rate in the 2025 period included the effect of a $0.3 million favorable adjustment related to a change in the state tax rate applied to the accumulated unrealized loss on the available for sale securities portfolio.
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 established to maximize the Company’s profitability within an acceptable level of business risk .
The following table presents the Company’s loan portfolio by category of loan and the percentage of loans in each category to total loans as of the dates stated.
March 31, 2026
December 31, 2025
(Dollars in thousands)
Amount
Percent
Amount
Percent
Commercial and industrial
$
264,004
14.4
%
$
271,158
14.5
%
Real estate – construction, commercial
45,831
2.5
%
51,738
2.8
%
Real estate – construction, residential
33,397
1.8
%
31,772
1.7
%
Real estate – commercial
831,794
45.4
%
836,308
44.9
%
Real estate – residential
623,591
34.0
%
636,743
34.2
%
Real estate – farmland
4,451
0.2
%
4,580
0.2
%
Consumer
29,608
1.6
%
32,213
1.7
%
Gross loans held for investment
1,832,676
100.0
%
1,864,512
100.0
%
Deferred costs, net of loan fees
1,223
1,205
Gross loans held for investment, net of deferred costs
1,833,899
1,865,717
Less: allowance for credit losses
(19,184
)
(19,444
)
Net loans
$
1,814,715
$
1,846,273
Loans held for sale
(not included in totals above)
$
—
$
14,769
The Company has pledged certain qualifying loans as collateral for borrowings. Commercial and residential mortgages totaling $665.7 million and $695.1 million were pledged with the Federal Home Loan Bank of Atlanta ("FHLB") as of March 31, 2026 and December 31, 2025, respectively. The Company pledged as collateral for borrowings with the Federal Reserve Bank of Richmond (“FRB”) Discount Window certain construction and commercial and industrial loans totaling $71.1 million and $72.8 million as of March 31, 2026 and December 31, 2025, respectively.
32
The following table presents the Company’s portfolio of commercial real estate loans by property type as of the dates stated.
March 31, 2026
December 31, 2025
(Dollars in thousands)
Amount
Percent
Amount
Percent
Commercial real estate – owner occupied
$
185,240
22.3
%
$
178,270
21.3
%
Commercial real estate – non-owner occupied
Hospitality
155,641
18.7
%
154,077
18.4
%
Multi-family
207,721
25.0
%
217,130
26.0
%
Retail
91,859
11.0
%
94,821
11.3
%
Office
55,324
6.7
%
55,650
6.7
%
Mixed use
43,380
5.2
%
42,886
5.1
%
Warehouse and industrial
39,798
4.8
%
40,136
4.8
%
Other
52,831
6.4
%
53,338
6.4
%
Total real estate – commercial
$
831,794
100.0
%
$
836,308
100.0
%
While the Federal Reserve has reduced the target Fed Funds rate by 175 basis points from a recent peak, the current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment than had existed when the majority of the Company's loans may have been originated. Potential negative impacts may include higher debt service burdens for floating rate loans and fixed rate loans originated in a lower rate environment that reprice or mature, requiring renewal or refinancing. As these loans mature, they may be repriced at higher interest rates leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased relatively.
Additionally, collateral values overall may be impaired by higher capitalization rates, further complicating refinancing efforts and increasing credit risk to the Bank. Certain CRE collateral types have experienced declining occupancy, demand, and rental rates, which could potentially lead to material declines in property level economics and further weaken borrowers' ability to service their debt.
The Bank’s credit administration department led by the Chief Risk Officer performs periodic analyses of emerging trends by geography and property type where the Bank has larger concentrations by CRE property type. These analyses include all real estate property types and geographic markets represented in the loan portfolio and are provided to the Bank's board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the Bank's board of directors. As of March 31, 2026, the Bank was in compliance with all limits.
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, 2026. Loans shown in the one year or less column are term loans that have a stated maturity date within twelve months. Variable rate loans reprice at various intervals (monthly or quarterly) and the rate is tied to a published index such as the Fed Prime rate, U.S. Treasury bond indices, or the Secured Overnight Funding Rate.
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
$
264,004
$
33,241
$
129,512
$
105,515
$
22,947
$
1,050
$
101,251
$
43,679
$
40,198
$
17,374
Real estate – construction, commercial
45,831
15,872
22,600
14,320
3,320
4,960
7,359
6,680
679
—
Real estate – construction, residential
33,397
22,782
2,815
2,503
—
312
7,800
5,194
—
2,606
Real estate – commercial
831,794
121,088
420,438
90,460
148,331
181,647
290,268
207,191
74,193
8,884
Real estate – residential
623,591
12,984
362,065
27,364
63,287
271,414
248,542
30,930
24,775
192,837
Real estate – farmland
4,451
1,468
1,882
91
212
1,579
1,101
295
113
693
Consumer loans
29,608
1,935
4,273
4,245
28
—
23,400
20,743
2,657
—
Gross loans
$
1,832,676
$
209,370
$
943,585
$
244,498
$
238,125
$
460,962
$
679,721
$
314,712
$
142,615
$
222,394
Allowance for Credit Losses . In determining the adequacy of the Company’s ACL, management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company’s ACL was adequate as of March 31, 2026 and December 31, 2025. There can be no assurance, however, that adjustments to the ACL will not be required in the future. Changes in the economic assumptions underlying management’s estimates and judgments, adverse developments in the economy, on a national basis or in the Company’s market area, and changes in the circumstances of particular borrowers are criteria,
33
among others that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on their judgment of the facts at the time of their review that may differ than that of management.
The following tables present an analysis of the change in the ACL by loan type as of and for the periods stated.
For the three months ended March 31, 2026
(Dollars in thousands)
Commercial and industrial
Real estate – construction, commercial
Real estate – construction, residential
Real estate – commercial
Real estate – residential
Real estate – farmland
Consumer
Total
ACL, beginning of period
$
4,337
$
678
$
264
$
5,959
$
7,655
$
14
$
537
$
19,444
(Recovery of) provision for credit losses - loans
(972
)
(23
)
(56
)
317
(54
)
(2
)
190
(600
)
Charge-offs
(2,011
)
—
—
—
—
—
(252
)
(2,263
)
Recoveries
2,492
—
—
—
1
—
110
2,603
Net recoveries (charge-offs)
481
—
—
—
1
—
(142
)
340
ACL, end of period
$
3,846
$
655
$
208
$
6,276
$
7,602
$
12
$
585
$
19,184
Ratio of net recoveries (charge-offs) to average loans outstanding
0.17
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
-0.47
%
0.02
%
For the three months ended March 31, 2025
(Dollars in thousands)
Commercial and industrial
Real estate – construction, commercial
Real estate – construction, residential
Real estate – commercial
Real estate – residential
Real estate – farmland
Consumer
Total
ACL, beginning of period
$
5,767
$
2,057
$
540
$
5,963
$
7,933
$
18
$
745
$
23,023
Provision for (recovery of) credit losses - loans
(189
)
(65
)
12
(240
)
253
—
229
—
Charge-offs
(2,123
)
—
—
(63
)
(16
)
—
(587
)
(2,789
)
Recoveries
2,271
—
—
338
1
—
282
2,892
Net recoveries (charge-offs)
148
—
—
275
(15
)
—
(305
)
103
ACL, end of period
$
5,726
$
1,992
$
552
$
5,998
$
8,171
$
18
$
669
$
23,126
Ratio of net recoveries (charge-offs) to average loans outstanding
0.16
%
0.00
%
0.00
%
0.14
%
-0.01
%
0.00
%
-2.71
%
0.02
%
Of the $2.3 million and $2.8 million of loan charge-offs for the three months ended March 31, 2026, and 2025, respectively, $1.6 million and $2.0 million for the same respective periods were attributable to business and consumer credit cards originated through a partnership with a third-party company. The third-party provides limited credit loss protection to the Bank, and upon receipt, credits for losses are reported as recoveries. Since the inception of this partnership in early 2023, the Bank has not experienced a credit loss from this arrangement.
The ACL includes specific reserves for individually evaluated loans and a general allowance applicable to loans pooled by loan categories; however, management has allocated the ACL by loan type to provide an indication of the relative risk characteristics of the loan portfolio. The allocation is an estimate and should not be interpreted as an indication that charge-offs will occur in these amounts or that the allocation indicates future trends, and does not restrict the usage of the allowance for any specific loan or category. The following table presents the allocation of the ACL by loan category and the percentage of loans in each category to total loans as of the dates stated.
March 31, 2026
December 31, 2025
(Dollars in thousands)
ACL Amount
% of
Loans
ACL Amount
% of
Loans
Commercial and industrial
$
3,846
14.4
%
$
4,337
14.5
%
Real estate – construction, commercial
655
2.5
%
678
2.8
%
Real estate – construction, residential
208
1.8
%
264
1.7
%
Real estate – commercial
6,276
45.4
%
5,959
44.9
%
Real estate – residential
7,602
34.0
%
7,655
34.2
%
Real estate – farmland
12
0.2
%
14
0.2
%
Consumer
585
1.6
%
537
1.7
%
Total
$
19,184
100.0
%
$
19,444
100.0
%
34
Nonperforming Assets. The following table presents a summary of nonperforming assets and various measures as of the dates stated.
(Dollars in thousands)
March 31, 2026
December 31, 2025
Nonaccrual loans held for investment
$
19,502
$
20,605
Loans past due 90 days and still accruing
1,525
3,158
Total nonperforming loans
$
21,027
$
23,763
Other real estate owned ("OREO")
1,560
1,683
Total nonperforming assets
$
22,587
$
25,446
Loans held for investment
$
1,833,899
$
1,865,717
Total assets
$
2,414,046
$
2,432,589
ACL on loans held for investment
$
19,184
$
19,444
ACL to loans held for investment
1.05
%
1.04
%
ACL to nonaccrual loans
98.37
%
94.37
%
ACL to nonperforming loans
91.24
%
81.82
%
Nonaccrual loans to loans held for investment
1.06
%
1.10
%
Nonperforming loans to loans held for investment
1.15
%
1.27
%
Nonperforming loans to total assets
0.87
%
0.98
%
Nonperforming assets to total assets
0.94
%
1.05
%
Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt. A loan remains in nonaccrual status until the loan is current as to payment of both principal and interest or past due less than 90 days and the borrower demonstrates the ability to pay and remain current for a sustained period of time, generally six months, or when the loan otherwise becomes well-secured and in the process of collection. When cash payments are received, they are applied to principal first, then to accrued interest. It is the Company's policy not to record interest income on nonaccrual loans until the loan has returned to accrual status. In certain instances, accruing loans that are past due 90 days or more as to principal or interest may not be placed on nonaccrual status, if the Company determines that the loans are well-secured and are in the process of collection. The decline in nonperforming loans and the related ratios above for March 31, 2026 from December 31, 2025 primarily reflects loan paydowns in the first quarter of 2026.
OREO generally includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. Such properties,which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the new carrying value. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value. In limited cases, the Bank may receive non-cash consideration, including equity interests, pursuant to negotiated or court-approved settlements with borrowers. The fair value of nonmarketable equity interests are generally estimated using a discounted cash flow analysis based on management’s assumptions regarding expected future cash flows, timing, and a risk adjusted discount rate. These assets, which are reported with OREO on the Company's consolidated balance sheets, are subsequently carried at the lower of cost or fair value, less estimated costs to sell, and are periodically evaluated for impairment. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value.
As of March 31, 2026 and December 31, 2025, OREO included a property with a carrying value of $1.3 million that served as collateral for a government guaranteed loan. The guaranteed portion of the loan (90%) is owned by the U.S. Small Business Administration ("SBA"), and the Company is obligated to remit to the SBA its share of the liquidation proceeds upon the sale of the property. Accordingly, the Company recorded a $1.2 million liability, reported in other liabilities on the Company's consolidated balance sheets as both March 31, 2026 and December 31, 2025, representing the SBA's contractual interest in the expected proceeds from the sale of the property.
Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities available for sale ("AFS") may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s AFS investment securities portfolio was $331.9 million as of March 31, 2026, a decrease of $1.0 million from $332.9 million at December 31, 2025. As a result of elevated market interest rates, the Company’s portfolio of AFS securities had net unrealized losses of approximately $40.3 million as of both March 31,
35
2026 and December 31, 2025, of which approximately 83% and 84%, respectively, were related to securities backed by U.S. government agencies.
As of March 31, 2026 and December 31, 2025, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default, to be of the best quality, and to carry the smallest degree of investment risk. At March 31, 2026 and December 31, 2025, securities with a fair value of $169.8 million and $174.3 million, respectively, were pledged to secure the Bank’s borrowing facility with the FHLB.
The Company reviews its AFS investment securities portfolio for potential credit losses at least quarterly. AFS investment securities with unrealized losses are generally a result of pricing changes due to changes in the current interest rate environment and not as a result of permanent credit impairment. The Company does not intend to sell nor does it believe that it will be required to sell, any of its impaired securities prior to the recovery of the amortized cost. No ACL has been recognized for AFS securities as of both March 31, 2026 and December 31, 2025.
Restricted equity investments consisted of stock in the FHLB (carrying basis $8.9 million and $9.1 million at March 31, 2026 and December 31, 2025, respectively), FRB stock (carrying value of $9.0 million and $9.4 million as of March 31, 2026 and December 31, 2025, respectively), and stock in the Company’s correspondent bank (carrying value of $0.5 million at both March 31, 2026 and December 31, 2025). Restricted equity investments are carried at cost.
The Company has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $5.0 million and $4.9 million as of March 31, 2026 and December 31, 2025, respectively.
The Company also holds investments in early-stage focused investment funds and low-income housing partnerships, which totaled $20.9 million and $20.8 million as of March 31, 2026 and December 31, 2025, respectively, and are reported in other investments on the consolidated balance sheets.
The Company had no investment securities classified as held to maturity as of March 31, 2026 or December 31, 2025.
The following table presents the amortized cost of the investment portfolio by contractual maturities, as well as the weighted average yields for each of the maturity ranges as of and for the period stated. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
March 31, 2026
Within One Year
One to Five Years
Five to Ten Years
Over Ten Years
(Dollars in thousands)
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
Total Amortized Cost
Securities available for sale
Mortgage backed securities
$
—
—
$
6,098
1.99
%
$
11,662
2.90
%
$
196,717
2.51
%
$
214,477
U. S. Treasury and agencies
12,507
0.92
%
33,919
1.32
%
31,863
2.32
%
133
4.24
%
78,422
State and municipal
932
3.58
%
14,776
2.45
%
28,366
2.26
%
5,095
3.15
%
49,169
Corporate bonds
1,500
7.00
%
7,750
6.86
%
20,391
4.09
%
500
4.00
%
30,141
Total
$
14,939
$
62,543
$
92,282
$
202,445
$
372,209
Deposits. The principal sources of funds for the Company are deposits, including transaction accounts (demand and money market accounts), time deposits, and savings accounts, of customers in the Company’s primary geographic market area. Such customers provide the Bank a source of fee income and cross-marketing opportunities and are generally a lower cost source of funding for the Bank.
Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity and in anticipation of the exit of the Company's fintech BaaS deposit operations. The Bank has a liquidity management program, with oversight of the Bank’s asset and liability committee (the “ALCO”), that sets forth guidelines and monitors for the desired maximum level of brokered deposits, which is 20.0% of total deposits. In recent quarters, the Company has reduced its level of higher-priced brokered deposits by sourcing non-brokered deposits and through cash flows from the loan portfolio, and expects to continue reducing brokered deposits in future periods to 10.0% or less of total deposits.
36
Total deposits decreased $18.1 million from $1.91 billion as of December 31, 2025 to $1.89 billion as of March 31, 2026, as:
• Deposits, excluding brokered deposits, increased $13.4 million from $1.67 billion as of December 31, 2025 to $1.69 billion as of March 31, 2026; and
• Brokered deposits decreased $31.5 million from $238.7 million, or 12.5% of total deposits, as of December 31, 2025 to $207.2 million, or 10.9% of total deposits, as of March 31, 2026.
Estimated uninsured deposits totaled approximately $414.3 million as of March 31, 2026, or 20.3% of total deposits, compared to $397.0 million, or 19.1% of total deposits, as of December 31, 2025. Uninsured deposit amounts are based on estimates as of the reported dates.
The following table presents a summary of average deposits and the weighted average rate paid for the periods stated. The decline in average balances and rate for interest-bearing demand accounts reflects the exit of fintech BaaS depository operations.
For the three months ended
March 31, 2026
March 31, 2025
(Dollars in thousands)
Average
Balance
Average Rate
Average
Balance
Average Rate
Noninterest-bearing demand
$
388,303
—
$
458,157
—
Interest-bearing:
Demand
229,795
1.03
%
239,001
1.27
%
Savings
100,571
2.33
%
101,671
2.53
%
Money market
370,057
2.01
%
379,362
2.06
%
Time
807,942
3.82
%
989,486
4.38
%
Total interest-bearing
$
1,508,365
$
1,709,520
Total average deposits
$
1,896,668
$
2,167,677
The following table presents maturities of time deposits for certificates of deposits of $250 thousand or greater as of the dates stated.
(Dollars in thousands)
March 31, 2026
December 31, 2025
Maturing in:
3 months or less
$
41,757
$
38,475
Over 3 months through 6 months
52,375
33,385
Over 6 months through 12 months
40,045
49,776
Over 12 months
47,748
33,676
$
181,925
$
155,312
The Company's brokered deposits were issued in denominations of $1 thousand each under master certificates, and therefore are excluded from the table above.
Borrowings. The Company uses short-term and long-term borrowings from various sources, including FHLB advances and FRB advances, to fund assets and operations. The following table presents information on the balances of borrowings as of and for the periods ended March 31, 2026 and December 31, 2025. The weighted average rate was 3.82% and 3.87% as of and for the same periods, respectively.
(Dollars in thousands)
Period-End Balance
Highest Month-End Balance
Average Balance
FHLB borrowings
$
150,000
$
150,000
$
150,000
As of March 31, 2026, FHLB advances were secured by collateral consisting of a blanket lien on qualifying loans in the Company’s residential, multifamily, and commercial real estate mortgage loan portfolios with a lendable value of $384.7 million, as well as selected investment portfolio securities with a lendable value of $161.3 million. FRB
37
advances through the FRB Discount Window were secured by qualifying pledged construction and commercial and industrial loans totaling $71.1 million as of March 31, 2026.
The Company had $14.7 million of subordinated notes, net, outstanding as of both March 31, 2026 and December 31, 2025. Prior to June 1, 2025, the Company's subordinated notes had been comprised of a $15 million issuance in May 2020 maturing June 1, 2030 (the “2030 Note”) and a $25 million issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”).
On June 1, 2025, the Company completed the $15.0 million redemption of the 2030 Note. The interest rate on the 2030 Note was 6.0% up to the redemption date. Interest expense on the 2030 Note was $0 and $0.2 million for the three months ended March 31, 2026 and 2025, respectively.
On July 15, 2025, the Company completed a $10.0 million partial redemption of its 2029 Notes. As of March 31, 2026, the 2029 Notes bore an annual interest rate of 8.0%. As of March 31, 2026, the net carrying amount of the 2029 Notes was $14.7 million, inclusive of a $0.2 million purchase accounting adjustment (premium). For the three months ended March 31, 2026 and 2025, the effective interest rate on the 2029 Notes was 7.92% and 6.31%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium).
Liquidity . Liquidity is essential to the Company’s business. The Company’s liquidity could be impaired by unforeseen outflows of cash, including deposits, or the inability to access the capital and/or brokered funding markets. This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the Company or the financial services industry generally, or an operational problem that affects the Company or a third party. The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the markets in which they operate or other events.
Deposits are the primary source of the Company’s liquidity. Cash flows from amortizing or maturing assets also provide funding to meet the liquidity needs of the Company. Deposits are sourced from the Bank’s customers and, as needed, through brokered deposit markets. The brokered deposit markets are accessed through brokers or through the IntraFi Network (“IntraFi”), of which the Bank is a member. IntraFi facilitates the Bank attaining brokered deposits via an on-line marketplace. The Bank also utilizes IntraFi's reciprocal deposit services to offer its high-value customers access to FDIC insurance through IntraFi's network of banks.
The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management. Pursuant to the Company’s liquidity contingency plan, liquidity needs are forecasted based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. Management then stress tests the Company’s liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established and are reviewed by the ALCO. Management also monitors the Company’s liquidity position on a day-to-day basis through daily cash monitoring and short- and long-term cash flow forecasting and believes its sources of liquidity are adequate to conduct the business of the Company.
The following table presents information on the Company's available sources of liquidity as of the date stated.
(Dollars in thousands)
Capacity
Less: Outstanding Borrowings
Available Balance
Cash and due from banks
$
146,608
Fed funds sold
1,451
Unpledged securities available for sale
162,150
Total
$
310,209
Borrowings
FHLB
$
545,987
$
220,060
(1)
$
325,927
FRB
71,118
—
71,118
Unsecured line of credit
10,000
—
10,000
Total
$
627,105
$
220,060
$
407,045
Available liquidity as of March 31, 2026
$
717,254
(1) Outstanding borrowings are comprised of advances of $150.0 million and letters of credit totaling $70.1 million, of which $70.0 million served as collateral for public deposits with the Treasury Board of the Commonwealth of Virginia.
38
Estimated uninsured deposits at March 31, 2026 were approximately $414.3 million. In the unlikely event that uninsured deposit balances leave the Bank over a short period of time, management could more than satisfy the demand with cash on-hand and FHLB borrowing capacity.
Capital. Capital adequacy is an important measure of financial stability and performance. The Company’s objectives are to maintain a level of capitalization that is sufficient to support the Company's strategic objectives.
Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Banks must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios except the Tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Additionally, regulators place certain restrictions on dividends paid by banks.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized; although, these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.
The Company adopted ASC 326, Financial Instruments - Credit Losses (referred to herein as "current expected credit losses" or "CECL") effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment to retained earnings (the "CECL Transitional Amount") over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital was 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report. The CECL Transitional Amount was $8.1 million and was fully phased in as a reduction to the regulatory capital amounts and ratios as of March 31, 2026, compared to a $6.1 million reduction as of December 31, 2025.
The following tables present the capital ratios to which banks are subject to be adequately and well capitalized, as well as the capital and capital ratios for the Bank as of the dates stated. Adequately capitalized ratios include the conservation buffer, if applicable. The following table also includes the capital adequacy ratios to which bank holding companies are subject.
March 31, 2026
Actual
For Capital
Adequacy Purposes
To Be Well Capitalized
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total risk based capital (to risk-weighted assets)
Blue Ridge Bank, N.A.
$
286,488
16.47
%
$
182,643
10.50
%
$
173,945
10.00
%
Blue Ridge Bankshares, Inc.
$
327,867
18.67
%
$
140,489
8.00
%
n/a
n/a
Tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.
$
266,647
15.33
%
$
147,847
8.50
%
$
139,150
8.00
%
Blue Ridge Bankshares, Inc.
$
296,223
16.87
%
$
105,355
6.00
%
n/a
n/a
Common equity tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.
$
266,647
15.33
%
$
121,757
7.00
%
$
113,060
6.50
%
Blue Ridge Bankshares, Inc.
$
296,223
16.87
%
$
79,016
4.50
%
n/a
n/a
Tier 1 leverage (to average assets)
Blue Ridge Bank, N.A.
$
266,647
11.01
%
$
96,874
4.00
%
$
121,093
5.00
%
Blue Ridge Bankshares, Inc.
$
296,223
12.13
%
$
97,683
4.00
%
n/a
n/a
39
December 31, 2025
Actual
For Capital
Adequacy Purposes
To Be Well Capitalized
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
Amount
Ratio
Total risk based capital (to risk-weighted assets)
Blue Ridge Bank, N.A.
$
339,784
19.16
%
$
186,188
10.50
%
$
177,322
10.00
%
Blue Ridge Bankshares, Inc.
$
370,984
20.69
%
$
143,427
8.00
%
n/a
n/a
Tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.
$
322,320
18.18
%
$
150,724
8.50
%
$
141,858
8.00
%
Blue Ridge Bankshares, Inc.
$
344,604
19.22
%
$
107,570
6.00
%
n/a
n/a
Common equity tier 1 capital (to risk-weighted assets)
Blue Ridge Bank, N.A.
$
322,320
18.18
%
$
124,125
7.00
%
$
115,259
6.50
%
Blue Ridge Bankshares, Inc.
$
344,604
19.22
%
$
80,677
4.50
%
n/a
n/a
Tier 1 leverage (to average assets)
Blue Ridge Bank, N.A.
$
322,320
13.04
%
$
98,859
4.00
%
$
123,574
5.00
%
Blue Ridge Bankshares, Inc.
$
344,604
13.81
%
$
99,777
4.00
%
n/a
n/a
The decline in the capital amounts and capital ratios for both the Bank and the Company as of March 31, 2026 from December 31, 2025 was primarily a result of the aforementioned special cash dividend declared in the first quarter of 2026.
Commitments and Contingencies
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract and involve the same credit risk and evaluation as making a loan to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness, in a manner similar to that if underwriting a loan. As of March 31, 2026 and December 31, 2025, the Company had outstanding loan commitments of $253.6 million and $247.2 million, respectively. Of these amounts, $35.6 million and $35.2 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.
Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of March 31, 2026 and December 31, 2025, commitments under outstanding financial stand-by letters of credit totaled $6.1 million and $6.3 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.
For the three months ended March 31, 2026 and 2025, the Company did not record a provision for credit losses for unfunded commitments. The reserve for unfunded commitments, which is included in other liabilities on the consolidated balance sheets, was $0.8 million as of both March 31, 2026 and December 31, 2025.
The Company has investments in various partnerships and limited liability companies. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At March 31, 2026 and December 31, 2025, the Company had future commitments outstanding totaling $4.7 million and $4.9 million, respectively, related to these investments.
Interest Rate Risk Management
As a financial institution, the Company is exposed to various business risks, including interest rate risk. Interest rate risk is the risk to earnings and value arising from volatility in market interest rates. Interest rate risk arises from timing differences in the repricing and cash flows of interest-earning assets and interest-bearing liabilities, changes in the expected cash flows of assets and liabilities arising from embedded options, such as borrowers' ability to prepay loans and depositors' ability to redeem certificates of deposit before maturity, changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion, and changes in spread relationships between different yield curves, such as U.S. Treasuries and other market-based index rates. The Company’s goal is to maximize net interest income without incurring excessive interest rate risk. Management of net interest income and interest rate risk must be consistent with the level of capital and liquidity that the Bank maintains. The Company manages interest rate risk through the ALCO comprised of members of management, with oversight by a committee of its board of directors. The ALCO is responsible for monitoring the Company’s interest rate risk in conjunction with liquidity and capital management, pursuant to policy guidelines approved by the board of directors.
40
The Company employs an independent firm to model its interest rate sensitivity that uses a net interest income simulation model as its primary tool to measure interest rate sensitivity. 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 demand, money market, and savings accounts, as well as certificates of deposit. Based on inputs that include the current balance sheet, the current level of interest rates, and the developed assumptions, the model produces an expected level of net interest income assuming that market rates remain unchanged. This is considered the base case. The model then simulates what net interest income would be based on specific changes in interest rates. The rate simulations are performed for a two-year period and include rapid rate changes of down 100 basis points to 400 basis points and up 100 basis points to 400 basis points. The results of these simulations are then compared to the base case.
The following tables present the estimated change in net interest income under various rate change scenarios as of the dates presented. The scenarios assume rate changes occur instantaneously and in a parallel manner, which means the changes are the same on all points of the rate curve. Estimated changes set forth below are dependent on material assumptions, such as those previously discussed.
March 31, 2026
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
$
6,527
9.2
%
$
9,338
12.2
%
+300 basis points
4,900
6.9
%
7,095
9.3
%
+200 basis points
3,307
4.7
%
4,879
6.4
%
+100 basis points
1,695
2.4
%
2,579
3.4
%
Base case
-100 basis points
(2,086
)
(2.9
%)
(3,392
)
(4.4
%)
-200 basis points
(4,041
)
(5.7
%)
(6,700
)
(8.8
%)
-300 basis points
(5,311
)
(7.5
%)
(8,852
)
(11.6
%)
-400 basis points
(7,365
)
(10.4
%)
(12,760
)
(16.7
%)
December 31, 2025
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
$
5,243
7.0
%
$
5,961
7.6
%
+300 basis points
3,925
5.3
%
4,510
5.7
%
+200 basis points
2,653
3.6
%
3,151
4.0
%
+100 basis points
1,369
1.8
%
1,741
2.2
%
Base case
-100 basis points
(1,775
)
(2.4
%)
(2,553
)
(3.2
%)
-200 basis points
(3,511
)
(4.7
%)
(5,466
)
(6.9
%)
-300 basis points
(4,584
)
(6.2
%)
(7,076
)
(9.0
%)
-400 basis points
(6,933
)
(9.3
%)
(11,170
)
(14.2
%)
Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve is a regulatory and banking industry practice. However, these stress tests may not represent a realistic forecast of future interest rate movements in the yield curve. In addition, instantaneous parallel rate shock modeling is not a predictor of actual future performance of earnings. It is a financial metric used to manage interest rate risk and track the movement of the Company’s interest rate risk position over a historical time frame for comparison purposes.
The Company's AFS securities portfolio is reported at fair value, with the unrealized gain or loss representing the difference in amortized cost and fair value reported net of tax as a component of shareholders' equity. Changes in market interest rates affect the valuation of the securities portfolio, as market interest rates at reporting dates may differ than those interest rates in effect when the securities were purchased. The Company does not intend to sell, nor does it believe it will be required to sell the AFS securities; therefore, any unrealized gains or losses in the Company's AFS
41
securities portfolio are deemed temporary. Any unrealized gains or losses for individual securities will diminish as the securities reach maturity.
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.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.