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, 2021	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. FINANCIAL INFORMATION

Item 1. Financial Statements

Blue Ridge Bankshares, Inc.

Consolidated Balance 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 Statements 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 Statements 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 – Investments

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.

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	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.

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	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

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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 line 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, none 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.

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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

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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%

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(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, the 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.

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	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.

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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.

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(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

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	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.
 

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	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.

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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

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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

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	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

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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.

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

The following presents management’s discussion and analysis of the Company’s consolidated financial condition and the results of 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;

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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%.

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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.

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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.

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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).

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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.

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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.

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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

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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 months. 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.

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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.

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(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.

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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.

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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

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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	%)

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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 Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

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.

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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. Risk 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 Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

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).

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SIGNATURES

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

	BLUE RIDGE BANKSHARES, INC.
Date: 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

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