Blue Ridge Bankshares, Inc. — FY2021 Form 10-K Summary
Business context and reporting period
Blue Ridge Bankshares, Inc. is a Virginia bank holding company operating primarily through Blue Ridge Bank, N.A., BRB Financial Group, Inc., and related subsidiaries. The Bank provides commercial and consumer banking, mortgage banking, government-guaranteed lending, wealth and trust management, payroll processing, employee benefits, and banking-as-a-service solutions to fintech partners. At December 31, 2021, it operated 26 full-service banking offices in Virginia and North Carolina and employed 513 full-time and 43 part-time employees.
The filing covers the fiscal year ended December 31, 2021. It includes the operations of Bay Banks of Virginia from the January 31, 2021 merger date through year-end; the 2020 comparable period does not include Bay Banks. The financial statements received an unqualified audit opinion from Elliott Davis, PLLC.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Total assets | $2.665 billion | $1.498 billion |
| Gross loans held for investment | $1.808 billion | $1.021 billion |
| Loans held for sale | $121.9 million | $152.9 million |
| Total deposits | $2.298 billion | $945.1 million |
| Stockholders’ equity | $277.1 million | $108.2 million |
| Net interest income | $92.5 million | $44.5 million |
| Noninterest income | $88.0 million | $56.8 million |
| Net income attributable to Blue Ridge Bankshares | $52.5 million | $17.7 million |
| Basic and diluted EPS | $2.94 | $2.07 |
| Net interest margin | 3.51% | 3.49% |
| Return on average assets | 1.86% | 1.44% |
| Return on average equity | 21.50% | 17.65% |
| Efficiency ratio | 62.15% | 67.49% |
Net interest income after the loan-loss provision was $92.4 million. The provision for loan losses was $117 thousand, compared with $10.5 million in 2020. Net charge-offs increased to $1.8 million from $1.2 million, while the allowance for loan losses declined to $12.1 million from $13.8 million.
Operating cash flow was $59.3 million, compared with an operating cash outflow of $108.3 million in 2020. Investing activities provided $52.5 million, primarily reflecting proceeds from the sale of PPP loans and cash acquired in the Bay Banks merger. Financing activities used $99.1 million, including debt repayments and $7.2 million of common-stock dividends. Cash and due from banks ended at $130.6 million.
Debt and borrowings at December 31, 2021 included $10.1 million of FHLB borrowings, $17.9 million of Federal Reserve borrowings under the PPP Liquidity Facility, and $40.0 million of subordinated notes. The Bank had $263.1 million of available FHLB borrowing capacity and $44.0 million of unsecured federal funds lines, none of which were drawn at year-end. Management stated that liquidity resources were sufficient to meet expected needs.
The Bank was well capitalized at year-end. Regulatory capital ratios were 13.11% total risk-based capital, 12.49% Tier 1 and common equity Tier 1 capital, and 10.05% Tier 1 leverage. Nonperforming assets were $16.3 million, or 0.61% of total assets, compared with $6.6 million, or 0.44%, in 2020.
Material changes versus the prior comparable period
- The January 31, 2021 Bay Banks merger added approximately $1.22 billion of assets and $1.03 billion of deposits, significantly expanding the Company’s geographic footprint and balance sheet.
- Total assets increased 77.9%, gross loans held for investment increased 77.1%, and deposits increased 143.1%, primarily due to the merger and organic deposit growth.
- Net income increased approximately 196.6% to $52.5 million. The increase reflected balance-sheet growth, higher net interest income, lower loan-loss provisioning, PPP-related gains, and fintech investment gains.
- Noninterest income increased 54.8% to $88.0 million. Key items included a $24.3 million gain on the sale of approximately $712.6 million of PPP loans, a $6.2 million gain on terminating interest-rate swaps, and $7.3 million of fair-value gains on other equity investments, primarily fintech investments.
- Residential mortgage banking income declined 35.6% to $28.6 million as mortgage sale pricing decreased, despite higher mortgage servicing-rights income.
- Noninterest expense increased 64.0% to $112.1 million, including $11.9 million of merger-related expenses, higher compensation, technology, occupancy, and other costs.
- The Company completed a three-for-two stock split effective April 30, 2021. Historical share and per-share amounts were adjusted accordingly.
- The Company and FVCBankcorp mutually terminated their proposed merger agreement on January 20, 2022. Each party agreed to bear its own costs, with no termination fee.
Guidance, outlook, commentary, risks, and unusual items
The filing does not provide formal quantitative earnings or revenue guidance. Management emphasized continued growth in commercial banking, mortgage banking, fintech partnerships, wealth and trust services, and banking-as-a-service. The Company ended 2021 with fintech-related deposits of approximately $189 million and fintech-related interest and fee revenue of approximately $3.4 million.
Key risks include the concentration of lending in real estate, including approximately 77.8% of loans secured by real estate, $701.5 million of commercial real estate loans, and $205.4 million of construction and land-development loans. Credit quality could deteriorate if economic conditions weaken, collateral values decline, or COVID-19 effects persist. Nonperforming assets increased materially during 2021, primarily because of commercial loans to the same borrower relationship placed on nonaccrual status.
Mortgage banking revenue is cyclical and sensitive to interest rates, refinancing activity, housing conditions, and secondary-market pricing. The Company also faces interest-rate, liquidity, regulatory, cybersecurity, third-party service-provider, fintech-partnership, competition, and integration risks. The filing identifies a pending VCB ESOP class action alleging damages that approach or exceed $12 million; the Company believes the claims are without merit and has accrued no loss.
Other notable items include the planned 2022 termination of an acquired pension plan, subject to regulatory and tax approvals; $20.95 million of mortgage servicing rights at fair value versus $16.47 million at amortized cost; and $6.7 million of unrealized losses on available-for-sale securities at year-end, which management did not consider credit-related or other-than-temporary.
Most important facts for investors to verify
- How much of 2021 earnings was recurring versus attributable to the $24.3 million PPP loan-sale gain, $6.2 million swap-termination gain, and $7.3 million fintech-investment fair-value gain.
- Post-merger credit performance, particularly the $16.3 million of nonperforming assets, the concentrated commercial real estate portfolio, and the adequacy of the $12.1 million allowance for loan losses.
- The sustainability of deposit growth and the level and behavior of uninsured deposits, which totaled approximately $680.4 million at year-end.
- The impact of rising interest rates on net interest margin, mortgage production, securities valuations, deposit costs, and borrower credit quality.
- The operational, compliance, and credit-risk controls supporting the Company’s expanding fintech and banking-as-a-service relationships.
- The status and potential financial exposure of the VCB ESOP litigation and any additional legal or regulatory matters.
- The effect of the Bay Banks integration and terminated FVCBankcorp transaction on future expenses, capital, and strategic growth.