BRBS

Business Context and Reporting Period

Company: Blue Ridge Bankshares, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2019
Business Overview: The Company operates Blue Ridge Bank, N.A., providing commercial banking services primarily in Virginia and North Carolina, along with mortgage banking and payroll processing services through subsidiaries. The Company is classified as a smaller reporting company and an emerging growth company.

Key Financial Metrics

Material Changes vs. Prior Period

• Balance Sheet Growth: Total assets increased 36.4% to $736.2 million from $539.6 million at year-end 2018. This was driven by a 142.9% increase in investment securities ($142.7 million) and a 174.5% increase in loans held for sale ($80.3 million).
• Capital Raise: Stockholders' equity increased by $26.0 million, primarily due to a private placement of 1.5 million shares of common stock generating net proceeds of $22.2 million.
• Liabilities: Total deposits grew 25.4% to $520.3 million. Other borrowings (FHLB advances) increased 77.3% to $129.6 million to fund loan growth.
• Earnings: Net income for the nine months ended September 30, 2019, was $4.1 million compared to $3.6 million in the prior year period. However, diluted EPS decreased to $1.01 from $1.29 due to the increased share count from the capital raise.
• Expense Growth: Non-interest expenses increased 61.9% year-over-year for the nine-month period, largely due to a $6.0 million increase in salaries and benefits and costs associated with the pending merger.

Outlook, Risks, and Unusual Items

• Merger with VCB: On December 15, 2019, the Company completed the acquisition of Virginia Community Bankshares, Inc. (VCB). The merger consideration included approximately 1.3 million shares of Blue Ridge stock and $16.6 million in cash. Management anticipates cost savings and enhanced revenues but notes integration risks.
• Accounting Changes: The Company adopted ASU No. 2016-02 (Leases) on January 1, 2019, resulting in the recognition of a $7.0 million right-of-use asset and lease liability.
• Asset Quality: Non-performing assets decreased to $5.8 million (0.79% of total assets) from $7.7 million at year-end 2018. The allowance for loan losses increased to 0.96% of total loans to reflect portfolio growth.
• Interest Rate Risk: The Company's asset/liability position is slightly asset-sensitive. Net interest income is projected to increase by 14.2% in a +100 basis point scenario over one year.
• Risks: Key risks include the successful integration of VCB, changes in interest rates, deterioration in asset quality, and cybersecurity threats.

Investor Verification Checklist

• Merger Integration: Verify the timeline and actual realization of cost savings and revenue synergies from the VCB acquisition.
• Capital Adequacy: Confirm that the Company maintains "well-capitalized" status post-merger and assess the impact of the new equity issuance on future EPS dilution.
• Loan Portfolio Quality: Monitor the allowance for loan losses coverage ratio and net charge-off trends, particularly in the commercial real estate and consumer segments.
• Interest Rate Sensitivity: Review future earnings reports to see if the asset-sensitive position continues to benefit from rising rates or if margin compression occurs.
• Expense Management: Track non-interest expense ratios to ensure merger-related costs do not permanently elevate the cost-to-income ratio.