Blue Ridge Bankshares, Inc. Announces Third Quarter Earnings

CHARLOTTESVILLE, Va., Oct. 28, 2020 /PRNewswire/ -- Blue Ridge Bankshares, Inc. (the "Company") (NYSE American: BRBS) announced today its third quarter 2020 net income of $5.1 million, or $0.88 earnings per share, compared to $6.2 million, or $1.10 earnings per share, for the quarterly period ended June 30, 2020, and $1.3 million, or $0.29 earnings per share, for the quarterly period ended September 30, 2019.  Earnings for the third quarter of 2020 include approximately $1.1 million in one-time expenses related to the proposed merger with Bay Banks of Virginia, Inc. ("Bay Banks") (OTCQB: BAYK).  The Company continues to experience record quarterly earnings, largely attributable to its mortgage division and the increased loan volumes.  The Company also continued to recognize Paycheck Protection Program ("PPP") loan processing fees over the expected loan lives throughout the third quarter, which was largely offset by increased loan loss provisioning due to the uncertainty surrounding COVID-19 and its long-term economic impact.  Additionally, the Company was pleased to declare a third quarter 2020 dividend of $0.1425 per share, payable on October 30, 2020 to shareholders of record as of the close of business on October 22, 2020.

"Our team continues to proactively serve our clients and communities with unparalleled dedication," said Brian K. Plum, President and Chief Executive Officer.  "The ongoing combination of Paycheck Protection Program fee accretion and a historically strong mortgage market has enabled us to achieve record earnings while funding our loan loss provision at meaningful levels."

"We remain vigilantly engaged on the loan portfolio and maintain an open line of communication with borrowers as we work through the fallout of COVID-19 together," Plum added.  "While the overall economic recovery this year has been strong and deferrals have significantly fallen, we recognize that many borrowers continue to struggle and will do so for the foreseeable future in an uncertain environment.  We anticipate these conditions will contribute to a deterioration of asset quality in coming quarters."

Proposed Merger

On August 13, 2020, the Company announced the signing of a definitive merger agreement with Bay Banks, pursuant to which the companies will combine in an all-stock merger with the Company as the surviving company. At or immediately following consummation of the merger, Virginia Commonwealth Bank, the wholly-owned commercial banking subsidiary of Bay Banks, will be merged with and into Blue Ridge Bank, National Association (the "Bank"), the wholly-owned commercial banking subsidiary of Blue Ridge, with the Bank as the surviving bank.

Paycheck Protection Program

The Company funded over 2,400 PPP loans totaling approximately $361 million, as of September 30, 2020.  Estimated PPP processing fees earned by the Company for these loans is approximately $11.5 million.  The Company funded these loans, which have a statutory loan interest rate of 1.00%, using the Federal Reserve Paycheck Protection Program Liquidity Facility ("PPPLF"), which provides 100% funding at a cost of 0.35%.  PPP loans do not count toward bank regulatory capital ratios.  The Company is currently working with PPP borrowers through the forgiveness phase of the program.  As of October 28, 2020, $48.7 million in PPP loans have been submitted and are awaiting full forgiveness. 

COVID-19 Response

The Company resumed normalized branch operations early in the third quarter and continues to follow appropriate hygienic and distancing guidelines.  While branch traffic has steadily improved, the Company believes digital use adoption following COVID-19 will have a meaningful impact on future customer behaviors and business investment decisions.

Asset Quality

Nonperforming loans and loans 90 days or more past due totaled $4.5 million at September 30, 2020, a decrease of $1.7 million, or 27.1%, from June 30, 2020.  The Company's provision for loan losses amounted to $4.0 million for the third quarter of 2020, compared to $3.5 million in the second quarter of 2020.  The increased provisioning in the second and third quarters is related to the continued uncertainty surrounding COVID-19 and its impact on the Company's borrowers.

In response to COVID-19, the Company approved 553 loan deferrals for a total of $110.6 million, or 16.3% of the held-for-investment loan portfolio excluding PPP loans, as of October 20, 2020.  Approximately $104.1 million, or 94.1%, of these deferred loan balances are now past the deferment period and are back on normal payment schedules.  At the time of this release, the Company was aware of five borrowers with loan balances totaling $6.5 million that were either still in deferral or in the process of requesting a second deferral for a period of three months. The Company is closely monitoring the past due loan portfolio, and proactively staying in touch with borrowers, especially as it relates to high-risk industries as outlined below. 

The economic fallout from COVID-19 is materially impacting all parts of the economy, and especially certain industries. The information below provides the Company's exposure to these industries, utilizing the Company's NAICS coding on its loan accounting system as of October 20, 2020:

Balance Sheet

The Company had total assets of $1.5 billion at September 30, 2020, an increase of $562.5 million, or 58.6%, from December 31, 2019 and a decrease of $62.5 million, or 3.9% from June 30, 2020.  The increase in total assets year-to-date was primarily driven by PPP.  Loans held for investment increased $392.3 million, or 60.7% from December 31, 2019, and $17.7 million, or 1.7%, from June 30, 2020.  Included in this increase is approximately $361.8 million in PPP loans originated year-to-date, and $11.8 million in PPP loans originated in the third quarter.  A majority of these loans are fully funded by the Federal Reserve's PPPLF program, resulting in a corresponding increase in other borrowed funds on the balance sheet. The decline in total assets for the third quarter is largely due to the maturity of additional funding obtained in the first half of the year, included in cash and due from banks, in response to the insecurity surrounding COVID-19.  The Company continues to test liquidity sources to ensure proper funding is available as the uncertainty around COVID-19 remains at the forefront.   Total deposits increased $193.2 million, or 26.8%, from December 31, 2019, and decreased $50.6 million, or 5.2% from June 30, 2020.  Noninterest demand deposit accounts increased $100.8 million, or 56.7% year-to-date and decreased $6.6 million, or 2.3% for the third quarter.  The increase in deposits year-to-date was attributable to funds retained from PPP customers as well as the build-up of liquidity in response to COVID-19.  The decrease in the third quarter is largely due to the maturity of some of those additional liquidity reserves. 

The Company experienced held-for-sale loan growth of $137.5 million, or 247.1%, year-to-date, and $65.3 million, or 51.1% in the third quarter. The growth in available-for-sale loans was due to an uptick in volume created by market conditions and the continued expansion of our retail and wholesale mortgage operations. 

Income Statement

Net Interest Income

Net interest income was approximately $11.8 million for the quarter ended September 30, 2020, compared to $10.6 million for the second quarter of 2020, and $5.4 million for the quarter ended September 30, 2019.  Included in third quarter net interest income was approximately $3.8 million in net PPP related loan income.  The Company's cost of deposits remained steady in the third quarter, decreasing slightly to 0.64% from 0.65% for the second quarter of 2020.  Net interest margin increased to 3.26% in the third quarter from 3.19% in the second quarter of 2020, due to slight yield improvement in certain loan categories.  The Company continues to experience margin pressure, including the net interest margin on its large PPP loan portfolio, which is 0.65%. 

Other Income

Other income for the third quarter ended September 30, 2020 was $17.7 million compared to $16.5 million for the quarter ended June 30, 2020.  This increase is attributable to increased mortgage revenue of $739 thousand in the third quarter in addition to the gains on the sale of government guaranteed loans, which amounted to $272 thousand in third quarter.  Year-to-date mortgage volume for 2020 was over $900 million through September 30, 2020, a record for the Company.   

Other Expense

Other expenses for the third quarter ended September 30, 2020 were $18.8 million compared to $15.8 million in the second quarter of 2020.  The majority of this increase relates to the aforementioned one-time merger expenses of $1.1 million.  Additionally, salaries and benefits increased $960 thousand for the third quarter of 2020 due to bonuses and commissions for the mortgage division in relation to increased volume. 

Mortgage Division

The Company's mortgage operations, which consists of its retail division operating as Monarch Mortgage and its wholesale division operating as LenderSelect Mortgage Group, recorded net income of $4.3 million for the third quarter compared to $5.1 million in the second quarter of 2020.  The primary driver of these record earnings for the mortgage division was increased volume, largely due to the low rate environment, expansion of the retail business line, the addition of the wholesale business line in late 2019, and retaining mortgage servicing rights ("MSRs") beginning in the second quarter of 2020.  Income related to MSRs increased from $1.6 million through June 30, 2020 to $3.2 million year-to-date through September 30, 2020.

Capital and Dividends

The Company continually monitors its capital position and is particularly focused on the potential impact that the fallout from COVID-19 will have on its capital position.  The Company remains confident in its ability to maintain capital levels at amounts required for regulatory purposes and for the payment of its common stock dividend, but the ability to maintain its dividend payment remains highly dependent on the depth and breadth of the economic impact of COVID-19.  The Company may, depending on conditions, find it necessary to suspend common stock dividends.

Non-GAAP Financial Measures

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles ("GAAP") and prevailing practices in the banking industry.  However, management uses certain non-GAAP measures to supplement the evaluation of the Company's performance. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company's core businesses.  These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP measures are included at the end of this release.

Forward-Looking Statements

This release of Blue Ridge Bankshares, Inc. (the "Company") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of the Company'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 its 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 the Company's 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: (i) the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; (ii) geopolitical conditions, including acts or threats of terrorism, or actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; (iii) the effects of the COVID-19 pandemic, including the adverse impact on the Company's business and operations and on the Company's customers which may result, among other things, in increased delinquencies, defaults, foreclosures and losses on loans; (iv) the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events; (v) the Company's management of risks inherent in its real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of the Company's  collateral and its ability to sell collateral upon any foreclosure; (vi) changes in consumer spending and savings habits; (vii) technological and social media changes; (viii) 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; (ix) changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Company's subsidiary bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; (x) the impact of changes in financial services policies, laws and regulations, including laws, regulations and policies concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies; (xi) the impact of changes in laws, regulations and policies affecting the real estate industry; (xii) 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; (xiii) the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers; (xiv) the willingness of users to substitute competitors' products and services for the Company's products and services; (xv) the effect of acquisitions the Company may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions; (xvi) changes in the level of the Company's nonperforming assets and charge-offs; (xvii) the Company's involvement, from time to time, in legal proceedings and examination and remedial actions by regulators; (xviii) potential exposure to fraud, negligence, computer theft and cyber-crime; (xix) the Company's ability to pay dividends; (xx) the Company's involvement as a participating lender in the PPP as administered through the U.S. Small Business Administration; (xxi) expenses related to the Company's proposed merger with Bay Banks, unexpected delays related to the merger, or the inability to obtain regulatory and shareholder approvals or satisfy other closing conditions required to complete the merger; and (xxii) other risks and factors identified in the "Risk Factors" sections and elsewhere in documents the Company files from time to time with the SEC.

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SOURCE Blue Ridge Bankshares, Inc.