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Blue Ridge Bankshares, Inc. Announces First Quarter Earnings and Paycheck Protection Program Results

CHARLOTTESVILLE, Va., April 30, 2020 /PRNewswire/ -- Blue Ridge Bankshares, Inc. (the "Company") (NYSE American: BRBS) announced today its first quarter 2020 net income of $841,000, or $0.15 earnings per share, compared to $1,282,000, or $0.38 per share, for the quarterly period ended March 31, 2019.  The decline in quarterly earnings are primarily attributable to fair value adjustments in the mortgage division, the addition of personnel in retail mortgage, the integration of the LenderSelect Mortgage Group in January 2020, and the spillover of costs into 2020 for the acquisition of Virginia Community Bankshares, Inc. ("VCB"), which closed in December 2019 but was operationally integrated at the bank level on January 24, 2020. 

BRBS

"We entered 2020 looking forward to the full integration of the VCB acquisition and strong growth across all of our business lines, and particularly our noninterest income lines," said Brian K. Plum, President and Chief Executive Officer.  "The arrival of COVID-19 quickly changed many of those plans.  We rotated focus and energy to the management of the current balance sheet and the mitigation of increased credit losses that are inevitable with an economic crisis of this magnitude.  Our team proactively launched efforts to engage significant borrowers very early in the process, including a focus on tangential effects of any supply chain impacts in China.  Energies originally designed for balance sheet growth were reallocated to intense borrower engagement and assistance." 

Plum continued "The emergence of the Paycheck Protection Program created an opportunity for us to provide significant and meaningful assistance to many of our borrowers and other relationships, and our team fully invested its energy into the success of this effort.  We also leveraged the program and our team's proactive and engaged approach to win numerous key relationships across our footprint."

"We recognize that 2020 and 2021 will likely be difficult years in the financial services industry," Plum added, "and we are committed to making the decisions required for us to be both successful today and in the future. We believe our focus in recent years on growing our noninterest income revenues will be particularly beneficial as the industry enters what is forecasted to be another prolonged period of historically low long-term interest rates.  Ultimately all disruption creates significant opportunity, and we are absolutely committed to realizing the opportunities tomorrow brings by making the right decisions today."

Paycheck Protection Program ("PPP")

The Company received Small Business Administration ("SBA") approval for over 2,100 loans totaling approximately $341,000,000, as of April 29, 2020.  Estimated SBA processing fees earned by the Company for these loans is approximately $9.0 million.  The final loans funded amount and SBA processing fees earned may be lower than the above amounts as some borrowers may not complete the loan closing process.  The Company is largely funding these loans, which have a statutory loan interest rate of 1.00%, using the Federal Reserve Paycheck Protection Program Liquidity Facility, which provides 100% funding at a cost of 0.35%.  The Company will aggressively pursue the loan forgiveness feature for PPP loans among its borrowers, but it does expect an artificially inflated balance sheet will continue over the balance of 2020 and into 2021 as PPP borrowers retain some portion of loan balances that are not forgiven.  The PPP loans do not count toward bank regulatory ratios, so there is no capital charge for their inclusion on the balance sheet.

COVID-19 Response

The COVID-19 pandemic is having a swift and seismic impact on the economy.  Recognizing this impact, the Company quickly pivoted to an aggressive borrower outreach campaign to discuss immediate and foreseeable effects on businesses in its market areas.  The significant uncertainty surrounding the duration of shutdowns and a return to normal consumer and business behavior make the ultimate outcomes difficult to predict, but the Company is managing its efforts around a worst-case scenario.  The Company has undertaken substantial efforts to reduce noninterest expense levels, including personnel costs.  These efforts include reducing headcount, suspending 2020 incentive plans, salary reductions for highly compensated employees, and employee furloughs.  The Company is also performing a deep review of market and division line profitability.  The Company has currently identified approximately $1,500,000 in annualized noninterest expense savings, and has plans for additional saving enhancements moving forward.

The Company took advantage of the decline in interest rates triggered by COVID-19 to reduce cost of funds and to restructure and extend liability pricing.

Branch operations were redirected to drive-thru and digital channels across the bank in mid-March.  Lending focus shifted from loan originations to portfolio maintenance and protection, which includes working with borrowers on loan deferrals (see Asset Quality below).

The Company is evaluating the possible long-term implications of the response to COVID-19 to its operations, and to the financial services industry as a whole.  The Company believes that the sudden then sustained shift in the conduct of banking business away from branch locations will accelerate the move to digital channels by users of financial services.  The potential direction of this consumer behavior will likely generate a substantive impact on the Company's strategic planning, and it is reasonable to expect that the value of bricks and mortar locations will likely decline as preferences shift in a world impacted by social distancing.

Asset Quality

Nonperforming loans and loans 90 days or more past due totaled $5,121,000 at March 31, 2020, a decrease of $38,000, or 0.74%, from December 31, 2019 and $448,000, or 8.04%, from March 31, 2019.  The Company's provision for loan losses amounted to $575 thousand for the first quarter of 2020, compared to $277 thousand in the fourth quarter of 2019 and $295 thousand in the first quarter of 2019.

The Company approved 59 loan deferrals for a total of $13,471,000, or 2.01% of the held-for-investment loan portfolio, as of March 31, 2020.  The deferrals were granted for periods up to six months depending on the industry in which the borrower operates and the borrower's specific needs.  The Company stays in continuous contact with deferred borrowers and will reevaluate the risk rating, nonaccrual, and potential impairment status of these loans consistently during the deferral period.

The economic fallout from COVID-19 is materially impacting all parts of the economy.  The hospitality and restaurant industries are being particularly impacted by significant decreases in consumer usage and shutdowns at most hotels and restrictions for dining in all restaurants in the Company's footprint as a result of social distancing.  The information below provides the Company's exposure to these industries, utilizing the Company's NAICS coding on its loan accounting system as of April 20, 2020:

Industry by NAICS Code

Number
of
Borrowers

Total Loan Balance

Hotels and Motels

15

$13,403,144

Bed & Breakfasts

4

2,670,167

All Other Traveler Accommodations

4

3,330,022

Food Service Contractors

1

1,468,043

Full-Service Restaurants

15

5,058,068

Limited-Service Restaurants

7

2,579,146

          TOTAL

46

$28,508,590

Balance Sheet

The Company had total assets of $1,027,605,000 at March 31, 2020, an increase of $66,794,000, or 6.95%, from December 31, 2019 and $452,804,000, or 78.8% from March 31, 2019.  The increase from March 31, 2019 is primarily attributable to the acquisition of VCB in the fourth quarter of 2019.

The increase in first quarter 2020 assets is also due in part to the Company's efforts to obtain additional liquidity in March 2020 as COVID-19 began to unfold and significantly increased market volatility and the probability of a systemic liquidity risk event.  The excess liquidity was also accumulated to fund planned PPP loans until additional outlets, if any, were provided by the federal government. 

The Company experienced held-for-investment loan growth of $24,101,000 , or 3.73%, in the first quarter of 2020.  The available-for-sale loan portfolio grew by $34,373,000, or 61.77%, in the same period.  The growth in available-for-sale loans was due to an uptick in volume, created both by market conditions and the addition of the LenderSelect Mortgage Group, and market volatility in March 2020 that disrupted the market and mortgage delivery efforts to investors.

Income Statement

Net Interest Income

Net interest income was approximately $8,023,000 for the quarter ended March 31, 2020, compared to $4,849,000 for the same period in 2019.  Approximately $2,700,000 of this increase is attributable to the addition of VCB's portfolio, with the remaining difference related to the legacy bank.  In mid-March, the Company put significant focus into realigning the balance sheet to obtain more favorable long-term pricing as a result of the significant downward rate movements that occurred.  As a result of these efforts, the Company began to see improved net interest margin, going from 3.46% as of December 31, 2019 to 3.71% as of March 31, 2020.  The full impact of these efforts will be more pronounced in the coming quarters and will continue to be evaluated as balances mature and renew. 

Other Income

Other income increased approximately $1,099,000 to $4,998,000 for the quarterly period ended March 31, 2020, compared to $3,899,000 for the same period in 2019.  This increase is attributable to increased mortgage volume in the first quarter with the addition of the LenderSelect Mortgage Group and the expansion of the Company's retail mortgage division.  Closed mortgage volume in the first quarter of 2020 was approximately $132.7 million compared to approximately $59.0 million for the same period in 2019.  The gain on sale of mortgages was less than anticipated given the increased volume due to a hedging loss related to market conditions, as discussed later in this release.     

Other Expense

Other expenses increased $4,488,000, or 65.5%, to $11,338,000 for the quarter ended March 31, 2020, compared to $6,850,000 for the same period in 2019. The majority of this increase relates to salaries and benefits.  The addition of the LenderSelect Mortgage Group, expansion of the retail mortgage division, and employees retained in the acquisition of VCB account for the significant increase over prior year first quarter.  Occupancy expenses increased $255,000, or 42.4%, compared to first quarter 2019.  A majority of the expense in this category relates to lease expense for several branch and mortgage office locations.  Growth and expansion have resulted in the need for more leased facilities. 

Mortgage Division

The Company's mortgage division, which consists of its retail and wholesale mortgage efforts, recorded a $704,000 loss in the first quarter of 2020.  The primary driver of this loss was a significant fair value loss in March created by historic levels of volatility in mortgage markets.  The Company recorded a pre-tax loss of $1,706,000 on its hedge accounting in the first quarter.  The effects of the market volatility waned in April, and as a result the Company anticipates a recovery of most of this noncash hedge valuation loss. 

The integration of the LenderSelect Mortgage Group into the Company was effective January 1, 2020, so an additional earnings drag was created as activity ramped up with the transition.  Additionally, the retail mortgage team added teams early in the first quarter whose volume took time to increase.

The Company is generating its highest mortgage volume ever, allowing it to deal directly with federal agency cash windows beginning in April 2020.  Transacting with the cash window should allow the Company to consistently capture meaningful additional margin on its loan volume.

Lastly, the Company made the strategic decision to selectively retain servicing rights beginning in April 2020.  The Company expects the retention of servicing rights will support the LenderSelect Mortgage Group's wholesale mortgage efforts by clients' members and customers being subjected to reduced cross-selling by other financial institutions.  The retention of servicing rights in retail is based on current market valuations for these rights.  The Company believes the retention of these rights in the current environment will create meaningful economic returns in the future as markets normalize.

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 contains forward-looking statements regarding the Company. Forward-looking statements are typically identified by words such as "believe," "expect", "anticipate", "intend", "target", "estimate", "continue", "positions", "prospects", "potential", "would", "should", "could", "will" or "may". These statements include, without limitation, the Company's expectations regarding its future financial performance. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, and these statements may not be realized. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) the impact of the ongoing COVID-19 pandemic; (2) the businesses of the Company and/or VCB may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (3) expected revenue synergies and cost savings from the VCB merger may not be fully realized or realized within the expected timeframe; (4) revenues following the VCB merger may be lower than expected; (5) customer and employee relationships and business operations may be disrupted by the VCB merger; (6) changes in interest rates, general economic conditions, legislation and regulation, and monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury, Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System; (7) the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows, competition, and demand for financial services in the Company's market areas; (8) the implementation of new technologies, and the ability to develop and maintain secure and reliable electronic systems; (9) accounting principles, policies, and guidelines; and (10) other risk factors detailed from time to time in filings made by the Company with the Securities and Exchange Commission ("SEC") and available on the SEC's website at www.sec.gov. The Company undertakes no obligation to update or clarify these forward-looking statements, whether as a result of new information, future events or otherwise.



(Unaudited)



(Audited)



(Unaudited)



March 31,



December 31,



March 31,

ASSETS


2020



2019



2019










Cash and due from banks

$

67,158,018


$

60,026,071


$

16,518,062

Federal funds sold


164,000



480,000



3,239,000

Investment securities









 Securities available for sale (at fair value) 


98,931,747



108,571,161



37,418,813

 Securities held to maturity


11,218,518



12,192,139



15,533,016

 Restricted investments


10,103,984



8,133,519



5,118,211










 Total Investment Securities


120,254,249



128,896,819



58,070,040










Loans held for sale


90,019,366



55,646,215



35,610,217

Loans held for investment


670,935,158



646,833,864



431,087,054

 Allowance for loan losses 


(4,896,956)



(4,572,371)



(3,744,177)










 Net Loans Held for Investment


666,038,202



642,261,493



427,342,877










Bank premises and equipment, net 


14,262,805



13,650,556



3,383,427

Bank owned life insurance


14,826,967



14,734,261



9,110,310

Goodwill


19,892,331



19,914,942



3,306,664

Other intangible assets


-



-



-

Other assets


34,988,872



25,200,948



18,220,352










Total Assets

$

1,027,604,810


$

960,811,305


$

574,800,949










LIABILITIES



























Demand deposits









Noninterest bearing

$

178,481,693


$

177,819,205


$

83,543,392

Interest bearing


262,721,061



220,776,065



129,801,274

Savings deposits


65,230,117



62,479,898



28,744,545

Time deposits 


262,726,987



260,954,991



182,433,551










Total Deposits


769,159,858



722,030,159



424,522,762










Other borrowed funds


140,900,000



124,800,000



67,800,000

Subordinated debt, net of issuance costs


9,808,904



9,800,434



9,775,024

Other liabilities


17,461,929



11,843,037



10,036,153










Total liabilities


937,330,691



868,473,630



512,133,939










STOCKHOLDERS' EQUITY


















Common stock, no par value, authorized - 10,000,000 shares;









  outstanding - 5,660,985 shares at 3/31/20, 5,658,585 shares









  at 12/31/19, and $4,329,616 at 3/31/19)


66,283,217



66,204,739



38,647,528

Contributed equity


251,543



251,543



251,543

Retained earnings


26,259,793



25,428,056



23,983,867

Accumulated other comprehensive income


(2,754,227)



229,051



(437,081)










Total Stockholders' Equity


90,040,326



92,113,389



62,445,857

Noncontrolling interest


233,793



224,286



221,153

   Total Equity


90,274,119



92,337,675



62,667,010










Total Liabilities and Equity

$

1,027,604,810


$

960,811,305


$

574,800,949

 

 



(Unaudited)



(Unaudited)



Three Months



Three Months



Ended



Ended



March 31, 2020



March 31, 2019

INTEREST INCOME






Interest and fees on loans held for investment

$

9,105,158


$

5,832,456

Interest and fees on loans held for sale


438,726



282,285

Interest on federal funds sold


1,609



1,138

Interest and dividends on taxable investment securities


829,301



490,847

Interest and dividends on nontaxable investment securities


48,084



64,338







Total Interest Income


10,422,878



6,671,064







INTEREST EXPENSE






Interest on savings and interest bearing demand deposits


489,922



349,811

Interest on time deposits


1,235,236



835,835

Interest on borrowed funds


674,676



636,852







Total Interest Expense


2,399,834



1,822,498







Net Interest Income


8,023,044



4,848,566







PROVISION FOR LOAN LOSSES


575,000



295,000







Net Interest Income after Provision for Loan Losses


7,448,044



4,553,566







OTHER INCOME






Service charges on deposit accounts


271,516



134,115

Earnings on investment in life insurance


92,707



55,416

Mortgage brokerage income


819,895



1,124,654

Gain on sale of mortgages


3,040,622



1,966,754

Gain (loss) on disposal of assets


(3,554)



2,474

Gain (loss) on sale of securities


-



-

Gain (loss) on sale of OREO


-



(29,736)

Gain on sale of guaranteed USDA loans


20,229



-

Small business investment company fund income


-



10,414

Other noninterest income


756,673



635,380







Total Other Income


4,998,088



3,899,471







OTHER EXPENSES






Salaries and employee benefits


7,340,741



4,245,864

Occupancy and equipment expenses


856,421



601,624

Data processing


466,376



349,790

Legal and other professional fees


197,987



45,271

Advertising expense


224,142



195,240

Communications


134,893



110,222

Debit card expenses


157,757



81,984

Directors fees


66,300



53,150

Audits and examinations


42,673



36,385

FDIC insurance expense


150,388



75,000

Other contractual services


175,250



75,186

Other taxes and assessments


223,718



156,063

Other noninterest expense


1,301,015



823,761







Total Other Expenses


11,337,661



6,849,540







Income before Income Taxes


1,108,471



1,603,497







INCOME TAX EXPENSE


267,228



321,827







Net Income


841,243



1,281,670

Net Income attributable to noncontrolling interest


(9,506)



(13,108)

Net Income attributable to Blue Ridge Bankshares, Inc.

$

831,737


$

1,268,562







Net Income Available to Common Stockholders

$

831,737


$

1,268,562







Earnings per Share

$

0.15


$

0.38







Weighted Average Shares Outstanding


5,664,387



3,307,400

 

 

Blue Ridge Bankshares, Inc.
















Five Quarter Summary of Selected Financial Data


















Three Months Ended



March 31,


December 31,


September 30,


June 30, 


March 31,

(Dollars and shares in thousands, except per share data)


2020


2019


2019


2019


2019

Income Statement Data:



Unaudited



Unaudited



Unaudited



Unaudited



Unaudited

Interest and Dividend Income


$

10,423


$

8,457


$

8,118


$

7,641


$

6,671

Interest Expense



2,400



2,577



2,682



2,438



1,822

Net Interest Income



8,023



5,880



5,436



5,203



4,849

Provision for Loan Losses



575



277



570



600



295

Net Interest Income After Provision for Loan Losses



7,448



5,603



4,866



4,603



4,554

Noninterest Income



4,998



4,541



4,973



5,383



3,900

Noninterest Expenses



11,338



9,628



8,206



8,162



6,850

Income before income taxes



1,108



516



1,633



1,824



1,604

Income tax expense (benefit)



267



(17)



380



288



322

Net income



841



533



1,253



1,536



1,282

Net income attributable to noncontrolling interest



(9)



(3)



(3)



(5)



(13)

Net income attributable to Blue Ridge Bankshares, Inc.


$

832


$

530


$

1,250


$

1,531


$

1,269

Per Common Share Data:
















Net income-basic


$

0.15


$

0.10


$

0.28


$

0.35


$

0.37

Net income-diluted



0.15



0.10



0.28



0.35



0.37

Dividends declared



0.1425



0.1425



0.1425



0.1425



0.1425

Book value per common share



15.95



16.32



15.09



14.82



14.47

Tangible book value per common share



11.80



12.14



14.00



13.71



13.34

Balance Sheet Data:
















Assets


$

1,027,605


$

960,811


$

736,238


$

721,784


$

574,801

Loans held for investment



670,935



646,834



460,878



452,229



431,087

Loans held for sale



90,019



55,646



80,255



61,976



35,610

Securities



120,254



128,897



142,712



153,764



58,070

Deposits



769,160



722,030



520,280



498,982



424,523

Subordinated Debt, net 



9,809



9,800



9,792



9,783



9,775

Other borrowed funds



140,900



124,800



129,600



138,200



67,800

Total equity



90,274



92,338



65,597



64,134



62,667

Average common shares outstanding - basic



5,664



4,588



4,347



4,329



3,307

Average common shares outstanding - diluted



5,664



4,588



4,347



4,329



3,307

Financial Ratios:
















Return on average assets



0.34%



0.25%



0.69%



0.95%



0.92%

Return on average equity



3.68%



2.61%



7.73%



9.69%



10.03%

Total loan to deposit ratio



98.93%



97.29%



104.01%



103.05%



109.93%

Held for investment loan to deposit ratio



87.23%



89.59%



88.58%



90.63%



101.55%

Net interest margin



3.71%



3.46%



3.16%



3.35%



3.70%

Cost of deposits



0.95%



1.29%



1.35%



1.35%



1.17%

Efficiency ratio



91.10%



94.91%



83.40%



81.73%



81.03%

Capital and Credit Quality Ratios:
















Average Equity to Average Assets



9.18%



9.31%



8.90%



9.78%



9.18%

Allowance for loan losses to loans held for investment



0.73%



0.71%



0.96%



0.90%



0.87%

Nonperforming loans to total assets



0.50%



0.54%



0.78%



0.74%



0.97%

Nonperforming assets to total assets



0.50%



0.54%



0.78%



0.77%



0.98%

Net charge-offs to total loans held for investment



0.04%



0.02%



0.05%



0.06%



0.03%

















Reconciliation of Non-GAAP Disclosures (Unaudited):
































Tangible Common Equity:
















Common equity (GAAP)


$

90,274


$

92,338


$

65,597


$

64,134


$

62,667

Less:  Goodwill and amortizable intangibles



(23,456)



(23,633)



(4,722)



(4,792)



(4,905)

Tangible common equity (Non-GAAP)


$

66,818


$

68,705


$

60,875


$

59,342


$

57,762

















Total shares outstanding



5,661



5,659



4,347



4,329



4,330

















Book Value per Share (GAAP)


$

15.95


$

16.32


$

15.09


$

14.82


$

14.47

Tangible Book Value per Share (Non-GAAP)


$

11.80


$

12.14


$

14.00


$

13.71


$

13.34

 

 


Cision

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SOURCE Blue Ridge Bankshares, Inc.