Blue Ridge Bankshares Inc.
03/12/2026 | Press release | Distributed by Public on 03/12/2026 15:05
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 the Company's operations. This discussion should be read in conjunction with the Company's consolidated financial statements and the notes thereto presented in Item 8, Financial Statements and Supplementary Information, of this Form 10-K.
Cautionary Note About Forward-Looking Statements
The Company makes certain forward-looking statements in this Form 10-K 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 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 may 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 the Company conducts operations;
•
the effects of, and changes in, the macroeconomic environment and financial market conditions, including monetary and fiscal policies, interest rates, and inflation;
•
reputational risk and potential adverse reactions of the Company's customers, suppliers, employees, or other business partners;
•
the quality and composition of the Company's loan and investment portfolios, including changes in the level of the Company's nonperforming assets and charge-offs;
•
the Company's management of risks inherent in its loan portfolio, the credit quality of its borrowers, 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;
•
the ability to maintain adequate liquidity by growing and retaining deposits and secondary funding sources, especially if the Company's or its industry's reputation become damaged;
•
the emergence of digital assets and payment stablecoins, and evolving legislative or regulatory frameworks, which could alter deposit flows, competition, and credit intermediation and, in turn, adversely affect the Company's funding, liquidity, or overall financial performance;
•
the ability to maintain capital levels adequate to support the Company's business;
•
the ability of the Company to implement cost-saving initiatives and efficiency measures, as well as increase earning assets, in order to yield acceptable levels of profitability;
•
the ability to generate sufficient future taxable income for the Company to realize its deferred tax assets, including the net operating loss carryforward;
•
the usage of advances and changes in technological and social media to develop timely and competitive 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 impact of unanticipated outflows of deposits;
•
potential exposure to fraud, negligence, computer theft, and cyber-crime;
•
adverse developments in the financial industry generally, such as bank failures, responsive measures to mitigate and manage such developments, supervisory and regulatory actions and costs, and related impacts on customer and client behavior;
•
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 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;
•
political developments, including government shutdowns and other significant disruptions and changes in the funding, size, scope and effectiveness of the federal government, its agencies and services;
•
the impact of changes in financial services policies, laws, and regulations, including laws, regulations, and policies concerning taxes, banking, securities, real estate and insurance, the application thereof by bank regulatory bodies, and the three branches of the federal government;
•
the effect of changes in accounting standards, policies, and practices as may be adopted from time to time;
•
estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Company's assets and liabilities;
•
geopolitical conditions, including acts or threats of terrorism and/or military conflicts, 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;
•
the economic impact of duties, tariffs, or other barriers or restrictions on trade, any retaliatory countermeasures, and the volatility and uncertainty arising therefrom;
•
the occurrence or continuation of widespread health emergencies or pandemics, significant natural disasters, severe weather conditions, floods, and other catastrophic events;
•
the Company's involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company; and
•
other risks and factors identified in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections and elsewhere in this Form 10-K and in filings the Company makes from time to time with the SEC.
The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this Form 10-K, including those discussed in the section entitled "Risk Factors" in Item 1A above. 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-K. 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.
Critical Accounting Policies and Estimates
General
The accounting principles the Company applies under GAAP are complex and require management to apply significant judgment to various accounting, reporting, and disclosure matters. Management must use assumptions, judgments, and estimates when applying these principles where precise measurements are not possible or practical. The Company views the following policies as critical because they are highly dependent upon subjective or complex judgments, assumptions, and estimates. Changes in such judgments, assumptions, and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from initial estimates.
Allowance for Credit Losses
The ACL represents management's best estimate of credit losses over the remaining life of the Company's held for investment loan portfolio. Loans are charged-off against the ACL when management believes the loan balance is no longer collectible. Subsequent recoveries of previously charged-off amounts (recoveries) are recorded as increases to the ACL. The provision for (recovery of) credit losses is an amount sufficient to bring the ACL to an estimated balance that management considers adequate to absorb lifetime expected losses in the Company's held for investment loan portfolio. The ACL is a valuation account that is deducted from the loans' recorded investment to present the net amount expected to be collected on the loan portfolio. In accordance with ASC 326, the Company elected to exclude accrued interest from the recorded investment basis in its determination of the ACL for loans held for investment, and instead reverses accrued but unpaid interest through interest income in the period in which the loan is placed on nonaccrual status.
Management's determination of the adequacy of the ACL under ASC 326 is based on an evaluation of the composition of the loan portfolio, current economic conditions, historical loan loss experience, reasonable and supportable forecasts, and other risk factors. The Company uses a third-party model in estimating the ACL on a quarterly basis. Loans with similar risk characteristics are collectively assessed within pools (or segments). Loss estimates within the collectively assessed population are based on a combination of pooled assumptions and loan-level characteristics. The Company determined that using federal call codes is generally an appropriate loan segmentation methodology, as it is generally based on risk characteristics of a loan's underlying collateral. Using federal call codes also allows the Company to utilize publicly-available external information when developing its estimate of the ACL. The discounted cash flow ("DCF") method is the primary credit loss estimation methodology used by the Company and involves estimating future cash flows for each individual loan and discounting them back to their present value using the loan's contractual interest rate, which is adjusted for any net deferred fees, costs, premiums, or discounts existing at the loan's origination or acquisition date (also referred to as the effective interest rate). The DCF method also considers factors such as loan term, prepayment or curtailment assumptions, accrual status, and other relevant economic factors that could affect future cash flows. By discounting the cash flows, this method incorporates the time value of money and reflects the credit risk inherent in the loan.
In applying future economic forecasts, the Company utilizes a forecast period of one year and then reverts to the mean of historical loss rates on a straight-line basis over the following one-year period. The Company considers economic forecasts of national gross domestic product and unemployment rates from the Federal Open Market Committee to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank's and peer bank data obtained from publicly-available sources (i.e., federal call reports) encompassing an economic cycle. The Bank's peer group utilized is comprised of financial institutions of relatively similar size (i.e., $1 - $5 billion of total assets) and in similar markets. Management also considers qualitative adjustments when estimating loan losses to take into account the model's quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of trends in delinquencies, changes in volume and terms of loans, effects of changes in lending policy, experience and depth of management, regional and local economic trends and conditions, concentrations of credit, and loan review results.
For collectively evaluated loans not assessed using the DCF method, the Company applies the remaining life method. This approach uses the Company's historical loss rate, adjusted for current and future expectations, and factors in the remaining average life of the loan segment. It is used exclusively for loan segments where developing a DCF model was not feasible.
For those loans that do not share similar risk characteristics, the Company evaluates the ACL needs on an individual (or loan-by-loan) basis. This population of individually evaluated loans (or loan relationships with the same primary source of
repayment) is determined on a quarterly basis and is based on whether (1) the risk grade of the loan is substandard or worse and the balance exceeds $500,000, (2) the risk grade of the loan is special mention and the balance exceeds $1,000,000, or (3) the loan's terms or risks differ significantly from other pooled loans. Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan's effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan discounted for estimated costs to sell the collateral for collateral-dependent loans. In limited circumstances, the collateral value for a collateral-dependent loan may be based on the enterprise value of a company. The enterprise value method involves assessing the borrower's ability to repay the loan by estimating the total value of its business, including both debt and equity. This approach is typically used where the recoverable value is based on the fair value of the company as a going concern, adjusted for the priority of the company's claim. If the net value applying these measures is less than the loan's recorded investment, a specific reserve is recorded in the ACL and charged-off in the period when management believes the loan balance is no longer collectible.
The Company has an ACL management "work group", which includes executive and senior management of the accounting and credit administration teams, who approve the key methodologies and assumptions, as well as the final ACL, on a quarterly basis. While management uses available information at the time of estimation to determine expected credit losses on loans, future changes in the ACL may be necessary based on changes in portfolio composition, portfolio credit quality, changes in underlying facts for individually evaluated loans, and/or economic conditions. In addition, bank regulatory agencies and the Company's independent auditors periodically review its ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on judgments different than those of management.
Income Taxes
Income taxes are accounted for using the balance sheet method in accordance with ASC 740, Accounting for Income Taxes, and recently adopted ASU No. 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures (collectively "ASC 740"). Per ASC 740, the objective is to (a) recognize the amount of taxes payable or refundable for the current year, and (b) defer tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or federal income tax returns. Deferred tax assets and liabilities are determined based on the tax effects of the temporary differences between the book (i.e., financial statement) and tax bases of the various balance sheet assets and liabilities and give current recognition to changes in tax rates and laws. Temporary differences are reversed in the period in which an amount or amounts become taxable or deductible.
A deferred tax liability is recognized for all temporary differences that will result in future taxable income; a deferred tax asset is recognized for all temporary differences that will result in future tax deductions, potentially reduced by a valuation allowance. A valuation allowance is recognized if, based on an analysis of available evidence, management determines that it is more likely than not that some portion or all of the deferred tax asset will not be realized. In making this assessment, all sources of taxable income available to realize the deferred tax asset are considered including future releases of existing temporary differences, tax planning strategies, and future taxable income exclusive of reversing temporary differences and carryforwards. The predictability that future taxable income, exclusive of reversing temporary differences, will occur is the most subjective of these four sources. Additionally, cumulative losses in recent years, if any, are considered negative evidence that may be difficult to overcome to support a conclusion that future taxable income, exclusive of reversing temporary differences and carryforwards, is sufficient to realize a deferred tax asset. Adjustments to increase or decrease the valuation allowance are charged or credited, respectively, to income tax expense. The evaluation of the recoverability of deferred tax assets requires management to make significant judgments regarding the releases of temporary differences and future profitability, among other items.
When the Company's federal tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would ultimately be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely to be realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties, if any, associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of operations.
Five Year Summary of Selected Financial Data
|
As of and for the years ended December 31, |
||||||||||||||||||||
|
(Dollars and shares in thousands, except per share data) |
2025 |
2024 |
2023 |
2022 |
2021 |
|||||||||||||||
|
Income Statement Data: |
||||||||||||||||||||
|
Interest income |
$ |
137,773 |
$ |
160,320 |
$ |
168,995 |
$ |
121,652 |
$ |
103,546 |
||||||||||
|
Interest expense |
58,912 |
81,659 |
75,954 |
17,085 |
11,065 |
|||||||||||||||
|
Net interest income |
78,861 |
78,661 |
93,041 |
104,567 |
92,481 |
|||||||||||||||
|
(Recovery of) provision for credit losses |
(4,000 |
) |
(5,100 |
) |
22,323 |
25,687 |
117 |
|||||||||||||
|
Net interest income after (recovery of) provision for credit losses |
82,861 |
83,761 |
70,718 |
78,880 |
92,364 |
|||||||||||||||
|
Noninterest income |
12,836 |
13,573 |
28,375 |
47,945 |
86,988 |
|||||||||||||||
|
Noninterest expense |
81,922 |
113,841 |
157,937 |
104,629 |
110,988 |
|||||||||||||||
|
Income (loss) from continuing operations before income tax expense |
13,775 |
(16,507 |
) |
(58,844 |
) |
22,196 |
68,364 |
|||||||||||||
|
Income tax expense (benefit) attributable to continuing operations |
3,066 |
(1,122 |
) |
(7,071 |
) |
5,199 |
15,740 |
|||||||||||||
|
Net income (loss) from continuing operations |
10,709 |
(15,385 |
) |
(51,773 |
) |
16,997 |
52,624 |
|||||||||||||
|
Net income (loss) from discontinued operations |
- |
- |
- |
337 |
(144 |
) |
||||||||||||||
|
Net income from discontinued operations attributable to noncontrolling interest |
- |
- |
- |
(1 |
) |
(3 |
) |
|||||||||||||
|
Net income (loss) attributable to Blue Ridge Bankshares, Inc. |
$ |
10,709 |
$ |
(15,385 |
) |
$ |
(51,773 |
) |
$ |
17,333 |
$ |
52,477 |
||||||||
|
Share Data: |
||||||||||||||||||||
|
Diluted (loss) earnings per share from continuing operations (1) |
$ |
0.11 |
$ |
(0.31 |
) |
$ |
(2.73 |
) |
$ |
0.90 |
$ |
2.95 |
||||||||
|
Dividends declared per common share (1) |
0.250 |
- |
0.245 |
0.490 |
0.435 |
|||||||||||||||
|
Book value per common share (1) |
3.54 |
3.86 |
9.69 |
13.13 |
14.76 |
|||||||||||||||
|
Common shares oustanding |
91,475 |
84,973 |
19,198 |
18,950 |
18,774 |
|||||||||||||||
|
Warrants to purchase common stock outstanding |
24,320 |
31,452 |
- |
- |
- |
|||||||||||||||
|
Balance Sheet Data: |
||||||||||||||||||||
|
Total assets |
$ |
2,432,589 |
$ |
2,737,260 |
$ |
3,117,554 |
$ |
3,130,465 |
$ |
2,665,139 |
||||||||||
|
Loans held for investment, gross |
1,865,717 |
2,111,797 |
2,430,947 |
2,411,059 |
1,807,578 |
|||||||||||||||
|
Loans held for sale |
14,769 |
30,976 |
46,337 |
69,534 |
121,943 |
|||||||||||||||
|
Securities and investments |
356,854 |
336,144 |
352,607 |
399,374 |
396,050 |
|||||||||||||||
|
Total deposits |
1,911,162 |
2,179,442 |
2,566,032 |
2,502,507 |
2,297,771 |
|||||||||||||||
|
Subordinated notes, net |
14,716 |
39,789 |
39,855 |
39,920 |
39,986 |
|||||||||||||||
|
FHLB borrowings |
150,000 |
150,000 |
210,000 |
311,700 |
10,111 |
|||||||||||||||
|
FRB borrowings |
- |
- |
65,000 |
51 |
17,901 |
|||||||||||||||
|
Stockholders' equity |
323,691 |
327,788 |
185,989 |
248,793 |
277,139 |
|||||||||||||||
|
Weighted average common shares outstanding - basic (1) |
87,719 |
49,124 |
18,939 |
18,811 |
17,841 |
|||||||||||||||
|
Weighted average common shares outstanding - diluted (1) |
97,258 |
49,124 |
18,939 |
18,825 |
17,851 |
|||||||||||||||
|
Financial Ratios: |
||||||||||||||||||||
|
Return on average assets |
0.41 |
% |
(0.51 |
)% |
(1.60 |
)% |
0.61 |
% |
1.86 |
% |
||||||||||
|
Return on average equity |
3.18 |
% |
(5.31 |
)% |
(23.13 |
)% |
6.57 |
% |
21.50 |
% |
||||||||||
|
Net interest margin |
3.17 |
% |
2.77 |
% |
3.07 |
% |
4.00 |
% |
3.51 |
% |
||||||||||
|
Efficiency ratio |
89.34 |
% |
123.43 |
% |
130.08 |
% |
68.60 |
% |
62.15 |
% |
||||||||||
|
Capital and Credit Quality Ratios: |
||||||||||||||||||||
|
Average equity to average assets |
13.00 |
% |
9.60 |
% |
6.92 |
% |
9.34 |
% |
8.65 |
% |
||||||||||
|
Allowance for credit losses to loans held for investment |
1.04 |
% |
1.09 |
% |
1.48 |
% |
1.27 |
% |
0.67 |
% |
||||||||||
|
Nonperforming loans to total assets |
0.98 |
% |
0.93 |
% |
2.02 |
% |
2.69 |
% |
0.60 |
% |
||||||||||
|
Nonperforming assets to total assets |
1.05 |
% |
0.94 |
% |
2.02 |
% |
2.70 |
% |
0.61 |
% |
||||||||||
|
Net (recoveries) charge-offs to total loans held for investment |
(0.02 |
)% |
0.48 |
% |
1.13 |
% |
0.30 |
% |
0.10 |
% |
||||||||||
|
(1) Share and per share figures for 2021 have been adjusted to reflect the Company's 3-for-2 stock split effective April 30, 2021. |
||||||||||||||||||||
Comparison of Results of Operations for the Years Ended December 31, 2025 and 2024
For the year ended December 31, 2025, the Company reported net income of $10.7 million compared to a net loss of $15.4 million for 2024. Diluted income (loss) per share was $0.11 for 2025 compared to ($0.31) for 2024. Contributing to the net loss in 2024 was a $6.3 million after-tax non-cash negative fair value adjustment of an equity investment the Company holds in a fintech company. Additionally, for 2024, the Company reported $3.6 million of after-tax regulatory remediation expenses, while none were reported for 2025.
Net Interest Income.Net interest income is the excess of interest earned on loans, investments, and other interest-earning assets over the interest paid on deposits and borrowings and is the Company's primary revenue source. Net interest income is thereby affected by overall balance sheet size, changes in interest rates, and changes in the mix of investments, loans, deposits, and borrowings.
The following table presents the average balance sheets for each of the years ended December 31, 2025 and 2024. In addition, the amounts of interest earned on interest-earning assets, with related taxable equivalent yields, and interest expense on interest-bearing liabilities, with related rates, are presented.
|
For the Years Ended December 31, |
||||||||||||||||||||||||
|
2025 |
2024 |
|||||||||||||||||||||||
|
(Dollars in thousands) |
Average |
Interest |
Yield/ |
Average |
Interest |
Yield/ |
||||||||||||||||||
|
Assets: |
||||||||||||||||||||||||
|
Taxable securities |
$ |
338,590 |
$ |
10,426 |
3.08 |
% |
$ |
326,405 |
$ |
9,406 |
2.88 |
% |
||||||||||||
|
Tax-exempt securities (1) |
12,303 |
340 |
2.76 |
% |
12,575 |
317 |
2.52 |
% |
||||||||||||||||
|
Total securities |
350,893 |
10,766 |
3.07 |
% |
338,980 |
9,723 |
2.87 |
% |
||||||||||||||||
|
Interest-earning deposits in other banks |
134,213 |
5,569 |
4.15 |
% |
157,087 |
7,993 |
5.09 |
% |
||||||||||||||||
|
Federal funds sold |
2,396 |
101 |
4.22 |
% |
6,232 |
335 |
5.38 |
% |
||||||||||||||||
|
Loans held for sale |
20,309 |
4,607 |
22.68 |
% |
57,225 |
8,157 |
14.25 |
% |
||||||||||||||||
|
Loans held for investment (including loan fees) (2,3,4) |
1,983,309 |
116,806 |
5.89 |
% |
2,286,446 |
134,182 |
5.87 |
% |
||||||||||||||||
|
Total average interest-earning assets |
2,491,120 |
137,849 |
5.53 |
% |
2,845,970 |
160,390 |
5.64 |
% |
||||||||||||||||
|
Less: allowance for credit losses |
(22,167 |
) |
(31,896 |
) |
||||||||||||||||||||
|
Total noninterest-earning assets |
120,643 |
205,453 |
||||||||||||||||||||||
|
Total average assets |
$ |
2,589,596 |
$ |
3,019,527 |
||||||||||||||||||||
|
Liabilities and stockholders' equity: |
||||||||||||||||||||||||
|
Interest-bearing demand, money market, and savings |
$ |
723,761 |
$ |
13,679 |
1.89 |
% |
$ |
921,674 |
$ |
23,716 |
2.57 |
% |
||||||||||||
|
Time (5) |
887,639 |
37,413 |
4.21 |
% |
997,470 |
45,354 |
4.55 |
% |
||||||||||||||||
|
Total interest-bearing deposits |
1,611,400 |
51,092 |
3.17 |
% |
1,919,144 |
69,070 |
3.60 |
% |
||||||||||||||||
|
FHLB borrowings |
150,000 |
5,806 |
3.87 |
% |
213,003 |
9,095 |
4.27 |
% |
||||||||||||||||
|
FRB borrowings |
- |
- |
- |
23,087 |
1,080 |
4.68 |
% |
|||||||||||||||||
|
Subordinated notes (6) |
26,697 |
2,014 |
7.54 |
% |
39,829 |
2,414 |
6.06 |
% |
||||||||||||||||
|
Total average interest-bearing liabilities |
1,788,097 |
58,912 |
3.29 |
% |
2,195,063 |
81,659 |
3.72 |
% |
||||||||||||||||
|
Noninterest-bearing demand deposits |
430,512 |
493,133 |
||||||||||||||||||||||
|
Other noninterest-bearing liabilities |
34,441 |
41,327 |
||||||||||||||||||||||
|
Stockholders' equity |
336,546 |
290,004 |
||||||||||||||||||||||
|
Total average liabilities and stockholders' equity |
$ |
2,589,596 |
$ |
3,019,527 |
||||||||||||||||||||
|
Net interest income and margin (7) |
$ |
78,937 |
3.17 |
% |
$ |
78,731 |
2.77 |
% |
||||||||||||||||
|
Cost of funds (8) |
2.66 |
% |
3.04 |
% |
||||||||||||||||||||
|
Net interest spread (9) |
2.24 |
% |
1.92 |
% |
||||||||||||||||||||
(1) Computed on a fully taxable equivalent basis assuming a 21.96% and 22.32% income tax rate for the years ended December 31, 2025 and 2024, respectively.
(2) Includes deferred loan fees/costs.
(3) Nonaccrual loans have been included in the computations of average loan balances.
(4) Includes accretion of fair value adjustments (discounts) on acquired loans of $1.6 million and $1.1 million for the years ended December 31, 2025 and 2024, respectively.
(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $0.1 million and $0.3 million for the years ended December 31, 2025 and 2024, respectively.
(6) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $0.1 million for both years ended December 31, 2025 and 2024.
(7) Net interest margin is net interest income divided by average interest-earning assets.
(8) Cost of funds is total interest expense divided by total interest-bearing liabilities and non interest-bearing demand deposits.
(9) Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities.
The following table presents the changes in interest income and interest expense due to changes in average assets and liability balances and changes in rates earned on assets and paid on liabilities for the periods stated.
|
2025 compared to 2024 |
||||||||||||
|
Increase/(Decrease) |
Total |
|||||||||||
|
(Dollars in thousands) |
Volume |
Rate |
(Decrease) |
|||||||||
|
Interest Income |
||||||||||||
|
Taxable securities |
$ |
351 |
$ |
669 |
$ |
1,020 |
||||||
|
Tax-exempt securities |
(8 |
) |
31 |
23 |
||||||||
|
Interest-earning deposits in other banks |
(1,164 |
) |
(1,260 |
) |
(2,424 |
) |
||||||
|
Federal funds sold |
(206 |
) |
(28 |
) |
(234 |
) |
||||||
|
Loans held for sale |
(5,262 |
) |
1,712 |
(3,550 |
) |
|||||||
|
Loans held for investment |
(17,790 |
) |
414 |
(17,376 |
) |
|||||||
|
Total interest income |
$ |
(24,079 |
) |
$ |
1,538 |
$ |
(22,541 |
) |
||||
|
Interest Expense |
||||||||||||
|
Interest-bearing demand, money market, and savings |
$ |
(5,092 |
) |
$ |
(4,945 |
) |
$ |
(10,037 |
) |
|||
|
Time |
(4,994 |
) |
(2,947 |
) |
(7,941 |
) |
||||||
|
FHLB borrowings |
(2,690 |
) |
(599 |
) |
(3,289 |
) |
||||||
|
FRB borrowings |
(1,080 |
) |
- |
(1,080 |
) |
|||||||
|
Subordinated notes |
(796 |
) |
396 |
(400 |
) |
|||||||
|
Total interest expense |
(14,652 |
) |
(8,095 |
) |
(22,747 |
) |
||||||
|
Change in Net Interest Income |
$ |
(9,427 |
) |
$ |
9,633 |
$ |
206 |
|||||
|
(1) 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 $2.49 billion for the year ended December 31, 2025 compared to $2.85 billion for the same period of 2024, a $354.9 million decrease. This decrease was primarily attributable to lower average balances of loans held for investment, which declined $303.1 million. To transition the Company to a more traditional community banking model, the Company selectively reduced its loan portfolio to borrowers outside of the Bank's geographic markets by approximately $120.0 million in 2025. Generally, these loans carried higher yields but also presented greater credit risk than the remainder of the Company's loan portfolio. Total interest income (on a taxable equivalent basis) decreased by $22.5 million to $137.8 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was primarily due to lower average balances of loans held for investment, partially offset by fee income of $3.5 million associated with the extension and subsequent payoff of a previously criticized out-of-market loan. The yields on loans held for investment in 2025 and 2024 were 5.89% and 5.87%, respectively. In 2025, a large previously criticized out-of-market loan relationship paid off resulting in $3.5 million of fee income, which had a positive 15 basis point effect on the yield on loans held for investment in 2025. Interest income in 2025 and 2024 also included accretion of fair value adjustments (discounts) on acquired loans of $1.6 million and $1.1 million, respectively.
Average interest-bearing liabilities were $1.79 billion for the year ended December 31, 2025 compared to $2.20 billion for the same period of 2024, a $407.0 million decrease. The majority of this decline ($307.7 million) was attributable to decreases in average interest-bearing deposits, primarily fintech-related deposits ($237.0 million) and wholesale time deposits ($173.3 million). These changes reflect the balance sheet repositioning as the Company moved towards a more traditional community bank model. Interest expense decreased by $22.7 million to $58.9 million for the year ended December 31, 2025 compared to the 2024 period, largely driven by the decline in average balances and the cost of interest-bearing deposits. The cost of average interest-bearing liabilities decreased to 3.29% in 2025 from 3.72% in 2024, while the cost of funds decreased to 2.66% in 2025 from 3.04% in 2024. Interest expense in the 2025 and 2024 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $0.1 million and $0.3 million, respectively, which was a reduction to interest expense.
Net interest income (on a taxable equivalent basis) was $78.9 million for the year ended December 31, 2025 compared to $78.7 million for the year ended December 31, 2024, while net interest margin was 3.17% and 2.77% for the same respective periods. The aforementioned fee income of $3.5 million had a positive 12 basis point effect on net interest margin in 2025. Accretion and amortization of purchase accounting adjustments had a 7 basis point and 5 basis point positive effect on net interest margin for the same respective periods. The decrease in net interest income in 2025 was primarily due to lower average balances of loans held for investment, partially offset by lower average balances of and rates paid on interest-bearing demand accounts, money market accounts, and time deposits. The Company anticipates that future net interest income and net interest margin will be positively affected as portions of the loan portfolio reprice and amortize, and new production is added in a higher interest rate environment than portions of the existing portfolio. Additionally, maturities of higher-cost time
deposits, including brokered deposits, are expected to have a positive effect on net interest margin as new and renewed deposits are anticipated to be sourced at lower rates.
Recovery of Credit Losses.The Company recorded a recovery of credit losses of $4.0 million for the year ended December 31, 2025 compared to $5.1 million for the year ended December 31, 2024. The recovery of credit losses in 2025 was primarily due to loan portfolio balance reductions, recoveries of loans charged off in prior years, and reductions to reserves on individually evaluated loans. The recovery of credit losses in 2024 was primarily attributable to an $8.4 million recovery from the sale of a specialty finance loan reserved for in 2023 and 2022, lower reserve needs due to loan portfolio balance reductions, and lower balances of loan commitments, partially offset by higher specific reserves for certain purchased loans.
Noninterest Income. The following table provides detail for noninterest income and changes for the periods stated.
|
For the years ended |
||||||||||||||||
|
(Dollars in thousands) |
2025 |
2024 |
Change $ |
Change % |
||||||||||||
|
Service charges on deposit accounts |
$ |
2,573 |
$ |
1,526 |
$ |
1,047 |
68.6 |
% |
||||||||
|
Bank and purchase card interchange income, net |
2,259 |
2,060 |
199 |
9.7 |
% |
|||||||||||
|
Wealth and trust management fees |
1,882 |
2,434 |
(552 |
) |
(22.7 |
%) |
||||||||||
|
Swap transaction fees |
540 |
- |
540 |
100.0 |
% |
|||||||||||
|
Increase in cash surrender value of bank owned life insurance |
33 |
855 |
(822 |
) |
(96.1 |
%) |
||||||||||
|
Residential mortgage banking income |
860 |
9,752 |
(8,892 |
) |
(91.2 |
%) |
||||||||||
|
Mortgage servicing rights ("MSRs") |
(385 |
) |
629 |
(1,014 |
) |
(161.2 |
%) |
|||||||||
|
Income (loss) on sale of MSRs |
1,427 |
(3,607 |
) |
5,034 |
(139.6 |
%) |
||||||||||
|
Loss on sale of securities available for sale |
- |
(67 |
) |
67 |
(100.0 |
%) |
||||||||||
|
Fair value adjustments of other equity investments |
(112 |
) |
(8,152 |
) |
8,040 |
(98.6 |
%) |
|||||||||
|
Other |
3,759 |
8,143 |
(4,384 |
) |
(53.8 |
%) |
||||||||||
|
Total noninterest income |
$ |
12,836 |
$ |
13,573 |
$ |
(737 |
) |
(5.4 |
%) |
|||||||
The Company reported higher service charges on deposit accounts for 2025 compared to 2024, primarily due to the execution of a project in early 2025 to more closely align products and pricing with competitors in the markets in which the Bank operates. The decline in residential mortgage banking income for the same comparative periods was attributable to the sale of the mortgage division in the first quarter of 2025. The decline in bank owned life insurance income for 2025 compared to 2024 was due to the surrender of policies at their cash surrender values in the latter half of 2024. Swap transaction fees in 2025 represent income earned upon the execution of interest rate swaps agreements that the Bank entered into with certain commercial borrowers and swap counterparties.
In 2024, the Company identified potential impairment indicators related to one of its investments, mainly due to regulatory pressures on banks partnering with fintech companies in the BaaS sector. These pressures led some fintech companies to announce cost-saving measures and at least one to seek bankruptcy protection. As a result, the Company engaged a third-party valuation firm to value the Company's investment in a fintech company. This valuation resulted in an $8.5 million impairment charge in the second quarter of 2024, which was recorded in fair value adjustments of other equity investments. No such impairment indicators were identified in 2025.
Income on sale of MSRs in 2025 was attributable to the release of reserves associated with the 2024 sales of MSRs. The reserves related to a portion of the sales proceeds held back pending the Company providing certain documentation to the buyers subsequent to the sales. During 2025, all such available documentation was delivered, and the heldback sales proceeds were received.
The decline in other noninterest income for 2025 compared to 2024 was primarily driven by lower fee income from the Company's exit of its indirect fintech lending and BaaS depository partnerships.
Noninterest Expense.The following table provides detail for noninterest expense and changes for the periods stated.
|
For the years ended |
||||||||||||||||
|
(Dollars in thousands) |
2025 |
2024 |
Change $ |
Change % |
||||||||||||
|
Salaries and employee benefits |
$ |
46,174 |
$ |
58,161 |
$ |
(11,987 |
) |
(20.6 |
%) |
|||||||
|
Occupancy and equipment |
4,919 |
5,577 |
(658 |
) |
(11.8 |
%) |
||||||||||
|
Technology and communication |
9,740 |
10,024 |
(284 |
) |
(2.8 |
%) |
||||||||||
|
Legal and regulatory filings |
2,398 |
2,050 |
348 |
17.0 |
% |
|||||||||||
|
Advertising and marketing |
1,203 |
933 |
270 |
28.9 |
% |
|||||||||||
|
Audit fees |
1,413 |
3,019 |
(1,606 |
) |
(53.2 |
%) |
||||||||||
|
FDIC insurance |
2,784 |
5,463 |
(2,679 |
) |
(49.0 |
%) |
||||||||||
|
Intangible amortization |
914 |
1,083 |
(169 |
) |
(15.6 |
%) |
||||||||||
|
Other contractual services |
1,895 |
6,576 |
(4,681 |
) |
(71.2 |
%) |
||||||||||
|
Other taxes and assessments |
3,678 |
3,037 |
641 |
21.1 |
% |
|||||||||||
|
Regulatory remediation |
- |
4,671 |
(4,671 |
) |
(100.0 |
%) |
||||||||||
|
Other |
6,804 |
13,247 |
(6,443 |
) |
(48.6 |
%) |
||||||||||
|
Total noninterest expense |
$ |
81,922 |
$ |
113,841 |
$ |
(31,919 |
) |
(28.0 |
%) |
|||||||
The majority of the decline in noninterest expenses in 2025 compared to 2024 was for salaries and employee benefits. Employee headcount was reduced to 302 employees as of December 31, 2025 from 442 as of December 31, 2024, a 32% reduction. The headcount reduction and lower audit fees, FDIC insurance premiums, consulting fees, regulatory remediation expenses, and other noninterest expenses resulted primarily from the exit of fintech BaaS depository operations, the remediation of the now-terminated Consent Order, and the sale of the mortgage division..
Higher advertising and marketing expenses for the 2025 period compared to the 2024 period were the result of marketing campaigns designed to drive future growth, which launched in the second half of 2025. Higher other taxes and assessments in the 2025 period were due to higher bank franchise taxes as a result of higher capital levels at the Bank.
While the Company anticipates additional noninterest expense reductions in future periods, due to operational efficiency and other strategic initiatives, the amount and rate of cost reductions are expected to be significantly less than the change from 2024 to 2025.
Income Tax Expense. For the year ended December 31, 2025, the Company recorded income tax expense of $3.1 million (effective income tax rate of 22.3%) compared to an income tax benefit of $1.1 million (effective income tax rate of 6.8%) for the same period of 2024. The effective income tax rate in the 2024 period was primarily attributable to income tax expense on the surrender of the majority of the Company's investment in bank owned life insurance, which resulted in a taxable gain and nondeductible penalties.
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.
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.
|
December 31, 2025 |
December 31, 2024 |
|||||||||||||||
|
(Dollars in thousands) |
Amount |
Percent |
Amount |
Percent |
||||||||||||
|
Commercial and industrial |
$ |
271,158 |
14.5 |
% |
$ |
354,904 |
16.8 |
% |
||||||||
|
Real estate - construction, commercial |
51,738 |
2.8 |
% |
114,491 |
5.4 |
% |
||||||||||
|
Real estate - construction, residential |
31,772 |
1.7 |
% |
51,807 |
2.4 |
% |
||||||||||
|
Real estate - commercial |
836,308 |
44.9 |
% |
847,842 |
40.2 |
% |
||||||||||
|
Real estate - residential |
636,743 |
34.2 |
% |
692,253 |
32.8 |
% |
||||||||||
|
Real estate - farmland |
4,580 |
0.2 |
% |
5,520 |
0.3 |
% |
||||||||||
|
Consumer |
32,213 |
1.7 |
% |
43,938 |
2.1 |
% |
||||||||||
|
Gross loans held for investment |
1,864,512 |
100.0 |
% |
2,110,755 |
100.0 |
% |
||||||||||
|
Deferred costs, net of loan fees |
1,205 |
1,042 |
||||||||||||||
|
Gross loans held for investment, net of deferred costs |
1,865,717 |
2,111,797 |
||||||||||||||
|
Less: allowance for credit losses |
(19,444 |
) |
(23,023 |
) |
||||||||||||
|
Net loans held for investment |
$ |
1,846,273 |
$ |
2,088,774 |
||||||||||||
|
Loans held for sale |
$ |
14,769 |
$ |
30,976 |
||||||||||||
The Company has pledged certain qualifying loans as collateral for borrowings. Commercial and residential mortgages totaling $695.1 million and $797.9 million were pledged with the FHLB as of December 31, 2025 and 2024, respectively. The Company pledged as collateral for borrowings with the FRB Discount Window certain construction and commercial and industrial loans totaling $72.8 million and $91.6 million as of December 31, 2025 and 2024, respectively.
The following table presents the Company's portfolio of commercial real estate mortgages by property type as of the dates stated.
|
December 31, |
||||||||||||||||
|
2025 |
2024 |
|||||||||||||||
|
(Dollars in thousands) |
Amount |
Percent |
Amount |
Percent |
||||||||||||
|
Commercial real estate - owner occupied |
$ |
178,270 |
21.3 |
% |
$ |
193,608 |
22.8 |
% |
||||||||
|
Commercial real estate - non-owner occupied |
||||||||||||||||
|
Hospitality |
154,077 |
18.4 |
% |
120,910 |
14.3 |
% |
||||||||||
|
Multi-family |
217,130 |
26.0 |
% |
186,619 |
22.0 |
% |
||||||||||
|
Retail |
94,821 |
11.3 |
% |
104,363 |
12.3 |
% |
||||||||||
|
Office |
55,650 |
6.7 |
% |
73,871 |
8.7 |
% |
||||||||||
|
Mixed use |
42,886 |
5.1 |
% |
49,666 |
5.9 |
% |
||||||||||
|
Warehouse and industrial |
40,136 |
4.8 |
% |
39,830 |
4.7 |
% |
||||||||||
|
Other |
53,338 |
6.4 |
% |
78,975 |
9.3 |
% |
||||||||||
|
Total real estate - commercial |
$ |
836,308 |
100.0 |
% |
$ |
847,842 |
100.0 |
% |
||||||||
While the Federal Reserve has reduced the target Fed Funds rate by 175 basis points from a recent peak, the current lending environment for commercial real estate ("CRE") loans has heightened risk due to a higher interest rate environment than had existed when these loans may have been originated. Potential negative impacts may include higher debt service burdens for floating rate loans and fixed rate loans originated in a lower rate environment that reprice or mature, requiring renewal or refinancing. As these loans mature, they may be repriced at significantly higher interest rates leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased relatively.
Additionally, collateral values overall may be impaired by higher capitalization rates, further complicating refinancing efforts and increasing credit risk to the Bank. Certain CRE collateral types have experienced declining occupancy, demand,
and rental rates, which could potentially lead to material declines in property level economics and further weaken borrowers' ability to service their debt.
The Bank's credit administration department led by its Chief Credit Officer performs periodic analyses of emerging trends by geography and property type where the Bank has larger concentrations by CRE property type. These analyses include all real estate property types and geographic markets represented in the loan portfolio and are provided to the Bank's board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank's exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the Bank's board of directors. As of December 31, 2025, all limits are in compliance.
The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed) as of December 31, 2025. Loans shown in the one year or less column are term loans that have a stated maturity date within twelve months. Variable rate loans reprice at various intervals (monthly or quarterly) and the rate is tied to a published index such as the Fed Prime rate, U.S. Treasury bond indices, or the Secured Overnight Funding Rate.
|
Variable rate |
Fixed rate |
|||||||||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Total Maturities |
One Year |
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 |
$ |
271,158 |
$ |
42,580 |
$ |
121,983 |
$ |
96,313 |
$ |
24,615 |
$ |
1,055 |
$ |
106,595 |
$ |
46,382 |
$ |
42,211 |
$ |
18,002 |
||||||||||||||||||||
|
Real estate - construction, commercial |
51,738 |
18,146 |
26,164 |
17,593 |
3,395 |
5,176 |
7,428 |
6,730 |
698 |
- |
||||||||||||||||||||||||||||||
|
Real estate - construction, residential |
31,772 |
20,893 |
1,970 |
1,458 |
200 |
312 |
8,909 |
5,269 |
- |
3,640 |
||||||||||||||||||||||||||||||
|
Real estate - commercial |
836,308 |
90,915 |
450,822 |
100,324 |
160,489 |
190,009 |
294,571 |
205,517 |
80,108 |
8,946 |
||||||||||||||||||||||||||||||
|
Real estate - residential |
636,743 |
9,604 |
372,583 |
26,223 |
66,618 |
279,742 |
254,556 |
31,723 |
25,688 |
197,145 |
||||||||||||||||||||||||||||||
|
Real estate - farmland |
4,580 |
1,472 |
1,906 |
91 |
217 |
1,598 |
1,202 |
370 |
115 |
717 |
||||||||||||||||||||||||||||||
|
Consumer loans |
32,213 |
2,380 |
4,452 |
4,423 |
29 |
- |
25,381 |
22,698 |
2,683 |
- |
||||||||||||||||||||||||||||||
|
Gross loans |
$ |
1,864,512 |
$ |
185,990 |
$ |
979,880 |
$ |
246,425 |
$ |
255,563 |
$ |
477,892 |
$ |
698,642 |
$ |
318,689 |
$ |
151,503 |
$ |
228,450 |
||||||||||||||||||||
Allowance for Credit Losses. In determining the adequacy of the Company's ACL, management makes estimates based on facts available at the time the ACL is determined. Such estimation requires significant judgment at the time made. Management believes that the Company's ACL was adequate as of December 31, 2025 and December 31, 2024. There can be no assurance, however, that adjustments to the ACL 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, and changes in the circumstances of particular borrowers are criteria, among others that could increase the level of the ACL required, resulting in charges to the provision for credit losses for loans. In addition, bank regulatory agencies periodically review the Bank's ACL and may require an increase in the ACL or the recognition of further loan charge-offs, based on their judgment of the facts at the time of their review that may differ than that of management.
The following tables present an analysis of the change in the ACL by loan type as of the dates and for the periods stated.
|
For the year ended December 31, 2025 |
||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Commercial and industrial |
Real estate - construction, commercial |
Real estate - construction, residential |
Real estate - commercial |
Real estate - residential |
Real estate - farmland |
Consumer |
Total |
||||||||||||||||||||||||
|
ACL, beginning of period |
$ |
5,767 |
$ |
2,057 |
$ |
540 |
$ |
5,963 |
$ |
7,933 |
$ |
18 |
$ |
745 |
$ |
23,023 |
||||||||||||||||
|
(Recovery of) provision for credit losses - loans |
(1,683 |
) |
(1,379 |
) |
(276 |
) |
(699 |
) |
(396 |
) |
(4 |
) |
537 |
(3,900 |
) |
|||||||||||||||||
|
Charge-offs |
(9,385 |
) |
- |
- |
(611 |
) |
(234 |
) |
- |
(1,910 |
) |
(12,140 |
) |
|||||||||||||||||||
|
Recoveries |
9,638 |
- |
- |
1,306 |
352 |
- |
1,165 |
12,461 |
||||||||||||||||||||||||
|
Net recoveries (charge-offs) |
253 |
- |
- |
695 |
118 |
- |
(745 |
) |
321 |
|||||||||||||||||||||||
|
ACL, end of period |
$ |
4,337 |
$ |
678 |
$ |
264 |
$ |
5,959 |
$ |
7,655 |
$ |
14 |
$ |
537 |
$ |
19,444 |
||||||||||||||||
|
Ratio of net (recoveries) charge-offs to average loans outstanding |
(0.08 |
%) |
- |
- |
(0.09 |
%) |
(0.02 |
%) |
- |
1.96 |
% |
0.02 |
% |
|||||||||||||||||||
|
For the year ended December 31, 2024 |
||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Commercial and industrial |
Real estate - construction, commercial |
Real estate - construction, residential |
Real estate - commercial |
Real estate - residential |
Real estate - farmland |
Consumer |
Total |
||||||||||||||||||||||||
|
ACL, beginning of period |
$ |
13,787 |
$ |
4,024 |
$ |
1,094 |
$ |
9,929 |
$ |
6,286 |
$ |
15 |
$ |
758 |
$ |
35,893 |
||||||||||||||||
|
(Recovery of) provision for credit losses - loans |
(613 |
) |
(1,982 |
) |
(515 |
) |
(2,798 |
) |
1,734 |
3 |
1,271 |
(2,900 |
) |
|||||||||||||||||||
|
Charge-offs |
(24,005 |
) |
- |
(39 |
) |
(1,238 |
) |
(216 |
) |
- |
(2,939 |
) |
(28,437 |
) |
||||||||||||||||||
|
Recoveries |
16,598 |
15 |
- |
70 |
129 |
- |
1,655 |
18,467 |
||||||||||||||||||||||||
|
Net (charge-offs) recoveries |
(7,407 |
) |
15 |
(39 |
) |
(1,168 |
) |
(87 |
) |
- |
(1,284 |
) |
(9,970 |
) |
||||||||||||||||||
|
ACL, end of period |
$ |
5,767 |
$ |
2,057 |
$ |
540 |
$ |
5,963 |
$ |
7,933 |
$ |
18 |
$ |
745 |
$ |
23,023 |
||||||||||||||||
|
Ratio of net (recoveries) charge-offs to average loans outstanding |
(1.79 |
%) |
0.02 |
% |
(0.02 |
%) |
(0.14 |
%) |
(0.01 |
%) |
- |
(3.76 |
%) |
(0.44 |
%) |
|||||||||||||||||
Net recoveries were $0.3 million for the year ended December 31, 2025, compared to net charge-offs of $10.0 million for the year ended December 31, 2024. Contributing to the higher charge-offs and recoveries in 2024 compared to 2025 was the sale of a nonperforming specialty finance loan in 2024 that resulted in both a reduction of reserves ($8.4 million) established in 2022 and 2023 and a partial charge off ($9.4 million).
The ACL includes specific reserves for individually evaluated loans and a general allowance applicable to all loan categories; however, management has allocated the ACL 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 ACL by loan category and the percentage of loans in each category to total loans as of the dates stated.
|
December 31, 2025 |
December 31, 2024 |
|||||||||||||||
|
(Dollars in thousands) |
ACL Amount |
% of |
ACL Amount |
% of |
||||||||||||
|
Commercial and industrial |
$ |
4,337 |
14.5 |
% |
$ |
5,767 |
16.8 |
% |
||||||||
|
Real estate - construction, commercial |
678 |
2.8 |
% |
2,057 |
5.4 |
% |
||||||||||
|
Real estate - construction, residential |
264 |
1.7 |
% |
540 |
2.4 |
% |
||||||||||
|
Real estate - commercial |
5,959 |
44.9 |
% |
5,963 |
40.2 |
% |
||||||||||
|
Real estate - residential |
7,655 |
34.2 |
% |
7,933 |
32.8 |
% |
||||||||||
|
Real estate - farmland |
14 |
0.2 |
% |
18 |
0.3 |
% |
||||||||||
|
Consumer |
537 |
1.7 |
% |
745 |
2.1 |
% |
||||||||||
|
Total |
$ |
19,444 |
100.0 |
% |
$ |
23,023 |
100.0 |
% |
||||||||
Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt. A loan remains in nonaccrual status until the loan is current as to payment of both principal and interest or past due less than 90 days and the borrower demonstrates the ability to pay and remain current for a sustained period of time, generally six months, or when the loan otherwise becomes well-secured and in the process of collection. When cash payments are received, they are applied to principal first, then to accrued interest. It is the Company's policy not to record interest income on nonaccrual loans until the loan has returned to accrual status. In certain instances, accruing loans that are past due 90 days or more as to principal or interest may not be placed on nonaccrual status, if the Company determines that the loans are well-secured and are in the process of collection.
OREO generally includes properties that have been substantively repossessed or acquired in complete or partial satisfaction of debt. Such properties, which are held for resale, are initially stated at fair value, including a reduction for the estimated selling expenses, which becomes the new carrying value. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value. In limited cases, the Bank may receive non-cash consideration, including equity interests, pursuant to negotiated or court-approved settlements with borrowers. The fair value of nonmarketable equity interests are generally estimated using a discounted cash flow analysis based on management's assumptions regarding expected future cash flows, timing, and a risk-adjusted discount rate. These assets, which are reported with OREO on the Company's consolidated balance sheets, are subsequently carried at the lower of cost or fair value, less estimated costs to sell, and are periodically evaluated for impairment.
Nonperforming Assets.The following table presents a summary of nonperforming assets and various measures as of the dates stated.
|
December 31, |
||||||||
|
(Dollars in thousands) |
2025 |
2024 |
||||||
|
Nonaccrual loans held for investment |
$ |
20,605 |
$ |
22,957 |
||||
|
Loans past due 90 days and still accruing |
3,158 |
2,486 |
||||||
|
Total nonperforming loans |
$ |
23,763 |
$ |
25,443 |
||||
|
OREO |
1,683 |
279 |
||||||
|
Total nonperforming assets |
$ |
25,446 |
$ |
25,722 |
||||
|
Loans held for investment |
$ |
1,865,717 |
$ |
2,111,797 |
||||
|
Total assets |
$ |
2,432,589 |
$ |
2,737,260 |
||||
|
ACL on loans held for investment |
$ |
19,444 |
$ |
23,023 |
||||
|
ACL to loans held for investment |
1.04 |
% |
1.09 |
% |
||||
|
ACL to nonaccrual loans |
94.37 |
% |
100.29 |
% |
||||
|
ACL to nonperforming loans |
81.82 |
% |
90.49 |
% |
||||
|
Nonaccrual loans to loans held for investment |
1.10 |
% |
1.09 |
% |
||||
|
Nonperforming loans to loans held for investment |
1.27 |
% |
1.20 |
% |
||||
|
Nonperforming loans to total assets |
0.98 |
% |
0.93 |
% |
||||
|
Nonperforming assets to total assets |
1.05 |
% |
0.94 |
% |
||||
Nonperforming loans, which include nonaccrual loans and loans past due 90 days and still accruing interest, decreased $1.7 million from prior year end, to $23.8 million as of December 31, 2025.
As of December 31, 2025, OREO included a property with a carrying value of $1.3 million that served as collateral for a government guaranteed loan. The guaranteed portion of the loan (90%) is owned by the SBA, and the Company is obligated to remit to the SBA its share of the liquidation proceeds upon the sale of the property. Accordingly, the Company recorded a $1.2 million liability, reported in other liabilities on the Company's consolidated balance sheets as December 31, 2025, representing the SBA's contractual interest in the expected proceeds from the sale of the property.
Investment Securities.The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest 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, securities' prepayment risk, 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 $332.9 million and $312.0 million at December 31, 2025 and 2024, respectively. Primarily as a result of market interest rates, the Company's portfolio of securities available for sale had a net unrealized loss of approximately $40.3 million as of December 31, 2025. Of the unrealized loss in the portfolio at December 31, 2025, approximately 84% was related to securities backed by U.S. government agencies.
Securities in the investment portfolio may be classified as held to maturity, if the Company has the ability and intent to hold them to maturity, in which case they would be carried at amortized cost. The Company did not hold any investment securities classified as held to maturity as of December 31, 2025 or December 31, 2024.
At December 31, 2025 and 2024, securities with a fair value of $174.3 million and $268.9 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB. As of December 31, 2025 and 2024, the Company had pledged securities with a fair value of $0 and $16.3 million as collateral for the FRB Discount Window. The decline in pledged securities as of December 31, 2025 from December 31, 2024 with both FHLB and FRB reflects the release of securities held as collateral.
The Company reviews its available for sale investment securities portfolio for potential credit losses at least quarterly. Investment grade securities are judged to have a low risk of default, to be of the best quality and carry the smallest degree of investment risk. As of December 31, 2025 and 2024, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency; however, a portion of securities in an unrealized loss position did not have a third-party investment grade available (securities with fair values of of $23.5 million and $29.3 million, respectively). These securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds. Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit impairment. Contractual cash flows for mortgage backed and U.S. Treasury and agencies securities are guaranteed and/or funded by the U.S. government. Municipal
securities with unrealized losses showed 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 impaired securities prior to the recovery of the amortized cost. No ACL has been recognized for investment securities as of December 31, 2025 and 2024.
Restricted equity investments consisted of stock in the FHLB (carrying basis $9.1 million and $9.4 million at December 31, 2025 and 2024, respectively), FRB stock (carrying basis of $9.4 million at both December 31, 2025 and 2024, respectively), and stock in the Company's correspondent bank (carrying basis of $0.5 million at both December 31, 2025 and 2024). Restricted equity investments are carried at cost.
The Company also has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.9 million and $4.8 million as of December 31, 2025 and 2024, respectively. The Company reports such investments at fair value if observable market transactions have occurred in similar securities, resulting in a new carrying value that is evaluated for indication of impairment no less than quarterly. These impairment analyses may include quantitative and/or qualitative information obtained either directly from the investee, a third-party broker, or a third-party valuation firm. If a potential impairment has been identified, the carrying value of the investment would be written down to its estimated fair market value through a charge to earnings. In the second quarter of 2024, the Company identified impairment indicators related to one of its investments, resulting in an $8.5 million impairment charge that was recorded in fair value adjustments of other equity investments on the consolidated statements of operations. No such potential impairment indicators were noted in 2025.
The Company also holds other investments, primarily in early-stage focused investment funds, which totaled $20.8 million and $19.4 million as of December 31, 2025 and 2024, respectively, and are reported in other investments on the consolidated balance sheets.
The following table presents the composition of the Company's available for sale securities portfolio, at amortized cost, as of the dates stated.
|
December 31, |
||||||||||||||||
|
2025 |
2024 |
|||||||||||||||
|
(Dollars in thousands) |
Balance |
Percent of |
Balance |
Percent of |
||||||||||||
|
Securities available for sale |
||||||||||||||||
|
Mortgage backed securities |
$ |
212,436 |
56.9 |
% |
$ |
199,453 |
54.3 |
% |
||||||||
|
U.S. Treasury and agencies |
78,828 |
21.1 |
% |
79,430 |
21.6 |
% |
||||||||||
|
State and municipal |
49,212 |
13.2 |
% |
50,233 |
13.7 |
% |
||||||||||
|
Corporate bonds |
32,702 |
8.8 |
% |
38,453 |
10.4 |
% |
||||||||||
|
Total |
$ |
373,178 |
100.0 |
% |
$ |
367,569 |
100.0 |
% |
||||||||
The following table presents the amortized cost of the investment portfolio by contractual maturities, as well as the weighted average yields, for each of the maturity ranges as of the date and for the periods 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.
|
December 31, 2025 |
||||||||||||||||||||||||||||||||||||
|
Within One Year |
One to Five Years |
Five to Ten Years |
Over Ten Years |
|||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Amortized |
Weighted |
Amortized |
Weighted |
Amortized |
Weighted |
Amortized |
Weighted |
Total Amortized Cost |
|||||||||||||||||||||||||||
|
Securities available for sale |
||||||||||||||||||||||||||||||||||||
|
Mortgage backed securities |
$ |
- |
- |
$ |
6,101 |
1.99 |
% |
$ |
11,055 |
2.79 |
% |
$ |
195,280 |
2.43 |
% |
$ |
212,436 |
|||||||||||||||||||
|
U. S. Treasury and agencies |
7,501 |
0.87 |
% |
36,531 |
1.23 |
% |
29,661 |
2.39 |
% |
5,135 |
1.83 |
% |
78,828 |
|||||||||||||||||||||||
|
State and municipal |
890 |
3.58 |
% |
14,096 |
2.41 |
% |
29,086 |
2.21 |
% |
5,140 |
3.01 |
% |
49,212 |
|||||||||||||||||||||||
|
Corporate bonds |
1,500 |
7.00 |
% |
10,325 |
7.19 |
% |
20,377 |
4.09 |
% |
500 |
4.00 |
% |
32,702 |
|||||||||||||||||||||||
|
Total |
$ |
9,891 |
$ |
67,053 |
$ |
90,179 |
$ |
206,055 |
$ |
373,178 |
||||||||||||||||||||||||||
Deposits.The principal sources of funds for the Company are deposits, including transaction accounts (demand and money market accounts), time deposits, and savings accounts, of customers in the Company's primary geographic market area. Such customers provide the Bank a source of fee income and cross-marketing opportunities and are generally a lower cost source of funding for the Bank.
Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity and in anticipation of the exit of the Company's fintech BaaS deposit operations. The Bank has a liquidity management program, with oversight of the Bank's asset and liability committee (the "ALCO"), that sets forth guidelines for the desired maximum level of brokered deposits, which is 20.0% of total deposits. In recent quarters, the Company has reduced its level of higher-priced brokered deposits by sourcing non-brokered deposits and through cash flows from the loan portfolio, and expects to continue reducing brokered deposits in future periods to 10.0% or less of total deposits. The ALCO monitors brokered deposit concentrations as part of its liquidity risk management program.
Total deposits decreased $268.3 million to $1.91 billion as of December 31, 2025 from $2.18 billion as of December 31, 2024, as:
•
Deposits, excluding brokered deposits, decreased $104.5 million from approximately $1.78 billion as of December 31, 2024 to approximately $1.67 billion as of December 31, 2025; and
•
Brokered deposits decreased $163.8 million from approximately $402.5 million, or 18.5% of total deposits, as of December 31, 2024 to approximately $238.7 million, or 12.5% of total deposits, as of December 31, 2025.
The following table presents the composition of deposits as of the dates stated.
|
December 31, |
||||||||||||||||
|
2025 |
2024 |
|||||||||||||||
|
(Dollars in thousands) |
Amount |
Percent of Total Deposits |
Amount |
Percent of Total Deposits |
||||||||||||
|
Noninterest-bearing demand |
$ |
398,541 |
20.9 |
% |
$ |
452,690 |
20.8 |
% |
||||||||
|
Interest-bearing demand and money market |
612,648 |
32.1 |
% |
598,875 |
27.5 |
% |
||||||||||
|
Savings |
100,346 |
5.3 |
% |
100,857 |
4.6 |
% |
||||||||||
|
Time |
799,627 |
41.7 |
% |
1,027,020 |
47.1 |
% |
||||||||||
|
Total deposits |
$ |
1,911,162 |
100.0 |
% |
$ |
2,179,442 |
100.0 |
% |
||||||||
Estimated uninsured deposits totaled approximately $397.0 million as of December 31, 2025, or 19.4% of total deposits, compared to $399.3 million, or 18.0% of total deposits, as of December 31, 2024. Uninsured deposit amounts are based on estimates as of the reported dates.
The following table presents a summary of average deposits and the weighted average rate paid for the periods stated.
|
For the year ended December 31, |
||||||||||||||||
|
2025 |
2024 |
|||||||||||||||
|
(Dollars in thousands) |
Average |
Average Rate |
Average |
Average Rate |
||||||||||||
|
Noninterest-bearing demand |
$ |
430,512 |
- |
$ |
493,133 |
- |
||||||||||
|
Interest-bearing: |
||||||||||||||||
|
Demand |
235,286 |
0.44 |
% |
432,099 |
2.22 |
% |
||||||||||
|
Savings |
101,844 |
4.14 |
% |
108,093 |
4.63 |
% |
||||||||||
|
Money market |
386,631 |
2.18 |
% |
381,482 |
2.40 |
% |
||||||||||
|
Time |
887,639 |
4.21 |
% |
997,470 |
4.55 |
% |
||||||||||
|
Total interest-bearing |
$ |
1,611,400 |
$ |
1,919,144 |
||||||||||||
|
Total average deposits |
$ |
2,041,912 |
$ |
2,412,277 |
||||||||||||
The decline in the average balances and rate of interest-bearing demand deposits for the year ended December 31, 2025 compared to the same period of 2024 was primarily due to lower average balances of higher cost fintech-related deposits.
The following table presents maturities of time deposits for certificates of deposits $250 thousand or greater as of the dates stated.
|
(Dollars in thousands) |
2025 |
2024 |
||||||
|
Maturing in: |
||||||||
|
3 months or less |
$ |
38,475 |
$ |
38,758 |
||||
|
Over 3 months through 6 months |
33,385 |
33,845 |
||||||
|
Over 6 months through 12 months |
49,776 |
60,308 |
||||||
|
Over 12 months |
33,676 |
31,117 |
||||||
|
$ |
155,312 |
$ |
164,028 |
|||||
The Company's brokered deposits were issued in denominations of $1 thousand each under master certificates, and therefore are excluded from the table above.
Borrowings. The Company uses short-term and long-term borrowings from various sources, including FHLB advances and FRB advances, to fund assets and operations. The following tables present information on the balances and interest rates on borrowings as of and for the periods stated.
|
December 31, 2025 |
||||||||||||||||
|
(Dollars in thousands) |
Period-End Balance |
Highest Month-End Balance |
Average Balance |
Weighted Average Rate |
||||||||||||
|
FHLB borrowings |
$ |
150,000 |
$ |
150,000 |
$ |
150,000 |
3.87 |
% |
||||||||
|
December 31, 2024 |
||||||||||||||||
|
(Dollars in thousands) |
Period-End Balance |
Highest Month-End Balance |
Average Balance |
Weighted Average Rate |
||||||||||||
|
FHLB borrowings |
$ |
150,000 |
$ |
280,000 |
$ |
213,003 |
4.27 |
% |
||||||||
|
FRB borrowings |
- |
65,000 |
23,087 |
4.68 |
% |
|||||||||||
As of December 31, 2025, FHLB advances were secured by collateral consisting of a blanket lien on qualifying loans in the Company's residential, multifamily, and commercial real estate mortgage loan portfolios with a lendable value of $400.0 million, as well as selected investment portfolio securities with a lendable value of $165.5 million. FRB advances through the FRB Discount Window were secured by qualifying pledged construction and commercial and industrial loans totaling $72.8 million as of December 31, 2025.
Subordinated notes, net, totaled $14.7 million and $39.8 million as of December 31, 2025 and 2024, respectively. Prior to June 1, 2025, the Company's subordinated notes had been comprised of a $15 million issuance in May 2020 maturing June 1, 2030 (the "2030 Note") and a $25 million issuance in October 2019 maturing October 15, 2029 (the "2029 Notes").
On June 1, 2025, the Company completed the $15.0 million redemption of the 2030 Note. The interest rate on the 2030 Note was 6.0% up to the redemption date. Interest expense on the 2030 Note was $0.4 million and $0.9 million for the years ended December 31, 2025 and 2024, respectively.
On July 15, 2025, the Company completed a $10.0 million partial redemption of its 2029 Notes. The 2029 Notes bore interest at 5.625% per annum, through October 14, 2024, payable semi-annually in arrears. From October 15, 2024 through October 15, 2029, or up to an early redemption date, the interest rate resets quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Funding Rate plus 433.5 basis points, payable quarterly in arrears. As of December 31, 2025, the 2029 Notes bore an annual interest rate of 8.37%. As of December 31, 2025, the net carrying amount of the 2029 Notes was $14.7 million, inclusive of a $0.2 million purchase accounting adjustment (premium). For the years ended December 31, 2025 and 2024, the effective interest rate on the 2029 Notes was 7.87% and 5.92%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium).
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 and/or wholesale funding 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 markets in which they operate or other events.
Deposits are the primary source of the Company's liquidity. Cash flows from amortizing or maturing assets also provide funding to meet the liquidity needs of the Company. Deposits are sourced from the Bank's customers and, as needed, through wholesale deposit markets. The wholesale deposit markets are accessed through brokers or through the IntraFi Network ("IntraFi"), of which the Bank is a member. IntraFi facilitates the Bank attaining brokered deposits via an on-line marketplace. The Bank also utilizes IntraFi's reciprocal deposit services to offer its high-value customers access to FDIC insurance through IntraFi's network of banks.
Prior to the termination of the Consent Order, the Bank was not deemed to be "well capitalized," which restricted it from accepting, renewing, or rolling over brokered deposits except in compliance with certain applicable restrictions under federal law. As a result, the Bank received waiver approvals periodically from the FDIC allowing it to accept, renew, or rollover brokered deposits. With the termination of the Consent Order in the fourth quarter 2025, the Bank is no longer subject to such restrictions.
The Company has established a formal liquidity contingency plan that provides guidelines for liquidity management. Pursuant to the Company's liquidity contingency plan, liquidity needs are forecasted 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 and are reviewed by the Bank's ALCO. Management also monitors the Company's liquidity position on a day-to-day basis through daily cash monitoring and short- and long-term cash flow forecasting and believes its sources of liquidity are adequate to conduct the business of the Company.
The following table presents information on the available sources of liquidity as of the period stated.
|
(Dollars in thousands) |
Capacity |
Less: Outstanding Borrowings |
Available Balance |
|||||||||
|
Cash and due from banks |
$ |
115,949 |
||||||||||
|
Fed funds sold |
1,851 |
|||||||||||
|
Unpledged securities available for sale |
158,654 |
|||||||||||
|
Total |
$ |
276,454 |
||||||||||
|
Borrowings |
||||||||||||
|
FHLB |
$ |
565,519 |
$ |
201,160 |
(1) |
$ |
364,359 |
|||||
|
FRB |
72,755 |
- |
72,755 |
|||||||||
|
Unsecured line of credit |
10,000 |
- |
10,000 |
|||||||||
|
Total |
$ |
648,274 |
$ |
201,160 |
$ |
447,114 |
||||||
|
Available liquidity as of December 31, 2025 |
$ |
723,568 |
||||||||||
|
(1) Outstanding borrowings are comprised of advances of $150.0 million and letters of credit totaling $51.2 million, of which $50 million served as collateral for public deposits with the Treasury Board of the Commonwealth of Virginia. |
||||||||||||
Uninsured deposits at December 31, 2025 were $397.0 million. In the unlikely event that uninsured deposit balances exit the Bank over a short period of time, management could more than satisfy the liquidity demand with cash on-hand and FHLB borrowing capacity.
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 support the Company's strategic objectives.
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.
Banks 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. Additionally, regulators may place certain restrictions on dividends paid by banks. The total amount of dividends which may be paid at any date is generally limited to retained earnings of banks.
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.
Pursuant to the Consent Order, the Bank was required to maintain a minimum leverage ratio of 10.0% and a total risk-based capital ratio of 13.0%. The Consent Order was terminated in the fourth quarter of 2025; therefore, as of December 31, 2025, the Bank was no longer subject to these minimum capital requirements.
As previously noted, the Company adopted CECL effective January 1, 2023. Federal and state banking regulations allow financial institutions to irrevocably elect to phase-in the after-tax cumulative effect adjustment at adoption to retained earnings ("CECL Transitional Amount") over a three-year period. The three-year phase-in of the CECL Transitional Amount to regulatory capital is 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank made this irrevocable election effective with its first quarter 2023 call report. The CECL Transitional Amount was $8.1 million, of which $6.1 million and $4.1 million reduced the regulatory capital amounts and capital ratios as of December 31, 2025 and 2024, respectively.
The following tables present the capital ratios to which banks are subject to be adequately and well capitalized, as well as the capital and capital ratios for the Bank as of the dates stated. Adequately capitalized ratios include the conversation buffer, if applicable. The following tables also include the capital adequacy ratios to which bank holding companies are subject. Also presented as of December 31, 2024 are the minimum capital ratios set forth in the Consent Order for the Bank with the corresponding capital amounts for both the leverage ratio and the total capital ratio.
|
December 31, 2025 |
||||||||||||||||||||||||
|
Actual |
For Capital |
To Be Well Capitalized |
||||||||||||||||||||||
|
(Dollars in thousands) |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
||||||||||||||||||
|
Total risk based capital (to risk-weighted assets) |
||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
339,784 |
19.16 |
% |
$ |
186,188 |
10.50 |
% |
$ |
177,322 |
10.00 |
% |
||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
370,984 |
20.69 |
% |
$ |
143,427 |
8.00 |
% |
n/a |
n/a |
||||||||||||||
|
Tier 1 capital (to risk-weighted assets) |
||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
322,320 |
18.18 |
% |
$ |
150,724 |
8.50 |
% |
$ |
141,858 |
8.00 |
% |
||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
344,604 |
19.22 |
% |
$ |
107,570 |
6.00 |
% |
n/a |
n/a |
||||||||||||||
|
Common equity tier 1 capital (to risk-weighted assets) |
||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
322,320 |
18.18 |
% |
$ |
124,125 |
7.00 |
% |
$ |
115,259 |
6.50 |
% |
||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
344,604 |
19.22 |
% |
$ |
80,677 |
4.50 |
% |
n/a |
n/a |
||||||||||||||
|
Tier 1 leverage (to average assets) |
||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
322,320 |
13.04 |
% |
$ |
98,859 |
4.00 |
% |
$ |
123,574 |
5.00 |
% |
||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
344,604 |
13.81 |
% |
$ |
99,777 |
4.00 |
% |
n/a |
n/a |
||||||||||||||
|
December 31, 2024 |
||||||||||||||||||||||||||||||||
|
Actual |
For Capital |
To Be Well Capitalized |
Minimum Capital Ratios |
|||||||||||||||||||||||||||||
|
(Dollars in thousands) |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
||||||||||||||||||||||||
|
Total risk based capital (to risk-weighted assets) |
||||||||||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
358,848 |
17.26 |
% |
$ |
218,260 |
10.50 |
% |
$ |
207,866 |
10.00 |
% |
$ |
270,226 |
13.00 |
% |
||||||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
414,284 |
19.79 |
% |
$ |
167,444 |
8.00 |
% |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||||||
|
Tier 1 capital (to risk-weighted assets) |
||||||||||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
340,386 |
16.38 |
% |
$ |
176,687 |
8.50 |
% |
$ |
166,293 |
8.00 |
% |
n/a |
n/a |
||||||||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
360,933 |
17.24 |
% |
$ |
125,583 |
6.00 |
% |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||||||
|
Common equity tier 1 capital (to risk-weighted assets) |
||||||||||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
340,386 |
16.38 |
% |
$ |
145,507 |
7.00 |
% |
$ |
135,113 |
6.50 |
% |
n/a |
n/a |
||||||||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
360,933 |
17.24 |
% |
$ |
94,187 |
4.50 |
% |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||||||
|
Tier 1 leverage (to average assets) |
||||||||||||||||||||||||||||||||
|
Blue Ridge Bank, N.A. |
$ |
340,386 |
11.80 |
% |
$ |
115,364 |
4.00 |
% |
$ |
144,204 |
5.00 |
% |
$ |
288,409 |
10.00 |
% |
||||||||||||||||
|
Blue Ridge Bankshares, Inc. |
$ |
360,933 |
12.43 |
% |
$ |
116,169 |
4.00 |
% |
n/a |
n/a |
n/a |
n/a |
||||||||||||||||||||
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 and involve the same credit risk and evaluation as making a loan to a customer. 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 in a manner similar to that if underwriting a loan. As of December 31, 2025 and December 31, 2024, the Company had outstanding loan commitments of $247.2 million and $283.2 million, respectively. Of the December 31, 2025 and 2024 balances, $35.2 million and $32.9 million, respectively, were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.
Conditional commitments are issued by the Company in the form of 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 December 31, 2025 and 2024, commitments under outstanding financial stand-by letters of credit totaled $6.3 million and $12.5 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.
As of December 31, 2025 and 2024, the Company recorded a recovery of credit losses for unfunded commitments of $0.1 million and $2.2 million, respectively, which was primarily attributable to lower balances of loan commitments. As of December 31, 2025, the reserve for unfunded commitments to borrowers was $0.8 million compared to $0.9 million as of the December 31, 2024. The unfunded commitments reserve is included in other liabilities on the Company's consolidated balance sheets.
As part of the sale of substantially all of its MSRs during 2024, the Company recorded a reserve for estimated putbacks, transition costs, and unearned sales proceeds. The putbacks related to industry-standard items, including prepayments or early delinquencies of the underlying mortgages, all of which were subject to term limits per the respective sales agreements. As of December 31, 2025, all such term limits have been substantially completed. The reserve for unearned sales proceeds relates to the Company providing certain documentation to the buyers. In the year ended December 31, 2025, the Company received $1.4 million of previously unearned sale proceeds, which resulted in a corresponding release of the reserve and were reported as income on sale of MSRs on the consolidated statements of operations. As of December 31, 2025 and 2024, the reserve was $0.2 million and $1.8 million, respectively, and was included in other liabilities on the Company's consolidated balance sheets.
The Company holds interests in various partnerships and limited liability companies. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At December 31, 2025 and 2024, the Company had future commitments outstanding totaling $4.9 million and $7.1 million, respectively, related to these investments.
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 cash flows of interest-earning assets and interest-bearing liabilities, changes in the expected cash flows 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 the ALCO comprised of members of management, with oversight by a committee of its board of directors. The ALCO is responsible for monitoring the Company's interest rate risk in conjunction with liquidity and capital management, pursuant to policy guidelines approved by the board of directors.
The Company employs an independent 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 demand, money market, and 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 what net interest income would be 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 400 basis points and up 100 basis points to 400 basis points. The results of these simulations are then compared to the base case.
The following tables present the estimated change in net interest income under various rate change scenarios as of the dates presented. The scenarios assume rate changes occur instantaneous and in a parallel manner, which means the changes are the same on all points of the rate curve. Estimated changes set forth below are dependent on material assumptions, such as those previously discussed.
|
December 31, 2025 |
||||||||||||||||
|
Instantaneous Parallel Rate Shock Scenario |
||||||||||||||||
|
(Dollars in thousands) |
Change in Net Interest Income - Year 1 |
Change in Net Interest Income - Year 2 |
||||||||||||||
|
Change in interest rates: |
||||||||||||||||
|
+400 basis points |
$ |
5,243 |
7.0 |
% |
$ |
5,961 |
7.6 |
% |
||||||||
|
+300 basis points |
3,925 |
5.3 |
% |
4,510 |
5.7 |
% |
||||||||||
|
+200 basis points |
2,653 |
3.6 |
% |
3,151 |
4.0 |
% |
||||||||||
|
+100 basis points |
1,369 |
1.8 |
% |
1,741 |
2.2 |
% |
||||||||||
|
Base case |
||||||||||||||||
|
-100 basis points |
(1,775 |
) |
(2.4 |
%) |
(2,553 |
) |
(3.2 |
%) |
||||||||
|
-200 basis points |
(3,511 |
) |
(4.7 |
%) |
(5,466 |
) |
(6.9 |
%) |
||||||||
|
-300 basis points |
(4,584 |
) |
(6.2 |
%) |
(7,076 |
) |
(9.0 |
%) |
||||||||
|
-400 basis points |
(6,933 |
) |
(9.3 |
%) |
(11,170 |
) |
(14.2 |
%) |
||||||||
|
December 31, 2024 |
||||||||||||||||
|
Instantaneous Parallel Rate Shock Scenario |
||||||||||||||||
|
(Dollars in thousands) |
Change in Net Interest Income - Year 1 |
Change in Net Interest Income - Year 2 |
||||||||||||||
|
Change in interest rates: |
||||||||||||||||
|
+400 basis points |
$ |
3,288 |
3.8 |
% |
$ |
6,628 |
6.7 |
% |
||||||||
|
+300 basis points |
3,347 |
3.8 |
% |
5,842 |
5.9 |
% |
||||||||||
|
+200 basis points |
2,877 |
3.3 |
% |
4,610 |
4.7 |
% |
||||||||||
|
+100 basis points |
1,798 |
2.1 |
% |
2,751 |
2.8 |
% |
||||||||||
|
Base case |
||||||||||||||||
|
-100 basis points |
(2,978 |
) |
(3.4 |
%) |
(4,205 |
) |
(4.3 |
%) |
||||||||
|
-200 basis points |
(6,468 |
) |
(7.4 |
%) |
(9,650 |
) |
(9.8 |
%) |
||||||||
|
-300 basis points |
(9,831 |
) |
(11.2 |
%) |
(15,174 |
) |
(15.4 |
%) |
||||||||
|
-400 basis points |
(12,664 |
) |
(14.5 |
%) |
(19,666 |
) |
(20.0 |
%) |
||||||||
Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve 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 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 Company's available for sale ("AFS") securities portfolio is reported at fair value, with the unrealized gain or loss representing the difference in amortized cost and fair value reported net of tax as a component of shareholders' equity. Changes in market interest rates affect the valuation of the securities portfolio, as market interest rates at reporting dates may differ than those interest rates in effect when the securities were purchased. The Company does not intend to sell, nor does it believe it will be required to sell the AFS securities; therefore, any unrealized gains or losses in the Company's AFS securities portfolio are deemed temporary. Any unrealized gains or losses for individual securities will diminish as the securities reach maturity.
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.
Blue Ridge Bankshares Inc. published this content on March 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 12, 2026 at 21:05 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]