# BLUE RIDGE BANKSHARES, INC. (BRBS) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from BLUE RIDGE BANKSHARES, INC.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/842717/000095017023007265/brbs-20221231.htm
Accession: 0000950170-23-007265
Filing date: 2023-03-10
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/BRBS/
All MD&A years: /company/BRBS/mda/
Previous year: /company/BRBS/mda/fy2021/ (FY 2021)
Next year: /company/BRBS/mda/fy2023/ (FY 2023)

ITEM 7: 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 or phases 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 are subject to change based on factors which are, in many instances, beyond the 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 effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Federal Reserve, inflation, interest rate, market, and monetary fluctuations;

•
the impact of, and the ability to comply with, the terms of the formal written agreement between the Bank and the OCC;

•
the strength of the United States economy in general and the strength of the local economies in which it conducts operations;

•
changes in the level of the Company’s nonperforming assets and charge-offs;

•
management of risks inherent in the Company’s real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of collateral and the ability to sell collateral upon any foreclosure;

•
changes in consumer spending and savings habits;

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•
the Company's ability to identify, attract, and retain experienced management, relationship managers, and support personnel, particularly in a competitive labor environment;

•
technological and social media changes impacting the Company, the Bank, and the financial services industry in general;

•
the Bank's ability to effectively manage its fintech partnerships, and the abilities of those fintech companies to perform as expected;

•
changing bank regulatory conditions, laws, regulations, 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, increased regulations, prohibition of certain income producing activities, or changes in the secondary market for loans and other products;

•
the impact of changes in financial services policies, laws and regulations, including laws, regulations and policies concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies;

•
the Company’s involvement, from time to time, in legal proceedings and examination and remedial actions by regulators;

•
the impact of changes in laws, regulations, and policies affecting the real estate industry;

•
the effect of changes in accounting policies and practices, as may be adopted from time to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the FASB, or other accounting standards setting bodies, for example, the Company's adoption of CECL effective January 1, 2023;

•
the impact of the COVID-19 pandemic, including the adverse impact on our business and operations and on the Company’s customers which may result, among other things, in increased delinquencies, defaults, foreclosures and losses on loans;

•
the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues, and other catastrophic events;

•
geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;

•
the timely development of competitive new 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 Company’s inability to successfully manage growth or implement its growth strategy;

•
reputational risk and potential adverse reactions of the Company’s customers, suppliers, employees or other business partners;

•
the effect of acquisitions the Company may make in the future, including, without limitation, disruption of employee or customer relationships, and the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;

•
the Company’s participation in the PPP established by the U.S. government and its administration of the loans and processing fees earned under the program;

•
the Company’s involvement, from time to time, in legal proceedings, and examination and remedial actions by regulators;

•
the Company’s potential exposure to fraud, negligence, computer theft, and cyber-crime; and

•
the Bank’s ability to pay dividends.

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

31

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 these 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 Loan Losses

The allowance for loan losses is maintained at a level believed to be adequate to absorb probable losses inherent in the portfolio and is based on the size and current risk characteristics of the loan portfolio, an assessment of individual problem loans and actual loss experience, current economic events in specific industries, and other pertinent factors, such as regulatory guidance and general economic conditions. The Company’s allowance for loan losses is established through a provision for loan losses charged to earnings. Loans identified as losses and deemed uncollectible by management are charged to the allowance for loan losses. Subsequent recoveries, if any, are credited to the allowance for loan losses. The allowance for loan losses is evaluated on a periodic basis by management, but no less than quarterly.

The allowance for loan losses consists of specific and general components. The specific component relates to loans that are determined to be impaired and, therefore, individually evaluated for impairment. The Company considers a loan to be impaired when 1) the risk grade of the loan is substandard or worse and the balance of the loan exceeds $500,000 or 2) the loan is a TDR, regardless of balance. A loan is not considered impaired during a period of delay in payment if the Company expects to collect all amounts due, including past due interest. Measurement of impairment is based on the expected future cash flows of an impaired loan, discounted at the loan's effective interest rate, or measured based on an observable market value, if one exists, or the fair value of the collateral underlying the loan, discounted to consider estimated costs to sell the collateral for collateral-dependent loans. If the net value is less than the loan balance (including any unamortized premium or discount associated with the loan) an impairment is recognized and a specific reserve is established for the impaired loan. The general component of the allowance for loan losses covers those loans not classified as impaired and those loans classified as impaired that are not individually evaluated for impairment. Loans in the general component population are segmented into homogenous groups that share similar characteristics and receive a loss factor that is based on historical loss experience adjusted for other internal or external influences on credit quality that are not fully reflected in the historical data. Internal and external factors include, but are not limited to, internal underwriting standards, loan portfolio composition and concentrations, and local and national economic conditions.

The determination of the allowance for loan losses is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends, all of which may be susceptible to significant change.

Credit losses are an inherent part of the Company’s business. Management believes the methodologies for determining the allowance for loan losses and the current level of the allowance are appropriate; however, it is possible that there may be unidentified losses in the portfolio at any particular time that may become evident at a future date pursuant to additional internal analysis or regulatory comment. Additional provisions for such losses, if necessary, would be recorded as a charge to earnings.

Accounting for Acquired Loans

Loans acquired pursuant to a business combination are recorded at fair value, with no allowance for loan losses carrying over at the effective date of the transaction. The difference between contractually required amounts receivable and the acquisition date fair value of the loans that are not deemed credit-impaired at acquisition is accreted (recognized) into income

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over the life of the loan either on a level yield or interest method in accordance to ASC 310-20, Receivables-Nonrefundable Fees and Other Costs.

Subsequent to the acquisition date, an allowance for loan losses may be established through a provision for loan losses, based upon a process that is similar to the evaluation process used for originated loans. This evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers, among other factors, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience, carrying value of the loans, which includes the remaining net purchase discount or premium, and other factors that warrant recognition in determining the allowance for loan losses.

Loans are designated purchased credit-impaired ("PCI") on the effective date of a business combination when there is evidence of credit deterioration after origination and for which it is probable that all contractually required principal and interest payments will not be collected. The applicable accounting guidance for PCI loans is ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. PCI loans are initially recorded at fair value (as determined by the present value of expected future cash flows) with no allowance for loan losses. The Company recognizes interest income on PCI loans acquired at a discount (that is due, in part, to credit quality) based on the acquired loans’ expected cash flows. PCI loans may be aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics. A pool is accounted for as a single asset with a single composite yield and an aggregate expectation of cash flow. The difference between the cash flows expected at acquisition and the investment in the loans, or the accretable yield, is recognized as interest income utilizing the level-yield method over the life of each pool. Increases in expected cash flows subsequent to the acquisition are recognized prospectively through adjustment of the yield on the pool over its remaining life, while decreases in expected cash flows are recognized as impairment through a loan loss provision and an increase in the allowance for loan losses. Therefore, the allowance for loan losses on these impaired pools reflects only losses incurred after the acquisition (representing the present value of all cash flows that were expected at acquisition but currently are not expected to be received).

Management periodically evaluates the remaining contractual required payments due and estimates of cash flows expected to be collected. These evaluations, performed no less than semi-annually, require the continued use of key assumptions and estimates, similar to the initial estimate of fair value. Changes in the contractual required payments due and estimated cash flows expected to be collected may result in changes in the accretable yield and non-accretable difference or reclassifications between accretable yield and the non-accretable difference.

Fair Value Measurements

The Company determines the fair values of financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy describes three levels of inputs that may be used to measure fair value. For example, the Company’s available-for-sale investment securities are recorded at fair value using reliable and unbiased evaluations by an industry-wide valuation service. This service uses evaluated pricing models that vary based on asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates; therefore, the values presented may not represent future fair values and may not be realizable.

Derivatives

Derivatives are recognized as assets and liabilities on the Company’s consolidated balance sheets and measured at fair value. The Company’s derivatives consist of forward sales of to-be-announced ("TBA") mortgage-backed securities ("MBS") and interest rate lock commitments. The Company’s hedging policies permit the use of various derivative financial instruments to manage interest rate risk or to hedge specified assets and liabilities. The Company may be required to recognize certain contracts and commitments as derivatives when the characteristics of those contracts and commitments meet the definition of a derivative. If derivative instruments are designated as hedges of fair values, both the change in the fair value of the hedge and the hedged item are included in current earnings.

During the normal course of business, the Company enters into commitments to originate mortgage loans, whereby the interest rate on the loan is determined prior to funding (“rate lock commitments”). For commitments issued in connection with potential loans intended for sale, the Company enters into positions of forward month MBS TBA contracts on a mandatory basis or on a one-to-one forward sales contract on a best efforts basis. The Company enters into TBA contracts in order to control interest rate risk during the period between the rate lock commitment and mandatory sale of the mortgage

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loan. Both the rate lock commitment and the forward TBA contract are considered derivatives. A mortgage loan sold on a best efforts basis is locked into a forward sales contract with a counterparty on the same day as the rate lock commitment to control interest rate risk during the period between the commitment and the sale of the mortgage loan. Both the rate lock commitment and the forward sales contract are considered derivatives.

The market values of rate lock commitments and delivery commitments are not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded in stand-alone markets. The Company determines the fair value of rate lock commitments, delivery contracts, and forward sales contracts of MBS by measuring the change in the value of the underlying asset, while taking into consideration the probability that the rate lock commitments will close or will be funded. Certain risks arise from the forward delivery contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts. Additional risks inherent in mandatory delivery programs include the risk that, if the Company does not close the loans subject to rate lock commitments, it will still be obligated to deliver MBS to the counterparty under the forward sales agreements.

Income Taxes

Income taxes are accounted for using the balance sheet method in accordance with ASC 740, Accounting for Income Taxes. 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. A net deferred tax asset or liability is 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 gives 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 taxable income in prior carryback years, 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. The Company concluded that, as of December 31, 2022, no valuation allowance was required on the Company's deferred tax asset.

Mortgage Servicing Rights ("MSR")

MSR assets represent the economic value associated with servicing a borrower during the life of the mortgage. The assets are separate from the underlying mortgage and may be retained or sold by the Company when the related mortgage is sold. In accordance with ASC 860-50, Transfers and Servicing, MSR assets are initially recognized at fair value and subsequently accounted for using either the amortization method or the fair value measurement method. On January 1, 2022, the Company changed its accounting method for MSR assets from the amortization method to the fair value measurement method. This change in accounting method, which was an irrevocable election, was prospective in nature and resulted in an after-tax difference in carrying values of its MSR assets under the two methods at the beginning of the year. Consequently, a positive $3.5 million after-tax cumulative effect adjustment was recorded to stockholders' equity as of January 1, 2022.

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Five Year Summary of Selected Financial Data

[[GREPCENT_TABLE]]
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basic (1)","","","18,811","","","","17,841","","","","8,535","","","","6,221","","","","4,169"],["Weighted average common shares outstanding - diluted (1)","","","18,825","","","","17,851","","","","8,535","","","","6,221","","","","4,169"],["Financial Ratios:"],["Return on average assets","","","0.99","%","","","1.86","%","","","1.44","%","","","0.61","%","","","0.95","%"],["Return on average equity","","","10.58","%","","","21.50","%","","","17.65","%","","","6.94","%","","","12.02","%"],["Net interest margin","","","4.22","%","","","3.51","%","","","3.49","%","","","3.34","%","","","3.88","%"],["Efficiency ratio","","","66.11","%","","","62.15","%","","","67.49","%","","","81.78","%","","","74.66","%"],["Dividend payout ratio","","","33.56","%","","","14.80","%","","","13.75","%","","","51.61","%","","","32.92","%"],["Capital and Credit Quality Ratios:"],["Average equity to average assets","","","9.34","%","","","8.65","%","","","7.08","%","","","8.79","%","","","7.89","%"],["Allowance for loan losses to loans held for investment, excluding PPP loans","","","0.96","%","","","0.68","%","","","1.90","%","","","0.71","%","","","0.86","%"],["Nonperforming loans to total assets","","","0.59","%","","","0.60","%","","","0.44","%","","","0.54","%","","","1.39","%"],["Nonperforming assets to total assets","","","0.60","%","","","0.61","%","","","0.44","%","","","0.54","%","","","1.42","%"],["Net charge-offs to total loans held for investment","","","0.30","%","","","0.10","%","","","0.12","%","","","0.12","%","","","0.11","%"],["(1) Share and per share figures have been adjusted for all periods presented to reflect the Company's 3-for-2 stock split effective April 30, 2021."],["(2) Beginning in the fourth quarter of 2020, the quarterly dividends have been declared and paid subsequent to the applicable quarter-end."]]
[[/GREPCENT_TABLE]]

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Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021

This section of this Form 10-K generally discusses 2022 and 2021 events and results and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

For the year ended December 31, 2022, the Company reported net income from continuing operations of $27.5 million compared to $52.6 million reported for 2021. Basic and diluted earnings per share from continuing operations were $1.46 for 2022 compared to $2.95 for 2021.

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 growth, changes in interest rates, and changes in the mix of investments, loans, deposits, and borrowings.

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The following table presents the average balance sheets for each of the years ended December 31, 2022, 2021, and 2020. 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.

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2022","","","2021","","","2020"],["(Dollars in thousands)","","Average Balance","","","Interest","","","Yield/ Rate","","","Average Balance","","","Interest","","","Yield/ Rate","","","Average Balance","","","Interest","","","Yield/ Rate"],["Assets:"],["Taxable securities","","$","386,363","","","$","8,744","","","","2.26","%","","$","304,685","","","$","5,192","","","","1.70","%","","$","106,228","","","$","2,582","","","","2.43","%"],["Tax-exempt securities (1)","","","20,562","","","","423","","","","2.06","%","","","12,518","","","","302","","","","2.41","%","","","6,175","","","","178","","","","2.88","%"],["Total securities","","","406,925","","","","9,167","","","","2.25","%","","","317,203","","","","5,494","","","","1.73","%","","","112,403","","","","2,760","","","","2.46","%"],["Interest-earning deposits in other banks","","","83,544","","","","1,208","","","","1.45","%","","","114,316","","","","135","","","","0.12","%","","","108,587","","","","169","","","","0.16","%"],["Federal funds sold","","","33,989","","","","364","","","","1.07","%","","","45,314","","","","47","","","","0.10","%","","","596","","","","2","","","","0.34","%"],["Loans held for sale","","","44,543","","","","1,494","","","","3.35","%","","","145,075","","","","4,162","","","","2.87","%","","","140,496","","","","3,922","","","","2.79","%"],["Paycheck Protection Program loans (2)","","","18,224","","","","535","","","","2.94","%","","","351,179","","","","17,311","","","","4.93","%","","","237,229","","","","10,347","","","","4.36","%"],["Loans held for investment (including loan fees) (2,3,4)","","","2,028,828","","","","114,797","","","","5.66","%","","","1,659,845","","","","76,460","","","","4.61","%","","","675,226","","","","37,291","","","","5.52","%"],["Total average interest-earning assets","","","2,616,053","","","","127,565","","","","4.88","%","","","2,632,932","","","","103,609","","","","3.94","%","","","1,274,537","","","","54,491","","","","4.28","%"],["Less: allowance for loan losses","","","(16,474",")","","","","","","","","","(13,036",")","","","","","","","","","(7,944",")"],["Total noninterest-earning assets","","","225,253","","","","","","","","","","201,222","","","","","","","","","","106,245"],["Total average assets","","$","2,824,832","","","","","","","","","$","2,821,118","","","","","","","","","$","1,372,838"],["Liabilities and stockholders\u2019 equity:"],["Interest-bearing demand, money market deposits, and savings","","$","1,131,718","","","$","7,625","","","","0.67","%","","$","908,418","","","$","2,244","","","","0.25","%","","$","346,784","","","$","1,485","","","","0.43","%"],["Time deposits (5)","","","412,671","","","","3,635","","","","0.88","%","","","540,471","","","","4,193","","","","0.78","%","","","261,891","","","","4,761","","","","1.82","%"],["Total interest-bearing deposits","","","1,544,389","","","","11,260","","","","0.73","%","","","1,448,889","","","","6,437","","","","0.44","%","","","608,675","","","","6,246","","","","1.03","%"],["FHLB borrowings (6)","","","113,478","","","","3,497","","","","3.08","%","","","147,919","","","","1,211","","","","0.82","%","","","121,033","","","","1,654","","","","1.37","%"],["FRB borrowings","","","4,881","","","","114","","","","2.34","%","","","245,196","","","","790","","","","0.32","%","","","223,869","","","","785","","","","0.35","%"],["Subordinated notes (7)","","","39,953","","","","2,215","","","","5.54","%","","","46,226","","","","2,627","","","","5.68","%","","","23,566","","","","1,265","","","","5.37","%"],["Total average interest-bearing liabilities","","","1,702,701","","","","17,086","","","","1.00","%","","","1,888,230","","","","11,065","","","","0.59","%","","","977,143","","","","9,950","","","","1.02","%"],["Noninterest-bearing demand deposits","","","821,208","","","","","","","","","","658,063","","","","","","","","","","283,186"],["Other noninterest-bearing liabilities","","","37,042","","","","","","","","","","30,700","","","","","","","","","","15,358"],["Stockholders\u2019 equity","","","263,881","","","","","","","","","","244,125","","","","","","","","","","97,151"],["Total average liabilities and stockholders\u2019 equity","","$","2,824,832","","","","","","","","","$","2,821,118","","","","","","","","","$","1,372,838"],["Net interest income and margin (8)","","","","","$","110,479","","","","4.22","%","","","","","$","92,544","","","","3.51","%","","","","","$","44,541","","","","3.49","%"],["Cost of funds (9)","","","","","","","","","0.68","%","","","","","","","","","0.43","%","","","","","","","","","0.79","%"],["Net interest spread (10)","","","","","","","","","3.87","%","","","","","","","","","3.35","%","","","","","","","","","3.26","%"]]
[[/GREPCENT_TABLE]]

(1) Computed on a fully taxable equivalent basis assuming a 21% federal income tax rate.

(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 $7.4 million, $2.0 million, and $1.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

(5) Includes amortization of fair value adjustments (premiums) on assumed time deposits of $1.5 million, $3.2 million and $23 thousand for the years ended December 31, 2022, 2021, and 2020, respectively.

(6) Includes amortization of fair value adjustments (premiums) on assumed FHLB borrowings of $111 thousand, $12 thousand, and $0 for the years ended December 31, 2022, 2021, and 2020, respectively.

(7) Includes amortization of fair value adjustments (premiums) on assumed subordinated notes of $101 thousand, $176

37

thousand, and $0 for the years ended December 31, 2022, 2021, and 2020, respectively.

(8) Net interest margin is net interest income divided by average interest-earning assets.

(9) Cost of funds is total interest expense divided by total interest-bearing liabilities and non interest-bearing demand deposits.

(10) 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.

[[GREPCENT_TABLE]]
[["","","2022 compared to 2021","","","2021 compared to 2020"],["","","Increase/(Decrease) Due to (1)","","","Total Increase/","","","Increase/(Decrease) Due to (1)","","","Total Increase/"],["(Dollars in thousands)","","Volume","","","Rate","","","(Decrease)","","","Volume","","","Rate","","","(Decrease)"],["Interest Income"],["Taxable securities","","$","1,392","","","$","2,160","","","$","3,552","","","$","4,824","","","$","(2,214",")","","$","2,610"],["Tax-exempt securities","","","194","","","","(72",")","","","122","","","","183","","","","(59",")","","","124"],["Interest-earning deposits in other banks","","","(36",")","","","1,110","","","","1,074","","","","9","","","","(43",")","","","(34",")"],["Federal funds sold","","","(12",")","","","328","","","","316","","","","150","","","","(105",")","","","45"],["Loans held for sale","","","(2,884",")","","","216","","","","(2,668",")","","","128","","","","112","","","","240"],["Paycheck Protection Program loans","","","(16,413",")","","","(363",")","","","(16,776",")","","","4,970","","","","1,994","","","","6,964"],["Loans held for investment","","","16,996","","","","21,341","","","","38,337","","","","54,378","","","","(15,209",")","","","39,169"],["Total interest income","","$","(763",")","","$","24,720","","","$","23,957","","","$","64,642","","","$","(15,524",")","","$","49,118"],["Interest Expense"],["Interest-bearing demand, money market deposits, and savings","","$","551","","","$","4,830","","","$","5,381","","","$","2,405","","","","(1,646",")","","$","759"],["Time deposits","","","(991",")","","","434","","","","(557",")","","","5,064","","","","(5,632",")","","","(568",")"],["FHLB borrowings","","","(282",")","","","2,568","","","","2,286","","","","367","","","","(810",")","","","(443",")"],["FRB borrowings","","","(775",")","","","98","","","","(677",")","","","75","","","","(70",")","","","5"],["Subordinated notes","","","(356",")","","","(55",")","","","(411",")","","","1,218","","","","144","","","","1,362"],["Total interest expense","","","(1,853",")","","","7,875","","","$","6,022","","","","9,129","","","","(8,014",")","","","1,115"],["Change in Net Interest Income","","$","1,090","","","$","16,845","","","$","17,935","","","$","55,513","","","$","(7,510",")","","$","48,003"]]
[[/GREPCENT_TABLE]]

(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 $2.62 billion for the year ended December 31, 2022 compared to $2.63 billion for the same period of 2021, a $16.9 million decrease. Growth in average balances of loans held for investment, excluding PPP loans, was $369.0 million for 2022, partially attributable to the Company's investment in its government guaranteed, middle market, and specialized lending teams, which drove approximately 30% of this growth. This growth was partially offset by lower average balances of PPP loans in the 2022 period ($18.2 million) compared to the 2021 period ($351.2 million). Total interest income (on a taxable equivalent basis) increased by $24.0 million to $127.6 million for the year ended December 31, 2022 compared to the same period of 2021. This increase was primarily due to higher average balances of and yields on loans held for investments, excluding PPP loans, partially offset by lower average balances of PPP loans. Processing fees, net of costs, and interest income earned by the Company for PPP loans for the years ended December 31, 2022 and 2021 were $535 thousand and $17.3 million, respectively. Interest income in 2022 and 2021 included accretion of fair value adjustments (discounts) on acquired loans of $7.4 million and $2.0 million, respectively.

Average interest-bearing liabilities were $1.70 billion for the year ended December 31, 2022 compared to $1.89 billion for the same period of 2021, a $185.5 million decrease. Most of this decrease was attributable to lower average balances of Federal Reserve Bank of Richmond ("FRB") and FHLB borrowings and time deposits, partially offset by higher average balances of non-maturity interest-bearing deposits. Interest expense increased by $6.0 million to $17.1 million for the year ended December 31, 2022 compared to 2021. Higher interest expense was primarily attributable to higher rates paid on interest-bearing liabilities (except for subordinated notes), particularly deposits related to the Bank's fintech relationships, due

38

to significant increases in market interest rates throughout 2022. The interest rate for the majority of the fintech-related accounts are index-priced, with the index being the federal funds rate. The cost of average interest-bearing liabilities increased to 1.00% in 2022 from 0.59% in 2021, while the cost of funds increased to 0.68% in 2022 from 0.43% in 2021. Interest expense in the 2022 and 2021 periods included the amortization of fair value adjustments (premium) on assumed time deposits of $1.5 million and $3.2 million, respectively, which was a reduction to interest expense.

Net interest income (on a taxable equivalent basis) was $110.5 million for the year ended December 31, 2022 compared to $92.5 million for the year ended December 31, 2021, while net interest margin was 4.22% and 3.51% for the same respective periods. The increase in net interest income in 2022 was primarily due to significant loan growth, higher loan and other interest-earning asset yields, a positive shift in the mix of interest-earning assets, and favorable purchase accounting adjustments, partially offset by higher funding costs and lower PPP-related income. The Company anticipates that net interest income and net interest margin will be negatively affected if funding costs continue to rise in 2023.

Provision for Loan Losses. The provision for loan losses was $17.9 million for the year ended December 31, 2022 compared to $117 thousand for the year ended December 31, 2021, an increase of $17.8 million. The increase in the provision for loan losses during 2022 was primarily due to reserves for loan growth, excluding PPP loans, of $621.9 million, qualitative loss factor adjustments, primarily due to changes in economic conditions, and higher specific reserves for impaired loans.

Noninterest Income. The following table provides detail for noninterest income and changes for the periods stated.

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["(Dollars in thousands)","","2022","","","2021","","","Change $","","","Change %"],["Fair value adjustments of other equity investments","","$","9,306","","","$","7,316","","","$","1,990","","","","27.20","%"],["Gain on sale of Paycheck Protection Program loans","","","\u2014","","","","24,315","","","","(24,315",")","","","(100.00","%)"],["Residential mortgage banking income, net","","","12,609","","","","28,624","","","","(16,015",")","","","(55.95","%)"],["Mortgage servicing rights","","","8,038","","","","8,398","","","","(360",")","","","(4.29","%)"],["Gain on termination of interest rate swaps","","","\u2014","","","","6,221","","","","(6,221",")","","","(100.00","%)"],["Gain on sale of guaranteed government loans","","","4,734","","","","2,005","","","","2,729","","","","136.11","%"],["Wealth and trust management","","","1,769","","","","2,373","","","","(604",")","","","(25.45","%)"],["Service charges on deposit accounts","","","1,289","","","","1,464","","","","(175",")","","","(11.95","%)"],["Increase in cash surrender value of bank owned life insurance","","","1,348","","","","932","","","","416","","","","44.64","%"],["Bank and purchase card, net","","","2,240","","","","1,805","","","","435","","","","24.10","%"],["Other","","","6,759","","","","3,535","","","","3,224","","","","91.20","%"],["Total noninterest income","","$","48,092","","","$","86,988","","","$","(38,896",")","","","(44.71","%)"]]
[[/GREPCENT_TABLE]]

The Company’s primary noninterest income sources include residential mortgage banking income, which includes gains on sales of mortgages, mortgage servicing income, gains on the sale of government guaranteed loans, and wealth and trust management fees. Noninterest income totaled $48.1 million and $87.0 million for the years ended December 31, 2022 and 2021, respectively. The lower noninterest income in 2022 compared to 2021 was primarily attributable to lower residential mortgage banking income, which was driven by lower mortgage volumes in the 2022 period ($404.7 million) compared to the 2021 period ($1.18 billion) as a result of significant increases in market interest rates throughout 2022. Also contributing to the decline in noninterest income was a $24.3 million gain on the sale of PPP loans and a $6.2 million gain on the termination of interest rate swaps that hedged interest rates on certain FHLB advances, both of which were 2021 transactions. Fair value adjustments attributable to certain other equity investments, primarily direct investments in fintech companies, were $9.3 million and $7.3 million in the 2022 and 2021 periods, respectively.

39

Noninterest Expense. The following table provides detail for noninterest expense and changes for the periods stated.

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["(Dollars in thousands)","","2022","","","2021","","","Change $","","","Change %"],["Salaries and employee benefits","","$","56,006","","","$","61,481","","","$","(5,475",")","","","(8.91","%)"],["Occupancy and equipment","","","5,916","","","","6,413","","","","(497",")","","","(7.75","%)"],["Data processing","","","4,593","","","","4,233","","","","360","","","","8.50","%"],["Legal and regulatory filing","","","3,004","","","","1,736","","","","1,268","","","","73.04","%"],["Advertising and marketing","","","1,460","","","","1,364","","","","96","","","","7.04","%"],["Communications","","","3,825","","","","2,810","","","","1,015","","","","36.12","%"],["Audit and accounting fees","","","1,304","","","","902","","","","402","","","","44.57","%"],["FDIC insurance","","","1,340","","","","1,014","","","","326","","","","32.15","%"],["Intangible amortization","","","1,525","","","","1,671","","","","(146",")","","","(8.74","%)"],["Other contractual services","","","3,137","","","","2,783","","","","354","","","","12.72","%"],["Other taxes and assessments","","","2,668","","","","2,607","","","","61","","","","2.34","%"],["Regulatory remediation","","","7,442","","","","\u2014","","","","7,442","","","","100.00","%"],["Merger-related","","","50","","","","11,868","","","","(11,818",")","","","(99.58","%)"],["Other","","","12,506","","","","12,106","","","","400","","","","3.30","%"],["Total noninterest expense","","$","104,776","","","$","110,988","","","$","(6,212",")","","","(5.60","%)"]]
[[/GREPCENT_TABLE]]

Noninterest expense totaled $104.8 million and $111.0 million for the years ended December 31, 2022 and 2021, respectively. Regulatory remediation expenses incurred in 2022 consisted primarily of consulting and legal fees associated with the Written Agreement. Excluding merger-related and regulatory remediation expenses, noninterest expense decreased $1.8 million for the year ended December 31, 2022 compared to the same period in 2021. Lower noninterest expense for the 2022 period was primarily attributable to lower salaries and employee benefit expenses in the Company's mortgage division due to reduced headcount and lower commissions, partially offset by salaries and employee benefits and other expenses related to the addition of commercial lenders and support personnel, primarily in the Company's government guaranteed, middle market, and specialized lending teams, and personnel to support the fintech business. The increase in legal and regulatory filing expenses in 2022 was primarily related to legal costs incurred for loan origination and on corporate, employee benefit plans and other employment matters.

Income Tax Expense. For the year ended December 31, 2022, provision for income taxes was $8.3 million (effective tax rate of 23.0%) compared to $15.7 million (effective tax rate of 23.0%) for the same period of 2021.

Analysis of Financial Condition

Loan Portfolio. The Company makes loans to individuals as well as to commercial entities. Specific loan terms vary as to interest rate and repayment and collateral requirements based on the type of loan requested and the creditworthiness of the prospective borrower. Credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by the Bank. All loans are underwritten within specific lending policy guidelines that are designed to maximize the Company’s profitability within an acceptable level of credit and business risk.

40

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.

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2022","","","2021"],["(Dollars in thousands)","","Amount","","","Percent","","","Amount","","","Percent"],["Commercial and industrial","","$","590,049","","","","24.4","%","","$","320,827","","","","17.7","%"],["Paycheck Protection Program","","","11,967","","","","0.5","%","","","30,742","","","","1.7","%"],["Real estate \u2013 construction, commercial","","","183,301","","","","7.6","%","","","146,523","","","","8.1","%"],["Real estate \u2013 construction, residential","","","76,599","","","","3.2","%","","","58,857","","","","3.3","%"],["Real estate \u2013 mortgage, commercial","","","864,989","","","","35.8","%","","","701,503","","","","38.8","%"],["Real estate \u2013 mortgage, residential","","","631,772","","","","26.2","%","","","493,982","","","","27.3","%"],["Real estate \u2013 mortgage, farmland","","","6,599","","","","0.3","%","","","6,173","","","","0.3","%"],["Consumer","","","47,423","","","","2.0","%","","","49,877","","","","2.8","%"],["Gross loans","","","2,412,699","","","","100.0","%","","","1,808,484","","","","100.0","%"],["Less: deferred loan fees, net of costs","","","(1,640",")","","","","","","(906",")"],["Gross loans, net of deferred loan fees","","","2,411,059","","","","","","","1,807,578"],["Less: Allowance for loan losses","","","(22,939",")","","","","","","(12,121",")"],["Net loans","","$","2,388,120","","","","","","$","1,795,457"],["Loans held for sale (not included in totals above)","","$","69,534","","","","","","$","121,943"]]
[[/GREPCENT_TABLE]]

41

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, 2022.

[[GREPCENT_TABLE]]
[["","","","","","","","","Variable rate","","","Fixed rate"],["(Dollars in thousands)","","Total Maturities","","","One Year or Less","","","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","","$","590,049","","","$","126,390","","","$","218,423","","","$","178,193","","","$","37,292","","","$","2,938","","","$","245,236","","","$","125,642","","","$","94,471","","","$","25,123"],["Paycheck Protection Program","","","11,967","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","11,967","","","","11,967","","","","\u2014","","","","\u2014"],["Real estate \u2013 construction, commercial","","","183,301","","","","47,658","","","","93,144","","","","59,449","","","","9,845","","","","23,850","","","","42,499","","","","40,063","","","","2,429","","","","7"],["Real estate \u2013 construction, residential","","","76,599","","","","25,969","","","","2,560","","","","655","","","","\u2014","","","","1,905","","","","48,070","","","","1,581","","","","3,121","","","","43,368"],["Real estate \u2013 mortgage, commercial","","","864,989","","","","22,704","","","","461,289","","","","68,670","","","","213,472","","","","179,147","","","","380,996","","","","195,934","","","","159,521","","","","25,541"],["Real estate \u2013 mortgage, residential","","","631,772","","","","22,519","","","","342,318","","","","13,377","","","","73,255","","","","255,686","","","","266,935","","","","39,186","","","","44,849","","","","182,900"],["Real estate \u2013 mortgage, farmland","","","6,599","","","","683","","","","1,786","","","","91","","","","261","","","","1,434","","","","4,130","","","","2,474","","","","907","","","","749"],["Consumer","","","47,423","","","","5,418","","","","4,726","","","","4,560","","","","166","","","","\u2014","","","","37,279","","","","23,650","","","","13,565","","","","64"],["Gross loans","","$","2,412,699","","","$","251,341","","","$","1,124,246","","","$","324,995","","","$","334,291","","","$","464,960","","","$","1,037,112","","","$","440,497","","","$","318,863","","","$","277,752"]]
[[/GREPCENT_TABLE]]

42

The following table presents a summary of the activity in the Company's allowance for loan losses and the ratio of net charge-offs to average loans outstanding for the periods stated.

[[GREPCENT_TABLE]]
[["","","For the years ended December 31,"],["(Dollars in thousands)","","2022","","","2021"],["Allowance, beginning of period","","$","12,121","","","$","13,827"],["Charge-offs"],["Commercial and industrial","","$","(4,779",")","","$","(1,098",")"],["Real estate \u2013 construction","","","(162",")","","","(195",")"],["Real estate \u2013 mortgage","","","(1,824",")","","","(125",")"],["Consumer","","","(1,686",")","","","(1,123",")"],["Total charge-offs","","","(8,451",")","","","(2,541",")"],["Recoveries"],["Commercial and industrial","","","442","","","","196"],["Real estate \u2013 construction","","","40","","","","\u2014"],["Real estate \u2013 mortgage","","","409","","","","98"],["Consumer","","","492","","","","424"],["Total recoveries","","","1,383","","","","718"],["Net charge-offs","","","(7,068",")","","","(1,823",")"],["Provision for loan losses","","","17,886","","","","117"],["Allowance, end of period","","$","22,939","","","$","12,121"],["Ratio of net charge-offs to average loans outstanding during period:"],["Commercial and industrial","","","0.98","%","","","0.32","%"],["Real estate \u2013 construction","","","0.06","%","","","0.10","%"],["Real estate \u2013 mortgage","","","0.11","%","","","0.00","%"],["Consumer","","","1.04","%","","","0.32","%"],["Total loans","","","0.34","%","","","0.10","%"]]
[[/GREPCENT_TABLE]]

The $3.7 million and $1.7 million increase in 2022 in commercial and industrial loan and real estate - mortgage charge-offs, respectively, was primarily due to charge-offs of loans to a single borrower. The Company does not anticipate any additional charge-offs attributable to this borrower in future periods.

Management believes that the Company's allowance for loan losses was adequate as of December 31, 2022. There can be no assurance that adjustments to the allowance for loan losses 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; or changes in the circumstances of particular borrowers are criteria that could require adjustments to the provision for loan losses. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to record additions to the allowance for loan losses based on their judgments of information available to them at the time of their examination.

The allowance for loan losses includes specific and general components applicable to all loan categories; however, management has allocated the allowance 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.

43

The following presents the allocation of the allowance for loan losses by loan category and the percentage of loans in each category to total loans as of the dates stated.

[[GREPCENT_TABLE]]
[["","","December 31,"],["(Dollars in thousands)","","2022","","","% of Loans","","","2021","","","% of Loans"],["Commercial and industrial","","$","15,272","","","","24.4","%","","$","2,859","","","","17.7","%"],["Paycheck Protection Program","","","\u2014","","","","0.5","%","","","\u2014","","","","1.7","%"],["Real estate \u2013 construction, commercial","","","1,637","","","","7.6","%","","","895","","","","8.1","%"],["Real estate \u2013 construction, residential","","","628","","","","3.2","%","","","21","","","","3.3","%"],["Real estate \u2013 mortgage, commercial","","","2,356","","","","35.8","%","","","4,294","","","","38.8","%"],["Real estate \u2013 mortgage, residential","","","1,760","","","","26.2","%","","","1,493","","","","27.3","%"],["Real estate \u2013 mortgage, farmland","","","4","","","","0.3","%","","","18","","","","0.3","%"],["Consumer","","","1,282","","","","2.0","%","","","2,541","","","","2.8","%"],["","","$","22,939","","","","100.0","%","","$","12,121","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

The Company does not carry an allowance for loan losses on PPP loans as they are fully guaranteed by the U.S. government. In future periods, the Company may be required to establish an allowance for loan losses for these loans, which would result in a provision for loan losses charged to earnings.

Nonperforming Assets. The following table presents a summary of nonperforming assets and various measures as of the dates stated.

[[GREPCENT_TABLE]]
[["","","December 31,"],["(Dollars in thousands)","","2022","","","2021"],["Nonaccrual loans (1)","","$","10,324","","","$","15,177"],["Loans past due 90 days and still accruing (1)","","","8,260","","","","917"],["Total nonperforming loans","","$","18,584","","","$","16,094"],["Other real estate owned","","","195","","","","157"],["Total nonperforming assets","","$","18,779","","","$","16,251"],["Allowance for loan losses","","$","22,939","","","$","12,121"],["Loans held for investment, including PPP loans","","$","2,411,059","","","$","1,807,578"],["Loans held for investment, excluding PPP loans","","$","2,399,092","","","$","1,777,172"],["Total assets","","$","3,141,045","","","$","2,665,139"],["Allowance for loan losses to total loans held for investment, including PPP loans","","","0.95","%","","","0.67","%"],["Allowance for loan losses to total loans held for investment, excluding PPP loans","","","0.96","%","","","0.68","%"],["Allowance for loan losses to nonaccrual loans","","","222.19","%","","","79.86","%"],["Allowance for loan losses to nonperforming loans","","","123.43","%","","","75.31","%"],["Nonaccrual loans to total loans held for investment, including PPP loans","","","0.43","%","","","0.84","%"],["Nonaccrual loans to total loans held for investment, excluding PPP loans","","","0.43","%","","","0.85","%"],["Nonperforming loans to total loans held for investment, including PPP loans","","","0.77","%","","","0.89","%"],["Nonperforming loans to total loans held for investment, excluding PPP loans","","","0.77","%","","","0.91","%"],["Nonperforming assets to total assets","","","0.60","%","","","0.61","%"],["(1) Excluding PCI loans and accruing TDRs"]]
[[/GREPCENT_TABLE]]

The $7.3 million increase in loans past due 90 days and still accruing in 2022 was primarily attributable to a matured $6.2 million commercial real estate loan that was in the process of being extended as of December 31, 2022. It was well-secured and in the process of collection as of the same date. The Company anticipates that this loan will be renewed in the first quarter of 2023 and it will collect all contractually owed principal and interest up to and through the sale of the underlying collateral.

The increases in the above allowance for loan losses ratios in 2022 was primarily due to reserve needs for commercial and industrial loans, which are generally riskier than loans secured by real estate, and higher qualitative loss factor adjustments, primarily due to changes in economic conditions. During 2022, the Company added a team of commercial lenders that focus on relationships lending to middle market borrowers. Loans to these borrowers are generally larger and may be secured by cash flows and/or other assets of the business.

Loans are placed in nonaccrual status when in the opinion of management the collection of additional interest is unlikely or a specific loan meets the criteria for nonaccrual status established by regulatory authorities, generally 90 days or more past

44

due. Any unpaid interest previously accrued on those loans is reversed from income in the period in which the loan's status changes to nonaccrual. No interest income is recognized on loans in nonaccrual status and any payments received for interest reduce the recorded investment of the respective loan. Generally, a loan remains on nonaccrual status until the loan is current as to both principal and interest or the borrower demonstrates the ability to pay and remain current, or both.

OREO 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 carrying value. In subsequent periods, such properties are stated at the lower of the restated carrying value or fair value.

Impaired loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. The Company had 11 TDRs in the amount of $1.1 million as of December 31, 2022 and eight TDRs in the amount of $688 thousand as of December 31, 2021.

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 for loan demand, for general 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 $354.3 million at December 31, 2022, a decrease of $19.2 million from $373.5 million at December 31, 2021. Primarily as a result of a significant increase in market interest rates in the year ended December 31, 2022, the Company’s portfolio of securities available for sale had a net unrealized loss of approximately $58.8 million in the same period. A significant portion of the unrealized loss in the portfolio at December 31, 2022 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 held to maturity as of December 31, 2022 or December 31, 2021.

As of December 31, 2022 and 2021, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. 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. The fair value of investment securities that were pledged to secure public deposits totaled $0 and $8.7 million as of December 31, 2022 and December 31, 2021, respectively. At December 31, 2022 and 2021, securities with a fair value of $241.9 million and $23.1 million, respectively, were pledged to secure the Bank's borrowing facility with the FHLB.

The Company reviews for other-than-temporary impairment of its investment portfolio at least quarterly. At December 31, 2022 and 2021, the majority of securities in an unrealized loss position were of investment grade; however, a few did not have a third-party investment grade available. These ungraded 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 MBS 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 temporarily impaired securities prior to the recovery of the amortized cost. No other-than-temporary impairment was recognized for the securities in the Company’s investment portfolio as of and for the years ended December 31, 2022 and 2021.

Restricted equity investments consisted of stock in the FHLB (carrying basis $14.7 million and $1.7 million at December 31, 2022 and 2021, respectively), FRB stock (carrying basis of $6.1 million at both December 31, 2022 and 2021), and stock in the Company’s correspondent bank (carrying basis of $468 thousand at both December 31, 2022 and 2021). Restricted equity investments are carried at cost. The Company holds various other equity investments, including shares in other financial institutions and fintech companies, totaling $23.8 million and $14.2 million as of December 31, 2022 and 2021, respectively, which are carried at fair value with any gain or loss reported in the consolidated statements of operations each reporting period.

45

The following table presents the composition of the Company’s available for sale securities portfolio, at amortized cost, as of the dates stated.

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2022","","","2021"],["(Dollars in thousands)","","Balance","","","Percent of total","","","Balance","","","Percent of total"],["Securities available for sale"],["State and municipal","","$","60,018","","","","14.5","%","","$","51,341","","","","13.6","%"],["U. S. Treasury and agencies","","","80,073","","","","19.4","%","","","65,680","","","","17.3","%"],["Mortgage backed securities","","","230,015","","","","55.7","%","","","222,968","","","","58.9","%"],["Corporate bonds","","","42,909","","","","10.4","%","","","38,752","","","","10.2","%"],["Total","","$","413,015","","","","100.0","%","","$","378,741","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

46

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 and for the period 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.

[[GREPCENT_TABLE]]
[["","","December 31, 2022"],["","","Within One Year","","","One to Five Years","","","Five to Ten Years","","","Over Ten Years"],["(Dollars in thousands)","","Amortized Cost","","","Weighted Average Yield","","","Amortized Cost","","","Weighted Average Yield","","","Amortized Cost","","","Weighted Average Yield","","","Amortized Cost","","","Weighted Average Yield","","","Total Amortized Cost"],["Securities available for sale"],["State and municipal","","$","502","","","","1.04","%","","$","4,146","","","","2.40","%","","$","30,940","","","","1.89","%","","$","24,430","","","","2.34","%","","$","60,018"],["U. S. Treasury and agencies","","","\u2014","","","","\u2014","","","","17,486","","","","0.97","%","","","51,627","","","","1.80","%","","","10,960","","","","2.23","%","","","80,073"],["Mortgage backed securities","","","2,894","","","","(0.09","%)","","","3,133","","","","0.51","%","","","19,313","","","","2.23","%","","","204,675","","","","1.91","%","","","230,015"],["Corporate bonds","","","1,500","","","","5.58","%","","","6,000","","","","6.57","%","","","34,908","","","","4.62","%","","","501","","","","4.00","%","","","42,909"],["Total","","$","4,896","","","","","","$","30,765","","","","","","$","136,788","","","","","","$","240,566","","","","","","$","413,015"]]
[[/GREPCENT_TABLE]]

47

Deposits. The principal sources of funds for the Company are core deposits, which include transaction accounts (demand deposits and money market accounts), time deposits, and savings accounts, all of which provide the Bank a source of fee income and cross-marketing opportunities. Core deposits are generally a low-cost source of funding for the Bank and are preferred to brokered deposits. The Company's fintech partnerships have been a significant source of deposits and comprised approximately $690 million (or 27.6%) of the Company's deposits as of December 31, 2022 compared to approximately $189 million (or 8.2%) as of December 31, 2021.

The following table presents the composition of deposits as of the dates stated.

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2022","","","2021"],["(Dollars in thousands)","","Amount","","","% of Total Deposits","","","Amount","","","% of Total Deposits"],["Noninterest-bearing demand","","$","640,101","","","","25.6","%","","$","685,801","","","","29.8","%"],["Interest-bearing demand and money market deposits","","","1,318,799","","","","52.7","%","","","962,092","","","","41.9","%"],["Savings","","","151,646","","","","6.1","%","","","150,376","","","","6.5","%"],["Time deposits","","","391,961","","","","15.6","%","","","499,502","","","","21.8","%"],["Total deposits","","$","2,502,507","","","","100.0","%","","$","2,297,771","","","","100.0","%"]]
[[/GREPCENT_TABLE]]

Total deposits include uninsured deposits of $1.14 billion and $680.4 million as of December 31, 2022 and 2021, respectively. Uninsured deposit amounts are based on estimates as of the reported date.

Brokered deposits comprising both time deposits and money market accounts totaled $49.5 million and $62.1 million as of December 31, 2022 and 2021, respectively.

Approximately 15.6% of the Company’s deposits as of December 31, 2022 were comprised of time deposits, which are generally the most expensive form of deposit because of their fixed rate and term, compared to 21.8% as of December 31, 2021. Noninterest-bearing demand deposits, which represented 25.6% and 29.8% of total deposits as of December 31, 2022 and 2021, respectively, are generally viewed as the most favorable form of deposit for financial institutions.

The following table presents a summary of average deposits and the weighted average rate paid for the periods stated.

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["","","2022","","","2021"],["(Dollars in thousands)","","Average Balance","","","Rate","","","Average Balance","","","Rate"],["Noninterest-bearing demand deposits","","$","821,208","","","","\u2014","","","$","658,063","","","","\u2014"],["Interest-bearing deposits:"],["Demand deposits","","","567,897","","","","0.93","%","","","262,679","","","","0.27","%"],["Savings","","","150,947","","","","0.32","%","","","144,151","","","","0.16","%"],["Money market deposits","","","412,874","","","","0.45","%","","","501,588","","","","0.26","%"],["Time deposits","","","412,671","","","","0.88","%","","","540,471","","","","0.78","%"],["Total interest-bearing deposits","","","1,544,389","","","","","","","1,448,889"],["Total average deposits","","$","2,365,597","","","","","","$","2,106,952"]]
[[/GREPCENT_TABLE]]

The following table presents maturities of time deposits for certificate of deposits $250 thousand or greater as of the dates stated.

[[GREPCENT_TABLE]]
[["","","December 31,"],["(Dollars in thousands)","","2022","","","2021"],["Maturing in:"],["3 months or less","","$","10,642","","","$","30,943"],["Over 3 months through 6 months","","","14,699","","","","47,818"],["Over 6 months through 12 months","","","15,423","","","","14,213"],["Over 12 months","","","35,075","","","","51,868"],["","","$","75,839","","","$","144,842"]]
[[/GREPCENT_TABLE]]

48

Borrowings. The Company uses short-term and long-term borrowings from various sources, including FHLB advances and FRB advances, to fund asset growth and operations. The following table presents information on the balances and interest rates on borrowings as of and for periods stated.

[[GREPCENT_TABLE]]
[["","","December 31, 2022"],["(Dollars in thousands)","","Period-End Balance","","","Highest Month-End Balance","","","Average Balance","","","Weighted Average Rate"],["FHLB borrowings","","$","311,700","","","$","311,700","","","$","113,478","","","","3.08","%"],["FRB borrowings","","","51","","","","17,197","","","","4,881","","","","2.34","%"],["","","December 31, 2021"],["(Dollars in thousands)","","Period-End Balance","","","Highest Month-End Balance","","","Average Balance","","","Weighted Average Rate"],["FHLB borrowings","","$","10,111","","","$","220,000","","","$","147,919","","","","0.82","%"],["FRB borrowings","","","17,901","","","","632,540","","","","245,196","","","","0.32","%"]]
[[/GREPCENT_TABLE]]

FHLB advances are secured by collateral consisting of a blanket lien on qualifying loans in the Company’s residential, multifamily, and commercial real estate mortgage loan portfolios, as well as selected investment portfolio securities. FRB borrowings in the 2022 and 2021 periods consist exclusively of PPPLF advances secured by PPP loans.

Subordinated notes, net, totaled $39.9 million as of December 31, 2022 and $40.0 million as of December 31, 2021.

Liquidity. Liquidity in the banking industry is defined as the ability to meet the demand for funds of both depositors and borrowers. The Company must be able to meet these needs by obtaining funding from depositors or other lenders or by converting non-cash items into cash. Stable core deposits and a strong capital position provide the base for the Company’s liquidity position. The objective of the Company’s liquidity management program is to ensure that it has sufficient resources to meet the demands of depositors and borrowers. Management believes the Company has demonstrated its ability to attract deposits through its branch network, personal service, technology, and pricing. Cash flows from amortizing or maturing assets (loans and securities) also provide funding to meet the needs of depositors and borrowers. A significant source of the Company's liquidity is deposits sourced through fintech partnerships. The Bank enters into agreements with its fintech partners and continually monitors these relationships. Management believes any changes in deposit balances can be effectively controlled and replacement funds, if necessary, can be managed. Having diverse funding alternatives reduces the Company’s reliance on any one source for funding.

The Company maintains secured lines of credit with the FHLB under which the Bank can borrow up to the allowable amount for the collateral pledged. The FHLB may provide a credit line of up to 30% of the Bank’s asset value as of the prior quarter-end, subject to certain eligibility requirements, and loan and/or securities pledged as collateral. The Bank's line of credit with the FHLB was $525.0 million as of December 31, 2022, with available credit of $128.3 million as of the same date. Outstanding advances drawn on this line totaled $311.7 million and letters of credit pledged for the purpose of collateral for public deposits with the Treasury Board of the Commonwealth of Virginia, which also reduce the available credit balance, totaled $85.1 million as of December 31, 2022. The Company continually reviews its loan portfolio for additional qualifying collateral.

The Bank had unsecured federal fund lines available with correspondent banks for overnight borrowing totaling $28.0 million and $44.0 million at December 31, 2022 and 2021, respectively. These lines bear interest at the prevailing rate for such lines and are cancellable at any time by the correspondent banks. These lines were not drawn upon at December 31, 2022 or 2021.

In addition to deposits and federal funds lines, the Company has access to various wholesale funding markets. These markets include the brokered certificate of deposit market, and listing service deposit market. The Bank is a member of the IntraFi Network, which allows banking customers to access FDIC insurance protection through the Bank on deposits that exceed FDIC insurance limits. The Bank has one-way authority with IntraFi for both its Certificate of Deposit Account Registry Service and Insured Cash Swap Service products, providing the Bank with the ability to access additional wholesale funding as needed.

The Company’s liquidity could be impaired by an inability to access the capital markets or by unforeseen outflows of cash, including deposits. This situation may arise due to circumstances that the Company may be unable to control, such as general market disruption, negative views about the financial services industry generally, or an operational problem that

49

affects a third party or the Company. The Company’s ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events. The Company has established a formal liquidity contingency plan, which provides guidelines for liquidity management. For the Company’s liquidity management program, the current liquidity position is determined and then forecasted based on anticipated changes in the balance sheet. In this forecast, the Company expects to maintain a liquidity cushion. The Company then stresses its liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushions and under each stress scenario have been established by policies approved by the board of directors. Management believes the Company has sufficient resources to meet its liquidity needs.

Capital. Capital adequacy is an important measure of financial stability and performance. Management's objectives are to maintain a level of capitalization that is sufficient for the Bank to be categorized as "well capitalized" for regulatory purposes, to sustain asset growth, and promote depositor and investor confidence.

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.

The Basel III Capital Rules were phased-in over a multi-year schedule and were fully phased-in on January 1, 2019. Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios of 2.50% 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. As of December 31, 2022, the Bank met all capital adequacy requirement to which it is subject.

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. At December 31, 2022, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework. There are no conditions or events since that notification that management believes have changed the institution's category.

On September 17, 2019, the federal banking agencies jointly issued a final rule required by the EGRRCPA that permits qualifying banks and bank holding companies that have less than $10 billion in consolidated assets to elect to be subject to the CBLR. Under the rule, which became effective on January 1, 2020, banks and bank holding companies that opt into the CBLR framework and maintain a CBLR of greater than 9% are not subject to other risk-based and leverage capital requirements under the Basel III Capital Rules and would be deemed to have met the well capitalized ratio requirements under the “prompt corrective action” framework. The Company has not opted into the CBLR framework.

As previously noted, the Company will adopt 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 to retained earnings ("Day 1 CECL adjustment") over a three-year period. The three-year phase-in of the Day 1 CECL adjustment to regulatory capital will be 25%, 50%, and 25% in 2023, 2024, and 2025, respectively. The Bank plans to make this irrevocable election effective with its first quarter 2023 call report. See “Recent Accounting Pronouncements” in Note 2 of the Company’s audited financial statements as of and for the year ended December 31, 2022 for additional information.

50

The following tables present the capital and capital ratios to which the Bank is subject and the amounts and ratios to be adequately and well capitalized for the dates stated. Adequately capitalized ratios include the conversation buffer.

[[GREPCENT_TABLE]]
[["","","As of December 31, 2022"],["","","Actual","","","For Capital Adequacy Purposes","","","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.","","$","303,876","","","","11.15","%","","$","286,161","","","","10.50","%","","$","272,535","","","","10.00","%"],["Tier 1 capital"],["(To risk-weighted assets)"],["Blue Ridge Bank, N.A.","","$","279,125","","","","10.25","%","","$","231,470","","","","8.50","%","","$","217,854","","","","8.00","%"],["Common equity tier 1 capital"],["(To risk-weighted assets)"],["Blue Ridge Bank, N.A.","","$","279,125","","","","10.25","%","","$","190,622","","","","7.00","%","","$","177,006","","","","6.50","%"],["Tier 1 leverage"],["(To average assets)"],["Blue Ridge Bank, N.A.","","$","279,125","","","","9.25","%","","$","120,703","","","","4.00","%","","$","150,878","","","","5.00","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","As of December 31, 2021"],["","","Actual","","","For Capital Adequacy Purposes","","","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.","","$","273,978","","","","13.11","%","","$","219,393","","","","10.50","%","","$","208,946","","","","10.00","%"],["Tier 1 capital"],["(To risk-weighted assets)"],["Blue Ridge Bank, N.A.","","$","260,896","","","","12.49","%","","$","177,604","","","","8.50","%","","$","167,157","","","","8.00","%"],["Common equity tier 1 capital"],["(To risk-weighted assets)"],["Blue Ridge Bank, N.A.","","$","260,896","","","","12.49","%","","$","146,262","","","","7.00","%","","$","135,815","","","","6.50","%"],["Tier 1 leverage"],["(To average assets)"],["Blue Ridge Bank, N.A.","","$","260,896","","","","10.05","%","","$","103,883","","","","4.00","%","","$","129,853","","","","5.00","%"]]
[[/GREPCENT_TABLE]]

51

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. As of December 31, 2022 and December 31, 2021, the Company had outstanding loan commitments of $719.2 million and $475.1 million, respectively. Of these amounts, $107.9 million and $88.1 million were unconditionally cancellable at the sole discretion of the Company as of the same respective dates.

Conditional commitments are issued by the Company in the form of performance stand-by letters of credit, which guarantee the performance of a customer to a third party. As of December 31, 2022 and 2021, commitments under outstanding performance stand-by letters of credit totaled $0 and $655 thousand, respectively. Additionally, the Company issues 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, 2022 and 2021, commitments under outstanding financial stand-by letters of credit totaled $29.8 million and $4.5 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.

The Company invests in various partnerships, limited liability companies, and small business investment company funds. Pursuant to these investments, the Company commits to an investment amount that may be fulfilled in future periods. At December 31, 2022, the Company had future commitments outstanding totaling $19.0 million 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 maturities of interest-earning assets and interest-bearing liabilities, changes in the expected maturities 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 an asset and liability committee comprised of members of its board of directors and management (the “ALCO”). The ALCO is responsible for monitoring the Company’s interest rate risk in conjunction with liquidity and capital management.

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 interest checking, money market checking, 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 300 basis points and up 100 basis points to 300 basis points. The results of these simulations are then compared to the base case.

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The following table illustrates the expected effect on net interest income for year one and year two following December 31, 2022 due to an immediate change ("instantaneous parallel rate shock" scenario) in interest rates at various degrees of change. Estimated changes set forth below are dependent on material assumptions, such as those previously discussed.

[[GREPCENT_TABLE]]
[["","","December 31, 2022"],["","","Instantaneous Parallel Rate Shock Scenario"],["","","Change in Net Interest Income - Year 1","","","Change in Net Interest Income - Year 2"],["Change in interest rates:"],["+300 basis points","","$","(14,509",")","","","(12.2","%)","","$","(12,436",")","","","(9.7","%)"],["+200 basis points","","","(8,790",")","","","(7.4","%)","","","(7,179",")","","","(5.6","%)"],["+100 basis points","","","(3,912",")","","","(3.3","%)","","","(2,939",")","","","(2.3","%)"],["Base case"],["-100 basis points","","","1,958","","","","1.6","%","","","115","","","","0.1","%"],["-200 basis points","","","3,232","","","","2.7","%","","","(1,480",")","","","(1.1","%)"],["-300 basis points","","","4,147","","","","3.5","%","","","(4,122",")","","","(3.2","%)"]]
[[/GREPCENT_TABLE]]

The severity of the effect of instantaneous increases in interest rates as shown above is due to the timing of pricing change in the Company's interest-bearing liabilities compared to its interest-earning assets. A significant portion of the Company's deposits through its fintech partnerships reprice with changes in federal funds rates. Therefore, an instantaneous change in this index rate results in a relative change in deposit costs. The Company contracts with its fintech partners and continually assesses the cost of these fintech-related deposits relative to sources of fees and other noninterest income earned from these partnerships.

Stress testing the balance sheet and net interest income using instantaneous parallel rate shock movements in the yield curve of 100 to 300 basis points 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 asset and liability repricing characteristics of the Company’s assets and liabilities will have a significant impact on its future interest rate risk profile.