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Section 1: DEFM14A (DEFM14A)

DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under § 240.14a-12

BAY BANKS OF VIRGINIA, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO   LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

Dear Fellow Shareholders:

The boards of directors of Blue Ridge Bankshares, Inc. (“Blue Ridge”) and Bay Banks of Virginia, Inc. (“Bay Banks”) have unanimously approved a strategic merger in which Bay Banks will merge with and into Blue Ridge. After the merger, Blue Ridge is expected to have approximately $2.8 billion in assets, $2.0 billion in deposits, and $2.0 billion in loans. We are sending you this document to ask you, as a Blue Ridge and/or Bay Banks shareholder, to approve the merger.

In the merger, each share of Bay Banks common stock will be converted into the right to receive 0.5000 shares of Blue Ridge common stock, plus cash in lieu of any fractional shares. Although the number of shares of Blue Ridge common stock that Bay Banks’ shareholders will receive is fixed, the market value of the merger consideration that Bay Banks shareholders will receive will fluctuate with the market price of Blue Ridge stock and will not be known at the time the Blue Ridge and Bay Banks shareholders vote on the merger. Based on the closing price of $14.45 per share Blue Ridge common stock on August 12, 2020, the date preceding the public announcement of the merger, the merger consideration represented approximately $7.23 in value for each share of Bay Banks common stock, or $96.4 million on an aggregate basis. Based on the closing price of Blue Ridge common stock on December 8, 2020, the last practicable date before the date of this joint proxy statement/prospectus, the merger consideration represented approximately $8.06 in value for each share of Bay Banks common stock, or $107.4 million on an aggregate basis. We urge you to obtain current market quotations for Blue Ridge common stock, which is quoted on the NYSE American (trading symbol BRBS) and Bay Banks common stock, which is quoted on the OTC Markets Groups OTCQB marketplace (trading symbol BAYK).

Based on the current number of shares of Bay Banks common stock outstanding, Blue Ridge expects to issue approximately 6,664,848 shares of common stock in the aggregate upon completion of the merger, with current Blue Ridge shareholders owning approximately 46.2% of Blue Ridge’s outstanding common stock and former shareholders of Bay Banks owning approximately 53.8% of Blue Ridge’s outstanding common stock immediately following the merger.

Your vote is very important. We are holding special meetings of our respective shareholders to obtain approval of the merger agreement and related plan of merger as described in this joint proxy statement/prospectus. Approval of the merger agreement and related plan of merger requires the affirmative vote of the holders of more than two-thirds of the outstanding shares of Blue Ridge common stock and at least 60% of the outstanding shares of Bay Banks common stock.

Due to the ongoing coronavirus (COVID-19) pandemic and in support of the health of our shareholders, directors and employees, the special meetings will be held in a virtual meeting format via online live webcast. Please follow the instructions in this joint proxy statement/prospectus and your proxy card to attend the respective virtual meetings online.

Whether or not you plan to attend the Blue Ridge or Bay Banks special meeting online, it is important that your shares be represented at the applicable meeting and your vote recorded. Please take the time to vote by completing and mailing the enclosed proxy card or by voting via the Internet or telephone using the instructions given on the proxy card. Even if you return the proxy card, you may attend the Blue Ridge or Bay Banks special meeting via the Internet and vote your shares online during the meeting. The boards of directors of Blue Ridge and Bay Banks unanimously recommend that you vote “FOR” approval of the merger agreement and related plan of merger and “FOR” the other matters to be considered at each shareholder meeting.

 

 

This document, which serves as a joint proxy statement for the special meetings of Blue Ridge and Bay Banks, and as a prospectus for the shares of Blue Ridge common stock to be issued to Bay Banks shareholders in the merger, describes the special meetings, the merger, the documents related to the merger and other related matters. Please carefully read this entire joint proxy statement/prospectus, including the information in the “Risk Factors” section beginning on page 31 for a discussion of the risks relating to the proposed merger.

Thank you for your support.

 

LOGO   LOGO
Brian K. Plum   Randal R. Greene
President and Chief Executive Officer   President and Chief Executive Officer
Blue Ridge Bankshares, Inc.   Bay Banks of Virginia, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares of Blue Ridge common stock are not savings or deposit accounts or other obligations of any bank or savings association, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

The date of this joint proxy statement/prospectus is December 11, 2020, and it is first being mailed or otherwise delivered to the shareholders of Blue Ridge and Bay Banks on or about December 14, 2020.


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LOGO

BLUE RIDGE BANKSHARES, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON JANUARY 21, 2021

A special meeting of shareholders of Blue Ridge Bankshares, Inc., a Virginia corporation (“Blue Ridge”), will be held on Thursday, January 21, 2021 at 11:00 a.m., local time, for the purpose of considering and voting upon the following:

 

  1.

A proposal to approve the Agreement and Plan of Reorganization, dated as of August 12, 2020, as amended on November 6, 2020, between Blue Ridge and Bay Banks of Virginia, Inc. (“Bay Banks”), including the related Plan of Merger (together, the “merger agreement”), pursuant to which Bay Banks will merge with and into Blue Ridge, as more fully described in the accompanying joint proxy statement/prospectus (the “Blue Ridge merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus.

 

  2.

A proposal to adjourn the special meeting to a later date or dates, if necessary to solicit additional proxies to approve the Blue Ridge merger proposal (the “Blue Ridge adjournment proposal”).

 

  3.

To act upon any other matter that may properly come before the special meeting or any adjournment thereof.

Only holders of record of Blue Ridge common stock at the close of business on December 8, 2020 will be entitled to notice of and to vote at the special meeting or any adjournment thereof.

Blue Ridge’s board of directors unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal.

Due to the current coronavirus (COVID-19) pandemic and in support of the health of its shareholders, directors and employees, Blue Ridge’s board of directors has determined that the special meeting will be conducted as a virtual meeting of shareholders via online live webcast. You will be able to attend and participate in the special meeting online, vote your shares electronically and submit your questions prior to and during the meeting by visiting www.meetingcenter.io/205738032.

You may vote your shares through the Internet, by telephone, by regular mail, or virtually at the special meeting. If you receive a proxy card, it also contains instructions regarding how to vote through the Internet, by telephone, by regular mail, or virtually at the special meeting. If your shares are held in the name of a broker, trust, bank or other nominee, please follow the instructions on the voting instruction card provided by such person.

You may revoke your proxy at any time prior to or at the meeting by providing written notice to Blue Ridge, by executing a proxy bearing a later date, or by attending the meeting via the Internet and voting during the meeting. If you wish to attend the meeting via the Internet and vote during the meeting and your shares are held in the name of a broker, trust, bank or other nominee, you must register in advance to attend the special meeting virtually via the Internet. Additional instructions are included in this joint proxy statement/prospectus.

 

By Order of the Board of Directors,
LOGO
Amanda G. Story
Corporate Secretary

Charlottesville, Virginia

December 11, 2020


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LOGO

BAY BANKS OF VIRGINIA, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON JANUARY 21, 2021

A special meeting of shareholders of Bay Banks of Virginia, Inc., a Virginia corporation (“Bay Banks”), will be held on Thursday, January 21, 2021, at 10:00 a.m., local time. The special meeting will be held in a virtual meeting format via online live webcast at https://www.cstproxy.com/baybanks/2021. At the meeting, you will be asked to consider and vote upon the following:

 

  1.

A proposal to approve the Agreement and Plan of Reorganization, dated as of August 12, 2020, as amended on November 6, 2020, between Blue Ridge Bankshares, Inc. (“Blue Ridge”) and Bay Banks, including the related Plan of Merger (together, the “merger agreement”), pursuant to which Bay Banks will merge with and into Blue Ridge, as more fully described in the accompanying joint proxy statement/prospectus (the “Bay Banks merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus.

 

  2.

A proposal to approve, on a nonbinding advisory basis, specified compensation that may become payable to the named executive officers of Bay Banks in connection with the merger (the “Bay Banks compensation proposal”).

 

  3.

A proposal to adjourn the special meeting to a later date or dates, if necessary to solicit additional proxies to approve the Bay Banks merger proposal (the “Bay Banks adjournment proposal”).

 

  4.

To act upon any other matter that may properly come before the special meeting or any adjournment thereof.

Only holders of record of Bay Banks common stock at the close of business on November 30, 2020 will be entitled to notice of and to vote at the special meeting or any adjournment thereof.

Bay Banks’ board of directors unanimously recommends that Bay Banks shareholders vote “FOR” the Bay Banks merger proposal, “FOR” the Bay Banks compensation proposal and “FOR” the Bay Banks adjournment proposal.

You are cordially invited to attend the virtual meeting online. To attend and participate in the meeting, visit https://www.cstproxy.com/baybanks/2021 and enter the 12 digit control number included on your proxy card. If you hold your shares through a broker, trust, bank or other nominee and wish to attend the meeting and vote during online during the meeting, you will need to take additional steps to participate in the meeting, as described in this joint proxy statement/prospectus.

Even if you expect to attend the virtual meeting, you are requested to complete, sign, and date the enclosed appointment of proxy and return it in the envelope provided for that purpose to ensure that a quorum is present at the meeting. You may also vote via the Internet, smartphone or tablet by following the instructions on the proxy card. If your shares are held in the name of a broker, trust, bank or other nominee, please follow the instructions on the voting instruction card provided by such person.

You have the right to assert appraisal rights with respect to the merger and demand in writing that Blue Ridge pay the fair value of your shares of Bay Banks common stock under applicable provisions of Virginia law. Any shareholder who wishes to exercise and perfect appraisal rights must strictly comply with the procedures set forth in Article 15 of Title 13.1 of the Virginia Stock Corporation Act, a copy of which is included as Appendix D to the joint proxy statement/prospectus. A description of these procedures is included in the “The Merger—Appraisal Rights” section beginning on page 101.

You may revoke your proxy at any time prior to or at the virtual meeting by providing written notice to Bay Banks, by executing a proxy bearing a later date, or by attending the virtual meeting and voting online during the meeting. If your shares are held through a through a broker, trust, bank or other nominee and you wish to revoke your proxy or change your vote, you should contact that organization.

 

By Order of the Board of Directors,
LOGO
Pamela A. Varnier
Corporate Secretary

Richmond, Virginia

December 11, 2020


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ADDITIONAL INFORMATION

This joint proxy statement/prospectus is part of a registration statement filed by Blue Ridge with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”) that registers the shares of Blue Ridge common stock to be issued to shareholders of Bay Banks in the merger. The registration statement, including the attached exhibits and schedules, contains additional relevant information about Blue Ridge and its common stock, Bay Banks and the combined company. The rules and regulations of the SEC allow Blue Ridge to omit some information included in the registration statement from this joint proxy statement/prospectus.

The SEC maintains a website that contains information about issuers, like Blue Ridge and Bay Banks, that file electronically with the SEC. The address of that site is www.sec.gov. Blue Ridge and Bay Banks are each subject to the informational and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, in accordance with those requirements, files reports and proxy statements with the SEC. You may inspect and obtain copies of these reports and proxy statements and other information on the SEC’s website at the address set forth above.

Blue Ridge’s website is www.mybrb.com and Bay Banks’ website is www.baybanks.com. Blue Ridge and Bay Banks will make available on their respective websites, their respective annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they electronically file such materials with, or furnish them to, the SEC. Neither the information on Blue Ridge’s website nor Bay Banks’ website is a part of, or is incorporated into, this joint proxy statement/prospectus.

Additional information about Blue Ridge may be obtained by contacting Amanda G. Story, Chief Financial Officer, Blue Ridge Bankshares, Inc., 17 West Main Street, Luray, Virginia 22835, at (540) 743-6521, and additional information about Bay Banks may be obtained by contacting Pamela A. Varnier, Corporate Secretary, at Bay Banks of Virginia, Inc., 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226, at (757) 414-9808, ext. 5756. To obtain timely delivery, you must request the information no later than January 13, 2021. In addition, financial information about Blue Ridge Bank and Virginia Commonwealth Bank is available through financial reports that they file with their regulators on a quarterly basis. This information is available through the website maintained by the Federal Financial Institutions Examination Council at http://www.ffiec.gov. The information on, or that can be accessed through, the Federal Financial Institutions Examination Council’s website is not part of, and is not incorporated into, this joint proxy statement/prospectus.

Blue Ridge has supplied all information contained in this joint proxy statement/prospectus relating to Blue Ridge and Blue Ridge Bank, and Bay Banks has supplied all information contained in or incorporated by reference into this joint proxy statement/prospectus relating to Bay Banks and Virginia Commonwealth Bank.

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus relating to the offered securities and the merger. Neither Blue Ridge nor Bay Banks has authorized anyone to provide you with different information. We are not offering to sell the securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information which appears in, or is incorporated by reference to another document into, this joint proxy statement/prospectus is accurate as of any date other than the date of this joint proxy statement/prospectus or the date of such other document, as applicable. The business, financial condition, results of operations and prospects of Blue Ridge or Bay Banks may have changed since that date.

Unless otherwise specified in this joint proxy statement/prospectus or the context otherwise requires:

 

   

references to “Blue Ridge” are to the registrant, Blue Ridge Bankshares, Inc.;

 

   

references to “Blue Ridge Board” are to the board of directors of Blue Ridge;

 

   

references to “Blue Ridge Bank” are to Blue Ridge Bank, National Association, a national bank and a wholly-owned subsidiary of Blue Ridge;

 

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references to “Bay Banks” are to Bay Banks of Virginia, Inc.;

 

   

references to “Bay Banks Board” are to the board of directors of Bay Banks;

 

   

references to “Virginia Commonwealth Bank” are to Virginia Commonwealth Bank, a Virginia chartered bank and a wholly-owned subsidiary of Bay Banks;

 

   

references to “VCB Financial Group” are to VCB Financial Group, Inc., a wholly-owned subsidiary of Bay Banks;

 

   

references to the “merger agreement” are to the Agreement and Plan of Reorganization, dated as of August 12, 2020, between Blue Ridge and Bay Banks, as amended on November 6, 2020, including the related Plan of Merger, a copy of which attached to this joint proxy statement/prospectus as Appendix A;

 

   

references to the “merger” are to the proposed merger of Bay Banks with and into Blue Ridge pursuant to the terms of the merger agreement, as more fully described in the “The Merger” section beginning on page 66; and

 

   

references to the “shareholder meetings” are to the special meeting of shareholders of Blue Ridge and the special meeting of shareholders of Bay Banks, collectively.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows Bay Banks to incorporate certain information into this document by reference to other information that has been filed with the SEC. The information incorporated by reference is deemed to be part of this document, except to the extent any information is superseded by information in this document. The documents that are incorporated by reference contain important information about Bay Banks and you should read this document together with any other documents incorporated by reference in this document.

This document incorporates by reference the following documents that have previously been filed with the SEC by Bay Banks (File No. 0-22955):

 

   

Annual Report on Form 10-K for the year ended December 31, 2019;

 

   

Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June  30, 2020 and September 30, 2020; and

 

   

Current Reports on Form 8-K filed on January 2, 2020, January  29, 2020, June 15, 2020 (two reports), August 13, 2020, August  17, 2020, September  21, 2020 and November 13, 2020.

Bay Banks also incorporates by reference any future documents it may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, excluding any document or portion thereof that has been furnished to the SEC rather than filed, during the period between the filing of the registration statement and its effectiveness.

In addition, Bay Banks is incorporating by reference any documents it may file under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this joint proxy statement/prospectus and prior to the date of the special meetings of the Bay Banks and Blue Ridge shareholders, provided, however, that Bay Banks is not incorporating by reference any information furnished (but not filed), except as otherwise specified herein.

Bay Banks files annual, quarterly and current reports, proxy statements and other business and financial information with the SEC. You may obtain the information incorporated by reference and any other materials Bay Banks files with the SEC without charge by following the instructions in the section entitled “Additional Information.”

 

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     Page  

ADDITIONAL INFORMATION

     i  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     ii  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGS

     1  

SUMMARY

     8  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BLUE RIDGE

     18  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BAY BANKS

     20  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     22  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     29  

COMPARATIVE MARKET PRICES OF COMMON STOCK

     30  

RISK FACTORS

     31  

Risks Related to the Merger

     31  

Risks Related to Blue Ridge’s Business

     36  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     54  

BLUE RIDGE SPECIAL MEETING OF SHAREHOLDERS

     57  

General

     57  

Matters to be Considered

     57  

Recommendations of the Blue Ridge Board

     57  

Record Date and Voting Rights

     57  

Votes Required

     58  

Voting of Proxies

     58  

Revocation of Proxies

     59  

Solicitation of Proxies

     60  

BLUE RIDGE PROPOSALS

     60  

Proposal No. 1 – Approval of the Merger

     60  

Proposal No. 2 – Adjournment of the Special Meeting

     60  

BAY BANKS SPECIAL MEETING OF SHAREHOLDERS

     61  

General

     61  

Matters to be Considered

     61  

Recommendations of the Bay Banks Board

     61  

Record Date and Voting Rights

     61  

Votes Required

     62  

Stock Ownership of Bay Banks Directors and Executive Officers

     62  

Voting of Proxies

     62  

Revocation of Proxies

     63  

Solicitation of Proxies

     64  

Appraisal Rights

     64  

BAY BANKS PROPOSALS

     64  

Proposal No. 1 – Approval of the Merger

     64  

Proposal No. 2 – Approval of Compensation Proposal

     64  

Proposal No. 3 – Adjournment of the Special Meeting

     65  

THE MERGER

     66  

Background of the Merger

     66  

Blue Ridge’s Reasons for the Merger; Recommendation of the Blue Ridge Board

     73  

Opinion of Blue Ridge’s Financial Advisor

     75  

Bay Banks’ Reasons for the Merger; Recommendation of the Bay Banks Board

     82  

Opinion of Bay Banks’ Financial Advisor

     85  

Certain Unaudited Prospective Financial Information

     94  

Interests of Bay Banks’ Directors and Officers in the Merger

     97  

 

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(continued)

 

     Page  

Potential Payments and Benefits to Bay Banks Named Executive Officers in Connection with a Change in Control

     99  

Blue Ridge’s Board of Directors and Management Following Completion of the Merger

     100  

Amendments to Blue Ridge Bylaws

     101  

Public Trading Markets

     102  

Appraisal Rights

     102  

Regulatory Approvals Required for the Merger

     104  

Accounting Treatment

     105  

Resales of Blue Ridge Common Stock

     105  

Material United States Federal Income Tax Consequences

     105  

THE MERGER AGREEMENT

     109  

Structure of the Merger

     109  

Merger Consideration

     109  

Closing and Effective Time of Merger

     109  

Procedures for Exchanging Bay Banks Stock Certificates

     109  

Representations and Warranties

     111  

Covenants and Agreements

     112  

Required Shareholder Votes

     114  

Agreement Not to Solicit Other Offers

     114  

Expenses and Fees

     116  

Indemnification and Insurance

     116  

Conditions to Complete the Merger

     116  

Termination of the Merger Agreement

     117  

Termination Fees

     118  

Amendment and Waiver of the Merger Agreement

     119  

Affiliate and Director Noncompetition Agreements

     119  

INFORMATION ABOUT BLUE RIDGE

     120  

General Description of Blue Ridge’s Business

     120  

Properties

     123  

Employees

     124  

Legal Proceedings

     124  

Supervision and Regulation

     124  

Certain Relationships and Related Transactions

     135  

Board of Directors and Director Compensation

     135  

Executive Officers of Blue Ridge

     140  

Executive Compensation

     140  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BLUE RIDGE

     145  

Critical Accounting Policies

     145  

Comparison of Financial Condition at September  30, 2020 and December 31, 2019

     148  

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2020 and 2019

     148  

Comparison of Results of Operations for the Years Ended December  31, 2019 and 2018

     152  

Analysis of Financial Condition

     156  

Off-Balance Sheet Activities

     166  

Interest Rate Risk Management

     167  

INFORMATION ABOUT BAY BANKS

     169  

 

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(continued)

 

     Page  

DESCRIPTION OF BLUE RIDGE CAPITAL STOCK

     171  

General

     171  

Common Stock

     171  

Preferred Stock

     172  

Liability and Indemnification of Directors and Officers

     172  

Blue Ridge Common Stock Not Insured by the FDIC

     172  

Antitakeover Provisions of Blue Ridge’s Articles of Incorporation, Bylaws, and Virginia Law

     172  

COMPARISON OF SHAREHOLDERS’ RIGHTS

     176  

Authorized Capital Stock

     176  

Voting Rights

     177  

Dividend Rights

     177  

Directors and Classes of Directors

     178  

Antitakeover Provisions

     178  

Amendments to Articles of Incorporation and Bylaws

     181  

Director and Officer Exculpation

     181  

Indemnification

     181  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF BLUE RIDGE

     183  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF BAY BANKS

     185  

EXPERTS

     187  

LEGAL MATTERS

     187  

SUBMISSION OF FUTURE BLUE RIDGE AND BAY BANKS SHAREHOLDER PROPOSALS

     187  

INDEX TO BLUE RIDGE FINANCIAL STATEMENTS

     F-1  

APPENDIX A—AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF AUGUST 12, 2020, BETWEEN BLUE RIDGE BANKSHARES, INC. AND BAY BANKS OF VIRGINIA, INC. AND FIRST AMENDMENT, DATED AS OF NOVEMBER 6, 2020

     A-1  

APPENDIX B—OPINION OF RAYMOND JAMES & ASSOCIATES, INC.

     B-1  

APPENDIX C—OPINION OF PIPER SANDLER & CO.

     C-1  

APPENDIX D—ARTICLE 15 OF TITLE 13.1 OF THE VIRGINIA STOCK CORPORATION ACT

     D-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGS

The following are answers to certain questions that you may have regarding the merger and the meetings of the shareholders of Blue Ridge and Bay Banks. You should carefully read this entire joint proxy statement/prospectus because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to and other documents referred to in this joint proxy statement/prospectus.

 

Q:

Why am I receiving this document?

 

A:

Blue Ridge and Bay Banks have entered into an Agreement and Plan of Reorganization, dated as of August 12, 2020, as amended on November 6, 2020, under which Bay Banks will merge with and into Blue Ridge, with Blue Ridge as the surviving corporation. If the merger is completed, it is expected that Virginia Commonwealth Bank, Bay Banks’ wholly-owned bank subsidiary, will merge with and into Blue Ridge Bank, Blue Ridge’s wholly-owned bank subsidiary. A copy of the merger agreement is included in this joint proxy statement/prospectus as Appendix A.

You are receiving this document because Blue Ridge and Bay Banks are each holding a special meeting of shareholders to vote on the proposals necessary to complete the merger. The merger cannot be completed unless, among other things:

 

   

the holders of more than two-thirds of the shares of Blue Ridge’s outstanding common stock entitled to vote at Blue Ridge’s special meeting vote in favor of the merger; and

 

   

the holders of not less than 60% of the shares of Bay Banks’ outstanding common stock entitled to vote at Bay Banks’ special meeting vote in favor of the merger.

Each of the Blue Ridge Board and the Bay Banks Board has unanimously determined that the merger is in the best interest of its shareholders, approved the merger and recommended that its shareholders vote “FOR” the merger proposals. Blue Ridge and Bay Banks will hold separate shareholder meetings to obtain these approvals.

This joint proxy statement/prospectus contains important information about the merger and the other proposals being voted on at the shareholder meetings, and you should read it carefully. It is a joint proxy statement because both the Blue Ridge Board and the Bay Banks Board are soliciting proxies from their respective shareholders. It is a prospectus because it registers the shares of Blue Ridge common stock that Blue Ridge will issue to holders of Bay Banks common stock in connection with the merger. The enclosed materials allow you to have your shares voted by proxy without attending your respective shareholder meeting. Your vote is important. We encourage you to submit your proxy as soon as possible.

 

Q:

Why do Blue Ridge and Bay Banks want to merge?

 

A:

Blue Ridge and Bay Banks are merging to create one of the leading community banks in Virginia. The combined organization is expected to benefit from scale of approximately $2.8 billion in assets, creating the fourth largest community bank headquartered in Virginia, based on deposit market share of community banks with total assets under $10.0 billion. When combined, Blue Ridge will operate across seven attractive Virginia and North Carolina metropolitan areas, including Richmond, Charlottesville, Hampton Roads and the Piedmont Triad. The combined company is also expected to benefit from diversified revenue composition and expanded opportunities for lending and fee income, as well as accelerated investment in technology. In connection with the merger, Blue Ridge Bank is planning to relocate its headquarters to Richmond, Virginia, to continue its expansion into high growth markets.

Each of the Blue Ridge Board and the Bay Banks Board has unanimously determined that the merger is fair and in the best interest of its respective shareholders and recommends that its shareholders vote for their respective proposals. You should review the reasons for the merger described in greater detail under the

 

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sections entitled “The Merger—Blue Ridge’s Reasons for the Merger; Recommendation of the Blue Ridge Board” and “—Bay Banks’ Reasons for the Merger; Recommendation of the Bay Banks Board,” beginning on pages 73 and 82, respectively.

 

Q:

What will Bay Banks shareholders receive in the merger?

 

A:

At the effective time of the merger, each issued and outstanding share of Bay Banks common stock will be converted into the right to receive 0.5000 shares (the “exchange ratio”) of Blue Ridge common stock.

The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger.

In lieu of fractional shares, Blue Ridge will issue cash to holders of Bay Banks common stock in an amount based upon the closing prices of Blue Ridge common stock preceding the effective time of the merger.

Blue Ridge shareholders will continue to own their existing shares, which will not be affected by the merger.

 

Q:

When and where are the shareholder meetings?

 

A:

Blue Ridge: A special meeting of shareholders of Blue Ridge will be held on Thursday, January 21, 2021, at 11:00 a.m., local time, as a virtual meeting of shareholders via online live webcast at www.meetingcenter.io/205738032.

Bay Banks: A special meeting of shareholders of Bay Banks will be held on Thursday, January 21, 2021, at 10:00 a.m., local time, in a virtual meeting format at https://www.cstproxy.com/baybanks/2021.

 

Q:

Who can vote at the shareholder meetings?

 

A:

Blue Ridge: Only holders of record of Blue Ridge common stock at the close of business on December 8, 2020 will be entitled to notice of and to vote at the special meeting or any adjournment thereof.

Bay Banks: Only holders of record of Bay Banks common stock at the close of business on November 30, 2020 will be entitled to notice of and to vote at the special meeting or any adjournment thereof.

 

Q:

In addition to the Blue Ridge merger proposal, what are Blue Ridge’s shareholders voting on at the Blue Ridge special meeting?

 

A:

A proposal to adjourn the special meeting to a later date or dates, if necessary to solicit additional proxies to approve the Blue Ridge merger proposal (the “Blue Ridge adjournment proposal”).

 

Q:

How does the Blue Ridge Board recommend that Blue Ridge shareholders vote at the Blue Ridge special meeting?

 

A:

The Blue Ridge Board unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal.

 

Q:

In addition to the Bay Banks merger proposal, what are Bay Banks’ shareholders voting on at the Bay Banks special meeting?

 

A:

A proposal to approve, on a nonbinding advisory basis, specified compensation that may become payable to the named executive officers of Bay Banks in connection with the merger (the “Bay Banks compensation proposal”), and a proposal to adjourn the special meeting to a later date or dates, if necessary to solicit additional proxies to approve the Bay Banks merger proposal (the “Bay Banks adjournment proposal”).

 

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Q:

How does the Bay Banks Board recommend that Bay Banks shareholders vote at the Bay Banks special meeting?

 

A:

The Bay Banks Board unanimously recommends that Bay Banks shareholders vote “FOR” the Bay Banks merger proposal, “FOR” the Bay Banks compensation proposal and “FOR” the Bay Banks adjournment proposal.

 

Q:

What do I need to do now?

 

A:

After you have carefully read this joint proxy statement/prospectus and have decided how you wish to vote your shares, please vote your shares promptly so that your shares are represented and voted at the Blue Ridge special meeting or Bay Banks special meeting, as applicable. If you hold your shares in your name as a shareholder of record, you must complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope, or follow the telephone or Internet voting procedures, as applicable, described on the proxy card, as soon as possible. If you hold your shares in “street name” through a bank or broker, you must direct your bank or broker how to vote in accordance with the instructions you have received from your bank or broker. You may also cast your vote via the Internet during the Blue Ridge special meeting or Bay Banks special meeting, as applicable. “Street name” shareholders who wish to vote via the Internet during the Blue Ridge special meeting or Bay Banks special meeting, as applicable, will need to obtain a legal proxy form from the institution that holds their shares and take additional steps as described in this joint proxy statement/prospectus.

 

Q:

What constitutes a quorum for the shareholder meetings?

 

A:

Blue Ridge: The presence at the Blue Ridge special meeting, in person via the Internet or by proxy, of holders of a majority of the outstanding shares of Blue Ridge common stock entitled to vote at the Blue Ridge special meeting will constitute a quorum for the transaction of business. Abstentions will be included in determining the number of shares present at the Blue Ridge special meeting for the purpose of determining the presence of a quorum. If a Blue Ridge shareholder holds shares in “street name” through a bank, broker or other nominee, those shares will not be counted for purposes of determining the presence of a quorum unless the bank, broker or other nominee has been instructed to vote on at least one of the proposals at the Blue Ridge special meeting.

Bay Banks: The presence at the Bay Banks special meeting, in person via the Internet or by proxy, of holders of at least 60% of the outstanding shares of Bay Banks common stock entitled to vote at the Bay Banks special meeting will constitute a quorum for the transaction of business. Abstentions will be included in determining the number of shares present at the Bay Banks special meeting for the purpose of determining the presence of a quorum. If a Bay Banks shareholder holds shares in “street name” through a bank, broker or other nominee, those shares will not be counted for purposes of determining the presence of a quorum unless the bank, broker or other nominee has been instructed to vote on at least one of the proposals at the Bay Banks special meeting.

 

Q:

What is the vote required to approve each proposal?

 

A:

Blue Ridge: Approval of the Blue Ridge merger proposal requires the affirmative vote of more than two-thirds of the outstanding shares of Blue Ridge common stock entitled to vote on the merger as of the close of business on December 8, 2020, the record date for the Blue Ridge special meeting. If you (1) fail to submit a proxy or vote during the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the Blue Ridge merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the Blue Ridge adjournment proposal requires that the votes cast for such proposal exceed the votes cast against such proposal. If you (1) fail to submit a proxy or vote during the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the Blue Ridge adjournment proposal, it will have no effect on the outcome of the vote on that proposal.

 

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Bay Banks: Approval of the Bay Banks merger proposal requires the affirmative vote of not less than 60% of the outstanding shares of Bay Banks common stock entitled to vote on the merger as of the close of business on November 30, 2020, the record date for the Bay Banks special meeting. If you (1) fail to submit a proxy or vote during the Bay Banks special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the Bay Banks merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the Bay Banks compensation proposal requires the affirmative vote of more than 60% of the shares represented at the Bay Banks special meeting. If you (1) fail to submit a proxy or vote during the Bay Banks special meeting or (2) fail to instruct your bank or broker how to vote with respect to the Bay Banks compensation proposal, it will have no effect on the outcome of the proposal. If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the Bay Banks adjournment proposal requires the affirmative vote of more than 60% of the shares represented at the Bay Banks special meeting, whether or not a quorum is present. If you (1) fail to submit a proxy or vote during the Bay Banks special meeting or (2) fail to instruct your bank or broker how to vote with respect to the Bay Banks adjournment proposal, it will have no effect on the outcome of the proposal. If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the proposal.

 

Q:

Why is my vote important?

 

A:

If you do not submit a proxy or vote during the meeting, it may be more difficult for Blue Ridge or Bay Banks to obtain the necessary quorum to hold their respective shareholder meetings. In addition, your failure to submit a proxy or vote during the meeting, failure to instruct your bank or broker how to vote, or abstention will have the same effect as a vote against approval of the applicable merger proposal. The Blue Ridge merger proposal must be approved by the affirmative vote of more than two-thirds of Blue Ridge’s outstanding shares, and the Bay Banks merger proposal must be approved by the affirmative vote of not less than 60% of Bay Banks’ outstanding shares.

 

Q:

If my shares are held in “street name” by my bank or broker, will my bank or broker automatically vote my shares for me?

 

A:

If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you should provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Blue Ridge or Bay Banks or by voting during your respective company’s shareholder meeting unless you follow the instructions provided by your broker, bank or other nominee, and take other additional steps as described in this joint proxy statement/prospectus.

Under the rules of applicable securities exchanges, brokers who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from the beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters that the securities exchanges determine to be “non-routine” without specific instructions from the beneficial owner. We believe that all proposals to be voted on at the shareholder meetings are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power.

Blue Ridge: If you are a Blue Ridge shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares:

 

   

your broker, bank or other nominee may not vote your shares on the Blue Ridge merger proposal, which will have the same effect as a vote “AGAINST” such proposal; and

 

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your broker, bank or other nominee may not vote your shares on the Blue Ridge adjournment proposal, which will have no effect on the outcome of the vote on such proposal.

Bay Banks: If you are a Bay Banks shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares:

 

   

your broker, bank or other nominee may not vote your shares on the Bay Banks merger proposal, which will have the same effect as a vote “AGAINST” such proposal; and

 

   

your broker, bank or other nominee may not vote your shares on the Bay Banks adjournment proposal or the Bay Banks compensation proposal, which will have no effect on the outcome of the vote on such proposals.

 

Q:

What if I fail to vote or abstain from voting?

 

A:

Blue Ridge: With respect to the Blue Ridge merger proposal, if you fail to submit a proxy or vote during the Blue Ridge special meeting, or you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the proposal. With respect to the Blue Ridge adjournment proposal, if you fail to submit a proxy or vote during the Blue Ridge special meeting, or you mark “ABSTAIN” on your proxy, it will have no effect on the outcome of the vote on such proposal.

Bay Banks: With respect to the Bay Banks merger proposal, if you fail to submit a proxy or vote during the Bay Banks special meeting, or you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the proposal. With respect to the Bay Banks adjournment proposal and the Bay Banks compensation proposal, if you fail to submit a proxy or vote during the Bay Banks special meeting, it will have no effect on the outcome of the vote on such proposals. If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” such proposals.

 

Q:

Can I attend the shareholder meeting and vote my shares in person?

 

A:

The Blue Ridge special meeting and Bay Banks special meetings will be conducted exclusively as virtual meetings of shareholders via online live webcast.

Blue Ridge: All shareholders of Blue Ridge, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record will be able to attend and participate in the Blue Ridge special meeting online, vote their shares electronically and submit their questions prior to and during the meeting by visiting at www.meetingcenter.io/205738032.

If you are not a shareholder of record, you must register in advance to attend the special meeting virtually on the Internet. To register to attend the Blue Ridge special meeting, you must submit proof of your proxy power (legal proxy) reflecting your holdings along with your name and email address to Blue Ridge’s transfer agent, Computershare, Inc. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on January 15, 2021.

You will receive a confirmation of your registration by email after Computershare, Inc. receives your registration materials. Requests for registration should be directed to Computershare, Inc. at the following:

 

By email:   

Forward the email from your broker or other custodian, or attach an image

of your legal proxy, to legalproxy@computershare.com

By mail:   

Computershare, Inc.

Blue Ridge Bankshares, Inc. Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

Bay Banks: Holders of record of Bay Banks common stock can attend and participate in the Bay Banks special meeting, submit questions and vote shares electronically during the meeting by visiting https://www.cstproxy.com/baybanks/2021 and entering the 12 digit control number included on your proxy

 

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card. You may pre-register to attend the special meeting and to vote and submit questions. If you hold your shares in street name and wish to attend the special meeting, you must contact Bay Banks’ transfer agent, Continental Stock Transfer & Trust Company, at the telephone number or e-mail address below for specific instructions on how to receive a control number and access the meeting. If you hold your shares in street name and wish to vote during the meeting, you also must obtain a legal proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote during the meeting. Please allow up to 48 hours prior to the special meeting to process your control number.

If you are a Bay Banks shareholder of record and do not have a control number, or if you hold your shares in street name and wish to receive a control number to access the Bay Banks special meeting, please contact Continental Stock Transfer & Trust Company at (917) 262-2373 or proxy@continentalstock.com.

 

Q:

Can I change my vote?

 

A:

Blue Ridge: Yes. If you are a holder of record of Blue Ridge common stock, you may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) timely submitting a later proxy via the telephone or Internet, (3) delivering a written revocation letter to Blue Ridge’s Corporate Secretary or (4) attending the Blue Ridge special meeting via the Internet and voting during the Blue Ridge special meeting. Attendance at the Blue Ridge special meeting alone will not automatically revoke your proxy. A revocation or later-dated proxy received by Blue Ridge after the Blue Ridge special meeting will be ineffective. Blue Ridge’s Corporate Secretary’s mailing address is: 17 West Main Street, Luray, Virginia 22835, Attention: Corporate Secretary. If you hold your shares in “street name” through a bank or broker, you should contact your bank or broker if you want to revoke or change your voting instructions.

Bay Banks: Yes. If you are a holder of record of Bay Banks common stock, you may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) timely submitting a later proxy via the Internet, smartphone or tablet, (3) delivering a written revocation letter to Bay Banks’ Corporate Secretary or (4) attending the Bay Banks special meeting online and voting during the Bay Banks special meeting. Virtual attendance at the Bay Banks special meeting alone will not automatically revoke your proxy. A revocation or later-dated proxy received by Bay Banks after the Bay Banks special meeting will be ineffective. Bay Banks’ Corporate Secretary’s mailing address is: 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226, Attention: Corporate Secretary. If you hold your shares in “street name” through a bank or broker, you should contact your bank or broker if you want to revoke or change your voting instructions.

 

Q:

What are the material U.S. federal income tax consequences of the merger to Bay Banks shareholders?

 

A:

As structured, the merger will qualify as a tax-free “reorganization” within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (“Code”). Accordingly, holders of Bay Banks common stock generally will not, except with respect to cash received in lieu of a fractional share interest in Blue Ridge common stock, recognize any gain or loss for U.S. federal income tax purposes on the exchange of Bay Banks common stock solely for Blue Ridge common stock in the merger.

Holders of Bay Banks common stock who receive solely cash pursuant to a valid election of such holder’s appraisal rights will recognize gain or loss on the exchange in an amount equal to the difference between the cash received and that shareholder’s adjusted basis in the shares of Bay Banks common stock exchanged therefor. For further information, see “The Merger—Material United States Federal Income Tax Consequences” beginning on page 105.

The U.S. federal income tax consequences described above may not apply to all holders of Bay Banks common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your own tax advisor to determine the particular tax consequences of the merger to you.

 

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Q:

Are Bay Banks shareholders entitled to dissenters’ or appraisal rights?

 

A:

Yes. Bay Banks shareholders are entitled to appraisal rights in connection with the merger. For information on how to exercise and perfect your appraisal rights, please see “The Merger—Appraisal Rights” beginning on page 101.

 

Q:

If I am a Bay Banks shareholder, should I send in my Bay Banks stock certificates now?

 

A:

No. Please do not send in your Bay Banks stock certificates with your proxy. The exchange agent, Computershare, will send you instructions for exchanging your Bay Banks stock certificates for the merger consideration. See “The Merger Agreement—Procedures for Exchanging Bay Banks Stock Certificates” on page 108.

 

Q:

Whom may I contact if I cannot locate my Bay Banks stock certificate(s)?

 

A:

If you are unable to locate your original Bay Banks stock certificate(s), you should contact Bay Banks’ transfer agent, Continental Stock Transfer & Trust Company, at 1 State Street, 30th Floor, New York, New York 10004, or at (212) 509-4000.

Following the merger, any inquiries should be directed to Blue Ridge’s transfer agent, Computershare, at 250 Royall Street, Canton, Massachusetts 02021, or at (800) 368-5948.

 

Q:

When do you expect to complete the merger?

 

A:

Blue Ridge and Bay Banks expect to complete the merger in the first quarter of 2021; however, neither Blue Ridge nor Bay Banks can assure you when or if the merger will occur. In addition to other customary closing conditions provided in the merger agreement, Blue Ridge and Bay Banks must first obtain regulatory approvals and the approval of Blue Ridge shareholders and Bay Banks shareholders for the merger.

 

Q:

Who may solicit proxies on behalf of Blue Ridge or Bay Banks?

 

A:

Blue Ridge: In addition to solicitation of proxies by Blue Ridge by mail, proxies may also be solicited by Blue Ridge’s directors and employees personally, and by telephone, facsimile or other means. Blue Ridge has also retained Regan & Associates, Inc. to assist in soliciting proxies for a fee of approximately $20,000. For more information on solicitation of proxies in connection with the Blue Ridge special meeting, see “Blue Ridge Special Meeting of Shareholders—Solicitation of Proxies” on page 57.

Bay Banks: In addition to solicitation of proxies by Bay Banks by mail, proxies may also be solicited by Bay Banks’ directors and employees personally, and by telephone, facsimile or other means. Bay Banks has also retained Regan & Associates, Inc. to assist in soliciting proxies for a fee of approximately $20,000. For more information on solicitation of proxies in connection with the Bay Banks special meeting, see “Bay Banks Special Meeting of Shareholders—Solicitation of Proxies” on page 61.

 

Q:

Whom should I call with questions?

 

A:

Blue Ridge: If you have any questions concerning the merger or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of Blue Ridge common stock, please contact: Amanda G. Story, Chief Financial Officer, 17 West Main Street, Luray, Virginia 22835, at (540) 743-6521. You may also obtain more information about the merger and the proxy materials by contacting Regan & Associates, Inc., Blue Ridge’s proxy solicitor, at (800) 737-3426.

Bay Banks: If you have any questions concerning the merger or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of Bay Banks common stock, please contact: Pamela A. Varnier, Corporate Secretary, at Bay Banks of Virginia, Inc., 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226, at (804) 404-9668. You may also obtain more information about the merger and the proxy materials by contacting Regan & Associates, Inc., Bay Banks’ proxy solicitor, at (800) 737-3426.

 

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SUMMARY

This summary highlights selected information from this joint proxy statement/prospectus. It does not contain all of the information that may be important to you. We urge you to read carefully the entire document and the other documents we refer you to so that you may fully understand the merger and the related transactions. Each item in this summary refers to the page of this joint proxy statement/prospectus on which that subject is discussed in more detail.

The Parties

Blue Ridge (see page 120)

Blue Ridge is a bank holding company headquartered in Charlottesville, Virginia. It provides commercial and consumer banking and financial services through its wholly-owned bank subsidiary, Blue Ridge Bank, National Association, and its non-bank financial services affiliates. Blue Ridge was incorporated under the laws of the Commonwealth of Virginia in July 1988 in connection with the holding company reorganization of Blue Ridge Bank, which was completed in July 1988.

Blue Ridge Bank is a federally chartered national bank headquartered in Martinsville, Virginia that traces its roots to Page Valley Bank of Virginia, which opened for business in 1893. Blue Ridge Bank currently operates 14 full-service banking offices in central Virginia and one in north-central North Carolina.

As of September 30, 2020, Blue Ridge had total consolidated assets of approximately $1.5 billion, total consolidated loans of approximately $1.23 billion, total consolidated deposits of approximately $915.3 million and consolidated shareholders’ equity of approximately $99.9 million.

The principal executive offices of Blue Ridge are located at 1807 Seminole Trail, Charlottesville, Virginia 22835, and its telephone number is (540) 743-6521. Blue Ridge’s website can be accessed at www.mybrb.com. Information contained on Blue Ridge’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. Blue Ridge’s common stock is listed on the NYSE American under the symbol “BRBS.”

Bay Banks (see page 169)

Bay Banks is a Virginia corporation and bank holding company that conducts substantially all of its operations through its subsidiaries, Virginia Commonwealth Bank and VCB Financial Group. Virginia Commonwealth Bank opened for business in 1930 as Bank of Lancaster and partners with the communities it serves to deliver banking and other financial services.

Virginia Commonwealth Bank is a state-chartered bank, headquartered in Richmond, Virginia, and a member of the Federal Reserve System. Virginia Commonwealth Bank has 17 banking offices located throughout the greater Richmond region of Virginia, the Northern Neck region of Virginia, Middlesex County, and the Hampton Roads region of Virginia. Virginia Commonwealth Bank serves businesses, professionals, and consumers with a wide variety of financial services, including retail and commercial banking, and mortgage banking.

As of September 30, 2020, Bay Banks had total assets of $1.25 billion, deposits of $1.03 billion, and shareholders’ equity of $121.4 million.



 

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The principal executive offices of Bay Banks are located at 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226 and its telephone number is (804) 404-9668. Bay Banks’ website is www.baybanks.com. Information contained on Bay Banks’ website is not a part of or incorporated into this report or any other filing Bay Banks makes with the SEC. Bay Banks’ common stock is quoted on the OTC Markets Group’s OTCQB marketplace under the symbol “BAYK.”

The Merger (see page 66)

The terms and conditions of the merger are contained in the merger agreement, which is attached to this joint proxy statement/prospectus as Appendix A, and is incorporated in this joint proxy statement/prospectus by reference. You should read the merger agreement carefully and in its entirety, as it, along with its ancillary documents, is the legal document that governs the merger.

The merger agreement provides for the merger of Bay Banks with and into Blue Ridge, with Blue Ridge as the surviving corporation. The separate existence of Bay Banks shall cease upon completion of the merger, and Blue Ridge will continue to exist as a Virginia corporation. As soon as practicable after the merger, Virginia Commonwealth Bank will be merged with and into Blue Ridge Bank, with Blue Ridge Bank as the surviving bank. Blue Ridge Bank will continue to exist as a national banking association and a wholly-owned subsidiary of Blue Ridge.

Closing and Effective Time of the Merger (see page 109)

The merger is currently expected to close in the first quarter of 2021. The merger will close on either the fifth business day following the completion of the conditions to closing set forth in the merger agreement, or another mutually agreed upon date. The merger will become effective upon the issuance of a certificate of merger by the Virginia State Corporation Commission, or such other date and time as may be set forth in the articles of merger filed with the Virginia State Corporation Commission. Neither Blue Ridge nor Bay Banks can predict, however, the actual date on which the merger will be completed because it is subject to factors beyond each company’s control, including whether or when the parties’ respective shareholders’ approvals and outstanding regulatory approval will be received, if at all.

Merger Consideration (see page 109)

Under the terms of the merger agreement, at the effective time of the merger, each issued and outstanding share of Bay Banks common stock will be converted into the right to receive 0.5000 shares (the “exchange ratio”) of Blue Ridge common stock. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger.

In lieu of fractional shares, Blue Ridge will issue cash to holders of Bay Banks common stock in an amount based upon the closing prices of Blue Ridge common stock preceding the effective time of the merger.

Blue Ridge’s shareholders will continue to own their existing shares of Blue Ridge common stock, which will not be affected by the merger.

Treatment of Bay Banks Stock Options and Other Equity-Based Awards (see page 110)

As of November 30, 2020, Bay Banks had stock options to purchase an aggregate of 219,960 shares of Bay Banks common stock, of which 195,793 were exercisable. At the effective time of the merger, each Bay Banks stock option, whether vested or unvested, then issued and outstanding under an equity or equity-based compensation plan of Bay Banks (a “Bay Banks stock plan”) will be converted into a stock option to purchase,



 

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on the same terms and conditions as were applicable under such Bay Banks stock option, shares of Blue Ridge common stock in a number equal to the shares subject to such Bay Banks stock option multiplied by the exchange ratio, with any fractional shares rounded down to the next lower whole number of shares. The exercise price per share of each newly issued Blue Ridge stock option will be equal to the exercise price per share of Bay Banks common stock subject to such Bay Banks stock option divided by the exchange ratio, rounded up to the next whole cent. Notwithstanding the foregoing, each Bay Banks stock option that is intended to qualify as an “incentive stock option” will be adjusted if necessary in accordance with Treasury Regulation Section 1.424-1(a) and all other Bay Banks stock options will be adjusted if necessary in a manner that maintains the option’s exemption from Section 409A of the Code.

As of November 30, 2020, Bay Banks had 133,673 restricted stock awards granted under a Bay Banks stock plan that was unvested or contingent. At the effective time of the merger, each Bay Banks restricted stock award that is unvested or contingent and outstanding immediately prior to the effective time will vest fully and be converted into the right to receive the merger consideration with respect to each share of Bay Banks common stock underlying such Bay Banks restricted stock award.

At the effective time of the merger, Blue Ridge will assume the Bay Banks stock plans, and will have the right, but not the obligation to make additional grants or awards under the Bay Banks stock plans. For a more complete description of the treatment of Bay Banks stock options and other equity-based awards, please see “The Merger—Treatment of Bay Banks Stock Options and Other Equity-Based Awards” beginning on page 109.

Blue Ridge Board Recommendations (see page 57)

After careful consideration, the Blue Ridge Board unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal.

For a more complete description of Blue Ridge’s reasons for the merger and the recommendation of the Blue Ridge Board, please see “The Merger—Blue Ridge’s Reasons for the Merger; Recommendation of the Blue Ridge Board” beginning on page 57.

Bay Banks Board Recommendations (see page 61)

After careful consideration, the Bay Banks Board unanimously recommends that Bay Banks shareholders vote “FOR” the Bay Banks merger proposal, FOR” the Bay Banks compensation proposal and “FOR” the Bay Banks adjournment proposal.

For a more complete description of Bay Banks’ reasons for the merger and the recommendation of the Bay Banks Board, please see “The Merger—Bay Banks’ Reasons for the Merger; Recommendation of the Bay Banks Board” beginning on page 61.

Opinion of Blue Ridge’s Financial Advisor (see page 75 and Appendix B)

At the August 12, 2020 meeting of the Blue Ridge Board, representatives of Raymond James & Associates, Inc. (“Raymond James”) rendered Raymond James’ opinion dated August 12, 2020 to the Blue Ridge board (in its capacity as such), as to the fairness, as of such date, from a financial point of view, to Blue Ridge of the exchange ratio in the merger pursuant to the merger agreement, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Raymond James in connection with the preparation of its opinion.



 

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The full text of the written opinion of Raymond James, dated August 12, 2020, which sets forth, among other things, the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Raymond James, is attached as Appendix B to this joint proxy statement/prospectus. Raymond James provided its opinion for the information and assistance of the Blue Ridge Board (in its capacity as such) in connection with, and for purposes of, its consideration of the financial terms of the merger and its opinion only addresses whether the exchange ratio in the merger pursuant to the merger agreement was fair, from a financial point of view, to Blue Ridge. The opinion of Raymond James did not address any other term or aspect of the merger agreement or the merger contemplated thereby, the underlying business decisions of Blue Ridge to engage in the merger, the form or structure of the merger, the relative merits of the merger as compared to any other alternative business strategies that might exist for Blue Ridge, or the effect of any other transaction in which Blue Ridge might engage. The description of the opinion is qualified in its entirety by reference to the full text of the opinion. Blue Ridge shareholders are urged to read the entire opinion carefully in connection with their consideration of the Blue Ridge share issuance. Neither the Raymond James opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus is intended to be or constitute advice or a recommendation to the Blue Ridge Board or any holder of Blue Ridge common stock as to how the Blue Ridge Board, such shareholder or any other person should vote or otherwise act with respect to the merger or any other matter.

Opinion of Bay Banks’ Financial Advisor (see page 85 and Appendix C)

At the August 12, 2020 meeting of the Bay Banks Board, representatives of Piper Sandler & Co. (“Piper Sandler”) rendered its opinion, dated August 12, 2020, to the Bay Banks Board (in its capacity as such), to the effect that, as of such date, the exchange ratio was fair to the holders of Bay Banks common stock from a financial point of view. The full text of Piper Sandler’s opinion is attached as Appendix C to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler in rendering its opinion. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion. Holders of Bay Banks common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Piper Sandler’s opinion was directed to the Bay Banks Board in connection with its consideration of the merger and the merger agreement and does not constitute a recommendation to any shareholder of Bay Banks as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger and the merger agreement. Piper Sandler’s opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Bay Banks common stock and did not address the underlying business decision of Bay Banks to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Bay Banks or the effect of any other transaction in which Bay Banks might engage.

For further information, please see “The Merger—Opinion of Bay Banks’ Financial Advisor” beginning on page 85.

Interests of Bay Banks Directors and Executive Officers in the Merger (see page 97)

In addition to the receipt of merger consideration on the same terms as all other Bay Banks shareholders, Blue Ridge will appoint seven of Bay Banks’ directors (including C. Frank Scott, III, the Chairman of the Bay Banks Board, and Randal R. Greene, Bay Banks’ President and Chief Executive Officer) as directors of Blue Ridge and Blue Ridge Bank effective upon consummation of the merger, certain of Bay Banks’ directors and executive officers hold stock options and restricted stock awards that will vest upon completion of the merger, certain of Bay Banks’ executive officers are expected to continue with Blue Ridge following completion of the merger and



 

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four of Bay Banks’ executive officers have entered into employment agreements with Blue Ridge that will be effective at the closing of the merger and, in addition, certain officers will receive cash payments related to change in control provisions in existing employment agreements. The Bay Banks Board was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendation on the Bay Banks merger proposal.

These interests are discussed in more detail in the “The Merger—Interests of Bay Banks’ Directors and Officers in the Merger” section beginning on page 97.

Material U.S. Federal Income Tax Consequences of the Merger (see page 105)

As structured, the merger will qualify as a tax-free “reorganization” within the meaning of Section 368 of the Code. Accordingly, holders of Bay Banks common stock generally will not, except with respect to cash received in lieu of a fractional share interest in Blue Ridge common stock, recognize any gain or loss for U.S. federal income tax purposes on the exchange of Bay Banks common stock solely for Blue Ridge common stock in the merger.

Holders of Bay Banks common stock who receive solely cash pursuant to a valid election of such holder’s appraisal rights will recognize gain or loss on the exchange in an amount equal to the difference between the cash received and that shareholder’s adjusted basis in the shares of Bay Banks common stock exchanged therefor. For further information, see “The Merger—Material United States Federal Income Tax Consequences” beginning on page 105.

The U.S. federal income tax consequences described above may not apply to all holders of Bay Banks common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your own tax advisor to determine the particular tax consequences of the merger to you.

Bay Banks’ Shareholders Have Appraisal Rights in the Merger (see page 102 and Appendix D)

If the merger is completed, Virginia law gives holders of Bay Banks common stock the right to assert appraisal rights with respect to the merger and demand in writing that Blue Ridge pay the fair value of their shares of Bay Banks common stock, instead of accepting the consideration offered in the merger. Any Bay Banks shareholder who wishes to exercise and perfect appraisal rights must strictly comply with the procedures set forth in Article 15 of Title 13.1 of the Virginia Stock Corporation Act (the “VSCA”), a copy of which is included as Appendix D to the joint proxy statement/prospectus. A description of these procedures is included in the “The Merger—Appraisal Rights” section beginning on page 101.

Blue Ridge shareholders do not have the right to dissent and assert appraisal rights.

Accounting Treatment (see page 105)

The merger will be accounted for under the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States of America.

Regulatory Approvals (see page 104)

The merger requires various approvals or waivers from bank regulatory authorities, including the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency (the “OCC”) and the Virginia Bureau of Financial Institutions. As of the date of this joint proxy statement/prospectus, we have received approvals from the Federal Reserve and the Virginia Bureau of Financial Institutions regarding the merger. As of the date of this joint proxy statement/prospectus, we have not yet received approval from the OCC regarding the bank merger.



 

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Any approval of the regulators will not constitute an endorsement of the merger or a determination that the terms of the merger are fair to Blue Ridge shareholders or Bay Banks shareholders.

For a more complete description of the regulatory approvals, please see “The Merger—Regulatory Approvals Required for the Merger” on page 104.

Conditions to Complete the Merger (see page 116)

Blue Ridge’s and Bay Banks’ respective obligations to complete the merger are subject to the fulfillment or waiver of certain conditions, including the following:

 

   

approval of the Blue Ridge merger proposal and the Bay Banks merger proposal by Blue Ridge and Bay Banks shareholders, respectively;

 

   

approval of the merger by the necessary federal and state regulatory authorities;

 

   

the effectiveness of Blue Ridge’s registration statement on Form S-4, of which this joint proxy statement/prospectus is a part;

 

   

the absence of any order, decree or injunction of a court or regulatory agency that enjoins or prohibits the completion of the merger;

 

   

approval for listing on the NYSE American market of the shares of Blue Ridge common stock to be issued to Bay Banks shareholders upon consummation of the merger;

 

   

the accuracy of the other party’s representations and warranties in the merger agreement, subject to the material adverse effect standard in the merger agreement;

 

   

the other party’s performance in all material respects of its obligations under the merger agreement; and

 

   

the receipt by each party from its respective outside legal counsel of a written legal opinion to the effect that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

Where the merger agreement and/or law permits, Blue Ridge and Bay Banks could choose to waive a condition to its obligation to complete the merger even if that condition has not been satisfied. Any determination whether to waive any condition to the merger or whether to amend this joint proxy statement/prospectus and resolicit shareholder approval as a result of any such waiver (for example, in the case of a waiver of a material condition such that disclosure previously provided would be materially misleading) will be made by Blue Ridge or Bay Banks, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived or that the merger will be completed.

No Solicitation (see page 114)

Blue Ridge and Bay Banks have each agreed that it will not directly or indirectly:

 

   

initiate, solicit, endorse or knowingly encourage or knowingly facilitate any inquiries, proposals or offers with respect to, or any inquiry, proposal or offer that is reasonably likely to lead to, an “acquisition proposal” (as defined in the merger agreement);

 

   

furnish any confidential or nonpublic information relating to an acquisition proposal; or

 

   

engage or participate in any negotiations or discussions concerning an acquisition proposal.

The merger agreement does not, however, prohibit Blue Ridge or Bay Banks from considering an unsolicited bona fide written acquisition proposal from a third party if certain specified conditions are met.



 

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Termination of the Merger Agreement (see page 117)

The merger agreement may be terminated, and the merger abandoned, by Blue Ridge and Bay Banks at any time before the merger is completed if the boards of directors of both parties vote to do so. In addition, the merger agreement may be terminated, and the merger abandoned, under the following circumstances:

Termination by Blue Ridge or Bay Banks. The merger agreement may be terminated and the merger abandoned, by either party’s board of directors if:

 

   

the merger has not been completed by July 31, 2021, or such later date as agreed to by the parties in writing, unless the failure to complete the merger by such time was caused by or the result of a breach or failure to perform an obligation under the merger agreement by the terminating party;

 

   

approval of the merger by any necessary federal or state regulatory authority has been denied by such regulatory authority and the denial has become final and nonappealable, or any regulatory authority has issued a final, nonappealable injunction permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement, unless the denial of such regulatory approval is due to, or materially contributed to by, the failure of the terminating party to perform or observe the covenants or agreements of such party set forth in the merger agreement;

 

   

there is a breach by the other party of any representation, warranty, covenant or agreement contained in the merger agreement that would cause the failure of the closing conditions described above, and the breach cannot be or is not cured within 30 days following written notice to the breaching party; or

 

   

the Blue Ridge shareholders do not approve the Blue Ridge merger proposal or the Bay Banks shareholders do not approve the Bay Banks merger proposal.

Termination by Blue Ridge. Blue Ridge may terminate the merger agreement if:

 

   

at any time before the Bay Banks special meeting, the Bay Banks Board (i) fails to recommend to the Bay Banks shareholders that they approve the Bay Banks merger proposal, (ii) withdraws, modifies or changes its recommendation in any manner adverse to Blue Ridge, or (iii) approves, adopts, endorses or recommends any acquisition proposal;

 

   

at any time before the Bay Banks special meeting, Bay Banks fails to comply in all material respects with its obligations under the merger agreement requiring the calling and holding of a meeting of shareholders to consider the Bay Banks merger proposal or its obligations regarding the non-solicitation of other competing offers; or

 

   

the Blue Ridge Board determines to enter into a definitive agreement to accept a “superior proposal” (as defined in the merger agreement) which has been received and considered by the Blue Ridge Board in accordance with the applicable terms of the merger agreement.

Termination by Bay Banks. Bay Banks may terminate the merger agreement if:

 

   

at any time before the Blue Ridge special meeting, the Blue Ridge Board (i) fails to recommend to the Blue Ridge shareholders that they approve the Blue Ridge merger proposal, (ii) withdraws, modifies or changes its recommendation in any manner adverse to Bay Banks, (iii) approves, adopts, endorses or recommends any acquisition proposal;

 

   

at any time before the Blue Ridge special meeting, Blue Ridge fails to comply in all material respects with its obligations under the merger agreement requiring the calling and holding of a meeting of shareholders to consider the Blue Ridge merger proposal or its obligations regarding the non-solicitation of other competing offers; or



 

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the Bay Banks Board determines to enter into a definitive agreement to accept a “superior proposal” (as defined in the merger agreement) which has been received and considered by the Bay Banks Board in accordance with the applicable terms of the merger agreement.

Termination Fees and Expenses (see page 118)

If either Blue Ridge or Bay Banks takes any of certain specified, limited actions and the merger agreement is terminated on that basis, that party will immediately owe the other party a $4.0 million termination fee. In addition, a $4.0 million termination fee is payable in certain other circumstances if (i) the merger agreement is terminated for certain specified, limited reasons and (ii) within 12 months of such termination one of the parties enters into a definitive agreement with respect to an acquisition proposal. The termination and payment circumstances are more fully described elsewhere in this joint proxy statement/prospectus. See “The Merger Agreement—Termination Fees” beginning on page 117.

In general, whether or not the merger is completed, Blue Ridge and Bay Banks will each pay its respective expenses incident to preparing, entering into and carrying out the terms of the merger agreement. The parties will share the costs of printing this joint proxy statement/prospectus all filing fees to the SEC and other governmental authorities.

Amendments to Blue Ridge Bylaws (page 101)

In connection with entering into the merger agreement and to facilitate the addition of certain Bay Banks directors to the Blue Ridge Board at the time of the merger, Blue Ridge has agreed to amend its bylaws prior to the merger so that the number of directors that will comprise the full Blue Ridge Board is to be fixed at such number, not to exceed 15 directors, consisting of (i) eight current Blue Ridge directors to be designated by Blue Ridge (after consultation with Bay Banks), including Larry Dees, the Chairman of the Blue Ridge Board, and Brian K. Plum, Blue Ridge’s President and Chief Executive Officer (the “Blue Ridge Directors”), and (ii) seven current Bay Banks directors to be designated by Bay Banks (after consultation with Blue Ridge), including C. Frank Scott, III, the Chairman of the Bay Banks Board, and Randal R. Greene, Bay Banks’ President and Chief Executive Officer (the “Bay Banks Directors”).

The Blue Ridge Directors and the Bay Banks Directors will be split as equally as possible among the three classes of directors to serve staggered terms; provided, however, that Mr. Greene will be designated to serve in the class of directors for a term expiring in 2024. Until the third anniversary of the merger, all vacancies on the Blue Ridge Board created by the cessation of service of a Blue Ridge Director must be filled by a nominee proposed to the nominating committee of the Blue Ridge Board by a majority of the remaining Blue Ridge Directors, and all vacancies on the Blue Ridge Board created by the cessation of service of a Bay Banks Director shall be filled by a nominee proposed to the nominating committee of the Blue Ridge Board by a majority of the remaining Bay Banks Directors. Such bylaw provision may not be modified, amended or repealed during such three-year period other than by a majority of the Bay Banks Directors and a majority of the Blue Ridge Directors.

The forms of the above-described bylaw amendments are set forth in their entirety in Exhibit 1.4(a) to the merger agreement, which is attached to this joint proxy statement/prospectus as Appendix A.

Blue Ridge Special Meeting (see page 57)

The Blue Ridge special meeting is scheduled to take place on Thursday, January 21, 2021 at 11:00 a.m. local time, as a virtual meeting. At the special meeting, Blue Ridge shareholders will be asked to vote on:

 

   

the Blue Ridge merger proposal; and

 

   

the Blue Ridge adjournment proposal.



 

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Holders of Blue Ridge common stock as of the close of business on December 8, 2020 are entitled to notice of and to vote at the Blue Ridge special meeting. As of the record date, there were 5,718,621 shares of Blue Ridge common stock outstanding and entitled to vote held by approximately 650 holders of record. Each Blue Ridge shareholder can cast one vote for each share of Blue Ridge common stock owned on the record date.

Each of Blue Ridge’s directors has agreed, subject to several conditions and exceptions, to vote all of his or her shares of Blue Ridge common stock in favor of the Blue Ridge merger proposal. As of the record date, directors of Blue Ridge and their affiliates beneficially owned and are entitled to vote 830,055 shares of Blue Ridge common stock, or approximately 14.51% of the total voting power of the shares of Blue Ridge common stock outstanding on that date.

Bay Banks Special Meeting (see page 61)

The Bay Banks special meeting is scheduled to take place on Thursday, January 21, 2021, at 10:00 a.m., local time, in a virtual meeting format at https://www.cstproxy.com/baybanks/2021. At the special meeting, Bay Banks shareholders will be asked to vote on:

 

   

the Bay Banks merger proposal;

 

   

the Bay Banks compensation proposal; and

 

   

the Bay Banks adjournment proposal.

Holders of Bay Banks common stock as of the close of business on November 30, 2020, are entitled to notice of and to vote at the Bay Banks special meeting. As of the record date, there were 13,329,695 shares of Bay Banks common stock outstanding and entitled to vote held by approximately 703 holders of record. Each Bay Banks shareholder can cast one vote for each share of Bay Banks common stock owned on the record date.

Each of Bay Banks’ directors has agreed, subject to several conditions and exceptions, to vote all of his or her shares of Bay Banks common stock in favor of the Bay Banks merger proposal. As of the record date, directors of Bay Banks and their affiliates beneficially owned and are entitled to vote 961,863 shares of Bay Banks common stock, or approximately 7.16% of the total voting power of the shares of Bay Banks common stock outstanding on that date, of which 855,959 shares, or approximately 6.42% of the total voting power of the shares of Bay Banks common stock outstanding on that date, are subject to an affiliate agreement.

Required Shareholder Votes (see pages 58 and 62)

Approval of the Blue Ridge merger proposal requires the affirmative vote of more than two-thirds of the outstanding shares of Blue Ridge common stock entitled to vote on the merger as of the close of business on December 8, 2020, the record date for the Blue Ridge special meeting. If you (1) fail to submit a proxy or vote during the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the proposal to approve the merger agreement, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the Blue Ridge adjournment proposal requires that the votes cast for such proposal exceed the votes cast against such proposal. If you (1) fail to submit a proxy or vote during the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the Blue Ridge adjournment proposal, it will have no effect on the outcome of the vote on such proposals.

Approval of the Bay Banks merger proposal requires the affirmative vote of not less than 60% of the outstanding shares of Bay Banks common stock entitled to vote on the merger as of the close of business on November 30, 2020, the record date for the Bay Banks special meeting. If you (1) fail to submit a proxy or vote during the Bay Banks special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the proposal to approve the merger agreement, it will have the same effect as a vote “AGAINST” the proposal.



 

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Approval of the Bay Banks compensation proposal requires the affirmative vote of more than 60% of the shares represented at the Bay Banks special meeting. If you (1) fail to submit a proxy or vote during the Bay Banks special meeting or (2) fail to instruct your bank or broker how to vote with respect to the Bay Banks compensation proposal, it will have no effect on the outcome of the proposal. If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the proposal.

Approval of the Bay Banks adjournment proposal requires the affirmative vote of more than 60% of the shares represented at the Bay Banks special meeting, whether or not a quorum is present. If you (1) fail to submit a proxy or vote during the Bay Banks special meeting or (2) fail to instruct your bank or broker how to vote with respect to the Bay Banks adjournment proposal, it will have no effect on the outcome of the proposal. If you mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the proposal.

No Restrictions on Resale of Blue Ridge Common Stock Received by Bay Banks Shareholders (see page 105)

All shares of Blue Ridge common stock received by Bay Banks shareholders in the merger will be freely tradable, except that shares of Blue Ridge received by persons who are or become affiliates of Blue Ridge for purposes of Rule 144 under the Securities Act may be resold by them only in transactions permitted by Rule 144, or as otherwise permitted under the Securities Act.

Comparative Rights of Shareholders (see page 176)

The rights of Bay Banks shareholders who continue as Blue Ridge shareholders after the merger will be governed by Virginia law and the articles of incorporation and bylaws of Blue Ridge, which are different from Bay Banks’ existing articles of incorporation and bylaws. For more information, please see “Comparison of Shareholders’ Rights” beginning on page 174.

Risk Factors (see page 31)

Before voting at the shareholder meetings, you should carefully consider all of the information contained in this joint proxy statement/prospectus, including the risk factors set forth in the “Risk Factors” section beginning on page 31.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BLUE RIDGE

The following table sets forth certain of Blue Ridge’s consolidated financial data as of the end of and for the fiscal years ended December 31, 2019 and 2018 and as of and for the nine months ended September 30, 2020 and 2019. The historical consolidated financial information as of the end of and for the fiscal years ended December 31, 2019 and 2018 is derived from Blue Ridge’s audited consolidated financial statements. The consolidated financial information as of and for the nine-month periods ended September 30, 2020 and 2019 is derived from Blue Ridge’s unaudited consolidated financial statements. In Blue Ridge’s opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the nine months ended September 30, 2020 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2020.

The selected historical financial data below is only a summary and should be read in conjunction with Blue Ridge’s consolidated financial statements and their accompanying notes that are included elsewhere in this joint proxy statement/prospectus.

 

     Nine Months Ended
September 30,
(Unaudited)
    Year Ended
December 31,
 
     2020     2019     2019     2018  
     (Amounts in thousands, except per share data)  

Results of Operations:

        

Interest income

   $ 38,034     $ 22,430     $ 30,888     $ 22,437  

Interest expense

     7,537       6,943       9,520       5,152  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     30,497       15,487       21,368       17,285  

Provision for loan losses

     8,075       1,465       1,742       1,225  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     22,422       14,022       19,626       16,060  

Noninterest income

     39,270       14,255       18,796       10,123  

Noninterest expenses

     45,958       23,217       32,845       20,463  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     15,734       5,060       5,577       5,720  

Income tax expense

     3,618       989       973       1,147  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 12,116     $ 4,071     $ 4,604     $ 4,573  
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

        

Assets

   $ 1,523,299     $ 736,238     $ 960,811     $ 539,590  

Loans, net of unearned income

     1,232,302       460,878       702,480       444,101  

Deposits

     915,266       520,280       722,030       415,027  

Stockholders’ equity

     99,930       65,596       92,337       39,621  

Ratios:

        

Return on average assets

     1.30     0.85     0.61     0.95

Return on average equity

     16.80     10.26     6.94     12.02

Efficiency ratio

     74.49     82.11     85.48     78.16

Common equity to total assets

     6.56     8.91     9.61     7.34

Asset Quality:

        

Allowance for loan losses

   $ 12,123     $ 4,404     $ 4,572     $ 3,580  

Non-accrual loans

   $ 3,732     $ 5,141     $ 4,790     $ 5,515  

Other real estate owned

   $ —       $ —       $ —       $ 134  

ALLL / total outstanding loans

     0.98     0.81     0.65     0.81


 

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ALLL / non-performing loans

     269.52     75.29     88.62     47.61

NPAs / total outstanding loans

     0.37     1.08     0.73     1.72

Net charge-offs / total average outstanding loans

     0.06     0.05     0.02     0.12

Provision / total outstanding loans

     0.66     0.27     0.25     0.28

Per Share Data:

        

Earnings per share, basic

   $ 2.13     $ 1.01     $ 1.10     $ 1.64  

Earnings per share, diluted

     2.13       1.01       1.10       1.64  

Cash dividends paid

     0.4275       0.4275       0.5700       0.5400  

Book value per common share

     17.47       15.09       16.32       14.11  

Price to earnings ratio, diluted

     6.36       20.30       18.51       10.37  

Price to book value ratio

     0.78       1.36       1.25       1.21  

Dividend payout ratio

     13.38     42.33     51.82     32.93

Weighted average shares outstanding, basic

     5,680,930       3,998,267       4,146,980       2,779,090  

Weighted average shares outstanding, diluted

     5,680,930       3,998,267       4,146,980       2,779,090  


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BAY BANKS

The following table sets forth certain of Bay Banks’ consolidated financial data as of the end of and for the fiscal years ended December 31, 2019 and 2018 and as of and for the nine months ended September 30, 2020 and 2019. The historical consolidated financial information as of the end of and for the fiscal years ended December 31, 2019 and 2018 is derived from Bay Banks’ audited consolidated financial statements. The consolidated financial information as of and for the nine-month periods ended September 30, 2020 and 2019 is derived from Bay Banks’ unaudited consolidated financial statements. In Bay Banks’ opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the nine months ended September 30, 2020 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2020. Financial data for the nine months ended September 30, 2020 includes a goodwill impairment charge of $10.4 million (pre-tax) resulting from a second quarter assessment triggered by the adverse effect the deterioration of the macroeconomic environment due to the COVID-19 pandemic has had on the market value of Bay Banks’ common stock and, in particular, Bay Banks’ stock valuation pursuant to the merger. This impairment charge was reported in noninterest expense. Financial data for the nine months ended September 30, 2020 also includes $1.5 million of expenses incurred in connection with the merger.

The selected historical financial data below is only a summary and should be read in conjunction with Bay Banks’ consolidated financial statements and their accompanying notes that are incorporated by reference into this joint proxy statement/prospectus.

 

     Nine Months Ended
September 30,
(Unaudited)
    Year Ended
December 31,
 
     2020     2019     2019     2018  
     (Amounts in thousands, except per share data)  

Results of Operations:

        

Interest income

   $ 36,262     $ 37,421   $ 50,418   $ 43,803

Interest expense

     9,321       11,231       15,085       10,225  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     26,941       26,190     35,333       33,578  

Provision for loan losses

     5,673       871       1,182       1,351  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     21,268       25,319     34,151       32,227  

Noninterest income

     5,870       3,585       4,958       4,303  

Noninterest expenses

     33,408       22,668       30,402       32,119  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (6,270     6,236       8,707       4,411  

Income tax expense

     378       1,180       1,649       533  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (6,648)     $ 5,056     $ 7,058     $ 3,878  
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

        

Assets

   $ 1,251,582     $ 1,112,219     $ 1,131,923     $ 1,080,617  

Loans, net of unearned income

     1,054,610       931,763       925,421       902,461  

Deposits

     1,027,681       893,688       910,440       842,192  

Stockholders’ equity

     121,429       124,857       126,185       117,476  

Ratios:

        

(Loss) return on average assets

     (0.73 )%      0.61     0.64     0.39

(Loss) return on average equity

     (7.08 )%      5.65     5.79     3.36

Efficiency ratio

     101.8     76.1     75.5     82.6

Common equity to total assets

     9.70     11.23     11.15     10.87


 

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Asset Quality:

        

Allowance for loan losses

   $ 12,899     $ 7,495     $ 7,562     $ 7,902  

Non-accrual loans

     17,198     $ 7,194       4,476       5,206  

Other real estate owned

     1,113     $ 2,178       1,916       3,597  

ALLL / total outstanding loans

     1.22     0.80     0.82     0.88

ALLL / non-performing loans

     75.0     104.2     168.9     151.8

Nonperforming loans / total outstanding loans

     1.63     0.77     0.48     0.58

Net charge-offs / total average outstanding loans

     0.14     0.19     0.17     0.15

Provision for loan losses / total outstanding loans

     0.54     0.09     0.13     0.15

Per Share Data:

        

(Loss) earnings per share, basic

   $ (0.51   $ 0.39     $ 0.54     $ 0.30  

(Loss) earnings per share, diluted

     (0.51     0.39       0.54       0.30  

Cash dividends paid

     —         —         —         —    

Book value per common share

     9.10       9.36       9.51       8.90  

Price to earnings ratio, diluted

     (13.1     21.1       16.0       24.5  

Price to book value ratio

     73.6     87.9     91.0     82.6

Dividend payout ratio

     —       —       —       —  

Weighted average shares outstanding, basic

     13,075,761       13,046,694       13,053,080       13,057,537  

Weighted average shares outstanding, diluted

     13,075,761       13,092,367       13,111,853       13,122,136  


 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of Blue Ridge and Bay Banks, as an acquisition by Blue Ridge of Bay Banks using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of Bay Banks will be recorded by Blue Ridge at their respective fair values as of the date the merger is completed. Certain reclassifications have been made to the historical financial statements of Bay Banks to conform to the presentation in Blue Ridge’s financial statements.

The unaudited pro forma condensed combined balance sheet gives effect to the merger as if the transaction had occurred on September 30, 2020. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2020 and the year ended December 31, 2019 give effect to the merger as if the transaction had occurred on January 1, 2019.

A final determination of the fair values of Bay Banks’ assets and liabilities, which cannot be made prior to the completion of the merger, will be based on the actual net tangible and intangible assets of Bay Banks that exist as of the date of completion of the transaction. Consequently, fair value adjustments and amounts preliminarily allocated to a bargain purchase value or goodwill and identifiable intangibles could change significantly from those allocations used in the unaudited pro forma combined condensed consolidated financial statements presented herein and could result in a material change in amortization of acquired intangible assets.

The unaudited pro forma condensed combined financial information included herein is presented for informational purposes only and does not necessarily reflect the financial results of the combined companies had the companies actually been combined at the beginning of the periods presented. The adjustments included in this unaudited pro forma condensed combined financial information are preliminary and may be revised and may not agree to actual amounts recorded by Blue Ridge upon consummation of the merger. This financial information does not reflect the benefits of the expected cost savings and expense efficiencies, opportunities to earn additional revenue, potential impacts of current market conditions on revenues or asset dispositions, among other factors, and includes various preliminary estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be attained in the future.

The unaudited pro forma condensed combined financial information should be read in conjunction with and is qualified in its entirety by reference to the historical consolidated financial statements and related notes thereto of Blue Ridge and its subsidiaries, which are included in this joint proxy statement/prospectus, and the historical consolidated financial statements and related notes thereto of Bay Banks and its subsidiaries, which are incorporated by reference into this joint proxy statement/prospectus.



 

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BLUE RIDGE BANKSHARES, INC. AND BAY BANKS OF VIRGINIA, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

As of September 30, 2020

(Dollars in thousands)

 

    Blue Ridge
Bankshares, Inc.
(As Reported)
    Bay Banks of
Virginia, Inc.
(As Reported)
    Merger
Pro Forma
Adjustments
    Pro Forma
Combined
 
 

 

 

   

 

 

   

 

 

   

 

 

 

ASSETS

       

Cash and cash equivalents

  $ 77,596     $ 60,811     $ —       $ 138,407  

Securities available for sale, at fair value

    113,889       87,853       —         201,742  

Restricted stock, at cost

    9,441       5,022       —         14,463  

Loans held for sale

    193,122       2,687       —         195,809  

Loans, net of unearned income

    1,039,180       1,054,610       (34,837 )(a)      2,058,953  

Less allowance for loan losses

    (12,123     (12,899     12,899 (b)      (12,123
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loans

    1,027,057       1,041,711       (21,938     2,046,830  
 

 

 

   

 

 

   

 

 

   

 

 

 

Bank premises and equipment, net

    14,947       17,859       —         32,806  

Bank owned life insurance

    15,013       20,103       —         35,116  

Other real estate owned, net of valuation allowance

    —         1,113       (956 )(c)      157  

Core deposit intangibles, net

    1,538       1,094       2,956 (d)      5,588  

Goodwill

    19,892       —         —         19,892  

Other intangible assets

    4,725       845       —         5,570  

Other assets

    46,079       12,484       4,187 (e)      62,750  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 1,523,299     $ 1,251,582     $ (15,751   $ 2,759,130  
 

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES

       

Noninterest-bearing demand deposits

    278,584       190,843       —         469,427  

Interest-bearing deposits

    636,682       836,838       —         1,473,520  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

    915,266       1,027,681       —         1,942,947  
 

 

 

   

 

 

   

 

 

   

 

 

 

Other borrowed funds

    459,611       58,754       —         518,365  

Subordinated debt, net of issuance costs

    24,489       31,083       —         55,572  

Other liabilities

    24,003       12,635       —         36,638  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    1,423,369       1,130,153       —         2,553,522  
 

 

 

   

 

 

   

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

       

Common stock and surplus

    66,807       102,201       3,477 (f)(g)(h)      172,485  

Retained earnings

    35,107       18,012       (18,012 )(f)      35,107  

Accumulated other comprehensive income

    (2,210     1,216       (1,216 )(f)      (2,210
 

 

 

   

 

 

   

 

 

   

 

 

 
    99,704       121,429       (15,751     205,382  

Noncontrolling interest

    226       —         —         226  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

    99,930       121,429       (15,751     205,608  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

  $ 1,523,299     $ 1,251,582     $ (15,751   $ 2,759,130  
 

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

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Table of Contents

BLUE RIDGE BANKSHARES, INC. AND BAY BANKS OF VIRGINIA, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME

For the Nine Months Ended September 30, 2020

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

 

    Blue Ridge
Bankshares, Inc.
(As Reported)
    Bay Banks of
Virginia, Inc.
(As Reported)
    Merger
Pro Forma
Adjustments
    Pro Forma
Combined
 

Interest and dividend income:

       

Interest and fees on loans

  $ 35,766     $ 34,013     $ —       $ 69,779  

Other interest income

    2,268       2,249       —         4,517  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividend income

    38,034       36,262       —         74,296  
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

       

Interest on deposits

    4,889       7,364       —         12,253  

Other interest expense

    2,648       1,957       —         4,605  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

    7,537       9,321       —         16,858  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    30,497       26,941       —         57,438  

Provision for loan losses

    8,075       5,673       —         13,748  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

    22,422       21,268       —         43,690  
 

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income:

       

Service charges on deposit accounts

    669       529       —         1,198  

Other service charges, commissions and fees

    132       94       —         226  

Mortgage income

    35,210       2,015       —         37,225  

Other operating income

    3,259       3,232       —         6,491  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

    39,270       5,870       —         45,140  
 

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expenses:

       

Salaries and benefits

    30,141       11,532       —         41,673  

Occupancy expenses

    2,653       2,510       —         5,163  

Amortization expense for other intangible assets

    608       425       900 (i)      1,933  

Other expenses

    12,555       18,941       —         31,496  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expenses

    45,957       33,408       900       80,265  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    15,735       (6,270     (900     8,565  

Income tax expense

    3,618       378       (189     3,807  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 12,117     $ (6,648   $ (711   $ 4,758  
 

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share, basic

  $ 2.13     $ (0.51     $ 0.39  
 

 

 

   

 

 

     

 

 

 

Earnings per common share, diluted

  $ 2.13     $ (0.51     $ 0.39  
 

 

 

   

 

 

     

 

 

 

Weighted average common shares outstanding, basic

    5,681       13,081       (6,540 )(k)      12,221  

Weighted average common shares outstanding, diluted

    5,681       13,081       (6,540 )(k)      12,221  

See accompanying notes to condensed consolidated financial statements.



 

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BLUE RIDGE BANKSHARES, INC. AND BAY BANKS OF VIRGINIA, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME

For the Year Ended December 31, 2019

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

 

    Blue Ridge
Bankshares, Inc.
(As Reported)
    Bay Banks
of Virginia, Inc.
(As Reported)
    Merger
Pro Forma
Adjustments
    Pro Forma
Combined
 

Interest and dividend income:

       

Interest and fees on loans

  $ 27,090     $ 46,998     $ —       $ 74,088  

Other interest income

    3,797       3,420       —         7,217  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and dividend income

    30,887       50,418       —         81,305  
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

       

Interest on deposits

    6,209       12,075       —         18,284  

Other interest expense

    3,310       3,011       —         6,321  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

    9,519       15,085       —         24,604  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    21,368       35,333       —         56,701  

Provision for (recovery of) loan losses

    1,742       1,182       —         2,924  
 

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

    19,626       34,151       —         53,777  
 

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income:

       

Service charges on deposit accounts

    651       977       —         1,628  

Other service charges, commissions and fees

    4,046       115       —         4,161  

Gains on sales of mortgage loans, net of commissions

    10,387       941       —         11,328  

Other operating income

    3,712       2,925       —         6,637  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

    18,796       4,958       —         23,754  
 

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expenses:

       

Salaries and benefits

    19,328       15,597       —         34,925  

Occupancy expenses

    2,538       3,319       —         5,857  

Amortization expense for other intangible assets

    455       674       537 (i)      1,667  

Other expenses

    10,524       10,813       17,256 (j)      38,593  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expenses

    32,845       30,402       17,793       81,041  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    5,577       8,706       (17,793     (3,510

Income tax expense

    973       1,649       (3,737     (1,115

Net (Income) from non-controlling interests

    (24     —           (24
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 4,580     $ 7,057     $ (14,057   $ (2,395
 

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share, basic

  $ 1.09     $ 0.54       $ (0.22
 

 

 

   

 

 

     

 

 

 

Earnings per common share, diluted

  $ 1.09     $ 0.54       $ (0.22
 

 

 

   

 

 

     

 

 

 

Weighted average common shares outstanding, basic

    4,147       13,053       (6,527 )(k)      10,674  

Weighted average common shares outstanding, diluted

    4,147       13,112       (6,556 )(k)      10,703  

See accompanying notes to condensed consolidated financial statements.



 

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Table of Contents

Notes to Unaudited Pro Forma Condensed Combined Financial Information

NOTE A – BASIS OF PRESENTATION

On August 12, 2020, Blue Ridge entered into the merger agreement with BAYK, as amended on November 6, 2020. The merger agreement provides that at the effective date of the merger, each outstanding share of common stock of BAYK will be converted into the right to receive 0.500 shares of Blue Ridge common stock, no par value.

The unaudited pro forma condensed combined financial information of BRBS’s financial condition and results of operations, including per share data, are presented after giving effect to the merger. The pro forma financial information assumes that the merger with BAYK was consummated on January 1, 2019 for purposes of the unaudited pro forma condensed combined statements of income and on September 30, 2020 for purposes of the unaudited pro forma condensed combined balance sheet and gives effect to the merger, for purposes of the unaudited pro forma condensed combined statement of income, as if it had been effective during the entire period presented.

The merger will be accounted for using the acquisition method of accounting; accordingly, the difference between the purchase price over the estimated fair value of the assets acquired (including identifiable intangible assets) and liabilities assumed will be recorded as goodwill, or the difference between the estimated fair value of the assets acquired and liabilities assumed over the purchase price will be recorded as a bargain purchase.

The pro forma financial information includes estimated adjustments to record the assets and liabilities of BAYK at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analysis is performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of a final analysis to determine the fair values of BAYK’s tangible, and identifiable intangible, assets and liabilities as of the effective time of the merger.

NOTE B – PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current valuations, estimates, and assumptions. Subsequent to the completion of the merger, Blue Ridge will engage an independent third-party valuation firm to determine the fair value of certain assets acquired and liabilities assumed which could significantly change the amount of the estimated fair values used in pro forma financial information presented.

 

(a)

Estimated adjustment for credit deterioration of the acquired portfolio in the amount of $34.8 million which represented a mark of 3.3% on BAYK’s outstanding loan portfolio. In order to determine the adjustment related to credit deterioration, BRBS engaged an independent third-party loan review team to review and perform analytics on BAYK’s loan portfolio.

 

(b)

Elimination of BAYK’s allowance for loan losses. Purchased loans acquired in a business combination are recorded at fair value and the recorded allowance of the acquired company is not carried over.

 

(c)

Estimated fair value adjustment on other real estate owned (“OREO”), which represented a mark of 85.9% on BAYK’s outstanding OREO balance.

 

(d)

BRBS’s estimate of the fair value of the core deposit intangible asset in the amount of $2.9 million. This will be amortized over ten years using the sum of years digits method. This estimate represents a 0.50% premium on BAYK’s core deposits based on current market data for similar transactions.

 

(e)

Estimated deferred taxes related to merger adjustments.

 



 

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Table of Contents
(f)

Elimination of BAYK’s stockholders’ equity representing conversion of all of BAYK’s common shares into BRBS common shares.

 

(g)

Recognition of the equity portion of the merger consideration. The adjustment to common stock and surplus represents 100% of the total purchase price to effect the transaction.

 

(h)

Bargain purchase gain generated as a result of the fair value of net assets acquired exceeding the total purchase price. (See Note C).

 

(i)

Represents amortization of core deposit premium (see Note D). Premium will be amortized over ten years using the sum-of-years digits method.

 

(j)

Represents estimated one-time transaction related costs of $17.3 million.

 

(k)

Weighted average basic and diluted shares outstanding were adjusted to effect the transaction.

NOTE C – PRO FORMA ALLOCATION OF PURCHASE PRICE

The following table shows the pro forma allocation of the consideration paid for BAYK’s common equity to the acquired identifiable assets and liabilities assumed and the pro forma goodwill generated from the transaction (unaudited, dollars in thousands):

 

(In thousands)

     

Purchase Price:

     

Fair value of consideration(1)

      $ 100,414  
     

 

 

 

Total pro forma purchase price

      $ 100,414  

Fair value of assets acquired:

     

Cash and cash equivalents

   $ 60,811     

Securities available for sale

     87,853     

Restricted stock, at cost

     5,022     

Net loans

     1,022,460     

Bank premise and equipment

     17,859     

Bank owned life insurance

     20,103     

OREO, net of valuation allowance

     157     

Core deposit intangible

     4,050     

Other assets

     16,671     
  

 

 

    

Total assets

     1,234,986     

Fair value of liabilities assumed:

     

Deposits

     1,027,681     

Long-term borrowings

     89,837     

Other liabilities

     12,635     
  

 

 

    

Total liabilities

     1,130,153     

Net assets acquired

      $ 104,833  
     

 

 

 

Preliminary pro forma goodwill (bargain purchase)

      $ (4,419
     

 

 

 

 

(1)

Based on 13,344,104 of Bay Banks’ common stock outstanding as of August 5, 2020 and Blue Ridge’s common stock price of $15.05, the 20-day volume weighted average price of Blue Ridge common stock as of August 10, 2020.



 

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Table of Contents

The following table depicts the sensitivity of the purchase price and resulting goodwill or bargain purchase to changes in the price of Blue Ridge’s common stock at a price of $15.05, the 20 day volume weighted average price of Blue Ridge common stock as of August 10, 2020:

 

Share Price Sensitivity (unaudited, dollars in thousands)

 
     Purchase Price      Estimated Goodwill  

Up 20%

   $ 120,497      $ 15,664  

Up 10%

   $ 110,455      $ 5,622  

As presented in proforma

   $ 100,414      $ (4,419

Down 10%

   $ 90,373      $ (14,460

Down 20%

   $ 80,331      $ (24,502

NOTE D – ESTIMATED AMORTIZATION/ACCRETION OF ACQUISITION ACCOUNTING ADJUSTMENTS

The following table sets forth an estimate of the expected effects of the estimated aggregate acquisition accounting adjustments reflected in the pro forma combined financial statements on the future pre-tax net income of Blue Ridge after the merger with BAYK (unaudited, dollars in thousands):

 

     Discount Accretion (Premium Amortization)  
     For the Years Ended December 31,  
     2021    2022     2023     2024     2025     Thereafter     Total  

Core Deposit Intangible

   (537)      (484     (430     (376     (322     (807     (2,956

The actual effect of purchase accounting adjustments on the future pre-tax income of Blue Ridge will differ from these estimates based on the closing date estimates of fair values and the use of different amortization methods than assumed above.

NOTE E– ESTIMATED COST SAVINGS

Estimated cost savings, expected to approximate 28.0% of BAYK’s annualized pre-tax non-interest expenses, are excluded from the pro forma analysis. Cost savings are estimated to be realized at 100%.



 

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Table of Contents

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table shows per common share data regarding basic and diluted net income, book value and cash dividends per share for (1) Blue Ridge and Bay Banks on a historical basis, (2) Blue Ridge after giving effect to the merger and (3) Bay Banks on a pro forma equivalent basis. The pro forma basic and diluted net income per share information was computed as if the merger had been completed on January 1, 2019. The pro forma book value per share information was computed as if the merger had been completed on September 30, 2020. The pro forma dividends per share represent Blue Ridge’s historical dividends per share.

The Bay Banks pro forma equivalent per share amounts are calculated by multiplying the pro forma combined per share amounts by the exchange ratio of 0.5000 for the merger consideration so that the per share amounts equate to the respective values for one share of Bay Banks common stock.

The following pro forma information has been derived from and should be read in conjunction with Blue Ridge’s consolidated financial statements and Bay Banks’ consolidated financial statements for the year ended December 31, 2019 and the nine-month period ended September 30, 2020, included elsewhere in, or incorporated by reference into, this joint proxy statement/prospectus. This information is presented for illustrative purposes only. You should not place undue reliance on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the net income per share, book value per share, operating results or financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future net income per share, book value per share, operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of Blue Ridge as the surviving company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results. The information below should be read in conjunction with the “Unaudited Pro Forma Condensed Combined Financial Information” section beginning on page 22 and the historical financial information and the notes thereto for Blue Ridge and Bay Banks, included elsewhere in, or incorporated by reference into, this joint proxy statement/prospectus.

 

     As of and for the
Nine Months Ended
September 30, 2020
     As of and for the
Year Ended
December 31, 2019
 

Blue Ridge Historical

     

Net income per common share (basic and diluted)

   $ 2.13      $ 1.10  

Book value per common share (basic and diluted)

     17.47        16.32  

Cash dividends declared per share

     0.4275        0.5700  

Bay Banks Historical

     

Net income per common share (basic and diluted)

   $ (0.51    $ 0.54  

Book value per common share (basic and diluted)

     9.10        9.51  

Cash dividends declared per share

     —          —    

Pro Forma Combined

     

Net income per common share (basic and diluted)

   $ 0.39      $ (0.22

Book value per common share (basic and diluted)

     16.82        19.26  

Cash dividends declared per share

     0.4275        0.5700  


 

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Pro Forma Bay Banks Equivalent

     

Net income per common share (basic and diluted)

   $ 0.19      $ (0.11

Book value per common share (basic and diluted)

     8.41        9.29  

Cash dividends declared per share

     0.21        0.29  

COMPARATIVE MARKET PRICES OF COMMON STOCK

Blue Ridge common stock is listed on the NYSE American under the symbol “BRBS.” Bay Banks common stock is quoted on the OTC Markets Group’s OTCQB marketplace under the symbol “BAYK.” As of December 8, 2020, there were 5,718,621 shares of Blue Ridge common stock outstanding held by approximately 650 holders of record and there were 13,329,695 shares of Bay Banks common stock outstanding held by approximately 703 holders of record.

As of August 12, 2020, the date preceding the public announcement of the merger, the closing prices of Blue Ridge common stock and Bay Banks common stock were $14.45 and $5.95 per share, respectively. As of December 8, 2020, the latest practicable date before the date of this joint proxy statement/prospectus, the closing prices of Blue Ridge common stock and Bay Banks common stock were $16.11 and $8.20 per share, respectively.

The following table sets forth the closing prices per share of Blue Ridge common stock, as reported on the NYSE American, and of Bay Banks common stock, as reported on the OTC Markets Group’s OTCQB marketplace as of August 12, 2020, the date preceding the public announcement of the merger, and as of December 8, 2020, the latest practicable date before the date of this joint proxy statement/prospectus. The following table also includes the equivalent price per share of Bay Banks common stock on those dates, which reflects the value on each date of the Blue Ridge common stock that would have been received by Bay Banks shareholders with respect to each share of Bay Banks common stock converted into the right to receive merger consideration, if the merger had been completed on those dates, based on the exchange ratio of 0.5000 and the closing prices of Blue Ridge common stock.

 

     Blue Ridge
Common Stock
     Bay Banks
Common Stock
     Equivalent Market
Value per Share of
Bay
Banks Common Stock
 

August 12, 2020

   $ 14.45      $ 5.95      $ 7.23  

December 8, 2020

   $ 16.11      $ 8.20      $ 8.06  

The market quotations for Bay Banks’ common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Bay Banks shareholders are advised to obtain current market quotations for Blue Ridge common stock and Bay Banks common stock. The market value for Blue Ridge common stock will fluctuate between the time the merger agreement was executed, the date of this joint proxy statement/prospectus, the date of the shareholder meetings and the completion of the merger. No assurance can be given concerning the market price of Blue Ridge common stock before or after the effective time of the merger. Changes in the market price of Blue Ridge common stock prior to the completion of the merger may affect the market value of the merger consideration that Bay Banks shareholders will receive. Because the exchange ratio is fixed, however, the number of Blue Ridge shares that Bay Banks shareholders receive with respect to each share of Bay Banks common stock that is converted into the right to receive the merger consideration will not change.

After the completion of the merger, there will be no further trading in Bay Banks common stock.



 

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RISK FACTORS

The merger, including the issuance of Blue Ridge common stock and the other transactions contemplated by the merger agreement, involves significant risks. Blue Ridge shareholders and Bay Banks shareholders should carefully read and consider the following factors in deciding whether to vote for the merger proposals.

Risks Related to the Merger

Because the market price of Blue Ridge common stock will fluctuate, Bay Banks shareholders cannot be certain of the market value of the merger consideration that they will receive.

Upon completion of the merger, each share of Bay Banks common stock will be converted into the right to receive the merger consideration. The exchange ratio of 0.5000 shares of Blue Ridge common stock for each share of Bay Banks common stock is fixed and will not be adjusted to reflect changes in the market price of either the shares of Blue Ridge common stock or the shares of Bay Banks common stock prior to the closing of the merger. As a result, the market value of the merger consideration received by Bay Banks shareholders will vary with the market price of Blue Ridge common stock. Blue Ridge’s stock price changes daily as a result of a variety of other factors in addition to the business and relative prospects of Blue Ridge, including general market and economic conditions, industry trends, market assessment of the likelihood that the merger will be completed as anticipated or at all, and the regulatory environment. These factors are beyond Blue Ridge’s control. Therefore, at the time of the Bay Banks special meeting, holders of Bay Banks common stock will not know or be able to calculate the precise market value of the merger consideration they may receive upon completion of the merger, which could be significantly less than the current market value of Blue Ridge common stock.

Combining Blue Ridge and Bay Banks may be more difficult, costly or time-consuming than we expect.

The success of the merger will depend, in part, on Blue Ridge’s ability to realize the anticipated benefits and cost savings from combining the businesses of Blue Ridge and Bay Banks. To realize such anticipated benefits and cost savings, Blue Ridge must successfully combine the businesses of Blue Ridge and Bay Banks in a manner that permits growth opportunities and cost savings to be realized without materially disrupting the existing customer relationships of Bay Banks or Blue Ridge or decreasing revenues due to loss of customers. If Blue Ridge is not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than expected.

Blue Ridge and Bay Banks have operated, and, until the completion of the merger, will continue to operate, independently, and after the completion of the merger, Blue Ridge will integrate Bay Banks’ business into its own. The integration process in the merger could result in the loss of key employees, the disruption of each party’s ongoing business, inconsistencies in standards, controls, procedures and policies that may adversely affect either party’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the merger. The loss of key employees could adversely affect Blue Ridge’s ability to successfully conduct its business in the markets in which Bay Banks now operates, which could have an adverse effect on Blue Ridge’s financial results and the value of its common stock. If Blue Ridge experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized, fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be disruptions that cause Blue Ridge and Bay Banks to lose customers or cause customers to withdraw their deposits from Blue Ridge’s or Bay Banks’ banking subsidiaries, or other unintended consequences that could have a material adverse effect on Blue Ridge’s results of operations or financial condition after the merger. These integration matters could have an adverse effect on each of Blue Ridge and Bay Banks during this transition period and for an undetermined period after consummation of the merger.

 

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The COVID-19 pandemic could have a material adverse effect on the merger.

The spread of COVID-19 throughout the United States, and the measures taken by national, state and local governmental authorities in the United States attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter-in-place orders, and limitations on business activity, including closures, are, among other things, restricting economic activity in the United States and the banking markets in which Blue Ridge and Bay Banks operate. These measures have disrupted national and regional supply chains and resulted in declines in asset valuations, increases in unemployment and underemployment levels, declines in liquidity in markets for certain securities, and increases in volatility and periods of disruption in the financial markets, and may continue to have similar effects in the future. It is difficult to predict the impact of the COVID-19 pandemic on the businesses of Blue Ridge and Bay Banks, and there is no guarantee that efforts by Blue Ridge or Bay Banks to address the adverse impacts of the COVID-19 pandemic will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the continued severity of COVID-19 and actions taken to contain COVID-19 or its impact, among others.

The COVID-19 pandemic could delay and adversely affect the completion of the merger. Each of Blue Ridge and Bay Banks may be required to incur additional costs to remedy disruptions caused by the COVID-19 pandemic. Additional time may be required to process Blue Ridge’s outstanding OCC regulatory application, and the federal bank regulatory agencies may impose additional requirements on Blue Ridge or Bay Banks that must be satisfied prior to completion of the merger.

In addition, some economists and major investment banks have expressed concern that the COVID-19 pandemic could lead to a significant economic recession in the United States. Such a recession and other disruptions in economic and financial markets caused by the COVID-19 pandemic may negatively affect financial institutions for an extended period of time. If such conditions or disruptions continue following completion of the merger, the business, results of operation, financial condition, liquidity and prospects of Blue Ridge as the surviving corporation in the merger may be adversely affected.

Blue Ridge may not be able to effectively integrate the operations of Bay Banks into the operations of Blue Ridge.

The future operating performance of Blue Ridge Bank as the continuing bank following the bank merger will depend, in part, on the success of the bank merger, which is expected to occur as soon as practicable after the merger. The success of the bank merger will, in turn, depend on a number of factors, including Blue Ridge’s ability to (i) integrate the operations and branches of Virginia Commonwealth Bank and Blue Ridge Bank, (ii) retain the deposits and customers of Virginia Commonwealth Bank and Blue Ridge Bank, (iii) control the incremental increase in noninterest expense arising from the merger in a manner that enables Blue Ridge Bank as the continuing bank to improve its overall operating efficiencies and (iv) retain and integrate the appropriate personnel of Bay Banks within the operations of Blue Ridge. The integration of Virginia Commonwealth Bank into Blue Ridge Bank following the bank merger will require the dedication of the time and resources of the banks’ management teams and may temporarily distract the management teams’ attention from the day-to-day business of the banks. If Blue Ridge Bank and Virginia Commonwealth Bank are unable to successfully integrate, Blue Ridge may not be able to realize expected operating efficiencies and eliminate redundant costs.

Blue Ridge and Bay Banks will incur significant transaction and merger-related integration costs in connection with the merger.

Blue Ridge and Bay Banks expect to incur significant costs associated with completing the merger and integrating the operations of the two companies. Blue Ridge and Bay Banks are continuing to assess the impact of these costs. Although Blue Ridge and Bay Banks believe that the elimination of duplicate costs, as well as the realization of other efficiencies related to the integration of the businesses, will offset incremental transaction and

 

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merger-related costs over time, this net benefit may not be achieved in the near term, or at all. If the merger is not completed, the parties would have to recognize these expenses without realizing any of the expected benefits of the merger.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are burdensome on Blue Ridge or Bay Banks, not presently anticipated or cannot be met.

Before the transactions contemplated by the merger agreement may be completed, various approvals or waivers must be obtained from bank regulatory authorities, including the Federal Reserve, the OCC, and the Virginia Bureau of Financial Institutions. In determining whether to grant these approvals, the applicable regulatory agencies consider a variety of factors, including the competitive impact of the proposal in the relevant geographic and banking markets; financial, managerial and other supervisory considerations of each party; convenience and needs of the communities to be served and the record of insured depository institution subsidiaries under the Community Reinvestment Act of 1977 and related regulations (the “Community Reinvestment Act”); and the effectiveness of the parties in combating money laundering activities. These regulators may impose conditions on the granting of such approvals or request changes to the terms of the merger. Such conditions or changes and the process of obtaining regulatory approvals or waivers could have the effect of delaying completion of the merger or of imposing additional costs or limitations on Blue Ridge following the merger. As of the date of this joint proxy statement/prospectus, Blue Ridge has received regulatory approval from the Federal Reserve and the Virginia Bureau of Financial Institutions for the merger. However, the regulatory approval or a waiver from the OCC for the bank merger has not been received as of the date of this joint proxy statement/prospectus. Regulatory approval or a waiver from the OCC for the bank merger may not be received at all, may not be received in a timely fashion or may contain conditions on the completion of the merger that are onerous on Blue Ridge or Bay Banks, not anticipated or cannot be met. If the remaining necessary governmental approval or waiver contains such conditions, the business, financial condition and results of operations of Blue Ridge following the merger may be materially adversely affected. If the consummation of the merger is delayed, including by a delay in receipt of the remaining necessary regulatory approval or a waiver, the business, financial condition and results of operations of Blue Ridge and Bay Banks may be materially adversely affected.

Failure of the merger to be completed, the termination of the merger agreement, or a significant delay in completing the merger could negatively impact Blue Ridge and Bay Banks.

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. These conditions to the consummation of the merger may not be fulfilled and, accordingly, the merger may not be completed. In addition, if the merger is not completed by July 31, 2021, either Blue Ridge or Bay Banks may terminate the merger agreement at any time after that date if the failure of the effective time to occur on or before that date is not caused by any breach of the merger agreement by the party electing to terminate the merger agreement, before or after shareholder approval.

Any delay in completion of the merger may have a material adverse effect on Blue Ridge’s and Bay Banks’ business during the pendency of the merger, and on Blue Ridge’s business and results of operations following the merger, due to potential diversion of management attention from other opportunities, constraints contained in the merger agreement on Bay Banks’ and Blue Ridge’s respective businesses during the pendency of the merger, the incurrence of additional merger-related expenses, and negative reactions by markets and customers. If the merger is not completed, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market price of each party’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be completed.

In addition, Blue Ridge’s or Bay Banks’ business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. If the merger agreement is terminated and a party’s board of directors seeks another merger or business combination, such party’s shareholders cannot be certain that such party will be able to find another company willing to engage in a merger or business combination on more attractive terms than the merger.

 

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Blue Ridge and Bay Banks will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of Blue Ridge and Bay Banks. These uncertainties may impair Blue Ridge’s or Bay Banks’ ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the completion of the merger, as such personnel and customers may experience uncertainty about their future roles and relationships with Blue Ridge or Blue Ridge Bank following the merger and the bank merger. Additionally, these uncertainties could cause customers (including depositors and borrowers) to seek to change existing business relationships with Bay Banks or Blue Ridge or fail to extend an existing relationship with Bay Banks or Blue Ridge. Further, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger and the bank merger.

The merger agreement restricts Blue Ridge and Bay Banks from taking certain actions without the other party’s consent while the merger is pending. These restrictions could have a material adverse effect on each party’s business, financial condition and results of operations, including by limiting the actions that Blue Ridge or Bay Banks may take to address a business uncertainty while the merger is pending.

The opinions of Raymond James and Piper Sandler delivered to the respective boards of directors of Blue Ridge and Bay Banks prior to the signing of the amendment to the merger agreement will not reflect changes in circumstances after the dates of the opinions.

Prior to the execution of the merger agreement, each of the Blue Ridge Board and the Bay Banks Board, received an opinion, dated August 12, 2020, as to the fairness of the exchange ratio from a financial point of view. Such opinions were as of their respective dates and subject to the limitations and assumptions contained therein. Subsequent changes in the operations and prospects of Blue Ridge or Bay Banks, general market and economic conditions and other factors beyond the control of Blue Ridge or Bay Banks, may significantly alter the value of Blue Ridge or Bay Banks, including the market prices of each party’s common stock, or the value of the merger consideration at the effective time of the merger. The opinions do not speak as of the effective time or as of any date other than the date of such opinions.

Bay Banks’ directors and executive officers have interests in the merger that differ from the interests of Bay Banks’ other shareholders.

Bay Banks shareholders should be aware that certain of Bay Banks’ directors and executive officers have interests in the merger that are different from, or in addition to, those of Bay Banks shareholders generally. The Bay Banks Board was fully informed of these interests and thoroughly considered these interests, among other matters, when making its decision to approve the merger agreement and recommend that Bay Banks’ shareholders vote in favor of approving the Bay Banks merger proposal. Among other things, Blue Ridge will appoint seven of Bay Banks’ directors (including C. Frank Scott, III, the Chairman of the Bay Banks Board, and Randal R. Greene, Bay Banks’ President and Chief Executive Officer) as directors of Blue Ridge and Blue Ridge Bank, certain of Bay Banks directors and executive officers hold stock options and restricted stock awards that will vest upon completion of the merger, certain of Bay Banks’ executive officers are expected to continue with Blue Ridge following completion of the merger and four of Bay Banks’ executive officers have entered into employment agreements with Blue Ridge and Blue Ridge Bank that will be effective at the closing of the merger and, in addition, certain officers will receive cash payments related to change in control provisions in existing employment agreements. For a more complete description of these interests, see “The Merger—Interests of Bay Banks’ Directors and Officers in the Merger” beginning on page 97.

 

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The merger agreement limits the ability of Bay Banks and Blue Ridge to pursue alternatives to the merger and might discourage competing offers for a higher price or premium.

The merger agreement contains “no-shop” provisions that, subject to limited exceptions, limit the ability of each of Bay Banks and Blue Ridge to discuss, solicit, facilitate or commit to competing third-party proposals to acquire all or a significant part of Bay Banks or Blue Ridge. In addition, under certain circumstances, if the merger agreement is terminated and either party, subject to certain restrictions, consummates a similar transaction other than the merger, that party must pay the other party a termination fee of $4.00 million.

Each of the members of the Blue Ridge Board and the Bay Banks Board, in their capacities as shareholders of Blue Ridge or Bay Banks, respectively, entered into affiliate agreements and agreed to vote their shares of Blue Ridge common stock and Bay Banks common stock, as applicable, in favor of the Blue Ridge merger proposal, in the case of Blue Ridge, and in favor of the Bay Banks merger proposal, in the case of Bay Banks, and in each case against alternative transactions. As of the close of business on December 8, 2020, the record date for the Blue Ridge special meeting and November 30, 2020, the record date for the Bay Banks special meeting, shares constituting approximately 11.88% of Blue Ridge common stock and 6.42% of the Bay Banks common stock are subject to the affiliate agreements.

Litigation against Bay Banks or Blue Ridge, or the members of the Bay Banks Board or Blue Ridge Board, could prevent or delay the completion of the merger.

Purported shareholder plaintiffs may assert legal claims related to the merger. The results of any such potential legal proceeding would be difficult to predict and such legal proceedings could delay or prevent the merger from being completed in a timely manner. The existence of litigation related to the merger could affect the likelihood of obtaining the required approval from Blue Ridge’s and Bay Banks’ shareholders. Moreover, any litigation could be time consuming and expensive, and could divert attention of Blue Ridge’s and Bay Banks’ respective management teams away from their companies’ regular business. Any lawsuit adversely resolved against Bay Banks, Blue Ridge or members of the Bay Banks Board or Blue Ridge Board, could have a material adverse effect on each party’s business, financial condition and results of operations.

One of the conditions to the consummation of the merger is the absence of any law, order, decree or injunction (whether temporary, preliminary or permanent) or other action taken by the governmental authority of competent jurisdiction that restricts, enjoins or prohibits or makes illegal the consummation of the transactions contemplated by the merger agreement, including the merger. Consequently, if a settlement or other resolution is not reached in any lawsuit that is filed or any regulatory proceeding and a claimant secures injunctive or other relief or a governmental authority issues an order or other directive restricting, prohibiting or making illegal the completion of the transactions contemplated by the merger agreement, including the merger, then such injunctive or other relief may prevent the merger from being completed in a timely manner or at all.

If the merger is completed, Blue Ridge and Bay Banks shareholders will have less influence on the management and policies of Blue Ridge following the merger than they had on Blue Ridge and Bay Banks, respectively, prior to the merger.

After the merger is complete, it is anticipated that approximately 56% of the shares of Blue Ridge common stock will be held by former shareholders of Bay Banks. In addition, upon consummation of the merger, Blue Ridge will have 15 directors, seven of whom will be former directors of Bay Banks. Consequently, shareholders of Blue Ridge and Bay Banks will have less influence on the management and policies of Blue Ridge after the merger than they now have on the management and policies of Blue Ridge and Bay Banks, respectively.

 

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Risks Related to Blue Ridge’s Business

The ongoing COVID-19 pandemic and measures intended to prevent its spread may adversely affect Blue Ridge’s business, financial condition and operations; the extent of such impacts are highly uncertain and difficult to predict.

Global health and economic concerns relating to the COVID-19 outbreak and government actions taken to reduce the spread of the virus have had a material adverse impact on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. The pandemic has resulted in federal, state and local authorities, including those who govern the markets in which Blue Ridge operates, implementing numerous measures to try to contain the virus. These measures, including shelter in place orders and business limitations and shutdowns, have significantly contributed to rising unemployment and negatively impacted consumer and business spending.

The COVID-19 outbreak has adversely impacted and is likely to continue to adversely impact Blue Ridge’s workforce and operations and the operations of Blue Ridge’s customers and business partners. In particular, Blue Ridge may experience adverse effects due to a number of operational factors impacting it or its customers or business partners, including but not limited to:

 

   

loan losses resulting from financial stress experienced by Blue Ridge’s borrowers, especially those operating in industries hardest hit by government measures to contain the spread of the virus;

 

   

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

 

   

as a result of the decline in the Federal Reserve’s target federal funds rate, the yield on Blue Ridge’s assets may decline to a greater extent than the decline in Blue Ridge’s cost of interest-bearing liabilities, reducing Blue Ridge’s net interest margin and spread, and reducing net income;

 

   

operational failures, disruptions or inefficiencies due to changes in Blue Ridge’s normal business practices necessitated by Blue Ridge’s internal measures to protect its employees and government-mandated measures intended to slow the spread of the virus;

 

   

possible business disruptions experienced by Blue Ridge’s vendors and business partners in carrying out work that supports Blue Ridge’s operations;

 

   

decreased demand for Blue Ridge’s products and services due to economic uncertainty, volatile market conditions and temporary business closures;

 

   

potential financial liability, loan losses, litigation costs or reputational damage resulting from Blue Ridge’s origination of loans as a participating lender in the Paycheck Protection Program (the “PPP”) as administered through the U.S. Small Business Administration (the “SBA”); and

 

   

heightened levels of cyber and payment fraud, as cyber criminals try to take advantage of the disruption and increased online activity brought about by the pandemic.

The extent to which the pandemic impacts Blue Ridge’s business, liquidity, financial condition and operations will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, its duration and severity, the actions to contain it or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. In addition, the rapidly changing and unprecedented nature of COVID-19 heightens the inherent uncertainty of forecasting future economic conditions and their impact on Blue Ridge’s loan portfolio, thereby increasing the risk that the assumptions, judgments and estimates used to determine the allowance for loan losses and other estimates are incorrect. Further, Blue Ridge’s loan deferral program could delay or make it difficult to identify the extent of asset quality deterioration during the 90-day deferral period. As a result of these and other conditions, the ultimate impact of the pandemic is highly uncertain and subject to change, and Blue Ridge cannot predict the full extent of the impacts on its

 

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business, Blue Ridge’s operations or the global economy as a whole. To the extent any of the foregoing risks or other factors that develop as a result of COVID-19 materialize, it could exacerbate the other risk factors discussed in this joint proxy statement/prospectus, or otherwise materially and adversely affect Blue Ridge’s business, liquidity, financial condition and results of operations.

The outbreak of COVID-19, or the outbreak of another highly infectious or contagious disease, could adversely affect Blue Ridge’s business, financial condition and results of operations.

Blue Ridge’s business is dependent upon the willingness and ability of its customers to conduct banking and other financial transactions. Since the beginning of January 2020, the COVID-19 outbreak has caused significant disruption in the financial markets both globally and in the United States. The continuing spread of COVID-19 and the related government actions to mandate or encourage quarantines and social distancing has resulted in a significant decrease in commercial activity nationally and in the Blue Ridge’s markets, and may cause customers, vendors, and counterparties to be unable to meet existing payment or other obligations to Blue Ridge and Blue Ridge Bank.

The national public health crisis arising from the COVID-19 pandemic (and public expectations about it), combined with certain pre-existing factors, including, but not limited to, international trade disputes, inflation risks, and oil price volatility, could further destabilize the financial markets and the markets in which Blue Ridge operates. The resulting impacts on consumers, including the sudden increase in the unemployment rate, is expected to cause changes in consumer and business spending, borrowing needs and saving habits, which will likely affect the demand for loans and other products and services Blue Ridge offers, as well as the creditworthiness of potential and current borrowers. Borrower loan defaults that adversely affect Blue Ridge’s earnings correlate with deteriorating economic conditions, which, in turn, may impact borrowers’ creditworthiness and Blue Ridge Bank’s ability to make loans.

The use of quarantines and social distancing methods to curtail the spread of COVID-19—whether mandated by governmental authorities or recommended as a public health practice—may adversely affect Blue Ridge’s operations as key personnel, employees and customers avoid physical interaction. In response to the COVID-19 pandemic, Blue Ridge Bank has been directing branch customers to use drive-thru windows and online banking services, and many employees are telecommuting. It is not yet known what impact these operational changes may have on Blue Ridge’s financial performance. The continued spread of COVID-19 (or an outbreak of a similar highly contagious disease) could also negatively impact the business and operations of third-party service providers who perform critical services for Blue Ridge’s business.

As a result, if COVID-19 continues to spread or the response to contain the COVID-19 pandemic is unsuccessful, Blue Ridge could experience a material adverse effect on its business, financial condition, and results of operations.

Blue Ridge’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses.

Blue Ridge assumes credit risk by virtue of making loans and extending loan commitments and letters of credit. Blue Ridge manages credit risk through a program of underwriting standards, the review of certain credit decisions and a continuous quality assessment process of credit already extended. Blue Ridge’s exposure to credit risk is managed through the use of consistent underwriting standards that emphasize local lending while avoiding highly leveraged transactions, as well as excessive industry and other concentrations. Blue Ridge’s credit administration function employs risk management techniques to help ensure that problem loans and leases are promptly identified. While these procedures are designed to provide Blue Ridge with the information needed to implement policy adjustments where necessary and to take appropriate corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.

 

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Blue Ridge Bank’s allowance for loan losses may be insufficient and any increases in the allowance for loan losses may have a material adverse effect on Blue Ridge’s financial condition and results of operations.

Blue Ridge Bank maintains an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, that represents Blue Ridge Bank’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio.

The level of the allowance reflects management’s evaluation of the level of loans outstanding, the level of non-performing loans, historical loan loss experience, delinquency trends, underlying collateral values, the amount of actual losses charged to the reserve in a given period and assessment of present and anticipated economic conditions. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires Blue Ridge Bank to make significant estimates of current credit risks and future trends, all of which may undergo material changes. The outbreak of the COVID-19 pandemic and the unprecedented governmental response have made these subjective judgements even more difficult. Although Blue Ridge Bank believes the allowance for loan losses is a reasonable estimate of known and inherent losses in the loan portfolio, it cannot precisely predict such losses or be certain that the loan loss allowance will be adequate in the future. Deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside Blue Ridge Bank’s control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies and Blue Ridge Bank’s auditors periodically review its allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. Further, if charge-offs in future periods exceed the allowance for loan losses, Blue Ridge Bank will need additional provisions to increase the allowance for loan losses.

Non-performing assets take significant time to resolve and adversely affect Blue Ridge’s results of operations and financial condition.

Blue Ridge’s non-performing assets adversely affect its net income in various ways. Non-performing assets, which include non-accrual loans and other real estate owned, were $4.5 million, or 0.30% of total assets, as of September 30, 2020. When Blue Ridge receives collateral through foreclosures and similar proceedings, it is required to mark the related loan to the then fair market value of the collateral less estimated selling costs, which may result in a loss. An increased level of non-performing assets also increases Blue Ridge’s risk profile and may impact the capital levels regulators believe are appropriate in light of such risks. Blue Ridge utilizes various techniques such as workouts, restructurings and loan sales to manage problem assets. Increases in, or negative changes in, the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect Blue Ridge’s business, results of operations and financial condition. In addition, the resolution of non-performing assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including generation of new loans. There can be no assurance that Blue Ridge will avoid increases in non-performing loans in the future.

Blue Ridge’s focus on lending to small to mid-sized community-based businesses may increase its credit risk.

Most of Blue Ridge’s commercial business and commercial real estate loans are made to small business or middle market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. If general economic conditions in the market areas in which Blue Ridge operates negatively impact this important customer sector, Blue Ridge’s results of operations and financial condition may be adversely affected. Moreover, a portion of these loans have been made by Blue Ridge in recent years and the borrowers may not have experienced a complete business or economic cycle. Any deterioration of the borrowers’ businesses may hinder their ability to repay their loans with Blue Ridge, which could have a material adverse effect on its financial condition and results of operations.

 

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Blue Ridge’s concentration in loans secured by real estate may increase its future credit losses, which would negatively affect Blue Ridge’s financial results.

Blue Ridge offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans. Credit risk and credit losses can increase if its loans are concentrated to borrowers who, as a group, may be uniquely or disproportionately affected by economic or market conditions. As of September 30, 2020, approximately 53.55% of Blue Ridge’s loans and approximately 76.45% of Bay Banks’ loans are secured by real estate, both residential and commercial, substantially all of which are located in their respective market areas. A major change in the real estate market in the regions in which Blue Ridge and Bay Banks operate, resulting in a deterioration in real estate values, or in the local or national economy, including changes caused by the COVID-19 pandemic, could adversely affect Blue Ridge’s or Bay Banks’ customers’ ability to pay these loans, which in turn could adversely impact Blue Ridge or Bay Banks. Risk of loan defaults and foreclosures are inherent in the banking industry, and Blue Ridge tries to limit its exposure to this risk by carefully underwriting and monitoring its extensions of credit. Blue Ridge cannot fully eliminate credit risk, and as a result credit losses may occur in the future.

Blue Ridge has a moderate concentration of credit exposure in commercial real estate and loans with this type of collateral are viewed as having more risk of default.

As of September 30, 2020, Blue Ridge had approximately $251.2 million in loans secured by commercial real estate, representing approximately 20.4% of total loans outstanding at that date. As of September 30, 2020, Bay Banks had approximately $358.6 million in loans secured by commercial real estate, representing approximately 34.0% of total loans outstanding at that date. The real estate consists primarily of non-owner-operated properties and other commercial properties. These types of loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. It may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers’ abilities to repay their loans frequently depends on the successful rental of their properties. Cash flows may be affected significantly by general economic conditions, and a sustained downturn in the local economy or in occupancy rates in the local economy where the property is located could increase the likelihood of default. Because Blue Ridge’s loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in its percentage of non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for loan losses and an increase in charge-offs, all of which could have a material adverse effect on Blue Ridge’s financial condition.

Blue Ridge’s banking regulators generally give commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital as a result of commercial real estate lending growth and exposures, which could have a material adverse effect on Blue Ridge’s results of operations.

A portion of Blue Ridge’s loan portfolio consists of construction and land development loans, and a decline in real estate values and economic conditions would adversely affect the value of the collateral securing the loans and have an adverse effect on Blue Ridge’s financial condition.

At September 30, 2020, approximately 5.60% of Blue Ridge’s loan portfolio, or $68.9 million, and approximately 12.56% of Bay Banks’ loan portfolio, or $132.5 million, consisted of construction and land development loans. Construction financing typically involves a higher degree of credit risk than financing on improved, owner-occupied real estate and improved, income producing real estate. Risk of loss on a construction or land development loan is largely dependent upon the accuracy of the initial estimate of the property’s value at completion of construction or development, the marketability of the property, and the bid price and estimated cost (including interest) of construction or development. If the estimate of construction or development costs

 

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proves to be inaccurate, Blue Ridge may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of the value proves to be inaccurate, it may be confronted, at or prior to the maturity of the loan, with a project whose value is insufficient to assure full repayment. When lending to builders and developers, the cost breakdown of construction or development is provided by the builder or developer. Although Blue Ridge’s underwriting criteria are designed to evaluate and minimize the risks of each construction or land development loan, there can be no guarantee that these practices will have safeguarded against material delinquencies and losses to Blue Ridge’s operations. In addition, construction and land development loans are dependent on the successful completion of the projects they finance. Loans secured by vacant or unimproved land are generally riskier than loans secured by improved property. These loans are more susceptible to adverse conditions in the real estate market and local economy.

Blue Ridge’s results of operations are significantly affected by the ability of borrowers to repay their loans.

A significant source of risk for Blue Ridge is the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most of Blue Ridge’s loans are secured but some loans are unsecured. With respect to the secured loans, the collateral securing the repayment of these loans may be insufficient to cover the obligations owed under such loans. Collateral values may be adversely affected by changes in economic, environmental and other conditions, including the impacts of the COVID-19 pandemic, declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, terrorist activity, environmental contamination and other external events. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not. Blue Ridge has adopted underwriting and credit monitoring procedures and policies, including regular reviews of appraisals and borrower financial statements, that management believes are appropriate to mitigate the risk of loss. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on Blue Ridge’s financial condition and results of operations.

Changes in economic conditions, especially in the areas in which Blue Ridge conducts operations, could materially and negatively affect its business.

Blue Ridge’s business is directly impacted by economic conditions, legislative and regulatory changes, changes in government monetary and fiscal policies, and inflation, all of which are beyond its control. A deterioration in economic conditions, whether caused by global, national or local concerns (including the COVID-19 pandemic), especially within Blue Ridge’s market area, could result in the following potentially material consequences: loan delinquencies increasing; problem assets and foreclosures increasing; demand for products and services decreasing; low cost or non-interest bearing deposits decreasing; and collateral for loans, especially real estate, declining in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans. A continued economic downturn could result in losses that materially and adversely affect Blue Ridge’s business.

Blue Ridge may be adversely impacted by changes in market conditions.

Blue Ridge is directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions. As a financial institution, market risk is inherent in the financial instruments associated with Blue Ridge’s operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt and trading account assets and liabilities. A few of the market conditions that may shift from time to time, thereby exposing Blue Ridge to market risk, include fluctuations in interest rates, equity and futures prices, and price deterioration or changes in value due to changes in market perception or actual credit quality of issuers. Blue Ridge’s investment securities portfolio, in particular, may be impacted by market conditions beyond its control,

 

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including rating agency downgrades of the securities, defaults of the issuers of the securities, lack of market pricing of the securities, and inactivity or instability in the credit markets. Any changes in these conditions, in current accounting principles or interpretations of these principles could impact Blue Ridge’s assessment of fair value and thus the determination of other-than-temporary impairment of the securities in the investment securities portfolio, which could adversely affect Blue Ridge’s earnings and capital ratios.

Blue Ridge’s business is subject to interest rate risk, and variations in interest rates and inadequate management of interest rate risk may negatively affect financial performance.

Changes in the interest rate environment may reduce Blue Ridge’s profits. It is expected that Blue Ridge will continue to realize income from the differential or “spread” between the interest earned on loans, securities, and other interest earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest earning assets and interest-bearing liabilities. In addition, loan volume and yields are affected by market interest rates on loans, and the current interest rate environment encourages extreme competition for new loan originations from qualified borrowers. Blue Ridge’s management cannot ensure that it can minimize interest rate risk. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, Blue Ridge’s net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Accordingly, changes in levels of market interest rates could materially and adversely affect the net interest spread, asset quality, loan origination volume and Blue Ridge’s overall profitability.

Following the COVID-19 outbreak, market interest rates have declined significantly, with the 10-year U.S. Treasury bond falling below 1.00% on March 3, 2020 for the first time. Such events also may adversely affect business and consumer confidence, generally, and Blue Ridge and its customers, and their respective suppliers, vendors and processors may be adversely affected. On March 3, 2020, the Federal Open Market Committee (“FOMC”) reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. Subsequently, on March 16, 2020, the FOMC further reduced the target federal funds rate by an additional 100 basis points to 0.00% to 0.25%. These reductions in interest rates and related actions in response to the COVID-19 outbreak may adversely affect Blue Ridge’s financial condition and results of operations.

Blue Ridge’s mortgage banking revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market, any of which could adversely impact Blue Ridge’s profits.

Mortgage banking income, net of commissions, represented approximately 50.1% of Blue Ridge’s total noninterest income for the year ended December 31, 2019, and approximately 68.5% of Blue Ridge’s total noninterest income for the nine months ended September 30, 2020. The success of Blue Ridge’s mortgage division is dependent upon its ability to originate loans and sell them to investors at or near current volumes. Loan production levels are sensitive to changes in the level of interest rates and changes in economic conditions. During the recovery from the financial crisis, revenues from mortgage banking increased due to a lowering interest rate environment that resulted in a high volume of mortgage loan refinancing activity. Subsequently, revenues were adversely affected by rising interest rates, home affordability and inventory issues, and changing incentives for homeownership. Following the outbreak of the COVID-19 pandemic, mortgage rates have generally fallen, creating the potential for renewed refinancing activity, but economic conditions have also deteriorated. Loan production levels may suffer if there is a sustained slowdown in the housing markets in which Blue Ridge conducts business or tightening credit conditions. Any sustained period of decreased activity caused by an economic downturn, fewer refinancing transactions, higher interest rates, housing price pressure or loan underwriting restrictions would adversely affect Blue Ridge’s mortgage originations and, consequently, could significantly reduce its income from mortgage banking activities. As a result, these conditions would also adversely affect Blue Ridge’s results of operations.

 

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Blue Ridge’s liquidity needs could adversely affect results of operations and financial condition.

Blue Ridge’s primary sources of funds are deposits and loan repayments. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including, but not limited to, changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, availability of, and/or access to, sources of refinancing, business closings or lay-offs, pandemics or endemics, inclement weather, natural disasters and international instability. Additionally, deposit levels may be affected by a number of factors, including, but not limited to, rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to customers on alternative investments and general economic conditions. Accordingly, Blue Ridge may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include Federal Home Loan Bank of Atlanta (“FHLB”) advances, sales of securities and loans, federal funds lines of credit from correspondent banks and borrowings from the Federal Reserve Discount Window, as well as additional out-of-market time deposits and brokered deposits. While Blue Ridge believes that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if Blue Ridge continues to grow and experiences increasing loan demand. Blue Ridge may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate.

Blue Ridge may need to raise additional capital in the future and may not be able to do so on acceptable terms, or at all.

Access to sufficient capital is critical in order to enable Blue Ridge to implement its business plan, support its business, expand its operations and meet applicable capital requirements. The inability to have sufficient capital, whether internally generated through earnings or raised in the capital markets, could adversely impact Blue Ridge’s ability to support and to grow its operations. If Blue Ridge grows its operations faster than it generates capital internally, it will need to access the capital markets. Blue Ridge may not be able to raise additional capital in the form of additional debt or equity on acceptable terms, or at all. Blue Ridge’s ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, Blue Ridge’s financial condition and its results of operations. Economic conditions and a loss of confidence in financial institutions may increase Blue Ridge’s cost of capital and limit access to some sources of capital. Further, if Blue Ridge needs to raise capital in the future, it may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. An inability to raise additional capital on acceptable terms when needed could have a material adverse impact on Blue Ridge’s business, financial condition and results of operations.

Future issuances of Blue Ridge’s common stock could adversely affect the market price of the common stock and could be dilutive.

The Blue Ridge Board, without the approval of shareholders, could from time to time decide to issue additional shares of common stock or shares of preferred stock, which may adversely affect the market price of the shares of common stock and could be dilutive to Blue Ridge’s shareholders. Any sale of additional shares of Blue Ridge’s common stock may be at prices lower than the current market value of Blue Ridge’s shares. In addition, new investors may have rights, preferences and privileges that are senior to, and that could adversely affect, Blue Ridge’s existing shareholders. For example, preferred stock would be senior to common stock in right of dividends and as to distributions in liquidation. Blue Ridge cannot predict or estimate the amount, timing, or nature of its future offerings of equity securities. Thus, Blue Ridge’s shareholders bear the risk of future offerings diluting their stock holdings, adversely affecting their rights as shareholders, and/or reducing the market price of Blue Ridge’s common stock.

 

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Blue Ridge operates in a highly regulated industry and the laws and regulations that govern Blue Ridge’s operations, corporate governance, executive compensation and financial accounting, or reporting, including changes in them or Blue Ridge’s failure to comply with them, may adversely affect Blue Ridge.

Blue Ridge is subject to extensive regulation and supervision that govern almost all aspects of its operations. These laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on Blue Ridge’s business activities, limit the dividends or distributions that it can pay, restrict the ability of institutions to guarantee its debt and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in its capital than accounting principles generally accepted in the United States of America (“GAAP”). Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs.

Blue Ridge is currently facing increased regulation and supervision of its industry as a result of the financial crisis in the banking and financial markets. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) instituted major changes to the banking and financial institutions regulatory regimes. Other changes to statutes, regulations or regulatory policies or supervisory guidance, including changes in interpretation or implementation of statutes, regulations, policies or supervisory guidance, could affect Blue Ridge in substantial and unpredictable ways. Such additional regulation and supervision has increased, and may continue to increase, Blue Ridge’s costs and limit its ability to pursue business opportunities. Further, Blue Ridge’s failure to comply with these laws and regulations, even if the failure was inadvertent or reflects a difference in interpretation, could subject it to restrictions on its business activities, fines and other penalties, any of which could adversely affect Blue Ridge’s results of operations, capital base and the price of its securities. Further, any new laws, rules and regulations could make compliance more difficult or expensive or otherwise adversely affect Blue Ridge’s business and financial condition.

Recently enacted capital standards, including the Basel III Capital Rules, may require Blue Ridge and Blue Ridge Bank to maintain higher levels of capital and liquid assets, which could adversely affect Blue Ridge’s profitability and return on equity.

Blue Ridge is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital that Blue Ridge and Blue Ridge Bank must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines. If Blue Ridge fails to meet these minimum capital guidelines and/or other regulatory requirements, its financial condition would be materially and adversely affected. The rules implementing the Basel III capital framework and certain related provisions of the Dodd-Frank Act (the “Basel III Capital Rules”) require bank holding companies and their subsidiaries to maintain significantly more capital as a result of higher required capital levels and more demanding regulatory capital risk weightings and calculations. While Blue Ridge is exempt from these capital requirements under the Federal Reserve’s interim final rule required by the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (the “EGRRCPA”) that expands the applicability of the Federal Reserve’s Small Bank Holding Company Policy Statement (the “SBHC Policy Statement”), Blue Ridge Bank is not exempt and must comply. Blue Ridge Bank must also comply with the capital requirements set forth in the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act of 1950 (the “FDI Act”). Satisfying capital requirements may require Blue Ridge to limit its banking operations, retain net income or reduce dividends to improve regulatory capital levels, which could negatively affect its business, financial condition and results of operations. The EGRRCPA, which became effective May 24, 2018, amended the Dodd-Frank Act to, among other things, provide relief from certain of these requirements. Although the EGRRCPA is still being implemented, Blue Ridge does not expect the EGRRCPA and the related rulemakings to materially reduce the impact of capital requirements on its business.

 

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Regulations issued by the CFPB could adversely impact earnings due to, among other things, increased compliance costs or costs due to noncompliance.

The Consumer Financial Protection Bureau (the “CFPB”) has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers. The CFPB has also been directed to write rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. For example, the CFPB issued a final rule, effective January 10, 2014, requiring mortgage lenders to make a reasonable and good faith determination based on verified and documented information that a consumer applying for a mortgage loan has a reasonable ability to repay the loan according to its terms, or to originate “qualified mortgages” that meet specific requirements with respect to terms, pricing and fees. The rule also contains additional disclosure requirements at mortgage loan origination and in monthly statements. The requirements under the CFPB’s regulations and policies could limit Blue Ridge’s ability to make certain types of loans or loans to certain borrowers, or could make it more expensive and/or time consuming to make these loans, which could adversely impact Blue Ridge’s profitability.

Blue Ridge is subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage Blue Ridge’s reputation and otherwise adversely affect its business.

Blue Ridge’s business requires the collection and retention of large volumes of customer data, including personally identifiable information (“PII”) in various information systems that Blue Ridge maintains and in those maintained by third party service providers. Blue Ridge also maintains important internal company data such as PII about its employees and information relating to its operations. Blue Ridge is subject to complex and evolving laws and regulations governing the privacy and protection of PII of individuals (including customers, employees and other third-parties). For example, Blue Ridge’s business is subject to the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”), which, among other things: (i) imposes certain limitations on Blue Ridge’s ability to share nonpublic PII about its customers with nonaffiliated third parties; (ii) requires that Blue Ridge provides certain disclosures to customers about its information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by it with nonaffiliated third parties (with certain exceptions); and (iii) requires that Blue Ridge develops, implements and maintains a written comprehensive information security program containing appropriate safeguards based on Blue Ridge’s size and complexity, the nature and scope of its activities, and the sensitivity of customer information it processes, as well as plans for responding to data security breaches. Various federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in the event of a security breach. Ensuring that Blue Ridge’s collection, use, transfer and storage of PII complies with all applicable laws and regulations can increase Blue Ridge’s costs. Furthermore, Blue Ridge may not be able to ensure that customers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or misused, Blue Ridge could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of Blue Ridge’s measures to safeguard PII, or even the perception that such measures are inadequate, could cause Blue Ridge to lose customers or potential customers and thereby reduce its revenues. Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws and regulations may subject Blue Ridge to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage Blue Ridge’s reputation and otherwise adversely affect its operations, financial condition and results of operations.

 

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The obligations associated with operating as a public company require significant resources and management attention and have caused and will continue to cause Blue Ridge to incur additional expenses, which will adversely affect its profitability.

Blue Ridge became a public company in connection with its acquisition of Virginia Community Bankshares, Inc. (“VCB”) in December 2019. Blue Ridge’s non-interest expenses have increased in 2020 and are expected to increase in the future as a result of the additional accounting, legal and various other additional expenses usually associated with operating as a public company and complying with public company disclosure obligations. As a privately held company prior to December 2019, Blue Ridge was not required to comply with certain corporate governance and financial reporting practices and policies required of a publicly traded company. Blue Ridge is required to comply with the requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Act, NYSE American listing requirements and other applicable securities rules and regulations. The Exchange Act requires, among other things, that Blue Ridge files annual, quarterly, and current reports with respect to its business and operating results with the SEC. Blue Ridge is required to ensure that it has the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. During 2020, compliance with these rules and regulations have increased Blue Ridge’s legal and financial compliance costs, made some activities more difficult, time-consuming or costly and increased demand on Blue Ridge’s systems and resources. Such compliance impact is expected to continue in the future. Blue Ridge might not be successful in complying with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on its business, financial condition, results of operations and cash flows.

Blue Ridge’s business and earnings are impacted by governmental, fiscal and monetary policy over which it has no control.

Blue Ridge is affected by domestic monetary policy. The Federal Reserve regulates the supply of money and credit in the United States and its policies determine in large part Blue Ridge’s cost of funds for lending, investing and capital raising activities and the return it earns on those loans and investments, both of which affect Blue Ridge’s net interest margin. The actions of the Federal Reserve also can materially affect the value of financial instruments that Blue Ridge holds, such as loans and debt securities, and also can affect Blue Ridge’s borrowers, potentially increasing the risk that they may fail to repay their loans. Blue Ridge’s business and earnings also are affected by the fiscal or other policies that are adopted by various regulatory authorities of the United States. Changes in fiscal or monetary policy are beyond Blue Ridge’s control and hard to predict.

Changes in accounting standards could impact reported earnings.

The authorities that promulgate accounting standards, including the Financial Accounting Standards Board (“FASB”), the SEC and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of Blue Ridge’s consolidated financial statements. These changes are difficult to predict and can materially impact how Blue Ridge records and reports its financial condition and results of operations. In some cases, Blue Ridge could be required to apply a new or revised standard retroactively, resulting in the restatement of financial statements for prior periods. Such changes could also require Blue Ridge to incur additional personnel or technology costs. For information regarding recent accounting pronouncements and their effects on Blue Ridge, see “Recent Accounting Pronouncements” in Note 2 of Blue Ridge’s audited financial statements for the year ended December 31, 2019 and Note 2 of Blue Ridge’s unaudited consolidated financial statements for the quarter ended September 30, 2020 included elsewhere in this joint proxy statement/prospectus.

Failure to maintain effective systems of internal and disclosure control could have a material adverse effect on Blue Ridge’s results of operation and financial condition.

Effective internal and disclosure controls are necessary for Blue Ridge to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. Blue Ridge Bank is also required to establish and maintain an adequate internal control structure over financial reporting pursuant to regulations of

 

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the Federal Deposit Insurance Corporation (“FDIC”). As a public company, Blue Ridge is required by the Sarbanes-Oxley Act to design and maintain a system of internal control over financial reporting and, beginning with its second annual report on Form 10-K, include management’s assessment regarding internal control over financial reporting. If Blue Ridge cannot provide reliable financial reports or prevent fraud, its reputation and operating results would be harmed. As part of Blue Ridge’s ongoing monitoring of internal control, it may discover material weaknesses or significant deficiencies in its internal control that require remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Blue Ridge’s inability to maintain the operating effectiveness of the controls described above could result in a material misstatement to Blue Ridge’s financial statements or other disclosures, which could have an adverse effect on its business, financial condition or results of operations. In addition, any failure to maintain effective controls in accordance with Section 404 of the Sarbanes-Oxley Act and FDIC regulations or to timely effect any necessary improvement of Blue Ridge’s internal and disclosure controls could, among other things, result in losses from fraud or error, harm Blue Ridge’s reputation or cause investors to lose confidence in its reported financial information, all of which could have a material adverse effect on its results of operation and financial condition.

Blue Ridge qualifies as an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make its common stock less attractive to investors.

Blue Ridge qualifies as an “emerging growth company,” as defined in the federal securities laws. For as long as it continues to be an emerging growth company, Blue Ridge may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company Blue Ridge has elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to a company that is not an issuer (as defined under Section 2(a) of the Sarbanes-Oxley Act), if such standards apply to companies that are not issuers. This may make Blue Ridge’s financial statements not comparable with other public companies that are not emerging growth companies or that are emerging growth companies that have opted out of the extended transition period because of the potential differences in accounting standards used. Blue Ridge could be an emerging growth company for up to five years, although it could lose that status sooner if its gross revenues exceed $1.07 billion, if it issues more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of its common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case Blue Ridge would no longer be an emerging growth company as of the following December 31. Blue Ridge cannot predict if investors will find its common stock less attractive because it may rely on these exemptions, or if it chooses to rely on additional exemptions in the future. If some investors find Blue Ridge’s common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile.

Blue Ridge also qualifies as a “smaller reporting company,” and the reduced disclosure obligations applicable to smaller reporting companies may makes its common stock less attractive to investors.

Blue Ridge also is a “smaller reporting company,” as defined in federal securities laws, and will remain a smaller reporting company until the fiscal year following the determination that its voting and non-voting common shares held by non-affiliates is more than $250 million measured on the last business day of its second fiscal quarter, or its annual revenues are less than $100 million during the most recently completed fiscal year and its voting and non-voting common shares held by non-affiliates is more than $700 million measured on the last

 

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business day of its second fiscal quarter. Similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified executive compensation information and only two years of audited financial statements. If Blue Ridge is a smaller reporting company at the time it ceases to be an emerging growth company, it may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. If some investors find Blue Ridge’s common stock less attractive because it may rely on these reduced disclosure obligations, there may be a less active trading market for its common stock and its stock price may be more volatile.

Blue Ridge faces strong and growing competition from financial services companies and other companies that offer banking and other financial services, which could negatively affect Blue Ridge’s business.

Blue Ridge encounters substantial competition from other financial institutions in its market area and competition is increasing. Ultimately, Blue Ridge may not be able to compete successfully against current and future competitors. Many competitors offer the same banking services that Blue Ridge offers in its service area. These competitors include national, regional and community banks. Blue Ridge also faces competition from many other types of financial institutions, including finance companies, mutual and money market fund providers, brokerage firms, insurance companies, credit unions, financial subsidiaries of certain industrial corporations, financial technology companies and mortgage companies. Increased competition may result in reduced business for Blue Ridge.

Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of larger customers. Areas of competition include interest rates for loans and deposits, efforts to obtain loans and deposits, and range and quality of products and services provided, including new technology-driven products and services. If Blue Ridge is unable to attract and retain banking customers, it may be unable to continue to grow loan and deposit portfolios and its results of operations and financial condition may otherwise be adversely affected.

Combining Blue Ridge and VCB may be more difficult, costly or time-consuming than expected.

The success of Blue Ridge’s acquisition of VCB will depend, in part, on Blue Ridge’s ability to realize the anticipated benefits and cost savings from combining the businesses of Blue Ridge and VCB. To realize such anticipated benefits and cost savings, Blue Ridge must successfully combine the businesses of Blue Ridge and VCB in a manner that permits growth opportunities and cost savings to be realized without materially disrupting existing customer relationships or decreasing revenues due to loss of customers. If Blue Ridge is not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than expected.

Until the completion of the merger in December 2019, Blue Ridge and VCB operated independently. To realize anticipated benefits from the merger, Blue Ridge will continue to integrate VCB’s business into its own. The integration process could result in the loss of key employees, the disruption of Blue Ridge’s ongoing business, or inconsistencies in standards, controls, procedures and policies that affect adversely Blue Ridge’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the merger. The loss of key employees could adversely affect Blue Ridge’s ability to conduct business in the markets it entered in connection with its acquisition of VCB, which could have an adverse effect on Blue Ridge’s financial results and the value of its common stock. If Blue Ridge experiences difficulties with the integration process, the anticipated benefits of the merger may not be realized, fully or at all, or may take longer to realize than expected, which could have a material adverse effect on its results of operation and financial condition.

 

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Blue Ridge may not be able to effectively integrate the operations of Blue Ridge Bank and Virginia Community Bank.

The future operating performance of Blue Ridge Bank will depend, in part, on the success of the merger of Blue Ridge Bank and Virginia Community Bank in December 2019. The success of the Blue Ridge Bank and Virginia Community Bank merger depends on a number of factors, including Blue Ridge’s ability to (i) integrate operations and branches, (ii) retain deposits and customers, (iii) control the incremental increase in noninterest expense arising from the merger, and (iv) retain and integrate appropriate personnel and reduce overlapping personnel. The continued integration of Blue Ridge Bank and Virginia Community Bank will require the dedication of the time and resources of Blue Ridge’s management team and may temporarily distract the management team’s attention from the day-to-day business of Blue Ridge and Blue Ridge Bank. If Blue Ridge Bank and Virginia Community Bank are unable to successfully integrate, Blue Ridge Bank may not be able to realize expected operating efficiencies and eliminate redundant costs.

Blue Ridge may not be able to successfully manage its long-term growth, which may adversely affect its results of operations and financial condition.

A key aspect of Blue Ridge’s long-term business strategy is its continued growth and expansion. Blue Ridge’s ability to continue to grow depends, in part, upon its ability to (i) open new branch offices or acquire existing branches or other financial institutions, (ii) attract deposits to those locations, and (iii) identify attractive loan and investment opportunities.

Blue Ridge may not be able to successfully implement its growth strategy if it is unable to identify attractive markets, locations or opportunities to expand in the future, or if Blue Ridge is subject to regulatory restrictions on growth or expansion of its operations. Blue Ridge’s ability to manage its growth successfully also will depend on whether it can maintain capital levels adequate to support its growth, maintain cost controls and asset quality and successfully integrate any businesses Blue Ridge acquires into its organization. As Blue Ridge identifies opportunities to implement its growth strategy by opening new branches or acquiring branches or other banks, it may incur increased personnel, occupancy and other operating expenses. In the case of new branches, Blue Ridge must absorb those higher expenses while it begins to generate new deposits, and there is a further time lag involved in redeploying new deposits into attractively priced loans and other higher yielding assets.

Blue Ridge may consider acquiring other businesses or expanding into new product lines that it believes will help it fulfill its strategic objectives. Blue Ridge expects that other banking and financial companies, some of which have significantly greater resources, will compete with it to acquire financial services businesses. This competition could increase prices for potential acquisitions that Blue Ridge believes are attractive. Acquisitions may also be subject to various regulatory approvals. If Blue Ridge fails to receive the appropriate regulatory approvals, it will not be able to consummate acquisitions that it believes are in its best interests.

When Blue Ridge enters into new markets or new lines of business, its lack of history and familiarity with those markets, clients and lines of business may lead to unexpected challenges or difficulties that inhibit its success. Blue Ridge’s plans to expand could depress earnings in the short run, even if it efficiently executes a growth strategy leading to long-term financial benefits.

Blue Ridge depends on the accuracy and completeness of information about clients and counterparties and Blue Ridge’s financial condition could be adversely affected if it relies on misleading or incorrect information.

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, Blue Ridge may rely on information furnished to it by or on behalf of clients and counterparties, including financial statements and other financial information, which it does not independently verify. Blue Ridge also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend

 

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credit to clients, Blue Ridge may assume that a client’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of that client. Blue Ridge’s financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading.

Blue Ridge’s success depends on its management team, and the unexpected loss of any of these personnel could adversely affect operations.

Blue Ridge’s success is, and is expected to remain, highly dependent on its management team. This is particularly true because, as a community bank, Blue Ridge depends on the management team’s ties to the community and customer relationships to generate business. Blue Ridge’s growth will continue to place significant demands on management, and the loss of any such person’s services may have an adverse effect upon growth and profitability. If Blue Ridge fails to retain or continue to recruit qualified employees, growth and profitability could be adversely affected.

The success of Blue Ridge’s strategy depends on its ability to identify and retain individuals with experience and relationships in its markets.

In order to be successful, Blue Ridge must identify and retain experienced key management members and sales staff with local expertise and relationships. Competition for qualified personnel is intense and there is a limited number of qualified persons with knowledge of and experience in the community banking and mortgage industry in Blue Ridge’s chosen geographic market. Even if Blue Ridge identifies individuals that it believes could assist it in building its franchise, it may be unable to recruit these individuals away from their current employers. In addition, the process of identifying and recruiting individuals with the combination of skills and attributes required to carry out Blue Ridge’s strategy is often lengthy. Blue Ridge’s inability to identify, recruit and retain talented personnel could limit its growth and could materially adversely affect its business, financial condition and results of operations.

Blue Ridge relies on other companies to provide key components of its business infrastructure.

Third parties provide key components of Blue Ridge’s business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, internet connections and network access. While Blue Ridge has selected these third-party vendors carefully, it does not control their actions. Any problem caused by these third parties, including poor performance of services, failure to provide services, disruptions in communication services provided by a vendor and failure to handle current or higher volumes, could adversely affect Blue Ridge’s ability to deliver products and services to its customers and otherwise conduct its business, and may harm its reputation. Financial or operational difficulties of a third-party vendor could also hurt Blue Ridge’s operations if those difficulties interface with the vendor’s ability to serve Blue Ridge. Replacing these third-party vendors could also create significant delay and expense. Accordingly, use of such third-parties creates an unavoidable inherent risk to Blue Ridge’s business operations.

The soundness of other financial institutions could adversely affect Blue Ridge.

Blue Ridge’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. Blue Ridge has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by Blue Ridge or by other institutions. Many of these transactions expose Blue Ridge to credit risk in the event of default of its counterparty or client. In addition, credit risk may be exacerbated when the collateral held cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the financial instrument exposure due. There is no assurance that any such losses would not materially and adversely affect results of operations.

 

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Blue Ridge is subject to a variety of operational risks, including reputational risk, legal and compliance risk, and the risk of fraud or theft by employees or outsiders.

Blue Ridge is exposed to many types of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees, operational errors, clerical or record-keeping errors, and errors resulting from faulty or disabled computer or communications systems.

Reputational risk, or the risk to Blue Ridge’s earnings and capital from negative public opinion, could result from Blue Ridge’s actual or alleged conduct in any number of activities, including lending practices, corporate governance, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect Blue Ridge’s ability to attract and keep customers and employees and can expose it to litigation and regulatory action.

Further, if any of Blue Ridge’s financial, accounting, or other data processing systems fail or have other significant issues, Blue Ridge could be adversely affected. Blue Ridge depends on internal systems and outsourced technology to support these data storage and processing operations. Blue Ridge’s inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of Blue Ridge’s business operations. It could be adversely affected if one of its employees causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates its operations or systems. Blue Ridge is also at risk of the impact of natural disasters, terrorism and international hostilities on its systems and from the effects of outages or other failures involving power or communications systems operated by others. Blue Ridge may also be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or electrical or communications outages), which may give rise to disruption of service to customers and to financial loss or liability. In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. Although Blue Ridge has policies and procedures in place to verify the authenticity of its customers, it cannot guarantee that such policies and procedures will prevent all fraudulent transfers. Such activity can result in financial liability and harm to Blue Ridge’s reputation. If any of the foregoing risks materialize, it could have a material adverse effect on Blue Ridge’s business, financial condition and results of operations.

Pending litigation could result in a judgment against Blue Ridge resulting in the payment of damages.

On August 12, 2019, a former employee of VCB and participant in its Employee Stock Ownership Plan (the “ESOP”) filed a class action complaint against VCB, Virginia Community Bank, and certain individuals associated with the ESOP in the U.S. District Court for the Western District of Virginia, Charlottesville Division (Case No. 3:19-cv-00045-GEC). The complaint alleges, among other things, that the defendants breached their fiduciary duties to ESOP participants in violation of the Employee Retirement Income Security Act of 1974, as amended. The complaint alleges that the ESOP incurred damages “that approach or exceed $12 million.” Blue Ridge automatically assumed any liability of VCB in connection with this litigation as a result of Blue Ridge’s acquisition of VCB. The outcome of this litigation is uncertain, and the plaintiff and other individuals may file additional lawsuits related to the ESOP. The defense, settlement, or adverse outcome of any such lawsuit or claim could have a material adverse financial impact on Blue Ridge.

Blue Ridge may be required to transition from the use of the LIBOR index in the future.

Blue Ridge has certain variable-rate loans indexed to LIBOR to calculate the loan interest rate. The United Kingdom Financial Conduct Authority, which regulates LIBOR, has announced that the continued availability of LIBOR on the current basis is not guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional

 

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reforms to LIBOR may be enacted in the United Kingdom or elsewhere. At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR, and it is impossible to predict the effect of any such alternatives on the value of LIBOR-based variable-rate loans, as well as LIBOR-based securities, subordinated notes, trust preferred securities, or other securities or financial arrangements. The implementation of a substitute index or indices for the calculation of interest rates under Blue Ridge’s loan agreements with borrowers, subordinated notes that it has issued, or other financial arrangements may cause Blue Ridge to incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers or other counter-parties over the appropriateness or comparability to LIBOR of the substitute index or indices, any of which could have a material adverse effect on Blue Ridge’s results of operations.

Blue Ridge’s operations may be adversely affected by cyber security risks.

In the ordinary course of business, Blue Ridge collects and stores sensitive data, including proprietary business information and personally identifiable information of its customers and employees in systems and on networks. The secure processing, maintenance, and use of this information is critical to operations and Blue Ridge’s business strategy. Blue Ridge has invested in accepted technologies, and continually reviews processes and practices that are designed to protect its networks, computers, and data from damage or unauthorized access. Despite these security measures, Blue Ridge’s computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. A breach of any kind could compromise systems and the information stored there could be accessed, damaged or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to Blue Ridge’s reputation, which could adversely affect its business and financial condition. Furthermore, as cyber threats continue to evolve and increase, Blue Ridge may be required to expend significant additional financial and operational resources to modify or enhance its protective measures, or to investigate and remediate any identified information security vulnerabilities.

In addition, multiple major U.S. retailers have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information and other financial or privileged data. Retailer incursions affect cards issued and deposit accounts maintained by many banks, including Blue Ridge Bank. Although Blue Ridge’s systems are not breached in retailer incursions, these events can cause it to reissue a significant number of cards and take other costly steps to avoid significant theft loss to Blue Ridge and its customers. In some cases, Blue Ridge may be required to reimburse customers for the losses they incur. Other possible points of intrusion or disruption not within Blue Ridge’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (cloud) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers.

Consumers may increasingly decide not to use banks to complete their financial transactions, which would have a material adverse impact on Blue Ridge’s financial condition and operations.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on Blue Ridge’s financial condition and results of operations.

 

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Blue Ridge’s ability to operate profitably may be dependent on its ability to integrate or introduce various technologies into its operations.

The market for financial services, including banking and consumer finance services, is increasingly affected by advances in technology, including developments in telecommunications, data processing, computers, automation, online banking and tele-banking. Blue Ridge’s ability to compete successfully in its market may depend on the extent to which it is able to implement or exploit such technological changes. If Blue Ridge is not able to afford such technologies, properly or timely anticipate or implement such technologies, or effectively train its staff to use such technologies, its business, financial condition or operating results could be adversely affected.

Blue Ridge relies upon independent appraisals to determine the value of the real estate that secures a significant portion of its loans and the value of foreclosed properties carried on its books, and the values indicated by such appraisals may not be realizable if it is forced to foreclose upon such loans or liquidate such foreclosed property.

As indicated above, a significant portion of Blue Ridge’s loan portfolio consists of loans secured by real estate and it also holds a portfolio of foreclosed properties. Blue Ridge relies upon independent appraisers to estimate the value of such real estate. Appraisals are only estimates of value and the independent appraisers may make mistakes of fact or judgment that adversely affect the reliability of their appraisals. In addition, events occurring after the initial appraisal may cause the value of the real estate to increase or decrease. As a result of any of these factors, the real estate securing some of Blue Ridge’s loans and the foreclosed properties held by Blue Ridge may be more or less valuable than anticipated. If a default occurs on a loan secured by real estate that is less valuable than originally estimated, Blue Ridge may not be able to recover the outstanding balance of the loan. It may also be unable to sell its foreclosed properties for the values estimated by their appraisals.

Blue Ridge is exposed to risk of environmental liabilities with respect to properties to which it takes title.

In the course of its business, Blue Ridge may foreclose and take title to real estate, potentially becoming subject to environmental liabilities associated with the properties. Blue Ridge may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs or Blue Ridge may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. Costs associated with investigation or remediation activities can be substantial. If Blue Ridge is the owner or former owner of a contaminated site, it may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect Blue Ridge’s business.

Blue Ridge is not obligated to pay dividends and its ability to pay dividends is limited.

Blue Ridge’s ability to make dividend payments on its common stock depends primarily on certain regulatory considerations and the receipt of dividends and other distributions from Blue Ridge Bank. There are various regulatory restrictions on the ability of banks, such as Blue Ridge Bank, to pay dividends or make other payments to their holding companies. Blue Ridge is currently paying a quarterly cash dividend to holders of its common stock at a rate of $0.1425 per share. Although Blue Ridge has historically paid a cash dividend to the holders of its common stock, holders of its common stock are not entitled to receive dividends, and Blue Ridge is not obligated to pay dividends in any particular amounts or at any particular times. Regulatory, economic and other factors may cause Blue Ridge’s board to consider, among other things, the reduction of dividends paid on its common stock.

Blue Ridge’s common stock is thinly traded, and a more liquid market for its common stock may not develop, which may limit the ability of shareholders to sell their shares and may increase price volatility.

Blue Ridge’s common stock is listed on the NYSE American market under the symbol “BRBS.” Blue Ridge’s common stock is thinly traded and has substantially less liquidity than the trading markets for many other bank holding companies. Although Blue Ridge recently listed its common stock on the NYSE American market, Blue

 

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Ridge may be unable to maintain the listing of its common stock in the future. In addition, there can be no assurance that an active trading market for shares of Blue Ridge’s common stock will develop or if one develops, that it can be sustained. The development of a liquid public market depends on the existence of willing buyers and sellers, the presence of which is not within Blue Ridge’s control. Therefore, Blue Ridge’s shareholders may not be able to sell their shares at the volume, prices, or times that they desire. Shareholders should be financially prepared and able to hold shares for an indefinite period.

In addition, thinly traded stocks can be more volatile than more widely traded stocks. Blue Ridge’s stock price has been volatile in the past and several factors could cause the price to fluctuate substantially in the future. These factors include, but are not limited to, changes in analysts’ recommendations or projections, developments related to Blue Ridge’s business and operations, stock performance of other companies deemed to be peers, news reports of trends, concerns, irrational exuberance on the part of investors, and other issues related to the financial services industry. Blue Ridge’s stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to its performance. General market declines or market volatility in the future, especially in the financial institutions sector of the economy, could adversely affect the price of Blue Ridge’s common stock, and the current market price may not be indicative of future market prices.

Blue Ridge’s governing documents and Virginia law contain provisions that may discourage or delay an acquisition of Blue Ridge even if such acquisition or transaction is supported by shareholders.

Certain provisions of Blue Ridge’s articles of incorporation could delay or make a merger, tender offer or proxy contest involving Blue Ridge more difficult, even in instances where the shareholders deem the proposed transaction to be beneficial to their interests. One provision, among others, provides that a plan of merger, share exchange, sale of all or substantially all of Blue Ridge’s assets, or similar transaction must be approved and recommended by the affirmative vote of 80% of the outstanding capital stock of Blue Ridge entitled to vote on the transaction if the transaction is with a corporation, person or entity that is a beneficial owner, directly or indirectly, of more than 5% of the shares of capital stock of Blue Ridge. In addition, certain provisions of state and federal law may also have the effect of discouraging or prohibiting a future takeover attempt in which Blue Ridge’s shareholders might otherwise receive a substantial premium for their shares over then-current market prices. To the extent that these provisions discourage or prevent takeover attempts, they may tend to reduce the market price for Blue Ridge’s common stock.

The rights of holders of Blue Ridge’s common stock are subordinate in some respects to the rights of holders of Blue Ridge’s debt securities.

As of September 30, 2020, Blue Ridge had $25.0 million of subordinated notes outstanding and may issue more debt securities or otherwise incur debt in the future. The rights of holders of Blue Ridge’s debt to receive payments are superior to the rights of the holders of Blue Ridge’s common stock to receive payments of dividends and payments upon a sale or liquidation of Blue Ridge. In addition, the agreements under which the subordinated notes were issued prohibit Blue Ridge from paying any dividends on its common stock or making any other distributions to its shareholders upon its failure to make any required payment of principal or interest or during the continuance of an event of default under the applicable agreement. Events of default generally consist of, among other things, certain events of bankruptcy, insolvency or liquidation relating to Blue Ridge. If Blue Ridge were to fail to make a required payment of principal or interest on its subordinated notes, it could have a material adverse effect on the market value of Blue Ridge’s common stock.

An investment in Blue Ridge’s common stock is not an insured deposit.

Blue Ridge’s common stock is not a bank deposit and, therefore, it is not insured against loss by the FDIC or by any other public or private entity. An investment in Blue Ridge’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company and, as a result, shareholders may lose some or all of their investment.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This joint proxy statement/prospectus reflects the current views and estimates of future economic circumstances, industry conditions, company performance, and financial results of the management of Blue Ridge and Bay Banks. These forward-looking statements are subject to a number of risks and uncertainties which could cause Blue Ridge’s or Bay Banks’ actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements, and such differences may be material. Forward-looking statements speak only as of the date they are made and Blue Ridge and Bay Banks do not assume any duty to update forward-looking statements. These forward-looking statements include, but are not limited to, statements about (i) the expected benefits of the merger between Blue Ridge and Bay Banks, including future financial and operating results, cost savings, enhanced revenues and the expected market position of the combined company that may be realized from the merger, and (ii) Blue Ridge’s and Bay Banks’ plans, objectives, expectations and intentions and other statements contained in this joint proxy statement/prospectus that are not historical facts. Other statements identified by words including, but not limited to, “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” “predicts,” “potential,” “possible,” “should,” “would,” “will,” “goal,” “target” or words of similar meaning generally are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of Blue Ridge’s and Bay Banks’ management and are inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond their respective control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ from those indicated or implied in the forward-looking statements and such differences may be material.

The following risks, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

 

   

fluctuations in the market price of Blue Ridge common stock and the related effect on the market value of the merger consideration that Bay Banks shareholders will receive upon completion of the merger;

 

   

the expected cost savings from the merger may not be fully realized or may take longer to realize than expected;

 

   

the integration of the businesses of Blue Ridge and Bay Banks may be more difficult, costly or time-consuming than expected, and could result in the loss of customers;

 

   

regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met;

 

   

a significant delay in the completion of the merger could negatively affect Blue Ridge and Bay Banks as a combined company;

 

   

the fairness opinions of Blue Ridge’s and Bay Banks’ advisors have not been, and are not expected to be, updated to reflect changes in circumstances between the date of the opinions and the shareholder meetings or the completion of the merger;

 

   

if the merger is completed, Blue Ridge and Bay Banks shareholders will have less influence on the management and policies of Blue Ridge than they had on Blue Ridge and Bay Banks, respectively, independently before the merger;

 

   

business uncertainties and contractual restrictions while the merger is pending;

 

   

distraction of Bay Banks and Blue Ridge management as a result of the merger;

 

   

the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

 

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

 

   

the effects of the COVID-19 pandemic, including the adverse impact on Blue Ridge’s and Bay Banks’ business and operations and on their 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;

 

   

the management of risks inherent in the real estate loan portfolio of Bay Banks and Blue Ridge, and the risk of a prolonged downturn in the real estate market, which could impair the value of both companies’ collateral and ability to sell collateral upon any foreclosure;

 

   

changes in consumer spending and savings habits; technological and social media changes;

 

   

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;

 

   

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 Blue Ridge Bank or Virginia Commonwealth 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;

 

   

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 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 Financial Accounting Standards Board (the “FASB”) or other accounting standards setting bodies;

 

   

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 products and services of Blue Ridge and Bay Banks;

 

   

the effect of acquisitions we may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;

 

   

changes in the level of nonperforming assets and charge-offs of Blue Ridge and Bay Banks;

 

   

our involvement, from time to time, in legal proceedings and examination and remedial actions by regulators;

 

   

potential exposure to fraud, negligence, computer theft and cyber-crime;

 

   

Blue Ridge’s ability to pay dividends;

 

   

Blue Ridge’s involvement as a participating lender in the PPP as administered through the SBA; and

 

   

increased information security risk, including cyber security risk, which may lead to potential business disruptions or financial losses;

 

   

volatility in the securities markets generally or in the market price of Blue Ridge’s stock specifically; and

 

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other risks and factors identified in this joint proxy statement/prospectus in the “Risk Factors” section beginning on page 31.

On December 15, 2019, Blue Ridge completed its acquisition of VCB. In addition to the factors described above, Blue Ridge’s operations, performance, business strategy and results may be affected by the following factors:

 

   

cost savings from the acquisition may not be fully realized or realized within the expected timeframe;

 

   

the businesses of Blue Ridge and/or VCB may not be integrated successfully or such integration may be more difficult, time-consuming or more costly than expected;

 

   

revenues following the acquisition may be lower than expected; and

 

   

customer and employee relationships and business operations may be disrupted by the acquisition.

The COVID-19 pandemic is having a swift and seismic impact on the economy. Recognizing this impact, in March 2020, Blue Ridge quickly pivoted to an aggressive borrower outreach campaign to discuss immediate and foreseeable effects on businesses in its market areas, and these efforts continued throughout the second quarter of 2020. The significant uncertainty surrounding the duration of shutdowns and a return to normal consumer and business behavior make the ultimate outcomes difficult to predict, but Blue Ridge is managing its efforts around a worst-case scenario. Blue Ridge has undertaken substantial efforts to reduce noninterest expense levels, including personnel costs, where feasible. Blue Ridge is also performing a deep review of market and division line profitability. Blue Ridge took advantage of the decline in interest rates triggered by COVID-19 to reduce cost of funds and to restructure and extend liability pricing. Branch operations were redirected to drive-thru and digital channels across the bank in mid-March and resumed normalized branch operations, following appropriate hygienic and distancing guidelines, in early July 2020. Lending focus shifted from loan originations to portfolio maintenance and protection, which includes working with borrowers on loan deferrals.

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

The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in this joint proxy statement/prospectus. We caution you not to place undue reliance on our forward-looking information and statements. We 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 us to predict their occurrence or how they will affect us.

 

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BLUE RIDGE SPECIAL MEETING OF SHAREHOLDERS

General

This section contains information about the Blue Ridge special meeting that has been called to vote upon the matters described below.

Blue Ridge is mailing this joint proxy statement/prospectus on or about December 14, 2020, to holders of shares of Blue Ridge common stock at the close of business on December 8, 2020, which is the record date for the Blue Ridge special meeting. Together with this joint proxy statement/prospectus, Blue Ridge is also sending a notice of the Blue Ridge special meeting and a form of proxy that is solicited by the Blue Ridge Board for use at the Blue Ridge special meeting to be held on Thursday, January 21, 2021 at 11:00 a.m., local time, as a virtual meeting, and at any adjournment or postponement of that meeting.

Matters to be Considered

At the special meeting, Blue Ridge shareholders will be asked to:

 

  1.

Approve the Blue Ridge merger proposal (see “Blue Ridge Proposals—Proposal No. 1—Approval of the Merger” on page 60; and

 

  2.

Approve any motion to adjourn the Blue Ridge special meeting to a later date or dates, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to achieve a quorum or to approve the Blue Ridge merger proposal (see “Blue Ridge Proposals—Proposal No. 2—Adjournment of the Special Meeting” on page 60).

Recommendations of the Blue Ridge Board

The Blue Ridge Board unanimously (1) determined that the merger agreement is in the best interests of Blue Ridge and its shareholders, (2) approved and adopted the merger agreement and (3) recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal. The Blue Ridge Board also unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge adjournment proposal.

Record Date and Voting Rights

The Blue Ridge Board has fixed the close of business on December 8, 2020 as the record date for determining the shareholders entitled to notice of and to vote at the Blue Ridge special meeting or any postponement or adjournment thereof. Accordingly, Blue Ridge shareholders are only entitled to notice of and to vote at the Blue Ridge special meeting if they were record holders of Blue Ridge common stock at the close of business on the record date. On the record date, there were 5,718,621 shares of Blue Ridge common stock outstanding, held by approximately 650 holders of record.

To have a quorum that permits Blue Ridge to conduct business at the Blue Ridge special meeting, it needs the presence, whether in person via the Internet or by proxy, of the holders of Blue Ridge common stock representing a majority of the shares outstanding on the record date and entitled to vote. Each Blue Ridge shareholder is entitled to one vote for each outstanding share of Blue Ridge common stock held by such shareholder as of the close of business on the record date.

Holders of shares of Blue Ridge common stock present in person via the Internet at the Blue Ridge special meeting but not voting, and shares of Blue Ridge common stock for which Blue Ridge has received proxies indicating that its holders have abstained, will be counted as present at the Blue Ridge special meeting for purposes of determining whether there is a quorum for transacting business. With respect to shares held in “street name,” the holders of record have the authority to vote shares for which their customers do not provide voting

 

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instructions only on certain “routine” items. In the case of “non-routine” items, the institution holding street name shares cannot vote the shares if it has not received voting instructions. These are considered to be “broker non-votes.” Since there are no “routine” items to be voted on at the Blue Ridge special meeting, nominee record holders of Blue Ridge common stock that do not receive voting instructions from the beneficial owners of such shares will not be able to return a proxy card with respect to such shares; as a result, these shares will not be considered present at the Blue Ridge special meeting and will not count towards the satisfaction of a quorum.

Votes Required

Vote Required for the Blue Ridge Merger Proposal (Proposal No. 1)

Approval of the Blue Ridge merger proposal requires the affirmative vote of more than two-thirds of the shares of Blue Ridge common stock outstanding on the record date and entitled to vote. Accordingly, abstentions and broker non-votes will have the same effect as votes against the Blue Ridge merger proposal. In addition, a failure to vote Blue Ridge shares by proxy or in person will have the same effect as a vote against the Blue Ridge merger proposal.

Vote Required for the Adjournment Proposal (Proposal No. 2)

The approval of the adjournment proposal requires that the votes cast for the proposal exceed the votes cast against the proposal, whether or not a quorum is present.

Abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the adjournment proposal has been approved.

Stock Ownership of Blue Ridge Directors and Executive Officers

As of the record date, directors and executive officers of Blue Ridge and their affiliates beneficially owned 830,055 shares of Blue Ridge common stock, representing approximately 14.51% of the aggregate voting power of Blue Ridge shares entitled to vote at the Blue Ridge special meeting. All of Blue Ridge’s directors have entered into affiliate agreements pursuant to which, subject to certain exceptions, they have agreed to vote their shares of Blue Ridge common stock in favor of the Blue Ridge merger proposal. As of the close of business on December 8, 2020, the record date for the Blue Ridge special meeting, shares constituting  11.88% of Blue Ridge common stock were subject to the affiliate agreements.

Voting of Proxies

By Mail

A proxy card is enclosed for the use of Blue Ridge shareholders. To submit a proxy by mail, complete, sign, and date the enclosed proxy card and, if the Blue Ridge shareholder is a shareholder of record, return it as soon as possible in the enclosed postage-paid envelope. Street name shareholders should refer to the information card provided by his or her bank, broker, or other nominee. When the enclosed proxy card is returned properly executed, the shares of Blue Ridge common stock represented by it will be voted at the Blue Ridge special meeting in accordance with the instructions contained therein.

If the accompanying proxy card is returned properly executed without an indication as to how to vote, the Blue Ridge common stock represented by each such proxy will be voted at the Blue Ridge special meeting as follows: (1) “FOR” the Blue Ridge merger proposal (Proposal No. 1) and (2) “FOR” the Blue Ridge adjournment proposal (Proposal No. 2).

 

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If the Blue Ridge special meeting is postponed or adjourned, all proxies will be voted at the postponed or adjourned Blue Ridge special meeting in the same manner as they would have been voted at the originally scheduled Blue Ridge special meeting except for any proxies that have been properly withdrawn or revoked.

By Internet or Telephone

You may vote your shares via the Internet, by accessing the site listed on the enclosed proxy card and following the instructions, or by telephone, by calling the toll-free number listed on the enclosed proxy card on a touch-tone phone and following the recorded instructions.

Street name shareholders may also be eligible to vote their shares over the Internet or by telephone, by following the voting instructions provided by the bank, broker or other nominee that holds the shares, using the Internet address or telephone number provided on the voting instruction card (if the bank, broker or other nominee provides this voting method).

Your vote is important! Please complete, sign, date, and return promptly the proxy card in the enclosed postage-paid envelope (or follow the instructions to vote your shares via the Internet or by telephone) whether or not you plan to attend the Blue Ridge special meeting via the Internet.

Voting Electronically During the Meeting

If a Blue Ridge shareholder wishes to vote during the Blue Ridge special meeting, such shareholder should visit www.meetingcenter.io/205738032. However, street name shareholders must follow the instructions provided by the holder of record to be able to vote those shares at the meeting.

If you are not a shareholder of record, you must register in advance to attend the special meeting virtually on the Internet. To register to attend the Blue Ridge special meeting, you must submit proof of your proxy power (legal proxy) reflecting your holdings along with your name and email address to Blue Ridge’s transfer agent, Computershare, Inc. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on January 15, 2021.

You will receive a confirmation of your registration by email after Computershare, Inc. receives your registration materials. Requests for registration should be directed to Computershare, Inc. at the following:

 

By email:

   Forward the email from your broker or other custodian, or attach an image of your legal proxy, to legalproxy@computershare.com

By mail:

  

Computershare, Inc.

Blue Ridge Bankshares, Inc. Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

Revocation of Proxies

Any Blue Ridge shareholder giving a proxy may change or revoke it at any time before the polls are closed for voting at the Blue Ridge special meeting. If a Blue Ridge shareholder grants a proxy with respect to the shareholder’s Blue Ridge shares and then attends the Blue Ridge special meeting in person via the Internet, such attendance at the Blue Ridge special meeting or at any adjournment or postponement of the Blue Ridge special meeting will not automatically revoke the proxy. A Blue Ridge shareholder of record may change or revoke a proxy by:

 

   

timely delivering a later-dated proxy or a written notice of revocation;

 

   

voting via the Internet or telephone as of a date subsequent to the initial Internet or telephone vote; or

 

   

attending the Blue Ridge special meeting and voting during the meeting (attendance at the Blue Ridge special meeting will not itself revoke a proxy).

 

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If a Blue Ridge shareholder chooses the first method, he or she must submit the new proxy or notice of revocation to the Corporate Secretary of Blue Ridge, 17 West Main Street, Luray, Virginia 22835, so that it is received by the Corporate Secretary no later than the beginning of the Blue Ridge special meeting or, if the Blue Ridge special meeting is adjourned or postponed, before the adjourned or postponed meeting is actually held.

If a Blue Ridge shareholder is a street name shareholder, he or she must follow the instructions found on the voting instruction card provided by his or her bank, broker, or other nominee, or contact his or her bank, broker, or other nominee, in order to change or revoke a previously given voting instruction.

If assistance is needed in changing or revoking a proxy, please contact Amanda G. Story, Blue Ridge’s Corporate Secretary, at 17 West Main Street, Luray, Virginia 22835, or at (540) 743-6521.

Solicitation of Proxies

This solicitation is made on behalf of the Blue Ridge Board, and Blue Ridge will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing brokers and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding these proxy materials to Blue Ridge shareholders. Proxies may be solicited, without extra compensation, by Blue Ridge’s directors, officers, and employees in person or by mail, telephone or other electronic means. In addition, Blue Ridge has engaged Regan & Associates, Inc. to assist it in the distribution and solicitation of proxies for a fee of approximately $20,000.

BLUE RIDGE PROPOSALS

Proposal No. 1—Approval of the Merger

At the Blue Ridge special meeting, Blue Ridge shareholders will be asked to approve the Blue Ridge merger proposal providing for the merger of Bay Banks with and into Blue Ridge. Blue Ridge shareholders should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

After careful consideration, the Blue Ridge Board, by a unanimous vote of all directors, approved the merger agreement and the merger, and determined that the merger is advisable and in the best interests of Blue Ridge and its shareholders. See “The Merger—Blue Ridge’s Reasons for the Merger; Recommendation of the Blue Ridge Board” for a more detailed discussion of the recommendation of the Blue Ridge Board.

THE BLUE RIDGE BOARD UNANIMOUSLY RECOMMENDS THAT BLUE RIDGE SHAREHOLDERS VOTE “FOR” THE BLUE RIDGE MERGER PROPOSAL.

Proposal No. 2—Adjournment of the Special Meeting

If Blue Ridge does not receive a sufficient number of votes to constitute a quorum of the Blue Ridge common stock or approve the Blue Ridge merger proposal, it may propose to adjourn the special meeting for the purpose of soliciting additional proxies to establish such quorum or approve the merger agreement. Blue Ridge does not currently intend to propose adjournment of the special meeting if there are sufficient votes to approve such proposal. If approval of the proposal to adjourn the special meeting for the purpose of soliciting additional proxies is submitted to the Blue Ridge shareholders for approval, the approval requires that the votes cast for the proposal exceed the votes cast against the proposal, whether or not a quorum is present.

THE BLUE RIDGE BOARD UNANIMOUSLY RECOMMENDS THAT BLUE RIDGE SHAREHOLDERS VOTE “FOR” THE BLUE RIDGE ADJOURNMENT PROPOSAL.

 

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BAY BANKS SPECIAL MEETING OF SHAREHOLDERS

General

This section contains information about the Bay Banks special meeting that has been called to vote upon the matters described below.

Bay Banks is mailing this joint proxy statement/prospectus on or about December 14, 2020, to holders of shares of Bay Banks common stock at the close of business on November 30, 2020, which is the record date for the Bay Banks special meeting. Together with this joint proxy statement/prospectus, Bay Banks is also sending a notice of the Bay Banks special meeting and a form of proxy that is solicited by the Bay Banks Board for use at the Bay Banks special meeting to be held on Thursday, January 21, 2021, at 10:00 a.m., local time, in a virtual meeting format at https://www.cstproxy.com/baybanks/2021, and at any adjournment or postponement of that meeting.

Matters to be Considered

At the special meeting, Bay Banks shareholders will be asked to:

 

  1.

Approve the Bay Banks merger proposal (see “Bay Banks Proposals–Proposal No. 1–Approval of the Merger” on page 64);

 

  2.

Approve the Bay Banks compensation proposal (see “Bay Banks Proposals—Proposal No. 2—Approval of the Compensation Proposal” on page 64); and

 

  3.

Approve any motion to adjourn the Bay Banks special meeting to a later date or dates, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special meeting to achieve a quorum or to approve the Bay Banks merger proposal (see “Bay Banks Proposals–Proposal No. 3–Adjournment of the Special Meeting” on page 65).

Recommendations of the Bay Banks Board

The Bay Banks Board unanimously (1) determined that the merger agreement is in the best interests of Bay Banks and its shareholders, (2) approved and adopted the merger agreement and (3) recommends that Bay Banks shareholders vote “FOR” the Bay Banks merger proposal. The Bay Banks Board also unanimously recommends that Bay Banks shareholders vote “FOR” the Bay Banks compensation proposal and “FOR” Bay Banks adjournment proposal.

Record Date and Voting Rights

The Bay Banks Board has fixed the close of business on November 30, 2020 as the record date for determining the shareholders entitled to notice of and to vote at the Bay Banks special meeting or any postponement or adjournment thereof. Accordingly, Bay Banks shareholders are only entitled to notice of and to vote at the Bay Banks special meeting if they were record holders of Bay Banks common stock at the close of business on the record date. On the record date, there were 13,329,695 shares of Bay Banks common stock outstanding, held by approximately 703 holders of record.

To have a quorum that permits Bay Banks to conduct business at the Bay Banks special meeting, it needs the presence, whether in person via the Internet or by proxy, of the holders of Bay Banks common stock representing 60% of the shares outstanding on the record date and entitled to vote. A Bay Banks shareholder is entitled to one vote for each outstanding share of Bay Banks common stock held as of the close of business on the record date.

Holders of shares of Bay Banks common stock present attending the virtual Bay Banks special meeting but not voting, and shares of Bay Banks common stock for which Bay Banks has received proxies indicating that its holders have abstained, will be counted as present at the Bay Banks special meeting for purposes of determining

 

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whether there is a quorum for transacting business. With respect to shares held in “street name,” the holders of record have the authority to vote shares for which their customers do not provide voting instructions only on certain routine items. In the case of non-routine items, the institution holding street name shares cannot vote the shares if it has not received voting instructions. These are considered to be “broker non-votes.” Since there are no routine items to be voted on at the Bay Banks special meeting, nominee record holders of Bay Banks common stock that do not receive voting instructions from the beneficial owners of such shares will not be able to return a proxy card with respect to such shares; as a result, these shares will not be considered present at the Bay Banks special meeting and will not count towards the satisfaction of a quorum.

Votes Required

Vote Required for the Bay Banks Merger Proposal (Proposal No. 1)

Approval of the Bay Banks merger proposal requires the affirmative vote of not less than 60% of the shares of Bay Banks common stock outstanding on the record date and entitled to vote. Accordingly, abstentions and broker non-votes will have the same effect as votes against the Bay Banks merger proposal. In addition, a failure to vote Bay Banks shares by proxy or during the meeting will have the same effect as a vote against the Bay Banks merger proposal.

Vote Required for the Bay Banks Compensation Proposal (Proposal No. 2)

Approval of the Bay Banks compensation proposal requires the affirmative vote of more than 60% of the shares represented at the Bay Banks special meeting. Abstentions will be counted as present at the Bay Banks special meeting and, accordingly, will have the same effect as votes against the Bay Banks compensation proposal. Broker non-votes and a failure to vote Bay Banks shares by proxy or during the meeting will have no effect for purposes of determining whether the Bay Banks compensation proposal has been approved.

Vote Required for the Adjournment Proposal (Proposal No. 3)

The approval of the Bay Banks adjournment proposal requires the affirmative vote of more than 60% of the shares represented at the Bay Banks special meeting, whether or not a quorum is present. Abstentions will be counted as present at the Bay Banks special meeting and, accordingly, will have the same effect as votes against the Bay Banks adjournment proposal. Broker non-votes and a failure to vote Bay Banks shares by proxy or during the meeting will have no effect for purposes of determining whether the Bay Banks adjournment proposal has been approved.

Stock Ownership of Bay Banks Directors and Executive Officers

As of the record date, directors and executive officers of Bay Banks and their affiliates beneficially owned 1,025,742 shares of Bay Banks common stock, representing approximately 7.63% of the aggregate voting power of Bay Banks shares entitled to vote at the Bay Banks special meeting. All of Bay Banks’ directors have entered into affiliate agreements pursuant to which, subject to certain exceptions, they have agreed to vote their shares of Bay Banks common stock in favor of the Bay Banks merger proposal. As of the close of business on November 30, 2020, the record date for the Bay Banks special meeting, shares constituting approximately 6.42% of Bay Banks common stock were subject to the affiliate agreements.

Voting of Proxies

By Mail

A proxy card is enclosed for the use of Bay Banks shareholders. To submit a proxy by mail, complete, sign, and date the enclosed proxy card and, if the Bay Banks shareholder is a shareholder of record, return it as soon as possible in the enclosed postage-paid envelope. Street name shareholders should refer to the information card provided by his or her bank, broker, or other nominee. When the enclosed proxy card is returned properly executed, the shares of Bay Banks common stock represented by it will be voted at the Bay Banks special meeting in accordance with the instructions contained therein.

 

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If the accompanying proxy card is returned properly executed without an indication as to how to vote, the Bay Banks common stock represented by each such proxy will be voted at the Bay Banks special meeting as follows: (1) “FOR” the Bay Banks merger proposal (Proposal No. 1), (2) “FOR” the Bay Banks compensation proposal (Proposal No. 2) and (3) “FOR” the Bay Banks adjournment proposal (Proposal No. 3).

If the Bay Banks special meeting is postponed or adjourned, all proxies will be voted at the postponed or adjourned Bay Banks special meeting in the same manner as they would have been voted at the originally scheduled Bay Banks special meeting except for any proxies that have been properly withdrawn or revoked.

By Internet, Smartphone or Tablet

You may vote your shares via the Internet, by accessing the site listed on the enclosed proxy card and following the instructions, or by smartphone or tablet, by scanning the QR code on the enclosed proxy card and following the instructions.

Street name shareholders may also be eligible to vote their shares over the Internet or by telephone or other electronic means, by following the voting instructions provided by the bank, broker or other nominee that holds the shares on the voting instruction card (if the bank, broker or other nominee provides this voting method).

Your vote is important! Please complete, sign, date, and return promptly the proxy card in the enclosed postage-paid envelope (or follow the instructions to vote your shares via the Internet or by smartphone or tablet) whether or not you plan to attend the Bay Banks special meeting online.

Voting in Person during the Meeting

Bay Banks shareholders of record may attend the Bay Banks special meeting online and vote electronically during the meeting by visiting https://www.cstproxy.com/baybanks/2021 and entering the 12 digit control number included on the enclosed proxy card.

Street name shareholders must contact Bay Banks’ transfer agent, Continental Stock Transfer & Trust Company, at the telephone number or e-mail address below for specific instructions on how to receive a control number and access the meeting online. To be able to vote electronically during the meeting, street name shareholders also must obtain a legal proxy, executed in such shareholder’s favor, from the holder of record, such as a broker, bank or other nominee. Please allow up to 48 hours prior to the special meeting to process a control number.

Shareholders of record who do not have a control number, or street name shareholders who wish to receive a control number to access the Bay Banks special meeting, should contact Continental Stock Transfer & Trust Company at (917) 262-2373 or proxy@continentalstock.com.

Revocation of Proxies

Any Bay Banks shareholder giving a proxy may change or revoke it at any time before the polls are closed for voting at the Bay Banks special meeting. If a Bay Banks shareholder grants a proxy with respect to the shareholder’s Bay Banks shares and then attends the Bay Banks special meeting online, such attendance at the Bay Banks special meeting or at any adjournment or postponement of the Bay Banks special meeting will not automatically revoke the proxy. A Bay Banks shareholder of record may change or revoke a proxy by:

 

   

timely delivering a later-dated proxy or a written notice of revocation;

 

   

voting via Internet, smartphone or tablet as of a date subsequent to the initial Internet, smartphone or tablet vote; or

 

   

attending the Bay Banks special meeting online and voting during the meeting (virtual attendance at the Bay Banks special meeting will not itself revoke a proxy).

 

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If a Bay Banks shareholder chooses the first method, he or she must submit the new proxy or notice of revocation to the Corporate Secretary of Bay Banks at 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226, so that it is received by the Corporate Secretary no later than the beginning of the Bay Banks special meeting or, if the Bay Banks special meeting is adjourned or postponed, before the adjourned or postponed meeting is actually held.

If a Bay Banks shareholder is a street name shareholder, he or she must follow the instructions found on the voting instruction card provided by his or her bank, broker, or other nominee, or contact his or her bank, broker, or other nominee, in order to change or revoke a previously given voting instruction.

If assistance is needed in changing or revoking a proxy, please contact Pamela A. Varnier, Corporate Secretary, at 1801 Bayberry Court, Suite 101, Richmond, Virginia 23226, or by telephone at (757) 414-9808, ext. 5756.

Solicitation of Proxies

This solicitation is made on behalf of the Bay Banks Board, and Bay Banks will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing brokers and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding these proxy materials to Bay Banks shareholders. Proxies may be solicited, without extra compensation, by Bay Banks’ directors, officers, and employees in person or by mail, telephone or other electronic means. In addition, Bay Banks has engaged Regan & Associates, Inc. to assist it in the distribution and solicitation of proxies for a fee of approximately $20,000.

Appraisal Rights

Bay Banks shareholders are entitled to appraisal rights under Virginia law in connection with the merger. For information on how to exercise and perfect your appraisal rights, please see “The Merger–Appraisal Rights” beginning on page 101.

BAY BANKS PROPOSALS

Proposal No. 1—Approval of the Merger

At the Bay Banks special meeting, Bay Banks shareholders will be asked to approve the merger agreement proposal providing for the merger of Bay Banks with and into Blue Ridge. Bay Banks shareholders should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

After careful consideration, the Bay Banks Board, by a unanimous vote of all directors, approved the merger agreement and the merger, and determined that the merger is advisable and in the best interests of Bay Banks and its shareholders. See “The Merger–Bay Banks’ Reasons for the Merger; Recommendation of the Bay Banks Board” for a more detailed discussion of the recommendation of the Bay Banks Board.

THE BAY BANKS BOARD UNANIMOUSLY RECOMMENDS THAT BAY BANKS SHAREHOLDERS

VOTE “FOR” THE BAY BANKS MERGER PROPOSAL.

Proposal No. 2—Compensation Proposal

In accordance with Section 14A of the Exchange Act, Bay Banks is providing its shareholders with the opportunity to cast a nonbinding advisory vote on the compensation that may be payable to its named executive officers in connection with the merger, the value of which is set forth in the table included in the section of this joint proxy statement/prospectus captioned “The Merger - Potential Payments and Benefits to Bay Banks Named

 

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Executive Officers in Connection with a Change in Control.” As required by Section 14A of the Exchange Act, Bay Banks is asking its shareholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid to Bay Banks’ named executive officers in connection with the merger, as disclosed in the table in the section of the joint proxy statement/prospectus statement captioned “The Merger—Potential Payments and Benefits to Bay Banks Named Executive Officers in Connection with a Change in Control,” including the associated narrative discussion, are hereby APPROVED.”

The vote on specified compensation that may be payable in connection with the merger is a vote separate and apart from the vote to approve the merger agreement. Accordingly, a shareholder may vote to approve such specified compensation and vote not to approve the merger agreement and vice versa. Because the vote to approve such specified compensation is advisory in nature only, it will not be binding on either Bay Banks or Blue Ridge. Accordingly, because Bay Banks may be contractually obligated to pay the compensation, the compensation will be payable, subject only to the conditions applicable thereto, if the merger agreement is approved and the merger is consummated and regardless of the outcome of the advisory vote.

Bay Banks shareholders should carefully review the section entitled “The Merger—Interests of Bay Banks’ Directors and Officers in the Merger” for information regarding changes that may occur to certain merger-related compensation of Bay Banks’ executive officers.

THE BAY BANKS BOARD UNANIMOUSLY RECOMMENDS THAT BAY BANKS SHAREHOLDERS VOTE “FOR” THE BAY BANKS COMPENSATION PROPOSAL.

Proposal No. 3—Adjournment of the Special Meeting

If Bay Banks does not receive a sufficient number of votes to constitute a quorum of the Bay Banks common stock or approve the Bay Banks merger proposal, it may propose to adjourn the special meeting for the purpose of soliciting additional proxies to establish such quorum or approve the Bay Banks merger proposal. Bay Banks does not currently intend to propose adjournment of the special meeting if there are sufficient votes to approve the Bay Banks merger proposal.

THE BAY BANKS BOARD UNANIMOUSLY RECOMMENDS THAT BAY BANKS SHAREHOLDERS

VOTE “FOR” THE BAY BANKS ADJOURNMENT PROPOSAL.

 

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THE MERGER

The following is a discussion of the merger. This summary may not contain all of the information about the merger that is important to you. Holders of Blue Ridge common stock and Bay Banks common stock should read carefully this joint proxy statement/prospectus in its entirety, including the appendices, for more detailed information concerning the merger and the merger agreement. In particular, you are directed to the merger agreement, including the exhibits thereto, copies of which are attached as Appendix A and are incorporated in this joint proxy statement/prospectus by reference.

Background of the Merger

The Bay Banks Board and management of have periodically explored and discussed strategic options available to Bay Banks for maintaining its competitiveness and increasing shareholder value. These discussions have included, among other things, exploring the merger and acquisition environment for financial institutions and a potential business combination involving Bay Banks. In April 2017, Bay Banks completed a “mergers of equals” transaction with Virginia BanCorp, Inc. After the acquisition and integration of Virginia BanCorp, from time to time Randal R. Greene, the President and Chief Executive Officer of Bay Banks, was contacted by representatives of larger financial institutions to inquire about Bay Banks’ interest in a merger transaction. Mr. Greene informed the Bay Banks Board of these preliminary inquiries, but such discussions did not result in any proposals that the Bay Banks Board could recommend to Bay Banks’ shareholders.

Similarly, the Blue Ridge Board and management have, from time to time, engaged in long-term strategic reviews and considered ways to enhance shareholder value and Blue Ridge’s performance in light of industry and market conditions, including through potential strategic transactions such as an acquisition of another financial institution.

On January 8, 2020, a larger financial institution (“Company A”) submitted an unsolicited written nonbinding indication of interest to acquire 100% of the issued and outstanding shares of Bay Banks’ common stock at a value of $10.00 per share, or approximately $134.0 million in aggregate merger consideration. The merger consideration offered consisted of a choice of cash, Company A’s common stock or preferred stock, or a mix of cash and stock. Such offer was based on Company A’s limited preliminary assessment of Bay Banks and subject to its due diligence investigation of the company and its operations. On the date the indication of interest was delivered, the closing price of Bay Banks’ common stock was $8.96 per share. Bay Banks’ management shared the indication of interest with legal counsel at Williams Mullen and representatives of Piper Sandler & Co., a nationally known and experienced investment banking firm focused on financial institutions.

On January 23, 2020, the Bay Banks Board held a special meeting at which Company A’s indication of interest was discussed. Representatives of Piper Sandler and Williams Mullen were present. Representatives of Piper Sandler provided information on the then current market conditions in the banking industry, recent merger and acquisition activity, a possible valuation of Bay Banks’ franchise in a business combination transaction, and a list of other financial institutions that it believed may have an interest in a transaction with Bay Banks. Representatives of Williams Mullen provided an overview of director fiduciary duties and standards of director conduct under Virginia law in the context of Company A’s unsolicited offer, specifically, and strategic alternatives available to Bay Banks from a legal perspective. Following discussion, the Bay Banks Board determined that Company A’s indication of interest should be reviewed and considered carefully. The Bay Banks Board also determined that it was in the best interest of Bay Banks and its shareholders for the Bay Banks Board to receive information from other financial institutions that may be interested in a business combination with Bay Banks, and authorized Mr. Greene and C. Frank Scott, III, the Chairman of the Bay Banks Board, to have exploratory discussions with certain financial institutions concerning a business combination transaction. The Bay Banks Board approved the engagement of Piper Sandler to serve as financial advisor in connection with exploring a potential transaction, including with Company A, and authorized management to work with Piper Sandler towards obtaining pertinent information from parties interested in combining with Bay Banks. Bay Banks executed an engagement letter with Piper Sandler on January 28, 2020.

 

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Over the following weeks, Messrs. Greene and Scott contacted and held initial and high-level discussions with representatives of several financial institutions, including Blue Ridge, regarding their institutions and the possibility of a business combination with Bay Banks.

At a February 5, 2020 special meeting of the Bay Banks Board, Mr. Greene informed the board that he and Mr. Scott had been in contact with several potential merger candidates. Representatives of Piper Sandler were asked to attend the meeting, and provided and reviewed an updated presentation on peer banks and stock trading metrics, a net present value analysis of Bay Banks’ common stock, a summary of recent merger transactions of banks with asset sizes ranging from $750.0 million to $1.25 billion, and an overview of Company A and its January 8 offer. In addition, the Bay Banks Board reviewed an initial list of other potential merger partners that representatives of Piper Sandler and management had begun to develop. During the Piper Sandler presentation, the Bay Banks Board discussed with representatives of Piper Sandler the bank merger environment in general, certain potential merger partners and Company A’s offer. The meeting concluded with the Bay Banks Board supporting management continuing to have exploratory discussions with certain financial institutions, with the assistance of Piper Sandler.

On February 19, 2020, Mr. Greene met with Brian K. Plum, President and Chief Executive Officer of Blue Ridge. The two had a high-level discussion about the banking landscape and how a strategic combination could be advantageous to the shareholders of both organizations.

On February 20, 2020, the Bay Banks Board held a regular meeting at which representatives of Piper Sandler and Williams Mullen were present. During the meeting, the Bay Banks Board and representatives of Piper Sandler discussed updates to the then current banking environment and recent merger transactions in the financial services industry. The Bay Banks Board also reviewed an updated list of potential merger partners developed by management and representatives of Piper Sandler using certain criteria including (i) the ability and flexibility to pay a premium to the then current stock price of Bay Banks, (ii) interest in the market areas in which Bay Banks does business, and (iii) potential operating synergies. At the conclusion of the discussion, the Bay Banks Board authorized representatives of Piper Sandler to solicit the financial institutions on the list regarding a potential business combination with Bay Banks. The Bay Banks Board also instructed management, in coordination with Piper Sandler, to prepare a confidential information memorandum that could be used to provide information about Bay Banks to potential merger partners and to populate an electronic data room to facilitate the performance of due diligence by potential merger partners.

Also at the February 20, 2020 meeting, the Bay Banks Board noted that it was not under any obligation to proceed with a transaction should the distribution of the confidential information memorandum not generate the desired results in terms of valuation and other factors that it determined to be in the best interests of Bay Banks and its shareholders. From late February 2020 through mid-March 2020, representatives of Piper Sandler contacted 38 financial institutions regarding their interest in a potential strategic transaction. Because Bay Banks already had received an indication of interest from Company A, Bay Banks determined not to include Company A in this additional outreach process. Of those institutions contacted, 16 candidates, including Blue Ridge, entered into confidentiality agreements in order to access the virtual data room containing the confidential information memorandum and extensive financial and operating information on Bay Banks. Out of the 16 candidates who signed confidentiality agreements, four actually accessed the data room. Blue Ridge signed a non-disclosure agreement on February 25, 2020 and on February 26, 2020 received the confidential information memorandum and was granted access to the electronic data room. The confidential information memorandum provided that indications of interest were due to Piper Sandler by March 18, 2020.

On March 6, 2020, Messrs. Greene and Plum met as a follow up to prior discussions and to deepen an understanding about business lines, leadership, opportunities, and strategies for the future, and how a potential combination may facilitate the attainment of key goals of both companies. Both agreed to set another meeting for additional discussion and the introduction of the Chairman of each company to meet.

 

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On March 9, 2020, Messrs. Greene and Scott met with Mr. Plum and Larry Dees, Chairman of the Blue Ridge Board. The parties held a high-level discussion around backgrounds and philosophies, prospects for the future and the banking market generally, as well as the general attractiveness of a potential combination of the two banks.

During the course of the foregoing process, the seriousness of the COVID-19 pandemic increased significantly in the United States. In the first two weeks of March, states of emergency were declared by certain governors, including Virginia, and President Trump declared a national emergency on March 13, 2020. Interest rates fell dramatically as the Federal Reserve reduced the target federal funds rate by 150 basis points. The stock markets experienced extreme volatility, and most publicly-traded companies suffered significant decreases in their stock prices. From the launch date of the process on February 25 to March 18, when indications of interest were due, the SNP 500 fell 25.7%, the Nasdaq Bank Stock Index decreased 37.6% and Bay Banks’ common stock was down 34.5%.

At a regular meeting of the Blue Ridge Board on March 18, 2020, the Blue Ridge Board discussed a potential transaction with Bay Banks with Blue Ridge management and representatives of Raymond James, a nationally recognized investment banking firm. At the meeting, the Blue Ridge Board reviewed and discussed a draft of a nonbinding indication of interest and a pro forma analysis of the combined companies, both of which were provided to the Blue Ridge Board in advance of the meeting. Representatives of Raymond James were present by telephone and reviewed the financial analysis of the key terms of the potential acquisition, including a discussion of the financial modeling and underlying assumptions of the transaction. Blue Ridge management discussed the benefits of a partnership between Blue Ridge and Bay Banks, the culture of both companies, the purchase price and form of consideration, corporate structure, contingencies, board of directors and employee matters, executive officer retention, timing, and required approvals. Following thorough discussion, the Blue Ridge Board authorized Blue Ridge management to submit the nonbinding indication of interest to the Bay Banks Board and, if selected by Bay Banks to do so, proceed with additional due diligence of Bay Banks.

On March 18, 2020, Bay Banks received preliminary written nonbinding indications of interest from three of the 16 financial institutions that signed a confidentiality agreement. Blue Ridge and another financial institution (“Company B”) provided indications of interest that included a range of exchange ratios, and the third financial institution (“Company C”) presented a specific exchange ratio. The indications of interest also outlined non-financial terms for a merger transaction. All were subject to further due diligence by the potential merger partners.

On March 20, 2020, a special meeting of the Bay Banks Board was held to review all of the indications of interest. Representatives of Piper Sandler and Williams Mullen were present at the meeting. Representatives of Piper Sandler provided the Bay Banks Board with an overview of the proposal process, and presented an analysis of the three indications of interest received on March 18 from a financial point of view. Representatives of Piper Sandler then reviewed the history of the interested financial institutions and their stock performance, and a preliminary pro forma impact analysis of certain financial measures under each of the indications of interest if a transaction was completed. The Blue Ridge proposal consisted of 100% stock consideration with a range of exchange ratios of 0.4440 to 0.4813 and an implied per share consideration ranging from $7.15 to $7.75, based on its closing stock price on March 18, 2020, with an aggregate consideration ranging from approximately $94.8 million to $102.8 million. Company B offered consideration of 80-100% stock and an implied per share consideration ranging from $5.43 to $6.04 based on its closing stock price on March 18, 2020, with an aggregate consideration ranging from approximately $72.0 million to $80.0 million. The proposal from Company C consisted of 100% stock consideration and an implied per share consideration of $6.08 based on its closing stock price on March 18, 2020, with an aggregate consideration of approximately $80.6 million. The per share closing price of Bay Banks’ common stock on March 18, 2020 was $5.76. Although Company A’s indication of interest had expired in accordance with its terms and the stock markets had suffered dramatic declines since January 8, for comparative purposes Piper Sandler also included information on a possible range of values that it believed

 

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Company A could propose if it was still interested in acquiring Bay Banks. The Bay Banks Board engaged in a high level discussion on the merits of the three offers and determined to give the proposals additional consideration over the March 20 weekend.

At a March 23, 2020 special meeting, the Bay Banks Board continued its discussion on the indications of interest the company received on March 18. A representative from Williams Mullen was present at the meeting. Given the unprecedented and rapidly changing nature of the COVID-19 outbreak, the Bay Banks Board also invited a representative from a second financial advisory firm serving the community bank industry (not Piper Sandler) to attend this meeting and provide another perspective on COVID-19’s impact on the market and the financial industry. The financial advisor stated that the effect on the stock market was substantial, with significant declines across all industries, and that bank stocks were hit particularly hard as investors became concerned about borrowers’ ability to pay and low interest rates further reducing earnings. The advisor also noted that most merger activity had been suspended as companies were focused on assessing the impact of COVID-19 on their own operations and implementing business continuity plans, and that parties who were in merger discussions may also be pausing due to concerns about credit quality given the current unsettled environment. The financial advisor then left the board meeting.

The Bay Banks Board further considered the March 18 indications of interest and Company A’s interest in Bay Banks, as well as the significant market changes and unsettled business environment as a result of COVID-19. Due primarily to the distressed business environment and unprecedented operating conditions in dealing with the pandemic, including rising unemployment, increasing requests for loan deferrals and complying with stay at home orders, the Bay Banks Board determined that it would not be in the best interest of shareholders to further pursue a transaction at that time.

On April 8, 2020, Company A submitted another unsolicited written nonbinding indication of interest to acquire Bay Banks. The offer was essentially the same as the January 8 indication of interest except that Company A had reduced its offer to $6.75 for each Bay Banks share, or approximately $90.0 million in aggregate merger consideration. Bay Banks’ management shared the indication of interest with Piper Sandler and Williams Mullen.

On April 21, 2020, the Bay Banks Board held a special meeting to discuss Company A’s April 8 indication of interest. Representatives of Piper Sandler and Williams Mullen were present at the meeting. Representatives of Piper Sandler provided an update on the then current market conditions, reporting that there was still volatility and uncertainty in the markets, and bank stocks had continued to perform poorly since the last time the board had met. Representatives of Piper Sandler also reviewed Company A’s April 8 offer and noted that it was basically within the same valuation range as the January 8 offer, based on the current stock prices of Company A and Bay Banks. Representatives of Williams Mullen reminded the Bay Banks Board of the fiduciary duties’ discussion during the January 23 board meeting, and again provided information on the standards of director conduct under Virginia law when evaluating merger offers. The Bay Banks Board engaged in a thorough discussion of market conditions and Company A’s revised offer. Among other things, the board discussed the prolonged uncertainty, volatility and business impacts of the COVID-19 pandemic on Bay Banks and its customers, as well as the significant management attention required to be devoted to the company’s operations from a business continuity perspective due to COVID-19. In light of these conditions, the Bay Banks Board instructed management to update the company’s strategic financial plan to address the current environment and determined that more time and information would be needed to assess Company A’s offer. The Bay Banks Board also directed management to contact Company A to request an extension of its offer deadline.

On May 8, 2020, Messrs. Greene and Scott contacted a representative of Company A, who agreed to such extension. Mr. Greene also suggested that an in-person meeting with the Company A representative may be an appropriate next step, and Company A’s representative tentatively agreed and informed Messrs. Greene and Scott that he would contact them at a later time with open dates for a meeting. The representative of Company A did not contact Messrs. Greene and Scott after this conversation to suggest meeting dates and a meeting never occurred.

 

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Also during May 2020, Mr. Plum contacted Mr. Greene by phone. The two discussed the current state of the banking market and their banks and determined to remain in contact to continue informal discussions regarding a combination.

At a June 3, 2020 special meeting of the Bay Banks Board, management presented an updated three-year strategic financial plan and projected outlook for the company, and members of the board asked questions of and received answers from management on the financial plan. The Bay Banks Board also reviewed the actions taken since receiving Company A’s January 8 indication of interest, including the process in February and March of soliciting interest from other financial institutions and the results of such process. The Bay Banks Board and management also engaged in a substantial review and discussion of strategic alternatives, including Bay Banks’ prospects for organic growth on a stand-alone basis and a combination with another financial institution. The review included a discussion of Company A’s April 8 indication of interest and the nonbinding indication of interest submitted by Blue Ridge, which was the proposal with the highest offer in mid-March. Mr. Greene also provided information to the Bay Banks Board about several preliminary conversations he had recently with Mr. Plum. In addition, representatives of Piper Sandler were present at the meeting and presented an update on the banking market, a net present value analysis of Bay Banks, and a high-level analysis of a potential combination with Blue Ridge. The Bay Banks Board and management discussed how the business operating environment for banks during the COVID-19 pandemic, while still challenging, had become more settled since the board meeting on March 23. Following substantial discussion, the Bay Banks Board authorized management to explore negotiations with Blue Ridge’s management for the purpose of entering into a nonbinding indication of interest between the companies relating to a merger transaction.

On June 8, 2020, Messrs. Greene and Plum met to discuss the state of matters in the macroeconomy and the impact of COVID-19 on their respective companies. The two agreed that based on market conditions and the impact of COVID-19 it made sense to continue conversations around a strategic combination to provide additional scale and resources.

On June 18, 2020, the Bay Banks Board held a regular meeting at which representatives of Piper Sandler and Williams Mullen were present. The following significant terms of the March 18, 2020 nonbinding indication of interest from Blue Ridge were again reviewed: (i) the exchange ratio range of 0.4440 to 0.4813 would result in an implied per share consideration of $7.06 to $7.66 based on Blue Ridge’s stock price on June 18, 2020; (ii) Bay Banks shareholders would own 51-53% of the combined company; (iii) the board of directors of the combined company would consist of seven Blue Ridge directors and five Bay Banks directors; (iv) the change in control arrangements in place for Bay Banks officers would be honored; and (v) the combined bank headquarters would be in Richmond. Representatives of Piper Sandler presented and reviewed stand-alone projections for Bay Banks and Blue Ridge and a pro forma financial model for a combination of Bay Banks and Blue Ridge, based on publicly available information and other information obtained from the companies. The representatives of Piper Sandler discussed with the Bay Banks Board that the transaction would likely be considered a merger of equals and, although Bay Banks is larger in terms of asset size and its shareholders would own more than 50% of the combined company, based on the financial information available, including that Blue Ridge’s stock was then trading at higher multiples, the acquirer would likely be Blue Ridge. The representatives of Piper Sandler informed the Bay Banks Board that this structure is not unusual, and similar transactions were reviewed. Representatives of Piper Sandler noted that Piper Sandler does not as a matter of practice provide any legal or accounting advice. The business advantages of the transaction were also highlighted, such as a more significant Virginia franchise, a combined company with total assets of over $2 billion providing greater economies of scale, opportunities for increased non-interest income, and a strengthened capital position providing the opportunity for future growth. Upon completion of the Piper Sandler presentation and after management discussion, the Bay Banks Board determined that it needed additional time to review the materials and information presented and discussed in order to make a more informed decision. The Bay Banks Board also directed management and Piper Sandler to request that Blue Ridge increase and fix the exchange ratio at 0.5200 and that the combined board be increased to 13 directors, with Bay Banks having six director representatives.

 

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On June 29, 2020, a special meeting of the Blue Ridge Board was held with representatives of Raymond James present by telephone. Representatives of Raymond James reviewed updated financial aspects of the proposed transaction and an updated nonbinding indication of interest. Blue Ridge management discussed with the Blue Ridge Board the results of due diligence performed to date and the changes from the initial indication of interest that had been submitted to Bay Banks. Following thorough discussion, the Blue Ridge Board authorized Blue Ridge management to submit a revised nonbinding indication of interest to the Bay Banks Board on the terms discussed during the meeting.

At a June 29, 2020 special meeting, the Bay Banks Board reviewed the revised indication of interest that Blue Ridge delivered on June 29, 2020. Mr. Greene updated the Bay Banks Board on discussions regarding the proposed terms of the transaction that he had with Mr. Plum since the last board meeting. Representatives of Piper Sandler attended the meeting and reviewed the changes of Blue Ridge’s offer from its March 18, 2020 nonbinding indication of interest, which were as follows: (i) the exchange ratio increased from a range of 0.4440-0.4813 to 0.5000 (no range), which increased the post-merger ownership for Bay Banks shareholders from 52-53% to 54%; (ii) the representation of Bay Banks directors on the combined company’s board of directors was increased from five to six; and (iii) director and officer “tail” insurance coverage was increased from five to six years. The Bay Banks Board was informed by representatives of Piper Sandler that the new exchange ratio was essentially 5-10% higher in price and represented an implied value of $7.76 based on the closing price of Blue Ridge’s common stock on June 26, 2020. Representatives of Piper Sandler also noted that the offered merger consideration was approximately a 28-30% premium over the recent trading prices of Bay Banks common stock and implied a $0.29 per share dividend. Representatives of Williams Mullen were present at the meeting and provided certain publicly available information on a lawsuit regarding the employee stock ownership plan (“ESOP”) of VCB that Blue Ridge inherited as a result of its acquisition of VCB in December 2019. Representatives of Williams Mullen also informed the board that it had represented Blue Ridge in that merger, had a conflict of interest with respect to advising Bay Banks about ESOP litigation and that it was advisable for Bay Banks to seek independent legal representation relating to the litigation. After discussion, the Bay Banks Board approved and accepted the terms of Blue Ridge’s June 26 nonbinding indication of interest and authorized management to execute the same. The Bay Banks Board also instructed management to move forward with thorough due diligence on Blue Ridge, including with respect to Blue Ridge’s loan portfolio and the ESOP lawsuit.

Throughout the month of July 2020, Blue Ridge conducted a comprehensive due diligence review of Bay Banks, including meetings with executive management of Bay Banks to discuss various matters, continued financial analysis of a transaction with Bay Banks, and review of third-party consultant’s report on Bay Bank’s loan portfolio.

On July 16, 2020, Bay Banks held a special meeting of the Bay Banks Board. Representatives of Piper Sandler, Williams Mullen and the law firm of Kaufman & Canoles, P.C. (“K&C”) were present. Mr. Greene informed the Bay Banks Board that Bay Banks’ due diligence on Blue Ridge commenced after the indication of interest was executed. He also mentioned that Bay Banks and Blue Ridge hired an independent third-party consultant to conduct a review of each company’s loan portfolio, and that the review should be completed within two weeks. Representatives of Williams Mullen provided an overview of employment agreements between Bay Banks and certain officers and the impact the merger may have on those arrangements. Mr. Greene stated that in response to the Bay Banks Board’s request for outside legal counsel to assist with due diligence related to the litigation involving Virginia Community’s ESOP, K&C was engaged. The representatives of K&C then reviewed the present status of the case, each of the allegations in the lawsuit, what K&C believed to be potential and factual defenses with respect to each allegation, insurance coverage, and its assessment of the lawsuit and potential damages. The Bay Banks Board asked questions of, and received answers from, K&C with respect to the ESOP lawsuit. At the conclusion of the meeting, the Bay Banks Board authorized management to move forward with the negotiation of a merger agreement with Blue Ridge.

 

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On July 21, 2020, representatives of Blue Ridge and Bay Banks met in-person to conduct diligence of, and ask questions regarding, each party’s loan portfolio and lending operations.

On July 27, 2020, Troutman Pepper Hamilton Sanders LLP (“Troutman Pepper”), legal counsel for Blue Ridge, delivered a draft of a proposed definitive agreement containing the proposed complete terms of the transaction. During the period through August 12, 2020, the parties and their legal counsel exchanged drafts and negotiated changes to the draft merger agreement to resolve all open issues and to reach a final definitive agreement. During this time, management of the parties and their respective financial advisors continued discussions and additional due diligence on both Bay Banks and Blue Ridge was performed. The parties also provided drafts of their respective disclosure schedules to the merger agreement and discussed other aspects of the proposed transaction and merger integration issues. During this period, Blue Ridge also negotiated the terms of the employment agreements to be entered into between Blue Ridge and Blue Ridge Bank and each of Randal R. Greene, Bay Banks’ President and Chief Executive Officer, Judy C. Gavant, Bay Banks’ Executive Vice President and Chief Financial Officer, and Susan S. Pittman, Executive Vice President of Virginia Commonwealth Bank, each to be effective upon the consummation of the proposed merger. Mr. Greene, Ms. Gavant and Ms. Pittman, as well as other Bay Banks officers with employment or change in control agreements with Bay Banks, were advised by separate independent counsel in connection with the employment agreements.

Also on July 27, 2020, the Bay Banks Board held a special meeting at which management provided an update on the status of the merger negotiations and Bay Banks’ due diligence review of Blue Ridge to date. Representatives from the independent third-party consulting firm engaged by Bay Banks’ management to conduct a review and analysis on Blue Ridge’s loan portfolio were present and reported its findings to the Bay Banks Board. Management commented on Blue Ridge’s loan portfolio and reviewed a comparison of the loan portfolios of the two companies. A report on Blue Ridge’s mortgage operations was also provided to the Bay Banks Board.

On July 28, 2020, representatives of Blue Ridge and Bay Banks, with the assistance of their respective financial and legal advisors, gathered by phone to review business, financial and other information regarding each company. During these meetings, members of management of each of the companies, with the assistance of their advisors, engaged in a series of discussions and asked and answered questions regarding, each company’s respective businesses.

At an August 3, 2020 special meeting of the Bay Banks Board, management provided an update on the status of the merger negotiations and Bay Banks’ continued due diligence investigation of Blue Ridge’s operations.

On the afternoon of August 12, 2020, the Bay Banks Board held a special meeting to consider the terms of the proposed merger with Blue Ridge. At the meeting, representatives of Piper Sandler reviewed and discussed with the Bay Banks Board its financial analyses of Bay Banks, Blue Ridge and the proposed merger. Piper Sandler rendered its oral opinion to the Bay Banks Board, which was subsequently confirmed in writing by delivery of Piper Sandler’s written opinion dated August 12, 2020, to the effect that, as of August 12, 2020 and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of Bay Banks common stock. See “—Opinion of Bay Banks’ Financial Advisor.”

Representatives of Williams Mullen also were present at the meeting and discussed with the Bay Banks Board the legal standards applicable to its decisions and actions with respect to its consideration of the proposed merger. Williams Mullen reviewed in detail the proposed merger agreement and related transaction documents, copies of which were delivered to each director before the meeting, and informed the Bay Banks Board that the terms of the merger had been finalized between the parties. Following extensive review, discussion and consideration of the presentations from Piper Sandler and Williams Mullen, and after considering the proposed terms of the merger agreement and other transaction documents, the Bay Banks Board unanimously voted to approve the merger, approve and adopt the merger agreement, and directed Mr. Greene to finalize and execute a definitive merger agreement on the terms presented at the meeting.

 

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Also on the afternoon of August 12, 2020, the Blue Ridge Board held a special meeting to provide the Blue Ridge Board with an opportunity to review, consider, and discuss the potential merger and the merger agreement. Management reviewed for the Blue Ridge Board the progress of its negotiations with Bay Banks and reported on the status of its due diligence review of Bay Banks. Representatives from Raymond James and Troutman Pepper also joined this meeting and provided an update on the status of merger discussions. Following discussion, the representatives of Raymond James presented their financial analysis with respect to the exchange ratio in the proposed merger pursuant to the merger agreement and rendered the oral opinion of Raymond James to the Blue Ridge Board (in its capacity as such), to the effect that, as of August 12, 2020 and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Raymond James as set forth in its opinion, the exchange ratio in the proposed merger pursuant to the merger agreement was fair, from a financial point of view, to Blue Ridge. See “—Opinion of Blue Ridge’s Financial Advisor.”

Representatives of Troutman Pepper also discussed with the Blue Ridge Board the legal standards of conduct applicable to its deliberations, decisions and actions with respect to the proposed merger and reviewed in detail the proposed merger agreement and related agreements, copies of which were delivered to each director before the meeting. Following extensive review and discussion and consideration of the presentations from Raymond James and Troutman Pepper, the Blue Ridge Board unanimously voted to approve the merger, approve and adopt the merger agreement and directed Brian K. Plum, President and Chief Executive Officer of Blue Ridge, to finalize and execute a definitive merger agreement on the terms presented at the meeting.

Bay Banks and Blue Ridge executed the merger agreement the evening of August 12, 2020 and publicly announced the transaction on August 13, 2020 in a press release issued jointly by Blue Ridge and Bay Banks.

Blue Ridge’s Reasons for the Merger; Recommendation of the Blue Ridge Board

In reaching its determination to approve and adopt the merger agreement, and to recommend the merger agreement to Blue Ridge shareholders, the Blue Ridge Board consulted with Blue Ridge’s management and its financial and legal advisors, and considered a number of factors, including the following:

 

   

its knowledge of Bay Banks’ financial condition, earnings, business operations and prospects, taking into account the results of Blue Ridge’s extensive due diligence investigation of Bay Banks and its loan portfolio;

 

   

the strategic opportunities associated with expansion into complementary geographic markets in central Virginia and the Piedmont Triad of Virginia in which Bay Banks operates, and the ability to leverage the relocation of Blue Ridge’s and Blue Ridge Bank’s headquarters to Charlottesville, Virginia and Richmond, Virginia, respectively, to continue its expansion into attractive, high growth markets;

 

   

the advantages of being part of a larger institution with nearly $2.5 billion in assets, including a better ability to leverage overhead costs and the potential for operating efficiencies and increased profitability, particularly in light of the regulatory and competitive environments and the effects of continued rapid consolidation in the financial services industry generally;

 

   

the opportunity for further growth in complementary lines of business and for diversification of revenue composition, including expanded opportunities for lending and fee income;

 

   

the expectation that the combined company will be better positioned to compete and grow its business and will have superior future earnings and prospects compared to Blue Ridge on an independent basis;

 

   

the greater potential for increased liquidity in the market for common stock and higher trading multiples of tangible book value and earnings per share of the combined company compared to an institution of Blue Ridge’s current size;

 

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Blue Ridge’s expectations and analyses of the financial metrics of the merger, including potential cost saving opportunities, expected earnings per share accretion and projected tangible book value accretion of over 7.0%;

 

   

the financial analysis prepared by Raymond James and the opinion delivered to the Blue Ridge Board (in its capacity as such) by Raymond James on August 12, 2020, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by Raymond James in preparing the opinion, as to the fairness, from a financial point of view, of the exchange ratio in the merger pursuant to the merger agreement to Blue Ridge, as more fully described below in the section titled “—Opinion of Blue Ridge’s Financial Advisor”;

 

   

the corporate governance and social aspects of the merger, including relative representation on the board of directors of the combined company and the added strength and depth of experience of the members of Bay Banks’ management team who will join Blue Ridge’s management team following the merger;

 

   

the proportionate equity ownership of legacy Blue Ridge shareholders in the combined company;

 

   

the anticipated impact on the communities served by Blue Ridge and Bay Banks, and the increased ability to serve the communities and its customer base with responsive commercial banking services and a larger branch network;

 

   

the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals in a timely manner; and

 

   

the ability of Blue Ridge’s management team to successfully integrate and operate the businesses of Blue Ridge and Bay Banks after the merger.

The Blue Ridge Board also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the proposed transaction, including, without limitation, the following:

 

   

the challenges of integrating Bay Banks’ business, operations and employees with those of Blue Ridge;

 

   

the risk that the benefits and cost savings sought in the merger would not be fully realized;

 

   

the substantial merger and integration related expenses, estimated at approximately $3.2 million after tax;

 

   

the risk that the merger would not be consummated;

 

   

the effect of the public announcement of the merger on Blue Ridge’s customer relationships and its ability to retain employees;

 

   

the unique operating challenges and risks posed by the ongoing COVID-19 pandemic and ongoing responses thereto; and

 

   

the risks of the type and nature described under “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

In the judgment of the Blue Ridge Board, the potential benefits of the merger outweigh these considerations.

The preceding discussion of the information and factors considered by the Blue Ridge Board is not intended to be exhaustive, but, rather, includes all of the material factors considered by it in connection with its evaluation of the merger. In reaching its determination to approve and adopt the merger agreement and recommend that Blue Ridge shareholders approve the merger agreement, the Blue Ridge Board did not quantify, rank or otherwise assign any relative or specific weights to the factors considered in reaching that determination. In addition, the Blue Ridge Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Moreover, in considering

 

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the information and factors described above, individual directors may have given differing weights to different factors. The Blue Ridge Board based its determination on the totality of the information presented.

The Blue Ridge Board unanimously determined that the merger agreement is in the best interests of Blue Ridge and its shareholders. Accordingly, the Blue Ridge Board unanimously approved and adopted the merger agreement and unanimously recommends that shareholders vote “FOR” the Blue Ridge merger proposal.

Opinion of Blue Ridge’s Financial Advisor

Blue Ridge retained Raymond James as financial advisor on July 13, 2020. Blue Ridge selected Raymond James as a financial advisor because it is a globally-recognized investment banking firm offering a full range of investment banking services to its clients. In the ordinary course of its investment banking business, Raymond James is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. Pursuant to that engagement, the Blue Ridge Board requested that Raymond James evaluate the fairness, from a financial point of view, to Blue Ridge of the exchange ratio in the merger pursuant to the merger agreement.

At the August 12, 2020 meeting of the Blue Ridge Board, representatives of Raymond James rendered its opinion dated August 12, 2020 to the Blue Ridge Board (in its capacity as such), as to the fairness, as of such date, from a financial point of view, to Blue Ridge of the exchange ratio in the merger pursuant to the merger agreement, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Raymond James in connection with the preparation of its opinion.

The full text of the written opinion of Raymond James is attached as Appendix B to this joint proxy statement/prospectus. The summary of the opinion of Raymond James set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such written opinion. Holders of Blue Ridge common stock are urged to read this opinion in its entirety. The opinion of Raymond James speaks only as of the date of the opinion and does not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger.

Raymond James provided its opinion for the information of the Blue Ridge Board (in its capacity as such) in connection with, and for purposes of, its consideration of the exchange ratio in the merger pursuant to the merger agreement and its opinion only addresses whether the exchange ratio in the merger pursuant to the merger agreement was fair, from a financial point of view, to Blue Ridge. The opinion of Raymond James does not address any other term or aspect of the merger agreement or the merger contemplated thereby. The Raymond James opinion does not constitute a recommendation to the Blue Ridge Board or to any holder of Blue Ridge common stock as to how the Blue Ridge Board, such shareholder or any other person should vote or otherwise act with respect to the merger or any other matter. Raymond James does not express any opinion as to the likely trading range of Blue Ridge common stock following the merger, which may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Blue Ridge at that time.

In connection with its review of the proposed merger and the preparation of its opinion, Raymond James, among other things:

 

   

reviewed the financial terms and conditions as stated in the draft dated August 8, 2020 of the merger agreement;

 

   

reviewed certain information related to the historical condition and prospects of Blue Ridge and Bay Banks, as made available to Raymond James by or on behalf of Blue Ridge, including, but not limited to, (a) financial projections for each of Blue Ridge and Bay Banks certified by the management of Blue Ridge (together, the “Projections”) and (b) certain forecasts and estimates of potential cost savings,

 

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operating efficiencies, revenue effects, and other pro forma financial adjustments then-expected to result from the merger, as prepared by management of Blue Ridge (the “Pro Forma Financial Adjustments”);

 

   

reviewed Blue Ridge’s and Bay Banks’ (a) audited financial statements for the fiscal years ended December 31, 2019, December 31, 2018 and December 31, 2017; and (b) unaudited financial statements for the six month period ended June 30, 2020;

 

   

reviewed Blue Ridge’s and Bay Banks’ recent public filings and certain other publicly available information regarding Blue Ridge and Bay Banks;

 

   

reviewed the financial and operating performance of Blue Ridge and Bay Banks and those of other selected public companies that Raymond James deemed to be relevant;

 

   

reviewed the then-current and historical market prices and trading volume for Blue Ridge common stock and for Bay Banks common stock, and the then-current market prices of the publicly traded securities of certain other companies that Raymond James deemed to be relevant;

 

   

compared the relative contributions of Blue Ridge and Bay Banks to certain financial statistics of the combined company on a pro forma basis;

 

   

reviewed certain potential pro forma financial effects of the merger on earnings per share, capitalization and financial ratios of Blue Ridge;

 

   

conducted such other financial studies, analyses and inquiries and considered such other information and factors as Raymond James deemed appropriate;

 

   

received a certificate addressed to Raymond James from a member of senior management of Blue Ridge regarding, among other things, the accuracy of the information, data and other materials (financial or otherwise) provided to, or discussed with, Raymond James by or on behalf of Blue Ridge; and

 

   

discussed with members of the senior management of each of Blue Ridge and Bay Banks certain information relating to the aforementioned and any other matters which Raymond James deemed relevant to its inquiry including, but not limited to, the past and then-current business operations of Blue Ridge and Bay Banks, respectively, and the financial condition and future prospects and operations of Blue Ridge and Bay Banks, respectively.

With Blue Ridge’s consent, Raymond James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of Blue Ridge, or otherwise reviewed by or discussed with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor did Raymond James, independently verify any of such information. Furthermore, Raymond James undertook no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which Blue Ridge or Bay Banks was a party or may have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which Blue Ridge or Bay Banks was a party or may become subject. With Blue Ridge’s consent, the opinion of Raymond James made no assumption concerning, and therefore did not consider, the potential effects of any such litigation, claims or investigations or possible assertions. Raymond James did not make or obtain an independent appraisal of the assets or liabilities (contingent or otherwise) of Blue Ridge or of Bay Banks. With respect to the Projections, Pro Forma Financial Adjustments, and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James, with Blue Ridge’s consent, assumed that the Projections, Pro Forma Financial Adjustments and such other information and data were reasonably prepared in good faith on bases reflecting the best then-currently available estimates and judgments of management of Blue Ridge and Raymond James relied upon Blue Ridge to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. With respect to the future estimates of potential cost savings, operating efficiencies, revenue effects, one-time costs and other financial adjustments expected to

 

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result from the merger (the “Synergies”) underlying the Pro Forma Financial Adjustments, Raymond James, with Blue Ridge’s consent, assumed that they will be realized in the amounts and at the time periods indicated thereby. Raymond James expressed no opinion with respect to the Projections, Pro Forma Financial Adjustments, Synergies or the assumptions on which they were based. Raymond James assumed that the final form of the merger agreement would be substantially similar to the draft reviewed by Raymond James, and that the merger would be consummated in accordance with the terms of the merger agreement without waiver or amendment of any conditions thereto. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct and that each such party would perform all of the covenants and agreements required to be performed by it under the merger agreement without being waived. Raymond James relied upon and assumed, without independent verification, that (i) the merger would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the merger, Bay Banks or Blue Ridge that would be material to its analysis or opinion.

Raymond James expressed no opinion as to the underlying business decision to effect the merger, the structure or tax consequences of the merger, or the availability or advisability of any alternatives to the merger. Raymond James provided advice to Blue Ridge with respect to the proposed merger. Raymond James did not, however, recommend any specific amount of consideration or that any specific consideration constituted the only appropriate consideration for the merger. Raymond James did not solicit indications of interest with respect to a transaction involving Blue Ridge nor did Raymond James advise Blue Ridge with respect to its strategic alternatives. The opinion of Raymond James did not express any opinion as to the likely trading range of Bay Banks common stock or Blue Ridge common stock following announcement or consummation of the merger, which have varied or may vary depending on numerous factors that generally impact the price of securities or on the financial condition of Bay Banks and Blue Ridge at that time. The Raymond James opinion was limited to the fairness, from a financial point of view, of the exchange ratio in the merger pursuant to the merger agreement to Blue Ridge.

Raymond James expressed no opinion with respect to any other reasons (legal, business, or otherwise) that may support the decision of the Blue Ridge Board to approve or consummate the merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting, regulatory or tax advice. Raymond James assumed that such opinions, counsel or interpretations had been or would be obtained from appropriate professional sources. Furthermore, Raymond James relied, with the consent of Blue Ridge, on the fact that Blue Ridge was assisted by legal, accounting and tax advisors, and, with the consent of Blue Ridge, relied upon and assumed the accuracy and completeness of the assessments by Blue Ridge and its advisors, as to all legal, accounting and tax matters with respect to Blue Ridge, Bay Banks and the merger, including, without limitation, that the merger would qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. Raymond James was not an expert in the evaluation of allowances for loan and lease losses and had not independently verified such allowances or reviewed or examined any individual loan or credit files. Raymond James assumed, with Blue Ridge’s consent, that the allowance for loan and lease losses (i) set forth in the respective financial statements of each of Blue Ridge and Bay Banks were adequate to cover such losses, (ii) would be adequate on a pro forma basis for the combined entity and (iii) complied fully with applicable law, regulatory policy and sound banking practices as of the date of such financial statements.

In formulating its opinion, Raymond James considered only what it understood to be the consideration to be received by Blue Ridge, and Raymond James did not consider, and did not express an opinion on, the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Blue Ridge, or such class of persons, in connection with the merger whether relative to the consideration to be received by Blue Ridge or otherwise. Raymond James was not requested to opine as to, and its opinion did not

 

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express an opinion as to or otherwise address, among other things: (1) the fairness of the merger to the holders of any class of securities, creditors or other constituencies of Blue Ridge, or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion or (2) the fairness of the merger to any one class or group of Blue Ridge’s or any other party’s security holders or other constituents vis-à-vis any other class or group of Blue Ridge’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the merger amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion as to the impact of the merger on the solvency or viability of Blue Ridge or Bay Banks or the ability of Blue Ridge or Bay Banks to pay their respective obligations when they come due.

Material Financial Analyses

The following summarizes the material financial analyses reviewed by Raymond James with the Blue Ridge Board at its meeting on August 12, 2020, which material was considered by Raymond James in rendering its opinion. No company used in the analyses described below is identical or directly comparable to Blue Ridge or Bay Banks.

Contribution Analysis. Raymond James analyzed the relative contribution of Blue Ridge and Bay Banks to certain financial and operating metrics for the pro forma combined company resulting from the merger, in each case, as provided by Blue Ridge management. The financial and operating metrics included: (i) total assets, excluding PPP loans; (ii) gross loans, excluding PPP loans; (iii) total deposits; (iv) tangible common equity; (v) shareholders equity; (vi) estimated 2020 pre-tax, pre-provision (“PTPP”) net income, excluding estimated PPP fees and excluding a $10 million pre-tax goodwill impairment in 2020 for Bay Banks (“Goodwill Impairment”); and (vii) estimated 2021 PTPP net income, excluding estimated PPP fees. The relative contribution analysis did not give effect to any Synergies as a result of the merger. The results of this analysis are summarized in the table below:

 

     Relative Contribution        
     Blue Ridge     Bay Banks     Implied
Exchange Ratio
 

Total Assets (Excl. PPP)

     51.3     48.7     0.41x  

Gross Loans (Excl. PPP)

     44.7     55.3     0.53x  

Total Deposits

     49.0     51.0     0.45x  

Tangible Common Equity

     37.7     62.3     0.71x  

Shareholders Equity

     44.2     55.8     0.54x  

2020E Pre-Tax, Pre-Provision Income (Excl. PPP Fees)

     54.8     45.2     0.36x  

2021E Pre-Tax, Pre-Provision Income (Excl. PPP Fees)

     52.5     47.5     0.39x  

Exchange Ratio in the Merger

         0.50x  

Discounted Cash Flow Analysis. Raymond James performed a discounted cash flow analysis of Blue Ridge and Bay Banks based on the Projections. Consistent with the periods included in the Projections, Raymond James used estimated calendar year 2025 as the final year for the analysis and applied multiples, ranging from 11.0x to 13.0x, to estimated calendar year 2025 earnings in order to derive a range of estimated terminal values for Blue Ridge and Bay Banks in 2024. Raymond James arrived at this range by using the median of the historical 2-year price to next twelve month EPS multiple for the NASDAQ Bank Index of approximately 12.0x and added 1.0x to get the high of that range and subtracted 1.0x to get the low of that range.

For Blue Ridge and Bay Banks, Raymond James used discount rates ranging from 12.50% to 15.50%. Raymond James arrived at its discount rate range by using the 2019 Duff & Phelps Valuation Handbook to estimate their respective discount rates at approximately 14.0% and then added 1.5% to get the high of that range and subtracted

 

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1.5% to get the low of that range of estimated discount rates. Raymond James reviewed the ranges of implied per share values indicated by the discounted cash flow analysis for each of Blue Ridge and Bay Banks and calculated a range of implied exchange ratios by dividing the maximum implied per share value of Blue Ridge common stock by the minimum implied per share value of Bay Banks common stock to calculate the maximum implied exchange ratio, and by dividing the minimum implied per share value of Blue Ridge common stock by the maximum implied per share value of Bay Banks common stock to calculate the minimum implied exchange ratio. The results of the discounted cash flow analysis are summarized in the table below:

 

     Implied Per Share Value      Implied
Exchange Ratio
 
     Blue Ridge      Bay Banks  
     Low      High      Low      High      Low/High         High/Low  

Net Income Terminal Multiple

   $ 18.81      $ 25.02      $ 9.38      $ 11.60        0.37x     -     0.62x  

Exchange Ratio in the Merger

                 0.50x  

Selected Public Companies Analysis. Raymond James reviewed certain data for selected companies with publicly traded equity securities that it deemed relevant for its analysis. The selected group represents companies Raymond James believed to be relevant to each of Blue Ridge and Bay Banks. Raymond James selected certain public companies that: (i) are headquartered in Virginia and North Carolina; and (ii) have total assets between $750 million and $3.5 billion. The aforementioned financial characteristics were shown for the bank subsidiary if consolidated data was unavailable, and the financial characteristics were based on the most recent last twelve month period reported as of June 30, 2020, except for Southern BancShares (N.C.), Inc., Burke & Herbert Bank & Trust, and First Bancorp Inc., for which the most recent financial data was as of March 31, 2020. The selected group excludes targets of announced mergers. No company used in the analysis described below is identical or directly comparable to either Blue Ridge or Bay Banks. The selected public companies Raymond James deemed relevant and their corresponding multiples include the following:

 

     Price / TBV     Price /2020
PTPP EPS
     Price /2021
PTPP EPS
 

Southern BancShares (N.C.), Inc.

     86     —          —    

Burke & Herbert Bank & Trust

     82     —          —    

Southern National Bancorp of Virginia, Inc.

     82     3.55x        4.23x  

First Community Bankshares, Inc.

     134     —          —    

American National Bankshares, Inc.

     113     6.43x        7.85x  

First Bancorp, Inc.

     217     —          —    

C&F Financial Corporation

     75     —          —    

John Marshall Bancorp, Inc.

     80     —          —    

FVCBankcorp, Inc.

     79     5.55x        4.86x  

Community Bankers Trust Corporation

     74     4.95x        5.85x  

MainStreet Bancshares, Inc.

     78     5.21x        5.44x  

National Bankshares, Inc.

     92     7.94x        8.76x  

Peoples Bancorp of North Carolina, Inc.

     74     —          —    

Select Bancorp, Inc.

     83     8.62x        6.85x  

Old Point Financial Corporation

     70     —          —    

Chesapeake Financial Shares, Inc.

     80     —          —    

Eagle Financial Services, Inc.

     86     —          —    

UB Bancorp

     83     —          —    

F & M Bank Corporation

     76     —          —    

First National Corporation

     84     —          —    

Bank of the James Financial Group, Inc.

     71     —          —    

Raymond James calculated various financial multiples for each selected public company, including price per share at close on August 10, 2020 compared to: (i) basic tangible book value (“TBV”) per share at June 30, 2020,

 

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per S&P Global Market Intelligence; (ii) estimated 2020 PTPP earnings per share (“EPS”), as shown by mean street consensus estimates per S&P Global Market Intelligence; and (iii) estimated 2021 PTPP EPS, as shown by mean street consensus estimates per S&P Global Market Intelligence. All financial multiples—TBV per share, 2020E PTPP EPS, and 2021E PTPP EPS—greater than two standard deviations away from the unadjusted mean were considered not meaningful. Raymond James reviewed the 75th percentile, mean, median, and 25th percentile relative valuation multiples of the selected public companies. The results of the selected companies’ analysis for each of Blue Ridge and Bay Banks are summarized below:

 

     Blue Ridge Multiples     Bay Banks Multiples  
     25th Pctl.     75th Pctl.     25th Pctl.     75th Pctl.  

Tangible Book Value

     76     86     76     86

2020E PTPP EPS (Excl. PPP Fees)

     5.1     7.2     5.1     7.2

2021E PTPP EPS (Excl. PPP Fees)

     5.1     7.3     5.1     7.3

Taking into account the results of the selected public companies analysis, Raymond James applied the 75th and 25th percentiles of the price to tangible book value per share ratio and earnings per share multiples to corresponding financial data for each of Blue Ridge and Bay Banks. Raymond James reviewed the ranges of implied per share values and calculated a range of implied exchange ratios by dividing the higher implied per share value of Blue Ridge by the lower implied per share value of Bay Banks to calculate the implied exchange ratio, and by dividing the lower implied per share value of Blue Ridge by the higher implied per share value of Bay Banks to calculate the low implied exchange ratio. The results of the selected public companies analysis are summarized below:

 

     Implied Per Share Value      Implied
Exchange Ratio
 
     Blue Ridge      Bay Banks  
     Low      High      Low      High      Low/High    

 

    High/Low  

Tangible Book Value

   $ 9.67      $ 10.95      $ 6.75      $ 7.64        0.62x       -       0.79x  

2020E PTPP EPS (Excl. PPP Fees)

   $ 13.10      $ 18.54      $ 4.62      $ 6.54        0.25x       -       0.50x  

2021E PTPP EPS (Excl. PPP Fees)

   $ 14.47      $ 20.64      $ 5.61      $ 8.01        0.27x       -       0.55x  

Exchange Ratio in the Merger

                 0.50x  

Pro Forma Discounted Cash Flow Analysis. Raymond James performed a discounted cash flow analysis to estimate an illustrative range for the implied equity value of the pro forma combined entity, taking into account the cost savings and related expenses expected to result from the merger as well as certain purchase accounting adjustments. In this analysis, Raymond James used the Projections for each of Blue Ridge and Bay Banks, and the Pro Forma Financial Adjustments, each of which was provided by Blue Ridge management and approved by it for the use by Raymond James, and Raymond James assumed discount rates ranging from 12.50% to 15.50%. Raymond James arrived at its discount rate range by using the 2019 Duff & Phelps Valuation Handbook to estimate the pro forma company’s discount rate at approximately 14.0% and then added 1.5% to get the high of that range and subtracted 1.5% to get the low of that range of estimated discount rates. The range of values was derived by adding (i) the present value of the estimated excess cash flows that the pro forma combined entity could generate over the period from December 31, 2020 through December 31, 2024 and (ii) the present value of the pro forma combined entity’s implied terminal value at the end of such period, in each case applying the estimated Pro Forma Financial Adjustments. Raymond James assumed that the pro forma combined entity would maintain a tangible common equity to tangible assets ratio of 8.00% and would retain sufficient earnings to maintain that level. In calculating the terminal value of the pro forma combined entity, Raymond James applied a range of 11.0x to 13.0x the pro forma combined entity’s estimated 2025 earnings. Raymond James arrived at this range by using the median of the historical 2-year price to next twelve month EPS multiple for the NASDAQ Bank Index of approximately 12.0x and added 1.0x to get the high of that range and subtracted 1.0x to get the low of that range. This discounted cash flow analysis resulted in an illustrative range of implied values of $23.31 to $29.98 for each share of Blue Ridge common stock in the proposed merger.

 

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The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The above analysis did not purport to be indicative of the actual values or expected values of the pro forma combined entity.

Pro Forma Impact Analysis. For informational purposes only, Raymond James performed a pro forma financial impact analysis that combined projected balance sheet and 2021 and 2022 estimated EPS information of Blue Ridge and Bay Banks. Using (i) closing balance sheet estimates as of December 31, 2020 for each of Blue Ridge and Bay Banks; (ii) financial forecasts and projections of each of Blue Ridge and Bay Banks for the year ending 2021 and the year ending 2022; and (iii) pro forma assumptions (including, without limitation, the cost savings expected to result from the merger, as well as the purchase accounting adjustments), each of which were provided by Blue Ridge management. Raymond James analyzed the estimated financial impact of the merger on certain projected financial results. This analysis indicated that the merger could be accretive to Blue Ridge’s estimated tangible book value per share at December 31, 2020, and accretive to Blue Ridge’s estimated 2021 and 2022 earnings per share. For all of the above analyses, the actual results achieved by the pro forma company following the merger may vary from the projected results, and the variations may be material.

Additional Considerations. The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of Raymond James as to the actual value of Blue Ridge.

In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of Blue Ridge. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Blue Ridge Board (in its capacity as such) and were prepared solely as part of the analysis of Raymond James of the fairness, from a financial point of view, to Blue Ridge of the exchange ratio in the proposed merger pursuant to the merger agreement. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into account by the Blue Ridge Board in making its determination to approve the merger. Neither Raymond James’ opinion nor the analyses described above should be viewed as determinative of the Blue Ridge Board’s or Blue Ridge management’s views with respect to Blue Ridge, Bay Banks or the merger. Raymond James provided advice to Blue Ridge with respect to the proposed merger. Raymond James did not, however, recommend any specific amount of consideration to the Blue Ridge Board or that any specific consideration constituted the only appropriate consideration for the merger. Blue Ridge placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.

The Raymond James opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it as of August 12, 2020, and any material change in such circumstances and conditions may affect the opinion of Raymond James, but Raymond James does not have any obligation to update, revise or reaffirm that opinion. As the Blue Ridge Board was aware, the credit, financial and stock markets had been experiencing unusual volatility and Raymond James expressed no opinion or view as to any potential effects of such volatility on the merger, Blue Ridge, or Bay Banks and the Raymond James opinion did not purport to address potential developments in any such markets. As the Blue Ridge Board was aware, there was significant uncertainty as to the potential direct and indirect business, financial, legal, economic and social implications and consequences of the spread of the coronavirus and associated illnesses and the actions and

 

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measures that countries, governments, regulatory agencies, central banks, international financing and funding organizations, stock markets, businesses and individuals may take to address the spread of the coronavirus and associated illnesses including, without limitation, those actions and measures pertaining to fiscal or monetary policies, legal and regulatory matters and the credit, financial and stock markets (collectively, the “Pandemic Effects”). Raymond James expressed no opinion or view as to the potential impact of the Pandemic Effects on its analysis, its opinion, the merger, Blue Ridge or Bay Banks. Raymond James relied upon and assumed, without independent verification, that, other than as had been disclosed to Raymond James, there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Blue Ridge of Bay Banks since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.

Blue Ridge will pay Raymond James a fee for advisory services in connection with the merger equal to $1,250,000 (inclusive of a retainer fee of $50,000 paid when Raymond James was engaged, a fee of $150,000 paid when Raymond James delivered its opinion, and a fee of $500,000 paid when the merger agreement was executed), of which $550,000 is contingent upon the closing of the merger. Blue Ridge also agreed to reimburse Raymond James for its expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.

Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of Blue Ridge and Bay Banks for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Raymond James provided certain services to Blue Ridge in the previous two years, including (i) having served as sole financial advisor for Blue Ridge’s purchase of Virginia Community Bankshares, Inc. in May 2019, for which Raymond James received fees of approximately $500,000, and (ii) having served as sole placement agent for a common equity private placement in February 2019, for which Raymond James received fees of approximately $440,000. Raymond James may provide investment banking, financial advisory and other financial services to Blue Ridge and/or Bay Banks or other participants in the merger in the future, for which Raymond James may receive compensation.

Bay Banks’ Reasons for the Merger; Recommendations of the Bay Banks Board

After careful consideration, the Bay Banks Board has determined that the merger agreement, including the merger and the other transactions contemplated thereby, is in the best interests of Bay Banks and its shareholders.

In reaching its decision to adopt and approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and to recommend that Bay Banks shareholders approve the merger agreement, the Bay Banks Board evaluated the merger agreement and the merger in consultation with Bay Banks’ management, as well as Bay Banks’ financial and legal advisors, and considered a number of factors, including, among others, the following principal factors which are not presented in order of priority:

 

   

the review undertaken by the Bay Banks Board and management with respect to the business strategy of Bay Banks and its prospects for the future as an independent institution, and the strategic alternatives available to Bay Banks;

 

   

the expectation that the merger will create the fourth largest community bank headquartered in Virginia, with nearly $2.5 billion in assets, and the benefits of increased scale, cost savings, and operating efficiencies;

 

   

the strategic opportunities associated with merging Bay Banks and Blue Ridge, including complementary geographical markets and lines of business that will provide enhanced capabilities, a more diverse revenue stream and a platform for expansion of growth opportunities;

 

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the ability of Bay Banks’ shareholders to benefit from the combined company’s potential growth and stock appreciation, and the expectation that the combined company will have superior future earnings and prospects compared to Bay Banks’ earnings and prospects on an independent basis;

 

   

the fact that Blue Ridge’s common stock is listed on the NYSE American, and the expectation that the combined company will offer greater potential for increased liquidity for its shareholders versus Bay Banks on a standalone basis;

 

   

a review of the historical financial statements and condition of Blue Ridge and certain other information, primarily financial in nature, relating to the business, earnings, financial condition and prospects of Blue Ridge and its ability to successfully complete the merger and provide increased value to Bay Banks shareholders following the merger, taking into account the results of Bay Banks’ due diligence investigation of Blue Ridge;

 

   

a review of the prospects, challenges and risks facing Bay Banks in the current competitive, economic, financial and regulatory climate, including the low interest rate environment, accelerating pace of technological change in the banking industry, increased operating costs resulting from regulatory and compliance mandates, and the and the ability of a larger institution to address these challenges and compete in the banking environment;

 

   

the complementary nature of the products, customers and markets of the two companies, which Bay Banks believes should provide the opportunity to mitigate risks, including areas within the banks’ respective loan portfolios disproportionately affected by the COVID-19 pandemic, and increase potential returns;

 

   

the fact that the aggregate transaction value would be approximately $100.4 million, estimated as of August 12, 2020;

 

   

the financial and other terms of the merger agreement, including the merger consideration, deal protection and termination fee provisions, which it reviewed with its outside financial and legal advisors;

 

   

that the executive management team of the combined company, including Mr. Greene as President and Chief Operating Officer and Ms. Gavant as Chief Financial Officer, will represent a deeply experienced and talented management team with a shared vision of commitment to customers;

 

   

the provisions of the merger agreement setting forth the corporate governance of the combined company, including that the combined company’s board of directors would be comprised of seven legacy Blue Ridge directors and six legacy Bay Banks directors (now amended to eight legacy Blue Ridge directors and seven legacy Bay Banks directors), which the Bay Banks Board believes will enhance the likelihood that the strategic benefits that Bay Banks expects to achieve as a result of the merger will be realized;

 

   

the compatibility of Bay Banks’ and Blue Ridge’s culture and similar commitments to the communities they serve and the customer relationships they foster;

 

   

the likelihood that Blue Ridge will be able to complete a merger transaction from a financial and regulatory perspective; and

 

   

the financial analyses and opinion of PSC delivered to the Bay Banks Board on August 12, 2020, to the effect that, as of that date, and based upon and subject to the conditions, limitations, qualifications and assumptions set forth in the opinion, the exchange ratio was fair, from a financial point of view, to the common shareholders of Bay Banks.

The Bay Banks Board also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberations on the merger, including, without limitation, the following, which are not presented in order of priority:

 

   

the fact that Bay Banks would be prohibited from soliciting acquisition proposals after execution of the merger agreement, and the possibility that, while it was not viewed as precluding other proposals, the

 

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$4.0 million termination fee payable to Blue Ridge upon the termination of the merger agreement under certain circumstances could potentially discourage certain other potential acquirers from making a competing offer to acquire Bay Banks;

 

   

the potential risks and costs associated with integrating Bay Banks and Blue Ridge’s businesses, operations and workforces;

 

   

the risk that potential benefits and synergies sought in the merger may not be realized or may not be realized within the expected time periods;

 

   

the impacts of and uncertainty surrounding the COVID-19 pandemic on Blue Ridge, Bay Banks and U.S. financial markets;

 

   

the fact that certain of Bay Banks’ directors and executive officers have other interests in the merger that are different from, or in addition to, their interests as Bay Banks shareholders, as described in more detail in the section entitled “—Interests of Bay Banks Directors and Officers in the Merger”;

 

   

the possibility that the merger and the integration process could result in employee attrition and have a negative effect on business and customer relationships;

 

   

the fact that, while Bay Banks expects that the merger will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, including the risk that certain regulatory approvals, the receipt of which are conditions to the closing of the merger, might not be obtained, and as a result, the merger may not be completed;

 

   

while the merger is pending, Bay Banks’ officers and employees will have to focus extensively on actions required to complete the merger, which could divert their attention from Bay Banks’ business, and Bay Banks will incur substantial costs even if the merger is not consummated;

 

   

while the merger is pending, Bay Banks will be subject to certain customary restrictions on the conduct of its business, which may delay or prevent it from pursuing business opportunities that may arise, or preclude it from taking actions that would be advisable if it was to remain independent;

 

   

the significant risks and costs involved in connection with entering into and completing the merger, or failing to complete the merger in a timely manner, or at all, including as a result of any failure to obtain required regulatory approvals, such as the risk and costs relating to diversion of management and employee attention from other strategic opportunities and operational matters, potential employee attrition, and the potential effect on business and customer relationships;

 

   

the possibility of litigation in connection with the merger; and

 

   

other risks described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

The foregoing discussion of the information and factors considered by the Bay Banks Board is not intended to be exhaustive, but, rather, includes the material factors considered by the Bay Banks Board. In reaching its decision to adopt and approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Bay Banks Board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Bay Banks Board considered all these factors as a whole, including discussions with, and questioning of, Bay Banks’ management and Bay Banks’ financial and legal advisors, and overall considered the factors to be favorable to, and support, its determination to approve the merger agreement and the transactions contemplated thereby, including the merger.

This explanation of the Bay Banks Board’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Regarding Forward-Looking Statements.”

 

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The Bay Banks Board unanimously determined that the merger agreement is in the best interests of Blue Ridge and its shareholders. Accordingly, the Bay Banks Board unanimously approved and adopted the merger agreement and unanimously recommends that shareholders vote “FOR” the Bay Banks merger proposal.

Opinion of Bay Banks’ Financial Advisor

Bay Banks retained Piper Sandler to act as financial advisor to the Bay Banks Board in connection with Bay Banks’ consideration of a possible business combination. Bay Banks selected Piper Sandler to act as its financial advisor because Piper Sandler is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Piper Sandler is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Piper Sandler acted as financial advisor to the Bay Banks Board in connection with the proposed merger and participated in certain of the negotiations leading to the execution of the merger agreement. At the August 12, 2020 meeting at which the Bay Banks Board considered the merger and the merger agreement, Piper Sandler delivered to the Bay Banks Board its oral opinion, which was subsequently confirmed in writing on August 12, 2020, to the effect that, as of such date, the exchange ratio was fair to the holders of Bay Banks common stock from a financial point of view. The full text of Piper Sandler’s opinion is attached as Appendix C to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Piper Sandler in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of Bay Banks common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Piper Sandler’s opinion was directed to the Bay Banks Board in connection with its consideration of the merger and the merger agreement and does not constitute a recommendation to any shareholder of Bay Banks as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger and the merger agreement. Piper Sandler’s opinion was directed only to the fairness, from a financial point of view, of the exchange ratio to the holders of Bay Banks common stock and did not address the underlying business decision of Bay Banks to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Bay Banks or the effect of any other transaction in which Bay Banks might engage. Piper Sandler also did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by any officer, director or employee of Bay Banks or Blue Ridge, or any class of such persons, if any, relative to the compensation to be received in the merger by any other shareholder. Piper Sandler’s opinion was approved by Piper Sandler’s fairness opinion committee.

In connection with its opinion, Piper Sandler reviewed and considered, among other things:

 

   

a draft of the merger agreement, dated August 12, 2020;

 

   

certain publicly available financial statements and other historical financial information of Bay Banks that Piper Sandler deemed relevant;

 

   

certain publicly available financial statements and other historical financial information of Blue Ridge that Piper Sandler deemed relevant;

 

   

certain internal financial projections for Bay Banks for the years ending December 31, 2020 through December 31, 2024, as provided by the senior management of Bay Banks;

 

   

certain internal financial projections for Blue Ridge for the years ending December 31, 2020 through December 31, 2022, as well as an estimated long-term annual net income and asset growth rate for the

 

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years ending December 31, 2023 and December 31, 2024 and estimated dividends per share for the years ending December 31, 2020 through December 31, 2024, as provided by the senior management of Blue Ridge;

 

   

the pro forma financial impact of the merger on Blue Ridge based on certain assumptions relating to transaction expenses, purchase accounting adjustments, and cost savings, as well as certain adjustments to Bay Banks’ loan loss provision expense for the years ending December 31, 2021 through December 31, 2024, as provided by the senior management of Blue Ridge;

 

   

the relative contribution of assets, equity and earnings of Bay Banks and Blue Ridge to the combined entity, as well as their respective business models, deposit bases, branch locations and opportunities for synergies and cost savings as a result of the merger, as discussed with the senior management of Bay Banks;

 

   

the publicly reported historical price and trading activity for Bay Banks common stock and Blue Ridge common stock, including a comparison of certain stock trading information for Bay Banks common stock and Blue Ridge common stock and certain stock indices, as well as similar publicly available information for certain other companies, the securities of which are publicly traded;

 

   

a comparison of certain financial and market information for Bay Banks and Blue Ridge with similar financial institutions for which information was publicly available;

 

   

the current market environment generally and the banking environment in particular; and

 

   

such other information, financial studies, analyses and investigations and financial, economic and market criteria as Piper Sandler considered relevant.

Piper Sandler also discussed with certain members of the senior management of Bay Banks and its representatives the business, financial condition, results of operations and prospects of Bay Banks and held similar discussions with certain members of the senior management of Blue Ridge and its representatives regarding the business, financial condition, results of operations and prospects of Blue Ridge.

In performing its review, Piper Sandler relied upon the accuracy and completeness of all of the financial and other information that was available to Piper Sandler from public sources, that was provided to Piper Sandler by Bay Banks, Blue Ridge or their respective representatives, or that was otherwise reviewed by Piper Sandler, and Piper Sandler assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification or investigation. Piper Sandler relied on the assurances of the respective senior managements of Bay Banks and Blue Ridge that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading in any respect material to its analyses. Piper Sandler was not asked to perform and did not undertake an independent verification of any such information and Piper Sandler did not assume any responsibility or liability for the accuracy or completeness thereof. Piper Sandler did not make an independent evaluation or perform an appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of Bay Banks or Blue Ridge. Piper Sandler rendered no opinion on, or evaluation of, the collectability of any assets or the future performance of any loans of Bay Banks or Blue Ridge. Piper Sandler did not make an independent evaluation of the adequacy of the allowance for loan losses of Bay Banks or Blue Ridge, or the combined entity after the merger, and Piper Sandler did not review any individual credit files relating to Bay Banks or Blue Ridge. Piper Sandler assumed, with Bay Banks’ consent, that the respective allowances for loan losses for both Bay Banks and Blue Ridge were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Piper Sandler used certain internal financial projections for Bay Banks for the years ending December 31, 2020 through December 31, 2024, as provided by the senior management of Bay Banks. In addition, Piper Sandler used certain internal financial projections for Blue Ridge for the years ending December 31, 2020 through December 31, 2022, as well as an estimated long-term annual net income and asset growth rate for the years ending December 31, 2023 and December 31, 2024 and estimated dividends per share

 

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for the years ending December 31, 2020 through December 31, 2024, as provided by the senior management of Blue Ridge. Piper Sandler also received and used in its pro forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments and cost savings, as well as certain adjustments to Bay Banks’ loan loss provision expense for the years ending December 31, 2021 through December 31, 2024, as provided by the senior managements of Blue Ridge. With respect to the foregoing information, the respective senior managements of Bay Banks and Blue Ridge confirmed to Piper Sandler that such information reflected the best currently available estimates and judgements of those respective senior managements as to the future financial performance of Bay Banks and Blue Ridge, respectively, and Piper Sandler assumed that the financial results reflected in such information would be achieved. Piper Sandler expressed no opinion as to such estimates or judgements, or the assumptions on which they were based. Piper Sandler assumed that there had been no material change in Bay Banks’ or Blue Ridge’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to Piper Sandler. Piper Sandler assumed in all respects material to its analyses that Bay Banks and Blue Ridge would remain as going concerns for all periods relevant to its analyses.

Piper Sandler also assumed, with Bay Banks’ consent, that (i) each of the parties to the merger agreement would comply in all material respects with all material terms and conditions of the merger agreement and all related agreements, that all of the representations and warranties contained in such agreements were true and correct in all material respects, that each of the parties to such agreements would perform in all material respects all of the covenants and other obligations required to be performed by such party under such agreements and that the conditions precedent in such agreements were not and would not be waived, (ii) in the course of obtaining the necessary regulatory or third party approvals, consents and releases with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Bay Banks, Blue Ridge, the merger or any related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with Bay Banks’ consent, Piper Sandler relied upon the advice that Bay Banks received from its legal, accounting and tax advisors as to all legal, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement. Piper Sandler expressed no opinion as to any such matters.

Piper Sandler’s opinion was necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Piper Sandler as of, the date thereof. Events occurring after the date thereof could materially affect Piper Sandler’s opinion. Piper Sandler has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Piper Sandler expressed no opinion as to the trading value of Bay Banks common stock or Blue Ridge common stock at any time or what the value of Blue Ridge common stock will be once it is actually received by the holders of Bay Banks common stock.

In rendering its opinion, Piper Sandler performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Piper Sandler’s opinion or the presentation made by Piper Sandler to the Bay Banks Board, but is a summary of the material analyses performed and presented by Piper Sandler. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Piper Sandler believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Piper Sandler’s comparative analyses described below is identical to Bay Banks or Blue Ridge and no transaction is

 

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identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or transaction values, as the case may be, of Bay Banks and Blue Ridge and the companies to which they were compared. In arriving at its opinion, Piper Sandler did not attribute any particular weight to any analysis or factor that it considered. Rather, Piper Sandler made qualitative judgments as to the significance and relevance of each analysis and factor. Piper Sandler did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinion, rather, Piper Sandler made its determination as to the fairness of the exchange ratio to the holders of Bay Banks common stock on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

In performing its analyses, Piper Sandler also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Bay Banks, Blue Ridge and Piper Sandler. The analyses performed by Piper Sandler are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Piper Sandler prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Bay Banks Board at its August 12, 2020 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Piper Sandler’s analyses do not necessarily reflect the value of Bay Banks common stock or Blue Ridge common stock or the prices at which Bay Banks or Blue Ridge common stock may be sold at any time. The analyses of Piper Sandler and its opinion were among a number of factors taken into consideration by the Bay Banks Board in making its determination to approve the merger agreement and the analyses described below should not be viewed as determinative of the decision of the Bay Banks Board with respect to the fairness of the exchange ratio.

Summary of Proposed Merger Consideration and Implied Transaction Metrics

Piper Sandler reviewed the financial terms of the proposed merger. Pursuant to the terms of the merger agreement, at the effective time of the merger each share of Bay Banks common stock issued and outstanding immediately prior to the effective time of the merger, except for certain shares as set forth in the merger agreement, shall be converted into the right to receive 0.5000 of a share of common stock of Blue Ridge. Based on the closing price per share of Blue Ridge common stock on August 11, 2020 of $14.63 and based upon 13,344,104 shares of Bay Banks common stock outstanding and 222,460 Bay Banks options outstanding with a weighted average exercise price of $7.83, Piper Sandler calculated an aggregate implied transaction value of $97.8 million. Based upon financial information for Bay Banks as of or for the last twelve months (“LTM”) ended June 30, 2020 and the closing price of Bay Banks’ common stock on August 11, 2020, Piper Sandler calculated the following implied transaction metrics:

 

Transaction Price / Bay Banks June 30, 2020 Book Value per Share

     81

Transaction Price / Bay Banks June 30, 2020 Tangible Book Value per Share

     82

Transaction Price / Bay Banks June 30, 2020 LTM Earnings per Share¹

     17.4

Transaction Price / Bay Banks 2020E Earnings per Share²

     20.6

Transaction Price / Bay Banks 2021E Median Analyst GAAP Earnings per Share²

     11.4

Tangible Book Premium / Core Deposits³

     -2.8

Tangible Book Premium / Core Deposits4

     -2.3

Premium to Bay Banks Market Price as of August 11, 2020

     22.1

 

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  1)

Excludes the after-tax impact of Bay Banks goodwill impairment of $9.8 million in Q2 2020

  2)

As provided by Bay Banks management

  3)

Core deposits defined as total deposits less time deposits with balances greater than $100,000

  4)

Core deposits defined as total deposits less time deposits with balances greater than $250,000

Contribution Analysis

Piper Sandler reviewed the relative contributions of Bay Banks and Blue Ridge to the pro forma balance sheet and income of the combined entity. This analysis excluded mark-to-market and other transaction-related adjustments. The results of this analysis are set forth in the following table, which also compares the results of this analysis with the implied pro forma ownership percentages of Bay Banks and Blue Ridge shareholders in the combined company:

 

     Bay Banks     Blue Ridge  

$ value in millions

          

Balance Sheet:

     $        %       $        %  

Net Loans

   $ 1,041        47.5   $ 1,151        52.5

Net Loans, Excluding PPP

   $ 985        55.2   $ 801        44.8

Total Assets

   $ 1,238        43.7   $ 1,595        56.3

Total Deposits

   $ 1,007        51.0   $ 966        49.0

Total Equity

   $ 120        55.7   $ 95        44.3

Tangible Common Equity

   $ 118        62.3   $ 72        37.7

Earnings:

          

Year-to-date Pre-tax Pre-Provision Net Revenue¹

   $ 6.8        34.1   $ 13.0        65.9

Year-to-date Net Income²

   $ 1.6        18.9   $ 7.1        81.1

2020E Net Income²

   $ 4.6        28.7   $ 11.5        71.3

2021E Net Income²

   $ 8.4        41.7   $ 11.7        58.3

Market Valuation:

          

Market Capitalization as of 8/11/2020

   $ 80        49.1   $ 83        50.9

Pro Forma Ownership to Common Shareholders

        53.8        46.2

 

  1)

Excludes pre-tax impact of Bay Banks goodwill impairment of $10.4 million in Q2 2020

  2)

Excludes after-tax impact of Bay Banks goodwill impairment of $9.8 million in Q2 2020

Stock Trading History

Piper Sandler reviewed the publicly available historical reported trading prices of Bay Banks common stock and Blue Ridge common stock for the one-year and three-year periods ended August 11, 2020. Piper Sandler then compared the relationship between the movements in the price of Blue Ridge common stock and Bay Banks common stock, respectively, to movements in their peer group (as described below) as well as certain stock indices.

One-Year Stock Performance

 

     Beginning Value
August 11, 2019
    Ending Value
August 11, 2020
 

Bay Banks

     100     74.0

Blue Ridge

     100     74.1

Peer Group

     100     70.8

S&P 500 Index

     100     114.2

NASDAQ Bank Index

     100     81.5

 

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Three-Year Stock Performance

 

     Beginning Value
August 11, 2017
    Ending Value
August 11, 2020
 

Bay Banks

     100     63.1

Blue Ridge

     100     99.7

Peer Group

     100     72.3

S&P 500 Index

     100     136.6

NASDAQ Bank Index

     100     80.7

Comparable Company Analyses

Piper Sandler used publicly available information to compare selected financial information for Bay Banks and Blue Ridge with a group of financial institutions selected by Piper Sandler. The Bay Banks and Blue Ridge peer group included publicly traded bank and thrifts headquartered in Virginia, North Carolina, South Carolina and Tennessee with total assets between $750 million and $2.0 billion as of August 12, 2020 (the “Peer Group”)¹. The Peer Group consisted of the following companies:

 

Bank of the James Financial Group, Inc.

  

FVCBankcorp, Inc.

Benchmark Bankshares, Inc.

  

GrandSouth Bancorporation

C&F Financial Corporation

  

John Marshall Bancorp, Inc.

Chesapeake Financial Shares, Inc.

  

MainStreet Bancshares, Inc.

CoastalSouth Bancshares, Inc.

  

Mountain Commerce Bancorp, Inc.

Community Bankers Trust Corporation

  

National Bankshares, Inc.

Eagle Financial Services, Inc.

  

Old Point Financial Corporation

F & M Bank Corp.

  

Parkway Acquisition Corp.

Fauquier Bankshares, Inc.

  

Peoples Bancorp of North Carolina, Inc.

First Community Corporation

  

Security Federal Corp.

First Farmers and Merchants Corporation

  

Select Bancorp, Inc.

First National Corporation

  

South Atlantic Bancshares, Inc.

First Reliance Bancshares, Inc.

  

Virginia National Bankshares Corporation

 

  1)

Excludes CNB Corporation and UB Bancorp due to undisclosed shares outstanding and First Citizens Bancshares, Inc. due to financial information only available as of 12/31/2019.

The analysis compared financial data for Bay Banks and Blue Ridge with corresponding data for the Peer Group as of or for the last twelve months ended June 30, 2020 (unless otherwise noted) with pricing data as of August 11, 2020. The table below sets forth the data for Bay Banks, Blue Ridge, and the median, mean, low and high data for the Peer Group.

 

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Bay Banks and Blue Ridge Comparable Company Analysis ¹

 

     Bay Banks     Blue
Ridge
     Peer
Group
Median
   &n