Form 1-A Issuer Information UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1-A
REGULATION A OFFERING STATEMENT
UNDER THE SECURITIES ACT OF 1933
OMB APPROVAL

FORM 1-A

OMB Number: 3235-0286


Estimated average burden hours per response: 608.0

1-A: Filer Information

Issuer CIK
0000842717
Issuer CCC
XXXXXXXX
DOS File Number
Offering File Number
Is this a LIVE or TEST Filing? LIVE TEST
Would you like a Return Copy?
Notify via Filing Website only?
Since Last Filing?

Submission Contact Information

Name
Phone
E-Mail Address

1-A: Item 1. Issuer Information

Issuer Infomation

Exact name of issuer as specified in the issuer's charter
Blue Ridge Bankshares, Inc.
Jurisdiction of Incorporation / Organization
VIRGINIA
Year of Incorporation
1988
CIK
0000842717
Primary Standard Industrial Classification Code
STATE COMMERICAL BANKS
I.R.S. Employer Identification Number
00-0000000
Total number of full-time employees
42
Total number of part-time employees
6

Contact Infomation

Address of Principal Executive Offices

Address 1
17 W. Main Street
Address 2
City
Luray
State/Country
VIRGINIA
Mailing Zip/ Postal Code
22835
Phone
540-743-6521

Provide the following information for the person the Securities and Exchange Commission's staff should call in connection with any pre-qualification review of the offering statement.

Name
Scott H. Richter, Esq.
Address 1
Address 2
City
State/Country
Mailing Zip/ Postal Code
Phone

Provide up to two e-mail addresses to which the Securities and Exchange Commission's staff may send any comment letters relating to the offering statement. After qualification of the offering statement, such e-mail addresses are not required to remain active.

Financial Statements

Industry Group (select one) Banking Insurance Other

Use the financial statements for the most recent period contained in this offering statement to provide the following information about the issuer. The following table does not include all of the line items from the financial statements. Long Term Debt would include notes payable, bonds, mortgages, and similar obligations. To determine "Total Revenues" for all companies selecting "Other" for their industry group, refer to Article 5-03(b)(1) of Regulation S-X. For companies selecting "Insurance", refer to Article 7-04 of Regulation S-X for calculation of "Total Revenues" and paragraphs 5 and 7 of Article 7-04 for "Costs and Expenses Applicable to Revenues".

Balance Sheet Information

Cash and Cash Equivalents
$ 6263504.00
Investment Securities
$ 37387761.00
Total Investments
$
Accounts and Notes Receivable
$
Loans
$ 219961198.00
Property, Plant and Equipment (PP&E):
$
Property and Equipment
$ 2052463.00
Total Assets
$ 272213600.00
Accounts Payable and Accrued Liabilities
$ 1383989.00
Policy Liabilities and Accruals
$
Deposits
$ 209732943.00
Long Term Debt
$ 36451839.00
Total Liabilities
$ 247568771.00
Total Stockholders' Equity
$ 24644829.00
Total Liabilities and Equity
$ 272213600.00

Statement of Comprehensive Income Information

Total Revenues
$
Total Interest Income
$ 2888200.00
Costs and Expenses Applicable to Revenues
$
Total Interest Expenses
$ 699219.00
Depreciation and Amortization
$ 67090.00
Net Income
$ 524354.00
Earnings Per Share - Basic
$ 0.37
Earnings Per Share - Diluted
$ 0.37
Name of Auditor (if any)
Brown, Edwards & Company, L.L.P.

Outstanding Securities

Common Equity

Name of Class (if any) Common Equity
Common
Common Equity Units Outstanding
1401511
Common Equity CUSIP (if any):
095825105
Common Equity Units Name of Trading Center or Quotation Medium (if any)
OTC Pink marketplace

Preferred Equity

Preferred Equity Name of Class (if any)
N/A
Preferred Equity Units Outstanding
0
Preferred Equity CUSIP (if any)
000000000
Preferred Equity Name of Trading Center or Quotation Medium (if any)
N/A

Debt Securities

Debt Securities Name of Class (if any)
Subordinated Notes Due 2025
Debt Securities Units Outstanding
14
Debt Securities CUSIP (if any):
Various
Debt Securities Name of Trading Center or Quotation Medium (if any)
N/A

1-A: Item 2. Issuer Eligibility

Issuer Eligibility

Check this box to certify that all of the following statements are true for the issuer(s)

1-A: Item 3. Application of Rule 262

Application Rule 262

Check this box to certify that, as of the time of this filing, each person described in Rule 262 of Regulation A is either not disqualified under that rule or is disqualified but has received a waiver of such disqualification.

Check this box if "bad actor" disclosure under Rule 262(d) is provided in Part II of the offering statement.

1-A: Item 4. Summary Information Regarding the Offering and Other Current or Proposed Offerings

Summary Infomation

Check the appropriate box to indicate whether you are conducting a Tier 1 or Tier 2 offering Tier1 Tier2
Check the appropriate box to indicate whether the financial statements have been audited Unaudited Audited
Types of Securities Offered in this Offering Statement (select all that apply)
Equity (common or preferred stock)
Does the issuer intend to offer the securities on a delayed or continuous basis pursuant to Rule 251(d)(3)? Yes No
Does the issuer intend this offering to last more than one year? Yes No
Does the issuer intend to price this offering after qualification pursuant to Rule 253(b)? Yes No
Will the issuer be conducting a best efforts offering? Yes No
Has the issuer used solicitation of interest communications in connection with the proposed offering? Yes No
Does the proposed offering involve the resale of securities by affiliates of the issuer? Yes No
Number of securities offered
527644
Number of securities of that class outstanding
1401511

The information called for by this item below may be omitted if undetermined at the time of filing or submission, except that if a price range has been included in the offering statement, the midpoint of that range must be used to respond. Please refer to Rule 251(a) for the definition of "aggregate offering price" or "aggregate sales" as used in this item. Please leave the field blank if undetermined at this time and include a zero if a particular item is not applicable to the offering.

Price per security
$ 18.75
The portion of the aggregate offering price attributable to securities being offered on behalf of the issuer
$ 9893325.00
The portion of the aggregate offering price attributable to securities being offered on behalf of selling securityholders
$ 0.00
The portion of the aggregate offering price attributable to all the securities of the issuer sold pursuant to a qualified offering statement within the 12 months before the qualification of this offering statement
$ 0.00
The estimated portion of aggregate sales attributable to securities that may be sold pursuant to any other qualified offering statement concurrently with securities being sold under this offering statement
$ 0.00
Total (the sum of the aggregate offering price and aggregate sales in the four preceding paragraphs)
$ 9893325.00

Anticipated fees in connection with this offering and names of service providers

Underwriters - Name of Service Provider
Underwriters - Fees
$
Sales Commissions - Name of Service Provider
Sales Commissions - Fee
$
Finders' Fees - Name of Service Provider
Finders' Fees - Fees
$
Audit - Name of Service Provider
Brown, Edwards & Company, L.L.P.
Audit - Fees
$ 50000.00
Legal - Name of Service Provider
LeClairRyan, A Professional Corporation
Legal - Fees
$ 200000.00
Promoters - Name of Service Provider
Promoters - Fees
$
Blue Sky Compliance - Name of Service Provider
Blue Sky Compliance - Fees
$
CRD Number of any broker or dealer listed:
Estimated net proceeds to the issuer
$
Clarification of responses (if necessary)

1-A: Item 5. Jurisdictions in Which Securities are to be Offered

Jurisdictions in Which Securities are to be Offered

Using the list below, select the jurisdictions in which the issuer intends to offer the securities

Selected States and Jurisdictions
ALABAMA
CALIFORNIA
COLORADO
FLORIDA
GEORGIA
IDAHO
MASSACHUSETTS
NEW JERSEY
NEW YORK
NORTH CAROLINA
OHIO
PENNSYLVANIA
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
VIRGINIA

Using the list below, select the jurisdictions in which the securities are to be offered by underwriters, dealers or sales persons or check the appropriate box

None
Same as the jurisdictions in which the issuer intends to offer the securities
Selected States and Jurisdictions

1-A: Item 6. Unregistered Securities Issued or Sold Within One Year

Unregistered Securities Issued or Sold Within One Year

None

Unregistered Securities Act

(e) Indicate the section of the Securities Act or Commission rule or regulation relied upon for exemption from the registration requirements of such Act and state briefly the facts relied upon for such exemption
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The information contained herein is subject to completion or amendment. An offering statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the offering statement becomes qualified. This joint proxy statement/offering circular does not constitute an offer to sell these securities, nor a solicitation of any offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale is not permitted.

[INSERT BLUE RIDGE AND RIVER LOGOS]

PRELIMINARY — SUBJECT TO COMPLETION — DATED MAY 18, 2016

PROPOSED MERGER – YOUR VOTE IS VERY IMPORTANT

 

 

Dear Fellow Shareholders:

The boards of directors of Blue Ridge Bankshares, Inc. and River Bancorp, Inc. have unanimously approved a strategic merger in which River will merge with and into Blue Ridge to create a community banking organization with enhanced scale and efficiency towards building long-term shareholder value. We are sending this document to ask you, as a Blue Ridge and/or River shareholder, to approve the merger.

If the merger is completed, each share of River common stock will be converted into the right to receive, at the holder’s election, either:

 

    $16.57 per share in cash (the “cash consideration”); or

 

    0.9821 shares of Blue Ridge common stock (the “stock consideration”); provided, however, that the stock consideration is subject to adjustment based on the volume weighted average price of Blue Ridge common stock for the 30 consecutive trading days (or such longer period as a minimum of 2,500 Blue Ridge shares are traded) prior to and including the second trading day prior to the effective date of the merger (the “BRB VWAP”), as follows:

 

    if the BRB VWAP is less than or equal to $16.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $15.71 by the BRB VWAP, and

 

    if the BRB VWAP is greater than or equal to $18.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $17.68 by the BRB VWAP.

If you are a River shareholder, you have the opportunity to elect the form of consideration to be received for all shares of River common stock held by you, subject to allocation and proration procedures set forth in the merger agreement and described in this joint proxy statement/offering circular. These allocation procedures are intended to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive the stock consideration and 30% of the outstanding shares of River common stock will be converted into the right to receive the cash consideration. If you are a River shareholder, the form of the consideration ultimately received by you will depend upon the election, allocation and proration procedures described below and the choices of other River shareholders, and may be different from what you elect. If the BRB VWAP was calculated substituting the date of this joint proxy statement/offering circular ([•], 2016) for the effective date of the merger, the exchange ratio for the stock consideration would be [•] shares of Blue Ridge common stock. The market price of Blue Ridge common stock is subject to change at all times based on the future financial condition and operating results of Blue Ridge, future market conditions and other factors. We urge you to obtain current market quotations for Blue Ridge (trading symbol “BRBS”).


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If you are a Blue Ridge shareholder, you will continue to hold your shares of Blue Ridge common stock following the merger, assuming you do not exercise your appraisal rights. As of the date of this joint proxy statement/offering circular, Blue Ridge expects that it will issue approximately [•] shares of Blue Ridge common stock to the holders of River common stock in the merger (assuming no outstanding options of River are exercised before the consummation of the merger). At the completion of the merger, it is expected that there will be issued and outstanding approximately [•] shares of Blue Ridge common stock, with current Blue Ridge shareholders owning approximately [•]% of Blue Ridge’s outstanding common stock and former holders of River common stock owning approximately [•]% of Blue Ridge’s outstanding common stock.

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/offering circular. 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 each of Blue Ridge and River common stock.

Whether or not you plan to attend the Blue Ridge or River special meeting, it is important that your shares be represented at the respective meetings 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 River special meeting and vote your shares in person. The boards of directors of Blue Ridge and River unanimously recommend that you vote “FOR” approval of the merger agreement and the related plan of merger.

 

 

This joint proxy statement/offering circular describes the special meetings, the merger, the documents related to the merger and other related matters. Please carefully read this joint proxy statement/offering circular, including the information in the “Risk Factors” section beginning on page 29.

Thank you for your support.

 

Brian K. Plum

President and Chief Executive Officer

Blue Ridge Bankshares, Inc.

 

Ronald D. Haley

President and Chief Executive Officer

River Bancorp, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger or determined if the joint proxy statement/offering circular is accurate or complete. Any representation to the contrary is a criminal offense.

 

 

The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either Blue Ridge or River, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement/offering circular is dated [•], 2016 and is first being mailed to Blue Ridge and River shareholders on or about [•], 2016.


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[Blue Ridge Logo]

BLUE RIDGE BANKSHARES, INC.

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

To be held on [•], 2016

A special meeting of shareholders of Blue Ridge Bankshares, Inc. (“Blue Ridge”) will be held at [•], located at [•], Luray, Virginia, at [•]:[•] [•].m. local time, on [•], 2016 for the following purposes:

 

  1. To consider and vote on a proposal to approve the Agreement and Plan of Reorganization, dated as of March 30, 2016, between Blue Ridge and River Bancorp, Inc. (“River”), including the related Plan of Merger (together, the “merger agreement”), pursuant to which River will merge with and into Blue Ridge, as more fully described in the accompanying joint proxy statement/offering circular (the “Blue Ridge merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/offering circular.

 

  2. To consider and vote on a proposal to adjourn the meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the Blue Ridge merger proposal and the articles amendment proposal (the “Blue Ridge adjournment proposal”).

 

  3. To transact such other business as may properly come before the meeting or any adjournments thereof.

All holders of record of Blue Ridge common stock at the close of business on [•], 2016, are entitled to notice of and to vote at the meeting and any adjournments thereof.

Each holder of Blue Ridge common stock is entitled to assert appraisal rights in connection with the merger and seek an appraisal of the fair value of his or her shares, provided the proper procedures of Article 15 of Section 13.1 of the Virginia Stock Corporation Act are followed. A copy of Article 15 is attached as Appendix D to the accompanying joint proxy statement/offering circular.

By Order of the Board of Directors,

Amanda G. Story

Corporate Secretary

[•], 2016

The Blue Ridge board of directors unanimously recommends that you vote “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal.

Please promptly vote by completing and returning the enclosed proxy card, whether or not you plan to attend the special meeting. You may also vote via the Internet or telephone by following the instructions on the proxy card. If you attend the meeting in person, you may withdraw your proxy card and vote your shares in person.


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[River Logo]

RIVER BANCORP, INC.

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

 

To be held on [•], 2016

A special meeting of shareholders of River Bancorp, Inc. (“River”) will be held at [•], located at [•], Martinsville, Virginia, at [•]:[•][•].m. local time, on [•], 2016, for the following purposes:

 

  1. To consider and vote on a proposal to approve the Agreement and Plan of Reorganization, dated as of March 30, 2016, between Blue Ridge Bankshares, Inc. (“Blue Ridge”) and River, including the related Plan of Merger (together, the “merger agreement”), pursuant to which River will merge with and into Blue Ridge, as more fully described in the accompanying joint proxy statement/offering circular (the “River merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/offering circular.

 

  2. To consider and vote on a proposal to adjourn the meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the River merger proposal (the “River adjournment proposal”).

 

  3. To transact such other business as may properly come before the meeting or any adjournments thereof.

All holders of record of River common stock at the close of business on [•], 2016, are entitled to notice of and to vote at the meeting and any adjournments thereof.

Each holder of River common stock is entitled to assert appraisal rights in connection with the merger and seek an appraisal of the fair value of his or her shares, provided the proper procedures of Article 15 of Section 13.1 of the Virginia Stock Corporation Act are followed. A copy of Article 15 is attached as Appendix D to the accompanying joint proxy statement/offering circular.

By Order of the Board of Directors,

Mary S. Handy

Corporate Secretary

[•], 2016

The River board of directors unanimously recommends that you vote “FOR” the River merger proposal and “FOR” the River adjournment proposal.

Please promptly vote by completing and returning the enclosed proxy card, whether or not you plan to attend the special meeting. You may also vote via the Internet or telephone by following the instructions on the proxy card. If you attend the meeting in person, you may withdraw your proxy card and vote your shares in person.


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In this joint proxy statement/offering circular:

 

    Blue Ridge Bankshares, Inc. is referred to as “Blue Ridge”

 

    River Bancorp, Inc. is referred to as “River”

 

    River Community Bank, National Association, the wholly-owned national bank subsidiary of River, is referred to as “River Community Bank”

 

    The merger of River with and into Blue Ridge is referred to as the “merger”

 

    The Agreement and Plan of Reorganization, dated as of March 30, 2016, by and between Blue Ridge and River, including the related Plan of Merger, is referred to as the “merger agreement,” a copy of which is attached as Appendix A to this joint proxy statement/offering circular

 

    The effective date and time of the merger set forth on the certificate of merger issued by the Virginia State Corporation Commission effecting the merger are referred to collectively as the “effective date” of the merger

 

    Blue Ridge’s proposal to approve the merger agreement is referred to as the “Blue Ridge merger proposal”

 

    Blue Ridge’s proposal to adjourn its special meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the Blue Ridge merger proposal is referred to as the “Blue Ridge adjournment proposal”

 

    River’s proposal to approve the merger agreement is referred to as the “River merger proposal”

 

    River’s proposal to adjourn its special meeting, if necessary or appropriate, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the meeting to approve the River merger proposal is referred to as the “River adjournment proposal”

 

    The special meeting of stockholders of Blue Ridge is referred to as the “Blue Ridge special meeting”

 

    The special meeting of stockholders of River is referred to as the “River special meeting”

 

    The special meeting of stockholders of Blue Ridge and the special meeting of stockholders of River are sometimes referred to collectively as the “special meetings”

 

    the merger of Blue Ridge Bank with and into River Community Bank, which will occur as soon as practicable after the merger of River into Blue Ridge, is referred to as the “subsidiary bank merger”

 

    the subsidiary bank continuing in operation after the subsidiary bank merger, which will be a national bank named “Blue Ridge Bank, National Association,” is referred to as the “continuing bank” or the “surviving bank”

 

i


Table of Contents

TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

     1   

SUMMARY

     5   

SELECTED HISTORICAL FINANCIAL DATA OF BLUE RIDGE

     16   

SELECTED HISTORICAL FINANCIAL DATA OF RIVER

     18   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     20   

COMPARATIVE HISTORICAL AND PRO FORMA UNAUDITED SHARE DATA

     28   

RISK FACTORS

     29   

Risks Related to the Merger

     29   

Risks Related to Blue Ridge’s Business

     33   

Risks Related to Blue Ridge’s Common Stock

     40   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     43   

THE BLUE RIDGE SPECIAL MEETING

     45   

Date, Place and Time

     45   

Purposes of the Blue Ridge Special Meeting

     45   

Recommendation of the Blue Ridge Board of Directors

     45   

Record Date and Voting Rights; Quorum

     45   

Votes Required

     45   

Stock Ownership of Blue Ridge Executive Officers and Directors

     46   

Voting at the Blue Ridge Special Meeting

     46   

Revocation of Proxies

     47   

Solicitation of Proxies

     48   

PROPOSALS TO BE CONSIDERED AT THE BLUE RIDGE SPECIAL MEETING

     49   

Approval of the Blue Ridge Merger Proposal (Blue Ridge Proposal No. 1)

     49   

Approval of the Blue Ridge Adjournment Proposal (Blue Ridge Proposal No. 2)

     49   

THE RIVER SPECIAL MEETING

     50   

Date, Place and Time

     50   

Purposes of the River Special Meeting

     50   

Recommendation of the River Board of Directors

     50   

Record Date and Voting Rights; Quorum

     50   

Votes Required

     50   

Stock Ownership of River Executive Officers and Directors

     51   

Voting at the River Special Meeting

     51   

Revocation of Proxies

     52   

Solicitation of Proxies

     53   

PROPOSALS TO BE CONSIDERED AT THE RIVER SPECIAL MEETING

     54   

Approval of the River Merger Proposal (River Proposal No. 1)

     54   

Approval of the River Adjournment Proposal (River Proposal No. 2)

     54   

THE MERGER

     55   

General

     55   

Background of the Merger

     55   

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

     60   

River’s Reasons for the Merger; Recommendation of River’s Board of Directors

     62   

Opinion of Blue Ridge’s Financial Advisor

     64   

Opinion of River’s Financial Advisor

     73   

Interests of Certain River Directors and Executive Officers in the Merger

     78   

Regulatory Approvals

     81   

Appraisal Rights

     81   

Certain Differences in the Rights of Shareholders

     83   

Accounting Treatment

     83   

THE MERGER AGREEMENT

     84   

Structure of the Merger

     84   

Effective Date; Closing

     84   

Merger Consideration

     84   

 

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Table of Contents
     Page  

Cash or Stock Election for River Shareholders

     85   

Allocation Procedures

     86   

Procedures for Exchanging River Stock Certificates

     87   

Treatment of River Stock Options

     87   

Corporate Governance

     88   

Representations and Warranties

     88   

Conditions to Completion of the Merger

     90   

Business Pending the Merger

     90   

Regulatory Matters

     93   

Shareholder Meetings and Recommendations of Boards of Directors

     93   

No Solicitation

     93   

Termination of the Merger Agreement

     95   

Termination Fee

     96   

Indemnification and Insurance

     97   

Expenses

     97   

Waiver and Amendment

     97   

Affiliate Agreements

     98   

Possible Alternative Merger Structure

     98   

Resales of Blue Ridge Stock

     98   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     99   

DESCRIPTION OF BLUE RIDGE CAPITAL STOCK

     104   

Authorized and Outstanding Capital Stock

     104   

Common Stock

     104   

Preferred Stock

     105   

Liability and Indemnification of Directors and Officers

     105   

Blue Ridge Common Stock Not Insured by the FDIC

     106   

COMPARATIVE RIGHTS OF SHAREHOLDERS

     106   

Authorized Capital Stock

     106   

Dividend Rights

     106   

Voting Rights

     106   

Directors and Classes of Directors

     107   

Anti-takeover Provisions

     107   

Amendments to Articles of Incorporation and Bylaws

     110   

Appraisal Rights

     111   

Director and Officer Exculpation

     111   

Indemnification

     111   

INFORMATION ABOUT BLUE RIDGE

     112   

General

     112   

Market Area

     113   

Products and Services

     113   

Competition

     114   

Properties

     114   

Employees

     114   

Legal Proceedings

     114   

Security Ownership of Principal Shareholders

     115   

Security Ownership of Management

     115   

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

     116   

MANAGEMENT OF BLUE RIDGE

     131   

INFORMATION ABOUT RIVER

     135   

General

     135   

Market Area

     135   

Business Strategy

     135   

Lending Activities

     136   

Capital Resources

     138   

 

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Table of Contents
     Page  

Loan Quality

     139   

Classification of Assets

     140   

Investment Securities

     142   

Deposit Activities

     143   

Liquidity

     144   

Properties

     144   

Competition

     144   

Employees

     145   

Legal Proceedings

     145   

Management

     145   

Security Ownership of Management

     146   

SUPERVISION AND REGULATION

     147   

MARKET FOR COMMON STOCK AND DIVIDENDS

     154   

LEGAL MATTERS

     156   

EXPERTS

     156   

OTHER MATTERS

     156   

WHERE YOU CAN FIND MORE INFORMATION

     156   

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF BLUE RIDGE

     F-1   

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF RIVER

     G-1   

 

Appendix A  

  Agreement and Plan of Reorganization, including the Plan of Merger (excluding certain exhibits)      A-1   

Appendix B

  Opinion of Sandler O’Neill & Partners, L.P., Financial Advisor to Blue Ridge      B-1   

Appendix C

  Opinion of BSP Securities, LLC, Financial Advisor to River      C-1   

Appendix D

  Virginia Stock Corporation Act Article 15 – Appraisal Rights      D-1   

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following questions and answers briefly address some commonly asked questions about the special meetings and the merger. They may not include all of the information that is important to Blue Ridge and River shareholders. We urge shareholders to read carefully this joint proxy statement/offering circular, including the appendices and the other documents referred to herein.

 

Q: What is the merger?

 

A: Blue Ridge and River have entered into the merger agreement whereby River will merge with and into Blue Ridge, with Blue Ridge being the surviving company. Blue Ridge and River currently expect to complete the merger in the third quarter of 2016. A copy of the merger agreement is attached to this joint proxy statement/offering circular as Appendix A.

If the merger is completed, Blue Ridge Bank, the wholly-owned bank subsidiary of Blue Ridge, will merge with and into River Community Bank, the wholly-owned bank subsidiary of River as soon as practicable after the merger of River into Blue Ridge. The surviving bank in the subsidiary bank merger will continue in operation under the name “Blue Ridge Bank, N.A.”

 

Q: Why do Blue Ridge and River want to merge?

 

A: Blue Ridge and River believe that the proposed merger has significant strategic benefits to both parties, and that the merger will create a stronger community bank franchise, with enhanced scale and efficiency towards building long-term shareholder value. To review the reasons for the merger in more detail, see “The Merger – Blue Ridge’s Reasons for the Merger; Recommendation of Blue Ridge’s Board of Directors” on page [•] and “The Merger – River’s Reasons for the Merger; Recommendation of River’s Board of Directors” on page [•].

 

Q: What will River shareholders receive in the merger?

 

A: River shareholders will have the opportunity to elect to receive cash or Blue Ridge common stock, or a combination of cash and Blue Ridge common stock, for their shares of River common stock, subject to allocation and proration procedures set forth in the merger agreement and described in this joint proxy statement/offering circular. In the proposed merger, each share of River common stock will be converted into the right to receive, at the election of the holder, either:

 

    $16.57 per share in cash (the “cash consideration”); or

 

    0.9821 shares of Blue Ridge common stock (the “stock consideration”); provided, however, that the stock consideration is subject to adjustment based on the volume weighted average price of Blue Ridge common stock for the 30 consecutive trading days (or such longer period as a minimum of 2,500 Blue Ridge shares are traded) prior to and including the second trading day prior to the effective date of the merger (the “BRB VWAP”), as follows:

 

    if the BRB VWAP is less than or equal to $16.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $15.71 by the BRB VWAP, and

 

    if the BRB VWAP is greater than or equal to $18.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $17.68 by the BRB VWAP.

The allocation and proration procedures are intended to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive shares of Blue Ridge common stock and 30% of the outstanding shares of River common stock will be converted into the right to receive cash. Because of these procedures, the actual allocation of Blue Ridge common stock and/or cash River shareholders receive will depend on the elections of other River shareholders and may be different from what each River shareholder elects. For more information, see “The Merger Agreement – Merger Consideration” on page [•], “– Cash or Stock Election for River Shareholders” on page [•] and “ – Allocation Procedures” on page [•].

 

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

 

Q: Why am I receiving this joint proxy statement/offering circular?

 

A: In order to approve the merger, Blue Ridge and River have each called a special meeting of their respective shareholders. The Blue Ridge and River boards of directors are soliciting proxies from their shareholders and this document serves as the proxy statement for both companies’ special meetings and describes the proposals to be presented at each company’s special meeting. This document is also an offering circular that is being delivered to River shareholders because Blue Ridge is offering shares of its common stock to River shareholders in connection with the merger.

This joint proxy statement/offering circular contains important information about the merger. You should read it carefully and in its entirety. The enclosed materials allow you to have your shares voted by proxy without attending your meeting. Your vote is important. We encourage you to submit your proxy as soon as possible.

 

Q: What do I need to do now to vote my shares?

 

A: After carefully reading and considering the information contained in this joint proxy statement/offering circular, please vote your shares as soon as possible so that your shares will be represented at the Blue Ridge or River special meeting, as applicable. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker or other nominee (“street name”).

 

Q: If my shares are held in “street name” by a broker or other nominee, will my broker or nominee vote my shares for me if I do not provide instructions on how to vote my shares?

 

A: No. Your broker or other nominee does not have authority to vote on the proposals described in this joint proxy statement/offering circular if you do not provide instructions to it on how to vote. Your broker or other nominee will vote your shares held by it in “street name” with respect to these matters ONLY if you provide instructions to it on how to vote. You should follow the directions your broker or other nominee provides.

 

Q: When and where is the Blue Ridge special meeting of shareholders?

 

A: The special meeting of Blue Ridge shareholders will be held at [•]:[•] [•].m. local time, on [•], 2016, at [•], located at [•], Luray, Virginia.

 

Q: When and where is the River special meeting of shareholders?

 

A: The special meeting of River shareholders will be held at [•]:[•] [•].m. local time, on [•], 2016, at [•], located at [•], Martinsville, Virginia.

 

Q: What vote is required to approve each proposal at the Blue Ridge special meeting?

 

A: 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 proposal.

The Blue Ridge adjournment proposal requires the affirmative vote of at least a majority of the shares voted on the proposal, whether or not a quorum is present.

 

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Q: What vote is required to approve each proposal at the River special meeting?

 

A: The River proposal requires the affirmative vote of more than two-thirds of the outstanding shares of River common stock entitled to vote on the proposal.

The River adjournment proposal requires the affirmative vote of at least a majority of the shares voted on the proposal, whether or not a quorum is present.

 

Q: What if I do not vote on the matters relating to the merger?

 

A: If you are a Blue Ridge shareholder. With respect to the Blue Ridge merger proposal, if you fail to vote or fail to instruct your broker or other nominee how to vote, your failure to vote will have the same effect as a vote against the Blue Ridge merger proposal. If you respond with an “abstain” vote on such proposal, your proxy will have the same effect as a vote against the Blue Ridge merger proposal. If you are a shareholder of record of Blue Ridge common stock and you sign and return your proxy card but do not indicate how you want to vote on the Blue Ridge merger proposal, your proxy will be counted as a vote in favor of the proposal.

If you are a River shareholder. With respect to the River merger proposal, if you fail to vote or fail to instruct your broker or other nominee how to vote, your failure to vote will have the same effect as a vote against the River merger proposal. If you respond with an “abstain” vote, your proxy will have the same effect as a vote against the River merger proposal. If you are a shareholder of record of River common stock and you sign and return your proxy card but do not indicate how you want to vote on the River merger proposal, your proxy will be counted as a vote in favor of the proposal.

 

Q: May I change my vote after I have delivered my proxy or voting instruction card?

 

A: Yes. If you are a shareholder of record of Blue Ridge or River common stock, you may change your vote at any time before your proxy is voted at the applicable special meeting. You may do this in any of the following ways:

 

    by sending a notice of revocation to either the Blue Ridge corporate secretary or the River corporate secretary, as the case may be;

 

    by sending a completed proxy card bearing a later date than your original proxy card;

 

    by voting via the Internet or telephone any time after delivering your proxy or voting instruction card; or

 

    by attending the Blue Ridge or River special meeting and voting in person; your attendance alone will not revoke any proxy.

If you choose either of the first two methods, your notice or new proxy card must be actually received before the voting takes place at the applicable special meeting.

If your shares are held in a stock brokerage account or by a bank or other nominee, you should call your broker or other nominee for additional information.

 

Q: What are the material U.S. federal income tax consequences of the merger to River shareholders?

 

A:

Blue Ridge and River intend for the merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Assuming the merger qualifies for such treatment, a holder of River common stock generally will not recognize any gain or loss for U.S. federal income tax purposes as a result of the exchange of the holder’s shares of River common stock solely for shares of Blue Ridge common stock pursuant to the merger. However, River shareholders generally will recognize gain (but not loss) in an amount limited to the amount of cash they receive for their

 

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  shares of River common stock. Additionally, a holder will recognize gain or loss on any cash he receives in lieu of fractional shares of Blue Ridge common stock. For greater detail, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [•]. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the specific tax consequences of the merger to you.

 

Q: Do I have dissenters’ or appraisal rights?

 

A: Yes. Under Virginia law, shareholders of Blue Ridge and River are entitled to exercise appraisal rights in connection with the merger. However, under the terms of the merger agreement, if holders of 10% or more of the outstanding shares of River common stock determine to exercise their appraisal rights, Blue Ridge has the right to terminate the merger agreement and the merger.

You are urged to read the summary of appraisal rights contained in this joint proxy statement/offering circular under the section titled “The Merger – Appraisal Rights” beginning on page [•], as well as Article 15 of Section 13.1 of the Virginia Stock Corporation Act, which is attached as Appendix D to this this joint proxy statement/offering circular.

 

Q: If I am a River shareholder with shares represented by stock certificates, should I send in my River stock certificates now?

 

A: No. Please do not send your stock certificates with your proxy card.

If you are a holder of River common stock, you will receive written instructions from Computershare Trust Company, N.A. (the “exchange agent”) within five business days after the merger is completed on how to exchange your River stock certificates for the merger consideration and receive your check in lieu of any fractional shares of Blue Ridge common stock.

 

Q: As a River shareholder, how do I make my election to receive the stock consideration or the cash consideration?

 

A: River shareholders will receive a separate mailing that will allow them to make an election to receive the stock consideration, cash consideration, a mixture thereof, or to indicate that they have no preference. These forms must be returned separately no later than the deadline stated in the election materials.

 

Q: Who should I contact if I have any questions about the proxy materials or voting?

 

A: If you have any questions about the merger or if you need assistance in submitting your proxy or voting your shares or need additional copies of the joint proxy statement/offering circular or the enclosed proxy card:

 

    if you are a Blue Ridge shareholder, you should contact Blue Ridge’s Corporate Secretary by calling (540) 843-5208 or by writing to Blue Ridge Bankshares, Inc., 17 West Main Street, Luray, Virginia 22835, Attention: Corporate Secretary. You may also obtain more information about the merger and the proxy materials by contacting [            ], Blue Ridge’s proxy solicitor, at 1-800-[            ].

 

    if you are a River shareholder, you should contact River’s Corporate Secretary by calling (276) 643-3030 or by writing to River Bancorp, Inc., 433 Commonwealth Blvd. East, Suite 1, Martinsville, Virginia 24112, Attention: Corporate Secretary. You may also obtain more information about the merger and the proxy materials by contacting [            ], River’s proxy solicitor, at 1-800-[            ].

If your shares are held in a stock brokerage account or by a bank or other nominee, you should call your broker or other nominee for additional information.

 

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SUMMARY

This summary highlights selected information from this joint proxy statement/offering circular. We urge you to read carefully the joint proxy statement/offering circular and the other documents to which this joint proxy statement/offering circular refers to understand fully the merger and the other matters to be considered at the special meetings. See “Where You Can Find More Information” beginning on page []. Each item in this summary includes a page reference directing you to a more complete description of that item.

The Parties to the Merger (pages [] and [])

Blue Ridge Bankshares, Inc.

Blue Ridge Bankshares, Inc. is a bank holding company headquartered in Luray, Virginia providing a wide array of financial services through Blue Ridge Bank, its community bank subsidiary. Blue Ridge Bank currently operates five banking offices in its market area, which stretches from Charlottesville to Luray, covering the Shenandoah Valley. As of March 31, 2016, Blue Ridge had total consolidated assets of approximately $272.2 million, total consolidated gross portfolio loans of approximately $207.7 million, total consolidated deposits of approximately $209.7 million, and consolidated stockholders’ equity of approximately $24.6 million.

The principal executive offices of Blue Ridge are located at 17 West Main Street, Luray, Virginia 22835, and its telephone number is (540) 743-6521. Blue Ridge’s website can be accessed at https://www.mybrb.com. Information contained in Blue Ridge’s website does not constitute part of, and is not incorporated into, this joint proxy statement/offering circular. Blue Ridge’s common stock is traded on the OTC Pink marketplace under the symbol “BRBS.”

River Bancorp, Inc.

River Bancorp, Inc. is a bank holding company headquartered in Martinsville, Virginia providing full consumer and commercial banking services through River Community Bank, its community bank subsidiary. River Community Bank currently operates four banking offices in its primary market area, which covers the counties of Charlotte, Henry and Patrick as well as the city of Martinsville, Virginia. River Community Bank also has a loan production office in Greensboro, North Carolina and mortgage production offices located in Cary, Raleigh, Greensboro, Eden, Kernersville, Wilmington and Whiteville, North Carolina and Martinsville, Virginia. As of March 31, 2016, River had total consolidated assets of approximately $111.9 million, total consolidated gross portfolio loans of approximately $98.3 million (including $9.3 million of mortgage loans held for sale), total consolidated deposits of approximately $94.7 million, and consolidated stockholders’ equity of approximately $11.5 million.

The principal executive offices of River are located at 433 Commonwealth Blvd. East, Suite 1, Martinsville, Virginia 24112, and its telephone number is (276) 638-3600. River’s website can be accessed at http://www.rcbna.com. Information contained in River’s website does not constitute part of, and is not incorporated into, this joint proxy statement/offering circular. River’s common stock is not traded on a public market or exchange.

The Merger and the Merger Agreement (page [•])

The merger agreement provides for the merger of River into Blue Ridge, with Blue Ridge being the surviving corporation in the merger. The merger agreement also calls for Blue Ridge Bank, the wholly-owned bank subsidiary of Blue Ridge, to be merged with and into River Community Bank, the wholly-owned bank subsidiary of River, as soon as practicable after the merger of River into Blue Ridge. The surviving bank in the subsidiary bank merger will continue in operation under the name “Blue Ridge Bank, N.A.”

The parties expect to complete the merger in the third quarter of 2016, subject to the receipt of required shareholder and regulatory approvals, and the satisfaction or waiver of the closing conditions set forth in the merger agreement.

 



 

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The merger agreement is attached to this joint proxy statement/offering circular as Appendix A. We encourage you to read the merger agreement, as it is the legal document that governs the merger.

Consideration to be Received in the Merger by River Shareholders (page [•])

If the merger is completed, each share of River common stock will be converted into the right to receive, at the election of the holder, either:

 

    $16.57 per share in cash (the “cash consideration”); or

 

    0.9821 shares of Blue Ridge common stock (the “stock consideration”); provided, however, that the stock consideration is subject to adjustment based on the volume weighted average price of Blue Ridge common stock for the 30 consecutive trading days (or such longer period as a minimum of 2,500 Blue Ridge shares are traded) prior to and including the second trading day prior to the effective date of the merger (the “BRB VWAP”), as follows:

 

    if the BRB VWAP is less than or equal to $16.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $15.71 by the BRB VWAP, and

 

    if the BRB VWAP is greater than or equal to $18.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $17.68 by the BRB VWAP.

The cash consideration and the stock consideration are sometimes together referred to in this joint proxy statement/offering circular as the “merger consideration.”

If you are a River shareholder, you have the opportunity to elect the form of consideration to be received for all shares of River common stock held by you, subject to allocation and proration procedures set forth in the merger agreement and described in this joint proxy statement/offering circular. These allocation procedures are intended to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive shares of Blue Ridge common stock and 30% of the outstanding shares of River common stock will be converted into the right to receive cash. If you are a River shareholder, the form of the consideration ultimately received by you will depend upon the election, allocation and proration procedures described below and the choices of other River shareholders, and may be different from what you elect.

If the BRB VWAP was calculated substituting the last trading day before public announcement of the merger (March 30, 2016) for the effective date of the merger, the exchange ratio for the stock consideration would be 0.9821 shares of Blue Ridge common stock. If the BRB VWAP was calculated substituting the date of this joint proxy statement/offering circular ([•], 2016) for the effective date of the merger, the exchange ratio for the stock consideration would be [•] shares of Blue Ridge common stock. The market price of Blue Ridge common stock is subject to change at all times based on the future financial condition and operating results of Blue Ridge, future market conditions and other factors.

Blue Ridge’s shareholders will continue to own their existing shares of Blue Ridge common stock. Each share of Blue Ridge common stock will continue to represent one share of common stock of Blue Ridge following the merger.

As of the date of this joint proxy statement/offering circular, Blue Ridge expects that it will issue approximately [•] shares of Blue Ridge common stock to the holders of River common stock in the merger (assuming no outstanding options of River are exercised before the consummation of the merger). At the completion of the merger, it is expected that there will be issued and outstanding approximately [•] shares of Blue Ridge common stock, with current Blue Ridge shareholders owning approximately [•]% of Blue Ridge’s outstanding common stock and former holders of River common stock owning approximately [•]% of Blue Ridge’s outstanding common stock.

 



 

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Election of Cash or Stock Consideration by River Shareholders (page [•])

If you are a River shareholder, an election form is being sent to you in a separate mailing so that you can indicate whether your preference is to receive cash, Blue Ridge common stock or a combination of cash and Blue Ridge common stock (a mixed election), in exchange for your shares of River common stock, or whether you have no preference. The River shares in these three categories are referred to herein as stock election shares, cash election shares and no election shares. In order to make an effective election, you must send in your properly completed election form to Computershare Trust Company, N.A., the exchange agent for the merger, no later than [•]:[•] [•].m., Eastern Time on [•], 2016.

All elections by River shareholders are subject to the allocation and proration procedures described in the merger agreement that are intended to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive Blue Ridge common stock and the remaining 30% of the outstanding shares of River common stock will be converted into the right to receive cash. It is unlikely that elections will be made in the exact proportions provided for in the merger agreement. As a result, the merger agreement describes procedures to be followed if River shareholders in the aggregate elect to receive stock consideration in exchange for more or fewer than 70% of the outstanding shares of River common stock. These procedures are summarized below.

 

    If stock consideration is oversubscribed. If the total number of stock election shares (including stock election shares that are part of mixed elections) is more than 70% of the outstanding shares of River common stock, then each cash election share and no election share will be converted into the right to receive the cash consideration and a sufficient number of shares from among the holders of stock election shares will be converted on a pro rata basis into cash election shares to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive Blue Ridge common stock (taking into account dissenting shares described below under “– Appraisal Rights”). This proration will reflect the proportion that the number of stock election shares of each holder of stock election shares bears to the total number of stock election shares.

 

    If stock consideration is undersubscribed. If the total number of stock election shares (including stock election shares that are part of mixed elections) is less than 70% of the outstanding shares of River common stock, then each stock election share will be converted into the right to receive the stock consideration and a sufficient number of other shares will be converted into stock election shares, first from among the holders of no election shares and then, if necessary, from among the holders of cash election shares, on a pro rata basis, to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive Blue Ridge common stock (taking into account dissenting shares. This proration will reflect the proportion that the number of no election shares of each holder of no election shares bears to the total number of no election shares and the number of cash election shares of each holder of cash election shares bears to the total number of cash election shares, as the case may be.

The above-described allocation will be made by Blue Ridge’s exchange agent within five business days after the completion of the merger.

Treatment of River Stock Options (page [•])

In the merger, each option to purchase shares of River common stock that is outstanding immediately prior to the effective date of the merger, whether vested or unvested, will be converted into the right to receive cash from Blue Ridge in an amount equal to the product of (i) the amount equal to (a) the product of the BRB VWAP and the exchange ratio relating to the stock consideration, minus (b) the per share exercise price of such stock option, and (ii) the number of shares of River common stock subject to such option. In the event that the product obtained by such calculation is zero or a negative number, then such option will be cancelled for no consideration.

 



 

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Dividend Information (pages [•] and [•])

Blue Ridge is currently paying a quarterly cash dividend on shares of its common stock at a rate of $0.1175 per share, and has a decades-long history of consistently paying a dividend on its common stock. Blue Ridge has no current intention to change its dividend strategy of paying a quarterly cash dividend, but has and will continue to evaluate that decision based on a quarterly review of earnings, growth, capital and such other factors that the Blue Ridge board of directors considers relevant to the dividend decision process. River currently pays a quarterly cash dividend on shares of its common stock at a rate of $0.10 per share.

Material U.S. Federal Income Tax Consequences (page [•])

The merger is intended to qualify as a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a) of the Code, and it is a condition to the obligations to complete the merger of each of Blue Ridge and River that it receive a legal opinion to that effect. Accordingly, the merger generally will be tax free to River shareholders with respect to the shares of Blue Ridge common stock received in the merger and taxable with respect to the cash received in the merger. The amount of gain that River shareholders recognize in the merger generally will be limited to the lesser of the amount of gain that is realized and the amount of cash that is received in the merger. The amount of gain that is realized generally is equal to the excess, if any, of the sum of the cash and the fair market value of the Blue Ridge common stock that River shareholders receive over their tax basis in the River common stock surrendered in the merger.

The federal income tax consequences described above may not apply to all holders of River common stock. If you are a River shareholder, your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

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 (page [•])

Blue Ridge’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of Blue Ridge and its shareholders and has unanimously approved the merger agreement. The Blue Ridge board of directors unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the Blue Ridge board, including, among others:

 

    River’s financial condition, earnings, business, operations, asset quality and prospects, taking into account the results of Blue Ridge’s due diligence investigation of River;

 

    Blue Ridge’s belief that the merger enables it to enhance shareholder value by generating additional scale and increased shareholder liquidity;

 

    the fact that the merger will provide Blue Ridge a significant noninterest income stream through River’s mortgage division that can be developed into Blue Ridge’s current footprint;

 

    Blue Ridge’s expectations and analyses, and its financial advisor’s analyses, that the merger offers the opportunity to significantly improve earnings per share in a transaction with tangible book value dilution being recovered in a period less than two years;

 

    Blue Ridge’s belief that the merger will accelerate achievement of its financial performance goals; and

 

    the financial and other terms of the transaction, including that the merger consideration is a mix of stock and cash, expected tax treatment, deal protection and termination fee provisions, which Blue Ridge reviewed with its outside financial and legal advisors.

Blue Ridge also considered the oral opinion of Sandler O’Neill & Partners (“Sandler O’Neill”) rendered to the Blue Ridge board of directors on March 30, 2016 (which was subsequently confirmed in writing by delivery of Sandler O’Neill’s written opinion dated March 30, 2016) with respect to the fairness of the merger consideration in the merger pursuant to the merger agreement, from a financial point of view, to Blue Ridge. For additional discussion of the factors considered by Blue Ridge’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – Blue Ridge’s Reasons for the Merger; Recommendation of Blue Ridge’s Board of Directors.”

 



 

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River’s Board of Directors Unanimously Recommends that River Shareholders Vote “FOR” the River Merger Proposal and “FOR” the River Adjournment Proposal (page [•])

River’s board of directors has determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are in the best interests of River and its shareholders and has unanimously approved the merger agreement. The River board of directors unanimously recommends that River shareholders vote “FOR” the River merger proposal and “FOR” the River adjournment proposal. In making its recommendations, a number of substantive reasons were considered by the River board, including, among others:

 

    the value and form of the consideration to be received by River’s shareholders relative to the book value and earnings per share of River’s common stock and River’s estimated future value;

 

    the positive effects on the businesses and future prospects of River and River Community Bank, going forward after the merger, which the board viewed favorably in view of Blue Ridge’s business and the business opportunities of the combined entities and the ongoing influence that management of River is expected to have following the merger;

 

    the board’s view of Blue Ridge’s ability to produce long-term value for River’s shareholders who receive shares of Blue Ridge common stock in the merger; and

 

    the board’s view that the merger represents a continuation of River’s strategic goal to be a community-based lending organization providing long-term shareholder value.

River also considered the oral opinion of BSP Securities, LLC (“BSP Securities”) rendered to the River board of directors on March 29, 2016 (which was subsequently confirmed in writing by delivery of BSP Securities’ written opinion dated March 29, 2016) with respect to the fairness of the merger consideration in the merger pursuant to the merger agreement, from a financial point of view, to the holders of River common stock. For additional discussion of the factors considered by River’s board of directors in reaching its decision to approve the merger agreement, see “The Merger – River’s Reasons for the Merger; Recommendation of River’s Board of Directors.”

Opinion of Blue Ridge’s Financial Advisor (page [•])

At the March 30, 2016 meeting of the Blue Ridge board of directors, Sandler O’Neill rendered its oral opinion to the Blue Ridge board of directors, which was subsequently confirmed by delivery of its written opinion dated March 30, 2016 to the Blue Ridge board of directors, as of such date and based upon and subject to, assumptions, qualifications, limitations and other matters considered in connection with the preparation of its opinion, that the merger consideration provided for in the merger agreement was fair, from a financial point of view, to Blue Ridge.

A copy of the fairness opinion, setting forth the information reviewed, assumptions made and matters considered by Sandler O’Neill, is attached to this joint proxy statement/offering circular as Appendix B. We encourage you to read carefully the entire opinion of Sandler O’Neill. The opinion of Sandler O’Neill has not been updated prior to the date of this joint proxy statement/offering circular and does not reflect any change in circumstances after March 30, 2016.

Sandler O’Neill’s opinion as to the fairness, from a financial point of view, of the merger consideration to Blue Ridge was provided to the Blue Ridge board of directors in connection with its evaluation of the merger consideration from a financial point of view, does not address any other aspect of the merger and does not constitute a recommendation to any Blue Ridge shareholder as to how to vote or act with respect to the merger.

 



 

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Opinion of River’s Financial Advisor (page [•])

At the March 29, 2016 meeting of the River board of directors, BSP Securities rendered its oral opinion to the River board of directors, which was subsequently confirmed by delivery of its written opinion dated March 29, 2016 to the River board of directors, as of such date and based upon and subject to, assumptions, qualifications, limitations and other matters considered in connection with the preparation of its opinion, that the merger consideration provided for in the merger agreement was fair, from a financial point of view, to holders of River common stock.

A copy of the fairness opinion, setting forth the information reviewed, assumptions made and matters considered by BSP Securities, is attached to this joint proxy statement/offering circular as Appendix C. We encourage you to read carefully the entire opinion of BSP Securities. The opinion of BSP Securities has not been updated prior to the date of this joint proxy statement/offering circular and does not reflect any change in circumstances after March 29, 2016.

BSP Securities’ opinion as to the fairness, from a financial point of view, of the merger consideration to holders of River common stock was provided to the River board of directors in connection with its evaluation of the merger consideration from a financial point of view, does not address any other aspect of the merger and does not constitute a recommendation to any River shareholder as to how to vote or act with respect to the merger.

Regulatory Approvals (page [•])

Blue Ridge and River cannot complete the merger without prior approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Virginia State Corporation Commission (the “Virginia SCC”). On [•], 2016, Blue Ridge filed the required applications with the Federal Reserve and the Virginia SCC seeking approval of the merger.

The subsidiary bank merger cannot be completed without the prior approval from the Office of the Comptroller of the Currency (the “OCC”) and, with respect to Blue Ridge’s acquisition of all outstanding shares of River Community Bank, the Virginia SCC. On [•], 2016, River Community Bank filed the required application with the OCC seeking approval of the subsidiary bank merger and on [•], 2016, Blue Ridge filed the required application with the Virginia SCC seeking approval of the acquisition of all outstanding shares of River Community Bank.

As of the date of this joint proxy statement/offering circular, Blue Ridge has not yet received the required regulatory approvals for the merger and the acquisition of all outstanding shares of River Community Bank, and River Community Bank has not yet received the required regulatory approval for the subsidiary bank merger. While Blue Ridge and River do not know of any reason why they would not be able to obtain the necessary regulatory approvals in a timely manner, or why they would be received with conditions unacceptable to Blue Ridge or River, they cannot be certain when or if they will receive them or as to the nature of any conditions imposed.

Conditions to Completion of the Merger (page [•])

Blue Ridge’s and River’s respective obligations to complete the merger are subject to the fulfillment or waiver of certain conditions, as follows:

 

    approval of the Blue Ridge merger proposal and the River merger proposal by the shareholders of each of Blue Ridge and River;

 

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

 

    the qualification of Blue Ridge’s offering statement on Form 1-A, of which this joint proxy statement/offering circular 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;

 



 

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    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 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 and, for River only, that except with respect to cash received in the merger, no gain or loss will be recognized by any of the holders of River common stock.

In addition, Blue Ridge’s obligation to complete the merger is subject to the satisfaction or waiver of certain other conditions set forth below:

 

    the aggregate number of shares of River common stock whose holders are seeking appraisal rights under the Virginia Stock Corporation Act does not represent 10% or more of the outstanding shares of River common stock;

 

    River not incurring losses or having been notified of potential losses with respect to residential mortgage loans sold in the secondary mortgage market and which have been re-purchased by it or which River has been notified of potential re-purchase, which in the aggregate exceed $1,000,000 between the date of the merger agreement and the closing date of the merger; and

 

    Blue Ridge receiving resignations, effective as of the effective date of the subsidiary bank merger, from all of the directors of River Community Bank other than those individuals who will serve as directors of the continuing bank immediately after the subsidiary bank merger.

Where the merger agreement and law permits, Blue Ridge and River could choose to waive a condition to its obligation to complete the merger even if that condition has not been satisfied. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived or that the merger will be completed.

Timing of the Merger (page [•])

Blue Ridge and River expect to complete the merger after all conditions to the merger in the merger agreement are satisfied or waived, including after shareholder approvals are received at the respective special meetings of Blue Ridge and River and all required regulatory approvals are received. We currently expect to complete the merger in the third quarter of 2016. However, it is possible that factors outside of either party’s control could require us to complete the merger at a later time or not to complete it at all.

Interests of Certain River Directors and Executive Officers in the Merger (page [•])

In considering the recommendation of the River board of directors that River shareholders vote in favor of the River merger proposal, River shareholders should be aware that River directors and executive officers may have interests in the merger that differ from, or are in addition to, their interests as shareholders of River. These interests exist because of, among other things:

 

    the appointment of Ronald D. Haley, President and Chief Executive Officer of River and River Community Bank, as President and Chief Operating Officer of the continuing bank after the subsidiary bank merger;

 

    the assumption by Blue Ridge of employment agreements between River and certain officers of River, and the receipt by such officers of change in control, severance or termination payments regardless of the arrangements, if any, Blue Ridge makes for the continuation of employment of such officers after the merger;

 



 

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    the appointment of three current River directors, Hunter H. Bost, Kenneth E. Flynt and Mr. Haley, to the Blue Ridge board of directors, and such directors and Robert B. Burger, Jr., a current director of River Community Bank, also being appointed to the board of directors of the continuing bank; and

 

    the agreement by Blue Ridge to indemnify the directors and officers of River against certain liabilities arising before the effective date of the merger and Blue Ridge’s purchase of a six year “tail” prepaid policy for the current directors and officers of River, subject to a cap equal to 250% of River’s current annual premium.

The members of the River board of directors knew about these additional interests and considered them when they approved the merger agreement and the merger. See “The Merger – Interests of Certain River Directors and Executive Officers in the Merger” on page [•].

No Solicitation (page [•])

River has agreed that, while the merger agreement is in effect, it will not directly or indirectly:

 

    initiate, solicit or encourage any inquiries or proposals with respect to any “acquisition proposal” (as defined in the merger agreement); or

 

    engage or participate in any negotiations or discussions concerning, or provide any confidential or nonpublic information relating to, an acquisition proposal.

The merger agreement does not, however, prohibit River from considering an unsolicited bona fide acquisition proposal from a third party if certain specified conditions are met.

Termination of the Merger Agreement (page [•])

Termination by Blue Ridge and River. The merger agreement may be terminated and the merger abandoned by Blue Ridge and River, at any time before the merger is completed, by mutual consent of the parties.

Termination by Blue Ridge or River. The merger agreement may be terminated and the merger abandoned by Blue Ridge or River if:

 

    the merger has not been completed by January 15, 2017, unless the failure to complete the merger by such time was caused by a breach or failure to perform an obligation under the merger agreement by the terminating party;

 

    the River shareholders do not approve the River merger proposal or the Blue Ridge shareholders do not approve the Blue Ridge merger proposal;

 

    there is a breach or inaccuracy of any representation or warranty of Blue Ridge or River contained in the merger agreement that would cause the failure of the closing conditions described above to be met by the other party, which is not cured within 30 days following notice or by its nature cannot be cured within such time period, unless the party wishing to terminate is in breach of any representation, warranty, covenant or agreement;

 

    there is a material breach by Blue Ridge or River of any covenant or agreement contained in the merger agreement, and the breach is not cured within 30 days following notice to the other party or by its nature cannot be cured within such time period, unless the party wishing to terminate is in breach of any representation, warranty, covenant or agreement; or

 

    any of the conditions precedent to the obligations of Blue Ridge or River to consummate the merger set forth in the merger agreement cannot be satisfied or fulfilled by January 15, 2017, unless the party wishing to terminate is in breach of any representation, warranty, covenant or agreement.

 



 

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Termination by Blue Ridge. Blue Ridge may terminate the merger agreement at any time before the merger is completed if:

 

    without Blue Ridge’s prior consent, River or River Community Bank enters into an agreement with respect to a business combination transaction, a sale or lease of substantially all assets, or an acquisition directly from River of securities representing 10% or more of River common stock;

 

    a tender offer or exchange offer for 20% or more of the outstanding shares of River common stock is commenced, and the River board recommends that River shareholders tender their shares in the offer or otherwise fails to recommend that they reject the offer; or

 

    at any time before the River special meeting, (i) River materially breaches its agreement regarding the non-solicitation of other business combination offers, (ii) the board of directors of River fails to recommend, or withdraws, modifies or changes its recommendation to the River shareholders that the River merger proposal be approved in any way that is adverse to Blue Ridge, or (iii) River materially breaches its covenants in the merger agreement requiring the calling and holding of a meeting of shareholders to consider the River merger proposal.

Termination by River. River may terminate the merger agreement at any time before the merger is completed if:

 

    at any time before the Blue Ridge special meeting, (i) the board of directors of Blue Ridge fails to recommend, or withdraws, modifies or changes its recommendation to the Blue Ridge shareholders that the Blue Ridge merger proposal be approved in any way that is adverse to River, or (ii) Blue Ridge materially breaches its covenants in the merger agreement requiring the calling and holding of a meeting of shareholders to consider the Blue Ridge merger proposal; or

 

    at any time before the River special meeting, it determines to enter into an agreement with respect to an unsolicited “superior proposal” (as defined in the merger agreement) which has been received and considered by River in compliance with the merger agreement, provided that River has notified Blue Ridge in advance of any such termination and given Blue Ridge the opportunity to promptly make an offer at least as favorable as the superior proposal, as determined by the River board of directors.

In the event of termination, the merger agreement will become null and void, except that certain provisions thereof relating to fees and expenses (including the obligation to pay the termination fee described below in certain circumstances) and confidentiality of information exchanged between the parties will survive any such termination.

Termination Fee and Expenses (pages [•] and [•])

River must pay Blue Ridge a termination fee of $495,000 if the merger agreement is terminated by either party under certain specified circumstances. Blue Ridge must pay River a termination fee of $200,000 if the merger agreement is terminated by River under certain specified circumstances. The termination and payment circumstances are more fully described elsewhere in this joint proxy statement/offering circular. See “The Merger Agreement – Termination Fee” on page [•] and in Article 7 of the merger agreement.

In general, whether or not the merger is completed, Blue Ridge and River 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 all filing fees paid to the SEC and other governmental authorities. The costs of printing and mailing this joint proxy statement/offering circular will be borne by Blue Ridge and River in proportion to their number of shareholders.

The Blue Ridge Special Meeting (page [•])

The Blue Ridge special meeting will be held on [•], 2016 at [•]:[•] [•].m. local time, at [•], located at [•], Luray, Virginia.

 



 

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At the special meeting, the shareholders of Blue Ridge will be asked to vote on the following matters:

 

    the Blue Ridge merger proposal; and

 

    the Blue Ridge adjournment proposal.

The River Special Meeting (page [•])

The River special meeting will be held on [•], 2016 at [•]:[•] [•].m. local time, at [•], located at [•], Martinsville, Virginia.

At the special meeting, the shareholders of River will be asked to vote on the following matters:

 

    the River merger proposal; and

 

    the River adjournment proposal.

Record Date and Votes Required – Blue Ridge Special Meeting (page [•])

You can vote at the Blue Ridge special meeting of shareholders if you owned Blue Ridge common stock at the close of business on [•], 2016. On that date, Blue Ridge had [•] shares of common stock outstanding and entitled to vote. For each proposal presented at the Blue Ridge special meeting, a shareholder can cast one vote for each share of Blue Ridge common stock owned on the record date.

The votes required to approve the proposals at the Blue Ridge special meeting are as follows:

 

    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 proposal.

 

    The Blue Ridge adjournment proposal requires the affirmative vote of a majority of the shares voted on the proposal, whether or not a quorum is present.

Record Date and Votes Required – River Special Meeting (page [•])

You can vote at the River special meeting of shareholders if you owned River common stock at the close of business on [•], 2016. On that date, River had [•] shares of common stock outstanding and entitled to vote. For each proposal presented at the River special meeting, a shareholder can cast one vote for each share of River common stock owned on the record date.

The votes required to approve the proposals at the River special meeting are as follows:

 

    The River merger proposal requires the affirmative vote of more than two-thirds of the outstanding shares of River common stock entitled to vote on the proposal.

 

    The River adjournment proposal requires the affirmative vote of a majority of the shares voted on the proposal, whether or not a quorum is present.

Affiliate Agreements and Voting by Blue Ridge and River Directors and Executive Officers (page [•])

Each of Blue Ridge’s directors and executive officers has agreed, subject to several conditions and exceptions, to vote all of the shares of Blue Ridge common stock over which he or she has the right and power to vote in favor of the Blue Ridge merger proposal. As of [•], 2016, the record date for the Blue Ridge special meeting, directors and executive officers of Blue Ridge are entitled to vote [•] shares of Blue Ridge common stock, or approximately [•]% of the total voting power of the shares of Blue Ridge common stock outstanding on that date.

 



 

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Each of River’s directors and executive officers has agreed, subject to several conditions and exceptions, to vote all of the shares of River common stock over which he or she has the right and power to vote in favor of the River merger proposal and against any competing acquisition proposal. As of [•], 2016, the record date for the River special meeting, directors and executive officers of River are entitled to vote [•] shares of River common stock, or approximately [•]% of the total voting power of the shares of River common stock outstanding on that date.

Appraisal Rights (page [•])

Under Virginia law, holders of Blue Ridge common stock or River common stock may exercise appraisal rights and, if the merger is consummated and all requirements of law are satisfied by holders seeking to exercise such rights, may receive payment equal to the “fair value” of their shares of Blue Ridge common stock or River common stock, as the case may be, determined in the manner set forth under Virginia law. The procedures which must be followed in connection with the exercise of appraisal rights by shareholders are described in this joint proxy statement/offering circular under “The Merger – Appraisal Rights” and in Article 15, Sections 13.1-729 through 13.1-741.1 of the Virginia Stock Corporation Act (“Virginia SCA”), a copy of which is attached as Appendix D to this joint proxy statement/offering circular. A shareholder seeking to exercise appraisal rights must deliver to the company of which he or she is a shareholder, before the shareholder vote on the merger agreement at the respective company’s special meeting, a written objection to the merger stating that he or she intends to demand payment for his or her shares through the exercise of his or her statutory appraisal rights, and must not vote his or her shares in favor of the merger agreement. The return of a signed proxy which does not specify whether you vote in favor or against approval of the merger agreement or abstain from voting will be considered a vote to approve the merger agreement. A shareholder vote against the merger agreement or an abstention alone, however, will not satisfy the notice requirement of Article 15 of the Virginia SCA. Any failure to follow the specific procedures set forth in Article 15 of the Virginia SCA may result in a shareholder losing the right to claim fair value as described above.

Shareholders of Blue Ridge and River Have Different Rights (page [•])

Blue Ridge and River are Virginia corporations governed by the Virginia SCA. In addition, the rights of Blue Ridge and River shareholders are governed by their respective articles of incorporation and bylaws. Upon completion of the merger, River shareholders will become shareholders of Blue Ridge, and as such their shareholder rights will then be governed by the articles of incorporation and bylaws of Blue Ridge, each as amended, and by the Virginia SCA. The rights of shareholders of Blue Ridge differ in certain respects from the rights of shareholders of River.

The Merger Will Be Accounted for Under the Acquisition Method of Accounting (page [•])

Blue Ridge will use the acquisition method of accounting to account for the merger.

Market Prices and Share Information (page [•])

Blue Ridge’s common stock is currently quoted on the OTC Pink marketplace under the symbol “BRBS.” The closing bid price on the OTC Pink marketplace for a share of Blue Ridge common stock prior to the date of this joint proxy statement/offering circular was $[•] on [•], 2016.

River’s common stock does not currently trade on any securities exchange or interdealer quotation system. The last known sale price for a share of River common stock prior to the date of this joint proxy statement/offering circular was $[•] on [•], 2016.

Risk Factors (page [•])

You should consider all the information contained in or incorporated by reference into this joint proxy statement/offering circular in deciding how to vote for the proposals presented in the joint proxy statement/offering circular. In particular, you should consider the factors under “Risk Factors.”

 



 

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SELECTED HISTORICAL 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 years ended December 31, 2015 and 2014 and as of and for the three months ended March 31, 2016 and 2015. The historical consolidated financial information as of the end of and for the years ended December 31, 2015 and 2014 is derived from Blue Ridge’s audited consolidated financial statements, which are included in this joint proxy statement/offering circular beginning on page F-1. The consolidated financial information as of and for the three months ended March 31, 2016 and 2015 is derived from Blue Ridge’s unaudited consolidated financial statements, which are included in this joint proxy statement/offering circular beginning on page F-37. 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 three months ended March 31, 2016 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2016. The selected historical financial data below is only a summary and should be read in conjunction with Blue Ridge’s consolidated financial statements that are included in this joint proxy statement/offering circular and their accompanying notes.

Blue Ridge Bankshares, Inc.

 

     Three Months Ended
March 31,
(Unaudited)
    December 31,  
     2016     2015     2015     2014  
     (Amounts in thousands, except per share data)   

Results of Operations:

        

Interest income

   $ 2,888      $ 2,506      $ 10,669      $ 9,290   

Interest expense

     699        472        2,044        1,684   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     2,189        2,034        8,625        7,606   

Provision for loan losses

     90        40        320        70   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     2,099        1,994        8,305        7,536   

Noninterest income

     216        243        1,145        983   

Noninterest expenses

     1,578        1,454        5,904        5,699   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     737        783        3,546        2,820   

Income tax expense

     213        228        1,048        791   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 524      $ 555      $ 2,498      $ 2,029   
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

        

Assets

   $ 272,214      $ 244,703      $ 268,910      $ 239,354   

Loans, net of unearned income

     207,722        188,646        207,284        186,845   

Deposits

     209,733        189,073        196,492        183,899   

Stockholders’ equity

     24,645        27,029        24,101        24,786   

Ratios:

        

Return on average assets

     0.78     0.92     0.98     0.89

Return on average equity

     8.61     8.57     10.22     9.22

Efficiency ratio

     59.30     61.80     57.30     64.20

Common equity to total assets

     9.05     9.21     8.96     8.48

Tangible common equity / tangible assets

     8.93     9.07     8.84     8.34

 

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Asset Quality:

        

Allowance for loan losses

   $ 2,401      $ 2,130      $ 2,348      $ 2,121   

Nonaccrual loans

   $ 364      $ 315      $ 384      $ 131   

Other real estate owned

   $ —        $ 210      $ 70      $ 210   

ALL / total outstanding loans

     1.16     1.13     1.13     1.14

ALL / nonperforming loans

     633.5     676.2     578.1     858.7

NPAs / total outstanding loans

     0.18     0.29     0.23     0.25

Net charge-offs / total outstanding loans

     0.02     0.02     0.05     0.01

Provision / total outstanding loans

     0.04     0.02     0.15     0.04

Per Share Data:

        

Earnings per share, basic

   $ 0.37      $ 0.43      $ 1.79      $ 2.11   

Earnings per share, diluted

     0.37        0.43        1.79        2.11   

Cash dividends paid

     0.1175        0.115        0.46        0.44   

Book value per common share

     17.58        16.07        17.20        15.97   

Price to earnings ratio, diluted

     11.83        10.80        9.71        9.45   

Price to book value ratio

     1.01        1.04        0.99        0.92   

Dividend payout ratio

     31.41     27.01     25.70     20.90

Weighted average shares outstanding, basic

     1,401,511        1,276,375        1,370,656        938,286   

Weighted average shares outstanding, diluted

     1,401,511        1,276,375        1,370,656        938,286   

 

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SELECTED HISTORICAL FINANCIAL DATA OF RIVER

The following table sets forth certain of River’s consolidated financial data as of the end of and for the years ended December 31, 2015 and 2014 and as of and for the three months ended March 31, 2016 and 2015. The historical consolidated financial information as of the end of and for the years ended December 31, 2015 and 2014 is derived from River’s audited consolidated financial statements, which are included in this joint proxy statement/offering circular beginning on page G-1. The consolidated financial information as of and for the three months ended March 31, 2016 and 2015 is derived from River’s unaudited consolidated financial statements, which are included in this joint proxy statement/offering circular beginning on page G-36. In River’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 three months ended March 31, 2016 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2016. The selected historical financial data below is only a summary and should be read in conjunction with River’s consolidated financial statements that are included in this joint proxy statement/offering circular and their accompanying notes.

River Bancorp, Inc.

 

     Three Months Ended
March 31,
(Unaudited)
    December 31,  
     2016     2015     2015     2014  
     (Amounts in thousands, except per share data)  

Results of Operations:

        

Interest income

   $ 1,407      $ 1,401      $ 5,858      $ 5,601   

Interest expense

     160        161        659        621   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     1,247        1,240        5,199        4,980   

Provision for loan losses

     140        40        1        1,048   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     1,107        1,200        5,198        3,932   

Noninterest income

     1,660        1,938        7,742        8,477   

Noninterest expenses

     2,511        2,685        10,798        10,816   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     256        453        2,142        1,593   

Income tax expense

     88        157        738        575   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 168      $ 296      $ 1,404      $ 1,018   
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

        

Assets

   $ 111,891      $ 117,583      $ 114,620      $ 113,870   

Loans, net of unearned income

     88,881        88,350        88,631        87,435   

Loans held for sale, at fair value

     9,263        12,325        11,603        11,626   

Deposits

     94,672        96,442        97,563        93,288   

Federal Home Loan Bank Advances

     5,000        10,000        5.000        10,000   

Stockholders’ equity

     11,486        10,133        11,361        9,838   

Ratios:

        

Return on average assets

     0.60     1.06     1.20     0.96

Return on average equity

     6.17     12.82     13.61     11.04

Efficiency ratio

     90.72     85.55     83.44     87.16

Common equity to total assets

     10.63     8.61     9.90     8.91

Tangible common equity / tangible assets

     10.63     8.61     9.90     8.91

 

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Asset Quality:

        

Allowance for loan losses

   $ 1,104      $ 1,338      $ 1,410      $ 1,298   

Nonaccrual loans

   $ 1,288      $ 1,206      $ 1,257      $ 1,243   

Other real estate owned

   $ 787      $ 294      $ 838      $ 352   

ALL / total outstanding loans

     1.24     1.51     1.59     1.48

ALL / total outstanding loans, adjusted for acquired

     1.24     1.51     1.59     1.48

ALL / nonperforming loans

     85.68     110.92     112.14     104.39

NPAs / total outstanding loans

     2.33     1.69     2.36     1.82

Net charge-offs / total outstanding loans

     0.50     0.00     (0.12 %)      0.69

Provisions / total outstanding loans

     0.16     0.05     0.00     1.19

Per Share Data:

        

Earnings per share, basic

   $ 0.23      $ 0.42      $ 1.98      $ 1.44   

Earnings per share, diluted

     0.23        0.42        1.98        1.44   

Cash dividends paid

     0.10        0.08        0.38        0.13   

Book value per common share

     15.63        14.34        15.46        13.92   

Weighted average shares outstanding, basic

     734,921        706,681        711,109        706,681   

Weighted average shares outstanding, diluted

     736,276        706,681        711,109        706,681   

 

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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 River, as an acquisition by Blue Ridge of River 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 River 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 River 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 March 31, 2016. The unaudited pro forma condensed combined income statements for the three months ended March 31, 2016 and the year ended December 31, 2015 give effect to the merger as if the transaction had occurred on January 1, 2015.

A final determination of the fair values of River’s 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 River 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/offering circular, and the historical consolidated financial statements and related notes thereto of River and its subsidiaries, which are also included in this joint proxy statement/offering circular.

 

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BLUE RIDGE BANKSHARES, INC. AND RIVER BANCORP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

As of March 31, 2016

(Dollars in thousands)

 

     Blue Ridge
Bankshares, Inc.
(As Reported)
    River
Bancorp, Inc.
(As Reported)
     Merger
Pro Forma
Adjustments
    Pro Forma
Combined
 

ASSETS

         

Cash and cash equivalents

   $ 7,359      $ 5,229       $ (3,768 ) (a)    $ 8,820   

Securities available for sale, at fair value

     20,966        5,205         —          26,171   

Securities held to maturity

     14,198        —           —          14,198   

Restricted stock, at cost

     2,224        584         —          2,808   

Loans held for sale

     12,239        9,263         —          21,502   

Loans, net of unearned income

     207,722        88,881         (700 ) (b)      295,903   

Less allowance for loan losses

     2,401        1,104         (1,104 ) (c)      2,401   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net loans

     205,321        87,777         404        293,502   
  

 

 

   

 

 

    

 

 

   

 

 

 

Bank premises and equipment, net

     2,052        710         (500 ) (d)      2,262   

Bank owned life insurance

     3,430        —           —          3,430   

Other real estate owned, net of valuation allowance

     —          787         (200 ) (e)      587   

Core deposit intangibles, net

     —          —           600    (f)      600   

Goodwill

     366        —           819    (g)      1,185   

Other assets

     4,059        2,336         —          6,395   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 272,214      $ 111,891       $ (2,645   $ 381,460   
  

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES

         

Noninterest-bearing demand deposits

     36,086        15,308         —          51,394   

Interest-bearing deposits

     173,647        79,364         50    (h)      253,061   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total deposits

     209,733        94,672         50        304,455   
  

 

 

   

 

 

    

 

 

   

 

 

 

Other borrowed funds

     26,779        5,000         —          31,779   

Subordinated debt, net of issuance costs

     9,673        —           —          9,673   

Other liabilities

     1,384        733         —          2,117   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities

     247,569        100,405         50        348,024   
  

 

 

   

 

 

    

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

         

Common stock and surplus

     7,124        7,942         849    (i)(j)      15,915   

Retained earnings

     18,046        3,509         (3,509 ) (i)      18,046   

Accumulated other comprehensive income

     (17     35         (35 ) (i)      (17
  

 

 

   

 

 

    

 

 

   

 

 

 
     25,153        11,486         (2,695     33,944   

Unearned ESOP Shares

     (508     —           —          (508
  

 

 

   

 

 

    

 

 

   

 

 

 

Total stockholders’ equity

     24,645        11,486         (2,695     33,436   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 272,214      $ 111,891       $ (2,645   $ 381,460   
  

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

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BLUE RIDGE BANKSHARES, INC. AND RIVER BANCORP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended March 31, 2016

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

 

     Blue Ridge      River      Merger        
     Bankshares, Inc.      Bancorp, Inc.      Pro Forma     Pro Forma  
     (As Reported)      (As Reported)      Adjustments     Combined  

Interest and dividend income:

          

Interest and fees on loans

   $ 2,609       $ 1,356       $ (35 ) (k)    $ 3,930   

Other interest income

     279         51         —          330   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest and dividend income

     2,888         1,407         (35     4,260   
  

 

 

    

 

 

    

 

 

   

 

 

 

Interest expense:

          

Interest on deposits

     402         154         (6 ) (l)      550   

Other interest expense

     297         6           303   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest expense

     699         160         (6     853   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income

     2,189         1,247         (29     3,407   

Provision for loan losses

     90         140         —          230   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     2,099         1,107         (29     3,177   
  

 

 

    

 

 

    

 

 

   

 

 

 

Noninterest income:

          

Service charges on deposit accounts

     77         79           156   

Other service charges, commissions and fees

     —           544         —          544   

Gains on sales of mortgage loans, net of commissions

     —           946         —          946   

Other operating income

     139         91         —          230   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest income

     216         1,660         —          1,876   
  

 

 

    

 

 

    

 

 

   

 

 

 

Noninterest expenses:

          

Salaries and benefits

     741         1,470         —          2,211   

Occupancy expenses

     79         167         —          246   

Furniture and equipment expenses

     69         133         —          202   

Other expenses

     689         741         38   (m)      1,468   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest expenses

     1,578         2,511         38        4,127   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     737         256         (66     927   

Income tax expense

     213         88         (23     278   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 524       $ 168       $ (44   $ 648   
  

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per common share, basic

   $ 0.37       $ 0.23         $ 0.34   
  

 

 

    

 

 

      

 

 

 

Earnings per common share, diluted

   $ 0.37       $ 0.23         $ 0.34   
  

 

 

    

 

 

      

 

 

 

Weighted average common shares outstanding, basic

     1,402         735         (230 ) (p)      1,907   

Weighted average common shares outstanding, diluted

     1,402         736         (231 ) (p)      1,907   

See accompanying notes to condensed consolidated financial statements.

 

 

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BLUE RIDGE BANKSHARES, INC. AND RIVER BANCORP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME

For the Year Ended December 31, 2015

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

 

     Blue Ridge      River      Merger        
     Bankshares, Inc.      Bancorp, Inc.      Pro Forma     Pro Forma  
     (As Reported)      (As Reported)      Adjustments     Combined  

Interest and dividend income:

          

Interest and fees on loans

   $ 9,661       $ 5,635       $ (140 ) (k)    $ 15,156   

Other interest income

     1,008         223         —          1,231   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest and dividend income

     10,669         5,858         (140     16,387   
  

 

 

    

 

 

    

 

 

   

 

 

 

Interest expense:

          

Interest on deposits

     1,482         634         (25 ) (l)      2,091   

Other interest expense

     562         25           587   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest expense

     2,044         659         (25     2,678   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income

     8,625         5,199         (115     13,709   

Provision for loan losses

     320         1         —          321   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     8,305         5,198         (115     13,388   
  

 

 

    

 

 

    

 

 

   

 

 

 

Noninterest income:

          

Service charges on deposit accounts

     304         311         —          615   

Other service charges, commissions and fees

     —           3,328         —          3,328   

Gains on sales of mortgage loans, net of commissions

     —           3,875         —          3,875   

Other operating income

     841         228         —          1,069   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest income

     1,145         7,742         —          8,887   
  

 

 

    

 

 

    

 

 

   

 

 

 

Noninterest expenses:

          

Salaries and benefits

     2,703         6,480         —          9,183   

Occupancy expenses

     303         741         —          1,044   

Furniture and equipment expenses

     264         500         —          764   

Other expenses

     2,634         3,077         2,150    (m)(n)      7,861   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest expenses

     5,904         10,798         2,150        18,852   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income before income taxes

     3,546         2,142         (2,265     3,423   

Income tax expense

     1,048         738         (770     1,016   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 2,498       $ 1,404       $ (1,495   $ 2,407   
  

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per common share, basic

   $ 1.79       $ 1.97         $ 1.28   
  

 

 

    

 

 

      

 

 

 

Earnings per common share, diluted

   $ 1.79       $ 1.97         $ 1.28   
  

 

 

    

 

 

      

 

 

 

Weighted average common shares outstanding, basic

     1,371         711         (206 ) (o)      1,876   

Weighted average common shares outstanding, diluted

     1,371         711         (206 ) (o)      1,876   

See accompanying notes to condensed consolidated financial statements.

 

 

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NOTE A – BASIS OF PRESENTATION

On March 30, 2016, Blue Ridge entered into the merger agreement with River. The merger agreement provides that at the effective date of the merger, each outstanding share of common stock of River will be converted into the right to receive, at the election of the holder, either $16.57 per share in cash, or 0.9821 shares of Blue Ridge common stock, no par value, subject to allocation and proration procedures set forth in the merger agreement. These allocation procedures are intended to ensure that 70% of the outstanding shares of River common stock will be converted into the right to receive shares of Blue Ridge common stock and 30% of the outstanding shares of River common stock will be converted into the right to receive cash. Per share stock consideration is subject to change based on the BRB VWAP.

The unaudited pro forma condensed combined financial information of Blue Ridge’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 River was consummated on January 1, 2015 for purposes of the unaudited pro forma condensed combined statements of income and on March 31, 2016 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.

The pro forma financial information includes estimated adjustments to record the assets and liabilities of River 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 River’s tangible, and identifiable intangible, assets and liabilities as of the effective date 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 the 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 cash portion of transaction, which represents 30% of the total purchase price, and $2.0 million of one time transaction costs.

 

(b) A fair value adjustment was recorded to River’s outstanding loan portfolio. This fair value adjustment consists of:

 

  i. An adjustment for credit deterioration of the acquired portfolio in the amount of $1.4 million which represented a mark of 1.6% on River’s outstanding loan portfolio. In order to determine the adjustment related to credit deterioration, Blue Ridge engaged an independent third party loan review team to review and perform analytics on River’s loan portfolio.

 

  ii. A further fair value adjustment (premium) to reflect differences in interest rates in the amount of $700,000 partially offset the credit deterioration adjustment. This portion of the fair value adjustment was based on current market interest rates and spreads including the consideration for liquidity concerns.

 

(c) Elimination of River’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.

 

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(d) Estimated fair value adjustments of acquired fixed assets as of acquisition date. The discount of $500,000 represents 70.4% of River’s fixed assets.

 

(e) Estimated fair value adjustment of the acquired other real estate owned (“OREO”) as of the acquisition date. The discount of $200,000 is based on an independent third party valuation utilizing market data for similar assets and applying judgment based on the individual circumstances of the OREO.

 

(f) Blue Ridge’s estimate of the fair value of the core deposit intangible asset ($600,000). This will be amortized over ten years using sum-of-years digits method. This estimate represents a 1.5% premium on River’s core deposits based on current market data for similar transactions.

 

(g) Addition of goodwill generated as a result of the total purchase price and the fair value of assets acquired exceeding the fair value of liabilities assumed. (See Note C).

 

(h) Estimated fair value adjustment on deposits at current market rates and spreads for similar products.

 

(i) Elimination of River’s stockholders’ equity representing conversion of all of River’s common shares into Blue Ridge common shares.

 

(j) Recognition of the equity portion of the merger consideration. The adjustment to common stock and surplus represents 70% of the total purchase price to effect the transaction.

 

(k) Represents the net premium amortization on acquired loans assuming the merger closed on January 1, 2015 (see Note D). Premium will be amortized over five years using the straight-line method.

 

(l) Represents premium amortization on deposits assumed as part of the merger assuming the merger closed on January 1, 2015 (see Note D). Premium will be amortized over two years using the straight-line method.

 

(m) Represents amortization of core deposit premium assuming the merger closed on January 1, 2015 (see Note E). Premium will be amortized over seven years using the sum-of-years digits method.

 

(n) Represents one time transaction related costs.

 

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

 

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NOTE C – PRO FORMA ALLOCATION OF PURCHASE PRICE

The following table shows the pro forma allocation of the consideration paid for River’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

      $ 12,559   
     

 

 

 

Total pro forma purchase price

      $ 12,559   

Fair value of assets acquired:

     

Cash and cash equivalents

   $ 5,229      

Securities available for sale

     5,205      

Restricted stock, at cost

     584      

Loans held for sale

     9,263      

Net loans

     88,181      

Bank premise and equipment

     210      

OREO, net of valuation allowance

     587      

Core deposit intangible

     600      

Other assets

     2,336      
  

 

 

    

Total assets

     112,195      

Fair value of liabilities assumed:

     

Deposits

     94,722      

Long-term borrowings

     5,000      

Other liabilities

     733      
  

 

 

    

Total liabilities

     100,455      

Net assets acquired

      $ 11,740   
     

 

 

 

Preliminary pro forma goodwill

      $ 819   
     

 

 

 

The following table depicts the sensitivity of the purchase price and resulting goodwill to changes in the price of Blue Ridge’s common stock at a price of $17.40 as of March 31, 2016:

 

Share Price Sensitivity (unaudited, dollars in thousands)

 
     Purchase Price      Estimated Goodwill  

Up 20%

   $ 15,071       $ 3,331   

Up 10%

   $ 13,815       $ 2,075   

As presented in proforma

   $ 12,559       $ 819   

Down 10%

   $ 11,303       $ (437 )(1) 

Down 20%

   $ 10,047       $ (1,693 )(1) 

 

(1) Transaction would result in a bargin purchase.

 

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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 River (unaudited, dollars in thousands):

 

     Discount Accretion (Premium Amortization)  
     For the Years Ended December 31,  
     2017     2018     2019     2020     2021     Thereafter     Total  

Loans

   $ (140   $ (140   $ (140   $ (140   $ (140   $ —        $ (700

Deposits

     (25     (25     —          —          —          —          (50

Core Deposit Intangible

     (150     (129     (107     (86     (64     (64     (600

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 13% of River’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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COMPARATIVE HISTORICAL AND PRO FORMA UNAUDITED SHARE DATA

Summarized below is historical unaudited per share information for Blue Ridge and River and additional information as if the companies had been combined for the periods shown, which is referred to as “pro forma” information.

The River pro forma equivalent per share amounts are calculated by multiplying the Blue Ridge pro forma combined book value per share and net income per share by an assumed exchange ratio of 0.9821 for the stock consideration so that the per share amounts equate to the respective values for one share of River common stock. The actual exchange ratio with respect to the stock consideration may be subject to adjustment based on the BRB VWAP.

It is expected that both Blue Ridge and River will incur merger and integration charges as a result of the merger. Also anticipated is that the merger will provide the combined company with financial benefits that may include reduced operating expenses. The information set forth below, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, may not reflect all of these anticipated financial expenses and does not reflect all of these anticipated financial benefits or consider any potential impacts of current market conditions or the merger on revenues, expense efficiencies, asset dispositions, and share repurchases, among other factors, and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during the periods presented.

In addition, the information set forth below has been prepared based on preliminary estimates of merger consideration and fair values attributable to the merger; the actual amounts recorded for the merger may differ from the information presented. The estimation and allocations of merger consideration are subject to change pending further review of the fair value of the assets acquired and liabilities assumed and actual transaction costs. A final determination of fair value will be based on the actual net tangible and intangible assets and liabilities of River that will exist on the date of completion of the merger.

The information in the following table is based on, and should be read together with, the historical financial information and the notes thereto for Blue Ridge and River incorporated by reference into, or contained in, this joint proxy statement/offering circular.

 

     Historical               
     Blue Ridge
Bankshares, Inc.
     River Bancorp,
Inc.
     Pro Forma
Combined
    Pro Forma Equivalent
River Share
 

Basic Earnings Per Common Share

          

For the year ended December 31, 2015

   $ 1.7900       $ 1.9800       $ 1.2836  (1)    $ 1.2607  (2) 

For the three months ended March 31, 2016

   $ 0.3700       $ 0.2300       $ 0.3399  (1)    $ 0.3339  (2) 

Diluted Earnings Per Common Share

          

For the year ended December 31, 2015

   $ 1.7900       $ 1.9800       $ 1.2836  (1)    $ 1.2607  (2) 

For the three months ended March 31, 2016

   $ 0.3700       $ 0.2300       $ 0.3399  (1)    $ 0.3339  (2) 

Cash Dividends Per Common Share

          

For the year ended December 31, 2015

   $ 0.4363       $ 0.3800       $ 0.4363  (3)    $ 0.4285  (2) 

For the three months ended March 31, 2016

   $ 0.1175       $ 0.1000       $ 0.1175  (3)    $ 0.1173  (2) 

Book Value Per Common Share

          

At December 31, 2015

   $ 17.2000       $ 15.4600       $ 17.8232  (4)    $ 17.5042  (2) 

At March 31, 2016

   $ 17.5800       $ 15.6300       $ 17.5335  (4)    $ 17.2196  (2) 

 

(1) Pro forma earnings per share is based on pro forma combined net income and pro forma combined shares outstanding at the end of the period.
(2) Calculated based on pro forma combined multiplied by the assumed 0.9821 exchange ratio.
(3) Pro forma dividends per share represent Blue Ridge’s historical dividends per share.
(4) Calculated based on pro forma combined equity and pro forma combined shares outstanding at the end of the period.

 

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RISK FACTORS

In addition to general investment risks and the other information contained in this joint proxy statement/offering circular, including the matters addressed under the heading “Cautionary Statement Regarding Forward-Looking Statements” on page [•], you should consider carefully the following risk factors in deciding how to vote on the proposals presented in this joint proxy statement/offering circular.

Risks Related to the Merger

The form of merger consideration that River shareholders ultimately receive could be different from the form elected depending on the form of merger consideration elected by other River shareholders.

All River shareholders will be permitted to make an election as to the form of consideration they wish to receive. The exchange agent will be allowed, subject to limitations set forth in the merger agreement, to adjust the form of consideration that a River shareholder will receive in order to ensure that 70% of the outstanding shares of River common stock are converted into shares of Blue Ridge common stock and 30% of the shares of River common stock are converted into cash. Consequently, if either the stock consideration or the cash consideration is oversubscribed, River shareholders could receive a different form of consideration from the form they elect, which could result in different tax consequences than they had anticipated (including the recognition of gain for federal income tax purposes with respect to the cash received). If River shareholders do not make an election, they will receive the merger consideration in cash, shares or a combination of cash and shares as provided for in the merger agreement.

Because the market price of Blue Ridge common stock will fluctuate, River shareholders who receive stock consideration will not know until the effective date of the merger the value of the consideration they will receive in the merger.

Each share of River common stock converted into the right to receive the stock consideration will receive 0.9821 shares of Blue Ridge common stock or (i) if the BRB VWAP is less than or equal to $16.00, such number of shares of Blue Ridge common stock determined by dividing $15.71 by the BRB VWAP, and (ii) if the BRB VWAP is greater than or equal to $18.00, such number of shares of Blue Ridge common stock determined by dividing $17.68 by the BRB VWAP. Based on fluctuations in the value of Blue Ridge common stock prior to the effective date, however, the value of shares of Blue Ridge common stock delivered for each such share of River common stock may be greater than, less than, or equal to (a) $16.45, the value of the stock consideration immediately before the public announcement of the merger or (b) $16.57, the per share cash consideration in the merger. Changes in the price of the Blue Ridge common stock may result from a variety of factors, including, among others, general market and economic conditions, changes in Blue Ridge’s business, operations and prospects, market assessment of the likelihood that the merger will be completed as anticipated or at all and regulatory considerations. Many of these factors are beyond Blue Ridge’s control.

As a result of changes in Blue Ridge’s stock price, the market value of the shares of Blue Ridge common stock that River shareholders receiving the stock consideration will receive at the time that the merger is completed could be lower or higher than the value of such shares immediately before the public announcement of the merger, on the date of this joint proxy statement/offering circular, on the date of the River special meeting or on the date on which the River shareholders actually receive their shares of Blue Ridge common stock. Accordingly, at the time of the River special meeting, River shareholders will not know or be able to calculate the exact market value of Blue Ridge common stock that shareholders receiving the stock consideration will receive upon completion of the merger.

Because there is a limited public market for Blue Ridge common stock, it is difficult to determine how the fair value of Blue Ridge common stock compares with the merger consideration.

The outstanding shares of Blue Ridge common stock are quoted on the OTC Pink marketplace of the OTC Markets Group, Inc., but historically trading has been limited. This limited public market makes it difficult to determine the fair value of Blue Ridge common stock. Blue Ridge’s and River’s boards of directors, respectively, obtained fairness opinions from their financial advisors; however, because there is no public market for Blue Ridge’s common stock such opinions may not be indicative of the fair value of the shares of Blue Ridge common stock that may be received by certain River shareholders in the merger.

 

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The market price of Blue Ridge common stock after the merger may be affected by factors different from those affecting the shares of Blue Ridge or River currently.

Upon completion of the merger, certain holders of River common stock will become holders of Blue Ridge common stock. Blue Ridge’s business differs in important respects from that of River, and, accordingly, the results of operations of the combined company and the market price of Blue Ridge common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of Blue Ridge and River. For a discussion of the businesses of Blue Ridge and River and of certain factors to consider in connection with those businesses, see the information described elsewhere in this joint proxy statement/offering circular.

Future results of the combined company after the merger may be materially different from those reflected in the unaudited pro forma condensed combined financial statements included in this joint proxy statement/offering circular because such financial statements do not reflect actual merger-related expenses and restructuring charges.

The unaudited pro forma condensed combined financial statements included in this joint proxy statement/offering circular are presented for illustrative purposes only and do not necessarily indicate the future financial condition or operating results of the combined company. The pro forma financial data reflect adjustments, which are based on preliminary estimates, to record River’s identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. Additionally, Blue Ridge estimates that the combined company will record an aggregate of approximately $2.0 million, on a pre-tax basis, in merger-related expenses and restructuring charges. The actual charges may be higher or lower than estimated, depending upon how costly or difficult it is to integrate the two companies. These charges will decrease the capital of the combined company available for future profitable, income-earning investments.

Combining Blue Ridge and River 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 River and to combine the businesses of Blue Ridge and River in a manner that permits growth opportunities and cost savings to be realized without materially disrupting the existing customer relationships of River or Blue Ridge or decreasing revenues due to loss of customers. However, to realize these anticipated benefits and cost savings, Blue Ridge must successfully combine the businesses of Blue Ridge and River. 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 River have operated, and, until the completion of the merger, will continue to operate, independently. To realize anticipated benefits from the merger, after the completion of the merger, Blue Ridge will integrate River’s 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 affect adversely 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 River 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 River to lose customers or cause customers to withdraw their deposits from River’s or Blue Ridge’s 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 River and Blue Ridge during this transition period and for an undetermined period after consummation of the merger.

 

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

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

A substantial percentage of River’s historical earnings are attributable to its mortgage operation, and the success of the merger is largely dependent upon Blue Ridge’s ability to integrate and continue the success of that operation.

River runs a successful “full correspondent” mortgage operation. For the three months ended March 31, 2016, pretax income from River’s mortgage operation accounted for 45.1% of its pretax income, and River’s mortgage operation accounted for 41.3% of River’s total pretax income for the year ended December 31, 2015. While Blue Ridge currently offers mortgage loan products to its customers, its mortgage operation is not as expansive as River’s. While the scope of River’s mortgage operation offers many benefits, it also has risks that Blue Ridge does not face today, including risks related to retention of key mortgage personnel, risks related to lease obligations and capital markets risks related to hedging interest rate risk inherent in River’s available for sale loan portfolio. If Blue Ridge is not able to successfully integrate and operate River’s mortgage operation, including by managing the risks of the operation, Blue Ridge may not achieve the expected benefits of the merger, which could have a material adverse effect on Blue Ridge’ financial condition and results of operations and the value of its common stock.

The continuing bank will have a different regulator from the regulators that currently supervise and regulate Blue Ridge Bank.

Blue Ridge Bank is currently a state-chartered bank that is a member of the Federal Reserve System. As a result, Blue Ridge Bank is currently supervised and regulated by the Virginia SCC and the Federal Reserve. Following the merger, the continuing bank will be a national bank, supervised and regulated by the OCC. While management of Blue Ridge Bank has no reason to believe its regulatory standing will not continue to be satisfactory following the merger, the OCC is not familiar with Blue Ridge Bank’s management and operating philosophy. It is possible that the OCC could have different views as to the policies and procedures of Blue Ridge Bank than those held by the Virginia SCC and the Federal Reserve, which could cause the regulatory standing of Blue Ridge Bank to suffer. Such event could have a material adverse effect on Blue Ridge Bank’s future prospects.

The merger may distract management of Blue Ridge and River from their other responsibilities.

The merger could cause the respective management groups of Blue Ridge and River to focus their time and energies on matters related to the transaction that otherwise would be directed to their business and operations. Any such distraction on the part of either company’s management could affect its ability to service existing business and develop new business and adversely affect the business and earnings of Blue Ridge or River before the merger, or the business and earnings of Blue Ridge after the merger.

 

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Termination of the merger agreement could negatively impact Blue Ridge or River.

If the merger agreement is terminated, Blue Ridge’s or River’s business may be impacted adversely 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. Additionally, if the merger agreement is terminated, the market price of Blue Ridge’s or River’s common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. Furthermore, costs relating to the merger, such as legal, accounting and financial advisory fees, must be paid even if the merger is not completed. If the merger agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by Blue Ridge’s or River’s board of directors, a termination fee may be payable. See “The Merger Agreement – Termination Fee” on page [•].

The fairness opinions received by Blue Ridge and River in connection with the merger have not been updated to reflect changes in circumstances since the signing of the merger agreement, and they likely will not be updated before completion of the merger.

The opinions rendered by Sandler O’Neill, financial advisor to Blue Ridge, on March 30, 2016 and BSP Securities, financial advisor to River, on March 29, 2016, are based upon information available as of such dates. Neither opinion has been updated to reflect changes that may occur or may have occurred after the date on which it was delivered, including changes to the operations and prospects of Blue Ridge or River, changes in general market and economic conditions, or other changes. Any such changes may alter the relative value of Blue Ridge or River or the prices of shares of Blue Ridge common stock or River common stock by the time the merger is completed. The opinions do not speak as of the date the merger will be completed or as of any date other than the dates of such opinions. Blue Ridge and River do not currently anticipate asking their respective financial advisors to update the opinions prior to the time the merger is completed. For a description of the opinion that Blue Ridge received from its financial advisor, please see “The Merger – Opinion of Blue Ridge’s Financial Advisor,” beginning on page [•]. For a description of the opinion that River received from its financial advisor, please see “The Merger – Opinion of River’s Financial Advisor,” beginning on page [•].

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

River shareholders, in deciding how to vote on the River merger proposal, should be aware that River’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of River shareholders generally. These interests exist because of, among other things, (i) offers of employment after the merger, (ii) the receipt and potential receipt certain executive officers of River of change in control, severance or termination payments, (iii) the appointment of certain current River directors to the board of directors of Blue Ridge and/or the continuing bank, and (iv) the agreement by Blue Ridge to indemnify the directors and officers of River against certain liabilities arising before the effective date of the merger and Blue Ridge’s purchase of a six year “tail” prepaid policy for the current directors and officers of River. These interests may cause directors and executive officers of River to view the merger proposal differently than other River shareholders view the proposal. See “The Merger – Interests of Certain River Directors and Executive Officers in the Merger” on page [•].

The merger agreement limits the ability of River 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 River to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of its company. In addition, under certain circumstances, if the merger agreement is terminated and River, subject to certain restrictions, consummates a similar transaction other than the merger, River must pay Blue Ridge a termination fee of $495,000. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant percentage of ownership of River from considering or proposing an acquisition even if it were prepared to pay consideration with a higher per share market value than that proposed in the merger. See “The Merger Agreement – Termination Fee” on page [•].

 

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Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the merger.

Before the merger may be completed, Blue Ridge and River must obtain approvals from the Federal Reserve, the OCC and the Virginia SCC. Other approvals, waivers or consents from regulators may also be required. These regulators may impose conditions on the completion of the merger or require changes to the terms of the merger. Although Blue Ridge and River do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, in which case the merger may not be completed, or if completed, such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of the combined company following the merger, any of which might have an adverse effect on the combined company following the merger. See “The Merger – Regulatory Approvals” on page [•].

If the merger is not completed, Blue Ridge and River will have incurred substantial expenses without realizing the expected benefits of the merger.

Each of Blue Ridge and River has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing this joint proxy statement/offering circular and all filing and other fees paid to the SEC and other regulatory authorities in connection with the merger. If the merger is not completed, Blue Ridge and River would have to incur these expenses without realizing the expected benefits of the merger.

Current holders of Blue Ridge common stock, and certain current holders of River common stock, will have less influence as holders of Blue Ridge common stock after the merger.

It is expected that, as a group, the current holders of common stock of River will own approximately 26.5% of the outstanding common stock of Blue Ridge after the merger. Each current holder of River common stock will own a significantly smaller percentage of Blue Ridge after the merger than they currently own of River. As a result of the merger, holders of River common stock will have less influence on the management and policies of Blue Ridge than they currently have on the management and policies of River.

River shareholders who receive Blue Ridge common stock in the merger will experience a substantial reduction in their respective percentage ownership interests and effective voting power through their stock ownership in Blue Ridge relative to their percentage ownership interest in River prior to the merger. If the merger is consummated, current River shareholders would own approximately 26.5% of Blue Ridge’s issued and outstanding common stock, on a fully diluted basis, based on the number of shares of outstanding River common stock as of March 31, 2016. Accordingly, even if such shareholders were to vote as a group, such a group could still be outvoted by other Blue Ridge shareholders.

In addition, the current holders of Blue Ridge common stock will have their ownership interest in Blue Ridge diluted by the issuance of common stock to the common stock holders of River. Consequently, while the current Blue Ridge shareholders will still own a majority of the Blue Ridge common stock after the merger, they will have less voting power per share.

Risks Related to Blue Ridge’s Business

Blue Ridge’s business may be adversely affected by conditions in the financial markets and economic conditions generally and in the market in which it operates.

The community banking industry is directly affected by national, regional and local economic conditions. The economies in Blue Ridge’s market areas improved during 2015, though growth remained sluggish. Management allocates significant resources to mitigate and respond to risks associated with the current economic conditions, however, such conditions cannot be predicted or controlled. Therefore, such conditions, including a reduction in federal government spending, a flatter yield curve and extended low interest rates, could adversely affect the credit quality of Blue Ridge’s loans, and/or Blue Ridge’s results of operations and financial condition. Blue Ridge’s financial performance is dependent on the business environment in the markets where Blue Ridge operates, in

 

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particular, the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services Blue Ridge offers. In addition, Blue Ridge holds securities which can be significantly affected by various factors including credit ratings assigned by third parties, and an adverse credit rating in securities held by Blue Ridge could result in a reduction of the fair value of its securities portfolio and have an adverse impact on its financial condition. While general economic conditions in markets served by Blue Ridge and the U.S. continued to improve in 2015, there can be no assurance that this improvement will continue.

The competition Blue Ridge faces is increasing and may reduce its customer base and negatively impact Blue Ridge’s results of operations.

There is significant competition among banks in the market areas served by Blue Ridge. In addition, as a result of deregulation of the financial industry, it also competes with other providers of financial services such as savings and loan associations, credit unions, consumer finance companies, securities firms, mortgage companies, insurance companies, the mutual funds industry, full service brokerage firms and discount brokerage firms, some of which are subject to less extensive regulations than Blue Ridge with respect to the products and services they provide. Some of Blue Ridge’s competitors have greater resources than Blue Ridge and, as a result, may have higher lending limits and may offer other services not offered by Blue Ridge.

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 earning assets. Thus, any plans for branch expansion could decrease Blue Ridge’s earnings in the short run, even if it efficiently executes its branching strategy.

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 declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, widespread disease, 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 nonperforming 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.

 

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Changes in interest rates may have an adverse effect on Blue Ridge’s profitability.

The operations of financial institutions such as Blue Ridge are dependent to a large degree on net interest income, which is the difference between interest income from loans and investments and interest expense on deposits and borrowings. An institution’s net interest income is significantly affected by market rates of interest that in turn are affected by prevailing economic conditions, by the fiscal and monetary policies of the federal government and by the policies of various regulatory agencies. The Federal Reserve regulates the national money supply in order to manage recessionary and inflationary pressures. In doing so, the Federal Reserve may use techniques such as engaging in open market transactions of U.S. Government securities, changing the discount rate and changing reserve requirements against bank deposits. The use of these techniques may also affect interest rates charged on loans and paid on deposits. The interest rate environment, which includes both the level of interest rates and the shape of the U.S. Treasury yield curve, has a significant impact on net interest income and may also impact the value of Blue Ridge’s securities portfolio. Like all financial institutions, Blue Ridge’s balance sheet is affected by fluctuations in interest rates. Volatility in interest rates can also result in disintermediation, which is the flow of deposits away from financial institutions into direct investments, such as U.S. Government and corporate securities and other investment vehicles, including mutual funds, which, because of the absence of federal insurance premiums and reserve requirements, generally pay higher rates of return than bank deposit products.

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, 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’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 leases 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.

Blue Ridge’s allowance for loan losses may be insufficient, and any increases in the allowance for loan losses will result in a decrease in net income and possibly capital, and may have a material adverse effect on Blue Ridge’s financial condition and results of operations.

Blue Ridge maintains an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, that represents management’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.

 

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The level of the allowance reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires Blue Ridge to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Continuing 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’s control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review Blue Ridge’s allowance for loan losses and have in the past required 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 will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and possibly capital, and may have a material adverse effect on Blue Ridge’s financial condition and results of operations.

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, 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.

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. Approximately 80.8% of Blue Ridge’s loans are secured by real estate, both residential and commercial, substantially all of which are located in its market area. A major change in the region’s real estate market, resulting in a deterioration in real estate values, or in the local or national economy, including changes caused by raising interest rates, could adversely affect Blue Ridge customers’ ability to pay these loans, which in turn could adversely impact Blue Ridge. 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 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 still holds a significant 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.

 

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A substantial decline in the value of Blue Ridge’s securities portfolio may result in an “other-than-temporary” impairment charge.

The total amount of Blue Ridge’s available-for-sale securities portfolio was $20.9 million at March 31, 2016. The measurement of the fair value of these securities involves significant judgment due to the complexity of the factors contributing to the measurement. Market volatility makes measurement of the fair value of Blue Ridge’s securities portfolio even more difficult and subjective. More generally, as market conditions continue to be volatile, Blue Ridge cannot provide assurance with respect to the amount of future unrealized losses in the portfolio. To the extent that any portion of the unrealized losses in these portfolios is determined to be other than temporary, and the loss is related to credit factors, Blue Ridge would recognize a charge to its earnings in the quarter during which such determination is made, and its capital ratios could be adversely affected.

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, including current River officers that will join the management team in connection with the merger. 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.

Blue Ridge is subject to extensive supervision and regulation, which is subject to change, the compliance or noncompliance with which could adversely affect Blue Ridge.

Blue Ridge is subject to extensive federal and state regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, and not security holders. These regulations affect lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. These provisions, or any other aspects of current proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of Blue Ridge’s business activities or change certain of its business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads, and could expose Blue Ridge to additional costs, including increased compliance costs. These changes also may require Blue Ridge to invest significant management attention and resources to make any necessary changes to its operations in order to comply, and could therefore also materially adversely affect its business, financial condition and results of operations. Furthermore, failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on Blue Ridge’s business, financial condition and results of operations.

Blue Ridge will be subject to more stringent capital requirements in the future, which could adversely affect results of operations and future growth.

Blue Ridge is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which we must maintain. In July 2013, the Federal Reserve and the federal banking agencies issued final rules revising risk-based and leverage capital requirements and the method for calculating risk-weighted assets. The rules implement the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The rules establish a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets) and a higher minimum Tier 1 risk-based capital requirement (6% of risk-weighted assets) and assign higher risk weightings to loans that are past due and certain loans financing the acquisition, development or construction of commercial real estate. The final rule also establishes a “capital conservation buffer” of 2.5% above the regulatory minimum capital ratios, which buffer will be phased in beginning in January 2016 at 0.625% each year until fully implemented in January 2019. Because Blue Ridge’s total assets are less than $1.0 billion, it is considered a small bank holding company under the Federal Reserve’s capital adequacy regulations

 

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and is subject to capital requirements applied on a bank-only basis. These requirements and any other new regulations, could adversely affect Blue Ridge’s ability to pay dividends, or could require it to reduce business levels or to raise capital, including in ways that may adversely affect its financial condition or results of operations. See “Supervision and Regulation – Regulation of Blue Ridge Bank – Capital Requirements” on page [•].

New regulations issued by the Consumer Financial Protection Bureau 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 new rule also contains new 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.

The deposit insurance assessments that Blue Ridge is required to pay may increase in the future, which would have an adverse effect on its earnings.

As an insured depository institution, Blue Ridge is required to pay quarterly deposit insurance premium assessments to the Federal Deposit Insurance Corporation (the “FDIC”) to maintain the level of the FDIC deposit insurance reserve ratio. The past failures of financial institutions have significantly increased the loss provisions of the FDIC’s Deposit Insurance Fund (the “DIF”), resulting in a decline in the reserve ratio. As a result of recent economic conditions and the enactment of the Dodd-Frank Act, the FDIC revised its assessment rates, which raised deposit premiums for certain insured depository institutions. If these increases are insufficient for the DIF to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required. Blue Ridge is generally unable to control the amount of premiums that it is required to pay for FDIC insurance. If there are additional bank or financial institution failures, the FDIC may increase the deposit insurance assessment rates. Any future assessments, increases or required prepayments in FDIC insurance premiums may materially adversely affect earnings and could negatively affect Blue Ridge’s stock price.

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. For example, 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 the Federal Reserve’s policies 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, 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.

 

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Blue Ridge may need to raise capital that may not ultimately be available to it.

Regulatory authorities require Blue Ridge to maintain certain levels of capital to support its operations. While Blue Ridge remained “well capitalized” at March 31, 2016 and expects to be “well capitalized” following the merger, it may need to raise additional capital in the future if it incurs losses or due to regulatory mandates. The ability to raise capital, if needed, will depend in part on conditions in the capital markets at that time, which are outside Blue Ridge’s control, and on Blue Ridge’s financial performance. Accordingly, Blue Ridge may not be able to raise capital, if and when needed, on terms acceptable to it, or at all. If Blue Ridge cannot raise capital when needed, its ability to increase capital ratios could be materially impaired, and it could face regulatory challenges.

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

Third parties provide key components of Blue Ridge’s business infrastructure, for example, system support and network access. While Blue Ridge has selected these third party vendors carefully, it does not control their actions. Any problems caused by these third parties, including those resulting from their failure to provide services for any reason or their poor performance of services, could adversely affect Blue Ridge’s ability to deliver products and services to its customers and otherwise conduct its business. Replacing these third party vendors could also entail significant delay and expense.

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 not sufficient 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.

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, and unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Blue Ridge’s necessary dependence upon automated systems to record and process its transaction volume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. Blue Ridge also may 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 telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. Blue Ridge is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as Blue Ridge is) and to the risk that its (or its vendors’) business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in a diminished ability of Blue Ridge to operate its business, potential liability to clients, reputational damage and regulatory intervention, which could adversely affect its business, financial condition and results of operations, perhaps materially.

 

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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 recently 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. 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 the Blue Ridge Bank 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.

Negative perception of Blue Ridge through social media may adversely affect its reputation and business.

Blue Ridge’s reputation is critical to the success of its business. Blue Ridge believes that its brand image has been well received by customers, reflecting the fact that the brand image, like its business, is based in part on trust and confidence. Blue Ridge’s reputation and brand image could be negatively affected by rapid and widespread distribution of publicity through social media channels. Blue Ridge’s reputation could also be affected by its association with customers affected negatively through social media distribution, or other third parties, or by circumstances outside of its control. Negative publicity, whether true or untrue, could affect Blue Ridge’s ability to attract or retain customers, or cause Blue Ridge to incur additional liabilities or costs, or result in additional regulatory scrutiny.

Risks Related to Blue Ridge’s Common Stock

An investment in Blue Ridge common stock is not an insured deposit and, as with any stock, inherent market risk may cause you to lose some or all of your investment.

Blue Ridge common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. Investment in Blue Ridge common stock is inherently risky and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire Blue Ridge common stock, you may lose some or all of your investment.

 

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

Blue Ridge’s common stock is quoted on the OTC Pink marketplace of the OTC Markets Group, Inc. Although price quotations are available, Blue Ridge common stock is thinly traded and has substantially less liquidity than the trading markets for many other bank holding companies. Blue Ridge cannot assure you that a more active trading market for Blue Ridge common stock will develop or be sustained following the merger. 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. As a result, it may be difficult for you to sell your shares of Blue Ridge common stock at the times or prices that you desire.

Blue Ridge is not obligated to pay cash dividends on its common stock, and its ability to pay dividends depends upon the results of operations of its bank subsidiary.

Blue Ridge is a bank holding company that conducts substantially all of its operations through Blue Ridge Bank. As a result, Blue Ridge’s ability to make dividend payments on its common stock depends primarily on certain federal 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 rate of $0.1175 per share. Although Blue Ridge has historically paid a cash dividend to the holders of its common stock, holders of the 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 of directors to consider, among other things, the reduction of dividends paid on its common stock. See “Description of Blue Ridge Capital Stock” on page [•] and “Market for Common Stock and Dividends” on page [•].

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

Blue Ridge is not restricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of common stock. Issuances of a substantial number of shares of common stock, or the expectation that such issuances might occur, including in connection with acquisitions by Blue Ridge, could materially adversely affect the market price of the shares of common stock and could be dilutive to Blue Ridge shareholders. Because Blue Ridge’s decision to issue common stock in the future will depend on market conditions and other factors, it cannot predict or estimate the amount, timing, or nature of possible future issuances of its common stock. Accordingly, Blue Ridge’s shareholders bear the risk that future issuances will reduce the market price of the common stock and dilute their stock holdings in Blue Ridge.

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

Certain provisions of Blue Ridge’s articles 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 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.

 

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Blue Ridge’s board of directors is authorized to issue preferred stock without shareholder approval.

Blue Ridge’s board of directors, without shareholder approval, is empowered under Blue Ridge’s articles to authorize the issuance, in one or more classes or series, of shares of preferred stock at such times, for such purposes and for such consideration as it may deem advisable. In connection with any such issuance, the Blue Ridge board may by resolution determine the designation, voting rights, preferences as to dividends, in liquidation or otherwise, participation, redemption, sinking fund, conversion, dividend or other special rights to powers, and the limitations, qualifications and restrictions of such shares of preferred stock. Such preferred stock may have voting and conversion rights that could adversely affect the voting power of the holders of common stock and, under certain circumstances, discourage an attempt by others to gain control of Blue Ridge.

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

Blue Ridge has issued certain debt securities 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. If Blue Ridge is not able to service its debt obligations in the future, the rights of holders of Blue Ridge common stock will be limited.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. Blue Ridge and River desire to take advantage of these “safe harbor” provisions with regard to the forward-looking statements in this joint proxy statement/offering circular and in the documents that are incorporated herein by reference. These forward-looking statements reflect the current views of Blue Ridge and River with respect to future events and financial performance. Specifically, forward-looking statements may include:

 

    statements relating to the ability of Blue Ridge and River to timely complete the merger and the benefits thereof, including anticipated efficiencies, opportunities, synergies and cost savings estimated to result from the merger;

 

    projections of revenues, expenses, income, income per share, net interest margins, asset growth, loan production, asset quality, deposit growth and other performance measures;

 

    statements regarding expansion of operations, including branch openings, entrance into new markets, development of products and services, and execution of strategic initiatives;

 

    discussions of the future state of the economy, competition, regulation, taxation, our business strategies, subsidiaries, investment risk and policies; and

 

    statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

These forward-looking statements express the best judgment of Blue Ridge and River based on currently available information and we believe that the expectations reflected in our forward-looking statements are reasonable.

By their nature, however, forward-looking statements often involve assumptions about the future. Such assumptions are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. As such, Blue Ridge and River cannot guarantee you that the expectations reflected in our forward-looking statements actually will be achieved. Actual results may differ materially from those in the forward-looking statements due to, among other things, the following factors:

 

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

 

    expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected timeframe;

 

    revenues following the merger may be lower than expected;

 

    customer and employee relationships and business operations may be disrupted by the merger;

 

    the ability to obtain required regulatory and shareholder approvals, and the ability to complete the merger within the expected timeframe, may be more difficult, time-consuming or costly than expected;

 

    changes in general business, economic and market conditions;

 

    changes in fiscal and monetary policies, and laws and regulations;

 

    changes in interest rates, deposit flows, loan demand and real estate values;

 

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    deterioration in asset quality and/or a reduced demand for, or supply of, credit;

 

    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

 

    the risks outlined in “Risk Factors” beginning on page [•].

We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date of this joint proxy statement/offering circular or, in the case of a document incorporated herein by reference, as of the date of that document. Except as required by law, neither Blue Ridge nor River undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

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THE BLUE RIDGE SPECIAL MEETING

Date, Place and Time

This joint proxy statement/offering circular is first being mailed on or about [•], 2016 to Blue Ridge shareholders who held shares of Blue Ridge common stock, no par value per share, on the record date for the Blue Ridge special meeting of shareholders. This joint proxy statement/offering circular is accompanied by the notice of the special meeting and a form of proxy that is solicited by the board of directors of Blue Ridge for use at the special meeting to be held on [•], 2016 at [•]:[•] [•].m. local time, at [•], located at [•], Luray, Virginia, and at any adjournments of that meeting.

Purposes of the Blue Ridge Special Meeting

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

 

    to approve the Blue Ridge merger proposal as more fully described in this joint proxy statement/offering circular; and

 

    to approve the Blue Ridge adjournment proposal as more fully described in this joint proxy statement/offering circular.

Recommendation of the Blue Ridge Board of Directors

The Blue Ridge board believes that the proposed merger with River is fair to and is in the best interests of Blue Ridge and its shareholders and unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal and the Blue Ridge adjournment proposal.

Record Date and Voting Rights; Quorum

The Blue Ridge board of directors has fixed the close of business on [•], 2016 as the record date for determining the shareholders of Blue Ridge entitled to notice of and to vote at the special meeting or any adjournments thereof. Accordingly, you are only entitled to notice of and to vote at the special meeting if you were a record holder of Blue Ridge common stock at the close of business on the record date. At that date, [•] shares of Blue Ridge common stock were outstanding and entitled to vote.

To have a quorum that permits Blue Ridge to conduct business at the Blue Ridge special meeting, we require the presence, whether in person or by proxy, of the holders of Blue Ridge’s common stock representing a majority of the voting shares outstanding on the record date. You are entitled to one vote for each outstanding share of Blue Ridge common stock you held as of the close of business on the record date.

Holders of shares of Blue Ridge common stock present in person at the special meeting but not voting, and shares of the common stock for which proxy cards are received indicating that their holders have abstained, will be counted as present at the special meeting for purposes of determining whether there is a quorum for transacting business. Shares held in “street name” that have been designated by brokers on proxies as not voted will not be counted as votes cast for or against any proposal. These broker non-votes will, however, be counted for purposes of determining whether a quorum exists.

Votes Required

Vote Required for Approval of the Blue Ridge Merger Proposal. The 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 for the special meeting.

Failures to vote, abstentions and broker non-votes will not count as votes cast on the proposal. Because, however, 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, failures to vote, abstentions and broker non-votes will have the same effect as votes against the Blue Ridge merger proposal.

 

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Vote Required for Approval of the Blue Ridge Adjournment Proposal. The approval of the Blue Ridge adjournment proposal requires the affirmative vote of a majority of the shares of Blue Ridge common stock voted on the proposal, whether or not a quorum is present.

Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the Blue Ridge adjournment proposal has been approved.

Stock Ownership of Blue Ridge Executive Officers and Directors

As of the record date for the Blue Ridge special meeting, directors and executive officers of Blue Ridge beneficially owned and were entitled to vote approximately [•] shares of Blue Ridge common stock at the Blue Ridge special meeting, or approximately [•]% of the total voting power of Blue Ridge shares entitled to vote at the special meeting. Each director and executive officer of Blue Ridge has entered into an agreement with Blue Ridge and River pursuant to which he or she has agreed to vote all of his or her shares in favor of the Blue Ridge merger proposal, subject to certain exceptions.

Voting at the Blue Ridge Special Meeting

Record Holders. If your shares of Blue Ridge common stock are held of record in your name, your shares can be voted at the Blue Ridge special meeting in any of the following ways:

 

    By Mail. You can vote your shares by using the proxy card which is enclosed for your use in connection with the special meeting. If you complete and sign the proxy card and return it in the enclosed postage-paid envelope, you will be appointing the “proxies” named in the proxy card to vote your shares for you at the meeting. The authority you will be giving the proxies is described in the proxy card. When your 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 in the proxy card.

If proxy cards are returned properly executed without an indication as to how the proxies should vote, the Blue Ridge common stock represented by each such proxy card will be considered to be voted “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal.

 

    By the Internet or Telephone. You can appoint the proxies to vote your shares for you by going to the Internet website (http://www.[                    ]) or by calling 1-[                    ]. When you are prompted for your “control number,” enter the number printed just above your name on the enclosed proxy card, and then follow the instructions provided. You may vote by Internet or telephone only until [•]:[•] [•].m. Eastern Time on [•], 2016, which is the day of the Blue Ridge special meeting. If you vote by the Internet or telephone, you need not sign and return a proxy card. Under Virginia law, you will be appointing the proxies to vote your shares on the same terms as are described above and with the same authority as if you completed, signed and returned a proxy card. The authority you will be giving the proxies is described in the proxy card.

 

    In Person. You can attend the Blue Ridge special meeting and vote in person. A ballot will be provided for your use at the meeting.

Your vote is important. Accordingly, please sign, date and return the enclosed proxy card, or follow the instructions above to vote by the Internet or telephone, whether or not you plan to attend the Blue Ridge special meeting in person.

 

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Shares Held in “Street Name. Only the record holders of shares of Blue Ridge common stock, or their appointed proxies, may vote those shares. As a result, if your shares of Blue Ridge common stock are held for you in “street name” by a broker or other nominee, such as a bank or custodian, then only your broker or nominee (i.e., the record holder) may vote them for you, or appoint the proxies to vote them for you, unless you previously have made arrangements for your broker or nominee to assign its voting rights to you or for you to be recognized as the person entitled to vote your shares. You will need to follow the directions your broker or nominee provides you and give it instructions as to how it should vote your shares by following the instructions you received from your broker or nominee with your copy of this joint proxy statement/offering circular. Brokers and other nominees who hold shares in “street name” for their clients typically have the discretionary authority to vote those shares on “routine” proposals when they have not received instructions from beneficial owners of the shares. However, they may not vote those shares on non-routine matters, such as the proposals that will be presented at the Blue Ridge special meeting, unless their clients give them voting instructions. To ensure that your shares are represented at the Blue Ridge special meeting and voted in the manner you desire, it is important that you instruct your broker or nominee as to how it should vote your shares.

If your shares are held in “street name” and you wish to vote them in person at the Blue Ridge special meeting, you must obtain a proxy, executed in your favor, from the holder of record.

Revocation of Proxies

Record Holders. If you are the record holder of shares of Blue Ridge common stock and you sign and return a proxy card or appoint the proxies by the Internet or telephone and you later wish to revoke the authority or change the voting instructions you gave the proxies, you can do so at any time before the voting takes place at the Blue Ridge special meeting by taking the appropriate action described below.

To change the voting instructions you gave the proxies:

 

    you can complete, sign and submit a new proxy card, dated after the date of your original proxy card, which contains your new instructions, and submit it so that it is received before the special meeting or, if hand delivered, before the voting takes place at the Blue Ridge special meeting; or

 

    if you appointed the proxies by the Internet or telephone, you can go to the same Internet website (http://www.[            ]) or use the same telephone number (1-[            ]) before [•]:[•] [•]. m. Eastern Time on [•], 2016 (the day of the special meeting), enter the same control number (printed just above your name on the enclosed proxy card) that you previously used to appoint the proxies, and then change your voting instructions.

The proxies will follow the last voting instructions received from you before the special meeting.

To revoke your proxy card or your appointment of the proxies by the Internet or telephone:

 

    you can give Blue Ridge’s Corporate Secretary a written notice, before the special meeting or, if hand delivered, before the voting takes place at the special meeting, that you want to revoke your proxy card or Internet or telephone appointment; or

 

    you can attend the special meeting and vote in person or notify Blue Ridge’s Corporate Secretary, before the voting takes place, that you want to revoke your proxy card or Internet or telephone appointment. Simply attending the special meeting alone, without voting in person or notifying Blue Ridge’s Corporate Secretary, will not revoke your proxy card or Internet or telephone appointment.

If you submit your new proxy card or notice of revocation by mail, it should be addressed to Blue Ridge’s Corporate Secretary at Blue Ridge Bankshares, Inc., Attention: Corporate Secretary, 17 West Main Street, Luray, Virginia 22835, and must be received no later than the beginning of the Blue Ridge special meeting or, if the special meeting is adjourned, before the adjourned meeting is actually held. If hand delivered, your new proxy card or notice of revocation must be received by Blue Ridge’s Corporate Secretary before the voting takes place at the special meeting or at any adjourned meeting.

If you need assistance in changing or revoking your proxy, please contact:

 

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    Blue Ridge’s Corporate Secretary by calling (540) 843-5208 or by writing to Blue Ridge Bankshares, Inc., 17 West Main Street, Luray, Virginia 22835, Attention: Corporate Secretary; or

 

    [            ] [Proxy solicitor information to be completed]

Shares Held in “Street Name.” If your shares are held in “street name” and you want to change or revoke voting instructions you have given to the record holder of your shares, you must follow the directions given by your bank, broker, custodian or nominee.

Solicitation of Proxies

This solicitation is made on behalf of the Blue Ridge board of directors, and Blue Ridge will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing banks and brokers for forwarding proxy materials to shareholders. Proxies may be solicited, without extra compensation, by Blue Ridge’s officers and employees by mail, electronic mail, telephone, fax or personal interviews. Blue Ridge has currently engaged [                    ] to assist it in the distribution and solicitation of proxies for a fee of $[            ], plus reasonable expenses. Blue Ridge will also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions.

 

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PROPOSALS TO BE CONSIDERED AT THE BLUE RIDGE SPECIAL MEETING

Approval of the Blue Ridge Merger Proposal (Blue Ridge Proposal No. 1)

At the special meeting, shareholders of Blue Ridge will be asked to approve the Blue Ridge merger proposal providing for the merger of River with and into Blue Ridge. Shareholders of Blue Ridge should read this joint proxy statement/offering circular 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/offering circular as Appendix A.

After careful consideration, the Blue Ridge board of directors, by a unanimous vote of all directors, approved the merger agreement and the merger to be advisable and in the best interests of Blue Ridge and the shareholders of Blue Ridge. See “The Merger – Blue Ridge’s Reasons for the Merger; Recommendation of Blue Ridge’s Board of Directors” included elsewhere in this joint proxy statement/offering circular for a more detailed discussion of the Blue Ridge board of directors’ recommendation.

The Blue Ridge board of directors unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal.

Approval of the Blue Ridge Adjournment Proposal (Blue Ridge Proposal No. 2)

If at the Blue Ridge special meeting there are not sufficient votes to approve the Blue Ridge merger proposal, the meeting may be adjourned to a later date or dates, if necessary or appropriate, to permit further solicitation of proxies to approve the Blue Ridge merger proposal. In that event, Blue Ridge shareholders will be asked to vote on the Blue Ridge adjournment proposal, and will not be asked to vote on the Blue Ridge merger proposal.

In order to allow proxies that have been received by Blue Ridge at the time of the Blue Ridge special meeting to be voted for the Blue Ridge adjournment proposal, Blue Ridge is submitting the Blue Ridge adjournment proposal to its shareholders as a separate matter for their consideration. This proposal asks Blue Ridge shareholders to authorize the holder of any proxy solicited by the Blue Ridge board of directors on a discretionary basis to vote in favor of adjourning the Blue Ridge special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from Blue Ridge shareholders who have previously voted.

If it is necessary to adjourn the Blue Ridge special meeting, then, unless the meeting will have been adjourned for a total of more than 120 days, no notice of such adjourned meeting is required to be given to shareholders, other than an announcement at the special meeting of the place, date and time to which the Blue Ridge special meeting is adjourned. Even if a quorum is not present, shareholders who are represented at a meeting may approve an adjournment of the meeting.

The Blue Ridge board of directors unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge adjournment proposal.

 

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THE RIVER SPECIAL MEETING

Date, Place and Time

This joint proxy statement/offering circular is first being mailed on or about [•], 2016 to River shareholders who held shares of River common stock, par value $5.00 per share, on the record date for the River special meeting of shareholders. This joint proxy statement/offering circular is accompanied by the notice of the special meeting and a form of proxy that is solicited by the board of directors of River for use at the special meeting to be held on [•], 2016 at [•]:[•] [•].m. local time, at [•], located at [•], Martinsville, Virginia, and at any adjournments of that meeting.

Purposes of the River Special Meeting

At the River special meeting, the shareholders of River will be asked:

 

    to approve the River merger proposal as more fully described in this joint proxy statement/offering circular; and

 

    to approve the River adjournment proposal as more fully described in this joint proxy statement/offering circular.

Recommendation of the River Board of Directors

The River board believes that the proposed merger with Blue Ridge is fair to and is in the best interests of River and its shareholders and unanimously recommends that River shareholders vote “FOR” the River merger proposal and the River adjournment proposal.

Record Date and Voting Rights; Quorum

The River board of directors has fixed the close of business on [•], 2016 as the record date for determining the shareholders of River entitled to notice of and to vote at the special meeting or any adjournments thereof. Accordingly, you are only entitled to notice of and to vote at the special meeting if you were a record holder of River common stock at the close of business on the record date. At that date, [•] shares of River common stock were outstanding and entitled to vote.

To have a quorum that permits River to conduct business at the River special meeting, we require the presence, whether in person or by proxy, of the holders of River’s common stock representing a majority of the voting shares outstanding on the record date. You are entitled to one vote for each outstanding share of River common stock you held as of the close of business on the record date.

Holders of shares of River common stock present in person at the special meeting but not voting, and shares of the common stock for which proxy cards are received indicating that their holders have abstained, will be counted as present at the special meeting for purposes of determining whether there is a quorum for transacting business. Shares held in “street name” that have been designated by brokers on proxies as not voted will not be counted as votes cast for or against any proposal. These broker non-votes will, however, be counted for purposes of determining whether a quorum exists.

Votes Required

Vote Required for Approval of the River Merger Proposal. The approval of the River merger proposal requires the affirmative vote of more than two-thirds of the shares of River common stock outstanding on the record date for the special meeting.

Failures to vote, abstentions and broker non-votes will not count as votes cast on the proposal. Because, however, approval of the River merger proposal requires the affirmative vote of more than two-thirds of the shares of River common stock outstanding on the record date, failures to vote, abstentions and broker non-votes will have the same effect as votes against the River merger proposal.

 

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Vote Required for Approval of the River Adjournment Proposal. The approval of the River adjournment proposal requires the affirmative vote of a majority of the shares of River common stock voted on the proposal, whether or not a quorum is present.

Failures to vote, abstentions and broker non-votes will not count as votes cast and will have no effect for purposes of determining whether the River adjournment proposal has been approved.

Stock Ownership of River Executive Officers and Directors

As of the record date for the River special meeting, directors and executive officers of River beneficially owned and were entitled to vote approximately [•] shares of River common stock at the River special meeting, or approximately [•]% of the total voting power of River shares entitled to vote at the special meeting. Each director and executive officer of River has entered into an agreement with Blue Ridge and River pursuant to which he or she has agreed to vote all of his or her shares in favor of the River merger proposal, subject to certain exceptions.

Voting at the River Special Meeting

Record Holders. If your shares of River common stock are held of record in your name, your shares can be voted at the River special meeting in any of the following ways:

 

    By Mail. You can vote your shares by using the proxy card which is enclosed for your use in connection with the special meeting. If you complete and sign the proxy card and return it in the enclosed postage-paid envelope, you will be appointing the “proxies” named in the proxy card to vote your shares for you at the meeting. The authority you will be giving the proxies is described in the proxy card. When your proxy card is returned properly executed, the shares of River common stock represented by it will be voted at the River special meeting in accordance with the instructions contained in the proxy card.

If proxy cards are returned properly executed without an indication as to how the proxies should vote, the River common stock represented by each such proxy card will be considered to be voted “FOR” the River merger proposal and “FOR” the River adjournment proposal.

 

    By the Internet or Telephone. You can appoint the proxies to vote your shares for you by going to the Internet website (http://www.[                    ]) or by calling 1-[                    ]. When you are prompted for your “control number,” enter the number printed just above your name on the enclosed proxy card, and then follow the instructions provided. You may vote by Internet or telephone only until [•]:[•] [•].m. Eastern Time on [•], 2016, which is the day of the River special meeting. If you vote by the Internet or telephone, you need not sign and return a proxy card. Under Virginia law, you will be appointing the proxies to vote your shares on the same terms as are described above and with the same authority as if you completed, signed and returned a proxy card. The authority you will be giving the proxies is described in the proxy card.

 

    In Person. You can attend the River special meeting and vote in person. A ballot will be provided for your use at the meeting.

Your vote is important. Accordingly, please sign, date and return the enclosed proxy card, or follow the instructions above to vote by the Internet or telephone, whether or not you plan to attend the River special meeting in person.

Shares Held in “Street Name. Only the record holders of shares of River common stock, or their appointed proxies, may vote those shares. As a result, if your shares of River common stock are held for you in “street name” by a broker or other nominee, such as a bank or custodian, then only your broker or nominee (i.e., the

 

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record holder) may vote them for you, or appoint the proxies to vote them for you, unless you previously have made arrangements for your broker or nominee to assign its voting rights to you or for you to be recognized as the person entitled to vote your shares. You will need to follow the directions your broker or nominee provides you and give it instructions as to how it should vote your shares by following the instructions you received from your broker or nominee with your copy of this joint proxy statement/offering circular. Brokers and other nominees who hold shares in “street name” for their clients typically have the discretionary authority to vote those shares on “routine” proposals when they have not received instructions from beneficial owners of the shares. However, they may not vote those shares on non-routine matters, such as the proposals that will be presented at the River special meeting, unless their clients give them voting instructions. To ensure that your shares are represented at the River special meeting and voted in the manner you desire, it is important that you instruct your broker or nominee as to how it should vote your shares.

If your shares are held in “street name” and you wish to vote them in person at the River special meeting, you must obtain a proxy, executed in your favor, from the holder of record.

Revocation of Proxies

Record Holders. If you are the record holder of shares of River common stock and you sign and return a proxy card or appoint the proxies by the Internet or telephone and you later wish to revoke the authority or change the voting instructions you gave the proxies, you can do so at any time before the voting takes place at the River special meeting by taking the appropriate action described below.

To change the voting instructions you gave the proxies:

 

    you can complete, sign and submit a new proxy card, dated after the date of your original proxy card, which contains your new instructions, and submit it so that it is received before the special meeting or, if hand delivered, before the voting takes place at the River special meeting; or

 

    if you appointed the proxies by the Internet or telephone, you can go to the same Internet website (http://www.[            ]) or use the same telephone number (1-[            ]) before [•]:[•] [•].m. Eastern Time on [•], 2016 (the day of the special meeting), enter the same control number (printed just above your name on the enclosed proxy card) that you previously used to appoint the proxies, and then change your voting instructions.

The proxies will follow the last voting instructions received from you before the special meeting.

To revoke your proxy card or your appointment of the proxies by the Internet or telephone:

 

    you can give River’s Corporate Secretary a written notice, before the special meeting or, if hand delivered, before the voting takes place at the special meeting, that you want to revoke your proxy card or Internet or telephone appointment; or

 

    you can attend the special meeting and vote in person or notify River’s Corporate Secretary, before the voting takes place, that you want to revoke your proxy card or Internet or telephone appointment. Simply attending the special meeting alone, without voting in person or notifying River’s Corporate Secretary, will not revoke your proxy card or Internet or telephone appointment.

If you submit your new proxy card or notice of revocation by mail, it should be addressed to River’s Corporate Secretary at River Bancorp, Inc., Attention: Corporate Secretary, 433 Commonwealth Blvd. East, Suite 1, Martinsville, Virginia 24112, and must be received no later than the beginning of the River special meeting or, if the special meeting is adjourned, before the adjourned meeting is actually held. If hand delivered, your new proxy card or notice of revocation must be received by River’s Corporate Secretary before the voting takes place at the special meeting or at any adjourned meeting.

If you need assistance in changing or revoking your proxy, please contact:

 

    River’s Corporate Secretary by calling (276) 638-3600 or by writing to River Bancorp, Inc., 433 Commonwealth Blvd. East, Suite 1, Martinsville, Virginia 24112, Attention: Corporate Secretary; or

 

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    [            ] [Proxy solicitor information to be completed]

Shares Held in “Street Name.” If your shares are held in “street name” and you want to change or revoke voting instructions you have given to the record holder of your shares, you must follow the directions given by your bank, broker, custodian or nominee.

Solicitation of Proxies

This solicitation is made on behalf of the River board of directors, and River will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing banks and brokers for forwarding proxy materials to shareholders. Proxies may be solicited, without extra compensation, by River’s officers and employees by mail, electronic mail, telephone, fax or personal interviews. River has currently engaged [                    ] to assist it in the distribution and solicitation of proxies for a fee of $[                    ], plus reasonable expenses. River will also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions.

 

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PROPOSALS TO BE CONSIDERED AT THE RIVER SPECIAL MEETING

Approval of the River Merger Proposal (River Proposal No. 1)

At the special meeting, shareholders of River will be asked to approve the River merger proposal providing for the merger of River with and into Blue Ridge. Shareholders of River should read this joint proxy statement/offering circular 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/offering circular as Appendix A.

After careful consideration, the River board of directors, by a unanimous vote of all directors, approved the merger agreement and the merger to be advisable and in the best interests of River and the shareholders of River. See “The Merger – River’s Reasons for the Merger; Recommendation of River’s Board of Directors” included elsewhere in this joint proxy statement/offering circular for a more detailed discussion of the River board of directors’ recommendation.

The River board of directors unanimously recommends that River shareholders vote “FOR” the River merger proposal.

Approval of the River Adjournment Proposal (River Proposal No. 2)

If at the River special meeting there are not sufficient votes to approve the River merger proposal, the meeting may be adjourned to a later date or dates, if necessary or appropriate, to permit further solicitation of proxies to approve the River merger proposal. In that event, River shareholders will be asked to vote on the River adjournment proposal, and will not be asked to vote on the River merger proposal.

In order to allow proxies that have been received by River at the time of the River special meeting to be voted for the River adjournment proposal, River is submitting the River adjournment proposal to its shareholders as a separate matter for their consideration. This proposal asks River shareholders to authorize the holder of any proxy solicited by the River board of directors on a discretionary basis to vote in favor of adjourning the River special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from River shareholders who have previously voted.

If it is necessary to adjourn the River special meeting, then, unless the meeting will have been adjourned for a total of more than 120 days, no notice of such adjourned meeting is required to be given to shareholders, other than an announcement at the special meeting of the place, date and time to which the River special meeting is adjourned. Even if a quorum is not present, shareholders who are represented at a meeting may approve an adjournment of the meeting.

The River board of directors unanimously recommends that River shareholders vote “FOR” the River adjournment proposal.

 

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THE MERGER

The following discussion contains certain information about the merger. The discussion is subject to and is qualified in its entirety by reference to the merger agreement, which is attached as Appendix A to this joint proxy statement/offering circular and incorporated herein by reference. We urge you to read carefully this joint proxy statement/offering circular, including the merger agreement attached as Appendix A, for a more complete understanding of the merger.

General

The Blue Ridge board of directors and the River board of directors have each unanimously approved the merger agreement, which provides for the merger of River with and into Blue Ridge, with Blue Ridge as the surviving entity.

After the merger, Blue Ridge Bank, the wholly-owned Virginia chartered bank subsidiary of Blue Ridge, will merge with and into River Community Bank, the wholly-owned national bank subsidiary of River. River Community Bank will be the surviving bank in the subsidiary bank merger, and will continue in operation under the name “Blue Ridge Bank, N.A.”

Pursuant to the terms of the merger agreement, as a result of the merger, each share of River common stock issued and outstanding immediately prior to the effective date of the merger will cease to be outstanding and will be converted into the right to receive, at the election of the holder, either:

 

    $16.57 per share in cash; or

 

    0.9821 shares of Blue Ridge common stock; provided, however, that the stock consideration is subject to adjustment based on the volume weighted average price of Blue Ridge common stock for the 30 consecutive trading days (or such longer period as a minimum of 2,500 Blue Ridge shares are traded) prior to and including the second trading day prior to the effective date of the merger, which we refer to BRB VWAP, as follows:

 

    if the BRB VWAP is less than or equal to $16.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $15.71 by the BRB VWAP, and

 

    if the BRB VWAP is greater than or equal to $18.00, then the stock consideration will equal the number of shares of Blue Ridge common stock determined by dividing $17.68 by the BRB VWAP.

As of the date of this joint proxy statement/offering circular, Blue Ridge expects that it will issue approximately [•] shares of Blue Ridge common stock to the holders of River common stock in the merger. At the completion of the merger, it is expected that there will be issued and outstanding approximately [•] shares of Blue Ridge common stock, with current Blue Ridge shareholders owning approximately [•]% of Blue Ridge’s outstanding common stock and former holders of River common stock owning approximately [•]% of Blue Ridge’s outstanding common stock.

Background of the Merger

The board of directors of River has regularly assessed and considered strategic alternatives that might maximize value for its shareholders.

In September 2010, River engaged BSP Securities to identify potential strategic partners, including potential acquirers, entities that might present a merger of equals or strategic investors. In the period through April 2011, BSP Securities approached 39 potential strategic partners to gauge interest in River. These potential partners were identified in several different ways, including, without limitation, logical and strategic bank acquirers based on size, geographic market, expected cost savings, ability to execute a transaction, perceived cultural fit and business prospects and strategic investment groups and private equity firms identified through industry and local market knowledge.

 

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Of these 39 potential partners, 25 signed non-disclosure agreements (each an “NDA”), 19 were granted access to a virtual data room containing information on River and three conducted onsite due diligence. None of these three potential partners chose to pursue a transaction after due diligence. In addition, in April 2011, another potential partner submitted a written non-binding letter of intent (a “LOI”) to acquire River for $7.9 million in cash, which at that time represented a slight premium to River’s book value. This LOI was accepted by River but was withdrawn by the issuing party the following month after further due diligence.

In February 2012, BSP Securities, at the direction of River, began discussions with another potential strategic partner. In March 2012, this financial institution signed an NDA and commenced due diligence on River. There were multiple meetings among management of the two institutions following the execution of the NDA, as well as contact between their directors. River and the potential partner signed an LOI in March 2012, but in July 2012 both parties decided not to pursue a transaction for financial and cultural reasons.

As part of Blue Ridge’s ongoing consideration and evaluation of its operations and prospects, the Blue Ridge board of directors and management have periodically reviewed and assessed the company’s business strategy and objectives, including the strategic opportunities and challenges facing the company. These reviews have included, among other things, the business and regulatory environment in which Blue Ridge and other similar community banks operate, as well as market and other conditions in the financial services industry generally.

In March 2013, management of River and Blue Ridge had informal discussions about a potential business combination of their respective companies. Following the execution of an NDA, extensive due diligence was conducted by each company on the other party. On June 4, 2013, Blue Ridge delivered an LOI proposing to acquire River in an all-stock transaction. On June 11, 2013, the board of directors of River met to review the LOI and voted in favor of entering into the LOI with Blue Ridge. On June 13, 2013, River executed and delivered the LOI to Blue Ridge. On August 16, 2013, after a meeting of the Blue Ridge board of directors, Blue Ridge withdrew its LOI, mainly because of certain business and strategic considerations that had developed since it had delivered the LOI to River in June 2013.

In May 2014, management of another financial institution (“Party X”) contacted BSP Securities to express interest in a merger with River, and the parties signed an NDA in June 2014. Preliminary due diligence was then conducted by Party X and there were meetings between management of River and Party X. In July 2014, Party X presented an LOI to acquire River in an all-stock transaction. After negotiations and revisions to the LOI, the parties signed the LOI in August 2014 and mutual due diligence commenced. In September 2014, Party X decided to terminate the LOI based on a perceived lack of fit between certain business units of the two companies.

In early 2015, BSP Securities had contact with three financial institutions regarding a possible strategic transaction with River. The first financial institution (“Party Y”) signed an NDA with River in February 2015 and the second financial institution signed an NDA with River in March 2015. Management of the second financial institution and River had multiple meetings and each conducted preliminary due diligence on the other party, but ultimately in May 2015 the second financial institution decided not to pursue a transaction due to lack of operational fit between certain business units of the two companies. Management of the third financial institution and River had multiple discussions, but the third potential merger partner decided not to proceed based on execution risk on its own side. In addition, in May 2015, there was an informal discussion between management of River and Blue Ridge regarding a strategic transaction, but Blue Ridge indicated to River that it did not want to reconsider a transaction at that time.

Beginning in February 2015, management of Party Y and River held multiple meetings and conducted preliminary due diligence on each other’s businesses and operations. On May 27, 2015, Party Y submitted an LOI to River proposing an all-cash acquisition of River. The executive committee of the board of directors of River, consisting of Hunter H. Bost, Chairman of the Board, Robert B. Burger, Jr., Kenneth E. Flynt and Ronald D. Haley, President and Chief Executive Officer of River, met on June 2, 2015 and June 9, 2015 to discuss the terms of the LOI submitted by Party Y. During this period, BSP Securities provided feedback to Party Y and on June 19, 2015, Party Y submitted a revised LOI to River containing changes to the terms of the proposed acquisition based on such

 

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feedback. On June 23, 2015, River’s executive committee met to consider the revised LOI and to formulate a proper response. Based on such meeting, BSP Securities delivered to Party Y proposed modifications with respect to the LOI dated June 19, 2015 and again on June 29, 2015, Party Y submitted a revised LOI to River. On July 2, 2015, the board of directors of River met to review and consider the latest revised LOI and unanimously voted to approve entering into such LOI. On July 3, 2015, River executed and delivered the latest revised LOI to Party Y. The executed LOI with Party Y included a debt financing contingency by Party Y to complete the merger, given the all-cash nature of the proposed merger consideration and Party Y’s financial condition at such time. Subsequently, advisors to Party Y determined that equity financing would also be required under applicable banking regulations.

In August 2015, Party Y delivered an initial draft of a merger agreement to River, and the parties proceeded to negotiate the agreement and exchange drafts through December 2015. On November 5, Party Y delivered a revised LOI containing an increase in purchase price, among other changes, based on feedback from River. On November 6, 2015, the board of directors of River met via teleconference and reviewed and approved the revised LOI and discussed its expectation that Party Y would obtain firm commitments for its equity and debt financing by December 31, 2015. On November 9, 2015, the parties executed and delivered to each other the revised LOI, which contained a 60-day exclusivity period.

On December 24, 2015, financial advisors to Party Y informed BSP Securities that Party Y’s equity and debt financing plans would be delayed. On or about January 8, 2016, the exclusivity period in the LOI with Party Y expired.

Following the expiration of the exclusivity period in Party Y’s LOI, Mr. Haley contacted Brian K. Plum, President and Chief Executive Officer of Blue Ridge, to gauge Blue Ridge’s interest in a business combination transaction with River. Mr. Plum replied that Blue Ridge would be open for a discussion on such a potential transaction and, on January 13, 2016, Messrs. Haley and Plum met and discussed the possibility of a merger between their respective companies.

On January 20, 2016, at a regular meeting of the board of directors of Blue Ridge, Mr. Plum informed the board of his January 13 meeting with Mr. Haley. The Blue Ridge board reviewed business and financial information on River provided by Blue Ridge management. After discussion on River’s expression of interest, the board concluded that Blue Ridge should explore the possibilities of a merger transaction with River. The Blue Ridge board then authorized Mr. Plum to move forward with merger discussions and to contact Sandler O’Neill with respect to assisting Blue Ridge’s management on the financial modeling and analysis of a business combination with River, as well as producing an LOI within certain transaction parameters.

On January 29, 2016, River and Blue Ridge entered into an NDA. Following the execution of the NDA, the companies exchanged information and financial analysis to further advance the merger discussions.

On February 12, 2016, Blue Ridge delivered an LOI to River. After discussions with River’s management and members of its executive committee, BSP Securities provided initial feedback to Blue Ridge on the LOI and the proposed terms of a potential merger with River, without commenting on pricing.

On February 17, 2016, at a regular meeting of Blue Ridge’s board of directors, Mr. Plum informed the board on the feedback received on Blue Ridge’s initial LOI to River. Sandler O’Neill provided additional financial analysis and modeling of the proposed business combination based on due diligence performed to date. The Blue Ridge board of directors approved an updated LOI based on its discussions and analysis at the meeting, and authorized Mr. Plum to negotiate additional outstanding merger terms in consultation with Larry Dees, Blue Ridge’s Chairman of the Board, and the advice of Sandler O’Neill and LeClairRyan, A Professional Corporation (“LeClairRyan”), legal counsel for Blue Ridge.

On February 17, 2016, River received a letter dated February 16, 2016, from a foreign (non-U.S.) individual investor (“Party Z”) expressing interest in initially acquiring up to 55% of the outstanding common stock of River from its shareholders at a price representing River’s book value based on its latest available audited financial statements. Party Z further stated in the letter that his ultimate goal was to acquire all of the outstanding common stock of River and that he understood that, based on contact Party Z’s representatives had with certain shareholders of River, a number of River shareholders collectively owning approximately 41.2% of such stock had expressed an interest in his offer. Party Z’s letter requested that River allow him to conduct due diligence on River as soon as practicable and further stated that he intended to request a period of exclusivity from River shareholders interested in selling.

 

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On February 22, 2016, Blue Ridge delivered a revised LOI to River, with changes made from the initial LOI based on its February 17 board meeting and information provided to Blue Ridge by BSP Securities. On February 24, 2016, the executive committee of the board of directors of River met to review and consider the revised LOI and, at the direction of the executive committee, BSP Securities responded to Blue Ridge with proposed changes to the pricing and transaction structure.

On February 29, 2016, at a special meeting of Blue Ridge’s board of directors, Mr. Plum informed the board of River’s proposed changes to the pricing and transaction structure from that outlined in Blue Ridge’s LOI of February 22. Sandler O’Neill presented additional and updated analysis and modeling of the proposed business combination. After thorough discussion of River’s proposed terms and recognizing the opportunity that existed for Blue Ridge to enhance shareholder value and liquidity through the transaction as proposed, the Blue Ridge board authorized Mr. Plum to deliver to River a revised LOI that contained the revisions requested by River. On February 29, 2016, Blue Ridge delivered a further revised LOI to River.

On February 29, 2016, Mr. Bost sent a letter on behalf of River to Party Z responding to Party Z’s February 16, 2016 letter. River’s response letter stated that, in light of the fact Party Z’s letter proposed transactions directly between Party Z and certain individual shareholders, it would not be appropriate for River to comment on those transactions and River was not willing to provide confidential information to Party Z or agree to any period of exclusive dealing with Party Z.

On March 1, 2016, the board of directors of River met via teleconference and reviewed the terms of the revised Blue Ridge LOI. BSP Securities updated the board on the status of Party Y’s interest in continuing to pursue a transaction and procurement of financing, noting that there was significant execution risk in such financing and that market pressures would likely prevent Party Y from raising the per share cash price for River common stock that Party Y offered in the November 9, 2015 LOI to the value level of that offered by Blue Ridge in its February 29, 2016 LOI. BSP Securities informed the board that Party Z had sent a letter to River expressing an interest in acquiring up to 55% of the outstanding common stock of River from its shareholders and asserting that a significant number of River shareholders had expressed interest in selling to Party Z. BSP Securities also described the response letter sent by Mr. Bost to Party Z on February 29, 2016. BSP Securities further noted that the per share price offered by Party Z was below the per share price offered by Blue Ridge in the February 29, 2016 LOI and that there was very significant due diligence and execution risks inherent in a transaction with Party Z. River’s legal counsel, Bryan Cave LLP (“Bryan Cave”) explained in further detail the regulatory risk related to pursuing a transaction with Party Z. BSP Securities provided a detailed presentation regarding the terms of the latest LOI from Blue Ridge, including a comparison with the terms of the LOI with Party Y dated November 9, 2015. Management of River described its views of a potential merger with Blue Ridge, which included the fact it would be a good cultural fit and that the merged entity would have very strong business and strategic prospects. The River board thereafter voted unanimously to approve the LOI with Blue Ridge, and authorized Mr. Haley to execute and deliver such LOI to Blue Ridge, which he did on March 2, 2016, beginning a 30-day exclusivity period to negotiate the merger and merger agreement with Blue Ridge.

On March 8, 2016, as the directed by Blue Ridge, LeClairRyan delivered an initial draft of a merger agreement to Bryan Cave and River’s other legal counsel, Woods Rogers, PLC (“Woods Rogers”).

On March 10, 2016, Mr. Plum and representatives of LeClairRyan and Sandler O’Neill conducted onsite due diligence at the headquarters office of River. Mr. Plum and these representatives met with River’s senior management to discuss River’s business, results of operations and business prospects.

On March 11, 2016, the executive committee of the board of directors of River held a teleconference with Bryan Cave and Woods Rogers to discuss the draft merger agreement and various communications from Party Z.

 

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On March 16, 2016, Bryan Cave and Woods Rogers delivered a revised draft of the merger agreement to LeClairRyan that contained certain changes to the initial draft based on River’s board meeting of March 11. Also, on March 16, 2016, Mr. Haley and a representative of BSP Securities conducted onsite due diligence at the headquarters office of Blue Ridge.

On March 16, 2016, the board of directors of Blue Ridge held a regularly scheduled meeting at which Mr. Plum provided the board with an update on the status of the merger negotiations with River. The results of the onsite due diligence of River performed by Blue Ridge and its legal and financial advisors also were reviewed and discussed. Mr. Plum informed the board that Blue Ridge had received a revised draft of the merger agreement from River’s legal counsel and briefed the board on certain outstanding items in the merger agreement based on such revised draft.

On March 18, 2016, the board of directors of River met via teleconference. Mr. Haley provided an update on the status of the draft merger agreement, the negotiations with Blue Ridge and the onsite due diligence by both River and Blue Ridge. Mr. Haley also noted that he had a brief phone call with a representative of Party Y before signing the Blue Ridge LOI, and Bryan Cave described the exclusivity period with Blue Ridge as set forth in the LOI with Blue Ridge. BSP Securities and Bryan Cave then provided an update on communications from Party Z and an analysis of the terms of Party Z’s potential offer to acquire 100% of the stock of River and the execution and regulatory risks of a transaction with Party Z, noting in particular that there was a very high risk of delay without regulatory approval ever being obtained. The board had a full discussion of Party Z’s potential offer, with questions asked by directors and answered by Mr. Haley, BSP Securities and River’s legal counsel. Mr. Haley and BSP Securities discussed the results of due diligence on Blue Ridge. Woods Rogers briefed the board on several key legal terms in the draft merger agreement that were not covered in the Blue Ridge LOI.

On March 21, 2016, a River shareholder forwarded to River management a letter from Party Z containing an unsolicited offer to purchase no less than 51% of the outstanding common stock of River for cash at a price equal to River’s book value as of December 31, 2015 (representing approximately $15.46 per share of River’s outstanding common stock), with the ultimate goal of acquiring all of River’s outstanding common stock. Based on information obtained by River management, such letter was delivered by Party Z to a select number of River shareholders.

On March 22, 2016, LeClairRyan delivered a revised draft of the merger agreement to Bryan Cave and Woods Rogers. The revised document contained changes to the draft merger agreement of March 16 that were based on discussions between management of Blue Ridge and River as well as their respective legal counsel and financial advisors.

On March 23, 2016, the board of directors of River met via teleconference. Mr. Haley provided an update on the status of the transaction with Blue Ridge, including the draft merger agreement. He also reported to the River board that credit quality due diligence had been completed by the parties on each other’s loan portfolio, with no surprises found in terms of asset quality. Mr. Haley then informed the board that a number of River shareholders had received an offer letter from Party Z, as described above. BSP Securities provided a detailed presentation regarding the terms, contingencies and risks of the proposed merger with Blue Ridge, including a comparison with the terms, contingencies and risks of the LOI with Party Y of November 9 and the offer from Party Z delivered to certain River shareholders. BSP Securities and Bryan Cave went into detail regarding the very significant execution and regulatory risks inherent with Party Z’s offer. BSP Securities’ presentation also compared Party Y with Blue Ridge with respect to certain financial and banking performance metrics and branch maps. Bryan Cave and Woods Rogers advised the River board that it was appropriate to regard Party Z’s offer as a tender offer under applicable SEC rules, thus requiring the board to take a position regarding the offer. After a full discussion with questions asked and answered, and the input of BSP Securities, Bryan Cave and Woods Rogers, the board unanimously voted to recommend to River shareholders that they reject the offer from Party Z.

On March 24, 2016, Bryan Cave and Woods Rogers delivered a revised draft of the merger agreement to LeClairRyan based on further review and discussions between the parties and their respective legal counsel and financial advisors. The respective legal counsel continued to communicate revisions to the merger agreement on March 25 through March 29, 2016, with all key terms agreed upon as of March 29, 2016.

On March 28, 2016, Party Z communicated with the River shareholders that had received his letter that he was withdrawing his prior offer to purchase shares of River common stock held by such shareholders.

 

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On March 29, 2016, the board of directors of River met via teleconference to consider the proposed merger and the merger agreement. Bryan Cave provided an update on the withdrawn offer from Party Z. Woods Rogers reviewed with the board a memorandum on its legal duties under Virginia law in a change-in-control transaction. Representatives of BSP Securities then provided a detailed presentation to the board in connection with the delivery of its report and opinion, as to the fairness, from a financial point of view, of the consideration to be paid to River’s shareholders in the merger with Blue Ridge. See the section titled “The Merger – Opinion of River’s Financial Advisor” beginning on page [•]. The presentation covered the process followed by BSP Securities since its retention in September 2010 to identify potential strategic partners, an overview and analysis of the merger, its analysis of the value of the merger consideration to River shareholders and the state of the market for comparable banks. Woods Rogers then reviewed a summary of the terms of the merger agreement. Bryan Cave provided detail on the applicable “no shop” provisions contained therein and discussed the anticipated timing of the transaction. After a full discussion with questions asked and answered and the input of BSP Securities and legal counsel and after consideration of the factors described under “— River’s Reasons for the Merger; Recommendation of River’s Board of Directors” beginning on page [•], and consideration of the above referenced memorandum, presentation and summary, the board unanimously voted to approve the merger agreement and the merger and other associated transactions, to determine that the merger is advisable and the best interests of River and its shareholders and to recommend the merger and the merger agreement to the shareholders for their approval. Finally, Mr. Haley discussed the process for the announcement of the merger agreement and other communications with River shareholders.

On March 30, 2016, the board of directors of Blue Ridge held a special meeting to consider the proposed merger and the merger agreement. At the meeting, the board received an update from Mr. Plum on the status of the negotiations with River, as reflected in the draft merger agreement presented at the meeting. Blue Ridge’s management and board discussed the proposed representation that River would have on the Blue Ridge board after the merger, as well as the officer positions proposed to certain members of River’s management and the general terms of employment for such individuals. Also at the meeting, representatives of Sandler O’Neill reviewed its financial analysis of the terms of the merger, including the merger consideration in the merger agreement presented to the board, and delivered to Blue Ridge’s board of directors an oral opinion (which was subsequently confirmed in writing) to the effect that, as of March 30, 2016 and based on and subject to various assumptions and limitations described in the opinion, the merger consideration in the proposed merger was fair, from a financial point of view, to Blue Ridge. Representatives of LeClairRyan discussed with Blue Ridge’s board of directors the legal standards applicable to its decisions and actions with respect to the proposed transaction and reviewed in detail the proposed merger agreement and related agreements. Following these discussions, including consideration of the factors described under “— Blue Ridge’s Reasons for the Merger; Recommendation of Blue Ridge’s Board of Directors” beginning on page [•], and consideration of the above referenced presentations, Blue Ridge’s board of directors unanimously determined to approve the merger, the merger agreement and the related plan of merger, and directed Blue Ridge’s management to finalize and execute a definitive merger agreement on the terms presented at the meeting.

On March 30, 2016, following the meeting of Blue Ridge’s board of directors, the merger agreement was finalized, and River and Blue Ridge executed and delivered the merger agreement and ancillary documents.

On March 31, 2016, before the financial markets opened, River and Blue Ridge issued a joint press release announcing the merger agreement and describing the terms of the transaction.

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

After careful consideration, Blue Ridge’s board of directors, at a meeting held on March 30, 2016, unanimously determined that the merger agreement is in the best interests of Blue Ridge and its shareholders. Accordingly, Blue Ridge’s board of directors adopted and approved the merger agreement and unanimously recommends that Blue Ridge shareholders vote “FOR” the Blue Ridge merger proposal and “FOR” the Blue Ridge adjournment proposal.

 

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In reaching its decision to adopt and approve the merger agreement and to recommend that its shareholders approve the merger agreement, Blue Ridge’s board of directors consulted with Blue Ridge management, as well as Blue Ridge’s financial and legal advisors, and considered a number of factors, including, but not limited to, the following material factors:

 

    River’s financial condition, earnings, business, operations, asset quality, reputation and prospects, taking into account the results of Blue Ridge’s due diligence investigation of River;

 

    its belief that the merger enables Blue Ridge to enhance shareholder value by generating additional scale and increased shareholder liquidity;

 

    its belief that the merger is aligned with Blue Ridge’s strategy of consistent and meaningful balance sheet growth to assist in the absorption of current and future higher operating costs resulting from growth in noninterest expenses, particularly personnel, technology, and compliance;

 

    the fact that the merger will provide Blue Ridge a significant noninterest income stream through River’s mortgage division that can be developed into Blue Ridge’s current footprint;

 

    its belief that current River mortgage production offices offer future opportunities to grow Blue Ridge’s core banking franchise in attractive and growing markets;

 

    its expectations and analyses, and its financial advisor’s analyses, that the merger offers the opportunity to significantly improve earnings per share in a transaction with tangible book value dilution being recovered in a period less than two years;

 

    its belief that the merger will accelerate Blue Ridge’s achievement of its financial performance goals;

 

    the merger will result in a larger capital base which will allow Blue Ridge to better service loan customers through a larger legal lending limit and create additional opportunities for which Blue Ridge may currently be inhibited from making competitive loan proposals due to size;

 

    the market for alternative merger or acquisition transactions in the financial services industry and the likelihood and timing of other material strategic transactions;

 

    the regulatory and other approvals required in connection with the merger and the expectation that the approvals will be received in a timely manner and without imposition of unacceptable conditions;

 

    the financial and other terms of the transaction, including that the merger consideration is a mix of stock and cash, expected tax treatment, deal protection and termination fee provisions, which it reviewed with its outside financial and legal advisors;

 

    the social and economic effects of the merger on the depositors, employees, suppliers, customers and other constituents of Blue Ridge and on the communities that Blue Ridge serves; and

 

    the opinion of Sandler O’Neill & Partners, L.P. delivered to the Blue Ridge board of directors on March 30, 2016 to the effect that, as of that date, and subject to and based on the various assumptions, considerations, qualifications and limitations set forth in the opinion, the merger consideration in the merger agreement was fair, from a financial point of view, to Blue Ridge.

The Blue Ridge board also considered the risks and potential negative factors outlined below, but concluded that the anticipated benefits of combining with River were likely to outweigh substantially these risks and factors. The risk factors included:

 

    the potential for an initial negative impact on the market price of Blue Ridge common stock;

 

    the possibility that the merger and related integration process could result in the loss of key employees, the disruption of Blue Ridge’s ongoing business and the loss of customers;

 

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    the potential risks and costs associated with integrating River’s business, operations and workforce with those of Blue Ridge;

 

    the potential risks of diverting management attention and resources from the operation of Blue Ridge’s business and towards the completion of the merger;

 

    the possibility of encountering difficulties in achieving cost savings in the amount currently estimated or in the timeframe currently contemplated;

 

    the significant merger and integration related expenses, estimated at approximately $2.0 million on a pre-tax basis; and

 

    the risks of the type and nature described under “Cautionary Statement Regarding Forward-Looking Statements,” “Risk Factors,” and in filings of Blue Ridge incorporated in this joint proxy statement/offering circular by reference.

The foregoing discussion of the information and factors considered by Blue Ridge’s board of directors is not intended to be exhaustive but includes the material factors considered by Blue Ridge’s board of directors. In view of the wide variety of the factors considered in connection with its evaluation of the merger and the complexity of these matters, Blue Ridge’s board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, the individual members of Blue Ridge’s board of directors may have given different weight to different factors. Blue Ridge’s board of directors conducted an overall analysis of the factors described above including thorough discussions with, and questioning of, Blue Ridge management and Blue Ridge’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.

The foregoing explanation of Blue Ridge’s board of directors’ 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 in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

River’s Reasons for the Merger; Recommendation of River’s Board of Directors

After careful consideration, River’s board of directors, at a meeting held on March 29, 2016, unanimously determined that the merger agreement is in the best interests of River and its shareholders. Accordingly, River’s board of directors adopted and approved the merger agreement and unanimously recommends that River shareholders vote “FOR” the approval of the River merger proposal and “FOR” the approval of the River adjournment proposal.

In reaching its decision to adopt and approve the merger agreement and to recommend that its shareholders approve the merger agreement, River’s board of directors consulted with River management, as well as River’s financial and legal advisors, and considered a number of factors, including, but not limited to, the following material factors:

 

    the value and form of the consideration to be received by River’s shareholders relative to the book value and earnings per share of River’s common stock and River’s estimated future value;

 

    information concerning the financial condition, results of operations and business prospects of River and of Blue Ridge;

 

    the positive effects on the businesses and future prospects of River and River Community Bank, going forward after the merger, which the board viewed favorably in view of Blue Ridge’s business and the business opportunities of the combined entities and the ongoing influence that management of River is expected to have following completion of the merger;

 

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    the financial terms of recent business combinations in the financial services industry and a comparison of the multiples of selected combinations with the terms of the proposed transaction with Blue Ridge;

 

    a report and opinion presented by BSP Securities, River’s independent financial advisor, as to the fairness, from a financial point of view, of the consideration to be paid to River’s shareholders;

 

    the execution risk of the merger versus other strategic alternatives, including the relatively low due diligence risk with Blue Ridge due to its familiarity with River, the likelihood of gaining regulatory approvals for the merger in a timely fashion in light of Blue Ridge’s financial and regulatory standing and the view that the fact many key employees know and hold Blue Ridge’s management in high regard should mitigate the risk of key employees leaving River prior to closing;

 

    the relative liquidity of the cash and stock consideration to be received by River’s shareholders in the merger as compared to the existing liquidity of shares of River’s common stock, particularly in view of Blue Ridge’s stock being quoted on the OTC Pink marketplace, even though such trading is limited at this time;

 

    Blue Ridge’s historical dividend payment, which is expected to allow River shareholders who receive Blue Ridge common stock in the merger to continue to receive dividend payments;

 

    the board’s view of Blue Ridge’s ability to produce long-term value for River’s shareholders who receive shares of Blue Ridge common stock in the merger;

 

    the board’s view that the merger represents a continuation of River’s strategic goal to be a community-based lending organization providing long-term shareholder value;

 

    the alternatives to the merger, including remaining an independent institution and pursuing other expressions of interest made to River;

 

    the competitive and regulatory environment for financial institutions generally; and

 

    the fact that the merger is structured as a tax-free reorganization with no immediate tax consequences to River’s shareholders to the extent that they receive Blue Ridge common stock in the merger.

The River board also considered the risks and potential negative factors outlined below, but concluded that the anticipated benefits of combining with Blue Ridge were likely to outweigh substantially these risks and factors. The risk factors included:

 

    the lack of control of the River board and River shareholders over the future operations and strategy of the combined company;

 

    the fact that certain benefits of the merger are reliant on the successful operation of Blue Ridge in the future, as opposed to selling River entirely for cash, which would deliver all value to River shareholders upon closing of such a sale; and

 

    the limited liquidity of Blue Ridge common stock, even though it is quoted on the OTC Pink marketplace.

The foregoing discussion of the information and factors considered by River’s board of directors is not intended to be exhaustive but includes the material factors considered by River’s board of directors. In view of the wide variety of the factors considered in connection with its evaluation of the merger and the complexity of these matters, River’s board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, the individual members of River’s board of directors may have given different weight to different factors. River’s board of directors conducted an overall analysis of the factors described above including thorough discussions with, and questioning of, River management and River’s legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.

 

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The foregoing explanation of River’s board of directors’ 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 in the section entitled “Cautionary Statement Concerning Forward-Looking Statements.”

Opinion of Blue Ridge’s Financial Advisor

By letter dated February 29, 2016, Blue Ridge retained Sandler O’Neill to act as financial advisor to the Blue Ridge board of directors in connection with Blue Ridge’s consideration of a possible business combination. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions, and Blue Ridge selected Sandler O’Neill as its financial advisor on that basis. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Sandler O’Neill is acting as financial advisor to the Blue Ridge board of directors in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the merger agreement. At the March 30, 2016 meeting at which the Blue Ridge board of directors considered and approved the merger agreement, Sandler O’Neill delivered to the Blue Ridge board of directors its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the merger consideration was fair to Blue Ridge from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix B to this joint proxy statement/offering circular. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill 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 Blue Ridge common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the Blue Ridge board of directors in connection with its consideration of the merger agreement and the merger and is directed only to the fairness, from a financial point of view, of the merger consideration to Blue Ridge. Sandler O’Neill’s opinion does not constitute a recommendation to any holder of Blue Ridge common stock as to how such holder of Blue Ridge common stock should vote at any meeting of shareholders called to consider and vote upon the adoption of the merger agreement and approval of the merger or issuance of additional shares of Blue Ridge common stock in connection with the merger. It does not address the underlying business decision of Blue Ridge to engage in the merger, the form or structure of the merger or any 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 Blue Ridge or the effect of any other transaction in which Blue Ridge might engage. Sandler O’Neill 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 Blue Ridge or River officer, director, or employee, or class of such persons, if any, relative to the amount of compensation to be received by any other shareholder. Sandler O’Neill’s opinion was approved by Sandler O’Neill’s fairness opinion committee.

In connection with rendering its opinion, Sandler O’Neill reviewed and considered, among other things:

 

    a draft of the merger agreement, dated March 25, 2016;

 

    certain publicly available financial statements and other historical financial information of Blue Ridge and Blue Ridge Bank that Sandler O’Neill deemed relevant;

 

    certain publicly available financial statements and other historical financial information of River that Sandler O’Neill deemed relevant;

 

    internal financial projections for Blue Ridge for the years ending December 31, 2016 through December 31, 2020, as reviewed with and confirmed by the senior management of Blue Ridge;

 

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    internal financial projections for River for the years ending December 31, 2016 through December 31, 2020, as provided by the senior management of River;

 

    the pro forma financial impact of the merger on Blue Ridge based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings, an adjustment to River’s estimated provision expense as well as a core deposit intangible asset, as provided by the senior management of Blue Ridge;

 

    the publicly reported historical price and trading activity for Blue Ridge common stock, including a comparison of certain stock market information for Blue Ridge common stock and certain stock indices as well as similar publicly available information for certain other similar companies the securities of which are publicly traded;

 

    a comparison of certain financial information for Blue Ridge and River with similar institutions for which publicly available information is available;

 

    the financial terms of certain recent business combinations in the commercial banking industry on a regional basis, to the extent 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 that Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of senior management of Blue Ridge the business, financial condition, results of operations and prospects of Blue Ridge and held similar discussions with certain members of the senior management of River regarding the business, financial condition, results of operations and prospects of River.

In performing its review, Sandler O’Neill relied upon, the accuracy and completeness of all of the financial and other information that was available to Sandler O’Neill from public sources, that was provided to Sandler O’Neill by Blue Ridge or River, or their respective representatives, or that was otherwise reviewed by Sandler O’Neill and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion without any independent verification. Sandler O’Neill relied, at the direction of Blue Ridge, without independent verification or investigation, on the assessments of the management of Blue Ridge as to its existing and future relationships with key employees and partners, clients, products and services and Sandler O’Neill assumed, with Blue Ridge’s consent, that there would be no developments with respect to any such matters that would affect its analyses or opinion. Sandler O’Neill further relied on the assurances of the respective managements of Blue Ridge and River that they were not aware of any facts or circumstances that would have made any of such information inaccurate or misleading. Sandler O’Neill was not asked to and did not make an independent verification of any such information and Sandler O’Neill did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill 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 Blue Ridge or River, or any of their respective subsidiaries, nor was Sandler O’Neill furnished with any such evaluations or appraisals. Sandler O’Neill rendered no opinion or evaluation on the collectability of any assets or the future performance of any loans of Blue Ridge or River. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of Blue Ridge or River, or the combined entity after the merger, and Sandler O’Neill did not review any individual credit files relating to Blue Ridge or River. Sandler O’Neill assumed, with Blue Ridge’s consent, that the respective allowances for loan losses for both Blue Ridge and River were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used internal financial projections for Blue Ridge for the years ending December 31, 2016 through December 31, 2020, as reviewed with and confirmed by the senior management of Blue Ridge, as well as internal financial projections for River for the years ending December 31, 2016 through December 31, 2020, as provided by the senior management of River. Sandler O’Neill also received and used in its

 

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pro forma analyses certain assumptions relating to transaction expenses, purchase accounting adjustments, cost savings, an adjustment to River’s estimated provision expense as well as a core deposit intangible asset, as provided by the senior management of Blue Ridge. With respect to the foregoing information, the respective senior managements of Blue Ridge and River confirmed to Sandler O’Neill that such information reflected the best currently available projections, estimates and judgments of those respective managements of the future financial performance of Blue Ridge and River, respectively, and Sandler O’Neill assumed that such performance would be achieved. Sandler O’Neill expressed no opinion as to such projections, estimates or judgments, or the assumptions on which such information was based. Sandler O’Neill also assumed that there had been no material change in Blue Ridge’s or River’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements made available to it. Sandler O’Neill assumed in all respects material to its analysis that Blue Ridge and River would remain as going concerns for all periods relevant to its analyses.

Sandler O’Neill also assumed, with Blue Ridge’s 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 Blue Ridge, River or the merger or any related transaction, (iii) the merger and any related transaction will 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, and (iv) the merger would qualify as a tax-free reorganization for federal income tax purposes. Sandler O’Neill, with Blue Ridge’s consent, relied upon the advice that Blue Ridge 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.

Sandler O’Neill’s opinion was necessarily based on financial, economic, regulatory, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date of its opinion. Events occurring after the date thereof could materially affect Sandler O’Neill’s opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof. Sandler O’Neill expressed no opinion as to the trading values of Blue Ridge common stock at any time or what the value of Blue Ridge’s common stock would be once it is actually received by the holders of River common stock.

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to the Blue Ridge board of directors, but is a summary of the material analyses performed and presented by Sandler O’Neill. 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. Sandler O’Neill 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 Sandler O’Neill’s comparative analyses described below is identical to Blue Ridge or River and no transaction is 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 merger transaction values, as the case may be, of Blue Ridge and River and the companies to which they are being compared. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, Sandler O’Neill made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill 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, Sandler O’Neill made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

 

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In performing its analyses, Sandler O’Neill 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 Blue Ridge, River, and Sandler O’Neill. The analyses performed by Sandler O’Neill 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. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Blue Ridge board of directors at its March 30, 2016 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, Sandler O’Neill’s analyses do not necessarily reflect the value of Blue Ridge common stock or the price at which Blue Ridge common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by the Blue Ridge board of directors 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 Blue Ridge board of directors or senior management with respect to the fairness of the merger.

Summary of Proposed Merger Consideration and Implied Transaction Metrics. Sandler O’Neill reviewed the financial terms of the proposed transaction. Pursuant to the terms of the merger agreement, upon the effective time of the merger, all shares of River common stock issued and outstanding immediately prior to the effective time, other than certain shares of River common stock as described in the merger agreement, will be converted into and exchanged for the right to receive, at the election of the holder thereof, either: (a) cash in the amount of $16.57 per share; or (b) 0.9821 shares of Blue Ridge common stock, subject to certain adjustments, as set forth in the merger agreement. The merger agreement provides, generally, that shareholder elections may be adjusted as necessary to result in an overall ratio of 30% of River common stock being converted into the right to receive the cash consideration and 70% of River common stock being converted into the right to receive the stock consideration. Based on the shares of River common stock and stock options of River common stock outstanding as of March 28, 2016, Sandler O’Neill calculated an aggregate implied transaction value of approximately $12.4 million. Based upon financial information for River as of or for the twelve months ended December 31, 2015, Sandler O’Neill calculated the following implied transaction metrics.

 

Transaction Price / LTM Earnings Per Share

     8.6x   

Transaction Price / 2016 Estimated Earnings Per Share (1)

     9.5x   

Transaction Price / 2017 Estimated Earnings Per Share (1)

     8.9x   

Transaction Price / Book Value

     107%   

Transaction Price / Tangible Book Value

     107%   

Tangible Book Premium / Core Deposits (2)

     1.2%   

 

(1) River earnings estimates based on management projections.
(2) Core deposits defined as total deposits less time deposits with balances of more than $250,000.

Stock Trading History. Sandler O’Neill reviewed the historical publicly reported trading prices of Blue Ridge common stock for the three-year period ended March 28, 2016. Sandler O’Neill then compared the relationship between the movements in the price of Blue Ridge common stock to movements in its peer group (as described on page 68) as well as certain stock indices.

 

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Blue Ridge’s Three-Year Stock Performance

 

     Beginning Value
March 28, 2013
    Ending Value
March 28, 2016
 

Blue Ridge

     100     161.9

Blue Ridge Peer Group

     100     134.1

NASDAQ Bank Index

     100     127.6

S&P 500 Index

     100     129.8

Comparable Company Analyses. Sandler O’Neill used publicly available information to compare selected financial information for Blue Ridge with a group of financial institutions selected by Sandler O’Neill. The group consisted of banks whose securities are publicly traded on a United States exchange, are headquartered in Virginia or North Carolina and with assets between $200 million and $400 million, excluding targets of announced merger transactions (the “Blue Ridge Peer Group”). The Blue Ridge Peer Group consisted of the following companies:

Blue Ridge Peer Group

 

Aquesta Financial Holdings, Inc.    Little Bank, Inc.
Bank of Botetourt    M&F Bancorp, Inc.
Bank of McKenney    Oak Ridge Financial Services, Inc.
Carolina Trust Bank    Pinnacle Bankshares Corporation
Citizens Bancorp of Virginia, Inc.    Premara Financial, Inc.
Cordia Bancorp Inc.    Surrey Bancorp
Grayson Bankshares, Inc.    The Farmers Bank of Appomattox
KS Bancorp, Inc.    Virginia Community Bankshares, Inc.

The analysis compared publicly available financial information for Blue Ridge with corresponding data for the Blue Ridge Peer Group as of or for the twelve months ended December 31, 2015 (unless otherwise indicated), with pricing data as of March 28, 2016. The table below sets forth the data for Blue Ridge and the high, low, mean, and median data for the Blue Ridge Peer Group.

Blue Ridge Comparable Company Analysis (Blue Ridge Peer Group)

 

     Blue
Ridge (1)(2)
    Blue
Ridge
Peer
Group
High
    Blue
Ridge
Peer
Group
Low
    Blue
Ridge
Peer
Group
Mean
    Blue
Ridge
Peer
Group
Median
 

Total Assets ($ millions) (3)

   $ 269      $ 371      $ 215      $ 304      $ 327   

Tangible Common Equity / Tangible Assets (4)

     8.82     13.46     6.79     9.63     9.40

Leverage Ratio (4)

     10.86     13.48     7.82     10.30     9.89

Total Risk Based Capital Ratio (4)

     16.45     24.42     10.30     15.20     13.80

Last Twelve Months Return on Average Assets (4)

     0.99     1.17     (0.17 %)      0.62     0.74

Last Twelve Months Return on Average Equity (4)

     9.35     10.63     (1.82 %)      6.06     7.53

Last Twelve Months Net Interest Margin (4)(5)

     3.80     4.76     2.68     3.75     3.72

Last Twelve Months Efficiency Ratio (4)

     60.4     100.3     59.2     78.2     76.7

Loan Loss Reserves / Gross Loans (3)

     1.08     2.22     0.33     1.33     1.35

Nonperforming Assets / Total Assets (4)(6)(7)(8)(9)

     0.18     9.79     0.31     2.29     1.75

Net Charge-Offs / Average Loans (7)(10)

     0.03     0.64     (0.04 %)      0.09     0.02

Price / Tangible Book Value

     101     131     25     86     85

Price / Last Twelve Months Earnings per Share

     9.5     32.8     8.6     13.6     11.0

Current Dividend Yield

     2.8     4.2     0.0     1.7     1.5

Market Capitalization ($ millions)

   $ 24      $ 43      $ 6      $ 25      $ 24   

 

(1) Leverage Ratio and Total Risk Based Capital Ratio reflect bank level financial data as it was not available at the holding company.
(2) Nonperforming Assets/Total Assets as of the period ending September 30, 2015.
(3) Total Assets and Loan Loss Reserves/Gross Loans for Virginia Community Bankshares, Inc. as of the period ending June 30, 2015.

 

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(4) Tangible Common Equity/Tangible Assets, Leverage Ratio, Total Risk Based Capital Ratio, Return on Average Assets, Return on Average Equity, Net Interest Margin, Efficiency Ratio and Nonperforming Assets/Total Assets for Virginia Community Bankshares, Inc. reflect bank level financial data as data was not available at the holding company.
(5) Net Interest Margin for Aquesta Financial Holdings, Inc. reflects bank level financial data as data was not available at the holding company.
(6) Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.
(7) Nonperforming Assets/Total Assets and Net Charge-Offs/Average Loans for Cordia Bancorp, Inc. as of the period ending September 30, 2015.
(8) Nonperforming Assets/Total Assets for Citizens Bancorp of Virginia, Inc., KS Bancorp, Inc. and Oak Ridge Financial Services, Inc. reflects bank level financial data as data was not available at the holding company.
(9) Nonperforming Assets/Total Assets for Citizens Bancorp of Virginia, Inc., KS Bancorp, Inc. and Oak Ridge Financial Services, Inc. reflects bank level financial data as data was not available at the holding company.
(10) Net Charge-Offs/Average Loans for Aquesta Financial Holdings, Inc. as of the period ending September 30, 2015.

Sandler O’Neill used publicly available information to perform a similar analysis for River and a group of financial institutions selected by Sandler O’Neill. The group consisted of banks whose securities are publicly traded on a United States exchange, are headquartered in Virginia or North Carolina, with assets between $50 million and $200 million and with positive Last Twelve Months Return on Average Assets, excluding targets of announced merger transactions (the “River Peer Group”). The River Peer Group consisted of the following companies:

River Peer Group

 

BlueHarbor Bank    Oak View National Bank
CB Financial Corporation    Peoples Bankshares, Inc
CCB Bankshares, Inc.    Pioneer Bankshares, Inc.
First Capital Bancshares, Inc.    Sound Banking Company
Great State Bank    Virginia Bank Bankshares, Inc

The analysis compared publicly available financial information for River with corresponding data for the River Peer Group as of or for the twelve months ended December 31, 2015 (unless otherwise indicated), with pricing data as of March 28, 2016. The table below sets forth the data for River and the high, low, mean, and median data for the River Peer Group.

River Comparable Company Analysis (River Peer Group)

 

     River     River
Peer
Group
High
    River
Peer
Group
Low
    River
Peer
Group
Mean
    River
Peer
Group
Median
 

Total Assets ($ millions) (1)

   $ 114      $ 186      $ 52      $ 148      $ 166   

Tangible Common Equity / Tangible Assets

     9.41     14.68     4.59     10.85     10.32

Leverage Ratio (1)

     9.41     14.61     8.71     11.19     10.51

Total Risk Based Capital Ratio (1)

     12.98     21.26     11.08     16.07     15.65

Last Twelve Months Return on Average Assets

     1.33     1.16     0.42     0.64     0.57

Last Twelve Months Return on Average Equity

     15.26     17.44     3.68     6.84     5.25

Last Twelve Months Net Interest Margin (2)(3)

     5.22     5.45     3.18     4.04     3.85

Last Twelve Months Efficiency Ratio (2)(3)

     81.5     86.6     69.4     76.2     76.2

Loan Loss Reserves / Gross Loans (2)

     1.41     2.40     1.00     1.43     1.28

Nonperforming Assets / Total Assets (2)(3)(4)

     1.83     6.29     0.00     2.31     1.58

Net Charge-Offs / Average Loans (2)(3)

     (0.49 %)      1.26     (1.35 %)      0.09     0.01

Price / Tangible Book Value

     —          131     20     80     90

Price / Last Twelve Months Earnings per Share

     —          33.1     9.4     17.1     14.9

Current Dividend Yield

     —          6.1     0.0     1.2     0.0

Market Capitalization ($ millions)

     —        $ 29      $ 1      $ 15      $ 14   

 

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(1) Total Assets, Leverage Ratio and Total Risk Based Capital Ratio reflect financial data from the bank level and do not match River’s audited consolidated financial statements.
(2) Net Interest Margin, Efficiency Ratio, Loan Loss Reserves/Gross Loans, Nonperforming Assets/Total Assets and Net Charge-Offs/Average Loans for Pioneer Bankshares, Inc. reflect financial data from the bank level as data was not available at the holding company.
(3) Net Interest Margin, Efficiency Ratio, Nonperforming Assets/Total Assets and Net Charge-Offs/Average Loans for CB Financial Corporation reflect financial data from the bank level as data was not available at the holding company.
(4) Nonperforming assets defined as nonaccrual loans and leases, renegotiated loans and leases, and real estate owned.

Note: Financial data for First Capital Bancshares, Inc., and Peoples Bankshares, Inc as of or for the period ending September 30, 2015.

Analysis of Selected Merger Transactions. Sandler O’Neill reviewed a group of selected merger and acquisition transactions. The group consisted of 10 regional bank and thrift transactions announced between January 1, 2013 and March 29, 2016 with reported deal values between $5 million and $25 million and where the target was headquartered in North Carolina or Virginia (the “Precedent Transactions”).

The Precedent Transactions group was composed of the following transactions:

 

Acquiror

   Target
American National Bankshares Inc.    MainStreet BankShares, Inc.
BNC Bancorp    Randolph Bank & Trust Company
Carolina Alliance Bank    Forest Commercial Bank
Eastern Virginia Bankshares, Inc.    Virginia Company Bank
Entegra Financial Corp.    Oldtown Bank
HomeTrust Bancshares, Inc.    Bank of Commerce
NewBridge Bancorp    Premier Commercial Bank
Southern BancShares (N.C.), Inc.    Heritage Bancshares, Inc.
Summit Financial Group, Inc.    Highland County Bankshares, Inc.
Xenith Bankshares, Inc.    Colonial Virginia Bank

Using the latest publicly available information prior to the announcement of the relevant transactions, Sandler O’Neill reviewed the following quantitative transaction metrics: transaction price to last twelve months earnings per share, transaction price to tangible book value per share, tangible book premium to core deposits, and one-month market premium. Sandler O’Neill compared the indicated transaction metrics for the merger to the high, low, mean and median metrics of the Precedent Transactions group.

 

     Blue
Ridge /

River
    Precedent
Transactions
High
    Precedent
Transactions
Low
    Precedent
Transactions
Mean
    Precedent
Transactions
Median
 

Transaction Price / Last Twelve Months Earnings per Share

     8.6     40.2     9.1     21.3     18.6

Transaction Price / Tangible Book Value per Share

     107     138     60     99     105

Tangible Book Premium / Core Deposits

     1.1     6.0     (5.3 %)      0.1     0.6

1-Month Market Premium

     —          105.3     24.9     53.8     51.5

 

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Net Present Value Analyses. Sandler O’Neill performed an analysis that estimated the net present value per share of Blue Ridge common stock, assuming that Blue Ridge performed in accordance with the internal projections reviewed with and confirmed by Blue Ridge management for the years ending December 31, 2016 through December 31, 2020. To approximate the terminal value of Blue Ridge common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings multiples ranging from 10.0x to 20.0x and multiples of December 31, 2020 tangible book value ranging from 70% to 120%. The terminal values were then discounted to present values using different discount rates ranging from 12.0% to 16.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Blue Ridge common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Blue Ridge common stock of $14.29 to $32.17 when applying earnings multiples and $10.23 to $19.51 when applying multiples of tangible book value.

Earnings per Share Multiples

 

Discount Rate

   10.0x      12.0x      14.0x      16.0x      18.0x      20.0x  

12.0%

   $ 16.90       $ 19.95       $ 23.01       $ 26.06       $ 29.12       $ 32.17   

13.0%

   $ 16.19       $ 19.11       $ 22.04       $ 24.96       $ 27.88       $ 30.80   

14.0%

   $ 15.52       $ 18.32       $ 21.12       $ 23.91       $ 26.71       $ 29.51   

15.0%

   $ 14.89       $ 17.57       $ 20.24       $ 22.92       $ 25.60       $ 28.27   

16.0%

   $ 14.29       $ 16.85       $ 19.41       $ 21.98       $ 24.54       $ 27.10   

Tangible Book Value Multiples

 

Discount Rate

   70%      80%      90%      100%      110%      120%  

12.0%

   $ 12.05       $ 13.54       $ 15.03       $ 16.52       $ 18.02       $ 19.51   

13.0%

   $ 11.56       $ 12.99       $ 14.41       $ 15.84       $ 17.26       $ 18.69   

14.0%

   $ 11.09       $ 12.46       $ 13.82       $ 15.18       $ 16.55       $ 17.91   

15.0%

   $ 10.65       $ 11.95       $ 13.26       $ 14.57       $ 15.87       $ 17.18   

16.0%

   $ 10.23       $ 11.48       $ 12.73       $ 13.98       $ 15.23       $ 16.48   

Sandler O’Neill also considered and discussed with the Blue Ridge board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Blue Ridge’s net income varied from 20% above projections to 20% below projections. This analysis resulted in the following range of per share values for Blue Ridge common stock, applying the price to 2020 earnings multiples range of 10.0x to 20.0x referred to above and a discount rate of 14.00%, which was the midpoint of the 12% to 16% discount rate range referred to above.

 

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Earnings per Share Multiples

 

Annual

Estimate

Variance

   10.0x      12.0x      14.0x      16.0x      18.0x      20.0x  

(20.0%)

   $ 12.73       $ 14.97       $ 17.20       $ 19.44       $ 21.68       $ 23.91   

(15.0%)

   $ 13.43       $ 15.80       $ 18.18       $ 20.56       $ 22.93       $ 25.31   

(5.0%)

   $ 14.83       $ 17.48       $ 20.14       $ 22.79       $ 25.45       $ 28.11   

0.0%

   $ 15.52       $ 18.32       $ 21.12       $ 23.91       $ 26.71       $ 29.51   

5.0%

   $ 16.22       $ 19.16       $ 22.10       $ 25.03       $ 27.97       $ 30.90   

15.0%

   $ 17.62       $ 20.84       $ 24.05       $ 27.27       $ 30.48       $ 33.70   

20.0%

   $ 18.32       $ 21.68       $ 25.03       $ 28.39       $ 31.74       $ 35.10   

Sandler O’Neill also performed an analysis that estimated the net present value per share of River common stock assuming that River performed in accordance with the internal projections for the years ending December 31, 2016 through December 31, 2020, as provided by River senior management. To approximate the terminal value of River common stock at December 31, 2020, Sandler O’Neill applied price to 2020 earnings multiples ranging from 10.0x to 20.0x and multiples of tangible book value ranging from 70% to 120%. The terminal values were then discounted to present values using different discount rates ranging from 12.0% to 16.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of River common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of River common stock of $13.13 to $29.02 when applying multiples of earnings and $9.58 to $17.88 when applying multiples of tangible book value.

Earnings per Share Multiples

 

Discount Rate

   10.0x      12.0x      14.0x      16.0x      18.0x      20.0x  

12.0%

   $ 15.48       $ 18.19       $ 20.90       $ 23.60       $ 26.31       $ 29.02   

13.0%

   $ 14.85       $ 17.44       $ 20.03       $ 22.62       $ 25.21       $ 27.80   

14.0%

   $ 14.24       $ 16.72       $ 19.20       $ 21.68       $ 24.16       $ 26.63   

15.0%

   $ 13.67       $ 16.04       $ 18.42       $ 20.79       $ 23.16       $ 25.53   

16.0%

   $ 13.13       $ 15.40       $ 17.67       $ 19.94       $ 22.21       $ 24.48   

Tangible Book Value Multiples

 

Discount Rate

   70%      80%      90%      100%      110%      120%  

12.0%

   $ 11.26       $ 12.58       $ 13.91       $ 15.23       $ 16.56       $ 17.88   

13.0%

   $ 10.81       $ 12.07       $ 13.34       $ 14.61       $ 15.88       $ 17.14   

14.0%

   $ 10.38       $ 11.59       $ 12.80       $ 14.02       $ 15.23       $ 16.44   

15.0%

   $ 9.97       $ 11.13       $ 12.29       $ 13.45       $ 14.61       $ 15.78   

16.0%

   $ 9.58       $ 10.69       $ 11.81       $ 12.92       $ 14.03       $ 15.14   

Sandler O’Neill also considered and discussed with the Blue Ridge board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis, assuming River’s net income varied from 30% above projections to 30% below projections. This analysis resulted in the following range of per share values for River common stock, applying the price to 2020 earnings multiples range of 10.0x to 20.0x referred to above and a discount rate of 14.00%, which was the midpoint of the 12% to 16% discount rate range referred to above.

Earnings per Share Multiples

 

Annual

Estimate

Variance

   10.0x      12.0x      14.0x      16.0x      18.0x      20.0x  

(30.0%)

   $ 10.53       $ 12.26       $ 14.00       $ 15.73       $ 17.47       $ 19.20   

(20.0%)

   $ 11.77       $ 13.75       $ 15.73       $ 17.71       $ 19.70       $ 21.68   

(10.0%)

   $ 13.01       $ 15.24       $ 17.47       $ 19.70       $ 21.93       $ 24.16   

0.0%

   $ 14.24       $ 16.72       $ 19.20       $ 21.68       $ 24.16       $ 26.63   

10.0%

   $ 15.48       $ 18.21       $ 20.93       $ 23.66       $ 26.39       $ 29.11   

20.0%

   $ 16.72       $ 19.70       $ 22.67       $ 25.64       $ 28.62       $ 31.59   

30.0%

   $ 17.96       $ 21.18       $ 24.40       $ 27.62       $ 30.85       $ 34.07   

 

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In connection with its analyses, Sandler O’Neill considered and discussed with the Blue Ridge board of directors how the present value analyses would be affected by changes in the underlying assumptions. Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Merger Analysis. Sandler O’Neill analyzed certain potential pro forma effects of the merger, based on certain assumptions, including the following: (i) 70% of the outstanding shares of River common stock are converted into stock consideration at the 0.9821 exchange ratio; (ii) 30% of the outstanding shares of River common stock are converted into $16.57 per share in cash; and (iii) all outstanding River stock options are to receive $16.57 per share in cash. Sandler O’Neill also utilized the following assumptions: (a) internal earnings projections for River, as provided by the senior management of River; (b) internal earnings projections for Blue Ridge, as reviewed with and confirmed by the senior management of Blue Ridge, (c) a purchase accounting adjustment of a credit mark on loans, as provided by the senior management of Blue Ridge; (d) a purchase accounting adjustment of an interest rate mark on time deposits based on the Wells Fargo Brokered CD curve from March 15, 2016; (e) an adjustment to River’s estimated provision expense, as provided by the senior management of Blue Ridge; (f) a core deposit premium on River’s non-time deposits with sum-of-the-years’ digits amortization over 10 years, as provided by the senior management of Blue Ridge; (g) cost savings projections, as provided by Blue Ridge senior management; (h) estimated pre-tax one-time transaction costs and expenses, as provided by Blue Ridge senior management; and (i) an annual pre-tax opportunity cost of cash, as provided by Blue Ridge senior management. The analysis indicated that the merger could be accretive to Blue Ridge’s estimated earnings per share (excluding one-time transaction costs and expenses) in the year ended December 31, 2017 and dilutive to estimated tangible book value per share at close.

In connection with this analysis, Sandler O’Neill considered and discussed with the Blue Ridge board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O’Neill’s Relationship. Sandler O’Neill is acting as the financial advisor to the Blue Ridge board of directors in connection with the merger and will receive a transaction fee in connection with the merger in an amount equal to $200,000, a substantial portion of which is contingent upon consummation of the merger. Sandler O’Neill also received a fee for rendering its fairness opinion, which will be credited in full towards the transaction fee becoming payable to Sandler O’Neill upon consummation of the merger. Blue Ridge has also agreed to indemnify Sandler O’Neill against certain claims and liabilities arising out of its engagement and to reimburse Sandler O’Neill for certain of its out-of-pocket expenses incurred in connection with its engagement. In the two years preceding the date of Sandler O’Neill’s opinion, Sandler O’Neill provided certain other investment banking services to Blue Ridge and received fees for such services. In the ordinary course of Sandler O’Neill’s business as a broker-dealer, Sandler O’Neill may purchase securities from and sell securities to Blue Ridge, River and their respective affiliates. Sandler O’Neill may also actively trade the equity and debt securities of Blue Ridge or their affiliates for its own account and for the accounts of its customers.

Opinion of River’s Financial Advisor

Pursuant to its engagement, River requested that BSP Securities render a written opinion to the River board of directors as to the fairness, from a financial point of view, of the merger consideration to be paid by Blue Ridge to River shareholders as set forth in the merger agreement. BSP Securities is an investment banking firm that specializes in providing investment banking services to financial institutions. BSP Securities has been involved in numerous bank-related business combinations. No limitations were imposed by River upon BSP Securities with respect to rendering its opinion.

 

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At the March 29, 2016 meeting at which the River board of directors considered and approved the merger agreement, BSP Securities delivered to the River board of directors its written opinion that, as of such date, the merger consideration was fair to River shareholders from a financial point of view.

The full text of BSP Securities’ opinion is attached as Appendix C to this joint proxy statement/offering circular. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by BSP Securities in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. We urge you to read the entire opinion carefully in connection with your consideration of the proposed merger.

The opinion speaks only as of the date of the opinion. The opinion was directed to the River board of directors and is directed only to the fairness, from a financial point of view, of the merger consideration to River’s shareholders. It does not address our underlying business decision to engage in the merger or any other aspect of the merger and is not a recommendation to any shareholder as to how such shareholder should vote at the special meeting with respect to the merger or any other matter.

For purposes of its opinion and in connection with its review of the proposed transactions, BSP Securities, among other things, did the following:

 

    reviewed the terms of the merger agreement in a draft dated March 25, 2016;

 

    participated in discussions with River management concerning River’s financial condition, asset quality and regulatory standing, capital position, historical and current earnings and management succession, and River’s and Blue Ridge’s future financial performance;

 

    reviewed River’s audited financial statements for the years ended December 31, 2015, 2014 and 2013;

 

    reviewed Blue Ridge’s audited financial statements for the years ended December 31, 2015 and 2014;

 

    reviewed internal budgets of River, prepared by its management, as well as the estimated cost savings and related transaction expenses expected to result from the merger;

 

    analyzed certain aspects of River’s financial performance and condition and compared such financial performance with similar data of publicly traded companies BSP Securities deemed similar to River;

 

    analyzed certain aspects of Blue Ridge’s financial performance and condition and compared such financial performance with similar data of publicly traded companies BSP Securities deemed similar to Blue Ridge;

 

    reviewed historical trading activity of Blue Ridge’s common stock;

 

    compared the proposed financial terms of the merger with the financial terms of certain other recent merger and acquisition transactions involving companies that BSP Securities deemed to be relevant; and

 

    performed such other analyses and considered such other information, financial studies and investigations and financial, economic and market criteria as BSP Securities deemed relevant.

BSP Securities assumed and relied, without independent verification, upon the accuracy and completeness of all of the financial and other information that has been provided to it by River, Blue Ridge and their respective representatives, and of the publicly available information that was reviewed by it. BSP Securities is not an expert in the evaluation of allowances for loan losses and has not independently verified such allowances, and has relied on and assumed that such allowances of River and Blue Ridge were adequate to cover such losses and complied fully with applicable law, regulatory policy and sound banking practice as of the date of such financial statements. BSP

 

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Securities was not retained to and did not conduct a physical inspection of any of the properties or facilities of River or Blue Ridge, did not make any independent evaluation or appraisal of the assets, liabilities or prospects of River or Blue Ridge, was not furnished with any such evaluation or appraisal other than third-party loan reviews and did not review any individual credit files. BSP Securities’ opinion was necessarily based on economic, market and other conditions in effect on, and the information made available to it, as of March 29, 2016.

BSP Securities, as part of its investment banking business, is regularly engaged in the valuation of banks and bank holding companies, thrifts and thrift holding companies and various other financial services companies, in connection with mergers and acquisitions, private placements of securities and valuations for other purposes. In rendering its fairness opinion, BSP Securities acted on behalf of the River board of directors.

BSP Securities’ opinion is limited to the fairness, from a financial point of view, of the merger consideration to be paid to holders of River common stock in the merger and does not address the ability of the merger to be consummated, the satisfaction of the conditions precedent contained in the merger agreement or the likelihood of the merger receiving regulatory approval. Although BSP Securities was retained on behalf of the River board of directors, our opinion does not constitute a recommendation to any director of River as to how such director, or any shareholder, should vote with respect to the merger agreement.

Based upon and subject to the foregoing and based on BSP Securities’ experience as investment bankers, BSP Securities’ activities as described above and other factors they deemed relevant, BSP Securities rendered its opinion that, as of March 29, 2016, the merger consideration to be paid to the holders of River’s common stock in the merger is fair, from a financial point of view.

The following is a summary of material analyses performed by BSP Securities in connection with its opinion to the River board of directors on March 29, 2016. The summary does not purport to be a complete description of the analyses performed by BSP Securities but summarizes the material analyses performed and presented in connection with such opinion.

Summary of the Proposed Merger. BSP Securities reviewed the financial terms of the proposed transaction. In accordance with the terms of the merger agreement, each share of River common stock issued and outstanding, other than dissenting shares, will be converted into and exchanged for the right to receive either: (i) $16.57 in cash; or (ii) 0.9821 shares of Blue Ridge common stock; provided, however, that, notwithstanding the foregoing, (A) if the volume weighted average price of Blue Ridge common stock for the 30 consecutive trading days (or such longer period as a minimum of 2,500 Blue Ridge shares are traded) prior to and including the second trading day prior to the effective date of the merger, which we refer to BRB VWAP, is less than or equal to $16.00, then the number of shares (rounded to the nearest 1/1000th of a share) of Blue Ridge common stock to be exchanged for each share of River common stock will be determined by dividing $15.71 by the BRB VWAP, and (B) if the BRB VWAP is greater than or equal to $18.00, then the number of shares (rounded to the nearest 1/1000th of a share) of Blue Ridge common stock to be exchanged for each share of River common stock will be determined by dividing $17.68 by the BRB VWAP.

Based on Blue Ridge’s volume-weighted average price for the 30 trading days ending March 28, 2016 of $16.79 per share, total implied merger consideration is $12.4 million, or $16.51 per share of River common stock. BSP Securities summarized the merger terms, based on River’s financial information as of December 31, 2015, in the table below.

 

Pricing  

Total Transaction Value

   $ 12,393,903   

Blue Ridge Volume-Weighted Average Price as of 3/28/2016

   $ 16.79   

Blue Ridge 12/31/2015 Tangible Book Value Per Share

   $ 16.90   

Price / Tangible Book Value

     99.3

Price / LTM Earnings per Share (1) (2)

     9.4

Price / 2016 Estimated Earnings per Share (1)

     9.4

 

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Current Offer per Common Share

   $ 16.51   

River 12/31/2015 Tangible Book Value per Share

   $ 15.46   

Price / LTM Earnings per Share (1) (2)

     8.8

Price / 2016 Estimated Earnings per Share (1)

     9.5

Price / Tangible Book Value

     109.1

Price / Assets

     10.8

Premium / Core Deposits

     1.2

 

(1) Amount is fully diluted to reflect outstanding options.
(2) “LTM” refers to the last twelve months.

Relative Contribution Analysis. BSP Securities reviewed the relative contributions of River and Blue Ridge to the pro forma combined company with respect to certain financial and operating measurements. This analysis was based on December 31, 2015 financials for both parties. BSP Securities then compared these contributions to the pro forma implied stock ownership interests of River and Blue Ridge shareholders based on the merger agreement’s exchange ratio.

The following table indicates what River’s and Blue Ridge’s percentage contributions would have been on a pro forma basis to the combined company, excluding merger synergies and merger accounting adjustments, in the categories listed (dollars in thousands, as of December 31, 2015):

 

     Blue Ridge      River      River Contribution  

Total Assets

   $ 268,910       $ 114,620         29.9

Total Loans

   $ 216,599       $ 88,630         29.0

Total Deposits

   $ 196,492       $ 97,563         33.2

Tangible Common Equity

   $ 23,692       $ 11,361         32.4

2015 Net Income

   $ 2,498       $ 1,405         36.0

2016 Projected Net Income

   $ 2,500       $ 1,304         34.3

Average Contribution

           32.5

River Pro Forma Common Ownership

           26.5

River Pro Forma Common Ownership, If All Stock (1)

           34.0

 

(1) Calculated by dividing (i) the product of 0.9821 and River’s shares outstanding by (ii) Blue Ridge’s pre-merger shares outstanding plus the product of 0.9821 and River’s shares outstanding.

Sum-of-the-Parts Selected Peer Mergers Analysis. BSP Securities conducted a sum-of-the-parts analysis, calculating separate acquisition values for River’s two major business segments – commercial banking and mortgage banking – by applying median pricing multiples of publicly announced merger transactions that BSP Securities deemed relevant for purposes of its analysis. BSP Securities compared selected operating results of River’s commercial banking operations to (a) 14 mergers in the Southeast announced since January 1, 2014 for whole banks with total assets less than $200 million, nonperforming assets/total assets between 0.75% and 4.50% and LTM ROAA greater than 0.50% as of merger announcement; (b) 13 mergers in the Southeast announced since January 1, 2015 for whole banks with total assets less than $200 million and involving sellers headquartered in Metropolitan Statistical Areas with a total population less than 200,000; and (c) seven mergers for whole banks announced since January 1, 2014 with the seller headquartered in Virginia or North Carolina. BSP Securities compared selected operating results of River’s mortgage banking operations to (a) nine mergers for mortgage companies announced since January 1, 2004 with a total transaction value less than $100 million; and (b) 14 mergers for mortgage companies announced since January 1, 2004. BSP Securities used the median pricing multiples from each merger peer group and applied these multiples to River commercial banking metrics and River mortgage banking metrics to determine a range of implied acquisition values for each business segment. BSP Securities then assigned valuation weights to each implied acquisition value to determine the weighted average valuation for each

 

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business segment. These weighted average valuations for River’s commercial banking segment and River’s mortgage banking segment were then added together to determine an implied acquisition value for River of $16.67 per common share. Comparing this implied acquisition value to the transaction value of $16.51 per River share indicated pricing in line with peer mergers.

 

     Weighted
Mean
Valuation
     Highest
Estimated
Valuation
     Median
Estimated
Valuation
     Lowest
Estimated
Valuation
 

River Commercial Banking Valuation Range

   $ 11.67       $ 17.83       $ 13.39       $ 9.75   

River Mortgage Banking Valuation Range

   $ 5.00       $ 6.16       $ 5.48       $ 4.48   

Consolidated Valuation

   $ 16.67       $ 24.00       $ 18.87       $ 14.23   

No target company used in the sum-of-the-parts selected peer merger group analysis described above is identical to River. Accordingly, an analysis of the results of the foregoing necessarily involves complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the merger, public trading or other values of the companies to which River is being compared.

Net Present Value Analysis of Common Stock. BSP Securities calculated potential net present values for River common stock. The purpose of the analysis was to compare the implied value of River’s common stock to the merger consideration offered by Blue Ridge. Because River’s stock is not publicly traded and receives no coverage by independent equity research analysts, BSP Securities estimated tangible common equity and net income for fiscal year 2019, applied a range of terminal multiples as of December 31, 2019, and discounted these terminal values, along with intermediate cash dividends, back to the present using discount rates ranging from 12% to 16% and determined that the Net Present Value of the River common stock fell within a range of $9.30 to $19.84. The following table shows the calculated Net Present Value of River common stock at varying terminal multiples and discount rates.

 

     Terminal Tangible Book Value Multiples  

Discount Rates

   80%      90%      100%      110%  

12%

   $ 12.80       $ 14.25       $ 15.70       $ 17.15   

13%

   $ 12.40       $ 13.80       $ 15.20       $ 16.61   

14%

   $ 12.02       $ 13.37       $ 14.73       $ 16.09   

15%

   $ 11.65       $ 12.96       $ 14.27       $ 15.59   

16%

   $ 11.30       $ 12.57       $ 13.84       $ 15.11   
     Terminal Earnings Multiples  

Discount Rates

   6.0      8.0      10.0      12.0  

12%

   $ 10.52       $ 13.63       $ 16.74       $ 19.84   

13%

   $ 10.20       $ 13.20       $ 16.21       $ 19.21   

14%

   $ 9.89       $ 12.79       $ 15.70       $ 18.61   

15%

   $ 9.59       $ 12.40       $ 15.21       $ 18.03   

16%

   $ 9.30       $ 12.02       $ 14.75       $ 17.47   

Conclusion. Based on the results of the various analyses described above, BSP Securities concluded that the merger consideration to be received under the terms of the merger agreement is fair, from a financial point of view, to River’s shareholders.

 

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The opinion expressed by BSP Securities was based upon market, economic and other relevant considerations as they existed and could be evaluated as of the date of the opinion. Events occurring after the date of issuance of the opinion, including but not limited to, changes affecting the securities markets, the results of operations or material changes in the assets of River or Blue Ridge could materially affect the assumptions used in preparing the opinion.

As described above, BSP Securities’ opinion was among the many factors taken into consideration by the River board of directors in making its determination to approve the merger agreement. For purposes of rendering its opinion, BSP Securities assumed that, in all respects material to its analyses:

 

    the merger will be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any term, condition or agreement thereof;

 

    the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement are true and correct;

 

    each party to the merger agreement and all related documents will perform all of the covenants and agreements required to be performed by such party under such documents;

 

    all conditions to the completion of the merger will be satisfied without any waivers; and

 

    in the course of obtaining the necessary regulatory, contractual or other consents or approvals for the merger, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications will be imposed that will have a material adverse effect on the future results of operations or financial condition of the combined entity or the contemplated benefits of the merger.

BSP Securities cannot provide assurance as to when or if all of the conditions to the merger can or will be satisfied or, if applicable, waived by the appropriate party. As of the date of this joint proxy statement/offering circular, BSP Securities has no reason to believe that any of these conditions will not be satisfied.

Compensation to BSP Securities. BSP Securities will be paid a fee of $290,000 for services as River’s financial advisor in connection with the merger, $50,000 of which was paid upon the signing of the merger agreement, $40,000 of which was paid for the fairness opinion and $200,000 of which will be paid at the closing of the merger. In addition, River has agreed to indemnify BSP Securities and its directors, officers and employees from liability in connection with the transaction, and to hold BSP Securities harmless from any losses, actions, claims, damages, expenses or liabilities related to any of BSP Securities’ acts or decisions made in good faith and in the best interest of River.

Interests of Certain River Directors and Executive Officers in the Merger

In considering the recommendation of the River board of directors that River shareholders vote in favor of the River merger proposal, River shareholders should be aware that River directors and executive officers may have interests in the merger that differ from, or are in addition to, their interests as shareholders of River. The River board of directors was aware of these interests and took them into account in its decision to approve the merger agreement and the merger. Such interests include the following items.

Indemnification and Insurance. Blue Ridge has agreed to indemnify the directors and officers of River against certain liabilities arising before the effective date of the merger. Blue Ridge has also agreed to purchase a six year “tail” prepaid policy, on the same terms as River’s existing directors’ and officers’ liability insurance, for the current directors and officers and directors of River, subject to a cap on the cost of such policy equal to 250% of River’s current annual premium.

Director Appointments. Blue Ridge has agreed to take all actions necessary prior to the effective date of the merger to appoint three current River directors to the Blue Ridge board of directors effective upon consummation of the merger. The directors to be appointed to Blue Ridge’s board are Hunter H. Bost, Kenneth E. Flynt and Ronald D. Haley. The appointed directors will serve in such capacity until the next annual meeting of shareholders of Blue

 

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Ridge following the merger, and, subject to the good faith consideration by the nominating committee of Blue Ridge’s board of the selection criteria set forth in its charter, such persons will be nominated to sit for election at such annual meeting. Such directors, and Robert B. Burger, Jr., a current director of River Community Bank, will also be appointed to the board of directors of the continuing bank effective upon consummation of the subsidiary bank merger. The directors will receive the same compensation for their services as all other directors of Blue Ridge and its subsidiary bank. Membership on the Blue Ridge board and the continuing bank’s board is conditional upon execution of an agreement providing that such member will not engage in activities competitive with Blue Ridge until the later of the date that is one year following the merger or the date on which he or she ceases to be a member of such board.

Advisory Board. In connection with the merger, Blue Ridge will establish an advisory board with respect to its operations in the market area currently served by River. The advisory board will initially be comprised of the current River Community Bank directors who are not designated to serve on the board of directors of the continuing bank, together with other business and community leaders chosen by Blue Ridge after consultation with River. Membership on the advisory board is conditional upon execution of an agreement providing that such member will not engage in activities competitive with Blue Ridge until the later of the date that is one year following the merger or the date on which he or she ceases to be a member of the advisory board.

Officer Appointments. Blue Ridge has agreed to appoint the following officers of River to officer positions with Blue Ridge upon completion of the merger and the subsidiary bank merger, as set forth below:

 

    Ronald D. Haley, President and Chief Executive Officer of River and River Community Bank, to be appointed as President and Chief Operating Officer of the continuing bank after the subsidiary bank merger.

 

    Mary S. Handy, Senior Vice President and Chief Financial Officer of River and Executive Vice President and Chief Financial Officer of River Community Bank, to be appointed as Chief Accounting Officer of Blue Ridge and the continuing bank after the subsidiary bank merger.

 

    Betty J. Gibson, Executive Vice President of River Community Bank’s Mortgage Division, to be appointed as the President – Mortgage Division of the continuing bank after the subsidiary bank merger.

Mr. Haley, Ms. Handy and Ms. Gibson are expected to continue to receive their respective current annual base salaries after the merger and the subsidiary bank merger for their services to Blue Ridge.

River Employment Agreements with Executive Officers. River currently has employment agreements with Ronald D. Haley, Mary S. Handy and Betty J. Gibson, each of whom is an executive officer of River.

River Employment Agreement with Mr. Haley. Blue Ridge has agreed to assume the employment agreement, dated as of May 10, 2010, by and among River, River Community Bank and Mr. Haley, the current President and Chief Executive Officer of River and River Community Bank. Under the terms of Mr. Haley’s employment agreement, in the event of a “change of control” (as defined in the agreement) of River or River Community Bank, he is entitled to receive in one lump sum payment an amount equal to 2.0 times his annual base salary in effect immediately before the change of control. If the merger is completed, such event will constitute a change of control under the agreement and Mr. Haley will be entitled to receive such payment regardless of whether he remains employed after the merger. Blue Ridge does not contemplate entering into a separate employment agreement and/or change of control agreement with Mr. Haley with respect to his continued employment following completion of the merger, but has offered him the opportunity, which he has accepted, to serve as the President and Chief Operating Officer of the continuing bank following the merger and the subsidiary bank merger. In such position, he will continue to receive his current annual base salary of $178,500. If the merger is completed, based on such salary, the approximate payment to Mr. Haley pursuant to his current employment agreement would be $357,000.

 

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Under the terms of Mr. Haley’s employment agreement, and if he otherwise remains eligible, he will be entitled to the continuation of health and life insurance as presently provided by River for a period of one year after the merger or his termination of employment. In addition, following the termination of his employment for any reason, Mr. Haley is subject to a six month covenant not to compete, a one year covenant not to solicit existing customers or employees and a six month covenant not to solicit prospective customers.

River Employment Agreement with Ms. Handy. Blue Ridge has agreed to assume the employment agreement, dated as of May 10, 2010, by and among River, River Community Bank and Ms. Handy, currently Senior Vice President and Chief Financial Officer of River and Executive Vice President and Chief Financial Officer of River Community Bank. Under the terms of Ms. Handy’s employment agreement, if (i) a “change of control” (as defined in the agreement) of River or River Community Bank occurs, (ii) she is not offered an employment agreement for continued employment for a period of at least six months after the change of control at the same location, at the same or higher compensation, with the same benefits and with substantially the same duties as immediately prior to the change of control, (iii) she does not elect to remain in the employ of the acquiring entity after the change of control, and (iv) she executes a severance/release agreement, then Ms. Handy is entitled to receive in one lump sum payment an amount equal to 1.0 times her annual base salary in effect immediately before the change of control.

If the merger is completed, such event will constitute a change of control under the agreement. Blue Ridge does not contemplate entering into a separate employment agreement and/or change of control agreement with Ms. Handy with respect to her continued employment following completion of the merger, but has offered her the opportunity, which she has accepted, to serve as Chief Accounting Officer of Blue Ridge and the continuing bank after the subsidiary bank merger. In the event Ms. Handy elects not to remain in the employ of Blue Ridge after the merger and executes a severance/release agreement, she will be entitled to receive approximately $122,400, based on her current annual base salary.

Under the terms of Ms. Handy’s employment agreement, following the termination of her employment for any reason, Ms. Handy is subject to a six month covenant not to compete, a one year covenant not to solicit existing customers, a six month covenant not to solicit existing employees and a six month covenant not to solicit prospective customers.

River Employment Agreement with Ms. Gibson. Blue Ridge has agreed to assume the employment agreement, dated as of July 1, 2012, by and between River Community Bank and Ms. Gibson, current Executive Vice President of River Community Bank’s Mortgage Division. Under the terms of Ms. Gibson’s employment agreement, if (i) a majority interest in River Community Bank is sold to an outsider, and (ii) she is not offered to remain employed with the new owner at the same location, at the same compensation and benefits, and performing substantially similar duties as immediately prior to the change of owners, and (iii) she executes a severance/release agreement, then Ms. Gibson is entitled to receive in one lump sum payment an amount equal to 1.0 times her annual base salary in effect immediately before the change of control. Under the terms of Ms. Gibson’s employment agreement, following the termination of her employment for any reason, Ms. Gibson is subject to a six month covenant not to compete, a one year covenant not to solicit existing customers, a six month covenant not to solicit existing employees and a six month covenant not to solicit prospective customers.

If the merger is completed, such event will constitute a change of control under the agreement. Ms. Gibson has accepted an offer to serve as the President – Mortgage Division of the continuing bank following the merger and the subsidiary bank merger, and Blue Ridge contemplates entering into an employment agreement with Ms. Gibson with respect to her continued employment with substantially the same terms and provisions as her existing agreement with River Community Bank. In such position, she will continue to receive her current annual base salary of $146,192 and earn certain production-based compensation. Accordingly, it is not expected that Ms. Gibson will receive any severance payment in connection with the merger.

Stock Options. River has awarded certain directors and officers stock options pursuant to its equity compensation plan. In the merger, each option to purchase shares of River common stock that is outstanding immediately prior to the effective date of the merger, whether vested or unvested, will be converted into the right to receive cash from Blue Ridge in an amount equal to the product of (i) the amount equal to (a) the product of the BRB VWAP and the exchange ratio relating to the stock consideration, minus (b) the per share exercise price of such stock option, and (ii) the number of shares of River common stock subject to such option.

 

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Employee Benefit Plans. On or as soon as reasonably practicable following the merger, employees of River who continue on as employees of Blue Ridge will be entitled to participate in the Blue Ridge health and welfare benefit and similar plans on the same terms and conditions as employees of Blue Ridge. Subject to certain exceptions, these employees will receive credit for their years of service to River or River Community Bank for participation, vesting and benefit accrual purposes.