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As filed with the Securities and Exchange Commission on August 8, 2019

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

BLUE RIDGE BANKSHARES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Virginia   6022   54-1470908

(State or other jurisdiction of

Incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

17 West Main Street

Luray, Virginia 22835

Telephone: (540) 743-6521

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Brian K. Plum

President and Chief Executive Officer

17 West Main Street

Luray, Virginia 22835

Telephone: (540) 743-6521

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Scott H. Richter

Benjamin A. McCall

Williams Mullen

200 South 10 th Street, Suite 1600

Richmond, Virginia 23219

(804) 420-6000

 

Brian L. Hager

Lawton B. Way

Hunton Andrews Kurth LLP

Riverfront Plaza, East Tower

951 East Byrd Street

Richmond, Virginia 23219

(804) 788-8200

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon completion of the merger described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an ☒ in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Amount

to be
registered (1) (2)

 

Proposed

maximum
offering price

per share

 

Proposed

maximum
aggregate

offering price (3)

  Amount of
registration fee (4)

Common stock, no par value

  1,312,970   N/A   $23,726,732   $2,876

 

 

(1)

Represents the maximum number of shares of Blue Ridge Bankshares, Inc. (“Blue Ridge”) common stock, no par value, estimated to be issuable upon the completion of the merger of Virginia Community Bankshares, Inc. (“VCB”) with and into Blue Ridge pursuant to the Agreement and Plan of Reorganization, dated May 13, 2019, between Blue Ridge and VCB.

(2)

Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”) this registration statement also covers an indeterminate number of additional shares of Blue Ridge common stock as may be issuable as a result of stock splits, stock dividends or the like.

(3)

Pursuant to Rule 457(f) under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is equal to (a) the product of the average of the high and low prices per share of VCB common stock on August 2, 2019 ($56.27) as reported on the OTC Markets Group’s Pink marketplace and the estimated maximum number of shares of VCB common stock to be received by Blue Ridge in the merger (717,471) less (b) the estimated maximum amount of cash consideration to be paid in the merger by Blue Ridge in exchange for shares of VCB common stock ($16,645,362).

(4)

Computed in accordance with Section 6(b) of the Securities Act.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to Section 8(a) of the Securities Act, may determine.

 

 

 


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The information in this joint proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell or otherwise issue these securities and is not soliciting offers to buy these securities in any state or jurisdiction where such offer or sale is not permitted.

 

PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS

SUBJECT TO COMPLETION, DATED AUGUST 8, 2019

 

LOGO

 

                                      LOGO

MERGER PROPOSED – YOUR VOTE IS VERY IMPORTANT

 

 

Dear Fellow Shareholders:

The boards of directors of Blue Ridge Bankshares, Inc. (“Blue Ridge”) and Virginia Community Bankshares, Inc. (“VCB”) have unanimously approved a strategic merger in which VCB will merge with and into Blue Ridge. After the merger, Blue Ridge is expected to have approximately $825.9 million in assets, $646.7 million in deposits and $598.1 million in loans. We are sending you this document to ask you, as a Blue Ridge and/or VCB shareholder, to approve the merger.

In the merger, each share of VCB common stock will be converted into the right to receive, at the holder’s election, either:

 

   

$58.00 per share in cash (the “cash consideration”); or

 

   

3.05 shares of Blue Ridge common stock (the “stock consideration”).

If you are a VCB shareholder, you will have the opportunity to elect the form of consideration to be received for all shares of VCB common stock held by you, subject to allocation and proration procedures set forth in the merger agreement and described in this joint proxy statement/prospectus. These allocation procedures are intended to ensure that 60% of the outstanding shares of VCB common stock will be converted into the right to receive the stock consideration and 40% of the outstanding shares of VCB common stock will be converted into the right to receive the cash consideration. If you are a VCB shareholder, the form of the consideration ultimately received by you will depend upon the election, allocation and proration procedures described in this joint proxy statement/prospectus and the choices of other VCB shareholders, and may be different from what you elect.

The market value of the stock consideration that VCB shareholders will receive will fluctuate with the market price of Blue Ridge stock and will not be known at the time the Blue Ridge and VCB shareholders vote on the merger. Based on the closing price of Blue Ridge common stock on May 13, 2019, the date preceding the public announcement of the merger, the stock consideration represented approximately $64.96 in value for each share of VCB common stock. Based on the closing price of Blue Ridge common stock on [●], 2019, the last practicable date before the date of this joint proxy statement/prospectus, the stock consideration represented approximately $[●] in value for each share of VCB common stock. We urge you to obtain current market quotations for Blue Ridge common stock, which is quoted on the OTC Markets Group’s Pink marketplace (trading symbol “BRBS”) and VCB common stock, which is quoted on the OTC Markets Group’s Pink marketplace (trading symbol “VCBS”) .

Based on the current number of shares of VCB common stock outstanding, Blue Ridge expects to issue 1,312,970 shares of common stock in the aggregate upon completion of the merger, with current Blue Ridge shareholders owning approximately 76.7% of Blue Ridge’s outstanding common stock and former shareholders of VCB owning approximately 23.3% of Blue Ridge’s outstanding common stock immediately following the merger.

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

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

 

 

This document, which serves as a joint proxy statement for the special meetings of Blue Ridge and VCB, and as a prospectus for the shares of Blue Ridge common stock to be issued to VCB shareholders in the merger, describes the special meetings, the merger, the documents related to the merger and other related matters.  Please carefully read this entire joint proxy statement/prospectus, including the information in the “ Risk Factors ” section beginning on page   25 for a discussion of the risks relating to the proposed merger.

Thank you for your support.

 

Brian K. Plum

  

A. Preston Moore, Jr.

President and Chief Executive Officer

  

President and Chief Executive Officer

Blue Ridge Bankshares, Inc.

  

Virginia Community Bankshares, Inc.

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

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

The date of this joint proxy statement/prospectus is [●], 2019, and it is first being mailed or otherwise delivered to the shareholders of Blue Ridge and VCB on or about [●], 2019.

 


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LOGO

BLUE RIDGE BANKSHARES, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON [ ], 2019

A special meeting of shareholders of Blue Ridge Bankshares, Inc., a Virginia corporation (“Blue Ridge”), will be held on [●], [●], 2019 at [●] [●].m., local time, at [●], for the purpose of considering and voting upon the following:

 

  1.

A proposal to approve the Agreement and Plan of Reorganization, dated as of May 13, 2019, between Blue Ridge and Virginia Community Bankshares, Inc. (“VCB”), including the related Plan of Merger (together, the “merger agreement”), pursuant to which VCB will merge with and into Blue Ridge, as more fully described in the accompanying joint proxy statement/prospectus (the “Blue Ridge merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus.

 

  2.

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

 

  3.

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

Only holders of record of Blue Ridge common stock at the close of business on [●], 2019 will be entitled to notice of and to vote at the special meeting or any adjournment thereof.

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

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

You may revoke your proxy at any time prior to or at the meeting by providing written notice to Blue Ridge, by executing a proxy bearing a later date, or by attending the meeting and voting in person. If you wish to attend the meeting and vote in person and your shares are held in the name of a broker, trust, bank or other nominee, you must bring with you to the meeting a legal proxy from the broker, trust, bank or other nominee to confirm your beneficial ownership of the shares.

 

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

Luray, Virginia

[●], 2019


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LOGO

VIRGINIA COMMUNITY BANKSHARES, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON [ ], 2019

A special meeting of shareholders of Virginia Community Bankshares, Inc., a Virginia corporation (“VCB”), will be held on [●], [●], 2019 at [●] [●].m., local time, at [●], for the purpose of considering and voting upon the following:

 

  1.

A proposal to approve the Agreement and Plan of Reorganization, dated as of May 13, 2019, between Blue Ridge Bankshares, Inc. (“Blue Ridge”) and VCB, including the related Plan of Merger (together, the “merger agreement”), pursuant to which VCB will merge with and into Blue Ridge, as more fully described in the accompanying joint proxy statement/prospectus (the “VCB merger proposal”). A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus.

 

  2.

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

 

  3.

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

Only holders of record of VCB common stock at the close of business on [●], 2019 will be entitled to notice of and to vote at the special meeting or any adjournment thereof.

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

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

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

You may revoke your proxy at any time prior to or at the meeting by providing written notice to VCB, by executing a proxy bearing a later date, or by attending the meeting and voting in person. If you wish to attend the meeting and vote in person and your shares are held in the name of a broker, trust, bank or other nominee, you must bring with you to the meeting a legal proxy from the broker, trust, bank or other nominee to confirm your beneficial ownership of the shares.

 

By Order of the Board of Directors,
Amy M. Schick
Corporate Secretary

Louisa, Virginia

[●], 2019


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ADDITIONAL INFORMATION

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

The SEC maintains a website that contains information about issuers, like Blue Ridge, that file electronically with the SEC. The address of that site is www.sec.gov . Following effectiveness of the registration statement of which this joint proxy statement/prospectus is a part, Blue Ridge will become subject to the informational and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, in accordance with those requirements, will file reports and proxy statements with the SEC. You will be able to inspect and obtain copies of these reports and proxy statements and other information on the SEC’s website at the address set forth above.

Blue Ridge’s website is www.mybrb.com . Blue Ridge will make available on its website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such materials with, or furnishes them to, the SEC. The information on Blue Ridge’s website is not a part of, and is not incorporated into, this joint proxy statement/prospectus. VCB’s website is www.virginiacommunitybank.com . The information on VCB’s website is not a part of, and is not incorporated into, this joint proxy statement/prospectus.

Additional information about Blue Ridge may be obtained by contacting Amanda G. Story, Chief Financial Officer, 17 West Main Street, Luray, Virginia 22835, at (540) 743-6521, and additional information about VCB may be obtained by contacting Thomas M. Crowder, Executive Vice President, Chief Financial Officer and Chief Operating Officer, 114 Industrial Drive, Louisa, Virginia 23093, at (540) 967-2111. To obtain timely delivery, you must request the information no later than [ ], 2019. In addition, financial information about Blue Ridge Bank and Virginia Community Bank is available through financial reports that they file with their regulators on a quarterly basis. This information is available through the website maintained by the Federal Financial Institutions Examination Council at http:// www.ffiec.gov . The information on, or that can be accessed through, the Federal Financial Institutions Examination Council’s website is not part of, and is not incorporated into, this joint proxy statement/prospectus.

Blue Ridge has supplied all information contained in this joint proxy statement/prospectus relating to Blue Ridge and Blue Ridge Bank, and VCB has supplied all information contained in this joint proxy statement/prospectus relating to VCB and Virginia Community Bank.

You should rely only on the information contained in this joint proxy statement/prospectus relating to the offered securities. We have not authorized anyone to provide you with different information. We are not offering to sell the securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information which appears in this joint proxy statement/prospectus is accurate as of any date other than the date of this joint proxy statement/prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

 

 

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

 

   

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

 

   

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

 

   

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

 

   

references to “VCB” are to Virginia Community Bankshares, Inc.;

 

   

references to “VCB Board” are to the board of directors of VCB;

 

   

references to “Virginia Community Bank” are to Virginia Community Bank, a Virginia chartered bank and a wholly-owned subsidiary of VCB;

 

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references to the “merger agreement” are to the Agreement and Plan of Reorganization, dated as of May 13, 2019, between Blue Ridge and VCB, including the related Plan of Merger, a copy of which attached to this joint proxy statement/prospectus as Appendix A ;

 

   

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

 

   

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

 

ii


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TABLE OF CONTENTS

 

     Page Number  

Questions and Answers about the Merger and the Shareholder Meetings

     1  

Summary

     7  

Selected Historical Consolidated Financial Data of Blue Ridge

     14  

Selected Historical Consolidated Financial Data of VCB

     15  

Unaudited Pro Forma Condensed Combined Financial Information

     16  

Comparative Historical and Unaudited Pro Forma Per Share Data

     23  

Comparative Market Prices of Common Stock

     24  

Risk Factors

     25  

Risks Related to the Merger

     25  

Risks Related to Blue Ridge’s Business

     28  

Risks Related to Blue Ridge’s Common Stock

     37  

Cautionary Statement Regarding Forward-Looking Statements

     40  

Blue Ridge Special Meeting of Shareholders

     41  

General

     41  

Matters to be Considered

     41  

Recommendations of the Blue Ridge Board

     41  

Record Date and Voting Rights

     41  

Votes Required

     41  

Stock Ownership of Blue Ridge Directors and Executive Officers

     42  

Voting of Proxies

     42  

Revocation of Proxies

     42  

Solicitation of Proxies

     43  

Blue Ridge Proposals

     44  

Proposal No. 1 – Approval of the Merger

     44  

Proposal No. 2 – Adjournment of the Special Meeting

     44  

VCB Special Meeting of Shareholders

     45  

General

     45  

Matters to be Considered

     45  

Recommendations of the VCB Board

     45  

Record Date and Voting Rights

     45  

Votes Required

     45  

Stock Ownership of VCB Directors and Executive Officers

     46  

Voting of Proxies

     46  

Revocation of Proxies

     46  

Solicitation of Proxies

     47  

Appraisal Rights

     47  

VCB Proposals

     48  

Proposal No. 1 – Approval of the Merger

     48  

Proposal No. 2 – Adjournment of the Special Meeting

     48  

The Merger

     49  

Background of the Merger

     49  

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

     52  

Opinion of Blue Ridge’s Financial Advisor

     53  

VCB’s Reasons for the Merger; Recommendation of the VCB Board

     59  

Opinion of VCB’s Financial Advisor

     61  

Certain Unaudited Prospective Financial Information

     70  

VCB’s Directors and Officers Have Financial Interests in the Merger

     72  

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

     74  

Public Trading Markets

     74  

Appraisal Rights

     74  

Regulatory Approvals Required for the Merger

     76  

Accounting Treatment

     76  

 

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     Page Number  

Resales of Blue Ridge Common Stock

     77  

Material United States Federal Income Tax Consequences

     77  

The Merger Agreement

     81  

Structure of the Merger

     81  

Merger Consideration

     81  

Closing and Effective Time of the Merger

     81  

Cash or Stock Election for VCB Shareholders

     81  

Allocation Procedures

     82  

Procedures for Exchanging VCB Stock Certificates

     83  

Representations and Warranties

     83  

Covenants and Agreements

     84  

Required Shareholder Votes

     86  

Agreement Not to Solicit Other Offers

     87  

Expenses and Fees

     88  

Indemnification and Insurance

     88  

Conditions to Complete the Merger

     88  

Termination of the Merger Agreement

     88  

Termination Fees

     89  

Amendment and Waiver of the Merger Agreement

     90  

Affiliate and Director Noncompetition Agreements

     90  

Information about Blue Ridge

     92  

General Description of Blue Ridge’s Business

     92  

Properties

     94  

Employees

     94  

Legal Proceedings

     94  

Supervision and Regulation

     94  

Certain Relationships and Related Transactions

     101  

Board of Directors and Director Compensation

     101  

Executive Officers of Blue Ridge

     104  

Executive Compensation

     105  

Blue Ridge’s Management’s Discussion and Analysis of Financial Condition and Results of Operations

     109  

Information about VCB

     126  

General Description of VCB’s Business

     126  

Competition and Market Area

     126  

Regulatory Considerations

     127  

Properties

     127  

Common and Preferred Stock

     127  

Market for Common Stock

     127  

Employees

     127  

Legal Proceedings

     127  

Certain Relationships and Related Transactions

     127  

Board of Directors and Director Compensation

     128  

VCB’s Management’s Discussion and Analysis of Financial Condition and Results of Operations

     130  

Description of Blue Ridge Capital Stock

     149  

General

     149  

Common Stock

     149  

Preferred Stock

     149  

Liability and Indemnification of Directors and Officers

     150  

Blue Ridge Common Stock Not Insured by the FDIC

     150  

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

     150  

Comparison of Shareholders’ Rights

     153  

Security Ownership of Certain Beneficial Owners and Management of Blue Ridge

     157  

Security Ownership of Certain Beneficial Owners and Management of VCB

     159  

Experts

     160  

Legal Matters

     160  

 

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     Page Number  

Submission of Future Blue Ridge and VCB Shareholder Proposals

     160  

Index to Blue Ridge Financial Statements

     F-1  

Index to VCB Financial Statements

     F-66  

Appendices

    

Appendix A

   

Agreement and Plan of Reorganization, dated as of May  13, 2019, between Blue Ridge Bankshares, Inc. and Virginia Community Bankshares, Inc.

  

Appendix B

   

Opinion of Raymond James & Associates, Inc.

  

Appendix C

   

Opinion of Sandler O’Neill & Partners, L.P.

  

Appendix D

   

Article 15 of Title 13.1 of the Virginia Stock Corporation Act

  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SHAREHOLDER MEETINGS

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

 

Q:

Why am I receiving this document?

 

A:

Blue Ridge and VCB have entered into an Agreement and Plan of Reorganization, dated as of May 13, 2019, under which VCB will merge with and into Blue Ridge, with Blue Ridge as the surviving corporation. If the merger is completed, it is expected that Virginia Community Bank, VCB’s wholly-owned bank subsidiary, will merge with and into Blue Ridge Bank, Blue Ridge’s wholly-owned bank subsidiary. A copy of the merger agreement is included in this joint proxy statement/prospectus as Appendix A .

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

 

   

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

 

   

the holders of not less than two-thirds of the shares of VCB’s outstanding common stock entitled to vote at VCB’s special meeting vote in favor of the merger.

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

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

 

Q:

Why do Blue Ridge and VCB want to merge?

 

A:

Blue Ridge and VCB are merging to create one of the premier community banks in central Virginia. With the addition of VCB’s seven branches to Blue Ridge’s existing footprint, the combined organization is expected to benefit from scale of nearly $1 billion in assets, low cost funding to support future growth, and further growth in complementary lines of business, including purchase and credit cards, payroll, insurance, mortgage, and qualified intermediary services. In connection with the merger, Blue Ridge is planning to relocate its headquarters to Charlottesville, Virginia, to continue its expansion into high growth markets.

In addition, shareholders of the combined company could benefit from greater potential for increased liquidity in the market for Blue Ridge’s common stock and higher trading multiples than either company could achieve independently. Blue Ridge also plans to apply to list its common stock on the Nasdaq Stock Market or the New York Stock Exchange in connection with the merger.

Each of the Blue Ridge Board and the VCB Board has unanimously determined that the merger is fair and in the best interest of its respective shareholders and recommends that its shareholders vote for their respective proposals. You should review the reasons for the merger described in greater detail under the sections entitled “The Merger – Blue Ridge’s Reasons for the Merger; Recommendation of the Blue Ridge Board” and “The Merger – VCB’s Reasons for the Merger; Recommendation of the VCB Board,” beginning on pages [●] and [●], respectively.

 

Q:

What will VCB shareholders receive in the merger?

 

A:

VCB 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 VCB common stock, subject to allocation and proration procedures set forth in the merger agreement and described in this joint proxy statement/prospectus. In the proposed merger, each share of VCB common stock will be converted into the right to receive, at the election of the holder, either:

 

   

$58.00 per share in cash (the “cash consideration”); or

 

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3.05 shares of Blue Ridge common stock (the “stock consideration”).

The allocation and proration procedures are intended to ensure that 60% of the outstanding shares of VCB common stock will be converted into the right to receive shares of Blue Ridge common stock and 40% of the outstanding shares of VCB 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 VCB shareholders receive will depend on the elections of other VCB shareholders and may be different from what each VCB shareholder elects. For more information, see “The Merger Agreement – Merger Consideration” on page [●], “– Cash or Stock Election for VCB Shareholders” on page [●] and “ – Allocation Procedures” on page [●].

The stock consideration exchange ratio of 3.05 shares of Blue Ridge common stock is fixed and will not be adjusted to reflect stock price changes prior to the closing of the merger.

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

 

Q:

How do I elect the form of consideration that I prefer?

 

A:

If you are a VCB shareholder, you also will receive a separate mailing that will allow you to make an election to receive the stock consideration, cash consideration, a mixture thereof, or to indicate that you have no preference. These forms must be returned separately no later than the deadline stated in the election materials. If you hold your shares in “street name” through a bank or broker, your bank or broker will separately provide instructions for making your election with respect to such shares. For more information, see “The Merger Agreement – Merger Consideration” on page [●], “– Cash or Stock Election for VCB Shareholders” on page [●] and “ – Allocation Procedures” on page [●].

 

Q:

When and where are the shareholder meetings?

 

A:

Blue Ridge : The Blue Ridge special meeting is scheduled to take place on [●], [●], 2019 at [●] [●].m., local time, at the [●].

VCB : The VCB special meeting is scheduled to take place on [●], [●], 2019 at [●] [●].m., local time, at the [●].

 

Q:

Who can vote at the shareholder meetings?

 

A:

Blue Ridge : Holders of record of Blue Ridge common stock at the close of business on [●], 2019, which is the date that the Blue Ridge Board has fixed as the record date for the Blue Ridge special meeting, are entitled to vote at the Blue Ridge special meeting.

VCB : Holders of record of VCB common stock at the close of business on [●], 2019, which is the date that the VCB Board has fixed as the record date for the VCB special meeting, are entitled to vote at the VCB special meeting.

 

Q:

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

 

A:

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

 

Q:

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

 

A:

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

 

Q:

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

 

A:

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

 

Q:

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

 

A:

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

 

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Q:

What do I need to do now?

 

A:

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

If you are a VCB shareholder, you also will receive a separate mailing that will allow you to make an election to receive the stock consideration, cash consideration, a mixture thereof, or to indicate that you have no preference. These forms must be returned separately no later than the deadline stated in the election materials.

 

Q:

What constitutes a quorum for the shareholder meetings?

 

A:

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

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

 

Q:

What is the vote required to approve each proposal?

 

A:

Blue Ridge : Approval of the Blue Ridge merger proposal requires the affirmative vote of more than two-thirds of the outstanding shares of Blue Ridge common stock entitled to vote on the merger as of the close of business on [●], 2019, the record date for the Blue Ridge special meeting. If you (1) fail to submit a proxy or vote in person at the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the Blue Ridge merger proposal, it will have the same effect as a vote “AGAINST” the proposal. Approval of the Blue Ridge adjournment proposal requires that the votes cast for such proposal exceed the votes cast against such proposal. If you (1) fail to submit a proxy or vote in person at the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the Blue Ridge adjournment proposal, it will have no effect on the outcome of the vote on that proposal.

VCB : Approval of the VCB merger proposal requires the affirmative vote of not less than two-thirds of the outstanding shares of VCB common stock entitled to vote on the merger as of the close of business on [●], 2019, the record date for the VCB special meeting. If you (1) fail to submit a proxy or vote in person at the VCB special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the VCB merger proposal, it will have the same effect as a vote “AGAINST” the proposal. Approval of the VCB adjournment proposal requires that the votes cast for such proposal exceed the votes cast against such proposal. If you (1) fail to submit a proxy or vote in person at the VCB special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the VCB adjournment proposal, it will have no effect on the outcome of the vote on that proposal.

 

Q:

Why is my vote important?

 

A:

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

 

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Q:

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

 

A:

If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you should provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Blue Ridge or VCB or by voting in person at your respective company’s shareholder meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee.

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

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

 

   

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

 

   

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

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

 

   

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

 

   

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

 

Q:

What if I fail to vote or abstain from voting?

 

A:

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

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

 

Q:

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

 

A:

Yes. All shareholders of Blue Ridge and VCB, including shareholders of record and shareholders who hold their shares through banks, brokers, nominees or any other holder of record, are invited to attend their respective shareholder meeting. Holders of record of Blue Ridge common stock and holders of record of VCB common stock can vote in person at the Blue Ridge special meeting or VCB special meeting, respectively. If you are not a shareholder of record, you must obtain a legal proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to be able to vote in person at the shareholder meetings. If you plan to attend your shareholder meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership.

 

Q:

Can I change my vote?

 

A:

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

 

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VCB : Yes. If you are a holder of record of VCB common stock, you may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) timely submitting a later proxy via telephone or the Internet, (3) delivering a written revocation letter to VCB’s Corporate Secretary or (4) attending the VCB special meeting in person, notifying the Corporate Secretary and voting by ballot at the VCB special meeting. Attendance at the VCB special meeting alone will not automatically revoke your proxy. A revocation or later-dated proxy received by VCB after the VCB special meeting will be ineffective. VCB’s Corporate Secretary’s mailing address is: 114 Industrial Drive, Louisa, Virginia 23093, Attention: Corporate Secretary. If you hold your shares in “street name” through a bank or broker, you should contact your bank or broker if you want to revoke or change your voting instructions.

 

Q:

What are the U.S. federal income tax consequences of the merger to VCB shareholders?

 

A:

The merger is intended to qualify as a tax-free “reorganization” within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (“Code”). Accordingly, holders of VCB common stock generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of VCB common stock solely for Blue Ridge common stock in the merger. A holder of VCB common stock who elects to receive a combination of cash and Blue Ridge common stock will generally not recognize any loss but will recognize gain, if any, in an amount equal to the lesser of (1) the excess, if any, of the sum of the cash received and the fair market value of the shares of Blue Ridge common stock received pursuant to the merger over that shareholder’s adjusted tax basis in his, her, or its shares of VCB common stock surrendered, and (2) the amount of cash received by that shareholder in exchange for their shares of VCB common stock pursuant to the merger. Holders of VCB common stock who elect to receive solely cash pursuant to the merger or who receive solely cash pursuant to a valid election of such holder’s appraisal rights will recognize gain or loss on the exchange in an amount equal to the difference between the cash received and that shareholder’s adjusted basis in the shares of VCB common stock exchanged therefor. For further information, see “The Merger—Material United States Federal Income Tax Consequences” beginning on page [●].

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

 

Q:

Are VCB shareholders entitled to dissenters’ or appraisal rights?

 

A:

Yes. VCB shareholders are entitled to appraisal rights in connection with the merger. For information on how to exercise and perfect your appraisal rights, please see “The Merger – Appraisal Rights” beginning on page [●].

 

Q:

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

 

A:

No. Please do not send in your VCB stock certificates with your proxy. After the merger is completed, the exchange agent, Computershare, will send you instructions for exchanging your VCB stock certificates for the merger consideration. See “The Merger Agreement – Procedures for Exchanging VCB Stock Certificates” beginning on page [●].

 

Q:

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

 

A:

If you are unable to locate your original VCB stock certificate(s), you should contact VCB’s transfer agent, Issuer Direct, at 500 Perimeter Park Drive, Suite D, Morrisville, North Carolina 27560, or at (919) 481-4000.

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

 

Q:

When do you expect to complete the merger?

 

A:

Blue Ridge and VCB expect to complete the merger in the fourth quarter of 2019; however, neither Blue Ridge nor VCB can assure you when or if the merger will occur. In addition to other customary closing conditions provided in the merger agreement, Blue Ridge and VCB must first obtain the approval of Blue Ridge shareholders and VCB shareholders for the merger.

 

Q:

Who may solicit proxies on behalf of Blue Ridge or VCB?

 

A:

Blue Ridge : In addition to solicitation of proxies by Blue Ridge by mail, proxies may also be solicited by Blue Ridge’s directors and employees personally, and by telephone, facsimile or other means. Blue Ridge has also retained Regan & Associates, Inc. to assist in soliciting proxies for a fee of approximately $11,000. For more information on solicitation of proxies in connection with the Blue Ridge special meeting, see “Blue Ridge Special Meeting of Shareholders—Solicitation of Proxies” beginning on page [●].

 

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VCB : In addition to solicitation of proxies by VCB by mail, proxies may also be solicited by VCB’s directors and employees personally, and by telephone, facsimile or other means. VCB has also retained Regan & Associates, Inc. to assist in soliciting proxies for a fee of approximately $4,500. For more information on solicitation of proxies in connection with the VCB special meeting, see “VCB Special Meeting of Shareholders—Solicitation of Proxies” beginning on page [●].

 

Q:

Whom should I call with questions?

 

A:

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

VCB : If you have any questions concerning the merger or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of VCB common stock, please contact: Thomas M. Crowder, Executive Vice President, Chief Financial Officer and Chief Operating Officer, 114 Industrial Drive, Louisa, Virginia 23093, at (540) 967-2111. You may also obtain more information about the merger and the proxy materials by contacting Regan & Associates, Inc., VCB’s proxy solicitor, at (800) 737-3426.

 

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SUMMARY

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

The Parties

Blue Ridge (see page [ ])

Blue Ridge is a bank holding company headquartered in Luray, Virginia, providing a wide array of financial services through its wholly-owned subsidiary, Blue Ridge Bank, a national banking association, and its non-bank financial services affiliates. Blue Ridge Bank currently operates nine full-service banking offices in central Virginia and north-central North Carolina. As of March 31, 2019, Blue Ridge had total consolidated assets of approximately $574.8 million, total consolidated loans of approximately $431.1 million, total consolidated deposits of approximately $424.5 million, and consolidated stockholders’ equity of approximately $62.4 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 www.mybrb.com . Information contained on Blue Ridge’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. Blue Ridge’s common stock is traded on the OTC Markets Group’s Pink marketplace under the symbol “BRBS.”

VCB (see page [ ])

VCB is a bank holding company headquartered in Louisa, Virginia, providing a wide array of banking services through its wholly-owned subsidiary, Virginia Community Bank, a Virginia-chartered commercial bank. VCB currently has seven branch offices in Louisa, Orange, Mineral, Culpeper, Troy, Fredericksburg and Gordonsville, Virginia and its commercial office in Charlottesville, Virginia. As of March 31, 2019, VCB reported $250.6 million of assets, $168.5 million of loans, $222.7 million of deposits, and $24.4 million of shareholders’ equity.

The principal executive offices of VCB are located at 114 Industrial Drive, Louisa, Virginia 23093, and its telephone number is (540) 967-2111. VCB’s website can be accessed at www.virginiacommunitybank.com . Information contained on VCB’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. VCB’s common stock is traded on the OTC Markets Group’s Pink marketplace under the symbol “VCBS.”

The Merger (see page [ ])

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

Under the terms of the merger agreement, each share of VCB common stock will be converted into the right to receive, at the election of the holder, either $58.00 in cash or 3.05 shares of Blue Ridge common stock, with cash paid in lieu of any fractional shares of Blue Ridge common stock. Upon the closing of the merger, VCB will merge with and into Blue Ridge with Blue Ridge as the surviving corporation. The merger agreement also calls for Virginia Community Bank to be merged with and into Blue Ridge Bank as soon as practicable after the merger of VCB into Blue Ridge.

Closing and Effective Time of the Merger (see page [ ])

The merger is currently expected to close in the fourth quarter of 2019. The merger will close on either the fifth business day following the completion of the conditions to closing set forth in the merger agreement, or another mutually agreed upon date. The merger will become effective upon the issuance of a certificate of merger by the Virginia State Corporation Commission, or such other date and time as may be set forth in the articles of merger filed with the Virginia State Corporation Commission. Neither Blue Ridge nor VCB can predict, however, the actual date on which the merger will be completed because it is subject to factors beyond each company’s control, including whether or when the parties’ respective shareholders’ approvals and regulatory approvals will be received, if at all.



 

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Merger Consideration (see page [ ])

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

 

   

$58.00 per share in cash (the “cash consideration”); or

 

   

3.05 shares of Blue Ridge common stock (the “stock consideration”).

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

If you are a VCB shareholder, you have the opportunity to elect the form of consideration to be received for all shares of VCB common stock held by you, subject to allocation and proration procedures set forth in the merger agreement and described in this joint proxy statement/prospectus. These allocation procedures are intended to ensure that 60% of the outstanding shares of VCB common stock will be converted into the right to receive shares of Blue Ridge common stock and 40% of the outstanding shares of VCB common stock will be converted into the right to receive cash. If you are a VCB 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 VCB shareholders, and may be different from what you elect.

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.

Based on the current number of shares of VCB common stock outstanding, Blue Ridge expects to issue 1,312,970 shares of common stock in the aggregate upon completion of the merger, with current Blue Ridge shareholders owning approximately 76.7% of Blue Ridge’s outstanding common stock and former shareholders of VCB owning approximately 23.3% of Blue Ridge’s outstanding common stock immediately following the merger.

Election of Cash or Stock Consideration by VCB Shareholders (see page [ ])

If you are a VCB 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 VCB common stock, or whether you have no preference. The VCB 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, the exchange agent for the merger, no later than [ ] , Eastern time, on [ ] , 2019.

All elections by VCB shareholders are subject to the allocation and proration procedures described in the merger agreement that are intended to ensure that 60% of the outstanding shares of VCB common stock will be converted into the right to receive Blue Ridge common stock and the remaining 40% of the outstanding shares of VCB 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 VCB shareholders in the aggregate elect to receive stock consideration in exchange for more or fewer than 60% of the outstanding shares of VCB 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 60% of the outstanding shares of VCB 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 60% of the outstanding shares of VCB common stock will be converted into the right to receive Blue Ridge common stock (taking into account dissenting shares described under “The Merger– 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 60% of the outstanding shares of VCB 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 60% of the outstanding shares of VCB common stock will be converted into the right to receive Blue Ridge common stock. 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.



 

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

Blue Ridge Board Recommendations (see page [ ])

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

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

VCB Board Recommendations (see page [ ])

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

For a more complete description of VCB’s reasons for the merger and the recommendation of the VCB Board, please see “The Merger – VCB’s Reasons for the Merger; Recommendation of the VCB Board” beginning on page [●].

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

In connection with the merger, Blue Ridge’s financial advisor, Raymond James & Associates, Inc. (“Raymond James”) delivered its oral opinion to the Blue Ridge Board, which was subsequently confirmed in writing, as of May 13, 2019, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by Raymond James in preparing the opinion, as to the fairness of the merger consideration, from a financial point of view, to Blue Ridge.

Raymond James provided its opinion for the information and assistance of the Blue Ridge Board (in its capacity as such) in connection with its consideration of the financial terms of the merger and the opinion relates only to the fairness of the merger consideration, from a financial point of view, to Blue Ridge. Raymond James’ opinion does not address the underlying business decisions of Blue Ridge to engage in the merger, the form or structure of the merger, the relative merits of the merger as compared to any other alternative business strategies that might exist for Blue Ridge, or the effect of any other transaction in which Blue Ridge might engage. The full text of Raymond James’ opinion, dated May 13, 2019, which sets forth the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Raymond James is included as Appendix B to this joint proxy statement/prospectus. The description of the opinion is qualified in its entirety by reference to the opinion. Blue Ridge shareholders are urged to read the entire opinion carefully in connection with their consideration of the approval of the merger agreement. However, neither Raymond James’ opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the Blue Ridge Board or any shareholder as to how to act or vote with respect to the merger or related matters.

For further information, please see “The Merger – Opinion of Blue Ridge’s Financial Advisor” beginning on page [●].

Opinion of VCB’s Financial Advisor (see page [ ]and Appendix C )

VCB retained Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) to act as financial advisor to the VCB Board in connection with VCB’s consideration of a possible business combination. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. 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.

In connection with the merger, Sandler O’Neill delivered to the VCB Board its oral opinion on May 13, 2019, which it subsequently confirmed in writing as of the same date, to the effect that, as of such date and based upon and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations set forth in the opinion, the merger consideration provided for in the merger agreement was fair to the holders of VCB common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix C to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the VCB Board in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any shareholder of VCB as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger. Sandler O’Neill’s opinion was directed only as to the fairness, from a financial point of view, of the



 

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merger consideration to the holders of VCB common stock and does not address the underlying business decision of VCB to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for VCB or the effect of any other transaction in which VCB might engage.

For further information, please see “The Merger—Opinion of VCB’s Financial Advisor” beginning on page [●].

Interests of VCB Directors and Executive Officers in the Merger (see page [ ])

In addition to the receipt of merger consideration on the same terms as all other VCB shareholders, two of VCB’s directors (in addition to A. Pierce Stone, its former President, Chief Executive Officer and Chairman) will be appointed to serve on the Blue Ridge Board and Blue Ridge Bank board, VCB’s other directors will be offered the opportunity to serve on an advisory board of Blue Ridge, certain of VCB’s executive officers are expected to continue with Blue Ridge following completion of the merger and two of VCB’s executive officers have entered into employment agreements with Blue Ridge that will be effective at the closing of the merger and, in addition, they will receive cash severance payments related to change in control provisions in existing transaction bonus agreements. The VCB Board was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendation on the VCB merger proposal.

These interests are discussed in more detail in the “The Merger – VCB’s Directors and Officers Have Financial Interests in the Merger” section beginning on page [●].

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

The merger is intended to qualify as a tax-free “reorganization” within the meaning of Section 368 of the Code. Accordingly, holders of VCB common stock generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of VCB common stock solely for Blue Ridge common stock in the merger. A holder of VCB common stock who elects to receive a combination of cash and Blue Ridge common stock will generally not recognize any loss but will recognize gain, if any, in an amount equal to the lesser of (1) the excess, if any, of the sum of the cash received and the fair market value of the shares of Blue Ridge common stock received pursuant to the merger over that shareholder’s adjusted tax basis in his, her, or its shares of VCB common stock surrendered, and (2) the amount of cash received by that shareholder in exchange for their shares of VCB common stock pursuant to the merger. Holders of VCB common stock who elect to receive solely cash pursuant to the merger or who receive solely cash pursuant to a valid election of such holder’s appraisal rights will recognize gain or loss on the exchange in an amount equal to the difference between the cash received and that shareholder’s adjusted basis in the shares of VCB common stock exchanged therefor.

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

For further information, please see “The Merger – Material United States Federal Income Tax Consequences” beginning on page [●].

VCB’s Shareholders Have Appraisal Rights in the Merger (see page [ ]and Appendix D )

If the merger is completed, Virginia law gives holders of VCB common stock the right to assert appraisal rights with respect to the merger and demand in writing that Blue Ridge pay the fair value of your shares of VCB common stock, instead of accepting the consideration offered in the merger. Any VCB shareholder who wishes to exercise and perfect appraisal rights must strictly comply with the procedures set forth in Article 15 of Title 13.1 of the Virginia Stock Corporation Act (the “VSCA”), a copy of which is included as Appendix D to the joint proxy statement/prospectus. A description of these procedures is included in the “The Merger – Appraisal Rights” section beginning on page [●]. Blue Ridge shareholders do not have the right to dissent and assert appraisal rights.

Accounting Treatment (see page [ ])

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

Regulatory Approvals (see page [ ])

The merger requires various approvals or waivers from bank regulatory authorities, including the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency (the “OCC”) and the Virginia Bureau of Financial Institutions. Approval of the regulators does not constitute an endorsement of the merger or a determination that the terms of the merger are fair to Blue Ridge shareholders or VCB shareholders. As of the date of this joint proxy statement/prospectus, we have not yet received the required regulatory approvals. While we do not know of any reason why we would not be able to obtain the



 

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necessary regulatory approvals in a timely manner, we cannot be certain when or if we will receive them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to the combined company after completion of the merger.

For a more complete description of the regulatory approvals, please see “The Merger – Regulatory Approvals Required for the Merger” beginning on page [●].

Conditions to Complete the Merger (see page [ ])

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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;

 

   

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

 

   

no material adverse effect with respect to the other party shall have occurred; and

 

   

the aggregate number of VCB shares held by VCB shareholders who perfect their appraisal rights under the VSCA shall not represent 10% or more of the outstanding shares of VCB common stock.

In addition, Blue Ridge’s obligation to complete the merger is subject to VCB having minimum tangible equity (as defined in the merger agreement) of at least $23.5 million as of the last date of the month ended prior to the completion of the merger. As of June 30, 2019, VCB had tangible equity (measured as defined in the merger agreement) of $25.8 million.

Where the merger agreement and/or law permits, Blue Ridge and VCB 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.

No Solicitation (see page [ ])

VCB has agreed that it will not directly or indirectly:

 

   

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

 

   

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

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

Termination of the Merger Agreement (see page [ ])

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

 

   

by the Blue Ridge Board or the VCB Board if the merger has not been completed by March 1, 2020 or such later date as agreed to by the parties in writing, unless the failure to complete the merger by such time was primarily caused by a breach or failure to perform an obligation under the merger agreement by the terminating party;



 

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

 

   

by the Blue Ridge Board at any time before VCB obtains shareholder approval if (i) the VCB Board (a) fails to recommend to the VCB shareholders that they approve the VCB merger proposal, or (b) withdraws, modifies or changes such recommendation in any manner adverse to Blue Ridge; or (ii) VCB fails to comply in all material respects with its obligations in the merger agreement requiring the calling and holding of a meeting of shareholders to consider the VCB merger proposal or its obligations regarding the non-solicitation of competing offers for certain corporate transactions;

 

   

by the Blue Ridge Board or the VCB Board if VCB shareholders do not approve the VCB merger proposal;

 

   

by the VCB Board at any time before Blue Ridge obtains shareholder approval if (i) the Blue Ridge Board (a) fails to recommend to the Blue Ridge shareholders that they approve the Blue Ridge merger proposal, or (b) withdraws, modifies or changes such recommendation in any manner adverse to VCB; or (ii) Blue Ridge fails to comply in all material respects with its obligations in the merger agreement requiring the calling and holding of a meeting of shareholders to consider the VCB merger proposal;

 

   

by the Blue Ridge Board or the VCB Board if Blue Ridge shareholders do not approve the Blue Ridge merger proposal;

 

   

by the Blue Ridge Board, if (i) VCB enters into an agreement with any person to merge or consolidate with or acquire VCB, or purchase, lease or otherwise acquire all or substantially all of the assets of VCB, or purchase or otherwise acquire from VCB securities representing 10% or more of the voting power of VCB or (ii) a tender or exchange offer is commenced for 10% or more of the outstanding shares of VCB common stock, and the VCB Board recommends that VCB’s shareholders tender their shares or otherwise fails to recommend that shareholders reject such offer; or

 

   

by the VCB Board at any time before VCB obtains shareholder approval to change, modify or withdraw its recommendation to the VCB shareholders that they approve the merger agreement and enter into an agreement with respect to a “superior proposal” (as defined in the merger agreement), which has been received and considered by VCB in compliance with the applicable terms of the merger agreement.

Termination Fees and Expenses (see page [ ])

VCB must pay Blue Ridge a termination fee of $1.5 million if the merger agreement is terminated by either party under certain specified, limited circumstances. In addition, Blue Ridge must pay VCB a termination fee of $500,000 and reimburse VCB for up to $500,000 of reasonable expenses incurred by VCB in connection with the merger if the merger agreement is terminated by VCB under certain specified, limited circumstances. The termination and payment circumstances are more fully described elsewhere in this joint proxy statement/prospectus. See “The Merger Agreement – Termination Fees” beginning on page [●] and in Article 7 of the merger agreement.

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

Blue Ridge Special Meeting (see page [ ])

The Blue Ridge special meeting is scheduled to take place on [●], [●], 2019 at [●] [●].m., local time, at the [●], [●], [●], Virginia. At the special meeting, Blue Ridge shareholders will be asked to vote on:

 

   

the Blue Ridge merger proposal; and

 

   

the Blue Ridge adjournment proposal.

Holders of Blue Ridge common stock as of the close of business on [●], 2019, are entitled to notice of and to vote at the Blue Ridge special meeting. As of the record date, there were [●] shares of Blue Ridge common stock outstanding and entitled to vote held by approximately [●] holders of record. Each Blue Ridge shareholder can cast one vote for each share of Blue Ridge common stock owned on the record date.

Each of Blue Ridge’s directors has agreed, subject to several conditions and exceptions, to vote all of his or her shares of Blue Ridge common stock in favor of the Blue Ridge merger proposal. As of the record date, directors of Blue Ridge and their affiliates beneficially owned and are entitled to vote [●] 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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VCB Special Meeting (see page [ ])

The VCB special meeting is scheduled to take place on [●], [●], 2019 at [●] [●].m., local time, at the [●], [●], [●], Virginia. At the special meeting, VCB shareholders will be asked to vote on:

 

   

the VCB merger proposal; and

 

   

the VCB adjournment proposal.

Holders of VCB common stock as of the close of business on [●], 2019, are entitled to notice of and to vote at the VCB special meeting. As of the record date, there were [●] shares of VCB common stock outstanding and entitled to vote held by approximately [●] holders of record. Each VCB shareholder can cast one vote for each share of VCB common stock owned on the record date.

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

Required Shareholder Votes (see pages [ ] and [ ])

Approval of the Blue Ridge merger proposal requires the affirmative vote of more than two-thirds of the outstanding shares of Blue Ridge common stock entitled to vote on the merger as of the close of business on [●], 2019, the record date for the Blue Ridge special meeting. If you (1) fail to submit a proxy or vote in person at the Blue Ridge special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the proposal to approve the merger agreement, it will have the same effect as a vote “AGAINST” the proposal.

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

Approval of the VCB merger proposal requires the affirmative vote of not less than two-thirds of the outstanding shares of VCB common stock entitled to vote on the merger as of the close of business on [●], 2019, the record date for the VCB special meeting. If you (1) fail to submit a proxy or vote in person at the VCB special meeting, (2) mark “ABSTAIN” on your proxy or (3) fail to instruct your bank or broker how to vote with respect to the proposal to approve the merger agreement, it will have the same effect as a vote “AGAINST” the proposal.

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

No Restrictions on Resale of Blue Ridge Common Stock Received by VCB Shareholders (see page [ ])

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

Comparative Rights of Shareholders (see page [ ])

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

Risk Factors (see page [ ])

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



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BLUE RIDGE

The following table sets forth certain of Blue Ridge’s consolidated financial data as of the end of and for the fiscal years ended December 31, 2018 and 2017 and as of and for the three months ended March 31, 2019 and 2018. The historical consolidated financial information as of the end of and for the fiscal years ended December 31, 2018 and 2017 is derived from Blue Ridge’s audited consolidated financial statements. The consolidated financial information as of and for the three-month periods ended March 31, 2019 and 2018 is derived from Blue Ridge’s unaudited consolidated financial statements. In Blue Ridge’s opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the three months ended March 31, 2019 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2019.

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

 

     Three Months Ended
March 31,
(Unaudited)
    Year Ended
December 31,
 
     2019     2018     2018     2017  
     (Amounts in thousands, except per share data)  

Results of Operations :

        

Interest income

   $ 6,671     $ 4,999     $ 22,437     $ 18,481  

Interest expense

     1,822       1,047       5,152       3,931  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     4,849       3,952       17,285       14,550  

Provision for loan losses

     295       185       1,225       1,095  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     4,554       3,767       16,060       13,455  

Noninterest income

     3,899       1,874       10,123       7,799  

Noninterest expenses

     6,850       4,151       20,463       15,847  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,603       1,490       5,720       5,407  

Income tax expense

     321       301       1,147       2,057  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 1,282     $ 1,189     $ 4,573     $ 3,350  
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

        

Assets

   $ 574,801     $ 442,356     $ 539,590     $ 424,122  

Loans, net of unearned income

     466,697       353,363       444,101       348,024  

Deposits

     424,523       357,686       415,027       339,290  

Stockholders’ equity

     62,446       36,915       39,407       36,242  

Ratios :

        

Return on average assets

     1.01 %     1.13 %     0.95 %     0.80 %

Return on average equity

     10.28 %     13.37 %     12.02 %     9.56 %

Efficiency ratio

     75.14 %     66.19 %     69.78 %     66.27 %

Common equity to total assets

     10.86 %     8.35 %     7.30 %     8.55 %

Tangible common equity / tangible assets

     10.10 %     7.55 %     6.61 %     7.69 %

Asset Quality :

        

Allowance for loan losses

   $ 3,744     $ 2,950     $ 3,580     $ 2,802  

Non-accrual loans

   $ 5,450     $ 5,883     $ 5,530     $ 7,513  

Other real estate owned

   $ 68     $ 66     $ 134     $ 207  

ALLL / total outstanding loans

     0.80 %     0.83 %     0.81 %     0.81 %

ALLL / non-performing loans

     73.24 %     48.07 %     63.21 %     35.43 %

NPAs / total outstanding loans

     1.10 %     1.74 %     1.28 %     2.28 %

Net charge-offs / total average outstanding loans

     0.11 %     0.04 %     0.12 %     0.09 %

Provision / total outstanding loans

     0.07 %     0.05 %     0.30 %     0.33 %

Per Share Data :

        

Earnings per share, basic

   $ 0.38     $ 0.43     $ 1.64     $ 1.22  

Earnings per share, diluted

     0.38       0.43       1.64       1.22  

Cash dividends paid

     0.1425       0.1200       0.5400       0.3200  

Book value per common share

     14.42       13.35       14.11       13.10  

Price to earnings ratio, diluted

     11.25       10.47       10.52       13.93  

Price to book value ratio

     1.19       1.35       1.22       1.30  

Dividend payout ratio

     37.50     27.91     32.93     26.23

Weighted average shares outstanding, basic

     3,307,400       2,764,535       2,779,090       2,751,503  

Weighted average shares outstanding, diluted

     3,307,400       2,764,535       2,779,090       2,751,503  


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF VCB

The following table sets forth certain of VCB’s consolidated financial data as of the end of and for the fiscal years ended December 31, 2018 and 2017 and as of and for the three months ended March 31, 2019 and 2018. The historical consolidated financial information as of the end of and for the fiscal years ended December 31, 2018 and 2017 is derived from VCB’s audited consolidated financial statements. The consolidated financial information as of and for the three-month periods ended March 31, 2019 and 2018 is derived from VCB’s unaudited consolidated financial statements. In VCB’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, 2019 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2019.

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

 

     Three Months Ended
March 31,
(Unaudited)
    December 31,  
     2019     2018     2018     2017  
     (Amounts in thousands, except per share data)  

Results of Operations :

        

Interest income

   $ 2,842     $ 2,817     $ 11,540     $ 10,418  

Interest expense

     234       224       876       800  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     2,608       2,503       10,664       9,618  

Provision for loan losses

     0       (500     (484     (600
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     2,608       3,093       11,148       10,218  

Noninterest income

     302       315       1,409       1,538  

Noninterest expenses

     2,111       2,402       9,689       9,072  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     799       1,006       2,868       2,684  

Income tax expense

     169       214       618       971  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 630     $ 792     $ 2,250     $ 1,713  
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Condition:

        

Assets

   $ 250,636     $ 251,177     $ 245,665     $ 248,406  

Loans, net of unearned income

     168,519       178,676       168,202       181,712  

Deposits

     222,709       220,262       211,218       208,474  

Stockholders’ equity

     24,454       24,827       23,615       24,407  

Ratios :

        

Return on average assets

     1.02 %     1.29 %     0.90 %     0.71 %

Return on average equity

     9.95 %     12.50 %     8.74 %     6.89 %

Efficiency ratio

     71.7 %     77.5 %     80.19 %     77.16 %

Common equity to total assets

     9.75 %     9.88 %     9.61 %     9.82 %

Tangible common equity / tangible assets

     9.75 %     9.88 %     9.61 %     9.82 %

Asset Quality :

        

Allowance for loan losses

   $ 1,509     $ 1,645     $ 1,521     $ 2,126  

Non-accrual loans

   $ 226     $ 471     $ 284     $ 486  

Other real estate owned

   $ 147     $ 141     $ 147     $ 141  

ALL / total outstanding loans

     0.90 %     0.92 %     0.90 %     1.17 %

ALL / non-performing loans

     667.7 %     349.2 %     535.5 %     437.4 %

NPAs / total outstanding loans

     0.22 %     0.34 %     0.26 %     0.34 %

Net charge-offs / total outstanding loans

     0.00 %     0.00 %     0.07 %     0.07 %

Provision / total outstanding loans

     0.00 %     0.00 %     0.00 %     0.00 %

Per Share Data :

        

Earnings per share, basic

   $ 0.88     $ 0.56     $ 3.04     $ 2.28  

Earnings per share, diluted

     0.88       0.56       3.04       2.28  

Cash dividends paid

     0.00       0.00       0.50       0.35  

Book value per common share

     34.08       33.10       32.91       32.54  

Price to earnings ratio, diluted

     10.30     7.90     11.57     15.35

Price to book value ratio

     108 %     101     106 %     107

Dividend payout ratio

     0.00 %     0.00 %     15.9 %     15.30 %

Weighted average shares outstanding, basic

     717,471       750,000       739,667       750,000  

Weighted average shares outstanding, diluted

     717,471       750,000       739,667       750,000  


 

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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 VCB, as an acquisition by Blue Ridge of VCB 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 VCB 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 VCB 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, 2019. The unaudited pro forma condensed combined income statements for the three months ended March 31, 2019 and the year ended December 31, 2018 give effect to the merger as if the transaction had occurred on January 1, 2018.

A final determination of the fair values of VCB’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 VCB 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 condensed combined 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 opportunities to earn additional revenue or potential impacts of current market conditions on revenues or asset dispositions, among other factors, and includes various preliminary estimates and expectations, including cost savings, that may not materialize 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 elsewhere in this joint proxy statement/prospectus, and the historical consolidated financial statements and related notes thereto of VCB and its subsidiaries, which are also included elsewhere in this joint proxy statement/prospectus.



 

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BLUE RIDGE BANKSHARES, INC. AND VIRGINIA COMMUNITY BANKSHARES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

As of March 31, 2019

 

(Dollars in thousands)          Virginia              
     Blue Ridge     Community     Merger        
     Bankshares, Inc.     Bankshares, Inc.     Pro Forma     Pro Forma  
     (As Reported)     (As Reported)     Adjustments     Combined  

Assets :

        

Cash and cash equivalents

   $ 19,757     $ 13,342     $ (16,998 ) (a)     $ 16,101  

Securities available for sale, at fair value

     38,105       54,898       (429 ) (b)       92,574  

Securities held to maturity

     15,533       —         —         15,533  

Restricted stock, at cost

     4,432       886       —         5,318  

Loans held for sale

     35,610       —         —         35,610  
        

Loans, net of unearned income

     431,087       168,519       (1,509 ) (c)       598,097  

Less allowance for loan losses

     3,744       1,509       (1,509 ) (d)       3,744  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loans

     427,343       167,010       —         594,353  
  

 

 

   

 

 

   

 

 

   

 

 

 

Bank premises and equipment, net

     3,383       5,032       2,708 (e)       11,123  

Bank owned life insurance

     9,110       6,265       —         15,375  

Other real estate owned, net of valuation allowance

     —         147       —         147  

Core deposit intangibles, net

     —         —         3,933 (f)       3,933  

Goodwill

     3,307       —         12,710 (g)       16,017  

Other assets

     18,221       3,056       (1,417 ) (h)       19,860  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 574,801     $ 250,636     $ 507     $ 825,944  
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities :

        

Noninterest-bearing demand deposits

     83,543       76,196       —         159,739  

Interest-bearing deposits

     340,980       146,513       (537 ) (i)       486,956  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

     424,523       222,709       (537     646,695  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other borrowed funds

     67,800       3,000       —         70,800  

Subordinated debt, net of issuance costs

     9,775       —         —         9,775  

Other liabilities

     10,036       473       —         10,509  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     512,134       226,182       (537     737,779  
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity :

        

Common stock and surplus

     38,899       3,702       21,796 (j) (k)       64,397  

Retained earnings

     23,984       21,742       (21,742 ) (j)       23,984  

Accumulated other comprehensive income

     (437     (990     990 (j)       (437
  

 

 

   

 

 

   

 

 

   

 

 

 
     62,446       24,454       1,044       87,944  

Noncontrolling interest

     221       —         —         221  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     62,667       24,454       1,044       88,165  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 574,801     $ 250,636     $ 507     $ 825,944  
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to condensed consolidated financial statements.



 

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BLUE RIDGE BANKSHARES, INC. AND VIRGINIA COMMUNITY BANKSHARES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended March 31, 2019

 

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

Virginia

Community

Bankshares, Inc.

              
    

Blue Ridge

Bankshares, Inc.

    

Merger

Pro Forma

       
    Pro
Forma
 
     (As Reported)      (As Reported)      Adjustments     Combined  

Interest and dividend income:

          

Interest and fees on loans

   $ 6,115      $ 2,297      $ —       $ 8,412  

Other interest income

     556        545        —         1,101  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest and dividend income

     6,671        2,842        —         9,513  
  

 

 

    

 

 

    

 

 

   

 

 

 

Interest expense:

          

Interest on deposits

     1,185        205        (45 ) (l)       1,345  

Other interest expense

     637        29        36 (m)       702  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest expense

     1,822        234        (9     2,047  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income

     4,849        2,608        9       7,466  

Provision for loan losses

     295        —          —         295  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     4,554        2,608        9       7,171  
  

 

 

    

 

 

    

 

 

   

 

 

 

Noninterest income:

          

Service charges on deposit accounts

     134        214          348  

Other service charges, commissions and fees

     1,124        —          —         1,124  

Gains on sales of mortgage loans, net of commissions

     1,967        27        —         1,994  

Other operating income

     674        61        —         735  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest income

     3,899        302        —         4,201  
  

 

 

    

 

 

    

 

 

   

 

 

 
          

Noninterest expenses:

          

Salaries and benefits

     4,246        1,101        —         5,347  

Occupancy expenses

     446        144        —         590  

Furniture and equipment expenses

     156        59        —         215  

Other expenses

     2,002        807        179 (n)       2,988  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest expenses

     6,850        2,111        179       9,140  
  

 

 

    

 

 

    

 

 

   

 

 

 
          

Income before income taxes

     1,603        799        (170     2,232  

Income tax expense

     322        169        (36     455  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 1,281      $ 630      $ (134   $ 1,777  
  

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per common share, basic

   $ 0.39      $ 0.88        $ 0.38  
  

 

 

    

 

 

      

 

 

 

Earnings per common share, diluted

   $ 0.39      $ 0.88        $ 0.38  
  

 

 

    

 

 

      

 

 

 
          

Weighted average common shares outstanding, basic

     3,307        717        596 (q)       4,620  

Weighted average common shares outstanding, diluted

     3,307        717        596 (q)       4,620  
          

See accompanying notes to condensed consolidated financial statements.



 

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BLUE RIDGE BANKSHARES, INC. AND VIRGINIA COMMUNITY BANKSHARES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME

For the Year Ended December 31, 2018

 

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

Virginia

Community

Bankshares, Inc.

              
    

Blue Ridge

Bankshares, Inc.

    

Merger

Pro Forma

       
   

Pro

Forma

 
     (As Reported)      (As Reported)      Adjustments     Combined  

Interest and dividend income:

          

Interest and fees on loans

   $ 20,479      $ 9,441      $ —       $ 29,920  

Other interest income

     1,958        2,099        —         4,057  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest and dividend income

     22,437        11,540        —         33,977  
  

 

 

    

 

 

    

 

 

   

 

 

 

Interest expense:

          

Interest on deposits

     3,513        812        (179 ) (l)       4,146  

Other interest expense

     1,639        64        143 (m)       1,846  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total interest expense

     5,152        876        (36 )       5,992  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income

     17,285        10,664        36       27,985  

Provision for (recovery of) loan losses

     1,225        (484 )        —         741  
  

 

 

    

 

 

    

 

 

   

 

 

 

Net interest income after provision for loan losses

     16,060        11,148        36       27,244  
  

 

 

    

 

 

    

 

 

   

 

 

 

Noninterest income:

          

Service charges on deposit accounts

     635        946        —         1,581  

Other service charges, commissions and fees

     2,724        —          —         2,724  

Gains on sales of mortgage loans, net of commissions

     4,541        164        —         4,705  

Other operating income

     2,223        299        —         2,522  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest income

     10,123        1,409        —         11,532  
  

 

 

    

 

 

    

 

 

   

 

 

 
          

Noninterest expenses:

          

Salaries and benefits

     11,843        4,967        (2,297 ) (p)       14,513  

Occupancy expenses

     1,126        590        (316 ) (p)       1,400  

Furniture and equipment expenses

     488        265        —         753  

Other expenses

     7,006        3,867        4,162 (n)(o)(p)       15,035  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest expenses

     20,463        9,689        1,549       31,701  
  

 

 

    

 

 

    

 

 

   

 

 

 
          

Income before income taxes

     5,720        2,868        (1,513 )       7,075  

Income tax expense

     1,147        618        (318 )       1,447  

Net (Income) from non-controlling interests

          
  

 

 

    

 

 

    

 

 

   

 

 

 

Net income

   $ 4,573      $ 2,250      $ (1,195 )     $ 5,628  
  

 

 

    

 

 

    

 

 

   

 

 

 

Earnings per common share, basic

   $ 1.63      $ 3.04        $ 1.37  
  

 

 

    

 

 

      

 

 

 

Earnings per common share, diluted

   $ 1.63      $ 3.04        $ 1.37  
  

 

 

    

 

 

      

 

 

 
          

Weighted average common shares outstanding, basic

     2,779        740        596 (q)       4,115  

Weighted average common shares outstanding, diluted

     2,779        740        596 (q)       4,115  
          

See accompanying notes to condensed consolidated financial statements.



 

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

NOTE A – BASIS OF PRESENTATION

On May 14, 2019, Blue Ridge entered into the merger agreement with VCB. The merger agreement provides that at the effective time of the merger, each outstanding share of common stock of VCB will be converted into the right to receive, at the election of the holder, either $58.00 per share in cash, or 3.05 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 60% of the outstanding shares of VCB common stock will be converted into the right to receive shares of Blue Ridge common stock and 40% of the outstanding shares of VCB common stock will be converted into the right to receive cash.

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 VCB was consummated on January 1, 2018 for purposes of the unaudited pro forma condensed combined statements of income and on March 31, 2019 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 VCB 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 VCB’s tangible, and identifiable intangible, assets and liabilities as of the effective time of the merger.

NOTE B – PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current valuations, estimates, and assumptions. Subsequent to the completion of the merger, Blue Ridge will engage an independent third-party valuation firm to determine the fair value of 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 40% of the total purchase price.

 

(b)

Estimated fair value adjustment of acquired securities as of acquisition date. The discount of $429,000 represents 0.78% of VCB’s securities available for sale.

 

(c)

Estimated adjustment for credit deterioration of the acquired portfolio in the amount of $1.5 million which represented a mark of 0.90% on VCB’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 VCB’s loan portfolio.

 

(d)

Elimination of VCB’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.

 

(e)

Estimated fair value adjustments of acquired fixed assets as of acquisition date. The premium of $2,708,000 represents 53.8% of VCB’s fixed assets.

 

(f)

Blue Ridge’s estimate of the fair value of the core deposit intangible asset ($3,933,000). This will be amortized over ten years using sum-of-years digits method. This estimate represents a 2.0% premium on VCB’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 deferred tax liability related to merger adjustments.

 

(i)

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



 

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Table of Contents
(j)

Elimination of VCB’s stockholders’ equity representing conversion of all of VCB’s common shares into Blue Ridge common shares.

 

(k)

Recognition of the equity portion of the merger consideration. The adjustment to common stock and surplus represents 60% of the total purchase price to effect the transaction.

 

(l)

Represents premium amortization on deposits assumed as part of the merger assuming the merger closed on January 1, 2018 (see Note D). Premium will be amortized over three years using the straight-line method.

 

(m)

Represents amortization of securities mark.

 

(n)

Represents amortization of core deposit premium assuming the merger closed on January 1, 2018 (see Note D). Premium will be amortized over ten years using the sum-of-years digits method.

 

(o)

Represents one-time transaction related costs.

 

(p)

Represents estimated cost saves to be recognized during the first year after the merger.

 

(q)

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

NOTE C – PRO FORMA ALLOCATION OF PURCHASE PRICE

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

 

Purchase Price:

     

Fair value of consideration

      $ 42,496  
     

 

 

 

Total pro forma purchase price

      $ 42,496  

Fair value of assets acquired:

     

Cash and cash equivalents

   $ 13,342     

Securities available for sale

     54,469     

Restricted stock, at cost

     886     

Net loans

     167,010     

Bank premise and equipment

     7,740     

Bank owned life insurance

     6.265     

OREO, net of valuation allowance

     147     

Core deposit intangible

     3,933     

Other assets

     1,639     
  

 

 

    

Total assets

     255,431     

Fair value of liabilities assumed:

     

Deposits

     222,172     

Long-term borrowings

     3,000     

Other liabilities

     473     
  

 

 

    

Total liabilities

     225,645     

Net assets acquired

      $ 29,786  
     

 

 

 

Preliminary pro forma goodwill

      $ 12,710  
     

 

 

 

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 $17.10 as of March 31, 2019:

 

Share Price Sensitivity  (unaudited,   dollars  in  thousands)

 
     Purchase Price      Estimated Goodwill  

Up 20%

   $ 50,995      $ 21,209  

Up 10%

   $  46,746    $  16,960  

As presented in pro forma

   $  42,496    $  12,710  

Down 10%

   $  38,246    $  8,461  

Down 20%

   $  33,997    $  4,211  


 

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Table of Contents

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 condensed combined financial statements on the future pre-tax net income of Blue Ridge after the merger with VCB  (unaudited,  dollars  in  thousands) :

 

     Discount Accretion (Premium Amortization)  
     For the Years Ended December 31,  
     2020     2021     2022     2023     2024     Thereafter     Total  

Securities

   $ 143     $ 143     $ 143       —         —         —       $ 429  

Deposits

     (179     (179     (179     —         —         —         (537

Core Deposit Intangible

     (715     (644     (572     (501     (429     (1,072     (3,933

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 are expected to approximate 41.1% of VCB’s annualized pre-tax non-interest expenses. Cost savings are estimated to be realized at 100%.



 

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Table of Contents

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table shows per common share data regarding basic and diluted net income, book value and cash dividends per share for (1) Blue Ridge and VCB on a historical basis, (2) Blue Ridge after giving effect to the merger and (3) VCB on a pro forma equivalent basis. The pro forma basic and diluted net income per share information was computed as if the merger had been completed on January 1, 2018. The pro forma book value per share information was computed as if the merger had been completed on March 31, 2019. The pro forma dividends per share represent Blue Ridge’s historical dividends per share.

The VCB pro forma equivalent per share amounts are calculated by multiplying the pro forma combined per share amounts by the exchange ratio of 3.05 for the stock consideration so that the per share amounts equate to the respective values for one share of VCB common stock.

The following pro forma information has been derived from and should be read in conjunction with Blue Ridge’s consolidated financial statements and VCB’s consolidated financial statements for the year ended December 31, 2018 and the three-month period ended March 31, 2019, included elsewhere in this joint proxy statement/prospectus. This information is presented for illustrative purposes only. You should not place undue reliance on the pro forma combined or pro forma equivalent amounts as they are not necessarily indicative of the net income per share, book value per share, operating results or financial position that would have occurred if the merger had been completed as of the dates indicated, nor are they necessarily indicative of the future net income per share, book value per share, operating results or financial position of the combined company. The pro forma information, although helpful in illustrating the financial characteristics of Blue Ridge as the surviving company under one set of assumptions, does not reflect the benefits of expected cost savings, opportunities to earn additional revenue, the impact of restructuring and merger-related costs, or other factors that may result as a consequence of the merger and, accordingly, does not attempt to predict or suggest future results. The information below should be read in conjunction with the “Unaudited Pro Forma Condensed Combined Financial Information” section beginning on page [●] and the historical financial information and the notes thereto for Blue Ridge and VCB, included elsewhere in this joint proxy statement/prospectus.

 

    As of and for the
three months ended
March 31, 2019
    As of and for the
year ended
December 31, 2018
 

Blue Ridge Historical

   

Net income per common share (basic and diluted)

  $ 0.38     $ 1.64  

Book value per common share (basic and diluted)

    14.42       14.11  

Cash dividends declared per share

    0.14       0.54  

VCB Historical

   

Net income per common share (basic and diluted)

  $ 0.88     $ 3.04  

Book value per common share (basic and diluted)

    34.08       32.84  

Cash dividends declared per share

    0.00       0.50  

Pro Forma Combined

   

Net income per common share (basic and diluted)

  $ 0.38     $ 1.37  

Book value per common share (basic and diluted)

    19.08       21.43  

Cash dividends declared per share

    0.14       0.54  

Pro Forma VCB Equivalent

   

Net income per common share (basic and diluted)

  $ 1.17     $ 4.17  

Book value per common share (basic and diluted)

    58.20       65.35  

Cash dividends declared per share

    0.43       1.65  


 

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COMPARATIVE MARKET PRICES OF COMMON STOCK

Blue Ridge common stock is quoted on the OTC Markets Group’s Pink marketplace under the symbol “BRBS.” As of [●], 2019, there were [●] shares of Blue Ridge common stock outstanding held by [●] holders of record. The closing price of Blue Ridge common stock on or before May 13, 2019, the last trading day before the public announcement of the signing of the merger agreement, and [●], 2019, the latest practicable date before the date of this joint proxy statement/prospectus, was $21.30 and $[●], respectively. These market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Blue Ridge plans to apply to list its common stock on the Nasdaq Stock Market or the New York Stock Exchange in connection with the merger. Blue Ridge will be required to meet the initial listing requirements of such exchange to be listed. Blue Ridge may not be able to meet those initial requirements, and even if Blue Ridge’s common stock is so listed, Blue Ridge may be unable to maintain the listing of its common stock in the future. There can be no assurance that a liquid trading market for Blue Ridge’s common stock will develop or be sustained after the merger.

VCB common stock is quoted on the OTC Markets Group’s Pink marketplace under the symbol “VCBS.” As of [●], 2019, there were [●] shares of VCB common stock outstanding held by [●] holders of record. The closing price of VCB common stock on May 13, 2019, the last trading day before the public announcement of the signing of the merger agreement, and on [●], 2019, the latest practicable date before the date of this joint proxy statement/prospectus, was $39.00 and $[●], respectively. These market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. After the completion of the merger, there will be no further trading in VCB common stock.

The following table sets forth the closing prices per share of Blue Ridge common stock as reported on the OTC Markets Group’s Pink marketplace on May 13, 2019, the last trading day before Blue Ridge and VCB announced the signing of the merger agreement, and [●], 2019, the last trading day before the date of this joint proxy statement/prospectus, respectively. The table also sets forth the closing prices per share of VCB common stock OTC Markets Group’s Pink marketplace on May 13, 2019 and [●], 2019, respectively. The following table also includes the equivalent price per share of VCB common stock on those dates. The equivalent per share price reflects the value on each date of the Blue Ridge common stock that would have been received by VCB shareholders with respect to each share of VCB common stock converted into the right to receive stock consideration, if the merger had been completed on those dates, based on the exchange ratio of 3.05 and the closing prices of Blue Ridge common stock.

 

     Blue Ridge
Common Stock
     VCB
Common Stock
     Equivalent Market
Value per Share of
VCB Common Stock
 

May 13, 2019

   $ 21.30      $ 39.00      $ 64.96  

[●], 2019

     [●      [●      [●

The market value for Blue Ridge common stock will fluctuate between the time the merger agreement was executed, the date of this joint proxy statement/prospectus, the date of the shareholder meetings and the completion of the merger. Because the stock consideration exchange ratio is fixed, however, the number of shares that VCB shareholders receive with respect to the stock consideration in the merger will not change. You are advised to obtain current market quotations for Blue Ridge common stock and VCB common stock.



 

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RISK FACTORS

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

Risks Related to the Merger

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

All VCB 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 VCB shareholder will receive in order to ensure that 60% of the outstanding shares of VCB common stock are converted into shares of Blue Ridge common stock and 40% of the outstanding shares of VCB common stock are converted into cash. Consequently, if either the stock consideration or the cash consideration is oversubscribed, VCB 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 VCB 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, VCB shareholders cannot be certain of the market value of the stock consideration that they will receive.

Upon completion of the merger, each share of VCB common stock will be converted into the right to receive, at the election of the holder, either the cash consideration or the stock consideration. The stock consideration exchange ratio of 3.05 shares of Blue Ridge common stock for each share of VCB common stock is fixed and will not be adjusted to reflect changes in the market price of either the shares of Blue Ridge common stock or the shares of VCB common stock prior to the closing of the merger. As a result, the market value of the stock consideration received by VCB shareholders will vary with the market price of Blue Ridge common stock. Blue Ridge’s stock price changes daily as a result of a variety of other factors in addition to the business and relative prospects of Blue Ridge, including general market and economic conditions, industry trends, market assessment of the likelihood that the merger will be completed as anticipated or at all, and the regulatory environment. These factors are beyond Blue Ridge’s control. Therefore, at the time of the VCB special meeting, holders of VCB common stock will not know or be able to calculate the precise market value of the stock consideration they may receive upon completion of the merger, which could be significantly less than the current market value of Blue Ridge common stock.

Combining Blue Ridge and VCB 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 VCB. To realize such anticipated benefits and cost savings, Blue Ridge must successfully combine the businesses of Blue Ridge and VCB in a manner that permits growth opportunities and cost savings to be realized without materially disrupting the existing customer relationships of VCB 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 VCB. 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 VCB 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 VCB’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 VCB 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 VCB to lose customers or cause customers to withdraw their deposits from VCB’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 VCB and Blue Ridge during this transition period and for an undetermined period after consummation of the merger.

 

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

Blue Ridge and VCB expect to incur significant costs associated with completing the merger and integrating the operations of the two companies. Blue Ridge and VCB are continuing to assess the impact of these costs. Although Blue Ridge and VCB believe that the elimination of duplicate costs, as well as the realization of other efficiencies related to the integration of the businesses, will offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.

Blue Ridge may not be able to effectively integrate the operations of Virginia 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 Virginia 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 Virginia Community Bank and Blue Ridge Bank, (ii) retain the deposits and customers of Virginia 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 Virginia Community Bank with the operations of Blue Ridge Bank, particularly with regard to VCB’s mortgage operation, as well as reducing overlapping bank personnel. The integration of Virginia Community Bank and Blue Ridge Bank following the subsidiary bank merger will require the dedication of the time and resources of the banks’ management team and may temporarily distract the management teams’ attention from the day-to-day business of the banks. If Blue Ridge Bank and Virginia Community Bank are unable to successfully integrate, Blue Ridge may not be able to realize expected operating efficiencies and eliminate redundant costs.

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

Before the transactions contemplated by the merger agreement may be completed, various approvals or waivers must be obtained from bank regulatory authorities, including the Federal Reserve, the OCC, and the Virginia Bureau of Financial Institutions. These regulators may impose conditions on the granting of such approvals or changes to the terms of the merger. Such conditions or changes and the process of obtaining regulatory approvals or waivers could have the effect of delaying completion of the merger or of imposing additional costs or limitations on Blue Ridge following the merger. The regulatory approvals or waivers may not be received at all, may not be received in a timely fashion or may contain conditions on the completion of the merger that are burdensome, not anticipated or cannot be met. If the necessary governmental approvals or waivers contain such conditions, the business, financial condition and results of operations of Blue Ridge may be materially adversely affected.

A significant delay in the completion of the merger could negatively impact Blue Ridge and VCB as a combined company.

The merger agreement is subject to a number of conditions that must be fulfilled in order to complete the merger. Those conditions include, among others: (1) approval of the merger agreement by Blue Ridge shareholders and VCB shareholders, (2) receipt of all required approvals from bank regulatory authorities and expiration of all applicable waiting periods, (3) absence of any statute, rule, regulation, judgment, decree, injunction or other order prohibiting the completion of the merger and (4) effectiveness of the registration statement of which this joint proxy statement/prospectus is a part.

If these conditions to the completion of the merger are not fulfilled when expected and, accordingly, the completion of the merger is delayed, the diversion of management attention from pursuing other opportunities, the constraints in the merger agreement on the ability to make significant changes to each company’s ongoing business during the pendency of the merger, the incurrence of additional merger-related expenses, and other market and economic factors could have a material adverse effect on the combined company’s business, financial condition and results of operations.

The fairness opinions received by Blue Ridge and VCB in connection with the merger have not been, and are not expected to be, updated to reflect changes in circumstances between the dates of the opinions and the completion of the merger.

The fairness opinions rendered by Raymond James, financial advisor to Blue Ridge, and by Sandler O’Neill, financial advisor to VCB, on May 13, 2019, were based upon information available as of that date. Neither opinion reflects changes that may occur or may have occurred after the date on which each respective opinion was delivered, including changes to the operations and prospects of Blue Ridge or VCB, changes in general market and economic conditions, or other changes. Any such changes may alter the relative value of Blue Ridge or VCB or the prices of shares of Blue Ridge common stock or VCB 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 date of such opinions. For a description of the opinion that the Blue Ridge Board received from Blue Ridge’s financial advisor, please see “The Merger – Opinion of Blue Ridge’s Financial Advisor” beginning on page [●]. For a description of the opinion that the VCB Board received from VCB’s financial advisor, please see “The Merger – Opinion of VCB’s Financial Advisor” beginning on page [●].

 

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

VCB shareholders should be aware that certain of VCB’s directors and executive officers have interests in the merger that are different from, or in addition to, those of VCB shareholders generally. The VCB Board was fully informed of these interests and thoroughly considered these interests, among other matters, when making its decision to approve the merger agreement and recommend that VCB’s shareholders vote in favor of approving the VCB merger proposal. Among other things, two of VCB’s directors (in addition to A. Pierce Stone, its former President, Chief Executive Officer and Chairman) will be appointed to serve on the Blue Ridge Board and the Blue Ridge Bank board, VCB’s other directors will be offered the opportunity to serve on an advisory board of Blue Ridge, certain of VCB’s executive officers are expected to continue with Blue Ridge following completion of the merger and two of VCB’s executive officers have entered into employment agreements with Blue Ridge that will be effective at the closing of the merger and, in addition, they will receive cash severance payments related to change in control provisions in existing transaction bonus agreements. For a more complete description of these interests, see “The Merger – VCB’s Directors and Officers Have Financial Interests in the Merger” beginning on page [●].

The merger agreement limits the ability of VCB 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 VCB to discuss, solicit, facilitate or commit to competing third-party proposals to acquire all or a significant part of VCB or Virginia Community Bank. In addition, under certain circumstances, if the merger agreement is terminated and VCB, subject to certain restrictions, consummates a similar transaction other than the merger, VCB must pay to Blue Ridge a termination fee of $1.5 million. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant percentage of ownership of VCB from considering or proposing the acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger. See “The Merger Agreement – Termination Fees” beginning on page [●].

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

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Blue Ridge and VCB. These uncertainties may impair Blue Ridge’s and VCB’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with Blue Ridge and VCB to seek to change existing business relationships with Blue Ridge and VCB. Retention of certain employees by Blue Ridge and VCB may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with Blue Ridge or VCB. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Blue Ridge or VCB, Blue Ridge’s or VCB’s business, or the business of the combined company following the merger, could be harmed. In addition, subject to certain exceptions, Blue Ridge and VCB have each agreed to operate its business in the ordinary course prior to closing and refrain from taking certain specified actions until the merger occurs, which may prevent Blue Ridge or VCB from pursuing attractive business opportunities that may arise prior to completion of the merger. See “The Merger Agreement – Covenants and Agreements” beginning on page [●] for a description of the restrictive covenants applicable to Blue Ridge and VCB.

If the merger is completed, VCB shareholders will have less influence on the management and policies of Blue Ridge than they had on VCB before the merger.

After the merger is complete, it is anticipated that approximately 23.3% of the shares of Blue Ridge will be held by former shareholders of VCB. In addition, the Blue Ridge Board currently consists of 15 members, and, upon consummation of the merger, Blue Ridge will add three additional members that are current or former directors of VCB. Consequently, shareholders of VCB will have significantly less influence on the management and policies of Blue Ridge after the merger than they now have on the management and policies of VCB.

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

The merger could cause the respective management groups of Blue Ridge and VCB 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 VCB before the merger, or the business and earnings of Blue Ridge after the merger.

If the merger does not qualify as a reorganization under Section 368 of the Code, then certain holders of VCB common stock may incur additional U.S. income taxes related to the merger.

VCB and Blue Ridge believe that the merger will qualify as a reorganization within the meaning of Section 368 of the Code. However, if the United States Internal Revenue Service (the “IRS”) determines that the merger does not qualify as a reorganization under Section 368 of the Code, then the exchange of VCB common stock pursuant to the merger would be a taxable transaction, regardless of whether a holder of VCB receives cash or Blue Ridge common stock in exchange for that shareholder’s shares of VCB common stock. For holders of VCB common stock that elect to receive solely cash in exchange for their shares of VCB common

 

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stock pursuant to the merger (or who receive cash in exchange for their shares of VCB common stock pursuant to a valid exercise of their appraisal rights), the tax consequences will not be different. Each such holder of VCB common stock will recognize gain or loss on the exchange in an amount equal to the difference between the cash received and that holder’s adjusted tax basis in the shares of VCB common stock exchanged therefor. Holders of VCB common stock who elect to receive solely Blue Ridge common stock or a combination of cash and Blue Ridge common stock in the merger, however, may incur additional U.S. income taxes as a result of that exchange. In that case, each such holder of VCB common stock will recognize a gain or loss in an amount equal to the difference between the (i) the sum of the fair market value of cash and the Blue Ridge common stock received by such shareholder in the merger and (ii) such shareholder’s adjusted tax basis in the shares of VCB common stock exchanged therefor.

Risks Related to Blue Ridge’s Business

An investment in Blue Ridge’s common stock involves certain risks, including those described below. The risks discussed below are substantially similar to those which VCB currently faces as an independent company in the banking industry. Unless otherwise indicated or as the context requires, all references in this section to “we,” “us” and “our” refer to Blue Ridge or Blue Ridge Bank, as appropriate.

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

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

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

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

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

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

Blue Ridge’s non-performing assets adversely affect its net income in various ways. Non-performing assets, which include non-accrual loans and other real estate owned, were $5.6 million, or 0.98% of total assets, as of March 31, 2019. When Blue Ridge receives collateral through foreclosures and similar proceedings, it is required to mark the related loan to the then fair market value of the collateral less estimated selling costs, which may result in a loss. An increased level of non-performing assets also increases Blue Ridge’s risk profile and may impact the capital levels regulators believe are appropriate in light of such risks. Blue Ridge utilizes various techniques such as workouts, restructurings and loan sales to manage problem assets. Increases in, or negative changes in, the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect Blue Ridge’s business, results of operations and financial condition. In addition, the resolution of non-performing assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities, including generation of new loans. There can be no assurance that Blue Ridge will avoid increases in non-performing loans in the future.

 

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

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

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

Blue Ridge offers a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans. Credit risk and credit losses can increase if its loans are concentrated to borrowers who, as a group, may be uniquely or disproportionately affected by economic or market conditions. As of March 31, 2019, approximately 81.5% 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 rising 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 has a moderate concentration of credit exposure in commercial real estate and loans with this type of collateral are viewed as having more risk of default.

As of March 31, 2019, Blue Ridge had approximately $176.9 million in loans secured by commercial real estate, representing approximately 40.9% of total loans outstanding at that date. The real estate consists primarily of non-owner-operated properties and other commercial properties. These types of loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. It may be more difficult for commercial real estate borrowers to repay their loans in a timely manner, as commercial real estate borrowers’ abilities to repay their loans frequently depends on the successful rental of their properties. Cash flows may be affected significantly by general economic conditions, and a downturn in the local economy or in occupancy rates in the local economy where the property is located could increase the likelihood of default. Because Blue Ridge’s loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in its percentage of non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for loan losses and an increase in charge-offs, all of which could have a material adverse effect on Blue Ridge’s financial condition.

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

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

At March 31, 2019, approximately 7.1% of Blue Ridge’s loan portfolio, or $30.9 million, consisted of construction and land development loans. Construction financing typically involves a higher degree of credit risk than financing on improved, owner-occupied real estate and improved, income producing real estate. Risk of loss on a construction or land development loan is largely dependent upon the accuracy of the initial estimate of the property’s value at completion of construction or development, the marketability of the property, and the bid price and estimated cost (including interest) of construction or development. If the estimate of construction or development costs proves to be inaccurate, Blue Ridge may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of the value proves to be inaccurate, it may be confronted, at or prior to the maturity of the loan, with a project whose value is insufficient to assure full repayment. When lending to builders and developers, the cost breakdown of construction or development is provided by the builder or developer. Although Blue Ridge’s underwriting criteria are designed to evaluate and minimize the risks of each construction or land development loan, there can be no guarantee that these practices will have safeguarded against material delinquencies and losses to Blue Ridge’s operations. In addition, construction and land development loans are dependent on the successful completion of the projects they finance. Loans secured by vacant or unimproved land are generally riskier than loans secured by improved property. These loans are more susceptible to adverse conditions in the real estate market and local economy.

 

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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, terrorist activity, environmental contamination and other external events. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not. Blue Ridge has adopted underwriting and credit monitoring procedures and policies, including regular reviews of appraisals and borrower financial statements, that management believes are appropriate to mitigate the risk of loss. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on Blue Ridge’s financial condition and results of operations.

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

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

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

Blue Ridge is directly and indirectly affected by changes in market conditions. Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions. As a financial institution, market risk is inherent in the financial instruments associated with Blue Ridge’s operations and activities, including loans, deposits, securities, short-term borrowings, long-term debt and trading account assets and liabilities. A few of the market conditions that may shift from time to time, thereby exposing Blue Ridge to market risk, include fluctuations in interest rates, equity and futures prices, and price deterioration or changes in value due to changes in market perception or actual credit quality of issuers. Blue Ridge’s investment securities portfolio, in particular, may be impacted by market conditions beyond its control, including rating agency downgrades of the securities, defaults of the issuers of the securities, lack of market pricing of the securities, and inactivity or instability in the credit markets. Any changes in these conditions, in current accounting principles or interpretations of these principles could impact Blue Ridge’s assessment of fair value and thus the determination of other-than-temporary impairment of the securities in the investment securities portfolio, which could adversely affect Blue Ridge’s earnings and capital ratios.

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

Changes in the interest rate environment may reduce Blue Ridge’s profits. It is expected that Blue Ridge will continue to realize income from the differential or “spread” between the interest earned on loans, securities, and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. In addition, loan volume and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume of loan originations. Blue Ridge’s management cannot ensure that it can minimize interest rate risk. While an increase in the general level of interest rates may increase the loan yield and the net interest margin, it may adversely affect the ability of certain borrowers with variable rate loans to pay the interest and principal of their obligations. Also, when the difference between long-term interest rates and short-term interest rates is small or when short-term interest rates exceed long-term interest rates, Blue Ridge’s margins may decline and its earnings may be adversely affected. Accordingly, changes in levels of market interest rates could materially and adversely affect the net interest spread, asset quality, loan origination volume and Blue Ridge’s overall profitability.

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

Mortgage banking income, net of commissions, represented approximately 52.8% of total noninterest income for the year ended December 31, 2018. The success of Blue Ridge’s mortgage company is dependent upon its ability to originate loans and sell them to investors at or near current volumes. Loan production levels are sensitive to changes in the level of interest rates and

 

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changes in economic conditions. During the recovery from the financial crisis, revenues from mortgage banking increased due to a lowering interest rate environment that resulted in a high volume of mortgage loan refinancing activity. More recently, revenues have been adversely affected by rising interest rates, home affordability and inventory issues, and changing incentives for homeownership. Loan production levels may also suffer if Blue Ridge experiences a slowdown in the housing markets in which it conducts business or tightening credit conditions. Any sustained period of decreased activity caused by fewer refinancing transactions, higher interest rates, housing price pressure or loan underwriting restrictions would adversely affect Blue Ridge’s mortgage originations and, consequently, could significantly reduce its income from mortgage banking activities. As a result, these conditions would also adversely affect Blue Ridge’s results of operations.

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

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

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

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

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

 

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Recently enacted capital standards, including the rules implementing the Basel III capital framework and certain provisions of the Dodd-Frank Act (the “Basel III Capital Rules”), may require Blue Ridge and Blue Ridge Bank to maintain higher levels of capital and liquid assets, which could adversely affect Blue Ridge’s profitability and return on equity.

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

Regulations issued by the Consumer Financial Protection Bureau (the “CFPB”) could adversely impact earnings due to, among other things, increased compliance costs or costs due to noncompliance.

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

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

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

 

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

Following the merger, Blue Ridge’s non-interest expenses will increase as a result of the additional accounting, legal and various other additional expenses usually associated with operating as a public company and complying with public company disclosure obligations. As a privately held company, Blue Ridge is not required to comply with certain corporate governance and financial reporting practices and policies required of a publicly traded company. After the merger, Blue Ridge will be required to comply with the requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, stock exchange listing requirements and other applicable securities rules and regulations. The Exchange Act requires, among other things, that Blue Ridge files annual, quarterly, and current reports with respect to its business and operating results with the SEC. Blue Ridge will also be required to ensure that it has the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. Compliance with these rules and regulations will increase Blue Ridge’s legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on Blue Ridge’s systems and resources. As a public company, Blue Ridge will, among other things:

 

   

prepare and distribute periodic public reports and other stockholder communications in compliance with its obligations under the federal securities laws and applicable stock exchange rules;

 

   

create or expand the roles and duties of its board of directors and committees of the board;

 

   

institute more comprehensive financial reporting and disclosure compliance functions;

 

   

enhance its investor relations function;

 

   

establish new internal policies, including those relating to disclosure controls and procedures; and

 

   

involve and retain to a greater degree outside counsel and accountants in the activities listed above.

These changes will require a significant commitment of additional resources. Blue Ridge might not be successful in complying with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on its business, financial condition, results of operations and cash flows.

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

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

Changes in accounting standards could impact reported earnings.

The authorities that promulgate accounting standards, including the Financial Accounting Standards Board, the SEC and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of Blue Ridge’s consolidated financial statements. These changes are difficult to predict and can materially impact how Blue Ridge records and reports its financial condition and results of operations. In some cases, Blue Ridge could be required to apply a new or revised standard retroactively, resulting in the restatement of financial statements for prior periods. Such changes could also require Blue Ridge to incur additional personnel or technology costs. For information regarding recent accounting pronouncements and their effects on Blue Ridge, see “Recent Accounting Pronouncements and Changes” in Note 26 of Blue Ridge’s audited financial statements for the year ended December 31, 2018 included elsewhere in this joint proxy statement/prospectus.

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

Effective internal and disclosure controls are necessary for Blue Ridge to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. If Blue Ridge cannot provide reliable financial reports or prevent fraud, its reputation and operating results would be harmed. As part of Blue Ridge’s ongoing monitoring of internal control, it may discover material weaknesses or significant deficiencies in its internal control that require remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

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

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

Blue Ridge qualifies as an “emerging growth company,” as defined in the federal securities laws. For as long as it continues to be an emerging growth company, Blue Ridge may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Blue Ridge could be an emerging growth company for up to five years, although it could lose that status sooner if its gross revenues exceed $1.0 billion, if it issues more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of its common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case Blue Ridge would no longer be an emerging growth company as of the following December 31. Blue Ridge cannot predict if investors will find its common stock less attractive because it may rely on these exemptions, or if it chooses to rely on additional exemptions in the future. If some investors find Blue Ridge’s common stock less attractive as a result, there may be a less active trading market for its common stock and its stock price may be more volatile.

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

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

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

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

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

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

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

 

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

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

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, Blue Ridge may rely on information furnished to it by or on behalf of clients and counterparties, including financial statements and other financial information, which it does not independently verify. Blue Ridge also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, Blue Ridge may assume that a client’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of that client. Blue Ridge’s financial condition and results of operations could be negatively impacted to the extent it relies on financial statements that do not comply with GAAP or are materially misleading.

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

Blue Ridge’s success is, and is expected to remain, highly dependent on its management team, including current VCB 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.

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

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

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

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

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

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

 

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

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

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

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

Blue Ridge may be required to transition from the use of the London Interbank Offered Rate (“LIBOR”) index in the future.

Blue Ridge has certain variable-rate loans indexed to LIBOR to calculate the loan interest rate. The United Kingdom Financial Conduct Authority, which regulates LIBOR, has announced that the continued availability of the LIBOR on the current basis is not guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR, and it is impossible to predict the effect of any such alternatives on the value of LIBOR-based variable-rate loans, as well as LIBOR-based securities, subordinated notes, trust preferred securities, or other securities or financial arrangements. The implementation of a substitute index or indices for the calculation of interest rates under Blue Ridge’s loan agreements with borrowers, subordinated notes that it has issued, or other financial arrangements may cause Blue Ridge to incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers or other counter-parties over the appropriateness or comparability to LIBOR of the substitute index or indices, any of which could have a material adverse effect on Blue Ridge’s results of operations.

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

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

In addition, multiple major U.S. retailers have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information and other financial or privileged data. Retailer incursions affect cards issued and deposit accounts maintained by many banks, including Blue Ridge. Although Blue Ridge’s systems are not breached in retailer

 

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incursions, these events can cause it to reissue a significant number of cards and take other costly steps to avoid significant theft loss to Blue Ridge and its customers. In some cases, Blue Ridge may be required to reimburse customers for the losses they incur. Other possible points of intrusion or disruption not within Blue Ridge’s control include internet service providers, electronic mail portal providers, social media portals, distant-server (cloud) service providers, electronic data security providers, telecommunications companies, and smart phone manufacturers.

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

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

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

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

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

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

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

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

Risks Related to Blue Ridge’s Common Stock

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

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

 

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

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

Blue Ridge common stock currently has a limited trading market 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 Markets Group’s Pink marketplace under the symbol “BRBS.” Blue Ridge common stock is thinly traded and has substantially less liquidity than the trading markets for many other bank holding companies. Although Blue Ridge intends to apply to list its common stock on the Nasdaq Stock Market or the New York Stock Exchange in connection with the merger, Blue Ridge will be required to meet the initial listing requirements of such exchange to be listed. Blue Ridge may not be able to meet those initial listing requirements, and even if Blue Ridge’s common stock is so listed, Blue Ridge may be unable to maintain the listing of its common stock in the future. In addition, there can be no assurance that an active trading market for shares of Blue Ridge’s common stock will develop or if one develops, that it can be sustained 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. Therefore, Blue Ridge’s shareholders may not be able to sell their shares at the volume, prices, or times that they desire. Shareholders should be financially prepared and able to hold shares for an indefinite period.

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

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

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

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

As of March 31, 2019, Blue Ridge had $10.0 million of subordinated notes outstanding and may issue more debt securities or otherwise incur debt in the future. The rights of holders of Blue Ridge’s debt to receive payments are superior to the rights of the holders of Blue Ridge’s common stock to receive payments of dividends and payments upon a sale or liquidation of Blue Ridge. In addition, the agreements under which the subordinated notes were issued prohibit Blue Ridge from paying any dividends on its common stock or making any other distributions to its shareholders upon its failure to make any required payment of principal or interest or during the continuance of an event of default under the applicable agreement. Events of default generally consist of,

 

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among other things, certain events of bankruptcy, insolvency or liquidation relating to Blue Ridge. If Blue Ridge were to fail to make a required payment of principal or interest on its subordinated notes, it could have a material adverse effect on the market value of Blue Ridge’s common stock.

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

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

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

the fairness opinions of Blue Ridge’s and VCB’s advisors have not been, and are not expected to be, updated to reflect changes in circumstances between the date of the opinions and the shareholder meetings or the completion of the merger; if the merger is completed, VCB shareholders will have less influence on the management and policies of Blue Ridge than they had on VCB independently before the merger;

 

   

business uncertainties and contractual restrictions while the merger is pending;

 

   

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

 

   

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;

 

   

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

 

   

Blue Ridge’s limited ability to pay dividends;

 

   

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

 

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BLUE RIDGE SPECIAL MEETING OF SHAREHOLDERS

General

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

Blue Ridge is mailing this joint proxy statement/prospectus on or about [●], 2019, to holders of shares of Blue Ridge common stock at the close of business on [●], 2019, which is the record date for the Blue Ridge special meeting. Together with this joint proxy statement/prospectus, Blue Ridge is also sending a notice of the Blue Ridge special meeting and a form of proxy that is solicited by the Blue Ridge Board for use at the Blue Ridge special meeting to be held on [●], 2019 at [●] [●].m., local time, at the [●], and at any adjournment or postponement of that meeting.

Matters to be Considered

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

 

  1.

Approve the Blue Ridge merger proposal (see “Blue Ridge Proposals – Proposal No. 1 – Approval of the Merger” beginning on page [●]); and

 

  2.

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

Recommendations of the Blue Ridge Board

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

Record Date and Voting Rights

The Blue Ridge Board has fixed the close of business on [●], 2019 as the record date for determining the shareholders entitled to notice of and to vote at the Blue Ridge special meeting or any postponement or adjournment thereof. Accordingly, Blue Ridge shareholders are only entitled to notice of and to vote at the Blue Ridge special meeting if they were record holders of Blue Ridge common stock at the close of business on the record date. On the record date, there were [●] shares of Blue Ridge common stock outstanding, held by approximately [●] holders of record.

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

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

Votes Required

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

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

 

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

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

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

Stock Ownership of Blue Ridge Directors and Executive Officers

As of the record date, directors and executive officers of Blue Ridge and their affiliates beneficially owned [●] shares of Blue Ridge common stock, representing approximately [●]% of the aggregate voting power of Blue Ridge shares entitled to vote at the Blue Ridge special meeting. All of Blue Ridge’s directors have entered into affiliate agreements pursuant to which, subject to certain exceptions, they have agreed to vote their shares of Blue Ridge common stock in favor of the Blue Ridge merger proposal.

Voting of Proxies

By Mail

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

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

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

By Internet or Telephone

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

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

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

Voting in Person

If a Blue Ridge shareholder wishes to vote in person at the Blue Ridge special meeting, a ballot will be provided at the meeting. However, street name shareholders must obtain a legal proxy, executed in such shareholder’s favor, from the holder of record to be able to vote those shares at the meeting.

Revocation of Proxies

Any Blue Ridge shareholder giving a proxy may change or revoke it at any time before the polls are closed for voting at the Blue Ridge special meeting. If a Blue Ridge shareholder grants a proxy with respect to the shareholder’s Blue Ridge shares and then attends the Blue Ridge special meeting in person, such attendance at the Blue Ridge special meeting or at any adjournment or

 

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postponement of the Blue Ridge special meeting will not automatically revoke the proxy. A Blue Ridge shareholder of record may change or revoke a proxy by:

 

   

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

 

   

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

 

   

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

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

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

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

Solicitation of Proxies

This solicitation is made on behalf of the Blue Ridge Board, and Blue Ridge will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing brokers and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding these proxy materials to Blue Ridge shareholders. Proxies may be solicited, without extra compensation, by Blue Ridge’s directors, officers, and employees in person or by mail, telephone or other electronic means. In addition, Blue Ridge has engaged Regan & Associates, Inc. to assist it in the distribution and solicitation of proxies for a fee of approximately $11,000.

 

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BLUE RIDGE PROPOSALS

Proposal No. 1 – Approval of the Merger

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

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

THE BLUE RIDGE BOARD UNANIMOUSLY RECOMMENDS THAT BLUE RIDGE SHAREHOLDERS

VOTE “FOR” THE BLUE RIDGE MERGER PROPOSAL.

Proposal No. 2 – Adjournment of the Special Meeting

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

THE BLUE RIDGE BOARD UNANIMOUSLY RECOMMENDS THAT BLUE RIDGE SHAREHOLDERS

VOTE “FOR” THE BLUE RIDGE ADJOURNMENT PROPOSAL.

 

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VCB SPECIAL MEETING OF SHAREHOLDERS

General

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

VCB is mailing this joint proxy statement/prospectus on or about [●], 2019, to holders of shares of VCB common stock at the close of business on [●], 2019, which is the record date for the VCB special meeting. Together with this joint proxy statement/prospectus, VCB is also sending a notice of the VCB special meeting and a form of proxy that is solicited by the VCB Board for use at the VCB special meeting to be held on [●], 2019 at [●]:00 [●].m., local time, at [●], and at any adjournment or postponement of that meeting.

Matters to be Considered

At the special meeting, VCB shareholders will be asked to:

 

  1.

Approve the VCB merger proposal (see “VCB Proposals – Proposal No. 1 – Approval of the Merger” beginning on page [●]); and

 

  2.

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

Recommendations of the VCB Board

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

Record Date and Voting Rights

The VCB Board has fixed the close of business on [●], 2019 as the record date for determining the shareholders entitled to notice of and to vote at the VCB special meeting or any postponement or adjournment thereof. Accordingly, VCB shareholders are only entitled to notice of and to vote at the VCB special meeting if they were record holders of VCB common stock at the close of business on the record date. On the record date, there were [●] shares of VCB common stock outstanding, held by approximately [●] holders of record.

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

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

Votes Required

Vote Required for the VCB Merger Proposal (Proposal No. 1)

Approval of the VCB merger proposal requires the affirmative vote of not less than two-thirds of the shares of VCB common stock outstanding on the record date and entitled to vote. Accordingly, abstentions and broker non-votes will have the same effect as votes against the VCB merger proposal. In addition, a failure to vote VCB shares by proxy or in person will have the same effect as a vote against the VCB merger proposal.

 

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

The approval of the adjournment proposal requires that the votes cast for the proposal exceed the votes cast against the proposal.

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

Stock Ownership of VCB Directors and Executive Officers

As of the record date, directors and executive officers of VCB and their affiliates beneficially owned [●] shares of VCB common stock, representing approximately [●]% of the aggregate voting power of VCB shares entitled to vote at the VCB special meeting. All of VCB’s directors have entered into affiliate agreements pursuant to which, subject to certain exceptions, they have agreed to vote their shares of VCB common stock in favor of the VCB merger proposal.

Voting of Proxies

By Mail

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

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

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

By Internet or Telephone

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

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

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

Voting in Person

If a VCB shareholder wishes to vote in person at the VCB special meeting, a ballot will be provided at the meeting. However, street name shareholders must obtain a legal proxy, executed in such shareholder’s favor, from the holder of record to be able to vote those shares at the meeting.

Revocation of Proxies

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

 

   

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

 

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

 

   

attending the VCB special meeting and voting in person (attendance at the VCB special meeting will not itself revoke a proxy).

If a VCB shareholder chooses the first method, he or she must submit the new proxy or notice of revocation to the Corporate Secretary of VCB at 114 Industrial Drive, Louisa, Virginia 23093, so that it is received by the Corporate Secretary no later than the beginning of the VCB special meeting or, if the VCB special meeting is adjourned or postponed, before the adjourned or postponed meeting is actually held.

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

If assistance is needed in changing or revoking a proxy, please contact Amy M. Schick, Corporate Secretary, at 114 Industrial Drive, Louisa, Virginia 23093, by e-mail at amy.schick@vacmbk.com, or by telephone at (540) 967-2111.

Solicitation of Proxies

This solicitation is made on behalf of the VCB Board, and VCB will pay the costs of soliciting and obtaining proxies, including the cost of reimbursing brokers and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding these proxy materials to VCB shareholders. Proxies may be solicited, without extra compensation, by VCB’s directors, officers, and employees in person or by mail, telephone or other electronic means. In addition, VCB has engaged Regan & Associates, Inc. to assist it in the distribution and solicitation of proxies for a fee of approximately $4,500.

Appraisal Rights

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

 

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VCB PROPOSALS

Proposal No. 1 – Approval of the Merger

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

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

THE VCB BOARD UNANIMOUSLY RECOMMENDS THAT VCB SHAREHOLDERS

VOTE “FOR” THE VCB MERGER PROPOSAL.

Proposal No. 2 – Adjournment of the Special Meeting

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

THE VCB BOARD UNANIMOUSLY RECOMMENDS THAT VCB SHAREHOLDERS

VOTE “FOR” THE VCB ADJOURNMENT PROPOSAL.

 

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THE MERGER

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

Background of the Merger

As part of its consideration and assessment of VCB’s long-term alternatives, prospects and strategies, the VCB Board has periodically discussed and reviewed strategic opportunities to maximize value for its shareholders. These opportunities have included, among other alternatives, continuing as an independent institution, growing internally or affiliating with another institution.

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

With an understanding that size and scale may provide increased long-term shareholder value, the VCB Board and management continued in 2017 to evaluate strategic options, including a possible merger or other strategic combination with another financial institution or financial industry partner. Among other benefits, the VCB Board believed that a potential merger or strategic combination would likely achieve economies of scale to absorb increased regulatory compliance costs and additional operating costs. From time to time, VCB had been approached by other financial institutions and other financial industry firms looking to enter or expand in and around the central Virginia market. In consideration of these factors, in April 2017, VCB began exploring a strategic transaction with Atlantic Bay Mortgage Group L.L.C. (“Atlantic Bay”), a privately owned national mortgage lender. In July 2017, VCB announced plans to merge with Atlantic Bay in an all-stock deal. The deal initially was expected to close in the fourth quarter of 2017; however, in August 2018 the time frame for closing the transaction remained unclear, and the parties mutually decided to withdraw their merger applications and terminate the transaction. Following the termination of the merger with Atlantic Bay, management and the VCB Board focused on building value by remaining independent; however, VCB continued to be approached by other financial institutions looking to enter or expand in and around the central Virginia market. The VCB Board continued reviewing and assessing the company’s long-term strategic goals and opportunities, all with a focus on enhancing shareholder value.

To assist the VCB Board in its continuing review of strategic goals and opportunities (including potential strategic alternatives), on February 7, 2019, the VCB Board invited representatives of Sandler O’Neill, a nationally known and experienced investment banking firm, to attend the VCB Board’s strategic planning meeting. Over the past several years, VCB has worked with Sandler O’Neill on a variety of strategic initiatives, including reviewing capital and analyzing strategic alternatives. Sandler O’Neill also served as financial advisor to VCB in the terminated Atlantic Bay transaction. During the meeting the VCB Board and representatives of Sandler O’Neill discussed the current banking environment and recent transactions in the banking and financial services industry. The VCB Board reviewed a variety of strategic alternatives, including VCB’s prospects for organic growth on a stand-alone basis and a strategic merger with another financial institution. Following this discussion and in consideration of many of the same factors that led the VCB Board to enter into the Atlantic Bay transaction, the VCB Board formally engaged Sandler O’Neill and directed executive management, in coordination with Sandler O’Neill, to prepare a confidential information memorandum that could be used to provide information about VCB to potential merger partners and to populate an online data room to facilitate the performance of due diligence by potential merger partners.

The VCB Board noted that it was not under any obligation to proceed with a transaction should the distribution of the confidential information memorandum not generate the desired results in terms of valuation and other factors that it determined to be in the best interests of VCB and its shareholders. Sandler O’Neill contacted 18 financial institutions regarding their interest in a potential strategic transaction. Fifteen candidates entered into confidentiality agreements and then obtained access to a virtual data room containing the confidential information memorandum and extensive financial and operating information on VCB. Ten of those candidates, including Blue Ridge, submitted non-binding indications of interest to VCB by March 22, 2019.

At a regular meeting of the Blue Ridge Board on March 20, 2019, the Blue Ridge Board discussed a potential transaction with VCB with Blue Ridge management and representatives of Raymond James, a nationally recognized investment banking firm. At the meeting, the Blue Ridge Board reviewed and discussed a draft of a non-binding indication of interest to acquire VCB and a pro forma analysis of the combined companies, both of which were provided to the Blue Ridge Board in advance of the meeting. Representatives of Raymond James were present by telephone and reviewed the financial analysis of the key terms of the potential acquisition, including a discussion of the financial modeling and underlying assumptions of the transaction. Blue Ridge management discussed the benefits of a partnership between Blue Ridge and VCB, the culture of both companies, the purchase

 

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price and form of consideration, corporate structure, contingencies, board of directors and employee matters, executive officer retention, timing, and required approvals. Following thorough discussion, the Blue Ridge Board authorized Blue Ridge management to submit the non-binding indication of interest to the VCB Board and, if selected to do so, proceed with additional due diligence of VCB.

A special meeting of the VCB Board was held on March 26, 2019, with representatives of Sandler O’Neill present by telephone and with representatives from the law firm Hunton Andrews Kurth, LLP (“Hunton”), legal counsel for VCB, also present by telephone, to review the indications of interest. Representatives of Hunton reviewed with the board its fiduciary duties under Virginia law in the context of a proposed merger. The VCB Board reviewed the proposals in detail with extensive discussion regarding the history of the interested parties and their stock performance, pro-forma analysis of the combined companies, and opportunities and risks for VCB shareholders under each of the 10 proposals. One proposal consisted of 100% stock consideration and nine of the proposals consisted of mixed cash and stock consideration, with percentages ranging from 50% stock to 90% stock and with implied per share consideration ranging from $51.25 to $60.00.

The VCB Board, after discussions with representatives of Sandler O’Neill, identified the top four proposals. The Blue Ridge proposal consisted of mixed consideration with 60% stock and 40% cash. The cash portion of the consideration was fixed at $53.00 per share. The other institutions that submitted the leading non-binding indications of interest to VCB are referred to as Institution A, Institution B and Institution C. Institution A’s proposal consisted of mixed consideration with 70% stock and 30% cash. The cash portion per share ranged from $53.00 - $56.00. Institution B’s proposal consisted of mixed consideration with 80% stock and 20% cash. The cash portion per share was fixed at $56.00. Institution C’s proposal consisted of mixed consideration with 50% stock and 50% cash. The cash portion per share ranged from $53.00 - $58.00.

After considering the merits of each of the proposals, and after discussions with representatives of Sandler O’Neill and of Hunton, the VCB Board instructed Sandler O’Neill to invite Blue Ridge, Institution A, Institution B and Institution C to conduct additional due diligence on VCB, including on-site due diligence visits with VCB’s management, and to submit revised non-binding indications of interest to VCB by April 26, 2019.

From March 26, 2019, to April 26, 2019, the four financial institutions conducted a comprehensive due diligence review of VCB, including meetings with executive management of VCB to discuss various matters. During this time, Blue Ridge management conducted additional diligence of VCB, continued its financial analysis of a transaction with VCB and determined that the benefits of such a transaction warranted moving forward in the process. At a regularly scheduled meeting of the Blue Ridge Board and strategic planning committee on April 17, 2019, management provided an update on the status of a potential transaction with and its due diligence of VCB. Following that discussion, the Blue Ridge Board authorized Blue Ridge management to work toward preparing a revised non-binding indication of interest to submit to VCB by April 26, 2019.

On April 26, 2019, a special meeting of the Blue Ridge Board was held with representatives of Raymond James present by telephone. Representatives of Raymond James reviewed updated financial aspects of the proposed transaction and an updated non-binding indication of interest. Blue Ridge management discussed with the Blue Ridge Board the results of due diligence performed to date and the changes from the initial indication of interest that had been submitted to VCB. Blue Ridge’s revised indication of interest increased the cash portion of the merger consideration to $58.00 per share. Following thorough discussion, the Blue Ridge Board authorized Blue Ridge management to submit the revised non-binding indication of interest to the VCB Board on the terms discussed during the meeting.

Of the four candidates invited to perform additional due diligence and submit a revised non-binding indication of interest, three candidates, including Blue Ridge, submitted non-binding indications of interest to VCB on April 26, 2019. Institution C elected not to continue with the process. The three revised proposals consisted of mixed cash and stock consideration, with percentages ranging from 60% stock to 80% stock and with aggregate implied per share consideration ranging from $55.00 to $60.68. The Blue Ridge revised proposal consisted of mixed consideration with 60% stock and 40% cash, with cash consideration of $58.00 per share and a fixed exchange ratio (without a cap or collar) that resulted in an aggregate implied purchase price of $60.68 per share based on the closing price of Blue Ridge’s stock on April 26, 2019.

A special meeting of the VCB Board was held on April 30, 2019 with representatives of Sandler O’Neill and of Hunton present to review the revised indications of interest. A representative of Sandler O’Neill presented a financial analysis of Blue Ridge, Institution A and Institution B, and of the proposed merger consideration described in each of their proposals. The Sandler O’Neill representative also presented a net present value analysis of VCB on a stand-alone basis utilizing internal financial projections for VCB for the year ending December 31, 2019, as well as an estimated long-term annual earnings per share growth rate for the years thereafter, as provided by senior management of VCB. Hunton representatives discussed the purpose for the meeting and the legal standards and responsibilities of the directors with regard to matters before them. The VCB Board considered at length whether or not to move forward with a merger transaction, the merits of stock versus cash and percentages of mixed consideration, and the risks and benefits of continuing the process with only one of the parties. The VCB Board discussed which proposal represented the better combination of high valuation and low execution risk relative to the other proposals. Following this discussion, the VCB Board

 

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authorized management to advance the merger discussions with Blue Ridge and to grant Blue Ridge a 30-day period of exclusivity to conduct additional due diligence and negotiate a definitive merger agreement with VCB. On May 3, 2019, VCB and Blue Ridge entered into a letter of intent containing a 30-day exclusivity period.

On May 4, 2019, Williams Mullen, legal counsel for Blue Ridge, delivered a draft of a proposed definitive merger agreement containing the proposed complete terms of the transaction. During the period from May 4, 2019 through May 13, 2019, the parties and their legal counsel exchanged drafts and negotiated changes to the draft merger agreement in an effort to resolve all open issues to reach a definitive merger agreement. During this time, management of the parties and their respective financial advisors continued discussions and additional due diligence on both VCB and Blue Ridge was performed. Among other things, Blue Ridge populated a virtual data room to facilitate the performance of due diligence of it by VCB. The parties also provided drafts of their respective disclosure schedules to the merger agreement and discussed other aspects of the proposed transaction and merger integration issues. During this period, Blue Ridge also negotiated the terms of the employment agreements to be entered into between Blue Ridge and each of A. Preston Moore Jr., VCB’s President and Chief Executive Officer, and Thomas M. Crowder, VCB’s Executive Vice President, Chief Financial Officer and Chief Operating Officer, each to be effective upon the consummation of the proposed merger. Messrs. Moore and Crowder were advised by separate independent counsel in connection with the employment agreements.

On May 10, 2019, the VCB Board held a special meeting to discuss the draft merger agreement and related issues. Also present were representatives of Sandler O’Neill and Hunton. Hunton representatives discussed the purpose for the meeting and the legal standards and responsibilities of the directors with regard to the matters before them. The purpose of the meeting was to provide the VCB Board with an opportunity to review, consider, and discuss the potential merger. Hunton representatives reviewed the draft merger agreement and related ancillary documents with the VCB Board, copies of which were delivered to each director prior to the meeting, and responded to questions, and engaged in discussion, regarding various transaction terms, including the circumstances under which the VCB Board would have the right to entertain superior third-party offers prior to the closing of the merger, the termination fee that would be payable by VCB if the merger agreement were terminated under certain circumstances, and the affirmative and negative covenants that would be applicable to VCB and Virginia Community Bank prior to the closing of the merger. Hunton representatives also walked the VCB Board through the remaining open points in the draft merger agreement and related ancillary documents and received guidance on those items from management and the VCB Board. VCB management and representatives of Hunton also reported on the status of their due diligence review of Blue Ridge. A Sandler O’Neill representative reviewed with the VCB Board the background of the process which had been undertaken to that point, and presented a financial analysis of Blue Ridge and of the proposed merger consideration.

On the afternoon of May 13, 2019, the VCB Board held a special telephonic meeting to further consider the proposed merger with Blue Ridge. Representatives of Sandler O’Neill and Hunton also joined the meeting by telephone. Representatives of Sandler O’Neill delivered to the VCB Board its oral opinion, which was subsequently confirmed in writing, to the effect that, based on and subject to the assumptions, limitations, qualifications and conditions set forth in Sandler O’Neill written opinion, as of that date, the merger consideration to be received in the merger by VCB common shareholders was fair, from a financial point of view, to such holders. Hunton representatives then requested and received confirmation from the directors that each of the directors present had reviewed the draft merger agreement, resolutions and other ancillary material provided to the directors prior to the special meeting, and addressed additional questions. Hunton representatives also reiterated that pursuant to the merger agreement, the directors would need to sign shareholder support agreements, which would require them to vote their shares in favor of the merger. Thereafter, the VCB Board received and considered resolutions concerning the transaction. The members of the VCB Board unanimously approved the merger agreement and transactions set forth therein and authorized Mr. Moore to execute and deliver the merger agreement and take the other actions necessary to effect the transaction.

On the afternoon of May 13, 2019, the Blue Ridge Board held a special meeting to consider the proposed merger with VCB. The purpose of the meeting was to provide the Blue Ridge Board with an opportunity to review, consider, and discuss the potential merger and the merger agreement. Management reviewed for the Blue Ridge Board the progress of its negotiations with VCB and reported on the status of its due diligence review of VCB. Representatives from Raymond James and Williams Mullen also joined this meeting and provided an update on the status of merger discussions. Also at the meeting, representatives of Raymond James reviewed its financial analysis of the terms of the merger, including the merger consideration, and delivered to the Blue Ridge Board its oral opinion (which was subsequently confirmed in writing) that, based on and subject to various assumptions and limitations described in the opinion, the merger consideration was fair, from a financial point of view, to Blue Ridge. Representatives of Williams Mullen also discussed with the Blue Ridge Board the legal standards applicable to its decisions and actions with respect to its consideration of the proposed merger and reviewed in detail the proposed merger agreement and related agreements, copies of which were delivered to each director before the meeting. Following extensive review and discussion and consideration of the presentations from Raymond James and Williams Mullen, the Blue Ridge Board unanimously voted to approve the merger, approve and adopt the merger agreement and directed Brian K. Plum, President and Chief Executive Officer of Blue Ridge, to finalize and execute a definitive merger agreement on the terms presented at the meeting.

 

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VCB and Blue Ridge executed the merger agreement the evening of May 13, 2019 and publicly announced the transaction before the stock markets opened on the morning of May 14, 2019 in a press release issued jointly by Blue Ridge and VCB.

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

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

 

   

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

 

   

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

 

   

the advantages of being part of a larger institution with over $800 million in assets, including a better ability to leverage overhead costs and the potential for operating efficiencies and increased profitability, particularly in light of the regulatory and competitive environments and the effects of continued rapid consolidation in the financial services industry generally;

 

   

the compatibility of Blue Ridge’s business, operations and culture with those of VCB, including the opportunity for further growth in complementary lines of business such as purchase and credit cards, payroll, insurance, mortgage, and qualified intermediary services;

 

   

the attractiveness of VCB’s low cost funding base to support future growth;

 

   

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

 

   

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

 

   

Blue Ridge’s expectations and analyses of the financial metrics of the merger, including potential cost saving opportunities, expected earnings per share accretion and manageable dilution to tangible book value of approximately 3.75 years;

 

   

the financial analyses and other information presented by Raymond James to the Blue Ridge Board with respect to the merger and the opinion delivered to the Blue Ridge Board by Raymond James to the effect that, as of the date of that opinion, the merger consideration was fair to Blue Ridge from a financial point of view;

 

   

the corporate governance and social aspects of the merger, including the added strength and depth of experience of the members of VCB’s management team who will join Blue Ridge’s management team following the merger;

 

   

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

 

   

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

 

   

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

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

 

   

the challenges of integrating VCB’s business, operations and employees with those of Blue Ridge;

 

   

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

 

   

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

 

   

the risk that the merger would not be consummated;

 

   

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

 

   

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

 

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

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

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

Opinion of Blue Ridge’s Financial Advisor

Blue Ridge retained Raymond James to act as its investment banking advisor in connection with Blue Ridge’s consideration of a possible acquisition of VCB. Blue Ridge selected Raymond James as a financial advisor because it is a globally-recognized investment banking firm offering a full range of investment banking services to its clients. In the ordinary course of its investment banking business, Raymond James is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

Raymond James delivered its oral opinion to the Blue Ridge Board, which was subsequently confirmed in writing, as of May 13, 2019, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by Raymond James in preparing the opinion, as to the fairness of the merger consideration, from a financial point of view, to Blue Ridge. Raymond James provided its opinion for the information and assistance of the Blue Ridge Board (in its capacity as such) in connection with its consideration of the financial terms of the merger and the opinion relates only to the fairness of the merger consideration, from a financial point of view, to Blue Ridge. Raymond James’ opinion does not address the underlying business decisions of Blue Ridge to engage in the merger, the form or structure of the merger, the relative merits of the merger as compared to any other alternative business strategies that might exist for Blue Ridge, or the effect of any other transaction in which Blue Ridge might engage. Neither Raymond James’ opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the Blue Ridge Board or any shareholder as to how to act or vote with respect to the merger or related matters.

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

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

 

   

reviewed the financial terms and conditions as stated in the draft of the merger agreement dated May 11, 2019;

 

   

reviewed Blue Ridge’s and VCB’s audited and unaudited financial statements;

 

   

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

 

   

reviewed certain information related to the historical, current and future operations, financial condition and prospects of VCB and Blue Ridge made available to Raymond James by Blue Ridge, including, but not limited to, (a) financial projections prepared by the management of Blue Ridge relating to VCB for the periods ending December 31, 2019 through December 31, 2023, as approved for Raymond James’ use by Blue Ridge, which are referred to in this section as the “Projections”, and (b) certain forecasts and estimates of potential cost savings, operating efficiencies, revenue effects, and other synergies expected to result from the merger, all as prepared by management of Blue Ridge, which are referred to in this section as the “Synergies”;

 

   

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

 

   

considered the publicly available financial terms of certain transactions Raymond James deemed to be relevant;

 

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reviewed the current and historical market prices for Blue Ridge’s public shares, and the current market prices of publicly traded securities of certain other companies that Raymond James deemed to be relevant;

 

   

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

 

   

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

 

   

reviewed a certificate, dated May 12, 2019, addressed to Raymond James from a member of senior management of Blue Ridge regarding, among other things, the accuracy of financial information and data provided to, or discussed with, Raymond James by or on behalf of Blue Ridge; and

 

   

discussed with members of the senior management of Blue Ridge certain information relating to the aforementioned and any other matters which Raymond James deemed relevant to its inquiry for the purposes of its opinion.

With Blue Ridge’s consent, Raymond James has assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of Blue Ridge or otherwise reviewed by or discussed with Raymond James, and Raymond James has undertaken no duty or responsibility to, nor did Raymond James, independently verify any such information. Raymond James has not made or obtained an independent appraisal of the assets, the collateral securing assets or the liabilities (contingent or otherwise) of VCB or Blue Ridge, nor has Raymond James been furnished with any such evaluations or appraisals. Raymond James is not an expert in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowance for loan losses or any other reserves; accordingly Raymond James has assumed that such allowances and reserves are in the aggregate adequate to cover such losses and comply fully with applicable law, regulatory policy and sound banking practices as of May 13, 2019. Raymond James renders no opinion or evaluation on the collectability of any assets or the future performance of any loans of Blue Ridge, VCB or any of their respective subsidiaries. Furthermore, Raymond James has undertaken no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which VCB or Blue Ridge is a party or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which VCB or Blue Ridge is a party or may be subject. With Blue Ridge’s consent, this opinion makes no assumption concerning, and therefore does not consider, the potential effects of any such litigation, claims or investigations or possible assertions of claims, outcomes or damages arising out of any such matters. With respect to the Projections and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James has, with Blue Ridge’s consent, assumed that the Projections and such other information and data have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of management of Blue Ridge, and Raymond James has relied upon Blue Ridge to advise Raymond James promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. Accordingly, with Blue Ridge’s consent, in rendering its opinion, Raymond James’ reliance upon Blue Ridge management as to the reasonableness and achievability of such information includes reliance upon the judgments and assessments of Blue Ridge and Blue Ridge management with respect to such differences. Raymond James expresses no opinion with respect to the Projections or the assumptions on which they are based. Furthermore, upon the advice of management of Blue Ridge, Raymond James has assumed that the estimated Synergies reviewed by Raymond James have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Blue Ridge and that the Synergies will be realized in the amounts and the time periods indicated thereby, and Raymond James expresses no opinion with respect to such Synergies or the assumptions on which they are based. Raymond James relied upon and assumed, without independent verification, that the final form of the merger agreement would be substantially similar to the draft reviewed by Raymond James, and that the merger will be consummated in accordance with the terms of the merger agreement without waiver or amendment of any conditions thereto and without adjustment to the merger consideration. Furthermore, Raymond James has assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement are true and correct and that each such party will perform all of the covenants and agreements required to be performed by it under the merger agreement without waiver or modification. Raymond James has relied upon and assumed, without independent verification, that (i) the merger will be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the merger will be obtained and that no delay, limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have an effect on the merger, VCB, or Blue Ridge that would be material to its analyses or this opinion.

Raymond James expresses no opinion as to the underlying business decision to effect the merger, the structure or tax consequences of the merger, or the availability or advisability of any alternatives to the merger. The Raymond James opinion is limited to the fairness of the merger consideration, from a financial point of view, to Blue Ridge. Raymond James expresses no opinion with respect to any other reasons, legal, business, or otherwise, that may support the decision of the Blue Ridge Board to approve or consummate the merger. Furthermore, no opinion, counsel or interpretation is intended by Raymond James on matters that require legal, accounting or tax advice. It is assumed that such opinions, counsel or interpretations have been or will be obtained from the appropriate professional sources. Furthermore, Raymond James has relied, with the consent of Blue Ridge, on the fact that Blue Ridge has been assisted by legal, accounting and tax advisors and Raymond James has, with the consent of Blue Ridge, relied upon and assumed the accuracy and completeness of the assessments by Blue Ridge and its advisors as to all legal, accounting and tax matters with respect to Blue Ridge and the merger, including, without limitation, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

 

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In formulating its opinion, Raymond James has considered only the merger consideration to be paid by Blue Ridge and Raymond James did not consider and it expresses no opinion on the fairness of the amount or nature of any compensation to be paid or payable to any of VCB’s officers, directors or employees, or class of such persons, whether relative to the compensation payable by Blue Ridge or otherwise. Raymond James has not been requested to opine as to, and its opinion does not express an opinion as to or otherwise address, among other things: (i) the fairness of the merger to the holders of any class of securities, creditors, or other constituencies of Blue Ridge or VCB, or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion or (ii) the fairness of the merger to any one class or group of Blue Ridge’s, VCB’s, or any other party’s security holders or other constituencies vis-à-vis any other class or group of Blue Ridge’s, VCB’s, or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the merger amongst or within such classes or groups of security holders or other constituents). Raymond James is not expressing any opinion as to the impact of the merger on the solvency or viability of Blue Ridge or VCB or the ability of Blue Ridge, VCB, or their respective subsidiaries to pay their respective obligations when they come due.

The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. Accordingly, Raymond James believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create an incomplete or potentially misleading view of the process underlying its analyses and opinion. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before May 10, 2019, and is not necessarily indicative of current market conditions.

Material Financial Analyses

The following summarizes the material financial analyses Raymond James considered in rendering its opinion. No company or transaction used in the analyses described below is identical or directly comparable to Blue Ridge, VCB or the merger.

Selected Companies Analysis . Raymond James reviewed certain data for selected companies with publicly traded equity securities that it deemed relevant for its analysis. The selected groups represent companies Raymond James believed relevant to VCB. Raymond James selected certain companies that: (i) are headquartered in the Southeastern United States (Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia); (ii) have total assets between $200 million and $400 million; (iii) have a last twelve months (“LTM”) pre-tax return on average assets (“ROAA”) between 0.75% and 1.50%; (iv) have a most recent quarter (“MRQ”) tangible common equity (“TCE”) ratio greater than 8.0%; and (v) have MRQ non-performing assets (“NPAs”) / total assets of less than 2.00%. The selected group excludes targets of announced mergers. No company used in the analysis described below is identical or directly comparable to VCB. The selected companies Raymond James deemed relevant include the following:

Selected Companies for VCB

 

•   First Citrus Bancorp. Inc.

  

•   Farmers Bank of Appomattox

•   Citizens Bancorp of Virginia

  

•   Pinnacle Bancshares Inc.

•   CNB Financial Services Inc.

  

•   blueharbor bank

•   Exchange Bankshares Inc.

  

•   Security Bancorp Inc.

•   Oak View National Bank

  

•   Virginia Bank Bankshares Inc.

Raymond James calculated various financial multiples for each selected public company, including: closing price per share on May 10, 2019 compared to (i) tangible book value (“TBV”) per share at MRQ as shown by S&P Global Market Intelligence; and (ii) LTM core operating earnings per share (“core EPS”) as shown by S&P Global Market Intelligence. Raymond James reviewed the mean, median, 25th percentile, and 75th percentile relative valuation multiples of the selected public companies. The results of the selected companies analysis for VCB are summarized below:

 

     Price / MRQ TBV     Price / LTM Core EPS  

Mean

     104     11.9x  

Median

     102     11.8x  

25 th Percentile

     96     10.2x  

75 th Percentile

     110     13.3x  

Merger Consideration

     180     19.6x  

 

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Taking into account the results of the selected companies analysis, Raymond James applied the mean, median 25th and 75th percentiles of the price to tangible book value ratio and earnings per share multiples to corresponding financial data for VCB. Raymond James reviewed the ranges of implied per share values and then compared those implied per share values to the merger consideration, which was assumed to have a value of $59.23 per share based on VCB’s shareholders’ right to receive, at the election of the VCB shareholder, (i) 3.05 shares of Blue Ridge common stock per share of VCB common stock or (ii) $58.00 in cash per share of VCB common stock with a final 60% common stock / 40% cash allocation mix. For purposes of valuing the stock consideration, Raymond James utilized Blue Ridge’s 10 day volume weighted average price of $19.69 as of May 10, 2019. The results of the selected companies analysis are summarized below:

 

     Price / MRQ TBV      Price / LTM Core EPS  

Mean

   $ 34.19      $ 35.85  

Median

   $ 33.55      $ 35.67  

25 th Percentile

   $ 31.46      $ 30.67  

75 th Percentile

   $ 36.14      $ 40.09  

Merger Consideration

   $ 59.23      $ 59.23  

Selected Transaction Analysis .  Raymond James analyzed publicly available information relating to selected transactions announced since (i) January 1, 2018 involving targets headquartered in the United States or (ii) January 1, 2017 involving targets headquartered in Southeastern United States (Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia), in each case, with target assets between $200 million and $400 million, target pre-tax ROAA between 0.75% and 1.50%, target TCE ratio greater than 8.0%, and target NPAs / total assets of less than 2.00%. Financial data for the selected targets was based on the most recent last twelve months reported prior to announcement of the respective transaction. The selected national and regional transactions (with respective transaction announcement dates shown) used in the analysis included:

Selected National Transactions

 

   

Acquisition of Partnership Community Bancshares Inc. by Bank First National Corp. (1/23/19)

 

   

Acquisition of LBC Bancshares Inc. by Colony Bankcorp Inc. (12/18/18)

 

   

Acquisition of FNB Bancshares of Central AL Inc. by BankFirst Capital Corp. (11/15/18)

 

   

Acquisition of First Prestonsburg Bancshares Inc. by Peoples Bancorp Inc. (10/29/18)

 

   

Acquisition of Merchants Holding Co. by Bank of Commerce Holdings (10/4/18)

 

   

Acquisition of Monument Bancorp Inc. by Citizens & Northern Corp. (9/28/18)

 

   

Acquisition of Comanche National Corp. by Spirit of Texas Bancshares Inc. (7/19/18)

 

   

Acquisition of Foothills Bancorp Inc. by SmartFinancial Inc. (6/27/18)

 

   

Acquisition of Richland State Bancorp Inc. by Bus. First Bancshares Inc. (6/4/18)

 

   

Acquisition of MNB Bancorp by Independent Bank Corp. (5/29/18)

 

   

Acquisition of Americas United Bank by Bank of Southern California NA (2/22/18)

 

   

Acquisition of Westbound Bank by Guaranty Bancshares Inc. (1/29/18)

 

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Selected Regional Transactions

 

   

Acquisition of LBC Bancshares Inc. by Colony Bankcorp Inc. (12/18/18)

 

   

Acquisition of FNB Bancshares of Central AL Inc. by BankFirst Capital Corp. (11/15/18)

 

   

Acquisition of Foothills Bancorp Inc. by SmartFinancial Inc. (6/27/18)

 

   

Acquisition of Southwest Banc Shares Inc. by First Bancshares Inc. (10/24/17)

 

   

Acquisition of Mountain Valley Bancshares Inc. by Piedmont Bancorp Inc. (3/17/17)

 

   

Acquisition of Jefferson Bankshares Inc. by HCBF Holding Co. (1/20/17)

Raymond James examined valuation multiples of transaction value compared to the target companies’ (i) most recent quarter TBV per share as shown by S&P Global Market Intelligence; (ii) LTM net income; and (iii) premium to tangible book value divided by core deposits (total deposits less time deposits greater than $250,000). Raymond James reviewed the mean, median, 25th percentile and 75th percentile relative valuation multiples of the selected transactions and compared them to corresponding valuation multiples for VCB implied by the merger consideration. Furthermore, Raymond James applied the mean, median, 25th percentile and 75th percentile relative valuation multiples to VCB’s MRQ tangible book value, LTM net income, and MRQ core deposits to determine the implied equity price per share and then compared those implied equity values per share to the merger consideration, which was assumed to have a value of $59.23 per share based on VCB’s shareholders’ right to receive, at the election of the VCB shareholder, (i) 3.05 shares of Blue Ridge common stock per share of VCB common stock or (ii) $58.00 in cash per share of VCB common stock with a final 60% common stock / 40% cash allocation mix. For purposes of valuing the stock consideration, Raymond James utilized Blue Ridge’s 10 day volume weighted average price of $19.69 as of May 10, 2019. The results of the selected national and regional transactions analyses, respectively, are summarized below:

National Selected Transactions

 

     Price / MRQ TBV     Price / LTM Net
Income
     Prem. / Core Deposits  

Mean

     178     21.0      8.5

Median

     184     19.5      8.6

25 th Percentile

     159     17.6      7.3

75 th Percentile

     192     24.7      9.7

Merger Consideration

     180     18.9      9.2
     Price / MRQ TBV     Price / LTM Net
Income
     Prem. / Core Deposits  

Mean

   $ 58.45     $ 65.90      $ 57.43  

Median

   $ 60.69     $ 61.10      $ 57.65  

25 th Percentile

   $ 52.40     $ 55.15      $ 53.90  

75 th Percentile

   $ 63.13     $ 77.59      $ 60.83  

Merger Consideration

   $ 59.23     $ 59.23      $ 59.23  

Regional Selected Transactions

 

     Price / MRQ TBV     Price / LTM Net
Income
     Prem. / Core Deposits  

Mean

     170     22.0      7.5

Median

     171     20.6      7.7

25 th Percentile

     158     18.8      5.9

75 th Percentile

     186     25.0      9.3

Merger Consideration

     180     18.9      9.2

 

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     Price / MRQ TBV      Price / LTM Net
Income
     Prem. / Core Deposits  

Mean

   $ 56.00      $ 69.10      $ 54.57  

Median

   $ 56.24      $ 64.59      $ 55.14  

25 th Percentile

   $ 52.05      $ 58.91      $ 49.93  

75 th Percentile

   $ 61.25      $ 78.26      $ 59.51  

Merger Consideration

   $ 59.23      $ 59.23      $ 59.23  

Discounted Cash Flow Analysis .  Raymond James performed a discounted cash flow analysis of VCB based on the Projections and Synergies. Consistent with the periods included in the Projections, Raymond James used calendar year 2023 as the final year for the analysis and applied multiples, ranging from 11.0x to 13.0x, to calendar year 2023 earnings in order to derive a range of terminal values for VCB in 2023.

For VCB, Raymond James used discount rates ranging from 13% to 15%. Raymond James arrived at its discount rate ranges by using the 2018 Duff & Phelps Valuation Handbook. Raymond James reviewed the range of per share prices derived in the discounted cash flow analysis and compared them to the merger consideration, which was assumed to have a value of $59.23 per share based on VCB’s shareholders’ right to receive, at the election of the VCB shareholder, (i) 3.05 shares of Blue Ridge common stock per share of VCB common stock or (ii) $58.00 in cash per share of VCB common stock with a final 60% common stock / 40% cash allocation mix. For purposes of valuing the stock consideration, Raymond James utilized Blue Ridge’s 10 day volume weighted average price of $19.69 as of May 10, 2019. The results of the discounted cash flow analysis are summarized in the table below:

 

     Implied Per Share Value  
     VCB  
     Low      High  

Net Income Terminal Multiple

   $ 76.15      $ 92.28  

Merger Consideration

      $ 59.23  

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

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

The Raymond James opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it as of May 10, 2019, and any material change in such circumstances and conditions may affect the

 

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opinion of Raymond James, but Raymond James does not have any obligation to update, revise or reaffirm its opinion. Raymond James relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Blue Ridge or VCB since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.

For its services as financial advisor to Blue Ridge in connection with the merger, Raymond James will receive a transaction fee of $500,000, of which $25,000 was due and payable upon execution of an engagement letter with Raymond James, $125,000 was due and payable upon execution of the merger agreement, $150,000 was due and payable when Raymond James rendered its opinion and the remainder of which is contingent upon successful completion of the merger. Blue Ridge has agreed to reimburse Raymond James for its reasonable expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.

Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. Raymond James has provided certain services to Blue Ridge in the previous two years, including having served as sole placement agent in connection with the private offering of Blue Ridge common stock in February 2019. Raymond James has not provided any investment banking services to, or received any fees from, VCB in the two years preceding the date of its opinion. However, in the two years preceding the date of its opinion, Raymond James has provided fixed income and sales trading services to VCB and has received compensation related to these activities. In the ordinary course of business, Raymond James may trade in the securities of Blue Ridge for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Raymond James may provide investment banking, financial advisory and other financial services to Blue Ridge and/or VCB or other participants in the merger in the future, for which Raymond James may receive compensation, although as of the date of Raymond James’ opinion, there was no agreement to do so.

VCB’s Reasons for the Merger; Recommendation of the VCB Board

In reaching its decision to adopt and approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, and to recommend that its shareholders approve the merger agreement, the VCB Board consulted with VCB management, as well as its financial and legal advisors, and considered a number of factors, including the following material factors:

 

   

the review undertaken by the VCB Board and management with respect to the strategic alternatives available to VCB;

 

   

the business strategy of VCB and its prospects for the future as an independent institution, including the risks inherent in successful execution of its strategic plan, its projected financial results, and expectations relating to the proposed merger with Blue Ridge;

 

   

a review of the challenges facing VCB in the current competitive, economic, financial and regulatory climate, and the potential benefits of aligning VCB with a larger organization;

 

   

the consistency of the merger with VCB’s long-term strategic plan to seek profitable future expansion, leading to opportunities for growth in overall shareholder value and enhanced liquidity for VCB shareholders;

 

   

a review of the historical financial statements and condition of VCB and certain other internal information, primarily financial in nature, relating to the business, earnings and balance sheet of VCB;

 

   

a review of the historical financial statements and condition of Blue Ridge and certain other information, primarily financial in nature, relating to the business, earnings and financial condition of Blue Ridge and its ability to successfully complete the merger;

 

   

the fact that VCB’s core processing contract will be coming up for long-term renewal in the first quarter of 2020;

 

   

a review and discussions with VCB management and its advisors concerning the due diligence examination of VCB by Blue Ridge;

 

   

a review and discussions with VCB management and its advisors concerning the due diligence examination of Blue Ridge by VCB;

 

   

the fact that the merger would combine two established banking franchises to create a bank that is expected to have over $800 million in assets;

 

   

the complementary nature of the businesses of VCB and Blue Ridge, the anticipated improved opportunities for VCB customers and communities served by VCB, the opportunities for VCB’s employees and the familiarity of the two management teams resulting from their collaboration on a payment card program;

 

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the financial strength of Blue Ridge based on its historical earnings and its capital position;

 

   

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

 

   

the fact that the transaction value would be approximately $42.5 million, with an implied price per share of VCB common stock of approximately $59.23 based on the 10-day volume weighted average price of Blue Ridge common stock prior to announcement;

 

   

the form and amount of the merger consideration, including the ability of VCB shareholders who desire to do so to participate in the future performance of the combined company and the potential synergies resulting from the merger;

 

   

the ability of Blue Ridge to complete a merger transaction from a financial and regulatory perspective;

 

   

the fact that Blue Ridge agreed to use commercially reasonable efforts to have its common stock, including the shares issued to VCB shareholders in connection with the merger, approved for listing on the New York Stock Exchange or The Nasdaq Stock Market;

 

   

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

 

   

the financial analyses and opinion of Sandler O’Neill delivered to the VCB Board on May 13, 2019, to the effect that, as of that date, and based upon and subject to the conditions, limitations, qualifications and assumptions set forth in the opinion, the merger consideration to be received in the merger by VCB common shareholders was fair, from a financial point of view, to such shareholders.

The VCB Board also considered a variety of risks and other potentially negative factors concerning the merger, including the following, which are not intended to be exhaustive and are not presented in any relative order of importance:

 

   

the fact that VCB would be prohibited from soliciting acquisition proposals after execution of the merger agreement, and the possibility that, while it was not viewed as precluding other proposals, the $1,500,000 termination fee payable to Blue Ridge upon the termination of the merger agreement under certain circumstances could potentially discourage certain other potential acquirers from making a competing offer to acquire VCB;

 

   

VCB will lose the autonomy and local strategic decision-making capability associated with being an independent financial institution;

 

   

the potential impact on VCB’s employees and the customers and communities served by VCB;

 

   

the potential risks and costs associated with integrating the VCB and Blue Ridge businesses, operations and workforces;

 

   

the risk that potential benefits and synergies sought in the merger may not be realized or may not be realized within the expected time period, and the risks associated with the integration of the two companies;

 

   

the fact that certain of VCB’s directors and executive officers have other interests in the merger that are different from, or in addition to, their interests as VCB shareholders. See “—VCB’s Directors and Executive Officers Have Financial Interests in the Merger” beginning on page [●];

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

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the possibility of litigation in connection with the merger.

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

For the reasons set forth above, the VCB Board has unanimously approved the merger agreement and the transactions contemplated thereby, determined that the merger is advisable and in the best interests of VCB and its shareholders and recommends that the shareholders vote “FOR” the VCB merger proposal.

Opinion of VCB’s Financial Advisor

VCB retained Sandler O’Neill to act as financial advisor to the VCB Board in connection with VCB’s consideration of a possible business combination. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. 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 acted as financial advisor in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the merger agreement. At the May 13, 2019 meeting at which the VCB Board considered and discussed the terms of the merger agreement and the merger, Sandler O’Neill delivered to the VCB Board its oral opinion, which was subsequently confirmed in writing on May 13, 2019, to the effect that, as of such date, the merger consideration provided for in the merger agreement was fair to the holders of VCB common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix C to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by 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 VCB 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 VCB Board in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any shareholder of VCB as to how any such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger. Sandler O’Neill’s opinion was directed only as to the fairness, from a financial point of view, of the merger consideration to the holders of VCB common stock and does not address the underlying business decision of VCB to engage in the merger, the form or structure of the merger or any other transactions contemplated in the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for VCB or the effect of any other transaction in which VCB 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 officer, director or employee of VCB or Blue Ridge, or any class of such persons, if any, relative to the compensation to be received in the merger by any other shareholder, including the merger consideration to be received by the holders of VCB common stock. Sandler O’Neill’s opinion was approved by its fairness opinion committee.

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

 

   

an execution copy of the merger agreement;

 

   

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

 

   

audited financial statements for VCB for the year ending December 31, 2018, as provided by the senior management of VCB;

 

   

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

 

   

certain internal financial projections for VCB for the year ending December 31, 2019, as well as an estimated long-term annual earnings per share growth rate for the years thereafter and estimated dividends per share for the years ending December 31, 2019 through December 31 2023, as provided by the senior management of VCB;

 

   

certain internal financial projections for Blue Ridge for the year ending December 31, 2019, as well as estimated long-term annual net income and earnings per share growth rates for the years thereafter and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Blue Ridge;

 

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the pro forma financial impact of the merger on Blue Ridge based on certain assumptions relating to purchase accounting adjustments, transaction expenses, and cost savings, as well as estimated net income for VCB for the years ending December 31, 2020 through December 31, 2022, as provided by the senior management of Blue Ridge (collectively, the “Pro Forma Assumptions”);

 

   

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

 

   

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

 

   

the financial terms of certain recent business combinations in the bank and thrift industry (on a regional and nationwide 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 as Sandler O’Neill considered relevant.

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

In performing its review, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to and reviewed by Sandler O’Neill from public sources, that was provided to Sandler O’Neill by VCB or Blue Ridge 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 or investigation. Sandler O’Neill relied on the assurances of the respective senior managements of VCB and Blue Ridge 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 undertake an independent verification of any of 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 VCB or Blue Ridge 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 VCB or Blue Ridge. Sandler O’Neill did not make an independent evaluation of the adequacy of the allowance for loan losses of VCB or Blue Ridge, or of the combined entity after the merger, and Sandler O’Neill did not review any individual credit files relating to VCB or Blue Ridge. Sandler O’Neill assumed, with VCB’s consent, that the respective allowances for loan losses for both VCB and Blue Ridge were adequate to cover such losses and would be adequate on a pro forma basis for the combined entity.

In preparing its analyses, Sandler O’Neill used certain internal financial projections for VCB for the year ending December 31, 2019, as well as an estimated long-term annual earnings per share growth rate for the years thereafter and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of VCB. In addition, Sandler O’Neill used certain internal financial projections for Blue Ridge for the year ending December 31, 2019, as well as estimated long-term annual net income and earnings per share growth rates for the years thereafter and estimated dividends per share for the years ending December 31, 2019 through December 31, 2023, as provided by the senior management of Blue Ridge. Sandler O’Neill also received and used in its pro forma analyses the Pro Forma Assumptions, as provided by the senior management of Blue Ridge. With respect to the foregoing information, the respective senior managements of VCB and Blue Ridge confirmed to Sandler O’Neill that such information reflected the best currently available projections, estimates and judgments of those respective senior managements as to the future financial performance of VCB and Blue Ridge, respectively, and the other matters covered thereby, and Sandler O’Neill assumed that the future financial performance reflected in such information would be achieved. Sandler O’Neill expressed no opinion as to such information, or the assumptions on which such information was based. Sandler O’Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of VCB or Blue Ridge since the date of the most recent financial statements made available to Sandler O’Neill. Sandler O’Neill assumed in all respects material to Sandler O’Neill’s analyses that VCB and Blue Ridge would remain as going concerns for all periods relevant to Sandler O’Neill’s analyses.

Sandler O’Neill also assumed, with VCB’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 VCB, Blue Ridge or the merger or any

 

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related transactions, and (iii) the merger and any related transactions would be consummated in accordance with the terms of the merger agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, with VCB’s consent, Sandler O’Neill relied upon the advice that VCB 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 expressed no opinion as to any such matters.

Sandler O’Neill’s opinion was necessarily based on financial, regulatory, economic, 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 of its opinion could materially affect Sander O’Neill’s opinion. Sandler O’Neill did not undertake 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 value of VCB common stock or Blue Ridge common stock at any time or what the value of Blue Ridge common stock would be once it is actually received by the holders of VCB common stock.

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to the VCB Board, but is a summary of all 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 VCB or Blue Ridge 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 VCB and Blue Ridge 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.

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 are beyond the control of VCB, Blue Ridge 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 VCB Board at its May 13, 2019 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 VCB common stock or the prices at which VCB common stock or 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 VCB Board in making its determination to approve the merger agreement and should not be viewed as determinative of the merger consideration or the decision of the VCB Board or management with respect to the fairness of the merger. The type and amount of consideration payable in the merger were determined through negotiations between VCB and Blue Ridge.

Summary of Proposed Merger Consideration and Implied Transaction Metrics. Sandler O’Neill reviewed the financial terms of the proposed merger. As set forth in the merger agreement, at the effective time, each share of common stock of VCB issued and outstanding immediately prior to the effective time, except for certain shares of VCB common stock as set forth in the merger agreement, shall become and be converted into the right to receive, at the election of the holder thereof, either (i) $58.00 in cash, or (ii) 3.05 shares of Blue Ridge common stock; provided, however, that the merger agreement provides, generally, that 60% of the total number of shares of VCB common stock issued and outstanding prior to the effective time shall be converted into the stock consideration and 40% of such shares shall be converted into the cash consideration in accordance with the allocation procedures set forth in the merger agreement. Based on the closing price of Blue Ridge common stock on May 10, 2019 of $21.30 and 717,471 shares of VCB common stock outstanding, Sandler O’Neill calculated an aggregate implied transaction value of approximately $44.6 million, or an implied transaction price per share of $62.18. Based upon financial information for VCB as of or for the last twelve months ended December 31, 2018 and internal earnings per share projections for VCB for the year ending

 

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December 31, 2019, as provided by the senior management of VCB, Sandler O’Neill calculated the following implied transaction metrics:

 

Transaction Price Per Share / VCB 2018 Earnings Per Share:

     20.5x  

Transaction Price Per Share / VCB 2019E Earnings Per Share:

     17.7x  

Transaction Price Per Share / VCB Book Value Per Share:

     189

Transaction Price Per Share / VCB Tangible Book Value Per Share:

     189

Tangible Book Premium / Core Deposits (1) :

     10.7

Tangible Book Premium / Core Deposits (2) :

     10.2

Premium to VCB’s Market Price as of May 10, 2019 (3) :

     59.4

 

(1)

Core Deposits defined as total deposits less time deposits greater than $100,000

(2)

Core Deposits defined as total deposits less time deposits greater than $250,000

(3)

Closing price of VCB common stock on May 10, 2019 was $39.00

Stock Trading History. Sandler O’Neill reviewed the historical stock price performance of VCB common stock for the one- and three-year periods ended May 10, 2019. Sandler O’Neill then compared the relationship between the stock price performance of VCB common stock to stock price movements in the VCB Peer Group (as described below) as well as certain stock indices.

 

VCB One-Year Stock Price Performance

 

 
     Beginning
May 10, 2018
    Ending
May 10, 2019
 

VCB

     100     116.4

VCB Peer Group

     100     95.1

NASDAQ Bank Index

     100     88.0

S&P 500 Index

     100     105.8

VCB Three-Year Stock Price Performance

 

 
     Beginning
May 10, 2018
    Ending
May 10, 2019
 

VCB

     100     132.8

VCB Peer Group

     100     131.8

NASDAQ Bank Index

     100     135.7

S&P 500 Index

     100     138.2

Sandler O’Neill also reviewed the historical stock price performance of Blue Ridge common stock for the one- and three-year periods ended May 10, 2019. Sandler O’Neill then compared the relationship between the stock price performance of Blue Ridge common stock to stock price movements in the Blue Ridge Peer Group (as described below) as well as certain stock indices.

 

Blue Ridge One-Year Stock Price Performance

 

 
     Beginning
May 10, 2018
    Ending
May 10, 2019
 

Blue Ridge

     100     118.3

Blue Ridge Peer Group

     100     94.5

NASDAQ Bank Index

     100     88.0

S&P 500 Index

     100     105.8

Blue Ridge Three-Year Stock Price Performance

 

 
     Beginning
May 10, 2018
    Ending
May 10, 2019
 

Blue Ridge

     100     178.5

Blue Ridge Peer Group

     100     141.0

NASDAQ Bank Index

     100     135.7

S&P 500 Index

     100     138.2

 

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Comparable Company Analyses. Sandler O’Neill used publicly available information to compare selected financial information for VCB with a group of financial institutions selected by Sandler O’Neill (the “VCB Peer Group”). The VCB Peer Group consisted of publicly-traded banks and thrifts headquartered in Virginia and North Carolina with total assets between $150 million and $500 million, excluding announced merger targets and mutual holding companies. The VCB Peer Group consisted of the following companies:

 

Pinnacle Bankshares Corporation    M&F Bancorp, Inc.
Freedom Bank of Virginia    Oak View National Bank
Aquesta Financial Holdings, Inc.    Farmers Bank of Appomattox
Oak Ridge Financial Services, Inc.    Bank of Fincastle
Bank of Botetourt    blueharbor bank
Touchstone Bank    Pioneer Bankshares, Inc.
KS Bancorp, Inc.    Virginia Bank Bankshares, Incorporated
Citizens Bancorp of Virginia, Inc.    Peoples Bankshares, Incorporated
Surrey Bancorp   

The analysis compared publicly available financial information for VCB as of or for the period ended December 31, 2018 with the corresponding publicly available data for the VCB Peer Group as of or for the period ended March 31, 2019 (or, if data as of or for the period ended March 31, 2019 was not publicly available, as of or for the period ended December 31, 2018), with pricing data as of May 10, 2019. The table below sets forth the data for VCB and the high, low, median and mean data for the VCB Peer Group.

 

VCB Peer Group Analysis

 

 
     VCB     VCB Peer
Group
Median
     VCB Peer
Group
Mean
     VCB Peer
Group
Low
     VCB Peer
Group
High
 

Total assets ($mm)

     246       312        335        201        448  

Loans / Deposits (%)

     79.4       91.3        89.9        66.7        104.8  

Non-performing assets (1) / Total assets (%)

     0.87       0.95        1.30        0.14        3.12  

Tangible common equity/Tangible assets (%)

     9.61       10.40        10.68        5.86        14.60  

Tier 1 leverage ratio (%)

     10.52       10.81        11.29        8.05        14.54  

Total risk-based capital ratio (%)

     13.57       14.71        15.93        12.25        23.98  

CRE / Total risk-based capital ratio (%)

     208.5 (2)       166.1        164.1        48.5        285.4  

LTM return on average assets (%)

     0.91       0.92        0.78        -0.28        1.63  

LTM return on average equity (%)

     9.37       8.34        7.71        -3.59        16.60  

LTM Net interest margin (%)

     4.50       3.81        3.86        3.34        4.58  

LTM Efficiency ratio (%)

     78.9       72.0        73.5        56.5        94.3  

Price/Tangible book value (%)

     119       106        108        82        138  

Price/LTM earnings per share (x)

     12.8       12.0        13.6        8.6        26.2  

Current dividend yield (%)

     2.6       1.5        1.8        0.0        6.2  

Market value ($mm)

     29       35        36        5        66  

 

(1)

Non-performing assets defined as non-accrual loans and leases, renegotiated loans and leases, and real estate owned.

(2)

Bank-level data as of December 31, 2018.

Sandler O’Neill used publicly available information to perform a similar analysis for Blue Ridge and a group of financial institutions selected by Sandler O’Neill (the “Blue Ridge Peer Group”). The Blue Ridge Peer Group consisted of publicly-traded banks and thrifts headquartered in Virginia, North Carolina and the District of Columbia with total assets between $500 million and

 

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$750 million, excluding announced merger targets and companies with undisclosed common shares outstanding. The Blue Ridge Peer Group consisted of the following companies:

 

Benchmark Bankshares, Inc.    Virginia National Bankshares Corporation
Fauquier Bankshares, Inc.    Carolina Trust BancShares, Inc.
Bank of the James Financial Group, Inc.    Highlands Bankshares, Inc.
New Peoples Bankshares, Inc.    West Town Bancorp, Inc.
Parkway Acquisition Corp.    Village Bank and Trust Financial Corp.
Uwharrie Capital Corp   

The analysis compared publicly available financial information for Blue Ridge as of or for the period ended March 31, 2019 with the corresponding publicly available data for the Blue Ridge Peer Group as of or for the period ended March 31, 2019 (or, if data as of or for the period ended March 31, 2019 was not publicly available, as of or for the period ended December 31, 2018), with pricing data as of May 10, 2019. The table below sets forth the data for Blue Ridge and the high, low, median and mean data for the Blue Ridge Peer Group:

 

Blue Ridge Peer Group Analysis

 

 
     Blue
Ridge
    Blue Ridge
Peer Group
Median
     Blue Ridge
Peer Group
Mean
     Blue Ridge
Peer Group
Low
     Blue Ridge
Peer Group
High
 

Total assets ($mm)

     575       655        641        522        705  

Loans / Deposits (%)

     101.5       90.6        88.0        62.7        95.3