BLUE RIDGE BANKSHARES, INC.  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  December 31,2012  Note 1. Nature of Operations and Significant Accounting Policies (Continued):  Loans (Continued):  Allowance for Loan Losses:  Loan Charge-off Policies:  10 Consumer loans are generally fiilly or partially charged down to the fair value of collateral securing  the asset when the loan is 120 days past due unless the loan is well secured and in the process of  collection. All other loans are generally charged down to the net realizable value when the loan is 90  days past due or when current information confirms all or part of a specific loan to be uncollectible.  There have been no significant changes to the methods used to determine the allowance for loan  losses during the years ended December 31, 2012 and 2011.  An unallocated component is maintained to cover uncertainties that could affect management’s  estimate of probable losses. The unallocated component of the allowance reflects the margin of  imprecision inherent in the underlying assumptions used in the methodologies for estimating specific  and general losses in the portfolio. Qualitative and environmental factors include extemal risk factors  that management believes affect the overall lending environment of the Company. Environmental  factors that management ofthe Company routinely analyze include levels and trends in delinquencies  and impaired loans, levels and trends in charge-offs and recoveries, trends in volume and terms of  loans, effects of changes in risk selection and underwriting practices, experience, ability, depth of  lending management and staff, national and local economic trends, conditions such as unemployment  rates, housing statistics, banking industry conditions, and the effect of changes in credit  concentrations. Detennination of the allowance is inherently subjective as it requires significant  estimates, including the amoimts and timing of expected future cash flows on impaired loans,  estimated losses on pools of homogeneous loans based on historical loss experience and consideration  of current economic trends, all of which may be susceptible to significant change.  The allowance consists of specific, general and unallocated components. The specific component  relates to loans that are classified as impaired, for which an allowance is established when the fair  value ofthe loan is lower than its carrying value. The general component covers non-impaired loans  and is based on historical loss experience adjusted for qualitative factors. Historical losses are  categorized into risk-similar loan pools and a loss ratio factor is applied to each group’s loan balances  to determine the allocation. The loss ratio factor is based on average loss history for the current year  and two prior years.  The allowance for loan losses is maintained at a level believed to be adequate by management to  absorb probable losses inherent in the portfolio and is based on the size and current risk  characteristics of the loan portfolio, an assessment of individual problem loans and actual loss  experience, current economic events in specific industries and other pertinent factors such as  regulatory guidance and general economic conditions. The allowance is established through a  provision for loan losses charged to eamings. Loans identified as losses and deemed uncollectible by  management are charged to the allowance. Subsequent recoveries, if any, are credited to the  allowance. The allowance for loan losses is evaluated on a regular basis by management.  The accmal of interest on impaired loans is discontinued when, in the opinion of management, the  interest income recognized will not be collected. Receipts on impaired loans are applied to principal  until the loan is brought current and collection is reasonably assured. Loans are considered past due  based on the contractual terms ofthe loan.  (Continued)