DEFA14A: Blue Ridge Bankshares Finalizes $150 Million Capital Infusion, Amends Securities Purchase Agreement

Blue Ridge Bankshares completed a $150 million private placement after amending its securities purchase agreement, aiming to bolster capital levels and reposition business lines.

Summary

• Blue Ridge Bankshares, Inc. finalized an Amended and Restated Securities Purchase Agreement on April 3, 2024, securing $150 million in gross proceeds through a private placement.
• The agreement involves the issuance of 3.4 million common shares at $2.50 each, 11,418 Series B preferred shares, and 2,732 Series C preferred shares, both at $10,000 each.
• Warrants to purchase Series B and Series C preferred stock were also issued, excluding directors and executive officers.
• Castle Creek Capital Partners gains the right to appoint two board members, contingent on maintaining at least 9.9% ownership of common stock, with provisions for one board member if ownership falls between 4.9% and 9.9%.
• Kenneth R. Lehman also has board designation rights based on ownership thresholds.
• The company plans to reduce the board size to 12 or 13 members, depending on Lehman's board designation.
• Shareholder approval will be sought by June 17, 2024, to increase authorized common stock to at least 150,000,000 shares and to approve the issuance of underlying preferred shares and warrant shares.
• If the Articles Amendment Approval is not obtained, a Partial Conversion of the Series B Preferred Stock will occur.
• The company intends to substantially exit its fintech banking-as-a-service (BaaS) operations by the end of 2024.
• Net proceeds from the private placement will be used for general corporate purposes, business line repositioning, organic growth, and enhancing capital levels of Blue Ridge Bank, National Association.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the successful capital raise is positive, the expected margin compression and elevated expenses, along with the exit from BaaS, temper the overall outlook. The sentiment is neutral as the capital raise is a positive but the company is still facing challenges.

Positives

• The $150 million capital injection strengthens the company's financial position.
• Repositioning business lines and supporting organic growth can lead to improved future performance.
• Enhancing capital levels of Blue Ridge Bank, National Association, improves its stability and regulatory compliance.
• The agreement with Castle Creek Capital Partners brings experienced financial expertise to the board.

Negatives

• The company expects net interest margin compression to continue due to increased funding costs.
• Noninterest expenses are expected to remain elevated due to the fintech operations wind-down and remediation of a Consent Order.
• The company is winding down its fintech banking-as-a-service (BaaS) operations.

Risks

• Failure to obtain shareholder approvals could impact the conversion of preferred shares.
• Continued net interest margin compression may affect profitability.
• Elevated noninterest expenses may strain financial resources.
• The wind-down of fintech operations could present operational and financial challenges.

Future Outlook

The company expects net interest margin compression to continue due to increased funding costs and plans to use the proceeds to reposition business lines, support organic growth, and enhance capital levels.

Industry Context

The announcement reflects a strategic move by Blue Ridge Bankshares to strengthen its capital base amidst a challenging environment for regional banks, particularly those involved in the fintech space. The capital raise and shift away from BaaS operations align with broader industry trends focused on stability and regulatory compliance.

Comparison to Industry Standards

• The terms of the preferred stock, including the 15% dividend rate, are relatively high compared to standard preferred stock issuances by larger, more stable financial institutions.
• Comparable capital raises in the banking sector often involve a mix of common and preferred equity, with the specific terms varying based on the institution's risk profile and growth strategy.
• The decision to wind down BaaS operations mirrors actions taken by other banks that have faced regulatory scrutiny or profitability challenges in the fintech sector.
• Comparable companies that have exited or scaled back fintech partnerships include [list specific examples if available], indicating a broader trend in the industry.

Management Changes

Stakeholder Impact

• Shareholders will be impacted by the potential dilution from the issuance of new shares.
• Employees may be affected by the wind-down of the fintech operations.
• Customers may experience changes in the company's service offerings as it repositions its business lines.
• Suppliers and creditors may be impacted by the company's financial performance and strategic direction.

Next Steps

• The company will seek shareholder approval for the Articles Amendment and Issuance Approval by June 17, 2024.
• The company will file a registration statement to register the resale of the Common Shares, the Underlying Preferred Shares, and the Warrant Shares.
• The company will continue its wind down of fintech banking-as-a-service (BaaS) operations and expects to substantially exit this business by the end of 2024.
• The company and Mr. Lehman, with non-binding input from Castle Creek, will work together to identify specific work-out assets and develop and adopt a mutually agreeable asset resolution plan.

Key Dates

Keywords

capital raise, private placement, preferred stock, common stock, Blue Ridge Bankshares, financial results, board designation, regulatory approval, fintech, BaaS