8-K: Blue Ridge Bankshares Reports Net Loss in Q4 2024, Completes Exit from Fintech BaaS Operations

Blue Ridge Bankshares reported a net loss of $2.0 million for the fourth quarter of 2024, while making progress on strategic initiatives including exiting banking-as-a-service depository partnerships.

Summary

• Blue Ridge Bankshares, Inc. announced a net loss of $2.0 million, or $0.03 per diluted share, for the fourth quarter of 2024, compared to a net income of $0.9 million in the previous quarter and a net loss of $5.8 million in the same quarter of 2023.
• The company's full-year 2024 net loss was $15.4 million, or $0.31 per diluted share, an improvement from the $51.8 million loss in 2023.
• The bank completed its exit from 45 fintech banking-as-a-service (BaaS) depository partnerships, reducing deposits from these sources by $445 million and wholesale funding by $113 million.
• Deposits in the bank's primary footprint grew by approximately $172 million during the year.
• Noninterest expense decreased by 3% from the previous quarter and 16% from the fourth quarter of 2023, driven by lower salaries, benefits, and regulatory remediation costs.
• The nonperforming loans to total assets ratio improved to 0.93% at the end of the fourth quarter, compared to 1.09% in the previous quarter and 2.02% at the end of 2023.
• The company reduced its employee count by 71, or 14%, compared to the end of 2023.
• The tangible book value per common share was $3.82 at the end of the quarter, compared to $4.25 at the end of the previous quarter.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While there are positive signs of strategic realignment and improved asset quality, the company still reported a net loss and faces ongoing challenges. The language is cautiously optimistic, but the financial results are mixed.

Positives

• The company significantly reduced its net loss compared to the previous year, indicating a turnaround.
• The successful exit from fintech BaaS partnerships and reduction in wholesale funding demonstrates a strategic shift towards core banking operations.
• The growth in deposits within the bank's primary footprint shows a positive trend in customer engagement.
• The reduction in noninterest expenses indicates improved operational efficiency.
• The improvement in the nonperforming loans to total assets ratio suggests better asset quality.
• The bank's capital ratios exceed the minimum requirements set by the OCC.

Negatives

• The company reported a net loss for the quarter, indicating ongoing financial challenges.
• The sale of mortgage servicing rights resulted in a loss of $2.6 million in the fourth quarter.
• The tangible book value per common share decreased from $4.25 to $3.82 in the quarter.
• The company experienced a decrease in total assets and total deposits.

Risks

• The company is still in the process of exiting fintech lending relationships, which may take several quarters to complete.
• The company needs to rebuild its earning-asset base and right-size its cost structure, which will take time.
• The company is subject to a Consent Order with the OCC, which imposes heightened capital requirements and other restrictions.
• The company's financial performance could be affected by changes in the macroeconomic environment, interest rates, and inflation.
• The company faces risks related to its loan portfolio, credit quality of borrowers, and the real estate market.

Future Outlook

The company expects to stabilize its loan portfolio and continue to focus on growing in-market deposits over the next several quarters. They also anticipate it will take several quarters to rebuild their earning-asset base and right-size their cost structure.

Management Comments

• The President and CEO is pleased with the progress in restoring Blue Ridge Bank to its core strengths as a community-focused banking institution.
• Management is focused on regulatory remediation, improving operational efficiency, and positioning the bank for future growth.
• The company has exited 45 fintech BaaS depository partnerships in an orderly wind down.
• The company is focused on improving the quality of its lending portfolio.
• Management is confident that Blue Ridge Bank is a stronger, healthier financial institution than at the beginning of the year.
• The company is highly focused on bringing profitability to acceptable levels.

Industry Context

The move away from fintech partnerships and towards a more traditional community bank model reflects a broader trend in the banking industry where institutions are re-evaluating their strategies in light of regulatory scrutiny and market conditions. Many banks are focusing on core banking activities and reducing exposure to higher-risk areas.

Comparison to Industry Standards

• Blue Ridge Bankshares' move to exit fintech partnerships is similar to actions taken by other regional banks that have faced regulatory pressure or experienced losses in this sector. For example, some banks have reduced their exposure to crypto-related businesses or have tightened lending standards for fintech clients.
• The reduction in nonperforming loans and improvement in capital ratios are positive signs, but the company's profitability still lags behind many of its peers. Banks like First Citizens BancShares and Truist Financial have shown stronger profitability metrics in recent quarters.
• The company's focus on growing in-market deposits aligns with industry best practices, as banks are increasingly prioritizing stable, low-cost funding sources. This is in contrast to the reliance on volatile fintech deposits that many banks have moved away from.
• The reduction in employee headcount is a common cost-cutting measure in the banking industry, especially as banks invest in technology and automation. However, the company needs to ensure that these cuts do not negatively impact customer service or operational efficiency.

Stakeholder Impact

• Shareholders may be concerned about the net loss but encouraged by the strategic changes and improved asset quality.
• Employees may be affected by the reduction in headcount, but the company's focus on efficiency could lead to a more stable future.
• Customers may benefit from the company's focus on core banking services and improved financial health.
• Suppliers and creditors may be reassured by the company's efforts to strengthen its balance sheet and reduce risk.

Next Steps

• The company will continue to exit fintech lending relationships.
• The company will focus on stabilizing its loan portfolio.
• The company will continue to focus on growing in-market deposits.
• The company will work to rebuild its earning-asset base and right-size its cost structure.

Key Dates

Keywords

Blue Ridge Bankshares, financial results, net loss, fintech, banking-as-a-service, BaaS, deposits, noninterest expense, nonperforming loans, regulatory remediation, capital ratios