10-Q: Blue Ridge Bankshares Reports Net Loss of $0.4 Million for Q1 2025, Announces Sale of Mortgage Division

Blue Ridge Bankshares reports a net loss of $0.4 million for the first quarter of 2025, while completing the sale of its mortgage division and continuing to address regulatory requirements.

Summary

• Blue Ridge Bankshares, Inc. reported a net loss of $0.4 million, or $0.01 per diluted common share, for the three months ended March 31, 2025, compared to a net loss of $2.9 million, or $0.15 per diluted common share, for the same period in 2024.
• The company completed the sale of its mortgage division on March 27, 2025, resulting in a $0.2 million loss.
• Net interest income decreased to $19.0 million from $20.3 million year-over-year, primarily due to a decline in average loan balances.
• Total assets decreased to $2.69 billion as of March 31, 2025, from $2.74 billion as of December 31, 2024, mainly due to a decline in loans held for investment.
• Total deposits decreased to $2.13 billion as of March 31, 2025, from $2.18 billion as of December 31, 2024, primarily due to a decrease in brokered time deposits.
• Total stockholders' equity increased to $338.3 million as of March 31, 2025, from $327.8 million at December 31, 2024, driven by warrant exercises and a decrease in unrealized losses on securities.
• The company continues to operate under a Consent Order from the OCC, requiring it to maintain a leverage ratio of 10.0% and a total capital ratio of 13.0%, which the bank met as of March 31, 2025.
• The company is working to meet the requirements of the Consent Order.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company is still operating at a loss, there are some positive signs such as the increase in stockholders' equity and progress in meeting regulatory requirements. The sale of the mortgage division is a strategic move, but it resulted in a loss.

Positives

• Net loss improved from $2.9 million in Q1 2024 to $0.4 million in Q1 2025.
• Stockholders' equity increased by $10.5 million to $338.3 million.
• The bank met the minimum capital ratios required by the OCC Consent Order.
• The company believes it has made significant progress towards meeting the requirements of the Consent Order.
• The company expects to save more than $2 million in interest expense annually due to the regulatory non-objection to redeem a significant portion of its subordinated debt.

Negatives

• The company reported a net loss of $0.4 million for Q1 2025.
• Net interest income decreased to $19.0 million from $20.3 million year-over-year.
• Total assets decreased by $52.2 million to $2.69 billion.
• Total deposits decreased by $50.0 million to $2.13 billion.
• The sale of the mortgage division resulted in a $0.2 million loss.

Risks

• The company is subject to the terms of the Consent Order with the OCC, including heightened capital requirements and restrictions on fintech operations.
• The company's financial performance could be affected by changes in economic conditions, interest rates, and inflation.
• The company faces risks related to the quality and composition of its loan and investment portfolios.
• The company's liquidity could be impaired by unforeseen outflows of cash or the inability to access capital markets.
• The company's ability to generate sufficient future taxable income to realize its deferred tax assets is uncertain.
• The current lending environment for commercial real estate (CRE) loans has heightened risk due to a higher interest rate environment.

Future Outlook

The company expects to continue to reduce levels of brokered deposits in future periods to a level of 10.0% or less of total deposits. The Company expects brokered deposits to be a funding source for several years. The Company expects to save more than $2 million in interest expense annually due to the regulatory non-objection to redeem a significant portion of its subordinated debt. A recently completed review of the Banks deposit products and services led to a more streamlined and competitive offering, which the Company expects will result in higher service charges on deposit accounts in the subsequent periods.

Industry Context

The financial results reflect a challenging environment for regional banks, with pressure on net interest income and the need to manage regulatory requirements. The sale of the mortgage division is a strategic move to streamline operations and focus on core banking activities. The company's efforts to comply with the Consent Order are critical for its long-term stability and growth.

Comparison to Industry Standards

• Given the limited information, a detailed comparison to industry standards is challenging.
• However, regional banks like Truist, PNC, and Regions Financial typically aim for higher profitability metrics.
• Their Q1 results often show stronger net income and efficiency ratios.
• Blue Ridge's focus on resolving regulatory issues and optimizing its balance sheet is similar to actions taken by other banks under regulatory scrutiny, such as PacWest Bancorp before its acquisition.

Legal Proceedings

• A former Deputy Bank Secrecy Act Officer and manager at the Bank filed suit against the Company and the Company’s and the Bank’s Chief Executive Officer alleging that she was retaliated against and constructively discharged in violation of the Virginia Whistleblower Protection Act.
• An alleged shareholder of the Company commenced a putative class action in the U.S. District Court for the Eastern District of New York on behalf of himself and any persons or entities who purchased the publicly traded stock of the Company between February 3, 2023, and October 31, 2023, both dates inclusive (the Action).

Stakeholder Impact

• Shareholders: The net loss and stock performance may negatively impact shareholder value.
• Employees: The sale of the mortgage division and cost-cutting initiatives may lead to job losses or changes in roles.
• Customers: Changes in deposit offerings and loan products may affect customer relationships.
• Regulators: The company's compliance with the Consent Order is critical for maintaining regulatory approval.

Next Steps

• The company will continue to work towards meeting the requirements of the Consent Order.
• The company will manage loans in process toward closing and funding.
• The company will continue to reduce levels of brokered deposits.
• The company will redeem the 2030 Note on June 1, 2025.

Key Dates

Keywords

Blue Ridge Bankshares, financial results, net loss, mortgage division, consent order, capital ratios, deposits, loans, OCC, Q1 2025