10-Q: Blue Ridge Bankshares Returns to Profit, Boosts Shareholder Value

Blue Ridge Bankshares, Inc. reported a return to profitability for Q3 and YTD 2025, driven by strategic portfolio reductions and cost efficiencies, while announcing a special dividend and share repurchase program.

Summary

• Net income for the three months ended September 30, 2025, was $5.6 million ($0.06 diluted EPS), a significant increase from $0.9 million ($0.01 diluted EPS) for the same period in 2024.
• For the nine months ended September 30, 2025, net income was $6.5 million ($0.07 diluted EPS), reversing a net loss of $13.4 million ($0.34 diluted EPS) in the prior year period.
• Total assets decreased by $240.3 million to $2.50 billion as of September 30, 2025, from $2.74 billion at December 31, 2024, primarily due to a $199.1 million reduction in loans held for investment.
• Total deposits decreased by $228.4 million to $1.95 billion, mainly due to a $134.6 million decrease in brokered time deposits and a $16.6 million decrease in fintech-related deposits.
• Net interest income for Q3 2025 was $21.9 million, a decline of $2.8 million from Q3 2024, while net interest income for YTD Q3 2025 was $60.7 million, a $1.2 million decrease from YTD Q3 2024.
• Net interest margin improved to 3.60% for Q3 2025 from 2.74% for Q3 2024, positively impacted by loan fee income from an out-of-market loan payoff.
• Noninterest expense decreased by $6.4 million (24.2%) in Q3 2025 and $23.2 million (26.3%) YTD Q3 2025, reflecting workforce reductions and lower regulatory remediation costs.
• The company adopted a share repurchase program on August 25, 2025, authorizing purchases of up to $15.0 million of common stock.
• The sale of the mortgage division (Monarch Mortgage) was completed on March 27, 2025, resulting in a $0.2 million loss.
• The Bank continues to exceed the minimum capital ratios (10.0% leverage, 13.0% total capital) required by the OCC Consent Order.
• A special cash dividend of $0.25 per share, totaling approximately $30.0 million, was announced on October 27, 2025.

Sentiment

Score: 8

Explanation: The company demonstrated a strong turnaround to profitability, significantly reduced noninterest expenses, and improved its net interest margin. Capital ratios remain robust, and the announcement of a special dividend and share repurchase program indicates management's confidence. While assets and deposits declined, this was largely a strategic reduction of higher-cost funding and out-of-market loans. Ongoing regulatory oversight and legal proceedings are noted but appear to be managed.

Positives

• Returned to profitability with net income of $5.6 million in Q3 2025 and $6.5 million YTD Q3 2025, reversing a prior year net loss.
• Net interest margin significantly improved to 3.60% in Q3 2025 from 2.74% in Q3 2024, partly due to strategic loan portfolio management.
• Achieved substantial reductions in noninterest expense, decreasing by $6.4 million (24.2%) in Q3 2025 and $23.2 million (26.3%) YTD Q3 2025, driven by lower salaries, regulatory remediation, and other contractual services.
• Successfully reduced higher-cost fintech BaaS deposits and wholesale funding, optimizing the funding mix.
• Maintained strong capital ratios, exceeding the minimums required by the OCC Consent Order (Leverage Ratio: 13.67% vs. 10.0%; Total Capital Ratio: 19.96% vs. 13.0%).
• Reported a recovery of credit losses of $1.8 million in Q3 2025 and $2.5 million YTD Q3 2025.
• Resolved a significant class action lawsuit with a $2.5 million settlement, largely covered by insurance.
• Announced a special cash dividend of $0.25 per share, totaling $30.0 million, demonstrating improved financial health and commitment to shareholder returns.
• Initiated a share repurchase program for up to $15.0 million, further enhancing shareholder value.

Negatives

• Total assets decreased by $240.3 million to $2.50 billion as of September 30, 2025, from $2.74 billion at December 31, 2024.
• Loans held for investment declined by $199.1 million, partly due to a purposeful reduction of out-of-market relationships.
• Total deposits decreased by $228.4 million, primarily from brokered time deposits and fintech-related deposits.
• Net interest income declined by $2.8 million in Q3 2025 and $1.2 million YTD Q3 2025 compared to the same periods in 2024.
• Nonperforming loans increased to $28.6 million (1.49% of loans) as of September 30, 2025, from $25.4 million (1.20% of loans) at December 31, 2024.
• Mortgage banking income significantly decreased due to the sale of the mortgage division.
• The Bank is still deemed 'less than well capitalized' due to the OCC Consent Order, despite exceeding minimum capital ratios, which can lead to certain restrictions.
• An appeal is ongoing in a legal proceeding (Porter v. Blue Ridge Bankshares, Inc.) after the company's motion to dismiss was granted.

Risks

• The strength of the United States economy in general and the strength of the local economies in which the Company conducts operations.
• The effects of, and changes in, the macroeconomic environment and financial market conditions, including monetary and fiscal policies, interest rates, and inflation.
• The impact of, and the ability to comply with, the terms of the Consent Order with the Office of the Comptroller of the Currency (OCC), including heightened capital requirements and other restrictions.
• The imposition of additional regulatory actions or restrictions for noncompliance with the Consent Order or otherwise.
• The Company's involvement in, and the outcome of, any litigation, legal proceedings, or enforcement actions that may be instituted against the Company.
• Reputational risk and potential adverse reactions of the Company's customers, suppliers, employees, or other business partners.
• The Company's ability to manage its fintech relationships, including implementing enhanced controls, complying with OCC directives, and managing the final phases of the wind down of these partnerships.
• The quality and composition of the Company's loan and investment portfolios, including changes in the level of nonperforming assets and charge-offs.
• The Company's management of risks inherent in its loan portfolio, the credit quality of its borrowers, and the risk of a prolonged downturn in the real estate market, which could impair the value of collateral and its ability to sell collateral upon any foreclosure.
• The ability to maintain adequate liquidity by growing and retaining deposits and secondary funding sources, especially if the Company's or its industry's reputation becomes damaged.
• The emergence of digital assets and payment stablecoins, and evolving legislative or regulatory frameworks, may alter deposit flows, competition, and credit intermediation, adversely affecting funding, liquidity, or overall financial performance.
• The ability to maintain capital levels adequate to support the Company's business and to comply with the Consent Order directives.
• The ability of the Company to implement cost-saving initiatives and efficiency measures, as well as increase earning assets, in order to yield acceptable levels of profitability.
• The ability to generate sufficient future taxable income for the Company to realize its deferred tax assets, including the net operating loss carryforward.
• The timely development of competitive products and services and the acceptance of these products and services by new and existing customers.
• Changes in consumer spending and savings habits and the willingness of users to substitute competitors' products and services for the Company's.
• The impact of unanticipated outflows of deposits.
• Technological and social media changes, and potential exposure to fraud, negligence, computer theft, and cyber-crime.
• Adverse developments in the financial industry generally, such as bank failures, responsive measures, supervisory and regulatory actions and costs, and related impacts on customer and client behavior.
• Changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities, more restrictive capital requirements, increased costs, or changes in the secondary market for loans.
• Political developments, including government shutdowns and other significant disruptions and changes in the funding, size, scope and effectiveness of the federal government, its agencies and services.
• The impact of changes in financial services policies, laws, and regulations, including laws, regulations, and policies concerning taxes, banking, securities, real estate and insurance, and the application thereof by regulatory bodies.
• The effect of changes in accounting standards, policies, and practices as may be adopted from time to time.
• Estimates of the fair value and other accounting values, subject to impairment assessments, of certain assets and liabilities.
• Geopolitical conditions, including acts or threats of terrorism and/or military conflicts, or actions taken by governments in response.
• The economic impact of duties, tariffs, or other barriers or restrictions on trade, any retaliatory countermeasures, and the volatility and uncertainty arising therefrom.
• The occurrence or continuation of widespread health emergencies or pandemics, significant natural disasters, severe weather conditions, floods, and other catastrophic events.

Future Outlook

The company expects to continue reducing brokered deposits to a level of 10.0% or less of total deposits in future periods and will continue to seek waivers from the FDIC to accept, renew, or rollover brokered deposits. Management believes that future credit losses from a $4.7 million multifamily loan placed on nonaccrual status will not be significant. The company does not expect new accounting pronouncements (ASU 2023-09 and ASU 2025-01) to have a material effect on its consolidated financial statements, but they will result in expanded disclosures in future reports. The company will not update forward-looking statements to reflect actual results or changes in factors affecting them.

Management Comments

• "The Company believes it has made significant progress towards meeting the requirements of the Consent Order."
• "The Company cannot predict when or if it will repurchase additional shares of common stock as the Repurchase Program will depend on a number of factors, including constraints specified in any Securities and Exchange Commission Rule 10b5-1 trading plans, price, and general business and market conditions."
• "Management believes that the Company's ACL was adequate as of September 30, 2025 and December 31, 2024."
• "Management believes that such legal proceedings, in the aggregate, will not have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows."

Industry Context

The company's strategic reduction of its loan portfolio and exit from fintech BaaS deposit operations reflect a broader industry trend of banks de-risking and optimizing funding costs in a higher interest rate environment. The challenging lending environment for commercial real estate (CRE) loans, due to elevated interest rates and potential collateral value impairment, is a significant industry-wide concern that the company is actively monitoring. The company's adherence to and exceeding of regulatory capital requirements, particularly under an OCC Consent Order, highlights the increased scrutiny and compliance demands across the banking sector following recent financial industry events.

Comparison to Industry Standards

• The Bank's capital ratios (Leverage Ratio: 13.67%, Total Capital Ratio: 19.96%) significantly exceed the minimums required by the OCC Consent Order (10.0% and 13.0% respectively) and also surpass the 'well capitalized' thresholds (5.0% and 10.0% respectively), indicating a strong capital position relative to regulatory benchmarks.
• The company's liquidity management program aims to reduce brokered deposits to 10.0% or less of total deposits, aligning with common industry practices to decrease reliance on potentially volatile wholesale funding sources.
• The company employs an independent firm to model its interest rate sensitivity using a net interest income simulation model, a standard regulatory and banking industry practice for managing interest rate risk and tracking its position over time.

Corporate Governance

Legal Proceedings

• **Porter v. Blue Ridge Bankshares, Inc.**: A former Deputy Bank Secrecy Act Officer filed suit on December 20, 2024, alleging retaliation and constructive discharge. The company's motion to dismiss was granted on July 18, 2025, but the plaintiff appealed on August 15, 2025. The company believes the claims are without merit and will defend vigorously.
• **Russell Hunter v. Blue Ridge Bankshares, Inc., et al.**: A putative class action filed on December 5, 2023, alleging federal securities law violations related to accounting judgments. Parties agreed in principle to a $2.5 million settlement on December 5, 2024, which was preliminarily approved on July 5, 2025, and final approval hearing held on October 29, 2025, with no objections. The company was insured for the settlement amount less a deductible.

Stakeholder Impact

• **Shareholders**: Positive impact from the return to profitability, improved net interest margin, reduced expenses, special cash dividend ($0.25/share), and share repurchase program ($15.0 million). Potential dilution from warrant exercises. The class action settlement is largely covered by insurance, mitigating direct financial impact.
• **Employees**: Reduction in headcount (from 468 to 311 employees) due to right-sizing, leading to severance costs for some. Performance-based restricted stock awards granted to executive officers.
• **Customers**: Strategic reduction of out-of-market loan relationships. Changes in product and pricing for deposit accounts to align with competitors.
• **Regulators (OCC, FDIC)**: Ongoing compliance with the Consent Order, exceeding capital requirements, and seeking waivers for brokered deposits. Improved regulatory position reflected in lower FDIC insurance assessments.
• **Fintech Partners**: Exit of fintech BaaS deposit operations and reduction in indirect lending relationships. Conclusion of exit activities with a former fintech BaaS partner.

Next Steps

• Continue efforts to obtain stockholder approval for Exercise Price adjustment if a reduction requires it under Principal Trading Market rules.
• Continue to use commercially reasonable efforts to obtain stockholder approval for Exercise Price adjustment, including calling a special meeting of stockholders.
• Company expects to continue to seek waivers from the FDIC to accept, renew, or rollover brokered deposits.
• Company expects to continue to reduce levels of brokered deposits to 10.0% or less of total deposits in future periods.
• The special cash dividend of $0.25 per share is payable on November 21, 2025, to shareholders of record as of November 7, 2025.
• The company will continue to defend itself vigorously in the Porter v. Blue Ridge Bankshares, Inc. appeal.
• The company will provide expanded income tax-related disclosures beginning with its 2025 Form 10-K due to ASU 2023-09.
• The company will provide expanded income statement expense disaggregation disclosures beginning with its financial statements for the year ending December 31, 2027, due to ASU 2025-01.

Key Dates

Recommendation

The company has demonstrated a significant turnaround, moving from a net loss to profitability, driven by strategic de-risking, cost efficiencies, and improved net interest margin. The strong capital position, exceeding regulatory requirements, and the proactive steps to address regulatory concerns (Consent Order) provide a solid foundation. The announcement of a special cash dividend and a share repurchase program signals management's confidence in future performance and commitment to shareholder returns. While asset and deposit bases have shrunk, this appears to be a deliberate strategy to shed higher-cost and riskier segments, positioning the company for more sustainable growth. The resolution of the class action lawsuit removes a significant overhang. The ongoing appeal in another legal matter is a minor concern but the overall trajectory is positive.

Keywords

Blue Ridge Bankshares, BRBS, Quarterly Report, Financial Results, Banking, Financial Services, Net Income, Deposits, Loans, Capital Ratios, OCC Consent Order, Share Repurchase, Special Dividend, Mortgage Division Sale, Fintech, Regulatory Compliance, Credit Losses, Interest Rate Risk, Liquidity