DEFA14A: Blue Ridge Bankshares Secures $150 Million in Private Placement to Bolster Capital and Strategic Initiatives

Blue Ridge Bankshares has successfully closed a $150 million private placement of common and preferred stock, superseding a previous transaction and aiming to enhance capital levels and support strategic growth.

Summary

• Blue Ridge Bankshares, Inc. has finalized a private placement, securing $150 million through the issuance of common and preferred stock.
• This placement replaces a previously announced transaction from December 22, 2023.
• The funds are intended to strengthen the bank's capital position, support organic growth, and reposition business lines.
• The private placement involves the issuance of 3.4 million common shares at $2.50 per share, 14,150 shares of convertible Series B or Series C preferred stock, and 7,383 warrants to purchase convertible Series B or Series C preferred stock.
• Each share of preferred stock is equivalent to 4,000 common shares.
• Upon shareholder approval, Series B preferred stock will convert into common shares, and warrants will convert into warrants to acquire common shares.
• Assuming full conversion, the company would issue 60 million common and common-equivalent shares at $2.50 and have approximately 29.5 million common stock warrants outstanding with a strike price of $2.50.
• The transaction was led by Kenneth R. Lehman, with participation from Castle Creek Capital Partners VIII L.P., other institutional investors, and Blue Ridge directors and officers.
• Blue Ridge expects to add up to three new investor-appointed representatives to its Board of Directors, pending regulatory approval, reducing the board size to 13 members after the 2024 annual meeting.
• The company intends to file a proxy statement with the SEC seeking shareholder approval for certain matters related to the transactions.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the successful capital raise, but tempered by the need for shareholder approval and the regulatory oversight from the Consent Order. The change in offering structure due to voting tabulation issues also introduces some uncertainty.

Positives

• The $150 million private placement provides a significant capital infusion for Blue Ridge Bankshares.
• The funds will support strategic initiatives, including repositioning business lines and supporting organic growth.
• The capital will help enhance the core community bank's capital levels and comply with the Consent Order issued by the Office of the Comptroller of the Currency.
• The addition of experienced investors to the Board of Directors could bring valuable expertise and oversight.

Negatives

• The private placement requires shareholder approval for the conversion of preferred stock and the increase in authorized common shares.
• The company received a shareholder inquiry that raised questions about how votes were tabulated by an outside party on the articles amendment proposal at the shareholders meeting that made it difficult to move forward in a timely fashion.
• The company is subject to a Consent Order from the OCC, indicating regulatory concerns.

Risks

• The company's financial performance could be affected by the strength of the U.S. economy and local economies.
• Macroeconomic and financial market conditions, including interest rates and inflation, could impact results.
• The company's ability to obtain shareholder approvals is uncertain.
• Failure to comply with the Consent Order could lead to additional regulatory actions.
• Reputational risk and adverse reactions from customers, suppliers, or employees could arise.
• The company faces risks related to managing its fintech relationships and maintaining deposit levels.
• Maintaining adequate liquidity and capital levels is crucial.
• The company is exposed to potential fraud, negligence, computer theft, and cyber-crime.
• Adverse developments in the financial industry generally could have an impact.
• Changes in financial services policies, laws, and regulations could affect the company.
• Geopolitical conditions and widespread health emergencies could impact business and economic conditions.

Future Outlook

The company plans to use the capital to propel its near-term strategic initiatives, including repositioning business lines, supporting organic growth, and further enhancing the core community bank's capital levels. They also intend to file a proxy statement with the SEC seeking shareholder approval for certain matters related to the transactions.

Management Comments

• 'Although we believe we had nearly satisfied the appropriate closing conditions of the Previous Transaction, we received a shareholder inquiry that has raised questions about how votes were tabulated by an outside party on the articles amendment proposal at the shareholders meeting that made it difficult to move forward in a timely fashion, so we felt the best path was to adjust the offering structure,' said President and CEO, G. William Billy Beale.
• 'We appreciate the commitment of the investors from the Previous Transaction to Blue Ridge as this continues to represent a significant step for our Virginia-based community bank to build a stronger platform for growth and shareholder value.'

Industry Context

Community banks are facing increasing pressure to maintain adequate capital levels and adapt to changing market conditions. This private placement reflects Blue Ridge Bankshares' efforts to address these challenges and position itself for future growth. Similar capital raises have been observed across the industry as banks seek to strengthen their balance sheets and invest in strategic initiatives.

Comparison to Industry Standards

• Many regional banks have recently undertaken capital raises to improve their capital ratios in light of increased regulatory scrutiny and economic uncertainty.
• For example, PacWest Bancorp raised capital to stabilize its financial position amidst market concerns.
• The $150 million raised by Blue Ridge is a significant amount for a bank of its size, indicating a substantial commitment from investors.
• The terms of the private placement, including the conversion features of the preferred stock, are relatively standard for such transactions in the banking sector.

Stakeholder Impact

• Shareholders will be impacted by the potential dilution from the issuance of new shares and the conversion of preferred stock.
• Employees may benefit from the company's strategic initiatives and growth plans.
• Customers could see improved services and stability from a better-capitalized bank.
• The capital raise could strengthen the bank's relationships with suppliers and creditors.

Next Steps

• Blue Ridge intends to file a proxy statement with the SEC seeking shareholder approval for certain matters related to the transactions.
• The company expects to add up to three new investor-appointed representatives to its Board of Directors, subject to regulatory approval.
• The company will work to reposition business lines, support organic growth, and enhance capital levels.

Key Dates

Keywords

private placement, capital raise, Blue Ridge Bankshares, common stock, preferred stock, shareholder approval, Consent Order, Kenneth R. Lehman, Castle Creek Capital, strategic initiatives, bank, banking