DEF 14A: Blue Ridge Bankshares Seeks Shareholder Approval for $150 Million Capital Raise

Blue Ridge Bankshares is holding a special meeting on June 20, 2024, to seek shareholder approval for proposals related to its recently closed $150 million capital raise.

Summary

• Blue Ridge Bankshares is seeking shareholder approval for three proposals related to its $150 million capital raise, which closed on April 3, 2024.
• The capital raise involved issuing common stock, preferred stock, and warrants to purchase preferred stock.
• Proposal 1 asks for approval to issue shares of common stock upon conversion or exchange of the Series B and Series C preferred stock and related warrants.
• Proposal 2 seeks approval to amend the company's articles of incorporation to increase the number of authorized common shares from 50,000,000 to 150,000,000.
• Proposal 3 requests approval to adjourn the Special Meeting if necessary to solicit additional proxies.
• The Board of Directors unanimously recommends voting FOR all proposals.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the capital raise is a positive step, the company's recent financial losses and regulatory challenges temper the overall outlook.

Positives

• The $150 million capital raise allows Blue Ridge Bank, N.A., to comply with regulatory capital requirements.
• The capital raise is a significant step for the company to build a stronger platform for growth and shareholder value.
• Over 93% of votes cast at the original meeting supported the initial private placement, indicating strong shareholder support for a capital raise.
• The Board believes the private placement is in the best interest of shareholders.

Negatives

• The issuance of shares of Common Stock upon the Conversion will result in substantial dilution to existing common shareholders.
• The resale of the additional shares of Common Stock could also cause the market price of the Common Stock to decline.
• The Company's financial performance during 2023 reflected a net loss of $51.8 million.

Risks

• The company faces business challenges and financial pressures that began in 2022 and continued throughout 2023 and into 2024.
• The Bank is subject to a consent order from the OCC requiring it to maintain higher capital ratios.
• The company plans to substantially exit its banking-as-a-service fintech operations in 2024.
• There is a risk of further deterioration within the company's specialty finance loans or other increases in nonperforming loans in the future.

Future Outlook

The company plans to use the capital for general corporate purposes, repositioning business lines, supporting organic growth, and enhancing the Bank's capital levels.

Management Comments

• G. William Beale, President and Chief Executive Officer: 'These proceeds allow the Companys subsidiary bank, Blue Ridge Bank, N.A., to comply with regulatory capital requirements and represent a significant step for the Company to build a stronger platform for growth and shareholder value.'

Industry Context

This announcement reflects the ongoing challenges faced by smaller banks in meeting regulatory capital requirements and adapting to evolving market conditions, particularly in the fintech space.

Comparison to Industry Standards

• Global benchmarks for capital adequacy typically involve comparisons to Basel III requirements, which set minimum capital ratios for banks.
• Comparable companies in the regional banking sector, such as Truist Financial and Fifth Third Bancorp, maintain capital ratios within the Basel III framework.
• Blue Ridge Bank's efforts to meet the OCC's IMCR requirements are similar to other banks under regulatory scrutiny seeking to improve their capital positions.

Management Changes

Related Party Transactions

• Certain directors and executive officers of the company purchased an aggregate of 270 shares of Series B Preferred Stock in the Private Placement at a purchase price of $10,000 per share.
• These directors and executive officers did not receive Warrants in connection with the Private Placement.
• These directors and executive officers will not have any rights to any dividends on the shares of Series B Preferred Stock held by such director or executive officer.
• These directors and executive officers will not have any rights to any adjustment or change to the Conversion Rate or Conversion Price on the shares of Series B Preferred Stock held by such director or executive officer.

Stakeholder Impact

• Existing shareholders will experience substantial dilution of their ownership interests if additional shares of Common Stock are issued.
• The issuance of additional shares could cause a significant reduction in the percentage interests of current shareholders, their voting power, the liquidation value, book and market value of their shares and the future earnings per share of the Company.
• The sale or resale of the additional securities could also cause the market price of the Common Stock to decline.

Next Steps

• Shareholders will vote on the proposals at the Special Meeting on June 20, 2024.
• The company will file the Articles Amendment with the Virginia State Corporation Commission if approved.
• The company will work with Mr. Lehman and Castle Creek to develop and adopt an asset resolution plan.
• The Company will use its commercially reasonable efforts to cause all of the shares of Common Stock issued in the Conversion to be approved for listing on the NYSE American as promptly as possible.

Key Dates

Keywords

capital raise, shareholder approval, preferred stock, common stock, warrants, conversion, dilution, Blue Ridge Bankshares, regulatory capital, OCC