[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents unaudited consolidated financial statements and detailed notes for Blue Ridge Bankshares, Inc. for periods ending June 30, 2025, and December 31, 2024 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and explanatory notes for Blue Ridge Bankshares, Inc. for the periods ended June 30, 2025, and December 31, 2024 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20(unaudited)%20and%20December%2031%2C%202024) This table presents the consolidated financial position, including assets, liabilities, and equity, as of June 30, 2025, and December 31, 2024 | (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | **ASSETS** | | | | Cash and due from banks | $131,199 | $173,533 | | Securities available for sale, at fair value | $327,958 | $312,035 | | Loans held for investment, net | $1,956,611 | $2,088,774 | | Total assets | $2,555,439 | $2,737,260 | | **LIABILITIES & STOCKHOLDERS' EQUITY** | | | | Total deposits | $2,010,266 | $2,179,442 | | FHLB borrowings | $150,000 | $150,000 | | Subordinated notes, net | $24,928 | $39,789 | | Total liabilities | $2,211,174 | $2,409,472 | | Total stockholders' equity | $344,265 | $327,788 | | Total liabilities and stockholders' equity | $2,555,439 | $2,737,260 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This table details the company's revenues, expenses, and net income (loss) for the three and six months ended June 30, 2025, and 2024 | (Dollars in thousands, except per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $34,736 | $40,631 | $70,086 | $83,162 | | Total interest expense | $14,895 | $20,546 | $31,255 | $42,728 | | Net interest income | $19,841 | $20,085 | $38,831 | $40,434 | | Total (recovery of) provision for credit losses | ($700) | $3,100 | ($700) | $2,100 | | Total noninterest income | $3,244 | $272 | $6,316 | $8,060 | | Total noninterest expense | $22,009 | $29,308 | $44,960 | $61,745 | | Income (loss) before income tax expense | $1,776 | ($12,051) | $887 | ($15,351) | | Net income (loss) | $1,296 | ($11,435) | $862 | ($14,328) | | Basic and diluted income (loss) per common share | $0.01 | ($0.47) | $0.01 | ($0.66) | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This table presents the net income (loss) and other comprehensive income (loss) for the three and six months ended June 30, 2025, and 2024 | (Dollars in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $1,296 | ($11,435) | $862 | ($14,328) | | Other comprehensive (loss) income, net of tax | ($34) | $3,131 | $3,772 | $573 | | Comprehensive net income (loss) | $1,262 | ($8,304) | $4,634 | ($13,755) | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This table outlines changes in stockholders' equity components, including net income, other comprehensive income, and stock transactions, for periods ended June 30, 2025, and 2024 | (Dollars in thousands) | Balance at beginning of period (Dec 31, 2024) | Net income | Other comprehensive income | Exercise of warrants | Restricted stock awards, net | Balance at end of period (June 30, 2025) | | :--------------------- | :-------------------------------------------- | :--------- | :------------------------- | :------------------- | :--------------------------- | :--------------------------------------- | | Common Stock | $322,791 | — | — | $9,445 | $2,398 | $334,634 | | Additional Paid-in Capital | $29,687 | — | — | — | — | $29,687 | | Retained Earnings | $17,772 | $862 | — | — | — | $18,634 | | Accumulated Other Comprehensive (Loss) Income, net | ($42,462) | — | $3,772 | — | — | ($38,690) | | Total Stockholders' Equity | $327,788 | $862 | $3,772 | $9,445 | $2,398 | $344,265 | | (Dollars in thousands) | Balance at beginning of period (Dec 31, 2023) | Net loss | Other comprehensive income | Issuance of stock and warrants | Restricted stock awards, net | Balance at end of period (June 30, 2024) | | :--------------------- | :-------------------------------------------- | :------- | :------------------------- | :----------------------------- | :--------------------------- | :--------------------------------------- | | Common Stock | $197,636 | — | — | $102,434 | $906 | $300,976 | | Series C Preferred Stock | $0 | — | — | $137 | — | $137 | | Additional Paid-in Capital | $33,157 | — | — | $49,903 | — | $50,155 | | Retained Earnings | ($45,056) | ($14,328) | — | — | — | $18,829 | | Accumulated Other Comprehensive (Loss) Income, net | ($45,056) | — | $573 | — | — | ($44,483) | | Total Stockholders' Equity | $185,989 | ($14,328) | $573 | $152,474 | $906 | $325,614 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This table summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 | (Dollars in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------- | :----------------------------- | :----------------------------- | | **Cash Flows From Operating Activities** | | | | Net income (loss) | $862 | ($14,328) | | Cash provided by (used in) operating activities | $7,068 | ($12,333) | | **Cash Flows From Investing Activities** | | | | Cash provided by investing activities | $122,810 | $181,354 | | **Cash Flows From Financing Activities** | | | | Cash used in financing activities | ($174,671) | ($159,641) | | Net (decrease) increase in cash and due from banks | ($44,793) | $9,380 | | Cash and due from banks and restricted cash at end of period | $131,199 | $130,531 | [Note 1 – Organization and Basis of Presentation](index=9&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20Basis%20of%20Presentation) This note describes the company's structure, significant events like the mortgage division sale and private placements, and regulatory compliance status - The Company's business activities are primarily conducted through its wholly-owned subsidiary bank, Blue Ridge Bank, National Association, and its wealth and trust management subsidiary, BRB Financial Group, Inc[19](index=19&type=chunk) - On March 27, 2025, the Company completed the sale of its mortgage division, Monarch Mortgage, resulting in a **$0.2 million loss** reported in other noninterest income, with this transaction reported within continuing operations[23](index=23&type=chunk)[24](index=24&type=chunk) - In Q2 2024, the Company closed private placements, issuing common and preferred stock for gross proceeds of **$161.6 million**, with net proceeds of **$152.1 million**, and also issued warrants to purchase common stock at **$2.50 per share**[25](index=25&type=chunk) Warrants to Purchase Common Stock (as of and for the six months ended June 30, 2025) | Category | Warrants Issued April 3, 2024 | Warrants Issued June 13, 2024 | Total Warrants | | :------- | :---------------------------- | :---------------------------- | :------------- | | Outstanding at beginning of period | 29,027,999 | 2,424,000 | 31,451,999 | | Exercised during the period (1) | (3,778,000) | — | (3,778,000) | | Outstanding at end of period | 25,249,999 | 2,424,000 | 27,673,999 | | Remaining exercise term (years) | 3.76 | 3.95 | | (1) 1,016,000 warrants were exercised during the three months ended June 30, 2025. - The Bank is subject to a Consent Order with the OCC (January 24, 2024) requiring enhanced controls for fintech operations, a strategic plan, a capital plan, and minimum capital ratios (**10.0% leverage**, **13.0% total capital**), which the Bank exceeded as of June 30, 2025, and December 31, 2024[28](index=28&type=chunk) [Note 2 – Investment Securities and Other Investments](index=10&type=section&id=Note%202%20%E2%80%93%20Investment%20Securities%20and%20Other%20Investments) This note details the composition and fair value of investment securities available for sale, along with information on pledged securities and other equity investments Investment Securities Available for Sale (AFS) - June 30, 2025 (Dollars in thousands) | Category | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :------- | :------------- | :--------------------- | :---------------------- | :--------- | | Mortgage backed securities | $211,685 | $97 | ($33,170) | $178,612 | | U.S. Treasury and agencies | $79,082 | — | ($8,094) | $70,988 | | State and municipal | $49,763 | — | ($6,396) | $43,367 | | Corporate bonds | $37,425 | $43 | ($2,477) | $34,991 | | **Total investment securities** | **$377,955** | **$140** | **($50,137)** | **$327,958** | Investment Securities Available for Sale (AFS) - December 31, 2024 (Dollars in thousands) | Category | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :------- | :------------- | :--------------------- | :---------------------- | :--------- | | Mortgage backed securities | $199,453 | — | ($35,015) | $164,438 | | U.S. Treasury and agencies | $79,430 | — | ($9,975) | $69,455 | | State and municipal | $50,233 | — | ($7,296) | $42,937 | | Corporate bonds | $38,453 | — | ($3,248) | $35,205 | | **Total investment securities** | **$367,569** | **—** | **($55,534)** | **$312,035** | - Securities pledged to secure FHLB borrowings totaled **$177.0 million** as of June 30, 2025, and **$268.9 million** as of December 31, 2024[33](index=33&type=chunk) - Securities pledged to secure FRB Discount Window borrowing capacity were **$0** as of June 30, 2025, and **$16.3 million** as of December 31, 2024[34](index=34&type=chunk) - Restricted equity investments (FHLB, FRB, correspondent bank stock) totaled **$18.9 million** as of June 30, 2025, and **$19.3 million** as of December 31, 2024, carried at cost[39](index=39&type=chunk) - Other equity investments (fintech, limited partnerships) totaled **$4.6 million** as of June 30, 2025, and **$4.8 million** as of December 31, 2024, while other investments (early-stage funds) totaled **$20.9 million** as of June 30, 2025, and **$19.4 million** as of December 31, 2024[40](index=40&type=chunk) [Note 3 – Loans and ACL](index=12&type=section&id=Note%203%20%E2%80%93%20Loans%20and%20ACL) This note provides a breakdown of loans held for investment, nonaccrual loans, and changes in the allowance for credit losses Amortized Cost of Loans Held for Investment (Dollars in thousands) | Loan Category | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Commercial and industrial | $323,976 | $354,904 | | Real estate – construction, commercial | $78,476 | $114,491 | | Real estate – construction, residential | $52,031 | $51,807 | | Real estate – commercial | $810,978 | $847,842 | | Real estate – residential | $671,317 | $692,253 | | Real estate – farmland | $4,723 | $5,520 | | Consumer | $36,237 | $43,938 | | **Gross loans held for investment** | **$1,977,738** | **$2,110,755** | - Loans pledged as collateral for FHLB borrowings totaled **$749.7 million** as of June 30, 2025, and **$797.7 million** as of December 31, 2024[42](index=42&type=chunk) - Loans pledged as collateral for FRB Discount Window totaled **$75.1 million** as of June 30, 2025, and **$91.6 million** as of December 31, 2024[42](index=42&type=chunk) Nonaccrual Loans Held for Investment (Dollars in thousands) | Loan Category | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Commercial and industrial | $9,160 | $10,185 | | Real estate – construction, commercial | — | $220 | | Real estate – commercial | $4,033 | $4,235 | | Real estate – residential | $8,244 | $7,497 | | Consumer | $669 | $820 | | **Total Nonaccrual Loans** | **$22,106** | **$22,957** | - The Company recognized **$30 thousand** and **$148 thousand** of interest income on nonaccrual loans for the three and six months ended June 30, 2025, respectively, compared to **$122 thousand** and **$187 thousand** for the same periods in 2024[45](index=45&type=chunk) Allowance for Credit Losses (ACL) - Changes for the Six Months Ended June 30, 2025 (Dollars in thousands) | Loan Category | ACL, beginning of period | (Recovery of) provision for credit losses - loans | Charge-offs | Recoveries | ACL, end of period | | :------------ | :----------------------- | :------------------------------------------------ | :---------- | :--------- | :----------------- | | Commercial and industrial | $5,767 | ($42) | ($4,661) | $4,782 | $5,846 | | Real estate – construction, commercial | $2,057 | ($785) | — | — | $1,272 | | Real estate – construction, residential | $540 | ($142) | — | — | $398 | | Real estate – commercial | $5,963 | ($359) | ($63) | $338 | $5,879 | | Real estate – residential | $7,933 | $184 | ($123) | $7 | $8,001 | | Real estate – farmland | $18 | ($3) | — | — | $15 | | Consumer | $745 | $447 | ($1,035) | $406 | $563 | | **Total** | **$23,023** | **($700)** | **($5,882)** | **$5,533** | **$21,974** | - Troubled Loan Modifications (TLMs) totaled **$2.165 million** for the six months ended June 30, 2025, compared to **$0.225 million** for the same period in 2024, with concessions including term extensions, principal deferrals, and interest forgiveness[71](index=71&type=chunk) [Note 4 – Borrowings](index=21&type=section&id=Note%204%20%E2%80%93%20Borrowings) This note details the company's FHLB borrowings, FRB Discount Window capacity, and subordinated notes, including recent redemptions - FHLB borrowings remained at **$150.0 million** as of June 30, 2025, and December 31, 2024, with the secured facility totaling **$583.3 million** and **$696.0 million**, respectively, and available balances of **$382.2 million** and **$494.9 million**[78](index=78&type=chunk)[79](index=79&type=chunk) - FRB Discount Window borrowing capacity was **$75.1 million** as of June 30, 2025, and **$105.7 million** as of December 31, 2024, with no outstanding advances on either date[83](index=83&type=chunk) - Subordinated notes, net, decreased to **$24.9 million** as of June 30, 2025, from **$39.8 million** as of December 31, 2024, primarily due to the **$15.0 million** redemption of the 2030 Note on June 1, 2025[85](index=85&type=chunk)[86](index=86&type=chunk) - The 2029 Notes bore an annual interest rate of **8.59%** as of June 30, 2025, with an effective interest rate of **7.86%** for the three months ended June 30, 2025, compared to **5.08%** in 2024[87](index=87&type=chunk) [Note 5 – Fair Value](index=22&type=section&id=Note%205%20%E2%80%93%20Fair%20Value) This note explains the categorization of fair value measurements and presents financial assets measured at fair value on both recurring and nonrecurring bases - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[89](index=89&type=chunk) Financial Assets Measured at Fair Value on a Recurring Basis (June 30, 2025, Dollars in thousands) | Category | Total | Level 1 | Level 2 | Level 3 | | :------- | :---- | :------ | :------ | :------ | | Securities available for sale | $327,958 | — | $327,458 | $500 | | Mortgage servicing rights assets | $249 | — | — | $249 | | Rabbi trust assets | $643 | $643 | — | — | | Interest rate swap asset | $56 | — | $56 | — | Financial Assets Measured at Fair Value on a Nonrecurring Basis (June 30, 2025, Dollars in thousands) | Category | Total | Level 1 | Level 2 | Level 3 | | :------- | :---- | :------ | :------ | :------ | | Other equity investments | $4,641 | — | $1,635 | $3,006 | | Collateral-dependent loans | $3,916 | — | — | $3,916 | | Loans held for sale | $12,380 | — | $12,380 | — | | Other non-real estate owned | $222 | — | — | $222 | [Note 6 – Minimum Regulatory Capital Requirements](index=26&type=section&id=Note%206%20%E2%80%93%20Minimum%20Regulatory%20Capital%20Requirements) This note outlines the Bank's compliance with Consent Order-mandated minimum capital ratios and its "adequately capitalized" status - The Bank is subject to a Consent Order requiring higher minimum capital ratios of **10.0% leverage ratio** and **13.0% total capital ratio**, which the Bank met as of June 30, 2025, and December 31, 2024[103](index=103&type=chunk) - Due to the Consent Order, the Bank is deemed 'less than well capitalized,' thus 'adequately capitalized,' which can impose limitations on activities[103](index=103&type=chunk) Blue Ridge Bank, N.A. Capital Ratios (June 30, 2025, Dollars in thousands) | Capital Ratio | Actual Amount | Actual Ratio | Minimum for Capital Adequacy | Minimum to Be Well Capitalized | Consent Order Minimum | | :------------ | :------------ | :----------- | :--------------------------- | :----------------------------- | :-------------------- | | Total risk based capital | $361,482 | 18.90% | 10.50% | 10.00% | 13.00% | | Tier 1 capital | $341,443 | 17.86% | 8.50% | 8.00% | n/a | | Common equity tier 1 capital | $341,443 | 17.86% | 7.00% | 6.50% | n/a | | Tier 1 leverage | $341,443 | 12.89% | 4.00% | 5.00% | 10.00% | - The CECL Transitional Amount was **$8.1 million**, reducing regulatory capital by **$6.1 million** as of June 30, 2025, and **$4.1 million** as of December 31, 2024[105](index=105&type=chunk) [Note 7 – Commitments and Contingencies](index=27&type=section&id=Note%207%20%E2%80%93%20Commitments%20and%20Contingencies) This note details outstanding loan commitments, letters of credit, and reserves for unfunded commitments and MSR-related liabilities - Outstanding loan commitments were **$273.8 million** as of June 30, 2025, and **$283.2 million** as of December 31, 2024, with **$111.4 million** and **$108.4 million**, respectively, being unconditionally cancelable[109](index=109&type=chunk) - Commitments under outstanding financial stand-by letters of credit totaled **$13.5 million** as of June 30, 2025, and **$12.5 million** as of December 31, 2024[110](index=110&type=chunk) - The reserve for unfunded commitments was **$0.9 million** as of both June 30, 2025, and December 31, 2024[111](index=111&type=chunk) - The reserve for estimated MSR putbacks, transition costs, and unearned sales proceeds was **$1.4 million** as of June 30, 2025, and **$1.8 million** as of December 31, 2024, with the Company receiving **$0.3 million** of previously unearned sale proceeds in Q2 2025[112](index=112&type=chunk) - Future commitments outstanding related to investments in partnerships and limited liability companies totaled **$5.6 million** as of June 30, 2025[113](index=113&type=chunk) [Note 8 – Stock-Based Compensation](index=28&type=section&id=Note%208%20%E2%80%93%20Stock-Based%20Compensation) This note reports stock-based compensation expense and activity for restricted stock awards and performance share awards - Stock-based compensation expense was **$2.2 million** for the three months ended June 30, 2025 (vs. **$0.3 million** in 2024) and **$2.3 million** for the six months ended June 30, 2025 (vs. **$0.5 million** in 2024)[115](index=115&type=chunk) - On April 29, 2025, the Company granted PSAs totaling **3,400,000 shares** of common stock to executive officers, vesting contingent on profitability thresholds over three one-year periods[115](index=115&type=chunk) Time-based RSA and PSA Activity (June 30, 2025) | Category | Shares unvested and outstanding, Dec 31, 2024 | Granted | Vested | Forfeited | Shares unvested and outstanding, June 30, 2025 | | :------- | :-------------------------------------------- | :------ | :----- | :-------- | :--------------------------------------------- | | Time-based RSAs | 585,700 | 96,322 | (141,147) | (41,557) | 499,318 | | PSAs | 116,830 | 3,400,000 | — | (20,939) | 3,495,891 | [Note 9 – Earnings Per Share](index=28&type=section&id=Note%209%20%E2%80%93%20Earnings%20Per%20Share) This table presents basic and diluted earnings per share calculations, including net income available to common stockholders and weighted average shares outstanding Basic and Diluted Earnings Per Share (Dollars in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) available to common stockholders | $1,296 | ($11,585) | $862 | ($14,478) | | Weighted average common shares outstanding, basic | 88,257,659 | 24,477,007 | 87,136,670 | 21,827,669 | | Weighted average common shares outstanding, dilutive | 88,582,343 | 24,477,007 | 87,310,546 | 21,827,669 | | Basic and diluted income (loss) per common share | $0.01 | ($0.47) | $0.01 | ($0.66) | | Total weighted average anti-dilutive shares excluded from diluted EPS | 1,570,433 | — | 829,234 | — | [Note 10 – Segment Reporting](index=29&type=section&id=Note%2010%20%E2%80%93%20Segment%20Reporting) This note outlines the company's reportable segments, including commercial banking, mortgage banking, and holding company activities, with net income (loss) by segment - The Company operated through three reportable segments: commercial banking, mortgage banking (sold March 2025), and holding company activities, with mortgage banking presented for comparative purposes[121](index=121&type=chunk) Net Income (Loss) by Segment (Three months ended June 30, 2025, Dollars in thousands) | Segment | Net Income (Loss) | | :------ | :---------------- | | Commercial Banking | $3,204 | | Mortgage Banking | ($1,028) | | Parent Only | ($880) | | **Consolidated** | **$1,296** | Net Income (Loss) by Segment (Six months ended June 30, 2025, Dollars in thousands) | Segment | Net Income (Loss) | | :------ | :---------------- | | Commercial Banking | $4,529 | | Mortgage Banking | ($1,912) | | Parent Only | ($1,755) | | **Consolidated** | **$862** | [Note 11 – Changes to Accumulated Other Comprehensive Income (Loss), net](index=31&type=section&id=Note%2011%20%E2%80%93%20Changes%20to%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)%2C%20net) This table details the changes in accumulated other comprehensive income (loss), net, primarily from unrealized gains and losses on available-for-sale securities Accumulated Other Comprehensive Income (Loss), net (Dollars in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | ($38,656) | ($47,614) | ($42,462) | ($45,056) | | Change in net unrealized holding losses on securities available for sale, net of deferred income tax | ($34) | $3,079 | $3,772 | $521 | | Reclassification for previously unrealized net losses on securities available for sale, net of deferred income tax | — | $52 | — | $52 | | **Balance at end of period** | **($38,690)** | **($44,483)** | **($38,690)** | **($44,483)** | [Note 12 – Legal Matters](index=32&type=section&id=Note%2012%20%E2%80%93%20Legal%20Matters) This note provides updates on significant legal proceedings, including a dismissed whistleblower lawsuit and a preliminarily settled class action securities lawsuit - A whistleblower lawsuit filed by a former Deputy Bank Secrecy Act Officer was dismissed by the court on July 18, 2025, with the Company believing the claims are without merit[131](index=131&type=chunk) - A putative class action securities lawsuit (Russell Hunter v. Blue Ridge Bankshares, Inc., et al.) was preliminarily settled for **$2.5 million**, with preliminary approval granted on July 25, 2025, and the Company's payment obligations satisfied on July 29, 2025[132](index=132&type=chunk) [Note 13 – Subsequent Events](index=32&type=section&id=Note%2013%20%E2%80%93%20Subsequent%20Events) This note discloses events occurring after the reporting period, including a subordinated note redemption and a multifamily loan placed on nonaccrual status - On July 15, 2025, the Company redeemed **$10.0 million** of its 2029 Notes[133](index=133&type=chunk) - Subsequent to June 30, 2025, a **$4.8 million** multifamily loan was placed on nonaccrual status, though it was current as of July 31, 2025, and the Company expects future credit losses, if any, to be insignificant[134](index=134&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section offers management's analysis of financial condition and operating results, covering forward-looking statements, the mortgage division sale, regulatory issues, private placements, and performance comparisons [Cautionary Note About Forward-Looking Statements](index=33&type=section&id=Cautionary%20Note%20About%20Forward-Looking%20Statements) This note advises that the report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements based on management's expectations, which are subject to known and unknown risks and uncertainties beyond the company's control[136](index=136&type=chunk) - Key factors that could cause actual results to differ include the strength of the U.S. economy, macroeconomic conditions, compliance with the OCC Consent Order, litigation outcomes, reputational risk, fintech relationship management, loan and investment portfolio quality, liquidity, capital levels, cost-saving initiatives, deferred tax asset realization, competition, deposit outflows, technological changes, fraud, adverse financial industry developments, regulatory changes, accounting standards, geopolitical conditions, trade policies, and catastrophic events[137](index=137&type=chunk)[139](index=139&type=chunk) [Sale of Mortgage Division](index=35&type=section&id=Sale%20of%20Mortgage%20Division) This section details the completion of the Monarch Mortgage division sale on March 27, 2025, resulting in a $0.2 million loss reported in continuing operations - The Company completed the sale of its mortgage division, Monarch Mortgage, on March 27, 2025, resulting in a **$0.2 million loss**, primarily from fixed asset write-off and lease impairment, with this transaction reported within continuing operations[140](index=140&type=chunk)[141](index=141&type=chunk) [Regulatory Matters](index=35&type=section&id=Regulatory%20Matters) This section discusses the Bank's compliance with the OCC Consent Order, requiring enhanced controls and minimum capital ratios, which were met - The Bank is operating under an OCC Consent Order (January 24, 2024) requiring enhanced controls for fintech operations, a strategic plan, a capital plan, and minimum capital ratios (**10.0% leverage**, **13.0% total capital**), which the Bank exceeded as of June 30, 2025, and December 31, 2024[142](index=142&type=chunk) [Private Placements](index=35&type=section&id=Private%20Placements) This section describes the Q2 2024 private placements, which generated $152.1 million in net proceeds from common and preferred stock issuance, along with warrants - In Q2 2024, the Company closed private placements, issuing common and preferred stock for gross proceeds of **$161.6 million**, with net proceeds of **$152.1 million**, and also issued warrants to purchase common stock at **$2.50 per share**[143](index=143&type=chunk) Warrants to Purchase Common Stock (as of and for the six months ended June 30, 2025) | Category | Warrants Issued April 3, 2024 | Warrants Issued June 13, 2024 | Total Warrants | | :------- | :---------------------------- | :---------------------------- | :------------- | | Outstanding at beginning of period | 29,027,999 | 2,424,000 | 31,451,999 | | Exercised during the period (1) | (3,778,000) | — | (3,778,000) | | Outstanding at end of period | 25,249,999 | 2,424,000 | 27,673,999 | (1) 1,016,000 warrants were exercised during the three months ended June 30, 2025. [General](index=35&type=section&id=General) This section confirms no changes to critical accounting policies and notes that prior period reclassifications did not impact net income or financial position - There were no changes to the Critical Accounting Policies disclosed in the 2024 Form 10-K, and reclassifications in prior period financial statements had no effect on net income, net income per share, total assets, total liabilities, or stockholders' equity[146](index=146&type=chunk) [Comparison of Financial Condition](index=36&type=section&id=Comparison%20of%20Financial%20Condition%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section compares key financial condition metrics, including assets, loans, deposits, and stockholders' equity, between June 30, 2025, and December 31, 2024 Key Financial Condition Changes (June 30, 2025 vs. December 31, 2024, Dollars in millions) | Metric | June 30, 2025 | December 31, 2024 | Change | | :----- | :------------ | :---------------- | :----- | | Total assets | $2,560 | $2,740 | ($180) | | Loans held for investment, net | $1,980 | $2,110 | ($130) | | Allowance for credit losses | $22.0 | $23.0 | ($1.0) | | Total deposits | $2,010 | $2,180 | ($170) | | Total stockholders' equity | $344.3 | $327.8 | $16.5 | - The decline in loans held for investment included a **$35.1 million** reduction due to the Company's strategic actions to reduce balances of loans from out-of-market relationships[147](index=147&type=chunk) - The decrease in total deposits was primarily driven by a **$106.4 million** decrease in brokered time deposits[148](index=148&type=chunk) - The increase in stockholders' equity was primarily due to **$9.4 million** from the exercise of warrants and a **$3.8 million** decrease in after-tax unrealized losses on available-for-sale securities[149](index=149&type=chunk) [Comparison of Results of Operations](index=36&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section compares net income, EPS, and key drivers of financial performance for the three and six months ended June 30, 2025, and 2024 Net Income (Loss) and EPS (Dollars in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $1,296 | ($11,435) | $862 | ($14,328) | | Diluted EPS | $0.01 | ($0.47) | $0.01 | ($0.66) | - The six months ended June 30, 2025, included **$0.8 million** after-tax severance costs and a **$1.0 million** after-tax benefit from concluding exit activities with a former fintech BaaS partner, while regulatory remediation expenses were **$0** compared to **$3.1 million** in 2024[152](index=152&type=chunk) - Net interest income for the three and six months ended June 30, 2025, was **$19.8 million** and **$38.8 million**, respectively, representing declines of **$0.2 million** and **$1.6 million** from the same periods in 2024[152](index=152&type=chunk) - Interest income decreased by **$5.9 million** (Q2) and **$13.1 million** (YTD) in 2025 compared to 2024, primarily due to lower average balances of interest-earning assets, while interest expense decreased by **$5.7 million** (Q2) and **$11.5 million** (YTD) in 2025 compared to 2024, largely due to lower average balances and costs of interest-bearing deposits[153](index=153&type=chunk) [Net Interest Income](index=36&type=section&id=Net%20Interest%20Income) This section analyzes net interest income and margin, highlighting changes in average interest-earning assets and interest-bearing liabilities Net Interest Income and Margin (Taxable Equivalent Basis) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $19,860 | $20,103 | $38,868 | $40,468 | | Net interest margin | 3.15% | 2.79% | 3.02% | 2.77% | | Cost of funds | 2.63% | 3.02% | 2.71% | 3.02% | - Average interest-earning assets decreased by **$360.4 million** to **$2.53 billion** (Q2 2025) and by **$353.3 million** to **$2.57 billion** (YTD 2025) compared to 2024, primarily due to lower average balances of loans held for investment[161](index=161&type=chunk)[172](index=172&type=chunk) - Average interest-bearing liabilities decreased by **$408.3 million** to **$1.82 billion** (Q2 2025) and by **$460.6 million** to **$1.86 billion** (YTD 2025) compared to 2024, primarily due to the exit of fintech BaaS deposit operations and payoff of wholesale funding[162](index=162&type=chunk)[173](index=173&type=chunk) - Cost of deposits, excluding wholesale deposits, was **1.01%** for Q2 2025, down from **2.28%** for Q2 2024[163](index=163&type=chunk) [Provision for Credit Losses](index=40&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the recovery of credit losses for 2025, contrasting it with the provision for credit losses in 2024, and explains the underlying factors - A recovery of credit losses of **$0.7 million** was reported for both the three and six months ended June 30, 2025, contrasting with a **$3.1 million** provision for credit losses for the same periods in 2024[176](index=176&type=chunk) - The 2025 recovery resulted from declines in balances of loans held for investment, partially offset by specific reserves and charge-offs for two out-of-market loans, while the 2024 provision was primarily for certain purchased loans and increased reserves for government-guaranteed loans[176](index=176&type=chunk) [Noninterest Income](index=40&type=section&id=Noninterest%20Income) This section details changes in noninterest income, including residential mortgage banking, MSRs, service charges, and other noninterest income Noninterest Income (Dollars in thousands) | Category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change $ | Change % | | :------- | :------------------------------- | :------------------------------- | :------- | :------- | | Total noninterest income | $3,244 | $272 | $2,972 | 1,092.6% | | Residential mortgage banking income | $312 | $3,090 | ($2,778) | (89.9%) | | Mortgage servicing rights ("MSRs") | ($139) | $2,019 | ($2,158) | (106.9%) | | Service charges on deposit accounts | $721 | $386 | $335 | 86.8% | | Other noninterest income | $1,389 | $1,845 | ($456) | (24.7%) | Noninterest Income (Dollars in thousands) | Category | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change $ | Change % | | :------- | :----------------------------- | :----------------------------- | :------- | :------- | | Total noninterest income | $6,316 | $8,060 | ($1,744) | (21.6%) | | Residential mortgage banking income | $1,268 | $5,754 | ($4,486) | (78.0%) | | Mortgage servicing rights ("MSRs") | ($137) | $2,748 | ($2,885) | (105.0%) | | Service charges on deposit accounts | $1,178 | $747 | $431 | 57.7% | | Other noninterest income | $2,090 | $4,787 | ($2,697) | (56.3%) | - The decline in mortgage banking income and MSRs was due to the sale of the mortgage division and the majority of the MSR assets portfolio, while higher service charges on deposit accounts resulted from aligning products and pricing with competitors[178](index=178&type=chunk) - Other noninterest income declined due to a decrease in fintech indirect lending relationships, which contributed **$0.5 million** in YTD 2025 compared to **$2.5 million** in YTD 2024[178](index=178&type=chunk) [Noninterest Expense](index=41&type=section&id=Noninterest%20Expense) This section analyzes changes in noninterest expense, focusing on salaries, regulatory remediation, contractual services, and other expenses Noninterest Expense (Dollars in thousands) | Category | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change $ | Change % | | :------- | :------------------------------- | :------------------------------- | :------- | :------- | | Total noninterest expense | $22,009 | $29,308 | ($7,299) | (24.9%) | | Salaries and employee benefits | $13,000 | $14,932 | ($1,932) | (12.9%) | | Regulatory remediation | — | $1,397 | ($1,397) | (100.0%) | | Other contractual services | $433 | $1,857 | ($1,424) | (76.7%) | | Other | $1,684 | $3,965 | ($2,281) | (57.5%) | Noninterest Expense (Dollars in thousands) | Category | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change $ | Change % | | :------- | :----------------------------- | :----------------------------- | :------- | :------- | | Total noninterest expense | $44,960 | $61,745 | ($16,785) | (27.2%) | | Salaries and employee benefits | $25,610 | $30,977 | ($5,367) | (17.3%) | | Regulatory remediation | — | $4,041 | ($4,041) | (100.0%) | | Other contractual services | $1,028 | $3,665 | ($2,637) | (72.0%) | | Other | $3,795 | $7,596 | ($3,801) | (50.0%) | - Excluding regulatory remediation, noninterest expense decreased by **$5.9 million** (Q2 2025) and **$12.7 million** (YTD 2025) compared to 2024[180](index=180&type=chunk) - Salaries and employee benefits decreased due to headcount reduction (**333 employees** at June 30, 2025, vs. **503** in 2024) and transition to a traditional community banking model, with severance costs of **$0.3 million** (Q2 2025) and **$1.0 million** (YTD 2025)[180](index=180&type=chunk) - Other noninterest expense declined due to the recovery of non-credit-related amounts from fintech exit activities and lower mortgage servicing fees, while regulatory remediation and contractual services decreased due to the completion of certain regulatory directives[181](index=181&type=chunk) [Income Tax Expense](index=42&type=section&id=Income%20Tax%20Expense) This section explains the effective tax rates for 2025 and 2024, noting factors such as compensation deductibility and state tax rate changes Effective Tax Rates | Period | 2025 Effective Tax Rate | 2024 Effective Tax Rate | | :----- | :---------------------- | :---------------------- | | Three months ended June 30 | 27.0% | 5.1% | | Six months ended June 30 | 2.8% | 6.7% | - The higher Q2 2025 effective tax rate was driven by the potential elimination of deductibility of compensation costs, while the lower YTD 2025 rate was due to a **$0.3 million** favorable adjustment from a state tax rate change on the AFS securities portfolio's unrealized loss[182](index=182&type=chunk) - 2024 rates were impacted by a **$2.0 million** provision expense from surrendering bank-owned life insurance policies[182](index=182&type=chunk) [Analysis of Financial Condition](index=42&type=section&id=Analysis%20of%20Financial%20Condition) This section provides a detailed analysis of the company's financial position, including loan portfolio, allowance for credit losses, nonperforming assets, and liquidity [Loan Portfolio](index=42&type=section&id=Loan%20Portfolio) This section presents the composition of the gross loans held for investment and discusses risks associated with commercial real estate lending Gross Loans Held for Investment (Dollars in thousands) | Loan Category | June 30, 2025 Amount | June 30, 2025 Percent | December 31, 2024 Amount | December 31, 2024 Percent | | :------------ | :------------------- | :-------------------- | :----------------------- | :------------------------ | | Commercial and industrial | $323,976 | 16.4% | $354,904 | 16.8% | | Real estate – construction, commercial | $78,476 | 4.0% | $114,491 | 5.4% | | Real estate – construction, residential | $52,031 | 2.6% | $51,807 | 2.4% | | Real estate – commercial | $810,978 | 41.1% | $847,842 | 40.2% | | Real estate – residential | $671,317 | 33.9% | $692,253 | 32.8% | | Real estate – farmland | $4,723 | 0.2% | $5,520 | 0.3% | | Consumer | $36,237 | 1.8% | $43,938 | 2.1% | | **Total** | **$1,977,738** | **100.0%** | **$2,110,755** | **100.0%** | - The current lending environment for commercial real estate (CRE) loans presents heightened risk due to higher interest rates, potentially leading to increased debt service burdens, impaired collateral values, and declining occupancy/demand in certain property types[187](index=187&type=chunk)[188](index=188&type=chunk) - The Bank's credit administration department performs periodic analyses of emerging CRE trends and maintains compliance with board-approved concentration limits by real estate collateral type[189](index=189&type=chunk) [Allowance for Credit Losses](index=43&type=section&id=Allowance%20for%20Credit%20Losses) This section details the allowance for credit losses (ACL) and related ratios, affirming management's belief in its adequacy Allowance for Credit Losses (ACL) and Ratios (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | ACL on loans held for investment | $21,974 | $23,023 | | ACL to loans held for investment | 1.11% | 1.09% | | ACL to nonaccrual loans | 99.40% | 100.29% | | ACL to nonperforming loans | 91.61% | 90.49% | - Management believes the ACL was adequate as of June 30, 2025, but acknowledges that future adjustments may be required due to economic changes, adverse developments, or regulatory reviews[191](index=191&type=chunk) [Nonperforming Assets](index=45&type=section&id=Nonperforming%20Assets) This section provides a breakdown of nonperforming assets, including nonaccrual loans and past due loans, and their ratios to total assets Nonperforming Assets (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Nonaccrual loans held for investment | $22,106 | $22,957 | | Loans past due 90 days and still accruing | $1,881 | $2,486 | | Total nonperforming loans | $23,987 | $25,443 | | Other non-real estate owned | $222 | — | | Other real estate owned | — | $279 | | Total nonperforming assets | $24,209 | $25,722 | | Nonperforming loans to loans held for investment | 1.20% | 1.20% | | Nonperforming assets to total assets | 0.95% | 0.94% | - Loans are generally placed on nonaccrual status when **90 days or more past due** or when collection is doubtful, with interest income not recorded until principal is current[196](index=196&type=chunk) [Investment Securities](index=45&type=section&id=Investment%20Securities) This section discusses the fair value and unrealized losses on available-for-sale investment securities, along with pledged securities - The fair value of the AFS investment securities portfolio increased by **$15.9 million** to **$328.0 million** as of June 30, 2025, from **$312.0 million** at December 31, 2024, primarily due to purchases[197](index=197&type=chunk) - Unrealized losses on AFS securities were **$50.1 million** (June 30, 2025) and **$55.5 million** (December 31, 2024), with approximately **82%** and **81%**, respectively, related to U.S. government agency-backed securities[197](index=197&type=chunk)[198](index=198&type=chunk) - Pledged securities for FHLB borrowings were **$177.0 million** (June 30, 2025) and **$268.9 million** (December 31, 2024), while pledged securities for FRB Discount Window were **$0** (June 30, 2025) and **$16.3 million** (December 31, 2024)[199](index=199&type=chunk) - No Allowance for Credit Losses (ACL) has been recognized for AFS securities, as unrealized losses are primarily due to interest rate changes, not permanent credit impairment[200](index=200&type=chunk) [Deposits](index=46&type=section&id=Deposits) This section analyzes changes in total deposits, including fintech-related and brokered deposits, and estimated uninsured deposits - Total deposits decreased by **$169.2 million** to **$2.01 billion** as of June 30, 2025, from **$2.18 billion** at December 31, 2024[208](index=208&type=chunk) - Fintech-related deposits decreased to **$13.0 million** (June 30, 2025) from **$21.3 million** (December 31, 2024), following the completion of fintech BaaS deposit operations exit in Q4 2024[205](index=205&type=chunk)[210](index=210&type=chunk) - Brokered deposits decreased by **$106.4 million** to **$296.1 million** (**14.7%** of total deposits) as of June 30, 2025, from **$402.5 million** (**18.5%** of total deposits) at December 31, 2024, with the Company aiming to reduce brokered deposits to **10.0% or less**[206](index=206&type=chunk)[207](index=207&type=chunk)[210](index=210&type=chunk) - Estimated uninsured deposits totaled **$409.2 million** (**20.4%** of total deposits) as of June 30, 2025, compared to **$399.3 million** (**18.0%** of total deposits) as of December 31, 2024[208](index=208&type=chunk) [Borrowings](index=48&type=section&id=Borrowings) This section details the company's FHLB borrowings, FRB capacity, and subordinated notes, including recent redemptions Borrowings Balances (Dollars in thousands) | Borrowing Type | June 30, 2025 Period-End Balance | December 31, 2024 Period-End Balance | | :------------- | :------------------------------- | :----------------------------------- | | FHLB borrowings | $150,000 | $150,000 | | FRB borrowings | — | — | | Subordinated notes, net | $24,928 | $39,789 | - The Company redeemed **$15.0 million** of the 2030 Note on June 1, 2025, and the 2029 Notes bore an annual interest rate of **8.59%** as of June 30, 2025[214](index=214&type=chunk)[215](index=215&type=chunk) - Subsequent to June 30, 2025, on July 15, 2025, the Company redeemed an additional **$10.0 million** of the 2029 Notes[216](index=216&type=chunk) [Liquidity](index=48&type=section&id=Liquidity) This section outlines the company's liquidity sources, including deposits, brokered markets, and available borrowing capacities, and addresses uninsured deposits - Deposits are the primary source of liquidity, with the Company also utilizing brokered deposit markets and IntraFi Network services[218](index=218&type=chunk) - Due to the Consent Order, the Bank is restricted from accepting, renewing, or rolling over brokered deposits without FDIC approval, though approvals have been received through December 2025[219](index=219&type=chunk) Available Sources of Liquidity (June 30, 2025, Dollars in thousands) | Source | Available Balance | | :----- | :---------------- | | Cash and due from banks | $131,199 | | Fed funds sold | $628 | | Unpledged securities available for sale | $150,936 | | FHLB (available capacity) | $382,184 | | FRB (available capacity) | $75,060 | | Unsecured line of credit | $10,000 | | **Total Available Liquidity** | **$750,007** | - Uninsured deposits totaled **$409.2 million** at June 30, 2025, which management believes can be satisfied with on-hand cash and FHLB borrowing capacity[223](index=223&type=chunk) [Capital](index=49&type=section&id=Capital) This section discusses the Bank's regulatory capital ratios, compliance with the Consent Order, and implications of being "adequately capitalized" - The Bank is required by the Consent Order to maintain a leverage ratio of **10.0%** and a total capital ratio of **13.0%**, which it met as of June 30, 2025[228](index=228&type=chunk) - Despite meeting minimums, the Bank is deemed 'less than well capitalized' due to the Consent Order, which may lead to higher FDIC premiums, restrictions on acquisitions, and increased regulatory scrutiny[228](index=228&type=chunk)[229](index=229&type=chunk) Blue Ridge Bank, N.A. Capital Ratios (June 30, 2025) | Capital Ratio | Actual Ratio | Consent Order Minimum | | :------------ | :----------- | :-------------------- | | Total risk based capital | 18.90% | 13.00% | | Tier 1 capital | 17.86% | n/a | | Common equity tier 1 capital | 17.86% | n/a | | Tier 1 leverage | 12.89% | 10.00% | - The CECL Transitional Amount was **$8.1 million**, reducing regulatory capital by **$6.1 million** as of June 30, 2025[231](index=231&type=chunk) [Commitments and Contingencies](index=52&type=section&id=Commitments%20and%20Contingencies) This section details outstanding loan commitments, letters of credit, and reserves for unfunded commitments and MSR-related liabilities - Outstanding loan commitments were **$273.8 million** (June 30, 2025) and **$283.2 million** (December 31, 2024), with **$111.4 million** and **$108.4 million**, respectively, unconditionally cancelable[233](index=233&type=chunk) - Commitments under outstanding financial stand-by letters of credit totaled **$13.5 million** (June 30, 2025) and **$12.5 million** (December 31, 2024)[234](index=234&type=chunk) - The reserve for unfunded commitments was **$0.9 million** as of both June 30, 2025, and December 31, 2024[235](index=235&type=chunk) - The reserve for estimated MSR putbacks, transition costs, and unearned sales proceeds was **$1.4 million** (June 30, 2025) and **$1.8 million** (December 31, 2024)[236](index=236&type=chunk) - Future commitments outstanding related to investments in partnerships and limited liability companies totaled **$5.6 million** as of June 30, 2025[237](index=237&type=chunk) [Interest Rate Risk Management](index=52&type=section&id=Interest%20Rate%20Risk%20Management) This section describes the company's approach to managing interest rate risk through ALCO and net interest income simulation modeling - The Company manages interest rate risk through its ALCO, using a net interest income simulation model to measure sensitivity to market interest rate volatility[238](index=238&type=chunk)[239](index=239&type=chunk) Estimated Change in Net Interest Income Under Instantaneous Parallel Rate Shock Scenario (Year 1) | Change in interest rates | June 30, 2025 Change in NII - Year 1 | December 31, 2024 Change in NII - Year 1 | | :----------------------- | :----------------------------------- | :--------------------------------------- | | +400 basis points | $453 (0.6%) | $3,288 (3.8%) | | +300 basis points | $1,295 (1.6%) | $3,347 (3.8%) | | +200 basis points | $1,537 (1.9%) | $2,877 (3.3%) | | +100 basis points | $1,135 (1.4%) | $1,798 (2.1%) | | -100 basis points | ($2,428) (3.0%) | ($2,978) (3.4%) | | -200 basis points | ($5,367) (6.7%) | ($6,468) (7.4%) | | -300 basis points | ($7,936) (9.9%) | ($9,831) (11.2%) | | -400 basis points | ($10,378) (12.9%) | ($12,664) (14.5%) | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section incorporates by reference the information provided in the 'Interest Rate Risk Management' section within Management's Discussion and Analysis of Financial Condition and Results of Operations - Information regarding quantitative and qualitative disclosures about market risk is incorporated by reference from the 'Interest Rate Risk Management' section in Item 2[244](index=244&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of June 30, 2025, and confirming no material changes to internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=53&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[246](index=246&type=chunk) - No changes in the Company's internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[247](index=247&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) This section states that, in the ordinary course of operations, the Company is party to legal proceedings, but management believes these will not have a material adverse effect - Management believes that 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[248](index=248&type=chunk) - Further information regarding legal proceedings is provided in Note 12 to the unaudited consolidated financial statements[249](index=249&type=chunk) [Item 1A. Risk Fact

Core Viewpoint - Blue Ridge Bankshares, Inc. (BRBS) has returned to profitability in Q2 2025, reporting a net income of $1.3 million, marking a significant recovery from a net loss of $11.4 million in the same quarter last year [2][8]. Financial Performance - BRBS reported a net income of $1.3 million, or $0.01 per diluted share, compared to a net loss of $11.4 million, or ($0.47) per share, in the prior-year period [2]. - Net interest income was $19.8 million, relatively flat compared to $20.1 million in Q2 2024, with a recovery of credit losses of $0.7 million against a provision of $3.1 million in the previous year [3]. - Non-interest income surged to $3.2 million from $0.3 million in the prior year's quarter, driven by improved service charges and previously withheld mortgage servicing rights proceeds [4]. - Non-interest expenses decreased by 24.9% to $22 million from $29.3 million a year earlier, aided by cost-cutting measures [4]. Key Business Metrics - Net interest margin improved to 3.15% from 2.90% in Q1 2025 and 2.79% a year ago, primarily due to a decrease in deposit costs [5]. - Total assets decreased to $2.56 billion from $2.69 billion in Q1 2025 and $2.93 billion a year earlier [6]. - Loans held for investment declined 12.4% year over year to $1.98 billion, while deposits were down 13.6% year over year to $2.01 billion [6]. Management Commentary - CEO G. William "Billy" Beale described the quarter as a turning point, highlighting improvements in net interest margin and disciplined cost management as key factors [8]. - The company has undergone headcount reductions, with 109 positions cut in the first half of the year, as part of efforts to streamline operations [8]. Future Outlook - Management expects to achieve an annualized non-interest expense-to-assets ratio below 3% by Q4 2025, with a focus on operational improvement and further cost reductions [11]. - The company believes it is nearing completion of regulatory remediation stemming from a January 2024 consent order [12]. Strategic Developments - On March 27, 2025, BRBS completed the divestiture of Monarch Mortgage, resulting in a $0.2 million loss year to date, as part of a strategy to realign its business model towards traditional community banking [13]. - The company redeemed $15 million in subordinated debt and partially redeemed an additional $10 million of its 2029 Notes, actions aimed at supporting future interest expense reductions [14].

```markdown [Overview](index=1&type=section&id=Blue%20Ridge%20Bankshares%2C%20Inc.%20Announces%202025%20Second%20Quarter%20Results) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) The company returned to profitability in Q2 2025, reporting net income of $1.3 million, a significant improvement from the net loss in the previous quarter and the same quarter last year. For the first half of 2025, the company reported net income of $0.9 million, reversing a substantial loss from the first half of 2024 Quarterly Financial Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $1.3 million | ($0.4 million) | ($11.4 million) | | Diluted EPS | $0.01 | ($0.01) | ($0.47) | First Half Financial Performance | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | | Net Income (Loss) | $0.9 million | ($14.3 million) | | Diluted EPS | $0.01 | ($0.66) | [Message from the CEO](index=1&type=section&id=A%20Message%20From%20Blue%20Ridge%20Bankshares%2C%20Inc.%20President%20and%20CEO%2C%20G.%20William%20%27Billy%27%20Beale) CEO G. William "Billy" Beale highlighted the company's return to profitability as a sign of future sustainable earnings. Key positive trends include a growing net interest margin (3.15%) due to lower deposit costs, improved noninterest income, and significant reductions in noninterest expenses through headcount cuts. The focus is now shifting from regulatory remediation to community bank growth - The company's net interest margin grew to **3.15%** for the quarter, primarily driven by lower deposit costs[6](index=6&type=chunk) - Noninterest expense was reduced by almost **$1.0 million** from the first quarter, with an expectation of further reductions as the company nears completion of regulatory remediation activities[7](index=7&type=chunk) - Headcount was reduced by **109** in the first half of 2025 and by **170** since the end of Q2 2024, contributing to expense savings[7](index=7&type=chunk) - The company is shifting its focus from remediation activities ('fixers') to growing its community bank ('growers')[8](index=8&type=chunk)[9](index=9&type=chunk) [Sale of Monarch Mortgage](index=2&type=section&id=Sale%20of%20Monarch%20Mortgage) The company completed the sale of its Monarch Mortgage division on March 27, 2025. The transaction resulted in a minor loss of $0.2 million, and all related loan activities were concluded by the end of Q2 2025 - The sale of the Monarch Mortgage division was completed on **March 27, 2025**[9](index=9&type=chunk) - The sale resulted in a **$0.2 million loss**, which was reported in other noninterest income for the year-to-date 2025 period[9](index=9&type=chunk) [Detailed Financial Performance](index=2&type=section&id=Detailed%20Financial%20Performance) [Q2 2025 Key Metrics Analysis](index=2&type=section&id=Q2%202025%20Highlights) The company's Q2 2025 performance showed significant improvement across key metrics. Net income turned positive, driven by a 25 basis point expansion in net interest margin to 3.15% and a $1.0 million reduction in noninterest expenses. Capital ratios strengthened, exceeding regulatory requirements, and asset quality remained stable with a slight decrease in nonperforming loans [Net Income](index=2&type=section&id=Net%20Income) The company reported net income of $1.3 million in Q2 2025, a turnaround from a $0.4 million loss in Q1 2025. The quarter's results were influenced by $0.3 million in severance costs and a $1.3 million benefit from a recovery related to a former fintech BaaS partner Net Income and Special Items (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | **Net Income (Loss)** | **$1.3M** | **($0.4M)** | | Severance Costs | $0.3M | $0.7M | | BaaS Partner Recovery | $1.3M | - | | Mortgage Division Sale Loss | - | $0.2M | [Net Interest Income and Net Interest Margin (NIM)](index=2&type=section&id=Net%20Interest%20Income%20%2F%20Net%20Interest%20Margin) Net interest income increased to $19.8 million from $19.0 million in the prior quarter. The net interest margin improved significantly to 3.15% from 2.90%, primarily due to a 19 basis point reduction in the cost of interest-bearing deposits. The company also redeemed $15.0 million of subordinated notes Net Interest Income & Margin (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Interest Income | $19.8M | $19.0M | | Net Interest Margin | 3.15% | 2.90% | - The improvement in NIM was primarily driven by a decline in the cost of deposits, which fell by **19 basis points** from the prior quarter[11](index=11&type=chunk) - The company redeemed its **$15.0 million, 6.0% fixed-to-floating rate subordinated note** on **June 1, 2025**[11](index=11&type=chunk) - A partial redemption of **$10.0 million** of the 2029 subordinated notes was completed on **July 15, 2025**[12](index=12&type=chunk) [Capital](index=3&type=section&id=Capital) Capital ratios improved quarter-over-quarter, with the Bank's tier 1 leverage ratio increasing to 12.89% and the total risk-based capital ratio rising to 18.91%. These levels comfortably exceed the minimums required by the OCC Consent Order. The tangible common equity to tangible total assets ratio also increased to 13.4% Bank Capital Ratios (June 30, 2025 vs March 31, 2025) | Ratio | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Tier 1 Leverage Ratio | 12.89% | 12.33% | | Tier 1 Risk-Based Capital | 17.86% | 16.88% | | Total Risk-Based Capital | 18.91% | 17.93% | - The Bank's capital ratios exceeded the OCC Consent Order minimums of **10.00% for tier 1 leverage** and **13.00% for total risk-based capital**[15](index=15&type=chunk) - The ratio of tangible common stockholders' equity to tangible total assets increased to **13.4%** from **12.5%** at the prior quarter end[15](index=15&type=chunk) [Asset Quality](index=3&type=section&id=Asset%20Quality) Asset quality remained stable, with nonperforming loans decreasing slightly to $24.0 million, or 0.94% of total assets. The company reported a recovery of credit losses of $0.7 million, driven by loan portfolio reductions. Net loan charge-offs were minimal at $0.5 million for the quarter Asset Quality Metrics (QoQ) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Nonperforming Loans | $24.0M (0.94% of assets) | $24.9M (0.93% of assets) | | (Recovery) of Credit Losses | ($0.7M) | $0 | | ACL to Total Loans | 1.11% | 1.12% | | Net Loan Charge-offs | $0.5M | ($0.1M) | [Noninterest Income and Expense](index=4&type=section&id=Noninterest%20Income%20%2F%20Noninterest%20Expense) Noninterest income was stable at $3.2 million, supported by higher service charges on deposit accounts. Noninterest expense decreased by $1.0 million to $22.0 million, mainly due to a recovery related to a former fintech partner, which offset severance costs and new PSA expenses. Headcount was reduced from 351 to 333 during the quarter - Noninterest income was **$3.2 million**, up slightly from **$3.1 million** in Q1, primarily due to higher service charges on deposit accounts[19](index=19&type=chunk) - Noninterest expense decreased by **$1.0 million** to **$22.0 million** compared to Q1 2025. This was mainly due to a recovery of non-credit-related amounts from a former fintech BaaS partner[19](index=19&type=chunk) - Salaries and benefits expense was **$13.0 million**, which included **$0.3 million in severance** and **$2.0 million in PSA expense**. Excluding these items, the underlying expense declined by **$1.2 million** due to headcount reductions from **351 to 333**[19](index=19&type=chunk) [Income Tax](index=4&type=section&id=Income%20Tax) The company recorded an income tax expense of $0.5 million in Q2 2025, corresponding to an effective tax rate of 27.0%. This is a normalization from the 51.2% effective tax rate in Q1 2025, which was skewed by a favorable adjustment related to state tax rates Income Tax (QoQ) | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Income Tax Expense (Benefit) | $0.5M | ($0.5M) | | Effective Tax Rate | 27.0% | 51.2% | - The higher effective tax rate in Q1 2025 was driven by a **$0.3 million favorable adjustment** related to a change in state tax rates[18](index=18&type=chunk) [Income Statement Analysis (YTD and YoY)](index=5&type=section&id=Income%20Statement) For the first six months of 2025, the company achieved net income of $0.9 million, a stark contrast to the $14.3 million loss in the first half of 2024. The improvement was driven by a significant reduction in noninterest expenses, particularly in salaries, consulting, and regulatory remediation, and a recovery of credit losses, which more than offset lower net interest income and noninterest income compared to the prior year - Net interest income for Q2 2025 was **$19.8 million**, down slightly from **$20.1 million** in Q2 2024, due to lower average loan balances[21](index=21&type=chunk) - Noninterest income for Q2 2025 was **$3.2 million**, a significant improvement from **$0.3 million** in Q2 2024. The prior-year period included an **$8.5 million non-cash negative fair value adjustment** on a fintech equity investment[28](index=28&type=chunk) - Noninterest expense for Q2 2025 decreased by **$7.3 million** to **$22.0 million** compared to Q2 2024, reflecting a smaller workforce, completion of regulatory directives, and the transition to a community banking model[29](index=29&type=chunk) - A recovery of credit losses of **$0.7 million** was reported for Q2 2025, compared to a provision of **$3.1 million** in Q2 2024[27](index=27&type=chunk) [Balance Sheet Analysis](index=5&type=section&id=Balance%20Sheet) The company continued to shrink its balance sheet in Q2 2025, with total assets decreasing by $129.6 million to $2.56 billion. This was driven by planned reductions in loans and deposits as the company exits non-core activities. Total deposits fell by $119.2 million to $2.01 billion, including a $43.0 million decline in brokered deposits. Liquidity remains strong, with available sources covering 183.3% of uninsured deposits Key Balance Sheet Items (QoQ) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Assets | $2.56 billion | $2.69 billion | | Loans Held for Investment | $1.98 billion | $2.06 billion | | Total Deposits | $2.01 billion | $2.13 billion | - Liquidity sources totaled **$750.0 million**, representing **183.3%** of uninsured deposits as of June 30, 2025[25](index=25&type=chunk) - Brokered deposits declined by **$43.0 million** during the quarter to **$296.1 million**. The company received an extension from the FDIC to accept, renew, or rollover brokered deposits through **December 2025**[33](index=33&type=chunk) [Financial Statements and Other Information](index=7&type=section&id=Financial%20Statements%20and%20Other%20Information) [Consolidated Financial Statements](index=11&type=section&id=Consolidated%20Financial%20Statements) This section provides the detailed unaudited consolidated financial statements for Blue Ridge Bankshares, Inc. as of June 30, 2025. It includes the Consolidated Balance Sheets, Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024, a summary of selected quarterly financial data, and a reconciliation of non-GAAP measures - Presents the Consolidated Balance Sheets as of **June 30, 2025**, and **December 31, 2024**[45](index=45&type=chunk) - Presents the Consolidated Statements of Income for the three and six months ended **June 30, 2025**, and **June 30, 2024**[46](index=46&type=chunk)[47](index=47&type=chunk) - Provides a Quarter Summary of Selected Financial Data for the last five quarters and a Reconciliation of Non-GAAP Financial Measures[48](index=48&type=chunk)[49](index=49&type=chunk) [Forward-Looking Statements and Risk Factors](index=8&type=section&id=Forward-Looking%20Statements) The company provides a standard safe harbor statement, cautioning that forward-looking statements are subject to numerous risks and uncertainties. Key risks highlighted include the macroeconomic environment, the ability to comply with the OCC Consent Order, managing fintech relationships, credit quality of the loan portfolio, and maintaining adequate liquidity and capital - The company's performance is subject to risks from the US economy, interest rates, and inflation[40](index=40&type=chunk) - A primary risk is the ability to comply with the **January 24, 2024 Consent Order** with the OCC, including its heightened capital requirements and other restrictions[40](index=40&type=chunk) - Other significant risks include managing the wind-down of fintech partnerships, the credit quality of the loan portfolio, and maintaining adequate liquidity[41](index=41&type=chunk) [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP financial measures such as tangible book value per common share and the ratio of tangible common equity to tangible total assets to supplement GAAP-based evaluation. Management believes these provide useful information for understanding the company's financial condition. A reconciliation of GAAP to non-GAAP measures is provided at the end of the release - Management uses non-GAAP measures including tangible assets, tangible common equity, tangible book value per common share, and tangible common equity to tangible total assets to supplement its evaluation[37](index=37&type=chunk) - These non-GAAP disclosures are not a substitute for GAAP and may not be comparable to measures presented by other companies[38](index=38&type=chunk) - Reconciliations of GAAP to non-GAAP measures are included at the end of the press release[38](index=38&type=chunk)[49](index=49&type=chunk) ```

Financial Performance - For the quarter ended June 30, 2025, the company reported net income of $1.3 million, or $0.01 per diluted common share, compared to a net loss of $0.4 million for the prior quarter and a net loss of $11.4 million for the same quarter in 2024 [2][8] - For the first half of 2025, the company reported net income of $0.9 million, or $0.01 per diluted common share, compared to a net loss of $14.3 million for the first half of 2024 [3] Revenue and Expenses - Net interest income totaled $19.8 million for the second quarter of 2025, an increase from $19.0 million in the first quarter [12][16] - Noninterest income was $3.2 million for the second quarter of 2025, compared to $3.1 million in the prior quarter [22][26] - Noninterest expense decreased to $22.0 million for the second quarter of 2025, down from $23.0 million in the first quarter [23][26] Operational Improvements - The net interest margin improved to 3.15% for the second quarter of 2025, up from 2.90% in the prior quarter, primarily due to lower funding costs [20][19] - The company has made significant progress in reducing noninterest expenses, with a focus on operational improvements and regulatory remediation [5][6] Capital and Asset Quality - The ratio of tangible common stockholders' equity to tangible total assets increased to 13.4% at the end of the second quarter of 2025, compared to 12.5% at the prior quarter end [12] - Nonperforming loans were $24.0 million, or 0.94% of total assets, at quarter end, a slight decrease from $24.9 million, or 0.93% of total assets, in the prior quarter [11] Strategic Initiatives - The company completed the sale of its mortgage division, Monarch Mortgage, resulting in a $0.2 million loss, which was reported in other noninterest income [7] - The company is transitioning to a more traditional community banking model, focusing on growing its community bank after significant remediation efforts [6][29]

Core Viewpoint - Zacks Investment Research has initiated coverage of Blue Ridge Bankshares, Inc. (BRBS) with an "Outperform" recommendation, indicating a positive outlook on the company's recovery and cost management efforts [1] Company Overview - Blue Ridge Bankshares, based in Richmond, VA, operates as a bank holding company providing a range of services including commercial and consumer banking, mortgage lending, and investment services through its subsidiary, Blue Ridge Bank, National Association, and BRB Financial Group, Inc. As of December 31, 2024, BRBS had 27 full-service branches in Virginia and central North Carolina [2] Financial Health - The capital profile of Blue Ridge Bankshares has improved significantly due to equity raises and balance sheet adjustments, with tangible common equity at 12.5% and a total risk-based capital ratio of 20.83%, exceeding regulatory requirements [3] - The company has achieved a nearly $10 million year-over-year reduction in non-interest expenses and is focusing on community banking by exiting non-core business lines, which is expected to drive future growth [4] Operational Performance - Blue Ridge Bankshares has seen a rebound in its net interest margin, which increased to 2.90% from 2.75% the previous year, alongside strong liquidity, with available resources covering over 180% of uninsured deposits [4] - The stock has outperformed industry peers and the broader market over the past year, reflecting recognition of the company's operational improvements and enhanced fundamentals [6] Market Positioning - The modest market capitalization of Blue Ridge Bankshares is $358.3 million, and the company is positioned in a promising yet risky segment of the market, with ongoing regulatory and profitability challenges [7]

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Blue Ridge Bankshares, Inc. as of March 31, 2025, and for the three-month period then ended [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $2.69 billion, a decrease from $2.74 billion at year-end 2024, primarily due to a reduction in loans held for investment Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$2,685,084** | **$2,737,260** | | Loans held for investment, net | $2,036,584 | $2,088,774 | | Securities available for sale | $325,401 | $312,035 | | **Total Liabilities** | **$2,346,795** | **$2,409,472** | | Total deposits | $2,129,477 | $2,179,442 | | FHLB borrowings | $150,000 | $150,000 | | **Total Stockholders' Equity** | **$338,289** | **$327,788** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the first quarter of 2025, the company reported a net loss of $0.43 million, a significant improvement from the $2.89 million net loss in the same period of 2024 Quarterly Statement of Operations (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $18,990 | $20,349 | | Total Noninterest Income | $3,072 | $7,788 | | Total Noninterest Expense | $22,951 | $32,437 | | Loss Before Income Taxes | $(889) | $(3,300) | | **Net Loss** | **$(434)** | **$(2,893)** | | **Basic and Diluted Loss Per Share** | **$(0.01)** | **$(0.15)** | [Consolidated Statements of Comprehensive (Loss) Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) The company recorded comprehensive income of $3.37 million for Q1 2025, a stark contrast to the comprehensive loss of $5.45 million in Q1 2024 Comprehensive (Loss) Income (in thousands) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Loss | $(434) | $(2,893) | | Other Comprehensive Income (Loss), net of tax | $3,806 | $(2,558) | | **Comprehensive Net Income (Loss)** | **$3,372** | **$(5,451)** | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased from $327.8 million at the beginning of the period to $338.3 million at the end of Q1 2025 - Key drivers for the change in stockholders' equity in Q1 2025 were the exercise of **2,762,000 warrants** for common stock, generating **$6.9 million**, and a **$3.8 million** increase from other comprehensive income[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first three months of 2025, cash used in operating activities was $3.6 million, cash provided by investing activities was $43.3 million, and cash used in financing activities was $43.0 million Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(3,588) | $(7,518) | | Net Cash Provided by Investing Activities | $43,254 | $44,724 | | Net Cash Used in Financing Activities | $(43,025) | $(30,159) | | **Net (Decrease) Increase in Cash** | **$(3,359)** | **$7,047** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, significant events, and compliance with the OCC Consent Order, covering key financial components and legal matters - On March 27, 2025, the Company completed the sale of its mortgage division, Monarch Mortgage, resulting in a **$0.2 million loss** reported in other noninterest income[20](index=20&type=chunk) - The Bank is subject to a consent order with the OCC from January 24, 2024, which requires it to maintain a leverage ratio of **10.0%** and a total capital ratio of **13.0%**. The Bank was in compliance with these ratios as of March 31, 2025[26](index=26&type=chunk) - In Q2 2024, the Company raised **$152.1 million** in net proceeds from private placements of common and preferred stock. During Q1 2025, **2,762,000 warrants** were exercised, leaving **28,689,999** outstanding[22](index=22&type=chunk)[25](index=25&type=chunk) - The company is involved in a putative class action lawsuit, for which it has agreed in principle to a settlement of **$2.5 million**, expected to be covered by insurance less a deductible[120](index=120&type=chunk)[121](index=121&type=chunk) - Subsequent to the quarter end, the Company provided a notice to redeem its **$15 million 2030 Note** and granted **3,400,000 performance-based stock awards** to executive officers[122](index=122&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results, highlighting improved net loss in Q1 2025 due to reduced noninterest expenses and compliance with regulatory capital requirements [Comparison of Financial Condition](index=34&type=section&id=Comparison%20of%20Financial%20Condition) Total assets decreased by $52.2 million to $2.69 billion at March 31, 2025, mainly due to a $52.1 million decline in loans held for investment Key Balance Sheet Changes (Q1 2025 vs YE 2024) | Account | Change (in millions) | Reason | | :--- | :--- | :--- | | Total Assets | $(52.2) | Decline in loans held for investment | | Total Deposits | $(50.0) | $63.4M decrease in brokered time deposits | | Stockholders' Equity | $10.5 | $6.9M from warrant exercises & $3.8M decrease in AOCI loss | [Results of Operations](index=34&type=section&id=Results%20of%20Operations) The company's net loss narrowed to $0.4 million in Q1 2025 from $2.9 million in Q1 2024, driven by a significant reduction in noninterest expense - Net interest margin improved to **2.90%** in Q1 2025 from **2.75%** in Q1 2024, despite a **$1.4 million** decline in net interest income[153](index=153&type=chunk) - No provision for credit losses was recorded in Q1 2025, compared to a **$1.0 million recovery** in Q1 2024[154](index=154&type=chunk) - Noninterest expense decreased by **$9.5 million (29.2%)** YoY, driven by a **$3.4 million** reduction in salaries and benefits and the elimination of **$2.6 million** in regulatory remediation costs[159](index=159&type=chunk) - The effective income tax rate was **51.2%** in Q1 2025, significantly higher than **12.3%** in Q1 2024, primarily due to a favorable adjustment related to a change in the state tax rate applied to unrealized securities losses[160](index=160&type=chunk) [Loan Portfolio and Credit Quality](index=37&type=section&id=Loan%20Portfolio%20and%20Credit%20Quality) Gross loans held for investment decreased to $2.06 billion as of March 31, 2025, with nonperforming assets remaining stable at 0.94% of total assets Nonperforming Assets (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total nonperforming loans | $24,881 | $25,443 | | Total nonperforming assets | $25,160 | $25,722 | | ACL to loans held for investment | 1.12% | 1.09% | | Nonperforming assets to total assets | 0.94% | 0.94% | - The company is managing heightened risk in its Commercial Real Estate (CRE) portfolio due to the higher interest rate environment, with specific monitoring of office loans and concentration limits by property type[164](index=164&type=chunk)[166](index=166&type=chunk) [Deposits and Borrowings](index=41&type=section&id=Deposits%20and%20Borrowings) Total deposits decreased by $50.0 million in Q1 2025 to $2.13 billion, driven by a reduction in brokered deposits, while borrowings remained stable - Brokered deposits decreased to **$339.1 million (15.9% of total deposits)** from **$402.5 million (18.5%)** at year-end 2024, with the company expecting to reduce this level to **10% or less** of total deposits[185](index=185&type=chunk)[189](index=189&type=chunk) - Fintech-related deposits have been substantially reduced to **$14.4 million** as of March 31, 2025, following the exit of BaaS deposit operations in late 2024[184](index=184&type=chunk) - Subsequent to quarter-end, the company received regulatory non-objection to redeem a significant portion of its subordinated debt, which is expected to save over **$2 million** in annual interest expense[192](index=192&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $788.8 million in available sources, and capital ratios remain well above regulatory minimums and OCC Consent Order requirements Available Liquidity as of March 31, 2025 (in thousands) | Source | Available Balance | | :--- | :--- | | Cash, Fed Funds, Unpledged Securities | $323,064 | | FHLB/FRB/Other Borrowing Capacity | $465,770 | | **Total Available Liquidity** | **$788,834** | Bank Capital Ratios vs. Consent Order Minimums (March 31, 2025) | Ratio | Actual | Minimum Required | | :--- | :--- | :--- | | Tier 1 Leverage Ratio | 12.33% | 10.00% | | Total Risk-Based Capital Ratio | 17.93% | 13.00% | - While subject to the Consent Order, the Bank is deemed 'adequately capitalized' rather than 'well capitalized', which restricts its ability to accept brokered deposits without a waiver from the FDIC[197](index=197&type=chunk)[205](index=205&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk through its ALCO using a net interest income simulation model, showing asset-sensitivity in rising rates and liability-sensitivity in falling rates Net Interest Income Sensitivity Analysis (Year 1 - as of March 31, 2025) | Rate Shock Scenario | Change in NII ($ thousands) | Change in NII (%) | | :--- | :--- | :--- | | +200 bps | $2,662 | 3.1% | | +100 bps | $1,698 | 2.0% | | **Base Case** | **-** | **-** | | -100 bps | $(2,919) | (3.4%) | | -200 bps | $(6,458) | (7.4%) | [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[223](index=223&type=chunk) - There were no changes in the Company's internal control over financial reporting during the first quarter of 2025 that materially affected, or are reasonably likely to materially affect, these controls[224](index=224&type=chunk) [PART II: OTHER INFORMATION](index=48&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is party to ordinary course legal proceedings which are not expected to have a material adverse effect - For detailed information regarding legal proceedings, refer to Note 11 of the unaudited consolidated financial statements[226](index=226&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have been made to the risk factors disclosed in the 2024 Form 10-K[227](index=227&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[228](index=228&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) During the quarter ended March 31, 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or other non-Rule 10b5-1 trading arrangement during the fiscal quarter[228](index=228&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - Filed exhibits include CEO and CFO certifications pursuant to Rule 13(a)-14(a) and 18 U.S.C. Section 1350, as well as XBRL data files[229](index=229&type=chunk)

Financial Performance - For Q1 2025, the company reported a net loss of $0.4 million, or $0.01 per diluted common share, an improvement from a net loss of $2.0 million in Q4 2024 and $2.9 million in Q1 2024[4]. - Total interest income for Q1 2025 was $35,350,000, a decrease of 6.8% from $37,932,000 in Q4 2024 and a decrease of 16.7% from $42,531,000 in Q1 2024[46]. - Net interest income after recovery of credit losses for Q1 2025 was $18,990,000, down 5.6% from $20,125,000 in Q4 2024 and down 11.1% from $21,349,000 in Q1 2024[46]. - Noninterest income for Q1 2025 was $3.1 million, a decrease of $1.3 million compared to Q4 2024, primarily due to lower residential mortgage banking income[30]. - The net loss for Q1 2025 was $434,000, an improvement from a net loss of $2,003,000 in Q4 2024 and a net loss of $2,893,000 in Q1 2024[46]. - The efficiency ratio for Q1 2025 was 104.0%, an improvement from 116.9% in Q4 2024[47]. - The return on average assets for Q1 2025 was -0.06%, an improvement from -0.28% in Q4 2024[47]. Asset and Deposit Management - Total assets decreased to $2.69 billion from $2.74 billion, primarily due to a decline in loans held for investment[20]. - Total assets decreased to $2,685,084,000 as of March 31, 2025, from $2,737,260,000 as of December 31, 2024[47]. - Loans held for investment were $2.06 billion as of March 31, 2025, down from $2.11 billion at December 31, 2024, reflecting a strategic reduction in assets[32]. - Total deposits decreased to $2.13 billion at March 31, 2025, a decline of $50.0 million from the previous quarter and $336.3 million year-over-year[33]. - Brokered deposits were $339.1 million at March 31, 2025, down $63.4 million from December 31, 2024, and down $174.8 million from March 31, 2024[34]. - Noninterest-bearing deposits represented 21.3% of total deposits as of March 31, 2025, compared to 20.8% at December 31, 2024[35]. - The loan-to-deposit ratio was 96.7% at March 31, 2025, slightly down from 96.9% at December 31, 2024[35]. Cost Management and Workforce Reduction - The company reduced its workforce by 91 employees, a 21% decrease since December 31, 2024, resulting in expected annualized cost savings of approximately $6 million[7]. - Noninterest expense decreased to $23.0 million in Q1 2025, down $2.7 million from Q4 2024 and $9.5 million from Q1 2024, mainly due to reduced salaries and employee benefits[31]. - Total noninterest expense for Q1 2025 was $22,951,000, a decrease of 10.5% from $25,640,000 in Q4 2024 and a decrease of 29.3% from $32,437,000 in Q1 2024[47]. Capital and Equity - The tier 1 leverage ratio improved to 12.33% and total risk-based capital ratio to 17.93% as of March 31, 2025, exceeding minimum capital requirements[16]. - Total stockholders' equity increased to $338,289,000 as of March 31, 2025, up from $327,788,000 as of December 31, 2024, representing a growth of 0.15%[48]. - Common stockholders' equity increased to $338,289,000 as of March 31, 2025, compared to $327,788,000 as of December 31, 2024, marking a growth of 3.4%[48]. - Tangible common equity (Non-GAAP) reached $335,549,000 for the three months ended March 31, 2025, compared to $324,790,000 for the previous quarter, reflecting a 3.3% increase[48]. - Tangible common equity to tangible total assets (Non-GAAP) improved to 12.5% as of March 31, 2025, up from 11.9% in the previous quarter[48]. Strategic Changes and Future Outlook - The company is transitioning to a more traditional community banking model, which includes a reduction in headcount and expenses related to regulatory compliance[31]. - The company anticipates ongoing challenges due to regulatory compliance and the wind down of fintech partnerships, which may impact future performance[40]. - The company expects to see positive results in core deposits and loans growth in the near-term quarters[9].

Core Points - The company reported a net loss of $0.4 million for Q1 2025, an improvement from a net loss of $2.0 million in Q4 2024 and $2.9 million in Q1 2024 [2][8][38] - Regulatory remediation efforts are progressing well, with no regulatory remediation expenses reported for Q1 2025, compared to $0.2 million and $2.1 million in the previous quarters [2][4][23] - The company is transitioning back to community banking, focusing on operational efficiencies and reducing staff by 21% since December 31, 2024, which is expected to save approximately $6 million annually [5][8][23] Financial Performance - Net interest income for Q1 2025 was $19.0 million, slightly down from $19.1 million in Q4 2024, primarily due to a decline in average loan balances [11][16][40] - The net interest margin improved to 2.90% in Q1 2025 from 2.80% in Q4 2024, driven by a reduction in funding costs [20][40] - Noninterest income increased to $3.1 million in Q1 2025 from $2.8 million in Q4 2024, despite a loss of $0.2 million on the sale of the mortgage division [22][24][40] Balance Sheet Highlights - Total assets decreased to $2.69 billion at the end of Q1 2025, down from $2.74 billion at the end of Q4 2024, mainly due to a decline in loans held for investment [26][27][40] - Total deposits were $2.13 billion, a decrease of $50 million from the previous quarter, with a notable decline in fintech-related deposits [27][28][40] - The company's tangible common equity to tangible total assets ratio improved to 12.5% from 11.9% in the prior quarter, reflecting a decline in total tangible assets [11][40] Capital and Liquidity - The company received regulatory non-objection to redeem a significant portion of its subordinated debt, which is expected to save over $2 million in annual interest expenses [4][5] - As of March 31, 2025, the bank's capital ratios exceeded the minimum requirements set forth in the Consent Order, indicating improved capital adequacy [11][40] - Sources of liquidity totaled $788.8 million, representing 182.9% of uninsured deposits, indicating a strong liquidity position [24][40]

Core Viewpoint - Blue Ridge Bankshares, Inc. has announced the sale of certain assets of its mortgage division, Monarch Mortgage, to an unrelated third-party mortgage company, as part of a strategic refocus on community banking [1][3]. Group 1: Transaction Details - Blue Ridge Bank has entered into a definitive asset purchase and sale agreement to sell assets of Monarch Mortgage, which provides mortgage banking services primarily for the secondary market [1]. - The transaction is expected to close by the end of the first quarter, pending customary closing conditions [1]. - Blue Ridge Bank will continue to manage loans in process and fulfill obligations to prospective borrowers during the transition [2]. Group 2: Strategic Rationale - The decision to exit the mortgage banking division aligns with the company's strategy to concentrate on community banking within its primary geographical footprint [3]. - The current interest rate environment necessitated additional investment in the mortgage banking line, which is not aligned with the company's near-term focus on profitability [3]. Group 3: Company Overview - Blue Ridge Bankshares, Inc. is the holding company for Blue Ridge Bank and BRB Financial Group, Inc., offering a range of financial services including retail and commercial banking, investment and wealth management, and trust administration [4].

Financial Position - As of December 31, 2024, the Company had total assets of approximately $2.74 billion, total gross loans of approximately $2.11 billion, total deposits of approximately $2.18 billion, and stockholders' equity of approximately $327.8 million[16]. - The Company completed a merger with Bay Banks of Virginia, Inc., adding $1.22 billion in assets and $1.03 billion in deposits, expanding its operating footprint[21]. - As of December 31, 2024, the Bank's common equity Tier 1 capital ratio was 17.26%, exceeding the well-capitalized threshold[61]. - The Bank's Tier 1 capital to risk-weighted assets ratio was 16.38%, while the Company's was 17.24% as of December 31, 2024[61]. - The Bank's Tier 1 leverage ratio was 11.80%, exceeding the minimum requirement of 10.00%[62]. - The Company recorded expenses of $5.5 million and $5.1 million for FDIC insurance premiums in the years ended December 31, 2024 and 2023, respectively[55]. Capital Management - In the second quarter of 2024, the Company closed private placements for gross proceeds of $161.6 million, with net capital proceeds totaling $152.1 million after issuance costs[17][18]. - The Company intends to use the capital from the Private Placements to support organic growth and enhance capital levels, ensuring compliance with minimum capital ratios set by the OCC[19]. - The Bank is required to maintain a Tier 1 leverage ratio of 10.00% and a total capital ratio of 13.00%, which it met as of December 31, 2024[62]. - The Federal Reserve requires banks to maintain a capital conservation buffer of 2.50% above the minimum capital ratios[58]. - The Company is unlikely to resume dividend payments in the foreseeable future due to restrictions from the Consent Order and the need for written non-objection from the OCC[64]. Regulatory Compliance - The Bank is subject to a Consent Order requiring remediation of BSA/AML deficiencies and enhanced oversight of third-party partnerships[45]. - The Company is subject to extensive federal and state consumer protection laws, which mandate compliance to avoid penalties and potential regulatory approval issues for mergers or acquisitions[77]. - Compliance with anti-money laundering laws is costly and requires the Company to maintain robust policies and procedures to detect and report potential money laundering activities[83]. - The Company must adhere to the Office of Foreign Assets Control regulations, which involve blocking transactions with prohibited parties and reporting blocked transactions[84]. - The Dodd-Frank Act requires bank holding companies to act as a source of financial strength for their subsidiary banks, even during financial difficulties[71]. - The Company must inform and consult with the Federal Reserve before declaring dividends that exceed current operating earnings, which could adversely affect its capital structure[63]. Business Operations - The Company offers a variety of financial services, including retail and commercial banking, mortgage banking, and wealth management, contributing to its diverse revenue streams[12][14]. - The Company’s primary source of revenue is interest income from lending activities, supplemented by fees from various banking services[14]. - The Company has partnerships with fintech providers for indirect lending services, with active partnerships as of December 31, 2024, including Upgrade, Inc. and Best Egg, Inc.[15]. - The Company predominantly originates compliant qualified mortgages, which are entitled to a presumption of meeting ability-to-repay requirements[91]. - The Company operates twenty-seven full-service banking offices across Virginia and central North Carolina as of December 31, 2024[11]. Community Engagement - In 2024, the Company committed approximately $279 thousand in financial donations to community organizations[40]. - The Bank was rated "satisfactory" in its most recent Community Reinvestment Act evaluation, which assesses its record in meeting the credit needs of the communities served[80]. - The revised CRA regulations, effective January 1, 2026, will alter the assessment methodology and may make it more challenging for the Bank to achieve at least a "satisfactory" rating[81]. Cybersecurity and Data Protection - The Company must notify regulators of significant cybersecurity incidents within 36 hours of discovery[93]. - The Company faces ongoing cybersecurity threats due to the increasing use of internet and mobile banking[95]. - The Company must implement additional safeguards for information security as per the amended GLB Act's Safeguards Rule[94]. - The CFPB's new rule requires financial services providers to make certain data available to consumers upon request starting April 1, 2028[86]. Future Outlook and Challenges - Future legislation and regulation may significantly impact the regulatory structure under which the Company and the Bank operate[96]. - Changes in legislation could increase costs and impede the efficiency of internal business processes[96]. - Regulatory changes may require an increase in regulatory capital for the Company and the Bank[96]. - Modifications to business strategy may be necessary due to changes in statutes or regulations[96]. - The Company and the Bank's ability to pursue business opportunities efficiently may be limited by regulatory changes[96]. - A material adverse effect on the business, financial condition, and results of operations may result from changes in regulatory policies[96].