Blue Ridge Bankshares(BRBS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION 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 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 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 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) 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 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 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 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] - 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][24] - 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] 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] Note 2 – Investment Securities and Other Investments 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] - 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] - 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] - 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] Note 3 – Loans and ACL 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] - 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] 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] 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] Note 4 – Borrowings 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][79] - 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] - 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][86] - 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] Note 5 – Fair Value 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] 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 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] - Due to the Consent Order, the Bank is deemed 'less than well capitalized,' thus 'adequately capitalized,' which can impose limitations on activities[103] 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] Note 7 – Commitments and Contingencies 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] - 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] - The reserve for unfunded commitments was $0.9 million as of both June 30, 2025, and December 31, 2024[111] - 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] - Future commitments outstanding related to investments in partnerships and limited liability companies totaled $5.6 million as of June 30, 2025[113] Note 8 – Stock-Based Compensation 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] - 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] 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 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 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] 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 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 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] - 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] Note 13 – Subsequent Events 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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][139] Sale of Mortgage Division 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][141] Regulatory Matters 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] Private Placements 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] 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 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] Comparison of Financial Condition 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] - The decrease in total deposits was primarily driven by a $106.4 million decrease in brokered time deposits[148] - 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] Comparison of Results of Operations 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] - 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] - 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] Net Interest Income 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][172] - 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][173] - Cost of deposits, excluding wholesale deposits, was 1.01% for Q2 2025, down from 2.28% for Q2 2024[163] Provision for Credit Losses 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] - 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] Noninterest Income 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] - 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] Noninterest Expense 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] - 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] - 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] Income Tax Expense 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] - 2024 rates were impacted by a $2.0 million provision expense from surrendering bank-owned life insurance policies[182] Analysis of Financial Condition 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 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][188] - 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] Allowance for Credit Losses 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] Nonperforming Assets 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] Investment Securities 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] - 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][198] - 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] - 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] 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] - 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][210] - 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][207][210] - 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] 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][215] - Subsequent to June 30, 2025, on July 15, 2025, the Company redeemed an additional $10.0 million of the 2029 Notes[216] 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] - 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] 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] 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] - 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][229] 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] Commitments and Contingencies 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] - Commitments under outstanding financial stand-by letters of credit totaled $13.5 million (June 30, 2025) and $12.5 million (December 31, 2024)[234] - The reserve for unfunded commitments was $0.9 million as of both June 30, 2025, and December 31, 2024[235] - 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] - Future commitments outstanding related to investments in partnerships and limited liability companies totaled $5.6 million as of June 30, 2025[237] Interest Rate Risk Management 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][239] 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 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] Item 4. Controls and Procedures 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 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] - 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] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits Item 1. Legal Proceedings 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] - Further information regarding legal proceedings is provided in Note 12 to the unaudited consolidated financial statements[249] [Item 1A. Risk Fact