Executive Summary / Key Takeaways

• Blue Ridge Bankshares is undergoing a significant strategic transformation, shedding its past fintech Banking-as-a-Service (BaaS) and mortgage banking ventures to refocus on a traditional, relationship-driven community banking model.
• This pivot, largely driven by regulatory directives, has led to improved financial performance in the first nine months of 2025, marked by a return to net income and a notable increase in net interest margin.
• The company has significantly strengthened its capital position and liquidity, exceeding regulatory minimums and actively reducing higher-cost brokered deposits, while also initiating a share repurchase program and a special cash dividend.
• While challenges remain, particularly in scaling against larger regional competitors and enhancing technological capabilities, BRBS's commitment to operational efficiencies and local market penetration positions it for a more stable and potentially profitable future.
• Investors should monitor the successful execution of its community banking strategy, continued regulatory compliance, and the effective integration of technology to enhance its competitive standing.

A Strategic Reorientation Towards Core Banking

Blue Ridge Bankshares, Inc. ($BRBS), founded in 1893 and headquartered in Richmond, Virginia, has historically served its communities through commercial banking, mortgage banking, and wealth management. The company operates primarily through its subsidiary, Blue Ridge Bank, National Association, and BRB Financial Group, Inc., with a presence across Virginia and in Greensboro, North Carolina. Over the past few years, BRBS has embarked on a profound strategic reorientation, moving away from a diversified model that included significant fintech operations and mortgage banking, to a more focused, traditional community banking approach. This transformation is central to understanding its current investment thesis.

The impetus for this strategic shift largely stemmed from regulatory scrutiny. In August 2022, Blue Ridge Bank entered into a formal written agreement with the Office of the Comptroller of the Currency (OCC), primarily addressing its fintech operations. This was followed by a Consent Order in January 2024, which mandated enhanced controls for third-party, Bank Secrecy Act/Anti-Money Laundering, and information technology risks associated with its fintech partnerships. The Consent Order also imposed higher minimum capital ratios, requiring the Bank to maintain a leverage ratio of 10% and a total capital ratio of 13%. In response, BRBS initiated a deliberate wind-down of its fintech BaaS deposit operations by the fourth quarter of 2024 and completed the sale of its mortgage division, Monarch Mortgage, in March 2025. This decisive action underscores the company's commitment to de-risking and streamlining its business model.

In the evolving banking landscape, where larger regional players like Truist Financial Corporation , Atlantic Union Bankshares Corporation , and First Citizens BancShares, Inc. leverage scale and advanced digital capabilities, BRBS is carving out its niche by emphasizing localized service and deep community relationships. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, BRBS's extensive branch network and focus on personalized service aim to differentiate it from the broader, more standardized offerings of its larger rivals. The company is actively upgrading its business treasury products to be competitive, recognizing that technological parity and operational efficiency are crucial in attracting and retaining local businesses and individuals. This strategic intent to improve its technological offerings, rather than relying on a unique proprietary technology, is a foundational element of its renewed community banking focus.

Operational Streamlining and Financial Resilience

The strategic pivot has begun to yield tangible financial improvements. For the three months ended September 30, 2025, Blue Ridge Bankshares reported net income of $5.6 million, or $0.06 per diluted common share, a significant turnaround from a net income of $0.9 million, or $0.01 per diluted common share, in the same period of 2024. This positive trend extended to the nine-month period, with net income reaching $6.5 million, or $0.07 per diluted common share, compared to a net loss of $13.4 million, or ($0.34) per diluted common share, for the first nine months of 2024. These results reflect the impact of strategic divestitures and a concerted effort to enhance operational efficiencies.

A key driver of this improved profitability was a notable increase in net interest margin (NIM), which expanded to 3.60% for the third quarter of 2025, up from 2.74% in the prior year's quarter. This improvement was significantly bolstered by a 49 basis point positive effect from $3 million in loan fee income realized from the payoff of a large, previously criticized out-of-market loan. Interest expense saw a substantial decrease of $5.8 million for the three months ended September 30, 2025, and $17.3 million for the nine-month period, largely due to the reduction in higher-cost interest-bearing deposits following the exit from fintech BaaS operations and a reduction in wholesale funding. This highlights the financial benefits of the company's de-risking strategy.

The company's asset base has also been recalibrated. Total assets decreased by $240.3 million to $2.50 billion as of September 30, 2025, from $2.74 billion at December 31, 2024, primarily due to a $199.1 million decline in loans held for investment. This reduction was a deliberate outcome of the company's strategy to selectively reduce balances of loans from non-local relationships. On the liability side, total deposits decreased by $228.4 million to $1.95 billion, driven by a $134.6 million decrease in brokered time deposits and a $16.6 million decrease in fintech-related deposits. BRBS aims to further reduce brokered deposits to 10% or less of total deposits in future periods, indicating a continued focus on lower-cost, relationship-based funding.

BRBS has also made substantial progress in strengthening its capital position and liquidity. As of September 30, 2025, the Bank's capital ratios significantly exceeded the minimums mandated by the Consent Order, with a Tier 1 leverage ratio of 13.67% (compared to the 10% requirement) and a total risk-based capital ratio of 19.96% (compared to the 13% requirement). The company's liquidity position is robust, with $808.7 million in available sources, covering 200% of uninsured deposits as of September 30, 2025.

Furthermore, BRBS has actively managed its capital structure, completing a $15 million redemption of its 2030 subordinated note and a $10 million partial redemption of its 2029 subordinated notes in 2025.

The company also announced a special cash dividend of $0.25 per share in October 2025, totaling approximately $30 million, and has been actively repurchasing shares, including $2.8 million in the third quarter of 2025 and an additional $6.1 million subsequent to quarter-end. These actions signal management's confidence in the company's financial health and its commitment to shareholder returns.

Competitive Landscape and Future Outlook

In the competitive banking arena, Blue Ridge Bankshares operates against a backdrop of larger, more technologically advanced regional banks and nimble fintech players. While BRBS's smaller scale may lead to higher operational costs and potential gaps in digital innovation compared to rivals like Truist (TFC), Atlantic Union (AUB), and First Citizens (FCNCA), its strength lies in its deep community ties and personalized service. These local advantages foster customer loyalty and can lead to more efficient relationship management, potentially yielding superior margins in niche markets. The company's strategic focus on upgrading its business treasury products is a direct response to the digital offerings of its competitors, aiming to close any technological gaps and maintain its competitive edge in local markets.

The current lending environment for commercial real estate (CRE) loans presents a heightened risk due to higher interest rates, which could strain borrowers and impact collateral values. BRBS is actively monitoring these trends and managing its loan portfolio, having purposefully reduced out-of-market loan balances. The company's headcount reduction, from 468 employees at September 30, 2024, to 311 at September 30, 2025, reflects its commitment to operational efficiencies and a leaner, more focused community banking model.

Looking ahead, management expects to continue reducing brokered deposits to 10% or less of total deposits, a move that should further enhance funding stability and reduce interest expense. While the company does not anticipate a material impact on its consolidated financial statements from recent accounting standard updates, it is preparing for expanded disclosures. The CEO, G. William "Billy" Beale, emphasized that the third-quarter results represent "a good news story on many fronts" and that the company "will return Blue Ridge to a prominent place in Virginia community banking." This forward-looking statement, coupled with the ongoing efforts to align product pricing and enhance operational efficiencies, paints a picture of a company committed to its transformative journey.

Conclusion

Blue Ridge Bankshares is in the midst of a significant and necessary transformation, shedding its past complexities to embrace a more focused and resilient community banking future. The company's recent financial performance, marked by a return to profitability, improved net interest margin, and strengthened capital, demonstrates the initial success of this strategic pivot. While the path ahead involves navigating a competitive landscape dominated by larger players and adapting to evolving technological demands, BRBS's commitment to operational efficiency, local market penetration, and prudent capital management forms the bedrock of its investment thesis. The successful resolution of regulatory matters and the sustained execution of its community-focused strategy will be critical determinants of its long-term value creation. Investors should view BRBS as a company in active recovery and strategic realignment, with its future performance tied to the continued realization of efficiencies and the deepening of its community banking relationships.