Embattled Blue Ridge Bankshares lands $150 million capital infusion

The embattled Blue Ridge Bankshares is getting a $150 million capital infusion through a private placement deal with two investors. 

The Charlottesville, Virginia-based bank's stock has sunk 70% this year, as the fintech-friendly company faces heavy regulatory scrutiny over a lack of controls. The bank hired a new CEO this summer and has begun scaling back its vast list of fintech partners, which had fueled the $3.3 billion-asset bank's growth. 

Under the deal, Blue Ridge Bankshares is issuing 60 million new shares and 29.4 million warrants to buy future stock at $2.50 per share — a steep discount from its roughly $18 per share stock price in 2021.

The bank investor Kenneth R. Lehman, who is leading the private placement, is set to own roughly 25% of the company. The investment firm Castle Creek Capital Partners is also participating in the deal and will own 12.5% of the bank.

"We are delighted to welcome our new shareholders and additional investment from current shareholders," Blue Ridge Bankshares CEO Billy Beale said in a news release. "This transaction represents a significant step for our Virginia-based community bank to build a stronger platform for growth and shareholder value."

The bank also said that Lehman and Castle Creek will "identify certain criticized assets and develop an asset resolution plan," which could lead to workouts, dispositions, upgrades or some other resolution of troubled assets.

The Office of the Comptroller of the Currency had penalized the bank last year, requiring it to improve its monitoring of fintech partners and bolster its anti-money-laundering oversight.

Beale, a veteran banker, became CEO in July and has acknowledged the scale of the task ahead.

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"There's still a lot of just blocking and tackling that we've got to do to get the bank to work the way it's supposed to," Beale told American Banker in October, adding that the bank had "jumped in up to their clavicles" on fintech partnerships. 

At one point, the company worked with more than 70 firms through its banking-as-a-service offering, where the bank gets money from fintechs in partnerships that let them get the benefits of a bank charter. Last month, the company told investors it had started offboarding at least a dozen fintech partners.

Blue Ridge has paused its dividend payment for months to retain capital.

In its announcement Friday, Blue Ridge said it will use the capital infusion to restructure business lines, support organic growth and build more capital. 

The company suffered a $41.4 million loss in the third quarter, compared to an $8.6 million loss in the second quarter. Still, it remained well capitalized in the third quarter, with a Tier 1 leverage ratio of 7.63%, down from 7.92% in the second quarter.

The deal is pending regulatory and shareholder approvals. After the deal closes, the investors will appoint up to three representatives to the Blue Ridge board, as well as the board of its bank subsidiary.

Piper Sandler & Co. was the sole placement agent on the deal. The law firm Williams Mullen provided legal advice to Blur Ridge and Troutman Pepper Hamilton Sanders was legal counsel to Piper Sandler. The law firm Fenimore Kay Harrison provided advice to Lehman, and Sidley Austin was legal counsel to Castle Creek. 

Blue Ridge's stock price jumped 7.06% to $3.79 per share in mid-afternoon trading.