A Charlottesville, Virginia-based community bank grappling with regulatory, legal and asset quality issues is extending a previously disclosed halt to its dividend in an effort to conserve capital.
The $3.3 billion-asset Blue Ridge Bankshares paid its most recent dividend, of 12 cents per share, on April 28, before announcing the suspension of its third-quarter dividend in July. It extended the hiatus indefinitely on Tuesday, citing the desire to continue husbanding capital.
The company, which reported third-quarter results on Tuesday, remained well capitalized as of Sept. 30, with a Tier 1 leverage ratio of 7.63%. That number represents a nearly 30-basis-point drop from the June 30 ratio of 7.92%.
CEO Billy Beale, who joined Blue Ridge in May, characterized the third quarter as a "turning point." The company addressed looming questions about goodwill impairment, reached a tentative $6 million settlement of a lawsuit linked to a bank it acquired in 2019, and made continued strides in resolving compliance issues.
"My focus since coming on board at Blue Ridge has been to ensure we are driving enhanced oversight, rigor, and portfolio refinement into our operations so we can take better advantage of our inherent strengths and the opportunities before us," Beale said in a press release. "I am confident we are building a stronger platform for growth and shareholder value."
Blue Ridge reported a $41.4 million loss for the three months ending Sept. 30, considerably wider than the $8.6 million loss it reported for the quarter ending June 30. The majority of the third-quarter loss — $26.8 million — reflected a noncash, after-tax goodwill impairment charge taken in response to a decline in the company's stock price. Blue Ridge's shares began 2023 trading at $12.40. They opened Monday at $3.28 and closed Wednesday at $2.09.
Though the goodwill impairment charge did not impact the bank's regulatory capital levels, several other issues did. Blue Ridge reported a $6 million settlement reserve to resolve a lawsuit that originated at Virginia Community Bankshares, which Blue Ridge acquired in December 2019.
Compliance costs tied to Blue Ridge's August 2022 formal agreement with the Office of the Comptroller of the Currency totaled $3.8 million in the third quarter, up from $2.4 million for the three months ending June 30.
Nonperforming loans of $81.8 million were level with the June 30 total and amounted to 2.51% of total assets. Blue Ridge reported a provision for credit losses of $11.1 million, which increased its allowance for credit losses to $49.6 million, or 2.03% of loans held for investment.
Blue Ridge's issues with the OCC stem from its embrace of a high-growth strategy that resulted in partnerships with dozens of fintechs in the years before Beale's arrival. The company began working to scale back fintech ties upon entering into the formal agreement. The process has continued under Beale, who has announced his intention to
Still, fintech partnerships generated interest and fee income totaling $3.6 million in the third quarter and will remain an "important focus" for the bank, Beale said Tuesday. Ultimately, Blue Ridge is seeking to downsize its fintech customer base, retaining the partners that generate high levels of deposits but limiting compliance red flags. Blue Ridge developed a strategic roadmap to reach that end during the third quarter, while closing a number of fintech-related customer accounts that were inactive or lacked proper documentation, Beale said.
Blue Ridge also announced plans to restate its 2022 annual report, as well as interim 10-Q reports for the quarters ending March 31 and June 30, 2023. The revisions reflect a conclusion that loans placed on nonaccrual status, reserved for or charged off in the first and second quarters should have been acted on earlier.
"We believe these restatements do not significantly impact our present financial condition, nor do they indicate any trends in our current or prospective business," Beale said.
The proposed legal settlement would provide a coda to a case involving claims by a former Virginia Community Bankshares branch manager. Janice Moore alleged that executives at Virginia Community mishandled the company's employee stock ownership program, costing her and her colleagues tens of thousands of dollars in retirement proceeds. Moore filed suit in August 2019, before Blue Ridge closed its acquisition of Virginia Community. She succeeded in adding Blue Ridge as a defendant in March 2022.
In its Tuesday press release, Blue Ridge said it is seeking a settlement "to eliminate the burden and expense of further litigation."
