Blue Ridge Bankshares to sell mortgage unit as part of profitability strategy

Blue Ridge Bankshares, Inc. is making a significant shift in its business strategy by selling key assets of its mortgage banking division, Monarch Mortgage. The move is aimed at refocusing the company’s operations on traditional community banking, following a period of financial challenges and strategic reassessments. The deal, expected to close by the end of the first quarter of 2025, involves an unnamed third-party mortgage company acquiring Monarch Mortgage’s assets. This decision marks another step in Blue Ridge Bankshares’ ongoing restructuring, as it works to streamline its business and improve financial stability.

Why Is Blue Ridge Bankshares Exiting Mortgage Banking?

Blue Ridge Bankshares, the parent company of Blue Ridge Bank and BRB Financial Group, has been navigating a challenging financial landscape, exacerbated by high interest rates and regulatory scrutiny. Monarch Mortgage, which specializes in originating and processing residential mortgage loans for sale in the secondary market, had become increasingly difficult to sustain under current economic conditions.

President and CEO G. William Beale explained that continuing to operate Monarch Mortgage at a profitable scale would require further investment—an approach that does not align with the bank’s near-term objectives. Instead, the company is choosing to concentrate on its core community banking services, which align more closely with its primary geographical footprint and long-term profitability goals.

The sale of Monarch Mortgage is the latest in a series of strategic moves by Blue Ridge Bankshares, which has been realigning its operations to mitigate financial risk. In January 2025, the company announced its full-year and fourth-quarter 2024 earnings, revealing a concerted effort to strengthen its balance sheet by increasing deposit growth, reducing noninterest expenses, and addressing nonperforming assets.

How Has Blue Ridge Bankshares Performed Financially?

Blue Ridge Bankshares reported a net loss of $15.4 million for 2024, a significant improvement from the $51.8 million loss in 2023. The previous year’s losses were driven by a $26.8 million goodwill impairment charge and a $4.7 million after-tax reserve for a settlement related to Employee Stock Ownership Plan (ESOP) litigation inherited from the 2019 acquisition of Virginia Community Bankshares, Inc.

The fourth quarter of 2024 saw a net loss of $2 million, a reduction compared to the $5.8 million loss in Q4 2023. However, financial pressures persist, particularly as the company navigates regulatory remediation efforts. After-tax regulatory remediation expenses for 2024 totaled $3.6 million, down from $8.1 million in 2023, reflecting progress but also highlighting continued regulatory challenges.

Despite these difficulties, the company has managed to exit certain non-core operations, including its banking-as-a-service depository operations. These strategic moves suggest that Blue Ridge Bankshares is actively working to strengthen its financial position and move toward long-term sustainability.

What Does This Mean for Investors?

Investors are closely watching Blue Ridge Bankshares’ restructuring efforts and their impact on the company’s stock performance. As of March 20, 2025, Blue Ridge Bankshares’ stock (NYSE American: BRBS) is trading at $3.30 per share, reflecting a 29.48% gain over the past year. While the stock saw a 0.01223% increase from its previous close, trading volumes indicate cautious investor sentiment.

The stock’s intraday range has fluctuated between $3.26 and $3.35, with a trading volume of 369,212 shares. However, analyst coverage remains limited, leaving investors without a clear consensus on future price targets. Given the company’s ongoing financial adjustments and restructuring efforts, many investors are adopting a hold position, waiting for further clarity on the company’s profitability trajectory.

The decision to sell Monarch Mortgage could ultimately prove beneficial if Blue Ridge Bankshares successfully redirects its resources into strengthening its core banking services. However, the key question remains: can the company offset revenue losses from mortgage banking with stronger performance in its traditional banking segments?

How Does This Reflect Broader Banking Industry Trends?

The banking industry as a whole has been facing significant pressure due to fluctuating interest rates, regulatory demands, and changing consumer behavior. Mortgage banking, in particular, has been heavily impacted by rising borrowing costs, making it increasingly difficult for regional banks to maintain profitability in this sector.

Many financial institutions have been forced to reassess their business models, with some opting to exit mortgage banking entirely, as Blue Ridge Bankshares is doing. The focus for many regional banks has shifted toward stabilizing deposit bases, optimizing loan portfolios, and enhancing risk management strategies.

Blue Ridge Bankshares’ decision aligns with this broader industry shift, as it prioritizes community banking over high-risk mortgage lending. The company’s ability to navigate this transition successfully will depend on its ability to enhance operational efficiencies, attract new customers, and rebuild investor confidence.

What’s Next for Blue Ridge Bankshares?

With the Monarch Mortgage sale expected to close by the end of March 2025, the next phase of Blue Ridge Bankshares’ transformation will likely involve further operational refinements and potential strategic partnerships. The company’s efforts to improve its regulatory standing and reduce financial risk will be critical in determining its long-term success.

Investors and market analysts will be watching closely to see how Blue Ridge Bankshares adjusts its revenue streams following the exit from mortgage banking. If the company can successfully grow its community banking and wealth management divisions while maintaining cost discipline, it may position itself for stronger financial performance in the coming years.

As the banking sector continues to face evolving challenges, Blue Ridge Bankshares’ ability to execute its restructuring strategy effectively will determine its place in an increasingly competitive market.