Blue Ridge Bankshares Inc. is hitting pause on M&A after its merger-of-equals with FVCBankcorp Inc. fell through in January, President and CEO Brian Plum said in an interview.
The bank plans to focus on deepening relationships in its current footprint and capitalizing on returning loan demand, Plum said. M&A is not "an imminent strategic focus" from here, he said.
Blue Ridge has struck four mergers and acquisitions since in the past six years, including two MOEs within one year. The expansionary moves may have piqued regulators' interest, said Christopher Marinac, an analyst with Janney Montgomery Scott. Blue Ridge's total assets have grown to $2.67 billion as of the fourth quarter of 2021 from $1.50 billion in the year-ago period, driven by both organic growth and the string of deals, including a merger of equals with Bay Banks of Virginia that closed in January 2021. Blue Ridge has 10 active fintech partnerships to help fuel growth, Plum said.
Plum declined to comment on the FVCBankcorp deal termination and referred to the November 2021 disclosure of regulatory scrutiny when asked about the Office of the Comptroller of the Currency's concerns with Blue Ridge Bank NA. FVCBankcorp did not reply to a request for comment.
While the nature of the OCC's interest in Blue Ridge remains unknown, it was the likely catalyst for the MOE dissolution and might have led to months of inquiries and uncertainty, Marinac said.
"History shows that you have to have extreme patience when dealing with the regulators," Marinac said in an interview. "And if you're FVCBankcorp, you don't necessarily have to exercise that because it's not your problem. It's really Blue Ridge's issue, and Blue Ridge has to resolve that."
Fintech partnerships
That relationship was the target of an April 2021 letter to the OCC from a coalition of nonprofits that urged the regulator to "critically question" whether ISAs are appropriate for banks. The letter claims that ISAs pose "substantial legal and reputational risks," especially around fair lending laws if the terms of the product are based on qualitative measures, the letter claims.
"ISA companies' survival depends on their ability to vary their loan terms for students in different schools or major programs," the letter read. "However, given that income levels, college selection and major choice are all closely associated with race in the U.S., allowing for differences in ISA pricing based on borrowers' educational background opens the door for fair lending violations."
Plum said he is aware of the letter. "I appreciate the concerns that are represented and the sentiment," he said in an interview. "[But] MentorWorks is a quality company with quality leadership and committed to doing things the right way."
MentorWorks did not reply to a request for comment.
Following the letter, the OCC met with a handful of groups in October 2021 to learn more about ISAs, according to Ben Kaufman, head of investigations and senior policy advisor at the Student Borrower Protection Center, one of the letter's signatories. The meeting was a general information session on ISAs, and the agency did not discuss Blue Ridge Bank, Kaufman said.
Other Blue Ridge partnerships include Aeldra Financial Inc., a neobank targeting customers outside of the U.S., and Unit, a banking-as-a-service platform. Fintech partnerships, cybersecurity and anti-money laundering compliance are "areas of increased focus" among regulators, garnering a "magnified view" recently, Plum said.
A handful of U.S. banks have leaned into fintech as their primary business model. For Blue Ridge, the numerous fintech partnerships represent opportunities to enhance its community banking business, Plum said.
"We don't look at it right now as you have to make a strategic choice between 'are you going to be a traditional bank or are you going to be a bank that works with fintechs?'" he said. "It's a symbiotic relationship. Being really good at community banking makes us better with what we do in fintech, and being really good and involved in fintech makes us better at community banking."
Looking to the future
As Blue Ridge pivots to an organic growth focus, the bank plans to focus on deepening relationships in its current footprint in Virginia and North Carolina and capitalizing on returning loan demand, Plum said.
For FVCBankcorp, equity analysts were bullish on its future given the improved environment since it struck the MOE with Blue Ridge in July 2021. Marinac said the termination may be a "blessing in disguise" for FVCBankcorp to operate independently during the anticipated environment of increasing loan demand and rising interest rates in 2022.
"They could be more valuable if they go alone, make more money in the next year, one and a half years, and then revisit their strategic plans," Marinac said.
Marinac pointed to FVCBankcorp's Northern Virginia and Washington, D.C., footprint as attractive markets.
"Where they play, there's plenty of opportunity. There's no lack of business to take from the big banks, but there's still plenty of growth and attractive demographics," he said. "This is not a rural bank that has limited options."
On the other hand, Raymond James analyst Wally Wallace believes FVCBankcorp may still be interested in selling and "the potential universe of buyers may be greater today than it was when [FVCBankcorp] was last looking for a potential partner," he wrote in a Jan. 20 note.
Atlantic Union Bankshares Corp., F.N.B. Corp., Sandy Spring Bancorp Inc., United Bankshares Inc. and WesBanco Inc. could have interest in FVCBankcorp, Wallace wrote in a Jan. 24 note. If the company were interested in another MOE, Wallace views John Marshall Bancorp Inc. as the most likely potential partner.