BLUE RIDGE BANKSHARES, INC.

Previous wording

The following presents management’s discussion and analysis of the Company’s consolidated financial condition and the results of the Company's operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the“2024 Form 10-K”). Results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations for the balance of 2025, or for any other period. As used in this report, the terms “the Company,” “we,” “us,” and “our” refer to Blue Ridge Bankshares, Inc. and its consolidated subsidiaries. The term “Bank” refers to Blue Ridge Bank, National Association.

Current wording

The following presents management’s discussion and analysis of the Company’s consolidated financial condition and the results of the Company's operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this Form 10-Q and the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the“2024 Form 10-K”). Results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results of operations for the balance of 2025, or for any other period. As used in this report, the terms “the Company,” “we,” “us,” and “our” refer to Blue Ridge Bankshares, Inc. and its consolidated subsidiaries. The term “Bank” refers to Blue Ridge Bank, National Association.

Previous wording

the economic impact of duties, tariffs, or other barriers or restrictions on trade, any retaliatory counter measures, and the volatility and uncertainty arising therefrom;

Current wording

the economic impact of duties, tariffs, or other barriers or restrictions on trade, any retaliatory countermeasures, and the volatility and uncertainty arising therefrom;

Previous wording

The Company’s previously announced sale of its mortgage division operating as Monarch Mortgage to an unrelated third-party mortgage company was completed on March 27, 2025. The sale, which included the transfer of certain assets and leases, resulted in a $0.2 million loss, primarily due to the write-off of fixed assets and lease impairment, and is reported in other noninterest income. The Company has continued to fulfill its obligations to borrowers with respect to loans in process and will manage such loans toward closing and funding in the ordinary course of business.

Current wording

On March 27, 2025, the Company completed the previously announced sale of its mortgage division operating as Monarch Mortgage. The sale, which included the transfer of certain assets and leases, resulted in a $0.2 million loss, primarily due to the write-off of fixed assets and lease impairment, and is reported in other noninterest income. As of June 30, 2025, the Company had closed, funded, and sold the loans that were in process at the time of the sale.

Previous wording

On January 24, 2024, the Bank consented to the issuance of the Consent Order by the OCC ("Consent Order"). The Consent Order generally incorporates the provisions of the formal written agreement (the "Written Agreement") entered into between the Bank and the OCC on August 29, 2022, as well as adding new provisions. The Written Agreement principally concerned the Bank’s fintech operations and required the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering ("BSA/AML"), and information technology risks stemming from its fintech partnerships. The Consent Order adds time frames by which certain of the directives are required, requires the Bank to submit a strategic plan and a capital plan, and places further restrictions on the Company’s fintech operations. The Consent Order also requires the Bank to maintain a leverage ratio of 10.0% and a total capital ratio of 13.0%, referred to as minimum capital ratios. As of March 31, 2025 and December 31, 2024, the Bank’s capital ratios exceeded these minimum capital ratios. The Company believes it has made significant progress towards meeting the requirements of the Consent Order. Complete copies of the Written Agreement and the Consent Order are included as Exhibits 10.9 and 10.10, respectively, of the 2024 Form 10-K.

Current wording

On January 24, 2024, the Bank consented to the issuance of the Consent Order by the OCC ("Consent Order"). The Consent Order generally incorporates the provisions of the formal written agreement (the "Written Agreement") entered into between the Bank and the OCC on August 29, 2022, as well as adding new provisions. The Written Agreement principally concerned the Bank’s fintech operations and required the Bank to continue enhancing its controls for assessing and managing the third-party, Bank Secrecy Act/Anti-Money Laundering, and information technology risks stemming from its fintech partnerships. The Consent Order adds time frames by which certain of the directives are required, requires the Bank to submit a strategic plan and a capital plan, and places further restrictions on the Company’s fintech operations. The Consent Order also requires the Bank to maintain a leverage ratio of 10.0% and a total capital ratio of 13.0%, referred to as minimum capital ratios. As of June 30, 2025 and December 31, 2024, the Bank’s capital ratios exceeded these minimum capital ratios. The Company believes it has made significant progress towards meeting the requirements of the Consent Order. Complete copies of the Written Agreement and the Consent Order are included as Exhibits 10.9 and 10.10, respectively, of the 2024 Form 10-K.

Previous wording

In the second quarter of 2024, the Company closed private placements in which it issued and sold shares of its common and preferred stock for gross proceeds of $161.6 million (collectively, the "Private Placements"). At a special meeting of shareholders held June 20, 2024, the Company’s shareholders approved the Private Placements and an amendment to the Company's articles of incorporation authorizing the issuance of additional shares of common stock, thus enabling the conversion of the preferred shares issued in the Private Placements into shares of the Company’s common stock. On June 28, 2024, and November 7, 2024, all outstanding shares of the Company’s Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series B and Mandatorily Convertible Cumulative Perpetual Preferred Stock, Series C (together the "preferred stock"), were converted or exchanged for shares of the Company’s common stock. Capital proceeds received, net of issuance costs, from the Private Placements totaled $152.1 million.

Current wording

In the second quarter of 2024, the Company closed private placements in which it issued and sold shares of its common and preferred stock for gross proceeds of $161.6 million (collectively, the "Private Placements"). On June 20, 2024, the Company’s shareholders approved an amendment to the Company's articles of incorporation authorizing the issuance of additional shares of common stock, thus enabling the conversion of the preferred shares issued in the Private Placements into shares of the Company’s common stock. The conversion occurred on June 28, 2024 and November 7, 2024. Capital proceeds received, net of issuance costs, from the Private Placements totaled $152.1 million. The Private Placements also included the issuance of warrants to purchase common stock at $2.50 per share.

Previous wording

Total assets were $2.69 billion as of March 31, 2025, a decrease of $52.2 million from $2.74 billion as of December 31, 2024. Most of this decrease was attributable to a decline in loans held for investment, which decreased $52.1 million to $2.06 billion as of March 31, 2025, from $2.11 billion as of December 31, 2024. The decline in loans held for investment was partially due to a continuation of the Company purposefully and selectively reducing balances of loans where borrowers did not represent in-market relationships. The allowance for credit losses ("ACL") was $23.1 million and $23.0 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

Total assets were $2.56 billion as of June 30, 2025, a decrease of $181.8 million from $2.74 billion as of December 31, 2024. Most of this decrease was attributable to a decline in loans held for investment, which decreased $133.2 million to $1.98 billion as of June 30, 2025, from $2.11 billion as of December 31, 2024. Of the decline in loans held for investment, $35.1 million was due to a continuation of the Company's actions beginning in 2024 to purposefully and selectively reduce balances of loans where borrowers did not represent in-market relationships. The allowance for credit losses ("ACL") was $22.0 million and $23.0 million as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

Total deposits were $2.13 billion as of March 31, 2025, a net decrease of $50.0 million from December 31, 2024. The decline in the first three months of 2025 was primarily due to a $63.4 million decrease in brokered time deposits.

Current wording

Total deposits were $2.01 billion as of June 30, 2025, a net decrease of $169.2 million from December 31, 2024. The decline in the first six months of 2025 was primarily due to a $106.4 million decrease in brokered time deposits.

Previous wording

Total stockholders’ equity increased by $10.5 million to $338.3 million as of March 31, 2025, compared to $327.8 million at December 31, 2024, primarily due to additional capital of $6.9 million from the exercise of warrants to purchase common stock and a $3.8 million decrease in after-tax unrealized losses in the Company’s portfolio of securities available for sale.

Current wording

Total stockholders’ equity increased by $16.5 million to $344.3 million as of June 30, 2025, compared to $327.8 million at December 31, 2024, primarily due to additional capital of $9.4 million from the exercise of warrants to purchase common stock and a $3.8 million decrease in after-tax unrealized losses in the Company’s portfolio of securities available for sale.

Previous wording

Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024

Previous wording

For the three months ended March 31, 2025, the Company reported a net loss of $0.4 million, or $0.01 per diluted common share, compared to a net loss of $2.9 million, or $0.15 per diluted common share, for the three months ended March 31, 2024. Net loss for the first quarter of 2025 included after-tax severance costs of $0.5 million and an after-tax $0.2 million loss on the sale of the mortgage division. After-tax regulatory remediation expenses in connection with the Consent Order for the first quarter of 2025 were $0, compared to $2.1 million for first quarter of 2024. Net interest income for the three months ended March 31, 2025 was $19.0 million, a decline of $1.4 million from the same period in 2024, primarily due a decline in average loan balances.

Current wording

For the three months ended June 30, 2025, the Company reported net income of $1.3 million, or $0.01 per diluted common share, compared to a net loss of $11.4 million, or ($0.47) per diluted common share, for the same period of 2024.

Previous wording

Average balances of interest-earning assets decreased $345.8 million to $2.62 billion for the first quarter of 2025 compared to $2.97 billion for the same period of 2024. Relative to the year-ago period, this decrease reflected primarily lower average balances of loans held for investment. The yield on average loans held for investment was 5.70% for the first quarter of 2025 compared to 6.02% for the first quarter of 2024. The decline in loan yield was primarily driven by the purposeful and selective exit of higher-rate loans to borrowers that did not represent in-market relationships. Interest income for the three months ended March 31, 2025 and 2024 included accretion of discounts on acquired loans of $366 thousand and $329 thousand, respectively.

Current wording

Average balances of interest-earning assets decreased $360.4 million to $2.53 billion for the three months ended June 30, 2025 compared to $2.89 billion for the same period of 2024. Relative to the year-ago period, this decrease reflected primarily lower average balances of loans held for investment. The yield on average loans held for investment was 5.80% for both the second quarter of 2025 and the second quarter of 2024. Interest income for the three months ended June 30, 2025 and 2024 included accretion of discounts on acquired loans of $0.4 million and $0.3 million, respectively.

Previous wording

Average balances of interest-bearing liabilities decreased $512.4 million to $1.90 billion for the three months ended March 31, 2025 compared to $2.41 billion for the same period of 2024. The decline relative to the comparative periods was primarily due to the exit of fintech Banking-as-a-Service ("BaaS") deposit operations and the payoff of wholesale funding.

Current wording

Average balances of interest-bearing liabilities decreased $408.3 million to $1.82 billion for the three months ended June 30, 2025 compared to $2.23 billion for the same period of 2024. The decline relative to the comparative periods was primarily due to the exit of fintech Banking-as-a-Service ("BaaS") deposit operations and the payoff of wholesale funding.

Previous wording

Cost of funds was 2.78% for the first quarter of 2025 compared to 3.03% for the first quarter of 2024, while cost of deposits was 2.62% and 2.84%, for the same respective periods. Lower cost of funds in the first quarter of 2025 was primarily due to the exit of higher cost fintech BaaS deposit operations and lower average balances of wholesale funding, relative to the year-ago period, partially offset by the higher variable cost of $25.0 million of the Company’s subordinated debt, which increased the cost of funds by 3 basis points. Cost of deposits, excluding wholesale deposits, was 1.34% for the first quarter of 2025 compared to 2.52% for the first quarter of 2024. The first quarter of 2025 decline from the comparative period of 2024 was primarily due to lower average balances of higher cost fintech-related deposits.

Current wording

Cost of funds was 2.63% for the second quarter of 2025 compared to 3.02% for the second quarter of 2024, while cost of deposits was 2.47% and 2.84%, for the same respective periods. Lower cost of funds and lower cost of deposits in the 2025 periods relative to the year-ago periods were primarily due to the exit of higher cost fintech BaaS deposit operations and the reduction in wholesale deposits. Cost of deposits, excluding wholesale deposits, was 1.01% for the second quarter of 2025 compared to 2.28% for the second quarter of 2024.

Previous wording

Net interest income (on a taxable equivalent basis) for the three months ended March 31, 2025 was $19.0 million compared to $20.4 million for the same period in 2024. The decline in the first quarter of 2025 compared to the first quarter of 2024 was primarily attributable to lower interest and fee income on loans due to lower average balances. This decline was partially offset by lower average balances and rates paid on interest-bearing demand accounts and lower average balances of wholesale funding. The majority of fintech BaaS deposits were in interest-bearing demand accounts. Net interest margin was 2.90% and 2.75% for the first quarter of 2025 and 2024, respectively. Accretion and amortization of purchase accounting adjustments had a 6 basis point positive effect on net interest margin for both respective periods.

Current wording

Net interest income (on a taxable equivalent basis) for the three months ended June 30, 2025 was $19.9 million compared to $20.1 million for the same period in 2024. The decline in the second quarter of 2025 compared to the second quarter of 2024 was primarily attributable to lower interest and fee income on loans due to lower average balances. This decline was partially offset by lower average balances and rates paid on interest-bearing demand accounts and lower average balances of wholesale funding. Net interest margin was 3.15% and 2.79% for the second quarter of 2025 and 2024, respectively. Accretion and amortization of purchase accounting adjustments had a 7 and 5 basis point positive effect on net interest margin for the same respective periods.

Previous wording

The decline in mortgage banking income in the first quarter of 2025 compared to the same period of 2024 was due to a combination of lower mortgage volumes and lower servicing income, with the latter attributable to the sale of the majority of mortgage servicing rights assets ("MSR") portfolio in the third and fourth quarters of 2024. The decline in other noninterest income was driven by the decrease in the number of fintech indirect lending relationships, which contributed $0.2 million and $1.4 million of noninterest income in the first quarters of 2025 and 2024, respectively. Additionally, other noninterest income in the 2025 period included a $0.2 million loss on the sale of the mortgage division. A recently completed review of the Bank’s deposit products and services led to a more streamlined and competitive offering, which the Company expects will result in higher service charges on deposit accounts in the subsequent periods.

Current wording

The decline in mortgage banking income in the three and six months ended June 30, 2025 compared to the same periods of 2024 was due to the previously mentioned sale of the mortgage division, and the decline in mortgage servicing income over the same period was attributable to the sale of the majority of MSR assets portfolio in the third and fourth quarters of 2024. Higher service charges on deposits accounts in the 2025 periods compared to the same periods of 2024 were primarily due to the execution of a project to more closely align products and pricing with competitors in the markets in which the Bank operates. The decline in bank owned life insurance income in the 2025 periods compared to the same periods of 2024 was due to the surrender of policies at their cash surrender values impacting the last half of 2024. The decline in other noninterest income was driven by the decrease in the number of fintech indirect lending relationships, which contributed $0.5 million and $2.5 million of noninterest income in the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Excluding regulatory remediation, noninterest expense decreased $6.8 million for the three months ended March 31, 2025 compared to the same period of 2024. The decline relative to the prior period was primarily due to lower expenses for salaries and employee benefits. The decline in salaries and employee benefits in the first quarter of 2025 reflected a reduction in headcount as the Company continues to right-size its workforce, as it completes certain regulatory directives and transitions to a more traditional community banking model. As of March 31, 2025 and 2024, the Company had 351 and 519 employees, respectively. Also included in salaries and employee benefits expense were severance costs of $0.7 million and $0, for the 2025 and 2024 periods, respectively. Lower regulatory remediation costs and contractual services and audit fees in the 2025 period reflect a reduction in the use of outside consulting services, also due to the completion of certain regulatory directives.

Current wording

Excluding regulatory remediation, noninterest expense decreased $5.9 million and $12.7 million for the three and six months ended June 30, 2025, respectively, from the same periods of 2024. These declines relative to the prior periods were primarily due to lower expenses for salaries and employee benefits, other contractual services, and other noninterest expense. The decline in salaries and employee benefits in the three and six months ended June 30, 2025 reflected a reduction in headcount as the Company continues to right-size its workforce, with the completion of certain regulatory directives and the transitioning to a more traditional community banking model. As of June 30, 2025 and 2024, the Company had 333 and 503 employees, respectively. Included in salaries and employee benefits expense were severance costs of $0.3 million and $1.0 million for the three and six months ended June 30, 2025, compared to $0 for the same respective periods in 2024. Also included in salaries and employee benefits expense for the three and six months ended June 30, 2025 was $2.0 million of expense for performance-based restricted stock awards relating to 3,400,000 shares of the Company's common stock granted to certain executive officers, which vest contingent upon the Company achieving specified profitability thresholds over three one-year performance measurement periods.

Previous wording

Income Tax Expense. Income tax benefit for the three months ended March 31, 2025 was $0.5 million compared to an income tax benefit of $0.4 million for the same period of 2024, resulting in effective income tax rates of 51.2% and 12.3%, respectively. The higher effective income tax rate in the 2025 period was primarily driven by a $0.3 million favorable adjustment related to a change in the state tax rate applied to the accumulated unrealized loss on the available for sale securities portfolio. Excluding this adjustment, the effective income tax rate for the quarter was 22.7%. The lower effective income tax rate in the 2024 period was primarily attributable to tax-exempt income, primarily from bank owned life insurance and tax-exempt securities and loans, relative to income subject to statutory tax rates.

Current wording

Income Tax Expense. For the three and six months ended June 30, 2025, effective tax rates were 27.0% and 2.8%, respectively, compared to 5.1% and 6.7% for the three and six months ended June 30, 2024. The higher effective income tax rate for the three months ended June 30, 2025 was primarily driven by the potential elimination of deductibility of compensation costs in future taxable periods, while the lower effective rate for the six months ended June 30, 2025 was primarily driven by the effects of a $0.3 million favorable adjustment related to a change in the state tax rate applied to the accumulated unrealized loss on the available for sale securities portfolio. The effective income tax rates for both 2024 periods were primarily attributable to $2.0 million of provision expense recognized in the second quarter of 2024 upon surrendering bank owned life insurance policies, representing the tax effect of the life-to-date income earned on the policies. Taxes on such earnings were previously permanently deferred but became subject to tax upon the surrender of the policies.

Previous wording

The current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment. Potential negative impacts include higher debt service burdens for floating rate loans and fixed rate loans that mature and require renewal or refinancing. As these loans mature, they may be repriced at significantly higher interest rates, leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased proportionally.

Current wording

The current lending environment for commercial real estate (“CRE”) loans has heightened risk due to a higher interest rate environment. Potential negative impacts include higher debt service burdens for floating rate loans and fixed rate loans originated in a lower rate environment that mature and require renewal or refinancing. As these loans mature, they may be repriced at significantly higher interest rates, leading to increased debt service costs that can strain borrowers' ability to meet payment obligations. In some cases, the higher cost of refinancing may lead to loan defaults, particularly if property cash flows have not increased relatively.

Previous wording

In response to the heightened risk, in 2024, the Bank’s credit policy and risk committee conducted a targeted review of certain of the Bank’s loan types, including office loans, to confirm its internal risk ratings. In addition, the Bank’s credit administration department led by its Chief Credit Officer performs a periodic analysis of emerging trends by geography where the Bank has the largest concentrations by CRE property type. The analysis includes all real estate property types and geographic markets represented in the loan portfolio. This analysis is provided to the Bank's board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the board of directors. As of March 31, 2025, all limits are in compliance.

Current wording

The Bank’s credit administration department led by its Chief Credit Officer performs periodic analyses of emerging trends by geography where the Bank has the largest concentrations by CRE property type. These analyses include all real estate property types and geographic markets represented in the loan portfolio and are provided to the Bank's board of directors to assess whether the CRE lending strategy and risk appetite continue to be appropriate, considering changes in local market conditions and the Bank’s exposure to collateral type concentrations. Also, concentration limits by real estate collateral type are approved and monitored by the board of directors. As of June 30, 2025, the Bank is in compliance with all limits.

Previous wording

The following table presents the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of March 31, 2025.

Current wording

The following tables present the remaining maturities, based on contractual maturity, by loan type and by rate type (variable or fixed), as of June 30, 2025.

Previous wording

Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities available for sale ("AFS") may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s AFS investment securities portfolio was $325.4 million as of March 31, 2025, an increase of $13.4 million from $312.0 million at December 31, 2024, of which $12.4 million was due to the purchase of securities in the first quarter of 2025. As a result of elevated market interest rates, the Company’s portfolio of AFS securities had an unrealized loss of approximately $50.3 million as of March 31, 2025, approximately 44.1% of which was related to securities backed by U.S. government agencies.

Current wording

Investment Securities. The investment portfolio is used as a source of interest income, credit risk diversification, and liquidity, as well as to manage interest rate sensitivity and provide collateral for short-term borrowings. Securities in the investment portfolio classified as securities available for sale ("AFS") may be sold in response to changes in market interest rates, securities’ prepayment risk, liquidity needs, and other similar factors, and are carried at estimated fair value. The fair value of the Company’s AFS investment securities portfolio was $328.0 million as of June 30, 2025, an increase of $15.9 million from $312.0 million at December 31, 2024, primarily due to the purchase of securities in the first half of 2025. As a result of elevated market interest rates, the Company’s portfolio of AFS securities had unrealized losses of approximately $50.1 million and $55.5 million as of June 30, 2025 and December 31, 2024, respectively, of which approximately 82% and 81%, respectively, were related to securities backed by U.S. government agencies as of the same dates.

Previous wording

As of March 31, 2025 and December 31, 2024, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading ratings agency. Investment grade securities are judged to have a low risk of default, to be of the best quality and carry the smallest degree of investment risk. At March 31, 2025 and December 31, 2024, securities with a fair value of $174.5 million and $268.9 million, respectively, were pledged to secure the Bank’s borrowing facility with the Federal Home Loan Bank of Atlanta ("FHLB"). As of March 31, 2025 and December 31, 2024, the Company had pledged securities with a fair value of $0 and $16.3 million, respectively, as collateral for the Federal Reserve Bank of Richmond ("FRB") Discount Window. The decline in pledged securities as of March 31, 2025 from December 31, 2024 at both FHLB and FRB reflects the release of securities held as collateral.

Current wording

As of June 30, 2025 and December 31, 2024, the majority of the investment securities portfolio consisted of securities rated investment grade by a leading rating agency. Investment grade securities are judged to have a low risk of default, to be of the best quality, and to carry the smallest degree of investment risk. At June 30, 2025 and December 31, 2024, securities with a fair value of $177.0 million and $268.9 million, respectively, were pledged to secure the Bank’s borrowing facility with the Federal Home Loan Bank of Atlanta ("FHLB"). As of June 30, 2025 and December 31, 2024, the Company had pledged securities with a fair value of $0 and $16.3 million, respectively, as collateral for the Federal Reserve Bank of Richmond ("FRB") Discount Window. The decline in pledged securities as of June 30, 2025 from December 31, 2024 at both FHLB and FRB reflects the release of securities held as collateral.

Previous wording

Restricted equity investments consisted of stock in the FHLB (carrying basis $9.1 million and $9.4 million at March 31, 2025 and December 31, 2024, respectively), FRB stock (carrying value of $9.2 million and $9.4 million at March 31, 2025 and December 31, 2024, respectively), and stock in the Company’s correspondent bank (carrying value of $468 thousand at both March 31, 2025 and December 31, 2024). Restricted equity investments are carried at cost.

Current wording

Restricted equity investments consisted of stock in the FHLB (carrying basis $9.1 million and $9.4 million at June 30, 2025 and December 31, 2024, respectively), FRB stock (carrying value of $9.3 million and $9.4 million at June 30, 2025 and December 31, 2024, respectively), and stock in the Company’s correspondent bank (carrying value of $0.5 million at both June 30, 2025 and December 31, 2024). Restricted equity investments are carried at cost.

Previous wording

The Company has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.7 million and $4.8 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

The Company has various other equity investments, including an investment in a fintech company and limited partnerships, totaling $4.6 million and $4.8 million as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

The Company also holds investments in early-stage focused investment funds and low-income housing partnerships, which totaled $20.4 million and $19.4 million as of March 31, 2025 and December 31, 2024, respectively, and are reported in other investments on the consolidated balance sheets.

Current wording

The Company also holds investments in early-stage focused investment funds and low-income housing partnerships, which totaled $20.9 million and $19.4 million as of June 30, 2025 and December 31, 2024, respectively, and are reported in other investments on the consolidated balance sheets.

Previous wording

In prior years, deposits sourced from fintech partnerships (“fintech-related deposits”), inclusive of fintech BaaS deposits, were a significant source of deposits for the Company. Prior to 2024, deposits sourced from fintech BaaS providers comprised a significant portion of the Company’s fintech-related deposits. In the fourth quarter of 2024, the Company completed the exit of its fintech BaaS deposit operations and substantially reduced its fintech-related deposit exposure to approximately 1.0% of deposits as of December 31, 2024, consisting of corporate accounts of a few companies in the fintech sector. As of March 31, 2025 and December 31, 2024, fintech-related deposits totaled $14.4 million and $21.3 million, respectively, of which fintech BaaS deposits were $0.2 million for both respective periods.

Current wording

In prior years, deposits sourced through fintech partnerships, inclusive of fintech BaaS deposits, were a significant source of deposits for the Company. In the fourth quarter of 2024, the Company completed the exit of its fintech BaaS deposit operations, thus substantially reducing its fintech-related deposit exposure to approximately 1.0% of deposits as of December 31, 2024, consisting of corporate accounts of a few companies in the fintech sector. As of June 30, 2025 and December 31, 2024, fintech-related deposits totaled $13.0 million and $21.3 million, respectively.

Previous wording

Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity in light of financial industry events that began in March 2023 and in anticipation of the exit of the Company's fintech BaaS deposit operations. Brokered deposits represented approximately 15.9% and 18.5% of total deposits as of March 31, 2025 and December 31, 2024, respectively, and were all time deposits at March 31, 2025. The Bank has a liquidity management program, with oversight of the Bank’s asset and liability committee (the “ALCO”), that sets forth guidelines for the desired maximum level of brokered deposits, which is 20.0% of total deposits. As noted, the Company issued brokered deposits as part of its liquidity management plan, and as a result, the Company's brokered deposit levels have approximated the high-end of the guideline. In recent quarters, the Company has reduced levels of brokered deposits and expects to continue to reduce levels in future periods to a level of 10.0% or less of total deposits. As certain brokered deposits have multiple-year terms, the Company expects brokered deposits to be a funding source for several years.

Current wording

Brokered deposit balances are sourced through intermediaries and are an unsecured source of funding for the Bank. Brokered deposits were added throughout 2023 and early 2024 to enhance liquidity in light of financial industry events that began in March 2023 and in anticipation of the exit of the Company's fintech BaaS deposit operations. Brokered deposits represented approximately 14.7% and 18.5% of total deposits as of June 30, 2025 and December 31, 2024, respectively, which consisted entirely of time deposits at June 30, 2025. The Bank has a liquidity management program, with oversight by the Bank’s asset and liability committee (the “ALCO”), that sets forth guidelines for the desired maximum level of brokered deposits, which is 20.0% of total deposits. In recent quarters, the Company has reduced levels of brokered deposits and expects to continue to reduce levels in future periods to a level of 10.0% or less of total deposits. As certain brokered deposits have multiple-year terms, the Company expects brokered deposits to be a funding source for several years.

Previous wording

Total deposits decreased $50.0 million from $2.18 billion as of December 31, 2024 to $2.13 billion as of March 31, 2025, as:

Current wording

Total deposits decreased $169.2 million from $2.18 billion as of December 31, 2024 to $2.01 billion as of June 30, 2025, as:

Previous wording

Deposits, excluding fintech-related and brokered deposits, increased $20.4 million from approximately $1.76 billion as of December 31, 2024 to approximately $1.78 billion as of March 31, 2025;

Current wording

Deposits, excluding fintech-related and brokered deposits, decreased $54.4 million from approximately $1.76 billion as of December 31, 2024 to approximately $1.70 billion as of June 30, 2025;

Previous wording

Brokered deposits decreased $63.4 million from approximately $402.5 million, or 18.5% of total deposits, as of December 31, 2024 to approximately $339.1 million, or 15.9% of total deposits, as of March 31, 2025; and

Current wording

Brokered deposits decreased $106.4 million from approximately $402.5 million, or 18.5% of total deposits, as of December 31, 2024 to approximately $296.1 million, or 14.7% of total deposits, as of June 30, 2025; and

Previous wording

Fintech-related deposits decreased $7.0 million from approximately $21.3 million as of December 31, 2024 to approximately $14.4 million as of March 31, 2025. Of the decline, fintech BaaS deposits decreased $35 thousand from December 31, 2024.

Current wording

Fintech-related deposits decreased $8.3 million from approximately $21.3 million as of December 31, 2024 to approximately $13.0 million as of June 30, 2025. Of the decline, fintech BaaS deposits decreased $0.2 million from December 31, 2024.

Previous wording

Estimated uninsured deposits totaled approximately $431.2 million as of March 31, 2025, or 19.8% of total deposits, compared to $399.3 million, or 18.0% of total deposits, as of December 31, 2024.

Current wording

Estimated uninsured deposits totaled approximately $409.2 million as of June 30, 2025, or 20.4% of total deposits, compared to $399.3 million, or 18.0% of total deposits, as of December 31, 2024.

Previous wording

FHLB advances are secured by collateral consisting of a blanket lien on qualifying pledged loans in the Company’s residential, multi-family, and commercial real estate mortgage loan portfolios, as well as selected investment portfolio securities. FRB advances through the FRB Discount Window are secured by qualifying pledged construction and commercial and industrial loans, as well as selected investment portfolio securities. Total borrowings were $150.0 million as of both March 31, 2025 and December 31, 2024.

Current wording

FHLB advances are secured by collateral consisting of a blanket lien on qualifying pledged loans in the Company’s residential, multi-family, and commercial real estate mortgage loan portfolios, as well as select investment securities. FRB advances through the FRB Discount Window are secured by qualifying pledged construction and commercial and industrial loans.

Previous wording

Subordinated notes, net, totaled $39.8 million as of both March 31, 2025 and December 31, 2024. The Company's subordinated notes are comprised of a $25 million issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”) and a $15 million issuance in May 2020 maturing June 1, 2030 (the “2030 Note”). The fixed rates on the 2029 Notes transitioned and the 2030 note will transition to variable rates based on the Secured Overnight Funding Rate ("SOFR") roughly five years from issue date. The 2029 Notes can be paid off in whole or in part without penalty at any time and the 2030 Note can be paid off in whole or in part, without penalty, at any time after its initial reset date. Due to the Consent Order, the Company must obtain approval to redeem its subordinated notes. Subsequent to March 31, 2025, the Company received regulatory non-objection to redeem a significant portion of its subordinated debt, which the Company expects will save more than $2 million in interest expense annually.

Current wording

The Company had $24.9 million and $39.8 million of subordinated notes, net, outstanding as of June 30, 2025 and December 31, 2024, respectively. Prior to June 1, 2025, the Company's subordinated notes had been comprised of a $15 million issuance in May 2020 maturing June 1, 2030 (the “2030 Note”) and a $25 million issuance in October 2019 maturing October 15, 2029 (the “2029 Notes”).

Previous wording

The 2029 Notes bore interest at 5.625% per annum, through October 14, 2024, payable semi-annually in arrears. On October 15, 2024, the rate on the 2029 Notes began to reset quarterly to the current three-month CME Term SOFR interest rate, which was 4.65%, plus 433.5 basis points at initial reset. As of March 31, 2025, the 2029 Notes bore an annual interest rate of 8.64%. For the three months ended March 31, 2025 and 2024, the effective interest rate on the 2029 Notes was 8.05% and 5.22%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium).

Current wording

The 2029 Notes bore interest at 5.625% per annum, through October 14, 2024, payable semi-annually in arrears. From October 15, 2024 through October 15, 2029, or up to an early redemption date, the interest rate resets quarterly to an interest rate per annum equal to the then current three-month Secured Overnight Funding Rate ("SOFR") plus 433.5 basis points, payable quarterly in arrears. As of June 30, 2025, the 2029 Notes bore an annual interest rate of 8.59%. As of June 30, 2025, the net carrying amount of the 2029 Notes was $24.9 million, inclusive of a $0.4 million purchase accounting adjustment (premium). For the three months ended June 30, 2025 and 2024, the effective interest rate on the 2029 Notes was 7.86% and 5.08%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium). For the six months ended June 30, 2025 and 2024, the effective interest rate on the 2029 Notes was 7.96% and 5.15%, respectively, inclusive of the amortization of the purchase accounting adjustment (premium).

Previous wording

While subject to the Consent Order, the Bank may not be deemed to be “well capitalized,” which restricts it from accepting, renewing, or rolling over brokered deposits except in compliance with certain applicable restrictions under federal law. During the third quarter of 2024, the Bank received approval from the FDIC allowing it to accept, renew, and rollover brokered deposits. In the fourth quarter of 2024, the Bank received an extension of this approval. Each approval was for a six-month period and in the amount of maturities during this period. The Company expects to continue to seek waivers of this prohibition in the future; however, there is no assurance that such waivers will be approved or that the Company will be able to rely on brokered deposits as a source of funding in the future.

Current wording

While subject to the Consent Order, the Bank may not be deemed to be “well capitalized,” which restricts it from accepting, renewing, or rolling over brokered deposits except in compliance with certain applicable restrictions under federal law. The Bank received approvals from the FDIC allowing the Bank to accept, renew, or rollover brokered deposits for consecutive six-month periods through December 2025 and limited to the amount of maturities during these periods. The Company expects to continue to seek waivers of this prohibition in the future; however, there is no assurance that such waivers will be approved or that the Company will be able to rely on brokered deposits as a source of funding in the future.

Previous wording

Uninsured deposits at March 31, 2025 were $431.2 million or 19.8% of total deposits. In the unlikely event that uninsured deposit balances leave the Bank over a short period of time, management could more than satisfy the demand with cash on-hand and FHLB borrowing capacity.

Current wording

Uninsured deposits at June 30, 2025 were $409.2 million. In the unlikely event that uninsured deposit balances leave the Bank over a short period of time, management could more than satisfy the demand with cash on-hand and FHLB borrowing capacity.

Previous wording

Banks must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios except the Tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Additionally, regulators may place certain restrictions on dividends paid by banks. The total amount of dividends which may be paid at any date is generally limited to retained earnings of banks.

Current wording

Banks must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios for all ratios except the Tier 1 leverage ratio. If a banking organization dips into its capital conservation buffer, it is subject to limitations on certain activities, including payment of dividends, share repurchases, and discretionary compensation to certain officers. Additionally, regulators may place certain restrictions on dividends paid by banks.

Previous wording

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract and involve the same credit risk and evaluation as making a loan to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis, in a manner similar to that if underwriting a loan. As of March 31, 2025 and December 31, 2024, the Company had outstanding loan commitments of $274.3 million and $283.2 million, respectively. Of these amounts, $110.6 million and $108.4 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.

Current wording

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract and involve the same credit risk and evaluation as making a loan to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis, in a manner similar to that if underwriting a loan. As of June 30, 2025 and December 31, 2024, the Company had outstanding loan commitments of $273.8 million and $283.2 million, respectively. Of these amounts, $111.4 million and $108.4 million were unconditionally cancelable at the sole discretion of the Company as of the same respective dates.

Previous wording

Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of March 31, 2025 and December 31, 2024, commitments under outstanding financial stand-by letters of credit totaled $11.3 million and $12.5 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.

Current wording

Conditional commitments are issued by the Company in the form of financial stand-by letters of credit, which guarantee payment to the underlying beneficiary (i.e., third party) if the customer fails to meet its designated financial obligation. As of June 30, 2025 and December 31, 2024, commitments under outstanding financial stand-by letters of credit totaled $13.5 million and $12.5 million, respectively. The credit risk of issuing stand-by letters of credit can be greater than the risk involved in extending loans to customers.