Blue Ridge, which erred with fintechs, exits consent order

• Key insight: A community bank in Virginia has been freed from a consent order related to its previous fintech partnerships.
  
• Expert quote: "We just threw BaaS out the door," said CEO Billy Beale.
  
• Forward look: The bank is now focused on a traditional community bank strategy, Beale said.

Blue Ridge Bankshares in Richmond, Virginia, which became a poster child for what can go wrong when banks partner with fintechs, has been released from a 2024 consent order related to its failed foray into banking as a service.

The termination comes just shy of 23 months after the Office of the Comptroller of the Currency issued the enforcement action against the $2.5 billion-asset community bank. 

The January 2024 consent order said Blue Ridge was in "troubled condition" following its venture into BaaS. It  identified certain "deficiencies" in Blue Ridge's anti-money-laundering compliance program. And it ordered the bank to ramp up its risk-management controls, improve its capital ratios and provide better oversight of its relationships with fintechs.

In the months since then, Blue Ridge has taken swift action to rid itself of fintech partnerships and move back into traditional community banking, President and CEO Billy Beale said Friday. 

The bank exited its BaaS program in full at the end of 2024. At its high point, the program had about 70 fintech partnerships. Blue Ridge launched its BaaS strategy in 2020 under then-CEO Brian Plum.

"We just threw BaaS out the door," Beale told American Banker. "If three or four [partnerships] had been all that the bank had, and we'd managed it right, none of this would have ever occurred. It was just that the volume outran the capacity of the bank to run it the right way."

Being freed from the consent order "is clearly a positive development," Christopher Marinac, an analyst at Janney Montgomery Scott, said Friday in an email. "The company can get back to originating new deposits and loans from both existing and new business customers," he said.

The OCC did not provide comment before this article's deadline.

For years, Blue Ridge Bankshares and its banking subsidiary, Blue Ridge Bank, have been an example of how the BaaS business can go wrong. Regulatory scrutiny came to light in 2022 as it was trying to win approval for its proposed merger with FVCBankcorp in Fairfax, Virginia.

The deal was ultimately called off following "certain regulatory concerns" raised by the OCC. 

Later that same year, Blue Ridge agreed to bolster its anti-money-laundering program and improve its oversight of fintech partners as part of a written agreement with the OCC.

In May 2023, Beale, a veteran community banker, was hired as CEO of the bank and instructed to "clean the thing up," he said. Two months later, as the bank continued to face pressure, Plum resigned as president and CEO of the holding company, and Beale was appointed to the role.

When Blue Ridge failed to meet the OCC's initial requirements, the written agreement was converted into the January 2024 consent order. The bank hired certain executives from larger banks, including its current chief risk officer, who had worked at OceanFirst Financial in New Jersey.

On Friday, Beale attributed the bank's successful exit from the consent order to good hiring.

"We were able to attract in the risk-management group some very talented people from much larger banks that had skill sets that just made all the difference in the world," he said.

The bank now is focused on local banking. That includes making more commercial-and-industrial loans and more commercial real estate loans, Beale said. Blue Ridge no longer has loans outside of its home state, and it has hired relationship managers who live in the markets where they work.

"We're just trying to grow and trying to hire the right people to do that," Beale said.