MVB FINANCIAL CORP [MVBF] Filings

10-Q 1 mvbf-20230930.htm 10-Q mvbf-20230930


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
☐ TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.

Commission File Number: 001-38314

MVB Financial Corp.
(Exact name of registrant as specified in its charter)

West Virginia						20-0034461
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

301 Virginia Avenue, Fairmont, WV						26554
(Address of principal executive offices)						(Zip Code)

(304) 363-4800
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $1.00 par value

MVBF

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:

As of November 6, 2023, there were 12,736,623 shares of our common stock outstanding with a par value of $1.00 per share.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION	5

Item 1	Financial Statements	5

	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	8
	Consolidated Statements of Changes in Stockholders’ Equity	9
	Consolidated Statements of Cash Flows	11
	Notes to the Consolidated Financial Statements	13

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52

Item 3	Quantitative and Qualitative Disclosures About Market Risk	66

Item 4	Controls and Procedures	66

PART II	OTHER INFORMATION	67

Item 1	Legal Proceedings	67

Item 1A	Risk Factors	67

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	67

Item 3	Defaults Upon Senior Securities	67

Item 4	Mine Safety Disclosures	67

Item 5	Other Information	67

Item 6	Exhibits	67

	SIGNATURES	68

Forward-Looking Statements:

Statements in this Quarterly Report on Form 10-Q, other than statements that are based on historical data, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others, statements with respect to the beliefs, plans, objectives, goals, guidelines, expectations, anticipations and future financial condition, results of operations and performance of the Company and its subsidiaries (collectively, “we,” “our,” or “us”), including the MVB Bank, Inc. (the “Bank”), and statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “target,” “expect,” “intend,” “plan,” “projects,” “outlook” or the negative of those terms or similar expressions.

These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing our view as of any subsequent date. Forward-looking statements involve significant risks and uncertainties (both known and unknown) and actual results may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Factors that might cause such differences include, but are not limited to:


l			industry factors and general economic and political conditions and events (such as economic slowdowns or recessions, volatility of market interest rates and inflation) nationally and in the markets in which we operate;
l			changes in financial market conditions in areas in which we conduct operations, including, without limitation, changes in deposit flows, the cost of funds, reduced rates of business formation and growth, commercial and residential real estate development and real estate prices;
l			interest rate fluctuations in response to economic conditions and the policies of various governmental and regulatory agencies;
l			legislative or regulatory changes, including the possibility of increased oversight due to the evolving nature and complexity of our business model and heightened regulatory scrutiny in financial technology (“Fintech”) and banking-as-a-service sectors, and our ability to recruit and retain employees with industry expertise to comply with such legislation and regulatory scrutiny;
l			the impacts related to or resulting from recent turmoil in the banking industry, which could affect the ability of depository institutions, including us, to attract and retain depositors, which could adversely affect our liquidity, business, financial condition and results of operations.
l			our ability to adapt to technological change and to successfully execute business plans, manage risks and achieve objectives, including strategies related to investments in Fintech;
l			market, economic, operational, liquidity, credit and interest rate risks associated with our business;
l			changes, volatility and disruption in local, national and international political and economic conditions, including, without limitation, wars, climate change and natural disasters, epidemics and pandemics and any governmental or societal responses thereto, military actions, terrorist attacks and geopolitical conflict, including the ongoing Ukraine and Israel wars;
l			unanticipated changes in our liquidity position, including, but not limited to, changes in access to sources of liquidity and capital to address our liquidity needs;
l			concentration risk in our deposit base, including risk of losing large clients and concentration in certain industries, such as gaming deposits;
l			the quality and composition of our loan and securities portfolios;
l			our ability to successfully conduct acquisitions and integrate acquired businesses and potential difficulties in expanding businesses in existing and new markets;
l			our ability to successfully manage credit risk and the sufficiency of allowance for credit losses;
l			increases in the levels of losses, customer bankruptcies, bank failures, claims and assessments;
l			changes in government legislation and accounting policies, including the Dodd-Frank Act and Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”);
l			uncertainty about the transition away from the London Inter-bank Offered Rate (“LIBOR”) and to the Secured Overnight Financing Rate (“SOFR”) as the primary interest rate benchmark;
l			competition and consolidation in the financial services industry;
l			new legal claims against us, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies or changes in existing legal matters;
l			risks associated with the termination of the merger agreement with Integrated Financial Holdings, Inc., including impact on the market price of our common stock, ability to retain customers, litigation, reputational and regulatory risks, as well as potential adverse reactions from customers, business partners and others resulting from the termination;
l			changes in consumer spending and savings habits, including demand for loan products and deposit flow;
l			increased competitive challenges and expanding product and pricing pressures among financial institutions and non-bank financial companies;


l			risks related to our dependence on our information technology and telecommunications systems and the potential for any system failures or interruptions, as well as operational risks or risk management failures by us or critical third parties, including without limitation, with respect to data processing, information systems, technological changes, vendor problems, business interruptions and fraud risk;
l			increasing risk of continually evolving, sophisticated cybersecurity activities faced by financial institutions and others, including third-party vendors and other entities that we rely on, that could result in, among other things, theft, loss, misuse or disclosure of confidential client, customer or corporate information or assets and a disruption of computer, software or network systems and the potential impact from such risks, including reputational damage, regulatory penalties, loss of revenues, additional costs (including repair, remediation and other costs), exposure to litigation and other financial losses;
l			risks, uncertainties and losses involved with the developing digital assets industry, including the evolving regulatory framework and the potential impact of geopolitical events;
l			failure or circumvention of internal controls;
l			increased emphasis by regulators on federal and state consumer protection laws that extensively govern customer relationships;
l			changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (“FASB”) or regulatory agencies, including the impact of adopting the current expected credit losses standard; and
l			costs of deposit insurance and changes with respect to Federal Deposit Insurance Corporation (“FDIC”) insurance coverage levels.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those made in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023, and from time to time, in our other filings with the SEC. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except to the extent required by law, we undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this report or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

REFERENCES

Unless the context otherwise requires, references in this report to “MVB Financial,” “MVB,” the “Company,” “we,” “us,” “our,” and “ours” refer to the registrant, MVB Financial Corp., and its subsidiaries consolidated for the purposes of its financial statements.

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

MVB Financial Corp. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except per share data)


	September 30, 2023		December 31, 2022
	(Unaudited)		(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	8,108	$	5,290
Interest-bearing balances with banks	578,992		34,990
Total cash and cash equivalents	587,100		40,280

Investment securities available-for-sale	311,537		379,814
Equity securities	40,835		38,744
Loans held-for-sale	7,603		23,126
Loans receivable	2,270,433		2,372,645
Allowance for credit losses	(24,276)		(23,837)
Loans receivable, net	2,246,157		2,348,808
Premises and equipment, net	21,468		23,630
Bank-owned life insurance	44,109		43,239
Equity method investments	76,967		76,223
Accrued interest receivable and other assets	98,969		87,833
Assets from discontinued operations	—		4,315
Goodwill	2,838		2,838
TOTAL ASSETS	$	3,437,583	$	3,068,850

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	1,093,903	$	1,231,544
Interest-bearing	1,944,986		1,338,938
Total deposits	3,038,889		2,570,482

Accrued interest payable and other liabilities	40,872		36,112
Repurchase agreements	4,502		10,037
FHLB and other borrowings	—		102,333
Subordinated debt	73,478		73,286
Senior term loan	8,473		9,765
Liabilities from discontinued operations	—		5,444
Total liabilities	3,166,214		2,807,459

STOCKHOLDERS’ EQUITY

Common stock - par value $1; 40,000,000 and 20,000,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively; 13,574,239 and 12,726,223 shares issued and outstanding, respectively, as of September 30, 2023 and 13,466,281 and 12,618,265 shares issued and outstanding, respectively, as of December 31, 2022	13,574		13,466
Additional paid-in capital	159,717		157,152
Retained earnings	155,117		144,911
Accumulated other comprehensive loss	(40,251)		(37,704)
Treasury stock - 848,016 shares as of September 30, 2023 and December 31, 2022, at cost	(16,741)		(16,741)
Total equity attributable to parent	271,416		261,084
Noncontrolling interest	(47)		307
Total stockholders' equity	271,369		261,391
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,437,583	$	3,068,850

See accompanying notes to unaudited consolidated financial statements.

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited) (Dollars in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
INTEREST INCOME
Interest and fees on loans	$	40,030	$	31,789	$	118,046	$	79,074
Interest on deposits with banks	6,404		114		15,099		654
Interest on investment securities	1,056		897		4,133		2,383
Interest on tax-exempt loans and securities	835		1,103		2,841		3,144
Total interest income	48,325		33,903		140,119		85,255

INTEREST EXPENSE
Interest on deposits	17,460		2,974		44,063		4,291
Interest on short-term borrowings	—		312		888		326
Interest on subordinated debt	809		771		2,409		2,284
Interest on senior term loan	191		—		583		—
Total interest expense	18,460		4,057		47,943		6,901

NET INTEREST INCOME	29,865		29,846		92,176		78,354
Provision (release of allowance) for credit losses	(159)		5,120		182		11,500
Net interest income after provision (release of allowance) for credit losses	30,024		24,726		91,994		66,854

NONINTEREST INCOME
Payment card and service charge income	2,852		3,313		9,965		9,970

Insurance and investment services income	81		195		251		667
Gain (loss) on sale of available-for-sale securities, net	—		—		(1,536)		650
Gain (loss) on sale of equity securities, net	25		(156)		(269)		(56)

Gain (loss) on sale of loans, net	330		1,298		(1,015)		3,786
Holding gain (loss) on equity securities	219		(61)		71		(146)
Compliance and consulting income	1,314		966		3,326		3,380
Equity method investments income (loss)	(750)		(1,021)		(70)		666
Loss on divestiture activity	—		—		(986)		—
Equity method investments gain	—		—		—		1,874
Other operating income	1,720		933		5,540		3,339
Total noninterest income	5,791		5,467		15,277		24,130

NONINTEREST EXPENSES
Salaries and employee benefits	16,016		15,905		48,508		48,217
Occupancy expense	921		1,130		2,803		3,009
Equipment depreciation and maintenance	1,439		1,502		4,347		3,966
Data processing and communications	1,257		1,039		3,523		3,110


Professional fees	5,682		3,911		12,581		11,654
Insurance, tax and assessment expense	1,397		622		3,432		1,772
Travel, entertainment, dues and subscriptions	1,362		1,708		5,421		5,421
Other operating expenses	2,651		2,359		8,709		6,256
Total noninterest expense	30,725		28,176		89,324		83,405
Income from continuing operations before income taxes	5,090		2,017		17,947		7,579
Income taxes	1,218		184		3,639		1,563


Net income from continuing operations	3,872		1,833		14,308		6,016
Income from discontinued operations before income taxes	—		935		11,831		2,599
Income taxes from discontinued operations	—		213		3,049		598
Net income from discontinued operations	—		722		8,782		2,001
Net income	3,872		2,555		23,090		8,017
Net (income) loss attributable to noncontrolling interest	(5)		163		231		521


Net income attributable to parent	$	3,867	$	2,718	$	23,321	$	8,538

Earnings per share from continuing operations - basic	$	0.30	$	0.16	$	1.15	$	0.54
Earnings per share from discontinued operations - basic	$	—	$	0.06	$	0.69	$	0.16
Earnings per common shareholder - basic	$	0.30	$	0.22	$	1.84	$	0.70
Earnings per share from continuing operations - diluted	$	0.29	$	0.16	$	1.12	$	0.51
Earnings per share from discontinued operations - diluted	$	—	$	0.05	$	0.67	$	0.15
Earnings per common shareholder - diluted	$	0.29	$	0.21	$	1.79	$	0.66
Weighted-average shares outstanding - basic	12,722,010		12,238,505		12,678,708		12,170,028
Weighted-average shares outstanding - diluted	13,116,629		12,854,951		13,012,834		12,852,574

See accompanying notes to unaudited consolidated financial statements.

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited) (Dollars in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income before noncontrolling interest	$	3,872	$	2,555	$	23,090	$	8,017

Other comprehensive loss:
Unrealized holding losses on securities available-for-sale	(7,748)		(14,437)		(5,131)		(48,587)
Reclassification adjustment for gain (loss) recognized in income	—		—		1,536		(650)
Change in defined benefit pension plan	100		156		443		845
Reclassification adjustment for amortization of net actuarial loss recognized in income	29		107		87		321
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income	—		56		(289)		(141)
Other comprehensive loss, before tax	(7,619)		(14,118)		(3,354)		(48,212)

Income taxes related to items of other comprehensive loss:
Unrealized holding losses on securities available-for-sale	1,863		3,641		1,234		11,939
Reclassification adjustment for gain (loss) recognized in income	—		—		(369)		152
Change in defined benefit pension plan	(24)		(39)		(106)		(206)
Reclassification adjustment for amortization of net actuarial loss recognized in income	(7)		(27)		(21)		(79)
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income	—		(14)		69		35
Income taxes related to items of other comprehensive loss:	1,832		3,561		807		11,841

Total other comprehensive loss, net of tax	(5,787)		(10,557)		(2,547)		(36,371)

Comprehensive (income) loss attributable to noncontrolling interest	(5)		163		231		521

Comprehensive income (loss)	$	(1,920)	$	(7,839)	$	20,774	$	(27,833)

See accompanying notes to unaudited consolidated financial statements.

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited) (Dollars in thousands except per share data)


	Common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock				Total stockholders' equity attributable to parent		Noncontrolling interest		Total stockholders' equity
		Shares								Amount		Shares								Amount
Balance at December 31, 2022			13,466,281	$	13,466	$	157,152	$	144,911	$	(37,704)		848,016	$	(16,741)	$	261,084	$	307		$	261,391

Net income (loss)			—	—		—		11,342		—			—	—		11,342		(122)			11,220
Other comprehensive income			—	—		—		—		6,766			—	—		6,766		—			6,766
Dividends on common stock ($0.17 per share)			—	—		—		(2,146)		—			—	—		(2,146)		—			(2,146)
Impact of adopting ASC 326, net of tax			—	—		—		(6,642)		—			—	—		(6,642)		—			(6,642)
Stock-based compensation			—	—		831		—		—			—	—		831		—			831

Stock-based compensation related to equity method investments			—	—		69		—		—			—	—		69		—			69
Common stock options exercised			4,450	4		66		—		—			—	—		70		—			70
Restricted stock units vested			43,882	44		(44)		—		—			—	—		—		—			—
Minimum tax withholding on restricted stock units issued			(13,416)	(13)		(230)		—		—			—	—		(243)		—			(243)

Balance at March 31, 2023			13,501,197	$	13,501	$	157,844	$	147,465	$	(30,938)		848,016	$	(16,741)	$	271,131	$	185		$	271,316

Net income (loss)			—	—		—		8,112		—			—	—		8,112		(114)			7,998
Other comprehensive loss			—	—		—		—		(3,526)			—	—		(3,526)		—			(3,526)
Dividends on common stock ($0.17 per share)			—	—		—		(2,163)		—			—	—		(2,163)		—			(2,163)
Stock-based compensation			—	—		792		—		—			—	—		792		—			792
Stock-based compensation related to equity method investments			—	—		104		—		—			—	—		104		—			104
Common stock options exercised			3,000	3		40		—		—			—	—		43		—			43
Restricted stock units vested			86,520	87		(87)		—		—			—	—		—		—			—
Minimum tax withholding on restricted stock units issued			(22,878)	(23)		(415)		—		—			—	—		(438)		—			(438)
Redemption of noncontrolling interest			—	—		294		—		—			—	—		294		(123)			171

Balance at June 30, 2023			13,567,839	$	13,568	$	158,572	$	153,414	$	(34,464)		848,016	$	(16,741)	$	274,349	$	(52)		$	274,297

Net income			—	—		—		3,867		—			—	—		3,867		5			3,872
Other comprehensive loss			—	—		—		—		(5,787)			—	—		(5,787)		—			(5,787)
Dividends on common stock ($0.17 per share)			—	—		—		(2,164)		—			—	—		(2,164)		—			(2,164)
Stock-based compensation			—	—		949		—		—			—	—		949		—			949
Stock-based compensation related to equity method investment			—	—		104		—		—			—	—		104		—			104
Common stock options exercised			6,400	6		92		—		—			—	—		98		—			98
Balance at September 31, 2023			13,574,239	$	13,574	$	159,717	$	155,117	$	(40,251)		848,016	$	(16,741)	$	271,416	$	(47)		$	271,369


	Common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock				Total stockholders' equity attributable to parent		Noncontrolling interest		Total stockholders' equity
		Shares								Amount		Shares								Amount
Balance at December 31, 2021			12,934,966	$	12,935	$	143,521	$	138,219	$	(3,606)		848,016	$	(16,741)	$	274,328	$	975		$	275,303

Net income (loss)			—	—		—		2,864		—			—	—		2,864		(193)			2,671
Other comprehensive loss			—	—		—		—		(13,556)			—	—		(13,556)		—			(13,556)
Dividends on common stock ($0.17 per share)			—