MVB Financial Corp. (NASDAQ: MVBF) (“MVB Financial,” “MVB” or the “Company”), the holding company for MVB Bank, Inc. ("MVB Bank"), today announced financial results for the third quarter of 2022, with reported net income of $2.7 million, or $0.22 basic and $0.21 diluted earnings per share.

“During the third quarter, we continued to drive strong loan production, counter-cyclical growth in low-cost deposits and net interest margin expansion, resulting in robust growth in net interest income, while maintaining strong asset quality,” said Larry F. Mazza, Chief Executive Officer, MVB Financial. “In addition, MVB’s year-to-date results evidenced significant progress in our efforts to drive growth in Fintech fee income, further diversifying our revenue base.”

Mazza added, “Amidst these favorable underlying trends, challenges also emerged. Higher interest rates and a slowing economy impacted our mortgage business and fee income and, coupled with elevated provisioning for loan losses related to our strong loan growth, impacted our earnings for the quarter.”

“As demonstrated throughout MVB’s history, and through our corporate values, we are ‘Adaptive’ as market conditions change. While we continue to successfully execute on our MVB-F1: Success Loves Speed Strategy, we are adjusting to wet track conditions by sharpening our focus. Specifically, we are implementing initiatives that are expected to drive a 12% reduction from MVB’s annualized third quarter 2022 noninterest expense base, with 75% of the projected cost savings to be achieved by the end of the first quarter 2023, and the remainder expected to be fully captured by the end of the third quarter of 2023.”

THIRD QUARTER 2022 HIGHLIGHTS

• Strong growth in low-cost deposits amidst cyclical industry headwinds
  • Total deposits were $2.70 billion as of September 30, 2022, an increase of $82.0 million, or 3.1%, from June 30, 2022 and $298.0 million, or 12.4%, from September 30, 2021.
  • Noninterest-bearing (“NIB”) deposits were $1.41 billion as of September 30, 2022, an increase of $68.9 million, or 5.1%, from June 30, 2022 and $412.4 million, or 41.3%, from September 30, 2021. NIB deposits represented 52% of total deposits as of September 30, 2022, as compared to 51% and 42% as of June 30, 2022 and September 30, 2021, respectively.
  • The cost of funds was 59 basis points for the quarter ended September 30, 2022 up 37 basis points compared to the quarter ended June 30, 2022 and 35 basis points compared to the quarter ended September 30, 2021. The increase from the prior quarter primarily reflected a change in deposit mix based on average balances, led by growth in average interest-bearing deposits as compared to relatively consistent average NIB deposits, as well as higher interest rates and increased Federal Home Loan Banks borrowings during the quarter. The increase in cost of funds compared to the prior year period mostly reflected higher interest rates, partially offset by the relatively higher contribution of NIB deposits relative to the prior year.
• Loan growth and margin expansion drive our strong growth in net interest income
  • Net interest income on a tax-equivalent basis totaled $30.1 million for the quarter ended September 30, 2022, up $3.2 million, or 11.8%, and $10.7 million, or 55.1%, from the quarters ended June 30, 2022 and September 30, 2021, respectively.
  • Total loan balances of $2.47 billion as of September 30, 2022 increased by $256.3 million, or 11.6%, compared to June 30, 2022 and $707.2 million, or 40.1%, compared to September 30, 2021.
  • Loans held-for-sale were $20.0 million as of September 30, 2022, compared to $11.9 million as of June 30, 2022 and none as of September 30, 2021, led by MVB Bank’s Small Business Administration (“SBA”) lending growth vehicle.
  • On a tax-equivalent basis, net interest margin for the quarter ended September 30, 2022 was 4.25%, an increase of 15 basis points versus the quarter ended June 30, 2022 and an increase of 100 basis points versus the quarter ended September 30, 2021. The quarter over quarter increase in net interest margin was due primarily to strong loan growth, higher loan yields, and significantly lower cash balances, partially offset by an increase in funding costs.
• Asset quality indicators remained stable
  • Nonperforming loans totaled $22.4 million, or 0.9% of total loans, as of September 30, 2022, as compared to $19.3 million, or 0.9% of total loans, as of June 30, 2022, and $17.5 million, or 1.0% of total loans, as of September 30, 2021. Criticized loans as a percentage of total loans were 3.4%, as compared to 4.0% as of June 30, 2022, and 6.5% as of September 30, 2021.
  • Net charge-offs were $1.3 million, or 0.22% of total loans on an annualized basis, for the quarter ended September 30, 2022, compared to $1.2 million, or 0.21% of total loans on an annualized basis, for the quarter ended June 30, 2022. Net charge-offs on an annualized basis, for the quarter ended September 30, 2021, were not significant.
  • The provision for loan losses totaled $5.1 million for the quarter ended September 30, 2022, compared to $5.1 million for the quarter ended June 30, 2022, and $0.4 million for the quarter ended September 30, 2021. Allowance for loan losses was 1.07% of total loans as of September 30, 2022, an increase of four basis points from June 30, 2022 and a decline of 36 basis points from September 30, 2021. Approximately 84% of the increase in the allowance for loan losses for the quarter ended September 30, 2022 is attributable to strong growth in our loan balances during the quarter.
• Quarter over quarter expense growth largely held in check
  • Noninterest expense totaled $30.0 million for the quarter ended September 30, 2022, an increase of $0.1 million, or 0.5%, from the quarter ended June 30, 2022 and an increase of $4.1 million, or 16.0%, from the quarter ended September 30, 2021. The increase from the quarter ended June 30, 2022 primarily reflects an increase in other operating expenses of $0.5 million, or 24.1%, and an increase in equipment depreciation and maintenance of $0.3 million, or 19.9%, mostly offset by a decrease in salaries and employee benefits of $0.7 million, or 3.5%. The increase relative to the prior year period primarily reflects higher salaries and employee benefits costs of $1.8 million, or 10.8%, and higher other operating expenses of $1.3 million, or 116.1%.

INCOME STATEMENT

Net interest income on a tax-equivalent basis totaled $30.1 million for the quarter ended September 30, 2022, up $3.2 million, or 11.8%, from the quarter ended June 30, 2022 and $10.7 million, or 55.1%, from the quarter ended September 30, 2021. The increase in net interest income compared to both periods generally reflects strong loan growth, primarily driven by the Company’s strategic lending partnerships growth vehicle and broad-based growth throughout CoRe Banking business.

Interest income increased $5.8 million, or 20.7%, to $33.9 million from the quarter ended June 30, 2022 and $13.4 million, or 65.5%, from the quarter ended September 30, 2021. The tax-equivalent yield on loans was 5.26% for the quarter ended September 30, 2022, compared to 5.06% for the quarter ended June 30, 2022 and 4.25% for the quarter ended September 30, 2021. Higher loan yields generally reflect new loan production at favorable interest rates and the impact of the Fed rate increases on our commercial loan portfolio.

Interest expense increased $2.6 million, or 183.7%, from the quarter ended June 30, 2022 and increased $2.7 million, or 192.3%, from the quarter ended September 30, 2021. The cost of funds was 59 basis points for the quarter ended September 30, 2022, up 37 basis point compared to the quarter ended June 30, 2022 and 35 basis points compared to the quarter ended September 30, 2021. The increase from the prior quarter primarily reflected a change in deposit mix based on average balances, led by growth in average interest-bearing deposits as compared to relatively consistent average NIB deposits, as well as higher interest rates and increased FHLB borrowings during the quarter. The increase in cost of funds compared to the prior year period mostly reflected higher interest rates, partially offset by the relatively higher contribution of NIB deposits relative to the prior year.

On a tax-equivalent basis, net interest margin for the quarter ended September 30, 2022 was 4.25%, an increase of 15 basis points versus the quarter ended June 30, 2022 and 100 basis points versus the quarter ended September 30, 2021. Please see the table below for a reconciliation between net interest margin and net interest margin on a fully tax-equivalent basis, a non-GAAP measure. The increase in net interest margin from the quarter ended June 30, 2022 reflected the impact of strong loan growth, partially offset by an increase in deposit costs. The increase in net interest margin from the quarter ended September 30, 2021 also reflected strong loan growth and an increase in deposit costs, to a greater extent. The average loan-to-deposit ratio during the quarter ended September 30, 2022 was 92.5%, compared to 82.9% for the quarter ended June 30, 2022, and 78.9% for the quarter ended September 30, 2021.

Noninterest income totaled $8.2 million for the quarter ended September 30, 2022, a decrease of $3.7 million, or 31.2% from the quarter ended June 30, 2022 and a decrease of $13.8 million, or 62.7%, from the quarter ended September 30, 2021.

The decrease in noninterest income compared to the prior quarter is driven by decreases in equity method investment income of $1.6 million, or 286.0%, in other operating income of $0.9 million, or 51.5%, and in payment card and service charge income of $0.7 million, or 17.5%. The sale of mortgaging servicing rights in June 2022 resulted in $1.2 million of the decrease in other operating income. The decrease in payment card and service charge income is driven by decreased interchange income. The decline in equity method investment income was primarily due to lower mortgage banking revenue reflecting the continued sharp increase in market interest rates during the third quarter of 2022. Further disaggregation of the Company’s noninterest income is available below.

The decrease in noninterest income compared to the comparable quarter in the prior year is driven by a one-time gain on acquisition and divestiture activity in the quarter ended September 30, 2021 totaling $10.8 million.

Noninterest expense totaled $30.0 million for the quarter ended September 30, 2022, an increase of $0.1 million, or 0.5%, from the quarter ended June 30, 2022 and an increase of $4.1 million, or 16.0%, from the quarter ended September 30, 2021. The increase from the quarter ended June 30, 2022 in expenses primarily reflects a decrease in salaries and employee benefits of $0.7 million, or 3.5%, partially offset by an increase in other operating expenses of $0.5 million, or 24.1%. The increase relative to the prior year period primarily reflects higher salaries and employee benefits costs of $1.8 million, or 10.8% and higher other operating expenses of $1.3 million, or 116.1%. The increases in salaries and employee benefits were due to continued hiring during 2022 that resulted in a 30% increase in average full time equivalent employees for the nine months’ ended September 30, 2022 as compared to the nine months’ ended September 30, 2021. This hiring was strategic to front-line revenue producers and enhanced risk management infrastructure.

The Company continues to make Fintech investments to transform its business model and adapt to changing market conditions and opportunities. For the quarter ended September 30, 2022, earnings were impacted by approximately $1.6 million of net loss from its MVB Edge Ventures segment, as compared to net losses of $1.3 million and $1.6 million for the quarters ended June 30, 2022 and September 30, 2021, respectively.

BALANCE SHEET

Loans totaled $2.47 billion at September 30, 2022, an increase of $256.3 million, or 11.6%, and $707.2 million, or 40.1%, as compared to June 30, 2022 and September 30, 2021, respectively. Adjusted for the removal of PPP loans from all periods, loan balances increased by 11.8% from the quarter ended June 30, 2022 and by 51.6% from the quarter ended September 30, 2021. Loan growth for both periods was driven primarily by the Company’s strategic lending partnerships growth vehicle. Loans held-for-sale were $20.0 million as of September 30, 2022, compared to $11.9 million at June 30, 2022 and none at September 30, 2021, led by MVB Bank’s SBA lending growth vehicle.

Deposits totaled $2.70 billion as of September 30, 2022, an increase of $82.0 million, or 3.1%, from June 30, 2022 and $298.0 million, or 12.4%, from September 30, 2021. NIB deposits totaled $1.41 billion as of September 30, 2022, an increase $68.9 million, or 5.1%, from June 30, 2022 and $412.4 million, or 41.3%, from September 30, 2021. Growth in NIB deposit balances primarily reflects Fintech business, while the increase in total deposits also reflects an increase in brokered deposits and other certificates of deposit. At 52% of total deposits, NIB deposits continue to exceed all other deposits combined.

CAPITAL

The Community Bank Leverage Ratio was 11.1% as of September 30, 2022, compared to 11.6% as of June 30, 2022 and 12.0% as of September 30, 2021. MVB’s Tier 1 Risk-Based Capital Ratio was 13.1% as of September 30, 2022, compared to 13.7% as of June 30, 2022 and 15.7% as of September 30, 2021. The Bank’s Total Risk-Based Capital Ratio was 14.1% as of September 30, 2022, compared to 14.7% as of June 30, 2022 and 17.0% as of September 30, 2021.

The Company issued a quarterly cash dividend of $0.17 per share for the quarter ended September 30, 2022, consistent with the quarter ended June 30, 2022 and up $0.03, or 21%, from the quarter ended September 30, 2021.

ASSET QUALITY

Nonperforming loans totaled $22.4 million, or 0.9% of total loans, as of September 30, 2022, as compared to $19.3 million, or 0.9% of total loans, as of June 30, 2022, and $17.5 million, or 1.0% of total loans, as of September 30, 2021. Criticized loans as a percentage of total loans were 3.4%, as compared to 4.0% as of June 30, 2022, and 6.5% as of September 30, 2021.

Net charge-offs were $1.3 million, or 0.22% of total loans on an annualized basis, for the quarter ended September 30, 2022, compared to $1.2 million, or 0.21% of total loans on an annualized basis, for the quarter ended June 30, 2022. Net charge-offs on an annualized basis, for the quarter ended September 30, 2021, were not significant.

Changes to the outstanding balances of the loan portfolios, the level of recognized charge-offs and the resulting historical loss rates and adjustments to the risk grading of loans within the portfolio are all contributing factors in the provision for loan losses. The provision for loan losses totaled $5.1 million for the quarter ended September 30, 2022, compared to $5.1 million for the quarter ended June 30, 2022, and $0.4 million for the quarter ended September 30, 2021. Allowance for loan losses to total loans was 1.07% as September 30, 2022, as compared to 1.03% as of June 30, 2022 and 1.43% as of September 30, 2021.

About MVB Financial Corp.

MVB Financial, the holding company of MVB Bank, is publicly traded on The Nasdaq Capital Market^® (“Nasdaq”) under the ticker “MVBF.”

MVB Financial is a financial holding company headquartered in Fairmont, WV. Through its wholly-owned subsidiary, MVB Bank, and MVB Bank’s subsidiaries, MVB Financial provides financial services to individuals and corporate clients in the Mid-Atlantic region and beyond.

Nasdaq is a leading global provider of trading, clearing, exchange technology, listing, information and public company services.

For more information about MVB, please visit ir.mvbbanking.com.

Forward-looking Statements

MVB Financial has made forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in this press release that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations about the future and are subject to risks and uncertainties. Forward-looking statements include, without limitation, information concerning possible or assumed future results of operations of the Company and its subsidiaries. Forward-looking statements can be identified by the use of words such as “may,” “could,” “should,” “would,” “will,” “plans,” “believes,” “estimates,” “expects,” “anticipates,” “intends,” “continues” or the negative of those terms or similar expressions. Note that many factors could affect the future financial results of the Company and its subsidiaries, both individually and collectively, and could cause those results to differ materially from those expressed in forward-looking statements. Therefore, undue reliance should not be placed upon any forward-looking statements. Those factors include but are not limited to: market, economic, operational, liquidity and credit risk; changes in market interest rates; inability to achieve anticipated synergies and successfully integrate recent mergers and acquisitions; inability to successfully execute business plans, including strategies related to investments in Fintech companies; competition; length and severity of the COVID-19 pandemic and its impact on the Company’s business and financial condition; changes in economic, business and political conditions; changes in demand for loan products and deposit flow; operational risks and risk management failures; and government regulation and supervision. Additional factors that may cause actual results to differ materially from those described in the forward-looking statements can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as well as its other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. Except as required by law, the Company disclaims any obligation to update, revise or correct any forward-looking statements.

Accounting standards require the consideration of subsequent events occurring after the balance sheet date for matters that require adjustment to, or disclosure in, the consolidated financial statements. The review period for subsequent events extends up to and including the filing date of a public company’s financial statements when filed with the SEC. Accordingly, the consolidated financial information in this announcement is subject to change.