MVB Financial Corp. Announces Fourth Quarter and Full Year 2022 Results

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 fourth quarter and year ended December 31, 2022, with reported net income of $6.5 million, or $0.52 basic and $0.50 diluted earnings per share for the three months ended December 31, 2022.

“Our company made significant forward progress in 2022 on our MVB-F1: Success Loves Speed Strategic Plan, while adapting to challenging wet track conditions along the way,” said Larry F. Mazza, Chief Executive Officer, MVB Financial. “During the year, we welcomed new partners, delivered on the promise of our fast-track vehicles, and quickly adapted to setbacks brought on by market conditions.”

“Fourth quarter results reflected both notable progress and ongoing challenges. Our core earnings power improved, driven by net interest margin expansion and net interest income growth, while our actions to right-size the cost base drove expenses lower, resulting in positive operating leverage. Underlying it all, our solid foundation remained intact, as evidenced by capital strength, sound asset quality and growth in tangible book value per share.”

Mazza added, “Looking to 2023, higher interest rates, slowing economic growth and lingering market uncertainty continue to weigh on our mortgage business, fee income and certain of our Fintech initiatives. Despite these challenges, we are keenly focused on our North Star of earnings per share.”

FOURTH QUARTER 2022 HIGHLIGHTS

• Net interest margin expansion drives strong growth in net interest income
  • On a tax-equivalent basis, net interest margin for the quarter ended December 31, 2022 was 4.57%, up 32 basis points versus the quarter ended September 30, 2022 and 129 basis points versus the quarter ended December 31, 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. Relative to both prior periods, net interest margin expansion primarily reflected higher loan yields, anchored by the large base of noninterest bearing Fintech, title and specialty deposits, partially offset by higher funding costs due to Fed rate increases.
  • Net interest income on a tax-equivalent basis totaled $33.7 million for the quarter ended December 31, 2022, up $3.6 million, or 12.0% from the quarter ended September 30, 2022 and $11.9 million, or 54.6%, from the quarter ended December 31, 2021.
• Expenses decline as cost-savings initiatives take effect, helping to drive positive operating leverage
  • Noninterest expense totaled $28.7 million for the quarter ended December 31, 2022, a decline of $1.2 million, or 4.1%, from the quarter ended September 30, 2022 and a decrease of $0.4 million, or 1.2%, from the quarter ended December 31, 2021. The decline relative to both prior periods was primarily attributable to lower salaries and employee benefits costs.
  • The company had previously announced that certain cost-savings initiatives were 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 of 2023, and the remainder expected to be fully captured by the end of the third quarter of 2023.
  • As compared to the prior quarter, total revenues (net interest income, plus noninterest income) grew 4.6% and total noninterest expense declined 4.1%, resulting in strong positive operating leverage.
• Measures of foundational strength remained intact
  • Nonperforming loans totaled $11.2 million, or 0.5% of total loans, as of December 31, 2022, compared to 0.9% of total loans as of both September 30, 2022 and December 31, 2021. Criticized loans as a percentage of total loans were 3.0%, down from 3.4% as of September 30, 2022 and 5.4% as of December 31, 2021.
  • Net charge-offs were $5.4 million, or 0.91% of total loans on an annualized basis, for the quarter ended December 31, 2022, compared to $1.3 million, or 0.22% of total loans on an annualized basis, for the quarter ended September 30, 2022 and $1.2 million, or 0.25% of total loans on an annualized basis, for the quarter ended December 31, 2021. The increase in net charge-offs compared to both periods was driven by a charge-off of one commercial relationship, which was previously reserved, and increased charge-offs in our consumer loan portfolio.
  • The ratio of tangible common equity to tangible assets was 8.38% as of December 31, 2022, compared to 7.60% as of September 30, 2022 and 9.62% as of December 31, 2021.
  • Tangible book value (“TBV”) per share, a non-U.S. GAAP measure, was $20.25 as of December 31, 2022, an increase of 4.5% from September 30, 2022 and a decline of 8.7% from December 31, 2021. A reconciliation of TBV to its most comparable U.S. GAAP measure is included below.
• Balance sheet management drives sequential period decline in deposit balances
  • Deposits totaled $2.57 billion as of December 31, 2022, a decrease of $126.5 million, or 4.7%, from September 30, 2022 and an increase of $192.9 million, or 8.1%, from December 31, 2021.
  • Noninterest-bearing (“NIB”) deposits totaled $1.23 billion as of December 31, 2022, down $180.2 million, or 12.8%, from September 30, 2022 and up $111.1 million, or 9.9%, from December 31, 2021.
  • The decline in total deposits and NIB deposits as compared to September 30, 2022, reflects the use of off-balance sheet deposit networks to generate fee income, enhance capital and manage liquidity and concentration risk. Further, impacting the decease was a decline in title deposits due to the seasonality and overall slowdown of the mortgage industry. Total off-balance sheet deposits, including gaming and banking as a service relationships, total $724.0 million, an increase of $156.0 million, or 27.5%, compared to September 30, 2022 and $241.8 million, or 50.1%, from December 31, 2021. Growth in NIB balances as compared to December 31, 2021, primarily reflects an increase in Fintech deposits.
• Noninterest income declines on continued cyclical headwinds, loss on loan sales
  • Noninterest income totaled $6.3 million for the quarter ended December 31, 2022, a decrease of $1.9 million, or 22.8%, from the quarter ended September 30, 2022 and a decrease of $8.2 million, or 56.5%, from the quarter ended December 31, 2021.
  • Ongoing cyclical headwinds reflected weakness in mortgage banking and Fintech-related fee income. Specifically, equity method investment loss related to our investment in Intercoastal Mortgage Company, LLC (“ICM”) was $1.2 million for the quarter ended December 31, 2022, as compared to $0.8 million for the quarter ended September 30, 2022 and income of $1.8 million for the quarter ended December 31, 2021. Total payment card and service charge income was $1.7 million for the quarter ended December 31, 2022, as compared to $3.3 million for the quarter ended September 30, 2022 and $2.4 million for the quarter ended December 31, 2021.
  • During fourth quarter 2022, the Company elected to exit its bitcoin mining portfolio including selling the remaining loans. As a result, the Company reported a loss of $3.8 million on the sale of $10.7 million of bitcoin mining loans, which represented MVB’s entire crypto-related lending exposure.
• M&A Update: Receipt of shareholder approval for acquisition of Integrated Financial Holdings, Inc.
  • In January 2023, MVB and Integrated Financial Holdings, Inc. jointly announced that each had received shareholder approval of a previously-announced merger, with MVB as the surviving company. The merger is currently expected to close in the [first] quarter of 2023, subject to satisfaction of customary closing conditions and receipt of necessary regulatory approvals.

INCOME STATEMENT

Net interest income on a tax-equivalent basis totaled $33.7 million for the quarter ended December 31, 2022, up $3.6 million, or 12.0%, from the quarter ended September 30, 2022 and $11.9 million, or 54.6%, from the quarter ended December 31, 2021. The increase in net interest income compared to the quarter ended September 30, 2022 primarily reflects higher loan yields from the Company’s commercial loan portfolio. The increase compared to the quarter ended December 31, 2021 generally reflects strong loan growth at favorable interest rates during 2022, primarily driven by the Company’s strategic lending partnerships growth vehicle and broad-based growth throughout CoRe Banking business.

Interest income increased $6.8 million, or 20.1%, compared to the quarter ended September 30, 2022 and increased $17.7 million, or 76.6%, compared to the quarter ended December 31, 2021. The tax-equivalent yield on loans was 6.1% for the quarter ended December 31, 2022, compared to 5.3% for the quarter ended September 30, 2022 and 4.6% for the quarter ended December 31, 2021. Higher loan yields generally reflect the impact of the Fed rate increases on our commercial loan portfolio. The higher loan yields compared to the quarter ended December 31, 2021 also reflect new loan production at favorable interest rates.

Interest expense increased $3.2 million, or 78.8%, compared to the quarter ended September 30, 2022 and decreased $5.7 million, or 369.1%, compared to the quarter ended December 31, 2021. The cost of funds was 1.00% for the quarter ended December 31, 2022, up 41 basis points compared to the quarter ended September 30, 2022 and 76 basis points compared to the quarter ended December 31, 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 during the quarter. The increase in cost of funds compared to the prior year period mostly reflected higher interest rates and increased FHLB borrowings and subordinated debt during the quarter, partially offset by the relatively higher contribution of NIB deposits relative to the prior year.

On a fully tax-equivalent basis, net interest margin for the quarter ended December 31, 2022 was 4.57%, an increase of 32 basis points versus the quarter ended September 30, 2022 and 129 basis points versus the quarter ended December 31, 2021. The increase in net interest margin for both quarters reflected the impact of higher loan yields due to interest rate increases, partially offset by an increase in deposit costs. The average loan-to-deposit ratio during the quarter ended December 31, 2022 was 87.7%, compared to 92.5% for the quarter ended September 30, 2022 and 74.5% for the quarter ended December 31, 2021.

Noninterest income totaled $6.3 million for the quarter ended December 31, 2022, a decrease of $1.9 million, or 22.8%, from the quarter ended September 30, 2022 and a decrease of $8.2 million, or 56.5%, from the quarter ended December 31, 2021. The $1.9 million decrease in noninterest income from the quarter ended September 30, 2022 was primarily due to decreases in gain on sale of loans of $3.4 million, or 264.2%, compared to the quarter ended September 30, 2022. The $8.2 million decrease in noninterest income from the quarter ended December 31, 2021 was primarily due to decreases in equity method investment income of $4.2 million, or 148.3%, gain on sale of loans of $3.2 million, or 302.4%, and holding gain on equity securities of $3.4 million, or 169.0%. The decrease in gain on sale of loans was driven by the loss of $3.8 million on the sale of $10.7 million of bitcoin mining loans, which represented MVB’s entire crypto-related lending exposure. Included in noninterest income was a $2.0 million gain recognized as a result of the partial sale of the Company’s Interchecks investment, which also caused the investment to be reclassified from an equity method investment to an equity security in fourth quarter 2022.

Noninterest expense totaled $28.7 million for the quarter ended December 31, 2022, a decrease of $1.2 million, or 4.1%, from the quarter ended September 30, 2022 and $0.4 million, or 1.2%, from the quarter ended December 31, 2021. The $1.2 million decrease in noninterest expense from the quarter ended September 30, 2022 was due to a decrease in salaries and employee benefits of $1.4 million, as the Company began to implement the expense reduction initiatives announced in the prior quarter, partially offset by an increase in other operating expense of $0.2 million, primarily driven by increased servicing expense. The decrease compared to the quarter ended December 31, 2021 was driven by decreases of $1.2 million, or 6.7%, in salaries and employee benefits and $1.1 million, or 27.5% in professional fees, partially offset by increases of $1.0 million, or 55.5%, in other operating expense, primarily driven by increased servicing expense and $0.4 million, or 34.9%, in equipment depreciation and maintenance.

BALANCE SHEET

Loans totaled $2.36 billion at December 31, 2022, a decrease of $112.0 million, or 4.5%, and an increase of $489.6 million, or 26.2%, as compared to September 30, 2022 and December 31, 2021, respectively. Adjusted for the removal of Paycheck Protection Program (“PPP”) loans from all periods, loan balances decreased by 4.3% from the quarter ended September 30, 2022 and increased by 35.0% from the quarter ended December 31, 2021. The decrease in loan balances compared to September 30, 2022 primarily reflect the Company’s balance sheet management as it contemplates future market uncertainty. Loan growth compared to December 31, 2021 was driven primarily by the Company’s strategic lending partnerships growth vehicle. Loans held-for-sale were $23.1 million as of December 31, 2022, compared to $20.0 million at September 30, 2022 and none December 31, 2021, led by MVB Bank’s government guaranteed lending growth vehicle.

Deposits totaled $2.57 billion as of December 31, 2022, a decrease of $126.5 million, or 4.7%, from September 30, 2022 and an increase of $192.9 million, or 8.1%, from December 31, 2021. NIB deposits totaled $1.23 billion as of December 31, 2022, a decrease of $180.2 million, or 12.8%, from September 30, 2022 and an increase of $111.1 million, or 9.9%, from December 31, 2021. The decrease in both total deposits and NIB deposits in the current quarter is primarily due to the Company’s utilization of off-balance sheet deposit networks to generate fee income, enhance capital and manage liquidity and concentration risk. Growth in NIB deposit balances compared to December 31, 2021 primarily reflects higher Fintech deposits, while the increase in total deposits also reflects an increase in brokered deposits and other certificates of deposit.

CAPITAL

The Community Bank Leverage Ratio was 9.83% as of December 31, 2022, compared to 11.1% as of September 30, 2022 and 11.6% as of December 31, 2021. MVB’s Tier 1 Risk-Based Capital Ratio was 12.4% as of December 31, 2022, compared to 13.1% as of September 30, 2022 and 15.8% as of December 31, 2021. The Bank’s Total Risk-Based Capital Ratio was 13.4% as of December 31, 2022, compared to 14.1% as of September 30, 2022 and 16.7% as of December 31, 2021.

The Company issued a quarterly cash dividend of $0.17 per share for the quarter ended December 31, 2022, consistent with the quarter ended September 30, 2022 and up $0.02, or 13.3%, from the quarter ended December 31, 2021.

ASSET QUALITY

Nonperforming loans totaled $11.2 million, or 0.5% of total loans, as of December 31, 2022, compared to 0.9% of total loans as of both September 30, 2022 and December 31, 2021. Criticized loans as a percentage of total loans were 3.0%, as compared to 3.4% as of September 30, 2022 and 5.4% as of December 31, 2021.

Net charge-offs were $5.4 million, or 0.9% of total loans on an annualized basis, for the quarter ended December 31, 2022, compared to $1.3 million, or 0.2% of total loans on an annualized basis, for the quarter ended September 30, 2022 and $1.2 million, or 0.3% of total loans on an annualized basis, for the quarter ended December 31, 2021. Charge-offs during the quarter include $2.9 million related to one commercial relationship, previously reserved, and $2.5 million related to the consumer loan portfolio.

Changes to the outstanding balances of the loan portfolios and the level of recognized charge-offs are all contributing factors in the provision for loan losses. The provision for loan losses totaled $2.7 million for the quarter ended December 31, 2022, compared to $5.1 million for the quarter ended September 30, 2022 and release of allowance of $5.7 million for the quarter ended December 31, 2021. Allowance for loan losses to total loans was 1.01% as of December 31, 2022, as compared to 1.07% as of September 30, 2022 and 0.98% as of December 31, 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 is a financial holding company headquartered in Fairmont, West Virginia. Through its 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.