Growth in Noninterest-Bearing Deposits and Loans Drive Earnings Above Expectations

MVB Financial Corp. (NASDAQ: MVBF) (“MVB Financial,” “MVB” or the “Company”) today reported net income of $9.2 million, or $0.79 basic and $0.73 diluted earnings per share for the three months ended June 30, 2021.

Our earnings for the second quarter were impacted by the release of allowance for loan losses of $1.5 million and costs related to acquisition and divestiture activity of $0.4 million. The after-tax impact of these items on a basic per share basis was $0.11 and $(0.03), respectively, and was $0.10 and $(0.03) on a diluted per share basis, respectively, for the three months ended June 30, 2021.

SECOND QUARTER 2021 HIGHLIGHTS

• Financial technology (“Fintech”) and gaming initiatives drive continued transformation of MVB’s core funding profile
  • Noninterest-bearing (“NIB”) deposits were $932.7 million as of June 30, 2021, an increase of $95.4 million, or 11%, from March 31, 2021, and an increase of $404.1 million, or 76%, from June 30, 2020. NIB deposits as a percentage of total deposits were 41.8% as of June 30, 2021, compared to 37.8% as of March 31, 2021 and 28.4% as of June 30, 2020.
  • With the Company’s ever-expanding Banking-as-a-Service (“BaaS”) platform, MVB became the 18th largest bank in the United States based on the number of customer accounts.
  • Fintech deposits totaled $765.9 million as of June 30, 2021, an increase of $21.3 million, or 3%, from March 31, 2021 and an increase of $539.7 million, or 239%, from June 30, 2020.
  • Gaming deposits, which are included in total Fintech deposits, totaled $595.9 million as of June 30, 2021, an increase of $17.2 million, or 3%, from March 31, 2021 and an increase of $454.0 million, or 320%, from June 30, 2020.
• Robust quarter-over-quarter revenue growth
  • Net interest income was $19.1 million for the quarter ended June 30, 2021, an increase of $1.6 million, or 9%, compared to the quarter ended March 31, 2021, and an increase of $0.6 million, or 3%, compared to the quarter ended June 30, 2020.
  • Fully tax-equivalent net interest margin was 3.24% for the quarter ended June 30, 2021, a decrease of 2 basis points compared to the quarter ended March 31, 2021, and a decrease of 54 basis points compared to the quarter ended June 30, 2020, primarily driven by Paycheck Protection Program (“PPP”) loans and excess liquidity.
  • Loans, including loans of branches held-for-sale of $54.5 million, were $1.75 billion as of June 30, 2021, an increase of $57.5 million, or 3%, from March 31, 2021, and an increase of $257.2 million, or 17%, from June 30, 2020.
  • Payment card and service charge income was $1.9 million for the quarter ended June 30, 2021, an increase of $0.4 million, or 29%, compared to the quarter ended March 31, 2021, and an increase of $1.4 million, or 265%, compared to the quarter ended June 30, 2020.
• Continued strong value creation
  • Tangible book value (“TBV”) per share, a non-U.S. GAAP measure, was $20.54 as of June 30, 2021, an increase of $0.56, or 3%, from March 31, 2021, and an increase of $3.89, or 23%, from June 30, 2020. A reconciliation of TBV to its most comparable U.S. GAAP measure is included below.
  • MVB Bank, Inc. (“MVB Bank” or the “Bank”) finished the second quarter with strong capital ratios. As of June 30, 2021, the Bank’s Community Bank Leverage Ratio was 11.0%. The Company’s tangible common equity to tangible assets was 8.9% as of June 30, 2021.
  • As a result of this strong capital position, the Company increased the second quarterly dividend in 2021 to $0.12 per share, an increase of 20% compared to the previous quarter’s dividend. This dividend was payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021.
  • In July, MVB completed the sale of four banking centers in Southern West Virginia. This transaction included deposit balances of approximately $167 million and loan balances of $55 million. MVB will record a pre-tax gain of approximately $10 million on the sale, equating to a projected increase of 3% to TBV, in the third quarter of 2021.
• Improving credit quality, recovering market conditions and growing economic confidence drive reserve release
  • The release of allowance for loan losses totaled $1.5 million for the quarter ended June 30, 2021, compared to provision for loan losses of $0.6 million and $6.6 million for the quarters ended March 31, 2021 and June 30, 2020, respectively.
  • Allowance for loan losses to total loans was 1.5% as of June 30, 2021, a decrease of 8 basis points from March 31, 2021 and an increase of 28 basis points from June 30, 2020. Excluding PPP loans of $207.3 million, allowance for loan losses to total loans was 1.7% as of June 30, 2021.
  • There were no net charge-offs for the quarter ended June 30, 2021, a decrease of $0.5 million compared to the quarter ended March 31, 2021 and a decrease of $0.3 million compared to the quarter ended June 30, 2020.
• MVB completes the acquisition of Trabian Technology, Inc. (“Trabian”) and launches MVB Edge Ventures (“Edge Ventures”)
  • In April, the Company acquired a majority interest in Trabian, a leading software development firm servicing financial institutions and Fintech companies. MVB’s investment allowed Trabian to add 21 new team members to support their continued revenue growth and increased technology contribution to MVB’s Fintech initiatives.
  • In June, the Bank announced the formation of Edge Ventures, a wholly-owned subsidiary. Edge Ventures was created as a management company providing oversight, alignment and structure for MVB’s Fintech companies and allocates resources to help incubate venture businesses and technologies acquired and developed by MVB.

MANAGEMENT OVERVIEW

Throughout 2021, Team MVB continued to differentiate itself by generating growth in loans, including loans of branches held-for-sale, of $57.5 million, or 3%, from March 31, 2021, and $257.2 million, or 17%, from June 30, 2020. This loan growth will enhance future profitability and was funded by the sustained and robust growth in NIB deposits of $95.4 million, or 11%, from March 31, 2021, and $404.1 million, or 76%, from June 30, 2020. With NIB deposits as a percentage of total deposits up to 41.8% as of June 30, 2021, the Company’s strategy to evolve its deposit mix by replacing high-cost deposits with NIB deposits has proved to be successful and viable long-term. The Company generated net income of $9.2 million for the second quarter.

“MVB continues to build a best-in-class deposit funding base. In the second quarter, we achieved a huge milestone with NIB deposits now representing nearly 42% of total deposits. This bodes well for our future in a potentially rising rate environment. Our loan growth and loan quality are also exceeding expectations,” said Larry F. Mazza, President and CEO, MVB Financial. “We are seeing tangible progress in our various Fintech initiatives and continue to heavily invest in the build-out of that business, putting more ‘tech’ in our ‘fin’ by closing on the Trabian acquisition, more than doubling the size of the Trabian software development team and launching MVB Edge Ventures during the second quarter of 2021.”

LOANS

Loans, including loans of branches held-for-sale totaling $54.5 million, were $1.75 billion as of June 30, 2021, an increase of $57.5 million, or 3%, from March 31, 2021, and an increase of $257.2 million, or 17%, from June 30, 2020. Included in loans are PPP loans totaling $207.3 million at June 30, 2021, an increase of $16.7 million, or 9%, from March 31, 2021, and $117.5 million, or 131%, from June 30, 2020. The increase in loans was driven by increased commercial lending production, including the impact of the addition of a Small Business Administration (“SBA”) lending team during the fourth quarter of 2020. During the quarter ended June 30, 2021, the SBA team originated 7(a) loans totaling $12.3 million and sold 7(a) loans totaling $9.8 million for a gain on sale of $1.3 million.

The tax-equivalent yield on loans, including PPP loans, was 4.31% for the quarter ended June 30, 2021, a decrease of seven basis points from the quarter ended March 31, 2021 and a decrease of 43 basis points from the quarter ended June 30, 2020. These decreases were primarily the result of a decrease in the yield on commercial loans.

DEPOSITS

Deposits totaled $2.23 billion as of June 30, 2021, an increase of $12.6 million, or 1%, from March 31, 2021 and an increase of $365.2 million, or 20%, from June 30, 2020. NIB deposits totaled $932.7 million as of June 30, 2021, an increase of $95.4 million, or 11%, from March 31, 2021 and an increase of $404.1 million, or 76%, from June 30, 2020.

NET INTEREST INCOME

Net interest income for the quarter ended June 30, 2021 was $19.1 million, an increase of $1.6 million, or 9%, from the quarter ended March 31, 2021 and an increase of $0.6 million, or 3%, from the quarter ended June 30, 2020. On a fully tax-equivalent basis, net interest margin for the quarter ended June 30, 2021 was 3.24%, a decrease of two basis points versus the quarter ended March 31, 2021 and a decrease of 54 basis points versus the quarter ended June 30, 2020. Please see the table on page 16 for a reconciliation between net interest margin and net interest margin on a fully tax-equivalent basis, a non-GAAP measure. Net interest margin was primarily impacted by excess liquidity and PPP loans. For the quarter ended June 30, 2021, the excess liquidity from increased cash balances accounted for 11 basis points of the decrease and the PPP loans accounted for 21 basis points of the decrease. The tax-equivalent adjustments are added to net interest income and were $0.4 million for the quarter ended June 30, 2021, $0.4 million for the quarter ended March 31, 2021 and $0.3 million for the quarter ended June 30, 2020. Excluding the impact from the April 2020 acquisition of The First State Bank (“First State”), the fully-tax equivalent net interest margin for the quarter ended June 30, 2021 would have decreased 20 basis points.

Interest income increased $1.8 million, or 9%, compared to the quarter ended March 31, 2021 and decreased $0.9 million, or 4%, compared to the quarter ended June 30, 2020. The increase was primarily driven by growth in the interest income on commercial loans. The tax-equivalent yield on commercial loans decreased five basis points due to the average balance of commercial loans outpacing the increase in interest income compared to the quarter ended March 31, 2021. The 43-basis point decrease in the yield on commercial loans and the 118-basis point decrease in the yield on investments drove the 90-basis point decrease in the tax-equivalent yield on earning assets compared to the quarter ended June 30, 2020.

Interest expense increased $0.2 million, or 14%, compared to the quarter ended March 31, 2021 and decreased $1.5 million, or 46%, compared to the quarter ended June 30, 2020. The one-basis point decrease in the cost of interest-bearing liabilities compared to the quarter ended March 31, 2021 was driven by a 17-basis point decrease in the cost of certificates of deposit, while the overall cost of deposits remained flat. The 46-basis point decrease in the cost of interest-bearing liabilities compared to the quarter ended June 30, 2020 was driven by a 55-basis point decrease in the cost of deposits.

Despite a decrease in the Company's average NIB balances of $11.6 million from the quarter ended March 31, 2021, the Company maintained a 17-basis point favorable spread on the tax-equivalent net interest margin for the quarter ended June 30, 2021, compared to a 20-basis point favorable spread for the quarter ended March 31, 2021. An increase in the Company’s average NIB balances of $355.8 million from the quarter ended June 30, 2020 helped to maintain a 17-basis point favorable spread on the tax-equivalent net interest margin for the quarter ended June 30, 2021 compared to a 27-basis point favorable spread for the same period in 2020.

ASSET QUALITY

The release of allowance for loan losses totaled $1.5 million for the quarter ended June 30, 2021, as compared to provision for loan losses of $0.6 million and $6.6 million for the quarters ended March 31, 2021 and June 30, 2020, respectively. The release of allowance for loan losses was primarily the result of improvement in the qualitative adjustment factors within the allowance methodology. In addition, changes to the outstanding balances of the loan portfolios, changes to the level of recognized charge-offs and changes in the resulting historical loss rates, and adjustments to the risk grading of loans within the portfolio were all contributing factors in the ultimate change from provision for loan losses to the release of allowance for loan losses. Nonperforming loans totaled $15.5 million, or 0.9% of total loans, as of June 30, 2021, compared to 0.7% of total loans as of March 31, 2021 and compared to 0.9% of total loans as of June 30, 2020. Criticized loans as a percentage of total loans were 7.3%, a decrease of 70 basis points, or 9%, from March 31, 2021, and an increase of 46 basis points, or 7%, from June 30, 2020.

NONINTEREST INCOME

Noninterest income totaled $13.6 million for the quarter ended June 30, 2021, an increase of $1.2 million, or 10%, from the quarter ended March 31, 2021 and a decrease of $31.9 million, or 70%, from the quarter ended June 30, 2020.

The $1.2 million increase in noninterest income from the quarter ended March 31, 2021 was due to increases in the gain on sale of loans of $1.1 million, in compliance consulting income of $0.6 million, in the gain on sale of available-for-sale securities of $0.6 million, in payment card and service charge income of $0.4 million, and in the holding gain on equity securities of $0.2 million. These increases were partially offset by a decrease in equity method investment income related to the Company’s investment in Intercoastal Mortgage Company, LLC (“ICM”) of $1.9 million.

The $31.9 million decrease in noninterest income from the quarter ended June 30, 2020 was due to decreases in mortgage-related income of $28.4 million from the transition to the equity method from the mortgage combination with ICM that occurred in July 2020 and the gains on acquisition and divestiture activity of $14.3 million from the Company’s strategic transactions in the second quarter of 2020, including $9.6 million from the sale of Eastern Panhandle, WV banking centers and $4.7 million from the bargain purchase gain from the acquisition of First State. These decreases were partially offset by increases in equity method investment income related to the Company’s investment in ICM of $4.5 million, payment card and service charge income of $1.4 million, gain on sale of loans of $1.4 million, gain on sale of available-for-sale securities of $1.2 million, compliance consulting income of $0.9 million and holding gain on equity securities of $0.7 million.

The Company expects continued growth in payment card and service charge income as a result of several sponsoring agreements and new products and services as a result of recent investments in Fintech capabilities.

NONINTEREST EXPENSE

Noninterest expense totaled $23.4 million for the quarter ended June 30, 2021, an increase of $4.3 million, or 22%, from the quarter ended March 31, 2021 and a decrease of $9.9 million, or 30%, from the quarter ended June 30, 2020.

The $4.3 million increase in noninterest expense from the quarter ended March 31, 2021 was due to increases in salaries and employee benefits of $1.8 million, in professional fees of $0.7 million, in data processing and communications expense of $0.5 million, and in travel, entertainment, dues and subscriptions of $0.3 million. The increase in salaries and employee benefits was driven by increases of $0.8 million at Chartwell Compliance, $0.5 million at Trabian, $0.2 million at the Bank, and $0.2 million at the Holding Company. These increases were due to 53 net new hires to further build-out the Fintech vertical at the Bank, Chartwell Compliance and the shared services at the Holding Company, as well as annual salary increases for existing employees during the second quarter of 2020.

The $9.9 million decrease in noninterest expense from the quarter ended June 30, 2020 was due to decreases in salaries and employee benefits of $9.0 million, in mortgage processing expense of $0.9 million and in professional fees of $0.5 million. The decrease in salaries and employee benefits was primarily due to the mortgage combination with ICM in July 2020.

About MVB Financial Corp.

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

MVB is a financial holding company headquartered in Fairmont, WV. Through its subsidiary, MVB Bank, Inc., and the bank’s subsidiaries, the Company 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 financial technology 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, 2020, 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.

Questions or comments concerning this Earnings Release should be directed to:

MVB Financial Corp.

Donald T. Robinson, Executive Vice President and CFO

(304) 598-3500

drobinson@mvbbanking.com