MVB Financial Corporation Announces Fourth Quarter Results and Record Earnings for Year-End 2021

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, 2021, with reported net income of $10.0 million, or $0.83 basic and $0.77 diluted earnings per share for the three months ended December 31, 2021.

Earnings for the fourth quarter were impacted by the release of allowance for loan losses of $5.7 million. The after-tax impact of the release on basic and diluted earnings per share was $0.38 and $0.35, respectively, for the three months ended December 31, 2021.

“MVB’s fourth quarter and record earnings for 2021 reflect the diversity of our tech-forward business model, as well as our strong positioning for the future,” said Larry F. Mazza, Chief Executive Officer, MVB Financial. “The transformation of our ‘best-in-class’ funding profile continues, as noninterest-bearing deposits now represent 47% of MVB Bank’s total deposit funding, up from 8% when we pivoted our company seven years ago. At the same time, our loan growth initiatives have come to fruition against the backdrop of a strengthening economy and rising interest rates, leaving our highly-liquid balance sheet very well-positioned, highlighted on one side by strong low-cost funding, and on the other by an increasingly diverse loan growth engine.”

Mazza added, “Other recent highlights include substantial gains recognized from our Fintech investment portfolio, a core component of our business in which we not only provide banking services to Fintechs, but also build and invest in them as well. 2021 marked the successful completion of our MVB 3.0 three-year strategic plan, in which we exceeded our performance goals. We now look to implement our new three-year plan, called ‘MVB F1,’ the details of which we look forward to discussing at our Investor Conference in Las Vegas on March 14 and 15, 2022.”

FOURTH QUARTER 2021 HIGHLIGHTS

• Fintech and Gaming verticals power continued favorable remix of funding base
  • Noninterest-bearing (“NIB”) deposits were $1.12 billion as of December 31, 2021, up $121.1 million, or 12%, and $404.6 million, or 57%, from September 30, 2021 and December 31, 2020, respectively. NIB deposits as a percentage of total deposits were 47% as of December 31, 2021, as compared to 42% and 36% as of September 30, 2021 and December 31, 2020, respectively.
  • Financial technology (“Fintech”) deposits totaled $1.14 billion as of December 31, 2021, up $166.4 million, or 17%, and $609.1 million, or 114%, from September 30, 2021 and December 31, 2020, respectively.
  • Gaming deposits, which are included in total Fintech deposits, totaled $911.6 million as of December 31, 2021, up $137.5 million, or 18%, and $553.7 million, or 155%, from September 30, 2021 and December 31, 2020, respectively.
• Robust loan growth driven by an increasingly diverse customer base
  • Total loans of $1.87 billion increased by $105.7 million, or 6%, compared to September 30, 2021 and $416.1 million, or 29%, from December 31, 2020. Loans, excluding Paycheck Protection Program (“PPP”) loans of $131.7 million, totaled $1.74 billion as of December 31, 2021, an increase of $121.3 million, or 8%, from September 30, 2021, and an increase of $366.4 million, or 27% from December 31, 2020.
  • Loan growth during the quarter was driven primarily by our health care lending group and strategic lending partnerships.
  • The loan-to-deposit ratio was 78.6% as of December 31, 2021, as compared to 73.5% at September 30, 2021, and 73.3% as of December 31, 2020.
• Strategic Fintech investments yield recent gains
  • For the quarter ended December 31, 2021, MVB recorded income of $2.8 million related to a strategic investment within its Fintech investment portfolio.
  • Since 2016, MVB’s Fintech investment portfolio has generated an internal rate of return of 184%.
• Continued value creation at a peer-leading pace
  • Tangible book value (“TBV”) per share, a non-U.S. GAAP measure, was $22.17 as of December 31, 2021, an increase of 2% and 12% from September 30, 2021 and December 31, 2020, respectively. A reconciliation of TBV to its most comparable U.S. GAAP measure is included below.
  • Since 2016, MVB has increased TBV per share at a compound annual growth rate of just under 16%, which compares favorably to the regional peer average of 10%.
  • Reflecting MVB’s strong capital position and earnings profile as of December 31, 2021, the Company elected to increase the quarterly cash dividend to $0.15 per share for the fourth quarter of 2021, up $0.01 (or 7%) from the third quarter of 2021.

INCOME STATEMENT

On a fully tax-equivalent basis, net interest margin for the quarter ended December 31, 2021 was 3.28%, an increase of three basis points versus the quarter ended September 30, 2021 and a decrease of 16 basis points versus the quarter ended December 31, 2020. 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 tax-equivalent adjustments impacting net interest income were $0.3 million for the quarter ended December 31, 2021, $0.3 million for the quarter ended September 30, 2021 and $0.4 million for the quarter ended December 31, 2020.

Interest income increased $2.6 million, or 13%, compared to the quarter ended September 30, 2021 and increased $3.7 million, or 19%, compared to the quarter ended December 31, 2020. The tax-equivalent yield on commercial loans increased 45 basis points compared to the quarter ended September 30, 2021. The decreases of 158 and 95 basis points in the yield on real estate loans and investments, respectively, drove the 24 basis point decrease in the tax-equivalent yield on earning assets compared to the quarter ended December 31, 2020.

Interest expense increased $0.2 million, or 11%, compared to the quarter ended September 30, 2021 and decreased $0.1 million, or 7%, compared to the quarter ended December 31, 2020. The increase compared to the quarter ended September 30, 2021 was the result of an increase of $0.3 million in interest on subordinated debt. Despite an increase in average deposits of $227.5 million during the quarter, interest on deposits decreased $0.1 million during the quarter, as NIB deposits grew as a percentage of total deposits and cost of interest-bearing deposits decreased.

MVB Bank's average NIB deposits increased by $239.6 million from the quarter ended September 30, 2021, maintaining a 19 basis point favorable spread on the tax-equivalent net interest margin for the quarter ended December 31, 2021, compared to a 16 basis point favorable spread for the quarter ended September 30, 2021. An increase in MVB Bank’s average NIB deposits of $406.0 million from the quarter ended December 31, 2020 helped to maintain a 19 basis point favorable spread on the tax-equivalent net interest margin for the quarter ended December 31, 2021, compared to a 18 basis point favorable spread for the same period in 2020.

Noninterest income totaled $14.5 million for the quarter ended December 31, 2021, a decrease of $7.4 million, or 34%, from the quarter ended September 30, 2021 and a decrease of $2.0 million, or 12%, from the quarter ended December 31, 2020.

The $7.4 million decrease in noninterest income from the quarter ended September 30, 2021 was due primarily to the gain on sale of branches of $10.8 million in the quarter ended September 30, 2021.

The $2.0 million decrease in noninterest income from the quarter ended December 31, 2020 was primarily due to decreases in equity method investment income of $7.7 million and gain on sale of equity securities of $3.5 million, offset by increases in holding gain on equity securities of $1.8 million, compliance consulting income of $2.1 million, payment card and service charge income of $1.3 million, gain on sale of portfolio loans of $1.1 million and other operating income of $2.4 million.

Noninterest expense totaled $29.1 million for the quarter ended December 31, 2021, an increase of $3.3 million, or 13%, from the quarter ended September 30, 2021 and an increase of $8.2 million, or 39%, from the quarter ended December 31, 2020.

The $3.3 million increase in noninterest expense from the quarter ended September 30, 2021 was due to an increase in salaries and employee benefits of $1.6 million, primarily driven by incentive compensation and new hires to further build-out the Fintech vertical at Victor Technologies, Inc. (“Victor”),as well as an increase in professional fees of $1.2 million. Victor makes it faster and more efficient for entities to launch a Fintech program. Its technology simplifies integration for Fintech companies and offers risk tools to banks to help them conduct due diligence, risk assessments, onboarding and oversight of their Fintech clients.

The $8.2 million increase in noninterest expense from the quarter ended December 31, 2020 was primarily due to increases in salaries and employee benefits of $5.8 million and professional fees of $1.4 million.

The efficiency ratio was 80.7% for the quarter ended December 31, 2021, compared to 62.9% and 61.0%% for the quarters ended September 30, 2021 and December 31, 2020, respectively, as a result of our ongoing expansion of our risk management and operations teams in support of Fintech initiatives .

BALANCE SHEET

Loan balances grew $105.7 million as compared to September 30, 2021 and $416.1 million as compared to December 31, 2020. Included in loans are PPP loans totaling $131.7 million at December 31, 2021, a decrease of $15.6 million, or 11%, from September 30, 2021, and an increase of $49.7 million, or 61%, from December 31, 2020.

The tax-equivalent yield on loans, including PPP loans, was 4.64% for the quarter ended December 31, 2021, an increase of 39 basis points from the quarter ended September 30, 2021 and a decrease of seven basis points from the quarter ended December 31, 2020.

Deposits totaled $2.38 billion as of December 31, 2021, a decrease of $21.3 million, or 1%, from September 30, 2021 and an increase of $395.2 million, or 20%, from December 31, 2020. With NIB deposits as a percentage of total deposits at 47% as of December 31, 2021, the Company’s strategy to evolve MVB Bank’s deposit mix by replacing high-cost deposits with NIB deposits has proved to be successful and viable long-term.

CAPITAL

There was no significant change in regulatory ratios quarter over quarter. The Community Bank Leverage Ratio was 11.6% and 12.0% as of December 31, 2021 and September 30, 2021, respectively. MVB Bank’s Tier 1 Risk-Based Capital Ratio was 15.8% and 15.7% as of December 31, 2021 and September 30, 2021, respectively. The Bank’s Total Risk-Based Capital Ratio was 16.7% and 16.9% as of December 31, 2021 and September 30, 2021, respectively.

ASSET QUALITY

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. Nonperforming loans totaled $17.7 million, or 0.9% of total loans, as of December 31, 2021, compared to 1.0% of total loans as of September 30, 2021 and 0.9% of total loans as of December 31, 2020. Criticized loans as a percentage of total loans were 5.4%, a decrease of 118 basis points, or 18%, from September 30, 2021, and a decrease of 413 basis points, or 2%, from December 31, 2020.

The release of allowance for loan losses totaled $5.7 million for the quarter ended December 31, 2021, compared to a provision for loan losses of $0.4 million for the quarter ended September 30, 2021 and a provision for loan losses of $0.2 million for the quarter ended December 31, 2020. The $5.7 million release was driven by a $2.6 million release allocated to a single loan, as well as improvements in allocation rates, portfolio risk grades and economic and business factors.

Allowance for loan losses to total loans was 1.0% as of December 31, 2021, a decrease of 45 basis points from September 30, 2021 and a decrease of 80 basis points from December 31, 2020. Excluding PPP loans, allowance for loan losses to total loans was 1.1% as of December 31, 2021.

There were $1.3 million net charge-offs for the quarter ended December 31, 2021, compared to $0.1 million in the quarter ended September 30, 2021 and $0.3 million for the quarter ended December 31, 2020.

About MVB Financial Corp.

MVB Financial Corp., 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, 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 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.