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 first quarter of 2022, with reported net income of $2.9 million, or $0.24 basic and $0.22 diluted earnings per share.

“MVB’s first quarter results reflect the investments we’ve made to transform our business model and demonstrate our ability and readiness to adapt to changing market conditions and opportunities,” said Larry F. Mazza, Chief Executive Officer, MVB Financial. “During the first quarter, our initiatives in Fintech and gaming were the primary drivers of growth in noninterest-bearing deposits, which now represent 52% of our total deposit balances, exceeding all other deposits combined for the first time in our history. These deposits should prove increasingly valuable in a rising interest rate environment.”

Mazza added, “On the other side of the balance sheet, loan growth was robust, driven by our strategic lending partnerships. We believe our balance sheet is well-situated for the road ahead, with ample liquidity, strong loan and deposit growth pipelines and a limited concentration of investment securities.“

“During the first quarter, we continued to invest significantly in infrastructure to support our growth vehicles,” Mazza continued. “While we saw headwinds in the mortgage business from interest rate increases this quarter, reduction in noninterest income from our mortgage business investment, coupled with an increase in salary expense deployed for build-out of our strategic plan, drove the change in earnings versus comparative periods, and we believe we are well-positioned to capitalize on the growth in our deposit and loan portfolios.”

FIRST QUARTER 2022 HIGHLIGHTS

• Fintech and Gaming initiatives drive growth in low-cost deposits.
  • Noninterest-bearing (“NIB”) deposits were $1.31 billion as of March 31, 2022, up $188.6 million, or 17%, and $471.8 million, or 56%, from December 31, 2021 and March 31, 2021, respectively. NIB deposits represented 52% of total deposits as of March 31, 2022, as compared to 47% and 38% as of December 31, 2021 and March 31, 2021, respectively. Growth in noninterest-bearing deposits was driven primarily by our Fintech and gaming business verticals. Gaming deposits, which are included in total Fintech deposits, totaled $970.4 million as of March 31, 2022, compared to $911.6 million at December 31, 2021.
  • Total deposits increased $131.5 million, or 5.5%, compared to December 31, 2021 and $292.5 million, or 13.2%, compared to March 31, 2021.
  • The cost of total deposits was 0.19% for the quarter ended March 31, 2022, down five basis points and 16 basis points from the quarters ended December 31, 2021 and March 31, 2021, respectively. The decline in deposit costs for both periods was driven primarily by a change in deposit mix, led by growth in noninterest-bearing deposits.
  • New banking as a service (“BaaS”) products related to tax season and refunds that are provided by a partner, but for which we hold the deposits, contributed to the growth in NIB deposits.
  • Average assets were $3.06 billion for the quarter ended March 31, 2022, an increase of $234.9 million, or 8%, from December 31, 2021 and $624.9 million, or 26%, from the quarter ended March 31, 2021, largely driven by additional cash received from these tax programs.

• Asset transformation takes root, powered by strong loan growth.
  • Total loan balances of $1.88 billion as of March 31, 2022, increased by $27.5 million, or 1.5%, compared to December 31, 2021 and $210.9 million, or 12.6%, compared to March 31, 2021.
  • Adjusted for the removal of PPP loans, loan balances increased by 6.8% and 23.4%, compared to December 31, 2021 and March 31, 2021, respectively. Loan growth during the quarter was driven by strategic lending partnerships.
  • Loans held-for-sale were $9.2 million as of March 31, 2022, compared to $0 as of December 31, 2021 and March 31, 2021, led by our new SBA lending initiatives.
  • The loan-to-deposit ratio was 75.6% as of March 31, 2022, as compared to 78.6% as of December 31, 2021 and 76.4% as of March 31, 2021.
  • Investment securities available-for-sale represented 13.7% of total assets as of March 31, 2022, as compared to 15.1% as of December 31, 2021 and 16.0% as of March 31, 2021.

• MVB’s foundation remains strong.
  • Net charge-offs were $0.7 million, or 0.04% of average loans, for the quarter ended March 31, 2022, compared to $1.3 million, or 0.07% of average loans, for the quarter ended December 31, 2021 and $0.2 million, or 0.02% of average loans, for the quarter ended March 31, 2021.
  • Allowance for loan losses was 1.0% of total loans as of March 31, 2022, consistent with December 31, 2021, and a decline of 56 basis points from March 31, 2021.
  • Tangible book value (“TBV”) per share, a non-U.S. GAAP measure, was $21.16, a decline of $1.01, or 4.6%, from December 31, 2021 and an increase of $1.18, or 5.9%, from March 31, 2021.
  • Tier 1 Leverage (Community Bank Leverage Ratio) was 10.8% as of March 31, 2022, compared to 11.6% as of December 31, 2021 and 11.3% as of March 31, 2021.
  • Reflecting MVB’s strong capital position and earnings profile, the Company elected to increase the quarterly cash dividend to $0.17 per share for the quarter ended March 31, 2022, an increase of $0.02, or 13.3%, from the quarter ended December 31, 2021 and up $0.07, or 70.0%, from the quarter ended March 31, 2021. The quarter ended March 31, 2022, marks the fifth consecutive quarter that MVB has elected to increase the quarterly cash dividend.

INCOME STATEMENT

Net interest income on a tax-equivalent basis totaled $22.1 million for the quarter ended March 31, 2022, up $0.3 million, or 1.3%, and $4.2 million, or 23.6%, from the quarters ended December 31, 2021 and March 31, 2021, respectively. The increase in net interest income compared to both periods generally reflects strong loan growth, higher loan yields and lower funding costs, partially offset by lower balances of investment securities.

Interest income increased $0.2 million, or 0.9%, to $23.3 million from the quarter ended December 31, 2021 and $4.2 million, or 22.0% from the quarter ended March 31, 2021. The tax-equivalent yield on loans (including PPP loans) was 4.71% for the quarter ended March 31, 2022, compared to 4.64% for the quarter ended December 31, 2021 and 4.38% for the quarter ended March 31, 2021. Higher loan yields generally reflect new loan production at higher incremental yields due to recent increases in interest rates and the changing mix of MVB’s loan portfolio, including the expansion of our consumer subprime auto loan portfolio, partially offset by declines in PPP loans.

Interest expense decreased $0.1 million, or 8.5%, from the quarter ended December 31, 2021 and $0.1 million, or 9.2%, from the quarter ended March 31, 2021. The cost of interest-bearing liabilities declined by four basis points as compared to the quarter ended March 31, 2022, primarily reflecting a six basis point decrease in the cost of NOW accounts and a five basis point decline in the overall cost of deposits. The cost of interest-bearing liabilities declined by nine basis points as compared to the quarter ended March 31, 2021, primarily driven by a 17 basis point decline in the cost of NOW accounts and a 16 basis point decrease in the overall cost of deposits. Lower deposit costs relative to both periods reflect a shift in the overall mix of deposit funding due to the growth in noninterest-bearing deposits and a lessening focus on higher-cost deposits.

On a tax-equivalent basis, net interest margin for the quarter ended March 31, 2022, was 3.18%, a decline of 10 basis points versus the quarter ended December 31, 2021 and a decrease of eight basis points versus the quarter ended March 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. As a result of the deposit increase from BaaS tax programs, the average loan-to-deposit ratio during the quarter ended March 31, 2022 was 69.7%, compared to 74.5% for the quarter ended December 31, 2021 and 76.6% for the quarter ended March 31, 2021. The decline in net interest margin from the quarter ended December 31, 2021 reflected the impact of higher cash balances, primarily resulting from the aforementioned deposit increase from BaaS tax programs, partially offset by a decline in deposit costs, strong loan growth, higher core loan yields (adjusted for PPP) and a shift in the mix of earning assets due to increases in higher-yielding loans and declines in lower-yielding investment securities. The decrease in net interest margin relative to the quarter ended March 31, 2021 reflected significantly higher cash balances and the issuance of subordinated debt, partially offset by robust loan growth, higher core loan yields, a shift in the mix of earning assets and lower deposit costs.

Noninterest income totaled $11.9 million for the quarter ended March 31, 2022, a decline of $2.7 million, or 18.4%, from the quarter ended December 31, 2021 and a decline of $0.6 million, or 4.7%, from the quarter ended March 31, 2021. The decline relative to the prior quarter primarily reflects lower other operating income and a decline in equity method investment income of 66% on a combined basis, due almost entirely to a slowdown in mortgage banking revenue, partially offset by a gain related to a strategic investment within the Fintech investment portfolio. Noninterest income otherwise increased by 5.0% compared to the quarter ended December 31, 2021, reflecting an increase of 9.2% in payment card and service charge income due to an increase in volume and seasonal considerations related to BaaS clients, an increase of 11.7% in compliance and consulting income, primarily driven by revenue growth from professional services companies, and an increase of 2.8% on gain on sale of loans, driven by the sale of SBA loans. The decline relative to the prior year period reflects the same general considerations, but to a greater extreme. Other operating income and equity method investment income were lower by 79.1%, owing primarily to lower mortgage banking revenues. All other noninterest income categories on a combined basis increased by 120% due to increases nearly across-the-board, including an increase of 77.0% in payment card and service income, primarily driven by customer growth, expansion of the acquiring business and new seasonal revenue from BaaS clients, an increase of 202% in compliance and consulting income, primarily driven by revenue growth from professional services companies, and the beneficial impact of the new SBA initiatives, which had not yet produced gain on sale revenue in the prior year period.

Noninterest expense totaled $28.9 million for the quarter ended March 31, 2022, a decline of $0.2 million, or 0.8%, from the quarter ended December 31, 2021 and an increase of $9.7 million, or 51.0%, from the quarter ended March 31, 2021. The slight decline from the quarter ended December 31, 2021 in expenses primarily reflects a decrease in professional fees, which were elevated in the prior quarter, but is otherwise consistent with the level of expenses recorded in the prior quarter. The increase relative to the prior year period primarily reflects higher salaries and employee benefits costs due to the continued build-out of the team, including front-line revenue producers and enhanced risk management infrastructure, amidst the transformation of the business model, mitigated in part by a focused reallocation of resources, including lower infrastructure costs related to a reduction in branch count.

BALANCE SHEET

Loan balances were $1.88 billion at March 31, 2022, an increase of $27.5 million, or 1.5%, and $210.9 million, or 12.6%, as compared to December 31, 2021 and March 31, 2021, respectively, and included outstanding PPP loans of $41.7 million at March 31, 2022, $131.7 million at December 31, 2021 and $190.6 million at March 31, 2021. Adjusted for the removal of PPP loans from all periods, loan balances increased by 6.8% from the prior quarter and by 23.4% from the prior year period. Loan growth for both periods was driven primarily by MVB’s strategic lending partnerships. Loans held-for-sale were $9.2 million as of March 31, 2022, compared to $0 at December 31, 2021 and March 31, 2021, led by MVB’s new SBA lending initiatives.

Investment securities available-for-sale were $395.3 million, a decline of $26.2 million, or 6.2%, from December 31, 2021 and $27.8 million, or 6.6%, from March 31, 2021, primarily reflecting management’s decision to sell investment securities in accordance with the Company’s strategy to manage interest rate risk. Investment securities available-for-sale represented 13.7% of total assets as of March 31, 2022, compared to 15.1% as of December 31, 2021 and 16.0% as of March 31, 2021.

Deposits totaled $2.51 billion as of March 31, 2022, an increase of $131.5 million, or 5.5%, from December 31, 2021 and $292.5 million, or 13.2%, from March 31, 2021. NIB deposits totaled $1.31 billion as of March 31, 2022, an increase $188.6 million, or 16.8%, from December 31, 2021 and $471.8 million, or 56.4%, from March 31, 2021. Growth in NIB and total deposit balances primarily reflect the Company’s Fintech and gaming initiatives. Gaming deposits, which are included in total Fintech deposits, totaled $970.4 million as of March 31, 2022, compared to $911.6 million at December 31, 2021. NIB deposit balances, at 52% of total deposits, now exceed all other deposits combined, for the first time in the Company’s history.

The loan-to-deposit ratio was 75.6% as of March 31, 2022, as compared to 78.6% at December 31, 2021 and 76.4% at March 31, 2021.

CAPITAL

The Community Bank Leverage Ratio was 10.8% as of March 31, 2022, compared to 11.6% as of December 31, 2021 and 11.3% as of March 31, 2021. MVB’s Tier 1 Risk-Based Capital Ratio was 15.0% as of March 31, 2022, compared to 15.8% as of December 31, 2021 and 14.8% as of March 31, 2021. The Bank’s Total Risk-Based Capital Ratio was 15.9% as of March 31, 2022, compared to 16.7% as of December 31, 2021 and 16.0% as of March 31, 2021.

The Company elected to increase the quarterly cash dividend to $0.17 per share for the quarter ended March 31, 2022, up $0.02, or 13.3%, from the quarter ended December 31, 2021 and up $0.07, or 70%, from the quarter ended March 31, 2021.

ASSET QUALITY

Nonperforming loans totaled $18.0 million, or 1.0% of total loans, as of March 31, 2022, as compared to $17.7 million, or 0.9% of total loans, as of December 31, 2021. There were no notable changes in the composition of nonperforming loans relative to December 31, 2021. Criticized loans as a percentage of total loans were 5.2%, as compared to 5.4% as of December 31, 2021.

Net charge-offs were $0.7 million, or 0.04% of average loans, for the quarter ended March 31, 2022, compared to $1.3 million, or 0.07% of average loans, for the quarter ended December 31, 2021 and $0.2 million, or 0.02% of average loans, for the quarter ended March 31, 2021.

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 $1.3 million for the quarter ended March 31, 2022, compared to a release of allowance for loan losses of $5.7 million for the quarter ended December 31, 2021 and a provision of $0.6 million for the quarter ended March 31, 2021. Allowance for loan losses to total loans was 1.0% as March 31, 2022, as compared to 1.0% as of December 31, 2021 and 1.5% as of March 31, 2021.

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, 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 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.

The following table reconciles, for the periods shown below, net interest margin on a fully tax-equivalent basis:

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