mvbf_Current Folio_10Q

Table of Contents

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[  X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

 

OR

 

[     ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to                 .

Commission File number 000-50567

MVB Financial Corp.

(Exact name of registrant as specified in its charter)

 

 

 

West Virginia

20-0034461

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

301 Virginia Avenue

Fairmont, West Virginia  26554-2777

(Address of principal executive offices)

304-363-4800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant has (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  [ X ]                         No  [    ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  [ X ]                         No  [    ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

Large accelerated filer

Accelerated filer    [ X ]

Non-accelerated filer                            

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes  [     ]                         No  [ X ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of August 6, 2015, the number of shares outstanding of the issuer’s only class of common stock was 7,996,978.

 

 


 

Table of Contents

MVB Financial Corp.

Table of Contents

 

 

 

Part I. 

Financial Information

 

 

Item 1. 

Financial Statements

 

 

 

The unaudited interim consolidated financial statements of MVB Financial Corp. (“the Company” or “MVB”) and subsidiaries (“Subsidiaries”) including MVB Bank, Inc. (the “Bank” or “MVB Bank”) and its wholly-owned subsidiary Potomac Mortgage Group, Inc., which does business as  MVB Mortgage (“MVB Mortgage”) and MVB Insurance, LLC (“MVB Insurance”) listed below are included on pages 3-36 of this report.

 

 

 

Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

 

Consolidated Statements of Income for the Six Months and Three Months ended June 30, 2015 and 2014

 

Consolidated Statements of Comprehensive Income for the Six Months and Three Months ended June 30, 2015 and 2014

 

Consolidated Statements of Cash Flows for the Six Months ended June 30, 2015 and 2014

 

Notes to Consolidated Financial Statements

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations are included on pages 37-51 of this report.

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk.

 

 

Item 4. 

Controls and Procedures

 

 

Part II. 

Other Information

 

 

Item 1. 

Legal Proceedings

 

 

Item 1A. 

Risk Factors

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

Item 3. 

Defaults Upon Senior Securities

 

 

Item 4. 

Mine Safety Disclosures

 

 

Item 5. 

Other Information

 

 

Item 6. 

Exhibits

 

 

 

2


 

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

MVB Financial Corp. and Subsidiaries

Consolidated Balance Sheets  

(Dollars in thousands except per share data)

 

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

(Note 1)

 

Assets

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

Cash and due from banks

 

$

11,944

 

$

13,403

 

Interest bearing balances

 

 

2,070

 

 

16,674

 

Total cash and cash equivalents

 

 

14,014

 

 

30,077

 

Certificates of deposits in other banks

 

 

11,659

 

 

11,907

 

Investment securities:

 

 

 

 

 

 

 

Securities available-for-sale

 

 

65,855

 

 

68,213

 

Securities held-to-maturity (fair value of $53,441 for 2015 and $55,871 for 2014)

 

 

53,141

 

 

54,538

 

Loans held for sale

 

 

116,307

 

 

69,527

 

Loans:

 

 

911,085

 

 

798,297

 

Less: Allowance for loan losses

 

 

(7,047)

 

 

(6,223)

 

Net loans

 

 

904,038

 

 

792,074

 

Bank premises, furniture and equipment

 

 

25,645

 

 

25,472

 

Bank owned life insurance

 

 

22,011

 

 

21,679

 

Accrued interest receivable and other assets

 

 

22,617

 

 

19,193

 

Goodwill

 

 

17,779

 

 

17,779

 

Total assets

 

$

1,253,066

 

$

1,110,459

 

Liabilities

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Non-interest bearing

 

$

76,666

 

$

67,066

 

Interest bearing

 

 

814,303

 

 

756,161

 

Total deposits

 

 

890,969

 

 

823,227

 

 

 

 

 

 

 

 

 

Accrued interest, taxes and other liabilities

 

 

10,791

 

 

10,310

 

Repurchase agreements

 

 

26,263

 

 

32,673

 

FHLB and other borrowings

 

 

178,245

 

 

101,287

 

Subordinated debt

 

 

33,524

 

 

33,524

 

Total liabilities

 

 

1,139,792

 

 

1,001,021

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

Preferred stock, par value $1,00020,783 authorized and 9,283 issued in 2015 and 2014, respectively

 

 

16,334

 

 

16,334

 

Common stock, par value $1;  20,000,000 shares authorized; 8,047,550 and 8,034,362 issued; and 7,996,473 and 7,983,285 outstanding in 2015 and 2014, respectively

 

 

8,048

 

 

8,034

 

Additional paid-in capital

 

 

74,450

 

 

74,342

 

Retained earnings

 

 

17,858

 

 

14,454

 

Accumulated other comprehensive loss

 

 

(2,332)

 

 

(2,642)

 

Treasury stock, 51,077 shares, at cost

 

 

(1,084)

 

 

(1,084)

 

Total stockholders’ equity

 

 

113,274

 

 

109,438

 

Total liabilities and stockholders’ equity

 

$

1,253,066

 

$

1,110,459

 

 

See accompanying notes to unaudited financial statements.

3


 

Table of Contents

 

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited) (Dollars in thousands except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

Three months ended 

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Interest income

    

 

    

    

 

    

    

 

    

    

 

    

 

Interest and fees on loans

 

$

18,603

 

$

15,162

 

$

9,839

 

$

7,996

 

Interest on deposits with other banks

 

 

127

 

 

97

 

 

63

 

 

51

 

Interest on investment securities – taxable

 

 

461

 

 

769

 

 

222

 

 

358

 

Interest on tax exempt loans and securities

 

 

1,141

 

 

1,511

 

 

570

 

 

757

 

Total interest income

 

 

20,332

 

 

17,539

 

 

10,694

 

 

9,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,889

 

 

2,796

 

 

1,522

 

 

1,691

 

Repurchase agreements

 

 

44

 

 

233

 

 

20

 

 

107

 

FHLB and other borrowings

 

 

334

 

 

273

 

 

177

 

 

143

 

Subordinated debt

 

 

1,092

 

 

45

 

 

549

 

 

26

 

Total interest expense

 

 

4,359

 

 

3,347

 

 

2,268

 

 

1,967

 

Net interest income

 

 

15,973

 

 

14,192

 

 

8,426

 

 

7,195

 

Provision for loan losses

 

 

1,220

 

 

1,408

 

 

561

 

 

889

 

Net interest income after provision for loan losses

 

 

14,753

 

 

12,784

 

 

7,865

 

 

6,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

296

 

 

317

 

 

164

 

 

171

 

Income on bank owned life insurance

 

 

332

 

 

255

 

 

165

 

 

127

 

Visa debit card and interchange income

 

 

440

 

 

370

 

 

231

 

 

203

 

Mortgage fee income

 

 

14,926

 

 

7,543

 

 

8,617

 

 

4,333

 

Gain on sale of portfolio loans

 

 

800

 

 

1,333

 

 

454

 

 

658

 

Insurance and investment services income

 

 

2,663

 

 

1,836

 

 

965

 

 

820

 

Gain on sale of securities

 

 

126

 

 

125

 

 

5

 

 

125

 

Gain (loss) on derivatives

 

 

2,106

 

 

939

 

 

(143)

 

 

604

 

Other operating income

 

 

256

 

 

102

 

 

76

 

 

25

 

Total noninterest income

 

 

21,945

 

 

12,820

 

 

10,534

 

 

7,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salary and employee benefits

 

 

19,928

 

 

14,729

 

 

10,194

 

 

7,932

 

Occupancy expense

 

 

1,755

 

 

1,304

 

 

880

 

 

677

 

Equipment depreciation and maintenance

 

 

967

 

 

711

 

 

484

 

 

349

 

Data processing and communications

 

 

1,870

 

 

1,381

 

 

944

 

 

696

 

Mortgage processing

 

 

1,536

 

 

1,112

 

 

790

 

 

567

 

Marketing, contributions and sponsorships

 

 

696

 

 

535

 

 

359

 

 

290

 

Professional fees

 

 

1,281

 

 

878

 

 

619

 

 

380

 

Printing, postage and supplies

 

 

356

 

 

392

 

 

170

 

 

199

 

Insurance, tax and assessment expense

 

 

847

 

 

724

 

 

419

 

 

385

 

Travel, entertainment, dues and subscriptions

 

 

752

 

 

674

 

 

432

 

 

362

 

Other operating expenses

 

 

690

 

 

584

 

 

420

 

 

351

 

Total noninterest expense

 

 

30,678

 

 

23,024

 

 

15,711

 

 

12,188

 

Income before income taxes

 

 

6,020

 

 

2,580

 

 

2,688

 

 

1,184

 

Income tax expense

 

 

2,012

 

 

453

 

 

783

 

 

215

 

Net income

 

$

4,008

 

$

2,127

 

$

1,905

 

$

969

 

Preferred dividends

 

 

285

 

 

43

 

 

143

 

 

22

 

Net income available to common shareholders

 

$

3,723

 

$

2,084

 

$

1,762

 

$

947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share – basic

 

$

0.47

 

$

0.27

 

$

0.22

 

$

0.12

 

Earnings per share – diluted

 

$

0.46

 

$

0.26

 

$

0.22

 

$

0.12

 

Weighted average shares outstanding - basic

 

 

7,985,320

 

 

7,778,152

 

 

7,987,333

 

 

7,897,242

 

Weighted average shares outstanding - diluted

 

 

8,672,228

 

 

7,991,701

 

 

8,674,241

 

 

8,110,791

 

 

See accompanying notes to unaudited financial statements.

4


 

Table of Contents

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

Three months ended 

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

    

$

4,008

    

$

2,127

    

$

1,905

    

$

969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains during the year

 

 

114

 

 

1,646

 

 

(425)

 

 

1,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect

 

 

(44)

 

 

(658)

 

 

170

 

 

(443)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gain recognized in income

 

 

(126)

 

 

(125)

 

 

(5)

 

 

(125)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect

 

 

50

 

 

50

 

 

2

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in defined benefit pension plan

 

 

527

 

 

(315)

 

 

800

 

 

(315)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax effect

 

 

(211)

 

 

126

 

 

(320)

 

 

126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

310

 

 

724

 

 

222

 

 

402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

4,318

 

$

2,851

 

$

2,127

 

$

1,371

 

 

See accompanying notes to unaudited financial statements.

 

 

 

5


 

Table of Contents

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited) (Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

Operating activities

    

 

    

    

 

    

  

Net income

 

$

4,008

 

$

2,127

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

Net amortization and accretion of investments

 

 

387

 

 

434

 

Net amortization of deferred loan fees

 

 

(4)

 

 

27

 

Provision for loan losses

 

 

1,220

 

 

1,408

 

Depreciation and amortization

 

 

932

 

 

587

 

Stock based compensation

 

 

203

 

 

129

 

Loans originated for sale

 

 

(708,970)

 

 

(381,190)

 

Proceeds of loans sold

 

 

677,116

 

 

408,709

 

Mortgage fee income

 

 

(14,926)

 

 

(7,543)

 

Gain on sale of investment securities

 

 

(126)

 

 

(125)

 

Income on bank owned life insurance

 

 

(332)

 

 

(255)

 

Deferred taxes

 

 

254

 

 

(936)

 

Other, net

 

 

(195)

 

 

150

 

Net cash (used in) provided by operating activities

 

 

(40,433)

 

 

23,522

 

Investing activities

 

 

 

 

 

 

 

Purchases of investment securities available-for-sale

 

 

(22,733)

 

 

(24,268)

 

Purchases of investment securities held-to-maturity

 

 

 —

 

 

(250)

 

Maturities/paydowns of investment securities held-to-maturity

 

 

790

 

 

750

 

Maturities/paydowns of investment securities available-for-sale

 

 

13,521

 

 

4,759

 

Sales of investment securities available-for-sale

 

 

11,484

 

 

37,177

 

Sales of investment securities held-to-maturity

 

 

421

 

 

 —

 

Purchases of premises and equipment

 

 

(1,105)

 

 

(4,962)

 

Net increase in loans

 

 

(113,180)

 

 

(112,078)

 

Purchases of restricted bank stock

 

 

(12,418)

 

 

(7,361)

 

Redemptions of restricted bank stock

 

 

9,498

 

 

5,937

 

Proceeds from sale of certificates of deposit with banks

 

 

248

 

 

76

 

Proceeds from sale of other real estate owned

 

 

239

 

 

 —

 

Purchase of bank owned life insurance

 

 

 —

 

 

(5,000)

 

Net cash used in investing activities

 

 

(113,235)

 

 

(105,220)

 

Financing activities

 

 

 

 

 

 

 

Net increase in deposits

 

 

67,742

 

 

51,232

 

Net (decrease) in repurchase agreements

 

 

(6,410)

 

 

(45,057)

 

Net change in short-term FHLB borrowings

 

 

77,041

 

 

22,202

 

Principal payments on FHLB borrowings

 

 

(83)

 

 

(1,080)

 

Proceeds from subordinated debt

 

 

 —

 

 

29,313

 

Proceeds from stock offering

 

 

 —

 

 

5,662

 

Preferred stock issuance

 

 

 —

 

 

7,834

 

Dividend reinvestment plan proceeds

 

 

 —

 

 

180

 

Common stock options exercised

 

 

(81)

 

 

48

 

Cash dividends paid on common stock

 

 

(319)

 

 

(317)

 

Cash dividends paid on preferred stock

 

 

(285)

 

 

(43)

 

Net cash provided by financing activities

 

 

137,605

 

 

69,974

 

(Decrease) in cash and cash equivalents

 

 

(16,063)

 

 

(11,724)

 

Cash and cash equivalents at beginning of period

 

 

30,077

 

 

39,843

 

Cash and cash equivalents at end of period

 

$

14,014

 

$

28,119

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

    

 

    

    

 

    

 

 

 

 

 

 

 

 

 

Loans transferred to other real estate owned

 

$

 —

 

$

146

 

Cashless stock options exercised

 

$

169

 

$

 —

 

 

 

 

 

 

 

 

 

Cash payments for:

 

 

 

 

 

 

 

Interest on deposits, repurchase agreements and borrowings

 

$

5,391

 

 

3,632

 

Income taxes

 

$

1,900

 

 

1,020

 

 

See accompanying notes to unaudited financial statements.

6


 

Table of Contents

 

MVB Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

 

Note 1 – Basis of Presentation

 

These consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with instructions to Form 10‑Q.  Accordingly, they do not include all the information and footnotes required by GAAP for annual year-end financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, have been included and are of a normal, recurring nature. The consolidated balance sheet as of December 31, 2014 has been derived from audited financial statements included in the Company’s 2014 filing on Form 10-K.  Operating results for the six and three months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

 

The accounting and reporting policies of MVB Financial Corp. (“the Company” or “MVB”) and its subsidiaries (“Subsidiaries”), including MVB Bank, Inc. (the “Bank”), the Bank’s subsidiary Potomac Mortgage Group, Inc., which does business as MVB Mortgage (“MVB Mortgage”) and MVB Insurance, LLC, conform to accounting principles generally accepted in the United States and practices in the banking industry. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates, such as the allowance for loan losses, are based upon known facts and circumstances. Estimates are revised by management in the period such facts and circumstances change.  Actual results could differ from those estimates. All significant inter-company accounts and transactions have been eliminated in consolidation. 

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in MVB’s December 31, 2014, Form 10-K filed with the Securities and Exchange Commission.

 

In certain instances, amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation. Specifically, a portion of the prior periods’ interest income and interest expense was classified as gain on loans held for sale and has been reclassified in the current presentation.

 

Information is presented in these notes with dollars expressed in thousands, unless otherwise noted or specified.

 

Note 2 – Recent Accounting Pronouncements 

 

In June 2014, the FASB issued ASU No. 2014-11, "Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The amendments in the ASU also require expanded disclosures, effective for the current reporting period of June 30, 2015, about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings (see Note 5 to the Consolidated Financial Statements). The Company adopted the amendments in this ASU effective January 1, 2015. As of June 30, 2015, all of the Company's repurchase agreements were typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements executed as a repurchase financing) and are accounted for as secured borrowings. As such, the adoption of ASU No. 2014-11 did not have a material impact on the Company's Consolidated Financial Statements but resulted in additional disclosures.

 

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In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis.  The amendments modify the evaluation reporting organizations must perform to determine if certain legal entities should be consolidated as VIEs. Specifically, the amendments: (1) Modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities; (2) Eliminate the presumption that a general partner should consolidate a limited partnership; (3) Affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) Provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. ASU No. 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. The Company is currently evaluating the provisions of ASU No. 2015-02 to determine the potential impact the new standard will have on the Company's consolidated financial statements.

Note 3 – Investments

Amortized cost and fair values of investment securities held-to-maturity at June 30, 2015, including gross unrealized gains and losses, are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Amortized

    

Unrealized

    

Unrealized

    

Fair

 

(in thousands)

 

Cost

 

Gain

 

Loss

 

Value

 

Municipal securities

 

$

53,141

 

$

1,048

 

$

(748)

 

$

53,441

 

Total investment securities held-to-maturity

 

$

53,141

 

$

1,048

 

$

(748)

 

$

53,441

 

 

Amortized cost and fair values of investment securities held-to-maturity at December 31, 2014, including gross unrealized gains and losses, are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Amortized

    

Unrealized

    

Unrealized

    

Fair

 

(in thousands)

 

Cost

 

Gain

 

Loss

 

Value

 

Municipal securities

 

$

54,538

 

$

1,600

 

$

(267)

 

$

55,871

 

Total investment securities held–to-maturity

 

$

54,538

 

$

1,600

 

$

(267)

 

$

55,871

 

 

Amortized cost and fair values of investment securities available-for-sale at June 30, 2015 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Amortized

    

Unrealized

    

Unrealized

    

Fair

 

(in thousands)

 

Cost

 

Gain

 

Loss

 

Value

 

U.S. Agency securities

 

$

30,847

 

$

13

 

$

(278)

 

$

30,582

 

U.S. Sponsored Mortgage-backed securities

 

 

35,026

 

 

17

 

 

(513)

 

 

34,530

 

Total debt securities

 

 

65,873

 

 

30

 

 

(791)

 

 

65,112

 

Equity and other securities

 

 

670

 

 

73

 

 

 —

 

 

743

 

Total investment securities available-for-sale

 

$

66,543

 

$

103

 

$

(791)

 

$

65,855

 

 

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Table of Contents

Amortized cost and fair values of investment securities available-for-sale at December 31, 2014 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Amortized

    

Unrealized

    

Unrealized

    

Fair

 

(in thousands)

 

Cost

 

Gain

 

Loss

 

Value

 

U.S. Agency securities

 

$

37,926

 

$

73

 

$

(465)

 

$

37,534

 

U.S. Sponsored Mortgage-backed securities

 

 

30,293

 

 

58

 

 

(419)

 

 

29,932

 

Total debt securities

 

 

68,219

 

 

131

 

 

(884)

 

 

67,466

 

Equity and other securities

 

 

670

 

 

77

 

 

 —

 

 

747

 

Total investment securities available-for-sale

 

$

68,889

 

$

208

 

$

(884)

 

$

68,213

 

 

The following tables summarize amortized cost and fair values of debt securities by maturity at June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held to Maturity

 

Available for sale

 

 

    

Amortized

    

Fair

    

Amortized

    

Fair

 

 

 

Cost

 

Value

 

Cost

 

Value

 

Within one year

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

After one year, but within five

 

 

4,758

 

 

4,870

 

 

23,112

 

 

22,962

 

After five years, but within ten

 

 

14,497

 

 

14,593

 

 

9,845

 

 

9,702

 

After ten years

 

 

33,886

 

 

33,978

 

 

32,916

 

 

32,448

 

Total

 

$

53,141

 

$

53,441

 

$

65,873

 

$

65,112

 

 

Investment securities with a carrying value of $114,838 at June 30, 2015, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve discount window.

 

The Company's investment portfolio includes securities that are in an unrealized loss position as of June 30, 2015, the details of which are included in the following table.  Although these securities, if sold at June 30, 2015 would result in a pretax loss of $1,539, the Company has no intent to sell the applicable securities at such market values, and maintains the Company has the ability to hold these securities until all principal has been recovered.  Declines in the market values of these securities can be traced to general market conditions which reflect the prospect for the economy as a whole.  When determining other-than-temporary impairment on securities, the Company considers such factors as adverse conditions specifically related to a certain security or to specific conditions in an industry or geographic area, the time frame securities have been in an unrealized loss position, the Company's ability to hold the security for a period of time sufficient to allow for anticipated recovery in value, whether or not the security has been downgraded by a rating agency, and whether or not the financial condition of the security issuer has severely deteriorated.  As of June 30, 2015, the Company considers all securities with unrealized loss positions to be temporarily impaired, and consequently, does not believe the Company will sustain any material realized losses as a result of the current temporary decline in market value.

 

The following table discloses investments in an unrealized loss position at June 30, 2015:

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description and number of positions

 

Less than 12 months

 

12 months or more

 

(in thousands)

    

Fair Value

    

Unrealized Loss

    

Fair Value

    

Unrealized Loss

 

U.S. Agency securities (9)

 

$

13,102

 

$

(135)

 

$

13,964

 

$

(143)

 

U.S. Sponsored Mortgage-backed securities (15)

 

 

18,826

 

 

(168)

 

 

12,836

 

 

(345)

 

Municipal securities (60)

 

 

16,260

 

 

(349)

 

 

8,121

 

 

(399)

 

 

 

$

48,188

 

$

(652)

 

$

34,921

 

$

(887)

 

 

The following table discloses investments in an unrealized loss position at December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description and number of positions

 

Less than 12 months

 

12 months or more

 

(in thousands)

    

Fair Value

    

Unrealized Loss

    

Fair Value

    

Unrealized Loss

 

U.S. Agency securities (9)

 

$

996

 

$

(3)

 

$

26,900

 

$

(462)

 

U.S. Sponsored Mortgage-backed securities (8)

 

 

678

 

 

(3)

 

 

14,824

 

 

(416)

 

Municipal securities (42)

 

 

528

 

 

(3)

 

 

16,489

 

 

(264)

 

 

 

$

2,202

 

$

(9)

 

$

58,213

 

$

(1,142)

 

 

For the three month period ended June 30, 2015 and 2014, the Company sold investments available-for-sale of $0 and $37.2 million, respectively, resulting in gross gains of $0 and $214 and gross losses of $0 and $89. 

 

For the six month period ended June 30, 2015 and 2014, the Company sold investments available-for-sale of $11.4 million and $37.2 million, respectively, resulting in gross gains of $121 and $214 and gross losses of $0 and $89.

 

For the three and six month periods ended June 30, 2015, the Company sold investments held-to-maturity of $421, resulting in gross gains of $5.  The held-to-maturity investment was sold due to a credit downgrade. The Company sold no held-to-maturity investments during 2014.

 

Note 4 – Loans and Allowance for Loan Losses

 

The following table summarizes the primary segments of the allowance for loan losses (“ALL”), segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Home 

    

 

 

    

 

 

(in thousands)

 

Commercial

 

Residential

 

Equity

 

Consumer

 

Total

 

ALL balance March 31, 2015

 

$

4,647

 

$

957

 

$

680

 

$

197

 

$

6,481

 

Charge-offs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Recoveries

 

 

 —

 

 

 —

 

 

 —

 

 

5

 

 

5

 

Provision

 

 

554

 

 

61

 

 

(48)

 

 

(6)

 

 

561

 

ALL balance June 30, 2015

 

$

5,201

 

$

1,018

 

$

632

 

$

196

 

$

7,047

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Home

    

 

    

 

 

 

 

Commercial

 

Residential

 

Equity

 

Consumer

 

Total

 

ALL balance December 31, 2014

 

$

4,363

 

$

962

 

$

691

 

$

207

 

$

6,223

 

Charge-offs

 

 

(409)

 

 

(14)

 

 

 —

 

 

 —

 

 

(423)

 

Recoveries

 

 

21

 

 

1

 

 

1

 

 

5

 

 

28

 

Provision

 

 

1,226

 

 

69

 

 

(60)

 

 

(16)

 

 

1,219

 

ALL balance June 30, 2015

 

$

5,201

 

$

1,018

 

$

632

 

$

196

 

$

7,047

 

Individually evaluated for impairment

 

$

605

 

$

303

 

$

28

 

$

7

 

$

943

 

Collectively evaluated for impairment

 

$

4,596

 

$

715

 

$

604

 

$

189

 

$

6,104

 

 

The following table summarizes the primary segments of the Company loan portfolio as of June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

Commercial

    

Residential

    

Home Equity

    

Consumer

    

Total

 

Individually evaluated for impairment

 

$

12,627

 

$

1,008

 

$

28

 

$

11

 

$

13,674

 

Collectively evaluated for impairment

 

 

644,457

 

 

183,535

 

 

53,078

 

 

16,341

 

 

897,411

 

Total Loans

 

$

657,084

 

$

184,543

 

$

53,106

 

$

16,352

 

$

911,085

 

 

The following table summarizes the primary segments of the allowance for loan losses (“ALL”), segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Home

    

 

 

    

    

 

 

(in thousands)

 

Commercial

 

Residential

 

Equity

 

Consumer

 

Total

 

ALL balance March 31, 2014

 

$

3,902

 

$

746

 

$

555

 

$

248

 

$

5,451

 

Charge-offs

 

 

 —

 

 

(103)

 

 

 —

 

 

(1)

 

 

(104)

 

Recoveries

 

 

4

 

 

 —

 

 

1

 

 

 —

 

 

5

 

Provision

 

 

579

 

 

42

 

 

269

 

 

(1)

 

 

889

 

ALL balance June 30, 2014

 

$

4,485

 

$

685

 

$

825

 

$

246

 

$

6,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Home

    

 

 

    

 

 

 

 

Commercial

 

Residential

 

Equity

 

Consumer

 

Total

 

ALL balance December 31, 2013

 

$

3,609

 

$

519

 

$

554

 

$

253

 

$

4,935

 

Charge-offs

 

 

 —

 

 

(103)

 

 

 —

 

 

(8)

 

 

(111)

 

Recoveries

 

 

4

 

 

 —

 

 

2

 

 

3

 

 

9

 

Provision

 

 

872

 

 

269

 

 

269

 

 

(2)

 

 

1,408

 

ALL balance June 30, 2014

 

$

4,485

 

$

685

 

$

825

 

$

246

 

$

6,241

 

Individually evaluated for impairment

 

$

1,507

 

$

322

 

$

29

 

$

7

 

$

1,865

 

Collectively evaluated for impairment

 

$

2,978

 

$

363

 

$

796

 

$

239

 

$

4,376

 

 

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Table of Contents

The following table summarizes the primary segments of the Company loan portfolio as of June 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

Commercial

    

Residential

    

Equity

    

Consumer

    

Total

  

Individually evaluated for impairment

 

$

6,726

 

$

873

 

$

29

 

$

14

 

$

7,642

 

Collectively evaluated for impairment

 

 

526,776

 

 

142,754

 

 

39,060

 

 

18,022

 

 

726,612

 

Total Loans

 

$

533,502

 

$

143,627

 

$

39,089

 

$

18,036

 

$

734,254

 

 

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates.  Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

 

All loan origination fees and direct loan origination costs are deferred and recognized over the life of the loan. As of June 30, 2015 and 2014, net deferred fees and costs of $1,186 and $1,596, respectively, were included in the carrying value of loans.

 

During December 2013 the Bank purchased $74.3 million in performing commercial real estate secured loans in the northern Virginia area. At the time of acquisition, none of these loans were considered impaired. They were acquired at a premium of roughly 1.024 or $1.8 million, which is being amortized in accordance with ASC 310-20. These loans, with the exception of one, are collectively evaluated for impairment under ASC 450. The loans continue to be individually monitored for payoff activity, and any necessary adjustments to the premium are made accordingly. The loan that has been individually evaluated for impairment is discussed in further detail below in the discussion of impaired loans.

 

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The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Impaired

    

 

 

    

 

 

 

 

 

 

 

 

 

 

 

Loans with

 

 

 

 

 

 

 

 

 

Impaired Loans with

 

No Specific

 

 

 

 

 

 

 

 

 

Specific Allowance

 

Allowance

 

Total Impaired Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpaid

 

 

 

Recorded

 

Related

 

Recorded

 

Recorded

 

Principal

 

June 30, 2015

 

Investment

 

Allowance

 

Investment

 

Investment

 

Balance

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Business

 

$

 —

 

$

 —

 

$

3,039

 

$

3,039

 

$

3,039

 

Commercial Real Estate

 

 

6,530

 

 

507

 

 

 —

 

 

6,530

 

 

6,530

 

  Acquisition & Development

 

 

271

 

 

98

 

 

2,787

 

 

3,058

 

 

4,433

 

          Total Commercial

 

 

6,801

 

 

605

 

 

5,826

 

 

12,627

 

 

14,002

 

Residential

 

 

900

 

 

303

 

 

108

 

 

1,008

 

 

1,008

 

Home Equity

 

 

28

 

 

28

 

 

 —

 

 

28

 

 

28

 

Consumer

 

 

7

 

 

7

 

 

4

 

 

11

 

 

1

 

Total impaired loans

 

$

7,736

 

$

943

 

$

5,938

 

$

13,674

 

$

15,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Business

 

$

 —

 

$

 —

 

$

3,606

 

$

3,606

 

$

3,606

 

Commercial Real Estate

 

 

1,527

 

 

260

 

 

5,021

 

 

6,548

 

 

6,548

 

  Acquisition & Development

 

 

273

 

 

102

 

 

3,355

 

 

3,628

 

 

4,703

 

          Total Commercial

 

 

1,800

 

 

362

 

 

11,982

 

 

13,782

 

 

14,857

 

Residential

 

 

969

 

 

298

 

 

 —

 

 

969

 

 

969

 

Home Equity

 

 

28

 

 

28

 

 

 —

 

 

28

 

 

28

 

Consumer

 

 

2

 

 

2

 

 

 —

 

 

2

 

 

2

 

Total impaired loans

 

$

2,799

 

$

690

 

$

11,982

 

$

14,781

 

$

15,856

 

 

Impaired loans have decreased during 2015, primarily as the result of three loans, of which the recorded investment of each has decreased for various reasons. A loan that is dependent upon the condition of the coal industry, which had a balance of $3.6 million as of December 31, 2014, was reduced by principal payments totaling $567 and now represents a recorded investment of $3.0 million. Meanwhile, two unrelated acquisition and development loans with a total December 31, 2014 balance of $3.1 million were reduced as the result of a principal curtailment of a $268 and a $300 charge-off. These two loans now represent a total recorded investment of $2.5 million. Meanwhile, it is important to note that $8.1 million, or 59%, of the $13.7 million total recorded investment in impaired loans as of June 30, 2015 was concentrated in just two impaired loans. Furthermore, one of the two loans had a balance of $5.0 million and is a loan to finance a commercial real estate property in the Northern Virginia market, which had as primary tenants, government contractors that have vacated the premises as a result of losing significant contracts with the United States government. This loan was purchased from another financial institution in late 2013 but it is the Bank’s position that the “Loan Sales Agreement” has been breached by the selling institution and legal recourse is being pursued by the Bank.

 

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The following tables present the average recorded investment in impaired loans and related interest income recognized for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

Three months ended 

 

 

 

June 30, 2015

 

June 30, 2015

 

 

    

 

    

Interest

    

Interest

    

 

    

Interest

    

Interest

 

 

 

Average

 

Income

 

Income

 

Average

 

Income

 

Income

 

 

 

Investment

 

Recognized

 

Recognized on

 

Investment

 

Recognized

 

Recognized

 

 

 

in Impaired

 

on Accrual

 

Cash

 

in Impaired

 

on Accrual

 

on Cash

 

 

 

Loans

 

Basis

 

Basis

 

Loans

 

Basis

 

Basis

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Commercial Business

 

$

3,369

 

$

78

 

$

75

 

 

3,228

 

 

39

 

 

39

 

  Commercial Real Estate

 

 

6,538

 

 

30

 

 

25

 

 

6,533

 

 

15

 

 

12

 

  Acquisition & Development

 

 

3,337

 

 

4

 

 

4

 

 

3,147

 

 

2

 

 

2

 

    Total Commercial

 

 

13,244

 

 

112

 

 

104

 

 

12,908

 

 

56

 

 

53

 

Residential

 

 

948

 

 

10

 

 

2

 

 

946

 

 

5

 

 

 —

 

Home Equity

 

 

28

 

 

1

 

 

1

 

 

28

 

 

 —

 

 

 —

 

Consumer

 

 

2

 

 

 —

 

 

 —

 

 

1

 

 

 —

 

 

 —

 

Total

 

$

14,222

 

$

123

 

$

107

 

$

13,883

 

$

61

 

$

53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

Three months ended 

 

 

 

June 30, 2014

 

June 30, 2014

 

 

 

Average

 

Interest

 

Interest

 

Average

 

Interest

 

Interest

 

 

 

Investment

 

Income

 

Income

 

Investment

 

Income

 

Income

 

 

 

in Impaired

 

Recognized on

 

Recognized on

 

in Impaired

 

Recognized on

 

Recognized on

 

 

 

Loans

 

Accrual Basis

 

Cash Basis

 

Loans

 

Accrual Basis

 

Cash Basis

 

Commercial

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

  Commercial Business

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

  Commercial Real Estate

 

 

1,911

 

 

30

 

 

35

 

 

1,907

 

 

15

 

 

15

 

  Acquisition & Development

 

 

4,661

 

 

117

 

 

81

 

 

4,825

 

 

58

 

 

69

 

    Total Commercial

 

 

6,572

 

 

147

 

 

116

 

 

6,732

 

 

73

 

 

84

 

Residential

 

 

734

 

 

10

 

 

8

 

 

884

 

 

5

 

 

5

 

Home Equity

 

 

28

 

 

1

 

 

 —

 

 

29

 

 

 —

 

 

 —

 

Consumer

 

 

30

 

 

1

 

 

1

 

 

15

 

 

 —

 

 

 —

 

Total

 

$

7,364

 

$

159

 

$

125

 

$

7,660

 

$

78

 

$

89

 

 

As of June 30, 2015, the Bank did not hold any foreclosed residential real estate property. However, there were five consumer mortgage loans collateralized by residential real estate properties in the process of foreclosure. The total recorded investment in these loans was $420 as of June 30, 2015.

Bank management uses a nine point internal risk rating system to monitor the credit quality of the overall loan portfolio.  The first six categories are considered not criticized, and are aggregated as "Pass" rated.  The criticized rating categories utilized by Bank management generally follow bank regulatory definitions.  The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.  Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.  All loans greater than 90 days past due are considered Substandard.  The portion of any

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loan that represents a specific allocation of the allowance for loan losses is placed in the Doubtful category.  Any portion of a loan that has been charged off is placed in the Loss category.

 

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.  The Bank's Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis.  The Credit Department ensures that a review of all commercial relationships of one million dollars or greater is performed annually.

 

Review of the appropriate risk grade is included in both the internal and external loan review process, and on an ongoing basis.  The Bank has an experienced Credit Department that continually reviews and assesses loans within the portfolio.  The Bank engages an external consultant to conduct loan reviews on at least an annual basis.  Generally, the external consultant reviews larger commercial relationships or criticized relationships.  The Bank’s Credit Department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis.  Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

 

The following table represents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

 

June 30, 2015

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Business

 

$

307,156

 

$

3,385

 

$

3,185

 

$

 —

 

$

313,726

 

Commercial Real Estate

 

 

249,488

 

 

11,072

 

 

7,272

 

 

 —

 

 

267,832

 

Acquisition & Development

 

 

69,527

 

 

2,942

 

 

1,225

 

 

1,832

 

 

75,526

 

Total Commercial

 

 

626,171

 

 

17,399

 

 

11,682

 

 

1,832

 

 

657,084

 

Residential

 

 

181,412

 

 

2,051

 

 

996

 

 

84

 

 

184,543

 

Home Equity

 

 

52,724

 

 

354

 

 

28

 

 

 —

 

 

53,106

 

Consumer

 

 

15,905

 

 

436

 

 

11

 

 

 —

 

 

16,352

 

Total Loans

 

$

876,212

 

$

20,240

 

$

12,717

 

$

1,916

 

$

911,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special

 

 

 

 

 

 

 

 

 

 

December 31, 2014

    

Pass

    

Mention

    

Substandard

    

Doubtful

    

Total

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Business

 

$

234,547

 

$

618

 

$

3,713

 

$

 —

 

$

238,878

 

Commercial Real Estate

 

 

262,215

 

 

11,242

 

 

7,323

 

 

 —

 

 

280,780

 

Acquisition & Development

 

 

34,391

 

 

3,075

 

 

1,496

 

 

2,132

 

 

41,094

 

Total Commercial

 

 

531,153

 

 

14,935

 

 

12,532

 

 

2,132

 

 

560,752

 

Residential

 

 

171,395

 

 

2,147

 

 

965

 

 

 —

 

 

174,507

 

Home Equity

 

 

45,684

 

 

223

 

 

28

 

 

 —

 

 

45,935

 

Consumer

 

 

16,477

 

 

624

 

 

2

 

 

 —

 

 

17,103

 

Total Loans

 

$

764,709

 

$

17,929

 

$

13,527

 

$

2,132

 

$

798,297

 

 

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Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. 

 

A loan that has deteriorated and is in a collection process could warrant non-accrual status. A thorough review is to be presented to the Chief Credit Officer and or the Management Loan Committee ("MLC"), as required with respect to any loan which is in a collection process and to make a determination as to whether the loan should be placed on non-accrual status. The placement of loans on non-accrual status will be subject to applicable regulatory restrictions and guidelines. Generally, loans should be placed in non-accrual status when the loan approaches 90 days past due, when it becomes likely the borrower cannot or will not make scheduled principal or interest payments, when full repayment of principal and interest is not expected, or when the loan displays potential loss characteristics. Normally, all accrued interest should be charged off when a loan is placed in non-accrual status. Any payments subsequently received should be applied to principal. To remove a loan from non-accrual status, all principal and interest due must be paid up to date and the bank is reasonably sure of future satisfactory payment performance. Usually, this requires a six-month recent history of payments due. Removal of a loan from non-accrual status will require the approval of the Chief Credit Officer and or MLC.

 

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-59 Days

 

60-89 Days

 

90 Days +

 

Total

 

 

 

 

Non-

 

90+ Days

 

June 30, 2015

  

Current

  

    Past Due    

  

    Past Due    

  

    Past Due    

  

    Past Due    

  

Total Loans

  

Accrual

  

Still Accruing

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Business

 

$

310,523

 

$

3,107

 

$

 —

 

$

96

 

$

3,203

 

$

313,726

 

$

146

 

$

10

 

Commercial Real Estate

 

 

257,298

 

 

28

 

 

4,837

 

 

5,669

 

 

10,534

 

 

267,832

 

 

5,020

 

 

649

 

Acquisition & Development

 

 

72,385

 

 

 —

 

 

 —

 

 

3,141

 

 

3,141

 

 

75,526

 

 

2,787

 

 

354

 

Total Commercial

 

 

640,206

 

 

3,135

 

 

4,837

 

 

8,906

 

 

16,878

 

 

657,084

 

 

7,953

 

 

1,013

 

Residential

 

 

183,834

 

 

 —

 

 

119

 

 

590

 

 

709

 

 

184,543

 

 

457

 

 

133

 

Home Equity

 

 

52,927

 

 

143

 

 

 —

 

 

36

 

 

179

 

 

53,106

 

 

36

 

 

 —

 

Consumer

 

 

16,151

 

 

10

 

 

1

 

 

190

 

 

201

 

 

16,352

 

 

4

 

 

186

 

Total

 

$

893,118

 

$

3,288

 

$

4,957

 

$

9,722

 

$

17,967

 

$

911,085

 

$

8,450

 

$

1,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30-59 Days

 

60-89 Days

 

90 Days +

 

Total

 

 

 

 

Non-

 

90+ Days

 

December 31, 2014

  

Current

  

    Past Due    

  

    Past Due    

  

    Past Due    

  

    Past Due    

  

Total Loans

  

Accrual

  

Still Accruing

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Business

 

$

233,464

 

$

3,738

 

$

1,500

 

$

176

 

$

5,414

 

$

238,878

 

$

107

 

$

69

 

Commercial Real Estate

 

 

270,600

 

 

234

 

 

4,925

 

 

5,021

 

 

10,180

 

 

280,780

 

 

 —

 

 

5,021

 

Acquisition & Development

 

 

37,739

 

 

 —

 

 

 —

 

 

3,355

 

 

3,355

 

 

41,094

 

 

3,355

 

 

 —

 

Total Commercial

 

 

541,803

 

 

3,972

 

 

6,425

 

 

8,552

 

 

18,949

 

 

560,752

 

 

3,462

 

 

5,090

 

Residential

 

 

167,392

 

 

4,478

 

 

2,126

 

 

511

 

 

7,115

 

 

174,507

 

 

487

 

 

216

 

Home Equity

 

 

45,815

 

 

120

 

 

 —

 

 

 —

 

 

120

 

 

45,935

 

 

 —

 

 

 —

 

Consumer

 

 

16,692

 

 

411

 

 

 —

 

 

 —

 

 

411

 

 

17,103

 

 

 —

 

 

 —

 

Total

 

$

771,702

 

$

8,981

 

$

8,551

 

$

9,063

 

$

26,595

 

$

798,297

 

$

3,949

 

$

5,306

 

 

The ALL is maintained to absorb losses from the loan portfolio.  The ALL is based on the Bank management's continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic

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conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

 

The Bank's methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance.  The total of the two components represents the Bank's ALL.

 

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate.  For general allowances, historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualified factors.

 

The segments described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis.  Company and Bank management track the historical net charge-off activity at the call code level.  A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters.  All pools currently utilize a rolling 12 quarters.

 

"Pass" rated credits are segregated from "Criticized" credits for the application of qualitative factors.    Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

 

Company and Bank management have identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.  The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are:  national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volume and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint. The combination of historical charge-off and qualitative factors are then weighted for each risk grade. These weightings are determined internally based upon the likelihood of loss as a loan’s risk grading deteriorates.

 

Bank management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

 

To estimate the liability for off-balance sheet credit exposures, bank management analyzed the portfolios of letters of credit, non-revolving lines of credit, and revolving lines of credit, and based its calculation on the expectation of future advances of each loan category. Letters of credit were determined to be highly unlikely to advance since they are generally in place only to ensure various forms of performance of the borrowers. In the Bank’s history, there have been no letters of credit drawn upon. In addition, many of the letters of credit are cash secured and do not warrant an allocation. Non-revolving lines of credit were determined to be highly likely to advance as these are typically construction lines. Meanwhile, the likelihood of revolving lines of credit advancing varies with each individual borrower. Therefore, the future usage of each line was estimated based on the average line utilization of the revolving line of credit portfolio as a whole.

Once the estimated future advances were calculated, an allocation rate, which was derived from the Bank’s historical losses and qualitative environmental factors, was applied in the similar manner as those used for the allowance for loan loss calculation. The resulting estimated loss allocations were totaled to determine the off-balance sheet liability related to these loans.

Troubled Debt Restructurings

 

The restructuring of a loan is considered a troubled debt restructuring (“TDR”) if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.  Concessions may include interest rate reductions or

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below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. No new TDR’s have defaulted. At June 30, 2015 and December 31, 2014, the Bank had specific reserve allocations for TDR’s of $619 and $582, respectively.

 

The following tables present details related to loans identified as TDR’s for the periods indicated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New TDRs (1)

 

 

 

For the Six months ended

 

For the Three months ended 

 

 

 

June 30, 2014

 

June 30, 2014

 

 

    

 

    

Pre-Modification

    

Post-Modification

    

 

    

Pre-Modification

    

Post-Modification

  

 

 

 

 

Outstanding

 

Outstanding

 

 

 

Outstanding

 

Outstanding

 

 

 

Number of

 

Recorded

 

Recorded

 

Number of

 

Recorded

 

Recorded

 

 

 

Contracts

 

Investment

 

Investment

 

Contracts

 

Investment

 

Investment

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Acquisition and development

 

1

 

$

496

 

$

492

 

 —

 

$

 —

 

$

 —

 

     Total Commercial

 

1

 

 

496

 

 

492

 

 —

 

 

 —

 

 

 —

 

Residential Real Estate

 

1

 

 

389

 

 

388

 

 —

 

 

 —

 

 

 —

 

            Total

 

2

 

$

885

 

$

880

 

 —

 

$

 —

 

$

 —

 

 


(1)

The pre-modification and post-modification balances represent the balances outstanding immediately before and after modification of the loan.

 

There were no new TDR’s for the six and three months ended June 30, 2015.

 

 

 

NOTE 5 - BORROWED FUNDS

 

Short-term Borrowings

 

Along with traditional deposits, the Bank has access to short-term borrowings from FHLB to fund its operations and investments. Short-term borrowings from FHLB totaled $172.9 million at June 30, 2015, compared to $95.8 million at December 31, 2014.  

 

Information related to short-term borrowings is summarized as follows:

 

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

(Dollars in thousands)

 

2015

 

2014

 

Balance at end of period

 

$

172,871

 

$

95,829

 

Average balance during the three and twelve months ended

 

 

130,956

 

 

76,185

 

Maximum month-end balance during the three and twelve months ended

 

 

172,871

 

 

120,229

 

Weighted-average rate during the three and twelve months ended

 

 

0.32

%

 

0.27

%

Rate at end of period

 

 

0.34

%

 

0.32

%

 

Repurchase agreements:

 

Along with traditional deposits, the Bank has access to securities sold under agreements to repurchase “repurchase

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agreements” with customers represent funds deposited by customers, on an overnight basis, that are collateralized by investment securities owned by the Company. Repurchase agreements with customers are included in borrowings section on the consolidated  balance sheets. All repurchase agreements are subject to terms and conditions of repurchase/security agreements between the Company and the client and are accounted for as secured borrowings. The Company's repurchase agreements reflected in liabilities consist of customer accounts and securities which are pledged on an individual security basis.

As of June 30, 2015 and December 31, 2014, the Bank had repurchase agreements of $26.3 million and $32.7 million, respectively. These borrowings were collateralized by investment securities and FHLB letters of credit with a carrying value of $116.2 million and $163.7 million at June 30, 2015 and December 31, 2014, respectively. Declines in the value of the collateral would require the Company to pledge additional securities. As of June 30, 2015 and December 31, 2014 the Company had $3.9 million and $5.6 million, respectively, of available unpledged securities.

Information related to repurchase agreements is summarized as follows:

 

 

 

 

 

 

 

 

 

    

June 30,

    

December 31,

 

(Dollars in thousands)

 

2015

 

2014

 

Balance at end of period

 

$

26,263

 

$

32,673

 

Average balance during the three and twelve months ended

 

 

26,140

 

 

55,731

 

Maximum month-end balance during the three and twelve months ended

 

 

26,263

 

 

83,781

 

Weighted-average rate during the three and twelve months ended

 

 

0.29

%

 

0.52

%

Rate at end of period

 

 

0.30

%

 

0.35

%

 

 

 

 

 

 

 

 

 

 

Term notes from the FHLB were as follows:

    

June 30,

    

December 31,

 

(Dollars in thousands)

 

2015

 

2014

  

 

 

 

 

 

 

 

 

Fixed interest rate notes, originating between April 2002 and December 2007, due between July 2016 and April 2022, interest of between 4.50% and 5.90% payable monthly

 

$

4,544

 

$

4,618

 

 

 

 

 

 

 

 

 

Amortizing fixed interest rate note, originating February 2007, due February 2022, payable in monthly installments of $5, including interest of 5.22%

 

 

830

 

 

840

 

 

 

$

5,374

 

$

5,458

 

Subordinated Debt

 

In March 2007, the Company completed the private placement of $4 million Floating Rate, Trust Preferred Securities through its MVB Financial Statutory Trust I subsidiary (the “Trust”).  The Company established the trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust.  The proceeds from the sale of the Trust Preferred Securities were loaned to the Company under subordinated Debentures (the “Debentures”) issued to the Trust pursuant to an Indenture.  The Debentures are the only asset of the Trust.  The Trust Preferred Securities have been issued to a pooling vehicle that will use the distributions on the Trust Preferred Securities to securitize note obligations.  The obligations of the Company with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by the Company of the Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantees. The securities issued by the Trust are includable for regulatory purposes as a component of the Company’s Tier I capital.

 

The Trust Preferred Securities and the Debentures mature in 2037 and have been redeemable by the Company since 2012.  Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of 1.62% over the three month LIBOR Rate. The obligations of the Company with respect to the issuance of the trust

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preferred securities constitute a full and unconditional guarantee by the Company of the Trust's obligations with respect to the trust preferred securities to the extent set forth in the related guarantees.

 

On June 30, 2014, MVB Financial Corp. (the “Company”) issued its Convertible Subordinated Promissory Notes Due 2024 (the “Notes”) to various investors in the aggregate principal amount of $29,400,000.  The Notes were issued in $100,000 increments per Note subject to a minimum investment of $1,000,000.  The Notes expire 10 years after the initial issuance date of the Notes (the “Maturity Date”). 

 

Interest on the Notes accrues on the unpaid principal amount of each Note (paid quarterly in arrears on January 1, April 1, July 1 and October 1 of each year) which rate shall be dependent upon the principal invested in the Notes and the holder’s ownership of common stock in the Company.  For investments of less than $3,000,000 in Notes, an ownership of Company common stock representing at least 30% of the principal of the Notes acquired, the interest rate on the Notes is 7% per annum.  For investments of $3,000,000 or greater in Notes and ownership of the Company’s common stock representing at least 30% of the principal of the Notes acquired, the interest rate on the Notes is 7.5% per annum.  For investments of $10,000,000 or greater, the interest rate on the Notes is 7% per annum, regardless of whether the holder owns or acquires MVB common stock.  The principal on the Notes shall be paid in full at the Maturity Date.  On the fifth anniversary of the issuance of the Notes, a holder may elect to continue to receive the stated fixed rate on the Notes or a floating rate determined by LIBOR plus 5% up to a maximum rate of 9%, adjusted quarterly.

 

The Notes are unsecured and subject to the terms and conditions of any senior debt and after consultation with the Board of Governors of the Federal Reserve System, the Company may, after the Notes have been outstanding for five years, and without premium or penalty, prepay all or a portion of the unpaid principal amount of any Note together with the unpaid interest accrued on such portion of the principal amount of such Note.  All such prepayments shall be made pro rata among the holders of all outstanding Notes. 

 

At the election of a holder, any or all of the Notes may be converted into shares of common stock during the 30-day period after the first, second, third, fourth, and fifth anniversaries of the issuance of the Notes or upon a notice to prepay by the Company.  The Notes will convert into common stock based on $16 per share of the Company’s common stock.  The conversion price will be subject to anti-dilution adjustments for certain events such as stock splits, reclassifications, non-cash distributions, extraordinary cash dividends, pro rata repurchases of common stock, and business combination transactions.  The Company must give 20 days’ notice to the holders of the Company’s intent to prepay the Notes, so that holders may execute the conversion right set forth above if a holder so desires. 

 

Repayment of the Notes is subordinated to the Company’s outstanding senior debt including (if any) without limitation, senior secured loans.  No payment will be made by the Company, directly or indirectly, on the Notes, unless and until all of the senior debt then due has been paid in full.  Notwithstanding the foregoing, so long as there exists no event of default under any senior debt, the Company would make, and a holder would receive and retain for the holder’s account, regularly scheduled payments of accrued interest and principal pursuant to the terms of the Notes.

 

The Company must obtain a consent of the holders of the Notes prior to issuing any new senior debt in excess of $15,000,000 after the date of issuance of the Notes and prior to the Maturity Date. 

 

An event of default will occur upon the Company’s bankruptcy or any failure to pay interest, principal, or other amounts owing on the Notes when due.   Upon the occurrence and during the continuance of an event of default (but subject to the subordination provisions of the Notes) the holders of a majority of the outstanding principal amount of the Notes may declare all or any portion of the outstanding principal amount of the Notes due and payable and demand immediate payment of such amount.

 

The Notes are redeemable, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed on any interest payment date after a date five years from the original issue date.

 

The Company reflects subordinated debt in the amount of $33.5 million as of June 30, 2015 and December 31, 2014 and interest expense of $1,092 and $45 for the six months ended June 30, 2015 and 2014.

 

20


 

Table of Contents

A summary of maturities of borrowings and subordinated debt over the next five years is as follows:

(dollars in thousands)

 

 

 

 

 

 

 

Year

    

Amount

 

2015

 

$

172,956

 

2016

 

 

1,246

 

2017

 

 

1,470

 

2018

 

 

81

 

2019

 

 

85

 

Thereafter

 

 

35,931

 

 

 

$

211,769

 

 

 

 

 

 

 

 

Note 6 – Fair Value of Financial Instruments

 

The following summarizes the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial instruments.

 

Level I:      Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

 

Level II:     Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.  The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

 

Level III:    Assets and liabilities that have little to no pricing observability as of the reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

 

Assets Measured on a Recurring Basis

As required by accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The Company classified investments in government securities as Level 2 instruments and valued them using the market approach.  The following measurements are made on a recurring basis.

·

Available-for-sale investment securities -  Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities and private label entities, municipal bonds and corporate debt securities. There have been no changes in valuation techniques for the year ended December 31, 2014. Valuation techniques are consistent with techniques used in prior periods.

 

21


 

Table of Contents

·

Loans held for sale — Loans held for sale are carried at fair value. These loans currently consist of one-to-four-family residential loans originated for sale in the secondary market. Fair value is based on the committed market rates or the price secondary markets are currently offering for similar loans using observable market data.

 

·

Interest rate lock commitment - For mortgage interest rate locks, the fair value is based on either (i) the price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis or (ii) the observable price for individual loans traded in the secondary market for loans that will be delivered on a mandatory basis less (iii) expected costs to deliver the interest rate locks, any expected “pull through rate” is applied to this calculation to estimate the derivative value. 

 

·

Interest rate cap - The fair value of the interest rate cap is determined at the end of each quarter by using Bloomberg Finance which values the interest rate cap using observable inputs from forward and futures yield curves as well as standard market volatility.

 

·

Forward sales commitments – Forward sales commitments are considered derivatives and are recorded at fair value, based on (i) committed sales prices from investors for commitments to sell mortgage loans or (ii) observable market data inputs for commitments to sell mortgage backed securities. A majority of the interest rate locks and loans held for sale are committed on a best efforts basis.

 

 

The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of June 30, 2015 and December 31, 2014 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

(in thousands)

    

Level I

    

Level II

    

Level III

    

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Agency Securities

 

$

 —

 

$

30,582

 

$

 —

 

$

30,582

 

U.S. Sponsored Mortgage backed securities

 

 

 —

 

 

34,530

 

 

 —

 

 

34,530

 

Equity and Other Securities

 

 

73

 

 

670

 

 

 —

 

 

743

 

Loans held for sale

 

 

 —

 

 

116,307

 

 

 —

 

 

116,307

 

Interest rate lock commitment

 

 

 —

 

 

 —

 

 

1,653

 

 

1,653

 

Forward sales commitments

 

 

 

 

 

783

 

 

 

 

 

783

 

Interest rate cap

 

 

 —

 

 

936

 

 

 —

 

 

936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

(in thousands)

    

Level I

    

Level II

    

Level III

    

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Agency Securities

 

$

 —

 

$

37,534

 

$

 —

 

$

37,534

 

U.S. Sponsored Mortgage backed securities

 

 

 —

 

 

29,932

 

 

 —

 

 

29,932

 

Equity and Other Securities

 

 

77

 

 

670

 

 

 —

 

 

747

 

Loans held for sale

 

 

 —

 

 

69,527

 

 

 —

 

 

69,527

 

Interest rate lock commitment

 

 

 —

 

 

 —

 

 

1,020

 

 

1,020

 

Interest rate cap

 

 

 —

 

 

1,423

 

 

 —

 

 

1,423

 

Liability:

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward sales commitments

 

 

 —

 

 

431

 

 

 —

 

 

431

 

 

22


 

Table of Contents

 

The following table represents recurring level III assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the three months ended

 

For the six months ended

 

For the six months ended

 

(in thousands)

    

June 30, 2015

 

June 30, 2014

 

June 30, 2015

 

June 30, 2014

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

1,790

 

$

2,607

 

$

1,020

 

$

2,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized and unrealized gains (loss) included in earnings

 

 

(137)

 

 

603

 

 

633

 

 

939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, end of period

 

$

1,653

 

$

3,210

 

$

1,653

 

$

3,210

 

 

Assets Measured on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain financial assets, financial liabilities, non-financial assets and non-financial liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Certain non-financial assets measured at fair value on a non-recurring basis include foreclosed assets (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. Non-financial assets measured at fair value on a nonrecurring basis during 2015 and 2014 include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for possible loan losses and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other non-interest expense.

 

·

Impaired Loans - Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. For a majority of impaired real estate related loans, the Company obtains a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

 

·

Other Real Estate owned — Other real estate owned, which is obtained through the Bank’s foreclosure process is valued utilizing the appraised collateral value. Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria. At the time, the foreclosure is completed, the Company obtains a current external appraisal.

 

·

Mortgage Servicing Rights – Mortgage servicing rights (“MSRs”) do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available.

23


 

Table of Contents

Assets measured at fair value on a nonrecurring basis as of June 30, 2015 and December 31, 2014 are included in the tables below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

(in thousands)

    

Level I

    

Level II

    

Level III

    

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

 —

 

$

 —

 

$

12,731

 

$

12,731

 

Other real estate owned

 

 

 —

 

 

 —

 

 

375

 

 

375

 

Mortgage servicing rights

 

 

 —

 

 

 —

 

 

1,262

 

 

1,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

(in thousands)

    

Level I

    

Level II

    

Level III

    

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

 —

 

$

 —

 

$

14,091

 

$

14,091

 

Other real estate owned

 

 

 —

 

 

 —

 

 

575

 

 

575

 

Mortgage servicing rights

 

 

 —

 

 

 —

 

 

1,423

 

 

1,423

 

 

The following tables present quantitative information about the Level 3 significant unobservable inputs for assets measured at fair value on a nonrecurring basis at June 30, 2015 and December 31, 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

 

    

 

 

    

Valuation

    

Unobservable

    

 

 

(Dollars in thousands)

 

Fair Value

 

Technique

 

Input

 

Range

 

June 30, 2015:

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

12,731

 

Appraisal of collateral (1)

 

Appraisal adjustments(2)

 

20% - 30%

 

 

 

 

 

 

 

 

Liquidation expense (2)

 

5% - 10%

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned

 

$

375

 

Appraisal of collateral (1)

 

Appraisal adjustments (2)

 

20% - 30%

 

 

 

 

 

 

 

 

Liquidation expense (2)

 

5% - 10%

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

$

1,262

 

Discounted cash flows

 

Constant prepayment rate

 

12%

 

 

 

 

 

 

 

 

Cost of service

 

0.25%

 

 

 

 

 

 

 

 

Discount rate

 

12%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

 

    

 

 

    

Valuation

    

Unobservable

    

 

 

(Dollars in thousands)

 

Fair Value

 

Technique

 

Input

 

Range

 

December 31, 2014:

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

14,091

 

Appraisal of collateral (1)

 

Appraisal adjustments (2)

 

20% - 30%

 

 

 

 

 

 

 

 

Liquidation expense (2)

 

5% - 10%

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned

 

$

575

 

Appraisal of collateral (1)

 

Appraisal adjustments (2)

 

20% - 30%

 

 

 

 

 

 

 

 

Liquidation expense (2)

 

5% - 10%

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage servicing rights

 

$

1,423

 

Discounted cash flows

 

Constant prepayment rate

 

12%

 

 

 

 

 

 

 

 

Cost of service

 

0.25%

 

 

 

 

 

 

 

 

Discount rate

 

12%

 


(1)

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not observable.

(2)

Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

 

24


 

Table of Contents

The following summarizes the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial instruments.

 

Cash and cash equivalents: The carrying amounts for cash and cash equivalents approximate fair value because they have original maturities of 90 days or less and do not present unanticipated credit concerns.

 

Certificates of deposits: The fair values for certificates of deposits are computed based on scheduled future cash flows of principal and interest, discounted at interest rates currently offered for certificates of deposits with similar terms of investors.  No prepayments of principal are assumed.

 

Securities:  Fair values of securities are based on quoted market prices, where available.  If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities.

 

Loans held for sale: Loans held for sale are reported at fair value. These loans currently consist of one-to-four-family residential loans originated for sale in the secondary market. Fair value is based on committed market rates or the price secondary markets are currently offering for similar loans using observable market data. (Level II)

 

Loans:  The fair values for loans are computed based on scheduled future cash flows of principal and interest, discounted at interest rates currently offered for loans with similar terms of borrowers of similar credit quality.  No prepayments of principal are assumed.

 

Mortgage servicing rights: The carrying value of mortgage servicing rights approximates their fair value.    

 

Interest rate lock commitment: For mortgage interest rate locks, the fair value is based on either (i) the price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis or (ii) the observable price for individual loans traded in the secondary market for loans that will be delivered on a mandatory basis less (iii) expected costs to deliver the interest rate locks, any expected “pull through rate” is applied to this calculation to estimate the derivative value. The “pull through rate” range from 78% – 80% and 77% - 81% as of June 30, 2015 and December 31, 2014.

 

Interest rate cap: The fair value of the interest rate cap is determined at the end of each quarter by using Bloomberg Finance which values the interest rate cap using observable inputs from forward and futures yield curves as well as standard market volatility.

 

Accrued interest receivable and payable and repurchase agreements:  The carrying values of accrued interest receivable and payable approximate their fair values.

 

Deposits:  The fair values of demand deposits (i.e., non-interest bearing checking, NOW and money market), savings accounts and other variable rate deposits approximate their carrying values.  Fair values of fixed maturity deposits are estimated using a discounted cash flow methodology at rates currently offered for deposits with similar remaining maturities.  Any intangible value of long-term relationships with depositors is not considered in estimating the fair values disclosed.

 

Forward Sales Commitments: Forward sales commitments are used to mitigate interest rate risk for residential mortgage loans held for sale and interest rate locks and manage expected funding percentages. These instruments are considered derivatives and are recorded at fair value, based on (i) committed sales prices from investors for commitments to sell mortgage loans or (ii) observable market data inputs for commitments to sell mortgage backed securities.

 

FHLB and other borrowings: The fair values for loans are computed based on scheduled future cash flows of principal and interest, discounted at interest rates currently offered for loans with similar terms of borrowers of similar credit quality.  No prepayments of principal are assumed.

 

25


 

Table of Contents

Subordinated debt: The fair values for debt are computed based on scheduled future cash flows of principal and interest, discounted at interest rates currently offered for debt with similar terms of borrowers of similar credit quality.  No prepayments of principal are assumed.

 

Off-balance sheet instruments:  The fair values of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of agreements and the present credit standing of the counterparties.  The amounts of fees currently charged on commitments and standby letters of credit are deemed insignificant, and therefore, the estimated fair values and carrying values are not shown.  

 

26


 

Table of Contents

The carrying values and estimated fair values of the Company’s financial instruments are summarized as follows (in thousands):

 

Fair Value Measurements at:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Quoted Prices in

    

Significant

    

Significant

    

 

 

 

 

    

 

 

    

Active Markets For

 

Other

 

Unobservable

 

 

 

Carrying

 

Estimated

 

Identical Assets

 

Observable

 

Inputs

 

 

    

Value

    

Fair Value

    

(Level 1)

    

Inputs (Level 2)

    

(Level 3)

  

June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,014

 

$

14,014

 

$

14,014

 

$

 —

 

$

 —

 

Certificates of deposits with other banks

 

 

11,659

 

 

11,891

 

 

 —

 

 

11,891

 

 

 —

 

Securities available-for-sale

 

 

65,855

 

 

65,855

 

 

73

 

 

65,782

 

 

 —

 

Securities held-to-maturity

 

 

53,141

 

 

53,441

 

 

 —

 

 

53,441

 

 

 —

 

Loans held for sale

 

 

116,307

 

 

116,307

 

 

 —

 

 

116,307

 

 

 —

 

Loans, net

 

 

904,038

 

 

912,331

 

 

 —

 

 

 —

 

 

912,331

 

Mortgage servicing rights

 

 

1,262

 

 

1,262

 

 

 —

 

 

 —

 

 

1,262

 

Interest rate lock commitment

 

 

1,653

 

 

1,653

 

 

 —

 

 

 —

 

 

1,653

 

Forward sales commitments

 

 

783

 

 

783

 

 

 —

 

 

783

 

 

 —

 

Interest rate cap

 

 

936

 

 

936

 

 

 —

 

 

936

 

 

 —

 

Accrued interest receivable

 

 

2,923

 

 

2,923

 

 

 —

 

 

668

 

 

2,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

890,969

 

$

894,979

 

$

 —

 

$

894,979

 

$

 —

 

Repurchase agreements

 

 

26,263

 

 

26,263

 

 

 —

 

 

26,263

 

 

 —

 

FHLB and other borrowings

 

 

178,245

 

 

178,264

 

 

 —

 

 

178,264

 

 

 —

 

Accrued interest payable

 

 

437

 

 

437

 

 

 —

 

 

437

 

 

 —

 

Subordinated debt

 

 

33,524

 

 

31,172

 

 

 —

 

 

31,172

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

30,077

 

$

30,077

 

$

30,077

 

$

 —

 

$

 —

 

Certificates of deposits with other banks

 

 

11,907

 

 

12,035

 

 

 —

 

 

12,035

 

 

 —

 

Securities available-for-sale

 

 

68,213

 

 

68,213

 

 

77

 

 

68,136

 

 

 —

 

Securities held-to-maturity

 

 

54,538

 

 

55,871

 

 

 —

 

 

55,871

 

 

 —

 

Loans held for sale

 

 

69,527

 

 

69,527

 

 

 —

 

 

69,527

 

 

 —

 

Loans, net

 

 

792,074

 

 

803,036

 

 

 —

 

 

 —

 

 

803,036

 

Mortgage servicing rights

 

 

1,423

 

 

1,423

 

 

 —

 

 

 —

 

 

1,423

 

Interest rate lock commitment

 

 

1,020

 

 

1,020

 

 

 —

 

 

 —

 

 

1,020

 

Interest rate cap

 

 

1,423

 

 

1,423

 

 

 —

 

 

1,423

 

 

 —

 

Accrued interest receivable

 

 

2,387

 

 

2,387

 

 

 —

 

 

728

 

 

1,659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

823,227

 

$

824,078

 

$

 —

 

$

824,078

 

$

 —

 

Repurchase agreements

 

 

32,673

 

 

32,673

 

 

 —

 

 

32,673

 

 

 —

 

FHLB and other borrowings

 

 

101,287

 

 

101,338

 

 

 —

 

 

101,338

 

 

 —

 

Forward sales commitments

 

 

431

 

 

431

 

 

 —

 

 

431

 

 

 —

 

Accrued interest payable

 

 

376

 

 

376

 

 

 —

 

 

376

 

 

 —

 

Subordinated debt

 

 

33,524

 

 

31,172

 

 

 —

 

 

31,172

 

 

 —

 

 

27


 

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Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.  Fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

 

Note 7 – Stock Offerings

 

On June 30, 2014, the Company filed Certificates of Designations for its Convertible Noncumulative Perpetual Preferred Stock, Series B (“Class B Preferred”) and its Convertible Noncumulative Perpetual Preferred Stock, Series C (“Class C Preferred”).  The Class B Preferred Certificate designated 400 shares of preferred stock as Class B Preferred shares.  The Class B Preferred shares carry an annual dividend rate of 6% and are convertible into shares of Company common stock within thirty days after the first, second, third, fourth and fifth anniversaries of the original issue date, based on a common stock price of $16 per share, as adjusted for future corporate activities.  The Class B Preferred shares are redeemable by the Company on or after the fifth anniversary of the original issue date for Liquidation Amount, as defined therein, plus declared and unpaid dividends.  Redemption is subject to any necessary regulatory approvals.  In the event of liquidation of the Company, shares of Class B Preferred stock shall be junior to creditors of the Company and to the shares of Senior Noncumulative Perpetual Preferred Stock, Series A.  Holders of Class B Preferred shares shall have no voting rights, except for authorization of senior shares of stock, amendment to the Class B Preferred shares, share exchanges, reclassifications or changes of control, or as required by law.

 

The Class C Preferred Certificate designated 383.4 shares of preferred stock as Class C Preferred shares.  The Class C Preferred shares carry an annual dividend rate of 6.5% and are convertible into shares of Company common stock within thirty days after the first, second, third, fourth and fifth anniversaries of the original issue date, based on a common stock price of $16 per share, as adjusted for future corporate activities.  The Class C Preferred shares are redeemable by the Company on or after the fifth anniversary of the original issue date for Liquidation Amount, as defined therein, plus declared and unpaid dividends.  Redemption is subject to any necessary regulatory approvals.  In the event of liquidation of the Company, shares of Class C Preferred stock shall be junior to creditors of the Company and to the shares of Senior Noncumulative Perpetual Preferred Stock, Series A and the Class B Preferred shares.  Holders of Class C Preferred shares shall have no voting rights, except for authorization of senior shares of stock, amendment to the Class C Preferred shares, share exchanges, reclassifications or changes of control, or as required by law. The proceeds of these preferred stock offerings will be used to support continued growth of the Company and its Subsidiaries.

 

On September 8, 2011 MVB received $8.5 million in Small Business Lending Fund (SBLF) capital.  MVB issued 8,500 shares of $1,000 per share preferred stock with dividends payable in arrears on January 1, April 1, July 1 and October 1 each year.  At December 31, 2014 and 2013, MVB's loan production qualified for the lowest dividend rate possible of 1%.  MVB may continue to utilize the SBLF capital through March 8, 2016 at the 1% dividend rate. After that time, if the SBLF is not retired, the dividend rate increases to 9%.

 

 Note 8 – Net Income Per Common Share

 

The Company determines basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income plus interest on convertible preferred stock by the weighted average number of shares outstanding increased by both the number of shares that would be issued assuming the exercise of stock options and convertible preferred stock. At June 30, 2015 and 2014, stock options to purchase 678,159 and 494,470 shares at an average price of $10.53 and $9.09, respectively, were outstanding.  For the six and months ended June 30, 2015 and 2014, the dilutive effect of stock options was 197,283 and 213,549 shares, respectively.  For the six and months ended June 30, 2015 and 2014, the dilutive effect of convertible preferred stock was 489,625 and 0 shares, respectively. 

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Table of Contents

 

Note 9 – Segment Reporting

 

During 2013, the Company identified three reportable segments: commercial and retail banking; mortgage banking; and insurance services. Revenue from commercial and retail banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. In addition, the commercial and retail banking segment activity includes holding company revenue and expense items.  

 

Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage origination process. The mortgage banking services are conducted by MVB Mortgage. Revenue from insurance services is comprised mainly of commissions on the sale of insurance products.

 

Information about the reportable segments and reconciliation to the consolidated financial statements for the three and six month periods ended June 30, 2015 and 2014 are as follows:

 

 

r

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Commercial &

  

 

 

  

 

 

  

 

 

  

 

 

 

Three months ended June 30, 2015

 

Retail

 

Mortgage

 

 

 

Intercompany

 

 

 

 

(in thousands)

 

Banking

 

Banking

 

Insurance

 

Eliminations

 

Consolidated

  

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

9,719

 

$

1,137

 

$

 —

 

$

(162)

 

$

10,694

 

Mortgage fee income

 

 

76

 

 

8,833

 

 

 —

 

 

(292)

 

 

8,617

 

Insurance and investment services income

 

 

106

 

 

 —

 

 

859

 

 

 —

 

 

965

 

Other income

 

 

2,132

 

 

(88)

 

 

4

 

 

(1,096)

 

 

952

 

Total operating income

 

 

12,033

 

 

9,882

 

 

863

 

 

(1,550)

 

 

21,228

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

2,193

 

 

529

 

 

 —

 

 

(454)

 

 

2,268

 

Provision for loan losses

 

 

561

 

 

 —

 

 

 —

 

 

 —

 

 

561

 

Salaries and employee benefits

 

 

3,718

 

 

5,574

 

 

902

 

 

 —

 

 

10,194

 

Other expense

 

 

4,485

 

 

1,888

 

 

240

 

 

(1,096)

 

 

5,517

 

Total operating expenses

 

 

10,957

 

 

7,991

 

 

1,142

 

 

(1,550)

 

 

18,540

 

Income (loss) before income taxes

 

 

1,076

 

 

1,891

 

 

(279)

 

 

 —

 

 

2,688

 

Income tax expense (benefit)

 

 

165

 

 

723

 

 

(105)

 

 

 —

 

 

783

 

Net income (loss)

 

 

911

 

 

1,168

 

 

(174)

 

 

 —

 

 

1,905

 

Preferred stock dividends

 

 

143

 

 

 —

 

 

 —

 

 

 —

 

 

143

 

Net income (loss) available to common shareholders

 

$

768

 

$

1,168

 

$

(174)

 

$

 —

 

$

1,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for the three-month period ended June 30, 2015

 

$

638

 

$

71

 

$

2

 

$

-

 

$

711

 

Total assets as of June 30, 2015

 

 

1,390,957

 

 

139,767

 

 

4,321

 

 

(281,979)

 

 

1,253,066

 

Total assets as of December 31, 2014

 

 

1,189,746

 

 

101,791

 

 

4,031

 

 

(185,109)

 

 

1,110,459

 

Goodwill as of June 30, 2015

 

 

897

 

 

16,882

 

 

-

 

 

-

 

 

17,779

 

Goodwill as of December 31, 2014

 

$

897

 

$

16,882

 

$

-

 

$

-

 

$

17,779

 

 

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Commercial &

  

 

 

  

 

 

  

 

 

  

 

 

 

Three months ended June 30, 2014

 

Retail

 

Mortgage

 

 

 

Intercompany

 

 

 

 

(in thousands)

 

Banking

 

Banking

 

Insurance

 

Eliminations

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

8,364

 

$

688

 

$

 —

 

$

110

 

$

9,162

 

Mortgage fee income

 

 

25

 

 

4,649

 

 

 —

 

 

(341)

 

 

4,333

 

Insurance and investment services income

 

 

71

 

 

 —

 

 

749

 

 

 —

 

 

820

 

Other income

 

 

2,746

 

 

604

 

 

 —

 

 

(1,437)

 

 

1,913

 

Total operating income

 

 

11,206

 

 

5,941

 

 

749

 

 

(1,668)

 

 

16,228

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,931

 

 

278

 

 

 —

 

 

(242)

 

 

1,967

 

Provision for loan losses

 

 

889

 

 

 —

 

 

 —

 

 

 —

 

 

889

 

Salaries and employee benefits

 

 

3,331

 

 

3,655

 

 

946

 

 

 —

 

 

7,932

 

Other expense

 

 

4,125

 

 

1,346

 

 

211

 

 

(1,426)

 

 

4,256

 

Total operating expenses

 

 

10,276

 

 

5,279

 

 

1,157

 

 

(1,668)

 

 

15,044

 

Income (loss) before income taxes

 

 

930

 

 

662

 

 

(408)

 

 

 —

 

 

1,184

 

Income tax expense (benefit)

 

 

107

 

 

263

 

 

(155)

 

 

 —

 

 

215

 

Net income (loss)

 

 

823

 

 

399

 

 

(253)

 

 

 —

 

 

969

 

Preferred stock dividends

 

 

22

 

 

 —

 

 

 —

 

 

 —

 

 

22

 

Net income (loss) available to common shareholders

 

$

801

 

$

399

 

$

(253)

 

$

 —

 

$

947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for the three-month period ended June 30, 2014

 

$

2,559

 

$

74

 

 

33

 

$

-

 

$

2,666

 

Total assets as of June 30, 2014

 

 

1,143,107

 

 

101,609

 

 

4,431

 

 

(186,526)

 

 

1,062,621

 

Total assets as of December 31, 2013

 

 

1,021,097

 

 

92,290

 

 

3,012

 

 

(129,339)

 

 

987,060

 

Goodwill as of June 30, 2014

 

 

897

 

 

16,882

 

 

-

 

 

-

 

 

17,779

 

Goodwill as of December 31, 2013

 

$

897

 

$

16,882

 

$

-

 

$

-

 

$

17,779

 

 

30


 

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Commercial &

  

 

 

  

 

 

  

 

 

  

 

 

 

Six months ended June 30, 2015

 

Retail

 

Mortgage

 

 

 

Intercompany

 

 

 

 

(in thousands)

 

Banking

 

Banking

 

Insurance

 

Eliminations

 

Consolidated

  

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

18,622

 

$

1,966

 

$

 —

 

$

(256)

 

$

20,332

 

Mortgage fee income

 

 

63

 

 

15,385

 

 

 —

 

 

(522)

 

 

14,926

 

Insurance and investment services income

 

 

178

 

 

 —

 

 

2,485

 

 

 —

 

 

2,663

 

Other income

 

 

4,068

 

 

2,600

 

 

4

 

 

(2,316)

 

 

4,356

 

Total operating income

 

 

22,931

 

 

19,951

 

 

2,489

 

 

(3,094)

 

 

42,277

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,234

 

 

903

 

 

 —

 

 

(778)

 

 

4,359

 

Provision for loan losses

 

 

1,220

 

 

 —

 

 

 —

 

 

 —

 

 

1,220

 

Salaries and employee benefits

 

 

7,476

 

 

10,664

 

 

1,788

 

 

 —

 

 

19,928

 

Other expense

 

 

9,059

 

 

3,581

 

 

426

 

 

(2,316)

 

 

10,750

 

Total operating expenses

 

 

21,989

 

 

15,148

 

 

2,214

 

 

(3,094)

 

 

36,257

 

Income before income taxes

 

 

942

 

 

4,803

 

 

275

 

 

 —

 

 

6,020

 

Income tax expense

 

 

68

 

 

1,838

 

 

106

 

 

 —

 

 

2,012

 

Net income

 

 

874

 

 

2,965

 

 

169

 

 

 —

 

 

4,008

 

Preferred stock dividends

 

 

285

 

 

 —

 

 

 —

 

 

 —

 

 

285

 

Net income available to common shareholders

 

$

589

 

$

2,965

 

$

169

 

$

 —

 

$

3,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for the six-month period ended June 30, 2015

 

$

997

 

$

99

 

$

9

 

$

-

 

$

1,105

 

Total assets as of June 30, 2015

 

 

1,390,957

 

 

139,767

 

 

4,321

 

 

(281,979)

 

 

1,253,066

 

Total assets as of December 31, 2014

 

 

1,189,746

 

 

101,791

 

 

4,031

 

 

(185,109)

 

 

1,110,459

 

Goodwill as of June 30, 2015

 

 

897

 

 

16,882

 

 

-

 

 

-

 

 

17,779

 

Goodwill as of December 31, 2014

 

$

897

 

$

16,882

 

$

-

 

$

-

 

$

17,779

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Commercial &

  

 

 

  

 

 

  

 

 

  

 

 

 

Six months ended June 30, 2014

 

Retail

 

Mortgage

 

 

 

Intercompany

 

 

 

 

(in thousands)

 

Banking

 

Banking

 

Insurance

 

Eliminations

 

Consolidated

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

16,123

 

$

1,235

 

$

 —

 

$

181

 

$

17,539

 

Mortgage fee income

 

 

(8)

 

 

8,139

 

 

 —

 

 

(588)

 

 

7,543

 

Insurance and investment services income

 

 

129

 

 

 —

 

 

1,707

 

 

 —

 

 

1,836

 

Other income

 

 

5,204

 

 

939

 

 

 —

 

 

(2,702)

 

 

3,441

 

Total operating income

 

 

21,448

 

 

10,313

 

 

1,707

 

 

(3,109)

 

 

30,359

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

3,278

 

 

489

 

 

 —

 

 

(420)

 

 

3,347

 

Provision for loan losses

 

 

1,408

 

 

 —

 

 

 —

 

 

 —

 

 

1,408

 

Salaries and employee benefits

 

 

6,362

 

 

6,632

 

 

1,735

 

 

 —

 

 

14,729

 

Other expense

 

 

7,996

 

 

2,595

 

 

393

 

 

(2,689)

 

 

8,295

 

Total operating expenses

 

 

19,044

 

 

9,716

 

 

2,128

 

 

(3,109)

 

 

27,779

 

Income (loss) before income taxes

 

 

2,404

 

 

597

 

 

(421)

 

 

 —

 

 

2,580

 

Income tax expense (benefit)

 

 

375

 

 

238

 

 

(160)

 

 

 —

 

 

453

 

Net income (loss)

 

 

2,029

 

 

359

 

 

(261)

 

 

 —

 

 

2,127

 

Preferred stock dividends

 

 

43

 

 

 —

 

 

 —

 

 

 —

 

 

43

 

Net income (loss) available to common shareholders

 

$

1,986

 

$

359

 

$

(261)

 

$

 —

 

$

2,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures for the six-month period ended June 30, 2014

 

$

4,428

 

$

191

 

$

343

 

$

-

 

$

4,962

 

Total assets as of June 30, 2014

 

 

1,143,107

 

 

101,609

 

 

4,431

 

 

(186,526)

 

 

1,062,621

 

Total assets as of December 31, 2013

 

 

1,021,097

 

 

92,290

 

 

3,012

 

 

(129,339)

 

 

987,060

 

Goodwill as of June 30, 2014

 

 

897

 

 

16,882

 

 

-

 

 

-

 

 

17,779

 

Goodwill as of December 31, 2013

 

$

897

 

$

16,882

 

$

-

 

$

-

 

$

17,779

 

 

 

 

Commercial & Retail Banking

 

For the three months ended June 30, 2015, the Commercial & Retail Banking segment earned $911 compared to $823 during the three months ended June 30, 2014. Net interest income increased by $1.1 million, mainly the result of average loan balances increasing by $173.0 million. In addition, average subordinated debt increased $29.1 million which led to a $262 increase in interest expense. Noninterest income decreased by $528,  largely the result of decreased gains on sales of portfolio loans of $204 and decreased gains on security sales of $121. The decreased gain on sales of portfolio loans was the result of an $8.1 million decrease in volume of portfolio loans sold. Noninterest expense increased by $747, mainly the result of the following: $387 increase in salaries expense and $300 increase in data processing and communications expense. Preferred stock dividends also increased by $121 as a result of new preferred stock issued by the Company on June 30, 2014.

 

For the six months ended June 30, 2015, the Commercial & Retail Banking segment earned  $874 compared to $2.0 million during the six months ended June 30, 2014. Net interest income increased by $1.5 million, mainly the result of average loan balances increasing by $171.8 million. In addition, average subordinated debt increased $29.2 million which led to a $956 increase in interest expense. Noninterest income decreased by $1.0 million, largely the result of

32


 

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decreased gains on sales of portfolio loans of $533 and decrease of $494 in gain on derivative. The decreased gain on sales of portfolio loans was the result of an $8.1 million decrease in volume of portfolio loans sold. Noninterest expense increased by $2.2 million, mainly the result of the following: $1.1 million in salaries expense, $521 in occupancy and equipment expense, $599 in data processing and communications expense and $446 in professional fees. Preferred stock dividends also increased by $121 as a result of new preferred stock issued by the Company on June 30, 2014.

 

 

Mortgage Banking

 

For the three months ended June 30, 2015, the Mortgage Banking segment earned $1.2 million compared to $400 during the three months ended June 30, 2014. Net interest income increased $198, noninterest income increased by $3.5 million and noninterest expense increased by $2.5 million. The $769 earnings increase is mainly due to a 69% increase in origination volume, which helped drive a $4.2 million increase in mortgage fee income. A  $9.5 million decrease in loans held for sale caused a $691 decrease in gain on derivative. Personnel expense also increased by $1.9 million.

 

For the six months ended June 30, 2015, the Mortgage Banking segment earned $3.0 million compared to $359 during the six months ended June 30, 2014. Net interest income increased $317, noninterest income increased by $8.9 million and noninterest expense increased by $5.0 million. The $2.6 million earnings increase is mainly due to a 94% increase in origination volume, which helped drive a $7.2 million increase in mortgage fee income as well as a  $1.7 million increase in gain on derivative. Personnel expense also increased by $4.0 million.

 

Insurance

 

For the three months ended June 30, 2015, the Insurance segment lost $174 compared to  a $253 loss during the three months ended June 30, 2014. Noninterest income increased by $114 and noninterest expense decreased by $15.  Income tax benefit for the second quarter 2015 decreased by $50.

 

For the six months ended June 30, 2015, the Insurance segment earned $169 compared to  a $261 loss during the six months ended June 30, 2014. Noninterest income increased by $782 and noninterest expense increased by $86.  Income tax expense for the six months ended June 30, 2015 increased by $266.

 

 

Note 10 – Pension Plan

 

The Company participates in a trusteed pension plan known as the Allegheny Group Retirement Plan covering virtually all full-time employees.  Benefits are based on years of service and the employee's compensation.  Accruals under the Plan were frozen as of May 31, 2014. Freezing the plan resulted in a re-measurement of the pension obligations and plan assets as of the freeze date. The pension obligation was re-measured using the discount rate based on the Citigroup Above Median Pension Discount Curve in effect on May 31, 2014 of 4.46%.  

 

Information pertaining to the activity in the Company's defined benefit plan, using the latest available actuarial valuations for the three and six months ended June 30, 2015 and 2014 is as follows:

 

 

 

 

 

 

 

 

 

 

 

    

For the three months ended

    

For the three months ended

 

(in thousands)

 

June 30, 2015

 

June 30, 2014

 

Service cost

 

$

-

 

$

138

 

Interest cost

 

 

78

 

 

77

 

Expected Return on Plan Assets

 

 

(79)

 

 

(79)

 

Amortization of Net Actuarial Loss

 

 

64

 

 

35

 

Amortization of Prior Service Cost

 

 

 —

 

 

 —

 

Net Periodic Benefit Cost

 

$

63

 

$

171

 

 

 

 

 

 

 

 

 

Contributions Paid

 

$

36

 

$

94

 

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For the six months ended

    

For the six months ended

 

(in thousands)

 

June 30, 2015

 

June 30, 2014

 

Service cost

 

$

 —

 

$

346

 

Interest cost

 

 

157

 

 

155

 

Expected Return on Plan Assets

 

 

(158)

 

 

(158)

 

Amortization of Net Actuarial Loss

 

 

128

 

 

70

 

Amortization of Prior Service Cost

 

 

 —

 

 

 —

 

Net Periodic Benefit Cost

 

$

127

 

$

413

 

 

 

 

 

 

 

 

 

Contributions Paid

 

$

72

 

$

188

 

 

 

 

 

 

 

 

 

Note 11Comprehensive Income

 

The following tables present the components of accumulated other comprehensive income (“AOCI”) for the three and six months ended June 30, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the three months ended

 

For the six months ended

 

For the six months ended

 

 

 

 

    

June 30, 2015

 

June 30, 2014

 

June 30, 2015

 

June 30, 2014

    

 

 

 

 

Amount

 

Amount

 

Amount

 

Amount

 

    

 

(in thousands)

 

Reclassified

 

Reclassified

 

Reclassified

 

Reclassified

 

Affected line item in the Statement where net

 

Details about AOCI Components

 

from AOCI

 

from AOCI

 

from AOCI

 

from AOCI

 

income is presented

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains

 

$

5

 

$

125

 

$

126

 

$

125

 

Gain on sale of securities

 

 

 

 

5

 

 

125

 

 

126

 

 

125

 

Total before tax

 

 

 

 

(2)

 

 

(50)

 

 

(50)

 

 

(50)

 

Income tax expense

 

 

 

 

3

 

 

75

 

 

76

 

 

75

 

Net of tax

 

Defined benefit pension plan items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net actuarial loss

 

 

(64)

 

 

(35)

 

 

(128)

 

 

(70)

 

Salaries and benefits

 

 

 

 

(64)

 

 

(35)

 

 

(128)

 

 

(70)

 

Total before tax

 

 

 

 

25

 

 

14

 

 

50

 

 

27

 

Income tax expense

 

 

 

 

(39)

 

 

(21)

 

 

(78)

 

 

(43)

 

Net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total reclassifications

 

$

(36)

 

$

54

 

$

(2)

 

$

32

 

 

 

 

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Unrealized

    

 

 

    

 

 

 

 

 

gains (losses)

 

 

 

 

 

 

 

 

 

on available-

 

Defined benefit

 

 

 

 

 

 

for-sale

 

pension plan

 

 

 

 

(in thousands)

 

securities

 

items

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2015

 

$

(154)

 

$

(2,400)

 

$

(2,554)

 

Other comprehensive income (loss) before reclassification

 

 

(255)

 

 

441

 

 

186

 

Amounts reclassified from AOCI

 

 

(3)

 

 

39

 

 

36

 

Net current period OCI

 

 

(258)

 

 

480

 

 

222

 

Balance at June 30, 2015

 

$

(412)

 

$

(1,920)

 

$

(2,332)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2014

 

$

(1,154)

 

$

(1,485)

 

$

(2,639)

 

Other comprehensive income loss before reclassification

 

 

666

 

 

(210)

 

 

456

 

Amounts reclassified from AOCI

 

 

(75)

 

 

21

 

 

(54)

 

Net current period OCI

 

 

591

 

 

(189)

 

 

402

 

Balance at June 30, 2014

 

$

(563)

 

$

(1,674)

 

$

(2,237)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2015

 

$

(406)

 

$

(2,236)

 

$

(2,642)

 

Other comprehensive income (loss) before reclassification

 

 

70

 

 

238

 

 

308

 

Amounts reclassified from AOCI

 

 

(76)

 

 

78

 

 

2

 

Net current period OCI

 

 

(6)

 

 

316

 

 

310

 

Balance at June 30, 2015

 

$

(412)

 

$

(1,920)

 

$

(2,332)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2014

 

$

(1,476)

 

$

(1,485)

 

$

(2,961)

 

Other comprehensive income loss before reclassification

 

 

988

 

 

(232)

 

 

756

 

Amounts reclassified from AOCI

 

 

(75)

 

 

43

 

 

(32)

 

Net current period OCI

 

 

913

 

 

(189)

 

 

724

 

Balance at June 30, 2014

 

$

(563)

 

$

(1,674)

 

$

(2,237)

 

 

 

 

Note 12 – Mergers and Acquisitions

 

On July 29, 2014 the Company and its subsidiary, the Bank, had entered into an amended Purchase and Assumption Agreement (“Agreement”) with CFG Community Bank (“CFG Bank”) and its parent, Capital Funding Bancorp, Inc., and affiliates, Capital Finance, LLC and Capital Funding, LLC. The Agreement was subsequently terminated on October 31, 2014 by a Mutual Termination Agreement (“Mutual Termination Agreement”) among the parties. 

 

The Agreement and Agreement Amendment provided that the Bank, subject to regulatory approvals, would purchase certain assets and assume certain liabilities of CFG Bank and its subsidiaries for $30 million in consideration, consisting of $26 million in cash and $4 million in shares of Company common stock, subject to certain adjustments; however, under the Mutual Termination Agreement, the Company, CFG Bank, Capital Funding Bancorp, Inc. and the other affiliates of CFG Bank have mutually agreed to terminate the Agreement and Agreement Amendment without any future obligation or liability between or among the parties under the Agreement or Agreement Amendment.  The Bank and CFG Bank, as well as other CFG Bank affiliates, intend to continue a working relationship and may, from time to time, engage in loan transactions and, if applicable, servicing arrangements.

 

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On May 1, 2015, MVB Bank, Inc. (MVB Bank), a wholly-owned subsidiary of MVB Financial Corp. (MVB Financial or the Company), issued a joint news release with BB&T Corporation (BB&T) and Susquehanna Bancshares, Inc. (Susquehanna) announcing the signing of a definitive agreement, subject to customary closing conditions including regulatory approvals, through which MVB Bank will acquire two branch locations of Susquehanna Bank in Berkeley County, West Virginia and will assume approximately $69 million of deposits and $17 million of loans. The two Susquehanna Bank branch locations are slated for divestiture under BB&T’s agreement with the United States Department of Justice and commitments to the Board of Governors of the Federal Reserve System in connection with BB&T’s pending acquisition of Susquehanna. On July 22, 2015, regulatory approvals for the acquisition of the two Susquehanna Bank branch locations were received. The acquisition is expected to close August 28, 2015.

 

 

The following acquisition related costs are included in the consolidated statements of income for the three and six months ended June 30, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

 

Three Months Ended

 

(in thousands)

 

June 30, 2015

 

June 30, 2014

 

Professional fees

 

$

12

 

$

3

 

Marketing

 

 

 —

 

 

2

 

Printing, postage and supplies

 

 

3

 

 

1

 

Equipment depreciation and maintenance

 

 

 —

 

 

1

 

Travel and entertainment

 

 

5

 

 

41

 

Total

 

$

20

 

$

48

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Six months ended

    

Six months ended

 

(in thousands)

 

June 30, 2015

 

June 30, 2014

 

Professional fees

 

$

12

 

$

72

 

Marketing

 

 

 —

 

 

4

 

Printing, postage and supplies

 

 

3

 

 

8

 

Equipment depreciation and maintenance

 

 

 —

 

 

6

 

Travel and entertainment

 

 

5

 

 

73

 

Total

 

$

20

 

$

163

 

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING INFORMATION

 

Statements in this Quarterly Report on Form 10-Q that are based on other than historical data are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others:

 

·

statements with respect to the beliefs, plans, objectives, goals, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of MVB  Financial Corp. (the “Company”) and its subsidiaries (collectively “we,” “our,” or “us), including MVB Bank, Inc. (the “Bank”);

 

·

statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” or similar expressions.

 

These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing the Company’s or the Bank management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in this Management’s Discussion and Analysis section. Factors that might cause such differences include, but are not limited to:

 

·

the ability of the Company, the Bank, MVB Mortgage, and MVB Insurance to successfully execute business plans, manage risks, and achieve objectives;

 

·

changes in local, national and international political and economic conditions, including without limitation the political and economic effects of the recent economic crisis, delay of recovery from that crisis, economic conditions and fiscal imbalances in the United States and other countries, potential or actual downgrades in rating of sovereign debt issued by the United States and other countries, and other major developments, including wars, military actions, and terrorist attacks;

 

·

changes in financial market conditions, either internationally, nationally or locally in areas in which the Company, the Bank,  MVB Mortgage, and MVB Insurance conduct operations, including without limitation, reduced rates of business formation and growth, commercial and residential real estate development and real estate prices;

 

·

fluctuations in markets for equity, fixed-income, commercial paper and other securities, including availability, market liquidity levels, and pricing; changes in interest rates, the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows and competition;

 

·

the ability of the Company, the Bank, MVB Mortgage, and MVB Insurance to successfully conduct acquisitions and integrate acquired businesses;

 

·

potential difficulties in expanding the businesses of the Company, the Bank, MVB Mortgage, and MVB Insurance in existing and new markets;

 

·

increases in the levels of losses, customer bankruptcies, bank failures, claims, and assessments;

 

·

changes in fiscal, monetary, regulatory, trade and tax policies and laws, and regulatory assessments and fees, including policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, and the FDIC;

 

·

the impact of executive compensation rules under the Dodd-Frank Act and banking regulations which may impact the ability of the Company, the Bank, MVB Mortgage, MVB Insurance, and other American financial

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institutions to retain and recruit executives and other personnel necessary for their businesses and competitiveness;

 

·

the impact of the Dodd-Frank Act and of new international standards known as Basel III, and rules and regulations thereunder, many of which have not yet been promulgated, on our required regulatory capital and liquidity levels, governmental assessments on us, the scope of business activities in which we may engage, the manner in which the Company, the Bank, MVB Mortgage, and MVB Insurance engage in such activities, the fees that the Bank, MVB Mortgage, and MVB Insurance may charge for certain products and services, and other matters affected by the Dodd-Frank Act and these international standards;

 

·

continuing consolidation in the financial services industry; new legal claims against the Company, the Bank, MVB Mortgage, and MVB Insurance, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies, or changes in existing legal matters;

 

·

success in gaining regulatory approvals, when required, including for proposed mergers or acquisitions;

 

·

changes in consumer spending and savings habits;

 

·

increased competitive challenges and expanding product and pricing pressures among financial institutions;

 

·

inflation and deflation;

 

·

technological changes and the implementation of new technologies by the Company, the Bank, MVB Mortgage, and MVB Insurance;

 

·

the ability of the Company, the Bank, MVB Mortgage, and MVB Insurance to develop and maintain secure and reliable information technology systems;

 

·

legislation or regulatory changes which adversely affect the operations or business of the Company, the Bank, MVB Mortgage, or MVB Insurance;

 

·

the ability of the Company, the Bank, MVB Mortgage, and MVB Insurance to comply with applicable laws and regulations; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies; and,

 

·

costs of deposit insurance and changes with respect to FDIC insurance coverage levels.

 

Except to the extent required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

 

 

 

 

 

 

 

 

 

 

 

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SUMMARY OF RESULTS OF OPERATIONS

 

At June 30, 2015 and 2014 and for the Six and Three Months Ended June 30, 2015 and 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended

 

Three months ended 

 

 

 

June 30,

 

June 30,

 

 

    

2015

    

2014

    

2015

    

2014

 

Net income to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average assets (annualized)

 

 

0.70

%

 

0.42

%

 

0.64

%

 

0.37

%

Average stockholders’ equity (annualized)

 

 

7.25

%

 

4.40

%

 

6.84

%

 

3.93

%

Net interest margin

 

 

3.01

%

 

3.07

%

 

3.06

%

 

2.99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average stockholders’ equity to average assets

 

 

9.59

%

 

9.54

%

 

9.35

%

 

9.42

%

Total loans to total deposits (end of period)

 

 

102.26

%

 

98.29

%

 

102.26

%

 

98.29

%

Allowance for loan losses to total loans (end of period)

 

 

0.77

%

 

0.85

%

 

0.77

%

 

0.85

%

Efficiency ratio

 

 

80.90

%

 

85.24

%

 

82.90

%

 

85.46

%

Bank Capital ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 capital ratio

 

 

12.25

%

 

15.20

%

 

12.25

%

 

15.20

%

Risk-based capital ratio

 

 

12.96

%

 

16.01

%

 

12.96

%

 

16.01

%

Leverage ratio

 

 

10.33

%

 

11.25

%

 

10.33

%

 

11.25

%

Common Equity Tier 1 capital ratio

 

 

12.25

%

 

N/A

 

 

12.25

%

 

N/A

 

Cash dividends on common stock as a percentage of net income

 

 

7.97

%

 

14.90

%

 

7.97

%

 

14.90

%

Per share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share (end of period)

 

$

12.05

 

$

11.60

 

$

12.05

 

$

11.60

 

Basic earnings per share

 

$

0.47

 

$

0.27

 

$

0.22

 

$

0.12

 

Diluted earnings per share

 

$

0.46

 

$

0.26

 

$

0.22

 

$

0.12

 

 

Introduction

 

MVB Financial Corp. (“the Company”) was formed on January 1, 2004, as a bank holding company and, effective December 19, 2012, became a financial holding company.  The Company features multiple subsidiaries and affiliated businesses, including MVB Bank, Inc. (the “Bank” or “MVB Bank”) and its wholly-owned subsidiary MVB Mortgage and MVB Insurance, LLC (“MVB Insurance”). On December 31, 2013, three Company subsidiaries, MVB-Central, Inc. (a second-tier level holding company), MVB-East, Inc. (a second tier holding company) and Bank Compliance Solutions, Inc. (an inactive subsidiary) were merged into the Company.

 

The Bank was formed on October 30, 1997 and chartered under the laws of the State of West Virginia.  The Bank commenced operations on January 4, 1999. In August of 2005, the Bank opened a full service office in neighboring Harrison County, West Virginia.  During October of 2005, the Bank purchased a branch office in Jefferson County, West Virginia, situated in West Virginia’s eastern panhandle.  During the third quarter of 2007, the Bank opened a full service office in the Martinsburg area of Berkeley County, West Virginia.  In the second quarter of 2011, the Bank opened a banking facility in the Cheat Lake area of Monongalia County, West Virginia.  The Bank opened its second Harrison County, West Virginia location, the downtown Clarksburg office in the historic Empire Building during the fourth quarter of 2012. 

 

Also during the fourth quarter of 2012, the Bank acquired Potomac Mortgage Group, Inc. (“PMG” which, following July 15, 2013, began doing business under the registered trade name “MVB Mortgage”), a mortgage company in the northern Virginia area, and fifty percent (50%) interest in a mortgage services company, Lender Service Provider, LLC (“LSP”).  In the third quarter of 2013, this fifty percent (50%) interest in LSP was reduced to a twenty-five percent (25%) interest through a sale of a partial interest.  This PMG acquisition provided the Company and the Bank the opportunity to make the mortgage banking operation a much more significant line of business to further diversify its net income stream.  

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MVB Mortgage has thirteen mortgage only offices, located in Virginia, Washington, DC, as well as North Carolina and South Carolina, and, in addition, has mortgage loan originators located at select Bank locations throughout West Virginia.

 

In the first quarter of 2013, the Bank opened its second Monongalia County location in the Sabraton area of Morgantown, West Virginia.  In the second quarter of 2013, the Bank opened its second full service office in Berkeley County, West Virginia, at Edwin Miller Boulevard. In addition, the Bank opened a loan production office at 184 Summers Street, Charleston, Kanawha County, West Virginia, which was subsequently moved to 400 Washington Street East, Charleston, West Virginia and later replaced during March 2015 by a full service branch at the same location. During the first quarter of 2014, the Company continued to focus on growth in the Harrison, Berkeley, Jefferson and Monongalia County areas, as well as the Kanawha county area, as the primary method for reaching performance goals. In addition, the Bank opened a loan production office in Reston, Fairfax County, Virginia, from which the Bank operates as MVB Commercial Lending Company. During January 2015, the Bank opened a location at 100 NASA Boulevard, Fairmont, Marion County, West Virginia, which replaced the 9789 Mall Loop, White Hall, Marion County, West Virginia location as the Technology Park location offers a drive-thru facility to better serve customers. During March 2015, the location at 9789 Mall Loop was closed.  Additionally during March 2015, the Bank opened a new full service location at 400 Washington Street East, Charleston, Kanawha County, West Virginia, replacing its loan production office at the same address. The Company continuously reviews key performance indicators to measure success.

 

Currently, the Bank operates ten full-service banking branches in West Virginia, which are located at:  301 Virginia Avenue in Fairmont, Marion County; 100 NASA Boulevard in Fairmont, Marion County; 1000 Johnson Avenue in Bridgeport, Harrison County; 406 West Main St. in Clarksburg, Harrison County; 88 Somerset Boulevard in Charles Town, Jefferson County; 651 Foxcroft Avenue in Martinsburg, Berkeley County; 2400 Cranberry Square in Cheat Lake, Monongalia County; 10  Sterling  Drive in Morgantown, Monongalia County; and 231 Aikens Center in Martinsburg, Berkeley County; 400 Washington Street East in Charleston, Kanawha Country. In addition, as noted, the Bank operates a loan production office as MVB Commercial Lending Company, at 1801 Reston Parkway, Suite 103, Reston, Fairfax County, Virginia.

 

In addition to MVB Mortgage, the Company has a wholly-owned subsidiary, MVB Insurance, LLC.  MVB Insurance was originally formed in 2000 and reinstated in 2005, as a Bank subsidiary.  Effective June 1, 2013, MVB Insurance became a direct subsidiary of the Company.  MVB Insurance offers select insurance products such as title insurance, individual insurance, commercial insurance, employee benefits insurance, and professional liability insurance.  MVB Insurance maintains its headquarters at 301 Virginia Avenue, Fairmont, West Virginia, and operates offices at: 48 Donley Street, Suite 703, Morgantown, West Virginia, 400 Washington Street East, Charleston, West Virginia,; and 300 Wharton Circle, Suite 260, Triadelphia, West Virginia.

 

The Company’s primary business activities, through its Subsidiaries, are currently community banking, mortgage banking, insurance services, and wealth management.  As a community banking entity, the Bank offers its customers a full range of products through various delivery channels.  Such products and services include checking accounts, NOW accounts, money market and savings accounts, time certificates of deposit, commercial, installment, commercial real estate and residential real estate mortgage loans, debit cards, and safe deposit rental facilities.  Services are provided through our walk-in offices, automated teller machines (“ATMs”), drive-in facilities, and internet and telephone banking. Additionally, the Bank offers non-deposit investment products through an association with a broker-dealer.  Since the opening date of January 4, 1999, the Bank, has experienced significant growth in assets, loans, and deposits due to overwhelming community and customer support in the Marion County, West Virginia and Harrison County, West Virginia markets, expansion into West Virginia’s eastern panhandle counties and, most recently, into Monongalia County, West Virginia.  With the acquisition of PMG, mortgage banking is now a much more significant focus, which has opened up increased market opportunities in the Washington, District of Columbia metropolitan region and added enough volume to better diversify the Company’s earnings stream.

 

This discussion and analysis should be read in conjunction with the prior year-end audited financial statements and footnotes thereto included in the Company’s filing on Form 10-K and the unaudited financial statements, ratios, statistics, and discussions contained elsewhere in this Form 10-Q. At June 30, 2015, the Company had 351 full-time

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equivalent employees. The Company’s principal office is located at 301 Virginia Avenue, Fairmont, West Virginia 26554, and its telephone number is (304) 363-4800.  The Company’s Internet web site is www.mvbbanking.com.

 

Application of Critical Accounting Policies

 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the banking industry.  Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.  Application of certain accounting policies inherently requires a greater reliance on the use of estimates, assumptions and judgments and as such, the probability of actual results being materially different from reported estimates is increased.  Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event.  Carrying assets and liabilities at fair value inherently results in more financial statement volatility.  The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal forecasting techniques.

 

The most significant accounting policies followed by the Company are presented in Note 1 to the audited consolidated financial statements included in the Company’s 2014 Annual Report on Form 10-K. These policies, along with the disclosures presented in the other financial statement notes and in management’s discussion and analysis of operations, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses to be the accounting area that requires the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

 

The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio.  Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of losses inherent in classifications of homogeneous loans based on historical loss experience of peer banks, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.  Non-homogeneous loans are specifically evaluated due to the increased risks inherent in those loans.  The loan portfolio also represents the largest asset type in the consolidated balance sheet.  Note 1 to the consolidated financial statements in MVB’s 10-K describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in the Allowance for Loan Losses section of Management’s Discussion and Analysis in this quarterly report on Form 10-Q.

 

All dollars are expressed in thousands, unless as otherwise noted or specified.

 

Results of Operations

 

Overview of the Statements of Income

 

For the three months ended June 30, 2015, the Company earned $1.9 million compared to $1.0 million in the second quarter of 2014.  Net interest income increased by $1.2 million, noninterest income increased by $3.5 million and noninterest expenses increased by $3.5 million.  The increase in net interest income was driven mainly by the continued growth of the Company balance sheet, with $173.0 million in average loan growth and despite an increase in average interest bearing liabilities of $117.0 million and an increase in interest expense of $338.  The increase in average interest bearing liabilities generated the increase in interest expense of $338, $523 of the increase was related to the issuance of subordinated debt in June 2014, which increased cost of funds on subordinated debt by 421 basis points. There was also a $498 decrease in NOW interest expense for the three months ended June 30, 2015. This decrease was related to the

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subordinated debt in that the funds were held in escrow during the three months ended 2014 up until the subordinated debt was issued on June 30, 2014.

 

Loan loss provisions of $561 and $889 were made for the quarters ended June 30, 2015 and 2014, respectively. The decrease in loan loss provision is attributable to significantly less residential real estate loan growth, the decreasing nature of the historical loss rate within the home equity loan portfolio and lower historical levels of charge-offs. The provision for loan losses, which is a product of management’s formal quarterly analysis, is recorded in response to inherent risks in the loan portfolio.  The Company charged off no in loans during the second quarter of 2015 versus $104 for the same time period in 2014.  

 

For the six months ended June 30, 2015, the Company earned $4.0 million compared to $2.1 million for the six months ended June 30, 2014.  Net interest income increased by $1.8 million, noninterest income increased by $9.1 million and noninterest expenses increased by $7.7 million.  The increase in net interest income was driven mainly by the continued growth of the Company balance sheet, with $171.8 million in average loan growth and despite an increase in average interest bearing liabilities of $113.3 million and an increase in interest expense of $1.1 million. The increase in average interest bearing liabilities generated the increase in interest expense of $1.1 million, $1.0 million which related to the issuance of subordinated debt in June 2014, which increased cost of funds on subordinated debt by 441 basis points. There was also a $401 decrease in NOW interest expense for the six months ended June 30, 2015. This decrease was related to the subordinated debt in that the funds were held in escrow during the six months ended 2014 up until the subordinated debt was issued on June 30, 2014.

 

 

Loan loss provisions of $1.2 million and $1.4 million were made for the six months ended June 30, 2015 and 2014, respectively. The decrease in loan loss provision is attributable to significantly less residential real estate loan growth, the decreasing nature of the historical loss rate within the home equity loan portfolio and lower historical levels of charge-offs. The provision for loan losses, which is a product of management’s formal quarterly analysis, is recorded in response to inherent risks in the loan portfolio.  The Company charged off $423 in loans during the six month period ended June 30, 2015 versus $111 for the same time period in 2014.  

 

Interest Income and Expense

 

Net interest income is the amount by which interest income on earning assets exceeds interest expense on interest-bearing liabilities. Interest-earning assets include loans and investment securities. Interest-bearing liabilities include interest-bearing deposits and repurchase agreements, subordinated debt and Federal Home Loan Bank advances. Net interest income is a primary source of revenue for the bank. Changes in market interest rates, as well as changes in the mix and volume of interest-earning assets and interest-bearing liabilities impact net interest income. Net interest margin is calculated by dividing net interest income by average interest-earning assets. This ratio serves as a performance measurement of the net interest revenue stream generated by the Bank’s balance sheet.

 

The net interest margin for the three months ended June 30, 2015 and 2014 was 3.06% and 2.99% respectively.  The 7 basis point increase in the net interest margin for the quarter ended June 30, 2015 was the result of an 8 basis point increase in yield, mainly the result of a 32 basis point increase in yield on real estate loans and loans held for sale. Interest expense related to the new subordinated debt that was issued on June 30, 2014 increased $523. The new subordinated debt earned an average rate of approximately 7% during the three month period ended June 30, 2015. This was offset by the decrease in interest expense on NOW deposits of $498, as discussed above. The continued low rate environment and increasing competition for quality credit continues to apply pressure upon the Bank’s loan portfolio yield. The Bank was able to grow average loan balances by $173.0 million, which enabled an increase in net interest income of $1.2 million. Additionally, investment securities average balance declined by $36.2 million through sales and maturities, and the resulting funds earned higher rates in the loan portfolio.  An increase in the Bank’s average non-interest bearing balances of $12.4 million led to a favorable increase in the impact of non-interest bearing funds on the margin by 1 basis point.

 

The net interest margin for the six months ended June 30, 2015 and 2014 was 3.01% and 3.07% respectively.  The 6 basis point decrease in the net interest margin for the six months ended June 30, 2015 was the result of a 12 basis point

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increase in cost of funds and a 4 basis point increase in yield. The 12 basis point increase in cost of funds was mainly the result of the addition of new subordinated debt. Interest expense related to the new subordinated debt that was issued on June 30, 2014 increased $1.0 million. The 4 basis point increase in yield was mainly the result of a 19 basis point increase in yield on real estate loans and loans held for sale   The continued low rate environment and increasing competition for quality credit continues to apply pressure upon the Bank’s loan portfolio yield. The Bank was able to grow average loan balances by $171.8 million, which enabled an increase in net interest income of $2.8 million. Additionally, investment securities average balance declined by $39.6 million through sales and maturities, and the resulting funds earned higher rates in the loan portfolio.  An increase in the Bank’s average non-interest bearing balances of $12.5 million led to a favorable increase in the impact of non-interest bearing funds on the margin by 2 basis point.

 

Company and Bank management continuously monitor the effects of net interest margin on the performance of the Bank and, thus, the Company. Growth and mix of the balance sheet will continue to impact net interest margin in future periods.

 

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Average Balances and Interest Rates

(Unaudited)(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

June 30, 2015

 

June 30, 2014

 

 

    

    

 

    

Interest

    

    

    

    

 

    

Interest

    

 

 

 

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

 

 

Balance

 

Expense

 

Cost

 

Balance

 

Expense

 

Cost

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits in banks

 

$

13,035

 

$

9

 

0.28

%

$

13,347

 

$

9

 

0.27

%

CD’s with other banks

 

 

11,659

 

 

54

 

1.85

 

 

9,427

 

 

42

 

1.78

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

53,396

 

 

222

 

1.66

 

 

97,470

 

 

358

 

1.47

 

Tax-exempt

 

 

64,172

 

 

382

 

2.38

 

 

56,304

 

 

407

 

2.89

 

Loans and loans held for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

593,831

 

 

6,308

 

4.25

 

 

483,635

 

 

5,476

 

4.53

 

Tax exempt

 

 

21,179

 

 

188

 

3.55

 

 

38,226

 

 

350

 

3.66

 

Real estate

 

 

326,220

 

 

3,356

 

4.12

 

 

244,634

 

 

2,327

 

3.80

 

Consumer

 

 

16,743

 

 

175

 

4.18

 

 

18,479

 

 

193

 

4.18

 

Allowance for loan losses

 

 

(6,740)

 

 

 

 

 

 

 

(5,924)

 

 

 

 

 

 

    Net loans

 

 

951,233

 

 

10,027

 

4.22

 

 

779,050

 

 

8,346

 

4.29

 

Total earning assets

 

 

1,100,235

 

 

10,694

 

3.89

 

 

961,522

 

 

9,162

 

3.81

 

Cash and due from banks

 

 

13,381

 

 

 

 

 

 

 

19,834

 

 

 

 

 

 

Other assets

 

 

83,404

 

 

 

 

 

 

 

72,937

 

 

 

 

 

 

    Total assets

 

$

1,190,280

 

 

 

 

 

 

$

1,048,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW

 

$

426,094

 

$

641

 

0.60

%

$

389,650

 

$

1,139

 

1.17

%

Money market checking

 

 

61,611

 

 

91

 

0.59

 

 

30,160

 

 

30

 

0.40

 

Savings

 

 

37,364

 

 

28

 

0.30

 

 

37,897

 

 

31

 

0.33

 

IRAs

 

 

10,765

 

 

33

 

1.23

 

 

9,609

 

 

26

 

1.08

 

CDs

 

 

276,272

 

 

729

 

1.06

 

 

219,094

 

 

465

 

0.85

 

Repurchase agreements & federal funds sold

 

 

26,140

 

 

20

 

0.31

 

 

78,699

 

 

107

 

0.54

 

FHLB and other borrowings

 

 

123,847

 

 

177

 

0.57

 

 

109,098

 

 

143

 

0.52

 

Subordinated debt

 

 

33,524

 

 

549

 

6.55

 

 

4,446

 

 

26

 

2.34

 

Total interest-bearing liabilities

 

 

995,617

 

 

2,268

 

0.91

 

 

878,653

 

 

1,967

 

0.90

 

Non-interest bearing demand deposits

 

 

75,338

 

 

 

 

 

 

 

62,904

 

 

 

 

 

 

Other liabilities

 

 

7,980

 

 

 

 

 

 

 

8,091

 

 

 

 

 

 

    Total liabilities

 

 

1,078,935

 

 

 

 

 

 

 

949,648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

16,334

 

 

 

 

 

 

 

8,586

 

 

 

 

 

 

Common stock

 

 

8,038

 

 

 

 

 

 

 

7,954

 

 

 

 

 

 

Paid-in capital

 

 

74,447

 

 

 

 

 

 

 

72,203

 

 

 

 

 

 

Treasury stock

 

 

(1,084)

 

 

 

 

 

 

 

(1,084)

 

 

 

 

 

 

Retained earnings

 

 

16,162

 

 

 

 

 

 

 

13,698

 

 

 

 

 

 

Accumulated other comprehensive income

 

 

(2,552)

 

 

 

 

 

 

 

(2,636)

 

 

 

 

 

 

    Total stockholders’ equity

 

 

111,345

 

 

 

 

 

 

 

98,721

 

 

 

 

 

 

    Total liabilities and stockholders’ equity

 

$

1,190,280

 

 

 

 

 

 

$

1,048,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

2.98

 

 

 

 

 

 

 

2.92

 

Impact of non-interest bearing funds on margin

 

 

 

 

 

 

 

0.08

 

 

 

 

 

 

 

0.07

 

Net interest income-margin

 

 

 

 

$

8,426

 

3.06

%

 

 

 

$

7,195

 

2.99

%

 

 

 

 

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Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Six Months Ended

 

 

 

June 30, 2015

 

June 30, 2014

 

 

    

    

 

    

Interest

    

    

    

    

 

    

Interest

    

    

 

 

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

 

 

Balance

 

Expense

 

Cost

 

Balance

 

Expense

 

Cost

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits in banks

 

$

14,404

 

$

19

 

0.26

%

$

12,380

 

$

14

 

0.23

%

CD’s with other banks

 

 

11,723

 

 

108

 

1.84

 

 

9,427

 

 

83

 

1.76

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

53,846

 

 

461

 

1.71

 

 

101,675

 

 

769

 

1.51

 

Tax-exempt

 

 

64,758

 

 

770

 

2.38

 

 

56,525

 

 

820

 

2.90

 

Loans and loans held for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

572,626

 

 

12,015

 

4.20

 

 

459,212

 

 

10,312

 

4.49

 

Tax exempt

 

 

21,016

 

 

371

 

3.53

 

 

37,719

 

 

691

 

3.66

 

Real estate

 

 

307,210

 

 

6,235

 

4.06

 

 

230,590

 

 

4,462

 

3.87

 

Consumer

 

 

17,027

 

 

353

 

4.15

 

 

18,539

 

 

388

 

4.19

 

Allowance for loan losses

 

 

(6,678)

 

 

 

 

 

 

 

(5,628)

 

 

 

 

 

 

    Net loans

 

 

911,201

 

 

18,974

 

4.16

 

 

740,432

 

 

15,853

 

4.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total earning assets

 

 

1,062,610

 

 

20,332

 

3.83

 

 

926,067

 

 

17,539

 

3.79

 

Cash and due from banks

 

 

14,077

 

 

 

 

 

 

 

22,306

 

 

 

 

 

 

Other assets

 

 

83,105

 

 

 

 

 

 

 

71,895

 

 

 

 

 

 

    Total assets

 

$

1,153,114

 

 

 

 

 

 

$

1,014,640

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW

 

$

420,579

 

$

1,290

 

0.61

%

$

364,514

 

$

1,691

 

0.93

%

Money market checking

 

 

57,316

 

 

172

 

0.60

 

 

30,972

 

 

61

 

0.39

 

Savings

 

 

37,053

 

 

55

 

0.30

 

 

38,278

 

 

68

 

0.36

 

IRAs

 

 

10,305

 

 

62

 

1.20

 

 

9,607

 

 

56

 

1.17

 

CDs

 

 

260,163

 

 

1,310

 

1.01

 

 

225,960

 

 

920

 

0.81

 

Repurchase agreements & federal funds sold

 

 

28,050

 

 

44

 

0.31

 

 

77,007

 

 

233

 

0.61

 

FHLB and other borrowings

 

 

114,796

 

 

334

 

0.58

 

 

97,821

 

 

273

 

0.56

 

Subordinated debt

 

 

33,524

 

 

1,092

 

6.51

 

 

4,286

 

 

45

 

2.10

 

Total interest-bearing liabilities

 

 

961,786

 

 

4,359

 

0.91

 

 

848,445

 

 

3,347

 

0.79

 

Non-interest bearing demand deposits

 

 

73,815

 

 

 

 

 

 

 

61,319

 

 

 

 

 

 

Other liabilities

 

 

6,977

 

 

 

 

 

 

 

8,125

 

 

 

 

 

 

    Total liabilities

 

 

1,042,578

 

 

 

 

 

 

 

917,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

16,334

 

 

 

 

 

 

 

8,543

 

 

 

 

 

 

Common stock

 

 

8,036

 

 

 

 

 

 

 

7,826

 

 

 

 

 

 

Paid-in capital

 

 

74,415

 

 

 

 

 

 

 

70,383

 

 

 

 

 

 

Treasury stock

 

 

(1,084)

 

 

 

 

 

 

 

(1,084)

 

 

 

 

 

 

Retained earnings

 

 

15,431

 

 

 

 

 

 

 

13,879

 

 

 

 

 

 

Accumulated other comprehensive income

 

 

(2,596)

 

 

 

 

 

 

 

(2,796)

 

 

 

 

 

 

    Total stockholders’ equity

 

 

110,536

 

 

 

 

 

 

 

96,751

 

 

 

 

 

 

    Total liabilities and stockholders’ equity

 

$

1,153,114

 

 

 

 

 

 

$

1,014,640

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

 

 

 

2.92

 

 

 

 

 

 

 

3.00

 

Impact of non-interest bearing funds on margin

 

 

 

 

 

 

 

0.09

 

 

 

 

 

 

 

0.07

 

Net interest income-margin

 

 

 

 

$

15,973

 

3.01

%

 

 

 

$

14,192

 

3.07

%

 

 

 

 

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Non-Interest Income

 

Mortgage fee income, insurance and investment services income and gain on derivatives generate the core of the Bank’s noninterest income. Also, gain on sale of portfolio loans continue to be part of the core of the Bank’s noninterest income.

 

For the three months ended June 30, 2015, noninterest income totaled $10.5 million compared to $7.1 million for the same time period in 2014.  The $3.5 million increase in noninterest income was mainly the result of an increase in mortgage fee income of $4.3 million and a decrease in gain on derivatives of $747. The increase in mortgage fee income was due to an increase in loan production and loan sale volume as a result of an expansion into new markets and a decrease in interest rates. The decrease in gain on derivatives was a result of a $9.5 million decrease in loans held for sale.  Further, the decrease in interest rates has increased the share of refinances from 18% during the second quarter of 2014 to 27% during the second quarter of 2015.  

 

For the six months ended June 30, 2015, noninterest income totaled $21.9 million compared to $12.8 million for the same time period in 2014.  The $9.1 million increase in noninterest income was mainly the result of an increase in mortgage fee income of $7.4 million, an increase in gain on derivatives of $1.2 million and an increase in insurance and investment services income of $827.  Both the increase in mortgage fee income and gain on derivatives was due to an increase in loan production and loan sale volume as a result of an expansion into new markets and a decrease in interest rates. Further, the decrease in interest rates has increased the share of refinances from 19% during the six months ended June 30, 2014 to 41% during the same time period in 2015.    

 

 

Non-Interest Expense

 

The Company had 351 full-time equivalent personnel at June 30, 2015, as noted, compared to 313 full-time equivalent personnel as of June 30, 2014.  Company and Bank management will continue to strive to find new ways of increasing efficiencies and leveraging its resources, while effectively optimizing customer service.

 

Salaries and employee benefits, occupancy and equipment,  data processing and communications, mortgage processing and professional fees generate the core of the Company’s noninterest expense. The Company’s efficiency ratio was 82.90% for the second  quarter of 2015 compared to 85.46% for the second quarter of 2014. This ratio measures the efficiency of noninterest expenses incurred in relationship to net interest income plus noninterest income.  The decreased efficiency ratio is the result of net interest income and noninterest income outpacing the growth in noninterest expense.

 

For the three months ended June 30, 2015,  noninterest expense totaled $15.7 million compared to $12.2 million for the same time period in 2014. The $3.5 million increase in noninterest expense was mainly the result of the following:

 

Salaries and employee benefits expense increased $2.3 million,  this increase related to: the addition of new bank and mortgage offices, increased commissions related to increased mortgage production, additional staffing related to organic growth and raises for existing staff.

 

Occupancy and equipment expense increased $338. This increase was mainly the result of the opening of multiple new bank and mortgage office locations, the completion of a new facility in Kanawha County, West Virginia and construction of a new facility in the West Virginia High Technology Park in Fairmont, Marion County, West Virginia.

 

Data processing and communication costs increased $248. This increase was largely driven by overall growth in terms of client base, personnel and office space, and the usage of new and enhanced products, services and providers to better serve the client base.

 

Mortgage processing costs increased $223. This increase was primarily the result of increase mortgage loan volume.

 

 

 

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Salaries and employee benefits, occupancy and equipment,  data processing and communications, mortgage processing and professional fees generate the core of the Company’s noninterest expense. The Company’s efficiency ratio was 80.90% for the six months ended June 30, 2015 compared to 85.24% for the same time period in 2014. This ratio measures the efficiency of noninterest expenses incurred in relationship to net interest income plus noninterest income.  The decreased efficiency ratio is the result of net interest income and noninterest income outpacing the growth in noninterest expense.

 

For the six months ended June 30, 2015, noninterest expense totaled $30.7 million compared to $23.0 million for the same time period in 2014. The $7.7 million increase in noninterest expense was mainly the result of the following:

 

Salaries and employee benefits expense increased $5.2 million, this increase related to: the addition of new bank and mortgage offices, increased commissions related to increased mortgage production, additional staffing related to organic growth and raises for existing staff.

 

Occupancy and equipment expense increased $707. This increase was mainly the result of the opening of multiple new bank and mortgage office locations, the completion of a new facility in Kanawha County, West Virginia and construction of a new facility in the West Virginia High Technology Park in Fairmont, Marion County, West Virginia.

 

Data processing and communication costs increased $489. This increase was largely driven by overall growth in terms of client base, personnel and office space, and the usage of new and enhanced products, services and providers to better serve the client base.

 

Mortgage processing costs increased $424. This increase was primarily the result of increase mortgage loan volume.

 

Return on Average Assets and Average Equity (Annualized)

 

Returns on average assets (ROA) and average equity (ROE) annualized were .64% and 6.84% for the second quarter of 2015 compared to .37% and 3.93% in the second quarter of 2014. The .27% increase in ROA is due to increased earnings of $936 and a $141.9 million increase in average assets for the second quarter of 2015 compared to the second quarter of 2014. The increase in average assets was primarily due to an increase in net loans due to continued loan growth. The 2.91% increase in ROE is also due to increased earnings of $936 and a $12.6 million increase in average equity for the second quarter of 2015 compared to the second quarter of 2014. The increase in average equity was mainly due to the issuance of additional preferred stock.

 

Overview of the Statement of Condition

 

The Company’s interest-earning assets, interest-bearing liabilities, and stockholders’ equity changed significantly during the second quarter of 2015 compared to June 30, 2014. The most significant areas of change between the quarters ended June 30, 2015 and June 30, 2014 were as follows: net loans increased to an average balance of $951.2 million from $779.1 million, investment securities declined by $36.2 million to an average of $117.6 million, interest-bearing liabilities grew to an average balance of $995.6 million from $878.7 million and stockholders’ equity grew by $12.6 million to an average of $111.3 million.  These trends reflect the continued growth of the Company and its subsidiaries in the loan, deposit and capital areas.

 

Total assets at June 30, 2015 were $1.3  billion or an increase of $142.6 million since December 31, 2014.  The greatest areas of increase were $112.0 million in net loan growth and $46.8 in loans held for sale.

 

Deposits totaled $891.0 million at June 30, 2015 or an increase of $67.7 million since December 31, 2014, mainly the result of an increase in savings, NOW and time deposits.  

 

Stockholders’ equity has increased approximately $3.8 million from December 31, 2014 mainly due to earnings for the six months ended June 30, 2015 of $4.0 million.

 

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Cash and Cash Equivalents

 

Cash and cash equivalents totaled $14.0 million as of June 30, 2015 compared to $30.1 million as of December 31, 2014. 

 

Total cash and cash equivalents fluctuate on a daily basis due to transactions in process and other liquidity and performance demands.  Management believes the liquidity needs of the Company are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and non-traditional funding sources, and the portions of the investment and loan portfolios that mature within one year.  These sources of funds should enable the Company and the Bank to meet cash obligations as they come due. 

 

Investment Securities

 

Investment securities totaled $119.0 million as of June 30, 2015 and $122.8 million as of December 31, 2014. The investment portfolio is fairly evenly balanced between government sponsored agency securities, mortgage-backed securities and municipal securities. 

 

During the three months ended June 30, 2015, the Bank sold a held-to-maturity investment security due to a credit downgrade. This type of sale is permissible in accordance with GAAP. Due to the significant deterioration in this issuer’s creditworthiness, we feel the sale does not taint our intentions in regards to the remainder of our held-to-maturity portfolio.

 

The Company and Bank management monitor the earnings performance and liquidity of the investment portfolio on a regular basis through Asset/Liability Committee meetings. The group also monitors net interest income and pricing guidelines, and manages interest rate risk for the bank. Through active balance sheet management and analysis of the investment securities portfolio, the bank maintains sufficient liquidity to satisfy depositor requirements and the various credit needs of its customers. The Company and Bank management believes the risk characteristics inherent in the investment portfolio are acceptable based on these parameters.

 

Loans

 

The Company’s loan portfolio totaled $911.1 million as of June 30, 2015 and $798.3 million as of December 31, 2014. The Bank’s lending is primarily focused in the Marion, Harrison, Jefferson, Berkeley, Monongalia, and Kanawha counties of West Virginia, as well as the northern Virginia area for the mortgage and commercial lending business. Its extended market is in the adjacent counties. The portfolio consists principally of commercial lending, retail lending, which includes single-family residential mortgages, and consumer lending. The growth in loans is primarily attributable to organic growth within the Bank’s primary lending areas and northern Virginia.

 

Loan Concentration

 

At June 30, 2015, commercial loans comprised the largest component of the loan portfolio.  The majority of commercial loans that are not secured by real estate are lines of credit secured by accounts receivable and equipment and obligations of states and political subdivisions. While the loan concentration is in commercial loans, the commercial portfolio is comprised of loans to many different borrowers, in numerous different industries but primarily located in our market areas. The loan portfolio mix as of June 30, 2015 remains consistent with the mix as of December 31, 2014.  

 

Allowance for Loan Losses

 

The allowance for loan losses was $7.0 million or 0.77% of total loans at June 30, 2015 compared to $6.2 million or 0.78% of total loans at December 31, 2014. The Bank management continually monitors the loan portfolio through review of the monthly delinquency reports and through the Bank Loan Review Committee.  The Bank Loan Review Committee is responsible for the determination of the adequacy of the allowance for loan losses.  Their analysis involves both experience of the portfolio to date and the makeup of the overall portfolio.  Specific loss estimates are derived for individual loans based on specific criteria such as current delinquency status, related deposit account activity, where applicable, local market rumors, which are generally based on some factual information, and changes in the local and

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national economy.  While local market rumors are not measurable or perhaps not readily supportable, historically, this form of information can be an indication of a potential problem.  The allowance for loan losses is further based upon the internal risk rating assigned to the various loan types within the portfolio.

 

Capital Resources

 

The Company considers a number of alternatives, including but not limited to deposits, short-term borrowings and long-term borrowings when evaluating funding sources. Traditional deposits continue to be the most significant source of funds for the bank, reaching $891.0 million at June 30, 2015.

 

Non-interest bearing deposits remain a core funding source for the Bank and, thus, the Company.  At June 30, 2015, non-interest bearing deposits totaled $76.7 million compared to $67.1 million at December 31, 2014.  The Company and Bank management intend to continue to focus on finding ways to increase the base of non-interest bearing funding sources of the Bank and other Company subsidiaries. 

 

Interest-bearing deposits totaled $814.3 million at June 30, 2015 compared to $756.2 million at December 31, 2014. Average interest-bearing liabilities totaled $995.6 million during the second quarter of 2015 compared to $878.7 million for the second quarter of 2014This $117.0 million increase is the result of the following: $58.2 million increase in CDs, $36.4 million increase in NOW, $31.5 million increase in MMDA, $14.7 million increase in FHLB and other borrowings, $29.1 million in subordinated debt and $52.6 million decrease in repurchase agreements and federal funds sold.  Average non-interest bearing demand deposits totaled $75.3 million for the second quarter of 2015 compared to $62.9 million for the second quarter of 2014.  Management will continue to emphasize deposit gathering in 2015 by offering outstanding customer service and competitively priced products.  The Company and Bank management will also concentrate on balancing deposit growth with adequate net interest margin to meet the Company’s strategic goals.

 

Along with traditional deposits, the Bank has access to both repurchase agreements, which are corporate deposits secured by pledging securities from the investment portfolio, and Federal Home Loan Bank borrowings to fund its operations and investments.  At June 30, 2014, repurchase agreements totaled $26.3 million compared to $32.7 million at December 31, 2014.  In addition to the aforementioned funds alternatives, the Bank has access to more than $312.6 million through additional advances from the Federal Home Loan Bank of Pittsburgh and the ability to readily sell jumbo certificates of deposits to other banks as well as brokered deposit markets.

 

Liquidity

 

The Company recognizes the importance of liquidity in the day-to-day operations of the Bank, and believes it is critical to have a plan for addressing liquidity in times of crisis, as well as prudently managing levels to maximize earnings.  The Bank has historically recognized the need for funding sources that go beyond the most important source which is retail deposit business.  The Company and the Bank have created a funding program that identifies various wholesale funding sources that may be used whenever appropriate.  These sources include the following: FHLB advances, brokered deposits, CDARS, repurchase agreements, internet CDs through Qwickrate, the Federal Reserve discount window, State of West Virginia CD auctions, and federal funds purchased through the Federal Reserve.  Limits have been set as to how much MVB will utilize each identified source.  The Bank currently utilizes several of the above. This allows the Bank to lower funding costs slightly while documenting the availability of each.

 

Current Economic Conditions

 

The current economic climate in West Virginia, and, in particular, in the six counties in which the Company and the Bank focuses possess better economic climates than the general national climate.  Unemployment in the United States was 5.3% and 6.1% in 2015 and 2014, respectively.  The unemployment levels in the six West Virginia counties where MVB operates in were as follows for the periods indicated:

 

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May 2015

    

May 2014

 

Berkeley County

 

5.1

%  

5.4

%  

Harrison County

 

6.7

%  

5.0

%  

Jefferson County

 

4.4

%  

4.6

%  

Marion County

 

7.0

%  

5.9

%  

Monongalia County

 

5.1

%  

4.4

%  

Kanawha County

 

6.2

%  

5.9

%  

 

Nonperforming loans to total loans were 1.07%  in June of 2015 versus 0.35% in June of 2014 and charge offs to total loans were 0.05% and 0.02% for each period respectively. The Company and the Bank continue to closely monitor economic and delinquency trends.

 

Capital/Stockholders’ Equity

 

The Company and the Bank have financed operations and growth over the years through the sale of equity.  These equity sales have resulted in an effective source of capital.

 

During 2013, the Company commenced a private offering to accredited investors under Rule 506 of Regulation D.  As of December 31, 2013, the Company had received subscriptions for 610,194 shares totaling $9.8 million in additional capital at December 31, 2013. 

 

During the six month period ended June 30, 2014 the Company received additional subscriptions for 361,865 shares totaling $5.8 million in additional capital. The proceeds of this offering are being used to support continued growth of the Company.

 

At June 30, 2015, accumulated other comprehensive loss totaled $(2,332) compared to $(2,642) at December 31, 2014. This change is primarily the result in the rise of the change in the value of the defined benefit pension plan.

 

Treasury stock shares totaled 51,077 shares.

 

The primary source of funds for dividends to be paid by the Company are dividends received by the Company from the Bank. Dividends paid by the Bank are subject to restrictions by banking regulations. The most restrictive provision requires regulatory approval if dividends declared in any year exceed that year’s retained net profits, as defined, plus the retained net profits, as defined, of the two preceding years.

 

Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy.  Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios.  A weight category of 0% (lowest risk assets), 20%, 50%, 100% or 150% (highest risk assets) is assigned to each asset on the balance sheet.  Detailed information concerning MVB’s risk-based capital ratios can be found in Note 14 of the Notes to the Consolidated Financial Statements of the Company’s 2014 Form 10-K. At June 30, 2015, the Company’s and the Bank’s risk-based capital ratios exceeded the minimum standards for a well capitalized financial institution.

 

Commitments

 

In the normal course of business, the Bank is party to financial instruments with off-balance sheet risk necessary to meet the financing needs of customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of these instruments express the extent of involvement the bank has in these financial instruments.

 

Loan commitments are made to accommodate the financial needs of the Bank’s customers.  The Bank uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments.

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The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. The total amount of loan commitments outstanding at June  30, 2015 and December 31, 2014 was $215.0 million and $143.2 million, respectively.

 

Market Risk

 

There have been no material changes in market risks faced by the Company since December 31, 2014.  For information regarding the Company’s market risk, refer to the Company’s Annual Report to Shareholders for the year ended December 31, 2014.

 

Effects of Inflation on Financial Statements

 

Substantially all of the Bank’s assets relate to banking and are monetary in nature. Therefore, they are not impacted by inflation to the same degree as companies in capital-intensive industries in a replacement cost environment. During a period of rising prices, a net monetary asset position results in loss in purchasing power and conversely a net monetary liability position results in an increase in purchasing power. In the banking industry, typically monetary assets exceed monetary liabilities. Therefore as prices increase, financial institutions experience a decline in the purchasing power of their net assets.

 

Future Outlook

 

The Company’s results of operations in the second quarter of 2015 increased significantly compared to the second quarter of 2014 mainly due to an increase in noninterest income in the mortgage banking segment.  The Company has invested in the infrastructure to support envisioned future growth in each key area, including personnel, technology and processes to meet the growing compliance requirements in the industry. Commercial and retail loan production remains strong and mortgage and insurance have added staff and locations to ramp up production and improve profitability. The Company believes it is well positioned in some of the finest markets in the states of West Virginia and Virginia and will focus on doing the things that have made it successful thus far through the following: margin improvement; leveraging capital; organic portfolio loan growth; and operating efficiency. The critical challenge for the Company in the future is to attract core deposits to fund growth in the new markets through continued delivery of the most outstanding customer service with the highest quality products and technology.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

No response required.

 

Item 4. Controls and Procedures

 

The Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer (the Principal Financial Officer), has evaluated the effectiveness as of June 30, 2015, of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Principal Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2015.

 

There have been no material changes in the Company’s internal control over financial reporting during the second quarter of 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. Other Information

 

Item 1. Legal Proceedings

 

From time to time in the ordinary course of business, the Company and its subsidiaries are subject to claims, asserted or unasserted, or named as a party to lawsuits or investigations.  Litigation, in general, and intellectual property and securities litigation in particular, can be expensive and disruptive to normal business operations.  Moreover, the results of legal proceedings cannot be predicted with any certainty and in the case of more complex legal proceedings, the results are difficult to predict at all.  The Company is not aware of any asserted or unasserted legal proceedings or claims that the Company believes would have a material adverse effect on the Company’s financial condition or results of the Company’s operations.

 

Item 1A. Risk Factors

 

No response required.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the first quarter of 2014, the Company began a private offering under Regulation D of the Securities Act of 1933, as amended (the “Securities Act”) of subordinated promissory notes and preferred stock.  During the six month period ended June 30, 2014, the Company received net proceeds related to subscriptions for subordinated promissory notes totaling $29.3 million.  In addition, during the same period, the Company received subscriptions for seven hundred eighty-three preferred stock shares totaling $7.8 million in additional capital.  The proceeds of these subordinated debt and preferred stock offerings will be used to support continued growth of the Company and its Subsidiaries.

 

During 2013, the Company commenced a private offering under Rule 506 of Regulation D of its common stock to accredited investors.  As of December 31, 2013, the Company had received subscriptions for 610,194 common stock shares totaling $9.8 million in additional capital.  During the six month period ended June 30, 2014, the Company received additional subscriptions for 361,865 common stock shares totaling $5.8 million in additional capital at September 30, 2014.  The proceeds of this offering are also being used to support continued growth of the Company and its Subsidiaries.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

The following exhibits are filed herewith.

 

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Exhibit 31.1

 

Certificate of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Exhibit 31.2

 

Certificate of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

Exhibit 32.1

 

Certificate of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Exhibit 32.2

 

Certificate of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS

 

XBRL Instance Document

 

101.SCH

 

XBRL Taxonomy Extension Schema

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: August 6, 2015

 

 

 

 

 

 

MVB Financial Corp.

 

 

 

 

 

 

 

 

 

By:

/s/ Larry F. Mazza

 

 

 

Larry F. Mazza

 

 

 

Chief Executive Officer & President

 

 

 

 

 

 

 

 

 

 

By:

/s/ Bret S. Price

 

 

 

Bret S. Price

 

 

 

Senior Vice President & Chief Financial Officer

 

 

 

 

 

 

55