MVB Financial Corp. Announces Fourth Quarter and Full Year 2023 Results

MVB Financial Corp. (NASDAQ: MVBF) (“MVB Financial,” “MVB” or the “Company”), the holding company for MVB Bank, Inc. ("MVB Bank"), today announced financial results for the fourth quarter and year ended December 31, 2023, with reported net income of $7.9 million, or $0.62 basic and $0.61 diluted earnings per share for the three months ended December 31, 2023.

Fourth Quarter 2023 Highlights As Compared to Third Quarter 2023

Net interest income increased 4.2%, or $1.2 million.

Net interest margin improved by 17 bps to 4.04%.

Earnings per share up 106.7% to $0.62.

Loan growth of 2.1%; Balance sheet loan to deposit ratio of 79.9% from 74.7%.

Noninterest expense declined by 7.9%, or $2.4 million.

Book value per share and tangible book value per share, a non-GAAP financial measure, increased 6.3% and 6.4% to $22.68 and $22.43, respectively.

Asset quality measures improved; Capital strength further enhanced.

From Larry F. Mazza, Chief Executive Officer, MVB Financial:

“MVB closed a challenging year for the banking industry with strong fourth quarter results. Loans and investment securities continued to reprice higher, excess liquidity was redeployed as the pace of loan growth picked up and funding costs stabilized, driving significant improvement in net interest margin and net interest income. At the same time, expenses were well-controlled, Fintech-related fee income growth accelerated and measures of safety, soundness, foundational strength and shareholder value were improved and further enhanced. Team MVB’s resilience and adaptability enabled us to navigate the disruptive industry events last year, and now leave us well-positioned to drive further improvement in earnings and profitability as market conditions begin to turn favorably.”

FOURTH QUARTER 2023 HIGHLIGHTS

• Loan growth and net interest margin expansion powered net interest income growth.
  • Net interest income on a fully tax-equivalent basis, a non-GAAP financial measure, increased 4.0%, or $1.2 million, to $31.3 million relative to the prior quarter, primarily reflecting net interest margin expansion and higher average loan balances, partially offset by lower interest-bearing balances with banks.
  • Net interest margin on a fully tax-equivalent basis, a non-GAAP financial measure, was 4.06%, up 16 basis points from the prior quarter, primarily reflecting higher earning asset yields, a favorable shift in the mix of earning assets and deposit funding and relatively stable funding costs. Total cost of funds was 2.44%, compared to 2.43% for the prior quarter.
  • Average earning asset balances decreased 0.3% during the fourth quarter of 2023, primarily reflecting lower interest-bearing balances with banks, primarily offset by higher average loan and investment securities balances. Average total loan balances increased 1.1%, largely driven by higher commercial loans.
• Deposit balances declined as funding mix optimization continued.
  • Total deposits declined 4.5%, or $137.4 million, to $2.9 billion, compared to the prior quarter-end, primarily reflecting lower certificate of deposit (“CD”) balances, which includes a 10.5%, or $45.8 million, decline in brokered deposits, as the Company looks to reduce higher-cost funding that had been added in response to 2023 industry events.
  • Total off-balance sheet deposits remained consistent at $1.09 billion as compared to $1.11 billion at the prior quarter-end. Off-balance sheet deposit networks are utilized to generate fee income, enhance capital efficiency and manage liquidity and concentration risk.
  • Noninterest bearing (“NIB”) deposit balances increased 9.4%, or $103.4 million, to $1.20 billion, as compared to the prior quarter-end, primarily reflecting gaming and seasonal considerations. NIB deposits represented 41.3% of total deposits, as compared to 36.0% of total deposits at the prior quarter-end.
  • Balance sheet loan to deposit ratio was 79.9% as of December 31, 2023, compared to 74.7% as of September 30, 2023.
• Asset quality measures improved; Capital strength and shareholder value further enhanced.
  • Nonperforming loans declined $2.3 million, or 22.0%, to $8.3 million, or 0.4% of total loans, from $10.6 million, or 0.5% of total loans, at the prior quarter-end. Criticized loans as a percentage of total loans were 5.3%, as compared to 6.1% at the prior quarter-end. Net charge-offs were $0.5 million, or 0.1% of total loans on an annualized basis, for the fourth quarter of 2023, compared to $5.9 million, or 1.0%, for the prior quarter.
  • The release of allowance for credit losses totaled $2.1 million, primarily reflecting the general improvement in credit indicators and the continued changes in loan portfolio composition. The allowance for credit losses was 1.0% of total loans, as compared to 1.1% as of the prior quarter-end.
  • The Community Bank Leverage Ratio, Tier 1 Risk-Based Capital Ratio and MVB Bank’s Total Risk-Based Capital Ratio were 10.5%, 14.4%, and 15.1%, respectively, compared to 10.4%, 14.0%, and 14.8%, respectively, at the prior quarter-end.
  • The tangible common equity to tangible assets ratio was 8.6%, compared to 7.8% at the prior quarter-end. Tangible book value per share, a non-U.S. GAAP measure, increased 6.4% to $22.43, relative to the prior quarter-end.
• Expenses declined on lower personnel costs; Fee income down on mortgage loss; Fintech-related fee income increased.
  • Noninterest expense declined 7.9% to $28.3 million relative to the prior quarter, primarily reflecting lower salaries and employee benefits costs and other operating expense. Professional fees remained elevated due to actions taken to enhance regulatory and compliance infrastructure.
  • Total noninterest income declined 23.4% to $4.4 million relative to the prior quarter, primarily reflecting increased equity method investment losses, partially offset by higher payment card and service charge income, which primarily relates to the Company’s Fintech-related fee income initiatives.

INCOME STATEMENT

Net interest income on a tax-equivalent basis totaled $31.3 million for the fourth quarter of 2023, an increase of $1.2 million, or 4.0%, from the third quarter of 2023 and a decline of $2.4 million, or 7.2%, from the fourth quarter of 2022. The increase in net interest income compared to the third quarter of 2023 reflected a higher net interest margin, partially offset by a slight decline in total average earning asset balances. The decline compared to the fourth quarter of 2022 reflected higher funding costs, partially offset by higher average earning asset balances.

Interest income increased $1.4 million, or 2.8%, from the third quarter of 2023 and increased $9.0 million, or 22.1%, compared to the fourth quarter of 2022. The tax-equivalent yield on loans was 7.2% for the fourth quarter of 2023, compared to 7.0% for the third quarter of 2023 and 6.1% for the fourth quarter of 2022. Higher loan yields generally reflected the cumulative impact of loans booked at higher yields than the prevailing portfolio yield in prior periods and the repricing of variable rate loans.

Interest expense increased $0.1 million, or 0.7%, compared to the third quarter of 2023 and $11.3 million, or 156.3%, compared to the fourth quarter of 2022. The cost of funds was 2.44% for the fourth quarter of 2023, consistent with the third quarter of 2023 and up 144 basis points compared to the fourth quarter of 2022. The increase in cost of funds compared to the prior year reflected higher funding costs across the board and a shift in the mix of deposit funding toward higher cost deposit products.

On a fully tax-equivalent basis, net interest margin for the fourth quarter of 2023 was 4.06%, an increase of 16 basis points from the third quarter of 2023 and a decrease of 51 basis points from the fourth quarter of 2022. See the table below for a reconciliation between net interest margin and net interest margin on a fully tax-equivalent basis, a non-GAAP measure. The increase in net interest margin from the third quarter of 2023 primarily reflected higher loan and investment portfolio yields, a favorable shift in the mix of earning assets and deposit funding and stable funding costs. Contraction in the net interest margin from the fourth quarter of 2022 primarily reflected higher funding costs and an unfavorable shift in the mix of deposit funding, partially offset by higher earning asset yields.

Noninterest income totaled $4.4 million for the fourth quarter of 2023, a decrease of $1.4 million, or 23.4%, from the third quarter of 2023 and an increase of $1.0 million, or 29.2%, from the fourth quarter of 2022. The decrease compared to the third quarter of 2023 was primarily driven by an increase of $1.7 million in equity method investment losses from our mortgage companies and a $0.7 million loss on derivatives during the fourth quarter of 2023 without a comparable loss in the prior quarter, partially offset by a $1.0 million increase in payment card and service charge income. The increase in noninterest income from the fourth quarter of 2022 was primarily driven by increases of $2.4 million in gain on sale of loans, $2.1 million in payment card and service charge income, $1.5 million in holding gains on equity securities and $0.7 million in other operating income. The increases were partially offset by a $3.6 million gain on sale of assets in the fourth quarter of 2022 without a comparable gain in the current quarter, an increase of $1.1 million in equity method investment losses from our mortgage companies and a $0.7 million loss on derivatives in the fourth quarter of 2023 without a comparable loss in the prior year.

Noninterest expense totaled $28.3 million for the fourth quarter of 2023, a decrease of $2.4 million, or 7.9%, from the third quarter of 2023 and an increase of $1.6 million, or 5.8%, from the fourth quarter of 2022. The decrease from the third quarter of 2023 was driven by declines of $1.2 million in salaries and employee benefits, $0.8 million in other operating expense and $0.4 million in insurance, tax and assessment expense. The increase from the fourth quarter of 2022 primarily reflected higher professional fees of $1.8 million and higher salaries and employee benefits of $0.5 million, partially offset by a decline in other operating expense of $0.7 million.

BALANCE SHEET

Loans totaled $2.32 billion at December 31, 2023, an increase of $47.2 million, or 2.1%, and a decrease of $55.1 million, or 2.3%, as compared to September 30, 2023 and December 31, 2022, respectively. Loan growth compared to September 30, 2023 was driven primarily by higher commercial loan balances. The decrease in loan balances compared to December 31, 2022 primarily reflected deliberate efforts to improve balance sheet liquidity, lower market demand and the sale of $44.4 million of subprime automobile loans during 2023. Loans held-for-sale, which represent MVB Bank’s government guaranteed lending, were $0.6 million as of December 31, 2023, compared to $7.6 million at September 30, 2023 and $23.1 million at December 31, 2022. The decline in loans held-for-sale from the prior periods was driven by loan sales and amortization of the portfolio, as government guaranteed lending is no longer a growth vehicle.

Deposits totaled $2.90 billion as of December 31, 2023, a decrease of $137.4 million, or 4.5%, from September 30, 2023 and an increase of $331.0 million, or 12.9%, from December 31, 2022. NIB deposits totaled $1.20 billion as of December 31, 2023, an increase of $103.4 million, or 9.4%, and a decrease of $34.3 million, or 2.8%, from September 30, 2023 and December 31, 2022, respectively. The decrease in total deposits compared to September 30, 2023 primarily reflected a decline in CDs and brokered deposits. The increase in total deposits relative to December 31, 2022 reflected higher CDs and brokered deposits, partially offset by a decrease in NIB deposits driven by the highly-competitive deposit environment, higher interest rates and the utilization of off-balance sheet deposit networks to generate fee income, enhance capital efficiency and manage liquidity and concentration risk.

CAPITAL

The Community Bank Leverage Ratio was 10.5% as of December 31, 2023, compared to 10.4% as of September 30, 2023 and 9.8% as of December 31, 2022. MVB’s Tier 1 Risk-Based Capital Ratio was 14.4% as of December 31, 2023, compared to 14.0% as of September 30, 2023 and 12.4% as of December 31, 2022. The Bank’s Total Risk-Based Capital Ratio was 15.1% as of December 31, 2023, compared to 14.8% as of September 30, 2023 and 13.4% as of December 31, 2022.

The Company issued a quarterly cash dividend of $0.17 per share for the quarter ended December 31, 2023, consistent with the quarters ended September 30, 2023 and December 31, 2022.

ASSET QUALITY

Nonperforming loans totaled $8.3 million, or 0.4% of total loans, for the fourth quarter of 2023, as compared to $10.6 million, or 0.5% of total loans for the third quarter of 2023 and $11.2 million, or 0.5% of total loans for the fourth quarter of 2022. Criticized loans were $122.4 million, or 5.3% of total loans, as compared to $137.5 million, or 6.1% of total loans, for the third quarter of 2023 and $71.2 million, or 3.0% of total loans, for the fourth quarter of 2022.

Net charge-offs on an annualized basis were $0.5 million, or 0.1% of total loans, for the fourth quarter of 2023, compared to $5.9 million, or 1.0% of total loans, for the third quarter of 2023 and $5.4 million, or 0.9% of total loans for the fourth quarter of 2022.

The release of allowance for credit losses totaled $2.1 million for the quarter ended December 31, 2023, compared to a release of $0.2 million for the quarter ended September 30, 2023 and a provision of $2.7 million for the quarter ended December 31, 2022. The release of allowance for credit losses for the quarter ended December 31, 2023 was attributed to an improvement in asset quality and the reduction in criticized loans. The allowance for credit losses was 1.0% of total loans at December 31, 2023, as compared to 1.1% as of September 30, 2023 and 1.0% as of December 31, 2022.

About MVB Financial Corp.

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

MVB is a financial holding company headquartered in Fairmont, West Virginia. Through its subsidiary, MVB Bank, and MVB Bank’s subsidiaries, MVB Financial provides financial services to individuals and corporate clients in the Mid-Atlantic region and beyond.

Nasdaq is a leading global provider of trading, clearing, exchange technology, listing, information and public company services.

For more information about MVB, please visit ir.mvbbanking.com.

Forward-looking Statements

MVB Financial has made forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in this press release that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations about the future and are subject to risks and uncertainties. Forward-looking statements include, without limitation, information concerning possible or assumed future results of operations of the Company and its subsidiaries. Forward-looking statements can be identified by the use of words such as “may,” “could,” “should,” “would,” “will,” “plans,” “believes,” “estimates,” “expects,” “anticipates,” “intends,” “continues” or the negative of those terms or similar expressions. Note that many factors could affect the future financial results of the Company and its subsidiaries, both individually and collectively, and could cause those results to differ materially from those expressed in forward-looking statements. Therefore, undue reliance should not be placed upon any forward-looking statements. Those factors include but are not limited to: market, economic, operational, liquidity and credit risk; changes in market interest rates; impacts related to or resulting from recent turmoil in the banking industry; inability to successfully execute business plans, including strategies related to investments in Fintech companies; competition; unforeseen events, such as pandemics or natural disasters, and any governmental or societal responses thereto; changes in economic, business and political conditions; changes in demand for loan products and deposit flow; operational risks and risk management failures; and government regulation and supervision. Additional factors that may cause actual results to differ materially from those described in the forward-looking statements can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as well as its other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. Except as required by law, the Company disclaims any obligation to update, revise or correct any forward-looking statements.

Accounting standards require the consideration of subsequent events occurring after the balance sheet date for matters that require adjustment to, or disclosure in, the consolidated financial statements. The review period for subsequent events extends up to and including the filing date of a public company’s financial statements when filed with the SEC. Accordingly, the consolidated financial information in this announcement is subject to change.

Non-U.S. GAAP Financial Measures

This document contains supplemental financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management uses these non-U.S. GAAP measures in its analysis of the Company’s performance. These measures should not be considered a substitute for U.S. GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with U.S. GAAP. Management believes the presentation of non-U.S. GAAP financial measures that exclude the impact of specified items provide useful supplemental information that is essential to a proper understanding of the Company’s financial condition and results. Non-U.S. GAAP measures are not formally defined under U.S. GAAP, and other entities may use calculation methods that differ from those used by us. As a complement to U.S. GAAP financial measures, our management believes these non-U.S. GAAP financial measures assist investors in comparing the financial condition and results of operations of financial institutions due to the industry prevalence of such non-U.S. GAAP measures. See the tables below for a reconciliation of these non-U.S. GAAP measures to the most directly comparable U.S. GAAP financial measures.