Strong First Quarter Growth in Loans, Deposits and Investments in Technology is Distancing MVB from the Pack

MVB Financial Corp. (NASDAQ: MVBF) (“MVB Financial,” “MVB,” or the “Company”) today reported net income of $8.1 million, or $0.70 basic and $0.66 diluted earnings per share for the three months ended March 31, 2021.

FIRST QUARTER 2021 HIGHLIGHTS

• Deposits: Noninterest-bearing (“NIB”) deposits were $837.2 million as of March 31, 2021, an increase of $121.4 million, or 17.0%, from December 31, 2020, and an increase of $449.7 million, or 116.0%, from March 31, 2020. NIB deposits as a percentage of total deposits were 37.8% as of March 31, 2021, compared to 36.1% as of December 31, 2020 and 24.2% as of March 31, 2020.
• Tangible Book Value (“TBV”) per Share: TBV per share, a non-U.S. GAAP measure, was $19.98 as of March 31, 2021 an increase of $0.26, or 1.3%, from December 31, 2020, and an increase of $4.82, or 31.8%, from March 31, 2020. A reconciliation of TBV to its most comparable U.S. GAAP measure is included below.
• Asset Quality: Nonperforming assets, including nonperforming loans and other real estate owned, were $16.8 million, or 0.6% of total assets, compared to $19.4 million, or 0.8%, at December 31, 2020, and $7.1 million, or 0.3%, at March 31, 2020.
• Capital: MVB Bank, Inc. (“MVB Bank” or the “Bank”) finished the first quarter with strong capital ratios. As of March 31, 2021, the Bank’s Community Bank Leverage Ratio was 11.3%. The Company’s tangible common equity to tangible assets was 8.8% as of March 31, 2021.
• Fee Income: Payment card and service charge income was $1.5 million for the quarter ended March 31, 2021, an increase of $0.4 million, or 35.1%, compared to the quarter ended December 31, 2020, and an increase of $0.9 million, or 171.5%, compared to the quarter ended March 31, 2020.
• Transactions: In January, the Company acquired a majority interest in Flexia Payments, LLC (“Flexia”), a prepaid card platform for land-based casinos to facilitate the move to a totally cashless casino floor. This acquisition continues to advance the Company’s relationships within the gaming industry. In April, the Company also acquired a majority interest in Trabian Technology, Inc. (“Trabian”), a leading software development firm servicing financial institutions and financial technology (“Fintech”) companies.

FINTECH HIGHLIGHTS

• Fintech deposits totaled $744.6 million as of March 31, 2021, an increase of $211.6 million, or 39.7%, from December 31, 2020 and an increase of $557.8 million, or 298.6%, from March 31, 2020.
• Gaming deposits, which are included in total Fintech deposits, totaled $578.7 million as of March 31, 2021, an increase of $220.8 million, or 61.7%, from December 31, 2020 and an increase of $467.5 million, or 420.5%, from March 31, 2020.
• With the Company’s expanding Banking as a Service (“BaaS”) platform, MVB became the 21st largest bank in the United States based on the number of customer accounts.

MANAGEMENT OVERVIEW

Team MVB came out strong in 2021 with net income of $8.1 million for the first quarter and generating notable growth in loans and deposits that are expected to drive profitability now and in the future. Loans, excluding PPP loans, grew $132.1 million, or 9.6%, since December 31, 2020 and $107.2 million since March 31, 2020. The Company continues to recognize vast improvements in its deposit mix by replacing high cost deposits with NIB deposits, which has pushed NIB deposits as a percentage of total deposits to 37.8% as of March 31, 2021. Income related to MVB’s equity method investment in Intercoastal Mortgage Company (“ICM”) generated pre-tax earnings of $6.5 million for the quarter ended March 31, 2021, which allowed significant investments in technology. These investments, including the acquisition of Grand in August 2020, Flexia in January 2021 and Trabian in April 2021, will drive and diversify the Company’s future earnings potential, along with the Company’s existing consulting subsidiaries, Chartwell Compliance and Paladin Fraud.

“Building on momentum from the end of 2020, MVB’s first quarter growth in loans and deposits sets us apart from the pack,” said Larry F. Mazza, President, CEO, MVB Financial. “Significant investments in technology including our transactions involving Flexia and Trabian enhance our ability to scale our Gaming, Banking as a Service, Payments and Digital Asset sectors as part of our expanding Fintech vertical. These investments create new revenue streams for MVB and add technological expertise that will benefit MVB and all of our stakeholders.”

LOANS

Loans, excluding PPP loans of $190.6 million, totaled $1.50 billion as of March 31, 2021, an increase of $132.1 million, or 9.6%, from December 31, 2020 and an increase of $107.2 million, or 7.7%, from March 31, 2020. In the fourth quarter of 2020, the Company expanded its lending platform into Small Business Administration (“SBA”) 7(a) loans with the addition of three lenders. The increase in loans was driven by increased commercial lending production, including the onboarding and uptick of the SBA lending team. During the quarter ended March 31, 2021, the SBA team originated ten 7(a) loans totaling $9.7 million. Of these loans, three loans totaling $2.8 million were sold for a gain on sale of $0.4 million. The Company expects the SBA team to ramp up production to approximately $100 million in the team’s first full year.

The tax-equivalent yield on loans, including PPP loans, was 4.4% for the quarter ended March 31, 2021, a decrease of 33 basis points from the quarter ended December 31, 2020 and a decrease of 59 basis points from the quarter ended March 31, 2020. These decreases were primarily the result of a decrease in the yield on commercial loans.

DEPOSITS

Deposits totaled $2.22 billion as of March 31, 2021, an increase of $234.2 million, or 11.8%, from December 31, 2020 and an increase of $618.3 million, or 38.7%, from March 31, 2020. NIB deposits totaled $837.2 million as of March 31, 2021, an increase of $121.4 million, or 17.0%, from December 31, 2020 and an increase of $449.7 million, or 116.0%, from March 31, 2020.

NET INTEREST INCOME

Net interest income for the quarter ended March 31, 2021 was $17.5 million, a decrease of $0.2 million, or 1.0%, from the quarter ended December 31, 2020 and an increase of $1.3 million, or 8.2%, from the quarter ended March 31, 2020. Net interest margin, on a fully tax-equivalent basis, for the quarter ended March 31, 2021 was 3.26%, a decrease of 18 basis points versus the quarter ended December 31, 2020 and a decrease of 40 basis points versus the quarter ended March 31, 2020. Net interest margin was primarily impacted by excess liquidity and PPP loans. For the quarter ended March 31, 2021, the excess liquidity from increased cash balances accounted for 35 basis points of the decrease and the PPP loans accounted for 10 basis points of the decrease. The tax-equivalent adjustments are added to net interest income and were $0.4 million for the quarter ended March 31, 2021, $0.4 million for the quarter ended December 31, 2020 and $0.3 million for the quarter ended March 31, 2020. Excluding the impact from the April 2020 acquisition of The First State Bank (“First State”), the fully-tax equivalent net interest margin for the quarter ended March 31, 2021 would have decreased six basis points.

Interest income decreased $0.3 million, or 1.5%, compared to the quarter ended December 31, 2020 and $1.6 million, or 7.9%, compared to the quarter ended March 31, 2020. The 27-basis point decrease in the yield on commercial loans and the 29-basis point decrease in the yield on investments drove the 22-basis point decrease in the tax-equivalent yield on earning assets compared to the quarter ended December 31, 2020. The 56-basis point decrease in the yield on commercial loans and the 53-basis point decrease in the yield on investments drove the 113-basis point decrease in the tax-equivalent yield on earning assets compared to the quarter ended March 31, 2020.

Interest expense decreased $0.1 million, or 6.5%, compared to the quarter ended December 31, 2020 and $3.0 million, or 65.6%, compared to the quarter ended March 31, 2020. The two-basis point decrease in the cost of interest-bearing liabilities compared to the quarter ended December 31, 2020 was driven by a 11-basis point decrease in the cost of deposits and partially offset by a 27-basis point increase in the cost of subordinated debt. The 86-basis point decrease in the cost of interest-bearing liabilities compared to the quarter ended March 31, 2020 was driven by a 93-basis point decrease in the cost of deposits.

An increase in the Company's average NIB balances of $135.4 million from the quarter ended December 31, 2020 helped to maintain a 20-basis point favorable spread on the tax-equivalent net interest margin for the quarter ended March 31, 2021, compared to a 18-basis point favorable spread for the quarter ended December 31, 2020. An increase in the Company’s average NIB balances of $490.0 million from the quarter ended March 31, 2020 helped to maintain a 20-basis point favorable spread on the tax-equivalent net interest margin in 2020 compared to a 33-basis point favorable spread for the same period in 2020.

ASSET QUALITY

Provision for loan losses totaled $0.6 million for the quarter ended March 31, 2021, an increase of $0.4 million, or 188.8%, from the quarter ended December 31, 2020 and a decrease of $0.5 million, or 45.7%, from the quarter ended March 31, 2020. As a result of the changes in provision, allowance for loan losses to total loans, excluding the fair value mark totaling $16.9 million on the loans acquired from First State, was 1.5% as of March 31, 2021, a decrease of 23 basis points from December 31, 2020 and an increase of 75 basis points from March 31, 2020. Excluding PPP loans of $190.6 million, allowance for loan losses to total loans was 1.7% as of March 31, 2021. The Company continues to evaluate the effects of COVID-19 as it relates to the asset quality of the loan portfolio and will continue to evaluate and assess the need for additional loan loss provision during the remainder of 2021.

Nonperforming loans totaled $11.6 million, or 0.7% of total loans, as of March 31, 2021, compared to 0.9% of total loans as of December 31, 2020 and compared to 0.4% of total loans as of March 31, 2020. In addition, net charge-offs for the quarter ended March 31, 2021 decreased $0.04 million compared to the quarter ended December 31, 2020 and decreased $1.5 million compared to the quarter ended March 31, 2020. Commercial loan modifications and mortgage loan modifications also continue to decrease and totaled $34.7 million and $9.0 million, respectively, as of March 31, 2021. These modifications include interest-only payments and payment deferrals. Of the current commercial loan modifications, $32.5 million were related to the hotel portfolio and all related payments are current. These modifications were not considered to be troubled debt restructurings.

NONINTEREST INCOME

Noninterest income totaled $12.5 million for the quarter ended March 31, 2021, a decrease of $4.1 million, or 24.8%, from the quarter ended December 31, 2020 and an increase of $1.6 million, or 14.8%, from the quarter ended March 31, 2020.

The $4.1 million decrease in noninterest income from the quarter ended December 31, 2020 was due to a decrease of $4.1 million in equity method investment income related to the Company’s investment in ICM and a decrease of $3.5 million in the gain on sale of equity securities. These decreases were partially offset by an increase of $1.1 million in the gain on sale of available-for-sale securities. Additionally in the fourth quarter of 2020, the Company recognized $1.0 million in the loss on extinguishment of debt related to the prepayment of Federal Home Loan Bank borrowings.

The $1.6 million increase in noninterest income from the quarter ended March 31, 2020 was due to increases of $6.5 million in equity method investment income related to the Company’s investment in ICM, $0.9 million in payment card and service charge income, $0.9 million in the gain on sale of available-for-sale securities and $0.5 million in the holding gain on equity securities. These increases were partially offset by a decrease of $7.6 million in mortgage-related income due to the transition to the equity method from the mortgage combination with ICM that occurred in July 2020.

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

NONINTEREST EXPENSE

Noninterest expense totaled $19.1 million for the quarter ended March 31, 2021, a decrease of $1.8 million, or 8.5%, from the quarter ended December 31, 2020 and a decrease of $5.5 million, or 22.5%, from the quarter ended March 31, 2020.

The $1.8 million decrease in noninterest expense from the quarter ended December 31, 2020 was due to decreases of $0.8 million in professional fees, $0.4 million in salaries and employee benefits, $0.2 million in data processing and communications and $0.1 million in marketing, contributions, and sponsorships.

The $5.5 million decrease in noninterest expense from the quarter ended March 31, 2020 was due to decreases of $4.3 million in salaries and employee benefits and $0.9 million in mortgage processing expense. The mortgage transaction that occurred in July 2020 had the largest impact to the decreases noted as a result of the transition to the equity method accounting.

STRATEGIC TRANSACTIONS

In January 2021, the Company acquired a majority interest in Flexia. MVB invested approximately $2.5 million for its 80% interest. Flexia’s platform allows users to access a reloadable account that combines a debit account and casino gaming accounts into one card, allowing them for non-cash transactions at participating casinos.

In April 2021, the Company announced the acquisition of a majority interest in Trabian for 17,597 shares of MVB stock and an undisclosed amount of cash. Founded in 2003, Trabian builds digital products, web and mobile applications for forward-thinking community banks, credit unions, digital banks and Fintechs.

PREFERRED STOCK REDEMPTION

As previously announced, the Company issued a notice of redemption to redeem all of the Company’s outstanding shares of Convertible Noncumulative Perpetual Preferred Stock. In January 2021, all preferred stock totaling $7.3 million was redeemed.

DIVIDEND

As previously announced on February 17, 2021, MVB issued its first quarterly dividend for 2021, including an increase of 11.1% compared to the previous quarter’s dividend. The Company declared a quarterly cash dividend of $0.10 per share payable on March 15, 2021 to shareholders of record at the close of business on March 1, 2021.

SUBSEQUENT EVENTS

In addition to the Trabian acquisition discussed earlier, the Bank entered into a Purchase and Assumption Agreement with Summit Community Bank, Inc. (“Summit”) pursuant to which Summit will purchase certain assets and assume certain liabilities of four branch locations in Cabell, Kanawha, and Putnam counties in West Virginia. Per the agreement, Summit will assume approximately $190 million in deposits and will acquire approximately $60 million in loans, as well as cash, real property, personal property and other fixed assets. The purchase price will be calculated at closing and includes a 6% premium on the deposits assumed. The Bank expects to close this purchase early in the third quarter of 2021.

About MVB Financial Corp.

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

MVB is a financial holding company headquartered in Fairmont, WV. Through its subsidiary, MVB Bank, Inc., and the bank’s subsidiaries, MVB Technology, the MVB Community Development Corporation, Chartwell Compliance and Paladin Fraud, the Company provides financial services to individuals and corporate clients in the Mid-Atlantic region and beyond.

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

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

Forward-looking Statements

MVB Financial has made forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, in this press release that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations about the future and subject to risks and uncertainties. Forward-looking statements include, without limitation, information concerning possible or assumed future results of operations of the Company and its subsidiaries. Forward-looking statements can be identified by the use of words such as “may,” “could,” “should,”, “would,” “will,” “plans,” “believes,” “estimates,” “expects,” “anticipates,” “intends,” “continues” or the negative of those terms or similar expressions. Note that many factors could affect the future financial results of the Company and its subsidiaries, both individually and collectively, and could cause those results to differ materially from those expressed in forward-looking statements. Therefore, undue reliance should not be placed upon any forward-looking statements. Those factors include but are not limited to: market, economic, operational, liquidity and credit risk; changes in market interest rates; inability to achieve anticipated synergies and successfully integrate recent mergers and acquisitions; inability to successfully execute business plans, including strategies related to investments in financial technology companies; competition; length and severity of the COVID-19 pandemic and its impact on the Company’s business and financial condition; changes in economic, business and political conditions; changes in demand for loan products and deposit flow; operational risks and risk management failures; and government regulation and supervision. Additional factors that may cause actual results to differ materially from those described in the forward-looking statements can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as well as its other filings with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website at www.sec.gov. Except as required by law, the Company disclaims any obligation to update, revise or correct any forward-looking statements.

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

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

MVB Financial Corp.

Donald T. Robinson, Executive Vice President and CFO

(304) 598-3500

drobinson@mvbbanking.com

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