Edgar Filing: MVB FINANCIAL CORP

form10q-118706_mvb.htm

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 September 30, 2011

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

For the transition period from to .

Commission File number 333-120931

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

(Issuer’s telephone number)

Not Applicable

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

Indicate by check mark whether the registrant has (1) 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

Non-accelerated filer (Do not check if a smaller reporting company)

Smaller reporting company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [ X ]

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

As of November 14, 2011, the number of shares outstanding of the issuer’s only class of common stock was 2,234,767.

MVB Financial Corp.
Part I.	Financial Information

Item 1.	Financial Statements

	The unaudited interim consolidated financial statements of MVB Financial Corp. and Subsidiaries (MVB or “the Company”) listed below are included on pages 2-18 of this report.

	Consolidated Balance Sheets at September 30, 2011 and December 31, 2010

	Consolidated Statements of Income for the Nine and Three Months ended September 30, 2011 and 2010

	Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2011 and 2010

	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 is included on pages 19-30 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 1.a.	Risk Factors

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

Item 3.	Defaults Upon Senior Securities

Item 4.	Removed and Reserved

Item 5.	Other Information

Item 6.	Exhibits

Index

Part I. Financial Information

Item 1. Financial Statements

MVB Financial Corp. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except Share and Per Share Data)

	September 30			December 31
	2011			2010
	(Unaudited)			(Note 1)
Assets
Cash and due from banks	$	10,667		$	3,713
Interest bearing balances		6,962			10,091
Certificates of deposits in other banks		9,918			17,734
Investment securities:
Securities held-to-maturity, at cost		10,168			7,460
Securities available-for-sale, at approximate fair value		102,292			61,824

Loans:		357,830			294,044
Less: Allowance for loan losses		(2,676	)		(2,478	)
Net loans		355,154			291,566
Loans held for sale		3,352			1,839
Bank premises, furniture and equipment, net		7,673			7,579
Accrued interest receivable and other assets		13,993			12,461
Total assets	$	520,179		$	414,267
Liabilities
Deposits
Non-interest bearing	$	42,345		$	28,449
Interest bearing		335,540			271,985
Total deposits		377,885			300,434

Accrued interest, taxes and other liabilities		2,302			2,703
Repurchase agreements		77,826			47,623
Federal Home Loan Bank and other borrowings		9,823			28,614
Long-term debt		4,124			4,124
Total liabilities		471,960			383,498

Stockholders’ equity
Preferred stock, $1,000 par value, 8,500 shares authorized and issued		8,500			-
Common stock, $1 par value, 4,000,000 authorized, 2,234,767 and 1,802,391 issued		2,235			1,802
Additional paid-in capital		32,574			23,864
Common stock paid for but not issued, par value $1; 90,560 shares		-			1,729
Treasury stock, 51,077 and 47,218 shares, respectively		(1,084	)		(1,006	)
Retained earnings		5,792			4,643
Accumulated other comprehensive income/(loss)		202			(263	)
Total stockholders’ equity		48,219			30,769
Total liabilities and stockholders’ equity	$	520,179		$	414,267

See accompanying notes to unaudited financial statements.

Index

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited) (Dollars in Thousands except Share and Per Share Data)

	Nine Months Ended				Three Months Ended
	September 30				September 30
	2011		2010		2011		2010
Interest income
Interest and fees on loans	$	12,043	$	9,795	$	4,306	$	3,449
Interest on deposits with other banks		60		501		11		115
Interest on investment securities – taxable		1,101		1,071		393		401
Interest on tax exempt loans and securities		625		586		211		224
Total interest income		13,829		11,953		4,921		4,189

Interest expense
Deposits		2,909		3,379		969		1,105
Repurchase agreements		358		338		125		115
FHLB and other borrowings		349		385		114		123
Long-term debt		60		62		20		23
Total interest expense		3,676		4,164		1,228		1,366
Net interest income		10,153		7,789		3,693		2,823
Provision for loan losses		1,221		760		591		240
Net interest income after provision for loan losses		8,932		7,029		3,102		2,583

Other income
Service charges on deposit accounts		471		498		178		143
Income on bank owned life insurance		206		193		78		64
Visa debit card income		309		263		106		93
Income on loans held for sale		591		372		318		170
Other operating income		401		311		170		95
Gain on sale of securities		485		88		129		32
Total other income		2,463		1,725		979		597

Other expense
Salary and employee benefits		4,816		3,501		1,725		1,267
Occupancy expense		497		446		182		149
Equipment expense		439		350		152		127
Data processing		252		355		147		78
Visa debit card expense		245		218		84		79
Advertising		283		215		121		73
Legal and accounting fees		292		122		151		42
Printing, stationery and supplies		123		97		38		31
Consulting fees		291		116		92		61
FDIC insurance		322		395		79		129
Other taxes		126		140		40		47
Other operating expenses		967		709		341		252
Total other expense		8,653		6,664		3,152		2,335
Income before income taxes		2,742		2,090		929		845
Income tax expense		767		535		256		225
Net income	$	1,975	$	1,555	$	673	$	620

Basic net income per share	$	0.92	$	0.97	$	0.31	$	0.39
Diluted net income per share	$	0.91	$	0.96	$	0.30	$	0.38
Basic weighted average shares outstanding		2,135,826		1,599,382		2,185,703		1,593,629
Diluted weighted average shares outstanding		2,171,967		1,624,241		2,221,844		1,618,488

See accompanying notes to unaudited financial statements.

Index

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited) (Dollars in thousands)

	Nine Months Ended			September 30
	2011			2010
Operating activities
Net income	$	1,975		$	1,555
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,221			760
Deferred income tax expense/(benefit)		145			(274	)
Depreciation		343			338
Stock based compensation		88			27
Loans originated for sale		(31,675	)		(27,717	)
Proceeds of loans sold		30,162			26,957
Proceeds from sale of other real estate owned		312			866
(Gain) on sale of other real estate owned		-			(61	)
(Gain) on sale of investment securities		(485	)		-
Amortization, net of accretion		613			331
(Increase) in interest receivable and other assets		(198	)		(4	)
(Decrease)/increase in accrued interest, taxes, and other liabilities		(401	)		760
Net cash provided by operating activities		2,100			3,538
Investing activities
(Increase) in loans made to customers		(64,809	)		(46,939	)
Purchases of premises and equipment		(437	)		(196	)
Decrease/(increase) in interest bearing balances with banks, net		3,129			(17,695	)
Purchases of certificates of deposit in other banks		(9,918	)		(16,321	)
Maturities of certificates of deposit in other banks		17,734			44,886
Purchases of investment securities available-for-sale		(215,143	)		(59,976	)
Proceeds from sales, maturities and calls of securities
Available-for-sale		175,336			31,501
Proceeds from sales, maturities and calls of securities
held to maturity		1,225			474
Purchases of investment securities held-to-maturity		(3,948	)		(985	)
Purchase of bank owned life insurance		(2,100	)		-
Net cash (used in) investing activities		(98,931	)		(65,251	)
Financing activities
Net increase in deposits		77,451			52,465
Net increase in repurchase agreements		30,203			18,942
Proceeds from Federal Home Loan Bank borrowings		63,594			92,500
Principal payments on Federal Home Loan Bank borrowings		(82,385	)		(101,657	)
Purchase of treasury stock		(78	)		(304	)
Net proceeds of stock offering		6,500			-
Common stock options exercised		-			38
Issuance of preferred stock		8,500			-
Net cash provided by financing activities		103,785			61,984
Increase in cash and cash equivalents		6,954			271
Cash and cash equivalents - beginning of period		3,713			2,321
Cash and cash equivalents - end of period	$	10,667		$	2,592

Cash payments for:
Interest on deposits, repurchase agreements and borrowings	$	3,763		$	4,296
Income taxes	$	686		$	516

See accompanying notes to unaudited financial statements.

Index

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 generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Section 310(b) of Regulation SB. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles 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 balance sheet as of December 31, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles. Operating results for the nine and three months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The accounting and reporting policies of MVB 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.

The consolidated balance sheet as of December 31, 2010 has been extracted from audited financial statements included in MVB’s 2010 filing on Form 10-K. 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, 2010, Form 10-K filed with the Securities and Exchange Commission.

Management has reviewed events occurring through November 14, 2011, the date the financial statements were issued and no subsequent events transpired requiring accrual or disclosure.

Note 2. - Loans

The following table summarizes the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2011. Activity in the allowance is presented for the period ended September 30, 2011 (in thousands):

Index

							Home						Credit
	Commercial			Residential			Equity			Installment			Card			Total
ALL balance 12/31/10	$	1,517		$	460		$	207		$	274		$	20		$	2,478
Charge-offs		(554	)		(354	)		(114	)		(29	)		(3	)		(1,054	)
Recoveries		4			-			10			17			-			31
Provision		849			332			68			(31	)		3			1,221
ALL balance 9/30/11	$	1,816		$	438		$	171		$	231		$	20		$	2,676
Individually evaluated for impairment	$	1,329		$	95		$	54		$	104		$	3		$	1,585
Collectively evaluated for impairment	$	487		$	343		$	117		$	127		$	17		$	1,091

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.

The following table summarizes the primary segments of the loan portfolio as of September 30, 2011 (in thousands):

	Commercial		Residential		Home Equity		Installment		Credit Cards		Total

Sept. 30, 2011
Total Loans	$	230,583	$	99,578	$	15,038	$	12,045	$	586	$	357,830
Individually evaluated for impairment	$	2,583	$	77	$	43	$	8	$	-	$	2,711
Collectively evaluated for impairment	$	228,000	$	99,501	$	14,995	$	12,037	$	586	$	355,119

The following table summarizes the primary segments of the loan portfolio as of December 31, 2010 (in thousands):

	Commercial		Residential		Home Equity		Installment		Credit Cards		Total

December 31, 2010
Total Loans	$	194,700	$	71,686	$	14,334	$	12,830	$	494	$	294,044
Individually evaluated for impairment	$	393	$	197	$	262	$	0	$	4	$	856
Collectively evaluated for impairment	$	194,307	$	71,489	$	14,072	$	12,830	$	490	$	293,188

Index

Management evaluates individual loans in all of the commercial segments for possible impairment. Loans are considered to be impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Corporation also separately evaluates individual consumer and residential mortgage loans for impairment.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan's effective interest rate; (b) the loan's observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis.

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 September 30, 2011 (in thousands):

					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
Sept. 30, 2011	Investment		Allowance		Investment		Investment		Balance

Commercial	$	-	$	-	$	2,583	$	2,583	$	2,583
Residential		77		77		-		77		77
Home Equity		43		43		-		43		43
Installment		8		8		-		8		8
Credit Card		-		-		-		-		-
Total impaired loans	$	128	$	128	$	2,583	$	2,711	$	2,711

					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
Dec 31, 2010	Investment		Allowance		Investment		Investment		Balance

Commercial	$	59	$	20	$	334	$	393	$	393
Residential		165		75		32		197		197
Home Equity		262		99		0		262		262
Installment		0		0		0		0		0
Credit Card		4		4		0		4		4
Total impaired loans	$	490	$	198	$	366	$	856	$	856

Index

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

	Sept.
	2011		2010
Average investment in impaired loans	$	1,144	$	1,220
Interest income recognized on an accrual basis on impaired loans	$	47	$	49

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 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 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 performs an annual review of all commercial relationships $500,000 or greater. Confirmation of the appropriate risk grade is included in the review 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 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 September 30, 2011 and December 31, 2010 (in thousands):

			Special
Sept. 30, 2011	Pass		Mention		Substandard		Doubtful		Total

Commercial	$	216,852	$	6,830	$	4,318	$	2,583	$	230,583
Residential		98,040		1,286		175		77		99,578
Home Equity		14,872		97		26		43		15,038
Installment		11,657		223		157		8		12,045
Credit Card		583		-		3		-		586
Total	$	342,004	$	8,436	$	4,679	$	2,711	$	357,830

			Special
December 31, 2010	Pass		Mention		Substandard		Doubtful		Total

Commercial	$	180,568	$	8,294	$	5,446	$	392	$	194,700
Residential		69,906		613		1,002		165		71,686
Home Equity		13,945		99		262		28		14,334
Installment		12,424		233		173		-		12,830
Credit Card		488		-		6		-		494
Total	$	277,331	$	9,239	$	6,889	$	585	$	294,044

Index

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. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of September 30, 2011and December 31, 2010 (in thousands):

	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due		Total Past Due		Non- Accrual		Total Loans
Sept. 30, 2011
Commercial	$	224,036	$	341	$	2,935	$	-	$	3,276	$	3,271	$	230,583
Residential		98,916		58		188		76		322		340		99,578
Home Equity		14,896		75		-		-		75		67		15,038
Installment		11,756		63		28		42		133		156		12,045
Credit Card		586		-		-		-		-		-		586
Total	$	350,190	$	537	$	3,151	$	118	$	3,806	$	3,834	$	357,830

			30-59		60-89		90
			Days		Days		Days		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
Dec 31, 2010
Commercial	$	193,414	$	241		-	$	217	$	458	$	828	$	194,700
Residential		68,529		1,761		272		143		2,176		981		71,686
Home Equity		13,979		28		18		47		93		262		14,334
Installment		12,222		141		158		155		454		154		12,830
Credit Card		490		-		-		-		-		4		494
Total	$	288,634	$	2,171	$	448		562	$	3,181	$	2,229	$	294,044

An allowance for loan losses ("ALL") is maintained to absorb losses from the loan portfolio. The ALL is based on management's continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic 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 classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks 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. Commercial, Mortgage and Consumer 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.

Index

Management has 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.

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.

Historically, management has utilized an internally developed spreadsheet to track and apply the various components of the allowance.

The following table presents details related to loans identified as TDRs during the three and nine months ended September 30, 2011:

	New TDRs (1)
	For the Three Months Ended							For the Nine Months Ended
	30-Sep-11							30-Sep-11
(Unaudited, dollars in thousands)	Number of Contracts			Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate:		-			-		-		-
Land and construction		1			2,745		2,250		1		2,745		2,250
Other							-		-		-		-
Total commercial real estate		1	(1)		2,745		2,250		1		2,745		2,250
Commercial and industrial		-			-		-		-		-		-
Residential real estate		1			418		418		1		418		418
Home equity		-			-		-		-		-		-
Consumer		-			-		-		-		-		-
Total		2			3,163		2,668		2		3,163		2,668

(1) Excludes loans that were either paid off or charged-off by period end. The pre-modification balance represents the balance outstanding at the beginning of the period. The post-modification balance represents the outstanding balance at period end.

Note 3. Borrowed Funds

The Company is a party to repurchase agreements with certain customers. As of September 30, 2011 and December 31, 2010, the Company had repurchase agreements of $77.8 million and $47.6 million.

The bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh, Pennsylvania. Borrowings from the FHLB are secured by stock in the FHLB of Pittsburgh, qualifying first mortgage loans, mortgage-backed securities and certain investment securities. The remaining maximum borrowing capacity with the FHLB at September 30, 2011 was approximately $117.1 million.

Borrowings from the FHLB were as follows:	Sept 30 2011		Dec 31 2010
(dollars in thousands)
Fixed interest rate note, originating April 1999, due April 2014, interest of 5.41% is payable monthly.	$	1,000	$	1,000

Fixed interest rate note, originating January 2005, due January 2020, interest of 5.14% is payable in monthly installments of $11.		872		933

Fixed interest rate note, originating April 2002, due May 2017, interest of 5.90% is payable monthly.		635		647

Fixed interest rate note, originating July 2006, due July 2016, interest of 4.50% is payable in monthly installments of $8.		1,311		1,341

Fixed interest rate note, originating October 2006, due October 2021, interest of 5.20% is payable in monthly installments of $6.		1,073		1,089

Fixed interest rate note, originating February 2007, due February 2022, interest of 5.22% is payable in monthly installments of $5.		901		913

Fixed interest rate note, originating April 2007, due April 2022, interest of 5.18% is payable in monthly installments of $6.		1,019		1,034

Floating interest rate note, originating March 2003, due December 2011, interest of 0.68% payable monthly.		-		14,126

Fixed interest rate note, originating December 2007, due December 2017, interest of 5.25% is payable in monthly installments of $7.		1,012		1,031

Fixed interest rate note originating March 2008, due March 2013, interest of 2.37% payable quarterly.		2,000		2,000

	$	9,823	$	24,114

Index

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 will be 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 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 30 years and are redeemable by the Company after five years. 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 Company reflects borrowed funds in the amount of $4.1 million as of September 30, 2011 and 2010 and interest expense of $60 and $62 for the periods ended September 30, 2011 and 2010.

The bank had borrowed $4,500 in overnight funds at the Federal Reserve discount window on December 31, 2010 at a rate of 0.75%

A summary of maturities of these borrowings over the next five years is as follows:

(dollars in thousands)
Year	Amount
2011	$	56
2012		232
2013		2,244
2014		1,257
2015		271
Thereafter		9,887
	$	13,947

Note 4. - Comprehensive Income

The Company is required to present comprehensive income in a full set of general-purpose financial statements for all periods presented. The following represents comprehensive income for the nine and three month periods ended September 30, 2011 and September 30, 2010.

The following table represents other comprehensive income before tax and net of tax:

(in thousands)	For the three months ended Sept. 30,						For the nine months ended Sept. 30,
	2011			2010			2011			2010
Unrealized gain (loss) on securities available for sale	$	156		$	257		$	774		$	747
Pension liability adjustment		-			-			-			(139	)
Tax effect		(62	)		(103	)		(310	)		(243	)
Net of tax effect		94			154			464			365
Net income as reported		673			620			1,975			1,555
Total comprehensive income	$	767		$	774		$	2,439		$	1,920

Index

Note 5 – Net Income Per Common Share

MVB 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 by the weighted average number of shares outstanding increased by the number of shares that would be issued assuming the exercise of stock options. At September 30, 2011 and 2010, stock options to purchase 148,423 and 124,297 shares at an average price of $15.13 and $16.00, respectively, were outstanding. For the three months ended September 30, 2011 and 2010, the dilutive effect of stock options was 36,141 and 24,859 shares, respectively.

Note 6 – Recent Accounting Pronouncements

In July 2010, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company has provided the necessary disclosures in Note 2 herein.

In December, 2010, the Financial Accounting Standards Board (“FASB”) issued ASU 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating an impairment may exist. The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For public entities, the amendments in this Update are effective for fiscal year, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities may early adopt the amendments using the effective date for public entities. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

Index

In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this Update provide additional guidance or clarification to help creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The amendments in this Update are effective for the first interim or annual reporting period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. The Company has provided the necessary disclosures in Note 2.

In April 2011, the FASB issued ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements. The main objective in developing this Update is to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this Update apply to all entities, both public and nonpublic. The amendments affect all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that have goodwill reported in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU is not expected to have a significant impact on the Company’s financial statements.

Index

In September 2011, the FASB issued ASU 2011-09, Compensation-Retirement Benefits-Multiemployer Plans (Subtopic 715-80). The amendments in this Update will require additional disclosures about an employer’s participation in a multiemployer pension plan to enable users of financial statements to assess the potential cash flow implications relating to an employer’s participation in multiemployer pension plans. The disclosures also will indicate the financial health of all of the significant plans in which the employer participates and assist a financial statement user to access additional information that is available outside the financial statements. For public entities, the amendments in this Update are effective for annual periods for fiscal years ending after December 15, 2011, with early adoption permitted. For nonpublic entities, the amendments are effective for annual periods of fiscal years ending after December 15, 2012, with early adoption permitted. The amendments should be applied retrospectively for all prior periods presented. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial statements.

Note 7 – Fair Value of 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.

Index

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.

The following table presents the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of September 30, 2011 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.

(In Thousands)	September 30, 2011
	Level I		Level II		Level III		Total
Assets:
Investment securities, available for sale		-		102,292		-		102,292
Other Real Estate Owned		-		270		-		270
Impaired Loans		-		-		2,711		2,711

(In Thousands)	December 31, 2010
	Level I		Level II		Level III		Total
Assets:
Investment securities, available for sale		-		61,824		-		61,824
Other Real Estate Owned		-		402		-		402
Impaired Loans		-		-		856		856

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

Short-term financial instruments: The carrying values of short-term financial instruments including cash and due from banks, interest bearing balances – FHLB, and certificates of deposit in other banks approximate the fair value of these instruments.

Securities: Estimated 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: The estimated 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.

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

Repurchase Agreements: The fair values of repurchase agreements approximate their estimated fair values.

Deposits: The estimated 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.

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 significant, and therefore, the estimated fair values and carrying values are not shown.

Index

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

	Sept. 30, 2011
	Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks		10,667		10,667
Interest bearing balances		6,962		6,962
Securities available-for-sale		102,292		102,292
Securities held-to-maturity		10,168		10,524
Loans		357,830		371,070
Accrued interest receivable		1,639		1,639
	$	489,558	$	503,154

Financial liabilities:
Deposits	$	377,885	$	397,082
Repurchase agreements		77,826		77,826
Federal Home Loan Bank Borrowings		9,823		11,336
Accrued interest payable		291		291
Long-term debt		4,124		4,124
	$	469,949		490,659

	December 31, 2010
	Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks		3,713		3,713
Interest bearing balances		27,825		27,878
Securities available-for-sale		61,824		61,824
Securities held-to-maturity		7,460		7,442
Loans		294,044		302,277
Accrued interest receivable		1,398		1,398
	$	396,264	$	404,532

Financial liabilities:
Deposits	$	300,434	$	307,584
Repurchase agreements		47,623		47,671
FHLB and other Borrowings		28,614		32,305
Accrued interest payable		378		378
Long-term debt		4,124		4,124
	$	381,173		392,062

Index

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.

Amortized cost and approximate fair values of investment securities held-to-maturity at September 30, 2011, including gross unrealized gains and losses, are summarized as follows:

(Dollars in thousands)
							Approximate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		Loss		Value

Municipal securities	$	10,168	$	446	$	-	$	10,614

	$	10,168	$	446	$	-	$	10,614

Amortized cost and approximate fair values of investment securities held-to-maturity at December 31, 2010, including gross unrealized gains and losses, are summarized as follows:

(Dollars in thousands)
								Approximate
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

Municipal securities	$	6,460	$	27	$	(62	)	$	6,425
U.S. Agency securities		1,000		17		-			1,017
	$	7,460	$	44	$	(62	)	$	7,442

Amortized cost and approximate fair values of investment securities available-for-sale at September 30, 2011 are summarized as follows:

								Approximate
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

U. S. Agency securities	$	64,250	$	1,114	$	-		$	65,364
Mortgage-backed securities		36,482		354		(32	)		36,804
Other securities		124		-		-			124
	$	100,856	$	1,468	$	(32	)	$	102,292

Index

Amortized cost and approximate fair values of investment securities available-for-sale at December 31, 2010 are summarized as follows:

								Approximate
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

U. S. Agency securities	$	34,903	$	453	$	(76	)	$	35,280
Mortgage-backed securities		26,135		306		(21	)		26,420
Other securities		124		-		-			124
	$	61,162	$	759	$	(97	)		61,824

The following tables summarize amortized cost and approximate fair values of securities by maturity:

	September 30, 2011
	Held to Maturity				Available for sale
			Approximate				Approximate
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

Within one year	$	115	$	115	$	-	$	-
After one year, but within five		-		-		48,198		49,173
After five years, but within ten		4,026		4,258		6,052		6,191
After ten Years		6,027		6,241		46,606		46,928
Total	$	10,168	$	10,614	$	100,856	$	102,292

The Company's investment portfolio includes securities that are in an unrealized loss position as of September 30, 2011, the details of which are included in the following table. Although these securities, if sold at September 30, 2011 would result in a pretax loss of $32, 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 September 30, 2011, 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 September 30, 2011, total temporary impairment totaled $32.

Description and number	Less than 12 months					12 months or more
of positions	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss

U.S. Agencies(-)	$	-	$	-		$	-	$	-
Mortgage-backed securities(7) (11)		7,249		(32	)		-		-
Municipal securities(-)		-					-		-
	$	7,249	$	(32	)	$	-	$	-

Index

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

The Private Securities Litigation Reform Act of 1995 indicates that the disclosure of forward-looking information is desirable for investors and encourages such disclosure by providing a safe harbor for forward-looking statements that involve risk and uncertainty. All statements other than statements of historical fact included in this Form 10-Q including statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. In order to comply with the terms of the safe harbor, the corporation notes that a variety of factors, (e.g., changes in the national and local economies, changes in the interest rate environment, competition, etc.) could cause MVB’s actual results and experience to differ materially from the anticipated results or other expectations expressed in those forward-looking statements.

At September 30, 2011 and for the Nine and Three Months Ended September 30, 2011 and 2010:

	Nine Months Ended Sept. 30						Three Months Ended Sept. 30
	2011			2010			2011			2010
Net income to:
Average assets		.58	%		.54	%		.55	%		.62	%
Average stockholders’ equity		6.94			7.58			6.63			8.83
Net interest margin		3.17			2.88			3.23			3.01

Average stockholders’ equity to average assets		8.37			7.15			8.30			7.08
Total loans to total deposits (end of period)		94.69			88.18			94.69			88.18
Allowance for loan losses to total loans (end of period)		0.75			.99			0.75			0.99
Efficiency ratio		68.59			70.04			67.47