MVB Financial Corp. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with fiscal 2021. MVB is a West Virginia financial holding company operating mainly through MVB Bank, with community and commercial banking, nationwide Fintech banking, mortgage investments, professional services and early-stage Fintech ventures.
Financial performance and condition
| Metric | 2022 | 2021 |
|---|---|---|
| Net interest income | $111.8 million | $77.2 million |
| Net interest margin, tax-equivalent | 4.04% | 3.26% |
| Noninterest income | $38.3 million | $62.6 million |
| Noninterest expense | $117.4 million | $97.5 million |
| Provision (release) for loan losses | $14.2 million | ($6.3) million |
| Net income attributable to parent | $15.0 million | $39.1 million |
| Diluted earnings per share | $1.17 | $3.10 |
| Return on average assets / equity | 0.5% / 5.9% | 1.5% / 15.6% |
| Efficiency ratio | 78.2% | 69.7% |
The income statement reports consolidated net income of $14.4 million and net income attributable to the parent of $15.0 million, reflecting a loss attributable to noncontrolling interests. Fourth-quarter 2022 net income was $6.5 million and diluted EPS was $0.50.
- Balance sheet: Total assets were $3.07 billion, up from $2.79 billion. Loans receivable, net, were $2.35 billion, compared with $1.85 billion. Deposits were $2.57 billion, versus $2.38 billion.
- Funding and liquidity: Cash and cash equivalents fell to $40.3 million from $307.4 million. Noninterest-bearing deposits were $1.23 billion, or 47.9% of deposits. The Bank had $102.3 million in FHLB and other short-term borrowings at year-end and $539.3 million of remaining FHLB borrowing capacity.
- Debt and capital: Year-end balances included $73.3 million subordinated debt and $9.8 million senior term debt. The Bank’s Community Bank Leverage Ratio was 9.83%, above the 9% well-capitalized threshold. Equity to assets declined to 8.5% from 9.8%.
- Cash flow: Operating activities provided $65.2 million; investing activities used $629.0 million, largely reflecting loan growth and investment activity; financing activities provided $296.6 million. Cash declined by $267.2 million over the year.
- Credit: Nonperforming loans were $11.2 million, or 0.5% of loans, versus $18.0 million, or 0.9%, in 2021. The allowance for loan losses was $23.8 million, about 1.0% of loans. Net charge-offs rose to $8.6 million from $1.3 million.
- Investment securities: Available-for-sale securities had a $47.3 million net unrealized loss at year-end; the filing says management did not intend, and was unlikely, to need to sell them at a loss. Accumulated other comprehensive loss was $37.7 million.
Material changes versus 2021
- Net interest income rose 44.8%, driven by loan growth and higher asset yields as market rates increased. The cost of interest-bearing liabilities also increased, to 1.03% from 0.44%.
- Net income attributable to the parent fell by $24.1 million. Noninterest income declined by $24.3 million, principally due to lower mortgage-related equity-method income and the absence of prior-year acquisition/divestiture and securities gains. Noninterest expense rose $19.9 million, including higher compensation costs.
- The loan portfolio grew by $502.8 million. Residential real estate loans increased substantially, as did consumer loans, including purchased subprime auto loans. PPP balances fell to $13.6 million from $131.7 million.
- Gaming deposits declined to $652.1 million from $911.6 million, although deposits overall increased. Three largest gaming clients accounted for $536.9 million of gaming deposits at year-end.
- The company invested $38.4 million in cash and issued shares valued at $9.6 million for a 37.5% interest in Warp Speed, completed October 1, 2022. Its 2022 earnings were not included because MVB elected to report the investment on a three-month lag.
Outlook, risks and notable events
- Management described adapting to higher rates and a slowing economy, pursuing Fintech banking, treasury services and fee-income opportunities, and implementing cost-saving measures. Initiatives begun in the fourth quarter targeted a 12% reduction from the annualized third-quarter 2022 noninterest expense base; the filing does not provide a subsequent achieved reduction.
- The proposed acquisition of Integrated Financial Holdings, including West Town Bank & Trust, was approved by both companies’ boards and shareholders in January 2023, but required regulatory approvals remained pending when the filing was issued. Integration, execution and dilution risks remain.
- In February 2023, MVB sold Chartwell for $14.4 million. This subsequent event may change the future contribution of professional-services revenue and earnings.
- Management expected adoption of CECL in 2023 to reduce retained earnings by approximately $6.5 million to $7.0 million. The filing also identifies $317.1 million of loans referencing LIBOR for transition to SOFR by June 30, 2023.
- Interest-rate modeling showed net interest income at risk outside policy limits in parallel rate-decline scenarios of 100 to 400 basis points. Management characterized the balance sheet as asset-sensitive in the first year; modeled results are assumption-dependent.
- Key risks include concentration in gaming and other large-client deposits, deposit outflows and higher funding costs, real-estate and commercial credit exposure, subprime auto loan losses, rising rates and securities valuation, Fintech and cryptocurrency regulation, cybersecurity and operational risks, and potential recession or inflation effects. The filing discusses March 2023 banking-industry disruptions as a risk and notes the Federal Reserve Bank Term Funding Program introduced March 12, 2023.
- The filing provides no formal earnings or revenue guidance. It cautions that forward-looking statements are uncertain. No material pending legal proceeding was reported. The independent auditor issued unqualified opinions on the financial statements and internal controls; management reported no material weakness.
Important facts for investors to verify
- Whether MVB can retain and diversify deposits as gaming deposits and industry funding conditions change, including the concentration among its largest clients and uninsured balances.
- Whether loan growth—particularly commercial real estate, purchased subprime auto and third-party-originated loans—produces higher delinquencies, charge-offs or allowance needs; also assess the expected CECL impact.
- How the $47.3 million unrealized securities loss, cash decline and increased FHLB borrowing affect liquidity and capital under stress scenarios.
- Whether expense reductions, fee-income initiatives and the Chartwell sale change recurring profitability, and whether mortgage-related earnings recover.
- The status and final terms of the IFH merger, regulatory approvals, integration costs and expected benefits; also track Warp Speed results once included in MVB’s reported earnings.
- Confirm subsequent-period results against the filing’s modeled interest-rate sensitivities, dividend expectations and other forward-looking statements; these are not guarantees of future performance.