MVB Financial Corp. — FY 2023 Form 10-K
Reporting period: Year ended December 31, 2023. This is an annual filing; it also provides unaudited fourth-quarter results. MVB is a West Virginia financial holding company operating mainly through MVB Bank, with commercial and retail banking, Fintech banking, mortgage investments and technology and professional-services businesses.
Financial performance and position
| Metric | FY 2023 / Dec. 31, 2023 | Prior comparable period |
|---|---|---|
| Net income attributable to parent | $31.2 million; diluted EPS $2.40 | $15.0 million; diluted EPS $1.17 in 2022 |
| Continuing-operations net income | $22.2 million | $11.7 million in 2022 |
| Net interest income | $123.3 million | $111.8 million in 2022 |
| Net interest margin | 4.01% GAAP; 4.04% tax-equivalent | 3.99% GAAP; 4.04% tax-equivalent in 2022 |
| Noninterest income / expense | $19.7 million / $117.6 million | $27.6 million / $110.1 million in 2022 |
| Cash and cash equivalents | $398.2 million | $40.3 million at year-end 2022 |
| Total assets / loans receivable | $3.31 billion / $2.32 billion | $3.07 billion / $2.37 billion at year-end 2022 |
| Total deposits | $2.90 billion | $2.57 billion at year-end 2022 |
| Stockholders’ equity / equity-to-assets | $289.3 million / 8.7% | $261.4 million / 8.5% at year-end 2022 |
| Credit quality | $8.3 million nonperforming loans; 0.4% of loans. ACL $22.1 million, or 0.95% of loans. Net charge-offs $9.3 million. | $11.2 million nonperforming loans; 0.5%. ACL $23.8 million, or 1.00%. Net charge-offs $8.6 million in 2022. |
Cash flows were $58.2 million from operations, $88.2 million from investing and $211.5 million from financing; cash and cash equivalents increased $357.9 million. The filing reports a 10.5% Bank Community Bank Leverage Ratio, above the 9% well-capitalized threshold. Year-end borrowings included $73.5 million of subordinated debt and $6.8 million on the senior term loan; there were no FHLB advances outstanding. Repurchase agreements were $4.8 million.
Material changes and unusual items
- Net interest income rose $11.5 million, but the cost of interest-bearing liabilities increased to 3.38% from 1.03%. The tax-equivalent margin held at 4.04%; the spread narrowed to 2.82% from 3.51%.
- Net income included $8.8 million of after-tax discontinued-operations income, including an $11.8 million pretax gain from the February 2023 Chartwell sale. Sale consideration was a $14.4 million note to the buyer, bearing 7% interest and maturing in 2027.
- Noninterest income fell $7.9 million, reflecting, among other items, lower loan-sale and investment gains, larger equity-method investment losses and a $1.0 million divestiture loss. The prior year included a $5.0 million gain on asset sales and a $1.9 million equity-method investment gain.
- Noninterest expense increased $7.5 million, including higher professional fees related to risk-management and compliance work and increased FDIC insurance costs. The efficiency ratio worsened to 82.3% from 78.2%.
- MVB adopted CECL in January 2023. Adoption increased the allowance for credit losses by $10.0 million before tax effects and reduced retained earnings by $6.6 million after tax. The 2023 income statement recorded a $1.9 million release of credit-loss allowance versus a $14.2 million provision in 2022.
- The available-for-sale securities portfolio had $33.5 million of pretax unrealized losses at year-end. Management attributed these losses to market conditions, reported no credit-loss allowance, and stated it had the intent and ability to hold the securities.
Outlook, risks and contingencies
Management describes a challenging environment of higher interest rates, a slowing economy and banking-sector disruptions. It intends to maintain its focus on gaming and payments-related Fintech, develop treasury services and expand deposit-acquisition and fee-income strategies, while adding compliance and risk-management resources. The filing gives no specific earnings, revenue or margin guidance.
- Deposit concentration and liquidity: Uninsured deposits were $1.2 billion, or 42.5% of deposits. Gaming deposits on balance sheet fell to $354.1 million from $652.1 million; $292.7 million was held by the three largest gaming clients. Off-balance-sheet gaming deposits were $277.1 million. Available liquidity included $398.2 million of cash and $699.8 million of remaining FHLB borrowing capacity.
- Rate exposure: The Bank was asset-sensitive in the first year. Modeled net-interest-income exposure exceeded policy limits in all tested falling-rate shock scenarios, ranging from a 13.3% decline at -100 basis points to a 44.8% decline at -400 basis points. These are modeled shocks, not management guidance.
- Credit and concentration: Commercial and non-residential real estate loans were 69.2% of loans; healthcare loans were 23.4% of total loans. Special Mention loans rose to $83.8 million from $31.3 million, with identified exposures including retail, office, multifamily, healthcare and hospitality-related credits. Management says the allowance is adequate, but notes its estimates depend on forecasts and judgment.
- Other material risks: The filing highlights competition for deposits, potential deposit outflows, uninsured-deposit risk, securities valuation, interest-rate and credit risks, regulatory scrutiny of Fintech and banking-as-a-service, cybersecurity and third-party risks, and mortgage-market exposure through equity-method investments. Management reported no known material pending legal proceedings and no material cybersecurity impact or reasonably likely material cybersecurity threat impact as of the filing date.
Most important facts for investors to verify
- How much of reported earnings growth is repeatable: 2023 parent-attributable net income was $31.2 million, including discontinued-operations income and the Chartwell-sale gain; continuing-operations net income was $22.2 million.
- Whether deposits remain stable and diversified, including balances and concentration among gaming and other Fintech clients, uninsured deposits, and off-balance-sheet placement programs.
- Whether deposit costs and asset yields preserve net interest margin as rates change, particularly given the modeled falling-rate sensitivity and policy-limit breaches.
- Whether criticized commercial credits, especially real estate and healthcare exposures, worsen and require additional provisions or charge-offs; review CECL assumptions and allowance sensitivity.
- Whether liquidity, capital and shareholder distributions remain adequate: check the 10.5% Bank leverage ratio, available borrowing capacity, dividend restrictions and the $33.5 million unrealized securities loss.