MVB Financial Corp
Annual Report 2011

Plain-text annual report

 Welcome to MVB MVB Financial Corp. is the bank holding company for MVB Bank, Inc. We provide community banking services in the Berkeley, Harrison, Jefferson, Marion and Monongalia Counties of West Virginia. We offer a wide range of deposit products including checking, money market, savings accounts, our enhanced Kasasa Cash and Kasasa Saver accounts, and time certificates of deposit. In addition, we recently launched our new Wealth Management Solutions service. MVB is an active business partner when it comes to commercial and consumer loans, offering an array of loan products for commercial development and real estate, capital needs, and agricultural loans, as well as personal loans, residential real estate loans, home equity lines of credit, and construction mortgages. We offer many other personalized and automated services in our branch locations, online and by phone. MVB commenced operations in 1999 and is based in Fairmont, West Virginia. Most importantly, we consider the communities we serve and our relationships with all of our clients to be our most valuable assets. Visit us at www.mvbbanking.com. Vision, Mission & Values VISION A valued partner in growing strong communities VALUES Extraordinary Service MISSION A proactive community partner providing quality financial products and services that go beyond a typical bank through recognized extraordinary service and valued relationships on the coVer Integrity Accountability Teamwork Respect Honesty Community White water rafting is a sport enjoyed in West Virginia because of its challenges and unpredictable excitement - one minute you’re paddling along a peaceful calm stretch of the Gauley River, enjoying the scenery of our beautiful mountains - the next moment you’re shooting through rocks, boulders and down water falls, hanging on for dear life. Without skillful navigation, good direction of the raft’s guide, and the collective efforts of the whole crew, a tumble into the water is possible. Metaphorically, the 2011 Annual Report cover symbolizes through nature MVB’s successful navigation of the choppy and often difficult financial and economic ‘rapids’ of the past several years. The journey challenged the discipline and focus of MVB’s entire team, who not only successfully traversed the highly difficult passages, but emerged stronger and ready for future opportunities in all waters. Selected Financial Highlights MVB has posted progressive increases for each of the past four years in these selected indicators of growth and development. The graphs below depict the strength of MVB Bank’s performance in the communities we serve. Compared to the previous year, MVB’s total deposits increased by 30%, with total assets growing by nearly 29%, on a 27% increase in total loans during 2011. Net income jumped by nearly 21% from the previous year. TOTAL LOANS TOTAL DEPOSITS $373,822 $294,044 $203,241 $232,847 ) s d n a s u o h t ( $500,000 $400,000 $300,000 $200,000 $100,000 $- $390,545 $264,531 $300,434 ) s d n a s u o h t ( $500,000 $400,000 $300,000 $200,000 $173,065 $100,000 $- Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2008 Dec 2009 Dec 2010 Dec 2011 TOTAL ASSETS NET INCOME $600,000 $500,000 $400,000 ) s d n a s u o h t ( $533,481 $414,267 $352,762 $300,000 $258,706 $200,000 $100,000 $- ) s d n a s u o h t ( $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- $2,702 $2,237 $1,406 $828 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Following a record high stock price at the end of 2011, MVB’s stock has outperformed the S&P 500 and the major bank index KBW with a compounded annual growth rate of 8.9%. MVB STOCk PErfOrMANCE VS. S&P 500 & kBW BANk INDEx 1 0 0 2 r e b m e c e D n i d e t s e v n I 0 0 0 , 0 1 $ f o e u a V l $25,000 $20,000 $15,000 $10,000 $5,000 $- MVB $23,491 8.9% S&P 500 $10,726 0.7% KBW Bank Index $4,471 -7.7% 1 1 Growth rate is calculated as the compound annual growth rate using end of December stock prices and index values unless otherwise noted. Stock and cash dividends are included for MVB. Source: MVB documents; Yahoo! Finance for S&P 500 and KBW Bank Index. 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Successfully Navigating Challenging Waters Dear Shareholders, Teammates and Friends: As I write this letter, the flow of economic news appears to be calming the streams of uncertainty and negativity, contemplating smoother waters for financial institutions, especially U.S. banks, going forward. Yet, recent history suggests that there can yet be eddies and unsettling times brought on by the confluence of changes both globally and here at home. The positive news is how well Your Most Valuable Bank has navigated the most challenging and heaviest waters of our lifetime. rEADINg ThE WATErS LArry f. MAzzA, CEO The past several years have upset many financial institutions, who failed to read the waters correctly, made maneuvering mistakes and perhaps, were too cautious. MVB never took for granted the seriousness of the situation, continually assessing what was directly ahead, always steering to less dangerous currents, while searching the most advantageous forward route. Now, despite settling waters on the surface, MVB continues to move swiftly to ensure our momentum is sustained. Reading the current bank climate, local is the new global. Across the country, community banks are successfully differentiating themselves from other types of banks. This includes local ownership and control, products and services tailored to local markets and clients, speed of decision making, the ability to form a personal connection with clients and the capacity to leverage local knowledge and relationships to garner new clients. MVB excels in all of these. NAVIgATINg ThE WATErWAyS MVB purposefully planned in advance and throughout the 2011 voyage, so that all our “rafts” were well equipped and fully ready. My observations are that we avoided credit quality issues by approaching our lending, not only from credit score values, but also by knowing the clients. Basing our lending on the individual, through building trusting relationships that last beyond the signing of a loan document, is how we operate. While to some extent we are fortunate to be in strong markets, we also rOgEr TurNEr, COMMErCIAL LENDINg “Lending money is not an exact science, especially during tough economic times. MVB kept its lending philosophy simple – first and foremost, know the client, be consistent and find lending solutions that work for the client, while protecting the bank’s best interest.” held to a discipline that sought out more of the best opportunities, instead of just taking every available lending opportunity. We focused on diversity in size of loans and the markets in which we lent, not relying on one model or one place. We never compromised on hiring the absolute best people to be part of our team. We even did so when the right person was available with the right skills and experience, often in advance of proven need. An example is when this past year we ramped up the mortgage business landing a strong mortgage lending team in Morgan- town to help create new channels to take MVB to the next level of mortgage loans production. This, along with advance development of a dedicated loan processing operations center, has led to a significantly increased presence in the retail 2 3 mortgage market in a short time period. Most importantly, we demonstrated our mission by helping more people with home ownership than most other financial institutions in West Virginia. All in all, we stayed on course by using a ‘people first’ focus to guide us. You will see on these few pages messages from some of our senior management team members reflecting on how we maneuvered amid the challenging narrow chutes and rough rapids over the past several years. I remain pleased in how MVB continued to navigate uncertain times with the right focus and execution that brought strong perfor- mance and a continued effective building of a solid foundation for future growth. I attribute the majority of our success in these endeavors to the very talented MVB Team, who, in each area of operation and at every level JOy kNIghT, MOrTgAgE LENDINg “During the unsettling times, rather than stand on the sidelines, we continued to build our capabilities and capacity to stay active in the mortgage marketplace.” of the organization, helped steer MVB’s top notch performance in 2011. The MVB Team is well-balanced, steady and prepared to handle any emerging hurdles or opportunities. Before offering our future navigation plan, I reflect on the financial highlights of our 2011 journey. CELEBrATINg Our 2011 JOurNEy In every area of our operations, MVB delivered a solid performance in 2011. A few highlights include: • Loans increased $79.8 million or 27% over 2010. • Total assets increased $119.2 million or 29% from previous year, mainly the result of the increased loan and investment portfolios. • Total deposits increased $90.1 million or 30% from 2010. • Stockholders’ equity increased $17.0 million or a 55% increase from the previous year. • Net Income increased $465,000 or a 21% increase from 2010. Listed separately in this report are key milestones of the notable achievements made during 2011 beyond the excellent financial results. PLOTTINg Our COurSE The MVB Team continues to chart its course based on the economy, our own experience and knowing our markets. Our regional economy is showing signs of strength. MVB is located in the sweet spot of the Marcellus natural gas play. Over the longer term, this will continue to be important to us regardless of energy commodity pricing. West Virginia University continues to be an economic engine, growing in size, programs, research scope and with a large healthcare presence contributing to the Morgantown area’s continued expansion. West Virginia’s Eastern Panhandle is showing positive signs of recovery with several national companies build- ing facilities in these markets. We will continue to be proactive in taking advantage of these and other developmental opportunities that are clearly in our JIM rODgErS, COMMErCIAL LENDINg EAST “All MVB teammates were committed to finding ways to identify new, quality clients and assisting existing clients with a high level of personal service. This resulted in expanded relationships, with multiple financial products provided to the individuals we helped.” footprint. However, as credit lending loosens, and the larger, national and regional banks become more aggressive in the lending arena, MVB must be prepared to stay ahead of the competition. We must not waiver from what has made us successful, yet we 2 3 must continue to be innovative in our products, services and lending practices. Further, to advance growth, we need to continue building a motivated team that ensures the most effective and efficient support system for executing our plan. To this point, the following summarizes our highest priority focus areas for 2012. Although fully addressed in our updated strategic plan, Building Bank Value, 2012-2016, the following summary represents the underlying foundation for our work ahead: 1. CuLTIVATE A hEALThy, TALENTED TEAM ThAT IS rEWArDED fOr PErfOrMANCE Our teammates are one of MVB’s most valuable assets. Without quality talent working in every area of MVB, our results to date DON rOBINSON, COMMErCIAL LENDINg NOrTh “Most banks used the struggling national economy and increased regulatory pressures as excuses to slow down their growth and increase fees. At MVB, we understood our markets and the needs of our clients, so during the challenging times we forged ahead, expanded into Morgantown, recruited great talent and reported strong results.” would not have been possible. We will continue our efforts to ensure that our team members have an excellent work environment, are appropriately skilled in their areas of expertise, and are given the resources needed to perform. 2. ENSurE TOP grOWTh AND SOLID PrOfITABILITy While looking to future growth and opportunities, we cannot lose sight of the vital importance of ensuring all of our operations are performing at high levels and fully contributing to MVB’s profitability. Focus on the East and newly established North operations remains clearly in our sights to do all we can to ensure growth and profitability. Both areas have significant opportunities for us to grow our client base, increase loans and gain revenues. 3. SuCCEED IN grOWINg MEANINgfuL DEPOSITS The key ingredient for any bank to significantly add value rests in its ability to grow net deposits month in and month out. The dynamics associated with management and growth of deposits creates challenges that MVB must effectively navigate to DAVID JONES, CrEDIT AND rISk “Throughout the period of tightened or little credit, MVB never wavered from its well-established and effective credit risk analysis practices designed to ensure the highest level of quality prevailed, while still actively lending in our markets.” reach the level of success we envision. Deposits are everyone’s business at MVB. 4. MAxIMIzE LOAN grOWTh WIThIN hIgh CrEDIT QuALITy STANDArDS The commercial, mortgage and retail lending teams are key to reaching our loan volume targets. We are fortunate to have very talented professionals in each of these areas. In all aspects of lending, we must work diligently to maintain a quality balance sheet and meet all compliance and regulatory requirements that reflect positively on our financial strength and stability in all our lending areas. Driving strong organic growth coupled with increased operational efficiency is our equation to increase shareholder value. 5. ACT ON NEW grOWTh OPPOrTuNITIES & DIVErSIfIED rEVENuE OPTIONS During the planning with the Board this year, agreement was reached to become more active in pursuing opportunities in both merger and acquisition endeavors. Specifically, we will remain vigilant and agile for acquisition opportunities that align with MVB’s vision and strategic direction. We will continue to diversify our sources of revenue with an emphasis on non-interest ones. For exam- ple, late in 2011, we established a wealth management services unit under the banner of MVB Wealth Management Solutions (WMS) dedicated to supporting the financial management interests of high net worth individuals, families and small business owners. 4 5 6. BuILD MVB’S rETAIL BANkINg OPErATIONS ThAT SuSTAIN DEEPEr CLIENT BANkINg rELATIONShIPS AND LOyALTy As MVB expands into new areas and looks to increase business in existing facilities, we are building the best retail banking operation that fully supports all lending areas and deepens existing and new client banking relationships. This will also assist us with our deposit growth initiatives. Client service is a true competitive edge for any organization. With many banks claiming superior service, MVB has to continually review how it delivers client service that is second to none. That means, being leaders in client service, not followers, in the marketplace. 7. ENSurE MVB IS OrgANIzED EffECTIVELy TO DrIVE CONSISTENT hIgh PErfOrMANCE We must match our aggressive growth with a com- mensurate and appropriate level of support services JOhN SChIrrIPA, COMMErCIAL LENDINg CENTrAL “MVB has been fortunate to have a seasoned, community-based team who understands how to do banking within our communi- ties, always being sensitive to community needs and those of each client in our service area.” and infrastructure. We will invest in necessary technology and tools and enhance internal compliance, marketing, opera- tions, back office support, and training in alignment with our growth plan. We’re focused on how to best manage our central functions to ensure that MVB fully leverages our internal resources, including our ability to develop internal capacity to scale quickly when opportunities arise (organic expansion, M&A). Similarly, we are assessing how to best structure and operate our corporate and regional Boards in order to optimize their talent in the most effective manner. Although we are pleased with our 2011 results, our attention is clearly on the waters in front of us and in strengthening our capacity and abilities for traversing whatever comes our way. While I cannot predict the future, I am confident MVB has been diligent in planning and plotting a course that best prepares us to be leaders in community banking. As I enter my fourth year as CEO, I remain extremely appreciative of my Team- mates, the Board of Directors and shareholders who have entrusted me and the excellent management team to steer MVB in such a way as to put us in the forefront of successful community banking. Having such exper- tise and experience beside me at the helm has made all ErIC TIChENOr, fINANCE AND INVESTMENTS “From the financial perspective, MVB used a conservative, quality first approach to grow earnings. We took advantage of opportunities to deploy our excess capital into sound investment strategies that allowed us the flexibility to build our loan portfolio when opportunities became available and continue to expand our operations without sacrificing the yield, quality or cash flow of the portfolio.” the difference. We remain gratified for our many clients, new and old, who entrust their banking needs with us. We pledge to sustain that trust by being their most valuable “community” bank with the best products and services, bar none! With Kindest Regards and Gratitude, 4 5 Larry F. Mazza, CEO 2011 Milestones • Expanded geographically (North) through opening an MVB Office in Morgantown, West Virginia to serve the surrounding areas with commercial and home mortgage lending; received approval by bank regulators to open a full service community bank in the Morgantown area and started location identification work. • Opened MVB’s first separate dedicated Operations Center in Bridgeport, West Virginia. • Increased capital by an additional $8.3 million from completing a highly successful offering to accredited investors started in late 2010, with $6.6 million of the total finalized in early 2011. • Received $8.5 million in capital from the Small Business Lending Fund (SBLF). Only healthy community banks with positive track records were selected to receive this funding. • Established MVB’s Wealth Management Solutions, a financial and investment advisory service. • Issued a 10% stock dividend declared in January 2011, and paid a ten cent per share cash dividend, a 10% increase over 2010 based on the stock dividend paid in 2011. • Achieved a record high stock price value for MVB shares in 2011. • Earned the 5-Star Superior rating from Bauer Financial, Inc. This 3rd party, objective award is an important industry standard that places MVB in a special group of banks and speaks to MVB’s safety, sound- ness and financial strength. • Managed successfully, and better than its peers, a lower level of non-performing loans and charge-offs to total loans. • Launched TeamVoice as a way to listen to and more fully engage every MVB team member ensuring a positive, healthy working environment with a culture of continuous improvement. • Welcomed new directors, James Cava, Managing Member of Cava & Banko, PLLC, to the Central Board, and two MVB senior leaders, Roger Turner to the MVB Financial Corp. Board and John Schirripa to the Central Board. • Implemented MVB Wellness Works, a comprehensive bank-wide wellness program for all teammates. 6 7 Listening To Our Clients It’s a win-win – we get better by responding to our clients’ input, and they receive products and services that better match their needs. When MVB began our ClientVoice program, we hoped we would hear not just good news, but helpful input into how we could better serve our clients. That’s exactly what we’ve received and we’ve been able to respond with better products and services. Below is a sample of the type of input our clients have voiced and how we responded. Weekend Hours for Client ConvenienCe online banking Could be easier One client whose schedule makes banking on weekends We heard from a range of clients that our online banking essential wished that our Fairmont lobby was open on Satur- was not as user friendly as we intended. So we’re making it days. Our response: We’ll meet you in person with a special easier for everyone. In April 2012, we’re launching a brand appointment on Saturdays! We are delighted to be able to new online banking experience that will set the bank apart service clients individually when it’s convenient for them. from the competition. Coffee Warms up our lobbies Customer serviCe great all over tHe state Many clients are enjoying the coffee bars we’ve added to the A client that used to live in Fairmont and moved to the branches and the hospitality and friendliness that goes along Eastern Panhandle noted that MVB’s customer service was with the coffee. Some of our branch lobbies are community great no matter the location. gathering spots for some of our regular clients and we’re happy to host them each and every day. 6 7 TM MVB Cares About Our Communities As a bank, and as a group of dedicated teammates, MVB invests time, expertise and money in organiza- tions across our communities. Our teammates offer financial expertise to nonprofit boards and give their time and talents to help local charities do their important daily work. Our reach extends from youth and high school sports teams, to community health, local festivals and economic development projects. We also support many educational initiatives and recently embarked on a program known as MoneyIsland,™ an entertaining online world for kids that encourages financial literacy with units on: Saving & Spending, Earning & Investing and Using Credit Wisely. The program was created by master teachers to align with national standards published by the Jump$tart Coalition for Personal Financial Literacy. To date, we’ve helped more than 2,000 middle school students in our communities get on board with MoneyIsland. We recognize that engaging with people and nonprofit organizations is key to keeping our communities vibrant and that’s why we make community involvement a cornerstone of our culture. Our vision is to be a valued partner in growing strong communities. 8 9 Do You Kasasa? MVB does and we’re the first bank in West Virginia to do so. Thousands of MVB clients have been enjoying the interest when they meet certain qualifications. most innovative checking and savings accounts Being part of Kasasa affords access to a portfolio of available from a financial institution, anywhere. products and services in the future. For example, These common services, most frequently used by there can be products made available that appeal banking consumers, truly set MVB apart from its to specific age groups or lifestyles that all center peers, including the bigger banks – who are adding fees, not saving their clients from nuisance fees such on the Kasasa branding. Through Kasasa, MVB also taps into collaborative funding for market as charges at ATM machines. The Kasasa concept research and advertising designed to reach exist- and its focused execution will benefit our clients ing and new clients. Kasasa, and its exclusive focus and MVB. In early 2012, MVB became part of Kasasa which is a growing national brand and on community banks, has a proven track record. Banks using Kasasa in other states have shown promotion movement. MVB joins a growing network improvements in deposit growth and in growing of community banks nationwide under the Kasasa their client base. MVB is committed to leverage the brand to deliver innovative products that set the most from the Kasasa initiative by increasing the participating banks apart from others. It’s a new number of people who DO Kasasa in our markets. name for a new way of banking. Kasasa is targeted Join the crowd and come Kasasa with us! to significantly increase the message about the value of the products MVB has already been offering. Thus, our Most Valuable Checking will be changed to Kasasa Cash. Similarly, our Most Valuable Savings account will now be called Kasasa Saver. The names may change, but the accounts remain exactly the same - clients are rewarded with greater ka • sa • sa PrONuNCIATION: (kAh-SAh-SAh) IT’S a neW WorD For a neW DaY. a neW WaY To PuT Your MoneY Where Your PaSSIon IS. a neW equaTIon: You + real choIceS For Your MoneY + aMerIca’S FIneST coMMunITY BanKS anD creDIT unIonS. BeYonD rIGID olD WaYS To a neW era oF choIce - chooSInG WhaT You WanT FIrST, Then Where You WanT IT. KaSaSa creaTeS Free checKInG anD SaVInGS accounTS ThaT GIVe BacK To You In ToTallY neW WaYS. Do You WanT To Be InSPIreD BY Your accounT? Do You WanT real choIceS For Your MoneY? IF You KaSaSa You Do. 8 9 S. R. Snodgrass, A.C. • 980 National Road • Wheeling, West Virginia 26003-6400 • Phone: (304) 233-5030 • Facsimile: (304) 233-3062 S. R. Snodgrass, A.C. • 980 National Road • Wheeling, West Virginia 26003-6400 • Phone: (304) 233-5030 • Facsimile: (304) 233-3062 10 11 MVB Financial Corp. Consolidated Balance Sheets (Dollars in thousands, except number of shares) December 31, 2011 and 2010 ASSETS Cash and due from banks Interest bearing balances with banks Certificates of deposit with other banks Investment Securities: Securities held-to-maturity, at cost Securities available-for-sale, at approximate fair value Loans: Less: Allowance for loan losses Net Loans Loans held for sale Bank premises, furniture and equipment Bank owned life insurance Accrued interest receivable and other assets 2011 2010 $ 9,763 278 9,918 $ 3,713 10,091 17,734 13,568 99,366 7,460 61,824 373,822 (3,045) 370,777 7,147 7,782 8,076 6,806 294,044 (2,478) 291,566 1,839 7,579 5,689 6,772 TOTAL ASSETS $ 533,481 $ 414,267 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Non-interest bearing Interest bearing Total Deposits Accrued interest, taxes, and other liabilities Repurchase agreements FHLB and other borrowings Subordinated debt Total Liabilities STOCKHOLDERS' EQUITY $ 38,632 351,913 390,545 3,478 77,835 9,767 4,124 485,749 $ 28,449 271,985 300,434 2,703 47,623 28,614 4,124 383,498 Preferred stock, par value $1,000; 8,500 and 5,000 shares authorized; 8,500 and 0 shares issued Common stock, par value $1; 4,000,000 shares authorized; 2,234,767 and 1,802,391 shares issued respectively Additional paid-in capital Common stock paid for but not issued, par value $1; 0 and 90,560 shares Treasury Stock, 51,077 and 47,218 shares, respectively Retained earnings Accumulated other comprehensive loss Total Stockholders' Equity 8,500 - 2,235 32,603 0 (1,084) 6,220 (742) 47,732 1,802 23,864 1,729 (1,006) 4,643 (263) 30,769 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 533,481 $ 414,267 See Notes to Consolidated Financial Statements 10 11 MVB Financial Corp. Consolidated Statements of Income (Dollars in thousands except Share and Per Share Data) Years ended December 31, 2011 and 2010 INTEREST INCOME Interest and fees on loans Interest on deposits with other banks Interest on investment securities - taxable Interest on tax exempt loans and securities Total interest income INTEREST EXPENSE Interest on deposits Interest on repurchase agreements Interest on FHLB and other borrowings Interest on subordinated debt Total interest expense NET INTEREST INCOME Provision for loan losses Net interest income after provision for loan losses OTHER INCOME Service charges on deposit accounts Income on bank owned life insurance Visa debit card income Income on loans held for sale Gain on sale of securities Other operating income OTHER EXPENSES Salaries and employee benefits Occupancy expense Equipment depreciation and maintenance Data processing Visa debit card expense Advertising Legal and accounting fees Printing, stationery and supplies Consulting fees FDIC insurance Other taxes Other operating expenses 2011 2010 $ 16,446 103 1,539 920 19,008 $ 13,468 587 1,427 805 16,287 3,852 503 464 81 4,900 4,401 474 513 82 5,470 14,108 1,723 12,385 10,817 1,100 9,717 660 287 414 957 833 537 3,688 6,717 697 594 412 332 482 632 172 408 368 175 1,370 12,359 658 265 361 634 88 448 2,454 4,796 590 472 392 295 338 167 130 211 523 190 1,035 9,139 Income before income taxes 3,714 3,032 Income tax expense Net Income Basic net income per share after preferred dividends Diluted net income per share after preferred dividends Basic weighted average shares outstanding Diluted weighted average shares outstanding 1,012 795 $ 2,702 $ 2,237 $1.24 $1.21 2,147,890 2,194,410 $1.40 $1.38 1,598,432 1,625,884 See Notes to Consolidated Financial Statements 3 12 13 MVB Financial Corp. Consolidated Statements of Cash Flows (Dollars in thousands) Years ended December 31, 2011 and 2010 OPERATING ACTIVITIES Net Income Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses Deferred income tax expense/(benefit) Depreciation Stock based compensation Loans originated for sale Proceeds of loans sold Proceeds from sale of other real estate owned Loss/(gain) on sale of other real estate owned (Gain) on sale of investment securities Amortization, net of accretion (Increase) in interest receivable and other assets Increase in accrued interest, taxes, and other liabilities NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES INVESTING ACTIVITIES (Increase) in loans made to customers Purchases of premises and equipment Purchases of investment securities available-for-sale Purchases of investment securities held-to-maturity Decrease/(increase) in deposits with FHLB and Fed, net Purchases of certificates of deposit with other banks Proceeds from maturity of certificates of deposit with other banks Proceeds from sales, maturities and calls of securities available-for- sale Proceeds from maturities and calls of securities held-to-maturity Purchase of bank owned life insurance NET CASH (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Net increase in deposits Net increase in repurchase agreements Proceeds from FHLB and other borrowings Principal payments on FHLB and other borrowings Purchase of treasury stock Net proceeds of stock offering Cash dividend Common stock options exercised Issuance of preferred stock NET CASH PROVIDED BY FINANCING ACTIVITIES 2011 2010 $ 2,702 $ 2,237 1,723 147 466 117 (62,647) 57,339 373 73 (833) 886 (1,489) 775 (368) (80,934) (669) (249,771) (7,361) 9,813 (9,918) 17,734 212,300 1,225 (2,100) (109,681) 90,111 30,212 80,104 (98,951) (78) 6,500 (262) - 8,463 116,099 1,100 (144) 447 46 (46,657) 46,582 866 (61) (88) 513 (409) 573 5,005 (62,060) (269) (69,602) (1,359) (6,156) (16,321) 48,029 45,082 474 - (62,182) 35,903 11,982 205,716 (196,300) (484) 1,729 (160) 183 - 58,569 Increase in cash and cash equivalents 6,050 1,392 Cash and cash equivalents at beginning of period 3,713 2,321 Cash and cash equivalents at end of period $ 9,763 $ 3,713 Supplemental disclosure of cash flow information Cash payments for: Interest on deposits, repurchase agreements and FHLB borrowings Income taxes $ 4,958 $ 1,101 $ 5,623 $ 811 See Notes to Consolidated Financial Statements 33 12 13 MVB Financial Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 2011 and 2010 (Dollars in thousands) Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income/(loss) Total Treasury Stock Stockholders' Equity Balance, December 31, 2009 Comprehensive income: $ - $ 1,629 $ 20,457 $ 5,917 $ (343) $ (522) $ 27,138 Net Income 2,237 2,237 Other comprehensive income(loss) Net fair value adjustment on securities available for sale, reclassification adjustment for realized losses - net of tax effect of $(167) Total Comprehensive Income Minimum pension liability adjustment - net of tax effect of $60 Cash dividends paid ($0.10 per share) Stock offering in process Stock based compensation Stock dividend - 10% stock Treasury stock, acquired at cost Common stock options exercised 251 251 2,488 (171) (171) (160) (3,351) 1,729 46 3,191 160 13 170 (160) 1,729 46 (484) 183 (484) Balance, December 31, 2010 Comprehensive income: $ - - $ 1,802 $ 25,593 $ 4,643 $ (263) $(1,006) $ 30,769 Net Income 2,702 2,702 Other comprehensive income(loss) Net fair value adjustment on securities available for sale, less reclassification adjustment for realized gains - net of tax effect of $(38) Total Comprehensive Income Minimum pension liability adjustment - net of tax effect of $358 Cash dividends paid ($0.10 per share) Dividends on preferred stock Stock offering Preferred stock issued Stock based compensation Stock dividend - 10% stock dividend Treasury stock, acquired at cost 8,500 58 58 2,760 (537) (537) (218) (44) (6) (37) (820) 394 6,112 117 781 39 - 218) (44) 6,500 8,463 117 (78) - (78) - Balance, December 31, 2011 $ 8,500 $ 2,235 $ 32,603 $ 6,220 $ (742) $ (1,084) $ 47,732 See Notes to Consolidated Financial Statements 34 14 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Operations MVB Financial Corp., "the Company", provides banking services to the domestic market with the primary market areas being the Marion, Harrison, Monongalia, Jefferson and Berkeley counties of West Virginia. To a large extent, the operations of the Company, such as loan portfolio management and deposit growth, are directly affected by the market area economies. Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks with original maturities of ninety days or less. Principles of Consolidation The accompanying consolidated financial statements include the accounts of MVB Financial Corp. Inc., and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Management Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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 these estimates. Investment Securities Debt securities that management has the ability and intent to hold to maturity are classified as held-to-maturity and carried at cost, adjusted for amortization of premium and accretion of discounts computed by the interest method from purchase date to maturity. Other marketable securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on securities available-for-sale, net of the deferred income tax effect, are recognized as direct increases or decreases in stockholders' equity. Cost of securities sold is recognized using the specific identification method. Loans Held for Sale Through Crescent Mortgage Company, Franklin American Mortgage and Freddie MAC, MVB Bank, Inc. has the ability to offer customers long-term fixed rate mortgage products without holding these instruments in the bank's loan portfolio. MVB values loans held for sale at the lower of cost or market. After thorough review of the process the Company has concluded that no material derivative instruments exist, as the bank obtains pricing information directly from the websites of the secondary mortgage providers and locks in pricing based upon pre-established margins set by management. Loans and Allowance for Loan Losses Loans are stated at the amount of unpaid principal reduced by an allowance for loan losses. Loans are considered delinquent when scheduled principal or interest payments are 31 days past due. Interest income on loans is recognized on an accrual basis. The allowance for loan losses is maintained at a level deemed adequate to absorb probable losses inherent in the loan portfolio. The Company consistently applies a quarterly loan review process to continually evaluate loans for changes in credit risk. This process serves as the primary means by which the Company evaluates the adequacy of the allowance for loan losses, and is based upon periodic review of the collectibility of loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of specific and general components. The specific component relates to loans that are impaired. The general component covers non-classified loans and is based upon historical loss experience adjusted for qualitative factors. A loan is considered impaired when, based upon current information and events, it is probable that the Company 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 determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and shortages generally are not classified as impaired. Generally the Company considers impaired loans to include loans classified as non-accrual loans and loans past due for longer than 90 days. 14 35 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Loan Origination Fees and Costs Accounting standards require that loan origination and commitment fees and direct loan origination costs be deferred and the net amount amortized as an adjustment of the related loan's yield. Bank Premises, Furniture and Equipment Bank premises, furniture and equipment are carried at cost less accumulated depreciation. The provision for depreciation is computed for financial reporting by the straight-line-method based on the estimated useful lives of assets, which range from 7 to 40 years on buildings and leasehold improvements and 3 to 10 years on furniture, fixtures and equipment. Intangible Assets The excess of the cost of an acquired company over the fair value of the net assets and identified intangibles acquired is recorded as goodwill. The net carrying amount of intangible assets was $917 and $927 at December 31, 2011 and 2010, respectively. Other Investments Federal Home Loan Bank (FHLB) stock is recorded at cost and considered to be restricted as the Company is required by the FHLB to hold this investment, and the only market for this stock is the issuing agency. FHLB stock totaled $1,973 and $1,816 at December 31, 2011 and 2010, respectively, and is included in other assets in the accompanying balance sheet. Income Taxes Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes. The differences relate principally to accretion of discounts on investment securities, provision for loan losses, minimum pension liability, and differences between book and tax methods of depreciation. Stock Based Compensation The Company accounts for stock-based compensation in accordance with generally accepted accounting standards. Under these standards the Company is required to record compensation expense for all awards granted after the date of adoption and for any unvested options previously granted. Foreclosed Assets Held for Resale Foreclosed assets held for resale acquired in satisfaction of mortgage obligations and in foreclosure proceedings are recorded at the lower of cost or fair value less estimated selling costs at the time of foreclosure, with any valuation adjustments charged to the allowance for loan losses. Any unrealized gains or losses on sale are then recorded in other non-interest expense. At December 31, 2011 and 2010, the Company held other real estate of $176 and $402. Net Income Per Common Share Diluted net income per common share includes any dilutive effects of stock options, and is computed by dividing net income by the average number of common shares outstanding during the period less the preferred stock dividend, adjusted for the dilutive effect of options under the Company's 2003 Stock Incentive Plan. Comprehensive Income Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities and minimum pension liability, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Bank-owned life insurance Bank-owned life insurance ("BOLI") represents life insurance on the lives of certain Company employees who have provided positive consent allowing the Company to be the beneficiary of such policies. These policies are recorded at their cash surrender value, or the amount that can be realized upon surrender of the policy. Income from these policies is not subject to income taxes and is recorded as other income. Advertising Costs Advertising costs are expensed as incurred. 35 16 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Transfers of Financial Assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assests have been isolated from the company, (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Reclassifications Certain amounts in the 2010 financial statements have been reclassified to conform to the 2011 financial statement presentation. NOTE 2. INVESTMENT SECURITIES Amortized cost and approximate fair values of investment securities held-to-maturity at December 31, 2011, including gross unrealized gains and losses, are summarized as follows: (Dollars in thousands) Amortized Cost Unrealized Gain Unrealized Loss Approximate Fair Value Municipal securities 13,568 $ 13,568 587 $ 587 (11) $ (11) 14,144 $ 14,144 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: Amortized Cost Unrealized Gain Unrealized Loss Approximate Fair Value Municipal securities U. S. Agency securities 6,460 1,000 $ 7,460 27 17 (62) - 6,425 1,017 $ 44 $ (62) $ 7,442 Amortized cost and approximate fair values of investment securities available-for-sale at December 31, 2011 are summarized as follows: Amortized Cost Unrealized Gain Unrealized Loss Approximate Fair Value U. S. Agency securities Mortgage-backed securities Other securities $ 51,165 47,319 124 $ 98,608 $ 710 198 - $ 908 $ (1) (149) - $ 51,874 47,368 124 $ (150) $ 99,366 Amortized cost and approximate fair values of investment securities available-for-sale at December 31, 2010 are summarized as follows: Amortized Cost Unrealized Gain Unrealized Loss Approximate Fair Value U. S. Agency securities Mortgage-backed securities Other securities $ 34,903 26,135 124 $ 61,162 $ 453 306 - $ 759 $ (76) (21) - $ 35,280 26,420 124 $ (97) $ 61,824 16 35 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 The following tables summarize amortized cost and approximate fair values of securities by maturity: Held to Maturity Available for sale December 31, 2011 Amortized Cost $ 115 - 4,650 8,803 $ 13,568 Approximate Fair Value $ 115 - 4,934 9,095 $ 14,144 Amortized Cost Approximate Fair Value $ - 34,130 20,302 44,176 $ - 34,795 20,280 44,291 $ 98,608 $ 99,366 Within one year After one year, but within five After five years, but within ten After ten Years Total Investment securities with a carrying value of $94,866 and $66,426 at December 31, 2011 and 2010, respectively, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve discount window. The Company's investment portfolio includes securities that are in an unrealized loss position as of December 31, 2011, the details of which are included in the following table. Although these securities, if sold at December 31, 2011 would result in a pretax loss of $161, 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 December 31, 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 December 31, 2011, total temporary impairment totaled $161. Description and number Less than 12 months 12 months or more of positions Fair Value Unrealized Loss Fair Value Unrealized Loss U.S. Agencies (1) Mortgage-backed securities (16) Municipal securities (3) $ 4,999 31,073 936 $ (1) (128) (11) $ 37,008 $ (140) $ - 3,124 - $ 3,124 $ - (21) - $ (21) NOTE 3. LOANS The components of loans in the balance sheet at December 31, were as follows: (Dollars in thousands) Commercial and non-residential real estate Residential real estate Consumer and other Net deferred fees and costs 2011 2010 $ 231,030 128,683 13,782 327 $ 373,822 $ 194,605 86,020 13,324 95 $ 294,044 18 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Changes in the allowance for loan losses were as follows for the years ended December 31: (Dollars in thousands) Balance at beginning of period Losses charged to allowance Recoveries credited to allowance Provision for loan losses Balance at end of period 2011 2010 $ 2,478 (1,189) 33 1,723 $ 2,241 (912) 49 1,100 $ 3,045 $ 2,478 The following table summarizes the primary segments of the loan portfolio as of December 31, 2011 and 2010 (in thousands): Commercial Residential Home Equity Installment Credit Cards Total December 31, 2011 Total Loans $231,357 $112,753 $15,930 $13,217 $565 $373,822 Individually evaluated for impairment $2,597 $76 $9 $140 $0 $2,822 Collectively evaluated for impairment $228,760 $112,677 $15,921 $13,077 $565 $371,000 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 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 Company 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 Company 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 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. 18 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 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 December 31, 2011 and 2010 (in thousands): Impaired Loans with Specific Allowance Impaired Loans with No Specific Allowance Total Impaired Loans December 31, 2011 Commercial Residential Home Equity Installment Credit Card Total impaired loans December 31, 2010 Commercial Residential Home Equity Installment Credit Card Total impaired loans Recorded Investment Related Allowance Recorded Investment Recorded Investment $2,597 76 9 140 0 $2,822 $59 165 262 0 4 $490 $758 10 9 100 0 $877 $20 75 99 0 4 $198 $0 0 0 0 0 $0 $334 32 0 0 0 $366 $2,597 76 9 140 0 $2,822 $393 197 262 0 4 $856 Unpaid Principal Balance $2,597 76 9 140 0 $2,822 $393 197 262 0 4 $856 The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated (in thousands): Average investment in impaired loans Interest income recognized on an accrual basis on impaired loans December 2011 $2,091 $84 2010 $1,901 $76 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. 20 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 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 $750,000 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 portolio. 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 December 31, 2011 and 2010 (in thousands): December 31, 2011 Commercial Residential Home Equity Installment Credit Card Total December 31, 2010 Commercial Residential Home Equity Installment Credit Card Total Pass $218,353 111,105 15,750 12,806 565 $358,579 $180,568 69,906 13,945 12,424 488 $277,331 Special Mention $7,752 1,157 96 242 - $9,247 $8,294 613 99 233 - $9,239 Substandard Doubtful Total $2,655 491 75 29 - $3,250 $5,446 1,002 262 173 6 $6,889 $2,597 - 9 140 - $2,746 $392 165 28 - - $585 $231,357 112,753 15,930 13,217 565 $373,822 $194,700 71,686 14,334 12,830 494 $294,044 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 December 31, 2011 and 2010: (in thousands) Total 30-59 Days Past Due 60-89 Days Past Due 90 Days + Past Due Past Due Non- Accrual Total Loans December 31, 2011 Commercial Residential Home Equity Installment Credit Card Total December 31, 2010 Commercial Residential Home Equity Installment Credit Card Total Current $225,618 111,022 15,846 12,888 565 $365,939 $193,414 68,529 13,979 12,222 490 $288,634 $448 1,593 - 138 - $2,179 $2,836 - 84 26 - $2,946 $2 62 - 2 - $66 $3,286 1,655 84 166 - $5,191 $2,453 76 - 163 - $2,692 $231,357 112,753 15,930 13,217 565 $373,822 241 1,761 28 141 - 272 18 158 - $2,171 - $448 $217 143 47 155 - $562 $458 2,176 93 454 - $3,181 $828 981 262 154 4 $2,229 $194,700 71,686 14,334 12,830 494 $294,044 20 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 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. 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 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 December 31, 2011 and 2010. Activity in the allowance is presented for the year ended December 31, 2011 (in thousands): Commercial Residential Home Equity Installment Credit Card Total ALL balance at December 31, 2010 Charge-offs Recoveries Provision ALL balance at December 31, 2011 Individually evaluated for impairment Collectively evaluated for impairment $ 1,517 (552) 4 1,195 $ 460 (349) - 255 $ 207 (177) 10 209 $ 274 (105) 19 67 $ 20 (6) - (3) $ 2,478 (1,189) 33 1,723 $ 2,164 $ 366 $ 249 $ 255 $ 11 $ 3,045 $758 $1,406 $10 $356 $9 $240 $100 $155 $0 $877 $11 $2,168 22 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 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. Troubled Debt Restructurings The restructuring of a loan is considered a "troubled debt restructuring" if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. Troubled debt restructurings during 2011 are set forth in the following table. There were no troubled debt restructurings during 2010. The following table presents details related to loans identified as Troubled Debt Restructurings (TDRs) at December 31, 2011 and 2010. New TDRs (1) (Unaudited, dollars in thousands) Commercial real estate: Land and construction Other Total commercial real estate Commercial and industrial Residential real estate Home equity Consumer Total Number of Contracts - - 1 11 - 1 - - 2 December 31, 2011 December 31, 2010 Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment - - - - 103 103 103 103 - - 415 415 - - - - 518 518 Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts - - - - - - - - - - - - - - - - - - - - - - - - - - - (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 4. BANK PREMISES, FURNITURE AND EQUIPMENT Bank premises, furniture and equipment at December 31, were as follows: (Dollars in thousands) Bank Premises Equipment, furniture and fixtures Allowance for depreciation 2011 2010 $ 7,647 3,445 11,092 (3,310) $ 7,782 $ 7,533 2,893 10,426 (2,847) $ 7,579 22 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 NOTE 5. DEPOSITS Deposits at December 31, were as follows: (Dollars in thousands) Demand deposits of individuals, partnerships, and corporations Interest bearing Non-interest bearing Time and savings deposits of individuals, partnerships and corporations Deposits of states and political subdivisions Official checks Total Domestic Deposits 2011 2010 $ 113,515 37,744 184,993 53,237 1,056 $ 390,545 $ 77,970 27,984 161,534 32,431 515 $ 300,434 Time deposits of over $100 included above $ 65,316 $ 58,661 Maturities of certificates of deposit at December 31, 2011 were as follows: 2012 2013 2014 2015 2016 Total $ 58,029 18,013 6,190 5,317 5,539 $ 93,088 NOTE 6. BORROWED FUNDS The Company is a party to repurchase agreements with certain customers. As of December 31, 2011 and 2010, the company held repurchase agreements of $77,835 and $47,623. Information related to repurchase agreements is summarized below: (Dollars in thousands) 2011 2010 Balance at end of year Average balance during the year Maximum month-end balance Weighted-average rate during the year Rate at December 31 $ 77,835 61,855 86,507 0.81% 0.66% $ 47,623 44,238 55,550 1.07% 1.00% MVB Bank, Inc. (the Bank) is a member of the Federal Home Loan Bank ("FHLB") of Pittsburgh, Pennsylvania. The remaining maximum borrowing capacity with the FHLB at December 31, 2011 was approximately $174,439. At December 31, 2011 and 2010 the Bank had borrowed $9,767 and $24,114. 24 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Borrowings from the FHLB as of December 31 were as follows: (Dollars in thousands) Fixed interest rate note, originating April 1999, due April 2014, interest of 5.405% is payable monthly 2011 2010 $ 1,000 $ 1,000 Fixed interest rate note, originating January 2005, due January 2020, payable in monthly installments of $11, including interest of 5.140% 851 933 Fixed interest rate note, originating April 2002, due May 2017, payable in monthly installments of $4, including interest of 5.90% 631 647 Floating interest rate note, originating March 2003, due December 2011, interest payable monthly, including interest of 0.68% - 14,126 Fixed interest rate note, originating July 2006, due July 2016, payable in monthly installments of $8, including interest of 4.50% 1,301 1,341 Fixed interest rate note, originating October 2006, due October 2021, payable in monthly installments of $6, including interest of 5.20% 1,068 1,089 Fixed interest rate note, originating April 2007, due April 2022, payable in monthly installments of $6, including interest of 5.18% 1,015 1,034 Amortizing fixed interest rate note, originating February 2007, due February 2022, payable in monthly installments of $5, including interest of 5.22% 896 913 Fixed interest rate note, originating December 2007, due December 2017, payable in monthly installments of $7, including interest of 5.25% 1,005 1,031 Fixed interest rate note, originating March 2008. due March 2013, interest of 2.37% payable quarterly 2,000 2,000 $ 9,767 $ 24,114 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 2037 and are redeemable by the Company in 2012. 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 December 31, 2011 and 2010 and interest expense of $81 and $82 for the years ended December 31, 2011 and 2010. 24 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 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 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: Year 2012 2013 2014 2015 2016 Thereafter Amount $ 232 2,244 1,257 271 1,353 8,534 $ 13,891 NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES Financial Instruments with Off-Balance-Sheet Risk The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the statements of financial condition. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by the Company upon extension of credit, varies and is based on management's credit evaluation of the customer. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company's policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit. Total contractual amounts of the commitments as of December 31 were as follows: (Dollars in thousands) Available on lines of credit Stand-by letters of credit Other loan commitments 2011 2010 $ 45,627 346 1,423 $ 47,396 $ 32,539 758 691 $ 33,988 26 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Concentration of Credit Risk The Company grants a majority of its commercial, financial, agricultural, real estate and installment loans to customers throughout the Marion, Harrison, Monongalia, Jefferson and Berkeley County areas of West Virginia and adjacent counties. Collateral for loans is primarily residential and commercial real estate, personal property, and business equipment. The Company evaluates the credit worthiness of each of its customers on a case-by- case basis, and the amount of collateral it obtains is based upon management's credit evaluation. Litigation The subsidiary bank is involved in various legal actions arising in the ordinary course of business. In the opinion of management and counsel, the outcome of these matters will not have a significant adverse effect on the consolidated financial statements. NOTE 8. INCOME TAXES Accounting standards require that the Company use an asset and liability approach that requires the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of other assets and liabilities. The amount reflected as income taxes represents federal and state income taxes on financial statement income. Certain items of income and expense, primarily the provision for possible loan losses, allowance for losses on foreclosed assets held for resale, depreciation, and accretion of discounts on investment securities are reported in different accounting periods for income tax purposes. The provisions for income taxes for the years ended December 31, were as follows: (Dollars in thousands) Current: 2011 $ 658 207 $ 865 2010 $ 773 166 $ 939 Federal State Deferred expense(benefit) Federal State Income Tax expense $ 112 35 147 $ 1,012 $ (119) (25) (144) $ 795 Following is a reconciliation of income taxes at federal statutory rates to recorded income taxes for the year ended December 31: 2011 2010 Amount % Amount % Tax at Federal tax rate Tax effect of: State income tax Tax exempt earnings Other $ 1,263 34.0% $ 1,031 34.0% 93 (345) 1 $ 1,012 2.5% -9.3% 0.0% 27.2% 76 (313) 1 $ 795 2.5% -10.3% 0.0% 26.2% 26 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Deferred tax assets and liabilities are the result of timing differences in recognition of revenue and expense for income tax and financial statement purposes. Deferred income tax liabilities and (assets) were comprised of the following at December 31: Depreciation Unrealized loss on securities available-for-sale Pension Gross deferred tax liabilities Allowance for loan losses Minimum pension liability Gross deferred tax (assets) 2011 2010 $ 482 $ 303 (9) 776 (871) (798) (1,669) $ 299 $ 264 (66) 497 (778) (440) (1,218) Net deferred tax (asset) $ (893) $ (721) No deferred income tax valuation allowance is provided since it is more likely than not that realization of the deferred income tax asset will occur in future years. NOTE 9. RELATED PARTY TRANSACTIONS The Company has granted loans to officers and directors of the Company and to their associates. Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than normal risk of collectibility. Set forth below is a summary of the related loan activity. (Dollars in thousands) Balance at Beginning of Year Borrowings Repayments Balance at end of Year December 31, 2011 $ 13,995 $ 2,004 $ (2,699) $ 13,300 December 31, 2010 $ 15,067 $ 764 $ (1,836) $ 13,995 The Company held related party deposits of $14,973 and $11,812 at December 31, 2011 and December 31, 2010, respectively. The Company held related party repurchase agreements of $1,313 and $1,697 at December 31, 2011 and December 31, 2010, respectively. NOTE 10. PENSION PLAN The Company participates in a trusteed pension plan known as the Allegheny Group Retirement Plan covering virtually all full-time employees. Benefits are based on years of service and the employee's compensation. The Company's funding policy is to fund normal costs of the plan as accrued. Contributions are intended to provide not only for benefits attributed to service to date, but also for those benefits expected to be earned in the future. The Company participated in the pension plan beginning January 1, 1999. The Company has recognized estimated pension expense of $410 and $335 for the years ended December 31, 2011 and 2010. 28 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Information pertaining to the activity in the Company's defined benefit plan, using the latest available actuarial valuations with a measurement date of December 31, 2011 and 2010 is as follows: (Dollars in thousands) Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Actuarial loss Benefits paid Benefit obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Employer contribution Benefits paid Fair value of plan assets at end of year Funded status Unrecognized net actuarial loss Unrecognized prior service cost Prepaid pension cost recognized 2011 2010 $ 3,059 356 166 669 (36) $ 4,214 $ 2,389 311 142 243 (26) $ 3,059 $ 1,794 (113) 553 (36) $ 2,198 $ 1,575 188 57 (26) $ 1,794 $ (2,016) 1,990 4 $ (22) $ (1,265) 1,093 7 $ (165) Accumulated benefit obligation $ 3,288 $ 2,414 At December 31, 2011 and 2010, the weighted average assumptions used to determine the benefit obligation are as follows: Discount rate Rate of compensation increase The components of net periodic pension cost are as follows: Service cost Interest cost Expected return on plan assets Amortization of prior service costs Amortization of loss Net periodic pension cost 5.06% 3.00% 5.50% 3.00% $ 356 166 (180) 2 66 $ 410 $ 311 142 (139) 2 44 $ 360 At December 31, 2011 and 2010, the weighted average assumptions used to determine net periodic pension cost are as follows: Discount rate Expected long-term rate of return on plan assets Rate of compensation increase 5.50% 8.00% 3.00% 6.00% 8.00% 3.00% 28 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 The Company's pension plan asset allocations at December 31, 2011 and 2010, as well as target allocations for 2012 are as follows: Asset Category Equity securities Balanced fund Other Total 2012 Target 60% 30% 10% 100% 12/31/2011 72% 24% 4% 100% 12/31/2010 59% 31% 10% 100% The net transition obligation (asset), prior service cost (credit), and estimated net loss (gain) for the plan that are expected to be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are shown in the table below. 2012 2011 Expected amortization of transition obligation (asset) Expected amortization of prior service cost (credit) Expected amortization of net loss (gain) $ - $ - 2 117 2 66 Plan Assets The pension plan's overall investment strategy is to achieve a mix of approximately 75 percent of investments for long- term growth and 25 percent for near-term benefit payments with a wide diversification of asset types, fund strategies, and fund managers. The target allocations for plan assets are 75 percent equity securities, 20 percent corporate bonds and US Treasury securities, and 5 percent to all other types of investments. Equity securities primarily include investments in large-cap and mid-cap companies primarily located in the United States. Fixed income securities include corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S. Treasuries. Other types of investments include investments in hedge funds and private equity funds that follow several different strategies. The fair value of MVB's pension plan assets at December 31, 2011 by asset class are as follows: The following table sets forth by level, within the fair value hierarchy, as defined in Note 18 - Fair Value Measurements, the Plan's assets at fair value as of December 31, 2011. Level I Level II Level III Total Assets: Cash and cash equivalents Investment in equity securities Investment in debt $ 88 $ 1,583 $ - $ - $ - $ 527 $ - $ - $ - $ 88 $ 1,583 $ 527 Total assets at fair value $ 1,671 $ 527 $ - $ 2,198 Investment in government and debt securities and short-term investments are valued at the closing price reported on the active market on which the individual securities are traded. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. 30 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Below we show the best estimate of the plan contribution for next fiscal year. We also show the benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five fiscal years thereafter. Contributions for the period of 01/01/12 through 12/31/12 Estimated future benefit payments reflecting expected future service 1/1/2012 through 12/31/2012 1/1/2013 through 12/31/2013 1/1/2014 through 12/31/2014 1/1/2015 through 12/31/2015 1/1/2016 through 12/31/2016 1/1/2017 through 12/31/2021 Cash Flow $ 948,348 $ 117,901 $ 129,994 $ 138,416 $ 163,324 $ 201,165 $1,214,592 NOTE 11. INTANGIBLE ASSETS On October 7, 2005, the Company purchased a full service office in the Charles Town area of Jefferson County West Virginia. This office held assets of $1.8 million and total deposits of $17.1 million. As a result of this transaction, the Company recorded intangible assets. As of December 31, 2011 the Company has allocated $21 to core deposit intangibles, which are being amortized using the double-declining balance method over 10 years. The remaining $896 has been recorded as goodwill, and is evaluated for impairment on October 1st each year by the Company. NOTE 12. STOCK OFFERING During 2011 the Company completed a confidential offering to accredited investors which began in 2010 that resulted in the issuance of 393,305 shares of common stock totaling $8.3 million in additional capital. As of December 31, 2010 the Company had received signed offering memoranda and payment for 82,328 shares totaling 1.7 million in additional capital at December 31, 2010. The proceeds of this offering are being used to support current and long-range growth plans of the Company. During 2011 the Company issued 393,305 shares, concluding 2011 with outstanding shares of 2,234,767. A 10% stock dividend declared December 21, 2010 with a record date of January 25, 2011, payable February 15, 2011 resulted in an additional 39,071 shares. On September 8, 2011 MVB received $8.5 million in Small Business Lending Fund (SBLF) capital. MVB issued 8,500 shares of $1,000 per share preferred stock with dividends payable in arrears on January 1, April 1, July 1 and October 1 each year. At the time of receipt of the SBLF money, MVB's loan production qualified for the lowest dividend rate posssible of 1%. MVB may continue to utilize the SBLF capital for a period of four and one half years at the 1% dividend rate so long as loan growth continues to support the reduced rate. NOTE 13. STOCK OPTIONS The MVB Financial Corp. Incentive Stock Plan provides for the issuance of stock options to selected employees. Under the provisions of the plan, the option price per share shall not be less than the fair market value of the common stock on the date of the grant. All options granted prior to 2004 vest in 4 years, and expire 10 years from the date of grant. For options granted in 2004 and 2005 the vesting period has been accelerated to fully vest at December 31, 2005. These options also expire 10 years from the date of the grant. Options granted in 2006, 2007, 2010 and 2011 vest in 5 years and expire 10 years from the date of the grant, with the exception of 10,000 shares granted in 2010 that vest in 3 years and expire 10 years from the date of the grant. 30 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 The following summarizes MVB's stock options as of December 31, and the changes for the year then ended: Outstanding at beginning of year Granted Adjust for 10% stock dividend Exercised Forfeited/expired 2011 2010 Number of Shares Weighted- Average Exercise Price Number of Shares Weighted- Average Exercise Price 207,297 10,500 21,779 - - $ 17.88 - $ - - - 134,658 99,500 - (12,859) (14,002) $ 15.83 - $ - - - Outstanding at end of year 239,576 $ 16.46 207,297 $ 17.88 Exercisable at end of year 148,973 $ 15.13 115,297 $ 16.00 Weighted-average fair value of options granted $ 3.67 $ 3.10 during the year The fair value for the options was estimated at the date of grant using a Black-Scholes option-pricing model with average risk-free interest rates of 3.29% and 3.28% for 2011 and 2010 and a weighted average expected life of the options of 7 years for both 2011 and 2010. The expected volatility of MVB's stock price used for 2011 options was 5.40%, while for the 2010 options it was 1.26%. The expected dividend yield used was .50% for both 2011 and 2010. The following summarizes information concerning MVB's stock options outstanding at December 31, 2011: Options Outstanding Weighted Average Remaining Contractual Weighted Average Exercise Options Options Exercisable Weighted Average Exercise Number Outstanding Life Price Exercisable Price 127,376 89,650 22,550 5.00 9.00 9.00 $14.55 $18.18 $20.45 148,973 $15.13 Exercise Price $14.55 $18.18 $20.45 NOTE 14. REGULATORY CAPITAL REQUIREMENTS The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. 32 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets, as defined. As of December 31, 2011 and 2010, the Bank meets all capital adequacy requirements to which it is subject. The most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. Both the Company's and the Bank's actual capital amounts and ratios are presented in the table below. ACTUAL MINIMUM TO BE WELL CAPITALIZED MINIMUM FOR CAPITAL ADEQUACY PURPOSES AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO (Dollars in thousands) As of December 31, 2011 Total Capital (to risk-weighted assets) Consolidated Subsidiary Bank Tier I Capital (to risk-weighted assets) Consolidated Subsidiary Bank Tier I Capital (to average assets) Consolidated Subsidiary Bank As of December 31, 2010 Total Capital (to risk-weighted assets) Consolidated Subsidiary Bank Tier I Capital (to risk-weighted assets) Consolidated Subsidiary Bank Tier I Capital (to average assets) Consolidated Subsidiary Bank $ 50,603 $ 54,291 14.8% 15.8% N/A $ 34,276 N/A 10.0% $ 27,421 $ 27,421 $ 47,558 $ 51,246 13.9% 14.9% N/A $ 20,566 N/A 6.0% $ 13,710 $ 13,710 $ 47,558 $ 51,246 8.9% 9.6% N/A $ 26,686 N/A 5.0% $ 21,354 $ 21,349 $ 32,582 $ 36,275 11.9% 13.3% N/A $ 27,258 N/A 10.0% $ 21,807 $ 21,807 $ 30,104 $ 33,797 11.0% 12.4% N/A $ 16,355 N/A 6.0% $ 10,903 $ 10,903 $ 30,104 $ 33,797 7.3% 8.2% N/A $ 20,590 N/A 5.0% $ 16,487 $ 16,472 8.0% 8.0% 4.0% 4.0% 4.0% 4.0% 8.0% 8.0% 4.0% 4.0% 4.0% 4.0% NOTE 15. REGULATORY RESTRICTION ON DIVIDEND The approval of the regulatory agencies is required if the total of all dividends declared by the Bank in any calendar year exceeds the Bank's net profits, as defined, for that year combined with its retained net profits for the preceding two calendar years. 32 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 NOTE 16. LEASES The Company leases land and building space for the operation of some banking offices. All such leases qualify as operating leases. Following is a schedule by year of future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2011: Years ended December 31: (Dollars in thousands) 2012 2013 2014 2015 2016 Thereafter Total minimum payments required: $ 245 226 164 164 151 246 $ 1,196 Total lease expense for the years ended December 31, 2011 and 2010 was $156 and $54, respectively. NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS 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 insignificant, and therefore, the estimated fair values and carrying values are not shown. 34 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 The carrying values and estimated fair values of the Company's financial instruments are summarized as follows: Financial assets: Cash and due from banks Interest bearing balances with banks Securities available-for-sale Securities held-to-maturity Loans Accrued interest receivable Financial liabilities: Deposits Repurchase agreements FHLB and other borrowings Accrued interest payable Long-term debt Financial assets: Cash and due from banks Interest bearing balances with banks Securities available-for-sale Securities held-to-maturity Loans Accrued interest receivable Financial liabilities: Deposits Repurchase agreements FHLB and other borrowings Accrued interest payable Long-term debt December 31, 2011 Carrying Value Estimated Fair Value (Dollars in thousands) $ 9,763 10,196 99,366 13,568 373,822 1,582 $ 508,297 $ 390,545 77,835 9,767 341 4,124 $ 482,612 $ 9,763 10,216 99,366 14,144 388,027 1,582 $ 523,098 $ 400,894 77,861 11,027 341 4,124 $ 494,247 December 31, 2010 Carrying Value Estimated Fair Value $ 3,713 27,825 61,824 7,460 294,044 1,398 $ 396,264 $ 300,434 47,623 28,614 378 4,124 $ 381,173 $ 3,713 27,878 61,824 7,442 302,277 1,398 $ 404,532 $ 307,584 47,671 32,305 378 4,124 $ 392,062 34 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 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. NOTE 18. FAIR VALUE MEASUREMENTS Accounting standards require that the Company adopt fair value measurement for financial assets and financial liabilities. This enhanced guidance for using fair value to measure assets and liabilities applies whenever other standards require or permit assets or liabilities to be measured at fair value. This guidance does not expand the use of fair value in any new circumstances. Accounting standards establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by these standards are as follows: 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. 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 tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of December 31, 2011 and 2010 by level within the fair value hierarchy. As required by accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company classified investments in government securities as Level 2 instruments and valued them using the market approach. All measurements are made on a recurring basis. (In Thousands) Level I Level II Level III Total Level I Level II Level III Total December 31, 2011 December 31, 2010 Assets: U.S. Government Agency Securities Mortgage backed Securities Other Securities Other Real Estate Owned Impaired Loans Total Level 3 rollforward table (In Thousands) 51,874 47,368 124 - 176 - 2,822 99,366 51,874 47,368 124 176 2,822 2,998 102,364 35,280 26,420 124 - 402 - 856 1,258 61,824 35,280 26,420 124 402 856 63,082 Level 3 measurements at 12/31/10 $1,258 Gain/(loss) (596) Additions 2,819 Sales (483) Level 3 measurements at 12/31/11 $2,998 36 37 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. NOTE 18. FAIR VALUE MEASUREMENTS Accounting standards require that the Company adopt fair value measurement for financial assets and financial liabilities. This enhanced guidance for using fair value to measure assets and liabilities applies whenever other standards require or permit assets or liabilities to be measured at fair value. This guidance does not expand the use of fair value in any new circumstances. Accounting standards establish a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by these standards are as follows: 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. 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 tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of December 31, 2011 and 2010 by level within the fair value hierarchy. As required by accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company classified investments in government securities as Level 2 instruments and valued them using the market approach. All measurements are made on a recurring basis. (In Thousands) Level I Level II Total Level I Level II Total Level III Level III December 31, 2011 December 31, 2010 Assets: U.S. Government Agency Securities Mortgage backed Securities Other Securities Other Real Estate Owned Impaired Loans Total Level 3 rollforward table (In Thousands) Level 3 measurements at 12/31/10 $1,258 51,874 47,368 124 51,874 47,368 124 - 176 176 - 2,822 2,822 99,366 2,998 102,364 35,280 26,420 124 35,280 26,420 124 - 402 402 - 856 856 61,824 1,258 63,082 Gain/(loss) (596) Additions 2,819 Sales (483) at 12/31/11 $2,998 Level 3 measurements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MVB FINANCIAL CORP. December 31, 2011 NOTE 19. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY The investment of the Company in its second tier subsidiaries is presented on the equity method of accounting. Information relative to the parent company's balance sheets at December 31, 2010 and 2009, and the related statements of income and cash flows for each of those years are presented below: (Dollars in thousands, except share data) Balance Sheets Assets Cash Investment in bank subsidiary, eliminated in consolidation Other assets Total assets Liabilities and shareholders' equity Liabilities Other liabilities Long-term debt Total liabilities Stockholders' equity Preferred stock, par value $1,000; 8,500 and 5,000 shares authorized, 8,500 and 0 shares issued Common stock, par value $1; 4,000,000 shares authorized; 2,234,767 and 1,802,391 shares issued respectively Additional paid in capital Common stock paid for but not issued, par value $1; 82,328 shares issued Treasury stock Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity (Dollars in thousands) Statements of Income Income - dividends from bank subsidiary Expenses - operating (Loss) before income taxes and undistributed income Income tax (benefit) Income after tax Equity in undistributed income of bank subsidiary Net income December 31 2011 2010 $ 167 $ 1,779 51,421 293 $ 51,881 32,733 385 $ 34,897 $ 25 4,124 4,149 $ 4 4,124 4,128 $ 8,500 $ - 2,235 32,603 - (1,084) 6,220 (742) 47,732 $ 51,881 2011 $ - 296 (296) (112) (184) 2,886 $ 2,702 1,802 23,864 1,729 (1,006) 4,643 (263) 30,769 $ 34,897 2010 $ - 176 (176) (67) (109) 2,346 $ 2,237 36 37 (Dollars in thousands) Statements of Cash Flows OPERATING ACTIVITIES Net income Equity in undistributed income of bank subsidiary Decrease/(increase) in other assets Increase in other liabilities Stock option expense Unrealized (loss)/gain Net cash (used in) operating activities INVESTING ACTIVITIES Investment in subsidiary Net cash (used in)/provided by investing activities FINANCING ACTIVITIES Proceeds of stock offering Preferred stock issued Proceeds from long-term borrowings Common stock options exercised Cash dividend Preferred stock dividend Purchase of treasury stock Net cash provided by financing activities Exhibit 99.2 2011 2010 $ 2,702 $ 2,237 (2,886) 92 21 117 (479) (2,346) (66) - 46 80 (433) (49) (15,802) 161 (15,802) 161 6,500 8,463 - - (218) (44) (78) 1,729 - - 183 (160) - (484) 14,623 1,268 (Decrease)/increase in cash (1,612) 1,380 Cash at beginning of period 1,779 399 Cash at end of period $ 167 $ 1,779 38 39 MVB Financial Corp. Selected Financial Data Amounts in thousands, except for share data Summary of Operations Interest Income Interest Expense Net Interest Income Provisions for Loan Losses Non-Interest Income Non-Interest Expense Applicable Income Tax Expenses (Benefit) Net Income (Loss) from operations Per Share Data Basic Net Income (Loss)/Share Fully Diluted Net Income/Share Cash Dividends Declared Book Value Basic weighted-average shares outstanding Diluted weighted-average shares outstanding Average Balance Sheet Summary Loans, Gross Investment Securities Total Assets Deposits Capital End of Period Balance Sheet Summary Loans, Gross Investment Securities Total Assets Deposits Capital Selected Ratios Average Equity to Average Assets Return on Average Assets Net Income (Loss) Return on Average Equity Net Income (Loss) At or for the Year Ended December 31 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 $ $ $ $ 19,008 4,900 14,108 1,723 3,688 12,359 1,012 2,702 1.24 1.21 0.10 17.88 2,148 2,194 334,747 95,529 473,734 353,698 40,379 373,822 112,934 533,481 390,545 47,732 16,287 5,470 10,817 1,100 2,454 9,139 795 2,237 1.40 1.38 0.10 17.07 1,598 1,626 261,116 64,104 390,350 293,913 28,037 294,044 69,284 414,267 300,434 30,769 14,337 5,533 8,804 785 2,190 8,349 454 1,406 0.88 0.86 0.10 16.64 1,602 1,628 219,356 30,456 310,187 232,023 26,746 232,847 43,886 352,762 264,531 27,138 13,687 5,949 7,738 595 1,788 7,840 263 828 0.52 0.51 0.10 16.11 1,584 1,621 189,070 27,568 238,785 169,946 25,695 203,241 26,591 258,706 173,065 25,836 13,274 6,377 6,897 584 1,623 6,240 414 1,282 0.87 0.85 n/a 15.60 1,470 1,509 158,495 26,658 205,544 147,454 22,259 181,537 27,843 230,098 157,448 23,525 10,011 4,360 5,651 445 1,240 5,132 341 973 0.68 0.67 n/a 14.82 1,428 1,588 124,794 27,335 168,950 122,733 20,015 142,599 28,739 191,284 134,593 21,655 6,651 2,326 4,325 160 876 4,284 195 562 0.57 0.49 n/a 13.52 993 1,153 5,536 1,570 3,966 269 677 2,689 627 1,058 1.46 1.41 n/a 11.80 726 752 87,145 22,466 123,668 95,349 12,957 105,214 28,534 151,334 113,953 18,518 70,252 23,012 101,887 81,414 8,342 78,844 20,791 106,206 85,486 8,843 4,852 1,702 3,150 223 598 2,348 396 781 1.10 1.07 n/a 11.04 708 730 55,301 25,219 91,981 71,657 7,575 62,615 25,073 94,936 75,338 7,818 4,227 1,852 2,375 225 458 2,033 175 400 0.70 0.68 n/a 10.37 571 586 42,153 18,794 74,597 58,294 5,379 48,032 22,335 80,977 64,904 7,340 3,893 2,195 1,698 166 391 1,712 64 147 0.28 0.27 n/a 8.75 533 541 30,560 14,773 59,425 44,924 4,761 35,075 18,121 65,325 49,710 4,798 2,977 1,820 1,157 138 207 1,397 1,188 643 545 104 127 944 (50) (121) (118) (258) (0.23) (0.23) n/a 8.48 517 517 (0.57) (0.57) n/a 9.14 517 517 20,429 8,400 42,764 31,646 4,500 26,117 10,093 50,358 38,110 4,622 5,591 5,553 19,461 12,336 4,058 13,899 8,139 34,087 24,006 4,572 8.52% 7.18% 8.62% 10.76% 10.83% 11.85% 10.48% 8.19% 8.24% 7.21% 8.01% 10.52% 20.85% 0.57% 0.57% 0.45% 0.35% 0.62% 0.58% 0.45% 1.04% 0.85% 0.54% 0.25% -0.28% -6.36% 6.69% 7.98% 5.26% 3.22% 5.76% 4.86% 4.34% 12.68% 10.31% 7.44% 3.09% -2.69% -1.33% Leverage Ratio 9.60% 8.21% 8.55% 11.49% 11.53% 11.35% 11.82% 8.35% 8.21% 8.95% 7.14% 9.40% 24.20% Risk-Based Capital Ratios Tier I Capital Total Capital Common Stock Price Per Share at Year End * adjusted for 5% stock dividends, effective June 1, 2001 & August 15, 2004 & 10% stock dividend effective February 15, 2011 14.95% 15.84% 12.40% 13.31% 12.32% 13.25% 13.38% 14.26% 13.60% 14.52% 14.37% 15.21% 15.66% 16.45% 11.27% 12.40% 11.98% 13.03% 13.98% 14.96% 12.31% 13.25% 16.20% 17.00% 27.00% 27.60% $ 22.00 19.09 * 18.18 * 18.18 * 18.18 * 14.55 * 14.55 * 12.73 * 11.25 * 10.82 * 9.52 * 9.07 * 9.07 38 39 Shareholder & Company Information ShArEhOLDErS MEETINg MVB BANk LOCATIONS & OffICES 301 Virginia Avenue Fairmont, WV 26554 304.363.4800 888.689.1877 1000 Johnson Avenue Bridgeport, WV 26330 304.842.6700 888.842.6722 88 Somerset Boulevard Charles Town, WV 25414 304.728.9500 866.350.8635 651 Foxcroft Avenue Martinsburg, WV 25401 304.264.4000 800.945.0408 9789 Mall Loop White Hall, WV 26554 304.366.8400 888.499.4881 2400 Cranberry Square Morgantown, WV 26508 304.594.3500 The Annual Meeting of Shareholders of MVB Financial Corp. will be held at 5:30 p.m. on Tuesday, May 15, 2012, at MVB Bank’s Fairmont location at 301 Virginia Avenue, Fairmont, West Virginia 26554. Notice of the meeting is made to shareholders of record as of the close of business on March 26, 2012. TrANSfEr AgENT AND ShArEhOLDEr INQuIrIES The corporation’s transfer agent is The Registrar & Transfer Company. Inquiries concerning transfer requirements, lost certificates and change of address should be directed to: The Registrar & Transfer Company 10 Commerce Dr. Cranford, NJ 07016 www.rtco.com ALL OThEr INQuIrIES INVESTOr INQuIrIES TO ThE COMPANy ShOuLD BE DIrECTED TO: Lisa Wanstreet 304.367.8697 lwanstreet@mvbbanking.com ALL OThEr INQuIrIES ABOuT ThE COMPANy ShOuLD BE DIrECTED TO: MVB Financial Corp. 301 Virginia Avenue Fairmont, West Virginia 26554 304.363.4800 www.mvbbanking.com fOrM 10k A copy of the MVB Financial Corp. Form 10-K for 2011, which has been filed with the SEC, is available without attachments at no charge upon written request and is also available at http://ir.mvbbanking.com. Inquiries should be directed to the Investor Relations contact (above). INDEPENDENT rEgISTErED ACCOuNTINg fIrM S.R. Snodgrass, A.C. Certified Public Accountants, Wheeling, WV STOCk MArkET LISTINg MVB Financial Corp. is an over-the-counter stock traded under the symbol: MVBF 40 kENNEth F. LOWE, III Board Member of MVB East, Inc.; Director of Hotel and Restaurant Operations for the Clarion Hotel & Conference Center & CEO/ Vice President of Ken Lowe Management Company in Shepherdstown, WV JOhN t. SChIrrIpA Board Member of MVB Central, Inc.; President and Chief Executive Officer of MVB Central, Inc. and Executive Vice President, Regional President – Central, and Commercial Loan Officer of MVB Bank, Inc. in Bridgeport, WV JAMES r. MArtIN Chair of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc., Board Member of MVB East, Inc.; Past President & Chief Executive Officer of MVB Financial Corp. and MVB Bank, Inc. in Fairmont, WV ChrIStOphEr B. ShULtz Board Member of MVB East, Inc.; Owner/ Realtor of Shultz Realty and Commercial Associates and Developer in Jefferson County, WV Board of Directors DAVID B. ALVArEz Board Member of MVB Central, Inc.; President of MEC Construction in Bridgeport, WV StEphEN r. BrOOkS Vice-Chair of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Attorney with Flaherty, Sensabaugh & Bonasso in Morgantown, WV JAMES J. CAVA, Jr. Board Member of MVB Central, Inc.; CPA & Managing Member of Cava & Banko, PLLC in Bridgeport, WV Dr. JOSEph p. CINCINNAtI Chair of MVB East, Inc. and Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Orthopedic Surgeon with the Center of Orthopedic Excellence in Martinsburg, WV LArry F. MAzzA Board Member of MVB Financial Corp., MVB Bank, Inc., MVB Central, Inc. and MVB East, Inc.; Chief Executive Officer of MVB Finan- cial Corp. and President & Chief Executive Officer of MVB Bank, Inc. and MVB East, Inc. in Fairmont, WV BErNIECE D. COLLIS Vice-Chair of MVB East, Inc., Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Vice President of Minghini’s General Contractors, Inc. in Martinsburg, WV BArBArA A. MCkINNEy Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Owner/Broker – Howard Hannah/Premier Properties by Barbara Alexander, LLC. in Morgantown, WV JOhN W. EBErt Board Member of MVB Central, Inc.; President of J. W. Ebert Corp. dba McDonald’s in Bridgeport, WV. G. WArrEN MICkEy Board Member of MVB East, Inc.; Retired Educator/Farmer, in Charles Town, WV Dr. CArL r. FISChEr Board Member of MVB Central, Inc.; General Surgeon in Bridgeport, WV Dr. BrIAN D. GILpIN Board Member of MVB East, Inc.; Veterinarian with Shenandoah Veterinary Hospital in Martinsburg, WV hArVEy M. hAVLIChEk Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; President of Adams Office Supply & Novelty Company, Inc. in Fairmont, WV ChrIStINE B. IELApI Board Member of MVB Central, Inc.; Executive Vice President of Your Chef, Inc. in Bridgeport, WV MArIA k. LOrENSEN Board Member of MVB East, Inc.; Development Director for the Hospice of the Panhandle in Martinsburg, WV Dr. SAAD MOSSALLAtI Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc..; Vascular Surgeon with Associated Specialists, Inc. in Bridgeport, WV Dr. kELLy r. NELSON Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Senior Vice President with MedExpress Urgent Care in Bridgeport, WV LEONArD W. NOSSOkOFF Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Owner, Shop ‘n Save Supermarkets in Pittsburgh, PA J. ChrIStOphEr pALLOttA Board Member of MVB Financial Corp., MVB Bank, Inc., MVB Central, Inc. and MVB East, Inc.; President of Bond Insurance Agency in Fairmont, WV NItESh S. pAtEL Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Business Consultant; Previously President & Chief Executive Officer of D.N. American, Inc. in Dayton, OH JOhN B. SpADAFOrE Board Member of MVB Central, Inc.; Retired Physical Therapist in Bridgeport, WV LOUIS SpAtAFOrE Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; President & General Manager of Friendly Furniture Galleries in Fairmont, WV WAyNE h. StANLEy Board Member of MVB Financial Corp, MVB Bank, Inc. and MVB Central, Inc.; Chief Executive Officer of Victory of West Virginia, Inc. and President of Stanley Industries, Inc. in Bridgeport, WV rIChArD L. tOOthMAN Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Broker & Owner of Toothman Realty in Fairmont, WV Dr. MIChAEL F. trENt Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Dentist in the Naval Dental Center in Camp Lejeune, NC. rOGEr J. tUrNEr Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; Presi- dent of MVB Financial Corp. and Executive Vice President and Senior Commercial Loan Officer of MVB Bank, Inc. in Fairmont, WV SAMUEL J. WArASh Board Member of MVB Financial Corp., MVB Bank, Inc. and MVB Central, Inc.; President of S.J. Warash, Inc. in Fairmont, WV 301 VIRGINIA AVENUE • FAIRMONT, WEST VIRGINIA 26554 • 304.363.4800 • 1.888.689.1877 • WWW.MVBBANKING.COM 

Continue reading text version or see original annual report in PDF format above