Maintaining Momentum
2013 ANNUAL REPORT
301 VIRGINIA AVENUE (cid:127) FAIRMONT, WEST VIRGINIA 26554 (cid:127) 304.363.4800 (cid:127) 1.888.689.1877 (cid:127) MVBBANKING.COM
002933_MVB_annual_report_FIN.indd 1-2
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“ We have
acted for
tomorrow,
knowing
we could
not rest
on today.”
- Larry Mazza, CEO
Larry F. Mazza, CEO
SOLID EXECUTION CREATES VALUES
A YEAR OF MAJOR MILESTONES
Dear Fellow Shareholders:
The following 2013 accomplishments highlight remarkable milestones for MVB:
For MVB Financial Corp., 2013 proved to be truly transformative. We made strategic
decisions based on our priority goals, weathered diverse challenges, and maintained
momentum. This year’s message is clear: solid execution creates value.
A YEAR OF GREAT PROGRESS
We have acted for tomorrow, knowing we could not rest on today. We have
strategically expanded our presence in new markets and aggressively grown our
non-interest income enterprises. We have reached beyond our established, successful
banking model to create the optimal financial services company of the future.
In 2013, we continued to improve the MVB Financial Corp. structure. As part of this
initiative, we established an operating team to oversee MVB Bank, its wholly-owned
subsidiary MVB Mortgage and also realigned MVB Insurance, LLC. We made extensive
process improvements to build internal capacity, including key process developments,
system enhancements, and optimizing resources throughout the organization. Along
with these major improvements, our merger and acquisition strategy, our focused drive
on organic growth, and two capital raises made 2013 a very busy year.
Notably, by year end 2013, MVB’s capital base increased by $26.5 million, or 39%,
since December 31, 2012. Primary contributors included organic earnings generated
during the year and MVB’s successful capital raises in 2013. However, like many banking
and financial services businesses, MVB was affected by the unexpected sharp rise in
long-term interest rates during the year. Substantial dynamics remain in the mortgage
market that reduce visibility in forecasting mortgage volumes.
As reflected in full 2013 financial results, we grew loans and core deposits, maintained
fiscal soundness and safety and significantly increased shareholder equity. We
recorded another profitable year with net income of $4 million. Summary highlights
include the following:
• Total deposits INCREASED 43% to $696 million
• Assets INCREASED 36% to $992 million
• Loan growth INCREASED 40% to $617 million
• Shareholders’ equity INCREASED $26.2 million or 39%
MVB directly benefited from our strong track record in commercial loan development,
a strong balance sheet and productive business relationships in the communities
we serve. MVB Bank’s credit quality continues to be among the best in the country
compared to our peers. Our nonperforming loan ratio of 0.13% represents a
continuation of the company’s high-credit standards.
Also, MVB Bank was again ranked among top-tier banks in the country by earning
the 5-Star Superior Bank rating from Bauer Financial, Inc., for the Bank’s safety,
soundness and financial strength. Additionally, the Bank earned an A+ rating from
DepositAccounts.com during 2013, indicating its superior standing in security for
depositors.
• We expanded our footprint in lucrative areas with the opening of an additional branch in Morgantown’s Sabraton area in
March and another on Edwin Miller Boulevard in Martinsburg. We also celebrated the “topping out” – raising the top beam
– of our new structure in Charleston, which will open this summer.
• We continued to augment our insurance offering and named an experienced leadership team for MVB Insurance with
Randy Cober as CEO and Ken Juskowich as President. The expansion of our team under their leadership brings us closer
to our goal of becoming a leading, valued insurance provider in our market.
• In mid-year we completed the integration of Potomac Mortgage Group (PMG) to become MVB Mortgage. Under the
leadership of CEO Ed Dean, the combined efforts of the former PMG and MVB’s existing mortgage business are solidifying
our presence in the mortgage arena and in the robust Northern Virginia market.
• In early 2013 we completed a successful campaign to help fund PMG. During the fourth quarter, we initiated a larger capital
raise program to provide the necessary capital foundation to ensure quality with continued growth.
• In 2013, we restructured our Board committees to strengthen our
governance. In December, we announced key changes to the MVB
Financial Corp. Board to include the election of Stephen R. Brooks as
Chairman of the Board of Directors, succeeding founding Chairman
James R. “Dick” Martin upon his retirement. David B. Alvarez was
elected as Vice Chairman, succeeding Mr. Brooks.
REACHING OUR POTENTIAL
Our most critical priority is to accelerate top line revenue growth that
generates consistent, quality earnings. This will require us to find the
right balance between standardizing efficiencies and allowing the
flexibility necessary for our TEAM to best serve our clients. We have
established clear goals for 2014 to advance MVB and looking ahead, we
continue to see opportunity to reaching our potential.
I want thank our Board of Directors who helped to set strategic direction and openly support the MVB TEAM and our hard
work. The entire MVB TEAM appreciates the significant investments made by our shareholders in the past and in our most
recent capital funding initiative. All of our successful results would not be possible without the care, trust and commitment
of our team. We have some of the best people in the industry.
We are confident that what we have achieved in 2013 will help us pave the way for our continued success. I remain fully
committed to building a profitable and sustainable financial services company that is a sound investment for our shareholders,
a great work environment for our TEAM members and a good citizen in the communities we serve. Nothing less will do.
Sincerely,
Larry F. Mazza, CEO & President
MVB Financial Corp.
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Table of Contents
(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
� TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file Number 34603-9
MVB Financial Corp.
(Exact name of registrant as specified in its charter)
West Virginia
(State or other jurisdiction of
incorporation or organization)
301 Virginia Avenue, Fairmont, WV
(Address of principal executive offices)
20-0034461
(I.R.S. Employer Identification No.)
26554
(Zip Code)
Registrant’s telephone number (304) 363-4800
(Former name, former address and former fiscal year, if changed since last report)[None]
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $1.00 Par
Name of each exchange on
which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par
(Title of Class)
Preferred Stock $1,000.00 Par
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes � No ⌧.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) Act. Yes � No ⌧
Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No �
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No �
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. Yes ⌧ No �
TABLE OF CONTENTS
PART I
Page
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 4. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7. Management’s discussion and analysis of financial condition and results of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 8. Financial Statements and Supplementary Data.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Item 9B. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . .80
Item 13. Certain Relationships and Related transactions, and Director Independence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Part IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer �
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes � No ⌧.
Smaller reporting company ⌧
Non-accelerated filer �
Accelerated filer �
Based upon the average selling price of sales known to the Registrant of the common shares of the Registrant during the period
through June 30, 2013, the aggregate market value of the common shares of the Registrant held by non affiliates during that time was
$72,082,022. For this purpose certain executive officers and directors are considered affiliates.
Portions of the registrant’s definitive proxy statement relating to the Annual Meeting to be held May 20, 2014, are incorporated by
reference into Part III of this Annual Report on Form 10-K.
As of March 28, 2014, the Registrant had 7,705,894 shares of common stock outstanding with a par value of $1.
2
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PART 1
At December 31, 2013, the Company had total assets of $987.1 million, total loans of $622.3 million, total deposits of $695.8 million
and total stockholders’ equity of $94.0 million.
ITEM 1.BUSINESS
MVB Financial Corp. (“the Company”) was formed on January 1, 2004, as a bank holding company and, effective December 19, 2012,
became a financial holding company. The Company features multiple subsidiaries and affiliated businesses, including MVB Bank,
Inc. (the “Bank” or “MVB Bank”) and its wholly-owned subsidiary MVB Mortgage and MVB Insurance, LLC (“MVB Insurance”). On
December 31, 2013, three Company subsidiaries, MVB-Central, Inc. (a second-tier level holding company), MVB-East, Inc. (a second
tier holding company) and Bank Compliance Solutions, Inc. (an inactive subsidiary) were merged into the Company.
The Bank was formed on October 30, 1997 and chartered under the laws of the State of West Virginia. The Bank commenced
operations on January 4, 1999. In August of 2005, the Bank opened a full service office in neighboring Harrison County, West
Virginia. During October of 2005, the Bank purchased a branch office in Jefferson County, West Virginia, situated in West Virginia’s
eastern panhandle. During the third quarter of 2007, the Bank opened a full service office in the Martinsburg area of Berkeley
County, West Virginia. In the second quarter of 2011, the Bank opened a banking facility in the Cheat Lake area of Monongalia
County, West Virginia. The Bank opened its second Harrison County, West Virginia location, the downtown Clarksburg office in the
historic Empire Building during the fourth quarter of 2012.
Also during the fourth quarter of 2012, the Bank acquired Potomac Mortgage Group, Inc. (“PMG” which, following July 15, 2013,
began doing business under the registered trade name “MVB Mortgage”), a mortgage company in the northern Virginia area, and
fifty percent (50%) interest in a mortgage services company, Lender Service Provider, LLC (“LSP”). In the third quarter of 2013, this
fifty percent (50%) interest in LSP was reduced to a twenty-five percent (25%) interest through a sale of a partial interest. This PMG
acquisition provided the Company and the Bank the opportunity to make the mortgage banking operation a much more significant
line of business to further diversify its net income stream. MVB Mortgage has four mortgage only offices, all located in northern
Virginia, within the Washington, District of Columbia / Baltimore, Maryland metropolitan area, and, in addition, has mortgage loan
originators located at select Bank locations.
In the first quarter of 2013, the Bank opened its second Monongalia County location in the Sabraton area of Morgantown, West
Virginia. In the second quarter of 2013, the Bank opened its second full service office in Berkeley County, West Virginia, at Edwin
Miller Boulevard. During 2013, the Company continued to focus on growth in the Harrison, Berkeley, Jefferson and Monongalia
County areas, as well as the Kanawha county area, as the primary method for reaching performance goals. The Company
continuously reviews key performance indicators to measure our success.
Currently, the Bank operates nine full-service banking branches in West Virginia, which are located at: 301 Virginia Avenue in
Fairmont, Marion County; 9789 Mall Loop (inside the Shop N Save Supermarket) in White Hall, Marion County; 1000 Johnson
Avenue in Bridgeport, Harrison County; 406 West Main St. in Clarksburg, Harrison County; 88 Somerset Boulevard in Charles Town,
Jefferson County; 651 Foxcroft Avenue in Martinsburg, Berkeley County; 2400 Cranberry Square in Cheat Lake, Monongalia County;
10 Sterling Drive in Morgantown, Monongalia County; and 231 Aikens Center in Martinsburg, Berkeley County. In addition, the
Bank operates a loan processing office at 184 Summers Street, Charleston, Kanawha County, West Virginia. The Bank has received
regulatory approval from the Federal Deposit Insurance Corporation (“FDIC”) and the West Virginia Division of Financial Institutions
to construct a replacement location on Copley Drive in Fairmont, Marion County, West Virginia, for its current White Hall location.
In addition, the Bank has initiated construction of a new facility in Kanawha County, West Virginia.
In addition to MVB Mortgage, the Company has a wholly-owned subsidiary, MVB Insurance, LLC. MVB Insurance was originally
formed in 2000 and reinstated in 2005, as a Bank subsidiary. Effective June 1, 2013, MVB Insurance became a direct subsidiary of
the Company. MVB Insurance offers select insurance products such as title insurance, individual insurance, commercial insurance,
employee benefits insurance, and professional liability insurance. MVB Insurance maintains its headquarters at 301 Virginia Avenue,
Fairmont, West Virginia, and operates offices at: 48 Donley Street, Suite 703, Morgantown, West Virginia, 2400 Cranberry Square,
Morgantown, West Virginia,; and 355 Wharton Circle, Suite 123, Triadelphia, West Virginia.
The Company’s primary business activities, through its Subsidiaries, are currently community banking, mortgage banking, insurance
services, and wealth management. As a community banking entity, the Bank offers its customers a full range of products through
various delivery channels. Such products and services include checking accounts, NOW accounts, money market and savings
accounts, time certificates of deposit, commercial, installment, commercial real estate and residential real estate mortgage loans,
debit cards, and safe deposit rental facilities. Services are provided through our walk-in offices, automated teller machines (“ATMs”),
drive-in facilities, and internet and telephone banking. Additionally, the Bank offers non-deposit investment products through an
association with a broker-dealer, and also offers correspondent lending services to assist other community banks in offering longer
term fixed rate loan products that may be sold into the secondary market. Since the opening date of January 4, 1999, the Bank,
has experienced significant growth in assets, loans, and deposits due to overwhelming community and customer support in the
Marion County, West Virginia and Harrison County, West Virginia markets, expansion into West Virginia’s eastern panhandle counties
and, most recently, into Monongalia County, West Virginia. With the acquisition of PMG, mortgage banking is now a much more
significant focus, which has opened up increased market opportunities in the Washington, District of Columbia / Baltimore, Maryland
metropolitan region and added enough volume to better diversify the Company’s earnings stream.
The Company and the Bank entered into a purchase and assumption agreement, on October 23, 2013, to purchase certain assets
and assume specific liabilities, subject to regulatory approvals, of CFG Community Bank (“CFG Bank”), a subsidiary of Capital
Funding Bancorp, Inc., headquartered in Lutherville, Maryland. This pending transaction, which is, again, subject to regulatory
approvals, would increase the presence of the Company and the Bank in the Washington, District of Columbia / Baltimore, Maryland
metropolitan region through the addition of three new branches in: Annapolis, Maryland; Baltimore, Maryland; and Lutherville,
Maryland. Further, the transaction would include an additional office, also in Lutherville, Maryland.
At December 31, 2013, the Company had 274 full-time equivalent employees. The Company’s principal office is located at 301 Virginia
Avenue, Fairmont, West Virginia 26554, and its telephone number is (304) 363-4800. The Company’s Internet web site is www.
mvbbanking.com.
During 2013, the Company continued to focus on growth in the Harrison, Berkeley, Jefferson and Monongalia County areas, as
well as the Kanawha county area, as the primary method for reaching performance goals. The Company continuously reviews key
performance indicators to measure our success.
Segment Reporting
Beginning in 2013, the Company began to operate in a decentralized fashion in three principal business activities: commercial and
retail banking services; mortgage banking services; and insurance services. Revenue from commercial and retail banking activities
consists primarily of interest earned on loans and investment securities and service charges on deposit accounts.
Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage
origination process. The Company recognizes income on the sale of mortgages as part of income on loans held for sale.
Revenue from insurance services is comprised of fees related to insurance services transactions.
MVB Mortgage has an outstanding line of credit for which it pays interest to the Bank. Transactions related to these relationships are
eliminated to reach consolidated totals.
4
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The following table presents segment information for the year end December 31, 2013.
populous county in West Virginia. Martinsburg’s population has increased 15.1% since 2000 to 17,227 in 2010. Monongalia County’s
population has increased from 81,866 in 2000 to 96,189 in 2010, an increase of 17.5%. Morgantown’s population in 2010 was 29,660,
an increase of 2,851 or 10.6% since 2000. Based upon this data, the company’s offices are in some of the most desirable locations in
(in thousands)
Revenues:
Commercial &
Mortgage
Intercompany
Retail Banking
Banking
Insurance
Eliminations
Consolidated
the state of West Virginia.
Unemployment in Marion County has improved compared to that of the State of West Virginia from November 1995 through
December 2013. As of December 2013, the overall state rate was 5.9% compared to 4.6% for Marion County. During this same period
Interest income
$ 25,088
$ 2,103
$ -
$ (646)
$ 26,545
of time, the Marion County Unemployment Rate has decreased from 8.9% to 6.5%, while the West Virginia rate decreased from
Income on loans held for sale
Insurance income
Other income
Total operating income
Expenses:
Interest expense
Salaries and employee benefits
Provision for loan losses
Other expense
Total operating expenses
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Preferred stock dividends
Net income (loss) available to
common shareholders
2,853
-
3,843
31,784
5,014
12,441
2,260
9,811
29,526
2,258
5
2,253
85
19,042
-
1,400
22,545
1,181
13,017
-
5,081
19,279
3,266
1,240
2,026
-
-
1,722
-
1,722
-
1,609
-
634
2,243
(521)
(262)
(259)
-
-
-
-
(646)
(646)
-
-
-
(646)
-
-
-
-
21,895
1,722
5,243
55,405
5,549
27,067
2,260
15,526
50,402
5,003
983
4,020
85
$ 2,168
$ 2,026
$ (259)
$ -
$ 3,935
Total assets
$ 1,021,097
$ 92,290
$ 3,012
$ (129,339)
$ 987,060
Capital expenditures
Goodwill
5,613
897
489
16,882
399
-
-
-
6,501
17,779
Market Area
The Company’s primary market areas are the Marion, Harrison, Jefferson, Berkeley, Monongalia, and Kanawha counties of West
Virginia, as well as the northern Virginia area for the mortgage and commercial lending business. Its extended market is in the
adjacent counties.
United States Census Bureau data indicates that the Fairmont and Marion County, West Virginia populations have had somewhat
different trends from 1980 to 2010. The population of Fairmont has fluctuated from 23,863 in 1980; 20,210 in 1990; 19,097 in 2000
and 18,704 in 2010, or a net decline of 5,159 or 21.6%. Marion County increased its population from 1980 to 1990, 55,789 to 57,249,
decreased to 56,598 in 2000 and decreased to 56,418 in 2010. These changes resulted in a net increase of 1.1%. The Marion
County population includes that of Fairmont. The result is that over the last 30 years, there has not been any significant change
in population. Harrison County’s population decreased from 69,371 in 1990 to 68,652 in 2000, increased to 69,099 in 2010 while
7.5% to 5.9%. At December 31, 2013, Harrison, Jefferson, Berkeley and Monongalia counties showed unemployment rates of 4.6%,
3.6%, 4.4% and 3.4%, respectively. Marion, Harrison, Jefferson, Berkeley and Monongalia County’s rates are all better than the state
average. The future direction of unemployment will probably be driven by what occurs economically on a national level.
The Company originates various types of loans, including commercial and commercial real estate loans, residential real estate loans,
home equity lines of credit, real estate construction loans, and consumer loans (loans to individuals). In general, the Company retains
most of its originated loans (exclusive of certain long-term, fixed rate residential mortgages that are sold.) However, loans originated
in excess of the Bank’s legal lending limit are participated to other banking institutions and the servicing of those loans is retained by
the bank. The Company has no loans to foreign entities. The Company’s lending market area is primarily concentrated in the Marion,
Harrison, Berkeley, Jefferson and Monongalia Counties of West Virginia, as well as the northern Virginia area for mortgage lending.
Commercial Loans
At December 31, 2013, the Bank had outstanding approximately $457.4 million in commercial loans, including commercial, commercial
real estate, financial and agricultural loans. These loans represented approximately 73.5% of the total aggregate loan portfolio as of
that date.
Lending Practices. Commercial lending entails significant additional risks as compared with consumer lending (i.e., single-family
residential mortgage lending, and installment lending). In addition, the payment experience on commercial loans typically depends
on adequate cash flow of a business and thus may be subject, to a greater extent, to adverse conditions in the general economy
or in a specific industry. Loan terms include amortization schedules commensurate with the purpose of each loan, the source of
repayment and the risk involved. The primary analysis technique used in determining whether to grant a commercial loan is the
review of a schedule of estimated cash flows to evaluate whether anticipated future cash flows will be adequate to service both
interest and principal due. In addition, The Bank reviews collateral to determine its value in relation to the loan in the event of a
foreclosure.
The Bank evaluates all new commercial loans, and on an annual basis mortgage loans in excess of $300,000, as well as customers
that have total outstanding loans that aggregate more than $750,000. If deterioration in credit worthiness has occurred, The Bank
takes effective and prompt action designed to assure repayment of the loan. Upon detection of the reduced ability of a borrower to
meet original cash flow obligations, the loan is considered a classified loan and reviewed for possible downgrading or placement on
non-accrual status.
Consumer Loans
At December 31, 2013, the Bank had outstanding consumer loans in an aggregate amount of approximately $18.9 million or
approximately 3.0% of the aggregate total loan portfolio.
Lending Practices. Consumer loans generally involve more risk as to collectability than mortgage loans because of the type and
nature of the collateral and, in certain instances, the absence of collateral. As a result, consumer lending collections are dependent
upon the borrower’s continued financial stability, and thus are more likely to be adversely affected by employment loss, personal
bankruptcy, or adverse economic conditions. Credit approval for consumer loans requires demonstration of sufficiency of income
to repay principal and interest due, stability of employment, a positive credit record and sufficient collateral for secured loans. It is
the policy of the Bank to review its consumer loan portfolio monthly and to charge off loans that do not meet its standards and to
Bridgeport’s population has increased from 7,306 in 2000 to 7,896 in 2010, indicating that while population change in Harrison
adhere strictly to all laws and regulations governing consumer lending.
County has been relatively flat, the Bridgeport area is growing. The population in Jefferson County has been on the rise in recent
years, increasing from 42,190 in 2000 to 53,498 in 2010. During this period, Charles Town has seen an increase in population of
80.9% to 5,259 in 2010. Berkeley County’s population has grown from 75,905 in 2000 to 104,169 in 2010, making it the second-most
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Real Estate Loans
thereto. Under the BHCA, bank holding companies that qualify and elect to be financial holding companies, such as MVB Financial
Corp., may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either(i)financial
At December 31, 2013, the Bank had approximately $146.0 million of residential real estate loans, home equity lines of credit, and
in nature or incidental to such financial activity (as determined by the Federal Reserve Board in consultation with the Office of the
construction mortgages outstanding, representing 23.5% of total loans outstanding.
Lending Practices. The Bank generally requires that the residential real estate loan amount be no more than 80% of the purchase
price or the appraised value of the real estate securing the loan, unless the borrower obtains private mortgage insurance for the
Comptroller of the Currency) or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and
soundness of depository institutions or the financial system generally (as solely determined by the Federal Reserve Board). MVB
Financial Corp.’s subsidiary bank, MVB Bank, Inc., is subject to restrictions imposed by the Federal Reserve Act on transactions
with affiliates. The Company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with
percentage exceeding 80%. Occasionally, the Bank may lend up to 100% of the appraised value of the real estate. Loans made
extensions of credit and/or the provision of other property or services to a customer by MVB Financial Corp. or its subsidiaries.
in this lending category are generally one to ten year adjustable rate, fully amortizing to maturity mortgages. MVB Bank also
originates fixed rate real estate loans and generally sells these loans in the secondary market. Most real estate loans are secured by
On July 30, 2002, the Senate and the House of Representatives of the United States (Congress) enacted the Sarbanes-Oxley Act
first mortgages with evidence of title in favor of The Bank in the form of an attorney’s opinion of the title or a title insurance policy.
of 2002, a law that addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and
MVB Bank also requires proof of hazard insurance with the Bank named as the mortgagee and as the loss payee. Full appraisals are
enhanced and timely disclosure of corporate information. The New York Stock Exchange proposed corporate governance rules
obtained from licensed appraisers for the majority of loans secured by real estate.
that were enacted by the Securities and Exchange Commission. The changes are intended to allow stockholders to more easily and
efficiently monitor the performance of companies and directors and should not significantly impact the Company.
Home Equity Loans. Home equity lines of credit are generally made as second mortgages by MVB Bank. The maximum amount of
a home equity line of credit is generally limited to 80% of the appraised value of the property less the balance of the first mortgage.
Effective August 29, 2002, as directed by Section 302(a) of Sarbanes-Oxley, MVB Financial Corp.’s chief executive officer and
The Bank will lend up to 100% of the appraised value of the property at higher interest rates which are considered compatible with
chief financial officer are each required to certify that the company’s Quarterly and Annual Reports do not contain any untrue
the additional risk assumed in these types of loans. The home equity lines of credit are written with 10 year terms, but are subject to
statement of a material fact. The rules have several requirements, including having these officers certify that: they are responsible
review upon request for renewal.
Construction Loans. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing
on improved, occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate
for establishing, maintaining and regularly evaluating the effectiveness of MVB Financial Corp.’s internal controls; they have made
certain disclosures to the Company’s auditors and the audit committee of the Board of Directors about the company’s internal
controls; and they have included information in MVB Financial Corp.’s Quarterly and Annual Reports about their evaluation and
whether there have been significant changes in the Company’s internal controls or in other factors that could significantly affect
of the property’s value at completion of construction and the estimated cost (including interest) of construction. If the estimate of
internal controls subsequent to the evaluation.
construction cost proves to be inaccurate, MVB may advance funds beyond the amount originally committed to permit completion
of the project.
Competition
The Gramm-Leach-Bliley Act (also known as the Financial Services Modernization Act of 1999) permits bank holding companies
to become financial holding companies. This allows them to affiliate with securities firms and insurance companies and to engage
in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its
subsidiary banks is well capitalized, is well managed and has at least a satisfactory rating under the Community Reinvestment
Act. No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings
The Company experiences significant competition in attracting depositors and borrowers. Competition in lending activities
association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by
comes principally from other commercial banks, savings associations, insurance companies, governmental agencies, credit unions,
the Federal Reserve Board.
brokerage firms and pension funds. The primary factors in competing for loans are interest rate and overall lending services.
Competition for deposits comes from other commercial banks, savings associations, money market funds and credit unions as well
The Financial Services Modernization Act defines “financial in nature” to include: securities underwriting, dealing and market
as from insurance companies and brokerage firms. The primary factors in competing for deposits are interest rates paid on deposits,
making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities;
account liquidity, convenience of office location and overall financial condition. The Company believes that its community approach
and activities that the Federal Reserve Board has determined to be closely related to banking. A bank also may engage, subject to
provides flexibility, which enables the bank to offer an array of banking products and services.
limitations on investment, in activities that are financial in nature, other than insurance underwriting, insurance company portfolio
investment, real estate development and real estate investment, through a financial subsidiary of the bank, if the bank is well
The Company primarily focuses on the Marion, Harrison, Jefferson, Berkeley and Monongalia County markets in West Virginia and
capitalized, well managed and has at least a satisfactory Community Reinvestment Act rating.
the northern Virginia area for its products and services. Management believes it has developed a niche and a level of expertise in
serving this area.
Banking Subsidiary Regulation. MVB Bank, Inc. was chartered as a state bank and is regulated by the West Virginia Division of
Financial Institutions and the Federal Deposit Insurance Corporation. The Bank provides FDIC insurance on its deposits and is a
The Company operates under a “needs-based” selling approach that management believes has proven successful in serving the
member of the Federal Home Loan Bank of Pittsburgh (“FHLB”).
financial needs of most clients. It is not the Company’s strategy to compete solely on the basis of interest rates. Management
believes that a focus on client relationships and service will promote our customers’ continued use of our financial products and
International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (USA Patriot Act)
services and will lead to enhanced revenue opportunities.
Supervision and Regulation – The following is a summary of certain statutes and regulations affecting the Company and its
subsidiaries and is qualified in its entirety by reference to such statutes and regulations:
Financial Holding Company Regulation – MVB Financial Corp. is a financial holding company under the Bank Holding Company
Act of 1956, as amended, or BHCA, and is subject to the reporting requirements of, and examination and regulation by, the Federal
The International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (the “Patriot Act”) was adopted in
response to the September 11, 2001 terrorist attacks. The Patriot Act provides law enforcement with greater powers to investigate
terrorism and prevent future terrorist acts. Among the broad-reaching provisions contained in the Patriot Act are several designed
to deter terrorists’ ability to launder money in the United States and provide law enforcement with additional powers to investigate
how terrorists and terrorist organizations are financed. The Patriot Act creates additional requirements for banks, which were
already subject to similar regulations. The Patriot Act authorizes the Secretary of the Treasury to require financial institutions to
Reserve Board. In general, the BHCA limits the business of bank holding companies to banking, managing or controlling banks
take certain “special measures” when the Secretary suspects that certain transactions or accounts are related to money laundering.
and other activities that the Federal Reserve Board has determined to be so closely related to banking as to be a proper incident
These special measures may be ordered when the Secretary suspects that a jurisdiction outside of the United States, a financial
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institution operating outside of the United States, a class of transactions involving a jurisdiction outside of the United States or
certain types of accounts are of “primary money laundering concern.” The special measures include the following: (a) require
financial institutions to keep records and report on the transactions or accounts at issue; (b) require financial institutions to obtain
Federal and State Consumer Laws
and retain information related to the beneficial ownership of any account opened or maintained by foreign persons; (c)require
financial institutions to identify each customer who is permitted to use a payable-through or correspondent account and obtain
MVB Bank, Inc. is subject to regulatory oversight under various consumer protection and fair lending laws. These laws govern,
certain information from each customer permitted to use the account; and (d) prohibit or impose conditions on the opening or
among other things, truth-in-lending disclosure, equal credit opportunity, fair credit reporting and community reinvestment. Failure
maintaining of correspondent or payable-through accounts.
Federal Deposit Insurance Corporation
to abide by federal laws and regulations governing community reinvestment could limit the ability of a bank to open a new branch or
engage in a merger transaction. Community reinvestment regulations evaluate how well and to what extent a bank lends and invests
in its designated service area, with particular emphasis on low-to-moderate income communities and borrowers in such areas.
The FDIC insures the deposits of the Bank which is subject to the applicable provisions of the Federal Deposit Insurance Act. The
Monetary Policy and Economic Conditions
FDIC may terminate a bank’s deposit insurance upon finding that the institution has engaged in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition enacted
The business of financial institutions is affected not only by general economic conditions, but also by the policies of various
or imposed by the bank’s regulatory agency.
Federal Home Loan Bank
Federal Home Loan Bank
governmental regulatory agencies, including the Federal Reserve Board. The Federal Reserve Board regulates money and credit
conditions and interest rates to influence general economic conditions primarily through open market operations in U.S. government
securities, changes in the discount rate on bank borrowings and changes in the reserve requirements against depository institutions’
deposits. These policies and regulations significantly affect the overall growth and distribution of loans, investments and deposits,
and the interest rates charged on loans, as well as the interest rates paid on deposit accounts.
The FHLB provides credit to its members in the form of advances. As a member of the FHLB of Pittsburgh, the Bank must maintain
The monetary policies of the Federal Reserve Board have had a significant effect on the operating results of financial institutions in
an investment in the capital stock of that FHLB in an amount equal to 0.35% of the calculated Member Asset Value (MAV) plus
the past and are expected to continue to have significant effects in the future. In view of the changing conditions in the economy
4.60% of outstanding advances. The MAV is determined by taking line item values for various investment and loan classes and
and the money markets and the activities of monetary and fiscal authorities, the Company cannot predict future changes in interest
applying an FHLB haircut to each item.
rates, credit availability or deposit levels.
Capital Requirements
Effect of Environmental Regulation
Federal Reserve Board. The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies. The risk-
based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning assets
The Company’s primary exposure to environmental risk is through its lending activities. In cases when management believes
environmental risk potentially exists, the Company mitigates its environmental risk exposures by requiring environmental site
and off-balance sheet items to broad risk categories. For further discussion regarding the Bank’s risk-based capital requirements, see
assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than
Note 14 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
normal potential for environmental impact, as determined by reference to present and past uses of the subject property and
adjacent sites. Environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate
West Virginia Division of Financial Institutions. State banks, such as MVB Bank, Inc. are subject to similar capital requirements
adopted by the West Virginia Division of Financial Institutions.
collateral.
Limits on Dividends
With regard to residential real estate lending, management reviews those loans with inherent environmental risk on an individual
basis and makes decisions based on the dollar amount of the loan and the materiality of the specific credit.
The Company anticipates no material effect on anticipated capital expenditures, earnings or competitive position as a result of
The Company’s ability to obtain funds for the payment of dividends and for other cash requirements largely depends on the
compliance with federal, state or local environmental protection laws or regulations.
amount of dividends the Company declares. However, the Federal Reserve Board expects MVB Financial Corp. to serve as a source
of strength to the Bank. The Federal Reserve Board may require the Company to retain capital for further investment in the Bank,
rather than pay dividends to its shareholders. MVB Bank, Inc. may not pay dividends to MVB if, after paying those dividends, the
Bank would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio
ITEM 1A.RISK FACTORS
requirements. The Bank must have the approval from the West Virginia Division of Financial Institutions if a dividend in any year
No response required.
would cause the total dividends for that year to exceed the sum of the current year’s net earnings as defined and the retained
earnings for the preceding two years as defined, less required transfers to surplus. These provisions could limit the Company’s ability
to pay dividends on its outstanding common shares.
ITEM 1B.UNRESOLVED STAFF COMMENTS
No response required.
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ITEM 2.PROPERTIES
PART II
The Company owns its main office located at 301 Virginia Avenue in Fairmont, along with its offices at 1000 Johnson Avenue in
Bridgeport, 88 Somerset Boulevard in Charles Town, 651 Foxcroft Avenue in Martinsburg and 10 Sterling Drive in Morgantown. In
addition, the Bank has initiated construction of a new facility in Kanawha County, West Virginia.
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUERS PURCHASES OF EQUITY SECURITIES
The Company leases its office at 2500 Fairmont Avenue inside the Shop N Save supermarket in White Hall, in addition to the land at
the Bridgeport branch location, the 2400 Cranberry Square office in Morgantown, the 406 West Main Street office in Clarksburg, the
operations center space in Bridgeport, the 48 Donley Street office space in Morgantown, the 231 Aikens Center office in Martinsburg,
the 300 Wharton Circle office space in Triadelphia and the 184 Summers Street office space in Charleston. Office space is also leased
at the following Virginia locations: 6824 Elm Street in McLean, 20130 Lakeview Center Plaza in Ashburn, 11325 Random Hills Road in
Fairfax, 4035 Ridgetop Road in Fairfax and 12120 Sunset Hills Road in Reston.
Additional information concerning the property and equipment owned or leased by the Company and its subsidiaries is incorporated
herein by reference from “Note 4, Bank Premises and Equipment” and “Note 16, Leases” of the Notes to the Financial Statements
included in Item 8 of this Form 10-K.
ITEM 3.LEGAL PROCEEDINGS
From time to time in the ordinary course of business, the Company and its subsidiaries are subject to claims, asserted or unasserted,
or named as a party to lawsuits or investigations. Litigation, in general, and intellectual property and securities litigation in particular,
can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings cannot be predicted with
any certainty and in the case of more complex legal proceedings, the results are difficult to predict at all. The Company is not aware
of any asserted or unasserted legal proceedings or claims that the Company believes would have a material adverse effect on the
Company’s financial condition or results of the Company’s operations.
ITEM 4.MINE SAFETY DISCLOSURES
No response required.
MVB Financial Corp.’s common shares are not traded on any national exchange.
The table presented below sets forth the estimated market value for the indicated periods based upon sales known to management
with respect to the Company’s common shares. The information set forth in the table is based on knowledge of certain arms-length
transactions in the stock. In addition, dividends are subject to the restrictions described in Note 15 to the financial statements.
Quarterly Market and Dividend Information:
2013 2012
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Estimated Market Value
Per Share
Dividend
Estimated Market Value
Per Share
Dividend
$ 16.60
$ 0.04
$ 12.00
$ 0.035
19.25
14.13
12.25
0.00
0.035
0.00
12.00
11.25
11.00
0.00
0.035
0.00
MVB Financial Corp. had 1,205 stockholders of record at December 31, 2013. The Company began paying an annual dividend of
$.05 per share beginning in December 2008 through December 2011. Beginning in 2012 the Company began paying a semi-annual
dividend of $.04 per share in June and December. In 2013 MVB Financial Corp. paid a semi-annual dividend of $.04 per share in June
and $.04 per share in December. No dividends were paid prior to 2008.
Equity Compensation Plan Information
Number of securities to
be issued upon exercise
of outstanding options
(a)
Weighted-average
exercise price of
outstanding options
(b)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
379,270
$ 8.40
987,780
n/a
n/a
Plan Category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
379,270
$ 8.40
During 2013 44,352 stock options under the Company’s equity compensation plan were exercised.
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n/a
987,780
13
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ITEM 6.SELECTED FINANCIAL DATA
No response required.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-looking Statements:
The following discussion contains statements that refer to future expectations, contain projections of the results of operations or of
financial condition, or state other information that is “forward-looking.” “Forward-looking” statements are easily identified by the use
of words such as “could,” “anticipate,” “estimate,” “believe,” and similar words that refer to a future outlook. There is always a degree
of uncertainty associated with “forward-looking” statements. The Company’s management believes that the expectations reflected
in such statements are based upon reasonable assumptions and on the facts and circumstances existing at the time of these
disclosures. Actual results could differ significantly from those anticipated.
Many factors could cause the Company’s actual results to differ materially from the results contemplated by the forward-looking
statements. Some factors, which could negatively affect the results, include:
• General economic conditions, either nationally or within the Company’s market, could be less favorable than expected;
• Changes in market interest rates could affect interest margins and profitability;
• Competitive pressures could be greater than anticipated;
• Legal or accounting changes could affect results; and
• Adverse changes could occur in the securities and investments markets.
In Management’s Discussion and Analysis we review and explain the general financial condition and the results of operations for
MVB Financial Corp. and its subsidiaries. We have designed this discussion to assist you in understanding the significant changes in
the Company’s financial condition and results of operations. We have used accounting principles generally accepted in the United
States to prepare the accompanying consolidated financial statements. We engaged S.R. Snodgrass, P.C. to audit the consolidated
financial statements and their independent audit report is included herein.
Introduction
The following discussion and analysis of the Consolidated Financial Statements is presented to provide insight into management’s
assessment of the financial results and operations of the Company. You should read this discussion and analysis in conjunction with
the audited Consolidated Financial Statements and footnotes and the ratios and statistics contained elsewhere in this Form 10-K.
Application of Critical Accounting Policies
The Company’s consolidated financial statements are prepared in accordance with U. S. generally accepted accounting principles
and follow general practices within the banking industry. Application of these principles requires management to make estimates,
assumptions, and judgments that affect the amounts reported in the financial statements; accordingly, as this information changes,
the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater
reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could
be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities
are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair
value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded
contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility.
The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted
market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation
adjustments are estimated in good faith by management primarily through the use of internal forecasting techniques.
The most significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements.
These policies, along with the disclosures presented in the other financial statement notes and in management’s discussion and
analysis of operations, provide information on how significant assets and liabilities are valued in the financial statements and how
those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the
methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for
loan losses to be the accounting area that requires the most subjective or complex judgments, and as such could be most subject to
revision as new information becomes available.
Allowance for Loan Losses
The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio. Determining
the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and
the use of estimates related to the amount and timing of losses inherent in classifications of homogeneous loans based on historical
loss experience of peer banks, and consideration of current economic trends and conditions, all of which may be susceptible to
significant change. Non-homogeneous loans are specifically evaluated due to the increased risks inherent in those loans. The loan
portfolio also represents the largest asset type in the consolidated balance sheet. Note 1 to the consolidated financial statements
describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the
amount of the allowance for loan losses is included in the Allowance for Loan Losses section of this financial review.
Investment Securities
Investment securities at the time of purchase are classified as one of the following:
Held-to-Maturity Securities
Includes securities that the Company has the positive intent and ability to hold to maturity. These securities are reported at
amortized cost. The Company had $56.7 million and $35.4 million as of December 31, 2013 and 2012.
Available-for-Sale Securities
Includes debt and equity securities not classified as held-to-maturity that will be held for indefinite periods of time. These securities
may be sold in response to changes in market interest or prepayment rates, needs for liquidity and changes in the availability of and
yield of alternative investments. Such securities are reported at fair value, with unrealized holding gains and losses excluded from
earnings and reported as a separate component of stockholders’ equity, net of estimated income tax effect.
The amortized cost of investment in debt securities is adjusted for amortization of premiums and accretion of discounts, computed
by a method that results in a level yield. Gains and losses on the sale of investment securities are computed on the basis of specific
identification of the adjusted cost of each security.
Securities are periodically reviewed for other-than-temporary impairment. For debt securities, management considers whether the
present value of future cash flows expected to be collected are less than the security’s amortized cost basis (the difference defined
as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and the Company’s intent to sell
the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated
recovery in market value, to determine whether the loss in value is other than temporary. Once a decline in value is determined to be
other than temporary, if the Company does not intend to sell the security, and it is more-likely-than-not that it will not be required to
sell the security, before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss.
Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in
other comprehensive income, net of applicable taxes. For equity securities where the fair value has been significantly below cost
for one year, the Company’s policy is to recognize an impairment loss unless sufficient evidence is available that the decline is not
other than temporary and a recovery period can be predicted. A decline in value that is considered to be other-than-temporary is
recorded as a loss within non-interest income in the consolidated statement of income.
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Common stock of the Federal Home Loan Bank represents ownership in an institution which is wholly owned by other financial
investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive
institutions. These equity securities are accounted for at cost and are classified as other assets.
guidance for assessing whether an entity is an investment Company. 2. Require an investment company to measure noncontrolling
See Note 2 to the consolidated financial statements for the Company’s policy regarding the other than temporary impairment of
following additional disclosures: (a) the fact that the entity is an investment company and is applying the guidance in Topic 946,
ownership interests in other investment companies at fair value rather than using the equity method of accounting. 3. Require the
investment securities.
Goodwill and Other Intangible Assets
(b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support
provided or contractually required to be provided by an investment company to any of its investees. The amendments in this Update
are effective for an entity’s interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application
is prohibited. This ASU is not expected to have a significant impact on the Company’s financial statements.
As discussed in Note 1 of the consolidated financial statements, the Company must assess goodwill and other intangible assets
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net
each year for impairment. This assessment involves estimating the fair value of the Company’s reporting units. If the fair value of
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update applies to all entities that
the reporting unit is less than its carrying value including goodwill, we would be required to take a charge against earnings to write
have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists
down the assets to the lower value.
Deferred Tax Assets
at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the
financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is
not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would
result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and
We use an estimate of future earnings to support our position that the benefit of our deferred tax assets will be realized. If future
the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the
income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be
financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax
applied, the asset may not be realized and our net income will be reduced. Management also evaluates deferred tax assets to
asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be
determine if it is more likely than not that the deferred tax benefit will be utilized in future periods. If not, a valuation allowance is
made presuming disallowance of the tax position at the reporting date. The amendments in this Update are effective for fiscal years,
recorded. Our deferred tax assets are described further in Note 8 of the consolidated financial statements.
and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all
Recent Accounting Pronouncements and Developments
unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. This ASU is not expected to have a
significant impact on the Company’s financial statements.
In January 2014, FASB issued ASU 2014-01, Investments – Equity Method and Join Ventures (Topic 323): Accounting for Investments
In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the
in Qualified Affordable Housing Projects. The amendments in this Update permit reporting entities to make an accounting policy
Total Amount of the Obligation is Fixed at the Reporting Date. The ASU requires the measurement of obligations resulting from
election to account for their investments in qualified affordable housing projects using the proportional amortization method if
joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the
certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment
amount the reporting entity agreed to pay on the basis of its arrangement with its co-obligors as well as any additional amount
in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income
that the entity expects to pay on behalf of its co-obligors. The new standard is effective retrospectively for fiscal years and interim
statement as a component of income tax expense (benefit). The amendments in this Update should be applied retrospectively to
periods within those years, beginning after December 15, 2013, and early adoption is permitted. This ASU is not expected to have a
all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable
significant impact on the Company’s financial statements.
housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments.
The amendments in this Update are effective for public business entities for annual periods and interim reporting periods within
In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The
those annual periods, beginning after December 15, 2014. Early adoption is permitted. This ASU is not expected to have a significant
amendments in this Update are being issued to clarify when an entity should apply the liquidation basis of accounting. In addition,
impact on the Company’s financial statements.
the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial
statements prepared using the liquidation basis of accounting. The amendments require an entity to prepare its financial statements
In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40):
using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this
the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority
Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical
to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a
possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining
plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified
legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the
in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the
residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a
liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the
similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed
entity’s inception. The amendments are effective for entities that determine liquidation is imminent during annual reporting periods
residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by
beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from
residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.
the day that liquidation becomes imminent. Early adoption is permitted. Entities that use the liquidation basis of accounting as
The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual
of the effective date in accordance with other Topics (for example, terminating employee benefit plans) are not required to apply
periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this Update using either a modified
the amendments. Instead, those entities should continue to apply the guidance in those other Topics until they have completed
retrospective transition method or a prospective transition method. This ASU is not expected to have a significant impact on the
liquidation. This ASU is not expected to have a significant impact on the Company’s financial statements.
Company’s financial statements.
In June 2013, the FASB issued ASU 2013-08, Financial Services – Investment Companies (Topic 946): Amendments to the Scope,
Measurement, and Disclosure Requirements. The amendments in this Update affect the scope, measurement, and disclosure
requirements for investment companies under U.S. GAAP. The amendments do all of the following: 1. Change the approach to the
16
002933_MVB_annual_report_FIN.indd 19-20
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5/14/14 4:07 PM
Summary Financial Results
Net interest margin is calculated by dividing net interest income by average interest-earning assets and serves as a measurement of
the net revenue stream generated by the Bank’s balance sheet. As noted above, the net interest margin was 2.94% in 2013 compared
The Company earned $4.0 million in 2013 compared to $4.2 million in 2012, a decrease of $0.2 million. The earnings equated to
to 3.12% in 2012. The net interest margin continues to face considerable pressure due to competitive pricing of loans and deposits in
a 2013 return on average assets of .51% and a return on average equity of 5.11%, compared to prior year results of .71% and 8.33%,
the Bank’s markets. During 2013, the Federal Reserve did not change rates and in fact committed to keep rates low through mid-
respectively. Basic earnings per share were $1.18 in 2013 compared to $1.84 in 2012. Diluted earnings per share were $1.15 in 2013
2015. Management’s estimate of the impact of future changes in market interest rates is shown in the section captioned “Interest
compared to $1.79 in 2012. Net interest income increased $3.7 million, noninterest income increased $21.1 million and noninterest
Rate Risk.”
expenses increased by $26.2 million. The increase in net interest income was driven mainly by the continued growth of the Company
balance sheet, with $77.2 million in average loan growth and despite an increase in average interest bearing liabilities of $166.2
Management continues to analyze methods to deploy MVB’s assets into an earning asset mix which will result in a stronger net
million and an increase in interest expense of $619,000. There was also a decrease in cost of funds of 25 basis points. The increase
interest margin. Loan growth continues to be strong and management anticipates that loan activity will remain strong in the near
in noninterest income was mainly the result of an increase in income on loans held for sale of $18.0 million as a result of additional
term future.
volume that the Company was able to produce through the acquisition of PMG. Other factors that resulted in the increase to
noninterest income include insurance income of $1.7 million, due to new products being offered, and gain on sale of subsidiary of
During 2013, net interest income increased by $3.7 million or 21.2% to $21.0 million from $17.3 million in 2012. This increase is largely
$626 which was the result of PMG selling 25% of its 50% interest in Lender Service Provider, LLC. The increase in other operating
due to the growth in average earning assets, primarily $131.3 million in loans and loans held for sale. Average total earning assets
expenses was principally the result of increased salaries expense of $17.8 million, with the addition of the Sabraton and Edwin Miller
were $715.0 million in 2013 compared to $549.3 million in 2012. Average total loans and loans held for sale grew to $555.3 million
Bank offices as well as additions in the areas of information technology staff, legal and marketing staff, operations center staff,
in 2013 from $424.0 million in 2012. Primarily as a result of this growth, total interest income increased by $4.3 million, or 19.3%, to
human resources and accounting additions and the additional staff related to the acquisition of PMG and additional staff related
$26.5 million in 2013 from $22.3 million in 2012. Average investment securities increased $23.6 million, mainly the result of a $22.9
to MVB Insurance, LLC, as well as increases for existing staff. Occupancy, Equipment and depreciation costs increased $1.5 million,
million average increase in municipal investments. The increased yield on the municipal securities helped to hold the total investment
the result of the additions of Sabraton and Edwin Miller Bank offices, full year of the Clarksburg Bank office, the acquisition of
portfolio yield flat, despite the downward trend in rates from 3 to 5 years. Average interest-bearing liabilities, mainly deposits,
PMG, and additional leased office space in both the Cheat Lake Bank office, the Bank Operations Center and MVB Insurance, LLC.
likewise increased in 2013 by $166.2 million. Average interest-bearing deposits grew to $507.7 million in 2013 from $402.3 million in
Data processing costs increased $568,000: the mortgage company added $146,000 in data processing expense, the insurance
2012. Total interest expense increased by only $619,000 despite the $166.2 million in average interest bearing liabilities growth. This
company added $26,000 and the bank’s expense increased by $396,000. The increase at the bank level was driven by the addition
was the result of a 16 basis point decrease in interest cost from 2012 to 2013.
of two additional offices, a 13.5% growth in number of accounts, and the usage of additional products, services and providers to
better serve the client base. Mortgage processing increased by $2.4 million, the direct result of the acquisition of PMG who uses a
The Company’s earnings assets increased $165.7 million and net interest income increased by $4.3 million. The net interest margin
related entity to perform processing services related to mortgage loans. Advertising increased by $797,000, the result of aggressive
continues to be pressured by increased competition for high quality loan growth and the deposit volume required to fund the
marketing of the Bank’s core deposit products. Legal and accounting fees increased by $877,000. This increase was largely due to
growth.
the setup of MVB Insurance, the acquisition of PMG and general course of business items at the bank and holding company level.
Other operating expense increased by $1.9 million. This increase was driven mainly by the acquisition PMG as well as increases in
The Bank’s yield on earning assets changed during 2013 as follows: The loan portfolio yield decreased by 43 basis points while
travel and entertainment, directors’ fees, postage and courier, telephone, licenses and permits, publications, collections, training
funding costs decreased by 16 basis points.
expense, telephone and miscellaneous expense.
The Bank’s yield on earning assets in 2013 was 3.73% compared to 4.05% in 2012. This decrease in yield is attributable to a 38 basis
cost of funds as follows: Certificates of deposit costs decreased 24 basis points, IRA costs decreased 77 basis points and NOW
The cost of interest-bearing liabilities decreased to 0.85% in 2013 from 1.01% in 2012. This decrease is primarily the result of reduced
point decline in the yield on loans. Despite extensive competition, total loans increased to $622.3 million at December 31, 2013, from
accounts costs decreased 14 basis points.
$446.4 million at December 31, 2012. The Bank’s ability to originate quality loans is supported by a minimal delinquency rate.
Deposits increased $209.3 million to $695.8 million at December 31, 2013, from $486.5 million at December 31, 2012, due to
the following: $14.2 million in growth from broker buster checking, $83.4 million in time deposits, $24.8 million in commercial
2012 compared to 2011
checking, $22.1 in savings and NOW accounts, and $54.9 million in public funds. The Bank offers an uncomplicated product design
During 2012, net interest income increased by $3.2 million or 22.8% to $17.3 million from $14.1 million in 2011. This increase is largely
accompanied by a simple fee structure that is attractive to customers. The overall cost of funds for the bank was 0.85% in 2013
due to the growth in average earning assets, primarily $92.8 million in loans. Average total earning assets were $554.5 million in
compared to 1.01% in 2012. This cost of funds, combined with the earning asset yield, resulted in a net interest margin of 2.94% in
2012 compared to $444.6 million in 2011. Average total loans grew to $427.5 million in 2012 from $334.7 million in 2011. Primarily
2013 compared to 3.12% in 2012.
as a result of this growth, total interest income increased by $3.2 million, or 17.1%, to $22.3 million in 2012 from $19.0 million in 2011.
Average interest-bearing liabilities, mainly deposits, likewise increased in 2012 by $98.0 million. Average interest-bearing deposits
The Bank maintained a high-quality, short-term investment portfolio during 2013 to provide liquidity in the balance sheet, to fund
grew to $402.3 million in 2012 from $314.7 million in 2011. Total interest expense increased by only $30,000 despite the $98.0 million
loan growth, for repurchase agreements and to provide security for state and municipal deposits. As a result of being able to utilize
in average interest bearing liabilities growth. This was the result of a 24 basis point decrease in interest cost from 2011 to 2012.
more municipal securities for pledging purposes, the bank was able to increase the municipal investment portfolio by $21.3 million in
2013, which increased the portfolio yield and helped reduce the Company’s tax liability.
MVB’s yield on earning assets changed during 2012 as follows: The loan portfolio yield decreased by 44 basis points while funding
Interest Income and Expense
Net interest income is the amount by which interest income on earning assets exceeds interest expense incurred on interest-bearing
liabilities. Interest-earning assets include loans, investment securities and certificates of deposit in other banks. Interest-bearing
liabilities include interest-bearing deposits and borrowed funds such as sweep accounts and repurchase agreements. Net interest
income remains the primary source of revenue for the Bank. Net interest income is also impacted by changes in market interest
rates, as well as the mix of interest-earning assets and interest-bearing liabilities. Net interest income is also impacted favorably by
increases in non-interest bearing demand deposits and equity.
18
002933_MVB_annual_report_FIN.indd 21-22
yields decreased by 24 basis points.
The cost of interest-bearing liabilities decreased to 1.01% in 2012 from 1.25% in 2011. This decrease is primarily the result of reduced
cost of funds as follows: Certificates of deposit costs decreased 46 basis points, IRA costs decreased 46 basis points and NOW
accounts costs decreased 41 basis points.
19
5/14/14 4:07 PM
Statistical Financial Information Regarding MVB Financial Corp.
The following tables provide further information about interest income and expense:
Average Balances and Analysis of Net Interest Income:
2013 2012
(Dollars in thousands)
Average
Balance
Interest Income/
Expense
Yield/Cost
Average
Balance
Interest Income/
Expense
Yield/Cost
Interest-bearing deposits in banks
$ 12,530
$ 32
0.26 %
$ 6,695
$ 15
0.22 %
CDs with other banks
Investment securities:
Taxable
Tax-exempt
Loans and loans held for sale:
Commercial
Tax exempt
Real estate
Consumer
Allowance for loan losses
Net loans
Total earning assets
Cash and due from banks
Other assets
Total assets
Liabilities
Deposits:
NOW
Money market checking
Savings
IRAs
CDs
9,427
168
1.78
9,565
189
1.98
92,371
45,407
317,934
24,863
198,620
18,714
(4,827)
555,304
715,039
18,402
61,854
$795,295
1,348
1,281
1.46
2.82
91,703
22,466
1,457
679
1.59
3.02
14,681
4.62
255,641
959
3.86
18,980
7,230
3.64
138,034
846
4.52
14,812
(3,436)
12,511
809
5,770
824
4.89
4.26
4.18
5.56
23,716
4.27
424,031
26,545
3.71
554,460
19,914
22,254
4.70
4.01
11,163
24,101
$589,724
$ 291,969
$2,208
0.76
$202,850
$1,832
0.90
23,715
31,039
9,495
151,522
72
0.30
29,683
196
0.63
23,461
152
1.60
9,771
1,349
0.89
136,571
125
137
232
1,540
0.42
0.58
2.37
1.13
Rate Volume Calculation
2013 vs 2012
(in thousands)
Earning Assets
Loans
Commercial
Tax exempt
Real estate
Consumer
Investment securities
Taxable
Tax-exempt
Interest-bearing deposits in
banks
CDs with other banks
Total earning assets
Interest bearing liabilities
Change in Volume
Change in Rate
Change in both Rate & Volume
Total Change
3,048
(706)
(172)
2,170
251
(77)
2,532
(745)
217
(154)
11
693
13
(119)
(45)
2
(24)
(327)
(41)
(1)
(46)
150
1,460
22
(109)
602
2
17
(3)
(18)
-
(21)
6,762
(1,862)
(609)
4,291
NOW
805
(298)
Money market checking
(25)
(35)
(131)
7
376
(53)
Savings
IRAs
CDs
Repurchase agreements and
federal funds sold
44
11
4
59
(7)
(76)
169
(324)
2
(35)
(81)
(190)
94
(32)
(6)
56
FHLB and other borrowings
1,455
(241)
Subordinated debt
-
(8)
(754)
-
460
(8)
80,166
567
0.71
67,709
511
0.75
Total interest bearing liabilities
2,535
(1,003)
(913)
619
63,763
4,124
655,793
52,002
8,786
716,581
8,500
3,373
58,217
(1,084)
11,387
(1,679)
78,714
$795,295
926
79
1.45
1.92
15,468
4,124
466
87
5,549
0.85
489,637
4,930
3.01
2.11
1.01
Total
5,016
(859)
(485)
3,672
46,748
3,315
539,700
8,500
2,243
32,605
(1,083)
8,401
(642)
50,024
$589,724
2.86
3.00
$ 20,996
2.94%
$ 17,324
3.12%
Repurchase agreements and federal funds
sold
FHLB and other borrowings
Subordinated debt
Total interest-bearing liabilities
Non-interest bearing demand deposits
Other liabilities
Total liabilities
Stockholders’ equity
Preferred stock
Common stock
Paid-in capital
Treasury stock
Retained earnings
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
Net interest spread
Net interest income-margin
20
002933_MVB_annual_report_FIN.indd 23-24
21
5/14/14 4:07 PM
Rate Volume Calculation
2012 vs 2011
(in thousands)
Earning Assets
Loans
Commercial
Tax exempt
Real estate
Consumer
Change in Volume
Change in Rate
Change in both Rate & Volume
Total Change
investments with higher yields and similar maturities.
During the ordinary course of business in 2013, the Bank sold several investment securities at a gain of $145,304. All investments that
were sold were classified as available-for-sale. In many instances the investments that were sold were replaced with other similar
2,646
(700)
(173)
1,773
179
7
2
188
1,730
(582)
(208)
940
102
(140)
(16)
(54)
The Bank recognized income from the retention of servicing on mortgage loans sold of $826,000 in 2013 versus $591,000 in 2012.
This $235,000 increase relates to slightly increased volume in this area, though the Bank’s mortgage service asset at $1.4 million
remains a very insignificant piece of the balance sheet.
The Bank is constantly searching for new non-interest income opportunities that enhance income and provide customer benefits.
Investment securities
358
(50)
(10)
299
Interest-bearing deposits in banks
(12)
(3)
1
(14)
Non-Interest Expense
CDs with other banks
55
-
25
80
Non-interest Expense was $42.6 million in 2013 versus $16.4 million in 2012. Approximately 64% and 56% of non-interest expense
Total earning assets
5,058
(1,467)
(378)
3,212
Interest bearing liabilities
NOW
651
(111)
(54)
486
Money market checking
(59)
(150)
29
(180)
41
20
13
74
(5)
(46)
1
(50)
310
(537)
(90)
(316)
Savings
IRAs
CDs
Repurchase agreements and
federal funds sold
for 2013 and 2012, respectively, related to personnel costs. Personnel are the lifeblood of every service organization, which is why
personnel costs are such a significant part of the expenditure mix. Salaries and benefits increased by $17.8 million in 2013, this
increase related to the following: the addition of the Sabraton and Edwin Miller Bank offices, additions in the areas of information
technology, legal, marketing, operations center, human resource and accounting staff, the additional staff related to the acquisition
of PMG, additional staff related to MVB Insurance, LLC, and increases for existing staff.
Consulting expense decreased by $381,000 in 2013. This decrease related mainly to the acquisition of PMG, which took place during
2012.
48
(36)
(3)
8
Advertising increased by $797,000, the result of aggressive marketing of the Bank’s core deposit products.
FHLB and other borrowings
187
(132)
(53)
2
Data processing increased by $568,000, the result of the following: the mortgage company added $146,000 in data processing
Long-term debt
-
6
-
6
1,173
(986)
(157)
30
3,885
(482)
(221)
3,182
Provision for Loan Losses
The Company’s provision for loan losses for 2013 and 2012 were approximately $2.3 million and $2.8 million, respectively.
Determining the appropriate level of the Allowance for Loan Losses (ALL) requires considerable management judgment. In
exercising this judgment, management considers numerous internal and external factors including, but not limited to, portfolio
growth, national and local economic conditions, trends in the markets served and guidance from the Bank’s primary regulators.
Management seeks to maintain an ALL that is appropriate in the circumstances and that complies with applicable accounting and
regulatory standards. Further discussion can be found later in this discussion under “Allowance for Loan Losses.”
Non-Interest Income
expense, the insurance company added $26,000 and the bank’s expense increased by $396,000. The increase at the bank level
was driven by the addition of two additional offices, a 13.5% growth in number of accounts, and the usage of additional products,
services and providers to better serve the client base.
Mortgage processing increased by $2.4 million, the direct result of the acquisition of PMG who uses a related entity to perform
processing services related to mortgage loans.
Legal and accounting fees increased by $877,000. This increase was largely due to the setup of MVB Insurance and general course
of business items at the mortgage company, the bank and holding company.
Equipment and occupancy expense increased by $1.5 million. This increase was mainly the result of the PMG acquisition as well as
the additions of two new branch locations and two new office spaces for additional insurance staff that were brought on during
2013.
Other operating expense increased by $1.9 million. This increase was driven mainly by the acquisition PMG as well as increases in
travel and entertainment, directors’ fees, postage and courier, telephone, licenses and permits, publications, collections, training
expense, telephone and miscellaneous expense.
Fees related to deposit accounts and cash management accounts and income on loans held for sale represent a significant portion
of the Bank’s primary non-interest income. The total of non-interest income for 2013 was $28.9 million versus $7.7 million in 2012.
Income Taxes
The most significant increase in non-interest income from 2012 to 2013 was $18.0 million in income on loans held for sale and $1.7
million in insurance income, the details of which have been previously discussed.
MVB Mortgage sold a 25% share in a mortgage services company that they control, Lender Services Provider, LLC (“LSP”), during
the third quarter of 2013. A gain of $626,000 was recognized on this transaction.
The Company incurred income tax expense of $1.0 million in 2013 and $1.7 million in 2012.
The Company’s effective tax rate decreased from 28% in 2012 to 20% in 2013. This was largely driven by the increase in tax-free
income on investments and loans, the result of an increased municipal investment portfolio of $21.3 million and an increase in tax
free loans of $10.5 million.
22
002933_MVB_annual_report_FIN.indd 25-26
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5/14/14 4:07 PM
Return on Assets
Loans
The Company’s return on average assets was .51% in 2013, compared to .71% in 2012.
Return on Equity
The Company’s lending is primarily focused in Marion, Harrison, Berkeley, Jefferson and Monongalia County, West Virginia with a
secondary focus on the adjacent counties in West Virginia. The portfolio consists principally of commercial lending, retail lending,
which includes single-family residential mortgages and consumer lending. Loans totaled $622.3 million as of December 31, 2013,
compared to $446.4 million at December 31, 2012.
MVB Financial Corp.’s return on average stockholders’ equity (“ROE”) was 5.11% in 2013, compared to 8.33% in 2012. The decreased
During 2013, the Bank experienced loan growth of $175.9 million. The most significant portion of the growth came in the residential
return in 2013 is a direct result of earnings remaining relatively flat, while equity increased by $26.3 million as a result of the
real estate and commercial and non-residential real estate area. Residential real estate and home equity loans grew $16.0 million and
completion of a $27.1 million confidential offering to accredited investors.
commercial and non-residential real estate loans grew approximately $157.2 million.
Overview of the Statement of Condition
At December 31, 2013, commercial loans represented the largest portion of the portfolio approximating 73.4% of the total loan
portfolio. Commercial loans totaled $457.4 million at December 31, 2013, compared to $299.6 million at December 31, 2012. On
December 3, 2013, the Bank purchased $74.3 million in commercial loans. This purchase consisted of 20 loans, with yields ranging
The balance sheet changed significantly from 2012 to 2013. Loans increased by $175.9 million to $622.3 million at December 31, 2013.
from 5.00% to 6.84%. The transaction immediately added a significant monthly revenue stream to the Bank’s core earnings.
Deposits increased by $209.3 million, FHLB and other borrowings increased by $13.0 million and stockholders’ equity increased by
Management will continue to focus on the enhancement and growth of the commercial loan portfolio while maintaining appropriate
$26.5 million.
Cash and Cash Equivalents
underwriting standards and risk/price balance.
Residential real estate loans to retail customers (including home equity lines of credit) account for the second largest portion of
the loan portfolio, comprising 23.4% of the total loan portfolio. Residential real estate and home equity loans totaled $146.0 million
at December 31, 2013, compared to $130.0 million at December 31, 2012. Included in residential real estate loans are home equity
Cash and cash equivalents totaled $39.8 million at December 31, 2013, compared to $25.3 million at December 31, 2012. This increase
credit lines totaling $27.8 million at December 31, 2013, compared to $16.8 million at December 31, 2012. Management believes the
was due to additional balances in the Bank’s due from bank accounts at year end, as well as balances held at PMG.
home equity loans are competitive products with an acceptable return on investment after risk considerations. Residential real estate
lending continues to represent a primary focus due to the lower risk factors associated with this type of loan and the opportunity to
Management believes the current balance of cash and cash equivalents adequately serves the Company’s liquidity and performance
provide service to those in the Marion, Harrison, Berkeley, Jefferson and Monongalia County markets.
needs. Total cash and cash equivalents fluctuate on a daily basis due to transactions in process and other liquidity demands.
Management believes liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to
Consumer lending continues to be a part of core lending. At December 31, 2013, consumer loan balances totaled $18.9 million
traditional and non-traditional funding sources, and the portions of the investment and loan portfolios that mature within one year.
compared to $16.8 million at December 31, 2012. The majority of consumer loans are in the direct lending area. Management is
These sources of funds should enable the Company to meet cash obligations as they come due.
pleased with the performance and quality of the consumer loan portfolio, which can be attributed to the many years of experience
of its consumer lenders. This is another important product necessary to serve our market areas.
Investment Securities
The following table provides additional information about loans:
Investment securities totaled $163.1 million at December 31, 2013, compared to $114.7 million at December 31, 2012.
Loan maturities at December 31, 2013:
Investment securities are primarily classified as available-for-sale. Management believes the available-for-sale classification provides
flexibility in terms of managing the portfolio for liquidity, yield enhancement and interest rate risk management opportunities. At
December 31, 2013, the amortized cost of investment securities totaled $165.5 million, resulting in unrealized loss in the investment
portfolio of $5.0 million. The entire municipal portfolio is currently classified as held to maturity. The municipal portfolio was
increased by $21.3 million in 2013 as a result of acquiring the ability to utilize more municipals for pledging purposes and to better
the effective tax rate.
Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through Asset and
Liability Committee (“ALCO”) meetings. The ALCO also monitors net interest income and manages interest rate risk for the
Company. Through active balance sheet management and analysis of the investment securities portfolio, sufficient liquidity
is maintained to satisfy depositor requirements and the various credit needs of its customers. Management believes the risk
(in thousands)
One Year or Less
One Thru Five Years
Due After Five Years
Total
Commercial and nonresidential
real estate
Residential real estate and home
equity
Consumer and other
$ 77,527
$ 172,069
$ 207,792
$ 457,388
16,338
4,948
21,199
9,575
108,464
146,001
4,393
18,916
Total
$ 98,813
$ 202,843
$ 320,649
$ 622,305
characteristics inherent in the investment portfolio are acceptable based on these parameters.
The preceding data has been compiled based upon the earlier of either contractual maturity or next repricing date.
24
002933_MVB_annual_report_FIN.indd 27-28
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5/14/14 4:07 PM
The following table reflects the sensitivity of loans to changes in interest rates as of December 31, 2013 that mature after one year:
The following table reflects the allocation of the allowance for loan losses as of December 31, 2013 and 2012:
(in thousands)
Predetermined fixed interest rate
Floating or adjustable interest rate
Total as of December 31, 2013
Loan Concentration
Commercial and
Residential Real estate
nonresidential real estate
and home equity
Consumer and other
Total
(in thousands)
Commercial and
Residential Real estate
nonresidential real estate
and home equity
Consumer and other
Total
$ 264,003
115,858
$ 379,861
73,000
$ 129,663
3,506
192,364
$ 13,968
$ 56,663
$ 10,462
$331,128
ALL balance at December 31, 2012
At December 31, 2013, commercial loans comprised the largest component of the loan portfolio. There are very few commercial
loans that are not secured by real estate. Such non-real estate secured loans generally are lines of credit secured by accounts
receivable. While the loan concentration is in commercial loans, the commercial portfolio is comprised of loans to many different
borrowers, in numerous different industries but primarily located in our market areas.
Allowance for Loan Losses
Management continually monitors the risk in the loan portfolio through review of the monthly delinquency reports and the Loan
Review Committee. The Loan Review Committee is responsible for the determination of the adequacy of the allowance for loan
losses. This analysis involves both experience of the portfolio to date and the makeup of the overall portfolio. Specific loss estimates
are derived for individual loans based on specific criteria such as current delinquent status, related deposit account activity, where
applicable, local market rumors, which are generally based on some factual information, and changes in the local and national
economy. While local market rumors are not measurable or perhaps not readily supportable, historically, this form of information has
been a valuable indication of a potential problem.
The result of the evaluation of the adequacy at each period presented herein indicated that the allowance for loan losses was
considered adequate to absorb losses inherent in the loan portfolio.
At December 31, 2013 and 2012 impaired loans totaled $6.6 million and $3.1 million respectively. A portion of the Allowance for Loan
Losses of $1,458 and 723 was allocated to cover any loss in these loans at December 31, 2013 and 2012, respectively. Loans past due
more than 30 days were $2.8 million and $6.7 million, respectively, at December 31, 2013 and 2012.
December 31
Loans past due more than 30 days to gross loans
Loans past due more than 90 days to gross loans
2013
2012
0.45%
0.14%
0.81%
0.07%
Net charge-offs of $1.4 million in 2013 and $1.8 million in 2012 were incurred. The provision for loan losses was $2.3 million in 2013
Charge-offs
Recoveries
Provision
ALL balance at December 31, 2013
(in thousands)
ALL balance at December 31, 2011
Charge-offs
Recoveries
Provision
ALL balance at December 31, 2012
$ 3,107
(1,458)
57
1,903
$ 3,609
$ 756
$ 213
$ 4,076
(38)
(33)
70
285
$ 1,073
1
72
$ 253
(1,529)
128
2,260
$4,935
Commercial and
Residential Real estate
nonresidential real estate
and home equity
Consumer and other
Total
$ 2,164
(1,731)
5
2,669
$ 3,107
$ 615
(9)
5
145
$ 756
$ 266
$ 3,045
(51)
12
(14)
$ 213
(1,791)
22
2,800
$4,076
Non-performing assets consist of loans that are no longer accruing interest, loans that have been renegotiated to below market
rates based upon financial difficulties of the borrower, and real estate acquired through foreclosure. When interest accruals are
suspended, accrued interest income is reversed with current year accruals charged to earnings and prior year amounts generally
charged off as a credit loss. When, in management’s judgment, the borrower’s ability to make periodic interest and principal
payments resumes and collectability is no longer in doubt, the loan is returned to accrual status.
Non-performing assets and past due loans:
(Dollars in Thousands)
Non-accrual loans
Commercial
Real estate and home equity
Consumer and other
Total non-accrual loans
Accruing loan past due 90 days or more
Total non-performing loans
Other real estate, net
Total non-performing assets
2013
2012
$ 284
$ 3,081
29
76
389
460
849
375
43
1
3,125
329
3,454
207
$ 1,224
$ 3,661
0.14% 0.77%
and $2.8 million in 2012. Net charge-offs represented .25% and .41% in 2013 and 2012, respectively, compared to average outstanding
Non-performing loans as a % of total loans
loans for the indicated period.
Allowance for loan losses as a % of non-performing loans
581.27%
118.01%
26
002933_MVB_annual_report_FIN.indd 29-30
Funding Sources
The Bank considers a number of alternatives, including but not limited to deposits, short-term borrowings, and long-term
borrowings when evaluating funding sources. Traditional deposits continue to be the most significant source of funds, totaling
$695.8 million, or 78.5% of funding sources at December 31, 2013. This same information at December 31, 2012 reflected $486.5
million in deposits representing 74.5% of such funding sources. Cash management accounts, which are available to large corporate
customers, represented 9.2% and 10.8% of funding sources at December 31, 2013 and 2012, respectively. Borrowings represented the
remainder of such funding sources.
27
5/14/14 4:07 PM
Management continues to emphasize the development of additional non-interest-bearing deposits as a core funding source for MVB.
The Bank has also complied with the standards of capital adequacy mandated by the banking industry. Bank regulators have
At December 31, 2013, non-interest-bearing balances totaled $63.3 million compared to $54.6 million at December 31, 2012 or 9.1%
established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative
and 11.2% of total deposits respectively.
risks of various assets banks hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, or 100% (highest risk
assets) is assigned to each asset on the balance sheet. Detailed information concerning The Company’s risk-based capital ratios can
Interest-bearing deposits totaled $632.5 million at December 31, 2013, compared to $431.9 million at December 31, 2012. On a
be found in Note 14 of the Notes to the Audited Financial Statements. At December 31, 2013, the Company’s risk-based capital ratios
percentage basis, interest bearing checking accounts compose the largest component of deposits. Average interest-bearing
were above the minimum standards for a well-capitalized institution. The total risk-based capital ratio of 12.9% at December 31, 2013,
liabilities totaled $655.8 million during 2013 compared to $489.6 million during 2012. Average non-interest bearing liabilities totaled
is above the well-capitalized standard of 10%. The Tier 1 risk-based capital ratio of 12.1% also exceeded the well-capitalized minimum
$60.8 million during 2013 compared to $50.1 million during 2012. Management will continue to emphasize deposit gathering in 2014
of 6%. The leverage ratio at December 31, 2013, was 8.9% and was also above the well-capitalized standard of 5%. Management
by offering outstanding customer service and competitively priced products.
believes our capital continues to provide a strong base for profitable growth.
Maturities of Time Deposits $100,000 or more:
(Dollars in Thousands)
Under 3 months
Over 3-6 months
Over 6 to 12 months
Over 12 months
Total
2013
$ 95,207
25,978
23,272
18,752
$ 163,209
Short-term borrowings and repurchase agreements:
(Dollars in Thousands)
2013
2012
Ending balance
Average balance
Highest month-end balance
Weighted average rate during the year
Rate at December 31
$ 179,606
$ 93,299
135,852
179,606
0.52%
0.43%
74,040
93,299
0.72%
0.66%
Along with traditional deposits, the Bank has access to both overnight repurchase agreements and short-term borrowings from
FHLB to fund its operations and investments. Repurchase agreements totaled $81.6 million at December 31, 2013, compared to $70.2
million in 2012. Short-term borrowings from FHLB totaled $98.0 million at December 31, 2013, compared to $82.1 million at year-end
2012.
Capital/Stockholders’ Equity
During the year ended December 31, 2013, stockholders’ equity increased approximately $26.5 million to $94.0 million. This increase
consists of net income for the year of $4.0 million, along with capital raises of $23.1 million to accredited investors, and $913,000
associated with the dividend reinvestment plan during 2013. Although stockholders’ equity increased as noted above, the equity to
assets ratio only increased 0.24% to 9.53% due to the increase in total assets during 2013. The Company paid dividends to common
shareholders of $537,000 in 2013 and $307,000 in 2012 which increased the dividend payout ratio from 7.37% in 2012 to 13.36% in 2013.
At December 31, 2013, accumulated other comprehensive loss totaled $3.0 million, an increase in the loss of $1.5 million from
December 31, 2012. This principally represents net unrealized loss on available-for-sale securities, net of income taxes, and the
adjustment to pension liability, net of income taxes, at December 31, 2013. Because the majority of all the investment securities in
the portfolio are classified as available-for-sale, both the investment and equity sections of the balance sheet are more sensitive
to the changing market values of investments than those institutions that classify more of their investment portfolio as “held to
maturity”. Interest rate fluctuations between year-end 2013 and 2012 resulted in the change in market value of the portfolio.
Liquidity and Interest Rate Sensitivity
The objective of the asset/liability management function is to maintain consistent growth in net interest income within its policy
guidelines. This objective is accomplished through management of balance sheet liquidity and interest rate risk exposure based on
changes in economic conditions, interest rate levels, and customer preferences.
Interest Rate Risk
The most significant market risk resulting from the normal course of business, extending loans and accepting deposits, is interest
rate risk. Interest rate risk is the potential for economic loss due to future interest rate changes which can impact both the earnings
stream as well as market values of financial assets and liabilities. The Asset/Liability Committee (ALCO) is responsible for the overall
review and management of the Bank’s balance sheets related to the management of interest rate risk. The ALCO strives to stay
focused on the future, anticipating and exploring alternatives, rather than simply reacting to change after the fact.
To this end, the ALCO has established an interest risk management policy that sets the minimum requirements and guidelines for
monitoring and controlling the level and amount of interest rate risk. The objective of the interest rate risk policy is to encourage
management to adhere to sound fundamentals of banking while allowing sufficient flexibility to exercise the creativity and
innovations necessary to meet the challenges of changing markets. The ultimate goal of these policies is to optimize net interest
income within the constraints of prudent capital adequacy, liquidity, and safety.
The ALCO relies on different methods of assessing interest rate risk including simulating net interest income, monitoring the
sensitivity of the net present market value of equity or economic value of equity, and monitoring the difference or gap between
maturing or rate-sensitive assets and liabilities over various time periods. The ALCO places emphasis on simulation modeling as the
most beneficial measurement of interest rate risk due to its dynamic measure. By employing a simulation process that measures the
impact of potential changes in interest rates and balance sheet structures, and by establishing limits on changes in net income and
net market value, the ALCO is better able to evaluate the possible risks associated with alternative strategies.
The simulation process starts with a base case simulation which represents projections of current balance sheet growth trends. Base
case simulation results are prepared under a flat interest rate forecast and what is perceived to be the most likely alternative interest
rate forecast. Comparisons showing the earnings variance from the flat rate forecast illustrate the risks associated with the current
balance sheet strategy. If necessary, additional balance sheet strategies are developed and simulations prepared. The results from
model simulations are reviewed for indications of whether current interest rate risk strategies are accomplishing their goal and, if
not, what alternative strategies should be considered. The policy calls for periodic review by the ALCO of assumptions used in the
modeling.
The ALCO believes that it is beneficial to monitor interest rate risk for both the short-and long-term. Therefore, to effectively
evaluate results from model simulations, limits on changes in net interest income and the value of the balance sheet have been
established. The ALCO has determined that the earnings at risk shall not change more than 10 % from the base case for a 1% shift
in interest rates, nor more than 15 % from the base case for a 2% shift in interest rates. MVB is in compliance with this policy as of
December 31, 2013.
28
002933_MVB_annual_report_FIN.indd 31-32
29
5/14/14 4:07 PM
The following table is provided to show the earnings at risk as of December 31, 2013.
Fourth Quarter
(Dollars in Thousands)
Estimated Increase
Immediate Interest Rate Change
(Decrease) in Net Interest Income December 31, 2013
(one year time frame) (in Basis Points)
+200
+100
Base rate
-100
-200
Liquidity
Amount
$ 24,452
25,429
26,895
28,003
$ 27,885
Percent
-9.1%
-5.4%
4.1%
3.7%
Maintenance of a sufficient level of liquidity is a primary objective of the ALCO. Liquidity, as defined by the ALCO, is the ability to
meet anticipated operating cash needs, loan demand, and deposit withdrawals, without incurring a sustained negative impact on net
interest income. It is MVB’s policy to manage liquidity so that there is no need to make unplanned sales of assets or to borrow funds
under emergency conditions.
The main source of liquidity for the Bank comes through deposit growth. Liquidity is also provided from cash generated from
investment maturities, principal payments from loans, and income from loans and investment securities. During the year ended
December 31, 2013, cash provided by financing activities totaled $257.4 million, while outflows from investing activity totaled $244.0
million. When appropriate, the Bank has the ability to take advantage of external sources of funds such as advances from the Federal
Home Loan Bank (FHLB), national market certificate of deposit issuance programs, the Federal Reserve discount window, brokered
deposits and CDARS. These external sources often provide attractive interest rates and flexible maturity dates that enable the Bank
to match funding with contractual maturity dates of assets. Securities in the investment portfolio are primarily classified as available-
for-sale and can be utilized as an additional source of liquidity.
Off-Balance Sheet Commitments
The Bank has entered into certain agreements that represent off-balance sheet arrangements that could have a significant impact
on the financial statements and could have a significant impact in future periods. Specifically, the Bank has entered into agreements
to extend credit or provide conditional payments pursuant to standby and commercial letters of credit. Further discussion of these
agreements, including the amounts outstanding at December 31, 2013, is included in Note 7 to the financial statements.
Commitments to extend credit, including loan commitments, standby letters of credit, and commercial letters of credit do not
necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.
Fourth quarter net income was $591,000 in 2013 compared to $1.4 million in the fourth quarter of 2012. This equated to basic
earnings per share, on a quarterly basis, of $.16 in 2013 and $.59 in 2012. Diluted earnings per share for the fourth quarter of 2013
and 2012 were $.16 and $.57, respectively. Net interest income increased during the fourth quarter and was $7.2 million in the fourth
quarter of 2013 compared to $4.6 million in 2012. Non-interest income was $4.4 million in the fourth quarter of 2013 compared to
$3.4 million in 2012. Non-interest expense increased to $10.6 million for the fourth quarter of 2013 from $5.2 million in 2012. Loan
loss provision was $267,000 for the fourth quarter of 2013, a decrease of $408,000 over the fourth quarter of 2012.
Future Outlook
The Company’s net income in 2013 was down slightly from the prior year, the result of adding infrastructure to support a much
larger institution, as well as the challenges of a continued poor economic climate that slowed the mortgage lending business. MVB
believes it is well positioned in some of the finest markets in the states of West Virginia and Virginia, and now with the acquisition of
CFG, Maryland. We believe with continued customer acceptance in our markets and our commitment to customer service, we will
continue to capture market share with our emphasis on the highest quality products and technology.
Future plans involve taking advantage of both technology and personal customer contact. The Bank continues to expand delivery
channels to better serve both retail and business banking customers. In addition to “top of the line” technology, the Bank is
committed to providing individual and personal banking services. The Bank will continue to search for quality banking locations as
well as exploring alternative delivery systems.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No response required.
30
002933_MVB_annual_report_FIN.indd 33-34
31
5/14/14 4:07 PM
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MVB Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands except per share data)
December 31, 2013 and 2012
ASSETS
Securities available-for-sale
Securities held-to-maturity (fair value of $54,118 for 2013 and $36,218 for 2012)
Cash and cash equivalents:
Cash and due from banks
Interest bearing balances with banks
Total cash and cash equivalents
Certificates of deposit with other banks
Investment Securities:
Loans held for sale
Loans:
Less: Allowance for loan losses
Net Loans
Premises and equipment
Bank owned life insurance
Accrued interest receivable and other assets
Goodwill
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing
Interest bearing
Total Deposits
Accrued interest payable and other liabilities
Repurchase agreements
FHLB and other borrowings
Subordinated debt
Total Liabilities
STOCKHOLDERS’ EQUITY
$
$
$
2013
2012
$
28,907
10,936
39,843
9,427
106,411
56,670
89,186
622,305
(4,935)
617,370
16,919
16,062
17,393
17,779
21,637
3,703
25,340
9,427
79,378
35,370
85,529
446,443
(4,076)
442,367
11,354
10,524
9,858
17,622
987,060
$
726,769
$
63,336
632,475
695,811
6,878
81,578
104,647
4,124
893,038
54,620
431,899
486,519
6,726
70,234
91,617
4,124
659,220
Preferred stock, par value $1,000; 20,000 shares authorized and 8,500 shares issued
Common stock, par value $1; 10,000,000 and 4,000,000 shares authorized; 7,705,894 and
8,500
8,500
2,932,901 shares issued; and 7,654,817 and 2,881,824 shares outstanding in 2013 and 2012,
respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury Stock, 51,077 shares, at cost
Total Stockholders’ Equity
7,706
68,518
13,343
(2,961)
(1,084)
94,022
2,933
48,750
9,945
(1,495)
(1,084)
67,549
32
002933_MVB_annual_report_FIN.indd 35-36
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
987,060
$
726,769
See Notes to Consolidated Financial Statements
38
33
5/14/14 4:07 PM
Table of Contents
MVB Financial Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
Years ended December 31, 2013 and 2012
Net Income
Other comprehensive loss:
Unrealized holding losses on securities available-for-sale
Income tax effect
Reclassification adjustment for gain recognized in income
Income tax effect
Change in defined benefit pension plan
Income tax effect
Total other comprehensive loss
Comprehensive income
See Notes to Consolidated Financial Statements
40
2013
2012
$
4,020
$
4,168
(3,005)
1,202
145
(58)
415
(165)
(1,466)
(996)
398
638
(255)
(898)
360
(753)
$
2,554
$
3,415
Table of Contents
MVB Financial Corp. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands except per share data)
Years ended December 31, 2013 and 2012
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
NONINTEREST INCOME
Service charges on deposit accounts
Income on bank owned life insurance
Visa debit card income
Income on loans held for sale
Capitalized servicing retained income
Insurance income
Gain on sale of securities
Gain on sale of subsidiary
Other operating income
Total noninterest income
NONINTEREST EXPENSES
Salaries and employee benefits
Occupancy expense
Equipment depreciation and maintenance
Data processing
Mortgage processing
Visa debit card expense
Advertising
Legal and accounting fees
Printing, stationery and supplies
Consulting fees
FDIC insurance
Other operating expenses
Total noninterest expense
Income before income taxes
Income tax expense
Net Income
Preferred stock dividends
Net Income available to common shareholders
Earnings per share - basic
Earnings per share - diluted
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
2013
2012
$
$
22,757
200
1,348
2,240
26,545
3,977
567
926
79
5,549
20,996
2,260
18,736
623
460
558
21,895
826
1,722
145
626
2,005
28,860
27,067
1,814
1,282
1,180
2,417
475
1,444
1,273
503
641
489
4,008
42,593
5,003
983
$
$
$
$
4,020
$
85
3,935
0.59
0.57
6,657,093
6,939,028
$
$
$
19,105
204
1,457
1,488
22,254
3,866
511
466
87
4,930
17,324
2,800
14,524
730
343
471
3,850
591
—
638
—
1,126
7,749
9,266
852
717
612
—
387
647
396
200
1,022
302
2,038
16,439
5,834
1,666
4,168
136
4,032
0.92
0.90
4,388,650
4,509,234
34
39
See Notes to Consolidated Financial Statements
002933_MVB_annual_report_FIN.indd 37-38
35
5/14/14 4:07 PM
Table of Contents
MVB Financial Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Dollars in thousands except per share data)
Years ended December 31, 2013 and 2012
Preferred Common
Stock
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive Treasury
(Loss)
Stock
Total
Stockholders’
Equity
Balance, December 31, 2011
$
8,500 $
2,235
32,603 $
6,220 $
(742) $
(1,084) $
47,732
Net Income
Other comprehensive loss
Cash dividends paid ($0.07 per share)
Dividends on preferred stock
Common stock issuance
Dividend reinvestment plan proceeds
Stock based compensation
Stock issuance from acquisition
4,168
(307)
(136)
(753)
573
42
83
13,161
931
138
1,917
4,168
(753)
(307)
(136)
13,734
973
138
2,000
Balance, December 31, 2012
$
8,500 $
2,933
48,750
9,945 $
(1,495) $
(1,084) $
67,549
Net Income
Other comprehensive loss
Cash dividends paid ($0.08 per share)
Dividends on preferred stock
Stock split
Common stock issuance
Dividend reinvestment plan proceeds
Stock based compensation
Common stock options exercised
4,020
(537)
(85)
(1,466)
3,853
866
32
22
(3,853)
22,243
881
196
301
Balance, December 31, 2013
$
8,500 $
7,706
68,518
13,343 $
(2,961) $
(1,084) $
4,020
(1,466)
(537)
(85)
—
23,109
913
196
323
94,022
See Notes to Consolidated Financial Statements
41
Table of Contents
MVB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Years ended December 31, 2013 and 2012
OPERATING ACTIVITIES
Net Income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net amortization and accretion of investments
Net amortization of deferred loan fees
Provision for loan losses
Depreciation and amortization
Stock based compensation
Loans originated for sale
Proceeds of loans sold
Gain on sale of loans held for resale
Gain on sale of investment securities
Gain on sale of subsidiary
Income on bank owned life insurance
Deferred taxes
Other, net
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
INVESTING ACTIVITIES
Purchases of investment securities available-for-sale
Purchases of investment securities held-to-maturity
Maturities/paydowns of investment securities available-for-sale
Maturities/paydowns of investment securities held-to-maturity
Sales of investment securities available-for-sale
Purchases of premises and equipment
Net increase in loans
Loans purchased
Purchases of restricted bank stock
Redemptions of restricted bank stock
Maturities of certificates of deposit with banks
Proceeds from sale of other real estate owned
Proceeds from sale of subsidiary
Acquisition of mortgage company, net of cash acquired
Purchase of bank owned life insurance
NET CASH USED IN INVESTING ACTIVITIES
FINANCING ACTIVITIES
Net increase in deposits
Net increase (decrease) in repurchase agreements
Net change in short-term FHLB borrowings
Principal payments on FHLB borrowings
Proceeds from stock offering
Common stock options exercised
Dividend reinvestment plan proceeds
Cash dividends paid on common stock
Cash dividends paid on preferred stock
NET CASH PROVIDED BY FINANCING ACTIVITIES
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information
Loans transferred to other real estate owned
Cash payments for:
Interest
Income taxes
Issuance of stock in acquisition
2013
2012
$
4,020
$
4,168
1,041
168
2,260
936
196
(1,022,544)
1,040,782
(21,895)
(145)
(626)
(460)
494
(3,073)
1,154
(56,995)
(21,600)
11,269
—
15,237
(6,501)
(101,853)
(76,052)
(12,226)
8,757
—
278
725
—
(5,078)
(244,039)
209,292
11,344
15,945
(2,916)
23,109
323
913
(537)
(85)
257,388
14,503
25,340
1,240
(63)
2,800
533
138
(160,367)
146,068
(3,850)
(638)
—
(343)
(144)
(477)
(10,935)
(61,207)
(22,046)
31,624
115
48,617
(3,859)
(74,610)
—
(2,447)
1,622
491
215
—
(15,646)
(2,105)
(99,236)
95,974
(7,601)
23,065
(232)
13,734
—
973
(307)
(136)
125,470
15,299
10,041
$
$
$
$
$
39,843
$
25,340
472
$
284
5,551
863
—
$
$
$
4,922
1,184
2,000
36
002933_MVB_annual_report_FIN.indd 39-40
See Notes to Consolidated Financial Statements
42
37
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Table of Contents
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Business and Organization
MVB Financial Corp. (“the Company”) was formed on January 1, 2004, as a bank holding company and, effective December 19, 2012,
became a financial holding company. The Company features multiple subsidiaries and affiliated businesses, including MVB Bank, Inc.
(the “Bank” or “MVB Bank”) and its wholly-owned subsidiary MVB Mortgage and MVB Insurance, LLC (“MVB Insurance”).
The Bank was formed on October 30, 1997 and chartered under the laws of the State of West Virginia. The Bank commenced
operations on January 4, 1999. As of December 31, 2013, the bank operates nine full-service banking branches in Marion, Harrison,
Monongalia, Jefferson and Berkley counties, West Virginia and loan production offices in Harrison and Kanawha Counties in West
Virginia The Bank serves individual and corporate customers and is subject to competition from other financial institutions and
intermediaries with respect to these services. The Company and Bank are regulated by the West Virginia Division of Financial
Institutions and the Federal Deposit Insurance Corporation (FDIC).
During 2012, the Bank acquired Potomac Mortgage Group, Inc. (“PMG” which, following July 15, 2013, began doing business under
the registered trade name “MVB Mortgage”), a mortgage company in the northern Virginia area, and fifty percent (50%) interest in a
mortgage services company, Lender Service Provider, LLC (“LSP”). In the third quarter of 2013, this fifty percent (50%) interest in
LSP was reduced to a twenty-five percent (25%) interest through a sale of a partial interest. This PMG acquisition provided the
Company and the Bank the opportunity to make the mortgage banking operation a much more significant line of business to further
diversify its net income stream. MVB Mortgage has three mortgage only offices, all located in northern Virginia, within the
Washington, District of Columbia / Baltimore, Maryland metropolitan area, and, in addition, has mortgage loan originators located at
select Bank locations.
MVB Insurance was originally formed in 2000 and reinstated in 2005, as a Bank subsidiary. Effective June 1, 2013, MVB Insurance
became a direct subsidiary of the Company. MVB Insurance offers select insurance products such as title insurance, individual
insurance, commercial insurance, employee benefits insurance, and professional liability insurance. MVB Insurance maintains its
headquarters in Fairmont, West Virginia, and operates offices in Morgantown, West Virginia and Triadelphia, West Virginia.
A summary of significant accounting and reporting policies applied in the presentation of the accompanying financial statements
follows:
Basis of Presentation
The financial statements are consolidated to include the accounts of the Company and its subsidiaries and affiliated businesses, MVB
Insurance, LLC, and MVB Bank, Inc. and its wholly-owned subsidiary, MVB Mortgage. These statements have been prepared in
accordance with U.S. generally accepted accounting principles. All significant inter-company accounts and transactions have been
eliminated in the consolidated financial statements.
In preparing the financial statements, management makes estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are
particularly susceptible to significant change relate to determination of the allowance for loan losses and deferred tax assets and
liabilities.
Operating Segments
An operating segment is defined as a component of an enterprise that engages in business activities that generates revenue and incurs
expense, and the operating results of which are reviewed by the chief operating decision maker in the determination of resource
allocation and performance. While the Company’s chief decision makers monitor the revenue streams of the various Company’s
products and services, operations are managed and financial performance is evaluated on a Company-wide basis. During 2013, due to
the formation of the insurance subsidiary and increased mortgage banking activity, the Company’s business activities include three
primary segments: commercial and retail banking, mortgage banking and insurance services.
43
Cash equivalents include cash on hand, deposits in banks and interest-earning deposits. Interest-earning deposits with original
maturities of 90 or less are considered cash equivalents. Net cash flows are reported for loan, deposits and short term borrowing
transactions.
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.
Loans Held for Sale
Through multiple secondary market investors, 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 fair value.
Derivative Financial Instruments
The Company enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding
(rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. The
period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 30 to 120 days. The
Company protects itself from changes in interest rates through the use of both mandatory delivery arrangements and best efforts
forward delivery commitments, whereby the Company commits to sell a loan at the time the borrower commits to an interest rate with
the intent that the buyer has assumed interest rate risk on the loan. As a result, the Company is not exposed to losses and will not
realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation between the rate lock
commitments and the best efforts contracts is very high due to their similarity.
The fair value of rate lock commitments and best efforts contracts is not readily ascertainable with precision because rate lock
commitments and best efforts contracts are not actively traded in stand-alone-markets. The Company determines the fair value of rate
lock commitments and best efforts contracts by measuring the change in the value of the underlying asset while taking into
consideration the probability that the rate lock commitments will close. Because of the high correlation between rate lock commitments
and best efforts contracts, no gain or loss occurs on the rate lock commitments.
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 collectability 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
The Company allocates the allowance based on the factors described below, which conform to the Company’s loan classification
policy. In reviewing risk within the Bank’s loan portfolio, management has determined there to be several different risk categories
within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) residential real estate loans;
(ii) commercial and commercial real estate secured loans; (iii) home equity loans; (iv) consumer and other loans. Factors considered in
this process include general loan terms, collateral, and availability of historical data to support the analysis. Historical loss percentages
for each risk category are calculated and used as the basis for calculating allowance allocations. Certain qualitative factors are evaluated
to determine additional inherent risks in the loan portfolio, which are not necessarily reflected in the historical loss percentages. These
factors are then added to the historical allocation percentage to get the adjusted factor to be applied to non-classified loans. The
following qualitative factors are analyzed:
• Lending policies and procedures
• Change in volume and severity of past due loans
• Nature and volume of the portfolio
• Experience and ability of management
• Volume and severity of problem credits
• Results of loan reviews
• National, state, regional and local economic trends and business conditions
• General economic conditions
• Unemployment rates
• Inflation / CPI
• Changes in values of underlying collateral for collateral-dependent loans
• Value of underlying collateral
• Existence and effect of any credit concentrations, and changes in the level of such concentrations
The Company analyzes its loan portfolio each quarter to determine the appropriateness of its allowance for loan losses.
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.
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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
others totaled $248,491 and $89,295, respectively.
Premises and Equipment
Premises 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 and Goodwill
The Company tests goodwill for impairment on an annual basis. If it is determined that the fair value of the reporting unit is less than
the carrying value of the unit, the Company would be required to recognize impairment equal to the difference between the fair value
and the carrying value. Based upon this assessment it was determined that goodwill was not impaired at December 31, 2013 or 2012.
As of December 31, 2013 and 2012, the Company had goodwill of $17.8 million and $17.6 million.
Restricted Bank Stock
The Bank is a member of the FHLB of Pittsburgh and as such, is required to maintain a minimum investment in stock of the FHLB that
varies with the level of advances outstanding with the FHLB. As of December 31, 2013 and 2012, the Bank holds $6,267 and $2,798,
respectively. The stock is bought from and sold to the FHB based upon its $100 par value. The stock does not have a readily
determinable fair value and as such is classified as restricted stock, carried at cost and evaluated by management. The stock’s value is
determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determination of whether
the par value will ultimately be recovered is influenced by criteria such as the following: (a) A significant decline in net assets of the
FHLB as compared to the capital stock amount and the length of time this situation has persisted (b) commitments by the FHLB to
make payments required by law or regulation and the level of such payments in relation to the operating performance (c) the impact of
legislative and regulatory changes on the customer base of the FHLB and (d) the liquidity position of the FHLB. Management evaluated
the stock and concluded that the stock was not impaired for the periods presented herein. Management considered that the FHLB’s
regulatory capital ratios have improved in the most recent quarters, liquidity appears adequate, new shares of FHLB stock continue to
exchange hands at the $100 par value and the FHLB has repurchased shares of excess capital stock from its members during 2012 and
2013 and has reinstituted the dividend.
Income Taxes
The Company and the Bank file a consolidated federal income tax return. Deferred tax assets and liabilities are computed based on the
difference between the financial statement basis and income tax basis of assets and liabilities using the enacted marginal tax rates.
Deferred income tax expenses or benefits are based on the changes in the net deferred tax asset or liability from period to period.
Troubled Debt Restructurings (TDRs)
Stock Based Compensation
A restructuring of debt constitutes a TDR if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants
a concession to the debtor that it would not otherwise consider. The determination of whether a concession has been granted includes
an evaluation of the debtor’s ability to access funds at a market rate for debt with similar risk characteristics and among other things,
the significance of the modification relative to unpaid principal or collateral value of the debt, and/or the significance of a delay in the
timing of payments relative to the frequency of payments, original maturity date or the expected duration of the loan. The most
common concessions granted generally include one or more modifications to the terms of the debt such as a reduction in the interest
rate for the remaining life of the debt, an extension of the maturity date at an interest rate lower than the current market rate for new
debt with similar risk, or reduction of the unpaid principal or interest. All TDRs are considered impaired loans.
Mortgage Servicing Rights
Mortgage servicing rights (MSRs) are recorded when the Bank sells mortgage loans and retains the servicing on those loans. On a
monthly basis, MVB tracks the amount of mortgage loans that are sold with servicing retained. A valuation is done to determine the
MSR’s value, which is then recorded as an asset and amortized over the period of estimated net servicing revenues. The balance of
MSR’s is evaluated for impairment quarterly, and was determined not to be impaired at December 31, 2013 or 2012. Servicing loans
for others generally consists of collecting mortgage payments from borrowers, maintaining escrow accounts, remitting payments to
third party investors and when necessary, foreclosure processing. Serviced loans are not included in the Consolidated Balance Sheets.
The amortization taken on the servicing asset for the years ended December 31, 2013 and 2012 was $369 and $47, respectively. At
December 31, 2013 and 2012, total loans serviced for
45
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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 fair
value less estimated selling costs at the time of foreclosure, with any valuation adjustments charged to the allowance for loan losses.
Any gains or losses on sale are then recorded in other non-interest expense. At December 31, 2013 and 2012, the Company held other
real estate of $375 and $207.
Earnings Per 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 and 2013 Stock Incentive Plan.
46
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
(Dollars in thousands except shares and per share data)
Numerator for both basic and diluted earnings per share:
Net Income
Less: Dividends on preferred stock
Net income available to common shareholders
Denominator:
Total average shares outstanding
Effect of dilutive stock options
Total diluted average shares outstanding
Earnings Per Share - Basic
Earnings Per Share - Diluted
Comprehensive Income
For the years ended
December 31,
2013
2012
$
$
4,020 $
85
3,935 $
4,168
136
4,032
6,657,093
281,935
6,939,028
$
$
0.59 $
0.57 $
4,388,650
120,584
4,509,234
0.92
0.90
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 Consolidated 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. Advertising expense was $1.4 million and $647,000 for 2013 and 2012, respectively.
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 assets 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 2012 financial statements have been reclassified to conform to the 2013 financial statement presentation.
Recent Accounting Pronouncements
In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the
Total Amount of the Obligation is Fixed at the Reporting Date. The ASU requires the measurement of obligations resulting from joint
and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of the amount the
reporting entity agreed to pay on the basis of its arrangement with its co-obligors as well as any additional amount that the entity
expects to pay on behalf of its co-obligors. The new standard is effective retrospectively for fiscal years and interim periods within
those years, beginning after December 15, 2013, and early adoption is permitted. This ASU is not expected to have a significant impact
on the Company’s financial statements.
In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The
amendments in this Update are being issued to clarify when an entity should apply the liquidation basis of accounting. In addition, the
guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements
prepared using the liquidation basis of accounting. The amendments require an entity to prepare its financial statements using the
liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will
return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan
effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being
imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing
documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting
only if the approved plan for liquidation differs
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
from the plan for liquidation that was specified at the entity’s inception. The amendments are effective for entities that determine
liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein.
Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted.
Entities that use the liquidation basis of accounting as of the effective date in accordance with other Topics (for example, terminating
employee benefit plans) are not required to apply the amendments. Instead, those entities should continue to apply the guidance in those
other Topics until they have completed liquidation. This ASU is not expected to have a significant impact on the Company’s financial
statements.
In June 2013, the FASB issued ASU 2013-08, Financial Services — Investment Companies (Topic 946): Amendments to the Scope,
Measurement, and Disclosure Requirements. The amendments in this Update affect the scope, measurement, and disclosure
requirements for investment companies under U.S. GAAP. The amendments do all of the following: 1. Change the approach to the
investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive
guidance for assessing whether an entity is an investment Company. 2. Require an investment company to measure noncontrolling
ownership interests in other investment companies at fair value rather than using the equity method of accounting. 3. Require the
following additional disclosures: (a) the fact that the entity is an investment company and is applying the guidance in Topic 946,
(b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support
provided or contractually required to be provided by an investment company to any of its investees. The amendments in this Update are
effective for an entity’s interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is
prohibited. This ASU is not expected to have a significant impact on the Company’s financial statements.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update applies to all entities that have
unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting
date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a
reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows.
To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date
under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax
position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred
tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be
combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit
and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting
date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after
December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date.
Retrospective application is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.
In January 2014, FASB issued ASU 2014-01, Investments — Equity Method and Join Ventures (Topic 323): Accounting for
Investments in Qualified Affordable Housing Projects. The amendments in this Update permit reporting entities to make an accounting
policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if
certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in
proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a
component of income tax expense (benefit). The amendments in this Update should be applied retrospectively to all periods presented.
A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the
date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this Update
are effective for public business entities for annual periods and interim reporting periods within those annual periods, beginning after
December 15, 2014. Early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial
statements.
In January 2014, the FASB issued ASU 2014-04, Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40):
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this
Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession
of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the
residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate
property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.
Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property
held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that
are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are
effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15,
2014. An entity can elect to
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. This
ASU is not expected to have a significant impact on the Company’s financial statements.
NOTE 2. INVESTMENT SECURITIES
49
Amortized cost and fair values of investment securities held-to-maturity at December 31, 2013, including gross unrealized gains and
losses, are summarized as follows:
(in thousands)
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Fair
Value
Municipal securities
Total investment securities held-to-maturity
$
$
56,670
56,670
$
$
367
367
$
$
(2,919) $
(2,919) $
54,118
54,118
Amortized cost and fair values of investment securities held-to-maturity at December 31, 2012, including gross unrealized gains and
losses, are summarized as follows:
(in thousands)
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Fair
Value
Municipal securities
Total investment securities held-to-maturity
$
$
35,370
35,370
$
$
988
988
$
$
(140) $
(140) $
36,218
36,218
Amortized cost and fair values of investment securities available-for-sale at December 31, 2013 are summarized as follows:
(in thousands)
U. S. Agency securities
U.S. Sponsored Mortgage-backed securities
Total debt securities
Equity and other securities
Total investment securities available-for-sale
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Fair
Value
$
$
60,744
47,317
108,061
810
108,871
$
$
— $
118
118
187
305
$
(1,922) $
(843)
(2,765)
—
(2,765) $
58,822
46,592
105,414
997
106,411
Amortized cost and fair values of investment securities available-for-sale at December 31, 2012 are summarized as follows:
(in thousands)
U. S. Agency securities
U.S. Sponsored Mortgage-backed securities
Total debt securities
Equity and other securities
Total investment securities available-for-sale
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Fair
Value
$
$
21,951
56,217
78,168
810
78,978
$
$
50
247
328
575
—
575
$
$
(6) $
(169)
(175)
—
(175) $
22,192
56,376
78,568
810
79,378
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
The following tables summarize amortized cost and fair values of debt securities by maturity:
The following table discloses investments in an unrealized loss position at December 31, 2012:
Within one year
After one year, but within five
After five years, but within ten
After ten Years
Total
Held to Maturity
Available for sale
December 31, 2013
Amortized
Cost
Approximate
Fair
Value
Amortized
Cost
Fair
Value
$
$
— $
— $
— $
1,707
14,062
40,901
56,670
$
1,749
13,928
38,441
54,118
$
24,857
47,208
35,996
108,061
$
—
24,456
45,698
35,260
105,414
Investment securities with a carrying value of $152,193 and $98,209 at December 31, 2013 and 2012, 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, 2013, the details of
which are included in the following table. Although these securities, if sold at December 31, 2013 would result in a pretax loss of
$5,684, the Company has no intent to sell the applicable securities at such fair values, and maintains the Company has the ability to
hold these securities until all principal has been recovered. Declines in the fair 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, 2013,
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 fair value.
The following table discloses investments in an unrealized loss position at December 31, 2013:
(in thousands)
Description and
number of positions
Less than 12 months
12 months or more
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
U.S. Agency securities (19)
U.S. Sponsored Mortgage-backed securities (18)
Municipal securities (103)
$
$
58,822
14,969
35,502
109,293
$
$
(1,922) $
(113)
(2,535)
(4,570) $
— $
19,781
4,471
24,252
$
—
(730)
(384)
(1,114)
51
(in thousands)
Description and
number of positions
U.S. Agency securities (3)
U.S. Sponsored Mortgage-backed securities (11)
Municipal securities (28)
Less than 12 months
12 months or more
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
$
$
9,676
28,688
11,216
49,580
$
$
(6) $
(169)
(140)
(315) $
— $
—
—
— $
—
—
—
—
The Company sold investments available-for-sale of $15.2 million and $48.6 million in 2013 and 2012, respectively. These sales
resulted in gains of $145 and $665 in 2013 and 2012, respectively. Losses on the sale of investments available-for-sale totaled $0 and
$27 in 2013 and 2012, respectively.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The Company routinely generates 1-4 family mortgages for sale into the secondary market. During 2013 and 2012, the Company
recognized sales proceeds of $1.0 billion and $146.1 million, resulting in gains on loans held for sale of $21.9 million and $3.8
million, respectively.
The components of loans in the Consolidated Balance Sheet at December 31, were as follows:
(in thousands)
Commercial and non-residential real estate
Residential real estate
Home equity
Installment
Credit card
2013
2012
$
$
457,388
118,204
27,797
18,285
631
622,305
$
$
299,639
113,212
16,800
16,174
618
446,443
As of December 31, 2013 and 2012, net deferred fees and costs of $1,462 and $785, respectively, were included in the carrying value
of loans.
The following table summarizes the primary segments of the loan portfolio as of December 31, 2013 and 2012 (in thousands):
Commercial
Residential
Home
Equity
Installment
Credit
Cards
Total
December 31, 2013
Individually evaluated for
impairment
Collectively evaluated for
impairment
Total Loans
December 31, 2012
Individually evaluated for
impairment
Collectively evaluated for
impairment
Total Loans
$
$
$
$
6,254
$
261
$
28
$
92
$
1
$
6,636
451,134
457,388
$
117,943
118,204
$
27,769
27,797
$
18,193
18,285
$
630
631
$
615,669
622,305
3,074
$
43
$
— $
1
$
— $
3,118
296,565
299,639
$
113,169
113,212
$
16,800
16,800
$
16,173
16,174
$
618
618
$
443,325
446,443
52
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
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. The Chief Credit Officer identifies these loans individually by monitoring the delinquency status of the Bank’s portfolio.
Once identified, the Bank’s ongoing communications with the borrower allow Management to evaluate the significance of the
payment delays and the circumstances surrounding the loan and the borrower. A collateral evaluation is completed when it is
determined that the loan is impaired.
Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is
necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a)
the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price;
or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily
utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and
whether a loan can be removed from impairment status is made on a quarterly basis.
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for
which a specific allowance was not necessary as of December 31, 2013 and 2012 (in thousands):
Impaired Loans with
Specific Allowance
Recorded
Investment
Related
Allowance
Impaired
Loans with
No
Specific
Allowance
Recorded
Investment
Total Impaired Loans
Recorded
Investment
Unpaid
Principal
Balance
$
$
$
$
$
$
$
$
6,134
261
28
24
1
6,448
3,074
43
1
3,118
53
1,243
175
28
11
1
1,458
683
16
24
723
$
$
$
$
120
—
—
68
—
188
$
$
— $
—
—
— $
6,254
261
28
92
1
6,636
3,074
43
1
3,118
$
$
$
$
6,254
261
28
92
1
6,636
3,074
43
1
3,118
December 31, 2013
Commercial
Residential
Home Equity
Installment
Credit Card
Total impaired loans
December 31, 2012
Commercial
Residential
Installment
Total impaired loans
48
002933_MVB_annual_report_FIN.indd 51-52
The following table presents the average recorded investment in impaired loans and related interest income recognized for the years
ended (in thousands):
Average investment in impaired loans
Interest income recognized on an accrual basis on impaired loans
December 31,
2013
2012
$
$
4,623 $
180 $
2,970
112
Management uses a nine point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six
categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management
generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are
potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.
Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct
possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered
Substandard. The portion of any loan that represents a specific allocation of the allowance for loan losses is placed in the Doubtful
category. Any portion of a loan that has been charged off is placed in the Loss category.
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the
Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential
mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise
awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the
loans in the portfolio at origination and on an ongoing basis. The Credit Department performs an annual review of all commercial
relationships $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 portfolio. 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, 2013 and 2012 (in thousands):
December 31, 2013
Commercial
Residential
Home Equity
Installment
Credit Card
Total
December 31, 2012
Commercial
Residential
Home Equity
Installment
Credit Card
Total
Special
Mention
Substandard
Doubtful
Total
11,566
2,660
107
614
2
14,949
8,646
2,260
260
354
29
11,549
$
$
$
$
8,348
261
28
92
1
8,730
1,770
289
—
13
—
2,072
$
$
$
$
— $
—
—
—
—
— $
2,751
—
—
1
—
2,752
$
$
457,388
118,204
27,797
18,285
631
622,305
299,639
113,212
16,800
16,174
618
446,443
$
$
$
$
Pass
437,474
115,283
27,662
17,579
628
598,626
286,472
110,663
16,540
15,806
589
430,070
54
$
$
$
$
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
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, 2013 and 2012 (in thousands):
30-59
Days
Past Due
60-89
Days
Past Due
Current
90
Days +
Past
Due
Total
Past
Due
Total
Loans
Non-
Accrual
90+ Days
Still
Accruing
December 31,
2013
Commercial
Residential
Home Equity
Installment
Credit Card
Total
December 31,
2012
Commercial
Residential
Home Equity
Installment
Credit Card
Total
$ 456,580
116,121
27,741
18,043
628
$ 619,113
$ 292,214
111,010
16,772
15,990
589
$ 436,575
$
$
$
$
216
1,401
28
90
2
1,737
767
1,772
28
179
24
2,770
$
$
$
$
24
193
—
—
—
217
221
293
—
—
5
519
$
$
$
$
284
460
28
76
1
849
3,356
94
—
4
—
3,454
$
$
$
$
524
2,054
56
166
3
2,803
$ 457,388
$ 118,204
$ 27,797
$ 18,285
$
631
$ 622,305
4,344
2,159
28
183
29
6,743
$ 299,639
113,212
16,800
16,174
618
$ 446,443
$
$
$
$
284
29
—
76
—
389
3,081
43
—
1
—
3,125
$
$
$
$
—
431
28
—
1
460
275
51
—
3
—
329
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.
Interest income on loans would have increased by approximately $47 and $144 for 2013 and 2012, respectively, if loans had
performed in accordance with their terms.
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 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, Residential, Home Equity, Installment and Credit Card
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
55
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.
Loans that are 90 days past due and still accruing are both adequately secured and in the process of collection.
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.
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, 2013 and 2012.
Activity in the allowance is presented for the years ended December 31, 2013 and 2012 (in thousands):
ALL balance at December 31, 2012
Charge-offs
Recoveries
Provision
ALL balance at December 31, 2013
Individually evaluated for impairment
Collectively evaluated for impairment
ALL balance at December 31, 2011
Charge-offs
Recoveries
Provision
ALL balance at December 31, 2012
Individually evaluated for impairment
Collectively evaluated for impairment
Commercial
$
Installment
$
Residential
Home
Equity
$
$
$
$
$
$
$
$
514
(38)
60
(17)
519
175
344
Residential
366
—
—
148
514
16
498
$
$
$
$
$
$
$
$
242
—
10
302
554
28
526
Home
Equity
249
(9)
5
(3)
242
—
242
$
$
$
$
$
$
3,107
(1,458)
57
1,903
3,609
1,243
2,366
2,164
(1,731)
5
2,669
3,107
683
2,424
Credit
Card
13
(21)
—
22
14
1
13
Credit
Card
11
—
—
2
13
—
13
Total
4,076
(1,529)
128
2,260
4,935
1,458
3,477
Total
3,045
(1,791)
22
2,800
4,076
723
3,353
$
$
$
$
$
$
$
$
200 $
(12)
1
50
239 $
11 $
228 $
255 $
(51)
12
(16)
200 $
24 $
176 $
Commercial
$
Installment
$
$
$
$
$
$
$
During late 2013, the Bank purchased $74.3 million in commercial loans in the northern Virginia area. Because these purchased loans
were marked to fair value at the time they were recorded on the balance sheet, there is no consideration given to these loans in the
calculation of the allowance for loan losses.
56
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
The provision for the commercial portfolio decreased $766 during 2013 to $1,903 as of December 31, 2013. This decrease was the
result of decreasing charge-off trends and an improving commercial loan portfolio. The provision for the home equity loan portfolio
increased $305 during 2013 as a result of growth in home equity loans.
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.
57
52
002933_MVB_annual_report_FIN.indd 55-56
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 2013 and 2012 are set forth in the following table. No TDR’s have defaulted.
At December 31, 2013 and 2012, the Bank had specific reserve allocations for TDR’s of $268 and $154, respectively.
The following table presents details related to loans identified as Troubled Debt Restructurings during the years ended December 31,
2013 and 2012.
(Dollars in thousands)
Commercial
Home equity
Installment
Total
December 31, 2013
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Number
of
Contracts
December 31, 2012
Pre-
Modification
Outstanding
Recorded
Investment
Post-
Modification
Outstanding
Recorded
Investment
Number
of
Contracts
6
1
3
10
$
$
4,820
28
8
4,856
$
$
4,702
28
6
4,736
3 $
—
3
6 $
1,235
—
13
1,248
$
$
1,235
—
13
1,248
(1) The pre-modification and post-modification balances represent the balances outstanding immediately before and after
modification of the loan.
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment at December 31, were as follows:
(in thousands)
Land
Buildings and improvements
Furniture, fixtures and equipment
Construction in progress
Leasehold improvements
Accumulated depreciation
Net premises and equipment
Depreciation expense amounted to $936 and $533 for 2013 and 2012, respectively.
NOTE 5. DEPOSITS
Deposits at December 31, were as follows:
(in thousands)
Demand deposits of individuals, partnerships, and corporations
Interest bearing demand
Non-interest bearing demand
Savings and money markets
Time deposits including CDs and IRAs
Total deposits
Time deposits of over $100 included above
58
2013
2012
1,976 $
7,755
7,000
4,154
1,203
22,088
(5,169)
16,919
$
1,243
6,179
4,882
2,668
615
15,587
(4,233)
11,354
2013
2012
320,420 $
63,336
70,902
241,153
695,811 $
163,209
$
225,369
54,619
48,789
157,742
486,519
86,872
$
$
$
$
$
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Maturities of time deposits at December 31, 2013 were as follows (in thousands):
2014
2015
2016
2017
2018
Total
$
$
204,848
13,564
7,383
5,471
9,887
241,153
NOTE 6. BORROWED FUNDS
Short-term borrowings and Repurchase Agreements
Along with traditional deposits, the Bank has access to both overnight repurchase agreements and short-term borrowings from FHLB
to fund its operations and investments. Repurchase agreements totaled $81.6 million at December 31, 2013, compared to $70.2 million
in 2012. Short-term borrowings from FHLB totaled $98.0 million at December 31, 2013, compared to $82.1 million at year-end 2012.
Information related to short-term borrowings and repurchase agreements is summarized below:
(Dollars in thousands)
Balance at end of year
Average balance during the year
Maximum month-end balance
Weighted-average rate during the year
Rate at December 31
2013
2012
$
$
179,606
135,852
179,606
0.52%
0.43%
93,299
74,040
93,299
0.72%
0.66%
Average balances in the table above were calculated using daily averages for the related accounts.
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, 2013 was approximately $107,660. At December 31, 2013 and 2012 the Bank had borrowed
$104,647 and $32,600.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Borrowings from the FHLB as of December 31 were as follows:
(Dollars in thousands)
Fixed interest rate notes, originating between April 1999 and December 2007, due
between April 2014 and April 2022, interest of between 4.50% and 5.90% payable
monthly
Fixed interest rate note, originating March 2008, due March 2013, interest of 2.37%
payable quarterly
Amortizing fixed interest rate note, originating February 2007, due February 2022,
payable in monthly installments of $5, including interest of 5.22%
2013
2012
$
$
5,759 $
6,656
—
860
6,619
$
2,000
879
9,535
Borrowings from the FHLB are secured by stock in the FHLB of Pittsburgh, qualifying first mortgage loans, mortgage-backed
securities and certain investment securities.
Bank subsidiary PMG had borrowings of $59.0 million at December 31, 2012, which were comprised of three floating rate lines of
credit with other banks. The three floating rate lines have since been paid off and PMG now utilizes FHLB borrowings.
A summary of maturities of these borrowings over the next five years is as follows (in thousands):
Year
2014
2015
2016
2017
2018
Thereafter
Amount
1,161
169
1,246
1,470
81
2,492
6,619
$
59
Subordinated Debt
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 have been redeemable by the Company since 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, 2013 and 2012 and
interest expense of $79 and $87 for the years ended December 31, 2013 and 2012, respectively.
60
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Total contractual amounts of the commitments as of December 31 were as follows:
(in thousands)
Available on lines of credit
Stand-by letters of credit
Other loan commitments
Concentration of Credit Risk
2013
2012
$
$
89,956
680
1,681
92,317
$
$
60,357
458
1,616
62,431
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.
Regulatory
Beginning in 2013, the Company is required to maintain certain reserve balances on hand in accordance with the Federal Reserve
Board requirements. The average balance maintained in accordance with such requirements was $7,986 on December 31, 2013.
Contingent Liability
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.
61
NOTE 8. INCOME TAXES
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:
(in thousands)
Current:
Federal
State
Deferred expense(benefit)
Federal
State
Income Tax expense
2013
2012
216 $
273
489 $
464 $
30
494
983
$
1,479
331
1,810
(115)
(29)
(144)
1,666
$
$
$
$
62
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Following is a reconciliation of income taxes at federal statutory rates to recorded income taxes for the year ended December 31:
NOTE 9. RELATED PARTY TRANSACTIONS
(Dollars in thousands)
Tax at Federal tax rate
Tax effect of:
State income tax
Tax exempt earnings
Other
2013
Amount
%
Amount
2012
%
$
$
1,701
125
(839)
(4)
983
34.0%$
2.5%
-16.8%
0.0%
19.7%$
1,984
146
(465)
1
1,666
34.0%
2.5%
-8.0%
0.0%
28.5%
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 assets and (liabilities) were comprised of the following at December 31 (in thousands):
Allowance for loan losses
Minimum pension liability
Unrealized gain on securities available-for-sale
Gross deferred tax assets
Depreciation
Unrealized loss on securities available-for-sale
Pension
Goodwill
Gross deferred tax liabilities
Net deferred tax asset
2013
2012
$
1,263 $
990
984
3,237
(747)
—
(22)
(446)
(1,215)
$
2,022
$
1,203
1,157
—
2,360
(477)
(160)
(184)
—
(821)
1,539
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.
The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial
statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing
authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition
threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first
subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-
likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold
is no longer met. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. With limited
exception, the Company’s federal and state income tax returns for taxable years through 2009 have been closed for purposes of
examination by the federal and state taxing jurisdictions.
63
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 collectability. Set forth below is a summary of the related loan activity.
(in thousands)
December 31, 2013
December 31, 2012
Balance at
Beginning
of Year
Borrowings
Retirement
Repayments
Balance
at end
of Year
$
$
23,571
13,300
$
$
3,090
12,978
$
$
(7,723) $
(848) $
18,090
—
$
(2,707) $
23,571
The Company held related party deposits of $4,637 and $11,483 at December 31, 2013 and December 31, 2012, respectively.
The Company held related party repurchase agreements of $1,467 and $361 at December 31, 2013 and December 31, 2012,
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.
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, 2013 and 2012 is as follows:
(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
Accumulated benefit obligation
2013
2012
$
$
$
$
$
$
$
5,798 $
651
247
(65)
(139)
6,492 $
3,366 $
435
409
(139)
4,071 $
(2,421) $
2,475
—
54 $
4,983
$
4,214
424
210
998
(48)
5,798
2,198
232
984
(48)
3,366
(2,432)
2,890
2
460
4,473
64
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
At December 31, 2013 and 2012, 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 (in thousands):
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service costs
Amortization of loss
Net periodic pension cost
65
2013
4.86%
3.00%
2012
4.31%
3.00%
$
$
651 $
247
(271)
2
186
815
$
424
210
(251)
2
117
502
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
For the years December 31, 2013 and 2012, 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
2013
4.31%
7.46%
3.00%
2012
5.06%
8.00%
3.00%
The Company’s pension plan asset allocations at December 31, 2013 and 2012, as well as target allocations for 2014 are as follows:
Plan Assets
Cash
Fixed income
Alternative investments
Domestic equities
Foreign equities
Real estate inv. Trusts (REITs)
Total
12/31/2013
12/31/2012
7%
28%
12%
33%
17%
3%
100%
10%
36%
10%
28%
11%
5%
100%
The 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 is $143.
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, 2013.
(in thousands)
Assets:
Cash
Fixed income
Alternative investments
Domestic equities
Foreign equities
Real estate inv. Trusts
Total assets at fair value
Level I
Level II
Level III
Total
$
$
285 $
1,140
—
1,343
692
122
—
—
489
—
—
—
—
—
—
—
—
—
3,582 $
489 $
— $
285
1,140
489
1,343
692
122
4,071
66
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MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
continued growth of the Company. During 2012 the Company issued 573,263 shares, concluding 2012 with outstanding shares of
2,932,901. In 2012, MVB implemented a dividend reinvestment plan (DRIP) which resulted in the addition of 31,760 and 41,538
shares totaling $912,896 and $973,000, respectively, in 2013 and 2012.
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
December 31, 2012 and 2011, MVB’s loan production qualified for the lowest dividend rate possible 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 (‘the 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. For options granted in 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, 2010, 2011, 2012 and 2013 vest in 5 years and expire 10 years
from the date of the grant, with the exception of 22,000 shares granted in 2010 that vest in 3 years and expire 10 years from the date of
the grant. As of December 31, 2013, the Plan had $2.2 million shares authorized and $987,780 shares remaining available for
issuance.
Total compensation expense recorded on stock options during 2013 and 2012 was $196 and $138, respectively. Proceeds from stock
options exercised during 2013 was $323. There were no stock options exercised during 2012.
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
The fair value of MVB’s pension plan assets at December 31, 2012 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, 2012.
(in thousands)
Assets:
Cash and cash equivalents
Investment in equity securities
Investment in debt securities
Total assets at fair value
Level I
Level II
Level III
Total
$
$
707 $
1,818
—
2,525
$
— $
—
841
841
$
— $
—
—
—
$
707
1,818
841
3,366
Investment in government securities and short-term investments are valued at the closing price reported on the active market on which
the individual securities are traded. Alternative investments and investment in debt securities are valued at quoted prices which are
available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be
directly observed. 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.
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.
(in thousands)
Contributions for the period of 01/01/14 through 12/31/14
Estimated future benefit payments reflecting expected future service
2014
2015
2016
2017
2018
2019 through 2023
NOTE 11. INTANGIBLE ASSETS
Cash Flow
440
141
148
207
216
245
1,686
$
$
$
$
$
$
$
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, 2013 the Company has allocated $12 to core deposit intangibles, which are being amortized using the
double-declining balance method over 10 years. The original amount of the core deposit intangible was $128, with $123 amortized
through December 31, 2013 and $5 remaining to be amortized over the next two years. The remaining $897 has been recorded as
goodwill, and is evaluated for impairment on October 1st each year by the Company. In December 2012 the Company purchased
Potomac Mortgage Group (PMG), a mortgage company in Northern Virginia. As a result of this transaction, MVB recorded $16.9
million in goodwill. This goodwill will be evaluated for impairment on an annual basis each December.
NOTE 12. STOCK OFFERING
During 2013, the Company began a confidential offering to accredited investors. As of December 31, 2013 the Company had
received signed offering memoranda and payment for 305,097 shares totaling $9.8 million in additional capital at December 31, 2013.
The proceeds of this offering are being used to support the definitive agreement to acquire CFG Community Bank as well as
continued growth of the Company. Also during 2013, the Company completed a confidential offering to accredited investors that
began in late 2012. This offering resulted in the issuance of 1,132,527 shares totaling $27.1 million in additional capital. The proceeds
of this offering were used to support the acquisition of PMG as well as the
67
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
The following summarizes MVB’s stock options as of and for the year ended December 31, 2013, and the changes for the year then
ended:
Outstanding at beginning of year
Granted
Exercised
Forfeited/expired
Outstanding at end of year
Exercisable at end of year
Weighted-average fair value of options granted during 2013
Weighted-average fair value of options granted during 2012
Number
of
Shares
638,152
502,000
(44,342)
(4,400)
1,091,410
379,270
$
$
$
$
$
Weighted-
Average
Exercise
Price
9.17
13.48
7.28
10.23
11.20
8.40
1.71
1.19
The intrinsic value of options exercised during 2013 was $736,077. There were no options exercised during 2012.
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 2.08% and 1.67% for 2013 and 2012 and a weighted average expected life of the options of 7 years for both 2013 and
2012. The expected volatility of MVB’s stock price used for 2013 options was 6.70%, while for the 2012 options it was 5.60%. The
expected dividend yield used was .50% for both 2013 and 2012.
The following summarizes information related to the total outstanding and exercisable options at December 31, 2013:
Options Outstanding
Weighted-
Average
Exercise
Price
Intrinsic
Value
Weighted-
Average
Remaining
Life
Total
Options
Total
Options
Options Exercisable
Weighted-
Average
Exercise
Price
Intrinsic
Value
Weighted-
Average
Remaining
Life
1,091,410 $
11.20
5,897,429
7.12
379,270
$
8.40
3,111,014
3.81
NOTE 14. REGULATORY CAPITAL REQUIREMENTS
The Company and the Bank are 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 Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities,
and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and
classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company 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, 2013
and 2012, the Company meets all capital adequacy requirements to which it is subject.
69
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.
(Dollars in thousands)
AMOUNT
RATIO
ACTUAL
MINIMUM
TO BE WELL
CAPITALIZED
AMOUNT
RATIO
MINIMUM
FOR CAPITAL
ADEQUACY
PURPOSES
AMOUNT
RATIO
As of December 31,
2013
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,
2012
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 $
84,361
86,028
79,342
81,009
79,342
81,009
55,527
59,231
51,451
55,155
51,451
55,155
12.9%
13.2% $
N/A
65,262
N/A
$
10.0% $
12.2%
12.4% $
N/A
39,157
$
N/A
6.0% $
8.9%
9.0% $
N/A
44,800
N/A
$
5.0% $
12.3%
13.1% $
N/A
45,303
N/A
$
10.0% $
11.4%
12.2% $
N/A
27,182
$
N/A
6.0% $
8.4%
9.0% $
N/A
31,630
N/A
$
5.0% $
52,175
52,209
26,087
26,105
35,840
35,840
36,243
36,243
18,121
18,121
25,323
25,304
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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Loans held for sale: Loans held for sale are carried at the lower of cost or market value. These loans currently consist of one-to-four-
family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently
offering for similar loans using observable market data which is not materially different than cost due to the short duration between
origination and sale (Level II).
Derivative on loans held for sale: Derivatives on loans held for sale are used to mitigate interest rate risk for residential mortgage
loans held for sale and interest rate locks. These instruments are considered derivatives and are recorded at fair value, based on
(i) committed sales prices from investors for commitments to sell mortgage loans or (ii) observable market data inputs for
commitments to sell mortgage backed securities. The Company’s mortgage banking hedge instruments are classified as Level II. For
mortgage interest rate locks, the fair value is based on either (i) the price of the underlying loans obtained from an investor for loans
that will be delivered on a best efforts basis or (ii) the observable price for individual loans traded in the secondary market for loans
that will be delivered on a mandatory basis. All of the Company’s mortgage interest rate locks are classified as Level II.
Bank Owned Life Insurance: Fair values of bank owned life insurance approximate the cash surrender value of the policies.
72
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NOTE 16. LEASES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
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, 2013:
Years ended December 31:
2014
2015
2016
2017
2018
Thereafter
Total minimum payments required:
(in thousands)
$
$
1,342
988
874
645
575
819
5,243
Total rent expense for the years ended December 31, 2013 and 2012 was $1,034 and $251, 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.
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.
Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory
reports, and an estimation methodology suitable for each category of financial instruments. The Company’s fair value estimates,
methods and assumptions are set forth below for the Company’s other financial instruments
Cash and cash equivalents: The carrying amounts for cash and cash equivalents approximate fair value because they have original
maturities of 90 days or less and do not present unanticipated credit concerns.
Certificates of deposits: The 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.
Securities: 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 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.
71
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Accrued interest receivable and payable and repurchase agreements: The carrying values of accrued interest receivable and
payable approximate their fair values.
Deposits: The 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.
FHLB and other borrowings: The 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.
Subordinated debt: The 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.
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. The contractual amounts of unfunded
commitments and letters of credit are presented in Note 7.
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
The carrying values and estimated fair values of the Company’s financial instruments are summarized as follows (in thousands):
Fair Value Measurements at
December 31, 2013
Financial assets:
Cash and cash equivalents
Certificates of deposits with other banks
Securities available-for-sale
Securities held-to-maturity
Loans held for sale
Loans
Derivative on loans held for sale
Bank owned life insurance
Accrued interest receivable
Financial liabilities:
Deposits
Repurchase agreements
FHLB and other borrowings
Accrued interest payable
Subordinated debt
December 31, 2012
Financial assets:
Cash and cash equivalents
Certificates of deposits
Securities available-for-sale
Securities held-to-maturity
Loans held for sale
Loans
Derivative on loans held for sale
Bank owned life insurance
Accrued interest receivable
Financial liabilities:
Deposits
Repurchase agreements
FHLB and other borrowings
Accrued interest payable
Subordinated debt
Carrying
Value
Estimated
Fair
Value
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
$
$
$
$
$
$
39,843
9,427
106,411
56,670
89,186
617,370
2,271
16,062
2,764
695,811
81,578
104,647
327
4,124
25,340
9,427
79,378
35,370
85,529
442,367
1,261
10,524
1,778
486,519
70,234
91,617
329
4,124
$
$
$
$
39,843
9,616
106,411
54,118
89,186
620,295
2,271
16,062
2,764
697,301
81,578
104,742
327
3,153
25,340
9,427
79,378
36,218
85,529
453,082
1,261
10,524
1,778
498,244
70,234
94,487
329
4,664
39,843 $
—
187
—
—
2,271
16,062
2,764
454,658 $
81,578
98,028
327
3,153
25,340 $
9,427
—
—
—
1,261
10,524
1,778
328,777 $
70,234
—
329
4,664
$
$
—
—
106,224
54,118
89,186
—
—
—
—
—
—
—
—
—
— $
—
79,378
36,218
85,529
—
—
—
—
$
—
—
—
—
—
—
9,616
—
620,295
—
—
—
242,643
—
6,714
—
—
—
—
—
—
453,082
—
—
—
169,467
—
94,487
—
—
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
74
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
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.
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, with the exception of loans held for
sale, derivative on loans held for sale, other real estate and impaired loans, which are measured on a non-recurring basis.
The following tables present the assets reported on the consolidated statements of financial condition at their fair value on a recurring
basis as of December 31, 2013 and 2012 by level within the fair value hierarchy. Financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to the fair value measurement.
(in thousands)
Level I
Level II
Level III
December 31, 2013
U.S. Agency Securities
U.S. Sponsored Mortgage
backed Securities
Equity and Other Securities
$
—
—
187
58,822
46,592
810
(in thousands)
Level I
Level II
Level III
December 31, 2012
U.S. Agency Securities
U.S. Sponsored Mortgage
backed Securities
Equity and Other Securities
22,192
56,376
810
75
Total
58,822
46,592
997
Total
22,192
56,376
810
— $
—
—
—
—
—
The Company may be required, from time to time, to measure certain financial assets, financial liabilities, non-financial assets and
non-financial liabilities at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These
include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the
period. Certain non-financial assets measured at fair value on a non-recurring basis include foreclosed assets (upon initial recognition
or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill
impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.
Non-financial assets measured at fair value on a non-recurring basis during 2013 and 2012 include certain foreclosed assets which,
upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for possible loan losses and
certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in
other non-interest expense.
• Loans held for sale — Loans held for sale are carried at the lower of cost or market value. These loans currently consist of
one-to-four-family residential loans originated for sale in the secondary market. Fair value is based on the price secondary
markets are currently offering for similar loans using observable market data which is not materially different than cost due
to the short duration between origination and sale (Level II).
• Derivative on loans held for sale - Derivatives on loans held for sale are used to mitigate interest rate risk for residential
mortgage loans held for sale and interest rate locks. These instruments are considered derivatives and are recorded at fair
value, based on (i) committed sales prices from investors for commitments to sell mortgage loans or (ii) observable market
data inputs for commitments to sell mortgage backed securities. The Company’s mortgage banking hedge instruments are
classified as Level II. For mortgage interest rate locks, the fair value is based on either (i) the price of the underlying loans
obtained from an investor for loans that will be delivered on a best efforts basis or (ii) the observable price for individual
loans traded in the secondary market for loans that will be delivered on a mandatory basis. All of the Company’s mortgage
interest rate locks are classified as Level II.
• Impaired Loans - Loans for which it is probable that payment of interest and principal will not be made in accordance with
the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired,
management measures impairment using one of several methods, including collateral value, liquidation value and discounted
cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected
repayments or collateral exceed the recorded investments in such loans. Collateral values are estimated using Level 2 inputs
based on observable market data or Level 3 inputs based on customized discounting criteria. For a majority of impaired real
estate related loans, the Company obtains a current external appraisal. Other valuation techniques are used as well, including
internal valuations, comparable property analysis and contractual sales information.
• Other Real Estate owned — Other real estate owned, which is obtained through the Bank’s foreclosure process is valued
utilizing the appraised collateral value. Collateral values are estimated using Level 2 inputs based on observable market data
or Level 3 inputs based on customized discounting criteria. At the time, the foreclosure is completed, the Company obtains a
current external appraisal.
Assets measured at fair value on a nonrecurring basis as of December 31, 2013 and 2012 are included in the table below (in thousands):
Loans held for sale
Derivative on loans held for sale
Other real estate owned
Impaired loans
$
Level I
Level II
Level III
Total
December 31, 2013
89,186 $
2,271
—
—
— $
—
375
5,178
89,186
2,271
375
5,178
— $
—
—
—
76
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Details about AOCI Components
Available-for-sale securities
Unrealized holding gains
Defined benefit pension plan items
Change in defined benefit pension plan
Total reclassifications
(in thousands)
Balance at January 1, 2013
Other comprehensive loss before reclassification
Amounts reclassified from AOCI
Net current period OCI
Balance at December 31, 2013
2013
Amount
Reclassified
from AOCI
Affected line item in the Statement where net
income is presented
145
145
(58)
87
188
188
(75)
113
200
Gain on sale of securities
Total before tax
Income tax expense
Net of tax
Salaries and benefits
Total before tax
Income tax expense
Net of tax
Unrealized
gains (losses)
on available-
for-sale
securities
Defined benefit
pension plan
items
Total
$
240
(1,803)
87
(1,716)
(1,476) $
(1,735) $
137
113
250
(1,485) $
(1,495)
(1,666)
200
(1,466)
(2,961)
$
$
$
$
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
Level I
Level II
Level III
Total
December 31, 2012
Loans held for sale
Derivative on loans held for sale
Other real estate owned
Impaired loans
$
— $
—
—
—
85,529 $
1,261
—
—
— $
—
207
3,118
85,529
1,261
207
3,118
The following tables presents quantitative information about the Level 3 significant unobservable inputs for assets and liabilities
measured at fair value on a nonrecurring basis at December 31, 2013 and 2012.
(Dollars in thousands)
December 31, 2013
Impaired loans
Other real estate owned
(Dollars in thousands)
December 31, 2012
Impaired loans
Other real estate owned
Quantitative Information about Level 3 Fair Value Measurements
Fair Value
Valuation
Technique
Unobservable
Input
Range
Appraisal of
collateral
5,178
Appraisal of
collateral
375
Appraisal
adjustments (2)
Liquidation
expense (2)
Appraisal
adjustments
Liquidation
expense
20% - 30%
5% - 10%
20% - 30%
5% - 10%
Quantitative Information about Level 3 Fair Value Measurements
Fair Value
Valuation
Technique
Unobservable
Input
Range
Appraisal of
collateral (1)
3,118
Appraisal of
collateral (1)(3)
207
Appraisal
adjustments (2)
Liquidation
expense (2)
Appraisal
adjustments
Liquidation
expense
20% - 30%
5% - 10%
20% - 30%
5% - 10%
$
$
$
$
(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include
various level 3 inputs which are not identifiable.
(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated
liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are
presented as a percent of the appraisal.
(3) Includes qualitative adjustments by management and estimated liquidation expenses.
NOTE 19. COMPREHENSIVE INCOME
The following tables present the components of accumulated other comprehensive income (“AOCI”) for the year ended December 31,
2013 (in thousands):
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
NOTE 20. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
Information relative to the parent company’s condensed balance sheets at December 31, 2013 and 2012, and the related condensed
statements of income and cash flows for each of those years are presented below:
(in thousands)
Condensed Balance Sheets
Assets
Cash
Investment in subsidiaries
Other assets
Total assets
Liabilities and shareholders’ equity Liabilities
Other liabilities
Long-term debt
Total liabilities
Total stockholders’ equity
Total liabilities and stockholders’ equity
(in thousands)
Condensed Statements of Income
Income - dividends from bank subsidiary
Expenses - operating
Income before income taxes and undistributed earnings
Income tax (benefit)
Income after tax (benefit)
Equity in undistributed income earnings of subsidiaries
Net income
Preferred dividends
Net income available to common shareholders’
Comprehensive income
79
December 31
2013
2012
362 $
97,164
717
98,243 $
97 $
4,124
4,221
94,022
98,243 $
158
71,253
302
71,713
40
4,124
4,164
67,549
71,713
Year ended December 31,
2012
2013
2,666 $
499
2,167
(190)
2,357
1,663
4,020 $
85 $
3,935 $
2,554 $
531
350
181
(133)
314
3,854
4,168
136
4,032
3,415
$
$
$
$
$
$
$
$
$
(in thousands)
Condensed Statements of Cash Flows
OPERATING ACTIVITIES
Net income
Equity in undistributed earnings of subsidiaries
Increase in other assets
Increase in other liabilities
Stock option expense
Net cash provided by operating activities
INVESTING ACTIVITIES
Investment in subsidiary
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds of stock offering
Dividend reinvestment plan
Common stock options exercised
Cash dividends paid on common stock
Cash dividends paid on preferred stock
Net cash provided by financing activities
Increase (decrease) in cash
Cash at beginning of period
Cash at end of period
Non-cash investing activity
Issuance of stock in acquisition
NOTE 21. SEGMENT REPORTING
2013
2012
$
4,020
(1,663)
(340)
57
196
2,950
4,168
(3,854)
(9)
15
138
458
(26,469)
(14,731)
(26,469)
(14,731)
23,109
913
323
(537)
(85)
23,723
204
158
362
$
13,734
973
—
(307)
(136)
14,264
(9)
167
158
—
2,000
$
$
$
During 2013, the Company identified three reportable segments: commercial and retail banking; mortgage banking; and insurance
services. Revenue from commercial and retail banking activities consists primarily of interest earned on loans and investment
securities and service charges on deposit accounts.
Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage
origination process. The mortgage banking services are conducted by MVB Mortgage.
Information about the reportable segments and reconciliation to the consolidated financial statements for the year end December 31.
2013 are as follows:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MVB FINANCIAL CORP. AND SUBSIDIARIES
December 31, 2013
(in thousands)
Revenues:
Interest income
Income on loans held for sale
Insurance income
Other income
Total operating income
Expenses:
Interest expense
Salaries and employee benefits
Provision for loan losses
Other expense
Total operating expenses
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Preferred stock dividends
Net income (loss) available to common
shareholders
Total assets
Capital expenditures
Goodwill
NOTE 22. MERGERS AND ACQUISITIONS
Commercial
&
Retail
Banking
$
$
25,088
2,853
—
3,843
31,784
5,014
12,441
2,260
9,811
29,526
2,258
5
2,253
85
$
$
$
2,168
$ 1,021,097
5,613
897
Mortgage
Banking
Insurance
Intercompany
Eliminations
Consolidated
$
$
$
2,103
19,042
—
1,400
22,545
1,181
13,017
—
5,081
19,279
3,266
1,240
2,026
—
2,026
92,290
489
16,882
— $
—
1,722
—
1,722
(646) $
—
—
—
(646)
—
1,609
—
634
2,243
(521)
(262)
(259)
—
(646)
—
—
—
(646)
—
—
—
—
26,545
21,895
1,722
5,243
55,405
5,549
27,067
2,260
15,526
50,402
5,003
983
4,020
85
(259) $
— $
3,935
3,012
399
—
$
(129,339) $
—
—
987,060
6,501
17,779
The Company and its subsidiary, MVB Bank, have entered into a Purchase and Assumption Agreement with CFG Community Bank
(“CFG”) and its parent, Capital Funding Bancorp, Inc., pursuant to which, upon the terms and subject to the conditions set forth
therein, the Bank will purchase certain assets and assume certain liabilities of CFG and its subsidiaries for $30 million in
consideration, consisting of $26 million in cash and $4 million in shares of MVB Financial common stock, subject to certain
adjustments.
Consummation of this transaction is subject to certain customary closing conditions, including requisite regulatory approvals and
material third-party consents, the absence of certain legal impediments to the consummation of the transaction and subject to certain
exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party.
The parties have made customary representations, warranties and covenants in the Agreement, including among others, covenants by
CFG with respect to the conduct of its business during the interim period between the execution of the agreement and the closing of
the transaction.
NOTE 23. STOCK SPLIT
Common shares outstanding at December 31, 2013 and 2012, respectively, have been adjusted for the effect of a two for one stock
split effected as a stock dividend paid on February 11, 2014.
81
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
MVB Financial Corp.
We have audited the accompanying consolidated balance sheets of MVB Financial Corp. and subsidiaries as of December 31, 2013
and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows
for the years then ended. These consolidated financial statements are the responsibility of MVB Financial Corp.’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. MVB Financial Corp. is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of MVB
Financial Corp.’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
MVB Financial Corp. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for
the years then ended, in conformity with U.S. generally accepted accounting principles.
Wexford, Pennsylvania
March 27, 2014
S.R. Snodgrass, P.C. * 2100 Corporate Drive, Suite 400 * Wexford, Pennsylvania 15090-8399 * Phone: (724) 934-0344 * Facsimile: (724) 934-0345
82
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ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No response required
ITEM 9A.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company, under the supervision and with the participation of the Company’s management, including the Company’s President
and Chief Executive Officer, along with the Company’s Chief Financial Officer (the Principal Financial Officer), has evaluated the
effectiveness as of December 31, 2013, of the design and operation of the Company’s disclosure controls and procedures, as such
term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Based upon that evaluation, the Company’s President and Chief Executive Officer, along with the Company’s Principal Accounting
Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2013.
There have been no material changes in the Company’s internal control over financial reporting during the fourth quarter of 2013
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a significant deficiency (as defined in Public Company Accounting Oversight Board Auditing Standard No. 2),
or a combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of
the annual or interim financial statements will not be prevented or detected on a timely basis by management or employees in the
normal course of performing their assigned functions.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013.
Management’s assessment did not identify any material weaknesses in the Company’s internal control over financial reporting.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework in 1992. Because there were no material weaknesses discovered,
management believes that, as of December 31, 2013, the Company’s internal control over financial reporting was effective.
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ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
MVB and the Bank have, and expect to continue to have, banking and other transactions in the ordinary course of business with its
directors and officers and their affiliates, including members of their families or corporations, partnerships or other organizations
in which officers or directors have a controlling interest, on substantially the same terms (including documentation, price, interest
rates and collateral, repayment and amortization schedules and default provisions) as those prevailing at the time for comparable
transactions with unrelated parties. All of these transactions were made on substantially the same terms (including interest rates,
collateral and repayment terms on loans) as comparable transactions with non-affiliated persons. MVB’s management believes that
these transactions did not involve more than the normal business risk of collection or include any unfavorable features.
Total loans outstanding from the Bank at December 31, 2013 to MVB and Bank officers and directors as a group and members
of their immediate families and companies in which they had an ownership interest of 10% or more was $18.1 million or 19.2% of
total equity capital and 2.9% of total loans. These loans do not involve more than the normal risk of collectability or present other
unfavorable features.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
See “Ratification of Auditors” on page 16 of MVB’s definitive Proxy Statement relating to MVB’s Annual Meeting of Shareholders for
2014.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subjected to attestation by the Company’s registered public
accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
Date: March 28, 2014
Date: March 28, 2014
/s/ Larry F. Mazza
Larry F. Mazza
CEO
/s/ Bret S. Price
Bret S. Price
Senior Vice President & CFO
ITEM 9B.OTHER INFORMATION
No response required.
PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers of MVB include those persons identified under “Management Nominees to the Board of MVB” on
pages 3-4 of MVB’s definitive Proxy Statement relating to MVB’s Annual Meeting of Shareholders for 2014.
ITEM 11.EXECUTIVE COMPENSATION
See “Executive Compensation” on pages 11-12 of MVB’s definitive Proxy Statement relating to MVB’s Annual Meeting of Stockholders
for 2014.
MVB has adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer and other executive officers and
shall be deemed incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
See “Principal Holders of Voting Securities” on page 15 of MVB’s definitive Proxy Statement relating to MVB’s Annual Meeting of
Shareholders for 2014 which section is expressly incorporated by reference.
80
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PART IV
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits filed with this Annual Report on Form 10-K are attached hereto. For a list of such exhibits, see “Exhibit Index” beginning at
page 77. The Exhibit Index specifically identifies each management contract or compensatory plan required to be filed as an exhibit
to this Form 10-K.
EXHIBIT INDEX
MVB Financial Corp. Annual Report on Form 10-K for Fiscal Year Ended December 31, 2013
Exhibit Number Description
Exhibit Location
3.1
Articles of Incorporation
Form SB-2 Registration Statement, Registration No. 333-120931, filed
December 1, 2004, and incorporated by reference herein
3.1-1
Articles of Incorporation - Amendment
Form SB-2 Registration Statement, Registration No. 333-120931, filed
December 1, 2004, and incorporated by reference herein
Bylaws
Form SB-2 Registration Statement, Registration No. 333-120931, filed
December 1, 2004, and incorporated by reference herein
3.2
10.1
24
Power of Attorney
Filed herewith
31.1
Certificate of Principal Executive Officer
Filed herewith
pursuant to Section 302 of Sarbanes
Oxley Act of 2002
31.2
Certificate of Principal Financial Officer
Filed herewith
pursuant to Section 302 of Sarbanes
Oxley Act of 2002
32.1
Certificate of Principal Executive Officer &
Filed herewith
Principal Financial Officer pursuant to Section
906 of Sarbanes Oxley Act of 2002
99.1
Report of S.R. Snodgrass, P.C., Independent Auditors Found on Page 82 herein
99.2
Employment Agreement of Larry F. Mazza
Form 8-K/A, filed January 24, 2014 and incorporated by reference
herein.
99.3
Employment Agreement of Donald T. Robinson
Form 8-K/A, filed January 24, 2014 and
incorporated by reference herein.
99.4
Employment Agreement of Bret S. Price
Form 8-K/A, filed January 24, 2014 and
incorporated by reference herein.
99.5
Employment Agreement of Patrick R. Esposito II
Form 8-K/A, filed January 24, 2014 and
incorporated by reference herein.
MVB Financial Corp. 2003 Stock
Form SB-2 Registration Statement, Registration No. 333-120931, filed
Incentive Plan
December 1, 2004, and incorporated by reference herein
101
Interactive data files pursuant to Rule 405 of Regulation S-T (**)
10.2
MVB Financial Corp. 2013 Stock
Form S-8 Registration Statement, filed June 21, 2013, and
Incentive Plan
incorporated by reference herein
(**) Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a
registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those
10.3
Master Lease Agreement with S-N-S
Form SB-2 Registration Statement, Registration No. 333-120931, filed
sections
Foods, Inc. for premises occupied by
December 1, 2004, and incorporated by reference herein
Middletown Mall Office
10.4
Sublease Agreement with S-N-S Foods,
Form SB-2 Registration Statement, Registration No. 333-120931, filed
Inc. for premises occupied by
December 1, 2004, and incorporated by reference herein
Middletown Mall Office
10.5
Lease Agreement with Essex Properties,
Form SB-2 Registration Statement, Registration No. 333-120931, filed
LLC for land occupied by
Bridgeport Branch
December 1, 2004, and incorporated by reference herein
11
14
21
Statement Regarding Computation of
Filed herewith
Earnings per Share
Code of Ethics
Filed herewith
Subsidiary of Registrant
Filed herewith
23.1
Consent of Independent Registered Public
Filed herewith
Accounting Firm
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Earnings Per Share
Earnings per Share are calculated as follows:
(Dollars in thousands except shares and per share amounts)
For the years ended December 31,
2013 2012
Numerator for both basic and diluted earnings per share:
Net Income
Less: Dividends on preferred stock
Net income available to common shareholders
Denominator:
Total average shares outstanding
Effect of dilutive stock options
Total diluted average shares outstanding
Earnings Per Share - Basic
Earnings Per Share - Diluted
$ 4,020
$ 4,168
85
136
$ 3,935
$ 4,032
6,657,093
281,935
6,939,028
$ 0.59
4,388,650
120,584
4,509,234
$ 0.92
$ 0.57
$ 0.90
MVB Financial Corp. and Its Wholly Owned Subsidiaries,
(hereinafter, “MVB”)
CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS
Approved: June 18, 2013
This policy applies to all senior financial officers of MVB. The senior financial officers include Larry F. Mazza, Eric L. Tichenor, Roger J.
Turner, John T. Schirripa, Donald T. Robinson, David A. Jones, Harry E. Dean III, and Patrick R. Esposito II (“Covered Persons”).
Specifically, the senior financial officers for MVB represent the following organizations:
MVB Financial Corp.
Larry F. Mazza, Bret S. Price, Roger J. Turner, John T. Schirripa, Donald T. Robinson, David A. Jones, and Patrick R. Esposito II
MVB Bank, Inc.
Larry F. Mazza, Eric L. Tichenor, Roger J. Turner, John T. Schirripa, Donald T. Robinson, David A. Jones, and Patrick R. Esposito II
Potomac Mortgage Group, Inc.
Harry E. Dean III
MVB Insurance, LLC
Larry F. Mazza
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This Code of Ethics is required by the United States securities laws and the rules and regulations of the Securities and Exchange
Commission as being necessary to deter wrongdoing and to promote:
(i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships,
(ii) avoidance of conflicts of interest, including disclosure to an appropriate person or persons identified in the code
of any material transaction or relationship that reasonably could be expected to give rise to such a conflict,
(iii) full, fair, accurate, timely, and understandable disclosure in reports and documents that MVB files with, or submits
to, the Commission and in other public communications made by MVB,
(iv) compliance with applicable governmental laws, rules and regulations,
(v) the prompt internal reporting of code violations to an appropriate person or persons identified in the code; and
(vi) accountability for adherence to the code.
If you have any questions regarding this Code, please feel free to contact the Chief Executive Officer or the Chairman of the Board
of Directors. If you are not comfortable speaking with the Chief Executive Officer or Chairman of the Board of Directors, you are
encouraged to speak with the Human Resources Director.
1. Each Covered Person must avoid any transaction or arrangement that would create a conflict of interest or the appearance of
a conflict of interest between personal and professional relationships.
A conflict of interest may be generally defined as a conflict between the Covered Person’s private interests and his or her
responsibilities to MVB or an entity with which MVB maintains a relationship. A conflict of interest can also arise when an immediate
family member is involved in a transaction or arrangement that in any way casts doubt upon the Covered Person’s independence.
An “immediate family member” includes a Covered Person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and
daughters-in-law, sisters-in-law, brothers-in-law, and anyone (other than employees) who shares the Covered Person’s home.
2. Covered Persons may only accept items of nominal value as gifts from any individual or entity that is involved or seeks to
become involved in a business relationship with MVB.
Gifts to Covered Persons must be inexpensive, unsolicited and not given with the objective of influencing the Covered Person’s
judgment. It is acceptable for a Covered Person to accept modest meals or other inexpensive forms of entertainment from
individuals or entities that are involved or seek to become involved in a business relationship with MVB as long as these items are
not provided in order to influence the Covered Person’s business judgment or decision. Under no circumstances is a Covered Person
permitted to accept payments, loans, kickbacks, bribes, special privileges or services from anyone. If there are any questions or
borderline case, Covered Persons should discuss them first with the CEO, Chairman of the Board or Governance Committee or with
the Bank’s General Counsel as appropriate.
3. All Covered Persons are responsible for maintaining accurate financial records for MVB.
Covered Persons must closely adhere to the following accounting guidelines:
(i) All assets, liabilities and transactions of MVB should be accurately recorded in accordance with MVB’s record
keeping procedures and generally accepted accounting principles;
(ii) No false or misleading entries are permitted to be knowingly made or caused to be made in MVB’s record books,
even if such entries would not be material to MVB or its operations as a whole; and
(iii) Any entries that are inaccurate, false or irregular should be promptly reported to a member of the Audit
Committee for an immediate corrective action.
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4. Covered Persons must recognize that confidential information is an asset of MVB, and
must refrain from using inside information to their personal advantage.
7. In drafting periodic reports that are to be filed with the Securities and Exchange Commission, Covered Persons should take all
steps necessary to ensure full, fair, accurate, timely and complete disclosure.
Covered Persons must maintain the confidentiality of information entrusted to them by MVB or its customers or suppliers, except
(i) Go Beyond the Minimum Disclosure Required by Law. While in the past periodic reporting has focused on
when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use
disclosing only those items that were mandated by the law, Covered Persons should go beyond the minimum
to competitors, or harmful to MVB or its customers or suppliers, if disclosed.
requirements to convey the full financial picture of MVB to the public.
At its core, the prohibition against insider trading focuses on the buying, selling or trading in securities using non-public information.
Areas of special attention include: off-balance sheet structures, insider and affiliated party transactions, board relationships,
The prohibition applies to securities of MVB as well as to customers and suppliers of MVB and, or any entity with which MVB and
accounting policies, and auditor relationships.
has a business relationship.
Covered Persons are in a unique position to acquire non-public information about MVB, and such information might influence
(ii) Make Sure All Relationships that Could Give Rise to Any Perceived Conflicts are Fully Disclosed. Given the recent
focus of lawmakers on a more complete disclosure of any material conflict of interest to the public, it is important
their decision to buy, sell or trade securities. In addition to refraining from using inside information in making their own investment
to ensure that any transaction that threatens to create the appearance of a conflict of interest must be fully
decisions, Covered Persons should also avoid discussing the inside information with friends or immediate family members (whether
disclosed in MVB’s periodic reports.
at home or in the public) or mailing or faxing the inside information to outside sources unless appropriate confidentiality agreements
are in place to ensure that material, non-public information is not used improperly.
8. Covered Persons must comply with all laws and regulations that apply to MVB’s business.
5. The conduct of Covered Persons should be governed by the highest standards of integrity and fairness.
All Covered Persons should understand those laws that apply to them in the performance of their duties and ensure that their
decisions and actions are conducted in conformity with those laws. Any violation of the applicable laws can subject MVB or the
Covered Persons should avoid those situations in which outside personal interests conflict with MVB’s business. These situations
implicated Covered Person to liability. Any inquiries relating to compliance with applicable laws and regulations should be directed
include:
to MVB’s General Counsel.
(i) Ownership by a Covered Person, or a member of his or her immediate family, of a material financial interest in any
9. Accountability for adherence to the Code.
outside enterprise that is involved or seeks to become involved in a business relationship with MVB;
(ii) Ownership by a Covered Person, or a member of his or her immediate family, of a material financial interest in any
such persons. The disciplinary action may range up to and including termination. The Board of Directors shall be responsible for
outside enterprise that competes for business with MVB;
determining the proper action to be taken.
Failure to adhere to the above detailed responsibilities by the Covered Persons may result in disciplinary action being taken against
(iii) Outside employment of a Covered Person, or a member of his or her immediate family, whether as a consultant,
director, officer, employee or independent contractor, with an entity that is involved or seeks to become involved
Exhibit 21
in a business relationship with MVB; or
(iv) Appointment of a Covered Person, or a member of his or her immediate family, to a public office, board
or commission that may create an appearance of a conflict of interest between the goals and purposes of that
organization and MVB business. Such appointment would include a “public service” organization or a not-for-
MVB FINANCIAL CORP. AND SUBSIDIARIES ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2013
profit organization.
Subsidiaries of MVB Financial Corp.
6. Covered Persons must not take for themselves opportunities that they discover while working for MVB, or use corporate
The following are the only subsidiaries of MVB Financial Corp.:
property or information for personal gain.
Covered Persons must not (a) take personal advantage of a situation or knowledge acquired through the use of his or her position
or MVB’s property, if the situation or knowledge could be used for MVB’s benefit, (b) use his or her position or MVB property or
information for personal gain, or (c) compete with the MVB. Covered Persons owe a duty to the MVB to advance its interests
whenever the opportunity arises.
Name of Subsidiary
MVB Bank, Inc.
Potomac Mortgage Group, Inc. (D/B/A MVB Mortgage)
MVB Insurance
Jurisdiction of Incorporation
West Virginia
Virginia
West Virginia
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement Nos. 333-180317 of MVB Financial Corp. on Form S-3D
and Registration Nos. 333-189512, 333-186910, 333-145716, and 333-120234 of MVB Financial Corp. on Form S-8 of our report
dated March 27, 2014, relating to our audit of the consolidated financial statements, which appears in this Form 10-K of MVB
Financial Corp. for the year ended December 31, 2013.
Wexford, Pennsylvania
March 27, 2014
S.R. Snodgrass, P.C. * 2100 Corporate Drive, Suite 400 * Wexford, Pennsylvania 15090-8399 * Phone: (724) 934-0344 * Facsimile: (724) 934-0345
1
POWER OF ATTORNEY AND SIGNATURES
Know all persons by the presents, that each person whose signature appears below constitutes and appoints Larry F.
Mazza or Bret S. Price or either of them, as attorney-in-fact, with each having the power of substitution, for him or her in any and all
capacities, to sign any amendment to this Form 10-K and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Federal Deposit Insurance Corporation hereby ratifying and confirming all that each of said attorneys-in-fact or
his substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Form 10-K has been signed below by the
following person on behalf of the registrant in the capacities and on the dates indicated.
/s/ Larry F. Mazza
Larry F. Mazza, President and CEO
/s/ Bret S. Price
Bret S. Price, Senior Vice President and CFO
/s/ David B. Alvarez
David B. Alvarez, Director
/s/ Stephen R. Brooks
Stephen R. Brooks, Director
/s/ James J. Cava, Jr.
James J. Cava, Jr., Director
/s/ Joseph P. Cincinnati
Joseph P. Cincinnati, Director
/s/ Harry E. Dean III
Harry E. Dean III, Director
/s/ John W. Ebert
John W. Ebert, Director
/s/ Gayle C. Manchin
Gayle C. Manchin, Director
/s/ Kelly R. Nelson
Kelly R. Nelson, Director
/s/ J. Christopher Pallotta
J. Christopher Pallotta, Director
/s/ Nitesh S. Patel
Nitesh S. Patel, Director
/s/ Jimmy D. Staton
Jimmy D. Staton, Director
/s/ Roger J. Turner
Roger J. Turner, Director
/s/ Samuel J. Warash
Samuel J. Warash, Director
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
Date: March 28, 2014
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Form 10-K Certification
CERTIFICATIONS
I, Larry F. Mazza, certify that:
Form 10-K Certification
CERTIFICATIONS
I, Bret S. Price, certify that:
1. I have reviewed this annual report on Form 10-K of MVB Financial Corp.;
1. I have reviewed this annual report on Form 10-K of MVB Financial Corp.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
misleading with respect to the period covered by this annual report;
respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
in this annual report;
this annual report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted account
and the preparation of financial statements for external purposes in accordance with generally accepted account
principles;
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
financial reporting; and
reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
the registrant’s internal control over financial reporting.
Date: March 28, 2014
/s/ Larry F. Mazza
Larry F. Mazza
Chief Executive Officer & President
Date: March 28, 2014
/s/ Bret S. Price
Bret S. Price
Senior Vice President & Chief Financial Officer
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized and based on our knowledge and belief that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
MVB Financial Corp.
By: /s/ Larry F. Mazza
Larry F. Mazza, President
/s/ Bret S. Price
Bret S. Price, Senior Vice President & CFO
Date: March 28, 2014
Date: March 28, 2014
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