MVB Financial Corp: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and with the consolidated financial statements and accompanying notes and other detailed information appearing in the 2024 Form 10-K. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. See the “Forward-Looking Statements” section of this report for further information on forward-looking statements.

Executive Summary

We continue to adapt our business model due to challenging market conditions, primarily due to the current interest rate environment and economy, as well as consideration of regulatory and geopolitical environments, among others. Interest rates have remained at an elevated level through June 30, 2025, as the Federal Reserve has maintained its federal funds interest rate range of 4.25% to 4.5%. However, we have seen an increase in loan balances compared to the prior quarter, which primarily reflects the Bank's execution of its asset generation strategies that include the diversification of risk among loans with relatively smaller loan balances, as well as a focus on loans with fixed interest rates. We remain committed to the gaming, payments and banking-as-a-service industries. We continue to expand the Bank's treasury services function to support the banking needs of financial and emerging technology companies, which we believe will further enhance CoRe deposits, notably through the expansion of deposit acquisition and fee income strategies through the Fintech division. Additionally, we have expanded our compliance and risk management team to support the growth in these lines of business.

Financial Results

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

During the three months ended June 30, 2025, net interest income declined $1.8 million, noninterest income increased $0.8 million and noninterest expense declined $0.4 million compared to the three months ended June 30, 2024. Our tax-equivalent yield on earning assets for the three months ended June 30, 2025 was 6.04% compared to 6.26% for the three months ended June 30, 2024. Loans receivable increased $90.0 million to $2.15 billion during the three months ended June 30, 2025. Our overall cost of interest-bearing liabilities was 3.55% for the three months ended June 30, 2025 compared to 4.15% for the three months ended June 30, 2024. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.69% in the three months ended June 30, 2025, compared to 3.75% in the three months ended June 30, 2024.

Our net income for the three months ended June 30, 2025 was $2.0 million compared to $4.1 million for the three months ended June 30, 2024. Earnings for the three months ended June 30, 2025 equated to a return on average assets of 0.3% and a return on average equity of 2.6%, compared to the three months ended June 30, 2024 results of 0.5% and 5.7%, respectively. Basic and diluted earnings per share were $0.16 and $0.15 for the three months ended June 30, 2025, respectively, compared to $0.32 and $0.31, respectively, for the three months ended June 30, 2024. Our results for the three months ended June 30, 2025 included a $2.0 million provision for credit losses primarily due to loan growth during the quarter, compared to a $0.3 million provision for credit losses for the three months ended June 30, 2024. Our loan growth during the three months ended June 30, 2025 occurred late in the quarter, resulting in provisioning without the benefit of corresponding interest income.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

During the six months ended June 30, 2025, net interest income decreased $5.2 million, noninterest income remained consistent at $15.0 million and noninterest expense decreased by $1.8 million compared to the six months ended June 30, 2024. The decrease in our net interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 can primarily be attributed to a decrease in average loans with the loan growth during the six months ended June 30, 2025 occurring late in the second quarter. Our yield on tax-equivalent earning assets for the six months ended June 30, 2025 was 5.98% compared to 6.30% for the six months ended June 30, 2024. Loans receivable increased by $53.2 million to $2.15 billion during the six months ended June 30, 2025. Our overall cost of interest-bearing liabilities was 3.59% for the six months ended June 30, 2025 compared to 4.19% for the six months ended June 30, 2024. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.67% in the six months ended June 30, 2025, compared to 3.79% in the six months ended June 30, 2024.

Our net income for the six months ended June 30, 2025 was $5.6 million compared to $8.6 million in the six months ended June 30, 2024. Earnings for the six months ended June 30, 2025 equated to a return on average assets of 0.3% and a return on average equity of 3.7%, compared to the six months ended June 30, 2024 results of 0.5% and 5.9%, respectively. Basic and diluted earnings per share were $0.43 and $0.42, respectively, for the six months ended June 30, 2025, compared to $0.67 and $0.66, respectively, for the six months ended June 30, 2024.

Net Interest Income and Net Interest Margin (Average Balance Schedules)

The following tables present information regarding (i) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) the interest rate spread; (iv) net interest income and margin; and (v) net interest income and margin (on a tax-equivalent basis) as of and for the periods shown. The average balances presented are derived from daily average balances.

(Dollars in thousands)

1 In order to make pre-tax income and resultant yields on tax-exempt loans and investment securities comparable to those on taxable loans and investment securities, a tax-equivalent adjustment has been computed using a federal tax rate of 21% for the three months ended June 30, 2025 and 2024, which is a non-U.S. GAAP financial measure. See the reconciliation of this non-U.S. GAAP financial measure to its most directly comparable U.S. GAAP financial measure following this table.

2 Non-accrual loans are included in total loan balances, lowering the effective yield for the portfolio in the aggregate.

3 The senior term loan was paid off in May 2024 and the unamortized debt issuance costs were recorded as interest expense upon the repayment.

(Dollars in thousands)

1 In order to make pre-tax income and resultant yields on tax-exempt loans and investment securities comparable to those on taxable loans and investment securities, a tax-equivalent adjustment has been computed using a federal tax rate of 21% for the six months ended June 30, 2025 and 2024, which is a non-U.S. GAAP financial measure. See the reconciliation of this non-U.S. GAAP financial measure to its most directly comparable U.S. GAAP financial measure following this table.

2 Non-accrual loans are included in total loan balances, lowering the effective yield for the portfolio in the aggregate.

3 The senior term loan was paid off in May 2024 and the unamortized debt issuance costs were recorded as interest expense upon the repayment.

The following table presents the reconciliation of net interest margin for the periods shown:

(Dollars in thousands)

Key Metrics

(Dollars in thousands, except per share data)

1 Non-U.S. GAAP metric.

2 Noninterest expense as a percentage of net interest income and noninterest income.

3 Annualized for the quarterly periods presented.

4 Noninterest expense as a percentage of average assets.

5 Charge-offs less recoveries.

6 Excludes loans held-for-sale.

Tangible book value (“TBV”) per common share was $23.68 and $22.70 as of June 30, 2025 and June 30, 2024, respectively. TBV per common share is a non-U.S. GAAP measure that we believe is helpful to interpreting financial results. A reconciliation of TBV per common share is included below.

(Dollars in thousands, except per share data)

Net Interest Income

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 and investment securities. Interest-bearing liabilities include interest-bearing deposits and borrowed funds such as sweep accounts, repurchase agreements and subordinated debt. Net interest income, which is the primary source of revenue for the Bank, is also impacted by changes in market interest rates and the mix of interest-earning assets and interest-bearing liabilities.

Net interest margin is calculated by dividing net interest income by average interest-earning assets and measures the net revenue stream generated by the Bank’s balance sheet. Net interest spread is calculated by taking the difference between interest earned on earning assets and interest paid on interest-bearing liabilities in an effort to maximize net interest income, while maintaining an appropriate level of interest rate risk.

The Federal Reserve maintains its key interest rate to a range of 4.25% to 4.5%, which has not changed as of June 30, 2025. We continually analyze methods to deploy assets into an earning asset mix to generate a stronger net interest margin.

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

Net interest margin on a tax-equivalent basis was 3.69% for the three months ended June 30, 2025 compared to 3.75% for the three months ended June 30, 2024. The decline in net interest margin on a tax-equivalent basis primarily reflects a decline in earning asset yields, partially offset by lower funding costs. Tax-equivalent net interest spread was 2.49% for the three months ended June 30, 2025 compared to 2.11% for the three months ended June 30, 2024. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 120 basis points in the three months ended June 30, 2025 compared to 164 basis points in the three months ended June 30, 2024, driven by the decline in average assets.

During the three months ended June 30, 2025, net interest income declined $1.8 million, or 6.5%, to $25.8 million from $27.6 million during the three months ended June 30, 2024. Average total earning assets were $2.82 billion as of June 30, 2025, compared to $2.97 billion as of June 30, 2024. Total interest income declined by $3.7 million, or 8.1%, to $42.4 million in the three months ended June 30, 2025 from $46.1 million in the three months ended June 30, 2024, primarily reflecting lower interest income from decreased interest rates and balances of loans and cash, partially offset by higher interest income on investment securities balances due to higher rates earned on these investments and a higher overall balance of investment securities. Average total loans declined to $2.09 billion as of June 30, 2025 from $2.24 billion as of June 30, 2024, primarily as the result of a $108.7 million decline in average commercial loans, a $24.4 million decline in average real estate loans and a $12.5 million decline in average consumer loans. As previously discussed, our loan growth during the three months ended June 30, 2025 occurred later in the quarter.

Average investment securities increased $46.0 million as the result of an $52.6 million increase in taxable investments, partially offset by a $6.7 million decline in tax-exempt investments during the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The yield on taxable securities increased 68 basis points, and the yield on tax-exempt securities increased 74 basis points.

Average interest-bearing liabilities increased $80.2 million, which was primarily the result of average balance increases of $192.9 million in negotiable order of withdrawal accounts and $4.9 million in savings accounts, partially offset by an decrease of $74.0 million in certificates of deposit and $41.2 million in money market checking accounts.

Average interest-bearing deposits were $1.80 billion for the three months ended June 30, 2025 and $1.72 billion for the three months ended June 30, 2024. Total interest expense declined $2.0 million, primarily driven by lower interest rates. The cost of interest-bearing liabilities declined to 3.55% for the three months ended June 30, 2025 from 4.15% for the three months ended June 30, 2024.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

Net interest margin on a tax-equivalent basis was 3.67% for the six months ended June 30, 2025 compared to 3.79% for the six months ended June 30, 2024. The decrease in net interest margin on a tax-equivalent basis primarily reflects a decline in earning asset yields, partially offset by lower funding costs. Tax-equivalent net interest spread was 2.39% for the six months ended June 30, 2025 compared to 2.11% for the six months ended June 30, 2024. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 128 basis points in the six months ended June 30, 2025 compared to 168 basis points in the six months ended June 30, 2024. This difference was driven by the decrease in interest expense and the decline in average assets.

During the six months ended June 30, 2025, net interest income decreased by $5.3 million, or 9.1%, to $52.5 million from $57.7 million during the six months ended June 30, 2024. This decrease is largely due to lower yields on earning assets, partially offset by a decrease in the cost of funds. Average total earning assets were $2.90 billion in the six months ended June 30, 2025 compared to $3.08 billion in the six months ended June 30, 2024. Total interest income declined by $10.5 million, or 11.0%, to $85.6 million in the six months ended June 30, 2025 from $96.2 million in the six months ended June 30, 2024, primarily reflecting lower interest income from decreased interest rates and balances of loans and cash, partially offset by higher interest income on investment securities balances due to higher rates earned on these investments and a higher overall balance of investment securities. Average total loans decreased to $2.10 billion in the six months ended June 30, 2025 from $2.26 billion in the six months ended June 30, 2024, primarily as the result of a $121.4 million decrease in average commercial loans, a $27.2 million decrease in average real estate loans and a $13.4 million decrease in average consumer loans.

Average investment securities increased $61.6 million as the result of a $67.1 million increase in taxable investments, partially offset by a $5.5 million decrease in tax-exempt investments during the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The yield on taxable securities increased 62 basis points and the tax-exempt securities yield increased 39 basis points.

Average interest-bearing liabilities increased by $18.3 million for the six months ended June 30, 2025 from the six months ended June 30, 2024. The increase was primarily the result of average balance increases of $78.8 million in negotiable order of withdrawal accounts and $32.7 million in certificates of deposit, partially offset by declines of $57.1 million in money market checking accounts and $34.3 million in saving accounts.

Average interest-bearing deposits were $1.78 billion for the six months ended June 30, 2025 and $1.76 billion for the six months ended June 30, 2024. Total interest expense decreased by $5.3 million, primarily driven by decreases in interest rates. The cost of interest-bearing liabilities decreased to 3.59% in the six months ended June 30, 2025 from 4.19% in the six months ended June 30, 2024.

Provision for Credit Losses

The provision for credit losses, which is a product of management’s analysis, is recorded in response to an estimate of lifetime expected losses in the loan and available-for-sale investment security portfolios.

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

Provision for credit losses totaled $2.0 million for the three months ended June 30, 2025, compared to $0.3 million in the three months ended June 30, 2024. This increase in provision is due primarily to increases in loan balances, which increased $90.0 million during the three months ended June 30, 2025. This loan growth resulted in an additional $1.4 million in provision required. Additionally, increases in the allocation rates made by the allowance model and specific reserves required by individually analyzed loans required an additional $0.2 million in provision. Provision for unfunded commitments totaled $0.2 million and $0.1 million during the three months ended June 30, 2025 and 2024, respectively. Net charge-offs totaled $0.2 million and $0.9 million during the three months ended June 30, 2025 and 2024, respectively.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

Provision for credit losses totaled $2.2 million during the six months ended June 30, 2025, compared to $2.3 million in the six months ended June 30, 2024. Loan balances increased $53.2 million during the six months ended June 30, 2025. This loan growth resulted in an additional $0.6 million in provision required. Additionally, increases in the allocation rates made by the allowance model and increases specific reserves required by individually analyzed loans required an additional $0.6 million in provision. Provision for unfunded commitments was immaterial and totaled $0.1 million during the six months ended June 30, 2025 and 2024, respectively. Net charge-offs totaled $1.0 million and $2.2 million during the six months ended June 30, 2025 and 2024, respectively.

Noninterest Income

Payment card and service charge income, equity method investment income or loss and gains on sale of loans generally account for the majority of our noninterest income. From time to time, we also recognize gains or losses on acquisition and divestiture activity, sales of assets or our investment portfolio.

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

Noninterest income totaled $7.9 million for the three months ended June 30, 2025, an increase of $0.8 million from $7.1 million for the three months ended June 30, 2024. The increase was primarily the result of a $1.8 million increase in equity method investment income from our mortgage segment and a $0.8 million increase in payment card and service charge income, partially offset by declines of $1.3 million in compliance and consulting income, $0.4 million in holding gain on equity securities and $0.2 million in other operating income.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

Noninterest income totaled $15.0 million for the six months ended June 30, 2025, consistent with the six months ended June 30, 2024. The $3.6 million increase in equity method investment income from our mortgage segment, $1.0 million increase in payment card and service charge income and $0.6 million gain on divestiture activity were offset by a $1.9 million decline in other operating income, a $1.8 million decline in compliance consulting income, a $0.6 million decline in gain on sale of available-for-sale investment securities and a $0.6 million holding loss on equity securities.

Noninterest Expense

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

Noninterest expense was $28.6 million and $28.9 million in the three months ended June 30, 2025 and 2024, respectively. The decline from the prior period primarily reflects declines of $1.7 million in professional fees, $0.3 million in equipment depreciation and maintenance and $0.1 million in salaries and employee benefits. These declines were partially offset by increases of $0.7 million in other operating expenses, $0.8 million in travel, entertainment, dues and subscriptions and $0.4 million in occupancy expenses. Approximately 55.3% and 55.1% of noninterest expense for the three months ended June 30, 2025 and 2024, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense as such costs are critical to financial services organizations.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

Noninterest expense was $57.3 million and $59.1 million for the six months ended June 30, 2025 and 2024, respectively. The decline from the prior year period primarily reflects declines of $3.9 million in professional fees, $0.6 million in equipment depreciation and maintenance expense and $0.2 million in salaries and employee benefits. These declines were partially offset by increases of $1.3 million in other operating expenses, $0.8 million in occupancy expense and $0.7 million in travel, entertainment, dues and subscriptions. Approximately 56.2% and 54.9% of noninterest expense for the six months ended June 30, 2025 and 2024, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense, as such costs are critical to financial services organizations.

Return on Assets and Equity

Assets

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

Our return on average assets was 0.3% for the three months ended June 30, 2025, compared to 0.5% for the three months ended June 30, 2024. The lower return for the three months ended June 30, 2025 is the result of a $2.1 million decline in earnings and a decline in average total assets of $146.7 million, which was primarily the result of a $108.7 million decline in average commercial loans, $48.0 million decline in average interest-bearing balances with banks, a $24.4 million decline in average real estate loans and a $12.5 million decline in average consumer loans, partially offset by a $46.0 million increase in average investment securities.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

Our return on average assets was 0.3% for the six months ended June 30, 2025, compared to 0.5% for the six months ended June 30, 2024. The increased return for the six months ended June 30, 2025 is primarily the result of a decrease of $178.0 million in average total assets, mainly the result of a a $121.4 million decrease in average commercial loans, a $76.5 million decrease in average interest-bearing deposits with banks, a $27.2 million decrease in average real estate loans and a $13.4 million decrease in average consumer loans, partially offset by $61.6 million increase in average investment securities. This decrease in average total assets was offset by a $3.0 million decrease in earnings.

Equity

Three Months Ended June 30, 2025 vs. Three Months Ended June 30, 2024

Our return on average stockholders’ equity was 2.6% for the three months ended June 30, 2025, compared to 5.7% for the three months ended June 30, 2024. The lower return for the three months ended June 30, 2025 is a result of a $2.1 million decline in earnings, while average equity increased by $17.6 million.

Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024

Our return on average stockholders’ equity was 3.7% for the six months ended June 30, 2025, compared to 5.9% for the six months ended June 30, 2024. The lower return for the six months ended June 30, 2025 is a result of a $3.0 million decrease in earnings, while average equity increased by $16.5 million.

Statement of Financial Condition

Cash and Cash Equivalents

Cash and cash equivalents totaled $399.4 million at June 30, 2025, compared to $317.9 million at December 31, 2024. We believe the current balance of cash and cash equivalents adequately serves our liquidity and performance needs. Total cash and cash equivalents fluctuate daily due to transactions in process and other liquidity demands.

Investment Securities

Investment securities, including equity securities, totaled $440.5 million at June 30, 2025, compared to $453.5 million at December 31, 2024. The following table presents a summary of the investment securities portfolio as of the periods shown. The available-for-sale securities are reported at estimated fair value.

(Dollars in thousands)

Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through the Asset and Liability Committee (“ALCO”) meetings. The ALCO also monitors net interest income and assists in the management of interest rate risk. 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 our customers. Management believes the risk characteristics inherent in the investment portfolio are acceptable based on these parameters.

Our equity securities primarily consist of investments in private entities within the Fintech industry and these investments may not be as liquid as our investments in other types of securities.

Loans

Our loan portfolio totaled $2.15 billion as of June 30, 2025 and $2.10 billion as of December 31, 2024. The Bank’s lending is primarily focused in North Central West Virginia, Northern Virginia, North Carolina and South Carolina. The portfolio consists principally of commercial lending, retail lending, which includes single-family residential mortgages, and consumer lending.

For more information regarding our loans, see Note 3 – Loans and Allowance for Credit Losses accompanying the consolidated financial statements included elsewhere in this report.

Loan Concentration

At June 30, 2025 and December 31, 2024, commercial and non-residential real estate loans comprised the largest component of the loan portfolio. A large portion of commercial loans are secured by real estate and are diverse in terms of geographical location and industry. Loans that are not secured by real estate are typically secured by accounts receivable, mortgages or equipment. While the loan concentration is in commercial loans, the commercial portfolio is comprised of loans to many different borrowers in numerous different industries, generally located in our primary market areas. Additionally, within the commercial portfolio, loans within the healthcare industry, which include loans to physicians, nursing homes and pharmacies, represent 22% of our total loan portfolio as of June 30, 2025.

Allowance for Credit Losses

The ACL was $20.8 million, or 0.97% of loans receivable, at June 30, 2025, compared to $19.7 million, or 0.94% of loans receivable, at December 31, 2024. Over the six months ended June 30, 2025, changes to the loan portfolio balances, qualitative factor adjustments and expected loss forecasts within the expected credit loss calculations resulted in allowances increases of $1.1 million to the commercial business, commercial real estate and commercial acquisition, development and construction segments. There was a further increase of $0.9 million in provision needed by the individually analyzed segment. These increases were partially offset by a decrease of $0.6 million in allowance required by the residential, home equity lines of credit and consumer segments and reduction of $0.3 million in the unallocated segment. Bank management expects the markets in which it operates will experience potential economic viability over the next one to two years and for the six months ended June 30, 2025 has observed overall increases to both loan balances and allocation rates within the pooled loan portfolio.

Management continually monitors the risk in the loan portfolio by reviewing the monthly delinquency reports and through the Loan Review Committee. The Loan Review Committee is responsible for determining the adequacy of the ACL. This analysis involves the portfolio's experience 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, and changes in the local and national economy. When appropriate, we also consider public knowledge and verifiable information from the local market to assess risks to specific loans and the loan portfolios as a whole.

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.

Deposits remain the most significant source of funds, totaling $2.80 billion, or 97.2% of funding sources at June 30, 2025. This same information at December 31, 2024 reflected $2.69 billion in deposits representing 97.2% of funding sources. Of these amounts, Fintech deposits totaled $1.16 billion and $964.1 million at June 30, 2025 and December 31, 2024, respectively. The increase in Fintech deposits is primarily attributable to increases in banking-as-a-service and digital asset deposits from $208.1 million and $22.6 million at December 31, 2024, respectively, to $308.3 million and $216.2 million at June 30, 2025, respectively. The increase in banking-as-a-service is primarily the result of on-balance sheet deposit management, while the increase in digital asset deposits to due to the acquisition of a new client.

Borrowings represented 2.6% of funding sources at June 30, 2025, versus 2.7% at December 31, 2024. Repurchase agreements, which are available to large corporate customers, represented 0.1% of funding sources at June 30, 2025 and December 31, 2024.

At June 30, 2025, noninterest-bearing balances totaled $1.05 billion, compared to $941.0 million at December 31, 2024, or 37.4% and 34.9%, respectively, of total deposits. Interest-bearing deposits totaled $1.75 billion at June 30, 2025, compared to $1.75 billion at December 31, 2024.

The following table presents the balance of each of the deposit categories as of the periods shown:

(Dollars in thousands)

Average interest-bearing deposits were $1.80 billion during the three months ended June 30, 2025, compared to $1.72 billion during the same time period in 2024 and average noninterest-bearing deposits were $886.7 million during the three months ended June 30, 2025 compared to $1.14 billion during the same time period in 2024.

Average interest-bearing deposits were $1.78 billion during the six months ended June 30, 2025 compared to $1.76 billion during the same time period in 2024 and average noninterest-bearing deposits were $0.99 billion during the six months ended June 30, 2025 compared to $1.21 billion during the same time period in 2024.

We utilize a custodial deposit transference structure for certain deposit programs whereby we, acting as custodian of account holder funds, place a portion of such account holder funds that are not needed to support near term settlement at one or more third-party banks insured by the FDIC (each, a program bank). Accounts opened at program banks are established in our name as custodian, for the benefit of our account holders. We remain the issuer of all accounts under the applicable account holder agreements and have sole custodial control and transaction authority over the accounts opened at program banks. We maintain the records of each account holder's deposits maintained at program banks. Program banks undergo robust due diligence prior to becoming a program bank and are also subject to continuous monitoring. These off-balance sheet deposits totaled $1.11 billion at June 30, 2025 and $1.42 billion at December 31, 2024 and primarily represent the gaming and banking-as-a-service industries.

Along with traditional deposits, the Bank has access to both short-term borrowings from the Federal Home Loan Bank ("FHLB"), Federal Reserve Bank and overnight repurchase agreements to fund its operations and investments.

Deposit Concentration

Three of our primary deposit verticals are payments, banking-as-a-service and gaming, with such deposits totaling $437.4 million, $308.3 million and $193.2 million as of June 30, 2025, respectively, compared to $505.8 million, $208.1 million and $227.6 million as of December 31, 2024, respectively. Of the gaming deposits, $183.4 million is with our three largest gaming clients at June 30, 2025.

Capital Resources

During the six months ended June 30, 2025, stockholders’ equity declined $3.4 million to $302.3 million. This decline primarily consists of the stock repurchase of 314,580 shares for $6.4 million and cash dividends paid of $4.4 million, partially offset by net income of $5.6 million, stock based compensation of $1.8 million and other comprehensive income of $0.4 million.

During the six months ended June 30, 2025, total assets increased $95.3 million. The equity to assets ratio declined from 9.8% at December 31, 2024 to 9.4% at June 30, 2025 due to the decline in stockholders’ equity. We paid dividends to common shareholders of $4.4 million during the six months ended June 30, 2025 and 2024, compared to earnings of $5.6 million and $8.6 million during the six months ended June 30, 2025 and 2024, respectively, resulting in the dividend payout ratio increasing to 79.1% for the six months ended June 30, 2025 from 51.0% for the six months ended June 30, 2024.

MVB and the Bank are also subject to various regulatory capital requirements administered by 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 material effect on our consolidated financial statements. The Bank is required to comply with applicable capital adequacy standards established by the federal banking agencies. West Virginia state chartered banks, such as the Bank, are subject to similar capital requirements adopted by the West Virginia Division of Financial Institutions. Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets companies hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, 100% or 150% (highest risk assets) is assigned to each asset on the balance sheet. Detailed information concerning our risk-based capital ratios can be found in Supervision and Regulation in Item 1, Business and Note 15 – Regulatory Capital Requirements to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of the 2024 Form 10-K.

The optional community bank leverage ratio (“CBLR”) framework, which is issued through interagency guidance, intends to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions as directed under the Economic Growth, Regulatory Relief, and Consumer Protection Act. Under the CBLR, if a qualifying depository institution elects to use such measure, such institutions will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds a 9% threshold, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios.

The Bank has elected to use the CBLR and intends to utilize this measure for the foreseeable future. Eligibility criteria to utilize the CBLR includes the following:

• Total assets of less than $10 billion;
• Total trading assets plus liabilities of 5% or less of consolidated assets;
• Total off-balance sheet exposures of 25% or less of consolidated assets;
• Cannot be an advanced approaches banking organization; and
• Leverage ratio greater than 9%.

The Bank's CBLR at June 30, 2025 was 11.4%, which is above the minimum requirement of 9%. Management believes that capital continues to provide a strong base for profitable growth.

Liquidity

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 our policy to optimize the funding of the balance sheet, continually balancing the stability and cost factors of various funding sources. We believe liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and non-traditional funding sources and the portions of the investment and loan portfolios that mature within one year. Our liquid assets totaled $472.9 million as of June 30, 2025. We expect that these sources of funds should enable us to meet cash obligations as they come due.

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. For the six months ended June 30, 2025, cash from operating and financing activities totaled $21.6 million and $98.8 million, respectively, while cash used in investing activities totaled $38.9 million. Significant cash flows during the quarter included inflows of $109.6 million related to the net change in deposits, $59.3 million in maturities and paydowns of available-for-sale investment securities and $29.5 million in proceeds from sales of available-for-sale investment securities, partially offset by outflows of $83.5 million related to the net change in loans and $74.4 million to purchase available-for-sale investment securities.

When appropriate, the Bank has the ability to take advantage of external sources of funds such as advances from the FHLB, national market certificate of deposit issuance programs, the Federal Reserve discount window, brokered deposits and multiple deposit networks. These external sources often provide attractive interest rates and flexible maturity dates that enable the Bank to match funding with the contractual maturity dates of assets. Securities in the investment portfolio are classified as available-for-sale and can be utilized as an additional source of liquidity.

We have an effective shelf registration covering $75 million of debt and equity securities, all of which is available, subject to authorization from the Board of Directors and market conditions, to issue debt or equity securities at our discretion. While we seek to preserve flexibility with respect to cash requirements, there can be no assurance that market conditions would permit us to sell securities on acceptable terms or at all.

Current Economic Conditions

We consider North Central West Virginia and Northern Virginia to be our primary market areas for CoRe banking services. We consider our Fintech banking market to be customers located throughout the entire United States.

We believe that the current economic climate in our primary market areas reflects economic climates that are consistent with the general national economic climate. Unemployment in the United States was 4.4% for June 2025 and 4.3% for June 2024.

Commitments and Contingent Liabilities

In the ordinary course of business, we offer financial instruments with off-balance sheet risk to meet our customers' financing needs. 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.

Our exposure to credit loss in the event of nonperformance by the counterparty to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. We use the same credit policies when making commitments and conditional obligations as we do 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. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by us 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 us to guarantee a customer's performance 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. Our policy for obtaining collateral and the nature of such collateral is substantially the same as that involved in making commitments to extend credit.

Concentration of Credit Risk

We grant a majority of our commercial, financial, agricultural, real estate and installment loans to customers throughout the North Central West Virginia, Northern Virginia, North Carolina and South Carolina markets. Collateral for loans is primarily residential and commercial real estate, personal property and business equipment. We evaluate the creditworthiness of each of our customers on a case-by-case basis and the amount of collateral they obtain is based on management’s credit evaluation.

Contingent Liability

The 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.

Off-Balance Sheet Commitments

The Bank has entered into certain agreements that represent off-balance sheet arrangements that could significantly impact the consolidated 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. In addition, the Bank utilizes letters of credit issued by the FHLB to collateralize certain public funds deposits.

Commitments to extend credit, including loan commitments, standby letters of credit and commercial letters of credit do not necessarily represent future cash requirements, as these commitments often expire without being drawn upon.

Critical Accounting Policies and Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires us to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses.

There have been no significant changes to our critical accounting policies and estimates or in the underlying accounting assumptions and estimates used in these critical accounting policies from those disclosed in the consolidated financial statements and accompanying notes contained in the 2024 Form 10-K.

Recent Accounting Pronouncements and Developments

Recent accounting pronouncements and developments applicable us are described further in Note 1 – Nature of Operations and Basis of Presentation accompanying the consolidated financial statements included elsewhere in this report.

Interest Rate Risk

Our market risk is composed primarily of interest rate risk. The ALCO is responsible for reviewing the interest rate sensitivity position and establishing policies to monitor and coordinate our sources, uses and pricing of funds.

The objective of the asset/liability management function is to structure the balance sheet in ways that maintain consistent growth in net interest income and minimize exposure to market risks within our policy guidelines. This objective is accomplished by managing balance sheet liquidity and interest rate risk exposure based on changes in economic conditions, interest rate levels and customer preferences. We manage balance sheet liquidity through the investment portfolio, sales of commercial and residential real estate loans and through the utilization of diversified funding sources, including retail deposits, a variety of wholesale funding sources and borrowings through the FHLB. Interest rate risk is managed through the use of interest rate swaps, commercial loan swap transactions, interest rate lock commitments on mortgage loans held-for-sale and the structuring of loan terms that provide cash flows to be consistently re-invested along the rate cycle.

We believe that accepting some level of interest rate risk is necessary to achieve realistic profit goals. Management and our Board of Directors have chosen an interest rate risk profile that is consistent with our strategic business plan. While management carefully monitors the exposure to changes in interest rates and takes actions as warranted to decrease any adverse impact, there can be no assurance about the actual effect of interest rate changes on net interest income.

Credit Risk

We have counterparty risk which may arise from the possible inability of third-party investors to meet the terms of their forward sales contracts, including derivative contracts such as interest rate swaps and fair value hedges. We work with third-party investors that are generally well-capitalized, are investment grade and exhibit strong financial performance to mitigate this risk. We monitor the financial condition of these third parties on an annual basis and we do not currently expect these third parties to fail to meet their obligations.

As of June 30, 2025, we carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on the results of this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2025.

During the three months ended June 30, 2025, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our operations are subject to many risks that could adversely affect our future financial condition and performance, including the risk factors that are described in the 2024 Form 10-K. There have been no material changes in our risk factors from those disclosed, except for the following:

Our business strategy includes expected growth and our business, financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

Our business strategy includes expected growth in loans, deposits and fee income. Our ability to successfully grow will depend on a variety of factors, including our ability to hire or retain a sufficient number of qualified employees, the continued availability of desirable business opportunities, competition from other financial institutions and our ability to manage our growth. Growth opportunities may not be available to us or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected.

Our future success will depend on the ability of our officers and key employees to achieve operational scalability through the implementation and improvement of our financial and management controls, reporting systems and procedures and manage a growing number of customer relationships. We may not implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Consequently, any future growth may place a strain on our administrative and operational infrastructure. Any such strain could increase our costs, reduce or eliminate our profitability and reduce the trading price of our common stock.