UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023March 31, 2024
or
TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number: 001-38314
MVBF.jpg
MVB Financial Corp.
(Exact name of registrant as specified in its charter)
West Virginia20-0034461
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
301 Virginia Avenue, Fairmont, WV26554
(Address of principal executive offices)(Zip Code)
(304) 363-4800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $1.00 par valueMVBFThe Nasdaq Stock Market LLC
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 every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date:
As of August 7, 2023,May 6, 2024, there were 12,719,82312,885,752 shares of our common stock outstanding with a par value of $1.00 per share.



TABLE OF CONTENTS
Page

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Forward-Looking Statements:

Statements in this Quarterly Report on Form 10-Q, other than statements that are based on historical data, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others, statements with respect to the beliefs, plans, objectives, goals, guidelines, expectations, anticipations and future financial condition, results of operations and performance of the Company and its subsidiaries (collectively, “we,” “our,” or “us”), including the MVB Bank, Inc. (the “Bank”), and statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “target,” “expect,” “intend,” “plan,” “projects,” “outlook” or the negative of those terms or similar expressions.

These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing our view as of any subsequent date. Forward-looking statements involve significant risks and uncertainties (both known and unknown) and actual results may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Factors that might cause such differences include, but are not limited to:
linterest rate fluctuations in response to economic conditions and the policies of various governmental and regulatory agencies;
lchanges in the economy, which could materially impact credit quality trends and the ability to generate loans and gather deposits;
lindustry factors and general economic and political conditions and events, (suchsuch as economic slowdowns or recessions, volatility of market interest rates and inflation) nationally and in the markets in which we operate;
lchanges in financial market conditions in areas in which we conduct operations, including, without limitation, changes in deposit flows, the cost of funds, reduced rates of business formation and growth, commercial and residential real estate development and real estate prices;
linterest rate fluctuations in response to economic conditions and the policies of various governmental and regulatory agencies;
llegislative or regulatory changes, including the possibility of increased oversight due to the evolving nature and complexity of our business modellegislation and heightened regulatory scrutiny in emerging financial technology (“FinTech”("Fintech") and banking-as-a-service sectors, and our ability to recruit and retain employees with industry expertise to comply with such legislation and regulatory scrutiny;
lthe impacts related to or resulting from recent bank failures and other volatility, which could affect the ability of depository institutions, including us, to attract and retain depositors, which could adversely affect our liquidity, business, financial condition and results of operations.("BaaS") sectors;
lour ability to recruit, retain and train talented employees and executives with such knowledge, experience and industry expertise to understand and comply with evolving legislation and regulations and to successfully implement succession plans for such employees and executives;
lability to adapt to technological change and to successfully execute business plans, manage risks and achieve objectives, including strategies related to investments in FinTech;Fintech;
lmarket, economic, operational, liquidity, credit and interest rate risks associated with our business;
lchanges, volatility and disruption in local, national and international political and economic conditions, including, without limitation, major developments such as wars, natural disasters, epidemics and pandemics, military actions, terrorist attacks and geopolitical conflict, including the continuing escalation and conflict in Ukraine;conflict;
lclimate change, severe weather and natural disasters which could have a material adverse effect on our business, financial condition and results of operations;
lchanges in the economy and any governmental or societal responses to global health crises and pandemics, which could directly or indirectly impact credit quality trends and the ability to generate loans and gather deposits;
lunanticipated changes in our liquidity position, including, but not limited to, changes in access to sources of liquidity and capital to address our liquidity needs;
lconcentration riskchanges in volume or composition of our deposit base, including risk of losingcertain concentrations with large clients and concentration inwithin certain industries, such as gaming deposits;banking-as-a-service, digital assets and gaming;
lthe quality and composition of our loan and securities portfolios;
lour ability to successfully conduct acquisitions and integrate acquired businesses and potential difficulties in expanding businesses in existing and new markets;
lour ability to successfully manage credit risk and the sufficiency of allowance for credit losses;
lincreases in the levels of losses, customer bankruptcies, bank failures, claims and assessments;
lchanges in government legislation and accounting policies, including the Dodd-Frank Act and Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”);
luncertainty about the transition away from the London Inter-bank Offered Rate (“LIBOR”) and to the Secured Overnight Financing Rate (“SOFR”) as the primary interest rate benchmark;
lcompetition and consolidation in the financial services industry;
lnew legal claims against us, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies or changes in existing legal matters;
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lrisks associated with the termination of the merger agreement with Integrated Financial Holdings, Inc.,success in gaining regulatory approvals, when required, including impact on the market price of our common stock, ability to retain customers, litigation, reputational and regulatory risks, as well as potential adverse reactions from customers, business partners and others resulting from the termination;for proposed mergers or acquisitions;
lchanges in consumer spending and savings habits, including demand for loan products and deposit flow;
lincreased competitive challenges and expanding product and pricing pressures among financial institutions and non-bank financial companies;
3


lrisks related to our dependence on our information technology and telecommunications systems and the potential for any system failures or interruptions, as well as operational risks or risk management failures by us, our customers or critical third parties, including without limitation, with respect to data processing, information systems, compliance with bank secrecy and anti-money laundering laws, technological changes, vendor problems, business interruptions and fraud risk;
lincreasing risk of continually evolving, sophisticated cybersecurity activities faced by financial institutions and others including third-party vendors and other entities that we rely on, that could result in, among other things, theft, loss, misuse or disclosure of confidential client, customer or corporate information or assets and a disruption of computer, software or network systems and the potential impact from such risks, including reputational damage, regulatory penalties, loss of revenues, additional costs (including repair, remediation and other costs), exposure to litigation and other financial losses;
lrisks, uncertainties and losses involved with the developing digital assets industry, including the evolving regulatory framework;
lfailure or circumvention of internal controls;
llegislative or regulatory changes which adversely affect our operations or business, including the possibility of increased regulatory oversight due to changes in the nature and complexity of our business model;
lincreased emphasis by regulators on federal and state consumer protection laws that extensively govern customer relationships;
lchanges in accounting policies or procedures as may be required by the Financial Accounting Standards Board (“FASB”) or regulatory agencies, including the impact of adopting the current expected creditagencies;
lrisks and potential losses standard;involved with uninsured deposits beyond Federal Deposit Insurance Corporation (“FDIC”) limitations; and
lcosts of deposit insurance and changes with respect to Federal Deposit Insurance Corporation (“FDIC”)FDIC insurance coverage levels.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those made in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 20222023 (the “2022“2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023,13, 2024, and from time to time, in our other filings with the SEC. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except to the extent required by law, we undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this report or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

REFERENCES

Unless the context otherwise requires, references in this report to “MVB, Financial,” “MVB,” the “Company,” “we,” “us,” “our,” and “ours” refer to the registrant, MVB Financial Corp., and its subsidiaries consolidated for the purposes of its financial statements.

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PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements

MVB Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
June 30, 2023December 31, 2022
(Unaudited)(Audited)
March 31, 2024March 31, 2024December 31, 2023
(Unaudited)(Unaudited)(Audited)
ASSETSASSETS
Cash and cash equivalents:Cash and cash equivalents:
Cash and cash equivalents:
Cash and cash equivalents:
Cash and due from banks
Cash and due from banks
Cash and due from banksCash and due from banks$8,278 $5,290 
Interest-bearing balances with banksInterest-bearing balances with banks447,557 34,990 
Total cash and cash equivalentsTotal cash and cash equivalents455,835 40,280 
Investment securities available-for-sale
Investment securities available-for-sale
Investment securities available-for-saleInvestment securities available-for-sale329,137 379,814 
Equity securitiesEquity securities41,082 38,744 
Loans held-for-saleLoans held-for-sale7,009 23,126 
Loans receivableLoans receivable2,312,387 2,372,645 
Allowance for credit lossesAllowance for credit losses(30,294)(23,837)
Loans receivable, netLoans receivable, net2,282,093 2,348,808 
Premises and equipment, netPremises and equipment, net22,407 23,630 
Bank-owned life insuranceBank-owned life insurance43,746 43,239 
Equity method investmentsEquity method investments76,413 76,223 
Accrued interest receivable and other assetsAccrued interest receivable and other assets91,287 87,833 
Assets from discontinued operations— 4,315 
Goodwill2,838 2,838 
TOTAL ASSETS
TOTAL ASSETS
TOTAL ASSETSTOTAL ASSETS$3,351,847 $3,068,850 
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY  
Deposits:Deposits: Deposits: 
Noninterest-bearingNoninterest-bearing$987,555 $1,231,544 
Interest-bearingInterest-bearing1,971,384 1,338,938 
Total depositsTotal deposits2,958,939 2,570,482 
Accrued interest payable and other liabilitiesAccrued interest payable and other liabilities31,564 36,112 
Repurchase agreementsRepurchase agreements4,798 10,037 
FHLB and other borrowings— 102,333 
Subordinated debt
Subordinated debt
Subordinated debtSubordinated debt73,414 73,286 
Senior term loanSenior term loan8,835 9,765 
Liabilities from discontinued operations— 5,444 
Total liabilitiesTotal liabilities3,077,550 2,807,459 
STOCKHOLDERS’ EQUITYSTOCKHOLDERS’ EQUITY
STOCKHOLDERS’ EQUITY
STOCKHOLDERS’ EQUITY
Common stock - par value $1; 40,000,000 and 20,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 13,567,839 and 12,719,823 shares issued and outstanding, respectively, as of June 30, 2023 and 13,466,281 and 12,618,265 shares issued and outstanding, respectively, as of December 31, 2022
13,568 13,466 
Common stock - par value $1; 40,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 13,688,899 and 12,840,883 shares issued and outstanding, respectively, as of March 31, 2024 and 13,606,399 and 12,758,383 shares issued and outstanding, respectively, as of December 31, 2023
Common stock - par value $1; 40,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 13,688,899 and 12,840,883 shares issued and outstanding, respectively, as of March 31, 2024 and 13,606,399 and 12,758,383 shares issued and outstanding, respectively, as of December 31, 2023
Common stock - par value $1; 40,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 13,688,899 and 12,840,883 shares issued and outstanding, respectively, as of March 31, 2024 and 13,606,399 and 12,758,383 shares issued and outstanding, respectively, as of December 31, 2023
Additional paid-in capitalAdditional paid-in capital158,572 157,152 
Retained earningsRetained earnings153,414 144,911 
Accumulated other comprehensive lossAccumulated other comprehensive loss(34,464)(37,704)
Treasury stock - 848,016 shares as of June 30, 2023 and December 31, 2022, at cost
(16,741)(16,741)
Treasury stock - 848,016 shares as of March 31, 2024 and December 31, 2023, at cost
Total equity attributable to parentTotal equity attributable to parent274,349 261,084 
Noncontrolling interestNoncontrolling interest(52)307 
Total stockholders' equityTotal stockholders' equity274,297 261,391 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITYTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,351,847 $3,068,850 

See accompanying notes to unaudited consolidated financial statements.
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MVB Financial Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited) (Dollars in thousands, except per share data)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
202420242023
INTEREST INCOMEINTEREST INCOME
Interest and fees on loans
Interest and fees on loans
Interest and fees on loans Interest and fees on loans$39,321 $25,837 $78,016 $47,285 
Interest on deposits with banks Interest on deposits with banks5,542 313 8,695 540 
Interest on investment securities Interest on investment securities1,229 838 3,077 1,486 
Interest on tax-exempt loans and securities Interest on tax-exempt loans and securities939 1,102 2,006 2,041 
Total interest income Total interest income47,031 28,090 91,794 51,352 
INTEREST EXPENSEINTEREST EXPENSE
INTEREST EXPENSE
INTEREST EXPENSE
Interest on deposits
Interest on deposits
Interest on deposits Interest on deposits16,450 661 26,603 1,317 
Interest on short-term borrowings Interest on short-term borrowings— 888 14 
Interest on subordinated debt Interest on subordinated debt801 760 1,600 1,513 
Interest on senior term loan Interest on senior term loan198 — 392 — 
Total interest expenseTotal interest expense17,449 1,430 29,483 2,844 
NET INTEREST INCOMENET INTEREST INCOME29,582 26,660 62,311 48,508 
Provision (release of allowance) for credit losses(4,235)5,100 341 6,380 
Net interest income after provision (release of allowance) for credit losses33,817 21,560 61,970 42,128 
NET INTEREST INCOME
NET INTEREST INCOME
Provision for credit losses
Net interest income after provision for credit losses
NONINTEREST INCOMENONINTEREST INCOME
NONINTEREST INCOME
NONINTEREST INCOME
Payment card and service charge income
Payment card and service charge income
Payment card and service charge incomePayment card and service charge income3,503 4,015 7,113 6,657 
Insurance and investment services incomeInsurance and investment services income78 218 170 472 
Insurance and investment services income
Insurance and investment services income
Gain (loss) on sale of available-for-sale securities, netGain (loss) on sale of available-for-sale securities, net— — (1,536)650 
Gain (loss) on sale of equity securities, net(294)100 (294)100 
Loss on derivatives, netLoss on derivatives, net— — (100)— 
Gain (loss) on sale of loans, net(989)1,405 (1,345)2,488 
Holding gain (loss) on equity securities160 (26)(148)(85)
Loss on derivatives, net
Loss on derivatives, net
Loss on sale of loans, net
Holding loss on equity securities
Compliance and consulting incomeCompliance and consulting income996 1,180 2,012 2,414 
Equity method investments income1,873 549 680 1,687 
Loss on divestiture activity(986)— (986)— 
Equity method investments gain— 71 — 1,874 
Equity method investments loss
Other operating income
Other operating income
Other operating incomeOther operating income2,078 1,872 3,920 2,406 
Total noninterest income Total noninterest income6,419 9,384 9,486 18,663 
NONINTEREST EXPENSESNONINTEREST EXPENSES
NONINTEREST EXPENSES
NONINTEREST EXPENSES
Salaries and employee benefits
Salaries and employee benefits
Salaries and employee benefits Salaries and employee benefits15,746 16,585 32,492 32,312 
Occupancy expense Occupancy expense1,090 907 1,882 1,879 
Equipment depreciation and maintenance Equipment depreciation and maintenance1,451 1,252 2,908 2,464 
Data processing and communications Data processing and communications1,118 1,055 2,266 2,071 
Professional fees Professional fees3,948 3,726 6,899 7,743 
Professional fees
Professional fees
Insurance, tax and assessment expense Insurance, tax and assessment expense1,131 614 2,035 1,150 
Travel, entertainment, dues and subscriptions Travel, entertainment, dues and subscriptions2,137 2,045 4,059 3,713 
Other operating expenses Other operating expenses3,661 1,788 6,058 3,897 
Total noninterest expense Total noninterest expense30,282 27,972 58,599 55,229 
Income before income taxes9,954 2,972 12,857 5,562 
Income from continuing operations, before income taxes
Income taxes
Net income from continuing operations
Income from discontinued operations, before income taxes
Income taxes from discontinued operations
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Income taxes1,956 699 2,421 1,379 
Net income from continuing operations7,998 2,273 10,436 4,183 
Income from discontinued operations before income taxes— 678 11,831 1,664 
Income taxes from discontinued operations— 160 3,049 385 
Net income from discontinued operationsNet income from discontinued operations— 518 8,782 1,279 
Net income7,998 2,791 19,218 5,462 
Net loss attributable to noncontrolling interest114 165 236 358 
Net income from discontinued operations
Net income from discontinued operations
Net income, before noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net income attributable to parentNet income attributable to parent$8,112 $2,956 $19,454 $5,820 
Net income attributable to parent
Net income attributable to parent
Earnings per share from continuing operations - basic
Earnings per share from continuing operations - basic
Earnings per share from continuing operations - basicEarnings per share from continuing operations - basic$0.64 $0.20 $0.84 $0.37 
Earnings per share from discontinued operations - basicEarnings per share from discontinued operations - basic$— $0.04 $0.69 $0.11 
Earnings per common shareholder - basicEarnings per common shareholder - basic$0.64 $0.24 $1.54 $0.48 
Earnings per share from continuing operations - dilutedEarnings per share from continuing operations - diluted$0.63 $0.19 $0.82 $0.35 
Earnings per share from discontinued operations - dilutedEarnings per share from discontinued operations - diluted$— $0.04 $0.68 $0.10 
Earnings per common shareholder - dilutedEarnings per common shareholder - diluted$0.63 $0.23 $1.50 $0.45 
Weighted-average shares outstanding - basicWeighted-average shares outstanding - basic12,689,669 12,176,805 12,656,698 12,135,223 
Weighted-average shares outstanding - dilutedWeighted-average shares outstanding - diluted12,915,294 12,895,581 12,959,725 12,870,892 

See accompanying notes to unaudited consolidated financial statements.
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MVB Financial Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited) (Dollars in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net income before noncontrolling interest$7,998 $2,791 $19,218 $5,462 
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
202420242023
Net income, before noncontrolling interest
Other comprehensive income (loss):Other comprehensive income (loss):
Other comprehensive income (loss):
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-saleUnrealized holding gains (losses) on securities available-for-sale(5,381)(16,631)2,323 (34,150)
Reclassification adjustment for gain (loss) recognized in income294 — 1,830 (650)
Unrealized holding gains (losses) on securities available-for-sale
Unrealized holding gains (losses) on securities available-for-sale
Reclassification adjustment for (gain) loss recognized in income
Change in defined benefit pension planChange in defined benefit pension plan371 320 343 689 
Reclassification adjustment for amortization of net actuarial loss recognized in incomeReclassification adjustment for amortization of net actuarial loss recognized in income29 107 58 214 
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income45 (187)(289)(197)
Reclassification adjustment for investment hedge carrying value adjustment recognized in income
Other comprehensive income (loss), before taxOther comprehensive income (loss), before tax(4,642)(16,391)4,265 (34,094)
Income taxes related to items of other comprehensive income (loss):
Income taxes related to items of other comprehensive loss:
Income taxes related to items of other comprehensive loss:
Income taxes related to items of other comprehensive loss:
Unrealized holding gains (losses) on securities available-for-saleUnrealized holding gains (losses) on securities available-for-sale1,294 4,194 (558)8,298 
Reclassification adjustment for gain (loss) recognized in income(71)— (440)152 
Unrealized holding gains (losses) on securities available-for-sale
Unrealized holding gains (losses) on securities available-for-sale
Reclassification adjustment for (gain) loss recognized in income
Change in defined benefit pension planChange in defined benefit pension plan(89)(81)(82)(167)
Reclassification adjustment for amortization of net actuarial loss recognized in incomeReclassification adjustment for amortization of net actuarial loss recognized in income(7)(27)(14)(52)
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income(11)47 69 49 
Income taxes related to items of other comprehensive income (loss):1,116 4,133 (1,025)8,280 
Reclassification adjustment for investment hedge carrying value adjustment recognized in income
Income taxes related to items of other comprehensive loss:
Total other comprehensive income (loss), net of taxTotal other comprehensive income (loss), net of tax(3,526)(12,258)3,240 (25,814)
Total other comprehensive income (loss), net of tax
Total other comprehensive income (loss), net of tax
Comprehensive income attributable to noncontrolling interest114 165 236 358 
Comprehensive (income) loss attributable to noncontrolling interest
Comprehensive (income) loss attributable to noncontrolling interest
Comprehensive (income) loss attributable to noncontrolling interest
Comprehensive income (loss)$4,586 $(9,302)$22,694 $(19,994)
Comprehensive income
Comprehensive income
Comprehensive income

See accompanying notes to unaudited consolidated financial statements.

8


MVB Financial Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited) (Dollars in thousands except per share data)

Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockTotal stockholders' equity attributable to parentNoncontrolling interestTotal stockholders' equity
SharesAmountSharesAmount
Balance at December 31, 202213,466,281 $13,466 $157,152 $144,911 $(37,704)848,016 $(16,741)$261,084 $307 $261,391 
Net income (loss)— — — 11,342 — — — 11,342 (122)11,220 
Other comprehensive income— — — — 6,766 — — 6,766 — 6,766 
Dividends on common stock ($0.17 per share)— — — (2,146)— — — (2,146)— (2,146)
Impact of adopting ASC 326, net of tax— — — (6,642)— — — (6,642)— (6,642)
Stock-based compensation— — 831 — — — — 831 — 831 
Stock-based compensation related to equity method investments— — 69 — — — — 69 — 69 
Common stock options exercised4,450 66 — — — — 70 — 70 
Restricted stock units vested43,882 44 (44)— — — — — — — 
Minimum tax withholding on restricted stock units issued(13,416)(13)(230)— — — — (243)— (243)
Balance at March 31, 202313,501,197 $13,501 $157,844 $147,465 $(30,938)848,016 $(16,741)$271,131 $185 $271,316 
Net income (loss)— — — 8,112 — — — 8,112 (114)7,998 
Other comprehensive loss— — — — (3,526)— — (3,526)— (3,526)
Dividends on common stock ($0.17 per share)— — — (2,163)— — — (2,163)— (2,163)
Stock-based compensation— — 792 — — — — 792 — 792 
Stock-based compensation related to equity method investments— — 104 — — — — 104 — 104 
Common stock options exercised3,000 40 — — — — 43 — 43 
Restricted stock units vested86,520 87 (87)— — — — — — — 
Minimum tax withholding on restricted stock units issued(22,878)(23)(415)— — — — (438)— (438)
Redemption of noncontrolling interest— — 294 — — — — 294 (123)171 
Balance at June 30, 202313,567,839 $13,568 $158,572 $153,414 $(34,464)848,016 $(16,741)$274,349 $(52)$274,297 
Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockTotal stockholders' equity attributable to parentNoncontrolling interestTotal stockholders' equity
SharesAmountSharesAmount
Balance at December 31, 202313,606,399 $13,606 $160,488 $160,862 $(28,831)848,016 $(16,741)$289,384 $(42)$289,342 
Net income— — — 4,482 — — — 4,482 20 4,502 
Other comprehensive loss— — — — (1,968)— — (1,968)— (1,968)
Dividends on common stock ($0.17 per share)— — — (2,145)— — — (2,145)— (2,145)
Stock-based compensation— — 780 — — — — 780 — 780 
Stock-based compensation related to equity method investments— — 104 — — — — 104 — 104 
Common stock options exercised82,500 83 1,130 — — — — 1,213 — 1,213 
Balance at March 31, 202413,688,899 $13,689 $162,502 $163,199 $(30,799)848,016 $(16,741)$291,850 $(22)$291,828 

9



Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockTotal stockholders' equity attributable to parentNoncontrolling interestTotal stockholders' equity
SharesAmountSharesAmount
Balance at December 31, 202112,934,966 $12,935 $143,521 $138,219 $(3,606)848,016 $(16,741)$274,328 $975 $275,303 
Net income (loss)— — — 2,864 — — — 2,864 (193)2,671 
Other comprehensive loss— — — — (13,556)— — (13,556)— (13,556)
Dividends on common stock ($0.17 per share)— — — (2,059)— — — (2,059)— (2,059)
Stock-based compensation— — 674 — — — — 674 — 674 
Stock-based compensation related to equity method investments— — 104 — — — — 104 — 104 
Common stock options exercised56,174 56 669 — — — — 725 — 725 
Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockTotal stockholders' equity attributable to parentNoncontrolling interestTotal stockholders' equity
Balance at March 31, 202212,991,140 $12,991 $144,968 $139,024 $(17,162)848,016 $(16,741)$263,080 $782 $263,862 
SharesAmountAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockTotal stockholders' equity attributable to parentNoncontrolling interestTotal stockholders' equityAmountSharesAmount
Net income (loss)Net income (loss)— — — 2,956 — — — 2,956 (165)2,791 
Other comprehensive loss— — — — (12,258)— — (12,258)— (12,258)
Net income (loss)
Net income (loss)
Other comprehensive income
Dividends on common stock ($0.17 per share)Dividends on common stock ($0.17 per share)— — — (2,076)— — — (2,076)— (2,076)
Impact of adopting ASC 326, net of tax
Stock-based compensationStock-based compensation— — 757 — — — — 757 — 757 
Stock-based compensation related to equity method investmentsStock-based compensation related to equity method investments— — 173 — — — — 173 — 173 
Common stock options exercisedCommon stock options exercised30,200 30 362 — — — — 392 — 392 
Restricted stock units vested73,300 73 (73)— — — — — — — 
Restricted stock units issued
Minimum tax withholding on restricted stock units issuedMinimum tax withholding on restricted stock units issued(17,596)(17)(674)— — — — (691)— (691)
Stock purchase from noncontrolling interest— — (33)— — — — (33)(7)(40)
Balance at June 30, 202213,077,044 $13,077 $145,480 $139,904 $(29,420)848,016 $(16,741)$252,300 $610 $252,910 
Balance at March 31, 2023
Balance at March 31, 2023
Balance at March 31, 2023

See accompanying notes to unaudited consolidated financial statements.
109


MVB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited) (Dollars in thousands)

Three Months Ended March 31,Three Months Ended March 31,
202420242023
OPERATING ACTIVITIES
Net income, before noncontrolling interest
Net income, before noncontrolling interest
Net income, before noncontrolling interest
Adjustments to reconcile net income, before noncontrolling interest, to net cash from operating activities:
Six Months Ended June 30,
Net amortization and accretion of investments
20232022
OPERATING ACTIVITIES
Net income before noncontrolling interest$19,218 $5,462 
Adjustments to reconcile net income to net cash from operating activities:
Net amortization and accretion of investments
Net amortization and accretion of investments Net amortization and accretion of investments988 1,320 
Net amortization of deferred loan costs Net amortization of deferred loan costs831 1,269 
Provision for credit losses Provision for credit losses341 6,380 
Depreciation and amortization Depreciation and amortization2,683 1,780 
Stock-based compensation Stock-based compensation1,623 1,431 
Stock-based compensation related to equity method investments Stock-based compensation related to equity method investments173 277 
Loans originated for sale Loans originated for sale(402)(28,308)
Proceeds of loans held-for-sale sold Proceeds of loans held-for-sale sold23,562 45,361 
Holding loss on equity securities Holding loss on equity securities148 85 
(Gain) loss on sale of available-for-sale securities, net (Gain) loss on sale of available-for-sale securities, net1,536 (650)
(Gain) loss on sale of equity securities, net294 (100)
(Gain) loss on sale of available-for-sale securities, net
(Gain) loss on sale of available-for-sale securities, net
Gain on sale of loans held-for-sale Gain on sale of loans held-for-sale(154)(2,488)
Loss on sale of loans held for investment1,499 — 
Gain on sale of loans held-for-sale
Gain on sale of loans held-for-sale
Loss on sale of loans held-for-investment
Gain on sale of discontinued operations Gain on sale of discontinued operations(11,800)— 
Loss on divestiture activity986 — 
Gain on sale of other real estate owned
Gain on sale of other real estate owned
Gain on sale of other real estate owned Gain on sale of other real estate owned(138)(2)
Income on bank-owned life insurance Income on bank-owned life insurance(507)(487)
Deferred income taxes Deferred income taxes59 12 
Equity method investments income(680)(1,687)
Equity method investments gain— (1,874)
Return on equity method investments308 3,775 
Equity method investments loss
Other assets
Other assets
Other assets Other assets(6,552)(19,913)
Other liabilities Other liabilities(3,403)(22,188)
Net cash from operating activities Net cash from operating activities30,613 (10,545)
INVESTING ACTIVITIESINVESTING ACTIVITIES
Purchases of available-for-sale investment securities Purchases of available-for-sale investment securities(60,425)(67,867)
Purchases of available-for-sale investment securities
Purchases of available-for-sale investment securities
Net maturities/paydowns of available-for-sale investment securities Net maturities/paydowns of available-for-sale investment securities55,791 14,874 
Sales of available-for-sale investment securities Sales of available-for-sale investment securities54,531 60,635 
Purchases of premises and equipment Purchases of premises and equipment(1,213)(2,109)
Disposals of premises and equipment Disposals of premises and equipment425 — 
Net change in loans
Proceeds of loans held-for-investment sold
Net change in loans55,030 (374,878)
Proceeds of loans held for investment sold9,502 — 
Purchases of restricted bank stock— (2,962)
Redemptions of restricted bank stock— 2,325 
Proceeds from maturities of certificates of deposit with banks— 2,223 
Proceeds from sale of other real estate owned Proceeds from sale of other real estate owned385 1,004 
Proceeds from sale of other real estate owned
Proceeds from sale of other real estate owned
Investment in equity method investments
Investment in equity method investments
Investment in equity method investments
Purchase of equity securities Purchase of equity securities(300)(2,859)
Proceeds from sale of equity securities206 1,100 
Net cash transferred for sale of discontinued operations Net cash transferred for sale of discontinued operations(3,935)— 
Net cash transferred in divestiture activity(8)— 
Net cash transferred for sale of discontinued operations
Net cash transferred for sale of discontinued operations
Net cash from investing activities
Net cash from investing activities
Net cash from investing activities Net cash from investing activities109,989 (368,514)
FINANCING ACTIVITIESFINANCING ACTIVITIES
Net increase in deposits388,457 237,365 
Net change in deposits
Net change in deposits
Net change in deposits
Net change in repurchase agreements Net change in repurchase agreements(5,239)(233)
Net change in FHLB and other borrowings Net change in FHLB and other borrowings(102,333)— 
Principal payments on senior term loanPrincipal payments on senior term loan(956)— 
Principal payments on senior term loan
Principal payments on senior term loan
Common stock options exercised
Common stock options exercised
Common stock options exercised Common stock options exercised113 1,117 
Withholding cash issued in lieu of restricted stock Withholding cash issued in lieu of restricted stock(680)(691)
Withholding cash issued in lieu of restricted stock
Withholding cash issued in lieu of restricted stock
Cash dividends paid on common stock Cash dividends paid on common stock(4,309)(4,135)
1110


Redemption of noncontrolling interest(100)— 
Stock purchase from noncontrolling interest— (40)
Net cash from financing activities Net cash from financing activities274,953 233,383 
Net change in cash and cash equivalentsNet change in cash and cash equivalents415,555 (145,676)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period40,280 307,437 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$455,835 $161,761 
Cash payments for:Cash payments for:
Cash payments for:
Cash payments for:
Interest on deposits, repurchase agreements and borrowings
Interest on deposits, repurchase agreements and borrowings
Interest on deposits, repurchase agreements and borrowings Interest on deposits, repurchase agreements and borrowings$30,233 $3,450 
Income taxes Income taxes10,235 316 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Supplemental disclosure of cash flow information:
Change in unrealized holding losses on securities available-for-sale Change in unrealized holding losses on securities available-for-sale4,154 36,355 
Restricted stock units vested131 73 
Change in unrealized holding losses on securities available-for-sale
Change in unrealized holding losses on securities available-for-sale
Employee stock-based compensation tax withholding obligations
Employee stock-based compensation tax withholding obligations
Employee stock-based compensation tax withholding obligations Employee stock-based compensation tax withholding obligations(36)(17)
Impact of adopting ASC 326, net of tax Impact of adopting ASC 326, net of tax6,642 — 
Creation of servicing assets from loan sales406 — 
Loans transferred to loans held-for-sale7,909 7,957 
Loans transferred to (out of) loans held-for-sale
Loans transferred to (out of) loans held-for-sale
Loans transferred to (out of) loans held-for-sale
Due from broker for available-for-sale investment securities sold
See accompanying notes to unaudited consolidated financial statements.
1211


Notes to the Consolidated Financial Statements

Note 1 – Nature of Operations and Basis of Presentation

Business and Organization

MVB Financial Corp. is a financial holding company organized in 2003 as a West Virginia corporation that operates principally through its wholly-owned subsidiary, MVB Bank, Inc. (the “Bank”). The Bank’s consolidated subsidiaries include MVB Edge Ventures, LLC (“Edge Ventures”), Paladin Fraud, LLC (“Paladin Fraud”) and MVB Insurance, LLC, (“MVB Insurance”). The Bank owns a controlling interest in Trabian Technology, Inc. (“Trabian”). Edge Ventures wholly-owns Victor Technologies, Inc. (“Victor”) and MVB Technology, LLC ("MVB Technology"). The Bank also owns an equity method investment in Intercoastal Mortgage Company, LLC (“ICM”) and MVB Financial Corp. owns equity method investments in Warp Speed Holdings, LLC (“Warp Speed”) and Ayers Socure II, LLC (“Ayers Socure II”).

Edge Ventures serves as a management company providing oversight, alignment and structure for MVB’s Fintech companies and allocates resources to help incubate venture businesses and technologies acquired and developed by MVB. MVB Financial Corp.'s consolidated subsidiaries also includes SPE PR, LLC.

Through our professional services entities, which include Paladin Fraud and Trabian, we provide consulting solutions to assist Fintech and corporate clients in building digital products and meeting their fraud defense needs.

In February 2023, we completed the sale of the Bank’s wholly-owned subsidiary, ProCo Global, Inc. (“Chartwell,” which does business under the registered trade name Chartwell Compliance). In May 2023, MVBwe entered into an agreement with Flexia, to facilitate the divestiture of MVB’sour interests in the ongoing business of Flexia. Refer to Note 1415 – Acquisition & Divestiture Activity.

We conduct a wide range of business activities through the Bank, primarily commercial and retail (“CoRe”) banking services, as well as Fintech banking.

CoRe Banking

We offer our customers a full range of products and services including:
lVarious demand deposit accounts, savings accounts, money market accounts and certificates of deposit;
lCommercial, consumer and real estate mortgage loans and lines of credit;
lDebit cards;
lCashier’s checks; and
lSafe deposit rental facilities; andfacilities.
lNon-deposit investment services offered through an association with a broker-dealer.

Fintech Banking

We provide innovative strategies to independent banking and corporate clients throughout the United States. Our dedicated Fintech team specializes in providing banking services to corporate Fintech clients, with a primary focusprimarily focusing on operational risk management and compliance. Managing banking relationships with clients in the payments, digital savings, digital assets, crowd funding, lotterybanking-as-a-service and gaming industries is complex, from both an operational and regulatory perspective. We believe that theDue to this complexity, there are a limited number of banking institutions serving these industries, causes them to be underserved withwhich can result in a lack of quality banking services and providesfocus on these entities, providing us with a significantlyan expanded pool of potential customers. When serviced in a safe and efficient manner, we believe these industries provide a source of stable, lower cost deposits and noninterest, fee-based income. We thoroughly analyze each industry in which our customers operate, as well as any new products or services provided, from both an operational and regulatory perspective.

Principles of Consolidation and Basis of Presentation

The financial statements are consolidated to include the accounts of MVB and its subsidiaries, including the Bank and the Bank’s subsidiaries. In our opinion, the accompanying consolidated financial statements contain all normal recurring adjustments necessary for a fair presentation of our financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with instructions for Form 10-Q and Article 10 of Regulation S-X of the SEC. All significant intercompany accounts and transactions have been eliminated in consolidated financial statements.
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Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The consolidated balance sheet as of December 31, 20222023 has been derived from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20222023 (the “2022“2023 Form 10-K”). The information presented in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated
12


financial statements and notes thereto included in the 20222023 Form 10-K. Operating results for the three and six months ended June 30, 2023March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.2024.

Wholly-owned investments or investments in which we have a controlling financial interest, whether majority owned or in certain circumstances a minority interest, are required to be consolidated into our financial statements. We evaluate investments in entities on an ongoing basis to determine the need to consolidate.

The Bank owns an 80.8% interest in Trabian, which grants us a controlling interest. Accordingly, we are required to consolidate 100% of Trabian within the consolidated financial statements. The remaining interests of Trabian are accounted for separately as noncontrolling interestinterests within our consolidated financial statements. Noncontrolling interest represents the portion of ownership and profit or loss that is attributable to the minority owners of these entities.

Unconsolidated investments where we have the ability to exercise significant influence over the operating and financial policies of the respective investee are accounted for using the equity method of accounting. Those investments that are not consolidated or accounted for using the equity method of accounting are accounted for under cost or fair value accounting. For investments accounted for under the equity method, we record our investment in non-consolidated affiliates and the portion of income or loss in equity in earnings of non-consolidated affiliates. We periodically evaluate these investments for impairment. As of June 30, 2023,March 31, 2024, we held three equity method investments. See Note 5 – Equity Method Investments for further information.

Preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based upon the best available information and actual results could differ from those estimates. An estimate that is particularly significant to the consolidated financial statements relates to the determination of the allowance for credit losses (“ACL”) and the allowance for loan losses (“ALL”) for current and previous periods, respectively..

In certain instances, amounts reported in prior periods’ consolidated financial statements have been reclassified to conform to the current presentation.

We have evaluated subsequent events for potential recognition and/or disclosure through the date these consolidated financial statements were issued.

RecentRecently Issued Accounting Pronouncements

In March 2020, the FASBFinancial Accounting Standards Board ("FASB") issued ASUAccounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional expedients and exceptions for certain contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform. In December 2022, the FASB issued ASC 2022-06, Deferral of the Sunset Date of Topic 848, which extends the sunset date of Topic 848 from December 31, 2022, to December 31, 2024. The guidance permits entities to not apply modification accounting or remeasure lease payments in lease contracts if the changes to the contract are related to the discontinuation of the reference rate. If certain criteria are met, the amendments also allow exceptions to the de-designation criteria of the hedging relationship and the assessment of hedge effectiveness during the transition period. In January 2021, ASU 2021-01 was issued by the FASB and clarifies that certain exceptions in reference rate reform apply to derivatives that are affected by the discounting transition. As of June 30, 2023,March 31, 2024, all loans and other relevant financial instruments that referenced LIBOR have been transitioned to the secured overnight financing rate (“SOFR”).SOFR.

In June 2022,November 2023, the FASB issued ASU 2022-03,2023-07, Fair Value MeasurementSegment Reporting (Topic 820)280): Fair Value Measurement of Equity Securities SubjectImprovements to Contractual Sale RestrictionsReportable Segments Disclosures. . The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments clarify thatcircumstances in which an entity can disclose multiple segment measures of profit or loss and provide new segment disclosure requirements for entities with a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value.single reportable segment. The amendments also clarify that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account and require additional disclosures related to equity securities with contractual sale restrictions. The amendment isare effective for fiscal years beginning after December 15, 2023.2023 and interim periods within fiscal years beginning after December 14, 2024. We do notare currently expectevaluating the impact these amendments tochanges may have a material impacton our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require disaggregated information about a reporting entity's effect tax rate reconciliation as well as information on income taxes paid. Public business entities will be required to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. The amendments also require greater detail about individual reconciling items in the rate reconciliation to the extent that the impact of those items
14
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In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structure Using the Proportional Amortization Method.exceeds a specified threshold. The amendments allow registrants the option to apply the proportional amortization method to account for all types of investments in tax credit structures if certain conditions are met. Prior to these amendments, the option to use the proportional amortization method was limited to only investments in low-income-housing tax credit structures. Under the proportional amortization method, entities amortize the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognize the net amortization and income tax credits and other benefits in the income statement as a component of income tax expense or benefit. The amendment is effective for fiscal years beginning after December 15, 2023.2024. We are currently evaluating the impact these changes may have on our consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The amendments clarify how an entity determines whether a profits interest or similar award is within the scope of Compensation - Stock Compensation (Topic 718) or not a share-based payment arrangements, and therefore within the scope of other guidance. The amendments are effective for fiscal years beginning after December 15, 2024. We do not currently expect these amendments to have a material impact on our consolidated financial statements.

Adoption of NewRecently Adopted Accounting PronouncementPronouncements

In January 2023, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequent amendments to the initial guidance: ASU 2018-19,guidance, which collectively comprise Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments – Credit Losses, Topic 326, ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses and ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures all of which clarify codification and correct unintended application of the guidance. Collectively, upon adoption, these updates comprise Accounting Standards Codification Topic 326 Financial Instruments - Credit Losses ("ASC 326"). The new guidance replacesASC 326 replaced the incurred loss impairment methodology in current U.S. GAAP with an expected credit loss methodology and requiresrequired consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will beare presented at the net amount expected to be collected by using an allowance for credit losses.ACL. Purchased credit deteriorated (“PCD”) loans will receivereceived an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will beare recorded through an allowance for credit losses,ACL, with such allowance limited to the amount by which fair value is below amortized cost. We formed a cross-functional implementation team. This cross-functional team has completed testing the model and has executed the implementation plan, which included assessment and documentation of processes, internal controls and data sources; model testing and documentation; and system configuration, among other things. We completed the process of implementing a third-party vendor solution to assist us in the application of this standard. Adoption of this pronouncement resulted in an increase in the ACL as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio.

On January 1, 2023, we adopted ASU 2016-13ASC 326 using the modified retrospective method for loans, leases and off-balance sheet credit exposures. Adoption of this guidance resulted in a $10.0 million increase in the ACL, comprised of increases in the ACL for loans of $8.9 million and the ACL for unfunded commitments of $1.1 million, with $1.2 million of the increase reclassified from the amortized cost basis of PCD financial assets. This increase was offset by $2.1 million related to tax effect, resulting in a cumulative adjustment to retained earnings of $6.6 million. Results for reporting periods beginning after JanuaryFor additional information on the new standard, see Note 1 2023 are presented under ASU 2016-13 while prior period amounts continue- Summary of Significant Accounting Policies to be reportedthe consolidated financial statements included in accordance with the incurred loss model.

Item 8, Financial Statements and Supplementary Data
The ACL for the majority, of the Bank's loans and leases was calculated using a discounted cash flow methodology applied at a loan level with a one-year reasonable and supportable forecast period and a one-year straight-line reversion period. The Bank’s current ACL fluctuates over time due to macroeconomic conditions and forecasts as well as the size and composition of the loan portfolios.

We adopted ASC 326 using the prospective transition approach for PCD assets that were previously classified as purchased credit impaired (“PCI”). In accordance with the pronouncement, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. As mentioned above, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $1.2 million to the ACL. The remaining noncredit discount (based on the adjusted amortized cost basis) is being accreted into interest income at a rate that approximates the effective interest rate beginning on January 1, 2023. With regard to PCD assets, because we elected to disaggregate the former PCI pools and no longer considers these pools to be the unit of account, contractually delinquent PCD loans are now being reported as nonaccrual loans using the same criteria as other loans.

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In addition to the aforementioned elections, we made the following elections at adoption:
lto not measure an ACL for accrued interest receivable and instead elected to reverse interest income on those loans that are 90 days past due;
lto exclude accrued interest receivable from the amortized cost basis of financial instruments subject to ASC 326 and to separately state the balance of accrued interest receivable and other assets on the consolidated balance sheet;
las a practical expedient, elected to use the fair value of collateral when determining the ACL for loans if repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty (collateral-dependent loans).
l
to update our troubled debt restructuring ("TDR") disclosures in accordance with ASU 2022-02, Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminated the accounting guidance for TDRs for creditors.

In June 2023 we adopted ASU 2022-01, Fair Value Hedging – Portfolio Layer Method, upon entering into an interest rate swap to hedge the fair value of fixed rate mortgages included in a closed portfolio for changes in the SOFR benchmark interest rate component of the mortgages. This ASU amends the guidance in ASU 2017-12 and expands what it now calls the portfolio layer method (previously the last-of-layer method) to allow entities to hedge multiple layers of a closed portfolio of assets. It also allows for the use of an amortizing notional swap when entering into a portfolio layer method hedge. Thus, the interest rate swap is considered a hedge of a single layer of the closed portfolio of fixed rate loans. We applied this ASU to the derivatives we entered into during June 2023 as further described in Note 10 - Fair Value Measurements below. There were no instruments on the balance sheet that were subject to this ASU prior to June 2023.Form 10-K.


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Note 2 – Investment Securities

The following tables present amortized cost and fair values of investment securities available-for-sale as of the periods shown:
June 30, 2023
March 31, 2024March 31, 2024
(Dollars in thousands)(Dollars in thousands)Amortized CostUnrealized GainUnrealized LossFair Value(Dollars in thousands)Amortized CostUnrealized GainUnrealized LossFair Value
United States government agency securitiesUnited States government agency securities$44,844 $$(6,376)$38,474 
United States sponsored mortgage-backed securitiesUnited States sponsored mortgage-backed securities65,715 — (11,349)54,366 
United States treasury securitiesUnited States treasury securities106,552 — (8,523)98,029 
Municipal securitiesMunicipal securities136,352 4,232 (19,518)121,066 
Corporate debt securitiesCorporate debt securities9,071 — (170)8,901 
Other debt securitiesOther debt securities7,500 — — 7,500 
Total debt securities370,034 4,238 (45,936)328,336 
Total available-for-sale debt securities
Other securitiesOther securities801 — — 801 
Total investment securities available-for-sale$370,835 $4,238 $(45,936)$329,137 
Investment securities available-for-sale
December 31, 2022
December 31, 2023December 31, 2023
(Dollars in thousands)(Dollars in thousands)Amortized CostUnrealized GainUnrealized LossFair Value(Dollars in thousands)Amortized CostUnrealized GainUnrealized LossFair Value
United States government agency securitiesUnited States government agency securities$51,436 $15 $(6,637)$44,814 
United States sponsored mortgage-backed securitiesUnited States sponsored mortgage-backed securities68,267 — (11,696)56,571 
United States treasury securitiesUnited States treasury securities130,689 48 (9,828)120,909 
Municipal securitiesMunicipal securities157,842 2,412 (21,618)138,636 
Corporate debt securitiesCorporate debt securities10,570 10 (20)10,560 
Other debt securitiesOther debt securities7,500 — — 7,500 
Total debt securities426,304 2,485 (49,799)378,990 
Total available-for-sale debt securities
Other securitiesOther securities824 — — 824 
Total investment securities available-for-sale$427,128 $2,485 $(49,799)$379,814 
Investment securities available-for-sale

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The following table presents amortized cost and fair values of available-for-sale debt securities by contractual maturity as of the period shown:
June 30, 2023
March 31, 2024March 31, 2024
(Dollars in thousands)(Dollars in thousands)Amortized CostFair Value(Dollars in thousands)Amortized CostFair Value
Within one yearWithin one year$4,704 $4,701 
After one year, but within five yearsAfter one year, but within five years112,082 103,496 
After five years, but within ten yearsAfter five years, but within ten years39,867 35,626 
After ten yearsAfter ten years213,381 184,513 
Total$370,034 $328,336 
Total available-for-sale debt securities

The table above reflects contractual maturities. Actual results will differ as the loans underlying the mortgage-backed securities may be repaid sooner than scheduled.

Investment securities with a carrying value of $212.0$236.3 million and $91.3$223.4 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve discount window.

Our investment portfolio includes securities that are in an unrealized loss position as of June 30, 2023, the details of which are included in the following table.March 31, 2024. We evaluate available-for-sale debt securities to determine whether the unrealized loss is due to credit-related factors or non-credit-related factors. When determining the allowance for credit lossesACL on securities, we consider 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, our 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.

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Although these securities would result in a pre-tax loss of $45.9$36.8 million if sold at June 30, 2023, declinesMarch 31, 2024, we have no intent to sell the applicable securities at such fair values, and maintain that we have the ability to hold these securities until all principal has been recovered. It is more likely than not that we will not, for liquidity purposes, sell any securities at a loss. Declines in the fair valuevalues of these securities can be traced to general market conditions, which reflect the prospect for the economy as a whole, rather than credit-related conditions. Therefore, we have no allowance for creditACL losses as of June 30, 2023.March 31, 2024.

The following tables show available-for-sale debt securities in an unrealized loss position for which an allowance for credit lossesACL has not been recorded as of June 30, 2023March 31, 2024 and December 31, 2022,2023, aggregated by investment category and length of time that the individual securities have been in a continuous loss position:
June 30, 2023
(Dollars in thousands)Less than 12 months12 months or more
Description and number of positionsFair ValueUnrealized LossFair ValueUnrealized Loss
United States government agency securities (25)$272 $— $36,479 $(6,376)
United States sponsored mortgage-backed securities (48)2,362 (22)52,004 (11,327)
United States treasury securities (23)— — 98,028 (8,523)
Municipal securities (155)2,890 (6,810)85,784 (12,708)
Corporate debt securities (7)2,429 (142)1,472 (28)
Total$7,953 $(6,974)$273,767 $(38,962)
December 31, 2022
(Dollars in thousands)Less than 12 months12 months or more
Description and number of positionsFair ValueUnrealized LossFair ValueUnrealized Loss
United States government agency securities (32)$21,287 $(1,937)$19,423 $(4,700)
United States sponsored mortgage-backed securities (51)6,953 (852)49,618 (10,844)
United States treasury securities (29)11,936 (130)102,092 (9,698)
Municipal securities (173)65,930 (7,507)41,184 (14,111)
Corporate debt securities (3)2,380 (20)— — 
Total$108,486 $(10,446)$212,317 $(39,353)
March 31, 2024
(Dollars in thousands)Less than 12 months12 months or more
Description and number of positionsFair ValueUnrealized LossFair ValueUnrealized Loss
United States government agency securities (26)$4,363 $(21)$33,669 $(6,011)
United States sponsored mortgage-backed securities (54)19,467 (146)48,156 (11,774)
United States treasury securities (23)— — 100,563 (5,761)
Municipal securities (215)555 (11)86,573 (12,932)
Corporate debt securities (7)498 (2)3,451 (128)
Total$24,883 $(180)$272,412 $(36,606)
December 31, 2023
(Dollars in thousands)Less than 12 months12 months or more
Description and number of positionsFair ValueUnrealized LossFair ValueUnrealized Loss
United States government agency securities (25)$316 $— $34,619 $(5,603)
United States sponsored mortgage-backed securities (47)— — 50,345 (10,549)
United States treasury securities (23)— — 100,354 (6,045)
Municipal securities (216)847 (10)106,060 (11,148)
Corporate debt securities (7)2,009 (67)1,933 (67)
Total$3,172 $(77)$293,311 $(33,412)

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The following table summarizes investment sales, related gains and losses and unrealized holding gainslosses for the periods shown:
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)
Proceeds from sales of available-for-sale securities
Proceeds from sales of available-for-sale securities
Proceeds from sales of available-for-sale securities
Gains, gross
Gains, gross
Gains, gross
Losses, gross
Losses, gross
Losses, gross
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in thousands)2023202220232022
Proceeds from sales of available-for-sale securities$— $— $54,531 $60,635 
Gains, gross— — — 717 
Losses, gross— — 1,536 67 
Proceeds from sales of equity securities$206 $1,100 $206 $1,100 
Gain, gross— 100 — 100 
Losses, gross294 — 294 — 
Unrealized holding gains (losses) on equity securities160 (26)(148)(85)
Unrealized holding losses on equity securities
Unrealized holding losses on equity securities
Unrealized holding losses on equity securities

16


Note 3 – Loans and Allowance for Credit Losses

The following table presents the components of loans as of the periods shown:
(Dollars in thousands)(Dollars in thousands)June 30, 2023December 31, 2022(Dollars in thousands)March 31, 2024December 31, 2023
Commercial:Commercial:
Business
Business
Business Business$845,107 $851,072 
Real estate Real estate616,034 632,839 
Acquisition, development and construction Acquisition, development and construction106,906 126,999 
Total commercial Total commercial$1,568,047 $1,610,910 
Residential real estateResidential real estate674,090 606,970 
Home equity lines of creditHome equity lines of credit16,651 18,734 
ConsumerConsumer51,766 131,566 
Total loans, excluding PCI2,310,554 2,368,180 
Purchased credit impaired loans:
Residential real estate— 2,482 
Total purchased credit impaired loans— 2,482 
Total Loans$2,310,554 $2,370,662 
Total loans
Total loans
Total loans
Deferred loan origination costs, net Deferred loan origination costs, net1,833 1,983 
Loans receivableLoans receivable$2,312,387 $2,372,645 

We currently manage our loan portfolios and the respective exposure to credit losses (credit risk) by the following specific portfolio segments. With the adoption of ASU 2016-13 on January 1, 2023, we modified ourOur loan portfolio segmentation to beis based primarily on call report codes, which are levels at which we develop and document our systematic methodology to determine the allowance for credit lossesACL attributable to each respective portfolio segment. The ACL portfolio segments are aggregated into broader segments in order to present informative yet concise disclosures within this document, as follows:

Commercial business loans– Commercial business loans are made to provide funds for equipment and general corporate needs, as well as to finance owner-occupied real estate, and to finance future cash flows of Federal government lease contracts. Repayment of these loans primarily uses the funds obtained from the operation of the borrower’s business. Commercial business loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory. This segment includes both internally originated and purchased participation loans. Credit risk arises from the successful operation of the business, which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy.

Commercial real estate loans – Commercial real estate loans consist of non-owner occupied properties, such as investment properties for retail, office and multifamily with a history of occupancy and cash flow. This segment includes both internally originated and purchased participation loans. These loans carry the risk of adverse changes in the local economy and a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies, which can adversely impact cash flow.
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Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, and also includes loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan.

Residential real estate – This residential real estate subsegment contains permanent and construction mortgage loans principally to consumers, but also includes loans to residential real estate developers, secured by residential real estate, which we previously presented under commercial acquisitions, development and construction loans under the incurred loss model. Residential real estate loans to consumers are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios and collateral values. Credit risk arises from the borrower’s, and where applicable, the builder’s, continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Residential real estate secured loans to developers represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral.

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Home equity lines of credit – This segment includes subsegmentsubsegments for senior lien and subordinate lien lines of credit. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.

Consumer loans– This segment of loans includes primarily installment loans and personal lines of credit. Consumer loans include installment loans used by clients to purchase automobiles, boats and recreational vehicles. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. This segment primarily includes loans purchased from a third-party originator that originates loans in order to finance the purchase of personal automotive vehicles for sub-prime borrowers. Credit risk is unique in comparison to the Consumer segment as this segment includes only those loans provided to consumers that cannot typically obtain financing through traditional lenders. As such, these loans are subject to a higher risk of default than the typical consumer loan.

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with the incurred loss model.

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 the periods shown:
 Impaired Loans with Specific AllowanceImpaired Loans with No Specific AllowanceTotal Impaired Loans
(Dollars in thousands)Recorded InvestmentRelated AllowanceRecorded InvestmentRecorded InvestmentUnpaid Principal Balance
December 31, 2022
Commercial
Business$3,436 $1,253 $7,015 $10,451 $15,324 
Real estate1,240 222 125 1,365 1,470 
Acquisition, development and construction— — — — 1,415 
          Total commercial4,676 1,475 7,140 11,816 18,209 
Residential real estate— — 2,603 2,603 2,671 
Home equity lines of credit— — 90 90 94 
Consumer1,347 268 1,351 1,351 
          Total impaired loans$6,023 $1,743 $9,837 $15,860 $22,325 

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The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods shown:
Three Months Ended June 30, 2022Six Months Ended June 30, 2022
(Dollars in thousands)Average Investment in Impaired LoansInterest Income Recognized on Accrual BasisInterest Income Recognized on Cash BasisAverage Investment in Impaired LoansInterest Income Recognized on Accrual BasisInterest Income Recognized on Cash Basis
Commercial
Business$11,015 $— $— $10,741 $— $— 
Real estate1,597 16 15 1,681 33 33 
Acquisition, development and construction306 — — 314 — — 
        Total commercial12,918 16 15 12,736 33 33 
Residential8,374 8,372 10 
Home equity159 — — 174 — — 
Consumer754 — — 593 — — 
Total$22,205 $21 $19 $21,875 $43 $42 

As of June 30, 2023,March 31, 2024, the Bank’s other real estate owned balance totaled $0.9$0.8 million, substantially all of which was related to our acquisition of The First State Bank (“First State”) in 2020. The Bank held $0.8 million, or 89%, of other real estate owned as a result of the foreclosurebalance consisted of two unrelated commercial loans. The remaining $0.1 million, or 11%, consists of two foreclosed residential real estate property.properties. As of June 30, 2023,March 31, 2024, there were twowas one residential mortgagesmortgage in the process of foreclosure with loan balances totaling $0.2 million.

Bank 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.

Loans categorized as “Pass” rated have adequate sources of repayment, with little identifiable risk of collection and general conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

Loans categorized as “Special Mention” rated have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.

Loans categorized as “Substandard” rated are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Loans categorized as “Doubtful” rated have all the weakness inherent in those classified Substandard with the added characteristic that the weakness makes collections or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.

The Special Mention rated category includes assets that are currently protected but are potentially weak, resulting in 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. Any portion of a loan that has been or is expected to be 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 past due status, 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 Bank's Credit Department
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ensures that a review of all commercial relationships of $1.0 million or more is performed annually.

Review of the appropriate risk grade is included in both the internal and external loan review process and on an ongoing basis. The Bank has an experienced Credit Departmentcredit department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct independent loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships in excesswith the intent of $3.0 million or criticized relationships.reviewing 40% to 45% of the Bank's commercial outstanding loan balances on an annual basis. The Bank's Credit Departmentcredit 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 presents the amortized cost of loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system by vintage year as of the period shown:
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
June 30, 2023
Commercial business:
Risk rating:
Pass$67,617 $265,932 $141,159 $29,974 $17,500 $66,225 $235,707 $— $824,114 
Special Mention— 1,395 83 711 98 4,502 — — 6,789 
Substandard— 232 475 — 5,290 5,485 — — 11,482 
Doubtful— — 1,144 264 — 1,314 — — 2,722 
Total commercial business loans$67,617 $267,559 $142,861 $30,949 $22,889 $77,526 $235,707 $— $845,107 
Gross charge-offs$— $— $116 $141 $— $11 $— $268 
Commercial real estate:
Risk rating:
Pass$32,028 $157,930 $231,805 $12,251 $26,729 $113,943 $— $— $574,686 
Special Mention— — — — 6,859 15,123 — — 21,982 
Substandard— — — — — 19,366 — — 19,366 
Doubtful— — — — — — — — — 
Total commercial real estate loans$32,028 $157,930 $231,805 $12,251 $33,588 $148,432 $— $— $616,034 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial acquisition, development and construction:
Risk rating:
Pass$1,943 $32,930 $44,498 $21,945 $3,128 $1,653 $— $— $106,097 
Special Mention— — — — — 10 — — 10 
Substandard— — — — — 799 — — 799 
Doubtful— — — — — — — — — 
Total commercial acquisition, development and construction loans$1,943 $32,930 $44,498 $21,945 $3,128 $2,462 $— $— $106,906 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20242023202220212020PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
March 31, 2024
Commercial business:
Risk rating:
Pass$11,058 $148,499 $230,313 $71,110 $30,347 $119,528 $85,322 $— $696,177 
Special Mention— — 29,776 185 817 4,094 — — 34,872 
Substandard— 1,250 1,227 691 — 4,349 808 — 8,325 
Doubtful— — 924 779 264 1,028 — — 2,995 
Total commercial business loans$11,058 $149,749 $262,240 $72,765 $31,428 $128,999 $86,130 $— $742,369 
Gross charge-offs$— $— $614 $— $— $367 $— $— $981 
Commercial real estate:
Risk rating:
Pass$37,733 $112,029 $134,778 $191,268 $11,813 $131,047 $518 $— $619,186 
Special Mention— — — 25,919 — 17,150 — — 43,069 
Substandard— — — — — 18,812 — — 18,812 
Doubtful— — — — — — — — — 
Total commercial real estate loans$37,733 $112,029 $134,778 $217,187 $11,813 $167,009 $518 $— $681,067 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial acquisition, development and construction:
Risk rating:
Pass$5,146 $6,592 $56,763 $30,552 $23,656 $3,692 $2,500 $— $128,901 
Special Mention— — — — — — — — — 
Substandard— — — 14,652 — 708 — — 15,360 
Doubtful— — — — — — — — — 
Total commercial acquisition, development and construction loans$5,146 $6,592 $56,763 $45,204 $23,656 $4,400 $2,500 $— $144,261 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential Real Estate:
Risk rating:
Pass$8,946 $56,959 $417,220 $104,709 $34,748 $28,585 $2,705 $— $653,872 
Special Mention— — — — 4,118 1,161 — — 5,279 
Substandard— — — — 81 787 120 — 988 
Doubtful— — — 211 — 94 — — 305 
Total residential real estate loans$8,946 $56,959 $417,220 $104,920 $38,947 $30,627 $2,825 $— $660,444 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20242023202220212020PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
March 31, 2024
Home equity lines of credit:
Risk rating:
Pass$— $58 $36 $— $— $11 $12,828 $— $12,933 
Special Mention— — — — — — 271 — 271 
Substandard— — — — — — 165 — 165 
Doubtful— — — — — — — — — 
Total home equity lines of credit loans$— $58 $36 $— $— $11 $13,264 $— $13,369 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Risk rating:
Pass$— $2,040 $17,093 $5,243 $— $55 $30 $— $24,461 
Special Mention— — — — — — — — — 
Substandard— 21 189 10 — — — — 220 
Doubtful— — — — — — — — — 
Total consumer loans$— $2,061 $17,282 $5,253 $— $55 $30 $— $24,681 
Gross charge-offs$— $189 $833 $147 $— $— $— $— $1,169 
Total:
Risk rating:
Pass$62,883 $326,177 $856,203 $402,882 $100,564 $282,918 $103,903 $— $2,135,530 
Special Mention— — 29,776 26,104 4,935 22,405 271 — 83,491 
Substandard— 1,271 1,416 15,353 81 24,656 1,093 — 43,870 
Doubtful— — 924 990 264 1,122 — — 3,300 
Total loans$62,883 $327,448 $888,319 $445,329 $105,844 $331,101 $105,267 $— $2,266,191 
Gross charge-offs$— $189 $1,447 $147 $— $367 $— $— $2,150 


















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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
December 31, 2023
Commercial business:
Risk rating:
Pass$176,309 $251,265 $92,307 $64,964 $50,765 $90,355 $20,315 $— $746,280 
Special Mention990 32,342 72 830 339 3,767 — — 38,340 
Substandard368 988 521 — 4,640 1,436 — — 7,953 
Doubtful— 2,022 839 264 — 1,402 — — 4,527 
Total commercial business loans$177,667 $286,617 $93,739 $66,058 $55,744 $96,960 $20,315 $— $797,100 
Gross charge-offs$— $228 $1,250 $141 $— $2,953 $— $— $4,572 
Commercial real estate:
Risk rating:
Pass$80,553 $149,189 $205,651 $11,952 $26,438 $101,322 $51,239 $— $626,344 
Special Mention— — 7,961 — 6,079 11,201 — — 25,241 
Substandard— — — — — 18,999 — — 18,999 
Doubtful— — — — — — — — — 
Total commercial real estate loans$80,553 $149,189 $213,612 $11,952 $32,517 $131,522 $51,239 $— $670,584 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial acquisition, development and construction:
Risk rating:
Pass$6,546 $54,170 $29,535 $22,041 $— $1,483 $4,823 $— $118,598 
Special Mention— — 14,652 — — — — — 14,652 
Substandard— — — — — 754 — — 754 
Doubtful— — — — — — — — — 
Total commercial acquisition, development and construction loans$6,546 $54,170 $44,187 $22,041 $— $2,237 $4,823 $— $134,004 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential Real Estate:
Risk rating:
Pass$33,867 $413,466 $96,413 $38,169 $7,306 $21,313 $50,815 $— $661,349 
Special Mention— — — 4,224 414 708 — — 5,346 
Substandard— 988 3,764 82 146 777 — — 5,757 
Doubtful— — — — — 95 — — 95 
Total residential real estate loans$33,867 $414,454 $100,177 $42,475 $7,866 $22,893 $50,815 $— $672,547 
Gross charge-offs$— $— $— $— $19 $381 $— $— $400 
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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
June 30, 2023
Residential Real Estate:
Risk rating:
Pass$61,630 $426,251 $105,465 $39,932 $7,549 $25,496 $— $— $666,323 
Special Mention— — — 3,924 1,382 735 — — 6,041 
Substandard— — — 83 153 912 — — 1,148 
Doubtful— — — — — 578 — — 578 
Total residential real estate loans$61,630 $426,251 $105,465 $43,939 $9,084 $27,721 $— $— $674,090 
Gross charge-offs$— $— $— $— $— $22 $— $— $22 
Home equity lines of credit:
Risk rating:
Pass$— $37 $— $— $174 $866 $15,265 $— $16,342 
Special Mention— — — — — 75 150 — 225 
Substandard— — — — — 84 — — 84 
Doubtful— — — — — — — — — 
Total home equity lines of credit loans$— $37 $— $— $174 $1,025 $15,415 $— $16,651 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Risk rating:
Pass$8,860 $33,732 $8,011 $$56 $87 $— $— $50,748 
Special Mention— — — — — — — — — 
Substandard160 801 54 — — — — 1,017 
Doubtful— — — — — — — 
Total consumer loans$9,020 $34,533 $8,065 $$56 $90 $— $— $51,766 
Gross charge-offs$217 $6,772 $1,268 $— $— $— $— $— $8,257 
Total:
Risk rating:
Pass$172,078 $916,812 $530,938 $104,104 $55,136 $208,270 $250,972 $— $2,238,310 
Special Mention— 1,395 83 4,635 8,339 20,445 150 — 35,047 
Substandard160 1,033 529 83 5,443 26,648 — — 33,896 
Doubtful— — 1,144 264 — 1,893 — — 3,301 
Total consumer loans$172,238 $919,240 $532,694 $109,086 $68,918 $257,256 $251,122 $— $2,310,554 
Gross charge-offs$217 $6,772 $1,384 $141 $— $33 $— $— $8,547 
22



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 the periods shown:
(Dollars in thousands)PassSpecial MentionSubstandardDoubtfulTotal
December 31, 2022
Commercial
Business$830,319 $5,963 $12,103 $2,687 $851,072 
Real estate592,997 18,883 20,600 359 632,839 
Acquisition, development and construction120,788 5,277 934 — 126,999 
          Total commercial1,544,104 30,123 33,637 3,046 1,610,910 
Residential real estate605,513 760 1,556 1,623 609,452 
Home equity lines of credit18,269 375 90 — 18,734 
Consumer131,562 — — 131,566 
          Total loans$2,299,448 $31,258 $35,287 $4,669 $2,370,662 
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
December 31, 2023
Home equity lines of credit:
Risk rating:
Pass$638 $3,798 $1,779 $1,192 $501 $3,084 $3,154 $— $14,146 
Special Mention— 61 — 36 — 41 86 — 224 
Substandard— 83 — 78 — — — — 161 
Doubtful— — — — — — — — — 
Total home equity lines of credit loans$638 $3,942 $1,779 $1,306 $501 $3,125 $3,240 $— $14,531 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Risk rating:
Pass$2,275 $18,926 $5,753 $$28 $53 $20 $— $27,064 
Special Mention— — — — — — — — — 
Substandard20 266 58 — — — — — 344 
Doubtful— — — — — — — — — 
Total consumer loans$2,295 $19,192 $5,811 $$28 $53 $20 $— $27,408 
Gross charge-offs$1,144 $10,608 $1,753 $— $— $$— $— $13,507 
Total:
Risk rating:
Pass$300,188 $890,814 $431,438 $138,327 $85,038 $217,610 $130,366 $— $2,193,781 
Special Mention990 32,403 22,685 5,090 6,832 15,717 86 — 83,803 
Substandard388 2,325 4,343 160 4,786 21,966 — — 33,968 
Doubtful— 2,022 839 264 — 1,497 — — 4,622 
Total loans$301,566 $927,564 $459,305 $143,841 $96,656 $256,790 $130,452 $— $2,316,174 
Gross charge-offs$1,144 $10,836 $3,003 $141 $19 $3,336 $— $— $18,479 

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.

A loan that has deteriorated and requires additional collection efforts by the Bank could warrant non-accrual status. A complete review is presented to the Chief Credit Officer and/or the Special Asset Review Committee (“SARC”), as required with respect to any loan which is in a collection process and to make a determination as to whether the loan should be placed on non-accrual status. The placement of loans on non-accrual status is subject to applicable regulatory restrictions and guidelines. Generally, loans should be placed in non-accrual status when the loan reaches 90 days past due, becomes likely the borrower cannot or will not make scheduled principal or interest payments, full repayment of principal and interest is not expected or the loan displays potential loss characteristics. Normally, all accrued interest is charged off when a loan is placed in non-accrual status unless we believe it is likely the accrued interest will be collected. Any payments subsequently received are applied to the principal. All principal and interest due must be paid up-to-date and the Bank is reasonably sure of future satisfactory payment performance to remove a loan from non-accrual status. Usually, this requires the receipt of six consecutive months of regular, on-time payments. Removal of a loan from non-accrual status will require the approval of the Chief Credit Officer and/or the SARC.

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The following table presents the amortized cost basis in loans by aging category and accrual status as of the periods shown:
(Dollars in thousands)Current30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal Past DueTotal LoansNon-Accrual90+ Days Still AccruingNon Accrual with No Credit LossInterest Income Recognized
June 30, 2023
Commercial
Business$834,448 $239 $4,554 $5,866 $10,659 $845,107 $10,801 $— $3,825 $— 
Real estate616,034 — — — — 616,034 — — — — 
Acquisition, development and construction106,107 799 — — 799 106,906 — — — — 
          Total commercial1,556,589 1,038 4,554 5,866 11,458 1,568,047 10,801 — 3,825 — 
Residential real estate672,516 — — 1,574 1,574 674,090 1,659 — — — 
Home equity lines of credit16,651 — — — — 16,651 169 — — — 
Consumer43,140 5,320 2,291 1,015 8,626 51,766 1,017 — — — 
          Total loans$2,288,896 $6,358 $6,845 $8,455 $21,658 $2,310,554 $13,646 $— $3,825 $— 

The following table presents the aging of recorded investment in loans, including accruing and nonaccrual loans, as of the period shown:
(Dollars in thousands)(Dollars in thousands)Current30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal Past DueTotal LoansNon-Accrual90+ Days Still Accruing(Dollars in thousands)Current30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal Past DueTotal LoansNon-Accrual90+ Days Still AccruingNon Accrual with No Credit LossInterest Income Recognized
December 31, 2022
March 31, 2024
CommercialCommercial
Commercial
Commercial
Business
Business
BusinessBusiness$850,112 $— $960 $— $960 $851,072 $7,528 $— 
Real estateReal estate632,839 — — — — 632,839 — — 
Acquisition, development and constructionAcquisition, development and construction126,999 — — — — 126,999 — — 
Total commercial Total commercial1,609,950 — 960 — 960 1,610,910 7,528 — 
Residential real estateResidential real estate606,554 1,820 1,078 — 2,898 609,452 2,196 — 
Home equity lines of creditHome equity lines of credit18,131 603 — — 603 18,734 90 — 
ConsumerConsumer120,504 6,848 2,867 1,347 11,062 131,566 1,351 — 
Total loans Total loans$2,355,139 $9,271 $4,905 $1,347 $15,523 $2,370,662 $11,165 $— 
December 31, 2023
December 31, 2023
December 31, 2023
Commercial
Commercial
Commercial
Business
Business
Business
Real estate
Acquisition, development and construction
Total commercial
Residential real estate
Home equity lines of credit
Consumer
Total loans

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the loan balance is uncollectible. Accrued interest receivable is excluded from the estimate of credit losses. Management determines the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit behaviors along with model judgments provide the basis for the estimation of expected credit losses. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term, as well as for changes in environmental conditions, such as changes in economic conditions, property values or other relevant factors.

The Bank’s methodology for determining the ACL is based on the requirements of ASC 326 for loans individually evaluated for impairment and ASC Subtopic 450-20 - Contingencies for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Credit Losses and other bank regulatory guidance. The total of the two components represents the Bank’s ACL.326.

The ACL is calculated on a collective basis when similar risk characteristics exist. The ACL for the majority of loans and leases was calculated using a discounted cash flow methodology applied at a loan level with a one-year reasonable and supportable forecast period and a one-year straight-line reversion period with loss rates, prepayment assumptions and curtailment assumptions
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driven by each loan’s collateral type. Expected credit loss rates were estimated using a regression model based on historical data from peer banks which incorporates a third-party vendor’s economic forecast to predict the change in credit losses. As of June 30, 2023,March 31, 2024, the Bank expects the markets in which it operates will experience a decline in economic conditions and an increase in the unemployment rate and level of delinquencies,improvements over the next one to two years. The ACL for only one portfolio segment consisting entirely of automotive loans to consumers was calculated under the remaining life methodology using straight-line amortization over the remaining life of the portfolio.
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Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When Bank management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of the periods shown:
(Dollars in thousands)(Dollars in thousands)Real EstateVehicles and EquipmentAssignment of Cash FlowAccounts ReceivableOtherTotalsAllowance for Credit Losses(Dollars in thousands)Real EstateVehicles and EquipmentAssignment of Cash FlowAccounts ReceivableOtherTotalsAllowance for Credit Losses
June 30, 2023
March 31, 2024
Commercial
Commercial
CommercialCommercial
BusinessBusiness$1,434 $3,952 $900 $238 $264 $6,788 $2,666 
Business
Business
Real estate
Acquisition, development and construction
Total commercialTotal commercial$1,434 $3,952 $900 $238 $264 $6,788 $2,666 
ResidentialResidential1,599 — — — — 1,599 391 
Home equity lines of credit
ConsumerConsumer— 1,015 — — — 1,015 199 
TotalTotal$3,033 $4,967 $900 $238 $264 $9,402 $3,256 
Collateral value
December 31, 2023
December 31, 2023
December 31, 2023
Commercial
Commercial
Commercial
Business
Business
Business
Real estate
Acquisition, development and construction
Total commercial
Residential
Home equity lines of credit
Consumer
Total
Collateral valueCollateral value$2,503 $9,312 $— $178 $451 $12,444 

The Bank evaluates certain loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans are evaluated collectively for expected credit losses by applying allocation rates derived from the Bank’s historical losses specific to these loans. The reserve was immaterial at June 30, 2023March 31, 2024 and $0.1 million at December 31, 2022.2023.

Management has identified a number of additional qualitative factors which it uses to supplement the estimated losses derived from the loss rate methodologies employed within the CECLCurrent Expected Credit Losses model because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from the loss rate methodologies. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory and governmental sources are: lending policies and procedures, nature and volume of the portfolio, experience and ability of lending management and staff, volume and severity of problem credits, quality of the loan review system, changes in the value of underlying collateral, effect of concentrations of credit from a loan type, industry and/or geographic standpoint, changes in economic and business conditions, consumer sentiment and other external factors.

For accounting methodologies related to the incurred loss method previously used before the adoption of ASC 326, refer to Note 1 - Summary of Significant Accounting Policies and Note 3 - Loans and Allowance for Loan Losses of the Notes to the Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of the 2022 Form 10-K.

To estimate the liability for off-balance sheet credit exposures, Bank management analyzed the portfolios of unfunded commitments based on the same segmentation used for the allowance for credit lossesACL calculation. The estimated funding rate for each segment was derived from a funding rate study created by a third-party vendor which analyzed funding of various loan types over time to develop industry benchmarks at the call report code level. Once the estimated future advances were calculated, the allocation rate
24


applicable to that portfolio segment was applied in the same manner as those used for the allowance for credit lossACL calculation. The resulting estimated loss allocations were totaled to determine the liability for unfunded commitments related to these loans, which management considers necessary to anticipate potential losses on those commitments that have a reasonable probability of funding. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the liability for unfunded commitments related to loans held for investmentheld-for-investment was $1.4 million and $0.5 million, respectively.$1.0 million.

Bank 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 ACL. When information confirms all or part of specific loans to be uncollectible, these
25


amounts are promptly charged off against the ACL.

The following table presents the balance and activity for the primary segments of the ACL as of the periods shown:
CommercialResidentialHome EquityConsumerTotal
CommercialCommercialResidentialHome EquityConsumerTotal
(Dollars in thousands)(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal CommercialResidentialHome EquityConsumerTotal
ALL, prior to adoption of ASC 326, at December 31, 2022$8,771 $5,704 $1,064 $15,539 
Impact of adopting ASC 326(126)(2,846)288 (2,684)3,889 (5)6,482 7,682 
Provision (release of allowance) for credit losses2,186 180 355 2,721 (86)(14)(2,153)468 
Initial allowance on loans purchased with credit deterioration710 — — 710 507 — — 1,217 
Charge-offs(268)— — (268)(22)— (8,257)(8,547)
Recoveries35 13 — 48 — 5,587 5,637 
ACL at June 30, 2023$11,308 $3,051 $1,707 $16,066 $7,168 $114 $6,946 $30,294 
(Dollars in thousands)
ACL balance at March 31, 2023$9,918 $3,177 $1,640 $14,735 $7,618 $119 $13,041 $35,513 
ACL at December 31, 2023
ACL at December 31, 2023
ACL at December 31, 2023
Provision (release of allowance) for credit lossesProvision (release of allowance) for credit losses1,504 (133)67 1,438 (450)(6)(4,969)(3,987)
Charge-offsCharge-offs(127)— — (127)— — (3,573)(3,700)
RecoveriesRecoveries13 — 20 — 2,447 2,468 
ACL balance at June 30, 2023$11,308 $3,051 $1,707 $16,066 $7,168 $114 $6,946 $30,294 
ACL at March 31, 2024

CommercialResidentialHome EquityConsumerTotal
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal Commercial
ALL, prior to adoption of ASC 326, at December 31, 2022$8,771 $5,704 $1,064 $15,539 $2,880 $131 $5,287 $23,837 
Impact of adopting ASC 326(126)(2,846)288 (2,684)3,889 (5)6,482 7,682 
Initial allowance on loans purchased with credit deterioration710 — — 710 507 — — 1,217 
Provision (release of allowance) for credit losses681 313 288 1,282 364 (8)2,817 4,455 
Charge-offs(141)— — (141)(22)— (4,684)(4,847)
Recoveries23 — 29 — 3,139 3,169 
ACL balance at March 31, 2023$9,918 $3,177 $1,640 $14,735 $7,618 $119 $13,041 $35,513 

During the three and six months ended June 30, 2023,March 31, 2024, there were charge offs totaling $2.2 million. For the three months ended March 31, 2024, $1.2 million, or 55%, of charge offs were related to the subprime consumer automotive segment, $0.6 million, or 27%, was related to a $0.2commercial note secured by business assets and $0.4 million, and $0.1 million release of allowanceor 18%, was related to a commercial note secured by heavy equipment. During the three months ended March 31, 2024, the provision related to unfunded commitments respectively. Substantially all of the charge-offs during three and six months ended June 30, 2023 are related to our subprime automobile portfolio of loans.

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The following table presents 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 the periods shown:
CommercialResidentialHome EquityConsumerTotal
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal Commercial
ALL balance at December 31, 2021$8,027 $5,091 $982 $14,100 $948 $128 $2,427 $17,603 
     Charge-offs— — — — — — (3,652)(3,652)
     Recoveries10 62 — 72 — 1,664 1,740 
     Provision (release)40 1,488 (15)1,513 824 4,697 7,043 
ALL balance at June 30, 2022$8,077 $6,641 $967 $15,685 $1,772 $141 $5,136 $22,734 
Individually evaluated for impairment$1,076 $223 $— $1,299 $84 $— $212 $1,595 
Collectively evaluated for impairment$7,001 $6,418 $967 $14,386 $1,688 $141 $4,924 $21,139 
(Dollars in thousands)
ALL balance at March 31, 2022$6,869 $5,566 $735 $13,170 $1,127 $131 $3,766 $18,194 
     Charge-offs— — — — — — (2,529)(2,529)
     Recoveries55 — 64 — 1,289 1,355 
     Provision1,199 1,020 232 2,451 645 2,610 5,714 
ALL balance at June 30, 2022$8,077 $6,641 $967 $15,685 $1,772 $141 $5,136 $22,734 

The following table presents the primary segments of our loan portfolio as of the period shown:
CommercialResidentialHome Equity Lines of CreditConsumerTotal
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal Commercial
June 30, 2022
Individually evaluated for impairment$11,953 $1,182 $1,069 $14,204 $8,407 $198 $831 $23,640 
Collectively evaluated for impairment818,227 696,454 111,187 1,625,868 432,154 19,992 107,054 2,185,068 
Total Loans$830,180 $697,636 $112,256 $1,640,072 $440,561 $20,190 $107,885 $2,208,708 
was not significant.

The ACL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the portfolio segments, the related loss estimation methodologies and other qualitative factors, as well as the consistency in the application of assumptions, result in an ACL that is representative of the risk found in the components of the portfolio at any given date.

Purchased Credit Impaired Loans

The carrying amount of purchased credit impaired loans ("PCI") outstanding at June 30, 2022 was $5.8 million.

The following table presents the accretable yield, or income expected to be collected, during the periods shown:

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(Dollars in thousands)Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Beginning balance$6,253 $6,505 
Accretion of income(985)(1,793)
Accretion from disposals(1,041)(1,041)
Disposals(1,271)(1,271)
Other changes in expected cash flows(1,047)(491)
Ending balance1,909 1,909 

The following tables summarize 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 for the PCI loan portfolio as of the periods indicated:

CommercialResidentialConsumerTotal
(Dollars in thousands)BusinessReal EstateTotal Commercial
ALL balance as of December 31, 2021— — — 544 119 663 
     Release— — — (544)(119)(663)
ALL balance as of June 30, 2022— — — — — — 
Collectively evaluated for impairment— — — — — — 
(Dollars in thousands)
ALL balance as of March 31, 2022112 53 165 323 126 614 
     Release(112)(53)(165)(323)(126)(614)
ALL balance as of June 30, 2022— — — — — — 

Loan Modifications for Borrowers Experiencing Financial Difficulty

Occasionally, the Bank modifies loans to borrowers in financial distress by providing concessions that allow for the borrower to lower their payment obligations for a defined period, these may include, but are not limited to: principal forgiveness, payment delays, term extensions, interest rate reductions and any combinations of the preceding.
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The following tablestable summarize the amortized cost basis of loans that were modified during three and six months ended June 30, 2023:as of the period shown:

(Dollars in thousands)(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotalTotal Class of Financing Receivable(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotalTotal Class of Financing Receivable
June 30, 2023
March 31, 2024
CommercialCommercial
Commercial
Commercial
Business
Business
BusinessBusiness$— $4,563 $— $— $4,563 %$— $$1,377 $$— $$— $$1,377 — — %
Real estateReal estate— 11,376 — — 11,376 %Real estate— — — — — — — — — — — %
Total commercial
Total commercial
Total commercialTotal commercial— 15,939 — — 15,939 %— 1,377 1,377 — — — — 1,377 1,377 — — %
ResidentialResidential— — — — — — %Residential— — — — — — — — — — — %
Home equity lines of creditHome equity lines of credit— — — — — — %Home equity lines of credit— — — — — — — — — — — %
ConsumerConsumer— — — — — — %Consumer— — — — — — — — — — — %
TotalTotal$— $15,939 $— $— $15,939 %Total$— $$1,377 $$— $$— $$1,377 — — %

The above table presents the amortized cost basis of loans at June 30, 2023March 31, 2024 that were experiencing financial difficulty and modified during the three and six months ended June 30, 2023,March 31, 2024, by class and by type of modification. Also presented above is the percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable. FiveSix loans to unrelatedsix borrowers received payment delay modifications in the
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three and six months ended June 30, 2023,March 31, 2024, including foursix commercial loans with government guarantees totaling $4.6 million$1.4 million. There were no loans that were experiencing financial difficulty and one loan secured by commercial office real estate totaling $11.4 million.modified during the three months ended March 31, 2023.

The Bank closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified as of the period shown:
(Dollars in thousands)30-59 Days
Past Due
60-89 Days
Past Due
Greater Than
89 Days
Past Due
Total Past Due
June 30, 2023
Commercial
Business$— $2,075 $— $2,075 
Total commercial— 2,075 — 2,075 
Residential— — — — 
Home equity lines of credit— — — — 
Consumer— — — — 
Total$— $2,075 $— $2,075 

As of June 30, 2023, there is one modified loan past due, with an amortized costs basis of $2.1 million. This is a commercial note with a government guarantee and is considered non-accrual as of June 30, 2023.

The following table presents the amortized cost basis of loans that had a payment default and were modified prior to that default to borrowers experiencing financial difficulty as of the period shown:
(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotal
June 30, 2023
Commercial
Business$— $2,075 $— $— $2,075 
Real estate— — — — — 
Total commercial— 2,075 — — 2,075 
Residential— — — — — 
Home equity lines of credit— — — — — 
Consumer— — — — — 
Total$— $2,075 $— $— $2,075 

As of June 30, 2023, there is one modified loan that has defaulted, with an amortized costs basis of $2.1 million. This is a commercial note with a government guarantee and is considered non-accrual as of June 30, 2023. Upon the Bank’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit lossesACL is adjusted by the same amount.

Troubled Debt Restructurings

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, which eliminated the accounting guidance for TDRs, while There were no loans that had a payment default and were modified prior period amounts continue to be reported in accordance with the TDR model.

At December 31, 2022, the Bank had specific reserve allocations for TDRs of $0.4 million. Loans consideredthat default to be troubled debt restructured loans totaled $10.4 million as of December 31, 2022. Of the total, $4.7 million represents accruing troubled debt restructured loans and represent 45% of total impaired loans at December 31, 2022. Meanwhile, as of December 31, 2022, $5.7 million represents nine loans to seven borrowers that have defaulted under the restructured terms. The largest of these loans is a $1.9 million restructured commercial loan to a company previously dependent on the coal industry, which is now structured as an unsecured loan. Three of these loans to an unrelated borrower, totaling $3.1 million, are restructured equipment loans to a borrowerexperiencing financial difficulty in the coal industry, which was provided extended interest-only terms to allow time for the collateral equipment to be sold. There is a commercial loan totaling $0.5 million secured by government lease payments that previously defaulted and is now
29


making restructured payments. The four remaining unrelated borrowers have a single loan each, totaling $0.2 million. These borrowers have experienced continued financial difficulty and were considered non-performing loans as of December 31, 2022.

During the sixthree months ended June 30, 2022, no additional loans were classified as TDRsMarch 31, 2024 and no restructured loan defaulted under their modified terms that were not already classified as non-performing for having previously defaulted under their modified terms.March 31, 2023.

Note 4 – Premises and Equipment

The following table presents the components of premises and equipment as of the periods shown:
(Dollars in thousands)(Dollars in thousands)June 30, 2023December 31, 2022(Dollars in thousands)March 31, 2024December 31, 2023
LandLand$3,465 $3,465 
Buildings and improvementsBuildings and improvements13,393 13,393 
Furniture, fixtures and equipmentFurniture, fixtures and equipment17,666 17,549 
SoftwareSoftware6,598 6,019 
Construction in progressConstruction in progress521 508 
Leasehold improvementsLeasehold improvements2,836 2,836 
44,479 43,770 
42,648
Accumulated depreciationAccumulated depreciation(22,072)(20,140)
Premises and equipment, netPremises and equipment, net$22,407 $23,630 

We lease certain premises and equipment under operating and finance leases. At June 30, 2023,March 31, 2024, we had lease liabilities totaling $14.5$13.7 million and right-of-use assets totaling $13.3$12.5 million, substantially all of which $13.2 million was related to operating leases. At June 30, 2023,March 31, 2024, the weighted-average remaining lease term for operating leases was 11.110.4 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.0%3.1%.

At December 31, 2022,2023, we had lease liabilities totaling $15.0$14.0 million and right-of-use assets totaling $13.9$12.9 million, substantially all of which was related to operating leases. At December 31, 2022,2023, the weighted-average remaining lease term for operating leases was 11.610.5 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.0%3.1%.

26


Lease liabilities and right-of-use assets are reflected in accrued interest payable and other liabilities and accrued interest receivable and other assets, respectively.respectively.

The following table presents lease costs for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)(Dollars in thousands)2023202220232022
Amortization of right-of-use assets, finance leasesAmortization of right-of-use assets, finance leases$$14 $$29 
Amortization of right-of-use assets, finance leases
Amortization of right-of-use assets, finance leases
Operating lease cost
Operating lease cost
Operating lease costOperating lease cost446 445 896 890 
Short-term lease costShort-term lease cost14 
Short-term lease cost
Short-term lease cost
Variable lease costVariable lease cost10 10 19 19 
Variable lease cost
Variable lease cost
Sublease income
Sublease income
Sublease incomeSublease income(87)— (174)— 
Total lease costTotal lease cost$372 $477 $756 $952 
Total lease cost
Total lease cost

30


For operating leases with initial or remaining terms of one year or more as of June 30, 2023,March 31, 2024, the following table presents future minimum payments for the twelve month periods ended June 30:March 31:
(Dollars in thousands)(Dollars in thousands)Operating Leases
2024$829 
(Dollars in thousands)
(Dollars in thousands)
2025
2025
202520251,621 
202620261,618 
2026
2026
2027
2027
202720271,594 
202820281,625 
2029 and thereafter10,111 
2028
2028
2029
2029
2029
2030 and thereafter
2030 and thereafter
2030 and thereafter
Total future minimum lease payments
Total future minimum lease payments
Total future minimum lease paymentsTotal future minimum lease payments$17,398 
Less: Amounts representing interestLess: Amounts representing interest(2,921)
Less: Amounts representing interest
Less: Amounts representing interest
Present value of net future minimum lease paymentsPresent value of net future minimum lease payments$14,477 
Present value of net future minimum lease payments
Present value of net future minimum lease payments

Future minimum payments on finance leases were not material as of June 30, 2023 were not material.March 31, 2024.

Note 5 – Equity Method Investments

In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, we must assess whether our equity method investments are significant. In evaluating the significance of these investments, we performed the income, investment and asset tests described in S-X 1-02(w) for each equity method investment. Rule 4-08(g) of Regulation S-X requires summarized financial information for all equity method investees in a quarterly report if any of the equity method investees, individually or in the aggregate, result in any of the tests exceeding 10%.

Under the income test, our proportionate share of the revenue from equity method investments in the aggregate exceeded the applicable threshold under Rule 4-08(g) of 10%, accordingly, we are required to provide summarized income statement information for all investees for all periods presented. There were no equity method investments which met any of the applicable thresholds for reporting Rule 3-09 for reporting separate financial statements.

Our equity method investments are initially recorded at cost, including transaction costs to obtain the equity method investment, and are subsequently adjusted for changes due to our share of the entities' earnings.

27


ICM

The following table presents summarized income statement information for ICM for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)(Dollars in thousands)2023202220232022
Total revenuesTotal revenues$12,239 $22,063 $21,645 $44,179 
Net income (loss)(1,089)1,938 $(4,171)$5,169 
Total revenues
Total revenues
Net loss
Net loss
Net loss
Gain on sale of loans7,240 14,872 $12,688 $29,961 
Gain on loans sold
Gain on loans sold
Gain on loans sold
Gain on loans held-for-sale
Gain on loans held-for-sale
Gain on loans held-for-sale
Volume of loans soldVolume of loans sold409,222 692,553 $712,004 $1,380,646 
Volume of loans sold
Volume of loans sold

Our ownership percentage of 40% of ICM is 40% and it was determined that weallows us to have significant influence over the operations and decision making at ICM. Accordingly, the investment, which had a carrying value of $22.9 million at March 31, 2024, is accounted for as an equity method investment. Our share of ICM's net loss totaled $0.4$0.2 million and $1.7$1.2 million for the three and six months ended June 30,March 31, 2024 and March 31, 2023, respectively and our share of ICM's net income totaled $0.7 million and $2.0 million for the three and six months ended June 30, 2022, respectively.. As of June 30, 2023March 31, 2024 and December 31, 20222023, the mortgage pipeline was $631.9$537.6 million and $678.3$439.0 million, respectively.







31



Warp Speed

The following table presents summarized income statement information for our equity method investment in Warp Speed for the periods shown:
(Dollars in thousands)(Dollars in thousands)Three Months Ended June 30, 2023Six Months Ended June 30, 2023
(Dollars in thousands)
(Dollars in thousands)
Total revenuesTotal revenues$39,816 $75,333 
Net income6,243 8,925 
Total revenues
Total revenues
Net income (loss)
Net income (loss)
Net income (loss)
Gain on sale of loans12,464 25,146 
Gain on loans sold
Gain on loans sold
Gain on loans sold
Gain on loans held-for-sale
Gain on loans held-for-sale
Gain on loans held-for-sale
Volume of loans soldVolume of loans sold307,999 598,206 
Volume of loans sold
Volume of loans sold

OurIn October 2022, we acquired a 37.5% interest in Warp Speed and accounted for our ownership as an equity method investment, initially recorded at cost including costs incurred to obtain the equity method investment. It was determined that our ownership percentage of Warp Speed is 37.5% and it was determinedprovides that we have significant influence over its operations and decision making. Accordingly, the investment, which had a carrying value of $51.7 million at March 31, 2024, is accounted for as an equity method investment. At the time of acquisition, we made a policy election to record our proportionate share of net income of the investee on a three month lag. Our share of Warp Speed's net loss and income totaled $2.30.9 million and $3.3$1.0 million for the three and six months ended June 30,March 31, 2024 and March 31, 2023, respectively. As of June 30,March 31, 2024 and December 31, 2023, the mortgage pipeline was $116.9$253.2 million. and $267.8 million, respectively.

Ayers Socure II

Our ownership percentage of Ayers Socure II is 10% and it was determined that we have significant influence over the company. Accordingly, the investment is accounted for as an equity method investment. Our share of net income from Ayers Socure II for the three and six months ended June 30, 2023March 31, 2024 was not significant. The equity method investment in Ayers Socure II is not considered a significant investment based on the criteria of Rules 3-09 and 4-08(g) of Regulation S-X.

Ayers Socure II's sole business is ownership of equity securities in Socure Inc. (“Socure”). In addition to our equity method investment in Ayers Socure II, we also have direct equity security ownership interest in Socure. With the combination of our investments in both Ayers Socure II and Socure directly, we own less than 1% of Socure in the aggregate.

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Note 6 – Deposits

The following table presents the components of deposits as of the periods shown:
(Dollars in thousands)(Dollars in thousands)June 30, 2023December 31, 2022(Dollars in thousands)March 31, 2024December 31, 2023
Demand deposits of individuals, partnerships and corporationsDemand deposits of individuals, partnerships and corporations
Noninterest-bearing demandNoninterest-bearing demand$987,555 $1,231,544 
Interest-bearing demand639,814 720,074 
Noninterest-bearing demand
Noninterest-bearing demand
NOW
Savings and money marketsSavings and money markets624,276 284,447 
Time deposits, including CDs and IRAsTime deposits, including CDs and IRAs707,294 334,417 
Total depositsTotal deposits$2,958,939 $2,570,482 
Time deposits that meet or exceed the FDIC insurance limitTime deposits that meet or exceed the FDIC insurance limit$2,414 $4,386 
Time deposits that meet or exceed the FDIC insurance limit
Time deposits that meet or exceed the FDIC insurance limit

32


The following table presents the maturities of time deposits for the twelve month periods ended June 30:March 31:
(Dollars in thousands)(Dollars in thousands)
2024$402,287 
2025
2025
20252025300,347 
202620261,617 
20272027844 
202820281,959 
2029
ThereafterThereafter240 
TotalTotal$707,294 

As of June 30,March 31, 2024 and December 31, 2023, overdrawn deposit accounts totaling $3.4$5.0 million and $3.8 million were reclassified as loan balances.

Note 7 – Borrowed Funds

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh, Pennsylvania. As of June 30, 2023,March 31, 2024, the Bank's maximum borrowing capacity with the FHLB was $766.4$697.0 million and the remaining borrowing capacity was $753.1$683.9 million, with the difference being deposit letters of credit.credit of $11.9 million and credit enhancement recourse obligations related to the master commitments through the FHLB's Mortgage Partnership Finance program of $1.2 million.

Short-term borrowings

As of June 30,March 31, 2024 and December 31, 2023, the Bank had no short-term borrowings with the FHLB or Federal Reserve Bank and no borrowings under the federal funds rate purchased outstanding. As of December 31, 2022, the Bank had $102.3 million short-term borrowings with the FHLB and no borrowings under the federal funds rate purchased outstanding.


The following table presents information related to short-term borrowings as of and for the periods indicated:
(Dollars in thousands)Six Months Ended June 30, 2023Year Ended December 31, 2022
Balance at end of period$— $102,333 
Average balance during the period35,347 15,494 
Maximum month-end balance— 102,333 
Weighted-average rate during the period5.07 %2.82 %
Weighted-average rate at end of period— %4.45 %

(Dollars in thousands)Three Months Ended March 31, 2024Year Ended December 31, 2023
Balance at end of period$— $— 
Average balance during the period44 17,542 
Maximum month-end balance— — 
Weighted-average rate during the period9.14 %5.07 %
Weighted-average rate at end of period— %— %
Long-term borrowings

As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the Bank had no long-term borrowings with the FHLB or the Federal Reserve
29


Bank.

Repurchase agreements

Along with traditional deposits, the Bank has access to securities sold under agreements to repurchase (“repurchase agreements”) with clients representing funds deposited by clients, on an overnight basis, that are collateralized by investment securities owned by us. All repurchase agreements are subject to terms and conditions of repurchase/security agreements between us and the client and are accounted for as secured borrowings. Our repurchase agreements reflected in liabilities consist of client accounts and securities which are pledged on an individual security basis.

We monitor the fair value of the underlying securities on a monthly basis. Repurchase agreements are reflected in the amount of cash received in connection with the transaction. The primary risk with our repurchase agreements is the market risk associated with the investments securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents.

As of June 30, 2023March 31, 2024 and December 31, 2022,2023, all of our repurchase agreements were overnight agreements. These borrowings were collateralized with investment securities with a carrying value of $3.9 million and $4.9 million and $10.4 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively, and were comprised of United States government agency securities and United States sponsored mortgage-backed securities. Declines in the value of the collateral would require us to increase the amounts of securities pledged.
33



The following table presents information related to repurchase agreements as of and for the periods shown:
(Dollars in thousands)(Dollars in thousands)Six Months Ended June 30, 2023Year Ended December 31, 2022(Dollars in thousands)Three Months Ended March 31, 2024Year Ended December 31, 2023
Balance at end of periodBalance at end of period$4,798 $10,037 
Average balance during the periodAverage balance during the period6,514 10,987 
Maximum month-end balanceMaximum month-end balance10,041 12,680 
Weighted-average rate during the periodWeighted-average rate during the period0.03 %0.05 %Weighted-average rate during the period0.01 %0.02 %
Weighted-average rate at end of periodWeighted-average rate at end of period0.01 %0.06 %Weighted-average rate at end of period0.01 %0.01 %

Subordinated debt

The following table presents information related to subordinated debt as of and for the periods shown:
(Dollars in thousands)(Dollars in thousands)Six Months Ended June 30, 2023Year Ended December 31, 2022(Dollars in thousands)Three Months Ended March 31, 2024Year Ended December 31, 2023
Balance at end of periodBalance at end of period$73,414 $73,286 
Average balance during the periodAverage balance during the period73,350 73,159 
Maximum month-end balanceMaximum month-end balance73,414 73,286 
Weighted-average rate during the periodWeighted-average rate during the period4.40 %4.20 %Weighted-average rate during the period4.07 %4.38 %
Weighted-average rate at end of periodWeighted-average rate at end of period3.97 %3.97 %Weighted-average rate at end of period4.02 %4.02 %

In September 2021, we completed the private placement of $30.0 million fixed-to-floating rate subordinated notes to certain qualified institutional investors. These notes are unsecured and have a 10-year term, maturing October 1, 2031, and will bear interest at a fixed rate of 3.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus 254 basis points, payable quarterly in arrears. These notes have been structured to qualify as Tier 2 capital for regulatory capital purposes.

In November 2020, we completed the private placement of $40.0 million fixed-to-floating rate subordinated notes to certain qualified institutional investors. These notes are unsecured and have a ten-year term, maturing December 1, 2030, and will bear interest at a fixed rate of 4.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus 401 basis points, payable quarterly in arrears. These notes have been structured to qualify as Tier 2 capital for regulatory capital purposes.

In March 2007, we completed the private placement of $4.0 million Floating Rate, Trust Preferred Securities through our MVB Financial Statutory Trust I subsidiary (the “Trust”). We established the Trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust. The Trust Preferred Securities and the Debentures mature in 2037 and have been redeemable by us since 2012. Interest payments are due in March, June, September and December and are
30


adjusted at the interest due dates at a rate of 0.26% plus Three-Month Term SOFR. The obligations we provide with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by us of the Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantees. The securities issued by the Trust are includable for regulatory purposes as a component of our Tier 1 capital.

Senior term loan

The following table presents information related to senior term loan as of and for the periods shown:
(Dollars in thousands)Six Months Ended June 30, 2023Year Ended December 31, 2022
Balance at end of period$8,835 $9,765 
Average balance during the period9,557 2,328 
Maximum month-end balance9,768 9,886 
Weighted-average rate during the period8.27 %7.00 %
Weighted-average rate at end of period8.57 %7.44 %
34


(Dollars in thousands)Three Months Ended March 31, 2024Year Ended December 31, 2023
Balance at end of period$6,549 $6,786 
Average balance during the period6,736 9,007 
Maximum month-end balance6,794 9,768 
Weighted-average rate during the period8.18 %8.50 %
Weighted-average rate at end of period7.63 %8.76 %

In October 2022, we entered into a credit agreement with Raymond James Bank (“Raymond James”). Pursuant to the credit agreement, Raymond James has extended to us a senior term loan in the aggregate principal amount of up to $10.0 million. In connection with the closing of the Warp Speed transaction, we borrowed $10.0 million and paid Raymond James an upfront fee of 1% of the loan amount. The loan will bear interest per annum at a rate equal to 2.75%, plus term secured overnight financing rate,SOFR, which will reset monthly. Accrued interest is payable on the last business day of each month, beginning with October 31, 2022, with the then outstanding principal balance of the loan payable on the last business day of each quarter in the amount of 125,000$125,000 during the first year and 250,000$250,000 thereafter. The loan will mature in April 2025, unless accelerated earlier upon an event of default.

Note 8 – Pension and Supplemental Executive Retirement Plans

We participate in a trusteed pension plan known as the Allegheny Group Retirement Plan. Benefits are based on years of service and the employee’s compensation. Accruals under the plan were frozen as of May 31, 2014. Freezing the plan resulted in a remeasurement of the pension obligations and plan assets as of the freeze date. The pension obligation was remeasured using the discount rate based on the Citigroup Above Median Pension Discount Curve in effect on May 31, 2014 of 4.5%.

The following table presents information pertaining to the activity in our defined benefit pension plan, using the latest available actuarial valuations with a measurement date of March 31, 2024 and 2023 for the periods shown:

Three Months Ended March 31,
(Dollars in thousands)20242023
Interest cost$113 $113 
Expected return on plan assets(157)(164)
Amortization of net actuarial loss43 29 
     Net periodic benefit (income) cost$(1)$(22)
Contributions paid$— $— 

There was no service cost or amortization of prior service cost for the three months ended March 31, 2024 and 2023.

In June 2017, we approved a Supplemental Executive Retirement Plan (the “SERP”), pursuant to which the Chief Executive Officer of Potomac Mortgage Group (“PMG”) is entitled to receive certain supplemental nonqualified retirement benefits. The SERP took effect on December 31, 2017. As the executive completed three years of continuous employment with PMG prior to retirement date (which shall be no earlier than the date he attains age 55) he will, upon retirement, be entitled to receive $1.8 million payable in 180 equal consecutive monthly installments of $10 thousand.installments. The liability is calculated by discounting the anticipated future cash flows at 4.0%.The liability accrued for this obligation was $1.3$1.4 million as of both June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively.Service costs werecost was not material for any periods covered by this report.

The following table presents information pertaining In February 2024, the SERP was terminated. Within the agreement, there is a one year provision for payment delay. As such, the $1.8 million obligation is scheduled to the activitybe paid in our defined benefit plan, using the latest available actuarial valuations with a measurement date of June 30, 2023 and 2022 for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in thousands)2023202220232022
Interest cost$113 $85 226 170 
Expected return on plan assets(164)(167)(328)(334)
Amortization of net actuarial loss29 107 58 214 
     Net periodic benefit (income) cost$(22)$25 $(44)$50 
Contributions paid$— $— $— $— 

There was no service cost or amortization of prior service cost for the three and six months ended June 30, 2023 and 2022.


February 2025.
3531


Note 9 – Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of our financial instruments as of the periods shown:
(Dollars in thousands)(Dollars in thousands)Carrying ValueEstimated Fair ValueQuoted Prices in Active Markets for Identical Assets (Level I)Significant Other Observable Inputs (Level II)Significant Unobservable Inputs (Level III)(Dollars in thousands)Carrying ValueEstimated Fair ValueQuoted Prices in Active Markets for Identical Assets (Level I)Significant Other Observable Inputs (Level II)Significant Unobservable Inputs (Level III)
June 30, 2023
March 31, 2024
Financial Assets:
Financial Assets:
Financial Assets:Financial Assets:
Cash and cash equivalentsCash and cash equivalents$455,835 $455,835 $455,835 $— $— 
Cash and cash equivalents
Cash and cash equivalents
Securities available-for-saleSecurities available-for-sale329,137 329,137 — 294,719 34,418 
Equity securitiesEquity securities41,082 41,082 4,837 — 36,245 
Loans held-for-sale7,009 7,009 — 7,009 — 
Loans receivable, net
Loans receivable, net
Loans receivable, netLoans receivable, net2,282,093 2,158,860 — — 2,158,860 
Servicing rightsServicing rights1,911 1,972 — — 1,972 
Interest rate swap9,372 9,372 — 9,372 — 
Fair value hedge219 219 — 219 — 
Interest rate swaps
Accrued interest receivable
Accrued interest receivable
Accrued interest receivableAccrued interest receivable16,102 16,102 — 2,391 13,711 
FHLB StockFHLB Stock2,168 2,168 — 2,168 — 
Bank-owned life insurance43,746 43,746 — 43,746 — 
Embedded derivative
Embedded derivative
Embedded derivativeEmbedded derivative648 648 — — 648 
Financial Liabilities:Financial Liabilities:
Financial Liabilities:
Financial Liabilities:
Deposits
Deposits
DepositsDeposits$2,958,939 $2,623,395 $— $2,623,395 $— 
Repurchase agreementsRepurchase agreements4,798 4,798 — 4,798 — 
Interest rate swap8,429 8,429 — 8,429 — 
Interest rate swaps
Fair value hedge
Accrued interest payableAccrued interest payable1,809 1,809 — 1,809 — 
Senior term loanSenior term loan8,835 8,667 — 8,667 — 
Senior term loan
Senior term loan
Subordinated debtSubordinated debt73,414 63,539 — 63,539 — 
December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
Financial assets:Financial assets:
Financial assets:
Financial assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$40,280 $40,280 $40,280 $— $— 
Securities available-for-saleSecurities available-for-sale379,814 379,814 — 344,471 35,343 
Equity securitiesEquity securities38,744 38,744 5,382 — 33,362 
Loans held-for-saleLoans held-for-sale23,126 24,898 — 24,898 — 
Loans receivable, netLoans receivable, net2,348,808 2,285,427 — — 2,285,427 
Servicing rightsServicing rights1,616 1,634 — — 1,634 
Interest rate swap8,427 8,427 — 8,427 — 
Interest rate swaps
Accrued interest receivableAccrued interest receivable12,617 12,617 — 2,778 9,839 
Bank-owned life insurance43,239 43,239 — 43,239 — 
FHLB StockFHLB Stock9,966 9,966 — 9,966 — 
Embedded derivative
Embedded derivative
Embedded derivativeEmbedded derivative787 787 — — 787 
Financial liabilities:Financial liabilities:
Financial liabilities:
Financial liabilities:
Deposits
Deposits
DepositsDeposits$2,570,482 $2,226,037 $— $2,226,037 $— 
Repurchase agreementsRepurchase agreements10,037 10,037 — 10,037 — 
Interest rate swaps
Fair value hedgeFair value hedge572 572 — 572 — 
Interest rate swap8,427 8,427 — 8,427 — 
Accrued interest payableAccrued interest payable2,558 2,558 — 2,558 — 
FHLB and other borrowings102,333 102,006 — 102,006 — 
Senior term loan
Senior term loan
Senior term loanSenior term loan9,765 9,765 — 9,765 — 
Subordinated debtSubordinated debt73,286 64,330 — 64,330 — 



3632


Note 10 – Fair Value Measurements

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 of our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our 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.

The methods of determining the fair value of assets and liabilities presented in this footnote are consistent with our methodologies disclosed in Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statementsconsolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of the 20222023 Form 10-K.

Assets Measured on a Recurring Basis

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 following measurements are made on a recurring basis.

Available-for-sale investment securities Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level I securities include those traded on an active exchange, such as the New York Stock Exchange and money market funds. Level II securities include mortgage-backed securities issued by government sponsored entities and private label entities, municipal bonds, United States Treasury securities that are traded by dealers or brokers in inactive over-the-counter markets and corporate debt securities. There have been no changes in valuation techniques for the three and six months ended June 30, 2023.March 31, 2024. Valuation techniques are consistent with techniques used in prior periods. Certain local municipal securities related to tax increment financing (“TIF”) are independently valued and classified as Level III instruments. We classified investments in government securities as Level II instruments and valued them using the market approach.

Equity securities Certain equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating,prepayment assumptions and other factors such as credit loss assumptions. The valuation methodologies utilized may include significant unobservable inputs. There have been no changes in valuation techniques for the three and six months ended June 30, 2023.March 31, 2024. Valuation techniques are consistent with techniques used in prior periods.

Loans held-for-sale - The fair value of loans held-for-sale is determined, when possible, using quoted secondary market prices or investor commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants. If the fair value at the reporting date exceeds the amortized cost of a loan, the loan is reported at amortized cost.

Interest rate swapswaps Interest rate swaps are recorded at fair value based on third-party vendors who compile prices from various sources and may determine the fair value of identical or similar instruments by using pricing models that consider observable market data. These instruments are included in accrued interest receivable and other assets and accrued interest payable and other liabilities, as applicable, on the consolidated balance sheet.

Fair value hedgehedgesTreated like an interest rate swap, fair value hedges are recorded at fair value based on third-party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data. These instruments are included in loans receivable on the consolidated balance sheet.

Bank-owned life insurance - Life insurance where the bank is both the policy beneficiary and owner. Bank-owned life insurance is recorded at fair value on a recurring basis, and increases in cash surrender, contract value and net insurance proceeds at maturity are recorded as other income.

Embedded derivatives — Accounted for and recorded separately from the underlying contract as a derivative at fair value on a recurring basis. Fair values are determined using the Monte Carlo model valuation technique. The valuation methodology utilized includes significant unobservable inputs. These instruments are included in accrued interest receivable and other assets on the consolidated balance sheet and gains and losses are included in interest income on the consolidated statement of income.

3733


The following tables present assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of the periods shown by level within the fair value hierarchy:
 June 30, 2023
(Dollars in thousands)Level ILevel IILevel IIITotal
Assets:
United States government agency securities$— $38,474 $— $38,474 
United States sponsored mortgage-backed securities— 54,366 — 54,366 
United States treasury securities98,029 — — 98,029 
Municipal securities— 86,648 34,418 121,066 
Corporate debt securities— 8,901 — 8,901 
Other securities— 801 — 801 
Equity securities4,837 — — 4,837 
Interest rate swap— 9,372 — 9,372 
Fair value hedge— 219 — 219 
Bank-owned life insurance— 43,746 — 43,746 
Embedded derivative— — 648 648 
Liabilities:
Interest rate swap— 8,429 — 8,429 

December 31, 2022 March 31, 2024
(Dollars in thousands)(Dollars in thousands)Level ILevel IILevel IIITotal(Dollars in thousands)Level ILevel IILevel IIITotal
Assets:Assets:
United States government agency securitiesUnited States government agency securities$— $44,814 $— $44,814 
United States government agency securities
United States government agency securities
United States sponsored mortgage-backed securitiesUnited States sponsored mortgage-backed securities— 56,571 — 56,571 
United States treasury securitiesUnited States treasury securities— 120,909 — 120,909 
Municipal securitiesMunicipal securities— 103,293 35,343 138,636 
Corporate debt securitiesCorporate debt securities— 10,560 — 10,560 
Other securities
Other securities
Other securitiesOther securities— 824 — 824 
Equity securitiesEquity securities5,382 — — 5,382 
Loans held-for-sale
Interest rate swaps
Interest rate swap— 8,427 — 8,427 
Bank-owned life insurance— 43,239 — 43,239 
Embedded derivative
Embedded derivative
Embedded derivativeEmbedded derivative— — 787 787 
Liabilities:Liabilities:
Interest rate swap— 8,427 — 8,427 
Interest rate swaps
Interest rate swaps
Interest rate swaps
Fair value hedgeFair value hedge— 572 — 572 
 December 31, 2023
(Dollars in thousands)Level ILevel IILevel IIITotal
Assets:
United States government agency securities$— $38,408 $— $38,408 
United States sponsored mortgage-backed securities— 82,382 — 82,382 
United States treasury securities— 100,356 — 100,356 
Municipal securities— 88,662 18,245 106,907 
Corporate debt securities— 8,942 — 8,942 
Other securities— 780 — 780 
Equity securities3,590 — — 3,590 
Loans held-for-sale— 629 — 629 
Interest rate swaps— 6,249 — 6,249 
Embedded derivative— — 648 648 
Liabilities:
Interest rate swaps— 6,249 — 6,249 
Fair value hedge— 6,111 — 6,111 

3834


The following table represents recurring Level III assets as of the periods shown:
(Dollars in thousands)(Dollars in thousands)Municipal SecuritiesEmbedded DerivativesTotal(Dollars in thousands)Municipal SecuritiesEmbedded DerivativesTotal
Balance at March 31, 2023$36,458 $648 $37,106 
Realized and unrealized loss included in earnings— 
Maturities/calls(700)— (700)
Unrealized loss included in other comprehensive income (loss)(1,341)— (1,341)
Balance at June 30, 2023$34,418 $648 $35,066 
Balance at December 31, 2022$35,343 $787 $36,130 
Realized and unrealized loss included in earnings(139)(138)
Maturities/calls(767)— (767)
Unrealized loss included in other comprehensive income (loss)(159)— (159)
Balance at June 30, 2023$34,418 $648 $35,066 
Balance at March 31, 2022$39,668 $— $39,668 
Realized and unrealized gain included in earnings— 
Balance at December 31, 2023
Realized and unrealized income included in earnings
Purchase of securitiesPurchase of securities186 — 186 
Maturities/callsMaturities/calls(785)— (785)
Unrealized loss included in other comprehensive income (loss)Unrealized loss included in other comprehensive income (loss)(2,035)— (2,035)
Balance at June 30, 2022$37,035 $— $37,035 
Balance at March 31, 2024
Balance at December 31, 2021$41,763 $— $41,763 
Realized and unrealized gains included in earnings— 
Purchase of securities1,048 — 1,048 
Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022
Realized loss included in earnings
Maturities/callsMaturities/calls(3,075)— (3,075)
Unrealized loss included in other comprehensive income(2,709)— (2,709)
Balance at June 30, 2022$37,035 $— $37,035 
Maturities/calls
Maturities/calls
Unrealized gain included in other comprehensive income (loss)
Balance at March 31, 2023

Assets Measured on a Nonrecurring Basis

We 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. GAAP. 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 nonrecurring basis during 20232024 and 20222023 include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for possible loancredit losses and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other noninterest expense.

Collateral-dependent loans - Certain loans receivable are evaluated individually for credit loss when the borrower is experiencing financial difficulties and repayment is expected to be provided substantially through the operation or sale of collateral. Estimated credit losses are based on the fair value of the collateral, adjusted for costs to sell. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of collateral-dependent real estate related loans, we obtain a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.
Loans held-for-sale - The fair value of loans held-for-sale is determined, when possible, using quoted secondary-market prices or investor commitments. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan, which would be used by other market participants. If the fair value at the reporting date exceeds the amortized cost of a loan, the loan is reported at amortized cost.
39



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 II inputs based on observable market data or Level III inputs based on customized discounting criteria. At the time the foreclosure is completed, we obtain a current external appraisal.

Other debt securitiesCertain debt securities are recorded at fair value on a nonrecurring basis. These other debt securities are securities without a readily determinable fair value and are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer.

Equity securities Certain equity securities are recorded at fair value on a nonrecurring basis. Equity securities without a readily determinable fair value are measured at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer.
35


The following table presents the fair value of these assets as of the periods shown:
June 30, 2023
March 31, 2024March 31, 2024
(Dollars in thousands)(Dollars in thousands)Level ILevel IILevel IIITotal(Dollars in thousands)Level ILevel IILevel IIITotal
Collateral-dependent loansCollateral-dependent loans$— $— $6,146 $6,146 
Other real estate ownedOther real estate owned— — 947 947 
Other debt securitiesOther debt securities— — 7,500 7,500 
Equity securitiesEquity securities— — 36,245 36,245 
December 31, 2022
December 31, 2023December 31, 2023
(Dollars in thousands)(Dollars in thousands)Level ILevel IILevel IIITotal(Dollars in thousands)Level ILevel IILevel IIITotal
Impaired loans$— $— $14,117 $14,117 
Collateral-dependent loans
Other real estate ownedOther real estate owned— — 1,194 1,194 
Other debt securitiesOther debt securities— — 7,500 7,500 
Equity securitiesEquity securities— — 33,362 33,362 

4036


The following tables present quantitative information about the Level III significant unobservable inputs for assets and liabilities measured at fair value as of the periods shown:
 Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)Fair ValueValuation TechniqueUnobservable Input Range
June 30, 2023
Nonrecurring measurements:
Collateral-dependent loans$6,146 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Other real estate owned$947 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Other debt securities$7,500 Net asset valueCost, less impairment0%
Equity securities$36,245 Net asset valueCost, less impairment0%
Recurring measurements:
Municipal securities 5
$34,418 
Appraisal of bond 3
Bond appraisal adjustment 4
5% - 15%
Embedded derivatives$648 Monte Carlo pricing modelDeferred payment$0 - $49.1 million
Volatility59%
Term4.75 years
Risk free rate3.59%
December 31, 2022
Nonrecurring measurements:
Impaired loans$14,117 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
Liquidation expense 2
6%
Other real estate owned$1,194 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
Liquidation expense 2
6%
Other debt securities$7,500 Net asset valueCost, less impairment0%
Equity securities$33,362 Net asset valueCost, less impairment0%
Recurring measurements:
Municipal securities 5
$35,343 
Appraisal of bond 3
Bond appraisal adjustment 4
5% - 15%
Embedded derivatives$787 Monte Carlo pricing modelDeferred payment$0 - $51.9 million
Volatility58%
Term5 years
Risk free rate3.95%

 Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)Fair ValueValuation TechniqueUnobservable Input Range
March 31, 2024
Nonrecurring measurements:
Collateral-dependent loans$18,546 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Other real estate owned$825 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
   
Liquidation expense 2
6%
Other debt securities$7,500 Net asset valueCost, less impairment0%
Equity securities$37,237 Net asset valueCost, less impairment0%
Recurring measurements:
Municipal securities 5
$17,363 
Appraisal of bond 3
Bond appraisal adjustment 4
5% - 15%
Embedded derivatives$648 Monte Carlo pricing modelDeferred payment$0 - $49.1 million
Volatility59%
Term4.75 years
Risk free rate3.59%
December 31, 2023
Nonrecurring measurements:
Collateral-dependent loans$2,891 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
Liquidation expense 2
6%
Other real estate owned$825 
Appraisal of collateral 1
Appraisal adjustments 2
0% - 20%
Liquidation expense 2
6%
Other debt securities$7,500 Net asset valueCost, less impairment0%
Equity securities$37,496 Net asset valueCost, less impairment0%
Recurring measurements:
Municipal securities 5
$18,245 
Appraisal of bond 3
Bond appraisal adjustment 4
5% - 15%
Embedded derivatives$648 Monte Carlo pricing modelDeferred payment$0 - $49.1 million
Volatility59%
Term4.75 years
Risk free rate3.59%
1 Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level III inputs that 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 Fair value is determined through independent analysis of liquidity, rating, yield and duration.
4 Appraisals may be adjusted for qualitative factors, such as local economic conditions, liquidity, marketability and legal structure.
5 Municipal securities classified as Level III instruments are comprised of TIF bonds related to certain local municipal securities.








41
37



Note 11 – Derivatives

We use certain derivative instruments to meet the needs of customers, as well as to manage the interest rate risk associated with certain transactions. All derivative financial instruments are recognized as either assets or liabilities and measured at fair value.

Fair Value Hedges of Interest Rate Risk

We are exposed to changes in the fair value of fixed rate mortgages included in a closed portfolio due to changes in benchmark interest rates.

In June 2023 we entered into threefive fixed portfolio layer method fair value swaps, designated as hedging instruments, to manage exposure to changes in fair value on these instrumentsfixed rate mortgages and certain fixed rate available for sale securities attributable to the designated interest rate. Four of the interest rate swaps are designated to hedge a closed portfolio of fixed rate mortgages, and one of the interest rate swaps is designated to hedge a closed portfolio of fixed rate municipal bonds. The interest rate swaps involve the payment of fixed-rate amounts to a counterparty in exchange for us receiving variable-rate payments over the life of the agreements, without the exchange of the underlying notional amount.

We designated the fair value swaps under the portfolio layer method (“PLM”). The total notional amount of the three fiveswaps was $148.5$436.5 millionas of June 30, 2023,March 31, 2024, one of which is amortizing and included a $1.5$13.5 million amortization adjustment to the notional amount at June 30, 2023.March 31, 2024. Under this method, the hedged item isitems are designated as a hedged layer of a closed portfolioportfolios of financial loans and municipal bonds that isare anticipated to remain outstanding for the designated hedged period.periods. Adjustments will beare made to record the swapswaps at fair value on the consolidated balance sheets, with changes in fair value recognized in interest income. The carrying values of the fair value swaps on the consolidated balance sheets willare also be adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk.

The following table represents the carrying value of the portfolio layer method hedged assets and the cumulative fair value hedging adjustments included in the carrying value of the hedged assets as of June 30, 2023March 31, 2024 and December 31, 2022:2023:

June 30, 2023December 31, 2022
March 31, 2024March 31, 2024December 31, 2023
(Dollars in thousands)(Dollars in thousands)Amortized Cost BasisHedged AssetBasis AdjustmentAmortized Cost BasisHedged AssetBasis Adjustment(Dollars in thousands)Balance Sheet LocationAmortized Cost BasisHedged AssetBasis AdjustmentAmortized Cost BasisHedged AssetBasis Adjustment
Fixed Rate Assets$508,971 $148,547 $(870)$— $— $— 
Fixed rate mortgages
Fixed rate bonds
Total hedged assets

Derivatives Not Designated as Hedging Instruments

Matched Interest Rate Swaps. We enter into interest rate swap contracts to help commercial loan borrowers manage their interest rate risk. The interest rate swap contracts with commercial loan borrowers allow them to convert floating-rate loan payments to fixed rate loan payments. When we enter into an interest rate swap contract with a commercial loan borrower, we simultaneously enter into a "mirror" swap contract with a third-party. The third-party exchanges the borrower's fixed-rate loan payments for floating-rate loan payments. These derivatives are not designated as hedges and changes in fair value are recognized in earnings. Because these derivatives have mirror-image contractual terms, the changes in fair value substantially offset each other through earnings. Fees earned in connection with the execution of derivatives related to this program are recognized in earnings through loan-related derivative income.

38


The following tables summarize outstanding financial derivative instruments as of March 31, 2024 and December 31, 2023:
March 31, 2024
(Dollars in thousands)Balance Sheet LocationNotional AmountFair Value of Asset (Liability)Gain (Loss)
Fair value hedge of interest rate risk:
Pay fixed rate swaps with counterpartyAccrued interest receivable and other assets$436,459 $(729)$5,382 
Not designated hedges of interest rate risk:
Matched interest rate swaps with borrowersAccrued interest receivable and other assets143,048 7,784 7,784 
Matched interest rate swaps with counterpartyAccrued interest payable and other liabilities143,048 (7,784)(7,784)
Total derivatives$722,555 $(729)$5,382 

December 31, 2023
(Dollars in thousands)Balance Sheet LocationNotional AmountFair Value of Asset (Liability)Gain (Loss)
Fair value hedge of interest rate risk:
Pay fixed rate swaps with counterpartyAccrued interest receivable and other assets$440,297 $(6,111)$(6,111)
Not designated hedges of interest rate risk:
Matched interest rate swaps with borrowersAccrued interest receivable and other assets126,494 6,249 6,249 
Matched interest rate swaps with counterpartyAccrued interest payable and other liabilities126,494 (6,249)(6,249)
Total derivatives$693,285 $(6,111)$(6,111)

Embedded Derivative

In December 2022, we entered into an agreement to sell a portion of our shares of Interchecks Technologies, Inc., a former equity method investment that was subsequently reclassified to equity securities due to the decrease in the remaining ownership percentage. Based on the terms of the sale, we recognized the cash received at closing, as well as a receivable for the remaining installment payment, which is based on a future economic event and is accounted for and separately recorded as a derivative. The derivative instrument is included in accrued interest receivable and other assets on the consolidated balance sheet, while the gains and losses are included in noninterest income on the consolidated statement of income. The fair value of the embedded derivative was $0.6 million at March 31, 2024 and December 31, 2023, with no gain or loss for the three months ended March 31, 2024 and a loss of 0.1 million for the three months ended March 31, 2023.

39


Note 1112 – Earnings per Share

We determine basic earnings per share (“EPS”) by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is determined by dividing net income available to common shareholders by the weighted-average number of shares outstanding, increased by both the number of shares that would be issued assuming the exercise of instruments under our incentive stock plan.

42


The following table presents our calculation of EPS for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in thousands except shares and per share data)(Dollars in thousands except shares and per share data)2023202220232022
(Dollars in thousands except shares and per share data)
(Dollars in thousands except shares and per share data)
Numerator for earnings per share:
Numerator for earnings per share:
Numerator for earnings per share:Numerator for earnings per share:
Net income from continuing operationsNet income from continuing operations$7,998 $2,273 $10,436 $4,183 
Net loss attributable to noncontrolling interest114 165 236 358 
Net income from continuing operations
Net income from continuing operations
Net (income) loss attributable to noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net (income) loss attributable to noncontrolling interest
Net income available to common shareholders from continuing operations
Net income available to common shareholders from continuing operations
Net income available to common shareholders from continuing operations
Net income from discontinued operations available to common shareholders
Net income from discontinued operations available to common shareholders
Net income from discontinued operations available to common shareholders
Net income available to common shareholdersNet income available to common shareholders8,112 2,438 10,672 4,541 
Net income from discontinued operations available to common shareholders - basic and diluted— 518 8,782 1,279 
Net income available to common shareholders
Net income available to common shareholdersNet income available to common shareholders$8,112 $2,956 $19,454 $5,820 
Denominator:Denominator:
Denominator:
Denominator:
Weighted-average shares outstanding - basic
Weighted-average shares outstanding - basic
Weighted-average shares outstanding - basicWeighted-average shares outstanding - basic12,689,669 12,176,805 12,656,698 12,135,223 
Effect of dilutive securities225,625 718,776 303,027 735,669 
Effect of dilutive instruments
Effect of dilutive instruments
Effect of dilutive instruments
Weighted-average shares outstanding - diluted
Weighted-average shares outstanding - diluted
Weighted-average shares outstanding - dilutedWeighted-average shares outstanding - diluted12,915,294 12,895,581 12,959,725 12,870,892 
Earnings per share from continuing operations - basicEarnings per share from continuing operations - basic$0.64 $0.20 $0.84 $0.37 
Earnings per share from continuing operations - basic
Earnings per share from continuing operations - basic
Earnings per share from discontinued operations - basic
Earnings per share from discontinued operations - basic
Earnings per share from discontinued operations - basicEarnings per share from discontinued operations - basic$— $0.04 $0.69 $0.11 
Earnings per common share - basicEarnings per common share - basic$0.64 $0.24 $1.54 $0.48 
Earnings per common share - basic
Earnings per common share - basic
Earnings per share from continuing operations - diluted
Earnings per share from continuing operations - diluted
Earnings per share from continuing operations - dilutedEarnings per share from continuing operations - diluted$0.63 $0.19 $0.82 $0.35 
Earnings per share from discontinued operations - dilutedEarnings per share from discontinued operations - diluted$— $0.04 $0.68 $0.10 
Earnings per share from discontinued operations - diluted
Earnings per share from discontinued operations - diluted
Earnings per share common share - diluted
Earnings per share common share - diluted
Earnings per share common share - dilutedEarnings per share common share - diluted$0.63 $0.23 $1.50 $0.45 
Securities not included in the computation of diluted EPS because the effect would be antidilutive641,534 499,887 274,409 496,625 
Instruments not included in the computation of diluted EPS because the effect would be antidilutive
Instruments not included in the computation of diluted EPS because the effect would be antidilutive
Instruments not included in the computation of diluted EPS because the effect would be antidilutive


4340


Note 1213 – Comprehensive Income

The following tables present the reclassified components of accumulated other comprehensive income (“AOCI”) as of and for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(Dollars in thousands)(Dollars in thousands)2023202220232022
(Dollars in thousands)
(Dollars in thousands)
Details about AOCI components
Details about AOCI components
Details about AOCI componentsDetails about AOCI componentsAmount reclassified from AOCIAmount reclassified from AOCIAmount reclassified from AOCIAmount reclassified from AOCIAffected income statement line itemAmount reclassified from AOCIAffected income statement line item
Available-for-sale securitiesAvailable-for-sale securities   Available-for-sale securities 
Realized gain (loss) recognized in incomeRealized gain (loss) recognized in income$(294)$— $(1,830)$650 Gain (loss) on sale of available-for-sale securitiesRealized gain (loss) recognized in income$658 $$(1,536)Gain (loss) on sale of available-for-sale securitiesGain (loss) on sale of available-for-sale securities
Income tax effectIncome tax effect71 — 440 (152)Income taxes
Income tax effect
Income tax effect(158)369 Income taxes
Realized gain (loss) recognized in income, net of taxRealized gain (loss) recognized in income, net of tax(223)— (1,390)498 
Defined benefit pension plan items
Defined benefit pension plan items
Defined benefit pension plan itemsDefined benefit pension plan items    
Amortization of net actuarial loss Amortization of net actuarial loss(29)$(107)$(58)$(214)Salaries and employee benefits Amortization of net actuarial loss(43)$$(29)Salaries and employee benefitsSalaries and employee benefits
Income tax effectIncome tax effect27 14 52 Income taxes
Income tax effect
Income tax effect10 Income taxes
Defined benefit pension plan items, net of taxDefined benefit pension plan items, net of tax(22)(80)(44)(162)
Investment hedgeInvestment hedge
Investment hedge
Investment hedge
Carrying value adjustment
Carrying value adjustment
Carrying value adjustmentCarrying value adjustment(45)187 289 197 Interest on investment securities— 334 334 Interest on investment securitiesInterest on investment securities
Income tax effect
Income tax effect
Income tax effectIncome tax effect11 (47)(69)(49)Income taxes— (80)(80)Income taxesIncome taxes
Investment hedge, net of taxInvestment hedge, net of tax(34)140 220 148 
Total reclassificationsTotal reclassifications$(279)$60 $(1,214)$484  
Total reclassifications
Total reclassifications$467 $(935) 

(Dollars in thousands)Unrealized gains (losses) on available for-sale securitiesDefined benefit pension plan itemsInvestment hedgeTotal
Balance at December 31, 2023$(25,871)$(2,994)$34 $(28,831)
     Other comprehensive income (loss) before reclassification(1,957)456 — (1,501)
Amounts reclassified from accumulated other comprehensive income (loss)(500)33 — (467)
Net current period other comprehensive income (loss)(2,457)489 — (1,968)
Balance at March 31, 2024$(28,328)$(2,505)$34 $(30,799)
Balance at December 31, 2022$(34,829)$(3,129)$254 $(37,704)
     Other comprehensive income (loss) before reclassification5,852 (21)— 5,831 
Amounts reclassified from accumulated other comprehensive income (loss)1,167 22 (254)935 
Net current period other comprehensive income (loss)7,019 (254)6,766 
Balance at March 31, 2023$(27,810)$(3,128)$— $(30,938)

4441


(Dollars in thousands)Unrealized gains (losses) on available for-sale securitiesDefined benefit pension plan itemsInvestment hedgeTotal
Balance at March 31, 2023$(27,810)$(3,128)$— $(30,938)
     Other comprehensive income (loss) before reclassification(4,087)282 — (3,805)
Amounts reclassified from accumulated other comprehensive income (loss)223 22 34 279 
Net current period other comprehensive income (loss)(3,864)304 34 (3,526)
Balance at June 30, 2023$(31,674)$(2,824)$34 $(34,464)
Balance at December 31, 2022$(34,829)$(3,129)$254 $(37,704)
     Other comprehensive income (loss) before reclassification1,765 261 — 2,026 
Amounts reclassified from accumulated other comprehensive income (loss)1,390 44 (220)1,214 
Net current period other comprehensive income (loss)3,155 305 (220)3,240 
Balance at June 30, 2023$(31,674)$(2,824)$34 $(34,464)
Balance at March 31, 2022$(13,766)$(3,704)$308 $(17,162)
Other comprehensive income (loss) before reclassification(12,437)239 — (12,198)
Amounts reclassified from accumulated other comprehensive income (loss)— 80 (140)(60)
Net current period other comprehensive income (loss)(12,437)319 (140)(12,258)
Balance at June 30, 2022$(26,203)$(3,385)$168 $(29,420)
Balance at December 31, 2021$147 $(4,069)$316 $(3,606)
     Other comprehensive income (loss) before reclassification(25,852)522 — (25,330)
Amounts reclassified from accumulated other comprehensive income (loss)(498)162 (148)(484)
Net current period other comprehensive income (loss)(26,350)684 (148)(25,814)
Balance at June 30, 2022$(26,203)$(3,385)$168 $(29,420)


Note 1314 – Segment Reporting

We have identified three reportable segments: CoRe banking; mortgage banking;Banking; Mortgage Banking; and financial holding company.Financial Holding Company. All other operating segments are summarized in an otherOther category.

Our CoRe Banking segment, which includes our Fintech division, represents banking products and services offered to customers by the Bank, primarily loans and deposits accounts. Revenue from CoRe banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Our Fintech division is included in the CoRe banking segment.

Revenue from our mortgage bankingMortgage Banking segment is primarily comprised of our share of net income or loss from
45


mortgage banking activities of our equity method investments in ICM and Warp Speed.

Revenue from financial holding companyFinancial Holding Company activities is mainly comprised of intercompany service income and dividends.

The following tables present information about the reportable segments and reconciliation to the consolidated financial statements for the periods shown:

Three Months Ended June 30, 2023CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
Three Months Ended March 31, 2024Three Months Ended March 31, 2024CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
(Dollars in thousands)(Dollars in thousands)CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
Interest income
Interest income
Interest incomeInterest income$46,929 $105 $$$(12)$47,031 
Interest expenseInterest expense16,439 — 999 23 (12)17,449 
Net interest income (expense) Net interest income (expense)30,490 105 (996)(17)— 29,582 
Release of allowance for credit losses(4,235)— — — — (4,235)
Net interest income (expense) after release of allowance for credit losses34,725 105 (996)(17)— 33,817 
Provision for credit losses
Net interest income (expense) after provision for credit losses
Noninterest incomeNoninterest income4,113 1,872 3,116 1,051 (3,733)6,419 
Noninterest income
Noninterest income
Noninterest Expenses:Noninterest Expenses:
Noninterest Expenses:
Noninterest Expenses:
Salaries and employee benefits
Salaries and employee benefits
Salaries and employee benefitsSalaries and employee benefits9,053 4,623 2,063 — 15,746 
Other expensesOther expenses14,148 18 2,163 1,940 (3,733)14,536 
Total noninterest expenses Total noninterest expenses23,201 25 6,786 4,003 (3,733)30,282 
Income (loss) before income taxes15,637 1,952 (4,666)(2,969)— 9,954 
Income (loss), before income taxes
Income (loss), before income taxes
Income (loss), before income taxes
Income taxesIncome taxes3,237 643 (1,207)(717)— 1,956 
Net income (loss)12,400 1,309 (3,459)(2,252)— 7,998 
Net income (loss), before noncontrolling interest
Net loss attributable to noncontrolling interest— — — 114 — 114 
Net income (loss), before noncontrolling interest
Net income (loss), before noncontrolling interest
Net income attributable to noncontrolling interest
Net income attributable to noncontrolling interest
Net income attributable to noncontrolling interest
Net income (loss) available to common shareholdersNet income (loss) available to common shareholders$12,400 $1,309 $(3,459)$(2,138)$— $8,112 
Capital expenditures for the three months ended June 30, 2023$155 $— $— $1,561 $— $1,716 
Total assets as of June 30, 2023$3,295,564 $85,563 $335,193 $20,871 $(385,344)$3,351,847 
Total assets as of December 31, 2022$3,014,475 $34,248 $375,171 $27,075 $(382,119)$3,068,850 
Goodwill as of June 30, 2023$— $— $— $2,838 $— $2,838 
Goodwill as of December 31, 2022$— $— $— $2,838 $— $2,838 
Net income (loss) available to common shareholders
Net income (loss) available to common shareholders
Capital expenditures for the three months ended March 31, 2024
Capital expenditures for the three months ended March 31, 2024
Capital expenditures for the three months ended March 31, 2024
Total assets as of March 31, 2024
Total assets as of December 31, 2023
Goodwill as of March 31, 2024
Goodwill as of December 31, 2023


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Three Months Ended June 30, 2022CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
(Dollars in thousands)(Dollars in thousands)CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
Interest income
Interest income
Interest incomeInterest income$27,910 $103 $87 $— $(10)$28,090 
Interest expenseInterest expense672 — 760 (10)1,430 
Net interest income (expense) Net interest income (expense)27,238 103 (673)(8)— 26,660 
Release of allowance for loan losses5,100 — — — 5,100 
Net interest income (expense) after release of allowance for credit losses22,138 103 (673)(8)— 21,560 
Provision for loan losses
Net interest income (expense) after provision for loan losses
Noninterest incomeNoninterest income7,093 787 3,228 1,584 (3,308)9,384 
Noninterest income
Noninterest income
Noninterest Expenses:Noninterest Expenses:
Noninterest Expenses:
Noninterest Expenses:
Salaries and employee benefits
Salaries and employee benefits
Salaries and employee benefitsSalaries and employee benefits9,948 — 4,439 2,198 — 16,585 
Other expensesOther expenses10,913 94 2,247 1,441 (3,308)11,387 
Total noninterest expenses Total noninterest expenses20,861 94 6,686 3,639 (3,308)27,972 
Income (loss) before income taxes8,370 796 (4,131)(2,063)— 2,972 
Income (loss), before income taxes
Income (loss), before income taxes
Income (loss), before income taxes
Income taxesIncome taxes1,771 207 (815)(464)— 699 
Net income (loss) from continuing operations Net income (loss) from continuing operations6,599 589 (3,316)(1,599)— 2,273 
Income from discontinued operations, before income taxesIncome from discontinued operations, before income taxes— — — 678 — 678 
Income taxes - discontinued operationsIncome taxes - discontinued operations— — — 160 — 160 
Net income from discontinued operations Net income from discontinued operations— — — 518 — 518 
Net income (loss)6,599 589 (3,316)(1,081)— 2,791 
Net income (loss), before noncontrolling interest
Net loss attributable to noncontrolling interest
Net loss attributable to noncontrolling interest
Net loss attributable to noncontrolling interest Net loss attributable to noncontrolling interest— — — 165 — 165 
Net income (loss) available to common shareholdersNet income (loss) available to common shareholders$6,599 $589 $(3,316)$(916)$— $2,956 
Capital expenditures for the three months ended June 30, 2022$— $— $47 $834 $— $881 
Net income (loss) available to common shareholders
Net income (loss) available to common shareholders
Capital expenditures for the three months ended March 31, 2023
Capital expenditures for the three months ended March 31, 2023
Capital expenditures for the three months ended March 31, 2023

























4743


Six Months Ended June 30, 2023CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
(Dollars in thousands)
Interest income$91,591 $210 $36 $— $(43)$91,794 
Interest expense27,480 — 1,992 54 (43)29,483 
   Net interest income (expense)64,111 210 (1,956)(54)— 62,311 
Provision for credit losses341 — — — — 341 
Net interest income (expense) after provision for credit losses63,770 210 (1,956)(54)— 61,970 
Noninterest income7,131 686 5,526 2,835 (6,692)9,486 
Noninterest Expenses:
Salaries and employee benefits18,104 9,573 4,808 — 32,492 
Other expenses25,202 52 4,080 3,465 (6,692)26,107 
   Total noninterest expenses43,306 59 13,653 8,273 (6,692)58,599 
Income (loss) before income taxes27,595 837 (10,083)(5,492)— 12,857 
Income taxes5,752 139 (2,149)(1,321)— 2,421 
   Net income (loss) from continuing operations21,843 698 (7,934)(4,171)— 10,436 
Income from discontinued operations, before income taxes— — — 11,831 — 11,831 
Income taxes - discontinued operations— — — 3,049 — 3,049 
   Net income from discontinued operations— — — 8,782 — 8,782 
Net income (loss)21,843 698 (7,934)4,611 — 19,218 
   Net loss attributable to noncontrolling interest— — — 236 — 236 
Net income (loss) available to common shareholders$21,843 $698 $(7,934)$4,847 $— $19,454 
Capital expenditures for the six months ended June 30, 2023$492 $— $— $2,155 $— $2,647 

48


Six Months Ended June 30, 2022CoRe BankingMortgage BankingFinancial Holding CompanyOtherIntercompany EliminationsConsolidated
(Dollars in thousands)
Interest income$51,081 $206 $80 $— $(15)$51,352 
Interest expense1,331 — 1,513 15 (15)2,844 
   Net interest income (expense)49,750 206 (1,433)(15)— 48,508 
Provision for credit losses6,380 — — — — 6,380 
Net interest income (expense) after provision for credit losses43,370 206 (1,433)(15)— 42,128 
Noninterest income13,991 2,010 5,899 3,120 (6,357)18,663 
Noninterest Expenses:
Salaries and employee benefits19,456 — 8,495 4,361 — 32,312 
Other expenses21,961 94 4,452 2,767 (6,357)22,917 
   Total noninterest expenses41,417 94 12,947 7,128 (6,357)55,229 
Income (loss) before income taxes15,944 2,122 (8,481)(4,023)— 5,562 
Income taxes3,402 548 (1,684)(887)— 1,379 
   Net income (loss) from continuing operations12,542 1,574 (6,797)(3,136)— 4,183 
Income from discontinued operations, before income taxes— — — 1,664 — 1,664 
Income taxes - discontinued operations— — — 385 — 385 
   Net income from discontinued operations— — — 1,279 — 1,279 
   Net income (loss) before noncontrolling interest12,542 1,574 (6,797)(1,857)— 5,462 
   Net loss attributable to noncontrolling interest— — — 358 — 358 
Net income (loss) available to common shareholders$12,542 $1,574 $(6,797)$(1,499)$— $5,820 
Capital expenditures for the six months ended June 30, 2022$250 $— $385 $1,474 $— $2,109 



Note 1415 – Acquisition & Divestiture Activity

Flexia Payments, LLC

In May 2023, MVB Technology entered into an Assignment and Assumption Agreement with Flexia Payments, LLC ("Flexia"), wherein Flexia assigned loans outstanding between Flexia and MVB to MVB Technology. In consideration for the assignment, Flexia granted a license to MVB Technology for the Flexia software. Additionally, through a Mutual Release Agreement between Edge Ventures and Flexia, Edge Ventures transferred its 800 Class A Common Units and 1,500 Preferred Units of Flexia back to Flexia for cancellation. As a result of the transactions, we incurred a loss of $1.1 million and no longer consolidate Flexia in our financial statements.

Chartwell Compliance

In February 2023, we completed the sale of the Bank’s wholly-owned subsidiary, Chartwell, for total consideration of $14.4 million in the form of a note issued to the buyer, resulting in a gain on sale of $11.8 million. The note matures June 20, 2027 and bears interest at a fixed rate of 7%, payable in four equal annual installments commencing June 20, 2024. To facilitate a transition of the Chartwell services and support the onboarding and conversion of systems, we entered into a 60 day Employee Lease and Service Agreement, whereby we provided the purchaser with finance and accounting, human capital, information technology, marketing and record/data retention services. In addition, we entered into a contract with the purchaser to continue to provide services and support from Chartwell for three years following the sale. During the three months ended March 31, 2024, we have paid $1.2 million in fees related to this contract.

49


Balances attributable to Chartwell are included in assets from discontinued operations and liabilities from discontinued operations on our December 31, 2022 balance sheet. There were no assets from discontinued operations or liabilities from discontinued operations as of June 30, 2023. Chartwell's net income is presented in income from discontinued operations for all periods shown. Prior period balances have been reclassified to conform with this presentation.

The following table presents the major classes of assets held-for-sale from discontinued operations and liabilities held-for-sale from discontinued operations as of December 31, 2022:
(Dollars in thousands)December 31, 2022
Premises and equipment$23 
Accrued interest receivable and other assets3,142 
Goodwill1,150 
Total assets from discontinued operations$4,315 
Accrued interest payable and other liabilities$5,444 
Total liabilities from discontinued operations$5,444 

The following table presents the major classes of net income from discontinued operations for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
(Dollars in thousands)2023202220232022
Compliance consulting income$— $4,213 $2,369 $8,308 
Gain on sale of discontinued operations— — 11,800 — 
Total income$— $4,213 $14,169 $8,308 
Salaries and employee benefits$— $2,398 $2,082 $4,632 
Other expenses— 1,137 256 2,012 
Total expenses$— $3,535 $2,338 $6,644 
Income before income taxes$— $678 $11,831 $1,664 
Income taxes— 160 3,049 385 
Net income from discontinued operations$— $518 $8,782 $1,279 

Integrated Financial Holdings, Inc.
Three Months Ended March 31,
(Dollars in thousands)2023
Compliance consulting income$2,369 
Gain on sale of discontinued operations11,800 
Total income$14,169 
Salaries and employee benefits$2,082 
Other expenses256 
Total expenses$2,338 
Income, before income taxes$11,831 
Income taxes3,049 
Net income from discontinued operations$8,782 

In August 2022, we entered into a Merger Agreement (the “Merger Agreement”) with Integrated Financial Holdings, Inc. (“IFH”). The Merger Agreement provided that IFH would merge with and into MVB, with MVB continuing as the surviving corporation (the “Merger”). Following the Merger, West Town Bank & Trust, a state bank chartered under the laws of Illinois and wholly-owned subsidiary of IFH, would merge with and into the Bank, with the Bank as the surviving bank (the “Bank Merger”), pursuant to the Agreement and Plan of Merger, dated October 4, 2022, between West Town Bank & Trust and the Bank (the “Bank Merger Agreement” and, together with the Merger Agreement, the “Merger Agreements”). In May 2023, MVB, IFH, West Town Bank & Trust and the Bank entered into a Termination Agreement pursuant to which the parties mutually agreed to terminate the Merger Agreements and mutually released one another from any claims (subject to limited customary exceptions) related to the contemplated merger transactions.
5044


Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 20222023 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 Reportreport for further information on forward-looking statements.

Executive Summary

We continue to adapt our business model due to challenging market conditions, primarily brought on by an environment of increasing interest rates, a slowing economy and multiple high-profile bank failures.failures that occurred during the first half of 2023. Interest rates have remained at an elevated level through March 31, 2024 as the Federal Reserve raised its key interest rate to a range of 4.25% to 4.5%. Lower loan balances are the result of slower market demand and deliberate efforts to improve balance sheet liquidity. We remain committed to our key Fintech industryindustries of gaming and payments initiatives and continue to implement cost-saving measures.payments. 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. We have entered into agreements for card issuing and acquiring program sponsorships to further enhance fee income and noninterest income.

Current Market Conditions

InThere continues to be a focus on liquidity after the events in March 2023, when certain specialized banking institutions with elevated concentrations of uninsured deposits experienced large deposit outflows, resulting in the institutions being placed into FDIC receiverships. In the aftermath, there has been substantial market disruption and indications that deposit concerns could spread within the banking industry, leading to deposit outflows and other destabilizing results. These market events could have a material adverse affect on our business. A deterioration in economic conditions or the loss of confidence in financial institutions may result in deposit base outflows and limit our access to some of our customary sources of liquidity, including, but not limited to, inter-bank borrowings and borrowings from the Federal Reserve and FHLB. In addition, account and deposit balances may decrease when clients perceive alternative investments, such as the stock market or real estate, as providing a better risk/return tradeoff. Furthermore, the portion of our deposit portfolio that is comprised of large uninsured deposits may be more likely to be withdrawn rapidly under adverse economic conditions. If our clients move money out of bank deposits into investments or to other financial institutions, we could lose a relatively low cost source of funds. As of March 31, 2024 and March 31, 2023, our liquid assets totaled $737.3 million and $711.8 million, respectively, which we believe would enable us to meet our cash obligations as they come due.

Financial Results

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

During the three months ended June 30, 2023,March 31, 2024, net interest income increased $2.9decreased $2.6 million,noninterest income decreased $3.0increased $4.8 millionand noninterest expenses increased by $2.3$1.9 million compared to the three months ended June 30, 2022.March 31, 2023. Our tax- equivalent yield on earning assets (tax-equivalent) in the three months ended June 30, 2023March 31, 2024 was 6.02%6.34% compared to 4.32%6.00% in the three months ended June 30, 2022.March 31, 2023. Loans receivable decreased by $48.8$50.3 million to $2.31$2.27 billion during the three months ended June 30, 2023.March 31, 2024. Our overall cost of interest-bearing liabilities was 3.29%4.22% in the three months ended June 30, 2023March 31, 2024 compared to 0.47%2.95% in the three months ended June 30, 2022.March 31, 2023. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin (tax-equivalent) of 3.80%3.83% in the three months ended June 30, 2023,March 31, 2024, compared to 4.10%4.40% in the three months ended June 30, 2022.March 31, 2023.

Our net income for the three months ended June 30, 2023March 31, 2024 was $8.0$4.5 million compared to $2.8$11.3 million in the three months ended June 30, 2022.March 31, 2023. Earnings for the three months ended June 30, 2023March 31, 2024 equated to a return on average assets of 1.0%0.5% and a return on average equity of 12.0%6.2%, compared to the three months ended June 30, 2022March 31, 2023 results of 0.4%1.4% and 4.6%, respectively.Basic and diluted earnings per share were $0.64 and $0.63, respectively, for the three months ended June 30, 2023, compared to $0.24 and $0.23, respectively, for the three months ended June 30, 2022.


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Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

During the six months ended June 30, 2023, net interest income increased $13.8 million,noninterest income decreased $9.2 million and noninterest expenses increased by $3.4 million compared to the six months ended June 30, 2022.Our yield on earning assets (tax-equivalent) in the six months ended June 30, 2023was 6.01% compared to 3.84% in the six months ended June 30, 2022. Loans receivable decreased by $60.3 million to $2.31 billion during the six months ended June 30, 2023.Our overall cost of interest-bearing liabilities was 3.14% in the six months ended June 30, 2023 compared to 0.45% in the six months ended June 30, 2022. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a net interest margin (tax-equivalent) of 4.09% in the six months ended June 30, 2023, compared to 3.63% in the six months ended June 30, 2022.

Our net income for the six months ended June 30, 2023 was $19.2 million compared to $5.5 million in the six months ended June 30, 2022, largely the result of an $11.8 million pre-tax gain related to the sale of the Bank’s wholly-owned subsidiary, Chartwell. Earnings for the six months ended June 30, 2023 equated to a return on average assets of 1.2% and a return on average equity of 14.09%, compared to the six months ended June 30, 2022 results of 0.39% and 4.44%16.1%, respectively. Basic and diluted earnings per share were $1.54$0.35 and $1.50,$0.34, respectively, for the sixthree months ended June 30, 2023,March 31, 2024, compared to $0.48$0.90 and $0.45,$0.87, respectively, for the sixthree months ended June 30, 2022.March 31, 2023.

45




Corporate Updates

Flexia Payments, LLC

In May 2023, MVB Technology entered into an Assignment and Assumption Agreement with Flexia, wherein Flexia assigned loans outstanding between Flexia and MVB to MVB Technology. In consideration for the assignment, Flexia granted a license to MVB Technology for the Flexia software. Additionally, through a Mutual Release Agreement between Edge Ventures and Flexia, Edge Ventures transferred its 800 Class A Common Units and 1,500 Preferred Units of Flexia back to Flexia for cancellation. As a result of the transactions, we no longer consolidate Flexia in our financial statements.

Integrated Financial Holdings, Inc.

In August 2022, we entered into the Merger Agreement with IFH). The Merger Agreement provided that IFH would merge with and into MVB, with MVB continuing as the surviving corporation. Following the Merger, West Town Bank & Trust, a state bank chartered under the laws of Illinois and wholly-owned subsidiary of IFH, would merge with and into the Bank, with the Bank as the surviving bank, pursuant to the Agreement and Plan of Merger, dated October 4, 2022, between West Town Bank & Trust and the Bank. In May 2023, MVB, IFH, West Town Bank & Trust and the Bank entered into a Termination Agreement pursuant to which the parties mutually agreed to terminate the Merger Agreements and mutually released one another from any claims (subject to limited customary exceptions) related to the contemplated merger transactions.


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

The following tables present information regarding (1)(i) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (2)(ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (3)(iii) the interest rate spread; (4)(iv) net interest income and margin; and (5)(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.

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Three Months Ended June 30,
20232022
Three Months Ended March 31,Three Months Ended March 31,
202420242023
(Dollars in thousands)(Dollars in thousands)Average BalanceInterest Income/ExpenseYield/CostAverage BalanceInterest Income/ExpenseYield/Cost(Dollars in thousands)Average BalanceInterest Income/ExpenseYield/CostAverage BalanceInterest Income/ExpenseYield/Cost
AssetsAssets
Interest-bearing balances with banksInterest-bearing balances with banks$444,600 $5,542 5.00 %$197,613 $304 0.62 %
CDs with banks— — — 1,582 2.28 
Interest-bearing balances with banks
Interest-bearing balances with banks$549,894 $7,341 5.37 %$285,102 $3153 4.49 %
Investment securities:Investment securities:
Investment securities:
Investment securities:
Taxable
Taxable
Taxable Taxable220,687 1,229 2.23 237,745 838 1.41 
Tax-exempt 2
Tax-exempt 2
123,497 1,147 3.73 147,646 1,342 3.65 
Loans and loans held-for-sale: 1
Loans and loans held-for-sale: 1
Commercial
Commercial
Commercial Commercial1,635,438 30,534 7.49 1,564,266 20,021 5.13 
Tax exempt 2
Tax exempt 2
3,822 42 4.41 4,930 52 4.23 
Real estate Real estate593,767 5,691 3.84 393,983 2,674 2.72 
Consumer Consumer128,113 3,096 9.69 88,366 3,142 14.26 
Total loansTotal loans2,361,140 39,363 6.69 2,051,545 25,889 5.06 
Total earning assetsTotal earning assets3,149,924 47,281 6.02 2,636,131 28,382 4.32 
Less: Allowance for loan losses(35,143)(19,927)
Less: Allowance for credit losses
Cash and due from banks
Cash and due from banks
Cash and due from banksCash and due from banks5,756 5,579 
Other assetsOther assets289,161 237,016 
Other assets
Other assets
Total assets
Total assets
Total assets Total assets$3,409,698 $2,858,799 
LiabilitiesLiabilities
Liabilities
Liabilities
Deposits:Deposits:
Deposits:
Deposits:
NOW
NOW
NOW NOW$682,277 $4,816 2.83 %$654,781 $256 0.16 %$555,530 $$4,929 3.57 3.57 %$796,901 $$4,661 2.37 2.37 %
Money market checking Money market checking615,962 2,439 1.59 380,295 184 0.19 
Savings Savings72,289 351 1.95 27,496 0.01 
IRAs IRAs6,401 45 2.82 6,314 17 1.08 
CDs CDs662,753 8,799 5.33 75,487 203 1.08 
Repurchase agreements and federal funds soldRepurchase agreements and federal funds sold5,428 — — 11,566 0.03 
FHLB and other borrowingsFHLB and other borrowings158 — — 2,312 1.39 
Senior term loanSenior term loan9,351 198 8.49 — — — 
Subordinated debtSubordinated debt73,382 801 4.38 73,126 760 4.17 
Total interest-bearing liabilities Total interest-bearing liabilities2,128,001 17,449 3.29 1,231,377 1,430 0.47 
Noninterest-bearing demand depositsNoninterest-bearing demand deposits971,436 1,331,357 
Other liabilitiesOther liabilities38,842 40,900 
Other liabilities
Other liabilities
Total liabilities
Total liabilities
Total liabilities Total liabilities3,138,279 2,603,634 
Stockholders’ equityStockholders’ equity
Stockholders’ equity
Stockholders’ equity
Common stock
Common stock
Common stockCommon stock13,533 13,289 
Paid-in capitalPaid-in capital158,601 145,014 
Paid-in capital
Paid-in capital
Treasury stock
Treasury stock
Treasury stockTreasury stock(16,741)(16,741)
Retained earningsRetained earnings148,600 137,989 
Retained earnings
Retained earnings
Accumulated other comprehensive loss
Accumulated other comprehensive loss
Accumulated other comprehensive lossAccumulated other comprehensive loss(32,714)(25,097)
Total stockholders’ equity Total stockholders’ equity271,279 254,454 
Total stockholders’ equity
Total stockholders’ equity
Noncontrolling interest
Noncontrolling interest
Noncontrolling interestNoncontrolling interest140 711 
Total stockholders’ equity attributable to parent Total stockholders’ equity attributable to parent271,419 255,165 
Total stockholders’ equity attributable to parent
Total stockholders’ equity attributable to parent
Total liabilities and stockholders’ equity Total liabilities and stockholders’ equity$3,409,698 $2,858,799 
Total liabilities and stockholders’ equity
Total liabilities and stockholders’ equity
Net interest spread (tax-equivalent)
Net interest spread (tax-equivalent)
Net interest spread (tax-equivalent)Net interest spread (tax-equivalent)2.73 %3.85 %2.12 %3.05 %
Net interest income and margin (tax-equivalent) 2
Net interest income and margin (tax-equivalent) 2
$29,832 3.80 %$26,952 4.10 %
Net interest income and margin (tax-equivalent) 2
$30,333 3.83 3.83 %$33,013 4.40 4.40 %
Less: Tax-equivalent adjustmentsLess: Tax-equivalent adjustments$(250)$(292)
Net interest spreadNet interest spread2.70 %3.80 %
Net interest spread
Net interest spread2.10 %3.02 %
Net interest income and marginNet interest income and margin$29,582 3.77 %$26,660 4.06 %Net interest income and margin$30,139 3.81 3.81 %$32,729 4.36 4.36 %
1Non-accrual loans are included in total loan balances, lowering the effective yield for the portfolio in the aggregate.
2 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,March 31, 2024 and 2023, and 2022, 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.





53



Six Months Ended June 30,
20232022
(Dollars in thousands)Average BalanceInterest Income/ExpenseYield/CostAverage BalanceInterest Income/ExpenseYield/Cost
Assets
Interest-bearing balances with banks$365,291 $8695 4.80 %$395,494 $518 0.26 %
CDs with banks— — — 1,964 22 2.26 
Investment securities:
Taxable228,587 3,077 2.71 239,849 1,486 1.25 
Tax-exempt 2
130,609 2,456 3.79 138,170 2,478 3.62 
Loans and loans held-for-sale: 1
Commercial 3
1,628,015 59,065 7.32 1,509,071 37,000 4.94 
Tax exempt 2
3,882 85 4.42 4,998 105 4.24 
Real estate607,501 11,992 3.98 366,557 5,014 2.76 
Consumer132,804 6,959 10.57 71,588 5,271 14.85 
Total loans2,372,202 78,101 6.64 1,952,214 47,390 4.90 
Total earning assets3,096,689 92,329 6.01 2,727,691 51,894 3.84 
Less: Allowance for loan losses(32,653)(19,139)
Cash and due from banks3,015 5,822 
Other assets314,279 242,875 
Total assets$3,381,330 $2,957,249 
Liabilities
Deposits:
NOW$739,273 $9,478 2.59 %$650,903 $449 0.14 %
Money market checking413,718 3,367 1.64 423,053 386 0.18 
Savings82,735 991 2.42 38,706 0.01 
IRAs6,276 72 2.31 6,341 34 1.08 
CDs525,213 12,695 4.87 81,329 446 1.11 
Repurchase agreements and federal funds sold6,514 — — 11,693 0.05 
FHLB and other borrowings35,347 888 5.07 1,163 11 1.91 
Senior term loan9,557 392 8.27 — — — 
Subordinated debt73,350 1,600 4.40 73,094 1,513 4.17 
Total interest-bearing liabilities1,891,983 29,483 3.14 1,286,282 2,844 0.45 
Noninterest-bearing demand deposits1,174,965 1,365,037 
Other liabilities37,969 43,594 
Total liabilities3,104,917 2,694,913 
Stockholders’ equity
Preferred stock— — 
Common stock13,502 13,373 
Paid-in capital156,009 144,408 
Treasury stock(16,741)(16,741)
Retained earnings157,464 137,815 
Accumulated other comprehensive loss(34,022)(17,325)
Total stockholders’ equity276,212 261,530 
Noncontrolling interest201 806 
Total stockholders’ equity attributable to parent276,413 262,336 
Total liabilities and stockholders’ equity$3,381,330 $2,957,249 
Net interest spread (tax-equivalent)2.87 %3.39 %
Net interest income and margin (tax-equivalent) 2
$62,846 4.09 %$49,050 3.63 %
Less: Tax-equivalent adjustments$(535)$(542)
Net interest spread2.84 %3.35 %
Net interest income and margin$62,311 4.06 %$48,508 3.59 %
12 Non-accrual loans are included in total loan balances, lowering the effective yield for the portfolio in the aggregate.
2 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, 2023 and 2022, 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.
3 Our Small Business Association Paycheck Protection Program loans, totaling $4.5 million at June 30, 2023 and $22.3 million at June 30, 2022, are included in this amount.
5447






The following table presents the reconciliation of net interest margin for the periods shown:
Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(Dollars in thousands)
(Dollars in thousands)
(Dollars in thousands)(Dollars in thousands)2023202220232022
Net interest margin - U.S. GAAP basisNet interest margin - U.S. GAAP basis
Net interest margin - U.S. GAAP basis
Net interest margin - U.S. GAAP basis
Net interest income
Net interest income
Net interest incomeNet interest income$29,582 $26,660 $62,311 $48,508 
Average interest-earning assetsAverage interest-earning assets3,149,924 2,636,131 3,096,689 2,727,691 
Average interest-earning assets
Average interest-earning assets
Net interest margin
Net interest margin
Net interest marginNet interest margin3.77 %4.06 %4.06 %3.59 %
Net interest margin - non-U.S. GAAP basisNet interest margin - non-U.S. GAAP basis
Net interest margin - non-U.S. GAAP basis
Net interest margin - non-U.S. GAAP basis
Net interest income
Net interest income
Net interest incomeNet interest income$29,582 $26,660 $62,311 $48,508 
Impact of fully tax-equivalent adjustmentImpact of fully tax-equivalent adjustment250 292 535 542 
Impact of fully tax-equivalent adjustment
Impact of fully tax-equivalent adjustment
Net interest income on a fully tax-equivalent basis
Net interest income on a fully tax-equivalent basis
Net interest income on a fully tax-equivalent basisNet interest income on a fully tax-equivalent basis29,832 26,952 62,846 49,050 
Average interest-earning assetsAverage interest-earning assets$3,149,924 $2,636,131 $3,096,689 $2,727,691 
Average interest-earning assets
Average interest-earning assets
Net interest margin on a fully tax-equivalent basisNet interest margin on a fully tax-equivalent basis3.80 %4.10 %4.09 %3.63 %
Net interest margin on a fully tax-equivalent basis
Net interest margin on a fully tax-equivalent basis

Key Metrics
As of and for the three months ended June 30,As of and for the six months ended June 30,
As of and for the three months ended March 31,
As of and for the three months ended March 31,
As of and for the three months ended March 31,
(Dollars in thousands, except per share data)
(Dollars in thousands, except per share data)
(Dollars in thousands, except per share data)(Dollars in thousands, except per share data)2023202220232022
Book value per common shareBook value per common share$21.57 $20.63 $21.57 $20.63 
Book value per common share
Book value per common share
Tangible book value per common share 5
Tangible book value per common share 5
$21.31 $20.14 $21.31 $20.14 
Efficiency ratio 1 3 5 6
84.1 %77.3 %70.9 %81.2 %
Tangible book value per common share 5
Tangible book value per common share 5
Efficiency ratio 1 5
Efficiency ratio 1 5
Efficiency ratio 1 5
Overhead ratio 2 3 5
Overhead ratio 2 3 5
Overhead ratio 2 3 5
Overhead ratio 2 3 5
3.6 %4.2 %3.5 %4.0 %
Net loan charge-offs to total loans 4
Net loan charge-offs to total loans 4
0.2 %0.2 %0.3 %0.2 %
Allowance for credit losses to total loans 7
1.31 %1.03 %1.31 %1.03 %
Net loan charge-offs to total loans 4
Net loan charge-offs to total loans 4
Allowance for credit losses to total loans 6
Allowance for credit losses to total loans 6
Allowance for credit losses to total loans 6
Nonperforming loans
Nonperforming loans
Nonperforming loansNonperforming loans$13,646 $19,295 $13,646 $19,295 
Nonperforming loans to total loansNonperforming loans to total loans0.6 %0.9 %0.6 %0.9 %
Nonperforming loans to total loans
Nonperforming loans to total loans
Equity to assets
Equity to assets
Equity to assetsEquity to assets8.2 %8.5 %8.2 %8.5 %
Community Bank Leverage RatioCommunity Bank Leverage Ratio10.0 %11.6 %10.0 %11.6 %
Community Bank Leverage Ratio
Community Bank Leverage Ratio
1 Noninterest expense as a percentage of net interest income and noninterest income
2 Annualized for the quarterly periods presented
3 Noninterest expense as a percentage of average assets
4 Charge-offs less recoveries
5 Non-U.S. GAAP metric
6 Includes net income from discontinued operations
7Excludes loans held-for-sale















55






48



Tangible book value (“TBV”) per common share was $21.31$22.48 and $20.14$21.17 as of June 30,March 31, 2024 and March 31, 2023, and June 30, 2022, 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.

As of June 30,
As of March 31,As of March 31,
(Dollars in thousands, except per share data)(Dollars in thousands, except per share data)20232022(Dollars in thousands, except per share data)20242023
GoodwillGoodwill$2,838 $3,988 
IntangiblesIntangibles397 1,981 
Total intangiblesTotal intangibles3,235 5,969 
Total equity attributable to parentTotal equity attributable to parent274,349 252,300 
Total equity attributable to parent
Total equity attributable to parent
Less: Total intangibles
Less: Total intangibles
Less: Total intangiblesLess: Total intangibles(3,235)(5,969)
Tangible common equityTangible common equity271,114 246,331 
Tangible common equityTangible common equity$271,114 $246,331 
Tangible common equity
Tangible common equity
Common shares outstanding (000s)Common shares outstanding (000s)12,72012,229Common shares outstanding (000s)12,84112,653
Tangible book value per common shareTangible book value per common share$21.31 $20.14 


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, investment securities and certificates of deposit in banks. Interest-bearing liabilities include interest-bearing deposits and borrowed funds such as sweep accounts, repurchase agreements, subordinated debt and the senior term loan. 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.

In 2023, the Federal Reserve raised its key interest rate fromto a range of 4.25% to 4.5% as of December 31, 2022 to a range of 5.00% to 5.25%2023 and remains at this rate as of June 30, 2023.March 31, 2024. We continually analyze methods to deploy assets into an earning asset mix to result in a stronger net interest margin.

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

Net interest margin on a tax-equivalent basis was3.80% 3.83% for the three months ended June 30, 2023March 31, 2024 compared to4.10% 4.40% for the three months ended June 30, 2022.March 31, 2023. The decrease in net interest margin on a tax-equivalent basis primarily reflects higher funding costs and a shift in the mix of earnings assets, partially offset by higher loaninvestment yields. NetTax-equivalent net interest spread (tax-equivalent) was 2.73%2.12% for the three months ended June 30, 2023March 31, 2024 compared to 3.85%3.05% for the three months ended June 30, 2022.March 31, 2023. The difference between the tax-equivalent net interest margin (tax-equivalent) and tax-equivalent net interest spread (tax-equivalent) was107 171 basis points in the three months ended June 30, 2023March 31, 2024 compared to 25135 basis points in the three months ended June 30, 2022March 31, 2023 driven by the increase in interest expense outpacing the increase in average assets.

During the three months ended June 30, 2023,March 31, 2024, net interest income increaseddecreased by $2.9$2.6 million, or 11.0%7.9%, to $29.6$30.1 million from $26.7$32.7 million during the three months ended June 30, 2022. This increase is largely due to strong loan growth at favorable interest rates, primarily driven by the Company's strategic lending partnership growth vehicle and broad-based growth throughout CoRe banking business, as well as the effects of higher interest rates on earning assets, including investment securities and interest
56


bearing deposits with other banks, partially offset by an increase in cost of funds.March 31, 2023. Average total earning assets were $3.15$3.19 billion in the three months ended June 30, 2023March 31, 2024 compared to $2.64$3.04 billion in the three months ended June 30, 2022.March 31, 2023. Total interest incomeincreased by $18.9$5.3 million, or 67.4%11.8%, to $47.0 millionin the three months ended June 30, 2023 from $28.1$50.0 million in the three months ended June 30, 2022March 31, 2024 from $44.8 million in the three months ended March 31, 2023 driven by higher yields from new loan production at favorablean increase in total earning assets, including interest rates.bearing deposits with other banks. Average total loans increaseddecreased to $2.36$2.28 billion in the three months ended June 30, 2023March 31, 2024 from $2.05$2.38 billion in the three months ended June 30, 2022,March 31, 2023, primarily as the result of a $199.8$45.2 million increasedecrease in average real estate loans a $71.2 million increase in average commercial loans and an $39.7$60.2 million increasedecrease in average consumer loans. The yield on total loans increased 1.63%.50 basis points.
49



Average investment securities decreased $41.2$22.0 million as the result of a$24.1 $31.5 million decrease in tax-exempt investments, andpartially offset by a $17.1$9.5 million decreaseincrease in taxable investments during three months ended June 30, 2023,March 31, 2024, compared to three months ended June 30, 2022.March 31, 2023. The yield on tax-exempt securitiesincreased eight decreased 49 basis points, and the taxable securities yield increased 82decreased 32 basis points. driven by a decline in interest income associated with available-for-sale investment security fair value hedges.

Average interest-bearing liabilitiesincreased by $896.6$240.0 million for three months ended June 30, 2023March 31, 2024 from three months ended June 30, 2022.March 31, 2023. Theincreasewas primarily the result of average balance increases of $587.3$288.5 million in certificates of deposit and $235.7$199.5 million in money market checking deposits.deposits, partially offset by a decrease of $241.4 million in NOW accounts.

Average interest-bearing deposits were$2.04 billionfor the three months ended June 30, 2023 and$1.14 $1.81 billion for the three months ended June 30, 2022.March 31, 2024 and $1.49 billion for the three months ended March 31, 2023. Total interest expense increased by $16.0$7.9 million, caused primarily by a $15.8$8.8 million increase in deposit interest. The result was a 282127 basis point increase in the cost of interest-bearing liabilities, primarily driven by increases in interest rates and liquidity actions taken during the second quarter of 2023 in response to market conditions.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

Net interest margin on a tax-equivalent basis was4.09%for the six months ended June 30, 2023 compared to 3.63% for the six months ended June 30, 2022.The increase in net interest margin on a tax-equivalent basis primarily reflects higher funding costs and a shift in the mix of earnings assets, partially offset by higher loan yields. Net interest spread (tax-equivalent) was2.87%for the six months ended June 30, 2023 compared to3.39% for the six months ended June 30, 2022.The difference between the net interest margin (tax-equivalent) and net interest spread (tax-equivalent) was122basis points in the six months ended June 30, 2023 compared to24 basis points in the six months ended June 30, 2022. This was driven by the driven by the increase in interest expense outpacing the increase in average assets.

During the six months ended June 30, 2023,net interest income increased by $13.8 million, or 28.5%, to $62.3 million from $48.5 million during the six months ended June 30, 2022. This increase is largely due to strong loan growth at favorable interest rates, primarily driven by the Company's strategic lending partnership growth vehicle and broad-based growth throughout CoRe banking business, as well as the effects of higher interest rates on earning assets, including investment securities and interest bearing deposits with other banks, partially offset by an increase in cost of funds. Average total earning assets were$3.10 billionin the six months ended June 30, 2023 compared to $2.73 billion in the six months ended June 30, 2022. Total interest income increased by $40.4 million, or 78.8%, to $91.8 million in the six months ended June 30, 2023 from $51.4 million in the six months ended June 30, 2022 driven by higher yields from new loan production at favorable interest rates. Average total loansincreased to $2.37 billion in the six months ended June 30, 2023 from $1.95 billion in the six months ended June 30, 2022, primarily as the result ofa $240.9 million increase in average real estate loans and a $118.9 million increase in average commercial loans. The yield on total loans increased 174 basis points.

Average investment securitiesdecreased $18.8 million as the result of a $7.6 million decrease in tax-exempt investments and an $11.3 million decrease in taxable investments during the six months ended June 30, 2023, compared to the six months ended June 30, 2022.The yield on tax-exempt securities increased 17 basis points and the taxable securities yieldincreased 146 basis points.

Average interest-bearing liabilities increased by $605.7 million for the six months ended June 30, 2023 from the six months ended June 30, 2022. The increase was primarily the result of average balance increases of $443.9 million in certificates of deposit, $88.4 million in negotiable order of withdrawal accounts, $44.0 million in savings accounts, and $34.2 million in FHLB and other borrowings.

The cost of interest-bearing liabilities increased to 3.14%in the six months ended June 30, 2023 from0.45% in the six months ended June 30, 2022. This increase is primarily the result of an increase of 282 basis points in the cost of deposits, as well as the cost of the senior term loan, which was entered into during October 2022. Average interest-bearing deposits were $1.77 billionfor the six months ended June 30, 2023 and $1.20 billion for the six months ended June 30, 2022. Total interest expenseincreased by $26.6 million, primarily driven by increases in interest rates and liquidity actions taken during 2023 in response to market conditions.
57




Further discussion on borrowings is included in Note 7 – Borrowed Funds accompanying the consolidated financial statements included elsewhere in this report.

Provision for Credit Losses

The provision for credit losses, which is a product of management’s analysis, is recorded in response to inherent losses in the loan portfolio. Release of allowance and creditCredit loss provisions were $4.2$2.0 million for the three months ended June 30, 2023March 31, 2024 and $5.1$4.6 million for the three months ended June 30, 2022,March 31, 2023, respectively. The decrease in credit loss provision is the result of both decreasinglower calculated loss rates and lower portfolio balances across most of the pooled loan segments. The Bank did see an increase in loss rates in the other construction loan segment, balances across the entire loan portfolio, specifically concentrated within the subprime automobile segment.

Further discussion on new accounting standards is included in Note 1 – Naturewhich had an amortized cost basis of Operations and Basis of Presentation accompanying the consolidated financial statements included elsewhere in this report.$128.9 million at March 31, 2024.

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

Total loans decreased $48.8$50.3 million during the three months ended June 30, 2023,March 31, 2024, compared to an increasedecrease of $317.3$11.4 million in the three months ended June 30, 2022.March 31, 2023. The decline in loan balances compared to the prior quarters primarily reflects amortization of the loan portfolio and the Bank’s purposeful effort to improve the overall strength of the loan portfolio through selective originations. The commercial loan portfolio increaseddecreased by $12.2$34.0 million during the three months ended June 30, 2023,March 31, 2024, as compared to an increasedecrease of $150.1$55.1 million in the three months ended June 30, 2022,March 31, 2023, while the residential mortgage loan portfolio decreased by $33.4$12.1 million during the three months ended June 30, 2023,March 31, 2024, as compared to a $125.8$98.0 million increase during the three months ended June 30, 2022.March 31, 2023. Additionally, our consumer loan portfolio decreased by $26.9$2.7 million during the three months ended June 30, 2023,March 31, 2024, while it increaseddecreased by $41.9$52.9 million in the three months ended June 30, 2022.March 31, 2023. Net charge-offs totaled $1.2$1.3 million and $1.7 million during both the three months ended June 30,March 31, 2024 and 2023, and the three months ended June 30, 2022.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

Total loans decreased $60.3 million during the six months ended June 30, 2023 versus an increase of $345.3 million in the six months ended June 30, 2022. The commercial loan portfolio decreased by $42.9 million during the six months ended June 30, 2023, as compared to an increase of $148.8 million in the six months ended June 30, 2022, while the residential mortgage loan portfolio increased by $64.6 million during the six months ended June 30, 2023, while increasing by $132.7 million in the six months ended June 30, 2022. Additionally, our consumer loan portfolio decreased by $79.8 million during the six months ended June 30, 2023, while it increased by $63.6 million in the six months ended June 30, 2022. In addition, net charge-offs during the six months ended June 30, 2023 totaled $2.9 million compared to net charge-offs of $1.9 million in the six months ended June 30, 2022.respectively.

Noninterest Income

Payment card and service charge income, consulting compliance income, equity method investment income or loss and gains on securitiessale 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.activity, sales of assets or our investment portfolio.

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

Noninterest income for the three months ended June 30,March 31, 2024 and 2023 and 2022 totaled $6.4$7.8 million and $9.4$3.1 million,, respectively.The decreaseincrease in noninterest income for thethree months ended June 30, 2023March 31, 2024 compared to the three months ended June 30, 2022March 31, 2023 was primarily the result of a decreasean increase of $2.4$2.2 million in gain on sale of loans and $1.0 million in loss on acquisition and divestiture activity, partially offset byavailable-for-sale investment securities, an increase of $1.3$1.2 million in equity method investmentpayment card and service charge income and an increase of $0.6 million in other operating income.

Gain Loss on sale of loans decreased $2.4$0.4 million, primarily as a result of losses on the sale of subprime automobile loans as we reduce that portfolio during the three months ended June 30, 2023. Looking forward, we expect to continue to evaluate ways to further reduce our portfolio of subprime automobile loans. Gains on acquisition and divestiture activity decreased due toMarch 31, 2023, with no comparable losses in the $1.1 million loss resulting from divestiture of our investment in Flexia. For more information regarding the Flexia transaction, see Note 14 - Acquisition and Divestiture Activity. Equity method investment income increased $1.3 million due to income from our equity method investment in Warp Speed, which was purchased in October 2022.
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Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

Noninterest income for the six months ended June 30, 2023 and 2022 totaled$9.5 millionand $18.7 million,respectively. The decrease in noninterest income for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily the result ofdecreases of $3.8 million in gain on sale of loans, $2.2 million in gain on sale of available-for-sale securities and $1.9 million in equity method investment gains.

Gain on sale of loans decreased $3.8 million, primarily as a result of losses on the sale of subprime automobile loans as we reduce that portfolio. Gain on sale of available-for-sale securities decreased $2.2 million due to losses on the sale of securities as a result of repositioning our investment portfolio during the first quarter of 2023. The $1.9 million decrease in equity method investment gains reflected an in substance sale of an equity method investment from our portfolio during second quarter of 2022.current quarter.

Noninterest Expense

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

Noninterest expense was$30.3 $30.2 millionand $28.0$28.3 million in the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively. The increase from the prior period primarily reflects higher other operating expenses, specifically higher professional fees, partially offset by a decrease in salaries and employee benefits expense. Approximately52% 55% and 59% of noninterest expense for the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively, was
50


related to personnel costs. Personnel costs are a significant part of our noninterest expense as such costs are critical to financial services organizations.

The decreaseincrease of noninterest expense relative to the prior year periodthree months ended March 31 2023 primarily reflects the implementationan increase of expense reduction initiatives.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

Noninterest expense was $58.6 million and$55.2 million in the six months ended June 30, 2023 and 2022, respectively.The increase from the prior period primarily reflects higher other operating expenses, specifically higher professional fees partially offset by a decreaseof $2.8 million attributable to actions taken in salaries and employee benefits expense. Approximately55% and 59% of noninterest expense for the six months ended June 30, 2023 and 2022, 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. The decrease relativeresponse to the prior year period primarily reflects the implementation of expense reduction initiatives.

Discontinued Operations

In Februarymarket events in March 2023 we completed the sale of Chartwell for total consideration of $14.4 million in the form of a loan issued to the buyer, resulting in a gain on sale of $11.8 million. To facilitate a transition of the Chartwell servicesfurther enhance risk management and support the onboarding and conversion of systems, we entered into a 60 day Employee Lease and Service Agreement, whereby we provided the purchaser with finance and accounting, human capital, information technology, marketing and record/data retention services. In addition, we entered into a contract with the purchaser to continue to provide services and support from Chartwell for three years following the sale.

Net income from discontinued operations for the six months ended June 30, 2023 and 2022 totaled$8.8 millionand $1.3 million, respectively.The increase in net income from discontinued operations was driven primarily by the $11.8 million gain on sale, partially offset by a decrease of $5.9 million in compliance and consulting income during the six months ended June 30, 2023.compliance-related infrastructure.

Return on Assets and Equity

Assets

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

Our return on average assets was 1.0% 0.5%for the three months ended June 30, 2023,March 31, 2024, compared to 0.4%1.4% for the three months ended June 30, 2022.March 31, 2023. The increaseddecreased return in the three months ended June 30, 2023March 31, 2024 is the result of a$5.1 $6.9 million increase in earnings,while average total assets increased by $550.9 million, mainly as the result of a $309.6 million increase in average total loans and $247.0 million increase in average interest-bearing deposits with banks.

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Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

Our return on average assets was 1.2% for the six months ended June 30, 2023, compared to 0.4% for the six months ended June 30, 2022. The increased return for the six months ended June 30, 2023 is the result of a $13.7 million increasedecrease in earnings, while average total assets increased by $424.1$150.9 million, mainly as the result of a $420.0$264.8 million increase in average interest-bearing balances with banks, partially offset by a $100.3 million decrease in average total loans.


Equity

Three Months Ended June 30, 2023March 31, 2024 vs. Three Months Ended June 30, 2022March 31, 2023

Our return on average stockholders’ equity was 12.0%6.2% for the three months ended June 30, 2023,March 31, 2024, compared to 4.6%16.1% for the three months ended June 30, 2022. March 31, 2023. The increaseddecreased return in the three months ended June 30, 2023March 31, 2024 is a result of an $5.1$6.9 million increasedecrease in earnings, while average equity increased by $16.3$7.3 million.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

Our return on average stockholders’ equity was 14.1% for the six months ended June 30, 2023, compared to 4.4% for the six months ended June 30, 2022. The increased return for the six months ended June 30, 2023 is a result of a$13.7 million increase in earnings, while average equity increased by $14.1 million.


Statement of Financial Condition

Cash and Cash Equivalents

Cash and cash equivalents totaled $455.8$640.4 millionat June 30, 2023,March 31, 2024, compared to $40.3$398.2 million at December 31, 2022.2023. The increase in cash and cash equivalents reflects actions taken in 2023seasonal increases due to ensure liquidity in response to recent conditions in the banking industry.tax season driven by a BaaS relationship. 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.demands.

Investment Securities

Investment securities, including equity securities, totaled$370.2 $390.7 millionat June 30, 2023,March 31, 2024, compared to$418.6 $386.4 million at December 31, 2022.2023. 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)(Dollars in thousands)June 30, 2023December 31, 2022(Dollars in thousands)March 31, 2024December 31, 2023
Available-for-sale securities:Available-for-sale securities:
United States government agency securities
United States government agency securities
United States government agency securitiesUnited States government agency securities$38,474 $44,814 
United States sponsored mortgage-backed securitiesUnited States sponsored mortgage-backed securities54,366 56,571 
United States treasury securitiesUnited States treasury securities98,029 120,909 
Municipal securitiesMunicipal securities121,066 138,636 
Corporate debt securitiesCorporate debt securities8,901 10,560 
Other debt securitiesOther debt securities7,500 7,500 
Other securitiesOther securities801 824 
Total investment securities available-for-sale$329,137 $379,814 
Investment securities available-for-sale
Equity securitiesEquity securities$41,082 $38,744 
Equity securities
Equity securities

Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through the Asset and
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Liability Committee (“ALCO”) meetings. The ALCO also monitors net interest income and assists in the management of interest rate risk for us.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.

60Our 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 $2.31$2.27 billion as of June 30, 2023March 31, 2024 and $2.37$2.32 billion as of December 31, 2022.2023. The Bank’s lending is primarily focused in North Central West Virginia, Northern Virginia, North Carolina and Northern Virginia.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, 2023March 31, 2024 and December 31, 2022,2023, 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 they are diverse with respect to 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, 2023.March 31, 2024.

Allowance for Credit Losses

The ACL was $30.3$22.8 million, or 1.31%1.01% of loans receivable, at June 30, 2023,March 31, 2024, compared to $23.8$22.1 million, or 1.00% of loans receivable, at December 31, 2022.2023. The $0.7 million increase in the ACL of $6.5 million was primarily the result of the adoption of ASC 326, which requiredimpacted by an increase in the allowanceprovision needed for credit lossesindividually analyzed loans of $8.9 million as of January 1, 2023.$1.5 million. Additionally, over the course of the sixthree months ended June 30, 2023March 31, 2024, changes to the loan portfolio balances, qualitative factor adjustments and expected loss forecasts within the expected credit loss calculation resulted in allowance increases of $0.4 million and $0.3to the other construction segment. These increases have been offset by allowance decreases of $0.5 million to the Other Constructionconsumer auto and Residential Real Estate portfolio$0.4 million to the commercial and industrial segments, respectively, offset by a decrease of $4.8 million for the Consumer Auto portfolio segment, which was primarily driven by the sale of subprime automobile loans as we reduce that portfolio during the three months ended June 30, 2023.respectively. All other segments combined experienced an allowance increasedecrease of $1.6$0.4 million. In general, the increased allowance for the various segments was the result of the Bank management's expectations are that the markets in which it lends will experience an economic declineimprovements over the next 12 to 24 months.months, and most decreases in estimated loss rates have been further buoyed by decreases in loan balances in the three months ended March 31, 2024. This results in marginally lower allocation rates, against slightly lower loan balances, resulting in an overall lower allowance needed for the pooled loan portfolio. However, this has been more than offset by the increase in allowance needed by the individually analyzed loans. The changesincreases to the allowance for credit lossesACL totaled $2.4$0.6 million and combined with net charge offs to date of $2.9$1.3 million, resulted in total credit loss provision of $0.7 million over the three months ended March 31, 2024. Net charge-offs for the three months ended March 31, 2024 included $0.6 million related to a SBA loan secured by business assets, $0.5 million through six months ended June 30, 2023.related to the subprime consumer automotive segment and $0.4 million related to a commercial client in the energy industry.

Management continually monitors the risk in the loan portfolio through the 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 ACL. 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 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.

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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 Deposits remain the most significant source of funds, totaling $2.96$3.15 billion, or 97.1%97.4% of funding sources at June 30, 2023. March 31, 2024.This same information at December 31, 20222023 reflected $2.57$2.90 billion in deposits representing 92.9%97.1% of funding sources.sources. Borrowings, consisting of subordinated debt, senior term loan and FHLB and other borrowings represented 2.7%2.5% of funding sources at June 30, 2023,March 31, 2024, versus 6.7%2.7% at December 31, 2022.2023. Repurchase agreements, which are available to large corporate customers, represented 0.2%0.1% of funding sources at June 30, 2023March 31, 2024 and 0.4%0.2% at December 31, 2022.2023.

At June 30, 2023,March 31, 2024, noninterest-bearing balances totaled $987.6 million,$1.39 billion, compared to $1.23$1.20 billion at December 31, 2022,2023, or 33.4%44.2% and 47.9%41.3%, respectively, of total deposits.Interest-bearing deposits totaled $1.97$1.75 billion at June 30, 2023, March 31, 2024,compared to $1.34$1.70 billion at December 31, 2022, or 66.6% and 52.1%, respectively, of total deposits.2023.

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The following table presents the balance of each of the deposit categories as of the periods shown:
(Dollars in thousands)(Dollars in thousands)June 30, 2023December 31, 2022(Dollars in thousands)March 31, 2024December 31, 2023
Demand deposits of individuals, partnerships and corporationsDemand deposits of individuals, partnerships and corporations
Noninterest-bearing demandNoninterest-bearing demand$987,555 $1,231,544 
Interest-bearing demand639,814 720,074 
Noninterest-bearing demand
Noninterest-bearing demand
NOW
Savings and money marketsSavings and money markets624,276 284,447 
Time deposits, including CDs and IRAsTime deposits, including CDs and IRAs707,294 334,417 
Total depositsTotal deposits$2,958,939 $2,570,482 
Time deposits that meet or exceed the FDIC insurance limitTime deposits that meet or exceed the FDIC insurance limit$2,414 $4,386 
Time deposits that meet or exceed the FDIC insurance limit
Time deposits that meet or exceed the FDIC insurance limit

Average interest-bearing deposits were $2.04$1.81 billion during the three months ended June 30, 2023,March 31, 2024, compared to $1.14$1.49 billion during the same time period in 20222023 and and average noninterest-bearing deposits were $971.4 million$1.28 billion during the three months ended June 30, 2023March 31, 2024 compared to $1.33$1.38 billion during the same time period in 2022.2023.

Average interest-bearingWe utilize a custodial deposit transference structure for certain deposit programs whereby we, acting as custodian of account holder funds, places 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 has sole custodial control and transaction authority over the accounts opened at program banks. We maintain the records of each account holders' deposits were $1.77 billion during the six months ended June 30, 2023 comparedmaintained at program banks. Program banks undergo robust due diligence prior to $1.20 billion during the same time period in 2022becoming a program bank and average noninterest-bearing deposits were $1.17 billion during the six months ended June 30, 2023comparedare also subject to $1.37 billion during the same time period in 2022.

Off-balancecontinuous monitoring. These off-balance sheet deposits totalingtotaled $1.5 billion at March 31, 2024 and $1.1 billion at June 30,December 31, 2023 and $724.0 million at December 31, 2022 represent the gaming, banking-as-a-service and digital asset clients.

Along with traditional deposits, the Bank has access to both short-term borrowings from FHLB, Federal Reserve Bank and overnight repurchase agreements to fund its operations and investments. For details on our borrowings, refer to Note 7 – Borrowed Funds accompanying the consolidated financial statements included elsewhere in this report.


Deposit Concentration

Our noninterest bearingfour primary Fintech deposit verticals are gaming, payments, banking-as-a-service and digital assets, with deposits totaled $987.6totaling $257.6 million, $417.9 million, $357.6 million and $339.1 million as of June 30, 2023,March 31, 2024, respectively, compared to $1.23 billion as of December 31, 2022. The decline in noninterest bearing deposits reflects the use of off-balance sheet deposit networks to manage liquidity$354.1 million, $449.8 million, $251.6 million and concentration risk, enhance capital and generate fee income. Off-balance sheet deposits totaling $1.1 billion at June 30, 2023 and $724.0 million at December 31, 2022 represent the gaming, banking-as-a-service and digital asset clients.

Gaming deposits totaled $362.8 million as of June 30, 2023, compared to $652.1$188.4 million as of December 31, 2022.2023, respectively. Of the gaming deposits, $268.7$199.3 million is with our three largest gaming clients at June 30, 2023.March 31, 2024. Of the digital asset deposits, $309.5 million is with our largest digital asset client at March 31, 2024.

Capital Resources

During the sixthree months ended June 30, 2023,March 31, 2024, stockholders’ equity increased $12.9$2.5 million to $274.3$291.8 million. This increase consists of net income of $19.5$4.5 million, other comprehensive incomecommon stock options exercised of $3.2$1.2 million and stock based compensation of $1.8 $0.9
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million, and $0.2 million related to the redemption of noncontrolling interests partially offset by the impact to retained earnings of adopting ASC 326 of $6.6 million, cash dividends paid of $4.3$2.2 million and minimum tax withholding on restricted stock units issuedother comprehensive loss of $0.7$2.0 million.

The growth in assets of $283.0$233.5 million in the sixthree months ended June 30, 2023March 31, 2024 outpaced the growth in stockholders' equity, and the equity to assets ratio decreased from 8.5%8.7% at December 31, 20222023 to 8.2% at June 30, 2023.March 31, 2024. We paid dividends to common shareholders of $4.3$2.2 million and $4.1$2.1 million in the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, respectively, compared to earnings of $19.5$4.5 million and $5.8$11.3 million in the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, respectively, resulting in the dividend payout ratio decreasingincreasing to 22.1%48.7% in the sixthree months ended June 30, 2023March 31, 2024 from 71.0%18.9% in the sixthree months ended June 30, 2022.March 31, 2023.

We 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
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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 16 – Regulatory Capital Requirements to the consolidated financial statements included in Item 8, Financial Statements and accompanying notes contained inSupplementary Data, of the 20222023 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 EGRRCPA. 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 elected to begin using the CBLR for the first quarter of 2021 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% or temporarily prescribed threshold established in response to COVID-19..

The Bank's CBLR at June 30, 2023March 31, 2024 was 10.0%10.1%, which is above the well-capitalized standard 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 $737.3 million and $711.8 million as of March 31, 2024 and 2023, respectively. 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 sixthree months ended June 30, 2023,March 31, 2024,cash used in operating activities totaled $25.3 million, while cash from operating, investing and financing activities totaled $30.6 million, $110.0$25.8 million and $275.0$241.7 million, respectively. Significant changes in cash flows during the quarter include inflows from the net increase in deposits of $388.5$243.9 million, net change in loans of $49.3 million and sales of available-for-sale investment securities of $54.5$11.7 million, partially offset by cash outflowsan outflow of $102.3$34.8 million to pay down FHLB and other borrowings. purchase available-for-sale investment securities.

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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 Certificate of Deposit Account Registry Services. Additionally, on March 12, 2023, the Federal Reserve implemented the Bank Term Funding Program to support federally-insured depository institutions in response to prevailing market uncertainty about the banking industry resulting from the insolvencies of certain regional depository institutions. 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 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 our primary market area for CoRe banking services to be comprised of North Central West Virginia and Northern Virginia. We consider our Fintech banking market to be customers located throughout the entire United States.
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We believe that the current economic climate in our primary market areas reflect economic climates that are consistent with the general national economic climate. Unemployment in the United States was 3.9% for March 2024 and 3.6% for June 2023 and 3.8% for June 2022.March 2023.


Commitments and Contingent Liabilities

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

Our 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. We use 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. 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 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. 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 and Northern Virginia markets. Collateral for loans is primarily residential and commercial real estate, personal property and business equipment. We evaluate the credit worthiness of each of our customers on a case-by-case basis and the amount of collateral it obtains is based upon 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

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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, in that 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.

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Beginning January 1, 2023, we adopted ASU 2016-13. For accounting policies and underlying accounting assumptions used in estimating our allowance for credit losses under ASU 2016-13, refer to Note 1 – Nature of Operations and Basis of Presentation.

Except as related to the adoption of ASU 2016‑13, thereThere 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 20222023 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.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

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 through management of 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 caps, commercial loan swap transactions and interest rate lock commitments on mortgage loans held-for-sale, as well as the structuring of loan terms that provide cash flows to be consistently re-invested along the rate cycle.

Our primary market risk is composed primarilyinterest rate fluctuation. Interest rate risk results from the traditional banking activities in which the Bank engages, such as gathering deposits and extending loans. Many factors, including economic conditions, financial conditions, movements in interest rates and consumer preferences affect the difference between interest earned on assets and interest paid on liabilities. Our interest rate risk represents the levels of exposure our income and market values have to fluctuations in interest rates. Interest rate risk is measured as the change in earnings and the theoretical market value of equity that results from changes in interest rates. The ALCO oversees the management of interest rate risk.risk and our objective is to maximize stockholder value, enhance profitability and increase capital, serve customer and community needs and protect us from any material financial consequences associated with changes in interest rates.

Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); changing rate relationships across yield curves that affect bank activities (basis risk); changing rate relationships across the spectrum of maturities (yield curve risk); and interest rate related options embedded in certain bank products (option risk). Changes in interest rates may also affect a bank’s underlying economic value. The ALCOvalues of a bank’s assets, liabilities and interest-rate related, off-balance sheet contracts are affected by changes in rates because the present values of future cash flows, and in some cases the cash flows themselves, are changed when discounting by different rates.

We believe that accepting some level of interest rate risk is responsible for reviewingnecessary in order to achieve realistic profit goals. Management and the 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.

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Our Board of Directors has established a comprehensive interest rate risk management policy, which is administered by the ALCO. The policy establishes limits on risk, which are quantitative measures of the percentage change in net interest income (a measure of net interest income at risk) and the fair value of equity capital (a measure of economic value of equity, or “EVE”, at risk) resulting from a hypothetical change in interest rates. We measure the potential adverse impacts that changing interest rates may have on short-term earnings, long-term value and liquidity by employing simulation analysis through the use of computer modeling. The simulation model captures optionality factors such as call features and interest rate caps and floors embedded in investment and loan portfolio contracts. As with any method of gauging interest rate risk, there are certain shortcomings inherent in the interest rate modeling methodology employed. When interest rates change, actual movements in different categories of interest-earning assets and interest-bearing liabilities, loan prepayments and withdrawals of time and other deposits, may deviate significantly from assumptions used in the model. Finally, the methodology does not measure or reflect the impact that higher rates may have on adjustable-rate loan customers’ ability to service their debts or the impact of rate changes on demand for loan and deposit products.

A base case forecast is prepared using market consensus rate forecasts and alternative simulations reflecting more and less extreme behavior of rates each quarter. The analysis is presented to the ALCO and the Board of Directors. In addition, more frequent forecasts are produced when interest rates are particularly uncertain, when other business conditions so dictate or when necessary to model potential balance sheet changes.

The balance sheet is subject to quarterly testing for interest rate shock possibilities to indicate the inherent interest rate risk. Average interest rates are shocked by +/- 100, 200, 300 and 400 basis points (“bp”). The goal is to structure the balance sheet so that net interest-earnings at risk over 12-month and 24-month periods and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels and scenarios.

As of March 31, 2024, we are shown in an asset sensitive position in down rate environments after rate shocks. Management continuously strives to reduce higher cost fixed rate funding instruments, while increasing assets that are more fluid in their repricing. Theoretically, an asset sensitive position is more favorable in a rising rate environment, since more assets than liabilities will reprice in a given time frame as interest rates rise. Similarly, a liability sensitive position is theoretically favorable in a declining interest rate environment, since more liabilities than assets will reprice in a given time frame as interest rates decline. Management works to maintain a consistent spread between yields on assets and costs of deposits and borrowings, regardless of the direction of interest rates.

Estimated Changes in Net Interest Income
Change in interest rates+400 bp+300 bp+200 bp+100 bp-100 bp-200 bp-300 bp-400 bp
Policy Limit(25.0)%(20.0)%(15.0)%(10.0)%(10.0)%(15.0)%(20.0)%(25.0)%
March 31, 202425.7 %19.3 %12.9 %6.6 %(7.6)%(15.1)%(22.8)%(30.5)%
March 31, 202337.0 %26.9 %16.7 %7.0 %(12.5)%(23.2)%(34.2)%(38.4)%

Net interest income sensitivity positionis tested by using shocking a forward rate curve. The change in income is then examined in scenarios where the rate curve is shocked up or down in a parallel shock. Deposit repricing during the last year lagged the movement of the Fed Funds Rate. As these increases have been realized, interest expense is higher in a flat rate scenario. However, the betas for deposit repricing allow interest expense to increase more in up rates and establishing policiesdecrease more in down rates in 2024 than during 2023.

At March 31, 2024, the expectation is for rates to monitorremain stable, or see very small drops, throughout the rest of the year, with potential rate drops occurring in year two, with another stabilization moving forward. There is impact in a down rate environment as the bank deals heavily in variable rate loans and coordinatedeposits.

Net interest income at risk exceeded policy limits in the -200 bp, -300 bp and -400 bp parallel instantaneous interest rate shock scenarios. The policy violations in these scenarios are driven largely by the general level or market interest rates described in the preceding paragraph as well as our sources, usescost of funding. Our deposit costs are low and pricinghave little room to reprice to a lower interest rate in a falling rate environment. However, our floating rate assets are exposed to the full effect of repricing to a lower interest rate in a falling rate environment.

The paragraph above discusses net interest income at risk in various shock scenarios; scenarios in which interest rates immediately move by a large margin. Our net interest income profile exhibits declining net interest income when rates fall gradually, but the impact is not as extreme as is suggested in a shock scenario. A gradual interest rate decline scenario generally
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smooths the impact of falling rates over a 12-month and 24-month period. Our expectation is that over any given one to two year period, interest rates will likely move at a gradual pace.

As interest rates fall, mortgage companies expect to experience a higher volume of loan originations and refinance activity. This benefit is not reflected in measures of net interest income at risk, as origination and refinance activity are classified as income from an equity method investment. This increase in equity method investment income represents a benefit to net income that offsets the losses to net interest income experienced in a falling rate environment.

The measures of equity value at risk indicate the ongoing economic value of us by considering the effects of changes in interest rates on all of our cash flows and by discounting the cash flows to estimate the present value of assets and liabilities. The difference between these discounted values of the assets and liabilities is the economic value of equity, which theoretically approximates the fair value of our net assets

Estimated Changes in EVE
Change in interest rates+400 bp+300 bp+200 bp+100 bp-100 bp-200 bp-300 bp-400 bp
Policy Limit(35.0)%(25.0)%(17.0)%(12.0)%(12.0)%(17.0)%(25.0)%(35.0)%
March 31, 202413.3 %9.9 %6.5 %3.0 %(6.9)%(13.3)%(21.1)%(29.0)%
March 31, 20233.2 %2.0 %0.3 %0.6 %(2.5)%(5.5)%(9.9)%(14.1)%

The EVE was stable across rate changing scenarios for 2023. The Fed Funds Rate increased significantly during 2022. The full effect of this rate movement was not fully realized in the deposit portfolio until 2023. Throughout 2023, in the rising rate environment, interest-bearing deposits were repriced, leading to increased cost of funds. The significant change in rates also drove previously noninterest-bearing deposits into new interest-bearing account types. This migration of noninterest-bearing deposits to interest-bearing impacted the cost of interest-bearing liabilities. This impact drove the cost of interest-bearing liabilities up, allowing the cost to behave similar to the discount rate applied to cash flows. These changes in rates took place in 2023. Any further deposit repricing would also be a major driver in the EVE calculation differences.

Credit Risk

We have counter-party risk which may arise from the possible inability of third-party investors to meet the terms of their forward sales contracts.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.

Item 4 – Controls and Procedures

As of June 30, 2023,March 31, 2024, 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 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, 2023.

Beginning January 1, 2023, we adopted ASU 2016-13. We implemented changes to the policies, processes and controls over the estimation of the allowance for credit losses to support the adoption of ASU 2016-13. While many controls in operation under this new pronouncement mirror controls under prior GAAP, there were some new controls implemented.March 31, 2024.

During the three months ended June 30, 2023,March 31, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

From time to time in the ordinary course of business, we and our subsidiaries may be 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 can be difficult to predict. We are not aware of any material pending legal proceedings to which we or any of our subsidiaries is a party or of which any of their property is the subject.

Item 1A – Risk Factors

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 20222023 Form 10-K. There have been no material changes in our risk factors from those disclosed.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

Not applicable.

Item 5 – Other Information

During the three months ended June 30, 2023,March 31, 2024, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

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Item 6 – Exhibits

Exhibit NumberDescriptionExhibit Location
Termination Agreement, dated as of May 9, 2023, by and among MVB Financial Corp., Integrated Financial Holdings, Inc., West Town Bank & Trust, and MVB Bank, Inc.Form 8-K, File No. 001-38314, filed May 9, 2023, and incorporated by reference herein
Certificate of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
Certificate of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
Certificate of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
Certificate of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Filed herewith
XBRL Instance DocumentFiled herewith
XBRL Taxonomy Extension SchemaFiled herewith
XBRL Taxonomy Extension Calculation LinkbaseFiled herewith
XBRL Taxonomy Extension Definition LinkbaseFiled herewith
XBRL Taxonomy Extension Label LinkbaseFiled herewith
XBRL Taxonomy Extension Presentation LinkbaseFiled herewith
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)Filed herewith

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MVB Financial Corp.
Date:August 8, 2023May 7, 2024By:/s/ Larry F. Mazza
Larry F. Mazza
CEO and Director
(Principal Executive Officer)
Date:August 8, 2023May 7, 2024By:/s/ Donald T. Robinson
Donald T. Robinson
President and CFO
(Principal Financial and Accounting Officer)


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