Financial Performance Overview

MVB Financial Corp. reported a decline in its financial performance in 2024 compared to the prior year. Net interest income decreased by $14.1 million to $109.2 million, while noninterest income increased by $23.2 million to $42.9 million. However, noninterest expense also rose by $4.6 million to $122.2 million. As a result, net income available to common shareholders fell by $11.1 million to $20.1 million in 2024.

The company’s return on average assets declined from 0.9% in 2023 to 0.6% in 2024, and return on average equity decreased from 11.4% to 6.9%. Earnings per share also dropped from $2.46 and $2.40 in 2023 to $1.56 and $1.53 in 2024 for basic and diluted earnings, respectively.

Net Interest Income and Margin

The decline in net interest income was primarily driven by a $116.1 million decrease in average total loans, including declines of $51.0 million in commercial loans, $38.0 million in consumer loans, and $26.5 million in real estate loans. The yield on loans increased by 9 basis points, but this was offset by a 69 basis point increase in the cost of interest-bearing liabilities, from 3.38% in 2023 to 4.07% in 2024.

The tax-equivalent net interest margin decreased from 4.04% in 2023 to 3.67% in 2024, as the increase in the cost of funds outpaced the rise in the yield on earning assets. The net interest spread on a tax-equivalent basis also declined from 2.82% to 2.15% over the same period.

Provision for Credit Losses

The company recorded a provision for credit losses of $3.5 million in 2024, compared to a release of $1.9 million in 2023. This change was primarily due to an increase in recognized charge-offs within the loan portfolio, partially offset by decreases in the outstanding balances of the commercial, residential, and consumer loan segments.

Total loan receivable balances decreased by $217.5 million in 2024, with the commercial loan portfolio declining by $184.8 million. Net charge-offs in 2024 totaled $4.4 million, down from $9.3 million in 2023.

Noninterest Income

Noninterest income increased by $23.2 million in 2024, primarily due to an $11.7 million gain on the sale of assets, a $2.5 million increase in payment card and service charge income, and a $1.0 million increase in holding gains on equity securities. The gain on asset sales was driven by a sale-leaseback transaction.

Equity method investment income from the mortgage segment also improved by $3.9 million, from a loss of $2.5 million in 2023 to income of $1.4 million in 2024. Gains on the sale of available-for-sale securities and loans also contributed to the increase in noninterest income.

Noninterest Expense

Noninterest expense increased by $4.6 million in 2024, primarily due to a $4.6 million rise in salaries and employee benefits and a $3.0 million increase in professional fees. These increases were incurred to enhance the company’s risk management and compliance infrastructure.

Personnel costs accounted for approximately 56% of noninterest expense in 2024, reflecting the importance of human capital to the company’s operations as a service organization.

Discontinued Operations

In February 2023, the company completed the sale of its Chartwell subsidiary for $14.4 million, resulting in a gain of $11.8 million. The company provided transition services and support to the purchaser for 60 days and entered into a 3-year contract to continue providing services.

Capital and Liquidity

Stockholders’ equity increased by $16.4 million to $305.8 million in 2024, primarily due to net income of $20.1 million, stock-based compensation of $2.9 million, and common stock option exercises of $1.5 million, partially offset by $8.8 million in dividends paid.

The company’s equity to assets ratio increased from 8.7% at the end of 2023 to 9.8% at the end of 2024. The Bank’s Community Bank Leverage Ratio was 11.2% at the end of 2024, well above the 9% well-capitalized standard.

Liquidity is primarily provided through deposit growth, investment maturities, loan principal payments, and income from the loan and investment portfolios. The company’s liquid assets totaled $379.7 million at the end of 2024, down from $504.3 million at the end of 2023. The company also has available borrowing capacity of $648.6 million with the FHLB.

Loan Portfolio and Asset Quality

The company’s loan portfolio decreased by $217.5 million, or 9.4%, in 2024, with the largest declines in the commercial ($184.8 million) and residential ($21.8 million) loan segments. This was primarily due to slower market demand, loan amortization and payoffs, and overall portfolio management.

Nonperforming loans increased from $8.3 million, or 0.4% of total loans, at the end of 2023 to $24.6 million, or 1.2% of total loans, at the end of 2024. The allowance for credit losses decreased from $22.1 million to $19.7 million over the same period, but remained adequate at 0.94% of total loans.

The company’s commercial real estate (CRE) loan concentration, excluding owner-occupied loans, was 222.0% of capital at the end of 2024, above the regulatory guideline of 300%. Management closely monitors this concentration through regular portfolio reviews and has implemented specialized underwriting and monitoring processes for CRE loans.

Interest Rate Risk Management

The company uses interest rate swaps to manage the interest rate risk associated with certain fixed-rate loans and available-for-sale securities. At the end of 2024, the company had $126.0 million in notional value of interest rate swaps designated as hedging instruments, down from $390.3 million at the end of 2023.

The company also enters into “mirror” swap contracts with commercial loan borrowers to allow them to convert floating-rate loan payments to fixed-rate payments. At the end of 2024, the notional value of these non-designated hedging swaps was $133.9 million.

Outlook and Challenges

The company continues to face a challenging market environment, characterized by sustained higher interest rates, a slowing economy, and multiple bank failures in 2023. This has led to lower loan balances due to slower demand, loan amortization and payoffs, and slower loan growth.

The company has also decided to wind down its digital asset program account relationships, while maintaining operating accounts, due to changing market conditions and profitability challenges. However, the company remains committed to the gaming, payments, and banking-as-a-service industries and is expanding its treasury services function to support the banking needs of financial and emerging technology companies.

Overall, the company’s financial performance in 2024 was weaker than the prior year, with declines in net interest income, net income, and key profitability metrics. The company faces ongoing challenges related to the interest rate environment, loan portfolio management, and the evolving competitive landscape. Maintaining strong capital and liquidity positions, as well as effectively managing interest rate risk and credit risk, will be critical to the company’s future success.