
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 ~~March 31,~~September 30, 2021
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

MVB Financial Corp.
(Exact name of registrant as specified in its charter)

West Virginia						20-0034461
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

301 Virginia Avenue, Fairmont, WV						26554
(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 class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $1.00 par value

MVBF

The 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 ~~April 30,~~October 29, 2021, the Registrant had ~~11,622,335~~12,039,548 shares of common stock outstanding with a par value of $1.00 per share.

TABLE OF CONTENTS

Forward-Looking Statements:

Statements in this Quarterly Report on Form 10-Q that are based on other than 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~~MVB Financial Corp. and its subsidiaries ~~(collectively, “we,” “our,” or “us”), including the Bank,~~ and statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” ~~“projects,~~“project,” “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 ~~the Company's~~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 ~~the~~ Management’s Discussion and Analysis ~~section.~~of Financial Condition and Results of Operations. Factors that might cause such differences include, but are not limited to:


l			the length, severity, magnitude and duration of the Coronavirus Disease (“COVID-19”) pandemic and the direct and indirect impacts of the COVID-19 pandemic, including its impact on ~~the Company’s~~our financial condition and business operations;
l			changes in the economy, which could materially impact credit quality trends and the ability to generate loans and gather deposits, including the pace of recovery following the COVID-19 ~~pandemic;~~pandemic and the effects of inflation on our operations and operating expenses;
l			ability to successfully execute business plans, manage risks and achieve objectives, including strategies related to recent investments in financial technology (“Fintech”);
l			market, economic, operational, liquidity, credit and interest rate risks associated with ~~the Company's~~our business;
l			changes in local, national and international political and economic conditions, including without limitation, changes in the political and economic climate, economic conditions and other major developments, including wars, natural disasters, epidemics and pandemics, military actions and terrorist attacks;
l			changes in financial market conditions, either internationally, nationally or locally in areas in which ~~the Company conducts~~we conduct operations, including without limitation, reduced rates of business formation and growth, commercial and residential real estate development and real estate prices;
l			unanticipated changes in ~~the Company's~~our liquidity position, including but not limited to changes in access to sources of liquidity and capital to address ~~its~~our liquidity needs;
l			deposits include certain concentrations with large customers and industries;
l			changes in interest rates;
l			the quality and composition of the loan and securities portfolios;
l			ability to successfully conduct acquisitions and integrate acquired businesses and potential difficulties in expanding businesses in existing and new markets;
l			ability to successfully manage credit risk and the sufficiency of allowance for credit losses;
l			increases in the levels of losses, customer bankruptcies, bank failures, claims and assessments;
l			changes in government legislation and accounting policies, including the Dodd-Frank Act and Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”);
l			uncertainty about the discontinued use of the London Inter-bank Offered Rate (“LIBOR”) and the transition to an alternative rate;
l			competition and consolidation in the financial services industry;
l			new legal claims against us, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies or changes in existing legal matters;
l			success in gaining regulatory approvals, when required, including for proposed mergers or acquisitions;
l			changes in consumer spending and savings habits, including demand for loan products and deposit flow;
l			increased competitive challenges and expanding product and pricing pressures among financial institutions and non-bank financial companies;
l			operational risks or risk management failures by us or critical third parties, including without limitation, with respect to data processing, information systems, ~~cyber-security,~~ technological changes, vendor problems, business interruptions and fraud risk;


l			increasing risk of continually evolving, sophisticated cybersecurity activities faced by financial institutions and others 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;
l			failure or circumvention of internal controls;
l			legislation or regulatory changes which adversely affect operations or business, including changes to address the impact of COVID-19 through the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) and other legislative and regulatory responses to the COVID-19 pandemic; ~~and~~


l			ability to comply with applicable laws and ~~regulations;~~ regulations, including expanded regulatory reporting requirements of 12 CFR Part 370 due to increased levels of insured deposit accounts;
l			changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (“FASB”) or regulatory agencies, including the impact of future adoption of ~~new~~the Current Expected Credit Losses (“CECL”) standard; and
l			costs of deposit insurance and changes with respect to Federal Deposit Insurance Corporation (“FDIC”) insurance coverage levels.
l			~~other risks and uncertainties detailed in Part I,~~ ~~Item 1A, Risk Factors, in the Annual Report to Shareholders on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).~~

~~Certain risk factors that might cause actual results~~Further, we urge you to ~~differ materially from~~carefully review and consider the cautionary statements and disclosures, specifically those ~~presented are more fully described~~made in ~~the 2020 Form 10-K, filed with the SEC on March 9, 2021, within~~ Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), filed with the Securities and Exchange Commission ("SEC") on March 9, 2021, and from time to time, in our other filings with the ~~Securities and Exchange Commission (“SEC”).~~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, ~~the Company specifically disclaims any~~we undertake no obligation to update any ~~factors or to publicly announce the result of revisions to any of the~~ forward-looking statements ~~included herein~~in order to reflect ~~future events~~any event or ~~developments.~~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. References to “the Bank” refer to our wholly-owned banking subsidiary, MVB Bank, Inc.

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

MVB Financial Corp. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

March 31, 2021 December 31, 2020
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 19,603 $ 19,110
Interest-bearing balances with banks 320,013 244,783
Total cash and cash equivalents 339,616 263,893
Certificates of deposit with banks 11,803 11,803
Investment securities available-for-sale 423,122 410,624
Equity securities 28,200 27,585
Loans held-for-sale 0 1,062
Loans receivable 1,694,385 1,453,744
Allowance for loan losses (26,214) (25,844)
Loans receivable, net 1,668,171 1,427,900
Premises and equipment, net 27,290 26,203
Bank-owned life insurance 41,512 41,262
Equity method investment 39,883 46,494
Accrued interest receivable and other assets 64,142 72,300
Goodwill 2,350 2,350
TOTAL ASSETS $ 2,646,089 $ 2,331,476
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing $ 837,221 $ 715,791
Interest-bearing 1,379,332 1,266,598
Total deposits 2,216,553 1,982,389
Accrued interest payable and other liabilities 36,612 55,931
Repurchase agreements 10,613 10,266
FHLB and other borrowings 102,185 0
Subordinated debt 43,443 43,407
Total liabilities 2,409,406 2,091,993
STOCKHOLDERS’ EQUITY
Preferred stock - par value $1,000; 20,000 shares authorized; 0 shares issued and outstanding as of March 31, 2021 and 733 shares issued and outstanding as December 31, 2020 0 7,334
Common stock - par value $1; 20,000,000 shares authorized; 12,438,061 and 11,590,045 shares issued and outstanding, respectively, as of March 31, 2021 and 12,374,322 and 11,526,306 shares issued and outstanding, respectively, as of December 31, 2020 12,438 12,374
Additional paid-in capital 130,337 129,119
Retained earnings 112,068 105,171
Accumulated other comprehensive income (loss) (1,892) 2,226
Treasury stock - 848,016 shares as of March 31, 2021 and December 31, 2020, at cost (16,741) (16,741)
Total equity attributable to parent 236,210 239,483
Noncontrolling interest 473 0
Total stockholders' equity 236,683 239,483
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,646,089 $ 2,331,476


	September 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	9,784	$	19,110
Interest-bearing balances with banks	380,297		244,783
Total cash and cash equivalents	390,081		263,893
Certificates of deposit with banks	9,582		11,803
Investment securities available-for-sale	439,023		410,624
Equity securities	29,809		27,585
Loans held-for-sale	—		1,062
Loans receivable	1,764,186		1,453,744
Allowance for loan losses	(25,187)		(25,844)
Loans receivable, net	1,738,999		1,427,900
Premises and equipment, net	25,043		26,203
Bank-owned life insurance	42,011		41,262
Equity method investments	38,935		46,494
Accrued interest receivable and other assets	71,353		72,300

Goodwill	3,988		2,350
TOTAL ASSETS	$	2,788,824	$	2,331,476

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	999,328	$	715,791
Interest-bearing	1,399,612		1,266,598
Total deposits	2,398,940		1,982,389

Accrued interest payable and other liabilities	39,079		55,931
Repurchase agreements	11,139		10,266

Subordinated debt	72,966		43,407
Total liabilities	2,522,124		2,091,993

STOCKHOLDERS’ EQUITY
Preferred stock - par value $1,000; 20,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and 733 shares issued and outstanding as December 31, 2020	—		7,334
Common stock - par value $1; 20,000,000 shares authorized; 12,820,220 and 11,972,204 shares issued and outstanding, respectively, as of September 30, 2021 and 12,374,322 and 11,526,306 shares issued and outstanding, respectively, as of December 31, 2020	12,820		12,374
Additional paid-in capital	140,235		129,119
Retained earnings	130,066		105,171
Accumulated other comprehensive income (loss)	(815)		2,226
Treasury stock - 848,016 shares as of September 30, 2021 and December 31, 2020, at cost	(16,741)		(16,741)
Total equity attributable to parent	265,565		239,483
Noncontrolling interest	1,135		—
Total stockholders' equity	266,700		239,483
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,788,824	$	2,331,476

See accompanying notes to unaudited consolidated financial statements.

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited) (Dollars in thousands, except per share data)

Three Months Ended March 31
2021 2020
INTEREST INCOME
     Interest and fees on loans $ 16,892 $ 18,939
     Interest on deposits with banks 122 111
     Interest on investment securities 631 666
     Interest on tax-exempt loans and securities 1,418 983
     Total interest income 19,063 20,699
INTEREST EXPENSE
     Interest on deposits 1,048 3,910
     Interest on short-term borrowings 44 583
     Interest on subordinated debt 466 35
Total interest expense 1,558 4,528
NET INTEREST INCOME 17,505 16,171
     Provision for loan losses 618 1,138
     Net interest income after provision for loan losses 16,887 15,033
NONINTEREST INCOME
     Payment card and service charge income 1,493 550
     Mortgage fee income 0 11,219
     Insurance and investment services income 224 207
     Gain on sale of available-for-sale securities, net 1,143 276
     Loss on derivatives, net 0 (3,562)
     Holding gain on equity securities, net 515 14
     Compliance consulting income 1,281 1,009
     Equity method investment income 6,469 0
     Other operating income 1,333 1,137
     Total noninterest income 12,458 10,850
NONINTEREST EXPENSES
     Salaries and employee benefits 11,911 16,182
     Occupancy expense 1,158 1,220
     Equipment depreciation and maintenance 1,041 877
     Data processing and communications 909 1,163
     Mortgage processing 0 851
     Marketing, contributions and sponsorships 65 336
     Professional fees 1,742 1,331
     Insurance, tax and assessment expense 538 464
     Travel, entertainment, dues and subscriptions 884 1,218
     Other operating expenses 870 1,014
     Total noninterest expense 19,118 24,656
Income before income taxes 10,227 1,227
Income tax expense 2,169 179
Net income before noncontrolling interest 8,058 1,048
Net loss attributable to noncontrolling interest 27 0
Net income attributable to parent 8,085 1,048
Preferred dividends 35 114
Net income available to common shareholders $ 8,050 $ 934
Earnings per common shareholder - basic $ 0.70 $ 0.08
Earnings per common shareholder - diluted $ 0.66 $ 0.08
Weighted-average shares outstanding - basic 11,530,279 11,942,767
Weighted-average shares outstanding - diluted 12,286,731 12,298,092


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
INTEREST INCOME
Interest and fees on loans	$	18,530	$	16,976	$	54,175	$	56,064
Interest on deposits with banks	112		106		332		297
Interest on investment securities	575		411		1,831		1,554
Interest on tax-exempt loans and securities	1,267		1,134		4,042		3,185
Total interest income	20,484		18,627		60,380		61,100

INTEREST EXPENSE
Interest on deposits	898		1,894		3,182		8,840
Interest on short-term borrowings	9		703		105		1,543
Interest on subordinated debt	481		20		1,437		78
Total interest expense	1,388		2,617		4,724		10,461

NET INTEREST INCOME	19,096		16,010		55,656		50,639
Provision (release of allowance) for loan losses	380		8,631		(542)		16,365
Net interest income after provision (release of allowance) for loan losses	18,716		7,379		56,198		34,274

NONINTEREST INCOME
Payment card and service charge income	1,685		638		5,104		1,716
Mortgage fee income	—		7,264		—		33,427
Insurance and investment services income	236		224		707		620
Gain on sale of available-for-sale securities, net	529		35		3,380		865
Gain on sale of equity securities, net	—		18		5		48
Gain on sale of loans, net	908		172		3,125		302
Gain (loss) on derivatives, net	—		(7,508)		—		2,365
Holding gain on equity securities, net	536		94		1,750		111
Compliance and consulting income	3,013		1,085		6,162		3,035
Equity method investment income	3,573		13,620		14,570		13,620
Gains on acquisition and divestiture activity	10,783		—		10,783		14,302
Other operating income	688		3,756		2,467		5,350
Total noninterest income	21,951		19,398		48,053		75,761

NONINTEREST EXPENSES
Salaries and employee benefits	16,528		10,519		42,100		49,360
Occupancy expense	1,024		1,101		3,297		3,508
Equipment depreciation and maintenance	1,250		845		3,497		2,636
Data processing and communications	1,080		1,372		3,409		4,268
Mortgage processing	—		3		—		1,744
Marketing, contributions and sponsorships	207		227		418		891
Professional fees	2,665		1,606		6,857		5,931
Insurance, tax and assessment expense	532		577		1,570		1,607
Travel, entertainment, dues and subscriptions	1,437		624		3,525		2,683
Other operating expenses	1,106		1,391		3,677		3,626
Total noninterest expense	25,829		18,265		68,350		76,254
Income before income taxes	14,838		8,512		35,901		33,781
Income tax expense	3,164		2,021		7,006		8,208
Net income before noncontrolling interest	11,674		6,491		28,895		25,573



Net loss attributable to noncontrolling interest	154		—		265		—
Net income attributable to parent	11,828		6,491		29,160		25,573
Preferred dividends	—		116		35		345
Net income available to common shareholders	$	11,828	$	6,375	$	29,125	$	25,228



Earnings per common shareholder - basic	$	1.00	$	0.53	$	2.49	$	2.11


Earnings per common shareholder - diluted	$	0.92	$	0.53	$	2.32	$	2.07
Weighted-average shares outstanding - basic	11,880,348		11,948,989		11,684,570		11,948,857
Weighted-average shares outstanding - diluted	12,824,309		12,116,418		12,565,809		12,185,137

See accompanying notes to unaudited consolidated financial statements.

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited) (Dollars in thousands)

Three Months Ended March 31
2021 2020
Net income $ 8,058 $ 1,048
Other comprehensive loss:
Unrealized holding gain (loss) on securities available-for-sale (6,331) 1,414
Income tax effect 1,483 (382)
Reclassification adjustment for gain recognized in income (1,143) (276)
Income tax effect 268 75
Change in defined benefit pension plan 1,705 (706)
Income tax effect (399) 190
Reclassification adjustment for amortization of net actuarial loss recognized in income 127 105
Income tax effect (30) (28)
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income 264 (1,793)
Income tax effect (62) 484
Total other comprehensive loss (4,118) (917)
Comprehensive loss attributable to noncontrolling interest 27 0
Comprehensive income $ 3,967 $ 131


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income before noncontrolling interest	$	11,674	$	6,491	$	28,895	$	25,573

Other comprehensive (loss) income:

Unrealized holding gain (loss) on securities available-for-sale	239		1,226		(2,723)		3,191
Income tax effect	(56)		(331)		638		(862)

Reclassification adjustment for gain recognized in income	(529)		(35)		(3,380)		(865)
Income tax effect	124		9		793		234

Change in defined benefit pension plan	(914)		(102)		1,112		(1,809)
Income tax effect	214		28		(261)		489

Reclassification adjustment for amortization of net actuarial loss recognized in income	127		105		381		315
Income tax effect	(30)		(28)		(89)		(85)

Reclassification adjustment for carrying value adjustment - investment hedge recognized in income	14		95		637		(738)
Income tax effect	(3)		(26)		(149)		199

Total other comprehensive (loss) income	(814)		941		(3,041)		69

Comprehensive loss attributable to noncontrolling interest	154		—		265		—

Comprehensive income	$	11,014	$	7,432	$	26,119	$	25,642

See accompanying notes to unaudited consolidated financial statements.

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited) (Dollars in thousands except per share data)


	Preferred stock			Common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock			Total stockholders' equity attributable to parent		Noncontrolling interest		Total stockholders' equity
	Shares	Amount		Shares	Amount								Shares	Amount
Balance at December 31, 2020	733	$	7,334	12,374,322	$	12,374	$	129,119	$	105,171	$	2,226	848,016	$	(16,741)	$	239,483	$	—	$	239,483

Net income (loss)	—	—		—	—		—		8,085		—		—	—		8,085		(27)		8,058
Other comprehensive loss	—	—		—	—		—		—		(4,118)		—	—		(4,118)		—		(4,118)
Dividends on common stock ($0.10 per share)	—	—		—	—		—		(1,153)		—		—	—		(1,153)		—		(1,153)
Dividends on preferred stock	—	—		—	—		—		(35)		—		—	—		(35)		—		(35)
Stock-based compensation	—	—		—	—		592		—		—		—	—		592		—		592
Redemption of preferred stock	(733)	(7,334)		—	—		—		—		—		—	—		(7,334)		—		(7,334)
Common stock options exercised	—	—		52,584	53		637		—		—		—	—		690		—		690
Restricted stock units issued	—	—		11,155	11		(11)		—		—		—	—		—		—		—
Noncontrolling interests due to acquisition	—	—		—	—		—		—		—		—	—		—		500		500


Balance at March 31, 2021	—	$	—	12,438,061	$	12,438	$	130,337	$	112,068	$	(1,892)	848,016	$	(16,741)	$	236,210	$	473	$	236,683

Net income	—	—		—	—		—		9,247		—		—	—		9,247		(84)		9,163
Other comprehensive income	—	—		—	—		—		—		1,891		—	—		1,891		—		1,891
Dividends on common stock ($0.12 per share)	—	—		—	—		—		(1,405)		—		—	—		(1,405)		—		(1,405)

Stock-based compensation	—	—		—	—		692		—		—		—	—		692		—		692

Common stock options exercised	—	—		108,511	108		1,499		—		—		—	—		1,607		—		1,607
Restricted stock units issued	—	—		57,906	58		(58)		—		—		—	—		—		—		—
Minimum tax withholding on restricted stock units issued	—	—		—	—		(231)		—		—		—	—		(231)		—		(231)
Noncontrolling interests due to acquisition	—	—		—	—		—		—		—		—	—		—		400		400
Common stock issued related to Trabian acquisition	—	—		17,597	18		582		—		—		—	—		600		—		600

Balance at June 30, 2021	—	$	—	12,622,075	$	12,622	$	132,821	$	119,910	$	(1)	848,016	$	(16,741)	$	248,611	$	789	$	249,400

Preferred stock Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock Total stockholders' equity attributable to parent Noncontrolling interest Total stockholders' equity
Shares Amount Shares Amount Shares Amount
Balance at December 31, 2020 733 $ 7,334 12,374,322 $ 12,374 $ 129,119 $ 105,171 $ 2,226 848,016 $ (16,741) $ 239,483 $ 0 $ 239,483
Net income — — — — — 8,085 — — — 8,085 (27) 8,058
Other comprehensive loss — — — — — — (4,118) — — (4,118) — (4,118)
Dividends on common stock ($0.10 per share) — — — — — (1,153) — — — (1,153) — (1,153)
Dividends on preferred stock — — — — — (35) — — — (35) — (35)
Stock-based compensation — — — — 592 — — — — 592 — 592
Redemption of preferred stock (733) (7,334) — — — — — — — (7,334) — (7,334)
Common stock options exercised — — 52,584 53 637 — — — — 690 — 690
Restricted stock units issued — — 11,155 11 (11) — — — — — — 0
Noncontrolling interests due to acquisition — — — — — — — — — — 500 500
Balance at March 31, 2021 0 $ 0 12,438,061 $ 12,438 $ 130,337 $ 112,068 $ (1,892) 848,016 $ (16,741) $ 236,210 $ 473 $ 236,683
Balance at December 31, 2019 733 $ 7,334 11,995,366 $ 11,995 $ 122,516 $ 72,496 $ (1,321) 51,077 $ (1,084) $ 211,936 $ 0 $ 211,936
Net income — — — — — 1,048 — — — 1,048 — 1,048
Other comprehensive loss — — — — — — (917) — — (917) — (917)
Dividends on common stock ($0.09 per share) — — — — — (1,076) — — — (1,076) — (1,076)
Dividends on preferred stock — — — — — (114) — — — (114) — (114)
Stock-based compensation — — — — 498 — — — — 498 — 498
Common stock options exercised — — 2,500 3 35 — — — — 38 — 38
Common stock repurchased — — — — — — — 16,300 (260) (260) — (260)
Balance at March 31, 2020 733 $ 7,334 $ — 11,997,866 $ 11,998 $ — $ 123,049 $ — $ 72,354 $ — $ (2,238) $ — 67,377 $ (1,344) $ 211,153 $ 0 $0 $ 211,153


	Preferred stock			Common stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Treasury stock			Total stockholders' equity attributable to parent		Noncontrolling interest		Total stockholders' equity
	Shares	Amount		Shares	Amount								Shares	Amount

Net income (loss)	—	—		—	—		—		11,828		—		—	—		11,828		(154)		11,674
Other comprehensive loss	—	—		—	—		—		—		(814)		—	—		(814)		—		(814)
Dividends on common stock ($0.14 per share)	—	—		—	—		—		(1,672)		—		—	—		(1,672)		—		(1,672)

Stock-based compensation	—	—		—	—		1,055		—		—		—	—		1,055		—		1,055

Common stock options exercised	—	—		64,399	64		1,044		—		—		—	—		1,108		—		1,108
Restricted stock units issued	—	—		1,410	1		(1)		—		—		—	—		—		—		—
Minimum tax withholding on restricted stock units issued	—	—		—	—		(25)		—		—		—	—		(25)		—		(25)

Common stock issued related to stock-based compensation	—	—		24,408	25		975		—		—		—	—		1,000		—		1,000
Common stock issued related to Interchecks investment	—	—		107,928	108		4,366		—		—		—	—		4,474		—		4,474
MVB Technology membership units issued	—	—		—	—		—		—		—		—	—		—		500		500
Balance at September 30, 2021	—	$	—	12,820,220	$	12,820	$	140,235	$	130,066	$	(815)	848,016	$	(16,741)	$	265,565	$	1,135	$	266,700



	Preferred stock					Common stock					Additional paid-in capital				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock			Total stockholders' equity attributable to parent		Noncontrolling interest		Total stockholders' equity
	Shares	Amount				Shares	Amount																Shares	Amount
Balance at December 31, 2019	733	$	7,334			11,995,366	$	11,995			$	122,516			$	72,496			$	(1,321)			51,077	$	(1,084)	$	211,936	$	—	$	211,936

Net income	—	—				—	—				—				1,048				—				—	—		1,048		—		1,048
Other comprehensive loss	—	—				—	—				—				—				(917)				—	—		(917)		—		(917)
Dividends on common stock ($0.09 per share)	—	—				—	—				—				(1,076)				—				—	—		(1,076)		—		(1,076)
Dividends on preferred stock	—	—				—	—				—				(114)				—				—	—		(114)		—		(114)
Stock-based compensation	—	—				—	—				498				—				—				—	—		498		—		498
Common stock options exercised	—	—				2,500	3				35				—				—				—	—		38		—		38
Common stock repurchased	—	—				—	—				—				—				—				16,300	(260)		(260)		—		(260)

Balance at March 31, 2020	733	$	7,334	$	—	11,997,866	$	11,998	$	—	$	123,049	$	—	$	72,354	$	—	$	(2,238)	$	—	67,377	$	(1,344)	$	211,153	$	—	$	211,153

Net income	—	—				—	—				—				18,034				—				—	—		18,034		—		18,034
Other comprehensive income	—	—				—	—				—				—				45				—	—		45		—		45
Dividends on common stock (0.09 per share)	—	—				—	—				—				(1,076)				—				—	—		(1,076)		—		(1,076)
Dividends on preferred stock	—	—				—	—				—				(115)				—				—	—		(115)		—		(115)
Stock-based compensation	—	—				—	—				627				—				—				—	—		627		—		627

Restricted stock units issued	—	—				48,483	49				(49)				—				—				525	(7)		(7)		—		(7)
Common stock issued related to Paladin acquisition	—	—				19,278	19				221				—				—				—	—		240		—		240
Common stock repurchased	—	—				—	—				—				—				—				29,300	(401)		(401)		—		(401)

Balance at June 30, 2020	733	$	7,334			12,065,627	$	12,066			$	123,848			$	89,197			$	(2,193)			97,202	$	(1,752)	$	228,500	$	—	$	228,500

Net income	—	—				—	—				—				6,491				—				—	—		6,491		—		6,491
Other comprehensive income	—	—				—	—				—				—				941				—	—		941		—		941
Dividends on common stock ($0.09 per share)	—	—				—	—				—				(1,076)				—				—	—		(1,076)		—		(1,076)
Dividends on preferred stock	—	—				—	—				—				(116)				—				—	—		(116)		—		(116)
Stock-based compensation	—	—				—	—				592				—				—				—	—		592		—		592
Common stock options exercised	—	—				3,000	3				34				—				—				—	—		37		—		37
Common stock repurchased	—	—				—	—				—				—				—				82,424	(1,253)		(1,253)		—		(1,253)
Balance at September 30, 2020	733	$	7,334			12,068,627	$	12,069			$	124,474			$	94,496			$	(1,252)			179,626	$	(3,005)	$	234,116	$	—	$	234,116

See accompanying notes to unaudited consolidated financial statements.

810

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited) (Dollars in thousands)


	Nine Months Ended September 30,
	2021		2020
OPERATING ACTIVITIES
Net income before noncontrolling interest	$	28,895	$	25,573
Adjustments to reconcile net income to net cash from operating activities:
Net amortization and accretion of investments	3,011		1,112
Net amortization of deferred loan costs	2,062		779
Provision (release of allowance) for loan losses	(542)		16,365
Depreciation and amortization	2,800		761
Stock-based compensation	2,339		1,717
Loans originated for sale	(23,950)		(1,334,910)
Proceeds of loans sold	17,871		1,475,854
Holding gain on equity securities	(1,750)		(111)
Mortgage fee income	—		(33,427)
Gain on sale of available-for-sale securities	(3,411)		(899)
Loss on sale of available-for-sale securities	31		34
Gain on sale of equity securities	(5)		(48)

Gain on sale of loans	(3,125)		(302)
Gains on acquisition and divestiture activity	(10,783)		(14,302)
Gain on sale of other real estate owned	(116)		—
Income on bank-owned life insurance	(749)		(663)
Deferred income taxes	(1,186)		3,958
Equity method investment income	(14,570)		(13,620)
Return on equity method investment	29,795		(3,338)
Other assets	(503)		(36,669)
Other liabilities	(14,327)		3,444
Net cash from operating activities	11,787		91,308
INVESTING ACTIVITIES
Purchases of available-for-sale investment securities	(176,468)		(132,896)
Maturities/paydowns of available-for-sale investment securities	38,846		42,770
Sales of available-for-sale investment securities	103,365		48,579
Purchases of premises and equipment	(3,589)		(4,211)
Disposals of premises and equipment	—		1,687

Loans, net	(356,623)		(43,869)
Purchases of restricted bank stock	(1,410)		(24,013)
Redemptions of restricted bank stock	2,821		33,578
Proceeds from sale of certificates of deposit with banks	2,221		1,241
Purchases of certificates of deposit with banks	—		(993)
Proceeds from sale of other real estate owned	2,761		7,700


Purchase of equity securities	(3,472)		(6,260)
Sales of equity securities	61		669
Net cash transferred for banking center sale	(95,697)		—
Cash paid for acquisitions, net of cash acquired	(772)		(78,699)
Net cash from investing activities	(487,956)		(154,717)
FINANCING ACTIVITIES
Deposits, net	579,875		491,259
Repurchase agreements, net	873		(127)
FHLB and other borrowings, net	—		(154,483)

Issuance of subordinated debt	30,000		—
Payment of subordinated debt issuance costs	(441)		—

Preferred stock redemption	(7,334)		—
Common stock repurchased	—		(1,921)
Common stock options exercised	3,405		75
Withholding cash issued in lieu of restricted stock	(256)		—
Cash dividends paid on common stock	(4,230)		(3,228)
Cash dividends paid on preferred stock	(35)		(345)
Issuance of subsidiary membership units	500		—
Net cash from financing activities	602,357		331,230
Increase in cash and cash equivalents	126,188		267,821

Three Months Ended March 31,
2021 2020
OPERATING ACTIVITIES
Net income $ 8,058 $ 1,048
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
     Net amortization and accretion of investments 898 302
     Net amortization of deferred loan costs 669 114
     Provision for loan losses 618 1,138
     Depreciation and amortization 1,003 908
     Stock-based compensation 592 498
     Loans originated for sale 0 (484,989)
     Proceeds of loans sold 1,062 419,868
     Holding gain on equity securities (515) (14)
     Mortgage fee income 0 (11,219)
     Gain on sale of available-for-sale securities (1,156) (276)
     Loss on sale of available-for-sale securities 13 0
     Gain on sale of portfolio loans 0 (130)
     Income on bank-owned life insurance (249) (223)
     Deferred income taxes (1,036) (929)
     Equity method investment income (6,469) 0
     Return on equity method investment 13,080 0
     Other assets 10,768 (18,831)
     Other liabilities (17,120) 14,116
     Net cash from operating activities 10,216 (78,619)
INVESTING ACTIVITIES
     Purchases of available-for-sale investment securities (74,714) (16,325)
     Maturities/paydowns of available-for-sale investment securities 13,674 18,990
     Sales of available-for-sale investment securities 41,037 10,318
     Purchases of premises and equipment (1,436) (1,384)
     Loans, net (241,558) (16,063)
     Purchases of restricted bank stock (295) (7,439)
     Redemptions of restricted bank stock 0 13,414
     Proceeds from sale of other real estate owned 0 52
     Purchase of bank-owned life insurance (1) 0
     Purchase of equity securities (100) (498)
     Net cash from investing activities (263,393) 1,065
FINANCING ACTIVITIES
     Deposits, net 234,164 332,734
     Repurchase agreements, net 347 (826)
     FHLB and other borrowings, net 102,185 (192,070)
     Payment of subordinated debt issuance costs 36 0
     Preferred stock redemption (7,334) 0
     Common stock repurchased 0 (260)
     Common stock options exercised 690 38
     Cash dividends paid on common stock (1,153) (1,076)
     Cash dividends paid on preferred stock (35) (114)
     Net cash from financing activities 328,900 138,426
Increase in cash and cash equivalents 75,723 60,872
Cash and cash equivalents, beginning of period 263,893 28,002
Cash and cash equivalents, end of period $ 339,616 $ 88,874
Cash payments for:
     Interest on deposits, repurchase agreements and borrowings $ 1,261 $ 5,511
Supplemental disclosure of cash flow information:
     Fair value of noncontrolling interest at acquisition date $ 500 $ 0
     Loans transferred to other real estate owned 0 23
     Employee stock-based compensation tax withholding obligations 0 35


Cash and cash equivalents, beginning of period	263,893		28,002
Cash and cash equivalents, end of period	$	390,081	$	295,823

Cash payments for:
Interest on deposits, repurchase agreements and borrowings	$	4,488	$	13,275
Income taxes	9,600		7,613

Business combination non-cash disclosures:
Assets acquired in business combination (net of cash received)	$	739	$	87,722
Liabilities assumed in business combination	605		148,731

Supplemental disclosure of cash flow information:
Fair value of noncontrolling interests at acquisition date	$	1,400	$	—
Loans transferred to other real estate owned	357		800
Employee stock-based compensation tax withholding obligations	4,155		35
Restricted stock units vested	70		49
Common stock issued related to investments and acquisitions	708		240

See accompanying notes to unaudited consolidated financial statements.

912

Notes to the Consolidated Financial Statements

Note 1 – Nature of Operations and Basis of Presentation

Business and Organization

MVB Financial Corp. ~~(“MVB” or the “Company”)~~ is a financial holding company organized as a West Virginia corporation that operates principally through its ~~wholly owned~~wholly-owned subsidiary, MVB Bank, ~~Inc. (the “Bank”).~~Inc.. The Bank’s subsidiaries include MVB Insurance, LLC, a title insurance company (“MVB Insurance”), MVB Community Development Corporation (“MVB CDC”), ProCo Global, Inc. (“Chartwell”, which began doing business under the registered trade name Chartwell Compliance), Paladin Fraud, LLC (“Paladin Fraud”) and MVB ~~Technology,~~Edge Ventures, LLC (“~~MVB Technology”~~Edge Ventures”). ~~The Company~~We also ~~owns a minority interest~~own equity method investments in Intercoastal Mortgage Company, LLC (“ICM”) and ~~the~~Interchecks Technologies, Inc. ("Interchecks"). The Bank owns ~~a majority interest~~controlling interests in Trabian Technology, Inc. (“Trabian”) and Edge Ventures owns controlling interests in MVB Technology, LLC ("MVB Technology") and Flexia Payments, LLC (“Flexia”).

~~The Company conducts~~In 2021, Edge Ventures was created 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. Subsidiaries of Edge Ventures include MVB Technology, Flexia and Victor Technologies, Inc. (“Victor”).

We conduct a wide range of business activities, primarily commercial and retail (“CoRe”) banking. ~~The Company~~We also ~~continues~~continue to be involved in new innovative strategies to provide independent banking to corporate clients throughout the United States by leveraging recent investments in ~~Fintech related~~Fintech-related companies. ~~The Company considers~~We consider Fintech companies as those entities that use technology to electronically move funds.

~~COVID-19 Pandemic~~

Throughout 2020 and into 2021, economies throughout the world have been severely disrupted as a result of the outbreak of COVID-19. The outbreak and any preventative or protective actions that the Company or its clients may take in respect of this virus may result in a period of disruption, including the Company’s financial reporting capabilities, its operations generally and could potentially impact the Company’s clients, providers and third parties. The extent to which the COVID-19 pandemic impacts the Company’s future operating results will depend on future developments, which are highly uncertain and cannot be predicted.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements ~~are consolidated to~~ include the accounts of ~~the Company, its subsidiary,~~MVB and our subsidiaries, including the Bank and the Bank’s subsidiaries. ~~These~~In our opinion, the accompanying consolidated financial statements ~~have been prepared~~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”) ~~for interim financial information, practices in the banking industry~~ and with instructions tofor Form ~~10-Q.~~10-Q and Article 10 of Regulation S-X of the SEC. All ~~significant inter-company~~material intercompany accounts and transactions have been eliminated in ~~the consolidated~~consolidation. Accordingly, certain information and footnote disclosures normally included in financial ~~statements. In the opinion of management, all adjustments considered necessary for a fair presentation~~statements prepared in accordance with U.S. GAAP have been ~~included and are of a normal, recurring nature.~~omitted. The consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements included in the ~~Company's Annual~~2020 Form 10-K. The information presented in this Quarterly Report on Form ~~10-K for~~10-Q should be read in conjunction with our audited consolidated financial statements and notes thereto included in the 2020 Form 10-K. Operating results for the three and nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

In ~~February~~ 2021, the Bank entered into ~~an agreement~~agreements to acquire ~~an 80%~~majority interests in both Flexia and in Trabian and to divest a minority interest in Flexia. Flexia owns a license for technology which allows users to access a reloadable account that combines a debit card account and casino gaming accounts into one card, allowing them for non-cash transactions at participating casinos in the United States and Canada.MVB Technology. Although ~~the Company owns,~~we own, through ~~its subsidiary, the Bank,~~our subsidiaries, an ~~80%~~80.0% interest in each of Flexia ~~the Company is~~and Trabian and a 93.4% interest in MVB Technology, we are required to consolidate 100% of Flexia, Trabian and MVB Technology within the consolidated financial statements. The remaining ~~20% is~~20.0% of Flexia and Trabian and 6.6% of MVB Technology are accounted for separately as noncontrolling interests within the consolidated financial statements. Noncontrolling interest represents the portion of ownership and profit or loss that is attributable to the minority owners of ~~Flexia.~~

In preparing the consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the period. Estimates are based on known facts and circumstances and actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to determination of the allowance for loan losses (“ALL”), purchased credit impaired loans (“PCI loans”), derivative instruments, goodwill and deferred tax assets and liabilities.these entities.

Unconsolidated investments where ~~the Company has~~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 that are not consolidated or accounted for using the equity method of accounting are accounted for under cost or fair value accounting. For these investments accounted for under the equity method, ~~the Company records its~~we record our investment in non-consolidated affiliates and the portion of

income or loss in equity in earnings of non-consolidated affiliates. ~~The Company~~We periodically ~~evaluates~~evaluate these investments for impairment. As of ~~March 31,~~September 30, 2021, ~~the Company holds 1~~we hold 2 equity method ~~investment.~~investments.

~~Certain information and footnote disclosures normally included in~~Preparation of our consolidated financial statements ~~prepared~~ in accordance with U.S. GAAP ~~have been omitted. These consolidated financial statements should be read~~requires us to make estimates and assumptions that affect the amounts reported in ~~conjunction with~~ the consolidated financial statements and ~~notes thereto included in~~accompanying notes. These estimates are based upon the ~~Company’s 2020 Form 10-K.~~best available information and actual results could differ from those estimates. Estimates that are particularly significant to the consolidated financial statements relate to the determination of the allowance for loan losses (“ALL”), purchased credit impaired (“PCI”) loans, derivative instruments, goodwill and deferred tax assets and liabilities.

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

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

COVID-19 Pandemic

Throughout 2020 and into 2021, economies throughout the world have been severely disrupted as a result of the outbreak of COVID-19. The outbreak and any preventative or protective actions that we or our clients may take related to this virus may result in a period of disruption, including our financial reporting capabilities, our operations generally and could potentially impact our clients, providers and third parties. While significant progress has been made to combat the outbreak of COVID-19, the extent to which the COVID-19 pandemic continues to impact our future operating results will depend on future developments, including if there is a resurgence in the virus, which are highly uncertain and cannot be predicted.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance in November 2018, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, in April 2019, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, in May 2019, ASU 2019-05, Financial Instruments – Credit Losses, Topic 326 and in November 2019, ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, all of which clarifies codification and corrects unintended application of the guidance. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. PCI loans will receive 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 be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. The guidance was initially effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. On November 15, 2019, the FASB issued ASU 2019-10, Financial Investments – Credit Issues (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which finalizes a delay in the effective date of the standard for smaller reporting companies ~~until January 2023. The Company expects~~(“SRCs”). Effective in the first quarter of 2022, we will lose our SRC designation. However, because we met the criteria to be an SRC as of the issuance date of this guidance, we are eligible for the delay in effective date and plan to adopt this standard for fiscal years ending after December 15, 2022. We expect to recognize a one-time cumulative effect adjustment to the ALL as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. In that regard, ~~the Company has~~we have formed a cross-functional implementation team. The team is working to develop an implementation plan which will include assessment and documentation of processes, internal controls and data sources; model development and documentation; and system configuration, among other things. ~~The Company is~~We are also in the process of implementing a third-party vendor solution to assist itus in the application of this standard. The adoption of this standard could result in an increase in the ALL 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. While ~~the Company is~~we are currently unable to reasonably estimate the impact of adopting ASU 2016-13, ~~it expects~~we expect that the impact of adoption will be significantly influenced by the composition, characteristics and quality of ~~its~~our loan portfolio, as well as the prevailing economic conditions and forecasts as of the adoption date.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirement for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The updates in this ASU are part of the disclosure framework project ASU 2018-14 and modify the disclosure requirements under Accounting Standards Codification (“ASC”) 715-20 for employers that sponsor defined benefit pension or other postretirement plans. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements. The ASU removed the following disclosures: 1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year; 2) the amount and timing of plan assets expected to be returned to the employer; 3) the disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law; 4) related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan; 5) for nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy;

however, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets and 6) for public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (i) aggregate of the service and interest cost components of net periodic benefit costs and (ii) benefit obligation for postretirement health care benefits. The ASU added the following disclosures: 1) the ~~weighted-~~

~~average~~weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and 2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The ASU then clarified the following disclosures: 1) the projected benefit obligation (“PBO”) and fair value of plan assets for plans with PBOs more than plan assets; and 2) the accumulated benefit obligation (“ABO”) and fair value of plan assets for plans with ABOs more than plan assets. ASU 2018-14 is effective for public business entities for fiscal years ending after December 15, 2020. As ASU ~~2018-14 revises~~2018-04 is specific to disclosure ~~requirements. As ASU 2018-04 only revises disclosure~~ requirements, ~~the~~ adoption did not have a material impact on ~~the Company's~~our interim consolidated financial statements. ~~The Company's~~Our year-end disclosures will be revised to comply with the new requirements.

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments and certain derivatives, including accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The amendments were effective for ~~the Company~~us beginning January 1, 2021 and adoption did not have a material effect on ~~its~~our consolidated financial statements.

In March 2020, the FASB issued 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. The guidance is effective from the date of issuance until December 31, 2022. 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~~clarified that certain exceptions in reference rate reform apply to derivatives that are affected by the discounting transition. ~~The Company~~We will continue to assess the impact as the reference rate transition ~~occurs over the next two years.~~occurs.

Note 2 – Investment Securities

The following tables present amortized cost and fair values of investment securities available-for-sale as of the periods indicated:


	September 30, 2021
(Dollars in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
United States government agency securities	$	42,226	$	342	$	(597)	$	41,971
United States sponsored mortgage-backed securities	85,754		401		(884)		85,271
United States treasury securities	82,738		—		(316)		82,422
Municipal securities	202,717		5,182		(476)		207,423
Other debt securities	7,500		—		—		7,500
Total debt securities	420,935		5,925		(2,273)		424,587
Other securities	14,282		177		(23)		14,436
Total investment securities available-for-sale	$	435,217	$	6,102	$	(2,296)	$	439,023

March 31, 2021
(Dollars in thousands) Amortized Cost Unrealized Gain Unrealized Loss Fair Value
United States government agency securities $ 48,483 $ 446 $ (825) $ 48,104
United States sponsored mortgage-backed securities 90,076 428 (1,297) 89,207
United States treasury securities 56,953 97 (80) 56,970
Municipal securities 206,135 4,607 (1,008) 209,734
Other debt securities 7,500 0 0 7,500
Total debt securities 409,147 5,578 (3,210) 411,515
Other securities 11,543 109 (45) 11,607
Total investment securities available-for-sale $ 420,690 $ 5,687 $ (3,255) $ 423,122


		December 31, 2020									December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value		(Dollars in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
United States government agency securities	United States government agency securities	$	56,207	$	995	$	(210)	$	56,992	United States government agency securities	$	53,207	$	872	$	(210)	$	53,869
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	94,968		972		(171)		95,769		United States sponsored mortgage-backed securities	94,968		972		(171)		95,769
United States treasury securities										United States treasury securities	3,000		123		—		3,123
Municipal securities	Municipal securities	223,642		8,327		(82)		231,887		Municipal securities	223,642		8,327		(82)		231,887
Other debt securities	Other debt securities	7,500		0		0		7,500		Other debt securities	7,500		—		—		7,500
Total debt securities	Total debt securities	382,317		10,294		(463)		392,148		Total debt securities	382,317		10,294		(463)		392,148
Other securities	Other securities	18,401		146		(71)		18,476		Other securities	18,401		146		(71)		18,476
Total investment securities available-for-sale	Total investment securities available-for-sale	$	400,718	$	10,440	$	(534)	$	410,624	Total investment securities available-for-sale	$	400,718	$	10,440	$	(534)	$	410,624

1215

The following table presents amortized cost and fair values of available-for-sale debt securities by contractual maturity as of the period indicated:

March 31, 2021
(Dollars in thousands) Amortized Cost Fair Value
Within one year $ 0 $ 0
After one year, but within five years 62,819 63,045
After five years, but within ten years 37,397 37,427
After ten years 308,931 311,043
Total $ 409,147 $ 411,515


	September 30, 2021
(Dollars in thousands)	Amortized Cost		Fair Value
Within one year	$	5	$	5
After one year, but within five years	86,798		86,542
After five years, but within ten years	34,205		35,079
After ten years	299,927		302,961
Total	$	420,935	$	424,587

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

Investment securities with a carrying value of ~~$239.4~~$280.0 million and $229.4 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve Discount Window.

~~The Company’s~~Our investment portfolio includes securities that are in an unrealized loss position as of ~~March 31,~~September 30, 2021, the details of which are included in the following table. Although these securities ~~if sold at March 31, 2021,~~ would result in a pretax loss of ~~$3.3~~$2.3 million ~~the Company has~~if sold at September 30, 2021, we currently have no ~~intent to sell~~intention of selling the applicable securities at such fair values, and ~~maintains the Company has~~maintain that we have the ability to hold these securities until all principal has been recovered. It is more likely than not that ~~the Company~~we will not, for liquidity purposes, sell any securities at a loss. Declines in the fair values of these securities can be traced to general market conditions, which reflect the prospect for the economy as a whole. When determining other-than-temporary impairment on securities, ~~the Company considers~~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, ~~the Company’s~~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. As of ~~March 31,~~September 30, 2021, ~~the Company considers~~we consider all securities with unrealized loss positions to be temporarily ~~impaired, and consequently, does~~impaired. As a result, we do not believe ~~the Company~~we will sustain any material realized losses as a result of the current decline in fair value.

The following tables ~~presents~~present investments in an unrealized loss position as of the periods indicated:


	September 30, 2021
(Dollars in thousands)	Less than 12 months				12 months or more
Description and number of positions	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
United States government agency securities (20)	$	4,334	$	(138)	$	18,113	$	(459)
United States sponsored mortgage-backed securities (27)	57,861		(803)		4,431		(81)
United States treasury securities (18)	82,423		(316)		—		—
Municipal securities (56)	40,069		(430)		2,898		(46)
Other securities (1)	—		—		1,477		(23)
	$	184,687	$	(1,687)	$	26,919	$	(609)

March 31, 2021
(Dollars in thousands) Less than 12 months 12 months or more
Description and number of positions Fair Value Unrealized Loss Fair Value Unrealized Loss
United States government agency securities (28) $ 23,502 $ (705) $ 11,617 $ (120)
United States sponsored mortgage-backed securities (21) 68,695 (1,287) 2,005 (10)
United States treasury securities (9) 35,568 (80) 0 0
Municipal securities (86) 73,445 (952) 2,049 (56)
Other securities (3) 1,957 (43) 1,013 (2)
$ 203,167 $ (3,067) $ 16,684 $ (188)


		December 31, 2020									December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Less than 12 months				12 months or more				(Dollars in thousands)	Less than 12 months				12 months or more
Description and number of positions	Description and number of positions	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Description and number of positions	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
United States government agency securities (27)	United States government agency securities (27)	$	19,021	$	(68)	$	12,574	$	(142)	United States government agency securities (27)	$	19,021	$	(68)	$	12,574	$	(142)
United States sponsored mortgage-backed securities (9)	United States sponsored mortgage-backed securities (9)	15,331		(155)		3,349		(16)		United States sponsored mortgage-backed securities (9)	15,331		(155)		3,349		(16)
Municipal securities (14)	Municipal securities (14)	11,856		(82)		0		0		Municipal securities (14)	11,856		(82)		—		—
Other securities (5)	Other securities (5)	3,947		(71)		0		0		Other securities (5)	3,947		(71)		—		—
		$	50,155	$	(376)	$	15,923	$	(158)		$	50,155	$	(376)	$	15,923	$	(158)

1316

The following table summarizes investment sales, ~~and~~ related gains and losses and unrealized holding gains for the periods shown:

Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Sales of available-for-sale investments $ 41,037 $ 10,318
Gains, gross 1,156 276
Losses, gross 13 0

~~For the three months ended March 31, 2021 and 2020, the Company sold 0 equity investments.~~

For the three months ended March 31, 2021, the Company recognized unrealized holding gains on equity securities of $0.5 million which are included in noninterest income. Unrealized holding gains on equity securities for the three months ended March 31, 2020 were not material.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2021		2020		2021		2020
Sales of available-for-sale securities	$	28,049	$	7,379	$	103,365	$	48,579
Gains, gross	547		69		3,411		899

Losses, gross	18		34		31		34

Sales of equity securities	$	—	$	669	$	61	$	669
Gain, gross	—		18		5		48
Losses, gross	—		—		—		—

Unrealized holding gains on equity securities	536		94		1,750		111

Qualified Affordable Housing Projects

~~The Company has~~We have invested ~~as a~~in limited ~~partner, in 3~~partnerships that sponsor affordable housing projects utilizing low income house tax credits pursuant to Section 42 ~~affordable housing investment funds.~~of the Internal Revenue Code. In exchange for these investments, ~~the Company receives its pro rata~~we receive our pro-rata share of income, expense, gains and losses, including tax credits, that are received by the ~~projects.~~projects using the proportional amortization method. As of ~~March 31,~~both September 30, 2021 and December 31, 2020, ~~the Company has~~we have recognized ~~as an investment, $2.7~~investments totaling $4.0 million ~~and $2.8 million in the aggregate~~ between the 35 affordable housing investment ~~funds~~limited partnerships and ~~has~~have recognized cumulative ~~losses~~amortization of ~~$1.3~~$1.5 million and $1.2 million from these funds as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Note 3 – Loans and Allowance for Loan Losses

Prior to the ICM transaction, ~~the Company~~we routinely generated ~~one to four~~one-to-four family mortgages for sale into the secondary market. During the three months ended ~~March 31,~~September 30, 2020, we did not receive any sales proceeds and during the ~~Company~~nine months ended September 30, 2020, we received sales proceeds of ~~$419.9 million,~~$1.23 billion, resulting in mortgage fee income of ~~$11.2~~$33.4 million. Subsequent to the ICM transaction and during the three and nine months ended September 30, 2021, we did not receive any sales proceeds or recognize any mortgage fee income related to the sale of one-to-four family mortgages.

The following table presents the components of loans as of the periods indicated:


(Dollars in thousands)	September 30, 2021		December 31, 2020
Commercial and non-residential real estate	$	1,430,290	$	1,141,114
Residential real estate	269,967		240,264
Home equity	23,777		30,828
Consumer	22,144		3,156
Total	1,746,178		1,415,362
Purchased credit impaired loans:
Commercial and non-residential real estate	15,079		21,008
Residential real estate	4,430		16,943

Consumer	601		1,488
Total purchased credit impaired loans	20,110		39,439
Total Loans	$	1,766,288	$	1,454,801
Deferred loan origination costs and (fees), net	(2,102)		(1,057)
Loans receivable	$	1,764,186	$	1,453,744

(Dollars in thousands) March 31, 2021 December 31, 2020
Commercial and non-residential real estate $ 1,353,339 $ 1,141,114
Residential real estate 275,710 240,264
Home equity 28,843 30,828
Consumer 3,149 3,156
Total 1,661,041 1,415,362
Purchased credit impaired loans:
Commercial and non-residential real estate 19,834 21,008
Residential real estate 14,306 16,943
Consumer 1,284 1,488
Total purchased credit impaired loans 35,424 39,439
Total Loans $ 1,696,465 $ 1,454,801
Deferred loan origination costs and (fees), net (2,080) (1,057)
Loans receivable $ 1,694,385 $ 1,453,744

~~The Company~~We currently ~~manages its~~manage our loan portfolios and the respective exposure to credit losses (credit risk) by the following specific portfolio segments, which are levels at which ~~the Company develops~~we develop and ~~documents its~~document our systematic methodology to determine the allowance for credit losses attributable to each respective portfolio segment. These segments are as follows:

Commercial business loans – Commercial loans are made to provide funds for equipment and general corporate needs, as well as to finance ~~owner occupied~~owner-occupied real estate, and to finance future cash flows of Federal ~~Government~~government lease contracts. Repayment of these loans primarily uses the funds obtained from the operation of the borrower’s business. Commercial 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 ~~company~~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 ~~company~~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.

Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, including the construction of single-family dwellings, 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.

Commercial Small Business Administration (“SBA”) loans – Loans originated through the various SBA programs have become an area of lending focus for the Bank. As of June 30, 2021, these loans have not yet been designated as a unique portfolio segment due to the relative insignificance from a loan volume perspective. These loans are currently included within the loan types noted above, based on the purpose of each loan originated. However, it is anticipated that this portfolio will continue to expand through a dedicated SBA lending focus, which we continue to monitor. When appropriate, the portfolio segments will be adjusted to segregate the SBA loan portfolio segment from the other commercial loan portfolio segments.

Commercial SBA Paycheck Protection Program (“PPP”) loans –This segment includes the loan originated through the recently created SBA PPP loans. Credit risk is heightened as this SBA program mandates that these loans require no collateral and no guarantors of the loans. However, the loans are backed by a full guaranty of the SBA, so long as the loans were originated in accordance with the program guidelines. Additionally, these loans are eligible for full forgiveness by the SBA so long as the borrowers comply with the program guidelines as it pertains to their eligibility to borrow these funds, as well as their use of the funds.

Residential mortgage loans – This residential real estate subsegment contains permanent and construction mortgage loans principally to consumers secured by residential real estate. Residential real estate loans 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,~~builder’s, continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. 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.

Home equity lines of credit – This segment includes subsegment 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 also includes loans purchased from a third-party originator which it originates to finance the purchase of personal automotive vehicles. Credit risk is unique in comparison to the Consumer segment as this

1518

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.

The following table presents impaired loans by class, excluding PCI loans, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of the periods indicated:


		Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans					Impaired Loans with Specific Allowance				Impaired Loans with No Specific Allowance		Total Impaired Loans
(Dollars in thousands)	(Dollars in thousands)	Recorded Investment		Related Allowance		Recorded Investment		Recorded Investment		Unpaid Principal Balance		(Dollars in thousands)	Recorded Investment		Related Allowance		Recorded Investment		Recorded Investment		Unpaid Principal Balance
March 31, 2021
September 30, 2021												September 30, 2021
Commercial	Commercial											Commercial
Commercial business	Commercial business	$	3,504	$	741	$	3,824	$	7,328	$	8,770	Commercial business	$	5,931	$	3,792	$	3,646	$	9,577	$	11,283
Commercial real estate	Commercial real estate	767		267		956		1,723		1,877		Commercial real estate	676		243		495		1,171		1,341
Acquisition and development	Acquisition and development	0		0		2,035		2,035		3,441		Acquisition and development	—		—		1,401		1,401		2,816

Total commercial	Total commercial	4,271		1,008		6,815		11,086		14,088		Total commercial	6,607		4,035		5,542		12,149		15,440
Residential	Residential	0		0		1,927		1,927		2,160		Residential	—		—		6,971		6,971		7,222
Home equity	Home equity	0		0		95		95		95		Home equity	69		69		26		95		95
Consumer	Consumer	0		0		3		3		3		Consumer	—		—		3		3		3
Total impaired loans	Total impaired loans	$	4,271	$	1,008	$	8,840	$	13,111	$	16,346	Total impaired loans	$	6,676	$	4,104	$	12,542	$	19,218	$	22,760

December 31, 2020	December 31, 2020											December 31, 2020
Commercial	Commercial											Commercial
Commercial business	Commercial business	$	3,431	$	1,032	$	5,653	$	9,084	$	10,440	Commercial business	$	3,431	$	1,032	$	5,653	$	9,084	$	10,440
Commercial real estate	Commercial real estate	772		264		944		1,716		1,864		Commercial real estate	772		264		944		1,716		1,864
Acquisition and development	Acquisition and development	0		0		2,534		2,534		3,939		Acquisition and development	—		—		2,534		2,534		3,939

Total commercial	Total commercial	4,203		1,296		9,131		13,334		16,243		Total commercial	4,203		1,296		9,131		13,334		16,243
Residential	Residential	0		0		1,960		1,960		2,232		Residential	—		—		1,960		1,960		2,232
Home equity	Home equity	0		0		95		95		95		Home equity	—		—		95		95		95
Consumer	Consumer	0		0		5		5		5		Consumer	—		—		5		5		5
Total impaired loans	Total impaired loans	$	4,203	$	1,296	$	11,191	$	15,394	$	18,575	Total impaired loans	$	4,203	$	1,296	$	11,191	$	15,394	$	18,575

The following table presents the average recorded investment in impaired loans, excluding PCI loans, and related interest income recognized for the periods indicated:

Three Months Ended March 31,
2021 2020
(Dollars in thousands) Average Investment in Impaired Loans Interest Income Recognized on Accrual Basis Interest Income Recognized on Cash Basis Average Investment in Impaired Loans Interest Income Recognized on Accrual Basis Interest Income Recognized on Cash Basis
Commercial
  Commercial business $ 6,521 $ 0 $ 0 $ 3,261 $ 0 $ 0
  Commercial real estate 2,278 11 10 2,898 26 23
  Acquisition and development 357 0 0 2,048 29 19
  SBA PPP 0 0 0 0 0 0
    Total commercial 9,156 11 10 8,207 55 42
Residential 1,944 3 4 2,382 5 5
Home equity 69 0 0 101 0 0
Consumer 3 0 0 19 0 0
Total $ 11,172 $ 14 $ 14 $ 10,709 $ 60 $ 47


	Three Months Ended September 30,
	2021						2020
(Dollars in thousands)	Average Investment in Impaired Loans		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis		Average Investment in Impaired Loans		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis
Commercial
Commercial business	$	7,223	$	—	$	—	$	7,785	$	—	$	—
Commercial real estate	1,943		11		11		3,264		26		26
Acquisition and development	340		—		—		375		10		54

Total commercial	9,506		11		11		11,424		36		80
Residential	7,029		3		3		3,085		5		5
Home equity	69		—		—		69		—		—
Consumer	3		—		—		5		—		—
Total	$	16,607	$	14	$	14	$	14,583	$	41	$	85

	Nine Months Ended September 30,
	2021						2020
(Dollars in thousands)	Average Investment in Impaired Loans		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis		Average Investment in Impaired Loans		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis
Commercial
Commercial business	$	6,701	$	—	$	—	$	5,225	$	—	$	—
Commercial real estate	2,125		33		33		3,124		77		79
Acquisition and development	348		—		—		1,487		67		73

Total commercial	9,174		33		33		9,836		144		152
Residential	5,418		11		10		2,683		14		14
Home equity	69		—		—		94		—		—
Consumer	3		—		—		8		—		—
Total	$	14,664	$	44	$	43	$	12,621	$	158	$	166

As of ~~March 31,~~September 30, 2021, the Bank’s other real estate owned balance totaled ~~$5.2~~$3.4 million, of which ~~$4.1~~$2.7 million was related to the acquisition of The First State Bank (“First State”) in 2020. The Bank held ~~37 foreclosed residential real estate properties representing $3.5~~$2.6 million, or ~~67.3%, of the total balance of other real estate owned. The remaining $1.7 million, or 32.7%~~76.5%, of other real estate owned ~~is the~~as a result of the foreclosure of 720 unrelated commercial loans. The remaining $0.8 million, or 23.5%, consists of 11 foreclosed residential real estate properties. There are 95 additional consumer mortgage loans collateralized by residential real estate properties in the process of foreclosure, with a total recorded investment of

~~$0.7~~ $0.4 million as of ~~March 31,~~September 30, 2021. These include ~~five MVB~~four legacy Bank loans totaling $0.2 million and ~~four~~one loan acquired from First State ~~loans~~ totaling ~~$0.5~~$0.2 million. These loans are included in the table above and have 0no specific allowance allocated to them.

Bank management uses a ~~9 point~~9-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first 6 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 ~~bank~~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 ~~make~~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 category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. 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 Credit Department ensures that a review of all commercial relationships of $1.0 million or greater 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 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 larger commercial relationships or criticized relationships. The Credit Department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table represents the classes of the loan portfolio, excluding PCI loans, 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 indicated:

(Dollars in thousands) Pass Special Mention Substandard Doubtful Total
March 31, 2021
Commercial
     Commercial business $ 523,254 $ 14,114 $ 14,081 $ 962 $ 552,411
     Commercial real estate 425,841 31,503 33,774 533 491,651
     Acquisition and development 87,603 25,064 4,366 1,683 118,716
     SBA PPP 190,561 0 0 0 190,561
          Total commercial 1,227,259 70,681 52,221 3,178 1,353,339
Residential 271,772 933 2,834 171 275,710
Home equity 28,295 380 142 26 28,843
Consumer 3,120 24 5 0 3,149
          Total Loans $ 1,530,446 $ 72,018 $ 55,202 $ 3,375 $ 1,661,041
December 31, 2020
Commercial
     Commercial business $ 496,222 $ 9,529 $ 17,045 $ 1,095 $ 523,891
     Commercial real estate 356,544 32,044 34,001 533 423,122
     Acquisition and development 80,771 25,001 4,184 2,170 112,126
     SBA PPP 81,975 0 0 0 81,975
          Total commercial 1,015,512 66,574 55,230 3,798 1,141,114
Residential 236,250 948 2,896 170 240,264
Home equity 30,277 381 144 26 30,828
Consumer 3,124 32 0 0 3,156
          Total Loans $ 1,285,163 $ 67,935 $ 58,270 $ 3,994 $ 1,415,362


(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2021
Commercial
Commercial business	$	589,196	$	13,623	$	12,910	$	3,605	$	619,334
Commercial real estate	508,729		22,004		33,687		156		564,576
Acquisition and development	86,205		7,624		4,149		1,064		99,042
SBA PPP	147,338		—		—		—		147,338
Total commercial	1,331,468		43,251		50,746		4,825		1,430,290
Residential	259,864		917		8,693		493		269,967
Home equity	23,304		378		—		95		23,777
Consumer	22,123		18		3		—		22,144
Total Loans	$	1,636,759	$	44,564	$	59,442	$	5,413	$	1,746,178

December 31, 2020
Commercial
Commercial business	$	496,222	$	9,529	$	17,045	$	1,095	$	523,891
Commercial real estate	356,544		32,044		34,001		533		423,122
Acquisition and development	80,771		25,001		4,184		2,170		112,126
SBA PPP	81,975		—		—		—		81,975
Total commercial	1,015,512		66,574		55,230		3,798		1,141,114
Residential	236,250		948		2,896		170		240,264
Home equity	30,277		381		144		26		30,828
Consumer	3,124		32		—		—		3,156
Total Loans	$	1,285,163	$	67,935	$	58,270	$	3,994	$	1,415,362

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 ~~thorough~~complete review is presented to the Chief Credit Officer and/or the ~~SARC,~~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, when it becomes likely the borrower cannot or will not make scheduled principal or interest payments, when full repayment of principal and interest is not expected or when the loan displays potential loss characteristics. Normally, all accrued interest is charged off when a loan is placed in non-accrual status unless ~~the Company believes~~we believe it is likely the accrued interest will be collected. Any payments subsequently received are applied to the principal. ~~To remove a loan from non-accrual status, all~~All principal and interest due must be paid ~~up to date~~up-to-date and the Bank is reasonably sure of future satisfactory payment ~~performance.~~performance to remove a loan from non-accrual status. Usually, this requires thethe receipt of six consecutive months of regular, on-time ~~payments~~.payments. Removal of a loan from non-accrual status will require the approval of the Chief Credit Officer and/or SARC.

The following table presents the classes of the loan portfolio, excluding PCI loans, summarized by aging categories of performing loans and non-accrual loans as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Total Loans		Non-Accrual		90+ Days Still Accruing		(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Total Loans		Non-Accrual		90+ Days Still Accruing
March 31, 2021
September 30, 2021																		September 30, 2021
Commercial	Commercial																	Commercial
Commercial business	Commercial business	$	551,150	$	23	$	244	$	994	$	1,261	$	552,411	$	6,938	$	0	Commercial business	$	608,407	$	6,315	$	1,052	$	3,560	$	10,927	$	619,334	$	9,102	$	—
Commercial real estate	Commercial real estate	490,992		69		42		548		659		491,651		956		0		Commercial real estate	564,420		—		—		156		156		564,576		495		—
Acquisition and development	Acquisition and development	116,190		578		0		1,948		2,526		118,716		2,036		0		Acquisition and development	97,966		—		—		1,076		1,076		99,042		1,157		—
SBA PPP	SBA PPP	190,561		0		0		0		0		190,561		0		0		SBA PPP	147,338		—		—		—		—		147,338		—		—
Total commercial	Total commercial	1,348,893		670		286		3,490		4,446		1,353,339		9,930		0		Total commercial	1,418,131		6,315		1,052		4,792		12,159		1,430,290		10,754		—
Residential	Residential	267,500		1,740		5,767		703		8,210		275,710		1,549		0		Residential	268,281		726		415		545		1,686		269,967		6,601		—
Home equity	Home equity	28,657		75		16		95		186		28,843		95		0		Home equity	23,550		117		15		95		227		23,777		95		—
Consumer	Consumer	3,145		0		0		4		4		3,149		3		0		Consumer	22,138		3		3		—		6		22,144		3		—
Total Loans	Total Loans	$	1,648,195	$	2,485	$	6,069	$	4,292	$	12,846	$	1,661,041	$	11,577	$	0	Total Loans	$	1,732,100	$	7,161	$	1,485	$	5,432	$	14,078	$	1,746,178	$	17,453	$	—

December 31, 2020	December 31, 2020																	December 31, 2020
Commercial	Commercial																	Commercial
Commercial business	Commercial business	$	521,799	$	1,040	$	33	$	1,019	$	2,092	$	523,891	$	8,601	$	0	Commercial business	$	521,799	$	1,040	$	33	$	1,019	$	2,092	$	523,891	$	8,601	$	—
Commercial real estate	Commercial real estate	422,343		34		212		533		779		423,122		944		0		Commercial real estate	422,343		34		212		533		779		423,122		944		—
Acquisition and development	Acquisition and development	109,686		0		0		2,440		2,440		112,126		2534		0		Acquisition and development	109,686		—		—		2,440		2,440		112,126		2,534		—
SBA PPP	SBA PPP	81,975		0		0		0		0		81,975		0		0		SBA PPP	81,975		—		—		—		—		81,975		—		—
Total commercial	Total commercial	1,135,803		1,074		245		3,992		5,311		1,141,114		12,079		0		Total commercial	1,135,803		1,074		245		3,992		5,311		1,141,114		12,079		—
Residential	Residential	235,420		2,058		1,969		817		4,844		240,264		1,534		0		Residential	235,420		2,058		1,969		817		4,844		240,264		1,534		—
Home equity	Home equity	30,369		289		75		95		459		30,828		95		0		Home equity	30,369		289		75		95		459		30,828		95		—
Consumer	Consumer	3,156		0		0		0		0		3,156		5		0		Consumer	3,156		—		—		—		—		3,156		5		—
Total Loans	Total Loans	$	1,404,748	$	3,421	$	2,289	$	4,904	$	10,614	$	1,415,362	$	13,713	$	0	Total Loans	$	1,404,748	$	3,421	$	2,289	$	4,904	$	10,614	$	1,415,362	$	13,713	$	—

An ALL is maintained to absorb losses from the loan portfolio. The ALL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience and the amount of non-performing loans.

The Bank’s methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the 2 components represents the Bank’s ALL. The Bank’s methodology allows for the analysis of certain impaired loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on the outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans, when considered

impaired, are evaluated collectively for impairment by applying allocation rates derived from the Bank’s historical losses specific to impaired loans. Total collectively evaluated impaired loans, excluding the PCI loans acquired from First State, were ~~$2.0~~$1.4 million and $2.0 million, while the related reserves were $0.1 million and $0.1 million as of ~~March 31,~~September 30, 2021 and December 31, 2020. Such collectively evaluated impaired loans are included in total loans individually evaluated for impairment and in total impaired loans.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by qualified factors.

The segments described above, which are based on the federal call code assigned to each loan, provide the starting point for the ALL analysis. ~~Company and Bank management track~~Management tracks the historical net charge-off activity at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. All pools currently utilize a rolling 12 quarters.

“Pass” rated credits are segregated from “Criticized” credits for the application of qualitative factors. Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

~~Company and Bank management have~~Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory and governmental sources are: 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. The combination of historical charge-off and qualitative factors are then weighted for each risk grade. These weightings are determined internally based upon the likelihood of loss as a loan risk grading deteriorates.

~~To estimate the liability for off-balance sheet credit exposures,~~ Bank management analyzed the portfolios of letters of credit, non-revolving lines of credit and revolving lines of credit and based its calculation to estimate the liability for off-balance sheet credit exposures on the expectation of future advances of each loan category. Letters of credit were determined to be highly unlikely to advance since they are generally in place only to ensure various forms of performance of the borrowers. In the Bank’s history, there have been no letters of credit drawn upon. In addition, many of the letters of credit are cash secured and do not warrant an allocation. Non-revolving lines of credit were determined to be highly likely to advance as these are typically construction lines. Meanwhile, the likelihood of revolving lines of credit advancing varies with each individual borrower. Therefore, the future usage of each line was estimated based on the average line utilization of the revolving line of credit portfolio as a whole.

Once the estimated future advances were calculated, an allocation rate, which was derived from the Bank’s historical losses and qualitative environmental factors, was applied in ~~the~~a similar manner as those used for the allowance for loan loss 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 ~~March 31,~~September 30, 2021 and December 31, 2020, the liability for unfunded commitments related to loans held for investment, excluding loans acquired from First State, was ~~$0.6~~$0.5 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 ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

The following table presents the primary segments of the ALL, excluding PCI loans, 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 indicated:

(Dollars in thousands) Commercial Residential Home Equity Consumer Total
ALL balance at December 31, 2020 $ 24,033 $ 1,378 $ 298 $ 51 $ 25,760
     Charge-offs (265) 0 0 0 (265)
     Recoveries 10 0 4 3 17
     Provision 501 135 (19) (5) 612
ALL balance at March 31, 2021 $ 24,279 $ 1,513 $ 283 $ 49 $ 26,124
Individually evaluated for impairment $ 1,008 $ 0 $ 0 $ 0 $ 1,008
Collectively evaluated for impairment $ 23,271 $ 1,513 $ 283 $ 49 $ 25,116


(Dollars in thousands)	Commercial		Residential		Home Equity		Consumer		Total
ALL balance at June 30, 2021	$	22,659	$	1,363	$	284	$	576	$	24,882
Charge-offs	(96)		(2)		—		—		(98)
Recoveries	10		—		13		—		23
Provision (release)	(529)		(42)		(37)		609		1

ALL balance at September 30, 2021	$	22,044	$	1,319	$	260	$	1,185	$	24,808


(Dollars in thousands)	Commercial		Residential		Home Equity		Consumer		Total
ALL balance at December 31, 2020	$	24,033	$	1,378	$	298	$	51	$	25,760
Charge-offs	(361)		(2)		—		—		(363)
Recoveries	224		—		21		3		248
Provision (release)	(1,852)		(57)		(59)		1,131		(837)

ALL balance at September 30, 2021	$	22,044	$	1,319	$	260	$	1,185	$	24,808
Individually evaluated for impairment	$	4,035	$	—	$	69	$	—	$	4,104
Collectively evaluated for impairment	$	18,009	$	1,319	$	191	$	1,185	$	20,704

The following table presents the primary segments of ~~the Company's~~our loan portfolio, excluding PCI loans, as of the ~~periods~~period indicated:

(Dollars in thousands) Commercial Residential Home Equity Consumer Total
March 31, 2021
Individually evaluated for impairment $ 11,086 $ 1,927 $ 95 $ 3 $ 13,111
Collectively evaluated for impairment 1,342,253 273,783 28,748 3,146 1,647,930
Total Loans $ 1,353,339 $ 275,710 $ 28,843 $ 3,149 $ 1,661,041


(Dollars in thousands)	Commercial		Residential		Home Equity		Consumer		Total
September 30, 2021
Individually evaluated for impairment	$	12,148	$	6,971	$	95	$	3	$	19,217
Collectively evaluated for impairment	1,418,142		262,996		23,682		22,141		1,726,961
Total Loans	$	1,430,290	$	269,967	$	23,777	$	22,144	$	1,746,178

(Dollars in thousands) Commercial Residential Home Equity Consumer Total
ALL balance at December 31, 2019 $ 10,098 $ 1,272 $ 327 $ 78 $ 11,775
     Charge-offs (1,756) 0 0 0 (1,756)
     Recoveries 0 0 2 2 4
     Provision 1,255 0 (93) (24) 1,138
ALL balance at March 31, 2020 $ 9,597 $ 1,272 $ 236 $ 56 $ 11,161
Individually evaluated for impairment $ 532 $ 0 $ 0 $ 0 $ 532
Collectively evaluated for impairment $ 9,065 $ 1,272 $ 236 $ 56 $ 10,629


(Dollars in thousands)	Commercial		Residential		Home Equity		Consumer		Total
ALL balance at June 30, 2020	$	15,401	$	1,846	$	264	$	58	$	17,569
Charge-offs	(100)		—		—		—		(100)
Recoveries	3		—		2		—		5
Provision (release)	8,840		(218)		82		(8)		8,696
ALL balance at Allowance contributed with mortgage combination transaction	—		(354)		—		—		(354)
ALL balance at September 30, 2020	$	24,144	$	1,274	$	348	$	50	$	25,816


(Dollars in thousands)	Commercial		Residential		Home Equity		Consumer		Total
ALL balance at December 31, 2019	$	10,098	$	1,272	$	327	$	78	$	11,775
Charge-offs	(1,856)		—		(23)		—		(1,879)
Recoveries	9		—		6		2		17
Provision (release)	15,893		356		38		(30)		16,257
Allowance contributed with mortgage combination transaction	—		(354)		—		—		(354)
ALL balance at September 30, 2020	$	24,144	$	1,274	$	348	$	50	$	25,816
Individually evaluated for impairment	$	1,984	$	—	$	—	$	—	$	1,984
Collectively evaluated for impairment	$	22,160	$	1,274	$	348	$	50	$	23,832

The following table presents the primary segments of ~~the Company's~~our loan portfolio, excluding PCI loans, as of the ~~periods~~period indicated:

(Dollars in thousands) Commercial Residential Home Equity Consumer Total
March 31, 2020
Individually evaluated for impairment $ 7,737 $ 2,385 $ 104 $ 0 $ 10,226
Collectively evaluated for impairment 1,086,757 259,108 36,752 3,763 1,386,380
Total Loans $ 1,094,494 $ 261,493 $ 36,856 $ 3,763 $ 1,396,606


(Dollars in thousands)	Commercial		Residential		Home Equity		Consumer		Total
September 30, 2020
Individually evaluated for impairment	$	14,350	$	3,051	$	95	$	6	$	17,502
Collectively evaluated for impairment	1,102,976		231,707		34,689		3,980		1,373,352
Total Loans	$	1,117,326	$	234,758	$	34,784	$	3,986	$	1,390,854

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

Troubled Debt Restructurings

At ~~both March 31,~~September 30, 2021 and December 31, 2020, the Bank had specific reserve allocations for troubled debt restructurings (“TDRs”) of $0.5 million and $0.6 ~~million.~~million, respectively. Loans considered to be troubled debt restructured loans totaled ~~$8.3~~$7.7 million and $10.2 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Of these totals, ~~$1.5~~$1.4 million and $1.6 million, respectively, represent accruing troubled debt restructured loans and represent ~~11%~~8% and 10%, respectively, of total impaired loans. Meanwhile, as of ~~March 31,~~September 30, 2021, ~~$2.8~~$2.6 million represent 4 loans to 2 borrowers that have defaulted under the restructured terms. The largest of these loans, ~~$2.2~~totaling $2.1 million, is a commercial loan, and the other three of these loans, totaling ~~$0.6~~$0.5 million, are commercial acquisition and development loans that were considered TDRs due to extended ~~interest only~~interest-only periods and/or unsatisfactory repayment structures once transitioned to principal and interest payments. These borrowers have experienced continued financial difficulty and are considered non-performing loans as of ~~March 31,~~September 30, 2021 and December 31, 2020.

During the ~~quarter~~nine months ended ~~March 31,~~September 30, 2021, no additional loans were classified as TDRs and 0no restructured loan defaulted under their modified terms that were not already classified as non-performing for having previously defaulted under their modified terms. ~~The~~During the three months ended September 30, 2020, no additional loans were classified as TDRs and no restructured loans defaulted under their modified terms that were already classified as non-performing for having previously defaulted under their modified terms. For the nine months ended September 30, 2020, the following table presents the new TDRs as of the period indicated:

Three Months Ended March 31, 2020
(Dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment
Commercial
     Commercial business 2 $ 154 $ 149
     Commercial real estate 2 159 159
          Total commercial 4 313 308
          Total 4 $ 313 $ 308


		Nine Months Ended September 30,
	2020
(Dollars in thousands)			Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial
Commercial business			5	$	6,237	$	5,427
Commercial real estate			2	159		152


Total commercial			7	6,396		5,579
Residential			1	87		86


Total			8	$	6,483	$	5,665

The pre-modification and post-modification balances represent the balances outstanding immediately before and after modification of the loan.

Purchased Credit Impaired Loans

As a result of the acquisition of First State, ~~the Company has~~we have PCI loans. The following table presents the carrying amount of the PCI loan portfolio as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020
Commercial	Commercial	$	19,834	$	21,008	Commercial	$	15,079	$	21,008
Residential	Residential	14,306		16,943		Residential	4,430		16,943

Consumer	Consumer	1,284		1,488		Consumer	601		1,488
Outstanding balance	Outstanding balance	$	35,424	$	39,439	Outstanding balance	$	20,110	$	39,439
Carrying amount, net of allowance	Carrying amount, net of allowance	$	35,334	$	39,355	Carrying amount, net of allowance	$	20,110	$	39,355

The following table presents the accretable yield, or income expected to be collected, as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020
Beginning balance	Beginning balance	$	8,313	$	0	Beginning balance	$	8,313	$	—
New loans purchased	New loans purchased	0		11,746		New loans purchased	—		11,746
Accretion of income	Accretion of income	(1,021)		(2,945)		Accretion of income	(3,080)		(2,945)
Other changes in expected cash flows	Other changes in expected cash flows	955		(488)		Other changes in expected cash flows	1,234		(488)

Ending balance	Ending balance	$	8,247	$	8,313	Ending balance	$	6,467	$	8,313

There were no PCI loans purchased during the three or nine months ended ~~March 31,~~September 30, 2021. Income is not recognized on PCI loans if ~~the Company~~we cannot reasonably estimate cash flows expected to be collected and, as of ~~March 31,~~September 30, 2021, ~~the Company~~we held no such loans.

The following ~~table summarizes~~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:

(Dollars in thousands) Commercial Residential Total
December 31, 2020 $ 0 $ 84 $ 84
Provision 90 (84) 6
ALL balance at March 31, 2021 $ 90 $ 0 $ 90
Collectively evaluated for impairment $ 90 $ 0 $ 90


(Dollars in thousands)	Commercial		Residential		Total
ALL balance at June 30, 2021	$	—	$	—	$	—


Provision	14		365		379
ALL balance at September 30, 2021	$	14	$	365	$	379

~~For the PCI loan portfolio disclosed above, the Company increased the ALL by $0.01 million during the three months ended March 31, 2021.~~


(Dollars in thousands)	Commercial		Residential		Total
ALL balance at December 31, 2020	$	—	$	84	$	84


Provision	14		281		295
ALL balance at September 30, 2021	$	14	$	365	$	379

Collectively evaluated for impairment	$	14	$	365	$	379

~~There were no PCI as of March 31, 2020 and, accordingly, there was no ALL related to PCI loans for the three months ended March 31, 2020.~~


(Dollars in thousands)	Commercial		Residential		Total
ALL balance at June 30, 2020	$	121	$	52	$	173
Charge-offs	—		(11)		(11)

Provision	(121)		56		(65)
ALL balance at September 30, 2020	$	—	$	97	$	97


(Dollars in thousands)	Commercial		Residential		Total
ALL balance at December 31, 2019	$	—	$	—	$	—
Charge-offs	—		(11)		(11)

Provision	—		108		108
ALL balance at September 30, 2020	$	—	$	97	$	97

Collectively evaluated for impairment	$	—	$	97	$	97

As of ~~March 31,~~September 30, 2021, the loans in ~~the Company's~~our PCI portfolio were all collectively evaluated for impairment and are segmented into three categories: commercial loans totaling ~~$19.8~~$15.1 million, residential loans totaling ~~$14.3~~$4.4 million, and consumer loans totaling ~~$1.3~~$0.6 million, for a portfolio total of ~~$35.4~~$20.1 million.

2226

The following table presents the classes of the PCI 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 indicated:


(Dollars in thousands)	(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2021
September 30, 2021												September 30, 2021
Commercial	Commercial											Commercial
Commercial business	Commercial business	$	14,678	$	35	$	466	$	2,411	$	17,590	Commercial business	$	2,360	$	158	$	211	$	209	$	2,938
Commercial real estate	Commercial real estate	1,220		2		0		0		1,222		Commercial real estate	7,784		1,549		2,189		73		11,595
Acquisition and development	Acquisition and development	1,022		0		0		0		1,022		Acquisition and development	259		78		163		46		546

Total commercial	Total commercial	16,920		37		466		2,411		19,834		Total commercial	10,403		1,785		2,563		328		15,079
Residential	Residential	11,864		327		861		1,254		14,306		Residential	3,586		—		844		—		4,430

Consumer	Consumer	1,278		0		0		6		1,284		Consumer	36		—		563		2		601
Total Loans	Total Loans	$	30,062	$	364	$	1,327	$	3,671	$	35,424	Total Loans	$	14,025	$	1,785	$	3,970	$	330	$	20,110

December 31, 2020	December 31, 2020											December 31, 2020
Commercial	Commercial											Commercial
Commercial business	Commercial business	$	12,263	$	136	$	345	$	4,860	$	17,604	Commercial business	$	12,263	$	136	$	345	$	4,860	$	17,604
Commercial real estate	Commercial real estate	982		3		263		21		1,269		Commercial real estate	982		3		263		21		1,269
Acquisition and development	Acquisition and development	1,900		0		0		235		2,135		Acquisition and development	1,900		—		—		235		2,135

Total commercial	Total commercial	15,145		139		608		5,116		21,008		Total commercial	15,145		139		608		5,116		21,008
Residential	Residential	15,157		0		1,665		121		16,943		Residential	15,157		—		1,665		121		16,943

Consumer	Consumer	1,256		0		0		232		1,488		Consumer	1,256		—		—		232		1,488
Total Loans	Total Loans	$	31,558	$	139	$	2,273	$	5,469	$	39,439	Total Loans	$	31,558	$	139	$	2,273	$	5,469	$	39,439

The following table presents the classes of the PCI loan portfolio summarized by aging categories of performing loans and non-accrual loans as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Total Loans		(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Total Loans
March 31, 2021
September 30, 2021														September 30, 2021
Commercial	Commercial													Commercial
Commercial business	Commercial business	$	15,907	$	296	$	111	$	1,276	$	1,683	$	17,590	Commercial business	$	2,519	$	—	$	—	$	419	$	419	$	2,938
Commercial real estate	Commercial real estate	1,197		0		23		2		25		1,222		Commercial real estate	7,967		640		—		2,988		3,628		11,595
Acquisition and development	Acquisition and development	784		238		0		0		238		1,022		Acquisition and development	146		177		—		223		400		546

Total commercial	Total commercial	17,888		534		134		1,278		1,946		19,834		Total commercial	10,632		817		—		3,630		4,447		15,079
Residential	Residential	11,806		204		493		1,803		2,500		14,306		Residential	3,522		—		64		844		908		4,430

Consumer	Consumer	1,278		0		0		6		6		1,284		Consumer	36		—		—		565		565		601
Total Loans	Total Loans	$	30,972	$	738	$	627	$	3,087	$	4,452	$	35,424	Total Loans	$	14,190	$	817	$	64	$	5,039	$	5,920	$	20,110

December 31, 2020	December 31, 2020													December 31, 2020
Commercial	Commercial													Commercial
Commercial business	Commercial business	$	16,264	$	71	$	65	$	1,204	$	1,340	$	17,604	Commercial business	$	16,264	$	71	$	65	$	1,204	$	1,340	$	17,604
Commercial real estate	Commercial real estate	1,157		0		0		112		112		1,269		Commercial real estate	1,157		—		—		112		112		1,269
Acquisition and development	Acquisition and development	2,135		0		0		0		0		2,135		Acquisition and development	2,135		—		—		—		—		2,135

Total commercial	Total commercial	19,556		71		65		1,316		1,452		21,008		Total commercial	19,556		71		65		1,316		1,452		21,008
Residential	Residential	13,714		710		145		2,374		3,229		16,943		Residential	13,714		710		145		2,374		3,229		16,943

Consumer	Consumer	1,245		3		1		239		243		1,488		Consumer	1,245		3		1		239		243		1,488
Total Loans	Total Loans	$	34,515	$	784	$	211	$	3,929	$	4,924	$	39,439	Total Loans	$	34,515	$	784	$	211	$	3,929	$	4,924	$	39,439

None of the PCI loans are considered non-accrual as they are all currently accreting interest income under PCI accounting.

As ~~the Company's~~our PCI loan portfolio is accounted for in pools with similar risk characteristics in accordance with ASC 310-30,

this portfolio is not subject to the impaired loan and TDR guidance. Rather, the revised estimated future cash flows of the individually modified loans are included in the estimated future cash flows of the pool.

PPP Loans and CARES Act Deferrals

~~The Company is~~We actively ~~participating~~participated in the PPP as a lender, evaluating other programs available to assist ~~its~~our clients and providing deferrals consistent with GSE guidelines. ~~The Company~~We originated ~~634~~733 PPP loans with outstanding balances of ~~$88.5~~$27.9 million through our internal commercial team and originated PPP loans totaling ~~$102.1~~$119.4 million through our partnership with a Fintech company as of ~~March 31,~~September 30, 2021.

As of ~~March 31,~~September 30, 2021, commercial loans totaling ~~$34.7~~$6.6 million and mortgage loans totaling ~~$9.0~~$2.7 million were approved for COVID-19 related modifications, such as interest-only payments and payment deferrals. These modifications were not considered to be troubled debt restructurings in reliance on guidance issued by banking regulators titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus.”

Note 4 – Premises and Equipment

The following table presents the components of premises and equipment as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020
Land	Land	$	3,936	$	3,936	Land	$	3,465	$	3,936
Buildings and improvements	Buildings and improvements	14,350		14,350		Buildings and improvements	13,393		14,350
Furniture, fixtures and equipment	Furniture, fixtures and equipment	17,705		17,451		Furniture, fixtures and equipment	16,615		17,451
Software	Software	3,191		1,548		Software	3,978		1,527
Construction in progress	Construction in progress	53		28		Construction in progress	113		49
Leasehold improvements	Leasehold improvements	3,079		3,079		Leasehold improvements	2,865		3,079
		42,314		40,392			40,429		40,392
Accumulated depreciation	Accumulated depreciation	(15,024)		(14,189)		Accumulated depreciation	(15,386)		(14,189)
Net premises and equipment		$	27,290	$	26,203
Premises and equipment, net						Premises and equipment, net	$	25,043	$	26,203

~~The Company leases~~We lease certain premises and equipment under operating and finance leases.

At ~~March 31,~~September 30, 2021, ~~the Company~~we had lease liabilities totaling ~~$18.2~~$17.1 million, of which ~~$18.1~~$17.0 million was related to operating leases and $0.1 million was related to finance leases, and right-of-use assets totaling ~~$17.5~~$18.2 million, of which ~~$17.3~~$17.8 million was related to operating leases and ~~$0.2~~$0.4 million was related to finance ~~leases, related to these~~ leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively. At ~~March 31,~~September 30, 2021, the weighted-average remaining lease term for operating leases was 12.2 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.8%. At September 30, 2021, the weighted-average remaining lease term for finance leases was ~~2.1~~1.9 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 2.3%. At March 31, 2021, the weighted-average remaining lease term for operating leases was 12.7 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.9%2.1%.

At December 31, 2020, ~~the Company~~we had lease liabilities totaling $18.4 million, of which $18.3 million was related to operating leases and $0.2 million was related to finance leases, and right-of-use assets totaling $17.7 million, of which $17.5 million was related to operating leases and $0.2 million was related to finance ~~leases, related to these~~ leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively. For the year ended December 31, 2020, the weighted-average remaining lease term for finance leases was 2.3 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 2.4%. At December 31, 2020, the weighted-average remaining lease term for operating leases was 12.9 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.9%. At December 31, 2020, the weighted-average remaining lease term for finance leases was 2.3 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 2.4%.

2428

The following table presents lease costs for the periods indicated:

Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Amortization of right-of-use assets, finance leases $ 14 $ 18
Interest on lease liabilities, finance leases 1 1
Operating lease cost 477 544
Short-term lease cost 1 14
Variable lease cost 10 10
Total lease cost $ 503 $ 587


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2021		2020		2021		2020
Operating lease cost	$	504	$	473	$	1,458	1,594
Short-term lease cost	2		—		4		26
Variable lease cost	9		10		29		30
Amortization of right-of-use assets, finance leases	16		13		44		49
Interest on lease liabilities, finance leases	—		1		2		3
Total lease cost	$	531	$	497	$	1,537	$	1,702

The following table presents future minimum payments for finance leases and operating leases with initial or remaining terms of one year or more as of ~~March 31,~~September 30, 2021:


(Dollars in thousands)	(Dollars in thousands)	Finance Leases		Operating Leases		(Dollars in thousands)	Operating Leases		Finance Leases
2021	2021	$	44	$	1,285	2021	$	468	$	15
2022	2022	41		1,825		2022	1,946		42
2023	2023	5		1,779		2023	1,897		5
2024	2024	5		1,709		2024	1,827		5
2025	2025	4		1,708		2025	1,826		4
2026 and thereafter	2026 and thereafter	0		13,863		2026 and thereafter	12,901		—
Total future minimum lease payments	Total future minimum lease payments	$	99	$	22,169	Total future minimum lease payments	$	20,865	$	71
Less: Amounts representing interest	Less: Amounts representing interest	(2)		(4,045)		Less: Amounts representing interest	(3,878)		(1)
Present value of net future minimum lease payments	Present value of net future minimum lease payments	$	97	$	18,124	Present value of net future minimum lease payments	$	16,987	$	70

Note 5 – Equity Method ~~Investment~~Investments

ICM

In the third quarter of 2020, ~~the Company~~we acquired a portion of ICM, a direct mortgage lender, and ~~recognizes its~~account for our ownership as an equity method investment, initially recorded at fair value and subsequently adjusted for ~~the Company's~~our share of ICM's earnings. In accordance with Rule 8-03(b)(3) of Regulation S-X, ~~the Company~~we must assess whether ~~its~~our equity method investment is ~~a significant equity method investment.~~significant. In evaluating the significance of this investment, ~~the Company~~we performed the income, asset and investment tests described in S-X 3-05 and S-X 1-02(w). Rule 8-03(b)(3) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20%. Under the income test, ~~the Company’s~~our proportionate share of ~~its~~our equity method investee's aggregated net income exceeded the applicable threshold of 20%, and accordingly, ~~it is~~we are required to provide summarized income statement information for this investee for all periods presented. ~~The Company's~~Our share of net income from ~~its~~our equity method investment totaled ~~$6.5~~$3.6 million and $14.6 million for the three and ~~three~~nine months ended ~~March 31,~~September 30, 2021.

The following table presents summarized income statement information for ~~the Company's~~our equity method investment for the period indicated. ~~As ICM did not exist prior to July 1, 2020, no historical financial information is presented.~~

~~Three Months Ended March 31,~~

~~(Dollars in thousands)~~

~~2021~~

~~Total revenues~~

~~50,797~~

~~Net income~~

~~15,864~~

~~Gain on sale of loans~~

~~47,594~~

~~Volume of loans sold~~

~~1,778,090~~


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2021		2020		2021		2020
Total revenues	$	35,229	$	62,915	$	126,106	$	62,915
Net income	9,962		28,979		36,747		28,979

Gain on sale of loans	$	30,720	$	39,518	$	122,621	$	39,518
Volume of loans sold	$	1,098,475	$	1,215,512	$	4,368,875	$	1,215,512

As of ~~March 31,~~September 30, 2021 and December 31, ~~2021~~2020, the ~~locked~~ mortgage pipeline was ~~$1.43~~$1.15 billion ~~and~~and $1.54 billion, respectively.

Interchecks

In September 2021, we increased our equity investment in Interchecks by $4.5 million, for a total investment to $7.7 million as of September 30, 2021. The additional investment increased our ownership percentage to 16.9% and allows us to have significant influence over the operations and decision making at Interchecks; therefore, the investment has now been accounted for as an equity method investment as of September 30, 2021. The equity method investment in Interchecks is not considered a significant investment based on the criteria of Rule 8-03(b)(3) of Regulation S-X.

We have multiple business relationships with Interchecks beyond our investment. Interchecks is a banking client of ours and utilizes the Victor platform, which provides revenue to us. Additionally, Interchecks provides management services to MVB Technology, which provides revenue to Interchecks. Such revenues have not been material.

Note 6 – Deposits

The following table presents the components of deposits as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020
Noninterest-bearing demand	Noninterest-bearing demand	$	837,221	$	715,791	Noninterest-bearing demand	$	999,328	$	715,791
Interest-bearing demand	Interest-bearing demand	698,218		496,502		Interest-bearing demand	767,268		496,502
Savings and money markets	Savings and money markets	520,998		545,501		Savings and money markets	530,538		545,501
Time deposits, including CDs and IRAs	Time deposits, including CDs and IRAs	160,116		224,595		Time deposits, including CDs and IRAs	101,806		224,595
Total deposits	Total deposits	$	2,216,553	$	1,982,389	Total deposits	$	2,398,940	$	1,982,389

Time deposits that meet or exceed the FDIC insurance limit	Time deposits that meet or exceed the FDIC insurance limit	$	14,829	$	16,955	Time deposits that meet or exceed the FDIC insurance limit	$	9,563	$	16,955

The following table presents the maturities of time deposits ~~as of~~for the ~~period indicated:~~twelve month periods ended September 30:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		(Dollars in thousands)
2021		$	56,037
2022	2022	66,154		2022	$	64,757
2023	2023	22,254		2023	21,466
2024	2024	12,479		2024	10,794
2025	2025	3,192		2025	3,726
2026				2026	1,063
Total	Total	$	160,116	Total	$	101,806

As of ~~March 31,~~September 30, 2021, overdrawn deposit accounts totaling ~~$0.01 million~~$54 thousand were reclassified as loan balances.

Note 7 – Borrowed Funds

The Bank is a member of the ~~FHLB~~Federal Home Loan Bank ("FHLB") of Pittsburgh, Pennsylvania. As of ~~March 31,~~September 30, 2021, the Bank's maximum borrowing capacity with the FHLB was ~~$451.7~~$454.4 million and the remaining borrowing capacity was ~~$440.4~~$443.0 million, with the difference being deposit letters of credit.

The Bank also maintains borrowing capacity with the Federal Reserve Bank under the discount window program and with the Federal Reserve Board under the Federal Reserve's Paycheck Protection Program Liquidity Facility (“PPPLF”) program in the amount of the outstanding pledged PPP loans. Short-term borrowings

As of ~~March~~September 30, 2021 and December 31, ~~2021~~2020, the Bank had ~~borrowed $102.2 million~~no borrowings under ~~the PPPLF. As of December 31, 2020, 0 amounts were~~Fed Funds purchased outstanding.

~~Short-term borrowings~~

The following table presents information related to short-term borrowings as of and for the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	Three Months Ended March 31, 2021			Year Ended December 31, 2020			(Dollars in thousands)	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
Balance at end of period	Balance at end of period	$	102,185		$	0		Balance at end of period	$	—		$	—
Average balance during the period	Average balance during the period	46,349			68,407			Average balance during the period	33,914			68,407
Maximum month-end balance	Maximum month-end balance	102,185			154,248			Maximum month-end balance	130,047			154,248
Weighted-average rate during the period	Weighted-average rate during the period	0.35		%	0.58		%	Weighted-average rate during the period	0.36		%	0.58		%
Weighted-average rate at end of period	Weighted-average rate at end of period	0.28		%	0		%	Weighted-average rate at end of period	—		%	—		%

Long-term borrowings

As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Bank had 0no long-term borrowings with the FHLB or the Federal ~~Reserve.~~Reserve 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 ~~the Company. Repurchase agreements with clients are included in borrowings section on the consolidated balance sheets.~~us. All

repurchase agreements are subject to terms and conditions of repurchase/security agreements between ~~the Company~~us and the client and are accounted for as secured borrowings. ~~The Company’s~~Our repurchase agreements reflected in liabilities consist of client accounts and securities which are pledged on an individual security basis.

~~The Company monitors~~We monitor the fair value of the underlying securities on a monthly basis. Repurchase agreements are reflected atin the amount of cash received in connection with the transaction. The primary risk with ~~the Company’s~~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.

~~All~~As of ~~the Company’s~~September 30, 2021 and December 31, 2020, all of our repurchase agreements were overnight ~~agreements at March 31, 2021 and December 31, 2020.~~agreements. These borrowings were collateralized with investment securities with a carrying value of ~~$11.0~~$11.5 million and $10.7 million at ~~March 31,~~September 30, 2021 and December 31, 2020, 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 ~~the Company~~us to increase the amounts of securities pledged.

The following table presents information related to repurchase agreements as of and for the periods shown:


(Dollars in thousands)	(Dollars in thousands)	Three Months Ended March 31, 2021			Year Ended December 31, 2020			(Dollars in thousands)	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
Balance at end of period	Balance at end of period	$	10,613		$	10,266		Balance at end of period	$	11,139		$	10,266
Average balance during the period	Average balance during the period	10,249			9,856			Average balance during the period	10,677			9,856
Maximum month-end balance	Maximum month-end balance	10,613			10,505			Maximum month-end balance	11,361			10,505
Weighted-average rate during the period	Weighted-average rate during the period	0.13		%	0.23		%	Weighted-average rate during the period	0.14		%	0.23		%
Weighted-average rate at end of period	Weighted-average rate at end of period	0.13		%	0.14		%	Weighted-average rate at end of period	0.12		%	0.14		%

Subordinated ~~Debt~~debt

The following table presents information related to subordinated debt as of and for the periods shown:


(Dollars in thousands)	(Dollars in thousands)	Three Months Ended March 31, 2021			Year Ended December 31, 2020			(Dollars in thousands)	Nine Months Ended September 30, 2021			Year Ended December 31, 2020
Balance at end of period	Balance at end of period	$	43,443		$	43,407		Balance at end of period	$	72,966		$	43,407
Average balance during the period	Average balance during the period	43,425			7,568			Average balance during the period	43,786			7,568
Maximum month-end balance	Maximum month-end balance	43,443			43,524			Maximum month-end balance	72,966			43,524
Weighted-average rate during the period	Weighted-average rate during the period	4.29		%	3.45		%	Weighted-average rate during the period	0.17		%	3.45		%
Weighted-average rate at end of period	Weighted-average rate at end of period	4.02		%	4.02		%	Weighted-average rate at end of period	4.03		%	4.02		%

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, ~~the Company~~MVB completed the private placement of $40 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. The weighted-average rate during the period of nine months ended September 30, 2021 exceeds the coupon rate of the 4.25% subordinated debt due to the impact of the amortization of the issuance costs to interest expense.

In March 2007, ~~the Company~~we completed the private placement of $4 million Floating Rate, Trust Preferred Securities through ~~its~~our subsidiary, MVB Financial Statutory Trust I ~~subsidiary~~ (the “Trust”). ~~The Company~~We established the Trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust. The proceeds from the sale of the Trust Preferred Securities will be loaned to ~~the Company~~us under subordinated Debentures (the “Debentures”) issued to the Trust pursuant to an Indenture. The Debentures are the only asset of the Trust. The Trust Preferred Securities have been issued to a pooling vehicle that will use the distributions on the Trust Preferred Securities to securitize note obligations. The securities issued by the Trust are includable for regulatory purposes as a component of ~~the Company’s~~our Tier 1 capital. The Trust Preferred Securities and the Debentures mature in 2037 and have been redeemable by ~~the Company~~us since 2012. Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of ~~1.6%~~1.62% over the three-month LIBOR Rate. ~~The~~Our obligations ~~of the Company~~ with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by ~~the Company~~us of the Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantees.

~~All borrowings and subordinated debt mature after 2025.~~

Note 8 – Pension and Supplemental Executive Retirement Plans

~~The Company participates in a trusteed pension~~Supplemental executive retirement plan known as the Allegheny Group Retirement Plan covering virtually all full-time employees. Benefits are based on years of service and the employee’s compensation. Accruals under the Plan were frozen as of May 31, 2014. Freezing the plan resulted in a re-measurement of the pension obligations and plan assets as of the freeze date. The pension obligation was re-measured using the discount rate based on the Citigroup Above Median Pension Discount Curve in effect on May 31, 2014 of 4.5%.

OnIn June ~~19,~~ 2017, ~~the Company and~~we, along with MVB Mortgage, approved a Supplemental Executive Retirement Plan (“SERP”), pursuant to which the Chief Executive Officer of MVB Mortgage 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 MVB Mortgage 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. The liability is calculated by discounting the anticipated future cash flows at 4.0%. The liability accrued for this obligation was $1.3 million as of September 30, 2021 and $1.2 million as of ~~both March 31, 2021 and~~ December 31, 2020. Service ~~cost was $0.01 million~~costs were not material for any periods covered by this report.

Pension plan

We participate in a trusteed pension plan known as the Allegheny Group Retirement Plan covering virtually all full-time employees. Benefits are based on years of service and ~~$0.1 million for each~~the employee’s compensation. Accruals under the plan were frozen as of May 31, 2014. Freezing the plan resulted in a remeasurement of the ~~three months ended March~~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, ~~2021 and 2020.~~2014 of 4.5%.

The following table presents information pertaining to the activity in ~~the Company’s~~our defined benefit plan, using the latest available actuarial valuations with a measurement date of ~~March 31,~~September 30, 2021 and 2020 for the periods indicated:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		(Dollars in thousands)	2021		2020		2021		2020
Service cost	Service cost	$	0	$	0	Service cost	$	—	$	—	$	—	$	—
Interest cost	Interest cost	78		91		Interest cost	78		91		234		273
Expected return on plan assets	Expected return on plan assets	(118)		(109)		Expected return on plan assets	(118)		(109)		(354)		(327)
Amortization of net actuarial loss	Amortization of net actuarial loss	127		105		Amortization of net actuarial loss	127		105		381		315
Amortization of prior service cost	Amortization of prior service cost	0		0		Amortization of prior service cost	—		—		—		—
Net periodic benefit cost	Net periodic benefit cost	$	87	$	87	Net periodic benefit cost	$	87	$	87	$	261	$	261
Contributions paid	Contributions paid	$	3,835	$	349	Contributions paid	$	—	$	119	$	3,835	$	587

Note 9 – Stock Offerings

In December 2020, ~~the Company~~we issued a notice of redemption to redeem all of ~~the Company’s~~our outstanding shares of Convertible Noncumulative Perpetual Preferred Stock, Series B, par value $1.00 per share, with a liquidation preference of $1,000 per share (the “Series B Preferred Stock”) and all of ~~the Company’s~~our outstanding shares of Convertible Noncumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, with a liquidation preference of $1,000 per share (the “Series C Preferred Stock, together with the Series B Preferred Stock, referred to herein as the “Preferred Stock”), at a redemption price per share equal to $10,000, plus declared and unpaid dividends of $46.03 per share of Series B Preferred Stock, and $49.86 per share of Series C Preferred Stock, for the period from and including December 31, 2020, to but excluding January 28, 2021, the date of redemption (the “Preferred Stock Redemption”). The Preferred Stock Redemption is in accordance with the terms of ~~the Company’s~~our Articles of Incorporation, as amended. All outstanding shares of ~~the Company's~~our preferred stock were redeemed in January 2021.

In April 2021, the Bank entered into a Stock Purchase Agreement with Trabian, a leading software development firm servicing financial institutions. Pursuant to the agreement, a portion of the Bank's purchase consideration for Trabian included 17,597 unregistered shares of MVB common stock. For more information regarding the Trabian acquisition, see Note 15 – Acquisitions and Divestitures.

In August 2021, the Bank entered into a Stock Purchase Agreement with Interchecks, a leading payment disbursement platform. Pursuant to the agreement, a portion of the Bank's purchase consideration for Interchecks included 107,928 unregistered shares of MVB common stock. For more information regarding the Interchecks investment, see Note 5 – Equity Method Investments.

In September 2021, the Bank issued 24,408 shares of unregistered MVB common stock valued at $40.97 per share, totaling $1.0 million, pursuant to the Stock Purchase Agreement dated September 13, 2019 between the Bank and Chartwell.

Note 10 – Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of ~~the Company’s~~our financial instruments ~~are summarized as follows~~ as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		(Dollars in thousands)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)
March 31, 2021
September 30, 2021												September 30, 2021
Financial Assets:	Financial Assets:											Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	339,616	$	339,616	$	339,616	$	0	$	0	Cash and cash equivalents	$	390,081	$	390,081	$	390,081	$	—	$	—
Certificates of deposit with banks	Certificates of deposit with banks	11,803		11,986		0		11,986		0		Certificates of deposit with banks	9,582		9,657		—		9,657		—
Securities available-for-sale	Securities available-for-sale	423,122		423,122		0		382,850		40,272		Securities available-for-sale	439,023		439,023		—		397,609		41,414
Equity securities	Equity securities	28,200		28,200		543		0		27,657		Equity securities	29,809		29,809		729		—		29,080

Loans receivable, net	Loans receivable, net	1,668,171		1,675,631		0		0		1,675,631		Loans receivable, net	1,738,999		1,748,759		—		—		1,748,759
Mortgage servicing rights		2,886		2,886		0		0		2,886
Servicing Assets												Servicing Assets	2,667		2,667		—		—		2,667
Interest rate swap	Interest rate swap	8,367		8,367		0		8,367		0		Interest rate swap	8,444		8,444		—		8,444		—
Fair value hedge	Fair value hedge	1,750		1,750		0		1,750		0		Fair value hedge	1,699		1,699		—		1,699		—
Accrued interest receivable	Accrued interest receivable	8,513		8,513		0		2,819		5,694		Accrued interest receivable	8,513		8,513		—		2,621		5,892
Bank-owned life insurance	Bank-owned life insurance	41,512		41,512		0		41,512		0		Bank-owned life insurance	42,011		42,011		—		42,011		—

Financial Liabilities:	Financial Liabilities:											Financial Liabilities:
Deposits	Deposits	$	2,216,553	$	2,196,951	$	0	$	2,196,951	$	0	Deposits	$	2,398,940	$	2,375,650	$	—	$	2,375,650	$	—
Repurchase agreements	Repurchase agreements	10,613		10,613		0		10,613		0		Repurchase agreements	11,139		11,139		—		11,139		—
FHLB and other borrowings	FHLB and other borrowings	102,185		102,185		0		102,185		0		FHLB and other borrowings	—		—		—		—		—
Interest rate swap	Interest rate swap	8,367		8,367		0		8,367		0		Interest rate swap	8,444		8,444		—		8,444		—
Fair value hedge	Fair value hedge	1,427		1,427		0		1,427		0		Fair value hedge	1,129		1,129		—		1,129		—
Accrued interest payable	Accrued interest payable	869		869		0		869		0		Accrued interest payable	802		802		—		802		—
Subordinated debt	Subordinated debt	43,443		45,798		0		45,798		0		Subordinated debt	72,966		73,825		—		73,825		—

December 31, 2020	December 31, 2020											December 31, 2020
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	263,893	$	263,893	$	263,893	$	0	$	0	Cash and cash equivalents	$	263,893	$	263,893	$	263,893	$	—	$	—
Certificates of deposits with banks	Certificates of deposits with banks	11,803		11,986		0		11,986		0		Certificates of deposits with banks	11,803		11,986		—		11,986		—
Securities available-for-sale	Securities available-for-sale	410,624		410,624		0		366,945		43,679		Securities available-for-sale	410,624		410,624		—		366,945		43,679
Equity securities	Equity securities	27,585		27,585		472		0		27,113		Equity securities	27,585		27,585		472		—		27,113
Loans held-for-sale	Loans held-for-sale	1,062		1,062		0		1,062		0		Loans held-for-sale	1,062		1,062		—		1,062		—
Loans receivable, net	Loans receivable, net	1,427,900		1,434,275		0		0		1,434,275		Loans receivable, net	1,427,900		1,434,275		—		—		1,434,275
Mortgage servicing rights	Mortgage servicing rights	2,942		2,942		0		0		2,942		Mortgage servicing rights	2,942		2,942		—		—		2,942
Interest rate swap	Interest rate swap	13,822		13,822		0		13,822		0		Interest rate swap	13,822		13,822		—		13,822		—
Fair value hedge	Fair value hedge	2,215		2,215		0		2,215		0		Fair value hedge	2,215		2,215		—		2,215		0
Accrued interest receivable	Accrued interest receivable	7,793		7,793		0		2,770		5,023		Accrued interest receivable	7,793		7,793		—		2,770		5,023
Bank-owned life insurance	Bank-owned life insurance	41,262		41,262		0		41,262		0		Bank-owned life insurance	41,262		41,262		—		41,262		—

Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	1,982,389	$	1,964,860	$	0	$	1,964,860	$	0	Deposits	$	1,982,389	$	1,964,860	$	—	$	1,964,860	$	—
Repurchase agreements	Repurchase agreements	10,266		10,266		0		10,266		0		Repurchase agreements	10,266		10,266		—		10,266		—
Interest rate swap	Interest rate swap	13,822		13,822		0		13,822		0		Interest rate swap	13,822		13,822		—		13,822		—
Fair value hedge	Fair value hedge	2,141		2,141		0		2,141		0		Fair value hedge	2,141		2,141		—		2,141		—
Accrued interest payable	Accrued interest payable	572		572		0		572		0		Accrued interest payable	572		572		—		572		—
Subordinated debt	Subordinated debt	43,407		45,536		0		45,536		0		Subordinated debt	43,407		45,536		—		45,536		—

Note 11 – 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 ~~the Company’s~~of our entire holdings of a particular financial instrument. Because no market exists for a significant portion of ~~the Company’s~~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 Statements included in Item 8, Financial Statements and Supplementary Data, of the ~~Company’s~~ 2020 ~~Annual Report on~~ 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 Company~~We classified investments in government securities as Level II instruments and valued them using the market approach. 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, United States Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level II securities include mortgage-backed securities issued by ~~government sponsored~~government-sponsored entities and private label entities, municipal bonds and corporate debt securities. There have been no changes in valuation techniques for the three and nine months ended ~~March 31,~~September 30, 2021. 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. ~~The Company~~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 both a recurring and nonrecurring 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 nine months ended ~~March 31,~~September 30, 2021. Valuation techniques are consistent with techniques used in prior periods.

Loans held-for-sale – The fair value of mortgage 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.

Interest rate swap – Interest rate swaps are recorded at fair value based on ~~third party~~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.

Fair value hedge – Treated like an interest rate swap, fair value hedges are recorded at fair value based on ~~third party~~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.

3035

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 indicated by level within the fair value ~~hierarchy.~~hierarchy:


		March 31, 2021									September 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Level I		Level II		Level III		Total		(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:	Assets:									Assets:
United States government agency securities	United States government agency securities	$	0	$	48,104	$	0	$	48,104	United States government agency securities	$	—	$	41,971	$	—	$	41,971
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	0		89,207		0		89,207		United States sponsored mortgage-backed securities	—		85,271		—		85,271
United States treasury securities	United States treasury securities	56,970		0		0		56,970		United States treasury securities	82,422		—		—		82,422
Municipal securities	Municipal securities	0		169,462		40,272		209,734		Municipal securities	—		166,009		41,414		207,423

Other securities	Other securities	0		11,607		0		11,607		Other securities	—		14,436		—		14,436
Equity securities	Equity securities	543		0		0		543		Equity securities	729		—		—		729

Interest rate swap	Interest rate swap	0		8,367		0		8,367		Interest rate swap	—		8,444		—		8,444
Fair value hedge	Fair value hedge	0		1,750		0		1,750		Fair value hedge	—		1,699		—		1,699
Liabilities:	Liabilities:									Liabilities:
Interest rate swap	Interest rate swap	0		8,367		0		8,367		Interest rate swap	—		8,444		—		8,444
Fair value hedge	Fair value hedge	0		1,427		0		1,427		Fair value hedge	—		1,129		—		1,129


	December 31, 2020
(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
United States government agency securities	$	—	$	56,992	$	—	$	56,992
United States sponsored mortgage-backed securities	—		95,769		—		95,769
Municipal securities	—		188,208		43,679		231,887

Other securities	—		18,476		—		18,476
Equity securities	472		—		—		472
Loans held-for-sale	—		1,062		—		1,062

Interest rate swap	—		13,822		—		13,822
Fair value hedge	—		2,215		—		2,215

Liabilities:
Interest rate swap	—		13,822		—		13,822
Fair value hedge	—		2,141		—		2,141

December 31, 2020
(Dollars in thousands) Level I Level II Level III Total
Assets:
United States government agency securities $ 0 $ 56,992 $ 0 $ 56,992
United States sponsored mortgage-backed securities 0 95,769 0 95,769
Municipal securities 0 188,208 43,679 231,887
Other securities 0 18,476 0 18,476
Equity securities 472 0 0 472
Loans held-for-sale 0 1,062 0 1,062
Interest rate swap 0 13,822 0 13,822
Fair value hedge 0 2,215 0 2,215
Liabilities:
Interest rate swap 0 13,822 0 13,822
Fair value hedge 0 2,141 0 2,141

The following table represents recurring ~~level~~Level III assets as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	Interest Rate Lock Commitments		Municipal Securities		Total		(Dollars in thousands)	Interest Rate Lock Commitments		Municipal Securities		Total

Balance at June 30, 2021								Balance at June 30, 2021	$	—	$	39,770	$	39,770
Realized and unrealized gains included in earnings								Realized and unrealized gains included in earnings	—		5		5
Purchase of securities								Purchase of securities	—		1,757		1,757
Maturities/calls								Maturities/calls	—		(74)		(74)
Unrealized gain included in other comprehensive income (loss)								Unrealized gain included in other comprehensive income (loss)	—		3,300		3,300
Unrealized loss included in other comprehensive income (loss)								Unrealized loss included in other comprehensive income (loss)	—		(3,344)		(3,344)
Balance at September 30, 2021								Balance at September 30, 2021	$	—	$	41,414	$	41,414

Balance at December 31, 2020	Balance at December 31, 2020	$	0	$	43,679	$	43,679	Balance at December 31, 2020	$	—	$	43,679	$	43,679
Realized and unrealized gains included in earnings	Realized and unrealized gains included in earnings	0		19		19		Realized and unrealized gains included in earnings	—		25		25
Purchase of securities	Purchase of securities	0		1,191		1,191		Purchase of securities	—		3,575		3,575
Maturities/calls	Maturities/calls	0		(3,933)		(3,933)		Maturities/calls	—		(5,248)		(5,248)
Unrealized gain included in other comprehensive income (loss)	Unrealized gain included in other comprehensive income (loss)	0		1,127		1,127		Unrealized gain included in other comprehensive income (loss)	—		7,720		7,720
Unrealized loss included in other comprehensive income (loss)	Unrealized loss included in other comprehensive income (loss)	$	0	$	(1,811)	$	(1,811)	Unrealized loss included in other comprehensive income (loss)	—		(8,337)		(8,337)
Balance at March 31, 2021		$	0	$	40,272	$	40,272
Balance at September 30, 2021								Balance at September 30, 2021	$	—	$	41,414	$	41,414

Balance at June 30, 2020								Balance at June 30, 2020	$	7,338	$	40,457	$	47,795
Realized and unrealized losses included in earnings								Realized and unrealized losses included in earnings	(7,338)		—		(7,338)
Purchase of securities								Purchase of securities	—		368		368
Maturities/calls								Maturities/calls	—		(61)		(61)
Unrealized gain included in other comprehensive income (loss)								Unrealized gain included in other comprehensive income (loss)	—		1,810		1,810
Unrealized loss included in other comprehensive income (loss)								Unrealized loss included in other comprehensive income (loss)	—		(466)		(466)
Balance at September 30, 2020								Balance at September 30, 2020	$	—	$	42,108	$	42,108

Balance at December 31, 2019	Balance at December 31, 2019	$	1,660	$	37,259	$	38,919	Balance at December 31, 2019	$	1,660	$	37,259	$	38,919
Realized and unrealized losses included in earnings		4,131		0		4,131
Realized and unrealized gains included in earnings								Realized and unrealized gains included in earnings	(1,660)		3		(1,657)
Purchase of securities	Purchase of securities	0		522		522		Purchase of securities	—		21,147		21,147
Maturities/calls								Maturities/calls	—		(15,574)		(15,574)
Unrealized gain included in other comprehensive income (loss)	Unrealized gain included in other comprehensive income (loss)	0		(1,155)		(1,155)		Unrealized gain included in other comprehensive income (loss)	—		5,872		5,872

Balance at March 31, 2020		$	5,791	$	36,626	$	42,417
Unrealized loss included in other comprehensive income (loss)								Unrealized loss included in other comprehensive income (loss)	—		(6,599)		(6,599)
Balance at September 30, 2020								Balance at September 30, 2020	$	—	$	42,108	$	42,108

3137

Assets Measured on a Nonrecurring Basis

~~The Company~~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 nonrecurring 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 2021 and 2020 include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for possible loan losses and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other noninterest expense.

Impaired loans – Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of impaired real ~~estate related~~estate-related loans, ~~the Company obtains~~we obtain a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

Other real estate owned – Other real estate owned, which is obtained through the Bank’s foreclosure process, is valued utilizing the appraised collateral value. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. At the time the foreclosure is completed, ~~the Company obtains~~we obtain a current external appraisal.

Other debt securities – Certain debt securities are recorded at fair value on a nonrecurring basis. These other debt securities, which include preferred member interest in an equity method investment, 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.

The following table presents the fair value of these assets as of the periods indicated:


		March 31, 2021									September 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Level I		Level II		Level III		Total		(Dollars in thousands)	Level I		Level II		Level III		Total
Impaired loans	Impaired loans	$	0	$	0	$	12,103	$	12,103	Impaired loans	$	—	$	—	$	15,114	$	15,114
Other real estate owned	Other real estate owned	0		0		5,183		5,183		Other real estate owned	—		—		3,442		3,442


		December 31, 2020									December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Level I		Level II		Level III		Total		(Dollars in thousands)	Level I		Level II		Level III		Total
Impaired loans	Impaired loans	$	0	$	0	$	14,098	$	14,098	Impaired loans	$	—	$	—	$	14,098	$	14,098
Other real estate owned	Other real estate owned	0		0		5,730		5,730		Other real estate owned	—		—		5,730		5,730
Other debt securities		0		0		7,500		7,500
Equity securities		0		0		27,113		27,113

There were no changes to the fair value of other debt securities or equity securities measured on a ~~non-recurring~~nonrecurring basis as of ~~March 31,~~September 30, 2021.

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 indicated:

Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range
March 31, 2021
Nonrecurring measurements:
Impaired loans $ 12,103
Appraisal of collateral 1
Appraisal adjustments 2
20% - 62%

Liquidation expense 2
5% - 10%
Other real estate owned $ 5,183
Appraisal of collateral 1
Appraisal adjustments 2
20% - 30%

Liquidation expense 2
5% - 10%
Other debt securities $ 7,500 Net asset value Cost minus impairment 0%
Equity securities $ 27,657 Net asset value Cost minus impairment 0%
Recurring measurements:
Municipal securities 5
$ 40,272
Appraisal of bond 3
Bond appraisal adjustment 4
5% - 15%
December 31, 2020
Nonrecurring measurements:
Impaired loans $ 14,098
Appraisal of collateral 1
Appraisal adjustments 2
20% - 62%
Liquidation expense 2
5% - 10%
Other real estate owned $ 5,730
Appraisal of collateral 1
Appraisal adjustments 2
20% - 30%
Liquidation expense 2
5% - 10%
Other debt securities $ 7,500 Net asset value Cost minus impairment 0%
Equity securities $ 27,113 Net asset value Cost minus impairment 0%
Recurring measurements:
Municipal securities 5
$ 43,679
Appraisal of bond 3
Bond appraisal adjustment 4
5% - 15%

Quantitative Information about Level III Fair Value Measurements

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

September 30, 2021

Nonrecurring measurements:

Impaired loans

15,114

Appraisal of collateral 1

Appraisal adjustments 2

20% - 62%

Liquidation expense 2

5% - 10%

Other real estate owned

3,442

Appraisal of collateral 1

Appraisal adjustments 2

20% - 30%

Liquidation expense 2

5% - 10%

Recurring measurements:

Municipal securities 5

41,414

Appraisal of bond 3

Bond appraisal adjustment 4

5% - 15%

December 31, 2020

Nonrecurring measurements:

Impaired loans

14,098

Appraisal of collateral 1

Appraisal adjustments 2

20% - 62%

Liquidation expense 2

5% - 10%

Other real estate owned

5,730

Appraisal of collateral 1

Appraisal adjustments 2

20% - 30%

Liquidation expense 2

5% - 10%

Recurring measurements:

Municipal securities 5

43,679

Appraisal of bond 3

Bond appraisal adjustment 4

5% - 15%

1 Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various ~~level~~Level III inputs ~~which~~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.

5 Municipal securities classified as Level III instruments are comprised of TIF bonds related to certain local municipal securities.

Note 12 – Earnings per Share

~~The Company determines~~We determine basic earnings per share (“EPS”) by dividing net income ~~less preferred stock dividends~~available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is determined by dividing net income ~~less dividends on convertible preferred stock plus interest on convertible subordinated debt~~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 ~~options under the Company’s 2003 and 2013 Stock Incentive Plans and the conversion of preferred stock and subordinated debt, if dilutive.~~plan.

3339

The following table presents ~~the Company's~~our calculation of EPS for the periods indicated:


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands except shares and per share data)	(Dollars in thousands except shares and per share data)		2021		2020			(Dollars in thousands except shares and per share data)	2021		2020		2021		2020
Numerator for basic earnings per share:	Numerator for basic earnings per share:							Numerator for basic earnings per share:
Net income	Net income		$	8,085	$	1,048		Net income	$	11,828	$	6,491	$	29,160	$	25,573
Less: Dividends on preferred stock	Less: Dividends on preferred stock		35		114			Less: Dividends on preferred stock	—		116		35		345

Net income available to common shareholders - basic	Net income available to common shareholders - basic		$	8,050	$	934		Net income available to common shareholders - basic	$	11,828	$	6,375	$	29,125	$	25,228

Numerator for diluted earnings per share:	Numerator for diluted earnings per share:							Numerator for diluted earnings per share:

Net income available to common shareholders - diluted	Net income available to common shareholders - diluted		$	8,050	$	934		Net income available to common shareholders - diluted	$	11,828	$	6,375	$	29,125	$	25,228

Denominator:	Denominator:							Denominator:
Total weighted-average shares outstanding	Total weighted-average shares outstanding		11,530,279		11,942,767			Total weighted-average shares outstanding	11,880,348		11,948,989		11,684,570		11,948,857

Effect of dilutive stock options and restricted stock units	Effect of dilutive stock options and restricted stock units		756,452		355,325			Effect of dilutive stock options and restricted stock units	943,961		167,429		881,239		236,280
Total diluted weighted-average shares outstanding	Total diluted weighted-average shares outstanding		12,286,731		12,298,092			Total diluted weighted-average shares outstanding	12,824,309		12,116,418		12,565,809		12,185,137

Earnings per share - basic	Earnings per share - basic		$	0.70	$	0.08		Earnings per share - basic	$	1.00	$	0.53	$	2.49	$	2.11

Earnings per share - diluted	Earnings per share - diluted		$	0.66	$	0.08		Earnings per share - diluted	$	0.92	$	0.53	$	2.32	$	2.07

Stock options not included in the computation of diluted EPS because the effect would be antidilutive								Stock options not included in the computation of diluted EPS because the effect would be antidilutive	179,694		849,589		185,944		815,089

For the three months ended March 31, 2021 and 2020, approximately 12 thousand and 366 thousand, respectively, options to purchase shares of common stock were not included in the computation of diluted EPS because the effect would be antidilutive.

3440

Note 13 – Comprehensive Income

The following tables present the reclassified components of accumulated other comprehensive income (“AOCI”) as of and for the periods indicated:

Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Details about AOCI components Amount reclassified from AOCI Amount reclassified from AOCI Affected income statement line item
Available-for-sale securities
Unrealized holding gains $ 1,143 $ 276 Gain (loss) on sale of available-for-sale securities
1,143 276 Total before tax
(268) (75) Income tax expense
875 201 Net of tax
Defined benefit pension plan items
Amortization of net actuarial loss (127) (105) Salaries and benefits
(127) (105) Total before tax
30 28 Income tax expense
(97) (77) Net of tax
Investment hedge
Carrying value adjustment (264) 1,793 Interest on investment securities
(264) 1,793 Total before tax
62 (484) Income tax expense
(202) 1,309 Net of tax
Total reclassifications $ 576 $ 1,433


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2021		2020		2021		2020
Details about AOCI components	Amount reclassified from AOCI		Amount reclassified from AOCI		Amount reclassified from AOCI		Amount reclassified from AOCI		Affected income statement line item
Available-for-sale securities
Unrealized holding gains	$	529	$	35	$	3,380	$	865	Gain on sale of available-for-sale securities

	(124)		(9)		(793)		(234)		Income tax effect
	405		26		2,587		631		Net of tax
Defined benefit pension plan items
Amortization of net actuarial loss	(127)		(105)		(381)		(315)		Salaries and employee benefits

	30		28		89		85		Income tax effect
	(97)		(77)		(292)		(230)		Net of tax
Investment hedge
Carrying value adjustment	(14)		(95)		(637)		738		Interest on investment securities

	3		26		149		(199)		Income tax effect
	(11)		(69)		(488)		539		Net of tax

Total reclassifications	$	297	$	(120)	$	1,807	$	940

(Dollars in thousands) Unrealized gains (losses) on available for-sale securities Defined benefit pension plan items Investment hedge Total
Balance at January 1, 2021 $ 7,586 $ (5,047) $ (313) $ 2,226
     Other comprehensive income (loss) before reclassification (4,848) 1,306 0 (3,542)
     Amounts reclassified from AOCI (875) 97 202 (576)
Net current period OCI (5,723) 1,403 202 (4,118)
Balance at March 31, 2021 $ 1,863 $ (3,644) $ (111) $ (1,892)
Balance at January 1, 2020 $ 2,942 $ (4,295) $ 32 $ (1,321)
     Other comprehensive income (loss) before reclassification 1,032 (516) 0 516
     Amounts reclassified from AOCI (201) 77 (1,309) (1,433)
Net current period OCI 831 (439) (1,309) (917)
Balance at March 31, 2020 $ 3,773 $ (4,734) $ (1,277) $ (2,238)


(Dollars in thousands)	Unrealized gains (losses) on available for-sale securities		Defined benefit pension plan items		Investment hedge		Total






Balance at June 30, 2021	$	3,136	$	(3,301)	$	164	$	(1)
Other comprehensive income (loss) before reclassification	183		(700)		—		(517)
Amounts reclassified from AOCI	(405)		97		11		(297)
Net current period OCI	(222)		(603)		11		(814)
Balance at September 30, 2021	$	2,914	$	(3,904)	$	175	$	(815)

Balance at December 31, 2020	7,586		(5,047)		(313)		2,226
Other comprehensive income (loss) before reclassification	(2,085)		851		—		(1,234)
Amounts reclassified from AOCI	(2,587)		292		488		(1,807)
Net current period OCI	(4,672)		1,143		488		(3,041)
Balance at September 30, 2021	$	2,914	$	(3,904)	$	175	$	(815)

Balance at June 30, 2020	$	3,771	$	(5,388)	$	(576)	$	(2,193)
Other comprehensive income (loss) before reclassification	895		(74)		—		821
Amounts reclassified from AOCI	(26)		77		69		120
Net current period OCI	869		3		69		941
Balance at September 30, 2020	$	4,640	$	(5,385)	$	(507)	$	(1,252)

Balance at December 31, 2019	2,942		(4,295)		32		(1,321)
Other comprehensive income (loss) before reclassification	2,329		(1,320)		—		1,009
Amounts reclassified from AOCI	(631)		230		(539)		(940)
Net current period OCI	1,698		(1,090)		(539)		69
Balance at September 30, 2020	$	4,640	$	(5,385)	$	(507)	$	(1,252)

Note 14 – Segment Reporting

~~The Company has~~We have identified 3 reportable segments: CoRe banking; mortgage banking; and financial holding company. Revenue from CoRe banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. ~~The~~Our Fintech division, MVB Edge Ventures, MVB CDC, Chartwell, Trabian and Paladin Fraud ~~reside~~are included in the CoRe banking segment. Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage loan origination process. Prior to July 1, 2020, the mortgage banking services were conducted by ~~PMG.~~a subsidiary of the Bank, Potomac Mortgage Group ("PMG"). In July 2020, ~~the Company~~we announced the completion of PMG’s combination with Intercoastal Mortgage Company to form ICM. ~~The Company has~~We have recognized ~~its~~our ownership of ICM as an equity method ~~investment, initially recorded at fair value.~~investment. Income related to this equity method investment is included in the Mortgage Banking segment. Revenue from financial 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 indicated:

Three Months Ended March 31, 2021 CoRe Banking Mortgage Banking Financial Holding Company Intercompany Eliminations Consolidated
(Dollars in thousands)
Interest income $ 18,959 $ 104 $ 1 $ (1) $ 19,063
Interest expense 1,092 0 466 0 1,558
Net interest income 17,867 104 (465) (1) 17,505
Provision for loan losses 620 (2) 0 0 618
Net interest income after provision for loan losses 17,247 106 (465) (1) 16,887
Total noninterest income 6,437 6,407 1,581 (1,967) 12,458
Noninterest Expenses:
Salaries and employee benefits 8,842 0 3,069 0 11,911
Other expense 8,029 63 1,083 (1,968) 7,207
Total noninterest expenses 16,871 63 4,152 (1,968) 19,118
Income (loss) before income taxes 6,813 6,450 (3,036) 0 10,227
Income tax expense (benefit) 1,149 1,564 (544) 0 2,169
Net income before noncontrolling interest 5,664 4,886 (2,492) 0 8,058
Net loss attributable to noncontrolling interest 27 0 0 0 27
Net income attributable to parent $ 5,691 $ 4,886 $ (2,492) $ 0 $ 8,085
Preferred stock dividends — 0 35 0 35
Net income (loss) available to common shareholders $ 5,691 $ 4,886 $ (2,527) $ 0 $ 8,050
Capital expenditures for the three months ended March 31, 2021 $ 1,936 $ 0 $ 0 $ 0 $ 1,936
Total assets as of March 31, 2021 2,669,092 57,205 280,152 (360,360) 2,646,089
Total assets as of December 31, 2020 2,343,556 58,140 284,943 (355,163) 2,331,476
Goodwill as of March 31, 2021 2,350 0 0 0 2,350
Goodwill as of December 31, 2020 2,350 0 0 0 2,350


Three Months Ended September 30, 2021	CoRe Banking		Mortgage Banking		Financial Holding Company		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	20,383	$	105	$	1	$	(5)	$	20,484
Interest expense	912		—		481		(5)		1,388
Net interest income	19,471		105		(480)		—		19,096
Provision for loan losses	379		1		—		—		380
Net interest income (loss) after provision for loan losses	19,092		104		(480)		—		18,716


Total noninterest income	20,211		3,546		2,002		(3,808)		21,951

Noninterest Expenses:
Salaries and employee benefits	13,097		47		3,384		—		16,528
Other expense	11,654		(198)		1,653		(3,808)		9,301
Total noninterest expenses	24,751		(151)		5,037		(3,808)		25,829

Income (loss) before income taxes	14,552		3,801		(3,515)		—		14,838
Income tax expense (benefit)	2,973		922		(731)		—		3,164




Net income (loss) before noncontrolling interest	11,579		2,879		(2,784)		—		11,674
Net loss attributable to noncontrolling interest	154		—		—		—		154
Net income (loss) attributable to parent	$	11,733	$	2,879	$	(2,784)	$	—	$	11,828
Preferred stock dividends	—		—		—		—		—
Net income (loss) available to common shareholders	$	11,733	$	2,879	$	(2,784)	$	—	$	11,828

Capital expenditures for the three months ended September 30, 2021	$	1,975	$	—	$	—	$	—	$	1,975
Total assets as of September 30, 2021	2,827,019		53,261		342,677		(434,133)		2,788,824
Total assets as of December 31, 2020	2,343,556		58,140		284,943		(355,163)		2,331,476
Goodwill as of September 30, 2021	3,988		—		—		—		3,988
Goodwill as of December 31, 2020	2,350		—		—		—		2,350

3643


Three Months Ended March 31, 2020		CoRe Banking			Mortgage Banking			Financial Holding Company			Intercompany Eliminations					Consolidated
Three Months Ended September 30, 2020										Three Months Ended September 30, 2020				CoRe Banking						Mortgage Banking				Financial Holding Company				Intercompany Eliminations					Consolidated
(Dollars in thousands)	(Dollars in thousands)			CoRe Banking				Mortgage Banking					Financial Holding Company					Intercompany Eliminations									Consolidated				(Dollars in thousands)
Interest income	Interest income									Interest income					$	18,737				$	78			$	—						$	(188)					$	18,627
Interest expense	Interest expense	3,838					1,387			35				(732)					4,528			Interest expense			2,553				232					20				(188)			2,617
Net interest income	Net interest income	14,936			1,031			(34)			238					16,171		Net interest income				16,184				(154)				(20)					—				16,010
Provision for loan losses	Provision for loan losses	1,132			6			0			0					1,138		Provision for loan losses				8,631				—				—					—				8,631
Net interest income after provision for loan losses		13,804			1,025			(34)			238					15,033
Net interest income (loss) after provision for loan losses																		Net interest income (loss) after provision for loan losses				7,553				(154)				(20)					—				7,379

Noninterest income:
Mortgage fee income		110			11,347			0			(238)					11,219
Other income		3,346			(3,562)			1,504			(1,657)					(369)

Total noninterest income	Total noninterest income	3,456			7,785			1,504			(1,895)					10,850		Total noninterest income				3,106				16,793				1,481					(1,982)				19,398

Noninterest Expense:	Noninterest Expense:																	Noninterest Expense:
Salaries and employee benefits	Salaries and employee benefits	5,866			7,884			2,432			0					16,182		Salaries and employee benefits				7,526				82				2,911					—				10,519
Other expense	Other expense	6,659			2,397			1,075			(1,657)					8,474		Other expense				8,389				68				1,271					(1,982)				7,746
Total noninterest expenses	Total noninterest expenses	12,525			10,281			3,507			(1,657)					24,656		Total noninterest expenses				15,915				150				4,182					(1,982)				18,265

Income (loss) before income taxes	Income (loss) before income taxes	4,735			(1,471)			(2,037)			0					1,227		Income (loss) before income taxes				(5,256)				16,489				(2,721)					—				8,512
Income tax expense (benefit)	Income tax expense (benefit)	1,012			(349)			(484)			0					179		Income tax expense (benefit)				(1,556)				4,245				(668)					—				2,021

Net income before noncontrolling interest		3,723			(1,122)			(1,553)			0					1,048
Net income (loss)																		Net income (loss)				$	(3,700)			$	12,244			$	(2,053)				$	—			$	6,491
Preferred stock dividends	Preferred stock dividends	0			0			114			0					114		Preferred stock dividends				—				—				116					—				116
Net income (loss) available to common shareholders	Net income (loss) available to common shareholders	$	3,723		$	(1,122)		$	(1,667)		$	0				$	934	Net income (loss) available to common shareholders				$	(3,700)			$	12,244			$	(2,169)				$	—			$	6,375

Capital expenditures for the three months ended March 31, 2020		$	1,295		$	69		$	20		$	0				$	1,384
Capital expenditures for the three months ended September 30, 2020																		Capital expenditures for the three months ended September 30, 2020				$	1,652			$	—			$	—				$	—			$	1,652


Nine Months Ended September 30, 2021	CoRe Banking		Mortgage Banking		Financial Holding Company		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	60,078	$	307	$	2	$	(7)	$	60,380
Interest expense	3,294		—		1,437		(7)		4,724
Net interest income	56,784		307		(1,435)		—		55,656
Release of allowance for loan losses	(541)		(1)		—		—		(542)
Net interest income (loss) after release of allowance for loan losses	57,325		308		(1,435)		—		56,198


Total noninterest income	36,634		14,499		5,892		(8,972)		48,053

Noninterest Expenses:
Salaries and employee benefits	32,323		47		9,730		—		42,100
Other expense	31,261		(112)		4,073		(8,972)		26,250
Total noninterest expenses	63,584		(65)		13,803		(8,972)		68,350

Income (loss) before income taxes	30,375		14,872		(9,346)		—		35,901
Income tax expense (benefit)	5,290		3,606		(1,890)		—		7,006




Net income (loss) before noncontrolling interest	25,085		11,266		(7,456)		—		28,895
Net loss attributable to noncontrolling interest	265		—		—		—		265
Net income (loss) attributable to parent	$	25,350	$	11,266	$	(7,456)	$	—	$	29,160
Preferred stock dividends	—		—		35		—		35
Net income (loss) available to common shareholders	$	25,350	$	11,266	$	(7,491)	$	—	$	29,125

Capital expenditures for the nine months ended September 30, 2021	$	4,127	$	—	$	—	$	—	$	4,127


Nine Months Ended September 30, 2020	CoRe Banking		Mortgage Banking		Financial Holding Company		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	56,693	$	6,034	$	2	$	(1,629)	$	61,100
Interest expense	9,418		3,136		78		(2,171)		10,461
Net interest income	47,275		2,898		(76)		542		50,639
Provision for loan losses	16,361		4		—		—		16,365
Net interest income (loss) after provision for loan losses	30,914		2,894		(76)		542		34,274




Total noninterest income	24,394		53,140		4,664		(6,437)		75,761

Noninterest Expenses:
Salaries and employee benefits	19,562		21,550		8,248		—		49,360
Other expense	24,172		4,780		3,837		(5,895)		26,894
Total noninterest expenses	43,734		26,330		12,085		(5,895)		76,254

Income (loss) before income taxes	11,574		29,704		(7,497)		—		33,781
Income tax expense (benefit)	2,336		7,696		(1,824)		—		8,208




Net income (loss)	$	9,238	$	22,008	$	(5,673)	$	—	$	25,573
Preferred stock dividends	—		—		345		—		345
Net income (loss) available to common shareholders	$	9,238	$	22,008	$	(6,018)	$	—	$	25,228

Capital Expenditures for the nine-month period ended September 30, 2020	$	4,092	$	99	$	20	$	—	$	4,211

Note 15 – ~~Acquisition~~Acquisitions and Divestitures

Flexia Payments, LLC ~~Acquisition~~

In February 2021, the Bank entered into an agreement to acquire an 80% interest in Flexia. The Bank invested approximately $2.5 million for the 80% interest. At the time of acquisition, Flexia had 0no assets or liabilities. Soon after the Bank's investment, Flexia purchased a license for technology ~~which~~that allows users to access a reloadable account that combines a debit card account and casino gaming accounts into one card ~~allowing~~and to utilize them for non-cash transactions at participating casinos, for approximately $1 million for exclusive use in the United States and Canada. On the acquisition date, $0.5 million was recorded on the consolidated balance sheet for the 20% noncontrolling interest.

~~Note 16 – Subsequent Event~~Trabian Technology, Inc.

In April 2021, the Bank entered into a Stock Purchase Agreement with Trabian, ~~Technology, Inc. (“Trabian”),~~ a leading software development firm servicing financial institutions. ~~Per~~Pursuant to the agreement, the Bank ~~acquired a majority interest in Trabian for 17,597~~invested approximately $1.6 million, including unregistered shares of MVB common stock, for the 80% interest. At the time of acquisition, Trabian had assets totaling $0.8 million and ~~an undisclosed amount~~liabilities totaling $0.7 million. As a result of ~~cash.~~the transaction, the Bank recorded goodwill of $1.6 million and intangible assets related to Trabian's customer relationships and trade name totaling $0.6 million. On the acquisition date, $0.4 million was recorded on the consolidated balance sheet for the 20% noncontrolling interest.

Sale of Southern Market, WV Banking Centers

In ~~April~~July 2021, the Bank ~~entered into a~~completed the sale of certain assets and liabilities of 4 banking centers in West Virginia. Pursuant to the terms of the Purchase and Assumption Agreement ~~with~~between the Bank and Summit Community Bank, Inc. (“Summit”) ~~pursuant to which~~, Summit ~~will purchase certain assets and assume certain liabilities of 4 branch locations in West Virginia. Per the agreement, Summit will assume~~assumed approximately ~~$193~~$163.3 million in ~~deposits~~deposit liabilities, including accrued interest, and ~~will acquire~~acquired approximately ~~$57~~$57.8 million in loans, as well as accrued interest on those loans, cash, real property, personal property and other fixed ~~assets.~~assets associated with the banking centers, as of the July 10, 2021 closing date. The ~~purchase price will be calculated at closing and includes~~Bank recognized a ~~6% premium~~pre-tax gain of $10.8 million on the ~~deposits assumed. The Bank expects to close~~sale during the ~~purchase early in the third quarter of~~three months ended September 30, 2021.

3746

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 ~~the Company's~~our consolidated financial statements and ~~related~~the accompanying notes ~~thereto~~ included elsewhere in this ~~report. A discussion of changes in the Company's results of operations from 2019 to 2020 has been omitted from this report but may be found in~~ ~~Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations, of its~~ Quarterly Report on Form 10-Q ~~for the period ended March 31, 2020, filed~~and with the ~~SEC on April 28, 2020. Further,~~consolidated financial statements and accompanying notes and other detailed information appearing in the ~~Company encourages you~~2020 Form 10-K. To the extent that this discussion describes prior performance, the descriptions relate only to ~~revisit~~ the ~~Forward-Looking Statements at~~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 ~~beginning~~“Forward-Looking Statements” section of this ~~report.~~Report for further information on forward-looking statements.

Executive Summary

We have continued to invest in infrastructure to support anticipated future growth in each area that is key to our performance, including personnel, technology and processes in order to meet the increasing compliance obligations of the financial services industry. We believe we are well-positioned in high-growth markets in which we operate and will continue to focus on margin improvement, leveraging capital, organic portfolio loan growth and operating efficiency. We believe the key challenge for us in the future is to expand our lending platform and utilize the increase in our low cost deposits, while continuing to manage asset quality, as well as management of compliance in emerging and fast growing markets. We are expanding 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. During 2020 and into 2021, we entered into agreements for debit card program sponsorship to further enhance fee income and noninterest income. In addition, we continue to expand into the Fintech industry through the acquisition of technology, including a software development team, in order to scale and diversify our banking capabilities.

Financial Results

~~Total assets increased $314.6 million to $2.65 billion at March 31,~~Three Months Ended September 30, 2021 from $2.33 billion at December 31, 2020. Earning assets increased $327.9 million to $2.48 billion at March 31, 2021 from $2.15 billion at December 31, 2020. This increase of $327.9 million in earning assets was primarily driven by the $240.6 million increase in total loans to $1.69 billion during the three months ended March 31, 2021. Deposits increased $234.2 million to $2.22 billion at March 31, 2021, from $1.98 billion at December 31, 2020.vs. Three Months Ended September 30, 2020

Net interest income increased ~~$1.3~~$3.1 million, noninterest income increased ~~$1.6~~$2.6 million and noninterest expenses ~~decreased~~increased by ~~$5.5~~$7.6 million during the three months ended ~~March 31,~~September 30, 2021 compared to the three months ended ~~March 31,~~September 30, 2020. ~~The Company’s~~Our yield on earning assets (tax-equivalent) in the three months ended ~~March 31,~~September 30, 2021 was ~~3.54%~~3.48% compared to ~~4.67%~~3.88% in the three months ended ~~March 31,~~September 30, 2020. Total loans increased by ~~$240.6~~$66.9 million to ~~$1.69~~$1.76 billion during the three months ended ~~March 31,~~September 30, 2021. ~~The~~Our overall cost of interest-bearing liabilities ~~for the Company~~ was ~~0.48%~~0.39% in the three months ended ~~March 31,~~September 30, 2021 compared to ~~1.34%~~0.79% in the three months ended ~~March 31,~~September 30, 2020. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a net interest margin (tax-equivalent) of ~~3.26%~~3.25% in the three months ended ~~March 31,~~September 30, 2021 compared to ~~3.66%~~3.35% in the three months ended ~~March 31,~~September 30, 2020.

~~The Company~~We earned ~~$8.1~~$11.8 million in the three months ended ~~March 31,~~September 30, 2021 compared to ~~$1.0~~$6.5 million in the three months ended ~~March 31,~~September 30, 2020. The three months ended ~~March 31,~~September 30, 2021 earnings equated to a return on average assets of ~~1.3%~~1.9% and a return on average equity of ~~13.6%~~18.1%, compared to the three months ended ~~March 31,~~September 30, 2020 results of ~~0.2%~~1.2% and ~~1.9%~~11.3%, respectively. Basic and diluted earnings per share were ~~$0.70 in~~$1.00 and $0.92, respectively, for the three months ended ~~March 31,~~September 30, 2021 compared to ~~$0.08 in~~$0.53 and $0.53, respectively, for the three months ended ~~March 31,~~September 30, 2020. ~~Diluted~~

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Net interest income increased $5.0 million, noninterest income decreased $27.7 million and noninterest expenses decreased by $7.9 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Our yield on earning assets (tax-equivalent) in the nine months ended September 30, 2021 was 3.52% compared to 4.33% in the nine months ended September 30, 2020. Total loans increased by $310.4 million to $1.76 billion during the nine months ended September 30, 2021. Our overall cost of interest-bearing liabilities was 0.45% in the nine months ended September 30, 2021 compared to 1.02% in the nine months ended September 30, 2020. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a net interest margin (tax-equivalent) of 3.25% in the nine months ended September 30, 2021 compared to 3.60% in the nine months ended September 30, 2020.

We earned $29.2 million in the nine months ended September 30, 2021 compared to $25.6 million in the nine months ended September 30, 2020. The nine months ended September 30, 2021 earnings equated to a return on average assets of 1.5% and a return on average equity of 15.8%, compared to the nine months ended September 30, 2020 results of 1.6% and 15.4%,

respectively. Basic and diluted earnings per share were ~~$0.66 in~~$2.49 and $2.32, respectively, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$0.08 in~~$2.11 and $2.07, respectively, for the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Corporate Updates

In April 2021, the Bank entered into a Stock Purchase Agreement with Trabian, a leading software development firm servicing financial institutions, for 80% interest in Trabian. Trabian builds digital products, web and mobile applications for forward-thinking community banks, credit unions, digital banks and Fintechs. Consistent with our mission to pursue technology to accelerate community finance, Trabian has created technology platforms that have been instrumental to the success of many of today’s leading Fintech companies.

In June 2021, we announced the creation of Edge Ventures. Edge Ventures was created 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. Subsidiaries of Edge Ventures include MVB Technology, Flexia and Victor.

MVB Technology's primary product, GRAND, provides fast, cost effective payments from a modern bank account. Account-holders fund their GRAND account using a bank account, card or direct deposit and can then seamlessly transfer between their GRAND account and their favorite apps. GRAND helps drive significant savings for online merchants through a streamlined process for customer fund transfers.

MVB created its Victor platform to make it faster and easier to launch and scale a broad spectrum of Fintech solutions for the gaming, payments, banking-as-a-service and digital asset sectors. Within a matter of weeks, Fintech developers can build solutions to manage and move money with developer-friendly application programming interfaces. Banks can onboard and manage more programs with Victor’s tailored due diligence, risk assessment and oversight workflow tools. Recognizing the complexity of the Fintech ecosystem, Victor also supports seamless integration with a proven network of value-added technology and service providers.

In July 2021, the Bank completed the previously announced sale of certain assets and liabilities of four banking centers in West Virginia. Summit assumed approximately $163.3 million in deposit liabilities, including accrued interest, and acquired approximately $57.8 million in loans, as well as accrued interest on those loans, cash, real property, personal property and other fixed assets associated with the banking centers, as of the July 10, 2021 closing date. The Bank recognized a pre-tax gain of $10.8 million on the sale in the third quarter of 2021.

In September 2021, MVB completed the private placement of $30 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.

COVID-19 Pandemic

The COVID-19 pandemic has introduced a great degree of uncertainty to both the global and domestic economy ~~as well as~~and financial markets. The full impact of COVID-19 is unknown and continues to evolve. Financial markets adjusted dramatically to the reduced economic activity and the pace of recovery is uncertain. The financial market benchmark most relevant to ~~the Company’s~~our current and future profitability is the United States Government Treasury yield curve. The United States Government Treasury yield curve is used as a basis for ~~the~~ pricing of most bonds, loans, borrowings, deposits and other fixed income yield curves. The United States Government Treasury yield curve has experienced a large, relatively parallel, downward shift. Given ~~the Company’s~~our current asset-sensitive position, management expects ~~that~~continued pressure on net interest ~~income will decline.~~income. As the outlook for the COVID-19 pandemic improves, management expects that the United States Government Treasury curve will experience some degree of an upward shift over time.

Management expects that some clients will be unable to meet their financial obligations in the near-term as a result of the decreased economic activity brought on by the COVID-19 pandemic. However, management does not expect that these credit concerns will perpetuate indefinitely. Many clients may be eligible to defer loan payments to a later date. The CompanyWe actively participated in the PPP, ~~is evaluating~~and may evaluate other programs available to assist ~~its~~our clients and ~~is providing~~provide consumer deferrals consistent with government-sponsored enterprise (“GSE”) guidelines. Management is working to incorporate scenarios that reflect decreased loan cash flows in the short term into ~~the Company’s~~our interest rate risk models.

There was considerable demand for the PPP implemented by the CARES Act to combat the economic slowdown brought on by the COVID-19 pandemic. The PPP was created to provide funding to small business owners who may have had to temporarily

close or scale back production as a result of the COVID-19 pandemic. The intended use of this funding is to pay employees who may be temporarily unable to work. The original tranche of PPP funding of $349 billion ran out 13 days after the program's

implementation. The second tranche of PPP funding of $310 billion had funds available as of the program's closure date. On July 2, 2020, additional legislation was passed that allowed small businesses to apply for loans through August 8, 2020. On January 8, 2021, the SBA announced that the PPP program would reopen on January 11, 2021 for new borrowers and certain existing PPP borrowers. During the latest round, funds totaling $284 billion were authorized through March 31, 2021. As of ~~March 31,~~September 30, 2021, ~~the Company~~we originated ~~634~~733 PPP loans with outstanding balances of ~~$88.5~~$27.9 million through our internal commercial team and originated PPP loans ~~totaling $102.1~~with outstanding balances of $119.4 million through our partnership with a Fintech company.

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

The following tables present, for the periods indicated, information about (1) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (2) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (3) the interest rate spread; (4) net interest income and margin; and (5) net interest income and margin (on a tax-equivalent basis) as of and for the periods indicated. The average balances presented are derived from daily average balances.

Three Months Ended March 31,
2021 2020
(Dollars in thousands) Average Balance Interest Income/Expense Yield/Cost Average Balance Interest Income/Expense Yield/Cost
Assets
Interest-bearing deposits in banks $ 259,491 $ 65 0.10 % $ 13,643 $ 49 1.44 %
CDs with other banks 11,803 57 1.96 12,549 62 1.98
Investment securities:
     Taxable 172,902 631 1.48 127,327 666 2.10
     Tax-exempt 2
212,488 1,714 3.27 110,188 1,110 4.04
Loans and loans held-for-sale: 1
     Commercial 3
1,262,444 14,171 4.55 1,089,212 13,863 5.11
     Tax exempt 2
7,205 81 4.56 11,760 134 4.58
     Real estate 293,076 2,684 3.71 429,720 4,953 4.62
     Consumer 7,696 37 1.95 7,473 123 6.60
Total loans 1,570,421 16,973 4.38 1,538,165 19,073 4.97
Total earning assets 2,227,105 19,440 3.54 1,801,872 20,960 4.67
Less: Allowance for loan losses (26,170) (11,366)
Cash and due from banks 20,951 20,766
Other assets 209,995 136,744
     Total assets $ 2,431,881 $ 1,948,016
Liabilities
Deposits:
     NOW $ 518,937 $ 344 0.27 % $ 407,462 $ 798 0.79 %
     Money market checking 487,281 231 0.19 432,175 1,451 1.35
     Savings 39,668 6 0.06 36,867 1 0.01
     IRAs 12,693 42 1.34 16,573 78 1.89
     CDs 168,951 425 1.02 334,810 1,582 1.90
Repurchase agreements and federal funds sold 10,249 3 0.12 9,520 10 0.42
FHLB and other borrowings 46,349 41 0.36 115,930 573 1.98
Subordinated debt 43,425 466 4.35 4,124 35 3.40
     Total interest-bearing liabilities 1,327,553 1,558 0.48 1,357,461 4,528 1.34
Noninterest bearing demand deposits 821,923 331,962
Other liabilities 45,311 43,463
     Total liabilities 2,194,787 1,732,886
Stockholders’ equity
Preferred stock 2,349 7,334
Common stock 12,378 11,997
Paid-in capital 136,864 122,663
Treasury stock (16,741) (1,135)
Retained earnings 100,273 74,401
Accumulated other comprehensive (loss) 1,971 (130)
     Total stockholders’ equity 237,094 215,130
     Total liabilities and stockholders’ equity $ 2,431,881 $ 1,948,016
Net interest spread (tax-equivalent) 3.06 % 3.33 %
Net interest income and margin (tax-equivalent) 2
$ 17,882 3.26 % $ 16,432 3.66 %
Less: Tax-equivalent adjustments $ (377) $ (261)
Net interest spread 3.00 % 3.27 %
Net interest income and margin $ 17,505 3.19 % $ 16,171 3.60 %


	Three Months Ended September 30,
	2021						2020
(Dollars in thousands)	Average Balance		Interest Income/Expense		Yield/Cost		Average Balance		Interest Income/Expense		Yield/Cost
Assets
Interest-bearing balances with banks	$	184,131	$	60	0.13	%	$	174,203	$	45	0.10	%
CDs with banks	11,065		52		1.86		12,641		61		1.91
Investment securities:
Taxable	238,807		575		0.96		103,497		411		1.58
Tax-exempt 2	202,380		1,528		3.00		142,301		1,344		3.75
Loans and loans held-for-sale: 1
Commercial 3	1,416,236		15,646		4.38		1,160,214		14,108		4.82
Tax exempt 2	6,678		77		4.57		7,752		91		4.66
Real estate	297,450		2,282		3.04		325,992		2,749		3.35
Consumer	16,133		602		14.80		6,613		119		7.14
Total loans	1,736,497		18,607		4.25		1,500,571		17,067		4.51
Total earning assets	2,372,880		20,822		3.48		1,933,213		18,928		3.88
Less: Allowance for loan losses	(24,978)						(18,906)
Cash and due from banks	5,922						28,299
Other assets	200,536						205,038
Total assets	$	2,554,360					$	2,147,644

Liabilities
Deposits:
NOW	$	743,632	$	333	0.18	%	$	381,375	$	496	0.52	%
Money market checking	433,216		211		0.19		479,418		380		0.31
Savings	42,126		—		—		49,698		7		0.06
IRAs	7,302		21		1.14		12,389		44		1.41
CDs	121,482		333		1.09		334,828		967		1.15
Repurchase agreements and federal funds sold	10,941		3		0.11		10,145		4		0.16
FHLB and other borrowings	494		6		4.82		34,138		699		8.12
Subordinated debt	44,460		481		4.29		4,124		20		1.92
Total interest-bearing liabilities	1,403,653		1,388		0.39		1,306,115		2,617		0.79
Noninterest-bearing demand deposits	852,872						542,467
Other liabilities	36,097						68,223
Total liabilities	2,292,622						1,916,805

Stockholders’ equity
Preferred stock	—						7,334
Common stock	12,704						12,066
Paid-in capital	141,246						124,003
Treasury stock	(16,741)						(2,022)
Retained earnings	122,361						90,113
Accumulated other comprehensive income (loss)	1,207						(655)
Total stockholders’ equity	260,777						230,839
Noncontrolling interest	961						—
Total stockholders’ equity attributable to parent	261,738						230,839
Total liabilities and stockholders’ equity	$	2,554,360					$	2,147,644

Net interest spread (tax-equivalent)					3.09	%					3.09	%
Net interest income and margin (tax-equivalent) 2			$	19,434	3.25	%			$	16,311	3.35	%
Less: Tax-equivalent adjustments			$	(338)					$	(301)
Net interest spread					3.03	%					3.03	%
Net interest income and margin			$	19,096	3.19	%			$	16,010	3.29	%

1 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 three months ended ~~March 31,~~September 30, 2021 and 2020, which is a non-U.S. GAAP financial measure. ~~Please see~~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 ~~The Company’s~~Our PPP loans, totaling ~~$190.6~~$147.3 million at ~~March 31,~~September 30, 2021 and $87.9 million at September 30, 2020, are included in this amount for the three months ended ~~March 31,~~September 30, 2021.

4051


	Nine Months Ended September 30,
	2021						2020
(Dollars in thousands)	Average Balance		Interest Income/Expense		Yield/Cost		Average Balance		Interest Income/Expense		Yield/Cost
Assets
Interest-bearing balances with banks	$	207,195	$	164	0.11	%	$	77,667	$	110	0.19	%
CDs with banks	11,554		168		1.94		12,667		187		1.97
Investment securities:
Taxable	222,323		1,831		1.10		104,450		1,554		1.98
Tax-exempt 2	207,529		4,881		3.14		125,493		3,703		3.93
Loans and loans held-for-sale: 1
Commercial 3	1,365,680		45,905		4.49		1,138,438		42,292		4.95
Tax exempt 2	6,928		237		4.57		9,457		329		4.64
Real estate	303,701		7,509		3.31		428,989		13,402		4.16
Consumer	10,157		762		10.03		6,805		370		7.24
Total loans	1,686,466		54,413		4.31		1,583,689		56,393		4.74
Total earning assets	2,335,067		61,457		3.52		1,903,966		61,947		4.33
Less: Allowance for loan losses	(25,920)						(14,857)
Cash and due from banks	16,274						27,781
Other assets	201,198						178,701
Total assets	$	2,526,619					$	2,095,591

Liabilities
Deposits:
NOW	$	660,655	$	1,323	0.27	%	$	385,413	$	2,070	0.72	%
Money market checking	461,998		662		0.19		447,219		2,397		0.71
Savings	44,938		4		0.01		43,606		16		0.05
IRAs	10,764		102		1.27		13,785		169		1.63
CDs	148,807		1,091		0.98		388,190		4,188		1.44
Repurchase agreements and federal funds sold	10,677		10		0.13		9,784		19		0.26
FHLB and other borrowings	33,914		95		0.37		75,451		1,524		2.69
Subordinated debt	43,786		1,437		4.39		4,124		78		2.52
Total interest-bearing liabilities	1,415,539		4,724		0.45		1,367,572		10,461		1.02
Noninterest-bearing demand deposits	828,469						442,378
Other liabilities	36,665						63,853
Total liabilities	2,280,673						1,873,803

Stockholders’ equity
Preferred stock	774						7,334
Common stock	12,524						12,031
Paid-in capital	139,980						123,342
Treasury stock	(16,741)						(1,533)
Retained earnings	107,094						81,476
Accumulated other comprehensive income (loss)	1,788						(862)
Total stockholders’ equity	245,419						221,788
Noncontrolling interest	527						—
Total stockholders’ equity attributable to parent	245,946						221,788
Total liabilities and stockholders’ equity	$	2,526,619					$	2,095,591

Net interest spread (tax-equivalent)					3.07	%					3.31	%
Net interest income and margin (tax-equivalent) 2			$	56,733	3.25	%			$	51,486	3.60	%
Less: Tax-equivalent adjustments			$	(1,077)					$	(847)
Net interest spread					3.01	%					3.26	%
Net interest income and margin			$	55,656	3.19	%			$	50,639	3.54	%

1 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 nine months ended September 30, 2021 and 2020, 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 PPP loans, totaling $147.3 million at September 30, 2021 and $87.9 million at September 30, 2020, are included in this amount for the nine months ended September 30, 2021.

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


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021			2020				(Dollars in thousands)	2021			2020			2021			2020
Net 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	$	17,505		$	16,171			Net interest income	$	19,096		$	16,010		$	55,656		$	50,639
Average interest-earning assets	Average interest-earning assets	2,227,105			1,801,872				Average interest-earning assets	2,372,880			1,933,213			2,335,067			1,903,966
Net interest margin	Net interest margin	3.19		%	3.60		%		Net interest margin	3.19		%	3.29		%	3.19		%	3.54		%

Net 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	$	17,505		$	16,171			Net interest income	$	19,096		$	16,010		$	55,656		$	50,639
Plus: Impact of fully tax-equivalent adjustment		377			261
Impact of fully tax-equivalent adjustment									Impact of fully tax-equivalent adjustment	338			301			1,077			847
Net interest income on a fully tax-equivalent basis	Net interest income on a fully tax-equivalent basis	17,882			16,432				Net interest income on a fully tax-equivalent basis	19,434			16,311			56,733			51,486
Average interest-earning assets	Average interest-earning assets	2,227,105			1,801,872				Average interest-earning assets	$	2,372,880		$	1,933,213		$	2,335,067		$	1,903,966
Net interest margin on a fully tax-equivalent basis	Net interest margin on a fully tax-equivalent basis	3.26		%	3.66		%		Net interest margin on a fully tax-equivalent basis	3.25		%	3.35		%	3.25		%	3.60		%

Key Metrics

Three Months Ended March 31,
(Dollars in thousands, except per share data) 2021 2020
     Book value per common share $ 20.38 $ 17.08
     Efficiency ratio 1
63.8 % 91.3 %
     Overhead ratio 2 3
3.1 % 5.1 %
     Net loan charge-offs to total loans 4
0.1 % 0.5 %
     Allowance for loan losses to total loans 5
1.5 % 0.8 %
     Nonperforming loans $ 11,577 $ 5,909
     Nonperforming loans to total loans 0.7 % 0.4 %
     Equity to assets 8.9 % 10.1 %
     Bank leverage ratio 11.3 % 9.8 %


	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2021			2020			2021			2020
Book value per common share	$	22.18		$	19.07		$	22.18		$	19.07
Efficiency ratio 1 6	62.9		%	51.6		%	65.9		%	60.3		%
Overhead ratio 2 3 6	4.0		%	3.4		%	3.6		%	4.9		%
Net loan charge-offs to total loans 4	—		%	—		%	0.01		%	0.2		%
Allowance for loan losses to total loans 5	1.4		%	1.8		%	1.4		%	1.8		%
Nonperforming loans	$	17,453		$	14,893		$	17,453		$	14,893
Nonperforming loans to total loans	1.0		%	1.0		%	1.0		%	1.0		%
Equity to assets	9.5		%	10.6		%	9.5		%	10.6		%
Community Bank Leverage Ratio	12.0		%	10.6		%	12.0		%	10.6		%

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 Excludes loans held-for-sale

6 Non-U.S. GAAP metric

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 and ~~repurchase agreements.~~subordinated debt. Net interest income, which is the primary source of revenue for the Bank, is also impacted by changes in market interest rates ~~as well as~~and the mix of interest-earning assets and interest-bearing liabilities. Net interest income is impacted favorably by increases in noninterest-bearing demand deposits and equity.

Net interest margin is calculated by dividing net interest income by average interest-earning assets and ~~serves as a measurement of~~

measures the net revenue stream generated by the Bank’s balance sheet. ~~Net interest margin (tax equivalent) was 3.26% for the three months ended March 31, 2021 compared to 3.66% for the three months ended March 31, 2020.~~ The net interest margin continues to face considerable pressure due to low interest rates and competitive pricing of loans and deposits in the Bank’s markets. During 2020, the Federal Reserve lowered its key interest rate from a range of 1.50% to 1.75% to a range of 0.00% to 0.25% and remains at this rate as of March 31, 2021. Management’s estimate of the impact of future changes in market interest rates is shown in the section captioned ~~Interest Rate Risk, in~~ ~~Item 3 – Quantitative and Qualitative Disclosures About Market Risk~~ ~~included elsewhere in this report.~~

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. ~~Net interest spread (tax-equivalent) was 3.06% for the three months ended March 31, 2021 compared to 3.33% for the three months~~

ended March 31, 2020. The difference between the net interest margin (tax-equivalent) and net interest spread (tax-equivalent) was 20 basis points in the three months ended March 31, 2021 compared to 33 basis points in the three months ended March 31, 2020. The increase of $490.0 million in average noninterest-bearing demand deposits helped maintain the favorable spread.

~~Company management continues~~In 2020, the Federal Reserve lowered its key interest rate from a range of 1.50% to 1.75% to a range of 0.00% to 0.25% and remains at this rate as of September 30, 2021. We continue to analyze methods to deploy assets into an earning asset mix ~~which will~~to result in a stronger net interest margin. Loan growth continues to be strong and management anticipates that loan activity will remain strong in the ~~near term~~near-term future.

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Net interest margin (tax-equivalent) was 3.25% for the three months ended September 30, 2021 compared to 3.35% for the three months ended September 30, 2020. Net interest spread (tax-equivalent) was 3.09% for the three months ended September 30, 2021 compared to 3.09% for the three months ended September 30, 2020. The difference between the net interest margin (tax-equivalent) and net interest spread (tax-equivalent) was 16 basis points in the three months ended September 30, 2021 compared to 26 basis points in the three months ended September 30, 2020. The increase of $310.4 million in average noninterest-bearing demand deposits helped maintain the favorable spread for the three months ended September 30, 2021 compared to three months ended September 30, 2020.

During the three months ended ~~March 31,~~September 30, 2021, net interest income increased by ~~$1.3~~$3.1 million, or ~~8.25%~~19.3%, to ~~$17.5~~$19.1 million from ~~$16.2~~$16.0 million during the three months ended ~~March 31,~~September 30, 2020. This increase is largely due to the increase in the average earning assets of ~~$425.2~~$439.7 million being primarily funded by the increase in noninterest-bearing demand deposits of ~~$490.0~~$310.4 million. Average total earning assets were $2.37 billion in the three months ended September 30, 2021 compared to $1.93 billion in the three months ended September 30, 2020. Total interest income increased by $1.9 million, or 10.0%, to $20.5 million in the three months ended September 30, 2021 from $18.6 million in the three months ended September 30, 2020. This increase in total interest income was driven by the growth in earning assets offsetting the decrease in the yield on earning assets of 40 basis points. Average total loans increased to $1.74 billion in the three months ended September 30, 2021 from $1.50 billion in the three months ended September 30, 2020, primarily as the result of a $256.0 million increase in average commercial loans; however, PPP loan growth of $59.4 million from September 30, 2020 to September 30, 2021 accounted for a portion of the increase and carried just a 1% yield, exclusive of origination fee accretion. The yield on total loans decreased 26 basis points. Changes in the balance sheet related to the sale of of certain assets and liabilities of four banking center locations to Summit in July 2021 also impacted the yield on earning assets.

Average investment securities increased $195.4 million as the result of a $60.1 million increase in tax-exempt investments and a $135.3 million increase in taxable investments during three months ended September 30, 2021, compared to three months ended September 30, 2020. The yield on tax-exempt securities decreased 75 basis points and the taxable securities yield decreased 62 basis points.

Average interest-bearing liabilities increased by $97.5 million for three months ended September 30, 2021 from three months ended September 30, 2020. The increase was primarily the result of average balance increases of $362.3 million in negotiable order of withdrawal accounts and $40.3 million in subordinated debt, partially offset by average balance decreases of $213.3 million in certificates of deposit, $46.2 million in money market checking accounts, $33.6 million in FHLB and other borrowings and $7.6 million in savings accounts.

Average interest-bearing deposits were $1.35 billion for the three months ended September 30, 2021 and $1.26 billion for the three months ended September 30, 2020. Total interest expense decreased by $1.2 million, caused primarily by a $1.0 million decrease in deposit interest. The result was a 40-basis point decrease in the cost of interest-bearing liabilities, primarily from the improved deposit mix resulting from the replacement of high-cost deposits with noninterest-bearing deposits.

Our average earning assets increased $439.7 million and net interest income increased by $3.1 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Net interest margin continues to be pressured by depressed interest rates and increased competition for high-quality loan growth.

The Bank’s yield on earning assets for the three months ended September 30, 2021 declined due to decreases in the loan portfolio yield of 26 basis points, driven by the addition of PPP loans originated in the second quarter of 2020 and the first quarter of 2021, and the investment portfolio yield of 94 basis points, while the cost of interest-bearing liabilities decreased by 40 basis points compared to three months ended September 30, 2020.

The cost of interest-bearing liabilities decreased to 0.39% in the three months ended September 30, 2021 from 0.79% in the three months ended September 30, 2020. This decrease is primarily the result of 34 basis point decrease in the cost of deposits, primarily from the improved deposit mix resulting from the replacement of high-cost deposits with noninterest-bearing deposits.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Net interest margin (tax-equivalent) was 3.25% for the nine months ended September 30, 2021 compared to 3.60% for the nine months ended September 30, 2020. Net interest spread (tax-equivalent) was 3.07% for the nine months ended September 30, 2021 compared to 3.31% for the nine months ended September 30, 2020. The difference between the net interest margin (tax-equivalent) and net interest spread (tax-equivalent) was 18 basis points in the nine months ended September 30, 2021 compared to 29 basis points in the nine months ended September 30, 2020. The decrease in net interest spread was driven by the 81-basis point decrease in yield on earning assets outpacing the impact of the increase of $386.1 million in average noninterest-bearing demand deposits for the nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, net interest income increased by $5.0 million, or 9.9%, to $55.7 million from $50.6 million during the nine months ended September 30, 2020. This increase is largely due to the increase in the average earning assets of $431.1 million being primarily funded by the increase in noninterest-bearing demand deposits of $386.1 million. Also impacting the yield ~~were~~was the sale of of certain assets and liabilities of four ~~branches~~banking center locations to Summit in ~~April 2020,~~July 2021, the accretion related to loans acquired from First State and the amortization of PPP origination fees. Average total earning assets ~~was $2.23~~were $2.34 billion in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to ~~$1.80~~$1.90 billion in the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Although there was an increase in average total earning assets, total interest income decreased by ~~$1.6~~$0.7 million, or ~~7.90%~~1.2%, to ~~$19.1~~$60.4 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 from ~~$20.7~~$61.1 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2020. This decrease in total interest income was driven by the effect of the Federal Reserve lowering its key interest rates, which resulted in the decrease in yield on earning assets of ~~113~~81 basis points. Average total loans ~~and loans held-for-sale~~ increased to ~~$1.57~~$1.69 billion in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 from ~~$1.54~~$1.58 billion in the ~~three~~nine months ended ~~March 31,~~September 30, 2020, primarily as the result of a ~~$173.2~~$227.2 million increase in average commercial loans; however, PPP ~~loans with an outstanding balance~~loan growth of ~~$190.6~~$59.4 million from September 30, 2020 to September 30, 2021 accounted for a portion of the increase and carried just a 1% yield, ~~outside~~exclusive of origination fee accretion. ~~Yield~~The yield on total loans ~~and loans held-for-sale~~ decreased 5943 basis points. Changes in the balance sheet related to the Summit and First State transactions also impacted the yield on earning assets.

Average investment securities increased ~~$147.9~~$199.9 million as the result of a ~~$102.3~~$82.0 million increase in tax-exempt investments and a ~~$45.6~~$117.9 million increase in taxable ~~investments. Yield~~investments during the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. The yield on tax-exempt securities decreased 7779 basis points and the taxable securities yield decreased 6288 basis points.

Average interest-bearing liabilities ~~decreased~~increased by ~~$29.9 million.~~$48.0 million for the nine months ended September 30, 2021 from the nine months ended September 30, 2020. The ~~decrease~~increase was primarily the result of ~~decreases of $165.9 million in the~~ average balance increases of ~~certificates of deposit and $69.6~~$275.2 million in ~~the average balance of FHLB and other borrowings, partially offset by increases of $111.5 million in the average balance of~~ negotiable order of withdrawal accounts, ~~$55.1~~$39.7 million in subordinated debt, $14.8 million in money market checking accounts and ~~$39.3~~$1.3 million in ~~the~~savings accounts, partially offset by average balance decreases of ~~subordinated debt.~~$239.4 million in certificates of deposit and $41.5 million in FHLB and other borrowings.

Average interest-bearing deposits were ~~$1.23~~$1.33 billion for ~~both~~ the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and $1.28 billion for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. Total interest expense decreased by ~~$3.0~~$5.7 million, caused primarily by a ~~$2.9~~$5.7 million decrease in deposit interest. The result was a ~~86-basis~~57-basis point decrease in the cost of ~~interest bearing liabilities.~~interest-bearing liabilities, primarily from the improved deposit mix resulting from the replacement of high-cost deposits with noninterest-bearing deposits.

~~The Company’s~~Our average earning assets increased ~~$425.2~~$431.1 million and net interest income increased by ~~$1.3~~$5.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020. ~~The net~~Net interest margin continues to be pressured by ~~falling~~depressed interest rates and increased competition for ~~high quality~~high-quality loan growth.

The Bank’s yield on earning assets for the nine months ended September 30, 2021 declined due to decreases in the loan portfolio yield of 5943 basis points, driven by the addition of PPP loans originated in the second quarter of 2020 and the first quarter of 2021, and the investment portfolio yield of 5396 basis points, while the cost of ~~interest bearing~~interest-bearing liabilities decreased by 8657 basis ~~points.~~points compared to nine months ended September 30, 2020.

The cost of interest-bearing liabilities decreased to ~~0.48%~~0.45% in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 from ~~1.34%~~1.02% in the ~~three~~nine months ended ~~March 31,~~September 30, 2020. This decrease is primarily the result of decreases of ~~162~~232 basis points in the cost of FHLB and other borrowings and a 9360 basis point decrease in the cost of deposits, primarily from the improved deposit mix resulting from the replacement of high-cost deposits with noninterest-bearing deposits.

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

Provision for Loan Losses

The provision for loan losses, which is a product of management’s formal quarterly analysis, is recorded in response to inherent losses in the loan portfolio. Loan loss ~~provision of $0.6~~provisions were $0.4 million ~~and $1.1 million were made~~ for the three months ended ~~March 31,~~September 30, 2021 and ~~2020, respectively.~~$8.6 million for the three months ended September 30, 2020. The decrease in loan loss provision is ~~mainly~~primarily the result of ~~changes in~~ the ~~level~~improvement of ~~recognized charge-offs and changes in~~ the ~~resulting historical loss rates.~~qualitative adjustment factors within the allowance methodology. In addition, changes to the outstanding balances of the loan portfolios, changes to the ~~qualitative adjustment factor framework within~~level of recognized charge-offs and changes in the ~~allowance methodology~~resulting historical loss rates, and adjustments to the risk grading of ~~significant~~ loans within the portfolio were all contributing factors in the ultimate change in loan loss provision.

Total loan balances increased $240.6 million during the three months ended March 31, 2021 versus an increase of $22.0 million in the three months ended March 31, 2020. The commercial loan portfolio increased by $212.2 million during the three months ended March 31, 2021, in comparison to an increase of $30.7 million in the three months ended March 31, 2020, while the residential mortgage loan portfolio increased by $35.4 million during the three months ended March 31, 2021, while decreasing by $10.1 million in the three months ended March 31, 2020. Included in the commercial and total loan volume increases are SBA PPP loans totaling $190.6 million as of March 31, 2021. This portion of loan growth is significant to the overall change in provision as these loans are guaranteed by the SBA, and accordingly, are subject to a loan loss allocation that is only a fraction of the typical allocation rate applied to other loans in the portfolio. In addition, net charge-offs during the three months ended March 31, 2021 totaled $0.2 million, in comparison to net charge-offs of $1.8 million in the three months ended March 31, 2020. Additionally, provision was impacted by a $0.3 million decrease in the specific loan loss allocations in the three months ended March 31, 2021, relative to a $0.1 million decrease in the three months ended March 31, 2020.

~~Meanwhile, management has continued to evaluate the qualitative factor framework within the allowance for loan loss methodology in~~ order to assess how well the framework can appropriately respond to the unprecedented risk presented by the COVID-19 ~~pandemic.~~pandemic, we have continued to evaluate the qualitative factor framework within the allowance for loan loss methodology. As a result, the framework was significantly enhanced in the third quarter of 2020 to consider a much greater degree of risk than when the framework was originally designed. The framework has consistently generated an adequate allowance for loan loss within a generally stable economic ~~environment, but~~environment. However, the onset of the COVID-19 pandemic made it apparent that the framework required modifications to consider this greater degree of risk. While the ultimate timing and severity of impacts to the economic and business conditions in which ~~the Company~~we operates are not yet fully known, it appears that the impacts will continue to be significant and it is likely that the impacts will evolve ~~over time~~ as businesses and individuals learn to adapt to a new way of operating and living. The breadth of the COVID-19 pandemic and the fact that it impacts virtually all industries has inherently created additional risk within the loan portfolios, despite there being no change to the nature of those portfolios.

Furthermore, as a result of the ongoing analysis of the loan portfolios, it has become apparent that a significant number of borrowers are experiencing a strain on their operations, ~~and as~~As a result, they present an increase in the volume and severity of problem loans. Additionally, it is evident that consumer sentiment has been impacted, although not as significantly as during the Great Recession. Other significant factors include the increasingly volatile social atmosphere, the evolving political climate and the vaccines' timing and ~~effectiveness of vaccines.~~effectiveness. The unprecedented initiatives of the Federal ~~Government~~government to provide support to the economy through new loan programs has simultaneously served to temporarily mitigate some of the impacts to the economy and borrowers, while also adding some degree of increased risk to lending policies and procedures as a result of the pace and manner in which these programs have been developed and made available to the public. As a result, quantifiable evidence of the impacts to ~~the Company's~~our loan portfolios have not yet fully revealed themselves in terms of delinquent loans or deterioration in collateral values. Meanwhile, ~~the Company has~~we have not ~~currently~~ made any significant changes to lending strategies that would impact the concentrations of credit risk within those portfolios.

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Total loan balances increased $66.9 million during the three months ended September 30, 2021 versus an decrease of $66.1 million in the three months ended September 30, 2020. The commercial loan portfolio increased by $45.7 million during the three months ended September 30, 2021, in comparison to a decrease of $9.0 million in the three months ended September 30, 2020, while the residential mortgage loan portfolio increased by $9.6 million during the three months ended September 30, 2021, while decreasing by $55.4 million in the three months ended September 30, 2020. Included in the commercial and total loan volume increases are SBA PPP loans totaling $147.3 million as of September 30, 2021 compared to $87.9 million as of September 30, 2020. This portion of loan growth is significant to the overall change in provision as these loans are guaranteed by the SBA, and accordingly are subject to a loan loss allocation that is only a fraction of the typical allocation rate applied to other loans in the portfolio. In addition, net charge-offs during the three months ended September 30, 2021 totaled $0.1 million, compared to net charge-offs of $0.1 million in the three months ended September 30, 2020. Additionally, provision was impacted by a $3.0 million increase in the specific loan loss allocations in the three months ended September 30, 2021, relative to a $0.4 million increase in the three months ended September 30, 2020.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Total loan balances increased $310.4 million during the nine months ended September 30, 2021 versus an increase of $54.1 million in the nine months ended September 30, 2020. The commercial loan portfolio increased by $283.2 million during the nine months ended September 30, 2021, in comparison to an increase of $74.7 million in the nine months ended September 30, 2020, while the residential mortgage loan portfolio increased by $17.2 million during the nine months ended September 30, 2021, while decreasing by $20.3 million in the nine months ended September 30, 2020. Included in the commercial and total loan volume increases are SBA PPP loans totaling $147.3 million as of September 30, 2021 compared to $87.9 million as of September 30, 2020. This portion of loan growth is significant to the overall change in provision as these loans are guaranteed by the SBA, and

accordingly, are subject to a loan loss allocation that is only a fraction of the typical allocation rate applied to other loans in the portfolio. In addition, net charge-offs during the nine months ended September 30, 2021 totaled $0.1 million, compared to net charge-offs of $1.9 million in the nine months ended September 30, 2020. Additionally, provision was impacted by a $2.8 million increase in the specific loan loss allocations in the nine months ended September 30, 2021, relative to a $1.4 million increase in the nine months ended September 30, 2020.

Noninterest Income

Payment card and service charge income, ~~mortgage fee~~consulting compliance income, ~~consulting compliance~~equity method investment income and gains on ~~equity~~ securities ~~generate~~generally account for the ~~core~~majority of ~~the Company’s~~our noninterest income. ~~During the three months ended March 31,~~Also, from time to time, we recognize gains or losses on acquisition and divestiture activity.

Three Months Ended September 30, 2021 ~~equity method investment income has generated additional noninterest income. Total of noninterest~~vs. Three Months Ended September 30, 2020

Noninterest income for the three months ended ~~March 31,~~September 30, 2021 and 2020 ~~was $12.5~~totaled $22.0 million and ~~$10.8~~$19.4 million, respectively.

The increase in noninterest income for the three months ended ~~March 31,~~September 30, 2021 compared to the three months ended ~~March 31,~~September 30, 2020 was primarily the result of ~~an increase~~increases of ~~$6.5~~$10.8 million in gains on acquisition and divestiture activity, $1.9 million in compliance and consulting income, $1.0 million in payment card and service charge income, $0.7 million in the gain on sale of loans and $0.5 million in the gain on sale of available-for-sale securities. These increases were partially offset by decreases of $10.0 million in equity method investment income ~~from ICM~~ and ~~a decrease of $3.6 million in the loss on derivatives. These increases were partially offset by a decrease of $11.2~~$7.3 million in mortgage fee income.

Gains on acquisition and divestiture activity increased $10.8 million for the three months ended September 30, 2021 due to the sale of four banking centers to Summit in July of 2021. Compliance and consulting income increased $1.9 million for the three months ended September 30, 2021 due to team expansion and the acquisition of Trabian. Payment card and service charge income increased $1.0 million for the three months ended September 30, 2021 due to several sponsoring agreements and new products and services as a result of recent investments in Fintech capabilities. Gain on sale of loans increased $0.7 million for the three months ended September 30, 2021, primarily due to the addition of the SBA lending team during the fourth quarter of 2020. Gain on sale of available-for-sale securities increased $0.5 million for the three months ended September 30, 2021 due to the sale of available-for-sale investments totaling $28.0 million in the third quarter of 2021. Equity method investment income decreased $10.0 million for the three months ended September 30, 2021 due to decreased volume from the ICM combination.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Noninterest income for the nine months ended September 30, 2021 and 2020 totaled $48.1 million and $75.8 million, respectively. The decrease in noninterest income for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily the result of ~~$6.5~~decreases of $33.4 million ~~was~~in mortgage fee income, $3.5 million in gains on acquisition and divestiture activity and $2.4 million in the gain on derivatives. These decreases were partially offset by increases of $3.4 million in payment card and service charge income, $3.1 million in compliance and consulting income, $2.8 million in the gain on sale of loans, $2.5 million in the gain on sale of available-for-sale securities and $1.0 million in equity method investment income from ICM.

Mortgage fee income decreased $33.4 million for the nine months ended September 30, 2021 due to the ICM combination in July 2020. Prior to this combination, income from ~~the Company's~~our mortgage activities was recognized through mortgage fee income.

Payment card and service charge income increased from $0.6 million in the three months ended March 31, 2020 to $1.5 million in the three months ended March 31, 2021 due to the expansion of the Company's Banking as a Service (“BaaS”) platform.

~~Loss~~ Gain on derivatives decreased ~~from $3.6~~$2.4 million for the ~~three~~nine months ended ~~March 31, 2020 to zero for the three months ended March 31,~~September 30, 2021 due to the removal of the mortgage derivative driven by the ICM combination.

~~Mortgage fee~~Payment card and service charge income ~~decreased $11.2~~increased $3.4 million for the nine months ended September 30, 2021 due to several sponsoring agreements and new products and services as a result of recent investments in Fintech capabilities. Compliance and consulting income increased $3.1 million for the nine months ended September 30, 2021 due to team expansion and the acquisition of Trabian. Gain on sale of loans increased $2.8 million for the nine months ended September 30, 2021 due to the addition of the SBA lending team during the fourth quarter of 2020. Gain on sale of available-for-sale securities increased $2.5 million for the nine months ended September 30, 2021 due to the sale of available-for-sale securities totaling $103.4 million in the first and second quarters of 2021.

Noninterest Expense

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Noninterest expense was $25.8 million and $18.3 million in the three months ended ~~March 31, 2021 due to the ICM combination in July 2020. Prior to this combination, income from the Company's mortgage activities was recognized through mortgage fee income.~~

~~Noninterest Expense~~

~~Noninterest expense was $19.1 million and $24.7 million in in the three months ended March 31,~~September 30, 2021 and 2020, respectively. Approximately ~~62%~~64% and ~~66%~~58% of noninterest expense for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, was related to personnel costs. Personnel costs are a significant part of ~~the Company's~~our noninterest expense, as such costs are critical to financial services organizations. Salaries and benefits increased by $6.0 million, primarily as a result of our continued efforts to support our Fintech portfolio. Professional fees increased by $1.1 million in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to increased expenses related to the support of our Fintech portfolio.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Noninterest expense was $68.4 million and $76.3 million in the nine months ended September 30, 2021 and 2020, respectively. Approximately 62% and 65% of noninterest expense for the nine months ended September 30, 2021 and 2020, 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. Salaries and benefits decreased by ~~$4.3~~$7.3 million, primarily as a result of the ICM combination, ~~and~~partially offset by the ~~sale~~acquisition of ~~four branches to Summit~~First State in April 2020.

Mortgage processing decreased by ~~$0.9~~$1.7 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020 ~~primarily~~ as the result of the ICM combination.

Return on Assets and Equity

Assets

~~The Company’s~~Total assets increased $457.3 million to $2.79 billion at September 30, 2021 from $2.33 billion at December 31, 2020. Earning

assets increased $474.4 million to $2.62 billion at September 30, 2021 from $2.15 billion at December 31, 2020. This increase in

earning assets was primarily driven by the $310.4 million increase in total loans to $1.76 billion at September 30, 2021, from

$1.45 billion at December 31, 2020.

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Our return on average assets was ~~1.3%~~1.9% for the three months ended ~~March 31,~~September 30, 2021, compared to ~~0.2%~~1.2% for the three months ended ~~March 31,~~September 30, 2020. The increased return in 2021 is a result of a ~~$7.0~~$5.3 million increase in earnings, while average total assets increased by ~~$483.9~~$406.7 million, mainly as the result of a ~~$245.8~~$235.9 million increase in average ~~interest-bearing deposits with banks,~~total loans and a ~~$147.9~~$195.4 million increase in average investment securities.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Our return on average assets was 1.5% for the nine months ended September 30, 2021, compared to 1.6% for the nine months ended September 30, 2020. The decreased return in 2021 is a result of a $3.6 million increase in earnings being outpaced by an increase in average total assets of $431.0 million, mainly as the result of a $199.9 million increase in average investment securities, a $129.5 million increase in average interest-bearing balances with banks and a ~~$32.3~~$102.8 million increase in average total loans.

Equity

~~The Company’s~~Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Our return on average stockholders’ equity was ~~13.6%~~18.1% for the three months ended ~~March 31,~~September 30, 2021, compared to ~~1.9%~~11.3% for the three months ended ~~March 31,~~September 30, 2020. The increased return in 2021 is a result of an $5.3 million increase in earnings, while average equity increased by $30.9 million.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Our return on average stockholders’ equity was 15.8% for the nine months ended September 30, 2021, compared to 15.4% for the nine months ended September 30, 2020. The increased return in 2021 is a result of a ~~$7.0~~$3.6 million increase in earnings, while average equity increased by ~~$22.0~~$24.2 million.

Statement of Financial Condition

Cash and Cash Equivalents

Cash and cash equivalents totaled ~~$339.6~~$390.1 million at ~~March 31,~~September 30, 2021, compared to $263.9 million at December 31, 2020.

~~Management believes~~ We believe the current balance of cash and cash equivalents adequately serves ~~the Company’s~~our liquidity and performance needs. Total cash and cash equivalents fluctuate ~~on a~~ daily ~~basis~~ due to transactions in process and other liquidity demands. ~~Management believes~~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. These sources of funds should enable ~~the Company~~us to meet cash obligations as they come due. Due to the increase in liquidity driven by growth in noninterest-bearing deposits, ~~management has~~we have elected to maintain a higher cash and cash equivalents balance to provide flexibility during the COVID-19 pandemic.

Investment Securities

Investment securities, including equity securities, totaled ~~$451.3~~$468.8 million at ~~March 31,~~September 30, 2021, compared to $438.2 million at December 31, 2020. The following table presents a summary of the investment securities portfolio as of the periods indicated. The available-for-sale securities are reported at estimated fair value.


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020
Available-for-sale securities:	Available-for-sale securities:					Available-for-sale securities:
United States government agency securities	United States government agency securities	$	48,104	$	56,992	United States government agency securities	$	41,971	$	53,869
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	89,207		95,769		United States sponsored mortgage-backed securities	85,271		95,769
United States treasury securities	United States treasury securities	56,970		—		United States treasury securities	82,422		3,123
Municipal securities	Municipal securities	209,734		231,887		Municipal securities	207,423		231,887
Other debt securities	Other debt securities	7,500		7,500		Other debt securities	7,500		7,500
Other securities	Other securities	11,607		18,476		Other securities	14,436		18,476
Total investment securities available-for-sale	Total investment securities available-for-sale	$	423,122	$	410,624	Total investment securities available-for-sale	$	439,023	$	410,624

Equity securities	Equity securities	$	28,200	$	27,585	Equity securities	$	29,809	$	27,585

Management monitors the earnings performance and liquidity of the investment portfolio ~~on a regular basis~~regularly through the Asset and Liability Committee (“ALCO”) meetings. The ALCO also monitors net interest income and assists in ~~the management of~~managing interest rate risk for the Company. Through active balance sheet management and analysis of the investment securities portfolio, sufficient liquidity is maintained to satisfy depositor requirements and the various credit needs of ~~its~~our customers. Management believes the risk characteristics inherent in the investment portfolio are acceptable based on these parameters.

Loans

~~The Company’s~~Our loan portfolio totaled ~~$1.69~~$1.76 billion as of ~~March 31,~~September 30, 2021 and ~~totaled~~ $1.45 billion as of December 31, 2020. The Bank’s lending is primarily focused in North Central West Virginia and Northern Virginia. The portfolio consists principally of commercial lending, retail lending, which includes single-family residential mortgages, and consumer lending. The growth in loans is primarily attributable to organic growth within the Bank’s primary lending areas, as well as the addition of an SBA lending team in the fourth quarter of 2020.

The total of residential real estate loans reported as 90 or more days past due increased significantly during the nine months ended September 30, 2021. This increase was the result of a single loan in the amount of $5.6 million that became delinquent due to an interruption in the employment status of the borrower. The loan is well secured by the residence, which provides a loan to value of approximately 50%, and ~~Northern Virginia.~~the borrower is now under a forbearance agreement.

For more information regarding ~~the Company's~~our loans, ~~please~~ see Note 3 – Loans and Allowance for Loan Losses accompanying the consolidated financial statements included elsewhere in this report.

Loan Concentration

At ~~March 31,~~September 30, 2021 and December 31, 2020, 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, ~~primarily~~generally located in ~~the Company's~~our primary market areas. Additionally, within the commercial portfolio, there is a concentration within the healthcare industry which includes loans to physicians, nursing homes and pharmacies.

Allowance for Loan Losses

The ALL was ~~$26.2~~$25.2 million or ~~1.5%~~1.4% of total loans at ~~March 31,~~September 30, 2021 compared to $25.8 million or 1.8% of total loans at December 31, 2020. The decrease in this ratio directly resulted from the $0.5 million release from the ALL into earnings for the nine months ended September 30, 2021. The decrease in ALL was primarily the ~~direct~~ result of improvement in the qualitative adjustment factors within the allowance methodology. In addition, changes to the outstanding balances of the loan portfolios, changes in the level of recognized charge-offs and changes in the resulting historical loss ~~rates. In addition, changes to the outstanding balances of the loan portfolios, changes to the qualitative adjustment factor framework within the allowance methodology~~rates, and adjustments to the risk grading of ~~significant~~ loans within the portfolio were all contributing factors in the ~~change.~~ultimate change in the allowance for loan losses.

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 ALL. 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, ~~management~~we also ~~considers~~consider public knowledge and verifiable information from the local market to assess risks to specific loans and the loan portfolios as a whole.

Funding Sources

The Bank considers a number of alternatives, including but not limited to deposits, short-term borrowings and long-term borrowings when evaluating funding sources. Traditional deposits ~~continue to be~~remain the most significant source of funds, totaling ~~$2.22~~$2.40 billion, or ~~93.4%~~96.6% of funding sources, at ~~March 31,~~September 30, 2021. This same information at December 31, 2020 reflected $1.98 billion in deposits representing 97.4% of ~~such~~ funding sources.

FHLB and other borrowings and subordinated debt represented ~~6.1%~~2.9% of funding sources at ~~March 31, 2021. FHLB~~September 30, 2021 and ~~other borrowings, including PPPLF borrowings, totaled $102.2 million at March 31, 2021. Subordinated debt totaled $43.4 million at March 31, 2021.~~

~~FHLB and other borrowings and subordinated debt represented~~ 2.1% of funding sources at December 31, 2020. There were no outstanding amounts due to FHLB and other borrowings at September 30, 2021 and December 31, 2020. Subordinated debt totaled $73.0 million at September 30, 2021 and $43.4 million at December 31, 2020.

Repurchase agreements, which are available to large corporate customers, represented ~~0.4% and~~ 0.5% of funding sources at both September 30, 2021 and December 31, ~~2020 and 2019, respectively.~~2020.

Management continues to emphasize the development of additional noninterest-bearing deposits as a core funding source for the

Company. At ~~March 31,~~September 30, 2021, noninterest-bearing balances totaled ~~$837.2~~$999.3 million, compared to $715.8 million at December 31, 2020, or ~~37.8%~~41.7% and 36.1%, respectively, of total ~~deposits, respectively.~~deposits. Interest-bearing deposits totaled ~~$1.38~~$1.40 billion at ~~March 31,~~September 30, 2021, compared to $1.27 billion at December 31, 2020, or ~~62.2%~~58.3% and 63.9%, respectively, of total ~~deposits, respectively.~~deposits. The main driver of deposit growth has been the increase in Fintech deposits from $533.0 million at December 31, 2020 to $975.7 million as of September 30, 2021, through ~~adding~~the addition of new relationships and continuing to grow current relationships. This growth in Fintech deposits is primarily due to the ~~increasing~~increase in gaming deposits, primarily as a result of the increasing number of states legalizing sports gaming. ~~The Company~~Gaming deposits, which are included in total Fintech deposits, totaled $774.1 million as of September 30, 2021, compared to $357.9 million at December 31, 2020. We currently ~~expects its~~expect our Fintech banking deposits to continue to grow.

The following table ~~sets forth~~presents the balance of each of the deposit categories as of the periods indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020
Noninterest-bearing demand	Noninterest-bearing demand	$	837,221	$	715,791	Noninterest-bearing demand	$	999,328	$	715,791
Interest-bearing demand	Interest-bearing demand	698,218		496,502		Interest-bearing demand	767,268		496,502
Savings and money markets	Savings and money markets	520,998		545,501		Savings and money markets	530,538		545,501
Time deposits, including CDs and IRAs	Time deposits, including CDs and IRAs	160,116		224,595		Time deposits, including CDs and IRAs	101,806		224,595
Total deposits	Total deposits	$	2,216,553	$	1,982,389	Total deposits	$	2,398,940	$	1,982,389

Time deposits that meet or exceed the FDIC insurance limit	Time deposits that meet or exceed the FDIC insurance limit	$	14,829	$	16,955	Time deposits that meet or exceed the FDIC insurance limit	$	9,563	$	16,955

Average interest-bearing deposits ~~totaled $1.23~~were $1.35 billion during ~~both~~ the three months ended ~~March 31,~~September 30, 2021, compared to $1.26 billion during the same time period in 2020 and ~~2020. Average~~average noninterest-bearing deposits ~~totaled $821.9~~were $852.9 million during the three months ended ~~March 31,~~September 30, 2021 compared to ~~$332.0~~$542.5 million during the ~~three~~same time period in 2020.

Average interest-bearing deposits were $1.33 billion during the nine months ended ~~March 31,~~September 30, 2021 compared to $1.28 billion during the same time period in 2020 and average noninterest-bearing deposits were $828.5 million during the nine months ended September 30, 2021 compared to $442.4 million during the same time period in 2020.

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

Capital and Stockholders' Equity

During the ~~quarter~~nine months ended ~~March 31,~~September 30, 2021, stockholders’ equity ~~decreased approximately $3.3~~increased $27.2 million to ~~$236.7~~$266.7 million. This ~~decrease~~increase consists of net income attributable to us for the year-to-date period of $29.2 million, common stock options exercised totaling $3.4 million, stock-based compensation of $2.3 million and noncontrolling interests due to acquisitions of $1.1 million. These increases were partially offset by the redemption of preferred stock of $7.3 million, other comprehensive loss of ~~$4.1~~$3.0 million and cash dividends paid of ~~$1.2~~$4.2 million. These decreases were offset by net income for the quarter of $8.1 million, common stock options exercised totaling $0.7 million, stock-based compensation of $0.6 million and noncontrolling interest due to acquisition of $0.5 million.

With the stockholders’ equity ~~decreasing~~increasing as noted above and being outpaced by the growth in assets of $457.3 million in the nine months ended September 30, 2021, the equity to assets ratio decreased from 10.3% at December 31, 2020 to ~~8.9% due to a reduction in equity and the $314.6 million increase in total assets during the quarter. The Company~~9.5% at September 30, 2021. We paid dividends to common shareholders of ~~$1.2~~$4.2 million and $3.2 million in ~~each of~~ the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, compared to earnings of ~~$8.1~~$29.2 million and $25.6 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~versus $1.0 million in the three months ended March 31,~~and 2020, respectively, resulting in the dividend payout ratio ~~decreasing from 115.2%~~increasing to 14.5% in the ~~three~~nine months ended ~~March 31, 2020 to 14.3%~~September 30, 2021 from 12.8% in the ~~three~~nine months ended ~~March 31, 2021.~~

September 30, 2020 .

~~The Company~~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 direct material effect on ~~the Company’s~~our consolidated financial statements. The Bank is

required to comply with applicable capital adequacy standards established by the FDIC. ~~The Company is~~We are exempt from the Federal

Reserve Board’s capital adequacy standards as it believes it meets the requirements of the Small Bank Holding Company Policy Statement. West Virginia state chartered banks, such as the Bank, are subject to similar capital requirements adopted by the West Virginia Division of Financial Institutions. Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets companies hold in their portfolios. A

weight category of 0% (lowest risk assets), 20%, 50%, 100% or 150% (highest risk assets) is assigned to each asset on the balance

sheet. Detailed information concerning ~~the Company’s~~our risk-based capital ratios can be found in Supervision and Regulation in Item 1 – Business and Note 15 – Regulatory Capital Requirements to the consolidated financial statements and accompanying notes contained in the 2020 Form 10-K.

In November 2019, federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (“CBLR”), which became effective on January 1, 2020. The ~~intent of the~~ CBLR isintends 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.

In April 2020, under the CARES Act, the 9% leverage ratio threshold was temporarily reduced to 8% in response to the COVID-19 pandemic. The threshold ~~will increase~~increased to 8.5% in 2021 and will return to 9% in 2022. 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 ~~March 31,~~September 30, 2021 was ~~11.3%~~12.0%, which is above the ~~well capitalized~~well-capitalized standard of 8.5%. 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 ~~the Company’s~~our policy to manage liquidity so that there is no need to make unplanned sales of assets or to borrow funds under emergency conditions.

The main source of liquidity for the Bank comes through deposit growth. Liquidity is also provided from cash generated from investment maturities, principal payments from loans and income from loans and investment securities. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, cash provided by financing activities totaled ~~$328.9~~$602.4 million, while outflows from investing activity totaled ~~$263.4~~$488.0 million. 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. 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.

~~The Company has~~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 ~~the Company's~~our discretion. While ~~the Company seeks~~we seek to preserve flexibility with respect to cash requirements, there can be no assurance that market conditions would permit itus to sell securities on acceptable terms or at all.

Current Economic Conditions

~~The Company considers its~~We consider our primary market area for CoRe banking services to be comprised of North Central West Virginia and Northern ~~Virginia, where the Bank currently operates a total of 13 full-service banking branches: ten in West Virginia and three in~~ Virginia. ~~The Company considers its~~We consider our Fintech banking market to be customers located throughout the entire United States.

~~The Company believes~~We believe that the current economic climate in ~~its~~our primary market areas reflect economic climates that are consistent with the general national economic climate. Unemployment in the United States was ~~6.2%~~4.6% and ~~4.5%~~7.7% for ~~March~~September 2021 and 2020, respectively.

Commitments and Contingent Liabilities

~~The Company is~~We are a party to financial instruments with off-balance-sheet risk in the ~~normal~~ordinary course of business to meet the financing needs of ~~its~~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.

~~The Company’s~~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. ~~The Company uses~~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. ~~The Company evaluates~~We evaluate each customer’s ~~credit worthiness~~creditworthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by ~~the Company~~us upon extension of credit, varies and is based on ~~management��s~~management’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by ~~the Company~~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. ~~The Company’s~~Our policy for obtaining collateral, and the nature of such collateral, is ~~essentially~~substantially the same as that involved in making commitments to extend credit.

Concentration of Credit Risk

~~The Company grants~~We grant a majority of ~~its~~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. ~~The Company evaluates~~We evaluate the ~~credit worthiness~~creditworthiness of each of ~~its~~our customers on a case-by-case basis and the amount of collateral it obtains is based upon management’s credit evaluation.

Regulatory

~~The Company is~~We are required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. In accordance with these requirements, ~~the Company~~we implemented a deposit reclassification program that ~~allowed the Company~~allows us to maintain no such reserve balances as of ~~March 31,~~September 30, 2021 and December 31, 2020.

In addition, the Bank is now subject to certain regulatory requirements resulting from its increased levels of insured deposit accounts. FDIC rules set forth in 12 CFR Part 370 impose recordkeeping requirements on insured depository institutions with two million or more deposit accounts (such as the Bank) to facilitate rapid payment of insured deposits to customers if such an institution were to fail. The rule requires those insured depository institutions to: (i) maintain complete and accurate data on each depositor’s ownership interest by right and capacity for all of the institution’s deposit accounts and (ii) develop the capability to calculate the insured and uninsured amounts for each deposit owner within 24 hours of failure. The FDIC will conduct periodic testing of compliance with these requirements, and institutions subject to the rule must submit to the FDIC a certification of compliance, signed by the Bank’s CEO, and deposit insurance coverage summary report on or before the mandatory compliance date and annually thereafter.

Additional information regarding supervision and regulatory matters related to our business and operations can be found in Item 1. Business of the 2020 Form 10-K under the heading Supervision and Regulation.

Contingent Liability

~~The subsidiary bank is~~We are involved in various legal actions arising in the ordinary course of business. In the opinion of management and counsel, the outcome of these matters will not have a significant adverse effect on the consolidated financial statements.

Off-Balance Sheet Commitments

The Bank has entered into certain agreements that represent off-balance sheet arrangements that could ~~have a significant~~significantly impact on 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.

~~Future Outlook~~

The Company has invested in the infrastructure to support anticipated future growth in each key area, including personnel, technology and processes to meet the growing compliance requirements in the industry. The Company believes it is well positioned in some of the finest markets in West Virginia and Virginia and will continue to focus on margin improvement; leveraging capital; organic portfolio loan growth; and operating efficiency. The key challenge for the Company in the future is to attract core deposits to fund growth in new markets through continued delivery of outstanding client service coupled with high-quality products and technology. The Company is expanding the treasury services function to support the banking needs of financial and emerging technology companies, which will further enhance core deposits, notably through its expansion of deposit acquisition and fee income strategies through the Fintech division. During 2020 and into 2021, the Company entered into agreements for debit card program sponsorship to further enhance fee income and noninterest income. In addition, the Company continues to expand into the Fintech industry through the acquisition of technology, including a software development team, in order to scale and diversify its banking capabilities.

Critical Accounting Policies and Estimates

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

There have been no significant changes to ~~the Company's~~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 2020 Form 10-K.

Recent Accounting Pronouncements and Developments

Recent accounting pronouncements and developments applicable ~~to the Company~~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

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

~~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 its policy guidelines. This objective is accomplished through management of balance sheet liquidity and interest rate risk exposure based on changes in economic conditions, interest rate levels and customer preferences. The Company manages 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.

The Company's primary market risk is interest 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. The Company’s interest rate risk represents the levels of exposure its 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 and its objective is to maximize stockholder value, enhance profitability and increase capital, serve customer and community needs and protect the Company 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 values 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.

The Company believes that accepting some level of interest rate risk is necessary in order to achieve realistic profit goals. Management and the Board of Directors have chosen an interest rate risk profile that is consistent with the Company's 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.

The Company’s 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. The Company measures 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 a twelve-month period and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels.

At March 31, 2021, the Company is shown in an asset sensitive position for the first year after rate shocks. Management continuously strives to reduce higher costing 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 %
December 31, 2020 42.7 % 30.7 % 19.3 % 9.6 % (6.6) % (9.6) % (12.4) % (12.9) %
December 31, 2019 5.7 % 3.5 % 1.3 % 0.3 % (6.9) % (18.4) % (26.8) % (32.5) %

As shown above, measures of net interest income at risk in a rising rate environment were more favorable at December 31, 2020 versus December 31, 2019 and less favorable in a falling rate environment for the same time periods. One factor explaining this year-over-year difference is the general level of market interest rates. A parallel downward interest rate shock would further compress the yields on assets and liabilities, while a parallel upward interest rate shock would widen the spread between yields on assets and liabilities.

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 the Company's cost of funding. The Company's deposit costs are low and have little room to reprice to a lower interest rate in a falling rate environment. However, the Company's 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. The Company's 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. Essentially, a gradual interest rate decline scenario smooths the impact of falling rates over a 12 or 24 month period. The Company's 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 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 was classified as fee income prior to the combination with ICM. This increase in fee income represents a benefit to net income that offsets the losses to net interest income experienced in a falling rate environment. After the ICM combination, the income related to loan originations and refinance activity is reflected as income from an equity method investment.

The measures of equity value at risk indicate the ongoing economic value of the Company by considering the effects of changes in interest rates on all of the Company’s 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 the Company’s net assets.

Estimated Changes in Economic Value of Equity (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 %
December 31, 2020 2.7 % 3.8 % 5.0 % 3.0 % (3.1) % 4.1 % 14.8 % 20.0 %
December 31, 2019 10.6 % 8.6 % 6.7 % 5.0 % (15.1) % (36.8) % (44.1) % (32.5) %

The EVE at risk in down rate scenarios increased at December 31, 2020, when compared to December 31, 2019. The increase in economic value of equity in rising rate environments is largely attributable to the effect that an increase in interest rates has on the present value of non-interest-bearing deposits. The discount rate for non-interest-bearing deposits rises as interest rates rise; however, these deposits pay a rate of zero. The cost of these liabilities does not increase as interest rates rise, but the discount rate applied to the expected future cash flows of these liabilities increases with interest rates. Any increase in the market rates used to discount the cash flows of these liabilities reduces the present value of these liabilities. The decrease in present value of these liabilities results in a net increase to economic value of equity. A falling rate environment would result in a higher net present value for these liabilities and would lead to a net decrease to economic value of equity.

Additionally, interest-bearing deposits contribute to the large declines in economic value of equity in falling rate environments as a result of their low cost. Interest-bearing deposit costs are modeled with a floor of zero, meaning that the interest rates paid on deposits cannot be negative. In the event of a large downward interest rate shock, deposit costs would not move below zero. However, the discount rates applied to the expected future cash flows of these deposits could sustain a large decline in interest rates before reaching zero. This has the effect of increasing the present value of the interest-bearing-deposit liability and ultimately decreasing economic value of equity.

The COVID-19 pandemic has introduced a great degree of uncertainty to both the global and domestic economy as well as financial markets. The extent and magnitude of the economic slowdown occurring as a result of the COVID-19 pandemic is still unknown. Financial markets adjusted dramatically to the reduced economic activity and the pace of recovery is uncertain. The financial market benchmark most relevant to the Company’s current and future profitability is the United States Government Treasury yield curve. The United States Government Treasury yield curve is used as a basis for the pricing of most bonds, loans, borrowings, deposits and other fixed income yield curves. The United States Government Treasury yield curve experienced a large, relatively parallel, downward shift. Given the Company’s asset sensitive position, management expects that net interest income will begin to increase as the curve begins to shift upward. As the outlook for the COVID-19 pandemic improves, management expects that the United States Government Treasury curve will experience some degree of an upward shift over time.

Credit Risk

~~The Company has counter-party~~We have counterparty risk, which may arise from the possible inability of third-party investors to meet the terms of their forward sales contracts. ~~The Company works~~We work with third-party investors that are generally well-capitalized, ~~are~~ investment grade and exhibit strong financial performance to mitigate this risk. ~~The Company monitors~~We monitor the financial condition of these third parties on an annual basis and ~~the Company does~~we do not expect these third parties to fail to meet their obligations.

~~Management expects~~We expect that some clients will be unable to meet their financial obligations in the ~~near-term~~near term as a result of the decreased economic activity brought on by the COVID-19 pandemic. However, ~~management does~~we do not expect that these credit concerns will perpetuate indefinitely. Many clients may be eligible to defer loan payments to a later date. ~~Management is~~We are working to incorporate scenarios that reflect decreased loan cash flows in the short term into ~~the Company’s~~our interest rate risk models.

Impact of Inflation and Changing Prices

The consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP, which generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of operations. Unlike industrial companies, ~~the Company's~~our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Item 4 – Controls and Procedures

As of ~~March 31,~~September 30, 2021, ~~the Company~~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 ~~March 31,~~September 30, 2021.

During the three months ended ~~March 31,~~September 30, 2021, there were no changes in ~~the Company’s~~our internal control over financial reporting that have materially affected or are reasonably likely to materially affect ~~the Company’s~~our internal control over financial reporting.

5264

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

From time to time in the ordinary course of business, ~~the Company~~we and ~~its~~our subsidiaries are subject to claims, asserted or unasserted, or named as a party to lawsuits or investigations. Litigation, in general, and intellectual property and securities litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings cannot be predicted with any certainty and in the case of more complex legal proceedings, the results are difficult to predict at all. ~~The Company is~~We are not aware of any asserted or unasserted legal proceedings or claims that ~~the Company believes~~we believe would have a material adverse effect on ~~the Company’s~~our financial condition or results of ~~the Company’s~~our operations.

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 2020 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

(a) Not applicable.

(b) Not applicable.

There was no share repurchase activity during the three months ended ~~March 31,~~September 30, 2021.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

Not applicable.

Item 5 – Other Information

None.

Item 6 – Exhibits

~~The following exhibits are filed herewith:~~


Exhibit Number	Description	Exhibit Location
Exhibit 10.1	Subordinated Note Purchase Agreement, dated September 28, 2021, by and among MVB Financial Corp. and certain qualified institutional buyers	Form 8-K, File No. 001-38314, filed Sep tember 2 8 , 2021, and incorporated by reference herein
Exhibit 31.1	Certificate of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
Exhibit 31.2	Certificate of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
Exhibit 32.1	Certificate of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
Exhibit 32.2	Certificate of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
Exhibit 101.INS	XBRL Instance Document	Filed herewith
Exhibit 101.SCH	XBRL Taxonomy Extension Schema	Filed herewith
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed herewith
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed herewith
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed herewith
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed herewith

5366


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:	~~May 3,~~November 1, 2021	By:	/s/ Larry F. Mazza
			Larry F. Mazza
			President, CEO and Director
			(Principal Executive Officer)

Date:	~~May 3,~~November 1, 2021	By:	/s/ Donald T. Robinson
			Donald T. Robinson
			Executive Vice President and CFO
			(Principal Financial and Accounting Officer)

5467


		Page
PART I	FINANCIAL INFORMATION	5

Item 1	Financial Statements	5

	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Changes in Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	911
	Notes to the Consolidated Financial Statements	1013

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3848

Item 3	Quantitative and Qualitative Disclosures About Market Risk	4964

Item 4	Controls and Procedures	5264

PART II	OTHER INFORMATION	5365

Item 1	Legal Proceedings	5365

Item 1A	Risk Factors	5365

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	5365

Item 3	Defaults Upon Senior Securities	5365

Item 4	Mine Safety Disclosures	5365

Item 5	Other Information	5365

Item 6	Exhibits	5366

	SIGNATURES	5467


	Three Months Ended March 31
		2021		2020
INTEREST INCOME
Interest and fees on loans		$	16,892	$	18,939
Interest on deposits with banks		122		111
Interest on investment securities		631		666
Interest on tax-exempt loans and securities		1,418		983
Total interest income		19,063		20,699

INTEREST EXPENSE
Interest on deposits		1,048		3,910
Interest on short-term borrowings		44		583
Interest on subordinated debt		466		35
Total interest expense		1,558		4,528

NET INTEREST INCOME		17,505		16,171
Provision for loan losses		618		1,138
Net interest income after provision for loan losses		16,887		15,033

NONINTEREST INCOME
Payment card and service charge income		1,493		550
Mortgage fee income		0		11,219
Insurance and investment services income		224		207
Gain on sale of available-for-sale securities, net		1,143		276

Loss on derivatives, net		0		(3,562)
Holding gain on equity securities, net		515		14
Compliance consulting income		1,281		1,009
Equity method investment income		6,469		0

Other operating income		1,333		1,137
Total noninterest income		12,458		10,850

NONINTEREST EXPENSES
Salaries and employee benefits		11,911		16,182
Occupancy expense		1,158		1,220
Equipment depreciation and maintenance		1,041		877
Data processing and communications		909		1,163
Mortgage processing		0		851
Marketing, contributions and sponsorships		65		336
Professional fees		1,742		1,331
Insurance, tax and assessment expense		538		464
Travel, entertainment, dues and subscriptions		884		1,218
Other operating expenses		870		1,014
Total noninterest expense		19,118		24,656
Income before income taxes		10,227		1,227
Income tax expense		2,169		179
Net income before noncontrolling interest		8,058		1,048



Net loss attributable to noncontrolling interest		27		0
Net income attributable to parent		8,085		1,048
Preferred dividends		35		114
Net income available to common shareholders		$	8,050	$	934



Earnings per common shareholder - basic		$	0.70	$	0.08


Earnings per common shareholder - diluted		$	0.66	$	0.08
Weighted-average shares outstanding - basic		11,530,279		11,942,767
Weighted-average shares outstanding - diluted		12,286,731		12,298,092


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	%
December 31, 2020	42.7	%	30.7	%	19.3	%	9.6	%	(6.6)	%	(9.6)	%	(12.4)	%	(12.9)	%
December 31, 2019	5.7	%	3.5	%	1.3	%	0.3	%	(6.9)	%	(18.4)	%	(26.8)	%	(32.5)	%