
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 ~~September 30, 2022~~March 31, 2023
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~~November 7, 2022,~~ May 8, 2023, there were ~~12,609,965~~12,698,568 shares of our 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, other than statements that are based on historical data, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others, statements with respect to the beliefs, plans, objectives, goals, guidelines, expectations, anticipations and future financial condition, results of operations and performance of ~~MVB Financial Corp.~~the Company and its subsidiaries (collectively, “we,” “our,” or “us”), including the MVB Bank, Inc. (the “Bank”), and statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “will,” “believe,” “anticipate,” “estimate,” “target,” “expect,” “intend,” “plan,” ~~“project,~~“projects,” “outlook” or the negative of those terms or similar expressions.

These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing our view as of any subsequent date. Forward-looking statements involve significant risks and uncertainties (both known and unknown) and actual results may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Factors that might cause such differences include, but are not limited to:


l			~~changes in the economy, which could materially impact credit quality trends~~industry factors and ~~the ability to generate loans~~general economic and ~~gather deposits, including the pace~~political conditions and events (such as economic slowdowns or recessions, volatility of ~~recovery following the Coronavirus Disease ("COVID-19") pandemic, risk of recession, rising~~market interest rates and inflation) nationally and in the ~~effects of inflation on our operations and operating expenses;~~markets in which we operate;
l			changes in financial market conditions in areas in which we conduct operations, including, without limitation, changes in deposit flows, the cost of funds, reduced rates of business formation and growth, commercial and residential real estate development and real estate prices;
l			interest rate fluctuations in response to economic conditions and the policies of various governmental and regulatory agencies;
l			the impacts related to or resulting from recent bank failures and other volatility which could affect the ability of depository institutions, including us, to attract and retain depositors, which could adversely affect our liquidity, business, financial condition and results of operations.
l			evolving legislation and heightened regulatory scrutiny in emerging financial technology (“FinTech”) and banking-as-a-service sectors and our ability to recruit and retain employees with industry expertise to comply with such legislation and regulatory scrutiny;
l			ability to adapt to technological change and to successfully execute business plans, manage risks and achieve objectives, including strategies related to investments in ~~financial technology (“Fintech”);~~FinTech;
l			market, economic, operational, liquidity, credit and interest rate risks associated with our business;
l			changes, volatility and disruption in local, national and international political and economic conditions, including, without limitation, major developments such as wars, natural disasters, epidemics and pandemics, military actions, terrorist attacks and ~~terrorist attacks;~~geopolitical conflict, including the continuing escalation and conflict in Ukraine;
l			climate change, severe weather and natural disasters which could have a material adverse effect on our business, financial condition and results of operations;
l			changes in ~~financial market conditions in areas in which we conduct operations, including, without limitation, reduced rates~~the economy and any governmental or societal responses to global health crises and pandemics, such as the pace of ~~business formation and growth, commercial and residential real estate development and real estate prices;~~
l			recovery following the ~~length, severity, magnitude and duration~~continued effects of the ~~COVID-19~~Coronavirus Disease (“COVID-19”) pandemic, which could directly or indirectly impact credit quality trends and the ~~direct~~ability to generate loans and ~~indirect impacts of the COVID-19 pandemic, including its impact on our financial condition and business operations;~~gather deposits;
l			unanticipated changes in our liquidity position, including, but not limited to, changes in access to sources of liquidity and capital to address our liquidity needs;
l			deposits include certain concentrations with large customers and industries;
l			~~inflation and changes in interest rates;~~
l			the quality and composition of our 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~~transition away from the London Inter-bank Offered Rate (“LIBOR”) and to the ~~transition to an alternative rate;~~Secured Overnight Financing Rate (“SOFR”) as the primary interest rate benchmark;
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~~risks associated with the termination of the merger agreement with Integrated Financial Holdings, Inc., including impact on the market price of our common stock, ability to retain customers, litigation, reputational and regulatory ~~approvals, when required, including for proposed mergers or acquisitions;~~risks, as well as potential adverse reactions from customers, business partners and others resulting from the termination;
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			risks related to our dependence on our information technology and telecommunications systems and the potential for any system failures or interruptions, as well as operational risks or risk management failures by us or critical third parties, including without limitation, with respect to data processing, information systems, 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		risks, uncertainties and losses involved with the developing cryptocurrency industry, including the evolving regulatory framework;
l	failure or circumvention of internal controls;
l	legislative or regulatory changes which adversely affect our operations or business, including the possibility of increased regulatory oversight due to changes in the nature and complexity of our business model, as well as 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;model;
l	increased emphasis by regulators on federal and state consumer protection laws that extensively govern customer relationships;
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~~adopting the current expected credit losses ~~(“CECL”)~~ standard;
l	concentration risk in our deposit base, including risk of losing large clients and concentration in certain industries, such as gaming deposits; and
l	costs of deposit insurance and changes with respect to Federal Deposit Insurance Corporation (“FDIC”) insurance coverage levels.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those made in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 Form 10-K”), filed with the Securities and Exchange Commission ~~("SEC"~~(“SEC”) on March ~~10, 2022,~~16, 2023, and from time to time, in our other filings with the SEC. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except to the extent required by law, we undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this report or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

REFERENCES

Unless the context otherwise requires, references in this report to “MVB Financial,” ~~“the Company,~~“MVB,” the “Company,” “we,” “us,” ~~“our”~~“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)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)		(Audited)			(Unaudited)		(Audited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Cash and due from banks	Cash and due from banks	$	6,852	$	8,878	Cash and due from banks	$	7,476	$	5,290
Interest-bearing balances with banks	Interest-bearing balances with banks	73,094		298,559		Interest-bearing balances with banks	567,789		34,990
Total cash and cash equivalents	Total cash and cash equivalents	79,946		307,437		Total cash and cash equivalents	575,265		40,280
Certificates of deposit with banks		—		2,719

Investment securities available-for-sale	Investment securities available-for-sale	366,742		421,466		Investment securities available-for-sale	339,578		379,814
Equity securities	Equity securities	34,101		32,402		Equity securities	38,576		38,744
Loans held-for-sale	Loans held-for-sale	19,977		—		Loans held-for-sale	19,893		23,126
Loans receivable	Loans receivable	2,471,395		1,869,838		Loans receivable	2,361,153		2,372,645
Allowance for loan losses		(26,515)		(18,266)
Allowance for credit losses						Allowance for credit losses	(35,513)		(23,837)
Loans receivable, net	Loans receivable, net	2,444,880		1,851,572		Loans receivable, net	2,325,640		2,348,808
Premises and equipment, net	Premises and equipment, net	24,668		25,052		Premises and equipment, net	22,869		23,630
Bank-owned life insurance	Bank-owned life insurance	42,992		42,257		Bank-owned life insurance	43,499		43,239
Equity method investments	Equity method investments	37,871		40,013		Equity method investments	75,149		76,223
Accrued interest receivable and other assets	Accrued interest receivable and other assets	84,757		65,543		Accrued interest receivable and other assets	108,569		87,833

Assets from discontinued operations						Assets from discontinued operations	—		4,315
Goodwill	Goodwill	3,988		3,988		Goodwill	2,838		2,838
TOTAL ASSETS	TOTAL ASSETS	$	3,139,922	$	2,792,449	TOTAL ASSETS	$	3,551,876	$	3,068,850

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	1,411,772	$	1,120,433	Noninterest-bearing	$	1,134,257	$	1,231,544
Interest-bearing	Interest-bearing	1,285,186		1,257,172		Interest-bearing	2,016,558		1,338,938
Total deposits	Total deposits	2,696,958		2,377,605		Total deposits	3,150,815		2,570,482

Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	42,144		55,126		Accrued interest payable and other liabilities	41,329		36,112
Repurchase agreements	Repurchase agreements	9,910		11,385		Repurchase agreements	5,419		10,037
FHLB and other borrowings	FHLB and other borrowings	73,328		—		FHLB and other borrowings	—		102,333
Subordinated debt	Subordinated debt	73,222		73,030		Subordinated debt	73,350		73,286
Senior term loan						Senior term loan	9,647		9,765
Liabilities from discontinued operations						Liabilities from discontinued operations	—		5,444
Total liabilities	Total liabilities	2,895,562		2,517,146		Total liabilities	3,280,560		2,807,459

STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY

Common stock - par value $1;20,000,000 shares authorized; 13,134,951 and 12,286,935 shares issued and outstanding, respectively, as of September 30, 2022 and 12,934,966 and 12,086,950 shares issued and outstanding, respectively, as of December 31, 2021		13,135		12,935
Common stock - par value $1; 20,000,000 shares authorized; 13,501,197 and 12,653,181 shares issued and outstanding, respectively, as of March 31, 2023 and 13,466,281 and 12,618,265 shares issued and outstanding, respectively, as of December 31, 2022						Common stock - par value $1; 20,000,000 shares authorized; 13,501,197 and 12,653,181 shares issued and outstanding, respectively, as of March 31, 2023 and 13,466,281 and 12,618,265 shares issued and outstanding, respectively, as of December 31, 2022	13,501		13,466
Additional paid-in capital	Additional paid-in capital	146,950		143,521		Additional paid-in capital	157,844		157,152
Retained earnings	Retained earnings	140,546		138,219		Retained earnings	147,465		144,911
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(39,977)		(3,606)		Accumulated other comprehensive loss	(30,938)		(37,704)
Treasury stock - 848,016 shares as of September 30, 2022 and December 31, 2021, at cost		(16,741)		(16,741)
Treasury stock - 848,016 shares as of March 31, 2023 and December 31, 2022, at cost						Treasury stock - 848,016 shares as of March 31, 2023 and December 31, 2022, at cost	(16,741)		(16,741)
Total equity attributable to parent	Total equity attributable to parent	243,913		274,328		Total equity attributable to parent	271,131		261,084
Noncontrolling interest	Noncontrolling interest	447		975		Noncontrolling interest	185		307
Total stockholders' equity	Total stockholders' equity	244,360		275,303		Total stockholders' equity	271,316		261,391
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,139,922	$	2,792,449	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,551,876	$	3,068,850

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
INTEREST INCOME	INTEREST INCOME									INTEREST INCOME
Interest and fees on loans	Interest and fees on loans	$	31,789	$	18,530	$	79,074	$	54,175	Interest and fees on loans	$	38,695	$	21,448
Interest on deposits with banks	Interest on deposits with banks	114		112		654		332		Interest on deposits with banks	3,153		227
Interest on investment securities	Interest on investment securities	897		575		2,383		1,831		Interest on investment securities	1,848		648
Interest on tax-exempt loans and securities	Interest on tax-exempt loans and securities	1,103		1,267		3,144		4,042		Interest on tax-exempt loans and securities	1,067		939
Total interest income	Total interest income	33,903		20,484		85,255		60,380		Total interest income	44,763		23,262

INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Interest on deposits	Interest on deposits	2,974		898		4,291		3,182		Interest on deposits	10,153		656
Interest on short-term borrowings	Interest on short-term borrowings	312		9		326		105		Interest on short-term borrowings	888		5
Interest on subordinated debt	Interest on subordinated debt	771		481		2,284		1,437		Interest on subordinated debt	799		753
Interest on senior term loan										Interest on senior term loan	194		—
Total interest expense	Total interest expense	4,057		1,388		6,901		4,724		Total interest expense	12,034		1,414

NET INTEREST INCOME	NET INTEREST INCOME	29,846		19,096		78,354		55,656		NET INTEREST INCOME	32,729		21,848
Provision (release of allowance) for loan losses		5,120		380		11,500		(542)
Net interest income after provision (release of allowance) for loan losses		24,726		18,716		66,854		56,198
Provision for credit losses										Provision for credit losses	4,576		1,280
Net interest income after provision for credit losses										Net interest income after provision for credit losses	28,153		20,568

NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Payment card and service charge income	Payment card and service charge income	3,313		1,685		9,970		5,104		Payment card and service charge income	3,610		2,642

Insurance and investment services income	Insurance and investment services income	195		236		667		707		Insurance and investment services income	92		254
Gain on sale of available-for-sale securities, net		—		529		650		3,380
Gain (loss) on sale of equity securities, net		(156)		—		(56)		5
Gain on sale of loans, net		1,298		908		3,786		3,125
Gain (loss) on sale of available-for-sale securities, net										Gain (loss) on sale of available-for-sale securities, net	(1,536)		650

Holding gain (loss) on equity securities, net		(61)		536		(146)		1,750
Loss on derivatives, net										Loss on derivatives, net	(100)		—
Gain (loss) on sale of loans, net										Gain (loss) on sale of loans, net	(356)		1,083
Holding (loss) on equity securities										Holding (loss) on equity securities	(308)		(59)
Compliance and consulting income	Compliance and consulting income	3,736		3,013		11,355		6,162		Compliance and consulting income	1,016		1,234
Equity method investment income (loss)		(1,021)		3,573		666		14,570
Gains on acquisition and divestiture activity		—		10,783		—		10,783
Equity method investments income (loss)										Equity method investments income (loss)	(1,193)		1,138

Equity method investment gain	Equity method investment gain	—		—		1,874		—		Equity method investment gain	—		1,803
Other operating income	Other operating income	887		688		3,204		2,467		Other operating income	1,842		535
Total noninterest income	Total noninterest income	8,191		21,951		31,970		48,053		Total noninterest income	3,067		9,280

NONINTEREST EXPENSES	NONINTEREST EXPENSES									NONINTEREST EXPENSES
Salaries and employee benefits	Salaries and employee benefits	18,316		16,528		55,260		42,100		Salaries and employee benefits	16,746		15,727
Occupancy expense	Occupancy expense	1,130		1,024		3,009		3,297		Occupancy expense	792		972
Equipment depreciation and maintenance	Equipment depreciation and maintenance	1,519		1,250		4,012		3,497		Equipment depreciation and maintenance	1,457		1,212
Data processing and communications	Data processing and communications	1,039		1,080		3,110		3,409		Data processing and communications	1,148		1,016

Marketing, contributions and sponsorships		226		207		746		418

Professional fees	Professional fees	2,684		2,665		8,034		6,857		Professional fees	2,951		4,017
Insurance, tax and assessment expense	Insurance, tax and assessment expense	627		532		1,777		1,570		Insurance, tax and assessment expense	904		536
Travel, entertainment, dues and subscriptions	Travel, entertainment, dues and subscriptions	2,034		1,437		6,355		3,525		Travel, entertainment, dues and subscriptions	1,922		1,668
Other operating expenses	Other operating expenses	2,390		1,106		6,343		3,677		Other operating expenses	2,397		2,110
Total noninterest expense	Total noninterest expense	29,965		25,829		88,646		68,350		Total noninterest expense	28,317		27,258
Income before income taxes	Income before income taxes	2,952		14,838		10,178		35,901		Income before income taxes	2,903		2,590
Income taxes	Income taxes	397		3,164		2,161		7,006		Income taxes	465		680
Net income from continuing operations										Net income from continuing operations	2,438		1,910
Income from discontinued operations, before income taxes										Income from discontinued operations, before income taxes	11,831		986


Net income before noncontrolling interest		2,555		11,674		8,017		28,895
Income taxes - discontinued operations										Income taxes - discontinued operations	3,049		225
Net income from discontinued operations										Net income from discontinued operations	8,782		761
Net income										Net income	11,220		2,671
Net loss attributable to noncontrolling interest										Net loss attributable to noncontrolling interest	122		193

Net income attributable to parent										Net income attributable to parent	$	11,342	$	2,864

Net loss attributable to noncontrolling interest		163		154		521		265
Net income attributable to parent		2,718		11,828		8,538		29,160
Preferred dividends		—		—		—		35
Net income available to common shareholders		$	2,718	$	11,828	$	8,538	$	29,125

Earnings per share from continuing operations - basic										Earnings per share from continuing operations - basic	$	0.20	$	0.17
Earnings per share from discontinued operations - basic										Earnings per share from discontinued operations - basic	$	0.70	$	0.06
Earnings per common shareholder - basic	Earnings per common shareholder - basic	$	0.22	$	1.00	$	0.70	$	2.49	Earnings per common shareholder - basic	$	0.90	$	0.24

Earnings per share from continuing operations - diluted										Earnings per share from continuing operations - diluted	$	0.20	$	0.16
Earnings per share from discontinued operations - diluted										Earnings per share from discontinued operations - diluted	$	0.67	$	0.06
Earnings per common shareholder - diluted	Earnings per common shareholder - diluted	$	0.21	$	0.92	$	0.66	$	2.32	Earnings per common shareholder - diluted	$	0.87	$	0.22
Weighted-average shares outstanding - basic	Weighted-average shares outstanding - basic	12,238,505		11,880,348		12,170,028		11,684,570		Weighted-average shares outstanding - basic	12,623,361		12,093,179
Weighted-average shares outstanding - diluted	Weighted-average shares outstanding - diluted	12,854,951		12,824,309		12,852,574		12,565,809		Weighted-average shares outstanding - diluted	13,016,082		12,927,811

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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Net income before noncontrolling interest $ 2,555 $ 11,674 $ 8,017 $ 28,895
Other comprehensive income (loss):
Unrealized holding gain (loss) on securities available-for-sale (14,437) 239 (48,587) (2,723)
Reclassification adjustment for gain recognized in income — (529) (650) (3,380)
Change in defined benefit pension plan 156 (914) 845 1,112
Reclassification adjustment for amortization of net actuarial loss recognized in income 107 127 321 381
Reclassification adjustment for carrying value adjustment - investment hedge (gain) loss recognized in income 56 14 (141) 637
Other comprehensive loss, before tax (14,118) (1,063) (48,212) (3,973)
Income taxes related to items of other comprehensive income (loss):
Unrealized holding gain (loss) on securities available-for-sale 3,641 (56) 11,939 638
Reclassification adjustment for gain recognized in income — 124 152 793
Change in defined benefit pension plan (39) 214 (206) (261)
Reclassification adjustment for amortization of net actuarial loss recognized in income (27) (30) (79) (89)
Reclassification adjustment for carrying value adjustment - investment hedge (gain) loss recognized in income (14) (3) 35 (149)
Income taxes related to items of other comprehensive income (loss) 3,561 249 11,841 932
Total other comprehensive loss, net of tax (10,557) (814) (36,371) (3,041)
Comprehensive loss attributable to noncontrolling interest 163 154 521 265
Comprehensive income (loss) $ (7,839) $ 11,014 $ (27,833) $ 26,119


	Three Months Ended March 31,
		2023		2022
Net income before noncontrolling interest		$	11,220	$	2,671

Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale		7,704		(17,519)
Reclassification adjustment for gain (loss) recognized in income		1,536		(650)
Change in defined benefit pension plan		(28)		369
Reclassification adjustment for amortization of net actuarial loss recognized in income		29		107
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income		(334)		(10)
Other comprehensive income (loss), before tax		8,907		(17,703)

Income taxes related to items of other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale		(1,852)		4,104
Reclassification adjustment for gain (loss) recognized in income		(369)		152
Change in defined benefit pension plan		7		(86)
Reclassification adjustment for amortization of net actuarial loss recognized in income		(7)		(25)
Reclassification adjustment for carrying value adjustment - investment hedge recognized in income		80		2
Income taxes related to items of other comprehensive income (loss):		(2,141)		4,147

Total other comprehensive income (loss), net of tax		6,766		(13,556)

Comprehensive income attributable to noncontrolling interest		122		193

Comprehensive income (loss)		$	18,108	$	(10,692)

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, 2021 — $ — 12,934,966 $ 12,935 $ 143,521 $ 138,219 $ (3,606) 848,016 $ (16,741) $ 274,328 $ 975 $ 275,303
Net income (loss) — — — — — 2,864 — — — 2,864 (193) 2,671
Other comprehensive loss — — — — — — (13,556) — — (13,556) — (13,556)
Dividends on common stock ($0.17 per share) — — — — — (2,059) — — — (2,059) — (2,059)
Stock-based compensation — — — — 674 — — — — 674 — 674
Stock-based compensation related to equity method investment — — — — 104 — — — — 104 — 104
Common stock options exercised — — 56,174 56 669 — — — — 725 — 725
Balance at March 31, 2022 — $ — 12,991,140 $ 12,991 $ 144,968 $ 139,024 $ (17,162) 848,016 $ (16,741) $ 263,080 $ 782 $ 263,862
Net income (loss) — — — — — 2,956 — — — 2,956 (165) 2,791
Other comprehensive loss — — — — — — (12,258) — — (12,258) — (12,258)
Dividends on common stock ($0.17 per share) — — — — — (2,076) — — — (2,076) — (2,076)
Stock-based compensation — — — — 757 — — — — 757 — 757
Stock-based compensation related to equity method investment — — — — 173 — — — — 173 — 173
Common stock options exercised — — 30,200 30 362 — — — — 392 — 392
Restricted stock units vested — — 73,300 73 (73) — — — — — — —
Minimum tax withholding on restricted stock units issued — — (17,596) (17) (674) — — — — (691) — (691)
Stock purchase from noncontrolling interest — — — — (33) — — — — (33) (7) (40)
Balance at June 30, 2022 — $ — 13,077,044 $ 13,077 $ 145,480 $ 139,904 $ (29,420) 848,016 $ (16,741) $ 252,300 $ 610 $ 252,910

Net income (loss) — — — — — 2,718 — — — 2,718 (163) 2,555
Other comprehensive loss — — — — — — (10,557) — — (10,557) — (10,557)
Dividends on common stock ($0.17 per share) — — — — — (2,076) — — — (2,076) — (2,076)
Stock-based compensation — — — — 671 — — — — 671 — 671
Stock-based compensation related to equity method investment — — — — 139 — — — — 139 — 139
Common stock options exercised — — 55,853 56 662 — — — — 718 — 718
Restricted stock units vested — — 2,054 2 (2) — — — — — — —
Balance at September 30, 2022 — $ — 13,134,951 $ 13,135 $ 146,950 $ 140,546 $ (39,977) 848,016 $ (16,741) $ 243,913 $ 447 $ 244,360


	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
Balance at December 31, 2022			13,466,281	$	13,466	$	157,152	$	144,911	$	(37,704)		848,016	$	(16,741)	$	261,084	$	307		$	261,391

Net income (loss)			—	—		—		11,342		—			—	—		11,342		(122)			11,220
Other comprehensive income			—	—		—		—		6,766			—	—		6,766		—			6,766
Dividends on common stock ($0.17 per share)			—	—		—		(2,146)		—			—	—		(2,146)		—			(2,146)
Impact of adopting ASC 326, net of tax			—	—		—		(6,642)		—			—	—		(6,642)		—			(6,642)
Stock-based compensation			—	—		831		—		—			—	—		831		—			831

Stock-based compensation related to equity method investment			—	—		69		—		—			—	—		69		—			69
Common stock options exercised			4,450	4		66		—		—			—	—		70		—			70
Restricted stock units issued			43,882	44		(44)		—		—			—	—		—		—			—
Minimum tax withholding on restricted stock units issued			(13,416)	(13)		(230)		—		—			—	—		(243)		—			(243)

Balance at March 31, 2023			13,501,197	$	13,501	$	157,844	$	147,465	$	(30,938)		848,016	$	(16,741)	$	271,131	$	185		$	271,316

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 (loss) — — — — — 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

Net income — — — — — 11,828 — — — 11,828 (154) 11,674
Other comprehensive income — — — — — — (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


	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
Balance at December 31, 2021			12,934,966	$	12,935	$	143,521	$	138,219	$	(3,606)		848,016	$	(16,741)	$	274,328	$	975		$	275,303

Net income (loss)			—	—		—		2,864		—			—	—		2,864		(193)			2,671
Other comprehensive loss			—	—		—		—		(13,556)			—	—		(13,556)		—			(13,556)
Dividends on common stock ($0.17 per share)			—	—		—		(2,059)		—			—	—		(2,059)		—			(2,059)

Stock-based compensation			—	—		674		—		—			—	—		674		—			674

Stock-based compensation related to equity method investment			—	—		104		—		—			—	—		104		—			104
Common stock options exercised			56,174	56		669		—		—			—	—		725		—			725




Balance at March 31, 2022			12,991,140	$	12,991	$	144,968	$	139,024	$	(17,162)		848,016	$	(16,741)	$	263,080	$	782		$	263,862

See accompanying notes to unaudited consolidated financial statements.

129

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited) (Dollars in thousands)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income before noncontrolling interest	Net income before noncontrolling interest	$	8,017	$	28,895	Net income before noncontrolling interest	$	11,220	$	2,671
Adjustments to reconcile net income to net cash from operating activities:	Adjustments to reconcile net income to net cash from operating activities:					Adjustments to reconcile net income to net cash from operating activities:

Net amortization and accretion of investments	Net amortization and accretion of investments	2,020		3,011		Net amortization and accretion of investments	569		646
Net amortization of deferred loan costs	Net amortization of deferred loan costs	1,877		2,062		Net amortization of deferred loan costs	541		604
Provision (release of allowance) for loan losses		11,500		(542)
Provision for credit losses						Provision for credit losses	4,576		1,280
Depreciation and amortization	Depreciation and amortization	3,241		2,800		Depreciation and amortization	1,424		851
Stock-based compensation	Stock-based compensation	2,102		2,339		Stock-based compensation	831		674
Stock-based compensation related to equity method investment	Stock-based compensation related to equity method investment	416		—		Stock-based compensation related to equity method investment	69		104
Loans originated for sale	Loans originated for sale	(69,907)		(23,950)		Loans originated for sale	(402)		(16,452)
Proceeds of loans sold	Proceeds of loans sold	58,933		17,871		Proceeds of loans sold	3,681		10,804
Holding (gain) loss on equity securities		146		(1,750)
Holding loss on equity securities						Holding loss on equity securities	308		59

Gain on sale of available-for-sale securities, net		(650)		(3,380)
(Gain) loss on sale of available-for-sale securities, net						(Gain) loss on sale of available-for-sale securities, net	1,536		(650)

(Gain) loss on sale of equity securities, net		56		(5)

Gain on sale of loans		(3,786)		(3,125)
Gains on acquisition and divestiture activity		—		(10,783)

Gain on sale of loans held-for-sale						Gain on sale of loans held-for-sale	(205)		(1,083)
Gain on sale of discontinued operations						Gain on sale of discontinued operations	(11,800)		—

Gain on sale of other real estate owned	Gain on sale of other real estate owned	(38)		(116)		Gain on sale of other real estate owned	(137)		(21)
Income on bank-owned life insurance	Income on bank-owned life insurance	(735)		(749)		Income on bank-owned life insurance	(260)		(243)
Deferred income taxes	Deferred income taxes	16		(1,186)		Deferred income taxes	22		9
Equity method investment income		(666)		(14,570)
Equity method investment (income) loss						Equity method investment (income) loss	1,193		(1,138)
Equity method investment gain	Equity method investment gain	(1,874)		—		Equity method investment gain	—		(1,803)
Return on equity method investment	Return on equity method investment	4,682		29,795		Return on equity method investment	(119)		7,286
Other assets	Other assets	401		(503)		Other assets	(24,180)		(41,605)
Other liabilities	Other liabilities	(11,970)		(14,327)		Other liabilities	5,812		(19,332)
Net cash from operating activities	Net cash from operating activities	3,781		11,787		Net cash from operating activities	(5,321)		(57,339)
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Purchases of available-for-sale investment securities	Purchases of available-for-sale investment securities	(77,464)		(176,468)		Purchases of available-for-sale investment securities	(10,417)		(62,635)
Maturities/paydowns of available-for-sale investment securities		18,751		38,846
Net maturities/paydowns of available-for-sale investment securities						Net maturities/paydowns of available-for-sale investment securities	3,503		9,533
Sales of available-for-sale investment securities	Sales of available-for-sale investment securities	60,635		103,365		Sales of available-for-sale investment securities	54,531		60,635
Purchases of premises and equipment	Purchases of premises and equipment	(2,730)		(3,589)		Purchases of premises and equipment	(908)		(1,227)
Disposals of premises and equipment						Disposals of premises and equipment	427		—

Net (increase) decrease in loans						Net (increase) decrease in loans	25,378		(31,787)
Loss on sale of loans held for investment						Loss on sale of loans held for investment	561		—

Net increase in loans		(611,972)		(356,623)
Purchases of restricted bank stock		(38,779)		(1,410)
Redemptions of restricted bank stock	Redemptions of restricted bank stock	31,924		2,821		Redemptions of restricted bank stock	—		68
Proceeds from maturities of certificates of deposit with banks	Proceeds from maturities of certificates of deposit with banks	2,719		2,221		Proceeds from maturities of certificates of deposit with banks	—		490

Proceeds from sale of other real estate owned	Proceeds from sale of other real estate owned	1,256		2,761		Proceeds from sale of other real estate owned	374		245

Purchase of equity securities	Purchase of equity securities	(2,972)		(3,472)		Purchase of equity securities	(140)		(2,304)
Sales of equity securities		1,261		61
Net cash transferred for banking center sale		—		(95,697)
Cash paid for acquisitions, net of cash acquired		—		(772)

Net cash transferred for sale of discontinued operations						Net cash transferred for sale of discontinued operations	(3,935)		—

Net cash from investing activities	Net cash from investing activities	(617,371)		(487,956)		Net cash from investing activities	69,374		(26,982)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net increase in deposits	Net increase in deposits	319,353		579,875		Net increase in deposits	580,333		131,474
Net change in repurchase agreements	Net change in repurchase agreements	(1,475)		873		Net change in repurchase agreements	(4,618)		716
Net change in FHLB and other borrowings	Net change in FHLB and other borrowings	73,328		—		Net change in FHLB and other borrowings	(102,333)		—

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

Preferred stock redemption		—		(7,334)

Principal payments on senior term loan						Principal payments on senior term loan	(131)		—

Common stock options exercised	Common stock options exercised	1,835		3,405		Common stock options exercised	70		725

Withholding cash issued in lieu of restricted stock	Withholding cash issued in lieu of restricted stock	(691)		(256)		Withholding cash issued in lieu of restricted stock	(243)		—
Cash dividends paid on common stock	Cash dividends paid on common stock	(6,211)		(4,230)		Cash dividends paid on common stock	(2,146)		(2,059)
Cash dividends paid on preferred stock		—		(35)
Issuance of subsidiary membership units		—		500

1310


Stock purchase from noncontrolling interest		(40)		—
Net cash from financing activities	Net cash from financing activities	386,099		602,357		Net cash from financing activities	470,932		130,856
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(227,491)		126,188		Net change in cash and cash equivalents	534,985		46,535
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	307,437		263,893		Cash and cash equivalents, beginning of period	40,280		307,437
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	79,946	$	390,081	Cash and cash equivalents, end of period	$	575,265	$	353,972

Cash payments for:	Cash payments for:					Cash payments for:
Interest on deposits, repurchase agreements and borrowings	Interest on deposits, repurchase agreements and borrowings	$	6,299	$	4,488	Interest on deposits, repurchase agreements and borrowings	$	12,152	$	865
Income taxes	Income taxes	418		9,600		Income taxes	25		119

Business combination non-cash disclosures:
Assets acquired in business combination, net of cash acquired		$	—	$	739
Liabilities assumed in business combination		—		605

Supplemental disclosure of cash flow information:
Fair value of noncontrolling interests at acquisition date		$	—	$	1,400
Loans transferred to other real estate owned		70		357
Change in unrealized holding losses on securities available-for-sale		51,242		—
Restricted stock units vested		75		70
Employee stock-based compensation tax withholding obligations		(17)		4,155
Common stock issued related to acquisitions		—		708

Supplemental disclosure of cash flow information:						Supplemental disclosure of cash flow information:

Change in unrealized holding losses on securities available-for-sale						Change in unrealized holding losses on securities available-for-sale	9,241		11,441

Impact of adopting ASC 326, net of tax						Impact of adopting ASC 326, net of tax	6,642		—

Loans transferred to loans held-for-sale						Loans transferred to loans held-for-sale	232		2,430

See accompanying notes to unaudited consolidated financial statements.

1411

Notes to the Consolidated Financial Statements

Note 1 – Nature of Operations and Basis of Presentation

Business and Organization

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

Edge Ventures serves as a management company providing oversight, alignment and structure for MVB’s Fintech companies and allocates resources to help incubate venture businesses and technologies acquired and developed by MVB.

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

In February 2023, we completed the sale of the Bank’s wholly-owned subsidiary, ProCo Global, Inc. (“Chartwell,” which does business under the registered trade name Chartwell Compliance). Please refer to Note 14 – Acquisition & Divestiture Activity.

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

CoRe Banking

We offer our customers a full range of products and services including:


l			Various demand deposit accounts, savings accounts, money market accounts and certificates of deposit;
l			Commercial, consumer and real estate mortgage loans and lines of credit;
l			Debit cards;
l			Cashier’s checks;
l			Safe deposit rental facilities; and
l			Non-deposit investment services offered through an association with a broker-dealer.

Fintech Banking

We provide innovative strategies to independent banking and corporate clients throughout the United States. Our dedicated Fintech sales team specializes in providing banking services to corporate Fintech clients, with a primary focus on operational risk management and compliance. Managing banking relationships with clients in the payments, digital savings, ~~cryptocurrency,~~digital assets, crowd funding, lottery and gaming industries is complex, from both an operational and regulatory perspective. We believe that the complexity of serving these industries causes them to be underserved with quality banking services and provides us with a significantly expanded pool of potential customers. When serviced in a safe and efficient manner, we believe these industries ~~offer an excellent~~provide a source of stable, ~~low~~lower cost deposits and noninterest, fee-based income. We thoroughly analyze each industry in which our customers operate, as well as any new products or services provided, ~~thoroughly,~~from both ~~from~~ an operational and regulatory ~~viewpoint.~~perspective.

Principles of Consolidation and Basis of Presentation

The financial statements are consolidated to include the accounts of MVB and its subsidiaries, including the Bank and the Bank’s subsidiaries. In our opinion, the accompanying consolidated financial statements contain all normal recurring adjustments necessary for a fair presentation of our financial statements for interim periods in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with instructions for Form 10-Q and Article 10 of Regulation S-X of the SEC. All significant intercompany accounts and transactions have been eliminated in consolidated financial statements.

Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted. The consolidated balance sheet as of December 31, ~~2021~~2022 has been derived from audited financial

statements included in our Annual Report on Form 10-K for the ~~2021~~year ended December 31, 2022 (the “2022 Form ~~10-K.~~10-K”). The information presented in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and notes thereto included in the ~~2021~~2022 Form 10-K. Operating results for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023.

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

The Bank owns controlling interests in Flexia, Trabian and MVB Technology. We own an 80.0% interest in Flexia, an 80.8% interest in Trabian and a 93.4% interest in MVB Technology. Accordingly, we are required to consolidate 100% of each entity within the consolidated financial statements. The remaining interests of these entities are accounted for separately as noncontrolling interests within our consolidated financial statements. Noncontrolling interest represents the portion of ownership and profit or loss that is attributable to the minority owners of these entities.

Unconsolidated investments where we have the ability to exercise significant influence over the operating and financial policies of the respective investee are accounted for using the equity method of accounting. Those investments that are not consolidated or accounted for using the equity method of accounting are accounted for under cost or fair value accounting. For investments accounted for under the equity method, we record our investment in non-consolidated affiliates and the portion of income or loss in equity in earnings of non-consolidated affiliates. We periodically evaluate these investments for impairment. As of ~~September 30, 2022,~~March 31, 2023, we held threeequity method investments.

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

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

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

~~COVID-19 Pandemic~~

Since 2020 and continuing in 2022, 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 will continue to impact our future operating results will depend on future developments, including resurgences, such as the recent acceleration of the spread of variants and related sub-variants of COVID-19, 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. Purchased credit impaired ("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 (“SRCs”). Effective as of the first quarter of 2022, we no longer qualified as an SRC. 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 currently expect to recognize a one-time cumulative effect adjustment to the ALL as of January 1, 2023, 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, we have formed a cross-functional implementation team. This cross-functional team is currently in the process of testing the model and completing the implementation plan, which will include assessment and documentation of processes, internal controls and data sources; model testing and documentation; and system configuration, among other things. We are also in the process of implementing a third-party vendor solution to assist us 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. Upon adoption of ASU 2016-13, we currently expect to record an increase in our allowance for credit losses of between 15% and 25%, not including any change in unfunded commitment liability; however, the ultimate impact of adoption on our allowance for credit losses could vary significantly from our current estimate as it is influenced by, among other things, the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts as of the adoption date.

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~~In December 2022, the FASB issued ASC 2022-06, Deferral of the Sunset Date of Topic 848, which extends the sunset date of ~~issuance until~~Topic 848 from December 31, ~~2022.~~2022, to December 31, 2024. The guidance permits entities to not apply modification accounting or remeasure lease payments in lease contracts if the changes to the contract are related to the discontinuation of the reference rate. If certain criteria are met, the amendments also allow exceptions to the de-designation criteria of the hedging relationship and the assessment of hedge effectiveness during the transition period. In January 2021, ASU 2021-01 was issued by the FASB and clarifies that certain exceptions in reference rate reform apply to derivatives that are affected by the discounting transition. We will continue to assess the impact as the reference rate transition occurs over the next year. As of ~~September 30, 2022,~~March 31, 2023, we had loans totaling ~~$437.98~~$258.36 million that reference LIBOR which will be transitioned to the secured overnight financing rate ~~("SOFR"~~(“SOFR”) effective June 30, 2023.

~~In March 2022, the FASB issued ASU 2022-02,~~ ~~Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments eliminate the accounting guidance for troubled debt restructurings ("TDRs") in subtopic 310-40,~~ ~~Receivables - Troubled Debt Restructurings by Creditors~~, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 of the codification to determine whether a modification results in a new loan or a continuation of an existing loan. The amendments also include provisions for disclosure of current-period gross writeoffs by year of origination for financing receivables and net investment in leases within the scope of subtopic 326-20, ~~Financial Instruments - Credit Losses - Measured at Amortized Cost~~. Gross writeoff information must be included in the vintage disclosures required for public business entities which requires that an entity disclose the amortized cost basis of financing receivables by credit-quality indicator and class of financing receivables by year of origination. This amendment is effective concurrently with the amendments in ASU 2016-13 which is currently effective for fiscal years beginning after December 15, 2022. These amendments primarily impact disclosure requirements and we do not believe they will have a material impact on our consolidated financial statements.

~~In March 2022, the SEC released~~ ~~Staff Accounting Bulletin No. 121 ("SAB 121")~~, which updates the SEC's position regarding the accounting for obligations to safeguard crypto-assets an entity holds for platform users. When a reporting entity holds crypto-assets for platform users and maintains the cryptographic key information necessary to access the crypto-asset, the reporting entity should present a liability on its balance sheet to reflect its obligation to safeguard the crypto-assets held for platform users. The liability represents the loss exposure due to the risks associated with safeguarding crypto-assets. The entity should also record an asset at the same time that recognizes the fair value of the crypto-assets held for its platform users. SAB 121 is effective no later than the first interim or annual period ending after June 15, 2022, with retrospective application as of the beginning of the fiscal year to which the interim or annual period relates. We do not currently expect this update to impact our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments clarify that a contractual restriction on the sale of an equity

security is not considered part of the unit of account of the equity security, and therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account and require additional disclosures related to equity securities with contractual sale restrictions. The amendment is effective for fiscal years beginning after December 15, 2023. We do not currently expect these amendments to have a material impact our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structure Using the Proportional Amortization Method. The amendments allow registrants the option to apply the proportional amortization method to account for all types of investments in tax credit structures if certain conditions are met. Prior to these amendments the option to use the proportional amortization method was limited to only investments in low-income-housing tax credit structures. Under the proportional amortization method, entities amortize the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognize the net amortization and income tax credits and other benefits in the income statement as a component of income tax expense or benefit. The amendment is effective for fiscal years beginning after December 15, 2023. We do not currently expect these amendments to have a material impact on our consolidated financial statements.

Adoption of New Accounting Pronouncement

In January 2023, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance: ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments – Credit Losses, Topic 326 and 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 and ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures all of which clarify codification and correct unintended application of the guidance. Collectively, upon adoption, these updates comprise Accounting Standards Codification Topic 326 Financial Instruments - Credit Losses ("ASC 326"). The new guidance 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. Purchased credit deteriorated (“PCD”) 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. We formed a cross-functional implementation team. This cross-functional team has completed testing the model and has executed the implementation plan, which included assessment and documentation of processes, internal controls and data sources; model testing and documentation; and system configuration, among other things. We completed the process of implementing a third-party vendor solution to assist us in the application of this standard. Adoption of this pronouncement resulted in an increase in the allowance for credit loss ("ACL") as a result of changing from an “incurred loss” model, which encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss” model, which encompasses allowances for losses expected to be incurred over the life of the portfolio.

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

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

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

In addition to the aforementioned elections, we made the following elections at adoption:


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

Note 2 – Investment Securities

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


		September 30, 2022									March 31, 2023
(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	$	52,276	$	20	$	(6,148)	$	46,148	United States government agency securities	$	45,266	$	5	$	(5,283)	$	39,988
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	69,708		—		(11,879)		57,829		United States sponsored mortgage-backed securities	66,976		30		(10,233)		56,773
United States treasury securities	United States treasury securities	121,479		—		(10,447)		111,032		United States treasury securities	106,627		—		(7,273)		99,354
Municipal securities	Municipal securities	156,765		2,860		(23,867)		135,758		Municipal securities	137,434		4,687		(18,519)		123,602
Corporate debt securities	Corporate debt securities	7,654		—		(14)		7,640		Corporate debt securities	11,573		12		(37)		11,548
Other debt securities	Other debt securities	7,500		—		—		7,500		Other debt securities	7,500		—		—		7,500
Total debt securities	Total debt securities	415,382		2,880		(52,355)		365,907		Total debt securities	375,376		4,734		(41,345)		338,765
Other securities	Other securities	835		—		—		835		Other securities	813		—		—		813
Total investment securities available-for-sale	Total investment securities available-for-sale	$	416,217	$	2,880	$	(52,355)	$	366,742	Total investment securities available-for-sale	$	376,189	$	4,734	$	(41,345)	$	339,578


		December 31, 2021									December 31, 2022
(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	$	41,105	$	228	$	(896)	$	40,437	United States government agency securities	$	51,436	$	15	$	(6,637)	$	44,814
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	77,519		222		(1,633)		76,108		United States sponsored mortgage-backed securities	68,267		—		(11,696)		56,571
United States treasury securities	United States treasury securities	112,133		—		(1,744)		110,389		United States treasury securities	130,689		48		(9,828)		120,909
Municipal securities	Municipal securities	171,044		4,334		(366)		175,012		Municipal securities	157,842		2,412		(21,618)		138,636
Corporate debt securities	Corporate debt securities	11,093		49		—		11,142		Corporate debt securities	10,570		10		(20)		10,560
Other debt securities	Other debt securities	7,500		—		—		7,500		Other debt securities	7,500		—		—		7,500
Total debt securities	Total debt securities	420,394		4,833		(4,639)		420,588		Total debt securities	426,304		2,485		(49,799)		378,990
Other securities	Other securities	878		—		—		878		Other securities	824		—		—		824
Total investment securities available-for-sale	Total investment securities available-for-sale	$	421,272	$	4,833	$	(4,639)	$	421,466	Total investment securities available-for-sale	$	427,128	$	2,485	$	(49,799)	$	379,814

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


		September 30, 2022					March 31, 2023
(Dollars in thousands)	(Dollars in thousands)	Amortized Cost		Fair Value		(Dollars in thousands)	Amortized Cost		Fair Value
Within one year	Within one year	$	—	$	—	Within one year	$	5,208	$	5,204
After one year, but within five years	After one year, but within five years	133,910		123,295		After one year, but within five years	113,636		106,337
After five years, but within ten years	After five years, but within ten years	40,660		36,742		After five years, but within ten years	39,526		36,331
After ten years	After ten years	240,812		205,870		After ten years	217,006		190,893
Total	Total	$	415,382	$	365,907	Total	$	375,376	$	338,765

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

Investment securities with a carrying value of ~~$27.5~~$221.3 millionand ~~$244.6~~$91.3 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, were pledged to secure public funds, repurchase ~~agreements.~~agreements,and potential borrowings at the Federal Reserve discount window.

Our investment portfolio includes securities that are in an unrealized loss position as of ~~September 30, 2022,~~March 31, 2023, the details of which are included in the following table. ~~Although these~~We evaluate available-for-sale debt securities ~~would result in a pretax~~to determine whether the unrealized loss of~~$52.4 millionif sold at September~~

~~30, 2022, we currently have no intention of selling the applicable securities at such fair values, and believe that we have the ability~~is due to ~~hold these securities until all principal has been recovered.~~It is more likely than not that we will not, for liquidity purposes, sell any securities at a loss. Declines in the fair value of these securities can be traced to general market conditions, which reflect the prospect for the economy as a whole.credit-related factors or non-credit-related factors. When determining ~~other-than-temporary impairment~~the allowance for credit losses on securities, we consider such factors as adverse conditions specifically related to a certain security or to specific conditions in an industry or geographic area, the time frame securities have been in an unrealized loss position, our ability to hold the security for a period of time sufficient to allow for anticipated recovery in value, whether or not the security has been downgraded by a rating agency and whether or not the financial condition of the security issuer has severely deteriorated. As

Although these securities would result in a pretax loss of ~~September 30, 2022,~~$41.3 millionif sold at March 31, 2023, declines in the fair value of these securities can be traced to general market conditions, which reflect the prospect for the economy as a whole, rather than credit-related conditions. Therefore, we ~~consider all securities with unrealized loss positions to be temporarily impaired. As a result, we do not believe we will sustain any material realized~~have no allowance for credit losses as ~~a result~~ of ~~the current decline in fair value.~~March 31, 2023.

The following tables ~~disclose the length of time that investments have remained~~show available-for-sale debt securities in an unrealized loss position ~~at September 30, 2022~~for which an allowance for credit losses has not been recorded as of March 31, 2023 and December 31, ~~2021:~~2022, aggregated by investment category and length of time that the individual securities have been in a continuous loss position:


		September 30, 2022									March 31, 2023
(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 (31)		$	22,001	$	(1,818)	$	19,638	$	(4,330)
United States sponsored mortgage-backed securities (51)		15,078		(2,437)		42,750		(9,442)
United States treasury securities (28)		9,507		(95)		101,525		(10,352)
Municipal securities (214)		86,671		(18,089)		23,978		(5,778)
United States government agency securities (26)										United States government agency securities (26)	$	513	$	(1)	$	37,895	$	(5,282)
United States sponsored mortgage-backed securities (47)										United States sponsored mortgage-backed securities (47)	—		—		54,306		(10,233)
United States treasury securities (23)										United States treasury securities (23)	—		—		99,354		(7,273)
Municipal securities (136)										Municipal securities (136)	2,570		(6,082)		84,275		(12,437)
Corporate debt securities ~~(3)~~(4)	Corporate debt securities ~~(3)~~(4)	2,386		(14)		—		—		Corporate debt securities ~~(3)~~(4)	1,195		(22)		1,485		(15)

Total	Total	$	135,643	$	(22,453)	$	187,891	$	(29,902)	Total	$	4,278	$	(6,105)	$	277,315	$	(35,240)

December 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 (21) $ 5,101 $ (77) $ 21,770 $ (819)
United States sponsored mortgage-backed securities (30) 55,354 (1,346) 7,845 (287)
United States treasury securities (24) 110,389 (1,744) — —
Municipal securities (53) 32,221 (270) 7,001 (96)
Total $ 203,065 $ (3,437) $ 36,616 $ (1,202)


	December 31, 2022
(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 (32)	$	21,287	$	(1,937)	$	19,423	$	(4,700)
United States sponsored mortgage-backed securities (51)	6,953		(852)		49,618		(10,844)
United States treasury securities (29)	11,936		(130)		102,092		(9,698)
Municipal securities (173)	65,930		(7,507)		41,184		(14,111)
Corporate debt securities (3)	2,380		(20)		—		—

Total	$	108,486	$	(10,446)	$	212,317	$	(39,353)

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2022		2021		(Dollars in thousands)	2023		2022
Proceeds from sales of available-for-sale securities	Proceeds from sales of available-for-sale securities	$	—	$	28,049	$	60,635	$	103,365	Proceeds from sales of available-for-sale securities	$	54,531	$	60,635
Gains, gross	Gains, gross	—		547		717		3,411		Gains, gross	—		717
Losses, gross	Losses, gross	—		18		67		31		Losses, gross	1,536		67

Proceeds from sales of equity securities		$	161	$	—	$	1,261	$	61
Gain, gross		58		—		158		5
Losses, gross		214		—		214		—

Unrealized holding gains (losses) on equity securities		(61)		536		(146)		1,750

Unrealized holding losses on equity securities										Unrealized holding losses on equity securities	(308)		(59)

1916

Note 3 – Loans and Allowance for ~~Loan~~Credit Losses

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


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		(Dollars in thousands)	March 31, 2023		December 31, 2022
Commercial:	Commercial:					Commercial:
Business	Business	$	870,390	$	818,986	Business	$	845,801	$	851,072
Real estate	Real estate	701,485		561,718		Real estate	611,769		632,839
Acquisition, development and construction	Acquisition, development and construction	131,385		99,823		Acquisition, development and construction	98,251		126,999
Total commercial	Total commercial	$	1,703,260	$	1,480,527	Total commercial	$	1,555,821	$	1,610,910
Residential real estate	Residential real estate	602,084		306,140		Residential real estate	707,494		606,970
Home equity		19,376		22,186
Home equity lines of credit						Home equity lines of credit	17,237		18,734
Consumer	Consumer	141,289		43,919		Consumer	78,685		131,566
Total loans, excluding PCI	Total loans, excluding PCI	2,466,009		1,852,772		Total loans, excluding PCI	2,359,237		2,368,180
Purchased credit impaired loans:	Purchased credit impaired loans:					Purchased credit impaired loans:
Commercial:
Business		1,878		2,629
Real estate		—		11,018
Acquisition, development and construction		—		257
Total commercial		$	1,878	$	13,904

Residential real estate	Residential real estate	2,551		4,358		Residential real estate	—		2,482

Consumer		—		413

Total purchased credit impaired loans	Total purchased credit impaired loans	4,429		18,675		Total purchased credit impaired loans	—		2,482
Total Loans	Total Loans	$	2,470,438	$	1,871,447	Total Loans	$	2,359,237	$	2,370,662
Deferred loan origination costs and (fees), net	Deferred loan origination costs and (fees), net	957		(1,609)		Deferred loan origination costs and (fees), net	1,916		1,983
Loans receivable	Loans receivable	$	2,471,395	$	1,869,838	Loans receivable	$	2,361,153	$	2,372,645

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

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

Commercial real estate loans – Commercial real estate loans consist of non-owner occupied properties, such as investment properties for retail, office and multifamily with a history of occupancy and cash flow. This segment includes both internally originated and purchased participation loans. These loans carry the risk of adverse changes in the local economy and a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies, which can adversely impact cash flow.

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 September 30, 2022, 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 SBA PPP loan program. 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. These loans are currently included within the commercial business loan type above.

Residential ~~mortgage loans~~real estate – This residential real estate subsegment contains permanent and construction mortgage loans principally to consumers, but also includes loans to residential real estate developers, secured by residential real ~~estate.~~estate, which we previously presented under commercial acquisitions, development and construction loans under the incurred loss model. Residential real estate loans to consumers are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios and collateral values. Credit risk arises from the borrower’s, and where applicable, the builder’s, continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Residential real estate secured loans to developers represent a higher degree of risk than permanent real

estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral.

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 primarily includes loans purchased from a third-party originator that originates loans in order to finance the purchase of personal automotive vehicles for sub-prime borrowers. Credit risk is unique in comparison to the Consumer segment as this segment includes only those loans provided to consumers that cannot typically obtain financing through traditional lenders. As such, these loans are subject to a higher risk of default than the typical consumer loan.

21Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with the incurred loss model.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of the periods shown:


(Dollars in thousands)	Real Estate		Vehicles & Equipment		Assignment of Cash Flow		Accounts Receivable		Other		Totals
March 31, 2023
Commercial
Business	$	1,418	$	3,269	$	901	$	241	$	507	$	6,336


Total commercial	$	1,418	$	3,269	$	901	$	241	$	507	$	6,336
Residential	1,710		—		—		—		—		1,710

Consumer	—		980		—		—		—		980
Total	$	3,128	$	4,249	$	901	$	241	$	507	$	9,026

Collateral value	$	2,579	$	8,436	$	—	$	178	$	599	$	11,792

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


		Impaired Loans with Specific 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
September 30, 2022

December 31, 2022												December 31, 2022
Commercial	Commercial											Commercial
Business	Business	$	7,371	$	2,078	$	7,978	$	15,349	$	17,318	Business	$	3,436	$	1,253	$	7,015	$	10,451	$	15,324
Real estate	Real estate	644		221		446		1,090		1,213		Real estate	1,240		222		125		1,365		1,470
Acquisition, development and construction	Acquisition, development and construction	—		—		278		278		1,693		Acquisition, development and construction	—		—		—		—		1,415

Total commercial	Total commercial	8,015		2,299		8,702		16,717		20,224		Total commercial	4,676		1,475		7,140		11,816		18,209
Residential		1,212		84		7,209		8,421		8,438
Home equity		—		—		157		157		162
Residential real estate												Residential real estate	—		—		2,603		2,603		2,671
Home equity lines of credit												Home equity lines of credit	—		—		90		90		94
Consumer	Consumer	1,231		248		16		1,247		1,247		Consumer	1,347		268		4		1,351		1,351
Total impaired loans	Total impaired loans	$	10,458	$	2,631	$	16,084	$	26,542	$	30,071	Total impaired loans	$	6,023	$	1,743	$	9,837	$	15,860	$	22,325

December 31, 2021
Commercial
Business		$	2,401	$	232	$	8,796	$	11,197	$	13,010
Real estate		668		243		543		1,211		1,329
Acquisition, development and construction		—		—		1,392		1,392		2,807

Total commercial		3,069		475		10,731		13,800		17,146
Residential		—		—		8,179		8,179		8,219
Home equity		—		—		217		217		221
Consumer		—		—		259		259		259
Total impaired loans		$	3,069	$	475	$	19,386	$	22,455	$	25,845

2218

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods shown:
Three Months Ended September 30,
2022 2021
(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
Business $ 12,390 $ 1 $ 2 $ 7,312 $ — $ —
Real estate 1,372 14 18 1,943 11 11
Acquisition, development and construction 282 — — 1,437 — —
Total commercial 14,044 15 20 10,692 11 11
Residential 8,425 4 3 7,029 3 3
Home equity 157 — — 69 — —
Consumer 1085 — — 29 — —
Total $ 23,711 $ 19 $ 23 $ 17,819 $ 14 $ 14
Nine Months Ended September 30,
2022 2021
(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
Business $ 11,378 $ 6 $ 6 $ 6,791 $ — $ —
Real estate 1,491 43 47 2,185 33 33
Acquisition, development and construction 303 — — 1,772 — —
Total commercial 13,172 49 53 10,748 33 33
Residential 8,390 12 11 5,418 11 10
Home equity 169 — — 69 — —
Consumer 757 — — 29 — —
Total $ 22,488 $ 61 $ 64 $ 16,264 $ 44 $ 43


		Three Months Ended March 31,
	2022
(Dollars in thousands)			Average Investment in Impaired Loans		Interest Income Recognized on Accrual Basis		Interest Income Recognized on Cash Basis
Commercial
Business			$	10,505	$	—	$	—
Real estate			1,728		16		18
Acquisition, development and construction			322		—		—

Total commercial			12,555		16		18
Residential			8,370		5		5
Home equity			190		—		—
Consumer			433		—		—
Total			$	21,548	$	21	$	23

As of ~~September 30, 2022,~~March 31, 2023, the Bank’s other real estate owned balance totaled ~~$1.2~~$1.0 million, ~~all~~ of which $0.9 million was related to the acquisition of The First State Bank (“First State”) in 2020. The Bank held ~~$1.1~~$0.8 million, or ~~91.7%~~80.0%, of other real estate owned as a result of the foreclosure of ~~five~~two unrelated commercial loans. The remaining ~~$0.1~~$0.2 million, or ~~8.3%~~20.0%, consists of ~~one~~three foreclosed residential real estate property. ~~There are twelve additional consumer mortgage loans collateralized by~~As of March 31, 2023, there were five residential ~~real estate properties~~mortgages in the process of foreclosure with ~~a total recorded investment of $2.3 million as of September 30, 2022. These include five legacy Bank loans~~loan balances totaling ~~$1.5 million and seven loans acquired from First State totaling $0.8~~$0.7 million. ~~These loans are included in the table above and have $0.1 specific allowance allocated to them.~~

Bank management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions.

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

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

Loans categorized as “Substandard” rated are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize

the liquidation of the debt and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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

The Special Mention rated category includes assets that are currently protected but are potentially weak, resulting in undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Any portion of a loan that has been or is expected to be charged off is placed in the ~~"Loss"~~“Loss” category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories, unless a specific action, such as past due status, bankruptcy, repossession or death, occurs to raise awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Bank's Credit Department ensures that a review of all commercial relationships of $1.0 million or more is performed annually.

Review of the appropriate risk grade is included in both the internal and external loan review process and on an ongoing basis. The Bank has an experienced Credit Department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct independent loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships in excess of $3.0 million or criticized relationships. The Bank's 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 presents the amortized cost of loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system by vintage year as of the period shown:


	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
March 31, 2023
Commercial business:
Risk rating:
Pass	$	49,657	$	284,869	$	137,705	$	34,545	$	16,733	$	71,339	$	231,790	$	—	$	826,638
Special Mention	—		—		69		721		101		3,101		515		—		4,507
Substandard	—		5		411		—		3,028		5,939		—		—		9,383
Doubtful	—		—		1,137		264		2,553		1,319		—		—		5,273
Total commercial business loans	$	49,657	$	284,874	$	139,322	$	35,530	$	22,415	$	81,698	$	232,305	$	—	$	845,801
Gross charge-offs	$	—	$	—	$	—	$	141	$	—	$	—	$	—	$	—	$	141

Commercial real estate:
Risk rating:
Pass	$	15,787	$	153,443	$	232,327	$	12,396	$	26,864	$	117,383	$	—	$	—	$	558,200
Special Mention	—		4,441		—		—		6,898		22,667		—		—		34,006
Substandard	—		—		—		—		—		19,563		—		—		19,563
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	$	15,787	$	157,884	$	232,327	$	12,396	$	33,762	$	159,613	$	—	$	—	$	611,769
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial acquisition, development and construction:
Risk rating:
Pass	$	—	$	26,084	$	44,400	$	21,969	$	3,128	$	1,786	$	—	$	—	$	97,367
Special Mention	—		—		—		—		—		18		—		—		18
Substandard	—		—		—		—		—		866		—		—		866
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial acquisition, development and construction loans	$	—	$	26,084	$	44,400	$	21,969	$	3,128	$	2,670	$	—	$	—	$	98,251
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Real Estate:
Risk rating:
Pass	$	79,153	$	432,712	$	111,001	$	40,509	$	6,832	$	27,616	$	—	$	—	$	697,823


Special Mention	—		—		3,326		1,434		746		—		—		5,506		5,506
Substandard	—		—		—		83		463		1,512		—		—		2,058
Doubtful	—		—		—		1,226		—		881		—		—		2,107
Total residential real estate loans	$	79,153	$	432,712	$	111,001	$	45,144	$	8,729	$	30,755	$	—	$	—	$	707,494
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	22	$	—	$	—	$	22

Home equity lines of credit:
Risk rating:
Pass	$	—	$	37	$	—	$	—	$	174	$	855	$	15,611	$	—	$	16,677
Special Mention	—		—		—		—		—		225		151		—		376
Substandard	—		—		—		—		—		184		—		—		184
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity lines of credit loans	$	—	$	37	$	—	$	—	$	174	$	1,264	$	15,762	$	—	$	17,237
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer:
Risk rating:
Pass	$	9,571	$	58,543	$	9,394	$	3	$	73	$	115	$	—	$	—	$	77,699
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		852		129		2		—		2		—		—		985
Doubtful	—		—		—		—		—		1		—		—		1
Total consumer loans	$	9,571	$	59,395	$	9,523	$	5	$	73	$	118	$	—	$	—	$	78,685
Gross charge-offs	$	—	$	3,793	$	891	$	—	$	—	$	—	$	—	$	—	$	4,684

Total:
Risk rating:
Pass	$	154,168	$	955,688	$	534,827	$	109,422	$	53,804	$	219,094	$	247,401	$	—	$	2,274,404
Special Mention	—		4,441		69		4,047		8,433		26,757		666		—		44,413
Substandard	—		857		540		85		3,491		28,066		—		—		33,039
Doubtful	—		—		1,137		1,490		2,553		2,201		—		—		7,381
Total consumer loans	$	154,168	$	960,986	$	536,573	$	115,044	$	68,281	$	276,118	$	248,067	$	—	$	2,359,237
Gross charge-offs	$	—	$	3,793	$	891	$	141	$	—	$	22	$	—	$	—	$	4,847

The following table represents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the periods shown:


(Dollars in thousands)	(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total		(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2022

December 31, 2022												December 31, 2022
Commercial	Commercial											Commercial
Business	Business	$	846,598	$	3,442	$	19,983	$	2,245	$	872,268	Business	$	830,319	$	5,963	$	12,103	$	2,687	$	851,072
Real estate	Real estate	660,237		18,985		20,567		1,696		701,485		Real estate	592,997		18,883		20,600		359		632,839
Acquisition, development and construction	Acquisition, development and construction	125,180		4,888		1,317		—		131,385		Acquisition, development and construction	120,788		5,277		934		—		126,999

Total commercial	Total commercial	1,632,015		27,315		41,867		3,941		1,705,138		Total commercial	1,544,104		30,123		33,637		3,046		1,610,910
Residential		594,239		772		7,653		1,971		604,635
Home equity		18,843		376		157		—		19,376
Residential real estate												Residential real estate	605,513		760		1,556		1,623		609,452
Home equity lines of credit												Home equity lines of credit	18,269		375		90		—		18,734
Consumer	Consumer	141,109		—		2		178		141,289		Consumer	131,562		—		4		—		131,566
Total loans	Total loans	$	2,386,206	$	28,463	$	49,679	$	6,090	$	2,470,438	Total loans	$	2,299,448	$	31,258	$	35,287	$	4,669	$	2,370,662

December 31, 2021
Commercial
Business		$	789,101	$	12,246	$	18,143	$	2,125	$	821,615
Real estate		526,851		12,598		31,293		1994		572,736
Acquisition, development and construction		89,893		4,960		4,163		1,064		100,080

Total commercial		1,405,845		29,804		53,599		5,183		1,494,431
Residential		299,291		899		9,815		493		310,498
Home equity		21,582		387		191		26		22,186
Consumer		43,519		24		259		530		44,332
Total loans		$	1,770,237	$	31,114	$	63,864	$	6,232	$	1,871,447

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

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

2522

The following table presents the ~~classes of the loan portfolio summarized~~amortized cost basis in loans by aging ~~categories of performing loans~~category and ~~non-accrual loans~~accrual status as of the periods shown:


(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		Non Accrual with No Credit Loss		Interest Income Recognized
September 30, 2022
March 31, 2023																		March 31, 2023
Commercial	Commercial																	Commercial
Business	Business	$	866,111	$	1,911	$	—	$	4,246	$	6,157	$	872,268	$	12,552	$	—	Business	$	845,801	$	—	$	—	$	—	$	—	$	845,801	$	8,824	$	—	$	4,152	$	123
Real estate	Real estate	701,485		—		—		—		—		701,485		108		—		Real estate	609,637		2,132		—		—		2,132		611,769		—		—		—		—
Acquisition, development and construction	Acquisition, development and construction	131,145		—		—		240		240		131,385		279		—		Acquisition, development and construction	98,251		—		—		—		—		98,251		—		—		—		—

Total commercial	Total commercial	1,698,741		1,911		—		4,486		6,397		1,705,138		12,939		—		Total commercial	1,553,689		2,132		—		—		2,132		1,555,821		8,824		—		4,152		123
Residential		604,207		10		418		—		428		604,635		8,008		—
Home equity		19,172		139		—		65		204		19,376		170		—
Residential real estate																		Residential real estate	702,611		3,519		210		1,154		4,883		707,494		3,090		—		—		37
Home equity lines of credit																		Home equity lines of credit	17,054		85		—		98		183		17,237		187		—		—		3
Consumer	Consumer	129,972		7,206		2,880		1,231		11,317		141,289		1,233		—		Consumer	70,148		5,477		2,080		980		8,537		78,685		984		—		—		62
Total loans	Total loans	$	2,452,092	$	9,266	$	3,298	$	5,782	$	18,346	$	2,470,438	$	22,350	$	—	Total loans	$	2,343,502	$	11,213	$	2,290	$	2,232	$	15,735	$	2,359,237	$	13,085	$	—	$	4,152	$	225

December 31, 2021
Commercial
Business		$	816,638	$	1,718	$	11	$	3,248	$	4,977	$	821,615	$	8,261	$	—
Real estate		569,792		396		461		2087		2944		572,736		192		—
Acquisition, development and construction		98,781		67		412		820		1,299		100,080		1,392		—

Total commercial		1,485,211		2,181		884		6,155		9,220		1,494,431		9,845		—
Residential		303,940		3,620		285		2,653		6,558		310,498		7,636		—
Home equity		21,974		—		119		93		212		22,186		217		—
Consumer		42,231		1,211		461		429		2,101		44,332		259		—
Total loans		$	1,853,356	$	7,012	$	1,749	$	9,330	$	18,091	$	1,871,447	$	17,957	$	—

~~An ALL~~The following table presents the aging of recorded investment in loans, including accruing and nonaccrual loans, as of the period shown:


(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












December 31, 2022
Commercial
Business	$	850,112	$	—	$	960	$	—	$	960	$	851,072	$	7,528	$	—
Real estate	632,839		—		—		—		—		632,839		—		—
Acquisition, development and construction	126,999		—		—		—		—		126,999		—		—

Total commercial	1,609,950		—		960		—		960		1,610,910		7,528		—
Residential real estate	606,554		1,820		1,078		—		2,898		609,452		2,196		—
Home equity lines of credit	18,131		603		—		—		603		18,734		90		—
Consumer	120,504		6,848		2,867		1,347		11,062		131,566		1,351		—
Total loans	$	2,355,139	$	9,271	$	4,905	$	1,347	$	15,523	$	2,370,662	$	11,165	$	—

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

The Bank’s methodology for determining the ~~ALL~~ACL is based on the requirements of ASC ~~Topic 310 - Receivables~~ ("~~ASC 310~~")326 for loans individually evaluated for impairment and ASC Subtopic 450-20 - Contingencies for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for ~~Loan and Lease~~Credit Losses and other bank regulatory guidance. The total of the two components represents the Bank’s ~~ALL.~~ ACL.

The ACL is calculated on a collective basis when similar risk characteristics exist. The ACL for the majority of loans and leases was calculated using a discounted cash flow methodology applied at a loan level with a one-year reasonable and supportable forecast period and a one-year straight-line reversion period with loss rates, prepayment assumptions and curtailment assumptions

driven by each loan’s collateral type. Expected credit loss rates were estimated using a regression model based on historical data from peer banks which incorporates a third-party vendor’s economic forecast to predict the change in credit losses. As of March 31, 2023, the Bank expects the markets in which it operates will experience a decline in economic conditions and an increase in the unemployment rate and level of delinquencies, over the next one to two years. The ACL for only one portfolio segment consisting entirely of automotive loans to consumers was calculated under the remaining life methodology using straight-line amortization over the remaining life of the portfolio.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When Bank management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The Bank ~~analyzes~~evaluates certain ~~impaired~~ loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans ~~when considered impaired,~~ are evaluated collectively for ~~impairment~~expected credit losses by applying allocation rates derived from the Bank’s historical losses specific to ~~impaired~~these loans and the reserve totaled $0.1 million as of both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~These loans are included in total loans individually evaluated for impairment and in total impaired loans as these are individually identified as impaired prior to the collective application of allocation rates to calculate impairment.

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 loan segments described above, which are based on the federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. 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.

2022.

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

For accounting methodologies related to the incurred loss method previously used before the adoption of ~~historical charge-off~~ ASC 326, refer to Note 1 - Summary of Significant Accounting Policies and ~~qualitative factors are then weighted~~Note 3 - Loans and Allowance for ~~each risk grade. These weightings are determined internally based upon~~Loan Losses of the ~~likelihood~~Notes to the Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of ~~loss as a loan risk grading deteriorates.~~the 2022 Form 10-K.

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 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 estimatedunfunded commitments based on the ~~average line utilization~~same segmentation used for the allowance for credit losses calculation. The estimated funding rate for each segment was derived from a funding rate study created by a third-party vendor which analyzed funding of various loan types over time to develop industry benchmarks at the ~~revolving line of credit portfolio as a whole.~~

call report code level. Once the estimated future advances were calculated, anthe allocation rate ~~which was derived from the Bank’s historical losses and qualitative environmental factors,~~applicable to that portfolio segment was applied in ~~a similar~~the same manner as those used for the allowance for ~~loan~~credit 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the liability for unfunded commitments related to loans held for investment ~~excluding loans acquired from First State,~~ was $1.7 million and $0.5 ~~million.~~million, respectively.

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.~~ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ~~ALL.~~ACL.

The following table presents the balance and activity for the primary segments of the ACL as of the periods shown:


	Commercial								Residential		Home Equity		Consumer		Total
(Dollars in thousands)	Business		Real Estate		Acquisition, development and construction		Total Commercial
ALL, prior to adoption of ASC 326, at December 31, 2022	$	8,771	$	5,704	$	1,064	$	15,539	$	2,880	$	131	$	5,287	$	23,837
Impact of adopting ASC 326	(126)		(2,846)		288		(2,684)		3,889		(5)		6,482		7,682
Provision (release of allowance) for credit losses	681		313		288		1,282		364		(8)		2,817		4,455
Initial allowance on loans purchased with credit deterioration	710		—		—		710		507		—		—		1,217
Charge-offs	(141)		—		—		(141)		(22)		—		(4,684)		(4,847)
Recoveries	23		6		—		29		—		1		3,139		3,169
ACL at March 31, 2023	$	9,918	$	3,177	$	1,640	$	14,735	$	7,618	$	119	$	13,041	$	35,513

During the three months ended March 31, 2023, there was a $0.1 million provision related to unfunded commitments. Substantially all of the charge-offs during three months ended March 31, 2023 are related to our subprime consumer automobile portfolio of loans.

The following table presents the primary segments of the ALL segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of the periods shown:

Commercial Residential Home Equity Consumer Total
(Dollars in thousands) Business Real Estate Acquisition, development and construction Total Commercial
ALL balance at December 31, 2021 $ 8,027 $ 5,091 $ 982 $ 14,100 $ 1,492 $ 128 $ 2,546 $ 18,266
     Charge-offs — — — — — — (7,304) (7,304)
     Recoveries 51 127 — 178 — 5 3,870 4,053
     Provision 1,666 1,178 176 3,020 1,445 3 7,032 11,500
ALL balance at September 30, 2022 $ 9,744 $ 6,396 $ 1,158 $ 17,298 $ 2,937 $ 136 $ 6,144 $ 26,515
Individually evaluated for impairment $ 2,078 $ 221 $ — $ 2,299 $ 84 $ — $ 248 $ 2,631
Collectively evaluated for impairment $ 7,666 $ 6,175 $ 1,158 $ 14,999 $ 2,853 $ 136 $ 5,896 $ 23,884
(Dollars in thousands)
ALL balance at June 30, 2022 $ 8,077 $ 6,641 $ 967 $ 15,685 $ 1,772 $ 141 $ 5,136 $ 22,734
     Charge-offs — — — — — — (3,652) (3,652)
     Recoveries 41 65 — 106 — 1 2,206 2,313
     Provision (release) 1,626 (310) 191 1,507 1,165 (6) 2,454 5,120
ALL balance at September 30, 2022 $ 9,744 $ 6,396 $ 1,158 $ 17,298 $ 2,937 $ 136 $ 6,144 $ 26,515

~~Substantially all of the charge-offs during nine months ended September 30, 2022 are related to our subprime consumer automobile portfolio of loans.~~


	Commercial								Residential		Home Equity		Consumer		Total
(Dollars in thousands)	Business		Real Estate		Acquisition, development and construction		Total Commercial
ALL balance at December 31, 2021	$	8,027	$	5,091	$	982	$	14,100	$	948	$	128	$	2,427	$	17,603
Charge-offs	—		—		—		—		—		—		(1,124)		(1,124)
Recoveries	1		7		—		8		—		2		375		385
Provision (release)	(1,159)		468		(247)		(938)		179		1		2,088		1,330
ALL balance at March 31, 2022	$	6,869	$	5,566	$	735	$	13,170	$	1,127	$	131	$	3,766	$	18,194
Individually evaluated for impairment	$	218	$	224	$	—	$	442	$	84	$	—	$	111	$	637
Collectively evaluated for impairment	$	6,651	$	5,342	$	735	$	12,728	$	1,043	$	131	$	3,655	$	17,557

The following table presents the primary segments of our loan portfolio as of the period shown:


		Commercial								Residential		Home Equity			Consumer			Total				Commercial										Residential		Home Equity Lines of Credit		Consumer		Total
(Dollars in thousands)	(Dollars in thousands)	Business		Real Estate		Acquisition, development and construction		Total Commercial						(Dollars in thousands)			Business				Real Estate			Acquisition, development and construction			Total Commercial
September 30, 2022
March 31, 2022																				March 31, 2022
Individually evaluated for impairment	Individually evaluated for impairment	$	15,349	$	1,090	$	278	$	16,717	$	8,421	$	157		$	1,246		$	26,541	Individually evaluated for impairment		$	11,085		$	1,196		$	1,139	$	13,420	$	8,364	$	230	$	512	$	22,526
Collectively evaluated for impairment	Collectively evaluated for impairment	856,919		700,395		131,107		1,688,421		596,214		19,219			140,043			2,443,897		Collectively evaluated for impairment		774,222			598,066			95,699		1,467,987		305,199		21,194		65,119		1,859,499
Total loans		$	872,268	$	701,485	$	131,385	$	1,705,138	$	604,635	$	19,376		$	141,289		$	2,470,438
Total Loans																				Total Loans		$	785,307		$	599,262		$	96,838	$	1,481,407	$	313,563	$	21,424	$	65,631	$	1,882,025

2825

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

Purchased Credit Impaired Loans

The carrying amount of purchased credit impaired loans ("PCI") outstanding at March 31, 2022 was $15.3 million, net of an allowance of $0.6 million.

The following table presents the accretable yield, or income expected to be collected, during three months ended March 31, 2022:


(Dollars in thousands)	March 31, 2022
Beginning balance	$	6,505

Accretion of income	(808)
Other changes in expected cash flows	556

Ending balance	6,253

The following tables summarize the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment ~~as of~~for the ~~periods shown:~~

Commercial Residential Home Equity Consumer Total
(Dollars in thousands) Business Real Estate Acquisition, development and construction Total Commercial
ALL balance at December 31, 2020 $ 12,193 $ 9,079 $ 2,761 $ 24,033 $ 1,462 $ 298 $ 51 $ 25,844
     Charge-offs (361) — — (361) (2) — — (363)
     Recoveries 207 17 224 — 21 3 248
     Provision (release) 1,347 (1,916) (1,269) (1,838) 224 (59) 1,131 (542)
ALL balance at September 30, 2021 $ 13,386 $ 7,180 $ 1,492 $ 22,058 $ 1,684 $ 260 $ 1,185 $ 25,187
Individually evaluated for impairment $ 3,737 $ 298 $ — $ 4,035 $ — $ 69 $ — $ 4,104
Collectively evaluated for impairment $ 9,649 $ 6,882 $ 1,492 $ 18,023 $ 1,684 $ 191 $ 1,185 $ 21,083
(Dollars in thousands)
ALL balance at June 30, 2021 $ 12,914 $ 7,947 $ 1,798 $ 22,659 $ 1,363 $ 284 $ 576 $ 24,882
     Charge-offs (96) — — (96) (2) — — (98)
     Recoveries 9 1 — 10 — 13 — 23
     Provision (release) 559 (768) (306) (515) 323 (37) 609 380
ALL balance at September 30, 2021 $ 13,386 $ 7,180 $ 1,492 $ 22,058 $ 1,684 $ 260 $ 1,185 $ 25,187

~~The following table presents the primary segments of our~~PCI loan portfolio as of the ~~period shown:~~
Commercial Residential Home Equity Consumer Total
(Dollars in thousands) Business Real Estate Acquisition, development and construction Total Commercial
September 30, 2021
Individually evaluated for impairment $ 9,576 $ 1,171 $ 1,401 $ 12,148 $ 6,971 $ 95 $ 3 $ 19,217
Collectively evaluated for impairment 757,096 563,405 97,641 1,418,142 262,996 23,682 22,141 1,726,961
Total Loans $ 766,672 $ 564,576 $ 99,042 $ 1,430,290 $ 269,967 $ 23,777 $ 22,144 $ 1,746,178
periods indicated:

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.


	Commercial			Residential	Consumer	Total
(Dollars in thousands)	Business	Real Estate	Total Commercial
ALL balance as of December 31, 2021	—	—	—	544	119	663

Recoveries	1	—	1	—	—	1
Provision (release)	111	53	164	(221)	7	(50)
ALL balance as of March 31, 2022	112	53	165	323	126	614
Collectively evaluated for impairment	112	53	165	323	126	614

Troubled Debt Restructurings

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, which eliminated the accounting guidance for TDRs, while prior period amounts continue to be reported in accordance with the TDR model.

At ~~September 30, 2022 and~~ December 31, ~~2021,~~2022, the Bank had specific reserve allocations for TDRs of $0.4 ~~million and $0.5 million, respectively.~~million. Loans considered to be troubled debt restructured loans totaled ~~$12.2 million and $12.6~~$10.4 million as of ~~September 30, 2022 and~~ December 31, ~~2021, respectively.~~2022. Of ~~these totals, $4.2~~the total, $4.7 million ~~and $4.5 million represent~~represents accruing troubled debt restructured loans ~~at September 30, 2022 and December 31, 2021, respectively,~~ and represent ~~16% and 21%, respectively,~~45% of total impaired ~~loans.~~loans at December 31, 2022. Meanwhile, as of ~~September 30,~~December 31, 2022, ~~$0.1~~$5.7 million represents ~~one loan~~nine loans to ~~one borrower~~seven borrowers that ~~has~~have defaulted under the restructured terms. The largest of these loans is a $1.9 million restructured commercial loan to a company previously dependent on the coal industry, which is now structured as an unsecured loan. Three of these loans to an unrelated borrower, totaling $3.1 million, are restructured equipment loans to a borrower in the coal industry, which was provided extended interest-only terms ~~during~~to allow time for the ~~previous 12 months. This~~collateral equipment to be sold. There is a commercial loan totaling $0.5 million secured by government lease payments that previously defaulted and is now making restructured payments. The four remaining unrelated borrowers have a single loan ~~is a commericial loan secured by owner occupied real estate.~~each, totaling $0.2 million. These borrowers have experienced continued financial difficulty and are considered non-performing loans as ~~September 30,~~of December 31, 2022.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ no additional loans were ~~classified~~identified as ~~TDRs~~both experiencing financial difficulty and ~~one restructured loan defaulted~~modified. Financial difficulty is considered when the borrower's operating performance deteriorates to the degree we believe it is probably they will not able to perform under ~~modified~~the terms ~~that were not already classified as non-performing for having previously defaulted under modified terms.~~of the loan.

~~Purchased Credit Impaired Loans~~

As a result of the acquisition of First State, we have PCI loans, with a carrying amount of $4.4 million as of September 30, 2022. As of September 30, 2022, the loans in our PCI portfolio were all collectively evaluated for impairment and are categorized as residential loans. During the nine months ended September 30, 2022, we sold PCI loans with an unpaid principal balance of $13.4 million, resulting in the recognition of additional accretion income of $1.0 million.

None of the PCI loans are considered non-accrual as they are all currently accreting interest income under PCI loan accounting. Income is not recognized on PCI loans if we cannot reasonably estimate cash flows expected to be collected. As of September 30, 2022, we held no such loans. As 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~~

We actively participated in the PPP as a lender, evaluating other programs available to assist our clients and providing deferrals consistent with GSE guidelines. As of September 30, 2022, the outstanding balance of PPP loans totaled $9.3 million on loans originated through our internal commercial team and $10.8 million on loans originated through our partnership with a Fintech company.

As of September 30, 2022, all commercial and mortgage loans previously approved for COVID-19 related modifications, such as interest-only payment and payment deferrals, had returned to their previous payment structures. These modifications were not considered to be TDRs 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 shown:


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		(Dollars in thousands)	March 31, 2023		December 31, 2022
Land	Land	$	3,465	$	3,465	Land	$	3,465	$	3,465
Buildings and improvements	Buildings and improvements	13,393		13,393		Buildings and improvements	13,393		13,393
Furniture, fixtures and equipment	Furniture, fixtures and equipment	17,968		16,841		Furniture, fixtures and equipment	17,662		17,549
Software	Software	5,805		4,176		Software	6,399		6,019
Construction in progress	Construction in progress	437		531		Construction in progress	519		508
Leasehold improvements	Leasehold improvements	2,963		2,895		Leasehold improvements	2,836		2,836
		44,031		41,301			44,274		43,770
Accumulated depreciation	Accumulated depreciation	(19,363)		(16,249)		Accumulated depreciation	(21,405)		(20,140)
Premises and equipment, net	Premises and equipment, net	$	24,668	$	25,052	Premises and equipment, net	$	22,869	$	23,630

We lease certain premises and equipment under operating and finance leases. At ~~September 30, 2022,~~March 31, 2023, we had lease liabilities totaling ~~$15.3~~$14.8 million ~~substantially all~~and right-of-use assets totaling $13.7 million, of which $13.6 million was related to operating leases and ~~right-of-use assets totaling $14.2~~$0.1 million ~~substantially all of which~~ was related to ~~operating~~finance leases.At ~~September 30, 2022,~~March 31, 2023, the weighted-average remaining lease term for operating leases was ~~11.7~~11.3 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.0%. At ~~September 30, 2022,~~March 31, 2023, the weighted-average remaining lease term for finance leases was ~~3.0~~2.5 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 0.7%.

At December 31, ~~2021,~~2022, we had lease liabilities totaling ~~$18.6~~$15.0 million ~~of which $18.5 million was related to operating leases and $0.1 million was related to finance leases,~~ and right-of-use assets totaling ~~$17.5~~$13.9 million, substantially all of which was related to operating leases. At December 31, ~~2021,~~2022, the weighted-average remaining lease term for operating leases was 1211.6 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.8%. At December 31, 2021, the weighted-average remaining lease term for finance leases was 1.8 years and the weighted-average discount rate used in the measurement of finance lease liabilities was 2.0%3.0%.

Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively.

The following table presents lease costs for the periods shown:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2022		2021		(Dollars in thousands)		2023		2022
Amortization of right-of-use assets, finance leases										Amortization of right-of-use assets, finance leases		$	6	$	14
Operating lease cost	Operating lease cost	$	445	$	504	$	1,335	$	1,458	Operating lease cost		450		508
Short-term lease cost	Short-term lease cost	8		2		22		4		Short-term lease cost		5		6
Variable lease cost	Variable lease cost	10		9		29		29		Variable lease cost		10		10
Amortization of right-of-use assets, finance leases		13		16		42		44
Interest on lease liabilities, finance leases		—		—		—		2
Sublease income										Sublease income		(87)		—

Total lease cost	Total lease cost	$	476	$	531	$	1,428	$	1,537	Total lease cost		$	384	$	538

For operating leases with initial or remaining terms of one year or more as of ~~September 30, 2022,~~March 31, 2023, the following table presents future minimum payments for the twelve month periods ended ~~September 30:~~March 31:


(Dollars in thousands)	(Dollars in thousands)	Operating Leases		(Dollars in thousands)	Operating Leases
2023		$	1,682
2024	2024	1,578		2024	$	1,261
2025	2025	1,572		2025	1,621
2026	2026	1,587		2026	1,618
2027	2027	1,608		2027	1,594
2028 and thereafter		10,521
2028				2028	1,625
2029 and thereafter				2029 and thereafter	10,111
Total future minimum lease payments	Total future minimum lease payments	$	18,548	Total future minimum lease payments	$	17,830
Less: Amounts representing interest	Less: Amounts representing interest	(3,229)		Less: Amounts representing interest	(3,027)
Present value of net future minimum lease payments	Present value of net future minimum lease payments	$	15,319	Present value of net future minimum lease payments	$	14,803

~~There are no material future~~Future minimum payments on finance leases as of ~~September 30, 2022.~~March 31, 2023 were not material.

Note 5 – Equity Method Investments

In accordance with ~~Rule 10-01(b)(1)~~Rules 3-09 and 4-08(g) of Regulation S-X, we must assess whether our equity method investments are significant. In evaluating the significance of these investments, we performed the income, investment and ~~investment~~asset tests described in S-X 1-02(w) for each equity method investment. Rule ~~10-01(b)(1)~~4-08(g) of Regulation S-X requires summarized financial information for all equity method investees in a quarterly report if any of the equity method investees, individually or in the aggregate, result in any of the tests ~~exceeds 20% and if the investee for which separate financial statements would otherwise be required for annual periods.~~ exceeding 10%.

Under the income test, our proportionate share of the ~~net income of ICM~~revenue from equity method investments in the aggregate exceeded the applicable threshold under Rule 4-08(g) of ~~20%~~10%, ~~and criteria for reporting separate financial statements is also applicable,~~ accordingly, we are ~~requir~~edrequired to provide summarized income statement information for ~~this investee~~all investees for all periods presented. ~~There were no other equity method investments which met any of the applicable thresholds for interim reporting as of the quarter ended~~ ~~September 30, 2022.~~

Our equity method investments are initially recorded at fair value and subsequently adjusted for changes in the valuation of the entities and our share of the entities' earnings.

ICM

The following table presents summarized income statement information for ~~our equity method investment in~~ ICM for the periods shown:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2022		2021		(Dollars in thousands)	2023		2022
Total revenues	Total revenues	$	13,818	$	35,229	$	57,997	$	126,106	Total revenues	$	9,406	$	22,116
Net income (loss)	Net income (loss)	$	(1,986)	$	9,962	$	3,183	$	36,747	Net income (loss)	(3,082)		3,230

Gain on sale of loans	Gain on sale of loans	$	9,785	$	30,720	$	39,746	$	122,621	Gain on sale of loans	5,448		15,088
Volume of loans sold	Volume of loans sold	$	619,059	$	1,098,475	$	1,999,706	$	4,368,875	Volume of loans sold	302,782		688,094

Our ownership percentage of ICM is 40% ~~of ICM allows us to~~and it was determined that we have significant influence over the operations and decision making at ICM. Accordingly, the investment is accounted for as an equity method investment. Our share of ICM's net loss and net income income totaled ~~$0.8~~$1.2 million and ~~$1.2 million for thethree and nine months ended September 30, 2022, respectively,~~ ~~and our share of ICM's net income totaled $3.6 million and $14.6~~$1.3 million for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2021~~March 31, 2023 and March 31, 2022, respectively. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022, the mortgage pipeline was ~~$0.79 billion~~$714.3 million and ~~$1.01 billion,~~$678.3 million, respectively.

~~Interchecks~~

Warp Speed

The following table presents summarized income statement information for our equity method investment in Warp Speed for the periods shown:


	Three Months Ended December 31,
(Dollars in thousands)	2022
Total revenues	$	35,517
Net income	2,682

Gain on sale of loans	12,682

Our ownership percentage of ~~16% of Interchecks, as well as certain other qualitative factors, allows us to~~Warp Speed is 37.5% and it was determined that we have significant influence over ~~the~~its operations and decision ~~making at Interchecks.~~ making. Accordingly, the investment is accounted for as an equity method investment. At the time of acquisition, we made a policy election to record our proportionate share of net income of the investee on a three month lag. Our share of Warp Speed's net ~~loss from Interchecks~~income totaled ~~$0.2 million and $0.5~~$1.0 million for the three ~~and nine~~ months ended September 30, 2022, respectively. During the nine months ended September 30, 2022, we recorded a gain due to an observable transaction based on an in-substance sale of ownership in the amount of $1.9 million. The equity method investment in Interchecks is not considered a significant investment based on the criteria of Rule 10-01(b)(1) of Regulation S-X.

March 31, 2023.

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

Ayers Socure II

Our ownership percentage of ~~10% of~~ Ayers Socure II ~~allows us to~~is 10% and it was determined that we have significant influence over the company. Accordingly, the investment is accounted for as an equity method investment. Our share of net income from Ayers Socure II for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was not significant. The equity method investment in Ayers Socure II is not considered a significant investment based on the criteria of ~~Rule 10-01(b)(1)~~Rules 3-09 and 4-08(g) of Regulation S-X.

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

the aggregate.

Note 6 – Deposits

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


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		(Dollars in thousands)	March 31, 2023		December 31, 2022
Demand deposits of individuals, partnerships and corporations						Demand deposits of individuals, partnerships and corporations
Noninterest-bearing demand	Noninterest-bearing demand	$	1,411,772	$	1,120,433	Noninterest-bearing demand	$	1,134,257	$	1,231,544
Interest-bearing demand	Interest-bearing demand	763,401		651,016		Interest-bearing demand	780,713		720,074
Savings and money markets	Savings and money markets	306,170		510,068		Savings and money markets	595,152		284,447
Time deposits, including CDs and IRAs	Time deposits, including CDs and IRAs	215,615		96,088		Time deposits, including CDs and IRAs	640,693		334,417
Total deposits	Total deposits	$	2,696,958	$	2,377,605	Total deposits	$	3,150,815	$	2,570,482

Time deposits that meet or exceed the FDIC insurance limit	Time deposits that meet or exceed the FDIC insurance limit	$	6,864	$	9,573	Time deposits that meet or exceed the FDIC insurance limit	$	2,811	$	4,386

The following table presents the maturities of time deposits for the twelve month periods ended ~~September 30:~~March 31:


(Dollars in thousands)	(Dollars in thousands)			(Dollars in thousands)
2023		$	196,045
2024	2024	11,071		2024	$	290,504
2025	2025	5,228		2025	345,056
2026	2026	986		2026	2,326
2027	2027	2,285		2027	739
2028				2028	1,836
Thereafter				Thereafter	232
Total	Total	$	215,615	Total	$	640,693

As of ~~September 30, 2022,~~March 31, 2023, overdrawn deposit accounts totaling ~~$1.3~~$2.1 million were reclassified as loan balances.

Note 7 – Borrowed Funds

The Bank is a member of the Federal Home Loan Bank ~~("FHLB"~~(“FHLB”) of Pittsburgh, Pennsylvania. As of ~~September 30, 2022,~~March 31, 2023, the Bank's maximum borrowing capacity with the FHLB was ~~$576.7~~$777.3 million and the remaining borrowing capacity was ~~$239.8~~$763.3 million, with the difference being deposit letters of ~~credit and short-term borrowings with the FHLB.~~credit.

Short-term borrowings

As of ~~September 30, 2022, the Bank had $73.3 million short-term borrowings with the FHLB and no borrowings under Fed Funds purchased outstanding. As of December~~March 31, ~~2021,~~2023, the Bank had no short-term borrowings with the FHLB and no borrowings under ~~Fed Funds~~the federal funds rate purchased outstanding. As of December 31, 2022, the Bank had $102.3 million short-term borrowings with the FHLB and no borrowings under the federal funds rate purchased outstanding.

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


(Dollars in thousands)	(Dollars in thousands)	Nine Months Ended September 30, 2022			Year Ended December 31, 2021			(Dollars in thousands)	Three Months Ended March 31, 2023			Year Ended December 31, 2022
Balance at end of period	Balance at end of period	$	73,328		$	—		Balance at end of period	$	—		$	102,333
Average balance during the period	Average balance during the period	16,966			25,275			Average balance during the period	71,166			15,494
Maximum month-end balance	Maximum month-end balance	73,328			130,047			Maximum month-end balance	—			102,333
Weighted-average rate during the period	Weighted-average rate during the period	2.54		%	0.05		%	Weighted-average rate during the period	5.06		%	2.82		%
Weighted-average rate at end of period	Weighted-average rate at end of period	3.11		%	—		%	Weighted-average rate at end of period	—		%	4.45		%

Long-term borrowings

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Bank had no long-term borrowings with the FHLB or the Federal 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 us. All repurchase agreements are subject to terms and conditions of repurchase/security agreements between us and the client and are accounted for as secured borrowings. Our repurchase agreements reflected in liabilities consist of client accounts and securities which are pledged on an individual security basis.

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

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, all of our repurchase agreements were overnight agreements. These borrowings were collateralized with investment securities with a carrying value of ~~$10.2~~$5.5 million and ~~$15.8~~$10.4 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and were comprised of United States government agency securities and United

States sponsored mortgage-backed securities. Declines in the value of the collateral would require us to increase the amounts of securities pledged.

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


(Dollars in thousands)	(Dollars in thousands)	Nine Months Ended September 30, 2022			Year Ended December 31, 2021			(Dollars in thousands)	Three Months Ended March 31, 2023			Year Ended December 31, 2022
Balance at end of period	Balance at end of period	$	9,910		$	11,385		Balance at end of period	$	5,419		$	10,037
Average balance during the period	Average balance during the period	11,334			10,821			Average balance during the period	7,612			10,987
Maximum month-end balance	Maximum month-end balance	12,680			11,398			Maximum month-end balance	10,041			12,680
Weighted-average rate during the period	Weighted-average rate during the period	0.05		%	0.12		%	Weighted-average rate during the period	0.05		%	0.05		%
Weighted-average rate at end of period	Weighted-average rate at end of period	0.05		%	0.05		%	Weighted-average rate at end of period	0.01		%	0.06		%

Subordinated debt

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


(Dollars in thousands)	(Dollars in thousands)	Nine Months Ended September 30, 2022			Year Ended December 31, 2021			(Dollars in thousands)	Three Months Ended March 31, 2023			Year Ended December 31, 2022
Balance at end of period	Balance at end of period	$	73,222		$	73,030		Balance at end of period	$	73,350		$	73,286
Average balance during the period	Average balance during the period	73,126			51,149			Average balance during the period	73,318			73,159
Maximum month-end balance	Maximum month-end balance	73,222			73,030			Maximum month-end balance	73,350			73,286
Weighted-average rate during the period	Weighted-average rate during the period	4.18		%	4.28		%	Weighted-average rate during the period	4.41		%	4.20		%
Weighted-average rate at end of period	Weighted-average rate at end of period	3.88		%	3.71		%	Weighted-average rate at end of period	3.97		%	3.97		%

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

In November 2020, ~~MVB~~we completed the private placement of $40.0 million fixed-to-floating rate subordinated notes to certain qualified institutional investors. These notes are unsecured and have a ~~10-year~~ten-year term, maturing December 1, 2030, and will bear interest at a fixed rate of 4.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be Three-Month Term SOFR, plus 401 basis points, payable quarterly in arrears. These notes have been structured to qualify as Tier 2 capital for regulatory capital purposes.

In March 2007, we completed the private placement of $4.0 million Floating Rate, Trust Preferred Securities through our MVB Financial Statutory Trust I subsidiary (the “Trust”). We established the Trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust. The Trust Preferred Securities and the Debentures mature in 2037 and have been redeemable by us since 2012. Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of 1.62% over the three-month LIBOR Rate. The obligations we provide with respect to the issuance of the trust preferred securities constitute a full and unconditional guarantee by us of the Trust’s obligations with respect to the trust preferred securities to the extent set forth in the related guarantees. The securities issued by the Trust are includable for regulatory purposes as a component of our Tier 1 capital.

Senior term loan

The following table presents information related to senior term loan as of and for the periods shown:


(Dollars in thousands)	Three Months Ended March 31, 2023			Year Ended December 31, 2022
Balance at end of period	$	9,647		$	9,765
Average balance during the period	9,765			2,328
Maximum month-end balance	9,768			9,886
Weighted-average rate during the period	8.06		%	7.00		%
Weighted-average rate at end of period	8.27		%	7.44		%

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

Note 8 – Pension and Supplemental Executive Retirement Plans

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

In June 2017, we approved a Supplemental Executive Retirement Plan (the “SERP”), pursuant to which the Chief Executive Officer of Potomac Mortgage Group ~~("PMG"~~(“PMG”) is entitled to receive certain supplemental nonqualified retirement benefits. The SERP took effect on December 31, 2017. As the executive completed three years of continuous employment with PMG prior to retirement date (which shall be no earlier than the date he attains age 55) he will, upon retirement, be entitled to receive $1.8 million payable in 180 equal consecutive monthly installments of $10 thousand. 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 both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Service 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. Benefits are based on years of service and the employee’s compensation. Accruals under the plan were frozen as of May 31, 2014. Freezing the plan resulted in a remeasurement of the pension obligations and plan assets as of the freeze date. The pension obligation was remeasured using the discount rate based on the Citigroup Above Median Pension Discount Curve in effect on May 31, 2014 of 4.5%.

The following table presents information pertaining to the activity in our defined benefit plan, using the latest available actuarial valuations with a measurement date of ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ for the periods shown:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2022		2021		(Dollars in thousands)	2023		2022

Interest cost	Interest cost	$	85	$	78	255		234		Interest cost	$	113	$	85
Expected return on plan assets	Expected return on plan assets	(167)		(118)		(501)		(354)		Expected return on plan assets	(164)		(167)
Amortization of net actuarial loss	Amortization of net actuarial loss	107		127		321		381		Amortization of net actuarial loss	29		107

Net periodic benefit cost		$	25	$	87	$	75	$	261
Net periodic benefit (income) cost										Net periodic benefit (income) cost	$	(22)	$	25
Contributions paid	Contributions paid	$	—	$	—	$	—	$	3,835	Contributions paid	$	—	$	—

There was no service cost or amortization of prior service cost for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

3532

Note 9 – Fair Value of Financial Instruments

The following table presents the carrying values and estimated fair values of our financial instruments as of the periods shown:


(Dollars in thousands)	(Dollars in thousands)	Carrying 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)
September 30, 2022
March 31, 2023												March 31, 2023
Financial Assets:	Financial Assets:											Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	79,946	$	79,946	$	79,946	$	—	$	—	Cash and cash equivalents	$	575,265	$	575,265	$	575,265	$	—	$	—
Certificates of deposit with banks		—		—		—		—		—
Securities available-for-sale		366,742		366,742		—		331,613		35,129
Equity securities		34,101		34,101		4,466		—		29,635
Loans held-for-sale		19,977		21,201		—		21,201		—
Loans receivable, net		2,444,880		2,402,514		—		—		2,402,514
Servicing rights		1,401		1,450		—		—		1,450
Interest rate swap		8,908		8,908		—		8,908		—

Accrued interest receivable		10,197		10,197		—		2,389		7,808
Bank-owned life insurance		42,992		42,992		—		42,992		—

Financial Liabilities:
Deposits		$	2,696,958	$	2,377,908	$	—	$	2,377,908	$	—
Repurchase agreements		9,910		9,910		—		9,910		—
FHLB and other borrowings		73,328		72,976		—		72,976		—
Interest rate swap		8,908		8,908		—		8,908		—
Fair value hedge		738		738		—		738		—
Accrued interest payable		1,235		1,235		—		1,235		—
Subordinated debt		73,222		63,576		—		63,576		—

December 31, 2021
Financial assets:
Cash and cash equivalents		$	307,437	$	307,437	$	307,437	$	—	$	—
Certificates of deposits with banks		2,719		2,738		—		2,738		—
Securities available-for-sale	Securities available-for-sale	421,466		421,466		—		379,703		41,763		Securities available-for-sale	339,578		339,578		—		303,120		36,458
Equity securities	Equity securities	32,402		32,402		247		—		32,155		Equity securities	38,576		38,576		5,588		—		32,988
Loans held-for-sale	Loans held-for-sale	—		—		—		—		—		Loans held-for-sale	19,893		21,006		—		21,006		—
Loans receivable, net	Loans receivable, net	1,851,572		1,865,013		—		—		1,865,013		Loans receivable, net	2,325,640		2,273,778		—		—		2,273,778
Servicing rights	Servicing rights	2,812		2,831		—		—		2,831		Servicing rights	1,613		1,748		—		—		1,748
Interest rate swap	Interest rate swap	6,702		6,702		—		6,702		—		Interest rate swap	6,371		6,371		—		6,371		—
Fair value hedge	Fair value hedge	1,552		1,552		—		1,552				Fair value hedge	226		226		—		226		—
Accrued interest receivable	Accrued interest receivable	7,860		7,860		—		2,402		5,458		Accrued interest receivable	15,304		15,304		—		2,556		12,748
FHLB Stock												FHLB Stock	13,893		13,893		—		13,893		—
Bank-owned life insurance	Bank-owned life insurance	42,257		42,257		—		42,257		—		Bank-owned life insurance	43,499		43,499		—		43,499		—
Embedded derivative												Embedded derivative	648		648		—		—		648

Financial Liabilities:												Financial Liabilities:
Deposits												Deposits	$	3,150,815	$	2,790,047	$	—	$	2,790,047	$	—
Repurchase agreements												Repurchase agreements	5,419		5,419		—		5,419		—

Interest rate swap												Interest rate swap	6,371		6,371		—		6,371		—
Accrued interest payable												Accrued interest payable	2,440		2,440		—		2,440		—

Senior term loan												Senior term loan	9,647		9,396		—		9,396		—
Subordinated debt												Subordinated debt	73,350		62,823		—		62,823		—

December 31, 2022												December 31, 2022
Financial assets:												Financial assets:
Cash and cash equivalents												Cash and cash equivalents	$	40,280	$	40,280	$	40,280	$	—	$	—
Securities available-for-sale												Securities available-for-sale	379,814		379,814		—		344,471		35,343
Equity securities												Equity securities	38,744		38,744		5,382		—		33,362
Loans held-for-sale												Loans held-for-sale	23,126		24,898		—		24,898		—
Loans receivable, net												Loans receivable, net	2,348,808		2,285,427		—		—		2,285,427
Servicing rights												Servicing rights	1,616		1,634		—		—		1,634
Interest rate swap												Interest rate swap	8,427		8,427		—		8,427		—
Accrued interest receivable												Accrued interest receivable	12,617		12,617		—		2,778		9,839
Bank-owned life insurance												Bank-owned life insurance	43,239		43,239		—		43,239		—
FHLB Stock												FHLB Stock	9,966		9,966		—		9,966		—
Embedded derivative												Embedded derivative	787		787		—		—		787

Financial liabilities:	Financial liabilities:											Financial liabilities:
Deposits	Deposits	$	2,377,605	$	2,338,868	$	—	$	2,338,868	$	—	Deposits	$	2,570,482	$	2,226,037	$	—	$	2,226,037	$	—
Repurchase agreements	Repurchase agreements	11,385		11,385		—		11,385		—		Repurchase agreements	10,037		10,037		—		10,037		—
Fair value hedge												Fair value hedge	572		572		—		572		—
Interest rate swap	Interest rate swap	6,702		6,702		—		6,702		—		Interest rate swap	8,427		8,427		—		8,427		—
Fair value hedge		807		807		—		807		—
Accrued interest payable	Accrued interest payable	690		690		—		690		—		Accrued interest payable	2,558		2,558		—		2,558		—
FHLB and other borrowings												FHLB and other borrowings	102,333		102,006		—		102,006		—
Senior term loan												Senior term loan	9,765		9,765		—		9,765		—
Subordinated debt	Subordinated debt	73,030		74,774		—		74,774		—		Subordinated debt	73,286		64,330		—		64,330		—

Note 10 – Fair Value Measurements

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time of our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our financial instruments, fair value

estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

The methods of determining the fair value of assets and liabilities presented in this footnote are consistent with our methodologies disclosed in Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data, of the ~~2021~~2022 Form 10-K.

Assets Measured on a Recurring Basis

As required by accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following measurements are made on a recurring ~~basis:~~basis.

Available-for-sale investment securities – Available-for-sale investment securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level I securities include those traded on an active exchange, such as the New York Stock Exchange and money market funds. Level II securities include mortgage-backed securities issued by ~~government-sponsored~~government sponsored entities and private label entities, municipal bonds, United States Treasury securities that are traded by dealers or brokers in inactive over-the-counter markets and corporate debt securities. There have been no changes in valuation techniques for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Valuation techniques are consistent with techniques used in prior periods. Certain local municipal securities related to tax increment financing (“TIF”) are independently valued and classified as Level III instruments. We classified investments in government securities as Level II instruments and valued them using the market approach.

Equity securities – Certain equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. The valuation methodologies utilized may include significant unobservable inputs. There have been no changes in valuation techniques for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Valuation techniques are consistent with techniques used in prior periods.

Interest rate swap – Interest rate swaps are recorded at fair value based on third-party vendors who compile prices from various sources and may determine the fair value of identical or similar instruments by using pricing models that consider observable market data.

Fair value hedge – Treated like an interest rate swap, fair value hedges are recorded at fair value based on third-party vendors who compile prices from various sources and may determine fair value of identical or similar instruments by using pricing models that consider observable market data.

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

Embedded derivatives — Accounted for and recorded separately from the underlying contract as a derivative at fair value on a recurring basis. Fair values are determined using the Monte Carlo model valuation technique. The valuation methodology utilized includes significant unobservable inputs.

The following tables present assets and liabilities reported on the consolidated statements of financial condition at their fair value on a recurring basis as of the periods shown by level within the fair value hierarchy:


		September 30, 2022									March 31, 2023
(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	$	—	$	46,148	$	—	$	46,148	United States government agency securities	$	—	$	39,988	$	—	$	39,988
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	—		57,829		—		57,829		United States sponsored mortgage-backed securities	—		56,773		—		56,773
United States treasury securities	United States treasury securities	111,032		—		—		111,032		United States treasury securities	99,354		—		—		99,354
Municipal securities	Municipal securities	—		100,629		35,129		135,758		Municipal securities	—		87,144		36,458		123,602
Corporate debt securities	Corporate debt securities	—		7,654		—		7,654		Corporate debt securities	—		11,548		—		11,548

Other securities	Other securities	—		835		—		835		Other securities	—		813		—		813
Equity securities	Equity securities	4,466		—		—		4,466		Equity securities	5,588		—		—		5,588
Loans held-for-sale		—		21,201		—		21,201

Interest rate swap										Interest rate swap	—		6,371		—		6,371
Fair value hedge										Fair value hedge	—		226		—		226
Bank-owned life insurance										Bank-owned life insurance	—		43,499		—		43,499
Embedded derivative										Embedded derivative	—		—		648		648
Liabilities:										Liabilities:
Interest rate swap	Interest rate swap	—		8,908		—		8,908		Interest rate swap	—		6,371		—		6,371

Bank-owned life insurance		—		42,992		—		42,992
Liabilities:
Interest rate swap		—		8,908		—		8,908
Fair value hedge		—		738		—		738


		December 31, 2021									December 31, 2022
(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	$	—	$	40,437	$	—	$	40,437	United States government agency securities	$	—	$	44,814	$	—	$	44,814
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	—		76,108		—		76,108		United States sponsored mortgage-backed securities	—		56,571		—		56,571
United States treasury securities	United States treasury securities	—		110,389		—		110,389		United States treasury securities	—		120,909		—		120,909
Municipal securities	Municipal securities	—		133,249		41,763		175,012		Municipal securities	—		103,293		35,343		138,636
Corporate debt securities	Corporate debt securities	—		11,142		—		11,142		Corporate debt securities	—		10,560		—		10,560
Other debt securities		—		7,500		—		7,500
Other securities	Other securities	—		878		—		878		Other securities	—		824		—		824
Equity securities	Equity securities	247		—		—		247		Equity securities	5,382		—		—		5,382

Interest rate swap	Interest rate swap	—		6,702		—		6,702		Interest rate swap	—		8,427		—		8,427
Fair value hedge		—		1,552		—		1,552
Bank-owned life insurance	Bank-owned life insurance	—		42,257		—		42,257		Bank-owned life insurance	—		43,239		—		43,239
Embedded derivative										Embedded derivative	—		—		787		787
Liabilities:	Liabilities:									Liabilities:
Interest rate swap	Interest rate swap	—		6,702		—		6,702		Interest rate swap	—		8,427		—		8,427
Fair value hedge	Fair value hedge	—		807		—		807		Fair value hedge	—		572		—		572

3835

The following table represents recurring Level III assets ~~consisting of only municipal securities,~~ as of the periods shown:

~~(Dollars in thousands)~~

~~Total~~

~~Balance at June 30, 2022~~

~~37,035~~

~~Maturities/calls~~

~~(66)~~

~~Unrealized gain included in other comprehensive income (loss)~~

~~2,085~~

~~Unrealized loss included in other comprehensive income (loss)~~

~~(3,925)~~

~~Balance at September 30, 2022~~

~~35,129~~

~~Balance at December 31, 2021~~

~~41,763~~

~~Realized and unrealized gains included in earnings~~

~~Purchase of securities~~

~~1,048~~

~~Maturities/calls~~

~~(3,141)~~

~~Unrealized gain included in other comprehensive income (loss)~~

~~2,085~~

~~Unrealized loss included in other comprehensive income (loss)~~

~~(6,634)~~

~~Balance at September 30, 2022~~

~~35,129~~

~~Balance at June 30, 2021~~

~~39,770~~

~~Realized and unrealized losses included in earnings~~

~~Purchase of securities~~

~~1,757~~

~~Maturities/calls~~

~~(74)~~

~~Unrealized gain included in other comprehensive income (loss)~~

~~3,300~~

~~Unrealized loss included in other comprehensive income (loss)~~

~~(3,344)~~

~~Balance at September 30, 2021~~

~~41,414~~

~~Balance at December 31, 2020~~

~~43,679~~

~~Realized and unrealized gains included in earnings~~

~~Purchase of securities~~

~~3,575~~

~~Maturities/calls~~

~~(5,248)~~

~~Unrealized gain included in other comprehensive income (loss)~~

~~7,720~~

~~Unrealized loss included in other comprehensive income (loss)~~

~~(8,337)~~

~~Balance at September 30, 2021~~

~~41,414~~


(Dollars in thousands)	Municipal Securities		Embedded Derivatives		Total
Balance at December 31, 2022	$	35,343	$	787	$	36,130
Realized loss included in earnings	—		(139)		(139)

Maturities/calls	(67)		—		(67)
Unrealized gain included in other comprehensive income (loss)	1,182		—		1,182
Balance at March 31, 2023	$	36,458	$	648	$	37,106









Balance at December 31, 2021	$	41,763	$	—	$	41,763
Realized and unrealized gain included in earnings	7		—		7
Purchase of securities	862		—		862
Maturities/calls	(2,290)		—		(2,290)
Unrealized loss included in other comprehensive income (loss)	(674)		—		(674)
Balance at March 31, 2022	$	39,668	$	—	$	39,668

Assets Measured on a Nonrecurring Basis

~~From~~We may be required, from time to time, ~~we may be required~~ to measure certain financial ~~and~~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~~non-recurring basis include foreclosed assets (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. Non-financial assets measured at fair value on a nonrecurring basis during ~~2022~~2023 and ~~2021~~2022 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~~Collateral-dependent loans –~~Loans~~- Certain loans receivable are evaluated individually for ~~which it~~credit loss when the borrower is ~~probable that payment~~experiencing financial difficulties and repayment is expected to be provided substantially through the operation or sale of ~~interest and principal will not be made in accordance with the contractual terms of the loan agreement~~collateral. Estimated credit losses 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 whichbased on the fair value of the ~~expected repayments or~~ collateral, ~~exceed the recorded investments in such loans.~~adjusted for costs to sell. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of ~~impaired~~collateral-dependent real ~~estate-related~~estate related loans, we obtain a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

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

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

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

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

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


		September 30, 2022									March 31, 2023
(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		$	—	$	—	$	23,911	$	23,911
Collateral-dependent loans										Collateral-dependent loans	$	—	$	—	$	6,532	$	6,532
Other real estate owned	Other real estate owned	—		—		1,182		1,182		Other real estate owned	—		—		958		958
Other debt securities	Other debt securities	—		—		7,500		7,500		Other debt securities	—		—		7,500		7,500
Equity securities	Equity securities	—		—		29,635		29,635		Equity securities	—		—		32,988		32,988


		December 31, 2021									December 31, 2022
(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	$	—	$	—	$	21,980	$	21,980	Impaired loans	$	—	$	—	$	14,117	$	14,117
Other real estate owned	Other real estate owned	—		—		2,330		2,330		Other real estate owned	—		—		1,194		1,194
Other debt securities	Other debt securities	—		—		7,500		7,500		Other debt securities	—		—		7,500		7,500
Equity securities	Equity securities	—		—		32,155		32,155		Equity securities	—		—		33,362		33,362

4037

The following tables present quantitative information about the Level III significant unobservable inputs for assets and liabilities measured at fair value as of the periods shown:

~~Quantitative Information about Level III Fair Value Measurements~~

~~(Dollars in thousands)~~

~~Fair Value~~

~~Valuation Technique~~

~~Unobservable Input~~

~~Range~~

~~September 30, 2022~~

~~Nonrecurring measurements:~~

~~Impaired loans~~

~~23,911~~

~~Appraisal of collateral~~ 1

~~Appraisal adjustments~~ 2

~~0% - 20%~~

~~Liquidation expense~~ 2

~~Other real estate owned~~

~~1,182~~

~~Appraisal of collateral~~ 1

~~Appraisal adjustments~~ 2

~~0% - 20%~~

~~Liquidation expense~~ 2

~~Other debt securities~~

~~7,500~~

~~Net asset value~~

~~Cost minus impairment~~

—%

~~Equity securities~~

~~29,635~~

~~Net asset value~~

~~Cost minus impairment~~

—%

~~Recurring measurements:~~

~~Municipal securities~~ 5

~~35,129~~

~~Appraisal of bond~~ 3

~~Bond appraisal adjustment~~ 4

~~5% - 15%~~

~~December 31, 2021~~

~~Nonrecurring measurements:~~

~~Impaired loans~~

~~21,980~~

~~Appraisal of collateral~~ 1

~~Appraisal adjustments~~ 2

~~10% - 20%~~

~~Liquidation expense~~ 2

~~5% - 10%~~

~~Other real estate owned~~

~~2,330~~

~~Appraisal of collateral~~ 1

~~Appraisal adjustments~~ 2

~~10% - 20%~~

~~Liquidation expense~~ 2

~~5% - 10%~~

~~Other debt securities~~

~~7,500~~

~~Net asset value~~

~~Cost minus impairment~~

—%

~~Equity securities~~

~~32,155~~

~~Net asset value~~

~~Cost minus impairment~~

—%

~~Recurring measurements:~~

~~Municipal securities~~ 5

~~41,763~~

~~Appraisal of bond~~ 3

~~Bond appraisal adjustment~~ 4

~~1% - 20%~~


	Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range
March 31, 2023
Nonrecurring measurements:
Collateral-dependent loans	$	6,532	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%

Other real estate owned	$	958	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%

Other debt securities	$	7,500	Net asset value	Cost minus impairment	0%

Equity securities	$	32,988	Net asset value	Cost minus impairment	0%

Recurring measurements:
Municipal securities 5	$	36,458	Appraisal of bond 3	Bond appraisal adjustment 4	5% - 15%

Embedded derivatives	$	648	Monte Carlo pricing model	Deferred payment	$0 - $49.1 million
				Volatility	59%
				Term	4.75 years
				Risk free rate	3.59%

December 31, 2022
Nonrecurring measurements:
Impaired loans	$	14,117	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%

Other real estate owned	$	1,194	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%

Other debt securities	$	7,500	Net asset value	Cost minus impairment	0%

Equity securities	$	33,362	Net asset value	Cost minus impairment	0%

Recurring measurements:
Municipal securities 5	$	35,343	Appraisal of bond 3	Bond appraisal adjustment 4	5% - 15%

Embedded derivatives	$	787	Monte Carlo pricing model	Deferred payment	$0 - $51.9 million
				Volatility	58%
				Term	5 years
				Risk free rate	3.95%

1 Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level III inputs that are not identifiable.

2 Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

3 Fair value is determined through independent analysis of liquidity, rating, yield and duration.

4 Appraisals may be adjusted for qualitative factors, such as local economic conditions, liquidity, marketability and legal structure.

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

Note 11 – Earnings per Share

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

4138

The following table presents our calculation of EPS for the periods shown:

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands except shares and per share data) 2022 2021 2022 2021
Numerator for basic and diluted earnings per share:
Net income $ 2,718 $ 11,828 $ 8,538 $ 29,160
Less: Dividends on preferred stock — — — 35
Net income available to common shareholders $ 2,718 $ 11,828 $ 8,538 $ 29,125
Denominator:
Total weighted-average shares outstanding 12,238,505 11,880,348 12,170,028 11,684,570
Effect of dilutive stock options and restricted stock units 616,446 943,961 682,546 881,239
Total diluted weighted-average shares outstanding 12,854,951 12,824,309 12,852,574 12,565,809
Earnings per share - basic $ 0.22 $ 1.00 $ 0.70 $ 2.49
Earnings per share - diluted $ 0.21 $ 0.92 $ 0.66 $ 2.32
Securities not included in the computation of diluted EPS because the effect would be antidilutive 564,604 267,603 533,543 283,750


	Three Months Ended March 31,
(Dollars in thousands except shares and per share data)	2023		2022
Numerator for earnings per share:
Net income from continuing operations	$	2,438	$	1,910
Net loss attributable to noncontrolling interest	122		193

Net income available to common shareholders	2,560		2,103
Net income from discontinued operations available to common shareholders - basic and diluted	8,782		761
Net income available to common shareholders	$	11,342	$	2,864







Denominator:
Weighted-average shares outstanding - basic	12,623,361		12,093,179


Effect of dilutive securities	392,721		834,632
Weighted-average shares outstanding - diluted	13,016,082		12,927,811

Earnings per share from continuing operations - basic	$	0.20	$	0.17
Earnings per share from discontinued operations - basic	$	0.70	$	0.06
Earnings per common share - basic	$	0.90	$	0.24
Earnings per share from continuing operations - diluted	$	0.20	$	0.16
Earnings per share from discontinued operations - diluted	$	0.67	$	0.06
Earnings per share common share - diluted	$	0.87	$	0.22

Securities not included in the computation of diluted EPS because the effect would be antidilutive	140,666		405,994

4239

Note 12 – Comprehensive Income

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


		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2022		2021			(Dollars in thousands)		2023		2022
Details about AOCI components	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	Details about AOCI components		Amount reclassified from AOCI		Amount reclassified from AOCI		Affected income statement line item
Available-for-sale securities	Available-for-sale securities										Available-for-sale securities
Realized gain recognized in income		$	—	$	529	$	650	$	3,380	Gain on sale of available-for-sale securities
Realized gain (loss) recognized in income											Realized gain (loss) recognized in income		$	(1,536)	$	650	Gain (loss) on sale of available-for-sale securities

		—		(124)		(152)		(793)		Income tax effect			369		(152)		Income tax effect
		—		405		498		2,587		Net of tax			(1,167)		498		Net of tax
Defined benefit pension plan items	Defined benefit pension plan items										Defined benefit pension plan items
Amortization of net actuarial loss	Amortization of net actuarial loss	(107)		$	(127)	$	(321)	$	(381)	Salaries and employee benefits	Amortization of net actuarial loss		$	(29)	$	(107)	Salaries and employee benefits

		27		30		79		89		Income tax effect			7		25		Income tax effect
		(80)		(97)		(242)		(292)		Net of tax			(22)		(82)		Net of tax
Investment hedge	Investment hedge										Investment hedge
Carrying value adjustment	Carrying value adjustment	(56)		(14)		141		(637)		Interest on investment securities	Carrying value adjustment		334		10		Interest on investment securities

		14		3		(35)		149		Income tax effect			(80)		(2)		Income tax effect
		(42)		(11)		106		(488)		Net of tax			254		8		Net of tax

Total reclassifications	Total reclassifications	$	(122)	$	297	$	362	$	1,807		Total reclassifications		$	(935)	$	424


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

Balance at June 30, 2022		$	(26,203)	$	(3,385)	$	168	$	(29,420)

Balance at December 31, 2022										Balance at December 31, 2022	$	(34,829)	$	(3,129)	$	254	$	(37,704)
Other comprehensive income (loss) before reclassification	Other comprehensive income (loss) before reclassification	(10,796)		117		—		(10,679)		Other comprehensive income (loss) before reclassification	5,852		(21)		—		5,831
Amounts reclassified from accumulated other comprehensive income (loss)	Amounts reclassified from accumulated other comprehensive income (loss)	—		80		42		122		Amounts reclassified from accumulated other comprehensive income (loss)	1,167		22		(254)		935
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(10,796)		197		42		(10,557)		Net current period other comprehensive income (loss)	7,019		1		(254)		6,766
Balance at September 30, 2022		$	(36,999)	$	(3,188)	$	210	$	(39,977)
Balance at March 31, 2023										Balance at March 31, 2023	$	(27,810)	$	(3,128)	$	—	$	(30,938)

Balance at December 31, 2021	Balance at December 31, 2021	$	147	$	(4,069)	$	316	$	(3,606)	Balance at December 31, 2021	$	147	$	(4,069)	$	316	$	(3,606)
Other comprehensive income (loss) before reclassification	Other comprehensive income (loss) before reclassification	(36,648)		639		—		(36,009)		Other comprehensive income (loss) before reclassification	(13,415)		283		—		(13,132)
Amounts reclassified from accumulated other comprehensive income (loss)	Amounts reclassified from accumulated other comprehensive income (loss)	(498)		242		(106)		(362)		Amounts reclassified from accumulated other comprehensive income (loss)	(498)		82		(8)		(424)
Net current period other comprehensive income (loss)	Net current period other comprehensive income (loss)	(37,146)		881		(106)		(36,371)		Net current period other comprehensive income (loss)	(13,913)		365		(8)		(13,556)
Balance at September 30, 2022		$	(36,999)	$	(3,188)	$	210	$	(39,977)

Balance at June 30, 2021		$	3,136	$	(3,301)	$	164	$	(1)
Other comprehensive income (loss) before reclassification		183		(700)		—		(517)
Amounts reclassified from accumulated other comprehensive income (loss)		(405)		97		11		(297)
Net current period other comprehensive income (loss)		(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 accumulated other comprehensive income (loss)		(2,587)		292		488		(1,807)
Net current period other comprehensive income (loss)		(4,672)		1,143		488		(3,041)
Balance at September 30, 2021		$	2,914	$	(3,904)	$	175	$	(815)
Balance at March 31, 2022										Balance at March 31, 2022	$	(13,766)	$	(3,704)	$	308	$	(17,162)

Note 13 – Segment Reporting

We have identified ~~five~~three reportable segments: CoRe banking; mortgage banking; ~~professional services; Edge Ventures;~~ and financial holding company. All other operating segments are summarized in an other category. Revenue from CoRe banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Our Fintech division and MVB CDC are included in the CoRe banking segment. Revenue from our mortgage banking segment is primarily comprised of our share of net

income or loss from mortgage banking activities of our equity method ~~investment~~investments in ~~ICM. Professional services is the aggregate of Chartwell, Trabian~~ICM and Paladin Fraud. Revenue from these operating segments is made up of primarily of professional consulting income to banks and Fintech companies. Edge Ventures is the aggregate of Victor, MVB Technology, Flexia and the Edge Ventures holding company.

~~These operating segments are aggregated together as Edge Ventures and are all start-up Fintech software development companies.~~Warp Speed. 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 shown:


Three Months Ended September 30, 2022		CoRe Banking			Mortgage Banking			Professional Services			Edge Ventures				Financial Holding Company							Intercompany Eliminations					Consolidated
Three Months Ended March 31, 2023																	Three Months Ended March 31, 2023			CoRe Banking					Mortgage Banking															Financial Holding Company				Other			Intercompany Eliminations					Consolidated
(Dollars in thousands)	(Dollars in thousands)			CoRe Banking						Mortgage Banking					Professional Services				Edge Ventures					Financial Holding Company								Intercompany Eliminations			Consolidated							(Dollars in thousands)				CoRe Banking			Mortgage Banking														Other			Consolidated
Interest income	Interest income												$	33,903			Interest income	$			44,662					$	105													$	33	$	(6)		$		(31)					$	44,763
Interest expense	Interest expense	3,286					—			10			—				771								(10)				4,057	Interest expense				11,041					—												993						31				(31)				12,034
Net interest income (expense)	Net interest income (expense)	30,491			103			(10)			—				(738)							—					29,846		Net interest income (expense)		33,621						105														(960)						(37)				—				32,729
Provision for loan losses		5,120			—			—			—				—							—					5,120
Net interest income (expense) after provision for loan losses		25,371			103			(10)			—				(738)							—					24,726
Provision for credit losses																													Provision for credit losses		4,576					—												—						—				—				4,576
Net interest income (expense) after provision for credit losses																													Net interest income (expense) after provision for credit losses		29,045					105												(960)						(37)				—				28,153

Noninterest income	Noninterest income	5,356			(817)			5,666			115				2,366							(4,495)					8,191		Noninterest income		3,018					(1,186)												2,410						1,784				(2,959)				3,067

Noninterest Expenses:	Noninterest Expenses:																												Noninterest Expenses:
Salaries and employee benefits	Salaries and employee benefits	9,354			8			3,755			925				4,274							—					18,316		Salaries and employee benefits		9,051					—												4,950						2,745				—				16,746
Other expenses	Other expenses	11,523			25			1,394			1,392				1,810							(4,495)					11,649		Other expenses		11,054					34												1,917						1,525				(2,959)				11,571
Total noninterest expenses	Total noninterest expenses	20,877			33			5,149			2,317				6,084							(4,495)					29,965		Total noninterest expenses		20,105					34												6,867						4,270				(2,959)				28,317

Income (loss) before income taxes	Income (loss) before income taxes	9,850			(747)			507			(2,202)				(4,456)							—					2,952		Income (loss) before income taxes		11,958					(1,115)												(5,417)						(2,523)				—				2,903
Income taxes	Income taxes	1,817			(192)			116			(504)				(840)							—					397		Income taxes		2,515					(504)												(942)						(604)				—				465
Net income (loss) from continuing operations																													Net income (loss) from continuing operations		9,443					(611)												(4,475)						(1,919)				—				2,438
Income from discontinued operations, before income taxes																													Income from discontinued operations, before income taxes		—					—												—						11,831				—				11,831
Income taxes - discontinued operations																													Income taxes - discontinued operations		—					—												—						3,049				—				3,049
Net income from discontinued operations																													Net income from discontinued operations		—					—												—						8,782				—				8,782
Net income (loss)	Net income (loss)	8,033			(555)			391			(1,698)				(3,616)							—					2,555		Net income (loss)		9,443					(611)												(4,475)						6,863				—				11,220

Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—			—			36			127				—							—					163		Net loss attributable to noncontrolling interest		—					—												—						122				—				122

Net income (loss) available to common shareholders	Net income (loss) available to common shareholders	$	8,033		$	(555)		$	427		$	(1,571)			$	(3,616)						$	—				$	2,718	Net income (loss) available to common shareholders		$		9,443				$	(611)											$	(4,475)					$	6,985			$	—			$	11,342

Capital expenditures for the three months ended September 30, 2022		$	244		$	—		$	—		$	373			$	4						$	—				$	621
Total assets as of September 30, 2022		$	3,157,614		$	51,869		$	14,486		$	15,283			$	330,116						$	(429,446)				$	3,139,922
Total assets as of December 31, 2021		$	2,804,840		$	50,202		$	13,210		$	9,914			$	363,971						$	(449,688)				$	2,792,449
Goodwill as of September 30, 2022		$	—		$	—		$	3,988		$	—			$	—						$	—				$	3,988
Goodwill as of December 31, 2021		$	—		$	—		$	3,988		$	—			$	—						$	—				$	3,988
Capital expenditures for the three months ended March 31, 2023																													Capital expenditures for the three months ended March 31, 2023		$	337				$	—											$	—					$	594			$	—			$	931
Total assets as of March 31, 2023																													Total assets as of March 31, 2023		$	3,495,955				$	84,223											$	333,239					$	18,620			$	(380,161)			$	3,551,876
Total assets as of December 31, 2022																													Total assets as of December 31, 2022		$	3,014,475				$	34,248											$	375,171					$	27,075			$	(382,119)			$	3,068,850
Goodwill as of March 31, 2023																													Goodwill as of March 31, 2023		$	—				$	—											$	—					$	2,838			$	—			$	2,838
Goodwill as of December 31, 2022																													Goodwill as of December 31, 2022		$	—				$	—											$	—					$	2,838			$	—			$	2,838

4541

Three Months Ended September 30, 2021 CoRe Banking Mortgage Banking Professional Services Edge Ventures Financial Holding Company Intercompany Eliminations Consolidated
(Dollars in thousands)
Interest income $ 20,383 $ 105 $ — $ — $ 1 $ (5) $ 20,484
Interest expense 902 — 10 — 481 (5) 1,388
   Net interest income (expense) 19,481 105 (10) — (480) — 19,096
Release of allowance for loan losses 379 1 — — — — 380
Net interest income (expense) after provision for loan losses 19,102 104 (10) — (480) — 18,716
Noninterest income 15,387 3,546 4,806 18 2,002 (3,808) 21,951
Noninterest Expenses:
Salaries and employee benefits 8,296 47 3,993 808 3,384 — 16,528
Other expenses 8,973 (198) 1,213 1,468 1,653 (3,808) 9,301
   Total noninterest expenses 17,269 (151) 5,206 2,276 5,037 (3,808) 25,829
Income (loss) before income taxes 17,220 3,801 (410) (2,258) (3,515) — 14,838
Income taxes 3,657 922 (103) (581) (731) — 3,164
   Net income (loss) 13,563 2,879 (307) (1,677) (2,784) — 11,674
   Net loss attributable to noncontrolling interest — — 90 64 — — 154
Net income (loss) available to common shareholders $ 13,563 $ 2,879 $ (217) $ (1,613) $ (2,784) $ — $ 11,828
Capital expenditures for the three months ended September 30, 2021 $ 1,426 $ — $ 40 $ 509 $ — $ — $ 1,975

Nine Months Ended September 30, 2022 CoRe Banking Mortgage Banking Professional Services Edge Ventures Financial Holding Company Intercompany Eliminations Consolidated
(Dollars in thousands)
Interest income $ 84,858 $ 309 $ — $ — $ 113 $ (25) $ 85,255
Interest expense 4,617 — 25 — 2,284 (25) 6,901
   Net interest income (expense) 80,241 309 (25) — (2,171) — 78,354
Provision for loan losses 11,500 — — — — — 11,500
Net interest income (expense) after provision for loan losses 68,741 309 (25) — (2,171) — 66,854
Noninterest income 19,347 1,193 16,909 300 8,265 (14,044) 31,970
Noninterest Expenses:
Salaries and employee benefits 28,810 8 11,425 2,248 12,769 — 55,260
Other expenses 33,484 119 3,956 3,609 6,262 (14,044) 33,386
   Total noninterest expenses 62,294 127 15,381 5,857 19,031 (14,044) 88,646
Income (loss) before income taxes 25,794 1,375 1,503 (5,557) (12,937) — 10,178
Income taxes 5,219 356 375 (1,265) (2,524) — 2,161
   Net income (loss) 20,575 1,019 1,128 (4,292) (10,413) — 8,017
   Net loss attributable to noncontrolling interest — — 194 327 — — 521
Net income (loss) available to common shareholders $ 20,575 $ 1,019 $ 1,322 $ (3,965) $ (10,413) $ — $ 8,538
Capital expenditures for the nine months ended September 30, 2022 $ 494 $ — $ 26 $ 1,821 $ 389 $ — $ 2,730

Nine Months Ended September 30, 2021 CoRe Banking Mortgage Banking Professional Services Edge Ventures Financial Holding Company Intercompany Eliminations Consolidated
(Dollars in thousands)
Interest income $ 60,078 $ 307 $ — $ — $ 2 $ (7) $ 60,380
Interest expense 3,281 — 13 — 1,437 (7) 4,724
   Net interest income (expense) 56,797 307 (13) — (1,435) — 55,656
Release of allowance for loan losses (541) (1) — — — — (542)
Net interest income (expense) after provision for loan losses 57,338 308 (13) — (1,435) — 56,198
Noninterest income 26,832 14,499 9,784 18 5,892 (8,972) 48,053
Noninterest Expenses:
Salaries and employee benefits 24,170 47 7,099 1,054 9,730 — 42,100
Other expenses 26,702 (112) 2,898 1,661 4,073 (8,972) 26,250
   Total noninterest expenses 50,872 (65) 9,997 2,715 13,803 (8,972) 68,350
Income (loss) before income taxes 33,298 14,872 (226) (2,697) (9,346) — 35,901
Income taxes 6,060 3,606 (76) (694) (1,890) — 7,006
   Net income (loss) 27,238 11,266 (150) (2,003) (7,456) — 28,895
   Net loss attributable to noncontrolling interest — — 136 129 — — 265
   Net income (loss) attributable to parent 27,238 11,266 (14) (1,874) (7,456) — 29,160
Preferred stock dividends — — — — 35 — 35
Net income (loss) available to common shareholders $ 27,238 $ 11,266 $ (14) $ (1,874) $ (7,491) $ — $ 29,125
Capital expenditures for the nine months ended September 30, 2021 $ 2,071 $ — $ 47 $ 2,009 $ — $ — $ 4,127


Three Months Ended March 31, 2022	CoRe Banking		Mortgage Banking		Financial Holding Company		Other		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	23,171	$	103	$	(7)	$	—	$	(5)	$	23,262
Interest expense	659		—		753		7		(5)		1,414
Net interest income (expense)	22,512		103		(760)		(7)		—		21,848
Release of allowance for loan losses	1,280		—		—				—		1,280
Net interest income (expense) after provision for credit losses	21,232		103		(760)		(7)		—		20,568




Noninterest income	6,898		1,223		2,671		1,537		(3,049)		9,280

Noninterest Expenses:
Salaries and employee benefits	9,508		—		4,056		2,163		—		15,727
Other expenses	11,048		—		2,205		1,327		(3,049)		11,531
Total noninterest expenses	20,556		—		6,261		3,490		(3,049)		27,258

Income (loss) before income taxes	7,574		1,326		(4,350)		(1,960)		—		2,590
Income taxes	1,631		341		(869)		(423)		—		680
Net income (loss) from continuing operations	5,943		985		(3,481)		(1,537)		—		1,910
Income from discontinued operations, before income taxes	—		—		—		986		—		986
Income taxes - discontinued operations	—		—		—		225		—		225
Net income from discontinued operations	—		—		—		761		—		761
Net income (loss)	5,943		985		(3,481)		(776)		—		2,671

Net loss attributable to noncontrolling interest	—		—		—		193		—		193


Net income (loss) available to common shareholders	$	5,943	$	985	$	(3,481)	$	(583)	$	—	$	2,864

Capital expenditures for the three months ended March 31, 2022	$	250	$	—	$	338	$	639	$	—	$	1,866

Note 14 – ~~Pending~~ Acquisition & Divestiture Activity

Chartwell Compliance

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

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

The following table presents the major classes of assets held-for-sale from discontinued operations and liabilities held-for-sale from discontinued operations as of December 31, 2022:


(Dollars in thousands)	December 31, 2022
Premises and equipment	$	23
Accrued interest receivable and other assets	3,142
Goodwill	1,150
Total assets from discontinued operations	$	4,315

Accrued interest payable and other liabilities	$	5,444
Total liabilities from discontinued operations	$	5,444

The following table presents the major classes of net income from discontinued operations for the periods shown:


	Three Months Ended March 31,
(Dollars in thousands)	2023		2022
Compliance consulting income	$	2,369	$	4,095
Gain on sale of discontinued operations	11,800
Total income	$	14,169	$	4,095

Salaries and employee benefits	$	2,082	$	2,234
Other expenses	256		875
Total expenses	$	2,338	$	3,109

Income before income taxes	$	11,831	$	986
Income taxes	3,049		225
Net income from discontinued operations	$	8,782	$	761

Integrated Financial Holdings, Inc.

In August 2022, we entered into ana Merger Agreement ~~and Plan of Merger and Reorganization~~ (the “Merger Agreement”) with Integrated Financial Holdings, Inc. (“IFH”). ~~Pursuant to the~~The Merger Agreement provided that IFH ~~will~~would merge with and into MVB, with MVB continuing as the surviving corporation. Under the terms of the merger agreement, IFH shareholders will receive 1.21 shares of MVB common stock for each share of IFH common stock. The value of the merger consideration to be paid by MVB in shares of MVB common stock upon the completion of the merger will be determined based on the closing price of MVB common stock on the closing date and the number of issued and outstanding shares of IFH common stock immediately prior to the closing.corporation (the “Merger”). Following the ~~merger,~~Merger, West Town Bank & Trust, a state bank chartered under the laws of Illinois and wholly-owned subsidiary of IFH, ~~may, upon the direction of MVB,~~would merge with and into the Bank, with the Bank as the surviving ~~bank.~~

~~Note 15 – Subsequent Event~~

~~In March~~bank (the “Bank Merger”), pursuant to the Agreement and Plan of Merger, dated October 4, 2022, between West Town Bank & Trust and the Bank (the “Bank Merger Agreement” and, together with the Merger Agreement, the “Merger Agreements”). On May 9, 2023, MVB, IFH, West Town Bank & Trust and the Bank entered into ~~an Equity Purchase~~a Termination Agreement ~~(the “Purchase Agreement”) with Warp Speed Holdings LLC (“Warp Speed”),~~ pursuant to which the ~~Bank~~parties mutually agreed to ~~purchase certain common units of Warp Speed in an amount equal~~terminate the Merger Agreements and mutually released one another from any claims (subject to ~~37.5% of~~limited customary exceptions) related to the outstanding equity interests of Warp Speed, on a fully-diluted basis. In April 2022, we assumed the Bank's obligations under the Purchase Agreement. Effective October 1, 2022, we completed the purchase with $38.4 million in cash, plus 313,030 shares of newly-issued common stock of MVB, with an aggregate value of $9.6 million, based on the volume-weighted average closing price for shares of MVB common stock for the 20 trading days ending the day prior to closing.

~~In accordance with~~ contemplated merger transactions.~~ASC Topic 323 Investments - Equity Method and Joint Ventures~~, we have made an election to record our share of the results of operations of Warp Speed on a three-month lag. Accordingly, the transaction will not impact our financial statements until the first quarter of 2023.

In October 2022, we entered into a credit agreement with Raymond James Bank ("Raymond James"). Pursuant to the credit agreement, Raymond James has extended to us a senior term loan in the aggregate principal amount of up to $10 million. In connection with the closing of the Warp Speed transaction, we borrowed $10 million and paid Raymond James Bank an upfront fee of 1% of the loan amount. The loan will bear interest per annum at a rate equal to 2.75%, plus term secured overnight financing rate, which will reset monthly. Accrued interest is payable on the last business day of each month, beginning with October 31, 2022, with the then outstanding principal balance of the loan payable on the last business day of each quarter in the amount of $125,000 during the first year and $250,000 thereafter. The loan will mature 30 months after the effective date of the credit agreement, unless accelerate earlier upon an event of default.

4943

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and with the consolidated financial statements and accompanying notes and other detailed information appearing in the ~~2021~~2022 Form 10-K. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. See the “Forward-Looking Statements” section of this Report for further information on forward-looking statements.

Executive Summary

We 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 the high-growth markets in which we operate and will continue to ~~focus~~adapt our business model due to challenging market conditions, primarily brought on ~~margin improvement, leveraging capital, organic portfolio loan growth~~by an environment of increasing interest rates, a slowing economy and ~~operating efficiency.~~multiple high-profile bank failures. We ~~believe the~~remain committed to key ~~challenge for us in the future is~~Fintech industry gaming and payments initiatives and continue to ~~expand our lending platform and utilize the increase in our low cost deposits, while continuing~~implement cost-saving measures. We continue to ~~manage asset quality, as well as management of compliance and risk assessment of emerging and fast growing markets. We are expanding~~expand the Bank's treasury services function to support the banking needs of ~~Fintech~~financial and emerging technology companies, which we believe will further enhance core deposits, notably through the expansion of deposit acquisition and fee income strategies through the Fintech division. Additionally, we have expanded our compliance and risk management team to support the growth in these lines of business. We ~~continue to expand our debit~~have entered into agreements for card issuing and acquiring program ~~sponsorship~~sponsorships to further enhance fee income and noninterest income.

Current Market Conditions

In March 2023, certain specialized banking institutions with elevated concentrations of uninsured deposits experienced large deposit outflows, resulting in the institutions being placed into FDIC receiverships. In the aftermath, there has been substantial market disruption and indications that deposit concerns could spread within the banking industry, leading to deposit outflows and other destabilizing results. These market events could materially adversely affect our business. A deterioration in economic conditions or the loss of confidence in financial institutions may result in deposit base outflows and limit our access to some of our customary sources of liquidity, including, but not limited to, inter-bank borrowings and borrowings from the Federal Reserve and FHLB. In addition, account and deposit balances may decrease when clients perceive alternative investments, such as the stock market or real estate, as providing a better risk/return tradeoff. Furthermore, the portion of our deposit portfolio that is comprised of large uninsured deposits may be more likely to be withdrawn rapidly under adverse economic conditions. If our clients move money out of bank deposits into investments or to other financial institutions, we ~~continue~~could lose a relatively low cost source of funds. Despite the events of March 2023, our total deposits increased to ~~expand~~$3.15 billion as of March 31, 2023, as compared to $2.57 billion at December 31, 2022. Additionally, our ~~Fintech industry offerings through the acquisition~~off-balance sheet deposits grew to $1.04 billion as of ~~technology, including a software development team, in order to scale and diversify our banking capabilities.~~March 31, 2023 from $724.0 million at December 31, 2022.

Financial Results

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

~~Net~~During the three months ended March 31, 2023, net interest income increased ~~$10.8~~$10.9 million, noninterest income decreased ~~$13.8~~$6.2 million and noninterest expenses increased by ~~$4.1~~$1.1 million ~~during the three months ended September 30, 2022~~ compared to the three months ended ~~September 30, 2021.~~March 31, 2022. Our yield on earning assets (tax-equivalent) in the three months ended ~~September 30, 2022~~March 31, 2023 was ~~4.83%~~6.00% compared to ~~3.48%~~3.38% in the three months ended ~~September 30, 2021.~~March 31, 2022. Loans receivable ~~increased~~decreased by ~~$256.3~~$11.5 million to ~~$2.47~~$2.36 billion ~~during the three months ended September 30,~~compared to December 31, 2022. Our overall cost of interest-bearing liabilities was ~~1.15%~~2.95% in the three months ended ~~September 30, 2022~~March 31, 2023 compared to 0.39% in the three months ended ~~September 30, 2021.~~March 31, 2022. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a net interest margin (tax-equivalent) of ~~4.25%~~4.40% in the three months ended ~~September 30, 2022~~March 31, 2023, compared to ~~3.25%~~3.18% in the three months ended ~~September 30, 2021.~~March 31, 2022.

We earned ~~$2.7~~$11.3 million in the three months ended ~~September 30, 2022~~March 31, 2023, compared to ~~$11.8~~$2.9 million in the three months ended ~~September 30, 2021. The~~March 31, 2022, primarily the result of an $11.8 million pre-tax gain related to the sale of the Bank’s wholly-owned subsidiary, Chartwell. Earnings for the three months ended ~~September 30, 2022 earnings~~March 31, 2023 equated to a return on average assets of ~~0.4%~~1.4% and a return on average equity of ~~4.2%~~16.1%, compared to the three months ended ~~September 30, 2021~~March 31, 2022 results ~~of 1.9% and 18.1%,~~respectively. Basic and diluted earnings per share were $0.22 and $0.21, respectively, for the three months ended September 30, 2022 compared to $1.00 and $0.92, respectively, for the three months ended September 30, 2021.

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

Net interest income increased $22.7 million, noninterest income decreased $16.1 million and noninterest expenses increased by $20.3 million during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Our yield on earning assets (tax-equivalent) in the nine months ended September 30, 2022 was 4.18% compared to 3.52% in the nine months ended September 30, 2021. Loans receivable increased by $601.6 million to $2.47 billion during the nine months ended September 30, 2022. Our overall cost of interest-bearing liabilities was 0.70% in the nine months ended September 30, 2022 compared to 0.45% in the nine months ended September 30, 2021. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a net interest margin (tax-equivalent) of 3.84% in the nine months ended September 30, 2022 compared to 3.25% in the nine months ended September 30, 2021.

We earned $8.5 million in the nine months ended September 30, 2022 compared to $29.2 million in the nine months ended September 30, 2021. The nine months ended September 30, 2022 earnings equated to a return on average assets of 0.4% and a

~~return on average equity of 4.4%, compared to the nine months ended September 30, 2021 results of 1.5% and 15.8%~~4.2%, respectively. Basic and diluted earnings per share were ~~$0.70~~$0.90 and ~~$0.66,~~$0.87, respectively, for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, compared to ~~$2.49~~$0.24 and ~~$2.32,~~$0.22, respectively, for the ~~nine~~three months ended ~~September 30, 2021.~~

March 31, 2022.

~~Corporate Updates~~

~~Warp Speed Holdings, Inc.~~

In March 2022, the Bank entered into the Purchase Agreement with Warp Speed, pursuant to which the Bank agreed to purchase certain common units of Warp Speed in an amount equal to 37.5% of the outstanding equity interests of Warp Speed, on a fully-diluted basis. In April 2022, we assumed the Bank's obligations under the Purchase Agreement. Effective October 1, 2022, we completed the purchase with $38.4 million in cash, plus 313,030 shares of newly-issued common stock of MVB, with an aggregate value of $9.6 million, based on the volume-weighted average closing price for shares of MVB common stock for the 20 trading days ending the day prior to closing.

Warp Speed is the holding company for the Warp Family of Companies, which includes CalCon Mutual Mortgage, LLC, dba OneTrust Home Loans, One Trust International and Warp Speed Mortgage, as well as investments in Click2Bind Insurance Services, LLC, Empower Title, LLC and Grind Analytics LLC. Together, Warp Speed represents a horizontally integrated financial services platform focused on residential and commercial loan origination and servicing, title insurance services, business and personal insurance brokerage and data analytics to optimize business decisions in real time.Corporate Updates

Integrated Financial Holdings, Inc.

In August 2022, we entered into the Merger Agreement with ~~IFH. Pursuant to the~~IFH). The Merger Agreement provided that IFH ~~will~~would merge with and into MVB, with MVB continuing as the surviving corporation. Under the terms of the merger agreement, IFH shareholders will receive 1.21 shares of MVB common stock for each share of IFH common stock. The value of the merger consideration to be paid by MVB in shares of MVB common stock upon the completion of the merger will be determined based on the closing price of MVB common stock on the closing date and the number of issued and outstanding shares of IFH common stock immediately prior to the closing. Following the ~~merger,~~Merger, West Town Bank & Trust, a state bank chartered under the laws of Illinois and wholly-owned subsidiary of IFH, ~~may, upon the direction of MVB,~~would merge with and into the Bank, with the Bank as the surviving ~~bank. The closing of the merger, which is subject~~bank, pursuant to the ~~satisfaction~~Agreement and Plan of ~~closing conditions, including receipt of regulatory~~Merger, dated October 4, 2022, between West Town Bank & Trust and ~~shareholder approval, is currently expected to occur in~~ the ~~first quarter of 2023.~~

~~Credit Agreement~~

~~In October 2022, we~~Bank. On May 9, 2023, MVB, IFH, West Town Bank & Trust and the Bank entered into a ~~credit agreement with Raymond James. Pursuant~~Termination Agreement pursuant to which the parties mutually agreed to terminate the Merger Agreements and mutually released one another from any claims (subject to limited customary exceptions) related to the credit agreement, Raymond James has extended to us a senior term loan in the aggregate principal amount of up to $10 million. In connection with the closing of the Warp Speed transaction, we borrowed $10 million and paid Raymond James Bank an upfront fee of 1% of the loan amount. The loan will bear interest per annum at a rate equal to 2.75%, plus term secured overnight financing rate, which will reset monthly. Accrued interest is payable on the last business day of each month, beginning with October 31, 2022, with the then outstanding principal balance of the loan payable on the last business day of each quarter in the amount of $125,000 during the first year and $250,000 thereafter. The loan will mature 30 months after the effective date of the credit agreement, unless accelerate earlier upon an event of default.contemplated merger transactions.

~~COVID-19 Pandemic~~

The COVID-19 pandemic has continued to cause a great degree of uncertainty in both the global and domestic economy 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 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 pricing most bonds, loans, borrowings, deposits and other fixed income yield curves. 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.

We actively participated in the PPP, and may evaluate other programs available to assist our clients and provide consumer deferrals consistent with government-sponsored enterprise (“GSE”) guidelines. As of September 30, 2022, we originated 734 PPP

loans with outstanding balances of $9.3 million through our internal commercial team and originated 3,731 PPP loans with outstanding balances of $10.8 million through our partnership with a Fintech company.

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

The following tables present information regarding (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 shown. The average balances presented are derived from daily average balances.

5245


		Three Months Ended September 30,													Three Months Ended March 31,
		2022						2021							2023						2022
(Dollars in thousands)	(Dollars in thousands)	Average Balance		Interest Income/Expense		Yield/Cost		Average Balance		Interest Income/Expense		Yield/Cost		(Dollars in thousands)	Average Balance		Interest Income/Expense		Yield/Cost		Average Balance		Interest Income/Expense		Yield/Cost
Assets	Assets													Assets
Interest-bearing balances with banks	Interest-bearing balances with banks	$	32,552	$	111	1.35	%	$	184,131	$	60	0.13	%	Interest-bearing balances with banks	$	285,102	$	3,153	4.49	%	$	595,574	$	214	0.15	%
CDs with banks	CDs with banks	232		2		3.42		11,065		52		1.86		CDs with banks	—		—		—		2,352		13		2.24
Investment securities:	Investment securities:													Investment securities:
Taxable	Taxable	231,953		897		1.53		238,807		575		0.96		Taxable	236,574		1,848		3.17		241,974		648		1.09
Tax-exempt 2	Tax-exempt 2	144,719		1,346		3.69		202,380		1,528		3.00		Tax-exempt 2	137,799		1,308		3.85		128,588		1,137		3.59
Loans and loans held-for-sale: 1	Loans and loans held-for-sale: 1													Loans and loans held-for-sale: 1
Commercial 3		1,687,383		22,898		5.38		1,416,236		15,646		4.38
Commercial														Commercial	1,620,509		28,538		7.14		1,453,262		16,979		4.74
Tax exempt 2	Tax exempt 2	4,498		51		4.50		6,678		77		4.57		Tax exempt 2	3,944		43		4.42		5,066		52		4.16
Real estate	Real estate	579,685		4,707		3.22		297,450		2,282		3.04		Real estate	621,388		6,295		4.11		338,826		2,340		2.80
Consumer	Consumer	129,464		4,183		12.82		16,133		602		14.80		Consumer	137,547		3,862		11.39		54,623		2,128		15.80
Total loans	Total loans	2,401,030		31,839		5.26		1,736,497		18,607		4.25		Total loans	2,383,388		38,738		6.59		1,851,777		21,499		4.71
Total earning assets	Total earning assets	2,810,486		34,195		4.83		2,372,880		20,822		3.48		Total earning assets	3,042,863		45,047		6.00		2,820,265		23,511		3.38
Less: Allowance for loan losses	Less: Allowance for loan losses	(23,083)						(24,978)						Less: Allowance for loan losses	(30,135)						(18,343)
Cash and due from banks	Cash and due from banks	5,399						5,922						Cash and due from banks	243						6,067
Other assets	Other assets	227,337						200,536						Other assets	339,676						248,803
Total assets	Total assets	$	3,020,139					$	2,554,360					Total assets	$	3,352,647					$	3,056,792

Liabilities	Liabilities													Liabilities
Deposits:	Deposits:													Deposits:
NOW	NOW	$	734,271	$	1,394	0.75	%	$	743,632	$	333	0.18	%	NOW	$	796,901	$	4,661	2.37	%	$	785,108	$	193	0.10	%
Money market checking	Money market checking	258,527		422		0.65		433,216		211		0.19		Money market checking	209,227		928		1.80		466,287		202		0.18
Savings	Savings	71,370		153		0.85		42,126		—		—		Savings	93,297		641		2.79		50,041		1		0.01
IRAs	IRAs	6,132		17		1.10		7,302		21		1.14		IRAs	6,151		27		1.78		6,370		17		1.08
CDs	CDs	202,299		988		1.94		121,482		333		1.09		CDs	386,144		3,896		4.09		87,237		243		1.13
Repurchase agreements and federal funds sold	Repurchase agreements and federal funds sold	10,627		1		0.04		10,941		3		0.11		Repurchase agreements and federal funds sold	7,612		1		0.05		11,823		5		0.17
FHLB and other borrowings	FHLB and other borrowings	48,058		311		2.57		494		6		4.82		FHLB and other borrowings	71,166		888		5.06		—		—		—
Senior term loan														Senior term loan	9,765		194		8.06		—		—		—
Subordinated debt	Subordinated debt	73,190		771		4.18		44,460		481		4.29		Subordinated debt	73,318		798		4.41		73,062		753		4.18
Total interest-bearing liabilities	Total interest-bearing liabilities	1,404,474		4,057		1.15		1,403,653		1,388		0.39		Total interest-bearing liabilities	1,653,581		12,034		2.95		1,479,928		1,414		0.39
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	1,321,982						852,872						Noninterest-bearing demand deposits	1,380,516						1,260,965
Other liabilities	Other liabilities	37,019						36,097						Other liabilities	37,087						46,318
Total liabilities	Total liabilities	2,763,475						2,292,622						Total liabilities	3,071,184						2,787,211

Stockholders’ equity	Stockholders’ equity													Stockholders’ equity

Common stock	Common stock	13,086						12,704						Common stock	13,471						13,458
Paid-in capital	Paid-in capital	145,877						141,246						Paid-in capital	153,389						143,795
Treasury stock	Treasury stock	(16,741)						(16,741)						Treasury stock	(16,741)						(16,741)
Retained earnings	Retained earnings	144,816						122,361						Retained earnings	166,426						137,633
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(30,915)						1,207						Accumulated other comprehensive income (loss)	(35,345)						(9,466)
Total stockholders’ equity	Total stockholders’ equity	256,123						260,777						Total stockholders’ equity	281,200						268,679
Noncontrolling interest	Noncontrolling interest	541						961						Noncontrolling interest	263						902
Total stockholders’ equity attributable to parent	Total stockholders’ equity attributable to parent	256,664						261,738						Total stockholders’ equity attributable to parent	281,463						269,581
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,020,139					$	2,554,360					Total liabilities and stockholders’ equity	$	3,352,647					$	3,056,792

Net interest spread (tax-equivalent)	Net interest spread (tax-equivalent)					3.68	%					3.09	%	Net interest spread (tax-equivalent)					3.05	%					2.99	%
Net interest income and margin (tax-equivalent) 2	Net interest income and margin (tax-equivalent) 2			$	30,138	4.25	%			$	19,434	3.25	%	Net interest income and margin (tax-equivalent) 2			$	33,013	4.40	%			$	22,097	3.18	%
Less: Tax-equivalent adjustments	Less: Tax-equivalent adjustments			$	(292)					$	(338)			Less: Tax-equivalent adjustments			$	(284)					$	(249)
Net interest spread	Net interest spread					3.64	%					3.03	%	Net interest spread					3.02	%					2.96	%
Net interest income and margin	Net interest income and margin			$	29,846	4.21	%			$	19,096	3.19	%	Net interest income and margin			$	32,729	4.36	%			$	21,848	3.14	%

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 investmentsecurities, a tax-equivalent adjustment has been computed using a Federal tax rate of 21% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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 $20.1 million at September 30, 2022 and $147.3 million at September 30, 2021, are included in this amount.~~

Nine Months Ended September 30,
2022 2021
(Dollars in thousands) Average Balance Interest Income/Expense Yield/Cost Average Balance Interest Income/Expense Yield/Cost
Assets
Interest-bearing balances with banks $ 273,184 $ 630 0.31 % $ 207,195 $ 164 0.11 %
CDs with banks 1,381 24 2.32 11,554 168 1.94
Investment securities:
     Taxable 237,188 2,383 1.34 222,323 1,831 1.10
     Tax-exempt 2
140,377 3,824 3.64 207,529 4,881 3.14
Loans and loans held-for-sale: 1
     Commercial 3
1,569,161 59,899 5.10 1,365,680 45,905 4.49
     Tax exempt 2
4,829 156 4.32 6,928 237 4.57
     Real estate 438,380 9,722 2.97 303,701 7,509 3.31
     Consumer 91,092 9,454 13.88 10,157 762 10.03
Total loans 2,103,462 79,231 5.04 1,686,466 54,413 4.31
Total earning assets 2,755,592 86,092 4.18 2,335,067 61,457 3.52
Less: Allowance for loan losses (20,468) (25,920)
Cash and due from banks 5,680 16,274
Other assets 237,637 201,198
     Total assets $ 2,978,441 $ 2,526,619
Liabilities
Deposits:
     NOW $ 678,991 $ 1,844 0.36 % $ 660,655 $ 1,323 0.27 %
     Money market checking 367,608 807 0.29 461,998 662 0.19
     Savings 49,714 155 0.42 44,938 4 0.01
     IRAs 6,271 52 1.11 10,764 102 1.27
     CDs 122,095 1,433 1.57 148,807 1,091 0.98
Repurchase agreements and federal funds sold 11,334 4 0.05 10,677 10 0.13
FHLB and other borrowings 16,966 322 2.54 33,914 95 0.37
Subordinated debt 73,126 2,284 4.18 43,786 1,437 4.39
     Total interest-bearing liabilities 1,326,105 6,901 0.70 1,415,539 4,724 0.45
Noninterest-bearing demand deposits 1,350,533 828,469
Other liabilities 41,379 36,665
     Total liabilities 2,718,017 2,280,673
Stockholders’ equity
Preferred stock — 774
Common stock 13,276 12,524
Paid-in capital 144,903 139,980
Treasury stock (16,741) (16,741)
Retained earnings 140,174 107,094
Accumulated other comprehensive income (loss) (21,905) 1,788
     Total stockholders’ equity 259,707 245,419
Noncontrolling interest 717 527
     Total stockholders’ equity attributable to parent 260,424 245,946
     Total liabilities and stockholders’ equity $ 2,978,441 $ 2,526,619
Net interest spread (tax-equivalent) 3.48 % 3.07 %
Net interest income and margin (tax-equivalent) 2
$ 79,191 3.84 % $ 56,733 3.25 %
Less: Tax-equivalent adjustments $ (837) $ (1,077)
Net interest spread 3.44 % 3.01 %
Net interest income and margin $ 78,354 3.80 % $ 55,656 3.19 %

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

2In 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, 2022 and 2021, 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 $20.1 million at September 30, 2022 and $147.3 million at September 30, 2021, are included in this amount.~~

5446

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


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			2022			2021			(Dollars in thousands)	2023			2022
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	$	29,846		$	19,096		$	78,354		$	55,656		Net interest income	$	32,729		$	21,848
Average interest-earning assets	Average interest-earning assets	2,810,486			2,372,880			2,755,592			2,335,067			Average interest-earning assets	3,042,863			2,820,265
Net interest margin	Net interest margin	4.21		%	3.19		%	3.80		%	3.19		%	Net interest margin	4.36		%	3.14		%

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	$	29,846		$	19,096		$	78,354		$	55,656		Net interest income	$	32,729		$	21,848
Impact of fully tax-equivalent adjustment	Impact of fully tax-equivalent adjustment	292			338			837			1,077			Impact of fully tax-equivalent adjustment	284			249
Net interest income on a fully tax-equivalent basis	Net interest income on a fully tax-equivalent basis	30,138			19,434			79,191			56,733			Net interest income on a fully tax-equivalent basis	33,013			22,097
Average interest-earning assets	Average interest-earning assets	$	2,810,486		$	2,372,880		$	2,755,592		$	2,335,067		Average interest-earning assets	$	3,042,863		$	2,820,265
Net interest margin on a fully tax-equivalent basis	Net interest margin on a fully tax-equivalent basis	4.25		%	3.25		%	3.84		%	3.25		%	Net interest margin on a fully tax-equivalent basis	4.40		%	3.18		%

Key Metrics
As of and for the three months ended September 30, As of and for the nine months ended September 30,
(Dollars in thousands, except per share data) 2022 2021 2022 2021
Book value per common share $ 19.85 $ 22.18 $ 19.85 $ 22.18
Tangible book value per common share 5
$ 19.38 $ 21.64 $ 19.38 $ 21.64
Efficiency ratio 1 5
78.8 % 62.9 % 80.4 % 65.9 %
Overhead ratio 2 3 5
4.0 % 4.0 % 4.0 % 3.6 %
Net loan charge-offs to total loans receivable 4
0.2 % — % 0.2 % 0.01 %
Allowance for loan losses to total loans receivable 1.07 % 1.40 % 1.07 % 1.43 %
Nonperforming loans $ 22,350 $ 17,453 $ 22,350 $ 17,453
Nonperforming loans to total loans receivable 0.9 % 1.0 % 0.9 % 1.0 %
Equity to assets 7.8 % 9.5 % 7.8 % 9.5 %
Community Bank Leverage Ratio 11.1 % 12.0 % 11.1 % 12.0 %


	As of and for the three months ended March 31,
(Dollars in thousands, except per share data)		2023			2022
Book value per common share		$	21.43		$	21.66
Tangible book value per common share 5		$	21.17		$	21.16
Efficiency ratio 1 3 5 6		61.4		%	85.6		%
Overhead ratio 2 3 5		3.4		%	3.8		%
Net loan charge-offs to total loans receivable 4		0.3		%	0.2		%
Allowance for credit losses to total loans receivable 7		1.5		%	1.0		%
Nonperforming loans		$	13,085		$	18,048
Nonperforming loans to total loans receivable		0.6		%	1.0		%
Equity to assets		7.6		%	9.1		%
Community Bank Leverage Ratio		10.0		%	10.8		%

1 Noninterest expense as a percentage of net interest income and noninterest income

2 Annualized for the quarterly periods presented

3 Noninterest expense as a percentage of average assets

4 Charge-offs less recoveries

5 Non-U.S. GAAP metric

6 Includes net income from discontinued operations

7 Excludes loans held-for-sale

5547

Tangible book value ~~("TBV"~~(“TBV”) per common share was ~~$19.38~~$21.17 and ~~$21.64~~$21.16 as of ~~September 30,~~March 31, 2023 and March 31, 2022,~~and September 30, 2021,~~ respectively.TBV per common share is a non-U.S. GAAP measure that we believe is helpful to interpreting financial results. A reconciliation of TBV per common share is included below.


		As of September 30,					As of March 31,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2022		2021		(Dollars in thousands, except per share data)	2023		2022
Goodwill	Goodwill	$	3,988	$	3,988	Goodwill	$	2,838	$	3,988
Intangibles	Intangibles	1,806		2,518		Intangibles	420		2,155
Total intangibles	Total intangibles	5,794		6,506		Total intangibles	3,258		6,143

Total equity attributable to parent	Total equity attributable to parent	243,913		265,565		Total equity attributable to parent	271,131		263,080

Less: Total intangibles	Less: Total intangibles	(5,794)		(6,506)		Less: Total intangibles	(3,258)		(6,143)
Tangible common equity	Tangible common equity	238,119		259,059		Tangible common equity	267,873		256,937

Tangible common equity	Tangible common equity	238,119		259,059		Tangible common equity	267,873		256,937
Common shares outstanding (000s)	Common shares outstanding (000s)	12,287		11,972		Common shares outstanding (000s)	12,653		12,143
Tangible book value per common share	Tangible book value per common share	$	19.38	$	21.64	Tangible book value per common share	$	21.17	$	21.16

Net Interest Income

Net interest income is the amount by which interest income on earning assets exceeds interest expense incurred on interest-bearing liabilities. Interest-earning assets include loans, investment securities and certificates of deposit in banks. Interest-bearing liabilities include interest-bearing deposits and borrowed funds such as sweep accounts, repurchase agreements, subordinated debt and ~~subordinated debt.~~the senior term loan. Net interest income, which is the primary source of revenue for the Bank, is also impacted by changes in market interest rates and the mix of interest-earning assets and interest-bearing liabilities. ~~Net interest 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 measures the net revenue stream generated by the Bank’s balance sheet. ~~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.~~ Net interest spread is calculated by taking the difference between interest earned on earning assets and interest paid on interest-bearing liabilities in an effort to maximize net interest income, while maintaining an appropriate level of interest rate risk.

In ~~2022,~~2023, the Federal Reserve raised its key interest rate from a range of ~~0.00%~~4.25% to ~~0.25%~~4.50% as of December 31, 2022 to a range of ~~3.00%~~4.75% to ~~3.25%~~5.00% as of ~~September 30, 2022. Effective November 3, 2022, the Federal Reserve raised its key interest rate to a range of 3.75% to 4.00%.~~March 31, 2023. We ~~continue to~~continually analyze methods to deploy assets into an earning asset mix to result in a stronger net interest margin.

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

Net interest margin (tax-equivalent) was ~~4.25%~~4.40% for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~3.25%~~3.18% for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in net interest margin (tax equivalent) was driven by ~~the~~ strong loan growth and higher loan yields due to interest rate increases, partially offset by an increase in ~~funding costs.~~deposit costs and the cost of borrowings. Net interest spread (tax-equivalent) was ~~3.68%~~3.05% for the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~3.09%~~2.99% for the three months ended ~~September 30, 2021.~~March 31, 2022. The difference between the net interest margin (tax-equivalent) and net interest spread (tax-equivalent) was 57135 basis points in the three months ended ~~September 30, 2022~~March 31, 2023 compared to 1619 basis points in the three months ended ~~September 30, 2021. This was~~March 31, 2022 driven by the ~~1.35%~~ increase in ~~yield on earning assets~~interest expense outpacing the ~~impact of the cost savings associated with an~~ increase ~~of $469.1 million~~ in average ~~noninterest-bearing demand deposits.~~assets.

During the three months ended ~~September 30, 2022,~~March 31, 2023, net interest income increased by ~~$10.8~~$10.9 million, or ~~56.3%~~49.8%, to ~~$29.8~~$32.7 million from ~~$19.1~~$21.8 million during the three months ended ~~September 30, 2021.~~ March 31, 2022.This increase is largely due tostrong loan growth at favorable interest rates, primarily driven by the Company's strategic lending partnership growth vehicle and broad-based growth throughout CoRe banking business, as well as the effects of higher interest rates on earning assets, including investment securities and interest bearing deposits with other banks, partially offset by an increase in ~~the average earning assets~~cost of ~~$437.6 million being primarily funded by the increase in noninterest-bearing demand deposits of $469.1 million.~~ funds.Average total earning assets were ~~$2.81~~$3.04 billionin the three months ended March 31, 2023 compared to $2.82 billion in the three months ended ~~September 30, 2022 compared to $2.37 billion in the three months ended September 30, 2021.~~ March 31, 2022.Total interest income increased by ~~$13.4~~$21.5 million, or ~~65.5%~~92.4%, to ~~$33.9~~$44.8 million in the three months ended ~~September 30, 2022~~March 31, 2023 from ~~$20.5~~$23.3 million in ~~the three months ended September 30, 2021. This increase in total~~

5648

~~interest income was~~the three months ended March 31, 2022 driven by higher yields from new loan production at favorable interest ~~rates, as well as the change in our loan portfolio.~~ rates.Average total loans increased to ~~$2.40~~$2.38 billion in the three months ended ~~September 30, 2022~~ March 31, 2023from ~~$1.74~~$1.85 billion in the three months ended ~~September 30, 2021,~~March 31, 2022, primarily as the result of a ~~$282.2~~$282.6 million increase in average real estate loans, a ~~$271.1~~$167.2 million increase in average commercial loans and ~~a $113.3~~an $82.9 million increase in average consumer loans. The yield on total loans increased ~~1.01%~~1.88%.

Average investment securities ~~decreased $64.5~~increased $3.8 million as the result of a ~~$57.7~~$9.2 million ~~decrease~~increase in tax-exempt investments and a ~~$6.9~~$5.4 million decrease in taxable investments during three months ended ~~September 30, 2022,~~March 31, 2023, compared to three months ended ~~September 30, 2021.~~March 31, 2022. The yield on tax-exempt securitiesincreased 6926 basis points and the taxable securities yield increased 57208 basis points.

Average interest-bearing liabilitiesincreased by ~~$0.8~~$173.7 million for three months ended ~~September 30, 2022~~March 31, 2023 from three months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily the result of average balance increases of ~~$80.8~~$298.9 million in certificates of deposit, ~~$47.6~~$71.2 million in FHLB and other borrowings ~~$28.7 million in subordinated debt,~~ and ~~$29.2~~$43.3 million in savings, partially offset by an average balance ~~decreases~~decrease of ~~$174.7~~$257.1 million in money market checking ~~accounts and $9.4 million in negotiable order of withdrawal~~ accounts.

Average interest-bearing deposits were ~~$1.27~~$1.49 billion for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~$1.35~~$1.40 billion for the three months ended ~~September 30, 2021.~~ March 31, 2022.Total interest expense increased by ~~$2.7~~$10.6 million, caused primarily by a ~~$2.1~~$9.5 million increase in deposit interest. The result was a ~~seventy-six~~256 basis point increase in the cost of interest-bearing liabilities, primarily driven by increases in interest rates ~~despite the average interest-bearing deposits remaining consistent.~~

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

Net interest margin (tax-equivalent) was 3.84% for the nine months ended September 30, 2022 compared to 3.25% for the nine months ended September 30, 2021. Net interest spread (tax-equivalent) was 3.48% for the nine months ended September 30, 2022 compared to 3.07% for the nine months ended September 30, 2021. The difference between the net interest margin (tax-equivalent) and net interest spread (tax-equivalent) was 36 basis points in the nine months ended September 30, 2022 compared to 18 basis points in the nine months ended September 30, 2021. This was driven by the 66 basis point increase in yield on earning assets outpacing the impact of the cost savings associated with an increase of $522.1 million in average noninterest-bearing demand deposits.

~~During the nine months ended September 30, 2022, net interest income increased by $22.7 million, or 40.8%, to $78.4 million from $55.7 million~~liquidity actions taken during the nine months ended September 30, 2021. This increase is largely due to the increase in the average earning assets of $420.5 million being primarily funded by the increase in average noninterest-bearing demand deposits of $522.1 million. Average total earning assets were $2.76 billion in the nine months ended September 30, 2022 compared to $2.34 billion in the nine months ended September 30, 2021. Total interest income increased by $24.9 million, or 41.2%, to $85.3 million in the nine months ended September 30, 2022 from $60.4 million in the nine months ended September 30, 2021. This increase in total interest income was driven by higher yields from new loan production at favorable interest rates, as well as the change in our loan portfolio, including the increase in consumer loans and accelerated accretion on PCI loans as a result of a loan sale in the secondfirst quarter of ~~2022, which resulted~~2023 in ~~the increase in yield on earning assets of 66 basis points. Average total loans increased~~response to $2.10 billion in the nine months ended September 30, 2022 from $1.69 billion in the nine months ended September 30, 2021, primarily as the result of a $203.5 million increase in average commercial loans. The yield on total loans increased 73 basis points.

Average investment securities decreased $52.3 million as the result of a $67.2 million decrease in tax-exempt investments and offset by a $14.9 million increase in taxable investments during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The yield on tax-exempt securities increased 50 basis points and the taxable securities yield increased 24 basis points.

Average interest-bearing liabilities decreased by $89.4 million for the nine months ended September 30, 2022 from the nine months ended September 30, 2021. The decrease was primarily the result of average balance decrease of $94.4 million in money market checking accounts, $26.7 million in certificates of deposit and $16.9 million in FHLB and other borrowings, partially offset by an average balance increase of $18.3 million in negotiable order of withdrawal accounts and $29.3 million in subordinated debt.

conditions .

Average interest-bearing deposits were $1.22 billion for the nine months ended September 30, 2022 and $1.33 billion for the nine months ended September 30, 2021. Total interest expense increased by $2.2 million, caused primarily by a $1.1 million increase in deposit interest and a $0.8 million increase in interest on subordinated debt. The result was a 25 basis point increase in the cost

~~of interest-bearing liabilities, primarily from increases in interest rates, despite the improved deposit mix resulting from the replacement of high-cost deposits with noninterest-bearing deposits.~~

The cost of interest-bearing liabilities increased to 0.70% in the nine months ended September 30, 2022 from 0.45% in the nine months ended September 30, 2021. This increase is primarily the result of an increase of 15 basis points in the cost of deposits and an increase of 2.2% in the cost of FHLB and other borrowings, partially offset by a 21 basis point decrease in the cost of subordinated debt.

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

Provision for ~~Loan~~Credit Losses

The provision for ~~loan~~credit losses, which is a product of management’s ~~formal quarterly~~ analysis, is recorded in response to inherent losses in the loan portfolio. ~~Loan~~Credit loss provisions were ~~$5.1~~$4.6 million for the three months ended ~~September 30, 2022~~March 31, 2023 and ~~$0.4~~$1.3 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase in ~~loan~~credit loss provision is ~~primarily~~ the result of continued charge-offs, mainly against the ~~changes to the outstanding balances of the loan portfolios, including an increase in our consumer loan~~subprime auto segment, ~~level of recognized charge-offs and resulting historical loss rates,~~ as well as ~~adjustments~~increased allocation rates due to weakening economic forecasts and increasing loss rates in the ~~risk grading~~subprime auto segment.

Further discussion on new accounting standards is included in Note 1 – Nature of ~~loans within~~Operations and Basis of Presentation accompanying the ~~portfolio.~~consolidated financial statements included elsewhere in this report.

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

Total loan receivable balances ~~increased $256.3~~decreased $11.4 million during the three months ended ~~September 30, 2022 versus~~March 31, 2023, compared to anincrease of ~~$66.9~~$28.0 million in the three months ended ~~September 30, 2021.~~March 31, 2022. The commercial loan portfolio ~~increased~~decreased by ~~$61.8~~$55.1 million during the three months ended ~~September 30, 2022,~~March 31, 2023, in comparison to an ~~increase~~decrease of ~~$45.7~~$1.3 million in the three months ended ~~September 30, 2021,~~March 31, 2022, while the residential mortgage loan portfolio increased by ~~$161.4~~$98.0 million during the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to a ~~$9.6~~$6.8 million increase during the three months ended ~~September 30, 2021.~~ March 31, 2022.Additionally, our consumer loan portfolio ~~increased~~decreased by ~~$33.4~~$52.9 million during the three months ended ~~September 30, 2022,~~March 31, 2023, while it increased by ~~$12.2~~$21.7 million in the three months ended ~~September 30, 2021. Offsetting the commercial and total loan volume increases are SBA PPP loans, which decreased $2.2 million during the quarter ended September 30,~~March 31, 2022. In addition, net charge-offs during the three months ended ~~September 30, 2022~~March 31, 2023 totaled ~~$1.3~~$1.7 million, compared to ~~$0.1~~$0.7 million in the three months ended September 30, 2021. Provision was also impacted by a $1.0 million increase in the specific loan loss allocations in the three months ended September 30, 2022, relative to a $3.0 million increase in the three months ended September 30, 2021.

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

~~Total loan balances~~March 31, 2022.increased $601.6 million during the nine months ended September 30, 2022 versus an increase of $310.4 million in the nine months ended September 30, 2021. The commercial loan portfolio increased by $210.7 million during the nine months ended September 30, 2022, in comparison to an increase of $283.2 million in the nine months ended September 30, 2021, while the residential mortgage loan portfolio increased by $294.1 million during the nine months ended September 30, 2022, while increasing by $17.2 million in the nine months ended September 30, 2021. Included in the commercial and total loan volume are SBA PPP loans totaling $20.1 million as of September 30, 2022 compared to $147.3 million as of September 30, 2021. In addition, net charge-offs during the nine months ended September 30, 2022 totaled $3.3 million compared to net charge-offs of $0.1 million in the nine months ended September 30, 2021. Additionally, provision was impacted by a $2.2 million increase in the specific loan loss allocations in the nine months ended September 30, 2022, relative to a $2.8 million increase in the nine months ended September 30, 2021.

Noninterest Income

Payment card and service charge income, consulting compliance income, equity method investment income and gains on securities generally account for the majority of our noninterest income. Also, from time to time, we recognize gains or losses on acquisition and divestiture activity.

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

Noninterest income for the three months ended ~~September 30,~~March 31, 2023 and 2022 totaled $3.1 millionand ~~2021 totaled $8.2 million and $22.0~~$9.3 million, respectively. Thedecrease in noninterest income for the three months ended ~~September 30, 2022~~March 31, 2023 compared to the three months ended ~~September 30, 2021~~March 31, 2022 was primarily the result of ~~a one-time gain on acquisition and divestiture activity of $10.8 million during the three months ended September 30, 2021, as well as~~ decreases of ~~$4.6~~$2.3 million in equity method investment income, ~~and $0.5~~

million in the gain on sale of available-for-sale securities. These decreases were partially offset by increases of $1.6 million in payment card, $0.7 million in compliance and consulting income and $0.2 million in other operating income.

Equity method investment income decreased $4.6 million due to mortgage income being down as a result of sharp increases in market interest rates during the third quarter. Gain on sale of available-for-sale securities decreased $0.5 million due to no sales of available-for-sale investments in the third quarter of 2022 compared to sales of $28.0 million in the third quarter of 2021.Compliance and consulting income increased $0.7 million, primarily due to team expansion. Payment card and service charge income increased $1.6 million due to several sponsoring agreements, new products and services as a result of recent investments in Fintech capabilities and our banking-as-a-service relationships.

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

Noninterest income for the nine months ended September 30, 2022 and 2021 totaled $32.0 million and $48.1 million, respectively. The decrease in noninterest income for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was primarily the result of a decrease of $13.9 million in equity method investment income , $2.7$2.2 million in the gain on sale of available-for-sale securities, and $1.9 million in holding gain on equity securities. These decreases were partially offset by increases of $5.2 million in compliance consulting income, $4.9 million in payment card and service charge income, $1.9$1.8 million in equity method ~~investment~~holding gains and ~~$0.7~~$1.4 million in gain on sale of loans, partially offset by an increase of $1.3 million in other operating income.

Equity method investment income decreased ~~$13.9~~$2.3 million ~~for the nine months ended September 30, 2022 primarily~~ due to lower mortgage banking revenue.Gain on sale of available-for-sale securities decreased ~~$2.7~~$2.2 million ~~for the nine months ended September 30, 2022~~ due to losses on the ~~decreased sales~~sale of ~~available-for-sale~~ securities ~~totaling $60.6~~as we took repositioned our investment portfolio during the first quarter of 2023. The decrease in equity method holding gains of $1.8 million ~~in the nine months ended September 30, 2022~~as compared to ~~$103.4 million~~prior year reflected an in the nine months ended September 30, 2021 and market conditions. Compliance and consulting income increased $5.2 million for the nine months ended September 30, 2022 primarily by revenue growth from professional services companies. Payment card and service charge income increased $4.9 million for the nine months ended September 30, 2022 due to increased interchange income from our banking-as-a-service relationships. Equity method investment gains increased $1.9 million primarily due tosubstance sale of an ~~increased investments in current~~ equity method investment ~~portfolio. Other operating income increased $0.7~~from our portfolio in the first quarter of 2022. Gain on sale of loans decreased $1.4 million, primarily ~~due to~~as a result of losses on the sale of ~~mortgage servicing rights~~consumer automobile loans as we reduce that portfolio. The increase of $1.3 million in ~~June 2022.~~other operating income primarily reflects higher fee income related to off balance sheet deposits.

Noninterest Expense

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

Noninterest expense was ~~$30.0~~$28.3 millionand ~~$25.8~~$27.3 million in the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.Approximately ~~61% and 64%~~59% of noninterest expense for each of the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense as such costs are critical to financial services organizations.~~The increase relative to the prior year period primarily reflects higher salaries and employee benefits costs of $1.8 million. The increases in salaries and employee benefits were due to continued hiring that resulted in a 30% increase in average full time equivalent employees for the first three quarters of 2022 as compared to the first three quarters of 2021, including front-line revenue producers and enhanced risk management infrastructure, amidst the transformation of the Company’s business model, mitigated in part by a focused reallocation of resources, including lower infrastructure costs related to a reduction in branch count.

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

Noninterest expense was $88.6 million and $68.4 million in the nine months ended September 30, 2022 and 2021, respectively. Approximately 62% and 62% of noninterest expense for the nine months ended September 30, 2022 and 2021, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense as such costs are critical to financial services organizations. The increase relative to the prior year period primarily reflects higher salaries and employee benefits costs of ~~$13.2 million. The increases in salaries and employee benefits were~~$1.0 million due to ~~continued hiring that resulted in a 30% increase in average full time equivalent employees for~~ the ~~first three quarters of 2022 as compared to~~annual incentive plan, partially offset by the ~~first three quarters of 2021~~, ~~including front-line revenue producers and enhanced risk management infrastructure, amidst the transformation~~implementation of the ~~Company’s business model, mitigated~~expense reduction initiatives announced in ~~part by a focused reallocation of resources, including lower infrastructure costs related to a reduction in branch count.~~the prior year.

Discontinued Operations

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

Net income from discontinued operations for the three months ended March 31, 2023 and 2022 totaled $8.8 million and $0.8 million, respectively. The increase in net income from discontinued operations was driven primarily by the $11.8 million gain on sale, partially offset by a decrease of $1.7 million in compliance and consulting income during the three months ended March 31, 2023.

Return on Assets and Equity

Assets

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

Our return on average assets was1.4%for the three months ended March 31, 2023, compared to 0.4% for the three months ended ~~September 30, 2022, compared to 1.9% for the three months ended September 30, 2021.~~March 31, 2022. The ~~decreased~~increased return in ~~2022~~the first quarter of 2023 is a result of a ~~$9.1~~$8.4 million ~~decrease~~increase in ~~earnings,~~earnings. The increase is primarily due to the gain on sale of discontinued operations, while average total assets increased by ~~$465.8~~$295.9 million, mainly as the result of a ~~$664.5~~$531.6 million increase in average total loans, a $90.9 million increase in average other assets related to the purchase of our equity method investment in Warp Speed and additional assets received as part of our banking-as-a-service tax refund program, partially offset by a ~~$151.5~~$310.5 million decrease in average interest-bearing deposits with ~~banks and a $64.5 million decrease in average investment securities.~~

banks.

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

Our return on average assets was 0.4% for the nine months ended September 30, 2022, compared to 1.5% for the nine months ended September 30, 2021. The decreased return in 2022 is a result of a $20.6 million decrease in earnings being outpaced by an increase in average total assets of $451.8 million, mainly as the result of a $417.0 million increase in average total loans, a $66.0 million increase in average interest-bearing balances with banks, partially offset by a $52.3 million decrease in average investment securities.

Equity

Three Months Ended ~~September 30, 2022~~March 31, 2023 vs. Three Months Ended ~~September 30, 2021~~March 31, 2022

Our return on average stockholders’ equity was 16.1% for the three months ended March 31, 2023, compared to 4.2% for the three months ended ~~September 30, 2022, compared to 18.1% for the three months ended September 30, 2021.~~ March 31, 2022.The ~~decreased~~increased return in ~~2022~~the first quarter of 2023 is a result of an ~~$9.1~~$8.4 million ~~decrease in earnings, while average equity decreased by $5.1 million.~~

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~

Our return on average stockholders’ equity was 4.4% for the nine months ended September 30, 2022, compared to 15.8% for the nine months ended September 30, 2021. The decreased return in 2022 is a result of a $20.6 million decreaseincrease in earnings, while average equity increased by ~~$14.5~~$11.9 million.

Statement of Financial Condition

Cash and Cash Equivalents

Cash and cash equivalents totaled ~~$79.9~~$575.3 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$307.4~~$40.3 million at December 31, ~~2021.~~2022. The increase in cash and cash equivalents reflects actions taken in March 2023 to ensure liquidity in response to recent conditions in the banking industry. We believe the current balance of cash and cash equivalents adequately serves our liquidity and performance needs. Total cash and cash equivalents fluctuate daily due to transactions in process and other liquidity demands.

Investment Securities

Investment securities, including equity securities, totaled ~~$400.8~~$378.2 million at ~~September 30, 2022,~~March 31, 2023, compared to ~~$453.9~~$418.6 million at December 31, ~~2021.~~2022. The following table presents a summary of the investment securities portfolio as of the periods shown. The available-for-sale securities are reported at estimated fair value.


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		(Dollars in thousands)	March 31, 2023		December 31, 2022
Available-for-sale securities:	Available-for-sale securities:					Available-for-sale securities:
United States government agency securities	United States government agency securities	$	46,148	$	40,437	United States government agency securities	$	39,988	$	44,814
United States sponsored mortgage-backed securities	United States sponsored mortgage-backed securities	57,829		76,108		United States sponsored mortgage-backed securities	56,773		56,571
United States treasury securities	United States treasury securities	111,032		110,389		United States treasury securities	99,354		120,909
Municipal securities	Municipal securities	135,758		175,012		Municipal securities	123,602		138,636
Corporate debt securities	Corporate debt securities	7,640		11,142		Corporate debt securities	11,548		10,560
Other debt securities	Other debt securities	7,500		7,500		Other debt securities	7,500		7,500
Other securities	Other securities	835		878		Other securities	813		824
Total investment securities available-for-sale	Total investment securities available-for-sale	$	366,742	$	421,466	Total investment securities available-for-sale	$	339,578	$	379,814

Equity securities	Equity securities	$	34,101	$	32,402	Equity securities	$	38,576	$	38,744

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

Loans

Our loan portfolio totaled ~~$2.47~~$2.36 billion as of ~~September 30, 2022~~March 31, 2023 and ~~$1.87~~$2.37 billion as of December 31, ~~2021.~~2022. 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 driven by our strategic lending partnerships.~~

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

Loan Concentration

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, commercial and non-residential real estate loans comprised the largest component of the loan portfolio. A large portion of commercial loans are secured by real estate and they are diverse with respect to geographical location and industry. Loans that are not secured by real estate are typically secured by accounts receivable, mortgages or equipment. While the loan concentration is in commercial loans, the commercial portfolio is comprised of loans to many different borrowers in numerous different industries, generally located in our primary market areas. Additionally, within the commercial portfolio, there is a concentration within the healthcare industry which includes loans to physicians, nursing homes and pharmacies.

Allowance for ~~Loan~~Credit Losses

The ~~ALL~~ACL was ~~$26.5~~$35.5 million or ~~1.07%~~1.50% of loans receivable at ~~September 30, 2022~~March 31, 2023 compared to ~~$18.3~~$23.8 million or ~~0.98%~~1.00% of loans receivable at December 31, ~~2021. This ratio increased due to increased loan loss provision of $11.5 million, offset by a decrease in net charge-offs totaling $3.3 million for the nine months ended September 30,~~ 2022. The increase in ~~ALL~~the ACL of $11.7 million was primarily the result of ~~changes to~~ the ~~outstanding balances~~adoption of the loan portfolios, changes in the level of recognized charge-offs, changes in the Q Factor adjustments, and adjustments to the risk grading of loans within the portfolio were all contributing factors in the ultimate changeASC 326, which required an increase in the allowance for credit losses of $8.9 million as of January 1, 2023. Additionally, over the course of the three months ended March 31, 2023, changes to the loan ~~losses.~~portfolio balances, qualitative factor adjustments and expected loss forecasts within the CECL calculation resulted in allowance increases of $1.3 million, $1.2 million and $0.3 million to the Consumer Automobile, Commercial ~~Mortgage, Consumer,~~ and ~~subprime consumer automobile~~Residential Real Estate portfolio ~~with its relatively higher allocation rate, saw~~segments, respectively. All other portfolio segments combined experienced an ~~increase in loan balances. The total increase in~~allowance decrease of $0.1 million. In general, the ~~ALL of $8.2 million is the product of a $2.2 million increase in ALL required by changes in loan balances and allocation rates~~increased allowance for the ~~commercial loan portfolio~~various segments ~~a $3.2~~was the result of the Bank management’s expectations that the markets in which it lends will experience an economic decline over the next 12 to 24 months. These changes to the allowance for credit losses totaled $2.8 million, ~~increase~~and combined with quarterly net charge offs of $1.7 million, resulted in ~~ALL caused by the changes in loan balances and allocation rates~~total credit loss provision expense of $4.5 million for the ~~subprime consumer automobile portfolio, a $1.8 increase in ALL required by changes in loan balances and allocation rates for the mortgage loan~~

~~portfolio segments and $1.0 million increase in ALL caused by the changes in loan balances and allocation rates for all other loan portfolio segments combined.~~first quarter of 2023.

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.~~ACL. This analysis involves both experience of the portfolio to date and the makeup of the overall portfolio. Specific loss estimates are derived for individual loans based on specific criteria such as current delinquent status, related deposit account activity, where applicable and changes in the local and national economy. When appropriate, we also consider public knowledge and verifiable information from the local market to assess risks to specific loans and the loan portfolios as a whole.

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 remain the most significant source of funds, totaling ~~$2.70~~$3.15 billion, or ~~94.5%~~97.3% of funding sources at ~~September 30, 2022~~. March 31, 2023. This same information at December 31, ~~2021~~2022 reflected ~~$2.38~~$2.57 billion in deposits representing ~~96.6%~~92.9% of funding sources.~~Subordinated~~ Borrowings, consisting of subordinated debt, ~~of $73.2 million~~senior term loan and ~~amounts due to~~ FHLB and other borrowings ~~of $73.3 million~~ represented ~~5.1%~~2.6% of funding sources at ~~September 30, 2022 and$73.0 million and none, respectively, or 3.0% of funding sources~~March 31, 2023, versus 6.7% at December 31, ~~2021.~~ 2022.Repurchase agreements, which are available to large corporate customers, represented ~~0.3%~~0.2% of funding sources at ~~September 30, 2022~~March 31, 2023 and ~~0.5%~~0.4% at December 31, ~~2021.~~2022.

~~Management continues to emphasize the development of additional noninterest-bearing deposits as a core funding source for the Company.~~ At ~~September 30, 2022,~~March 31, 2023, noninterest-bearing balances totaled ~~$1.41~~$1.13 billion, compared to ~~$1.12~~$1.23 billion at December 31, ~~2021,~~2022, or ~~52.3%~~36.0% and ~~47.1%~~47.9%, respectively, of total deposits. Interest-bearing deposits totaled ~~$1.29~~$2.02 billion at ~~September 30, 2022,~~March 31, 2023, compared to ~~$1.26~~$1.34 billion at December 31, ~~2021,~~2022, or ~~47.7%~~64.0% and ~~52.9%~~52.1%, respectively, of total deposits.

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


(Dollars in thousands)	(Dollars in thousands)	September 30, 2022		December 31, 2021		(Dollars in thousands)	March 31, 2023		December 31, 2022
Demand deposits of individuals, partnerships and corporations						Demand deposits of individuals, partnerships and corporations
Noninterest-bearing demand	Noninterest-bearing demand	$	1,411,772	$	1,120,433	Noninterest-bearing demand	$	1,134,257	$	1,231,544
Interest-bearing demand	Interest-bearing demand	763,401		651,016		Interest-bearing demand	780,713		720,074
Savings and money markets	Savings and money markets	306,170		510,068		Savings and money markets	595,152		284,447
Time deposits, including CDs and IRAs	Time deposits, including CDs and IRAs	215,615		96,088		Time deposits, including CDs and IRAs	640,693		334,417
Total deposits	Total deposits	$	2,696,958	$	2,377,605	Total deposits	$	3,150,815	$	2,570,482

Time deposits that meet or exceed the FDIC insurance limit	Time deposits that meet or exceed the FDIC insurance limit	$	6,864	$	9,573	Time deposits that meet or exceed the FDIC insurance limit	$	2,811	$	4,386

Average interest-bearing deposits were ~~$1.27~~$1.49 billion during the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$1.35~~$1.40 billion during the same time period in ~~2021~~2022 and average noninterest-bearing deposits were ~~$1.32~~$1.38 billion during the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$852.9 million during the same time period in 2021.~~

~~Average interest-bearing deposits were $1.22 billion during the nine months ended September 30, 2022 compared to $1.33~~$1.26 billion during the same time period in ~~2021 and average noninterest-bearing deposits were $1.35 billion during the nine months ended September 30, 2022 compared to $828.5 million during the same time period in 2021.~~2022.

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. In response to recent conditions in the banking industry in March 2023, we borrowed $300 million on our FHLB line of credit to ensure liquidity. Borrowings on our FHLB line were repaid in full shortly thereafter. For details on our borrowings, refer to Note 7 – Borrowed Funds accompanying the consolidated financial statements included elsewhere in this report.

Deposit Concentration

Our noninterest bearing deposits totaled $1.13 billion as of March 31, 2023, compared to $1.23 billion as of December 31, 2022. The ~~main driver~~decline in noninterest bearing deposits reflects the use of ~~recent~~off-balance sheet deposit ~~growth has been the increase~~networks to manage liquidity and concentration risk, enhance capital and generate fee income. Off-balance sheet deposits totaled $420 million in ~~Fintech~~noninterest bearing deposits ~~from $1.14 billion~~and $616 million in interest bearing deposits at March 31, 2023. Off-balance sheet deposits totaled $272 million in noninterest bearing deposits and $452 million in interest bearing deposits at December 31, 2021 to $1.32 billion as of September 30, 2022, through the addition of new relationships and continuing to grow current relationships. This growth in Fintech deposits is slightly offset by the decrease in gaming deposits. 2022.Gaming deposits ~~which are included in total Fintech deposits,~~ totaled ~~$885.4~~$543.2 million as of ~~September 30, 2022,~~March 31, 2023, compared to ~~$911.6~~$652.1 million atas of December 31, ~~2021.~~ 2022.Of the gaming deposits, ~~$730.5~~$465.1 million is with our three largest clients at ~~September 30, 2022.~~March 31, 2023.

Capital ~~and Stockholders' Equity~~Resources

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, stockholders’ equity ~~decreased $30.9~~increased $9.9 million to ~~$244.4~~$271.3 million.This ~~decrease~~increase consists of net income of $11.2 million, other comprehensive loss of ~~$36.4~~$6.8 million ~~primarily due~~and stock based compensation of $0.8 million, partially offset by the impact to ~~unrealized holding loss on available-for-sale securities, net~~retained earnings of ~~taxes,~~adopting ASC 326 of ~~$36.6~~$6.6 million, ~~and~~ cash dividends paid of ~~$6.2 million, partially offset by net income available to common shareholders of $8.5 million, stock-based compensation of~~ $2.1 million and ~~common~~minimum tax withholding on restricted stock ~~options exercised totaling $1.8~~units issued of $0.2 million.

~~With stockholders’ equity decreasing as noted above and being outpaced by the~~The growth in assets of ~~$347.5~~$483.0 million in the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 outpaced the growth in stockholders' equity, and the equity to assets ratio decreased from ~~9.8%~~8.5% at December 31, ~~2021~~2022 to ~~7.8%~~7.6% at ~~September 30, 2022.~~ March 31, 2023.We paid dividends to common shareholders of ~~$6.2 million and $4.2~~$2.1 million in each of the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively,~~ compared to earnings of ~~$8.5~~$11.3 million and ~~$29.2~~$2.9 million in the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, resulting in the dividend payout ratio ~~increasing~~decreasing to ~~72.7%~~ 18.9%in the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 from ~~14.5%~~71.9% in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

We and the Bank are also subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material effect on our consolidated financial statements. The Bank is required to comply with applicable capital adequacy standards established by the ~~FDIC. We are exempt from the Federal Reserve Board’s capital adequacy standards as we believe we meet the requirements of the Small Bank Holding Company Policy Statement.~~federal banking agencies. West Virginia state chartered banks, such as the Bank, are subject to similar capital requirements adopted by the West Virginia Division of Financial Institutions. Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets companies hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, 100% or 150% (highest risk assets) is assigned to each asset on the balance sheet. Detailed information concerning our risk-based capital ratios can be found in Supervision and Regulation in Item 1, Business and Note 1516 – Regulatory Capital Requirements to the consolidated financial statements and accompanying notes contained in the ~~2021~~2022 Form 10-K.

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

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 increased to 8.5% in 2021 and has returned 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 ~~September 30, 2022~~March 31, 2023 was ~~11.1%~~10.0%,which is above the well-capitalized standard of 9%. Management believes that capital continues to provide a strong base for profitable growth.

Liquidity

Maintenance of a sufficient level of liquidity is a primary objective of the ALCO. Liquidity, as defined by the ALCO, is the ability to meet anticipated operating cash needs, loan demand and deposit withdrawals without incurring a sustained negative impact on net interest income. It is our policy to optimize the funding of the balance sheet, continually balancing the stability and cost factors of various funding sources. We believe liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and non-traditional funding sources and the portions of the investment and loan portfolios that mature within one year. These sources of funds should enable us to meet cash obligations as they come due.

The main source of liquidity for the Bank comes through deposit growth. Liquidity is also provided from cash generated from investment maturities, principal payments from loans and income from loans and investment securities. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, cash from operating, investing and financing activities totaled ~~$3.8~~$(5.3) million, ~~($617.4)~~$69.4 million and ~~$386.1~~$470.9 million, respectively. Significant changes in ~~operating~~ cash flows during the quarter include ~~outflows for loans originated for sale~~inflows from the net increase in deposits of ~~$69.9~~$580.3 million ~~related to the SBA lending program,~~and sales of available-for-sale investment securities of $54.5 million, partially offset by ~~proceeds~~cash outflows of ~~loans sold of $58.9~~$102.3 million ~~related~~ to ~~the SBA lending program~~pay down FHLB and ~~sale of PCI loans.~~other borrowings. When appropriate, the Bank has the ability to take advantage of external sources of funds such as advances from the FHLB, national market certificate of deposit issuance programs, the Federal Reserve discount window, brokered deposits and Certificate of Deposit Account Registry Services. Additionally, on March 12, 2023, the Federal Reserve implemented the Bank Term Funding Program to support federally-insured depository institutions in response to prevailing market uncertainty about the banking industry resulting from the insolvencies of certain regional depository institutions. These external sources often provide attractive interest rates and flexible maturity dates that enable the Bank to match funding with contractual maturity dates of assets. Securities in the investment portfolio are classified as available-for-sale and can be utilized as an additional source of liquidity.

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

Current Economic Conditions

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

We believe that the current economic climate in our primary market areas reflect economic climates that are consistent with the general national economic climate. Unemployment in the United States was ~~3.3%~~3.6% for March 2023 and ~~4.6% for September~~ 2022, ~~and 2021,~~ respectively.

~~Commitments and Contingent Liabilities~~

We are a party to financial instruments with off-balance-sheet risk in the ordinary course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the statements of financial condition.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount and type of collateral obtained, if deemed necessary by us upon extension of credit, varies and is based on management’s credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third-party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Our policy for obtaining collateral, and the nature of such collateral, is substantially the same as that involved in making commitments to extend credit.

~~Concentration of Credit Risk~~

We continue to grant a majority of our commercial, residential and home equity loans to customers throughout the North Central West Virginia and Northern Virginia markets. However, over time the focus on these markets has been supplemented by originating loans through strategic lending partnerships and government guaranteed lending, both of which have included a focus on lending across the United States. Collateral for loans is primarily residential and commercial real estate, personal property and business equipment. We evaluate the creditworthiness of each of our customers on a case-by-case basis and the amount of collateral it obtains is based upon management’s credit evaluation.

~~Contingent Liability~~

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 significantly impact the consolidated financial statements and could have a significant impact in future periods. Specifically, the Bank has entered into agreements to extend credit or provide conditional payments pursuant to standby and commercial letters of credit. In addition, the Bank utilizes letters of credit issued by the FHLB to collateralize certain public funds deposits.

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

Critical Accounting Policies and Estimates

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

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

Except as related to the adoption of ASU 2016‑13, there have been no significant changes to our critical accounting policies and estimates or in the underlying accounting assumptions and estimates used in these critical accounting policies from those disclosed in the consolidated financial statements and accompanying notes contained in the ~~2021~~2022 Form 10-K.

Recent Accounting Pronouncements and Developments

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

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

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

Credit Risk

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

We expect 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, we do not expect that these credit concerns will perpetuate indefinitely. Many clients may be eligible to defer loan payments to a later date. We are working to incorporate scenarios that reflect decreased loan cash flows in the short term into our interest rate risk models.

Item 4 – Controls and Procedures

As of ~~September 30, 2022,~~March 31, 2023, 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 ~~September 30, 2022.~~March 31, 2023.

~~During~~Beginning January 1, 2023, we adopted ASU 2016-13. We implemented changes to the ~~three months ended September 30, 2022,~~policies, processes and controls over the estimation of the allowance for credit losses to support the adoption of ASU 2016-13. While many controls in operation under this new pronouncement mirror controls under prior GAAP, there were some new controls implemented.

Except as related to the adoption of ASU 2016‑13, there were no changes in our internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6655

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

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

Item 1A – Risk Factors

Our operations are subject to many risks that could adversely affect our future financial condition and performance, including the risk factors that are described in the ~~2021~~2022 Form 10-K. There have been no material changes in our risk factors from those disclosed.

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

None.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

Not applicable.

Item 5 – Other Information

None.

Item 6 – Exhibits


Exhibit Number	Description	Exhibit Location
Exhibit ~~2.1~~10.1	Termination Agreement, ~~and Plan~~dated as of ~~Merger and Reorganization, dated August 12, 2022~~May 9, 2023, by and ~~between~~among MVB Financial Corp. ~~and~~, Integrated Financial Holdings, Inc., West Town Bank & Trust, and MVB Bank, Inc.	Form 8-K, File No. 001-38314, filed ~~August 15, 2022,~~May 9, 2023, 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
Exhibit 104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	Filed herewith

6757


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:	~~November 8, 2022~~May 10, 2023	By:	/s/ Larry F. Mazza
			Larry F. Mazza
			CEO and Director
			(Principal Executive Officer)

Date:	~~November 8, 2022~~May 10, 2023	By:	/s/ Donald T. Robinson
			Donald T. Robinson
			President and CFO
			(Principal Financial and Accounting Officer)

6858


		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	8
	Consolidated Statements of Changes in Stockholders’ Equity	9
	Consolidated Statements of Cash Flows	1310
	Notes to the Consolidated Financial Statements	1512

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5044

Item 3	Quantitative and Qualitative Disclosures About Market Risk	6555

Item 4	Controls and Procedures	6655

PART II	OTHER INFORMATION	6756

Item 1	Legal Proceedings	6756

Item 1A	Risk Factors	6756

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	6756

Item 3	Defaults Upon Senior Securities	6756

Item 4	Mine Safety Disclosures	6756

Item 5	Other Information	6756

Item 6	Exhibits	6757

	SIGNATURES	6858


	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, 2021	—	$	—	12,934,966	$	12,935	$	143,521	$	138,219	$	(3,606)	848,016	$	(16,741)	$	274,328	$	975	$	275,303

Net income (loss)	—	—		—	—		—		2,864		—		—	—		2,864		(193)		2,671
Other comprehensive loss	—	—		—	—		—		—		(13,556)		—	—		(13,556)		—		(13,556)
Dividends on common stock ($0.17 per share)	—	—		—	—		—		(2,059)		—		—	—		(2,059)		—		(2,059)

Stock-based compensation	—	—		—	—		674		—		—		—	—		674		—		674

Stock-based compensation related to equity method investment	—	—		—	—		104		—		—		—	—		104		—		104
Common stock options exercised	—	—		56,174	56		669		—		—		—	—		725		—		725




Balance at March 31, 2022	—	$	—	12,991,140	$	12,991	$	144,968	$	139,024	$	(17,162)	848,016	$	(16,741)	$	263,080	$	782	$	263,862

Net income (loss)	—	—		—	—		—		2,956		—		—	—		2,956		(165)		2,791
Other comprehensive loss	—	—		—	—		—		—		(12,258)		—	—		(12,258)		—		(12,258)
Dividends on common stock ($0.17 per share)	—	—		—	—		—		(2,076)		—		—	—		(2,076)		—		(2,076)

Stock-based compensation	—	—		—	—		757		—		—		—	—		757		—		757
Stock-based compensation related to equity method investment	—	—		—	—		173		—		—		—	—		173		—		173

Common stock options exercised	—	—		30,200	30		362		—		—		—	—		392		—		392
Restricted stock units vested	—	—		73,300	73		(73)		—		—		—	—		—		—		—
Minimum tax withholding on restricted stock units issued	—	—		(17,596)	(17)		(674)		—		—		—	—		(691)		—		(691)
Stock purchase from noncontrolling interest	—	—		—	—		(33)		—		—		—	—		(33)		(7)		(40)



Balance at June 30, 2022	—	$	—	13,077,044	$	13,077	$	145,480	$	139,904	$	(29,420)	848,016	$	(16,741)	$	252,300	$	610	$	252,910


Three Months Ended September 30, 2021	CoRe Banking		Mortgage Banking		Professional Services		Edge Ventures		Financial Holding Company		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	20,383	$	105	$	—	$	—	$	1	$	(5)	$	20,484
Interest expense	902		—		10		—		481		(5)		1,388
Net interest income (expense)	19,481		105		(10)		—		(480)		—		19,096
Release of allowance for loan losses	379		1		—		—		—		—		380
Net interest income (expense) after provision for loan losses	19,102		104		(10)		—		(480)		—		18,716




Noninterest income	15,387		3,546		4,806		18		2,002		(3,808)		21,951

Noninterest Expenses:
Salaries and employee benefits	8,296		47		3,993		808		3,384		—		16,528
Other expenses	8,973		(198)		1,213		1,468		1,653		(3,808)		9,301
Total noninterest expenses	17,269		(151)		5,206		2,276		5,037		(3,808)		25,829

Income (loss) before income taxes	17,220		3,801		(410)		(2,258)		(3,515)		—		14,838
Income taxes	3,657		922		(103)		(581)		(731)		—		3,164
Net income (loss)	13,563		2,879		(307)		(1,677)		(2,784)		—		11,674





Net loss attributable to noncontrolling interest	—		—		90		64		—		—		154


Net income (loss) available to common shareholders	$	13,563	$	2,879	$	(217)	$	(1,613)	$	(2,784)	$	—	$	11,828

Capital expenditures for the three months ended September 30, 2021	$	1,426	$	—	$	40	$	509	$	—	$	—	$	1,975


Nine Months Ended September 30, 2021	CoRe Banking		Mortgage Banking		Professional Services		Edge Ventures		Financial Holding Company		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	60,078	$	307	$	—	$	—	$	2	$	(7)	$	60,380
Interest expense	3,281		—		13		—		1,437		(7)		4,724
Net interest income (expense)	56,797		307		(13)		—		(1,435)		—		55,656
Release of allowance for loan losses	(541)		(1)		—		—		—		—		(542)
Net interest income (expense) after provision for loan losses	57,338		308		(13)		—		(1,435)		—		56,198




Noninterest income	26,832		14,499		9,784		18		5,892		(8,972)		48,053

Noninterest Expenses:
Salaries and employee benefits	24,170		47		7,099		1,054		9,730		—		42,100
Other expenses	26,702		(112)		2,898		1,661		4,073		(8,972)		26,250
Total noninterest expenses	50,872		(65)		9,997		2,715		13,803		(8,972)		68,350

Income (loss) before income taxes	33,298		14,872		(226)		(2,697)		(9,346)		—		35,901
Income taxes	6,060		3,606		(76)		(694)		(1,890)		—		7,006
Net income (loss)	27,238		11,266		(150)		(2,003)		(7,456)		—		28,895




Net loss attributable to noncontrolling interest	—		—		136		129		—		—		265
Net income (loss) attributable to parent	27,238		11,266		(14)		(1,874)		(7,456)		—		29,160
Preferred stock dividends	—		—		—		—		35		—		35
Net income (loss) available to common shareholders	$	27,238	$	11,266	$	(14)	$	(1,874)	$	(7,491)	$	—	$	29,125

Capital expenditures for the nine months ended September 30, 2021	$	2,071	$	—	$	47	$	2,009	$	—	$	—	$	4,127


	As of and for the three months ended September 30,						As of and for the nine months ended September 30,
(Dollars in thousands, except per share data)	2022			2021			2022			2021
Book value per common share	$	19.85		$	22.18		$	19.85		$	22.18
Tangible book value per common share 5	$	19.38		$	21.64		$	19.38		$	21.64
Efficiency ratio 1 5	78.8		%	62.9		%	80.4		%	65.9		%
Overhead ratio 2 3 5	4.0		%	4.0		%	4.0		%	3.6		%
Net loan charge-offs to total loans receivable 4	0.2		%	—		%	0.2		%	0.01		%
Allowance for loan losses to total loans receivable	1.07		%	1.40		%	1.07		%	1.43		%
Nonperforming loans	$	22,350		$	17,453		$	22,350		$	17,453
Nonperforming loans to total loans receivable	0.9		%	1.0		%	0.9		%	1.0		%
Equity to assets	7.8		%	9.5		%	7.8		%	9.5		%
Community Bank Leverage Ratio	11.1		%	12.0		%	11.1		%	12.0		%