Segment Reporting

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Segment Reporting

Note 9 – Segment Reporting

The Company has identified three reportable segments: commercial and retail banking; mortgage banking; and financial holding company. Revenue from commercial and retail banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Revenue from financial holding company activities is mainly comprised of intercompany service income and dividends.

Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage origination process. The mortgage banking services are conducted by MVB Mortgage.

Information about the reportable segments and reconciliation to the consolidated financial statements for the three-month periods ended March 31, 2018 and March 31, 2017 are as follows:

Three Months Ended March 31, 2018	Commercial & Retail Banking		Mortgage Banking		Financial Holding Company			Intercompany Eliminations			Consolidated
(Dollars in thousands)
Revenues:
Interest income	$	13,838	$	1,335	$	1		$	(120	)	$	15,054
Mortgage fee income	140		6,673		—			(250		)	6,563
Other income	1,780		517		1,553			(1,374		)	2,476
Total operating income	15,758		8,525		1,554			(1,744		)	24,093
Expenses:
Interest expense	2,674		727		558			(370		)	3,589
Salaries and employee benefits	3,569		5,416		1,488			—			10,473
Provision for loan losses	417		57		—			—			474
Other expense	4,559		2,122		959			(1,374		)	6,266
Total operating expenses	11,219		8,322		3,005			(1,744		)	20,802
Income (loss) before income taxes	4,539		203		(1,451		)	—			3,291
Income tax expense (benefit)	978		53		(334		)	—			697
Net income (loss)	$	3,561	$	150	$	(1,117	)	$	—		$	2,594
Preferred stock dividends	—		—		121			—			121
Net income (loss) available to common shareholders	3,561		150		(1,238		)	—			2,473
Capital Expenditures for the year ended March 31, 2018	$	403	$	78	$	25		$	—		$	506
Total Assets as of March 31, 2018	1,581,673		148,789		185,012			(333,957		)	1,581,518
Total Assets as of December 31, 2017	1,533,497		149,323		184,600			(333,117		)	1,534,302
Goodwill as of March 31, 2018	1,598		16,882		—			—			18,480
Goodwill as of December 31, 2017	1,598		16,882		—			—			18,480

Three Months Ended March 31, 2017	Commercial & Retail Banking		Mortgage Banking			Financial Holding Company			Intercompany Eliminations			Consolidated
(Dollars in thousands)
Revenues:
Interest income	$	12,312	$	781		$	1		$	(26	)	$	13,068
Mortgage fee income	185		9,637			—			(188		)	9,634
Other income	1,077		(1,831		)	1,210			(1,266		)	(810		)
Total operating income	13,574		8,587			1,211			(1,480		)	21,892
Expenses:
Interest expense	2,119		304			551			(212		)	2,762
Salaries and employee benefits	2,657		5,955			1,350			—			9,962
Provision for loan losses	500		18			—			—			518
Other expense	4,650		2,098			875			(1,268		)	6,355
Total operating expenses	9,926		8,375			2,776			(1,480		)	19,597
Income (loss) before income taxes	3,648		212			(1,565		)	—			2,295
Income tax expense (benefit)	1,161		96			(536		)	—			721
Net income (loss)	$	2,487	$	116		$	(1,029	)	$	—		$	1,574
Preferred stock dividends	—		—			129			—			129
Net income (loss) available to common shareholders	2,487		116			(1,158		)	—			1,445
Capital Expenditures for the year ended March 31, 2017	$	867	$	692		$	29		$	—		$	1,588
Total Assets as of March 31, 2017	1,430,792		103,621			168,325			(268,787		)	1,433,951
Total Assets as of December 31, 2016	1,415,735		122,242			180,340			(299,513		)	1,418,804
Goodwill as of March 31, 2017	1,598		16,882			—			—			18,480
Goodwill as of December 31, 2016	1,598		16,882			—			—			18,480

Commercial & Retail Banking

For the three months ended March 31, 2018, the Commercial & Retail Banking segment earned $3.6 million compared to $2.5 million in 2017. Net interest income increased by $971 thousand, primarily the result of an increase of $949 thousand in interest and fees on loans, an increase of $349 thousand in interest on taxable investment securities, and an increase $217 thousand in tax exempt loans and securities. These increases in interest income were offset by the following: an increase of $392 thousand in interest on deposits and an increase of $160 thousand in interest on FHLB and other borrowings due to an increase in short-term borrowing rates. Noninterest income increased by $658 thousand which was the result of an increase of $413 thousand in commercial swap fee income, an improvement of $183 thousand in the performance of the interest rate cap, and an increase of $203 thousand in gain on sale of portfolio loans. Noninterest expense increased by $821 thousand, primarily the result of the following: an increase of $912 thousand in salaries and employee benefits expense and an increase of $202 thousand in other operating expenses. These increases were partially offset by a decrease of $376 thousand in data processing and communications expense. In addition, provision expense decreased by $83 thousand due to significantly reduced historical loan loss rates, which more than offset the level of provision needed by the increased loan volume in the first quarter of 2018 versus the same quarter in 2017, and a higher level of charge-offs in the first quarter of 2018 versus 2017.

Mortgage Banking

For the three months ended March 31, 2018, the Mortgage Banking segment earned $150 thousand compared to $116 thousand in 2017. Net interest income increased $131 thousand, which was the result of an increase of $554 thousand in interest and fees on loans, offset by an increase of $423 thousand in interest on FHLB and other borrowings due to an increase in short-term borrowing rates. Noninterest income decreased by $616 thousand, primarily the result of a decrease of $3.0 million in mortgage fee income, partially offset by an increase of $2.3 million in the gain on derivative. The increase in gain on derivatives was largely the result of a 67.6% increase in the locked mortgage pipeline for the three months ended March 31, 2018 compared to a 12.8% increase in the locked mortgage pipeline for the three months ended March 31, 2017. Noninterest expense decreased by $515 thousand, which was the result of a decrease of $539 thousand in salaries and employee benefits expense. The decrease in salaries and employee benefits expense was primarily the result of lower commissions paid due to a 13.2% decrease in mortgage closed loan volume and a decrease of $125 thousand in the earn out paid to management of the mortgage company related to the 2012 acquisition.

Financial Holding Company

For the three months ended March 31, 2018, the Financial Holding Company segment lost $1.1 million compared to a loss of $1.0 million in 2017. Interest expense increased $7 thousand, noninterest income increased $343 thousand, and noninterest expense increased $222 thousand. In addition, the income tax benefit decreased $202 thousand. The increase in noninterest income was primarily the result of a $186 thousand gain on sale of securities, a $52 thousand holding gain on equity securities, and a $105 thousand increase in intercompany services income related to Regulation W. The increase in noninterest expense was primarily the result of a $138 thousand increase in salaries and employee benefits expense and an increase of $131 thousand in travel, entertainment, dues, and subscriptions.