UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
☐ TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number: 001-38314
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 May 6, 2024, there were 12,885,752 shares of our common stock outstanding with a par value of $1.00 per share.

TABLE OF CONTENTS

		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	10
	Notes to the Consolidated Financial Statements	12
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4	Controls and Procedures	58
PART II	OTHER INFORMATION	59
Item 1	Legal Proceedings	59
Item 1A	Risk Factors	59
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3	Defaults Upon Senior Securities	59
Item 4	Mine Safety Disclosures	59
Item 5	Other Information	59
Item 6	Exhibits	59
	SIGNATURES	60

2

Forward-Looking Statements:

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

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

l	interest rate fluctuations in response to economic conditions and the policies of various governmental and regulatory agencies;
l	changes in the economy, which could materially impact credit quality trends and the ability to generate loans and gather deposits;
l	industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, nationally and in the 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	evolving legislation and heightened regulatory scrutiny in emerging financial technology ("Fintech") and banking-as-a-service ("BaaS") sectors;
l	our ability to recruit, retain and train talented employees and executives with such knowledge, experience and industry expertise to understand and comply with evolving legislation and regulations and to successfully implement succession plans for such employees and executives;
l	ability to adapt to technological change and to successfully execute business plans, manage risks and achieve objectives, including strategies related to investments in 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 geopolitical conflict;
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	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	changes in volume or composition of our deposit base, including certain concentrations with large clients and within certain industries, such as banking-as-a-service, digital assets and gaming;
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	competition and consolidation in the financial services industry;
l	new legal claims against us, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies or changes in existing legal matters;
l	success in gaining regulatory approvals, when required, including for proposed mergers or acquisitions;
l	changes in consumer spending and savings habits, including demand for loan products and deposit flow;
l	increased competitive challenges and expanding product and pricing pressures among financial institutions and non-bank financial companies;

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l	operational risks or risk management failures by us, our customers or critical third parties, including without limitation, with respect to data processing, information systems, compliance with bank secrecy and anti-money laundering laws, technological changes, vendor problems, business interruptions and fraud risk;
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 digital assets 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;
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;
l	risks and potential losses involved with uninsured deposits beyond Federal Deposit Insurance Corporation (“FDIC”) limitations; and
l	costs of deposit insurance and changes with respect to 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, 2023 (the “2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 13, 2024, and from time to time, in our other filings with the SEC. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except to the extent required by law, we undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this report or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

REFERENCES

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

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PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

MVB Financial Corp. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

	March 31, 2024		December 31, 2023
	(Unaudited)		(Audited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	4,870	$	6,564
Interest-bearing balances with banks	635,556		391,665
Total cash and cash equivalents	640,426		398,229
Investment securities available-for-sale	349,678		345,275
Equity securities	41,037		41,086
Loans held-for-sale	—		629
Loans receivable	2,267,310		2,317,594
Allowance for credit losses	(22,804)		(22,124)
Loans receivable, net	2,244,506		2,295,470
Premises and equipment, net	19,968		20,928
Bank-owned life insurance	44,569		44,287
Equity method investments	76,190		75,754
Accrued interest receivable and other assets	131,016		92,224
TOTAL ASSETS	$	3,547,390	$	3,313,882
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	1,391,070	$	1,197,272
Interest-bearing	1,754,259		1,704,204
Total deposits	3,145,329		2,901,476
Accrued interest payable and other liabilities	26,272		37,917
Repurchase agreements	3,810		4,821
Subordinated debt	73,602		73,540
Senior term loan	6,549		6,786
Total liabilities	3,255,562		3,024,540
STOCKHOLDERS’ EQUITY
Common stock - par value $1; 40,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 13,688,899 and 12,840,883 shares issued and outstanding, respectively, as of March 31, 2024 and 13,606,399 and 12,758,383 shares issued and outstanding, respectively, as of December 31, 2023	13,689		13,606
Additional paid-in capital	162,502		160,488
Retained earnings	163,199		160,862
Accumulated other comprehensive loss	(30,799)		(28,831)
Treasury stock - 848,016 shares as of March 31, 2024 and December 31, 2023, at cost	(16,741)		(16,741)
Total equity attributable to parent	291,850		289,384
Noncontrolling interest	(22)		(42)
Total stockholders' equity	291,828		289,342
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,547,390	$	3,313,882

See accompanying notes to unaudited consolidated financial statements.

5

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Income

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

	Three Months Ended March 31,
	2024		2023
INTEREST INCOME
Interest and fees on loans	$	40,216	$	38,695
Interest on deposits with banks	7,341		3,153
Interest on investment securities	1,743		1,848
Interest on tax-exempt loans and securities	730		1,067
Total interest income	50,030		44,763
INTEREST EXPENSE
Interest on deposits	18,931		10,153
Interest on short-term borrowings	1		888
Interest on subordinated debt	809		799
Interest on senior term loan	150		194
Total interest expense	19,891		12,034
NET INTEREST INCOME	30,139		32,729
Provision for credit losses	1,997		4,576
Net interest income after provision for credit losses	28,142		28,153
NONINTEREST INCOME
Payment card and service charge income	4,813		3,610
Insurance and investment services income	66		92
Gain (loss) on sale of available-for-sale securities, net	658		(1,536)
Loss on derivatives, net	—		(100)
Loss on sale of loans, net	—		(356)
Holding loss on equity securities	(49)		(308)
Compliance and consulting income	1,000		1,016
Equity method investments loss	(1,128)		(1,193)
Other operating income	2,474		1,842
Total noninterest income	7,834		3,067
NONINTEREST EXPENSES
Salaries and employee benefits	16,489		16,746
Occupancy expense	864		792
Equipment depreciation and maintenance	1,216		1,457
Data processing and communications	1,459		1,148
Professional fees	5,737		2,951
Insurance, tax and assessment expense	892		904
Travel, entertainment, dues and subscriptions	1,551		1,922
Other operating expenses	1,983		2,397
Total noninterest expense	30,191		28,317
Income from continuing operations, before income taxes	5,785		2,903
Income taxes	1,283		465
Net income from continuing operations	4,502		2,438
Income from discontinued operations, before income taxes	—		11,831
Income taxes from discontinued operations	—		3,049

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Net income from discontinued operations	—		8,782
Net income, before noncontrolling interest	4,502		11,220
Net (income) loss attributable to noncontrolling interest	(20)		122
Net income attributable to parent	$	4,482	$	11,342
Earnings per share from continuing operations - basic	$	0.35	$	0.20
Earnings per share from discontinued operations - basic	$	—	$	0.70
Earnings per common shareholder - basic	$	0.35	$	0.90
Earnings per share from continuing operations - diluted	$	0.34	$	0.20
Earnings per share from discontinued operations - diluted	$	—	$	0.67
Earnings per common shareholder - diluted	$	0.34	$	0.87
Weighted-average shares outstanding - basic	12,810,956		12,623,361
Weighted-average shares outstanding - diluted	13,119,292		13,016,082

See accompanying notes to unaudited consolidated financial statements.

7

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited) (Dollars in thousands)

	Three Months Ended March 31,
	2024		2023
Net income, before noncontrolling interest	$	4,502	$	11,220
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available-for-sale	(2,576)		7,704
Reclassification adjustment for (gain) loss recognized in income	(658)		1,536
Change in defined benefit pension plan	601		(28)
Reclassification adjustment for amortization of net actuarial loss recognized in income	43		29
Reclassification adjustment for investment hedge carrying value adjustment recognized in income	—		(334)
Other comprehensive income (loss), before tax	(2,590)		8,907
Income taxes related to items of other comprehensive loss:
Unrealized holding gains (losses) on securities available-for-sale	619		(1,852)
Reclassification adjustment for (gain) loss recognized in income	158		(369)
Change in defined benefit pension plan	(145)		7
Reclassification adjustment for amortization of net actuarial loss recognized in income	(10)		(7)
Reclassification adjustment for investment hedge carrying value adjustment recognized in income	—		80
Income taxes related to items of other comprehensive loss:	622		(2,141)
Total other comprehensive income (loss), net of tax	(1,968)		6,766
Comprehensive (income) loss attributable to noncontrolling interest	(20)		122
Comprehensive income	$	2,514	$	18,108

See accompanying notes to unaudited consolidated financial statements.

8

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

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

	Common 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, 2023	13,606,399	$	13,606	$	160,488	$	160,862	$	(28,831)	848,016	$	(16,741)	$	289,384	$	(42)	$	289,342
Net income	—	—		—		4,482		—		—	—		4,482		20		4,502
Other comprehensive loss	—	—		—		—		(1,968)		—	—		(1,968)		—		(1,968)
Dividends on common stock ($0.17 per share)	—	—		—		(2,145)		—		—	—		(2,145)		—		(2,145)
Stock-based compensation	—	—		780		—		—		—	—		780		—		780
Stock-based compensation related to equity method investments	—	—		104		—		—		—	—		104		—		104
Common stock options exercised	82,500	83		1,130		—		—		—	—		1,213		—		1,213
Balance at March 31, 2024	13,688,899	$	13,689	$	162,502	$	163,199	$	(30,799)	848,016	$	(16,741)	$	291,850	$	(22)	$	291,828

	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 investments	—	—		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

See accompanying notes to unaudited consolidated financial statements.

9

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited) (Dollars in thousands)

	Three Months Ended March 31,
	2024		2023
OPERATING ACTIVITIES
Net income, before noncontrolling interest	$	4,502	$	11,220
Adjustments to reconcile net income, before noncontrolling interest, to net cash from operating activities:
Net amortization and accretion of investments	525		569
Net amortization of deferred loan costs	320		541
Provision for credit losses	1,997		4,576
Depreciation and amortization	1,102		1,424
Stock-based compensation	780		831
Stock-based compensation related to equity method investments	104		69
Loans originated for sale	—		(402)
Proceeds of loans held-for-sale sold	—		3,551
Holding loss on equity securities	49		308
(Gain) loss on sale of available-for-sale securities, net	(658)		1,536
Gain on sale of loans held-for-sale	—		(205)
Loss on sale of loans held-for-investment	—		561
Gain on sale of discontinued operations	—		(11,800)
Gain on sale of other real estate owned	—		(137)
Income on bank-owned life insurance	(282)		(260)
Deferred income taxes	20		22
Equity method investments loss	1,128		1,193
Other assets	(23,847)		(24,180)
Other liabilities	(11,001)		5,812
Net cash from operating activities	(25,261)		(4,771)
INVESTING ACTIVITIES
Purchases of available-for-sale investment securities	(34,833)		(10,417)
Net maturities/paydowns of available-for-sale investment securities	2,075		3,503
Sales of available-for-sale investment securities	11,711		54,531
Purchases of premises and equipment	(921)		(908)
Disposals of premises and equipment	54		427
Net change in loans	49,276		25,378
Proceeds of loans held-for-investment sold	—		130
Proceeds from sale of other real estate owned	—		374
Investment in equity method investments	(1,564)		(119)
Purchase of equity securities	—		(140)
Net cash transferred for sale of discontinued operations	—		(3,935)
Net cash from investing activities	25,798		68,824
FINANCING ACTIVITIES
Net change in deposits	243,853		580,333
Net change in repurchase agreements	(1,011)		(4,618)
Net change in FHLB and other borrowings	—		(102,333)
Principal payments on senior term loan	(250)		(131)
Common stock options exercised	1,213		70
Withholding cash issued in lieu of restricted stock	—		(243)
Cash dividends paid on common stock	(2,145)		(2,146)

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Net cash from financing activities	241,660		470,932
Net change in cash and cash equivalents	242,197		534,985
Cash and cash equivalents, beginning of period	398,229		40,280
Cash and cash equivalents, end of period	$	640,426	$	575,265
Cash payments for:
Interest on deposits, repurchase agreements and borrowings	$	19,212	$	12,152
Income taxes	117		25
Supplemental disclosure of cash flow information:
Change in unrealized holding losses on securities available-for-sale	(4,144)		9,241
Employee stock-based compensation tax withholding obligations	—		(13)
Impact of adopting ASC 326, net of tax	—		6,642
Loans transferred to (out of) loans held-for-sale	(629)		232
Due from broker for available-for-sale investment securities sold	12,633		—

See accompanying notes to unaudited consolidated financial statements.

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Notes to the Consolidated Financial Statements

Note 1 – Nature of Operations and Basis of Presentation

Business and Organization

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

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

In February 2023, we completed the sale of the Bank’s wholly-owned subsidiary, ProCo Global, Inc. (“Chartwell,” which does business under the registered trade name Chartwell Compliance). In May 2023, we entered into an agreement with Flexia, to facilitate the divestiture of our interests in the ongoing business of Flexia. Refer to Note 15 – 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; and
l	Safe deposit rental facilities.

Fintech Banking

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

Principles of Consolidation and Basis of Presentation

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

12

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

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

The Bank owns an 80.8% interest in Trabian, which grants us a controlling interest. Accordingly, we are required to consolidate 100% of Trabian within the consolidated financial statements. The remaining interests of Trabian are accounted for separately as noncontrolling 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 March 31, 2024, we held three equity method investments. See Note 5 – Equity Method Investments for further information.

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

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.

Recently Issued Accounting Pronouncements

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures. The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments clarify circumstances in which an entity can disclose multiple segment measures of profit or loss and provide new segment disclosure requirements for entities with a single reportable segment. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 14, 2024. We are currently evaluating the impact these changes may have on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require disaggregated information about a reporting entity's effect tax rate reconciliation as well as information on income taxes paid. Public business entities will be required to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. The amendments also require greater detail about individual reconciling items in the rate reconciliation to the extent that the impact of those items

13

exceeds a specified threshold. The amendments are effective for fiscal years beginning after December 15, 2024. We are currently evaluating the impact these changes may have on our consolidated financial statements.

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

Recently Adopted Accounting Pronouncements

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, which collectively comprise Accounting Standards Codification Topic 326 Financial Instruments - Credit Losses ("ASC 326"). ASC 326 replaced the incurred loss impairment methodology in current U.S. GAAP with an expected credit loss methodology and required consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost are presented at the net amount expected to be collected by using an ACL. Purchased credit deteriorated (“PCD”) loans received 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 are recorded through an ACL, with such allowance limited to the amount by which fair value is below amortized cost. We adopted ASC 326 using the modified retrospective method for loans, leases and off-balance sheet credit exposures. Adoption of this guidance resulted in a $10.0 million increase in the ACL, comprised of increases in the ACL for loans of $8.9 million and the ACL for unfunded commitments of $1.1 million, with $1.2 million of the increase reclassified from the amortized cost basis of PCD financial assets. This increase was offset by $2.1 million related to tax effect, resulting in a cumulative adjustment to retained earnings of $6.6 million. For additional information on the new standard, see Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of the 2023 Form 10-K.

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Note 2 – Investment Securities

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

	March 31, 2024
(Dollars in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
United States government agency securities	$	45,412	$	8	$	(6,032)	$	39,388
United States sponsored mortgage-backed securities	99,792		145		(11,920)		88,017
United States treasury securities	106,324		—		(5,761)		100,563
Municipal securities	117,434		—		(12,943)		104,491
Corporate debt securities	9,078		—		(130)		8,948
Other debt securities	7,500		—		—		7,500
Total available-for-sale debt securities	385,540		153		(36,786)		348,907
Other securities	771		—		—		771
Investment securities available-for-sale	$	386,311	$	153	$	(36,786)	$	349,678

	December 31, 2023
(Dollars in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
United States government agency securities	$	44,003	$	8	$	(5,603)	$	38,408
United States sponsored mortgage-backed securities	91,939		992		(10,549)		82,382
United States treasury securities	106,401		—		(6,045)		100,356
Municipal securities	118,065		—		(11,158)		106,907
Corporate debt securities	9,076		—		(134)		8,942
Other debt securities	7,500		—		—		7,500
Total available-for-sale debt securities	376,984		1,000		(33,489)		344,495
Other securities	780		—		—		780
Investment securities available-for-sale	$	377,764	$	1,000	$	(33,489)	$	345,275

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

	March 31, 2024
(Dollars in thousands)	Amortized Cost		Fair Value
Within one year	$	96,995	$	86,803
After one year, but within five years	102,365		96,832
After five years, but within ten years	41,990		37,664
After ten years	144,190		127,608
Total available-for-sale debt securities	$	385,540	$	348,907

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 $236.3 million and $223.4 million at March 31, 2024 and December 31, 2023, respectively, were pledged to secure public funds, repurchase agreements and potential borrowings at the Federal Reserve discount window.

Our investment portfolio includes securities that are in an unrealized loss position as of March 31, 2024. We evaluate available-for-sale debt securities to determine whether the unrealized loss is due to credit-related factors or non-credit-related factors. When determining the ACL 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, 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.

15

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

The following tables show available-for-sale debt securities in an unrealized loss position for which an ACL has not been recorded as of March 31, 2024 and December 31, 2023, aggregated by investment category and length of time that the individual securities have been in a continuous loss position:

	March 31, 2024
(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 (26)	$	4,363	$	(21)	$	33,669	$	(6,011)
United States sponsored mortgage-backed securities (54)	19,467		(146)		48,156		(11,774)
United States treasury securities (23)	—		—		100,563		(5,761)
Municipal securities (215)	555		(11)		86,573		(12,932)
Corporate debt securities (7)	498		(2)		3,451		(128)
Total	$	24,883	$	(180)	$	272,412	$	(36,606)

	December 31, 2023
(Dollars in thousands)	Less than 12 months				12 months or more
Description and number of positions	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
United States government agency securities (25)	$	316	$	—	$	34,619	$	(5,603)
United States sponsored mortgage-backed securities (47)	—		—		50,345		(10,549)
United States treasury securities (23)	—		—		100,354		(6,045)
Municipal securities (216)	847		(10)		106,060		(11,148)
Corporate debt securities (7)	2,009		(67)		1,933		(67)
Total	$	3,172	$	(77)	$	293,311	$	(33,412)

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

	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Proceeds from sales of available-for-sale securities	$	24,344	$	54,531
Gains, gross	658		—
Losses, gross	—		1,536
Unrealized holding losses on equity securities	(49)		(308)

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Note 3 – Loans and Allowance for Credit Losses

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

(Dollars in thousands)	March 31, 2024		December 31, 2023
Commercial:
Business	$	742,369	$	797,100
Real estate	681,067		670,584
Acquisition, development and construction	144,261		134,004
Total commercial	1,567,697		1,601,688
Residential real estate	660,444		672,547
Home equity lines of credit	13,369		14,531
Consumer	24,681		27,408
Total loans	2,266,191		2,316,174
Deferred loan origination costs, net	1,119		1,420
Loans receivable	$	2,267,310	$	2,317,594

We currently manage our loan portfolios and the respective exposure to credit losses (credit risk) by the following specific portfolio segments. Our loan portfolio segmentation is based primarily on call report codes, which are levels at which we develop and document our systematic methodology to determine the ACL attributable to each respective portfolio segment. The ACL portfolio segments are aggregated into broader segments in order to present informative yet concise disclosures within this document, as follows:

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

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

Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, and also includes loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan.

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

17

Home equity lines of credit – This segment includes subsegments 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.

As of March 31, 2024, the Bank’s other real estate owned balance totaled $0.8 million, all of which was related to our acquisition of The First State Bank (“First State”) in 2020. The other real estate owned balance consisted of two unrelated commercial properties. As of March 31, 2024, there was one residential mortgage in the process of foreclosure with loan balances totaling $0.2 million.

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

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

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

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

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

Any portion of a loan that has been or is expected to be charged off is placed in the “Loss” category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories, unless a specific action, such as past due status, bankruptcy, repossession or death, occurs to raise awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Bank's Credit Department 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 with the intent of reviewing 40% to 45% of the Bank's commercial outstanding loan balances on an annual basis. The Bank's credit department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis.

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:

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	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
March 31, 2024
Commercial business:
Risk rating:
Pass	$	11,058	$	148,499	$	230,313	$	71,110	$	30,347	$	119,528	$	85,322	$	—	$	696,177
Special Mention	—		—		29,776		185		817		4,094		—		—		34,872
Substandard	—		1,250		1,227		691		—		4,349		808		—		8,325
Doubtful	—		—		924		779		264		1,028		—		—		2,995
Total commercial business loans	$	11,058	$	149,749	$	262,240	$	72,765	$	31,428	$	128,999	$	86,130	$	—	$	742,369
Gross charge-offs	$	—	$	—	$	614	$	—	$	—	$	367	$	—	$	—	$	981
Commercial real estate:
Risk rating:
Pass	$	37,733	$	112,029	$	134,778	$	191,268	$	11,813	$	131,047	$	518	$	—	$	619,186
Special Mention	—		—		—		25,919		—		17,150		—		—		43,069
Substandard	—		—		—		—		—		18,812		—		—		18,812
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	$	37,733	$	112,029	$	134,778	$	217,187	$	11,813	$	167,009	$	518	$	—	$	681,067
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial acquisition, development and construction:
Risk rating:
Pass	$	5,146	$	6,592	$	56,763	$	30,552	$	23,656	$	3,692	$	2,500	$	—	$	128,901
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		14,652		—		708		—		—		15,360
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial acquisition, development and construction loans	$	5,146	$	6,592	$	56,763	$	45,204	$	23,656	$	4,400	$	2,500	$	—	$	144,261
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential Real Estate:
Risk rating:
Pass	$	8,946	$	56,959	$	417,220	$	104,709	$	34,748	$	28,585	$	2,705	$	—	$	653,872
Special Mention	—		—		—		—		4,118		1,161		—		—		5,279
Substandard	—		—		—		—		81		787		120		—		988
Doubtful	—		—		—		211		—		94		—		—		305
Total residential real estate loans	$	8,946	$	56,959	$	417,220	$	104,920	$	38,947	$	30,627	$	2,825	$	—	$	660,444
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
March 31, 2024
Home equity lines of credit:
Risk rating:
Pass	$	—	$	58	$	36	$	—	$	—	$	11	$	12,828	$	—	$	12,933
Special Mention	—		—		—		—		—		—		271		—		271
Substandard	—		—		—		—		—		—		165		—		165
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity lines of credit loans	$	—	$	58	$	36	$	—	$	—	$	11	$	13,264	$	—	$	13,369
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer:
Risk rating:
Pass	$	—	$	2,040	$	17,093	$	5,243	$	—	$	55	$	30	$	—	$	24,461
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		21		189		10		—		—		—		—		220
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	$	—	$	2,061	$	17,282	$	5,253	$	—	$	55	$	30	$	—	$	24,681
Gross charge-offs	$	—	$	189	$	833	$	147	$	—	$	—	$	—	$	—	$	1,169
Total:
Risk rating:
Pass	$	62,883	$	326,177	$	856,203	$	402,882	$	100,564	$	282,918	$	103,903	$	—	$	2,135,530
Special Mention	—		—		29,776		26,104		4,935		22,405		271		—		83,491
Substandard	—		1,271		1,416		15,353		81		24,656		1,093		—		43,870
Doubtful	—		—		924		990		264		1,122		—		—		3,300
Total loans	$	62,883	$	327,448	$	888,319	$	445,329	$	105,844	$	331,101	$	105,267	$	—	$	2,266,191
Gross charge-offs	$	—	$	189	$	1,447	$	147	$	—	$	367	$	—	$	—	$	2,150

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	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
December 31, 2023
Commercial business:
Risk rating:
Pass	$	176,309	$	251,265	$	92,307	$	64,964	$	50,765	$	90,355	$	20,315	$	—	$	746,280
Special Mention	990		32,342		72		830		339		3,767		—		—		38,340
Substandard	368		988		521		—		4,640		1,436		—		—		7,953
Doubtful	—		2,022		839		264		—		1,402		—		—		4,527
Total commercial business loans	$	177,667	$	286,617	$	93,739	$	66,058	$	55,744	$	96,960	$	20,315	$	—	$	797,100
Gross charge-offs	$	—	$	228	$	1,250	$	141	$	—	$	2,953	$	—	$	—	$	4,572
Commercial real estate:
Risk rating:
Pass	$	80,553	$	149,189	$	205,651	$	11,952	$	26,438	$	101,322	$	51,239	$	—	$	626,344
Special Mention	—		—		7,961		—		6,079		11,201		—		—		25,241
Substandard	—		—		—		—		—		18,999		—		—		18,999
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate loans	$	80,553	$	149,189	$	213,612	$	11,952	$	32,517	$	131,522	$	51,239	$	—	$	670,584
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial acquisition, development and construction:
Risk rating:
Pass	$	6,546	$	54,170	$	29,535	$	22,041	$	—	$	1,483	$	4,823	$	—	$	118,598
Special Mention	—		—		14,652		—		—		—		—		—		14,652
Substandard	—		—		—		—		—		754		—		—		754
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial acquisition, development and construction loans	$	6,546	$	54,170	$	44,187	$	22,041	$	—	$	2,237	$	4,823	$	—	$	134,004
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential Real Estate:
Risk rating:
Pass	$	33,867	$	413,466	$	96,413	$	38,169	$	7,306	$	21,313	$	50,815	$	—	$	661,349
Special Mention	—		—		—		4,224		414		708		—		—		5,346
Substandard	—		988		3,764		82		146		777		—		—		5,757
Doubtful	—		—		—		—		—		95		—		—		95
Total residential real estate loans	$	33,867	$	414,454	$	100,177	$	42,475	$	7,866	$	22,893	$	50,815	$	—	$	672,547
Gross charge-offs	$	—	$	—	$	—	$	—	$	19	$	381	$	—	$	—	$	400

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	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
December 31, 2023
Home equity lines of credit:
Risk rating:
Pass	$	638	$	3,798	$	1,779	$	1,192	$	501	$	3,084	$	3,154	$	—	$	14,146
Special Mention	—		61		—		36		—		41		86		—		224
Substandard	—		83		—		78		—		—		—		—		161
Doubtful	—		—		—		—		—		—		—		—		—
Total home equity lines of credit loans	$	638	$	3,942	$	1,779	$	1,306	$	501	$	3,125	$	3,240	$	—	$	14,531
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer:
Risk rating:
Pass	$	2,275	$	18,926	$	5,753	$	9	$	28	$	53	$	20	$	—	$	27,064
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	20		266		58		—		—		—		—		—		344
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer loans	$	2,295	$	19,192	$	5,811	$	9	$	28	$	53	$	20	$	—	$	27,408
Gross charge-offs	$	1,144	$	10,608	$	1,753	$	—	$	—	$	2	$	—	$	—	$	13,507
Total:
Risk rating:
Pass	$	300,188	$	890,814	$	431,438	$	138,327	$	85,038	$	217,610	$	130,366	$	—	$	2,193,781
Special Mention	990		32,403		22,685		5,090		6,832		15,717		86		—		83,803
Substandard	388		2,325		4,343		160		4,786		21,966		—		—		33,968
Doubtful	—		2,022		839		264		—		1,497		—		—		4,622
Total loans	$	301,566	$	927,564	$	459,305	$	143,841	$	96,656	$	256,790	$	130,452	$	—	$	2,316,174
Gross charge-offs	$	1,144	$	10,836	$	3,003	$	141	$	19	$	3,336	$	—	$	—	$	18,479

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

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The following table presents the amortized cost basis in loans by aging category and accrual status as of the periods shown:

(Dollars in thousands)	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
March 31, 2024
Commercial
Business	$	735,578	$	3,088	$	549	$	3,154	$	6,791	$	742,369	$	4,859	$	—	$	1,983	$	—
Real estate	678,997		2,070		—		—		2,070		681,067		—		—		—		—
Acquisition, development and construction	129,609		—		14,652		—		14,652		144,261		708		—		708		—
Total commercial	1,544,184		5,158		15,201		3,154		23,513		1,567,697		5,567		—		2,691		—
Residential real estate	658,397		125		324		1,598		2,047		660,444		1,678		—		404		—
Home equity lines of credit	13,264		105		—		—		105		13,369		81		—		—		—
Consumer	22,538		1,513		410		220		2,143		24,681		220		—		—		—
Total loans	$	2,238,383	$	6,901	$	15,935	$	4,972	$	27,808	$	2,266,191	$	7,546	$	—	$	3,095	$	—
December 31, 2023
Commercial
Business	$	788,430	$	4,728	$	448	$	3,494	$	8,670	$	797,100	$	6,926	$	—	$	1,825	$	—
Real estate	670,170		—		414		—		414		670,584		—		—		—		—
Acquisition, development and construction	134,004		—		—		—		—		134,004		754		—		754		—
Total commercial	1,592,604		4,728		862		3,494		9,084		1,601,688		7,680		—		2,579		—
Residential real estate	670,539		1,671		337		—		2,008		672,547		82		—		—		—
Home equity lines of credit	14,522		9		—		—		9		14,531		161		—		—		—
Consumer	24,494		1,792		778		344		2,914		27,408		344		—		—		—
Total loans	$	2,302,159	$	8,200	$	1,977	$	3,838	$	14,015	$	2,316,174	$	8,267	$	—	$	2,579	$	—

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

The Bank’s methodology for determining the ACL is based on the requirements of ASC 326.

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, 2024, the Bank expects the markets in which it operates will experience economic improvements over the next one to two years. The ACL for only one portfolio segment consisting entirely of automotive loans to consumers was calculated under the remaining life methodology using straight-line amortization over the remaining life of the portfolio.

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

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

(Dollars in thousands)	Real Estate		Vehicles and Equipment		Assignment of Cash Flow		Accounts Receivable		Other		Totals		Allowance for Credit Losses
March 31, 2024
Commercial
Business	$	16,209	$	2,732	$	—	$	442	$	695	$	20,078	$	2,958
Real estate	—		—		—		—		—		—		—
Acquisition, development and construction	—		—		—		—		—		—		—
Total commercial	$	16,209	$	2,732	$	—	$	442	$	695	$	20,078	$	2,958
Residential	1,387		—		—		—		—		1,387		35
Home equity lines of credit	—		—		—		—		—		—		—
Consumer	—		220		—		—		—		220		146
Total	$	17,596	$	2,952	$	—	$	442	$	695	$	21,685	$	3,139
Collateral value	$	34,924	$	2,393	$	—	$	38	$	—	$	37,355
December 31, 2023
Commercial
Business	$	424	$	2,277	$	—	$	452	$	1,037	$	4,190	$	1,583
Real estate	—		—		—		—		—		—		—
Acquisition, development and construction	—		—		—		—		—		—		—
Total commercial	$	424	$	2,277	$	—	$	452	$	1,037	$	4,190	$	1,583
Residential	—		—		—		—		—		—		—
Home equity lines of credit	—		—		—		—		—		—		—
Consumer	—		344		—		—		—		344		60
Total	$	424	$	2,621	$	—	$	452	$	1,037	$	4,534	$	1,643
Collateral value	$	301	$	2,040	$	—	$	906	$	320	$	3,567

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

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

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

24

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

Bank management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

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

	Commercial								Residential		Home Equity		Consumer		Total
(Dollars in thousands)	Business		Real Estate		Acquisition, development and construction		Total Commercial
ACL at December 31, 2023	$	7,931	$	2,931	$	1,674	$	12,536	$	6,412	$	97	$	3,079	$	22,124
Provision (release of allowance) for credit losses	1,297		365		447		2,109		(145)		(8)		39		1,995
Charge-offs	(981)		—		—		(981)		—		—		(1,169)		(2,150)
Recoveries	42		8		—		50		35		1		749		835
ACL at March 31, 2024	$	8,289	$	3,304	$	2,121	$	13,714	$	6,302	$	90	$	2,698	$	22,804

	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
Initial allowance on loans purchased with credit deterioration	710		—		—		710		507		—		—		1,217
Provision (release of allowance) for credit losses	681		313		288		1,282		364		(8)		2,817		4,455
Charge-offs	(141)		—		—		(141)		(22)		—		(4,684)		(4,847)
Recoveries	23		6		—		29		—		1		3,139		3,169
ACL balance at March 31, 2023	$	9,918	$	3,177	$	1,640	$	14,735	$	7,618	$	119	$	13,041	$	35,513

During the three months ended March 31, 2024, there were charge offs totaling $2.2 million. For the three months ended March 31, 2024, $1.2 million, or 55%, of charge offs were related to the subprime consumer automotive segment, $0.6 million, or 27%, was related to a commercial note secured by business assets and $0.4 million, or 18%, was related to a commercial note secured by heavy equipment. During the three months ended March 31, 2024, the provision related to unfunded commitments was not significant.

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

Loan Modifications for Borrowers Experiencing Financial Difficulty

Occasionally, the Bank modifies loans to borrowers in financial distress by providing concessions that allow for the borrower to lower their payment obligations for a defined period, these may include, but are not limited to: principal forgiveness, payment delays, term extensions, interest rate reductions and any combinations of the preceding.

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The following table summarize the amortized cost basis of loans that were modified as of the period shown:

(Dollars in thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Total		Total Class of Financing Receivable
March 31, 2024
Commercial
Business	$	—	$	1,377	$	—	$	—	$	1,377	—	%
Real estate	—		—		—		—		—		—	%
Total commercial	—		1,377		—		—		1,377		—	%
Residential	—		—		—		—		—		—	%
Home equity lines of credit	—		—		—		—		—		—	%
Consumer	—		—		—		—		—		—	%
Total	$	—	$	1,377	$	—	$	—	$	1,377	—	%

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

The Bank closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Upon the Bank’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount. There were no loans that had a payment default and were modified prior to that default to borrowers experiencing financial difficulty in the three months ended March 31, 2024 and March 31, 2023.

Note 4 – Premises and Equipment

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

(Dollars in thousands)	March 31, 2024		December 31, 2023
Land	$	4,062	$	3,465
Buildings and improvements	13,393		13,393
Furniture, fixtures and equipment	15,762		18,300
Software	6,592		7,140
Construction in progress	3		45
Leasehold improvements	2,836		2,836
	42,648		45,179
Accumulated depreciation	(22,680)		(24,251)
Premises and equipment, net	$	19,968	$	20,928

We lease certain premises and equipment under operating and finance leases. At March 31, 2024, we had lease liabilities totaling $13.7 million and right-of-use assets totaling $12.5 million, substantially all of which was related to operating leases. At March 31, 2024, the weighted-average remaining lease term for operating leases was 10.4 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.1%.

At December 31, 2023, we had lease liabilities totaling $14.0 million and right-of-use assets totaling $12.9 million, substantially all of which was related to operating leases. At December 31, 2023, the weighted-average remaining lease term for operating leases was 10.5 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.1%.

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

The following table presents lease costs for the periods shown:

	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Amortization of right-of-use assets, finance leases	$	1	$	6
Operating lease cost	450		450
Short-term lease cost	—		5
Variable lease cost	—		10
Sublease income	(97)		(87)
Total lease cost	$	354	$	384

For operating leases with initial or remaining terms of one year or more as of March 31, 2024, the following table presents future minimum payments for the twelve month periods ended March 31:

(Dollars in thousands)	Operating Leases
2025	$	1,326
2026	1,738
2027	1,611
2028	1,641
2029	1,629
2030 and thereafter	8,320
Total future minimum lease payments	$	16,265
Less: Amounts representing interest	(2,593)
Present value of net future minimum lease payments	$	13,672

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

Note 5 – Equity Method Investments

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

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

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

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ICM

The following table presents summarized income statement information for ICM for the periods shown:

	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Total revenues	$	9,857	$	9,406
Net loss	(422)		(3,082)
Gain on loans sold	$	5,823	$	5,448
Gain on loans held-for-sale	495		1,356
Volume of loans sold	266,598		302,782

Our ownership percentage of 40% of ICM allows us to have significant influence over the operations and decision making at ICM. Accordingly, the investment, which had a carrying value of $22.9 million at March 31, 2024, is accounted for as an equity method investment. Our share of ICM's net loss totaled $0.2 million and $1.2 million for the three months ended March 31, 2024 and March 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, the mortgage pipeline was $537.6 million and $439.0 million, respectively.

Warp Speed

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

(Dollars in thousands)	Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
Total revenues	$	37,497	$	35,517
Net income (loss)	(2,448)		2,682
Gain on loans sold	$	11,208	$	2,975
Gain on loans held-for-sale	587		9,707
Volume of loans sold	304,458		290,207

In October 2022, we acquired a 37.5% interest in Warp Speed and accounted for our ownership as an equity method investment, initially recorded at cost including costs incurred to obtain the equity method investment. It was determined that our ownership percentage of Warp Speed provides that we have significant influence over its operations and decision making. Accordingly, the investment, which had a carrying value of $51.7 million at March 31, 2024, is accounted for as an equity method investment. At the time of acquisition, we made a policy election to record our proportionate share of net income of the investee on a three month lag. Our share of Warp Speed's net loss and income totaled $0.9 million and $1.0 million for the three months ended March 31, 2024 and March 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, the mortgage pipeline was $253.2 million and $267.8 million, respectively.

Ayers Socure II

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

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

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Note 6 – Deposits

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

(Dollars in thousands)	March 31, 2024		December 31, 2023
Demand deposits of individuals, partnerships and corporations
Noninterest-bearing demand	$	1,391,070	$	1,197,272
NOW	530,745		538,444
Savings and money markets	519,209		571,299
Time deposits, including CDs and IRAs	704,305		594,461
Total deposits	$	3,145,329	$	2,901,476
Time deposits that meet or exceed the FDIC insurance limit	$	2,911	$	3,150

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

(Dollars in thousands)
2025	$	324,373
2026	116,157
2027	130,763
2028	51,732
2029	81,257
Thereafter	23
Total	$	704,305

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

Note 7 – Borrowed Funds

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

Short-term borrowings

As of March 31, 2024 and December 31, 2023, the Bank had no short-term borrowings with the FHLB or Federal Reserve Bank and no federal funds purchased outstanding.

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

(Dollars in thousands)	Three Months Ended March 31, 2024			Year Ended December 31, 2023
Balance at end of period	$	—		$	—
Average balance during the period	44			17,542
Maximum month-end balance	—			—
Weighted-average rate during the period	9.14		%	5.07		%
Weighted-average rate at end of period	—		%	—		%

Long-term borrowings

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

29

Bank.

Repurchase agreements

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

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

As of March 31, 2024 and December 31, 2023, all of our repurchase agreements were overnight agreements. These borrowings were collateralized with investment securities with a carrying value of $3.9 million and $4.9 million at March 31, 2024 and December 31, 2023, respectively, and were comprised of 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)	Three Months Ended March 31, 2024			Year Ended December 31, 2023
Balance at end of period	$	3,810		$	4,821
Average balance during the period	2,951			5,662
Maximum month-end balance	3,810			10,041
Weighted-average rate during the period	0.01		%	0.02		%
Weighted-average rate at end of period	0.01		%	0.01		%

Subordinated debt

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

(Dollars in thousands)	Three Months Ended March 31, 2024			Year Ended December 31, 2023
Balance at end of period	$	73,602		$	73,540
Average balance during the period	73,571			73,415
Maximum month-end balance	73,602			73,540
Weighted-average rate during the period	4.07		%	4.38		%
Weighted-average rate at end of period	4.02		%	4.02		%

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

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

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

30

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

Senior term loan

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

(Dollars in thousands)	Three Months Ended March 31, 2024			Year Ended December 31, 2023
Balance at end of period	$	6,549		$	6,786
Average balance during the period	6,736			9,007
Maximum month-end balance	6,794			9,768
Weighted-average rate during the period	8.18		%	8.50		%
Weighted-average rate at end of period	7.63		%	8.76		%

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

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

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

	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Interest cost	$	113	$	113
Expected return on plan assets	(157)		(164)
Amortization of net actuarial loss	43		29
Net periodic benefit (income) cost	$	(1)	$	(22)
Contributions paid	$	—	$	—

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

In June 2017, we approved a Supplemental Executive Retirement Plan (the “SERP”), pursuant to which the Chief Executive Officer of Potomac Mortgage Group (“PMG”) is entitled to receive certain supplemental nonqualified retirement benefits. The SERP took effect on December 31, 2017. As the executive completed three years of continuous employment with PMG prior to retirement date (which shall be no earlier than the date he attains age 55) he will, upon retirement, be entitled to receive $1.8 million payable in 180 equal consecutive monthly installments. The liability is calculated by discounting the anticipated future cash flows at 4.0%. The liability accrued for this obligation was $1.4 million as of March 31, 2024 and December 31, 2023, respectively. Service cost was not material for any periods covered by this report. In February 2024, the SERP was terminated. Within the agreement, there is a one year provision for payment delay. As such, the $1.8 million obligation is scheduled to be paid in February 2025.

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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)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)
March 31, 2024
Financial Assets:
Cash and cash equivalents	$	640,426	$	640,426	$	640,426	$	—	$	—
Securities available-for-sale	349,678		349,678		—		324,815		24,863
Equity securities	41,037		41,037		3,800		—		37,237
Loans receivable, net	2,244,506		2,326,879		—		—		2,326,879
Servicing rights	1,710		1,756		—		—		1,756
Interest rate swaps	7,784		7,784		—		7,784		—
Accrued interest receivable	17,885		17,885		—		2,809		15,076
FHLB Stock	2,088		2,088		—		2,088		—
Embedded derivative	648		648		—		—		648
Financial Liabilities:
Deposits	$	3,145,329	$	3,102,867	$	—	$	3,102,867	$	—
Repurchase agreements	3,810		3,810		—		3,810		—
Interest rate swaps	7,784		7,784		—		7,784		—
Fair value hedge	729		729		—		729		—
Accrued interest payable	3,064		3,064		—		3,064		—
Senior term loan	6,549		6,503		—		6,503		—
Subordinated debt	73,602		60,133		—		60,133		—
December 31, 2023
Financial assets:
Cash and cash equivalents	$	398,229	$	398,229	$	398,229	$	—	$	—
Securities available-for-sale	345,275		345,275		—		319,530		25,745
Equity securities	41,086		41,086		3,590		—		37,496
Loans held-for-sale	629		629		—		629		—
Loans receivable, net	2,295,470		2,230,279		—		—		2,230,279
Servicing rights	1,768		1,799		—		—		1,799
Interest rate swaps	6,249		6,249		—		6,249		—
Accrued interest receivable	15,267		15,267		—		2,836		12,431
FHLB Stock	2,094		2,094		—		2,094		—
Embedded derivative	648		648		—		—		648
Financial liabilities:
Deposits	$	2,901,476	$	2,587,246	$	—	$	2,587,246	$	—
Repurchase agreements	4,821		4,821		—		4,821		—
Interest rate swaps	6,249		6,249		—		6,249		—
Fair value hedge	6,111		6,111		—		6,111		—
Accrued interest payable	2,385		2,385		—		2,385		—
Senior term loan	6,786		6,786		—		6,786		—
Subordinated debt	73,540		57,234		—		57,234		—

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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 to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of the 2023 Form 10-K.

Assets Measured on a Recurring Basis

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

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

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

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

Interest rate swaps – 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 hedges – 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.

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.

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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:

	March 31, 2024
(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
United States government agency securities	$	—	$	39,388	$	—	$	39,388
United States sponsored mortgage-backed securities	—		88,017		—		88,017
United States treasury securities	—		100,563		—		100,563
Municipal securities	—		87,128		17,363		104,491
Corporate debt securities	—		8,948		—		8,948
Other securities	—		771		—		771
Equity securities	3,800		—		—		3,800
Loans held-for-sale	—		—		—		—
Interest rate swaps	—		7,784		—		7,784
Embedded derivative	—		—		648		648
Liabilities:
Interest rate swaps	—		7,784		—		7,784
Fair value hedge	—		729		—		729

	December 31, 2023
(Dollars in thousands)	Level I		Level II		Level III		Total
Assets:
United States government agency securities	$	—	$	38,408	$	—	$	38,408
United States sponsored mortgage-backed securities	—		82,382		—		82,382
United States treasury securities	—		100,356		—		100,356
Municipal securities	—		88,662		18,245		106,907
Corporate debt securities	—		8,942		—		8,942
Other securities	—		780		—		780
Equity securities	3,590		—		—		3,590
Loans held-for-sale	—		629		—		629
Interest rate swaps	—		6,249		—		6,249
Embedded derivative	—		—		648		648
Liabilities:
Interest rate swaps	—		6,249		—		6,249
Fair value hedge	—		6,111		—		6,111

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The following table represents recurring Level III assets as of the periods shown:

(Dollars in thousands)	Municipal Securities		Embedded Derivatives		Total
Balance at December 31, 2023	$	18,245	$	648	$	18,893
Realized and unrealized income included in earnings	1		—		1
Purchase of securities	—		—		—
Maturities/calls	(70)		—		(70)
Unrealized loss included in other comprehensive income (loss)	(813)		—		(813)
Balance at March 31, 2024	$	17,363	$	648	$	18,011
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

Assets Measured on a Nonrecurring Basis

We may be required, from time to time, to measure certain financial assets, financial liabilities, non-financial assets and non-financial liabilities at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Certain non-financial assets measured at fair value on a non-recurring basis include foreclosed assets (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. Non-financial assets measured at fair value on a nonrecurring basis during 2024 and 2023 include certain foreclosed assets which, upon initial recognition, were remeasured and reported at fair value through a charge-off to the allowance for possible credit losses and certain foreclosed assets which, subsequent to their initial recognition, were remeasured at fair value through a write-down included in other noninterest expense.

Collateral-dependent loans - Certain loans receivable are evaluated individually for credit loss when the borrower is experiencing financial difficulties and repayment is expected to be provided substantially through the operation or sale of collateral. Estimated credit losses are based on the fair value of the collateral, adjusted for costs to sell. Collateral values are estimated using Level II inputs based on observable market data or Level III inputs based on customized discounting criteria. For a majority of collateral-dependent real estate related loans, we obtain a current external appraisal. Other valuation techniques are used as well, including internal valuations, comparable property analysis and contractual sales information.

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

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.

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

	March 31, 2024
(Dollars in thousands)	Level I		Level II		Level III		Total
Collateral-dependent loans	$	—	$	—	$	18,546	$	18,546
Other real estate owned	—		—		825		825
Other debt securities	—		—		7,500		7,500
Equity securities	—		—		37,237		37,237

	December 31, 2023
(Dollars in thousands)	Level I		Level II		Level III		Total
Collateral-dependent loans	$	—	$	—	$	2,891	$	2,891
Other real estate owned	—		—		825		825
Other debt securities	—		—		7,500		7,500
Equity securities	—		—		37,496		37,496

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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
March 31, 2024
Nonrecurring measurements:
Collateral-dependent loans	$	18,546	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%
Other real estate owned	$	825	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%
Other debt securities	$	7,500	Net asset value	Cost, less impairment	0%
Equity securities	$	37,237	Net asset value	Cost, less impairment	0%
Recurring measurements:
Municipal securities 5	$	17,363	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, 2023
Nonrecurring measurements:
Collateral-dependent loans	$	2,891	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%
Other real estate owned	$	825	Appraisal of collateral 1	Appraisal adjustments 2	0% - 20%
				Liquidation expense 2	6%
Other debt securities	$	7,500	Net asset value	Cost, less impairment	0%
Equity securities	$	37,496	Net asset value	Cost, less impairment	0%
Recurring measurements:
Municipal securities 5	$	18,245	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%

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.

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Note 11 – Derivatives

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

Fair Value Hedges of Interest Rate Risk

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

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

We designated the fair value swaps under the portfolio layer method (“PLM”). The total notional amount of the five swaps was $436.5 million as of March 31, 2024, one of which is amortizing and included a $13.5 million amortization adjustment to the notional amount at March 31, 2024. Under this method, the hedged items are designated as a hedged layer of closed portfolios of financial loans and municipal bonds that are anticipated to remain outstanding for the designated hedged periods. Adjustments are made to record the swaps at fair value on the consolidated balance sheets, with changes in fair value recognized in interest income. The carrying values of the fair value swaps on the consolidated balance sheets are also adjusted through interest income, based on changes in fair value attributable to changes in the hedged risk.

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

		March 31, 2024						December 31, 2023
(Dollars in thousands)	Balance Sheet Location	Amortized Cost Basis		Hedged Asset		Basis Adjustment		Amortized Cost Basis		Hedged Asset		Basis Adjustment
Fixed rate mortgages	Loans receivable	$	478,727	$	386,459	$	(347)	$	491,018	$	390,297	$	4,055
Fixed rate bonds	Investment securities available-for-sale	$	58,316	$	50,000	$	616	$	59,270	$	50,000	$	1,570
Total hedged assets		$	537,043	$	436,459	$	269	$	550,288	$	440,297	$	5,625

Derivatives Not Designated as Hedging Instruments

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

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The following tables summarize outstanding financial derivative instruments as of March 31, 2024 and December 31, 2023:

		March 31, 2024
(Dollars in thousands)	Balance Sheet Location	Notional Amount		Fair Value of Asset (Liability)		Gain (Loss)
Fair value hedge of interest rate risk:
Pay fixed rate swaps with counterparty	Accrued interest receivable and other assets	$	436,459	$	(729)	$	5,382
Not designated hedges of interest rate risk:
Matched interest rate swaps with borrowers	Accrued interest receivable and other assets	143,048		7,784		7,784
Matched interest rate swaps with counterparty	Accrued interest payable and other liabilities	143,048		(7,784)		(7,784)
Total derivatives		$	722,555	$	(729)	$	5,382

		December 31, 2023
(Dollars in thousands)	Balance Sheet Location	Notional Amount		Fair Value of Asset (Liability)		Gain (Loss)
Fair value hedge of interest rate risk:
Pay fixed rate swaps with counterparty	Accrued interest receivable and other assets	$	440,297	$	(6,111)	$	(6,111)
Not designated hedges of interest rate risk:
Matched interest rate swaps with borrowers	Accrued interest receivable and other assets	126,494		6,249		6,249
Matched interest rate swaps with counterparty	Accrued interest payable and other liabilities	126,494		(6,249)		(6,249)
Total derivatives		$	693,285	$	(6,111)	$	(6,111)

Embedded Derivative

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

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Note 12 – 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.

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

	Three Months Ended March 31,
(Dollars in thousands except shares and per share data)	2024		2023
Numerator for earnings per share:
Net income from continuing operations	$	4,502	$	2,438
Net (income) loss attributable to noncontrolling interest	(20)		122
Net income available to common shareholders from continuing operations	4,482		2,560
Net income from discontinued operations available to common shareholders	—		8,782
Net income available to common shareholders	$	4,482	$	11,342
Denominator:
Weighted-average shares outstanding - basic	12,810,956		12,623,361
Effect of dilutive instruments	308,336		392,721
Weighted-average shares outstanding - diluted	13,119,292		13,016,082
Earnings per share from continuing operations - basic	$	0.35	$	0.20
Earnings per share from discontinued operations - basic	$	—	$	0.70
Earnings per common share - basic	$	0.35	$	0.90
Earnings per share from continuing operations - diluted	$	0.34	$	0.20
Earnings per share from discontinued operations - diluted	$	—	$	0.67
Earnings per share common share - diluted	$	0.34	$	0.87
Instruments not included in the computation of diluted EPS because the effect would be antidilutive	171,960		140,666

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Note 13 – 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 March 31,
(Dollars in thousands)	2024		2023
Details about AOCI components	Amount reclassified from AOCI		Amount reclassified from AOCI		Affected income statement line item
Available-for-sale securities
Realized gain (loss) recognized in income	$	658	$	(1,536)	Gain (loss) on sale of available-for-sale securities
Income tax effect	(158)		369		Income taxes
Realized gain (loss) recognized in income, net of tax	500		(1,167)
Defined benefit pension plan items
Amortization of net actuarial loss	(43)		$	(29)	Salaries and employee benefits
Income tax effect	10		7		Income taxes
Defined benefit pension plan items, net of tax	(33)		(22)
Investment hedge
Carrying value adjustment	—		334		Interest on investment securities
Income tax effect	—		(80)		Income taxes
Investment hedge, net of tax	—		254
Total reclassifications	$	467	$	(935)

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

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Note 14 – Segment Reporting

We have identified three reportable segments: CoRe Banking; Mortgage Banking; and Financial Holding Company. All other operating segments are summarized in an Other category.

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

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 investments in ICM and 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 March 31, 2024	CoRe Banking		Mortgage Banking		Financial Holding Company		Other		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	49,942	$	103	$	2	$	—	$	(17)	$	50,030
Interest expense	18,927		—		959		22		(17)		19,891
Net interest income (expense)	31,015		103		(957)		(22)		—		30,139
Provision for credit losses	1,997		—		—		—		—		1,997
Net interest income (expense) after provision for credit losses	29,018		103		(957)		(22)		—		28,142
Noninterest income	7,521		(1,129)		2,265		3,264		(4,087)		7,834
Noninterest Expenses:
Salaries and employee benefits	9,823		—		4,678		1,988		—		16,489
Other expenses	13,821		—		1,841		2,127		(4,087)		13,702
Total noninterest expenses	23,644		—		6,519		4,115		(4,087)		30,191
Income (loss), before income taxes	12,895		(1,026)		(5,211)		(873)		—		5,785
Income taxes	2,878		(229)		(1,157)		(209)		—		1,283
Net income (loss), before noncontrolling interest	10,017		(797)		(4,054)		(664)		—		4,502
Net income attributable to noncontrolling interest	—		—		—		(20)		—		(20)
Net income (loss) available to common shareholders	$	10,017	$	(797)	$	(4,054)	$	(684)	$	—	$	4,482
Capital expenditures for the three months ended March 31, 2024	$	652	$	—	$	11	$	258	$	—	$	921
Total assets as of March 31, 2024	$	3,489,684	$	84,448	$	347,031	$	16,633	$	(390,406)	$	3,547,390
Total assets as of December 31, 2023	$	3,255,369	$	83,909	$	345,314	$	17,728	$	(388,438)	$	3,313,882
Goodwill as of March 31, 2024	$	—	$	—	$	—	$	2,838	$	—	$	2,838
Goodwill as of December 31, 2023	$	—	$	—	$	—	$	2,838	$	—	$	2,838

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Three Months Ended March 31, 2023	CoRe Banking		Mortgage Banking		Financial Holding Company		Other		Intercompany Eliminations		Consolidated
(Dollars in thousands)
Interest income	$	44,662	$	105	$	33	$	(6)	$	(31)	$	44,763
Interest expense	11,041		—		993		31		(31)		12,034
Net interest income (expense)	33,621		105		(960)		(37)		—		32,729
Provision for loan losses	4,576		—		—				—		4,576
Net interest income (expense) after provision for loan losses	29,045		105		(960)		(37)		—		28,153
Noninterest income	3,018		(1,186)		2,410		1,784		(2,959)		3,067
Noninterest Expenses:
Salaries and employee benefits	9,051		—		4,950		2,745		—		16,746
Other expenses	11,054		34		1,917		1,525		(2,959)		11,571
Total noninterest expenses	20,105		34		6,867		4,270		(2,959)		28,317
Income (loss), before income taxes	11,958		(1,115)		(5,417)		(2,523)		—		2,903
Income taxes	2,515		(504)		(942)		(604)		—		465
Net income (loss) from continuing operations	9,443		(611)		(4,475)		(1,919)		—		2,438
Income from discontinued operations, before income taxes	—		—		—		11,831		—		11,831
Income taxes - discontinued operations	—		—		—		3,049		—		3,049
Net income from discontinued operations	—		—		—		8,782		—		8,782
Net income (loss), before noncontrolling interest	9,443		(611)		(4,475)		6,863		—		11,220
Net loss attributable to noncontrolling interest	—		—		—		122		—		122
Net income (loss) available to common shareholders	$	9,443	$	(611)	$	(4,475)	$	6,985	$	—	$	11,342
Capital expenditures for the three months ended March 31, 2023	$	337	$	—	$	—	$	571	$	—	$	908

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Note 15 – Acquisition & Divestiture Activity

Flexia Payments, LLC

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

Chartwell Compliance

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

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 net income from discontinued operations for the periods shown:

	Three Months Ended March 31,
(Dollars in thousands)	2023
Compliance consulting income	$	2,369
Gain on sale of discontinued operations	11,800
Total income	$	14,169
Salaries and employee benefits	$	2,082
Other expenses	256
Total expenses	$	2,338
Income, before income taxes	$	11,831
Income taxes	3,049
Net income from discontinued operations	$	8,782

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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 2023 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 continue to adapt our business model due to challenging market conditions, primarily brought on by an environment of increasing interest rates, a slowing economy and multiple high-profile bank failures that occurred during the first half of 2023. Interest rates have remained at an elevated level through March 31, 2024 as the Federal Reserve raised its key interest rate to a range of 4.25% to 4.5%. Lower loan balances are the result of slower market demand and deliberate efforts to improve balance sheet liquidity. We remain committed to our key Fintech industries of gaming and payments. We continue to expand the Bank's treasury services function to support the banking needs of financial and emerging technology companies, which we believe will further enhance core deposits, notably through the expansion of deposit acquisition and fee income strategies through the Fintech division. Additionally, we have expanded our compliance and risk management team to support the growth in these lines of business.

Current Market Conditions

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

Financial Results

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

During the three months ended March 31, 2024, net interest income decreased $2.6 million, noninterest income increased $4.8 million and noninterest expenses increased by $1.9 million compared to the three months ended March 31, 2023. Our tax- equivalent yield on earning assets in the three months ended March 31, 2024 was 6.34% compared to 6.00% in the three months ended March 31, 2023. Loans receivable decreased by $50.3 million to $2.27 billion during the three months ended March 31, 2024. Our overall cost of interest-bearing liabilities was 4.22% in the three months ended March 31, 2024 compared to 2.95% in the three months ended March 31, 2023. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.83% in the three months ended March 31, 2024, compared to 4.40% in the three months ended March 31, 2023.

Our net income for the three months ended March 31, 2024 was $4.5 million compared to $11.3 million in the three months ended March 31, 2023. Earnings for the three months ended March 31, 2024 equated to a return on average assets of 0.5% and a return on average equity of 6.2%, compared to the three months ended March 31, 2023 results of 1.4% and 16.1%, respectively. Basic and diluted earnings per share were $0.35 and $0.34, respectively, for the three months ended March 31, 2024, compared to $0.90 and $0.87, respectively, for the three months ended March 31, 2023.

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

The following tables present information regarding (i) average balances, the total dollar amount of interest income from interest earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) the interest rate spread; (iv) net interest income and margin; and (v) net interest income and margin (on a tax-equivalent basis) as of and for the periods shown. The average balances presented are derived from daily average balances.

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	Three Months Ended March 31,
	2024						2023
(Dollars in thousands)	Average Balance		Interest Income/Expense		Yield/Cost		Average Balance		Interest Income/Expense		Yield/Cost
Assets
Interest-bearing balances with banks	$	549,894	$	7,341	5.37	%	$	285,102	$	3153	4.49	%
Investment securities:
Taxable	246,091		1,743		2.85		236,574		1,848		3.17
Tax-exempt 2	106,309		887		3.36		137,799		1,308		3.85
Loans and loans held-for-sale: 1
Commercial	1,626,286		32,152		7.95		1,620,509		28,538		7.14
Tax exempt 2	3,373		37		4.41		3,944		43		4.42
Real estate	576,148		6,612		4.62		621,388		6,295		4.11
Consumer	77,300		1,452		7.55		137,547		3,862		11.39
Total loans	2,283,107		40,253		7.09		2,383,388		38,738		6.59
Total earning assets	3,185,401		50,224		6.34		3,042,863		45,047		6.00
Less: Allowance for credit losses	(22,258)						(30,135)
Cash and due from banks	5,405						243
Other assets	335,029						339,676
Total assets	$	3,503,577					$	3,352,647
Liabilities
Deposits:
NOW	$	555,530	$	4,929	3.57	%	$	796,901	$	4,661	2.37	%
Money market checking	408,764		3,759		3.70		209,227		928		1.80
Savings	163,611		1,640		4.03		93,297		641		2.79
IRAs	7,762		74		3.83		6,151		27		1.78
CDs	674,611		8,529		5.08		386,144		3,896		4.09
Repurchase agreements and federal funds sold	2,951		—		—		7,612		1		0.05
FHLB and other borrowings	44		1		9.14		71,166		888		5.06
Senior term loan	6,736		150		8.96		9,765		194		8.06
Subordinated debt	73,571		809		4.42		73,318		798		4.41
Total interest-bearing liabilities	1,893,580		19,891		4.22		1,653,581		12,034		2.95
Noninterest-bearing demand deposits	1,279,194						1,380,516
Other liabilities	42,017						37,087
Total liabilities	3,214,791						3,071,184
Stockholders’ equity
Common stock	13,659						13,471
Paid-in capital	161,532						153,389
Treasury stock	(16,741)						(16,741)
Retained earnings	160,933						166,426
Accumulated other comprehensive loss	(30,559)						(35,345)
Total stockholders’ equity	288,824						281,200
Noncontrolling interest	(38)						263
Total stockholders’ equity attributable to parent	288,786						281,463
Total liabilities and stockholders’ equity	$	3,503,577					$	3,352,647
Net interest spread (tax-equivalent)					2.12	%					3.05	%
Net interest income and margin (tax-equivalent) 2			$	30,333	3.83	%			$	33,013	4.40	%
Less: Tax-equivalent adjustments			$	(194)					$	(284)
Net interest spread					2.10	%					3.02	%
Net interest income and margin			$	30,139	3.81	%			$	32,729	4.36	%

1 In order to make pre-tax income and resultant yields on tax-exempt loans and investment securities comparable to those on taxable loans and investment securities, a tax-equivalent adjustment has been computed using a Federal tax rate of 21% for the three months ended March 31, 2024 and 2023, 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.

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

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

	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Net interest margin - U.S. GAAP basis
Net interest income	$	30,139		$	32,729
Average interest-earning assets	3,185,401			3,042,863
Net interest margin	3.81		%	4.36		%
Net interest margin - non-U.S. GAAP basis
Net interest income	$	30,139		$	32,729
Impact of fully tax-equivalent adjustment	194			284
Net interest income on a fully tax-equivalent basis	$	30,333		$	33,013
Average interest-earning assets	$	3,185,401		$	3,042,863
Net interest margin on a fully tax-equivalent basis	3.83		%	4.40		%

Key Metrics

	As of and for the three months ended March 31,
(Dollars in thousands, except per share data)	2024			2023
Book value per common share	$	22.73		$	21.43
Tangible book value per common share 5	$	22.48		$	21.17
Efficiency ratio 1 5	79.5		%	61.4		%
Overhead ratio 2 3 5	3.4		%	3.4		%
Net loan charge-offs to total loans 4	0.2		%	0.3		%
Allowance for credit losses to total loans 6	1.0		%	1.5		%
Nonperforming loans	$	7,546		$	13,085
Nonperforming loans to total loans	0.3		%	0.6		%
Equity to assets	8.2		%	7.6		%
Community Bank Leverage Ratio	10.1		%	10.0		%

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 Excludes loans held-for-sale

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Tangible book value (“TBV”) per common share was $22.48 and $21.17 as of March 31, 2024 and March 31, 2023, 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 March 31,
(Dollars in thousands, except per share data)	2024		2023
Goodwill	$	2,838	$	2,838
Intangibles	330		420
Total intangibles	$	3,168	$	3,258
Total equity attributable to parent	$	291,850	$	271,131
Less: Total intangibles	(3,168)		(3,258)
Tangible common equity	$	288,682	$	267,873
Tangible common equity	$	288,682	$	267,873
Common shares outstanding (000s)	12,841		12,653
Tangible book value per common share	$	22.48	$	21.17

Net Interest Income

Net interest income is the amount by which interest income on earning assets exceeds interest expense incurred on interest-bearing liabilities. Interest-earning assets include loans, investment securities and certificates of deposit in banks. Interest-bearing liabilities include interest-bearing deposits and borrowed funds such as sweep accounts, repurchase agreements, subordinated debt and the senior term loan. Net interest income, which is the primary source of revenue for the Bank, is also impacted by changes in market interest rates and the mix of interest-earning assets and interest-bearing liabilities.

Net interest margin is calculated by dividing net interest income by average interest-earning assets and measures the net revenue stream generated by the Bank’s balance sheet. Net interest spread is calculated by taking the difference between interest earned on earning assets and interest paid on interest-bearing liabilities in an effort to maximize net interest income, while maintaining an appropriate level of interest rate risk.

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

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Net interest margin on a tax-equivalent basis was 3.83% for the three months ended March 31, 2024 compared to 4.40% for the three months ended March 31, 2023. The decrease in net interest margin on a tax-equivalent basis primarily reflects higher funding costs and a shift in the mix of earnings assets, partially offset by investment yields. Tax-equivalent net interest spread was 2.12% for the three months ended March 31, 2024 compared to 3.05% for the three months ended March 31, 2023. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 171 basis points in the three months ended March 31, 2024 compared to 135 basis points in the three months ended March 31, 2023 driven by the increase in interest expense outpacing the increase in average assets.

During the three months ended March 31, 2024, net interest income decreased by $2.6 million, or 7.9%, to $30.1 million from $32.7 million during the three months ended March 31, 2023. Average total earning assets were $3.19 billion in the three months ended March 31, 2024 compared to $3.04 billion in the three months ended March 31, 2023. Total interest income increased by $5.3 million, or 11.8%, to $50.0 million in the three months ended March 31, 2024 from $44.8 million in the three months ended March 31, 2023 driven by an increase in total earning assets, including interest bearing deposits with other banks. Average total loans decreased to $2.28 billion in the three months ended March 31, 2024 from $2.38 billion in the three months ended March 31, 2023, primarily as the result of a $45.2 million decrease in average real estate loans and an $60.2 million decrease in average consumer loans. The yield on total loans increased 50 basis points.

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

Average interest-bearing liabilities increased by $240.0 million for three months ended March 31, 2024 from three months ended March 31, 2023. The increase was primarily the result of average balance increases of $288.5 million in certificates of deposit and $199.5 million in money market checking deposits, partially offset by a decrease of $241.4 million in NOW accounts.

Average interest-bearing deposits were $1.81 billion for the three months ended March 31, 2024 and $1.49 billion for the three months ended March 31, 2023. Total interest expense increased by $7.9 million, caused primarily by a $8.8 million increase in deposit interest. The result was a 127 basis point increase in the cost of interest-bearing liabilities, primarily driven by increases in interest rates.

Provision for Credit Losses

The provision for credit losses, which is a product of management’s analysis, is recorded in response to inherent losses in the loan portfolio. Credit loss provisions were $2.0 million for the three months ended March 31, 2024 and $4.6 million for the three months ended March 31, 2023, respectively. The decrease in credit loss provision is the result of lower calculated loss rates and lower portfolio balances across most of the pooled loan segments. The Bank did see an increase in loss rates in the other construction loan segment, which had an amortized cost basis of $128.9 million at March 31, 2024.

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

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

Noninterest Income

Payment card and service charge income, consulting compliance income, equity method investment income or loss and gains on sale of loans generally account for the majority of our noninterest income. From time to time, we also recognize gains or losses on acquisition and divestiture activity, sales of assets or our investment portfolio.

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Noninterest income for the three months ended March 31, 2024 and 2023 totaled $7.8 million and $3.1 million, respectively. The increase in noninterest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily the result of an increase of $2.2 million in gain on sale of available-for-sale investment securities, an increase of $1.2 million in payment card and service charge income and an increase of $0.6 million in other operating income. Loss on sale of loans decreased $0.4 million, as a result of losses on the sale of subprime automobile loans during the three months ended March 31, 2023, with no comparable losses in the current quarter.

Noninterest Expense

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Noninterest expense was $30.2 million and $28.3 million in the three months ended March 31, 2024 and 2023, respectively. Approximately 55% and 59% of noninterest expense for the three months ended March 31, 2024 and 2023, respectively, was

50

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

The increase of noninterest expense relative to the three months ended March 31 2023 primarily reflects an increase of professional fees of $2.8 million attributable to actions taken in response to the market events in March 2023 to further enhance risk management and compliance-related infrastructure.

Return on Assets and Equity

Assets

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Our return on average assets was 0.5% for the three months ended March 31, 2024, compared to 1.4% for the three months ended March 31, 2023. The decreased return in the three months ended March 31, 2024 is the result of a $6.9 million decrease in earnings, while average total assets increased by $150.9 million, mainly as the result of a $264.8 million increase in average interest-bearing balances with banks, partially offset by a $100.3 million decrease in average total loans.

Equity

Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023

Our return on average stockholders’ equity was 6.2% for the three months ended March 31, 2024, compared to 16.1% for the three months ended March 31, 2023. The decreased return in the three months ended March 31, 2024 is a result of an $6.9 million decrease in earnings, while average equity increased by $7.3 million.

Statement of Financial Condition

Cash and Cash Equivalents

Cash and cash equivalents totaled $640.4 million at March 31, 2024, compared to $398.2 million at December 31, 2023. The increase in cash and cash equivalents reflects seasonal increases due to tax season driven by a BaaS relationship. We believe the current balance of cash and cash equivalents adequately serves our liquidity and performance needs. Total cash and cash equivalents fluctuate daily due to transactions in process and other liquidity demands.

Investment Securities

Investment securities, including equity securities, totaled $390.7 million at March 31, 2024, compared to $386.4 million at December 31, 2023. The following table presents a summary of the investment securities portfolio as of the periods shown. The available-for-sale securities are reported at estimated fair value.

(Dollars in thousands)	March 31, 2024		December 31, 2023
Available-for-sale securities:
United States government agency securities	$	39,388	$	38,408
United States sponsored mortgage-backed securities	88,017		82,382
United States treasury securities	100,563		100,356
Municipal securities	104,491		106,907
Corporate debt securities	8,948		8,942
Other debt securities	7,500		7,500
Other securities	771		780
Investment securities available-for-sale	$	349,678	$	345,275
Equity securities	$	41,037	$	41,086

Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through the Asset and

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Liability Committee (“ALCO”) meetings. The ALCO also monitors net interest income and assists in the management of interest rate risk. 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.

Our equity securities primarily consist of investments in private entities within the Fintech industry and these investments may not be as liquid as our investments in other types of securities.

Loans

Our loan portfolio totaled $2.27 billion as of March 31, 2024 and $2.32 billion as of December 31, 2023. The Bank’s lending is primarily focused in North Central West Virginia, Northern Virginia, North Carolina and South Carolina. The portfolio consists principally of commercial lending, retail lending, which includes single-family residential mortgages, and consumer lending.

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

Loan Concentration

At March 31, 2024 and December 31, 2023, commercial and non-residential real estate loans comprised the largest component of the loan portfolio. A large portion of commercial loans are secured by real estate and they are diverse with respect to geographical location and industry. Loans that are not secured by real estate are typically secured by accounts receivable, mortgages or equipment. While the loan concentration is in commercial loans, the commercial portfolio is comprised of loans to many different borrowers in numerous different industries, generally located in our primary market areas. Additionally, within the commercial portfolio, loans within the healthcare industry, which include loans to physicians, nursing homes and pharmacies, represent 22% of our total loan portfolio as of March 31, 2024.

Allowance for Credit Losses

The ACL was $22.8 million, or 1.01% of loans receivable, at March 31, 2024, compared to $22.1 million, or 1.00% of loans receivable, at December 31, 2023. The $0.7 million increase in the ACL was primarily impacted by an increase in provision needed for individually analyzed loans of $1.5 million. Additionally, over the three months ended March 31, 2024, changes to the loan portfolio balances, qualitative factor adjustments and expected loss forecasts within the expected credit loss calculation resulted in allowance increases of $0.4 million to the other construction segment. These increases have been offset by allowance decreases of $0.5 million to the consumer auto and $0.4 million to the commercial and industrial segments, respectively. All other segments combined experienced an allowance decrease of $0.4 million. Bank management's expectations are that the markets in which it lends will experience economic improvements over the next 12 to 24 months, and most decreases in estimated loss rates have been further buoyed by decreases in loan balances in the three months ended March 31, 2024. This results in marginally lower allocation rates, against slightly lower loan balances, resulting in an overall lower allowance needed for the pooled loan portfolio. However, this has been more than offset by the increase in allowance needed by the individually analyzed loans. The increases to the ACL totaled $0.6 million and combined with net charge offs to date of $1.3 million, resulted in total credit loss provision of $0.7 million over the three months ended March 31, 2024. Net charge-offs for the three months ended March 31, 2024 included $0.6 million related to a SBA loan secured by business assets, $0.5 million related to the subprime consumer automotive segment and $0.4 million related to a commercial client in the energy industry.

Management continually monitors the risk in the loan portfolio through the review of the monthly delinquency reports and the Loan Review Committee. The Loan Review Committee is responsible for the determination of the adequacy of the ACL. This analysis involves both experience of the portfolio to date and the makeup of the overall portfolio. Specific loss estimates are derived for individual loans based on specific criteria such as current delinquent status, related deposit account activity, where applicable and changes in the local and national economy. When appropriate, we also consider public knowledge and verifiable information from the local market to assess risks to specific loans and the loan portfolios as a whole.

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Funding Sources

The Bank considers a number of alternatives including, but not limited to, deposits, short-term borrowings and long-term borrowings when evaluating funding sources. Deposits remain the most significant source of funds, totaling $3.15 billion, or 97.4% of funding sources at March 31, 2024. This same information at December 31, 2023 reflected $2.90 billion in deposits representing 97.1% of funding sources. Borrowings, consisting of subordinated debt, senior term loan and FHLB and other borrowings represented 2.5% of funding sources at March 31, 2024, versus 2.7% at December 31, 2023. Repurchase agreements, which are available to large corporate customers, represented 0.1% of funding sources at March 31, 2024 and 0.2% at December 31, 2023.

At March 31, 2024, noninterest-bearing balances totaled $1.39 billion, compared to $1.20 billion at December 31, 2023, or 44.2% and 41.3%, respectively, of total deposits. Interest-bearing deposits totaled $1.75 billion at March 31, 2024, compared to $1.70 billion at December 31, 2023.

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

(Dollars in thousands)	March 31, 2024		December 31, 2023
Demand deposits of individuals, partnerships and corporations
Noninterest-bearing demand	$	1,391,070	$	1,197,272
NOW	530,745		538,444
Savings and money markets	519,209		571,299
Time deposits, including CDs and IRAs	704,305		594,461
Total deposits	$	3,145,329	$	2,901,476
Time deposits that meet or exceed the FDIC insurance limit	$	2,911	$	3,150

Average interest-bearing deposits were $1.81 billion during the three months ended March 31, 2024, compared to $1.49 billion during the same time period in 2023 and average noninterest-bearing deposits were $1.28 billion during the three months ended March 31, 2024 compared to $1.38 billion during the same time period in 2023.

We utilize a custodial deposit transference structure for certain deposit programs whereby we, acting as custodian of account holder funds, places a portion of such account holder funds that are not needed to support near term settlement at one or more third-party banks insured by the FDIC (each, a program bank). Accounts opened at program banks are established in our name as custodian, for the benefit of our account holders. We remain the issuer of all accounts under the applicable account holder agreements and has sole custodial control and transaction authority over the accounts opened at program banks. We maintain the records of each account holders' deposits maintained at program banks. Program banks undergo robust due diligence prior to becoming a program bank and are also subject to continuous monitoring. These off-balance sheet deposits totaled $1.5 billion at March 31, 2024 and $1.1 billion at December 31, 2023 and represent gaming, banking-as-a-service and digital asset clients.

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

Deposit Concentration

Our four primary Fintech deposit verticals are gaming, payments, banking-as-a-service and digital assets, with deposits totaling $257.6 million, $417.9 million, $357.6 million and $339.1 million as of March 31, 2024, respectively, compared to $354.1 million, $449.8 million, $251.6 million and $188.4 million as of December 31, 2023, respectively. Of the gaming deposits, $199.3 million is with our three largest gaming clients at March 31, 2024. Of the digital asset deposits, $309.5 million is with our largest digital asset client at March 31, 2024.

Capital Resources

During the three months ended March 31, 2024, stockholders’ equity increased $2.5 million to $291.8 million. This increase consists of net income of $4.5 million, common stock options exercised of $1.2 million and stock based compensation of $0.9

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million, offset by cash dividends paid of $2.2 million and other comprehensive loss of $2.0 million.

The growth in assets of $233.5 million in the three months ended March 31, 2024 outpaced the growth in stockholders' equity, and the equity to assets ratio decreased from 8.7% at December 31, 2023 to 8.2% at March 31, 2024. We paid dividends to common shareholders of $2.2 million and $2.1 million in the three months ended March 31, 2024 and 2023, respectively, compared to earnings of $4.5 million and $11.3 million in the three months ended March 31, 2024 and 2023, respectively, resulting in the dividend payout ratio increasing to 48.7% in the three months ended March 31, 2024 from 18.9% in the three months ended March 31, 2023.

We and the Bank are also subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material effect on our consolidated financial statements. The Bank is required to comply with applicable capital adequacy standards established by the federal banking agencies. West Virginia state chartered banks, such as the Bank, are subject to similar capital requirements adopted by the West Virginia Division of Financial Institutions. Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets companies hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, 100% or 150% (highest risk assets) is assigned to each asset on the balance sheet. Detailed information concerning our risk-based capital ratios can be found in Supervision and Regulation in Item 1, Business and Note 16 – Regulatory Capital Requirements to the consolidated financial statements included in Item 8, Financial Statements and Supplementary Data, of the 2023 Form 10-K.

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

The Bank elected to begin using the CBLR for the first quarter of 2021 and intends to utilize this measure for the foreseeable future. Eligibility criteria to utilize the CBLR includes the following:

●    Total assets of less than $10 billion;

●    Total trading assets plus liabilities of 5% or less of consolidated assets;

●    Total off-balance sheet exposures of 25% or less of consolidated assets;

●    Cannot be an advanced approaches banking organization; and

●    Leverage ratio greater than 9%.

The Bank's CBLR at March 31, 2024 was 10.1%, which is above the well-capitalized standard of 9%. Management believes that capital continues to provide a strong base for profitable growth.

Liquidity

Maintenance of a sufficient level of liquidity is a primary objective of the ALCO. Liquidity, as defined by the ALCO, is the ability to meet anticipated operating cash needs, loan demand and deposit withdrawals without incurring a sustained negative impact on net interest income. It is our policy to optimize the funding of the balance sheet, continually balancing the stability and cost factors of various funding sources. We believe liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and non-traditional funding sources and the portions of the investment and loan portfolios that mature within one year. Our liquid assets totaled $737.3 million and $711.8 million as of March 31, 2024 and 2023, respectively. These sources of funds should enable us to meet cash obligations as they come due.

The main source of liquidity for the Bank comes through deposit growth. Liquidity is also provided from cash generated from investment maturities, principal payments from loans and income from loans and investment securities. For the three months ended March 31, 2024, cash used in operating activities totaled $25.3 million, while cash from investing and financing activities totaled $25.8 million and $241.7 million, respectively. Significant changes in cash flows during the quarter include inflows from the net increase in deposits of $243.9 million, net change in loans of $49.3 million and sales of available-for-sale investment securities of $11.7 million, partially offset by an outflow of $34.8 million to purchase available-for-sale investment securities.

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When appropriate, the Bank has the ability to take advantage of external sources of funds such as advances from the FHLB, national market certificate of deposit issuance programs, the Federal Reserve discount window, brokered deposits and Certificate of Deposit Account Registry Services. 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 3.9% for March 2024 and 3.6% for March 2023.

Commitments and Contingent Liabilities

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

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

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

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

Concentration of Credit Risk

We grant a majority of our commercial, financial, agricultural, real estate and installment loans to customers throughout the North Central West Virginia and Northern Virginia markets. Collateral for loans is primarily residential and commercial real estate, personal property and business equipment. We evaluate the credit worthiness of each of our customers on a case-by-case basis and the amount of collateral it obtains is based upon management’s credit evaluation.

Contingent Liability

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

Off-Balance Sheet Commitments

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

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

Critical Accounting Policies and Estimates

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

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 2023 Form 10-K.

Recent Accounting Pronouncements and Developments

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

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The objective of the asset/liability management function is to structure the balance sheet in ways that maintain consistent growth in net interest income and minimize exposure to market risks within our policy guidelines. This objective is accomplished through management of balance sheet liquidity and interest rate risk exposure based on changes in economic conditions, interest rate levels and customer preferences. We manage balance sheet liquidity through the investment portfolio, sales of commercial and residential real estate loans and through the utilization of diversified funding sources, including retail deposits, a variety of wholesale funding sources and borrowings through the FHLB. Interest rate risk is managed through the use of interest rate caps, commercial loan swap transactions and interest rate lock commitments on mortgage loans held-for-sale, as well as the structuring of loan terms that provide cash flows to be consistently re-invested along the rate cycle.

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

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

We believe that accepting some level of interest rate risk is necessary in order to achieve realistic profit goals. Management and the Board of Directors have chosen an interest rate risk profile that is consistent with our strategic business plan. While management carefully monitors the exposure to changes in interest rates and takes actions as warranted to decrease any adverse impact, there can be no assurance about the actual effect of interest rate changes on net interest income.

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

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

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

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

Estimated Changes in Net Interest Income
Change in interest rates	+400 bp		+300 bp		+200 bp		+100 bp		-100 bp		-200 bp		-300 bp		-400 bp
Policy Limit	(25.0)	%	(20.0)	%	(15.0)	%	(10.0)	%	(10.0)	%	(15.0)	%	(20.0)	%	(25.0)	%
March 31, 2024	25.7	%	19.3	%	12.9	%	6.6	%	(7.6)	%	(15.1)	%	(22.8)	%	(30.5)	%
March 31, 2023	37.0	%	26.9	%	16.7	%	7.0	%	(12.5)	%	(23.2)	%	(34.2)	%	(38.4)	%

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

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

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

The paragraph above discusses net interest income at risk in various shock scenarios; scenarios in which interest rates immediately move by a large margin. Our net interest income profile exhibits declining net interest income when rates fall gradually, but the impact is not as extreme as is suggested in a shock scenario. A gradual interest rate decline scenario generally

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smooths the impact of falling rates over a 12-month and 24-month period. Our expectation is that over any given one to two year period, interest rates will likely move at a gradual pace.

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

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

Estimated Changes in EVE
Change in interest rates	+400 bp		+300 bp		+200 bp		+100 bp		-100 bp		-200 bp		-300 bp		-400 bp
Policy Limit	(35.0)	%	(25.0)	%	(17.0)	%	(12.0)	%	(12.0)	%	(17.0)	%	(25.0)	%	(35.0)	%
March 31, 2024	13.3	%	9.9	%	6.5	%	3.0	%	(6.9)	%	(13.3)	%	(21.1)	%	(29.0)	%
March 31, 2023	3.2	%	2.0	%	0.3	%	0.6	%	(2.5)	%	(5.5)	%	(9.9)	%	(14.1)	%

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

Credit Risk

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

Item 4 – Controls and Procedures

As of March 31, 2024, we carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the results of this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2024.

During the three months ended March 31, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

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

Item 1A – Risk Factors

Our operations are subject to many risks that could adversely affect our future financial condition and performance, including the risk factors that are described in the 2023 Form 10-K. There have been no material changes in our risk factors from those disclosed.

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

None.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosures

Not applicable.

Item 5 – Other Information

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

Item 6 – Exhibits

Exhibit Number	Description	Exhibit Location
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

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

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