Attached files
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| 8-K - 8-K - MVB FINANCIAL CORP | mvbf-20200707.htm |
Exhibit 99.1
MVB Financial Corp. and Subsidiaries-
Condensed Consolidated Balance Sheets
(Unaudited) (Dollars in thousands)
| Adjustments | ||||||||||||||||||||||||||||||||||||||
| As of March 31, 2020 | As Reported | Disposal | Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 88,874 | $ | (3,796) | (a) | $ | — | $ | 85,078 | |||||||||||||||||||||||||||||
| Certificates of deposit with other banks | 12,549 | — | — | 12,549 | ||||||||||||||||||||||||||||||||||
| Investment securities available-for-sale, at fair value | 223,101 | — | — | 223,101 | ||||||||||||||||||||||||||||||||||
| Equity securities | 19,026 | — | 30,026 | (h) | 49,052 | |||||||||||||||||||||||||||||||||
| Loans held for sale | 186,128 | (186,128) | (b) | — | — | |||||||||||||||||||||||||||||||||
| Loans: | 1,396,578 | (101,078) | (c) | 30,000 | (i) | 1,325,500 | ||||||||||||||||||||||||||||||||
| Less: Allowance for loan losses | (11,161) | 434 | (c) | — | (10,727) | |||||||||||||||||||||||||||||||||
| Net Loans | 1,385,417 | (100,644) | 30,000 | 1,314,773 | ||||||||||||||||||||||||||||||||||
| Premises and equipment, net | 22,329 | (815) | (a) | — | 21,514 | |||||||||||||||||||||||||||||||||
| Assets of branches held for sale | 39,137 | — | — | 39,137 | ||||||||||||||||||||||||||||||||||
| Goodwill | 19,630 | (16,882) | (d) | — | 2,748 | |||||||||||||||||||||||||||||||||
| Other assets | 103,489 | (12,106) | (a) | 349 | (j) | 91,732 | ||||||||||||||||||||||||||||||||
| Total assets | $ | 2,099,680 | $ | (320,371) | $ | 60,375 | $ | 1,839,684 | ||||||||||||||||||||||||||||||
| Noninterest bearing deposits | $ | 387,536 | $ | — | $ | — | $ | 387,536 | ||||||||||||||||||||||||||||||
| Interest bearing deposits | 1,210,703 | (278,984) | (e) | — | 931,719 | |||||||||||||||||||||||||||||||||
| Deposits of branches held for sale | 187,807 | — | — | 187,807 | ||||||||||||||||||||||||||||||||||
| Borrowed funds | 30,815 | — | 30,000 | (i) | 60,815 | |||||||||||||||||||||||||||||||||
| Other liabilities | 71,666 | (11,012) | (g) | — | 60,654 | |||||||||||||||||||||||||||||||||
| Total stockholders’ equity | 211,153 | 1,122 | (1,122) | 211,153 | ||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,099,680 | $ | (288,874) | $ | 28,878 | $ | 1,839,684 | ||||||||||||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||||
| As of December 31, 2019 | As Reported | Disposal | Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 28,002 | $ | (4,973) | (a) | $ | — | $ | 23,029 | |||||||||||||||||||||||||||||
| Certificates of deposit with other banks | 12,549 | — | — | 12,549 | ||||||||||||||||||||||||||||||||||
| Investment securities available-for-sale, at fair value | 235,821 | — | — | 235,821 | ||||||||||||||||||||||||||||||||||
| Equity securities | 18,514 | — | 37,366 | (h) | 55,880 | |||||||||||||||||||||||||||||||||
| Loans held for sale | 109,788 | (109,788) | (b) | — | — | |||||||||||||||||||||||||||||||||
| Loans: | 1,374,541 | (97,762) | (c) | 30,000 | (i) | 1,306,779 | ||||||||||||||||||||||||||||||||
| Less: Allowance for loan losses | (11,775) | 428 | (c) | — | (11,347) | |||||||||||||||||||||||||||||||||
| Net Loans | 1,362,766 | (97,334) | 30,000 | 1,295,432 | ||||||||||||||||||||||||||||||||||
| Premises and equipment, net | 21,974 | (845) | (a) | — | 21,129 | |||||||||||||||||||||||||||||||||
| Assets of branches held for sale | 46,554 | — | — | 46,554 | ||||||||||||||||||||||||||||||||||
| Goodwill | 19,630 | (16,882) | (d) | — | 2,748 | |||||||||||||||||||||||||||||||||
| Other assets | 88,516 | (8,797) | (a) | — | 79,719 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 1,944,114 | $ | (238,619) | $ | 67,366 | $ | 1,772,861 | ||||||||||||||||||||||||||||||
| Noninterest bearing deposits | $ | 278,547 | $ | — | $ | — | $ | 278,547 | ||||||||||||||||||||||||||||||
| Interest bearing deposits | 986,495 | (39,952) | (e) | — | 946,543 | |||||||||||||||||||||||||||||||||
| Deposits of branches held for sale | 188,270 | — | — | 188,270 | ||||||||||||||||||||||||||||||||||
| Borrowed funds | 222,885 | (148,862) | (f) | 30,000 | (i) | 104,023 | ||||||||||||||||||||||||||||||||
| Other liabilities | 55,981 | (12,852) | (g) | 1,681 | (j) | 44,810 | ||||||||||||||||||||||||||||||||
| Total stockholders’ equity | 211,936 | (5,766) | 4,498 | 210,668 | ||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 1,944,114 | $ | (207,432) | $ | 36,179 | $ | 1,772,861 | ||||||||||||||||||||||||||||||
MVB Financial Corp. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited) (Dollars in thousands)
| Adjustments | ||||||||||||||||||||||||||||||||||||||
| For the three months ended March 31, 2020 | As Reported | Disposal | Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||||
| Interest income | $ | 20,699 | $ | (1,925) | (k) | $ | 103 | (l) | $ | 18,877 | ||||||||||||||||||||||||||||
| Interest expense | 4,528 | (656) | (k) | — | 3,872 | |||||||||||||||||||||||||||||||||
| Net interest income | 16,171 | (1,269) | 103 | 15,005 | ||||||||||||||||||||||||||||||||||
| Provision for loan losses | 1,138 | (6) | (k) | — | 1,132 | |||||||||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 15,033 | (1,263) | 103 | 13,873 | ||||||||||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||||||||
| Mortgage fee income | 11,219 | (11,109) | (k) | — | 110 | |||||||||||||||||||||||||||||||||
| Other income | (369) | 3,761 | (k) | (1,574) | (m) | 1,818 | ||||||||||||||||||||||||||||||||
| Total noninterest income | 10,850 | (7,348) | (1,574) | 1,928 | ||||||||||||||||||||||||||||||||||
| Noninterest expenses: | ||||||||||||||||||||||||||||||||||||||
| Salary and employee benefits | 16,182 | (7,884) | (k) | — | 8,298 | |||||||||||||||||||||||||||||||||
| Other expenses | 8,474 | (2,198) | (k) | — | 6,276 | |||||||||||||||||||||||||||||||||
| Total noninterest expense | 24,656 | (10,082) | — | 14,574 | ||||||||||||||||||||||||||||||||||
| Income before income taxes | 1,227 | 1,471 | (1,471) | 1,227 | ||||||||||||||||||||||||||||||||||
| Income tax expense | 179 | 349 | (k) | (349) | (n) | 179 | ||||||||||||||||||||||||||||||||
| Net income | $ | 1,048 | $ | 1,122 | $ | (1,122) | $ | 1,048 | ||||||||||||||||||||||||||||||
| Preferred dividends | $ | 114 | $ | — | $ | — | $ | 114 | ||||||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 934 | $ | 1,122 | $ | (1,122) | $ | 934 | ||||||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.08 | $ | 0.09 | $ | (0.09) | $ | 0.08 | ||||||||||||||||||||||||||||||
| Earnings per share - diluted | $ | 0.08 | $ | 0.09 | $ | (0.09) | $ | 0.08 | ||||||||||||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||||
| For the year ended December 31, 2019 | As Reported | Disposal | Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||||
| Interest income | $ | 82,361 | $ | (6,474) | (k) | $ | 413 | (l) | $ | 76,300 | ||||||||||||||||||||||||||||
| Interest expense | 22,961 | (3,494) | (k) | — | 19,467 | |||||||||||||||||||||||||||||||||
| Net interest income | 59,400 | (2,980) | 413 | 56,833 | ||||||||||||||||||||||||||||||||||
| Provision for loan losses | 1,789 | (167) | (k) | — | 1,622 | |||||||||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 57,611 | (2,813) | 413 | 55,211 | ||||||||||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||||||||
| Mortgage fee income | 41,045 | (40,387) | (k) | — | 658 | |||||||||||||||||||||||||||||||||
| Other income | 23,559 | (501) | (k) | 5,766 | (m) | 28,824 | ||||||||||||||||||||||||||||||||
| Total noninterest income | 64,604 | (40,888) | 5,766 | 29,482 | ||||||||||||||||||||||||||||||||||
| Noninterest expenses: | ||||||||||||||||||||||||||||||||||||||
| Salary and employee benefits | 56,175 | (28,432) | (k) | — | 27,743 | |||||||||||||||||||||||||||||||||
| Other expenses | 31,026 | (7,348) | (k) | — | 23,678 | |||||||||||||||||||||||||||||||||
| Total noninterest expenses | 87,201 | (35,780) | — | 51,421 | ||||||||||||||||||||||||||||||||||
| Income from continuing operations before income taxes | 35,014 | (7,921) | 6,179 | 33,272 | ||||||||||||||||||||||||||||||||||
| Income tax expense - continuing operations | 8,450 | (2,155) | (k) | 1,681 | (n) | 7,976 | ||||||||||||||||||||||||||||||||
| Net income from continuing operations | $ | 26,564 | $ | (5,766) | $ | 4,498 | $ | 25,296 | ||||||||||||||||||||||||||||||
| Income from discontinued operations before income taxes | 575 | — | — | 575 | ||||||||||||||||||||||||||||||||||
| Income tax expense - discontinued operations | 148 | — | — | 148 | ||||||||||||||||||||||||||||||||||
| Net income from discontinued operations | $ | 427 | $ | — | $ | — | $ | 427 | ||||||||||||||||||||||||||||||
| Net income | $ | 26,991 | $ | (5,766) | $ | 4,498 | $ | 25,723 | ||||||||||||||||||||||||||||||
| Preferred dividends | $ | 479 | $ | — | $ | — | $ | 479 | ||||||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 26,512 | $ | (5,766) | $ | 4,498 | $ | 25,244 | ||||||||||||||||||||||||||||||
| Earnings per share from continuing operations - basic | $ | 2.22 | $ | (0.49) | $ | 0.39 | $ | 2.12 | ||||||||||||||||||||||||||||||
| Earnings per share from discontinued operations - basic | $ | 0.04 | $ | — | $ | — | $ | 0.04 | ||||||||||||||||||||||||||||||
| Earnings per share - basic | $ | 2.26 | $ | (0.49) | $ | 0.39 | $ | 2.16 | ||||||||||||||||||||||||||||||
| Earnings per share from continuing operations - diluted | $ | 2.16 | $ | (0.47) | $ | 0.38 | $ | 2.07 | ||||||||||||||||||||||||||||||
| Earnings per share from discontinued operations - diluted | $ | 0.04 | $ | — | $ | — | $ | 0.04 | ||||||||||||||||||||||||||||||
| Earnings per share - diluted | $ | 2.20 | $ | (0.47) | $ | 0.38 | $ | 2.11 | ||||||||||||||||||||||||||||||
| Adjustments | ||||||||||||||||||||||||||||||||||||||
| For the three months ended March 31, 2019 | As Reported | Disposal | Acquisition | Pro Forma | ||||||||||||||||||||||||||||||||||
| Interest income | 19,623 | $ | (1,292) | (k) | $ | 103 | (l) | $ | 18,434 | |||||||||||||||||||||||||||||
| Interest expense | 5,651 | (611) | (k) | — | 5,040 | |||||||||||||||||||||||||||||||||
| Net interest income | 13,972 | (681) | 103 | 13,394 | ||||||||||||||||||||||||||||||||||
| Provision for loan losses | 300 | (53) | (k) | — | 247 | |||||||||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 13,672 | (628) | 103 | 13,147 | ||||||||||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 6,670 | (6,561) | (k) | — | 109 | |||||||||||||||||||||||||||||||||
| Other income | 2,095 | (228) | (k) | 515 | (m) | 2,382 | ||||||||||||||||||||||||||||||||
| Total noninterest income | 8,765 | (6,789) | 515 | 2,491 | ||||||||||||||||||||||||||||||||||
| Noninterest expenses: | ||||||||||||||||||||||||||||||||||||||
| Salary and employee benefits | 11,734 | (5,159) | (k) | — | 6,575 | |||||||||||||||||||||||||||||||||
| Other expenses | 6,714 | (1,777) | (k) | — | 4,937 | |||||||||||||||||||||||||||||||||
| Total noninterest expense | 18,448 | (6,936) | — | 11,512 | ||||||||||||||||||||||||||||||||||
| Income before income taxes | 3,989 | (481) | 618 | 4,126 | ||||||||||||||||||||||||||||||||||
| Income tax expense | 797 | (146) | (k) | 187 | (n) | 838 | ||||||||||||||||||||||||||||||||
| Net income | $ | 3,192 | $ | (335) | $ | 431 | $ | 3,288 | ||||||||||||||||||||||||||||||
| Preferred dividends | $ | 121 | $ | — | $ | — | $ | 121 | ||||||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 3,071 | $ | (335) | $ | 431 | $ | 3,167 | ||||||||||||||||||||||||||||||
| Earnings per share - basic | $ | 0.26 | $ | (0.03) | $ | 0.04 | $ | 0.27 | ||||||||||||||||||||||||||||||
| Earnings per share - diluted | $ | 0.26 | $ | (0.03) | $ | 0.03 | $ | 0.26 | ||||||||||||||||||||||||||||||
MVB Financial Corp. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
Note 1 – Basis of Presentation
The accompanying unaudited pro forma condensed consolidated financial statements of MVB Financial Corp. (“MVB”), which include MVB Bank, Inc., and the wholly-owned subsidiaries of the Bank, Potomac Mortgage Group, Inc., a Virginia corporation (dba MVB Mortgage) (“PMG”), MVB Insurance, LLC, MVB Community Development Corporation, ProCo Global, Inc. (dba Chartwell Compliance), and Paladin Fraud, LLC, were derived from the Company’s historical consolidated financial statements. The unaudited pro forma balance sheets as of March 31, 2020 and December 31, 2019 and the unaudited pro forma income statements for the three-month period ended March 31, 2020, the twelve-month period ended December 31, 2019, and the three-month period ended March 31, 2019 were adjusted to reflect the completion of the combination with Intercoastal Mortgage Company, a Virginia corporation (“Intercoastal”), providing for the combination of the mortgage origination services businesses of PMG and Intercoastal. This transaction closed on July 1, 2020 and is anticipated to result in a gain upon the disposition of the assets. Management is in the process of finalizing the fair value accounting on this transaction, but the Company expects to recognize a gain in the range of approximately $1.0 million to $3.0 million. This estimated gain is not included in the Pro Forma Condensed Consolidated Financial Statements.
Pursuant to the terms of the Agreement, on the closing date, Intercoastal converted into a Virginia limited liability company and PMG contributed substantially all of its assets and liabilities associated with its mortgage operations to Intercoastal as a capital contribution, in exchange for common units of Intercoastal, representing 47% of the common interest of Intercoastal, as well as $7.5 million in preferred units (the “Transaction”). The Company will recognize its ownership as an equity method investment, initially recorded at fair value. The completion of the Transaction was subject to certain regulatory approvals, conditions precedent and normal customary closing conditions. In the Agreement, the Bank, PMG, and Intercoastal made customary representations, warranties, and covenants, including covenants to enter into ancillary agreements related to the Transaction and the operation of the business following the completion of the Transaction.
The unaudited pro forma condensed consolidated financial statements are furnished for informational purposes only and do not purport to reflect the Company’s financial position and results of operations had the dispositions and the 47% equity method investment of ICM occurred on the dates as indicated above. Further, these financial statements are not necessarily indicative of the Company’s future financial position and future results of operations and should be read in conjunction with the historical financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2019.
Note 2 – Pro Forma Adjustments
The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial information:
| (a) | Represents the portion of PMG's assets classified as disposed as they were contributed to ICM as a capital contribution | ||||
| (b) | MVB will retain the loans held for sale ("LHFS") as of the closing date. Those loans will be sold by MVB over the course of the next 90 days. After the closing, LHFS will be originated and reported on ICM's balance sheet. | ||||
| (c) | Represents the construction loans classified as held for investment to be contributed to ICM, and the related allowance for loan losses | ||||
| (d) | Represents the portion of goodwill related to PMG that will be eliminated as a part of this transaction | ||||
| (e) | Borrowings of PMG were intercompany fundings and therefore eliminated in consolidation; however, the intercompany borrowings were funded through bank borrowings and through brokered deposits. As it is probable that reliance on these funding sources to support liquidity and mortgage operations will be greatly reduced as a result of this transaction, an adjustment was made to reduce the borrowings and brokered deposits accordingly. | ||||
| (f) | Borrowed funds were reduced by the amount outstanding related to PMG | ||||
| (g) | Represents the portion of PMG's liabilities classified as disposed in order to be assumed by ICM | ||||
| (h) | Represents the MVB's equity method investment, initially recorded at fair value, including MVB's share of the income generated by ICM | ||||
| (i) | Represents the $30 million warehouse line of credit provided to ICM by MVB and related borrowings to fund the line of credit | ||||
| (j) | Represents the tax benefit or (liability) related to MVB's share of the income generated by ICM | ||||
| (k) | Represents PMG's income and expenses, including the adjustment of eliminations included in MVB's consolidated financial statements relating to PMG | ||||
| (l) | Represents the interest income from the dividends of MVB's ownership of preferred stock of ICM in the amount of $7.5 million at a 5.5% interest rate | ||||
| (m) | Represents MVB's share of the income generated by ICM | ||||
| (n) | Tax calculated using PMG's effective tax rate | ||||