MVB FINANCIAL CORP

Previous wording

We continue to adapt our business model due to challenging market conditions, primarily due to the current high interest rate environment, 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 June 30, 2024, as the Federal Reserve raised its key interest rate to a range of 5.25% to 5.50% in July 2023. Lower loan balances are the result of slower market demand, the impact of loan amortization and payoffs and slower loan growth based on overall market conditions and portfolio management. We initiated the process of winding down our digital asset program account relationships, while maintaining operating accounts, during the second quarter of 2024, a decision that was prompted by changing market conditions and profitability challenges that contributed to an unfavorable risk/reward dynamic. We remain committed to the gaming, payments and banking-as-a-service industries. 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 wording

We continue to adapt our business model due to challenging market conditions, primarily due to the current high interest rate environment, 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 September 30, 2024, although the Federal Reserve did reduce its key interest rate to a range of 4.75% to 5.00% in September 2024. Lower loan balances are the result of slower market demand, the impact of loan amortization and payoffs and slower loan growth based on overall market conditions and portfolio management. We initiated the process of winding down our digital asset program account relationships, while maintaining operating accounts, during the second quarter of 2024. This decision was prompted by changing market conditions and profitability challenges that contributed to an unfavorable risk/reward dynamic. We remain committed to the gaming, payments and banking-as-a-service industries. 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.

Previous wording

There continues to be a focus on liquidity after the bank failures that occurred during the first half of 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 effect 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 trade-off. 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 June 30, 2024 and December 31, 2023, our liquid assets totaled $592.5 million and $504.3 million, respectively, which we believe would enable us to meet our cash obligations as they come due.

Current wording

There continues to be a focus on liquidity after the bank failures that occurred during the first half of 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 effect 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 trade-off. 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 September 30, 2024 and December 31, 2023, our liquid assets totaled $645.0 million and $504.3 million, respectively, which we believe would enable us to meet our cash obligations as they come due.

Previous wording

During the three months ended June 30, 2024, net interest income decreased $2.0 million, noninterest income increased $0.7 million and noninterest expenses decreased by $1.4 million compared to the three months ended June 30, 2023. Our tax- equivalent yield on earning assets in the three months ended June 30, 2024 was 6.26% compared to 6.02% in the three months ended June 30, 2023. Loans receivable decreased by $60.5 million to $2.21 billion during the three months ended June 30, 2024. Our overall cost of interest-bearing liabilities was 4.15% in the three months ended June 30, 2024 compared to 3.29% in the three months ended June 30, 2023. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.75% in the three months ended June 30, 2024, compared to 3.80% in the three months ended June 30, 2023.

Current wording

During the three months ended September 30, 2024, net interest income decreased $3.3 million, noninterest income increased $0.9 million and noninterest expenses decreased by $1.2 million compared to the three months ended September 30, 2023. Our tax-equivalent yield on earning assets in the three months ended September 30, 2024 was 6.32% compared to 6.29% in the three months ended September 30, 2023. Loans receivable decreased by $35.5 million to $2.17 billion during the three months ended September 30, 2024. Our overall cost of interest-bearing liabilities was 4.04% in the three months ended September 30, 2024 compared to 3.58% in the three months ended September 30, 2023. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.61% in the three months ended September 30, 2024, compared to 3.90% in the three months ended September 30, 2023.

Previous wording

Our net income for the three months ended June 30, 2024 was $4.1 million compared to $8.1 million in the three months ended June 30, 2023. Earnings for the three months ended June 30, 2024 equated to a return on average assets of 0.5% and a return on average equity of 5.7%, compared to the three months ended June 30, 2023 results of 1.0% and 12.0%, respectively. Basic and diluted earnings per share were $0.32 and $0.31, respectively, for the three months ended June 30, 2024, compared to $0.64 and

Current wording

Our net income for the three months ended September 30, 2024 was $2.1 million compared to $3.9 million in the three months ended September 30, 2023. Earnings for the three months ended September 30, 2024 equated to a return on average assets of 0.3% and a return on average equity of 2.8%, compared to the three months ended September 30, 2023 results of 0.5% and 5.8%, respectively. Basic and diluted earnings per share were $0.16 for the three months ended September 30, 2024, compared to $0.30 and $0.29, respectively, for the three months ended September 30, 2023.

Previous wording

During the six months ended June 30, 2024, net interest income decreased $4.6 million, noninterest income increased $5.5 million and noninterest expenses increased by $0.5 million compared to the six months ended June 30, 2023. Our yield on tax-equivalent earning assets in the six months ended June 30, 2024 was 6.30% compared to 6.01% in the six months ended June 30, 2023. Loans receivable decreased by $110.8 million to $2.21 billion during the six months ended June 30, 2024. Our overall cost of interest-bearing liabilities was 4.19% in the six months ended June 30, 2024 compared to 3.14% in the six months ended June 30, 2023. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.79% in the six months ended June 30, 2024, compared to 4.09% in the six months ended June 30, 2023.

Current wording

During the nine months ended September 30, 2024, net interest income decreased $7.9 million, noninterest income increased $6.4 million and noninterest expenses decreased by $0.7 million compared to the nine months ended September 30, 2023. Our yield on tax-equivalent earning assets in the nine months ended September 30, 2024 was 6.31% compared to 6.10% in the nine months ended September 30, 2023. Loans receivable decreased by $146.3 million to $2.17 billion during the nine months ended September 30, 2024. Our overall cost of interest-bearing liabilities was 4.14% in the nine months ended September 30, 2024 compared to 3.30% in the nine months ended September 30, 2023. This cost of interest-bearing liabilities, combined with the earning asset yield, resulted in a tax-equivalent net interest margin of 3.73% in the nine months ended September 30, 2024, compared to 4.03% in the nine months ended September 30, 2023.

Previous wording

Our net income for the six months ended June 30, 2024 was $8.6 million compared to $19.5 million in the six months ended June 30, 2023, largely the result of an $11.8 million pre-tax gain related to the sale of the Bank’s wholly-owned subsidiary, Chartwell. Earnings for the six months ended June 30, 2024 equated to a return on average assets of 0.5% and a return on average equity of 5.93%, compared to the six months ended June 30, 2023 results of 1.2% and 14.1%, respectively. Basic and diluted earnings per share were $0.67 and $0.66, respectively, for the six months ended June 30, 2024, compared to $1.54 and $1.50, respectively, for the six months ended June 30, 2023.

Current wording

Our net income for the nine months ended September 30, 2024 was $10.7 million compared to $23.3 million in the nine months ended September 30, 2023, largely the result of an $11.8 million pre-tax gain related to the sale of the Bank’s wholly-owned subsidiary, Chartwell. Earnings for the nine months ended September 30, 2024 equated to a return on average assets of 0.4% and a return on average equity of 4.9%, compared to the nine months ended September 30, 2023 results of 0.9% and 11.4%, respectively. Basic and diluted earnings per share were $0.83 and $0.81, respectively, for the nine months ended September 30, 2024, compared to $1.84 and $1.79, respectively, for the nine months ended September 30, 2023.

Previous wording

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 six months ended June 30, 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.

Current wording

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 nine months ended September 30, 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.

Previous wording

4 Non-U.S. GAAP metric

Current wording

1 Non-U.S. GAAP metric

Previous wording

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

Current wording

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

Previous wording

2 Annualized for the quarterly periods presented

Current wording

3 Annualized for the quarterly periods presented

Previous wording

3 Noninterest expense as a percentage of average assets

Current wording

4 Noninterest expense as a percentage of average assets

Previous wording

Tangible book value (“TBV”) per common share was $22.70 and $21.31 as of June 30, 2024 and June 30, 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.

Current wording

Tangible book value (“TBV”) per common share was $23.20 and $21.08 as of September 30, 2024 and September 30, 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.

Previous wording

In 2023, the Federal Reserve raised its key interest rate to a range of 5.25% to 5.5% as of December 31, 2023 and remained at this rate as of June 30, 2024. We continually analyze methods to deploy assets into an earning asset mix to generate a stronger net interest margin.

Current wording

In September 2024, the Federal Reserve lowered its key interest rate from a range of 5.25% to 5.5% as of December 31, 2023 to a range of 4.75% to 5.00% as of September 30, 2024. We continually analyze methods to deploy assets into an earning asset mix to generate a stronger net interest margin.

Previous wording

Net interest margin on a tax-equivalent basis was 3.75% for the three months ended June 30, 2024 compared to 3.80% for the three months ended June 30, 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 2.11% for the three months ended June 30, 2024 compared to 2.73% for the three months ended June 30, 2023. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 164 basis points in the three months ended June 30, 2024 compared to 107 basis points in the three months ended June 30, 2023 driven by the increase in interest expense and the decline in average assets.

Current wording

Net interest margin on a tax-equivalent basis was 3.61% for the three months ended September 30, 2024 compared to 3.90% for the three months ended September 30, 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 2.28% for the three months ended September 30, 2024 compared to 2.71% for the three months ended September 30, 2023. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 133 basis points in the three months ended September 30, 2024 compared to 119 basis points in the three months ended September 30, 2023 driven by the increase in interest expense and the decline in average assets.

Previous wording

During the three months ended June 30, 2024, net interest income decreased by $2.0 million, or 6.8%, to $27.6 million from $29.6 million during the three months ended June 30, 2023. Average total earning assets were $2.97 billion in the three months ended June 30, 2024 compared to $3.15 billion in the three months ended June 30, 2023. Total interest income decreased by $0.9 million, or 1.9%, to $46.1 million in the three months ended June 30, 2024 from $47.0 million in the three months ended June 30, 2023 driven by an decrease in total earning assets, including interest bearing deposits with other banks. Average total loans decreased to $2.24 billion in the three months ended June 30, 2024 from $2.36 billion in the three months ended June 30, 2023, primarily as the result of a $30.8 million decrease in average real estate loans and an $54.6 million decrease in average consumer loans. The yield on total loans increased 25 basis points.

Current wording

During the three months ended September 30, 2024, net interest income decreased by $3.3 million, or 11.0%, to $26.6 million from $29.9 million during the three months ended September 30, 2023. Average total earning assets were $2.95 billion in the three months ended September 30, 2024 compared to $3.06 billion in the three months ended September 30, 2023. Total interest income decreased by $1.7 million, or 3.5%, to $46.6 million in the three months ended September 30, 2024 from $48.3 million in the three months ended September 30, 2023 driven by a decrease in total earning assets, including interest bearing deposits with other banks. Average total loans decreased to $2.18 billion in the three months ended September 30, 2024 from $2.27 billion in the three months ended September 30, 2023, primarily as the result of a $40.2 million decrease in average commercial loans and an $26.7 million decrease in average consumer loans. The yield on total loans increased six basis points.

Previous wording

Average investment securities increased $11.6 million as the result of a $32.3 million increase in taxable investments, partially offset by a $20.7 million decrease in tax-exempt investments during the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The yield on tax-exempt securities decreased 105 basis points, and the taxable securities yield increased 80 basis points.

Current wording

Average investment securities increased $49.1 million as the result of a $51.8 million increase in taxable investments, partially offset by a $2.7 million decrease in tax-exempt investments during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The yield on tax-exempt securities decreased 46 basis points, and the taxable securities yield increased 81 basis points.

Previous wording

Average interest-bearing liabilities decreased by $330.9 million for the three months ended June 30, 2024 from the three months ended June 30, 2023. The decrease was primarily the result of average balance decreases of $216.7 million in NOW accounts and $215.8 million in money market checking deposits, partially offset by an increase of $68.6 million in certificates of deposit.

Current wording

Average interest-bearing liabilities decreased by $71.0 million for the three months ended September 30, 2024 from the three months ended September 30, 2023. The decrease was primarily the result of average balance decreases of $140.3 million in NOW accounts and $103.4 million in money market checking deposits, partially offset by an increase of $136.7 million in certificates of deposit.

Previous wording

The cost of interest-bearing liabilities increased to 4.19% in the six months ended June 30, 2024 from 3.14% in the six months ended June 30, 2023. This increase is primarily the result of an increase of 113 basis points in the cost of deposits. Average interest-bearing deposits were $1.76 billion for the six months ended June 30, 2024 and $1.77 billion for the six months ended June 30, 2023. Total interest expense increased by $9.0 million, primarily driven by increases in interest rates.

Current wording

Average interest-bearing deposits were $1.89 billion for the three months ended September 30, 2024 and $1.96 billion for the three months ended September 30, 2023.Total interest expense increased by $1.6 million, primarily driven by increases in interest rates. The cost of interest-bearing liabilities increased to 4.04% in the three months ended September 30, 2024 from 3.58% in the three months ended September 30, 2023.

Previous wording

Net interest margin on a tax-equivalent basis was 3.79% for the six months ended June 30, 2024 compared to 4.09% for the six months ended June 30, 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 2.11% for the six months ended June 30, 2024 compared to 2.87% for the six months ended June 30, 2023. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 168 basis points in the six months ended June 30, 2024 compared to 122 basis points in the six months ended June 30, 2023. This difference was driven by the increase in interest expense and the decline in average assets.

Current wording

Net interest margin on a tax-equivalent basis was 3.73% for the nine months ended September 30, 2024 compared to 4.03% for the nine months ended September 30, 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 loan yields. Tax-equivalent net interest spread was 2.17% for the nine months ended September 30, 2024 compared to 2.80% for the nine months ended September 30, 2023. The difference between the tax-equivalent net interest margin and tax-equivalent net interest spread was 156 basis points in the nine months ended September 30, 2024 compared to 123 basis points in the nine months ended September 30, 2023. This difference was driven by the increase in interest expense and the decline in average assets.

Previous wording

During the six months ended June 30, 2024, net interest income decreased by $4.6 million, or 7.4%, to $57.7 million from $62.3 million during the six months ended June 30, 2023. This decrease is largely due to an increase in cost of funds, partially offset by higher yields on earning assets. Average total earning assets were $3.08 billion in the six months ended June 30, 2024 compared to $3.10 billion in the six months ended June 30, 2023. Total interest income increased by $4.4 million, or 4.8%, to $96.2 million in the six months ended June 30, 2024 from $91.8 million in the six months ended June 30, 2023 driven by higher yields from new loan production at favorable interest rates. Average total loans decreased to $2.26 billion in the six months ended June 30, 2024 from $2.37 billion in the six months ended June 30, 2023, primarily as the result of a $57.4 million decrease in average consumer loans, a $37.9 million decrease in average real estate loans and a $16.2 million decrease in average commercial loans. The yield on total loans increased 38 basis points.

Current wording

During the nine months ended September 30, 2024, net interest income decreased by $7.9 million, or 8.6%, to $84.3 million from $92.2 million during the nine months ended September 30, 2023. This decrease is largely due to an increase in cost of funds, partially offset by higher yields on earning assets. Average total earning assets were $3.04 billion in the nine months ended September 30, 2024 compared to $3.09 billion in the nine months ended September 30, 2023. Total interest income increased by $2.7 million, or 1.9%, to $142.8 million in the nine months ended September 30, 2024 from $140.1 million in the nine months ended September 30, 2023 driven by higher yields from new loan production at favorable interest rates. Average total loans decreased to $2.23 billion in the nine months ended September 30, 2024 from $2.34 billion in the nine months ended September 30, 2023, primarily as the result of a $47.0 million decrease in average consumer loans, a $30.1 million decrease in average real estate loans and a $24.2 million decrease in average commercial loans. The yield on total loans increased 28 basis points.

Previous wording

Average investment securities decreased $5.1 million as the result of a $26.1 million decrease in tax-exempt investments, partially offset by a $20.9 million increase in taxable investments during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The yield on tax-exempt securities decreased 77 basis points, and the taxable securities yield increased 23 basis points.

Current wording

Average investment securities increased $13.1 million as the result of a $31.3 million increase in taxable investments, partially offset by an $18.2 million decrease in tax-exempt investments during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The yield on tax-exempt securities decreased 67 basis points, and the taxable securities yield increased 41 basis points.

Previous wording

Average interest-bearing liabilities decreased by $46.6 million for the six months ended June 30, 2024 from the six months ended June 30, 2023. The decrease was primarily the result of average balance decreases of $228.7 million in negotiable order of withdrawal accounts, $35.3 million in FHLB and other borrowings and $9.2 million in money market checking accounts, partially offset by $177.8 million in certificates of deposit and $55.2 million in saving accounts.

Current wording

Average interest-bearing liabilities decreased by $54.9 million for the nine months ended September 30, 2024 from the nine months ended September 30, 2023. The decrease was primarily the result of average balance decreases of $198.9 million in negotiable order of withdrawal accounts, $41.0 million in money market checking accounts and $23.4 million in FHLB and other borrowings, partially offset by $163.8 million in certificates of deposit and $51.7 million in saving accounts.

Previous wording

Average interest-bearing deposits were $1.72 billion for the three months ended June 30, 2024 and $2.04 billion for the three months ended June 30, 2023. Total interest expense increased by $1.1 million, caused primarily by a $1.2 million increase in deposit interest. The result was a 86 basis point increase in the cost of interest-bearing liabilities, primarily driven by increases in interest rates.

Current wording

Average interest-bearing deposits were $1.81 billion for the nine months ended September 30, 2024 and $1.83 billion for the nine months ended September 30, 2023. Total interest expense increased by $10.5 million, primarily driven by increases in interest rates. The cost of interest-bearing liabilities increased to 4.14% in the nine months ended September 30, 2024 from 3.30% in the nine months ended September 30, 2023.

Previous wording

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 $0.3 million for the three months ended June 30, 2024, while there was a release of allowance for credit losses of $4.2 million for the three months ended June 30, 2023, respectively. The increase in credit loss provisions is the result of an increase in the required reserve calculated by the individually analyzed loan, which was partially offset by lower calculated loss rates and lower portfolio balances across most of the pooled loan segments.

Current wording

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 $1.0 million for the three months ended September 30, 2024, while there was a release of allowance for credit losses of $0.2 million for the three months ended September 30, 2023, respectively. The increase in credit loss provisions is the result of an increase in the required reserve calculated by the pooled loan analysis, which was partially offset by lower calculated reserves of the individually analyzed loans.

Previous wording

Total loans decreased $60.5 million during the three months ended June 30, 2024, compared to a decrease of $48.8 million in the three months ended June 30, 2023. The decline in loan balances compared to the prior quarters primarily reflects the 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 $53.1 million during the three months ended June 30, 2024, as compared to an increase of $12.2 million in the three months ended June 30, 2023, while the residential mortgage loan portfolio decreased by $4.4 million during the three months ended June 30, 2024, as compared to a $33.4 million decrease during the three months ended June 30, 2023. Additionally, our consumer loan portfolio decreased by $1.9 million during the three months ended June 30, 2024, while it decreased by $26.9 million in the three months ended June 30, 2023. Net charge-offs totaled $0.9 million and $1.2 million during the three months ended June 30, 2024 and 2023, respectively.

Current wording

Total loans decreased $35.5 million during the three months ended September 30, 2024, compared to a decrease of $42.0 million in the three months ended September 30, 2023. The decline in loan balances compared to the prior quarters primarily reflects the 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 September 30, 2024, as compared to an increase of $5.1 million in the three months ended September 30, 2023, while the residential mortgage loan portfolio increased by $0.6 million during the three months ended September 30, 2024, as compared to a $23.8 million decrease during the three months ended September 30, 2023. Additionally, our consumer loan portfolio decreased by $2.3 million during the three months ended September 30, 2024, while it decreased by $21.4 million in the three months ended September 30, 2023. Net charge-offs totaled $0.7 million and $5.9 million during the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Total loans decreased $110.8 million during the six months ended June 30, 2024 versus a decrease of $60.3 million in the six months ended June 30, 2023. The commercial loan portfolio decreased by $87.1 million during the six months ended June 30, 2024, as compared to a decrease of $42.9 million in the six months ended June 30, 2023, while the residential mortgage loan portfolio decreased by $16.6 million during the six months ended June 30, 2024, while increasing by $64.6 million in the six months ended June 30, 2023. Additionally, our consumer loan portfolio decreased by $4.7 million during the six months ended June 30, 2024, while it decreased by $79.8 million in the six months ended June 30, 2023. In addition, net charge-offs during the six months ended June 30, 2024 totaled $2.2 million compared to net charge-offs of $2.9 million in the six months ended June 30, 2023.

Current wording

Total loans decreased $146.3 million during the nine months ended September 30, 2024 versus a decrease of $102.2 million in the nine months ended September 30, 2023. The commercial loan portfolio decreased by $121.2 million during the nine months ended September 30, 2024, as compared to a decrease of $37.8 million in the nine months ended September 30, 2023, while the residential mortgage loan portfolio decreased by $15.9 million during the nine months ended September 30, 2024, while increasing by $40.8 million in the nine months ended September 30, 2023. Additionally, our consumer loan portfolio decreased by $7.0 million during the nine months ended September 30, 2024, while it decreased by $101.2 million in the nine months ended September 30, 2023. In addition, net charge-offs during the nine months ended September 30, 2024 totaled $2.9 million compared to net charge-offs of $8.8 million in the nine months ended September 30, 2023.

Previous wording

Noninterest income for the six months ended June 30, 2024 and 2023 totaled $15.0 million and $9.5 million, respectively. The increase in noninterest income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily the result of a $1.5 million increase in payment card and service charge income, a $2.2 million increase in gains on sale of available-for-sale investment securities and a $1.3 million increase in gain on sale of loans, offset by a $1.3 million decrease in equity method investment income.

Current wording

Noninterest income for the nine months ended September 30, 2024 and 2023 totaled $21.6 million and $15.3 million, respectively. The increase in noninterest income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily the result of a $2.5 million increase in payment card and service charge income and a $0.7 million gain on sale of available-for-sale securities, compared to a $1.5 million loss during the prior year period. There were also losses of $1.0 million on divestiture activity and $1.0 million on the sale of loans for the nine months ended September 30, 2023, without corresponding losses in the current period. These increases were partially offset by a decline in other operating income of $1.5 million.

Previous wording

Noninterest expense was $28.9 million and $30.3 million in the three months ended June 30, 2024 and 2023, respectively. The decline from the prior period primarily reflects a decline in other operating expenses, partially offset by higher professional fees incurred to enhance our risk management and compliance-related infrastructure. Approximately 55.1% and 52.0% of noninterest expense for the three months ended June 30, 2024 and 2023, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense as such costs are critical to financial services organizations. The decrease as compared to the prior year period primarily reflects the implementation of expense reduction initiatives.

Current wording

Noninterest expense was $29.5 million and $30.7 million in the three months ended September 30, 2024 and 2023, respectively. The decline from the prior period primarily reflects declines of $1.0 million in professional fees and $0.9 million in other operating expenses, partially offset by an increase in salaries and employee benefits of $0.7 million. Approximately 56.7% and 52.1% of noninterest expense for the three months ended September 30, 2024 and 2023, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense as such costs are critical to financial services organizations.

Previous wording

Noninterest expense was $59.1 million and $58.6 million in the six months ended June 30, 2024 and 2023, respectively. The increase from the prior year period primarily reflects increased operating expenses, specifically higher professional fees incurred to enhance our risk management and compliance-related infrastructure. This increase was partially offset by a decrease in occupancy travel, entertainment, dues and subscriptions expenses. Approximately 54.9% and 55.4% of noninterest expense for the six months ended June 30, 2024 and 2023, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense, as such costs are critical to financial services organizations.

Current wording

Noninterest expense was $88.6 million and $89.3 million in the nine months ended September 30, 2024 and 2023, respectively. The decline from the prior year period primarily reflects declines of $3.2 million in other operating expenses, $0.8 million in equipment depreciation and maintenance and $0.7 million in travel, entertainment, dues and subscriptions. These declines were partially offset by an increase in professional fees of $3.0 million, incurred to enhance our risk management and compliance-related infrastructure, and an increase in salaries and employee benefits of $0.7 million. Approximately 55.5% and 54.3% of noninterest expense for the nine months ended September 30, 2024 and 2023, respectively, was related to personnel costs. Personnel costs are a significant part of our noninterest expense, as such costs are critical to financial services organizations.

Previous wording

Our return on average assets was 0.5% for the three months ended June 30, 2024, compared to 1.0% for the three months ended June 30, 2023. The decreased return in the three months ended June 30, 2024 is the result of a $4.0 million decrease in earnings, while average total assets decreased by $148.9 million, mainly as the result of a $64.3 million decrease in average interest-bearing balances with banks and a $54.6 million decrease in average consumer loans.

Current wording

Our return on average assets was 0.3% for the three months ended September 30, 2024, compared to 0.5% for the three months ended September 30, 2023. The decreased return in the three months ended September 30, 2024 is the result of a $1.8 million decrease in earnings, while average total assets decreased by $107.3 million, mainly as the result of a $82.8 million decrease in average interest-bearing balances with banks, a $40.2 million decrease in average commercial loans and a $26.7 million decrease in average consumer loans.

Previous wording

Our return on average assets was 0.5% for the six months ended June 30, 2024, compared to 1.2% for the six months ended June 30, 2023. The decreased return for the six months ended June 30, 2024 is the result of a $10.9 million decrease in earnings, while average total assets increased by $0.8 million, mainly the result of a $99.8 million increase in average interest-bearing deposits with banks, offset by a $57.4 million decrease in average consumer loans and a $37.9 million decrease in average real estate loans.

Current wording

Our return on average assets was 0.4% for the nine months ended September 30, 2024, compared to 0.9% for the nine months ended September 30, 2023. The decreased return for the nine months ended September 30, 2024 is the result of a $12.7 million decrease in earnings, while average total assets decreased by $35.3 million, mainly the result of a $47.0 million decrease in average consumer loans, a $30.1 million decrease in average real estate loans and a $24.2 million decrease in average commercial loans, offset by a $38.5 million increase in average interest-bearing deposits with banks.

Previous wording

Our return on average stockholders’ equity was 5.7% for the three months ended June 30, 2024, compared to 12.0% for the three months ended June 30, 2023. The decreased return in the three months ended June 30, 2024 is a result of a $4.0 million decrease in earnings, while average equity increased by $17.1 million.

Current wording

Our return on average stockholders’ equity was 2.8% for the three months ended September 30, 2024, compared to 5.8% for the three months ended September 30, 2023. The decreased return in the three months ended September 30, 2024 is a result of a $1.8 million decrease in earnings, while average equity increased by $28.4 million.

Previous wording

Our return on average stockholders’ equity was 5.9% for the six months ended June 30, 2024, compared to 14.1% for the six months ended June 30, 2023. The decreased return for the six months ended June 30, 2024 is a result of a $10.9 million decrease in earnings, while average equity increased by $12.2 million.

Current wording

Our return on average stockholders’ equity was 4.9% for the nine months ended September 30, 2024, compared to 11.4% for the nine months ended September 30, 2023. The decreased return for the nine months ended September 30, 2024 is a result of a $12.7 million decrease in earnings, while average equity increased by $17.7 million.

Previous wording

Cash and cash equivalents totaled $455.5 million at June 30, 2024, compared to $398.2 million at December 31, 2023. 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.

Current wording

Cash and cash equivalents totaled $610.9 million at September 30, 2024, compared to $398.2 million at December 31, 2023. 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.

Previous wording

Investment securities, including equity securities, totaled $402.5 million at June 30, 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.

Current wording

Investment securities, including equity securities, totaled $416.6 million at September 30, 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.

Previous wording

Our loan portfolio totaled $2.21 billion as of June 30, 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.

Current wording

Our loan portfolio totaled $2.17 billion as of September 30, 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.

Previous wording

The ACL was $22.1 million, or 1.00% of loans receivable, at June 30, 2024 and December 31, 2023. Over the six months ended June 30, 2024, the ACL was impacted by an increase in provision needed for individually analyzed loans of $2.2 million. Additionally, over the six months ended June 30, 2024, changes to the loan portfolio balances, qualitative factor adjustments and expected loss forecasts within the expected credit loss calculation resulted in allowance decreases of $0.8 million to the subprime auto segment, $0.6 million to the commercial and industrial segments and $0.3 million to the residential segment. All other segments combined experienced an allowance decrease of $0.6 million. Bank management expects that the markets in which it lends will experience economic improvements over the next one to two years, and most decreases in estimated loss rates have been further supported by decreases in loan balances in the six months ended June 30, 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 partially offset by the increase in allowance needed by the individually analyzed loans. Net charge-offs for the three months ended June 30, 2024 included $0.9 million related to five SBA loans secured by business assets and $0.6 million related to the subprime consumer automotive segment.

Current wording

The ACL was $21.5 million, or 0.99% of loans receivable, at September 30, 2024, compared to $22.1 million, or 0.95% of loans receivable, at December 31, 2023. Over the nine months ended September 30, 2024, the ACL was impacted by an increase in provision needed for individually analyzed loans of $1.8 million. Additionally, over the nine months ended September 30, 2024, changes to the loan portfolio balances, qualitative factor adjustments and expected loss forecasts within the expected credit loss calculation resulted in allowance decreases of $1.6 million to both the consumer segment, which includes the subprime automotive portfolio, and the commercial and industrial segment. This decrease was offset by an increase of $0.7 million in allowance required by the residential segment. The commercial real estate, commercial acquisition, development and construction and home equity line of credit segments required a total of $0.1 million of additional allowance over the same period. Bank management expects that the markets in which it lends will experience economic improvements over the next one to two years, and most decreases in estimated loss rates have been further supported by decreases in loan balances in the nine months ended September 30, 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 partially offset by the increase in allowance needed by the individually analyzed loans and net-charge-offs. Net charge-offs for the three months ended September 30, 2024 included $0.4 million related to five U.S. Small Business Administration loans secured by business assets and $1.0 million related to the subprime consumer automotive segment.

Previous wording

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 determining the adequacy of the ACL. This analysis involves both the 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.

Current wording

Management continually monitors the risk in the loan portfolio by reviewing of the monthly delinquency reports and the Loan Review Committee. The Loan Review Committee is responsible for determining the adequacy of the ACL. This analysis involves the portfolio's experience 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.

Previous wording

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 $2.88 billion, or 97.4% of funding sources at June 30, 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 June 30, 2024, versus 2.7% at December 31, 2023. Repurchase agreements, which are available to large corporate customers, represented 0.1% of funding sources at June 30, 2024 and 0.2% at December 31, 2023.

Current wording

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 $3.00 billion, or 97.4% of funding sources at September 30, 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, FHLB and other borrowings represented 2.4% of funding sources at September 30, 2024, versus 2.7% at December 31, 2023. Repurchase agreements, which are available to large corporate customers, represented 0.2% of funding sources at September 30, 2024 and 0.2% at December 31, 2023.

Previous wording

At June 30, 2024, noninterest-bearing balances totaled $983.8 million, compared to $1.20 billion at December 31, 2023, or 34.1% and 41.3%, respectively, of total deposits. Interest-bearing deposits totaled $1.90 billion at June 30, 2024, compared to $1.70 billion at December 31, 2023.

Current wording

At September 30, 2024, noninterest-bearing balances totaled $989.1 million, compared to $1.20 billion at December 31, 2023, or 33.0% and 41.3%, respectively, of total deposits. Interest-bearing deposits totaled $2.01 billion at September 30, 2024, compared to $1.70 billion at December 31, 2023.