MVB Financial Corp. ($MVBF)

Greetings, and welcome to the MVB Financial Corp. First Quarter 2026 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Amy Baker. Thank you. You may begin.

Thank you, operator. Good afternoon, and thank you all for joining us today for MVB's First Quarter 2026 Earnings Conference Call and our first ever earnings call as a public company. The company issued its earnings press release earlier this afternoon, and it is available on the company's website at ir.mvbbanking.com. In addition, the company has included a slide presentation that you can refer to during the call, which is also available on the website. Participating on this call today are MVB's President and CEO, Larry F. Mazza; and CFO, Mike Sumbs. Larry will provide high-level first quarter results, followed by a business overview, and Mike will discuss the quarter's financial results in more detail, after which we will open the call for your questions. Before we begin, I would like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of MVB Financial that involves risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as the reconciliation of GAAP to non-GAAP measures. With that, I'd like to turn the call over to MVB's President and CEO, Larry F. Mazza.

Thank you, Amy, and good afternoon, everyone. We appreciate you joining us today for our first ever earnings call. As Amy mentioned, we've included a slide presentation to support today's call, which provides additional details to our business and the quarter, and I'll reference a few of those slides as we go. We are pleased to kick off the year with strong first quarter results with net income up 45% year-over-year, demonstrating a meaningful progress in our core earnings power. We successfully executed across with our CoRe banking activities and Fintech platform, achieving solid performance on our key metrics, including growth in loans, deposits, noninterest income while also reducing expenses. As this is our first ever earnings call, I'll provide a brief overview of our business model and our value proposition. As you can see on Slide 3, MVB is a Fintech-enabled bank, combining traditional banking foundation with scaled Fintech capabilities in payments, banking-as-a-service and digital gaming. Today, we operate with approximately $3.3 billion in assets, $2.9 billion in deposits and payment platform processing approximately $48 billion annually. Our dual engine business model produces diversified revenue streams, including net interest income and growing base of fee-driven revenue. Our differentiation lies in the complementary nature of our business segments. We generate deposits on a national basis through our Fintech-related activities while maintaining a strong core regional banking franchise. This combination allows us to support both traditional lending activities as well as Fintech sponsorship lending and a growing set of payments and Fintech-driven revenue streams within a single platform. Our business operates across 4 complementary lanes as outlined on Slide 5 of the presentation. First, in our CoRe banking platform, which is our legacy bank that operates branch-light and is increasingly technology-enabled, supporting lending and deposit activities across our regional markets, primarily in commercial real estate, C&I and specialty lending. This is also the backbone of our Fintech platform that provides risk and compliance capabilities and capital to fuel growth. Second, we serve as a banking partner to Fintech companies across payments, banking-as-a-service and gaming, serving over 40 gaming clients. We work with Fortune 100 and 500 companies in the space, including Fiserv, Worldpay, Intuit-Credit Karma, Global Payments, FanDuel, DraftKings and BetMGM to mention a few. Third, we are builders of Fintech solutions, where we develop technology capabilities internally as demonstrated with Victor Technology, a payments platform, which we incubated and successfully sold last year for a gain of $34 million. And fourth, we invest in Fintech businesses that align with our vision, similar to the investment gains we recorded subsequent to quarter end that I will touch on in a minute. Turning to the quarter's performance by segment. Our CoRe banking business continued its growth trajectory with loans up 2.6% or 10% on an annualized basis from the prior quarter, marking the fourth consecutive quarter of expansion. The growth reflects increased demand as well as improving market conditions. Our deposit base remains a key strength. Noninterest-bearing deposits represented 35% of total deposits at quarter end, supporting our low 2.17% cost of funds and strong 3.71% net interest margin. In our Fintech platform, we continue to see solid progress across several fronts. Payment card and service charge income increased 13.5% sequentially, benefiting from seasonal factors and partner activity. As outlined in Slide 10, we launched 2 new Fintech partners during the first quarter, and we continue to see a strong pipeline of Fintech partnership opportunities across multiple stages. Another highlight of the quarter was our enhanced operational efficiency. Noninterest expense was down 2% year-over-year, while revenues were up 8.8%, delivering positive operating leverage. This positive operating leverage is the result of our ongoing efforts to streamline operations through strategic investments. A key component of that effort has been our investment in automation, data infrastructure and artificial intelligence capabilities. As outlined in Slide 11, we have built a data and AI infrastructure that supports automation across risk, compliance and operational workflows. As shown on Slide 12, we're beginning to see the benefit of those investments in our financial results. Over the past several quarters, we've reduced the number of personnel supporting risk and compliance functions from approximately 160 at the peak in the second quarter of 2024 to 111 during the fourth quarter of 2025 with further reductions underway. Importantly, those changes reflect increased efficiency through automation and process improvement while maintaining the strength of our risk and compliance framework. At the same time, we are continuing to invest in our business to support long-term growth, particularly through our technology and Fintech-related initiatives. During the quarter, we aligned our technology and operations functions under unified leadership with Michael Giorgio now serving as both Chief Information Officer and Chief Operating Officer. This reflects how closely integrated these areas have become within the organization. In addition, we strengthened our Board with the addition of Adam Famularo, whose deep experience in Fintech and artificial intelligence align well with the capabilities we are continuing to build. Finally, subsequent to quarter end, we recognized a pretax gain of approximately $10 million related to an existing Fintech investment that will be reported in the second quarter, validating our history of both building and investing in Fintech businesses, including the monetization of our Victor investment last year. Over the past several years, MVB has evolved from a small community bank to a leading national Fintech banking platform with a diversified business model. Our balance sheet has grown at a compounded annual growth rate of 10% over the past 9 years from $1.5 billion to $3.3 billion in assets. We also successfully overcame a challenging regulatory environment and built a resilient and dynamic business that is well positioned to outperform through the cycle. Looking forward, we are excited about the growth opportunities ahead of us, and we're well positioned for continued profitable growth. Our first quarter results demonstrated strong execution across our platforms with 45% earnings growth year-over-year, continued loan growth, margin expansion and improved efficiency. Our Fintech platform is gaining traction with our new partner launches and a robust pipeline. Combined with operational efficiency gains, expanding Fintech partnerships and loan growth, we expect continued momentum in profitability and shareholder value creation. With that, I'll turn the call over to Michael Sumbs to walk through the financial results for the quarter in more detail.

Thanks, Larry, and good afternoon, everyone. I'll provide a few additional details to help frame the quarter and some of the underlying drivers in the results. We delivered solid first quarter results with net income of $5.2 million, up 25% year-over-year and diluted earnings per share of $0.39, up 44% year-over-year. This performance was driven by strong revenue growth with net interest income and noninterest income, both up 7% and 17% year-over-year, respectively, while managing costs efficiently with noninterest expense down 2% year-over-year. Net interest margin for the quarter was 3.71%, up 8 basis points over the prior year period, primarily driven by favorable changes in the balance sheet mix, partially offset by lower earning asset yields. In addition, we executed on balance sheet optimization actions, including the repayment of $40 million of higher cost subordinated debt. This is expected to reduce funding costs and enhance net interest income with estimated annual savings of approximately $1.8 million starting in the second quarter of 2026. Noninterest income for the quarter was $8.2 million, up 17% over the prior year period, reflecting higher payment card volume and service charge income. While we continue to see robust growth opportunities in our payments-related business, fee revenue from new partners can be impacted by seasonal patterns and typically builds over time as partners onboard and scale. In addition, the conversion of the pipeline opportunities into revenue can vary from quarter-to-quarter, which may result in some variability in the near term. Noninterest expense of $28.1 million for the quarter was down 2% over the prior year period and down 11% sequentially, resulting in improved efficiency. While we expect continued efficiency gains from streamlined operations, we expect these savings to be offset by ongoing investments in technology and platform capabilities that position MVB for long-term growth. Turning to credit, Slide 24. Asset quality remained broadly stable during the quarter with net charge-offs and provision both down sequentially. Nonperforming assets increased slightly from the prior quarter, primarily driven by a small number of commercial and single-family residential loans. The increase in nonperforming loans does not reflect any material industry concentrations, and we believe the exposures are well secured. Approximately 1/3 of total nonperforming assets as of the first -- end of the first quarter or approximately $12.2 million relates to a single credit that we have discussed previously, which we expect to resolve over time with no loss. Overall, we view the underlying credit profile of the portfolio is stable. Turning to the balance sheet. Total loans reached $2.4 billion, up 10% on an annualized basis from the prior quarter. It is worth noting that a significant portion of the growth occurred for the end of the quarter, primarily in March. As a result, we recognized the associated provision for that growth during the quarter, while the full benefit to net interest income was not reflected in the first quarter results. Loan pipelines also remain strong heading into the second quarter. Tangible book value per share for the quarter was $25.98, down slightly sequentially, primarily driven by an increase in unrealized losses in our securities portfolio and a higher share count as a result of option exercises in the quarter. As Larry mentioned, subsequent to quarter end, we recognized a pretax gain of approximately $10 million related to a Fintech investment, which is expected to increase tangible book value per share by approximately $0.59. Moving to capital and liquidity, as shown on Slide 14. We continue to maintain a strong position with capital ratios well above regulatory requirements, offering support for growth and flexibility in capital allocation. Additionally, as shown on Slide 16, we continue to return capital to shareholders through dividends and share buybacks. Since the first quarter of last year, we have repurchased $10 million worth of shares or approximately 4% of the outstanding shares, and we announced a new $10 million share repurchase program in October of 2025. We will remain disciplined and opportunistic in deploying capital to generate the highest value for our shareholders. In summary, our quarter results demonstrated solid momentum and execution across our business and MVB is well positioned for continued strong growth. With that, operator, we're ready to take questions.

[Operator Instructions] Our first question comes from the line of Catherine Mealor with KBW.

[Technical Difficulty]

Yes. Loud and clear, Catherine. Welcome and thank you for joining...

So my first question is just on deposits. I know you've got some seasonality to your deposit flows for some of your Fintech and BaaS businesses. I wanted to see if you could talk a little bit about that and give us some insight into how you're thinking about that going into the second quarter. And then maybe tying that conversation with your expectations for deposit costs. I know you've mentioned in your slide that you've got some big CD maturities coming in the next couple of quarters. And so just curious how you think that could impact your deposit costs and maybe your overall margin.

Thank you, Catherine. I'm going to let Michael take that question.

Catherine, thanks for the question. So I'll explain a little bit about the seasonality that we experienced and you alluded to. So there's really 2 seasons for MVB. The first season relates to our gaming business, and we see the balances in that portfolio swell in the fourth quarter with NFL season and then persist into the first half of the first quarter with the Super Bowl and March Madness and then decline towards the end of the first quarter and trail off over the summer months. The second season is related to our banking-as-a-service business and specifically the relationship we have with Credit Karma. We see an uptick in deposits in the first quarter related to tax season. And so over the course of the first quarter, the average balance of deposits was up, reflecting that seasonal strength in our banking-as-a-service relationship. Overall, our deposits were up about $60 million point-to-point in the quarter, and that's with running off about $90 million of CDs and a lot of that CD maturity and repricing and runoff happened in March. So we grew deposits by about $60 million net of those CD runoff that we had. So overall, heading into the second quarter, I think a lot of the seasonality is behind us and reflected in the period end number in March. We do have a lot of CDs coming up about $117 million in the first quarter. And so we'll look to run off and reprice that down which should help support reducing the cost of funds and continuing to grow the margin.

Okay. Great. And then maybe if you could provide just an outlook on your fee income businesses. I know that you've got some new partnerships that are coming on, and it takes a while for you to see the revenue coming through. But maybe you can give us an insight into maybe a growth rate or how you're thinking that kind of payments and service charge line income should trend over the next -- through the back half of this year?

Michael?

Yes. So we've been actively launching new partners. As Larry mentioned, we launched 2 new partners in the first quarter and then a few new partners in the back half of last year. So you'll see that continue to provide both deposits and fee income as we move through '26. The timing of the ramp for those partners can be choppy and hard to predict. But you should see incremental improvement in growth in the payment card and service charge income line item, and it was up year-over-year slightly. So you'll continue to see that growth as we expand the customers or the clients that we've onboarded and onboard new clients throughout the course of '26.

Okay. Great. And then maybe my last question, if I may, is just big picture profitability outlook. You've made some great progress in improving your ROA this quarter. Any kind of near-term targets or how you kind of think about the path for your ROA and ROE as we move through the year?

Michael, do you want to go ahead and take that?

Yes. Certainly focused on continuing to grow core earnings. That's the North Star of the business and what we're focused on. And I think you can see in the first quarter, we made substantial progress in improving the core profitability of the bank, and we'll continue to do so over the course of the year, both through growing net interest income, driven by loan growth. And as I mentioned, improvement on the cost of deposits as well as the benefit of the Fintech partners that we've launched in the fee income side. So that's really the path we're on, Catherine, continuing to grow core earnings and driving up the ROA and ROE.

I think we started off the year really, really strong in the first quarter. I think it was a continuation of the first quarter -- or the fourth quarter of 2025. I would call it the trend is our friend right now, and we're looking for a very strong 2026. Core -- even though -- yes, we announced the subsequent event in the second quarter to be reported. The second quarter is going to be strong based on that as well as core earnings growth.

[Operator Instructions] Our next question comes from the line of Janet Lee with TD Cowen.

I have a question about the digital worker growth. Obviously, you're increasing the number of digital workers from 10 to 26 by the end of this year. I would imagine the cost of adding a new digital worker could be diminishing or gets lower over time. I know you said you'll be reinvesting some of those efficiency gains. But as we move through the year towards 2027, do you think there is room for your efficiency ratio to improve just on the expense side? Or how should we think about that overall in terms of where expenses are headed with your AI initiatives?

Janet, this is Larry. Thank you for the question. This is one of our favorite questions is our foray into AI. So with our digis, by year-end, we'll actually end up with 32 digis. We have 6 on board now with several that are coming on board, plus the 26. That's -- the total is 26 that we're building throughout 2026. There's a lot of 26s here and then the additional 6 that are already on board. So we'll have a total of 32 digis by the end of this year. You're exactly right on cost. The first 6 digis were I wouldn't call them extremely expensive, but they were costly in a way to get them up and going in our learning experience. The new digis will be about 1/3 of the cost of the first 6. So that is a big savings there. What has happened, our first 6 digis were really focused on risk and compliance. That was an area that had a large population of what we call outsourced employees. We used Dominion RightSource. We used AML companies, et cetera, to help us, especially with our seasonality. As Michael said, there's 2 seasons for MVB, football season and tax season, and we have to bring in extra workers. The digis have now taken care of the extra workers in that a human can process anywhere between 10 and 30 transactions. Our new digi named Evelyn can do 1 million transactions a day. So she gives us a ton of scalability in what we call our operational leverage. And so that will be very cost efficient. We show in our -- one of our last pages on the deck, the numbers. We were -- we peaked at 160 people at one point in risk and compliance. In the fourth quarter, we ended with 111. We had some seasonality in the first quarter, but that will drop immediately in the second quarter down and eventually, we will get that closer to 90 people -- from 160 down to 90 based on these digital workers. So again, that first focus was on risk and compliance. The second focus where these next 26 digis were going. The first 26 went to risk and compliance. The second 26 are going throughout the bank. And when I mean throughout the bank, we have digis in accounting. They're helping with reconciliations and other accounting functions. We have digis helping in our loan processing. For example, one digi has taken off 5 hours of loan input per loan. So that was an amazing growth there. And digis even to the teller line that are helping us with balancing, et cetera. We don't see -- so I think it makes it clear to our team even though we had that large reduction in force from 160 down to 111, eventually down to 90, we don't see us reduce -- having a giant reduction in force. We will have humans in the loop with all our AI digis and working teams. But additionally, what we see us being able to do is having our teams stay stable. So we have approximately a little over 400 people today. We hope to stay stable with that 400 people, but grow what I'd call pretty strong growth dramatically over the next several years and keeping that team pretty flat. That's our goal of AI and where we're going with this. The team will stay stable, but you'll see good growth. So the revenue per employee per our teammate will continue to grow, and that will be a measure that we look closely to.

For loan growth, in terms of your loan growth outlook for the rest of 2026, do you think this double-digit pace of loan growth is sustainable? And also on the deposit side, if you consider the seasonality factor in the second quarter, should we expect the deposit growth overall in 2026 to be comparable to your loan growth expectations?

Yes, Janet. We have strong pipelines on both deposits and loans. Our loan team has been working extremely hard. They will have a very good first half of the year. That momentum that we had in the first quarter will continue into the second quarter, a very positive loan growth there. And we expect -- as long as there's no geopolitical activities that would stall this, we would expect loan growth to be very positive. On the deposit side, we see both on our -- what we call our CoRe, our legacy side as well as our Fintech side, very strong pipelines as well. So we see good deposit growth to pace well with the loan growth. And we're excited about both of those sides, the Fintech side and the CoRe side.

Got it. And the last one for me. I believe there are some -- a lot of volatilities within certain fee income line items. Was the equity method investment income for the quarter and card acquiring income, are they just -- is it seasonality that was impacting the first quarter? Or how should we think about the trajectory of those line items over the near term?

Janet, thanks for the question. I'm going to let Michael take that one.

Yes. The equity method investment is related to the 2 mortgage companies that we hold a minority interest position in, Janet. So that's really tied to -- you could think about that as being tied more towards the mortgage market. And then the card acquiring income, there is some seasonality strength in that line item with some of our gaming partners. But that's a line item that we continue to onboard new clients in, which should support continued growth in that line item.

And we have reached the end of the question-and-answer session. Therefore, I'd like to turn the floor back over to CEO, Larry Mazza, for closing remarks.

Thank you. Thank you again to everybody for your time today and your continued interest in MVB Financial. Our entire team is energized by the opportunities ahead of us, and we're excited to continue to move forward with our -- growing our Fintech platform while strengthening our core banking foundation. We appreciate your support and look forward to updating you on our progress in the quarters to come. If you have any questions, please feel free to contact our Investor Relations with anything that we can help with. Thank you, and hope you have a nice evening. Good night.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.