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EX-32.2 - EXHIBIT 32.2 - MVB FINANCIAL CORPex32-2.htm
EX-31.1 - EXHIBIT 31.1 - MVB FINANCIAL CORPex31-1.htm
EX-32.1 - EXHIBIT 32.1 - MVB FINANCIAL CORPex32-1.htm
EX-31.2 - EXHIBIT 31.2 - MVB FINANCIAL CORPex31-2.htm
 
 

 
United States
Securities and Exchange Commission
 
Washington, D.C. 20549
 
FORM 10-Q
                                                                     (Mark One)
 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                       to                      .
 
Commission File number 333-120931
 
MVB Financial Corp.
(Exact name of registrant as specified in its charter)
West Virginia
20-0034461
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
301 Virginia Avenue
Fairmont, West Virginia  26554-2777
(Address of principal executive offices)

304-363-4800
(Issuer’s telephone number)

Not Applicable
(Former name, address, and fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  [ X ]                             No  [   ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes  [ X ]                             No  [    ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):
 
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer                        (Do not check if a smaller reporting company)
 
Smaller reporting company              [x]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)   Yes[  ]     No[x]
 
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
 
As of August 8, 2011, the number of shares outstanding of the issuer’s only class of common stock was 2,234,767.
 

 
 

 

MVB Financial Corp.
Financial Information
 
Financial Statements
 
The unaudited interim consolidated financial statements of MVB Financial Corp. and Subsidiaries (MVB or “the Company”) listed below are included on pages 2-18 of this report.
 
Consolidated Balance Sheets at June 30, 2010 and
December 31, 2010
Consolidated Statements of Income for the Six and Three Months ended
June 30, 2011 and 2010
Consolidated Statements of Cash Flows for the Six Months ended
June 30, 2011 and 2010
Notes to Consolidated Financial Statements
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations is included on pages 19-30 of this report.
 
Quantitative and Qualitative Disclosures About Market Risk.
 
Controls and Procedures
 
 
 
Other Information
 
Legal Proceedings

Risk Factors
 
 
Unregistered Sales of Equity Securities and Use of Proceeds.

Defaults Upon Senior Securities

Removed and Reserved

Other Information

Exhibits


Part I. Financial Information
 
Item 1. Financial Statements
 
MVB Financial Corp. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except Share and Per Share Data)
   
June 30
   
December 31
 
   
2011
   
2010
 
   
(Unaudited)
   
(Note 1)
 
Assets
           
Cash and due from banks
  $ 18,213     $ 3,713  
Interest bearing balances – FHLB
    4,313       10,091  
Certificates of deposits in other banks
    -       17,734  
Investment securities:
               
     Securities held-to-maturity, at cost
    6,226       7,460  
     Securities available-for-sale, at fair market value
    75,900       61,824  
                 
Loans:
    329,480       294,044  
     Less: Allowance for loan losses
    (2,646 )     (2,478 )
     Net loans
    326,834       291,566  
Loans held for sale
    2,042       1,839  
Bank premises, furniture and equipment, net
    7,536       7,579  
Accrued interest receivable and other assets
    13,297       12,461  
Total assets
  $ 454,361     $ 414,267  
Liabilities
               
Deposits
               
     Non-interest bearing
  $ 34,635     $ 28,449  
     Interest bearing
    314,292       271,985  
     Total deposits
    348,927       300,434  
                 
Accrued interest, taxes and other liabilities
    2,335       2,703  
Repurchase agreements
    50,222       47,623  
Federal Home Loan Bank and other borrowings
    9,879       28,614  
Long-term debt
    4,124       4,124  
     Total liabilities
    415,487       383,498  
                 
Stockholders’ equity
               
Preferred stock, $1,000 par value, 5,000 shares authorized; none issued
           
Common stock, $1 par value, 4,000,000 authorized, 2,234,767 and 1,802,391 issued
    2,235       1,802  
Additional paid-in capital       32,543        23,864  
Common stock paid for but not issued, par value $1; 90,560 shares
     -        1,729  
Treasury stock, 47,218 and 47,218 shares, respectively
    (1,006 )     (1,006 )
Retained earnings
    5,119       4,643  
Accumulated other comprehensive (loss)
    (17 )     (263 )
     Total stockholders’ equity
    38,874       30,769  
Total liabilities and stockholders’ equity
  $ 454,361     $ 414,267  
 
See accompanying notes to unaudited financial statements

MVB Financial Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited) (Dollars in Thousands except Share and Per Share Data)

   
Six Months Ended
   
Three Months Ended
 
   
June 30
   
June 30
 
   
2011
   
2010
   
2011
   
2010
 
Interest income
                       
   Interest and fees on loans
  $ 7,737     $ 6,346     $ 3,987     $ 3,254  
   Interest on deposits with other banks
    49       386       13       178  
   Interest on investment securities – taxable
    708       670       364       367  
   Interest on tax exempt loans and securities
    414       362       206       184  
Total interest income
    8,908       7,764       4,570       3,983  
                                 
Interest expense
                               
Deposits
    1,940       2,274       985       1,149  
Repurchase agreements
    233       223       124       122  
FHLB and other borrowings
    235       262       114       131  
Long-term debt
    40       39       20       20  
Total interest expense
    2,448       2,798       1,243       1,422  
Net interest income
    6,460       4,966       3,327       2,561  
Provision for loan losses
    630       520       330       240  
Net interest income after
provision for loan losses
    5,830       4,446       2,997       2,321  
                                 
Other income
                               
Service charges on deposit accounts
    293       355       163       183  
Income on bank owned life insurance
    128       129       81       65  
Visa debit card income
    203       170       107       91  
Income on loans held for sale
    273       202       180       113  
Other operating income
    231       216       126       99  
Gain on sale of securities
    356       56       207       9  
Total other income
    1,484       1,128       864       560  
                                 
Other expense
                               
Salary and employee benefits
    3,091       2,234       1,669       1,088  
Occupancy expense
    315       297       173       151  
Equipment expense
    287       223       161       117  
Data processing
    105       277       69       137  
Visa debit card expense
    161       139       84       74  
Advertising
    162       142       87       106  
Legal and accounting fees
    141       80       77       44  
Printing, stationery and supplies
    85       66       48       40  
Consulting fees
    199       55       107       55  
FDIC insurance
    243       266       124       129  
Other taxes
    86       93       37       48  
Other operating expenses
    626       457       352       208  
Total other expense
    5,501       4,329       2,988       2,197  
Income before income taxes
    1,813       1,245       873       684  
Income tax expense
    511       310       237       177  
Net income
  $ 1,302     $ 935     $ 636     $ 507  
                                 
Basic net income per share
  $ 0.62     $ 0.58     $ 0.29     $ 0.32  
Diluted net income per share
  $ 0.61     $ 0.57     $ 0.29     $ 0.31  
Basic weighted average shares outstanding
    2,110,474       1,602,307       2,187,549       1,599,982  
Diluted weighted average shares outstanding
    2,146,615       1,628,988       2,223,690       1,626,663  
 
See accompanying notes to unaudited financial statements


MVB Financial Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited) (Dollars in thousands)
 
   
Six Months Ended
   
June 30
 
   
2011
   
2010
 
Operating activities
           
Net income
  $ 1,302     $ 935  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Provision for loan losses
    630       520  
Deferred income tax expense/(benefit)
    106       (253 )
Depreciation
    224       225  
Stock based compensation
    57       7  
Loans originated for sale
    (18,489 )     (14,840 )
Proceeds of loans sold
    18,286       15,165  
Proceeds from sale of other real estate owned
    312       866  
(Gain) on sale of other real estate owned
    -       (61 )
(Gain) on sale of investment securities
    (356 )     (56 )
Amortization, net of accretion
    367       207  
(Increase)/decrease in interest receivable and other assets
    (217 )     144  
(Decrease)/increase in accrued interest, taxes, and other liabilities
    (368 )     514  
     Net cash provided by operating activities
    1,854       3,373  
Investing activities
               
(Increase) in loans made to customers
    (35,898 )     (31,897 )
Purchases of premises and equipment
    (181 )     (79 )
Decrease in interest bearing balances with banks, net
    5,778       1,376  
Purchases of certificates of deposit in other banks
    -       (16,321 )
Maturities of certificates of deposit in other banks
    17,734       28,460  
Purchases of investment securities available-for-sale
    (106,497 )     (34,741 )
Proceeds from sales, maturities and calls of securities
               
   Available-for-sale
    93,053       10,548  
Proceeds from sales, maturities and calls of securities
               
   held to maturity
    1,000       474  
Purchases of investment securities held-to-maturity
    -       (985 )
Purchase of bank owned life insurance
    (1,200 )     -  
     Net cash (used in) investing activities
    (26,211 )     (43,165 )
Financing activities
               
Net increase in deposits
    48,493       35,930  
Net increase in repurchase agreements
    2,599       9,466  
Proceeds from  Federal Home Loan Bank borrowings
    47,201       50,328  
Principal payments on Federal Home Loan Bank borrowings
    (65,936 )     (55,535 )
Purchase of treasury stock
    -       (278 )
Net proceeds of stock offering
    6,500       -  
     Net cash provided by financing activities
    38,857       39,911  
Increase in cash and cash equivalents
    14,500       119  
Cash and cash equivalents - beginning of period
    3,713       2,321  
Cash and cash equivalents - end of period
  $ 18,213     $ 2,440  
Cash payments for:
               
   Interest on deposits, repurchase agreements and borrowings
  $ 2,531     $ 2,844  
   Income taxes
  $ 467     $ 302  

See accompanying notes to unaudited financial statements


MVB Financial Corp. and Subsidiaries
 
Notes to Consolidated Financial Statements
 
Note 1 – Basis of Presentation
 
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Section 310(b) of Regulation SB.  Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for annual year-end financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, have been included and are of a normal, recurring nature. The balance sheet as of December 31, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles.  Operating results for the six and three months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The accounting and reporting policies of MVB conform to accounting principles generally accepted in the United States and practices in the banking industry. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates, such as the allowance for loan losses, are based upon known facts and circumstances. Estimates are revised by management in the period such facts and circumstances change.  Actual results could differ from those estimates. All significant inter-company accounts and transactions have been eliminated in consolidation.
 

The consolidated balance sheet as of December 31, 2010 has been extracted from audited financial statements included in MVB’s 2010 filing on Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in MVB’s December 31, 2010, Form 10-K filed with the Securities and Exchange Commission.
 
Management has reviewed events occurring through August 12, 2011, the date the financial statements were issued and no subsequent events transpired requiring accrual or disclosure.

Note 2. -  Loans
 
The following table summarizes the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2011.  Activity in the allowance is presented for the period ended June 30, 2011 (in thousands):
 

 


               
Home
         
Credit
       
   
Commercial
   
Residential
   
Equity
   
Installment
   
Card
   
Total
 
ALL balance 12/31/10
  $ 1,517     $ 460     $ 207     $ 274     $ 20     $ 2,478  
  Charge-offs
    (57 )     (289 )     (114 )     (29 )     (3 )     (492 )
  Recoveries
    4       -       10       16       -       30  
  Provision
    432       190       41       (36 )     3       630  
ALL balance 6/30/11
  $ 1,896     $ 361     $ 144     $ 225     $ 20     $ 2,646  
Individually evaluated for impairment
  $ 1,313     $ 33     $ 35     $ 13     $ 3     $ 1,397  
Collectively evaluated for impairment
  $ 583     $ 328     $ 109     $ 212     $ 17     $ 1,249  
 
The allowance for loan losses is based on estimates, and actual losses will vary from current estimates.  Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.
 
The following table summarizes the primary segments of the loan portfolio as of June 30, 2011 (in thousands):
 
   
Commercial
   
Residential
   
Home Equity
   
Installment
   
Credit Cards
   
Total
 
                                     
June 30, 2011
                                 
Total Loans
  $ 220,642     $ 80,684     $ 14,195     $ 13,386     $ 573     $ 329,480  
  Individually evaluated for impairment
  $ 333     $ -     $ 20     $ 8     $ -     $ 361  
  Collectively evaluated for impairment
  $ 220,309     $ 80,684     $ 14,175     $ 13,378     $ 573     $ 329,119  
 
The following table summarizes the primary segments of the loan portfolio as of December 31, 2010 (in thousands):
 
   
Commercial
   
Residential
   
Home Equity
   
Installment
   
Credit Cards
   
Total
 
                                     
December 31, 2010
                                 
Total Loans
  $ 194,700     $ 71,686     $ 14,334     $ 12,830     $ 494     $ 294,044  
  Individually evaluated for impairment
  $ 393     $ 197     $ 262     $ 0     $ 4     $ 856  
  Collectively evaluated for impairment
  $ 194,307     $ 71,489     $ 14,072     $ 12,830     $ 490     $ 293,188  


Management evaluates individual loans in all of the commercial segments for possible impairment.  Loans are considered to be impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  The Corporation also separately evaluates individual consumer and residential mortgage loans for impairment.
 
Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods:  (a) the present value of expected future cash flows discounted at the loan's effective interest rate; (b) the loan's observable market price; or (c) the fair value of the collateral less selling costs.  The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method.  The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis.
 
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of June 30, 2011 (in thousands):
 
               
Impaired
       
               
Loans with
       
   
Impaired Loans with
   
No Specific
       
   
Specific Allowance
   
Allowance
   
Total Impaired Loans
 
                           
Unpaid
 
   
Recorded
   
Related
   
Recorded
   
Recorded
   
Principal
 
June 30, 2011
 
Investment
   
Allowance
   
Investment
   
Investment
   
Balance
 
                               
 Commercial
  $ -     $ -     $ 333     $ 333     $ 333  
 Residential
    -       -       -       -       -  
 Home Equity
    20       20       -       20       20  
 Installment
    8       8       -       8       8  
 Credit Card
    -       -       -       -       -  
  Total impaired loans
  $ 28     $ 28     $ 333     $ 361     $ 361  
 
The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of December 31, 2010 (in thousands):
 
         
Impaired
       
         
Loans with
       
   
Impaired Loans with
   
No Specific
       
   
Specific Allowance
   
Allowance
   
Total Impaired Loans
 
                           
Unpaid
 
   
Recorded
   
Related
   
Recorded
   
Recorded
   
Principal
 
Dec 31, 2010
 
Investment
   
Allowance
   
Investment
   
Investment
   
Balance
 
                               
 Commercial
  $ 59     $ 20     $ 334     $ 393     $ 393  
 Residential
    165       75       32       197       197  
 Home Equity
    262       99       0       262       262  
 Installment
    0       0       0       0       0  
 Credit Card
    4       4       0       4       4  
  Total impaired loans
  $ 490     $ 198     $ 366     $ 856     $ 856  


The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated (in thousands):
 
   
June
 
   
2011
   
2010
 
Average investment in impaired loans
  $ 361     $ 2,369  
Interest income recognized on an accrual basis on impaired loans
  $ 15     $ 95  
                 
Management uses a nine point internal risk rating system to monitor the credit quality of the overall loan portfolio.  The first six categories are considered not criticized, and are aggregated as "Pass" rated.  The criticized rating categories utilized by management generally follow bank regulatory definitions.  The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.  Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.  All loans greater than 90 days past due are considered Substandard.  The portion of any loan that represents a specific allocation of the allowance for loan losses is placed in the Doubtful category.  Any portion of a loan that has been charged off is placed in the Loss category.
   
To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.  The Bank's Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis.  The Credit Department performs an annual review of all commercial relationships $500,000 or greater.  Confirmation of the appropriate risk grade is included in the review on an ongoing basis.  The Bank has an experienced Credit Department that continually reviews and assesses loans within the portfolio.  The Bank engages an external consultant to conduct loan reviews on at least an annual basis.  Generally, the external consultant reviews larger commercial relationships or criticized relationships.  The Credit Department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis.  Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.
 
The following table represents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of June 30, 2011 and December 31, 2010 (in thousands):
 
         
Special
                   
June 30, 2011
 
Pass
   
Mention
   
Substandard
   
Doubtful
   
Total
 
                               
 Commercial
  $ 206,922     $ 6,589     $ 6,798     $ 333     $ 220,642  
 Residential
    79,431       924       329       -       80,684  
 Home Equity
    14,041       119       15       20       14,195  
 Installment
    13,045       311       22       8       13,386  
 Credit Card
    570       -       3       -       573  
  Total
  $ 314,009     $ 7,943     $ 7,167     $ 361     $ 329,480  
                                         
 
         
Special
                   
December 31, 2010
 
Pass
   
Mention
   
Substandard
   
Doubtful
   
Total
 
                               
 Commercial
  $ 180,568     $ 8,294     $ 5,446     $ 392     $ 194,700  
 Residential
    69,906       613       1,002       165       71,686  
 Home Equity
    13,945       99       262       28       14,334  
 Installment
    12,424       233       173       -       12,830  
 Credit Card
    488       -       6       -       494  
  Total
  $ 277,331     $ 9,239     $ 6,889     $ 585     $ 294,044  


Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.  The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of June 30, 2011and December 31, 2010 (in thousands):
 
   
Current
   
30-59
Days
Past Due
   
60-89 Days
Past Due
   
90
Days
Past Due
   
Total
Past Due
   
Non-
Accrual
   
Total
Loans
 
June 30, 2011
                                         
 Commercial
  $ 211,370     $ 6,280     $ 1,739     $ 1,253     $ 9,272     $ -     $ 220,642  
 Residential
    80,011       160       -       298       458       215       80,684  
 Home Equity
    14,052       10       20       98       128       15       14,195  
 Installment
    13,052       139       35       143       317       17       13,386  
 Credit Card
    570       -       -       -       -       3       573  
  Total
  $ 319,055     $ 6,589     $ 1,794     $ 1,792     $ 10,175     $ 250     $ 329,480  
                                                         
 
           
30-59
Days
   
60-89
Days
   
90
Days
   
Total
   
Non-
   
Total
 
   
Current
   
Past Due
   
Past Due
   
Past Due
   
Past Due
   
Accrual
   
Loans
 
Dec 31, 2010
                                                       
 Commercial
  $ 193,414     $ 241       -     $ 217     $ 458     $ 828     $ 194,700  
 Residential
    68,529       1,761       272       143       2,176       981       71,686  
 Home Equity
    13,979       28       18       47       93       262       14,334  
 Installment
    12,222       141       158       155       454       154       12,830  
 Credit Card
    490       -       -       -       -       4       494  
  Total
  $ 288,634     $ 2,171     $ 448       562     $ 3,181     $ 2,229     $ 294,044  
 
An allowance for loan losses ("ALL") is maintained to absorb losses from the loan portfolio.  The ALL is based on management's continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.
 
The Bank's methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance.  The total of the two components represents the Bank's ALL.
 
Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate.  For general allowances, historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualified factors.
 
The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis.  Management tracks the historical net charge-off activity at the call code level.  A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters.  Commercial, Mortgage and Consumer pools currently utilize a rolling 12 quarters.
 
"Pass" rated credits are segregated from "Criticized" credits for the application of qualitative factors.    Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.


Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.  The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are:  national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volume and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.
 
Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.
 
Historically, management has utilized an internally developed spreadsheet to track and apply the various components of the allowance.
 
Note 3. Borrowed Funds
 
The Company is a party to repurchase agreements with certain customers.  As of June 30, 2011 and December 31, 2010, the Company had repurchase agreements of $50.2 million and $47.6 million.
 
The bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh, Pennsylvania.  Borrowings from the FHLB are secured by stock in the FHLB of Pittsburgh, qualifying first mortgage loans, mortgage-backed securities and certain investment securities.  The remaining maximum borrowing capacity with the FHLB at June 30, 2011 was approximately $99.7 million.
 
 
Borrowings from the FHLB were as follows:
 
June 30
2011
   
Dec 31
2010
 
(dollars in thousands)
           
Fixed interest rate note, originating April 1999, due April 2014, interest of 5.41% is payable monthly.
  $ 1,000     $ 1,000  
                 
Fixed interest rate note, originating January 2005, due January 2020, interest of 5.14% is payable in monthly installments of $11.
    892       933  
                 
Fixed interest rate note, originating April 2002, due May 2017, interest of 5.90% is payable monthly.
    639       647  
                 
Fixed interest rate note, originating July 2006, due July 2016, interest of 4.50% is payable in monthly installments of $8.
    1,321       1,341  
                 
Fixed interest rate note, originating October 2006, due October 2021, interest of 5.20% is payable in monthly installments of $6.
    1,079       1,089  
                 
Fixed interest rate note, originating February 2007, due February 2022, interest of 5.22% is payable in monthly installments of $5.
    905       913  
                 
Fixed interest rate note, originating April 2007, due April 2022, interest of 5.18% is payable in monthly installments of $6.
    1,024       1,034  
                 
Floating interest rate note, originating March 2003, due December 2011, interest of 0.68% payable monthly.
    -       14,126  
                 
Fixed interest rate note, originating December 2007, due December 2017, interest of 5.25% is payable in monthly installments of $7.
    1,018       1,031  
                 
Fixed interest rate note originating March 2008, due March 2013, interest of 2.37% payable quarterly.
    2,000       2,000  
                 
    $ 9,879     $ 24,114  



 

In March 2007 the Company completed the private placement of $4 million Floating Rate, Trust Preferred Securities through its MVB Financial Statutory Trust I subsidiary (the “Trust”).  The Company established the trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust.  The proceeds from the sale of the Trust Preferred Securities will be loaned to the Company under subordinated Debentures (the “Debentures”) issued to the Trust pursuant to an Indenture.  The Debentures are the only asset of the Trust.  The Trust Preferred Securities have been issued to a pooling vehicle that will use the distributions on the Trust Preferred Securities to securitize note obligations.  The securities issued by the Trust are includable for regulatory purposes as a component of the Company’s Tier I capital.
The Trust Preferred Securities and the Debentures mature in 30 years and are redeemable by the Company after five years.  Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of 1.62% over the three month LIBOR Rate.  The Company reflects borrowed funds in the amount of $4.1 million as of June 30, 2011 and 2010 and interest expense of $40 and $39 for the periods ended June 30, 2011 and 2010.
 
The bank had borrowed $4,500 in overnight funds at the Federal Reserve discount window on December 31, 2010 at a rate of 0.75%
 
A summary of maturities of these borrowings over the next five years is as follows:
 
(dollars in thousands)
 
                 Year
 
Amount
 
                 2011
    112  
                 2012
    232  
                 2013
    2,244  
                 2014
    1,257  
                 2015
    271  
                 Thereafter
    9,887  
 
    14,003  
 
Note 4. - Comprehensive Income
 
The Company is required to present comprehensive income in a full set of general-purpose financial statements for all periods presented.  The following represents comprehensive income for the six and three month periods ended June 30, 2011 and June 30, 2010.
 
The following table represents other comprehensive income before tax and net of tax:
 
(in thousands)
 
For the three months ended
June 30,
   
For the six months ended
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Unrealized gain (loss) on securities
     available for sale
  $ 618     $ 418     $ 409     $ 490  
Pension liability adjustment
    -       -       -       (139 )
Tax effect
    (247 )     (167 )     (163 )     (140 )
     Net of tax effect
    371       251       246       211  
Net income as reported
    636       507       1,302       935  
Total comprehensive income
  $ 1,007     $ 758     $ 1,548     $ 1,146  


Note 5 – Net Income Per Common Share
 
MVB determines basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income by the weighted average number of shares outstanding increased by the number of shares that would be issued assuming the exercise of stock options. At June 30, 2011 and 2010, stock options to purchase 148,423 and 127,658 shares at an average price of $15.13 and $15.82, respectively, were outstanding.  For the three months ended June 30, 2011 and 2010, the dilutive effect of stock options was 36,141 and 26,681 shares, respectively.
 
Note 6 – Recent Accounting Pronouncements
 
In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Subtopic 820-10 to clarify existing disclosures, require new disclosures, and includes conforming amendments to guidance on employers’ disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.  The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
 
In April 2010, the FASB issued ASU 2010-18, Receivables (Topic 310):  Effect of a Loan Modification When the Loan is a Part of a Pool That is Accounted for as a Single Asset – a consensus of the FASB Emerging Issues Task Force.  ASU 2010-18 clarifies the treatment for a modified loan that was acquired as part of a pool of assets.  Refinancing or restructuring the loan does not make it eligible for removal from the pool, the FASB said.  The amendment will be effective for loans that are part of an asset pool and are modified during financial reporting periods that end July 15, 2010 or later, and is not expected to have a significant impact on the Company’s financial statements.
 
In July 2010, FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.  ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010.  The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption.  The Company has presented the necessary disclosures in Note 2 herein.
 
In August, 2010, the FASB issued ASU 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules.  This ASU amends various SEC paragraphs pursuant to the issuance of Release No. 33-9026:  Technical Amendments to Rules, Forms, Schedules, and Codification of Financial Reporting Policies and is not expected to have a significant impact on the Company’s financial statements.
 
In August, 2010, the FASB issued ASU 2010-22, Technical Corrections to SEC Paragraphs – An announcement made by the staff of the U.S. Securities and Exchange Commission.  This ASU amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics and is not expected to have a significant impact on the Company’s financial statements.
 
In September, 2010, the FASB issued ASU 2010-25, Plan Accounting – Defined Contribution Pension Plans.  The amendments in this ASU require that participant loans be classified as notes receivable from participants, which are segregated from plan investments and measured at their unpaid principal balance plus any accrued but unpaid interest.  The amendments in this update are effective for fiscal years ending after December 15, 2010 and are not expected to have a significant impact on the Company’s financial statements.
 



 
In October, 2010, the FASB issued ASU 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts.  This ASU addresses the diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral, The amendments are effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2011 and are not expected to have a significant impact on the Company’s financial statements.
 
In December, 2010, the FASB issued ASU 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.  This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts.  For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists.  In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating an impairment may exist.  The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  For public entities, the amendments in this Update are effective for fiscal year, and interim periods within those years, beginning after December 15, 2010.  Early adoption is not permitted.  For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Nonpublic entities may early adopt the amendments using the effective date for public entities.  This ASU is not expected to have a significant impact on the Company’s financial statements.
 
In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations.  The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  The amendments also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.   The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted.  This ASU is not expected to have a significant impact on the Company’s financial statements.
 
In January 2011, the FASB issued ASU 2011-01, Receivables (Topic 310):  Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.  The amendments in this Update temporarily delay the effective date of the disclosures about troubled debt restructurings in Update 2010-20, enabling public-entity creditors to provide those disclosures after the FASB clarifies the guidance for determining what constitutes a troubled debt restructuring.  The deferral in this Update will result in more consistent disclosures about troubled debt restructurings.  This amendment does not defer the effective date of the other disclosure requirements in Update 2010-20.  In the proposed Update for determining what constitutes a troubled debt restructuring, the FASB proposed that the clarifications would be effective for interim and annual periods ending after June 15, 2011.  For the new disclosures about troubled debt restructurings in Update 2010-20, those clarifications would be applied retrospectively to the beginning of the fiscal year in which the proposal is adopted.  The adoption of this guidance in not expected to have a significant impact on the Company’s financial statements.
 
In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310):  A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.  The amendments in this Update provide additional guidance or clarification to help creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring.  The amendments in this Update are effective for the first interim or annual reporting period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning annual period of adoption.  As a result of applying these amendments, an entity may identify receivables that are newly considered impaired.  For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011.  This ASU is not expected to have a significant impact on the Company’s financial statements.
 



 
In April 2011, the FASB issued ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements.  The main objective in developing this Update is to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity.  The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion.  The amendments in this Update apply to all entities, both public and nonpublic.  The amendments affect all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity.  The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date.  Early adoption is not permitted.  This ASU is not expected to have a significant impact on the Company’s financial statements.
 
In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs.  Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  The amendments in this Update are to be applied prospectively.  For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011.  Early application by public entities is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.
 
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income.  The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income.  To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated.  The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income.  All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update.  For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter.  The amendments in this Update should be applied retrospectively, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.
 
Note 7 – Fair Value of Financial Instruments
 
Level I:      Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
 
Level II:    Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.  The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
 


Level III:    Assets and liabilities that have little to no pricing observability as of the reported date.  These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
 
The following table presents the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of June 30, 2010 by level within the fair value hierarchy.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 
(In Thousands)
June 30, 2011
 
 
Level I
 
Level II
 
Level III
 
Total
 
Assets:
               
   Investment securities, available for sale
      75,900         75,900  
      Other Real Estate Owned
      310         310  
       Impaired Loans
         
361
    361  

 
(In Thousands)
December 31, 2010
 
 
Level I
 
Level II
 
Level III
 
Total
 
Assets:
               
   Investment securities, available for sale
      61,824         61,824  
      Other Real Estate Owned
      402         402  
       Impaired Loans
         
856
    856  

 
The following summarizes the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial instruments.
 
Short-term financial instruments:  The carrying values of short-term financial instruments including cash and due from banks, interest bearing balances – FHLB, and certificates of deposit in other banks approximate the fair value of these instruments.
 
Securities:  Estimated fair values of securities are based on quoted market prices, where available.  If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities.
 
Loans:  The estimated fair values for loans are computed based on scheduled future cash flows of principal and interest, discounted at interest rates currently offered for loans with similar terms of borrowers of similar credit quality.  No prepayments of principal are assumed.
 
Accrued interest receivable and payable:  The carrying values of accrued interest receivable and payable approximate their estimated fair values.
 
Repurchase Agreements:  The fair values of repurchase agreements approximate their estimated fair values.
 
Deposits:  The estimated fair values of demand deposits (i.e., non interest bearing checking, NOW and money market), savings accounts and other variable rate deposits approximate their carrying values.  Fair values of fixed maturity deposits are estimated using a discounted cash flow methodology at rates currently offered for deposits with similar remaining maturities.  Any intangible value of long-term relationships with depositors is not considered in estimating the fair values disclosed.
 
Off-balance sheet instruments:  The fair values of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of agreements and the present credit standing of the counterparties.  The amounts of fees currently charged on commitments and standby letters of credit are deemed significant, and therefore, the estimated fair values and carrying values are not shown.


The carrying values and estimated fair values of the Company’s financial instruments are summarized as follows:

   
June 30, 2011
 
   
Carrying
Value
   
Estimated
Fair Value
 
   
(Dollars in thousands)
 
Financial assets:
           
   Cash and due from banks
    18,213       18,213  
   Interest bearing balances
    4,313       4,313  
   Securities available-for-sale
    75,900       75,900  
   Securities held-to-maturity
    6,226       6,441  
   Loans
    329,480       340,353  
   Accrued interest receivable
    1,417       1,417  
    $ 435,549     $ 446,637  
                 
Financial liabilities:
               
   Deposits
  $ 348,927     $ 346,485  
   Repurchase agreements
    50,222       50,257  
   Federal Home Loan Bank Borrowings
    9,879       10,857  
   Accrued interest payable
    294       294  
   Long-term debt
    4,124       4,124  
    $ 413,446       412,017  
                 
 
   
December 31, 2010
 
   
Carrying
Value
   
Estimated
Fair Value
 
   
(Dollars in thousands)
 
Financial assets:
           
   Cash and due from banks
    3,713       3,713  
   Interest bearing balances
    27,825       27,878  
   Securities available-for-sale
    61,824       61,824  
   Securities held-to-maturity
    7,460       7,442  
   Loans
    294,044       302,277  
   Accrued interest receivable
    1,398       1,398  
    $ 396,264     $ 404,532  
                 
Financial liabilities:
               
   Deposits
  $ 300,434     $ 307,584  
   Repurchase agreements
    47,623       47,671  
   FHLB and other Borrowings
    28,614       32,305  
   Accrued interest payable
    378       378  
   Long-term debt
    4,124       4,124  
    $ 381,173       392,062  
                 


Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.  Fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.
 
Amortized cost and approximate fair values of investment securities held-to-maturity at June 30, 2011, including gross unrealized gains and losses, are summarized as follows:
 
 
(Dollars in thousands)
                       
                     
Approximate
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gain
   
Loss
   
Value
 
                         
Municipal securities
  $ 6,226     $ 215     $ -     $ 6,441  
                                 
    $ 6,226     $ 215     $ -     $ 6,441  

 
Amortized cost and approximate fair values of investment securities held-to-maturity at December 31, 2010, including gross unrealized gains and losses, are summarized as follows:
 
(Dollars in thousands)
                       
                     
Approximate
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gain
   
Loss
   
Value
 
                         
Municipal securities
  $ 6,460     $ 27     $ (62 )     $ 6,425  
U.S. Agency securities
    1,000       17       -       1,017  
    $ 7,460     $ 44     $ (62 )   $ 7,442  
 
   
Amortized cost and approximate fair values of investment securities available-for-sale at June 30, 2011 are summarized as follows:
                     
Approximate
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gain
   
Loss
   
Value
 
                         
U. S. Agency securities
  $ 47,460     $ 773     $ (4 )   $ 48,229  
Mortgage-backed securities
    27,245       316       (14 )     27,547  
Other securities
    124       -       -       124  
    $ 74,829     $ 1,089     $ (18 )   $ 75,900  
                                 


Amortized cost and approximate fair values of investment securities available-for-sale at December 31, 2010 are summarized as follows:
 
                     
Approximate
 
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
   
Cost
   
Gain
   
Loss
   
Value
 
                         
U. S. Agency securities
  $ 34,903     $ 453     $ (76 )   $ 35,280  
Mortgage-backed securities
    26,135       306       (21 )     26,420  
Other securities
    124       -       -       124  
    $ 61,162     $ 759     $ (97 )     61,824  
                                 
 
The following tables summarize amortized cost and approximate fair values of securities by maturity:
 
   
June 30, 2011
 
   
Held to Maturity
   
Available for sale
 
         
Approximate
         
Approximate
 
   
Amortized
   
Fair
   
Amortized
   
Fair
 
   
Cost
   
Value
   
Cost
   
Value
 
                         
Within one year
  $ 115     $ 115     $ -     $ -  
After one year, but within five
    -       -       45,960       46,727  
After five years, but within ten
    3,400       3,557       1,500       1,502  
After ten Years
    2,711       2,769       27,369       27,671  
Total
  $ 6,226     $ 6,441     $ 74,829     $ 75,900  

The Company's investment portfolio includes securities that are in an unrealized loss position as of June 30, 2011, the details of which are included in the following table.  Although these securities, if sold at June 30, 2011 would result in a pretax loss of $18, the Company has no intent to sell the applicable securities at such market values, and maintains the Company has the ability to hold these securities until all principal has been recovered.  Declines in the market values of these securities can be traced to general market conditions which reflect the prospect for the economy as a whole.  When determining other-than-temporary impairment on securities, the Company considers such factors as adverse conditions specifically related to a certain security or to specific conditions in an industry or geographic area, the time frame securities have been in an unrealized loss position, the Company's ability to hold the security for a period of time sufficient to allow for anticipated recovery in value, whether or not the security has been downgraded by a rating agency, and whether or not the financial condition of the security issuer has severely deteriorated.  As of June 30, 2011, the Company considers all securities with unrealized loss positions to be temporarily impaired, and consequently, does not believe the Company will sustain any material realized losses as a result of the current temporary decline in market value.

The following table discloses investments in an unrealized loss position:
 
 
At June 30, 2011, total temporary impairment totaled $18.
 
             
Description and number
 
Less than 12 months
   
12 months or more
 
of positions
 
Fair Value
   
Unrealized Loss
   
Fair Value
   
Unrealized Loss
 
                         
U.S. Agencies(2)
  $ 5,287 -     $ (4 )   $ -     $ -  
Mortgage-backed securities(7) (11)
    8,588       (14 )     -       -  
Municipal securities(-)
    -               -       -  
    $ 13,875     $ (18 )   $ -     $ -  



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Private Securities Litigation Reform Act of 1995 indicates that the disclosure of forward-looking information is desirable for investors and encourages such disclosure by providing a safe harbor for forward-looking statements that involve risk and uncertainty. All statements other than statements of historical fact included in this Form 10-Q including statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934.  In order to comply with the terms of the safe harbor, the corporation notes that a variety of factors, (e.g., changes in the national and local economies, changes in the interest rate environment, competition, etc.) could cause MVB’s actual results and experience to differ materially from the anticipated results or other expectations expressed in those forward-looking statements.
 
At June 30, 2011 and for the Six and Three Months Ended June 30, 2011 and 2010:
 
   
Six Months Ended
June 30
   
Three Months Ended
June 30
 
   
2011
   
2010
   
2011
   
2010
 
Net income to:
                       
Average assets
    .60 %     .50 %     .57 %     .52 %
Average stockholders’ equity
    7.06       6.85       6.65       7.37  
Net interest margin
    3.13       2.81       3.10       2.80  
                                 
Average stockholders’ equity to average assets
    8.48       7.28       8.50       7.10  
Total loans to total deposits (end of period)
    94.43       88.11       94.43       88.11  
Allowance for loan losses to total loans (end of period)
    0.80       1.04       0.80       1.04  
Efficiency ratio
    69.25       71.04       71.30       70.39  
Capital ratios:
                               
Tier 1 capital ratio
    13.84       12.18       13.84       12.18  
Risk-based capital ratio
    14.73       13.26       14.73       13.26  
Leverage ratio
    9.28       8.00       9.28       8.00  
Cash dividends as a percentage of net income
    N/A       N/A       N/A       N/A  
Per share data:
                               
Book value per share (end of period)
  $ 17.39     $ 17.20     $ 17.39     $ 17.20  
Market value per share  (end of period)*
    20.00       20.00       20.00       20.00  
Basic earnings per share
    .62       .58       .29       .32  
Diluted earnings per share
    .61       .57       .29       .31  
 
*           Market value per share is based on MVB’s knowledge of certain arms-length transactions in the stock as MVB’s common stock is not traded on any market.  There may be other transactions involving either higher or lower prices of which MVB is unaware.
 


Introduction
 
The following discussion and