MVB Financial Corp. Common Stock Q2 2026 Earnings Call

Welcome to MVB Financial Corp second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Amy Baker, Vice President, Corporate Communications and Marketing. Thank you. You may begin.

Thank you, operator. Good afternoon, and thank you all for joining us today for MVB's second quarter 2026 earnings conference call. 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 second quarter results and commentary. 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. Good afternoon, everyone. Thank you for joining us.

We delivered strong second quarter results with net income of $12.3 million, or $0.93 per diluted share, up significantly from both the first quarter of 2026 and the second quarter of last year. The broad-based outperformance was driven by continued expansion of our net interest margin, disciplined loan and deposit growth, cost management, and momentum across our payment platform and fintech business. These results demonstrate the progress we're making in building a stronger, more diversified company with increasing earnings power. Before I discuss the quarter, I'd like to briefly welcome those who may be joining one of our earnings calls for the first time. MVB is a fintech-enabled bank that combines a core banking franchise with scaled fintech capabilities across payments, Banking as a Service, and gaming.

This business model provides diversified sources of revenue and deposits while creating opportunities for growth, innovation, and improved operating efficiency. Turning to the quarter, we delivered another quarter of strong loan growth, up 12% quarter-over-quarter on an annualized basis, representing the fifth consecutive quarter of net loan growth driven by continued momentum across several of our specialty lending businesses. That growth, combined with disciplined balance sheet management, contributed to another quarter of meaningful net interest margin expansion of 43 basis points sequentially and continued growth in net interest income. We're also encouraged by the improving trends in our underlying earnings trajectory. While reported earnings benefited from the gain recognized during the quarter, we continue to see increasing earnings power across our core businesses as margins expand, loan growth accelerates, and our diversified sources of revenue continue to grow. Credit quality remained another area of strength.

As Mike will discuss in more detail, the overall loan book continues to perform well and in line with our expectations. The higher provision this quarter was not driven by a deterioration in our broad asset quality, but by a couple of isolated and limited loan portfolios that we're diligently working to resolve. Our successful resolution of the largest non-performing loan during the quarter through full repayment and no loss gives us confidence in our ability to detect potential problem loans early and resolve timely on a favorable term. Within our fintech business, we continue to see encouraging momentum. During the second quarter, we successfully launched three new fintech partners and products across issuing and money movement. Year to date, we have launched five fintech partners compared to five new partnerships that closed all of last year.

Demonstrates our ability to continue executing against what we believe is one of the industry's strongest fintech pipelines. It is also worth noting that the second quarter has historically been a seasonally softer period for deposit growth within other areas of our fintech business, making this quarter's performance particularly encouraging. Just as importantly, we continue to maintain a robust pipeline of opportunities, providing confidence in our ability to sustain that momentum going forward. In addition to the strong growth within the fintech banking platform, we see encouraging long-term growth opportunities within our specialty lending business, including the recent addition to John Madea as Head of Specialty Lending. We're excited about the growth trajectory of this business over the next several quarters.

Alongside the strong earnings growth, we're also continuing to invest in the next phase of the business. That includes expanding our payment capabilities, advancing our AI and automation initiatives, and continuing to build the infrastructure and talent needed to support our sponsorship banking strategy and overall business. These investments are intended to improve how we operate, enhance the solutions we provide to clients, further strengthen our long-term competitive position, and strengthen our operational efficiencies. At the same time, we're seeing the benefit of investments we've made over the past several years in our people, technology, risk management, and operating infrastructure. Those investments created the foundation that support our business today. We believe they're increasingly being reflected in our financial performance through stronger operating leverage and increasing earnings power.

As an example, our risk management staffing declined sequentially from 123 to 116 during the quarter, and we see further opportunity to streamline the operations. Finally, I'd like to briefly touch on another aspect of our fintech strategy. As previously disclosed, we recognized a gain during the quarter related to our existing fintech investment. Together with the successful monetization of our internally incubated Victor Technologies platform last year, these transactions demonstrate our ability to both incubate and invest in innovative fintech businesses. Beyond the financial impact, they also reflect another way they're creating shareholder value while generating capital that can be reinvested to support the continued growth across the company. To summarize, there are four things we'd want you to take away from this quarter. First, our core earnings power continues to build with net income and returns improving meaningfully both sequentially and year-over-year.

Second, our two-engine model is working as designed. Core banking is growing loans and deposits at a healthy pace while continuing to lower our cost of funds. Our fintech banking platform is scaling fee income and adding new partners. Third, our credit profile improved this quarter with the resolution of our largest non-performing loan, even as we took a prudent forward-looking approach to provisioning. Fourth, we continue to invest in specialty lending, fintech sponsorship, technology, and in the regulatory infrastructure that lets us scale safely, all while returning capital to shareholders through our buyback program. Overall, we're very pleased with our performance during the quarter and the momentum in the business. Worth noting, our team is very hungry for continued improvements throughout the year and beyond. We're excited and confident in the long-term opportunities ahead, and the business is well-positioned to drive sustained shareholder value.

I believe the best is still in front of us. With that, I'll turn the call over to Mike Sumbs to discuss our financial results in more details.

Thank you, Larry, and good afternoon, everyone. I'll spend a few minutes providing some additional detail on the quarter before we open the line for questions. Net interest income increased to $32.3 million during the quarter, a 13% increase from the prior quarter. Net interest margin on a fully tax-equivalent basis expanded 43 basis points to 4.16% from 3.73% in the prior quarter. There was approximately $2.3 million of non-recurring net interest income in the quarter, primarily associated with the payoff of our largest non-performing loan. On a core basis, net interest income increased approximately 5.5% from the first quarter, while core net interest margin on a fully tax-equivalent basis expanded 14 basis points to 3.87%, reflecting continued loan growth, improvement in our funding profile, and further optimization of our balance sheet. We expect continued core net interest margin expansion over the remainder of 2026, albeit at a slower pace.

Turning to the balance sheet, loans increased 3% from the prior quarter or 12% annualized, representing our fifth consecutive quarter of loan growth. We expect loan growth to follow a similar pace in the second half of the year. Deposits increased 7.4%, including 5.7% growth in non-interest-bearing deposits, driven primarily by payments-related deposit growth. The balance sheet ended the quarter in a very strong liquidity position with a loan-to-deposit ratio of just under 80%. Non-interest-bearing deposits represented 34.4% of total deposit balances, further highlighting the quality of MVB's low-cost funding base. Non-interest income increased to $18.8 million, reflecting the previously announced $10 million pre-tax gain on an existing fintech investment. Excluding that gain, our core fee business was up 7%, led by growth in payment card and service charge income.

Payment card and service charge income increased 18% from the first quarter and 29% from the second quarter of 2025, demonstrating positive momentum as we continue to convert on our pipeline of new fintech partners. While we expect non-interest revenue to grow in the long term due to the strong pipeline, note that the third quarter is typically seasonally softer relative to the second quarter. On the expense side, expenses were up a little more than $2 million from the first quarter, of which approximately $600,000 was non-recurring. The increase in expenses was driven by a combination of annual salary adjustments, higher incentive compensation reflecting stronger financial performance, investment in revenue-generating personnel, as well as continued investment in fintech client onboarding efficiency, technology, and AI initiatives.

Turning to credit, the successful payoff of our largest non-performing loan contributed to improvement across several of our key credit quality metrics during the quarter. Non-performing loans decreased $5.5 million in the quarter to $29.2 million. The decrease reflected the resolution of an approximately $12 million non-performing loan, which was offset by several smaller credits moving into non-performing status. The migration into non-performing was comprised primarily of smaller credits within our commercial and SBA portfolios, as well as a portion of a tax refund portfolio that has experienced delays in repayment due to various factors impacting the timing of tax refunds. Criticized loans and classified loans both declined from the first quarter, demonstrating improvement in early-stage credit quality indicators. Net charge-offs were 23 basis points annualized, down three basis points from the prior quarter. Provision expense increased to $4.7 million in the quarter, driven by three factors.

First, we continue to grow the loan portfolio and reserve accordingly for that new growth. Second, we established specific reserves on a small number of credits in the quarter. Third, we updated certain qualitative factors within our allowance model based on recent economic conditions, which reflect higher interest rates and inflationary pressures from geopolitical events taking place at the time of the model update. Those three factors drove the increase in provision despite the overall improvement we saw in our underlying credit metrics during the quarter. Our capital position remained strong during the quarter. Tangible book value per share increased to $26.52, while tangible common equity ratio remained steady at 9.7%. During the quarter, we also repurchased approximately 48,000 shares under our existing authorization.

The gain recognized during the quarter further strengthened an already solid capital position, providing us with increased financial flexibility both now and as we look ahead. With that, Operator, we're ready to open the line for questions.

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from Brett Rabatin with StoneX Group. Please proceed. Hey, good afternoon, guys.

Thanks for the questions. Wanted just to start on, you mentioned, Mike, my line was breaking up a little bit towards the end of your prepared comments, I heard you indicated you expect the pace of loan growth in the back half of the year to be similar. Does that mean kind of low double digit? How much of that might come from specialty lines of business? Any thoughts on commercial versus consumer?

Hey, Brett. Yeah, great question. As I mentioned, we expect the loan growth to continue at roughly a similar pace to what we saw in the first and second quarter, $60 million-$70 million per quarter. We're really excited about the specialty line of business that we mentioned in the prepared remarks. It's hard to predict exactly how much of the growth will come from that business, given it's new, it has a really strong pipeline. We could see a really solid chunk of that prospective growth as soon as the third quarter coming from our specialty lending vertical.

Okay. That's helpful. On just the build-out of tech and AI, just what that does to expenses from here, any thoughts on the expense outlook? I know you guys are on the front leading edge, so to speak, of bots and AI relative to many banks. Just any thoughts on how you see that improving your operational tasks or anything you could share with us on AI developments? Thanks. Hey, Brett, Larry. Hey, thanks again for joining the call.

On the AI side, we feel really confident on where it's going. We see that we call our digies, which we're using, some call bots, really coming on strong. We now have 31 digies that they're either built or are being built. It's helped a ton, especially in our risk and compliance area. We have some really good news coming from that in the third quarter as we continue to implement the AI models and move forward there. I'll let Mike address the expense side.

Yeah. I really think about AI in two ways. One, it's really revolutionizing how we work and how efficient we are with the workforce that we have. The second part is how does that translate into the expense side? That's really the part where we're taking a very crawl, walk, run approach with rationalizing expenses using AI. We want to certainly have human in the loop on all we do and really be deliberate about how we phase that in. Overall, I'd say we've made the investments. The heavy expense related to AI, it's sort of baked in. We see a lot of future upside from an operating leverage and cost management perspective going forward, given where we're at in our AI journey.

Okay. With all that said, Mike, what do you think about an expense pace from here relative to 2Q?

Yeah. The increase, as I mentioned, Brett, was primarily driven by annual increases to salaries and incentive accruals that took place in the second quarter. Overall, I'd say going forward, we feel good about maintaining or being slightly below where we're at second quarter for the foreseeable few quarters.

Okay. That's really helpful. Thanks, guys.

Thanks, Brett. Thanks, Brett. Our next question is from Joe Antounis with Raymond James.

Please proceed. Good afternoon. Hey, Joe.

In the investor deck, you highlighted 10 fintech launches since the second quarter of 2025 that have generated about $2 million of revenue and $158 million of low-cost deposits. Do you have a sense for what % of those partners have reached their expected run rate today, and how much revenue remains to be realized as those programs mature? Just trying to get a sense for how much juice is left in the lemon.

Hey, Joe. I like the lemon squeeze, we actually see this like a winery. We're talking about grapes here instead of lemons. What I mean is we're going with the fruit theme. Thanks. What I mean by that is each one of these fintech clients are like a barrel of fine wine. They are in the process, as you noted, of maturing, and it's going to take time for them to come on, as you point out. I would say right now we're probably at 25% of what we plan them to contribute to the onward earnings going forward. The good news is, as you noted, all of last year, we onboarded five new fintech clients. Looking at the first half of this year already, we have onboarded five in the first six months.

The good news, the second half of the year will potentially look at another 15, which would mean in 2026, we will have onboarded approximately 20 new fintech clients with a good trajectory for both deposits and fee income. We expect those clients to come on, again, slowly. It's, again, a maturation process. It's like, again, the example of using the wine barrels. We're very excited about it, and the team has improved greatly on onboarding and getting clients up and running. It's been very positive. We're excited about the future there.

That's encouraging to hear. Oh, sorry, go ahead.

Just to add a little more on that, Joe. We mentioned the $2 million of net new fee revenue year to date. About 60% of that came in the second quarter. About $800,000 in the first quarter, $1.2 million in the second quarter. That's just from new clients. You can see there's still a ramp up in what those new clients are delivering to us. We expect that to grow going forward.

If you got 6 million more of wine coming out of this cohort, are we drinking that in 2027 or are we drinking that in back half of the year?

Yes. It's a good question. I would say late 2026 to early 2027 is when we expect to really start to see the full benefit of clients that have been launched on the platform starting in Q4 of last year and Q1 of this year. Keep in mind, this is going to be a rolling harvest of grapes as we continue to add new clients into the launch platform, and they continue to mature on That was very helpful.

I have to abandon the fruit theme. I can't keep up. Just kind of moving to capital. Following both the Victor monetization, the recent fintech investment gain, how are you thinking about capital deployment? Should we think that this gets deployed towards buybacks, additional fintech investments? Obviously, you're still building out the AI capabilities. Acquisitions or just for that organic growth that's on the come?

Yeah. Clearly we're continuing to grow the balance sheet, so that's organic growth of the existing balance sheet sort of first and foremost. We were active in our share repurchase this quarter. We bought back about $1.2 million of stock. We'll continue to be opportunistic. It's going to be price-driven on the share buyback. Really the focus is continuing to grow the platform, the balance sheet, and continue to invest in what we see as high return business lines.

Okay. That makes sense. Lastly from me, you characterize the higher provision as being driven by a couple isolated portfolios rather than being anything broad-based. Can you provide any more details on some of those portfolios that drove the higher provision?

We had about $3.3 million of the provision related to specific reserves. That was split between our legacy SBA portfolio, which was largely originated in the 2021, early 2022 timeframe. We have not been originating new SBA credits for quite some time. The balance was across a couple of smaller commercial loans. Generally, isolated and idiosyncratic loans is where we saw the majority of the specific reserve take place in the quarter. As we mentioned, we had some updates to our allowance model taking into account the recent developments, particularly the Middle East with higher inflation or expected higher inflation and higher interest rates. That drove some of our general allocations to a higher level.

That makes sense. Actually, I do have one more if that's all right. You had talked about potentially another 15 partners that you could onboard in the back half of the year. Is there any limiting constraints to the onboarding process?

Joe, we'll keep with the food theme. It's very much like a gourmet restaurant. It's not like a fast food type McDonald's thing. Each client has a determining need that you have to really cater to what they have for their product set and what we need to do. That's probably the biggest limiting piece of it. Our capacity has grown from the AI perspective, from our process improvement perspective. Our tech overall has been excellent. It's really dependent on the client base that we're onboarding. We do prioritize based on something we call REVO. It's R-E-V-O. That stands for risk, and then it stands for the level of effort it'll take to onboard. V is value, which is the profitability, and the O is the opportunity cost. If you do something, you have to give up something else to be able to do that.

We prioritize based on that REVO. We push clients through by that. We do see a very strong pipeline of fintech clients. There actually continues to be. Last time we talked, there were over 50 in the pipeline. There continues to be over 50, even though we have pushed some through, as we noted earlier. It continues to be very robust, and I think one of the best in the industry as far as fintech pipelines. As far as limiting factors, again, it's going to depend on the client we're bringing on. It's going to be the biggest limiting factor, their needs.

I appreciate it. I guess I'll take the check. Thank you for taking my questions.

Sure thing. Thanks, Joe. As a reminder, just star one on your telephone keypad if you would like to ask a question.

Our next question is from Janet Lee with TD Cowen. Please proceed. Good afternoon. Hi, Janet.

Hi, Janet. Circling back on credit and provision, is there any more workout to be done on any parts of the portfolio that would have an upward bias to your allowance for loan loss reserve ratio of 1.14% in the second quarter?

Should we expect more of these to come for any reason?

Janet, thanks for the question. Clearly we had a nice build in our allowance level this quarter, going from 94 basis points to 1.14%. At this point, we feel like the portfolio is appropriately reserved, but of course, we'll continue to monitor it I'll make updates to our model as needed.

Okay. Got it. Could you explain a little bit around. You talked about how your NIM should be expanding in the back half of 2026, albeit at a more moderating pace. Are you saying that NIM will increase off of the 387 level in the second quarter? What do you expect for your funding cost to do in the back half of 2026?

Yeah. We had a great quarter of NIM expansion, about 14 basis points on a core basis. We do see continued opportunity for expansion off that level. I think more of it's on the asset mix and repositioning into higher-yielding loans and also just a mix shift of our earning assets into more loans. We really benefited from three things in the quarter from a NIM perspective. That was decreasing our funding cost by about four basis points, shifting more of our earning assets into loans, and carrying less cash on the balance sheet. I think from where we're at from a rate standpoint, higher for longer, we still have some opportunity on the funding side. I think it's going to be relatively modest in terms of decreasing funding costs.

We've added about $150 million of net new fintech deposits, which tend to be net lower than our cost of funding. Help pull that cost of funding down as we reposition some of our CDs and higher-cost funding into lower-cost fintech deposits. I think we still have opportunity on the funding side. Really the other lever that we're continuing to push on is positioning more of our earning assets into loans and higher-yielding specialty loans.

Okay. Got it. Could you give us a refresh on your asset sensitivity profile? Does your NIM benefit if there's a rate hike?

Yeah. We are asset sensitive. I mean, a couple of drivers there are having roughly 35% of our deposits in a non-interest-bearing status. Carrying a healthy balance of cash, which clearly benefits immediately from a rate hike, as well as a fairly short-term portfolio in terms of repricing and a healthy amount of variables. The balance sheet is overall asset sensitive. Would benefit from a rate hike, although it'll take a little bit of time for that to flow into the margin numbers.

Okay. Got it. Thanks for taking my questions.

Thanks, Janet. Thanks, Janet. There are no further questions in the queue.

This will conclude the question and answer session. I would like to hand the conference back over to Larry for closing remarks.

Thank you, operator. Thank you all again for your time and continued interest in MVB Financial. We're energized by the opportunities in front of us and look forward to updating you on our progress in the next quarter. Have a great evening. Thank you.

This will conclude today's conference. You may disconnect at this time, and thank you for your participation.