Q2 2026 MVB Financial Corp Earnings Call
Speaker #1: Good evening. 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.
Speaker #1: 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.
Speaker #1: Thank you. You may begin.
Speaker #2: Thank you, operator. Good afternoon, and thank you all for joining us today for the Q2 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.
Speaker #2: 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.
Speaker #2: Maza, and CFO Mike Sums. Larry will provide high-level second quarter results and commentary, and Mike will discuss the quarter's financial results in more detail, after which we will open the call for your questions.
Speaker #2: 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, which involve risks and uncertainties.
Speaker #2: 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.
Speaker #2: The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may present information which is intended to supplement, but not substitute for, the most directly comparable GAAP measures.
Speaker #2: 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.
Speaker #2: With that, I'd like to turn the call over to MVB's President and CEO, Larry F. Mazza.
Speaker #3: Good afternoon, everyone, and 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.
Speaker #3: 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.
Speaker #3: These results demonstrate the progress we're making as a 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.
Speaker #3: 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.
Speaker #3: Turning to the quarter, we delivered another quarter of strong loan growth, up 12 percent 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.
Speaker #3: That growth, combined with disciplined balance sheet management, contributed to another quarter of meaningful net interest margin expansion—up 43 basis points sequentially—and continued growth in net interest income.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: The higher provision this quarter was not driven by deterioration in our broad asset quality, but by a couple of isolated and limited loan portfolios that we are diligently working to resolve.
Speaker #3: Our successful resolution of the largest nonperforming 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.
Speaker #3: Within our fintech business, we continue to see encouraging momentum. During the second quarter, we successfully launched three new fintech partners and products. Year to date, we have launched five fintech partners compared to five new partnerships that closed all of last year.
Speaker #3: Those launches will contribute to long-term, strong growth in payments related to deposits and fee income and demonstrate our ability to continue executing against what we believe is one of the industry's strongest fintech pipelines.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: Including the recent addition of John Medea as head of specialty lending, we're excited about the growth trajectory of this business over the next several quarters.
Speaker #3: 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.
Speaker #3: These investments are intended to improve how we operate and enhance the solutions we provide to clients, further strengthen our long-term competitive position, and improve our operational efficiencies.
Speaker #3: 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.
Speaker #3: Those investments created the foundation that supports our business today, and we believe they're increasingly being reflected in our financial performance through stronger operating leverage and increasing earnings power.
Speaker #3: As an example, 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.
Speaker #3: As previously disclosed, we recognized the 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.
Speaker #3: Beyond the financial impact, they also reflect another way they're creating shareholder value, while generating capital that can be reinvested to support continued growth across the company.
Speaker #3: To summarize, there are four things we'd like 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.
Speaker #3: 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, and our fintech banking platform is scaling fee income and adding new partners.
Speaker #3: Third, our credit profile improved this quarter with the resolution of our largest nonperforming loan, even as we took a prudent forward-looking approach to provisioning.
Speaker #3: And 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.
Speaker #3: Overall, we're very pleased with our performance during the quarter and the momentum in the business. It's worth noting our team is very hungry. We'll continue improvements throughout the year and beyond.
Speaker #3: 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.
Speaker #3: With that, I'll turn the call over to Mike Summs to discuss our financial results in more detail.
Speaker #1: 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.
Speaker #1: 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%, up from 3.73% in the prior quarter.
Speaker #1: There was approximately 2.3 million of non-recurring net interest income in the quarter, primarily associated with the payoff of our largest nonperforming 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.
Speaker #1: 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.
Speaker #1: 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 to deposit growth.
Speaker #1: 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.
Speaker #1: 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 businesses were up 7%, led by growth in payment, card, and service charge income.
Speaker #1: Payment, card, and service-charged 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.
Speaker #1: 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.
Speaker #1: 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.
Speaker #1: Turning to credit, the successful payoff of our largest nonperforming loan contributed to improvement across several of our key credit quality metrics during the quarter.
Speaker #1: Nonperforming loans decreased $5.5 million in the quarter to $29.2 million. The decrease reflected the resolution of an approximately $12 million nonperforming loan, which was offset by several smaller credits moving into nonperforming status.
Speaker #1: The migration into nonperforming 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.
Speaker #1: 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 3 basis points from the prior quarter.
Speaker #1: 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.
Speaker #1: Second, we established specific reserves on a small number of credits in the quarter. And 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.
Speaker #1: 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 remains strong during the quarter.
Speaker #1: Tangible book value per share increased to $26.52, while the tangible common equity ratio remained steady at 9.7%. During the quarter, we also repurchased approximately 48,000 shares under our existing authorization. In addition, 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.
Speaker #1: With that operator, we're ready to open the line for questions.
Speaker #2: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker #2: You may press star 2 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.
Speaker #2: One moment while we pull up questions. Our first question is from Brett Rabbiton with StoneX Group. Please proceed.
Speaker #3: Hey, good afternoon, guys. Thanks for the questions. Wanted just to start on you mentioned and, Mike, my line was breaking up a little bit towards the end of your prepared comments, but I heard you indicate that 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 and then how much of that might come from specialty lines of business and any thoughts on commercial versus consumer?
Speaker #1: Hey, Brett. Yeah, great question. So, 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.
Speaker #1: So 60 to 70 million, per quarter. And we're really excited about the specialty line of business that we mentioned in the prepared remarks. So it's hard to predict exactly how much of the growth will come from that business, given it's new, but it hasn't really strong pipeline.
Speaker #1: So we could see a really solid chunk of that prospective growth as soon as the third quarter, coming from our specialty lending vertical.
Speaker #3: Okay, that's helpful. And then, on just the build-out of tech and AI—just what that does to expenses from here—any thoughts on the expense outlook?
Speaker #3: And then, just—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?
Speaker #3: Thanks.
Speaker #1: Hey Brett, Larry, hey, thanks again for joining the call. On the AI side, we feel really confident about where it's going. We see what we call our Digies, which are some call bots, really coming on strong.
Speaker #1: We now have 31 Digies that are either built or being built. It's helped a ton, especially in our risk and compliance area. And 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.
Speaker #1: I'll let Mike address the expense side.
Speaker #4: Yeah, so 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.
Speaker #4: And then the second part is: how does that translate into the expense side? And that's really the part where we're taking a very crawl-walk-run approach with rationalizing expenses using AI.
Speaker #4: We want to certainly have human-in-the-loop on all we do and really be deliberate about how we phase that in. But overall, I'd say we've made the investments—the heavy expense related to AI is sort of baked in.
Speaker #4: So, 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.
Speaker #3: Okay. With all that said, Mike, what do you think about expense pace from here relative to Q2?
Speaker #1: Yeah, so the increase, as I mentioned, Brett, was primarily driven by annual increases to salaries and incentive accruals that took place in the second quarter.
Speaker #1: So overall, I'd say going forward we feel good about maintaining, or being slightly below, where we're at in the second quarter—for the foreseeable few quarters.
Speaker #3: Okay, that's really helpful. Thanks, guys.
Speaker #1: Thanks, Brett.
Speaker #2: Our next question is from Joe Yanchunis with Raymond James. Please proceed.
Speaker #5: Good afternoon.
Speaker #1: Hey, Joe.
Speaker #5: So in the investor deck, you highlighted 10 fintech launches since the second quarter of '25 that have generated about $2 million in revenue and $158 million in low-cost deposits.
Speaker #5: Do you have a sense for what percentage of those partners have reached their expected run rate today, and how much revenue remains to be realized as those programs mature?
Speaker #5: Just trying to get a sense for how much juice is left in the lemon.
Speaker #1: Hey, Joe. I like the lemon squeeze, but we actually see this like a winery, so we're talking about grapes here instead of lemons. And what I mean is we're going with the fruit theme.
Speaker #1: Thanks. But what I mean by that is, each one of these fintech clients is like a barrel of fine wine. They are in the process, as you noted, of maturing.
Speaker #1: 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 for them to contribute to the onward earnings going forward.
Speaker #1: 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.
Speaker #1: But the good news: in the second half of the year, we'll potentially look at another 15, which would mean that in 2026 we will have onboarded approximately 20 new fintech clients, with a good trajectory for both deposits and income.
Speaker #1: 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. But we're very excited about it.
Speaker #1: And the team has improved greatly on onboarding and getting clients up and running. It's been very, very positive. We're excited about the future there.
Speaker #5: That's encouraging to hear. Sorry, go ahead.
Speaker #4: Yeah, just to add a little more on that, Joe—so, we mentioned the $2 million of net new fee revenue year-to-date. About 60% of that came in the second quarter.
Speaker #4: So about $800,000 in the first quarter, $1.2 million in the second quarter. And that's just from new clients. So you can see there's still a ramp-up in what those new clients are delivering to us.
Speaker #4: We expect that to grow going forward.
Speaker #5: So, if you've got 6 million more of wine coming out of this cohort, are we drinking that in '27, or are we drinking that back half of the year?
Speaker #1: Yeah, it’s a good question. I would say late ’26 to early ’27 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.
Speaker #1: But keep in mind, this is going to be a rolling harvest of grapes as we continue to add new clients into the launched platform and they continue to mature on the platform.
Speaker #5: That was very helpful. I have to abandon the fruit theme—I can't keep up. But just kind of moving to capital: so following both the Victor monetization and the recent fintech investment gain, how are you thinking about capital deployment?
Speaker #5: I mean, should we expect that this gets deployed toward buybacks? Additional fintech investments? Obviously, you're still building out the AI capabilities. Are acquisitions just for that organic growth?
Speaker #5: That's kind of on the come.
Speaker #1: Yeah. So yeah, clearly, we're continuing to grow the balance sheet. So that's organic growth of the existing balance sheet, which is sort of first and foremost.
Speaker #1: And then we were active in our share repurchase this quarter. We bought back about $1.2 million of stock, so we'll continue to be opportunistic.
Speaker #1: It's going to be price-driven on the share buyback. But really, the focus is continuing to grow the platform, the balance sheet, and continuing to invest in what we see as high-return business lines.
Speaker #5: Okay, that makes sense. And then lastly, for me, you characterized the higher provision as being driven by a couple of isolated portfolios, rather than being anything broad-based. Can you provide any more details on some of those portfolios?
Speaker #5: That drove the higher provision.
Speaker #1: Yeah. So, we had about $3.3 million of the provision related to specific reserves, and that was split between our legacy SBA portfolio, which was largely originated in 2021 and early '22 timeframe.
Speaker #1: And we have not been originating new SBA credits for quite some time. Then, the balance was across a couple of smaller commercial loans.
Speaker #1: So generally, isolated and idiosyncratic loans are where we saw the majority of the specific reserve take place in the quarter. And then, as we mentioned, we had some updates to our allowance model, taking into account the recent developments, particularly in the Middle East, with expected higher inflation and higher interest rates.
Speaker #1: So that drove some of our general allocations to a higher level.
Speaker #5: Does that make sense? And actually, I do have one more question, if that's all right. You had mentioned potentially another 15 partners that you could onboard in the back half of the year.
Speaker #5: Are there any limiting constraints to the onboarding process?
Speaker #1: Joe, it's very 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.
Speaker #1: Each client has a determining need that you have to really cater to, with what they have for their product set and what we need to do.
Speaker #1: 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.
Speaker #1: But it's really dependent on the client base that we're onboarding. We do prioritize based on something we call RevO—R-E-V-O. That stands for risk.
Speaker #1: And then E stands for the effort—the level of effort it'll take to onboard. B is value, which is the profitability. And the O is the opportunity cost.
Speaker #1: If you do something, you have to give up something else to be able to do that. So we prioritize based on that RevO, and we push clients through by that.
Speaker #1: We do see a very strong pipeline of fintech clients. There actually continues to be—as there was the last time we talked—over 50 in the pipeline.
Speaker #1: There continue to be over 50, even though we have pushed some through, as we noted earlier. So, it continues to be very robust, and I think one of the best in the industry as far as fintech pipelines.
Speaker #1: So, as far as limiting factors, again, it's going to depend on the clients we're bringing on. That's going to be the biggest limiting factor.
Speaker #1: Their needs.
Speaker #5: I appreciate it. And I guess I'll take the check. Thank you for taking my questions.
Speaker #1: Sure thing. Thanks, Jeff.
Speaker #2: As a reminder, press the STAR key on your telephone keypad if you would like to ask a question. Our next question is from Janet Lee with TD Cowen.
Speaker #2: Please proceed.
Speaker #4: Good afternoon. 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?
Speaker #4: Should we expect more of these to come for any reason?
Speaker #1: And Janet, thanks for the question. So clearly, we had a nice build in our allowance level this quarter, going from 94 basis points to 1.14%.
Speaker #1: At this point, we feel like the portfolio is appropriately reserved. But, of course, we'll continue to monitor it and make updates to our model as needed.
Speaker #4: Okay, got it. Could you explain a little bit more about how you mentioned your NIM should be expanding in the back half of 2026, albeit at a more moderate pace?
Speaker #4: So, are you saying that NIM will increase off of the 3.87 level in the second quarter? And what do you expect your funding cost to do in the back half of '26?
Speaker #1: Yeah, so 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.
Speaker #1: I think more of it is on the asset mix and repositioning into higher-yielding loans, and also just a mix shift of our earning assets into more loans.
Speaker #1: So, 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.
Speaker #1: So, I think from where we’re at from a rate standpoint—higher for longer—we still have some opportunity on the funding side. But I think it’s going to be relatively modest in terms of decreasing funding costs.
Speaker #1: We added about $150 million—about $150 million of net new fintech deposits, which tend to be net lower than our cost of funding.
Speaker #1: So, help pull that cost of funding down as we reposition some of our CDs and higher-cost funding into lower-cost fintech deposits. So, I think we still have opportunity on the funding side.
Speaker #1: And 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.
Speaker #4: Okay, got it. Could you give us a refresh on your S sensitivity profile? Does your NIM benefit if there's a rate hike?
Speaker #1: Yeah. So we are asset sensitive. I mean, a couple of drivers there are having roughly 35% of our deposits as non-interest bearing, and then carrying a healthy balance of cash, which clearly benefits.
Speaker #1: Immediately from a rate hike, as well as a fairly short portfolio in terms of repricing, and a healthy amount of variable. So, the balance sheet is overall asset-sensitive.
Speaker #1: So, we would benefit from a rate hike, although it'll take a little bit of time for that to flow into the margin numbers.
Speaker #4: Okay, got it. Thanks for taking my questions.
Speaker #1: Thanks, Janet.
Speaker #5: Thanks, Janet.
Speaker #2: 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.
Speaker #1: Thank you, operator. And thank you all again for your time and continued interest in MVB Financial. We're energized by the opportunities in front of us, and we look forward to updating you on our progress in the next quarter.
Speaker #1: Have a great evening.
