MVB FINANCIAL CORP MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion and analysis should be read in conjunction with our
consolidated financial statements and related notes thereto included elsewhere
in this report. A discussion of changes in our results of operations from 2019
to 2020 may be found in Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations of our Annual Report on Form 10-K
for the year ended December 31, 2020, filed with the SEC on March 9, 2021.
Further, we encourage you to revisit the Forward-Looking Statements at the
beginning of this report.

Abstract

We have continued to invest in infrastructure to support anticipated future
growth in each area that is key to our performance, including personnel,
technology and processes in order to meet the increasing compliance obligations
of the financial services industry. We believe we are well-positioned in
high-growth markets in which we operate and will continue to focus on margin
improvement, leveraging capital, organic portfolio loan growth and operating
efficiency. We believe the key challenge for us in the future is to expand our
lending platform and utilize the increase in our low cost deposits, while
continuing to manage asset quality, as well as management of compliance in
emerging and fast growing markets. We are expanding the Bank's treasury services
function to support the banking needs of financial and emerging technology
companies, which we believe will further enhance core deposits, notably through
the expansion of deposit acquisition and fee income strategies through the
Fintech division. During 2020 and into 2021, we entered into agreements for
debit card program sponsorship to further enhance fee income and noninterest
income. In addition, we continue to expand into the Fintech industry through the
acquisition of technology, including a software development team, in order to
scale and diversify our banking capabilities.

Financial results

Net interest income increased $8.3 million, noninterest income decreased $29.2
million and noninterest expense increased $0.3 million during 2021 compared to
2020. Our yield on earning assets (tax-equivalent) in 2021 was 3.52% compared to
4.17% in 2020. Total loans increased by $416.1 million to $1.87 billion as of
December 31, 2021 from $1.45 billion as of December 31, 2020. Our overall cost
of interest-bearing liabilities was 0.44% in 2021 compared to 0.85% in 2020. The
decrease in earning assets yield, partially offset by the decrease in the cost
of interest-bearing liabilities, resulted in a decrease in our net interest
margin (tax-equivalent) to 3.26% in 2021 from 3.57% in 2020.

We earned $39.1 million in 2021 compared to $37.4 million in 2020, an increase
of $1.7 million. The 2021 earnings equated to a return on average assets of 1.5%
and a return on average equity of 15.6%, compared to 2020 results of 1.7% and
16.7%, respectively. Basic and diluted earnings per share were $3.32 and $3.10,
respectively, in 2021 compared to $3.13 and $3.06, respectively, in 2020.

Covid-19 pandemic

The COVID-19 pandemic has introduced a great degree of uncertainty to both the
global and domestic economy and financial markets. The full impact of COVID-19
is unknown and continues to evolve. Financial markets adjusted dramatically to
the reduced economic activity and the pace of recovery is uncertain. The
financial market benchmark most relevant to our current and future profitability
is the United States Government Treasury yield curve. The United States
Government Treasury yield curve is used as a basis for pricing most bonds,
loans, borrowings, deposits and other fixed income yield curves. The United
States Government Treasury yield curve has experienced a large, relatively
parallel, downward shift. Given our current asset-sensitive position, management
expects continued pressure on net interest income. As the outlook for the
COVID-19 pandemic improves, management expects that the United States Government
Treasury curve will experience some degree of an upward shift over time.

We actively participated in the Paycheck Protection Program ("PPP"), and may
evaluate other programs available to assist our clients and provide consumer
deferrals consistent with government-sponsored enterprise ("GSE") guidelines.
Management is working to incorporate scenarios that reflect decreased loan cash
flows in the short term into our interest rate risk models.

There was considerable demand for the PPP implemented by the CARES Act to combat
the economic slowdown brought on by the COVID-19 pandemic. The PPP was created
to provide funding to small business owners who may have had to temporarily
close or scale back production as a result of the COVID-19 pandemic. The
intended use of this funding is to pay employees who may be temporarily unable
to work. The original tranche of PPP funding of $349 billion ran out 13 days
after the program's implementation. The second tranche of PPP funding of $310
billion had funds available as of the program's closure date. On July
                                       37
--------------------------------------------------------------------------------


2, 2020, additional legislation was passed that allowed small businesses to
apply for loans through August 8, 2020. On January 8, 2021, the Small Business
Administration ("SBA") announced that the PPP would reopen on January 11, 2021
for new borrowers and certain existing PPP borrowers. During the latest round,
funds totaling $284 billion were authorized through March 31, 2021. As of
December 31, 2021, we originated 734 PPP loans with outstanding balances of
$18.0 million through our internal commercial team and originated 3,731 PPP
loans with outstanding balances of $113.7 million through our partnership with a
Fintech company.

As of December 31, 2021, mortgage loans totaling $2.1 million were outstanding
for modifications, such as interest-only payments and payment deferrals. There
were no commercial loan modifications outstanding as of December 31, 2021. These
modifications were not considered to be troubled debt restructurings in reliance
on guidance issued by banking regulators titled the "Interagency Statement on
Loan Modifications and Reporting for Financial Institutions Working with
Customers Affected by the Coronavirus."

Net interest income and net interest margin (average balance tables)

The following tables present, for the periods indicated, information about (1)
average balances, the total dollar amount of interest income from
interest-earning assets and the resultant average yields; (2) average balances,
the total dollar amount of interest expense on interest-bearing liabilities and
the resultant average rates; (3) the interest rate spread; (4) net interest
income and margin; and (5) net interest income and margin (on a tax-equivalent
basis). The average balances presented are derived from daily average balances.
                                       38
--------------------------------------------------------------------------------

Average Balances and Net Interest Income Analysis

                                                                                           2021                                                                       2020                                                                       2019
                                                                                          Interest                                                                   Interest                                                                   Interest
(Dollars in thousands)                                       Average Balance           Income/Expense             Yield/Cost            Average Balance           Income/Expense             Yield/Cost            Average Balance           Income/Expense             Yield/Cost

Assets

Interest-bearing deposits in banks                         $        249,801          $            305                   0.12  %       $        125,259          $            191                   0.15  %       $          9,264          $            209                   2.26  %
CDs with banks                                                       10,406                       201                   1.93                    12,484                       246                   1.97                    14,097                       280                   1.99
Investment securities:
   Taxable                                                          231,450                     2,405                   1.04                   121,607                     2,448                   2.01                   129,486                     3,055                   2.36
   Tax-exempt 2                                                     201,532                     6,328                   3.14                   144,389                     5,361                   3.71                   103,235                     4,456                   4.32

Loans and loans held for sale: 1 3

   Commercial                                                     1,387,273                    63,551                   4.58                 1,136,858                    54,434                   4.79                   987,674                    53,087                   5.37
   Tax-exempt 2                                                       6,646                       300                   4.51                     8,966                       422                   4.70                    12,549                       561                   4.47
   Real estate                                                      307,829                     9,662                   3.14                   403,166                    18,100                   4.49                   447,891                    21,220                   4.74
   Consumer                                                          15,890                     2,069                  13.02                     6,973                       465                   6.67                     8,948                       547                   6.11
Total loans                                                       1,717,638                    75,582                   4.40                 1,555,963                    73,421                   4.72                 1,457,062                    75,415                   5.18
Total earning assets                                              2,410,827                    84,821                   3.52                 1,959,702                    81,667                   4.17                 1,713,144                    83,415                   4.87
Allowance for loan losses                                           (25,682)                                                                   (18,079)                                                                   (11,318)
Cash and due from banks                                              13,874                                                                     26,460                                                                     17,625
Other assets                                                        201,904                                                                    181,439                                                                    131,370
   Total assets                                            $      2,600,923                                                           $      2,149,522                                                           $      1,850,821

Liabilities
Deposits:
   Negotiable order of withdrawal                          $        673,547          $          1,612                   0.24  %       $        408,110          $          2,521                   0.62  %       $        381,092          $          3,586                   0.94  %
   Money market checking                                            469,010                       883                   0.19                   458,606                     2,680                   0.58                   331,636                     5,144                   1.55
   Savings                                                           42,800                         5                   0.01                    45,420                         6                   0.01                    38,324                         4                   0.01
   IRAs                                                               9,674                       121                   1.25                    13,691                       218                   1.59                    17,415                       329                   1.89
   CDs                                                              134,250                     1,355                   1.01                   349,787                     4,869                   1.39                   387,660                     8,376                   2.16
Repurchase agreements                                                10,821                        13                   0.12                     9,856                        23                   0.23                    11,252                        48                   0.43
FHLB and other borrowings                                            25,275                        93                   0.37                    68,407                     1,049                   1.53                   183,812                     4,704                   2.56
Subordinated debt                                                    51,149                     2,188                   4.28                     7,568                       261                   3.45                    12,124                       770                   6.35
   Total interest-bearing liabilities                             1,416,526                     6,270                   0.44                 1,361,445                    11,627                   0.85                 1,363,315                    22,961                   1.68
Noninterest-bearing demand deposits                                 895,024                                                                    502,457                                                                    258,546
Other liabilities                                                    38,100                                                                     61,169                                                                     33,810
   Total liabilities                                              2,349,650                                                                  1,925,071                                                                  1,655,671

Stockholders' equity
Preferred stock                                                         730                                                                      7,334                                                                      7,660
Common stock                                                         12,614                                                                     12,047                                                                     11,762
Additional paid-in capital                                          140,610                                                                    130,312                                                                    118,837
Treasury stock                                                      (16,741)                                                                    (2,637)                                                                    (1,084)
Retained earnings                                                   112,843                                                                     77,044                                                                     61,712
Accumulated other comprehensive income (loss)                           534                                                                        351                                                                     (3,737)
   Total stockholders' equity attributable to parent                250,590                                                                    224,451                                                                    195,150
Noncontrolling interest                                                 683                                                                          -                                                                          -
   Total stockholders' equity                                       251,273                                                                    224,451                                                                    195,150
   Total liabilities and stockholders' equity              $      2,600,923                                                           $      2,149,522                                                           $      1,850,821

Net interest spread (tax-equivalent)                                                                                    3.08                                                                       3.32                                                                       3.19
Net interest income and margin (tax-equivalent) 2                                    $         78,551                   3.26  %                                 $         70,040                   3.57  %                                 $         60,454                   3.53  %
Less: Tax-equivalent adjustments                                                               (1,392)                                                                    (1,214)                                                                    (1,054)
Net interest spread                                                                                                     3.02                                                                       3.25                                                                       3.13
Net interest income and margin                                                       $         77,159                   3.20  %                                 $         68,826                   3.51  %                                 $         59,400                   3.47  %


1 Non-accrual loans are included in total loan balances, lowering the effective
yield for the portfolio in the aggregate.
2 In order to make pre-tax income and resultant yields on tax-exempt loans and
investment securities comparable to those on taxable loans and investment
securities, a tax-equivalent adjustment has been computed using a Federal tax
rate of 21% for the twelve months ended December 31, 2021, 2020 and 2019, which
is a non-U.S. GAAP financial measure. Please refer to the reconciliation of this
non-U.S. GAAP financial measure to its most directly comparable U.S. GAAP
                                       39
--------------------------------------------------------------------------------


financial measure following this table.
3 Our PPP loans, totaling $131.7 million and $82.0 million at December 31, 2021
and 2020, respectively, are included in this amount for the twelve months ended
December 31, 2021 and 2020, respectively.
                                                                    Year Ended December 31,
(Dollars in thousands)                                 2021                   2020                   2019
Net interest margin - U.S. GAAP basis
Net interest income                              $      77,159          $      68,826          $      59,400
Average interest-earning assets                      2,410,827              1,959,702              1,713,144
Net interest margin                                       3.20  %                3.51  %                3.47  %

Net interest margin - non-U.S. GAAP basis
Net interest income                              $      77,159          $      68,826          $      59,400
Plus: Impact of fully tax-equivalent
adjustment                                               1,392                  1,214                  1,054
Net interest income on a fully-tax
equivalent basis                                 $      78,551          $      70,040          $      60,454
Average interest-earning assets                  $   2,410,827          $   1,959,702          $   1,713,144
Net interest margin on a fully
tax-equivalent basis                                      3.26  %                3.57  %                3.53  %



Rate Volume Calculation

The year-on-year change in fare volume between 2021 and 2020 is as follows:

                                                      Change in          Change in         Change in Both Rate
(Dollars in thousands)                                  Volume              Rate                 & Volume               Total Change
Earning Assets
Loans
Commercial                                           $  11,991          $  (2,355)         $            (519)         $       9,117
Tax-exempt                                                (109)               (17)                         4                   (122)
Real estate                                             (4,280)            (5,446)                     1,288                 (8,438)
Consumer                                                   595                443                        566                  1,604
Investment securities:
Taxable                                                  2,211             (1,184)                    (1,070)                   (43)
Tax-exempt                                               2,121               (827)                      (327)                   967
Interest-bearing deposits in banks                         190                (38)                       (38)                   114
CDs with banks                                             (41)                (5)                         1                    (45)
Total earning assets                                 $  12,678          $  (9,429)         $             (95)         $       3,154

Interest-bearing liabilities
Negotiable order of withdrawal                       $   1,639          $  (1,544)         $          (1,004)         $        (909)
Money market checking                                       61             (1,817)                       (41)                (1,797)
Savings                                                      -                 (1)                         -                     (1)
IRAs                                                       (64)               (47)                        14                    (97)
CDs                                                     (3,000)            (1,339)                       825                 (3,514)
Repurchase agreements                                        2                (11)                        (1)                   (10)
FHLB and other borrowings                                 (662)              (797)                       503                   (956)
Subordinated debt                                        1,503                 63                        361                  1,927
Total interest-bearing liabilities                        (521)            (5,493)                       657                 (5,357)
Total                                                $  13,199          $  (3,936)         $            (752)         $       8,511



Net Interest Income

Net interest income, which is the primary source of revenue for the Bank, is the
amount by which interest income on earning assets exceeds interest expense
incurred on interest-bearing liabilities. Interest-earning assets include loans
and investment securities, as well as interest-bearing deposits and certificates
of deposit in banks. Interest-bearing liabilities include interest-bearing
deposits, borrowed funds, such as sweep accounts and repurchase agreements, and
subordinated debt. Net interest income is also impacted by changes in market
interest rates, as well as the mix of interest-earning assets and
interest-bearing liabilities.
                                       40
--------------------------------------------------------------------------------

Net interest income was favorably impacted by the increase in demand deposits and non-interest bearing shareholders’ equity.

Net interest margin is calculated by dividing net interest income by average
interest-earning assets and serves as a measurement of the net revenue stream
generated by the Bank's balance sheet. Net interest margin (tax equivalent) was
3.26% in 2021 compared to 3.57% in 2020. The net interest margin continues to
face considerable pressure due to falling interest rates and competitive pricing
of loans and deposits in the Bank's markets. During 2020, the Federal Reserve
lowered its key interest rate from a range of 1.50% to 1.75% to a range of -% to
0.25% and remained at this range as of 2021. Management's estimate of the impact
of future changes in market interest rates is shown in the section captioned
Interest Rate Risk, in Item 7A - Quantitative and Qualitative Disclosures About
Market Risk included elsewhere in this report.

Net interest spread is calculated by taking the difference between interest
earned on earning assets and interest paid on interest-bearing liabilities in an
effort to maximize net interest, while maintaining an appropriate level of
interest rate risk. Net interest spread (tax-equivalent) was 3.08% in 2021
compared to 3.32% in 2020. The difference between the net interest margin
(tax-equivalent) and net interest spread (tax-equivalent) was 18 basis points in
2021 compared to 25 basis points in 2020. This was driven by the 65 basis point
decrease in yield on earning assets outpacing the impact of the increase of
$392.6 million in average noninterest-bearing demand deposits.

We continue to explore methods to deploy assets into a profitable asset mix that will result in a stronger net interest margin. Loan growth continues to be strong and management expects lending activity to remain strong in the near term.

During 2021, net interest income increased by $8.3 million, or 12.1%, to $77.2
million from $68.8 million in 2020. This increase is largely due to the increase
in earnings assets of $451.1 million primarily funded by the increase in
noninterest-bearing demand deposits of $404.6 million. Also impacting the yield
was the sale of certain assets and liabilities of four banking center locations
to Summit in July 2021, the accretion related to loans acquired from First State
and the amortization of PPP origination fees. Average total earning assets were
$2.41 billion in 2021 compared to $1.96 billion in 2020. As a result of the
increase in average total earning assets, total interest income increased by
$3.0 million, or 3.7%, to $83.4 million in 2021 from $80.5 million in 2020.
Average total loans and loans held-for-sale increased to $1.72 billion in 2021
from $1.56 billion in 2020, primarily as the result of a $250.4 million increase
in average commercial loans; however, PPP loans with an outstanding balance of
$131.7 million accounted for a portion of the increase and carried just a 1%
yield, outside of origination fee accretion. Yield on total loans and loans
held-for-sale decreased 32 basis points. Changes in the balance sheet related to
the Summit and First State transactions also impacted yield on earning assets.

Average investment securities increased $167.0 million in 2021 as the result of
a $57.1 million increase in tax-exempt investments and a $109.8 million increase
in taxable investments. Yield on tax-exempt securities decreased 57 basis points
and taxable securities yield decreased 97 basis points.

Average interest-bearing liabilities increased in 2021 by $55.1 million. The
increase was primarily the result of an increase of $265.4 million in the
average balance of negotiable order of withdrawal accounts and an increase of
$10.4 million in money market checking accounts. The increase in average
interest-bearing liabilities was partially offset by decreases of $215.5 million
in the average balance of CDs and $43.1 million in the average balance of FHLB
and other borrowings.

Average interest-bearing deposits grew to $1.33 billion in 2021 from $1.28
billion in 2020. Total interest expense decreased by $5.4 million, primarily due
to decreases of $6.3 million in deposit interest and $1.0 million in interest on
FHLB and other borrowings, partially offset by an increase of $1.9 million in
interest on subordinated debt. The result was a 41-basis point decrease in the
cost of interest bearing liabilities from 2020 to 2021.

The Bank's yield on earning assets declined during 2021 due to decrease in the
loan portfolio yield of 32 basis points, driven by the addition of PPP loans
purchased in the first quarter of 2021, and the investment portfolio yield of 92
basis points, while the cost of interest bearing liabilities decreased by 41
basis points.

The cost of interest bearing liabilities decreased to 0.44% in 2021 from 0.85%
in 2020. This decrease is primarily the result of decrease of 116 basis points
in the cost of FHLB and other borrowings and a 51 basis point decrease in the
cost of deposits. Further discussion on borrowings is included in Note 7 -
Borrowed Funds accompanying the consolidated financial statements included
elsewhere in this report.


                                       41
--------------------------------------------------------------------------------

Allowance for loan losses

Our release of allowance for loan losses for 2021 was $6.3 million and our
provision for loan losses for 2020 was $16.6 million. The provision for loan
losses, which is a product of management's analysis, is recorded in response to
inherent losses in the loan portfolio. The changes in loan loss provision are
the result of a $2.6 million release allocated to a single loan as well as
improvements in allocation rates, portfolio risk grades and economic and
business factors.

Determining the appropriate provision for loan losses requires considerable
management judgment. In exercising this judgment, management considers numerous
internal and external factors including, but not limited to, portfolio growth,
national and local economic conditions, trends in the markets served and
guidance from the Bank's primary regulators.

Management has continued to evaluate the qualitative factor framework within the
allowance for loan loss methodology in order to assess how well the framework
can appropriately respond to the unprecedented risk presented by the COVID-19
pandemic. As a result, in 2020 the framework was significantly enhanced to
consider a much greater degree of risk than when the framework was originally
designed. The framework has consistently generated an adequate allowance for
loan loss within a generally stable economic environment, but the onset of the
pandemic made it apparent that the framework required modifications to consider
this greater degree of risk. These enhancements resulted in the need for $12.8
million in additional loan loss provision in 2020. Throughout 2021, management
observed continued improvement as the year progressed and the impacts of the
pandemic began to be mitigated by the development and acceptance of vaccines.
Furthermore, as a result of the ongoing analysis of the loan portfolios, a
significant number of borrowers are reporting recovery from the strain on their
operations experienced in 2020, and as a result present a relatively lower risk
of default than a year ago. While the ultimate severity of impacts to the
economic and business conditions in which we operate are not yet fully known, it
seems that the impacts have begun to subside in recent months. However, the
breadth of the worldwide COVID-19 pandemic has impacted virtually all industries
and has created the potential for additional risk within the loan portfolios,
should the pandemic again cause widespread economic disruptions.

Additionally, management executed an improvement to the qualitative factor
framework in 2021 that was designed to significantly reduce the level of
subjectivity within the model. More specifically, the framework was enhanced to
include specific metrics for each qualitative factor that will be routinely
monitored to measure the degree of potential risk in the loan portfolios. These
new metrics indicate that there is considerably less risk in the loan portfolios
than was previously indicated. As a result of both the improving economic and
business conditions, and the improvement to the qualitative factor framework,
there was no need for an increase to the total loan loss provision in 2021, and
a total of $6.3 million was released from the allowance.

Meanwhile, total loan balances, excluding purchased credit impaired ("PCI")
loans, increased $437.4 million in 2021 versus an increase of $41.1 million in
2020. The commercial loan portfolio increased by $339.4 million in 2021, in
comparison to an increase of $77.3 million in 2020, while the residential
mortgage loan portfolio increased by $65.9 million and decreased by $31.3
million in 2021 and 2020, respectively. Included in the commercial and total
loan volume increases are PPP loans totaling $131.7 million as of December 31,
2021. Growth in the commercial loan portfolio in 2021 was highly concentrated in
loans purchased from our strategic lending partners. As a result, this directly
impacted the perceived risk of Purchased Participations loan portfolio segment.
Additionally in 2021, $40.7 million of consumer loans were originated through a
strategic lending partner.

Net charge-offs in 2021 totaled $1.3 million, in comparison to net charge-offs
of $2.1 million in 2020. Lastly, the release of allowance for loan losses was
impacted by a $0.8 million decrease in the specific loan loss allocations in
2021, relative to a $0.7 million increase in 2020.

Non-interest income

Payment card and service charge income, consulting compliance income and holding
gains on equity securities generate the core of our noninterest income. During
2021 and 2020, equity method investment income and gains on acquisition and
divestiture activity have generated additional noninterest income. Total
noninterest income for 2021, 2020 and 2019 was $62.6 million, $91.8 million and
$64.6 million, respectively.

The decrease in noninterest income for 2021 compared to 2020 was primarily the
result of decrease of $33.4 million in mortgage fee income, $6.7 million in
equity method investment income from ICM, $6.9 million in gains on acquisition
and divestiture activity and $3.5 million in gain on sale of equity securities.
These decrease were partially offset by increase of $5.2 million in compliance
and consulting income, $4.7 million in payment card and service charge income,
$3.4 million in holding gain on equity securities, $3.8 million gain on sale of
portfolio loans and $3.0 million gain on sale of available-for-sale investment
securities.

                                       42
--------------------------------------------------------------------------------


Equity method investment income of $17.4 million was due primarily to income
from ICM. Prior to the combination with ICM in July 2020, income from our
mortgage activities was recognized through mortgage fee income. Mortgage fee
income was $33.4 million in 2020.

Gains on the activity of acquisition and sale of $10.8 million are due to the sale of four branches.

Compliance and consulting income increased $5.2 million from $4.4 million in
2020 to $9.6 million in 2021, driven by the Trabian Technology acquisition in
April 2021 and growth in Chartwell operations.

Revenue from payment cards and service fees increased $4.7 million from $2.8 million
in 2020 for $7.5 million in 2021, driven by an increase in the number of interchange transactions and the growth of our partnership with Worldpay.

Holding gain on equity securities increased $3.4 million from $0.4 million in
2020 to $3.8 million in 2021, primarily due to an increase in the valuation of
our Fintech investment portfolio during the fourth quarter of 2021.

Gain on sale of portfolio loans increased $3.8 million from $0.3 million in 2020
to $4.2 million in 2021, primarily due to an increase volume of SBA loan sale
activity.

Non interest Expense

Noninterest expense was $97.5 million, $97.1 million and $87.2 million in 2021,
2020 and 2019, respectively. Approximately 62%, 63% and 64% of noninterest
expense for 2021, 2020 and 2019, respectively, related to personnel costs.
Personnel costs are a significant part of our noninterest expense as such costs
are critical to services organizations. Salaries and benefits decreased by $1.4
million in 2021, primarily as a result of the ICM combination, partially offset
by incentive compensation and new hires to further build-out the Fintech
vertical.

Professional fees increased by $2.3 million in 2021, primarily the result of
deal costs related to the acquisitions of Trabian Technology, the sale of the
Southern West Virginia banking centers and other strategic initiatives.

Income taxes

We incurred an income tax expense of $9.9 million, $9.5 million and $8.6 million in 2021, 2020 and 2019, respectively.

Our effective tax rate was 20%, 20% and 24% in 2021, 2020 and 2019,
respectively. Our effective tax rate is affected by certain permanent tax
differences caused by statutory requirements in the tax code. The largest
permanent difference relates to tax-exempt interest income related to municipal
investments and loans held by us. Other, smaller permanent differences arise
from income derived from life insurance purchased on certain key employees and
directors and meals and entertainment expenses.

For 2021, we plan to file tax returns in 33 states.

Return on assets and equity

Assets

Our return on average assets was 1.5% in 2021, compared to 1.7% in 2020. The
decreased return in 2021 is a result of a $1.7 million increase in earnings,
while average total assets increased by $451.4 million, mainly as the result of
a $124.5 million increase in average interset-bearing deposits with banks and a
$161.7 million increase in average total loans.

Equity

Our return on average stockholders' equity was 15.6% in 2021, compared to 16.7%
in 2020. The decreased return in 2021 is a result of a $1.7 million increase in
earnings, while average equity increased by $26.1 million.





                                       43
--------------------------------------------------------------------------------

Statement of financial position

Cash and cash equivalents

Total cash and cash equivalents $307.4 million at December 31, 2021compared to $263.9 million at December 31, 2020.

Management believes the current balance of cash and cash equivalents adequately
serves our liquidity and performance needs. Total cash and cash equivalents
fluctuate on a daily basis due to transactions in process and other liquidity
demands. Management believes liquidity needs are satisfied by the current
balance of cash and cash equivalents, readily available access to traditional
and non-traditional funding sources and the portions of the investment and loan
portfolios that mature within one year. These sources of funds should enable us
to meet cash obligations as they come due. Due to the increase in liquidity
driven by growth in noninterest-bearing deposits, management has elected to
maintain a higher cash and cash equivalents balance to provide flexibility
during the COVID-19 pandemic.

Investment security

Investment securities total $453.9 million at December 31, 2021compared to
$438.2 million at December 31, 2020.

The following table sets forth a summary of the investment securities portfolio
as of the dates indicated. The available-for-sale securities are reported at
estimated fair value.
     December 31, (Dollars in thousands)                         2021      

2020

Titles available for sale:

     United States government agency securities               $  40,437    

$53,869

United States sponsored mortgage-backed securities 76 108

95,769

     United States treasury securities                          110,389    

3,123

     Municipal securities                                       175,012    

231,887

     Corporate debt securities                                   11,142    
    17,548
     Other debt securities                                        7,500          7,500
     Other securities                                               878            928
     Total investment securities available-for-sale           $ 421,466    
 $ 410,624

     Equity securities                                        $  32,402      $  27,585



At December 31, 2021, investment securities are available-for-sale or equity
securities. Management believes the available-for-sale classification provides
flexibility in terms of managing the portfolio for liquidity, yield enhancement
and interest rate risk management opportunities. Due to the increase in
liquidity driven by growth in noninterest-bearing deposits, management has
elected to increase balances in investment securities to generate additional
interest income. At December 31, 2021, the amortized cost of available-for-sale
investment securities totaled $421.3 million, resulting in a net unrealized gain
in the investment portfolio of $0.2 million. Management has the intent and
ability to hold the investments to maturity and they are all high quality
investments with no other than temporary impairment. The municipal securities
continue to give us the ability to pledge and to decrease the effective tax
rate.

At December 31, 2021, equity securities primarily consist of our Fintech
investment portfolio and are comprised of investments in nine companies with a
carrying value of $27.3 million. These securities do not have readily
determinable fair values; therefore, they are classified as equity securities
and are recorded at cost and adjusted for observable price changes for
underlying transactions for identical or similar investments.


                                       44
--------------------------------------------------------------------------------

The following table presents the maturities of the portfolio of marketable securities available for sale at December 31, 2021:

                                             Within one year                            After one year, but within five                   After five years, but within ten                            After ten years                            Total investment securities
(Dollars in thousands)         Amortized Cost         Weighted-Avg. Yield         Amortized Cost         Weighted-Avg. Yield         Amortized Cost        Weighted-Avg. Yield          Amortized Cost          Weighted-Avg. Yield          Amortized Cost          Fair Value
United States
government agency
securities                    $           -                            -  %       $        841                         1.91  %       $    16,418                         1.23  %       $       23,846                         1.20  %       $       41,105          $   40,437
United States sponsored
mortgage-backed
securities                                -                            -                 1,312                         0.55                3,069                         1.70                  73,138                         1.16                  77,519              76,108
United States treasury
securities                                -                            -               112,133                         0.63                    -                            -                       -                            -                 112,133             110,389
Municipal securities                      5                         3.00                 1,792                         4.07                9,162                         3.04                 160,085                         2.49                 171,044             175,012
Corporate debt
securities                              989                         4.07                   500                         6.25                9,604                         6.47                       -                            -                  11,093              11,142
Other debt securities                     -                            -                     -                            -                    -                            -                   7,500                            -                   7,500               7,500
Other securities                          -                            -                     -                            -                  878                            -                       -                            -                     878                 878
Total                         $         994                         4.06  %       $    116,578                         0.72  %       $    39,131                         2.95  %       $      264,569                         1.94  %       $      421,272          $  421,466


Maturities are based on final contractual payment dates and do not reflect the impact of prepayments or prepayments that may occur.

Management monitors the earnings performance and liquidity of the investment
portfolio on a regular basis through the Asset and Liability Committee ("ALCO")
meetings. The ALCO also monitors net interest income and assists in the
management of interest rate risk for us. Through active balance sheet management
and analysis of the investment securities portfolio, sufficient liquidity is
maintained to satisfy depositor requirements and the various credit needs of our
customers. Management believes the risk characteristics inherent in the
investment portfolio are acceptable based on these parameters.

Loans

Our primary market areas are North Central West Virginia and Northern Virginia.
The portfolio consists principally of commercial lending, retail lending, which
includes single-family residential mortgages, and consumer lending. Loans
totaled $1.87 billion as of December 31, 2021, an increase of $416.1 million
from $1.45 billion as of December 31, 2020.

Major classification of loans held for investment purposes, including PCI loans, to
the 31st of Decemberare as follows: (dollars in thousands)

                                 2021             

2020

Commercial and non-residential real estate         $ 1,494,431      $ 1,162,122
Residential                                            310,498          257,207
Home equity                                             22,186           30,828
Consumer                                                44,332            4,644
Total loans                                        $ 1,871,447      $ 1,454,801

Commissions and deferred loan origination fees, net ($1,609) $(1,057)
Loans to receive

                                   $ 1,869,838      $ 1,453,744



At December 31, 2021, commercial and non-residential real estate loans,
including PCI loans, represented the largest portion of the portfolio at 79.9%.
Commercial and non-residential real estate loans totaled $1.49 billion at
December 31, 2021, compared to $1.16 billion at December 31, 2020. Management
will continue to focus on the enhancement and growth of the commercial loan
portfolio while maintaining appropriate underwriting standards and risk/price
balance. PPP loans are included in the totals above and have outstanding
balances of $131.7 million and $82.0 million as of December 31, 2021 and 2020,
respectively.

Residential real estate loans to retail customers, including home equity lines
of credit and PCI loans, account for the second largest portion of the loan
portfolio, comprising 16.6%. Residential real estate totaled $310.5 million at
December 31, 2021, compared to $257.2 million at December 31, 2020. Management
believes the home equity loans are competitive products with an acceptable
return on investment after risk considerations. Residential real estate lending
continues to represent a primary focus due to the lower risk factors associated
with this type of loan and the opportunity to provide service to those in the
North Central
                                       45
--------------------------------------------------------------------------------

West Virginia and Northern Virginia markets.

For discussion related to the PCI loans acquired in the First State acquisition
and their related allowance for loan losses, please refer to Purchased Credit
Impaired Loans in Note 3 - Loans and Allowance for Loan Losses accompanying the
consolidated financial statements included elsewhere in this report.

At December 31, 2021, Special Mention loans not yet impaired amounted to $30.8
million. The balance is comprised of 71 loans, which include $7.0 million in
three commercial real estate hospitality loans to a single relationship, a $4.2
million owner occupied commercial property, $4.9 million in two related loans to
multifamily commercial real estate developers, a $4.9 million commercial real
estate loan to a senior care facility, $4.7 million to finance two government
lease transactions for a single borrower and $1.5 million in two loans to
finance a multifamily property. In addition, there are 60 loans to various
unrelated borrowers totaling $3.6 million in commercial, home equity line of
credit ("HELOC"), installment and mortgage loans. These are loans for which
information about the borrowers' possible credit problems causes management to
have doubts as to the borrowers' ability to comply with the loan repayment terms
in the future. However, most of these loans were significantly impacted by the
pandemic and as a result have qualified for government financial support and/or
debt service relief from the Bank. These loans are being monitored closely, but
were not considered impaired loans at December 31, 2021.

There were 74 additional loans that management identified as Substandard loans
not yet impaired, totaling $39.7 million as of December 31, 2021. These loans
include $27.8 million in four loans to finance hospitality properties to two
unrelated borrowers, $4.7 million in three loans to a single borrower to finance
movie theaters and a multifamily real estate property, a $2.2 million loan to
finance a Montessori school, a $1.6 million loan secured by residential lots, a
$1.0 million loan secured by a borrowing base and $0.5 million in two loans to a
borrower in the energy industry. In addition, there are 62 loans to various
unrelated borrowers totaling $1.9 million in commercial, HELOC, installment and
mortgage loans. These are loans where known information about the borrowers'
credit problems causes management to have serious doubts, relative to the eleven
loans discussed above, as to the borrowers' ability to comply with the loan
repayment terms in the future. However, these loans were all significantly
impacted by the pandemic and as a result have qualified for government financial
support and/or debt service relief from the Bank. These loans are being
monitored closely, but as of year-end were not considered impaired loans.

The following table shows loan maturities at December 31, 2021:

                                                 One Year          One 

Until Five Five Until Maturity After (in thousands of dollars)

                            or Less               Years             Fifteen Years        Fifteen Years            Total
Commercial and non-residential real
estate                                         $  352,656          $     781,502          $   317,005          $    43,267          $ 1,494,431
Residential                                       135,624                    543                6,554              167,777              310,498
Home equity                                           740                  2,726                  642               18,078               22,186
Consumer                                            3,762                 32,222                7,197                1,151               44,332
Total loans                                    $  492,782          $     820,457          $   331,398          $   226,809          $ 1,871,447



The following table reflects the sensitivity of the loans to changes in interest rates at December 31, 2021 which mature after one year:

                                                Commercial and
                                             non-residential real
(Dollars in thousands)                              estate                 Residential           Home equity          Consumer             Total
Predetermined fixed interest rate            $          658,765          $  

259,439 $41 $44,300 $962,546
Variable or revisable interest rate

                    835,666                51,059                22,145                32              908,901
Total as of December 31, 2021                $        1,494,431          $    310,498          $     22,186          $ 44,332          $ 1,871,447



Loan Concentration

At December 31, 2021, commercial and non-residential real estate loans comprised
the largest component of the loan portfolio. A large portion of commercial loans
are secured by real estate and they are diverse with respect to geographical
location and industry. Loans that are not secured by real estate are typically
secured by accounts receivable, mortgages or equipment. While the loan
concentration is in commercial loans, the commercial portfolio is comprised of
loans to many different borrowers, in numerous different industries, primarily
located in our market areas.

                                       46
--------------------------------------------------------------------------------

Allowance for loan losses

The Loan Review Committee is responsible for the determination of the adequacy
of the allowance for loan losses ("ALL"). The Committee's determination is based
on management's assessment of risk in the loan portfolios which is calculated
through the ALL model. Management continually monitors the risk in the loan
portfolio through routine delinquency reporting and the internal loan review
system, which directly inform the ALL calculation. Specific loss estimates are
derived for individual loans based on specific criteria such as current
delinquent status, related deposit account activity where applicable and changes
in the local and national economy. When appropriate, management also considers
public knowledge and/or verifiable information from the local market to assess
risks to specific loans and the loan portfolios as a whole.

The result of the evaluation of the adequacy at each period presented herein
indicated that the ALL was considered by management to be adequate to absorb
losses inherent in the loan portfolio.

At December 31, 2021 and 2020, impaired loans totaled $22.5 million and $15.4
million, respectively. A portion of the ALL of $0.5 million and $1.3 million was
allocated to cover any loss in these loans at December 31, 2021 and 2020,
respectively. Loans past due more than 30 days were $12.0 million and $10.6
million, respectively, at December 31, 2021 and 2020.

                                                                    

the 31st of December,

                                                                  2021          2020
        Loans past due more than 30 days to gross loans              0.9  %     1.2  %
        Loans past due more than 90 days to gross loans              0.5  %     0.6  %



For tables reflecting the allocation of the ALL, please refer to Note 3 - Loans
and Allowance for Loan Losses accompanying the consolidated financial statements
included elsewhere in this report.

The following table summarizes the primary segments of the ALL, excluding the
ALL related to PCI loans and loans individually evaluated for impairment as of
December 31, 2021 and 2020:

(Dollars in thousands)                                        2021                                          2020
                                                                 % of loans in each                            % of loans in each
                                                                  category to total                             category to total
December 31,                                    Amount                  loans                 Amount                  loans
Commercial and non-residential real
estate                                       $   14,100                        80  %       $   24,033                        80  %
Residential                                         948                        17               1,378                        18
Home equity                                         128                         1                 298                         2
Consumer and other                                2,427                         2                  51                         -
Total                                        $   17,603                       100  %       $   25,760                       100  %



Non-performing assets consist of loans that are no longer accruing interest,
loans that have been renegotiated to below market rates based upon financial
difficulties of the borrower and real estate acquired through foreclosure. When
interest accruals are suspended, accrued interest income is reversed with
current year accruals charged to earnings and prior year amounts generally
charged off as a credit loss. When, in management's judgment, the borrower's
ability to make periodic interest and principal payments resumes and
collectability is no longer in doubt, which is evident by the receipt of six
consecutive months of regular, on-time payments, the loan is eligible to be
returned to accrual status. Interest income on loans would have increased by
approximately $0.4 million, $0.6 million and $0.6 million for 2021, 2020 and
2019, respectively, if loans had performed in accordance with their terms.

                                       47
--------------------------------------------------------------------------------


Non-performing assets and past due loans as of December 31, are as follows:
(Dollars in thousands)                                     2021          2020
Non-accrual loans
   Commercial                                           $    9,845    $   12,079
   Real estate and home equity                               7,853         1,629
   Consumer and other                                          259             5
Total non-accrual loans                                     17,957        13,713
Accruing loan past due 90 days or more                           -             -
Total non-performing loans                                  17,957        13,713
Other real estate, net                                       2,330         5,730
Total non-performing assets                             $   20,287    $   19,443

Allowance for loan losses                               $   18,266    $   25,844
Non-performing loans to gross loans                         0.9  %       0.9   %
Allowance for loan losses to total loans                    1.0  %       1.8   %
Allowance for loan losses to non-performing loans         103.1  %     188.5   %
Non-performing assets to total assets                       0.7  %       

0.8%



Impaired loans have increased by $7.1 million, or 45.9%, during 2021. This
change is the net effect of multiple factors, primarily the identification of
$13.0 million of recently impaired loans, principal curtailments/payoffs of
$3.7 million, normal loan amortization of $0.5 million and the reclassification
of $0.7 million of previously reported impaired loans to performing loans.

The $13.0 million of recently impaired loans were concentrated in one commercial
relationship representing $4.8 million, or 37%, of the recently impaired loans
and one residential mortgage loan representing $5.6 million, or 43% of the
recently impaired loans. Both loans are currently under forbearance agreements
and paying as agreed.

The $3.7 million of principal curtailments/payoffs were concentrated in two
commercial relationships in which the notes were curtailed through the partial
sale of collateral. These two relationships represented $2.4 million, or 65%, of
the total principal curtailments.

the $0.9 million of loans written off were concentrated in a business relationship representing $0.8 million, or 89%, of impaired loans purchased. The relationship of $0.8 million is secured by a loan base.

Loans classified as Special Mention totaled $30.3 million and $67.9 million as
of December 31, 2021, and December 31, 2020, respectively. The decrease of $37.6
million, or 55.4%, was concentrated in the commercial loan portfolio. This
decrease is primarily the result of the payoff of 19 existing loans totaling
$40.8 million to 12 borrowers, the risk grade upgrade of eight loans to four
separate loan relationships, totaling $16.1 million, offset by the risk grade
downgrade of 30 loans to 13 relationships, totaling $15.5 million. There was
also a single commercial real estate hotel note upgraded to Special Mention,
totaling $4.4 million. Of the 30 loans recently classified as Special Mention,
there were eight commercial equipment loans to one relationship for $0.7
million, two government lease transactions totaling $4.7 million, two loans to
multifamily development corporations totaling $4.9 million, and an owner
occupied commercial real estate loan to a trucking company totaling $4.2
million. The $40.8 million in payoffs included four notes to two relationships
totaling $15.9 million secured by retail properties, two notes to a single
borrower totaling $14.7 million secured by office properties, a single note to a
multifamily borrower for $8.6 million, and twelve remaining notes to various
borrowers totaling $1.5 million.

Loans classified as Substandard totaled $61.0 million and $58.3 million as of
December 31, 2021 and December 31, 2020, respectively. The increase of $2.7
million, or 4.6%, was concentrated in the commercial loan portfolio. This
increase is primarily the result of the downgrade to Substandard of 30 loans
totaling $14.3 million, including two loans to a single relationship totaling
$4.8 million, secured by government lease transactions, a single residential
mortgage of $5.6 million, and a single note of $1.0 million secured by
equipment. The increase is partially offset by the risk grade upgrade of three
loans to two separate commercial loan relationships, totaling $4.5 million, the
payoff of 40 existing loans totaling $5.6 million and the $2.0 million, or 39%,
curtailment of three related equipment loans. There was also a charge-off of
$0.3 million to a single borrower involved in government contracting. The $5.6
million in payoffs included a $0.9 million line of credit secured by the account
receivables of an energy company, and three notes totaling $0.9 million to a
retail commercial real estate developer.


                                       48
--------------------------------------------------------------------------------


Loans classified as Doubtful totaled $1.7 million and $4.0 million as of
December 31, 2021 and December 31, 2020, respectively. The decrease of $2.3
million, or 57.5%, was concentrated in the commercial loan portfolio and is the
result of charging off the balance against associated marks of acquisition of
various loans to unrelated borrowers obtained as part of the First State
acquisition, as well as a charge off of a commercial loan totaling $0.9 million
secured by a borrowing base. As of December 31, 2021, there is $0 in calculated
loan loss reserve allocation against three legacy MVB loans totaling $0.1
million. The largest of purchased loans had a balance of $1.3 million, while the
remaining 34 loans had balances totaling $3.9 million.

Funding sources

The Bank considers a number of alternatives, including but not limited to
deposits, short-term borrowings and long-term borrowings when evaluating funding
sources. Traditional deposits continue to be the most significant source of
funds, totaling $2.38 billion, or 96.6% of funding sources, at December 31,
2021. This same information at December 31, 2020 reflected $1.98 billion in
deposits, representing 97.4% of such funding sources. Subordinated debt totaled
$73.0 million and $43.4 million at December 31, 2021 and 2020, respectively, and
represented 3.0% and 2.1% as of December 31, 2021 and 2020, respectively.
Repurchase agreements, which are available to large corporate customers,
represented 0.5% and 0.5% of funding sources at December 31, 2021 and 2020,
respectively. There were no FHLB and other borrowings at December 31, 2021 and
2020.

Management continues to emphasize the development of additional
noninterest-bearing deposits as a core funding source. At December 31, 2021,
noninterest-bearing balances totaled $1.1 billion, compared to $715.8 million at
December 31, 2020, or 47.1% and 36.1% of total deposits, respectively.
Interest-bearing deposits totaled $1.3 billion at December 31, 2021 and 2020, or
52.9% and 63.9% of total deposits, respectively. The main driver of deposit
growth has been the increase in Fintech deposits through adding new
relationships and continuing to grow current relationships. This growth in
Fintech deposits is primarily due to the increasing in gaming deposits,
primarily as a result of the increasing number of states legalizing sports
gaming. We currently expect our Fintech banking activities to continue to grow.

The following table sets forth the balance of each of the deposit categories for
the years ended December 31, 2021 and 2020:
(Dollars in thousands)                                                       2021                  2020

Demand deposits from individuals, partnerships and corporations

   Noninterest-bearing demand                                           $  

1,120,433 $715,791

   Interest-bearing demand                                                   651,016               496,502
   Savings and money markets                                                 510,068               545,501
   Time deposits including CDs and IRAs                                       96,088               224,595
     Total deposits                                                     $ 

2,377,605 $1,982,389

Time deposits that meet or exceed the FDIC insurance limit              $   

9,573 $16,955



Average interest-bearing deposits totaled $1.33 billion during 2021 compared to
$1.28 billion during 2020. Average noninterest bearing deposits totaled $895.0
million during 2021 compared to $502.5 million during 2020.

Maturities of time deposits that met or exceeded the FDIC insurance limit as of
December 31, 2021:
(Dollars in thousands)          2021
Under three months            $ 1,160
Over three to 12 months         5,657
Over one to three years         2,356
Over three years                  400
   Total                      $ 9,573


In addition to traditional deposits, the Bank has access to both short-term borrowings from FHLB and overnight repurchase agreements to finance its operations and investments. For more details on our borrowings, please refer to Note 7 – Borrowed funds accompanying the consolidated financial statements included elsewhere in this report.

Capital and equity

During the year ended December 31, 2021, stockholders' equity increased
approximately $35.8 million to $275.3 million. This increase consists of net
income for the year of $38.7 million, common stock options exercised totaling
$4.9 million, stock-based
                                       49
--------------------------------------------------------------------------------


compensation of $2.6 million, common stock issued related to stock-based
compensation of $2.0 million and common stock issued related to the Trabian and
Flexia acquisitions of $0.6 million and $4.5 million, respectively. These
changes were offset by a $5.8 million decrease in accumulated other
comprehensive income, dividends paid to both common and preferred shareholder
totaling $6.1 million and redemption of preferred stock of $7.3 million. Despite
the increase in stockholders' equity, the equity to assets ratio decreased from
10.3% to 9.8% due to asset growth of $461.0 million outpacing the increase in
stockholders' equity during 2021. We paid dividends to common shareholders of
$6.0 million in 2021 and $4.3 million in 2020, compared to earnings of $39.1
million in 2021 versus $37.4 million in 2020, resulting in the dividend payout
ratio increase from 11.4% in 2020 to 15.4% in 2021.

We and the Bank are also subject to various regulatory capital requirements
administered by federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on our consolidated financial statements. The Bank is required
to comply with applicable capital adequacy standards established by the FDIC. We
are exempt from the Federal Reserve Board's capital adequacy standards as we
believe we meet the requirements of the Small Bank Holding Company Policy
Statement. West Virginia state chartered banks, such as the Bank, are subject to
similar capital requirements adopted by the West Virginia Division of Financial
Institutions. Bank regulators have established "risk-based" capital requirements
designed to measure capital adequacy. Risk-based capital ratios reflect the
relative risks of various assets companies hold in their portfolios. A weight
category of 0% (lowest risk assets), 20%, 50%, 100% or 150% (highest risk
assets) is assigned to each asset on the balance sheet. Detailed information
concerning our risk-based capital ratios can be found in Supervision and
Regulation in Item 1 - Business and Note 15 - Regulatory Capital Requirements
accompanying the consolidated financial statements included elsewhere in this
report.

At December 31, 2021, the Bank's risk-based capital ratios were above the
minimum standards for a well-capitalized institution. The total risk-based
capital ratio of 16.7% at December 31, 2021 is above the well capitalized
standard of 10%. The Tier 1 risk-based capital ratio of 15.8% at December 31,
2021 also exceeded the well capitalized minimum of 8%. The common equity Tier 1
capital ratio of 15.8% at December 31, 2021 is above the well capitalized
standard of 6.5%. The leverage ratio at December 31, 2021 was 11.6% and was also
above the well capitalized standard of 5%. Management believes that capital
continues to provide a strong base for profitable growth.

Tangible book value ("TBV") per common share was $22.17 and $19.73 as of
December 31, 2021 and 2020, respectively. TBV per common share is a non-U.S.
GAAP measure that we believe is helpful to interpreting financial results. A
reconciliation of TBV per common share is included below.

                                              December 31, 2021       December 31, 2020
Goodwill                                   $            3,988      $            2,350
Intangibles                                             2,316                   2,400
Total intangibles                          $            6,304      $            4,750

Total equity attributable to parent $274,328

  239,483
Less: Preferred equity                                      -                  (7,334)
Less: Total intangibles                                (6,304)                 (4,750)
Tangible common equity                     $          268,024      $          227,399

Tangible common equity                     $          268,024      $          227,399
Common shares outstanding (000s)                       12,087               

11,526

Tangible book value per common share       $            22.17      $            19.73



Liquidity

Maintenance of a sufficient level of liquidity is a primary objective of the
ALCO. Liquidity, as defined by the ALCO, is the ability to meet anticipated
operating cash needs, loan demand and deposit withdrawals, without incurring a
sustained negative impact on net interest income. It is our policy to manage
liquidity so that there is no need to make unplanned sales of assets or to
borrow funds under emergency conditions.

The Bank’s main source of liquidity comes from the growth of deposits. Liquidity also comes from cash generated by

                                       50
--------------------------------------------------------------------------------


investment maturities, principal payments from loans and income from loans and
investment securities. During the year ended December 31, 2021, cash provided by
financing activities totaled $580.7 million, while outflows from investing
activity totaled $572.0 million. When appropriate, the Bank has the ability to
take advantage of external sources of funds such as advances from the FHLB,
national market certificate of deposit issuance programs, the Federal Reserve
discount window, brokered deposits and Certificate of Deposit Account Registry
Services. These external sources often provide attractive interest rates and
flexible maturity dates that enable the Bank to match funding with contractual
maturity dates of assets. Securities in the investment portfolio are classified
as available-for-sale and can be utilized as an additional source of liquidity.

We have an effective shelf registration covering $75 million of debt and equity
securities, all of which is available, subject to authorization from the Board
of Directors and market conditions, to issue debt or equity securities at our
discretion. While we seek to preserve flexibility with respect to cash
requirements, there can be no assurance that market conditions would permit us
to sell securities on acceptable terms, or at all.

We continue to face increasing concentrations of deposits from emerging industries and have instituted policies and procedures to ensure that we maintain adequate liquidity to manage these levels of deposits.

Significant Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. Our significant accounting policies are described
in Note 1 - Summary of Significant Accounting Policies accompanying the
consolidated financial statements included elsewhere in this report. The
preparation of these statements requires us to make certain assumptions,
judgments and estimates that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as the disclosure of contingent assets and
liabilities and commitments as of the date of our financial statements. We
analyze and base our estimates on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Changes in
facts and circumstances or additional information may result in revised
estimates, and actual results may differ from these estimates. We have
identified the following estimates as critical to the understanding of our
financial position and results of operations and which require the application
of significant judgment by management.

Allowance for loan losses

The ALL represents management's estimate of probable credit losses inherent in
the loan portfolio. Determining the amount of the ALL requires significant
judgment and the use of estimates related to the amount and timing of losses
inherent in the loan portfolio consisting of specific and general components.

We estimate the general component of the ALL based on the Bank's historical loss
experience and consideration of qualitative factors, both internal and external,
all of which may be susceptible to significant change. The qualitative factors
include items such as the nature and volume of the portfolio; the volume and
severity of problem credits; collateral values; portfolio concentrations;
economic and business conditions; lending policies and procedures; experience of
lending management and staff; and quality of the loan review system. Within each
of our eight portfolio segments, each of these individual factors are assigned a
rating between zero and seven, representing a measure of the risk that we
believe each factor creates for the Bank's loan portfolio. Each factor is also
weighted based on the relative risk we believe it poses to the Bank's portfolio
to determine a proportionate risk rating. As of December 31, 2021, the "economic
and business conditions" factor was generally the highest weighted qualitative
factor, with a weighting of 25% to 30%, and given a risk grade of two out of
seven for seven of the eight portfolio segments. Increasing the risk grade by
one for all segments would have resulted in an additional allowance of
approximately $2.0 million at December 31, 2021, and decreasing the risk grade
to three would have resulted in a reduction to the allowance of approximately
$1.8 million.

In addition to the above judgments and estimates, the specific reserves on
impaired loans is an important input to the ALL due to the increased risks
inherent in those loans. This evaluation requires significant judgment and
estimates related to the amount and timing of expected future cash flows and
collateral values. To the extent actual outcomes differ from our estimates, we
may need additional provisions for credit losses. Any such additional provisions
for credit losses will be a direct charge to our earnings.

Recent accounting pronouncements and developments

Recent accounting pronouncements and developments applicable to us are described
further in Note 1 - Summary of Significant Accounting Policies accompanying the
consolidated financial statements included elsewhere in this report.

                                       51

————————————————– ——————————

© Edgar Online, source Previews

Comments are closed.