SEGMENT REPORTING

12 Months Ended

Dec. 31, 2015

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 21. SEGMENT REPORTING

The Company has identified four reportable segments: commercial and retail banking; mortgage banking; financial holding company; and insurance services. Revenue from commercial and retail banking activities consists primarily of interest earned on loans and investment securities and service charges on deposit accounts. Revenue from financial holding company activities is mainly comprised of intercompany service income and dividends.  

Revenue from the mortgage banking activities is comprised of interest earned on loans and fees received as a result of the mortgage origination process. The mortgage banking services are conducted by MVB Mortgage. Revenue from insurance services is comprised mainly of commissions on the sale of insurance products.

Information about the reportable segments and reconciliation to the consolidated financial statements for the years end December 31, are as follows:

	2015
	Commercial
	&				Financial
	Retail		Mortgage		Holding				Intercompany
(in thousands)	Banking		Banking		Company		Insurance		Eliminations		Consolidated
Revenues:
Interest income	$	40,524	$	3,882	$	2	$	—	$	(308)	$	44,100
Mortgage fee income		7		30,560		—		—		(1,095)		29,472
Insurance and investment services income		338		—		—		4,733		—		5,071
Other income		3,721		1,673		4,331		6		(4,580)		5,151
Total operating income		44,590		36,115		4,333		4,739		(5,983)		83,794
Expenses:
Interest expense		6,776		1,647		2,204		—		(1,402)		9,225
Salaries and employee benefits		11,049		20,774		4,250		3,603		—		39,676
Provision for loan losses		2,493		—		—		—		—		2,493
Other expense		16,132		7,471		2,534		1,002		(4,581)		22,558
Total operating expenses		36,450		29,892		8,988		4,605		(5,983)		73,952
Income (loss) before income taxes		8,140		6,223		(4,655)		134		—		9,842
Income tax expense (benefit)		2,176		2,394		(1,597)		53		—		3,026
Net income (loss)		5,964		3,829		(3,058)		81		—		6,816
Preferred stock dividends		—		—		575		—		—		575
Net income (loss) available to common shareholders	$	5,964	$	3,829	$	(3,633)	$	81	$	—	$	6,241
Capital expenditures for the year ended December 31, 2015	$	1,174	$	354	$	616	$	9	$	—	$	2,153
Total assets as of December 31, 2015		1,378,988		125,227		151,441		5,017		(276,197)		1,384,476
Goodwill as of December 31, 2015		1,598		16,882		—		—		—		18,480

	2014
	Commercial
	&				Financial
	Retail		Mortgage		Holding				Intercompany
(in thousands)	Banking		Banking		Company		Insurance		Eliminations		Consolidated
Revenues:
Interest income	$	33,175	$	2,645	$	2	$	—	$	346	$	36,168
Mortgage fee income		64		18,691		—		—		(1,198)		17,557
Insurance and investment services income		328		—		—		3,523		—		3,851
Other income		4,458		(2)		4,357		—		(4,676)		4,137
Total operating income		38,025		21,334		4,359		3,523		(5,528)		61,713
Expenses:
Interest expense		5,663		1,063		1,703		—		(918)		7,511
Salaries and employee benefits		9,629		14,487		3,658		3,417		—		31,191
Provision for loan losses		2,582		—		—		—		—		2,582
Other expense		13,994		5,990		1,970		1,102		(4,610)		18,446
Total operating expenses		31,868		21,540		7,331		4,519		(5,528)		59,730
Income (loss) before income taxes		6,157		(206)		(2,972)		(996)		—		1,983
Income tax expense (benefit)		1,326		(57)		(993)		(372)		—		(96)
Net income (loss)		4,831		(149)		(1,979)		(624)		—		2,079
Preferred stock dividends		—		—		332		—		—		332
Net income (loss) available to common shareholders	$	4,831	$	(149)	$	(2,311)	$	(624)	$	—	$	1,747
Capital expenditures for the year ended December 31, 2014	$	9,072	$	333	$	40	$	353	$	—	$	9,798
Total assets as of December 31, 2014		1,048,101		101,791		146,137		4,031		(189,601)		1,110,459
Goodwill as of December 31, 2014		897		16,882		—		—		—		17,779

	2013
	Commercial
	&				Financial
	Retail		Mortgage		Holding				Intercompany
(in thousands)	Banking		Banking		Company		Insurance		Eliminations		Consolidated
Revenues:
Interest income	$	25,334	$	1,764	$	2	$	—	$	415	$	27,515
Mortgage fee income		2,172		19,044		—		—		(415)		20,801
Insurance and investment services income		140		—		—		1,722		—		1,862
Other income		4,200		1,351		—		—		(646)		4,905
Total operating income		31,846		22,159		2		1,722		(646)		55,083
Expenses:
Interest expense		4,958		796		79		—		(646)		5,187
Salaries and employee benefits		12,245		13,017		196		1,609		—		27,067
Provision for loan losses		2,260		—		—		—		—		2,260
Other expense		9,624		5,081		227		634		—		15,566
Total operating expenses		29,087		18,894		502		2,243		(646)		50,080
Income (loss) before income taxes		2,759		3,265		(500)		(521)		—		5,003
Income tax expense (benefit)		195		1,240		(190)		(262)		—		983
Net income (loss)		2,564		2,025		(310)		(259)		—		4,020
Preferred stock dividends		—		—		85		—		—		85
Net income (loss) available to common shareholders	$	2,564	$	2,025	$	(395)	$	(259)	$	—	$	3,935
Capital expenditures for the year ended December 31, 2013	$	5,613	$	489	$	—	$	399	$	—	$	6,501
Total assets as of December 31, 2013		924,328		92,290		99,730		3,012		(132,300)		987,060
Goodwill as of December 31, 2013		897		16,882		—		—		—		17,779

Commercial & Retail Banking

For the year ended December 31, 2015, the Commercial & Retail Banking segment earned $6.0 million compared to $4.8 million in 2014. Net interest income increased by $6.2 million, primarily the result of average loan balances increasing by $207.8 million. Noninterest income decreased by $784 thousand, mainly the result of the following: $1.0 million decrease in gain of derivative, $282 thousand decrease in gain on sale of securities and $138 thousand decrease in gain on sale of portfolio loans and offset by a $441 thousand increase in other operating income, $382 thousand of which related to commercial swap fees and a $209 thousand increase in visa debit card and interchange income. Noninterest expense increased by $3.6 million, primarily the result of the following: $1.4 million increase in salaries expense, $995 thousand increase in occupancy and equipment expense, $1.2million increase in data processing expense, and $650 thousand increase in professional fees.

Mortgage Banking

For the year ended December 31, 2015, the Mortgage Banking segment earned $3.8 million compared to a loss of $149thousand in 2014. Net interest income increased $653 thousand, noninterest income increased by $13.5 million and noninterest expense increased by $7.8 million. The $4.0 million earnings increase is primarily due to a 47.5% increase in origination volume, which led to an $11.9 million increase in mortgage fee income. The $7.8 million increase in noninterest expense was primarily the result of the following: $6.3 million in salaries expense, $655 thousand in mortgage processing expense, $363 thousand in other operating expense, $222 thousand in marketing expense and $167 thousand in occupancy and equipment expense.

Financial Holding Company

For the year ended December 31, 2015, the Financial Holding Company segment lost $3.1 million compared to a loss of $2.0 million in 2014. Interest expense increased $501 thousand, noninterest income decreased $26 thousand and noninterest expense increased $1.2 million. In addition, the income tax benefit increased $604 thousand. The increase in interest expense was due to twelve months of interest expense on subordinated debt in 2015 versus only six months in 2014. The increase in noninterest expense was primarily due to a $592 thousand increase in salaries expense, a $392 thousand increase in professional fees and a $123 thousand increase in data processing and communications.  

Insurance

For the year ended December 31, 2015, the Insurance segment earned $81thousand compared to a loss of $624thousand in 2014. Noninterest income increased by $1.2 million as a result of new production from both new and existing customers as well as contingent income based on growth and profitability and noninterest expense increased by $86 thousand. Income tax expense for 2015 increased by $425 thousand.