SEGMENT REPORTING

3 Months Ended

Mar. 31, 2016

SEGMENT REPORTING

SEGMENT REPORTING

Note 9 – 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 three month periods ended March 31, 2016 and 2015 are as follows:

	Commercial &				Financial
Three months ended March 31, 2016	Retail		Mortgage		Holding				Intercompany
(in thousands)	Banking		Banking		Company		Insurance		Eliminations		Consolidated
Revenues:
Interest income	$	12,462	$	941	$	1	$	—	$	(22)	$	13,382
Mortgage fee income		(22)		7,108		—		—		(301)		6,785
Insurance and investment services income		53		—		—		1,064		—		1,117
Other income		1,072		679		1,613		—		(1,590)		1,774
Total operating income		13,565		8,728		1,614		1,064		(1,913)		23,058
Expenses:
Interest expense		2,040		419		552		—		(324)		2,687
Provision for loan losses		625		—		—		—		—		625
Salaries and employee benefits		2,831		5,711		1,766		952		—		11,260
Other expense		4,473		1,944		764		282		(1,589)		5,874
Total operating expenses		9,969		8,074		3,082		1,234		(1,913)		20,446
Income (loss) before income taxes		3,596		654		(1,468)		(170)		—		2,612
Income tax expense (benefit)		1,137		258		(515)		(64)		—		816
Net income (loss)		2,459		396		(953)		(106)		—		1,796
Preferred stock dividends		—		—		186		—		—		186
Net income (loss) available to common shareholders	$	2,459	$	396	$	(1,139)	$	(106)	$	—	$	1,610
Capital expenditures for the three-month period ended March 31, 2016	$	549	$	41	$	62	$	—	$	—	$	652
Total assets as of March 31, 2016		1,433,380		126,854		146,896		2,366		(276,856)		1,432,640
Total assets as of December 31, 2015		1,378,988		125,227		151,441		5,017		(276,197)		1,384,476
Goodwill as of March 31, 2016		1,598		16,882		—		—		—		18,480
Goodwill as of December 31, 2015	$	1,598	$	16,882	$	—	$	—	$	—	$	18,480

	Commercial &				Financial
Three months ended March 31, 2015	Retail		Mortgage		Holding				Intercompany
(in thousands)	Banking		Banking		Company		Insurance		Eliminations		Consolidated
Revenues:
Interest income	$	8,903	$	830	$	1	$	—	$	(96)	$	9,638
Mortgage fee income		(13)		6,551		—		—		(229)		6,309
Insurance and investment services income		71		—		—		1,627		—		1,698
Other income		766		2,688		1,158		—		(1,220)		3,392
Total operating income		9,727		10,069		1,159		1,627		(1,545)		21,037
Expenses:
Interest expense		1,499		374		543		—		(325)		2,091
Provision for loan losses		659		—		—		—		—		659
Salaries and employee benefits		2,778		5,091		979		886		—		9,734
Other expense		4,128		1,691		436		186		(1,220)		5,221
Total operating expenses		9,064		7,156		1,958		1,072		(1,545)		17,705
Income (loss) before income taxes		663		2,913		(799)		555		—		3,332
Income tax expense (benefit)		167		1,115		(264)		211		—		1,229
Net income (loss)		496		1,798		(535)		344		—		2,103
Preferred stock dividends		—		—		142		—		—		142
Net income (loss) available to common shareholders	$	496	$	1,798	$	(677)	$	344	$	—	$	1,961
Capital expenditures for the three-month period ended March 31, 2015	$	318	$	28	$	41		7	$	—	$	394
Total assets as of March 31, 2015		1,204,263		159,904		141,096		4,188		(314,478)		1,194,973
Total assets as of December 31, 2014		1,048,101		101,791		146,137		4,031		(189,601)		1,110,459
Goodwill as of March 31, 2015		897		16,882		—		—		—		17,779
Goodwill as of December 31, 2014	$	897	$	16,882	$	—	$	—	$	—	$	17,779

Commercial & Retail Banking

For the three months ended March 31, 2016, the Commercial & Retail Banking segment earned$2.5 million compared to $496 thousand during the three months ended March 31, 2015.  Net interest income increased$3.0 million, mainly the result of average loan balances increasing by $227.0 million. In addition, average interest bearing liabilities increased$220.5 million which led to a $542 thousand increase in interest expense. Noninterest income increased by $278 thousand, largely the result of an increase in gain on sale of securities of $189 thousand and a $162 thousand expense reduction due to the mark to market valuation of the interest rate cap . Noninterest expense increased$399 thousand, largely the result of a $191 thousandincrease in other operating expense and a $163 thousand increase in occupancy and equipment. In addition, income tax expense increased $970 thousand due to the increase in earnings.

Mortgage Banking

For the three months ended March 31, 2016, the Mortgage Banking segment earned $396 thousandcompared to$1.8 million during the three months ended March 31, 2015. Net interest income increased $66 thousand, noninterest income decreased by $1.5 million and noninterest expense increased by $873 thousand. The $1.4 million earnings decrease is largely due to a $2.0 million decrease in gains related to the mark to market valuation of the interest rate lock commitments driven by a 50% increase in the locked mortgage loan pipeline for the three months ended March 31, 2016 compared to a 92% increase in the locked mortgage pipeline for the three months ended March 31, 2015. In addition, loans held for sale decreased from $125.8 million at March 31, 2015 to $98.9 million at March 31, 2016. Mortgage fee income also increased by $557 thousand. Personnel expense increased by $621 thousand and mortgage processing expense increased by $114 thousand. In addition, income tax expense decreased $858 thousand due to the decrease in earnings.

Financial Holding Company

For the three months ended March 31, 2016, the Financial Holding Company segment lost $953 thousand compared to a loss of $535 thousand during the three months ended March 31, 2015. Interest expense increased $9 thousand, noninterest income increased $455 thousand and noninterest expense increased $1.1 million. In addition, the income tax benefit increased $251 thousand. The increase in noninterest income was due a $385 thousand increase in other operating income and a $70 thousand increase in gain on sale of securities. The increase in noninterest expense was largely due to a $787 thousand increase in salaries expense, including a $500 thousand reorganization expense, and a $170 thousand increase in professional fees.

Insurance

For the three months ended March 31, 2016, the Insurance segment lost$106 thousand compared to  a$344 thousand profit during the three months ended March 31, 2015. Noninterest income decreased $562 thousand and noninterest expense increased by $162 thousand.  Income tax benefit for the first quarter 2016 increased by $275 thousand.