Edgar Filing: MVB FINANCIAL CORP

form10q-118706_mvb.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File number 333-120931

MVB Financial Corp.

(Exact name of registrant as specified in its charter)

West Virginia	20-0034461
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

301 Virginia Avenue

Fairmont, West Virginia 26554-2777

(Address of principal executive offices)

304-363-4800

(Issuer’s telephone number)

Not Applicable

(Former name, address, and fiscal year, if changed since last report)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer

Accelerated filer

Non-accelerated filer (Do not check if a smaller reporting company)

Smaller reporting company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [ X ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

As of November 14, 2011, the number of shares outstanding of the issuer’s only class of common stock was 2,234,767.

MVB Financial Corp.
Part I.	Financial Information

Item 1.	Financial Statements

	The unaudited interim consolidated financial statements of MVB Financial Corp. and Subsidiaries (MVB or “the Company”) listed below are included on pages 2-18 of this report.

	Consolidated Balance Sheets at September 30, 2011 and December 31, 2010

	Consolidated Statements of Income for the Nine and Three Months ended September 30, 2011 and 2010

	Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2011 and 2010

	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Management’s Discussion and Analysis of Financial Condition and Results of Operations is included on pages 19-30 of this report.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

Item 4.	Controls and Procedures

Part II.	Other Information

Item 1.	Legal Proceedings

Item 1.a.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

Item 3.	Defaults Upon Senior Securities

Item 4.	Removed and Reserved

Item 5.	Other Information

Item 6.	Exhibits

Index

Part I. Financial Information

Item 1. Financial Statements

MVB Financial Corp. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except Share and Per Share Data)

	September 30			December 31
	2011			2010
	(Unaudited)			(Note 1)
Assets
Cash and due from banks	$	10,667		$	3,713
Interest bearing balances		6,962			10,091
Certificates of deposits in other banks		9,918			17,734
Investment securities:
Securities held-to-maturity, at cost		10,168			7,460
Securities available-for-sale, at approximate fair value		102,292			61,824

Loans:		357,830			294,044
Less: Allowance for loan losses		(2,676	)		(2,478	)
Net loans		355,154			291,566
Loans held for sale		3,352			1,839
Bank premises, furniture and equipment, net		7,673			7,579
Accrued interest receivable and other assets		13,993			12,461
Total assets	$	520,179		$	414,267
Liabilities
Deposits
Non-interest bearing	$	42,345		$	28,449
Interest bearing		335,540			271,985
Total deposits		377,885			300,434

Accrued interest, taxes and other liabilities		2,302			2,703
Repurchase agreements		77,826			47,623
Federal Home Loan Bank and other borrowings		9,823			28,614
Long-term debt		4,124			4,124
Total liabilities		471,960			383,498

Stockholders’ equity
Preferred stock, $1,000 par value, 8,500 shares authorized and issued		8,500			-
Common stock, $1 par value, 4,000,000 authorized, 2,234,767 and 1,802,391 issued		2,235			1,802
Additional paid-in capital		32,574			23,864
Common stock paid for but not issued, par value $1; 90,560 shares		-			1,729
Treasury stock, 51,077 and 47,218 shares, respectively		(1,084	)		(1,006	)
Retained earnings		5,792			4,643
Accumulated other comprehensive income/(loss)		202			(263	)
Total stockholders’ equity		48,219			30,769
Total liabilities and stockholders’ equity	$	520,179		$	414,267

See accompanying notes to unaudited financial statements.

Index

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Income

(Unaudited) (Dollars in Thousands except Share and Per Share Data)

	Nine Months Ended				Three Months Ended
	September 30				September 30
	2011		2010		2011		2010
Interest income
Interest and fees on loans	$	12,043	$	9,795	$	4,306	$	3,449
Interest on deposits with other banks		60		501		11		115
Interest on investment securities – taxable		1,101		1,071		393		401
Interest on tax exempt loans and securities		625		586		211		224
Total interest income		13,829		11,953		4,921		4,189

Interest expense
Deposits		2,909		3,379		969		1,105
Repurchase agreements		358		338		125		115
FHLB and other borrowings		349		385		114		123
Long-term debt		60		62		20		23
Total interest expense		3,676		4,164		1,228		1,366
Net interest income		10,153		7,789		3,693		2,823
Provision for loan losses		1,221		760		591		240
Net interest income after provision for loan losses		8,932		7,029		3,102		2,583

Other income
Service charges on deposit accounts		471		498		178		143
Income on bank owned life insurance		206		193		78		64
Visa debit card income		309		263		106		93
Income on loans held for sale		591		372		318		170
Other operating income		401		311		170		95
Gain on sale of securities		485		88		129		32
Total other income		2,463		1,725		979		597

Other expense
Salary and employee benefits		4,816		3,501		1,725		1,267
Occupancy expense		497		446		182		149
Equipment expense		439		350		152		127
Data processing		252		355		147		78
Visa debit card expense		245		218		84		79
Advertising		283		215		121		73
Legal and accounting fees		292		122		151		42
Printing, stationery and supplies		123		97		38		31
Consulting fees		291		116		92		61
FDIC insurance		322		395		79		129
Other taxes		126		140		40		47
Other operating expenses		967		709		341		252
Total other expense		8,653		6,664		3,152		2,335
Income before income taxes		2,742		2,090		929		845
Income tax expense		767		535		256		225
Net income	$	1,975	$	1,555	$	673	$	620

Basic net income per share	$	0.92	$	0.97	$	0.31	$	0.39
Diluted net income per share	$	0.91	$	0.96	$	0.30	$	0.38
Basic weighted average shares outstanding		2,135,826		1,599,382		2,185,703		1,593,629
Diluted weighted average shares outstanding		2,171,967		1,624,241		2,221,844		1,618,488

See accompanying notes to unaudited financial statements.

Index

MVB Financial Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited) (Dollars in thousands)

	Nine Months Ended			September 30
	2011			2010
Operating activities
Net income	$	1,975		$	1,555
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,221			760
Deferred income tax expense/(benefit)		145			(274	)
Depreciation		343			338
Stock based compensation		88			27
Loans originated for sale		(31,675	)		(27,717	)
Proceeds of loans sold		30,162			26,957
Proceeds from sale of other real estate owned		312			866
(Gain) on sale of other real estate owned		-			(61	)
(Gain) on sale of investment securities		(485	)		-
Amortization, net of accretion		613			331
(Increase) in interest receivable and other assets		(198	)		(4	)
(Decrease)/increase in accrued interest, taxes, and other liabilities		(401	)		760
Net cash provided by operating activities		2,100			3,538
Investing activities
(Increase) in loans made to customers		(64,809	)		(46,939	)
Purchases of premises and equipment		(437	)		(196	)
Decrease/(increase) in interest bearing balances with banks, net		3,129			(17,695	)
Purchases of certificates of deposit in other banks		(9,918	)		(16,321	)
Maturities of certificates of deposit in other banks		17,734			44,886
Purchases of investment securities available-for-sale		(215,143	)		(59,976	)
Proceeds from sales, maturities and calls of securities
Available-for-sale		175,336			31,501
Proceeds from sales, maturities and calls of securities
held to maturity		1,225			474
Purchases of investment securities held-to-maturity		(3,948	)		(985	)
Purchase of bank owned life insurance		(2,100	)		-
Net cash (used in) investing activities		(98,931	)		(65,251	)
Financing activities
Net increase in deposits		77,451			52,465
Net increase in repurchase agreements		30,203			18,942
Proceeds from Federal Home Loan Bank borrowings		63,594			92,500
Principal payments on Federal Home Loan Bank borrowings		(82,385	)		(101,657	)
Purchase of treasury stock		(78	)		(304	)
Net proceeds of stock offering		6,500			-
Common stock options exercised		-			38
Issuance of preferred stock		8,500			-
Net cash provided by financing activities		103,785			61,984
Increase in cash and cash equivalents		6,954			271
Cash and cash equivalents - beginning of period		3,713			2,321
Cash and cash equivalents - end of period	$	10,667		$	2,592

Cash payments for:
Interest on deposits, repurchase agreements and borrowings	$	3,763		$	4,296
Income taxes	$	686		$	516

See accompanying notes to unaudited financial statements.

Index

MVB Financial Corp. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1 – Basis of Presentation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q and Section 310(b) of Regulation SB. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for annual year-end financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation, have been included and are of a normal, recurring nature. The balance sheet as of December 31, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles. Operating results for the nine and three months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The accounting and reporting policies of MVB conform to accounting principles generally accepted in the United States and practices in the banking industry. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates, such as the allowance for loan losses, are based upon known facts and circumstances. Estimates are revised by management in the period such facts and circumstances change. Actual results could differ from those estimates. All significant inter-company accounts and transactions have been eliminated in consolidation.

The consolidated balance sheet as of December 31, 2010 has been extracted from audited financial statements included in MVB’s 2010 filing on Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in MVB’s December 31, 2010, Form 10-K filed with the Securities and Exchange Commission.

Management has reviewed events occurring through November 14, 2011, the date the financial statements were issued and no subsequent events transpired requiring accrual or disclosure.

Note 2. - Loans

The following table summarizes the primary segments of the ALL, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of September 30, 2011. Activity in the allowance is presented for the period ended September 30, 2011 (in thousands):

Index

							Home						Credit
	Commercial			Residential			Equity			Installment			Card			Total
ALL balance 12/31/10	$	1,517		$	460		$	207		$	274		$	20		$	2,478
Charge-offs		(554	)		(354	)		(114	)		(29	)		(3	)		(1,054	)
Recoveries		4			-			10			17			-			31
Provision		849			332			68			(31	)		3			1,221
ALL balance 9/30/11	$	1,816		$	438		$	171		$	231		$	20		$	2,676
Individually evaluated for impairment	$	1,329		$	95		$	54		$	104		$	3		$	1,585
Collectively evaluated for impairment	$	487		$	343		$	117		$	127		$	17		$	1,091

The allowance for loan losses is based on estimates, and actual losses will vary from current estimates. Management believes that the granularity of the homogeneous pools and the related historical loss ratios and other qualitative factors, as well as the consistency in the application of assumptions, result in an ALL that is representative of the risk found in the components of the portfolio at any given date.

The following table summarizes the primary segments of the loan portfolio as of September 30, 2011 (in thousands):

	Commercial		Residential		Home Equity		Installment		Credit Cards		Total

Sept. 30, 2011
Total Loans	$	230,583	$	99,578	$	15,038	$	12,045	$	586	$	357,830
Individually evaluated for impairment	$	2,583	$	77	$	43	$	8	$	-	$	2,711
Collectively evaluated for impairment	$	228,000	$	99,501	$	14,995	$	12,037	$	586	$	355,119

The following table summarizes the primary segments of the loan portfolio as of December 31, 2010 (in thousands):

	Commercial		Residential		Home Equity		Installment		Credit Cards		Total

December 31, 2010
Total Loans	$	194,700	$	71,686	$	14,334	$	12,830	$	494	$	294,044
Individually evaluated for impairment	$	393	$	197	$	262	$	0	$	4	$	856
Collectively evaluated for impairment	$	194,307	$	71,489	$	14,072	$	12,830	$	490	$	293,188

Index

Management evaluates individual loans in all of the commercial segments for possible impairment. Loans are considered to be impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Corporation also separately evaluates individual consumer and residential mortgage loans for impairment.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan's effective interest rate; (b) the loan's observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis.

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2011 (in thousands):

					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
Sept. 30, 2011	Investment		Allowance		Investment		Investment		Balance

Commercial	$	-	$	-	$	2,583	$	2,583	$	2,583
Residential		77		77		-		77		77
Home Equity		43		43		-		43		43
Installment		8		8		-		8		8
Credit Card		-		-		-		-		-
Total impaired loans	$	128	$	128	$	2,583	$	2,711	$	2,711

					Impaired
					Loans with
	Impaired Loans with				No Specific
	Specific Allowance				Allowance		Total Impaired Loans
									Unpaid
	Recorded		Related		Recorded		Recorded		Principal
Dec 31, 2010	Investment		Allowance		Investment		Investment		Balance

Commercial	$	59	$	20	$	334	$	393	$	393
Residential		165		75		32		197		197
Home Equity		262		99		0		262		262
Installment		0		0		0		0		0
Credit Card		4		4		0		4		4
Total impaired loans	$	490	$	198	$	366	$	856	$	856

Index

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated (in thousands):

	Sept.
	2011		2010
Average investment in impaired loans	$	1,144	$	1,220
Interest income recognized on an accrual basis on impaired loans	$	47	$	49

Management uses a nine point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized, and are aggregated as "Pass" rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. The portion of any loan that represents a specific allocation of the allowance for loan losses is placed in the Doubtful category. Any portion of a loan that has been charged off is placed in the Loss category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event. The Bank's Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Credit Department performs an annual review of all commercial relationships $500,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Bank has an experienced Credit Department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct loan reviews on at least an annual basis. Generally, the external consultant reviews larger commercial relationships or criticized relationships. The Credit Department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table represents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of September 30, 2011 and December 31, 2010 (in thousands):

			Special
Sept. 30, 2011	Pass		Mention		Substandard		Doubtful		Total

Commercial	$	216,852	$	6,830	$	4,318	$	2,583	$	230,583
Residential		98,040		1,286		175		77		99,578
Home Equity		14,872		97		26		43		15,038
Installment		11,657		223		157		8		12,045
Credit Card		583		-		3		-		586
Total	$	342,004	$	8,436	$	4,679	$	2,711	$	357,830

			Special
December 31, 2010	Pass		Mention		Substandard		Doubtful		Total

Commercial	$	180,568	$	8,294	$	5,446	$	392	$	194,700
Residential		69,906		613		1,002		165		71,686
Home Equity		13,945		99		262		28		14,334
Installment		12,424		233		173		-		12,830
Credit Card		488		-		6		-		494
Total	$	277,331	$	9,239	$	6,889	$	585	$	294,044

Index

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of September 30, 2011and December 31, 2010 (in thousands):

	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due		Total Past Due		Non- Accrual		Total Loans
Sept. 30, 2011
Commercial	$	224,036	$	341	$	2,935	$	-	$	3,276	$	3,271	$	230,583
Residential		98,916		58		188		76		322		340		99,578
Home Equity		14,896		75		-		-		75		67		15,038
Installment		11,756		63		28		42		133		156		12,045
Credit Card		586		-		-		-		-		-		586
Total	$	350,190	$	537	$	3,151	$	118	$	3,806	$	3,834	$	357,830

			30-59		60-89		90
			Days		Days		Days		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
Dec 31, 2010
Commercial	$	193,414	$	241		-	$	217	$	458	$	828	$	194,700
Residential		68,529		1,761		272		143		2,176		981		71,686
Home Equity		13,979		28		18		47		93		262		14,334
Installment		12,222		141		158		155		454		154		12,830
Credit Card		490		-		-		-		-		4		494
Total	$	288,634	$	2,171	$	448		562	$	3,181	$	2,229	$	294,044

An allowance for loan losses ("ALL") is maintained to absorb losses from the loan portfolio. The ALL is based on management's continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of non-performing loans.

The Bank's methodology for determining the ALL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Bank's ALL.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualified factors.

The classes described above, which are based on the Federal call code assigned to each loan, provide the starting point for the ALL analysis. Management tracks the historical net charge-off activity at the call code level. A historical charge-off factor is calculated utilizing a defined number of consecutive historical quarters. Commercial, Mortgage and Consumer pools currently utilize a rolling 12 quarters.

"Pass" rated credits are segregated from "Criticized" credits for the application of qualitative factors. Loans in the criticized pools, which possess certain qualities or characteristics that may lead to collection and loss issues, are closely monitored by management and subject to additional qualitative factors.

Index

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and non-accrual loans; trends in volume and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALL.

Historically, management has utilized an internally developed spreadsheet to track and apply the various components of the allowance.

The following table presents details related to loans identified as TDRs during the three and nine months ended September 30, 2011:

	New TDRs (1)
	For the Three Months Ended							For the Nine Months Ended
	30-Sep-11							30-Sep-11
(Unaudited, dollars in thousands)	Number of Contracts			Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate:		-			-		-		-
Land and construction		1			2,745		2,250		1		2,745		2,250
Other							-		-		-		-
Total commercial real estate		1	(1)		2,745		2,250		1		2,745		2,250
Commercial and industrial		-			-		-		-		-		-
Residential real estate		1			418		418		1		418		418
Home equity		-			-		-		-		-		-
Consumer		-			-		-		-		-		-
Total		2			3,163		2,668		2		3,163		2,668

(1) Excludes loans that were either paid off or charged-off by period end. The pre-modification balance represents the balance outstanding at the beginning of the period. The post-modification balance represents the outstanding balance at period end.

Note 3. Borrowed Funds

The Company is a party to repurchase agreements with certain customers. As of September 30, 2011 and December 31, 2010, the Company had repurchase agreements of $77.8 million and $47.6 million.

The bank is a member of the Federal Home Loan Bank (“FHLB”) of Pittsburgh, Pennsylvania. Borrowings from the FHLB are secured by stock in the FHLB of Pittsburgh, qualifying first mortgage loans, mortgage-backed securities and certain investment securities. The remaining maximum borrowing capacity with the FHLB at September 30, 2011 was approximately $117.1 million.

Borrowings from the FHLB were as follows:	Sept 30 2011		Dec 31 2010
(dollars in thousands)
Fixed interest rate note, originating April 1999, due April 2014, interest of 5.41% is payable monthly.	$	1,000	$	1,000

Fixed interest rate note, originating January 2005, due January 2020, interest of 5.14% is payable in monthly installments of $11.		872		933

Fixed interest rate note, originating April 2002, due May 2017, interest of 5.90% is payable monthly.		635		647

Fixed interest rate note, originating July 2006, due July 2016, interest of 4.50% is payable in monthly installments of $8.		1,311		1,341

Fixed interest rate note, originating October 2006, due October 2021, interest of 5.20% is payable in monthly installments of $6.		1,073		1,089

Fixed interest rate note, originating February 2007, due February 2022, interest of 5.22% is payable in monthly installments of $5.		901		913

Fixed interest rate note, originating April 2007, due April 2022, interest of 5.18% is payable in monthly installments of $6.		1,019		1,034

Floating interest rate note, originating March 2003, due December 2011, interest of 0.68% payable monthly.		-		14,126

Fixed interest rate note, originating December 2007, due December 2017, interest of 5.25% is payable in monthly installments of $7.		1,012		1,031

Fixed interest rate note originating March 2008, due March 2013, interest of 2.37% payable quarterly.		2,000		2,000

	$	9,823	$	24,114

Index

In March 2007 the Company completed the private placement of $4 million Floating Rate, Trust Preferred Securities through its MVB Financial Statutory Trust I subsidiary (the “Trust”). The Company established the trust for the sole purpose of issuing the Trust Preferred Securities pursuant to an Amended and Restated Declaration of Trust. The proceeds from the sale of the Trust Preferred Securities will be loaned to the Company under subordinated Debentures (the “Debentures”) issued to the Trust pursuant to an Indenture. The Debentures are the only asset of the Trust. The Trust Preferred Securities have been issued to a pooling vehicle that will use the distributions on the Trust Preferred Securities to securitize note obligations. The securities issued by the Trust are includable for regulatory purposes as a component of the Company’s Tier I capital.

The Trust Preferred Securities and the Debentures mature in 30 years and are redeemable by the Company after five years. Interest payments are due in March, June, September and December and are adjusted at the interest due dates at a rate of 1.62% over the three month LIBOR Rate. The Company reflects borrowed funds in the amount of $4.1 million as of September 30, 2011 and 2010 and interest expense of $60 and $62 for the periods ended September 30, 2011 and 2010.

The bank had borrowed $4,500 in overnight funds at the Federal Reserve discount window on December 31, 2010 at a rate of 0.75%

A summary of maturities of these borrowings over the next five years is as follows:

(dollars in thousands)
Year	Amount
2011	$	56
2012		232
2013		2,244
2014		1,257
2015		271
Thereafter		9,887
	$	13,947

Note 4. - Comprehensive Income

The Company is required to present comprehensive income in a full set of general-purpose financial statements for all periods presented. The following represents comprehensive income for the nine and three month periods ended September 30, 2011 and September 30, 2010.

The following table represents other comprehensive income before tax and net of tax:

(in thousands)	For the three months ended Sept. 30,						For the nine months ended Sept. 30,
	2011			2010			2011			2010
Unrealized gain (loss) on securities available for sale	$	156		$	257		$	774		$	747
Pension liability adjustment		-			-			-			(139	)
Tax effect		(62	)		(103	)		(310	)		(243	)
Net of tax effect		94			154			464			365
Net income as reported		673			620			1,975			1,555
Total comprehensive income	$	767		$	774		$	2,439		$	1,920

Index

Note 5 – Net Income Per Common Share

MVB determines basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income by the weighted average number of shares outstanding increased by the number of shares that would be issued assuming the exercise of stock options. At September 30, 2011 and 2010, stock options to purchase 148,423 and 124,297 shares at an average price of $15.13 and $16.00, respectively, were outstanding. For the three months ended September 30, 2011 and 2010, the dilutive effect of stock options was 36,141 and 24,859 shares, respectively.

Note 6 – Recent Accounting Pronouncements

In July 2010, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company has provided the necessary disclosures in Note 2 herein.

In December, 2010, the Financial Accounting Standards Board (“FASB”) issued ASU 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating an impairment may exist. The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. For public entities, the amendments in this Update are effective for fiscal year, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Nonpublic entities may early adopt the amendments using the effective date for public entities. This ASU is not expected to have a significant impact on the Company’s financial statements.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

Index

In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this Update provide additional guidance or clarification to help creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The amendments in this Update are effective for the first interim or annual reporting period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. The Company has provided the necessary disclosures in Note 2.

In April 2011, the FASB issued ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements. The main objective in developing this Update is to improve the accounting for repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The amendments in this Update apply to all entities, both public and nonpublic. The amendments affect all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The guidance in this Update is effective for the first interim or annual period beginning on or after December 15, 2011 and should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011. Early application by public entities is not permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The amendments in this Update improve the comparability, clarity, consistency, and transparency of financial reporting and increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS, the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was eliminated. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. All entities that report items of comprehensive income, in any period presented, will be affected by the changes in this Update. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. The amendments in this Update should be applied retrospectively, and early adoption is permitted. This ASU is not expected to have a significant impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other Topics (Topic 350), Testing Goodwill for Impairment. The objective of this update is to simplify how entities, both public and nonpublic, test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments in this Update apply to all entities, both public and nonpublic, that have goodwill reported in their financial statements and are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This ASU is not expected to have a significant impact on the Company’s financial statements.

Index

In September 2011, the FASB issued ASU 2011-09, Compensation-Retirement Benefits-Multiemployer Plans (Subtopic 715-80). The amendments in this Update will require additional disclosures about an employer’s participation in a multiemployer pension plan to enable users of financial statements to assess the potential cash flow implications relating to an employer’s participation in multiemployer pension plans. The disclosures also will indicate the financial health of all of the significant plans in which the employer participates and assist a financial statement user to access additional information that is available outside the financial statements. For public entities, the amendments in this Update are effective for annual periods for fiscal years ending after December 15, 2011, with early adoption permitted. For nonpublic entities, the amendments are effective for annual periods of fiscal years ending after December 15, 2012, with early adoption permitted. The amendments should be applied retrospectively for all prior periods presented. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial statements.

Note 7 – Fair Value of Financial Instruments

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Index

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

The following table presents the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of September 30, 2011 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

(In Thousands)	September 30, 2011
	Level I		Level II		Level III		Total
Assets:
Investment securities, available for sale		-		102,292		-		102,292
Other Real Estate Owned		-		270		-		270
Impaired Loans		-		-		2,711		2,711

(In Thousands)	December 31, 2010
	Level I		Level II		Level III		Total
Assets:
Investment securities, available for sale		-		61,824		-		61,824
Other Real Estate Owned		-		402		-		402
Impaired Loans		-		-		856		856

The following summarizes the methods and significant assumptions used by the Company in estimating its fair value disclosures for financial instruments.

Short-term financial instruments: The carrying values of short-term financial instruments including cash and due from banks, interest bearing balances – FHLB, and certificates of deposit in other banks approximate the fair value of these instruments.

Securities: Estimated fair values of securities are based on quoted market prices, where available. If quoted market prices are not available, estimated fair values are based on quoted market prices of comparable securities.

Loans: The estimated fair values for loans are computed based on scheduled future cash flows of principal and interest, discounted at interest rates currently offered for loans with similar terms of borrowers of similar credit quality. No prepayments of principal are assumed.

Accrued interest receivable and payable: The carrying values of accrued interest receivable and payable approximate their estimated fair values.

Repurchase Agreements: The fair values of repurchase agreements approximate their estimated fair values.

Deposits: The estimated fair values of demand deposits (i.e., non interest bearing checking, NOW and money market), savings accounts and other variable rate deposits approximate their carrying values. Fair values of fixed maturity deposits are estimated using a discounted cash flow methodology at rates currently offered for deposits with similar remaining maturities. Any intangible value of long-term relationships with depositors is not considered in estimating the fair values disclosed.

Off-balance sheet instruments: The fair values of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of agreements and the present credit standing of the counterparties. The amounts of fees currently charged on commitments and standby letters of credit are deemed significant, and therefore, the estimated fair values and carrying values are not shown.

Index

The carrying values and estimated fair values of the Company’s financial instruments are summarized as follows:

	Sept. 30, 2011
	Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks		10,667		10,667
Interest bearing balances		6,962		6,962
Securities available-for-sale		102,292		102,292
Securities held-to-maturity		10,168		10,524
Loans		357,830		371,070
Accrued interest receivable		1,639		1,639
	$	489,558	$	503,154

Financial liabilities:
Deposits	$	377,885	$	397,082
Repurchase agreements		77,826		77,826
Federal Home Loan Bank Borrowings		9,823		11,336
Accrued interest payable		291		291
Long-term debt		4,124		4,124
	$	469,949		490,659

	December 31, 2010
	Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets:
Cash and due from banks		3,713		3,713
Interest bearing balances		27,825		27,878
Securities available-for-sale		61,824		61,824
Securities held-to-maturity		7,460		7,442
Loans		294,044		302,277
Accrued interest receivable		1,398		1,398
	$	396,264	$	404,532

Financial liabilities:
Deposits	$	300,434	$	307,584
Repurchase agreements		47,623		47,671
FHLB and other Borrowings		28,614		32,305
Accrued interest payable		378		378
Long-term debt		4,124		4,124
	$	381,173		392,062

Index

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Amortized cost and approximate fair values of investment securities held-to-maturity at September 30, 2011, including gross unrealized gains and losses, are summarized as follows:

(Dollars in thousands)
							Approximate
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gain		Loss		Value

Municipal securities	$	10,168	$	446	$	-	$	10,614

	$	10,168	$	446	$	-	$	10,614

Amortized cost and approximate fair values of investment securities held-to-maturity at December 31, 2010, including gross unrealized gains and losses, are summarized as follows:

(Dollars in thousands)
								Approximate
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

Municipal securities	$	6,460	$	27	$	(62	)	$	6,425
U.S. Agency securities		1,000		17		-			1,017
	$	7,460	$	44	$	(62	)	$	7,442

Amortized cost and approximate fair values of investment securities available-for-sale at September 30, 2011 are summarized as follows:

								Approximate
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

U. S. Agency securities	$	64,250	$	1,114	$	-		$	65,364
Mortgage-backed securities		36,482		354		(32	)		36,804
Other securities		124		-		-			124
	$	100,856	$	1,468	$	(32	)	$	102,292

Index

Amortized cost and approximate fair values of investment securities available-for-sale at December 31, 2010 are summarized as follows:

								Approximate
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		Loss			Value

U. S. Agency securities	$	34,903	$	453	$	(76	)	$	35,280
Mortgage-backed securities		26,135		306		(21	)		26,420
Other securities		124		-		-			124
	$	61,162	$	759	$	(97	)		61,824

The following tables summarize amortized cost and approximate fair values of securities by maturity:

	September 30, 2011
	Held to Maturity				Available for sale
			Approximate				Approximate
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

Within one year	$	115	$	115	$	-	$	-
After one year, but within five		-		-		48,198		49,173
After five years, but within ten		4,026		4,258		6,052		6,191
After ten Years		6,027		6,241		46,606		46,928
Total	$	10,168	$	10,614	$	100,856	$	102,292

The Company's investment portfolio includes securities that are in an unrealized loss position as of September 30, 2011, the details of which are included in the following table. Although these securities, if sold at September 30, 2011 would result in a pretax loss of $32, the Company has no intent to sell the applicable securities at such market values, and maintains the Company has the ability to hold these securities until all principal has been recovered. Declines in the market values of these securities can be traced to general market conditions which reflect the prospect for the economy as a whole. When determining other-than-temporary impairment on securities, the Company considers such factors as adverse conditions specifically related to a certain security or to specific conditions in an industry or geographic area, the time frame securities have been in an unrealized loss position, the Company's ability to hold the security for a period of time sufficient to allow for anticipated recovery in value, whether or not the security has been downgraded by a rating agency, and whether or not the financial condition of the security issuer has severely deteriorated. As of September 30, 2011, the Company considers all securities with unrealized loss positions to be temporarily impaired, and consequently, does not believe the Company will sustain any material realized losses as a result of the current temporary decline in market value.

The following table discloses investments in an unrealized loss position:

At September 30, 2011, total temporary impairment totaled $32.

Description and number	Less than 12 months					12 months or more
of positions	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss

U.S. Agencies(-)	$	-	$	-		$	-	$	-
Mortgage-backed securities(7) (11)		7,249		(32	)		-		-
Municipal securities(-)		-					-		-
	$	7,249	$	(32	)	$	-	$	-

Index

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Private Securities Litigation Reform Act of 1995 indicates that the disclosure of forward-looking information is desirable for investors and encourages such disclosure by providing a safe harbor for forward-looking statements that involve risk and uncertainty. All statements other than statements of historical fact included in this Form 10-Q including statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. In order to comply with the terms of the safe harbor, the corporation notes that a variety of factors, (e.g., changes in the national and local economies, changes in the interest rate environment, competition, etc.) could cause MVB’s actual results and experience to differ materially from the anticipated results or other expectations expressed in those forward-looking statements.

At September 30, 2011 and for the Nine and Three Months Ended September 30, 2011 and 2010:

	Nine Months Ended Sept. 30						Three Months Ended Sept. 30
	2011			2010			2011			2010
Net income to:
Average assets		.58	%		.54	%		.55	%		.62	%
Average stockholders’ equity		6.94			7.58			6.63			8.83
Net interest margin		3.17			2.88			3.23			3.01

Average stockholders’ equity to average assets		8.37			7.15			8.30			7.08
Total loans to total deposits (end of period)		94.69			88.18			94.69			88.18
Allowance for loan losses to total loans (end of period)		0.75			.99			0.75			0.99
Efficiency ratio		68.59			70.04			67.47			68.27
Capital ratios:
Tier 1 capital ratio		15.26			12.02			15.26			12.02
Risk-based capital ratio		16.08			13.07			16.08			13.07
Leverage ratio		10.40			7.96			10.40			7.96
Cash dividends as a percentage of net income		N/A			N/A			N/A			N/A
Per share data:
Book value per share (end of period)	$	17.77		$	17.64		$	17.77		$	17.64
Market value per share (end of period)*		20.00			20.00			20.00			20.00
Basic earnings per share		.92			.97			.31			.39
Diluted earnings per share		.91			.96			.30			.38

* Market value per share is based on MVB’s knowledge of certain arms-length transactions in the stock as MVB’s common stock is not traded on any market. There may be other transactions involving either higher or lower prices of which MVB is unaware.

Index

Introduction

The following discussion and analysis of the consolidated financial statements of MVB Financial Corp. is presented to provide insight into management’s assessment of the financial results. MVB has three wholly-owned second tier holding companies which own 100 percent of MVB Bank, Inc. (“the bank”). The bank is the primary financial entity in this discussion. Unless otherwise noted, this discussion will be in reference to the bank.

MVB Bank, Inc. was chartered by the State of West Virginia and is subject to regulation, supervision, and examination by the Federal Deposit Insurance Corporation and the West Virginia Department of Banking. The bank is not a member of the Federal Reserve System. The bank is a member of the Federal Home Loan Bank of Pittsburgh.

The bank began operations January 4, 1999, at 301 Virginia Avenue in Fairmont, West Virginia. MVB Bank, Inc. provides a full array of financial products and services to its customers, including traditional banking products such as deposit accounts, lending products, debit cards, automated teller machines, and safe deposit rental facilities. The bank opened a banking office in the Shop N Save supermarket in White Hall, WV during the second quarter of 2000. During August of 2005, the bank opened a full-service office at 1000 Johnson Avenue in Bridgeport, WV. In October of 2005 MVB Bank, Inc. purchased an office at 88 Somerset Boulevard in Charles Town, WV. The bank opened a full service office at 651 Foxcroft Avenue in Martinsburg, WV during August 2007. In the second quarter of 2011, MVB opened a banking office at 2400 Cranberry Square in Morgantown, WV.

This discussion and analysis should be read in conjunction with the prior year-end audited financial statements and footnotes thereto included in the Company’s filing on Form 10-K and the unaudited financial statements, ratios, statistics, and discussions contained elsewhere in this Form 10-Q.

Application of Critical Accounting Policies

MVB’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Application of certain accounting policies inherently requires a greater reliance on the use of estimates, assumptions and judgments and as such, the probability of actual results being materially different from reported estimates is increased. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are based either on quoted market prices or are provided by other third-party sources, when available. When third-party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal forecasting techniques.

The most significant accounting policies followed by MVB are presented in Note 1 to the audited consolidated financial statements included in MVB’s 2010 Annual Report on Form 10-K. These policies, along with the disclosures presented in the other financial statement notes and in management’s discussion and analysis of operations, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the determination of the allowance for loan losses to be the accounting area that requires the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

Index

The allowance for loan losses represents management’s estimate of probable credit losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of estimated future cash flows, estimated losses in pools of homogeneous loans based on historical loss experience of peer banks, estimated losses on specific commercial credits, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The loan portfolio also represents the largest asset in the consolidated balance sheet. Note 1 to the consolidated financial statements in MVB’s 10-K describes the methodology used to determine the allowance for loan losses and a discussion of the factors driving changes in the amount of the allowance for loan losses is included in the Allowance for Loan Losses section of Management’s Discussion and Analysis in this quarterly report on Form 10-Q.

Results of Operations

Overview of the Statement of Income

For the quarter ended September 30, 2011, MVB earned $673 compared to $620 in the third quarter of 2010. Net interest income increased by $870, other income increased by $382 and other expenses increased by $817. The increase in net interest income was driven mainly by the continued growth of the MVB balance sheet, with $80.8 million in average loan growth. Also contributing to the increase in net interest income was a reduction in interest expense of $138, despite an increase in average interest bearing liabilities of $71.5 million. This reduction in interest expense was the result of a decreased cost of funds of 42 basis points. The increase in other income was mainly the result of an increase in gains on the sale of investment securities of $97 as MVB took advantage of a riding the yield curve strategy in purchasing bullet agency securities that provided significant gains in the portfolio due to the steep yield curve. An increase in income on loans held for sale of $148 provided the other significant increase to other income. This increase was due to additional volume that MVB was able to produce with increased staffing in this area, specifically the Morgantown, WV office opened during the second quarter of 2011, as well as the sale of a large USDA commercial loan. The increase in other operating expenses was principally the result of salaries expense in the new Morgantown office of $312, along with the addition of a full time compliance officer, a more experienced secondary market lender in the eastern panhandle and increases for existing staff. Equipment and depreciation costs increased $25, the result of the start up expenses of the Morgantown office. Data processing costs increased $69 due to a credit recognized in 2010 from the renegotiation of the bank’s data processing contract. Legal and accounting fees increased $109 and occupancy expense increased $33, the result of the addition of the Morgantown office. Consulting fees increased by $31, as MVB pursued the possibility of diversifying revenue sources during the third quarter of 2011. Other operating expenses increased by $89, mainly the result of the following: increased loan expenses of $11, travel of $19, meals and entertainment of $18, telephone of $13 and director fees of $9.

Loan loss provisions of $591 and $240 were made for the quarters ended September 30, 2011 and 2010, respectively. The provision for loan losses, which is a product of management’s formal quarterly analysis, is recorded in response to inherent risks in the loan portfolio.

Non-interest income for the quarters ended September 30, 2011 and 2010 totaled $979 and $597, respectively. The most significant portions of non-interest income are service charges on deposit accounts, which totaled $178 at September 30, 2011, an increase of $35 from the prior year despite significant changes in the regulatory environment and income on loans held for sale which totaled $318, an increase of $148 over the third quarter of 2010, the result of the increased volume from existing lenders as well as the addition of the Morgantown location and the sale of one large commercial USDA loan. Other operating income increased by $75, the result of increased mortgage underwriting and title income of $66 and increased Visa Debit Card income of $13.

Non-interest expense for the quarters ended September 30, 2011 and 2010 totaled $3.1 million and $2.3 million, respectively. The most significant increases were as discussed above.

Index

For the nine months ended September 30, 2011 MVB earned $2.0 million compared to $1.6 million for the same time period in 2010. This $420 increase is mainly the result of balance sheet growth in the areas of loans and investments as discussed above, resulting in an increase in net interest income after provision for loan losses of $1.9 million for the first nine months of 2011. MVB’s other income increased $738, mainly the result of gains on sales of investment securities during 2011 and total other expenses increased by $2.0 million, mainly in the areas of salaries, other expense, consulting and legal and accounting. The $1.3 million increase in salaries expense was the result of the addition of the Morgantown office in May 2011, a full time compliance officer added at the beginning of 2011 and increases for existing staff. Increased other expenses of $258 were mainly the result of the following: increased loan expense of $75, increased travel of $46, increased meals and entertainment of $38, increased director fees of $27, increased telephone expense of $20 and increased training of $17. Consulting fees increased by $175, the result of two major project initiatives, one of which was the opening of the Morgantown location.

Loan loss provisions of $1.2 million and $760 were made for the nine months ended September 30, 2011 and 2010, respectively.

Non-interest income for the nine months ended September 30, 2011 and 2010 totaled $2.5 million and $1.7 million, respectively. This $738 increase was the result of income from the sale of loans into the secondary market increasing by $219, mortgage underwriting and title income increasing by $132 and gains on sale of securities increasing by $397.

Non-interest expense for the nine months ended September 30, 2011 and 2010 totaled $8.7 million and $6.7 million. The largest drivers of this $2.0 million increase were in the areas of salaries, other expenses, legal and consulting fees.

Interest Income and Expense

Net interest income is the amount by which interest income on earning assets exceeds interest expense on interest-bearing liabilities. Interest-earning assets include loans and investment securities. Interest-bearing liabilities include interest-bearing deposits and repurchase agreements and Federal Home Loan Bank advances. Net interest income is the primary source of revenue for the bank. Changes in market interest rates, as well as changes in the mix and volume of interest-earning assets and interest-bearing liabilities impact net interest income.

Net interest margin is calculated by dividing net interest income by average interest-earning assets. This ratio serves as a performance measurement of the net interest revenue stream generated by the bank’s balance sheet. The net interest margin for the quarters ended September 30, 2011 and 2010 was 3.23% and 3.01% respectively. The 22 basis point improvement in MVB’s net interest margin for the quarter ended September 30, 2011 was the result of the following: a 42 basis point reduction in the cost of funds, mainly in the CD portfolio and in interest bearing demand balances. While MVB’s yield on total loans declined by 30 basis points, the bank was able to grow average loan balances by $80.8 million, allowing a reduction in the lower yielding CDs with other banks portfolio, which improved the bank’s net interest margin.

Management continuously monitors the effects of net interest margin on the performance of the bank. Growth and mix of the balance sheet will continue to impact net interest margin in future periods.

Index

Average Balances and Interest Rates

(Unaudited)(Dollars in thousands)

	Three Months Ended September 30, 2011								Three Months Ended September 30, 2010
				Interest								Interest
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Cost			Balance			Expense		Cost
Assets
Interest-bearing deposits in banks	$	4,959		$	4		0.32	%	$	9,994		$	4		0.16	%
Certificates of deposit in other banks		3,634			7		0.77			28,332			111		1.57
Investment securities		102,375			463		1.81			71,030			464		2.61
Loans:
Commercial		214,511			2,834		5.28			161,574			2,146		5.31
Tax exempt		13,660			142		4.16			14,871			161		4.33
Real estate		105,739			1,260		4.77			75,566			1,058		5.60
Consumer		13,081			211		6.45			14,139			245		6.93
Total loans		346,991			4,447		5.13			266,150			3,610		5.43

Total earning assets		457,959			4,921		4.30			375,506			4,189		4.46
Cash and due from banks		12,135								2,313
Other assets		19,088								19,119
Total assets	$	489,182							$	396,938

Liabilities
Deposits:
Non-interest bearing demand	$	38,823		$	–	%			$	30,748		$	–	%

NOW		144,253			346		0.96			98,195			295		1.20
Money market checking		35,876			70		0.78			31,145			75		0.96
Savings		14,534			17		0.47			7,949			2		0.10
IRAs		9,886			71		2.87			10,955			84		3.07
CDs		123,128			464		1.51			124,010			649		2.09
Repurchase agreements & FFS		64,342			125		0.78			45,187			115		1.02
FHLB and other borrowings		10,766			115		4.27			13,807			123		3.56
Long-term debt		4,124			20		1.94			4,124			23		2.23
Total interest-bearing liabilities		406,909			1,228		1.21			335,372			1,366		1.63

Other liabilities		2,866								2,727
Total liabilities		448,598								368,847

Stockholders’ equity
Preferred stock		1,571								-
Common stock		2,234								1,632
Paid-in capital		32,397								20,488
Treasury Stock		(1,043	)							(825	)
Retained earnings		5,401								6,844
Accumulated other comprehensive income		24								(48	)
Total stockholders’ equity		40,584								28,091
Total liabilities and stockholders’ equity	$	489,182							$	396,938

Net interest spread							3.09								2.83
Impact of non-interest bearing funds on margin							.14								.18
Net interest income-margin				$	3,693		3.23	%				$	2,823		3.01

Index

Average Balances and Interest Rates

(Unaudited)(Dollars in thousands)

	Nine Months Ended September 30, 2011								Nine Months Ended September 30, 2010
				Interest								Interest
	Average			Income/		Yield/			Average			Income/		Yield/
	Balance			Expense		Cost			Balance			Expense		Cost
Assets
Interest-bearing deposits in banks	$	11,760		$	22		0.25	%	$	10,698		$	14		0.17	%
Certificates of deposit in other banks		4,036			38		1.26			40,062			487		1.62
Investment securities		89,074			1,291		1.93			60,814			1,257		2.76
Loans:
Commercial		200,447			7,917		5.27			153,194			6,123		5.33
Tax exempt		13,895			435		4.17			12,474			400		4.28
Real estate		94,906			3,461		4.86			69,840			2,950		5.63
Consumer		13,334			665		6.65			13,928			722		6.91
Total loans		322,582			12,478		5.16			249,436			10,195		5.45

Total earning assets		427,452			13,829		4.31			361,010			11,953		4.41
Cash and due from banks		6,966								2,295
Other assets		18,561								19,041
Total assets	$	452,979							$	382,346

Liabilities
Deposits:
Non-interest bearing demand	$	38,258		$	–		-	%	$	30,167		$	–		-	%

NOW		130,841			983		1.00			85,785			876		1.36
Money market checking		37,586			256		0.91			31,096			226		0.97
Savings		13,126			39		0.40			7,741			6		0.10
IRAs		10,030			215		2.86			10,900			259		3.17
CDs		112,809			1,415		1.67			123,985			2,012		2.16
Repurchase agreements & FFS		54,483			358		0.88			41,179			338		1.09
FHLB and other borrowings		11,228			350		4.16			17,515			385		2.93
Long-term debt		4,124			60		1.94			4,124			62		2.00
Total interest-bearing liabilities		374,227			3,676		1.31			322,325			4,164		1.72

Other liabilities		2,580								2,500
Total liabilities		415,065								354,992

Stockholders’ equity
Preferred stock		529								-
Common stock		2,234								1,631
Paid-in capital		31,581								20,470
Treasury Stock		(1,019	)							(688	)
Retained earnings		4,818								6,165
Accumulated other comprehensive income		(229	)							(224	)
Total stockholders’ equity		37,914								27,354
Total liabilities and stockholders’ equity	$	452,979							$	382,346

Net interest spread							3.00								2.69
Impact of non-interest bearing funds on margin							.17								.19
Net interest income-margin				$	10,153		3.17	%				$	7,789		2.88	%

Index

Non-Interest Income

Service charges on deposit accounts generate the core of the bank’s non-interest income. Non-interest income totaled $979 in the third quarter of 2011 compared to $597 in the third quarter of 2010. This increase of $382 is mainly the result of an increase in gain on sale of securities of $97, an increase in other operating income of $75 and an increase in income in loans held for sale of $148.

Service charges on deposit accounts continue to be the core of MVB’s other income and include mainly non-sufficient funds and returned check fees, allowable overdraft fees and service charges on commercial accounts.

The bank is continually searching for ways to increase non-interest income. Income from loans sold in the secondary market continues to be a major area of focus for MVB.

Non-Interest Expense

For the third quarter of 2011, non-interest expense totaled $3.1 million compared to $2.3 million in the third quarter of 2010. MVB’s efficiency ratio was 67.47% for the third quarter of 2011 compared to 68.27% for the third quarter of 2010. This ratio measures the efficiency of non-interest expenses incurred in relationship to net interest income plus non-interest income. The increased efficiency ratio is the result of the increased gains on sale of investment securities during the third quarter of 2011.

Salaries and benefits totaled $1.7 million for the quarter ended September 30, 2011 compared to $1.3 million for the quarter ended September 30, 2010. This $458 increase in salaries and benefits is mainly the result of the addition of the Morgantown location, a full time compliance officer and increases to existing employees. MVB had 106 full-time equivalent personnel at September 30, 2011 compared to 81 full-time equivalent personnel as of September 30, 2010. Management will continue to strive to find new ways of increasing efficiencies and leveraging its resources, while effectively optimizing customer service.

For the quarters ended September 30, 2011 and 2010, occupancy expense totaled $182 and $149, respectively. This $33 increase is the result of the addition of the Morgantown office.

Other operating expense totaled $341 in the third quarter of 2011 compared to $252 in the third quarter of 2010. The largest items relating to this increase were in the areas of collections, travel and entertainment, training and directors fees.

Return on Average Assets and Average Equity

Returns on average assets (ROA) and average equity (ROE) were .55% and 6.63% for the third quarter of 2011 compared to .62% and 8.83% in the third quarter of 2010.

Overview of the Statement of Condition

MVB’s interest-earning assets, interest-bearing liabilities, and stockholders’ equity changed significantly during the third quarter of 2011 compared to 2010. The most significant areas of change between the quarters ended September 30, 2011 and September 30, 2010 were as follows: investment securities increased from an average balance of $71.0 million to an average balance of $102.4 million, CDs with banks declined to an average balance of $3.6 million from an average of $28.3 million, loans increased to an average balance of $347.0 million from $266.1 million, interest-bearing liabilities grew to an average balance of $406.9 million from $335.4 million and stockholders’ equity grew by $12.5 million to an average of $40.1 million. These trends reflect the continued growth of MVB in the investment, loan, deposit and capital areas.

Total assets at September 30, 2011 were $520.2 million or an increase of $105.9 million since December 31, 2010. The greatest areas of increase were $63.8 million in loan growth and $40.5 million in investment securities.

Index

Deposits totaled $377.9 million at September 30, 2011 or an increase of $77.5 million since December 31, 2010. $45.6 million of this increase is the result of public funds deposit accounts. Other areas of significant deposit growth are as follows: CDARS money increased $16.2 million, brokered CDs increased $6.2 million, broker buster accounts increased $6.3 million and non interest bearing checking increased $6.1 million. Repurchase agreements totaled $77.8 million and have increased $30.2 million since December 31, 2010.

Federal Home Loan Bank and other borrowings decreased by $18.8 million from December 31, 2010, mostly the result of increased use of other alternative funding sources such as CDARS, brokered deposits and public funds.

Stockholders’ equity has increased approximately $17.5 million from December 31, 2010 due to the completion of an $8.3 million confidential stock offering to accredited investors begun in late December of 2010, earnings for the nine months ended September 30, 2011 of $2.0 million and the influx of $8.5 million in capital from the Small Business Lending Fund (SBLF).

Cash and Cash Equivalents

Cash and cash equivalents totaled $10.7 million as of September 30, 2011 compared to $3.7 million as of December 31, 2010. Cash and cash equivalents at the end of the third quarter 2011 were greater than at year end due to a new relationship with Compass Bank which pays MVB a high rate earnings credit to offset service charges.

Total cash and cash equivalents fluctuate on a daily basis due to transactions in process and other liquidity and performance demands. Management believes the liquidity needs of MVB 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 MVB to meet cash obligations as they come due.

Investment Securities

Investment securities totaled $112.5 million as of September 30, 2011 and $69.3 million as of December 31, 2010. Government sponsored agency securities comprise the majority of the portfolio. This $43.2 million increase is the result of adding investments to secure governmental deposits.

Management monitors the earnings performance and liquidity of the investment portfolio on a regular basis through Asset/Liability Committee meetings. The group also monitors net interest income, sets pricing guidelines, and manages interest rate risk for the bank. Through active balance sheet management and analysis of the investment securities portfolio, the bank maintains sufficient liquidity to satisfy depositor requirements and the various credit needs of its customers. Management believes the risk characteristics inherent in the investment portfolio are acceptable based on these parameters.

Loans

The bank’s lending is primarily focused in the Marion, Harrison, Jefferson, Berkeley and Monongalia County areas of West Virginia, and consists primarily of commercial lending, retail lending, which includes single-family residential mortgages, and consumer lending.

The following table details total loans outstanding as of:

(Dollars in thousands)	September 30		December 31
	2011		2010

Commercial and nonresidential real estate	$	230,354	$	194,605
Residential real estate		114,616		86,020
Consumer and other		12,631		13,324
Net deferred fees and costs		229		95
Total loans	$	357,830	$	294,044

Index

Loan Concentration

At September 30, 2011, commercial loans comprised the largest component of the loan portfolio. The majority of commercial loans that are not secured by real estate are lines of credit secured by accounts receivable and equipment and obligations of states and political subdivisions. While the loan concentration is in commercial loans, the commercial portfolio is comprised of loans to many different borrowers, in numerous different industries but primarily located in our market areas.

Allowance for Loan Losses

Management continually monitors the loan portfolio through review of the monthly delinquency reports and through the Loan Review Committee. The Loan Review Committee is responsible for the determination of the adequacy of the allowance for loan losses. Their analysis involves both experience of the portfolio to date and the makeup of the overall portfolio. Specific loss estimates are derived for individual loans based on specific criteria such as current delinquency status, related deposit account activity, where applicable, local market rumors, which are generally based on some factual information, and changes in the local and national economy. While local market rumors are not measurable or perhaps not readily supportable, historically, this form of information can be an indication of a potential problem. The allowance for loan losses is further based upon the internal risk rating assigned to the various loan types within the portfolio.

Funding Sources

MVB 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 for the bank, reaching $377.9 million at September 30, 2011.

Non interest bearing deposits remain a core funding source for MVB. At September 30, 2011, non-interest bearing deposits totaled $42.3 million compared to $28.4 million at December 31, 2010. Management intends to continue to focus on finding ways to increase the bank’s base of non-interest bearing funding sources.

Interest-bearing deposits totaled $335.5 million at September 30, 2011 compared to $272.0 million at December 31, 2010. Average interest-bearing liabilities totaled $406.9 million during the third quarter of 2011 compared to $335.4 million for the third quarter of 2010. Average non-interest bearing demand deposits totaled $38.8 million for the third quarter of 2011 compared to $30.7 million for the third quarter of 2010. Management will continue to emphasize deposit gathering in 2011 by offering outstanding customer service and competitively priced products. Management will also concentrate on balancing deposit growth with adequate net interest margin to meet MVB’s strategic goals.

Along with traditional deposits, MVB has access to both repurchase agreements, which are corporate deposits secured by pledging securities from the investment portfolio, and Federal Home Loan Bank borrowings to fund its operations and investments. At September 30, 2011, repurchase agreements totaled $77.8 million compared to $47.6 million at December 31, 2010. In addition to the aforementioned funds alternatives, MVB has access to more than $117.1 million through additional advances from the Federal Home Loan Bank of Pittsburgh and the ability to readily sell jumbo certificates of deposits to other banks as well as brokered deposit markets.

Index

Liquidity

MVB recognizes the importance of liquidity in the day-to-day operations of the bank, and believes it is critical to have a plan for addressing liquidity in times of crisis, as well as prudently managing levels to maximize earnings. The bank has historically recognized the need for funding sources that go beyond the most important source which is retail deposit business. MVB has created a funding program that identifies various wholesale funding sources that may be used whenever appropriate. These sources include the following: FHLB advances, brokered deposits, CDARS, repurchase agreements, internet CDs through Qwickrate, the Federal Reserve discount window, State of West Virginia CD auctions, and fed funds purchased. Limits have been set as to how much MVB will utilize each identified source. MVB currently is taking advantage of all of the above, with the exception of fed funds purchased and the discount window. This allows the bank to lower funding costs slightly while documenting the availability of each.

Current Economic Conditions

The current economic climate in West Virginia, and in particular in the five counties MVB focuses in is better than the national climate. Unemployment in the United States was 9.1% in September 2011 and 9.5% in September 2010. The unemployment levels in the five counties MVB operates in were as follows: Berkeley County unemployment was 8.3% in September 2011, compared to 9.2% in September 2010. Harrison County’s unemployment rate for September 2011 was 7.4% versus 7.8% in September 2010. Jefferson County’s unemployment rate improved from 7.1% in September 2010 to 6.2% in September 2011 and Marion County’s unemployment rate decreased from 7.7% in September of 2010 to 7.3% in September of 2011. Monongalia County’s unemployment rate decreased from 5.7% in September of 2010 to 5.6% in September of 2011. The numbers from all five counties continue to be significantly better than the national numbers.

MVB’s nonperforming loan information supports the fact that the West Virginia economy has not suffered as much as that of the nation as a whole. Nonperforming loans to total loans were 0.98% in September of 2011 versus 0.82% in September of 2010 and charge offs to total loans were .29% and 0.10% for each period respectively. MVB continues to closely monitor economic and delinquency trends.

Capital/Stockholders’ Equity

The bank was initially capitalized when it sold 452,000 shares of stock at $10 per share or a total of $4.5 million in an offering during 1998.

In October of 1999 the bank completed a secondary offering of 66,000 shares of stock at $11 per share or a total of $726,000. This offering was used to purchase MVB’s main office at 301 Virginia Avenue.

During November of 2002 the bank completed another secondary offering of 164,000 shares of stock at $12.50 per share or a total of $2.0 million. This offering was needed to continue funding the bank’s growth.

In 2004, the bank formed a one-bank holding company. In that transaction, MVB Financial Corp. issued shares of common stock in exchange for shares of the bank’s common stock.

In 2006, MVB completed a public offering of 725,000 shares totaling $11.6 million.

In March 2007, MVB formed a statutory business trust for the purpose of issuing $4 million in trust preferred capital securities with the proceeds invested in MVB Bank, Inc. This was done primarily to increase the lending limit of the bank. The securities mature in 30 years and are redeemable by the Company after five years. The securities are at an interest cost of 1.62% over the three month LIBOR rate which is reset quarterly.

In April 2008, MVB completed a public offering of more than 100,000 shares which provided 2.4 million in additional capital.

Index

In late December 2010 MVB began a confidential offering to accredited investors that resulted in the issuance of 393,305 shares of common stock totaling $8.3 million in additional capital. This offering was completed during the first quarter of 2011.

On September 8, 2011, MVB received $8.5 million in Small Business Lending Fund (SBLF) capital. 8,500 shares of $1,000 per share preferred stock were issued, with dividends payable quarterly in arrears on January 1, April 1, July 1 and October 1 each year. At the time of receipt of the SBLF money, MVB’s loan production qualified it for the lowest dividend possible at 1%. MVB may continue to utilized the SBLF capital for a period of four and one half years at the 1% dividend rate so long as loan growth continues to support the reduced rate.

At September 30, 2011, accumulated other comprehensive income/(loss) totaled $202 compared to $(263) at December 31, 2010. This change is related to increased gains in the investment portfolio.

Treasury stock shares totaled 51,077 shares, an increase of 3,859.

The primary source of funds for dividends to be paid by MVB Financial Corp. is dividends received from its subsidiary bank, MVB Bank, Inc. Dividends paid by the subsidiary bank are subject to restrictions by banking regulations. The most restrictive provision requires regulatory approval if dividends declared in any year exceed that year’s retained net profits, as defined, plus the retained net profits, as defined, of the two preceding years.

Bank regulators have established “risk-based” capital requirements designed to measure capital adequacy. Risk-based capital ratios reflect the relative risks of various assets banks hold in their portfolios. A weight category of 0% (lowest risk assets), 20%, 50%, or 100% (highest risk assets) is assigned to each asset on the balance sheet. Detailed information concerning MVB’s risk-based capital ratios can be found in Note 14 of the Notes to the Consolidated Financial Statements of MVB’s 2010 Form 10-K. At September 30, 2011, MVB and its banking subsidiary’s risk-based capital ratios exceeded the minimum standards for a well capitalized financial institution.

Commitments

In the normal course of business, the bank is party to financial instruments with off-balance sheet risk necessary to meet the financing needs of customers and to manage its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of these instruments express the extent of involvement the bank has in these financial instruments.

Loan commitments are made to accommodate the financial needs of MVB’s customers. MVB uses the same underwriting standards in making commitments and conditional obligations as it does for on-balance sheet instruments. The amount of collateral obtained is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant, and equipment, and income-producing commercial properties. The total amount of loan commitments outstanding at September 30, 2011 and December 31, 2010 was $48.6 million and $34.0 million, respectively.

Market Risk

There have been no material changes in market risks faced by MVB since December 31, 2010. For information regarding MVB’s market risk, refer to MVB’s Annual Report to Shareholders for the year ended December 31, 2010.

Effects of Inflation on Financial Statements

Substantially all of the bank’s assets relate to banking and are monetary in nature. Therefore they are not impacted by inflation to the same degree as companies in capital-intensive industries in a replacement cost environment. During a period of rising prices, a net monetary asset position results in loss in purchasing power and conversely a net monetary liability position results in an increase in purchasing power. In the banking industry, typically monetary assets exceed monetary liabilities. Therefore as prices increase, financial institutions experience a decline in the purchasing power of their net assets.

Index

Future Outlook

The bank’s results of operations in the third quarter of 2011 are an improvement over the third quarter of 2010 mainly due to the improvement in net interest income. MVB’s emphasis in future periods will be to do those things that have made the bank successful thus far. The critical challenge for the bank in the future is to attract core deposits to fund growth in the new markets through continued delivery of the most outstanding customer service with the highest quality products and technology.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

No response required.

Item 4. Controls and Procedures

The Company, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer, along with the Company’s Chief Financial Officer (the Principal Financial Officer), has evaluated the effectiveness as of September 30, 2011, of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the Company’s President and Chief Executive Officer, along with the Company’s Principal Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2011.

There have been no material changes in the Company’s internal control over financial reporting during the third quarter of 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Index

Part II. Other Information

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

No response required.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Removed and Reserved

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a)	The following exhibits were filed with Form SB-2 Registration Statement, Registration No. 333-120931, filed December 1, 2004, and are incorporated by reference herein.

Exhibit 3.1

Articles of Incorporation

Exhibit 3.1-1

Articles of Incorporation – Amendment

Exhibit 3.2

Bylaws

(b)	The following exhibits are filed herewith.

Exhibit 31.1

Certificate of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2

Certificate of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1

Certificate of principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2

Certificate of principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

November 14, 2011	MVB Financial Corp.


	By:	/s/ Larry F. Mazza
		Larry F. Mazza
		President and Chief Executive Officer


	By:	/s/ Eric L. Tichenor
		Eric L. Tichenor
		Chief Financial Officer