MVB Financial(MVBF) - 2022 Q4 - Annual Report

Financial Performance and Risks - The company's noninterest bearing deposits increased from 10.9% of total deposits as of December 31, 2017, to 47.9% as of December 31, 2022, largely due to its gaming initiative[160]. - Gaming deposits totaled $652.1 million as of December 31, 2022, down from $911.6 million as of December 31, 2021, with $536.9 million concentrated among the three largest clients[160]. - The Federal Reserve Board has significantly decreased benchmark interest rates to near zero in response to the COVID-19 pandemic, but is now reversing this policy due to inflation concerns, leading to rising market interest rates[159]. - The transition from LIBOR to SOFR as the primary interest rate benchmark is expected to create considerable costs and additional risks for the company[165]. - The company may experience adverse effects on its financial condition due to potential losses from credit risk associated with counterparties in the financial services industry[161]. - The company is facing significant volatility in cryptocurrency markets, which may materially impact financial statements and stock market price[171]. - The company is subject to liquidity risk, which could disrupt its ability to meet financial obligations if funding sources are restricted[184][185]. - Economic downturns may lead to deposit base outflows, limiting access to liquidity and increasing funding costs[186]. - The company’s ability to pay dividends is restricted by federal policies and regulations, and future dividend payments depend on various factors including earnings and capital requirements[217]. - The inability to generate profits and pay dividends could adversely affect the company's financial condition and results of operations[210]. Business Strategy and Growth - The company is focused on long-term growth through new business initiatives, including investments in FinTech and cryptocurrency, which present substantial risks and uncertainties[168]. - The company has increased its investments in securities and loan growth due to the rise in noninterest bearing deposits[160]. - The company is pursuing strategies to acquire and internally develop technologies to scale and diversify banking capabilities, with uncertain timing for profitability[172]. - The introduction of new lines of business may require significant investment and may not meet initial timetables or profitability targets due to external factors[173]. Competition and Market Position - The company faces significant competition from various financial institutions, which may adversely affect its market position and profitability[162]. - The trading volume of the company's common stock is lower than that of larger financial services companies, which may affect liquidity and marketability[212]. - The company is engaged in relationships with clients in the payments, digital savings, and gaming industries, which could be impacted by regulatory changes[169]. Regulatory and Compliance Risks - The merger with IFH is pending regulatory approvals, and its success will depend on realizing anticipated cost savings without adversely affecting revenues[177][178]. - Integration challenges post-merger may lead to loss of key employees and disrupt ongoing business operations, affecting the combined company's performance[180][181]. - The company is subject to extensive federal, state, and local taxes, which could adversely affect performance if tax laws change[204]. - The company must comply with capital adequacy guidelines imposed by the Federal Reserve Board and the FDIC, failure to meet these could compromise its status as a financial holding company[208]. - The company faces risks related to compliance with the Sarbanes-Oxley Act, and any material weaknesses in internal controls could lead to sanctions and loss of investor confidence[218]. Operational Risks - The company relies on external vendors for operations, and any failure in their performance could disrupt business and adversely impact financial condition[196]. - Environmental liability risks associated with lending activities could lead to significant remediation costs and affect property values[197]. - The accuracy of customer information is critical, as reliance on inaccurate data could materially impact financial condition and results of operations[198]. - Changes in accounting policies and estimates could materially affect how the company reports its financial condition and results of operations[221]. - The company’s financial condition may be negatively impacted by disruptions in securities markets, leading to potential impairments of its investment securities portfolio[220]. - The company is exposed to risks from inadequate or inaccurate analytical and forecasting models, which could result in unexpected losses or insufficient allowances for loan losses[225]. - The company’s stock price can be volatile, influenced by market fluctuations, economic conditions, and regulatory changes[215].