MVB FINANCIAL CORP - 10-K filing on 2017-03-10

MERGERS AND ACQUISITIONS

12 Months Ended

Dec. 31, 2016

On May 1, 2015, MVB Bank, Inc. (MVB Bank), a wholly-owned subsidiary of MVB Financial Corp. (MVB Financial or the Company), issued a joint news release with BB&T Corporation (BB&T) and Susquehanna Bancshares, Inc. (Susquehanna) announcing the signing of a definitive agreement, subject to customary closing conditions including regulatory approvals, through which MVB Bank will acquire two branch locations of Susquehanna Bank in Berkeley County, West Virginia and will assume approximately $69 million of deposits and $17 million of loans. The two Susquehanna Bank branch locations are slated for divestiture under BB&T’s agreement with the United States Department of Justice and commitments to the Board of Governors of the Federal Reserve System in connection with BB&T’s pending acquisition of Susquehanna. On July 22, 2015, regulatory approvals for the acquisition of the two Susquehanna Bank branch locations were received and the acquisition closed August 28, 2015.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805. The assets and liabilities were recorded at their estimated fair values as of the August 28, 2015 acquisition date.

The following is a summary of net liabilities assumed:

(Dollars in thousands)
Net assets acquired:
Cash received in transaction	$	47,962
Cash on hand	330
Loans	18,200
Bank premises, furniture and equipment	609
Accrued interest receivable and other assets	62
Core deposit intangible	878
	68,041

Deposits	68,697
Accrued interest payable and other liabilities	45
	68,742

Net liabilities assumed	(701		)
Goodwill	701
	$	—

A valuation of the acquired loans and core deposit intangible was performed with the assistance of a third-party valuation consultant. The unpaid principal balance and fair value of performing loans was $18.7 million and $18.2 million, respectively. The discount of $458 thousand will be accreted through interest income over the life of the loans in accordance with Accounting Standards Codification (ASC) topic 310-20. No nonperforming loans were acquired in this transaction. The core deposit intangible will be amortized over 10 years using a double declining balance amortization method.

Merger costs related to the branch acquisitions were $722 thousand, consisting primarily of legal, consulting and data processing expenses. Goodwill was recorded in the amount of $701 thousand which is the difference between the total purchase price and the net liabilities assumed and is not deductible for income tax purposes.

The following acquisition related costs are included in the consolidated statements of income for the periods indicated:

	Year ended		Year ended		Year ended
(Dollars in thousands)	December 31, 2016		December 31, 2015		December 31, 2014
Professional fees	$	—	$	471	$	183
Marketing	—		29		4
Printing, postage and supplies	—		71		9
Equipment depreciation and maintenance	—		—		26
Travel and entertainment	—		50		88
Data processing and communications	—		76		—
Other operating expense	—		25		—
Total	$	—	$	722	$	310

Actual total revenues net of interest expense and net (loss) relating to the branch acquisitions were $297 thousand and $(122) thousand for the year ended December 31, 2015.

The following pro forma financial information combines the historical results of MVB and two branches acquired on August 28, 2015. The pro forma results exclude the impact of branch acquisition costs of $722 thousand.

If the branch acquisition had been completed on January 1, 2014 total revenue, net of interest expense, would have been $55.1 million and $76.0 million for the years ended December 31, 2014 and 2015, respectively. Net income would have been $1.7 million and $6.4 million for the same periods. Basic and diluted earnings per share would have been $0.17 and $0.17 and $0.73 and $0.72, respectively for the years ended December 31, 2014 and 2015.