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MVBF > SEC Filings for MVBF > Form 8-K/A on 10-May-2013All Recent SEC Filings

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Form 8-K/A for MVB FINANCIAL CORP


10-May-2013

Financial Statements and Exhibits


Item 9.01 Financial Statements and Exhibits.

These are the pro forma financial statements referred to in Section 9.01 of the report on Form 8-K filed by MVB Financial Corp. on December 20, 2012.

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following unaudited pro forma condensed combined balance sheet as of September 30, 2012 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 and for the year ended December 31, 2011 are based on the historical financial statements of MVB Financial Corp. and Potomac Mortgage Group, LLC after giving to effect the acquisition in which MVB Financial Corp.'s wholly owned subsidiary, MVB Bank, Inc., will acquire Potomac Mortgage Group, LLC., as adjusted to reflect the subsequent issuance of up to 83,333 shares of MVB Financial Corp. at $24 per share. The acquisition will be accounted for using the acquisition method of accounting in accordance with Financial Accounting Standards Board ("FASB") ASC 805, "Business Combinations" ("ASC 805").

The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2012 and for the year end December 31, 2011 give effect to the acquisition as of the beginning of all periods presented. The unaudited pro forma condensed combined balance sheet as of September 30, 2012 assumed that the acquisition took place on September 30, 2012.

The unaudited condensed combined balance sheet and statement of operations as of and for the nine months ended September 30, 2012 were derived from MVB Financial Corp.'s unaudited condensed financial statements, and Potomac Mortgage Group, LLC's unaudited condensed financial statements and as of and for the nine months ended September 30, 2012, as adjusted for the subsequent issuance of up to 83,333 shares of MVB Financial Corp. at $24 per share. The unaudited condensed statement of operations for the year ended December 31, 2011 was derived from MVB Financial Corp. and Potomac Mortgage Group, LLC's audited statements of income for the year ended December 31, 2011.

The pro forma condensed combined financial statements reflect management's best estimate of the fair value of the tangible and intangible assets acquired and liabilities assumed. As final valuations are performed, increases or decreases in the fair value of assets acquired and liabilities assumed will result in adjustments, which may be material, to the balance sheet and/or statement of operations.

As required, the unaudited pro forma condensed combined financial data includes adjustments which give effect to the events that are directly attributable to the acquisition, expected to have a continuing impact and are factually supportable.

The unaudited pro forma condensed combined financial statements are provided for informational purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what the companies' actual performance or financial position would have been had the acquisition occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any date or for any future period. Please refer to the following information in conjunction with the accompanying notes to these pro forma financial statements and the historical financial statements.

MVB Financial Corp. and Subsidiaries

Unaudited Pro Forma Condensed Combined Balance Sheet

As of September 30, 2012



                                                                 Historical            Pro Forma        Pro Forma
                                                                                        Capital        Acquisition        Combined
(in thousands)                                                MVB          PMG         Issuance        Adjustments       Pro Forma
Assets
Cash and due from banks                                    $  11,132     $  3,166     $    20,000 A   $     (22,075 )B   $   12,223
Interest bearing balances                                      3,774            -               -                 -           3,774
Certificates of deposits with other banks                      9,427            -               -                 -           9,427
Investment securities:
Securities held-to-maturity, at amortized cost                32,816            -               -                 -          32,816
Securities available-for-sale, at approximate fair value      84,326            -               -                 -          84,326

Loans:                                                       446,215            -               -                 -         446,215
Less: Allowance for loan losses                               (3,692 )          -               -                 -          (3,692 )
Net loans                                                    442,523            -               -                 -         442,523
Loans held for sale, net                                       4,883       62,350               -               250 C        67,483
Bank premises, furniture and equipment, net                    8,848          412               -                 -           9,260
Goodwill                                                         897            -               -            15,399 E        16,296
Bank owned life insurance                                      8,307            -               -                 -           8,307
Accrued interest receivable and other assets                   6,698        3,174               -                 -           9,872
Total assets                                               $ 613,631     $ 69,102     $    20,000     $      (6,426 )    $  696,307

Liabilities
Deposits
Non-interest bearing                                       $  49,818     $      -     $         -     $           -      $   49,818
Interest bearing                                             421,413            -               -                 -         421,413
Total deposits                                               471,231            -               -                 -         471,231

Accrued interest, taxes and other liabilities                  3,043        2,077               -               (50 )D        5,070
Repurchase agreements                                         69,264            -               -                 -          69,264
Warehouse line of credit                                                   58,649               -                 -          58,649
Federal Home Loan Bank and other borrowings                   15,147            -               -                 -          15,147
Long-term debt                                                 4,124            -               -                 -           4,124
Total liabilities                                            562,809       60,726               -               (50 )       623,485

Stockholders' equity
Preferred stock, $1,000 par value, 8,500 shares
authorized and issued                                          8,500            -               -                 -           8,500
Common stock, $1 par value, 4,000,000 authorized               2,247            -             833 A              83  B        3,163

Additional paid-in capital                                    32,976            -          19,167 A           1,917  B       54,060
Treasury stock, 51,077 shares                                 (1,084 )          -               -                 -          (1,084 )
Members' Equity                                                    -        8,376               -            (8,376 )B            -
Retained earnings                                              8,678            -               -                 -           8,678
Accumulated other comprehensive (loss)                          (495 )          -               -                 -            (495 )
Total stockholders' equity                                    50,822        8,376          20,000            (6,376 )        72,822
Total liabilities and stockholders' equity                 $ 613,631     $ 69,102     $    20,000     $      (6,426 )    $  696,307

See accompanying notes to the unaudited pro forma condensed combined financial statements.

MVB Financial Corp. and Subsidiaries

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Nine Months Ended September 30, 2012



                                                            Historical              Pro Forma
                                                                                   Acquisition       Combined
(in thousands)                                            MVB           PMG        Adjustments       Pro Forma

Interest income                                       $    16,408     $ 1,222                 -     $    17,630
Interest expense                                            3,669       1,008                 - E         4,677
Net interest income                                        12,739         214                 -          12,953
Provision for loan losses                                   2,125           -                 -           2,125
Net interest income after provision for loan losses        10,614         214                 -          10,828

Noninterest Income                                          3,990       8,160                 -          12,150
Noninterest Expense                                        10,865       3,913                 -          14,778
Income before income taxes                                  3,739       4,461                 -           8,200
Income tax expense                                          1,013           -             1,428 F         2,441
Net income                                            $     2,726     $ 4,461     $      (1,428 )   $     5,759

Preferred stock dividends                                     115           -                 -             115
Net Income available to common shareholders           $     2,611     $ 4,461     $      (1,428 )   $     5,644

Basic earnings per common share                       $      1.19         n/a                       $      1.82
Diluted earnings per common share                     $      1.17         n/a                       $      1.79
Basic weighted average shares Outstanding               2,188,580         n/a           916,000       3,104,580
Diluted weighted average shares Outstanding             2,238,637         n/a           916,000       3,154,637

See accompanying notes to the unaudited pro forma condensed financial statements.

MVB Financial Corp. and Subsidiaries

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2011



                                                            Historical              Pro Forma
                                                                                   Acquisition       Combined
(in thousands)                                            MVB           PMG        Adjustments       Pro Forma

Interest Income                                       $    19,008     $ 1,026     $           -     $    20,034
Interest Expense                                            4,900         738                 - E         5,638

Net Interest Income                                        14,108         288                 -          14,396
Provision for loan losses                                   1,723         110                 -           1,833
Net interest income after provision for loan losses        12,385         178                 -          12,563
Noninterest Income                                          3,688       5,788                 -           9,476
Noninterest Expense                                        12,359       3,301                 -          15,660
Income before income taxes                                  3,714       2,665                 -           6,379
Income tax expense                                          1,012           -               973 F         1,985
Net Income                                            $     2,702     $ 2,665     $        (973 )   $     4,394

Preferred stock dividends                                      44           -                 -              44
Net Income available to common shareholders           $     2,658     $ 2,665     $        (973 )   $     4,350

Basic earnings per common share                       $      1.24         n/a                       $      1.43
Diluted earnings per common share                     $      1.21         n/a                       $      1.41
Basic weighted average shares Outstanding               2,147,890         n/a           916,000       3,063,890
Diluted weighted average shares Outstanding             2,194,410         n/a           916,000       3,110,410

See accompanying notes to the unaudited pro forma condensed combined financial statements.

Notes to Unaudited Condensed Combined Pro Forma Financial Statements

1) Description of the Acquisition and Basis of Preparation

The Acquisitions

The former Potomac Mortgage Group, LLC, which was acquired by MVB Bank, Inc., a subsidiary of MVB Financial Corp. is operated, under a new entity, Potomac Mortgage Group, Inc. as a wholly owned subsidiary of MVB Bank, Inc. The aggregate purchase price for all of the issued and outstanding Interests (the "Purchase Price") was $17 million in cash and 83,333 shares of MVB Financial Corp. Common Stock, with the purchase price paid to each Member of Potomac Mortgage Group, LLC consisting of either cash and MVB Financial Corp. Common Stock or cash only. At the time of the original filing on Form 8-K, MVB Financial Corp. was in the process of issuing approximately 833,000 shares associated with the raising approximately $20,000,000 in common equity, with a portion of the proceeds anticipated to be used to finance the acquisition of Potomac Mortgage Group, LLC. The pro forma financials were prepared assuming that all shares of common stock would be sold at $24 per share, as occurred. Subsequent to the original filing on Form 8-K, MVB Financial Corp. increased the private offering to issue 1,132,527 shares with a total capital raise of $27,180,648 in common equity.

Additional transaction costs to be incurred, under the pro formas, in the acquisition were assumed to be $585,000 for MVB Financial Corp. and its subsidiaries which are paid out as of the merger date and expensed to retained earnings. These costs are associated with legal, accounting, and due diligence fees directly related to the acquisition and are not expected to have a continuing impact on operations and therefore have not been included in the Unaudited Condensed Combined Pro Forma Statement of Operations.

Basis of Presentation

The unaudited pro forma condensed combined financial statements have been prepared based on MVB Financial Corp. and Potomac Mortgage Group, LLC's historical financial information. Certain disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted as permitted by SEC rules and regulations.

However, direct loan origination costs classified in Potomac Mortgage Group, LLC's audited financial statements as operating expenses were reclassified against mortgage banking income to conform to the current presentation model of MVB Financial Corp. Reclassifications had no effect on net income or shareholders' equity.

These unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations that would have been achieved had the acquisition actually taken place at the dates indicated and do not purport to be indicative of future financial condition or operating results.

2) Acquisition Method

The pro forma condensed combined financial statements reflect the accounting for the transaction under the acquisition method, where the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. Goodwill of $15 million arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies and is deductible for tax purposes.

The purchase price allocation for Potomac Mortgage Group, LLC is summarized as follows (in thousands):

Consideration
   Cash                                                                      $ 17,000
   Equity Instruments                                                           2,000

Fair Value of Total Consideration Transferred                                $ 19,000

Recognized amounts of identifiable assets acquired and liabilities assumed

   Cash and cash equivalents                                                 $      -
   Loans held for sale                                                         62,600
   Premises and equipment                                                         412
   Other assets                                                                 3,174
     Total assets acquired                                                   $ 66,186

   Warehouse line of credit          58,649
   Other borrowings                       -
   Liability to seller                1,909
   Other liabilities                  2,027
     Total liabilities assumed     $ 62,585

   Total identifiable net assets      3,601

Goodwill                             15,399

                                   $ 19,000

3) Pro Forma Adjustments and Assumptions

A. Reflects a capital raise of $20 million at $24 per share subsequent to closing. See Note 1.

B. Reflects the one-time pre-closing dividend of $5.075 million to Potomac Mortgage Group, LLC members and elimination of Potomac Mortgage Group, LLC's remaining historical net equity of approximately $3.3 million as a result of the acquisition. Additional consideration transferred to Potomac Mortgage Group, LLC members of $17 million in cash and $2 million in common stock with certain restrictions.

C. Reflects a purchase accounting adjustment associated with Potomac Mortgage Group, LLC's loans held for sale. Loans held for sale are to be reflected at fair value.

D. Reflects the removal of a deferred rent accrual.

E. MVB Financial Corp. anticipates eliminating the Potomac Mortgage Group, LLC warehouse facilities and financing originations through current unused lines with the FHLB. As noted in the December 31, 2011 financial statements of MVB Financial Corp., the remaining maximum borrowing capacity with the FHLB at December 31, 2011 was approximately $174.4 million and MVB Financial Corp.'s subsidiary, MVB Bank, Inc. had borrowed $9.8 million. At September 30, 2012, MVB Bank, Inc. had the maximum borrowing capacity at the FHLB of $205 million and had borrowed $15.1 million.

F. Reflects the tax impact of converting from a pass-through entity as a limited liability corporation to a C-Corp. Marginal tax rate of 36.5% was utilized.

4) Required Audited and Unaudited Financial Statements of Potomac Mortgage Group,
LLC

Below are the required audited and unaudited financial statements of Potomac Mortgage Group, LLC and, separately, a letter of consent from the auditors for Potomac Mortgage Group, LLC.

POTOMAC MORTGAGE GROUP, LLC

AUDITED FINANCIAL STATEMENTS

December 31, 2010 and 2009

Mortgage I.D. Number #30035 0000-6

Audit Partner - Brian McQuade

Audit Finn's Federal I.D. #52-1223909

                                                     POTOMAC MORTGAGE GROUP, LLC

                                                    AUDITED FINANCIAL STATEMENTS

                                                      December 31, 2010 and 2009







Report of Independent Auditors                                                   1

Balance Sheet                                                                    2

Statement of Income                                                              3

Statement of Changes in Members' Equity                                          4

Statement of Cash Flows                                                          5

Notes to Financial Statements                                                 6-12

Computation of Adjusted Net Worth for HUD Requirement Purposes                  13

Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing
Standards                                                                    14-15

Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs                                16-17

[[Image Removed]]

Certified Public Accountants and Consultants

1730 Rhode Island Avenue, NW

Suite 800

Washington, DC 20036

To the Members

Potomac Mortgage Group, LLC

Fairfax, Virginia

Report of Independent Auditors

We have audited the accompanying balance sheets of Potomac Mortgage Group, LLC (the Company) as of December 31, 2010 and 2009 and the related statements of income, changes in members' equity, and cash flows for the year ended December 31, 2010 and for the period January 16, 2009 (inception) through December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Potomac Mortgage Group, LLC at December 31, 2010 and 2009 and the results of its operations and its cash flows for the year ended December 31, 2010 and the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued our report dated March 4, 2011, on our consideration of the Company's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, and contracts. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The computation of adjusted net worth for HUD requirement purposes (shown on page 13) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects, in relation to the financial statements taken as a whole.

[[Image Removed]]

Washington, DC

March 4, 2011

Telephone (202) 296-3306

Fax (202) 296-0059

www.mcquadebrennan.com

Member, Enterprise Worldwide

An International Association of Accountants and Advisors

                                                     POTOMAC MORTGAGE GROUP, LLC

                                                                  BALANCE SHEETS

                                                AS OF DECEMBER 31, 2010 AND 2009







December 31,                                                  2010            2009

ASSETS

CURRENT ASSETS
Cash and cash equivalents                             $  2,206,713     $ 1,807,246
Loans held for sale at lower of cost or market, net     15,498,652       2,183,670
Accounts receivable                                         13,197           3,645
Prepaid expenses                                            71,636          50,787
Escrows                                                    157,597          51,626

TOTAL CURRENT ASSETS                                  $ 17,947,795     $ 4,096,974

DERIVATIVE INSTRUMENTS                                     244,284         231,479

PROPERTY AND EQUIPMENT, NET                                328,364         251,498

INTANGIBLES, NET                                            33,465          32,549

DEPOSITS                                                    47,345          36,426

TOTAL ASSETS                                          $ 18,601,253     $ 4,648,926

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