MVB Financial (MVBF) Q2 FY26 earnings call: guidance and Q&A

What is the expected pace of loan growth for the second half of the year, and how much will specialty lending contribute?

Management expects loan growth to continue at a similar pace to Q1/Q2 (around $60M-$70M per quarter), with specialty lending having a strong pipeline and potentially contributing a significant portion as early as Q3.

“So as I mentioned, we expect the loan growth to continue at roughly a similar pace to what we saw in the first and second quarter, so $60 million to $70 million per quarter. And we're really excited about the specialty line of business that we mentioned in the prepared remarks. So it's hard to predict exactly how much of the growth will come from that business, given it's new, but it has a really strong pipeline. So we could see a really solid chunk of that prospective growth as soon as the third quarter coming from our specialty lending vertical.”

asked by Brett Rabatin · answered by Michael Sumbs

How will AI build-out impact future expenses and operational efficiency?

AI is significantly improving efficiency, particularly in risk and compliance with 31 'digis' (call bots). The heavy investment in AI is already 'baked in,' and management expects future operating leverage and cost management benefits. Expenses for the foreseeable future are expected to be maintained or slightly below Q2 levels.

“I really think about AI in 2 ways. One, it's really revolutionizing how we work and how efficient we are with the workforce that we have and then the second part is how does that translate into the expense side. And that's really the part where we're taking a very crawl, walk, run approach with rationalizing expenses using AI. We want to certainly have human in the loop on all we do and really be deliberate about how we phase that in. But overall, I'd say we've made the investments, the heavy expense related to AI is sort of baked in. So we see a lot of future upside from an operating leverage and cost management perspective going forward given where we're at in our AI journey.”

asked by Brett Rabatin · answered by Michael Sumbs

What percentage of new fintech partners have reached their expected run rate, and when will the full revenue potential be realized?

New fintech clients are currently at about 25% of their planned contribution. The full benefit of clients launched in late Q4 FY25 and Q1 FY26 is expected in late 2026 to early 2027, with a continuous 'rolling harvest' as new clients are added.

“I would say right now, we're probably at 25% of their -- what we plan them to contribute to the onboarded earnings going forward. ... I would say late '26 to early '27 is when we expect to really start to see the full benefit of clients that have been launched on the platform starting in Q4 of last year and Q1 of this year.”

asked by Joseph Yanchunis · answered by Larry Mazza

How will capital from the Victor monetization and fintech investment gain be deployed?

The primary focus is on organic balance sheet growth and investing in high-return business lines. The company will also continue opportunistic, price-driven share repurchases.

“So clearly, we're continuing to grow the balance sheet. So that's organic growth of the existing balance sheet is sort of first and foremost. And then we were active in our share repurchase this quarter. We bought back about $1.2 million of stock. So we'll continue to be opportunistic. It's going to be price driven on the share buyback. But really, the focus is continuing to grow the platform, the balance sheet and continue to invest in what we see as high return business lines.”

asked by Joseph Yanchunis · answered by Michael Sumbs

Can you provide more details on the isolated portfolios that drove the higher provision expense?

The $3.3 million in specific reserves was split between the legacy SBA portfolio (originated 2021-early 2022) and smaller commercial loans. Additionally, the allowance model was updated based on recent economic conditions, including higher interest rates and inflationary pressures from geopolitical events.

“So we had about $3.3 million of the provision related to specific reserves. And that was split between our legacy SBA portfolio, which was largely originated in the 2021, early '22 time frame. And we have not been originating new SBA credits for quite some time. And then the balance was across a couple of smaller commercial loans. So generally, isolated and idiosyncratic loans is where we saw the majority of the specific reserve take place in the quarter.”

asked by Joseph Yanchunis · answered by Michael Sumbs

Are there any limiting constraints to onboarding the additional 15 fintech partners in the second half of the year?

Onboarding is client-dependent, requiring tailored solutions for each partner's needs. While capacity has grown through AI and process improvements, the biggest limiting factor remains the specific requirements of the clients being onboarded. MVB prioritizes clients based on a REVO framework (risk, effort, value, opportunity cost). The fintech pipeline remains robust with over 50 clients.

“It's very -- we'll keep with the fruit theme. It's very much like a gourmet restaurant. It's not like a fast food type McDonald's thing. Each client has a determining need that you have to really cater to what they have for their product set and what we need to do. That's probably the biggest limiting piece of it. Our capacity has grown from the AI perspective, from a process improvement perspective. Our tech overall has been excellent, but it's really dependent on the client base that we're onboarding.”

asked by Joseph Yanchunis · answered by Larry Mazza

Is there more workout to be done that would bias the allowance for loan loss reserve ratio upward, or should more specific reserves be expected?

Management believes the allowance level of 1.14% is 'appropriately reserved' at this point, but they will continue to monitor the portfolio and make updates to their model as needed.

“So clearly, we had a nice build in our allowance level this quarter going from 94 basis points to 1.14%. At this point, we feel like the portfolio is appropriately reserved. But of course, we'll continue to monitor it and make updates to our model as needed.”

asked by Sun Young Lee · answered by Michael Sumbs

Will NIM continue to expand off the 3.87% core level in H2 2026, and what are the expectations for funding costs?

Management expects continued core NIM expansion, driven by repositioning into higher-yielding loans and shifting earning assets towards loans. Funding cost decreases will be modest, but new fintech deposits (+$150M) will help lower the overall cost of funds.

“We do see continued opportunity for expansion of that level. I think more of it's on the asset mix and repositioning into higher-yielding loans and also just the mix shift of our earning assets into more loans. So we really benefited from 3 things in the quarter from a NIM perspective, that was decreasing our funding cost by about 4 basis points, shifting more of our earning assets into loans and carrying less cash on the balance sheet.”

asked by Sun Young Lee · answered by Michael Sumbs

Can you refresh the asset sensitivity profile and explain if NIM benefits from a rate hike?

MVB is asset sensitive, benefiting from approximately 35% noninterest-bearing deposits, a healthy cash balance that immediately benefits from rate hikes, and a relatively short repricing portfolio with variable rates. A rate hike would benefit NIM, though it would take some time to fully flow through.

“Yes. So we are asset sensitive. I mean a couple of drivers there are having roughly 35% of our deposits in noninterest-bearing status and then carrying a healthy balance of cash, which literally benefits immediately from a rate hike as well as a fairly short portfolio in terms of repricing and a healthy amount of variable. So balance sheet is overall asset sensitive. So would benefit from a rate hike, although it will take a little bit of time for that to flow into the margin numbers.”

asked by Sun Young Lee · answered by Michael Sumbs