Equity Method Investments

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

Note 5 – Equity Method Investments

In accordance with Rule 10-01(b)(1) of Regulation S-X, we must assess whether our equity method investments are significant. In evaluating the significance of these investments, we performed the income and investment tests described in S-X 1-02(w) for each equity method investment. Rule 10-01(b)(1) of Regulation S-X requires summarized financial information in a quarterly report if any of the tests exceeds 20% and if the investee for which separate financial statements would otherwise be required for annual periods. Under the income test, our proportionate share of the net income of ICM exceeded the applicable threshold of 20%, and criteria for reporting separate financial statements is also applicable, accordingly, we are required to provide summarized income statement information for this investee for all periods presented. There were no other equity method investments which met any of the applicable thresholds for interim reporting as of the quarter ended September 30, 2022.

Our equity method investments are initially recorded at fair value and subsequently adjusted for changes in the valuation of the entities and our share of the entities' earnings.

ICM

The following table presents summarized income statement information for our equity method investment in ICM for the periods shown:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Total revenues	$	13,818	$	35,229	$	57,997	$	126,106
Net income (loss)	$	(1,986)	$	9,962	$	3,183	$	36,747

Gain on sale of loans	$	9,785	$	30,720	$	39,746	$	122,621
Volume of loans sold	$	619,059	$	1,098,475	$	1,999,706	$	4,368,875

Our ownership percentage of 40% of ICM allows us to have significant influence over the operations and decision making at ICM. Accordingly, the investment is accounted for as an equity method investment. Our share of ICM's net loss and net income income totaled $0.8 million and $1.2 million for the three and nine months ended September 30, 2022, respectively, and our share of ICM's net income totaled $3.6 million and $14.6 million for the three and nine months ended September 30, 2021, respectively. As of September 30, 2022 and December 31, 2021, the mortgage pipeline was $0.79 billion and $1.01 billion, respectively.

Interchecks

Our ownership percentage of 16% of Interchecks, as well as certain other qualitative factors, allows us to have significant influence over the operations and decision making at Interchecks. Accordingly, the investment is accounted for as an equity method investment. Our share of net loss from Interchecks totaled $0.2 million and $0.5 million for the three and nine months ended September 30, 2022, respectively. During the nine months ended September 30, 2022, we recorded a gain due to an observable transaction based on an in-substance sale of ownership in the amount of $1.9 million. The equity method investment in Interchecks is not considered a significant investment based on the criteria of Rule 10-01(b)(1) of Regulation S-X.

We have multiple business relationships with Interchecks beyond our investment. Interchecks is a banking client and utilizes the software developed by Victor, which provides revenue to us. Additionally, Interchecks provides management services to MVB Technology, which provides revenue to Interchecks. Such revenues have not been material.

Ayers Socure II

Our ownership percentage of 10% of Ayers Socure II allows us to have significant influence over the company. Accordingly, the investment is accounted for as an equity method investment. Our share of net income from Ayers Socure II for the three and nine months ended September 30, 2022 was not significant. The equity method investment in Ayers Socure II is not considered a significant investment based on the criteria of Rule 10-01(b)(1) of Regulation S-X.

Ayers Socure II's sole business is ownership of equity securities in Socure Inc. ("Socure"). In addition to our equity method investment in Ayers Socure II, we also have direct equity security ownership interest in Socure. With the combination of our investments in both Ayers Socure II and Socure directly, we own less than 1% of Socure in total.