Mid-Southern Bancorp, Inc. (the “Company”) (NASDAQ: MSVB), the
holding company for Mid-Southern Savings Bank, FSB (the “Bank”),
reported net income for the second quarter ended June 30, 2022
of $526,000 or $0.19 per diluted share compared to $397,000 or
$0.13 per diluted share for the same period in 2021. For the six
months ended June 30, 2022, the Company reported net income of
$993,000 or $0.36 per diluted share compared to $775,000 or $0.26
per diluted share for the same period in 2021.
Income Statement Review
Net interest income after provision for loan
losses increased $222,000, or 13.0%, for the quarter ended
June 30, 2022 to $1.9 million as compared to the quarter
ended June 30, 2021. Total interest income increased $278,000,
or 14.8%, when comparing the two periods, due to an increase in the
average balances and yields of interest-earning assets. The average
balance of interest-earning assets increased to $262.1 million
for the quarter ended June 30, 2022 from $237.5 million
for the quarter ended June 30, 2021, due primarily to
increases in loans receivable and investment securities, partially
offset by lower interest-bearing deposits with banks. The average
tax equivalent yield on interest-earning assets increased to 3.46%
for the quarter ended June 30, 2022 from 3.33% for the quarter
ended June 30, 2021, due primarily to higher proportions in
loans receivable and investment securities. Total interest expense
increased $6,000, or 3.6%, when comparing the two periods due to an
increase in the average balance of interest-bearing liabilities,
partially offset by a decrease in the average cost of
interest-bearing liabilities. The average balance of
interest-bearing liabilities increased to $196.7 million for
the quarter ended June 30, 2022 from $171.3 million for
the same period in 2021, due primarily to increases in savings and
interest-bearing demand deposit accounts and FHLB borrowings,
partially offset by a decrease in time deposits. The average cost
of interest-bearing liabilities decreased to 0.35% for the quarter
ended June 30, 2022 from 0.39% for the same period in 2021. As
a result of the changes in interest-earning assets and
interest-bearing liabilities, the interest rate spread increased to
3.11% from 2.94% and the net interest margin increased to 3.20%
from 3.05% for the quarters ended June 30, 2022 and 2021,
respectively.
Net interest income after provision for loan
losses increased $260,000, or 7.6%, for the six months ended
June 30, 2022 to $3.7 million as compared to the six
months ended June 30, 2021. Total interest income increased
$296,000, or 7.9%, when comparing the two periods, due to an
increase in the average balance of interest-earning assets
partially offset by a decrease in the yield earned on
interest-earning assets. The average balance of interest-earning
assets increased to $256.5 million for the six months ended
June 30, 2022 from $233.2 million for the six months
ended June 30, 2021, due primarily to increases in loans
receivable and investment securities, partially offset by lower
interest-bearing deposits with banks. The average tax equivalent
yield on interest-earning assets decreased to 3.32% for the six
months ended June 30, 2022 from 3.38% for the six months ended
June 30, 2021, due primarily to a shift in the investment
asset mix. Total interest expense decreased $14,000, or 4.2%, when
comparing the two periods due to a decrease in the average cost of
interest-bearing liabilities, partially offset by an increase in
the average balance of interest-bearing liabilities. The average
cost of interest-bearing liabilities decreased to 0.34% for the six
months ended June 30, 2022 from 0.40% for the same period in
2021. The average balance of interest-bearing liabilities increased
to $190.8 million for the six months ended June 30, 2022
from $167.2 million for the same period in 2021, due primarily
to an increase in savings and interest-bearing demand deposit
accounts and higher FHLB borrowings, partially offset by a decrease
in time deposits. As a result of the changes in interest-earning
assets and interest-bearing liabilities, the interest rate spread
remained at 2.98% and the net interest margin decreased to 3.06%
from 3.09% for the six-month periods ended June 30, 2022 and
2021, respectively.
Noninterest income increased $39,000, or 12.0%,
for the quarter ended June 30, 2022 as compared to the same
period in 2021, due primarily to increases of $20,000 and $7,000 in
deposit account service charges and ATM and debit card fee income,
respectively, and a $36,000 gain on life insurance, partially
offset by a reduction in brokered loans fees of $25,000.
Noninterest income increased $50,000, or 8.3%,
for the six months ended June 30, 2022 as compared to the same
period in 2021, due primarily to increases of $51,000 and $14,000
in deposit account service charges and ATM and debit card fee
income, respectively, and a $36,000 gain on life insurance,
partially offset by a reduction in brokered loans fees of
$50,000.
Noninterest expense increased $114,000, or 7.0%,
for the quarter ended June 30, 2022 as compared to the same
period in 2021. The increase was due primarily to increases in
compensation and benefits of $39,000, professional fees of $35,000,
directors’ compensation of $17,000 and other expenses of
$24,000.
Noninterest expense increased $57,000, or 1.8%,
for the six months ended June 30, 2022 as compared to the same
period in 2021. The increase was due primarily to increases in
professional fees of $24,000, data processing expenses of $16,000,
occupancy and equipment expenses of $10,000 and other expenses of
$27,000, partially offset by lower compensation and benefits
expenses of $25,000.
The Company recorded an income tax expense of
$24,000 for the quarter ended June 30, 2022, compared to an
income tax expense of $6,000 for the same period in 2021. Income
tax expense for the six months ended June 30, 2022 was $58,000
compared to an expense of $23,000 for the same period in 2021
resulting from an increase in our effective tax rate to 5.5% for
2022 compared to 2.9% for 2021. The increase in the effective tax
rate is primarily due to an increase in pre-tax income generated
from core banking activities.
Balance Sheet Review
Total assets as of June 30, 2022 were
$266.5 million compared to $254.3 million at
December 31, 2021. The increase in total assets was primarily
due to increases in net loans of $15.6 million, other assets
of $3.8 million and investment securities of
$3.6 million, partially offset by a decrease in cash and cash
equivalents of $12.0 million. The increase in net loans was
due primarily to increases of $13.4 million in commercial real
estate loans, $2.3 million in multi-family residential loans
and $1.4 million in one-to-four family residential loans,
partially offset by a decrease of $960,000 in residential
construction loans and a decrease of $387,000 in commercial real
estate construction loans. The increase in other assets was due
primarily to a $3.5 million increase in net deferred tax assets,
largely attributable to the tax effect on the unrealized loss on
available for sale securities. Investment securities increased due
primarily to $26.0 million in purchases of available for sale
investment securities, partially offset by $7.4 million in
scheduled principal payments, calls and maturities of
mortgage-backed and tax-exempt securities and a $14.7 million
unrealized loss on available for sale securities. Total
liabilities, comprised mostly of deposits, increased
$24.3 million to $232.1 million as of June 30, 2022.
The increase was due primarily to a $16.0 million increase in
FHLB borrowings and an $8.9 million increase in
interest-bearing deposits, partially offset by a $702,000 decrease
in noninterest-bearing deposits.
Credit Quality
Non-performing loans increased to $822,000 at
June 30, 2022 compared to $753,000 at December 31, 2021,
or 0.6% of total loans for both periods. At June 30, 2022,
$459,000 or 55.9% of non-performing loans were current on their
loan payments. At June 30, 2022, non-performing troubled debt
restructured loans totaled $94,000. There was no foreclosed real
estate owned at either June 30, 2022 or December 31,
2021.
Based on management’s analysis of the allowance
for loan losses, the Company recorded a provision for loan losses
of $50,000 for the quarter ended June 30, 2022 compared to no
provision for the same period in 2021. The Company recognized net
charge-offs of $1,000 for the quarter ended June 30, 2022
compared to net recoveries of $22,000 for the same period in
2021.
The Company recorded a provision for loan losses
of $50,000 for the six-month period ended June 30, 2022
compared to no provision for the same periods in 2021. The Company
recognized net charge-offs of $2,000 for the six months ended
June 30, 2022 compared to net recoveries of $23,000 for the
same period in 2021. The allowance for loan losses totaled
$1.6 million at June 30, 2022 and $1.5 million at
December 31, 2021, representing 1.1% and 1.2% of total loans
at June 30, 2022 and December 31, 2021, respectively. The
allowance for loan losses represented 191.1% of non-performing
loans at June 30, 2022, compared to 202.3% at
December 31, 2021.
Capital
The Bank elected to use the CBLR effective
January 1, 2020. Effective January 1, 2022, a bank or
savings institution electing to use the Community Bank Leverage
Ratio (“CBLR”) will generally be considered well-capitalized and to
have met the risk-based and leverage capital requirements of the
capital regulations if it has a leverage ratio greater than 9.0%,
an increase from the 8.5% or higher ratio requirement for fiscal
year 2021. To be eligible to elect to use the CBLR, the bank or
savings institution also must have total consolidated assets of
less than $10 billion, off-balance sheet exposures of 25.0% or
less of its total consolidated assets, and trading assets and
trading liabilities of 5.0% or less of its total consolidated
assets, all as of the end of the most recent quarter.
At June 30, 2022, the Bank was considered
well-capitalized under applicable federal regulatory capital
guidelines with a CBLR of 15.7%.
The Company’s stockholders’ equity decreased to
$34.4 million at June 30, 2022, from $46.5 million
at December 31, 2021. The decrease was due primarily to a
decrease in the accumulated other comprehensive income, net of tax,
of $11.0 million and the repurchase of 152,897 shares of our
common stock at a total cost of $2.2 million, partially offset
by net income of $993,000, net of dividends of $221,000. At
June 30, 2022, a total of 174,686 shares remain
authorized for future purchases under the current stock repurchase
plan.
About Mid-Southern Bancorp, Inc.
Mid-Southern Savings Bank, FSB is a federally
chartered savings bank headquartered in Salem, Indiana,
approximately 40 miles northwest of Louisville, Kentucky. The
Bank conducts business from its main office in Salem and through
its branch offices located in Mitchell and Orleans, Indiana and
loan production offices located in New Albany, Indiana and
Louisville, Kentucky.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains certain
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements
may be identified by reference to a future period or periods, or by
the use of forward-looking terminology, such as “estimate,”
“project,” “believe,” “intend,” “anticipate,” “plan,” “seek,”
“expect,” “will,” “may,” “continue,” or similar terms or variations
on those terms, or the negative of those terms. Forward-looking
statements, by their nature, are subject to risks and
uncertainties. Certain factors that could cause actual results to
differ materially from expected results include the effect of the
COVID-19 pandemic, including on the Company’s credit quality and
business operations, as well as its impact on general economic and
financial market conditions and other uncertainties resulting from
the COVID-19 pandemic, such as the extent and duration of the
impact on public health, the U.S. and global economies, and
consumer and corporate customers, including economic activity,
employment levels and market liquidity; increased competitive
pressures; changes in the interest rate environment; general
economic conditions or conditions within the securities markets;
and legislative and regulatory changes affecting financial
institutions, including regulatory compliance costs and capital
requirements that could adversely affect the business in which the
Company and the Bank are engaged; and other factors described in
the Company’s latest Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q and other filings with the Securities and
Exchange Commission that are available on our website at
mid-southern.com and on the SEC’s website at www.sec.gov.
The factors listed above could materially affect
the Company’s financial performance and could cause the Company’s
actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in
any current statements.
Except as required by applicable law, the
Company does not undertake and specifically declines any obligation
to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events. When considering
forward-looking statements, you should keep in mind these risks and
uncertainties. You should not place undue reliance on any
forward-looking statement, which speaks only as of the date
made.
MID-SOUTHERN BANCORP,
INC.CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)(Dollars in thousands, except per share information)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
OPERATING
DATA |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
$ |
2,153 |
|
|
$ |
1,875 |
|
|
$ |
4,036 |
|
|
$ |
3,740 |
|
Total interest expense |
|
173 |
|
|
|
167 |
|
|
|
323 |
|
|
|
337 |
|
Net interest income |
|
1,980 |
|
|
|
1,708 |
|
|
|
3,713 |
|
|
|
3,403 |
|
Provision for loan losses |
|
50 |
|
|
|
— |
|
|
|
50 |
|
|
|
— |
|
Net interest income after provision for loan losses |
|
1,930 |
|
|
|
1,708 |
|
|
|
3,663 |
|
|
|
3,403 |
|
Total non-interest income |
|
364 |
|
|
|
325 |
|
|
|
649 |
|
|
|
599 |
|
Total non-interest expense |
|
1,744 |
|
|
|
1,630 |
|
|
|
3,261 |
|
|
|
3,204 |
|
Income before income taxes |
|
550 |
|
|
|
403 |
|
|
|
1,051 |
|
|
|
798 |
|
Income tax expense |
|
24 |
|
|
|
6 |
|
|
|
58 |
|
|
|
23 |
|
Net income |
$ |
526 |
|
|
$ |
397 |
|
|
$ |
993 |
|
|
$ |
775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.19 |
|
|
$ |
0.13 |
|
|
$ |
0.36 |
|
|
$ |
0.26 |
|
Diluted |
$ |
0.19 |
|
|
$ |
0.13 |
|
|
$ |
0.36 |
|
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
2,722,365 |
|
|
|
2,967,050 |
|
|
|
2,766,818 |
|
|
|
2,966,416 |
|
Diluted |
|
2,725,889 |
|
|
|
2,976,138 |
|
|
|
2,769,750 |
|
|
|
2,974,648 |
|
|
June 30, |
|
December 31, |
BALANCE SHEET
INFORMATION |
2022 |
|
2021 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
4,423 |
|
|
$ |
16,379 |
|
Investment securities |
|
110,959 |
|
|
|
107,314 |
|
Loans, net |
|
138,143 |
|
|
|
122,568 |
|
Interest-earning assets |
|
255,283 |
|
|
|
247,184 |
|
Total assets |
|
266,454 |
|
|
|
254,260 |
|
Deposits |
|
205,047 |
|
|
|
196,884 |
|
Borrowings |
|
26,000 |
|
|
|
10,000 |
|
Stockholders' equity |
|
34,382 |
|
|
|
46,529 |
|
|
|
|
|
|
|
|
|
Common stock shares outstanding |
|
2,871,325 |
|
|
|
3,016,653 |
|
|
|
|
|
|
|
|
|
Book value per share (1) |
|
11.97 |
|
|
|
15.42 |
|
Book value per share excluding AOCI (2) |
|
15.08 |
|
|
|
14.73 |
|
Tangible book value per share (3) |
|
11.97 |
|
|
|
15.42 |
|
Non-performing assets: |
|
|
|
|
|
|
|
Nonaccrual loans |
|
822 |
|
|
|
753 |
|
Accruing loans past due 90 days or more |
|
— |
|
|
|
— |
|
Foreclosed real estate |
|
— |
|
|
|
— |
|
Troubled debt restructurings on accrual status |
|
749 |
|
|
|
786 |
|
OTHER FINANCIAL DATA
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
Performance
ratios: |
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
$ |
0.04 |
|
|
$ |
0.03 |
|
|
$ |
0.08 |
|
|
$ |
0.06 |
|
Return on average assets (annualized) |
|
0.80 |
% |
|
|
0.64 |
% |
|
|
0.76 |
% |
|
|
0.64 |
% |
Return on average stockholders' equity (annualized) |
|
5.64 |
% |
|
|
3.26 |
% |
|
|
4.81 |
% |
|
|
3.17 |
% |
Net interest margin |
|
3.20 |
% |
|
|
3.05 |
% |
|
|
3.06 |
% |
|
|
3.09 |
% |
Interest rate spread |
|
3.11 |
% |
|
|
2.94 |
% |
|
|
2.98 |
% |
|
|
2.98 |
% |
Efficiency ratio |
|
74.4 |
% |
|
|
80.2 |
% |
|
|
74.8 |
% |
|
|
80.1 |
% |
Average interest-earning assets to average interest-bearing
liabilities |
|
133.2 |
% |
|
|
138.6 |
% |
|
|
134.4 |
% |
|
|
139.5 |
% |
Average stockholders' equity to average assets |
|
14.2 |
% |
|
|
19.7 |
% |
|
|
15.8 |
% |
|
|
20.1 |
% |
Stockholders' equity to total assets at end of period |
|
|
|
|
|
|
|
|
|
12.9 |
% |
|
|
19.7 |
% |
|
June 30, |
|
|
December 31, |
|
Capital
ratios: (4) |
2022 |
|
|
2021 |
|
|
|
|
|
|
|
Community Bank Leverage Ratio |
15.7 |
% |
|
16.3 |
% |
|
June 30, |
|
December 31, |
|
Asset quality
ratios: |
2022 |
|
2021 |
|
|
|
|
|
|
Allowance for loan losses as a percent of total loans |
1.1 |
% |
1.2 |
% |
Allowance for loan losses as percent of non-performing loans |
191.1 |
% |
202.3 |
% |
Net charge-offs (recoveries) to average outstanding loans during
the period (annualized) |
0.0 |
% |
0.0 |
% |
Non-performing loans as a percent of total loans |
0.6 |
% |
0.6 |
% |
Non-performing assets as a percent of total assets |
0.3 |
% |
0.3 |
% |
____________________________(1) - We calculate
book value per share as total stockholders’ equity at the end of
the relevant period divided by the outstanding number of our common
shares at the end of each period.
(2) - Book value per share excluding Accumulated
Other Comprehensive Income / Loss (“AOCI”) is a non-GAAP financial
measure. We calculate book value per share excluding AOCI as total
stockholders’ equity at the end of the relevant period, less AOCI,
divided by the outstanding number of our common shares at the end
of each period. The most directly comparable GAAP financial measure
is book value per share. We provide the book value per share
excluding AOCI in addition to those defined by banking regulators
because we believe it is important to evaluate the balance sheet
both before and after the effects of unrealized amounts associated
with mark-to-market adjustments on available-for-sale investment
securities. Refer to “Reconciliation of Non-GAAP Financial
Measures” below.
(3) - Tangible book value per share is a
non-GAAP financial measure. We calculate tangible book value per
share as total stockholders’ equity at the end of the relevant
period, less goodwill and other intangible assets, divided by the
outstanding number of our common shares at the end of each period.
The most directly comparable GAAP financial measure is book value
per share. We had no goodwill or other intangible assets as of any
of the dates indicated. As a result, tangible book value per share
is the same as book value per share as of each of the dates
indicated. We provide the tangible book value per share in addition
to those defined by banking regulators because of its widespread
use by investors as a means to evaluate capital adequacy.
(4) - Effective January 1, 2020, the Bank
elected to use the CBLR, as provided by the Economic Growth,
Regulatory Relief, and Consumer Protection Act (the “Act”). The Act
contains a number of provisions extending regulatory relief to
banks and savings institutions and their holding companies. A bank
or savings institution that elects to use the CBLR will generally
be considered well-capitalized and to have met the risk-based and
leverage capital requirements of the capital regulations if it has
a leverage ratio greater than 9.0% (adjusted to 8.5% effective
January 1, 2021, returning to 9.0% effective January 1,
2022).
|
June 30, |
|
December 31, |
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
2022 |
|
2021 |
|
|
|
|
|
|
|
Stockholders' equity |
$ |
34,382 |
|
|
$ |
46,529 |
|
Adjustments: |
|
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
(8,915 |
) |
|
|
2,096 |
|
Stockholders' equity excluding AOCI |
$ |
43,297 |
|
|
$ |
44,433 |
|
|
|
|
|
|
|
|
Common stock shares outstanding |
|
2,871,325 |
|
|
|
3,016,653 |
|
|
|
|
|
|
|
|
Book value per share |
$ |
11.97 |
|
|
$ |
15.42 |
|
Effect of accumulated other comprehensive income (loss) |
|
(3.11 |
) |
|
|
0.69 |
|
Book value per share excluding AOCI |
$ |
15.08 |
|
|
$ |
14.73 |
|
Contact:Alexander G. Babey, President
and Chief Executive OfficerRobert W. DeRossett,
Chief Financial OfficerMid-Southern
Bancorp, Inc.812-883-2639
Mid Southern Bancorp (NASDAQ:MSVB)
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