Mid-Southern Bancorp, Inc. (the “Company”) (NASDAQ: MSVB), the
holding company for Mid-Southern Savings Bank, FSB (the “Bank”),
reported net income for the fourth quarter ended December 31, 2021
of $377,000 or $0.13 per diluted share compared to $200,000 or
$0.07 per diluted share for the same period in 2020. For the year
ended December 31, 2021, the Company reported net income of $1.6
million or $0.55 per diluted share compared to $1.2 million or
$0.38 per diluted share for the same period in 2020.
In light of the events surrounding the COVID-19
pandemic, the Company is continually assessing the effects of the
pandemic to its employees, customers and communities. In
March 2020, the Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”) was enacted. The CARES Act contains many
provisions related to banking, lending, mortgage forbearance and
taxation, and the Company supported its customers through the SBA
Paycheck Protection Program (“PPP”), loan modifications and
deferrals and fee waivers on early withdrawal of certificates of
deposit due to hardship. During the initial round of funding for
PPP loans, the Bank funded 29 PPP loans totaling $474,000. As
of December 31, 2021, all loans funded in the initial round had
received full forgiveness from the SBA.
In late December 2020, the Emergency
Coronavirus Relief Act of 2020 (the “Relief Act”) was enacted. The
Relief Act extended certain provisions of the CARES Act, and
allotted $284 billion to the SBA for a second round of PPP
loans. For the year ended December 31, 2021, the Bank has funded
43 PPP loans totaling $815,000 as part of this second round,
and three loans with a principal balance of $58,000 remain
outstanding as of December 31, 2021. As of December 31,
2021, 40 loans with a principal balance of $757,000 had received
full forgiveness from the SBA. As of January 12, 2022, the
remaining three loans outstanding as of December 31, 2021 had
received full forgiveness from the SBA.
While the ultimate impact of the pandemic is
difficult to predict, management believes the Company is
well-capitalized and has the financial stability to continue to
responsibly serve its customers and communities during this
unprecedented time.
Income Statement Review
Net interest income after provision for loan
losses increased $263,000, or 16.0%, for the quarter ended December
31, 2021 to $1.9 million as compared to the quarter ended
December 31, 2020. Total interest income increased $65,000, or
3.5%, 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
$245.7 million for the quarter ended December 31, 2021 from
$215.2 million for the quarter ended December 31, 2020, due
primarily to increases in investment securities, loans receivable
and interest-bearing deposits with banks. The average tax
equivalent yield on interest-earning assets decreased to 3.32% for
the quarter ended December 31, 2021 from 3.70% for the quarter
ended December 31, 2020, due primarily to a decrease in market
interest rates. Total interest expense decreased $48,000, or 24.2%,
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 0.33%
for the quarter ended December 31, 2021 from 0.52% for the same
period in 2020. The average balance of interest-bearing liabilities
increased to $180.9 million for the quarter ended December 31,
2021 from $151.7 million for the same period in 2020, due
primarily to an increase in the number and balance of savings and
interest-bearing demand deposit accounts, 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 decreased to 2.99% from 3.18% and the net
interest margin decreased to 3.08% from 3.33% for the quarters
ended December 31, 2021 and 2020, respectively.
Net interest income after provision for loan
losses increased $668,000, or 10.5%, for the year ended December
31, 2021 to $7.1 million as compared to $6.4 million for
the year ended December 31, 2020. Total interest income increased
$131,000, or 1.8%, 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 $237.7 million for the year ended December 31,
2021 from $208.0 million for the year ended December 31, 2020,
due primarily to increases in investment securities, partially
offset by decreases in loans receivable and interest-bearing
deposits with banks. The average tax equivalent yield on
interest-earning assets decreased to 3.36% for the year ended
December 31, 2021 from 3.73% for the year ended December 31, 2020,
due primarily to a decrease in market interest rates, driven by
decreases in the targeted federal funds rate in response to the
COVID-19 pandemic. Total interest expense decreased $285,000, or
30.4%, 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 0.38%
for the year ended December 31, 2021 from 0.65% for the same period
in 2020. The average balance of interest-bearing liabilities
increased to $172.7 million for the year ended December 31,
2021 from $144.5 million for the same period in 2020, due
primarily to an increase in the number and balance of savings and
interest-bearing demand deposit accounts, 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 decreased to 2.98% from 3.08% and the net
interest margin decreased to 3.09% from 3.28% for the years
ended December 31, 2021 and 2020, respectively.
Noninterest income increased $112,000, or 53.8%,
for the quarter ended December 31, 2021 as compared to the same
period in 2020, due primarily to increases of $43,000, $33,000, and
$31,000 in brokered loan fees, ATM and debit card fee income and
deposit account service charges, respectively.
Noninterest income increased $355,000, or 41.0%,
for the year ended December 31, 2021 as compared to the same period
in 2020, due primarily to increases of $207,000, $133,000, and
$111,000 in brokered loan fees, ATM and debit card fee income and
deposit account service charges, respectively, partially offset by
a reduction of $104,000 in net gain on sales of securities
available for sale. Proceeds from sales of securities available for
sale were $4.5 million for the year ended December 31, 2020.
No available for sale securities have been sold during the year
ended December 31, 2021.
Noninterest expense increased $148,000, or 8.7%,
for the quarter ended December 31, 2021 as compared to the same
period in 2020. The increase was due primarily to increases in
compensation and benefits of $129,000, occupancy and equipment
expenses of $22,000, data processing expenses of $10,000 and other
expenses of $13,000, partially offset by a reduction in the loss on
disposal of premises and equipment of $13,000 and a reduction in
directors’ compensation of $12,000. A loss on disposal of premises
and equipment of $13,000 was recorded during the three months ended
December 31, 2020 whereas no loss was recorded during the three
months ended December 31, 2021.
Noninterest expense increased $574,000, or 9.5%,
for the year ended December 31, 2021 as compared to the same period
in 2020. The increase was due primarily to increases in
compensation and benefits of $394,000, occupancy and equipment
expenses of $87,000, data processing fees of $50,000, deposit
insurance premiums of $35,000 and other expenses of $68,000,
partially offset by decreases in professional fees of $23,000, a
reduction in the impairment loss on real estate held for sale of
$37,000 and a reduction in the loss on disposal of premises and
equipment of $13,000. An impairment loss on real estate held for
sale of $37,000 and a loss on disposal of premises and equipment of
$13,000 were recorded during the year ended December 31, 2020
whereas no impairment and disposal losses were recorded during the
year ended December 31, 2021.
The Company recorded an income tax expense of
$11,000 for the quarter ended December 31, 2021, compared to an
income tax benefit of $39,000 for the same period in 2020. Income
tax expense for the year ended December 31, 2021 was $67,000
compared to $35,000 for the same period in 2020 resulting from an
increase in our effective tax rate to 4.0% for 2021 compared to
2.9% for 2020.
Balance Sheet Review
Total assets as of December 31, 2021 were
$254.3 million compared to $235.4 million at
December 31, 2020. The increase in total assets was primarily
due to increases in net loans of $9.3 million, cash and cash
equivalents of $6.7 million and investment securities of $2.8
million. The increase in net loans was due primarily to increases
of $6.5 million in commercial real estate loans and
$3.6 million in commercial business loans, partially offset by
a decrease of $2.0 million in one-to-four family residential loans.
Investment securities increased due primarily to $15.4 million
in purchases of available for sale investment securities, partially
offset by $11.1 million in scheduled principal payments and
maturities of mortgage-backed and tax-exempt securities. Total
liabilities, comprised mostly of deposits, increased
$21.3 million to $207.7 million as of December 31, 2021.
The increase was due primarily to a $20.1 million increase in
interest-bearing deposits and a $2.7 million increase in
noninterest-bearing deposits, partially offset by a decrease of
$1.0 million in borrowings from the Federal Home Loan Bank of
Indianapolis.
Credit Quality
Non-performing loans decreased to $753,000 at
December 31, 2021 compared to $1.3 million at
December 31, 2020, or 0.6% and 1.1% of total loans,
respectively. At December 31, 2021, $235,000 or 31.2% of
non-performing loans were current on their loan payments. At
December 31, 2021, non-performing troubled debt restructured loans
totaled $101,000. There was no foreclosed real estate owned at
either December 31, 2021 or December 31, 2020.
Based on management’s analysis of the allowance
for loan losses, the Company recorded a recapture of the provision
for loan losses of $120,000 for the quarter ended December 31,
2021, compared to a $30,000 provision for loan losses for the same
period in 2020. The recapture for the current quarter reflects
expected credit losses based upon the conditions that existed as of
December 31, 2021. The Company recognized net charge-offs of $8,000
for the quarter ended December 31, 2021 compared to net charge-offs
of $22,000 for the same period in 2020.
The Company recorded a recapture of the
provision for loan losses of $120,000 for the year ended December
31, 2021, compared to a $132,000 provision for loan losses for the
same period in 2020. The Company recognized net recoveries of
$54,000 for the year ended December 31, 2021 compared to net
charge-offs of $41,000 for the same period in 2020. The allowance
for loan losses totaled $1.5 million at both December 31, 2021
and December 31, 2020, representing 1.2% and 1.4% of total loans at
December 31, 2021 and December 31, 2020, respectively. The
allowance for loan losses represented 202.3% of non-performing
loans at December 31, 2021, compared to 126.5% at December 31,
2020.
Capital
On May 23, 2018, the President signed into
law the Economic Growth, Regulatory Relief, and Consumer Protection
Act passed by Congress (the “Act”). The Act contains a number of
provisions extending regulatory relief to banks and savings
institutions and their holding companies. Effective January 1,
2020, 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% (adjusted to 8.0% effective
April 1, 2020 and 8.5% effective January 1, 2021). On
October 9, 2020, the Office of the Comptroller of the
Currency, along with the Board of Governors of the Federal Reserve
System and the Federal Deposit Insurance Corporation, published a
final rule, effective November 9, 2020, implementing a
temporary change to the CBLR framework pursuant to the CARES Act,
providing a graduated increase to the 9.0% requirement as
established under the final rule published in 2019. 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. The Bank elected to use the CBLR effective
January 1, 2020.
At December 31, 2021, the Bank was considered
well-capitalized under applicable federal regulatory capital
guidelines with a CBLR of 16.3%.
The Company’s stockholders’ equity decreased to
$46.5 million at December 31, 2021, from $49.0 million at
December 31, 2020. The decrease was due primarily to the
repurchase of 172,624 shares of our common stock at a total cost of
$3.0 million and a decrease in the accumulated other comprehensive
income, net of tax, of $1.1 million, partially offset by net income
of $1.6 million. At December 31, 2021, a total of
185,583 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 |
|
Year Ended |
|
|
December 31, |
|
December 31, |
OPERATING
DATA |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
$ |
1,939 |
|
|
$ |
1,874 |
|
|
$ |
7,582 |
|
|
$ |
7,451 |
Total interest expense |
|
|
150 |
|
|
|
198 |
|
|
|
651 |
|
|
|
936 |
Net interest income |
|
|
1,789 |
|
|
|
1,676 |
|
|
|
6,931 |
|
|
|
6,515 |
Provision (credit) for loan losses |
|
|
(120 |
) |
|
|
30 |
|
|
|
(120 |
) |
|
|
132 |
Net interest income after provision for loan losses |
|
|
1,909 |
|
|
|
1,646 |
|
|
|
7,051 |
|
|
|
6,383 |
Total non-interest income |
|
|
320 |
|
|
|
208 |
|
|
|
1,220 |
|
|
|
865 |
Total non-interest expense |
|
|
1,841 |
|
|
|
1,693 |
|
|
|
6,596 |
|
|
|
6,022 |
Income before income taxes |
|
|
388 |
|
|
|
161 |
|
|
|
1,675 |
|
|
|
1,226 |
Income tax expense (benefit) |
|
|
11 |
|
|
|
(39 |
) |
|
|
67 |
|
|
|
35 |
Net income |
|
$ |
377 |
|
|
$ |
200 |
|
|
$ |
1,608 |
|
|
$ |
1,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.13 |
|
|
$ |
0.07 |
|
|
$ |
0.55 |
|
|
$ |
0.38 |
Diluted |
|
$ |
0.13 |
|
|
$ |
0.07 |
|
|
$ |
0.55 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,817,379 |
|
|
|
2,977,035 |
|
|
|
2,906,728 |
|
|
|
3,172,057 |
Diluted |
|
|
2,829,082 |
|
|
|
2,983,283 |
|
|
|
2,916,661 |
|
|
|
3,175,200 |
|
|
|
|
|
|
|
December 31, |
|
December 31, |
BALANCE SHEET
INFORMATION |
2021 |
|
2020 |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
16,379 |
|
$ |
9,661 |
Investment securities |
|
107,314 |
|
|
104,487 |
Loans, net |
|
122,568 |
|
|
113,259 |
Interest-earning assets |
|
247,184 |
|
|
227,996 |
Total assets |
|
254,260 |
|
|
235,363 |
Deposits |
|
196,884 |
|
|
174,113 |
Borrowings |
|
10,000 |
|
|
11,000 |
Stockholders' equity |
|
46,529 |
|
|
49,004 |
Book value per share (1) |
|
15.42 |
|
|
15.44 |
Tangible book value per share (2) |
|
15.42 |
|
|
15.44 |
Non-performing assets: |
|
|
|
|
|
Nonaccrual loans |
|
753 |
|
|
1,256 |
Accruing loans past due 90 days or more |
|
— |
|
|
— |
Foreclosed real estate |
|
— |
|
|
— |
Troubled debt restructurings on accrual status |
|
786 |
|
|
892 |
OTHER FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
|
December 31, |
|
December 31, |
|
Performance
ratios: |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
|
$ |
0.04 |
|
$ |
0.02 |
|
$ |
0.13 |
|
$ |
0.08 |
|
Return on average assets (annualized) |
|
|
0.59 |
% |
|
0.35 |
% |
|
0.65 |
% |
|
0.55 |
% |
Return on average stockholders' equity (annualized) |
|
|
3.27 |
% |
|
1.63 |
% |
|
3.36 |
% |
|
2.33 |
% |
Net interest margin |
|
|
3.08 |
% |
|
3.33 |
% |
|
3.09 |
% |
|
3.28 |
% |
Interest rate spread |
|
|
2.99 |
% |
|
3.18 |
% |
|
2.98 |
% |
|
3.08 |
% |
Efficiency ratio |
|
|
87.3 |
% |
|
89.9 |
% |
|
80.9 |
% |
|
81.6 |
% |
Average interest-earning assets to average interest-bearing
liabilities |
|
|
135.8 |
% |
|
141.8 |
% |
|
137.7 |
% |
|
144.0 |
% |
Average stockholders' equity to average assets |
|
|
18.1 |
% |
|
21.7 |
% |
|
19.3 |
% |
|
23.5 |
% |
Stockholders' equity to total assets at end of period |
|
|
|
|
|
|
|
|
18.3 |
% |
|
20.8 |
% |
|
|
|
|
|
|
December 31, |
|
December 31, |
|
Capital
ratios: (3) |
2021 |
|
2020 |
|
|
|
|
|
|
Community Bank Leverage Ratio |
16.3 |
% |
17.6 |
% |
|
|
|
|
|
|
December 31, |
|
December 31, |
|
Asset quality
ratios: |
2021 |
|
2020 |
|
|
|
|
|
|
Allowance for loan losses as a percent of total loans |
1.2 |
% |
1.4 |
% |
Allowance for loan losses as percent of non-performing loans |
202.3 |
% |
126.5 |
% |
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 |
% |
1.1 |
% |
Non-performing assets as a percent of total assets |
0.3 |
% |
0.5 |
% |
(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) - 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.
(3) - Effective January 1, 2020, the Bank
elected to use the CBLR, as provided by 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 8.0% effective
April 1, 2020 and 8.5% effective January 1, 2021).
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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