Mid-Southern operation results

Salem, Indiana—April 26, 2019. Mid-Southern Bancorp, Inc. (the “Company”) (NASDAQ: MSVB), the holding company for Mid-Southern Savings Bank, FSB (the “Bank”), announced the Company’s operating results for the first quarter ended March 31, 2019. For the three months ended March 31, 2019, the Company reported net income of $362,000, or $0.11 per diluted share, compared to net income of $321,000, or $0.09 per diluted share, for the same period in 2018. On July 11, 2018, the Company completed the “second-step” conversion of Mid-Southern, M.H.C. and the Company’s related stock offering with the issuance of 2,559,871 shares of common stock at a price of $10.00 per share for net proceeds of approximately $24.6 million. The shares began trading on the Nasdaq Capital Market on Thursday, July 12, 2018, under the ticker symbol “MSVB.” Accordingly, the reported results and financial information for the quarter ended March 31, 2018 relate solely to the Bank.
The increase in net income in the first quarter ended March 31, 2019 compared to the same period last year is primarily due to an increase in net interest income after provision for loan losses partially offset by an increase in non-interest expense.
Income Statement Review
Net interest income after provision for loan losses increased $316,000, or 21.3%, for the quarter ended March 31, 2019 to $1.8 million as compared to $1.5 million for the quarter ended March 31, 2018. Total interest income increased $328,000, or 19.8%, when comparing the two periods, primarily due to an increase in the average balance of interest-earning assets. The average balance of interest-earning assets increased to $190.7 million for the quarter ended March 31, 2019 from $171.1 million for the quarter ended March 31, 2018.    Total interest expense increased $12,000, or 6.9%, when comparing the two periods due to an increase in the cost of interest-bearing liabilities. The average cost of interest-bearing liabilities increased to 0.57% for the quarter ended March 31, 2019 from 0.51% for the quarter ended March 31, 2018. The average balance of interest-bearing liabilities decreased to $131.2 million from $136.8 million, between the periods. As a result of the changes in interest-earning assets and interest-bearing liabilities, the interest rate spread increased to 3.69% from 3.43% and the net interest margin increased to 3.87% from 3.53% for the quarters ended March 31, 2019 and 2018, respectively.
Noninterest income decreased $16,000, or 7.7%, for the quarter ended March 31, 2019 as compared to the same period in 2018. The decrease was due to a $19,000 decrease in deposit account service charges along with a $2,000 decrease in other income and was partially offset by a $5,000 increase in ATM and debit card fee income when comparing the two periods.
Noninterest expenses increased $268,000 for the quarter ended March 31, 2019 as compared to the same period in 2018. This increase was primarily due to increases in data processing expense of $116,000, compensation and benefits of $78,000, professional fees of $42,000, and a decrease in the net gain on foreclosed real estate of $16,000, partially offset by a decrease of $18,000 in occupancy and equipment expense as compared to the same quarter last year. The increase in data processing expense is primarily due to $96,000 of contract termination expenses related to the Bank’s core processing system conversion, which is currently scheduled for the fourth quarter of 2019. The increase in compensation and benefits is primarily due to increased employee healthcare insurance premiums.
Income tax expense decreased $9,000 for the quarter ended March 31, 2019 as compared to the same period in 2018. The effective tax rate decreased to 15.8% for the quarter ended March 31, 2019 compared to 19.3% for the comparable quarter in 2018 primarily due to an increase in tax exempt interest income.
Balance Sheet Review
Total assets as of March 31, 2019 were $198.7 million compared to $200.7 million at December 31, 2018. Cash and cash equivalents and investment securities decreased $2.6 million and $2.2 million, respectively, which was partially offset by a $3.2 million increase in net loans receivable. Investment securities decreased due to maturities and normal principal payments for mortgage-backed securities. The increase in net loans receivable was due primarily to increases of $1.7 million in multi- family real estate loans and $1.6 million of commercial real estate loans during the quarter ended March 31, 2019. Total liabilities, comprised almost entirely of deposits, decreased $2.8 million during the quarter ended March 31, 2019.The decrease was due primarily to decreases in savings accounts, interest bearing demand deposits and non-interest bearing demand deposits of $1.4 million, $1.2 million and $995,000 respectively, which were partially offset by an increase in certificates of deposits of $965,000.
Credit Quality
Non-performing loans remained relatively unchanged at $1.3 million, or 1.0% of total loans, at both March 31, 2019 and December 31, 2018. At March 31, 2019, $597,000 or 46.0% of nonperforming loans were current on their loan payments. There was no foreclosed real estate owned at either March 31, 2019 or December 31, 2018.
Based on management’s analysis of the allowance for loan losses, there was no provision for loan losses during the quarters ended March 31, 2019 and 2018. The Company recognized net recoveries of $10,000 for the quarter ended March 31, 2019 compared to net charge-offs of $61,000 for the same period in 2018. The allowance for loan losses totaled $1.5 million, representing 1.2% of total loans at both March 31, 2019 and December 31, 2018. The allowance for loan losses represented 116.6% of non-performing loans at March 31, 2019, compared to 116.0% at December 31, 2018.
Capital
At March 31, 2019, the Bank was considered well-capitalized under applicable federal regulatory capital guidelines.
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 a loan production office located in New Albany, Indiana.

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