Mid-Southern Bancorp, Inc. (MSVB) is a bank holding company headquartered in Salem, Indiana, that provides a range of financial services through its wholly-owned subsidiary, Mid-Southern Savings Bank, FSB. The company has a longstanding history in the Southern Indiana region, having been founded in 1890 as a mutual savings and loan association.

Over the years, Mid-Southern has evolved to become a community-focused financial institution, offering a diverse array of products and services to individuals and businesses alike. The company's core business revolves around traditional banking activities, including the origination of real estate loans, commercial loans, and consumer loans, as well as the acceptance of deposits. In 2018, the bank completed a significant milestone by converting from a mutual holding company structure to a publicly traded stock company, which allowed it to raise capital and expand its operations.

Company History and Resilience

Mid-Southern has demonstrated resilience in the face of various economic challenges throughout its history. During the Great Recession of the late 2000s, the bank took proactive measures to maintain strong credit quality and minimize losses on its loan portfolio. Additionally, it strategically diversified its revenue streams by placing a greater emphasis on fee-based businesses such as mortgage lending and wealth management.

More recently, the COVID-19 pandemic in 2020 presented another significant challenge for the bank. Mid-Southern worked closely with its customers to provide loan modifications and other forms of assistance during this difficult period, showcasing its commitment to supporting the local community during times of crisis.

Business Overview

As of December 31, 2022, Mid-Southern reported total assets of $269.22 million, total loans of $146.51 million, and total deposits of $206.06 million. The bank operates six full-service branch locations throughout its primary market area of southern Indiana, serving the banking needs of both retail and commercial customers.

Mid-Southern's primary business activities involve attracting retail deposits and investing those funds in loans secured by real estate. The company's loan portfolio is diversified across several key segments. As of June 30, 2023, the one-to-four family residential loan segment was the largest, comprising $64.29 million or 42.9% of total loans. These loans are secured by the borrower's primary residence or investment properties. The commercial real estate segment accounted for $51.90 million or 34.6% of the portfolio, secured by various property types including office buildings, warehouses, retail space, and mixed-use buildings. Other significant segments include commercial business loans at $14.01 million (9.3%), multi-family residential loans at $9.54 million (6.4%), and consumer loans at $2.01 million (1.3%).

Financials

Mid-Southern's financial performance has been relatively stable in recent years, with the company reporting net income of $1.88 million and $1.61 million in 2022 and 2021, respectively. The bank's earnings have been supported by a consistently strong net interest margin, which was 2.82% and 2.90% for the full years 2022 and 2021, respectively.

However, the company has faced some challenges in recent periods, including rising interest rates and increased competition in its local market. In the first half of 2023, Mid-Southern reported a decrease in net income to $740,000, down from $993,000 in the same period of 2022. This decline was largely attributable to a $97,000 reduction in noninterest income, as well as a $320,000 increase in noninterest expenses.

In the most recent quarter, Mid-Southern reported revenue of $2.86 million and net income of $460,000. The increase in revenue and net income was due to growth in the loan portfolio and higher net interest margins, partially offset by higher noninterest expenses.

Asset Quality

The company's level of nonperforming loans increased to $913,000 or 0.6% of total loans as of June 30, 2023, up from $732,000 or 0.5% at the end of 2022. However, a significant portion of these nonperforming loans, $577,000 or 63.2%, were still current on their payments. Mid-Southern recorded a net recapture of credit losses of $16,000 for the second quarter of 2023 and a net provision of $36,000 for the first half of the year, compared to a $50,000 provision in the prior year period. The allowance for credit losses totaled $2.33 million or 1.55% of total loans as of June 30, 2023.

Liquidity

Despite these headwinds, Mid-Southern has demonstrated its resilience and adaptability. The company has actively managed its balance sheet and interest rate risk, as evidenced by its strong capital position. As of June 30, 2023, the bank's Community Bank Leverage Ratio was 15.60%, well above the 9.00% threshold required to be considered "well-capitalized" under regulatory guidelines.

Mid-Southern's primary funding sources are deposits, which totaled $202.92 million as of June 30, 2023, down 1.5% from the end of 2022. The bank also utilizes borrowings, which increased to $28.20 million from the Federal Reserve's Bank Term Funding Program during the first half of 2023. The company maintains a strong liquidity position, with cash and cash equivalents of $5.87 million and an additional $37.80 million in available borrowing capacity from the Federal Home Loan Bank of Indianapolis at the end of the second quarter.

The company's debt-to-equity ratio stands at 0.09, indicating a conservative approach to leverage. The current ratio and quick ratio are both 0.48, reflecting the company's ability to meet its short-term obligations.

Strategic Initiatives

Moreover, Mid-Southern has continued to invest in its core operations and explore new growth opportunities. In 2022, the company opened a new branch location, expanded its commercial lending team, and enhanced its digital banking capabilities to better serve its customer base.

Future Outlook

Looking ahead, Mid-Southern remains focused on prudently managing its risk profile while also seeking to capitalize on potential areas of growth within its regional market. The company has indicated that it remains committed to delivering solid financial performance and enhancing shareholder value over the long term.

Conclusion

Overall, Mid-Southern Bancorp is a well-established community bank that has weathered various economic cycles and industry challenges over its 130-year history. While the company has faced some headwinds in recent periods, its strong capital position, diversified revenue streams, and experienced management team position it well to navigate the current environment and continue serving the banking needs of its local communities. The company's focus on residential and commercial real estate lending in its local market area, combined with its solid asset quality and liquidity position, provide a stable foundation for future growth and resilience in the face of ongoing economic uncertainties.