Morris State Bancshares Announces Quarterly Earnings and Declares Fourth Quarter Dividend


DUBLIN, Ga., Oct. 25, 2023 (GLOBE NEWSWIRE) -- Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $4.5 million for the quarter ending September 30, 2023, representing a decrease of $315 thousand, or 6.55%, compared to net income of $4.8 million for the quarter ended June 30, 2023. The Company also announced diluted earnings per share of $2.12 for quarter, representing a 0.15% decrease from diluted earnings per share of $2.27 for the prior quarter. Net earnings for the third quarter were driven by the bank’s lower provisioning for income taxes due to the accretion of deferred tax assets (DTA’s) related to a prior merger and the accelerated use of solar tax credits associated with solar projects coming online as supply chain issues improved through the year. 

“In the third quarter, we generated net interest income of $12.9 million, just below the second quarter level of $13.2 million,” said Spence Mullis, Chairman and CEO.  “As projected, our margin compressed slightly in the third quarter, but we had solid loan growth of $25.4 million, or 10.0% annualized. This loan growth bolstered our net interest income as it remained in line of that of the second quarter. Our non-interest expense increased slightly during the quarter due to increased salaries and employee costs as well as expenses associated with selling and financing of a large, long-held piece of other real estate (ORE). The said ORE will remain on the bank’s balance sheet in the near term as the purchaser is in the process of improving the property with their funds which will eventually allow us to carry the asset as a loan versus ORE.”

The Company’s total shareholders’ equity increased 2.05% to $173.3 million as of September 30, 2023, as compared to $170.0 million as of June 30, 2023. Tangible book value per share increased to $76.61 as of September 30, 2023, a 2.24% increase from $74.93 per share on June 30, 2023. On October 18, 2023, the board of directors approved its fourth quarter dividend of $0.44 per share payable on or about December 15th to all shareholders of record as of November 15th. 

Deposits grew slightly by $2.3 million during the quarter.  The Company’s funding mix continues to shift towards certificates of deposit (CDs) as interest rates have continued to rise. CDs as a percentage of total deposits has increased and represented approximately 9% of total deposits at the end of the third quarter. In the current interest-rate environment, management anticipates CD levels will continue to rise and represent a higher percentage of the overall funding mix on a go-forward basis. From a historical perspective, ten years ago, CD funding represented 38% of our overall deposit mix at the quarter ending September 30, 2013. Management remains focused on managing overall deposit costs as tightly as possible and booking or renewing new loans at higher rates to minimize margin compression. Due to economic growth in the bank’s various markets related to many new manufacturing projects, solid loan growth opportunity is expected to continue. 

Credit quality of the loan book remained consistent during the quarter. Adversely classified assets to Tier 1 Capital plus the allowance ended the quarter at 7.00%, as compared to 6.41% at the end of the second quarter. The bank’s allowance for credit losses as a percentage of loans was 1.32%, as compared with 1.36% at the end of the second quarter.

Forward-looking Statements

Certain statements contained in this release may not be based on historical facts and are forward-looking statements. These forward-looking statements may be identified by their reference to a future period or periods or by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “may,” “might,” “will,” “would,” “could” or “intend.” We caution you not to place undue reliance on the forward-looking statements contained in this news release, in that actual results could differ materially from those indicated in such forward-looking statements as a result of a variety of factors, including, among others, the business and economic conditions; risks related to the integration of acquired businesses and any future acquisitions; changes in management personnel; interest rate risk; ability to execute on planned expansion and organic growth; credit risk and concentrations associated with the Company’s loan portfolio; asset quality and loan charge-offs; inaccuracy of the assumptions and estimates management of the Company makes in establishing reserves for probable loan losses and other estimates; lack of liquidity; impairment of investment securities, goodwill or other intangible assets; the Company’s risk management strategies; increased competition; system failures or failures to prevent breaches of our network security; changes in federal tax law or policy; the impact of recent and future legislative and regulatory changes; and increases in capital requirements. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this news release.

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
               
Consolidating Balance Sheet
               
               
  September 30, June 30,     September 30,
    
   2023   2023  Change % Change  2022  Change % Change
  (Unaudited)  (Unaudited)      (Unaudited)     
ASSETS              
               
Cash and due from banks $36,373,555  $49,157,915  $(12,784,360) -26.01% $61,031,336  $(24,657,781) -40.40%
Federal funds sold  8,695,149   16,908,217   (8,213,068) -48.57%  24,137,905   (15,442,756) -63.98%
Total cash and cash equivalents  45,068,704   66,066,132   (20,997,428) -31.78%  85,169,241   (40,100,537) -47.08%
               
Interest-bearing time deposits in other banks  100,000   100,000   -  0.00%  100,000   -  0.00%
Securities available for sale, at fair value  3,879,531   -   3,879,531  0.00%  -   3,879,531  0.00%
Securities held to maturity, at cost (net of CECL Reserve)  244,837,916   253,917,288   (9,079,372) -3.58%  266,551,405   (21,713,489) -8.15%
Federal Home Loan Bank stock, restricted, at cost  1,727,100   1,494,300   232,800  15.58%  1,494,400   232,700  15.57%
Loans, net of unearned income  1,049,730,890   1,024,348,931   25,381,959  2.48%  1,030,422,253   19,308,637  1.87%
Less-allowance for credit losses  (13,860,420)  (13,912,231)  51,811  -0.37%  (13,027,473)  (832,947) 6.39%
Loans, net  1,035,870,470   1,010,436,700   25,433,770  2.52%  1,017,394,780   18,475,690  1.82%
               
Bank premises and equipment, net  13,325,846   13,528,556   (202,710) -1.50%  14,018,310   (692,464) -4.94%
ROU assets for operating lease, net  1,216,601   1,327,882   (111,281) -8.38%  1,569,358   (352,757) -22.48%
Goodwill  9,361,704   9,361,704   -  0.00%  9,361,704   -  0.00%
Intangible assets, net  1,765,877   1,851,765   (85,888) -4.64%  2,110,003   (344,126) -16.31%
Other real estate and foreclosed assets  3,567,309   3,749,267   (181,958) -4.85%  3,774,402   (207,093) -5.49%
Accrued interest receivable  5,585,081   5,224,150   360,931  6.91%  4,737,122   847,959  17.90%
Cash surrender value of life insurance  14,613,337   14,516,332   97,005  0.67%  14,244,800   368,537  2.59%
Other assets  25,711,989   23,327,101   2,384,888  10.22%  14,373,367   11,338,622  78.89%
Total Assets $1,406,631,465  $1,404,901,177  $1,730,288  0.12% $1,434,898,892   (28,267,427) -1.97%
               
               
LIABILITIES AND SHAREHOLDERS' EQUITY              
               
Deposits:              
Non-interest bearing $316,825,603  $318,451,205  $(1,625,602) -0.51% $368,015,994   (51,190,391) -13.91%
Interest bearing  862,167,812   858,291,311   3,876,501  0.45%  870,746,377   (8,578,565) -0.99%
   1,178,993,415   1,176,742,516   2,250,899  0.19%  1,238,762,371   (59,768,956) -4.82%
             -   
Other borrowed funds  42,132,633   45,113,982   (2,981,349) -6.61%  28,808,031   13,324,602  46.25%
Lease liability for operating lease  1,216,601   1,327,882   (111,281) -8.38%  1,569,358   (352,757) -22.48%
Accrued interest payable  979,913   580,607   399,306  68.77%  306,662   673,251  219.54%
Accrued expenses and other liabilities  10,056,934   11,359,139   (1,302,205) -11.46%  5,784,488   4,272,446  73.86%
             -   
Total liabilities  1,233,379,496   1,235,124,126   (1,744,630) -0.14%  1,275,230,910   (41,851,414) -3.28%
               
Shareholders' Equity:              
Common stock  2,179,210   2,179,075   135  0.01%  2,171,665   7,545  0.35%
Paid in capital surplus  42,177,860   42,167,829   10,031  0.02%  41,086,276   1,091,584  2.66%
Retained earnings  116,076,498   116,950,728   (874,230) -0.75%  100,832,787   15,243,711  15.12%
Current year earnings  13,404,804   8,911,726   4,493,078  50.42%  14,464,536   (1,059,732) -7.33%
Accumulated other comprehensive income (loss)  2,148,509   2,302,605   (154,096) -6.69%  2,809,715   (661,206) -23.53%
Treasury Stock, at cost 63,014  (2,734,912)  (2,734,912)  -  0.00%  (1,696,997)  (1,037,915) 61.16%
Total shareholders' equity  173,251,969   169,777,051   3,474,918  2.05%  159,667,982   13,583,987  8.51%
               
Total Liabilities and Shareholders' Equity $1,406,631,465  $1,404,901,177   1,730,288  0.12% $1,434,898,892   (28,267,427) -1.97%
               


                                                    MORRIS STATE BANCSHARES, INC.  
                                                 AND SUBSIDIARIES  
              
                                                    Consolidating Statement of Income  
                                                 for the Three Months Ended  
              
 September 30, June 30,     September 30,
      
  2023   2023  Change % Change  2022  Change % Change
 (Unaudited)  (Unaudited)      (Unaudited)     
Interest and Dividend Income:             
Interest and fees on loans$15,803,711  $15,361,766  $441,945  2.88% $13,401,241  $2,402,470  17.93%
Interest income on securities 2,051,695   2,099,593   (47,898) -2.28%  1,882,931   168,764  8.96%
Income on federal funds sold 216,377   106,490   109,887  103.19%  58,422   157,955  270.37%
Income on time deposits held in other banks 302,545   267,047   35,498  13.29%  284,617   17,928  6.30%
Other interest and dividend income 43,630   66,236   (22,606) -34.13%  53,095   (9,465) -17.83%
Total interest and dividend income 18,417,958   17,901,132   516,826  2.89%  15,680,306   2,737,652  17.46%
              
Interest Expense:             
Deposits 5,109,712   4,290,251   819,461  19.10%  1,298,347   3,811,365  293.56%
Interest on other borrowed funds 455,105   574,301   (119,196) -20.75%  433,142   21,963  5.07%
Interest on federal funds purchased --   705   (705) 0.00%  2,854   (2,854) 0.00%
Total interest expense 5,564,817   4,865,257   699,560  14.38%  1,734,343   3,830,474  220.86%
              
Net interest income before provision for loan losses 12,853,141   13,035,875   (182,734) -1.40%  13,945,963   (1,092,822) -7.84%
Less-provision for credit losses (33,351)  (141,187)  107,836  -76.38%  3,750,000   (3,783,351) -100.89%
Net interest income after provision for credit losses 12,886,492   13,177,062   (290,570) -2.21%  10,195,963   2,690,529  26.39%
              
Noninterest Income:             
Service charges on deposit accounts 532,598   533,273   (675) -0.13%  639,971   (107,373) -16.78%
Other service charges, commissions and fees 399,587   376,266   23,321  6.20%  411,386   (11,799) -2.87%
Gain on sales of foreclosed assets --   --   --  --   --   --  -- 
Increase in CSV of life insurance 97,005   92,372   4,633  5.02%  90,902   6,103  6.71%
Other income 7,681   106,051   (98,370) -92.76%  70,907   (63,226) -89.17%
Total noninterest income 1,036,871   1,107,962   (71,091) -6.42%  1,213,166   (176,295) -14.53%
              
Noninterest Expense:             
Salaries and employee benefits 4,374,087   3,889,461   484,626  12.46%  4,499,343   (125,256) -2.78%
Occupancy and equipment expenses, net 599,714   570,746   28,968  5.08%  618,367   (18,653) -3.02%
Loss on sales of premises and equipment 54,269   --   54,269  --   220,280   (166,011) -75.36%
Loss on sales of foreclosed assets 320,110   5,816   314,294  0.00%  995   319,115  0.00%
Other expenses 3,837,844   3,681,617   156,227  4.24%  3,401,150   436,694  12.84%
Total noninterest expense 9,186,024   8,147,640   1,038,384  12.74%  8,740,135   445,889  5.10%
              
Income Before Income Taxes 4,737,339   6,137,384   (1,400,045) -22.81%  2,668,994   2,068,345  77.50%
Provision for income taxes 244,258   1,329,595   (1,085,337) -81.63%  568,076   (323,818) -57.00%
            -   
Net Income$4,493,081  $4,807,789   (314,708) -6.55% $2,100,918   2,392,163  113.86%
              
              
Earnings per common share:             
Basic$2.12  $2.27   (0.15) -6.61% $0.98   1.14  116.33%
Diluted$2.12  $2.27   (0.15) -6.61% $0.98   1.14  116.33%
              


  Quarter Ending
     
  September 30,June 30,Sept 30,
   2023  2023  2022 
Dollars in thousand, except per share data (Unaudited)(Unaudited)(Unaudited)
     
     
Per Share Data    
Basic Earnings per Common Share $2.12 $2.27 $0.98 
Diluted Earnings per Common Share  2.12  2.27  0.98 
Dividends per Common Share  0.44  0.44  0.44 
Book Value per Common Share  81.87  80.23  75.42 
Tangible Book Value per Common Share  76.61  74.93  70.01 
     
Average Diluted Shared Outstanding  2,116,186  2,118,681  2,116,463 
End of Period Common Shares Outstanding  2,116,196  2,116,061  2,116,921 
     
     
Annualized Performance Ratios (Bank Only)    
Return on Average Assets  1.45% 1.60% 0.80%
Return on Average Equity  11.37% 12.79% 6.34%
Equity/Assets  12.79% 12.45% 12.49%
Yield on Earning Assets  5.48% 5.38% 4.50%
Cost of Funds  1.69% 1.47% 0.43%
Net Interest Margin  3.94% 4.04% 4.12%
Efficiency Ratio  62.46% 54.37% 52.81%
     
Credit Metrics    
Allowance for Loan Losses to Total Loans  1.32% 1.36% 1.27%
Adversely Classified Assets to Tier 1 Capital plus Allowance for Loan Losses  7.00% 6.41% 5.59%
     
 

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