Morris State Bancshares Announces Quarterly Earnings and Declares Second Quarter Dividend

DUBLIN, Ga., April 27, 2023 (GLOBE NEWSWIRE) -- Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $4.1 million for the quarter ending March 31, 2023, representing a decrease of $2.5 million, or 38.23%, compared to net income of $6.6 million for the quarter ended December 31, 2022. Lower quarter over quarter net earnings were a result of higher deposit costs, higher noninterest expense, and higher tax provisioning.

“We continued to navigate a challenging economic environment in the first quarter marked by uncertainty in the banking industry with the backdrop of continued rising interest rates,” said Spence Mullis, Chairman and CEO. “While up 8.66% year over year in loans, we did see our loan book contract slightly, 1.09% or $11.4 million, from year-end. Our deposits held steady at $1.2 billion, which is in line with year-end deposit levels. The cost of these deposits, however, were up $1.2 million, or 51.86% over the fourth quarter of 2022. We expect deposit costs to continue to increase for the remainder of the year as the Fed signals that they will maintain higher rates for longer.”

The net interest margin was 3.98% for the first quarter of 2023 compared to 4.13% for the fourth quarter of 2022 and 4.04% for the first quarter of 2022. The average yield on earning assets grew 24 basis points from 4.82%, as of December 31, 2022, to 5.06%, while the bank’s cost of funds grew 41 basis points to 1.18% during the same period. Management expects the bank’s cost of funds to continue to increase and peak during the latter part of the third quarter of the year based on the current Fed rate forecast.

Noninterest expense increased $573,228, or 6.90%, over December 31, 2022, and provision for income taxes increased $1,695,418, or 240.81%, during the quarter. The increase in noninterest expense and income taxes quarter over quarter was due to the bank not investing in new solar tax credit projects and having to amortize the solar credits used in 2022. Provision for credit losses declined $216,624 during the quarter as the bank moved to the Current Expected Credit Losses Methodology (CECL).   The Company’s asset quality remains consistent with an adversely classified index of 6.49% as of March 31, 2023, which compares with 5.99% as of December 31, 2022. The bank’s reserve as a percentage of total loans was 1.35% for March 31, 2023, as compared to 1.30% for March 31, 2022 and 1.30% for December 31, 2022.

The Company’s total shareholders’ equity increased 8.57% year-over-year to $166 million as of March 31, 2022, and up 0.83% or $1.4 million from December 31, 2022. Tangible book value of the company grew to $73.14 on March 31, 2023, from $66.98, or 9.20%, from March 31, 2022, and was in line with the value as of December 31, 2022 of $72.68. On April 19, 2023, the board of directors approved a second quarter dividend of $0.44 per share payable on or about June 15, 2023, to all shareholders of record as of May 15, 2023.

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
	March 31,				March 31,											December 31,
		2023				2022			Change				% Change				2022			Change				% Change
	(Unaudited)				(Unaudited)											(Unaudited)
ASSETS
Cash and due from banks	$	51,448,341			$	143,422,859			$	(91,974,518	)		-64.13	%		$	49,302,788			$	2,145,553			4.35	%
Federal funds sold		16,102,872				15,664,564				438,308			2.80	%			21,007,642				(4,904,770	)		-23.35	%
Total cash and cash equivalents		67,551,213				159,087,423				(91,536,210	)		-57.54	%			70,310,430				(2,759,217	)		-3.92	%
Interest-bearing time deposits in other banks		100,000				350,000				(250,000	)		-71.43	%			100,000				-			0.00	%
Securities available for sale, at fair value
Securities held to maturity, at cost (net of CECL Reserve)		257,399,845				267,833,392				(10,433,547	)		-3.90	%			259,677,508				(2,277,663	)		-0.88	%
Federal Home Loan Bank stock, restricted, at cost		1,588,300				624,300				964,000			154.41	%			1,578,400				9,900			0.63	%
																					-
Loans, net of unearned income		1,040,411,604				957,533,245				82,878,359			8.66	%			1,051,888,290				(11,476,686	)		-1.09	%
Less-allowance for credit losses		(14,047,855	)			(12,408,458	)			(1,639,397	)		13.21	%			(13,629,255	)			(418,600	)		3.07	%
Loans, net		1,026,363,749				945,124,787				81,238,962			8.60	%			1,038,259,035				(11,895,286	)		-1.15	%
																					-
Bank premises and equipment, net		13,658,218				14,837,637				(1,179,419	)		-7.95	%			13,865,943				(207,725	)		-1.50	%
ROU assets for operating lease, net		1,431,413				1,158,386				273,027			23.57	%			1,529,545				(98,132	)		-6.42	%
Goodwill		9,361,704				9,361,704				-			0.00	%			9,361,704				-			0.00	%
Intangible assets, net		1,937,652				2,282,410				(344,758	)		-15.10	%			2,023,540				(85,888	)		-4.24	%
Other real estate and foreclosed assets		3,803,252				5,106,587				(1,303,335	)		-25.52	%			3,715,202				88,050			2.37	%
Accrued interest receivable		4,959,915				4,352,997				606,918			13.94	%			5,341,616				(381,701	)		-7.15	%
Cash surrender value of life insurance		14,423,960				14,065,097				358,863			2.55	%			14,333,544				90,416			0.63	%
Other assets		22,390,328				14,505,874				7,884,454			54.35	%			16,467,513				5,922,815			35.97	%
Total Assets	$	1,424,969,549			$	1,438,690,594			$	(13,721,045	)		-0.95	%		$	1,436,563,980				(11,594,431	)		-0.81	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing	$	323,091,870			$	355,354,700			$	(32,262,830	)		-9.08	%		$	339,657,309				(16,565,439	)		-4.88	%
Interest bearing		877,794,418				896,502,158				(18,707,740	)		-2.09	%			876,009,017				1,785,401			0.20	%
		1,200,886,288				1,251,856,858				(50,970,570	)		-4.07	%			1,215,666,326				(14,780,038	)		-1.22	%
																					-
Other borrowed funds		47,095,332				28,770,730				18,324,602			63.69	%			48,826,681				(1,731,349	)		-3.55	%
Lease liability for operating lease		1,431,413				1,158,386				273,027			23.57	%			1,529,545				(98,132	)		-6.42	%
Accrued interest payable		491,159				321,188				169,971			52.92	%			143,899				347,260			241.32	%
Accrued expenses and other liabilities		8,660,358				3,316,942				5,343,416			161.09	%			5,461,126				3,199,232			58.58	%
																					-
Total liabilities		1,258,564,550				1,285,424,104				(26,859,554	)		-2.09	%			1,271,627,577				(13,063,027	)		-1.03	%
Shareholders' Equity:
Common stock		2,177,510				2,165,730				11,780			0.54	%			2,169,557				7,953			0.37	%
Paid in capital surplus		42,045,076				40,907,274				1,137,802			2.78	%			41,302,572				742,504			1.80	%
Retained earnings		117,806,614				103,112,378				14,694,236			14.25	%			99,943,774				17,862,840			17.87	%
Current year earnings		4,103,935				5,561,414				(1,457,479	)		-26.21	%			21,108,630				(17,004,695	)		-80.56	%
Accumulated other comprehensive income (loss)		2,468,079				3,213,238				(745,159	)		-23.19	%			2,608,086				(140,007	)		-5.37	%
Treasury Stock, at cost 56,912		(2,196,215	)			(1,693,544	)			(502,671	)		29.68	%			(2,196,216	)			1			-0.00	%
Total shareholders' equity		166,404,999				153,266,490				13,138,509			8.57	%			164,936,403				1,468,596			0.89	%
Total Liabilities and Shareholders' Equity	$	1,424,969,549			$	1,438,690,594				(13,721,045	)		-0.95	%		$	1,436,563,980				(11,594,431	)		-0.81	%

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
Consolidating Statement of Income
for the Three Months Ended
	March 31,					December 31,										March 31,
		2023				2022			Change				% Change				2022			Change				% Change
	(Unaudited)				(Unaudited)											(Unaudited)
Interest and Dividend Income:
Interest and fees on loans	$	14,466,103			$	14,155,669			$	310,434			2.19	%		$	12,708,366			$	1,757,737			13.83	%
Interest income on securities		2,005,741				2,020,319				(14,578	)		-0.72	%			1,581,771				423,970			26.80	%
Income on federal funds sold		132,805				104,483				28,322			27.11	%			4,771				128,034			2683.59	%
Income on time deposits held in other banks		247,252				311,472				(64,220	)		-20.62	%			66,520				180,732			271.70	%
Other interest and dividend income		61,186				57,094				4,092			7.17	%			50,708				10,478			20.66	%
Total interest and dividend income		16,913,087				16,649,037				264,050			1.59	%			14,412,136				2,500,951			17.35	%
Interest Expense:
Deposits		3,469,654				2,284,739				1,184,915			51.86	%			462,472				3,007,182			650.24	%
Interest on other borrowed funds		564,278				517,834				46,444			8.97	%			391,195				173,083			44.24	%
Interest on federal funds purchased		--				240				(240	)		-100.00	%			--				-
Total interest expense		4,033,932				2,802,813				1,231,119			43.92	%			853,667				3,180,265			372.54	%
Net interest income before provision for loan losses		12,879,155				13,846,224				(967,069	)		-6.98	%			13,558,469				(679,314	)		-5.01	%
Less-provision for credit losses		383,376				600,000				(216,624	)		-36.10	%			375,000				8,376			2.23	%
Net interest income after provision for credit losses		12,495,779				13,246,224				(750,445	)		-5.67	%			13,183,469				(687,690	)		-5.22	%
Noninterest Income:
Service charges on deposit accounts		562,893				580,688				(17,795	)		-3.06	%			569,074				(6,181	)		-1.09	%
Other service charges, commissions and fees		403,583				264,603				138,980			52.52	%			363,780				39,803			10.94	%
Gain on sales of foreclosed assets		1,420				5,126				(3,706	)		-72.30	%			314,210				(312,790	)		-99.55	%
Gain on sales of premises and equipment		--				19,270				(19,270	)		-100.00	%			--				-
Increase in CSV of life insurance		90,416				88,744				1,672			1.88	%			87,146				3,270			3.75	%
Other income		420,788				41,739				379,049			908.14	%			41,987				378,801			902.19	%
Total noninterest income		1,479,100				1,000,170				478,930			47.88	%			1,376,197				102,903			7.48	%
Noninterest Expense:
Salaries and employee benefits		4,896,748				4,450,154				446,594			10.04	%			5,066,729				(169,981	)		-3.35	%
Occupancy and equipment expenses, net		549,051				595,444				(46,393	)		-7.79	%			532,932				16,119			3.02	%
Other expenses		3,433,785				3,260,758				173,027			5.31	%			2,851,857				581,928			20.41	%
Total noninterest expense		8,879,584				8,306,356				573,228			6.90	%			8,451,518				428,066			5.06	%
Income Before Income Taxes		5,095,295				5,940,038				(844,743	)		-14.22	%			6,108,148				(1,012,853	)		-16.58	%
Provision for income taxes		991,360				(704,058	)			1,695,418			240.81	%			546,734				444,626			81.32	%
																					-
Net Income	$	4,103,935			$	6,644,096				(2,540,161	)		-38.23	%		$	5,561,414				(1,457,479	)		-26.21	%
Earnings per common share:
Basic	$	1.94			$	3.14				(1.20	)		-38.22	%		$	2.64				(0.70	)		-26.52	%
Diluted	$	1.94			$	3.14				(1.20	)		-38.22	%		$	2.64				(0.70	)		-26.52	%

		Quarter Ending
		March 31,			December 31,			March 31,
			2023			2022			2022
Dollars in thousand, except per share data		(Unaudited)			(Unaudited)			(Unaudited)
Per Share Data
Basic Earnings per Common Share		$	1.94		$	3.14		$	2.64
Diluted Earnings per Common Share			1.94			3.14			2.64
Dividends per Common Share			0.44			0.44			0.44
Book Value per Common Share			78.47			78.07			72.49
Tangible Book Value per Common Share			73.14			72.68			66.98
Average Diluted Shared Outstanding		$	2,111,955		$	2,114,934		$	2,108,037
End of Period Common Shares Outstanding		$	2,120,598		$	2,112,645		$	2,114,439
Annualized Performance Ratios (Bank Only)
Return on Average Assets			1.33	%		2.03	%		1.74	%
Return on Average Equity			10.64	%		15.90	%		14.87	%
Equity/Assets			11.90	%		12.83	%		11.90	%
Yield on Earning Assets			5.06	%		4.82	%		4.18	%
Cost of Funds			1.18	%		0.77	%		0.15	%
Net Interest Margin			3.98	%		4.13	%		4.04	%
Efficiency Ratio			59.32	%		54.12	%		53.50	%
Credit Metrics
Allowance for Loan Losses to Total Loans			1.35	%		1.30	%		1.30	%
Adversely Classified Assets to Tier 1 Capital plus Allowance for Loan Losses			6.49	%		5.99	%		8.27	%