Morris State Bancshares Announces Quarterly Earnings and Declares Fourth Quarter Dividend

Rhea-AI Summary

Morris State Bancshares, Inc. announces a decrease in net income for the third quarter of 2023 compared to the previous quarter. The company experienced solid loan growth and an increase in shareholders' equity. CD funding is expected to rise in the future.

Positive

• Solid loan growth of $25.4 million, or 10.0% annualized
• Net interest income of $12.9 million
• Total shareholders' equity increased 2.05% to $173.3 million
• Tangible book value per share increased to $76.61
• Fourth quarter dividend of $0.44 per share approved

Negative

• Net income decreased by $315 thousand, or 6.55%
• Diluted earnings per share decreased by 0.15%
• Non-interest expense increased slightly
• Adversely classified assets increased to 7.00% of Tier 1 Capital plus the allowance

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	%

FAQ

What was the net income for the third quarter of 2023?

The net income for the third quarter of 2023 was $4.5 million, representing a decrease of $315 thousand, or 6.55%, compared to the previous quarter.

What was the loan growth during the quarter?

The company experienced solid loan growth of $25.4 million, or 10.0% annualized.

What was the total shareholders' equity as of September 30, 2023?

The total shareholders' equity increased 2.05% to $173.3 million as of September 30, 2023.

What was the approved dividend for the fourth quarter?

The board of directors approved a dividend of $0.44 per share payable on or about December 15th to all shareholders of record as of November 15th.

What was the percentage of adversely classified assets to Tier 1 Capital plus the allowance?

The percentage of adversely classified assets to Tier 1 Capital plus the allowance was 7.00% at the end of the third quarter.