Morris State Bancshares Announces Quarterly Earnings and Declares Third Quarter Dividend

DUBLIN, Ga., July 25, 2023 (GLOBE NEWSWIRE) -- Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $4.8 million for the quarter ending June 30, 2023, representing an increase of $704 thousand, or 17.15%, compared to net income of $4.1 million for the quarter ended March 31, 2023. Higher quarter-over-quarter net earnings were a result of three primary factors:

1. Higher net interest income
2. Lower credit provisioning
3. Lower salaries and benefits costs centered around lower bonus compensation and deferred compensation valuation adjustments
   

“We’re pleased with our execution of operational resiliency during the second quarter, which produced higher quarterly net income,” said Spence Mullis, Chairman and CEO. “While we experienced slight contraction in both loans and deposits during the quarter, we were able to produce a higher net interest margin of 4.04% and slightly higher net interest income of $13.0 million versus $12.9 in the first quarter. The Federal Reserve’s ongoing attempt to tame inflation by increasing rates continued to affect both our deposit and loan levels. We saw net loans decrease $15.9 million, or 1.55%, during the quarter, while overall deposits were down $24.1 million, or 2.01%. Net loan balances decreased due to normal amortization of the portfolio and many customers continuing to sell underlying collateral and paying off their debt. However, our bankers worked hard generating $112 million in gross new loans during the quarter pushing our average earning asset yield up by 32 basis points. Increased asset yields outpaced our cost of funds increase of 29 basis points. We expect competition for solid loans will remain strong, but we are confident in our team of relationship bankers and their focus on not only producing solid loans but more core deposits as well.”

Credit quality of the loan book continued to improve during the quarter with adversely classified assets to Tier 1 Capital plus the allowance ending at 6.41%, down from 6.49% in March and 6.82% at the end of June in the prior year. Due to net loans decreasing slightly and the bank’s recent transition to CECL, the bank recorded a negative provision expense of $141 thousand during the quarter. The bank’s allowance for loan losses as a percentage of loans increased during the same period to 1.36% from 1.35% at the end of the first quarter and 1.24% at the end of the second quarter a year ago.

Noninterest expense decreased $731,944, or 8.24%, from March 31, 2023. The decrease in noninterest expense was due primarily to lower exempt and non-exempt employee salaries and bonuses as well as a market adjustment to employee stock appreciation rights (SAR) values. “Overhead cost control remains an important strategic initiative. We are continually reviewing and monitoring our operating expenses to ascertain further opportunities to improve efficiency while not compromising the excellent service we provide to customers,” said Mullis. “As a result, the bank’s overall full-time equivalent (FTE) count is down by 5 over the prior year and now stands at 185 FTE’s.”

The Company’s total shareholders’ equity increased 6.80% year-over-year to $170 million as of June 30, 2023, and was up 2.03% or $3.4 million from March 31, 2023. Tangible book value per share grew to $74.93 on June 30, 2023, from $69.52, or 7.78%, from June 30, 2022, and was up from $73.14, or 2.45%, from the value as of March 31, 2023. On July 19, 2023, the board of directors approved a third quarter dividend of $0.44 per share payable on or about September 15, 2023, to all shareholders of record as of August 15, 2023.

During the quarter, Morris Bank was recognized as the number 38^th ranked publicly traded bank by American Banker in the banks under $2 billion in total assets category. American Banker’s rankings were based on various financial performance metrics averaged over the past three years. Mullis relayed “receiving this kind of recognition is an honor, but more so, a testament to our team of bankers that hustle and get after it everyday to make a difference in our customers’ lives and the communities we serve.”

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
	June 30, 2023				March 31, 2023				Change				% Change			June 30, 2022				Change				% Change
	(Unaudited)				(Unaudited)											(Unaudited)
ASSETS
Cash and due from banks	$	49,157,915			$	51,448,341			$	(2,290,426	)		-4.45	%		$	74,271,951			$	(25,114,036	)		-33.81	%
Federal funds sold		16,908,217				16,102,872				805,345			5.00	%			18,873,609				(1,965,392	)		-10.41	%
Total cash and cash equivalents		66,066,132				67,551,213				(1,485,081	)		-2.20	%			93,145,560				(27,079,428	)		-29.07	%
Interest-bearing time deposits in other banks		100,000				100,000				-			0.00	%			350,000				(250,000	)		-71.43	%
Securities held to maturity, at cost (net of CECL Reserve)		253,917,288				257,399,845				(3,482,557	)		-1.35	%			275,498,923				(21,581,635	)		-7.83	%
Federal Home Loan Bank stock, restricted, at cost		1,494,300				1,588,300				(94,000	)		-5.92	%			744,500				749,800			100.71	%
Loans, net of unearned income		1,024,348,931				1,040,411,604				(16,062,673	)		-1.54	%			1,009,838,142				14,510,789			1.44	%
Less-allowance for credit losses		(13,912,231	)			(14,047,855	)			135,624			-0.97	%			(12,519,189	)			(1,393,042	)		11.13	%
Loans, net		1,010,436,700				1,026,363,749				(15,927,049	)		-1.55	%			997,318,953				13,117,747			1.32	%
Bank premises and equipment, net		13,528,556				13,658,218				(129,662	)		-0.95	%			14,721,005				(1,192,449	)		-8.10	%
ROU assets for operating lease, net		1,327,882				1,431,413				(103,531	)		-7.23	%			1,061,310				266,572			25.12	%
Goodwill		9,361,704				9,361,704				-			0.00	%			9,361,704				-			0.00	%
Intangible assets, net		1,851,765				1,937,652				(85,887	)		-4.43	%			2,196,485				(344,720	)		-15.69	%
Other real estate and foreclosed assets		3,749,267				3,803,252				(53,985	)		-1.42	%			3,751,184				(1,917	)		-0.05	%
Accrued interest receivable		5,224,150				4,959,915				264,235			5.33	%			4,685,278				538,872			11.50	%
Cash surrender value of life insurance		14,516,332				14,423,960				92,372			0.64	%			14,153,898				362,434			2.56	%
Other assets		23,327,101				22,390,328				936,773			4.18	%			14,274,462				9,052,639			63.42	%
Total Assets	$	1,404,901,177			$	1,424,969,549			$	(20,068,372	)		-1.41	%		$	1,431,263,262			$	(26,362,085	)		-1.84	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing	$	318,451,205			$	323,091,870			$	(4,640,665	)		-1.44	%		$	367,004,039			$	(48,552,834	)		-13.23	%
Interest bearing		858,291,311				877,794,418				(19,503,107	)		-2.22	%			871,719,946				(13,428,635	)		-1.54	%
		1,176,742,516				1,200,886,288				(24,143,772	)		-2.01	%			1,238,723,985				(61,981,469	)		-5.00	%
																					-
Other borrowed funds		45,113,982				47,095,332				(1,981,350	)		-4.21	%			28,789,380				16,324,602			56.70	%
Lease liability for operating lease		1,327,882				1,431,413				(103,531	)		-7.23	%			1,061,310				266,572			25.12	%
Accrued interest payable		580,607				491,159				89,448			18.21	%			106,192				474,415			446.75	%
Accrued expenses and other liabilities		11,359,139				8,660,358				2,698,781			31.16	%			3,616,439				7,742,700			214.10	%
																					-
Total liabilities		1,235,124,126				1,258,564,550				(23,440,424	)		-1.86	%			1,272,297,306				(37,173,180	)		-2.92	%
Shareholders' Equity:
Common stock		2,179,075				2,177,510				1,565			0.07	%			2,171,665				7,410			0.34	%
Paid in capital surplus		42,167,829				42,045,076				122,753			0.29	%			41,391,867				775,962			1.87	%
Retained earnings		116,950,728				117,806,614				(855,886	)		-0.73	%			101,723,321				15,227,407			14.97	%
Current year earnings		8,911,726				4,103,935				4,807,791			117.15	%			12,363,616				(3,451,890	)		-27.92	%
Accumulated other comprehensive income (loss)		2,302,605				2,468,079				(165,474	)		-6.70	%			3,009,031				(706,426	)		-23.48	%
Treasury Stock, at cost 63,014		(2,734,912	)			(2,196,215	)			(538,697	)		24.53	%			(1,693,544	)			(1,041,368	)		61.49	%
Total shareholders' equity		169,777,051				166,404,999				3,372,052			2.03	%			158,965,956				10,811,095			6.80	%
Total Liabilities and Shareholders' Equity	$	1,404,901,177			$	1,424,969,549			$	(20,068,372	)		-1.41	%		$	1,431,263,262			$	(26,362,085	)		-1.84	%

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
Consolidating Statement of Income
for the Three Months Ended
	June 30, 2023				March 31, 2023			Change				% Change			June 30, 2022			Change				% Change
	(Unaudited)				(Unaudited)										(Unaudited)
Interest and Dividend Income:
Interest and fees on loans	$	15,361,766			$	14,466,103		$	895,663			6.19	%		$	12,916,106		$	2,445,660			18.93	%
Interest income on securities		2,099,593				2,005,741			93,852			4.68	%			1,809,274			290,319			16.05	%
Income on federal funds sold		106,490				132,805			(26,315	)		-19.81	%			18,380			88,110			479.38	%
Income on time deposits held in other banks		267,047				247,252			19,795			8.01	%			145,381			121,666			83.69	%
Other interest and dividend income		66,236				61,186			5,050			8.25	%			49,189			17,047			34.66	%
Total interest and dividend income		17,901,132				16,913,087			988,045			5.84	%			14,938,330			2,962,802			19.83	%
Interest Expense:
Deposits		4,290,251				3,469,654			820,597			23.65	%			485,077			3,805,174			784.45	%
Interest on other borrowed funds		574,301				564,278			10,023			1.78	%			398,866			175,435			43.98	%
Interest on federal funds purchased		705				--			705			0.00	%			--			705			0.00	%
Total interest expense		4,865,257				4,033,932			831,325			20.61	%			883,943			3,981,314			450.40	%
Net interest income before provision for loan losses		13,035,875				12,879,155			156,720			1.22	%			14,054,387			(1,018,512	)		-7.25	%
Less-provision for credit losses		(141,187	)			383,376			(524,563	)		-136.83	%			375,000			(516,187	)		-137.65	%
Net interest income after provision for credit losses		13,177,062				12,495,779			681,283			5.45	%			13,679,387			(502,325	)		-3.67	%
Noninterest Income:
Service charges on deposit accounts		533,273				562,893			(29,620	)		-5.26	%			628,174			(94,901	)		-15.11	%
Other service charges, commissions and fees		376,266				403,583			(27,317	)		-6.77	%			472,427			(96,161	)		-20.35	%
Gain on sales of foreclosed assets		--				1,420			(1,420	)		-100.00	%			290,564			(290,564	)		-100.00	%
Increase in CSV of life insurance		92,372				90,416			1,956			2.16	%			88,800			3,572			4.02	%
Other income		106,051				420,788			(314,737	)		-74.80	%			7,992			98,059			1226.96	%
Total noninterest income		1,107,962				1,479,100			(371,138	)		-25.09	%			1,487,957			(379,995	)		-25.54	%
Noninterest Expense:
Salaries and employee benefits		3,889,461				4,896,748			(1,007,287	)		-20.57	%			4,516,545			(627,084	)		-13.88	%
Occupancy and equipment expenses, net		570,746				549,051			21,695			3.95	%			543,815			26,931			4.95	%
Loss on sales of foreclosed assets		5,816				--			5,816			0.00	%			--			5,816			0.00	%
Other expenses		3,681,617				3,433,785			247,832			7.22	%			2,883,858			797,759			27.66	%
Total noninterest expense		8,147,640				8,879,584			(731,944	)		-8.24	%			7,944,218			203,422			2.56	%
Income Before Income Taxes		6,137,384				5,095,295			1,042,089			20.45	%			7,223,126			(1,085,742	)		-15.03	%
Provision for income taxes		1,329,595				991,360			338,235			34.12	%			420,925			908,670			215.87	%
Net Income	$	4,807,789			$	4,103,935		$	703,854			17.15	%		$	6,802,201		$	(1,994,412	)		-29.32	%
Earnings per common share:
Basic	$	2.27			$	1.94		$	0.33			17.01	%		$	3.21		$	(0.94	)		-29.28	%
Diluted	$	2.27			$	1.94	4	$	0.33			17.01	%		$	3.21		$	(0.94	)		-29.28	%

		Quarter Ending
		June 30,			March 31,			June 30,
		2023			2023			2022
Dollars in thousand, except per share data		(Unaudited)			(Unaudited)			(Unaudited)
Per Share Data
Basic Earnings per Common Share		$	2.27		$	1.94		$	3.21
Diluted Earnings per Common Share			2.27			1.94			3.21
Dividends per Common Share			0.44			0.44			0.43
Book Value per Common Share			80.23			78.47			74.97
Tangible Book Value per Common Share			74.93			73.14			69.52
Average Diluted Shared Outstanding			2,118,681			2,112,019			2,112,305
End of Period Common Shares Outstanding			2,116,061			2,120,598			2,120,374
Annualized Performance Ratios (Bank Only)
Return on Average Assets			1.60	%		1.33	%		2.08	%
Return on Average Equity			12.79	%		10.64	%		16.93	%
Equity/Assets			12.45	%		11.90	%		12.44	%
Yield on Earning Assets			5.38	%		5.06	%		4.29	%
Cost of Funds			1.47	%		1.18	%		0.16	%
Net Interest Margin			4.04	%		3.98	%		4.14	%
Efficiency Ratio			54.37	%		59.32	%		48.06	%
Credit Metrics
Allowance for Loan Losses to Total Loans			1.36	%		1.35	%		1.24	%
Adversely Classified Assets to Tier 1 Capital
plus Allowance for Loan Losses			6.41	%		6.49	%		6.82	%