Morris State Bancshares Announces Quarterly Earnings and Declares Fourth Quarter Dividend

Rhea-AI Summary

Morris State Bancshares, Inc. (OTCQX: MBLU) reported a net income of $2.1 million for Q3 2022, down 69.11% from $6.8 million in Q2 2022. Diluted EPS also decreased by 69.47% to $0.98. The decline in earnings was attributed to a $3.1 million charge-off related to a loan with identified weaknesses, leading to a total provision expense of $3.8 million, compared to $375,000 in the previous quarter. Despite these challenges, loan growth was stable, increasing by $20.6 million, and tangible book value rose to $70.01 per share. A dividend of $0.44 per share was approved for Q4 2022.

Positive

• Loan growth of $20.6 million, an annualized increase of 8.16%.
• Net interest income remained strong at $13.9 million.
• Tangible book value per share increased to $70.01.

Negative

• Net income decreased by 69.11% from the previous quarter.
• Diluted EPS fell by 69.47% to $0.98.
• Total provision expense increased significantly to $3.8 million.

DUBLIN, Ga., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $2.1 million for the quarter ended September 30, 2022, representing a decrease of $4.7 million, or 69.11%, compared to net income of $6.8 million for the quarter ended June 30, 2022. The company also announced diluted earnings per share of $0.98 for the quarter, representing a 69.47% decrease from diluted earnings per share of $3.21 for the prior quarter. Lower quarter over quarter net earnings were a result of higher provision expense centered around one loan relationship that management identified as having significant cash flow and collateral weaknesses. Management was proactive in identifying and charging off all amounts owed under the relationship. The amount of this charge-off was $3.1 million, which together with additional provision driven by loan growth resulted in total provision expense for the quarter of $3.8 million versus $375 thousand in the previous quarter.

“The company’s profitability was impacted during the quarter due to setting aside additional loan loss reserves. Management is confident that this was an isolated incident and is not indicative of weakness in our overall loan portfolio.” said Spence Mullis, CEO and Chairman. “Maintaining strong credit quality, practices, and solid reserves is always front and center for our management team, and we will continue to use this situation as an opportunity to improve. While credit costs were higher during the quarter, the company’s core operating earnings remain solid.”

The bank’s net interest margin compressed slightly to 4.12% at September 30, 2022 from 4.14% at June 30, 2022. Net interest income (before provision) during the quarter ending September 30, 2022 remained strong at $13.9 million and was in line with that of the prior quarter ending June 30, 2022 of $14.1 million. Loans grew by $20.6 million during the quarter, an annualized increase of 8.16%. Management has been pleased at how our lenders have been able to price loans in this rising rate environment. The weighted average yield on new and renewed loans of $139 million booked during the third quarter was 5.91% compared to the weighted average yield of 4.71% on $208 million booked in the second quarter of 2022.

Total deposits were relatively unchanged between the second and third quarter. The bank increased deposit rates in July, which resulted in an increase in the cost of funds of 27 basis points for the quarter. Interest bearing demand deposits fell by $12 million and certificates of deposit fell by $6 million during the quarter.  Management expects increased pressure on the net interest margin in future quarters due to continued competition for deposits in a rising rate environment.

The Company’s total shareholders’ equity increased 0.44% to $160 million as of September 30, 2022, as compared to $159 million as of June 30, 2022. Tangible book value per share increased to $70.01 as of September 30, 2022, a 0.70% increase from $69.52 per share on June 30, 2022. On October 19, 2022, the board of directors approved a fourth quarter dividend of $0.44 per share payable on or about December 15th to all shareholders of record as of November 15^th (unchanged from the dividends paid in the first and second quarters).

While the bank had higher credit charges during the quarter, overall asset quality improved as the bank’s adversely classified coverage ratio improved to 5.59% as of September 30, 2022, versus 6.82% as of June 30, 2022. Provision for loan losses was $3.8 million for the quarter ended September 30, 2022 versus $375 thousand for the quarter ending June 30, 2022. The bank’s reserve as a percentage of total loans was 1.27% as of September 30, 2022, versus 1.24% as of June 30, 2022.

“Our team is focused on finishing the year strong. We have invested in and are implementing technology solutions that are targeted at growing core deposits and improving delivery channels in retail lending. We believe these solutions will drive additional success for our customers and the bank.” said Mullis.

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,
				2022				2022			Change				% Change				2021
			(Unaudited)				(Unaudited)											(Unaudited)
	ASSETS
																					`
	Cash and due from banks		$	61,031,336			$	74,271,951			$	(13,240,615	)		-17.83	%		$	98,488,262
	Federal funds sold			24,137,905				18,873,609				5,264,296			27.89	%			67,966,892
	Total cash and cash equivalents			85,169,241				93,145,560				(7,976,319	)		-8.56	%			166,455,154
	Interest-bearing time deposits in other banks			100,000				350,000				(250,000	)		(71.43	%)			350,000
	Securities available for sale, at fair value			--				--				--			--				253,026,739
	Securities held to maturity, at cost			266,551,405				275,498,923				(8,947,518	)		(3.25	%)			13,220,095
	Federal Home Loan Bank stock, restricted, at cost			1,494,400				744,500				749,900			100.73	%			624,200
	Loans, net of unearned income			1,030,422,253				1,009,838,142				20,584,111			2.04	%			882,889,280
	Less-allowance for loan losses			(13,027,473	)			(12,519,189	)			(508,284	)		4.06	%			(12,125,731	)
	Loans, net			1,017,394,780				997,318,953				20,075,827			2.01	%			870,763,549
	Bank premises and equipment, net			14,018,310				14,721,005				(702,695	)		-4.77	%			15,127,699
	ROU assets for operating lease, net			1,569,358				1,061,310				508,048			47.87	%			420,363
	Goodwill			9,361,704				9,361,704				--			--				9,361,770
	Intangible assets, net			2,110,003				2,196,485				(86,482	)		-3.94	%			2,456,370
	Other real estate and foreclosed assets			3,774,402				3,751,184				23,218			0.62	%			5,470,761
	Accrued interest receivable			4,737,122				4,685,278				51,844			1.11	%			4,670,208
	Cash surrender value of life insurance			14,244,800				14,153,898				90,902			0.64	%			13,889,164
	Other assets			14,373,367				14,274,462				98,905			0.69	%			10,057,607
	Total Assets		$	1,434,898,892			$	1,431,263,262			$	3,635,630			0.25	%		$	1,365,893,679
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits:
	Non-interest bearing		$	368,015,994			$	367,004,039			$	1,011,955			0.28	%		$	331,663,248
	Interest bearing			870,746,377				871,719,946				(973,569	)		-0.11	%			854,987,023
				1,238,762,371				1,238,723,985				38,386			0.00	%			1,186,650,271
	Other borrowed funds			28,808,031				28,789,380				18,651			0.06	%			28,733,428
	Lease liability for operating lease			1,569,358				1,061,310				508,048			47.87	%			420,363
	Accrued interest payable			306,662				106,192				200,470			188.78	%			146,945
	Accrued expenses and other liabilities			5,784,488				3,616,439				2,168,049			59.95	%			7,137,289
	Total liabilities			1,275,230,910				1,272,297,306				2,933,604			0.23	%			1,223,088,296
	Shareholders' Equity:
	Common stock			2,171,665				2,171,665				-			0.00	%			2,151,398
	Paid in capital surplus			41,086,276				41,391,867				(305,591	)		-0.74	%			39,735,842
	Retained earnings			100,832,787				101,723,321				(890,534	)		-0.88	%			80,874,167
	Current year earnings			14,464,536				12,363,616				2,100,920			16.99	%			16,863,337
	Accumulated other comprehensive income (loss)			2,809,715				3,009,031				(199,316	)		-6.62	%			4,845,836
	Treasury Stock, at cost 54,744 shares			(1,696,997	)			(1,693,544	)			(3,453	)		0.20	%			(1,665,197	)
	Total shareholders' equity			159,667,982				158,965,956				702,026			0.44	%			142,805,383
	Total Liabilities and Shareholders' Equity		$	1,434,898,892			$	1,431,263,262				3,635,630			0.25	%		$	1,365,893,679

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
Consolidating Statement of Income
			September 30,			June 30,										September 30,
				2022			2022		Change				% Change				2021
			(Unaudited)			(Unaudited)										(Unaudited)
	Interest and Dividend Income:
	Interest and fees on loans		$	13,401,241		$	12,916,106		$	485,135			3.76	%		$	12,642,615
	Interest income on securities			1,882,931			1,809,274			73,657			4.07	%			1,580,691
	Income on federal funds sold			58,422			18,380			40,042			217.86	%			21,720
	Income on time deposits held in other banks			284,617			145,381			139,236			95.77	%			29,479
	Other interest and dividend income			53,095			49,189			3,906			7.94	%			51,191
	Total interest and dividend income			15,680,306			14,938,330			741,976			4.97	%			14,325,696
	Interest Expense:
	Deposits			1,298,347			485,077			813,270			167.66	%			515,038
	Interest on other borrowed funds			433,142			398,866			34,276			8.59	%			389,377
	Interest on federal funds purchased			2,854			--			2,854							--
	Total interest expense			1,734,343			883,943			850,400			96.21	%			904,415
	Net interest income before provision for loan losses			13,945,963			14,054,387			(108,424	)		-0.77	%			13,421,281
	Less-provision for loan losses			3,750,000			375,000			3,375,000			900.00	%			450,000
	Net interest income after provision for loan losses			10,195,963			13,679,387			(3,483,424	)		-25.46	%			12,971,281
	Noninterest Income:
	Service charges on deposit accounts			639,971			628,174			11,797			1.88	%			517,470
	Other service charges, commissions and fees			411,386			472,427			(61,041	)		-12.92	%			488,866
	Gain on sales of foreclosed assets			--			290,564			(290,564	)		-100.00	%			--
	Increase in CSV of life insurance			90,902			88,800			2,102			2.37	%			90,712
	Other income			70,907			7,992			62,915			787.22	%			247,726
	Total noninterest income			1,213,166			1,487,957			(274,791	)		-18.47	%			1,344,774
	Noninterest Expense:
	Salaries and employee benefits			4,499,343			4,516,545			(17,202	)		-0.38	%			4,648,196
	Occupancy and equipment expenses, net			618,367			543,815			74,552			13.71	%			575,664
	Loss (gain) on sales of foreclosed assets and other real estate			995			--			995							4,580
	Loss on sales of premises and equipment			220,280			--			220,280							--
	Other expenses			3,401,150			2,883,858			517,292			17.94	%			2,740,932
	Total noninterest expense			8,740,135			7,944,218			795,917			10.02	%			7,969,372
	Income Before Income Taxes			2,668,994			7,223,126			(4,554,132	)		-63.05	%			6,346,683
	Provision for income taxes			568,076			420,925			147,151			34.96	%			163,153
	Net Income		$	2,100,918		$	6,802,201			(4,701,283	)		-69.11	%		$	6,183,530
	Earnings per common share:
	Basic		$	0.98		$	3.21			(2.23	)		-69.47	%		$	2.94
	Diluted		$	0.98		$	3.21			(2.23	)		-69.47	%		$	2.94

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
Selected Financial Information
						Quarter Ending
						September 30,			June 30,			September 30,
							2022			2022			2021
Dollars in thousand, except per share data						(Unaudited)			(Unaudited)			(Unaudited)
Per Share Data
Basic Earnings per Common Share						$	0.98		$	3.21		$	2.93
Diluted Earnings per Common Share							0.98			3.21			2.93
Dividends per Common Share							0.44			0.44			0.38
Book Value per Common Share							75.42			74.97			67.99
Tangible Book Value per Common Share							70.01			69.52			62.36
Average Diluted Shared Outstanding						$	2,116,463		$	2,112,305		$	2,102,876
End of Period Common Shares Outstanding						$	2,116,921		$	2,120,374		$	2,100,471
Annualized Performance Ratios (Bank Only)
Return on Average Assets							0.80	%		2.08	%		1.97	%
Return on Average Equity							6.34	%		16.93	%		16.56	%
Equity/Assets							12.49	%		12.44	%		11.77	%
Yield on Earning Assets							4.50	%		4.29	%		4.26	%
Cost of Funds							0.43	%		0.16	%		0.17	%
Net Interest Margin							4.12	%		4.14	%		4.10	%
Efficiency Ratio							52.80	%		48.06	%		52.12	%
Credit Metrics
Allowance for Loan Losses to Total Loans							1.27	%		1.24	%		1.37	%
Allowance for Loan Losses to Total Loans*							1.27	%		1.24	%		1.41	%
Adversely Classified Assets to Tier 1 Capital
plus Allowance for Loan Losses							5.59	%		6.82	%		8.04	%
* Excludes PPP Loans

 

FAQ

What is Morris State Bancshares' net income for Q3 2022?

Morris State Bancshares reported a net income of $2.1 million for Q3 2022.

How much did diluted EPS decrease for Morris State Bancshares in Q3 2022?

Diluted EPS decreased by 69.47% to $0.98 for Q3 2022.

What was the loan growth for Morris State Bancshares in Q3 2022?

Loan growth was $20.6 million, resulting in an annualized increase of 8.16%.

When is the dividend for Morris State Bancshares payable?

The dividend of $0.44 per share is payable on or about December 15, 2022.

What caused the decrease in net income for Morris State Bancshares in Q3 2022?

The decrease was primarily due to a $3.1 million charge-off related to a problematic loan relationship.