Morris State Bancshares Announces Quarterly Earnings, Announces Retirement of Sub-Debt Tranche and Declares Third Quarter Dividend

Rhea-AI Summary

Morris State Bancshares (OTCQX: MBLU) reported strong Q2 2024 results, with net income of $5.3 million, up 10.70% year-over-year and 8.82% quarter-over-quarter. The company's performance was driven by loan growth and improved yields, pushing the net interest margin to 4.06%. Key highlights include:

- Loan growth of $21.2 million (7.24% annualized)
- Net interest margin increased to 4.06% from 3.99% in Q1 2024
- Efficiency ratio improved to 57.97% from 61.48% in Q1 2024
- Tangible book value grew to $16.531, up 10.27% year-over-year

The company declared a Q3 dividend of $0.0921 per share and redeemed $8.25 million of subordinated debt. Management plans to retire the remaining $15 million subordinated debt in July 2025 when eligible.

Positive

• Net income increased 10.70% year-over-year to $5.3 million
• Loan growth of $21.2 million, representing 7.24% annualized growth
• Net interest margin improved to 4.06% from 3.99% in Q1 2024
• Efficiency ratio improved to 57.97% from 61.48% in Q1 2024
• Tangible book value grew 10.27% year-over-year to $16.531
• Total shareholders' equity increased 9.69% year-over-year to $186 million
• Redeemed $8.25 million of subordinated debt, reducing future interest expenses

Negative

• Provision for credit losses increased by $267 thousand
• Adversely classified index increased to 6.04% from 5.22% in Q1 2024
• Remaining $15 million subordinated debt will convert to a higher floating rate in July 2025

DUBLIN, Ga., July 30, 2024 (GLOBE NEWSWIRE) -- Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $5.3 million for the quarter ending June 30, 2024, representing an increase of $515 thousand, or 10.70%, compared to net income of $4.8 million for the quarter ended June 30, 2023. In the linked quarter comparison, the Company’s net income increased $432 thousand, or 8.82%, compared to net income of $4.9 million for the quarter ended March 31, 2024. Net interest income before provision for credit losses increased $607 thousand, or 4.68%, from prior quarter levels. Increased quarterly net earnings were a result of growth in both loan balances and loan yields which pushed the bank’s net interest margin (NIM) back over 4.00% for the year.

“We are very pleased with the second quarter as we continued to outpace our budget. Our bankers have diligently continued to grow loans, mostly construction and development in our faster growing markets, which is providing steady growth in our earning asset yield as these loans fund. The growth in our earning asset yield outpaced the increase in our cost of funds by five basis points. We remain focused on growing our deposits, specifically noninterest bearing deposits to help further protect our margin,” said Spence Mullis, Chairman and CEO.  

The net interest margin was 4.06% for the second quarter of 2024 compared to 3.99% for the first quarter of 2024 and 4.04% for the second quarter of 2023. The average yield on earning assets grew 12 basis points from 5.87%, as of March 31, 2024, to 5.99%, while the bank’s cost of funds increased seven basis points from 2.09% to 2.16% during the same period.

Loans increased $21.2 million or an annualized 7.24% during the second quarter. The provision for credit losses increased $267 thousand, primarily driven by the bank’s CECL provision for unfunded commitments. The bank’s reserve as a percentage of total loans was 1.30% for June 30, 2024, as compared to 1.34% for March 31, 2024, and 1.36% as of June 30, 2023. The Company’s adversely classified index increased slightly from 5.22% as of March 31, 2024 to 6.04% as of June 30, 2024, but was down from 6.41% from the quarter ended June 30, 2023. The bank’s efficiency ratio improved to 57.97% as of June 30, 2024 from 61.48% at March 31, 2024.

The Company’s total shareholders’ equity increased 2.33% during the quarter to $186 million as of June 30, 2024, and up 9.69%, or $16.4 million, from June 30, 2023. Tangible book value of the Company grew to $16.53¹ on June 30, 2024, from $16.17¹ on March 31, 2024, and was up 10.27% from $14.99 as of June 30, 2023. On July 17, 2024, the board of directors approved a second quarter dividend of $0.092¹ per share payable on or about September 15, 2024, to all shareholders of record as of August 15, 2024.

During the quarter, the Company also redeemed in full the remaining $8.25 million of its subordinated debt issued in 2019.  This debt was set to reprice from its original fixed rate to a floating rate of 3-month SOFR plus 408 basis points, or 9.28% based upon current rates.  The adjustment in the rate payable on this issuance would have increased the Company’s pre-tax interest expense on the issuance from $129 thousand to $193 thousand per quarter, based upon rates at the time of the redemption.  The Company has one remaining issuance of subordinated debt of $15.0 million, which will convert from its current fixed rate of 5.25% to a floating rate currently equal to 10.20% in July 2025, at which time the debt will also be redeemable by the Company.  As the Company continues to build cash reserves, it is management’s intention to retire this tranche in full as well when it is eligible for redemption. 

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. 

_______________
¹ Per share amounts for March 31, 2024 and previous quarters have been adjusted to reflect the April 22, 2024 4-for-1 stock dividend.

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
Consolidating Balance Sheet
	June 30,				March 31,											June 30,
		2024				2024			Change				% Change				2023			Change				% Change
	(Unaudited)				(Unaudited)											(Unaudited)
ASSETS
Cash and due from banks	$	43,688,884			$	67,354,916			$	(23,666,032	)		-35.14	%		$	49,157,915			$	(5,469,031	)		-11.13	%
Federal funds sold		14,624,710				3,746,408				10,878,302			290.37	%			16,908,217				(2,283,507	)		-13.51	%
Total cash and cash equivalents		58,313,594				71,101,324				(12,787,730	)		-17.99	%			66,066,132				(7,752,538	)		-11.73	%
Interest-bearing time deposits in other banks		100,000				100,000				-			0.00	%			100,000				-			0.00	%
Securities available for sale, at fair value		7,669,642				7,845,095				(175,453	)		-2.24	%			-				7,669,642			0.00	%
Securities held to maturity, at cost (net of CECL Reserve)		227,532,821				231,758,455				(4,225,634	)		-1.82	%			253,917,288				(26,384,467	)		-10.39	%
Federal Home Loan Bank stock, restricted, at cost		1,027,800				1,029,600				(1,800	)		-0.17	%			1,494,300				(466,500	)		-31.22	%
Loans, net of unearned income		1,081,790,223				1,060,755,992				21,034,231			1.98	%			1,024,348,931				57,441,292			5.61	%
Less-allowance for credit losses		(14,109,191	)			(14,236,149	)			126,958			-0.89	%			(13,912,231	)			(196,960	)		1.42	%
Loans, net		1,067,681,032				1,046,519,843				21,161,189			2.02	%			1,010,436,700				57,244,332			5.67	%
																					-
Bank premises and equipment, net		13,051,972				13,112,437				(60,465	)		-0.46	%			13,528,556				(476,584	)		-3.52	%
ROU assets for operating lease, net		945,268				1,035,712				(90,444	)		-8.73	%			1,327,882				(382,614	)		-28.81	%
Goodwill		9,361,704				9,361,704				-			0.00	%			9,361,704				-			0.00	%
Intangible assets, net		1,508,214				1,594,101				(85,887	)		-5.39	%			1,851,765				(343,551	)		-18.55	%
Other real estate and foreclosed assets		43,408				38,558				4,850			12.58	%			3,749,267				(3,705,859	)		-98.84	%
Accrued interest receivable		6,421,999				5,964,911				457,088			7.66	%			5,224,150				1,197,849			22.93	%
Cash surrender value of life insurance		14,915,967				14,813,139				102,828			0.69	%			14,516,332				399,635			2.75	%
Other assets		21,721,225				25,151,653				(3,430,428	)		-13.64	%			23,327,101				(1,605,876	)		-6.88	%
Total Assets	$	1,430,294,646			$	1,429,426,532			$	868,114			0.06	%		$	1,404,901,177				25,393,469			1.81	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing	$	298,997,994			$	302,810,356			$	(3,812,362	)		-1.26	%		$	318,451,205				(19,453,211	)		-6.11	%
Interest bearing		914,360,430				904,181,606				10,178,824			1.13	%			858,291,311				56,069,119			6.53	%
		1,213,358,424				1,206,991,962				6,366,462			0.53	%			1,176,742,516				36,615,908			3.11	%
																					-
Other borrowed funds		18,998,904				27,169,934				(8,171,030	)		-30.07	%			45,113,982				(26,115,078	)		-57.89	%
Lease liability for operating lease		945,268				1,035,712				(90,444	)		-8.73	%			1,327,882				(382,614	)		-28.81	%
Accrued interest payable		1,730,280				1,419,439				310,841			21.90	%			580,607				1,149,673			198.01	%
Accrued expenses and other liabilities		9,038,821				10,830,616				(1,791,795	)		-16.54	%			11,359,139				(2,320,318	)		-20.43	%
																					-
Total liabilities		1,244,071,697				1,247,447,663				(3,375,966	)		-0.27	%			1,235,124,126				8,947,571			0.72	%
Shareholders' Equity:
Common stock		10,688,223				10,645,509				42,714			0.40	%			10,645,374				42,849			0.40	%
Paid in capital surplus		34,729,351				34,349,749				379,602			1.11	%			33,015,191				1,714,160			5.19	%
Retained earnings		132,061,494				133,038,717				(977,223	)		-0.73	%			117,637,067				14,424,427			12.26	%
Current year earnings		10,213,197				4,890,818				5,322,379			108.82	%			8,911,726				1,301,471			14.60	%
Accumulated other comprehensive income (loss)		1,648,392				1,811,160				(162,768	)		-8.99	%			2,302,605				(654,213	)		-28.41	%
Treasury Stock, at cost 83,142		(3,117,708	)			(2,757,084	)			(360,624	)		13.08	%			(2,734,912	)			(382,796	)		14.00	%
Total shareholders' equity		186,222,949				181,978,869				4,244,080			2.33	%			169,777,051				16,445,898			9.69	%
Total Liabilities and Shareholders' Equity	$	1,430,294,646			$	1,429,426,532				868,114			0.06	%		$	1,404,901,177				25,393,469			1.81	%

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
Consolidating Statement of Income
for the Three Months Ended
	June 30,				March 31,											June 30,
		2024				2024			Change				% Change				2023			Change				% Change
	(Unaudited)				(Unaudited)											(Unaudited)
Interest and Dividend Income:
Interest and fees on loans	$	17,879,134			$	17,124,889			$	754,245			4.40	%		$	15,361,766			$	2,517,368			16.39	%
Interest income on securities		1,837,396				1,970,394				(132,998	)		-6.75	%			2,099,593				(262,197	)		-12.49	%
Income on federal funds sold		156,184				168,129				(11,945	)		-7.10	%			106,490				49,694			46.67	%
Income on time deposits held in other banks		590,205				408,412				181,793			44.51	%			267,047				323,158			121.01	%
Other interest and dividend income		64,639				75,848				(11,209	)		-14.78	%			66,236				(1,597	)		-2.41	%
Total interest and dividend income		20,527,558				19,747,672				779,886			3.95	%			17,901,132				2,626,426			14.67	%
Interest Expense:
Deposits		6,568,679				6,339,843				228,836			3.61	%			4,290,251				2,278,428			53.11	%
Interest on other borrowed funds		389,629				445,278				(55,649	)		-12.50	%			574,301				(184,672	)		-32.16	%
Interest on federal funds purchased		--				--				--			0.00	%			705				(705	)		0.00	%
Total interest expense		6,958,308				6,785,121				173,187			2.55	%			4,865,257				2,093,051			43.02	%
Net interest income before provision for loan losses		13,569,250				12,962,551				606,699			4.68	%			13,035,875				533,375			4.09	%
Less-provision for credit losses		272,419				4,501				267,918			5952.41	%			(141,187	)			413,606			-292.95	%
Net interest income after provision for credit losses		13,296,831				12,958,050				338,781			2.61	%			13,177,062				119,769			0.91	%
Noninterest Income:
Service charges on deposit accounts		535,847				491,568				44,279			9.01	%			533,273				2,574			0.48	%
Other service charges, commissions and fees		397,787				362,692				35,095			9.68	%			376,266				21,521			5.72	%
Gain on sales of foreclosed assets		--				700				(700	)		-100.00	%			--				--			0.00	%
Gain on sales of premises and equipment		141				--				--			--				--				141			0.00	%
Increase in CSV of life insurance		102,828				101,516				1,312			1.29	%			92,372				10,456			11.32	%
Other income		355,155				251,361				103,794			41.29	%			106,051				249,104			234.89	%
Total noninterest income		1,391,758				1,207,837				183,921			15.23	%			1,107,962				283,796			25.61	%
Noninterest Expense:
Salaries and employee benefits		4,650,704				4,861,534				(210,830	)		-4.34	%			3,889,461				761,243			19.57	%
Occupancy and equipment expenses, net		536,330				545,126				(8,796	)		-1.61	%			570,746				(34,416	)		-6.03	%
Loss on sales and calls of securities		265				--				265			--				--				265			--
Loss on sales of foreclosed assets		--				--				--			--				5,816				(5,816	)		--
Other expenses		3,860,188				3,716,219				143,969			3.87	%			3,681,617				178,571			4.85	%
Total noninterest expense		9,047,487				9,122,879				(75,392	)		-0.83	%			8,147,640				899,847			11.04	%
Income Before Income Taxes		5,641,102				5,043,008				598,094			11.86	%			6,137,384				(496,282	)		-8.09	%
Provision for income taxes		318,723				152,190				166,533			-109.42	%			1,329,595				(1,010,872	)		-76.03	%
																					-
Net Income	$	5,322,379			$	4,890,818				431,561			8.82	%		$	4,807,789				514,590			10.70	%
Earnings per common share:
Basic	$	0.50			$	0.46				0.04			8.70	%		$	0.45				0.05			11.11	%
Diluted	$	0.50			$	0.46				0.04			8.70	%		$	0.45				0.05			11.11	%

Per share amounts for each period have been adjusted to reflect the April 22, 2024 4-for-1 stock dividend.

			Quarter Ending
			June 30,			March 31,			June 30,
				2024			2024			2023
Dollars in thousand, except per share data			(Unaudited)			(Unaudited)			(Unaudited)
Per Share Data
Basic Earnings per Common Share			$	0.50		$	0.46		$	0.45
Diluted Earnings per Common Share				0.50			0.46			0.45
Dividends per Common Share				0.092			0.092			0.088
Book Value per Common Share				17.56			17.20			16.05
Tangible Book Value per Common Share				16.53			16.17			14.99
Average Diluted Shared Outstanding				10,611,811			10,602,289			10,585,884
End of Period Common Shares Outstanding				10,605,080			10,624,932			10,583,263
Annualized Performance Ratios (Bank Only)
Return on Average Assets				1.73	%		1.55	%		1.60	%
Return on Average Equity				13.12	%		11.74	%		12.79	%
Equity/Assets				13.18	%		13.09	%		12.45	%
Yield on Earning Assets				5.99	%		5.87	%		5.38	%
Cost of Funds				2.16	%		2.09	%		1.47	%
Net Interest Margin				4.06	%		3.99	%		4.04	%
Efficiency Ratio				57.97	%		61.48	%		54.37	%
Credit Metrics
Allowance for Loan Losses to Total Loans				1.30	%		1.34	%		1.36	%
Adversely Classified Assets to Tier 1 Capital plus Allowance for Loan Losses				6.04	%		5.22	%		6.41	%

Per share amounts for each period have been adjusted to reflect the April 22, 2024 4-for-1 stock dividend.

FAQ

What was Morris State Bancshares' (MBLU) net income for Q2 2024?

Morris State Bancshares (MBLU) reported net income of $5.3 million for Q2 2024, representing a 10.70% increase year-over-year and an 8.82% increase quarter-over-quarter.

How much did Morris State Bancshares' (MBLU) loan portfolio grow in Q2 2024?

Morris State Bancshares' (MBLU) loan portfolio grew by $21.2 million in Q2 2024, representing an annualized growth rate of 7.24%.

What was Morris State Bancshares' (MBLU) net interest margin for Q2 2024?

Morris State Bancshares' (MBLU) net interest margin for Q2 2024 was 4.06%, up from 3.99% in Q1 2024 and 4.04% in Q2 2023.

What dividend did Morris State Bancshares (MBLU) declare for Q3 2024?

Morris State Bancshares (MBLU) declared a Q3 2024 dividend of $0.0921 per share, payable on or about September 15, 2024, to shareholders of record as of August 15, 2024.

How much subordinated debt did Morris State Bancshares (MBLU) redeem in Q2 2024?

Morris State Bancshares (MBLU) redeemed $8.25 million of subordinated debt in Q2 2024, which was set to reprice to a higher floating rate.