Morris State Bancshares Announces Solid Earnings in 2019 and Declares First Quarter Dividend


DUBLIN, Ga., Feb. 14, 2020 (GLOBE NEWSWIRE) -- Morris State Bancshares (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $13.6 million for the year ended December 31, 2019, representing a decrease of $1.6 million, or 10.60%, compared to net income of $15.2 million for the year ended December 31, 2018. The company also announced diluted earnings per share of $6.82 for 2019, representing a 18.23% decrease over diluted earnings per share of $8.34 for 2018. Net income for 2019 was impacted by a one-time merger related expense of $924 thousand related to the Company’s completed acquisition of FMB Equibanc, Inc. (“FMB”) as well as income tax expense of $2.1 million in 2019, versus none in 2018 as the company converted to a C corporation during 2019.  Excluding merger related expenses, 2019 pre-tax income was $16.7 million, versus $15.2 million for 2018, representing an increase of $1.5 million or 9.3%.  This increase was largely driven by the acquisition of FMB, which was completed at the end of April, as well as a one-time gain on sale of government guaranteed loans of $263 thousand of and a gain on sale of other real estate of $409 thousand.

“We are very pleased with the financial performance of the Company in 2019. It was a transformational year in that we completed the purchase and integration of FMB which not only significantly grew our bank’s footings but more importantly our core deposits and geographic diversity,” said Spence Mullis, President and CEO.  “We created significant value for our shareholders as we grew core deposits over 53% or $236.7 million.  Organic core deposit growth represented $109.0 million or 46% of the overall core deposit growth.”

The Company’s total shareholders’ equity to total assets ratio increased to 11.05%, as of December 31, 2019, as compared to 10.96% as of December 31, 2018. Tangible book value per share increased to $47.18 as of December 31, 2019 an 8.84% increase or $3.83 per share from December 31, 2018.  On January 9th, the board of directors approved a first quarter dividend of $0.35 per share payable on or about March 16th to all shareholders of record on March 2, 2020.  This quarterly dividend is in addition to the special dividend of the same amount which was paid to all shareholders on January 31, 2020. It is the company’s intentions to resume paying regular quarterly dividends throughout the rest of the calendar year.

Net interest income for the years ending December 31, 2019 and 2018 was $38.9 million and $32.3 million respectively, an increase of $6.7 million or 20.69%.  Net interest margin for the years ending December 31, 2019 and 2018 was 4.65% and 4.88%, respectively.  The contraction in the margin was a combination of a decline in the yield on earning assets that outpaced the decrease in cost of funds.  Our cost of funds increased as a result of the Fed’s tightening of deposit rates throughout 2018 that were priced forward into our 2019 costs.  However, we saw our cost of funds decrease towards the end of the year as evidenced by the cost of total deposits for the quarter ended December 31, 2019 of 0.91%, as compared to 0.99% for the quarter ended September 30, 2019. We expect further decreases in our costs throughout the rest of the year.

The provision for loan losses was $1.7 million for the year ending December 31, 2019 versus $1.4 million for the year ending December 31, 2018.  Our provision as a percentage of total loans was 1.32% as of December 31, 2019 versus 1.55% as of December 31, 2018.  Our adversely classified coverage ratio was 14.49% as of December 31, 2019 versus 15.25% as of December 31, 2018. Our level of ORE decreased to $384,310 at December 31, 2019 from $590,211 at December 31, 2018.  This level of ORE is the lowest held in over ten years.

Noninterest income increased $870 thousand or 27.52% for the year ending December 31, 2019.  The increase was driven primarily by an increase in service charges on deposit accounts as a result of the FMB merger.

Noninterest expense increased 36.39% or $6.8 million to $25.6 million at December 31, 2019 from $18.8 million as of December 31, 2018.  The majority of this increase was related to the aforementioned initial FMB transaction costs as well as 8 months of normal operating costs in the newly acquired market.

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
 
Consolidated Balance Sheet
December 31, 2019
         
         
         
   2019   2018  $ Change % Change
  (Unaudited)      
ASSETS               
                
Cash and due from banks $77,696,887  $29,257,366  $48,439,521  165.6%
Federal funds sold  16,293,628   14,044,014   2,249,614  16.0%
Interest bearing time deposits in other banks  1,350,000   2,098,000   (748,000) -35.7%
Securities available for sale, at fair value  124,315,098   70,845,928   53,469,170  75.5%
Securities held to maturity, at cost  4,752,384   5,716,318   (963,934) -16.9%
Federal Home Loan Bank stock  842,900   993,300   (150,400) -15.1%
Loans, less allowance for loan losses               
of $9,716,060 and $9,480,989 respectfully  729,170,345   603,548,731   125,621,614  20.8%
Premises and equipment, net  15,618,198   8,884,433   6,733,765  75.8%
Goodwill  9,361,770   2,237,890   7,123,880  318.3%
Intangible assets, net  3,067,075   288,920   2,778,155  961.6%
Other real estate and foreclosed assets  396,486   835,921   (439,435) -52.6%
Accrued interest receivable  3,962,807   3,064,254   898,553  29.3%
Cash surrender value of life insurance  13,248,384   7,035,138   6,213,246  88.3%
Other assets  7,979,800   1,215,978   6,763,822  556.2%
                
Total assets $1,008,055,762  $750,066,191  $257,989,571  34.4%
                
                
LIABILITIES AND SHAREHOLDERS' EQUITY               
                
Deposits:               
Non-interest-bearing demand $195,016,771  $122,899,907  $72,116,864  58.7%
Interest-bearing  682,509,497   532,608,585   149,900,912  28.1%
   877,526,268   655,508,492   222,017,776  33.9%
                
Other borrowed funds  15,003,206   9,857,143   5,146,063  52.2%
Accrued interest payable  537,928   401,934   135,994  33.8%
Accrued expenses and other liabilities  3,556,513   2,066,457   1,490,056  72.1%
                
Total liabilities  896,623,915   667,834,026   228,789,889  34.3%
                
Shareholders' Equity:               
Common stock  2,144,917   1,882,740   262,177  13.9%
Paid in capital surplus  39,298,458   24,225,182   15,073,276  62.2%
Less: treasury stock  (1,379,632)  (1,211,099)  (168,533) 13.9%
Retained earnings  55,916,996   42,556,445   13,360,551  31.4%
Current year earnings  13,620,624   15,236,144   (1,615,520) -10.6%
Accumulated other comprehensive income (loss)  1,830,484   (457,247)  2,287,731  -500.3%
Total shareholders' equity  111,431,847   82,232,165   29,199,682  35.5%
                
Total Liabilities and Shareholders' Equity $1,008,055,762  $750,066,191   257,989,571  34.4%
                
                


MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
         
Consolidated Statement of Income
December 31, 2019
         
         
         
   2019   2018  $ Change % Change
  (Unaudited)      
Interest and dividend income:               
Loans, including fees $42,472,550  $35,472,471  $7,000,079  19.73%
Securities  2,885,821   1,755,255   1,130,566  64.41%
Federal funds sold  513,422   312,613   200,809  64.24%
Interest-bearing deposits in banks  925,860   42,579   883,281  2074.45%
FHLB stock  71,588   79,172   (7,584) -9.58%
Other interest and dividend income  751,317   317,821   433,496  136.40%
Total interest income  47,620,558   37,979,911   9,640,647  25.38%
                
Interest expense:               
Deposits  7,963,852   5,408,394  $2,555,458  47.25%
Borrowed funds  733,660   319,560   414,100  129.58%
Federal funds purchased  151   946   (795) -84.04%
Total interest expense  8,697,663   5,728,900   2,968,763  51.82%
                
Net interest income  38,922,895   32,251,011   6,671,884  20.69%
                
Provision for loan losses  1,650,000   1,425,000   225,000  15.79%
                
Net interest income after               
provision for loan losses  37,272,895   30,826,011   6,446,884  20.91%
                
Noninterest income:               
Service charges on deposit accounts  3,076,556   2,384,911   691,645  29.00%
Other fees and commissions  61,413   155,083   (93,670) -60.40%
Gain (loss) on sales and calls of securities  (24,471)  (3,351)  (21,120) 630.26%
Gain on sale of loans  263,029   47,493   215,536  453.83%
Increase in CSV of life insurance  213,246   183,956   29,290  15.92%
Other income  443,079   394,494   48,585  12.32%
Total noninterest income  4,032,852   3,162,586   870,266  27.52%
                
Noninterest expense:               
Salaries and employee benefits  14,056,471   11,006,233   3,050,238  27.71%
Occupancy and equipment expenses, net  2,372,548   1,771,953   600,595  33.89%
Loss (gain) on sales and impairments of of foreclosed               
and other real estate  (270,572)  265,900   (536,472) -201.76%
Loss (gain) on sales of premises and equipment  (1,000)  435   (1,435) -329.89%
Other operating  9,418,971   5,707,932   3,711,039  65.02%
Total noninterest expense  25,576,418   18,752,453   6,823,965  36.39%
   Income before Taxes  15,729,329   15,236,144   493,185  3.24%
Income Taxes  2,108,705   --   2,108,705    
                
Net Income $13,620,624  $15,236,144  $(1,615,520) -10.60%
                
                
Earnings per Share $6.82  $8.34  $(1.52) -18.23%
TBV per Common Share $47.18  $43.35  $3.83  8.84%
                
                


MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
 
Selected Financial Information
     
              
              
    Year Ending Quarter Ended
  December 31,December 31,  December 31, September 30, June 30,  March 31,  December 31,
   2019 2018*  2019   2019   2019   2019  2018*
(Dollars in thousand, except per share data) (Unaudited)  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
                            
Per Share Data                           
Basic Earnings per Common Share $6.82 $8.34  $1.48  $1.95  $0.95  $2.50  $2.34 
Diluted Earnings per Common Share  6.82  8.34   1.48   1.95   0.95   2.50   2.34 
Dividends per Common Share  0.93  2.61   -   -   -   1.02   - 
Book Value per Common Share  53.11  44.72   53.11   51.87   49.78   46.71   44.72 
Tangible Book Value per Common Share  47.18  43.35   47.18   45.91   43.62   45.18   43.35 
                            
                            
Average Diluted Shares Outstanding  1,997,735  1,826,854   2,100,395   2,058,039   1,988,231   1,840,764   1,833,100 
End of Period Common Shares Outstanding  2,098,250  1,838,816   2,098,250   2,100,842   2,057,568   1,840,980   1,838,816 
                            
* Subchapter S Tax Status                           
                            
Annualized Performance Ratios (Bank Only)                           
Return on Average Assets  1.63% 2.15%  1.49%  1.80%  0.96%  2.44%  2.35%
Return on Average Equity  14.56% 20.65%  12.37%  14.51%  9.52%  23.74%  22.23%
Equity/Assets  11.65% 10.66%  11.65%  12.23%  12.14%  10.92%  10.66%
Cost of Funds  1.02% 0.89%  0.91%  0.99%  1.06%  1.17%  1.05%
Net Interest Margin  4.65% 4.88%  4.70%  5.20%  4.29%  4.42%  4.98%
Efficiency Ratio  57.80% 52.59%  54.88%  53.00%  64.39%  59.79%  51.07%
                            


            

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