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


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. 

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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.

 

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