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 15th (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 | |||||||||||||||
