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Morris State Bancshares Announces Quarterly Earnings and Declares Fourth Quarter Dividend
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Morris State Bancshares Announces Quarterly Earnings and Declares Fourth Quarter Dividend

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     

 


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