Morris State Bancshares Announces Quarterly Earnings, Declares Dividend, and Completes Subordinated Notes Offering

Friday, 23. October 2020 18:47

DUBLIN, Ga., Oct. 23, 2020 (GLOBE NEWSWIRE) -- Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $4.5 million, or an earnings per share of $2.13, for the quarter ended September 30, 2020. The earnings represent an increase of approximately $425 thousand, or 10.56%, compared to net income of $4.0 million, or $1.97 per share, for the quarter ended September 30, 2019. On a pretax basis, the Company earned $5.8 million for the quarter versus $4.9 million for the prior year quarter and $4.6 million in the linked prior quarter representing increases of 19% and 25%, respectively.   

“In the third quarter, we generated net interest income, net of PPP fees, of $11.3 million, which was a 4.5% increase as compared to the second quarter. We realized these solid core net interest earnings by way of a continued focus on lowering deposit costs and generating a slight increase in loan volume. Net earnings were further enhanced due to lower credit costs experienced in the quarter as compared to the quarter ended June 30, 2020,” said Spence Mullis, President and CEO. “As discussed last quarter, a charge on a legacy credit and additional uncertainty due to COVID led us to increase provision expense more than we budgeted at the beginning of the year. With no significant negative credit migration in the third quarter, we reserved $1.6 million less than in the prior quarter, which further enhanced our earnings. Our allowance as a percentage of gross loans net of PPP loans was 1.35% on September 30, 2020. We continue to monitor our local economies and our credit portfolio in real time. Like all Americans, we realize that we are still in the early stages of an unprecedented economic and health situation. However, up to this point, our customers and our balance sheet have both shown great resolve and stability, which gives us optimism as the rest of country follows states like ours and begins to reopen.”

Total assets of the Company increased $161 million, or 16.6%, from the end of 2019. Loans increased $115 million since year end, primarily SBA PPP loans. The bank’s business customers are saving more and keeping higher balances with the bank because of prudent planning and the stimulus still in the system. As these core deposits continue to increase, the bank’s securities portfolio and overnight cash balances have increased as well. Investment securities increased $38 million, or 29%, from year-end 2019. Fed funds and interest-bearing deposits increased $34 million during the same period. Management is focused on managing the excess liquidity in a conservative yet active fashion to generate incremental income. Total shareholders’ equity of the Company increased by $13 million, representing an increase of 11.7% from December 31, 2019. Tangible book value per share was $53.47 as of September 30, 2020, an increase of $6.29, or 13.33%, since December 31, 2019. On October 21, 2020, the board of directors approved a fourth quarter dividend of $0.35 per share payable on or about December 15th to all shareholders of record on November 30, 2020.

Net interest income for the quarters ended September 30, 2020 and 2019 was $11.5 million and $10.5 million, respectively, an increase of $1.0 million, or 10%. Morris Bank’s net interest margin for current quarter and prior year quarter was 4.40% and 4.78%, respectively.   The current margin of 4.40% represents a decline from 4.70% as of the quarter ended June 30, 2020, with the decline driven by the absence of the one-time PPP fees recognized in the second quarter. Management expects further moderate margin compression as reducing deposit rates on a go-forward basis will have negligible impact on the margin while loan pricing remains competitive. Secondary mortgage fee income, while strong, fell 11% from $707 thousand in the second quarter of 2020 to $628 thousand in the third quarter of 2020. This decrease was attributed to slower closings with increased underwriting times from correspondents.   Service charge income improved during the quarter as did interchange income. The bank also recognized a fee on the sale of an SBA loan of $187 thousand. As a result, total non-interest income increased 38.52%, or $399 thousand, as compared to the linked prior quarter. Efficiency of the bank remained solid at 51.38%.

As discussed in last quarter’s release, on July 22, 2020 the Company completed the issuance of $15 million of 5.25% fixed-to-floating rate subordinated notes due 2030.

COVID Relief

The bank offered two primary forms of pandemic relief options, a 90-day deferral of payment and a six-month interest only payment option.  As of September 30, 2020, the bank had completed 935 payment deferrals totaling $218.9 million.  Payments have resumed on 98.9% of these balances. As of September 30, 2020, the bank had completed six-month interest only modifications, totaling $22.6 million.  The majority of the loans (72%) remained in the interest-only period as of September 30, 2020. Management will continue to monitor changes in the statistics and additional pandemic relief requests.  To date, secondary relief request has totaled $10.7 million, representing under 5% of the total original loans that were offered relief.


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.

CONTACT:
Morris State Bancshares
Chris Bond
Chief Financial Officer
478-272-5202

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
               
Consolidating Statement of Income
for the Three Months Ended
               
  September 30, September 30,
       June 30,    
   2020  2019 Change % Change  2020 Change % Change
  (Unaudited)  (Unaudited)      (Unaudited)     
 Interest and dividend income:             
 Loans, including fees$11,741,017 $11,608,383 $132,634  1.14% $12,758,312 $(1,017,295) -7.97%
 Securities 1,086,503  808,597  277,906  34.37%  942,506  143,997  15.28%
 Federal funds sold 6,511  158,805  (152,294) -95.90%  8,615  (2,104) -24.42%
 Interest-bearing deposits in banks 4,590  8,191  (3,601) -43.96%  7,766  (3,176) -40.90%
 FHLB stock 9,731  16,861  (7,130) -42.29%  11,692  (1,961) -16.77%
 Other interest and dividend income 35,939  150,162  (114,223) -76.07%  26,666  9,273  34.77%
 Total interest income 12,884,291  12,750,999  133,292  1.05%  13,755,557  (871,266) -6.33%
               
 Interest expense:             
 Deposits 1,007,808  2,040,287  (1,032,479) -50.60%  1,381,632  (373,824) -27.06%
 Borrowed funds 329,114  205,653  123,461  60.03%  179,337  149,777  83.52%
 Federal funds purchased --  --  --  --   --  --   
 Total interest expense 1,336,922  2,245,940  (909,018) -40.47%  1,560,969  (224,047) -14.35%
               
 Net interest income 11,547,369  10,505,059  1,042,310  9.92%  12,194,588  (647,219) -5.31%
               
 Provision for loan losses 450,000  525,000  (75,000) -14.29%  2,000,000  (1,550,000) -77.50%
               
 Net interest income after             
 provision for loan losses 11,097,369  9,980,059  1,117,310  11.20%  10,194,588  902,781  8.86%
               
 Noninterest income:             
 Service charges on deposit accounts 441,632  656,085  (214,453) -32.69%  387,440  54,192  13.99%
 Other fees and commissions 612,688  446,453  166,235  37.23%  544,539  68,149  12.51%
 Gain on sale of securities available for sale 31,179  --  31,179  0.00%  --  31,179   
 Gain on sale of loans 187,006  --  187,006  0.00%  93,136  93,870  100.79%
 Gain on sales of premises and equipment 4,000  --  4,000  0.00%  9,742  (5,742) -58.94%
 Increase in CSV of life insurance 94,830  45,117  49,713  110.19%  --  94,830   
 Other income 62,163  1,774  60,389  3404.11%  --  62,163   
 Total noninterest income 1,433,498  1,149,429  284,069  24.71%  1,034,857  398,641  38.52%
               
 Noninterest expense:             
 Salaries and employee benefits 4,151,167  3,574,237  576,930  16.14%  4,377,552  (226,385) -5.17%
 Occupancy and equipment expenses, net 634,529  627,564  6,965  1.11%  603,710  30,819  5.10%
 Loss on sales of foreclosed assets 55,882  10,417  45,465  436.45%  2,240  53,642  2394.73%
 Loss on sale of loans --  215,534  (215,534) (100.00%)  --  --   
 Other operating 1,862,454  1,791,369  71,085  3.97%  1,601,247  261,207  16.31%
 Total noninterest expense 6,704,032  6,219,121  484,911  7.80%  6,584,749  119,283  1.81%
 Income before Taxes 5,826,835  4,910,367  916,468  18.66%  4,644,696  1,182,139  25.45%
 Income Taxes 1,374,277  883,169  491,108  55.61%  1,275,320  98,957  7.76%
               
    Net Income$4,452,558 $4,027,198 $425,360  10.56% $3,369,376 $1,083,182  32.15%
               
               
 Earnings per Share$2.13 $1.97 $0.16  8.12% $1.61 $0.52  32.30%
 Tangible Book Value per Common Share$53.47 $45.91 $7.56  16.47% $51.07 $2.40  4.70%
               


MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES
         
Consolidating Balance Sheet
 
  September 30 December 31    
  2020  2019  Change % Change
  (Unaudited)  (Unaudited)    
 ASSETS       
         
 Cash and due from banks$54,606,091  $77,696,887  $(23,090,796) -29.72%
 Federal funds sold 51,404,450   16,293,628   35,110,822  215.49%
 Interest bearing time deposits in other banks 600,000   1,350,000   (750,000) -55.56%
 Securities available for sale, at fair value 153,948,056   124,315,098   29,632,958  23.84%
 Securities held to maturity, at cost 12,804,101   4,752,384   8,051,717  169.42%
 Federal Home Loan Bank stock 899,700   842,900   56,800  6.74%
 Loans, less allowance for loan losses -       
 of $10,327,369 and $9,716,060 respectfully 843,839,602   729,170,345   114,669,257  15.73%
 Premises and equipment, net 15,941,962   15,618,198   323,764  2.07%
 Goodwill 9,361,770   9,361,770   -  0.00%
 Intangible assets, net 2,803,541   3,067,075   (263,534) -8.59%
 Other real estate and foreclosed assets 462,086   396,486   65,600  16.55%
 Accrued interest receivable 2,297,174   3,962,807   (1,665,633) -42.03%
 Cash surrender value of life insurance 13,529,344   13,248,384   280,960  2.12%
 Other assets 5,233,460   7,979,800   (2,746,340) -34.42%
         
  Total assets$1,167,731,337  $1,008,055,762  $159,675,575  15.84%
         
         
 LIABILITIES AND SHAREHOLDERS' EQUITY       
         
 Deposits:       
 Non-interest-bearing demand$276,158,577  $195,016,771  $81,141,806  41.61%
 Interest-bearing 731,147,178   682,509,497   48,637,681  7.13%
   1,007,305,755   877,526,268   129,779,487  14.79%
         
 Other borrowed funds 29,124,000   15,003,206   14,120,794  94.12%
 Accrued interest payable 322,439   537,928   (215,489) -40.06%
 Accrued expenses and other liabilities 6,772,441   3,556,513   3,215,928  90.42%
         
         Total liabilities 1,043,524,635   896,623,915   146,900,720  16.38%
         
 Shareholders' Equity:       
 Common stock 2,144,766   2,144,917   (151) -0.01%
 Paid in capital surplus 39,292,064   39,298,458   (6,394) -0.02%
 Less: treasury stock (1,564,569)  (1,379,632)  (184,937) 13.40%
 Retained earnings 66,603,322   55,916,996   10,686,326  19.11%
 Current year earnings 11,859,686   13,620,624   (1,760,938) (12.93%)
 Accumulated other comprehensive income gain 5,871,433   1,830,484   4,040,949  220.76%
       Total shareholders' equity 124,206,702   111,431,847   12,774,855  11.46%
         
       Total Liabilities and Shareholders' Equity$1,167,731,337  $1,008,055,762   159,675,575  15.84%
         
         

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES

Selected Financial information

  Quarter Ending Year Ending
  September 30,September 30,June 30, December 31,
  202020192020 2019
Dollars in thousand, except per share data)(Unaudited)(Unaudited)(Unaudited)  
         
Per Share Data        
Basic Earnings per Common Share $2.13  $1.97  $1.61  $6.82 
Diluted Earnings per Common Share  2.13   1.97   1.61   6.82 
Dividends per Common Share      0.35   0.93 
Book Value per Common Share  59.27   51.87   56.92   53.11 
Tangible Book Value per Common Share  53.47   45.91   51.07   47.18 
         
         
Average Diluted Shared Outstanding  2,095,443   2,058,039   2,095,451   1,997,735 
End of Period Common Shares Outstanding 2,095,468   2,100,993   2,095,468   2,098,250 
         
         
Annualized Performance Ratios (Bank Only)       
Return on Average Assets  1.72%  1.78%  1.31%  1.63%
Return on Average Equity  14.07%  14.51%  11.82%  14.56%
Equity/Assets  12.48%  12.23%  11.31%  11.65%
Cost of Funds  0.40%  0.99%  0.57%  1.02%
Net Interest Margin  4.40%  4.78%  4.70%  4.65%
Efficiency Ratio  51.38%  53.00%  50.56%  57.80%

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