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Morris State Bancshares Announces Quarterly Earnings and Declares Second Quarter Dividend

DUBLIN, Ga., April 27, 2020 (GLOBE NEWSWIRE) -- Morris State Bancshares (MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $4.0 million, or an earnings per share of $1.93, for the quarter ended March 31, 2020.  The earnings represent a decrease of $559 thousand, or 12.17%, compared to net income of $4.6 million, or $2.50 per share, for the quarter ended March 31, 2019.  On a pretax basis, the company earned $5.1 million versus $3.3 million a year earlier, which represents a 54% increase.  The increase in pretax net income was a result of balanced improvement in net interest income, higher non-interest income, and improved operational efficiency.

On April 23, 2020, the board of directors approved a second quarter dividend of $0.35 per share payable on or about June 15th to all shareholders of record on June 1st, 2020.  The company will evaluate future dividend strategies based on bank performance and overall economic conditions throughout the rest of 2020.

“In the first quarter, we experienced net interest income growth of $2.8 million, or 35%, as the margin increased 17 basis points,” said Spence Mullis, President and CEO.  “Our higher net interest income and improved operational efficiency led to very solid earnings on the quarter. While the quarter ended solid financially, management pivoted to focus significant resources in working through the current health and economic crisis. Focusing on our customers, employees, and communities physical and financial health will continue to be our strategic focus for the foreseeable future.”

As the crisis developed, the company executed pandemic policies and procedures that included remote working arrangements for some employees, shuttering lobbies, and continually cleaning surfaces throughout the bank’s physical locations.  Customer usage of the bank’s digital banking services continue to grow as both the bank’s and customers’ standard operating procedures have changed.  In helping borrowers, the bank agreed to payment deferrals on over 760 loans totaling approximately $207 million for 90 days to allow customers to preserve cash as they began to adjust to the COVID-19 financial stall. The bank also modified another 50 loans for 180 days of interest-only payments totaling approximately $23 million. These deferrals and modifications were granted to customers whose loans were performing and not adversely classified prior to the current crisis and represented approximately 30% of the bank’s total loan portfolio.

The bank participated in the Small Business Administration’s (SBA) Payment Protection Program (PPP), which is part of the Coronavirus Aid, Relief and Economic Security Act enacted by Congress. The bank received approval on over 350 loans totaling over $72 million in the first round of funding.  The bank’s weighted average fee income on PPP loans generated is estimated at 3.42%. 

Total assets of the company were up $259 million, or 34%, from the end of the first quarter of 2019.  The asset increase was a combination of the 2019 acquisition of FMB Equibanc, Inc. and organic growth in other markets.   Total loans were up $155 million, or 26%, from March 31, 2019.  The company’s loans-to-deposit ratio declined to 84.7% from 90.3% during the same period.  Total shareholders’ equity of the company increased 33% to $114 million during the twelve-month period ended March 31, 2020. Tangible book value per share increased to $48.65 as of March 31, 2020, an increase of 3.11%, or $1.47, since December 31, 2019. 

Net interest income for quarter March 31, 2020 and 2019 was $10.7 million and $8.0 million, respectively, which represents an increase of $2.7 million, or 35%.  The net interest margin for the said quarters was 4.59% and 4.42%, respectively.  Non-interest income was up $410 thousand, or 51.7%, for the quarter versus the same quarter a year ago.  Higher non-interest income was driven by a 34% increase in deposit account fees as well as a 130% increase in secondary mortgage fees that resulted from historically low mortgage rates.  Better operational performance as well as management’s decision to curtail certain compensation incentives as a result of an uncertain future due to the COVID-19 pandemic led to improved overall efficiency. The company’s efficiency ratio improved during the first quarter to 53.26% from 59.79% for the same period a year ago.

The company provided provision for loan losses of $435 thousand in the first quarter, which was $60 thousand more than in the first quarter of 2019.  As the bank has extended loans and business customers have received SBA PPP and other emergency funds, management believes it will take a couple of months to determine how much credit deterioration results from the COVID-19 pandemic.  The lending team is actively engaging customers in all industries and assessing potential issues that may develop going forward. Management is taking proactive measures in stress testing certain segments of the company’s loan portfolio such as hospitality, restaurants, residential construction, and commercial retail real estate. As of the first quarter of 2020, the company’s reserves as a percentage of total loans were 1.32%.  As market conditions develop, management expects higher reserves will be needed to absorb potential losses and plans to provide higher provisions in the second quarter and the remaining quarters of the year.

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, including conditions related to the COVID-19 pandemic; 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
March 31,

  2020   2019   Change   % Change
  (Unaudited)   (Unaudited)        
ASSETS              
               
Cash and due from banks $ 52,915,891     $ 50,160,250     $ 2,755,641     5.49 %
Federal funds sold   27,300,392       19,202,087       8,098,305     42.17 %
Interest bearing time deposits in other banks   1,350,000       1,850,000       (500,000 )   (27.03 %)
Securities available for sale, at fair value   139,307,643       70,495,389       68,812,254     97.61 %
Securities held to maturity, at cost   4,743,041       5,578,390       (835,349 )   (14.97 %)
Federal Home Loan Bank stock   842,900       1,057,200       (214,300 )   (20.27 %)
Loans, less allowance for loan losses of $9,788,969 and $9,695,079 respectively   743,359,037       588,863,297       154,495,740     26.24 %
Premises and equipment, net   16,096,382       9,592,348       6,504,034     67.80 %
Goodwill   9,361,770       2,237,890       7,123,880     318.33 %
Intangible assets, net   2,979,230       276,789       2,702,441     976.35 %
Other real estate and foreclosed assets   589,675       201,029       388,646     193.33 %
Accrued interest receivable   2,889,890       2,358,511       531,379     22.53 %
Cash surrender value of life insurance   13,341,379       7,078,363       6,263,016     88.48 %
Other assets   7,352,653       4,106,172       3,246,481     79.06 %
               
Total assets $ 1,022,429,883     $ 763,057,715     $ 259,372,168     33.99 %
               
               
LIABILITIES AND SHAREHOLDERS' EQUITY              
               
Deposits:              
Non-interest-bearing demand $ 194,485,444     $ 134,597,556     $ 59,887,888     44.49 %
Interest-bearing   694,767,211       528,476,269       166,290,942     31.47 %
    889,252,655       663,073,825       226,178,830     34.11 %
               
Other borrowed funds   14,124,000       9,785,714       4,338,286     44.33 %
Accrued interest payable   421,993       416,264       5,729     1.38 %
Accrued expenses and other liabilities   4,336,060       3,781,765       554,295     14.66 %
               
Total liabilities   908,134,708       677,057,568       231,077,140     34.13 %
               
Shareholders' Equity:              
Common stock   2,144,766       1,884,904       259,862     13.79 %
Paid in capital surplus   39,292,064       24,327,596       14,964,468     61.51 %
Less: treasury stock   (1,564,569 )     (1,211,099 )     (353,470 )   29.19 %
Retained earnings   68,070,150       55,916,997       12,153,153     21.73 %
Current year earnings   4,037,752       4,597,026       (559,274 )   (12.17 %)
Accumulated other comprehensive income (loss)   2,315,012       484,723       1,830,289     377.59 %
Total shareholders' equity   114,295,175       86,000,147       28,295,028     32.90 %
               
Total Liabilities and Shareholders' Equity $ 1,022,429,883     $ 763,057,715       259,372,168     33.99 %
               

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES

Consolidating Statement of Income
March 31,

  2020   2019   Change   % Change
  (Unaudited)   (Unaudited)        
Interest and dividend income:              
Loans, including fees $ 11,536,693   $ 9,029,837     $ 2,506,856     27.76 %
Securities   877,946     529,099       348,847     65.93 %
Federal funds sold   79,065     102,628       (23,563 )   (22.96 %)
Interest-bearing deposits in banks   5,345     8,975       (3,630 )   (40.45 %)
FHLB stock   12,599     16,199       (3,600 )   (22.22 %)
Other interest and dividend income   196,621     229,613       (32,992 )   (14.37 %)
Total interest income   12,708,269     9,916,351       2,791,918     28.15 %
               
Interest expense:              
Deposits   1,839,673     1,901,844     $ (62,171 )   (3.27 %)
Borrowed funds   158,799     58,733       100,066     170.37 %
Federal funds purchased   --     29       (29 )   (100.00 %)
Total interest expense   1,998,472     1,960,606       37,866     1.93 %
               
Net interest income   10,709,797     7,955,745       2,754,052     34.62 %
               
Provision for loan losses   435,000     375,000       60,000     16.00 %
               
Net interest income after provision for loan losses   10,274,797     7,580,745       2,694,052     35.54 %
               
Noninterest income:              
Service charges on deposit accounts   604,173     449,700       154,473     34.35 %
Other fees and commissions   502,401     298,437       203,964     68.34 %
Increase in CSV of life insurance   92,995     43,225       49,770     115.14 %
Other income   4,413     2,465       1,948     79.03 %
Total noninterest income   1,203,982     793,827       410,155     51.67 %
               
Noninterest expense:              
Salaries and employee benefits   3,713,931     3,396,652       317,279     9.34 %
Occupancy and equipment expenses, net   627,425     442,189       185,236     41.89 %
Loss on sales of foreclosed assets   5,072     61,136       (56,064 )   (91.70 %)
Loss on sale of securities available for sale   --     19,848       (19,848 )   (100.00 %)
Other operating   2,009,074     1,134,650       874,424     77.07 %
Total noninterest expense   6,355,502     5,054,475       1,301,027     25.74 %
Income before Taxes   5,123,277     3,320,097       1,803,180     54.31 %
Income Taxes   1,085,525     (1,276,929 )     2,362,454     (185.01 %)
               
Net Income $ 4,037,752   $ 4,597,026     $ (559,274 )   (12.17 %)
               
               
Earnings per Share $ 1.93   $ 2.50     $ (0.57 )   (22.80 %)
TBV per Common Share $ 1.93   $ 2.50     $ (0.57 )   (22.80 %)
               

MORRIS STATE BANCSHARES, INC.
AND SUBSIDIARIES

Selected Financial Information

  Quarter Ended   Year Ending
  March 31, March 31,   December 31,
  2020 2019   2019
(Dollars in thousand, except per share data) (Unaudited)      
         
Per Share Data        
Basic Earnings per Common Share $ 1.93   $ 2.50     $ 6.82  
Diluted Earnings per Common Share   1.93     2.50       6.82  
Dividends per Common Share   0.70     1.02       0.93  
Book Value per Common Share   54.54     46.71       53.11  
Tangible Book Value per Common Share   48.65     45.18       47.18  
         
         
Average Diluted Shares Outstanding   2,096,415     1,840,764       1,997,735  
End of Period Common Shares Outstanding   2,095,468     1,840,980       2,098,250  
         
* Subchapter S Tax Status        
         
Annualized Performance Ratios (Bank Only)        
Return on Average Assets   1.71 %   2.44 %     1.63 %
Return on Average Equity   14.46 %   23.74 %     14.56 %
Equity/Assets   11.88 %   10.92 %     11.65 %
Cost of Funds   0.84 %   1.17 %     1.02 %
Net Interest Margin   4.59 %   4.42 %     4.65 %
Efficiency Ratio   53.26 %   59.79 %     57.80 %
         

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