"We had a very strong third quarter. Core earnings continued to grow steadily this quarter, supported by higher net interest income as our net interest margin (NIM) increased 5 basis points (bp) to 4.48%. Additionally, we had a couple of one-time items that enhanced both our non-interest income and non-interest expense levels, producing the highest quarterly income in the Bank's history. The Bank received the COVID Employee Retention Credit (ERC) of just under $2.5 million in July as a result of eligible payroll expenses incurred during the pandemic under the federal relief program. We also retroactively adopted FASB's Proportional Amortization Method (PAM) as it relates to the Bank's investment tax credits at the beginning of the year. Due to the adoption of PAM, we recorded a reduction to equity and a corresponding increase in accumulated amortization of investment tax credits. However, this retroactive adoption of PAM reduced our current year amortization expense, which resulted in the reversal of $1.7 million in amortization expenses during the third quarter. So combined, the ERC and PAM adoption boosted pre-tax income by $4.2 million and increased overall net income by $3.2 million from the prior quarter," said Spence Mullis, Chairman and CEO. "Again, even without these one-time items, our net interest income grew due to our NIM expanding as a result of solid loan growth. Future earnings will also be enhanced by reduced amortization expense with the shift to PAM."
The net interest margin was 4.48% for the third quarter of 2025 compared to 4.43% for the second quarter of 2025 and 4.10% for the third quarter of 2024. The average yield on earning assets grew three basis points from 6.20%, as of June 30, 2025, to 6.23%, while the Bank's cost of funds decreased two basis points from 1.98% to 1.96% during the same period.
Total deposits declined slightly during the quarter by $5.5 million, or 0.42%. Loans increased $18.2 million during the third quarter. Management expects loan demand to remain largely unchanged for the remainder of the year, with the potential for a slight increase resulting from recent M&A activity by other banks in its markets.
The Bank's allowance for credit losses as a percentage of total loans was 1.27% for September 30, 2025, as compared to 1.28% for June 30, 2025, and 1.30% as of September 30, 2024. The Company's adversely classified index reduced slightly from 9.51% as of June 30, 2025, to 9.39% as of September 30, 2025. The Bank's efficiency ratio improved significantly from 50.97% as of June 30, 2025, to 36.96% as of September 30, 2025, because of the previously mentioned additional income from the ERC and PAM amortization accounting adjustment.
The Company's total shareholders' equity increased 2.27% to $207.5 million as of September 30, 2025, as compared to $202.9 million as of June 30, 2025. Tangible book value per share increased to $18.51 as of September 30, 2025, a 2.49% increase from $18.06 per share on June 30, 2025. On October 15, 2025, the board of directors approved its fourth quarter dividend of $0.12 per share payable on or about December 10th to all shareholders of record as of November 10th.
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 BancsharesChris BondChief Financial Officer478-272-5202
MORRIS STATE BANCSHARES, INC.AND SUBSIDIARIESConsolidating Balance Sheet
September 30,2025
June 30,2025
Change
% Change
September 30,2024
Change
% Change
(Unaudited)
(Unaudited)
(Unaudited)
ASSETS
Cash and due from banks
$
84,825,539
$
106,289,134
$
(21,463,595
)
-20.19
%
$
48,180,615
$
36,644,924
76.06
%
Federal funds sold
15,499,910
24,863,860
(9,363,950
)
-37.66
%
11,932,122
3,567,788
29.90
%
Total cash and cash equivalents
100,325,449
131,152,994
(30,827,545
)
-23.51
%
60,112,737
40,212,712
66.90
%
Interest-bearing time deposits in other banks
100,000
100,000
--
0.00
%
100,000
--
0.00
%
Securities available for sale, at fair value
22,248,768
9,805,608
12,443,160
126.90
%
6,299,609
15,949,159
0.00
%
Securities held to maturity, at cost (net of CECL Reserve)
191,253,253
205,814,736
(14,561,483
)
-7.08
%
224,532,603
(33,279,350
)
-14.82
%
Federal Home Loan Bank stock, restricted, at cost
1,084,200
1,084,200
--
0.00
%
1,740,300
(656,100
)
-37.70
%
Loans, net of unearned income
1,174,036,110
1,155,735,771
18,300,339
1.58
%
1,088,132,851
85,903,259
7.89
%
Less-allowance for credit losses
(14,959,466
)
(14,816,647
)
(142,819
)
0.96
%
(14,179,392
)
(780,074
)
5.50
%
Loans, net
1,159,076,644
1,140,919,124
18,157,520
1.59
%
1,073,953,459
85,123,185
7.93
%
-
Bank premises and equipment, net
14,698,463
14,720,155
(21,692
)
-0.15
%
12,912,111
1,786,352
13.83
%
ROU assets for operating lease, net
660,649
601,700
58,949
9.80
%
854,808
(194,159
)
-22.71
%
Goodwill
9,361,704
9,361,704
--
0.00
%
9,361,704
--
0.00
%
Intangible assets, net
1,085,256
1,167,611
(82,355
)
-7.05
%
1,422,326
(337,070
)
-23.70
%
Other real estate and foreclosed assets
5,700
3,300
2,400
72.73
%
39,755
(34,055
)
-85.66
%
Accrued interest receivable
7,388,887
6,760,207
628,680
9.30
%
6,640,617
748,270
11.27
%
Cash surrender value of life insurance
15,450,301
15,340,444
109,857
0.72
%
15,022,374
427,927
2.85
%
Other assets
17,652,382
17,574,139
78,243
0.45
%
22,311,520
(4,659,138
)
-20.88
%
Total Assets
$
1,540,391,656
$
1,554,405,922
$
(14,014,266
)
-0.90
%
$
1,435,303,923
105,087,733
7.32
%
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing
$
335,465,880
$
346,323,393
$
