Morris State Bancshares, Inc. (OTCQX: MBLU), the parent company of Morris Bank, announced net income of $4.9 million for the first quarter ending March 31, 2025, reflecting a marginal increase of 0.45% compared to the same period last year. However, this figure represents a 20.04% decline from the $6.1 million reported in the fourth quarter of 2024. The company’s net interest income before provisions for credit losses rose by $980,000 from the previous quarter and by $2.5 million year-over-year, underscoring growth in its core earnings despite some challenges.
The bank’s net interest margin expanded to 4.29% in Q1 2025, up from 4.17% in Q4 2024 and 3.99% in Q1 2024. This improvement was driven by a 6 basis-point increase in the average yield on earning assets, which reached 6.07%, alongside a 9 basis-point decrease in the cost of funds, which fell to 1.97%. These factors contributed to the growth in net interest income, a key revenue driver for the bank.
Loan growth remained robust despite significant payoffs during the quarter, with loans increasing by over $23 million, or 2.12%, which translates to an annualized growth rate of 8.48%. Asset quality showed modest improvement, as evidenced by a decrease in the adversely classified asset ratio from 4.96% at the end of 2024 to 4.66% as of March 31, 2025. The bank’s loan loss reserve ratio held steady at 1.30%, consistent with the previous quarter but slightly lower than the 1.34% recorded a year earlier.
The decline in quarterly net income compared to the linked quarter was primarily due to several factors: a $1.0 million increase in income tax provision following the expiration of solar project tax credits, higher reserves related to the Current Expected Credit Loss (CECL) model for unfunded loan commitments, and increased salary and benefits expenses tied to first-quarter bonuses for the prior year.
Noninterest expenses rose by $621,000, or nearly 7%, compared to the previous quarter, largely reflecting the increased personnel costs. Despite these headwinds, shareholders’ equity grew by 1.18% to $198 million at quarter-end, up 8.75% from March 31, 2024. Tangible book value per share rose to $17.66 from $17.45 at the end of 2024, marking a 9.21% increase year-over-year.
In terms of shareholder returns, the board of directors approved a quarterly dividend of $0.12 per share for the second quarter of 2025, payable on or about June 15 to shareholders of record as of May 15. This follows the company’s payment of a regular quarterly dividend and a one-time special dividend of $0.15 per share earlier in the year.
Spence Mullis, Chairman and CEO, highlighted the bank’s solid first-quarter results, emphasizing the strong growth in core net interest income and the expansion of the net interest margin. Mullis noted the bank’s ability to achieve loan growth despite significant payoffs and underscored the continued strength in asset quality.
The company’s performance in the first quarter reflects its strategic focus on sustainable growth and prudent risk management as it navigates a dynamic interest rate environment and evolving regulatory landscape.
Morris State Bancshares delivered steady earnings growth year-over-year, supported by improved net interest margins and loan growth, while managing increased expenses and tax provisions. The declaration of a consistent quarterly dividend signals the company’s commitment to returning value to shareholders amid ongoing operational investments and market challenges.
