Morris State Bancshares, Inc. (OTCQX: MBLU) (the “Company”), the parent of Morris Bank, today announced net income of $17.4 million for the year ended December 31, 2020, representing an increase of $3.8 million, or 27.80%, compared to net income of $13.6 million for the year ended December 31, 2019. The company also announced diluted earnings per share of $8.30 for 2020, representing a 20.82% increase over diluted earnings per share of $6.87 for 2019. Earnings were a result of disciplined cost of funds management and strong fee income from the SBA Paycheck Protection Program, or PPP, and strong mortgage production.

“We are very pleased with the financial performance of the Company in 2020. It was a year of significant change and challenges with the pandemic. Our team worked to strengthen community partnerships with our customers during the unprecedented economic conditions,” said Spence Mullis, President and CEO. “We continued to create significant value for our shareholders as we grew core deposits over 37% to $896 million. Noninterest-bearing deposit growth represented $87.7 million, or 45%, of the overall core deposit growth.”

The Company’s total shareholders’ equity increased 16.15% to $129 million as of December 31, 2020, as compared to $111 million as of December 31, 2019. Tangible book value per share increased to $56.04 as of December 31, 2020, an 18.78% increase or $8.86 per share from December 31, 2019. On January 27, 2021, the board of directors approved an increase in its first quarter dividend to $0.38 per share payable on or about March 15, 2021 to all shareholders of record as of February 28, 2021.

Net interest income for the years ended December 31, 2020 and 2019 was $48.8 million and $38.9 million respectively, an increase of $9.8 million, or 25.23%. With many moving parts during 2020, the net interest margin at the bank ended at 4.53% for December 31, 2020, which was equal to the December 31, 2019 level. The bank was an active participant in PPP, booking over $86 million in loans and recognizing $2.2 million in fee income during 2020. The margin’s stamina was a result of diligent cost of funds management that offset moderate earning asset yield contraction. Our earning asset yield declined form 5.47% for 2019 to 5.00% for the year ended December 31, 2020, a 47-basis point reduction. Our cost of funds declined from 1.02% for 2019 to 0.52% for the year ended December 31, 2020, a 50-basis point reduction. We anticipate continued pressure on the margin going forward as it will be difficult to significantly lower our cost of funds while competition for good loans will remain.

Provision for loan losses was $3.6 million for the year ended December 31, 2020 versus $1.7 million for the year ended December 31, 2019. Our reserve as a percentage of total loans was 1.39% when PPP loans are netted out of total loans as of December 31, 2020, versus 1.31% as of December 31, 2019. Our adversely classified coverage ratio was 8.75% as of December 31, 2020 versus 14.49% as of December 31, 2019. Our level of other real estate owned (ORE) decreased to $131 thousand as of December 31, 2020 from $384 thousand as of December 31, 2019. This level of problem assets and ORE are the lowest held by the bank in over ten years.

Noninterest expense increased 9.62%, or $2.46 million, to $28.1 million for the year ended December 31, 2020 versus $25.6 million as of December 31, 2019. Most of this increase was related to salaries and employee benefits.