All zones in the army start the battle with equal morale, but each zone has its own morale which changes during the field battle due to fatigue and damages. For example, attackers' right and left flank of the front line had 133 morale in round 10, when they destroyed the opponent flanks. Attacker's center of the front line had 124 morale at this moment, 116 was the morale of this zone at the end of the fortress siege. In the fortress siege, army is deployed in battle lines which use their own morale. The first attacking line starts the siege with 121 morale (average value of all first line zones of the field battle). They win the siege with 105 morale left and since they are the line with the biggest morale losses among the army, their losses are visible in the full battle report -
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If correctly calculated, formation allows you to deploy the available army in zones where they will fight with bonuses, or at least they will not have punishments on their attack/hit points. The higher bonuses from military researches as well as the general skills along with the chosen formation helped the attacker in winning this battle.
Probably I missed few changes at the last year because I don't remember people losing battles with 112 moral at the past.
The army was killed, they didn't lose due to a low morale.