CIB Marine Bancshares, Inc. Announces 2023 Results

CIB Marine Bancshares, Inc.

BROOKFIELD, Wis., Jan. 26, 2024 (GLOBE NEWSWIRE) -- CIB Marine Bancshares, Inc. (the “Company” or “CIB Marine”) (OTCQX: CIBH), the holding company of CIBM Bank (the “Bank”), announced its unaudited results of operations and financial condition for the quarter and year ended December 31, 2023. During the year, CIBM Bank grew its commercial loan portfolio and, to a lesser extent, residential loan portfolio; took cost reduction actions; and expanded the foundations of its mortgage operations during a very challenging mortgage operating environment. The Mortgage Division had an operating loss of $0.7 million for the year of 2023 and $0.9 million for the year of 2022 due to higher interest rates and housing supply shortages. The Bank’s cost of funds was sharply higher for the year 2023, causing a reduction in Banking Division earnings. In addition, there was a tax provision of $1.6 million during the year 2023. During the second half of 2023, the State of Wisconsin enacted a new tax law exempting interest income from commercial loans under $5 million dollars made to Wisconsin borrowers. The result was a reduction in forecasted future Wisconsin taxable income, causing a $1.1 million provision to adjust the valuation allowance for deferred tax assets related to State of Wisconsin net operating loss carryforwards.

Income before tax was $0.2 million for the fourth quarter of 2023 compared to $1.3 million for the same period of 2022. The primary reason for the difference was lower net interest income due to higher cost of funds. Net loss for the fourth quarter of 2023 was $0.9 million or $0.67 basic and $0.67 diluted net loss per share, compared to net income of $0.9 million or $0.81 basic and $0.59 diluted net loss per share for the same period of 2022. Income before tax was $2.5 million for the twelve months ended December 31, 2023, compared to $5.0 million for the same period of 2022. Net income was $0.9 million or $0.66 basic and $0.49 diluted net income per share for the twelve months ended December 31, 2023, compared to $3.7 million or $2.97 basic and $2.16 diluted net income per share for the same period of 2022.

Financial highlights for the quarter and year include:

• As of December 31, 2023, non-performing assets, modified loans to borrowers experiencing financial difficulty, and loans 90 days or more past due and still accruing to total assets and nonaccrual loans to total loans were 0.90% and 0.50%, respectively, compared to 0.20% and 0.16%, respectively, on December 31, 2022. Also, as of December 31, 2023, the allowance for credit losses on loans (“ACLL”) to loans was 1.27% compared to an allowance for loan and lease losses of 1.37% on December 31, 2022. The ACLL qualitative factors, including in the assessment of the ACLL, include economic forecasts obtained from third parties. Over the course of 2023, gross domestic product and unemployment forecasts have generally improved with declining recession risk resulting in a lower ACLL ratio to loans.

• Net interest income improved $0.2 million in the fourth quarter from the third quarter of 2023. Net interest income for the fourth quarter of 2023 declined $1.0 million compared to the same period of 2022, and declined $2.5 million for the twelve months ended December 31, 2023, compared to the same period of 2022. The net interest margin for the fourth quarter of 2023 was 2.41% compared to 3.32% for the same period of 2022, and for the year 2023 was 2.72% compared to 3.27% for the same period of 2022. The primary reason for the declines was a 231 basis point increase in the cost of interest bearing liabilities (“Cost of Funds”) compared to a 109 basis point increase in the yield on earning assets from the fourth quarter of 2022 to the same period of 2023, and a 214 basis point increase in the cost of interest bearing liabilities compared to a 122 basis point increase in interest earning assets from the year 2022 to the year 2023. Actions taken during the second half of 2023 to mitigate some of the interest rate risk in the balance sheet include: use of pay-fixed/receive-floating SOFR indexed interest rate swaps totaling $60 million notional with an average term of 3.5 years at origination and 3.2 years remaining term at the end of 2023; and issuing longer-term time deposits, including those with call options. In addition, CIBM Bank raised more than $50 million dollars in new time and money market deposits on a combined basis in the fourth quarter of 2023 to pay down short-term Federal Home Loan Bank of Chicago (“FHLB Chicago”) borrowings, which were initially used to fund loan growth.

• The Fed’s response to inflation by increasing short-term interest rates 525 basis points in roughly 18 months and a deeply inverted yield curve have had a severe effect on deposit mix and related Cost of Funds in the banking industry with the changes accelerated in the past year. Cost of Funds increased significantly during 2023 as deposit customers sought higher returns in a rising rate environment and to maximize their FDIC insurance coverage. Furthermore, deposit rate competition intensified dramatically during the year. Total deposits were up $99 million since December 31, 2022, with noninterest-bearing deposits down $26 million, and interest-bearing deposits up $125 million, largely in time deposit products, as balances move from lower to higher interest rate products. Money market deposit balances were relatively unchanged for the year; however, money market rates were up significantly due to rising short-term rates and intensifying competition. The remaining funding for loan growth was largely from short-term borrowings at the FHLB Chicago whose average cost for the quarter was 5.44% on a per annum basis. By growing deposits during the fourth quarter of 2023, CIB Marine was able to bring its loan to deposit ratio back below 100% to 99%.

• During 2023, CIB Marine’s loan portfolio balances increased $145 million, consisting of $89 million in commercial segment loans and the remaining primarily in residential mortgage loans. During the fourth quarter of 2023, loan portfolio balances increased $34 million primarily from $30 million in commercial segment loans and $2 million in residential mortgage loans. Commercial and residential mortgage loan portfolio growth were down $7 million and $11 million, respectively over the prior quarter. During 2023, the Mortgage Division originated $269 million in residential mortgage loans with 73% of the originated loans sold or held for sale, compared to $183 million and 87%, respectively, in 2022. The increase in mortgage loans originated in a very difficult mortgage environment was largely attributable to the addition of mortgage sales employees in the last month of 2022 and the first half of 2023.

• For the year ended December 31, 2023, Banking Division net income was $2.4 million and Mortgage Division net loss was $0.7 million. The remaining $0.8 million net loss from parent company sub-debt and administration expenses. Banking Division income was down primarily due to increased Cost of Funds. Mortgage Division net loss improved due to higher residential mortgage loan originations, which were up $86 million in 2023 compared to 2022.   The Mortgage Division has 36 more commission-based loan originators since the end of the third quarter of 2022 and 8 additional operations/administration employees, improving the Division’s lending capacity and mix of lending to operations staff. Pricing margins for mortgage loans continue to be very tight compared to the prior 10 years.

• During the second quarter of 2023, CIB Marine sold $23 million in retail deposits from the Bank’s Danville, Illinois, branch for a gain of $1.5 million, net of conversion related data processing costs. In addition, approximately $0.2 million in added costs were incurred related to the deposit sale and the subsequent closure of the Danville branch so that the combined effect was $1.3 million in total income and $1.0 million on a tax adjusted basis.

• CIB Marine took a $1.1 million tax provision charge to increase its valuation allowance for its Wisconsin deferred tax assets related to the exclusion of commercial interest income from borrowers that reside in Wisconsin for loans with balances less than $5 million, due to a Wisconsin statute that was signed into law and became effective in the later half of 2023.
  

Reflecting on the past year, Mr. J. Brian Chaffin, CIB Marine’s President and CEO, commented, “Our successes have been overshadowed by the effects of the rapid and significant Fed funds rate increases over the past year and an inverted yield curve. As a result, our Cost of Funds has surged higher and mortgage production volumes continue to suffer. In an effort to mitigate some of our interest rate risk, we have increased our use of interest rate swaps and callable CDs, and in support of earnings we have put in place several cost control measures that are projected to reduce our ongoing operating costs by more than $1 million per annum.

“In addition, we closed our Danville, Illinois, branch after selling its retail deposits for a premium during the second quarter; our Retail Division updated online deposit account opening services as they continue to develop household banking relationships to support funding; and our Mortgage Division has increased production relative to the same period of 2023, and improved efficiencies and future production capacity.”

He concluded, “Finally, our Corporate Banking Division continued to outperform budget in generating new loans and deposits for the year. At the same time, we have eased our ACLL rate over the year, thanks to continued moderately strong credit quality coupled with a resilient economy and improved GDP and unemployment rate forecasts from the Federal Reserve over the year.”

CIB Marine Bancshares, Inc. is the holding company for CIBM Bank, which operates nine banking offices in Illinois, Wisconsin, and Indiana, and has mortgage loan officers and/or offices in nine states. More information on the Company is available at www.cibmarine.com, including recent shareholder letters, links to regulatory financial reports, and audited financial statements.

FORWARD-LOOKING STATEMENTS
CIB Marine has made statements in this release that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. CIB Marine intends these forward-looking statements to be subject to the safe harbor created thereby and is including this statement to avail itself of the safe harbor. Forward-looking statements are identified generally by statements containing words and phrases such as “may,” “project,” “are confident,” “should be,” “intend,” “predict,” “believe,” “plan,” “expect,” “estimate,” “anticipate” and similar expressions. These forward-looking statements reflect CIB Marine’s current views with respect to future events and financial performance that are subject to many uncertainties and factors relating to CIB Marine’s operations and the business environment, which could change at any time.

There are inherent difficulties in predicting factors that may affect the accuracy of forward-looking statements.

Stockholders should note that many factors, some of which are discussed elsewhere in this Earnings Release and in the documents that are incorporated by reference, could affect the future financial results of CIB Marine and could cause those results to differ materially from those expressed in forward-looking statements contained or incorporated by reference in this document. These factors, many of which are beyond CIB Marine’s control, include but are not limited to:

• operating, legal, execution, credit, market, security (including cyber), and regulatory risks;

• economic, political, and competitive forces affecting CIB Marine’s banking business;

• the impact on net interest income and securities values from changes in monetary policy and general economic and political conditions; and

• the risk that CIB Marine’s analyses of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.

These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made. CIB Marine undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to significant risks and uncertainties and CIB Marine’s actual results may differ materially from the results discussed in forward-looking statements.

CIB MARINE BANCSHARES, INC.
Selected Unaudited Consolidated Financial Data
	At or for the
	Quarters Ended																	Years Ended
	December 31,			September 30,			June 30,			March 31,			December 31,					December 31,			December 31,
	2023			2023			2023			2023			2022					2023			2022
	(Dollars in thousands, except share and per share data)
Selected Statement of Operations Data:
Interest and dividend income	$	11,328		$	10,117		$	9,152		$	8,472		$	7,808				$	39,069		$	27,332
Interest expense		6,190			5,180			3,643			2,601			1,664					17,614			3,417
Net interest income		5,138			4,937			5,509			5,871			6,144					21,455			23,915
Provision for (reversal of) credit losses		135			(140	)		(246	)		159			(642	)				(92	)		(893	)
Net interest income after provision for
(reversal of) credit losses		5,003			5,077			5,755			5,712			6,786					21,547			24,808
Noninterest income (1)		1,824			2,368			3,298			1,410			791					8,900			5,469
Noninterest expense		6,669			7,007			7,457			6,805			6,316					27,938			25,263
Income before income taxes		158			438			1,596			317			1,261					2,509			5,014
Income tax expense		1,050			59			431			89			351					1,629			1,288
Net income (loss)	$	(892	)	$	379		$	1,165		$	228		$	910				$	880		$	3,726
Common Share Data:
Basic net income (loss) per share (2)	$	(0.67	)	$	0.28		$	0.88		$	0.17		$	0.81				$	0.66		$	2.97
Diluted net income (loss) per share (2)		(0.67	)		0.21			0.64			0.13			0.59					0.49			2.16
Dividend		0.00			0.00			0.00			0.00			0.00					0.00			0.00
Tangible book value per share (3)		53.35			52.05			52.47			53.28			53.19					53.35			53.19
Book value per share (3)		51.58			50.28			50.70			51.48			51.39					51.58			51.39
Weighted average shares outstanding - basic		1,334,163			1,333,889			1,318,460			1,308,603			1,308,279					1,324,131			1,303,859
Weighted average shares outstanding - diluted		1,813,207			1,814,716			1,815,593			1,803,218			1,796,947					1,811,975			1,795,037
Financial Condition Data:
Total assets	$	899,060		$	874,247		$	819,521		$	787,244		$	752,997				$	899,060		$	752,997
Loans		722,084			688,446			647,823			608,492			577,303					722,084			577,303
Allowance for credit losses on loans (4)		(9,136	)		(8,947	)		(8,999	)		(9,193	)		(7,894	)				(9,136	)		(7,894	)
Investment securities		131,529			130,476			114,661			126,001			124,421					131,529			124,421
Deposits		727,565			644,165			613,808			632,339			628,869					727,565			628,869
Borrowings		76,956			138,469			113,950			65,173			34,485					76,956			34,485
Stockholders' equity		85,075			83,313			83,876			83,615			83,503					85,075			83,503
Financial Ratios and Other Data:
Performance Ratios:
Net interest margin (5)		2.41	%		2.43	%		2.90	%		3.22	%		3.32	%				2.72	%		3.27	%
Net interest spread (6)		1.79	%		1.85	%		2.42	%		2.82	%		3.02	%				2.18	%		3.10	%
Noninterest income to average assets (7)		0.78	%		1.15	%		1.68	%		0.72	%		0.41	%				1.08	%		0.75	%
Noninterest expense to average assets		3.00	%		3.31	%		3.77	%		3.58	%		3.27	%				3.40	%		3.30	%
Efficiency ratio (8)		97.13	%		95.06	%		84.35	%		93.90	%		91.13	%				92.13	%		85.17	%
Earnings on average assets (9)		-0.40	%		0.18	%		0.59	%		0.12	%		0.47	%				0.11	%		0.49	%
Earnings on average equity (10)		-4.21	%		1.78	%		5.53	%		1.11	%		4.15	%				1.05	%		4.15	%
Asset Quality Ratios:
Nonaccrual loans to loans (11)		0.50	%		0.50	%		0.02	%		0.08	%		0.16	%				0.50	%		0.16	%
Nonaccrual loans, modified loans to borrowers experiencing
financial difficulty, loans 90 days or more past due and still
accruing to total loans (4)		1.07	%		0.56	%		0.11	%		0.12	%		0.20	%				1.07	%		0.20	%
Nonaccrual loans, modified loans to borrowers experiencing
financial difficulty, loans 90 days or more past due and still
accruing to total assets (4)		0.90	%		0.49	%		0.13	%		0.14	%		0.20	%				0.90	%		0.20	%
Allowance for credit losses on loans to total loans (4)(11)		1.27	%		1.30	%		1.39	%		1.51	%		1.37	%				1.27	%		1.37	%
Allowance for credit losses on loans to nonaccrual loans,
restructured loans and loans 90 days or
more past due and still accruing (4)(11)		118.59	%		231.01	%		1283.74	%		1262.77	%		684.06	%				118.59	%		684.06	%
Net charge-offs (recoveries) annualized
to average loans (11)		0.01	%		-0.01	%		-0.02	%		-0.02	%		-0.33	%				-0.01	%		-0.08	%
Capital Ratios:
Total equity to total assets		9.46	%		9.53	%		10.23	%		10.62	%		11.09	%				9.46	%		11.09	%
Total risk-based capital ratio		13.24	%		13.58	%		14.31	%		14.84	%		15.71	%				13.24	%		15.71	%
Tier 1 risk-based capital ratio		10.62	%		10.91	%		11.54	%		11.99	%		12.78	%				10.62	%		12.78	%
Leverage capital ratio		8.62	%		8.93	%		9.43	%		9.56	%		9.73	%				8.62	%		9.73	%
Other Data:
Number of employees (full-time equivalent)		193			194			206			202			189					193			189
Number of banking facilities		9			9			10			10			10					9			10
(1) Noninterest income includes gains and losses on securities.
(2) Net income available to common stockholders in the calculation of earnings per share includes the difference between the carrying amount less the consideration paid for redeemed preferred stock of $0.1 million for the quarter and year ended December 31, 2022.
(3) Tangible book value per share is the stockholder equity less the carry value of the preferred stock and less the goodwill and intangible assets, divided by the total shares of common outstanding. Book value per share is the stockholder equity less the liquidation preference of the preferred stock, divided by the total shares of common outstanding. Book value measures are reported inclusive of the net deferred tax assets. As presented here, shares of common outstanding excludes unvested restricted stock awards.
(4) Allowance for credit losses on loans is allowance for loan losses in ending dates and periods prior to January 1, 2023.
(5) Net interest margin is the ratio of net interest income to average interest-earning assets.
(6) Net interest spread is the yield on average interest-earning assets less the rate on average interest-bearing liabilities.
(7) Noninterest income to average assets excludes gains and losses on securities.
(8) The efficiency ratio is noninterest expense divided by the sum of net interest income plus noninterest income, excluding gains and losses on securities.
(9) Earnings on average assets are net income divided by average total assets.
(10) Earnings on average equity are net income divided by average stockholders' equity.
(11) Excludes loans held for sale.

CIB MARINE BANCSHARES, INC.
Consolidated Balance Sheets (unaudited)
	December 31,			September 30,			June 30,			March 31,			December 31,
	2023			2023			2023			2023			2022
	(Dollars in Thousands, Except Shares)
Assets
Cash and due from banks	$	9,491		$	9,203		$	14,444		$	16,490		$	19,667
Reverse repurchase agreements		-			-			-			-			-
Securities available for sale		129,370			128,413			112,532			123,838			122,292
Equity securities at fair value		2,159			2,063			2,129			2,163			2,129
Loans held for sale		9,209			15,011			14,726			10,848			5,057
Loans		722,084			688,446			647,823			608,492			577,303
Allowance for credit losses on loans (1)		(9,136	)		(8,947	)		(8,999	)		(9,193	)		(7,894	)
Net loans		712,948			679,499			638,824			599,299			569,409
Federal Home Loan Bank Stock		2,709			4,645			2,818			1,897			1,897
Premises and equipment, net		3,602			3,675			3,879			3,969			4,081
Accrued interest receivable		2,983			2,748			2,036			2,118			1,915
Deferred tax assets, net		14,753			16,815			16,790			16,464			16,273
Other real estate owned, net		375			375			375			375			375
Bank owned life insurance		6,247			6,204			6,160			6,119			6,076
Goodwill and other intangible assets		64			70			76			81			87
Other assets		5,150			5,526			4,732			3,583			3,739
Total assets	$	899,060		$	874,247		$	819,521		$	787,244		$	752,997
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand	$	89,025		$	88,674		$	93,487		$	94,700		$	115,186
Interest-bearing demand		90,232			73,086			82,484			93,388			76,918
Savings		256,059			254,211			247,339			259,907			260,159
Time		292,249			228,194			190,498			184,344			176,606
Total deposits		727,565			644,165			613,808			632,339			628,869
Short-term borrowings		67,227			128,748			104,238			55,469			24,789
Long-term borrowings		9,729			9,721			9,712			9,704			9,696
Accrued interest payable		1,883			1,491			963			557			554
Other liabilities		7,581			6,809			6,924			5,560			5,586
Total liabilities		813,985			790,934			735,645			703,629			669,494
Stockholders' Equity
Preferred stock, $1 par value; 5,000,000 authorized shares at both September 30, 2023 and December 31, 2022; 7% fixed rate noncumulative perpetual issued; 14,633 shares of series A and 1,610 shares of series B; convertible; $16.2 million aggregate liquidation preference		13,806			13,806			13,806			13,806			13,806
Common stock, $1 par value; 75,000,000 authorized shares; 1,349,392 and 1,323,547 issued shares; 1,335,323 and 1,309,478 outstanding shares at December 31, 2023 and 2022, respectively. (2)		1,349			1,349			1,349			1,324			1,324
Capital surplus		181,282			181,144			181,050			180,903			180,777
Accumulated deficit		(105,335	)		(104,443	)		(104,822	)		(105,987	)		(105,025	)
Accumulated other comprehensive income, net		(5,493	)		(8,009	)		(6,973	)		(5,897	)		(6,845	)
Treasury stock, 14,791 shares on December 31, 2023 and 2022 (3)		(534	)		(534	)		(534	)		(534	)		(534	)
Total stockholders' equity		85,075			83,313			83,876			83,615			83,503
Total liabilities and stockholders' equity	$	899,060		$	874,247		$	819,521		$	787,244		$	752,997
(1) Allowance for credit losses on loans is allowance for loan losses in ending dates and periods prior to January 1, 2023.
(2) Both issued and outstanding shares as stated here exclude 49,308 shares and 58,897 shares of unvested restricted stock awards at December 31, 2023 and 2022, respectively.
(3) Treasury stock includes 722 shares held by subsidiary bank CIBM Bank.

CIB MARINE BANCSHARES, INC.
Consolidated Statements of Operations (Unaudited)
	At or for the
	Quarters Ended															Years Ended
	December 31,			September 30,			June 30,			March 31,		December 31,				December 31,			December 31,
	2023			2023			2023			2023		2022				2023			2022
	(Dollars in thousands)
Interest Income
Loans	$	9,752		$	8,718		$	7,942		$	7,121	$	6,426			$	33,533		$	23,251
Loans held for sale		200			227			155			84		63				666			307
Securities		1,330			1,132			985			1,031		948				4,478			2,994
Other investments		46			40			70			236		371				392			780
Total interest income		11,328			10,117			9,152			8,472		7,808				39,069			27,332
Interest Expense
Deposits		5,071			3,918			3,076			2,364		1,452				14,429			2,848
Short-term borrowings		998			1,141			445			118		91				2,702			150
Long-term borrowings		121			121			122			119		121				483			419
Total interest expense		6,190			5,180			3,643			2,601		1,664				17,614			3,417
Net interest income		5,138			4,937			5,509			5,871		6,144				21,455			23,915
Provision for (reversal of) credit losses		135			(140	)		(246	)		159		(642	)			(92	)		(893	)
Net interest income after provision for
(reversal of) credit losses		5,003			5,077			5,755			5,712		6,786				21,547			24,808
Noninterest Income
Deposit service charges		74			101			76			79		82				330			348
Other service fees		3			6			11			16		15				36			129
Mortgage banking revenue, net		1,397			1,984			1,636			1,008		597				6,025			4,421
Other income		165			132			171			110		117				578			617
Net gains on sale of securities available for sale		0			0			0			0		0				0			0
Unrealized gains (losses) recognized on equity securities		96			(66	)		(34	)		34		4				30			(279	)
Net gains (loss) on sale of SBA loans		0			0			0			151		0				151			157
Net gains (losses) on sale of assets and (writedowns)		89			211			1,438			12		(24	)			1,750			76
Total noninterest income		1,824			2,368			3,298			1,410		791				8,900			5,469
Noninterest Expense
Compensation and employee benefits		4,369			4,631			5,101			4,550		4,061				18,651			16,705
Equipment		493			484			504			475		466				1,956			1,743
Occupancy and premises		415			490			404			438		399				1,747			1,619
Data Processing		224			245			221			199		202				889			744
Federal deposit insurance		170			123			150			87		70				530			231
Professional services		243			271			317			278		415				1,109			1,167
Telephone and data communication		66			57			56			61		66				240			248
Insurance		79			82			68			88		85				317			318
Other expense		610			624			636			629		552				2,499			2,488
Total noninterest expense		6,669			7,007			7,457			6,805		6,316				27,938			25,263
Income from operations
before income taxes		158			438			1,596			317		1,261				2,509			5,014
Income tax expense		1,050			59			431			89		351				1,629			1,288
Net (loss) income		(892	)		379			1,165			228		910				880			3,726
Preferred stock dividend		0			0			0			0		0				0			0
Discount from repurchase of preferred stock		0			0			0			0		146				0			0
Net income (loss) allocated to
common stockholders	$	(892	)	$	379		$	1,165		$	228	$	1,056			$	880		$	3,726

FOR INFORMATION CONTACT: J. Brian Chaffin, President & CEO (217) 355-0900 brian.chaffin@cibmbank.com