CIB Marine Bancshares, Inc. Announces Second Quarter 2023 Results

CIB Marine Bancshares, Inc.

BROOKFIELD, Wis., July 18, 2023 (GLOBE NEWSWIRE) -- CIB Marine Bancshares, Inc. (the “Company” or “CIBM”) (OTCQX: CIBH), the holding company of CIBM Bank (the “Bank”), announced its unaudited results of operations and financial condition for the quarter and six months ended June 30, 2023. During the quarter, CIBM Bank grew its loan portfolio, expanded its mortgage operations, and completed the sale of the retail deposits from its Danville, Illinois, branch. The Mortgage Division had a small operating profit in the second quarter versus a significant loss in the first quarter of 2023, and the Bank’s cost of funds were sharply higher.   Net income for the quarter was $1.2 million, or $0.88 basic and $0.64 diluted earnings per share, compared to $0.9 million, or $0.68 basic and $0.49 diluted earnings per share, for the same period of 2022. Net income for the six months ended June 30, 2023, was $1.4 million, or $1.06 basic and $0.77 diluted earnings per share, compared to $1.8 million, or $1.38 basic and $1.00 diluted earnings per share, for the same period of 2022.   

Financial highlights for the quarter and six-month period include:

• $23 million in retail deposits from the Bank’s Danville, Illinois, branch were sold for a gain of $1.5 million, net of conversion-related data processing costs. In addition, approximately $0.2 million additional costs were incurred related to the deposit sale and the recently announced closure of the Danville branch during the first half of 2023 so that the combined effect was $1.3 million in total income and $1.0 million on a tax adjusted basis.

• Loan portfolio balances increased $70 million year to date, comprised primarily of $38 million in residential mortgage loans and $31 million in commercial segment loans; and from March 31, 2023, to June 30, 2023, loan portfolio balances increased $39 million with $30 million in residential mortgage loans and $9 million in commercial segment loans. Loan growth is likely to slow significantly in the third quarter as more of the future residential mortgage loan originations will be sold in the foreseeable future.   During the first half of the year, the Mortgage Division originated $126 million in residential mortgage loans with roughly two-thirds of the originated loans sold or held for sale. The remainder are held in the Bank’s loan portfolio with the majority of those loans having the following terms: 5/1 ARM, 7/1 ARM, or 15-year fixed. Over the prior eight years, the Mortgage Division’s loans originated for sale ranged from 79% to 93% of its total originations.

  • As of June 30, 2023, non-performing assets, restructured loans, and loans 90 days or more past due and still accruing to total assets and nonaccrual loans to total loans were 0.13% and 0.02%, respectively, compared to 0.20% and 0.16%, respectively, on December 31, 2022, and 0.25% and 0.22%, respectively, on June 30, 2022. Also, as of June 30, 2023, the allowance for credit losses on loans (“ACLL”) to loans was 1.39% compared to an allowance for loan and lease losses of 1.37% at December 31, 2022, and 1.46% at June 30, 2022. The ACLL is down 12 basis points from March 31, 2023, due to improved economic forecasts and other qualitative factors, as well as a higher portion of the loan portfolio being in residential loans that generally have a lower expected loss rate than commercial segment loans.

• Net interest income and margin were $11.4 million and 3.06%, respectively, for the six months ended June 30, 2023, compared to $11.4 million and 3.15%, respectively, in the same period of 2022. The six-month period in 2023 had $0.3 million less Paycheck Protection Program loan fee accretion income and $0.1 million more subordinated debt interest expense compared to the same period in 2022, both of which were partially offset by a $22 million rise in average balances in earning assets. The net interest margin declined 9 basis points compared to same six month period in 2022 due to a number of factors, including a $24 million decline in average non-interest bearing deposit balances as higher short-term interest rates attracted money into interest bearing products, and a 44 basis point increase in the cost of interest bearing liabilities over the increase in yields on interest earning assets in part due to growth in generally tighter spread residential mortgage loans and the effects of an inverted yield curve.

  • Cost of funds is up significantly this year due to a shift in deposit mix as customers seek higher returns in a rising rate environment and to maximize their FDIC insurance coverage. Total deposits are down $15 million since December 31, 2022, with noninterest-bearing deposits down $22 million, and interest-bearing deposits up $7 million, largely in reciprocal and time deposit products. After adjusting for the sale of the Danville branch’s retail deposits, total deposits are up $8 million with noninterest-bearing deposits down $20 million, and interest-bearing deposits up $28 million.

• For the six months ended June 30, 2023, Banking Division net income was $2.3 million and Mortgage Division net loss was $0.5 million. The remaining $0.4 million on net loss was from parent company sub-debt and administration expenses. Residential mortgage loan originations are up $15 million compared to the same six-month period from 2022. The Mortgage Division added 40 commission-based loan originators since the end of the third quarter of 2022 and approximately seven operations/administration employees, improving the Division’s operating efficiencies. Although total loan originations are up for the Mortgage Division, the average number of loans per lender are down as markets remain adversely affected by higher mortgage interest rates compared to recent years and tight housing supply. In addition, tighter mortgage loan margins have persisted. Recently hired mortgage lenders are expected to become more fully established and up-front growth costs should diminish in the second half of 2023.

Reflecting on the past six months, Mr. J. Brian Chaffin, CIBM’s President and CEO, commented, “We have completed a number of significant projects in the first half of 2023. First, we more than doubled our Mortgage Division sales force with approximately one-half of our new lenders based in newly established northeastern U.S. markets. Despite relatively high rates, housing stock in short supply, and tight margins, the Mortgage Division was able to turn a profit in the second quarter after a significant loss in the first quarter, with loan production year to date spread evenly between the new loan originators and the Division’s existing staff. Second, and somewhat related, we increased our residential loan portfolio size after seeing it shrink over the prior three years. These new loans have higher yields than prior portfolio loans and continue to be lower risk and lower margin relative to the marginal cost of funds. Finally, we completed the sale of our Danville branch’s retail deposits for a gain and announced the branch’s closure as a part of our long-term strategic plan to improve efficiencies and focus attention on our core markets.”

He added, “Our Retail Banking, Corporate Banking, and Government Guaranteed Lending Divisions have continued their relationship development success this year. To date, the combined Corporate Banking and Government Guaranteed Lending Divisions are well ahead of their annual budget goals for loan and deposit growth and, excluding the effects of the sale of the Danville retail deposit sale, total deposit balances are up, in part due to the Retail Banking Division’s deposit retention and growth activities.

“Continued strong credit quality coupled with a resilient economy with a better forecast, and other qualitative factors, has eased our allowance for credit losses on loans.”

Looking ahead, he concluded, “The key challenges and areas of focus for the Company during the second half of the year will include continuing the improvement in Mortgage Division operating results; growth and retention of core loan and deposit relationships; and mitigating the rising cost of funds, partly through expense controls on certain programs, services, and capital.”

CIB Marine Bancshares, Inc. is the holding company for CIBM Bank, which operates ten banking offices in Illinois, Wisconsin, and Indiana, and has mortgage loan officers and/or offices in ten 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.

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

CIB MARINE BANCSHARES, INC.
Selected Unaudited Consolidated Financial Data
	At or for the
	Quarters Ended																	6 Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,					June 30,			June 30,
		2023			2023			2022			2022			2022					2023			2022
	(Dollars in thousands, except share and per share data)
Selected Statement of Operations Data:
Interest and dividend income	$	9,152		$	8,472		$	7,808		$	7,234		$	6,411				$	17,624		$	12,290
Interest expense		3,643			2,601			1,664			823			517					6,244			930
Net interest income		5,509			5,871			6,144			6,411			5,894					11,380			11,360
Provision for (reversal of) credit losses		(246	)		159			(642	)		34			40					(87	)		(285	)
Net interest income after provision for (reversal of) loan losses		5,755			5,712			6,786			6,377			5,854					11,467			11,645
Noninterest income (1)		3,298			1,410			791			1,313			1,660					4,708			3,365
Noninterest expense		7,457			6,805			6,316			6,311			6,374					14,262			12,636
Income before income taxes		1,596			317			1,261			1,379			1,140					1,913			2,374
Income tax expense		431			89			351			352			251					520			585
Net income	$	1,165		$	228		$	910		$	1,027		$	889		$	-	$	1,393		$	1,789
Common Share Data:
Basic net income per share (2)	$	0.88		$	0.17		$	0.81		$	0.78		$	0.68				$	1.06		$	1.38
Diluted net income per share (2)		0.64			0.13			0.59			0.57			0.49					0.77			1.00
Dividend		0.00			0.00			0.00			0.00			0.00					0.00			0.00
Tangible book value per share (3)		52.47			53.28			53.19			52.24			53.68					52.47			53.68
Book value per share (3)		50.70			51.48			51.39			49.78			51.22					50.70			51.22
Weighted average shares outstanding - basic		1,318,460			1,308,603			1,308,279			1,308,752			1,307,341					1,313,553			1,300,239
Weighted average shares outstanding - diluted		1,815,593			1,803,218			1,796,947			1,797,721			1,798,008					1,809,435			1,793,815
Financial Condition Data:
Total assets	$	819,521		$	787,244		$	752,997		$	762,965		$	774,356				$	819,521		$	774,356
Loans		647,823			608,492			577,303			564,841			549,175					647,823			549,175
Allowance for credit losses on loans (4)		(8,999	)		(9,193	)		(7,894	)		(8,061	)		(8,010	)				(8,999	)		(8,010	)
Investment securities		114,661			126,001			124,421			127,954			122,483					114,661			122,483
Deposits		613,808			632,339			628,869			633,234			642,500					613,808			642,500
Borrowings		113,950			65,173			34,485			37,168			37,693					113,950			37,693
Stockholders' equity		83,876			83,615			83,503			87,228			89,111					83,876			89,111
Financial Ratios and Other Data:
Performance Ratios:
Net interest margin (5)		2.90	%		3.22	%		3.32	%		3.45	%		3.23	%				3.06	%		3.15	%
Net interest spread (6)		2.42	%		2.82	%		3.02	%		3.29	%		3.14	%				2.62	%		3.06	%
Noninterest income to average assets (7)		1.68	%		0.72	%		0.41	%		0.72	%		0.91	%				1.21	%		0.94	%
Noninterest expense to average assets		3.77	%		3.58	%		3.27	%		3.24	%		3.34	%				3.68	%		3.35	%
Efficiency ratio (8)		84.35	%		93.90	%		91.13	%		80.73	%		83.52	%				88.65	%		84.72	%
Earnings on average assets (9)		0.59	%		0.12	%		0.47	%		0.53	%		0.47	%				0.36	%		0.47	%
Earnings on average equity (10)		5.53	%		1.11	%		4.15	%		4.52	%		3.96	%				3.35	%		3.97	%
Asset Quality Ratios:
Nonaccrual loans to loans (11)		0.02	%		0.08	%		0.16	%		0.13	%		0.22	%				0.02	%		0.22	%
Nonaccrual loans, restructured loans and loans 90 days or more past due and still accruing to total loans (4)		0.11	%		0.12	%		0.20	%		0.17	%		0.28	%				0.11	%		0.28	%
Nonperforming assets, restructured loans and loans 90 days or more past due and still accruing to total assets (4)		0.13	%		0.14	%		0.20	%		0.18	%		0.25	%				0.13	%		0.25	%
Allowance for credit losses on loans to total loans (4)(11)		1.39	%		1.51	%		1.37	%		1.43	%		1.46	%				1.39	%		1.46	%
Allowance for credit losses on loans to nonaccrual loans, restructured loans and loans 90 days or more past due and still accruing (4)(11)		1283.74	%		1262.77	%		684.06	%		852.11	%		512.48	%				1283.74	%		512.48	%
Net charge-offs (recoveries) annualized to average loans (11)		-0.02	%		-0.02	%		-0.33	%		-0.01	%		0.03	%				-0.02	%		0.02	%
Capital Ratios:
Total equity to total assets		10.23	%		10.62	%		11.09	%		11.43	%		11.51	%				10.23	%		11.51	%
Total risk-based capital ratio		14.31	%		14.84	%		15.71	%		16.42	%		16.85	%				14.31	%		16.85	%
Tier 1 risk-based capital ratio		11.54	%		11.99	%		12.78	%		13.48	%		13.85	%				11.54	%		13.85	%
Leverage capital ratio		9.43	%		9.56	%		9.73	%		10.16	%		10.20	%				9.43	%		10.20	%
Other Data:
Number of employees (full-time equivalent)		206			202			189			166			159					206			159
Number of banking facilities		10			10			10			10			10					10			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 June 30, 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)
	June 30,			March 31,			December 31,			September 30,			June 30,
		2023			2023			2022			2022			2022
	(Dollars in Thousands, Except Shares)
Assets
Cash and due from banks	$	14,444		$	16,490		$	19,667		$	36,454		$	68,097
Reverse repurchase agreements		-			-			-			-			-
Securities available for sale		112,532			123,838			122,292			125,830			120,265
Equity securities at fair value		2,129			2,163			2,129			2,124			2,218
Loans held for sale		14,726			10,848			5,057			6,471			7,519
Loans		647,823			608,492			577,303			564,841			549,175
Allowance for credit losses on loans (1)		(8,999	)		(9,193	)		(7,894	)		(8,061	)		(8,010	)
Net loans		638,824			599,299			569,409			556,780			541,165
Federal Home Loan Bank Stock		2,818			1,897			1,897			1,897			2,897
Premises and equipment, net		3,879			3,969			4,081			4,159			4,138
Accrued interest receivable		2,036			2,118			1,915			1,807			1,644
Deferred tax assets, net		16,790			16,464			16,273			16,977			16,142
Other real estate owned, net		375			375			375			403			403
Bank owned life insurance		6,160			6,119			6,076			6,040			6,002
Goodwill and other intangible assets		76			81			87			92			98
Other assets		4,732			3,583			3,739			3,931			3,768
Total Assets	$	819,521		$	787,244		$	752,997		$	762,965		$	774,356
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand	$	93,487		$	94,700		$	115,186		$	134,765		$	129,457
Interest-bearing demand		82,484			93,388			76,918			79,306			66,495
Savings		247,339			259,907			260,159			254,146			287,159
Time		190,498			184,344			176,606			165,017			159,389
Total deposits		613,808			632,339			628,869			633,234			642,500
Short-term borrowings		104,238			55,469			24,789			27,480			28,013
Long-term borrowings		9,712			9,704			9,696			9,688			9,680
Accrued interest payable		963			557			554			227			287
Other liabilities		6,924			5,560			5,586			5,108			4,765
Total liabilities		735,645			703,629			669,494			675,737			685,245
Stockholders' Equity
Preferred stock, $1 par value; 5,000,000 authorized shares at both June 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			18,762			18,762
Common stock, $1 par value; 75,000,000 authorized shares; 1,348,716 and 1,323,547 issued shares; 1,334,647 and 1,309,478 outstanding shares at June 30, 2023 and December 31, 2022, respectively. (2)		1,349			1,324			1,324			1,324			1,324
Capital surplus		181,050			180,903			180,777			180,664			180,544
Accumulated deficit		(104,822	)		(105,987	)		(105,025	)		(106,081	)		(107,108	)
Accumulated other comprehensive income, net		(6,973	)		(5,897	)		(6,845	)		(6,907	)		(3,877	)
Treasury stock, 14,791 shares on March 31, 2023 and December 31, 2022 (3)		(534	)		(534	)		(534	)		(534	)		(534	)
Total stockholders' equity		83,876			83,615			83,503			87,228			89,111
Total liabilities and stockholders' equity	$	819,521		$	787,244		$	752,997		$	762,965		$	774,356
(1) Allowance for credit losses on loans is allowance for loan losses in ending dates and periods prior to June 30, 2023.
(2) Both issued and outstanding shares as stated here exclude 52,373 shares of unvested restricted stock awards at June 30, 2023 and 58,897 shares at December 31, 2022.
(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															6 Months Ended
	June 30,			March 31,		December 31,			September 30,			June 30,				June 30,			June 30,
		2023			2023		2022			2022			2022				2023			2022
	(Dollars in thousands)
Interest Income
Loans	$	7,942		$	7,121	$	6,426		$	6,029		$	5,542			$	15,063		$	10,796
Loans held for sale		155			84		63			96			90				239			148
Securities		985			1,031		948			826			683				2,016			1,220
Other investments		70			236		371			283			96				306			126
Total interest income		9,152			8,472		7,808			7,234			6,411				17,624			12,290
Interest Expense
Deposits		3,076			2,364		1,452			662			384				5,440			734
Short-term borrowings		445			118		91			40			12				563			19
Long-term borrowings		122			119		121			121			121				241			177
Total interest expense		3,643			2,601		1,664			823			517				6,244			930
Net interest income		5,509			5,871		6,144			6,411			5,894				11,380			11,360
Provision for (reversal of) credit losses		(246	)		159		(642	)		34			40				(87	)		(285	)
Net interest income after provision for
(reversal of) loan losses		5,755			5,712		6,786			6,377			5,854				11,467			11,645
Noninterest Income
Deposit service charges		76			79		82			86			92				155			180
Other service fees		11			16		15			18			71				27			96
Mortgage banking revenue, net		1,636			1,008		597			1,126			1,268				2,644			2,698
Other income		171			110		117			147			141				281			353
Net gains on sale of securities available for sale		0			0		0			0			0				0			0
Unrealized gains (losses) recognized on equity securities		(34	)		34		4			(93	)		(78	)			0			(190	)
Net gains (loss) on sale of SBA loans		0			151		0			0			126				151			157
Net gains (losses) on sale of assets and (writedowns)		1,438			12		(24	)		29			40				1,450			71
Total noninterest income		3,298			1,410		791			1,313			1,660				4,708			3,365
Noninterest Expense
Compensation and employee benefits		5,101			4,550		4,061			4,240			4,175				9,651			8,404
Equipment		504			475		466			396			439				979			881
Occupancy and premises		404			438		399			390			408				842			830
Data Processing		221			199		202			205			171				420			337
Federal deposit insurance		150			87		70			58			51				237			103
Professional services		317			278		415			244			284				595			508
Telephone and data communication		56			61		66			61			60				117			121
Insurance		68			88		85			74			74				156			159
Other expense		636			629		552			643			712				1,265			1,293
Total noninterest expense		7,457			6,805		6,316			6,311			6,374				14,262			12,636
Income from operations
before income taxes		1,596			317		1,261			1,379			1,140				1,913			2,374
Income tax expense		431			89		351			352			251				520			585
Net income		1,165			228		910			1,027			889				1,393			1,789
Preferred stock dividend		0			0		0			0			0				0			0
Discount from repurchase of preferred stock		0			0		146			0			0				0			0
Net income allocated to common stockholders	$	1,165		$	228	$	1,056		$	1,027		$	889			$	1,393		$	1,789