CIB Marine Bancshares, Inc. Announces Second Quarter 2023 Results

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
[email protected]