CIB Marine Bancshares, Inc. Announces Second Quarter 2022 Results

Rhea-AI Summary

CIB Marine Bancshares (CIBH) reported a net income of $0.9 million for Q2 2022, down from $1.4 million in Q2 2021. For the first half of 2022, net income totaled $1.8 million, a decrease from $3.5 million in 2021. Mortgage banking income significantly declined due to rising interest rates, causing a 54% drop in loan originations. Despite challenges, deposits grew by $24 million as of June 30, 2022. The company is also focused on improving core banking operations and managing loan risks amid economic uncertainty. Plans to redeem Series A preferred stock were announced for Q4 2022.

Positive

• Deposits increased by $24 million from December 31, 2021, to June 30, 2022.
• Core banking activities showed improved net interest income, reaching $5.9 million for the quarter.
• Asset quality remains strong with non-performing assets at 0.25%.
• Implementation of a new mortgage loan operating system is underway to enhance efficiency.

Negative

• Net income for Q2 2022 fell to $0.9 million, down 36% year-over-year.
• Mortgage banking revenues dropped significantly by $1.5 million for Q2 and $5 million for the first half of 2022.
• Loan originations plummeted by 54% due to rising mortgage rates, affecting overall earnings.

BROOKFIELD, Wis., July 15, 2022 (GLOBE NEWSWIRE) -- CIB Marine Bancshares, Inc. (the “Company” or “CIBM”) (OTCQX: CIBH), the holding company of CIBM Bank, announced its unaudited results of operations and financial condition for the quarter and six months ended June 30, 2022. Net income for core banking activity (i.e., deposits and portfolio loans) strengthened, however earnings declined as a result of substantially reduced mortgage banking income following the significant rise in mortgage interest rates. Net income for the quarter was $0.9 million, or $0.68 basic and $0.49 diluted earnings per share, compared to $1.4 million, or $1.08 basic and $0.63 diluted earnings per share, for the same period of 2021; and net income for the six month period was $1.8 million, or $1.38 basic and $1.00 diluted earnings per share, compared to $3.5 million, or $2.74 basic and $1.59 diluted earnings per share, for the same period in 2021.

Financial highlights for the quarter include:

• Net interest income and margin for the quarter were $5.9 million and 3.23%, respectively, compared to $5.8 million and 3.26%, respectively, in the same period of 2021; and $11.4 million and 3.15%, respectively, for the six month period compared to $11.5 million and 3.24%, respectively, for the same period of 2021.   The six month period includes $0.3 million less PPP loan fee accretion income and $0.2 million more subordinated debt interest expense compared to the same period in 2021, revealing a stronger result for core banking activity in 2022 versus 2021. PPP loans are substantially paid down as of June 30, 2022, with remaining principal balances of $0.2 million and a negligible amount of fees left to accrete in the future.
• Net mortgage banking revenues were down $1.5 million and $5.0 million for the quarter and six month period, respectively, compared to the same periods of 2021. The change was due to a 54% decline in loan originations for the six months ended June 30, 2022, compared to the same period of 2021, as a result of an increase of more than 150 basis points in average mortgage rates that also prompted tightening margins across the industry as mortgage producers began to compete more intensively for each mortgage. Related Mortgage Division compensation expenses were also down $0.8 million and $2.5 million for the quarter and six month period, respectively, when compared to the same periods in 2021.
• Although nominally up from the lows reported for March 31, 2022, asset quality measures remain near cycle-best levels. As of June 30, 2022, 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 0.25% and 0.22%, respectively, compared to 0.21% and 0.14%, respectively, at December 31, 2021, and 0.29% and 0.19%, respectively, at June 30, 2021. In addition, CIBM reported no or 0.00% loans 30 days or greater past due and still accruing at June 30, 2022, compared to 0.40% on June 30, 2021; and made provisions for future loan losses of $40,000 during the second quarter of 2022 compared to a reversal of $0.3 million during in the same period of 2021.
• Checking deposits grew by $12 million and total deposits grew by $24 million from December 31, 2021, to June 30, 2022, due to ongoing marketing activity. Short-term federal funds and US T-Bill interest rates have risen substantially since the beginning of the year and, as a result, pressure on balances is expected to increase.

Mr. J. Brian Chaffin, CIBM’s President and CEO, commented, “We continue to focus on growing and improving our core banking activities and are seeing positive outcomes, including improved net interest income composition and growth in key loan and deposit balances. Although reduced residential mortgage activity has had a large impact on our earnings in 2022 compared to the prior two years, it has also afforded us the ability to make significant progress in the implementation of a new mortgage loan operating system, which will provide a better loan origination experience for both employees and customers alike in the future.”  

He added, “Project Falcon – which we launched two years ago – also concentrates on identifying and implementing internal process improvements and efficiency-enhancing technologies that allow us to maximize our internal capacity. This is critically important as we target improved efficiencies through higher core revenues as well as improvements in our cost structure and controls.”    

Mr. Chaffin also cautioned, “With growing economic uncertainty, high inflation rates, and rising interest rates, recession risks are significant in the foreseeable future. As a result, we are both seeking business opportunities to enhance our performance in the current markets and actively managing the loan portfolio to reflect higher future credit risks.”

He concluded, “As a reminder, at our 2022 Annual Meeting, we announced plans to redeem approximately 5,830 shares of Series A preferred stock during the fourth quarter of 2022. The redemption will be pro-rata among Series A preferred stockholders and at the fixed redemption price in our Articles of Incorporation of $825 per share, for a total price of approximately $4.8 million. Further details will be provided as we near the redemption date.”

CIB Marine Bancshares, Inc. is the holding company for CIBM Bank, which operates ten banking offices and two mortgage loan offices in Illinois, Wisconsin and Indiana. 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															6 Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
		2022			2022			2021			2021			2021			2022			2021
	(Dollars in thousands, except share and per share data)
Selected Statement of Operations Data:
Interest and dividend income	$	6,411		$	5,879		$	6,244		$	6,311		$	6,239		$	12,290		$	12,504
Interest expense		517			413			387			417			456			930			992
Net interest income		5,894			5,466			5,857			5,894			5,783			11,360			11,512
Provision for (reversal of) loan losses		40			(325	)		(502	)		(413	)		(300	)		(285	)		(280	)
Net interest income after provision for
(reversal of) loan losses		5,854			5,791			6,359			6,307			6,083			11,645			11,792
Noninterest income (1)		1,660			1,705			2,718			4,072			3,135			3,365			8,281
Noninterest expense		6,374			6,262			7,641			7,517			7,279			12,636			15,219
Income before income taxes		1,140			1,234			1,436			2,862			1,939			2,374			4,854
Income tax expense		251			334			336			788			558			585			1,356
Net income	$	889		$	900		$	1,100		$	2,074		$	1,381		$	1,789		$	3,498
Common Share Data:
Basic net income per share (2)	$	0.68		$	0.69		$	1.28		$	1.61		$	1.08		$	1.38		$	2.74
Diluted net income per share (2)		0.49			0.50			0.92			0.94			0.63			1.00			1.59
Dividend		0.00			0.00			0.00			0.00			0.00			0.00			0.00
Tangible book value per share (3)		53.68			54.53			57.06			55.60			54.19			53.68			54.19
Book value per share (3)		51.22			52.07			54.55			50.58			49.16			51.22			49.16
Weighted average shares outstanding - basic		1,307,289			1,295,573			1,287,438			1,286,536			1,282,917			1,300,164			1,275,971
Weighted average shares outstanding - diluted		1,798,002			1,792,181			1,784,005			2,208,493			2,208,600			1,793,809			2,197,071
Financial Condition Data:
Total assets	$	774,356		$	764,641		$	745,393		$	775,912		$	753,660		$	774,356		$	753,660
Loans		549,175			529,212			543,819			559,079			553,642			549,175			553,642
Allowance for loan losses		(8,010	)		(8,011	)		(8,352	)		(8,699	)		(9,165	)		(8,010	)		(9,165	)
Investment securities		122,483			109,533			106,647			102,243			108,825			122,483			108,825
Deposits		642,500			631,953			618,991			624,579			609,964			642,500			609,964
Borrowings		37,693			36,789			27,049			34,577			29,592			37,693			29,592
Stockholders' equity		89,111			89,931			91,780			108,984			107,051			89,111			107,051
Financial Ratios and Other Data:
Performance Ratios:
Net interest margin (4)		3.23	%		3.05	%		3.18	%		3.21	%		3.26	%		3.15	%		3.24	%
Net interest spread (5)		3.14	%		2.98	%		3.10	%		3.12	%		3.16	%		3.06	%		3.15	%
Noninterest income to average assets (6)		0.91	%		0.97	%		1.43	%		2.13	%		1.68	%		0.94	%		2.24	%
Noninterest expense to average assets		3.34	%		3.35	%		3.98	%		3.92	%		3.91	%		3.35	%		4.09	%
Efficiency ratio (7)		83.52	%		85.98	%		88.87	%		75.34	%		81.69	%		84.72	%		76.75	%
Earnings on average assets (8)		0.47	%		0.48	%		0.57	%		1.08	%		0.74	%		0.47	%		0.94	%
Earnings on average equity (9)		3.96	%		3.98	%		4.47	%		7.59	%		5.18	%		3.97	%		6.62	%
Asset Quality Ratios:
Nonaccrual loans to loans (10)		0.22	%		0.13	%		0.14	%		0.18	%		0.19	%		0.22	%		0.19	%
Nonaccrual loans, restructured loans and
loans 90 days or more past due and still
accruing to total loans (10)		0.28	%		0.20	%		0.21	%		0.27	%		0.32	%		0.28	%		0.32	%
Nonperforming assets, restructured loans
and loans 90 days or more past due and still
accruing to total assets (10)		0.25	%		0.19	%		0.21	%		0.25	%		0.29	%		0.25	%		0.29	%
Allowance for loan losses to total loans (10)		1.46	%		1.51	%		1.54	%		1.56	%		1.66	%		1.46	%		1.66	%
Allowance for loan losses to nonaccrual loans,
restructured loans and loans 90 days or
more past due and still accruing (10)		512.48	%		742.45	%		726.26	%		575.33	%		519.26	%		512.48	%		519.26	%
Net charge-offs (recoveries) annualized
to average loans (10)		0.03	%		0.01	%		-0.11	%		0.04	%		-0.16	%		0.02	%		-0.12	%
Capital Ratios:
Total equity to total assets		11.51	%		11.76	%		12.31	%		14.05	%		14.20	%		11.51	%		14.20	%
Total risk-based capital ratio		16.85	%		17.52	%		15.53	%		18.14	%		18.02	%		16.85	%		18.02	%
Tier 1 risk-based capital ratio		13.85	%		14.43	%		14.28	%		16.89	%		16.76	%		13.85	%		16.76	%
Leverage capital ratio		10.20	%		10.27	%		10.22	%		12.44	%		12.32	%		10.20	%		12.32	%
Other Data:
Number of employees (full-time equivalent)		159			172			177			179			176			159			176
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 $0.5 million for the quarter ended December 31, 2021.
(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) Net interest margin is the ratio of net interest income to average interest-earning assets.
(5) Net interest spread is the yield on average interest-earning assets less the rate on average interest-bearing liabilities.
(6) Noninterest income to average assets excludes gains and losses on securities.
(7) The efficiency ratio is noninterest expense divided by the sum of net interest income plus noninterest income, excluding gains and losses on securities.
(8) Earnings on average assets are net income divided by average total assets.
(9) Earnings on average equity are net income divided by average stockholders' equity.
(10) Excludes loans held for sale.

CIB MARINE BANCSHARES, INC.
Consolidated Balance Sheets (unaudited)
	June 30,			March 31,			December 31,			September 30,			June 30,
		2022			2022			2021			2021			2021
	(Dollars in Thousands, Except Shares)
Assets
Cash and due from banks	$	68,097		$	88,605		$	59,184		$	69,217		$	52,467
Reverse repurchase agreements		-			-			-			-			-
Securities available for sale		120,265			107,237			104,240			99,813			106,383
Equity securities at fair value		2,218			2,296			2,407			2,430			2,442
Loans held for sale		7,519			9,567			9,859			18,258			13,168
Loans		549,175			529,212			543,819			559,079			553,642
Allowance for loan losses		(8,010	)		(8,011	)		(8,352	)		(8,699	)		(9,165	)
Net loans		541,165			521,201			535,467			550,380			544,477
Federal Home Loan Bank Stock		2,897			3,140			3,140			3,140			3,140
Premises and equipment, net		4,138			4,226			4,200			3,979			3,873
Accrued interest receivable		1,644			1,611			1,605			1,813			1,916
Deferred tax assets, net		16,142			15,758			14,731			15,193			15,632
Other real estate owned, net		403			403			403			403			403
Bank owned life insurance		6,002			5,966			5,930			5,894			4,861
Goodwill and other intangible assets		98			103			109			115			120
Other assets		3,768			4,528			4,118			5,277			4,778
Total Assets	$	774,356		$	764,641		$	745,393		$	775,912		$	753,660
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand	$	129,457		$	124,724		$	120,479		$	122,441		$	121,862
Interest-bearing demand		66,495			67,362			63,693			62,414			61,439
Savings		287,159			294,255			289,943			287,609			266,085
Time		159,389			145,612			144,876			152,115			160,578
Total deposits		642,500			631,953			618,991			624,579			609,964
Short-term borrowings		28,013			27,117			27,049			34,577			29,592
Long-term borrowings		9,680			9,672			-			-			-
Accrued interest payable		287			144			100			111			127
Other liabilities		4,765			5,824			7,473			7,661			6,926
Total liabilities		685,245			674,710			653,613			666,928			646,609
Stockholders' Equity
Preferred stock, $1 par value; 5,000,000 authorized shares at June 30, 2022 and December 31, 2021; 7% fixed rate noncumulative perpetual issued; 20,463 shares and 40,690 shares of series A and 1,610 shares and 3,201 shares of series B; convertible; $22.1 million and $43.9 million aggregate liquidation preference, respectively		18,762			18,762			18,762			37,308			37,308
Common stock, $1 par value; 75,000,000 authorized shares; 1,323,547 and 1,306,660 issued shares; 1,309,478 and 1,292,591 outstanding shares at June 30, 2022 and December 31, 2021, respectively. (1)		1,324			1,318			1,307			1,302			1,301
Capital surplus		180,544			180,431			180,360			179,557			179,421
Accumulated deficit		(107,108	)		(107,997	)		(108,897	)		(109,997	)		(112,071	)
Accumulated other comprehensive income, net		(3,877	)		(2,049	)		782			1,348			1,626
Treasury stock, 14,791 shares on June 30, 2022 and December 31, 2021 (2)		(534	)		(534	)		(534	)		(534	)		(534	)
Total stockholders' equity		89,111			89,931			91,780			108,984			107,051
Total liabilities and stockholders' equity	$	774,356		$	764,641		$	745,393		$	775,912		$	753,660
(1) Both issued and outstanding shares as stated here exclude 59,957 shares of unvested restricted stock awards at June 30, 2022 and 66,299 shares at December 31, 2021.
(2) 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,
		2022			2022			2021			2021			2021				2022			2021
	(Dollars in thousands)
Interest Income
Loans	$	5,542		$	5,254		$	5,572		$	5,646		$	5,583			$	10,796		$	11,107
Loans held for sale		90			58			131			135			95				148			270
Securities		683			537			516			509			551				1,220			1,106
Other investments		96			30			25			21			10				126			21
Total interest income		6,411			5,879			6,244			6,311			6,239				12,290			12,504
Interest Expense
Deposits		384			350			379			409			447				734			959
Short-term borrowings		12			7			8			8			9				19			33
Long-term borrowings		121			56			0			0			0				177			0
Total interest expense		517			413			387			417			456				930			992
Net interest income		5,894			5,466			5,857			5,894			5,783				11,360			11,512
Provision for (reversal of) loan losses		40			(325	)		(502	)		(413	)		(300	)			(285	)		(280	)
Net interest income after provision for
(reversal of) loan losses		5,854			5,791			6,359			6,307			6,083				11,645			11,792
Noninterest Income
Deposit service charges		92			88			95			97			90				180			174
Other service fees		71			25			23			35			43				96			83
Mortgage banking revenue, net		1,268			1,430			2,300			3,626			2,763				2,698			7,746
Other income		141			212			185			186			280				353			472
Net gains on sale of securities available for sale		0			0			0			0			0				0			0
Unrealized gains (losses) recognized on equity securities		(78	)		(112	)		(23	)		(12	)		7				(190	)		(36	)
Net gains (loss) on sale of SBA loans		126			31			120			151			0				157			0
Net gains (losses) on sale of assets and (writedowns)		40			31			18			(11	)		(48	)			71			(158	)
Total noninterest income		1,660			1,705			2,718			4,072			3,135				3,365			8,281
Noninterest Expense
Compensation and employee benefits		4,175			4,229			5,334			5,436			5,099				8,404			11,055
Equipment		439			442			446			390			384				881			763
Occupancy and premises		408			422			400			395			443				830			877
Data Processing		171			166			167			105			181				337			366
Federal deposit insurance		51			52			51			46			47				103			95
Professional services		284			224			353			227			328				508			581
Telephone and data communication		60			61			67			70			56				121			116
Insurance		74			85			72			66			64				159			132
Other expense		712			581			751			782			677				1,293			1,234
Total noninterest expense		6,374			6,262			7,641			7,517			7,279				12,636			15,219
Income from operations
before income taxes		1,140			1,234			1,436			2,862			1,939				2,374			4,854
Income tax expense		251			334			336			788			558				585			1,356
Net income		889			900			1,100			2,074			1,381				1,789			3,498
Preferred stock dividend		0			0			0			0			0				0			0
Discount from repurchase of preferred stock		0			0			546			0			0				0			0
Net income allocated to
common stockholders	$	889		$	900		$	1,646		$	2,074		$	1,381			$	1,789		$	3,498

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

FAQ

What was CIB Marine Bancshares' net income for Q2 2022?

CIB Marine Bancshares reported a net income of $0.9 million for Q2 2022.

How much did mortgage banking revenue decline for CIB Marine in 2022?

Mortgage banking revenues declined by $1.5 million in Q2 2022 and by $5 million for the first half of the year.

What are the financial highlights for CIBH as of June 30, 2022?

Net interest income was $5.9 million with a margin of 3.23%, and total deposits grew by $24 million.

When is CIB Marine planning to redeem Series A preferred stock?

CIB Marine plans to redeem approximately 5,830 shares of Series A preferred stock in Q4 2022.

What challenges is CIB Marine facing in the current economic environment?

CIB Marine is managing higher credit risk due to economic uncertainty, high inflation, and rising interest rates.