CIB Marine Bancshares, Inc. Announces 2018 Results

BROOKFIELD, Wis., Jan. 25, 2019 (GLOBE NEWSWIRE) -- CIB Marine Bancshares, Inc. (the “Company” or “CIBM”) (OTCQB: CIBH), the holding company of CIBM Bank, announced its unaudited results of operations and financial condition for the fourth quarter and year-end 2018.  Net income for the year ended December 31, 2018, was $3.3 million or $0.28 basic and $0.15 diluted earnings per share, compared to $27.0 million or $1.49 basic and $0.74 diluted earnings per share for the same period of 2017.  Net income for 2017 included a tax benefit of $22.6 million that reflected special tax adjustment entries related to deferred tax assets and net income for 2018 included a tax expense of $1.2 million. Income before income taxes for the year ended December 31, 2018, was $4.5 million compared to $4.3 million for the same period of 2017.

Select highlights for the quarter and year include:

• Income before taxes was $1.3 million for the quarter ended December 31, 2018, compared to $1.2 million in the same period of 2017.  Comparing the two periods, there was a $0.1 million decrease in net interest income, due primarily to rising cost of funds; a $0.5 million decline in noninterest income, due to lower mortgage loan production; a $1.0 million increase in the reversal of loan losses, due to a significant recovery of prior charge-offs; and a $0.3 million increase in expenses, primarily from higher compensation, other, and equipment expenses.
• Tangible book value per share and stated book value per share at December 31, 2018, were $2.82 and $2.45 per share of common stock, respectively, reflecting increases of $0.29 and $0.41 versus the prior year ending numbers.  The increases were due primarily to net income and the $1.8 million discount to the carry value of the preferred stock repurchased in 2018 that was accretive to the common shareholders. 
• Income before taxes for subsidiary CIBM Bank was $5.7 million for the year 2018 compared to $5.2 million for the same period of 2017.  The improved earnings reflect increases of $0.4 million in net interest income and $0.6 million in non-interest income, as well as a reversal of provisions for loan losses of $1.2 million; offset in part by a $1.8 million increase in expenses, primarily due to higher compensation expenses. 
• Net interest income increased $0.4 million for the year 2018 compared to 2017. The increase was primarily due to increases of $16 million and $6 million in average balances in SBA reverse repurchase agreements and investment securities, respectively.  Both are lower margined asset classes that contributed to the 6 basis point decline in the net interest margin.  Earning asset yields were up 27 basis points and the cost of funds were up 40 basis points for the year 2018 versus 2017.
• Non-interest income increased by $0.7 million in 2018 versus 2017.  The increase was primarily the result of a $7 million increase in SBA 7(a) loans originated for sale in 2018 versus 2017.
• A reversal of provisions for loan losses of $1.2 million was recorded in 2018 versus a provision of $0.2 million in 2017.  The 2018 reversal of provisions for loan losses was primarily due to $2.0 million in recoveries of loans previously charged off versus $0.6 million in charge-offs during the year.
• Non-performing assets, restructured loans, and loans 90 days or more past due and still accruing to total assets was 1.45% at December 31, 2018, versus 1.13% on the same date in 2017.  Despite significant collection activity on lower quality assets during the year, the increase in the rate reflects primarily one commercial real estate loan that was placed on non-accrual during the fourth quarter of 2018.      

Mr. J. Brian Chaffin, President and CEO of CIB Marine Bancshares, Inc., commented, “Results in 2018 were affected by a number of different factors, including: higher SBA loan originations; higher compensation costs; costs related to the repurchase of preferred stock; rising cost of funds due to deposit based funding competition and a one percentage point increase in the federal funds target rate; the growth in lower margined, lower risk assets like the SBA reverse repurchase agreement; and moderated net loan growth.  Although commercial loan portfolio originations exceeded our goals, net loan balances increased by a modest $8 million as new loans were offset in part by collections of some lower quality loans and higher prepayments of quality loans due in part to strategic sales by borrowers of the real estate serving as collateral.”

Regarding preferred stock repurchases he stated, “During January 2019, CIBM bid to repurchase 14,688.94 shares of Series A Preferred Stock and 1,155.6 shares of Series B Preferred Stock.  The repurchase opportunity came about rapidly as a result of the liquidation of an investment trust (or Collateralized Debt Obligation) that has held the respective preferred shares of CIBM since 2009.  CIBM’s bid met the financial requirements for repurchase described in prior communications with shareholders, however, CIBM was not the winning bidder.”

“Although the latest opportunity could not be achieved within the disciplined parameters we have established, the previously reported $1.8 million discount to the carry value of shares repurchased in 2018 provided a nice bump to the book value of CIBM’s common stock. CIBM plans to hold the second of three annual modified Dutch auctions during the first half of 2019; more information will be forthcoming.  Given our limited amount of cash on hand, the price CIBM is willing to pay to repurchase preferred stock will require significant discounting to our current carrying value of the preferred stock in order to compensate for any possible dilutive effects of a capital raise, if needed to fund a repurchase, and any potential adverse consequences to our current $21 million in deferred tax assets,” he reminded shareholders.

“Lastly, our name unification project has begun as we phase out the use of our legacy market names and roll out the use of the bank name, CIBM Bank, in all markets and divisions.  This will help us build a common brand name in all markets, save marketing costs over time and unify our purpose and mission under one name and logo,” he concluded.  

CIB Marine Bancshares, Inc. is the holding company for CIBM Bank, which operates eleven banking offices and four 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.

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