CIB Marine Bancshares, Inc. ($CIBH)

Good day, ladies and gentlemen. My name is Mark Elste, Chairman of CIB Marine Bancshares. I would like to call this Annual Meeting of Shareholders to order, and welcome all participating today. Copies of this presentation are available on our website at cibmarine.com by clicking the 2026 Annual Meeting link at the top of the page. Before we proceed further, I wish to inform all participants in today's meeting that statements made during this presentation may contain forward-looking information. Forward-looking statements are subject to significant risks and uncertainty, and actual results may differ materially. Please see Slide #3 for forward-looking statement information. We have segmented our presentation into 3 parts. First, we will conduct the official business of the annual meeting. After adjourning the official meeting, the company's CEO, Mr. Chaffin, will review the financial results of 2025 and the unaudited results for the first quarter of 2026. Thereafter, I will offer comments on behalf of the Board concerning issues facing the company. Finally, we will address the questions submitted by shareholders. Now on to the proposals properly tendered for today's annual meeting. I have been advised by the Secretary of the company that the notice of meeting has been duly mailed and that a quorum is present for the topics to be considered with over 80% of the shares represented by proxy as of the start of the meeting. The final tally will be tabulated and included with the minutes of the meeting after adjustments for any additional proxies received. We are holding our Annual Shareholder Meeting virtually again this year. This format significantly reduces costs while ensuring all shareholders, regardless of location, have full access to information. Following the example of our peers, we believe this approach enhances participation and engagement while delivering significant savings. I would now like to introduce the Board and some of our CIB Bank management attending either in person or virtually. First, I would like to welcome our newest Board member, Dennis Pollack. Dennis joined the Board in February of this year. He is an experienced community bank executive, having been President and CEO and Director of several community banks over the last 30 years. Dennis brings a fresh perspective to the Board. His bank strategy, expertise and focus on shareholder return will be appreciated by our investors. Next, allow me to introduce the continuing Board members: Brian Chaffin; Gina Cockin; JoAnn Cotter; Mark Henderson; Rhonda Hopps; Charles Mires; Steve Palmitier; and Ronald Rhoades. Slide #6 shows the primary committees of the Board of Directors and their leadership. Each of our directors serves on at least 2 committees and actively monitors the critical business affairs of the company and beyond on our monthly meetings. I would also like to introduce our executive management team: Brian Chaffin, President and CEO; Patrick Straka, Chief Financial Officer; Daniel Rasmussen, Chief Administrative Officer and General Counsel; Scott Winkel, Chief Credit Officer; Lee Abner, Director of Technology Services; Bridget Condon, Team Leader of Government-Guaranteed Lending; Michael Knoeller, Director of Compliance; Jim Mullaney, Director of Corporate Banking; Lorraine Quintao, Director of Mortgage Banking; and Mark Wilmington, Director of Retail Banking. There are 2 items of business on the agenda for submission to vote by the shareholders at today's meeting: election of directors and ratification of the appointment of our independent public accounting firm. The Board of Directors has nominated the following sitting directors who will serve an additional 3-year term ending at the Annual Meeting of Shareholders in 2029, or until their successors are duly elected and qualified. They are, Gina Cocking, myself and Steve Palmitier. As no other nominations have been received in proper order, according to the procedures of the company's bylaws, nominations are closed. I've been advised by the Secretary that, as of the start of the meeting, each of the nominees has received votes in favor of their election, representing 70% or more of the votes cast with respect to the nominee. 30% or fewer of the votes cast were withheld for each nominee. Accordingly, the nominees are elected. The second proposal on the agenda is the ratification of the appointment of Crowe as the company's independent public accounting firm for the fiscal year that will end on December 31, 2026. I've been advised by the Secretary that votes in favor of the ratification of Crowe's engagement represent more than 97% of the votes cast with less than 1% of the votes cast against and 2% of the votes abstaining. Accordingly, the appointment of Crowe is ratified. All voting results discussed today are as of the beginning of today's meeting. Final voting results will be tabulated and included with the minutes of the meeting. There being no further proposals or official business having been properly presented for consideration, the annual meeting is adjourned. At this time, Mr. Brian Chaffin, your President and CEO, will discuss the results of 2025, what our investors might look forward to in 2026 and beyond. When Brian is finished with his remarks, I will share comments on behalf of the Board of Directors. Brian?

Thank you, Mark. Good afternoon. It is my pleasure to share with you some of the operating results from 2025 and the first quarter of 2026. For a complete review of the 2025 financials, I encourage all shareholders to review the audited financial statements provided with this year's proxy. In addition, while today's discussion focuses on the most important highlights, many of the detailed charts you've seen in the past are included at the end of the slide deck and are available in the PDF posted on our website for anyone who would like additional detail. Slide #12 shows key financial highlights from 2025 and 2024. Slide #13 provides detail on earnings variances. Positive variances were driven by higher net interest income, reflecting a 30 basis point increase in our net interest margin, which rose 2.72% in 2025, and by lower noninterest expense due to reduced commissions and ongoing cost control initiatives. Adverse differences were higher loan loss provisions as described in our year-end shareholder letter and lower noninterest income from the onetime sale leaseback transaction in 2024. Slide #14 reflects a $1.2 million increase in net interest income, offset in part by decline in mortgage banking revenue, following reductions in our mortgage lending staff in 2025. Despite lower mortgage banking revenues, the Mortgage division generated a small profit in 2025 through disciplined cost control measures. This slide also clearly shows the significant positive impact of the Mortgage division under better market conditions. The increase in net interest income was driven by a higher net interest margin, led by lower cost of funds. This positive trend continued into the first quarter of 2026 as the net interest margin increased to 2.96% and loan balances grew by $3 million. Slide #15 reflects the improvement in net interest income and margin in 2025 and first quarter of 2026. Continued improvement in this trend remains our highest priority to improve the core profitability of the Bank and thus improve shareholder value. Slide #16 reflects the Mortgage division's small profit in the first quarter of 2026 despite lower revenues. Mortgage rates have increased since the military conflict in the Middle East began in March, which has adversely impacted loan volumes. While the division faced combined losses of $2.3 million from 2022 through 2024 due to a challenging housing market marked by inventory shortages, higher mortgage rates and affordability pressures, it delivered very strong results in prior years, generating $11.8 million in combined income during 2020 and 2021. Since acquiring the assets of Avenue Mortgage in 2013 and with the strong dedication and hard work of many division employees, the company has achieved a substantial return on its investment of around 25% per annum. Slide #17 shows the improvement in commercial loan originations. As a reminder, the decline in loan production in 2024 was intentional as we focused on redemption of the remaining preferred shares and maintaining our well-capitalized position. We expect continued improvement to loan funding volume in 2026. Slide #18 reflects the geographic and segmentation of the loan portfolio and shows the increase in balance for the first quarter of 2026. Our Government-Guaranteed Lending division experienced a leadership change in late 2025, and we expect increased SBA 7(a) production and gain-on-sale revenue in 2026. Slide #19 provides a breakdown of SBA lending activity, reflecting much higher SBA 504 loan volumes in 2025. 504 loans are not sold in the secondary market, so they do not provide a gain-on-sale premium like SBA 7(a) loan sales. The first quarter of 2026 already reflects higher 7(a) loan origination than all of 2025, which supports gain-on-sale income. Slide #20 reflects the current mix of deposits by market and the balances by type for the past 4 years. As interest rates rose in 2023 and 2024, balances shifted in favor of higher rate deposit accounts as experienced by the financial industry as a whole. Deposit strategies are focused on lowering cost of funds through the repricing of higher rate deposits and growing checking accounts. Slide #21 shows the increase in charge-offs in the first quarter of 2025 as described in our February 2026 shareholder letter, followed by a net recovery in the first quarter of 2026. The fourth quarter charge-off amount was an unfortunate but correct action, and we continue to work out a handful of problem loans and liquidate some collateral. The potential for additional provisioning is always a possibility. It is important to note that CIBM Bank has had substantially better results in both provisions for credit losses and net charge-offs versus our local peer median over the past 3- and 10-year periods. Our nonperforming assets to total assets and nonaccrual loans to total loan ratios both increased at year-end 2025 for the reasons previously highlighted and both dropped slightly during the first quarter of 2026. The allowance for credit losses was 1.27% at year-end 2025 and 1.3% at the end of the first quarter of 2026, above our local peer group median. We issued our earnings release for the first quarter of 2026 earlier this month. Those results are highlighted on Slide #23. Our first quarter shareholder letter providing more detailed information should be available in early May. Income in the first quarter of 2026 was up from the first quarter of 2025 on improved net interest income, better income from mortgage operations and cost controls. The net interest margin increased to 2.97%, up from 2.81% in the prior quarter and 2.62% in the first quarter of 2025. We expect this trend to continue. Maximizing shareholder value while operating in a safe and sound manner remains the primary focus of our company. In 2026, we expect improved profitability and resulting earnings per share supported by: improved net interest income from repricing assets and liabilities, and enhanced earning asset composition, modest loan growth and new checking deposits; lower provisions for credit losses, reflecting a disciplined approach to credit origination and strengthening credit metrics through continued improvements in asset quality; solid contributions in revenue from our SBA loan sale activity; a modest increase in profitability in our mortgage operations; and a lower number of outstanding shares of common stock as a result of our stock repurchase program. The range in net income outcomes for 2026 is primarily due to a reasonable range of outcomes in loan growth, checking account growth, Mortgage division earnings and provision for credit losses. As I conclude my portion of the meeting, I want to extend my heartfelt gratitude to our CIBM colleagues across the company for their unwavering dedication and hard work. Their efforts are truly commendable. I also want to thank our shareholders for your continued support and confidence. Now Mr. Elste has a few remarks to make on behalf of our Board of Directors.

Thank you, Brian. I have a few additional comments to share the perspective of the company's Board on where we are now and our strategy going forward. Brian just shared with you several slides with Bank performance information. But for investors, the primary measurement is stock performance. Steps your Board has taken over the past several years to build shareholder value have resulted in significant growth in both tangible book value of the common stock and in our stock's performance on the OTCQX. In 2024, we completed the final redemption of the company's preferred stock. This milestone created material value for our common shareholders by eliminating what was originally a 49% dilutive effect from the convertibility feature in the Series B preferred. In the first quarter of 2025, we commenced a common stock repurchase plan, something we were unable to do until the complete elimination of the preferred shares. The resultant improvement in tangible book value supported stronger trading prices of CIBH shares on the OTCQX. We've done this without incurring debt and whilst maintaining robust capital ratios. As you examine Slide 26, please note the increase in tangible book value since 2022, demonstrating the impact of preferred and common stock repurchases. From the start of the repurchase activity through the recent quarter end, our stock has improved 30%, while the KBW Regional Bank Index grew at 1%. Current tangible book value of our common stock is $61.09. As of April 24, 2026, CIBH was trading at $39.70 or 65% of book value. Slide #27 demonstrates the progress we have made in our common stock repurchase plan since it began just over a year ago. Given the strong returns we have seen to date, earlier today, the Board approved a $1 million expansion of the repurchase authorization, increasing total capacity under the plan from $2.5 million to $3.5 million, subject to regulatory requirements. As of March 31, 2026, we have repurchased a total of 64,100 shares at an average price of $35.99 per share. We have repurchased approximately 5% of outstanding shares at a cost of $2.3 million. All repurchases have been at a significant discount to book value with an estimated return on the purchases of 60%. Put simply, given the current discount to book value, there is very little we can invest excess capital in, that delivers the same return to our shareholders as repurchasing our own common stock. Every dollar the company spends on stock buybacks below book value returns a meaningful surplus to our shareholders. As the common stock price fluctuates, the Board is actively engaged in monitoring and adjusting repurchase activity to provide the best results for the company and our shareholders. This point is critical to understand and warrants further explanation. Slide 28 demonstrates the value of common stock repurchases at prices below book value. At the top of the slide is the calculation of tangible book value per share. When we buy shares of CIBH at prices below tangible book value, shareholder value is created by spending less to buy each share than the asset value each share represents. The effect is twofold. The denominator effect: if company profits are unchanged, stock repurchases improve earnings per share. By reducing the number of shares, repurchases create accretion to EPS, which many investors focus on. The opportunity costs or drag: CIB Marine purchases shares with available cash, which would otherwise earn interest or be used to reduce company debt. Foregone interest, or the interest paid on borrowed funds is the drag and must be considered in the equation. A stock buyback is accretive to earnings per share only if the earnings yield is higher than the after-tax interest rate we give up by spending cash on the repurchases. When we can buy our shares at prices below tangible book value, that implies that the stock is trading at a very low price/earnings ratio. In that circumstance, the math strongly favors repurchases, making the transaction highly accretive to earnings per share. Value-focused investors understand that discounted repurchases, as described here, are highly efficient uses of capital, all other things being equal. They are a straightforward disciplined way to build value for our shareholders. Our process for repurchase activity includes open market transactions executed on the OTCQX market as well as privately negotiated purchases that are not reflected on the OTCQX. For example, in March of 2026, we concluded the purchase of $750,000 of common stock at a price of $38.43 per share and a direct purchase from a shareholder. The purchase was at a substantial discount to book value and a modest discount to the OTCQX trading price, and we were able to provide liquidity to a shareholder with a large block of shares. All of our repurchase activities have been accomplished without drawing on a credit facility and while maintaining Tier 1 leverage ratio of 8.8% and a total risk-based capital ratio of 13.5%, both well above regulatory standards. While this is all well and good, our Board is aware that fine words don't bake the bread. So let's look at stock performance data comparing CIBH stock and our peer index. In 2024, we completed the final redemption of the preferred stock and concluding a redemption process that began in 2018. Over this period, the original $60 million liquidation preference was reduced at a discount of $3.2 million to carrying value and $12.2 million to the liquidation preference amount. In addition, all conversion rights associated with the preferred shares were terminated. These rights originally represented 49% of the pro forma outstanding common stock, a significant dilutive effect on common shareholders, had they not been redeemed. Recall that until all preferred shares were redeemed, the company was prohibited from paying a dividend or retiring common shares. With those restrictions lifted, common stock repurchases began in early 2025. Based on total preferred and common stock repurchases since 2018 through the most recent quarter end, CIBH has returned 81% to investors compared to 46% for the KBW Regional Bank Index over the same period. In the past 12 months, CIBH stock has increased 32% or 2x that of the KBW Regional Bank Index return of 16%, an exceptional result for our shareholders. This outcome has been focused on by your Board of Directors and management for the last decade. Knowledgeable investors understand that significantly beating an industry index like the KBW Regional Bank Index over nearly 10 years is a very low probability event. Our Board, management group and professional staff deserve recognition for results they have delivered to our shareholders, as clearly demonstrated in the graphs on your screen. While the stock performance has been impressive, we aren't admiring the view. There is work to be done and your Board continues to partner closely with management to improve performance ratios because net interest margin is a primary driver of both earnings and efficiency, strengthening our margin remains a critical priority. The Board also keeps a close watch on individual projects that support our overall results, such as continued profitability improvement within our Mortgage division in context to a dearth of industry-wide mortgage origination activity. Finally, as mentioned last year, our Board and management continue to work closely with investment banking advisers to identify strategic opportunities to further enhance shareholder value. With a simplified capital structure and improving net interest margin, we are in a position to evaluate value-enhancing options that will best serve stakeholders. That process is continuous and uninterrupted. We are now in the second quarter of 2026 with your Board actively engaged with management to grow the organization in a sound manner, make improvements that position us as a peer-leading financial institution and continue building on and surpassing the solid stock performance we have enjoyed in recent years. Finally, for the first time in several years, no questions were submitted. Of course, if you have any questions after the meeting or at any time, please reach out to Brian Chaffin or through our shareholder relations e-mail on our website. We will be happy to respond. This concludes our presentation today. Thank you for your attendance and continued support of CIB Marine.