CIB MARINE BANCSHARES INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

COMMISSION FILE NUMBER 000-24149

CIB MARINE BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

WISCONSIN 37-1203599
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

N27 W24025 PAUL COURT, PEWAUKEE, WISCONSIN 53072
(Address of principal executive offices, Zip Code)

(262) 695-6010
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____

At May 12, 2003 CIB Marine had 18,313,742 shares of common stock
outstanding.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CIB MARINE BANCSHARES, INC

CONSOLIDATED BALANCE SHEET
(UNAUDITED)

See accompanying Notes to Unaudited Consolidated Financial Statements

1

CIB MARINE BANCSHARES, INC

CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

See accompanying Notes to Unaudited Consolidated Financial Statements

2

CIB MARINE BANCSHARES, INC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)

See accompanying Notes to Unaudited Consolidated Financial Statements

3

CIB MARINE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See accompanying Notes to Unaudited Consolidated Financial Statements

4

CIB MARINE BANCSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements should be read
in conjunction with CIB Marine Bancshares, Inc.'s ("CIB Marine") 2002 Annual
Report on Form 10-K. In the opinion of management, the unaudited consolidated
financial statements included in this report reflect all adjustments which are
necessary to present fairly CIB Marine's financial condition, results of
operations, and cash flows as of and for the three-month periods ended March 31,
2003 and 2002. The results of operations for the three-month period ended March
31, 2003 are not necessarily indicative of results to be expected for the entire
year. The consolidated financial statements include the accounts of CIB Marine
and its wholly-owned and majority-owned subsidiaries, including companies which
are held for disposal. All significant intercompany balances and transactions
have been eliminated.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Estimates used in the preparation of the financial statements are
based on various factors, including the current interest rate environment and
the general strength of the local economy. Changes in these factors can
significantly affect CIB Marine's net interest income and the value of its
recorded assets and liabilities.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45 (FIN 45) Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, to clarify accounting and disclosure requirements relating to a
guarantor's issuance of certain types of guarantees. FIN 45 requires entities to
disclose additional information about certain guarantees, or groups of similar
guarantees, even if the likelihood of the guarantor's having to make any
payments under the guarantee is remote. For certain guarantees, the
interpretation also requires that guarantors recognize a liability equal to the
fair value of the guarantee upon its issuance. CIB Marine adopted FIN 45 on
January 1, 2003. Adoption of FIN 45 did not have a material impact on CIB
Marine's financial statements.

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities, an
interpretation of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to improve financial reporting of special purpose and other
entities. In accordance with the interpretation, business enterprises that
represent the primary beneficiary of another entity by retaining a controlling
financial interest in that entity's assets, liabilities, and results of
operating activities must consolidate the entity in their financial statements.
Prior to the issuance of FIN 46, consolidation generally occurred when an
enterprise controlled another entity through voting interests. The accounting
provisions for existing unconsolidated entities of FIN 46 must be adopted July
1, 2003. Certain entities in which CIB Marine has an interest are being
evaluated, however adoption of FIN 46 is not expected to materially affect the
consolidated results of operations or financial position.

Reclassifications have been made to certain amounts as of and for the
three-month period ended March 31, 2002 to be consistent with classifications
for 2003.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 2 -- SECURITIES

The amortized cost, gross unrealized gains and losses, and approximate fair
values of securities are as follows:

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 3 -- LOANS

The components of loans are as follows:

Certain directors and principal officers of CIB Marine and its subsidiaries
and companies with which they are affiliated, are customers of, and have banking
transactions with, the subsidiary banks in the ordinary course of business. Such
loans totaled $55.3 million and $51.2 million at March 31, 2003 and December 31,
2002, respectively.

NOTE 4 -- GOODWILL AND OTHER INTANGIBLE ASSETS

CIB Marine's intangible asset values are as follows:

NOTE 5 -- COMPANIES HELD FOR DISPOSAL

CIB Marine has acquired two companies through loan collection activities
that are classified as held for disposal. The gross assets and liabilities of
these companies are separately reported on the Consolidated Balance Sheet.
Intercompany loan and cash balances and interest income and expense between the
two companies and CIB Marine have been eliminated from the totals shown on the
Consolidated Financial Statements. The financial statements of these companies
shown below include all adjustments necessary to reflect the fair values of the
assets and liabilities at date of acquisition.

CANRON CORPORATION

CIB Marine acquired Canron, a steel fabrication and erection company, in
October 2002 from the Borrower pursuant to a Settlement Order entered in the
Bankruptcy Court. CIB Marine is exploring various exit strategies relative to
Canron, all of which CIB Marine management has authority to do, including the

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- COMPANIES HELD FOR DISPOSAL -- CONTINUED

immediate sale of the company in its current condition, the stabilization of
operations and subsequent sale, or an orderly liquidation.

At March 31, 2003, CIB Marine also had $30.8 million in loans and interest
income of $0.4 million from Canron, all of which are eliminated in the
Consolidated Financial Statements of CIB Marine. These loans are collateralized
by a first lien on essentially all of the business assets of Canron, including
accounts receivable, certain inventories, equipment, and real estate.

Canron's functional currency is the Canadian dollar. The translation from
the Canadian dollar to U.S. dollars for balance sheet accounts is based upon
current exchange rates in effect at the balance sheet date and for revenue and
expense is based on the weighted average exchange rate during the period. The
gain or loss resulting from translation is included in accumulated other
comprehensive income. Gains related to translation are considered to be
reinvested in Canron therefore no provision for deferred income taxes has been
made for the repatriation of such gains.

The following table summarizes the composition of Canron's balance sheet:

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- COMPANIES HELD FOR DISPOSAL -- CONTINUED

Canron's pre-tax loss is included in CIB Marine's Other Income for the
quarter ended March 31, 2003. Canron's results of operations for the quarters
ended March 31, 2003 and 2002 are as follows:

The following represents supplemental pro forma disclosure required by
Statement of Financial Accounting Standards No. 141, Business Combinations, of
CIB Marine's consolidated net income and earnings per share as though the
business combination had been completed as of January 1, 2002.

See Item 2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Companies Held for Disposal -- Canron Corporation"
for additional information regarding the Borrower and Canron.

MICR, INC.

CIB Marine acquired and/or assumed, through MICR, Inc., a wholly owned
subsidiary of CIB-Chicago, the business and certain assets and liabilities of a
manufacturer of payment processing systems in October 2000. This business is
classified as a held for sale asset. Pre-tax income was $0.2 and $0.4 million
for the quarters ended March 31, 2003 and 2002, respectively. Pre-tax income
related to this business is classified as Other Income in the Consolidated
Statements of Income. CIB Marine management, which has authority to do so, has
developed and implemented a plan to sell this business.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- COMPANIES HELD FOR DISPOSAL -- CONTINUED

The following table summarizes the composition of MICR, Inc.'s balance
sheet:

NOTE 6 -- OTHER ASSETS

The following table summarizes the composition of CIB Marine's other
assets:

Other investments include interests in three limited partnerships. The
carrying value of these investments was $3.2 million at March 31, 2003 and $3.0
million at December 31, 2002. Equity income recorded on the limited partnerships
was $0.3 million for both of the three-month periods ended March 31, 2003 and
2002. There is currently no public market for these investments, and it is
unlikely that such a market will develop. These investments were purchased from
the Borrower in September 1999 to provide the Borrower with cash to meet its
current obligations to CIB Marine and other lenders. In December 2001, CIB
Marine purchased shares of the common stock of a closely held information
services company, which represents less than a 5% interest in the company, at a
public sale from one of its subsidiary banks as a result of a defaulted loan.
The common stock was owned by the Borrower and held as collateral for certain
loans made to the Borrower. The amount of this investment is carried at the
lower of cost or estimated fair market value which was estimated to be $1.6
million at both March 31, 2003 and December 31, 2002. See Item 2 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Companies Held for Disposal -- Canron Corporation" for additional
information regarding the Borrower.

Other investments also include investments in various affordable housing
partnerships. The carrying value of these investments, accounted for under the
equity method, was $4.1 million at March 31, 2003 and $4.2 million at December
31, 2002. CIB Marine has engaged in these transactions to provide additional

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 6 -- OTHER ASSETS -- CONTINUED

qualified investments under the CRA and to receive related income tax credits.
The partnerships provide affordable housing to low income residents within CIB
Marine's markets and other locations.

NOTE 7 -- SHORT-TERM BORROWINGS

The following table presents information regarding short-term borrowed
funds:

NOTE 8 -- LONG-TERM BORROWINGS

The following table presents information regarding amounts payable to the
Federal Home Loan Bank of Chicago that are included in the Consolidated Balance
Sheets as long-term borrowings:

CIB Marine is required to maintain qualifying collateral as security for
both the short-term and long-term FHLB Notes. The debt to collateral ratio is
dependent upon the type of collateral pledged and ranges from 60% on loans held
for sale to 90% on certain types of government securities. CIB Marine had
collateral of $185.2 million and $316.2 million at March 31, 2003, and December
31, 2002, respectively. As of March 31, 2003, this collateral consisted of
securities with a fair market value of $66.7 million and 1-4 family residential
mortgages of $118.5 million. The residential mortgages used as collateral
consist primarily of loans held for sale.

NOTE 9 -- STOCKHOLDERS' EQUITY

CIB Marine and its subsidiary banks are subject to various regulatory
capital requirements administered by the federal banking agencies. Pursuant to
federal holding company and bank regulations, CIB Marine and each bank
subsidiary is assigned to a capital category. There are five capital categories
defined in the regulations: well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 9 -- STOCKHOLDERS' EQUITY -- CONTINUED

critically undercapitalized. The assigned capital category is largely determined
by three ratios that are calculated in accordance with specific instructions
included in the regulations: total risk adjusted capital, Tier 1 capital, and
Tier 1 leverage ratios. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the bank subsidiaries must meet specific
capital guidelines that involve quantitative measures of the bank's assets and
certain off-balance sheet items as calculated under regulatory accounting
practices. The banks' capital amounts and classifications are also subject to
qualitative judgments by the regulators about risk weightings and other factors.
To be categorized as well-capitalized, the bank subsidiaries must maintain total
risk adjusted capital, Tier 1 capital, and Tier 1 leverage ratios of 10.0%, 6.0%
and 5.0%, respectively. At March 31, 2003, all of the bank subsidiaries were
categorized as well-capitalized under the regulatory framework for prompt
corrective action. Classification of a subsidiary bank in any of the
undercapitalized categories can result in certain mandatory and possible
additional discretionary actions by regulators that could have a direct material
effect on the Consolidated Financial Statements.

On January 30, 2003, CIB-Chicago entered into a Memorandum of Understanding
(the "Memorandum") with the Illinois Office of Banks and Real Estate (OBRE) and
the FDIC (together the "Regulators"). The Memorandum was entered into as a
result of deterioration in the credit quality of the loan portfolio, the level
of concentrations of credit, and weaknesses in the credit administration process
identified during the OBRE's regular examination of CIB-Chicago, which commenced
on September 23, 2002.

Pursuant to the Memorandum, CIB-Chicago has agreed to take certain actions
to correct the deficiencies noted within the examination report. In addition,
during the period in which the Memorandum is in effect, CIB-Chicago has agreed
to maintain a Tier 1 capital level equal to or exceeding 8% of the bank's total
assets. In the event such ratio is less than 8% as of June 30 or December 31 of
each calendar year the Memorandum is in effect, the bank is required within 30
days thereof to submit to the Regulators a plan for the augmentation of the
bank's capital accounts. Also, unless prior written consent is received from the
Regulators, CIB -- Chicago has agreed to restrict its loan growth to no more
than 2% during any consecutive three-month period and suspend the declaration or
payment of dividends.

The Memorandum is not a formal supervisory action. Failure to comply with
the Memorandum can lead to a formal enforcement action which could have a
material adverse affect on CIB Marine and its operations. CIB Marine has
initiated action plans to correct the deficiencies noted in the examination
report.

NOTE 10 -- EARNINGS PER SHARE COMPUTATIONS

The following provides a reconciliation of basic and diluted earnings per
share.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 11 -- STOCK OPTION PLANS

The following is a reconciliation of stock option activity for the three
months ended March 31, 2003.

CIB Marine applies Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees (APB 25), and related interpretations
in accounting for its stock-based compensation plans. Under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123), companies may elect to recognize stock-based compensation expenses
based on the fair value of the awards or continue to account for stock-based
compensation under APB 25. CIB Marine has elected to continue to apply the
provisions of APB 25.

Had compensation expense for these plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the
methodology in SFAS 123, CIB Marine's pro forma net income and earnings per
share would have been as follows:

Fair value has been estimated using the minimum value method as defined in
SFAS 123. Key assumptions used were zero percent volatility, zero percent
dividend yield, expected lives of ten years and risk-free interest rates
averaging 5.04% for 2002. The per share weighted average fair value of stock
options granted during the three months ended March 31, 2002 was $9.94 on the
date of grant. Because the options vest over a five-year period, the pro forma
disclosures are not necessarily representative of the effects on reported net
income for future years.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 12 -- BUSINESS SEGMENTS

CIB Marine has determined that its two reportable business segments are
General Banking and Mortgage Banking. General Banking consists of making loans,
accepting deposits, and providing other traditional banking services to CIB
Marine's commercial and retail customers. These products and services are
provided primarily by CIB Marine's subsidiary banks through its branch network.
Mortgage Banking primarily includes the operations of our mortgage banking
subsidiary, Mortgage Services, Inc. Mortgage Services originates and purchases
residential mortgages through a network of brokers, correspondent banks, and CIB
Marine's banking facilities. The majority of these loans are sold into the
secondary market.

Management reviews the operating performance of these segments using
primarily legal entity based financial reports. Management support services are
provided to the business segments by the holding company and an information
services subsidiary. The remaining unrecovered expenses of the holding company
are shown as corporate overhead in the business segment table below.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis presents CIB Marine's consolidated
financial condition as of March 31, 2003 and results of operations for the three
months ended March 31, 2003. This discussion should be read together with the
consolidated financial statements and accompanying notes contained in Part I,
Item 1 of this report, as well as CIB Marine's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002.

FORWARD-LOOKING STATEMENTS

CIB Marine has made statements in this report and documents that are
incorporated by reference that 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," "will be," "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, which 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. Potential risks and uncertainties that
may affect CIB Marine's operations, performance, development and business
results include the following:

- Adverse changes in business conditions in the banking industry generally
and in the markets in which CIB Marine operates;

- Changes in the legislative and regulatory environment which adversely
affect CIB Marine;

- Changes in accounting policies and practices;

- Changes in interest rates and changes in monetary and fiscal policies
which could negatively affect net interest margins, asset valuations and
expense expectations;

- Increased competition from other financial and non-financial
institutions;

- CIB Marine's ability to generate or obtain the funds necessary to achieve
its future growth objectives;

- CIB Marine's ability to manage its future growth;

- CIB Marine's ability to identify attractive acquisition and growth
opportunities;

- CIB Marine's ability to attract and retain key personnel;

- Adverse changes in CIB Marine's loan and investment portfolios;

- Changes in the financial condition or operating results of one or more
borrowers or related groups of borrowers or borrowers within a single
industry or small geographic region where CIB Marine has a concentration
of credit extended to those borrowers or related groups or to borrowers
within that single industry or small geographic region;

- Adverse changes in the valuation of assets held for disposal and/or
additional losses resulting from operations or disposition thereof;

- The competitive impact of technological advances in the banking industry;

- The costs and effects of unanticipated litigation and of unexpected or
adverse outcomes in such litigations; and

- Other risks set forth from time to time in CIB Marine's filings with the
Securities and Exchange Commission.
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These risks and uncertainties should be considered in evaluating
forward-looking statements, and undue reliance should not be placed on such
statements. CIB Marine does not assume any obligation to update or revise any
forward-looking statements subsequent to the date on which they are made,
whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

OVERVIEW

CIB Marine's net income decreased $2.3 million, or 33.1%, from $7.0 million
in the first quarter of 2002 to $4.7 million in the first quarter of 2003. The
decrease in net income was primarily the result of a $4.7 million increase in
the provision for loan losses. The increase in the provision for loan losses was
due primarily to an increase in loan charge-offs, nonperforming loans, loans 90
days or more past due and still accruing, and certain risks associated with the
growth in the loan portfolio. Additional information about nonperforming loans
is discussed in "Loans-Nonperforming Assets and Loans 90 Days or More Past Due
and Still Accruing Interest." Other factors affecting the change in net income
between the periods were increases in net interest income of $3.8 million and
noninterest income of $3.3 million, partially offset by an increase in operating
expenses of $6.2 million.

Diluted earnings per share decreased $0.13, or 34.2%, from $0.38 for the
first quarter of 2002 to $0.25 for the first quarter of 2003. The return on
average assets was 0.53% in the first quarter of 2003, as compared to 0.93% in
the first quarter of 2002. The return on average equity was 7.07% in the first
quarter of 2003, as compared to 11.66% in the first quarter of 2002.

As described in Note 12 to the Consolidated Financial Statements, CIB
Marine's reportable business segments are General Banking and Mortgage Banking.
CIB Marine's profitability is primarily dependent on the net interest revenue,
noninterest income, noninterest expense, and the provision for loan losses of
its General Banking segment. The consolidated discussion included herein is
therefore predominantly describing the General Banking segment. For a discussion
of the Mortgage Banking segment, refer to specific discussions of mortgage
banking related revenue and expense contained within "Noninterest Income" and
"Noninterest Expense."

The following table sets forth the percentage change in the average balance
sheet or income statement items represented from the quarter ended March 31,
2002 to the quarter ended March 31, 2003.

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(TE) Tax-equivalent basis at 35%

CIB Marine's asset growth has been largely attributable to the
implementation of its business strategy, which includes focusing on the
development of banking relationships with small to medium-sized businesses,
offering more personalized service to banking customers, hiring experienced
personnel, and expanding in both new and existing markets. CIB Marine had 51
banking facilities and 872 full-time equivalent employees at

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March 31, 2003, as compared to 51 banking facilities and 740 full-time
equivalent employees at March 31, 2002. CIB Marine opened four new branches in
April 2003, three located in Florida and one in the Chicago metropolitan area.

The following table sets forth selected unaudited consolidated financial
data. The selected financial data should be read in conjunction with the
Unaudited Consolidated Financial Statements, including the related notes.

SELECTED CONSOLIDATED FINANCIAL DATA

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(1) Noninterest income includes pre-tax gains on investment securities of $1.1
million for the quarter ended March 31, 2002.

(2) Net interest margin is the ratio of annualized net interest income, on a
tax-equivalent basis, to average interest-earning assets.

(3) Net interest spread is the yield on average interest-earning assets less the
rate on average interest-bearing liabilities.

(4) Noninterest income to average assets excludes gains and losses on
securities.

(5) The efficiency ratio is noninterest expense divided by the sum of net
interest income, on a tax-equivalent basis, plus noninterest income,
excluding gains and losses on securities.

(6) Return on average assets is annualized net income divided by average total
assets.

(7) Return on average equity is annualized net income divided by average common
equity.

(8) Does not include employees of companies held for disposal of 958 in 2003 and
42 in 2002.

NET INTEREST INCOME

The following tables set forth information regarding average balances,
interest income and interest expense, and the average rates earned or paid for
each of CIB Marine's major asset, liability and stockholders' equity categories
as applicable. The tables express interest income on a tax-equivalent basis in
order to compare the effective yield on earning assets. This means that the
interest income on tax-exempt loans and

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tax-exempt investment securities has been adjusted to reflect the income tax
savings provided by these assets. The tax-equivalent adjustment was based on CIB
Marine's effective federal income tax rate of 35%.

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(TE) Tax-equivalent basis of 35%

(1) Loan balance totals include nonaccrual loans.

(2) Interest earned on loans include amortized loan fees of $2.7 million and
$2.4 million for the quarters ended March 31, 2003 and 2002, respectively.

(3) Net interest spread is the yield on average interest-earning assets less the
rate on average interest-bearing liabilities.

(4) Net interest margin is the ratio of annualized net interest income, on a
tax-equivalent basis, to average interest-earning assets.

(5) Interest rates and amounts include the effects of derivatives entered into
for interest rate risk management.

Net interest income on a tax-equivalent basis increased $3.8 million, or
15.2%, from $25.2 million for the first quarter of 2002 to $29.1 million for the
first quarter of 2003. The increase in net interest income was primarily volume
related as CIB Marine's average interest-earning assets grew by $454.1 million,
or 15.3%, from the first quarter of 2002 to the first quarter of 2003. The
principal source of this growth occurred in CIB

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Marine's commercial real estate loans and loans held for sale. Asset growth was
primarily funded by increases in deposit liabilities.

CIB Marine's interest rate spread increased nine basis points from 3.02%
for the quarter ended March 31, 2002, to 3.11% for the quarter ended March 31,
2003, as a result of funding costs decreasing more rapidly than earning asset
yields in the declining interest rate environment. CIB Marine's net interest
margin remained unchanged at 3.44% during the periods. While interest rate
spreads improved during the first quarter, the contribution to net interest
margin attributable to interest-free funds supporting earning assets was an
offsetting factor. The higher interest rate environment of last year created a
higher value on these interest-free funds.

Total interest income, on a tax-equivalent basis, increased $3.3 million,
or 6.8%, from $48.9 million in the first quarter of 2002 to $52.2 million in the
first quarter of 2003. The increase was primarily the result of a 15.3% increase
in average interest-earning assets partially offset by a 49 basis point decrease
in the yield on interest-earning assets. Interest income on loans increased by
8.6% due to higher average loan balances partially offset by a 22 basis point
decline in the loan yield. Interest income on securities declined 26.7% due to
lower yields partially offset by higher average investment balances. Interest
income on loans held for sale increased 355.9% due primarily to higher average
balances.

Total interest expense decreased $0.5 million, or 2.2%, from $23.6 million
in the first quarter of 2002 to $23.1 million in the first quarter of 2003. This
reduction was primarily the result of a 58 basis point decline in the rate paid
on total interest-bearing liabilities partially offset by an increase in the
average balance of interest-bearing liabilities. Interest expense on deposits
decreased 1.5% due to lower interest rates paid offset by an increase in average
deposit balances. Interest expense on borrowed funds declined 7.2% primarily as
a result of a reduction in the rate paid on borrowed funds partially offset by
an increase in the average balances of borrowed funds.

The following table presents an analysis of changes in net interest income,
on a tax-equivalent basis, resulting from changes in average volumes of
interest-earning assets and interest-bearing liabilities and average rates
earned and paid.

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(TE) Tax-equivalent basis of 35%.

(1) Variances which were not specifically attributable to volume or rate have
been allocated proportionally between volume and rate using absolute values
as a basis for the allocation. Nonaccrual loans were included in the average
balances used in determining yields.

PROVISION FOR LOAN LOSSES

The provision for loan losses represents charges made to earnings in order
to maintain an allowance for loan losses. The provision for loan losses was $8.7
million in the first quarter of 2003, as compared to $4.0 million in the same
period of 2002. The increase in the provision was the result of increases in net
charge-offs, nonperforming loans, loans 90 days or more past due and still
accruing, the credit risk associated with certain borrowing relationships and
industry concentrations, and certain risks associated with the growth of the
loan portfolio. See, "Allowance for Loan Losses and Nonperforming Assets and
Loans 90 Days or More Past Due and Still Accruing Interest" for more
information.

NONINTEREST INCOME

The following table presents the significant components of noninterest
income:

Noninterest income increased $3.3 million, or 62.6% from $5.2 million in
the first quarter of 2002 to $8.5 million in the first quarter 2003. This
increase was primarily due to increased mortgage banking revenue, partially
offset by lower security gains and reduced income on companies held for
disposal.

Mortgage banking revenue increased $5.1 million, or 324.7%, from $1.6
million in the first quarter of 2002 to $6.6 million in the first quarter of
2003. This increase was due to both the favorable mortgage-lending environment
resulting from low mortgage rates and the acquisition of the business of a
mortgage banking

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company in December of 2002. Revenue produced from this acquired business
contributed approximately 25% of the revenue growth between the two periods.

Loan fees declined $0.4 million, or 29.0%, from $1.2 million in the first
quarter of 2002 to $0.9 million in the first quarter of 2003. A one-time loan
syndication fee received in the first quarter of 2002 was the primary reason for
the decline in loan fees between the two periods.

Deposit service charges increased $0.2 million, or 21.3%, from $0.7 million
in the first quarter of 2002 to $0.9 million in the first quarter of 2003.
Increased demand deposit accounts were the primary factor.

Income from companies held for disposal includes CIB Marine's equity
portion of these companies' pre-tax income or loss. See Note 5 to the
Consolidated Financial Statements for a discussion of these companies. The loss
in 2003 is attributable to the pre-tax loss of Canron, which was acquired in the
fourth quarter of 2002, and a lower level of pre-tax earnings of MICR.

NONINTEREST EXPENSE

The following table presents the significant components of noninterest
expense:

Total noninterest expense increased $6.2 million, or 40.4%, from $15.3
million in the first quarter of 2002 to $21.5 million in the first quarter of
2003. The increase was primarily the result of growth, including increased
mortgage banking activities.

Compensation and employee benefits expense is the largest component of
noninterest expense and represented 60.5% of total noninterest expense for the
first quarter of 2003 compared to 64.3% for the first quarter of 2002.
Compensation and employee benefits expense increased $3.2 million, or 32.1%,
from $9.8 million in the first quarter of 2002, to $13.0 million in the first
quarter of 2003. Approximately one half of the increase was due to the expanded
operations and volumes associated with CIB Marine's mortgage banking activities.
Additional factors were increased staffing to accommodate growth, hiring of
additional management and technical personnel, and increased salary levels of
existing personnel. The total number of full-time equivalent employees increased
17.8% from 740 at March 31, 2002 to 872 at March 31, 2003.

Equipment expense increased $0.1 million, or 9.6%, from $1.2 million in the
first quarter of 2002 to $1.3 million in the first quarter of 2003. The increase
was primarily due to higher computer software related costs incurred in support
of operational efficiencies.

Occupancy and premises expense increased $0.2 million, or 20.9%, from $1.1
million in the first quarter of 2002 to $1.3 million in the first quarter of
2003. Increased rental costs, maintenance, and utilities were contributing
factors.

22

Professional services increased $0.3 million, or 63.3%, from $0.4 million
in the first quarter of 2002 to $0.7 million in the first quarter of 2003.
Higher accounting, tax and audit fees arising from the acquisition of Canron was
the primary factor.

Mortgage banking expense increased $1.3 million, from $0.3 million in the
first quarter of 2002 to $1.6 million in the first quarter of 2003. These
expenses, which include such costs as appraisals, investor fees, and other
closing costs, are volume related and reflect the increased volume of loans
sold.

Loan collection expense increased $0.6 million primarily due to the level
of nonperforming assets. An additional provision for off-balance sheet losses of
$0.5 million was recorded in the first quarter of 2003 related to a $7.5 million
collateralized stand-by letter of credit to a company which has ceased
operations. The stand-by letter of credit was unfunded at March 31, 2003. The
total reserve for this letter of credit at March 31, 2003 was $1.5 million.

The efficiency ratio was 57.10% for the first quarter of 2003, compared to
52.06% for the first quarter 2002. Total noninterest expense as a percentage of
average assets was 2.43% for the first quarter of 2003 and 2.04% for the first
quarter of 2002.

INCOME TAXES

CIB Marine records a provision for income taxes currently payable, along
with a provision for income taxes payable or receivable in the future. Deferred
taxes arise from temporary differences between financial statement and income
tax reporting of assets and liabilities. The effective tax rates for the first
quarter of 2003 and 2002 were 32.8% and 35.4%, respectively. The decrease in the
effective tax rates was primarily due to lower income before taxes, the increase
in the percentage of tax-exempt municipal interest as compared to pre-tax
income, low income housing tax credits, and the implementation of certain tax
planning strategies relative to state income taxes.

FINANCIAL CONDITION

OVERVIEW

CIB Marine's total assets decreased $71.2 million, or 1.9%, from $3.7
billion at December 31, 2002 to $3.6 billion at March 31, 2003. The reduction in
total assets was primarily due to a $112.0 million reduction in loans held for
sale partially offset by increased securities and loans. Deposits increased by
$63.4 million, or 2.2%, while short-term borrowings were reduced by $135.7
million.

LOANS HELD FOR SALE

Loans held for sale, which are comprised primarily of residential first
mortgage loans, decreased $112.0 million, from $228.1 million at December 31,
2002 to $116.2 million at March 31, 2003. The year-end balance was unusually
high due to increases in the volume of loans originated and purchased for resale
and an increase in the number of days CIB Marine held the loans prior to being
funded by the purchasing investor. The increase in funding time was primarily
the result of the increase in the volume of loans being processed and purchased
by secondary market investors. CIB Marine originated $120.1 million, purchased
$476.3 million, and sold $707.3 million of loans held for sale during the first
quarter of 2003 as compared to originations, purchases, and sales of $50.4
million, $143.7 million, and $199.1 million, respectively during the first
quarter of 2002. The mortgage banking company acquired in the fourth quarter of
2002 accounted for $109.4 million, or 18.3%, of total mortgage originations and
purchases during the first quarter of 2003.

SECURITIES

Total securities at March 31, 2003, were $543.4 million, an increase of
$29.4 million, or 5.7%, compared to $514.0 million at December 31, 2002. The
ratio of total securities to total assets was 15.1% at March 31,

23

2003, as compared to 14.0% at December 31, 2002. The increase in the securities
portfolio was due primarily to CIB Marine's strategy to maintain an appropriate
level of liquid assets to total assets.

As of March 31, 2003, $477.1 million, or 87.8%, of the securities portfolio
was classified as available for sale and $66.3 million, or 12.2%, of the
portfolio was classified as held to maturity. At December 31, 2002, 86.4% was
classified as available for sale and 13.6% was classified as held to maturity.
The increase in the percentage of securities classified as available for sale
reflects CIB Marine's decision to make a larger percentage of the securities
portfolio available to meet its liquidity needs, if necessary, and to provide
the opportunity to react to changes in market interest rates and changes in the
spread relationship between alternative investments.

At March 31, 2003, the net unrealized gain on the available for sale
securities was $3.7 million, compared to $4.7 million at December 31, 2002.

LOANS

Loans, net of the allowance for loan losses, were $2.7 billion at March 31,
2003, an increase of $26.9 million, or 1.0%, from December 31, 2002, and
represented 74.6% of CIB Marine's total assets at March 31, 2003, and 72.4% at
December 31, 2002. Most of the increase was in commercial real estate and
construction loans, which in the aggregate represented 70.2% of gross loans at
March 31, 2003 and 68.0% at December 31, 2002.

CREDIT CONCENTRATIONS

Pursuant to CIB Marine's loan policy, a concentration of credit is deemed
to exist when the total credit relationship to one borrower, a related group of
borrowers, or borrowers within or dependent upon a related industry, exceeds 25%
of the stockholders' equity of CIB Marine. At March 31, 2003, CIB Marine had
four secured borrowing relationships that exceeded 25% of stockholders' equity.
These relationships include:

- Loans to a borrower, and its related interests, whose total outstanding
lending commitment, including lines of credit which have not been fully
drawn, as of March 31, 2003, was $120.6 million, or 45.3%, of CIB
Marine's stockholders' equity and 4.4% of total loans. The aggregate
principal amount actually drawn and outstanding was $117.1 million at
March 31, 2003. The majority of these loans are in the
nursing/convalescent home industry. These loans are primarily secured by
first mortgages on commercial real estate and security interests in other
business assets including stock in a community bank. At March 31, 2003,
all of the loans to this borrower and its related interests were current.

- Loans to a borrower, and its related interests, whose total outstanding
lending commitment, including lines of credit which have not been fully
drawn, as of March 31, 2003, was $115.4 million, or 43.3%, of CIB
Marine's stockholders' equity and 4.2% of total loans. The aggregate
principal amount actually drawn and outstanding was $92.9 million at
March 31, 2003. The majority of these loans are commercial real estate
and construction loans. These loans are primarily secured by first
mortgages on commercial real estate. At March 31, 2003, all of the loans
to this borrower and its related interests were current.

- Loans to a borrower, and its related interests, whose total outstanding
lending commitment, including lines of credit which have not been fully
drawn, as of March 31, 2003, was $82.9 million, or 31.1%, of CIB Marine's
stockholders' equity and 3.0% of total loans. The aggregate principal
amount actually drawn and outstanding was $75.6 million at March 31,
2003. The majority of these loans are in the commercial real estate
development and the nursing/convalescent home industries. These loans are
primarily secured by first mortgages on commercial real estate and
security interests in other business assets. At March 31, 2003, all of
the loans to this borrower and its related interests were current.

- Loans to a borrower, and its related interests, whose total outstanding
lending commitment, including lines of credit which have not been fully
drawn, as of March 31, 2003, was $72.3 million, or 27.1%, of CIB Marine's
stockholders' equity and 2.6% of total loans. The aggregate principal
amount actually drawn and outstanding was $56.3 million at March 31,
2003. The majority of these loans are
24

commercial real estate and construction loans. These loans are primarily
secured by first mortgages on commercial real estate. In January 2002, a
commercial real estate loan to a related interest of this borrower with a
March 31, 2003 outstanding balance of $3.0 million was classified as
restructured and is currently 89 days past due. CIB Marine does not
believe that there will be any loss with respect to this restructured
loan. At March 31, 2003, all of the loans to this borrower and its
related interests were current with the exception of the previously
mentioned restructured loan.

Approximately $27.5 million of the above described outstanding loan
commitments are counted in more than one of the described relationships.

At March 31, 2003, CIB Marine also had credit relationships within five
industries or industry groups that exceeded 25% of its stockholders' equity. The
total outstanding balance to commercial real estate developers, investors and
contractors was approximately $506.0 million, or 18.5%, of total loans and
189.9% of stockholders' equity. The total outstanding balance to residential
real estate developers, investors and contractors was approximately $674.1
million, or 24.6%, of total loans and 253.0% of stockholders' equity. The total
outstanding balance of loans made in the motel and hotel industry was
approximately $216.4 million, or 7.9%, of total loans and 81.2% of stockholders'
equity. The total outstanding balance of loans made in the nursing/convalescent
home industry was approximately $177.1 million, or 6.5%, of total loans and
66.5% of stockholders' equity. The total outstanding balance of loans made in
the health care facility industry was approximately $116.5 million, or 4.3%, of
total loans and 43.7% of stockholders' equity.

ALLOWANCE FOR LOAN LOSSES

CIB Marine monitors and maintains an allowance for loan losses to absorb an
estimate of probable losses inherent in the loan portfolio. At March 31, 2003
the allowance for loan losses was $57.1 million, or 2.09%, of total loans,
compared to $52.4 million, or 1.93% of total loans, at December 31, 2002 and
$37.3 million, or 1.51%, of total loans at March 31, 2002. The increase in the
allowance was primarily the result of increases in nonperforming loans, loans 90
days or more past due and still accruing, the credit risk associated with
certain borrowing relationships and industry concentrations, and certain risks
associated with the growth of the loan portfolio. The allowance is increased by
the amount of provision for loan losses and recoveries of previously charged-off
loans, and is decreased by the amount of loan charge-offs. Total charge-offs for
the first quarter of 2003 were $4.4 million, while recoveries were $0.4 million,
as compared to $0.8 million and $0.04 million, respectively, for the same period
of 2002. The ratio of the allowance to nonaccrual, restructured and 90 days or
more past due and still accruing loans was 72.7% at March 31, 2003 compared to
113.3% at December 31, 2002. The reduction in this ratio resulted from the
higher levels of nonaccrual and past due loans on March 31, 2003. Although CIB
Marine believes that the allowance for loan losses is adequate to absorb
probable losses on existing loans that may become uncollectible, there can be no
assurance that the allowance will prove sufficient to cover actual loan losses
in the future. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the quality of loans and the
adequacy of the allowance for loan losses. Such agencies may require CIB Marine
to make additional provisions to the allowance or downgrade loan ratings which
may result in additional provisions to the allowance, based upon their judgments
about information available to them at the time of their examination.

25

The following table summarizes changes in the allowance for loan losses for
the quarters ended March 31, 2003 and 2002:

NONPERFORMING ASSETS AND LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING
INTEREST

The level of nonperforming assets is an important element in assessing CIB
Marine's asset quality and the associated risk in its loan portfolio.
Nonperforming assets include nonaccrual loans, restructured loans and foreclosed
properties. Loans are placed on nonaccrual status when CIB Marine determines
that it is probable that some part or all of the principal and interest amounts
will not be collected. A loan is classified as restructured when a concession is
granted to a borrower for economic or legal reasons related to the borrower's
financial difficulties, which would not otherwise be considered. CIB Marine may
restructure the loan by modifying the terms to reduce or defer cash payments
required of the borrower, reduce the interest rate below current market rates
for new debt with similar risk, reduce the face amount of the debt, or reduce
the accrued interest. Foreclosed properties represents properties acquired by
CIB Marine as a result of loan defaults by customers.

26

The following table summarizes the composition of CIB Marine's
nonperforming assets, loans 90 days past due or more and still accruing, and
related asset quality ratios as of the dates indicated.

Total nonaccrual loans were $56.8 million at March 31, 2003 an increase of
$20.2 million, or 55.1%, from $36.6 million at December 31, 2002. The ratio of
nonaccrual loans to total loans was 2.07% at March 31, 2003, compared to 1.35%
at December 31, 2002.

At March 31, 2003, $52.1 million, or 91.8% of nonaccrual loans consisted of
the following nine lending relationships:

- Commercial real estate loans to a borrower with an outstanding balance of
$15.3 million as of March 31, 2003. These loans are secured by a first
mortgage on a multi-family development and are guaranteed by equity
members of the borrower. This loan was transferred to nonaccrual in March
2003. While CIB Marine believes that the value of this property is
sufficient to cover amounts owed, it cannot provide assurances that the
value will be maintained or that there will not be any losses with
respect to this relationship.

- Commercial real estate loans to a related group of borrowers with an
aggregate outstanding balance of $8.6 million as of March 31, 2003,
secured by first mortgages on two assisted living facilities which are
under construction. Of this total, $3.8 million was transferred to
nonaccrual in December 2000, and

27

$4.8 million was transferred to nonaccrual in June 2001. During the first
quarter of 2003, CIB Marine increased the amount allocated as a specific
reserve for these loans from $3.0 million to $4.1 million. Although CIB
Marine has allocated $4.1 million as a specific reserve to the allowance
for loan losses for these loans CIB Marine cannot provide assurances that
the value of the collateral will be maintained or that there will not be
additional losses with respect to this relationship.

- Commercial real estate loans to a borrower with an aggregate outstanding
balance of $7.9 million as of March 31, 2003, secured by four assisted
living properties and all business assets of the borrower, including
accounts receivable. These loans were transferred to nonaccrual in March
2003. While CIB Marine believes that the value of the collateral is
sufficient to cover amounts owed, it cannot provide assurances that the
value of the collateral will be maintained or that there will not be any
losses with respect to this relationship.

- Commercial loans to a borrower with an aggregate outstanding balance of
$6.9 million as of March 31, 2003, secured by all business assets of the
borrower including accounts receivable, inventory, and equipment. The
principal owner of this business has guaranteed these loans up to $3.0
million. These loans were transferred to nonaccrual in December 2002. CIB
Marine allocated $2.5 million as a specific reserve to the allowance for
loan losses for these loans during the fourth quarter of 2002, which
amount was charged-off in March of 2003. During April 2003, CIB Marine
sold substantially all of the assets which collateralized these loans for
$3.8 million. CIB Marine also expects to receive an additional $0.3
million upon the buyer's collection of certain accounts receivable.
Subsequent to this transaction, CIB Marine charged-off an additional $0.4
million in April 2003, resulting in an outstanding balance of $3.0
million which represents the amount of the principal owner's guarantee
for these loans. Although CIB Marine believes that the principal owner
has the financial ability to pay the $3.0 million guarantee and has
commenced litigation to enforce its rights under the guarantee, CIB
Marine cannot provide assurances that it will be successful in its
litigation efforts or that there will not be additional losses with
respect to this relationship.

- A commercial real estate loan and a construction loan to a borrower with
an aggregate outstanding balance of $5.1 million as of March 31, 2003,
secured by a first mortgage on an income producing commercial property.
These loans were transferred to nonaccrual during the second quarter of
2002. During the first quarter of 2003, CIB Marine increased the amount
allocated as a specific reserve for these loans from $1.0 million to $2.5
million. Although CIB Marine has allocated $2.5 million as a specific
reserve to the allowance for loan losses for these loans, CIB Marine
cannot provide assurances that the value of the collateral will be
maintained or that there will not be additional losses with respect to
this relationship.

- A commercial loan to a borrower with an outstanding balance of $2.5
million as of March 31, 2003, secured by stock in a closely held business
and 47,733 shares of CIB Marine common stock. The loan was transferred to
nonaccrual during the first quarter of 2003. While CIB Marine believes
that the value of the collateral is sufficient to cover amounts owed, it
cannot provide assurances that the value of the collateral will be
maintained or that there will not be losses with respect to this
borrower.

- A commercial real estate loan to a borrower with an outstanding balance
of $2.3 million as of March 31, 2003, secured by a first mortgage on an
improved commercial property. The loan was transferred to nonaccrual
during the third quarter of 2002. Although CIB Marine allocated $0.5
million as a specific reserve to the allowance for loan losses for this
loan, CIB Marine cannot provide assurances that the value of the
collateral will be maintained or that there will not be losses with
respect to this relationship.

- Commercial loans to a borrower and its related interests with an
outstanding balance of $2.0 million as of March 31, 2003. These loans are
secured by 81,400 shares of CIB Marine common stock. These loans were
transferred to non accrual in the third quarter of 2002 and the first
quarter of 2003. While CIB Marine believes that the value of the
collateral is sufficient to cover amounts owed, it cannot provide
assurances that the value will be maintained or that there will not be
additional losses with respect to the relationship.
28

- Commercial loans to the Borrower's related interests with an outstanding
balance of $1.6 million as of March 31, 2003. These loans were
transferred to nonaccrual during the third quarters of 2001 and 2002.
Although CIB Marine allocated $0.5 million as a specific reserve to the
allowance for loan losses for these loans during the second quarter of
2002, CIB Marine cannot provide assurances that the value will be
maintained or that there will be no further losses with respect to this
relationship. Additional information regarding the Borrower is contained
within "Companies Held For Disposal" and Note 5 to the Consolidated
Financial Statements.

Foreclosed properties were $5.8 million at March 31, 2003 and consisted of
nine properties as compared to $3.7 million and seven properties at December 31,
2002, all of which were held for sale. The increase in foreclosed properties
consisted primarily of two commercial properties that were collateral for
certain loans which were on nonaccrual at December 31, 2002. These properties
were transferred to foreclosed properties at their fair market value which was
estimated to be $2.9 million, resulting in an additional $1.1 million charge-
off with respect to one of the properties, during the first quarter of 2003.
Sales of foreclosed properties totaled $0.9 million during the first quarter of
2003.

Restructured loans were $3.0 million at March 31, 2003 and consisted of a
commercial real estate loan to a borrower that was classified as restructured in
the first quarter of 2002 and is current as to all payments in accordance with
the restructured loan agreement. While CIB Marine believes that the value of the
property securing the obligation approximates the amount owed it cannot provide
assurances that the value will be maintained or that there will not be losses
with respect to this relationship.

Loans 90 days or more past due and still accruing interest are loans which
are delinquent with respect to the payment of principal and/or interest but
which management believes all contractual principal and interest amounts due
will be collected. CIB Marine had $18.8 million in loans that were 90 days or
more past due and still accruing at March 31, 2003 compared to $6.4 million at
December 31, 2002. The increase was primarily the result of a $12.8 million
borrowing relationship secured by business assets, undeveloped real estate and
equity securities, including 388,676 shares of CIB Marine common stock. The
lending relationship is in the process of being renewed. CIB Marine believes
that all contractual principal and interest amounts will be collected and the
value of the collateral is sufficient to cover amounts owed. CIB Marine,
however, cannot provide assurances that there will not be any losses with
respect to this relationship.

The ratio of nonperforming assets and loans 90 days or more past due and
still accruing to total assets was 2.35% at March 31, 2003, as compared to 1.36%
at December 31, 2002.

A loan is considered impaired when, based on current information and
events, it is probable that CIB Marine will be unable to collect the scheduled
payments of principal or interest according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment records and the amount of
the shortfall in relation to the principal and interest owed. Impairment is
measured on a loan-by-loan basis for commercial and construction loans by either
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price, or the fair value
of the collateral if the loan is collateral dependent. Impaired loans were $75.8
million at March 31, 2003, an increase of $36.9 million from December 31, 2002.
This increase was due to the higher levels of nonperforming loans that were
subject to impairment testing. Large groups of smaller balance homogeneous loans
are collectively evaluated for impairment. Accordingly, CIB Marine does not
separately identify individual consumer and residential loans for impairment
disclosures.

29

The following table sets forth information regarding impaired loans:

COMPANIES HELD FOR DISPOSAL

CIB Marine has acquired interests in the following two companies from
borrowers who were in default of their obligations and which are classified as
held for disposal:

Canron Corporation

Pursuant to a Settlement Order entered in the Bankruptcy Court, on October
30, 2002 CIB Marine became the owner of a borrower's (the "Borrower") 84%
interest in Canron through a newly formed and wholly owned subsidiary, CIB
Construction, LLC. Canron is a steel fabrication and erection company with
operations in the United States, Canada and Mexico.

At March 31, 2003, CIB Marine had $30.8 million in loans receivable from
Canron, as compared to $26.2 million at December 31, 2002. The increase was a
result of Canron's drawing on available credit facilities to fund operations.
These loans are secured by substantially all of the assets of Canron and are
eliminated in the Consolidated Financial Statements.

During the first quarter of 2003, Canron incurred a net loss of $1.2
million, as compared to a net loss of $0.1 million for the first quarter of
2002, primarily as a result of an $18.4 million decrease in contract revenue
earned. The decrease in contract revenue earned was primarily the result of
Canron's inability to bid on many projects that require a bond. Canron has been
operating without, and unable to obtain, a surety bond line over the past two
years. As a result, Canron's backlog has continued to decrease. At March 31,
2003 Canron's backlog was $50.4 million, as compared to $52.4 million at
December 31, 2002. The decrease in backlog has resulted in a decrease in
profitability and is expected to continue to negatively impact earnings until a
bonding line is obtained. In order to obtain bonding, CIB Marine may be required
to make various commitments, including letters of credit, guarantees, and the
providing of collateral. CIB Marine may be required to fund the cash flow needs
of Canron until it obtains bonding and generates sufficient cash flows. Pre-tax
income of Canron is included in Other Income in CIB Marine's Consolidated
Statements of Income. See Item 1 -- "Financial Statements -- Note 5 -- Companies
Held for Disposal" for additional information regarding Canron.

CIB Marine is continuing to explore various exit strategies relative to
Canron, all of which CIB Marine management has authority to do, including the
immediate sale of the company in its current condition, the stabilization of
operations and subsequent sale, and an orderly liquidation. Although CIB Marine
believes that the current carrying value of its investment in Canron represents
its fair market value, and that the loans to Canron are adequately
collateralized, CIB Marine cannot provide assurances that these values will be
maintained or that there will not be further losses arising out of its
investments in Canron.

MICR, Inc.

CIB Marine acquired and/or assumed through MICR, Inc., a wholly owned
subsidiary of CIB -- Chicago, the business and certain assets and liabilities of
a manufacturer of payment processing systems in 2000. Pre-tax income related to
this business is included in Other Income in CIB Marine's Consolidated
Statements of Income. Pre-tax net income was $0.2 million for the first quarter
of 2003 as compared to $0.4 million for the first quarter of 2002. The business
has generated profits in each of the prior three years and although CIB Marine
believes it likely the business will continue to generate profits, CIB Marine
cannot

30

provide assurances that these profits will continue or that there will not be
losses with respect to this business. The borrower has an option to repurchase
the business under certain conditions. This option expires upon the earlier of
the divestiture of the business or October 13, 2003. The option, if exercised,
is not expected to result in any gain or loss to CIB Marine. CIB Marine
management which has authority so to do has developed and is implementing a plan
to sell this business.

DEPOSIT LIABILITIES

Total deposits increased $63.4 million, or 2.2%, from $2.8 billion at
December 31, 2002 to $2.9 billion at March 31, 2003. This increase was primarily
due to a $57.3 million increase in savings deposits and a $10.3 million increase
in time deposits. Time deposits represent the largest component of deposits. The
percentage of time deposits to total deposits was 69.4% at March 31, 2003 and
70.6% at December 31, 2002. These percentages reflect CIB Marine's reliance on
time deposits as a primary source of funding. At March 31, 2003 time deposits of
$100,000 or more amounted to $720.7 million, or 35.7%, of total time deposits,
compared to $724.2 million and 36.0% at December 31, 2002. CIB Marine accepts
brokered time deposits periodically to meet short-term funding needs and/or when
their related costs are at or below those being offered on other deposits.
Brokered time deposits were $186.9 million, or 9.2%, of total time deposits at
March 31, 2003, and $222.8 million, or 11.1% of total time deposits at December
31, 2002. Brokered time deposits included in time deposits of $100,000 or more
were $169.0 million at March 31, 2003 and $204.4 million at December 31, 2002.

BORROWINGS

CIB Marine utilizes various types of borrowings to meet liquidity needs,
fund asset growth and/or when the pricing of these borrowings is more favorable
than deposits. Total borrowed funds were $358.4 million at March 31, 2003
compared to $494.1 at December 31, 2002. Short-term borrowings decreased by
$135.7 million, during the three-month period ended March 31, 2003 as a result
of the increase in deposits together with the reduction of loans held for sale.

CAPITAL AND REGULATORY MATTERS

CIB Marine and its subsidiary banks are subject to various regulatory
capital guidelines. In general, these guidelines define the various components
of core capital and assign risk weights to various categories of assets. The
risk-based capital guidelines require financial institutions to maintain minimum
levels of capital as a percentage of risk-weighted assets.

The risk-based capital information of CIB Marine at March 31, 2003 and
December 31, 2002 is contained in the following table. The capital levels of CIB
Marine and its subsidiary banks are, and have been, in excess of the required
regulatory minimums during the periods indicated. At March 31, 2003, CIB Marine
and each of its subsidiary banks had sufficient capital to be categorized as
well capitalized. CIB Marine intends to maintain its capital level and the
capital levels of its subsidiary banks at or above levels sufficient to support
future growth.

- -------------------------

(1) Average assets as calculated for risk-based capital (deductions include
current period balances for goodwill and other intangibles).

(2) For regulatory capital purposes, the guaranteed trust preferred securities
qualify as Tier 1 equity capital.

(3) The allowance for loan losses is net of the disallowed portion of the
allowance for loan losses in excess of 1.25% of risk weighted assets.

On January 30, 2003, CIB -- Chicago entered into a Memorandum of
Understanding (the "Memorandum") with the Illinois Office of Banks and Real
Estate (OBRE) and the FDIC (together the "Regulators"). The Memorandum was
entered into as a result of deterioration in the credit quality of the loan
portfolio, the level of concentrations of credit, and weaknesses in the credit
administration process identified during the OBRE's regular examination of
CIB -- Chicago, which commenced on September 23, 2002.

Pursuant to the Memorandum, CIB -- Chicago has agreed to take certain
actions to correct the deficiencies noted within the examination report. In
addition, during the period in which the Memorandum is in effect, CIB -- Chicago
has agreed to maintain a Tier 1 capital level equal to or exceeding 8% of the
bank's total assets. In the event such ratio is less than 8% as of June 30 or
December 31 of each calendar year the Memorandum is in effect, the bank is
required within 30 days thereof to submit to the regulators a plan for the
augmentation of the bank's capital accounts. Also, unless prior written consent
is received from the Regulators, CIB -- Chicago has agreed to restrict its loan
growth to no more than 2% during any consecutive three-month period and suspend
the declaration or payment of dividends.

The Memorandum is not a formal supervisory action. Failure to comply with
the Memorandum can lead to a formal enforcement action which could have a
material adverse affect on CIB Marine and its operations. CIB Marine has
initiated action plans to correct the deficiencies noted in the examination
report. CIB Marine believes that the resolution of these deficiencies will
result in the termination of the Memorandum.

LIQUIDITY

The objective of liquidity risk management is to ensure that CIB Marine has
adequate funding capacity to fund commitments to extend credit, deposit account
withdrawals, maturities of borrowings and other obligations in a timely manner.
CIB Marine's Asset/Liability Management Committee actively manages CIB Marine's
liquidity position by estimating, measuring and monitoring its sources and uses
of funds. CIB Marine's sources of funding and liquidity include both asset and
liability components. CIB Marine's funding requirements are primarily met by the
inflow of funds from deposits. CIB Marine also makes use of noncore funding
sources in a manner consistent with its liquidity, funding, and market risk
policies. Noncore funding sources are used to meet funding needs and/or when the
pricing and continued availability of these sources presents lower funding cost
opportunities. Short-term noncore funding sources utilized by CIB Marine include
federal funds purchased, securities sold under agreements to repurchase,
Eurodollar deposits, short-term borrowings from the Federal Home Loan Bank, and
short-term brokered and negotiable time deposits. CIB

32

Marine has also established borrowing lines with the Federal Reserve Bank and
with unaffiliated banks. Long-term funding sources, other than core deposits,
include long-term brokered and negotiable time deposits and long-term borrowings
from the Federal Home Loan Bank. Additional sources of liquidity include cash
and cash equivalents, sales of loans held for sale, and the sale of available
for sale securities. CIB Marine considers substantially all of its cash and cash
equivalents, loans held for sale, and securities available for sale to be liquid
assets. These amounts total $670.9 million at March 31, 2003 and $770.4 million
at December 31, 2002.

The following discussion should be read in conjunction with the statements
of cash flows contained in the Consolidated Financial Statements.

Net cash provided by operating activities was $123.1 million for the
quarter ended March 31, 2003 compared with $3.5 million for the quarter ended
March 31, 2002. The increase in cash provided was primarily the result of the
net reduction in loans held for sale. For the quarter ended March 31, 2003, net
cash used in investing activities was $71.7 million, compared to $168.6 million
for the quarter ended March 31, 2002. The reduction in cash used for investing
activities was caused primarily by a reduction in the purchases of investment
securities in relationship to the sales and maturities of investment securities
during the periods. In addition, loan growth was somewhat lower during 2003
reducing cash used for that purpose. Net cash used in financing activities was
$72.2 million for the quarter ended March 31, 2003 compared to net cash provided
of $168.1 million for the quarter ended March 31, 2002. The increase in cash
used in financing activities was primarily attributable to a lower growth in
deposits and the repayment of FHLB advances with the proceeds from the sale of
loans held for sale.

CIB Marine was able to meet its liquidity needs during the first quarter of
2003 and expects to meet these needs for the remainder of 2003.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK SENSITIVITY

There have been no material changes in the market risks faced by CIB Marine
since December 31, 2002. For additional information regarding CIB Marine's
market risks, refer to its 2002 Annual Report on Form 10-K, which is on file
with the Securities and Exchange Commission.

33

The following table illustrates the period and cumulative interest rate
sensitivity gap for March 31, 2003.

The following table illustrates the expected percentage change in net
interest income over a one-year period due to the immediate change in short-term
U.S. prime rate of interest as of March 31, 2003, and December 31, 2002.

34

ITEM 4. CONTROLS AND PROCEDURES

a. Evaluation of Disclosure Controls and Procedures

CIB Marine's Chief Executive Officer and its Chief Financial Officer, after
evaluating the effectiveness of CIB Marine's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) on March 27, 2003,
have concluded that, as of such date, CIB Marine's disclosure controls and
procedures were adequate and effective to ensure that material information
relating to CIB Marine and its consolidated subsidiaries would be made known to
them by others within those entities. As a result of the ineffectiveness of
certain internal controls as noted in b. below, management took appropriate
actions to ensure that material information relating to CIB Marine and its
consolidated subsidiaries would be made known to them by others within those
entities.

b. Changes in Internal Controls

There were no significant changes in CIB Marine's internal controls or in
other factors that could significantly affect CIB Marine's disclosure controls
and procedures subsequent to the date of their evaluation. Except for the
ineffectiveness of certain internal controls over the loan risk management
process, there were no significant deficiencies or material weaknesses in CIB
Marine's internal controls. CIB Marine is taking actions to improve these
controls, including amendments to its loan policy and the hiring of additional
staff.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

CIB Marine is not currently involved in any material pending legal
proceedings other than litigation of a routine nature, which is being defended
and handled in the ordinary course of business.

CIB Marine has a lending relationship with a borrower who has been charged
with various criminal offenses, a conviction of which may result in forfeiture
to the United States of any and all property of the borrower involved in the
alleged criminal offenses and funds in the amount of $54.9 million. In May 2003,
this borrower pleaded guilty to three counts of wire fraud. The remaining
charges against the borrower have not been resolved. In August of 2002, CIB
Marine purchased various assets from certain of the borrower's related
interests, as a result of financial difficulties of this borrower. Although CIB
Marine does not currently believe it will incur any losses with respect to any
such forfeiture proceedings, this matter is being disclosed as a contingent
liability pursuant to Statement of Financial Accounting Standard No. 5,
Accounting for Contingencies. CIB Marine engaged in the lending activities with
the borrower and its related interests, and the acquisition of assets from the
borrower's related interests, without knowledge of the alleged criminal
activities and believes that it is a bona fide purchaser for value of the
assets.

In addition, CIB Marine has lending relationships with other individuals
and entities who purchased certain assets of other operating subsidiaries of the
borrower. These loans are secured by certain assets previously owned by the
borrower's related interests. CIB Marine has no reason to believe at this time
that such assets will be subject to forfeiture and does not expect any loss to
occur as a result of any such forfeiture proceedings.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

a. Not Applicable

b. Not Applicable

c. Not Applicable

d. Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable
35

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibit 99.1 -- Certificate of J. Michael Straka, Chief
Executive Officer, and Steven T. Klitzing, Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K -- On March 6, 2003 CIB Marine filed a
Form 8-K reporting under Item 9 the delay in release of 2002
financial information. No financial statements were filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 14th day of May 2003.

CIB MARINE BANCSHARES, INC.
(Registrant)

By: /s/ STEVEN T. KLITZING
--------------------------------------
Steven T. Klitzing
Senior Vice President and Chief
Financial Officer

36

CERTIFICATIONS

I, J. Michael Straka, Chief Executive Officer of CIB Marine Bancshares, Inc.,
certify that:

1. I have reviewed this quarterly report on Form 10-Q of CIB Marine
Bancshares, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based upon my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based upon our
evaluation as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditor's any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were any significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ J. MICHAEL STRAKA

--------------------------------------
J. Michael Straka
Chief Executive Officer

May 14, 2003

37

CERTIFICATIONS

I, Steven T. Klitzing, Chief Financial Officer, of CIB Marine Bancshares, Inc.,
certify that:

1. I have reviewed this quarterly report on Form 10-Q of CIB Marine
Bancshares, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based upon my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based upon our
evaluation as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditor's any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were any significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ STEVEN T. KLITZING

--------------------------------------
Steven T. Klitzing
Chief Financial Officer

May 14, 2003

38