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 JUNE 30, 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 August 8, 2003 CIB Marine had 18,259,831 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 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 quarter and six month periods ended June 30, 2003
and 2002. The results of operations for the six-month period ended June 30, 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 April 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities, (SFAS No. 149)
to amend and clarify financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities under FASB Statement No. 133, Accounting
For Derivative Instruments and Hedging Activities. In addition, SFAS No. 149
requires that contracts with comparable characteristics be accounted for
similarly. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003 (with certain exceptions) and for hedging relationships
designated after June 30, 2003. Adoption of SFAS No. 149 is not expected to
materially affect the consolidated results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards regarding the manner in which an issuer classifies and
measures certain types of financial instruments having characteristics of both
liabilities and equity. Pursuant to SFAS No. 150, such freestanding financial
instruments (i.e., those entered into separately from an entity's other
financial instruments or equity transactions or that are legally detachable and
separately exercisable) must be classified as liabilities or, in some cases,
assets. In addition, SFAS No. 150 requires that financial instruments containing
obligations to repurchase the issuing entity's equity shares and, under certain
circumstances, obligations that are settled by delivery of the issuer's shares
be classified as liabilities. SFAS No. 150 amends SFAS No. 128, Earnings Per
Share, and SFAS No. 133, Accounting For Derivative Instruments and Hedging
Activities, and nullifies (or partially nullifies) various Emerging Issues Task
Force consensuses. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003 and for contracts in existence at the start
of the first interim period beginning after June 15, 2003. CIB Marine does not
have any outstanding financial instruments at June 30, 2003 that would require
reclassification as a result of SFAS No. 150.

In November 2002, the FASB 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
5

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- BASIS OF PRESENTATION -- CONTINUED

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 FASB 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 immediately for variable interest entities
formed after January 31, 2003 and on July 1, 2003 for existing variable interest
entities. CIB Marine has no newly formed variable interest entities subject to
the January 31, 2003 effective date. CIB Marine is a limited partner in various
affordable housing partnerships which have been determined to be variable
interest entities. CIB Marine is not the primary beneficiary of these
partnerships and accordingly is not required to consolidate these entities. CIB
Marine's aggregate investment in these limited partnerships was $4.1 million at
June 30, 2003. CIB Marine was also committed to provide additional funding of
$1.8 million as of that date. These amounts, along with the potential recapture
of $0.6 million of tax credits, represent CIB Marine's maximum exposure to loss
as a result of its involvement in these limited partnerships. 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
quarter and six-month periods ended June 30, 2002 to be consistent with
classifications for 2003.

NOTE 2 -- SECURITIES

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

6

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 2 -- SECURITIES -- CONTINUED

Assets, primarily securities, carried at approximately $185.7 million and
$200.1 million at June 30, 2003 and December 31, 2002, respectively, were
pledged to secure public deposits, Federal Home Loan Bank advances, and for
other purposes as required or permitted by law. The approximate fair value of
these assets was $189.3 million and $203.3 million at June 30, 2003 and December
31, 2002, respectively.

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 $55.2 million and $51.2 million at June 30, 2003
and December 31, 2002, respectively.

7

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

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 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 continues to explore various exit strategies
relative to Canron, all of which CIB Marine management has authority to do,
including the immediate sale of its equity interest in the company. Canron is
also exploring an orderly liquidation of its assets, as well as other strategies
to wind up its affairs. As a result of Canron's lack of bonding and decrease in
backlog, Canron closed certain of its facilities and reduced its work force
during the second quarter of 2003, and will consider additional closings and
reductions as warranted. An impairment loss of $2.7 million was recorded in June
2003 to reduce CIB Marine's equity investment in Canron to its estimated fair
market value of $0.9 million.

At June 30, 2003, CIB Marine also had $32.0 million in loans outstanding
and received interest income of $0.9 million during the first six months of 2003
from Canron, both 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. CIB Marine had an additional
$6.8 million of unfunded loan commitments and letters of credit available to
Canron on June 30, 2003.

Canron's functional currency is the Canadian dollar. The translation from
Canadian dollars 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. As gains related to translation are considered to be
reinvested in Canron, no provision for deferred income taxes has been made for
such gains.

8

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- COMPANIES HELD FOR DISPOSAL -- CONTINUED

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

CIB Marine's 84% equity interest in Canron's pre-tax loss is included in
CIB Marine's Other Income for the quarter and six months ended June 30, 2003.
Canron's results of operations 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:

9

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- COMPANIES HELD FOR DISPOSAL -- CONTINUED

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 $0.7 and $0.8 million
for the six months ended June 30, 2003 and 2002, respectively. Dividends
totalling $0.8 million and $1.1 million were paid by MICR to CIB Marine for the
six months ended June 30, 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
is implementing a plan to sell this business.

The following table summarizes the composition of MICR'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 $2.9 million at June 30, 2003 and $3.0
million at December 31, 2002. Equity income recorded on the limited partnerships
was $0.4 million for both of the six-month periods ended June 30, 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

10

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 6 -- OTHER ASSETS -- CONTINUED

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 June 30, 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 June 30, 2003 and $4.2 million at December
31, 2002. CIB Marine has engaged in these transactions to provide additional
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 borrowings:

At June 30, 2003, CIB Marine was not in compliance with certain provisions
of its revolving lines of credit. CIB Marine has obtained waivers with respect
to these matters.

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 long-term borrowings:

11

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 8 -- LONG-TERM BORROWINGS -- CONTINUED

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 $210.0 million and $316.2 million at June 30, 2003 and December
31, 2002, respectively. As of June 30, 2003, this collateral consisted of
securities with a fair market value of $57.5 million and 1-4 family residential
mortgages of $152.5 million. The residential mortgages used as collateral
consisted 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 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 June 30, 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. At June 30, 2003, CIB-Chicago's Tier 1 capital to total
assets ratio was 8.53%. 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 to 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.

12

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 10 -- EARNINGS PER SHARE COMPUTATIONS

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

NOTE 11 -- STOCK OPTION PLANS

The following is a reconciliation of stock option activity for the six
months ended June 30, 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 SFAS 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.

13

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 11 -- STOCK OPTION PLANS -- CONTINUED

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 six months ended June 30, 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.

14

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 with servicing rights released.

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.

15

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 12 -- BUSINESS SEGMENTS -- CONTINUED

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 June 30, 2003 and results of operations for the
quarter and six months ended June 30, 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.

16

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;

- CIB Marine's ability to correct the deficiencies identified in the
Memorandum;

- 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 such borrowers;

- 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.

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 $4.3 million, or 82.0%, from $5.2 million
for the second quarter of 2002 to $0.9 million for the second quarter of 2003.
The decrease in net income was primarily the result of a $2.7 million impairment
loss associated with Canron, a $1.5 million provision for an off-balance sheet
loss, and a $1.1 million increase in the provision for loan losses. Additional
information about the impairment and off-balance sheet loss is discussed in
"Noninterest Expense." Other factors affecting the change in net income between
the periods were increases in net interest income of $2.3 million and
noninterest income of $2.1 million, partially offset by an increase in operating
expenses of $4.3 million.

17

Diluted earnings per share decreased $0.23, or 82.1%, from $0.28 for the
second quarter of 2002 to $0.05 for the second quarter of 2003. The return on
average assets was 0.10% for the second quarter of 2003, as compared to 0.66%
for the second quarter of 2002. The return on average equity was 1.39% for the
second quarter of 2003, as compared to 8.17% for the second quarter of 2002.

CIB Marine's net income decreased $6.6 million, or 54.1%, from $12.2
million for the six months ended June 30, 2002 to $5.6 million for the six
months ended June 30, 2003. The decrease in net income was primarily the result
of a $5.8 million increase in the provision for loan losses, a $2.7 million
impairment loss associated with Canron, and a $2.0 million provision for an
off-balance sheet loss. Additional information about these items is discussed in
"Provision for Loan Losses" and "Noninterest Expense". Other factors affecting
the change in net income between the periods were increases in net interest
income of $6.1 million and noninterest income of $5.2 million, partially offset
by an increase in operating expenses of $9.8 million.

Diluted earnings per share decreased $0.36, or 54.5%, from $0.66 for the
six months ended June 30, 2002 to $0.30 for the six months ended June 30, 2003.
The return on average assets was 0.31% for the six months ended June 30, 2003
compared to 0.79% for the same period of 2002. The return on average equity was
4.19% for the six months ended June 30, 2003 compared to 9.85% for the same
period 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 for the June 2003 periods compared to the same
periods of 2002:

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(TE) Tax-equivalent basis at 35%

18

CIB Marine's historical 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 57
banking facilities and 895 full-time equivalent employees at June 30, 2003, as
compared to 51 banking facilities and 751 full-time equivalent employees at June
30, 2002. CIB Marine opened five new branches in the second quarter of 2003,
three located in Florida and two 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

- -------------------------
(1) Noninterest income includes pre-tax gains on investment securities of $1.0
million for the quarter ended June 30, 2002 and $2.1 million for the six
months ended June 30, 2002.

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

(3) Net interest rate spread is the difference between the average rates on
interest-earning assets and 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 712 in 2003 and
40 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 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%.

20

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

(TE) Tax-equivalent basis of 35%

(1) Loan balance totals include nonaccrual loans.

(2) Interest earned on loans include amortized loan fees of $2.4 million and
$2.5 million for the quarters ended June 30, 2003 and 2002, respectively.

(3) Net interest rate spread is the difference between the average rates on
interest-earning assets and interest-bearing liabilities.

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

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

21

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

(TE) Tax-equivalent basis of 35%

(1) Loan balance totals include nonaccrual loans.

(2) Interest earned on loans include amortized loan fees of $5.1 million and
$4.9 million for the six months ended June 30, 2003 and 2002, respectively.

(3) Net interest rate spread is the difference between the average rates on
interest-earning assets and interest-bearing liabilities.

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

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

22

Net interest income on a tax-equivalent basis increased $2.3 million, or
8.4%, from $27.3 million for the second quarter of 2002 to $29.6 million for the
second quarter of 2003. Net interest income on a tax-equivalent basis increased
$6.1 million, or 11.7%, from $52.5 million for the six months ended June 30,
2002 to $58.7 million for the six months ended June 30, 2003. The increase in
net interest revenue was primarily volume related as CIB Marine's average
earnings assets grew by $358.2 million, or 11.5%, from the second quarter of
2002 to the second quarter of 2003, and $405.9 million, or 13.3%, from the first
six months of 2002 to the first six months of 2003. The principal source of this
growth occurred in CIB Marine's commercial real estate loans and loans held for
sale. Asset growth was primarily funded by increases in deposit liabilities.
Declining net interest margins partially offset the positive impact of increased
average earning assets in both the three and six-month periods.

CIB Marine's net interest rate spread was 3.10% for both the second quarter
of 2003 and 2002. The net interest spread increased five basis points from 3.06%
for the six months ended June 30, 2002 to 3.11% for the six months ended June
30, 2003. The net interest margin decreased nine basis points from 3.51% for the
second quarter of 2002 to 3.42% for the second quarter of 2003 and decreased by
five basis points from 3.48% for the six months ended June 30, 2002 to 3.43% for
the six months ended June 30, 2003. While interest rate spreads improved during
2003, the contribution to net interest margin attributable to interest-free
funds supporting earning assets was an offsetting factor. Earning assets funded
by interest free sources eliminates the need to incur interest expense on other
funding sources. This benefit declined in 2003 due to both the reduction in the
interest rate on alternative funding sources and a lower percentage of earning
assets funded by interest-free funding sources.

Total interest income, on a tax-equivalent basis, increased $0.6 million,
or 1.3%, from $51.6 million for the second quarter of 2002 to $52.2 million for
the second quarter of 2003. The increase was primarily the result of an 11.5%
increase in average interest-earning assets partially offset by a 61 basis point
decrease in the yield on interest-earning assets. Interest income on loans
increased by 2.8% due to higher average loan balances partially offset by a 35
basis point decline in the loan yield. Interest income on securities declined
30.6% due to lower yields partially offset by higher average investment
balances. Increased prepayments on mortgage backed securities has resulted in
accelerated amortization of purchase premiums and lower yields. Interest income
on loans held for sale increased by $1.4 million, or 298.3%, due primarily to
higher average balances.

For the six-month period, total interest income, on a tax-equivalent basis,
increased $4.0 million, or 4.0%, from $100.4 million for the six months ended
June 30, 2002 to $104.4 million in 2003. The increase was primarily the result
of a 13.3% increase in average interest-earning assets partially offset by a 55
basis point decrease in the yield on interest-earning assets. Interest income on
loans increased by 5.7% due to higher average loan balances partially offset by
a 28 basis point decline in the loan yield. Interest income on securities
declined 28.7% due to lower yields partially offset by higher average investment
balances. Increased prepayments on mortgage backed securities has resulted in
accelerated amortization of purchase premiums and lower yields. Interest income
on loans held for sale increased by $2.8 million, or 324.5%, due primarily to
higher average balances.

Total interest expense decreased $1.6 million, or 6.7%, from $24.3 million
in the second quarter of 2002 to $22.6 million in the second quarter of 2003.
This reduction was primarily the result of a 61 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 5.8% due to lower interest rates paid partially offset by an
increase in average deposit balances. Interest expense on borrowed funds
declined 13.3% primarily as a result of a reduction in the rate paid on borrowed
funds partially offset by an increase in the average balances of guaranteed
trust preferred securities.

For the six-month period, total interest expense decreased $2.2 million, or
4.5%, from $47.9 million for the six months ended June 30, 2002 to $45.7 million
in 2003. This reduction was primarily the result of a 60 basis point decline in
the rate paid on interest-bearing liabilities partially offset by an increase in
the average balance of interest-bearing liabilities. Interest expense on
deposits decreased by 3.7% due to lower interest rates paid partially offset by
an increase in average deposit balances. Interest expense on borrowed funds

23

declined by 10.2% due to lower interest rates paid on borrowed funds partially
offset by an increase in the average balances of guaranteed trust preferred
securities.

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:

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

(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 $8.9
million for the second quarter of 2003, as compared to $7.8 million for the same
period of 2002, representing an increase of 14.0%. For the six-month period
ended June 30, 2003, the provision for loan losses was $17.6 million, as
compared to $11.8 million for the same period of 2002, representing an increase
of 49.6%. 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.

24

NONINTEREST INCOME

The following table presents the significant components of noninterest
income:

Noninterest income increased $2.1 million, or 35.6% from $5.8 million for
the second quarter of 2002 to $7.9 million for the second quarter 2003. This
increase was primarily due to increased mortgage banking revenue, partially
offset by lower securities gains and the net loss on companies held for disposal
in 2003 compared to income in 2002.

Mortgage banking revenue increased $4.3 million, or 216.7%, from $2.0
million for the second quarter of 2002 to $6.3 million for the second 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 company in December of 2002. Revenue produced from this
acquired business contributed approximately 32% of the revenue growth between
the two periods.

Loan fees declined $0.5 million, or 52.3%, from $1.0 million for the second
quarter of 2002 to $0.5 million for the second quarter of 2003. The one-time
nature of some fees reduced 2003 loan fee revenue.

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 and "Companies Held For Disposal" for a
discussion of these companies. The loss in 2003 is primarily attributable to the
pre-tax loss of Canron, which was acquired in the fourth quarter of 2002.

Other income declined $0.4 million, or 73.1%, from $0.5 million for the
second quarter of 2002 to $0.1 million for the second quarter of 2003. This
reduction was due to a lower level of equity income from limited partnership
investments.

Noninterest income increased $5.2 million, or 47.2%, from $11.0 million for
the six months ended June 30, 2002 to $16.3 million for the six months ended
June 30 2003. This increase was primarily due to increased mortgage banking
revenue, partially offset by lower securities gains and the net loss on
companies held for disposal.

Mortgage banking revenue increased $9.3 million, or 260.0%, from $3.6
million for the six months ended June 30, 2002 to $12.8 million for the six
months ended June 30, 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 company in December of 2002.
Revenue produced from this acquired business contributed approximately 31% of
the revenue growth between the two periods.

Loan fees declined $0.9 million, or 39.2%, from $2.2 million for the six
months ended June 30, 2002 to $1.3 million for the six months ended June 30,
2003. The one-time nature of some fees reduced 2003 loan fee revenue.

25

Deposit service charges increased $0.2 million, or 12.3%, from $1.6 million
for the six months ended June 30, 2002 to $1.8 million for the six months ended
June 30, 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 and "Companies Held For Disposal" 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 $8.5 million, or 49.5%, from $17.2
million for the second quarter of 2002 to $25.7 million for the second quarter
of 2003. The increase was primarily due to an impairment loss recorded on
Canron, an additional provision for an off-balance sheet loss, and increased
expenses related to growth and increased mortgage banking activities.

Compensation and employee benefits expense is the largest component of
noninterest expense and represented 49.6% of total noninterest expense for the
second quarter of 2003 compared to 59.0% for the second quarter of 2002.
Compensation and employee benefits expense increased $2.6 million, or 25.6%,
from $10.2 million for the second quarter of 2002, to $12.8 million for the
second quarter of 2003. Approximately two-thirds 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 19.2% from 751 at June 30, 2002 to 895 at June 30, 2003.

Equipment expense increased $0.2 million, or 16.1%, from $1.2 million for
the second quarter of 2002 to $1.4 million for the second quarter of 2003. The
increase was primarily due to higher computer software related costs.

Occupancy and premises expense increased $0.2 million, or 16.9%, from $1.1
million for the second quarter of 2002 to $1.3 million for the second quarter of
2003. Increased costs associated with the opening of new branches was a
contributing factor.

Mortgage banking expense increased $0.9 million, from $0.7 million for the
second quarter of 2002 to $1.6 million for the second 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.

26

Loan collection expense increased $0.2 million from $0.2 million for the
second quarter of 2002 to $0.4 million for the second quarter of 2003. Costs
increased due to the higher level of nonperforming assets.

An impairment loss of $2.7 million was recorded in the second quarter of
2003 to reduce CIB Marine's net investment in Canron to $0.9 million, its
expected net realizable value. See "Companies Held For Disposal" for a
discussion of Canron.

An additional provision for off-balance sheet losses of $1.5 million was
recorded in the second 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 June 30, 2003. The total reserve for this
letter of credit at June 30, 2003 was $3.0 million. Although CIB Marine has
established a reserve for the letter of credit, it cannot provide assurances
that the collateral value will be maintained or that there will not be
additional losses with respect to this relationship.

The efficiency ratio was 68.61% for the second quarter of 2003, compared to
53.56% for the second quarter 2002. Total noninterest expense as a percentage of
average assets was 2.83% for the second quarter of 2003 and 2.17% for the same
period of 2002. The increase in these ratios was in part due to the additional
expense associated with the impairment and off-balance sheet losses recorded in
2003.

Total noninterest expense increased $14.6 million, or 44.8%, from $32.5
million for the six months ended June 30, 2002 to $47.0 million for the six
months ended June 30, 2003. Increased costs related to growth and mortgage
banking activities, along with the Canron impairment and the off-balance sheet
provision, were contributing factors to the increase in noninterest expense.

Compensation and employee benefits expense represented 54.6% of total
noninterest expense for the six months ended June 30, 2003 compared to 61.3% for
the same period of 2002. Compensation and employee benefits expense increased
$5.8 million, or 28.9%, from $19.9 million for the six months ended June 30,
2002, to $25.7 million in the same period 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 19.2% from 751 at June 30, 2002 to 895 at June
30, 2003.

Equipment expense increased $0.3 million, or 12.9% from $2.3 million for
the six months ended June 30, 2002 to $2.6 million in the same period of 2003.
The increase was primarily due to higher computer software related costs.

Occupancy and premises expense increased $0.4 million, or 18.8%, from $2.2
million for the six months ended June 30, 2002 to $2.6 million in the same
period of 2003. Increased costs associated with the opening of new branches was
a contributing factors.

Mortgage banking expense increased $2.1 million, from $1.0 million for the
six months ended June 30, 2002 to $3.1 million in the same period 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 $0.7 million primarily due to the level
of nonperforming assets.

An additional provision for off-balance sheet losses of $2.0 million was
recorded in the first half 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 June 30, 2003. The total reserve for this
letter of credit at June 30, 2003 was $3.0 million. Although CIB Marine has
established a reserve for the letter of credit, it cannot provide assurances
that the collateral value will be maintained or that there will not be
additional losses with respect to this relationship.

The efficiency ratio was 62.78% for the six months ended June 30, 2003,
compared to 52.84% for the same period of 2002. Total noninterest expense as a
percentage of average assets was 2.63% for the six months ended June 30, 2003
and 2.11% for the same period of 2002. The increase in these ratios was in part
due to the additional expense associated with the impairment and off-balance
sheet losses recorded in 2003.

27

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 second
quarter of 2003 and 2002 were 61.3% and 31.8%, respectively. The effective tax
rates for the six months ended June 30, 2003 and 2002 were 40.1% and 33.9%,
respectively. The increase in the effective tax rates was primarily due to the
inability to recognize a tax benefit for the $2.7 million Canron impairment loss
in the second quarter of 2003. Excluding the impairment loss, the effective tax
rate would have been 28% for the second quarter of 2003 and 31.0% for the six
months ended June 30, 2003. Partially offsetting this factor were reductions in
the effective tax rate resulting from 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 $68.6 million, or 1.9%, from $3.7
billion at December 31, 2002 to $3.6 billion at June 30, 2003. The reduction in
total assets was primarily due to an $80.5 million reduction in loans held for
sale and a $20.9 million reduction in loans, partially offset by a $53.9 million
increase in securities. Deposits increased by $115.6 million, or 4.1%, while
short-term borrowings were reduced by $182.1 million.

LOANS HELD FOR SALE

Loans held for sale, which are comprised primarily of residential first
mortgage loans, decreased $80.5 million, from $228.1 million at December 31,
2002 to $147.7 million at June 30, 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 was required to fund the loans
prior to being purchased by the secondary market 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 $279.0 million, purchased $918.2 million, and sold $1.3 billion of
loans held for sale during the six months ended June 30, 2003 as compared to
originations, purchases and sales of $101.1 million, $335.2 million and $441.1
million, respectively, during the same period of 2002. The mortgage banking
operations acquired in the fourth quarter of 2002 accounted for $224.8 million,
or 18.8%, of total mortgage originations and purchases during the first half of
2003.

SECURITIES

Total securities at June 30, 2003, were $567.9 million, an increase of
$53.9 million, or 10.5%, from $514.0 million at December 31, 2002. The ratio of
total securities to total assets was 15.8% at June 30, 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 increase the ratio of liquid assets to
total assets.

As of June 30, 2003, $505.4 million, or 89.0%, of the securities portfolio
was classified as available for sale and $62.5 million, or 11.0%, 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 June 30, 2003, the net unrealized gain on the available for sale
securities was $2.1 million, compared to $4.7 million at December 31, 2002.

28

LOANS

Loans, net of the allowance for loan losses, were $2.6 billion at June 30,
2003, a decrease of $29.1 million, or 1.1%, from December 31, 2002, and
represented 73.0% of CIB Marine's total assets at June 30, 2003, and 72.4% at
December 31, 2002. The reduction in loans was in part attributable to the
transfer through foreclosure of $18.2 million of loan balances to foreclosed
properties and, $10.5 million in loan charge-offs. In addition, more stringent
loan standards and an increased focus on the existing portfolio has resulted in
a reduced level of loan growth.

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 June 30, 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 June 30, 2003, was $116.0 million, or 43.7%, of CIB Marine's
stockholders' equity and 4.3% of total loans. The aggregate principal
amount actually drawn and outstanding was $97.5 million at June 30, 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 June 30, 2003, $11.6 million of the loans to this
borrower and its related interests were 30 to 89 days past due. At August
12, 2003, none of the loans to this borrower and its related interests
were 30 days or more past due.

- 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 June 30, 2003, was $113.1 million, or 42.7%, of CIB Marine's
stockholders' equity and 4.2% of total loans. The aggregate principal
amount actually drawn and outstanding was $105.1 million at June 30,
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 June 30, 2003, $1.3 million of
the loans to this borrower and its related interests were 30 to 89 days
past due. At August 12, 2003, none of the loans to this borrower and its
related interests were 30 days or more past due.

- 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 June 30, 2003, was $82.5 million, or 31.1%, of CIB Marine's
stockholders' equity and 3.1% of total loans. The aggregate principal
amount actually drawn and outstanding was $75.2 million at June 30, 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 June 30, 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 June 30, 2003, was $72.1 million, or 27.2%, of CIB Marine's
stockholders' equity and 2.7% of total loans. The aggregate principal
amount actually drawn and outstanding was $51.6 million at June 30, 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 June 30, 2003, $2.0 million of the loans to this borrower
and its related interests were 30 to 89 days. At August 12, 2003, none of
the loans to this borrower and its related interests were 30 days or more
past due.

Approximately $27.5 million of the above described outstanding loan
commitments are counted in more than one of the described relationships. Total
outstanding lending commitments of the above described relationships were $383.7
million, $391.3 million and $373.6 million at June 30, 2003, March 31, 2003 and
December 31, 2002, respectively. The total principal amount drawn and
outstanding by the above described

29

relationships were $329.4 million, $341.9 million and $314.1 million as of June
30, 2003, March 31, 2003 and December 31, 2002, respectively.

At June 30, 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 $505.3 million, or 18.8% of total loans and 190.6% of
stockholders' equity. The total outstanding balance to residential real estate
developers, investors and contractors was $653.5 million, or 24.3% of total
loans and 246.6% of stockholders' equity. The total outstanding balance of loans
made in the motel and hotel industry was $220.3 million, or 8.2% of total loans
and 83.1% of stockholders' equity. The total outstanding balance of loans made
in the nursing/convalescent home industry was $132.4 million, or 4.9% of total
loans and 49.9% of stockholders' equity. The total outstanding balance of loans
made in the health care facility industry was $112.1 million, or 4.2% of total
loans and 42.3% 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 June 30, 2003 the
allowance for loan losses was $60.6 million, or 2.25% of total loans, compared
to $52.4 million, or 1.93% of total loans at December 31, 2002 and $41.9
million, or 1.63% of total loans at June 30, 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 and the credit risk associated with certain
borrowing relationships and industry concentrations. 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 second quarter of 2003 were $6.1 million, while recoveries
were $0.7 million, as compared to $3.5 million and $0.3 million, respectively,
for the same period of 2002. Total charge-offs for the six months ended June 30,
2003 and 2002 were $10.5 million and $4.3 million, respectively, while total
recoveries were $1.1 million and $0.3 million, respectively. The increase in
charge-offs during 2003 was primarily associated with three lending
relationships.

The ratio of the allowance to nonaccrual, restructured and loans 90 days or
more past due and still accruing was 99.2% at June 30, 2003 compared to 72.7% at
March 31, 2003, 113.3% at December 31, 2002 and 73.2% at June 30, 2002. The
reduction in this ratio from December 31, 2002 to June 30, 2003 primarily
resulted from the higher levels of nonaccrual and past due loans on June 30,
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.

30

The following table summarizes changes in the allowance for loan losses:

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.

31

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

Total nonaccrual loans were $48.0 million at June 30, 2003, an increase of
$11.3 million, or 31.0%, from $36.6 million at December 31, 2002. The ratio of
nonaccrual loans to total loans was 1.79% at June 30, 2003, compared to 1.35% at
December 31, 2002.

At June 30, 2003, $42.6 million, or 88.9%, of total nonaccrual loans
consisted of the following ten lending relationships:

- Commercial real estate loans to a borrower with an aggregate outstanding
balance of $7.9 million as of June 30, 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 real estate loans to a related group of borrowers with an
aggregate outstanding balance of $6.9 million as of June 30, 2003,
secured by first mortgages on residential housing units which are under
construction. These loans were transferred to nonaccrual in June 2003.
While CIB Marine

32

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
relationship.

- Commercial loans to a borrower with an aggregate outstanding balance of
$5.5 million as of June 30, 2003, secured by all business assets of the
borrower, a junior mortgage on a residential property and marketable
securities. These loans were transferred to nonaccrual in June 2003. CIB
Marine allocated $2.1 million as a specific reserve to the allowance for
loan losses for these loans in the second quarter of 2003. Although CIB
Marine has allocated $2.1 million as a specific reserve to the allowance
for loan losses for these loans, it 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 loans to a borrower with an aggregate outstanding balance of
$4.6 million as of June 30, 2003, secured by business assets. These loans
were transferred to nonaccrual in June 2003. CIB Marine allocated $2.5
million as a specific reserve to the allowance for loan losses for these
loans in the second quarter of 2003. Although CIB Marine has allocated
$2.5 million as a specific reserve to the allowance for loan losses for
these loans, it 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 related group of borrowers with an
aggregate outstanding balance of $4.5 million as of June 30, 2003,
secured by first mortgages on two assisted living facilities which are
under construction. These loans were transferred to nonaccrual in
December 2000 and 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, all of which was charged-off in the second
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 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 $3.8 million as of June 30, 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, of which $1.3 million was charged-off in the second quarter of
2003. Although CIB Marine has a remaining $1.1 million 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 loans to a borrower with an aggregate outstanding balance of
$3.2 million as of June 30, 2003, secured by approximately $0.3 million
of accounts receivable. 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, and an additional $0.4 million in the second
quarter of 2003, which amounts were charged-off in the first and second
quarters of 2003. CIB Marine also expects to receive an additional $0.3
million upon the buyer's collection of certain accounts receivable.
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 loan to a borrower with an outstanding balance of $2.5
million as of June 30, 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. CIB Marine allocated $1.3
million as a specific reserve to the allowance for loan losses for this
loan in the second quarter of 2003. In July 2003, the CIB Marine shares
were sold to a nonaffiliated third party for $1.2 million, the proceeds
of which were applied to the loan. Although CIB Marine has allocated $1.3
million as a specific reserve to the

33

allowance for loan losses for this loan, it 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 real estate loan to a borrower with an outstanding balance
of $2.2 million as of June 30, 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 has allocated $0.6
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 additional losses
with respect to this relationship.

- Commercial loans to the Borrower's related interests with an outstanding
balance of $1.5 million as of June 30, 2003, secured by a first mortgage
on a commercial property and business assets. These loans were
transferred to nonaccrual during the third quarters of 2001 and 2002.
Although CIB Marine has 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 of the
collateral will be maintained or that there will not be additional 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 $20.5 million at June 30, 2003 and consisted of
ten 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 three commercial properties that were collateral for
certain loans. These properties were transferred to foreclosed properties at
their fair market value which was estimated to be $18.2 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 $1.4 million
during the first half of 2003. In August 2003, CIB Marine entered into a
contract to sell one of these properties for $15.2 million, its carrying value.
The transaction is expected to close in the latter part of the third quarter of
2003.

Restructured loans were $3.0 million at June 30, 2003 and consisted of a
commercial real estate loan to a borrower that was classified as restructured in
the first quarter of 2002. The borrower 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 $10.0 million in loans that were 90 days or
more past due and still accruing at June 30, 2003 compared to $6.4 million at
December 31, 2002.

The ratio of nonperforming assets and loans 90 days or more past due and
still accruing to total assets was 2.27% at June 30, 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 $65.2
million at June 30, 2003, an increase of $26.3 million from December 31, 2002.
This increase was due to the higher levels of nonperforming and past due loans
that were subject to impairment testing. Large groups of smaller balance
homogeneous loans are collectively evaluated

34

for impairment. Accordingly, CIB Marine does not separately identify individual
consumer and residential loans for impairment disclosures.

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 June 30, 2003, CIB Marine had $32.0 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 six months ended June 30, 2003, Canron incurred a net loss of
$2.6 million, as compared to net income of $0.7 million for the same period of
2002, primarily as a result of a $42.4 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 for approximately
three years. As a result, Canron's backlog has continued to decrease. At June
30, 2003 Canron's backlog was $42.1 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.
Further, it is unlikely that Canron will be able to obtain bonding due to the
continued decrease in its backlog and financial condition. CIB Marine's 84%
equity interest in Canron's pre-tax loss is included in Other Income in the
Consolidated Statements of Income. See Item 1 -- "Financial Statements -- Note
5 -- Companies Held for Disposal" for additional information regarding Canron.

CIB Marine continues to explore various exit strategies relative to Canron,
all of which CIB Marine management has authority to do, including the immediate
sale of its equity interest in the company. Canron is also exploring an orderly
liquidation of its assets, as well as other strategies to wind up its affairs.
As a result of Canron's lack of bonding and decrease in backlog, Canron has
closed certain of its facilities and reduced its workforce during the second
quarter of 2003, and will consider additional closings and reductions as
warranted. Based upon management's assessment and current discussions with
parties that have expressed interest in purchasing Canron or acquiring select
assets or operations of Canron, CIB Marine has determined that an impairment of
its investment in Canron existed on June 30, 2003. Accordingly, CIB Marine
recorded an impairment loss of $2.7 million in the second quarter of 2003, which
reduced its 84% equity investment in Canron to $0.9 million. 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.

35

MICR, Inc.

In 2000, 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. Pre-tax income related to this
business is included in Other Income in CIB Marine's Consolidated Statements of
Income. Pre-tax income was $0.7 million for the six months ended June 30, 2003
as compared to $0.8 million for the same period 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 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 $115.6 million, or 4.1%, from $2.8 billion at
December 31, 2002 to $3.0 billion at June 30, 2003. This increase was primarily
due to a $116.5 million increase in savings deposits. CIB Marine has been
targeting savings deposit growth in 2003 through competitive pricing and market
promotions. Time deposits represent the largest component of deposits. The
percentage of time deposits to total deposits was 67.4% at June 30, 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 June 30, 2003 time deposits of
$100,000 or more amounted to $667.0 million, or 33.4%, 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 $174.9 million, or 8.75%, of total time deposits at
June 30, 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 $161.2 million at June 30, 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 $312.5 million at June 30, 2003
compared to $494.1 at December 31, 2002. Short-term borrowings decreased by
$182.1 million during the six-month period ended June 30, 2003 as a result of an
increase in deposits together with a 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 June 30, 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 June 30, 2003, CIB Marine
and each of its subsidiary banks had sufficient capital to be categorized as
well capitalized. CIB Marine intends to

36

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.

During the second quarter of 2003, CIB Marine acquired, through its
subsidiary banks, 86,611 shares of its common stock from borrowers through
collection activities. These shares were valued at $2.2 million which was their
estimated fair market value and are reflected as treasury shares in
stockholders' equity. The receipt of these shares was used to reduce loans
outstanding by $2.0 million and record a $0.2 million recovery on previously
charged-off loans.

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. At June 30, 2003, the Tier I capital to total assets
ratio was 8.53%. 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 to suspend the declaration or
payment of dividends.

37

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 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 totaled $722.7 million at June 30, 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 $107.7 million for the six
months ended June 30, 2003 compared with $16.9 million for the six months ended
June 30, 2002. The increase in cash provided was primarily the result of the net
reduction in loans held for sale. For the six months ended June 30, 2003, net
cash used in investing activities was $70.4 million, compared to $248.3 million
for the six months ended June 30, 2002. The reduction in cash used for investing
activities was caused primarily by reduced loan growth. Net cash used in
financing activities was $66.0 million for the six months ended June 30, 2003
compared to net cash provided of $266.2 million for the six months ended June
30, 2002. The increase in cash used in financing activities was primarily
attributable to a repayment of short-term borrowed funds with the proceeds from
the sale of loans held for sale combined with lower funding demands as a result
of reduced loan growth between the two periods.

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

38

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.

The following table illustrates the period and cumulative interest rate
sensitivity gap for June 30, 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 June 30, 2003, and December 31, 2002:

39

ITEM 4. DISCLOSURE 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 Rule 13a-15(e) under the Securities Exchange Act of
1934) have concluded that, as of the end of the period covered by this quarterly
report, 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.

b. Changes in Internal Controls

There was no change in CIB Marine's "internal control over financial
reporting" (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934)
identified in connection with the evaluation required by Rule 13a-15(d) of the
Securities Exchange Act of 1934 that occurred during the fiscal quarter covered
by this report on Form 10-Q that has materially affected, or is reasonably
likely to materially affect, CIB Marine's internal control over financial
reporting.

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 pleaded
guilty to four charges, including three counts of wire fraud. The United States
alleges the borrower committed fraud in the amount of $54.9 million and may seek
recovery from the borrower by means of forfeiture. 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

40

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

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

a. CIB Marine held its Annual Meeting of Shareholders on May 22, 2003.

b. Matters related to the election of Directors.

The continuing Directors of CIB Marine whose seats were not up for election
at the annual meeting are as follows:

ITEM 5. OTHER INFORMATION

Not Applicable

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibit 31.1 -- Certification of J. Michael Straka, Chief
Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a).
Exhibit 31.2 -- Certification of Steven T. Klitzing, Chief
Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a).
Exhibit 32.1 -- Certification of J. Michael Straka, Chief
Executive Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2 -- Certification of 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 -- None

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 August, 2003.

CIB MARINE BANCSHARES, INC.
(Registrant)

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

41