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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                       COMMISSION FILE NUMBER: 000-24149

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

<TABLE>
<S>                                            <C>
                  WISCONSIN                                     37-1203599
          (State of incorporation)                 (I.R.S. Employer Identification No.)
 N27 W24025 PAUL COURT, PEWAUKEE, WISCONSIN                        53072
  (Address of principal executive offices)                      (Zip Code)
</TABLE>

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

Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:

                    COMMON STOCK, $1.00 PAR VALUE PER SHARE
                                (Title of Class)

     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 ____

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]

     The aggregate market value of the common stock held by nonaffiliates of the
registrant as of March 16, 2001, based on a price per share of $19.71 (the price
per share at which the registrant sold 22,709 shares of its common stock in its
most recent private placement in January 2001) was $295.7 million.

     As of March 16, 2001, there were issued and outstanding 16,942,170 shares
of the registrant's common stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference in this report:

1. Portions of the registrant's Proxy Statement for the 2001 Annual Meeting of
   Shareholders are incorporated by reference to Part III hereof.

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                                     PART I

ITEM 1. BUSINESS

CIB MARINE

     CIB Marine Bancshares, Inc. (CIB Marine) is a multi-bank holding company
with its principal executive offices in Pewaukee, Wisconsin, a suburb of
Milwaukee. CIB Marine currently owns and operates four separately chartered
commercial banking organizations and one federal savings bank:

     - Central Illinois Bank, with its main office in Champaign, Illinois;

     - CIB Bank, with its main office in Hillside, Illinois, a suburb of Chicago
       ("CIB-Chicago");

     - Marine Bank, with its main office in Wauwatosa, Wisconsin, a suburb of
       Milwaukee ("Marine Bank -- Milwaukee");

     - CIB Bank, with its main office in Indianapolis, Indiana ("CIB-Indiana");
       and

     - Marine Bank, a federal savings bank with its main office in Omaha,
       Nebraska ("Marine Bank -- Omaha").

     As of December 31, 2000, CIB Marine had a total of 42 full-service banking
facilities in Illinois, Wisconsin, Indiana and Nebraska. CIB Marine offers a
full array of traditional banking services through its bank and non-bank
subsidiaries. These services include a broad range of loan products, such as
commercial loans, commercial real estate loans, commercial and residential real
estate construction loans, one-to-four family residential real estate loans,
consumer loans and commercial and standby letters of credit; accepting demand,
savings, time, and Eurodollar deposits; providing commercial paper and
repurchase agreements; and other forms of banking services.

     CIB Marine also owns and operates two non-bank subsidiaries. These include
Mortgage Services, Inc. (a mortgage banking company) and CIB Data Processing
Services, Inc. (a data processing company).

     References in this document to "CIB Marine" include CIB Marine's
subsidiaries unless otherwise specified.

OVERVIEW

     CIB Marine was originally incorporated in the State of Illinois in 1985 as
Sidney Bancorporation, Inc., a one-bank holding company headquartered in Sidney,
Illinois. In September 1987, a group of investors led by J. Michael Straka,
President and Chief Executive Officer of CIB Marine, acquired all of the
outstanding stock of Sidney Bancorporation, which at the time had total assets
of $9.4 million, and subsequently changed its name to Central Illinois Bancorp,
Inc. On August 27, 1999, Central Illinois Bancorp, Inc. reincorporated as a
Wisconsin corporation and changed its name to CIB Marine Bancshares, Inc.

     Upon the change of ownership, CIB Marine changed its strategy to focus on
the development of banking relationships with small to medium-sized businesses
by providing more personalized banking services in a community banking
atmosphere. To facilitate this strategy CIB Marine expanded its banking
operations, first in central Illinois and more recently in the Chicago,
Milwaukee, Indianapolis and Omaha metropolitan areas.

     At December 31, 2000, CIB Marine had consolidated total assets of
approximately $2.4 billion as compared to consolidated total assets of $1.8
billion at December 31, 1999, an increase of 29.7%. Net income for the fiscal
year ended December 31, 2000 was $21.1 million, as compared to $13.5 million for
the fiscal year ended December 31, 1999, an increase of 55.7%. CIB Marine has
grown substantially over the last five years. CIB Marine's consolidated total
assets at December 31, 1996 were $550.6 million and its net income for the
fiscal year ended December 31, 1996 was $3.6 million.
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GROWTH STRATEGY

     CIB Marine believes that its growth, from a one-bank holding company with
$9.4 million in assets at September 15, 1987 to a five-bank holding company with
approximately $2.4 billion in assets at December 31, 2000, has been largely
attributable to the implementation of its growth strategy. CIB Marine's growth
strategy consists of the following four principal components:

     - DEVELOPING COMMERCIAL BANKING RELATIONSHIPS WITH SMALL TO MEDIUM-SIZED
       BUSINESSES. Although CIB Marine is a full-service banking organization,
       its niche has been to develop banking relationships with small to
       medium-sized businesses. Typically, CIB Marine meets its customers'
       borrowing needs through various types of loans, including commercial real
       estate loans, commercial business loans and construction loans, often
       making multiple and different types of loans to the same customer. In
       addition, CIB Marine believes that consolidation occurring within the
       banking industry has resulted in the formation of larger institutions
       that generally focus on larger commercial customers and has enhanced CIB
       Marine's ability to attract and retain commercial banking relationships
       with small to medium-sized businesses. CIB Marine expects to continue to
       focus on and build upon its experience in commercial banking.

     - OFFERING MORE PERSONALIZED SERVICE TO COMMERCIAL BANKING CUSTOMERS. CIB
       Marine believes that it is able to offer banking services in a community
       banking atmosphere that are more personalized than the services offered
       by other institutions. CIB Marine's banking culture has enabled it to
       attract and retain customers who value traditional community banking.

     - HIRING EXPERIENCED PERSONNEL.  CIB Marine recruits and hires experienced
       commercial banking officers who have established relationships in the
       markets that it serves. J. Michael Straka and each President of CIB
       Marine's subsidiary banks is an experienced commercial lender, further
       enhancing CIB Marine's strong commercial lending culture. In addition to
       its banking culture, consolidation within the banking industry has helped
       CIB Marine to recruit experienced commercial bankers. CIB Marine also
       hires experienced professionals in other areas to support and manage
       future growth.

     - EXPANDING IN BOTH NEW AND EXISTING MARKETS.  CIB Marine expands through
       the establishment of newly chartered banks, branching and acquisitions.
       CIB Marine expands its banking operations into geographic markets where
       there are a significant number of small to medium-sized businesses and
       where it has either identified and retained experienced commercial
       bankers or other personnel with established relationships to serve those
       markets or by relocating experienced bankers to that area. Since the
       change of ownership in 1987, CIB Marine has entered the metropolitan
       markets of Chicago, Milwaukee, Indianapolis and Omaha, as well as smaller
       metropolitan markets within the central Illinois region. CIB Marine
       expects to further expand banking operations in these markets and to
       enter new markets with populations of at least 100,000. When CIB Marine
       expands through acquisitions, it seeks to identify financial institutions
       or financial institution branches that offer lending opportunities and/or
       the opportunity to strengthen its deposit base, and that enhance
       shareholder value.

GROWTH AND DEVELOPMENT OF BANKING OPERATIONS

EXPANSION IN CENTRAL ILLINOIS.

     At the time of the change in ownership in September 1987, CIB Marine had a
single banking subsidiary, Sidney Community Bank, an Illinois state bank. The
bank was originally organized in 1958 and had its sole office in Sidney,
Illinois, a town with a population of approximately 1,000 people, located in
Champaign County. In January 1988, the name of the bank was changed to Central
Illinois Bank. As a result of the decision to focus on developing banking
relationships with small to medium-sized businesses, CIB Marine first expanded
into the Champaign-Urbana market, a community of approximately 100,000 people
and home to the University of Illinois. The bank opened its first branch
facility in Champaign in 1988 and opened its second branch facility in Urbana in
1990.

     In October 1991, CIB Marine acquired all of the stock of Arrowsmith State
Bank, an Illinois state bank organized in 1920. This bank had its sole office in
Arrowsmith, Illinois, a town with a population of

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approximately 350, located in McLean County. At the time of the acquisition, the
Arrowsmith bank had total assets of approximately $10.0 million. The name of the
bank was changed to Central Illinois Bank McLean County in 1992, and to Central
Illinois Bank MC in 1995. This acquisition allowed CIB Marine to enter the
Bloomington-Normal market, a community of approximately 100,000 people, and home
to Illinois State University. In July 1998, CIB Marine merged Central Illinois
Bank and Central Illinois Bank MC under the charter of Central Illinois Bank MC
and the name of Central Illinois Bank. The main office of the merged bank is
located in Champaign, Illinois.

     Between November 1992 and December 31, 2000, CIB Marine significantly
expanded the operations of the bank by establishing branch facilities throughout
central Illinois, including the five largest cities in this region. During this
period, Central Illinois Bank opened 15 additional branch facilities in central
Illinois. In February 1999, CIB Marine sold one of these facilities because it
did not fit within CIB Marine's long-term strategic plans. In October 2000, CIB
Marine consolidated its Bloomington and Normal facilities into a new facility in
Bloomington. At December 31, 2000, Central Illinois Bank had total assets of
$806.7 million, 167 full-time equivalent employees and 17 banking facilities in
central Illinois: three in Champaign-Urbana, one in Bloomington-Normal, two in
Peoria, and one each in Arrowsmith, Arthur, Danville, Decatur, East Peoria,
Lincoln, Monticello, Morton, Rantoul, Springfield and Sidney.

     In March 2001, CIB Marine made application to establish a third facility in
Peoria, Illinois. Subject to regulatory approval, this facility is expected to
open during the latter part of 2001.

EXPANSION INTO THE CHICAGO METROPOLITAN AREA

     In June 1994, CIB Marine entered the Chicago metropolitan market through
the acquisition of Hillside Investors, Ltd., a one-bank holding company located
in Hillside, Illinois. The sole subsidiary of Hillside Investors was the Bank of
Hillside, an Illinois state bank organized in 1963, with its main office located
in Hillside, a suburb of Chicago. At the time of the acquisition, the Bank of
Hillside had one banking facility and total assets of $34.5 million. In January
1995, the name of the bank was changed to CIB Bank.

     Between June 1994 and December 31, 2000, CIB Marine opened an office in
downtown Chicago and eleven additional branch facilities in the Chicago suburbs:
one each in Arlington Heights, Bolingbrook, Elk Grove Village, Elmhurst,
Frankfort, Gurnee, Mount Prospect, Niles, Northbrook, Willow Springs and Zion.
The Gurnee, Mount Prospect, Arlington Heights and Zion facilities were acquired
from other banking organizations and had $13.3 million, $33.0 million, $82.8
million and $28.2 million of deposit liabilities, respectively, at the time of
acquisition. In January 2000, CIB-Chicago established a foreign office in the
Cayman Islands. This office accepts Eurodollar deposits, thereby facilitating
CIB Marine's money desk operations. In June 2000, CIB Marine relocated its
downtown Chicago facility to a more convenient street level location in the
downtown area. At December 31, 2000, CIB-Chicago had total assets of
approximately $1.2 billion, 144 full-time equivalent employees and 13 banking
facilities.

EXPANSION INTO THE MILWAUKEE METROPOLITAN AREA

     In September 1997, CIB Marine entered the Milwaukee metropolitan area by
acquiring First Ozaukee Capital Corp., a one-bank holding company located in
Cedarburg, Wisconsin. The sole subsidiary of First Ozaukee Capital Corp. was
First Ozaukee Savings Bank, a Wisconsin savings bank, with its main office in
Cedarburg, and a branch facility in Grafton, both suburbs of Milwaukee. First
Ozaukee was originally chartered in 1923 as Cedarburg Building and Loan
Association. It subsequently converted to a mutual savings bank and then
converted to a stock savings bank in 1994. At the time of the acquisition, the
savings bank had total assets of $37.6 million. In September 1997, CIB Marine
changed the name of the savings bank to Marine Bank and Savings. In February
2000, Marine Bank and Savings converted its charter to a Wisconsin commercial
bank, changed its name to Marine Bank and moved its main office to the Wauwatosa
facility.

     Between September 1997 and December 31, 2000, CIB Marine opened four
additional branch facilities in the Milwaukee metropolitan area: one each in
Pewaukee, which also serves as the executive offices of CIB Marine, Wauwatosa,
downtown Milwaukee and Franklin. In November 2000, CIB Marine received
regulatory approval to establish a facility in Brookfield, another suburb of
Milwaukee, which is expected to open early in
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the third quarter of 2001. At December 31, 2000, Marine Bank -- Milwaukee had
total assets of $283.1 million, 48 full-time equivalent employees and six
banking facilities.

EXPANSION INTO THE INDIANAPOLIS METROPOLITAN AREA

     In March 1998, CIB Marine entered the Indianapolis metropolitan area by
establishing a new Indiana state bank, also under the name CIB Bank. Since its
organization, this bank has opened three additional facilities in Indianapolis
and one in Carmel, a suburb of Indianapolis. At December 31, 2000, CIB-Indiana
had total assets of $109.4 million, 28 full-time equivalent employees and five
banking facilities.

EXPANSION INTO THE OMAHA METROPOLITAN AREA

     In November 1999, CIB Marine entered the Omaha metropolitan area by
establishing a new federal savings bank under the name Marine Bank. At December
31, 2000, this bank had total assets of $31.5 million, six full-time equivalent
employees and one banking facility located in Omaha.

EXPANSION INTO FLORIDA

     In January 2001, CIB Marine established, through CIB-Chicago, a loan
production office in North Miami Beach. On March 6, 2001, CIB Marine signed a
definitive agreement whereby it will acquire, through a merger transaction,
Citrus Financial Services, Inc. Citrus Financial is a locally owned one-bank
holding company headquartered in Vero Beach, Florida. Citrus Financial operates
primarily through its subsidiary, Citrus Bank N.A., and offers a broad range of
retail and commercial banking services. At December 31, 2000, Citrus Financial
had total assets of approximately $95.9 million with 3 full-service banking
facilities, one each in Vero Beach, Barefoot Bay and Sebastian, and a loan
production office in Sebring, Florida. Pursuant to the terms of the merger
agreement, shares of Citrus Financial will be exchanged for shares of CIB Marine
common stock. The exchange ratio will be based on a 1.75 multiple of book value
for CIB Marine common stock and a 1.68 multiple of book value for Citrus
Financial common stock. Upon closing, each share of Citrus Financial common
stock will be exchanged for the number of shares of CIB Marine common stock
equal to 1.68 times the book value per share of Citrus Financial common stock
divided by 1.75 times the book value per share of CIB Marine common stock. Using
December 31, 2000 figures, the book value per share of CIB Marine common stock
was $11.50 and the book value per share of Citrus Financial common stock was
approximately $6.16, resulting in a deal value of approximately $15 million.
However, this deal value does not take into account the pre-closing adjustments.
The shares of Citrus Financial are not publicly traded. The transaction, which
will be accounted for as a pooling of interests, is expected to close during the
latter part of 2001. The transaction is subject to various regulatory approvals,
Citrus Financial shareholder approval and other customary conditions. This
transaction will enable CIB Marine to expand its Florida operations and better
serve its current customers who have existing ties to Florida. CIB Marine
intends to continue using the Citrus Bank name in Florida.

OPERATIONS OF NON-BANK SUBSIDIARIES

     CIB Marine also owns and operates two wholly-owned non-banking
subsidiaries: CIB Data Processing Services, Inc. and Mortgage Services, Inc.
Each of these subsidiaries was created or acquired to facilitate or complement
CIB Marine's banking activities. In addition, CIB-Chicago owns and operates
MICR, Inc., a manufacturer of payment processing systems based in Mukilteo,
Washington.

     CIB DATA PROCESSING SERVICES, INC.

     CIB Data Processing Services, Inc., an Illinois corporation, was
incorporated in August 1990. CIB Marine organized this subsidiary to provide
data processing services to CIB Marine and its other subsidiaries. CIB Data
coordinates computer equipment leases and purchases, licenses banking software
and coordinates operation of CIB Marine software. CIB Marine operates CIB Data
to facilitate internal operational needs and does not currently provide services
to third parties. CIB Marine believes that by performing its data processing
function in-house it receives more timely and cost-effective service than would
be received if it used a third-

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party service provider. In addition, CIB Data facilitates CIB Marine's growth
strategy by allowing CIB Marine to rapidly integrate newly opened or acquired
branches and banks.

     As of December 31, 2000, this subsidiary had 33 full-time equivalent
employees. CIB Data does not separately own any facilities, and its principal
office is located in the Rantoul, Illinois facility of Central Illinois Bank.

MORTGAGE SERVICES, INC.

     In September 1995, CIB Marine acquired all of the stock of Mortgage
Services of Illinois, Inc., a mortgage origination and mortgage brokerage
services company. In 1998, CIB Marine changed the name of this subsidiary to
Mortgage Services, Inc. This subsidiary is an Illinois corporation licensed to
conduct mortgage operations in Illinois, Iowa, Missouri, Nebraska and Wisconsin.
Mortgage Services also operates in the states of Colorado, Florida, Indiana,
Oklahoma and Wyoming, but is not required to be licensed in those states.
Through Mortgage Services, CIB Marine originates conventional mortgage loans and
offers VA, FHA and other fixed-rate and variable-rate loans. During 2000,
Mortgage Services established a wholesale division which purchases and
originates mortgage loans through a network of correspondent banks. Although CIB
Marine sells a majority of the mortgage loans in the secondary market with
servicing rights released, CIB Marine also retains mortgage loans that meet CIB
Marine's underwriting standards but which do not conform to secondary market
underwriting guidelines or where CIB Marine believes that retaining the loan is
important in enhancing a customer relationship.

     As of December 31, 2000, Mortgage Services had 34 full-time equivalent
employees. Mortgage Services does not separately own any facilities, and its
principal office is located in the Bloomington facility of Central Illinois
Bank. Mortgage Services' employees also provide mortgage origination and
mortgage brokerage services at many of the other branch facilities of CIB
Marine's subsidiary banks. The mortgage banking operations are not presented as
a separate segment as its assets and results of operations do not meet the
required disclosure criteria.

MICR, INC.

     In October 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. The business, which
operates under the name of Maverick International, was acquired in lieu of
foreclosure or other legal action from a borrower who was in default of its
obligations to CIB Marine. The primary business of this manufacturer is the
design, development, assembly, distribution and servicing of magnetic ink
character recognition check encoders and related embedded software to small and
mid-sized financial institutions, as well as to large retailers and independent
remittance processors. As of December 31, 2000 MICR, Inc. had 40 full-time
equivalent employees. Additional information regarding MICR, Inc. is contained
in "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition -- Other Assets."

FOREIGN OPERATIONS

     CIB Marine and its subsidiaries do not engage in any operations in foreign
countries other than the Cayman Islands branch facility of CIB-Chicago and one
other investment subsidiary. This investment subsidiary was formed under the
laws of the state of Delaware and has an office in the Cayman Islands. Each of
these entities has at least one employee who is a resident of the Cayman
Islands.

MANAGEMENT SUPPORT SERVICES

     In addition to the support services provided by its non-bank subsidiaries,
CIB Marine, as a holding company, performs a significant portion of its
subsidiaries' back office services, including credit administration, loan
review, accounting, finance, investment, audit, operations, human resources,
legal, marketing and advertising. CIB Marine believes that it is more efficient
to consolidate these services within the holding company in order to assure that
operating policies and procedures are consistent throughout the organization.
This also enables CIB Marine to more efficiently manage the costs of these
services than if the same were
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performed independently at each subsidiary. The holding company allocates the
cost of its employees among the subsidiaries based upon the services performed
for each subsidiary in accordance with a written agreement between the
companies. At December 31, 2000, the holding company had 112 full-time
equivalent employees, a majority of whom provide the services described above to
the subsidiaries.

TOTAL EMPLOYEES

     At December 31, 2000, CIB Marine and all of its bank and non-bank
subsidiaries had a combined total of 612 full-time equivalent employees.

COMPETITION

     The banking industry is highly competitive. CIB Marine's subsidiary banks
compete for loans, deposits and other financial services in their markets and
surrounding areas. CIB Marine competes with other financial institutions, money
market and other mutual funds, insurance companies, brokerage companies and
other non-depository financial service companies. Many of these financial firms
have a regional or national presence and resources many times greater than those
of CIB Marine. In addition, new financial companies such as money market mutual
funds, brokerage companies and other non-banking organizations are not subject
to the same regulations and laws that govern the operation of traditional
depository institutions.

     Recent changes in federal and state laws have resulted in and are expected
to continue to result in increased competition. The reductions in legal barriers
to the acquisition of banks resulting from the implementation of interstate
banking laws, the Gramm-Leach-Bliley Act (the "GLBA"), and other recent and
proposed changes, are expected to continue to further stimulate competition in
the markets in which CIB Marine operates, although it is not possible to predict
the extent or timing of such increased competition.

SUPERVISION AND REGULATION

GENERAL

     Financial institutions and their holding companies are extensively
regulated under both federal and state law. Any significant change in the
banking laws and regulations applicable to CIB Marine could materially impact
its operations or change the manner in which it conducts business. Federal and
state regulation of financial institutions is intended primarily for the
protection of the federal deposit insurance funds and depositors, rather than
stockholders, of a financial institution.

     CIB Marine is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA") and, as such, is regulated by the
Federal Reserve Board. Marine Bank -- Omaha is a federal savings bank, and its
primary regulator is the Office of Thrift Supervision (the "OTS"). CIB Marine's
other bank subsidiaries are regulated by the Federal Deposit Insurance
Corporation (the "FDIC"), as their primary federal regulator, and also by the
state banking regulator for the state in which they are chartered -- either the
Illinois Office of Banks and Real Estate, the Wisconsin Department of Financial
Institutions, or the Indiana Department of Financial Institutions. CIB Marine's
mortgage banking subsidiary is regulated by the Illinois Office of Banks and
Real Estate, the Wisconsin Department of Financial Institutions and the Nebraska
Department of Banking and Finance.

     CIB Marine and its non-bank subsidiaries are subject to examination by the
Federal Reserve Board. The state banking regulators and FDIC periodically
conduct examinations of CIB Marine's state bank subsidiaries and non-bank
subsidiaries that are subject to their regulation. The OTS periodically conducts
examinations of Marine Bank -- Omaha. The FDIC may also conduct special
examinations of Marine Bank -- Omaha.

     The following is a summary of certain statutes and regulations affecting
CIB Marine and its subsidiaries. It is not meant to be a complete discussion of
all the federal and state banking statutes and regulations applicable to CIB
Marine and its subsidiaries.

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EXPANSION ACTIVITIES

     The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve Board before merging with another bank holding company,
acquiring substantially all the assets of any bank, or acquiring directly or
indirectly any ownership or control of more than five percent of the voting
shares of any bank. The BHCA also prohibits a bank holding company, with certain
exceptions, from acquiring direct or indirect ownership of more than five
percent of the voting shares of any company which is not a bank or bank holding
company and from engaging in any business other than that of banking, managing
and controlling banks, or furnishing services to banks and their subsidiaries.
Bank holding companies may, however, engage in certain businesses and activities
determined by the Federal Reserve Board to be so closely related to banking or
managing and controlling banks as to be a proper incident thereto.

FINANCIAL MODERNIZATION LEGISLATION

     On November 12, 1999, President Clinton signed into law the GLBA. The GLBA
significantly changes financial services regulations by expanding permissible
non-banking activities of bank holding companies and removing barriers to
affiliations among banks, insurance companies, securities firms and other
financial services entities. As a result of the GLBA, a bank holding company may
become a "Financial Holding Company" and engage in a full range of financial
activities, including banking, insurance and securities activities, as well as
merchant banking and additional activities that are determined by the Federal
Reserve to be "financial in nature", "incidental" to such financial activities
or complementary activities that do not pose a substantial risk to the safety
and soundness of depository institutions or the financial system generally. The
provisions of the GLBA for expanded financial opportunities became effective
March 11, 2000.

     In order for a bank holding company to qualify as a Financial Holding
Company, the company is required to file a declaration with the Federal Reserve
electing to engage in activities permissible for Financial Holding Companies and
to certify that all of its insured depository institutions are
"well-capitalized" and "well-managed". In addition, the Federal Reserve must
also determine that each of the company's insured depository institutions has
received at least a satisfactory rating in their most recent Community
Reinvestment Act examination.

     CIB Marine currently meets the requirements to make an election to become a
Financial Holding Company. However, management has not determined at this time
whether it will seek such an election. CIB Marine is examining its strategic
growth and acquisition strategy to determine whether or when, based on market
and economic conditions, CIB Marine may desire to elect to use any of the
expanded powers provided in the GLBA.

     The GLBA also streamlines supervision of bank holding companies, expands
passive investments by Financial Holding Companies in any type of financial or
non-financial company through merchant bank and insurance company investments,
provides an enhanced framework for protecting the privacy of consumer
information, modifies the laws governing the implementation of the Community
Reinvestment Act, and broadens the activities which may be conducted by national
banks. Through a financial subsidiary and subject to certain eligibility
requirements and restrictions, a national bank may engage in any activity
authorized for a national bank directly or any financial activity, except
insurance investments or underwriting, real estate investments or development,
or merchant banking, which may be conducted through a Financial Holding Company.
Because Wisconsin, Illinois and Indiana provide for parity with national banks,
the subsidiary banks of CIB Marine will be able to form subsidiaries and engage
in the activities permitted for national bank subsidiaries.

     The GLBA also established a system of federal and state regulation based on
functional regulation, meaning that primary regulators' oversight for a
particular activity generally resides with the federal or state regulator having
the greatest expertise in the area. Banking is to be supervised by banking
regulators, insurance by state insurance regulators and securities activities by
the Securities and Exchange Commission ("SEC") and state securities regulators.

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     CIB Marine does not believe that the GLBA will have a material effect upon
our operations in the near term. However, to the extent the GLBA permits banks,
securities firms and insurance companies to affiliate, the financial services
industry may experience further consolidation. This could result in a growing
number of larger financial institutions that offer a wider variety of financial
services than CIB Marine currently offers and that can aggressively compete in
the markets currently served.

CAPITAL STANDARDS

     The Federal Reserve Board has adopted risk-based capital guidelines for
bank holding companies. The minimum ratio of qualifying total capital to
risk-weighted assets, including certain off-balance sheet items (Total Capital
Ratio) is 8%, and the minimum ratio of that portion of total capital that is
comprised of common stock, related surplus, retained earnings, non-cumulative
perpetual preferred stock, minority interests and, for bank holding companies, a
limited amount of qualifying cumulative perpetual preferred stock, less certain
intangibles including goodwill (Tier 1 Capital), to risk-weighted assets is 4%.
The balance of total capital may consist of other preferred stock, certain other
instruments, limited amounts of unrealized gains on equity securities and
limited amounts of subordinated debt and the loan and lease loss allowance.

     These risk-based capital standards contemplate that evaluation of capital
adequacy will take account of a wide range of other factors, including overall
interest rate exposure; liquidity, funding and market risks; the quality and
level of earnings; investment, loan portfolio, and other concentrations of
credit; certain risks arising from nontraditional activities; the quality of
loans and investments; the effectiveness of loan and investment policies; and
management's overall ability to monitor and control financial and operating
risks.

     In addition, the Federal Reserve Board has established a minimum Leverage
Ratio (Tier 1 capital to quarterly average total assets) which requires a
minimum Leverage Ratio of 3% for bank holding companies that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies are required to maintain a Leverage Ratio of at least 4%.

     The Federal Reserve Board's guidelines also provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "Tangible Tier 1 Leverage Ratio" in evaluating proposals
for expansion or new activities. The Tangible Tier 1 Leverage Ratio is the ratio
of Tier 1 capital, less intangibles not deducted from Tier 1 capital, to
quarterly average total assets.

     At December 31, 2000, CIB Marine was in compliance with these minimum
capital requirements. CIB Marine's banking subsidiaries are subject to similar
minimum regulatory capital requirements. For more information about the
regulatory capital levels of CIB Marine and its bank subsidiaries, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital" and Note 13 -- Stockholders' Equity as contained in the
"Notes to Consolidated Financial Statements."

PROMPT CORRECTIVE ACTION AND REGULATORY RESTRICTIONS

     Among other things, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") requires the federal banking regulators to take prompt
corrective action in respect to FDIC-insured depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." A depository institution's
capital tier will depend upon how its capital levels compare to various relevant
capital measures and certain other factors, as established by regulation. Under
applicable regulations, an FDIC-insured bank is defined as well capitalized if
it maintains a Leverage Ratio (Tier 1 capital to quarterly average total assets)
of at least 5%, a Total Capital Ratio (qualifying total capital to risk-
weighted assets, including certain off-balance sheet items) of at least 10% and
a Tier 1 Capital Ratio (Tier 1 capital to risk-weighted assets) of at least 6%
and is not otherwise in a "troubled condition" as specified by its appropriate
federal regulatory agency.

                                        8
<PAGE>   10

     A bank is generally considered to be adequately capitalized if it is not
defined as well capitalized but meets all of its minimum capital requirements
i.e., if it has a Leverage Ratio of 4% or greater (or a Leverage Ratio of 3% or
greater if the institution is rated composite 1 in its most recent report of
examination, subject to appropriate federal banking agency guidelines), a Total
Capital Ratio of 8% or greater and a Tier 1 Capital Ratio of 4% or greater. A
bank will be considered undercapitalized if it fails to meet any minimum
required measure, significantly undercapitalized if it is significantly below
such measure and critically undercapitalized if it maintains a level of tangible
equity capital equal to or less than 2% of total assets. A bank may be
reclassified to be in a capitalization category that is next below that
indicated by its actual capital position if it receives a less than satisfactory
examination rating by its examiners with respect to its assets, management,
earnings, or liquidity that has not been corrected, or it is determined that the
bank is in an unsafe or unsound condition or engages in an unsafe or unsound
practice.

     FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of dividends) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized.

     Under FDICIA, a bank that is not well capitalized is generally prohibited
from accepting or renewing brokered deposits and offering interest rates on
deposits significantly higher than the prevailing rate in its normal market area
or nationally (depending upon where the deposits are solicited); in addition,
"pass-through" insurance coverage may not be available for certain employee
benefit accounts.

     Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions may be restricted from making payments
of principal and interest on subordinated debt and are subject to appointment of
a receiver or conservator. At December 31, 2000, which is the most recent
notification from the banks' primary regulators, all of the bank subsidiaries
were categorized as well capitalized under the regulatory framework for prompt
corrective action.

DIVIDEND RESTRICTIONS

     The Federal Reserve Board's policy with respect to dividends is that a bank
holding company should not declare or pay a cash dividend which would impose
undue pressure on the capital of its subsidiary banks or would be funded only
through borrowing or other arrangements that might adversely affect a bank
holding company's financial position. The Federal Reserve Board believes that a
bank holding company should not initiate or continue cash dividends on its
common stock unless its net income is sufficient to fully fund each dividend and
its prospective rate of earnings retention appears consistent with its capital
needs, asset quality and overall financial condition.

     CIB Marine's ability to pay any dividends to its shareholders depends in
large part on the ability of CIB Marine's subsidiary banks to pay dividends to
it. The ability of the commercial subsidiary banks to pay dividends is subject
to restrictions primarily under the banking laws of the state under which the
subsidiary bank is organized, in the case of CIB Marine's subsidiaries, the laws
of Illinois, Indiana or Wisconsin. The ability of Marine Bank -- Omaha to pay
dividends is subject to OTS regulations applicable to federal savings banks.

     Under Illinois law, a bank may generally pay dividends without the approval
of the Illinois Office of Banks and Real Estate as long as the amount of the
dividend does not exceed net profits then on hand, after first deducting from
net profits the bank's losses and bad debts, and subject to certain additional
requirements of the Illinois Office of Banks and Real Estate.

     Under Wisconsin law, a Wisconsin-chartered commercial bank that meets its
regulatory capital requirement may declare dividends based upon undivided
profits, in an amount the Board of Directors considers expedient, provided that
the Board has made provisions for the payment of all expenses, losses,

                                        9
<PAGE>   11

reserves, taxes and interest accrued or due from the bank prior to declaring the
dividend from undivided profits. In the event the bank has declared and paid
dividends in either of the two immediately preceding years that exceeded net
income for either of those two years, the bank may not declare or pay any
dividend in the current year that exceeds year-to-date net income without the
written consent of the Division of Banking.

     Under Indiana law, a bank may pay dividends without the approval of the
Indiana Department of Financial Institutions so long as its capital is
unimpaired. In any event, dividends may not exceed undivided profits on hand,
less losses, bad debts, certain depreciation and other expenses.

     Under regulations of the OTS, the ability of a federal savings association
to pay cash dividends and make other capital distributions is subject to certain
limitations. An institution that desires to make a capital distribution may be
required to file a notice or an application with the OTS 30 days prior to the
proposed declaration of the dividend or approval of the proposed capital
distribution by the board of directors of the association. Whether an
association needs to file a notice or an application is relevant because the OTS
may disapprove a notice or deny an application if it determines that (i) the
association will be undercapitalized, significantly undercapitalized or
critically undercapitalized following the capital distribution, (ii) the
distribution raises safety and soundness concerns or (iii) the distribution
violates a prohibition contained in any statute, regulation, agreement between
the association and the OTS (or the FDIC) or a condition imposed on the
association in an OTS-approved application or notice. If neither the association
nor its proposed capital distribution meet any of the criteria for filing a
notice or an application then the association does not need to file a notice or
application with the OTS before making a capital contribution.

     An association is required to file an application for a proposed capital
distribution if (i) it is not eligible for expedited treatment (that is, it does
not have a composite rating of 1 or 2, a satisfactory CRA rating or better, a
compliance rating of 1 or 2, does not meet all of its capital requirements or
has been notified by supervisory personnel that it is a problem association or
an association in troubled condition), or (ii) the total amount of all of the
capital distributions (including the proposed capital distribution) by the
association during the applicable calendar year exceeds the association's net
income for that year to date plus the association's retained net income for the
preceding two years, or (iii) following the proposed capital distribution the
association would not be adequately capitalized (where an adequately capitalized
association is defined as one that has a total risk-based capital ratio of 8% or
greater and a Tier 1 risk-based capital ratio of 4% or greater and a leverage
ratio of 4% or greater or a leverage ratio of 3% or greater if the association
is assigned a composite rating of 1 and does not meet the definition of a "well
capitalized" savings association), or (iv) the proposed capital distribution
would violate a prohibition contained in any applicable statute, regulation or
agreement between the association and the OTS (or the FDIC) or violate a
condition imposed on the association in an OTS-approved application or notice.

     An association is required to file a notice for a proposed capital
distribution if it is not required to file an application for the distribution
and (i) following the proposed capital distribution it would not be well
capitalized (where a well capitalized association is defined as one that has
total risk-based capital ratio of 10% or greater and a Tier 1 risk-based capital
ratio of 6% of greater and a leverage ratio of 5% or greater and is not subject
to any written agreement or capital directive or the like issued by the OTS to
meet and maintain a specific capital level for any capital measure), or (ii) the
proposed capital distribution would reduce the amount of or retire any part of
the association's common or preferred stock or retire, with some exceptions, any
part of debt instruments such as notes or debentures included in capital, or
(iii) the association is a subsidiary of a savings and loan holding company. As
of December 31, 2000, Marine Bank-Omaha met the definition of a well-capitalized
savings association.

     In January 2000 a total of $0.8 million in dividends were paid to CIB
Marine by its bank and non-bank subsidiaries. As of December 31, 2000, $51.0
million of the total stockholders' equity of the subsidiary banks was available
for payment of dividends to CIB Marine without approval by the applicable
regulatory authorities.

                                        10
<PAGE>   12

FEDERAL DEPOSIT INSURANCE

     As FDIC-insured institutions, each of CIB Marine's subsidiary banks are
required to pay deposit insurance premiums based on the risk each poses to the
FDIC insurance funds. The FDIC has the authority to raise or lower assessment
rates on insured deposits in order to achieve certain designated reserve ratios
in the insurance funds and to impose special additional assessments. The FDIC
has adopted a premium rate schedule, which provides for an assessment range of
0% to 0.27% of deposits, depending on the capital category and supervisory
category to which it is assigned. In addition to its insurance assessment, each
insured institution is subject to quarterly debt service assessments in
connection with bonds issued by the government corporation that financed the
federal savings and loan bailout. The first quarter 2001 debt service assessment
was 0.0196%.

RESTRICTIONS ON AFFILIATE TRANSACTIONS

     Transactions between CIB Marine, its subsidiary banks and its non-bank
subsidiaries are subject to a number of restrictions. Federal Reserve Board
policies forbid the payment by bank subsidiaries of management fees which are
unreasonable in amount or exceed the fair market value of the services rendered
or, if no market exists, actual costs plus a reasonable profit. Bank holding
companies are also restricted in the extent to which they and their subsidiaries
can borrow or otherwise obtain credit from one another or engage in certain
other transactions, such as purchasing securities issued by an affiliate,
purchasing assets from an affiliate, accepting securities issued by an affiliate
as collateral for a loan and the issuance of a guarantee, acceptance, or letter
of credit for the benefit of an affiliate.

QUALIFIED THRIFT LENDER

     The Home Owners' Loan Act ("HOLA") requires savings associations such as
Marine Bank -- Omaha to meet a qualified thrift lender ("QTL") test. To meet the
QTL test, an association's "Qualified Thrift Investments" must total at least
65.0% of "portfolio assets." Under OTS regulations, portfolio assets are defined
as total assets less intangibles, property used by a savings association in its
business and liquid investments in an amount not exceeding 20.0% of assets.
Qualified Thrift Investments generally consist of residential housing, small
business, credit card and educational loans, and loans for personal, family and
household purposes. A savings association that does not meet the QTL test must
either convert to a bank charter or comply with the following restrictions on
its operations: (i) the association may not engage in any new activity or make
any new investment, directly or indirectly, unless such activity or investment
is permissible for a national bank; (ii) the branching powers of the association
shall be restricted to those of a national bank; (iii) the institution shall not
be eligible to obtain any advances from its FHLB; and (iv) payment of dividends
by the association shall be subject to the rules regarding payment of dividends
by a national bank. Upon the expiration of three years from the date the
association ceases to be a QTL, it must cease any activity and not retain any
investment not permissible for a national bank and immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations).

FORWARD-LOOKING STATEMENTS

     CIB Marine has made statements in this Annual Report on Form 10-K 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.

                                        11
<PAGE>   13

     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's subsidiary banks operate;

     - Changes in the legislative and regulatory environment that result in
       increased competition or operating expenses;

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

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

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

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

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

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

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

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

     - The competitive impact of technological advances in the banking business;
       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.

                                        12
<PAGE>   14

ITEM 2. PROPERTIES

     The following table provides information relating to the material real
properties owned or leased by CIB Marine's subsidiaries as of December 31, 2000.
CIB Marine's subsidiary banks lease or sublease office space to CIB Marine and
to its non-bank subsidiaries. CIB Marine does not separately own or lease any
real property.

<TABLE>
<CAPTION>
LOCATION                                                      OWNED OR LEASED   DATE OPENED
--------                                                      ---------------   -----------
<S>                                                           <C>               <C>
CENTRAL ILLINOIS BANK FACILITIES:
Sidney, Illinois............................................       Owned            9/87
Champaign, Illinois.........................................       Owned            9/88
Urbana, Illinois............................................       Owned            3/90
Arrowsmith, Illinois........................................       Owned           10/91
Champaign, Illinois (Midtown)...............................       Owned            4/94
Rantoul, Illinois...........................................      Leased           11/94
Monticello, Illinois........................................      Leased            5/95
Danville, Illinois..........................................       Owned            8/95
Decatur, Illinois...........................................      Leased           10/95
Bloomington, Illinois*......................................       Owned           10/00
Arthur, Illinois............................................       Owned           10/96
Morton, Illinois............................................      Leased           10/96
Peoria, Illinois............................................      Leased            9/97
East Peoria, Illinois.......................................       Owned           10/97
Springfield, Illinois.......................................      Leased            4/99
Peoria, Illinois (Fulton)...................................      Leased           10/99
Lincoln, Illinois...........................................       Owned            4/00
CIB-CHICAGO FACILITIES:
Hillside, Illinois..........................................      Leased            6/94
Willow Springs, Illinois....................................       Owned            7/96
Niles, Illinois.............................................      Leased            8/96
Elk Grove Village, Illinois.................................       Owned           10/96
Chicago, Illinois (Downtown)................................      Leased           10/96
Bolingbrook, Illinois.......................................      Leased            2/97
Elmhurst, Illinois..........................................      Leased            6/98
Gurnee, Illinois............................................      Leased            7/98
Mount Prospect, Illinois....................................       Owned            3/99
Arlington Heights, Illinois.................................       Owned            3/99
Northbrook, Illinois........................................      Leased            4/99
Zion, Illinois..............................................       Owned            9/99
Frankfort, Illinois.........................................      Leased            1/00
MARINE BANK-MILWAUKEE FACILITIES:
Cedarburg, Wisconsin........................................       Owned            9/97
Grafton, Wisconsin..........................................       Owned            9/97
Pewaukee, Wisconsin.........................................      Leased            2/98
Wauwatosa, Wisconsin........................................      Leased            5/98
Milwaukee, Wisconsin (Downtown).............................      Leased            4/99
Franklin, Wisconsin.........................................      Leased            8/00
</TABLE>

                                        13
<PAGE>   15

<TABLE>
<CAPTION>
LOCATION                                                      OWNED OR LEASED   DATE OPENED
--------                                                      ---------------   -----------
<S>                                                           <C>               <C>
CIB-INDIANA FACILITIES:
Indianapolis, Indiana (Fox Road)............................      Leased            3/98
Indianapolis, Indiana (Emerson Way).........................      Leased            9/98
Indianapolis, Indiana (Monument Circle).....................      Leased            4/99
Indianapolis, Indiana (Rockville Road)......................       Owned            3/00
Carmel, Indiana.............................................      Leased            8/00
MARINE BANK-OMAHA FACILITIES:
Omaha, Nebraska.............................................      Leased           11/99
MICR, INC.
Mukilteo, Washington........................................      Leased           10/00
</TABLE>

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

* CIB Marine combined its Normal and Bloomington, Illinois facilities into a new
  Bloomington facility in October 2000. The site on which this property is
  located is subject to a fifty-year land lease. The Normal facility originally
  opened in November 1992 and was subsequently sold in December 2000. The prior
  Bloomington facility originally opened in December 1995.

     None of the properties owned by CIB Marine's subsidiaries are subject to
encumbrances material to the operations of CIB Marine and its subsidiaries. CIB
Marine considers the conditions of its properties to be generally good and
adequate for the current needs of the businesses of it and its subsidiaries.

ITEM 3. 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.

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

     CIB Marine did not submit any matters to a vote of its shareholders during
the fourth quarter of fiscal year 2000.

SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF CIB MARINE

     The following table sets forth the names, ages and positions of all
executive officers of CIB Marine, the period that each has held his position
with CIB Marine, and a brief account of each officer's business experience
during at least the past five years. Under CIB Marine's by-laws, executive
officers are elected annually by the board of directors, and each executive
officer holds office until his successor has been duly elected and qualified or
until the earlier of his death, resignation or removal.

<TABLE>
<CAPTION>
                NAME AND AGE                                OFFICE AND EXPERIENCE
                ------------                                ---------------------
<S>                                             <C>
J. Michael Straka, 63(1).....................   Mr. Straka is the President and Chief
                                                Executive Officer of CIB Marine and has held
                                                those positions since 1987. Prior to assuming
                                                those positions, Mr. Straka was head of the
                                                international division of a large
                                                Milwaukee-based regional bank where he was
                                                employed for 26 years.
Donald M. Trilling, 70.......................   Mr. Trilling is Chairman of the Board of
                                                Directors of CIB Marine and has held that
                                                position since 1987. Since 1983, Mr. Trilling
                                                has been Secretary of Illinois Tile
                                                Distributors Inc., an importer and
                                                distributor of ceramic tiles, and was
                                                President of Tiles of Italy, Ltd., an
                                                importer of ceramic tiles, from 1975 to 2000.
</TABLE>

                                        14
<PAGE>   16

<TABLE>
<CAPTION>
                NAME AND AGE                                OFFICE AND EXPERIENCE
                ------------                                ---------------------
<S>                                             <C>
Michael L. Rechkemmer, 51....................   Mr. Rechkemmer has been Executive Vice
                                                President of CIB Marine since July 1998 and
                                                Chief Operations Officer since April 2000. He
                                                was CIB-Chicago's Vice Chairman and Chief
                                                Operating Officer from January 1997 to June
                                                1998 and its President and Chief Executive
                                                Officer from July 1994 to December 1996.
                                                Prior to joining CIB-Chicago, Mr. Rechkemmer
                                                was President and Chief Executive Officer of
                                                Mid America Bank N.A. from January 1991 to
                                                June 1994.
Steven T. Klitzing, 38.......................   Mr. Klitzing is Senior Vice President, Chief
                                                Financial Officer, Treasurer and Assistant
                                                Secretary of CIB Marine and has held those
                                                positions since December 1993. Mr. Klitzing
                                                has been with CIB Marine since 1986 and has
                                                held various positions with CIB Marine and
                                                its subsidiaries since that date.
Donald J. Straka, 38(1)......................   Mr. Straka is Senior Vice President,
                                                Secretary and General Counsel of CIB Marine
                                                and has held those positions since July 1997.
                                                Mr. Straka has been engaged in the practice
                                                of law since 1987. In 1992, Mr. Straka joined
                                                the law firm of Brashear & Ginn and he was a
                                                partner of that firm from 1995 to 1997.
Stephen C. Bonnell, 50.......................   Mr. Bonnell has been a Senior Vice President
                                                of CIB Marine since October 1994 and Head of
                                                Credit Administration since January 1996. Mr.
                                                Bonnell served in various capacities with CIB
                                                Marine, its subsidiaries and their
                                                predecessors from 1972 to October 1994.
Patrick J. Straka, 34(1).....................   Mr. Straka is Senior Vice President and Chief
                                                Investment Officer of CIB Marine and has held
                                                those positions since February 1999. He was a
                                                Vice President, Investment Officer and
                                                General Auditor of CIB Marine from 1995 to
                                                February 1999. Mr. Straka served in various
                                                positions with CIB Marine from 1992 to 1995.
</TABLE>

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

(1) J. Michael Straka is the father of Donald J. Straka and Patrick J. Straka.

                                        15
<PAGE>   17

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     There is no established public trading market for CIB Marine's common
stock. CIB Marine has offered and sold, from time to time, shares of its common
stock in private placement transactions. As of March 16, 2001, there were
approximately 1,098 holders of record of CIB Marine's common stock.

     CIB Marine has not paid cash dividends on its common stock during the two
most recent fiscal years. CIB Marine currently reinvests earnings to support
continued growth, but will periodically consider whether to pay cash dividends
in the future. Restrictions on CIB Marine's ability to pay dividends and the
ability of its subsidiaries to transfer funds to it for the payment of dividends
are discussed elsewhere in this Annual Report on Form 10-K. See,
"Business -- Supervision and Regulation -- Dividend Restrictions." See also Note
13 to the financial statements contained in Item 8 of this Form 10-K.

     On March 24, 2000, CIB Marine commenced a $5.0 million private placement
offering of its common stock at $17.29 per share, which terminated on April 7,
2000. CIB Marine sold 223,705 shares in this offering for a total of $3.9
million. On June 23, 2000, CIB Marine commenced a $3.0 private placement million
offering of its common stock at $17.90 per share, which terminated on June 30,
2000. CIB Marine sold 134,850 shares in this offering for a total of $2.4
million. On September 19, 2000, CIB Marine commenced a $2.0 million private
placement offering of its common stock at $18.80 per share, which terminated on
November 10, 2000. CIB Marine sold 52,969 shares in this offering for a total of
$1.0 million. On December 20, 2000, CIB Marine commenced a $1.0 million private
placement offering of its common stock at $19.71 per share, which terminated on
January 31, 2001. Although no funds were received in December, CIB Marine sold
22,709 shares in this offering in January 2001 for a total of $0.4 million.

     All of these offerings were made to a limited number of accredited
investors. In addition, the March and June offerings were made to CIB Marine's
employee stock ownership plan. Each of the offerings was made pursuant to
Section 4(2) of the Securities Act of 1933 (the "Act") and the provisions of
Rule 506 of Regulation D under the Act. CIB Marine incurred no commissions or
underwriting discounts in any of these offerings.

ITEM 6. SELECTED FINANCIAL DATA

     The following table sets forth CIB Marine's selected consolidated financial
data. The selected financial data as it relates to the five-year period ended
December 31, 2000, has been derived from CIB Marine's audited consolidated
financial statements. On June 19, 2000, CIB Marine announced that its Board of
Directors approved a 150-for-1 split of CIB Marine's outstanding shares of
common stock. The stock split was effected in the form of a stock dividend and
each shareholder of record at the close of business on July 1, 2000, received
149 additional shares of common stock for every share of common stock held. The
stock dividends resulting from the stock split were distributed by CIB Marine's
transfer agent on or about July 25, 2000. All share and per share data contained
in this document have been restated to reflect the effect of this stock split.
The following information should be read in conjunction with the consolidated
financial statements, including the related notes, and Management's Discussion
and Analysis of Financial Condition and Results of Operations presented
elsewhere herein.

                                        16
<PAGE>   18

                          CIB MARINE BANCSHARES, INC.

                      SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                           AT OR FOR THE YEARS ENDED DECEMBER 31,
                                               --------------------------------------------------------------
                                                  2000         1999         1998         1997         1996
                                                  ----         ----         ----         ----         ----
                                                         (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                            <C>          <C>          <C>          <C>          <C>
SELECTED STATEMENT OF INCOME DATA
Interest and dividend income:
  Loans......................................  $  155,044   $   98,759   $   68,070   $   46,942   $   31,196
  Loans held for sale........................         364          258          479          124           48
  Securities:
         Taxable.............................      23,327       14,539        9,725        7,519        4,589
         Tax-exempt..........................       2,821        1,808        1,359          908          452
         Dividends...........................         316          248          194          180          152
  Federal funds sold.........................       1,036          546          701          573          259
                                               ----------   ----------   ----------   ----------   ----------
         Total interest and dividend
           income............................     182,908      116,158       80,528       56,246       36,696
                                               ----------   ----------   ----------   ----------   ----------
Interest expense:
  Deposits...................................      98,815       59,508       40,833       29,746       18,384
  Short-term borrowings......................       7,113        1,507          407          180          588
  Long-term borrowings.......................       1,784          793          958          535           --
  Guaranteed trust preferred securities......       1,351           --           --           --           --
                                               ----------   ----------   ----------   ----------   ----------
         Total interest expense..............     109,063       61,808       42,198       30,461       18,972
                                               ----------   ----------   ----------   ----------   ----------
         Net interest income.................      73,845       54,350       38,330       25,785       17,724
Provision for loan loss......................       8,324        6,110        4,733        3,992        2,044
                                               ----------   ----------   ----------   ----------   ----------
         Net interest income after provision
           for loan loss.....................      65,521       48,240       33,597       21,793       15,680
                                               ----------   ----------   ----------   ----------   ----------
Noninterest income:
  Banking and trust service fees.............       7,150        4,861        5,493        3,171        2,304
  Gain on sale of assets.....................         459          805           --           --           --
  Other......................................         561           85          111           90          266
  Securities gains, net......................          31           --          344          136          183
                                               ----------   ----------   ----------   ----------   ----------
         Total noninterest income............       8,201        5,751        5,948        3,397        2,753
                                               ----------   ----------   ----------   ----------   ----------
Noninterest expense:
  Salaries and employee benefits.............      25,530       20,433       17,114       10,193        7,529
  Equipment..................................       2,528        2,071        1,495        1,615        1,161
  Occupancy and premises.....................       3,877        3,129        2,247        1,328          893
  Professional services......................       1,676        1,164          632          585          492
  Advertising/marketing......................         887          770          682          954          843
  Amortization of intangibles................       1,399        1,057          345          270          238
  Other......................................       5,648        4,415        3,866        2,433        1,803
                                               ----------   ----------   ----------   ----------   ----------
         Total noninterest expense...........      41,545       30,039       26,381       17,378       12,959
                                               ----------   ----------   ----------   ----------   ----------
Income before income taxes...................      32,177       20,952       13,164        7,812        5,474
Income tax expense...........................      11,104        7,417        4,510        2,537        1,901
                                               ----------   ----------   ----------   ----------   ----------
         Net income..........................  $   21,073   $   13,535   $    8,654   $    5,275   $    3,573
                                               ==========   ==========   ==========   ==========   ==========
PER SHARE DATA
  Basic earnings.............................  $     1.26   $     0.84   $     0.57   $     0.48   $     0.41
  Diluted earnings...........................        1.24         0.83         0.57         0.47         0.40
  Dividends..................................          --           --           --           --           --
  Book value (at end of period)..............       11.50         9.80         8.97         7.40         5.76
SELECTED FINANCIAL CONDITION DATA
  Securities.................................  $  492,241   $  363,350   $  216,284   $  160,936   $  112,167
  Loans, including held for sale.............   1,778,275    1,389,979      924,611      616,228      408,024
  Total assets...............................   2,367,541    1,824,840    1,186,523      807,323      550,578
  Deposits...................................   1,951,521    1,528,456    1,011,033      682,830      467,942
  Borrowings, including guaranteed trust
    preferred securities.....................     204,662      122,969       23,254       18,320       21,561
  Stockholders' equity.......................     194,596      161,335      144,096      100,732       58,232
</TABLE>

                                        17
<PAGE>   19

<TABLE>
<CAPTION>
                                                           AT OR FOR THE YEARS ENDED DECEMBER 31,
                                               --------------------------------------------------------------
                                                  2000         1999         1998         1997         1996
                                                  ----         ----         ----         ----         ----
                                                         (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                            <C>          <C>          <C>          <C>          <C>
SELECTED FINANCIAL RATIOS AND OTHER DATA
PERFORMANCE RATIOS:
  Net interest margin(1).....................        3.69%        3.93%        4.19%        4.06%        4.27%
  Net interest spread(2).....................        3.02         3.25         3.29         3.31         3.52
  Noninterest income to average assets.......        0.39         0.39         0.60         0.50         0.62
  Noninterest expense to average assets......        1.96         2.26         2.68         2.56         2.94
  Net overhead ratio(3)......................        1.57         1.87         2.07         2.06         2.31
  Efficiency ratio(4)........................       49.66        54.03        58.11        58.59        63.05
  Return on average assets(5)................        0.99         0.93         0.88         0.78         0.81
  Return on average equity(6)................       11.94         9.01         6.86         7.62         8.00
ASSET QUALITY RATIOS:
  Nonaccrual loans to loans, including held
    for sale.................................        0.82%        0.22%        0.43%        0.30%        0.59%
  Allowance for loan loss to loans, including
    held for sale............................        1.29         1.14         1.15         1.09         0.99
  Allowance for loan loss to nonperforming
    assets...................................      143.40       361.85       265.89       315.36       161.74
  Net charge-offs to average loans including
    held for sale............................        0.07         0.09         0.10         0.31         0.14
  Nonperforming assets to total assets(7)....        0.68         0.24         0.34         0.26         0.46
  Nonaccrual loans and 90+ days past due
    loans to loans, including held for
    sale.....................................        0.87         0.47         1.04         0.52         0.94
  Nonaccrual loans and 90 + days past due
    loans to total assets....................        0.66         0.36         0.81         0.40         0.69
  Nonperforming assets and 90+ days past due
    to total assets..........................        0.72         0.43         0.81         0.43         0.72
  Allowance as a percent of nonperforming and
    90+ days past due loans..................      134.96       200.57       111.10       192.80       103.05
BALANCE SHEET RATIOS:
  Average loans to average deposits..........       89.69%       87.68%       90.17%       83.12%       84.78%
  Average interest-earning assets to average
    interest-bearing liabilities.............      112.57       115.71       120.12       115.94       116.39
CAPITAL RATIOS:
  Total equity to total assets...............        8.22%        8.84%       12.14%       12.48%       10.58%
  Total risk-based capital ratio.............       10.66        10.19        14.61        15.50        13.71
  Tier 1 risk-based capital ratio............        9.58         9.22        13.58        14.50        12.79
  Leverage capital ratio.....................        8.87         8.95        12.57        12.36        10.90
OTHER DATA:
  Number of employees (full-time
    equivalent)..............................         612          503          421          316          251
  Number of banking facilities...............          42           38           30           24           18
  Shares outstanding at the end of period....  16,918,531   16,469,250   16,072,950   13,610,250   10,109,850
  Weighted average shares
    outstanding -- basic.....................  16,734,204   16,087,237   15,067,664   11,048,685    8,798,997
  Weighted average shares
    outstanding -- diluted...................  16,986,871   16,269,312   15,197,264   11,133,239    8,880,150
</TABLE>

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

(1) Net interest margin is net interest income divided by average
    interest-earning assets.

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

(3) The net overhead ratio is noninterest expense minus noninterest income
    divided by average total assets.

(4) The efficiency ratio is noninterest expense divided by the sum of net
    interest income (on a tax equivalent basis of 35% for 2000, 1999 and 1998,
    and 34% for prior periods) plus noninterest income excluding gains and
    losses on securities.

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

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

(7) Nonperforming assets include nonaccrual loans, restructured loans and
    foreclosed property.

                                        18
<PAGE>   20

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following is a discussion and analysis of CIB Marine's consolidated
financial condition as of December 31, 2000 and 1999, its changes in financial
condition and results of operations for the three years ended December 31, 2000,
1999 and 1998. References in the discussion below to "CIB Marine" include CIB
Marine's subsidiaries unless otherwise specified. On June 19, 2000, CIB Marine
announced that its Board of Directors approved a 150-for-1 split of CIB Marine's
outstanding shares of common stock. The stock split was effected in the form of
a stock dividend and each shareholder of record at the close of business on July
1, 2000, received 149 additional shares of common stock for every share of
common stock held. The stock dividends resulting from the stock split were
distributed by CIB Marine's transfer agent on or about July 25, 2000. All share
and per share data contained in this document have been restated to reflect the
effect of this stock split. This discussion and analysis should be read in
conjunction with the consolidated financial statements and notes contained in
Item 8 of this Form 10-K. All dollar amounts are rounded.

INTRODUCTION AND OVERVIEW

     CIB Marine had net income of $21.1 million in 2000, as compared to $13.5
million in 1999 and $8.7 million in 1998, an increase of 55.7% from 1999 to 2000
and 56.4% from 1998 to 1999. Total assets at December 31, 2000, were
approximately $2.4 billion, which represented a 29.7% increase from total assets
of $1.8 billion at December 31, 1999. Total assets increased 53.8% during 1999,
from $1.2 billion at December 31, 1998.

     CIB Marine's growth has been largely attributable to the implementation of
its growth 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. In 2000, CIB Marine established four new branch
facilities. In 1999, CIB Marine established Marine Bank-Omaha, opened five new
branch facilities, acquired three existing facilities with a total of $144.0
million in deposits and sold one facility with $12.2 million in deposits. In
1998, CIB Marine established CIB-Indiana, opened four new branch facilities and
acquired one existing branch facility with $13.2 million in deposits. CIB Marine
raised a significant portion of the capital necessary to facilitate its growth
through the sales of its common stock in private placement offerings in 2000,
1999 and 1998, as well as in prior years and through the issuance of guaranteed
trust preferred securities in 2000. The guaranteed trust preferred securities
qualify as Tier 1 capital for regulatory purposes, but are accounted for as debt
for financial reporting purposes.

     The following table provides an overview of CIB Marine's growth. The table
indicates the percentage increase in the average balance sheet or income
statement items at or for the years ended December 31, 2000, 1999 and 1998, in
each case as compared to the prior year.

<TABLE>
<CAPTION>
                                                                       AS OF DECEMBER 31,
                                                          ---------------------------------------------
                                                          2000 VS. 1999   1999 VS. 1998   1998 VS. 1997
                                                          -------------   -------------   -------------
<S>                                                       <C>             <C>             <C>
SELECTED AVERAGE BALANCE SHEET ITEMS
Total loans, including held for sale....................      44.31%          48.29%          51.43%
Total earning assets....................................      45.27           48.25           46.12
Total assets............................................      44.85           48.30           45.47
Total deposits..........................................      41.08           52.49           39.59
Total interest-bearing liabilities......................      45.27           48.25           46.12
</TABLE>

                                        19
<PAGE>   21

<TABLE>
<CAPTION>
                                                                 FISCAL YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------
                                                          2000 VS. 1999   1999 VS. 1998   1998 VS. 1997
                                                          -------------   -------------   -------------
<S>                                                       <C>             <C>             <C>
SELECTED INCOME STATEMENT ITEMS
Net interest income after provision for loan loss(TE)...      36.28%          42.80%          54.02%
Noninterest income......................................      42.60           (3.31)          75.10
Noninterest expense.....................................      25.75           25.24           51.81
Net income..............................................      55.69           56.40           64.06
Diluted earnings per share..............................      49.40           45.61           21.28
</TABLE>

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

(TE) -- Tax equivalent basis of 35%

RESULTS OF OPERATIONS

NET INCOME

     CIB Marine had net income of $21.1 million in 2000, $13.5 million in 1999
and $8.7 million in 1998, an increase of 55.7% from 1999 to 2000 and 56.4% from
1998 to 1999. The increases in net income for these periods were primarily a
result of an increase in average earning assets and the corresponding net
interest income earned on these earning assets, and an increase in noninterest
income. The increases in income were offset in part by increases in noninterest
expenses, the provision for loan loss and income tax expense.

     In addition, net income for 2000 included a $0.3 million pre-tax, or $0.2
million after-tax, gain on the sale of a branch building, and a $0.2 million
pre-tax, or $0.1 million after-tax, gain on the sale of Marine Trust and
Investment Company. Net income for 1999 included a $0.8 million pre-tax, or $0.5
million after-tax, gain on the sale of a branch facility. The 1998 period
included a $1.4 million pre-tax, or $0.8 million after-tax, non-cash
compensation expense related to the extension of the expiration date of all
previously issued and outstanding stock options granted under CIB Marine's stock
option plans as of February 25, 1998. The related non-cash compensation expense
for 1999 and 2000 was $0.2 million and $0.1 million pre-tax, respectively.

     Diluted earnings per share were $1.24 in 2000, $0.83 in 1999 and $0.57 in
1998, representing an increase of 49.4% from 1999 to 2000 and 45.6% from 1998 to
1999. Although substantial, growth in earnings per share has been less than the
growth in net income primarily due to an increase in the number of shares
outstanding as a result of CIB Marine's issuance of additional shares of common
stock in private placement offerings during each of these periods.

NET INTEREST INCOME

     Net interest income is the most significant component of CIB Marine's
earnings. Net interest income is the difference between interest earned on
income-producing assets and interest paid on deposits and other borrowed funds.
Net interest margin is this difference expressed as a percentage of average
earning assets. The amount of CIB Marine's net interest income is affected by
several factors, including interest rates and the volume and relative mix of
interest-earning assets and interest-bearing liabilities. Although CIB Marine
can control certain of these factors, others, such as the general level of
credit demand, fiscal policy and Federal Reserve Board monetary policy, are
beyond CIB Marine's control.

                                        20
<PAGE>   22

     The following table sets 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.
The following table expresses interest income on a tax equivalent (TE) 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 tax-exempt
assets. The tax equivalent adjustment was based on CIB Marine's effective
federal income tax rate of 35%.
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                         -----------------------------------------------------------------------------
                                                         2000                                    1999
                                         -------------------------------------   -------------------------------------
                                          AVERAGE      INTEREST      AVERAGE      AVERAGE      INTEREST      AVERAGE
                                          BALANCE     EARNED/PAID   YIELD/COST    BALANCE     EARNED/PAID   YIELD/COST
                                          -------     -----------   ----------    -------     -----------   ----------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                      <C>          <C>           <C>          <C>          <C>           <C>
ASSETS
INTEREST-EARNING ASSETS (TE):
Securities
 Taxable...............................  $  378,814    $ 23,643        6.24%     $  255,730    $ 14,787        5.78%
 Tax-exempt............................      55,275       4,340        7.85          36,311       2,782        7.66
                                         ----------    --------       -----      ----------    --------        ----
 Total Securities......................     434,089      27,983        6.45         292,041      17,569        6.02
Loans (1)(2)
 Commercial and agricultural...........   1,542,147     150,605        9.77       1,044,298      93,917        8.99
 Real estate...........................      38,416       3,526        9.18          40,419       3,349        8.29
 Installment and other consumer........      12,867       1,101        8.56          18,610       1,568        8.43
                                         ----------    --------       -----      ----------    --------        ----
   Total loans.........................   1,593,430     155,232        9.74       1,103,327      98,834        8.96
Federal funds sold.....................      15,464       1,036        6.70          10,148         546        5.38
Loans held for sale....................       3,747         309        8.25           3,415         258        7.55
                                         ----------    --------       -----      ----------    --------        ----
   Total interest-earning assets
     (TE)..............................   2,046,730    $184,560        9.02       1,408,931    $117,207        8.32
                                                       --------       -----                    --------        ----
NONINTEREST-EARNING ASSETS:
CASH AND DUE FROM BANKS................      19,322                                  15,407
Premises and equipment.................      21,996                                  19,570
Allowance for loan loss................     (19,942)                                (13,126)
Accrued interest receivable and other
 assets................................      50,385                                  31,764
                                         ----------                              ----------
 Total noninterest-earning assets......      71,761                                  53,615
                                         ----------                              ----------
   Total Assets........................  $2,118,491                              $1,462,546
                                         ==========                              ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
 Interest-bearing demand deposits......  $   45,588    $  1,223        2.68      $   39,820    $  1,003        2.52
 Money market..........................     179,963       9,962        5.54         132,596       6,222        4.69
 Other savings deposits................      35,838       1,127        3.14          33,751       1,079        3.20
 Time deposits.........................   1,410,741      86,503        6.13         970,556      51,204        5.28
                                         ----------    --------       -----      ----------    --------        ----
   Total interest-bearing deposits.....   1,672,130      98,815        5.91       1,176,723      59,508        5.06
Borrowings -- short-term...............     103,853       7,113        6.85          25,262       1,507        5.97
Borrowings -- long-term................      29,669       1,784        6.01          15,608         793        5.08
Guaranteed trust preferred
 securities............................      12,514       1,351       10.80              --          --        0.00
                                         ----------    --------       -----      ----------    --------        ----
   Total borrowed funds................     146,036      10,248        7.02          40,870       2,300        5.63
   Total interest-bearing
     liabilities.......................   1,818,166    $109,063        6.00       1,217,593    $ 61,808        5.07
                                                       --------       -----                    --------        ----
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing demand deposits....     108,572                                  85,468
Accrued interest and other
 liabilities...........................      15,218                                   9,300
                                         ----------                              ----------
   Total noninterest-bearing
     liabilities.......................     123,790                                  94,768
                                         ----------                              ----------
STOCKHOLDERS' EQUITY...................     176,535                                 150,185
                                         ----------                              ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
 EQUITY................................  $2,118,491                              $1,462,546
                                         ==========                              ==========
NET INTEREST INCOME (TE) AND INTEREST
 RATE SPREAD(3)........................                $ 75,497        3.02%                   $ 55,399        3.25%
                                                       ========       =====                    ========        ====
NET INTEREST MARGIN (TE)(4)............                                3.69%                                   3.93%
                                                                      =====                                    ====

<CAPTION>
                                              YEARS ENDED DECEMBER 31,
                                         -----------------------------------
                                                        1998
                                         -----------------------------------
                                         AVERAGE     INTEREST      AVERAGE
                                         BALANCE    EARNED/PAID   YIELD/COST
                                         -------    -----------   ----------
                                               (DOLLARS IN THOUSANDS)
<S>                                      <C>        <C>           <C>
ASSETS
INTEREST-EARNING ASSETS (TE):
Securities
 Taxable...............................  $163,285     $ 9,930        6.08%
 Tax-exempt............................    26,093       2,091        8.01
                                         --------     -------        ----
 Total Securities......................   189,378      12,021        6.35
Loans (1)(2)
 Commercial and agricultural...........   676,153      63,237        9.35
 Real estate...........................    40,404       3,555        8.80
 Installment and other consumer........    23,094       1,990        8.62
                                         --------     -------        ----
   Total loans.........................   739,651      68,782        9.30
Federal funds sold.....................    14,647         701        4.79
Loans held for sale....................     6,668         479        7.18
                                         --------     -------        ----
   Total interest-earning assets
     (TE)..............................   950,344     $81,983        8.63
                                                      -------        ----
NONINTEREST-EARNING ASSETS:
CASH AND DUE FROM BANKS................    13,235
Premises and equipment.................    14,250
Allowance for loan loss................    (8,699)
Accrued interest receivable and other
 assets................................    17,053
                                         --------
 Total noninterest-earning assets......    35,839
                                         --------
   Total Assets........................  $986,183
                                         ========
LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST-BEARING LIABILITIES:
Deposits:
 Interest-bearing demand deposits......  $ 31,550     $   859        2.72
 Money market..........................    62,746       2,871        4.58
 Other savings deposits................    27,865         784        2.81
 Time deposits.........................   642,900      36,308        5.65
                                         --------     -------        ----
   Total interest-bearing deposits.....   765,061      40,822        5.34
Borrowings -- short-term...............     8,650         407        4.71
Borrowings -- long-term................    17,451         958        5.49
Guaranteed trust preferred
 securities............................        --          --        0.00
                                         --------     -------        ----
   Total borrowed funds................    26,101       1,365        5.23
   Total interest-bearing
     liabilities.......................   791,162     $42,187        5.33
                                                      -------        ----
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing demand deposits....    62,644
Accrued interest and other
 liabilities...........................     6,295
                                         --------
   Total noninterest-bearing
     liabilities.......................    68,939
                                         --------
STOCKHOLDERS' EQUITY...................   126,082
                                         --------
TOTAL LIABILITIES AND STOCKHOLDERS'
 EQUITY................................  $986,183
                                         ========
NET INTEREST INCOME (TE) AND INTEREST
 RATE SPREAD(3)........................               $39,796        3.29%
                                                      =======        ====
NET INTEREST MARGIN (TE)(4)............                              4.19%
                                                                     ====
</TABLE>

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

(TE) -- Tax equivalent basis of 35%

(1) Loan balance totals include nonaccrual loans.

(2) Interest earned on loans include amortized loan fees of $6.0 million, $2.2
    million, and $0.6 million in 2000, 1999, and 1998, respectively.

(3) Interest rate spread is the net of the average rate on interest-earning
    assets and interest-bearing liabilities.

(4) Net interest margin is the ratio of net interest income (TE) to average
    earning assets.

                                        21
<PAGE>   23

     Net interest income on a tax equivalent basis was $75.5 million in 2000,
$55.4 million in 1999 and $39.8 million in 1998, representing a 36.3% increase
from 1999 to 2000 and a 39.2% increase from 1998 to 1999. The increases in the
volume of earning assets net of interest bearing liabilities accounted for
substantially all of the increase in net interest income for both 2000 and 1999,
and were partially offset by 23 and 4 basis point decreases respectively in the
net interest spread from the previous years.

     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.

<TABLE>
<CAPTION>
                                        YEAR ENDED DECEMBER 31, 2000             YEAR ENDED DECEMBER 31, 1999
                                                COMPARED TO                              COMPARED TO
                                      YEAR ENDED DECEMBER 31, 1999 (1)         YEAR ENDED DECEMBER 31, 1998 (1)
                                   --------------------------------------   --------------------------------------
                                   VOLUME     RATE      TOTAL    % CHANGE   VOLUME     RATE      TOTAL    % CHANGE
                                   ------     ----      -----    --------   ------     ----      -----    --------
                                                               (DOLLARS IN THOUSANDS)
<S>                                <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>
INTEREST INCOME (TE)
Securities -- taxable............  $ 7,602   $ 1,254   $ 8,856     59.89%   $ 5,367      (510)    4,857     48.91%
Securities -- tax-exempt.........    1,487        71     1,558     56.00        787       (96)      691     33.05
                                   -------   -------   -------    ------    -------   -------   -------    ------
  Total Securities...............    9,089     1,325    10,414     59.27      6,154      (606)    5,548     46.15
Total Loans (including fees).....   47,371     9,027    56,398     57.06     32,663    (2,611)   30,052     43.69
Federal funds sold...............      334       156       490     89.74       (234)       79      (155)   (22.11)
Loans held for sale..............       26        25        51     19.77       (245)       24      (221)   (46.14)
                                   -------   -------   -------    ------    -------   -------   -------    ------
TOTAL INTEREST INCOME (TE).......   56,820    10,533    67,353     57.46     38,338    (3,114)   35,224     42.97
                                   -------   -------   -------    ------    -------   -------   -------    ------
INTEREST EXPENSE
Interest-bearing demand
  deposits.......................      153        67       220     21.93        212       (68)      144     16.76
Money market.....................    2,489     1,251     3,740     60.11      3,276        75     3,351    116.72
Other savings deposits...........       66       (18)       48      4.45        179       116       295     37.63
Time deposits....................   25,998     9,301    35,299     68.94     17,425    (2,529)   14,896     41.03
                                   -------   -------   -------    ------    -------   -------   -------    ------
  Total Deposits.................   28,706    10,601    39,307     66.05     21,092    (2,406)   18,686     45.77
Borrowings -- short term.........    5,352       254     5,606    372.00      1,060        42     1,102    270.76
Borrowings -- long term..........      823       168       991    124.97       (166)        1      (165)   (17.22)
Guaranteed trust preferred
  securities.....................    1,351        --     1,351        --         --        --        --        --
                                   -------   -------   -------    ------    -------   -------   -------    ------
  Total Borrowed Funds...........    7,526       422     7,948    345.57        894        43       937     68.64
                                   -------   -------   -------    ------    -------   -------   -------    ------
TOTAL INTEREST EXPENSE...........   36,232    11,023    47,255     76.45     21,986    (2,363)   19,623     46.51
                                   -------   -------   -------    ------    -------   -------   -------    ------
NET INTEREST INCOME (TE).........  $20,588   $  (490)  $20,098     36.28%   $16,352   $  (751)  $15,601     39.20%
                                   =======   =======   =======    ======    =======   =======   =======    ======
</TABLE>

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

(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. Nonaccruing loans were included in the
     average balances used in determining yields.

INTEREST INCOME

     Total interest income for 2000 was $182.9 million, 57.5% higher than
interest income of $116.2 million in 1999. Interest income in 1999 increased
44.2% from $80.5 million in 1998. The primary reason for the increase in
interest income was the increase in the volume of CIB Marine's average earning
assets. Average earning assets increased 45.3% to $2.1 billion during 2000 from
$1.4 billion in 1999. Average earning assets in 1999 represented a 48.3%
increase over $950.3 million of average earning assets in 1998. Also
contributing to the increase in interest income from 1999 to 2000 was a 70 basis
point increase in the average interest rate earned on interest-earning assets,
due primarily to an overall increase in market interest rates during this
period. The impact of the increase in average earning assets from 1998 to 1999
was partially offset by a 31 basis point decrease in the average interest rate
earned on interest earning assets, caused primarily by an overall decline in
market interest rates during this period.

                                        22
<PAGE>   24

     Interest earned on loans is the largest component of total interest income
and represented 85.0%, 85.2% and 85.1% of total interest income in 2000, 1999,
and 1998, respectively. Interest income on securities in CIB Marine's portfolio
accounted for the majority of the remaining balance in total interest income.

INTEREST EXPENSE

     Total interest expense increased 76.5% to $109.1 million in 2000 from $61.8
million in 1999. Total interest expense for 1999 represented a 46.5% increase
over $42.2 million of total interest expense for 1998. These increases were due
primarily to growth in average interest-bearing liabilities. Increased volume
accounted for $36.2 million of the increase in total interest expense from 1999
to 2000 and $22.0 million of the variance from 1998 to 1999. Also contributing
to the increase in interest expense from 1999 to 2000 was a 93 basis point
increase in the average interest rate paid on interest-bearing liabilities,
caused primarily by an increase in market interest rates and the issuance of
guaranteed trust preferred securities in March and September of 2000. A 26 basis
point decrease in the average interest rate paid on interest-bearing liabilities
from 1998 to 1999 partially offset the increase in interest expense due to
volume during this period.

     Interest expense on time deposits represents the largest component of total
interest expense. The ratio of interest expense on time deposits to total
interest expense was 79.3%, 82.8% and 86.1% in 2000, 1999 and 1998,
respectively. The average balance of time deposits increased by $440.2 million,
or 45.4%, from 1999 to 2000, and by $327.7 million, or 51.0%, from 1998 to 1999.
The weighted average interest rate paid on these deposits increased by 85 basis
points from 1999 to 2000, due primarily to an increasing interest rate
environment. The weighted average interest rate paid on these deposits decreased
by 37 basis points from 1998 to 1999, due primarily to a declining interest rate
environment. The significant level of interest expense on time deposits is due
to the fact that CIB Marine has used these types of deposits to fund a large
portion of the growth in its loan portfolio.

     The average rate paid on interest-bearing deposits increased by 85 basis
points to 5.91% in 2000 from 5.06% in 1999. The average rate paid in 1999
reflected a 28 basis point decrease over the 5.34% paid in 1998. The increase in
the average rate paid on interest-bearing deposits from 1999 to 2000 was
primarily the result of an increase in market rates. The decrease in the average
rate paid in 1999 from 1998 was primarily the result of a 30 basis point
decrease in the average rate paid on time deposits, a 20 basis point decrease in
the rate paid on interest-bearing demand deposits, and a 40 basis point decrease
in time deposits of $100,000 or more, offset in part by a 11 basis point
increase in the average rate paid on money market accounts and a 39 basis point
increase in other savings deposits. The increase in the average interest rate
paid on both interest-bearing demand deposits and money markets was primarily
the result of the introduction of a tiered interest rate schedule within both
types of deposits, which provided for a higher interest rate to be paid to
accounts with balances above certain thresholds. The increase in the rate paid
on time deposits of $100,000 or more, was largely the result of reducing the
proportion of secured deposits to unsecured deposits, which generally require a
higher interest rate. CIB Marine decreased the proportion of secured time
deposits of $100,000 or more in order to maintain liquidity through the
availability of securities not pledged.

     CIB Marine's interest rate spread, which is the difference between the
average interest rate on interest-earning assets and the average interest rate
on interest-bearing liabilities, was 3.02% in 2000, 3.25% in 1999, and 3.29% in
1998. The net interest margin was 3.69%, 3.93% and 4.19% in 2000, 1999 and 1998,
respectively.

NET INTEREST MARGIN

     Although net interest income grew $19.5 million in 2000, the net interest
margin (the ratio of the net interest income (TE) to average earning assets)
decreased 24 basis points from 3.93% in 1999 to 3.69% for the year 2000. The
decrease in the net interest margin was primarily the result of the average cost
of funds increasing at a rate greater than the average yield on earning assets.
The increased average cost of funds was precipitated in part by a leveraging
strategy which is intended to increase the return on stockholders' equity. As
part of this strategy CIB Marine issued $25.0 million of guaranteed trust
preferred securities in 2000 with an average rate of 10.8%.

                                        23
<PAGE>   25

     The use of guaranteed trust preferred securities, instead of common stock,
contributed to a decline in the ratio of equity to average earning assets from
11.45% in 1999 to 9.51% in 2000. However, during this period the return on
average equity increased from 8.94% to 11.94%. CIB Marine expects to continue
this strategy into 2001 as a means of increasing the return on stockholders'
equity. See "Guaranteed Trust Preferred Securities" for additional information.

NONINTEREST INCOME

     Noninterest income increased $2.4 million from $5.8 million in 1999 to $8.2
million in 2000. The increase in noninterest income was primarily the result of
a $0.9 million, or 35.4%, increase in loan fees, a $0.7 million, or 53.2%,
increase in deposit account service charges, a $0.7 million, or 165.9%, increase
in other service fee income, and a $0.6 million, or 736.3%, increase in other
income. The increases in loan and other fee income was due primarily to the
receipt of $0.6 million in loan fees, late charges and other fees recognized in
connection with the MICR, Inc. transaction, and $0.2 million in net income from
MICR, Inc. operations from October 16, 2000 through December 31, 2000 (Refer to
Note 9 to the Consolidated Financial Statements for additional information).
Additional information about this transaction is discussed in "Other Assets".
Deposit service charges increased between 1999 and 2000 as average deposits grew
42.1% over that period. The increase in other income was due primarily to gains
on the sales of Marine Trust and foreclosed real estate. Gains on the sale of
assets were $0.3 million in 2000 and $0.8 million in 1999, resulting from the
sale of a branch building and a branch facility, respectively.

     Noninterest income decreased $0.1 million from $5.9 million in 1998 to $5.8
million in 1999. The decrease in noninterest income from 1998 to 1999 was
primarily the result of a $0.8 million, or 23.1%, decrease in loan fees and a
$0.3 million decrease in the gains on sales of securities, which were partially
offset by an $0.8 million gain on a branch sale in 1999. The decrease in loan
fees was due to a $1.1 million, or 39.0%, decrease in fees associated with the
origination and subsequent sales of residential first mortgage loans as a result
of a 39.8% reduction in origination volumes primarily due to higher interest
rates, and was partially offset by an increase in fees from standby letters of
credit of $0.3 million. Deposit service charges remained relatively unchanged
between 1999 and 1998 although average deposits grew 52.5% over that period.
Most of the deposit growth was in certificates of deposits or money market
accounts that generally do not produce fee income.

     Noninterest income represented 4.3%, 4.7% and 6.9% of total income on a tax
equivalent basis in 2000, 1999 and 1998, respectively. The primary source of
noninterest income was loan fees, which includes fees for originating loans sold
to others, standby letters of credit fees, late charges and service fees on
loans serviced for others, and in deposit service charges and other service
fees. Loan fees represented $3.4 million, or 41.9%, of total noninterest income
in 2000, $2.5 million, or 44.1%, in 1999, and $3.3 million, or 55.5%, in 1998.
Deposit account service charges and other service fees represented $3.2 million,
or 38.6%, of total noninterest income in 2000, $1.8 million, or 30.8%, in 1999,
and $1.8 million, or 30.5%, in 1998. Also included in noninterest income in 2000
and 1999 were gains on the sales of certain assets. In 2000, CIB Marine sold a
branch building in the central Illinois market, and the assets and business of
Marine Trust, which in the aggregate amounted to pre-tax gains of approximately
$0.5 million. In 1999 CIB Marine sold a branch facility which resulted in a
pre-tax gain of approximately $0.8 million.

NONINTEREST EXPENSE

     Total noninterest expense increased $8.5 million, or 25.7%, to $41.5
million in 2000 from $33.0 million in 1999. Noninterest expense increased $6.7
million, or 25.2%, in 1999 from $26.4 million in 1998. The increases in
noninterest expense between each of these periods was primarily attributable to
CIB Marine's growth, including internal growth and the acquisition and opening
of new branch facilities and banks. During 2000, four new banking offices were
added, while nine were added during 1999, and six during 1998.

     Compensation and employee benefits expense was $25.5 million in 2000, as
compared to $20.4 million in 1999, an increase of 24.9%. Compensation and
employee benefits expense increased 19.4% in 1999 from $17.1 million in 1998.
Compensation and employee benefits expense, as a percentage of total noninterest

                                        24
<PAGE>   26

expense was 61.5% in 2000, 61.8% in 1999, and 64.9% in 1998. The increase in
compensation and employee benefits is the result of a number of factors,
including the hiring of personnel to staff the new facilities, the hiring of
additional management personnel, increases in the salaries of existing personnel
and increased bonus expense as a result of performance measures being met in
2000, 1999 and 1998. As a result of CIB Marine's growth, the total number of its
full-time equivalent employees increased to 612 at December 31, 2000 from 503 at
December 31, 1999 and 421 at December 31, 1998, representing a 21.7% increase in
2000 and a 19.5% increase in 1999. In addition, CIB Marine recognized $0.1
million, $0.2 million, and $1.5 million in non-cash compensation expense during
2000, 1999, and 1998, respectively, as a result of the extension, in February
1998, of the expiration date of all previously issued and unexpired stock
options granted under its stock option plans.

     Equipment and occupancy expenses increased $1.2 million, or 18.8%, to $6.4
million in 2000 from $5.2 million in 1999. The 1999 amount represented an
increase of $1.5 million, or 38.9%, from $3.7 million in 1998. The increases in
equipment and occupancy expenses were primarily the result of the opening of new
bank and branch offices in 2000 and 1999.

     Professional services expense increased $0.5 million, or 44.0%, to $1.7
million in 2000 from $1.2 million in 1999. The 1999 amount represented an
increase of $0.5 million, or 84.1%, from 1998. The increases during both of
these periods was due primarily to increased expenditures for legal and
accounting services.

     Amortization of intangibles increased $0.3 million, or 32.4%, from 1999 to
2000 and by $0.7 million, or 206.1%, from 1998 to 1999. These increases were
primarily attributable to intangible asset increases of $9.5 million relating to
the two banking offices purchased in March 1999, and $2.0 million for the
banking office purchased in September 1999.

     All other noninterest expenses, which included advertising and marketing
and various other expenses, increased $1.3 million, or 26.0%, to $6.5 million in
2000 from $5.2 million in 1999. The 1999 other noninterest expenses amount
represented an increase of $0.6 million, or 14.0%, from $4.5 million in 1998.

     CIB Marine's efficiency ratio was 49.7% in 2000, 54.0% in 1999, and 58.1%
in 1998. Total noninterest expense as a percentage of average assets was 2.0% in
2000, 2.3% in 1999, and 2.7% in 1998.

INCOME TAXES

     CIB Marine records a provision for income taxes currently payable, along
with a provision for income taxes payable in the future on the reported income
before income taxes. Deferred taxes arise from temporary differences between
financial statement and income tax reporting. The effective tax rates for the
years ended December 31, 2000, 1999 and 1998 were 34.5%, 35.4% and 34.3%,
respectively. The increase in the income tax provision was primarily due to
increases in taxable income in each of the corresponding years.

                                        25
<PAGE>   27

FOURTH QUARTER RESULTS OF OPERATIONS

     The following table presents a summary of the results of operations for the
fourth quarters ended December 31, 2000 and 1999, respectively.

<TABLE>
<CAPTION>
                                                                  QUARTER ENDED
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                2000         1999
                                                                ----         ----
                                                              (DOLLARS IN THOUSANDS,
                                                                EXCEPT SHARE DATA)
<S>                                                           <C>          <C>
INTEREST AND DIVIDEND INCOME:
Loans.......................................................   $42,928      $29,035
Loans Held For Sale.........................................       157           43
Investment securities
  Taxable...................................................     7,084        4,197
  Tax-exempt................................................       690          539
  Dividends.................................................        72           88
Federal Funds Sold..........................................       372          232
                                                               -------      -------
       TOTAL INTEREST INCOME................................    51,303       34,134
                                                               -------      -------
INTEREST EXPENSE:
Deposits....................................................    28,390       17,743
Short-term Borrowings.......................................     2,233          713
Long-term Borrowings........................................       515          126
Guaranteed Trust Preferred Securities.......................       677           --
                                                               -------      -------
       TOTAL INTEREST EXPENSE...............................    31,815       18,582
                                                               -------      -------
       NET INTEREST INCOME..................................    19,488       15,552
PROVISION FOR LOAN LOSS.....................................     2,074        1,625
                                                               -------      -------
       NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS....    17,414       13,927
                                                               -------      -------
NONINTEREST INCOME:
Loan Fees...................................................     1,394          555
Deposit Service Charges.....................................       682          405
Other Service Charges.......................................       425          103
Trust.......................................................        --          159
Gain on Sale of Assets......................................       459           --
Other.......................................................       109           39
Securities Gains, net.......................................        22           --
                                                               -------      -------
       TOTAL NONINTEREST INCOME.............................     3,091        1,261
                                                               -------      -------
NONINTEREST EXPENSE:
Compensation and Employees Benefits.........................     6,472        5,579
Equipment...................................................       738          556
Occupancy and Premises......................................     1,027          938
Professional Services.......................................       409          215
Advertising/Marketing.......................................       175          222
Amortization of Intangibles.................................       352          386
Telephone & Data Communications.............................       239          213
Other.......................................................       477        1,027
                                                               -------      -------
       TOTAL NONINTEREST EXPENSE............................     9,889        9,136
                                                               -------      -------
INCOME BEFORE INCOME TAXES..................................    10,616        6,052
INCOME TAX EXPENSE..........................................     3,406        2,192
                                                               -------      -------
       NET INCOME...........................................   $ 7,210      $ 3,860
                                                               =======      =======
EARNINGS PER SHARE:
Basic.......................................................   $  0.38      $  0.24
                                                               =======      =======
Diluted.....................................................      0.38         0.24
                                                               =======      =======
</TABLE>

     CIB Marine had net income of $7.2 million in the fourth quarter of 2000, as
compared to $3.9 million in the fourth quarter of 1999, which represented an
increase of 86.8%. Diluted earnings per share were $0.38 in

                                        26
<PAGE>   28

the fourth quarter of 2000, as compared to $0.24 in the fourth quarter of 1999,
representing an increase of 58.3%. Net interest income was $19.5 million and
$15.6 million in the fourth quarter of 2000 and 1999, respectively, which
represented an increase of 25.3%.

     Total noninterest income was $3.1 million in the fourth quarter of 2000, as
compared to $1.3 million in the fourth quarter of 1999, which represented an
increase of 145.1%. Included in the fourth quarter 2000 amount was $0.6 million
in loan fees, late charges and other fees recognized in connection with the
MICR, Inc. transaction (refer to Note 9 to the Consolidated Financial Statements
for additional information). Also contributing to the increase in total
noninterest income between these periods was a $0.3 million pre-tax gain on the
sale of a branch building, a $0.3 million increase in fee income on letters of
credit, a $0.2 million increase in fee income on loans sold, and a $0.3 million
increase in deposit account service charges. The rest of the increase in net
income between these periods was due primarily to the growth of CIB Marine.

FINANCIAL CONDITION

OVERVIEW

     At December 31, 2000, CIB Marine had total assets of $2.4 billion, an
increase of $542.7 million, or 29.7%, from $1.8 billion at December 31, 1999.
This increase was primarily the result of the implementation of CIB Marine's
growth strategy. Asset growth occurred primarily in loans and securities which
increased $381.1 million and $460.2 million, respectively, funded by increases
in deposits of $423.1 million, borrowings of $81.7 million, and equity of $33.3
million. CIB Marine's ratio of stockholders' equity to total assets was 8.2% at
December 31, 2000, as compared to 8.8% at December 31, 1999. The increase in
equity in 2000 was primarily due to net income of $21.1 million and the sale of
common stock pursuant to private placement offerings which raised $7.6 million.
Also contributing to the increase in equity was a $4.3 million increase in
unrealized securities gains on available for sale securities, net of tax,
carried as a component of equity.

LOANS HELD FOR SALE

     Loans held for sale were $15.3 million at December 31, 2000, $2.1 million
at December 31, 1999, and $8.9 million at December 31, 1998. The held for sale
portfolio is comprised of residential first mortgage loans. The increase in
loans held for sale from December 31, 1999 to December 31, 2000 was attributable
to increases in the volume of loans originated and purchased for resale
primarily due to a lower interest rate environment in December of 2000. In 2000,
CIB Marine began originating and purchasing loans for sale through a wholesale
division of its mortgage banking subsidiary. In 2000, CIB Marine originated
$80.7 million, purchased $131.7 million and sold $199.3 million of loans held
for sale. In 1999, originations, purchases and sales were $113.4 million, $0.0
million and $120.2 million, respectively.

SECURITIES

     CIB Marine seeks to manage its investment portfolio in a manner that
promotes the achievement of its liquidity goals, optimizes after-tax net income,
provides collateral to secure borrowings, assists CIB Marine in meeting various
regulatory requirements and is consistent with its market risk policies. CIB
Marine manages the maturity structure of the investment portfolio to provide a
stream of cash flows to complement the market risk management of CIB Marine and
to promote the long-term after-tax earnings of CIB Marine.

                                        27
<PAGE>   29

     The carrying value and tax equivalent yield of CIB Marine's securities are
set forth in the following table.

<TABLE>
<CAPTION>
                                                 AT DECEMBER 31, 2000    AT DECEMBER 31, 1999    AT DECEMBER 31, 1998
                                                 ---------------------   ---------------------   ---------------------
                                                             YIELD TO                YIELD TO                YIELD TO
                                                  AMOUNT     MATURITY     AMOUNT     MATURITY     AMOUNT     MATURITY
                                                  ------     --------     ------     --------     ------     --------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                              <C>         <C>         <C>         <C>         <C>         <C>
HELD TO MATURITY
U.S. Government & agencies.....................  $ 60,000       6.28%    $ 73,940       6.10%    $ 62,731       5.85%
Obligations of states and political
  subdivisions.................................    46,434       7.49       57,679       7.04       26,445       7.37
Other notes and bonds..........................       450       7.10          450       7.11          450       7.10
Mortgage backed securities.....................    19,220       7.04       14,821       6.97       12,113       6.56
                                                 --------      -----     --------      -----     --------      -----
    Total Securities Held to Maturity..........   126,104       6.84      146,890       6.56      101,739       6.34
                                                 --------      -----     --------      -----     --------      -----
AVAILABLE FOR SALE
U.S. Government & agencies.....................   241,694       6.19      190,585       5.83       86,533       5.48
Obligations of states and political
  subdivisions.................................     7,627       8.70        3,735      10.49        3,572      11.17
Other notes and bonds..........................    51,097       7.16        2,107       6.80        2,264       6.07
Mortgage backed securities.....................    58,365       6.85       18,821       6.04       17,831       5.95
Federal Home Loan Bank stock...................     3,590       8.00        4,482       6.50        3,057       6.63
Other equities.................................        50        N/A           37        N/A           37        N/A
                                                 --------      -----     --------      -----     --------      -----
    Securities Available for Sale Before SFAS
      115 Adjustment...........................   362,423       6.50      219,767       5.95      113,294       5.77
                                                 --------      -----     --------      -----     --------      -----
    TOTAL SECURITIES BEFORE SFAS 115
      ADJUSTMENT...............................   488,527       6.59%     366,657       6.20%     215,033       6.04%
                                                               =====                   =====                   =====
SFAS 115 Available For Sale Market Value
  Adjustment...................................     3,714                  (3,307)                  1,251
                                                 --------                --------                --------
    TOTAL SECURITIES...........................  $492,241                $363,350                $216,284
                                                 ========                ========                ========
</TABLE>

     Total securities outstanding at December 31, 2000, were $492.2 million, an
increase of 35.5% from $363.4 million at December 31, 1999. Total securities
also increased 68.0% in 1999 from $216.3 million at December 31, 1998. The
increases in the securities portfolio were directly related to CIB Marine's
growth during these periods. Because CIB Marine's securities portfolio is one of
its sources of liquidity, CIB Marine has increased the size of its portfolio as
total assets have increased. The ratio of total securities to total assets was
20.8%, 19.9% and 18.2% at December 31, 2000, 1999 and 1998, respectively.

     At December 31, 2000, 61.8% of the portfolio consisted of U.S. Treasury and
Government Agency securities, as compared to 72.1% at December 31, 1999, and
69.4% at December 31, 1998. Mortgage backed securities represented 15.9%, 9.2%
and 13.9% for 2000, 1999 and 1998, respectively. Obligations of states and
political subdivisions of states represented 11.1% of the portfolio at December
31, 2000, 16.8% at December 31, 1999, and 14.0% at December 31, 1998. Most of
those obligations were general obligations of states or political subdivisions
of states in which CIB Marine's subsidiaries are located. Commercial paper
accounted for 10.0% of the portfolio in 2000. There were no commercial paper
securities in 1999 or 1998. Mortgage backed securities increased to take
advantage of spread changes to US Treasury notes and bonds. Obligations of state
and political subdivisions of states decreased as a percentage of total
securities in 2000 as compared to previous years due to the maturity of various
short term municipal obligations and the reinvestment of the proceeds in other
sectors of the portfolio. During 2000, CIB Marine increased the use of
commercial paper as a means of managing liquidity.

     CIB Marine has classified certain of its securities as held to maturity and
certain of its securities as available for sale. Securities classified as held
to maturity are those that CIB Marine has both the positive intent and ability
to hold to maturity, and are reported at amortized cost. Securities classified
as available for sale are those CIB Marine has not classified as held to
maturity or as trading securities. CIB Marine has not maintained any securities
for trading purposes. CIB Marine may sell securities classified as available for
sale if it believes the sale is necessary for liquidity, asset/liability
management or other reasons. Securities available for sale are reported at fair
value, with unrealized gains and losses, net of taxes, included as a separate
component of accumulated other comprehensive income in equity.

                                        28
<PAGE>   30

     At December 31, 2000, $366.1 million, or 74.4%, of the securities portfolio
was classified as available for sale and $126.1 million, or 25.6%, of the
portfolio as held to maturity. These ratios were 59.6% and 40.4% at December 31,
1999, and 53.0% and 47.0% at December 31, 1998, respectively. Securities
available for sale increased $149.7 million, or 69.2%, during 2000, while
securities held to maturity decreased $20.8 million, or 14.2%. The
classification of securities as available for sale and held to maturity is based
on a number of factors, including CIB Marine's current and projected liquidity
position and current and projected loan to deposit ratio. The increase in the
percentage of securities classified as available for sale in both 2000 and 1999
reflects CIB Marine's decision, based on such factors, to make a larger
percentage of its securities portfolio available to meet CIB Marine's liquidity
needs, if necessary, and to allow CIB Marine the opportunity to react to changes
in market interest rates and changes in the spread relationships between
alternative investments.

     The following table presents the maturities and weighted average yields of
securities as of December 31, 2000.
<TABLE>
<CAPTION>
                                  1 YEAR AND LESS        1 TO 5 YEARS         5 TO 10 YEARS
                                -------------------   -------------------   ------------------
                                           YIELD TO              YIELD TO             YIELD TO
                                BALANCE    MATURITY   BALANCE    MATURITY   BALANCE   MATURITY
                                -------    --------   -------    --------   -------   --------
                                                    (DOLLARS IN THOUSANDS)
<S>                             <C>        <C>        <C>        <C>        <C>       <C>
HELD TO MATURITY
U.S. Government & Agencies....  $  6,011     6.20%    $ 50,996     6.24%    $ 2,993     7.14%
Obligations of states and
  political subdivisions......     5,291     7.47       13,303     7.32      19,903     7.45
Other notes and bonds.........        --       --          450     7.10          --       --
Mortgage backed securities....         5     8.23          267     6.90       7,376     7.52
                                --------     ----     --------     ----     -------    -----
  Total Held To Maturity......  $ 11,307     6.80     $ 65,016     6.47     $30,272     7.44
                                --------     ----     --------     ----     -------    -----
AVAILABLE FOR SALE
U.S. Government & Agencies....  $ 51,451     5.25     $187,243     6.43     $ 3,000     7.75
Obligations of states and
  political subdivisions......     4,300     7.19          408     8.85       2,919    10.90
Other notes and bonds.........    50,497     7.17          250     6.50         350     6.73
Mortgage backed securities....       100     6.15        2,336     6.14      11,944     6.79
Federal Home Loan Bank
  stock.......................        --       --           --       --          --       --
Other equities................        --       --           --       --          --       --
                                --------     ----     --------     ----     -------    -----
  Total Available For Sale....   106,348     6.24      190,237     6.43      18,213     7.61
                                --------     ----     --------     ----     -------    -----
  Total Securities Before SFAS
    115 Adjustment............  $117,655     6.29%    $255,253     6.44%    $48,485     7.50%
                                ========     ====     ========     ====     =======    =====
AVAILABLE FOR SALE MARKET
  VALUE ADJUSTMENT (SFAS
  115)........................
  TOTAL SECURITIES............

<CAPTION>
                                  OVER 10 YEARS          GRAND TOTAL
                                ------------------   -------------------
                                          YIELD TO              YIELD TO
                                BALANCE   MATURITY   BALANCE    MATURITY
                                -------   --------   -------    --------
                                         (DOLLARS IN THOUSANDS)
<S>                             <C>       <C>        <C>        <C>
HELD TO MATURITY
U.S. Government & Agencies....  $    --      --%     $ 60,000     6.28%
Obligations of states and
  political subdivisions......    7,937    7.87        46,434     7.49
Other notes and bonds.........       --      --           450     7.10
Mortgage backed securities....   11,572    6.74        19,220     7.04
                                -------     ---      --------    -----
  Total Held To Maturity......  $19,509    7.20      $126,104     6.84
                                -------     ---      --------    -----
AVAILABLE FOR SALE
U.S. Government & Agencies....  $    --      --      $241,694     6.19
Obligations of states and
  political subdivisions......       --      --         7,627     8.70
Other notes and bonds.........       --      --        51,097     7.16
Mortgage backed securities....   43,985    6.91        58,365     6.85
Federal Home Loan Bank
  stock.......................    3,590    8.00         3,590     8.00
Other equities................       50     N/A            50      N/A
                                -------     ---      --------    -----
  Total Available For Sale....   47,625    6.99       362,423     6.50
                                -------     ---      --------    -----
  Total Securities Before SFAS
    115 Adjustment............  $67,134    7.05%      488,527     6.59%
                                =======     ===                  =====
AVAILABLE FOR SALE MARKET
  VALUE ADJUSTMENT (SFAS
  115)........................                          3,714
                                                     --------
  TOTAL SECURITIES............                       $492,241
                                                     ========
</TABLE>

LOANS

     GENERAL. CIB Marine offers a broad range of loan products, including
commercial loans, commercial real estate loans, commercial and residential real
estate construction loans, one-to-four family residential real estate loans, and
various types of consumer loans. CIB Marine's underwriting standards, as
contained within its loan policy, are based on the general assumption that the
primary source of repayment should be the regular operating cash flows and the
secondary source should be the liquidation and disposition of collateral.

     Loans, net of the allowance for loan loss, were $1.7 billion at December
31, 2000, an increase of $367.9 million, or 26.8%, from $1.4 billion at December
31, 1999, and represented 73.5% and 75.2% of CIB Marine's total assets at
December 31, 2000 and December 31, 1999, respectively. Most of the increase was
in the areas of commercial real estate loans, commercial loans and construction
loans, which in the aggregate represented 95.1% of gross loans at December 31,
2000, and 94.6% of gross loans at December 31, 1999. These increases in loans
are consistent with CIB Marine's strategy to focus on establishing banking
relationships with small to medium-sized businesses and has been achieved by
hiring lenders who have experience and expertise in making loans to these
customers.

                                        29
<PAGE>   31

     The following table sets forth a summary of CIB Marine's loan portfolio by
category for each of the periods indicated. The data for each category is
presented in terms of total dollars outstanding and as a percentage of the total
loans outstanding.

<TABLE>
<CAPTION>
                                                                     AS OF DECEMBER 31,
                              ------------------------------------------------------------------------------------------------
                                     2000                 1999                1998               1997               1996
                              ------------------   ------------------   ----------------   ----------------   ----------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                           <C>          <C>     <C>          <C>     <C>        <C>     <C>        <C>     <C>        <C>
Commercial and industrial...  $  592,984    33.6%  $  454,438    32.7%  $273,331    29.8%  $197,462    32.1%  $148,433    36.4%
Agricultural................       5,286     0.3        5,973     0.4      8,283     0.9      9,558     1.5      7,499     1.8
Real estate
  1-4 family................      67,096     3.8       50,292     3.6     52,348     5.7     59,217     9.6     41,826    10.3
  Commercial................     814,895    46.1      646,484    46.5    428,252    46.7    263,450    42.8    161,363    39.6
  Construction..............     272,278    15.4      214,251    15.4    117,703    12.9     52,791     8.6     27,953     6.9
Consumer....................       8,455     0.5       13,152     0.9     17,652     1.9     17,097     2.8     12,821     3.1
Credit card loans...........       1,833     0.1        1,436     0.1      1,454     0.2      1,592     0.3      1,187     0.3
Other.......................       4,392     0.2        5,486     0.4     17,929     1.9     13,593     2.3      6,287     1.6
                              ----------   -----   ----------   -----   --------   -----   --------   -----   --------   -----
Gross Loans.................   1,767,219   100.0%   1,391,512   100.0%   916,952   100.0%   614,760   100.0%   407,369   100.0%
                                           =====                =====              =====              =====              =====
Deferred Loan Fees (1)......      (4,264)              (3,681)            (1,241)              (430)               (18)
Allowance for loan loss.....     (23,002)             (15,813)           (10,657)            (6,692)            (4,058)
                              ----------           ----------           --------           --------           --------
Net loans...................  $1,739,953           $1,372,018           $905,054           $607,638           $403,293
                              ==========           ==========           ========           ========           ========
</TABLE>

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

(1) CIB Marine adopted the provisions of Statement of Financial Accounting
    Standard (SFAS) No. 91, prospectively, in 1996.

     COMMERCIAL REAL ESTATE LOANS. At December 31, 2000, commercial real estate
loans totaled $814.9 million, an increase of $168.4 million, or 26.1%, over the
prior year-end and represented 46.1% of gross loans. Commercial real estate
loans increased $218.2 million, or 51.0%, during 1999. Commercial real estate
loans are made to finance commercial properties such as office buildings,
multi-family residences, motels, strip malls, warehouses and other commercial
properties for which CIB Marine holds real property as collateral. CIB Marine
may also require other credit enhancements, such as personal and corporate
guarantees on these borrowings. Commercial real estate loans are made at both
fixed and variable interest rates with terms generally ranging from one to five
years. CIB Marine's underwriting standards generally require that a commercial
real estate loan not exceed 80% of the appraised value of the property securing
the loan.

     COMMERCIAL LOANS. At December 31, 2000, commercial loans totaled $593.0
million, an increase of $138.5 million, or 30.5%, over the prior year-end and
represented 33.6% of gross loans. Commercial loans also increased $181.1
million, or 66.3%, during 1999. Commercial loans consist of loans to small and
medium-sized businesses and individuals in a wide variety of industries,
including wholesalers, manufacturers and business service companies. CIB Marine
provides a broad range of commercial loans, including lines of credit for
working capital purposes, accounts receivable and inventory financing, and term
notes for the acquisition of equipment and for other purposes. In general,
commercial loans are collateralized by inventory, accounts receivable,
equipment, real estate and other commercial assets, and may be supported by
other credit enhancements, such as personal and corporate guarantees. When
warranted by the overall financial condition of the borrower, loans may also be
made on an unsecured basis. Terms of commercial loans generally range from one
to five years, and the majority of these loans have floating interest rates.

     REAL ESTATE CONSTRUCTION LOANS. At December 31, 2000, real estate
construction loans totaled $272.3 million, an increase of $58.0 million, or
27.1%, over the prior year-end and represented 15.4% of gross loans. Real estate
construction loans also increased $96.5 million, or 82.0%, during 1999. Real
estate construction loans include loans for the construction of office
buildings, multi-family residences, motels, strip malls, warehouses, other
commercial real estate projects and one-to-four family residences. Before
approving a construction loan, CIB Marine generally requires that permanent
financing for the project be approved by CIB Marine or a nonaffiliated third
party lender. These loans are typically secured by the real estate on which the
project is being constructed and generally require that the principal amount of
the loan be no more than

                                        30
<PAGE>   32

the lesser of 80% of the projects appraised value upon completion or 100% of the
estimated construction costs. CIB Marine may also require other credit
enhancements such as personal and corporate guarantees on these borrowings.
Generally, site inspections and various affidavits and statements are required
before a draw on the loan is disbursed. Real estate construction loans are made
at both fixed and variable rates and generally are for a term of 12 to 18
months.

     ONE-TO-FOUR FAMILY RESIDENTIAL MORTGAGE LOANS. At December 31, 2000,
one-to-four family residential mortgage loans totaled $67.1 million, an increase
of $16.8 million, or 33.4%, from December 31, 1999, and represented 3.8% of
gross loans. One-to-four family residential mortgage loans decreased $2.1
million, or 3.9%, during 1999. CIB Marine makes one-to-four family residential
mortgage loans which generally conform to FNMA, FHLMC and other secondary market
underwriting guidelines. These loans are primarily sold in the secondary market,
and, to a lesser degree, retained in CIB Marine's portfolio. Residential
mortgage loans that are sold into the secondary market are generally sold with
servicing rights released. Residential mortgage loans held in CIB Marine's
portfolio are made with both floating and fixed interest rates and terms of one
to 30 years.

     OTHER LOANS. CIB Marine also offers a variety of other types of loans,
including consumer loans, agricultural loans and other types of commercial
loans. Consumer loans include automobile loans, credit cards and other types of
consumer debt.

     LOAN MATURITIES. The following table sets forth the maturity distribution
and interest rate sensitivity of selected loan categories as of December 31,
2000. Maturities are based upon contractual terms of the underlying loans.

<TABLE>
<CAPTION>
                                                      LOAN MATURITIES AT DECEMBER 31, 2000
                                                   -------------------------------------------
                                                    1 YEAR     1 TO 5     OVER 5
                                                   AND LESS    YEARS      YEARS       TOTAL
                                                   --------    ------     ------      -----
                                                             (DOLLARS IN THOUSANDS)
<S>                                                <C>        <C>        <C>        <C>
Commercial and industrial........................  $345,498   $193,920   $ 53,566   $  579,422
Agricultural.....................................     3,242      2,044         --        5,286
Real estate
  1-4 family.....................................     2,638     36,960     27,498       67,096
  Commercial.....................................   285,565    464,687     64,643      814,895
  Construction...................................   172,558     97,455      2,265      272,278
Consumer and Credit Cards........................     3,973      6,063        252       10,288
Other............................................     1,246      2,339        807       17,954
                                                   --------   --------   --------   ----------
                                                   $814,720   $803,468   $149,031   $1,767,219
                                                   ========   ========   ========   ==========
SENSITIVITY TO CHANGES IN INTEREST RATES
Fixed rates......................................  $134,127   $425,549   $ 64,490   $  624,166
Variable rates...................................   680,593    377,919     84,541    1,143,053
                                                   --------   --------   --------   ----------
Total Gross loans................................  $814,720   $803,468   $149,031   $1,767,219
                                                   ========   ========   ========   ==========
</TABLE>

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 capital of CIB Marine. At December 31, 2000, CIB Marine did not have any
borrowing relationships with individual borrowers or related groups of borrowers
that exceeded 25% of capital.

     In July 1999, one of CIB Marine's borrowers, whose total borrowing
relationship exceeded 25% of capital at that time, experienced a substantial
decline in net worth as a result of a similar decline in the market value of a
publicly traded common stock which comprised a large part of this borrower's net
worth. The decline in the value of this security caused liquidity problems for
this borrower with respect to its obligations to CIB Marine and other lenders.
Since March 2000, the total outstanding lending commitment associated with

                                        31
<PAGE>   33

this borrowing relationship has represented less than 25% of the capital of CIB
Marine. As of December 31, 2000, the total outstanding lending commitment
associated with this borrowing relationship, including lines of credit which
have not been fully drawn, was approximately $34.5 million. The aggregate
principal amount actually drawn and outstanding at December 31, 2000, with
respect to this borrowing relationship was approximately $28.9 million and all
such loans were current with respect to principal and interest. CIB Marine has
renewed certain loans and extended new loans to this borrower and its related
interests since July 1999 based upon a credit evaluation at the time of
origination or renewal. As loans to this borrower become due, CIB Marine will
evaluate the credit relationship at that time to determine whether to renew such
loans. As of March 26, 2001, the total outstanding lending commitment associated
with this borrowing relationship, including lines of credit which have not been
fully drawn, was approximately $34.3 million. The aggregate principal amount
actually drawn, and outstanding at March 26, 2001, was $32.7 million.

     Since July 1999, CIB Marine has closely monitored this borrowing
relationship, including the collateral margins and cash flows. This borrower
continues to work with CIB Marine to improve this borrowing relationship,
including providing updated financial information so that CIB Marine can monitor
and evaluate the credit risk of this relationship. Although CIB Marine estimates
the value of the collateral securing this borrowing relationship currently
exceeds the outstanding principal balance to this borrower, this borrowing
relationship has been under-collateralized pursuant to the collateral
requirements of CIB Marine's loan policy since the first quarter of 2000.

     In order to assess this borrower's liquidity needs, CIB Marine continues to
monitor the borrower's obligations to other lenders and their collateral
positions. In November 1999, two of these other lenders filed lawsuits to
recover amounts due to them. During February 2000 one of these lawsuits was
dismissed. In March 2000, a third lender filed a lawsuit to recover amounts due
it. This lawsuit was dismissed in July 2000. In August 2000, another lawsuit was
filed against this borrower by another lender to recover amounts due it. The
borrower is engaging in a voluntary and orderly disposition of certain of its
assets to satisfy various obligations to CIB Marine and other lenders and to
strengthen its liquidity position.

     In working with this borrower to address its liquidity problems, management
determined that it was in the best interest of CIB Marine to provide this
borrower with additional cash to help it meet its current obligations both to
CIB Marine and to other lenders. On September 9, 1999, CIB Marine purchased
limited partnership interests in three private investment funds from this
borrower. The adjusted purchase price for these limited partnership interests
was $2.3 million, of which $1.0 million was used by the borrower to repay a loan
from CIB Marine that was previously secured by an interest in one of these
limited partnerships. A description of this investment is discussed in "Other
Assets."

     CIB Marine has not suffered any losses with respect to its loans to this
borrower and has determined that an additional provision to its allowance for
loan loss, above the normal provisions for a loan of similar credit quality, is
not currently required. CIB Marine cannot provide assurances that an additional
provision will not be required in the future or that there will not be future
losses with respect to loans to this borrower. Management of CIB Marine will
continue to closely monitor its loans to this borrower in order to assess its
ongoing exposure to the credit risk posed by this borrower and will take
additional action if deemed appropriate.

     At December 31, 2000, CIB Marine had credit relationships within three
industries or industry groups that exceeded 25% of its capital as of that date.
The total outstanding balance to commercial and residential real estate
developers, investors and contractors was approximately $721.5 million, or 40.8%
of gross loans and 370.8% of stockholders' equity. The total outstanding balance
of loans made in the motel and hotel industry was approximately $149.5 million,
or 8.5% of gross loans and 76.8% of stockholders' equity. The total outstanding
balance of loans made in the nursing/convalescent home industry was
approximately $109.7 million, or 6.2% of gross loans and 56.4% of stockholders'
equity.

     Commercial or multi-family real estate, other business collateral and/or
personal property generally collateralize the loans and lines of credit
described in this section. Additionally, most of the loans are personally
guaranteed by the principals. Management has no reason to believe that each loan
within these

                                        32
<PAGE>   34

concentrations represent any greater risk of loss than CIB Marine's other loans
that are similarly collateralized and underwritten.

CREDIT PROCEDURES AND REVIEW

     In order to manage credit risk and the growth of the loan portfolio, CIB
Marine has developed, implemented and periodically updates various policies and
procedures, including a comprehensive loan policy, and has established various
loan committees. The loan policy establishes underwriting standards, a loan
approval process, loan officer lending limits, loan pricing guidelines, a credit
rating system, delinquency monitoring procedures, credit collection procedures
and a comprehensive loan review system. The loan underwriting approval and
review processes are designed to protect asset quality by assuring that credit
requests are independently reviewed on at least two different levels, and to
promote uniform lending standards among CIB Marine's banks.

     LOAN UNDERWRITING. The underwriting standards contained within CIB Marine's
loan policy address various aspects of the lending function, including an
analysis of a borrower's ability to repay, collateral requirements,
loan-to-value ratios, appraisals and personal guarantees. CIB Marine's
underwriting standards are based on the assumption that the principal source of
repayment should be the regular operating cash flows of the borrower and the
secondary source should be the liquidation and disposition of collateral. The
extent to which collateral is required for a loan is determined by the loan
policy and management's assessment of the creditworthiness of the borrower. The
amount and type of collateral required varies, but may include real estate,
marketable securities, deposits held in financial institutions, accounts
receivable, equipment and inventory. CIB Marine may also require personal and
corporate guarantees when deemed necessary. Collateral values are monitored on a
regular basis to ensure that they are maintained at an adequate level. CIB
Marine obtains and updates appraisals on collateral when management believes
they are necessary and as required by applicable laws or regulations.

     LOAN APPROVAL. The approval process for a loan depends upon the size of the
prospective borrowing relationship. Depending on size, new loans and
modifications or renewals of existing loans are generally approved by the
individual lending officer, approved or ratified by the bank's applicable small
or large loan committee, or approved by CIB Marine's President and CEO and/or
the Head of the Credit Administration Department, each of whom has the authority
to approve loans under certain circumstances, such as loans requiring expedited
treatment.

     Generally, each bank's small loan committee is comprised of various
officers of that bank and CIB Marine, and each bank's large loan committee is
comprised of various officers and directors of that bank and CIB Marine.

     LOAN REVIEW. CIB Marine's Credit Administration Department is responsible
for CIB Marine's loan review function, which includes assessing the credit
quality of the loan portfolio, establishing and monitoring adherence to
underwriting standards, promptly identifying loans with potential credit
exposure, handling loan collections and determining the adequacy of the
allowance for loan loss. Loan reviews are conducted on a regular basis as
established by the loan policy. In general, all loans of $1.0 million or greater
and 70% of loans between $0.2 million and $1.0 million are reviewed on an annual
basis, or more frequently when management believes additional reviews are
necessary. Loans with identified weaknesses are monitored on an on-going basis
by bank and CIB Marine management, the bank's Board of Directors, and the Senior
Credit Review Committee, which is comprised of CIB Marine's President and CEO,
its head of the Credit Administration Department, the General Counsel and other
credit administration officers.

     In addition, the Credit Administration Department performs extensive loan
review analyses on CIB Marine's largest borrowing relationships, as well as
borrowers operating in industries where CIB Marine has a credit concentration.
These analyses are completed annually, or more frequently if warranted, and
include a comprehensive assessment of collateral and debt service ability of
these borrowers at both CIB Marine and other creditors. These analyses also
include an evaluation of geographic, industry and other credit risks.

                                        33
<PAGE>   35

PROVISION FOR LOAN LOSS AND THE ALLOWANCE FOR LOAN LOSS

     The provision for loan loss represents charges made to earnings in order to
maintain an allowance for loan loss. CIB Marine monitors and maintains an
allowance for loan loss to absorb an estimate of probable losses inherent in the
loan and lease portfolio. The provision for loan loss was $8.3 million in 2000,
$6.1 million in 1999, and $4.7 million in 1998. A significant portion of the
increase in the provision for each year was the result of the growth in the loan
portfolio. CIB Marine increases the allowance by the amount of the provision for
loan loss and recoveries of previously charged-off loans, and decreases the
allowance by the amount of loan charge-offs. The methodology for assessing the
adequacy of the allowance consists of several key elements, which include
estimates for general, specific and unallocated reserves.

     The general reserves are calculated by applying a general loss ratio to
outstanding loans and leases. The general loss ratios vary by loan type and the
internal credit risk grade. Changes in internal credit risk grades and in
general loss ratios affect the amount of the general reserves. General loss
ratios are based on the historical loss experience of CIB Marine and the
industry. These ratios may be adjusted for significant factors that, in CIB
Marine's judgment, affect the collectibility of the portfolio as of the
evaluation date, including general changes in the loan and lease portfolio and
in economic conditions

     Specific reserves are estimated losses in loans that have been identified
as impaired within the meaning of SFAS No. 114 Accounting by Creditors for
Impairment of a Loan and SFAS No. 118 Accounting by Creditors for Impairment of
a Loan -- Income Recognition and Disclosures. The sum of the general and the
specific reserves represent an estimate of the loan and lease losses inherent in
the portfolio at any given point in time.

     The unallocated reserves represent that portion of the reported allowance
that has not been allocated through the general or specific reserves. The
unallocated reserves are a variable component of the allowance. This variability
is based on various factors, including economic and regulatory conditions,
credit underwriting practices, collateral values, and industry and borrower
concentrations. The unallocated reserves are reviewed periodically to determine
whether they are at a level that CIB Marine believes are adequate, yet not
excessive.

                                        34
<PAGE>   36

     The following table summarizes changes in the allowance for loan loss.

<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                                 ---------------------------------------------
                                                  2000      1999      1998      1997     1996
                                                  ----      ----      ----      ----     ----
                                                            (DOLLARS IN THOUSANDS)
<S>                                              <C>       <C>       <C>       <C>      <C>
BALANCE AT BEGINNING OF PERIOD.................  $15,813   $10,657   $ 6,692   $4,058   $2,458
Loans Charged-Off:
Commercial and Agricultural....................     (344)     (672)     (149)  (1,661)    (392)
Real estate
  1-4 family...................................     (147)      (48)       (9)      --       --
  Commercial...................................     (470)     (143)     (398)     (56)     (60)
  Construction.................................       --       (36)      (30)      --       --
Consumer.......................................     (279)     (162)     (167)     (47)     (13)
Credit card....................................      (52)       (8)      (18)     (73)      --
Other..........................................       --       (21)     (157)      --       --
                                                 -------   -------   -------   ------   ------
TOTAL CHARGED-OFF..............................   (1,292)   (1,090)     (928)  (1,837)    (465)
                                                 -------   -------   -------   ------   ------
RECOVERIES OF LOANS CHARGED-OFF:
Commercial and Agricultural....................       58        53       134      325       20
Real estate
  1-4 family...................................       --         9        11       --       --
  Commercial...................................       20        --         4        1       --
  Construction.................................       --        46        --       --       --
Consumer.......................................       60        26         8        4        1
Credit card....................................       19         2         1        2       --
Other..........................................       --        --         2       --       --
                                                 -------   -------   -------   ------   ------
TOTAL RECOVERIES...............................      157       136       160      332       21
                                                 -------   -------   -------   ------   ------
NET LOANS CHARGED-OFF..........................   (1,135)     (954)     (768)  (1,505)    (444)
Allowance acquired.............................       --        --        --      147       --
Provision for loan loss........................    8,324     6,110     4,733    3,992    2,044
                                                 -------   -------   -------   ------   ------
BALANCE AT END OF PERIOD.......................  $23,002   $15,813   $10,657   $6,692   $4,058
                                                 =======   =======   =======   ======   ======
</TABLE>

     Increases in the provision and the allowance were primarily related to the
increase in average loans outstanding between the periods. Total charge-offs for
2000 were $1.3 million, as compared to $1.1 million in 1999 and $0.9 million in
1998. Total recoveries for 2000 were $0.2 million, resulting in net charge-offs
of $1.1 million. Total recoveries were $0.1 million in both 1999 and 1998,
resulting in net charge-offs of $1.0 million in 1999 and $0.8 million in 1998.
The majority of net charge-offs occurred in the commercial real estate and
commercial loan portfolios, and represented 63.0%, 74.8%, and 58.9% of total
charge-offs for 2000, 1999, and 1998 respectively.

                                        35
<PAGE>   37

     The following table sets forth CIB Marine's allocation of the allowance for
loan loss by type of loan as of the dates indicated.
<TABLE>
<CAPTION>
                                                             AT DECEMBER 31,
                           ------------------------------------------------------------------------------------
                                    2000                     1999                     1998              1997
                           ----------------------   ----------------------   ----------------------   ---------
                                       % OF LOANS               % OF LOANS               % OF LOANS
                           ALLOWANCE    IN EACH     ALLOWANCE    IN EACH     ALLOWANCE    IN EACH     ALLOWANCE
                            AMOUNT      CATEGORY     AMOUNT      CATEGORY     AMOUNT      CATEGORY     AMOUNT
                           ---------   ----------   ---------   ----------   ---------   ----------   ---------
                                                          (DOLLARS IN THOUSANDS)
<S>                        <C>         <C>          <C>         <C>          <C>         <C>          <C>
BALANCE AT END OF PERIOD
 APPLICABLE TO
 Commercial and
   Agricultural..........   $ 7,842       33.8%      $ 5,856       33.0%      $ 4,299       30.7%      $2,836
 Real Estate:
   1-4 Family............       674        3.8           432        3.6           381        5.7          529
   Commercial real
     estate..............     8,363       46.1         4,602       46.5         3,513       46.7        2,099
   Construction..........     2,006       15.4         1,186       15.4           603       12.8          494
 Consumer and Credit
   Cards.................       150        0.6           183        1.1           226        2.1          229
 Other...................        32        0.3            15        0.4           119        2.0           79
 Unallocated.............     3,935         --         3,539         --         1,516         --          426
                            -------      -----       -------      -----       -------      -----       ------
Total Reserves...........   $23,002      100.0%      $15,813      100.0%      $10,657      100.0%      $6,692
                            =======      =====       =======      =====       =======      =====       ======

<CAPTION>
                                     AT DECEMBER 31,
                           -----------------------------------
                              1997               1996
                           ----------   ----------------------
                           % OF LOANS               % OF LOANS
                            IN EACH     ALLOWANCE    IN EACH
                            CATEGORY     AMOUNT      CATEGORY
                           ----------   ---------   ----------
                                 (DOLLARS IN THOUSANDS)
<S>                        <C>          <C>         <C>
BALANCE AT END OF PERIOD
 APPLICABLE TO
 Commercial and
   Agricultural..........     33.7%      $1,452        38.3%
 Real Estate:
   1-4 Family............      9.6          447        10.3
   Commercial real
     estate..............     42.9        1,611        39.6
   Construction..........      8.6          228         6.9
 Consumer and Credit
   Cards.................      3.0          114         3.4
 Other...................      2.2           51         1.5
 Unallocated.............       --          155          --
                             -----       ------       -----
Total Reserves...........    100.0%      $4,058       100.0%
                             =====       ======       =====
</TABLE>

     CIB Marine performs a comprehensive analysis of the allowance on a
quarterly basis. Because the allowance is based upon estimates of probable
losses inherent in the loan and lease portfolio, the amount actually observed
for these losses can vary significantly from the estimated amount. Although CIB
Marine's analysis includes factors that are intended to reduce the differences
between estimated and actual losses, there can be no assurance that future
losses will not exceed estimated amounts or that additional provisions will not
be required in the future. In addition, CIB Marine's determination as to the
adequacy of the allowance is subject to review by the applicable federal and
state banking agencies as part of their examination process, which could result
in an additional provision to the allowance.

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

     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
property. Loans are placed on nonaccrual status when CIB Marine determines that
it is probable that principal and interest amounts will not be collected
according to the terms of the loan documentation. A loan is classified as
restructured when the interest rate is reduced or the term is extended beyond
the original maturity date because of the inability of the borrower to service
the loan under the original terms. Foreclosed property represents properties
acquired by CIB Marine as a result of loan defaults by customers.

                                        36
<PAGE>   38

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

<TABLE>
<CAPTION>
                                                          AS OF DECEMBER 31,
                                       --------------------------------------------------------
                                          2000         1999        1998       1997       1996
                                          ----         ----        ----       ----       ----
                                                        (DOLLARS IN THOUSANDS)
<S>                                    <C>          <C>          <C>        <C>        <C>
NONPERFORMING ASSETS
       NONACCRUAL LOANS
       Commercial and Agricultural...  $    1,357   $    1,298   $    718   $  1,264   $  2,027
       REAL ESTATE
          1-4 family.................         390          566        110        335        252
          Commercial.................      12,682          798      2,213        210        115
          Construction...............          --          180        281         --         --
       Consumer......................          87          161         75         32          1
       Credit card...................          --           --         --         --         --
       Other.........................          --           --        611         --         --
                                       ----------   ----------   --------   --------   --------
                 Total nonaccrual
                    loans............      14,516        3,003      4,008      1,841      2,395
                                       ----------   ----------   --------   --------   --------
       Foreclosed property...........       1,497        1,099         --        281        114
       Restructured loans............          27          268         --         --         --
                                       ----------   ----------   --------   --------   --------
          Total nonperforming
            assets...................  $   16,040   $    4,370   $  4,008   $  2,122   $  2,509
                                       ==========   ==========   ========   ========   ========
LOANS 90 DAYS OR MORE PAST DUE
AND STILL ACCRUING
       Commercial and Agricultural...  $      235   $    1,079   $  3,440   $  1,203   $    895
       Real estate
          1-4 family.................         737          126        250         19        195
          Commercial.................          20        1,421        787         34        300
          Construction...............          --          850        992         --          2
       Consumer......................           2           16         87         93         --
       Credit card...................           9            9         25         --          3
       Other.........................          --           13          3         --         34
                                       ----------   ----------   --------   --------   --------
          Total 90 days or more past
            due and still accruing...  $    1,003   $    3,514   $  5,584   $  1,349   $  1,429
                                       ==========   ==========   ========   ========   ========
Allowance for loan loss..............  $   23,002   $   15,813   $ 10,657   $  6,692   $  4,058
Loans at end of period, including
  held for sale......................   1,778,275    1,389,979    924,611    616,228    408,024
Average loans, including held for
  sale...............................   1,597,177    1,106,742    746,319    492,847    324,600
RATIOS
Ratio of allowance to loans..........        1.29%        1.14%      1.15%      1.09%      0.99%
Ratio of net loans charged-off to
  average loans......................        0.07         0.09       0.10       0.31       0.14
Ratio of recoveries to loans
  charged-off........................       12.15        12.48      17.24      18.07       4.52
Nonaccrual loans as a percent of
  loans..............................        0.82         0.22       0.43       0.30       0.59
Nonperforming assets as a percent of
  total assets.......................        0.68         0.24       0.34       0.26       0.46
Foreclosed properties as a percent of
  loans..............................        0.08         0.08         --       0.05       0.03
Allowance as a percent of nonaccrual
  loans..............................      158.46       526.57     265.89     363.50     169.44
Allowance as a percent of non
  performing assets..................      143.40       361.85     265.89     315.36     161.74
Nonaccrual loans and 90+ days past
  due loans as a percent of loans....        0.87         0.47       1.04       0.52       0.94
Nonaccrual loans and 90+ days past
  due loans as a percent of total
  assets.............................        0.66         0.36       0.81       0.40       0.69
Nonperforming assets and 90+ days
  past due loans as a percent of
  total assets.......................        0.72         0.43       0.81       0.43       0.72
Allowance as a percent of
  nonperforming assets and 90+ days
  past due loans.....................      134.96       200.57     111.10     192.80     103.05
</TABLE>

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

(1) Nonaccrual loans at December 31, 2000, include $876 of restructured loans.

                                        37
<PAGE>   39

     Total nonaccrual loans at December 31, 2000 increased $11.5 million, or
383.4%, to $14.5 million from $3.0 million at December 31, 1999. Total
nonaccrual loans decreased $1.0 million, or 25.1%, during 1999 from $4.0 million
at December 31, 1998. The ratio of nonaccrual loans to total loans was 0.82%,
0.22%, and 0.43% at December 31, 2000, 1999 and 1998, respectively.

     At December 31, 2000, $10.4 million, or 71.7%, of nonaccrual loans
consisted of the following two lending relationships:

        (1) Commercial real estate loans to a related group of borrowers with an
            aggregate outstanding balance of $7.7 million as of December 31,
            2000. These loans were transferred to nonaccrual in December 2000
            based on concerns by CIB management on how they were being handled
            in respect to project cost and timing overruns. Management continues
            to work with the principals of the loans to restructure.

        (2) Commercial real estate loan to an entity with an outstanding balance
            of $2.7 million was transferred into nonaccrual loans during the
            fourth quarter of 2000. CIB Marine is working with this customer to
            restructure the loan or obtain the property through a voluntary
            turnover. CIB Marine believes that the value of this property
            securing the obligation approximates all amounts owed.

     A commercial real estate loan to an entity with an outstanding balance of
$2.6 million was transferred into nonaccrual loans during the first quarter of
2001. CIB Marine had worked with the borrower, since construction of the
property was completed in the second quarter of 2000, to stabilize the property.
However, delinquencies persisted and the principals refused to inject additional
capital. While the value of the property securing the obligation approximates
the amount owed, CIB Marine cannot provide assurances that the value will be
maintained or that there will not be losses with respect to this relationship.

     The interest income on the nonaccrual loans that would have been recorded
in 2000 if the loans had been current in accordance with their original terms
and had been outstanding throughout 2000, or since origination if originated
during 2000, was $0.6 million. The amount of interest income on these loans
included in net income in 2000 was $0.04 million. The interest income on the
nonaccrual loans that would have been recorded in 1999 if the loans had been
current in accordance with their original terms and had been outstanding
throughout 1999, or since origination if originated during 1999, was $0.3
million. The amount of interest income on these loans included in net income in
1999 was $0.1 million.

     Foreclosed properties were $1.5 million at December 31, 2000, and consisted
of two commercial properties acquired through a voluntary transfer of assets by
a borrower. CIB Marine had $1.1 million in foreclosed property at December 31,
1999 which was sold in the second quarter of 2000 for a gain of $0.2 million.
CIB Marine did not have any foreclosed property at December 31, 1998.

     Loans 90 days or more past due and still accruing 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 $1.0 million in loans that were at least 90 days past
due and still accruing at December 31, 2000, and $3.5 million at December 31,
1999. Accrued interest on loans 90 days past due or more and still accruing as
of December 31, 2000, and 1999 was $0.04 million and $0.2 million respectively.

     The ratio of nonperforming assets and loans 90 days or more past due and
still accruing to total assets was 0.72% at December 31, 2000, as compared to
0.43% and 0.81% at December 31, 1999 and 1998, respectively.

OTHER ASSETS

     Other assets increased 198.4% to $12.8 million at December 31, 2000, from
$4.3 million at December 31, 1999. The majority of the increase was due to the
purchase of the business and certain assets and liabilities of a manufacturer of
payment processing systems. On October 16, 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. The business was acquired from a borrower, who was in

                                        38
<PAGE>   40

default of its obligations, in lieu of foreclosure or other legal action. At the
time of the acquisition, the loan principal plus accrued interest, late fees and
various collection costs were in the aggregate amount of $6.5 million. The
principal business of this manufacturer, which operates under the name Maverick
International, is the design, development, assembly, distribution and servicing
of magnetic ink character recognition check encoders and related embedded
software to small and medium-sized financial institutions, as well as to large
retailers and independent remittance processors. This business is classified as
a held for sale asset and included in Other Assets on CIB Marine's Consolidated
Balance Sheets at $6.7 million. This amount represents the approximate fair
value as determined by an independent appraisal of the business, less estimated
costs to sell, and includes the net income recorded under the equity method from
October 16, 2000 through December 31, 2000, which amounted to $0.2 million.
Other Noninterest Income on CIB Marine's Statements of Income. The business has
generated profits in each of the prior three years and CIB Marine believes that
the business will continue to generate profits. CIB Marine cannot, however,
provide assurances that these profits will continue or that there will not be
losses with respect to this business in the future. 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 is required under bank regulations to develop a plan to dispose of this
asset within a reasonable time period unless otherwise permitted by the
regulators.

     Other assets at December 31, 2000, include a $2.7 million investment in
three limited partnerships. In September 1999, CIB Marine purchased limited
partnership interests in three private investment funds from one of its largest
borrowers. These funds are currently invested in both public and private equity
securities. Two of the funds are focused on the environmental and waste-related
industries and the other fund is focused on the health care, pharmaceutical,
media and communications industries. CIB Marine engaged in this transaction
primarily to provide this borrower with cash to meet current obligations to CIB
Marine and other borrowers. Additional information about this borrower and its
loans from CIB Marine are discussed in "Loans-Credit Concentrations."

     The amount of this investment reflects the adjusted purchase price of $2.3
million and an additional capital call of $0.4 million. These partnership
investments are included in other assets and are carried at approximately the
lower of cost or estimated fair market value. CIB Marine may also be required to
invest up to an additional $2.0 million over the next 2 1/4 years pursuant to
further capital call commitments. In March 2001, CIB Marine received a
distribution of approximately $175,000 related to one of these partnerships.

     There is currently no public market for the limited partnership interests
in these private investment funds, and it is unlikely that such a market will
develop. Because of its illiquidity and the effect of market volatility on
equity investments such as this, this investment involves a higher risk of loss
than other securities in CIB Marine's portfolio. In order to reduce the risk in
this investment, CIB Marine negotiated a put option to require the borrower to
repurchase the limited partnership interests at any time for the greater of the
fair market value of the limited partnership interests as of the date that the
put option is exercised or the amount originally paid by CIB Marine to the
borrower (as adjusted for additional investments by CIB Marine in the funds and
distributions by the funds to CIB Marine). The value of this put option,
however, is dependent on the future financial ability of the borrower to perform
as discussed above in "Loans -- Credit Concentrations." CIB Marine believes that
this investment will provide an adequate return, however it cannot provide
assurances that this return will be adequate or that there will not be future
losses with respect to the limited partnership interests.

     Also contributing to the increase in other assets were capitalized
underwriting fees incurred with the issuance of $25.0 million in guaranteed
trust preferred securities. Additional information regarding these transactions
is discussed in "Borrowings".

     FUNDING STRATEGY. CIB Marine seeks to meet its short and long-term funding
needs by increasing core deposits, which are the primary funding source of its
subsidiary banks. Management primarily seeks to increase core deposits by
developing banking relationships with its commercial borrowers and residents in
the communities where its banking offices are located. In addition, CIB Marine
also seeks to increase its core

                                        39
<PAGE>   41

deposits through other activities such as marketing, hiring personnel
experienced in deposit gathering activities, establishing de novo branches and
purchasing existing branches from other financial institutions.

     CIB Marine also makes use of noncore deposit funding sources in a manner
consistent with its liquidity, funding and market risk policies. Noncore deposit
funding sources are used to meet short-term funding needs and/or when the
pricing and continued availability of these sources presents lower funding cost
opportunities. Short-term funding sources utilized by CIB Marine include federal
funds purchased, sales of marketable loans, securities sold under agreements to
repurchase, Eurodollar deposits, short-term borrowings from the Federal Home
Loan Bank of Chicago, and short-term brokered and negotiable time deposits. CIB
Marine has also established borrowing lines with the Federal Reserve Bank of
Chicago and with an unaffiliated bank. 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 of Chicago.

     DEPOSITS. CIB Marine has experienced significant growth in deposits.
Average total deposits increased 42.1% to $1.8 billion in 2000, as compared to
$1.3 billion in 1999. Average deposits increased 52.5% in 1999 from $827.7
million in 1998. The ratio of average deposits to average earning assets was
87.0% in 2000, 89.6% in 1999, and 87.1% in 1998.

     The following table sets forth the average amount of, and average rate paid
on, deposit categories for the periods indicated.
<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                ---------------------------------------------------------------------
                                              2000                                1999
                                ---------------------------------   ---------------------------------
                                 AVERAGE     % OF TOTAL   AVERAGE    AVERAGE     % OF TOTAL   AVERAGE
                                 BALANCE      DEPOSITS     RATE      BALANCE      DEPOSITS     RATE
                                 -------     ----------   -------    -------     ----------   -------
                                                       (DOLLARS IN THOUSANDS)
<S>                             <C>          <C>          <C>       <C>          <C>          <C>
Interest-bearing demand.......  $   45,588       2.56%     2.68%    $   39,820       3.15%     2.52%
Money market..................     179,963      10.11      5.54        132,596      10.51      4.69
Other savings.................      35,838       2.01      3.14         33,751       2.68      3.20
Time deposits.................   1,410,741      79.22      6.13        970,556      76.89      5.28
                                ----------     ------      ----     ----------     ------      ----
Total Interest Bearing
  Deposits....................   1,672,130      93.90%     5.91      1,176,723      93.23%     5.06
                                ----------     ------      ----     ----------     ------      ----
Noninterest bearing...........     108,572       6.10        --         85,468       6.77        --
                                ----------     ------      ----     ----------     ------      ----
Total Deposits................  $1,780,702     100.00%     5.55%    $1,262,191     100.00%     4.71%
                                ==========     ======      ====     ==========     ======      ====

<CAPTION>
                                    YEARS ENDED DECEMBER 31,
                                --------------------------------
                                              1998
                                --------------------------------
                                 AVERAGE    % OF TOTAL   AVERAGE
                                 BALANCE     DEPOSITS     RATE
                                 -------    ----------   -------
                                     (DOLLARS IN THOUSANDS)
<S>                             <C>         <C>          <C>
Interest-bearing demand.......  $ 31,550        3.81%     2.72%
Money market..................    62,746        7.58      4.58
Other savings.................    27,865        3.37      2.81
Time deposits.................   642,900       77.67      5.58
                                --------      ------      ----
Total Interest Bearing
  Deposits....................   765,061       92.43%     5.34%
                                --------      ------      ----
Noninterest bearing...........    62,644        7.57        --
                                --------      ------      ----
Total Deposits................  $827,705      100.00%     4.93%
                                ========      ======      ====
</TABLE>

     Average interest-bearing deposits as a percentage of average total deposits
were 93.9% in 2000, 93.2% in 1999, and 92.4% in 1998. Time deposits represent
the largest component of interest-bearing deposit liabilities. The percentage of
average time deposits to average total interest-bearing deposits was 84.4% in
2000, 82.5% in 1999, and 84.0% in 1998. These percentages reflect CIB Marine's
significant reliance on time deposits as a source of funding. The level of other
types of deposits also increased in 2000. Average noninterest-bearing demand
deposits increased $23.1 million, or 27.0%, in 2000, as compared to 1999, and
average money market accounts increased $47.4 million, or 35.7%. In total,
average deposits other than time deposits increased $78.3 million, or 26.9%,
during 2000, as compared to 1999.

     Branch acquisitions, net of sales, resulted in $131.8 million in net
deposit additions in 1999, including $41.8 million in savings deposits. Total
time deposits of $100,000 or more were $519.0 million, or 33.6%, of total time
deposits at December 31, 2000, and $415.9 million, or 35.4 %, at December 31,
1999.

     Brokered time deposits, including time deposits of $100,000 or over, were
$68.3 million, or 3.5% of total deposits at December 31, 2000, and $80.7
million, or 5.3% of total deposits at December 31, 1999. CIB Marine issues
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.

     The following table provides information on the maturity distribution of
time deposits of $100,000 and over at December 31, 2000.

                                        40
<PAGE>   42

<TABLE>
<CAPTION>
                                                                BALANCES AT
                                                                DECEMBER 31,
                                                                    2000
                                                                ------------
                                                                (DOLLARS IN
                                                                 THOUSANDS)
<S>                                                            <C>
MATURITY
3 months or less............................................      $231,472
Over 3 through 6 months.....................................       117,423
Over 6 through 12 months....................................       121,691
Over 12 months..............................................        48,445
                                                                  --------
Total.......................................................      $519,031
                                                                  ========
</TABLE>

BORROWINGS

     CIB Marine also uses various types of borrowings to meet liquidity needs
and to fund asset growth. These borrowings include:

     - federal funds purchased from correspondent banks;

     - securities sold under agreements to repurchase;

     - Federal Home Loan Bank advances;

     - loans from other commercial banks

     - treasury, tax and loan note;

     - federal Reserve discount window;

     - guaranteed trust preferred securities; and

     - Commercial paper

     The following table sets forth information regarding selected categories of
borrowings as of the dates indicated.

<TABLE>
<CAPTION>
                                                             AS OF DECEMBER 31,
                                       --------------------------------------------------------------
                                              2000                  1999                  1998
                                       -------------------   -------------------   ------------------
                                       BALANCE    AVG RATE   BALANCE    AVG RATE   BALANCE   AVG RATE
                                       -------    --------   -------    --------   -------   --------
                                                           (DOLLARS IN THOUSANDS)
<S>                                    <C>        <C>        <C>        <C>        <C>       <C>
SHORT-TERM BORROWINGS
Fed funds purchased..................  $107,974     6.13%    $ 29,575     5.21%    $   100     4.50%
Securities sold under repurchase
  agreements.........................    19,899     6.44       27,129     5.49       2,871     4.94
Treasury, tax and loan note..........       523     6.29          405     4.01         283     4.32
Federal Home Loan Bank -- short
  term...............................        --       --       26,400     5.16          --       --
Commercial paper.....................     6,453     6.81           --       --          --       --
Other borrowings -- short term.......    11,590     8.28       29,710     8.48          --       --
                                       --------     ----     --------     ----     -------     ----
     Total Short-Term Borrowings.....   146,439     6.37%     113,219     6.12%      3,254     4.87%
                                       --------     ----     --------     ----     -------     ----
LONG TERM BORROWINGS
Federal Home Loan Bank...............    33,223     6.46        9,750     4.98      20,000     5.01
Guaranteed trust preferred
  securities.........................    25,000    10.71           --       --          --       --
                                       --------     ----     --------     ----     -------     ----
     Total Long Term Borrowings......    58,223     8.28%       9,750     4.98%     20,000     5.01%
                                       --------     ----     --------     ----     -------     ----
     TOTAL BORROWINGS................  $204,662     6.92%    $122,969     6.03%    $23,254     4.99%
                                       ========     ====     ========     ====     =======     ====
</TABLE>

     Total borrowings were $204.7 million, $123.0 million, and $23.3 million at
December 31, 2000, 1999 and 1998, respectively, representing 9.0%, 7.0%, and
2.0% of earning assets. Fed Funds purchased accounted for $108.0 million, or
52.8%, of total borrowings at December 31, 2000, as compared to $29.5 million,
or 24.1%,

                                        41
<PAGE>   43

and $0.1 million, or 0.4%, of total borrowings at December 31, 1999 and 1998,
respectively. Repurchase agreements accounted for $19.9 million, or 9.7%, of
total borrowings at December 31, 2000, as compared to $27.1 million, or 22.1%,
of total borrowings at December 31, 1999, and $2.9 million, or 12.3%, of total
borrowings at December 31, 1998. Federal Home Loan Bank advances accounted for
$33.2 million, or 16.2%, of total borrowings at December 31, 2000, as compared
to $36.2 million, or 29.4%, of total borrowings at December 31, 1999, and $20.0
million, or 29.4%, at December 31, 1998. Guaranteed trust preferred securities
accounted for $25.0 million, or 12.2%, of total borrowings at December 31, 2000.
A description of these securities is included in "Guaranteed Trust Preferred
Securities." There were no guaranteed trust preferred securities outstanding at
December 31, 1999 or 1998. CIB Marine increased its utilization of short and
long-term borrowings during 2000 in order to meet its funding needs or when the
terms on these products were more favorable than other types of funding.

     During the first quarter of 2000, CIB Marine assumed a $25.0 million
Federal Home Loan Bank of Chicago advance due June 30, 2008, with an effective
rate, including premium, of 7.07%. The $1.7 million premium is recorded as a
contra liability against the debt and is being amortized over the life of the
borrowing. CIB Marine also entered into an interest rate swap with the Federal
Home Loan Bank of Chicago with a $25.0 million notional value and maturing on
June 30, 2008. CIB Marine pays a variable rate of interest at the one month
LIBOR rate and earns a fixed rate of interest at 7.08%. CIB Marine believes the
swap transaction will effectively reduce interest rate risk by converting the
fixed rate on the advance to a variable rate similar to the loans funded with
the proceeds of these borrowings.

     CIB Marine has a $30.0 million secured revolving line of credit with a
non-affiliated commercial bank. As of December 31, 2000 and 1999, there were
outstanding balances on this line of credit of $11.6 million and $29.7 million,
respectively. There were no outstanding revolving line of credit balances at
December 31, 1998. These funds were used to provide capital support for the
growth of the subsidiary banks, acquire branches and for working capital.

GUARANTEED TRUST PREFERRED SECURITIES

     In March and September 2000, CIB Marine issued $10.0 million and $15.0
million, respectively, in guaranteed trust preferred securities through wholly
owned special-purpose trusts. Though presented in the balance sheet as debt,
these securities qualify as Tier I equity capital for regulatory capital
purposes. The securities are classified in the liability section of the
Consolidated Balance Sheets, and the distributions on the securities are
classified as interest expense in the Consolidated Statements of Income. Such
distributions are cumulative and are payable to the security holders
semi-annually at rates of 10.875% and 10.60% per annum, respectively. CIB Marine
fully and unconditionally guarantees the obligations of the trusts on a
subordinated basis.

     The securities from the March issuance are mandatorily redeemable upon
their maturity on March 8, 2030, and are callable beginning March 8, 2010, at a
premium, which declines ratably to par by 2020. The securities from the
September issuance are mandatorily redeemable upon their maturity on September
7, 2030, and are callable beginning September 7, 2010 at a premium, which
declines ratably to par by 2020. Issuance costs of $0.3 million and $0.5 million
related to the securities issued in March and September, respectively, are
classified as other assets on the balance sheets and are being amortized over
the expected life of the securities as an adjustment to interest expense. CIB
Marine used the net proceeds of $9.7 million and $14.6 million to reduce its
debt at the non-affiliated commercial bank and for other corporate purposes.

     In February 2001, CIB Marine issued an additional $15.0 million in
guaranteed trust preferred securities through a wholly owned special-purpose
trust. Distributions are cumulative and are payable to the security holders
semi-annually at 10.20% per annum. CIB Marine fully and unconditionally
guarantees the obligations of the trust on a subordinated basis. The securities
are mandatorily redeemable upon their maturity on February 22, 2031, and are
callable beginning February 22, 2011, at a premium, which declines ratably to
par by February 22, 2021. Issuance costs of $0.5 million were incurred in
connection with these securities. CIB Marine used the net proceeds of $14.5
million to reduce its debt with the non-affiliated commercial bank and for other
corporate purposes.

                                        42
<PAGE>   44

NEW ACCOUNTING PRONOUNCEMENTS

     Refer to Note 1 -- Summary of Significant Accounting Policies.

LIQUIDITY

     The objective of liquidity risk management is to ensure that CIB Marine has
adequate funds available to fund various commitments, including those from loan
demand, deposit withdrawals and other obligations and opportunities 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 and its liquidity position. CIB Marine's sources of funding
and liquidity include both asset and liability components. CIB Marine's funding
requirements are primarily met by cash inflows of funds from deposits,
borrowings and loan repayments.

     The following discussion should be read in conjunction with the statements
of cash flows for 2000, 1999 and 1998 contained in Item 8 of this Form 10-K.

     Net cash provided by operating activities was $6.8 million, $22.6 million
and $7.3 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in net cash provided by operating activities from
1999 to 2000 was primarily due to increases in loans held for sale and other
assets. The increase in net cash provided by operating activities in 1999
compared to 1998 was primarily due to higher net income.

     Net cash used in investing activities was $499.7 million, $513.3 million,
and $360.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in cash used for investment activities in 2000
compared to 1999 was due primarily to the change in the net increase in loans
which was $382.5 million in 2000 and $483.4 million in 1999. The increase in
cash used for investing activities in 1999 compared to 1998 was primarily due to
the net increase in loans which was $483.4 million in 1999 and $301.9 million in
1998. The net increase in loans accounted for 76.5%, 94.2% and 83.6% of net cash
used for investing activities for 2000, 1999 and 1998, respectively. Securities
purchases represented the second largest amount of cash used in investing
activities for each period. Securities purchases, net of sales and maturities,
were $121.2 million, $151.9 million and $54.3 million, accounting for 24.2%,
29.6%, and 15.1%, respectively, of net cash used for investing activities in the
three years ended December 31, 2000, 1999 and 1998. In 1999 the purchase of
branch assets and deposits reduced net cash used in investing activities by
$124.4 million.

     Net cash provided by financing activities was $511.5 million, $492.7
million and $365.8 million for the years ended December 31, 2000, 1999 and 1998,
respectively. Deposits, which include demand, money market and savings accounts,
and time deposits, represented the largest source of net cash provided by
financing activities and accounted for 82.7%, 78.4% and 89.7% for each of the
respective years. Deposits, ignoring the effects of branch acquisitions and
sales, increased by $422.9 million in 2000, $386.1 million in 1999, and $328.2
million in 1998.

     CIB Marine was able to meet its liquidity needs in 2000 and expects to meet
these needs in 2001.

CAPITAL

     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.

                                        43
<PAGE>   45

     The risk-based capital information of CIB Marine at December 31, 2000, 1999
and 1998 are contained in the following table. The capital levels of CIB Marine
and the subsidiary banks were in excess of the required regulatory minimums at
the dates indicated. CIB Marine intends to maintain its capital level and the
capital levels of its subsidiary banks at or above levels sufficient to support
future growth and maintain sufficiently high lending limits to permit the banks
to meet the credit needs of medium-sized commercial borrowers. The risk-based
capital ratios of CIB Marine and its subsidiary banks for December 31, 2000 and
1999, are included in Note 13 to CIB Marine's December 31, 2000, audited
financial statements contained in Item 8 of this Form 10-K.

<TABLE>
<CAPTION>
                                                                     AT DECEMBER 31,
                                                           ------------------------------------
                                                              2000         1999         1998
                                                              ----         ----         ----
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                        <C>          <C>          <C>
RISK WEIGHTED ASSETS (RWA)...............................  $2,135,325   $1,618,852   $1,028,322
                                                           ==========   ==========   ==========
AVERAGE ASSETS(1)........................................  $2,306,227   $1,667,517   $1,110,753
                                                           ==========   ==========   ==========
CAPITAL COMPONENTS
  Stockholders' equity...................................  $  194,596   $  161,335   $  144,096
  Guaranteed trust preferred securities..................      25,000           --           --
  Less: disallowed intangibles...........................     (12,746)     (14,171)      (3,727)
  Add/less: Unrealized loss/(gain) on securities.........      (2,245)       2,034         (775)
                                                           ----------   ----------   ----------
TIER 1 CAPITAL...........................................  $  204,605   $  149,198   $  139,594
  Allowable allowance for loan loss......................      23,002       15,813       10,657
                                                           ----------   ----------   ----------
TOTAL RISK BASED CAPITAL.................................  $  227,607   $  165,011   $  150,251
                                                           ==========   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                  DECEMBER 31, 2000
                                                        --------------------------------------
                                                                                FOR CAPITAL
                                                             ACTUAL          ADEQUACY PURPOSES
                                                        -----------------    -----------------
                                                         AMOUNT     RATIO     AMOUNT     RATIO
                                                         ------     -----     ------     -----
<S>                                                     <C>         <C>      <C>         <C>
Total Capital (to RWA)..............................    $227,607    10.66%   $170,826    8.00%
Tier 1 Capital (to RWA).............................     204,605     9.58%     85,413    4.00%
Tier 1 Leverage (to avg. assets)....................     204,605     8.87%     92,249    4.00%
</TABLE>

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

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

     CIB Marine's primary sources of capital have been the retention of net
income, the issuance of additional common stock and, more recently, through the
issuance of guaranteed trust preferred securities. The issuance of common stock,
through private placement offerings, provided $7.6 million, $5.8 million and
$32.6 million in additional capital in 2000, 1999 and 1998, respectively.
Retained earnings provided $21.0 million, $13.5 million and $8.7 million of
additional capital in 2000, 1999 and 1998, respectively. In January 2001, CIB
Marine raised $0.5 million in capital pursuant to another private placement
offering of its common stock.

     During 2000, CIB Marine issued $25.0 million in guaranteed trust preferred
securities. In February 2001, CIB Marine issued an additional $15.0 million in
guaranteed trust preferred securities. A discussion of these securities is
included in "Guaranteed Trust Preferred Securities".

IMPACT OF INFLATION AND CHANGING PRICES

     CIB Marine's consolidated financial statements and notes contained in Item
8 of this Form 10-K have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the changes
in the relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the increased cost of CIB Marine's operations.
Unlike most industrial companies, nearly all of CIB Marine's assets and
liabilities are monetary in nature. As a result, interest rates and changes
therein, have a greater

                                        44
<PAGE>   46

impact on CIB Marine's performance than do the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     CIB Marine's primary market risk exposure is from interest rate risk. Net
interest income is vulnerable to changes in U.S. prime interest rates. Other
market risks, such as commodity price risk, foreign currency exchange rate risk
and equity price risk, do not normally arise in the course of CIB Marine's
business.

     CIB Marine's Board of Directors has overall responsibility for its interest
rate risk management policies. CIB Marine sets policy limits for interest rate
risk to be assumed in the normal course of business. CIB Marine's market risk
policy has the general objective of maintaining a low level of earnings
volatility due to interest rate risk and to protect the value of CIB Marine from
the impact changes in interest rates have on net interest income. CIB Marine
uses gap analysis and earnings simulations to measure interest rate risk. CIB
Marine's Asset-Liability Management Committee monitors, at least quarterly, the
interest rate risk measurements for compliance with policy limits.

     If the derived interest rate risk measurements are outside of the policy
limits, management may implement any of a variety of strategies to reduce the
risk. CIB Marine strives to use the most effective instrument for implementing
its interest rate risk management strategies, considering the costs, liquidity
impact and capital requirements of the various alternatives. The implementation
strategies usually involve altering the market risk characteristics of new
funding liabilities, and in addition may include the use of derivative
instruments and the altering of the market risk characteristics of groups of
interest rate sensitive assets (e.g., through repositioning of marketable
securities).

     The gap analysis as of December 31, 2000, is shown in the following table.
The table shows interest rate sensitive assets and liabilities and the
difference between them within each time interval. In this analysis the
repricing interest rate sensitivity position is balanced when an equal amount of
interest-earning assets and interest-bearing liabilities reprice during a given
time interval. Excessive interest rate sensitive assets or liabilities repricing
in a given time period results in the interest sensitivity gap (gap) shown in
the table. A positive or asset-sensitive gap indicates that more
interest-earning assets than interest-bearing liabilities will

                                        45
<PAGE>   47

reprice in a given time period, while a negative or liability-sensitive gap
indicates that more interest-bearing liabilities than interest earning-assets
will reprice in a given time period.

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 2000
                                ---------------------------------------------------------------------
                                   0-3          4-6        7-12        2-5       OVER 5
                                  MONTHS      MONTHS      MONTHS      YEARS      YEARS       TOTAL
                                  ------      ------      ------      -----      ------      -----
                                                       (DOLLARS IN THOUSANDS)
<S>                             <C>          <C>         <C>         <C>        <C>        <C>
DECEMBER 31, 2000
Interest-earning assets:
  Loans.......................  $1,088,782   $  98,208   $  71,191   $462,030   $ 58,064   $1,778,275
  Securities..................      95,189      18,478      34,407    297,594     46,574      492,242
  Federal funds sold..........      16,700          --          --         --         --       16,700
                                ----------   ---------   ---------   --------   --------   ----------
TOTAL INTEREST-EARNING
  ASSETS......................   1,200,671     116,686     105,598    759,624    104,638    2,287,217
                                ----------   ---------   ---------   --------   --------   ----------
Interest-bearing liabilities:
  Time deposits...............     583,081     340,513     459,191    159,900         13    1,542,698
  Savings and interest-bearing
     demand deposits..........     273,921          --          --         --         --      273,921
  Short-term borrowings.......     146,071          --         368         --         --      146,439
  Long-term borrowings........          --          --          --         --     33,223       33,223
  Impact of interest rate
     swap.....................      25,000          --          --         --    (25,000)          --
  Guaranteed trust preferred
     securities...............          --          --          --         --     25,000       25,000
                                ----------   ---------   ---------   --------   --------   ----------
TOTAL INTEREST-BEARING
  LIABILITIES.................  $1,028,073   $ 340,513   $ 459,559   $159,900   $ 33,236   $2,021,281
                                ----------   ---------   ---------   --------   --------   ----------
Interest sensitivity GAP (by
  period).....................     172,598    (223,827)   (353,961)   599,724     71,402      265,936
Interest sensitivity GAP
  (cumulative)................     172,598     (51,229)   (405,190)   194,534    265,936      265,936
Cumulative Gap as a % of Total
  Assets......................        7.29%      (2.18)%    (17.11)%     8.22%     11.23%
</TABLE>

     The financial instruments are shown to reprice at the earlier of their
maturity date or their next contractual reprice date (e.g., a variable rate
loan's next rate reset date). In the gap analysis, nonmaturing interest-earning
assets and interest-bearing liabilities are shown to reprice immediately and the
Collateralized Mortgage Obligations and the Real Estate Mortgage Investment
Conduits that are a part of the investment securities are shown to reprice in
those periods in which they are expected to repay.

     The table indicates that CIB Marine has a negative gap at one year and a
positive gap in time periods exceeding one year. With a positive gap, an
increase in interest rates will generally have a positive effect on the net
interest income, and a decrease in interest rates will generally have a negative
effect on net interest income. With a negative gap, a decrease in interest rates
will generally have a positive effect on the net interest income, and an
increase in interest rates will generally have a negative effect on net interest
income.

     While this repricing interest rate sensitivity analysis is a widely used
measure of interest rate risk and may be used as an indication of interest
margin direction, it does not fully reflect the effects given to interest rate
risks other than reprice risk, such as option, basis and yield curve risks.

     For these reasons, CIB Marine also performs interest rate sensitivity
analyses using earnings simulation models. These analyses express the potential
gain (loss) in net interest income from the financial instruments due to changes
in interest rates as a percentage of the potential net interest income from the
financial instruments of CIB Marine if interest rates did not change. CIB Marine
derives results for one or more selected hypothetical changes in interest rates
over a selected period of time, usually one year.

                                        46
<PAGE>   48

     The following table illustrates the expected percentage change in net
interest income over a one year period due to an immediate change in short term
U.S. prime rates of interest as of December 31, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                   BASIS POINT CHANGES
                                                           -----------------------------------
                                                           +200      +100      -100      -200
                                                           ----      ----      ----      ----
<S>                                                        <C>       <C>       <C>       <C>
DECEMBER 31, 2000:
Net interest income change over one year.................  (8.54)%   (4.30)%    3.54%     7.25%
DECEMBER 31, 1999:
Net interest income change over one year.................  (3.53)%   (1.77)%    1.54%     2.01%
</TABLE>

     The table illustrates, based upon the assumptions used in the model, that
net interest income of CIB Marine could change by approximately (8.54)%,
(4.30)%, 3.54% and 7.25% if interest rates were to change by +200, +100, -100
and -200 basis points, respectively. This reveals a liability sensitive rate
risk position for the one-year horizon. CIB Marine monitors the model on an
ongoing basis to ensure the assumptions most accurately reflect the current
conditions.

     The balance sheet financial instruments included in the gap and simulation
models include loans, investment securities, federal funds sold, time deposits,
saving deposits, interest-bearing demand deposits, federal funds purchased,
securities sold under agreements to repurchase, and other borrowings. Some of
the options accounted for in the simulation analysis include call options in
U.S. Government Sponsored Enterprise issued investment securities and embedded
call options in U.S. Government Sponsored Enterprise issued Collateralized
Mortgage Obligations and Real Estate Mortgage Investment Conduits. There is one
derivative financial instrument included in the gap and simulation models; a
pay-floating, receive-fixed $25.0 million notional interest rate swap. This
derivative is more fully described in "Borrowings".

     Some of the features of the financial instruments included in the model
that are not reflected fully in the quantitative market risk disclosure
information include repayment plans and embedded call options in loans, call
options in municipal bonds and U.S. Government Sponsored Enterprise issued
structured notes, early redemption and put options in time deposits and other
borrowings and interest rate caps, ceilings and floors in certain variable rate
loans and investment securities.

     The following assumptions were used in the simulation measurement
technique:

     - The balance sheet size was assumed to remain constant over the one-year
       simulation horizon;

     - All maturing assets and liabilities were invested or deposited into
       identical items with the same term to maturity; and

     - The interest rates were assumed to change by the same number of basis
       points regardless of term or type of interest rate, except that the
       timing, magnitude and direction of the change of interest rates paid on
       non-maturing savings and interest-bearing demand deposits were assumed to
       change in a way similar to that experienced in the past, which is less
       than perfectly correlated with the other interest rate changes.

     The simulations of earnings do not incorporate any management actions that
might moderate the negative consequences of certain interest rate changes.
Therefore, they may not reflect actual results but provide conservative
estimates of interest rate risk.

                                        47
<PAGE>   49

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
CIB Marine Bancshares, Inc.:

     We have audited the accompanying consolidated balance sheets of CIB Marine
Bancshares, Inc. and its subsidiaries (the "Company") as of December 31, 2000
and 1999, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CIB Marine
Bancshares, Inc. and its subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.

                                            KPMG LLP
Milwaukee, Wisconsin
February 9, 2001, except as to
the fifth paragraph of Note 4
which is as of March 6, 2001.

                                        48
<PAGE>   50

                          CIB MARINE BANCSHARES, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2000         1999
                                                                 ----         ----
                                                              (DOLLARS IN THOUSANDS,
                                                                EXCEPT SHARE DATA)
<S>                                                           <C>          <C>
ASSETS
Cash and Cash Equivalents:
  Cash and Due from Banks...................................  $   25,925   $   21,941
  Federal Funds Sold........................................      16,700        2,157
                                                              ----------   ----------
          Total Cash and Cash Equivalents...................      42,625       24,098
                                                              ----------   ----------
Loans Held for Sale.........................................      15,320        2,148
Securities:
  Available for Sale, at fair value.........................     366,137      216,460
  Held to Maturity (approximate fair value of $126,856 and
     $145,122, respectively)................................     126,104      146,890
                                                              ----------   ----------
          Total Securities..................................     492,241      363,350
                                                              ----------   ----------
Loans.......................................................   1,762,955    1,387,831
  Less: Allowance for Loan Loss.............................     (23,002)     (15,813)
                                                              ----------   ----------
Net Loans...................................................   1,739,953    1,372,018
                                                              ----------   ----------
Premises and Equipment, net.................................      21,498       21,499
Accrued Interest Receivable.................................      20,537       13,141
Deferred Income Taxes.......................................       8,301        9,018
Goodwill and Core Deposit Intangibles, net..................      12,744       14,171
Foreclosed Properties.......................................       1,497        1,099
Other Assets................................................      12,825        4,298
                                                              ----------   ----------
          Total Assets......................................  $2,367,541   $1,824,840
                                                              ==========   ==========
LIABILITIES
Deposits:
  Non Interest-Bearing Demand...............................  $  134,902   $   98,642
  Interest-Bearing Demand...................................      49,647       45,107
  Savings...................................................     224,274      209,333
  Time......................................................   1,542,698    1,175,374
                                                              ----------   ----------
          Total Deposits....................................   1,951,521    1,528,456
                                                              ----------   ----------
Short-term Borrowings.......................................     146,439      113,219
Accrued Interest Payable....................................      12,546        8,228
Accrued Income Taxes........................................         454          824
Other Liabilities...........................................       3,762        3,028
Long-term Borrowings........................................      33,223        9,750
Guaranteed Trust Preferred Securities.......................      25,000           --
                                                              ----------   ----------
          Total Liabilities.................................   2,172,945    1,663,505
                                                              ----------   ----------
STOCKHOLDERS' EQUITY
Preferred Stock, $1 Par Value; 5,000,000 Shares Authorized,
  None Issued...............................................          --           --
Common Stock, $1 Par Value; 50,000,000 Shares Authorized,
  16,918,531 and 16,469,250 Issued and Outstanding,
  respectively..............................................      16,918       16,469
Capital Surplus.............................................     134,725      126,891
Retained Earnings...........................................      40,708       20,009
Accumulated Other Comprehensive Income (Loss)...............       2,245       (2,034)
                                                              ----------   ----------
          Total Stockholders' Equity........................     194,596      161,335
                                                              ----------   ----------
          Total Liabilities and Stockholders' Equity........  $2,367,541   $1,824,840
                                                              ==========   ==========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements
                                        49
<PAGE>   51

                          CIB MARINE BANCSHARES, INC.

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                        ------------------------------------------
                                                            2000           1999           1998
                                                            ----           ----           ----
                                                        (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                     <C>            <C>            <C>
INTEREST AND DIVIDEND INCOME
Loans.................................................  $   155,044    $    98,759    $    68,070
Loans Held For Sale...................................          364            258            479
Securities:
  Taxable.............................................       23,327         14,539          9,725
  Tax-exempt..........................................        2,821          1,808          1,359
  Dividends...........................................          316            248            194
Federal Funds Sold....................................        1,036            546            701
                                                        -----------    -----------    -----------
          Total Interest and Dividend Income..........      182,908        116,158         80,528
                                                        -----------    -----------    -----------
INTEREST EXPENSE
Deposits..............................................       98,815         59,508         40,833
Short-term Borrowings.................................        7,113          1,507            407
Long-term Borrowings..................................        1,784            793            958
Guaranteed Trust Preferred Securities.................        1,351             --             --
                                                        -----------    -----------    -----------
          Total Interest Expense......................      109,063         61,808         42,198
                                                        -----------    -----------    -----------
Net Interest Income...................................       73,845         54,350         38,330
Provision for Loan Loss...............................        8,324          6,110          4,733
                                                        -----------    -----------    -----------
          Net Interest Income After Provision for Loan
            Loss......................................       65,521         48,240         33,597
                                                        -----------    -----------    -----------
NONINTEREST INCOME
Loan Fees.............................................        3,435          2,538          3,302
Deposit Service Charges...............................        2,103          1,373          1,385
Other Service Fees....................................        1,064            400            430
Trust.................................................          548            550            376
Gain on Sale of Assets................................          459            805             --
Other.................................................          561             85            111
Securities Gains, net.................................           31             --            344
                                                        -----------    -----------    -----------
          Total Noninterest Income....................        8,201          5,751          5,948
                                                        -----------    -----------    -----------
NONINTEREST EXPENSE
Salaries and Employee Benefits........................       25,530         20,433         17,114
Equipment.............................................        2,528          2,071          1,495
Occupancy and Premises................................        3,877          3,129          2,247
Professional Services.................................        1,676          1,164            632
Advertising / Marketing...............................          887            770            682
Amortization of Intangibles...........................        1,399          1,057            345
Telephone & Data Communications.......................          982            838            628
Other.................................................        4,666          3,577          3,238
                                                        -----------    -----------    -----------
          Total Noninterest Expense...................       41,545         33,039         26,381
                                                        -----------    -----------    -----------
Income Before Income Taxes............................       32,177         20,952         13,164
Income Tax Expense....................................       11,104          7,417          4,510
                                                        -----------    -----------    -----------
          Net Income..................................  $    21,073    $    13,535    $     8,654
                                                        ===========    ===========    ===========
EARNINGS PER SHARE
Basic.................................................  $      1.26    $      0.84    $      0.57
Diluted...............................................         1.24           0.83           0.57
Weighted Average Shares -- Basic......................   16,734,204     16,087,237     15,067,664
Weighted Average Shares -- Diluted....................   16,986,871     16,269,312     15,197,264
</TABLE>

          See accompanying Notes to Consolidated Financial Statements

                                        50
<PAGE>   52

                          CIB MARINE BANCSHARES, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                          COMMON STOCK                              ACCUMULATED
                                      --------------------                             OTHER
                                                     PAR     CAPITAL    RETAINED   COMPREHENSIVE   TREASURY
                                        SHARES      VALUE    SURPLUS    EARNINGS   INCOME (LOSS)    STOCK      TOTAL
                                        ------      -----    -------    --------   -------------   --------    -----
                                                         (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                   <C>          <C>       <C>        <C>        <C>             <C>        <C>
BALANCE, DECEMBER 31, 1997..........  13,610,250   $13,610   $ 86,241   $   660       $   221       $  --     $100,732
Comprehensive Income:
Net Income..........................                                      8,654                                  8,654
Other Comprehensive Income:
  Unrealized Securities Holding
    Gains Arising During the Year...                                                    1,239                    1,239
  Reclassification Adjustment for
    Gains Included in Net Income....                                                     (344)                    (344)
  Income Tax Effect.................                                                     (341)                    (341)
                                                                        -------       -------                 --------
        Total.......................                                      8,654           554                    9,208
                                                                        -------       -------                 --------
Common Stock Issuance...............   2,448,000     2,448     32,583    (2,448)                                32,583
Non-Cash Compensation...............                            1,459                                            1,459
Exercise of Stock Options...........      14,700        15         98                                              113
                                      ----------   -------   --------   -------       -------       -----     --------
BALANCE, DECEMBER 31, 1998..........  16,072,950   $16,073   $120,381   $ 6,867       $   775       $  --     $144,096
                                      ==========   =======   ========   =======       =======       =====     ========
Comprehensive Income:
Net Income..........................                                     13,535                                 13,535
Other Comprehensive Income:
  Unrealized Securities Holding
    Losses Arising During the
    Year............................                                                   (4,558)                  (4,558)
  Income Tax Effect.................                                                    1,749                    1,749
                                                                        -------       -------                 --------
        Total.......................                                     13,535        (2,809)                  10,726
                                                                        -------       -------                 --------
Common Stock Issuance...............     345,450       396      5,797      (393)                                 5,800
Non-Cash Compensation...............                              185                                              185
Exercise of Stock Options...........      50,850                  522                                              522
Purchase of Treasury Stock..........     (12,600)                                                    (206)        (206)
Sale of Treasury Stock..............      12,600                    6                                 206          212
                                      ----------   -------   --------   -------       -------       -----     --------
BALANCE, DECEMBER 31, 1999..........  16,469,250   $16,469   $126,891   $20,009       $(2,034)      $  --     $161,335
                                      ==========   =======   ========   =======       =======       =====     ========
Comprehensive Income:
Net Income..........................                                     21,073                                 21,073
Other Comprehensive Income:
  Unrealized Securities Holding
    Gains Arising During the Year...                                                    7,021                    7,021
  Reclassification Adjustment for
    Gains Included in Net Income....                                                      (31)                     (31)
  Income Tax Effect.................                                                   (2,711)                  (2,711)
                                                                        -------       -------                 --------
        Total.......................                                     21,073         4,279                   25,352
                                                                        -------       -------                 --------
Common Stock Issuance...............     428,581       428      7,595      (374)                                 7,649
Non-Cash Compensation...............                               67                                               67
Exercise of Stock Options...........      20,700        21        172                                              193
                                      ----------   -------   --------   -------       -------       -----     --------
BALANCE, DECEMBER 31, 2000..........  16,918,531   $16,918   $134,725   $40,708       $ 2,245       $  --     $194,596
                                      ==========   =======   ========   =======       =======       =====     ========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements

                                        51
<PAGE>   53

                          CIB MARINE BANCSHARES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                2000        1999        1998
                                                                ----        ----        ----
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income..................................................  $  21,073   $  13,535   $   8,654
Adjustments to Reconcile Net Income to Net Cash Provided by
  Operating Activities:
  Deferred Loan Fee Amortization............................     (6,046)     (2,232)       (640)
  Depreciation and Other Amortization.......................      3,646       3,407       2,213
  Non-Cash Compensation.....................................         67         185       1,459
  Provision for Loan Loss...................................      8,324       6,110       4,733
  Originations of Loans Held for Sale.......................    (80,770)   (113,426)   (188,397)
  Purchases of Loans Held for Sale..........................   (131,723)         --          --
  Proceeds from Sale of Loans Held for Sale.................    199,321     120,178     181,395
  Deferred Tax Benefits.....................................     (2,554)     (3,152)     (2,287)
  Gain on Sale of Branch....................................       (307)       (805)         --
  Gain on Sale of Other Assets..............................       (368)         (4)        (25)
  Gain on Sale of Securities................................        (31)         --        (344)
  Increase in Interest Receivable and Other Assets..........     (9,079)     (4,433)     (2,159)
  Increase in Interest Payable and Other Liabilities........      5,210       3,228       2,740
                                                              ---------   ---------   ---------
         Net Cash Provided by Operating Activities..........      6,763      22,591       7,342
                                                              ---------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Maturities of Securities Available for Sale...............    762,286     129,958      26,677
  Maturities of Securities Held to Maturity.................     42,134      54,235      37,422
  Purchase of Securities Available for Sale.................   (892,212)   (234,328)    (87,545)
  Purchase of Securities Held to Maturity...................    (17,169)    (96,660)    (35,452)
  Proceeds from Sales of Securities Available for Sale......     26,214          --      16,236
  Repayments of Mortgage Backed Securities Held to
    Maturity................................................      3,658       5,289       5,768
  Repayments of Mortgage Backed Securities Available for
    Sale....................................................      6,431       5,551       2,899
  Net Decrease (Increase) in other equities (including FHLB
    stock)..................................................      1,134      (1,426)     (1,632)
  Purchase of Mortgage Backed Securities Available for
    Sale....................................................    (45,912)     (6,488)    (15,835)
  Purchase of Mortgage Backed Securities Held to Maturity...     (7,715)     (8,002)     (2,888)
  Investment in Limited Partnerships........................       (436)     (2,457)         --
  Net Increase in Loans.....................................   (382,463)   (483,442)   (301,862)
  Proceeds from Sale of Foreclosed Properties...............      6,366          --         658
  Proceeds from Sale of Assets..............................      1,037       3,092          24
  Capital Expenditures......................................     (3,053)     (2,982)     (4,545)
  Purchase of Branch Assets and Deposits, net of Goodwill...         --     124,403        (795)
                                                              ---------   ---------   ---------
         Net Cash Used in Investing Activities..............   (499,700)   (513,257)   (360,870)
                                                              ---------   ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in Deposits......................................    422,852     386,072     328,203
  Proceeds from Long-term Borrowings........................     23,300          --      20,000
  Repayments of Long-term Borrowings........................         --     (10,250)     (2,150)
  Proceeds from Issuance of Guaranteed Trust Preferred
    Securities..............................................     24,250          --          --
  Proceeds from Issuance of Common Stock....................      7,649       5,800      32,584
  Proceeds from Stock Options Exercised.....................        193         522         113
  Purchase/Sale of Treasury Stock...........................         --           6          --
  Net Increase (Decrease) in Short-term Borrowings..........     33,220     110,534     (12,916)
                                                              ---------   ---------   ---------
         Net Cash Provided by Financing Activities..........    511,464     492,684     365,834
                                                              ---------   ---------   ---------
Net Increase in Cash and Cash Equivalents...................     18,527       2,018      12,306
Cash and Cash Equivalents, Beginning of Period..............     24,098      22,080       9,774
                                                              ---------   ---------   ---------
Cash and Cash Equivalents, End of Period....................  $  42,625   $  24,098   $  22,080
                                                              =========   =========   =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest..................................................  $ 104,745   $  58,505   $  40,543
  Income Taxes..............................................     13,463      10,040       6,278
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
    Transfers of Loans to Foreclosed Properties & Other
      Assets................................................     13,263       1,099         579
</TABLE>

          See accompanying Notes to Consolidated Financial Statements

                                        52
<PAGE>   54

                          CIB MARINE BANCSHARES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

     CIB Marine Bancshares, Inc. is a bank holding company owning 100% of the
common stock of its subsidiaries. References to "CIB Marine" include CIB
Marine's subsidiaries unless otherwise specified. The primary sources of revenue
are providing loans to customers who are small and middle-market businesses and
the investment in securities. CIB Marine also offers a competitive range of
deposit and other financial products to its customers. Offices and, generally,
customers are located in the central Illinois, Chicago, Milwaukee, Indianapolis,
and Omaha markets.

     The accounting and reporting policies of CIB Marine conformed to accounting
principles generally accepted in the United States of America and prevailing
practices within the banking industry.

CONSOLIDATION

     The consolidated financial statements include the accounts of CIB Marine
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. CIB Marine and its subsidiaries utilize the
accrual basis of accounting.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

     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.

RECLASSIFICATIONS

     Reclassifications have been made to certain balances as of and for the
years ended December 31, 1999 and 1998 to be consistent with classifications
adopted for 2000.

CASH FLOWS

     For purposes of presentation in the statements of cash flows, cash and cash
equivalents are defined as those amounts included in the consolidated balance
sheet captions "Cash and Due from Banks" and "Federal Funds Sold", all of which
mature within ninety days.

GOODWILL AND OTHER IDENTIFIED INTANGIBLES

     Intangible assets are amortized using the straight-line method over the
estimated remaining benefit periods which approximates 15 years for goodwill and
8 to 10 years for core deposit intangibles. CIB Marine reviews goodwill and
other intangible assets whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Adjustments, if
any, would be recorded as a loss in the statement of income in the period in
which the asset is determined to be impaired.

                                        53
<PAGE>   55
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

PREMISES AND EQUIPMENT

     Land is carried at cost. Premises and equipment are carried at cost less
accumulated depreciation computed primarily using the straight-line method.
Maintenance and repairs are charged to expense as incurred, while renewals and
betterments are capitalized. Leasehold improvements included in premises and
equipment are amortized over the shorter of the useful life or the term of the
lease.

FORECLOSED PROPERTIES

     Foreclosed properties includes property acquired primarily through
foreclosures. These properties are carried at the lower of cost or current fair
value less estimated selling cost. Losses from the acquisition of property in
full or partial satisfaction of debt are treated as loan losses. Holding costs,
subsequent declines in value and gains or losses on disposition are included in
other expenses.

SECURITIES HELD TO MATURITY

     Bonds, notes and certain debt securities which CIB Marine has the positive
intent and ability to hold to maturity are reported at cost and adjusted for
premiums and discounts that are recognized in interest income using the interest
method over the period to maturity. Impairments in the value of securities held
to maturity which are other than temporary are accounted for as a realized loss.

SECURITIES AVAILABLE FOR SALE

     Available for sale securities consist of equity securities, bonds, notes
and other debt securities not classified as held to maturity securities or
trading securities. Unrealized holding gains and losses, net of tax, on
available for sale securities are reported as a net amount in a separate
component of stockholders' equity until realized. Gains and losses on the sale
of available for sale securities are determined using the specific
identification method. Impairments in the value of available for sale
securities, which are other than temporary, are accounted for as a realized
loss. Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.

INCOME TAXES

     Deferred income taxes are provided on temporary differences between
financial statement and income tax reporting. Temporary differences are
differences between the amounts of assets and liabilities reported for financial
statement purposes and their tax bases. Deferred tax assets are recognized for
temporary differences that will be deductible in future years' tax returns and
for operating loss and tax credit carryforwards. Deferred tax assets are reduced
by a valuation allowance if it is deemed more likely than not that some or all
of the deferred tax assets will not be realized. Deferred tax liabilities are
recognized for temporary differences that will be taxable in future years' tax
returns.

     Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.

LOANS HELD FOR SALE

     Mortgage loans originated or purchased and intended for sale in the
secondary market are carried at the lower of cost or estimated market value in
the aggregate. Net unrealized losses are recognized through a valuation
allowance by a charge to income.

                                        54
<PAGE>   56
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

LOANS AND ALLOWANCE FOR LOAN LOSS

     Loans that management has the intent and ability to hold to maturity or the
foreseeable future are stated at the amount of unpaid principal, reduced by net
deferred fees or costs to originate and an allowance for loan loss. The accrual
of interest on loans is generally discontinued when a loan becomes ninety days
delinquent unless the credit is well secured and in process of collection. Loans
are placed on nonaccrual or charged off at an earlier date if collection of
principal or interest is considered doubtful. Interest on loans is calculated by
using the simple interest method on daily balances of the principal amount
outstanding.

     The allowance for loan loss is established through a provision for loan
loss charged to expense. Loans are charged against the allowance when management
believes that the collectibility of the principal amount is unlikely. Recoveries
of amounts previously charged off are credited to the allowance.

     The provision for loan loss is based on management's evaluation of the loan
portfolio, including such factors as the volume and character of loans
outstanding, the relationship of the allowance for loan loss to outstanding
loans, past loan loss experience, the estimated value of any underlying
collateral and general economic conditions.

     Management believes that the allowance for loan loss is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review CIB Marine's allowance for loan
loss. Such agencies may require CIB Marine to recognize additions to the
allowance based on their judgments about information available to them at the
time of their examination.

     A loan is treated as impaired when it is probable, based upon current
information and events, that CIB Marine will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Impairment is
recognized by creating an allowance for loan loss with a charge to the provision
for loan loss for the difference between its carrying value and its fair value.
Changes in the net carrying amount of the loan from one reporting period to the
next are accounted for as an adjustment to the provision for loan loss. Impaired
loans do not include nonperforming homogeneous loans such as 1-4 family real
estate loans and consumer loans. Loans, including impaired loans, are placed on
nonaccrual status when it is determined that it is probable that principal and
interest amounts will not be collected according to the terms of the loan
agreement. Income on impaired and nonaccrual loans is generally recorded when
cash is received and management considers it unlikely there will be a loss of
principal.

     Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield of the related loan. Fees for loans
sold and other loan fees are included in loan fee income as realized.

STOCK-BASED COMPENSATION

     CIB Marine applies Accounting Principles Board Opinion (APB) No. 25
Accounting for Stock Issued to Employees (APB No. 25), and related
interpretations in accounting for its stock-based compensation plans. Under
Statement of Financial Accounting Standards (SFAS) No. 123 Accounting for
Stock-Based Compensation, 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.

     Under APB 25, stock based compensation expense includes the excess, if any,
of the market price of the stock at grant date or other measurement date, over
the exercise price. This expense is recognized over the vesting period of the
options. Certain stock options have an exercise price less than the market price
at the
                                        55
<PAGE>   57
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

measurement date; accordingly, compensation expense associated with those
options is included in salaries and employee benefits expense with a
corresponding increase in capital surplus.

     CIB Marine follows the practice of recording amounts received upon the
exercise of options by crediting common stock and capital surplus. Income tax
benefits from the exercise of stock options result in a decrease in current
income taxes payable and, to the extent not previously recognized as a reduction
in income tax expense, an increase in capital surplus.

BUSINESS SEGMENTS

     An operating segment is defined as a component of an enterprise that
engages in business activities that generate revenue and incur expense. A
segment is further defined as a component whose operating results are reviewed
by the chief operating decision maker in the determination of resource
allocation and performance, and for which discrete financial information is
available.

     CIB Marine, through the bank branch network of its subsidiaries, provides a
broad range of financial services to companies and individuals in Illinois,
Wisconsin, Indiana and Nebraska. These services include commercial and retail
lending and deposits. While CIB Marine's chief operating decision maker monitors
the revenue streams of the various products and services, operations in all
areas, except for mortgage banking, are managed and financial performance is
evaluated on a corporate-wide basis. The mortgage banking operations are not
presented as a separate segment as its assets and results of operations do not
meet the required disclosure criteria. Accordingly, all of CIB Marine's
operations are reported in its financial statements in one reportable operating
segment.

EARNINGS PER COMMON SHARE

     Basic earnings per common share is computed on the basis of the weighted
average number of shares outstanding during the period. Diluted earnings per
common share is computed on the basis of the weighted average number of common
shares adjusted for the dilutive effect of outstanding stock options based upon
the treasury stock method.

NEW ACCOUNTING PRONOUNCEMENTS

DERIVATIVE AND HEDGING ACTIVITIES

     In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS 133).
In June 1999, the FASB issued SFAS No. 137 Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133. SFAS
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement requires that changes in
derivatives fair value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative instrument's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.

     SFAS 133, as amended in September 2000 by SFAS No. 138 Accounting for
Certain Derivative Instruments and Certain Hedging Activities (SFAS 138), is
effective for fiscal years beginning after June 15, 2000 and cannot be applied
retroactively. SFAS 133 must be applied to derivative instruments and certain
derivative instruments embedded in hybrid contracts. With respect to hybrid
instruments, a company may elect to apply SFAS 133, as amended, to all hybrid
contracts, only those hybrid instruments that were issued,

                                        56
<PAGE>   58
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

acquired or substantively modified after December 31, 1997, or only those hybrid
instruments that were issued, acquired or substantively modified after December
31, 1998.

     Effective January 1, 2001, CIB Marine adopted SFAS 133, as amended by SFAS
138 which establishes new rules for the recognition and measurement of
derivatives and hedging activities. The impact resulting from the transition
adjustment of adopting SFAS 133 will be $0.005 million to income and no
adjustment to other comprehensive income. CIB Marine does not expect that SFAS
133/138 will result in a material difference to income compared to current
accounting.

     CIB Marine utilizes derivative instruments primarily to hedge against
market risks in order to reduce earnings volatility attributable to changes in
market interest rates. The derivative instruments utilized by CIB Marine include
primarily interest rate swaps and forward contracts, but market risk policies of
CIB Marine allow for the use of other derivative instruments.

     CIB Marine utilizes interest rate swaps to hedge the changes in fair value
of fixed rate borrowings and deposits attributable to changes in market interest
rates. CIB Marine primarily engages in floating-pay, fixed-receive swaps whereby
CIB Marine pays a floating interest rate based upon an index (e.g., 3-month
LIBOR) and receives a fixed rate of interest rate. This type of transaction is
used to hedge the exposure of changes in fair value of a fixed rate liability,
and effectively change the net interest cash flows from fixed rate to floating
rate. This particular transaction is engaged in to provide a hedged funding
liability that more closely offsets the market risk of certain floating rate
assets whose rate is highly correlated with the index rate off which the
floating rate is paid in the interest rate swap. In order to offset these risks,
CIB Marine generally enters into swap agreements with nationally recognized
securities firms and monitors the credit status of counterparties and the level
of collateral for such swaps. At December 31, 2000 and 1999, CIB Marine had
floating-pay, fixed-receive interest rates swaps outstanding with a notional
amount of $25.0 million and $0.0 million, respectively. The agreements had a
fixed-receive rate of 7.08%, a floating-pay rate reset to 6.56%, and a maturity
date of 2008. The fair market value of the swaps was $1.8 million and $0.0
million as of December 31, 2000 and 1999, respectively.

     CIB Marine's mortgage banking activities include the issuance of
commitments to extend mortgage loans to be held for sale with interest rate
locks and the utilization of conditional forward contracts to hedge the changes
in cash flow of forecasted sales of residential mortgage loans attributable to
changes in market interest rates. CIB Marine does not formally designate a
hedging relationship under SFAS 133 for the use of these loan commitments and
forward contracts in its mortgage banking activities. CIB Marine is in a short
position with conditional forward contracts whereby CIB Marine agrees to sell a
residential mortgage loan at a pre-established price at some future date. This
type of hedge is used to hedge the exposure of changes in the prices of
residential mortgage loans from the time CIB Marine issues a loan commitment to
the time the loan sale actually occurs. Residential mortgage loans forecasted
for sale are primarily those originated or purchased by CIB Marine in its
mortgage banking activities. The notional amount of forward contracts
outstanding varies and is a function of the current loans held for sale and
commitments to extend mortgage loans to be held for sale. At December 31, 2000,
CIB Marine had forward sale agreements in the amount of $63.5 million, with a
fair market value of ($0.4) million. At December 31, 2000 CIB Marine had
commitments to extend credit with interest rate locks of $48.2 million, with a
fair market value of $0.5 million.

     In addition, CIB Marine has various agreements to be compensated for
extensions of credit in addition to interest rate. The compensation is typically
based upon or determined by the financial performance of the borrower. At
December 31, 2000, CIB Marine determined these not to have any fair value.

                                        57
<PAGE>   59
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES

     In September 2000, FASB issued SFAS No. 140 Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 140) -- a
replacement of SFAS No. 125. Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. This statement provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. Those standards are based on the consistent
application of a financial-components approach that focuses on control. Under
this approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities when
extinguished. SFAS 140 provides consistent standards for distinguishing
transfers of financial assets and extinguishments of liabilities occurring after
March 31, 2001. SFAS 140 was effective for recognition and reclassification of
collateral and for disclosures relating to securitization of transactions and
collateral for fiscal years ending after December 15, 2000. SFAS 140 is to be
applied prospectively with certain exceptions and earlier or retroactive
application of SFAS 140 is not permitted. Adoption of SFAS 140 did not
materially effect the results of operations or financial position of CIB Marine.

ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION

     In March 2000, the FASB issued Interpretation No. 44 Accounting for Certain
Transactions Involving Stock Compensation -- an interpretation of APB 25 (FIN
44). This Interpretation clarifies the definition of employee for purposes of
applying APB 25, the criteria for determining whether a plan qualifies as a
noncompensatory plan, the accounting consequence of various modifications to the
terms of a previously fixed stock option or award, and the accounting for an
exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15, 1998
or January 12, 2000. FIN 44 was adopted during the year ended December 31, 2000.
This adoption did not have a material effect on consolidated financial position
or results of operations.

NOTE 2 -- STOCK SPLIT

     On June 19, 2000 CIB Marine announced that its Board of Directors approved
a 150-for-1 split of the Company's outstanding shares of common stock. The stock
split was effected in the form of a stock dividend and each shareholder of
record at the close of business on July 1, 2000, received 149 additional shares
of common stock for every share of common stock held. The stock dividends
resulting from the stock split were distributed by CIB Marine's transfer agent
on or about July 25, 2000. All share and per share data contained in this
document have been restated to reflect the effect of this stock split.

NOTE 3 -- EARNINGS PER SHARE

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

                                        58
<PAGE>   60
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 3 -- EARNINGS PER SHARE -- CONTINUED

<TABLE>
<CAPTION>
                                                 2000           1999           1998
                                                 ----           ----           ----
                                              (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                           <C>            <C>            <C>
Net income..................................  $    21,073    $    13,535    $     8,654
                                              ===========    ===========    ===========
Weighted average shares outstanding:
  Basic.....................................   16,734,204     16,087,237     15,067,664
     Effect of dilutive stock options
       outstanding..........................      234,667        182,075        129,600
                                              -----------    -----------    -----------
  Diluted...................................   16,968,871     16,269,312     15,197,264
                                              ===========    ===========    ===========
Earnings per share -- Basic.................  $      1.26    $      0.84    $      0.57
  Effect of dilutive stock options
     outstanding............................        (0.02)         (0.01)            --
                                              -----------    -----------    -----------
Earnings per share -- Diluted...............  $      1.24    $      0.83    $      0.57
                                              ===========    ===========    ===========
</TABLE>

NOTE 4 -- BUSINESS COMBINATIONS

     On July 16, 1998, CIB Marine purchased the equipment of a banking office in
Gurnee, Illinois, and assumed $13.3 million in deposits. The net purchase price
for equipment and deposit premium was $1.1 million. CIB Marine also assumed the
lease for the banking office. The transaction was accounted for as a purchase,
and the results of operations since then have been included in the consolidated
financial statements. The excess of the acquisition cost over the fair value of
net assets acquired and deposit liabilities assumed, in the amount of $0.8
million, is classified as goodwill and is being amortized over 15 years using
the straight-line method.

     On February 26, 1999, CIB Marine sold a banking office in Charleston,
Illinois along with $14.4 million of loans and $12.2 million of deposits. The
transaction was accounted for as a sale. The net proceeds were $3.1 million and
the $0.8 million gain on the transaction is reflected as a component of
noninterest income in the Consolidated Statements of Income.

     On March 29, 1999, CIB Marine purchased two banking offices, one each in
Arlington Heights and Mount Prospect, Illinois, and assumed $115.8 million of
deposits. The net purchase price for premises and equipment and deposit premium
was $14.5 million. The transaction was accounted for as a purchase. The excess
of the acquisition cost over the fair value of net assets acquired and deposit
liabilities assumed was $9.5 million, of which $1.4 million is a core deposit
intangible being amortized over the 11 year expected lives of the related
deposits based upon a level-yield amortization method. Goodwill of $8.1 million
is being amortized over 15 years using the straight-line method.

     On September 24, 1999, CIB Marine purchased a banking office in Zion,
Illinois, and assumed deposits of $28.2 million. The net purchase price for
premises and equipment and deposit premium was $2.6 million. The transaction was
accounted for as a purchase. The excess of the acquisition cost over the fair
value of net assets acquired and deposit liabilities assumed was $2.0 million,
of which $1.1 million is core deposit intangible being amortized over the 11
year expected lives of the related deposits based upon a level-yield
amortization method. Goodwill of $0.9 million is being amortized for 15 years
using the straight-line method.

     On March 6, 2001, CIB Marine signed a definitive agreement whereby it will
acquire, through a merger transaction, Citrus Financial Services, Inc. Citrus
Financial is a locally owned one-bank holding company headquartered in Vero
Beach, Florida. Citrus Financial operates primarily through its subsidiary,
Citrus Bank N.A., and offers a broad range of retail and commercial banking
services. At December 31, 2000, Citrus Financial had total assets of
approximately $95.9 million with 3 full-service banking facilities, one each in
Vero Beach, Barefoot Bay and Sebastian, and a loan production office in Sebring,
Florida. Pursuant to the terms of the merger agreement, shares of Citrus
Financial will be exchanged for shares of CIB Marine

                                        59
<PAGE>   61
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 4 -- BUSINESS COMBINATIONS -- CONTINUED

common stock. The exchange ratio will be based on a 1.75 multiple of book value
for CIB Marine common stock and a 1.68 multiple of book value for Citrus
Financial common stock. Upon closing, each share of Citrus Financial common
stock will be exchanged for the number of shares of CIB Marine common stock
equal to 1.68 times the book value per share of Citrus Financial common stock
divided by 1.75 times the book value per share of CIB Marine common stock. Using
December 31, 2000 figures, the book value per share of CIB Marine common stock
was $11.50 and the book value per share of Citrus Financial common stock was
approximately $6.16, resulting in a deal value of approximately $15 million.
However, this deal value does not take into account the pre-closing adjustments.
The shares of Citrus Financial are not publicly traded. The transaction, which
will be accounted for as a pooling of interests, is expected to close during the
latter part of 2001. The transaction is subject to various regulatory approvals,
Citrus Financial shareholder approval and other customary conditions. This
transaction will enable CIB Marine to expand its Florida operations and better
serve its current customers who have existing ties to Florida. CIB Marine
intends to continue using the Citrus Bank name in Florida.

NOTE 5 -- CASH AND DUE FROM BANKS

     CIB Marine is required to maintain average reserve balances with the
Federal Reserve Bank. The required reserves of $4.3 million and $4.4 million at
December 31, 2000 and 1999, respectively, were maintained by CIB Marine.

NOTE 6 -- SECURITIES

     The carrying amount of securities, gross unrealized gains and losses and
their approximate fair values at December 31, 2000 and 1999 are as follows:

                                        60
<PAGE>   62
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 6 -- SECURITIES -- CONTINUED

Securities Available for Sale:

<TABLE>
<CAPTION>
                                                                      GROSS        GROSS
                                                        AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                          COST        GAINS        LOSSES      VALUE
                                                        ---------   ----------   ----------    -----
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                     <C>         <C>          <C>          <C>
2000
------------------------------------------------------
U.S. Treasury securities and obligations of U.S.
  Government agencies.................................  $241,694      $3,367       $  596     $244,465
Obligations of states and political subdivisions......     7,627          65            1        7,691
Other notes and bonds.................................    51,097           7           47       51,057
Mortgage backed securities............................    58,365       1,029          110       59,284
Federal Home Loan Bank stock..........................     3,590          --           --        3,590
Other equities........................................        50          --           --           50
                                                        --------      ------       ------     --------
                                                        $362,423      $4,468       $  754     $366,137
                                                        ========      ======       ======     ========
1999
------------------------------------------------------
U.S. Treasury securities and obligations of U.S.
  Government agencies.................................  $190,585      $   13       $3,073     $187,525
Obligations of states and political subdivisions......     3,735         198            4        3,929
Other notes and bonds.................................     2,107          --           20        2,087
Mortgage backed securities............................    18,821          --          421       18,400
Federal Home Loan Bank stock..........................     4,482          --           --        4,482
Other equities........................................        37          --           --           37
                                                        --------      ------       ------     --------
                                                        $219,767      $  211       $3,518     $216,460
                                                        ========      ======       ======     ========
</TABLE>

Securities Held to Maturity:

<TABLE>
<CAPTION>
                                                                      GROSS        GROSS
                                                        AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                          COST        GAINS        LOSSES      VALUE
                                                        ---------   ----------   ----------    -----
<S>                                                     <C>         <C>          <C>          <C>
2000
------------------------------------------------------
U. S. Treasury securities and obligations of U.S.
  Government agencies.................................  $ 60,000      $  296       $   73     $ 60,223
Obligations of states and political subdivisions......    46,434         639          320       46,753
Other notes and bonds.................................       450          --           --          450
Mortgage backed securities............................    19,220         261           51       19,430
                                                        --------      ------       ------     --------
                                                        $126,104      $1,196       $  444     $126,856
                                                        ========      ======       ======     ========
1999
------------------------------------------------------
U. S. Treasury securities and obligations of U.S.
  Government agencies.................................  $ 73,940      $   30       $  843     $ 73,127
Obligations of states and political subdivisions......    57,679         157          962       56,874
Other notes and bonds.................................       450          --           --          450
Mortgage backed securities............................    14,821          16          166       14,671
                                                        --------      ------       ------     --------
                                                        $146,890      $  203       $1,971     $145,122
                                                        ========      ======       ======     ========
</TABLE>

                                        61
<PAGE>   63
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 6 -- SECURITIES -- CONTINUED

     Assets, primarily securities, carried at approximately $209.1 million and
$168.2 million at December 31, 2000 and 1999, 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 were
$210.5 million and $167.4 million, at December 31, 2000 and 1999, respectively.

     The amortized cost and fair value of the securities as of December 31,
2000, by contractual maturity, are shown below. Securities, other than mortgage
backed securities, may be called earlier than their maturity date. Expected
maturities may differ from contractual maturities in mortgage backed securities,
because certain mortgages may be prepaid without penalties. Therefore, mortgage
backed securities are not included in the maturity categories in the following
maturity schedules.

<TABLE>
<CAPTION>
                                                SECURITIES HELD TO MATURITY     SECURITIES AVAILABLE FOR SALE
                                                ----------------------------    ------------------------------
                                                 AMORTIZED          FAIR          AMORTIZED           FAIR
                                                    COST            VALUE           COST             VALUE
                                                 ---------          -----         ---------          -----
                                                                    (DOLLARS IN THOUSANDS)
<S>                                             <C>              <C>            <C>               <C>
Due in one year or less.......................    $ 11,301        $ 11,314         $106,248         $106,019
Due after one year through five years.........      64,750          64,993          187,901          190,780
Due after five years through ten years........      22,896          23,085            6,269            6,414
Due after ten years...........................       7,937           8,034               --               --
                                                  --------        --------         --------         --------
                                                   106,884         107,426          300,418          303,213
FHLB Stock & Other Equities...................          --              --            3,640            3,640
Mortgage backed securities....................      19,220          19,430           58,365           59,284
                                                  --------        --------         --------         --------
                                                  $126,104        $126,856         $362,423         $366,137
                                                  ========        ========         ========         ========
</TABLE>

     Proceeds from the sale of securities available for sale during 2000, 1999
and 1998, were $26.2 million, $0.0 million and $16.2 million, respectively. Net
realized gains on sales of securities available for sale were $0.03 million,
$0.0 million and $0.3 million in 2000, 1999 and 1998, respectively. There were
no sales of held to maturity securities in any of these periods.

                                        62
<PAGE>   64
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 7 -- LOANS AND ALLOWANCE FOR LOAN LOSS

Loans

     The components of loans in the consolidated balance sheets were as follows:

<TABLE>
<CAPTION>
                                                              2000         1999
                                                              ----         ----
                                                           (DOLLARS IN THOUSANDS)
                                                           -----------------------
<S>                                                        <C>          <C>
Commercial and agricultural..............................  $  598,270   $  460,411
Real estate:
  1-4 family.............................................      67,080       50,292
  Commercial real estate.................................     809,325      646,484
  Construction...........................................     277,864      214,251
                                                           ----------   ----------
          Total Real Estate Loans........................   1,154,269      911,027
Consumer.................................................       8,455       13,152
Credit Cards.............................................       1,833        1,436
Other....................................................       4,392        5,486
                                                           ----------   ----------
          Total Consumer Loans...........................      14,680       20,074
Gross Loans..............................................   1,767,219    1,391,512
Deferred fees, net.......................................      (4,264)      (3,681)
Allowance for loan loss..................................     (23,002)     (15,813)
                                                           ----------   ----------
Loans, net...............................................  $1,739,953   $1,372,018
                                                           ==========   ==========
</TABLE>

     Loans on nonaccrual status were $14.5 million and $3.0 million at December
31, 2000 and 1999, respectively. CIB Marine has $7.7 million in nonaccrual loans
to one borrower that are not classified as impaired loans because management
expects to collect all amounts due including interest accrued at the contractual
interest rate. The total recorded investment in impaired loans was $6.5 million
and $1.9 million at December 31, 2000 and 1999, respectively, all of which have
a related allowance for loan loss. The allowance for loan loss related to these
impaired loans was $1.6 million and $0.6 million at December 31, 2000 and 1999,
respectively. The average amount of investment in impaired loans during 2000,
1999 and 1998 was $3.9 million, $2.9 million and $3.1 million, respectively. The
income recorded on these loans in 2000, 1999 and 1998 was $0.8 million, $0.5
million and $0.05 million.

     Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of mortgage loans
serviced for others was $14.6 million and $15.8 million as of December 31, 2000
and 1999, respectively. Included in other assets is an intangible asset for
originated mortgage servicing rights for loans serviced for others. These
amounted to $0.03 million at both December 31, 2000 and 1999. There was no
valuation allowance for this intangible asset in either 2000 or 1999.

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 capital of CIB Marine. At December 31, 2000, CIB Marine did not have any
borrowing relationships with individual borrowers or related groups of borrowers
that exceeded 25% of capital.

     In July 1999, one of CIB Marine's borrowers, whose total borrowing
relationship exceeded 25% of capital at that time, experienced a substantial
decline in net worth as a result of a similar decline in the market value of a
publicly traded common stock which comprised a large part of this borrower's net
worth. The decline in the value of this security caused liquidity problems for
this borrower with respect to its obligations to CIB Marine and other lenders.
Since March 2000, the total outstanding lending commitment associated with this
borrowing relationship has represented less than 25% of the capital of CIB
Marine. As of December 31,
                                        63
<PAGE>   65
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 7 -- LOANS AND ALLOWANCE FOR LOAN LOSS -- CONTINUED

2000, the total outstanding lending commitment associated with this borrowing
relationship, including lines of credit which have not been fully drawn, was
approximately $34.5 million. The aggregate principal amount actually drawn and
outstanding at December 31, 2000, with respect to this borrowing relationship
was approximately $28.9 million and all such loans were current with respect to
principal and interest. CIB Marine has renewed certain loans and extended new
loans to this borrower and its related interests since July 1999 based upon a
credit evaluation at the time of origination or renewal. As loans to this
borrower become due, CIB Marine will evaluate the credit relationship at that
time to determine whether to renew such loans.

     Since July 1999, CIB Marine has closely monitored this borrowing
relationship, including the collateral margins and cash flows. This borrower
continues to work with CIB Marine to improve this borrowing relationship,
including providing updated financial information so that CIB Marine can monitor
and evaluate the credit risk of this relationship. Although CIB Marine estimates
the value of the collateral securing this borrowing relationship currently
exceeds the outstanding principal balance to this borrower, this borrowing
relationship has been under-collateralized pursuant to the collateral
requirements of CIB Marine's loan policy since the first quarter of 2000.

     In order to assess this borrower's liquidity needs, CIB Marine continues to
monitor the borrower's obligations to other lenders and their collateral
positions. In November 1999, two of these other lenders filed lawsuits to
recover amounts due to them. During February 2000 one of these lawsuits was
dismissed. In March 2000, a third lender filed a lawsuit to recover amounts due
it. This lawsuit was dismissed in July 2000. In August 2000, another lawsuit was
filed against this borrower by another lender to recover amounts due it. The
borrower is engaging in a voluntary and orderly disposition of certain of its
assets to satisfy various obligations to CIB Marine and other lenders and to
strengthen its liquidity position.

     In working with this borrower to address its liquidity problems, management
determined that it was in the best interest of CIB Marine to provide this
borrower with additional cash to help it meet its current obligations both to
CIB Marine and to other lenders. On September 9, 1999, CIB Marine purchased
limited partnership interests in three private investment funds from this
borrower. The adjusted purchase price for these limited partnership interests
was $2.3 million, of which $1.0 million was used by the borrower to repay a loan
from CIB Marine that was previously secured by an interest in one of these
limited partnerships. A description of this investment is discussed in "Other
Assets."

     CIB Marine has not suffered any losses with respect to its loans to this
borrower and has determined that an additional provision to its allowance for
loan loss, above the normal provisions for a loan of similar credit quality, is
not currently required. CIB Marine cannot provide assurances that an additional
provision will not be required in the future or that there will not be future
losses with respect to loans to this borrower. Management of CIB Marine will
continue to closely monitor its loans to this borrower in order to assess its
ongoing exposure to the credit risk posed by this borrower and will take
additional action if deemed appropriate.

     At December 31, 2000, CIB Marine had credit relationships within three
industries or industry groups that exceeded 25% of its capital as of that date.
The total outstanding balance to commercial and residential real estate
developers, investors and contractors was approximately $721.5 million, or 40.8%
of gross loans and 370.8% of stockholders' equity. The total outstanding balance
of loans made in the motel and hotel industry was approximately $149.5 million,
or 8.5% of gross loans and 76.8% of stockholders' equity. The total outstanding
balance of loans made in the nursing/convalescent home industry was
approximately $109.7 million, or 6.2% of gross loans and 56.4% of stockholders'
equity.

     Commercial or multi-family real estate, other business collateral and/or
personal property generally collateralize the loans and lines of credit
described in this section. Additionally, most of the loans are personally
guaranteed by the principals. Management has no reason to believe that each loan
within these
                                        64
<PAGE>   66
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 7 -- LOANS AND ALLOWANCE FOR LOAN LOSS -- CONTINUED

concentrations represent any greater risk of loss than CIB Marine's other loans
that are similarly collateralized and underwritten.

Allowance

     Changes in the allowance for loan loss for the years ended December 31 are
as follows:

<TABLE>
<CAPTION>
                                                       2000      1999      1998
                                                       ----      ----      ----
                                                        (DOLLARS IN THOUSANDS)
<S>                                                   <C>       <C>       <C>
Balance at Beginning of Year........................  $15,813   $10,657   $ 6,692
Charge-offs.........................................   (1,292)   (1,090)     (928)
Recoveries..........................................      157       136       160
                                                      -------   -------   -------
  Net...............................................   (1,135)     (954)     (768)
Provision for loan loss.............................    8,324     6,110     4,733
                                                      -------   -------   -------
Balance at End of Year..............................  $23,002   $15,813   $10,657
                                                      =======   =======   =======
</TABLE>

Director and Officer Loans

     Certain directors of CIB Marine and subsidiary banks, companies with which
they are affiliated, and certain principal officers are customers of, and have
banking transactions with, the subsidiary banks in the ordinary course of
business. This indebtedness has been incurred on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons. The activity in these loans
during 2000 is as follows (dollars in thousands):

<TABLE>
<S>                                                             <C>
Balance as of December 31, 1999.............................    $40,569
New Loans...................................................     15,558
Repayments..................................................    (20,475)
                                                                -------
Balance as of December 31, 2000.............................    $35,652
                                                                =======
</TABLE>

NOTE 8 -- PREMISES AND EQUIPMENT, NET

     The major classes of premises and equipment and accumulated depreciation at
December 31, are summarized as follows:

<TABLE>
<CAPTION>
                                                                 2000         1999
                                                                 ----         ----
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>           <C>
Land......................................................     $  3,993      $ 4,614
Building and improvements.................................       12,083       12,469
Furniture and equipment...................................       14,877       12,189
Construction in progress..................................          868          258
                                                               --------      -------
                                                                 31,821       29,530
Less: Accumulated depreciation............................      (10,323)      (8,031)
                                                               --------      -------
Balance as of December 31.................................     $ 21,498      $21,499
                                                               ========      =======
</TABLE>

     Depreciation expense totaled $2.5 million, $2.1 million and $1.6 million
for 2000, 1999 and 1998, respectively.

                                        65
<PAGE>   67
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 8 -- PREMISES AND EQUIPMENT, NET -- CONTINUED

     CIB Marine leases certain premises and equipment under noncancellable
operating leases, which expire at various dates. Such noncancellable operating
leases also include options to renew. On June 30, 2000 CIB Marine entered into a
sale/leaseback transaction involving one of its banking facilities which
resulted in a net gain of approximately $0.1 million which is being amortized
over the 10-year lease term. This lease is being accounted for as an operating
lease. The following is a schedule by years of annual future minimum rental
commitments required under operating leases that have initial or remaining
noncancellable lease terms in excess of one year as of December 31, 2000
(dollars in thousands).

<TABLE>
<S>                                                           <C>
2001........................................................  $1,495
2002........................................................   1,535
2003........................................................   1,510
2004........................................................   1,289
2005........................................................     873
Thereafter..................................................   3,268
                                                              ------
Total.......................................................  $9,970
                                                              ======
</TABLE>

     Total rental expense was $1.2 million, $0.9 million and $0.6 million for
2000, 1999 and 1998, respectively.

NOTE 9 -- OTHER ASSETS

     On October 16, 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. The business
was acquired from a borrower, who was in default of its obligations, in lieu of
foreclosure or other legal action. At the time of the acquisition, the loan
principal plus accrued interest, late fees and various collection costs were in
the aggregate amount of $6.5 million. The principal business of this
manufacturer, which operates under the name Maverick International, is the
design, development, assembly, distribution and servicing of magnetic ink
character recognition check encoders and related embedded software to small and
medium-sized financial institutions, as well as to large retailers and
independent remittance processors. This business is classified as a held for
sale asset and included in Other Assets on CIB Marine's Consolidated Balance
Sheets at $6.7 million. This amount represents the approximate fair value as
determined by an independent appraisal of the business, less estimated costs to
sell, and includes the net income recorded under the equity method from October
16, 2000 through December 31, 2000, which amounted to $0.02 million. Income
related to this business is classified as Other Noninterest Income on CIB
Marine's Statements of Income. The business has generated profits in each of the
prior three years and CIB Marine believes that the business will continue to
generate profits. CIB Marine cannot, however, provide assurances that these
profits will continue or that there will not be losses with respect to this
business in the future. 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 is required
under bank regulations to develop a plan to dispose of this asset within a
reasonable time period unless otherwise permitted by the regulators.

NOTE 10 -- DEPOSITS

     The aggregate amount of time deposits of $100,000 or more at December 31,
2000 and 1999, were $519.0 million and $415.9 million, respectively. Brokered
time deposits were $68.3 million, or 3.5%, of total deposits at December 31,
2000, and $80.7 million, or 5.3%, of total deposits at December 31, 1999.

                                        66
<PAGE>   68
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 10 -- DEPOSITS -- CONTINUED
     At December 31, 2000, the scheduled maturities of time deposits are as
follows (dollars in thousands):

<TABLE>
<S>                                                           <C>
2001........................................................  $1,382,772
2002........................................................     102,367
2003........................................................      51,092
2004........................................................       3,154
2005........................................................       3,301
Thereafter..................................................          12
                                                              ----------
Total.......................................................  $1,542,698
                                                              ==========
</TABLE>

NOTE 11 -- SHORT-TERM BORROWINGS

<TABLE>
<CAPTION>
                                                               2000         1999
                                                               ----         ----
                                                             (DOLLARS IN THOUSANDS)
<S>                                                          <C>          <C>
At December 31.............................................  $146,439     $113,219
Average during year........................................   103,853       25,262
Maximum month-end balance..................................   146,439      113,219
Average rate at year-end...................................      6.37%        6.12%
Average rate during year...................................      6.85%        5.97%
</TABLE>

     Federal funds purchased, which totaled $108.0 million at December 31, 2000,
generally represent one-day borrowings. Securities sold under repurchase
agreements, which total $19.9 million at December 31, 2000, represent borrowings
maturing within one year that are collateralized by U.S. Treasury and Government
Agencies securities. The fair value of securities sold under repurchase
agreements was approximately $22.3 million and $27.6 million at December 31,
2000 and 1999, respectively. The securities underlying the agreements were under
CIB Marine's control at December 31, 2000 and 1999. Short-term borrowings
included Federal Home Loan Bank notes of $0 and $26.4 million at December 31,
2000 and 1999, respectively. Commercial Paper was also included in short-term
borrowings and amounted to $6.5 million at December 31, 2000. There were no
commercial paper borrowings in 1999.

     CIB Marine has a treasury, tax and loan note option with the Federal
Reserve Bank. The balance in the note option was $0.5 million and $0.4 million
at December 31, 2000 and 1999, respectively.

     CIB Marine has a $30.0 million secured revolving line of credit from a
non-affiliated commercial bank. The outstanding balances at December 31, 2000
and 1999 were $11.6 million and $29.7 million, respectively. The line of credit
matures April 1, 2001, and bears interest at the London Interbank Offered Rate
(LIBOR) + 1.5%. During 2000, the highest month-end balance was $30.0 million and
average monthly balance was $21.1 million. The loan is subject to certain
restrictive covenants and CIB Marine believes it was in compliance with all such
covenants at December 31, 2000.

                                        67
<PAGE>   69
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 12 -- LONG-TERM BORROWINGS

     The following table presents information regarding amounts payable to the
Federal Home Loan Bank of Chicago that are included in the balance sheet at
December 31, 2000 and 1999.

<TABLE>
<CAPTION>
DECEMBER 31, 2000    DECEMBER 31, 1999
------------------   ------------------                CALLABLE
        (DOLLARS IN THOUSANDS)            SCHEDULED   QUARTERLY @
 BALANCE     RATE     BALANCE     RATE    MATURITY     PAR AFTER
 -------     ----     -------     ----    ---------   -----------
<S>         <C>      <C>         <C>      <C>         <C>
3$,250...    4.95%     $3,250     4.95%    1/16/08      1/16/01
2,500...     4.95       2,500     4.95     1/16/08      1/16/01
2,000...     4.95       2,000     4.95     1/16/08      1/16/01
23,473..     7.07          --       --     6/30/08          N/A
2,000...     5.09       2,000     5.09     2/20/08      2/20/01
 -------     ----      ------     ----
3$3,223..    6.46%     $9,750     4.98%
 =======     ====      ======     ====
</TABLE>

     CIB Marine is required to maintain qualifying collateral as security for
the notes. The debt to collateral ratio cannot exceed 60%. CIB Marine had
eligible collateral of $102.0 million and $50.4 million at December 31, 2000 and
1999, respectively. As of December 31, 2000, this collateral consisted of
securities with a fair market value of $62.3 million and 1-4 family residential
mortgages not more than 90 days delinquent of $39.7 million.

     On February 25, 2000, CIB Marine assumed a $25.0 million Federal Home Loan
Bank of Chicago advance due June 30, 2008, with a net cost, including premium,
of 7.07%. The premium amount of $1.7 million is being amortized to interest
expense over the life of the borrowing. As of December 31, 2000, the unamortized
balance related to this premium was $1.5 million. Simultaneously with this
advance, CIB Marine entered into an interest rate swap with the Federal Home
Loan Bank of Chicago with a $25.0 million notional value and maturing on June
30, 2008, whereby CIB Marine pays a variable rate of interest at the 1 month
LIBOR rate and earns a fixed rate of interest at 7.08%. As of December 31, 2000,
the fair market value of the swap was approximately $1.8 million and the net
cash received from the hedging relationship for the year ended December 31,
2000, was approximately $0.1 million. CIB Marine's management believes the swap
transaction will reduce interest rate risk by converting the fixed rate on the
advance to a variable rate similar to the loans funded with the proceeds of
these borrowings.

     In March and September 2000, CIB Marine issued $10.0 million and $15.0
million, respectively, in guaranteed trust preferred securities through wholly
owned special-purpose trusts. These securities qualify as Tier 1 equity capital
for regulatory capital purposes. The securities are classified in the liability
section of the Consolidated Balance Sheets, and the distributions on the
securities are classified as interest expense in the Consolidated Statements of
Income. Such distributions are cumulative and are payable to the security
holders semi-annually at rates of 10.875% and 10.60% per annum, respectively.
CIB Marine fully and unconditionally guarantees the obligations of the trusts on
a subordinated basis.

     The securities from the March issuance are mandatorily redeemable upon
their maturity on March 8, 2030, and are callable beginning March 8, 2010, at a
premium, which declines ratably to par by 2020. The securities from the
September issuance are mandatorily redeemable upon their maturity on September
7, 2030, and are callable beginning September 7, 2010, at a premium, which
declines ratably to par by 2020. Issuance costs of $0.3 million and $0.5
million, related to the securities issued in March and September, respectively,
are classified as other assets on the balance sheets and are being amortized
over the expected life of the securities as an adjustment to interest expense.

                                        68
<PAGE>   70
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13 -- STOCKHOLDERS' EQUITY

     The payment of dividends by banking subsidiaries is subject to regulatory
restrictions by various federal and/or state regulatory authorities. At December
31, 2000, approximately $51.0 million of the retained earnings of the banking
subsidiaries was available for the payment of dividends to CIB Marine without
prior regulatory agency approval.

     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. The assigned capital category is
largely determined by the 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 components, 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.

     There are five capital categories defined in the regulations:
well-capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized. 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.

     At December 31, 2000, which is the most recent notification from the banks'
primary regulators, all of the bank subsidiaries were categorized as well
capitalized under the regulatory framework for prompt corrective action.

                                        69
<PAGE>   71
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13 -- STOCKHOLDERS' EQUITY -- CONTINUED

     The actual and required capital amounts and ratios are presented in the
tables below.

<TABLE>
<CAPTION>
                                                                                    TO BE WELL
                                                                                    CAPITALIZED
                                                             FOR CAPITAL           UNDER PROMPT
                                            ACTUAL        ADEQUACY PURPOSES    CORRECTIVE PROVISIONS
                                       ----------------   ------------------   ---------------------
           AS OF 12/31/00               AMOUNT    RATIO    AMOUNT     RATIO      AMOUNT      RATIO
           --------------               ------    -----    ------     -----      ------      -----
                                                          (DOLLARS IN THOUSANDS)
<S>                                    <C>        <C>     <C>         <C>      <C>          <C>
Total Capital (to RWA)(1)
  CIB Marine Bancshares, Inc. .......  $227,607   10.66%  $170,826    8.00%     $    N/A        N/A
  Central Illinois Bank..............    71,734   10.33     55,562    8.00%       69,452     10.00%
  CIB -- Chicago.....................   111,418   10.48     85,026    8.00%      106,282     10.00%
  Marine Bank -- Milwaukee...........    28,631   11.15     20,548    8.00%       25,685     10.00%
  CIB -- Indiana.....................    14,949   15.12      7,911    8.00%        9,889     10.00%
  Marine Bank -- Omaha...............    10,164   47.41      1,715    8.00%        2,144     10.00%
Tier 1 Capital (to RWA)
  CIB Marine Bancshares, Inc. .......   204,605    9.58%    85,413    4.00%          N/A        N/A
  Central Illinois Bank..............    63,614    9.16     27,781    4.00%       41,671      6.00%
  CIB -- Chicago.....................   100,198    9.43     42,513    4.00%       63,769      6.00%
  Marine Bank -- Milwaukee...........    26,096   10.16     10,274    4.00%       15,411      6.00%
  CIB -- Indiana.....................    14,001   14.16      3,956    4.00%        5,933      6.00%
  Marine Bank -- Omaha...............     9,885   46.58        857    4.00%        1,286      6.00%
Tier 1 Leverage (to avg. assets)
  CIB Marine Bancshares, Inc.........   204,605    8.87%    92,249    4.00%          N/A        N/A
  Central Illinois Bank..............    63,614    7.97     31,931    4.00%       39,913      5.00%
  CIB -- Chicago.....................   100,198    9.02     44,458    4.00%       55,572      5.00%
  Marine Bank -- Milwaukee...........    26,096    8.53     12,230    4.00%       15,288      5.00%
  CIB -- Indiana.....................    14,001   12.85      4,359    4.00%        5,449      5.00%
  Marine Bank -- Omaha...............     9,985   36.17%     1,104    4.00%        1,380      5.00%
</TABLE>

                                        70
<PAGE>   72
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 13 -- STOCKHOLDERS' EQUITY -- CONTINUED

<TABLE>
<CAPTION>
                                                                                     TO BE WELL
                                                                                    CAPITALIZED
                                                             FOR CAPITAL            UNDER PROMPT
                                           ACTUAL         ADEQUACY PURPOSES    CORRECTIVE PROVISIONS
                                     ------------------   ------------------   ----------------------
          AS OF 12/31/99              AMOUNT     RATIO     AMOUNT     RATIO      AMOUNT       RATIO
          --------------              ------     -----     ------     -----      ------       -----
                                                          (DOLLARS IN THOUSANDS)
<S>                                  <C>        <C>       <C>         <C>      <C>          <C>
Total Capital (to RWA)
  CIB Marine Bancshares, Inc. .....  $165,011    10.19%   $129,508    8.00%     $   N/A         N/A
  Central Illinois Bank............    61,481    10.31%     47,683    8.00%      59,604      10.00%
  CIB -- Chicago...................    78,491    10.36%     60,595    8.00%      75,744      10.00%
  Marine Bank -- Milwaukee.........    20,363    10.08%     16,164    8.00%      20,205      10.00%
  CIB -- Indiana...................    13,896    20.21%      5,500    8.00%       6,875      10.00%
  Marine Bank -- Omaha.............    10,003   199.22%        402    8.00%         502      10.00%
Tier 1 Capital (to RWA)
  CIB Marine Bancshares, Inc. .....   149,198     9.22%     64,754    4.00%         N/A         N/A
  Central Illinois Bank............    54,440     9.13%     23,841    4.00%      35,762       6.00%
  CIB -- Chicago...................    71,868     9.49%     30,298    4.00%      45,446       6.00%
  Marine Bank -- Milwaukee.........    18,968     9.39%      8,082    4.00%      12,123       6.00%
  CIB -- Indiana...................    13,202    19.20%      2,750    4.00%       4,125       6.00%
  Marine Bank -- Omaha.............     9,943   198.03%        201    4.00%         301       6.00%
Tier 1 Leverage (to avg. assets)
  CIB Marine Bancshares, Inc. .....   149,198     8.95%     66,701    4.00%         N/A         N/A
  Central Illinois Bank............    54,440     7.71%     28,248    4.00%      35,310       5.00%
  CIB -- Chicago...................    71,868     9.86%     29,168    4.00%      36,460       5.00%
  Marine Bank -- Milwaukee.........    18,968     9.73%      7,795    4.00%       9,743       5.00%
  CIB -- Indiana...................    13,202    18.49%      2,856    4.00%       3,570       5.00%
  Marine Bank -- Omaha.............     9,943   174.41%        228    4.00%         285       5.00%
</TABLE>

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

(1) RWA -- Risk weighted assets.

NOTE 14 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

     CIB Marine is party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers. CIB
Marine has entered into commitments to extend credit which involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the balance sheets. Standby letters of credit are conditional
commitments issued by CIB Marine to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing and similar
transactions.

     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require a payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. CIB Marine evaluates each
customer's creditworthiness and determines the amount of the collateral
necessary based on management's credit evaluation of the counterparty.
Collateral held varies, but may include accounts receivable, inventories,
property and equipment, residential real estate, and income-producing commercial
properties.

                                        71
<PAGE>   73
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 14 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK -- CONTINUED

     CIB Marine has no derivative financial instruments held or issued for
trading purposes. The derivative financial instruments with which CIB Marine is
involved are utilized for purposes of asset/liability management to modify the
existing market risk characteristics of certain hedged assets and liabilities
and predominately comprise interest rate swaps. An interest rate swap agreement
involves the exchange of fixed and floating rate interest payment obligations
based on the underlying notional principal amounts. The amounts potentially
subject to market and credit risks are the streams of interest payments under
the agreements and not the notional principal amounts used only to express the
volume of the transactions. CIB Marine's credit risk on a swap agreement is
limited to nonperformance of the counterparty's obligations under the terms of
the swap agreement. CIB Marine deals exclusively with counterparties that have
high credit ratings, and based on management's assessments, all counterparties
were expected to meet any outstanding obligations as of December 31, 2000.

     The following table summarizes the off-balance sheet financial instruments
with credit risk.

<TABLE>
<CAPTION>
                                                                 NOTIONAL AMOUNTS
                                                              -----------------------
                                                                 2000         1998
                                                                 ----         ----
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Commitments to extend credit................................   $383,122     $408,003
Commitments to extend mortgage loans to be held for sale....     48,160           --
Credit card arrangements....................................      6,994        6,791
Standby letters of credit...................................     77,501       40,004
Interest rate swaps.........................................     25,000           --
Forward loan sale agreements................................     63,480          N/A
</TABLE>

     For information related to interest rate swaps, see Note 12 -- Long-term
Borrowings.

NOTE 15 -- COMMITMENTS AND CONTINGENCIES

     In the ordinary course of business, CIB Marine has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements. 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.

NOTE 16 -- STOCK OPTION PLANS

     CIB Marine has a nonqualified stock option and incentive plan for its
employees and directors. At December 31, 2000, options to purchase 295,665
shares were available for future grant. The plan provides for the options to be
exercisable over a ten year period beginning one year from the date of the
grant, provided the participant has remained in the employ of, or on the Board
of Directors of CIB Marine and/or one of its subsidiaries. The plan also
provides that the exercise price of the options granted may not be less than
100% of fair market value on the option grant date.

                                        72
<PAGE>   74
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 16 -- STOCK OPTION PLANS -- CONTINUED

     The following table shows activity relating to stock options.

<TABLE>
<CAPTION>
                                                                      RANGE OF           WEIGHTED
                                                       NUMBER          OPTION            AVERAGE
                                                      OF SHARES   PRICES PER SHARE    EXERCISE PRICE
                                                      ---------   ----------------    --------------
<S>                                                   <C>         <C>                <C>
Shares under option at December 31, 1997............    446,700     $ 4.95-13.73         $ 9.0296
  Granted...........................................    478,950      13.07-15.20          13.1418
  Lapsed or surrendered.............................    (30,300)      8.50-13.07          10.2061
  Exercised.........................................    (14,700)      4.95- 8.50           6.1454
                                                      ---------     ------------         --------
Shares under option at December 31, 1998............    880,650     $ 4.95-15.20         $11.2737
  Granted...........................................    340,050      16.23-16.79          16.2687
  Lapsed or surrendered.............................    (61,800)      8.50-16.63          13.3391
  Exercised.........................................    (50,850)      4.95-15.20          16.2687
                                                      ---------     ------------         --------
Shares under option at December 31, 1999............  1,108,050     $ 4.95-16.79         $12.7978
  Granted...........................................    346,137      18.40-19.11          18.4290
  Lapsed or surrendered.............................    (34,452)     10.87-18.40          15.2059
  Exercised.........................................    (20,700)      8.50-16.23          10.1080
                                                      ---------     ------------         --------
Shares under option at December 31, 2000............  1,399,035     $ 4.95-19.11         $14.1715
                                                      =========     ============         ========
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 2000.

<TABLE>
<CAPTION>
                              OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                     -------------------------------------   -----------------------
                                     WEIGHTED
                                     AVERAGE      WEIGHTED                  WEIGHTED
     RANGE OF          NUMBER       REMAINING     AVERAGE       NUMBER      AVERAGE
      OPTION         OUTSTANDING   CONTRACTUAL    EXERCISE   EXERCISABLE    EXERCISE
      PRICES         AT 12/31/00   LIFE (YEARS)    PRICE     AT 12/31/00     PRICE
     --------        -----------   ------------   --------   -----------    --------
<S>                  <C>           <C>            <C>        <C>            <C>
$3.8221 -  5.7330        76,500        2.5        $ 4.9500      76,500      $ 4.9500
 5.7331 -  7.6440            --         --              --          --            --
 7.6441 -  9.5550        92,250        4.0          8.5000      92,250        8.5000
 9.5551 - 11.4660       121,050        5.3         10.8700      96,840       10.8700
11.4661 - 13.3770       426,930        7.1         13.0800     173,910       13.0826
13.3771 - 15.2880        32,850        7.0         14.0835      17,370       13.9859
15.2881 - 17.1990       308,970        8.5         16.2669      64,170       16.2656
17.1991 - 19.1100       340,485        9.6         18.4295          --            --
------------------    ---------        ---        --------     -------      --------
$3.8221 - 19.1100     1,399,035        7.4        $14.1715     521,040      $11.0881
==================    =========        ===        ========     =======      ========
</TABLE>

     CIB Marine applies APB 25 and related interpretations in accounting for its
plan. In February 1998, CIB Marine amended all of its previously adopted stock
option plans to extend the exercise period of all then outstanding options from
5 to 10 years. All options granted since January 1, 1998 have been granted with
10-year expiration periods. The amendment of prior year plans resulted in a new
measurement date for outstanding options granted under these plans. Compensation
expense related to these plans that were amended in 1998 was $0.1 million in
2000, $0.2 million in 1999 and $1.5 million in 1988. Compensation expense
related to these plans in 1998 included $1.2 million related to service for
prior years.

     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 No. 123 Accounting for Stock Based Compensation (SFAS 123),
CIB Marine's net income and earnings per share would have been the pro forma
amounts indicated below:

                                        73
<PAGE>   75
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 16 -- STOCK OPTION PLANS -- CONTINUED

<TABLE>
<CAPTION>
                                                         2000            1999           1998
                                                         ----            ----           ----
                                                      (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                  <C>              <C>             <C>             <C>
Net income.........................  As Reported       $21,073         $13,535         $8,654
                                     Pro Forma          20,384          13,160          9,250
Basic Earnings
  Per Share........................  As Reported          1.26            0.84           0.57
                                     Pro Forma            1.22            0.82           0.61
Diluted Earnings
  Per Share........................  As Reported          1.24            0.83           0.57
                                     Pro Forma            1.20            0.81           0.61
</TABLE>

     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 6.20%, 6.32% and 5.42%, respectively, for 2000, 1999 and 1998. The per
share weighted average fair value of stock options granted during 2000 and 1999
was $8.49 and $7.60, respectively, 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.

NOTE 17 -- OTHER BENEFIT PLANS

     CIB Marine provides a defined contribution 401(k) deferred compensation
plan to all employees of CIB Marine and its subsidiaries who have attained age
20 and work at least a minimum number of hours. Employees enter the plan on the
first entrance date after their start date. Entrance dates are January 1 and
July 1 of each year. The Plan permits participants to make voluntary tax
deferred contributions of up to 15% of annual compensation subject to various
limitations. In the past, CIB Marine has not matched employee contributions. The
administrative costs to maintain the plan are paid by the plan.

     CIB Marine has an employee stock ownership plan (ESOP) for the benefit of
employees who attain a certain number of hours worked and length of service. At
December 31, 2000, the plan held 230,700 shares of common stock, all of which
have been allocated to participants. CIB Marine made contributions in 2000 and
1999 of $ 0.4 million and $0.3 million, respectively. Contributions are
discretionary and are determined annually by the Board of Directors. The
administrative costs to maintain the plan are paid by the plan.

NOTE 18 -- INCOME TAXES

     CIB Marine and its subsidiaries file consolidated federal income tax
returns. The net income or loss of MICR Inc. is recorded net of income tax
expense and reported as noninterest income. MICR Inc. is included in the
consolidated federal income tax return of CIB Marine. The provision for income
taxes in the consolidated statements of income consisted of the following for
the years ended December 31:

<TABLE>
<CAPTION>
                                                        2000      1999      1998
                                                        ----      ----      ----
                                                         (DOLLARS IN THOUSANDS)
<S>                                                    <C>       <C>       <C>
Current tax provision:
  Federal............................................  $13,001     9,186   $5,889
  State..............................................      657     1,383      908
Deferred.............................................   (2,554)   (3,152)  (2,287)
                                                       -------   -------   ------
                                                       $11,104   $ 7,417   $4,510
                                                       =======   =======   ======
</TABLE>

                                        74
<PAGE>   76
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 18 -- INCOME TAXES -- CONTINUED

     A reconciliation of the income tax provision and income taxes, which would
have been provided at the federal statutory rate, is as follows:

<TABLE>
<CAPTION>
                                             2000             1999             1998
                                        --------------    -------------    -------------
                                        AMOUNT     %      AMOUNT    %      AMOUNT    %
                                        ------     -      ------    -      ------    -
                                                     (DOLLARS IN THOUSANDS)
<S>                                     <C>       <C>     <C>      <C>     <C>      <C>
Statutory tax rate....................  $11,262   35.0%   $7,333   35.0%   $4,607   35.0%
Increase (reduction) in tax rate
  resulting from:
  State income taxes, net of Federal
     income tax benefit...............      159     .5       464    2.2       304    2.3
  Goodwill............................      112     .3       112     .5        --     --
  Tax exempt interest.................     (838)  (2.6)     (573)  (2.7)     (497)  (3.7)
  Other, net..........................      409    1.3        81     .4        96     .7
                                        -------   ----    ------   ----    ------   ----
                                        $11,104   34.5%   $7,417   35.4%   $4,510   34.3%
                                        =======   ====    ======   ====    ======   ====
</TABLE>

     The net deferred tax asset in the accompanying Consolidated Balance Sheets
consisted of the following:

<TABLE>
<CAPTION>
                                                                   2000         1999
                                                                   ----         ----
                                                                (DOLLARS IN THOUSANDS)
<S>                                                             <C>           <C>
Deferred by assets:
  Net operating losses......................................     $   355       $  219
  Allowance for loan loss...................................       8,974        6,159
  Non-cash compensation.....................................         484          568
  Deferred loan fees and other..............................       1,337        1,539
  Net unrealized loss in securities available for sale......          --        1,274
                                                                 -------       ------
Deferred tax assets before valuation allowance..............      11,150        9,750
  Valuation allowance.......................................        (378)        (130)
                                                                 -------       ------
Net deferred tax assets.....................................      10,772        9,629
                                                                 -------       ------
Deferred tax liabilities:
  Net unrealized gain in securities available for sale......       1,469           --
  Depreciation..............................................         375          448
  Other Securities..........................................         112          134
  Other.....................................................         515           29
                                                                 -------       ------
          Total deferred tax liabilities....................       2,471          611
                                                                 -------       ------
Net deferred tax asset......................................     $ 8,301       $9,018
                                                                 =======       ======
</TABLE>

     The change in the net deferred tax asset is as follows:

<TABLE>
<CAPTION>
                                                                 2000      1999
                                                                 ----      ----
<S>                                                             <C>       <C>
Deferred tax benefits included in provision.................    $2,554    $3,152
Deferred tax included in other comprehensive income.........    (2,743)    1,771
Reclassifications from current..............................      (528)     (103)
                                                                ------    ------
          Total change in net deferred tax asset............    $ (717)   $4,820
                                                                ======    ======
</TABLE>

                                        75
<PAGE>   77
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 18 -- INCOME TAXES -- CONTINUED

     There were federal net operating loss carryforwards of $0.3 million in both
2000 and 1999, and state net operating loss carryforwards of approximately $5.1
million and $2.8 million in 2000 and 1999, respectively. The net operating loss
carryforwards will expire in varying amounts between 2002 and 2015. Realization
is dependent on generating sufficient taxable income prior to the expiration of
the loss carryforwards. Although realization is not assured, management believes
it is more likely than not that the net deferred tax asset recorded will be
realized.

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

     The table below summarizes the information required by SFAS No. 107,
Disclosures about Fair Value of Financial Instruments (SFAS 107).

<TABLE>
<CAPTION>
                                                                    2000
                                                          ------------------------
                                                           CARRYING     ESTIMATED
                                                            AMOUNT      FAIR VALUE
                                                           --------     ----------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                       <C>           <C>
Financial Assets:
  Cash and cash equivalents...........................    $   42,625    $   42,625
  Loans held for sale.................................        15,320        15,519
  Securities available for sale.......................       366,137       366,137
  Securities held to maturity.........................       126,104       126,856
  Loans receivable, net...............................     1,743,077     1,734,761
  Accrued interest receivable.........................        20,537        20,537
Financial Liabilities:
  Deposit liabilities.................................     1,951,521     1,957,971
  Short term Borrowings...............................       146,439       146,439
  Long Term Borrowings................................        33,223        35,068
  Guaranteed Trust Preferred Securities...............        25,000        25,522
  Accrued interest payable............................        12,546        12,546
</TABLE>

<TABLE>
<CAPTION>
                                                     CONTRACTUAL
                                                     OR NOTIONAL    CARRYING    FAIR
                                                       AMOUNT        AMOUNT     VALUE
                                                     -----------    --------    -----
                                                          (DOLLARS IN THOUSANDS)
<S>                                                  <C>            <C>         <C>
Off-Balance Sheet Items:
  Commitments to extend mortgage loans to be held
     for sale....................................      $48,160         $--      $ 539
  Letters of credit..............................       77,501         --         212
  Commitments to extend credit...................      383,122         --          --
  Credit card arrangements.......................        6,994         --          --
  Interest rate swap agreements..................       25,000         --       1,835
  Forward sale agreements........................       63,480         --        (381)
</TABLE>

                                        76
<PAGE>   78
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- CONTINUED

<TABLE>
<CAPTION>
                                                                    1999
                                                          ------------------------
                                                           CARRYING     ESTIMATED
                                                            AMOUNT      FAIR VALUE
                                                           --------     ----------
                                                           (DOLLARS IN THOUSANDS)
<S>                                                       <C>           <C>
Financial Assets:
  Cash and cash equivalents...........................    $   24,098    $   24,098
  Loans held for sale.................................         2,148         2,148
  Securities available for sale.......................       216,460       216,460
  Securities held to maturity.........................       146,890       145,122
  Loans receivable, net...............................     1,372,018     1,360,392
  Accrued interest receivable.........................        13,141        13,141
Financial Liabilities:
  Deposit liabilities.................................     1,528,456     1,526,207
  Borrowings..........................................       122,969       122,105
  Accrued interest payable............................         8,228         8,228
</TABLE>

     Fair value amounts represent estimates of value at a point in time.
Significant estimates regarding economic conditions, loss experience, risk
characteristics associated with particular financial instruments and other
factors were used for the purposes of this disclosure. These estimates are
subjective in nature and involve matters of judgment. Therefore, they cannot be
determined with precision. Changes in the assumptions could have a material
impact on the amounts estimated.

     While these estimated fair value amounts are designed to represent
estimates of the amounts at which these instruments could be exchanged in a
current transaction between willing parties, it is CIB Marine's intent to hold
most of its financial instruments to maturity. Therefore, it is not probable
that the fair values shown will be realized in a current transaction.

     The estimated fair values disclosed do not reflect the value of assets and
liabilities that are not considered financial instruments. In addition, the
value of long-term relationships with depositors (core deposit intangibles) are
not reflected. The value of this item is significant.

     Because of the wide range of valuation techniques and the numerous
estimates that must be made, it may be difficult to make reasonable comparisons
of CIB Marine's fair value to that of other financial institutions. It is
important that the many uncertainties discussed above be considered when using
the estimated fair value disclosures and to realize that because of these
uncertainties the aggregate fair value should in no way be construed as
representative of the underlying value of CIB Marine.

     The following describes the methodology and assumptions used to estimate
fair value of financial instruments required by SFAS 107.

Cash and cash equivalents

     The carrying amount reported in the balance sheet for cash and cash
equivalents approximates their fair value. For purposes of this disclosure only,
cash equivalents include cash and due from banks, Federal Funds sold and
repurchase agreements.

Available for Sale and Held to Maturity Securities

     The estimated fair values of securities by type are provided in Note 6 to
the Consolidated Financial Statements. These are based on quoted market prices,
when available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities or carrying values.

                                        77
<PAGE>   79
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- CONTINUED

Loans Held for Sale

     The fair value of loans held for sale, primarily conventional residential
mortgage loans, are estimated using quoted market prices of similar loans. If a
quoted market price is unavailable, the fair value is estimated using reasonable
and supportable assumptions and projections.

Loans Receivable

     For loans that reprice frequently, the carrying value approximates their
value. The fair values of all other loan receivables were estimated by
discounting the expected future cash flows using current interest rates at which
similar loans would be made to borrowers with similar credit ratings and
maturities. The carrying value and the fair value of Loans Receivable is net of
the Allowance for Loan and Lease Losses.

Accrued Interest Receivable

     The carrying amounts of accrued interest approximate their fair values.

Deposit Liabilities

     The carrying value of deposits with no stated maturity approximates their
fair value as they are payable on demand. The estimated fair value of fixed time
deposits is based on discounted cash flow analyses. The discount rates used in
these analyses are based on market rates of alternative funding sources
currently available for similar remaining maturities.

Short Term Borrowings

     The carrying value of short term borrowings payable within 3 months or less
approximates their fair value. The estimated fair value of borrowed funds with a
maturity greater than 3 months is based on quoted market prices, when available.
Debt for which quoted prices were not available was valued using cash flows
discounted at a current market rate for similar types of debt. For purposes of
this disclosure, short term borrowings are those borrowings with stated final
maturities of less than or equal to one year, securities sold under agreements
to repurchased, US Treasury Tax and Loan Notes, Lines of Credit, Commercial
Paper and other similar borrowings.

Long Term Borrowings

     The carrying value of long term borrowings payable within 3 months or less
approximates their fair value. The estimated fair value of borrowed funds with a
maturity greater than 3 months is based on quoted market prices, when available.
Debt for which quoted prices were not available was valued using cash flows
discounted at a current market rate for similar types of debt. For purposes of
this disclosure, long term borrowings are those borrowings with stated final
maturity of more than one year, including Federal Home Loan Bank advances with
stated final maturity of greater of more than one year. Notwithstanding their
stated final maturity of more than one year, guaranteed trust preferred
securities are excluded from long term borrowings.

Guaranteed Trust Preferred Securities

     The carrying value of guaranteed trust preferred securities payable within
3 months or less approximates their fair value. The estimated fair value of
guaranteed trust preferred securities with a maturity greater than 3 months is
based on quoted market prices, when available. Debt for which quoted prices were
not available was valued using cash flows discounted at a current market rate
for similar types of debt.

                                        78
<PAGE>   80
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS -- CONTINUED

Accrued Interest Payable

     The carrying amounts of accrued interest approximate their fair values.

Off-Balance Sheet Instruments

     The fair value of commitments to extend mortgage loans to be held for sale
represents the fair value of commitments to make or purchase loans, primarily
conventional mortgage loans, at an agreed upon interest rate. The fair value is
based upon current market quotes, when available. If a quoted market price is
not available, fair value is estimated using reasonable and supportable
assumptions and projections.

     The fair value of interest rate swaps is based upon quoted market prices,
when available. If quoted market price is not available, fair value is estimated
based on the net of the discounted cash flows of the fixed leg and the floating
leg of the swap using as a discount rate currently existing rates available for
swaps of comparable remaining term, notional value, index and counterparty
credit risk.

     The fair value of letters of credit and unused and open ended lines of
credit have been estimated based on the equivalent fees, net of expenses, that
would be charged for comparable transactions.

     The fair value of forward sale agreements represents the fair value of
conditional forward contracts entered into to sell mortgage loans, and is
related to CIB Marine's mortgage banking activities. The fair value is based
upon quoted market prices, when available. If quoted market price is not
available, fair value is based upon an estimate of the fair value of the forward
rate agreement given current interest rates for contracts with similar notional
value, underlying, and term.

NOTE 20 -- PARENT COMPANY FINANCIAL STATEMENTS

     The condensed financial statements of the parent company only, are
presented as follows:

                                        79
<PAGE>   81
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 20 -- PARENT COMPANY FINANCIAL STATEMENTS -- CONTINUED

                 CONDENSED BALANCE SHEETS (PARENT COMPANY ONLY)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2000         1999
                                                                 ----         ----
                                                              (DOLLARS IN THOUSANDS,
                                                                EXCEPT SHARE DATA)
<S>                                                           <C>          <C>
ASSETS
  Cash and Due from Banks...................................   $    907     $    365
  Investments in Subsidiaries...............................    231,043      184,702
  Other Investments.........................................      3,237        2,471
  Loans.....................................................      2,739        3,182
  Premises and Equipment, net...............................        620          248
  Accounts Receivable.......................................         71          455
  Deferred Income Taxes.....................................        586          591
  Other Assets..............................................      1,069          310
                                                               --------     --------
          Total Assets......................................   $240,272     $192,324
                                                               ========     ========
LIABILITIES
  Short-term Borrowings.....................................   $ 18,043     $ 29,710
  Accrued Interest Payable..................................        891          278
  Accrued Income Taxes......................................        673          100
  Other Liabilities.........................................      1,069          901
  Guaranteed Trust Preferred Securities.....................     25,000           --
                                                               --------     --------
          Total Liabilities.................................     45,676       30,989
                                                               --------     --------
STOCKHOLDERS' EQUITY
  Common Stock, $1 Par Value; 50,000,000 Shares Authorized,
     16,918,531 and 16,469,250 Issued and Outstanding,
     respectively...........................................     16,918       16,469
  Capital Surplus...........................................    134,725      126,891
  Retained Earnings.........................................     40,708       20,009
  Accumulated Other Comprehensive Income (Loss).............      2,245       (2,034)
                                                               --------     --------
          Total Stockholders' Equity........................    194,596      161,335
                                                               --------     --------
          Total Liabilities and Stockholders' Equity........   $240,272     $192,324
                                                               ========     ========
</TABLE>

                                        80
<PAGE>   82
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 20 -- PARENT COMPANY FINANCIAL STATEMENTS -- CONTINUED
              CONDENSED STATEMENTS OF INCOME (PARENT COMPANY ONLY)

<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                               2000      1999      1998
                                                               ----      ----      ----
                                                                (DOLLARS IN THOUSANDS)
<S>                                                           <C>       <C>       <C>
INTEREST AND DIVIDEND INCOME
Dividends from Subsidiaries.................................  $   750   $ 2,975   $   --
Loans.......................................................       30       281      412
Other.......................................................       12        --       14
                                                              -------   -------   ------
          Total Interest and Dividend Income................      792     3,256      426
Interest Expense -- Short-term Borrowings...................    1,833       605       83
Interest Expense -- Guaranteed Trust Preferred Securities...    1,351        --       --
                                                              -------   -------   ------
NET INTEREST INCOME (EXPENSE)...............................   (2,392)    2,651      343
NONINTEREST INCOME
Equity in Undistributed Earnings of Subsidiaries............   24,623    12,827   10,532
Loan Fees...................................................       --       109       13
Securities Gain, net........................................        9        --       --
Other Service Fees..........................................    5,450     3,744    3,052
                                                              -------   -------   ------
          Total Noninterest Income..........................   30,082    16,680   13,597
                                                              -------   -------   ------
NONINTEREST EXPENSE
Compensation and Employee Benefits..........................    6,609     5,095    5,314
Equipment...................................................      121        37       31
Occupancy and Premises......................................      577       425      239
Professional Services.......................................      780       554      286
Advertising / Marketing.....................................       38        40       17
Other.......................................................      551       576      347
                                                              -------   -------   ------
          Total Noninterest Expense.........................    8,676     6,727    6,234
                                                              -------   -------   ------
Income Before Income Taxes..................................   19,014    12,604    7,706
Income Tax Benefit..........................................   (2,059)     (931)    (948)
                                                              -------   -------   ------
          Net Income........................................  $21,073   $13,535   $8,654
                                                              =======   =======   ======
</TABLE>

                                        81
<PAGE>   83
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 20 -- PARENT COMPANY FINANCIAL STATEMENTS -- CONTINUED

            CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                                ----       ----       ----
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income................................................  $ 21,073   $ 13,535   $  8,654
  Adjustments to Reconcile Net Income to Net Cash Used by
     Operating Activities:
       Equity in Undistributed Earnings of Subsidiaries.....   (24,623)   (12,827)   (10,532)
       Depreciation and Amortization........................        56         54         36
       Non-Cash Compensation................................        67        185      1,459
       Deferred Tax Benefits................................       578       (322)      (371)
       Gain on Sale of Securities...........................        (9)        --         --
       Decrease (Increase) in Interest Receivable and Other
          Assets............................................       409       (391)       152
       Increase in Interest Payable and Other Liabilities...       781        596         46
                                                              --------   --------   --------
          Net Cash (Used) Provided By Operating
            Activities......................................    (1,668)       830       (556)
                                                              --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in Limited Partnerships and Other
     Investments............................................      (766)    (2,457)        --
  Net Decrease in Loans.....................................       443        190      3,062
  Net Increase in Investment in Subsidiaries................   (18,189)   (48,336)   (31,729)
  Dividends Received from Subsidiaries......................       750      2,975         --
  Proceeds from Sale of Fixed Assets........................        47         --         20
  Capital Expenditures......................................      (500)      (102)      (184)
                                                              --------   --------   --------
          Net Cash Used in Investing Activities.............   (18,215)   (47,730)   (28,831)
                                                              --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from Issuance of Common Stock....................     7,649      5,800     32,583
  Proceeds from Stock Options Exercised.....................       193        522        114
  Purchase/Sale of Treasury Stock...........................        --          6         --
Net Increase in Guaranteed Trust Preferred Securities.......    24,250         --         --
Net (Decrease) Increase in Short-term Borrowings............   (11,667)    29,710         --
                                                              --------   --------   --------
          Net Cash Provided by Financing Activities.........    20,425     36,038     32,697
                                                              --------   --------   --------
Net Increase (Decrease) in Cash and Cash Equivalents........       542    (10,862)     3,310
Cash and Cash Equivalents, Beginning of Year................       365     11,227      7,917
                                                              --------   --------   --------
Cash and Cash Equivalents, End of Year......................  $    907   $    365   $ 11,227
                                                              ========   ========   ========
</TABLE>

                                        82
<PAGE>   84
                          CIB MARINE BANCSHARES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 21 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    QUARTER ENDED 2000
                                                        -------------------------------------------
                                                        DEC. 31    SEPT. 30    JUNE 30    MARCH 31
                                                        -------    --------    -------    --------
                                                         (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                     <C>        <C>         <C>        <C>
2000
Total Interest Income.................................  $51,303     $47,996    $44,094     $39,515
Total Interest Expense................................   31,815      29,137     25,501      22,610
                                                        -------     -------    -------     -------
Net Interest Income...................................   19,488      18,859     18,593      16,905
Provision for Loan Losses.............................    2,074       1,975      1,915       2,360
                                                        -------     -------    -------     -------
Net Interest Income After Provision for Loan Loss.....   17,414      16,884     16,678      14,545
Securities Gains, net.................................       22           9         --          --
Other Noninterest Income..............................    3,069       1,907      1,817       1,377
Noninterest Expense...................................    9,889      10,662     10,886      10,108
                                                        -------     -------    -------     -------
Income Before Income Taxes............................   10,616       8,138      7,609       5,814
Income Tax Expense....................................    3,406       2,928      2,678       2,092
                                                        -------     -------    -------     -------
Net Income............................................  $ 7,210     $ 5,210    $ 4,931     $ 3,722
                                                        =======     =======    =======     =======
Earnings Per Share:
  Basic...............................................  $  0.38     $  0.33    $  0.31     $  0.24
  Diluted.............................................     0.38        0.32       0.31        0.24
</TABLE>

<TABLE>
<CAPTION>
                                                                    QUARTER ENDED 1999
                                                        -------------------------------------------
                                                        DEC. 31    SEPT. 30    JUNE 30    MARCH 31
                                                        -------    --------    -------    --------
                                                         (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                     <C>        <C>         <C>        <C>
1999
Total Interest Income.................................  $34,134     $30,567    $27,441     $24,015
Total Interest Expense................................   18,582      16,497     14,352      12,373
                                                        -------     -------    -------     -------
Net Interest Income...................................   15,552      14,070     13,089      11,642
Provision for Loan Losses.............................    1,625       1,515      1,484       1,486
                                                        -------     -------    -------     -------
Net Interest Income After Provision for Loan Loss.....   13,927      12,555     11,605      10,156
Securities Gains, net.................................       --          --         --          --
Other Noninterest Income..............................    1,261       1,272      1,309       1,941
Noninterest Expense...................................    9,136       8,587      8,111       7,239
                                                        -------     -------    -------     -------
Income Before Income Taxes............................    6,052       5,240      4,803       4,858
Income Tax Expense....................................    2,192       1,832      1,658       1,736
                                                        -------     -------    -------     -------
Net Income............................................  $ 3,860     $ 3,408    $ 3,145     $ 3,122
                                                        =======     =======    =======     =======
Earnings Per Share:
  Basic...............................................  $  0.24     $  0.21    $  0.20     $  0.19
  Diluted.............................................     0.24        0.21       0.19        0.19
</TABLE>

                                        83
<PAGE>   85

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     There were no disagreements or reportable events of the nature required to
be disclosed pursuant to Item 304(b) of Regulation S-K.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICES OF THE REGISTRANT

     The information called for by Item 10 with respect to directors and
director nominees is incorporated by reference to CIB Marine's Proxy Statement
for the annual meeting to be held on April 26, 2001 under the caption "Proposal
1 -- Election of Directors -- Information Regarding Nominees and Directors."

     The information called for by Item 10 with respect to executive officers is
incorporated by reference to Part I hereof under the caption "Supplemental Item.
Executive Officers of CIB Marine."

ITEM 11. EXECUTIVE COMPENSATION

     The information called for by Item 11 is incorporated by reference to CIB
Marine's Proxy Statement for the annual meeting to be held on April 26, 2001
under the captions "Proposal 1 -- Election of Directors" and "Executive
Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information called for by Item 12 is incorporated by reference to CIB
Marine's Proxy Statement for the annual meeting to be held on April 26, 2001
under the captions "Security Ownership of Certain Beneficial Owners" and
"Proposal 1 -- Election of Directors -- Stock Ownership of Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     The information called for by Item 13 is incorporated by reference to CIB
Marine's Proxy Statement for the annual meeting to be held on April 26, 2001
under the caption "Proposal 1 -- Election of Directors -- Certain Relationships
and Related Transactions."

                                        84
<PAGE>   86

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)(1) FINANCIAL STATEMENTS

     - Independent Auditors' Report of KPMG LLP.

     - Consolidated Balance Sheets as of December 31, 2000 and 1999.

     - Consolidated Statements of Income for the Years Ended December 31, 2000,
       1999 and 1998.

     - Consolidated Statements of Stockholders' Equity for the Years Ended
       December 31, 2000, 1999 and 1998.

     - Consolidated Statements of Cash Flows for the Years Ended December 31,
       2000, 1999 and 1998.

     - Notes to Consolidated Financial Statements.

     - See Item 8 for CIB Marine's Consolidated Financial Statements.

(A)(2) FINANCIAL STATEMENT SCHEDULES

     All schedules have been omitted as the required information is either
inapplicable or included in the Notes to Consolidated Financial Statements
contained in Item 8.

(A)(3) LIST OF EXHIBITS

     The exhibits filed herewith are listed on the Exhibit Index filed as part
of this Annual Report on Form 10-K. Each management contract or compensatory
plan or arrangement of CIB Marine listed on the Exhibit Index is designated by
an asterisk.

(b) REPORTS ON FORM 8-K

     No reports on Form 8-K were filed by CIB Marine during the quarter ended
December 31, 2000.

                                        85
<PAGE>   87

                                   SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.

<TABLE>
<S>                                             <C>
                                                CIB MARINE BANCSHARES, INC.
                                                (registrant)

Date: March 29, 2001                            By: /s/
                                                -----------------------------------------------------
                                                    J. Michael Straka
                                                    President and Chief Executive Officer
</TABLE>

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                     DATE
                      ---------                                    -----                     ----
<C>                                                    <S>                              <C>

                         /s/                           President and Chief Executive    March 29, 2001
-----------------------------------------------------  Officer (Principal Executive
                  J. Michael Straka                    Officer) and Director

                         /s/                           Chief Financial Officer          March 29, 2001
-----------------------------------------------------  (Principal Financial and
                 Steven T. Klitzing                    Accounting Officer)

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                     Jose Araujo

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                   Norman E. Baker

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                    John T. Bean

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                   W. Scott Blake

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                  Steven C. Hillard

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                  Dean M. Katsaros

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                   Jerry D. Maahs

                         /s/                           Chairman of the Board of         March 29, 2001
-----------------------------------------------------  Directors and Director
                 Donald M. Trilling

                         /s/                           Director                         March 29, 2001
-----------------------------------------------------
                 Howard E. Zimmerman
</TABLE>

                                        86
<PAGE>   88

                            EXHIBIT INDEX -- UPDATE

<TABLE>
<CAPTION>
        EXHIBIT
          NO.                                      EXHIBIT
        -------                                    -------
<C>                      <S>
           2.1           Agreement and Plan of Reorganization by and among CIB Marine
                         Bancshares, Inc. and Citrus Financial Services, Inc. and
                         Citrus Bank, N.A., dated March 6, 2001
           3.1           Amended and Restated Articles of Incorporation of CIB
                         Marine, Bancshares, Inc. (incorporated by reference to
                         Appendix B to the Proxy Statement of Central Illinois
                         Bancorp, Inc. filed with the Securities and Exchange
                         Commission on May 28, 1999)
           3.2           Bylaws of CIB Marine Bancshares, Inc. (incorporated by
                         reference to Appendix C to the Proxy Statement of Central
                         Illinois Bancorp, Inc. filled with the Securities and
                         Exchange Commission on May 28, 1999)
         *10.1           CIB Marine Bancshares, Inc. 2000 Stock Option and Incentive
                         Plan (incorporated by reference to Appendix A to the Proxy
                         Statement of Central Illinois Bancorp, Inc. filed with the
                         Securities and Exchange Commission on May 28, 1999)
         *10.2           Form of Deferred Compensation Agreement of CIB Marine
                         (incorporated by reference to Exhibit 10.3 to CIB Marine's
                         Form 10 filed on April 30, 1998)
          11             Statement of Computation of Earnings Per Share
          21             Subsidiaries of CIB Marine
          23.1           Consent of KPMG LLP
</TABLE>

                                        87