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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, 2006
 Commission File Number: 000-24149
 CIB MARINE BANCSHARES, INC.
  Wisconsin
(State of incorporation)
    
    37-1203599
(I.R.S. Employer Identification No.)N27 W24025 Paul Court, Pewaukee, Wisconsin
(Address of principal executive offices)
    
    53072
(Zip Code)
 (262) 695-6010
 None
  Common Stock, $1.00 Par Value Per Share
 o þ
 o þ
 o þ
 þ
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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EXPLANATORY NOTE
  FORM 10-K TABLE OF CONTENTS
 PagePart IItem 1
    
     Business
    
    
    3Item 1A
    
     Risk Factors
    
    
    14Item 1B
    
     Unresolved Staff Comments
    
    
    18Item 2
    
     Properties
    
    
    18Item 3
    
     Legal Proceedings
    
    
    19Item 4
    
     Submission of Matters to a Vote of Security Holders
    
    
    23Part IIItem 5
    
     Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    23Item 6
    
     Selected Financial Data
    
    
    24Item 7
    
     Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 7A
    
     Quantitative and Qualitative Disclosures About Market Risk
    
    
    62Item 8
    
     Financial Statements and Supplementary Data
    
    
    66Item 9
    
     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    112Item 9A
    
     Controls and Procedures
    
    
    112Item 9B
    
     Other Information
    
    
    113Part IIIItem 10
    
     Directors, Executive Officers and Corporate Governance
    
    
    113Item 11
    
     Executive Compensation
    
    
    115Item 12
    
     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    122Item 13
    
     Certain Relationships and Related Transactions, and Director Independence
    
    
    124Item 14
    
     Principal Accountant Fees and Services
    
    
    124Part IVItem 15
    
     Exhibits and Financial Statement Schedules
    
    
    125Signatures
    
    
    
    
    127SubsidiariesConsent of KPMG LLPCertification of Chief Executive OfficerCertification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  2




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PART I
 
 ITEM 1. BUSINESS
 CIB MARINE
  
    
    Central Illinois Bank, with its main office in Champaign, Illinois;
    
    Marine Bank, with its main office in Wauwatosa, Wisconsin, a suburb of Milwaukee
(Marine-Wisconsin); and
    
    Citrus Bank, N.A., with its main office in Vero Beach, Florida (Citrus Bank).
     Additional Information
  Markets Served
  3




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Operated
    
    BankingBank
    
    Geographic Market/Region (2)
    
    Since
    
    Facilities
    
    Assets
    
    Deposits(Dollars in millions)Central Illinois Bank
    
    Central Illinois
    
    1987
    
    12
    
    $465.9
    
    $375.0Marine-Wisconsin (1)
    
    Milwaukee, Indianapolis, Phoenix
and Las Vegas metropolitan areas
    
    1997
    
    12
    
    $390.1
    
    $316.3Citrus Bank
    
    Floridas southeastern coast
    
    2001
    
    6
    
    $135.9
    
    $103.9
 
 (1)
    
    Marine FSB was merged into Marine-Wisconsin in March 2006 and CIB-Indiana was merged into
Marine-Wisconsin in August 2006.(2)
    
    As a result of the evaluation of the effectiveness of its branch network, CIB Marine sold
its Omaha facility in June 2006 and closed its Henderson, Nevada facility, which served the
Las Vegas metropolitan area, in the second quarter of 2007, thereby exiting these markets.
See Item 8, Note 25-Subsequent Events in Part II of this Form 10-K for additional details
regarding branch sales and closures. Nonbank Subsidiaries
  CIB Marine Information Services, Inc.
  Mortgage Services, Inc.
  CIB Marine Capital, LLC
  MICR, Inc. (n/k/a Everett Tech, Inc.)
  4




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CIB Construction, LLC
  Management Support Services
  Total Employees
  COMPETITION
   5




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SUPERVISION AND REGULATION
 General
      Expansion Activities
  Interstate Banking and Branching
  6




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Capital Standards
  
    
    core capital (commonly referred to as Tier 1 capital), which generally includes common
equity, qualifying noncumulative perpetual preferred stock, and for bank holding companies,
a limited amount of qualifying cumulative perpetual preferred stock, and minority interests
in equity accounts of consolidated subsidiaries (including junior subordinated debentures
net of investment in trust, provided that not more than 25% of the qualifying Tier 1
capital may consist of junior subordinated debentures, net of investment in trust), less
goodwill and certain other intangible assets; and
    
    supplementary capital (commonly referred to as Tier 2 capital), which includes, among
other items, perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible securities, and limited amounts of subordinated debt and reserves for credit
losses.
       7




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Holding Company Obligations
  Cross-Guarantees Under the Federal Deposit Insurance Act
  Safety and Soundness Guidelines
  8




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Prompt Corrective Action
       9




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Dividend Restrictions
    10




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Federal Deposit Insurance
    Restrictions on Affiliate Transactions
   11




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Community Reinvestment Act and Fair Lending
  Compliance with Consumer Protection Laws
  
    
    require banks to disclose credit terms in meaningful and consistent ways;
    
    prohibit discrimination against an applicant in any consumer or business credit
transaction;
    
    prohibit discrimination in housing-related lending activities;
    
    require banks to collect and report applicant and borrower data regarding loans for
home purchases or improvement projects;
    
    require lenders to provide borrowers with information regarding the nature and cost
of real estate settlements;
    
    prohibit certain lending practices and limit escrow account amounts with respect to
real estate transactions; and
    
    prescribe possible penalties for violations of the requirements of consumer
protection statutes and regulations.
 Privacy and Security
  12




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USA Patriot Act of 2001
  Sarbanes-Oxley Act of 2002
  Exchange Act
  Future Legislation
  AVAILABLE INFORMATION
  13




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ITEM 1A. RISK FACTORS
 Forward-Looking Statements
   Risk Factors
  CIB Marine has suffered large losses in recent years, and it must execute its strategic plan and return to profitability.
  CIB Marines results of operations are subject to general and regional economic conditions, which
are beyond its control.
  14




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CIB Marine operates in a highly regulated environment and is subject to supervision and examination by various federal and state regulatory agencies.
   
    
    Adequate capital and financial condition;
    
    Permissible types, amounts and extensions of credit and investments;
    
    Permissible non-banking activities; and
    
    Restrictions on dividend payments.
   
    
    Maintenance of minimum capital levels;
    
    Restrictions on dividend payments and redemption of shares of CIB Marine without
regulatory approval;
    
    Limitations on asset and loan growth;
    
    Adoption of a comprehensive plan to improve earnings;
    
    Development of a plan to reduce concentrations of credit and loan relationships
classified as substandard or doubtful;
    
    Development of a system to correct loan administration deficiencies; and
    
    Development of a plan to correct and prevent violations of banking laws and regulations
related to affiliate transactions.
   CIB Marine is subject to litigation.
   15




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CIB Marine competes for key personnel.
  CIB Marines future success depends upon its ability to compete effectively in the highly
competitive banking industry.
  CIB Marines loan portfolio contains concentrations of credit to one borrower, related borrowers or
borrowers in the same industry, which creates special credit risks.
   16




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CIB Marine is subject to certain risks in connection with its use of technology.
   CIB Marines profitability is dependent upon its ability to manage net interest income.
   CIB Marine is subject to credit risk.
    17




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CIB Marine is subject to liquidity risk and has long-term obligations on which it has deferred
interest payments.
      CIB Marine relies on dividends received from its subsidiaries.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  18




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Owned or
    
    Date OpenedLocation
    
    Leased
    
    or AcquiredSUBSIDIARY BANKS:CENTRAL ILLINOIS BANK FACILITIESSidney, Illinois
    
    Owned
    
    09/87Champaign, Illinois
    
    Owned
    
    09/88Urbana, Illinois
    
    Owned
    
    03/90Arrowsmith, Illinois
    
    Owned
    
    10/91Champaign, Illinois (Midtown)
    
    Owned
    
    04/94Monticello, Illinois
    
    Leased
    
    05/95Danville, Illinois
    
    Owned
    
    08/95Decatur, Illinois
    
    Leased
    
    10/95Peoria, Illinois
    
    Leased
    
    09/97East Peoria, Illinois
    
    Owned
    
    10/97Bloomington, Illinois
    
    Owned
    
    10/00Peoria, Illinois (Grand Prairie)
    
    Leased
    
    04/03MARINE-WISCONSIN FACILITIESCedarburg, Wisconsin (1)
    
    Owned
    
    09/97Pewaukee, Wisconsin
    
    Leased
    
    02/98Wauwatosa, Wisconsin
    
    Leased
    
    05/98Milwaukee, Wisconsin(1)
    
    Leased
    
    04/99Franklin, Wisconsin
    
    Leased
    
    08/00Brookfield, Wisconsin (1)
    
    Leased
    
    09/01Indianapolis, Indiana (Fox Road) (1)
    
    Leased
    
    03/98Indianapolis, Indiana (Emerson Way)
    
    Leased
    
    09/98Carmel, Indiana
    
    Leased
    
    08/00Scottsdale, Arizona
    
    Leased
    
    10/01Henderson, Nevada (1)
    
    Leased
    
    01/02Sun City, Arizona (1)
    
    Leased
    
    02/04CITRUS BANK FACILITIESVero Beach, Florida
    
    Owned
    
    04/90Sebastian, Florida
    
    Owned
    
    02/93Barefoot Bay, Florida
    
    Owned
    
    09/96North Miami Beach, Florida
    
    Leased
    
    12/01Coral Gables, Florida
    
    Leased
    
    04/03Boca Raton, Florida
    
    Leased
    
    04/03NONBANK SUBSIDIARIES:CIB MARINE BANCSHARES, INC.Champaign, Illinois
    
    Leased
    
    10/99Gurnee, Illinois
    
    Leased
    
    04/05Chicago, Illinois
    
    Leased
    
    01/05
 
 (1)
    
    Subsequent to December 31, 2006, CIB Marine sold, closed or received regulatory approval to
close the branch. CIB Marines subsidiary banks are continuing to evaluate the effectiveness
of their respective branch networks, which may result in the sale or closure of additional
branches. See Item 7-Managements Discussion and Analysis of Financial Condition and Results
of Operations-Subsequent Events-Branch Activities in Part II of this Form 10-K.  
 ITEM 3. LEGAL PROCEEDINGS
   19




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Dennis Lewis, et
al. v. CIB Marine Bancshares, Inc., et al
   20




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21




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22




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
   23




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ITEM 6. SELECTED FINANCIAL DATA
  TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands, except share and per share data)Selected Statements of Operations DataInterest and dividend income
    
    $
    61,509
    
    
    $
    59,849
    
    
    $
    69,979
    
    
    $
    96,663
    
    
    $
    101,868Interest expense
    
    
    38,242
    
    
    
    34,795
    
    
    
    37,287
    
    
    
    46,578
    
    
    
    51,079Net interest income
    
    
    23,267
    
    
    
    25,054
    
    
    
    32,692
    
    
    
    50,085
    
    
    
    50,789Provision for credit losses
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    17,432
    
    
    
    50,506
    
    
    
    19,074Net interest income after provision for credit losses
    
    
    27,651
    
    
    
    33,723
    
    
    
    15,260
    
    
    
    (421
    )
    
    
    31,715Noninterest income(1)
    
    
    4,426
    
    
    
    2,895
    
    
    
    3,678
    
    
    
    5,113
    
    
    
    5,500Noninterest expense
    
    
    42,015
    
    
    
    50,970
    
    
    
    52,729
    
    
    
    51,348
    
    
    
    44,620Loss from continuing operations before income taxes
    
    
    (9,938
    )
    
    
    (14,352
    )
    
    
    (33,791
    )
    
    
    (46,656
    )
    
    
    (7,405
    )Income tax expense (benefit)
    
    
    (99
    )
    
    
    (1,208
    )
    
    
    (5,240
    )
    
    
    1,906
    
    
    
    (4,199
    )Loss from continuing operations
    
    
    (9,839
    )
    
    
    (13,144
    )
    
    
    (28,551
    )
    
    
    (48,562
    )
    
    
    (3,206
    )Discontinued operations:Pretax income (loss) from discontinued operations
    
    
    660
    
    
    
    3,850
    
    
    
    15,618
    
    
    
    (92,147
    )
    
    
    18,960Income tax expense (benefit)
    
    
    99
    
    
    
    2,367
    
    
    
    4,414
    
    
    
    (3,061
    )
    
    
    6,947Income (loss) from discontinued operations
    
    
    561
    
    
    
    1,483
    
    
    
    11,204
    
    
    
    (89,086
    )
    
    
    12,013Net loss
    
    $
    (9,278
    )
    
    $
    (11,661
    )
    
    $
    (17,347
    )
    
    $
    (137,648
    )
    
    $
    8,807Common Share DataBasic earnings (loss) per share:Loss from continuing operations
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )
    
    $
    (2.66
    )
    
    $
    (0.18
    )Discontinued operations
    
    
    0.03
    
    
    
    0.08
    
    
    
    0.61
    
    
    
    (4.87
    )
    
    
    0.66Net income (loss)
    
    $
    (0.51
    )
    
    $
    (0.64
    )
    
    $
    (0.95
    )
    
    $
    (7.53
    )
    
    $
    0.48Diluted earnings (loss) per share:Loss from continuing operations
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )
    
    $
    (2.66
    )
    
    $
    (0.18
    )Discontinued operations
    
    
    0.03
    
    
    
    0.08
    
    
    
    0.61
    
    
    
    (4.87
    )
    
    
    0.65Net income (loss)
    
    $
    (0.51
    )
    
    $
    (0.64
    )
    
    $
    (0.95
    )
    
    $
    (7.53
    )
    
    $
    0.47Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Book value per share
    
    $
    3.91
    
    
    $
    4.32
    
    
    $
    4.83
    
    
    $
    5.94
    
    
    $
    13.52Weighted average shares outstanding-basic
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884
    
    
    
    18,286,550
    
    
    
    18,167,379Weighted average shares outstanding-diluted
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884
    
    
    
    18,286,550
    
    
    
    18,547,515Financial Condition DataTotal assets
    
    $
    997,584
    
    
    $
    1,138,428
    
    
    $
    1,385,908
    
    
    $
    3,186,237
    
    
    $
    3,650,705Loans
    
    
    522,724
    
    
    
    515,544
    
    
    
    746,615
    
    
    
    2,360,041
    
    
    
    2,704,006Allowance for loan losses
    
    
    (20,906
    )
    
    
    (24,882
    )
    
    
    (29,551
    )
    
    
    (109,872
    )
    
    
    (65,122
    )Securities
    
    
    345,602
    
    
    
    493,409
    
    
    
    379,024
    
    
    
    637,356
    
    
    
    516,744Deposits
    
    
    739,784
    
    
    
    867,700
    
    
    
    1,178,488
    
    
    
    2,821,218
    
    
    
    2,848,404Deposits of branches held for sale
    
    
    55,365
    
    
    
    66,991
    
    
    
    
    
    
    
    
    
    
    
    Borrowings, including junior subordinated debentures
and guaranteed trust preferred securities
    
    
    91,510
    
    
    
    94,108
    
    
    
    87,916
    
    
    
    200,734
    
    
    
    494,086Stockholders equity
    
    
    71,613
    
    
    
    79,182
    
    
    
    92,892
    
    
    
    108,523
    
    
    
    247,563Financial Ratios and Other DataPerformance ratios:Net interest margin (2) (9)
    
    
    2.29
    %
    
    
    2.06
    %
    
    
    2.22
    %
    
    
    3.12
    %
    
    
    3.43
    %Net interest spread (3) (9)
    
    
    1.59
    
    
    
    1.56
    
    
    
    1.96
    
    
    
    2.81
    
    
    
    3.03Noninterest income to average assets(4)(9)
    
    
    0.46
    
    
    
    0.38
    
    
    
    1.23
    
    
    
    0.57
    
    
    
    0.41Noninterest expense to average assets (9)
    
    
    3.98
    
    
    
    4.07
    
    
    
    3.62
    
    
    
    2.06
    
    
    
    1.88Efficiency ratio (5) (9)
    
    
    148.58
    
    
    
    172.03
    
    
    
    106.40
    
    
    
    57.42
    
    
    
    49.97Return (loss) on average assets (6)
    
    
    (0.88
    )
    
    
    (0.93
    )
    
    
    (0.62
    )
    
    
    (3.94
    )
    
    
    0.27Return (loss) on average equity (7)
    
    
    (12.78
    )
    
    
    (13.51
    )
    
    
    (20.06
    )
    
    
    (63.02
    )
    
    
    3.57Asset quality ratios:Nonaccrual loans, restructured loans and loans 90
days or more past due and still accruing to total
loans
    
    
    4.24
    %
    
    
    8.17
    %
    
    
    8.41
    %
    
    
    6.58
    %
    
    
    1.80
    %Nonperforming assets and loans 90 days or more
past due and still accruing to total assets
    
    
    2.23
    
    
    
    3.96
    
    
    
    4.75
    
    
    
    6.15
    
    
    
    1.43Allowance for loan losses to total loans
    
    
    4.00
    
    
    
    4.83
    
    
    
    3.96
    
    
    
    4.66
    
    
    
    2.41Allowance for loan losses to nonaccrual loans,
restructured loans and loans 90 days or more past
due and still accruing
    
    
    94.37
    
    
    
    59.06
    
    
    
    47.08
    
    
    
    70.72
    
    
    
    134.09Net charge-offs (recoveries) to average loans
    
    
    (0.08
    )
    
    
    (0.67
    )
    
    
    3.85
    
    
    
    3.81
    
    
    
    0.64Capital ratios:
 24




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At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands, except share and per share data)Total equity to total assets
    
    
    7.18
    %
    
    
    6.96
    %
    
    
    6.70
    %
    
    
    3.41
    %
    
    
    6.78
    %Total risk-based capital ratio
    
    
    20.95
    
    
    
    21.37
    
    
    
    17.47
    
    
    
    7.19
    
    
    
    10.01Tier 1 risk-based capital ratio
    
    
    14.32
    
    
    
    15.33
    
    
    
    13.11
    
    
    
    5.03
    
    
    
    8.75Leverage capital ratio
    
    
    9.51
    
    
    
    9.20
    
    
    
    5.63
    
    
    
    4.23
    
    
    
    8.30Other data:Number of employees (full-time equivalent)(8)
    
    
    301
    
    
    
    359
    
    
    
    482
    
    
    
    898
    
    
    
    844Number of banking facilities
    
    
    30
    
    
    
    37
    
    
    
    41
    
    
    
    57
    
    
    
    52
 
 (1)
    
    Noninterest income includes pretax gains on investment securities of $0.4 million and $1.7
million for the years ended December 31, 2005 and 2002, respectively. There were no pretax
gains on investment securities in 2006, 2004 and 2003.(2)
    
    Net interest margin is the ratio of net interest income, on a tax-equivalent basis, to
average interest-earning assets. For the years 2003 and 2002 the effective tax rate used to
calculate the tax-equivalent basis was 35%. In the future, CIB Marine does not expect to
realize all the tax benefits associated with tax-exempt assets due to substantial losses and
at December 31, 2006, 2005 and 2004 no U.S. federal or state loss carryback potential remains.
Accordingly, the 2006, 2005 and 2004 interest income on tax-exempt earning assets has not been
adjusted to reflect the tax-equivalent basis. If 2006, 2005 and 2004 had been shown on a
tax-equivalent basis of 35%, the net interest margin would have been 2.34%, 2.13% and 2.28%,
respectively.(3)
    
    Net interest rate spread is the yield on average interest-earning assets less the rate on
average interest-bearing liabilities.(4)
    
    Noninterest income to average assets excludes gains and losses on securities.(5)
    
    The efficiency ratio is noninterest expense divided by the sum of net interest income, on a
tax-equivalent basis, plus noninterest income, excluding gains and losses on securities.(6)
    
    Return (loss) on average assets is net income (loss) divided by average total assets.(7)
    
    Return (loss) on average equity is net income (loss) divided by average common equity.(8)
    
    Does not include the employees of Canron and MICR which are manufacturing companies held for
disposal. These companies had full-time equivalent employees of 2 in 2006 and 2005, 37 in
2004, 49 in 2003 and 914 in 2002.(9)
    
    Ratio is calculated based on the total income/expense and average assets/liabilities for
continuing and discontinued operations.  CIB MARINE-CONTINUING OPERATIONS ONLY:
 At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands, except share and per share data)Selected Statements of Operations DataInterest and dividend income
    
    $
    61,509
    
    
    $
    59,849
    
    
    $
    69,979
    
    
    $
    96,663
    
    
    $
    101,868Interest expense
    
    
    38,242
    
    
    
    34,795
    
    
    
    37,287
    
    
    
    46,578
    
    
    
    51,079Net interest income
    
    
    23,267
    
    
    
    25,054
    
    
    
    32,692
    
    
    
    50,085
    
    
    
    50,789Provision for credit losses
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    17,432
    
    
    
    50,506
    
    
    
    19,074Net interest income after provision for credit losses
    
    
    27,651
    
    
    
    33,723
    
    
    
    15,260
    
    
    
    (421
    )
    
    
    31,715Noninterest income(1)
    
    
    4,426
    
    
    
    2,895
    
    
    
    3,678
    
    
    
    5,113
    
    
    
    5,500Noninterest expense
    
    
    42,015
    
    
    
    50,970
    
    
    
    52,729
    
    
    
    51,348
    
    
    
    44,620Loss from continuing operations before income taxes
    
    
    (9,938
    )
    
    
    (14,352
    )
    
    
    (33,791
    )
    
    
    (46,656
    )
    
    
    (7,405
    )Income tax expense (benefit)
    
    
    (99
    )
    
    
    (1,208
    )
    
    
    (5,240
    )
    
    
    1,906
    
    
    
    (4,199
    )Net loss from continuing operations
    
    $
    (9,839
    )
    
    $
    (13,144
    )
    
    $
    (28,551
    )
    
    $
    (48,562
    )
    
    $
    (3,206
    )Common Share DataBasic-loss from continuing operations
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )
    
    $
    (2.66
    )
    
    $
    (0.18
    )Diluted-loss from continuing operations
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )
    
    $
    (2.66
    )
    
    $
    (0.18
    )Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Book value per share
    
    $
    3.91
    
    
    $
    4.32
    
    
    $
    4.83
    
    
    $
    5.94
    
    
    $
    13.52Weighted average shares outstanding-basic
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884
    
    
    
    18,286,550
    
    
    
    18,167,379Weighted average shares outstanding-diluted
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884
    
    
    
    18,286,550
    
    
    
    18,547,515Financial Condition DataTotal assets
    
    $
    993,472
    
    
    $
    1,132,515
    
    
    $
    1,371,043
    
    
    $
    1,704,149
    
    
    $
    1,749,064Loans
    
    
    522,624
    
    
    
    515,544
    
    
    
    746,615
    
    
    
    1,231,412
    
    
    
    1,400,964Allowance for loan losses
    
    
    (20,906
    )
    
    
    (24,882
    )
    
    
    (29,551
    )
    
    
    (54,382
    )
    
    
    (31,756
    )Securities
    
    
    345,602
    
    
    
    493,409
    
    
    
    379,024
    
    
    
    353,754
    
    
    
    268,523Deposits
    
    
    739,784
    
    
    
    867,700
    
    
    
    1,178,488
    
    
    
    1,515,574
    
    
    
    1,596,253Deposits of branches held for sale
    
    
    55,365
    
    
    
    66,991
    
    
    
    
    
    
    
    
    
    
    
    Borrowings, including junior subordinated debentures
and guaranteed trust preferred securities
    
    
    91,510
    
    
    
    94,108
    
    
    
    87,916
    
    
    
    123,074
    
    
    
    242,403Stockholders equity
    
    
    71,613
    
    
    
    79,182
    
    
    
    92,892
    
    
    
    108,523
    
    
    
    247,563Financial Ratios and Other DataPerformance Ratios:Net interest margin (2)
    
    
    2.29
    %
    
    
    2.06
    %
    
    
    2.21
    %
    
    
    3.02
    %
    
    
    3.33
    %Net interest spread (3)
    
    
    1.59
    
    
    
    1.57
    
    
    
    1.91
    
    
    
    2.70
    
    
    
    2.93Noninterest income to average assets (4)
    
    
    0.42
    
    
    
    0.20
    
    
    
    0.24
    
    
    
    0.29
    
    
    
    0.24Noninterest expense to average assets
    
    
    4.00
    
    
    
    4.04
    
    
    
    3.49
    
    
    
    2.87
    
    
    
    2.78Efficiency ratio (5)
    
    
    151.72
    
    
    
    184.71
    
    
    
    144.98
    
    
    
    90.85
    
    
    
    79.81Return (loss) on average assets (6)
    
    
    (0.94
    )
    
    
    (1.04
    )
    
    
    (1.89
    )
    
    
    (2.72
    )
    
    
    (0.20
    )Return (loss) on average equity (7)
    
    
    (13.56
    )
    
    
    (15.23
    )
    
    
    (33.02
    )
    
    
    (22.23
    )
    
    
    (1.30
    )Asset Quality Ratios:Nonaccrual loans restructured loans and loans 90
days or more past due and still accruing to total
loans
    
    
    4.24
    %
    
    
    8.17
    %
    
    
    8.41
    %
    
    
    4.56
    %
    
    
    1.67
    %Nonperforming assets and loans 90 days or more
past due and still accruing to total assets
    
    
    2.24
    
    
    
    3.98
    
    
    
    4.79
    
    
    
    3.47
    
    
    
    1.50Allowance for loan losses to total loans
    
    
    4.00
    
    
    
    4.83
    
    
    
    3.96
    
    
    
    4.42
    
    
    
    2.27Allowance for loan losses to nonaccrual loans,
restructured loans and loans 90 days or more past
due and still accruing
    
    
    94.37
    
    
    
    59.06
    
    
    
    47.08
    
    
    
    96.85
    
    
    
    136.12Net charge-offs (recoveries) to average loans
    
    
    (0.08
    )
    
    
    (0.67
    )
    
    
    4.06
    
    
    
    2.04
    
    
    
    0.42Capital Ratios:Total equity to total assets
    
    
    7.21
    %
    
    
    6.99
    %
    
    
    6.78
    %
    
    
    6.37
    %
    
    
    14.15
    %
 25




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##### Table of Contents



At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands, except share and per share data)Total risk-based capital ratio
    
    
    20.95
    
    
    
    21.54
    
    
    
    17.53
    
    
    
    13.38
    
    
    
    19.11Tier 1 risk-based capital ratio
    
    
    14.32
    
    
    
    15.45
    
    
    
    13.16
    
    
    
    10.33
    
    
    
    17.85Leverage capital ratio
    
    
    9.51
    
    
    
    9.20
    
    
    
    9.08
    
    
    
    8.10
    
    
    
    16.20Other Data:Number of employees (full-time equivalent)
    
    
    301
    
    
    
    359
    
    
    
    482
    
    
    
    590
    
    
    
    544Number of banking facilities
    
    
    30
    
    
    
    37
    
    
    
    41
    
    
    
    41
    
    
    
    38
 
 (1)
    
    Noninterest income from continuing operations includes pretax gains on investment securities
of $0.4 million and $1.7 million on for the years ended December 31, 2005 and 2002 ,
respectively. There were no pretax gains on investment securities in 2006, 2004 and 2003.(2)
    
    Net interest margin is the ratio of net interest income, on a tax-equivalent basis, to
average interest-earning assets. For the years 2003 and 2002 the effective tax rate used to
calculate the tax-equivalent basis was 35%. In the future, CIB Marine does not expect to
realize all the tax benefits associated with tax-exempt assets due to substantial losses and
at December 31, 2006, 2005 and 2004 no U.S. federal or state loss carryback potential remains.
Accordingly, the 2006, 2005 and 2004 interest income on tax-exempt earning assets has not been
adjusted to reflect the tax-equivalent basis. If 2006, 2005 and 2004 had been shown on a
tax-equivalent basis of 35%, the net interest margin would have been 2.34%, 2.13% and 2.29%,
respectively.(3)
    
    Net interest rate spread is the yield on average interest-earning assets less the rate on
average interest-bearing liabilities.(4)
    
    Noninterest income to average assets excludes gains and losses on securities.(5)
    
    The efficiency ratio is noninterest expense divided by the sum of net interest income, on a
tax-equivalent basis, plus noninterest income, excluding gains and losses on securities.(6)
    
    Return (loss) on average assets is net income (loss) divided by average total assets.(7)
    
    Return (loss) on average equity is net income (loss) divided by average common equity. 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 CRITICAL ACCOUNTING POLICIES
   Allowance for Loan Losses
  Accounting by Creditors for Impairment
of a Loan, Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures. Accounting for Contingencies
  26




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##### Table of Contents



Other Investments
  Assets of Companies Held for Sale or Disposal
  27




---



##### Table of Contents



Income Taxes
    INTRODUCTION
  OVERVIEW
  28




---



##### Table of Contents



RESULTS OF OPERATIONS
  Net Income
    Net Interest Income
   29




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##### Table of Contents



TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageBalance
    
    
    Earned/Paid
    
    
    Yield/Cost
    
    
    Balance
    
    
    Earned/Paid
    
    
    Yield/Cost
    
    
    Balance
    
    
    Earned/Paid
    
    
    Yield/Cost(Dollars in thousands)AssetsInterest-earning assets:Securities:Taxable
    
    $
    406,560
    
    
    $
    18,512
    
    
    
    4.55
    %
    
    $
    476,249
    
    
    $
    16,545
    
    
    
    3.47
    %
    
    $
    673,100
    
    
    $
    15,535
    
    
    
    2.31
    %Tax-exempt (1)
    
    
    3,520
    
    
    
    161
    
    
    
    4.57
    
    
    
    10,551
    
    
    
    509
    
    
    
    4.82
    
    
    
    43,022
    
    
    
    1,660
    
    
    
    3.86Total securities
    
    
    410,080
    
    
    
    18,673
    
    
    
    4.55
    
    
    
    486,800
    
    
    
    17,054
    
    
    
    3.50
    
    
    
    716,122
    
    
    
    17,195
    
    
    
    2.40Loans held for sale
    
    
    25
    
    
    
    2
    
    
    
    8.00
    
    
    
    1,776
    
    
    
    111
    
    
    
    6.25
    
    
    
    24,259
    
    
    
    1,484
    
    
    
    6.12Loans (2)(3):Commercial
    
    
    50,234
    
    
    
    3,879
    
    
    
    7.72
    
    
    
    114,331
    
    
    
    6,771
    
    
    
    5.92
    
    
    
    528,242
    
    
    
    27,251
    
    
    
    5.16Commercial real estate
    
    
    418,907
    
    
    
    30,790
    
    
    
    7.35
    
    
    
    457,125
    
    
    
    30,146
    
    
    
    6.59
    
    
    
    1,289,930
    
    
    
    77,033
    
    
    
    5.97Consumer
    
    
    56,017
    
    
    
    3,871
    
    
    
    6.91
    
    
    
    23,258
    
    
    
    1,500
    
    
    
    6.45
    
    
    
    37,409
    
    
    
    2,240
    
    
    
    5.99Total loans
    
    
    525,158
    
    
    
    38,540
    
    
    
    7.34
    
    
    
    594,714
    
    
    
    38,417
    
    
    
    6.46
    
    
    
    1,855,581
    
    
    
    106,524
    
    
    
    5.74Federal funds sold
    
    
    79,731
    
    
    
    4,300
    
    
    
    5.39
    
    
    
    133,585
    
    
    
    4,296
    
    
    
    3.22
    
    
    
    126,717
    
    
    
    1,891
    
    
    
    1.49Total interest-earning assets (1)
    
    
    1,014,994
    
    
    
    61,515
    
    
    
    6.06
    
    
    
    1,216,875
    
    
    
    59,878
    
    
    
    4.92
    
    
    
    2,722,679
    
    
    
    127,094
    
    
    
    4.67Noninterest-earning assets:Cash and due from banks
    
    
    22,886
    
    
    
    
    
    
    
    
    
    
    
    28,255
    
    
    
    
    
    
    
    
    
    
    
    48,120Premises and equipment
    
    
    12,572
    
    
    
    
    
    
    
    
    
    
    
    14,910
    
    
    
    
    
    
    
    
    
    
    
    26,993Allowance for loan losses
    
    
    (22,968
    )
    
    
    
    
    
    
    
    
    
    
    (25,537
    )
    
    
    
    
    
    
    
    
    
    
    (100,286
    )Receivables from sale of stock
    
    
    (176
    )
    
    
    
    
    
    
    
    
    
    
    (739
    )
    
    
    
    
    
    
    
    
    
    
    (3,775
    )Accrued interest receivable and
other assets
    
    
    23,677
    
    
    
    
    
    
    
    
    
    
    
    26,741
    
    
    
    
    
    
    
    
    
    
    
    89,312Total noninterest-earning assets
    
    
    35,991
    
    
    
    
    
    
    
    
    
    
    
    43,630
    
    
    
    
    
    
    
    
    
    
    
    60,364Total assets
    
    $
    1,050,985
    
    
    
    
    
    
    
    
    
    
    $
    1,260,505
    
    
    
    
    
    
    
    
    
    
    $
    2,783,043Liabilities and Stockholders EquityInterest-bearing liabilities:Deposits:Interest-bearing demand deposits
    
    $
    43,001
    
    
    $
    425
    
    
    
    0.99
    %
    
    $
    55,764
    
    
    $
    628
    
    
    
    1.13
    %
    
    $
    85,979
    
    
    $
    994
    
    
    
    1.16
    %Money market
    
    
    194,290
    
    
    
    7,723
    
    
    
    3.97
    
    
    
    210,366
    
    
    
    5,187
    
    
    
    2.47
    
    
    
    343,764
    
    
    
    4,981
    
    
    
    1.45Other savings deposits
    
    
    21,839
    
    
    
    219
    
    
    
    1.00
    
    
    
    35,382
    
    
    
    409
    
    
    
    1.16
    
    
    
    192,847
    
    
    
    2,672
    
    
    
    1.39Time deposits (4)
    
    
    507,013
    
    
    
    20,880
    
    
    
    4.12
    
    
    
    641,274
    
    
    
    20,773
    
    
    
    3.24
    
    
    
    1,674,168
    
    
    
    48,973
    
    
    
    2.93Total interest-bearing deposits
    
    
    766,143
    
    
    
    29,247
    
    
    
    3.82
    
    
    
    942,786
    
    
    
    26,997
    
    
    
    2.86
    
    
    
    2,296,758
    
    
    
    57,620
    
    
    
    2.51Borrowings-short-term
    
    
    22,915
    
    
    
    1,008
    
    
    
    4.40
    
    
    
    25,939
    
    
    
    823
    
    
    
    3.17
    
    
    
    61,317
    
    
    
    2,364
    
    
    
    3.86Borrowings-long-term (4)
    
    
    4,834
    
    
    
    245
    
    
    
    5.07
    
    
    
    7,250
    
    
    
    367
    
    
    
    5.06
    
    
    
    37,447
    
    
    
    882
    
    
    
    2.36Junior subordinated debentures
    
    
    61,857
    
    
    
    7,742
    
    
    
    12.52
    
    
    
    61,857
    
    
    
    6,636
    
    
    
    10.73
    
    
    
    61,857
    
    
    
    5,710
    
    
    
    9.23Total borrowed funds
    
    
    89,606
    
    
    
    8,995
    
    
    
    10.04
    
    
    
    95,046
    
    
    
    7,826
    
    
    
    8.23
    
    
    
    160,621
    
    
    
    8,956
    
    
    
    5.58Total interest-bearing liabilities
    
    
    855,749
    
    
    
    38,242
    
    
    
    4.47
    
    
    
    1,037,832
    
    
    
    34,823
    
    
    
    3.36
    
    
    
    2,457,379
    
    
    
    66,576
    
    
    
    2.71Noninterest-bearing liabilities:Noninterest-bearing demand deposits
    
    
    91,668
    
    
    
    
    
    
    
    
    
    
    
    112,470
    
    
    
    
    
    
    
    
    
    
    
    185,606Accrued interest and other
liabilities
    
    
    30,988
    
    
    
    
    
    
    
    
    
    
    
    23,872
    
    
    
    
    
    
    
    
    
    
    
    53,588Total noninterest-bearing
liabilities
    
    
    122,656
    
    
    
    
    
    
    
    
    
    
    
    136,342
    
    
    
    
    
    
    
    
    
    
    
    239,194Stockholders equity
    
    
    72,580
    
    
    
    
    
    
    
    
    
    
    
    86,331
    
    
    
    
    
    
    
    
    
    
    
    86,470Total liabilities and stockholders
equity
    
    $
    1,050,985
    
    
    
    
    
    
    
    
    
    
    $
    1,260,505
    
    
    
    
    
    
    
    
    
    
    $
    2,783,043Net interest income and net
interest spread (1)(5)
    
    
    
    
    
    $
    23,273
    
    
    
    1.59
    %
    
    
    
    
    
    $
    25,055
    
    
    
    1.56
    %
    
    
    
    
    
    $
    60,518
    
    
    
    1.96
    %Net interest-earning assets
    
    $
    159,245
    
    
    
    
    
    
    
    
    
    
    $
    179,043
    
    
    
    
    
    
    
    
    
    
    $
    265,300Net interest margin (1)(6)
    
    
    
    
    
    
    
    
    
    
    2.29
    %
    
    
    
    
    
    
    
    
    
    
    2.06
    %
    
    
    
    
    
    
    
    
    
    
    2.22
    %Ratio of average interest-earning
assets to average interest-bearing
liabilities
    
    
    1.19
    
    
    
    
    
    
    
    
    
    
    
    1.17
    
    
    
    
    
    
    
    
    
    
    
    1.11
 
 (1)
    
    In the future, CIB Marine may not realize all of the tax benefits associated with tax-exempt
assets due to substantial losses, and at December 31, 2006, 2005 and 2004 no U.S. federal or
state loss carryback potential remains. Accordingly, 2006, 2005 and 2004 are not presented on
a tax-equivalent basis. If 2006, 2005 and 2004 had been shown on a tax-equivalent basis of
35%, the net interest margin would have been 2.34%, 2.13% and 2.28%, respectively.(2)
    
    Loan balance totals include nonaccrual loans.(3)
    
    Interest earned on loans includes amortized loan fees of $0.6 million, $0.9 million, and $2.9
million for the years ended December 31, 2006, 2005 and 2004, respectively.(4)
    
    Interest rates and amounts include the effects of derivatives entered into for interest rate
risk management and accounted for as fair value hedges.(5)
    
    Net interest rate spread is the difference between the average rates on interest-earning
assets and interest-bearing liabilities.(6)
    
    Net interest margin is the ratio of net interest income to average interest-earning assets. 30




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##### Table of Contents



Reconciliation of net interest income
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Interest income reported in margin table(1)
    
    $
    61,515
    
    
    $
    59,878
    
    
    $
    127,094Interest income included in discontinued operations
    
    
    (6
    )
    
    
    (29
    )
    
    
    (57,115
    )Interest income as reported in consolidated statements of operations
    
    
    61,509
    
    
    
    59,849
    
    
    
    69,979Interest expense reported in margin table
    
    
    38,242
    
    
    
    34,823
    
    
    
    66,576Interest expense included in discontinued operations
    
    
    
    
    
    
    (28
    )
    
    
    (29,289
    )Interest expense as reported in consolidated statements of operations
    
    
    38,242
    
    
    
    34,795
    
    
    
    37,287Net interest income reported in margin table(1)
    
    
    23,273
    
    
    
    25,055
    
    
    
    60,518Net discontinued operations
    
    
    (6
    )
    
    
    (1
    )
    
    
    (27,826
    )Net interest income, net of adjustments as reported in consolidated
statement of operations
    
    $
    23,267
    
    
    $
    25,054
    
    
    $
    32,692
 
 (1)
    
    In the future, CIB Marine may not realize all of the tax benefits associated with tax-exempt
assets due to substantial losses, and at December 31, 2006, 2005 and 2004 no U.S. federal or
state loss carryback potential remains. Accordingly, 2006, 2005 and 2004 are not presented on
a tax-equivalent basis. 31




---



##### Table of Contents



CIB MARINE-CONTINUING OPERATIONS ONLY:
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageBalance
    
    
    Earned/Paid
    
    
    Yield/Cost
    
    
    Balance
    
    
    Earned/Paid
    
    
    Yield/Cost
    
    
    Balance
    
    
    Earned/Paid
    
    
    Yield/Cost(Dollars in thousands)AssetsInterest-earning assets:Securities:Taxable
    
    $
    406,560
    
    
    $
    18,512
    
    
    
    4.55
    %
    
    $
    476,249
    
    
    $
    16,545
    
    
    
    3.47
    %
    
    $
    361,455
    
    
    $
    9,062
    
    
    
    2.51
    %Tax-exempt (1)
    
    
    3,520
    
    
    
    161
    
    
    
    4.57
    
    
    
    10,551
    
    
    
    509
    
    
    
    4.82
    
    
    
    20,060
    
    
    
    866
    
    
    
    4.32Total securities
    
    
    410,080
    
    
    
    18,673
    
    
    
    4.55
    
    
    
    486,800
    
    
    
    17,054
    
    
    
    3.50
    
    
    
    381,515
    
    
    
    9,928
    
    
    
    2.60Loans held for sale
    
    
    25
    
    
    
    2
    
    
    
    8.00
    
    
    
    1,470
    
    
    
    83
    
    
    
    5.65
    
    
    
    1,612
    
    
    
    213
    
    
    
    13.21Loans (2)(3):Commercial
    
    
    50,234
    
    
    
    3,873
    
    
    
    7.71
    
    
    
    114,331
    
    
    
    6,769
    
    
    
    5.92
    
    
    
    295,138
    
    
    
    15,022
    
    
    
    5.09Commercial real estate
    
    
    418,907
    
    
    
    30,790
    
    
    
    7.35
    
    
    
    457,125
    
    
    
    30,147
    
    
    
    6.59
    
    
    
    696,582
    
    
    
    41,829
    
    
    
    6.00Consumer
    
    
    56,017
    
    
    
    3,871
    
    
    
    6.91
    
    
    
    23,258
    
    
    
    1,500
    
    
    
    6.45
    
    
    
    31,372
    
    
    
    1,860
    
    
    
    5.93Total loans
    
    
    525,158
    
    
    
    38,534
    
    
    
    7.34
    
    
    
    594,714
    
    
    
    38,416
    
    
    
    6.46
    
    
    
    1,023,092
    
    
    
    58,711
    
    
    
    5.74Federal funds sold
    
    
    79,731
    
    
    
    4,300
    
    
    
    5.39
    
    
    
    133,585
    
    
    
    4,296
    
    
    
    3.22
    
    
    
    70,776
    
    
    
    1,127
    
    
    
    1.59Total interest-earning assets (1)
    
    
    1,014,994
    
    
    
    61,509
    
    
    
    6.06
    
    
    
    1,216,569
    
    
    
    59,849
    
    
    
    4.92
    
    
    
    1,476,995
    
    
    
    69,979
    
    
    
    4.74Noninterest-earning assets:Cash and due from banks
    
    
    22,886
    
    
    
    
    
    
    
    
    
    
    
    28,255
    
    
    
    
    
    
    
    
    
    
    
    32,605Premises and equipment (4)
    
    
    12,572
    
    
    
    
    
    
    
    
    
    
    
    14,910
    
    
    
    
    
    
    
    
    
    
    
    15,910Allowance for loan losses
    
    
    (22,968
    )
    
    
    
    
    
    
    
    
    
    
    (25,537
    )
    
    
    
    
    
    
    
    
    
    
    (52,237
    )Receivables from sale of stock
    
    
    (176
    )
    
    
    
    
    
    
    
    
    
    
    (739
    )
    
    
    
    
    
    
    
    
    
    
    (2,157
    )Accrued interest receivable and other
assets
    
    
    23,677
    
    
    
    
    
    
    
    
    
    
    
    26,741
    
    
    
    
    
    
    
    
    
    
    
    39,086Total noninterest- earning assets
    
    
    35,991
    
    
    
    
    
    
    
    
    
    
    
    43,630
    
    
    
    
    
    
    
    
    
    
    
    33,207Total assets of continuing operations
    
    
    1,050,985
    
    
    
    
    
    
    
    
    
    
    
    1,260,199
    
    
    
    
    
    
    
    
    
    
    
    1,510,202Assets of companies held for disposal(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306
    
    
    
    
    
    
    
    
    
    
    
    1,272,841Total assets
    
    $
    1,050,985
    
    
    
    
    
    
    
    
    
    
    $
    1,260,505
    
    
    
    
    
    
    
    
    
    
    $
    2,783,043Liabilities and Stockholders EquityInterest-bearing liabilities:Deposits:Interest-bearing demand deposits
    
    $
    43,001
    
    
    $
    425
    
    
    
    0.99
    %
    
    $
    55,764
    
    
    $
    628
    
    
    
    1.13
    %
    
    $
    63,291
    
    
    $
    754
    
    
    
    1.19
    %Money market
    
    
    194,290
    
    
    
    7,723
    
    
    
    3.97
    
    
    
    210,366
    
    
    
    5,187
    
    
    
    2.47
    
    
    
    293,044
    
    
    
    4,326
    
    
    
    1.48Other savings deposits
    
    
    21,839
    
    
    
    219
    
    
    
    1.00
    
    
    
    35,382
    
    
    
    409
    
    
    
    1.16
    
    
    
    40,611
    
    
    
    501
    
    
    
    1.23Time deposits (6)
    
    
    507,013
    
    
    
    20,880
    
    
    
    4.12
    
    
    
    641,274
    
    
    
    20,773
    
    
    
    3.24
    
    
    
    814,691
    
    
    
    24,154
    
    
    
    2.96Total interest-bearing deposits(4)
    
    
    766,143
    
    
    
    29,247
    
    
    
    3.82
    
    
    
    942,786
    
    
    
    26,997
    
    
    
    2.86
    
    
    
    1,211,637
    
    
    
    29,735
    
    
    
    2.45Borrowings-short-term
    
    
    22,915
    
    
    
    1,008
    
    
    
    4.40
    
    
    
    25,633
    
    
    
    795
    
    
    
    3.10
    
    
    
    32,065
    
    
    
    1,325
    
    
    
    4.13Borrowings-long-term (6)
    
    
    4,834
    
    
    
    245
    
    
    
    5.07
    
    
    
    7,250
    
    
    
    367
    
    
    
    5.06
    
    
    
    10,060
    
    
    
    517
    
    
    
    5.14Junior subordinated debentures
    
    
    61,857
    
    
    
    7,742
    
    
    
    12.52
    
    
    
    61,857
    
    
    
    6,636
    
    
    
    10.73
    
    
    
    61,857
    
    
    
    5,710
    
    
    
    9.23Total borrowed funds
    
    
    89,606
    
    
    
    8,995
    
    
    
    10.04
    
    
    
    94,740
    
    
    
    7,798
    
    
    
    8.23
    
    
    
    103,982
    
    
    
    7,552
    
    
    
    7.26Total interest-bearing liabilities
    
    
    855,749
    
    
    
    38,242
    
    
    
    4.47
    
    
    
    1,037,526
    
    
    
    34,795
    
    
    
    3.35
    
    
    
    1,315,619
    
    
    
    37,287
    
    
    
    2.83Noninterest-bearing liabilities:Noninterest-bearing demand deposits(4)
    
    
    91,668
    
    
    
    
    
    
    
    
    
    
    
    112,470
    
    
    
    
    
    
    
    
    
    
    
    124,108Accrued interest and other liabilities
    
    
    30,988
    
    
    
    
    
    
    
    
    
    
    
    23,872
    
    
    
    
    
    
    
    
    
    
    
    25,495Total noninterest- bearing liabilities
    
    
    122,656
    
    
    
    
    
    
    
    
    
    
    
    136,342
    
    
    
    
    
    
    
    
    
    
    
    149,603Liabilities of continuing operations
    
    
    978,405
    
    
    
    
    
    
    
    
    
    
    
    1,173,868
    
    
    
    
    
    
    
    
    
    
    
    1,465,222Liabilities of companies held for disposal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    306
    
    
    
    
    
    
    
    
    
    
    
    1,231,351Total liabilities
    
    $
    978,405
    
    
    
    
    
    
    
    
    
    
    $
    1,174,174
    
    
    
    
    
    
    
    
    
    
    $
    2,696,573Stockholders equity
    
    
    72,580
    
    
    
    
    
    
    
    
    
    
    
    86,331
    
    
    
    
    
    
    
    
    
    
    
    86,470Total liabilities and stockholders equity
    
    $
    1,050,985
    
    
    
    
    
    
    
    
    
    
    $
    1,260,505
    
    
    
    
    
    
    
    
    
    
    $
    2,783,043Net interest income and net interest
spread (1)(7)
    
    
    
    
    
    $
    23,267
    
    
    
    1.59
    %
    
    
    
    
    
    $
    25,054
    
    
    
    1.57
    %
    
    
    
    
    
    $
    32,692
    
    
    
    1.91
    %Net interest-earning assets
    
    $
    159,245
    
    
    
    
    
    
    
    
    
    
    $
    179,043
    
    
    
    
    
    
    
    
    
    
    $
    161,376Net interest margin (1)(8)
    
    
    
    
    
    
    
    
    
    
    2.29
    %
    
    
    
    
    
    
    
    
    
    
    2.06
    %
    
    
    
    
    
    
    
    
    
    
    2.21
    %Ratio of average interest-earning assets
to average interest-bearing liabilities
    
    
    1.19
    
    
    
    
    
    
    
    
    
    
    
    1.17
    
    
    
    
    
    
    
    
    
    
    
    1.12
 
 (1)
    
    In the future, CIB Marine may not realize all of the tax benefits associated with tax-exempt
assets due to substantial losses, and at December 31, 2006, 2005 and 2004 no U.S. federal or
state loss carryback potential remains. Accordingly, 2006, 2005 and 2004 are not presented on
a tax-equivalent basis. If 2006, 2005 and 2004 had been shown on a tax-equivalent basis of
35%, the net interest margin would have been 2.34% , 2.13% and 2.29%, respectively.(2)
    
    Loan balance totals include nonaccrual loans.(3)
    
    Interest earned on loans includes amortized loan fees of $0.6 million, $0.9 million, and $1.5
million for the years ended December 31, 2006, 2005 and 2004, respectively.(4)
    
    Includes fixed assets and deposits of branches held for sale or sold during 2006.(5)
    
    Excludes average loans of $1.6 million for 2004 held by CIB-Chicago, which on a consolidated
basis are classified as receivables from sale of stock. See Item 8, Note 14-Stockholders
Equity in Part II of this Form 10-K for information on receivables from sale of stock.(6)
    
    Interest rates and amounts include the effects of derivatives entered into for interest rate risk management and accounted for as fair value hedges.(7)
    
    Net interest rate spread is the difference between the average rates on interest-earning assets and interest-bearing liabilities.(8)
    
    Net interest margin is the ratio of net interest income, on a tax-equivalent basis, to average interest-earning assets.  32




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##### Table of Contents



TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 Year Ended December 31, 2006 Compared to
    
    
    Year Ended December 31, 2005 Compared toYear Ended December 31, 2005 (2)
    
    
    Year Ended December 31, 2004 (2)Volume
    
    
    Rate
    
    
    Total
    
    
    % Change
    
    
    Volume
    
    
    Rate
    
    
    Total
    
    
    % Change(Dollars in thousands)Interest IncomeSecurities-taxable
    
    $
    (2,662
    )
    
    $
    4,629
    
    
    $
    1,967
    
    
    
    11.89
    %
    
    $
    (5,386
    )
    
    $
    6,396
    
    
    $
    1,010
    
    
    
    6.50
    %Securities-tax-exempt (1)
    
    
    (324
    )
    
    
    (24
    )
    
    
    (348
    )
    
    
    (68.37
    )
    
    
    (1,487
    )
    
    
    336
    
    
    
    (1,151
    )
    
    
    (69.34
    )Total securities
    
    
    (2,986
    )
    
    
    4,605
    
    
    
    1,619
    
    
    
    9.49
    
    
    
    (6,873
    )
    
    
    6,732
    
    
    
    (141
    )
    
    
    (0.82
    )Loans held for sale
    
    
    (133
    )
    
    
    24
    
    
    
    (109
    )
    
    
    (98.20
    )
    
    
    (1,404
    )
    
    
    31
    
    
    
    (1,373
    )
    
    
    (92.52
    )Commercial
    
    
    (4,545
    )
    
    
    1,653
    
    
    
    (2,892
    )
    
    
    (42.71
    )
    
    
    (24,012
    )
    
    
    3,532
    
    
    
    (20,480
    )
    
    
    (75.15
    )Commercial real estate
    
    
    (2,642
    )
    
    
    3,286
    
    
    
    644
    
    
    
    2.14
    
    
    
    (54,200
    )
    
    
    7,313
    
    
    
    (46,887
    )
    
    
    (60.87
    )Consumer
    
    
    2,257
    
    
    
    114
    
    
    
    2,371
    
    
    
    158.07
    
    
    
    (902
    )
    
    
    162
    
    
    
    (740
    )
    
    
    (33.04
    )Total loans (including fees)
    
    
    (4,930
    )
    
    
    5,053
    
    
    
    123
    
    
    
    0.32
    
    
    
    (79,114
    )
    
    
    11,007
    
    
    
    (68,107
    )
    
    
    (63.94
    )Federal funds sold
    
    
    (2,169
    )
    
    
    2,173
    
    
    
    4
    
    
    
    0.09
    
    
    
    108
    
    
    
    2,297
    
    
    
    2,405
    
    
    
    127.18Total interest income (1)
    
    
    (10,218
    )
    
    
    11,855
    
    
    
    1,637
    
    
    
    2.73
    
    
    
    (87,283
    )
    
    
    20,067
    
    
    
    (67,216
    )
    
    
    (52.89
    )Interest ExpenseInterest-bearing demand deposits
    
    
    (133
    )
    
    
    (70
    )
    
    
    (203
    )
    
    
    (32.32
    )
    
    
    (341
    )
    
    
    (25
    )
    
    
    (366
    )
    
    
    (36.82
    )Money market
    
    
    (423
    )
    
    
    2,959
    
    
    
    2,536
    
    
    
    48.89
    
    
    
    (2,416
    )
    
    
    2,622
    
    
    
    206
    
    
    
    4.14Other savings deposits
    
    
    (143
    )
    
    
    (47
    )
    
    
    (190
    )
    
    
    (46.45
    )
    
    
    (1,882
    )
    
    
    (381
    )
    
    
    (2,263
    )
    
    
    (84.69
    )Time deposits
    
    
    (4,863
    )
    
    
    4,970
    
    
    
    107
    
    
    
    0.52
    
    
    
    (32,978
    )
    
    
    4,778
    
    
    
    (28,200
    )
    
    
    (57.58
    )Total deposits
    
    
    (5,562
    )
    
    
    7,812
    
    
    
    2,250
    
    
    
    8.33
    
    
    
    (37,617
    )
    
    
    6,994
    
    
    
    (30,623
    )
    
    
    (53.15
    )Borrowings-short-term
    
    
    (105
    )
    
    
    290
    
    
    
    185
    
    
    
    22.48
    
    
    
    (1,178
    )
    
    
    (363
    )
    
    
    (1,541
    )
    
    
    (65.19
    )Borrowings-long-term
    
    
    (121
    )
    
    
    (1
    )
    
    
    (122
    )
    
    
    (33.24
    )
    
    
    (1,048
    )
    
    
    533
    
    
    
    (515
    )
    
    
    (58.39
    )Junior subordinated debentures
    
    
    
    
    
    
    1,106
    
    
    
    1,106
    
    
    
    16.67
    
    
    
    
    
    
    
    926
    
    
    
    926
    
    
    
    16.22Total borrowed funds
    
    
    (226
    )
    
    
    1,395
    
    
    
    1,169
    
    
    
    14.94
    
    
    
    (2,226
    )
    
    
    1,096
    
    
    
    (1,130
    )
    
    
    (12.62
    )Total interest expense
    
    
    (5,788
    )
    
    
    9,207
    
    
    
    3,419
    
    
    
    9.82
    
    
    
    (39,843
    )
    
    
    8,090
    
    
    
    (31,753
    )
    
    
    (47.69
    )Net interest income (1)
    
    $
    (4,430
    )
    
    $
    2,648
    
    
    $
    (1,782
    )
    
    
    (7.11
    )%
    
    $
    (47,440
    )
    
    $
    11,977
    
    
    $
    (35,463
    )
    
    
    (58.60
    )%
 
 (1)
    
    In the future, CIB Marine may not realize all of the tax benefits associated with tax-exempt
assets due to substantial losses, and at December 31, 2006, 2005 and 2004 no U.S. federal or
state loss carryback potential remains. Accordingly, 2006, 2005 and 2004 are not presented on
a tax-equivalent basis.(2)
    
    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. CIB MARINE-CONTINUING OPERATIONS ONLY:
 Year Ended December 31, 2006 Compared to
    
    
    Year Ended December 31, 2005 Compared toYear Ended December 31, 2005 (2)
    
    
    Year Ended December 31, 2004 (2)Volume
    
    
    Rate
    
    
    Total
    
    
    % Change
    
    
    Volume
    
    
    Rate
    
    
    Total
    
    
    % Change(Dollars in thousands)Interest IncomeSecurities-taxable
    
    $
    (2,662
    )
    
    $
    4,629
    
    
    $
    1,967
    
    
    
    11.89
    %
    
    $
    3,379
    
    
    $
    4,104
    
    
    $
    7,483
    
    
    
    82.58
    %Securities-tax-exempt (1)
    
    
    (324
    )
    
    
    (24
    )
    
    
    (348
    )
    
    
    (68.37
    )
    
    
    (450
    )
    
    
    93
    
    
    
    (357
    )
    
    
    (41.22
    )Total securities
    
    
    (2,986
    )
    
    
    4,605
    
    
    
    1,619
    
    
    
    9.49
    
    
    
    2,929
    
    
    
    4,197
    
    
    
    7,126
    
    
    
    71.78Loans held for sale
    
    
    (106
    )
    
    
    25
    
    
    
    (81
    )
    
    
    (97.59
    )
    
    
    (18
    )
    
    
    (112
    )
    
    
    (130
    )
    
    
    (61.03
    )Commercial
    
    
    (4,540
    )
    
    
    1,644
    
    
    
    (2,896
    )
    
    
    (42.78
    )
    
    
    (10,390
    )
    
    
    2,138
    
    
    
    (8,252
    )
    
    
    (54.93
    )Commercial real estate
    
    
    (2,642
    )
    
    
    3,285
    
    
    
    643
    
    
    
    2.13
    
    
    
    (15,477
    )
    
    
    3,794
    
    
    
    (11,683
    )
    
    
    (27.93
    )Consumer
    
    
    2,257
    
    
    
    114
    
    
    
    2,371
    
    
    
    158.07
    
    
    
    (513
    )
    
    
    153
    
    
    
    (360
    )
    
    
    (19.35
    )Total loans (including fees)
    
    
    (4,925
    )
    
    
    5,043
    
    
    
    118
    
    
    
    0.31
    
    
    
    (26,380
    )
    
    
    6,085
    
    
    
    (20,295
    )
    
    
    (34.57
    )Federal funds sold
    
    
    (2,169
    )
    
    
    2,173
    
    
    
    4
    
    
    
    0.09
    
    
    
    1,475
    
    
    
    1,694
    
    
    
    3,169
    
    
    
    281.19Total interest income (1)
    
    
    (10,186
    )
    
    
    11,846
    
    
    
    1,660
    
    
    
    2.77
    
    
    
    (21,994
    )
    
    
    11,864
    
    
    
    (10,130
    )
    
    
    (14.48
    )Interest ExpenseInterest-bearing demand deposits
    
    
    (133
    )
    
    
    (70
    )
    
    
    (203
    )
    
    
    (32.32
    )
    
    
    (87
    )
    
    
    (39
    )
    
    
    (126
    )
    
    
    (16.71
    )Money market
    
    
    (423
    )
    
    
    2,959
    
    
    
    2,536
    
    
    
    48.89
    
    
    
    (1,463
    )
    
    
    2,324
    
    
    
    861
    
    
    
    19.90Other savings deposits
    
    
    (142
    )
    
    
    (48
    )
    
    
    (190
    )
    
    
    (46.45
    )
    
    
    (61
    )
    
    
    (31
    )
    
    
    (92
    )
    
    
    (18.36
    )Time deposits
    
    
    (4,863
    )
    
    
    4,970
    
    
    
    107
    
    
    
    0.52
    
    
    
    (5,474
    )
    
    
    2,093
    
    
    
    (3,381
    )
    
    
    (14.00
    )Total deposits
    
    
    (5,561
    )
    
    
    7,811
    
    
    
    2,250
    
    
    
    8.33
    
    
    
    (7,085
    )
    
    
    4,347
    
    
    
    (2,738
    )
    
    
    (9.21
    )Borrowings-short-term
    
    
    (92
    )
    
    
    305
    
    
    
    213
    
    
    
    26.79
    
    
    
    (235
    )
    
    
    (295
    )
    
    
    (530
    )
    
    
    (40.00
    )Borrowings-long-term
    
    
    (122
    )
    
    
    
    
    
    
    (122
    )
    
    
    (33.24
    )
    
    
    (142
    )
    
    
    (8
    )
    
    
    (150
    )
    
    
    (29.01
    )Junior subordinated debentures
    
    
    
    
    
    
    1,106
    
    
    
    1,106
    
    
    
    16.67
    
    
    
    
    
    
    
    926
    
    
    
    926
    
    
    
    16.22Total borrowed funds
    
    
    (214
    )
    
    
    1,411
    
    
    
    1,197
    
    
    
    15.35
    
    
    
    (377
    )
    
    
    623
    
    
    
    246
    
    
    
    3.26Total interest expense
    
    
    (5,775
    )
    
    
    9,222
    
    
    
    3,447
    
    
    
    9.91
    
    
    
    (7,462
    )
    
    
    4,970
    
    
    
    (2,492
    )
    
    
    (6.68
    )Net interest income (1)
    
    $
    (4,411
    )
    
    $
    2,624
    
    
    $
    (1,787
    )
    
    
    (7.13
    )%
    
    $
    (14,532
    )
    
    $
    6,894
    
    
    $
    (7,638
    )
    
    
    (23.36
    )%
 
 (1)
    
    In the future, CIB Marine may not realize all of the tax benefits associated with tax-exempt
assets due to substantial losses, and at December 31, 2006, 2005 and 2004 no U.S. federal or
state loss carryback potential remains. Accordingly, 2006, 2005 and 2004 are not presented on
a tax-equivalent basis.(2)
    
    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. 33




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##### Table of Contents



Interest Income
   Interest Expense
   Net Interest Margin/Net Interest Spread
  34




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##### Table of Contents



Provision for Credit Losses
   Noninterest Income
   Noninterest Expense
  
    
    Compensation and employee benefits expense is the largest component of noninterest
expense and represented 48.8% of total noninterest expense for 2006 compared to 50.4% for
2005. Compensation and employee benefits expense decreased $5.2 million or 20.3% from $25.7
million in 2005 to $20.5 million in 2006. The decrease is primarily due to an overall cost
savings program initiated by CIB Marine in the second half of 2004. The cost savings
program included a reduction in force program, restrictions on salaries and hiring, tight
expense controls and some executive management salary reductions. Additionally, CIB Marine
closed one branch and sold six branches during 2006 and closed three branches and sold one
during 2005. The total number of full-time equivalent employees of companies included in
continuing operations, decreased from 359 at December 31, 2005 to 301 at December 31, 2006.On January 1, 2006, CIB Marine adopted Statement of Financial Accounting Standards No. 123
(revised 2004) (SFAS No. 123 (R)), Share-Based Payments. A key provision of SFAS No. 123
(R) requires public companies to adopt Statement 123s fair-value method of accounting for
stock optons. Under this
 35




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##### Table of Contents



method, the cost of employee services received in exchange for equity instruments is measured
based on the grant-date fair value of these instruments. The cost is recognized over the
requisite service period. SFAS No. 123 (R) applies to all awards granted after the required
effective date and to awards modified, repurchased, or cancelled after that date. Pro forma
disclosure for grants after 2005 is no longer an alternative. Prior to 2006, CIB Marine
accounted for stock options in accordance with APB Opinion 25, as allowed under SFAS No. 123,
and therefore, no compensation cost had been recognized in connection with stock options
granted in any year prior to 2006. During 2006, CIB Marine adopted SFAS 123 (R) on a modified
prospective basis and accordingly, recorded a $0.1 million compensation expense in 2006
related to stock options.
    
    During 2006, CIB Marine recognized a net gain on the sale of assets of $2.7 million
which is included in noninterest income. During 2005, CIB Marine recognized $1.9 million in
write down and losses on assets. The $1.9 million loss recognized during 2005 was mainly
due to a $1.7 million loss on the sale of a limited number of commercial real estate and
commercial construction loans, a $0.3 million impairment loss on fixed assets of closed
facilities and a $0.1 million impairment loss on its equity interest in a small business
investment company. These losses were partially offset by a $0.3 million gain on the sale
of the fixed assets and deposits of its Sebring, Florida branch.
    
    During 2007, CIB Marine decided to sell certain of its available for sale securities.
As a result of this decision, CIB Marine determined it would not be holding these certain
securities for a period of time sufficient to recover the carrying value at December 31,
2006. Accordingly, CIB Marine realized a $1.1 million other-than-temporary loss on these
certain securities during 2006 compared to $2.0 million during 2005. See the Securities
discussion for further information.
    
    Other noninterest expense decreased $0.2 million from $9.4 million during 2005 to $9.2
million during 2006. Included in noninterest expense is a $1.8 million contingent liability
expense related to the settlement of the John C. Hadley and Mary Lydia Hadley litigation in
the first quarter of 2007. See Item 3-Legal Proceedings in Part II of this Form 10-K for
further information on the settlement. Offsetting the 2006 settlement expense is a $0.8
million decrease in advertising, supplies, shipping and handling due to management
initiatives and closing/sale of branches; a $0.5 million decrease in FDIC and state
assessments; a $0.2 million decrease in collection expense; and a $0.4 million decrease in
other noninterest expense.
  
    
    Compensation and employee benefits expense is the largest component of noninterest
expense and represented 50.4% of total noninterest expense for 2005 compared to 54.6% for
2004. Compensation and employee benefits expense decreased $3.1 million or 10.7% from $28.8
million in 2004 to $25.7 million in 2005. The decrease in compensation and employee benefit
expense is primarily due to an overall cost savings program initiated by CIB Marine in the
second half of 2004. The cost savings program included a reduction in force program,
restrictions on salaries and hiring, tight expense controls and some executive management
salary reductions. Additionally, CIB Marine closed three branches and sold one branch
during 2005. The total number of full-time equivalent employees of companies included in
continuing operations, decreased from 482 at December 31, 2004 to 359 at December 31, 2005.
These reductions were partially offset by $0.8 million of severance expense in 2005
compared to $0.1 million in 2004 and a $0.3 million increase in CIB Marines total
contribution to its employee 401(k) plan. During the first quarter of 2004, CIB Marine
suspended the matching contribution to the 401(k) plan. In 2005, CIB Marine reinstated and
increased the matching contribution to the 401(k) plan.
    
    Professional services decreased $2.1 million in 2005 compared to 2004. The decrease was
primarily due to expenses incurred in 2004 related to the special investigation and
strategic planning, partially offset by an increase in expenses during 2005 related to
legal actions filed against CIB Marine. See Item 3-Legal Proceedings in Part II of this
Form 10-K for further discussion of these legal actions. In October 2003, a Special Review
Committee of the Board of Directors of CIB Marine was established to evaluate credit and
other issues which had come to the attention of the Board of Directors. The committee
engaged the assistance of outside advisors, including independent legal counsel and an
external loan review firm, to conduct an independent investigation of these developments.
The investigation was completed in the fourth quarter of 2004. Costs associated with this
investigation were approximately $2.1 million in 2004. Additionally, in early 2004, the
Board of Directors also engaged a consulting firm to investigate various strategic
alternatives to strengthen the capital position of the company. Professional services costs
related to this process during 2004 were approximately $0.9 million.
 36




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##### Table of Contents




    
    During 2005, CIB Marine recognized $1.9 million in write down and losses on assets
compared to $2.0 million in 2004. The $1.9 million loss recognized during 2005 was mainly
due to a $1.7 million loss on the sale of a limited number of commercial real estate and
commercial construction loans, a $0.3 million impairment loss on fixed assets of closed
facilities and a $0.1 million impairment loss on its equity interest in a small business
investment company. These losses were partially offset by a $0.3 million gain on the sale
of the fixed assets and deposits of its Sebring, Florida branch. The $2.0 million loss in
2004 is primarily comprised of a $0.6 million loss on loans sold by its mezzanine lending
company, a $0.6 million loss on foreclosed properties, and a $0.7 million market value loss
on its unconsolidated interests in two closely held businesses.
    
    During 2007, CIB Marine decided to sell certain of its available for sale securities.
As a result of this decision, CIB Marine determined it would not be holding these certain
securities for a period of time sufficient to recover the carrying value at December 31,
2005. Accordingly, CIB Marine realized a $2.0 million other-than-temporary loss on these
certain securities during the first quarter of 2005. See the Securities discussion for
further information.
 Income Taxes
    FINANCIAL CONDITION
 Overview
  Securities
  37




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##### Table of Contents



Year Ended December 31, (1)2006
    
    
    2005
    
    
    2004Yield to
    
    
    
    
    
    
    Yield to
    
    
    
    
    
    
    Yield toAmount
    
    
    Maturity
    
    
    Amount
    
    
    Maturity
    
    
    Amount
    
    
    Maturity(Dollars in thousands)U.S. government agencies
    
    $
    101,321
    
    
    
    4.83
    %
    
    $
    155,867
    
    
    
    3.88
    %
    
    $
    194,164
    
    
    
    2.17
    %Obligations of states and
political subdivisions
    
    
    32,067
    
    
    
    5.10
    
    
    
    27,580
    
    
    
    5.07
    
    
    
    15,738
    
    
    
    4.82Other notes and bonds
    
    
    350
    
    
    
    6.66
    
    
    
    350
    
    
    
    6.73
    
    
    
    350
    
    
    
    6.73Asset-backed securities
    
    
    2,192
    
    
    
    5.65
    
    
    
    9,568
    
    
    
    3.72
    
    
    
    
    
    
    
    Corporate commercial paper
    
    
    4,384
    
    
    
    5.40
    
    
    
    13,033
    
    
    
    4.49
    
    
    
    12,658
    
    
    
    2.48Mortgage-backed securities
    
    
    194,854
    
    
    
    4.93
    
    
    
    263,727
    
    
    
    4.36
    
    
    
    143,005
    
    
    
    3.56Total securities before market
value adjustment
    
    
    335,168
    
    
    
    4.93
    %
    
    
    470,125
    
    
    
    4.23
    %
    
    
    365,915
    
    
    
    2.84
    %Available for sale market value
adjustment
    
    
    (1,880
    )
    
    
    
    
    
    
    (3,435
    )
    
    
    
    
    
    
    (642
    )Total securities available for sale
    
    
    333,288
    
    
    
    
    
    
    
    466,690
    
    
    
    
    
    
    
    365,273Federal Home Loan Bank and Federal
Reserve Bank stock at cost
    
    
    12,314
    
    
    
    3.30
    
    
    
    26,719
    
    
    
    3.07
    
    
    
    13,751
    
    
    
    5.93Total securities
    
    $
    345,602
    
    
    
    
    
    
    $
    493,409
    
    
    
    
    
    
    $
    379,024
 
 (1)
    
    In the future, CIB Marine may not realize all of the tax benefits associated with tax-exempt
assets due to substantial losses. Accordingly, 2006, 2005 and 2004 are not presented on a
tax-equivalent basis.     38




---



##### Table of Contents



December 31, 20061 Year and Less
    
    
    1 to 5 Years
    
    
    5 to 10 Years
    
    
    Over 10 Years
    
    
    TotalYield to
    
    
    
    
    
    
    Yield to
    
    
    
    
    
    
    Yield to
    
    
    
    
    
    
    Yield to
    
    
    
    
    
    
    Yield toBalance
    
    
    Maturity
    
    
    Balance
    
    
    Maturity
    
    
    Balance
    
    
    Maturity
    
    
    Balance
    
    
    Maturity
    
    
    Balance
    
    
    Maturity(Dollars in thousands)U.S. government
agencies
    
    $
    32,789
    
    
    
    3.65
    %
    
    $
    68,533
    
    
    
    5.40
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    101,321
    
    
    
    4.83
    %Obligations of
states and political
subdivisions
    
    
    739
    
    
    
    5.02
    
    
    
    1,103
    
    
    
    5.30
    
    
    
    11,957
    
    
    
    4.92
    
    
    
    18,268
    
    
    
    5.21
    
    
    
    32,067
    
    
    
    5.10Other notes and bonds
    
    
    150
    
    
    
    7.20
    
    
    
    200
    
    
    
    6.25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    6.66Asset-backed
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,038
    
    
    
    5.72
    
    
    
    1,154
    
    
    
    5.59
    
    
    
    2,192
    
    
    
    5.65Commercial paper
    
    
    4,384
    
    
    
    5.40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,384
    
    
    
    5.40Mortgage-backed
securities
    
    
    832
    
    
    
    5.23
    
    
    
    8,795
    
    
    
    5.26
    
    
    
    28,129
    
    
    
    5.53
    
    
    
    157,098
    
    
    
    4.80
    
    
    
    194,854
    
    
    
    4.93Total securities
before market value
adjustment
    
    $
    38,893
    
    
    
    3.92
    %
    
    $
    78,631
    
    
    
    5.39
    %
    
    $
    41,124
    
    
    
    5.36
    %
    
    $
    176,520
    
    
    
    4.85
    %
    
    $
    335,168
    
    
    
    4.93
    %Available for sale
market value
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,880
    )Total securities
available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    333,288Federal Home Loan
Bank and Federal
Reserve Bank stock
at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,314
    
    
    
    3.30
    
    
    
    12,314
    
    
    
    3.30Total securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    345,602
 Loans
 General.
  39




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##### Table of Contents



TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Balance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    Balance
    
    
    %(Dollars in thousands)Commercial
    
    $
    49,777
    
    
    
    9.5
    %
    
    $
    69,048
    
    
    
    13.4
    %
    
    $
    193,574
    
    
    
    25.9
    %
    
    $
    708,252
    
    
    
    29.9
    %
    
    $
    928,992
    
    
    
    34.3
    %Factored receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,447
    
    
    
    0.5
    
    
    
    6,780
    
    
    
    0.2Commercial real estate
    
    
    282,233
    
    
    
    54.0
    
    
    
    323,384
    
    
    
    62.6
    
    
    
    404,503
    
    
    
    54.1
    
    
    
    1,184,542
    
    
    
    50.1
    
    
    
    1,157,136
    
    
    
    42.7Commercial real estate construction
    
    
    111,040
    
    
    
    21.3
    
    
    
    89,313
    
    
    
    17.3
    
    
    
    109,676
    
    
    
    14.7
    
    
    
    363,822
    
    
    
    15.4
    
    
    
    513,804
    
    
    
    18.9Residential real estate
    
    
    19,225
    
    
    
    3.7
    
    
    
    19,925
    
    
    
    3.9
    
    
    
    31,027
    
    
    
    4.1
    
    
    
    85,893
    
    
    
    3.6
    
    
    
    91,577
    
    
    
    3.4Home equity loans
    
    
    57,990
    
    
    
    11.1
    
    
    
    12,603
    
    
    
    2.4
    
    
    
    7,701
    
    
    
    1.0
    
    
    
    12,272
    
    
    
    0.5
    
    
    
    15,100
    
    
    
    0.6Consumer loans
    
    
    2,363
    
    
    
    0.4
    
    
    
    2,179
    
    
    
    0.4
    
    
    
    2,124
    
    
    
    0.3
    
    
    
    3,554
    
    
    
    0.2
    
    
    
    6,032
    
    
    
    0.2Receivables from sale of stock
    
    
    (151
    )
    
    
    (0.0
    )
    
    
    (202
    )
    
    
    (0.0
    )
    
    
    (946
    )
    
    
    (0.1
    )
    
    
    (5,208
    )
    
    
    (0.2
    )
    
    
    (7,937
    )
    
    
    (0.3
    )Gross loans
    
    
    522,477
    
    
    
    100.0
    %
    
    
    516,250
    
    
    
    100.0
    %
    
    
    747,659
    
    
    
    100.0
    %
    
    
    2,364,574
    
    
    
    100.0
    %
    
    
    2,711,484
    
    
    
    100.0
    %Deferred loan fees
    
    
    247
    
    
    
    
    
    
    
    (706
    )
    
    
    
    
    
    
    (1,044
    )
    
    
    
    
    
    
    (4,533
    )
    
    
    
    
    
    
    (7,478
    )Total loans
    
    
    522,724
    
    
    
    
    
    
    
    515,544
    
    
    
    
    
    
    
    746,615
    
    
    
    
    
    
    
    2,360,041
    
    
    
    
    
    
    
    2,704,006Allowance for loan losses
    
    
    (20,906
    )
    
    
    
    
    
    
    (24,882
    )
    
    
    
    
    
    
    (29,551
    )
    
    
    
    
    
    
    (109,872
    )
    
    
    
    
    
    
    (65,122
    )Net loans
    
    $
    501,818
    
    
    
    
    
    
    $
    490,662
    
    
    
    
    
    
    $
    717,064
    
    
    
    
    
    
    $
    2,250,169
    
    
    
    
    
    
    $
    2,638,884
 CIB MARINE-CONTINUING OPERATIONS ONLY:
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Balance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    Balance
    
    
    %(Dollars in thousands)Commercial
    
    $
    49,777
    
    
    
    9.5
    %
    
    $
    69,048
    
    
    
    13.4
    %
    
    $
    193,574
    
    
    
    25.9
    %
    
    $
    416,323
    
    
    
    33.8
    %
    
    $
    556,754
    
    
    
    39.6
    %Commercial real estate
    
    
    282,233
    
    
    
    54.0
    
    
    
    323,384
    
    
    
    62.6
    
    
    
    404,503
    
    
    
    54.1
    
    
    
    537,791
    
    
    
    43.6
    
    
    
    508,474
    
    
    
    36.2Commercial real estate construction
    
    
    111,040
    
    
    
    21.3
    
    
    
    89,313
    
    
    
    17.3
    
    
    
    109,676
    
    
    
    14.7
    
    
    
    205,359
    
    
    
    16.6
    
    
    
    263,625
    
    
    
    18.7Residential real estate
    
    
    19,125
    
    
    
    3.7
    
    
    
    19,925
    
    
    
    3.9
    
    
    
    31,027
    
    
    
    4.1
    
    
    
    63,120
    
    
    
    5.1
    
    
    
    60,469
    
    
    
    4.3Home equity loans
    
    
    57,990
    
    
    
    11.1
    
    
    
    12,603
    
    
    
    2.4
    
    
    
    7,701
    
    
    
    1.0
    
    
    
    9,876
    
    
    
    0.8
    
    
    
    10,478
    
    
    
    0.8Consumer loans
    
    
    2,363
    
    
    
    0.4
    
    
    
    2,179
    
    
    
    0.4
    
    
    
    2,124
    
    
    
    0.3
    
    
    
    3,030
    
    
    
    0.2
    
    
    
    5,389
    
    
    
    0.4Receivables from sale of stock
    
    
    (151
    )
    
    
    (0.0
    )
    
    
    (202
    )
    
    
    (0.0
    )
    
    
    (946
    )
    
    
    (0.1
    )
    
    
    (1,530
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    Gross loans
    
    
    522,377
    
    
    
    100.0
    %
    
    
    516,250
    
    
    
    100.0
    %
    
    
    747,659
    
    
    
    100.0
    %
    
    
    1,233,969
    
    
    
    100.0
    %
    
    
    1,405,189
    
    
    
    100.0
    %Deferred loan fees
    
    
    247
    
    
    
    
    
    
    
    (706
    )
    
    
    
    
    
    
    (1,044
    )
    
    
    
    
    
    
    (2,557
    )
    
    
    
    
    
    
    (4,225
    )Total loans
    
    
    522,624
    
    
    
    
    
    
    
    515,544
    
    
    
    
    
    
    
    746,615
    
    
    
    
    
    
    
    1,231,412
    
    
    
    
    
    
    
    1,400,964Allowance for loan losses
    
    
    (20,906
    )
    
    
    
    
    
    
    (24,882
    )
    
    
    
    
    
    
    (29,551
    )
    
    
    
    
    
    
    (54,382
    )
    
    
    
    
    
    
    (31,756
    )Net loans
    
    $
    501,718
    
    
    
    
    
    
    $
    490,662
    
    
    
    
    
    
    $
    717,064
    
    
    
    
    
    
    $
    1,177,030
    
    
    
    
    
    
    $
    1,369,208
 Commercial Loans.
 Commercial Real Estate Loans.
 Commercial Real Estate Construction Loans.
 40




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##### Table of Contents



Residential Real Estate Loans.
 Home Equity and Consumer Loans.
 Leveraged Financing.
 Receivables from Sale of Stock.
 Loan Maturities.
 41




---



##### Table of Contents



1 year
    
    
    1 to 5
    
    
    Overand less
    
    
    years
    
    
    5 years
    
    
    Total(Dollars in thousands)Commercial
    
    $
    35,424
    
    
    $
    13,332
    
    
    $
    1,268
    
    
    $
    50,024Commercial real estate
    
    
    75,532
    
    
    
    127,454
    
    
    
    79,247
    
    
    
    282,233Commercial real estate construction
    
    
    74,369
    
    
    
    36,671
    
    
    
    
    
    
    
    111,040Residential real estate
    
    
    9,562
    
    
    
    5,515
    
    
    
    4,048
    
    
    
    19,125Home equity loans
    
    
    45,698
    
    
    
    11,276
    
    
    
    1,016
    
    
    
    57,990Consumer loans
    
    
    953
    
    
    
    1,322
    
    
    
    88
    
    
    
    2,363Loans to Purchase stock
    
    
    (151
    )
    
    
    
    
    
    
    
    
    
    
    (151
    )Total gross loans
    
    $
    241,387
    
    
    $
    195,570
    
    
    $
    85,667
    
    
    $
    522,624Sensitivity to changes in interest ratesFixed rates
    
    
    100,066
    
    
    
    123,210
    
    
    
    46,122
    
    
    
    269,398Variable rates
    
    
    141,321
    
    
    
    72,360
    
    
    
    39,545
    
    
    
    253,226Total gross loans
    
    $
    241,387
    
    
    $
    195,570
    
    
    $
    85,667
    
    
    $
    522,624
 Credit Concentrations
   % ofOutstanding
    
    % of
    
    StockholdersINDUSTRY
    
    Balance
    
    Loans
    
    Equity(Dollars in millions)Commercial Real Estate Developers
    
    $
    143.2
    
    
    
    27
    %
    
    
    200
    %Residential Real Estate Developers
    
    
    112.3
    
    
    
    22
    
    
    
    157Motel and Hotel
    
    
    40.1
    
    
    
    8
    
    
    
    56Nursing/Convalescent Homes
    
    
    28.7
    
    
    
    6
    
    
    
    40Retail Trade
    
    
    22.6
    
    
    
    4
    
    
    
    32Health Care Facilities
    
    
    20.9
    
    
    
    4
    
    
    
    29
 Credit Procedures and Review
  Loan Underwriting.
 42




---



##### Table of Contents



Loan Approval.
 Loan Review.
  Allowance for Loan Losses
   43




---



##### Table of Contents



TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 Years Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Balance at beginning of year
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    109,872
    
    
    $
    65,122
    
    
    $
    35,855Loans charged-off:Commercial:Commercial
    
    
    (64
    )
    
    
    (1,380
    )
    
    
    (53,848
    )
    
    
    (31,011
    )
    
    
    (14,443
    )Factored receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    Commercial real estate:Commercial real estate
    
    
    (471
    )
    
    
    (1,945
    )
    
    
    (21,432
    )
    
    
    (18,115
    )
    
    
    (2,752
    )Commercial real estate construction
    
    
    
    
    
    
    (524
    )
    
    
    (4,487
    )
    
    
    (53,668
    )
    
    
    Consumer:Residential real estate
    
    
    (78
    )
    
    
    (49
    )
    
    
    (95
    )
    
    
    (153
    )
    
    
    (79
    )Home equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )Consumer
    
    
    (9
    )
    
    
    (13
    )
    
    
    (117
    )
    
    
    (97
    )
    
    
    (155
    )Total charged-off
    
    
    (622
    )
    
    
    (3,911
    )
    
    
    (79,979
    )
    
    
    (103,139
    )
    
    
    (17,499
    )Recoveries of loans charged-off:Commercial:Commercial
    
    
    664
    
    
    
    6,017
    
    
    
    4,382
    
    
    
    1,830
    
    
    
    757Factored receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Commercial real estate:Commercial real estate
    
    
    352
    
    
    
    1,769
    
    
    
    3,796
    
    
    
    155
    
    
    
    294Commercial real estate construction
    
    
    
    
    
    
    89
    
    
    
    113
    
    
    
    
    
    
    
    Consumer:Residential real estate
    
    
    
    
    
    
    23
    
    
    
    215
    
    
    
    3
    
    
    
    20Home equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Consumer
    
    
    14
    
    
    
    13
    
    
    
    48
    
    
    
    51
    
    
    
    57Total recoveries
    
    
    1,030
    
    
    
    7,911
    
    
    
    8,554
    
    
    
    2,043
    
    
    
    1,134Net loans recovered (charged-off)
    
    
    408
    
    
    
    4,000
    
    
    
    (71,425
    )
    
    
    (101,096
    )
    
    
    (16,365
    )Allowance acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122Allowance on loans sold
    
    
    
    
    
    
    
    
    
    
    (38,842
    )
    
    
    
    
    
    
    Transfer from accrual for unfunded standby letters
of credit for funded standby letters of credit
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    Provision for loan losses
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    24,946
    
    
    
    145,846
    
    
    
    45,510Balance at end of year
    
    $
    20,906
    
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    109,872
    
    
    $
    65,122RatiosAllowance for loan losses to total loans
    
    
    4.00
    %
    
    
    4.83
    %
    
    
    3.96
    %
    
    
    4.66
    %
    
    
    2.41
    %Allowance for loan losses to nonaccrual loans,
restructured loans and loans 90 days or more past
due and still accruing
    
    
    94.37
    
    
    
    59.06
    
    
    
    47.08
    
    
    
    70.72
    
    
    
    134.09Net charge-offs (recoveries) to average loan types:Commercial
    
    
    (1.19
    )
    
    
    (4.06
    )
    
    
    9.36
    
    
    
    3.83
    
    
    
    1.70Commercial real estate
    
    
    0.03
    
    
    
    0.13
    
    
    
    1.71
    
    
    
    3.90
    
    
    
    0.14Consumer
    
    
    0.13
    
    
    
    0.11
    
    
    
    (0.14
    )
    
    
    0.36
    
    
    
    0.36Total loans
    
    
    (0.08
    )
    
    
    (0.67
    )
    
    
    3.85
    
    
    
    3.81
    
    
    
    0.64Ratio of recoveries to loans charged-off
    
    
    165.59
    
    
    
    202.28
    
    
    
    10.70
    
    
    
    1.98
    
    
    
    6.48Total loans
    
    $
    522,724
    
    
    $
    515,544
    
    
    $
    746,615
    
    
    $
    2,360,041
    
    
    $
    2,704,006Average total loans
    
    
    525,158
    
    
    
    594,714
    
    
    
    1,855,581
    
    
    
    2,651,680
    
    
    
    2,573,894Provision for credit losses-total companyProvision for loan loss-continuing operations
    
    $
    (4,384
    )
    
    $
    (8,669
    )
    
    $
    16,707
    
    
    $
    50,506
    
    
    $
    19,074Provision for loan loss-discontinued operations
    
    
    
    
    
    
    
    
    
    
    8,239
    
    
    
    95,340
    
    
    
    26,436Provision for losses on unfunded commitments and
standby letters of credit-continuing operations
    
    
    
    
    
    
    
    
    
    
    725
    
    
    
    
    
    
    
    Provision for losses on unfunded commitments and
standby letters of credit-discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,900
    )
    
    
    14,747
    
    
    
    1,000Total provision for credit losses
    
    $
    (4,384
    )
    
    $
    (8,669
    )
    
    $
    23,771
    
    
    $
    160,593
    
    
    $
    46,510
 44




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##### Table of Contents



CIB MARINE-CONTINUING OPERATIONS ONLY:
 Years Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Balance at beginning of year
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    54,382
    
    
    $
    31,756
    
    
    $
    18,109Loans charged-off:Commercial:Commercial
    
    
    (64
    )
    
    
    (1,380
    )
    
    
    (31,515
    )
    
    
    (11,115
    )
    
    
    (4,061
    )Commercial real estate:Commercial real estate
    
    
    (471
    )
    
    
    (1,945
    )
    
    
    (10,126
    )
    
    
    (4,340
    )
    
    
    (1,679
    )Commercial real estate construction
    
    
    
    
    
    
    (524
    )
    
    
    (3,665
    )
    
    
    (13,676
    )
    
    
    Consumer:Residential real estate
    
    
    (78
    )
    
    
    (49
    )
    
    
    
    
    
    
    (6
    )
    
    
    (79
    )Home equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )Consumer
    
    
    (9
    )
    
    
    (13
    )
    
    
    (73
    )
    
    
    (33
    )
    
    
    (147
    )Total charged-off
    
    
    (622
    )
    
    
    (3,911
    )
    
    
    (45,379
    )
    
    
    (29,170
    )
    
    
    (6,036
    )Recoveries of loans charged-off:Commercial:Commercial
    
    
    664
    
    
    
    6,017
    
    
    
    1,995
    
    
    
    1,124
    
    
    
    530Commercial real estate:Commercial real estate
    
    
    352
    
    
    
    1,769
    
    
    
    1,806
    
    
    
    116
    
    
    
    Commercial real estate construction
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    Consumer:Residential real estate
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    (1
    )
    
    
    20Home equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Consumer
    
    
    14
    
    
    
    13
    
    
    
    40
    
    
    
    51
    
    
    
    53Total recoveries
    
    
    1,030
    
    
    
    7,911
    
    
    
    3,841
    
    
    
    1,290
    
    
    
    609Net loans recovered (charged-off)
    
    
    408
    
    
    
    4,000
    
    
    
    (41,538
    )
    
    
    (27,880
    )
    
    
    (5,427
    )Allowance acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Allowance on loans sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for loan losses
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    16,707
    
    
    
    50,506
    
    
    
    19,074Balance at end of year
    
    $
    20,906
    
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    54,382
    
    
    $
    31,756RatiosAllowance for loan losses to total loans
    
    
    4.00
    %
    
    
    4.83
    %
    
    
    3.96
    %
    
    
    4.42
    %
    
    
    2.27
    %Allowance for loan losses to nonaccrual
loans, restructured loans and loans 90 days
or more past due and still accruing
    
    
    94.37
    
    
    
    59.06
    
    
    
    47.08
    
    
    
    96.85
    
    
    
    136.12Net charge-offs (recoveries) to average loans:Commercial
    
    
    (1.19
    )
    
    
    (4.06
    )
    
    
    10.00
    
    
    
    2.25
    
    
    
    0.72Commercial real estate
    
    
    0.03
    
    
    
    0.13
    
    
    
    1.72
    
    
    
    2.02
    
    
    
    0.24Consumer
    
    
    0.13
    
    
    
    0.11
    
    
    
    0.10
    
    
    
    (0.03
    )
    
    
    0.27Total loans
    
    
    (0.08
    )
    
    
    (0.67
    )
    
    
    4.06
    
    
    
    2.04
    
    
    
    0.42Ratio of recoveries to loans charged-off
    
    
    165.59
    
    
    
    202.28
    
    
    
    8.46
    
    
    
    4.42
    
    
    
    10.06Total loans
    
    $
    522,624
    
    
    $
    515,544
    
    
    $
    746,615
    
    
    $
    1,231,412
    
    
    $
    1,400,964Average total loans
    
    
    525,158
    
    
    
    594,714
    
    
    
    1,023,092
    
    
    
    1,366,902
    
    
    
    1,287,133
  TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans inAllowance
    
    
    each
    
    
    Allowance
    
    
    each
    
    
    Allowance
    
    
    each
    
    
    Allowance
    
    
    each
    
    
    Allowance
    
    
    eachAmount
    
    
    category
    
    
    Amount
    
    
    category
    
    
    Amount
    
    
    category
    
    
    Amount
    
    
    category
    
    
    Amount
    
    
    category(Dollars in thousands)Commercial
    
    $
    3,024
    
    
    
    6.08
    %
    
    $
    4,165
    
    
    
    6.03
    %
    
    $
    10,080
    
    
    
    5.22
    %
    
    $
    48,504
    
    
    
    6.85
    %
    
    $
    25,937
    
    
    
    2.79
    %Factored receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    3.10
    
    
    
    237
    
    
    
    3.50Commercial real estate
    
    
    12,859
    
    
    
    4.56
    
    
    
    17,721
    
    
    
    5.48
    
    
    
    16,211
    
    
    
    4.02
    
    
    
    48,813
    
    
    
    4.12
    
    
    
    22,658
    
    
    
    1.96Commercial real estate
construction
    
    
    2,383
    
    
    
    2.15
    
    
    
    2,193
    
    
    
    2.45
    
    
    
    2,258
    
    
    
    2.07
    
    
    
    9,456
    
    
    
    2.60
    
    
    
    11,012
    
    
    
    2.14Residential real estate
    
    
    625
    
    
    
    3.25
    
    
    
    433
    
    
    
    2.17
    
    
    
    871
    
    
    
    2.82
    
    
    
    2,027
    
    
    
    2.36
    
    
    
    3,802
    
    
    
    4.15Home equity loans
    
    
    1,928
    
    
    
    3.32
    
    
    
    292
    
    
    
    2.32
    
    
    
    83
    
    
    
    1.10
    
    
    
    104
    
    
    
    0.85
    
    
    
    225
    
    
    
    1.49Consumer loans
    
    
    86
    
    
    
    3.65
    
    
    
    78
    
    
    
    3.58
    
    
    
    48
    
    
    
    2.26
    
    
    
    47
    
    
    
    1.32
    
    
    
    160
    
    
    
    2.65Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    566
    
    
    
    
    
    
    
    1,091
    
    
    
    Total allowance
    
    $
    20,906
    
    
    
    4.00
    %
    
    $
    24,882
    
    
    
    4.83
    %
    
    $
    29,551
    
    
    
    3.96
    %
    
    $
    109,872
    
    
    
    4.66
    %
    
    $
    65,122
    
    
    
    2.41
    %
 45




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##### Table of Contents



CIB MARINE-CONTINUING OPERATIONS ONLY:
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans inAllowance
    
    
    each
    
    
    Allowance
    
    
    each
    
    
    Allowance
    
    
    each
    
    
    Allowance
    
    
    each
    
    
    Allowance
    
    
    eachAmount
    
    
    category
    
    
    Amount
    
    
    category
    
    
    Amount
    
    
    category
    
    
    Amount
    
    
    category
    
    
    Amount
    
    
    category(Dollars in thousands)Commercial
    
    $
    3,024
    
    
    
    6.08
    %
    
    $
    4,165
    
    
    
    6.03
    %
    
    $
    10,080
    
    
    
    5.22
    %
    
    $
    28,450
    
    
    
    6.83
    %
    
    $
    15,650
    
    
    
    2.81
    %Commercial real estate
    
    
    12,859
    
    
    
    4.56
    
    
    
    17,721
    
    
    
    5.48
    
    
    
    16,211
    
    
    
    4.02
    
    
    
    19,858
    
    
    
    3.69
    
    
    
    9,210
    
    
    
    1.81Commercial real estate
construction
    
    
    2,383
    
    
    
    2.15
    
    
    
    2,193
    
    
    
    2.45
    
    
    
    2,258
    
    
    
    2.07
    
    
    
    4,098
    
    
    
    2.00
    
    
    
    3,436
    
    
    
    1.30Residential real estate
    
    
    625
    
    
    
    3.25
    
    
    
    433
    
    
    
    2.17
    
    
    
    871
    
    
    
    2.82
    
    
    
    1,722
    
    
    
    2.73
    
    
    
    1,366
    
    
    
    2.26Home equity loans
    
    
    1,928
    
    
    
    3.32
    
    
    
    292
    
    
    
    2.32
    
    
    
    83
    
    
    
    1.10
    
    
    
    88
    
    
    
    0.89
    
    
    
    139
    
    
    
    1.33Consumer loans
    
    
    86
    
    
    
    3.65
    
    
    
    78
    
    
    
    3.58
    
    
    
    48
    
    
    
    2.26
    
    
    
    43
    
    
    
    1.42
    
    
    
    148
    
    
    
    2.75Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    1,806
    
    
    
    Total allowance
    
    $
    20,906
    
    
    
    4.00
    %
    
    $
    24,882
    
    
    
    4.83
    %
    
    $
    29,551
    
    
    
    3.96
    %
    
    $
    54,382
    
    
    
    4.42
    %
    
    $
    31,755
    
    
    
    2.27
    %
 Nonperforming Assets and Loans 90 Days or More Past Due and Still Accruing
   TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Nonperforming assetsNonaccrual loans:Commercial
    
    $
    3,881
    
    
    $
    6,426
    
    
    $
    25,431
    
    
    $
    58,161
    
    
    $
    17,329Commercial real estate
    
    
    16,110
    
    
    
    21,148
    
    
    
    23,020
    
    
    
    77,960
    
    
    
    15,507Commercial real estate construction
    
    
    142
    
    
    
    1,149
    
    
    
    5,399
    
    
    
    13,310
    
    
    
    5,221Residential real estate
    
    
    536
    
    
    
    379
    
    
    
    477
    
    
    
    2,622
    
    
    
    756Home equity loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Consumer loans
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    11
    
    
    
    45Total nonaccrual loans
    
    
    20,669
    
    
    
    29,105
    
    
    
    54,327
    
    
    
    152,064
    
    
    
    38,958Foreclosed property
    
    
    102
    
    
    
    2,931
    
    
    
    3,038
    
    
    
    40,715
    
    
    
    3,678Restructured loans
    
    
    
    
    
    
    1,486
    
    
    
    1,536
    
    
    
    2,946
    
    
    
    3,210Total nonperforming assets
    
    $
    20,771
    
    
    $
    33,522
    
    
    $
    58,901
    
    
    $
    195,725
    
    
    $
    45,846Loans 90 days or more past due and still accruingCommercial
    
    $
    100
    
    
    $
    589
    
    
    $
    1,009
    
    
    $
    
    
    
    $
    3,022Commercial real estate
    
    
    1,385
    
    
    
    2,962
    
    
    
    5,902
    
    
    
    352
    
    
    
    2,292Commercial real estate construction
    
    
    
    
    
    
    7,991
    
    
    
    
    
    
    
    
    
    
    
    Residential real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076Home equity loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    6Total loans 90 days or more past due and still accruing
    
    $
    1,485
    
    
    $
    11,542
    
    
    $
    6,911
    
    
    $
    359
    
    
    $
    6,396Allowance for loan losses
    
    $
    20,906
    
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    109,872
    
    
    $
    65,122Loans at end of period
    
    $
    522,724
    
    
    $
    515,544
    
    
    $
    746,615
    
    
    $
    2,360,041
    
    
    $
    2,704,006RatiosNonaccrual loans to total loans
    
    
    3.95
    %
    
    
    5.65
    %
    
    
    7.28
    %
    
    
    6.44
    %
    
    
    1.44
    %Foreclosed properties to total assets
    
    
    0.01
    
    
    
    0.26
    
    
    
    0.22
    
    
    
    1.28
    
    
    
    0.10Nonperforming assets to total assets
    
    
    2.08
    
    
    
    2.94
    
    
    
    4.25
    
    
    
    6.14
    
    
    
    1.26Nonaccrual loans, restructured loans and loans 90 days
or more past due and still accruing to total loans
    
    
    4.24
    
    
    
    8.17
    
    
    
    8.41
    
    
    
    6.58
    
    
    
    1.80Nonperforming assets and loans 90 days or more past
due and still accruing to total assets
    
    
    2.23
    
    
    
    3.96
    
    
    
    4.75
    
    
    
    6.15
    
    
    
    1.43
 46




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##### Table of Contents



CIB MARINE-CONTINUING OPERATIONS ONLY (1):
 December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Nonperforming assetsNonaccrual loans:Commercial
    
    $
    3,881
    
    
    $
    6,426
    
    
    $
    25,431
    
    
    $
    34,156
    
    
    $
    11,852Commercial real estate
    
    
    16,110
    
    
    
    21,148
    
    
    
    23,020
    
    
    
    16,099
    
    
    
    3,263Commercial real estate construction
    
    
    142
    
    
    
    1,149
    
    
    
    5,399
    
    
    
    189
    
    
    
    Residential real estate
    
    
    536
    
    
    
    379
    
    
    
    477
    
    
    
    2,397
    
    
    
    653Home equity loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    10
    
    
    
    45Total nonaccrual loans
    
    
    20,669
    
    
    
    29,105
    
    
    
    54,327
    
    
    
    52,851
    
    
    
    15,813Foreclosed property
    
    
    102
    
    
    
    2,931
    
    
    
    2,938
    
    
    
    3,027
    
    
    
    2,928Restructured loans
    
    
    
    
    
    
    1,486
    
    
    
    1,536
    
    
    
    2,939
    
    
    
    3,200Total nonperforming assets
    
    $
    20,771
    
    
    $
    33,522
    
    
    $
    58,801
    
    
    $
    58,817
    
    
    $
    21,941Loans 90 days or more past due and still accruingCommercial
    
    $
    100
    
    
    $
    589
    
    
    $
    1,009
    
    
    $
    
    
    
    $
    943Commercial real estate
    
    
    1,385
    
    
    
    2,962
    
    
    
    5,902
    
    
    
    352
    
    
    
    2,292Commercial real estate construction
    
    
    
    
    
    
    7,991
    
    
    
    
    
    
    
    
    
    
    
    Residential real estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076Home equity loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    6Total loans 90 days or more past due and still accruing
    
    $
    1,485
    
    
    $
    11,542
    
    
    $
    6,911
    
    
    $
    359
    
    
    $
    4,317Allowance for loan losses
    
    $
    20,906
    
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    54,382
    
    
    $
    31,756Loans at end of period
    
    $
    522,624
    
    
    $
    515,544
    
    
    $
    746,615
    
    
    $
    1,227,734
    
    
    $
    1,400,964RatiosNonaccrual loans to total loans
    
    
    3.95
    %
    
    
    5.65
    %
    
    
    7.28
    %
    
    
    4.29
    %
    
    
    1.13
    %Foreclosed properties to total assets
    
    
    0.01
    
    
    
    0.26
    
    
    
    0.21
    
    
    
    0.18
    
    
    
    0.17Nonperforming assets to total assets
    
    
    2.09
    
    
    
    2.96
    
    
    
    4.29
    
    
    
    3.45
    
    
    
    1.25Nonaccrual loans, restructured loans and loans 90 days
or more past due and still accruing to total loans
    
    
    4.24
    
    
    
    8.17
    
    
    
    8.41
    
    
    
    4.56
    
    
    
    1.67Nonperforming assets and 90 days or more past due and
still accruing loans to total assets
    
    
    2.24
    
    
    
    3.98
    
    
    
    4.79
    
    
    
    3.47
    
    
    
    1.50
 
 (1)
    
    For comparative purposes, all periods presented exclude the assets of all companies held for
disposal at December 31, 2006 and companies that were sold during prior periods.   
    
    Commercial real estate loans to a borrower totaling $10.6 million secured by first
mortgages on two commercial properties. During the fourth quarter of 2006, CIB Marine
charged off $0.3 million, and at December 31, 2006, specific reserves of $5.0 million were
allocated to this borrowing relationship. During the first nine months of 2007, the loans
were paid down by $0.2 million, and as of September 30, 2007, $10.4 million remained on
nonaccrual, with specific reserves of $5.7 million allocated to this relationship.
    
    Commercial and commercial real estate loans totaling $2.0 million to related borrowers
secured by business assets and first mortgages on three commercial properties. At December
31, 2006 specific reserves of $0.9 million were allocated to this relationship and CIB
Marine has charged off a total of $0.04 million. During 2007, CIB Marine foreclosed on the
underlying properties and reduced the loan by the $1.1 million estimated market value of
the foreclosed properties. The $0.9 million remaining balance of the loan was charged off.
    
    Commercial real estate loans totaling $1.9 million secured by first mortgages on three
commercial warehouse properties. During 2007 these loans were paid down by $0.3 million and
as of September 30, 2007 loans totaling $1.6 million to this borrower were classified as
nonaccrual. No specific reserves were allocated to these loans at either December 31, 2006
or September 30, 2007, and as of September 30, 2007, CIB Marine has charged off a total of
$0.9 million.
 47




---



##### Table of Contents




    
    Commercial and commercial real estate loans totaling $1.0 million to a borrower secured
by all business assets and a first mortgage on two commercial real estate properties. No
specific reserves were allocated to these loans at December 31, 2006 and CIB Marine has
total net charge-offs of $4.5 million. As of September 30, 2007, $1.0 million remained on
nonaccrual with no specific reserves allocated to this relationship.
    
    Commercial real estate loan in the total amount of $0.9 million to a borrower secured by
first mortgage on commercial property and an assignment of business assets. No specific
reserves were allocated to this loan at December 31, 2006. In the second quarter of 2007,
the $0.9 million loan was paid in full.
    
    Commercial loan in the amount of $0.8 million to a borrower secured by a junior mortgage
on residential property. At December 31, 2006 Specific reserves in the amount of $0.8
million were allocated to this loan. In the first quarter of 2007, the balance was fully
charged off.
     Regulatory Matters
  
    
    Maintenance of minimum capital levels;
    
    Restrictions on dividend payments and redemption of shares of CIB Marine without
regulatory approval;
    
    Limitations on asset and loan growth;
    
    Adoption of a comprehensive plan to improve earnings;
 48




---



##### Table of Contents




    
    Development of a plan to reduce concentrations of credit and loan relationships
classified as substandard or doubtful;
    
    Development of a system to correct loan administration deficiencies; and
    
    Development of a plan to correct and prevent violations of banking laws and regulations
related to affiliate transactions.
    Companies Held For Disposal
  CIB Construction (includes Canron)
   49




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##### Table of Contents



December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash on deposit at CIB Marine
    
    $
    50
    
    
    $
    626Accounts receivable
    
    
    551
    
    
    
    1,572Other assets
    
    
    2,649
    
    
    
    2,967Total assets
    
    $
    3,250
    
    
    $
    5,165Liabilities and Stockholders Equity:Income tax payable
    
    $
    3,082
    
    
    $
    3,106Other liabilities
    
    
    1,477
    
    
    
    2,055Total liabilities
    
    
    4,559
    
    
    
    5,161Stockholders equity
    
    
    (1,309
    )
    
    
    4Total liabilities and stockholders equity
    
    $
    3,250
    
    
    $
    5,165
 MICR
   December 31, 2006
    
    
    December 31, 2005(Dollars in thousands)Assets:Cash on deposit at non-affiliates
    
    $
    
    
    
    $
    273Income tax receivable
    
    
    127
    
    
    
    122Other assets
    
    
    
    
    
    
    200Total assets
    
    $
    127
    
    
    $
    595Liabilities and stockholders equity:Other liabilities
    
    $
    297
    
    
    $
    491Stockholders equity
    
    
    (170
    )
    
    
    104Total liabilities and stockholders equity
    
    $
    127
    
    
    $
    595
 MSI
   December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash on deposit at CIB Marine
    
    $
    14
    
    
    $
    24Net loans
    
    
    100
    
    
    
    105Income tax receivable
    
    
    685
    
    
    
    633Other assets
    
    
    1
    
    
    
    44Total assets
    
    $
    800
    
    
    $
    806Liabilities and stockholders equity:Loans payable to CIB Marine
    
    $
    103
    
    
    $
    829Other liabilities
    
    
    553
    
    
    
    1,072Total liabilities
    
    
    656
    
    
    
    1,901Stockholders equity
    
    
    144
    
    
    
    (1,095
    )Total liabilities and stockholders equity
    
    $
    800
    
    
    $
    806
 50




---



##### Table of Contents



Other Assets
  December 31,2006
    
    
    2005(Dollars in thousands)Prepaid expenses
    
    $
    1,067
    
    
    $
    1,113Accounts receivable
    
    
    1,508
    
    
    
    638Trust preferred securities underwriting fee, net of amortization
    
    
    1,335
    
    
    
    1,390Investment in trust common securities
    
    
    2,838
    
    
    
    2,654Other investments
    
    
    2,821
    
    
    
    3,562Income tax receivable
    
    
    3,492
    
    
    
    3,391Other
    
    
    116
    
    
    
    101$
    13,177
    
    
    $
    12,849
  
    
    Investments in limited partnership interests in various affordable housing
partnerships. The carrying value of these investments was $1.4 million and $1.8 million,
respectively, at December 31, 2006 and 2005. Equity loss on these limited partnerships,
included in noninterest expense, was $0.4 million in 2006, $0.3 million in 2005 and $1.0
million in 2004, including $0.6 million in discontinued operations. CIB Marine has
engaged in these transactions to provide additional qualified investments under the
Community Reinvestment Act and to receive related income tax credits. The partnerships
provide affordable housing to low-income residents within CIB Marines markets and other
locations.
    
    Investment in the common and preferred capital of a limited liability corporation
engaged in the development of owner-occupied housing in qualified low-income
communities. CIB Marine committed to a $1.0 million investment in this company. The
carrying value of this investment was $0.8 million at both December 31, 2006 and 2005.
    
    Investment in the common stock of a publicly traded company. The carrying value of
this investment was $0.4 million at December 31, 2006. During 2006, CIB Marine exercised
stock warrants it had received as payment for credit services. The carrying value of the
warrants at December 31, 2005 was $0.3 million and during both 2006 and 2005, CIB Marine
recognized a $0.1 million market value gain on these warrants. The market value gains
are included in net gain on assets.
    
    Interest in a company operating as a small business investment company under the
Small Business Investment Act of 1958, as amended. CIB Marine committed to a $0.5
million investment in this company and as of December 31, 2006 has invested $0.4
million. During 2006, CIB Marine received a capital distribution of $0.1 million on its
investment in this company. During 2005, CIB Marine recognized a $0.1 million impairment
loss on this investment due to a reduction in CIB Marines interest in the equity value
of this investment. The impairment loss is included in write down and losses on assets.
At December 31, 2006 and 2005, CIB Marines carrying value of this investment was $0.2
and $0.3, respectively.
    
    During 2006, CIB Marine sold its interest in a company operating as a small business
investment company under the Small Business Investment Act of 1958, as amended. No gain
or loss was recognized on the sale. CIB Marines carrying value of this investment at
December 31, 2005 was $0.4 million.
 Deposits
  51




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##### Table of Contents



TOTAL COMPANY-CONTINUING AND DISCONTINUED OPERATIONS:
 Year Ended December 31,2006
    
    

2005
    
    
    2004Average
    
    
    % of Total
    
    
    Average
    
    
    Average
    
    
    % of Total
    
    
    Average
    
    
    Average
    
    
    % of Total
    
    
    AverageBalance
    
    
    Deposits
    
    
    Rate
    
    
    Balance
    
    
    Deposits
    
    
    Rate
    
    
    Balance
    
    
    Deposits
    
    
    Rate(Dollars in thousands)Interest-bearing demand
    
    $
    43,001
    
    
    
    5.01
    %
    
    
    0.99
    %
    
    $
    55,764
    
    
    
    5.28
    %
    
    
    1.13
    %
    
    $
    85,979
    
    
    
    3.46
    %
    
    
    1.16
    %Money market
    
    
    194,290
    
    
    
    22.64
    
    
    
    3.97
    
    
    
    210,366
    
    
    
    19.94
    
    
    
    2.47
    
    
    
    343,764
    
    
    
    13.85
    
    
    
    1.45Other savings
    
    
    21,839
    
    
    
    2.55
    
    
    
    1.00
    
    
    
    35,382
    
    
    
    3.35
    
    
    
    1.16
    
    
    
    192,847
    
    
    
    7.77
    
    
    
    1.39Time deposits
    
    
    507,013
    
    
    
    59.11
    
    
    
    4.12
    
    
    
    641,274
    
    
    
    60.77
    
    
    
    3.24
    
    
    
    1,674,168
    
    
    
    67.44
    
    
    
    2.93Total interest-bearing deposits
    
    
    766,143
    
    
    
    89.31
    
    
    
    3.82
    
    
    
    942,786
    
    
    
    89.34
    
    
    
    2.86
    
    
    
    2,296,758
    
    
    
    92.52
    
    
    
    2.51Noninterest-bearing
    
    
    91,668
    
    
    
    10.69
    
    
    
    
    
    
    
    112,470
    
    
    
    10.66
    
    
    
    
    
    
    
    185,606
    
    
    
    7.48
    
    
    
    Total deposits
    
    $
    857,811
    
    
    
    100.00
    %
    
    
    3.41
    %
    
    $
    1,055,256
    
    
    
    100.00
    %
    
    
    2.56
    %
    
    $
    2,482,364
    
    
    
    100.00
    %
    
    
    2.32
    %
 CIB MARINE-CONTINUING OPERATIONS ONLY:
 Year Ended December 31,2006
    
    

2005
    
    
    2004Average
    
    
    % of Total
    
    
    Average
    
    
    Average
    
    
    % of Total
    
    
    Average
    
    
    Average
    
    
    % of Total
    
    
    AverageBalance
    
    
    Deposits
    
    
    Rate
    
    
    Balance
    
    
    Deposits
    
    
    Rate
    
    
    Balance
    
    
    Deposits
    
    
    Rate(Dollars in thousands)Interest-bearing demand
    
    $
    43,001
    
    
    
    5.01
    %
    
    
    0.99
    %
    
    $
    55,764
    
    
    
    5.28
    %
    
    
    1.13
    %
    
    $
    63,291
    
    
    
    4.74
    %
    
    
    1.19
    %Money market
    
    
    194,290
    
    
    
    22.64
    
    
    
    3.97
    
    
    
    210,366
    
    
    
    19.94
    
    
    
    2.47
    
    
    
    293,044
    
    
    
    21.94
    
    
    
    1.48Other savings
    
    
    21,839
    
    
    
    2.55
    
    
    
    1.00
    
    
    
    35,382
    
    
    
    3.35
    
    
    
    1.16
    
    
    
    40,611
    
    
    
    3.04
    
    
    
    1.23Time deposits
    
    
    507,013
    
    
    
    59.11
    
    
    
    4.12
    
    
    
    641,274
    
    
    
    60.77
    
    
    
    3.24
    
    
    
    814,691
    
    
    
    60.99
    
    
    
    2.96Total interest-bearing deposits
    
    
    766,143
    
    
    
    89.31
    
    
    
    3.82
    
    
    
    942,786
    
    
    
    89.34
    
    
    
    2.86
    
    
    
    1,211,637
    
    
    
    90.71
    
    
    
    2.45Noninterest-bearing
    
    
    91,668
    
    
    
    10.69
    
    
    
    
    
    
    
    112,470
    
    
    
    10.66
    
    
    
    
    
    
    
    124,108
    
    
    
    9.29
    
    
    
    Total deposits
    
    $
    857,811
    
    
    
    100.00
    %
    
    
    3.41
    %
    
    $
    1,055,256
    
    
    
    100.00
    %
    
    
    2.56
    %
    
    $
    1,335,745
    
    
    
    100.00
    %
    
    
    2.22
    %
    December 31, 2006(Dollars inthousands)Maturity3 months or less
    
    $
    39,225Over 3 through 6 months
    
    
    27,700Over 6 through 12 months
    
    
    35,323Over 12 months
    
    
    33,155135,403Liabilities held for sale
    
    
    (9,302
    )$
    126,101
 52




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##### Table of Contents



Deposits and assets of branches held for sale
  Borrowings
    As of December 31,2006
    
    

2005
    
    
    2004Average
    
    
    % of Total
    
    
    
    
    
    
    Average
    
    
    % of Total
    
    
    
    
    
    
    Average
    
    
    % of TotalBalance
    
    
    Rate
    
    
    Borrowings
    
    
    Balance
    
    
    Rate
    
    
    Borrowings
    
    
    Balance
    
    
    Rate
    
    
    Borrowings(Dollars in thousands)Short-Term BorrowingsFed funds purchased
    
    $
    2,057
    
    
    
    5.31
    %
    
    
    2.25
    %
    
    $
    297
    
    
    
    4.13
    %
    
    
    0.32
    %
    
    $
    
    
    
    
    
    %
    
    
    
    %Securities sold under repurchase agreements
    
    
    21,567
    
    
    
    4.74
    
    
    
    23.57
    
    
    
    20,684
    
    
    
    3.46
    
    
    
    21.98
    
    
    
    13,269
    
    
    
    1.67
    
    
    
    15.09Treasury, tax and loan note
    
    
    4,028
    
    
    
    5.04
    
    
    
    4.40
    
    
    
    4,020
    
    
    
    4.06
    
    
    
    4.27
    
    
    
    5,540
    
    
    
    2.03
    
    
    
    6.30Total short-term borrowings
    
    
    27,653
    
    
    
    4.83
    
    
    
    30.22
    
    
    
    25,001
    
    
    
    3.56
    
    
    
    26.57
    
    
    
    18,809
    
    
    
    1.78
    
    
    
    21.39Long-Term BorrowingsFederal Home Loan Bank-long-term
    
    
    2,000
    
    
    
    5.09
    
    
    
    2.19
    
    
    
    7,250
    
    
    
    4.99
    
    
    
    7.70
    
    
    
    7,250
    
    
    
    4.99
    
    
    
    8.25Junior subordinated debentures
    
    
    61,857
    
    
    
    9,94
    
    
    
    67.59
    
    
    
    61,857
    
    
    
    9.49
    
    
    
    65.73
    
    
    
    61,857
    
    
    
    9.00
    
    
    
    70.36Total long-term borrowings
    
    
    63,857
    
    
    
    9.78
    
    
    
    69.78
    
    
    
    69,107
    
    
    
    9.01
    
    
    
    73.43
    
    
    
    69,107
    
    
    
    8.58
    
    
    
    78.61Total borrowings
    
    $
    91,510
    
    
    
    8.29
    %
    
    
    100.00
    %
    
    $
    94,108
    
    
    
    7.57
    %
    
    
    100.00
    %
    
    $
    87,916
    
    
    
    7.12
    %
    
    
    100.00
    %
  Junior Subordinated Debentures and Guaranteed Trust Preferred Securities
  53




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54




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Other Liabilities
 December 31,2006
    
    
    2005(Dollars in thousands)Accounts payable
    
    $
    1,408
    
    
    $
    459Accrual for unfunded commitments and standby letters of credit
    
    
    725
    
    
    
    725Accrued real estate taxes
    
    
    159
    
    
    
    201Accrued compensation and employee benefits
    
    
    973
    
    
    
    913Accrued professional fees
    
    
    1,070
    
    
    
    1,476Accrued other expenses
    
    
    2,645
    
    
    
    997Fair value of derivatives
    
    
    29
    
    
    
    37Other liabilities
    
    
    360
    
    
    
    427$
    7,369
    
    
    $
    5,235
  Off-Balance Sheet Arrangements
  Commitments:
  Derivative Financial Instruments :
  Trust Preferred Securities:
  55




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Capital Calls:
  Residential Mortgage Recourse Obligations:
  Contractual obligations
  Included inassets or
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Moreliabilities held
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    than 5Total
    
    
    for sale
    
    
    Less than 1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-4 years
    
    
    4-5 years
    
    
    yearsCertificate of deposit and
other time deposit
obligations
    
    $
    438,212
    
    
    $
    (43,078
    )
    
    $
    347,674
    
    
    $
    73,196
    
    
    $
    36,847
    
    
    $
    9,601
    
    
    $
    8,991
    
    
    $
    4,981Long-term debt
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Junior subordinated debentures
    
    
    61,857
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,857Operating leases
    
    
    4,403
    
    
    
    
    
    
    
    1,451
    
    
    
    1,140
    
    
    
    873
    
    
    
    484
    
    
    
    252
    
    
    
    203Total
    
    $
    506,472
    
    
    $
    (43,078
    )
    
    $
    349,125
    
    
    $
    76,336
    
    
    $
    37,720
    
    
    $
    10,085
    
    
    $
    9,243
    
    
    $
    67,041
 Liquidity
  56




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Capital
  57




---



##### Table of Contents



December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Risk-weighted assets
    
    $
    674,565
    
    
    $
    704,754
    
    
    $
    942,040Average assets(1)
    
    $
    1,015,809
    
    
    $
    1,174,207
    
    
    $
    2,194,824Capital componentsStockholders equity
    
    $
    71,613
    
    
    $
    79,182
    
    
    $
    92,892Restricted core capital:Junior subordinated debentures net of investment in trust
    
    
    60,000
    
    
    
    60,000
    
    
    
    60,000Minority interests in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    Total restricted core capital elements
    
    
    60,000
    
    
    
    60,000
    
    
    
    60,000Disallowed amounts
    
    
    (36,129
    )
    
    
    (33,606
    )
    
    
    (29,036
    )Maximum allowable in tier 1 capital
    
    
    23,871
    
    
    
    26,394
    
    
    
    30,964Nonfinancial equity items
    
    
    (34
    )
    
    
    (14
    )
    
    
    (15
    )Less: disallowed intangibles
    
    
    (746
    )
    
    
    (982
    )
    
    
    (982
    )Add: unrealized loss on securities
    
    
    1,880
    
    
    
    3,435
    
    
    
    642Tier 1 capital
    
    
    96,584
    
    
    
    108,015
    
    
    
    123,501Allowable allowance for loan losses
    
    
    8,595
    
    
    
    9,008
    
    
    
    11,995Allowable subordinated debentures net of investment in trust
    
    
    36,129
    
    
    
    33,606
    
    
    
    29,036Total risk-based capital
    
    $
    141,308
    
    
    $
    150,629
    
    
    $
    164,532
 For CapitalAdequacyActual
    
    PurposesAmount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)December 31, 2006Total capital to risk-weighted assets
    
    $
    141,308
    
    
    
    20.95
    %
    
    $
    53,965
    
    
    
    8.00
    %Tier 1 capital to risk-weighted assets
    
    
    96,584
    
    
    
    14.32
    
    
    
    26,983
    
    
    
    4.00Tier 1 leverage to average assets
    
    
    96,584
    
    
    
    9.51
    
    
    
    40,632
    
    
    
    4.00December 31, 2005Total capital to risk-weighted assets
    
    $
    150,629
    
    
    
    21.37
    %
    
    $
    56,380
    
    
    
    8.00
    %Tier 1 capital to risk-weighted assets
    
    
    108,015
    
    
    
    15.33
    
    
    
    28,190
    
    
    
    4.00Tier 1 leverage to average assets
    
    
    108,015
    
    
    
    9.20
    
    
    
    46,968
    
    
    
    4.00December 31, 2004Total capital to risk-weighted assets
    
    $
    164,532
    
    
    
    17.47
    %
    
    $
    75,363
    
    
    
    8.00
    %Tier 1 capital to risk-weighted assets
    
    
    123,501
    
    
    
    13.11
    
    
    
    37,682
    
    
    
    4.00Tier 1 leverage to average assets
    
    
    123,501
    
    
    
    5.63
    
    
    
    87,793
    
    
    
    4.00
 
 (1)
    
    Average assets as calculated in accordance with 12 C.F.R. Part 325 of the FDIC rules and
regulations which requires a quarter to date average and allows for current period adjustments
of goodwill and other intangible assets.  58




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New Accounting Pronouncements
 Derivatives
 Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No 133 and 140
 Servicing of Financial Assets
 Accounting
for Servicing of Financial Assets-an amendment of FASB Statement No 140 (SFAS 156).
 Income Taxes
  Fair Value Measurements
 Fair Value Measurements
 59




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##### Table of Contents



The Fair
Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB
Statement No. 115 (SFAS 159).
 Consideration of the Effects of Prior Year Misstatements on Current Year Financial Statements
  Impact of Inflation and Changing Prices
  SUBSEQUENT EVENTS
 CIB Construction/Canron
  Regulatory Orders and Agreements
  60




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##### Table of Contents



Management Changes
  Liquidity
   FHLB Stock Investment
  Loan Pool Purchase
   61




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##### Table of Contents



Branch Activities
   Goodwill
  FDIC Deposit Insurance Premiums
  Stock Options
  Late Filing of Tax Returns
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   62




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Repricing Interest Rate Sensitivity Analysis
 December 31,2006Held for0-3 Months
    
    
    4-6 Months
    
    
    7-12 Months
    
    
    2-5 Years
    
    
    Over 5 Years
    
    
    sale/disposal
    
    
    Total(Dollars in thousands)Interest-earning assets:Loans
    
    $
    246,122
    
    
    $
    25,008
    
    
    $
    47,559
    
    
    $
    179,441
    
    
    $
    24,594
    
    
    $
    (100
    )
    
    $
    522,624Loans held for sale
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Securities
    
    
    32,727
    
    
    
    18,512
    
    
    
    58,437
    
    
    
    191,189
    
    
    
    44,737
    
    
    
    
    
    
    
    345,602Federal funds sold
    
    
    90,688
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,688Total interest-earning assets
    
    
    369,617
    
    
    
    43,520
    
    
    
    105,996
    
    
    
    370,630
    
    
    
    69,331
    
    
    
    (100
    )
    
    
    958,994Interest-bearing liabilities:Time deposits
    
    
    130,922
    
    
    
    98,812
    
    
    
    123,471
    
    
    
    123,377
    
    
    
    4,708
    
    
    
    (43,078
    )
    
    
    438,212Savings and interest-bearing demand deposits
    
    
    231,411
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,580
    )
    
    
    219,831Short-term borrowings
    
    
    25,753
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,653Long-term borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Junior subordinated debentures
    
    
    20,619
    
    
    
    
    
    
    
    
    
    
    
    41,238
    
    
    
    
    
    
    
    
    
    
    
    61,857Total interest-bearing liabilities
    
    
    408,705
    
    
    
    100,712
    
    
    
    123,471
    
    
    
    166,615
    
    
    
    4,708
    
    
    
    (54,658
    )
    
    
    749,553Interest sensitivity gap (by period)
    
    $
    (39,088
    )
    
    $
    (57,192
    )
    
    $
    (17,475
    )
    
    $
    204,015
    
    
    $
    64,623
    
    
    $
    54,558
    
    
    $
    209,441Interest sensitivity gap (cumulative)
    
    
    (39,088
    )
    
    
    (96,280
    )
    
    
    (113,755
    )
    
    
    90,260
    
    
    
    154,803
    
    
    
    209,361
    
    
    
    209,441Adjusted for derivativesDerivatives (notional, by period)
    
    
    (4,225
    )
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    (775
    )
    
    
    
    
    
    
    Derivatives (notional, cumulative)
    
    
    (4,225
    )
    
    
    (4,225
    )
    
    
    (4,225
    )
    
    
    775
    
    
    
    
    
    
    
    
    
    
    
    Interest sensitivity gap (by period)
    
    
    (43,313
    )
    
    
    (57,192
    )
    
    
    (17,475
    )
    
    
    209,015
    
    
    
    63,848
    
    
    
    54,558
    
    
    
    209,441Interest sensitivity gap (cumulative)
    
    
    (43,313
    )
    
    
    (100,505
    )
    
    
    (117,980
    )
    
    
    91,035
    
    
    
    154,803
    
    
    
    209,441
    
    
    
    209,441Cumulative gap as a % of totalassets
    
    
    (4.34
    )%
    
    
    (10.07
    )%
    
    
    (11.83
    )%
    
    
    9.13
    %
    
    
    15.52
    %
    
    
    21.00
    %
    63




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##### Table of Contents



Basis Point Changes+200
    
    +100
    
    100
    
    200Net interest income change over one yearDecember 31, 2006
    
    
    (5.78
    )%
    
    
    (4.31
    )%
    
    
    2.23
    %
    
    
    0.67
    %December 31, 2005
    
    
    1.48
    %
    
    
    (1.14
    )%
    
    
    (1.32
    )%
    
    
    (5.27
    )%
      
    
    The balance sheet size was assumed to remain constant;
    
    All maturing assets and liabilities were invested or deposited into similar financial
or derivative instruments;
    
    Spreads to the benchmark interest rates for pricing new volume to replace maturing or
paying older volumes were similar to spreads currently inherent in those financial
instruments, except for marketable securities which reflects current market spreads;
    
    The interest rates of financial instruments with like terms were assumed to change by
the same number of basis points except that the timing, magnitude, and direction of
change of interest rates paid on nonmaturing 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. Current
anticipated pricing strategies for nonmaturing deposits were also utilized.
   64




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65




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
 
    KPMG LLP
 
 66




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##### Table of Contents



CIB MARINE BANCSHARES, INC.
 Consolidated Balance Sheets
 December 31,2006
    
    
    2005(Dollars in thousands,except share data)AssetsCash and cash equivalents:Cash and due from banks
    
    $
    24,447
    
    
    $
    24,554Federal funds sold
    
    
    90,688
    
    
    
    88,358Total cash and cash equivalents
    
    
    115,135
    
    
    
    112,912Loans held for sale
    
    
    80
    
    
    
    Securities
    
    
    345,602
    
    
    
    493,409Loans
    
    
    522,624
    
    
    
    515,544Allowance for loan losses
    
    
    (20,906
    )
    
    
    (24,882
    )Net loans
    
    
    501,718
    
    
    
    490,662Premises and equipment, net
    
    
    10,912
    
    
    
    12,914Accrued interest receivable
    
    
    5,582
    
    
    
    5,133Foreclosed properties
    
    
    102
    
    
    
    2,931Assets of branches held for sale
    
    
    418
    
    
    
    723Assets of companies held for disposal
    
    
    4,112
    
    
    
    5,913Goodwill
    
    
    746
    
    
    
    982Other assets
    
    
    13,177
    
    
    
    12,849Total assets
    
    $
    997,584
    
    
    $
    1,138,428Liabilities and Stockholders EquityDeposits:Noninterest-bearing demand
    
    $
    81,741
    
    
    $
    99,483Interest-bearing demand
    
    
    38,167
    
    
    
    49,389Savings
    
    
    181,664
    
    
    
    220,037Time
    
    
    438,212
    
    
    
    498,791Total deposits
    
    
    739,784
    
    
    
    867,700Short-term borrowings
    
    
    27,653
    
    
    
    25,001Long-term borrowings
    
    
    2,000
    
    
    
    7,250Junior subordinated debentures
    
    
    61,857
    
    
    
    61,857Accrued interest payable
    
    
    24,940
    
    
    
    16,896Deposits of branches held for sale
    
    
    55,365
    
    
    
    66,991Liabilities of companies held for disposal
    
    
    7,003
    
    
    
    8,316Other liabilities
    
    
    7,369
    
    
    
    5,235Total liabilities
    
    
    925,971
    
    
    
    1,059,246Stockholders EquityPreferred stock, $1 par value; 5,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common stock, $1 par value; 50,000,000 shares authorized, 18,346,442
issued and outstanding
    
    
    18,346
    
    
    
    18,346Capital surplus
    
    
    158,266
    
    
    
    158,163Accumulated deficit
    
    
    (102,806
    )
    
    
    (93,528
    )Accumulated other comprehensive loss, net
    
    
    (1,880
    )
    
    
    (3,435
    )Receivables from sale of stock
    
    
    (151
    )
    
    
    (202
    )Treasury stock at cost, 12,663 shares
    
    
    (162
    )
    
    
    (162
    )Total stockholders equity
    
    
    71,613
    
    
    
    79,182Total liabilities and stockholders equity
    
    $
    997,584
    
    
    $
    1,138,428
  67




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##### Table of Contents



Consolidated Statements of Operations
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands, except share and per share data)Interest and Dividend IncomeLoans
    
    $
    38,533
    
    
    $
    38,416
    
    
    $
    58,711Loans held for sale
    
    
    2
    
    
    
    83
    
    
    
    213Securities:Taxable
    
    
    17,907
    
    
    
    15,367
    
    
    
    8,479Tax-exempt
    
    
    161
    
    
    
    509
    
    
    
    866Dividends
    
    
    605
    
    
    
    1,178
    
    
    
    583Federal funds sold
    
    
    4,301
    
    
    
    4,296
    
    
    
    1,127Total interest and dividend income
    
    
    61,509
    
    
    
    59,849
    
    
    
    69,979Interest ExpenseDeposits
    
    
    29,247
    
    
    
    26,997
    
    
    
    29,735Short-term borrowings
    
    
    1,008
    
    
    
    795
    
    
    
    1,325Long-term borrowings
    
    
    245
    
    
    
    367
    
    
    
    517Junior subordinated debentures
    
    
    7,742
    
    
    
    6,636
    
    
    
    5,710Total interest expense
    
    
    38,242
    
    
    
    34,795
    
    
    
    37,287Net interest income
    
    
    23,267
    
    
    
    25,054
    
    
    
    32,692Provision for credit losses
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    17,432Net interest income after provision for credit losses
    
    
    27,651
    
    
    
    33,723
    
    
    
    15,260Noninterest IncomeLoan fees
    
    
    154
    
    
    
    404
    
    
    
    1,270Deposit service charges
    
    
    1,041
    
    
    
    1,142
    
    
    
    1,648Other service fees
    
    
    184
    
    
    
    625
    
    
    
    538Other income
    
    
    320
    
    
    
    369
    
    
    
    222Net gain on sale of assets and deposits
    
    
    2,727
    
    
    
    
    
    
    
    Gain on sale of investment securities, net
    
    
    
    
    
    
    355
    
    
    
    Total noninterest income
    
    
    4,426
    
    
    
    2,895
    
    
    
    3,678Noninterest ExpenseCompensation and employee benefits
    
    
    20,484
    
    
    
    25,696
    
    
    
    28,771Equipment
    
    
    3,420
    
    
    
    4,134
    
    
    
    4,256Occupancy and premises
    
    
    3,332
    
    
    
    3,823
    
    
    
    3,241Professional services
    
    
    4,484
    
    
    
    3,990
    
    
    
    6,047Impairment loss on investment securities
    
    
    1,134
    
    
    
    2,024
    
    
    
    Write down and losses on assets
    
    
    
    
    
    
    1,896
    
    
    
    2,021Other expense
    
    
    9,161
    
    
    
    9,407
    
    
    
    8,393Total noninterest expense
    
    
    42,015
    
    
    
    50,970
    
    
    
    52,729Loss from continuing operations before income taxes
    
    
    (9,938
    )
    
    
    (14,352
    )
    
    
    (33,791
    )Income tax benefit
    
    
    (99
    )
    
    
    (1,208
    )
    
    
    (5,240
    )Loss from continuing operations
    
    
    (9,839
    )
    
    
    (13,144
    )
    
    
    (28,551
    )Discontinued operations:Pretax income from discontinued operations
    
    
    660
    
    
    
    3,650
    
    
    
    492Pretax net gain on sales of discontinued operations
    
    
    
    
    
    
    200
    
    
    
    15,126Total pretax income from discontinued operations
    
    
    660
    
    
    
    3,850
    
    
    
    15,618Income tax expense
    
    
    99
    
    
    
    2,367
    
    
    
    4,414Income from discontinued operations
    
    
    561
    
    
    
    1,483
    
    
    
    11,204Net Loss
    
    $
    (9,278
    )
    
    $
    (11,661
    )
    
    $
    (17,347
    )Earnings (Loss) Per ShareBasic:Loss from continuing operations
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )Discontinued operations
    
    
    0.03
    
    
    
    0.08
    
    
    
    0.61Net loss
    
    $
    (0.51
    )
    
    $
    (0.64
    )
    
    $
    (0.95
    )Diluted:Loss from continuing operations
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )Discontinued operations
    
    
    0.03
    
    
    
    0.08
    
    
    
    0.61Net loss
    
    $
    (0.51
    )
    
    $
    (0.64
    )
    
    $
    (0.95
    )Weighted average shares-basic
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884Weighted average shares-diluted
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884
  68




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##### Table of Contents



CIB MARINE BANCSHARES, INC.
 Consolidated Statements of Stockholders Equity
 StockAccumulated
    
    
    ReceivablesCommon Stock
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    andPar
    
    
    Capital
    
    
    Accumulated
    
    
    Comprehensive
    
    
    TreasuryShares
    
    
    Value
    
    
    Surplus
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Stock
    
    
    Total(Dollars in thousands, except share data)Balance, December 31, 2003
    
    
    18,346,442
    
    
    $
    18,346
    
    
    $
    158,163
    
    
    $
    (62,759
    )
    
    $
    2,184
    
    
    $
    (7,411
    )
    
    $
    108,523Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,347
    )
    
    
    
    
    
    
    
    
    
    
    (17,347
    )Other comprehensive loss:Unrealized securities
holding losses
arising during the
period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,826
    )
    
    
    
    
    
    
    (2,826
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,173
    )Reduction of receivables
from sale of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,262
    
    
    
    4,262Acquisition of treasury
stock (137,002 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (577
    )
    
    
    (577
    )Reduction of treasury
stock upon sale of Chicago
(210,950 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,761
    )
    
    
    
    
    
    
    2,618
    
    
    
    857Balance, December 31, 2004
    
    
    18,346,442
    
    
    $
    18,346
    
    
    $
    158,163
    
    
    $
    (81,867
    )
    
    $
    (642
    )
    
    $
    (1,108
    )
    
    $
    92,892Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,661
    )
    
    
    
    
    
    
    
    
    
    
    (11,661
    )Other comprehensive loss:Realized losses on
securities available
for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,024
    )
    
    
    
    
    
    
    (2,024
    )Unrealized securities
holding losses
arising during the
period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (769
    )
    
    
    
    
    
    
    (769
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,454
    )Reduction of receivables
from sale of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    744
    
    
    
    744Balance, December 31, 2005
    
    
    18,346,442
    
    
    $
    18,346
    
    
    $
    158,163
    
    
    $
    (93,528
    )
    
    $
    (3,435
    )
    
    $
    (364
    )
    
    $
    79,182Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,278
    )
    
    
    
    
    
    
    
    
    
    
    (9,278
    )Other comprehensive loss:Impairment loss on
investment securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,134
    )
    
    
    
    
    
    
    (1,134
    )Unrealized securities
holding gains arising
during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,689
    
    
    
    
    
    
    
    2,689Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,723
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103Reduction of receivables
from sale of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    51Balance, December 31, 2006
    
    
    18,346,442
    
    
    $
    18,346
    
    
    $
    158,266
    
    
    $
    (102,806
    )
    
    $
    (1,880
    )
    
    $
    (313
    )
    
    $
    71,613
  69




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##### Table of Contents



CIB MARINE BANCSHARES, INC.
 Consolidated Statements of Cash Flows
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Cash Flows from Operating ActivitiesNet loss from continuing operations
    
    $
    (9,839
    )
    
    $
    (13,144
    )
    
    $
    (28,551
    )Net income from discontinued operations
    
    
    561
    
    
    
    1,483
    
    
    
    11,204(9,278
    )
    
    
    (11,661
    )
    
    
    (17,347
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Deferred loan fee amortization
    
    
    (693
    )
    
    
    (982
    )
    
    
    (1,684
    )Depreciation and other amortization
    
    
    2,761
    
    
    
    2,637
    
    
    
    5,815Provision for credit losses
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    17,432Deferred tax expense
    
    
    
    
    
    
    
    
    
    
    911Originations of loans held for sale
    
    
    (1,965
    )
    
    
    
    
    
    
    Proceeds from sale of loans held for sale
    
    
    1,906
    
    
    
    
    
    
    
    Net gain on sale of assets and deposits
    
    
    (2,727
    )
    
    
    
    
    
    
    Write down and losses on assets
    
    
    
    
    
    
    1,896
    
    
    
    2,021Impairment loss on investment securities
    
    
    1,134
    
    
    
    2,024
    
    
    
    Gain on sale of investment securities, net
    
    
    
    
    
    
    (355
    )
    
    
    (Increase) decrease in interest receivable and other assets
    
    
    (2,238
    )
    
    
    4,495
    
    
    
    (549
    )Increase in interest payable junior subordinated debentures
    
    
    7,688
    
    
    
    6,581
    
    
    
    5,655Increase (decrease) in other interest payable and other liabilities
    
    
    2,487
    
    
    
    (964
    )
    
    
    2,089Operating cash flows of discontinued operations
    
    
    (523
    )
    
    
    2,176
    
    
    
    3,157Net cash provided by (used in) operating activities
    
    
    (5,832
    )
    
    
    (2,822
    )
    
    
    17,500Cash Flows from Investing ActivitiesMaturities of securities available for sale
    
    
    159,757
    
    
    
    620,224
    
    
    
    621,440Purchase of securities available for sale
    
    
    (100,943
    )
    
    
    (432,021
    )
    
    
    (643,694
    )Proceeds from sales of securities available for sale
    
    
    
    
    
    
    9,639
    
    
    
    Proceeds from sales of mortgage-backed securities available for sale
    
    
    
    
    
    
    6,400
    
    
    
    Repayments of asset and mortgage-backed securities available for sale
    
    
    81,072
    
    
    
    71,231
    
    
    
    53,469Purchase of asset and mortgage-backed securities available for sale
    
    
    (5,390
    )
    
    
    (381,492
    )
    
    
    (55,052
    )Net decrease (increase) in Federal Home Loan Bank Stock
    
    
    14,431
    
    
    
    (11,951
    )
    
    
    (6,166
    )Net decrease (increase) in other investments
    
    
    795
    
    
    
    (677
    )
    
    
    1,856Net decrease (increase) in loans
    
    
    (5,954
    )
    
    
    208,836
    
    
    
    432,365Proceeds from sale of loans held for sale
    
    
    
    
    
    
    24,113
    
    
    
    Proceeds from sale of foreclosed properties
    
    
    2,525
    
    
    
    1,372
    
    
    
    704Net cash received from the sale of branches
    
    
    3,620
    
    
    
    
    
    
    
    Proceeds from sale of subsidiaries
    
    
    
    
    
    
    
    
    
    
    68,991Capital expenditures
    
    
    (602
    )
    
    
    (2,007
    )
    
    
    (762
    )Investing cash flows of discontinued operations
    
    
    1,011
    
    
    
    4,955
    
    
    
    205,669Net cash provided by investing activities
    
    
    150,322
    
    
    
    118,622
    
    
    
    678,820Cash Flows from Financing ActivitiesDecrease in deposits
    
    
    (63,713
    )
    
    
    (243,515
    )
    
    
    (321,454
    )Decrease in deposits of branches held for sale
    
    
    (11,627
    )
    
    
    
    
    
    
    Deposits sold
    
    
    (64,329
    )
    
    
    
    
    
    
    Repayments of long-term borrowings
    
    
    (5,250
    )
    
    
    
    
    
    
    (8,500
    )Net increase (decrease) in short-term borrowings
    
    
    2,652
    
    
    
    6,192
    
    
    
    (11,937
    )Net decrease in receivables from sale of stock
    
    
    
    
    
    
    500
    
    
    
    220Financing cash flows of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (240,518
    )Net cash used in financing activities
    
    
    (142,267
    )
    
    
    (236,823
    )
    
    
    (582,189
    )Net increase (decrease) in cash and cash equivalents
    
    
    2,223
    
    
    
    (121,023
    )
    
    
    114,131Cash and cash equivalents, beginning of year
    
    
    112,912
    
    
    
    233,935
    
    
    
    119,804Cash and cash equivalents, end of year
    
    $
    115,135
    
    
    $
    112,912
    
    
    $
    233,935Supplemental Cash Flow InformationCash paid (received) during the year for:Interest expense-continuing operations
    
    $
    30,198
    
    
    $
    28,543
    
    
    $
    33,371Interest expense-discontinued operations
    
    
    
    
    
    
    31
    
    
    
    31,957Income taxes-continuing operations
    
    
    
    
    
    
    (5,763
    )
    
    
    (5,907
    )Income taxes-discontinued operations
    
    
    2
    
    
    
    (458
    )
    
    
    (5,860
    )Supplemental Disclosures of Noncash ActivitiesTransfers of loans to foreclosed properties-continuing operations
    
    $
    52
    
    
    $
    1,400
    
    
    $
    1,132Transfers of loans to foreclosed properties-discontinued operations
    
    
    
    
    
    
    
    
    
    
    100Transfers of commercial loans to loans held for sale
    
    
    
    
    
    
    25,847
    
    
    
    3,702Transfer deposits to deposits of branches held for sale
    
    
    64,331
    
    
    
    66,991
    
    
    
    Transfer assets to assets of branches held for sale
    
    
    452
    
    
    
    723
    
    
    
    Decrease in foreclosed properties and short-term borrowings satisfied
by the transfer of real estate
    
    
    
    
    
    
    
    
    
    
    25,120
  70




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##### Table of Contents



Notes to Consolidated Financial Statements
 Note 1-Summary of Significant Accounting Policies
 Nature of Operations
   Consolidation
  Use of Estimates in the Preparation of Financial Statements
  Cash Flows
  Other Investments
  71




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##### Table of Contents



Loans Held for Sale
  Securities Available for Sale
   Loans, Allowance for Loan Losses and Provision for Credit Losses
     72




---



##### Table of Contents



Goodwill
  Premises and Equipment
  Foreclosed Properties
  73




---



##### Table of Contents



Assets of Companies Held For Disposal
  Litigation Contingency
  Stock-Based Compensation
   December 31,2006
    
    
    2005
    
    
    2004Dividend yield
    
    
    
    
    
    
    
    
    
    NARisk free interest rate
    
    
    4.63
    %
    
    
    4.25
    %
    
    NAExpected volatility
    
    
    40
    %
    
    
    48
    %
    
    NAWeighted average expected life
    
    6.5 years
    
    6.5 years
    
    NAWeighted average per share fair value of options
    
    $
    0.76
    
    
    $
    1.47
    
    
    NA
    74




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##### Table of Contents



December 31,2005(Dollars in thousands,except share data)Net loss
    
    As reported
    
    
    
    $
    (11,661
    )Assumed compensation cost
    
    
    
    
    (35
    )Pro forma
    
    
    
    $
    (11,696
    )Basic loss per share
    
    As reported
    
    
    
    $
    (0.64
    )Pro forma
    
    
    
    
    (0.64
    )Diluted loss per share
    
    As reported
    
    
    
    $
    (0.64
    )Pro forma
    
    
    
    
    (0.64
    )
  Advertising Expense
  Receivables from Sale of Stock
  Income Taxes
    75




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##### Table of Contents



Business Segments
   Earnings Per Common Share
  Foreign Currency Translation
   Derivative and Hedging Activities
   76




---



##### Table of Contents



77




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##### Table of Contents



Note 2-Cash and Due from Banks
  Note 3-Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)December 31, 2006U.S. government agencies
    
    $
    101,321
    
    
    $
    193
    
    
    $
    554
    
    
    $
    100,960Obligations of states and political subdivisions
    
    
    32,067
    
    
    
    146
    
    
    
    526
    
    
    
    31,687Other notes and bonds
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    350Asset-backed securities
    
    
    2,192
    
    
    
    5
    
    
    
    
    
    
    
    2,197Commercial paper
    
    
    4,384
    
    
    
    
    
    
    
    
    
    
    
    4,384Mortgage-backed securities
    
    
    194,854
    
    
    
    520
    
    
    
    1,664
    
    
    
    193,710Total securities available for sale
    
    
    335,168
    
    
    
    864
    
    
    
    2,744
    
    
    
    333,288Federal Home Loan Bank and Federal Reserve Bank stock at cost
    
    
    12,314
    
    
    
    
    
    
    
    
    
    
    
    12,314Total securities
    
    $
    347,482
    
    
    $
    864
    
    
    $
    2,744
    
    
    $
    345,602December 31, 2005U.S. government agencies
    
    $
    155,867
    
    
    $
    55
    
    
    $
    974
    
    
    $
    154,948Obligations of states and political subdivisions
    
    
    27,580
    
    
    
    151
    
    
    
    177
    
    
    
    27,554Other notes and bonds
    
    
    350
    
    
    
    
    
    
    
    
    
    
    
    350Asset-backed securities
    
    
    9,568
    
    
    
    10
    
    
    
    
    
    
    
    9,578Commercial paper
    
    
    13,033
    
    
    
    38
    
    
    
    
    
    
    
    13,071Mortgage-backed securities
    
    
    263,727
    
    
    
    183
    
    
    
    2,721
    
    
    
    261,189Total securities available for sale
    
    
    470,125
    
    
    
    437
    
    
    
    3,872
    
    
    
    466,690Federal Home Loan Bank and Federal Reserve Bank stock at cost
    
    
    26,719
    
    
    
    
    
    
    
    
    
    
    
    26,719Total securities
    
    $
    496,844
    
    
    $
    437
    
    
    $
    3,872
    
    
    $
    493,409
  78




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##### Table of Contents



Amortized
    
    
    FairCost
    
    
    Value(Dollars in thousands)Due in one year or less
    
    $
    38,061
    
    
    $
    37,749Due after one year through five years
    
    
    69,836
    
    
    
    69,805Due after five years through ten years
    
    
    11,957
    
    
    
    11,715Due after ten years
    
    
    18,268
    
    
    
    18,112138,122
    
    
    
    137,381Mortgage-backed securities
    
    
    194,854
    
    
    
    193,710Asset-backed securities
    
    
    2,192
    
    
    
    2,197Total securities available for sale
    
    
    335,168
    
    
    
    333,288Federal Home Loan Bank and Federal Reserve Bank stock at cost
    
    
    12,314
    
    
    
    12,314$
    347,482
    
    
    $
    345,602
  At December 31, 2006Less than 12 months in an
    
    
    12 months or longer in anunrealized loss position
    
    
    unrealized loss position
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(Dollars in thousands)U.S. government agencies
    
    $
    7,473
    
    
    $
    17
    
    
    $
    49,506
    
    
    $
    537
    
    
    $
    56,979
    
    
    $
    554Obligations of states and
political subdivisions
    
    
    8,488
    
    
    
    100
    
    
    
    13,450
    
    
    
    426
    
    
    
    21,938
    
    
    
    526Mortgage-backed securities
    
    
    2,838
    
    
    
    16
    
    
    
    140,005
    
    
    
    1,648
    
    
    
    142,843
    
    
    
    1,664Total securities with
unrealized losses
    
    $
    18,799
    
    
    $
    133
    
    
    $
    202,961
    
    
    $
    2,611
    
    
    $
    221,760
    
    
    $
    2,744Securities without
unrealized losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123,842Total securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    345,602
 At December 31, 2005Less than 12 months in an
    
    
    12 months or longer in anunrealized loss position
    
    
    unrealized loss position
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(Dollars in thousands)U.S. government agencies
    
    $
    100,966
    
    
    $
    289
    
    
    $
    38,649
    
    
    $
    685
    
    
    $
    139,615
    
    
    $
    974Obligations of states and
political subdivisions
    
    
    12,671
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    12,671
    
    
    
    177Mortgage-backed securities
    
    
    163,503
    
    
    
    1,798
    
    
    
    75,081
    
    
    
    923
    
    
    
    238,584
    
    
    
    2,721Total securities with
unrealized losses
    
    $
    277,140
    
    
    $
    2,264
    
    
    $
    113,730
    
    
    $
    1,608
    
    
    $
    390,870
    
    
    $
    3,872Securities without
unrealized losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,539Total securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    493,409
 79




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##### Table of Contents



Note 4-Loans and Allowance for Loan Losses
 Loans
  December 31,2006
    
    
    2005% of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Commercial
    
    $
    49,777
    
    
    
    9.5
    %
    
    $
    69,048
    
    
    
    13.4
    %Commercial real estate
    
    
    282,233
    
    
    
    54.0
    
    
    
    323,384
    
    
    
    62.6Commercial real estate construction
    
    
    111,040
    
    
    
    21.3
    
    
    
    89,313
    
    
    
    17.3Residential real estate
    
    
    19,125
    
    
    
    3.7
    
    
    
    19,925
    
    
    
    3.9Home equity loans
    
    
    57,990
    
    
    
    11.1
    
    
    
    12,603
    
    
    
    2.4Consumer loans
    
    
    2,363
    
    
    
    0.4
    
    
    
    2,179
    
    
    
    0.4Receivables from sale of CIB Marine stock
    
    
    (151
    )
    
    
    (0.0
    )
    
    
    (202
    )
    
    
    (0.0
    )Gross loans
    
    
    522,377
    
    
    
    100.0
    %
    
    
    516,250
    
    
    
    100.0
    %Deferred loan fees
    
    
    247
    
    
    
    
    
    
    
    (706
    )Loans
    
    
    522,624
    
    
    
    
    
    
    
    515,544Allowance for loan losses
    
    
    (20,906
    )
    
    
    
    
    
    
    (24,882
    )Loans, net
    
    $
    501,718
    
    
    
    
    
    
    $
    490,662
   80




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##### Table of Contents



December 31,2006
    
    2005(Dollars in thousands)Nonaccrual loans
    
    $
    20,669
    
    
    $
    29,105Restructured loans
    
    
    
    
    
    
    1,486Loans 90 days or more past due and still accruing
    
    
    1,485
    
    
    
    11,542
  December 31,2006
    
    
    2005(Dollars in thousands)Impaired loans without a specific allowance
    
    $
    5,543
    
    
    $
    10,511Impaired loans with a specific allowance
    
    
    14,380
    
    
    
    18,349Total impaired loans
    
    $
    19,923
    
    
    $
    28,860Specific allowance related to impaired loans
    
    $
    7,451
    
    
    $
    8,562Average balance of impaired loans
    
    
    22,310
    
    
    
    31,375Cash basis interest on impaired loans
    
    $
    379
    
    
    $
    461
     Credit Concentrations
   81




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##### Table of Contents



% ofOutstanding
    
    % of
    
    StockholdersINDUSTRY
    
    Balance
    
    Loans
    
    Equity(Dollars in millions)Commercial Real Estate Developers
    
    $
    143.2
    
    
    
    27
    %
    
    
    200
    %Residential Real Estate Developers
    
    
    112.3
    
    
    
    22
    
    
    
    157Motel and Hotel
    
    
    40.1
    
    
    
    8
    
    
    
    56Nursing/Convalescent Homes
    
    
    28.7
    
    
    
    6
    
    
    
    40Retail Trade
    
    
    22.6
    
    
    
    4
    
    
    
    32Health Care Facilities
    
    
    20.9
    
    
    
    4
    
    
    
    29
 Allowance for Loan Losses
  For the Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Balance at beginning of year
    
    $
    24,882
    
    
    $
    29,551
    
    
    $
    109,872Charge-offs
    
    
    (622
    )
    
    
    (3,911
    )
    
    
    (79,979
    )Recoveries
    
    
    1,030
    
    
    
    7,911
    
    
    
    8,554Net loan (charge-offs) recoveries
    
    
    408
    
    
    
    4,000
    
    
    
    (71,425
    )Allowance for loans sold
    
    
    
    
    
    
    
    
    
    
    (38,842
    )Transfer from accrual for unfunded standby
letters of credit for funded standby letters of
credit
    
    
    
    
    
    
    
    
    
    
    5,000Provision for loan losses-discontinued operations
    
    
    
    
    
    
    
    
    
    
    8,239Provision for loan losses-continuing operations
    
    
    (4,384
    )
    
    
    (8,669
    )
    
    
    16,707Balance at end of year
    
    $
    20,906
    
    
    $
    24,882
    
    
    $
    29,551Allowance for loan losses as a percentage of loans
    
    
    4.00
    %
    
    
    4.83
    %
    
    
    3.96
    %
 Director and Officer Loans
  December 31,2006
    
    
    2005(Dollars in thousands)Balance at beginning of year
    
    $
    9,476
    
    
    $
    9,940New loans
    
    
    4,136
    
    
    
    1,834Repayments
    
    
    (6,587
    )
    
    
    (2,298
    )Balance at end of year
    
    $
    7,025
    
    
    $
    9,476
 Note 5-Premises and Equipment, net
  December 31,2006
    
    
    2005(Dollars in thousands)Land
    
    $
    1,845
    
    
    $
    2,281Buildings
    
    
    7,126
    
    
    
    8,038Leasehold improvements
    
    
    1,672
    
    
    
    1,951Furniture and equipment
    
    
    21,023
    
    
    
    22,80531,666
    
    
    
    35,075Less: accumulated depreciation
    
    
    (20,336
    )
    
    
    (21,438
    )$
    11,330
    
    
    $
    13,637Assets of branches held for sale
    
    
    (418
    )
    
    
    (723
    )$
    10,912
    
    
    $
    12,914
 82




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##### Table of Contents



Amount(Dollars in thousands)2007
    
    $
    1,4512008
    
    
    1,1402009
    
    
    8732010
    
    
    4842011
    
    
    252Thereafter
    
    
    203$
    4,403
 Note 6-Goodwill
  GoodwillBalance, December 31, 2004 and 2005 (1)
    
    $
    982Reduction of goodwill due to sale of branch (2)
    
    
    (236
    )Balance, December 31, 2006
    
    $
    746
 
 (1)
    
    There was no activity during 2005.(2)
    
    During 2006, CIB Marine sold the fixed assets and deposits of
its branch located in Grafton, Wisconsin. Goodwill of $0.2 million was
allocated to this branch.   Note 7-Companies Held For Disposal and Discontinued Operations
  83




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##### Table of Contents



December 31,2006
    
    
    2005(Dollars in thousands)Assets of companies held for disposalCIB Construction (1)
    
    $
    3,250
    
    
    $
    5,165MICR (1)
    
    
    127
    
    
    
    595MSI
    
    
    800
    
    
    
    806Other (2)
    
    
    (65
    )
    
    
    (653
    )Total assets of companies held for disposal
    
    $
    4,112
    
    
    $
    5,913Liabilities of companies held for disposalCIB Construction (1)
    
    $
    4,559
    
    
    $
    5,161MICR (1)
    
    
    297
    
    
    
    491MSI
    
    
    656
    
    
    
    1,901Other (2)
    
    
    1,491
    
    
    
    763Total liabilities of companies held for disposal
    
    $
    7,003
    
    
    $
    8,316
 
 (1)
    
    Banking regulations limit the holding period to five years, unless extended, for assets not
considered to be permissible banking activities and which have been acquired in satisfaction
of debt previously contracted. Both MICR and CIB Construction are subject to this restriction.(2)
    
    Includes mortgage banking assets/liabilities held by affiliates, tax liability of subsidiary
sold in 2004 and elimination of intercompany transactions between subsidiaries and affiliates.  Pretaxincome(loss)beforegain(loss) on
    
    
    Gain (loss)
    
    
    Income
    
    
    
    
    
    
    Net incomesale of assets
    
    
    on sale of
    
    
    tax
    
    
    
    
    
    
    (loss) Net ofand other
    
    
    discontinued
    
    
    expense
    
    
    Other
    
    
    intercompanyincome
    
    
    operations
    
    
    (benefit)
    
    
    Income (1)
    
    
    transactions(Dollars in thousands)2006CIB Construction
    
    $
    418
    
    
    $
    
    
    
    $
    156
    
    
    $
    
    
    
    $
    262MSI
    
    
    209
    
    
    
    
    
    
    
    (52
    )
    
    
    33
    
    
    
    294Other (2)
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    5Total
    
    $
    627
    
    
    $
    
    
    
    $
    99
    
    
    $
    33
    
    
    $
    5612005CIB Construction
    
    $
    2,716
    
    
    $
    
    
    
    $
    840
    
    
    $
    
    
    
    $
    1,876MICR
    
    
    1,037
    
    
    
    200
    
    
    
    (233
    )
    
    
    
    
    
    
    1,470MSI
    
    
    (304
    )
    
    
    
    
    
    
    (140
    )
    
    
    201
    
    
    
    37Other (3)
    
    
    
    
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    (1,900
    )Total
    
    $
    3,449
    
    
    $
    200
    
    
    $
    2,367
    
    
    $
    201
    
    
    $
    1,4832004CIB Construction
    
    $
    3,646
    
    
    $
    
    
    
    $
    676
    
    
    $
    957
    
    
    $
    3,927MICR
    
    
    (598
    )
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    (998
    )MSI
    
    
    (4,775
    )
    
    
    (738
    )
    
    
    (412
    )
    
    
    871
    
    
    
    (4,230
    )CIB-Chicago
    
    
    (4,471
    )
    
    
    15,627
    
    
    
    3,750
    
    
    
    4,941
    
    
    
    12,347Commercial Finance
    
    
    (221
    )
    
    
    237
    
    
    
    
    
    
    
    142
    
    
    
    158Total
    
    $
    (6,419
    )
    
    $
    15,126
    
    
    $
    4,414
    
    
    $
    6,911
    
    
    $
    11,204
 
 (1)
    
    Includes impairment losses recorded by the parent, mortgage banking income/expense recognized
by affiliates and elimination of intercompany transactions.(2)
    
    Relates to MICR.(3)
    
    Relates to subsidiary sold in 2004. CIB Construction (includes Canron)
  84




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##### Table of Contents



December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash on deposit at CIB Marine
    
    $
    50
    
    
    $
    626Accounts receivable
    
    
    551
    
    
    
    1,572Other assets
    
    
    2,649
    
    
    
    2,967Total assets
    
    $
    3,250
    
    
    $
    5,165Liabilities and stockholders equity:Income tax payable
    
    $
    3,082
    
    
    $
    3,106Other liabilities
    
    
    1,477
    
    
    
    2,055Total liabilities
    
    
    4,559
    
    
    
    5,161Stockholders equity
    
    
    (1,309
    )
    
    
    4Total liabilities and stockholders equity
    
    $
    3,250
    
    
    $
    5,165
  MICR
   December 31,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash on deposit at non-affiliates
    
    $
    
    
    
    $
    273Income tax receivable
    
    
    127
    
    
    
    122Other assets
    
    
    
    
    
    
    200Total assets
    
    $
    127
    
    
    $
    595Liabilities and stockholders equity:Other liabilities
    
    $
    297
    
    
    $
    491Stockholders equity
    
    
    (170
    )
    
    
    104Total liabilities and stockholders equity
    
    $
    127
    
    
    $
    595
 85




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##### Table of Contents



MSI
   December 31,2006
    
    
    2005(Dollars in thousands)Assets:Cash on deposit at CIB Marine
    
    $
    14
    
    
    $
    24Net Loans
    
    
    100
    
    
    
    105Income tax receivable
    
    
    685
    
    
    
    633Other assets
    
    
    1
    
    
    
    44Total assets
    
    $
    800
    
    
    $
    806Liabilities and stockholders equity:Loans payable to CIB Marine
    
    $
    103
    
    
    $
    829Other liabilities
    
    
    553
    
    
    
    1,072Total liabilities
    
    
    656
    
    
    
    1,901Stockholders equity
    
    
    144
    
    
    
    (1,095
    )Total liabilities and stockholders equity
    
    $
    800
    
    
    $
    806
  Hillside Investors (includes CIB-Chicago)
   86




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##### Table of Contents



Commercial Finance
  Note 8-Assets and Deposits of Branches Held For Sale
    Note 9-Other Assets
  December 31,2006
    
    
    2005(Dollars in thousands)Prepaid expenses
    
    $
    1,067
    
    
    $
    1,113Accounts receivable
    
    
    1,508
    
    
    
    638Trust preferred securities underwriting fee, net of amortization
    
    
    1,335
    
    
    
    1,390Investment in trust common securities
    
    
    2,838
    
    
    
    2,654Other investments
    
    
    2,821
    
    
    
    3,562Income tax receivable
    
    
    3,492
    
    
    
    3,391Other
    
    
    116
    
    
    
    101$
    13,177
    
    
    $
    12,849
  
    
    Investments in limited partnership interests in various affordable housing
partnerships. The carrying value of these investments was $1.4 million and $1.8 million,
respectively, at December 31, 2006 and 2005. Equity loss on these limited partnerships,
included in noninterest expense, was $0.4 million in 2006, $0.3 million in 2005 and $0.1
million in 2004, including $0.6 million in discontinued operations. CIB Marine has engaged
in these transactions to provide additional qualified investments under the Community
Reinvestment Act and to receive related income tax credits. The partnerships provide
affordable housing to low-income residents within CIB Marines markets and other locations.
    
    Investment in the common and preferred capital of a limited liability corporation
engaged in the development of owner-occupied housing in qualified low-income communities.
CIB Marine committed to a $1.0 million investment in this company. The carrying value of
this investment was $0.8 million at both December 31, 2006 and 2005.
 87




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##### Table of Contents




    
    Investment in the common stock of a publicly traded company. The carrying value of this
investment was $0.4 million at December 31, 2006. During 2006, CIB Marine exercised stock
warrants it had received as payment for credit services. The carrying value of the warrants
at December 31, 2005 was $0.3 million and during both 2006 and 2005, CIB Marine recognized
a $0.1 million market value gain on these warrants. The market value gains are included in
net gain on assets.
    
    Interest in a company operating as a small business investment company under the Small
Business Investment Act of 1958, as amended. CIB Marine committed to a $0.5 million
investment in this company and as of December 31, 2006 has invested $0.4 million. During
2006, CIB Marine received a capital distribution of $0.1 million on its investment in this
company. During 2005, CIB Marine recognized a $0.1 million impairment loss on this
investment due to a reduction in CIB Marines interest in the equity value of this
investment. The impairment loss is included in write down and losses on assets. At December
31, 2006 and 2005, CIB Marines carrying value of this investment was $0.2 and $0.3,
respectively.
    
    During 2006, CIB Marine sold its interest in a company operating as a small business
investment company under the Small Business Investment Act of 1958, as amended. No gain or
loss was recognized on the sale. CIB Marines carrying value of this investment at December
31, 2005 was $0.4 million.
 Note 10-Deposits
   December 31, 2005(Dollars in thousands)2007
    
    $
    347,6742008
    
    
    73,1962009
    
    
    36,8472010
    
    
    9,6012011
    
    
    8,991Thereafter
    
    
    4,981Deposits of branches held for sale (1)
    
    
    (43,078
    )$
    438,212
 
 (1)
    
    Deposits held by branches classified as held for sale at December 31, 2006. Note 11-Short-Term Borrowings
   At Year end
    
    
    For the YearWeighted-
    
    
    Daily
    
    
    Weighted-
    
    
    HighestAverage
    
    
    Average
    
    
    Average
    
    
    Balances atBalance
    
    
    Rate
    
    
    Balances
    
    
    Rate
    
    
    Month End(Dollars in thousands)2006Federal funds purchased and
securities sold under
repurchase agreements
    
    $
    23,625
    
    
    
    4.79
    %
    
    $
    19,109
    
    
    
    4.21
    %
    
    $
    23,624Federal Home Loan Bank Notes
    
    
    
    
    
    
    
    
    
    
    3,088
    
    
    
    5.57
    
    
    
    12,000Treasury, tax and loan note
    
    
    4,028
    
    
    
    5.04
    
    
    
    718
    
    
    
    4.47
    
    
    
    4,028Total short-term borrowings
    
    $
    27,653
    
    
    
    4.83
    %
    
    $
    22,915
    
    
    
    4.40
    %2005Federal funds purchased and
securities sold under
repurchase agreements
    
    $
    20,981
    
    
    
    3.50
    %
    
    $
    24,728
    
    
    
    3.00
    %
    
    $
    25,367Treasury, tax and loan note
    
    
    4,020
    
    
    
    4.06
    
    
    
    905
    
    
    
    5.93
    
    
    
    4,028Total short-term borrowings
    
    $
    25,001
    
    
    
    3.56
    %
    
    $
    25,633
    
    
    
    3.10
    %
 88




---



##### Table of Contents



Note 12-Long-Term Borrowings
  FHLB
  Scheduled
    
    Callable QuarterlyDecember 31,


    
    Maturity
    
    @ Par After2006
    
    
    2005Balance
    
    
    Rate
    
    
    Balance
    
    
    Rate(Dollars in thousands)$
    
    
    
    
    
    %
    
    $
    3,250
    
    
    4.95%
    
    01/16/08
    
    
    01/16/01
    
    
    
    
    
    
    
    2,000
    
    
    4.95
    
    01/16/08
    
    
    01/16/012,000
    
    
    
    5.09
    
    
    
    2,000
    
    
    5.09
    
    02/20/08
    
    
    02/20/01$
    2,000
    
    
    
    5.09
    %
    
    $
    7,250
    
    
    4.99%
  Junior Subordinated Debentures
  89




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##### Table of Contents



December 31,Issue
    
    
    Interest
    
    
    
    
    
    
    Callable2006
    
    
    2005
    
    
    Date
    
    
    Rate
    
    
    Maturity Date
    
    
    After(Dollars in thousands)CIB Marine Capital Trust I
    
    $
    10,310
    
    
    $
    10,310
    
    
    
    03/23/00
    
    
    
    10.88
    %
    
    
    03/08/30
    
    
    
    03/08/10CIB Statutory Trust III
    
    
    15,464
    
    
    
    15,464
    
    
    
    09/07/00
    
    
    
    10.60
    
    
    
    09/07/30
    
    
    
    09/07/10CIB Statutory Trust IV
    
    
    15,464
    
    
    
    15,464
    
    
    
    02/22/01
    
    
    
    10.20
    
    
    
    02/22/31
    
    
    
    02/22/11CIB Statutory Trust V
    
    
    20,619
    
    
    
    20,619
    
    
    
    09/27/02
    
    
    Variable (1)
    
    
    09/27/32
    
    
    
    09/30/07Total junior subordinated
debentures
    
    $
    61,857
    
    
    $
    61,857
 
 (1)
    
    Three-month LIBOR + 3.40% adjusted quarterly.   Note 13-Other Liabilities
 December 31,2006
    
    
    2005(Dollars in thousands)Accounts payable
    
    $
    1,408
    
    
    $
    459Accrual for unfunded commitments and standby letters of credit
    
    
    725
    
    
    
    725Accrued real estate taxes
    
    
    159
    
    
    
    201Accrued compensation and employee benefits
    
    
    973
    
    
    
    913Accrued professional fees
    
    
    1,070
    
    
    
    1,476Accrued other expenses
    
    
    2,645
    
    
    
    997Fair value of derivatives
    
    
    29
    
    
    
    37Other liabilities
    
    
    360
    
    
    
    427$
    7,369
    
    
    $
    5,235
  90




---



##### Table of Contents



For the Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Balance at beginning of year
    
    $
    725
    
    
    $
    725
    
    
    $
    15,747Transfer to allowance for loan losses for funded standby letters of credit
    
    
    
    
    
    
    
    
    
    
    (5,000
    )Charge-offs
    
    
    
    
    
    
    
    
    
    
    (6,255
    )Provision for losses on unfunded commitments and standby letters of
credit:Continuing Operations
    
    
    
    
    
    
    
    
    
    
    725Discontinued Operations
    
    
    
    
    
    
    
    
    
    
    (1,900
    )Reduction of accrual for unfunded loan commitments and standby letters of
credit losses due to sale of CIB-Chicago
    
    
    
    
    
    
    
    
    
    
    (2,592
    )Balance at end of year
    
    $
    725
    
    
    $
    725
    
    
    $
    725
 Note 14-Stockholders Equity
 Receivables from Sale of Stock
  Treasury Stock
  Regulatory Capital
   91




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92




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##### Table of Contents



To Be WellCapitalized UnderPromptFor Capital
    
    CorrectiveActual
    
    Adequacy Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)December 31, 2006Total capital to risk weighted
assetsCIB Marine Bancshares, Inc.
    
    $
    141,308
    
    
    
    20.95
    %
    
    $
    53,965
    
    
    
    8.00
    %
    
    $
    67,456Central Illinois Bank
    
    
    59,389
    
    
    
    20.18
    
    
    
    23,545
    
    
    
    8.00
    
    
    
    29,432
    
    
    
    10.00
    %Marine-Wisconsin
    
    
    48,631
    
    
    
    17.07
    
    
    
    22,796
    
    
    
    8.00
    
    
    
    28,495
    
    
    
    10.00Citrus Bank
    
    
    21,162
    
    
    
    24.40
    
    
    
    6,938
    
    
    
    8.00
    
    
    
    8,673
    
    
    
    10.00Tier 1 capital to risk weighted
assetsCIB Marine Bancshares, Inc.
    
    $
    96,584
    
    
    
    14.32
    %
    
    $
    26,983
    
    
    
    4.00
    %
    
    $
    40,474Central Illinois Bank
    
    
    55,593
    
    
    
    18.89
    
    
    
    11,773
    
    
    
    4.00
    
    
    
    17,659
    
    
    
    6.00
    %Marine-Wisconsin
    
    
    45,041
    
    
    
    15.81
    
    
    
    11,398
    
    
    
    4.00
    
    
    
    17,097
    
    
    
    6.00Citrus Bank
    
    
    20,069
    
    
    
    23.14
    
    
    
    3,469
    
    
    
    4.00
    
    
    
    5,204
    
    
    
    6.00Tier 1 leverage to average assetsCIB Marine Bancshares, Inc.
    
    $
    96,584
    
    
    
    9.51
    %
    
    $
    40,632
    
    
    
    4.00
    %
    
    $
    50,790Central Illinois Bank (1)
    
    
    55,593
    
    
    
    11.34
    
    
    
    19,605
    
    
    
    4.00
    
    
    
    24,507
    
    
    
    5.00
    %Marine-Wisconsin (1)
    
    
    45,041
    
    
    
    11.67
    
    
    
    15,437
    
    
    
    4.00
    
    
    
    19,297
    
    
    
    5.00Citrus Bank
    
    
    20,069
    
    
    
    15.10
    
    
    
    5,317
    
    
    
    4.00
    
    
    
    6,646
    
    
    
    5.00December 31, 2005Total capital to risk weighted
assetsCIB Marine Bancshares, Inc.
    
    $
    150,629
    
    
    
    21.37
    %
    
    $
    56,380
    
    
    
    8.00
    %
    
    $
    70,475Central Illinois Bank
    
    
    57,310
    
    
    
    16.69
    
    
    
    27,476
    
    
    
    8.00
    
    
    
    34,345
    
    
    
    10.00
    %Marine-Wisconsin
    
    
    27,643
    
    
    
    19.30
    
    
    
    11,458
    
    
    
    8.00
    
    
    
    14,322
    
    
    
    10.00CIB-Indiana
    
    
    12,849
    
    
    
    18.30
    
    
    
    5,618
    
    
    
    8.00
    
    
    
    7,022
    
    
    
    10.00Marine FSB
    
    
    9,495
    
    
    
    19.02
    
    
    
    3,994
    
    
    
    8.00
    
    
    
    4,992
    
    
    
    10.00Citrus Bank (2)
    
    
    20,429
    
    
    
    23.02
    
    
    
    7,098
    
    
    
    8.00
    
    
    
    8,873
    
    
    
    10.00Tier 1 capital to risk weighted
assetsCIB Marine Bancshares, Inc.
    
    $
    108,015
    
    
    
    15.33
    %
    
    $
    28,190
    
    
    
    4.00
    %
    
    $
    42,285Central Illinois Bank
    
    
    52,857
    
    
    
    15.39
    
    
    
    13,738
    
    
    
    4.00
    
    
    
    20,607
    
    
    
    6.00
    %Marine-Wisconsin
    
    
    25,839
    
    
    
    18.04
    
    
    
    5,729
    
    
    
    4.00
    
    
    
    8,593
    
    
    
    6.00CIB-Indiana
    
    
    12,086
    
    
    
    17.21
    
    
    
    2,809
    
    
    
    4.00
    
    
    
    4,213
    
    
    
    6.00Marine FSB
    
    
    8,866
    
    
    
    17.76
    
    
    
    1,997
    
    
    
    4.00
    
    
    
    2,995
    
    
    
    6.00Citrus Bank
    
    
    19,307
    
    
    
    21.76
    
    
    
    3,549
    
    
    
    4.00
    
    
    
    5,324
    
    
    
    6.00Tier 1 leverage to average assetsCIB Marine Bancshares, Inc.
    
    $
    108,015
    
    
    
    9.20
    %
    
    $
    46,968
    
    
    
    4.00
    %
    
    $
    58,710Central Illinois Bank (1)
    
    
    52,857
    
    
    
    8.73
    
    
    
    24,211
    
    
    
    4.00
    
    
    
    30,264
    
    
    
    5.00
    %Marine-Wisconsin (1)
    
    
    25,839
    
    
    
    11.46
    
    
    
    9,015
    
    
    
    4.00
    
    
    
    11,269
    
    
    
    5.00CIB-Indiana (1)
    
    
    12,086
    
    
    
    12.05
    
    
    
    4,013
    
    
    
    4.00
    
    
    
    5,016
    
    
    
    5.00Marine FSB
    
    
    8,866
    
    
    
    10.90
    
    
    
    3,255
    
    
    
    4.00
    
    
    
    4,069
    
    
    
    5.00Citrus Bank (2)
    
    
    19,307
    
    
    
    12.94
    
    
    
    5,969
    
    
    
    4.00
    
    
    
    7,461
    
    
    
    5.00
 
 (1)
    
    Pursuant to the Order and Memorandum of Understanding, the banks are required to
maintain a Tier 1 leverage capital level equal to or exceeding 8% of total average assets.(2)
    
    In 2004, Citrus Bank entered into a the Citrus Agreement with the OCC, which required
Citrus Bank to maintain total capital to risk weighted assets of at least 14% and a Tier 1
leverage capital level equal to or exceeding 8% of total average assets throughout such
time as the Citrus Agreement remained in effect. The Citrus Agreement was terminated in
September, 2006.  93




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##### Table of Contents



Federal Deposit Insurance
    Note 15-Other Expense
  Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Payroll and other processing charges
    
    $
    99
    
    
    $
    125
    
    
    $
    133Correspondent bank charges
    
    
    256
    
    
    
    291
    
    
    
    372Advertising/marketing
    
    
    722
    
    
    
    1,135
    
    
    
    691Communications
    
    
    1,386
    
    
    
    1,310
    
    
    
    1,182Supplies and printing
    
    
    357
    
    
    
    581
    
    
    
    421Shipping and handling
    
    
    523
    
    
    
    703
    
    
    
    807Collection expense
    
    
    43
    
    
    
    248
    
    
    
    221FDIC and state assessment
    
    
    1,289
    
    
    
    1,768
    
    
    
    1,634Recording and filing fees
    
    
    149
    
    
    
    185
    
    
    
    116Foreclosed property
    
    
    7
    
    
    
    46
    
    
    
    111Other expense
    
    
    4,330
    
    
    
    3,015
    
    
    
    2,705Total other expense
    
    $
    9,161
    
    
    $
    9,407
    
    
    $
    8,393
 94




---



##### Table of Contents



Note 16-Loss Per Share
  For the Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands, except share and per share data)Loss from continuing operations
    
    $
    (9,839
    )
    
    $
    (13,144
    )
    
    $
    (28,551
    )Weighted average shares outstanding:Basic
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884Effect of dilutive stock options outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted
    
    
    18,333,779
    
    
    
    18,333,779
    
    
    
    18,245,884Per share loss:Basic
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )Effect of dilutive stock options outstanding
    
    
    
    
    
    
    
    
    
    
    Diluted
    
    $
    (0.54
    )
    
    $
    (0.72
    )
    
    $
    (1.56
    )
  Note 17-Financial Instruments with Off-Balance Sheet Risk
  December 31,2006
    
    2005(Dollars in thousands)Commitments to extend credit
    
    $
    157,851
    
    
    $
    186,187Standby letters of credit
    
    
    5,637
    
    
    
    7,222Interest rate swaps
    
    
    15,675
    
    
    
    15,807
  .
  95




---



##### Table of Contents



,
   Note 18-Commitments and Contingencies
    96




---



##### Table of Contents



Dennis Lewis, et
al. v. CIB Marine Bancshares, Inc., et al
   97




---



##### Table of Contents



98




---



##### Table of Contents



99




---



##### Table of Contents



Note 19-Stock Option Plans
   WeightedRange of
    
    
    Weighted
    
    
    Average GrantNumber of
    
    
    Option Prices
    
    
    Average
    
    
    Date Fair ValueShares
    
    
    per Share
    
    
    Exercise Price
    
    
    Per ShareShares under option at December 31, 2003
    
    
    1,439,850
    
    
    $
    8.50-25.08
    
    
    $
    16.45Granted
    
    
    
    
    
    $
    
    
    
    $
    Lapsed or surrendered
    
    
    (648,519
    )
    
    
    8.50-25.08
    
    
    
    16.58Exercised
    
    
    
    
    
    
    
    
    
    
    Shares under option at December 31, 2004
    
    
    791,331
    
    
    $
    8.50-23.66
    
    
    $
    16.35Granted
    
    
    523,750
    
    
    $
    4.10
    
    
    $
    4.10
    
    
    $
    1.47Lapsed or surrendered
    
    
    (293,594
    )
    
    
    4.10-23.66
    
    
    
    13.63Exercised
    
    
    
    
    
    
    
    
    
    
    Shares under option at December 31, 2005
    
    
    1,021,487
    
    
    $
    4.10-23.66
    
    
    $
    10.85Granted
    
    
    483,750
    
    
    $
    4.10
    
    
    $
    4.10
    
    
    $
    0.76Lapsed or surrendered
    
    
    (332,916
    )
    
    
    4.10-23.66
    
    
    
    9.44Exercised
    
    
    
    
    
    
    
    
    
    
    Shares under option at December 31, 2006
    
    
    1,172,321
    
    
    $
    4.10-22.89
    
    
    $
    8.47Share exercisable at December 31, 2006
    
    
    468,771
    
    
    $
    4.10-22.89
    
    
    $
    15.02
  Nonvested stock options at December 31, 2005
    
    
    493,963Granted
    
    
    483,750Vested
    
    
    (73,050
    )Forfeited
    
    
    (201,113
    )Nonvested stock options at December 31, 2006
    
    
    703,550
  100




---



##### Table of Contents



Options OutstandingWeighted
    
    Options ExercisableNumber of
    
    Average
    
    
    
    
    
    Weighted
    
    Number ofShares
    
    Remaining
    
    Average
    
    Shares
    
    Average
    
    WeightedRange of Option
    
    Outstanding
    
    Contractual
    
    Exercise
    
    Exercisable
    
    Exercise
    
    AveragePrices
    
    at 12/31/06
    
    Life (Years)
    
    Price
    
    at 12/31/06
    
    Prices
    
    Contractual Term$4.10
    
    
    773,500
    
    
    
    9.30
    
    
    $
    4.10
    
    
    
    69,950
    
    
    $
    4.1010.90  13.89
    
    
    145,500
    
    
    
    1.13
    
    
    
    13.07
    
    
    
    145,500
    
    
    
    13.0713.90  16.89
    
    
    78,300
    
    
    
    2.58
    
    
    
    16.24
    
    
    
    78,300
    
    
    
    16.2416.90  19.89
    
    
    94,729
    
    
    
    3.57
    
    
    
    18.40
    
    
    
    94,729
    
    
    
    18.4019.90  22.89
    
    
    80,292
    
    
    
    4.91
    
    
    
    22.89
    
    
    
    80,292
    
    
    
    22.89$ 4.10  22.89
    
    
    1,172,321
    
    
    
    7.07
    
    
    $
    8.47
    
    
    
    468,771
    
    
    $
    15.02
    
    
    
    3.65
 Note 20-Other Benefit Plans
   Note 21-Income Taxes
  For the Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Current tax provision (benefit):Federal
    
    $
    (78
    )
    
    $
    (1,152
    )
    
    $
    (5,781
    )State
    
    
    (21
    )
    
    
    (56
    )
    
    
    (370
    )Deferred (benefit)
    
    
    
    
    
    
    
    
    
    
    911$
    (99
    )
    
    $
    (1,208
    )
    
    $
    (5,240
    )
  101




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##### Table of Contents



For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Income tax benefit at statutory tax rate
    
    $
    (3,478
    )
    
    
    (35.0
    )%
    
    $
    (5,023
    )
    
    
    (35.0
    )%
    
    $
    (11,827
    )
    
    
    (35.0
    )%Increase (reduction) in tax rate
resulting from:State income taxes, net of federal
income tax effect
    
    
    12
    
    
    
    0.1
    
    
    
    (63
    )
    
    
    (0.4
    )
    
    
    (2,845
    )
    
    
    (8.4
    )Tax-exempt interest
    
    
    (337
    )
    
    
    (3.4
    )
    
    
    (548
    )
    
    
    (3.8
    )
    
    
    (650
    )
    
    
    (1.9
    )Affordable housing credits
    
    
    (360
    )
    
    
    (3.6
    )
    
    
    (359
    )
    
    
    (2.5
    )
    
    
    (360
    )
    
    
    (1.1
    )Valuation allowance
    
    
    3,978
    
    
    
    40.0
    
    
    
    4,163
    
    
    
    29.0
    
    
    
    9,328
    
    
    
    27.6Other, net
    
    
    86
    
    
    
    0.9
    
    
    
    622
    
    
    
    4.3
    
    
    
    1,114
    
    
    
    3.3$
    (99
    )
    
    
    (1.0
    )%
    
    $
    (1,208
    )
    
    
    (8.4
    )%
    
    $
    (5,240
    )
    
    
    (15.5
    )%
  December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Deferred tax assets:Loss carryforwards (1)
    
    $
    59,678
    
    
    $
    53,121
    
    
    $
    48,406Tax credit carryforwards
    
    
    2,177
    
    
    
    1,817
    
    
    
    1,457Allowance for loan losses
    
    
    8,221
    
    
    
    9,759
    
    
    
    11,698Goodwill and intangible assets
    
    
    
    
    
    
    6
    
    
    
    1,609Allowance for unfunded loan commitments
    
    
    
    
    
    
    
    
    
    
    291Net unrealized loss in securities available for sale
    
    
    746
    
    
    
    1,322
    
    
    
    252Other real estate owned
    
    
    4
    
    
    
    498
    
    
    
    455Other
    
    
    1,435
    
    
    
    2,075
    
    
    
    1,135Deferred tax assets before valuation allowance
    
    
    72,261
    
    
    
    68,598
    
    
    
    65,303Valuation allowance
    
    
    (71,202
    )
    
    
    (67,193
    )
    
    
    (64,074
    )Net deferred tax assets
    
    
    1,059
    
    
    
    1,405
    
    
    
    1,229Deferred tax liabilities:Fixed assets
    
    $
    388
    
    
    $
    429
    
    
    $
    613Other
    
    
    671
    
    
    
    976
    
    
    
    616Total deferred tax liabilities
    
    
    1,059
    
    
    
    1,405
    
    
    
    1,229Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Includes U.S. federal net operating, capital loss and charitable contribution carryforwards.  December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Deferred tax benefits (expenses) included in continuing operations provision
    
    $
    
    
    
    $
    
    
    
    $
    (911
    )Deferred tax included in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    1,050Valuation allowance against deferred tax in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    (1,050
    )Total increase (decrease) in net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    (911
    )
 102




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103




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##### Table of Contents



Note 22-Fair Value of Financial Instruments
 Disclosures about Fair
Value of Financial Instruments
 December 31, 2006Carrying
    
    EstimatedAmount
    
    Fair Value(Dollars in thousands)Financial assets:Cash and cash equivalents
    
    $
    115,135
    
    
    $
    115,135Loans held for sale
    
    
    80
    
    
    
    80Securities
    
    
    345,602
    
    
    
    345,602Loans, net
    
    
    501,718
    
    
    
    502,800Accrued interest receivable
    
    
    5,582
    
    
    
    5,582Financial liabilities:Deposits
    
    
    739,784
    
    
    
    737,787Deposits of branches held for sale
    
    
    55,365
    
    
    
    55,216Short-term borrowings
    
    
    27,653
    
    
    
    27,653Long-term borrowings
    
    
    2,000
    
    
    
    2,014Junior subordinated debentures
    
    
    61,857
    
    
    
    64,832Accrued interest payable
    
    
    24,940
    
    
    
    24,940
 December 31, 2006Contractualor Notional
    
    Carrying
    
    EstimatedAmount
    
    Amount
    
    Fair Value(Dollars in thousands)Off-balance sheet items:Commitments to extend credit
    
    $
    157,851
    
    
    $
    
    
    
    $
    Standby letters of credit (1)
    
    
    5,637
    
    
    
    (749
    )
    
    
    (749
    )Interest rate swap agreements
    
    
    15,675
    
    
    
    (28
    )
    
    
    (28
    )
 December 31, 2005Carrying
    
    EstimatedAmount
    
    Fair Value(Dollars in thousands)Financial assets:Cash and cash equivalents
    
    $
    112,912
    
    
    $
    112,912Securities
    
    
    493,409
    
    
    
    493,409Loans, net
    
    
    490,662
    
    
    
    492,580Accrued interest receivable
    
    
    5,133
    
    
    
    5,133Financial liabilities:Deposits
    
    
    867,700
    
    
    
    864,089Deposits of branches held for sale
    
    
    66,991
    
    
    
    66,616Short-term borrowings
    
    
    25,001
    
    
    
    25,001Long-term borrowings
    
    
    7,250
    
    
    
    7,441Junior subordinated debentures
    
    
    61,857
    
    
    
    65,470Accrued interest payable
    
    
    16,896
    
    
    
    16,896
 104




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##### Table of Contents



December 31, 2005ContractualOr Notional
    
    Carrying
    
    EstimatedAmount
    
    Amount
    
    Fair Value(Dollars in thousands)Off-balance sheet items:Commitments to extend credit
    
    $
    186,187
    
    
    $
    
    
    
    $
    Standby letters of credit (1)
    
    
    7,222
    
    
    
    (753
    )
    
    
    (753
    )Interest rate swap agreements
    
    
    15,807
    
    
    
    (37
    )
    
    
    (37
    )
 
 (1)
    
    Includes an accrued liability for probable losses on unfunded commitments to extend
credit and standby letters of credit of $0.7 million at both December 31, 2006 and 2005.      Cash and Cash Equivalents
  Available for Sale Securities
  Loans held for Sale
  105




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##### Table of Contents



Loans Receivable
  Accrued Interest Receivable
  Deposit Liabilities
  Short-term Borrowings
  Long-term Borrowings
  Junior Subordinated Debentures
  Accrued Interest Payable
  Off-Balance Sheet Instruments
   106




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##### Table of Contents



Note 23-Parent Company Financial Statements
  Condensed Balance Sheets
 December 31,2006
    
    
    2005(Dollars in thousands)AssetsCash and due from affiliated banks
    
    $
    30,648
    
    
    $
    33,743Investments in subsidiaries
    
    
    120,187
    
    
    
    117,681Loans to subsidiaries
    
    
    100
    
    
    
    818Premises and equipment, net
    
    
    1,035
    
    
    
    1,376Investment in subsidiaries held for disposal
    
    
    (3,235
    )
    
    
    (2,884
    )Foreclosed properties
    
    
    
    
    
    
    888Other investments
    
    
    3,460
    
    
    
    2,970Income tax receivable
    
    
    2,469
    
    
    
    178Other assets
    
    
    2,163
    
    
    
    2,919Total assets
    
    $
    156,827
    
    
    $
    157,689LiabilitiesLoans to subsidiaries-subscribed stock
    
    $
    151
    
    
    $
    201Accrued interest payable
    
    
    21,757
    
    
    
    14,069Junior subordinated debentures
    
    
    61,857
    
    
    
    61,857Other liabilities
    
    
    1,449
    
    
    
    2,380Total liabilities
    
    
    85,214
    
    
    
    78,507Stockholders EquityPreferred stock, $1 par value; 5,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common stock, $1 par value; 50,000,000 shares authorized, 18,346,442
issued and outstanding
    
    
    18,346
    
    
    
    18,346Capital surplus
    
    
    158,266
    
    
    
    158,163Accumulated deficit
    
    
    (102,806
    )
    
    
    (93,528
    )Accumulated other comprehensive loss, net
    
    
    (1,880
    )
    
    
    (3,435
    )Receivables from sale of stock
    
    
    (151
    )
    
    
    (202
    )Treasury stock at cost, 12,663 shares
    
    
    (162
    )
    
    
    (162
    )Total stockholders equity
    
    
    71,613
    
    
    
    79,182Total liabilities and stockholders equity
    
    $
    156,827
    
    
    $
    157,689
 107




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##### Table of Contents



Condensed Statements of Operations
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Interest and Dividend IncomeDividends from subsidiaries
    
    $
    1,575
    
    
    $
    2,650
    
    
    $
    7,200Loan and other interest from subsidiaries
    
    
    1,332
    
    
    
    907
    
    
    
    320Other
    
    
    
    
    
    
    
    
    
    
    Total interest and dividend income
    
    
    2,907
    
    
    
    3,557
    
    
    
    7,520Interest ExpenseShort-term borrowings
    
    
    
    
    
    
    
    
    
    
    1,170Junior subordinated debentures
    
    
    7,742
    
    
    
    6,636
    
    
    
    5,710Total interest expense
    
    
    7,742
    
    
    
    6,636
    
    
    
    6,880Net interest income (loss)
    
    
    (4,835
    )
    
    
    (3,079
    )
    
    
    640Noninterest incomeEquity in undistributed earnings (loss) of subsidiaries
    
    
    911
    
    
    
    (1,819
    )
    
    
    (24,597
    )Fees from subsidiaries
    
    
    6,435
    
    
    
    7,348
    
    
    
    11,660Gain on sale of assets/subsidiaries, net
    
    
    
    
    
    
    
    
    
    
    14,889Other income
    
    
    234
    
    
    
    346
    
    
    
    120Total noninterest income
    
    
    7,580
    
    
    
    5,875
    
    
    
    2,072Noninterest expenseCompensation and employee benefits
    
    
    8,358
    
    
    
    11,179
    
    
    
    12,240Equipment
    
    
    864
    
    
    
    1,155
    
    
    
    1,079Occupancy and premises
    
    
    728
    
    
    
    966
    
    
    
    815Professional services
    
    
    1,039
    
    
    
    1,431
    
    
    
    3,817Write down and losses on assets
    
    
    247
    
    
    
    113
    
    
    
    1,075Other
    
    
    3,076
    
    
    
    2,413
    
    
    
    1,964Total noninterest expense
    
    
    14,312
    
    
    
    17,257
    
    
    
    20,990Loss before income taxes
    
    
    (11,567
    )
    
    
    (14,461
    )
    
    
    (18,278
    )Income tax benefit
    
    
    (2,289
    )
    
    
    (2,800
    )
    
    
    (931
    )Net loss
    
    $
    (9,278
    )
    
    $
    (11,661
    )
    
    $
    (17,347
    )
 108




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##### Table of Contents



Condensed Statement of Cash Flows
 Years Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Cash Flows from Operating Activities:Net loss
    
    $
    (9,278
    )
    
    $
    (11,661
    )
    
    $
    (17,347
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Equity in undistributed (earnings) loss of subsidiaries
    
    
    (911
    )
    
    
    (721
    )
    
    
    24,597Depreciation and amortization
    
    
    521
    
    
    
    614
    
    
    
    623Deferred tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    (6,244
    )Write down and losses on assets
    
    
    247
    
    
    
    113
    
    
    
    1,075Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (14,889
    )Decrease (increase) in interest receivable and other assets
    
    
    (3,588
    )
    
    
    224
    
    
    
    (1,877
    )Increase in interest payable junior subordinated debentures
    
    
    7,688
    
    
    
    6,581
    
    
    
    5,655Decrease in other interest payable and other liabilities
    
    
    (931
    )
    
    
    (1,200
    )
    
    
    (325
    )Net cash used in operating activities
    
    
    (6,252
    )
    
    
    (6,050
    )
    
    
    (8,732
    )Cash Flows from Investing Activities:Decrease in investment in limited partnerships and other investments
    
    
    
    
    
    
    
    
    
    
    3,022Net decrease in loans
    
    
    718
    
    
    
    2,807
    
    
    
    5,137Net increase in investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    (19,350
    )Dividends received from subsidiaries
    
    
    1,575
    
    
    
    2,650
    
    
    
    7,200Capital expenditures
    
    
    (124
    )
    
    
    (465
    )
    
    
    (236
    )Decrease (increase) in investment in subsidiaries held for disposal
    
    
    351
    
    
    
    7,268
    
    
    
    (4,384
    )Proceeds from sale of foreclosed property
    
    
    637
    
    
    
    
    
    
    
    Sale of subsidiaries, net of cash
    
    
    
    
    
    
    
    
    
    
    68,891Net cash provided by investing activities
    
    
    3,157
    
    
    
    12,260
    
    
    
    60,280Cash Flows from Financing Activities:Sale of treasury stock (1)
    
    
    
    
    
    
    
    
    
    
    (1,761
    )Net decrease in short-term borrowings
    
    
    
    
    
    
    
    
    
    
    (23,595
    )Net cash used in financing activities
    
    
    
    
    
    
    
    
    
    
    (25,356
    )Net increase (decrease) in cash and cash equivalents
    
    
    (3,095
    )
    
    
    6,210
    
    
    
    26,192Cash and cash equivalents, beginning of year
    
    
    33,743
    
    
    
    27,533
    
    
    
    1,341Cash and cash equivalents, end of year
    
    $
    30,648
    
    
    $
    33,743
    
    
    $
    27,533
 
 (1)
    
    Treasury stock sold in conjunction with the sale of CIB-Chicago. 109




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##### Table of Contents



Note 24-Quarterly Consolidated Financial Information (Unaudited)
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TOTAL(Dollars in thousands, except share data)2006Total interest income
    
    $
    14,367
    
    
    $
    15,017
    
    
    $
    15,952
    
    
    $
    16,173
    
    
    $
    61,509Total interest expense
    
    
    8,847
    
    
    
    9,346
    
    
    
    9,975
    
    
    
    10,074
    
    
    
    38,242Net interest income
    
    
    5,520
    
    
    
    5,671
    
    
    
    5,977
    
    
    
    6,099
    
    
    
    23,267Provision for credit losses
    
    
    (2,422
    )
    
    
    137
    
    
    
    (1,079
    )
    
    
    (1,020
    )
    
    
    (4,384
    )Net interest income after provision for credit losses
    
    
    7,942
    
    
    
    5,534
    
    
    
    7,056
    
    
    
    7,119
    
    
    
    27,651Gain on sale of investment securities, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other noninterest income
    
    
    490
    
    
    
    1,332
    
    
    
    1,536
    
    
    
    1,068
    
    
    
    4,426Other noninterest expense
    
    
    12,544
    
    
    
    10,639
    
    
    
    9,354
    
    
    
    9,478
    
    
    
    42,015Loss from continuing operations before income taxes
    
    
    (4,112
    )
    
    
    (3,773
    )
    
    
    (762
    )
    
    
    (1,291
    )
    
    
    (9,938
    )Income tax (benefit) expense
    
    
    (188
    )
    
    
    (43
    )
    
    
    53
    
    
    
    79
    
    
    
    (99
    )Loss from continuing operations
    
    
    (3,924
    )
    
    
    (3,730
    )
    
    
    (815
    )
    
    
    (1,370
    )
    
    
    (9,839
    )Discontinued operations:Pretax income from discontinued operations
    
    
    254
    
    
    
    33
    
    
    
    332
    
    
    
    41
    
    
    
    660Taxes effect for discontinued operations
    
    
    188
    
    
    
    43
    
    
    
    (53
    )
    
    
    (79
    )
    
    
    99Net income from discontinued operations
    
    
    66
    
    
    
    (10
    )
    
    
    385
    
    
    
    120
    
    
    
    561Net loss
    
    $
    (3,858
    )
    
    $
    (3,740
    )
    
    $
    (430
    )
    
    $
    (1,250
    )
    
    $
    (9,278
    )Earnings (loss) per share:BasicLoss from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.21
    )
    
    $
    (0.04
    )
    
    $
    (0.08
    )
    
    $
    (0.54
    )Discontinued operations
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.03Net Loss
    
    $
    (0.21
    )
    
    $
    (0.21
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.51
    )DilutedLoss from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.21
    )
    
    $
    (0.04
    )
    
    $
    (0.08
    )
    
    $
    (0.54
    )Discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.02
    
    
    
    0.01
    
    
    
    0.03Net loss
    
    $
    (0.21
    )
    
    $
    (0.21
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.51
    )2005Total interest income
    
    $
    15,406
    
    
    $
    14,675
    
    
    $
    14,947
    
    
    $
    14,821
    
    
    $
    59,849Total interest expense
    
    
    8,383
    
    
    
    8,633
    
    
    
    8,817
    
    
    
    8,962
    
    
    
    34,795Net interest income
    
    
    7,023
    
    
    
    6,042
    
    
    
    6,130
    
    
    
    5,859
    
    
    
    25,054Provision for credit losses
    
    
    (1,127
    )
    
    
    (1,916
    )
    
    
    (5,238
    )
    
    
    (388
    )
    
    
    (8,669
    )Net interest income after provision for credit losses
    
    
    8,150
    
    
    
    7,958
    
    
    
    11,368
    
    
    
    6,247
    
    
    
    33,723Gain on sale of investment securities, net
    
    
    
    
    
    
    154
    
    
    
    201
    
    
    
    
    
    
    
    355Other noninterest income
    
    
    918
    
    
    
    579
    
    
    
    588
    
    
    
    455
    
    
    
    2,540Other noninterest expense
    
    
    13,089
    
    
    
    13,922
    
    
    
    12,434
    
    
    
    11,525
    
    
    
    50,970Loss from continuing operations before income taxes
    
    
    (4,021
    )
    
    
    (5,231
    )
    
    
    (277
    )
    
    
    (4,823
    )
    
    
    (14,352
    )Income tax (benefit) expense
    
    
    5
    
    
    
    (162
    )
    
    
    (2,113
    )
    
    
    1,062
    
    
    
    (1,208
    )Loss from continuing operations
    
    
    (4,026
    )
    
    
    (5,069
    )
    
    
    1,836
    
    
    
    (5,885
    )
    
    
    (13,144
    )Discontinued operations:Pretax income from discontinued operations
    
    
    728
    
    
    
    2,745
    
    
    
    51
    
    
    
    126
    
    
    
    3,650Pretax gain on sales of discontinued operations (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    200Total pretax income from discontinued operations
    
    
    728
    
    
    
    2,745
    
    
    
    51
    
    
    
    326
    
    
    
    3,850Taxes effect for discontinued operations
    
    
    1,895
    
    
    
    162
    
    
    
    2,102
    
    
    
    (1,792
    )
    
    
    2,367Net income from discontinued operations
    
    
    (1,167
    )
    
    
    2,583
    
    
    
    (2,051
    )
    
    
    2,118
    
    
    
    1,483Net loss
    
    $
    (5,193
    )
    
    $
    (2,486
    )
    
    $
    (215
    )
    
    $
    (3,767
    )
    
    $
    (11,661
    )Earnings (loss) per share:BasicLoss from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.28
    )
    
    $
    0.10
    
    
    $
    (0.32
    )
    
    $
    (0.72
    )Discontinued operations
    
    
    (0.06
    )
    
    
    0.14
    
    
    
    (0.11
    )
    
    
    0.11
    
    
    
    0.08Net Loss
    
    $
    (0.28
    )
    
    $
    (0.14
    )
    
    $
    (0.01
    )
    
    $
    (0.21
    )
    
    $
    (0.64
    )DilutedLoss from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.28
    )
    
    $
    0.10
    
    
    $
    (0.32
    )
    
    $
    (0.72
    )Discontinued operations
    
    
    (0.06
    )
    
    
    0.14
    
    
    
    (0.11
    )
    
    
    0.11
    
    
    
    0.08Net loss
    
    $
    (0.28
    )
    
    $
    (0.14
    )
    
    $
    (0.01
    )
    
    $
    (0.21
    )
    
    $
    (0.64
    )
 
 (1)
    
    In the fourth quarter of 2005, CIB Marine sold MICR and recognized a $0.2 million gain on the
sale. 110




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##### Table of Contents



Note 25-Subsequent Events
 CIB Construction/Canron
  Regulatory Orders and Agreements
  Liquidity
  FHLB Stock Investment
  Loan Pool Purchase
   Branch Activities
   111




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##### Table of Contents



Goodwill
  FDIC Deposit Insurance Premiums
  Stock Options
  Late Filing of Tax Returns
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures
   112




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##### Table of Contents



(b) Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Directors
 TermExpired orServing
    
    ScheduledName and Age
    
    Since
    
    to Expire
    
    Position with CIB Marine or Other Principal Occupation and Other DirectorshipsJosé Araujo (61)
    
    
    1988
    
    
    
    2005
    
    
    Director of Central Illinois Bank since
1987; Chairman of the Board of Citrus Bank from March 2004 to January 2005, International
Business Development Officer of Citrus Bank since April 2003, and Director of Citrus Bank since
2001. President of Joaraucar Consulting, Inc., an industrial gas
service company, since October 1997.(1)Norman E. Baker (60)
    
    
    1988
    
    
    
    2004
    
    
    Chairman of Central
Illinois Bank from
February 2004 to
March 2006,
Director of Central
Illinois Bank since
1988; Director of
CIB-Indiana, from
1998 until its
merger into
Marine-Wisconsin in
August 2006;
Director of
Marine-Wisconsin
since September
2006; Chairman of
Marine-FSB from
February 2004 to
June 2005 and
Director of
Marine-FSB from
October 1999 until
its merger into
Marine-Wisconsin in
March 2006.
President and Chief
Executive Officer
of Estoy Pronto,
Inc., a consulting
and investment
company, since July
1994.W. Scott Blake (46)
    
    
    1987
    
    
    
    2004
    
    
    Chairman of CIB
Marine since
February 2004;
Chairman of
Marine-Wisconsin
since March 2006,
Director of
Marine-Wisconsin
since December
2002; Manager of
CIB Marine Capital
LLC since 2001; and
Director of MICR,
Inc. since 2000.
President of Blake
Capital Corp., a
real estate
development,
investment and
property management
company, since July
1998. (2)
(3)Stanley J. Calderon (61)
    
    
    2004
    
    
    
    2006
    
    
    President and Chief
Executive Officer
of CIB Marine since
April 2004;
Director of the
following bank and
nonbank
subsidiaries of CIB
Marine: Central
Illinois Bank since
December 2004,
Marine-Wisconsin
since February
2005, Citrus Bank
since February
2005, and CIB
Marine Information
Services, Inc.
since March 2005.
Prior to joining
CIB Marine, Mr.
Calderon was
Executive Vice
President and
Manager of Middle
Market Banking for
the Midwest Region
of Bank One from
1999 to
2003.(4)Steven C. Hillard (44)
    
    
    2004
    
    
    
    2006
    
    
    Director of CIB
Marine from 1991 to
2002 and since
September 2004;
Director of MICR,
Inc. since December
2004. President of
HILMUN Holdings,
Inc., a diversified
holding company
with interests in
manufacturing and
financial
investments, since
September 1991;
Chief Executive
Officer and
Chairman of the
Board of Pinnacle
Door Company, a
distributor and
installer of garage
doors, since
September 1992;
Managing member of
HILMUN Development,
LLC, a real estate
development
company, since
1993; and Chairman,
President and Chief
Executive Officer
of Strategic
Capital Bancorp,
Inc. from November
2002 to September
2004.(3)
 113




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##### Table of Contents



TermExpired orServing
    
    ScheduledName and Age
    
    Since
    
    to Expire
    
    Position with CIB Marine or Other Principal Occupation and Other DirectorshipsGary L. Longman (58)
    
    
    2004
    
    
    
    2006
    
    
    President of Sunny
Ridge Family
Center, an adoption
agency, since June
2003;President of
G.L. Longman
Consulting, a
consulting
business, since
January 2001;
Partner at KPMG,
LLP, an accounting,
tax and advisory
services firm from
1980 to 2000.Donald M. Trilling (76)
    
    
    1987
    
    
    
    2004
    
    
    Chairman of the
Board of CIB Marine
from September 1987
to February 2004;
Director of Central
Illinois Bank from
1987 to April 2004.
Sales
Representative at
TTT, a phone
service company,
since January 2005;
Secretary of Illini
Tile Distributors
Inc., an importer
and distributor of
ceramic tiles, from
1983 to
2002.(5)Howard E. Zimmerman (77)
    
    
    1987
    
    
    
    2005
    
    
    Retired; Chairman
of the Board of
Zimmerman Real
Estate Group, a
real estate
appraisal and
consulting company
since 1986.
 
 (1)
    
    Mr. Araujo passed away in March 2007.(2)
    
    Mr. Blake resigned as Chairman of CIB Marine in the first quarter of 2007. Mr. Blake remains a
director of CIB Marine.(3)
    
    In November 2005, CIB Marine sold substantially all of the assets of MICR and changed the
companys name to Everett Tech Inc.(4)
    
    On March 2, 2007, Mr. Calderon resigned from his positions as President and Chief Executive
Officer of CIB Marine and was succeeded by Mr. John P. Hickey, Jr. Mr. Calderon was appointed
Chairman of the Board of Directors of CIB Marine on March 8, 2007. See Item 7-Managements
Discussion and Analysis of Financial Condition and Results of Operations-Subsequent
Events-Management Changes in Part II of this Form 10-K for additional information relative to
management and Board of Directors changes.(5)
    
    In September 2003, Illini Tile Distributors, Inc. entered into liquidation through an
assignment for the benefit of creditors under Illinois law. Executive Officers
  Name and Age
    
    Office and ExperienceStanley J. Calderon (61)
    
    Mr. Calderon has served as President and Chief
Executive Officer of CIB Marine since April
2004, Director of CIB Marine since November
2004, and Director of the following bank and
nonbank subsidiaries of CIB Marine: Central
Illinois Bank since December 2004,
Marine-Wisconsin since February 2005, Citrus
Bank since February 2005, and CIB Marine
Information Services, Inc. since March 2005.
Prior to joining CIB Marine, Mr. Calderon was
Executive Vice President and Manager of Middle
Market Banking for the Midwest Region of Bank
One from 1999 to 2003.(1)Michael L. Rechkemmer (57)
    
    Mr. Rechkemmer has been Executive Vice
President of CIB Marine since July 1999 and
Chief Operations Officer since April 2000. He
was CIB-Chicagos interim President and CEO
from March 2004 to November 2004.Steven T. Klitzing (43)
    
    Mr. Klitzing has served as Executive Vice
President, Chief Financial Officer, Treasurer
and Assistant Secretary of CIB Marine since
December 1993.Michael L. Paoletta (54)
    
    Mr. Paoletta has served as Senior Vice
President and Chief Credit Officer since
January 2006. He was Senior Vice President and
Manager of Commercial Loan Workout department
from June 2004 to January 2006, and Senior Vice
President and Portfolio Manager of CIB-Chicago
from 1998 to June 2004.Daniel J. Rasmussen (40)
    
    Mr. Rasmussen has served as Senior Vice
President, General Counsel and Secretary of CIB
Marine since April 2005. He was Vice President
and Senior Attorney of CIB Marine from 1999 to
2005.Patrick J. Straka (39)
    
    Mr. Straka has served as Senior Vice President
and Chief Investment Officer of CIB Marine
since February 1999. He was Vice President,
Investment Officer and General Auditor of CIB
Marine from 1995 to February 1999.
 
 (1)
    
    On March 2, 2007, Mr. Calderon resigned from his positions as President and Chief Executive
Officer of CIB Marine and was succeeded by Mr. John P. Hickey, Jr. Mr. Calderon was appointed
Chairman of the Board of Directors of CIB Marine on March 8, 2007. See Item 7-Managements
Discussion and Analysis of Financial Condition and Results of Operations-Subsequent
Events-Management Changes in Part II of this Form 10-K for additional information relative to
management and Board of Directors changes. Audit Committee Financial Expert
  Code of Ethics
 http://www.cibmarine.com/
 114




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##### Table of Contents



Section 16(a) Beneficial Ownership Reporting Compliance
   
 ITEM 11. EXECUTIVE COMPENSATION
 COMPENSATION DISCUSSION AND ANALYSIS
   Executive Compensation Objectives
  
    
    Provide incentive to maximize shareholder value by aligning the executives interests
with those of the shareholders.
    
    Attract and retain the best available executive talent.
    
    Provide incentives and reward individual performance and contributions to CIB Marine.Setting Executive Compensation
  Current Elements of Compensation
  115




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##### Table of Contents



401(k) Plan
  Employment Agreement
  Stock Option Plan
  Perquisites and Other Benefits
  116




---



##### Table of Contents



2007 Events
 Effective March 2, 2007, Mr. Calderon resigned as President and Chief Executive Officer of
CIB Marine and assumed the position of Chairman of the Board. Effective as of the same date, John
P. Hickey, Jr. was appointed successor President and Chief Executive Officer of CIB Marine. CIB
Marine and Mr. Hickey have entered into an employment agreement that continues until June 1,
2010 and provides for a minimum base salary of $260,000. The employment agreement also provides for
severance equal to continued salary for the remainder of the term of the agreement if Mr.
Hickeys employment is terminated by CIB Marine for other than cause or he terminates his
employment with CIB Marine for good reason (as defined in the agreement).
 Deductibility of Executive Compensation
  COMPENSATION AND STOCK OPTION COMMITTEE REPORT
     
 EXECUTIVE COMPENSATION TABLES
  117




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##### Table of Contents



SUMMARY COMPENSATION TABLE
 All OtherOption
    
    CompensationName and Principal Position
    
    Year
    
    Salary ($)
    
    Awards ($)(1)
    
    ($)(2)
    
    Total ($)Stanley J. Calderon
    
    
    2006
    
    
    $
    278,000
    
    
    $
    
    
    
    $
    15,264
    
    
    $
    293,264President and CEOSteven T. Klitzing
    
    
    2006
    
    
    $
    195,000
    
    
    $
    8,820
    
    
    $
    27,888
    (4)
    
    $
    231,708Executive Vice
President,
Chief Financial
Officer
and TreasurerMichael L. Rechkemmer
    
    
    2006
    
    
    $
    180,000
    
    
    $
    5,880
    
    
    $
    11,503
    
    
    $
    197,383Executive Vice President
and
Chief Operations OfficerPatrick J. Straka
    
    
    2006
    
    
    $
    170,982
    
    
    $
    4,410
    
    
    $
    4,833
    
    
    $
    180,225Senior Vice President
and
Chief Investment OfficerDaniel J. Rasmussen
    
    
    2006
    
    
    $
    151,000
    
    
    $
    5,880
    
    
    $
    7,915
    
    
    $
    164,795Senior Vice President,
General Counsel and
Secretary
 
 (1)
    
    Represents grants of options to purchase shares of CIB Marines common stock made pursuant to
its Stock Option Plan. This column shows the dollar amount of expense recognized by CIB
Marine for financial reporting purposes in 2006 in accordance with Financial Accounting
Standards No. 123R (SFAS No. 123R), disregarding adjustments for potential forfeitures, for
all outstanding stock options granted to each Named Executive Officer. See Item 8, Note
1-Summary of Significant Accounting Policies Stock-Based Compensation contained in Part II of
this Form 10-K for a discussion of the assumptions made by CIB Marine in the valuation of
these option awards. Under SFAS No. 123R, the fair value of option awards is recognized as
expense over the vesting period of the award.(2)
    
    The table below provides the details of amounts included in the All Other Compensation
table for each Named Executive Officer. The perquisites are valued for disclosure purposes at
their incremental cost to CIB Marine in accordance with SEC regulations. LifeInsurance
    
    401(k)
    
    Car
    
    
    
    
    
    Parking/Name and Position
    
    Year
    
    Premiums
    
    Match
    
    Allowance
    
    Club Dues
    
    Transit
    
    TotalStanley J. Calderon
    
    
    2006
    
    
    $
    1,841
    
    
    $
    8,267
    
    
    $
    
    
    
    $
    2,484
    
    
    $
    2,672
    
    
    $
    17,270President and CEOSteven T. Klitzing
    
    
    2006
    
    
    $
    156
    
    
    $
    5,376
    
    
    $
    22,356
    
    
    $
    
    
    
    $
    
    
    
    $
    29,894Executive Vice
President,
Chief Financial
Officer and TreasurerMichael L.
Rechkemmer
    
    
    2006
    
    
    $
    1,151
    
    
    $
    5,491
    
    
    $
    3,033
    
    
    $
    
    
    
    $
    1,828
    
    
    $
    13,509Executive Vice
President and
Chief Operations OfficerPatrick J. Straka
    
    
    2006
    
    
    $
    131
    
    
    $
    4,702
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,839Senior Vice President
and
Chief Investment OfficerDaniel J. Rasmussen
    
    
    2006
    
    
    $
    161
    
    
    $
    4,249
    
    
    $
    3,505
    
    
    $
    
    
    
    $
    
    
    
    $
    9,921Senior Vice President,
General Counsel and
Secretary
 Employment Agreement
  118




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##### Table of Contents



GRANTS OF PLAN-BASED AWARDS
  All OtherOptionAwards:
    
    Exercise or
    
    Grant DateNumber of
    
    Base Price of
    
    Fair Value ofSecurities
    
    Option
    
    Stock andUnderlying
    
    Awards
    
    Option AwardsName
    
    Grant Date
    
    Options(1)
    
    ($/Sh)(2)
    
    ($)Stanley J. Calderon
    
    
    
    (3)
    
    
    0
    
    
    
    
    
    
    
    Steven T. Klitzing
    
    
    11/16/2006
    
    
    
    20,000
    
    
    
    4.10
    
    
    
    15,600Michael L. Rechkemmer
    
    
    11/16/2006
    
    
    
    20,000
    
    
    
    4.10
    
    
    
    15,600Patrick J. Straka
    
    
    11/16/2006
    
    
    
    15,000
    
    
    
    4.10
    
    
    
    11,700Daniel J. Rasmussen
    
    
    11/16/2006
    
    
    
    20,000
    
    
    
    4.10
    
    
    
    15,600
 
 (1)
    
    The option to purchase shares of CIB Marines common stock was granted pursuant to its Stock
Option Plan.(2)
    
    The amount shown represents the dollar amount of expense recognized by CIB Marine for
financial reporting purposes in 2006 in accordance with SFAS No. 123R, disregarding
adjustments for potential forfeitures, for options granted during 2006. See Item 8, Note
1-Summary of Significant Accounting Policies Stock-Based Compensation contained in Part II of
this Form 10-K for a discussion of the assumptions made by CIB Marine in valuation of these
option awards. Under SFAS No. 123R, the fair value of option awards is recognized as expense
over the vesting period of the award.(3)
    
    Mr. Calderon was not granted any stock options during 2006. Stock Option Plan Compensation
  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
  119




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##### Table of Contents



Option AwardsNumber of
    
    Number ofSecurities
    
    SecuritiesUnderlying
    
    UnderlyingUnexercised
    
    Unexercised
    
    Option
    
    OptionOptions (#)
    
    Options (#)
    
    Exercise
    
    ExpirationName
    
    Exercisable
    
    Unexercisable
    
    Price ($)
    
    DateStanley J. Calderon
    
    
    30,000
    
    
    
    120,000
    (1)
    
    $
    4.10
    
    
    
    09/29/2015Steven T. Klitzing
    
    
    12,600
    
    
    
    0
    
    
    $
    13.07
    
    
    
    02/25/200810,650
    
    
    
    0
    
    
    
    16.23
    
    
    
    07/29/200910,369
    
    
    
    0
    
    
    
    18.40
    
    
    
    07/27/201013,543
    
    
    
    0
    
    
    
    22.89
    
    
    
    11/29/20116,000
    
    
    
    24,000
    (1)
    
    
    4.10
    
    
    
    09/29/20150
    
    
    
    20,000
    (2)
    
    
    4.10
    
    
    
    11/16/2016Michael L. Rechkemmer
    
    
    5,700
    
    
    
    0
    
    
    $
    13.07
    
    
    
    02/25/20087,050
    
    
    
    0
    
    
    
    16.23
    
    
    
    07/29/200910,190
    
    
    
    0
    
    
    
    18.40
    
    
    
    07/27/20109,830
    
    
    
    0
    
    
    
    22.89
    
    
    
    11/29/20114,000
    
    
    
    16,000
    (1)
    
    
    4.10
    
    
    
    09/29/20150
    
    
    
    20,000
    (2)
    
    
    4.10
    
    
    
    11/16/2016Patrick J. Straka
    
    
    3,600
    
    
    
    0
    
    
    $
    13.19
    
    
    
    04/30/20079,150
    
    
    
    0
    
    
    
    13.07
    
    
    
    02/25/20085,250
    
    
    
    0
    
    
    
    16.23
    
    
    
    07/29/20097,704
    
    
    
    0
    
    
    
    18.40
    
    
    
    07/27/20108,191
    
    
    
    0
    
    
    
    22.89
    
    
    
    11/29/20113,000
    
    
    
    12,000
    (1)
    
    
    4.10
    
    
    
    09/29/20150
    
    
    
    15,000
    (2)
    
    
    4.10
    
    
    
    11/16/2016Daniel J. Rasmussen
    
    
    1,350
    
    
    
    0
    
    
    $
    16.23
    
    
    
    07/29/20091,332
    
    
    
    0
    
    
    
    18.40
    
    
    
    07/27/20101,365
    
    
    
    0
    
    
    
    22.89
    
    
    
    11/29/20114,000
    
    
    
    16,000
    (1)
    
    
    4.10
    
    
    
    09/29/20150
    
    
    
    20,000
    (2)
    
    
    4.10
    
    
    
    11/16/2016
 
 (1)
    
    One-fifth of these options became fully exercisable on September 29, 2006, one-fifth
became fully exercisable on September 29, 2007, one-fifth become fully exercisable on
September 29, 2008, one-fifth become fully exercisable on September 29, 2009, and one-fifth
become fully exercisable on September 29, 2010.(2)
    
    One-fifth of these options become fully exercisable on November 16, 2007, one-fifth
become fully exercisable on November 16, 2008, one-fifth become fully exercisable on
November 16, 2009, one-fifth become fully exercisable on November 16, 2010, and one-fifth
become fully exercisable on November 16, 2011.  POTENTIAL PAYMENTS UPON TERMINATION
OR CHANGE IN CONTROL OF THE COMPANY
  Employment Agreement
  120




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##### Table of Contents



Stock Option Plan
    DIRECTORS COMPENSATION
   121




---



##### Table of Contents



Fees Earned or
    
    Option AwardsName
    
    Paid in Cash ($)
    
    ($)
    
    Total ($)Jose Araujo
    
    $
    
    (1)
    
    $
    
    
    
    $
    Norman E. Baker
    
    
    28,000
    
    
    
    
    
    
    
    28,000W. Scott Blake
    
    
    168,300
    
    
    
    54,000
    (2)
    
    
    216,150Steven C. Hillard
    
    
    14,900
    
    
    
    
    
    
    
    14,900Gary L. Longman
    
    
    30,500
    
    
    
    
    
    
    
    30,500Donald M. Trilling
    
    
    16,000
    
    
    
    
    
    
    
    16,000Howard Zimmerman
    
    
    16,000
    
    
    
    
    
    
    
    16,000
 
 (1)
    
    Mr. Araujo commenced employment as International Business Officer of Citrus Bank on April
15, 2003. Pursuant to his compensation agreement, Mr. Araujo was no longer paid fees for
attending regularly scheduled CIB Marine Board meetings. During 2006, Mr. Araujo was paid a
salary of $30,111, which includes a bonus of $111 in connection with his employment.(2)
    
    On March 30, 2006, Mr. Blake was granted 50,000 options at an exercise price of $4.10. The
options vest ratably over a five-year period, and expire on March 30, 2016. On November 16,
2006, Mr. Blake was granted 25,000 options at an exercise price of $4.10. The options vest
ratably over a five-year period, and expire on November 16, 2016. The amount shown represents
the dollar amount of expense recognized by CIB Marine for financial reporting purposes in 2006
in accordance with SFAS No. 123R, disregarding adjustments for potential forfeitures. See Item
8, Note 1-Summary of Significant Accounting Policies Stock-Based Compensation contained in
Part II of this Form 10-K for a discussion of the assumptions made by CIB Marine in valuation
of these option awards. Under SFAS No. 123R, the fair value of option awards is recognized as
expense over the vesting period of the award. As of December 31, 2006, the Directors had the
following amounts of outstanding options: Jose Araujo  33,050; Norman E. Baker  33,050; W.
Scott Blake  108,050; Stanley Calderon  150,000; Steven C. Hillard  0; Donald M. Trilling 
33,050; and Howard E. Zimmerman  33,050.    Compensation Committee Interlocks and Insider Participation
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Securities Authorized for Issuance Under Equity Compensation Plans
  Equity Compensation Plan Information(1)Number of
    
    Weighted-
    
    Number of securitiessecurities to be
    
    average exercise
    
    remaining available forissued upon
    
    price of
    
    future issuance underexercise of
    
    outstanding
    
    equity compensationoutstanding
    
    options,
    
    plans (excludingoptions, warrants
    
    warrants and
    
    securities reflected inPlan category
    
    and rights
    
    rights
    
    column (a))(a)
    
    
    
    (b)
    
    
    
    (c)Equity compensation plans approved by security holders
    
    
    1,172,321
    
    
    $
    8.47
    
    
    
    489,041Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,172,321
    
    
    $
    8.47
    
    
    
    489,041
 
 (1)
    
    See Item 8, Note 1-Summary of Significant Accounting Policies-Stock-Based Compensation and
Note 19-Stock Option Plans in Part II of this Form 10-K for additional information regarding
our stock-based compensation plans. 122




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##### Table of Contents



Stock Ownership of Certain Beneficial Owners and Management
  Beneficial Ownership ofCommon StockAmount and
    
    Percentage ofNature of Beneficial
    
    Common StockBeneficial Owner
    
    Ownership(1)
    
    Outstanding5% StockholdersJohn and Mary Lydia Hadley915 W. Park Avenue, Champaign, Illinois 61821
    
    
    1,116,950
    (2)
    
    
    6.09
    %Named Executive Officers and DirectorsJose Araujo
    
    
    115,571
    (3)
    
    
    *Norman E. Baker
    
    
    402,500
    (4)
    
    
    2.19
    %(5)W. Scott Blake
    
    
    226,250
    (6)
    
    
    1.23
    %(5)Stanley J. Calderon
    
    
    30,058
    (7)
    
    
    *Steven C. Hillard
    
    
    165,030
    
    
    
    *Steven T. Klitzing
    
    
    80,485
    (8)
    
    
    *Gary L. Longman
    
    
    
    
    
    
    *Daniel J. Rasmussen
    
    
    8,320
    (9)
    
    
    *Michael L. Rechkemmer
    
    
    47,889
    (10)
    
    
    *Patrick J. Straka
    
    
    50,808
    (11)
    
    
    *Donald M. Trilling
    
    
    230,532
    (12)
    
    
    1.26
    %(5)Howard E. Zimmerman
    
    
    140,650
    (13)
    
    
    *All Directors and Executive Officers as a group (13 persons)
    
    
    1,505,048
    
    
    
    9.94
    %(14)
 
 *
    
    Less than one percent(1)
    
    Unless otherwise indicated, the nature of beneficial ownership for shares shown in this
column is sole voting and investment power. The information contained in this column is based
upon information furnished to the Company by the persons named above.(2)
    
    Based solely on information in CIB Marines stock transfer records.(3)
    
    Includes 33,050 shares that Mr. Araujo has the right to acquire within 60 days upon the
exercise of stock options. Mr. Araujo passed away in March 2007.(4)
    
    Includes 33,050 shares Mr. Baker has the right to acquire within 60 days upon the exercise of
stock options.(5)
    
    Percentage is calculated on a partially diluted basis, assuming only the exercise of stock
options by such individual which are exercisable within 60 days.(6)
    
    Includes 33,050 shares that Mr. Blake has the right to acquire within 60 days upon the
exercise of stock options, and 60,000 shares held in two trusts for the benefit of Mr. Blakes
mother, for which Mr. Blake shares voting and investment powers, and for which Mr. Blake
disclaims beneficial ownership of the shares.(7)
    
    Includes 30,000 shares that Mr. Calderon has the right to acquire within 60 days upon the
exercise of stock options.(8)
    
    Includes 53,162 shares that Mr. Klitzing has the right to acquire within 60 days upon the
exercise of stock options.(9)
    
    Includes 8,047 shares that Mr. Rasmussen has the right to acquire within 60 days upon the
exercise of stock options.(10)
    
    Includes 36,770 shares that Mr. Rechkemmer has the right to acquire within 60 days upon the
exercise of stock options.(11)
    
    Includes 1,400 shares jointly owned by Mr. Straka and his wife, 6,300 shares owned by
partnerships with respect to which Mr. Straka shares voting and investment power, and 36,895
shares that Mr. Straka has the right to acquire within 60 days upon the exercise of stock
options.(12)
    
    Includes 68,705 shares held in a trust for the benefit of Mr. Trillings wife and 33,050
shares that Mr. Trilling has the right to acquire within 60 days upon the exercise of stock
options.(13)
    
    Includes 33,050 shares Mr. Zimmerman has the right to acquire within 60 days upon the
exercise of stock options.(14)
    
    Percentage is calculated on a diluted basis, assuming the exercise of all stock options which
are exercisable within 60 days by individuals included in the above table. 123




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Transactions with Related Persons
  Review, Approval or Ratification of Related Party Transactions
  Director Independence
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  2006
    
    
    2005(Dollars in thousands)Audit fees
    
    $
    440
    
    
    $
    450Audit related fees (1)
    
    
    13
    
    
    
    Tax fees (2)
    
    
    99
    
    
    
    177Total fees
    
    $
    552
    
    
    $
    627
 
 (1)
    
    Audit related fees consisted of audits of financial statements of certain employee benefit
plans, audits of mortgage banking compliance and due diligence services.(2)
    
    Tax fees consisted of fees for tax consultation and tax compliance services, and included $20
thousand and $80 thousand paid in relation to Canron during 2006 and 2005, respectively. Pre-Approval Policy and Procedures
  124




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)(1) Financial Statements
  
    
    Report of Independent Registered Public Accounting Firm.
    
    Consolidated Balance Sheets as of December 31, 2006 and 2005.
    
    Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005, and
2004.
    
    Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2006,
2005 and 2004.
    
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and
2004.
    
    Notes to Consolidated Financial Statements.
 (a)(2) Financial Statement Schedules
  (a)(3) Exhibits
 Exhibit No.
    
    Exhibit3.1
    
    Amended and Restated Articles of Incorporation of CIB Marine Bancshares, Inc. (incorporated
by reference to Exhibit 3.1 to CIB Marines Form 10-K filed with the Securities and Exchange
Commission on October 31, 2005).3.2
    
    Bylaws of CIB Marine Bancshares, Inc. (incorporated by reference to Exhibit 3.2 to CIB
Marines Form 10-K filed with the Securities and Exchange Commission on October 31, 2005).*10.1
    
    CIB Marine Bancshares, Inc. 1999 Stock Option and Incentive Plan, as amended (incorporated by
reference to Exhibit 10.1 to CIB Marines Form 10-K filed with the Securities and Exchange
Commission on March 31, 2003).*10.2
    
    First Amendment to the CIB Marine Bancshares, Inc. 1999 Stock Option and Incentive Plan
(incorporated by reference to Exhibit 10.2 to CIB Marines Form 10-K filed with the
Securities and Exchange Commission on October 31, 2005).*10.3
    
    CIB Marine Bancshares, Inc. 1999 Stock Option and Incentive Plan Key Employee Non-Qualified
Stock Option Agreement (incorporated by reference to Exhibit 99.1 of CIB Marines Form 8-K
filed with the Securities and Exchange Commission on September 23, 2005).*10.4
    
    CIB Marine Bancshares, Inc. 1999 Stock Option and Incentive Plan Key Employee Non-Qualified
Stock Option Agreement (accelerated vesting upon sale of subsidiary bank) (incorporated by
reference to Exhibit 99.2 of CIB Marines Form 8-K filed with the Securities and Exchange
Commission on September 23, 2005).*10.5
    
    CIB Marine Bancshares, Inc. 1999 Stock Option and Incentive Plan Key Employee Non  Qualified
Stock Option Agreement (accelerated vesting upon sale of subsidiary bank) (incorporated by
reference to Exhibit 99.1 of CIB Marines Form 8-K filed with the Securities and Exchange
Commission on November 16, 2006).*10.6
    
    CIB Marine Bancshares, Inc. Severance Pay Plan (incorporated by reference to Exhibit 10.1 of
CIB Marines Form 8-K filed with the Securities and Exchange Commission on April 18, 2005).*10.7
    
    Employment Agreement between Stanley J. Calderon and CIB Marine Bancshares, Inc.
(incorporated by reference to Exhibit 99 to CIB Marines
Form 8-K filed with the Securities and Exchange Commission on November 22, 2004).*10.8
    

    Employment Agreement between John
P. Hickey, Jr. and CIB Marine Bancshares, Inc. (incorporated by
reference to Exhibit 99 to CIB Marines Form 8-K filed with the
Securities and Exchange Commission on October 23, 2007).10.9
    
    Written Agreement between CIB Marine and the Federal Reserve Bank of Chicago (incorporated by
reference to Exhibit 99.5 of CIB Marines Form 8-K filed with the Securities and Exchange
Commission on June 1, 2004).
 125




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##### Table of Contents



Exhibit No.
    
    Exhibit10.10
    
    Cease and Desist Order issued jointly by the Federal Deposit Insurance Corporation and the
State of Illinois Office of Banks and Real Estate Bureau of Banks and Trust Companies and
consented to by Central Illinois Bank, effective May 29, 2004 (incorporated by reference to
Exhibit 99.2 to CIB Marines Form 8-K filed with the Securities and Exchange Commission on
June 1, 2004).14.1
    
    Code of Ethics (incorporated by reference to Exhibit 99 to the Companys Form 8-K filed
November 2, 2004).21
    
    Subsidiaries of CIB Marine23.1
    
    Consent of KPMG LLP31.1
    
    Certification of John P. Hickey, Jr., Chief Executive Officer, under Rule 13a-14(a)/15d-14(a).31.2
    
    Certification of Steven T. Klitzing, Chief Financial Officer, under Rule 13a-14(a)/15d-14(a).32.1
    
    Certification of John P. Hickey, Jr., Chief Executive Officer, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Steven T. Klitzing, Chief Financial Officer, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of Sarbanes- Oxley Act of 2002.
  
 *
    
    Executive compensation plans 126




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##### Table of Contents



SIGNATURES
  CIB MARINE BANCSHARES, INC.
(registrant)By: /s/ JOHN P. HICKEY, Jr.Date: November 6, 2007
    
    John P. Hickey, Jr.President and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ JOHN P. HICKEY, Jr.
    
    President and Chief Executive
    
    November 6, 2007John P. Hickey, Jr.
    
    Officer (Principal Executive Officer)/s/ STEVEN T. KLITZING
    
    Executive Vice President and
    
    November 6, 2007Steven T. Klitzing
    
    Chief Financial Officer
(Principal Financial and Accounting
Officer)/s/ NORMAN E. BAKER
    
    Director
    
    November 6, 2007Norman E. Baker/s/ STANLEY J. CALDERON
    
    Chairman of the Board of
    
    November 6, 2007Stanley J. Calderon
    
    Directors and Director/s/ W. SCOTT BLAKE W.
    
    Director
    
    November 6, 2007Scott Blake/s/ STEVEN C. HILLARD
    
    Director
    
    November 6, 2007Steve Hillard/s/ GARY L. LONGMAN
    
    Director
    
    November 6, 2007Gary Longman/s/ DONALD M. TRILLING
    
    Director
    
    November 6, 2007Donald M. Trilling/s/ HOWARD E. ZIMMERMAN
    
    Director
    
    November 6, 2007Howard E. Zimmerman
 127