The regional court in the western city of Düsseldorf gave Stefan Ortseifen a 10-month suspended sentence and ordered him to give €100,000 ($127,000) to charity.
In their verdict on charges of stock price manipulation, the judges ruled that Ortseifen had "presented an embellished take on the institution's financial health in July 2007 in light of the US property crisis."
Ortseifen is the first German banker to be convicted over wrongdoing during the financial crisis.
The defendant's lawyer Reinhard Freiherr von Dalwigk called the verdict a "blatant misjudgement" and said his client would file an appeal.
Ortseifen is blamed for steering IKB into peril with risky investments in the US sub-prime property market and then cooking the books so the losses would not weigh on the bank's share price.
When IKB ran into serious trouble in 2007, the German government scrambled to save it from collapse with a €10-billion cash injection. The bank was sold in 2008 to US-based investment fund Lone Star.