##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended
MARCH 31, 2005
    
    Commission File Number
000-21329
 TIB FINANCIAL CORP.  FLORIDA
    
    65-0655973(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 599 9th STREET NORTH, SUITE 101, NAPLES, FLORIDA  34102-5624   Registrants telephone number, including area code: (239) 263-3344 Not Applicable  
 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the issuer was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ or No o Indicate by check mark whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes þ or No o Indicate the number of shares outstanding of each of the issuers classes of common equity, as of
the latest practicable date: Common Stock, $0.10 Par Value
    
    5,710,564Class
    
    Outstanding as of April 30, 2005




---



##### 



Part I.  FINANCIAL INFORMATION Item 1.  Financial Statements TIB FINANCIAL CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts) March 31, 2005
    
    
    December 31, 2004(Unaudited)ASSETSCash and due from banks
    
    $
    20,216
    
    
    $
    27,410Federal funds sold
    
    
    62,391
    
    
    
    15,528Cash and cash equivalents
    
    
    82,607
    
    
    
    42,938Investment securities available for sale
    
    
    80,735
    
    
    
    77,807Loans, net of deferred loan costs and fees
    
    
    719,285
    
    
    
    655,678Less: allowance for loan losses
    
    
    6,541
    
    
    
    6,243Loans, net
    
    
    712,744
    
    
    
    649,435Premises and equipment, net
    
    
    27,141
    
    
    
    27,559Goodwill
    
    
    155
    
    
    
    155Intangible assets, net
    
    
    1,320
    
    
    
    1,392Accrued interest receivable and other assets
    
    
    34,624
    
    
    
    30,039TOTAL ASSETS
    
    $
    939,326
    
    
    $
    829,325LIABILITIESDeposits:Noninterest-bearing demand
    
    $
    185,012
    
    
    $
    152,035Interest-bearing
    
    
    614,269
    
    
    
    535,824Total Deposits
    
    
    799,281
    
    
    
    687,859Federal Home Loan Bank (FHLB) advances
    
    
    25,000
    
    
    
    35,000Short-term borrowings
    
    
    19,922
    
    
    
    12,157Long-term borrowings
    
    
    17,000
    
    
    
    18,250Accrued interest payable and other liabilities
    
    
    9,844
    
    
    
    7,945TOTAL LIABILITIES
    
    
    871,047
    
    
    
    761,211SHAREHOLDERS EQUITYPreferred stock  no par value: 5,000,000and 0 shares authorized, 0 and 0 shares
issued
    
    
    
    
    
    
    Common stock  $.10 par value: 20,000,000and 7,500,000 shares authorized, 5,706,939and 5,679,239 shares issued
    
    
    571
    
    
    
    568Additional paid in capital
    
    
    38,629
    
    
    
    38,284Retained earnings
    
    
    29,859
    
    
    
    28,968Accumulated other comprehensive income
    
    
    (780
    )
    
    
    294TOTAL SHAREHOLDERS EQUITY
    
    
    68,279
    
    
    
    68,114TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    939,326
    
    
    $
    829,325
 (See notes to consolidated financial statements) 2




---



##### 



TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands, except earnings per share amounts) Three months endedMarch 31,2005
    
    
    2004INTEREST AND DIVIDEND INCOMELoans, including fees
    
    $
    11,310
    
    
    $
    8,601Investment securities:Taxable
    
    
    636
    
    
    
    410Tax-exempt
    
    
    160
    
    
    
    153Interest bearing deposits in other bank
    
    
    4
    
    
    
    1Federal Home Loan Bank Stock
    
    
    27
    
    
    
    15Federal funds sold
    
    
    209
    
    
    
    38TOTAL INTEREST AND DIVIDEND INCOME
    
    
    12,346
    
    
    
    9,218INTEREST EXPENSEDeposits
    
    
    3,101
    
    
    
    1,892Federal Home Loan Bank advances
    
    
    175
    
    
    
    94Short-term borrowings
    
    
    73
    
    
    
    9Long term borrowings
    
    
    383
    
    
    
    395TOTAL INTEREST EXPENSE
    
    
    3,732
    
    
    
    2,390NET INTEREST INCOME
    
    
    8,614
    
    
    
    6,828PROVISION FOR LOAN LOSSES
    
    
    586
    
    
    
    369NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    8,028
    
    
    
    6,459NON-INTEREST INCOMEService charges on deposit accounts
    
    
    608
    
    
    
    644Investment securities gains, net
    
    
    
    
    
    
    44Merchant bankcard processing income
    
    
    1,896
    
    
    
    1,760Fees on mortgage loans sold
    
    
    492
    
    
    
    398Other income
    
    
    398
    
    
    
    427TOTAL NON-INTEREST INCOME
    
    
    3,394
    
    
    
    3,273NON-INTEREST EXPENSESalaries and employee benefits
    
    
    4,212
    
    
    
    3,442Net occupancy expense
    
    
    1,276
    
    
    
    1,122Other expense
    
    
    3,565
    
    
    
    3,230TOTAL NON-INTEREST EXPENSE
    
    
    9,053
    
    
    
    7,794INCOME BEFORE INCOME TAX EXPENSE
    
    
    2,369
    
    
    
    1,938INCOME TAX EXPENSE
    
    
    822
    
    
    
    665NET INCOME
    
    $
    1,547
    
    
    $
    1,273BASIC EARNINGS PER SHARE:
    
    $
    0.27
    
    
    $
    0.29DILUTED EARNINGS PER SHARE:
    
    $
    0.26
    
    
    $
    0.27
 (See notes to consolidated financial statements) 3




---



##### 



TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited)
(dollars in thousands, except per share amounts) Additional
    
    
    
    
    
    
    Accumulated Other
    
    
    TotalCommon
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance,January 1, 2005
    
    
    5,679,239
    
    
    $
    568
    
    
    $
    38,284
    
    
    $
    28,968
    
    
    $
    294
    
    
    $
    68,114Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,547
    
    
    
    
    
    
    
    1,547Other comprehensive income, net of taxbenefit of $645:Net market valuation adjustment onsecurities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,074
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,074
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    473Exercise of stock options
    
    
    27,700
    
    
    
    3
    
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    283Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    65Cash dividends declared, $.115 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (656
    )
    
    
    
    
    
    
    (656
    )Balance,March 31, 2005
    
    
    5,706,939
    
    
    $
    571
    
    
    $
    38,629
    
    
    $
    29,859
    
    
    $
    (780
    )
    
    $
    68,279
 Additional
    
    
    
    
    
    
    Accumulated Other
    
    
    TotalCommon
    
    
    Paid in
    
    
    Retained
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance,January 1, 2004
    
    
    4,431,328
    
    
    $
    443
    
    
    $
    14,255
    
    
    $
    26,203
    
    
    $
    345
    
    
    $
    41,246Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,273
    
    
    
    
    
    
    
    1,273Other comprehensive income, net of taxexpense of $431:Net market valuation adjustment onsecurities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    740Less: reclassification adjustment for gainsincluded in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )Other comprehensive income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    713Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,986Exercise of stock options
    
    
    57,736
    
    
    
    6
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    426Income tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    122
    
    
    
    
    
    
    
    
    
    
    
    122Cash dividends declared, $.1125 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (505
    )
    
    
    
    
    
    
    (505
    )Balance,March 31, 2004
    
    
    4,489,064
    
    
    $
    449
    
    
    $
    14,797
    
    
    $
    26,971
    
    
    $
    1,058
    
    
    $
    43,275
 (See notes to consolidated financial statements) 4




---



##### 



TIB FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE IN CASH AND CASH EQUIVALENTS
(Unaudited)
(dollars in thousands) For the three month period endedMarch 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income
    
    $
    1,547
    
    
    $
    1,273Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    617
    
    
    
    527Provision for loan losses
    
    
    586
    
    
    
    369Deferred income tax benefit
    
    
    (120
    )
    
    
    (115
    )Investment securities net gains
    
    
    
    
    
    
    (44
    )Net gain on sale/disposal of premises, equipment and intangibles
    
    
    (32
    )
    
    
    (1
    )Mortgage loans originated for sale
    
    
    (45,679
    )
    
    
    (27,195
    )Proceeds from sale of mortgage loans
    
    
    43,153
    
    
    
    24,901Fees on mortgage loans sold
    
    
    (492
    )
    
    
    (398
    )Increase in accrued interest receivable and other assets
    
    
    (818
    )
    
    
    (109
    )Increase (decrease) in accrued interest payable and other liabilities
    
    
    1,960
    
    
    
    (581
    )NET CASH PROVIDED BY (USED BY) OPERATING ACTIVITIES
    
    
    722
    
    
    
    (1,373
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchases of investment securities available for sale
    
    
    (5,000
    )
    
    
    Repayments of principal and maturities of investment securities available for sale
    
    
    332
    
    
    
    1,199Sales of investment securities available for sale
    
    
    
    
    
    
    2,046Net sale of FHLB stock
    
    
    129
    
    
    
    1,250Proceeds from sales of government guaranteed loans
    
    
    
    
    
    
    569Loans originated or acquired, net of principal repayments
    
    
    (63,988
    )
    
    
    (11,854
    )Purchases of premises and equipment
    
    
    (186
    )
    
    
    (1,525
    )Sales of premises, equipment and intangibles
    
    
    93
    
    
    
    2NET CASH USED BY INVESTING ACTIVITIES
    
    
    (68,620
    )
    
    
    (8,313
    )CASH FLOWS FROM FINANCING ACTIVITIESNet increase in federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings
    
    
    7,765
    
    
    
    1,306Net decrease in FHLB short-term advances
    
    
    (10,000
    )
    
    
    (15,000
    )Repayments of FHLB long-term advances
    
    
    
    
    
    
    (10,000
    )Repayments of notes payable
    
    
    (1,250
    )
    
    
    Net increase in demand, money market and savings accounts
    
    
    55,564
    
    
    
    54,250Net increase in time deposits
    
    
    55,858
    
    
    
    9,370Proceeds from exercises of stock options
    
    
    283
    
    
    
    426Cash dividends paid
    
    
    (653
    )
    
    
    (499
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    107,567
    
    
    
    39,853NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    39,669
    
    
    
    30,167CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    42,938
    
    
    
    33,681CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    82,607
    
    
    $
    63,848SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:Cash paid for:Interest
    
    $
    3,655
    
    
    $
    3,621Income taxes
    
    $
    
    
    
    $
    
 (See notes to consolidated financial statements) 5




---



##### 



TIB FINANCIAL CORP.
UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(In thousands except for share and per share amounts) NOTE 1  BASIS OF PRESENTATION & ACCOUNTING POLICIES TIB Financial Corp. is a financial holding company headquartered in Naples, Florida. TIB Financial
Corp. owns and operates TIB Bank, which has a total of sixteen branches in Florida that are located
in Monroe, Miami-Dade, Collier and Lee counties. The accompanying unaudited consolidated financial statements for TIB Financial Corp. (the
Company) have been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statement presentation. For
further information and an additional description of the Companys accounting policies, refer to
the Companys annual report for the year ended December 31, 2004. The consolidated statements include the accounts of TIB Financial Corp. and its wholly-owned
subsidiary, TIB Bank, and the Banks subsidiary, TIB Investment Center Inc. (this corporation was
dissolved in January 2005  see Note 2), collectively known as the Company. All significant
intercompany accounts and transactions have been eliminated in consolidation. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Certain amounts previously reported on have been
reclassified to conform to the current period presentation. As used in this document, the terms we, us, our, TIB Financial, and Company mean TIB
Financial Corp. and its subsidiaries (unless the context indicates another meaning), and the term
Bank means TIB Bank and its subsidiaries (unless the context indicates another meaning). CRITICAL ACCOUNTING POLICIES The accounting and reporting policies of the Company are in accordance with accounting principles
generally accepted within the United States of America and conform to general practices within the
banking industry. Accounting and reporting policies for the allowance for loan losses are deemed
critical since they involve the use of estimates and require significant management judgments.
Losses on loans result from a broad range of causes from borrower specific problems, to industry
issues, to the impact of the economic environment. The identification of these factors that lead
to default or non-performance under a borrower loan agreement and the estimation of loss in these
situations are very subjective. In addition, a dramatic change in the performance of one or a small
number of borrowers can have a significant impact on the estimate of losses. Management has
implemented a process that has been applied consistently to systematically consider the many
variables that impact the estimation of the allowance for loan losses. Additional information with regard to the Companys methodology and reporting of the allowance for
loan losses is included in the 2004 Annual Report and 10-K. NOTE 2  ACQUISITIONS AND DIVESTITURES On December 15, 2004, the Company closed the sale of certain intangible assets which primarily
comprised a book of business which served as the foundation of the Companys investment center
operations. The buyer paid $50 in cash at the closing. The Company recognized a gain of $50 on the
transaction. Under the purchase agreement, additional cash payments totaling up to $60 may be paid
to the Company subject to the achievement of certain production and customer and asset retention
thresholds. Additionally, the Company will receive monthly cash payments of 10% of production
related to new referrals made through December 31, 2005. On January 7, 2005, the Company filed
Articles of Dissolution dissolving TIB Investment Center, Inc. 6




---



##### 



NOTE 3  INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities available for sale at March
31, 2005 and December 31, 2004 are presented below: March 31, 2005(dollars in thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Treasury securities
    
    $
    5,179
    
    
    $
    2
    
    
    $
    142
    
    
    $
    5,039U.S. Government agencies and corporations
    
    
    59,208
    
    
    
    47
    
    
    
    1,814
    
    
    
    57,441States and political subdivisions-tax-exempt
    
    
    9,595
    
    
    
    156
    
    
    
    76
    
    
    
    9,675States and political subdivisions-taxable
    
    
    2,691
    
    
    
    10
    
    
    
    13
    
    
    
    2,688Marketable equity securities
    
    
    3,000
    
    
    
    521
    
    
    
    
    
    
    
    3,521Mortgage-backed securities
    
    
    2,311
    
    
    
    60
    
    
    
    
    
    
    
    2,371$
    81,984
    
    
    $
    796
    
    
    $
    2,045
    
    
    $
    80,735
 December 31, 2004(dollars in thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Treasury securities
    
    $
    5,178
    
    
    $
    5
    
    
    $
    29
    
    
    $
    5,154U.S. Government agencies and corporations
    
    
    54,228
    
    
    
    104
    
    
    
    869
    
    
    
    53,463States and political subdivisions-tax-exempt
    
    
    9,596
    
    
    
    246
    
    
    
    26
    
    
    
    9,816States and political subdivisions-taxable
    
    
    2,862
    
    
    
    17
    
    
    
    23
    
    
    
    2,856Marketable equity securities
    
    
    3,000
    
    
    
    987
    
    
    
    
    
    
    
    3,987Mortgage-backed securities
    
    
    2,473
    
    
    
    58
    
    
    
    
    
    
    
    2,531$
    77,337
    
    
    $
    1,417
    
    
    $
    947
    
    
    $
    77,807
 NOTE 4  LOANS Major classifications of loans are as follows: (dollars in thousands)
    
    March 31, 2005
    
    
    December 31, 2004Real estate mortgage loans:Commercial
    
    $
    393,362
    
    
    $
    351,346Residential
    
    
    70,490
    
    
    
    67,204Farmland
    
    
    4,825
    
    
    
    4,971Construction and vacant land
    
    
    67,552
    
    
    
    49,815Commercial and agricultural loans
    
    
    57,647
    
    
    
    64,622Indirect auto dealer loans
    
    
    98,633
    
    
    
    91,890Home equity loans
    
    
    14,637
    
    
    
    13,856Other consumer loans
    
    
    10,075
    
    
    
    9,817Total loans
    
    
    717,221
    
    
    
    653,521Net deferred loan costs
    
    
    2,064
    
    
    
    2,157Loans, net of deferred loan costs
    
    $
    719,285
    
    
    $
    655,678
 NOTE 5  ALLOWANCE FOR LOAN LOSSES Activity in the allowance for loan losses for the three months ended March 31, 2005 and 2004
follows: (dollars in thousands)
    
    2005
    
    
    2004Balance, January 1
    
    $
    6,243
    
    
    $
    5,216Provision for loan losses charged to expense
    
    
    586
    
    
    
    369Loans charged off
    
    
    (307
    )
    
    
    (243
    )Recoveries of loans previously charged off
    
    
    19
    
    
    
    5Balance, March 31
    
    $
    6,541
    
    
    $
    5,347
 7




---



##### 



NOTE 6  EARNINGS PER SHARE AND COMMON STOCK Earnings per share have been computed based on the following weighted average number of common
shares outstanding for the three months ended March 31: 2005
    
    
    2004For the three months ended March 31:Basic
    
    
    5,686,233
    
    
    
    4,462,493Dilutive effect of options outstanding
    
    
    179,866
    
    
    
    196,901Diluted
    
    
    5,866,099
    
    
    
    4,659,394
 Stock options for 20,082 shares of common stock were not considered in computing diluted earnings
per common share for the three months ended March 31, 2004 because they were anti-dilutive. There
were no anti-dilutive stock options outstanding for the three months ended March 31, 2005. The
effect of stock options is the sole common stock equivalent for purposes of calculating diluted
earnings per common share. NOTE 7  STOCK-BASED COMPENSATION Total stock options granted, exercised, and expired/forfeited during the three months ended March
31, 2005, were 69,500, 27,700 and 8,000, respectively. As of March 31, 2005, there were 442,994
options for shares outstanding. Employee compensation expense under stock options is reported using the intrinsic value method. No
stock-based compensation cost is reflected in net income, as all options granted had an exercise
price equal to or greater than the market price of the underlying common stock at date of grant.
The following table illustrates the effect on net income and earnings per share if expense was
measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation. For the three months ended March 31,(dollars in thousands, except per share amounts)
    
    2005
    
    
    2004Net income, as reported
    
    $
    1,547
    
    
    $
    1,273Stock-based compensation expense determined under fair
value based method, net of tax
    
    
    63
    
    
    
    72Pro forma net income
    
    $
    1,484
    
    
    $
    1,201Basic earnings per share as reported
    
    $
    0.27
    
    
    $
    0.29Pro forma basic earnings per share
    
    
    0.26
    
    
    
    0.27Diluted earnings per share as reported
    
    
    0.26
    
    
    
    0.27Pro forma diluted earnings per share
    
    
    0.25
    
    
    
    0.26
 8




---



##### 



NOTE 8  CAPITAL ADEQUACY Federal banking regulators have established certain capital adequacy standards required to be
maintained by banks and bank holding companies. The minimum requirements established in the
regulations are set forth in the table below, along with the actual ratios at March 31, 2005 and
December 31, 2004: Well
    
    AdequatelyCapitalized
    
    Capitalized
    
    March 31, 2005
    
    December 31, 2004Requirement
    
    Requirement
    
    Actual
    
    ActualTier 1 Capital (to Average Assets)Consolidated
    
    35%
    
    34%
    
    9.1%
    
    
    10.0
    %Bank
    
    35%
    
    34%
    
    9.5%
    
    
    10.5
    %Tier 1 Capital (to Risk Weighted Assets)Consolidated
    
    36%
    
    34%
    
    9.9%
    
    
    10.9
    %Bank
    
    36%
    
    34%
    
    10.3%
    
    
    11.4
    %Total Capital (to Risk Weighted Assets)Consolidated
    
    310%
    
    38%
    
    11.2%
    
    
    12.6
    %Bank
    
    310%
    
    38%
    
    11.1%
    
    
    12.4
    %
 Management believes, as of March 31, 2005, that the Company and the Bank met all capital
requirements to which they are subject. The Company has included the trust preferred securities
that were issued in September 2000 and July 2001 in Tier 1 and Total capital. NOTE 9  SEGMENT REPORTING TIB Financial Corp. has two reportable segments: community banking and merchant bankcard
processing. The community banking segments business is to attract deposits from the public and to
use such deposits to make real estate, business and consumer loans in its primary service area.
The merchant bankcard processing segment processes credit card transactions for local merchants.
Parent and other includes the operations of the holding company and retail investment service
operations of the Bank. The Companys reportable segments are strategic business units that offer different products and
services. They are managed separately because each business requires different marketing
strategies. Intercompany transactions have been eliminated in preparing the segment reporting amounts below. The results of the Companys segments are as follows (dollars in thousands): Merchant
    
    
    ParentThree months ended
    
    Community
    
    
    Bankcard
    
    
    AndMarch 31, 2005
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    TotalsInterest and dividend income
    
    $
    12,346
    
    
    $
    
    
    
    $
    
    
    
    $
    12,346Interest expense
    
    
    3,349
    
    
    
    
    
    
    
    383
    
    
    
    3,732Net interest and dividend income (expense)
    
    
    8,997
    
    
    
    
    
    
    
    (383
    )
    
    
    8,614Other income
    
    
    1,488
    
    
    
    1,896
    
    
    
    10
    
    
    
    3,394Depreciation and amortization
    
    
    615
    
    
    
    2
    
    
    
    
    
    
    
    617Other expense
    
    
    7,295
    
    
    
    1,575
    
    
    
    152
    
    
    
    9,022Pretax segment profit (loss)
    
    $
    2,575
    
    
    $
    319
    
    
    $
    (525
    )
    
    $
    2,369Segment Assets
    
    $
    938,876
    
    
    $
    34
    
    
    $
    416
    
    
    $
    939,326
 9




---



##### 



Merchant
    
    
    ParentThree months ended
    
    Community
    
    
    Bankcard
    
    
    andMarch 31, 2004
    
    Banking
    
    
    Processing
    
    
    Other
    
    
    TotalsInterest and dividend income
    
    $
    9,218
    
    
    $
    
    
    
    $
    
    
    
    $
    9,218Interest expense
    
    
    1,995
    
    
    
    
    
    
    
    395
    
    
    
    2,390Net interest and dividend income (expense)
    
    
    7,223
    
    
    
    
    
    
    
    (395
    )
    
    
    6,828Other income
    
    
    1,414
    
    
    
    1,760
    
    
    
    99
    
    
    
    3,273Depreciation and amortization
    
    
    515
    
    
    
    11
    
    
    
    1
    
    
    
    527Other expense
    
    
    6,009
    
    
    
    1,433
    
    
    
    194
    
    
    
    7,636Pretax segment profit (loss)
    
    $
    2,113
    
    
    $
    316
    
    
    $
    (491
    )
    
    $
    1,938Segment Assets
    
    $
    710,065
    
    
    $
    37
    
    
    $
    455
    
    
    $
    710,557
 10




---



##### 



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Form 10-Q may constitute
forward-looking statements within the meaning of the Private Securities Litigation Reform Act and
as such may involve known and unknown risk, uncertainties and other factors which may cause the
actual results, performance or achievements of TIB Financial Corp. to be materially different from
future results described in such forward-looking statements. Actual results may differ materially
from the results anticipated in these forward-looking statements due to a variety of factors,
including, without limitation: the effects of future economic conditions; governmental monetary
and fiscal policies, as well as legislative and regulatory changes; the risks of changes in
interest rates on the level and composition of deposits, loan demand, and the values of loan
collateral, and interest rate risks; the effects of competition from other commercial banks,
thrifts, consumer finance companies, and other financial institutions operating in the Companys
market area and elsewhere. All forward-looking statements attributable to the Company are
expressly qualified in their entirety by these cautionary statements. The Company disclaims any
intent or obligation to update these forward-looking statements, whether as a result of new
information, future events or otherwise. The following discussion addresses the factors that have affected the financial condition and
results of operations of TIB Financial Corp. (the Company) as reflected in the unaudited
consolidated statement of condition as of March 31, 2005, and statement of income for the three
months ended March 31, 2005. Operating results for the three months ended March 31, 2005 are not
necessarily indicative of trends or results to be expected for the year ended December 31, 2005. QUARTERLY SUMMARY Our first quarter 2005 net income of $1.5 million represents an increase of 22% over $1.3 million
reported for the quarter ended March 31, 2004. On a per diluted share basis, earnings were $0.26
for the first quarter of 2005 as compared to $0.27 for the first quarter of 2004 due to dilution
caused by a successful public offering in April 2004 of 1.15 million new common shares which
provided the capital necessary to fuel our expansion strategy in southwest Florida. Credit quality
remains excellent and we continue to see growth opportunities in our newer southwest Florida
markets as well as our traditional base in the Florida Keys. The high-growth Naples-Fort Myers area continues to reaffirm the exportability of our island
banking culture as our new customers are rapidly discovering what our customers in the Florida Keys
have known for years. Our continued focus on providing superior customer service is filling a much
needed void in our local markets, which are realizing the effects of big bank mergers and
acquisitions. The increase in net income for the first quarter of 2005 over the respective prior-year period
resulted primarily from a 26% increase in net interest income from $6.8 million a year ago to $8.6
million in the current quarter. The net interest margin on a tax equivalent basis for the three
months ended March 31, 2005 was 4.40%, compared with 4.50% for the three months ended March 31,
2004. Non-interest expense for the first quarter of 2005 was $9.1 million, compared with $7.8 million for
the first quarter of 2004. The increase in non-interest expense is primarily attributable to
expenses associated with increased regulatory compliance and the Companys ongoing expansion
activities in the southwest Florida market, which included the addition of two new branch offices
and several key senior staff personnel. Credit quality remained solid during the first quarter of 2005 which ended with non-performing
loans representing only 0.05% of gross loans. As of March 31, 2005, the allowance for loan losses
totaled $6.5 million, or 0.91% of total loans and 1,673% of non-performing loans. These figures
compare with 0.97% and 1,107%, respectively, as of March 31, 2004. Total assets increased more than 32% to $939.3 million as of March 31, 2005, compared with $710.6
million a year ago. On a quarter over quarter basis, total assets increased more than 13%, which is
reflective of the companys solid organic growth since December 31, 2004. Total loans grew more
than 30% to $717.2 million as of March 31, 2005, versus $549.6 million a year ago. Total deposits
increased more than 29% to $799.3 million as of March 31, 2005, compared with $617.4 million a year
ago. 11




---



##### 



THREE MONTHS ENDED MARCH 31, 2005 AND 2004 RESULTS OF OPERATIONS
Our net income of $1.5 million for the first quarter of 2005 increased 21.5%, compared to $1.3
million for the same period last year. Basic and diluted earnings per share for the first quarter
of 2005 were $0.27 and $0.26, respectively, as compared to $0.29 and $0.27 per share in the
previous years quarter. Annualized return on average assets was 0.72% and 0.76% for the first quarter of 2005 and 2004,
respectively, while the annualized return on average shareholders equity was 9.20% and 12.04% for
the same period. The decline in the return on average shareholders equity in the current year is
primarily attributable to the 57.8% increase in shareholders equity from March 31, 2004 to March
31, 2005 due to the stock offering in the second quarter of 2004 and exercises of stock options. NET INTEREST INCOME
Net interest income represents the amount by which interest income on interest-earning assets
exceeds interest expense incurred on interest-bearing liabilities. Net interest income is the
largest component of our income, and is affected by the interest rate environment, and the volume
and the composition of interest-earning assets and interest-bearing liabilities. Our interest
earning assets include loans, federal funds sold, interest bearing deposits in other banks, and
investment securities. Our interest-bearing liabilities include deposits, federal funds purchased,
notes payable related to Company shares repurchased, subordinated debentures, advances from the
Federal Home Loan Bank, and other short term borrowings. Net interest income increased 26.2%, to $8.6 million in the three months ended March 31, 2005 as
compared to $6.8 million in the same period last year. While the prime rate as published in the
Wall Street Journal remained at 4.00% for the first quarter of 2004 it increased from 5.25% at the
beginning of 2005 to 5.75% by the end of the first quarter 2005. Many of the Banks loans are
indexed to this floating rate, although they may also include floors. The higher level of prime
rate in the first quarter of 2005 compared to the comparative period in 2004 is apparent in the
positive impact on yields in the loan portfolio as the effects of the higher rates are reflected in
variable loan re-pricings and new loan production. Increased loan volume is the primary driver
affecting the increased net interest income in the current period. In April 2002, the Bank began a program to acquire indirect automobile loans. We predominantly buy
loans from auto dealers in Southwest Florida which are for the purchase of new or late model used
cars. We serve customers over a broad range of creditworthiness and the required terms and rates
are reflective of those risk profiles. As of March 31, 2005 we had $98.6 million of indirect auto
dealer loans outstanding, compared to $66.8 million at March 31, 2004. Coupled with the
appropriate safeguards, we believe this product continues to offer us an opportunity to increase
asset yields while not sacrificing our primary objective of maintaining strong asset quality. The average yield on interest-earning assets for the first three months of 2005 was 6.29% which was
an increase of 23 basis points compared to the 6.06% yield earned during the first three months of
2004. The average cost of interest-bearing deposits increased 44 basis points from 1.72% during
the first three months of 2004 to 2.16% for the comparable period in 2005, and the rate of all
interest-bearing liabilities increased 44 basis points, from 1.93% in 2004 to 2.37% in 2005. The
Companys net interest margin decreased to 4.40% in the first three months of 2005 compared to
4.50% in the first three months of 2004. We anticipate interest rates to continue slowly trending
up over the next six months. If this occurs or if rates remain stable, net interest margin should
be fairly consistent as our mix of assets and liabilities should grow in roughly the same
proportions that exist currently on our balance sheet. Our margin is derived from the rate
difference between our average yields on our current mix of assets in excess of our average cost of
liabilities. 12




---



##### 



The following table presents average balances of the Company, the taxable-equivalent interest
earned, and the rate paid thereon during the three months ended March 31, 2005 and March 31, 2004. 2005
    
    
    
    
    
    
    
    
    
    
    2004Average
    
    
    Income/
    
    
    Yields/
    
    
    Average
    
    
    Income/
    
    
    Yields/(dollars in thousands)
    
    Balances
    
    
    Expense
    
    
    Rates
    
    
    Balances
    
    
    Expense
    
    
    RatesInterest-earning assets:Loans (1)(2)
    
    $
    686,418
    
    
    $
    11,312
    
    
    
    6.68
    %
    
    $
    546,516
    
    
    $
    8,602
    
    
    
    6.33
    %Investment securities (2)
    
    
    74,022
    
    
    
    779
    
    
    
    4.27
    %
    
    
    49,093
    
    
    
    553
    
    
    
    4.53
    %Marketable equity securities  90% taxexempt (2)
    
    
    3,680
    
    
    
    96
    
    
    
    10.58
    %
    
    
    3,000
    
    
    
    87
    
    
    
    11.74
    %Interest-bearing deposits in other banks
    
    
    633
    
    
    
    4
    
    
    
    2.56
    %
    
    
    589
    
    
    
    1
    
    
    
    0.51
    %Federal Home Loan Bank stock
    
    
    2,555
    
    
    
    27
    
    
    
    4.29
    %
    
    
    1,879
    
    
    
    16
    
    
    
    3.34
    %Federal funds sold
    
    
    34,348
    
    
    
    209
    
    
    
    2.47
    %
    
    
    16,225
    
    
    
    38
    
    
    
    0.94
    %Total interest-earning assets
    
    
    801,656
    
    
    
    12,427
    
    
    
    6.29
    %
    
    
    617,302
    
    
    
    9,297
    
    
    
    6.06
    %Non-interest-earning assets:Cash and due from banks
    
    
    22,560
    
    
    
    
    
    
    
    
    
    
    
    18,568Premises and equipment, net
    
    
    27,414
    
    
    
    
    
    
    
    
    
    
    
    20,433Allowances for loan losses
    
    
    (6,358
    )
    
    
    
    
    
    
    
    
    
    
    (5,292
    )Other assets
    
    
    30,159
    
    
    
    
    
    
    
    
    
    
    
    26,076Total non-interest-earning assets
    
    
    73,775
    
    
    
    
    
    
    
    
    
    
    
    59,785Total assets
    
    $
    875,431
    
    
    
    
    
    
    
    
    
    
    $
    677,087Interest-bearing liabilities:Interest-bearing deposits:NOW accounts
    
    $
    91,727
    
    
    
    178
    
    
    
    0.79
    %
    
    $
    70,636
    
    
    
    56
    
    
    
    0.32
    %Money market
    
    
    158,655
    
    
    
    633
    
    
    
    1.62
    %
    
    
    122,444
    
    
    
    226
    
    
    
    0.74
    %Savings deposits
    
    
    46,537
    
    
    
    52
    
    
    
    0.45
    %
    
    
    41,277
    
    
    
    40
    
    
    
    0.39
    %Time deposits
    
    
    284,232
    
    
    
    2,238
    
    
    
    3.19
    %
    
    
    209,305
    
    
    
    1,570
    
    
    
    3.02
    %Total interest-bearing deposits
    
    
    581,151
    
    
    
    3,101
    
    
    
    2.16
    %
    
    
    443,662
    
    
    
    1,892
    
    
    
    1.72
    %Other interest-bearing liabilities:Short-term borrowings and FHLB advances
    
    
    39,814
    
    
    
    248
    
    
    
    2.53
    %
    
    
    35,109
    
    
    
    103
    
    
    
    1.18
    %Long-term borrowings
    
    
    17,208
    
    
    
    383
    
    
    
    9.03
    %
    
    
    18,250
    
    
    
    395
    
    
    
    8.71
    %Total interest-bearing liabilities
    
    
    638,173
    
    
    
    3,732
    
    
    
    2.37
    %
    
    
    497,021
    
    
    
    2,390
    
    
    
    1.93
    %Non-interest-bearing liabilities andshareholders equity:Demand deposits
    
    
    158,525
    
    
    
    
    
    
    
    
    
    
    
    129,855Other liabilities
    
    
    10,555
    
    
    
    
    
    
    
    
    
    
    
    7,922Shareholders equity
    
    
    68,178
    
    
    
    
    
    
    
    
    
    
    
    42,289Total non-interest-bearing liabilities and
shareholders equity
    
    
    237,258
    
    
    
    
    
    
    
    
    
    
    
    180,066Total liabilities and shareholders equity
    
    $
    875,431
    
    
    
    
    
    
    
    
    
    
    $
    677,087Interest rate spread (tax equivalent basis)
    
    
    
    
    
    
    
    
    
    
    3.92
    %
    
    
    
    
    
    
    
    
    
    
    4.13
    %Net interest income (tax equivalent basis)
    
    
    
    
    
    $
    8,695
    
    
    
    
    
    
    
    
    
    
    $
    6,907Net interest margin (3) (tax equivalent basis)
    
    
    
    
    
    
    
    
    
    
    4.40
    %
    
    
    
    
    
    
    
    
    
    
    4.50
    %
  (1)
    Average loans include non-performing loans.(2)
    Interest income and rates include the effects of a tax equivalent adjustment using a Federal
tax rate of 34% in adjusting tax exempt interest on tax exempt investment securities and loans
to a fully taxable basis.(3)
    Net interest margin is net interest income divided by average total interest-earning assets. 13




---



##### 



The table below details the components of the changes in net interest income for the three months
ended March 31, 2005 and March 31, 2004. For each major category of interest-earning assets and
interest-bearing liabilities, information is provided with respect to changes due to average
volumes and changes due to rates, with the changes in both volumes and rates allocated to these two
categories based on the proportionate absolute changes in each category. 2005 compared to 2004(1)Due to changes in(dollars in thousands)
  
  
  
  
  
  
  
  
  
  NetAverage
  
  
  Average
  
  
  IncreaseVolume
    
    
    Rate
    
    
    (Decrease)Interest incomeLoans (2)
    
    $
    2,289
    
    
    $
    421
    
    
    $
    2,710Investment securities (2)
    
    
    264
    
    
    
    (38
    )
    
    
    226Marketable equity securities (2)
    
    
    18
    
    
    
    (9
    )
    
    
    9Interest-bearing deposits in other banks
    
    
    
    
    
    
    3
    
    
    
    3Federal Home Loan Bank Stock
    
    
    7
    
    
    
    4
    
    
    
    11Federal funds sold
    
    
    70
    
    
    
    101
    
    
    
    171Total interest income
    
    
    2,648
    
    
    
    482
    
    
    
    3,130Interest expenseNOW accounts
    
    
    21
    
    
    
    101
    
    
    
    122Money market
    
    
    83
    
    
    
    324
    
    
    
    407Savings deposits
    
    
    5
    
    
    
    7
    
    
    
    12Time deposits
    
    
    587
    
    
    
    81
    
    
    
    668Short-term borrowings and FHLB advances
    
    
    15
    
    
    
    130
    
    
    
    145Long-term borrowings
    
    
    (29
    )
    
    
    17
    
    
    
    (12
    )Total interest expense
    
    
    682
    
    
    
    660
    
    
    
    1,342Change in net interest income
    
    $
    1,966
    
    
    $
    (178
    )
    
    $
    1,788
  (1)
    The change in interest due to both rate and volume has been allocated to the volume and rate
components in proportion to the relationship of the dollar amounts of the absolute change in
each.(2)
    Interest income includes the effects of a tax equivalent adjustment using a federal tax rate
of 34% in adjusting tax exempt interest on tax exempt investment securities and loans to a
fully taxable basis. PROVISION FOR LOAN LOSSES
The provision for loan losses represents the charge to income necessary to adjust the allowance for
loan losses to an amount that represents managements assessment of the estimated probable credit
losses inherent in our loan portfolio which have been incurred at each balance sheet date. The provision for loan losses increased 58.8%, to $0.6 million in the first quarter of 2005
compared to $0.4 million in the comparable prior year quarter. The higher provision for loan
losses in 2005 was primarily attributable to the continued growth and change in composition of the
loan portfolio coupled with slightly higher charge offs. Total loans outstanding grew $63.7
million, or 9.7%, during the first quarter of 2005, as compared to $11.0 million, or 2.1%, during
the first quarter of 2004. The largest dollar increase during the first quarter of 2005 occurred
in commercial real estate loans which increased $42.0 million, or 12.0%. This compares to a $3.5
million, or 1.2% decrease in commercial real estate loans during the first quarter of 2004. Total loans outstanding were $717.2 million at March 31, 2005, compared to $549.6 million at March
31, 2004. Net charge-offs were $0.3 million during the three months ended March 31, 2005 compared
to $0.2 million for the same period in 2004. Management will continue to monitor the credit quality of the lending portfolio and will recognize
additional provisions in the future as necessary, in the opinion of management, to maintain the
allowance for loan losses at an appropriate level. NON-INTEREST INCOME
Non-interest income for the first quarter of 2005 was $3.4 million. This represents a 3.7%
increase over the prior year quarter which totaled $3.3 million. The increase in non-interest
income is primarily attributable to an increase in Merchant bankcard processing income and in fees
on mortgage loans sold. The increase in merchant bankcard processing income is primarily a 14




---



##### 



result of volume increases. The increase in fees on mortgage loans sold is primarily a result of
increased pass through loan volume during the 2005 quarter. NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 2005 was $9.1 million. This represents a 16.2%,
increase over the prior year quarter which totaled $7.8 million. The increase in non-interest
expense is primarily attributable to salaries and employee benefits increasing $0.8 million. At
March 31, 2005 the Bank had 308 full-time employees and 15 part-time employees, compared to 267
full-time employees and 17 part-time employees at March 31, 2004. The increased staffing was
attributable to the opening of two branches in Southwest Florida in the second half of 2004,
additions to manage growth throughout the Company and additions to assist in security and
regulatory compliance. Likewise, the majority of the other increases in the non-interest expense
category are the result of costs associated with the growth of our business. INCOME TAXES
The provision for income taxes includes federal and state income taxes. The effective tax rates
were 34.7% and 34.3%, for the three months ended March 31, 2005 and 2004, respectively. BALANCE SHEET
Total assets at March 31, 2005 were $939.3 million, up 13.3% from total assets of $829.3 million at
December 31, 2004. Asset growth was primarily funded by an increase in deposits of $111.4 million,
or 16.2%. Loans net of deferred loan costs increased $63.6 million, or 9.7%, to $719.3 million for
the first three months of 2005 from year end 2004. The largest dollar increase came in the
commercial real estate loan category which increased $42.0 million, or 12.0%. Although we have
continued to expand our indirect dealer auto loan program, it has begun to decrease in percentage
in proportion to the loan portfolio as a whole. At March 31, 2005, indirect auto loans accounted
for $98.6 million, or 13.8%, of our loan portfolio as compared to $91.9 million, or 14.1%, at
December 31, 2004. During the first three months of 2005, we reduced our advances from the Federal Home Loan Bank by
$10.0 million. Total advances outstanding were $25.0 million at March 31, 2005 as compared to
$35.0 million at December 31, 2004. Shareholders equity totaled $68.3 million at March 31, 2005, increasing from $68.1 million at
December 31, 2004. Book value per share decreased to $11.96 at March 31, 2005 from $11.99 at
December 31, 2004 due primarily to the decrease in accumulated other comprehensive income related
to unrealized losses on investments available-for-sale. Such unrealized losses arose primarily from
increases in market interest rates. The Company declared a quarterly dividend of $0.115 per share
in the first quarter of 2005 and $0.1125 per share in the first quarter of 2004. NON-PERFORMING ASSETS Non-performing assets include nonaccrual loans, accruing loans contractually past due 90 days or
more, repossessed personal property, and other real estate. Loans are placed on nonaccrual status
when management has concerns relating to the ability to collect the loan principal and interest and
generally when such loans are 90 days or more past due. A loan is considered impaired when it is
probable that not all principal and interest amounts will be collected according to the loan
contract. Non-performing assets were as follows: (dollars in thousands)
    
    March 31, 2005
    
    
    December 31, 2004Total nonaccrual loans
    
    $
    391
    
    
    $
    704Accruing loans delinquent 90 days or more (a)
    
    
    
    
    
    
    Total non-performing loans
    
    $
    391
    
    
    $
    704Repossessed personal property (indirect auto dealer loans)
    
    
    814
    
    
    
    688Other real estate owned (b)
    
    
    190
    
    
    
    882Other assets (b)
    
    
    2,688
    
    
    
    2,665Total non-performing assets
    
    $
    4,083
    
    
    $
    4,939Allowance for loan losses
    
    $
    6,541
    
    
    $
    6,243Non-performing assets as a percent of total assets
    
    
    0.43
    %
    
    
    0.60
    %Non-performing loans as a percent of gross loans
    
    
    0.05
    %
    
    
    0.11
    %Allowance for loan losses as a percent of non-performing loans
    
    
    1,672.9
    %
    
    
    886.8
    %
 15




---



##### 



(a)  Excludes the $1.6 million loan discussed below that is guaranteed for both principal
and interest by the U.S. Department of Agriculture (USDA).(b)  The Bank made a $10.0 million loan to construct a lumber mill in northern Florida. Of
this amount, $6.4 million had been sold by the Bank to other lenders. The loan was partially
guaranteed as to principal and interest by the USDA. In addition to business real estate and
equipment, the loan was collateralized by the business owners interest in a trust. Under
provisions of the trust agreement, beneficiaries cannot receive trust assets until November
2010.During 2001, upon completion of foreclosure on the underlying collateral, the non-guaranteed
portion of this loan and interest accrued through the foreclosure date was reclassified into
other real estate ($550,000) and other assets (approximately $1.9 million) based on the fair
value of the underlying-collateral. The portion of this loan guaranteed by the USDA was
approximately $1.6 million at March 31, 2005 and December 31, 2004, and is accruing
interest. Accrued interest on this loan totals approximately $703,000 and $677,000 at March
31, 2005 and December 31, 2004, respectively.The Bank is pursuing a sale of the property and equipment and has incurred various
expenditures. The Bank capitalized the liquidation costs and a portion of the protective
advances which it expects will be fully reimbursed by the USDA. Other real estate recorded
on the Banks books related to this property totaled $190,000 at March 31, 2005 and December
31, 2004. The non-guaranteed principal and interest ($2.0 million at March 31, 2005 and
December 31, 2004) and the reimbursable capitalized liquidation costs and protective advance
costs totaling approximately $784,000 and $704,000 at March 31, 2005 and December 31, 2004,
respectively, are included as other assets in the financial statements.The Bank sold certain pieces of equipment associated with the lumber mill property.
Proceeds from the sales were used to reduce the other real estate amount and liquidation
cost amounts recorded on the Banks books. In 2003, the Bank wrote down the carrying amount
of the other real estate by $262,000 based upon anticipated proceeds from the sale of the
property and remaining equipment.Florida law requires a bank to liquidate or charge off repossessed real property within five
years, and repossessed personal property within six months. The Bank was awarded title to
the real property on June 12, 2001, and an adjudicated interest in the owners trust
proceeds. The time constraints imposed by Florida law required that the personal property
be disposed of or charged off by December 2001. The Bank applied to the State of Florida
for an extension to carry the personal property on the Banks books and was granted an
extension to carry the personal property on its books until June 11, 2003. Since the
property had not been liquidated as of such date, the Bank charged-off the non guaranteed
principal and interest totaling $2.0 million at June 30, 2003, for regulatory purposes.
Since we believe this amount is ultimately realizable, we did not write off this amount for
financial statement purposes under generally accepted accounting principles. The allowance for loan losses amounted to $6.5 million and $6.2 million at March 31, 2005 and
December 31, 2004, respectively. The allowance for loan losses is a valuation allowance for probable incurred credit losses in the
loan portfolio. Our process for assessing the adequacy of the allowance for loan losses and the
resultant need, if any, for periodic provisions to the allowance charged to income, includes both
individual loan analyses and loan pool analyses. Individual loan analyses are periodically
performed on loan relationships of a significant size, or when otherwise deemed necessary, and
primarily encompass commercial real estate and other commercial loans. The result is that
commercial real estate loans and commercial loans are divided into the following risk categories:
Pass, Special Mention, and Substandard or worse. When appropriate, a specific reserve will be
established for individual loans. Otherwise, we allocate an allowance for each risk category. The
allocations are based on factors including historical loss rate, perceived economic conditions
(local, national and global), perceived strength of our management, recent trends in loan loss
history, and concentrations of credit. Home equity loans, indirect auto dealer loans, residential loans and consumer loans generally are
not analyzed individually. These loans are grouped into pools and assigned risk categories based
on their current payment status and managements assessment of risk inherent in the various types
of loans. As above, when appropriate, a specific reserve will be established for individual loans.
Otherwise, we allocate an allowance for each loan classification. The allocations are based on
the same factors mentioned above. Based on an analysis performed by management at March 31, 2005, the allowance for loan losses is
considered to be adequate to cover estimated loan losses in the portfolio as of that date.
However, managements judgment is based upon a number of assumptions about future events, which are
believed to be reasonable, but which may or may not prove valid. Thus, there can 16




---



##### 



be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or
that significant additional increases in the allowance for loan losses will not be required. In
addition, various regulatory agencies, as an integral part of their examination process,
periodically review our allowance for loan losses. Such agencies may require us to recognize
additions to the allowance based on their judgments about information available to them at the time
of their examination. During 2004, as the indirect auto dealer loan portfolio began to mature, the loss history
approached expected levels and the management processes, controls and monitoring and risk
management tools implemented throughout recent years indicated that higher multipliers were
necessary for the indirect loan portfolio. Contemporaneously, as the Florida economy has grown at
an accelerated pace compared to other markets, real estate prices have escalated and local
economies have benefited resulting in diminishing historical and expected loss factors. Analysis of
these events resulted in these same tools indicating that lower multipliers were necessary for
commercial loans collateralized by real estate. Looking forward, although the concentration of
indirect auto dealer loan category has increased rapidly since the inception of this program,
management believes that this growth has peaked slightly below 15% of the total loan portfolio
composition. This category should continue to decrease as a percentage of the loan portfolio as we
expect overall asset and loan growth to continue. As this occurs, if we make the assumption,
however unlikely, that all other factors were to remain constant, we would expect that the
allowance for loan losses would continue to decrease as a percentage of gross loans in the near
term. LIQUIDITY The goal of liquidity management is to ensure the availability of an adequate level of funds to
meet the loan demand and deposit withdrawal needs of the Companys customers. We manage the
levels, types and maturities of earning assets in relation to the sources available to fund current
and future needs to ensure that adequate funding will be available at all times. In addition to maintaining a stable core deposit base, we maintain adequate liquidity primarily
through the use of investment securities and unused borrowing capacity. The Bank has invested in
Federal Home Loan Bank stock for the purpose of establishing credit lines with the Federal Home
Loan Bank. The credit availability to the Bank is equal to 20 percent of the Banks total assets
as reported on the most recent quarterly financial information submitted to the regulators subject
to the pledging of sufficient collateral. At March 31, 2005, there were $25.0 million in advances
outstanding in addition to a $15 million letter of credit used in lieu of pledging securities to
the State of Florida. In July 2004, new agreements were executed with the FHLB and a blanket
floating lien pledge of the Banks residential 1-4 family mortgage and commercial real estate
secured loans was done to bring the collateral availability up to approximately $159.7 million. The Bank has an unsecured overnight federal funds purchased accommodation up to a maximum of $12.0
million from its principal correspondent bank. In the second quarter of 2004, we completed the sale of 1,150,000 shares of our common stock at a
price of $22.00 per share before commissions and expenses. The net proceeds provided additional
liquidity along with additional capital to the Company. ASSET AND LIABILITY MANAGEMENT Closely related to liquidity management is the management of interest-earning assets and
interest-bearing liabilities. The Company manages its rate sensitivity position to avoid wide
swings in net interest margins and to minimize risk due to changes in interest rates. 17




---



##### 



Our interest rate sensitivity position at March 31, 2005 is presented in the table below: 3 months
    
    
    4 to 6
    
    
    7 to 12
    
    
    1 to 5
    
    
    Over 5(dollars in thousands)
    
    or less
    
    
    Months
    
    
    Months
    
    
    years
    
    
    Years
    
    
    TotalInterest-earning assets:Loans
    
    $
    309,484
    
    
    $
    36,094
    
    
    $
    44,479
    
    
    $
    260,282
    
    
    $
    66,882
    
    
    $
    717,221Investment securities-taxable
    
    
    1,013
    
    
    
    
    
    
    
    
    
    
    
    42,184
    
    
    
    24,342
    
    
    
    67,539Investment securities-tax exempt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,139
    
    
    
    6,536
    
    
    
    9,675Marketable equity securities
    
    
    3,521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,521Federal Home Loan Bank stock
    
    
    2,781
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,781Fed funds sold
    
    
    62,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,391Interest bearing deposit in other
bank
    
    
    367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    367Total interest-bearing assets
    
    
    379,557
    
    
    
    36,094
    
    
    
    44,479
    
    
    
    305,605
    
    
    
    97,760
    
    
    
    863,495Interest-bearing liabilities:NOW accounts
    
    
    89,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,055Money Market
    
    
    169,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,391Savings Deposits
    
    
    48,783
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,783Time deposits
    
    
    46,509
    
    
    
    22,471
    
    
    
    151,002
    
    
    
    87,053
    
    
    
    5
    
    
    
    307,040Notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    4,000Subordinated debentures
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000
    
    
    
    13,000Other borrowings
    
    
    44,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,922Total interest-bearing liabilities
    
    
    403,660
    
    
    
    22,471
    
    
    
    151,002
    
    
    
    87,053
    
    
    
    12,005
    
    
    
    676,191Interest sensitivity gap
    
    $
    (24,103
    )
    
    $
    13,623
    
    
    $
    (106,523
    )
    
    $
    218,552
    
    
    $
    85,755
    
    
    $
    187,304Cumulative interest sensitivity gap
    
    $
    (24,103
    )
    
    $
    (10,480
    )
    
    $
    (117,003
    )
    
    $
    101,549
    
    
    $
    187,304
    
    
    $
    187,304Cumulative sensitivity ratio
    
    
    (2.8
    )%
    
    
    (1.2
    )%
    
    
    (13.5
    )%
    
    
    11.8
    %
    
    
    21.7
    %
    
    
    21.7
    %
 We are cumulatively liability sensitive through the one year time period, and asset sensitive in
the over one year timeframes above. Certain liabilities such as non-indexed NOW and passbook
savings accounts, while technically subject to immediate repricing in response to changing market
rates, historically do not reprice as quickly nor to the extent as other interest sensitive
accounts. Accordingly, if market interest rates should decrease, it is anticipated that the net
interest margin would decrease. Because of non-interest bearing liabilities, total
interest-earning assets are substantially greater than the total interest-bearing liabilities and
therefore it is anticipated that over time the effects on net interest income from changes in asset
yield will be greater than the change in expense from liability cost. Therefore, if rates
increase, it is anticipated that the net interest margin would, over time, increase, and this is
particularly true over longer time horizons since the Company has more total assets subject to rate
changes than total liabilities that are rate sensitive. Even in the near term, we believe the $117 million one year cumulative negative sensitivity gap may
exaggerate the probable effects on earnings in a changing rate environment for two reasons. First,
the liabilities subject to repricing are predominately not indexed to any specific market rate and
therefore, offer the Company the opportunity to delay or diminish any rate repricings. Further, in
this current rate environment, the Bank has been originating loans with interest rate floors. The
effect of this has been to decrease the volatility of net interest margin and decrease asset
sensitivity due to the fact that these loans behave similar to fixed rate loans in periods over a
significant range of interest rate changes. Interest-earning assets and other time deposits are presented based on their contractual terms. It
is anticipated that run off in any deposit category will be approximately offset by new deposit
generation. Since we have experienced steady growth in deposits, no net run off in any deposit
category is assumed in the interest rate sensitivity table. It is our policy to maintain our
cumulative one year gap ratio in the -20% to +10% range. At March 31, 2005 we were within this
range with a one year cumulative sensitivity ratio of -13.5%. See also Item 3, Quantitative and Qualitative Disclosures About Market Risk. COMMITMENTS The Bank is a party to financial instruments with off-balance sheet risk, entered into in the
normal course of business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of 18




---



##### 



credit. These instruments involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the consolidated balance sheets. The Banks exposure to credit loss in the event of nonperformance by the other party to financial
instruments for commitments to extend credit and standby letters of credit is represented by the
contractual notional amount of these instruments. The Bank uses the same credit policies in making
commitments to extend credit and generally uses the same credit policies for letters of credit as
it does for on-balance sheet instruments. Commitments to extend credit are legally binding agreements to lend to a customer as long as there
is no violation of any condition established in the contract. Since some of these commitments are
expected to expire without being drawn upon, the total commitment amount does not necessarily
represent future cash requirements. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. At March 31, 2005, total unfunded loan
commitments were approximately $133.2 million. Standby letters of credit are conditional commitments issued by the Bank to assure the performance
or financial obligations of a customer to a third party. The credit risk involved in issuing
standby letters of credit is essentially the same as that involved in extending loans to customers.
The Bank generally holds collateral and/or obtains personal guarantees supporting these
commitments. Since most of the letters of credit are expected to expire without being drawn upon,
they do not necessarily represent future cash requirements. At March 31, 2005, commitments under
standby letters of credit aggregated approximately $2.4 million. The Company believes the likelihood of the unfunded loan commitments and unfunded letters of credit
either needing to be totally funded or funded at the same time is low. However, should significant
funding requirements occur, we have sufficient available borrowing capacity from various sources as
discussed in the Liquidity section above. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is the risk that a financial institutions earnings and capital, or its ability to meet
its business objectives, will be adversely affected by movements in market rates or prices such as
interest rates, foreign exchange rates, equity rates, equity prices, credit spreads and/or
commodity prices. The Company has assessed its market risk as predominately interest rate risk. The following interest rate sensitivity analysis information as of March 31, 2005 was developed
using simulation analysis of the Companys sensitivity to changes in net interest income under
varying assumptions for changes in market interest rates. Specifically, the model derives expected
interest income and interest expense resulting from an immediate and parallel shift in the yield
curve in the amounts shown. These rate changes are matched with known repricing intervals and assumptions for new growth net of
expected prepayments. The assumptions are based primarily on experience in the Companys market
under varying rate environments. The imbedded options that the Companys loan customers possess to
refinance are considered for purposes of this analysis along with scheduled and unscheduled
principal reductions offset by anticipated loan originations. This analysis intentionally exaggerates interest sensitivity. For the sake of simplicity and
comparability, an immediate change in rates is assumed. However, any significant change in actual
market rates would probably be phased in over an extended period of time. This phase in would
reduce the net interest income effects for any absolute change in rates. Also, the Company has
been originating adjustable rate commercial loans with interest rate floors that are currently at
rates higher than the index and margin on the loans would indicate. An example would be a loan at
Prime plus 1% but with a 7.0% floor. The Company currently has in excess of $188 million of these
types of loans where the loan rates are at the floors. The effects of this are twofold. First,
this has benefited our margins currently since we have assets earning yields higher than would be
the case absent the floor rates. Second, in a declining rate environment and in a limited rising
rate environment those adjustable rate loans act like fixed rate loans. This limits the
Companys loss of interest income when rates decline but does constrain income gains in a rising
rate market. In general, having this significant amount of loans at their floors reduces the
Companys overall rate sensitivity. The Company attempts to retain interest rate neutrality by generating mostly adjustable rate loans
and managing the securities, wholesale funding, and Fed Funds positions to offset the repricing
characteristics of the deposit liabilities. 19




---



##### 



Item 4.  CONTROLS AND PROCEDURES (a)  Evaluation of Disclosure Controls and Procedures The Companys Chief Executive Officer and Chief Financial Officer have evaluated the
Corporations disclosure controls and procedures as of the end of the period covered by this
report. Based upon that evaluation, they have concluded that the Corporations disclosure controls
and procedures are effective in ensuring that material information related to the Corporation is
made known to them by others within the Corporation. Part II.     OTHER INFORMATION Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable Item 5.  OTHER INFORMATION Not applicable Item 6.  EXHIBITS (a)  Exhibits3.1
    
    
    Amendment to Restated Articles of Incorporation of TIB Financial Corp.3.2
    
    
    Amendment to Bylaws31.1
    
    
    Chief Executive Officers certification required under Section 302 of
Sarbanes-Oxley Act of 200231.2
    
    
    Chief Financial Officers certification required under Section 302 of
Sarbanes-Oxley Act of 200232.1
    
    
    Chief Executive Officers certification required under Section 906 of
Sarbanes-Oxley Act of 200232.2
    
    
    Chief Financial Officers certification required under Section 906 of
Sarbanes-Oxley Act of 2002
 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. TIB FINANCIAL CORP./s/ Edward V. LettDate:     May 10, 2005
    
    
    
    Edward V. LettPresident and Chief Executive Officer/s/ David P. JohnsonDavid P. JohnsonExecutive Vice President and Chief Financial Officer
 20