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
            
            Commission
      File NumberMARCH
      31, 2008
            
            000-21329











TIB
FINANCIAL CORP.


(Exact
name of registrant as specified in its charter)








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(Address
      of principal executive offices) (Zip Code)(239)
      263-3344(Registrant’s
      telephone number, including area code)Not
      Applicable(Former
      name, former address and former fiscal year, if changed since last
      report)Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past 90 days.  TYes   £NoIndicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company. See definitions of “accelerated filer”, “ large accelerated
      filer” and  “smaller reporting company” in Rule 12b-2 of the
      Exchange Act (Check one):£ Large
      accelerated filer
            T
      Accelerated filer
            £
      Non-accelerated filer£ Smaller
      reporting companyIndicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).  £Yes    TNoIndicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date:Common
      Stock, $0.10 Par Value
            
            14,028,949Class
            
            Outstanding
      as of  April 30, 2008





Table of Contents




TIB
FINANCIAL CORP.


FORM
10-Q


For the
Quarter Ended March 31, 2008








INDEX









PART I.  FINANCIAL
      INFORMATIONITEM 1.
            FINANCIAL STATEMENTS
            1ITEM 2.
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS
            13ITEM 3.
            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
            26ITEM 4.
            CONTROLS AND PROCEDURES
            27PART II.  OTHER
      INFORMATIONITEM 1A.
            RISK FACTORS
            28ITEM 4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            28ITEM 5.
            OTHER INFORMATION
            28ITEM 6.
            EXHIBITS
            28






Table of Contents




PART
I.  FINANCIAL INFORMATION




Item 1.  Financial Statements




TIB
      FINANCIAL CORP.
              CONSOLIDATED
      BALANCE SHEETS
              (Dollars
      in thousands, except per share amounts)March
      31,
              2008
            
            
            December
      31,
              2007(Unaudited)AssetsCash
      and due from banks
            
            $
            28,143
            
            
            $
            22,315Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            93,169
            
            
            
            48,744Cash
      and cash equivalents
            
            
            121,312
            
            
            
            71,059Investment
      securities available for sale
            
            
            166,090
            
            
            
            160,357Loans,
      net of deferred loan costs and fees
            
            
            1,139,993
            
            
            
            1,129,156Less:
      Allowance for loan losses
            
            
            15,856
            
            
            
            14,973Loans,
      net
            
            
            1,124,137
            
            
            
            1,114,183Premises
      and equipment, net
            
            
            37,908
            
            
            
            38,284Goodwill
            
            
            5,111
            
            
            
            4,686Intangible
      assets, net
            
            
            3,483
            
            
            
            2,772Accrued
      interest receivable and other assets
            
            
            54,596
            
            
            
            53,398Total
      Assets
            
            $
            1,512,637
            
            
            $
            1,444,739Liabilities
      and Shareholders’ EquityLiabilitiesDeposits:Noninterest-bearing
      demand
            
            $
            163,846
            
            
            $
            143,381Interest-bearing
            
            
            957,105
            
            
            
            906,577Total
      deposits
            
            
            1,120,951
            
            
            
            1,049,958Federal
      Home Loan Bank (FHLB) advances
            
            
            117,900
            
            
            
            140,000Short-term
      borrowings
            
            
            86,941
            
            
            
            77,922Long-term
      borrowings
            
            
            63,000
            
            
            
            63,000Accrued
      interest payable and other liabilities
            
            
            20,402
            
            
            
            17,619Total
      liabilities
            
            
            1,409,194
            
            
            
            1,348,499Shareholders’
      equityPreferred
      stock – no par value: 5,000,000 shares authorized, 0 shares
      issued
            
            
            -
            
            
            
            -Common
      stock - $.10 par value: 40,000,000 shares authorized, 14,072,149 and
      12,852,361 shares issued, 14,002,949 and 12,783,161 shares
      outstanding
            
            
            1,407
            
            
            
            1,285Additional
      paid in capital
            
            
            66,226
            
            
            
            56,133Retained
      earnings
            
            
            36,690
            
            
            
            39,151Accumulated
      other comprehensive income (loss)
            
            
            (311
            )
            
            
            240Treasury
      stock, at cost, 69,200 shares
            
            
            (569
            )
            
            
            (569
            )Total
      shareholders’ equity
            
            
            103,443
            
            
            
            96,240Total
      Liabilities and Shareholders’ Equity
            
            $
            1,512,637
            
            
            $
            1,444,739See
      accompanying notes to consolidated financial statements





1
 Table of Contents


TIB
FINANCIAL CORP.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





Three
      Months Ended
              March
      31,(Dollars
      in thousands, except per share amounts)
            
            2008
            
            
            2007Interest
      and dividend incomeLoans,
      including fees
            
            $
            20,150
            
            
            $
            20,958Investment
      securities:Taxable
            
            
            1,778
            
            
            
            1,434Tax-exempt
            
            
            112
            
            
            
            171Interest-bearing
      deposits in other banks
            
            
            11
            
            
            
            8Federal
      Home Loan Bank stock
            
            
            127
            
            
            
            112Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            744
            
            
            
            696Total
      interest and dividend income
            
            
            22,922
            
            
            
            23,379Interest
      expenseDeposits
            
            
            9,126
            
            
            
            9,529Federal
      Home Loan Bank advances
            
            
            1,483
            
            
            
            1,470Short-term
      borrowings
            
            
            552
            
            
            
            198Long-term
      borrowings
            
            
            905
            
            
            
            680Total
      interest expense
            
            
            12,066
            
            
            
            11,877Net
      interest income
            
            
            10,856
            
            
            
            11,502Provision
      for loan losses
            
            
            2,654
            
            
            
            472Net
      interest income after provision for loan losses
            
            
            8,202
            
            
            
            11,030Non-interest
      incomeService
      charges on deposit accounts
            
            
            722
            
            
            
            643Investment
      securities gains, net
            
            
            910
            
            
            
            -Fees
      on mortgage loans originated and sold
            
            
            232
            
            
            
            533Investment
      advisory fees
            
            
            125
            
            
            
            -Other
      income
            
            
            472
            
            
            
            703Total
      non-interest income
            
            
            2,461
            
            
            
            1,879Non-interest
      expenseSalaries
      and employee benefits
            
            
            6,053
            
            
            
            5,504Net
      occupancy and equipment expense
            
            
            2,014
            
            
            
            1,909Other
      expense
            
            
            4,959
            
            
            
            2,563Total
      non-interest expense
            
            
            13,026
            
            
            
            9,976Income
      (loss) before income taxes
            
            
            (2,363
            )
            
            
            2,933Income
      tax expense (benefit)
            
            
            (918
            )
            
            
            1,062Net
      Income (Loss)
            
            $
            (1,445
            )
            
            $
            1,871Basic
      earnings (loss) per common share
            
            $
            (0.11
            )
            
            $
            0.16Diluted
      earnings (loss) per common share
            
            $
            (0.11
            )
            
            $
            0.16


See
accompanying notes to consolidated financial statements






2
 Table of Contents


TIB
FINANCIAL CORP.


Consolidated
Statements of Changes in Shareholders’ Equity


(Unaudited)


(Dollars
in thousands, except per share amounts)





Shares
            
            
            Common
      Stock
            
            
            Additional
      Paid in Capital
            
            
            Retained
      Earnings
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Treasury
              Stock
            
            
            Total
      Shareholders’ EquityBalance,
      January 1, 2008
            
            
            12,783,161
            
            
            $
            1,285
            
            
            $
            56,133
            
            
            $
            39,151
            
            
            $
            240
            
            
            $
            (569
            )
            
            $
            96,240Cumulative-effect
      adjustment for split-dollar life insurance postretirement
      benefit
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (141
            )
            
            
            
            
            
            
            
            
            
            
            (141
            )Comprehensive
      loss:Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,445
            )
            
            
            
            
            
            
            
            
            
            
            (1,445
            )Other
      comprehensive income, net of tax benefit of $346:Net
      market valuation adjustment on securities available for
    sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            16Less:
      reclassification adjustment for gains, net of tax of $343
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (567
            )Other
      comprehensive loss, net of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (551
            )Comprehensive
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (1,996
            )Restricted
      stock grants, net of 312 cancellations
            
            
            4,988
            
            
            
            1
            
            
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            173
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            173Private
      placement of common shares
            
            
            1,200,000
            
            
            
            120
            
            
            
            9,826
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,946Exercise
      of stock options
            
            
            14,800
            
            
            
            1
            
            
            
            97
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            98Income
      tax effect related to stock based compensation
            
            
            
            
            
            
            
            
            
            
            (2
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2
            )Cash
      dividends declared, $.0625 per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (875
            )
            
            
            
            
            
            
            
            
            
            
            (875
            )Balance,
      March 31, 2008
            
            
            14,002,949
            
            
            $
            1,407
            
            
            $
            66,226
            
            
            $
            36,690
            
            
            $
            (311
            )
            
            $
            (569
            )
            
            $
            103,443





Shares
            
            
            Common
      Stock
            
            
            Additional
      Paid in Capital
            
            
            Retained
      Earnings
            
            
            Accumulated
      Other Comprehensive Income (Loss)
            
            
            Treasury
              Stock
            
            
            Total
      Shareholders’ EquityBalance,
      January 1, 2007
            
            
            11,720,527
            
            
            $
            1,172
            
            
            $
            40,514
            
            
            $
            44,620
            
            
            $
            (
      444
            )
            
            $
            -
            
            
            $
            85,862Comprehensive
      income:Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,871
            
            
            
            
            
            
            
            
            
            
            
            1,871Other
      comprehensive income, net of tax expense of $43:Net
      market valuation adjustment on securities available for
    sale
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            70Other
      comprehensive income, net of tax
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            70Comprehensive
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            1,941Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            143
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            143Exercise
      of stock options
            
            
            115,500
            
            
            
            12
            
            
            
            872
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            884Income
      tax benefit related to stock based compensation
            
            
            
            
            
            
            
            
            
            
            5
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5Cash
      dividends declared, $.06 per share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (710
            )
            
            
            
            
            
            
            
            
            
            
            (710
            )Balance,
      March 31, 2007
            
            
            11,836,027
            
            
            $
            1,184
            
            
            $
            41,534
            
            
            $
            45,781
            
            
            $
            (
      374
            )
            
            $
            -
            
            
            $
            88,125


3
 Table of Contents






TIB
      FINANCIAL CORP.
              CONSOLIDATED
      STATEMENTS OF CASH FLOWS
              INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
              (Unaudited)
              (Dollars in
      thousands)Three
      Months Ended
              March
      31,2008
            
            
            2007Cash
      flows from operating activities:Net
      income (loss)
            
            $
            (1,445
            )
            
            $
            1,871Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            982
            
            
            
            751Provision
      for loan losses
            
            
            2,654
            
            
            
            472Deferred
      income tax (benefit) expense
            
            
            (1,083
            )
            
            
            33Investment
      securities net realized gains
            
            
            (910
            )
            
            
            -Stock-based
      compensation
            
            
            173
            
            
            
            143Other
            
            
            (48
            )
            
            
            (221
            )Mortgage
      loans originated for sale
            
            
            (15,660
            )
            
            
            (33,721
            )Proceeds
      from sales of mortgage loans
            
            
            16,288
            
            
            
            33,641Fees
      on mortgage loans sold
            
            
            (230
            )
            
            
            (533
            )Increase
      in accrued interest receivable and other assets
            
            
            (1,112
            )
            
            
            (1,201
            )Increase
      in accrued interest payable and other liabilities
            
            
            2,527
            
            
            
            58Net
      cash provided by operating activities
            
            
            2,136
            
            
            
            1,293Cash
      flows from investing activities:Purchases
      of investment securities available for sale
            
            
            (42,097
            )
            
            
            (12,648
            )Sales
      of investment securities available for sale
            
            
            25,016
            
            
            
            -Repayments
      of principal and maturities of investment securities available for
      sale
            
            
            11,384
            
            
            
            1,752Acquisition
      of Naples Capital Advisors business
            
            
            (1,355
            )
            
            
            -Net
      sale (purchase) of FHLB stock
            
            
            982
            
            
            
            (223
            )Loans
      originated or acquired, net of principal repayments
            
            
            (12,587
            )
            
            
            19,977Purchases
      of premises and equipment
            
            
            (395
            )
            
            
            (1,085
            )Proceeds
      from sale of premises and equipment
            
            
            14
            
            
            
            491Net
      cash (used in) provided by investing activities
            
            
            (19,038
            )
            
            
            8,264Cash
      flows from financing activities:Net
      increase in demand, money market and savings accounts
            
            
            39,318
            
            
            
            72,216Net
      increase (decrease) in time deposits
            
            
            31,675
            
            
            
            (44,110
            )Net
      increase in federal funds purchased and securities sold under agreements
      to repurchase
            
            
            9,019
            
            
            
            7,255Increase
      in long term FHLB advances
            
            
            2,900
            
            
            
            50,000Repayment
      of long term FHLB advances
            
            
            (25,000
            )
            
            
            (50,000
            )Repayment
      of notes payable
            
            
            -
            
            
            
            (4,000
            )Proceeds
      from exercise of stock options
            
            
            98
            
            
            
            884Income
      tax effect related to stock-based compensation
            
            
            (2
            )
            
            
            5Proceed
      from private stock offering
            
            
            9,946
            
            
            
            -Cash
      dividends paid
            
            
            (799
            )
            
            
            (703
            )Net
      cash provided by financing activities
            
            
            67,155
            
            
            
            31,547Net
      increase  in cash and cash equivalents
            
            
            50,253
            
            
            
            41,104Cash
      and cash equivalents at beginning of period
            
            
            71,059
            
            
            
            55,552Cash
      and cash equivalents at end of period
            
            $
            121,312
            
            
            $
            96,656Supplemental
      disclosures of cash flow:Interest
            
            $
            11,420
            
            
            $
            13,173Income
      taxes
            
            
            125
            
            
            
            913See
      accompanying notes to consolidated financial statements







4
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
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. (the “Company”) is a multi-bank holding
company which owns and operates TIB Bank and The Bank of Venice, with a total of
twenty banking offices in Florida that are located in Monroe, Miami-Dade,
Collier, Lee, Highlands and Sarasota counties. On January 2, 2008, the Company
acquired Naples Capital Advisors, Inc., a registered investment
advisor.





The
accompanying unaudited consolidated financial statements for 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 on Form 10-K for the year ended
December 31, 2007.





The
consolidated statements include the accounts of TIB Financial Corp. and its
wholly-owned subsidiaries, TIB Bank, The Bank of Venice (subsequent to its
acquisition on April 30, 2007), and Naples Capital Advisors, Inc. (“NCA”;
subsequent to its acquisition on January 2, 2008) collectively known as the
Company.  All significant inter-company 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 “Banks” means TIB Bank and The Bank of
Venice.





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.





Allowance
for Loan Losses





The
allowance for loan losses is a valuation allowance for probable incurred credit
losses, which is increased by the provision for loan losses and decreased by
charge-offs less recoveries.  Loan losses are charged against the
allowance when management believes the uncollectiblity of a loan balance is
confirmed.  Subsequent recoveries, if any, are credited to the
allowance.  Management estimates the allowance balance required based
on factors including past loan loss experience, the nature and volume of the
portfolio, information about specific borrower situations and estimated
collateral values, economic conditions, and other
factors.  Allocations of the allowance may be made for specific loans,
but the entire allowance is available for any loan that, in management’s
judgment, should be charged off.





The
allowance consists of specific and general components.  The specific
component relates to loans that are individually classified as impaired or loans
otherwise classified as special mention, substandard or doubtful.  The
general component covers non-classified loans and is based on historical loss
experience adjusted for current factors.





A loan is
considered impaired when it is probable that not all principal and interest
amounts will be collected according to the loan contract.  Individual
commercial, commercial real estate and residential real estate loans exceeding
certain size thresholds established by management are individually evaluated for
impairment.  If a loan is considered to be impaired, a portion of the
allowance is allocated so that the carrying value of the loan is reported at the
present value of estimated future cash flows using the loan’s existing rate or
at the fair value of collateral if repayment is expected solely from the
collateral.  Large groups of smaller balance homogeneous loans, such
as consumer and indirect auto loans, are collectively evaluated for impairment,
and accordingly, they are not separately identified for impairment
disclosures.




Investment
Securities and Other Than Temporary Impairment





Investment securities which
management has the ability and intent to hold to maturity are reported at
amortized cost.  Debt securities which may be sold prior to maturity
are classified as available for sale and are carried at fair value, with
unrealized holding gains and losses reported in other comprehensive income.
Other securities such as Federal Home Loan Bank stock are carried at cost and
are included in other assets on the balance sheets.




5
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)




Interest
income includes amortization of purchase premium or
discount.  Premiums and discounts on securities are amortized on the
level-yield method without anticipating prepayments, except for mortgage backed
securities where prepayments are anticipated. Gains and losses on sales are
recorded on the trade date and determined using the specific identification
method based on the amortized cost of the security sold.





Declines
in the fair value of securities below their cost that are other than temporary
are reflected as realized losses. In estimating other-than temporary losses,
management considers: (1) the length of time and extent that fair value has been
less than cost, (2) the financial condition and near term prospects of the
issuer, and (3) the Company’s ability and intent to hold the security for a
period sufficient to allow for any anticipated recovery in fair
value.





Earnings
Per Common Share





Basic
earnings per share is net income divided by the weighted average number of
common shares and vested restricted shares outstanding during the period.
Diluted earnings per share includes the dilutive effect of additional potential
common shares issuable under stock options and warrants and the dilutive effect
of unvested restricted shares computed using the treasury stock
method.





Additional
information with regard to the Company’s methodology and reporting of the
allowance for loan losses and earnings per common share is included in the 2007
Annual Report on Form 10-K.





Acquisitions





The
Company accounts for its business combinations based on the purchase method of
accounting. The purchase method of accounting requires the Company to determine
the fair value of the tangible net assets and identifiable intangible assets
acquired. The fair values are based on available information and current
economic conditions at the date of acquisition. The fair values may be obtained
from independent appraisers, discounted cash flow present value techniques,
management valuation models, quoted prices on national markets or quoted market
prices from brokers. These fair value estimates will affect future earnings
through the disposition or amortization of the underlying assets and
liabilities. While management believes the sources utilized to arrive at the
fair value estimates are reliable, different sources or methods could have
yielded different fair value estimates. Such different fair value estimates
could affect future earnings through different values being utilized for the
disposition or amortization of the underlying assets and liabilities
acquired.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued Statement No. 157, “Fair Value
Measurements”.  This Statement defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements.  This Statement establishes a fair value hierarchy about
the assumptions used to measure fair value and clarifies assumptions about risk
and the effect of a restriction on the sale or use of an asset.  The
standard is effective for fiscal years beginning after November 15,
2007.  In February 2008, the FASB issued Staff Position (FSP) 157-2,
“Effective Date of FASB Statement No. 157”.  This FSP delays the
effective date of FAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value on a
recurring basis (at least annually) to fiscal years beginning after November 15,
2008, and interim periods within those fiscal years.  The impact of
adoption, on January 1, 2008 as required, was not material.





In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.”  The standard provides
companies with an option to report selected financial assets and liabilities at
fair value and establishes presentation and disclosure requirements designed to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities.  The Company
did not elect the fair value option for any financial assets or financial
liabilities as of January 1, 2008, the effective date of the
standard.





In
September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4,
“Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements”.  This issue
requires that a liability be recorded during the service period when a
split-dollar life insurance agreement continues after participants’ employment
or retirement.  The required accrued liability will be based on either
the post-employment benefit cost for the continuing life insurance or based on
the future death benefit depending on the contractual terms of the underlying
agreement.  As a result of adopting EITF 06-4 on January 1, 2008, the
Company recognized an increase of $141 to the balance of other liabilities and a
corresponding decrease to beginning retained earnings.




6
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)




In
December 2007, the FASB issued SFAS 141(R), “Business Combinations”, which is a
revision of SFAS 141, “Business Combinations”. SFAS 141(R) establishes
principles and requirements for how an acquirer in a business combination:
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree; recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and discloses information to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This Statement is effective for fiscal
years beginning after December 15, 2008, and is to be applied prospectively. The
Company is currently assessing the potential impact SFAS 141(R) will have on the
financial statements.





Note
2 – Investment Securities





The
amortized cost and estimated fair value of investment securities available for
sale at March 31, 2008 and December 31, 2007 are presented below:





March
      31, 2008Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unrealized
              Losses
            
            
            Estimated
              Fair
      ValueU.S.
      Government agencies and corporations
            
            $
            40,392
            
            
            $
            762
            
            
            $
            -
            
            
            $
            41,154States
      and political subdivisions—tax exempt
            
            
            8,635
            
            
            
            75
            
            
            
            4
            
            
            
            8,706States
      and political subdivisions—taxable
            
            
            2,454
            
            
            
            41
            
            
            
            -
            
            
            
            2,495Marketable
      equity securities
            
            
            1,224
            
            
            
            -
            
            
            
            572
            
            
            
            652Mortgage-backed
      securities
            
            
            99,917
            
            
            
            1,007
            
            
            
            187
            
            
            
            100,737Corporate
      bonds
            
            
            2,866
            
            
            
            -
            
            
            
            101
            
            
            
            2,765Collateralized
      debt obligations
            
            
            11,111
            
            
            
            -
            
            
            
            1,530
            
            
            
            9,581$
            166,599
            
            
            $
            1,885
            
            
            $
            2,394
            
            
            $
            166,090






December
      31, 2007Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unrealized
              Losses
            
            
            Estimated
              Fair
      ValueU.S.
      Government agencies and corporations
            
            $
            72,482
            
            
            $
            1,245
            
            
            $
            66
            
            
            $
            73,661States
      and political subdivisions—tax exempt
            
            
            9,629
            
            
            
            6
            
            
            
            51
            
            
            
            9,584States
      and political subdivisions—taxable
            
            
            2,495
            
            
            
            1
            
            
            
            21
            
            
            
            2,475Marketable
      equity securities
            
            
            1,224
            
            
            
            -
            
            
            
            -
            
            
            
            1,224Mortgage-backed
      securities
            
            
            60,161
            
            
            
            295
            
            
            
            296
            
            
            
            60,160Corporate
      bonds
            
            
            2,865
            
            
            
            -
            
            
            
            100
            
            
            
            2,765Collateralized
      debt obligations
            
            
            11,110
            
            
            
            -
            
            
            
            622
            
            
            
            10,488$
            159,966
            
            
            $
            1,547
            
            
            $
            1,156
            
            
            $
            160,357









7
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Note
3 – Loans





Major
classifications of loans are as follows:





March
      31,
              2008
            
            
            December
      31,
              2007Real
      estate mortgage loans:Commercial
            
            $
            624,557
            
            
            $
            612,084Residential
            
            
            128,191
            
            
            
            112,138Farmland
            
            
            11,284
            
            
            
            11,361Construction
      and vacant land
            
            
            159,377
            
            
            
            168,595Commercial
      and agricultural loans
            
            
            70,170
            
            
            
            72,076Indirect
      auto dealer loans
            
            
            112,163
            
            
            
            117,439Home
      equity loans
            
            
            22,619
            
            
            
            21,820Other
      consumer loans
            
            
            10,121
            
            
            
            12,154Total
      loans
            
            
            1,138,482
            
            
            
            1,127,667Net
      deferred loan costs
            
            
            1,511
            
            
            
            1,489Loans,
      net of deferred loan costs
            
            $
            1,139,993
            
            
            $
            1,129,156







Note
4 – Allowance for Loan Losses





Activity
in the allowance for loan losses for the three months ended March 31, 2008 and
2007 follows:





Three
      Months Ended
              March
      31,2008
            
            
            2007Balance,
      January 1
            
            $
            14,973
            
            
            $
            9,581Provision
      for loan losses charged to expense
            
            
            2,654
            
            
            
            472Loans
      charged off
            
            
            (1,784
            )
            
            
            (1,058
            )Recoveries
      of loans previously charged off
            
            
            13
            
            
            
            49Balance,
      March 31
            
            $
            15,856
            
            
            $
            9,044









8
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Nonaccrual loans are as
follows:


As
      of March 31, 2008
            
            
            As
      of December 31, 2007Loan
      Type
            
            Number
      of
              Loans
            
            
            Outstanding
      Balance
            
            
            Number
      of
              Loans
            
            
            Outstanding
      BalanceResidential
      *
            
            
            24
            
            
            $
            5,000
            
            
            
            13
            
            
            $
            4,442Commercial
      and agricultural
            
            
            2
            
            
            
            286
            
            
            
            4
            
            
            
            293Commercial
      real estate
            
            
            4
            
            
            
            2,372
            
            
            
            4
            
            
            
            2,619Commercial
      land development
            
            
            2
            
            
            
            13,840
            
            
            
            -
            
            
            
            -Residential
      land development
            
            
            -
            
            
            
            -
            
            
            
            1
            
            
            
            2,686Participations
      in residential loan pools *
            
            
            -
            
            
            
            -
            
            
            
            9
            
            
            
            1,246Government
      guaranteed loan
            
            
            1
            
            
            
            1,641
            
            
            
            1
            
            
            
            1,641Indirect
      auto-dealer, auto and consumer loans
            
            
            272
            
            
            
            3,731
            
            
            
            238
            
            
            
            3,159$
            26,870
            
            
            
            
            
            
            $
            16,086




*
            Our
      ownership in the nine loan pools was exchanged for an equivalent value of
      10 specific loans from the loan pools during the first
      quarter.








Impaired
loans are as follows:





March
      31,
              2008
            
            
            December
      31, 2007Loans
      with no allocated allowance for loan losses
            
            $
            5,783
            
            
            $
            4,448Loans
      with allocated allowance for loan losses
            
            
            18,106
            
            
            
            3,748Total
            
            $
            23,889
            
            
            $
            8,196Amount
      of the allowance for loan losses allocated
            
            $
            2,274
            
            
            $
            1,401








Note
5 – 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, 2008 and
2007:





Three
      Months Ended
              March
      31,2008
            
            
            2007Basic
            
            
            13,019,748
            
            
            
            11,702,150Dilutive
      effect of options outstanding
            
            
            -
            
            
            
            231,408Dilutive
      effect of restricted stock awards
            
            
            -
            
            
            
            10,882Dilutive
      effect of warrants
            
            
            -
            
            
            
            -Diluted
            
            
            13,019,748
            
            
            
            11,944,440





The
dilutive effect of stock options and warrants and the dilutive effect of
unvested restricted shares are the only common stock equivalents for purposes of
calculating diluted earnings per common share.




9
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)




Weighted
average anti-dilutive stock options and warrants and unvested restricted shares
excluded from the computation of diluted earnings per share are as
follows:





Three
      Months Ended
              March
      31,2008
            
            
            2007Anti-dilutive
      stock options
            
            
            663,638
            
            
            
            94,441Anti-dilutive
      restricted stock awards
            
            
            85,032
            
            
            
            -Anti-dilutive
      warrants
            
            
            316,484
            
            
            
            -





Note
6 – Capital Adequacy





The
Company (on a consolidated basis) and the Banks are subject to various
regulatory capital requirements administered by federal and state banking
agencies. Failure to meet minimum capital requirements result in certain
discretionary actions by regulators that could have an effect on the Company’s
operations. The regulations require the Company and the Banks to meet specific
capital adequacy guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Company’s capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.





To be
considered well capitalized and adequately capitalized (as defined) under the
regulatory framework for prompt corrective action, the Banks must maintain
minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based capital ratios.
These minimum ratios along with the actual ratios for the Company and the Banks
as of March 31, 2008 and December 31, 2007, are presented in the following
table.








Well
              Capitalized
              Requirement
            
            
            Adequately
      Capitalized Requirement
            
            
            March
      31,
              2008
              Actual
            
            
            December
      31, 2007
              ActualTier
      1 Capital (to Average Assets)Consolidated
            
            
            N/A
            
            
            
            ≥
      4.0
            %
            
            
            8.5
            %
            
            
            8.4
            %TIB
      Bank
            
            
            ≥
    5.0
            %
            
            
            ≥
      4.0
            %
            
            
            7.3
            %
            
            
            7.8
            %The
      Bank of Venice
            
            
            ≥
      5.0
            %
            
            
            ≥
      4.0
            %
            
            
            11.2
            %
            
            
            11.9
            %Tier
      1 Capital (to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            ≥
      4.0
            %
            
            
            10.5
            %
            
            
            10.0
            %TIB
      Bank
            
            
            ≥
      6.0
            %
            
            
            ≥
      4.0
            %
            
            
            9.0
            %
            
            
            9.2
            %The
      Bank of Venice
            
            
            ≥
      6.0
            %
            
            
            ≥
      4.0
            %
            
            
            14.4
            %
            
            
            15.5
            %Total
      Capital (to Risk Weighted Assets)Consolidated
            
            
            N/A
            
            
            
            ≥
      8.0
            %
            
            
            11.7
            %
            
            
            11.3
            %TIB
      Bank
            
            
            ≥
      10.0
            %
            
            
            ≥
      8.0
            %
            
            
            10.2
            %
            
            
            10.4
            %The
      Bank of Venice
            
            
            ≥
      10.0
            %
            
            
            ≥
      8.0
            %
            
            
            15.7
            %
            
            
            16.7
            %






10
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Note
7 – Acquisition





The
Company completed the acquisition of Naples Capital Advisors, Inc., a registered
investment advisor, on January 2, 2008 in exchange for consideration consisting
of $1,333 in cash upon consummation and up to $148 in cash on each of the first
three annual anniversaries of NCA or a subsidiary of the Company receiving a
trust department license under the Florida Financial Institutions Codes subject
to NCA achieving certain total revenue milestones. Under the purchase method of
accounting, the assets and liabilities of NCA were recorded at their respective
estimated fair values as of January 2, 2008 and are included in the accompanying
balance sheet as of March 31, 2008. Purchase accounting adjustments will be
amortized or accreted into income over the estimated lives of the related assets
and liabilities. The Company is currently in the process of refining its
estimates of the fair values of intangible assets acquired. Currently, goodwill
and other intangible assets approximate $1,268.





The
acquisition of NCA spearheads the Company’s entry into a new business line of
private banking, wealth management and trust services that began operations in
the first quarter of 2008. With $80 million of assets under advisement, NCA has
an existing client base, established operations and presence in the market and
revenue to support further growth and expansion.





Note
8 – Fair Value





FASB
Statement 157 establishes a fair value hierarchy which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard describes three levels of inputs
that may be used to measure fair value:





Level 1:
Quoted prices (unadjusted) for identical assets or liabilities in active markets
that the entity has the ability to access as of the measurement
date.





Level 2:
Significant other observable inputs other than Level 1 prices such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable
market data.





Level 3:
Significant unobservable inputs that reflect a reporting entity’s own
assumptions about the assumptions that market participants would use in pricing
and asset or liability.





The fair values of securities available
for sale are determined by 1) obtaining quoted prices on nationally recognized
securities exchanges when available (Level 1 inputs), 2) matrix pricing, which
is a mathematical technique widely used in the industry to value debt securities
without relying exclusively on quoted prices for the specific securities but
rather by relying on the securities’ relationship to other benchmark quoted
securities (Level 2 inputs) and 3) for certain collateralized debt obligations,
custom discounted cash flow modeling (Level 3 inputs).





Valuation
of certain collateralized debt securities





As of
March 31, 2008, the Company owned three collateralized debt obligations where
the underlying collateral is comprised primarily of corporate debt obligations
of homebuilders, REITs, real estate companies and commercial mortgage backed
securities. The inputs used in determining the estimated fair value of these
securities are Level 3 inputs. In determining their estimated fair value,
management utilizes a discounted cash flow modeling valuation approach. Discount
rates utilized in the modeling of these securities are estimated based upon a
variety of factors including the yield at issuance of similarly rated classes of
comparably structured collateralized debt obligations. Cash flows utilized in
the modeling of these securities were based upon actual default history of the
underlying issuers and varying assumptions of estimated future defaults of these
issuers. The valuation approach for these securities did not change during the
first quarter of 2008.





Valuation
of Impaired loans





The fair
value of impaired loans with specific allocations of the allowance for loan
losses is generally based on recent real estate appraisals. These appraisals may
utilize a single valuation approach or a combination of approaches including
comparable sales and the income approach. Adjustments are routinely made in the
appraisal process by the appraisers to adjust for differences between the
comparable sales and income data available. Such adjustments are typically
significant and result in a Level 3 classification for determining fair
value.




11
 Table of Contents
 TIB
FINANCIAL CORP.
 Unaudited
Notes to Consolidated Financial Statements
 (Dollars
in thousands except for share and per share amounts)
  Assets
and Liabilities Measured on a Recurring Basis





Assets
and liabilities measured at fair value on a recurring basis are summarized
below:





Fair
      Value Measurements at March 31, 2008 UsingMarch
      31, 2008
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs (Level 2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Assets:Available
      for sale securities
            
            $
            166,090
            
            
            $
            -
            
            
            $
            160,433
            
            
            $
            5,657





The table
below presents a reconciliation and income statement classification of gains and
losses for all assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the quarter ended March 31, 2008
and still held at March 31, 2008.





Fair
      Value Measurements Using
              Significant
      Unobservable Inputs
              (Level
      3)Collateralized
      Debt ObligationsBeginning
      balance, Jan. 1, 2008
            
            $
            6,111Included
      in other comprehensive income
            
            
            (454
            )Ending
      balance, March 31, 2008
            
            $
            5,657





Assets
and Liabilities Measured on a Non-Recurring Basis





Assets
and liabilities measured at fair value on a non-recurring basis are summarized
below:




Fair
      Value Measurements at March 31, 2008 UsingMarch
      31,
              2008
            
            
            Quoted
      Prices in Active Markets for Identical Assets
              (Level
      1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)Assets:Impaired
      loans with specific allocations of the allowance for loan
      losses
            
            $
            15,832
            
            
            $
            -
            
            
            $
            -
            
            
            $
            15,832





Impaired
loans, which are measured for impairment using the fair value of the collateral
for collateral dependent loans, had a carrying amount of $18,106, with a
valuation allowance of $2,274, resulting in specific allocations of the
allowance for loan losses of $949 for the period.







12
 Table of Contents




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. (the "Company") 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 the Company as reflected in the unaudited
consolidated statement of condition as of March 31, 2008, and statement of
operations for the three months ended March 31, 2008.  Operating
results for the three months ended March 31, 2008 are not necessarily indicative
of trends or results to be expected for the year ended December 31,
2008.





Quarterly
Summary





During
the first quarter of 2008, we entered a new line of business, wealth management,
with the completion of the acquisition of Naples Capital Advisors, Inc., a
registered investment advisor with $84 million of assets under management at the
end of the first quarter. In connection with this acquisition, we initiated our
new business line of providing comprehensive financial services to high
net-worth individuals through integrated private banking, wealth management and
after we receive regulatory approval, trust services.





We also
formed an alliance with two prominent Southwest Florida families and their
business interests through the private placement of 1.2 million shares of common
stock and warrants to purchase 1.2 million additional shares for $8.40
generating gross proceeds of $10.1 million.





In
response to increasing delinquencies and loan losses arising from our indirect
lending portfolio, we retained a nationally recognized financial services
consulting firm to assist us in reviewing and evaluating our indirect auto
lending operations. We have been working with this firm since the fourth quarter
of 2007 and we are restructuring our management, lending, collections and
vehicle disposition functions. The restructuring of our indirect lending
operations resulted in the acceleration of the resolution of nonperforming auto
loans and the disposition of repossessed vehicles which resulted in net
charge-offs of $1.7 million and write-downs of approximately $1.2 million of
repossessed vehicles and related assets. The write-downs were primarily
associated with vehicles we previously had anticipated would be sold on a
retail, less commission, basis which now have been, or are intended to be,
disposed of through wholesale auctions. These write-downs are reflective of the
downward pricing pressure in the regional used vehicle market stemming from
reduced demand and our business decision to dispose of more vehicles through
wholesale auctions to accelerate the reduction of repossessed vehicles.
Professional fees and expenses related to the consulting project during the
first quarter amounted to $263,000. Other collection charges related to the
indirect collections operations increased to $240,000.





13
 Table of Contents




For the
first quarter of 2008, our operations resulted in a net loss of $1.4 million
compared to net income of $1.9 million for the first quarter of
2007.  On a per share basis, the net loss was $0.11 for the 2008
quarter as compared to net income of $0.16 for the comparable 2007
quarter.





Our
results of operations during the first quarter of 2008 include the operations of
The Bank of Venice and Naples Capital Advisors, Inc. subsequent to their
acquisitions on April 30, 2007 and January 2, 2008, respectively.





The net
loss for the first quarter of 2008 compared to net income during the first
quarter of 2007 was due to the higher provision for loan losses, higher
non-interest expenses, lower net interest income, a lower net interest margin
and lower non-interest income excluding gains on investment securities. The net
interest margin continues to be impacted by the challenging interest rate
environment, highly competitive deposit pricing and a higher level of
non-performing loans.  The tax equivalent net interest margin was
3.13% for the three months ended March 31, 2008 and contracted in comparison
with the 3.74% net interest margin reported during the first quarter of
2007.




Non-interest income was $2.5
million in the first quarter of 2008 compared to $1.9 million in the first
quarter last year.  The increase is due primarily to gains recognized
from the sale of investment securities, partially offset by lower fees on
mortgage loans sold due to lower sales of residential loans in the secondary
market and a greater proportion of our residential mortgage loan production
being held in our portfolio.





During
the first quarter of 2008, non-interest expense rose 31% to $13.0 million
compared to $10.0 million for the first quarter of 2007.  The increase
reflects $1.7 million attributable to our indirect lending operation and its
restructuring, $756,000 of operating costs for The Bank of Venice which was
acquired April 30, 2007, $226,000 of valuation allowances recorded against other
real estate owned and a $197,000 increase in FDIC deposit
insurance.





Total
assets increased to $1.51 billion as of March 31, 2008, representing 5% asset
growth from December 31, 2007. Total loans increased 1% to $1.14 billion
compared to $1.13 billion at December 31, 2007. Total deposits of $1.12 billion
as of March 31, 2008 represent an increase of $71.0 million, or 7%, from
December 31, 2007.





As of
March 31, 2008, non-performing loans were $26.9 million, or 2.36% of
loans.  The allowance for loan losses increased to $15.9 million, or
1.39% of total loans, reflecting the excess of our provision for loan losses
over net charge-offs for the quarter.  Annualized net charge-offs
during the quarter represented 0.63% of average loans, compared to 0.39% for the
first quarter of last year.








Three
Months Ended March 31, 2008 and 2007:





Results
of Operations





For the
first quarter of 2008, our operations resulted in a net loss of $1.4 million
compared to net income of $1.9 million in the previous year’s
quarter.  On a per share basis, the net loss was $0.11 for the 2008
quarter as compared to net income of $0.16 for the comparable 2007
quarter.





Annualized
loss on average assets for the first quarter of 2008 was 0.39% compared to a
return on average assets of 0.57% for the first quarter of 2007.  Loss
on average shareholders’ equity was 5.83% for the first quarter of 2008 while
the return on average shareholders’ equity was 8.75% for the same quarter of
2007.





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 and securities purchased under agreements to resell, interest-bearing
deposits in other banks and investment securities.  Our
interest-bearing liabilities include deposits, federal funds purchased,
subordinated debentures, advances from the FHLB and other short term
borrowings.






14
 Table of Contents




Net
interest income was approximately $10.9 million for the three months ended March
31, 2008, a decline from the $11.5 million reported for the same period last
year. The $457,000 decrease in interest and dividend income from the first
quarter of 2008 over the first quarter of 2007 was mainly attributable to
decreased average rate on loan balances partially related to the higher level of
non-performing loans.  Partially offsetting this decline were
decreases in the interest cost of transaction accounts due to decreases in
rates.  Increases in balances led to an increase in interest expense
on short-term borrowings and FHLB advances and long-term borrowings. Net
interest income of The Bank of Venice represented approximately $577,000 of the
net interest income reported.





The
decline in net interest income in the first quarter of 2008 compared to the
first quarter of 2007 is due principally to a decline in the net interest margin
to 3.13% from 3.74%, respectively.





The
interest rate environment during the first quarter of 2008 was significantly
lower than the prior year period due to highly stimulative monetary policies
undertaken by the Federal Reserve beginning in the third quarter of 2007. As a
result of actions taken by the Federal Reserve, the prime rate declined from
8.25% to 7.25% at the end of 2007 and declined a further 200 basis points to
5.25% during the first quarter of 2008.





Due to
the rapid and significant decline in the prime rate, the yield on our loans
declined 88 basis points and the yield of our interest earning assets declined
97 basis points in the first quarter of 2008 compared to the first quarter of
2007.




Due to a
high level of demand for liquidity in the global financial system and
competitive pressures in our local markets, we were unable to reduce the cost of
our CDs and other interest rate sensitive deposits and funding sources as
quickly and to the same magnitude as the reductions in our interest earning
assets. As a consequence, our net interest margin declined 61 basis points. Of
this decline, approximately 20 basis points is due to the higher level of
non-performing loans and approximately $600,000 of income not recognized on
these loans during the first quarter of 2008.





Due to
the turmoil in financial markets that persisted in the fourth quarter of 2007
and the first quarter of 2008, we maintained a significantly higher level of
liquidity as reflected in our higher average balance of investment securities
and federal funds sold. This higher level of lower yielding assets also reduced
the net interest margin during the quarter.





Going
forward, we expect market interest rates to remain relatively stable resulting
in an additional decline in loan yields followed by a period of stability. At
the same time, we expect deposit costs will continue to decline but will
continue to be subject to the forces of competitive pressure which may result in
deposit rates decreasing more slowly. In the current interest rate environment,
we believe that, excluding the relative impact of changes in the level of
nonperforming assets, our interest margin should begin to stabilize. The
predominant driver to increase net interest income is and will continue to be
the growth of our balance sheet. Although the timing and possible effects of
future changes in interest rates could be significant, we expect any such impact
to continue to be less in extent than the relative impact of earning asset
growth.







15
 Table of Contents




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, 2008 and March 31, 2007.





2008
            
            
            2007(Dollars
      in thousands)
            
            Average
              Balances
            
            
            Income/
              Expense
            
            
            Yields/
              Rates
            
            
            Average
              Balances
            
            
            Income/
              Expense
            
            
            Yields/
              RatesInterest-earning
      assets:Loans
      (1)(2)
            
            $
            1,137,388
            
            
            $
            20,150
            
            
            
            7.13
            %
            
            $
            1,060,523
            
            
            $
            20,959
            
            
            
            8.01
            %Investment
      securities (2)
            
            
            157,773
            
            
            
            1,939
            
            
            
            4.94
            %
            
            
            134,666
            
            
            
            1,690
            
            
            
            5.09
            %Interest-bearing
      deposits in other banks
            
            
            1,382
            
            
            
            11
            
            
            
            3.20
            %
            
            
            591
            
            
            
            8
            
            
            
            5.49
            %Federal
      Home Loan Bank stock
            
            
            8,489
            
            
            
            127
            
            
            
            6.02
            %
            
            
            7,711
            
            
            
            112
            
            
            
            5.89
            %Federal
      funds sold and securities sold under agreements to resell
            
            
            94,276
            
            
            
            744
            
            
            
            3.17
            %
            
            
            54,291
            
            
            
            696
            
            
            
            5.20
            %Total
      interest-earning assets
            
            
            1,399,308
            
            
            
            22,971
            
            
            
            6.60
            %
            
            
            1,257,782
            
            
            
            23,465
            
            
            
            7.57
            %Non-interest-earning
      assets:Cash
      and due from banks
            
            
            20,269
            
            
            
            
            
            
            
            
            
            
            
            23,027Premises
      and equipment, net
            
            
            38,120
            
            
            
            
            
            
            
            
            
            
            
            34,398Allowance
      for loan losses
            
            
            (14,668
            )
            
            
            
            
            
            
            
            
            
            
            (9,336
            )Other
      assets
            
            
            52,624
            
            
            
            
            
            
            
            
            
            
            
            35,593Total
      non-interest-earning assets
            
            
            96,345
            
            
            
            
            
            
            
            
            
            
            
            83,682Total
      assets
            
            $
            1,495,653
            
            
            
            
            
            
            
            
            
            
            $
            1,341,464Interest-bearing
      liabilities:Interest-bearing
      deposits:NOW
      accounts
            
            $
            183,982
            
            
            $
            1,117
            
            
            
            2.44
            %
            
            $
            149,865
            
            
            $
            1,255
            
            
            
            3.40
            %Money
      market
            
            
            179,081
            
            
            
            1,424
            
            
            
            3.20
            %
            
            
            176,777
            
            
            
            1,814
            
            
            
            4.16
            %Savings
      deposits
            
            
            51,009
            
            
            
            180
            
            
            
            1.42
            %
            
            
            48,860
            
            
            
            139
            
            
            
            1.15
            %Time
      deposits
            
            
            536,065
            
            
            
            6,405
            
            
            
            4.81
            %
            
            
            513,335
            
            
            
            6,321
            
            
            
            4.99
            %Total
      interest-bearing deposits
            
            
            950,137
            
            
            
            9,126
            
            
            
            3.86
            %
            
            
            888,837
            
            
            
            9,529
            
            
            
            4.35
            %Other
      interest-bearing liabilities:Short-term
      borrowings and FHLB advances
            
            
            210,659
            
            
            
            2,035
            
            
            
            3.89
            %
            
            
            148,371
            
            
            
            1,668
            
            
            
            4.56
            %Long-term
      borrowings
            
            
            63,000
            
            
            
            905
            
            
            
            5.78
            %
            
            
            33,043
            
            
            
            680
            
            
            
            8.35
            %Total
      interest-bearing liabilities
            
            
            1,223,796
            
            
            
            12,066
            
            
            
            3.97
            %
            
            
            1,070,251
            
            
            
            11,877
            
            
            
            4.50
            %Non-interest-bearing
      liabilities and shareholders’ equity:Demand
      deposits
            
            
            153,579
            
            
            
            
            
            
            
            
            
            
            
            165,187Other
      liabilities
            
            
            18,676
            
            
            
            
            
            
            
            
            
            
            
            19,317Shareholders’
      equity
            
            
            99,602
            
            
            
            
            
            
            
            
            
            
            
            86,709Total
      non-interest-bearing liabilities and shareholders’ equity
            
            
            271,857
            
            
            
            
            
            
            
            
            
            
            
            271,213Total
      liabilities and shareholders’ equity
            
            $
            1,495,653
            
            
            
            
            
            
            
            
            
            
            $
            1,341,464Interest
      rate spread  (tax equivalent basis)
            
            
            
            
            
            
            
            
            
            
            2.63
            %
            
            
            
            
            
            
            
            
            
            
            3.07
            %Net
      interest income  (tax equivalent basis)
            
            
            
            
            
            $
            10,905
            
            
            
            
            
            
            
            
            
            
            $
            11,588Net
      interest margin (3) (tax equivalent basis)
            
            
            
            
            
            
            
            
            
            
            3.13
            %
            
            
            
            
            
            
            
            
            
            
            3.74
            %




(1)
            Average loans
      include non-performing loans.(2)
            Interest
      income and rates include the effects of a tax equivalent adjustment using
      applicable statutory tax rates 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.




16
 Table of Contents




Changes
in Net Interest Income





The table
below details the components of the changes in net interest income for the three
months ended March 31, 2008 and March 31, 2007.  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.





2008
      Compared to 2007 (1)
              Due
      to Changes in(Dollars
      in thousands)
            
            Average
              Volume
            
            
            Average
              Rate
            
            
            Net
      Increase
              (Decrease)Interest
      incomeLoans
      (2)
            
            $
            1,454
            
            
            $
            (2,263
            )
            
            $
            (809
            )Investment
      securities (2)
            
            
            285
            
            
            
            (36
            )
            
            
            249Interest-bearing
      deposits in other banks
            
            
            7
            
            
            
            (4
            )
            
            
            3Federal
      Home Loan Bank stock
            
            
            12
            
            
            
            3
            
            
            
            15Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            383
            
            
            
            (335
            )
            
            
            48Total
      interest income
            
            
            2,141
            
            
            
            (2,635
            )
            
            
            (494
            )Interest
      expenseNOW
      accounts
            
            
            250
            
            
            
            (388
            )
            
            
            (138
            )Money
      market
            
            
            23
            
            
            
            (413
            )
            
            
            (390
            )Savings
      deposits
            
            
            6
            
            
            
            35
            
            
            
            41Time
      deposits
            
            
            275
            
            
            
            (191
            )
            
            
            84Short-term
      borrowings and FHLB advances
            
            
            626
            
            
            
            (259
            )
            
            
            367Long-term
      borrowings
            
            
            477
            
            
            
            (252
            )
            
            
            225Total
      interest expense
            
            
            1,657
            
            
            
            (1,468
            )
            
            
            189Change
      in net interest income
            
            $
            484
            
            
            $
            (1,167
            )
            
            $
            (683
            )




(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 applicable
      statutory tax rates 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 increased to $2.7 million in the first quarter of 2007
compared to $472,000 in the comparable prior year period. Due to the weakening
economic environment, we began increasing certain quantitative and qualitative
economic risk factors employed in estimating the allowance for loan losses
during the second quarter of 2006. We further increased these factors during
each quarter of 2007 and have maintained these higher factors. The higher
provision for loan losses in 2008 reflects continued local economic contraction,
evidenced by increased unemployment levels, especially in the greater Fort
Myers, Florida area where we have a concentration of indirect auto loan
exposure. There continues to be a lower level of real estate sales and
development activity which is impacting the value of real estate and the economy
broadly. Additionally, we experienced increased levels of nonperforming loans
and delinquencies and higher levels of net charge-offs.  Accordingly,
during the first quarter of 2008, we again elevated certain risk factors used in
estimating our allowance for loan losses. An additional component of the
increased provision was the increase in total loans outstanding of $10.8
million, or 1%, during the first quarter of 2008. Net Charge-offs were $1.8
million, or 0.63% of average loans on an annualized basis, during the three
months ended March 31, 2008, compared to $1.0 million, or 0.39% of average loans
on an annualized basis, for the same period in 2007. The charge-offs in both
periods were comprised principally of indirect auto loans.






17
 Table of Contents




The level
of future charge offs is largely based upon the level of nonperforming assets
which cannot be reasonably predicted. We anticipate that net charge-offs in the
second quarter of 2008, resulting primarily from the resolution of the $3.7
million of nonperforming indirect auto loans in our portfolio at March 31, 2008
along with any new nonperforming indirect loans during the second quarter of
2008, will exceed our first quarter loss experience.





Management
continuously monitors and actively manages the credit quality of the loan
portfolio and will continue to recognize the provision required to maintain the
allowance for loan losses at an appropriate level. Due to the economic slowdown
discussed above, our customers are exhibiting increasing difficulty in timely
payment of their loan obligations. We believe that this trend may continue in
the near term. Consequently, we may experience higher levels of delinquent and
nonperforming loans, which may require higher provisions for loan losses, higher
charge-offs and higher collection related expenses in future
periods.





Non-interest
Income





Non-interest
income for the first quarter of 2008 was $2.5 million.  This
represented a 31% increase over the comparable prior year quarter which totaled
$1.9 million.  The increase was primarily attributable to gains of
$910,000 realized from the sale of investment securities. Investment advisory
fees from Naples Capital Advisors, Inc. contributed approximately $125,000 to
the increase.  Partially offsetting these increases were lower fees on
mortgage loans sold due to lower sales of residential loans in the secondary
market. Our sales of residential mortgages were lower during the first quarter
of 2008 due to dislocations in the secondary mortgage market and our decision to
retain $18.0 million of loans originated in our loan portfolio.





Non-interest
Expense





Non-interest
expense for the first quarter of 2008 was $13.0 million.  This
represented a 31% increase over the prior year period which totaled $10.0
million. This increase included approximately $756,000 resulting from the
operations of The Bank of Venice and $290,000 resulting from the operations of
Naples Capital Advisors, Inc. The overall increase reflected increased costs and
losses of $1.7 million primarily attributable to our indirect lending
operations. We continued our investments in people, systems and facilities which
provide the platform for future asset, deposit and revenue growth. The markets
we operate in are highly competitive in all regards and our continued success
requires continual investment in quality personnel, facilities, technology and
infrastructure to provide competitive products and services.





The
salary and employee benefits increased $549,000 in the first quarter of 2008
relative to the first quarter of 2007. The Bank of Venice represents
approximately $357,000 of the increase in this caption and Naples Capital
Advisors, Inc. represents approximately $162,000 of the increase.





For the
first quarter of 2008 there was a $105,000 increase in occupancy expense as
compared to the first quarter of 2007. Excluding the $198,000 of occupancy
related costs from the operations of The Bank of Venice, the Company would have
had a $93,000 decrease in occupancy costs for the quarter.  The
decrease is a result of cost containment efforts including a reduction in
insurance costs due to lower premium rates and the reduction of office space
occupied due to the sale of an office building during the second half of 2007
and the reduction of total rented square footage.  We continue to
focus on consolidating our facilities and containing operating
costs.





The $2.4
million increase in other expense resulted primarily from our indirect lending
operations and its restructuring including $1.2 million in write-downs of
repossessed vehicles and related assets and approximately $503,000 of consulting
and collections fees and costs. The increase also includes $201,000 of operating
costs for The Bank of Venice which was acquired April 30, 2007, $226,000 of
valuation allowances recorded against other real estate owned and a $197,000
increase in FDIC deposit insurance.






18
 Table of Contents




Balance
Sheet





Total
assets at March 31, 2008 were $1.51 billion, up 5% from total assets of $1.44
billion at December 31, 2007.  Total loans outstanding increased $10.8
million, or 1%, to $1.14 billion during the first three months of 2008 from year
end 2007.  Also, in the same period, investment securities increased
$5.7 million. As the overall Company continues to experience growth, securities
are purchased to maintain appropriate levels of liquid assets on the balance
sheet.




At March
31, 2008 advances from the Federal Home Loan Bank were $117.9 million, a $22.1
million decrease from $140.0 million at December 31, 2007.  Short-term
borrowings increased due to higher balances of repurchase agreements with
deposit customers, reflecting our business development efforts to attract new
business customers.





Shareholders’
equity totaled $103.4 million at March 31, 2008, increasing $7.20 million from
December 31, 2007. This increase is primarily due to the private placement of
1.2 million shares of common stock on March 7, 2008 resulting in gross proceeds
of approximately $10.1 million. Book value per share decreased to $7.39 at March
31, 2008 from $7.53 at December 31, 2007.  The Company declared a
quarterly dividend of $0.0625 per share in the first quarter of 2008 and $0.06
per share in the first quarter of 2007.





Investment
Securities





During
the first quarter of 2008, we realized net gains of $910,000 relating to sales
of approximately $25.0 million of available for sale securities occurring during
the quarter. No comparable gains were realized during the first quarter of 2007.
The reinvestment of the proceeds and additional investment resulted in a $5.7
million increase in investment securities to $166.1 million. The sales of
securities reflect a restructuring of a portion of the portfolio to reduce
interest rate risk by reducing duration while reinvesting in a comparably
yielding mix of investment securities with a shorter duration.





As of
March 31, 2008, we owned three collateralized debt obligation investment
securities with an aggregate original cost of $10.0 million with an estimated
fair value of $5.7 million. The underlying assets in the three collateralized
debt obligations are comprised primarily of corporate debt obligations of
homebuilders, REITs, real estate companies and commercial mortgage backed
securities. These securities are floating rate securities which were rated “A”
or better by an independent and nationally recognized rating agency at the time
of our purchase. In late December 2007, these securities were downgraded below
investment grade by a nationally recognized rating agency. Due to the ratings
downgrade, and the amount of unrealized loss, management concluded that the loss
of value was other than temporary under generally accepted accounting principles
and the Company wrote these investment securities down to their estimated fair
value.





During
2008, additional events of default occurred with respect to the underlying
issuers and their securities collateralizing our collateralized debt
obligations. As a result, the two collateralized debt obligations, which
remained on accrual at December 31, 2007 and aggregating $2.6 million were
placed on nonaccrual as of March 31, 2008. Management’s year-end analysis
contemplated such scenarios in estimation of the fair value of these securities
and assessing the nature of impairment. Management’s updated impairment analysis
concluded that the reduction in estimated value of these securities of $454,000
during the quarter was temporary.





We
regularly review each investment security for impairment based on criteria that
include the extent to which cost exceeds market price, the duration of that
market decline, the financial health of and specific prospects for the issuer(s)
and our ability and intention with regard to holding the security to maturity.
Future declines in the market value of these or other securities may result in
additional impairment charges which may be material to the financial condition
and results of operations of the Company.







19
 Table of Contents




Loan
Portfolio Composition





The two most significant components of
our loan portfolio are classified in the notes to the accompanying unaudited
financial statements as commercial real estate and construction and vacant land.
Our goal of maintaining high standards of credit quality include a strategy of
diversification of loan type and purpose within these categories. The following
charts illustrate the composition of these portfolios as of March 31, 2008 and
December 31, 2007.








March
      31, 2008
            
            
            December
      31, 2007(Dollars
      in thousands)
            
            Commercial
              Real
      Estate
            
            
            Percentage
      Composition
            
            
            Commercial
              Real
      Estate
            
            
            Percentage
      CompositionMixed
      Use Commercial/Residential
            
            $
            103,934
            
            
            
            17
            %
            
            $
            103,937
            
            
            
            17
            %1-4
      Family and Multi Family
            
            
            78,225
            
            
            
            13
            %
            
            
            76,339
            
            
            
            13
            %Hotels/Motels
            
            
            90,034
            
            
            
            14
            %
            
            
            86,909
            
            
            
            14
            %Guesthouses
            
            
            81,710
            
            
            
            13
            %
            
            
            81,817
            
            
            
            13
            %Office
      Buildings
            
            
            98,427
            
            
            
            16
            %
            
            
            97,633
            
            
            
            16
            %Retail
      Buildings
            
            
            69,642
            
            
            
            11
            %
            
            
            64,819
            
            
            
            11
            %Restaurants
            
            
            36,363
            
            
            
            6
            %
            
            
            37,186
            
            
            
            6
            %Marinas/Docks
            
            
            20,292
            
            
            
            3
            %
            
            
            20,364
            
            
            
            3
            %Warehouse
      and Industrial
            
            
            31,379
            
            
            
            5
            %
            
            
            29,958
            
            
            
            5
            %Other
            
            
            14,551
            
            
            
            2
            %
            
            
            13,122
            
            
            
            2
            %Total
            
            $
            624,557
            
            
            
            100
            %
            
            $
            612,084
            
            
            
            100
            %









March
      31, 2008
            
            
            December
      31, 2007(Dollars in
      thousands)
            
            Construction
      and Vacant Land
            
            
            Percentage
      Composition
            
            
            Construction
      and Vacant Land
            
            
            Percentage
      CompositionConstruction:Residential – owner
      occupied
            
            $
            19,785
            
            
            
            12
            %
            
            $
            20,620
            
            
            
            12
            %Residential – commercial
      developer
            
            
            28,056
            
            
            
            18
            %
            
            
            36,107
            
            
            
            21
            %Commercial
    structure
            
            
            16,022
            
            
            
            10
            %
            
            
            14,367
            
            
            
            9
            %63,863
            
            
            
            40
            %
            
            
            71,094
            
            
            
            42
            %Land:Raw land
            
            
            15,887
            
            
            
            10
            %
            
            
            15,890
            
            
            
            9
            %Residential
    lots
            
            
            14,432
            
            
            
            9
            %
            
            
            16,775
            
            
            
            10
            %Land
    development
            
            
            30,235
            
            
            
            19
            %
            
            
            29,818
            
            
            
            18
            %Commercial
lots
            
            
            34,960
            
            
            
            22
            %
            
            
            35,018
            
            
            
            21
            %Total
      land
            
            
            95,514
            
            
            
            60
            %
            
            
            97,501
            
            
            
            58
            %Total
            
            $
            159,377
            
            
            
            100
            %
            
            $
            168,595
            
            
            
            100
            %







20
 Table of Contents




Non-performing
Assets





Non-performing
assets include non-accrual loans and investment securities, accruing loans
contractually past due 90 days or more, repossessed personal property, and other
real estate.  Loans and investments in debt securities are placed on
non-accrual status when management has concerns relating to the ability to
collect the principal and interest and generally when 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 are as follows:





(Dollars
      in thousands)
            
            March
      31,
              2008
            
            
            December
      31, 2007Total
      non-accrual loans (a)
            
            $
            26,870
            
            
            $
            16,086Accruing
      loans delinquent 90 days or more
            
            
            -
            
            
            
            -Total
      non-performing loans
            
            
            26,870
            
            
            
            16,086Non-accrual
      investment securities (b)
            
            
            5,657
            
            
            
            3,154Repossessed
      personal property (primarily indirect auto dealer loans)
            
            
            1,964
            
            
            
            3,136Other
      real estate owned
            
            
            4,495
            
            
            
            1,846Other
      assets (c)
            
            
            2,919
            
            
            
            2,915Total  non-performing
      assets
            
            $
            41,905
            
            
            $
            27,137Allowance
      for loan losses
            
            $
            15,856
            
            
            $
            14,973Non-performing
      assets as a percent of total assets
            
            
            2.77
            %
            
            
            1.88
            %Non-performing
      loans as a percent of total loans
            
            
            2.36
            %
            
            
            1.43
            %Allowance
      for loan losses as a percent of non-performing loans
            
            
            59.01
            %
            
            
            93.08
            %Annualized
      net charge-offs as a percent of average loans
            
            
            0.63
            %
            
            
            0.45
            %


__________


(a)
            Non-accrual
      loans as of March 31, 2008 and December 31, 2007 are as
      follows:





(Dollars
      in thousands)
            
            March
      31, 2008
            
            
            December
      31, 2007Collateral
      Description
            
            Number
              of
      Loans
            
            
            Outstanding
      Balance
            
            
            Number
              of
      Loans
            
            
            Outstanding
      BalanceResidential
      **
            
            
            24
            
            
            $
            5,000
            
            
            
            13
            
            
            $
            4,442Commercial
      and agricultural
            
            
            2
            
            
            
            286
            
            
            
            4
            
            
            
            293Commercial
      real estate
            
            
            4
            
            
            
            2,372
            
            
            
            4
            
            
            
            2,619Residential
      land development
            
            
            -
            
            
            
            -
            
            
            
            1
            
            
            
            2,686Commercial
      land development
            
            
            2
            
            
            
            13,840
            
            
            
            -
            
            
            
            -Participations
      in residential loan pools **
            
            
            -
            
            
            
            -
            
            
            
            9
            
            
            
            1,246Government
      guaranteed loan
            
            
            1
            
            
            
            1,641
            
            
            
            1
            
            
            
            1,641Indirect
      auto-dealer, auto and consumer loans
            
            
            272
            
            
            
            3,731
            
            
            
            238
            
            
            
            3,159$
            26,870
            
            
            
            
            
            
            $
            16,086


**
            Our
      ownership in the nine loan pools was exchanged for an equivalent value of
      10 specific loans from the loan pools during the first
      quarter.






21
 Table of Contents





(b)
            In
      December 2007, the Company placed a collateralized debt security secured
      primarily by homebuilders, REITs, real estate companies and commercial
      mortgage backed securities on non-accrual. In March 2008, two additional,
      similarly secured, collateralized debt securities were placed on
      non-accrual. These three securities had a total original cost of $10.0
      million and were rated A at purchase. These securities have a current
      estimated value of $5.7 million. For additional details on this and other
      investment securities, see the section of management’s discussion and
      analysis that follows entitled “Investment
  Portfolio”.





(c)
            In
      1998, TIB 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 80% guaranteed as to principal and interest
      by the U.S. Department of Agriculture (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.




The portion of this loan
guaranteed by the USDA and held by us was approximately $1.6 million at March
31, 2008 and December 31, 2007. The loan was accruing interest until December
2006 when the Bank ceased the accrual of interest pursuant to a ruling made by
the USDA. Accrued interest on this loan totals approximately $941,000 at March
31, 2008 and December 31, 2007, respectively.
  In pursuing a sale of the
property and equipment, the Bank has incurred various expenditures. The Bank
capitalized the liquidation costs and portion of the protective advances which
it expects will be fully reimbursed by the USDA. The non-guaranteed principal
and interest ($2.0 million at March 31, 2008 and December 31, 2007) and the
reimbursable capitalized liquidation costs and protective advance costs totaling
approximately $958,000 and $954,000 at March 31, 2008 and December 31, 2007,
respectively, are included as “other assets” in the financial
statements.
  Florida law requires a
bank to liquidate or charge off repossessed real property within five years, and
repossessed personal property within six months. Since the property had not been
liquidated during this period, 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.


Net activity relating to nonaccrual
loans during the first quarter of 2008 is as follows:





Nonaccrual
      Loan Activity (Other Than Indirect Auto and Consumer)
              (Dollars
      in thousands)Nonaccrual
      loans at December 31, 2007
            
            $
            12,927Loans
      returned to accrual
            
            
            (903
            )Principal
      paid down on nonaccrual loans
            
            
            (632
            )Charge-offs
            
            
            (76
            )Loans
      foreclosed
            
            
            (2,814
            )Loans
      placed on nonaccrual
            
            
            14,637Nonaccrual
      loans at March 31, 2008
            
            $
            23,139







Net activity relating to other
real estate owned loans during the first quarter of 2008 is as
follows:





OREO
      Activity
              (Dollars
      in thousands)OREO
      as of December 31, 2007
            
            $
            1,846Real
      estate foreclosed
            
            
            2,814Other
      increases
            
            
            61Write-down
      of value
            
            
            (226
            )Property
      sold
            
            
            -OREO
      as of March 31, 2008
            
            $
            4,495








22
 Table of Contents




The
allowance for loan losses is a valuation allowance for probable incurred credit
losses in the loan portfolio and amounted to approximately $15.9 million and
$15.0 million at March 31, 2008 and December 31, 2007,
respectively.  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 classified into the following risk categories: Pass, Special Mention,
and Substandard or Loss.  The allowance consists of specific and
general components. When appropriate, a specific reserve will be established for
individual loans.  The specific component relates to loans that are
individually classified as impaired or loans otherwise classified as substandard
or worse. 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.





A loan is
considered impaired when it is probable that not all principal and interest
amounts will be collected according to the loan contract. Individual commercial
and commercial real estate loans exceeding certain size thresholds established
by management are individually evaluated for impairment. If a loan is considered
to be impaired, a portion of the allowance is allocated so that the carrying
value of the loan is reported at the present value of estimated future cash
flows using the loan’s existing rate or at the fair value of collateral if
repayment is expected solely from the collateral. Impaired loans are as
follows:





(Dollars in
      thousands)
            
            March
      31,
              2008
            
            
            December
      31,
              2007Year
      end loans with no allocated allowance for loan losses
            
            $
            5,783
            
            
            $
            4,448Year
      end loans with allocated allowance for loan losses
            
            
            18,106
            
            
            
            3,748Total
            
            $
            23,889
            
            
            $
            8,196Amount
      of the allowance for loan losses allocated
            
            $
            2,274
            
            
            $
            1,401




Home
equity loans, indirect auto dealer loans, residential loans and consumer loans
generally are not analyzed individually and or separately identified for
impairment disclosures.  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, 2008, 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 our
recent historical loss experience, the level of nonperforming and delinquent
loans, information known today and a number of assumptions about future events,
which are believed to be reasonable, but which may or may not prove
valid.  Thus, there can 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.




Capital
and Liquidity





The Company's policy is to maintain
capital in excess of the levels required to be Well Capitalized for regulatory
purposes.  As of March 31, 2008, the ratio of Total Capital to Risk
Weighted Assets was 11.7%.  The increase from the 11.3% reported as of
December 31, 2007 is related to the impact on capital from the private placement
of common stock. On March 7, 2008, we consummated a private placement
transaction whereby two of Southwest Florida’s prominent families, their
representatives and their related business interests purchased 1.2 million
shares of common stock and warrants to purchase an additional 1.2 million shares
of common stock. The warrants have an exercise price of $8.40 per share and may
be exercised at any time prior to March 7, 2011. This private placement resulted
in gross proceeds of $10.1 million. The terms of the transaction limits the
ownership of each of the two groups to 9.9% of outstanding shares.




In August 2007, the Board
authorized the repurchase of up to 400,000 shares of the Company's outstanding
common stock, however, no shares were purchased during the first
quarter.





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.






23
 Table of Contents




In
addition to maintaining a stable core deposit base, we maintain adequate
liquidity primarily through the use of investment securities, short term
investments such as federal funds sold and unused borrowing
capacity.  The Banks have 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 Banks is based on a percentage
of the Banks’ total assets as reported in their most recent quarterly financial
information submitted to the regulators subject to the pledging of sufficient
collateral.  At March 31, 2008, there were $117.9 million in advances
outstanding in addition to $25.0 million in letters of credit used in lieu of
pledging securities to the State of Florida to collateralize governmental
deposits.  As of March 31, 2008, collateral availability under our
agreements with the Federal Home Loan Bank provides for total borrowings of up
to approximately $205.8 million of which $62.9 million is
available.





The Banks
have unsecured overnight federal funds purchased accommodations up to a maximum
of $30.0 million from their correspondent banks. We continue to monitor our
liquidity position as part of our asset-liability management. We believe that we
have adequate funding sources through brokered deposits, unused borrowing
capacity from the FHLB, loan principal repayment and potential asset maturities
and sales to meet our foreseeable liquidity requirements.





As of
March 31, 2008, our financial holding company had cash of approximately $15.2
million, of which approximately $3.0 million is intended to be utilized to
capitalize the trust company we are in the process of organizing to complement
our wealth management, private banking and investment advisory business line. In
addition, during the second quarter of 2008, TIB Financial Corp. anticipates
purchasing approximately $5.0 million of subordinated debt to be issued by TIB
Bank to increase its risk based capital ratio. The balance of this cash is
available for providing capital support to the subsidiary banks, the payment of
interest on our trust preferred debt securities, the payment of dividends and
for other general corporate purposes.




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 manage net interest margins and to minimize risk due to
changes in interest rates.





Our
interest rate sensitivity position at March 31, 2008 is presented in the table
below:




(Dollars
      in thousands)
            
            3
      Months
              or
      Less
            
            
            4
      to 6
              Months
            
            
            7
      to 12
              Months
            
            
            1
      to 5
              Years
            
            
            Over
      5
              Years
            
            
            TotalInterest-earning
      assets:Loans
            
            $
            319,728
            
            
            $
            57,622
            
            
            $
            75,185
            
            
            $
            564,522
            
            
            $
            121,425
            
            
            $
            1,138,482Investment
      securities-taxable
            
            
            44,080
            
            
            
            3,701
            
            
            
            4,062
            
            
            
            18,068
            
            
            
            86,821
            
            
            
            156,732Investment
      securities-tax exempt
            
            
            1,773
            
            
            
            201
            
            
            
            -
            
            
            
            661
            
            
            
            6,071
            
            
            
            8,706Marketable
      equity securities
            
            
            652
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            652FHLB
      stock
            
            
            7,899
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,899Federal
      funds sold and securities purchased under agreements to
    resell
            
            
            93,169
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            93,169Interest-bearing
      deposit in other banks
            
            
            5,341
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,341Total
      interest-earning assets
            
            
            472,642
            
            
            
            61,524
            
            
            
            79,247
            
            
            
            583,251
            
            
            
            214,317
            
            
            
            1,410,981Interest-bearing
      liabilities:NOW
      accounts
            
            
            180,610
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            180,610Money
      market
            
            
            180,207
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            180,207Savings
      deposits
            
            
            51,860
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            51,860Time
      deposits
            
            
            196,864
            
            
            
            147,341
            
            
            
            113,139
            
            
            
            87,084
            
            
            
            -
            
            
            
            544,428Subordinated
      debentures
            
            
            25,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            8,000
            
            
            
            33,000Other
      borrowings
            
            
            86,941
            
            
            
            20,000
            
            
            
            10,000
            
            
            
            117,900
            
            
            
            -
            
            
            
            234,841Total
      interest-bearing liabilities
            
            
            721,482
            
            
            
            167,341
            
            
            
            123,139
            
            
            
            204,984
            
            
            
            8,000
            
            
            
            1,224,946Interest
      sensitivity gap
            
            $
            (248,840
            )
            
            $
            (105,817
            )
            
            $
            (43,892
            )
            
            $
            378,267
            
            
            $
            206,317
            
            
            $
            186,035Cumulative
      interest sensitivity gap
            
            $
            (248,840
            )
            
            $
            (354,657
            )
            
            $
            (398,549
            )
            
            $
            (20,282
            )
            
            $
            186,035
            
            
            $
            186,035Cumulative
      sensitivity ratio
            
            
            (17.6
            %)
            
            
            (25.1
            %)
            
            
            (28.2
            %)
            
            
            (1.4
            %)
            
            
            13.2
            %
            
            
            13.2
            %








24
 Table of Contents




We are
cumulatively liability sensitive through the five-year time period, and asset
sensitive in the over five year timeframe above.  Certain liabilities
such as non-indexed NOW and savings accounts, while technically subject to
immediate re-pricing in response to changing market rates, historically do not
re-price as quickly or to the extent as other interest-sensitive
accounts.  If market interest rates should decrease, it is anticipated
that our net interest margin would be relatively unchanged over a 12 month
period.  Also, as approximately 15% of our deposit funding is
comprised 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.  In the next three months, we anticipate short-term interest
rates will remain stable and accordingly, we expect that our net interest margin
may stabilize. This expectation is due to the effects of continued competitive
pressure on loan production combined with increased depositor rate sensitivity.
Significant increases in the level of nonperforming assets would have a negative
impact on our net interest margin. Due to the Federal Reserve’s recent monetary
policy where short-term interest rates have decreased rapidly, we anticipate
that our net interest margin will stabilize because we have positioned the
Company by increasing our liability sensitivity through variable rate borrowings
and shorter term certificates of deposit.





Even in
the near term, we believe the $398.5 million one year cumulative negative
sensitivity gap may exaggerate the probable effects on net interest income for
two primary reasons. First, the liabilities subject to re-pricing are
predominately not indexed to any specific market rate and therefore may not
fully reflect the changes in market rates in any rate re-pricings. Further, the
assets subject to re-pricing are expected to reflect fully any changes in market
rates, primarily the prime rate.





Interest-earning
assets and 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. It is our policy to maintain our
cumulative one year gap ratio in the -30% to 0% range.  At March 31,
2008, the Company is within this range with a one year cumulative sensitivity
ratio of –28.2%.





Commitments





The Banks
are party to financial instruments with off-balance sheet risk in the normal
course of business to meet the financing needs of their
customers.  These financial instruments include commitments to extend
credit and standby letters of credit.  These instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the consolidated balance sheets.





The
Banks’ 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 Banks use the same credit policies in making
commitments to extend credit and generally use the same credit policies for
letters of credit as they do 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, 2008, total unfunded loan commitments were approximately
$135.5 million.





Standby
letters of credit are conditional commitments issued by the Banks 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 Banks generally hold collateral and/or obtain 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, 2008, commitments under standby
letters of credit aggregated approximately $2.6 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 available borrowing capacity from various sources as discussed in the
“Capital and Liquidity” section above.







25
 Table of Contents




FASB
Statement 157





On
January 1, 2008, the Company adopted FASB Statement No. 157, Fair Value
Measurements.  As discussed in more detail in Note 8 to the unaudited
notes to consolidated financial statements, this statement defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements.  This Statement establishes a fair value
hierarchy about the assumptions used to measure fair value and clarifies
assumptions about risk and the effect of a restriction on the sale or use of an
asset.  Upon adoption, we classified the three collateralized debt
obligations, discussed in the investment portfolio section of management’s
discussion and analysis above, along with certain impaired loans, with specific
allocations of the allowance for loan losses, as assets reported at fair value
using Level 3 inputs as defined in Statement No. 157.




Collateralized
Debt Obligations





The collateralized debt obligations
classified as Level 3 represent $5.7 million, or 3%, of the $166.1 million of
investment securities measured at fair value and 0.4% of our total assets of
$1.51 billion. During the first quarter of 2008, unrealized losses of
approximately $454,000 were recorded in other comprehensive income as a
component of the change in our accumulated other comprehensive income in
shareholders’ equity, but had no impact on our regulatory capital ratios. As
these securities are illiquid and are not considered by management as a
liquidity source, the unrealized losses have no impact on our liquidity. The
decline in estimated value during the first quarter of 2008 was primarily due to
additional events of default by individual issuers of the securities comprising
the underlying collateral of these collateralized debt obligations along with
our assumptions of the likelihood of further additional defaults. The most
significant assumptions utilized in our valuations are the rate at which
estimated cash flows are discounted and our assumptions of default and recovery
rates.




Impaired
Loans





Impaired loans with specific
allocations of the allowance for loan losses classified as Level 3 represented
$15.8 million, or 1.0% of total assets. During the first quarter of 2008,
$949,000 of our allowance for loan losses was specifically allocated to impaired
loans. This allocation was considered in our evaluation of the reasonableness
and sufficiency of our allowance for loan losses and provision for loan losses
which, in turn, impact our regulatory capital ratios. As loans, in general, are
illiquid and are not considered by management as a source of liquidity, changes
in their fair value have no impact on our liquidity.







Item 3.  Quantitative and Qualitative Disclosures 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
interest rate sensitivity as of March 31, 2008 was analyzed using simulation
analysis of the Company’s sensitivity to changes in net interest income under
varying assumptions for changes in market interest rates.  The Banks
use standardized assumptions run against the Banks’ data by an outsourced
provider of Asset Liability reporting.  The model derives expected
interest income and interest expense resulting from both a +/- 2% parallel shift
in the yield curve and a +/- steepening/twist of the yield curve.  The
standard parallel yield curve shift is used to estimate risk related to the
level of interest rates.  While the non-parallel yield curve twist is
used to estimate risk related to the level of interest rates and changes in the
slope of the yield curve.   All rate change scenarios are
“ramped” over a three-month period.






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Yield
curve twists change both the level and slope of the yield curve and are more
realistic than parallel yield curve shifts and are more useful for planning
purposes.  A 100 basis point yield curve twist decrease would result
in short term rates decreasing approximately 100 basis points and long term
rates decreasing approximately 0 basis points.  A 200 basis point
yield curve twist increase would result in a short term rates increasing
approximately 200 basis points and long term rates increasing approximately 100
basis points.  Given the current low rate environment, a stress test
on the down side of 100bp is considered reasonable.




The
analysis indicates a 200 basis point parallel interest rate increase would
result in a decrease in net interest income of approximately $675,000 over a
12-month period.  While a 200 basis point parallel interest rate
decrease would result in a decrease in net interest income of approximately
$810,000 over a 12-month period.  Additionally, a 200 basis point
yield curve twist increase would result in a decrease in net interest income of
approximately $817,000 over a 12-month period.  While a 100 basis
point yield curve twist decrease would result in an increase in net interest
income of approximately $227,000 over a 12-month period.




We
attempt to manage and moderate the variability of our net interest income due to
changes in the level of interest rates and the slope of the yield curve by
generating adjustable rate loans and managing the securities, wholesale funding,
and Fed Funds positions consistent with the re-pricing characteristics of our
deposit and other interest bearing liabilities.







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 Company is made known to them by others
within the Corporation.





(b)
Changes in Internal Control Over Financial Reporting





There have
been no significant changes in the Company's internal control over financial
reporting during the three month period ended March 31, 2008 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.







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PART
II.  OTHER INFORMATION






Item 1a. Risk Factors







There has not been any material change
in the risk factor disclosure from that contained in the Company's 2007 Annual
Report on Form 10-K for the year ended December 31, 2007.







Item 4.  Submission of Matters to a Vote of Security
Holders







Not
applicable







Item 5.  Other Information







Not
applicable







Item 6.  Exhibits







(a) Exhibits





Exhibit
      31.1
            -
            Chief
      Executive Officer’s certification required under Section 302 of
      Sarbanes-Oxley Act of 2002Exhibit
      31.2
            -
            Chief
      Financial Officer’s certification required under Section 302 of
      Sarbanes-Oxley Act of 2002Exhibit
      32.1
            -
            Chief
      Executive Officer’s certification required under Section 906 of
      Sarbanes-Oxley Act of 2002Exhibit
      32.2
            -
            Chief
      Financial Officer’s certification required under Section 906 of
      Sarbanes-Oxley Act of 2002














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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.Date: 
      May 12, 2008
              By:
              /s/ Edward
      V. LettEdward
      V. LettPresident
      and Chief Executive Officer




Date: 
      May 12, 2008
              By:
              /s/ Stephen
      J. GilhoolyStephen
      J. GilhoolyExecutive
      Vice President, Chief Financial Officer and Treasurer









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